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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.
Operator: Thank you for standing by. Welcome to the Range Resources Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Statements made during this conference call that are not historical facts are forward-looking statements. Such statements are subject to risks and uncertainties, which could cause actual results to differ materially from those in the forward-looking statements. After the speaker's remarks, there will be a question-and-answer period. At this time, I would like to turn the call over to Mr. Laith Sando, SVP, Investor Relations at Range Resources. Please go ahead, sir. Laith Sando: Thank you, operator. Good morning, everyone, and thank you for joining Range's year-end 2025 Earnings Call. With me on the call today are Dennis Degner, Chief Executive Officer; and Mark Scucchi, Chief Financial Officer. Hopefully, you've had a chance to review the press release and updated investor presentation that we've posted on our website. We may reference certain slides on the call this morning. You'll also find our 10-K on Range's website under the Investors tab or you can access it using the SEC's EDGAR system. Please note, we'll be referencing certain non-GAAP measures on today's call. Our press release provides reconciliations of these to the most comparable GAAP figures. We've also posted supplemental tables on our website that include realized pricing details by product, along with calculations of EBITDAX, cash margins and other non-GAAP measures. With that, I'll turn the call over to Dennis. Dennis Degner: Thanks, Laith, and thanks to all of you for joining the call today. In the fourth quarter, Range continued its steady progress on key themes that we have discussed over the past year. We executed on our plans safely and efficiently, delivering consistent well results, free cash flow, returns to shareholders and steady activity levels that support Range's multiyear development plans we previously communicated. All-in capital came in at $183 million, while generating production of 2.3 Bcf equivalent per day for the quarter. For full year 2025, we invested $674 million in capital, placing us squarely within the previously improved guidance while generating production for the year at approximately 2.24 Bcf equivalent per day. This production level was a result of strong well performance and continued optimization of gathering and compression infrastructure that was mentioned on our previous calls. Diving into the quarter. Range operated 2 horizontal rigs, drilling approximately 225,000 horizontal feet across 15 laterals, averaging 15,000 feet per well. For the year, the team drilled 69 laterals with an average horizontal length leak of 14,800 feet with our total activity exceeding 1 million lateral feet drilled. Our large contiguous acreage position affords us the ability to drill these type of long laterals, increasing efficiencies and allowing us to access more reserves from a single location, all while reducing our overall development footprint and consolidating infrastructure requirements. For completions, the team ended the fourth quarter completing approximately 1,200 frac stages. Completion efficiencies for the fourth quarter approached 10 frac stages per day per crew, pushing our 2025 totals to nearly 3,800 total stages and setting a new yearly frac efficiency benchmark of 9.7 stages per day. While we are proud of these achievements, we are equally proud that the team accomplished this while delivering on one of our best safety performance levels for the company. During the quarter, our supply chain team also completed the annual RFP for services process. The result was pricing for 2026 drilling and completions materials and services, that are flat to slightly lower than 2025 levels. In addition, multiple long-term agreements are in place to provide service pricing stability throughout the year, including the continued use of a base electric hydraulic fracturing fleet, which began a new 2-year term agreement on January 1, 2026. Our RFP results, coupled with our operational efficiencies, should continue to provide a strong foundation for peer-leading well costs and capital efficiency while creating options for future growth. Shifting over to marketing. Consistent with themes we highlighted on the last call, U.S. energy exports continued to set new records in the fourth quarter of 2025. We are seeing this across both natural gas and NGLs as global demand for reliable, affordable supply continues to support growing exports from the U.S. for multiple products. For context, LNG exports averaged over 17 Bcf per day in the fourth quarter, which was up 10% from the previous quarter. Waterborne ethane exports were estimated at 622,000 barrels per day for the quarter, up over 40% year-on-year and 24% sequentially. And lastly, LPG exports were up modestly year-over-year and are expected to benefit significantly in 2026 from new U.S. export terminal capacity. We believe this will be helpful in improving propane storage levels over the course of 2026, particularly on a days of supply basis. In January, winter storm Fern proved to be a meaningful demonstration of the energy security provided by America's position as the world's leading energy exporter, as demand for natural gas to feed power plants and heat homes increased rapidly for several days in late January. Approximately 5 Bcf per day of LNG feed gas was redirected to serve the needs of U.S. citizens. Then when temperatures warmed closer to normal levels, LNG feed gas exports ramp back up to pre-storm levels just as quickly. This weather also provided for strong bid weak pricing for the month of February, which settled at over $7 per MMBtu. The gas marketing and operational teams did a superb job coordinating a production and sales plan, locking in strong free cash flow by selling nearly all of Range's natural gas during midweek. At the same time, the liquids marketing team picked up additional revenue by optimizing ethane extraction and selling more BTUs locally as natural gas. During the quarter, Range also executed a long-term sales agreement that will lead gas from our planned processing expansion to a new power plant in the Midwest. The plant is expected to start up in late 2027 with the transaction set at an attractive premium relative to a Midwest Index. In addition, we continue to support the development of a number of prospective projects in the power generation and data center space. While many of those projects are concentrated in our backyard, we are also seeing interest in other regions where we have transportation capacity as evidenced by the deal just mentioned. We believe there will be several near- and medium-term opportunities for Appalachian Energy to meet the growing demand for energy in North America and around the world. We look forward to reporting on more Range specific opportunities as they progress. Now turning to our go-forward plans. Range's strategic multiyear operational plan has built up more than 500,000 lateral feet of growth-focused inventory to support future development. This is approximately 100,000 more lateral feet in inventory than previously discussed, as a result of the continued strong drilling performance mentioned earlier. This additional DUC inventory provides Range added flexibility to align our future reinvestment plans with market fundamentals. Simplistically, we can reduce our previously communicated 2027 capital. It still produced 2.6 Bcfe per day next year. Or we could maintain a similar operational cadence with $650 million to $700 million in capital for 2027 and set up continued growth into 2028. So we are in a great position to see how demand shapes up over the next 24 months and respond accordingly. Looking more closely at 2026, we expect to continue an operationally efficient program that utilizes a single full-time super-spec drilling rig paired with a second rig utilized throughout the second half of the year. On the completion side, we anticipate running a single full-time electric frac crew while picking up a spot crew for the second and third quarter to harvest some of our DUC inventory. This drives an all-in capital budget of $650 million to $700 million, which consists of the following: approximately $500 million of maintenance D&C capital, an incremental $120 million to $140 million of D&C growth capital that is primarily allocated to a second completion crew, $15 million to $35 million in land for targeted acreage. This acreage capital is less than prior years as we have held more acreage with production, allowing maintenance land spend to decrease. Also included in the acreage budget is capital that supports increased lateral lengths, which can offset some or all of the lateral footage being turned to sales during the year. And lastly, we also plan to invest $15 million to $25 million for software and production facility upgrades to further reduce emissions. And by year-end, we will have completed the pneumatic retrofit project that was started in 2024. This total capital investment plan of $650 million to $700 million is consistent with prior discussions and will result in production of 2.35 to 2.4 Bcfe per day, while carrying significant momentum into 2027. Looking at the year ahead, the shape of our production profile is expected to look similar to prior years as we project first quarter production to be down versus Q4 of last year. As we commission sizable gathering and processing expansions at midyear, you will see production step up meaningfully in the second half of 2026 and continue into 2027. We are excited about how the company is positioned today with financial and operational flexibility that allows us to efficiently align production growth with sales to known the end markets while generating free cash flow and returning capital to shareholders. We believe our robust inventory and relatively low capital intensity provides Range a differentiated foundation for generating through-cycle returns for our investors. I'll now turn it over to Mark to discuss the financials. Mark Scucchi: Thanks, Dennis. 2025 again demonstrated the strength of Range's business. Throughout commodity cycles, we intend to generate free cash flow, prudently invest in the business and return capital to shareholders. Range accomplished just that generating cash flow from operations before working capital of $1.3 billion, and over $650 million in free cash flow, while priming the business for future growth, enabling an operational and reinvestment strategy that maximizes our competitive advantages to enable value capture from increasing long-term demand across the U.S. and internationally. Consistent with prior years, Range's free cash flow was enhanced in 2025 by realizing a price greater than NYMEX Henry Hub. NYMEX natural gas prices averaged $3.43 for the year, while Range achieved an average hedged realized price of $3.60 per unit of production, a $0.17 premium created by commodity mix, hedging strategy and our advantaged portfolio of transportation and sales contracts that provide access to geographically diversified sales points linking Range to customers in key U.S. and global markets, delivering roughly 90% of revenue from outside Appalachia. Alongside higher realized prices year-over-year, Range expanded its margins, growing per unit of production cash margin by roughly 20% to $1.64 per Mcfe or approximately 3x our maintenance drilling and completion capital per Mcfe. Premium pricing, strong operational execution and competitive full cycle costs generated enhanced free cash flow and enable growing shareholder returns. Range paid $86 million in dividends, invested $231 million in share repurchases and reduced net debt by $186 million while investing in operations that support our growth plans through 2027. Over the last several years, Range has reduced debt by a total of roughly $3 billion. With a strong balance sheet, we have increasing flexibility to make opportunistic investments. As of year-end, Range has purchased over 33 million shares since the program's initiation in 2019 investing $744 million during that time frame. To position the share repurchase program for the future, our Board has increased the currently available capacity to $1.5 billion. In addition, the fixed per share dividend is something that we expect over time to grow slowly and reliably. We expect to increase the quarterly dividend by $0.01 per share or 11% at the next announcement. We critically evaluate investment opportunities and shareholder returns with an unwavering focus on sustaining and further enhancing Range's core objective, durable and growing per share free cash flow. To achieve that objective, we seek to enhance our low full cycle cost structure, low reinvestment rate and durable margins. Like Dennis mentioned, Range could hold 2.6 Bcfe per day of production with less than $600 million of annual drilling and completion capital or less than $0.60 per Mcfe. Here's a key message we repeat today. We can thoughtfully grow Range's business in conjunction with increasing market demand, allowing us to grow the value of the business and deliver additional returns to shareholders. This is a consistent long-term strategy underpinned by quality long-duration assets and a strong balance sheet. As the U.S. and global natural gas markets continue to integrate with commissioning of LNG facilities, while domestic demand grew substantially, primarily from the need for additional gas-fired electric generation, we believe Range's long-life inventory, creates enormous option value by serving an integral role as a long-term energy supplier. Our durable free cash flow, evidenced through cycles, positions Range to consistently deliver value to its shareholders. Dennis, back to you. Dennis Degner: Thanks, Mark. Range's results continue to reflect a consistent theme. Strong operational performance against our stated multiyear plan, consistent free cash flow generation and prudent allocation of that cash flow, balancing returns of capital, balance sheet strength, and the optimal development of our world-class asset base. As we sit here today, our multiyear plan communicated just 1 year ago is on track in generating the results you've come to expect from Range. Years of disciplined planning have placed us in the strongest position in our company history, having derisked the high-quality inventory measured in decades and translated that into a business capable of generating significant free cash flow through cycles, and we have more opportunity in front of us more than ever. With that, let's open the line for questions. Operator: [Operator Instructions] The first question is from Scott Hanold of RBC Capital Markets. Scott Hanold: Could you give a little more color on the cadence of production you're expecting in 2026. I know you said there's a step up in the kind of the mid part of the year. But give us some context on the size of the step up. What's needed to get there in terms of infrastructure adds. And just more broadly on your typical cadence. Would you guys ever look to effectively drive higher production in sort of the first quarter versus, say, the midyear, given that you do see much more premium pricing, especially in Appalachia during the winter? Dennis Degner: Scott, thanks for joining our call this morning. As we start to think about 2026 and the production cadence, I know you heard us touch on this during the prepared remarks, but really the character will look in the first half of the year pretty similar to what you've seen from us over the prior several years where you see a ramp at the end of the year with turning lines that get executed and wells completed in term of sales, let's just say, during the mid part of that prior year. And then that carries momentum into improving commodity prices, which you're pointing to and in the winter months. And so that's what you'll kind of see from us through this cycle as well. So on a relative basis, Q4 was roughly 2.3, you'd expect Q1 to look roughly like 2.2 Bcf equivalent per day, with some of the fluctuation also being driven by ethane extraction fluctuations, where we had a real opportunity to take some ethane rejected into the gas stream, take advantage of some pricing opportunities during the last few months and then turn that back into ethane extraction when you see prices that fluctuate back the other way. So all in all, about 2.2 Bcf in the first quarter. Between now and the first half of the year, when we see the next wave of infrastructure get commissioned, you would expect to see us be kind of between that Q4 level and Q1 as we continue to utilize existing infrastructure at -- I'll just say at a high level of utilization. At the midyear point, we've got some processing that comes online. That's around 300 million a day of capacity -- processing capacity that will go into service. Then on the back end of the year, that's where you'll see the ramp really take shape that carries momentum at the back end of '26 into improving commodity prices for the winter of '26-'27, and then through '27 as well. So what should the end of the year look like? Our forecast internally has us at a year-end type production level of 2.5 Bcf equivalent per day. So plus or minus around that level. So significant ramp at the end of the year on the back of turn in lines in the middle of the year, second frac crew for Q2 and Q3 and kind of carrying that momentum in 2027. So it should be an exciting year for us as we think about our production profile and activity. Scott Hanold: I appreciate that. That's helpful. And then as my follow-up question. Obviously, all signed that -- a power contract for the Midwest. And you talked about potentially some other things out there that you'll continue to evaluate. Can you give us a little bit of color on what kind of premium you were able to capture there? Like what is the benchmark we should be thinking about? And how much of an uplift? And do you see a lot more of these opportunities like this? And what do you kind of see that maybe through the next year or 2? Dennis Degner: Yes. As you can imagine, we're pretty excited about the announcement, and we've been really talking about this for the better part of a year now around these kind of opportunities in the background, lots of discussions being held between -- just Range -- between Range and end users that are needing a surety of supply for a multi-decade investment decision for infrastructure. So we think in some ways, this is the first of many opportunities you could see Range participate in. Again, as you've heard us talk about, given our are really depth of inventory and the quality of it and the diverse transportation portfolio that we have that allows us to not only consider building or supplying for energy demand in the basin, but also kind of in the region. So we think there's a lot of reasons for us to be excited about as you can probably tell from my voice this morning. So what's out there that's in addition to this? I mean I think the deal that we signed, though it's difficult for us to share the confidential terms of that arrangement today just given some ask we have from the counterparties associated with it. This is also something that's scalable. So we see there's additional conversations around how we could participate in the scalability of not only this particular infrastructure but also what builds out in the region. And then, of course, you've got closer to home the Fort Cherry project, which we're continuing to see what I would say, reasonable progress to narrow down to an end user that could utilize gas that's right out of our producing assets that the facility would be built right on top of us. So I think there's a lot of ways for us to win is what I would point to, whether it's utilizing our transport or building direct -- or seeing someone build directly behind the meter right in the heart of the field where we produce our NGLs and our natural gas. And I think it was encouraging last night during the state of the union to also see some commentary around the willingness to encourage end users to, I'll just say, bring their own power. And so we think that aligns really well with companies like Range, which again, are going to have multi-decades of Marcellus high-quality inventory that can provide us significant backstop to those future needs. Operator: And the next question is from John Annis of Texas Capital. John Annis: For my first one, you laid out optionality beyond 2027, where you can either continue growing production or hold at that 2.6 Bcf a day level. Can you walk us through what signposts or criteria will ultimately drive that decision? I know there's a lot of time between now and then, but I was just curious whether this decision would be driven by a view on the commodity or more demand-led like tying growth volumes to additional gas supply agreements? Dennis Degner: Yes. Thanks for joining us. When I think about the next couple of years, really the production profile that we've laid out really starts with a couple of things and primarily it's generating free cash flow. And when you think about how lean the operation is with 1.5 drilling rigs and 1.5 frac crews, you're really talking about a low capital-intensive business for us that allows us, due to the inventory and productive capacity that we've built over the last couple of years, it allows us to really generate that thoughtful wage of growth through the next couple of years and doing so in a capital-efficient manner that would be difficult, we believe, to replicate by others in the sector. And then I think when you think about the other drivers, clearly, we feel like commodity pricing back to the cash flow statement is in place both on the nat gas side and on the NGLs that would support this production profile. And we also have transport that goes along with it to feed future growing demand. We were able to pick up some capacity on Energy Transfer's Rover system a year ago. That capacity is not an expansion, but it's actually taking on market share out of the basin. So think about it as being growth for Range, but not necessarily growth for Appalachia. And again, we think that was part and parcel because of our ability to have a longer-term view for demand and also our inventory and getting our inventory and production to that in demand use. So as I think about the next 24 months, if I kind of take a step back, we've got the infrastructure in place. We've got the inventory and very capital-efficient program to help deliver that into that expansion of infrastructure and growing demand over the next 24 months. The exciting thing is, we really have the ability when you start to think about beyond 2027, we've got really a theme that you've heard us say over the past few earnings calls. We've got a lot of flexibility built into the program where we could pull down capital and maintain a production profile that's in excess of 2.6 Bcf equivalent per day in '28 and beyond, with something that's in the neighborhood of sub $600 million in CapEx or think about it differently, less than $0.60 per Mcfe. Or we can continue to have a thoughtful wage of growth, depending upon future demand and deals that are worked on, on our end, as evidenced by our announcement today on the marketing side, we would have the ability just to continue this momentum with a capital profile that looks very similar to what you've heard us communicate for 2026. So we really think we've set the business up for the right kind of optionality as demand continues to materialize, and we would be able to deliver into that space in a very capital-efficient manner that you'd come to expect from us. John Annis: I appreciate all that color. For my follow-up, your 2026 gas differentials are roughly in line with where you've been running. I wanted to get your views on at what point would you expect structural in-basin demand growth to begin compressing Appalachian basis differentials? And does the current guidance already embed any early benefit from the mid 2026 takeaway additions? Or is that a '27 and beyond story? Mark Scucchi: Yes, this is Mark. I'll kick that one off. As we begin the year with guidance, really, it's driven by the significant portfolio of transportation options that we have, where we're delivering gas outside the basin. So it's what the market indicated levels are at the myriad of sales points we have across the U.S. So that also baked it into account the seasonality that is a natural part of the business and a natural part of prices across the U.S. for those differentials. Now as we set that guide based on market levels at the beginning of the year, also keep in mind over the course of the year, that Range's marketing team has been at this for a long time, optimizing that sales portfolio, optimizing around opportunities to present themselves based on weather or other needs or interruptions in service by some parties and our extremely high levels of uptime and being able to capture market runs, be it weather generated opportunities or otherwise. So those numbers do get refined over the course of the year, but it does all come back to the portfolio of transportation options we have. And then one other piece I would say is the team's ability to provide some stability and predictability in pricing that's realized. It's been Range's practice for a long time to take pricing at first a month for about 90% of our production volumes. So that has proven to be a very successful way of capturing strong prices when they present themselves, providing stability and predictability in your realizations. The other piece of it is based on the fundamental research we do internally, of course, supplemented with outside research, we can shape that a bit. Sometimes it's more than 90% perhaps, but sometimes a little bit less. I would also layer into that something Dennis mentioned a moment ago that we can alter ethane extraction levels. and increased natural gas sales or ratchet up the extraction levels of ethane prices and net margins are better. So there's a whole host of factors that play in there to that basis differential. But again, what it all comes back to is the business that has been built on top of Range's assets and that footprint that allows us to access a host of markets across the U.S. and maximize the value of each molecule we produce. It's about growth and cash flow. It's about growth in cash flow per share, not just about growth or production or scale for scale's sake. Operator: The next question is from Doug Leggate of Wolfe Research. Douglas George Blyth Leggate: Dennis, I wonder if I could ask you about the cadence of the DUC capacity. I mean you've given a little bit of color here, but you obviously have a lot of options here. Gas prices have weakened again. So what would cause you not to bring on DUC production if gas prices did indeed prove to be softer for the balance of the year? Dennis Degner: Yes. Doug, I think when you look at the balance of the year and the timing at which the infrastructure, let's just say, basically starts to come into service, which would really be end of Q2 type time frame, we kind of feel like the timing really works well when you start to think about the wells that will get turned in line or a portion of that DUC capacity that starts getting completed in the second quarter and then our ability to basically then start to see that production turn into spending the sales meter through the back half of 2026. So we feel like the timing is set up complementary to improving pricing as you start to get into the end of injection season, which internally, our view is depending upon just a normal weather outlook for the summer, we would anticipate to really see a number of around 3.6 to 3.7 Tcf. So -- in the ground. So with that in mind and the infrastructure, the timing, we feel like it really is kind of coming together as expected. We'll have around 900,000 lateral feet that gets turned to sales in the balance of 2026. But just like you've seen in the past few years, there's always some flexibility that we leave in the program to, we'll just say, take advantage of different commodity price signal. So as an example, some of our dry gas is right now planned to turn in line toward the end of the year, as you would expect, to take advantage of improving fundamentals as we start to go into the winter out of our Northeast PA asset. So we think we've got the right playbook in place for now, but we always leave some flexibility that we can also take some of those TILs, push them deeper into the year if the signals warrant. But when you look at where we are from a commodity price standpoint, how we risk the program, we feel like the cash flow we've communicated that would be delivered from the business is intact. We also feel like the reinvestment rate will remain really low going forward. So we feel like the fundamentals are all really there for us today. Douglas George Blyth Leggate: I appreciate that. I guess it's kind of a curtailment strategy, but not quite, if you know it. I mean, it's -- in terms of selling into the strength of the market. I was just trying to understand the physics of it. My follow-up is, if I could kind of play it to you like this, your balance sheet is in terrific shape. You don't really need to hedge because you're breakeven is as low as it is. And I guess my question is we're all used to the entire industry for the last however many years we've been doing this 20, 30 years selling into midweek just because that's the way the industry works. But it seems that you leave an awful lot of spikes on cash market pricing. Now I might be oversimplifying it, but I guess my question is why Bidweek sets the pace given how good a position your capital structure and so on is in at this point? Why not let more float on the cash market? And I'll leave it there. Dennis Degner: Yes, a really good question. I think what I would do is take a step back and really just spend a couple of seconds here talking about how we view Bidweek. And I think if you were to ask the question or look back at when we talked about Bidweek and our participation, I think roughly what you've seen us commit to is roughly plus or minus 90% to be committed in the Bidweek process. But what goes into that is really a I'll just say, utilizing internal resources, a multidisciplinary team. It's very talented that involves some of the same expertise that is a part of our hedging committee to also our operations team. And how are we viewing let's just say, what lies ahead. From weather, from a macro perspective, also to any operational maintenance that we would expect and new well turn-in lines. What that does mean is that we do toggle as we walk into the bid week based upon what pricing we see at that time versus what we believe to be most reflective of what the next 30 days reflects. So you do see us toggle that percentage contribution into the Bidweek that's committed. As you think about February, as an example, we kind of walked into that time frame with a much stronger view on the pricing on the front side. So we put 97% of our gas into the Bidweek process to try and capture what we believe was strong pricing and turned out to be excellent pricing. But there are other times when we back off of that to also have more exposure into what we believe is fluctuations in commodity price. And then, of course, lastly, some of our new production may not always go into meeting new well turn-in lines may not always be accounted for in that Bidweek process. So again, we could capture pricing through the balance of that 30-day cycle. So shortly or just put simply, I think we try and balance both, but it really is a complicated process that we try and walk through to make sure that we're delivering the best returns. Operator: The next question is from Jacob Roberts of TPH & Co. Jacob Roberts: Dennis, I appreciate the color on kind of the 2027-plus time frame. I was wondering if you could opine on where you view service costs over that same time period. And really what I'm getting at is their willingness to convert some of that DUC backlog into a more of a deferred till approach, if you do expect service costs to rise over the coming years and also potentially to be a little bit quicker to the market with volumes potentially in a better pricing scenario? Dennis Degner: Yes. Jake, I think when I start to think about the upcoming couple of years, I think the reality is, is we have baked in a lot of flexibility and options for us to think about timing of turn-in lines well mix, how we would think about our liquids contribution at what time of the year, of course. So I think the short answer is, yes. We would absolutely want to factor in what's the best in most optimum way to basically think about our turn-in-line cadence as we kind of move forward. From a service cost perspective and the role that, that would play. I know we touched on it in the prepared remarks, but we've kind of seen what I would call as low to mid-single-digit kind of relief in service costs as we're kind of planning for 2026. Some of the costs are going to be fairly secured with multiyear agreements. As you can imagine, that's been a part of our program on an annual basis. And then some are going to be more on a 12-month type structure where you're going to see more float in what's taking place year-over-year. It does feel like just given the efficiencies that we've all seen and especially range with some of the numbers we've talked about on the drilling and completion side. It's lended itself to really maximum utilization of 1 to 2 type frac crews or drilling rigs to still see the kind of growth that we're talking about, where you can generate 20% over a multiyear program, which is kind of exciting. So I say all that to say I don't know that I expect service costs to really go down a whole lot more. We're kind of -- it feels like we're reaching a bit of an asymptotic trend on the bottom end here where we're just kind of reaching the close bottom, if you will, and we're bringing out those additional dollars through other operational efficiencies. Water recycling, multiple stages a day, improvements in surface equipment design. So long-winded answer to say we would fully expect those savings to be an opportunity to think about either not spending all of our capital in a given year, thus the $50 million capital range. Or again, as we think about '27 and beyond, is that get invested into another thoughtful wage of growth, depending upon demand that continues to emerge and materialize. Jacob Roberts: That's super helpful. I did want to circle back to the supply agreement you guys signed, which I agree is very positive to see. I'm curious if the [ $75 million ] to the specific facility is a starting point for this facility. Is there the potential to grow those volumes. And maybe if not, is the specific counterparty someone you could view as someone you pursue additional projects with over the coming years? Dennis Degner: Yes, Jake, I think the short answer is yes. This is a facility that will require more than [ $75 million ] a day in gas feedstock to generate power. So this was a good starting point. There is scalability to the infrastructure, both at this site and in the region that we could help meet going forward through the same transport that we have. So this is all in line with some of the transport that we've picked up that will start in service in 2027 as a part of our multiyear plan, but also could be served through other transport that we actually have or other capacity we have on that same piece of transport. So yes, it's a great counterparty. It's a really high-quality counterparty on top of it. So we really think it sets up a strong foundation for how deals could get structured that allow growth that's also margin enhancing going forward. Operator: The next question is from Phillip Jungwirth of BMO Capital Markets. Phillip Jungwirth: Coming back to the question around growth beyond 2027. Just wondering how you would consider allocating capital across liquids versus dry gas acreage. And when would you need to commit to additional processing capacity or other infrastructure if you decide to grow? Or is there any willingness to focus more on the dry gas side and taking basin pricing? Dennis Degner: Phil, when we start to look at the inventory, we do have dry gas inventory that will continue to play a role in our program on a go-forward basis. So I know looking at this year, in prior years, it's tended to fluctuate somewhere between probably 20% to 30%, 35% of the program on an annual basis. There is the ability for us to flex that higher if warranted. I think a good example is just seeing some of our activity in Northeast PA, where we've had some high quality, lower Marcellus wells that we've been able to drill on an annual basis where we've taken a rig, drilled 1 to 2 pad sites and incrementally utilize existing infrastructure and incrementally added some nice production to the profile. So we do have, I'll just say, more of that, that we can do if we wanted to flex into a direction of being drier. As far as an infrastructure commitment standpoint, the Harmon Creek processing expansion that goes into service this year really carries a significant amount of momentum through '27 and to the back as we start to think about getting into 2028. There is some debottlenecking that is underway with one of our midstream partners MPLX at the Majorsville facility. So we're bringing out more with the same infrastructure to look for incremental capacities there. And gives us the option of growing production in the future without having to consider a new processing plant construction alone, which we think that's where we're at from a maturity of the business standpoint. And I know you've heard us, Phil, talk about it in the past where we think given our depth of inventory that we have, it's going to afford us the ability to step into capacities that others could let go underutilized in the future. So in the near term, maybe it's more also debottlenecking and bringing out some capacity that can be more efficiently utilized in existing processing plants and gathering. So that's how we're thinking about future growth. And we think the near-term or the time frame it would take to actually see those molecules go into service is -- if that time frame gets truncated, which again gives us more flexibility. Phillip Jungwirth: Okay. That's helpful. And then you also had a new macro slide on global naphtha cracking rationalization. I was just hoping you could touch on this. Is it incremental to what you're also showing as call on U.S. supply for NGLs? And then just given the petchem margins are historical lows, how do you think about operating rate assumptions or is what you're showing here a little bit more reflective of something closer to mid-cycle margins? Dennis Degner: Yes. The NGL macro has been clearly a hot topic as we think about the back half of 2025. So I'm going to attack this from a couple of different angles. But clearly, stock levels have been elevated through 2025, both on the propane and also on the ethane side. And I think each has a different story to tell. But in some ways, they've got a similar story. And the different part of the story is for propane, you had weak demand last year. And of course, there was an increased level of production that was a little stickier, I think, through associated gas contribution, than maybe was somewhat anticipated. And then on top of it, you did have -- on top of the demand being down a little bit in supply being pretty resilient last year, you also were a little bit lagged in seeing run rates improve on some of the infrastructure that was commissioned in '25. Export capacity, maybe the common ground is the export capacity expansions out of the Gulf have been really helpful to see the ability to move another 200,000, 300,000 barrels a day. You're seeing that materialize now in the numbers as we've started to get out of fog in the ship channel and other operational hiccups that have transpired, and you're really seeing strong numbers now in the 2 million barrels per day type level on the propane side as an example. So as we think about rolling the take forward for 2026, you really start looking at more utilization of the current dock expansions. You've got additional dock capacity that will get also commissioned through the balance of the end of the year with some of the same midstream providers that commissioned infrastructure last year. And then on top of it, you've got -- I'll just use INEOS and SINOPE, as an example, you've got close to 200,000 barrels of incremental demand that goes into service here over the balance of the next 12 to 18 months. So we're still optimistic and really as we're thinking about stock levels getting pulled down renormalized through the balance of 2026, and then run rates continuing to improve on infrastructure that was commissioned in 2025 and through the balance of the back end of '24. But I'd say this, we would also expect to see a lower growth rate with some of the NGL contribution out of the Permian and associated gas, just given some of the downward pressure to their growth associated with oil price today that we see. So hopefully, this gives you the color you're looking for. But it's definitely a complicated math problem, but we see at the end of the year that the stock levels get renormalized and pricing return to a healthier place. Operator: The next question is from Kevin MacCurdy of Pickering Energy Partners. Kevin MacCurdy: Dennis, at the end of your prepared remarks, you mentioned that Range had initiated this growth plan a year ago. I wonder if you could take a step back and compare the in-basin demand and supply outlook today compared to when you initiated this growth plan and maybe your confidence on that outlook. I guess the context of this question is that although we've had a lot of price volatility over the past few months, as it sits today, the curve is pretty materially lower than it was a year ago. Dennis Degner: You bet. Thanks for joining us this morning, Kevin. I think when we start to think about what's different between a year ago versus today, in some regards, the way we -- I think I may have touched on this a little bit already, but I'll try not to be too repetitive, but we did try and risk the program as we were thinking forward around what pricing could look like. Yes, it is down a little bit today. But I would say, by and large, it's really kind of intact to what -- how we had risk the program and the cash flow that we felt like that the business would throw off. The way we also structured the program was around using existing capacity though. So we didn't really build it around the premise of new demand that might come. Instead, it was taking on the Energy Transfer's Rover incremental capacity of around 250 million a day. It would get us to both the Midwest and also the Gulf markets, which we're marketing at on a regular basis through existing capacity as we speak. So we felt like it allowed us to take on market share instead of thinking about growing for growth sake. That's not a part of the equation for us as we go forward. We have to have a home for those molecules. And so we felt like taking on that market share was indicative of our ability to have a depth of inventory that would be the backstop for a commitment to this pipe. And we also felt like those -- that pipe capacity got us to end markets that would see growing demand in the future. So good optionality and flexibility as we move forward, and we were able to step into that capacity at a great time in our program. When we think about 2028 and beyond, I think that's where the growing demand piece really starts to become a bigger topic for us. And I think that's evidenced by the marketing deal that you're hearing us talking about. We think it's the first of many options that we can consider more in-basin or regional that allows us to think about that next wage of growth, but it also has to materialize. So more market share as a part of our plan now. We feel like pricing is still intact that allows us to continue to execute the current plan that we have for the multiple years, '28 and beyond, it will be based upon a home for that production in the in-basin region demand it materializes. Kevin MacCurdy: That's a really good answer. Maybe as a follow-up, I wanted to dig into your differential guidance a little more. Your fourth quarter realizations were strong, but your guidance for differentials are pretty similar year-over-year. If we saw first quarter gas prices strong in the Northeast relative to Henry Hub. Can you kind of square why the guidance is the same year-over-year? And give us any comments on how realizations will look throughout the year? Dennis Degner: Yes. I think as I started a minute ago, we start with just the market indications. Information content and forward curves is what it is. It's not perfect, but it's the starting point, the best predictor we have. Our guide is about $0.05 better year-over-year versus the starting point. And as we think about how 2026 has begun, we're off to a great start. I think it's important to note that 90-plus percent we take into first month capturing extremely high value. So variation quarter-over-quarter and the seasonality that drives that, variation year-over-year, again, is somewhat weather dependent. But ultimately, the consistency of our tight differential. And our premium to Henry Hub realized price per Mcfe is a function of the transportation portfolio. So I'll just leave it at that. The guide is -- Mark indicated and we'll continue to improve that through the experience of our marketing team as we do every year over the course of the year. Operator: The next question is from Michael Scialla with Stephens. Michael Scialla: Just wanted to ask on your return of capital. It's been heavily weighted to buybacks. You are increasing the dividend this year. Do you expect any inflection going forward? Or how are you thinking about allocation between the balance sheet and dividends and buybacks going forward? Mark Scucchi: Sure, Mike. I think as we evaluate what the current trading levels of the stock price versus an NAV, what the fundamental value is of an inventory measured in decades versus a stock that trades close to just your proved reserves, which is less than a 5-year development plan, we see tremendous value in buying back those shares. So I would expect us for the foreseeable future to continue favoring buybacks. As you look at the trend, I would also expect us to slowly steadily grow the cash dividend. I think there's a discipline and a real tangible total shareholder return element there. It's a commitment to return capital. It's a commitment to maintain a balance sheet that can do that through a cycle and to steadily slowly grow that persistently. As you think about the share repurchases, the scale, scope, timing, again, we have not done a formula quite intentionally. We think if you're formulaic and programmatic, you can end up with just a pro-cyclical and by high type program. So we think the flexibility of being opportunistic generates a much better return in buying when you see pullbacks and just lower points, lower entry points in the stock price. That is to say we still see tremendous value and where the stock is trading today. And I think you can look at our track record over the last number of years and the percentage of cash flow that we have deployed in returns of capital as compelling. Again, we're not going to provide a framework for perspective, we've been in the 20% to 30% range the last couple of years. This year approached 50% of free cash flow in returns. So as the best sheet, as you stated, is in a great place. We have a lot of flexibility in how best to reinvest in Range's business and continue improving it. Michael Scialla: Yes, makes a lot of sense, Mark. I wanted to ask on Slide 7, your free cash flow forecast for the next couple of years. you've given the assumptions there for production growth, prices and CapEx. I wanted to see what you're assuming for op cost. Do those stay flat? Or are there any efficiencies built in there going forward? Mark Scucchi: They're flat. We've tried to shoot this straight, be pretty conservative. And as Dennis said, we are approaching the lower limits in many situations on how far you can push costs down. So our focus, of course, is on ringing every penny out of the cost structure that we can contractually and strategically. But for purposes of modeling here, it's essentially flat. Michael Scialla: Is there any efficiency upside that could be? I know you talked about water infrastructure and some other places where you could save on op cost going forward? Mark Scucchi: The team always finds ways to get a few more stages a day done on average, more lateral footage per day each rig that's in operations. We certainly shoot for and plan for a certain amount of that. And every year, we are fortunate with a strong and safe execution by the team and continuously surprised by what the range team can do. So I would certainly think that there's a little bit more there, the team can ring out. Operator: And we are nearing the end of today's conference. We will go to the line of Neil Mehta of Goldman Sachs for our final question. Neil Mehta: I just wanted to circle back, Dennis, on Fern. It looks like you guys were able to run well through that period of time and sell into Bidweek. But I don't know if there's any quantification you could provide around the cash flow uplift around the storm. Any lessons learned around it because I'm sure volatility is here to stay in the gas markets, and just any perspectives on how your marketing can perform during that period of time. Dennis Degner: Yes, I think the -- first of all, thanks for joining us, Neil. When I think about that, we are -- sorry, Bidweek and also the operating plan we were able to really lean into the pricing of that $7 type level, which was really significant when you think about the cash flow that gets thrown after that kind of cycle. And as you point out, this is something that we've talked about now for a few years, we expect to see more volatility going forward, whether that's weather-related or driven by other factors. So the team really did a great job and I kind of have to congratulate the operating team because they were in some pretty rough conditions with sub-0 temperatures. And at any 1 point in time, we didn't have more than a pad site or two that was really down that then didn't get restored in pretty short order. So team really did a phenomenal job. And I think this is years of planning and teamwork between our team in the field and also our midstream providers, just from the standpoint, we continue to do winter operations look backs and improving our production facility designs rooting out downtime and sources of that downtime, so that we can preserve that flow from the wellhead all the way through the processing plant and get downstream to those critical end users, which as we saw from winter storm firm that was really important. And even in this last week for some in the Northeast, I'm sure they're feeling the effects and comfort of having natural gas flow generating power for their homes these days. So team did a really great job. And as you heard me touch on earlier, it's a multidisciplinary plan on how we think about capturing the value uplift or Bidweek or leaving more in the daily to try and capture what we think is more of upside opportunity through the balance of that upcoming month. But yes, we'd expect more volatility going forward and that multidisciplinary team will get leaned on a monthly basis. Mark Scucchi: I think, Neil, we're not going to give any forward guidance on it specifically, but just conceptually, I'll say this, that February looks to be one, if not perhaps the best free cash flow and realizations a month and perhaps company history. Operator: This concludes today's question-and-answer session. I'd like to turn the call back over to Mr. Degner for his concluding remarks. Dennis Degner: You bet. I'd just like to thank everybody again for joining us on the call this morning. Really appreciate your support. If you have any questions, as always, please follow up with our Investor Relations team. We look forward to catching up with you on the road in a one-on-one or in our next call. Thanks, everyone. Operator: Ladies and gentlemen, thank you for your participation in today's conference call. You may now disconnect.
Ian Hawksworth: Thank you very much. Okay. Yes, we've got the thumbs up. So if we're ready, we'll start. I know you've all got a very busy day and a very busy week. So very much appreciate you coming to our third set of annual results this morning. So we're really very pleased with the results for this year. Another excellent year of progress and performance. I think we're delivering growth as we said we would do. The agenda for this morning, fairly straightforward. I'll give you a bit of an overview of the results. Situl will then go through the financial review. I'll then update on what's going on in the portfolio, and we'll finish with a summary and outlook and some Q&A. So as I said, another very successful year, delivering strong performance, an increase in rents, values, income and dividends while strengthening our financial position and creating significant optionality for the group. Obviously, macroeconomic issues and geopolitical risks have been well documented. However, I'm pleased to say that conditions across the West End are very active. We continue to see positive trends in footfall and sales across our prime portfolio, and the team is successfully delivering leasing well ahead of ERV with excellent levels of activity, limited vacancy and a strong pipeline. During the year, we were pleased to have formed a long-term partnership on Covent Garden with the Norwegian Sovereign Wealth Fund, which highlights the fundamental value and attractiveness of our portfolio. We continue to expand over GBP 100 million invested through acquisitions and capital expenditure and a number of properties are currently under review. And with enhanced liquidity, we're well positioned to take advantage of market opportunities. As one of the largest property owners in London's West End, we play an important role in shaping the area's long-term future. Visitors continue to be drawn to the West End's exceptional cultural, retail and entertainment offering, reinforcing its position as a leading destination for experience-led travel. The portfolio is benefiting from record international arrivals to London airports. Hotel occupancy remains strong, whilst the Elizabeth line continues to broaden catchment for visitors and workers alike. Shaftesbury Capital's irreplaceable portfolio of properties located at the heart of the West End provides high occupancy, low capital requirements and reliable growing long-term cash flows. Turning to results. Our valuation increased 6.6% like-for-like to GBP 5.4 billion. This was led by a 6% increase in ERV and a small 2 basis point inward yield movement. Total accounting return and total property return of 9.1% and 10.1%, which is in line with our medium-term targets. We continue to deliver rental growth, which increased by 6% and every effort continues to be made to enhance customer service whilst delivering meaningful cost savings. Underlying earnings are up 12%, and the Board has proposed a final dividend of 2.1p per share, which brings the total dividend to 4p per share, which is an increase of 14% for the year. We have a very strong balance sheet and access to significant liquidity with low leverage. I think the performance overall demonstrates the exceptional qualities of the portfolio, delivering growth in cash rents, dividends, ERV and valuation. So I'll now hand over to Situl for the financial review. Situl Jobanputra: Thanks, Ian. Good morning, everyone. As you've heard, financial performance was positive in 2025 with growth in rental income, earnings, dividends, valuations and net tangible assets. In addition, we have strengthened our balance sheet and enhanced the group's financial flexibility. So starting with the income statement. The main points are that over the year, there was growth in rental income of 6%, earnings were 12% higher, and we've increased the dividend by 14%. We focus here on group share numbers, that is including Covent Garden at 75% post the transaction with Norges Bank. As is completed partway through the year, we've included in the appendix on Slide 43, a summary of how this affects year-on-year comparisons. Adjusting for this, gross rents were up 5.9% like-for-like to GBP 195.6 million, reflecting a successful year of leasing and asset management. In aggregate, lettings and renewals were 10% ahead of ERV and 14% up on previous passing rents. Management fees from Covent Garden for Q2 to Q4 represent the other income of GBP 3 million. Administration costs of GBP 41 million reflects an increased share option charge, which was up by nearly GBP 5 million compared with last year. Excluding this, costs were effectively 8% lower. Notwithstanding upward pressures, we are targeting further reductions in the absolute level of cash costs over the next 2 years. During the year, the cash receipt from the Covent Garden transaction lowered net debt significantly. As a result, finance costs have been reduced by almost 30% to GBP 41.4 million. This year, we will refinance or repay GBP 400 million of maturing debt. However, based on current levels of borrowing, we are targeting finance costs to be broadly flat overall. All of these movements taken together resulted in a 12% increase in underlying earnings to GBP 81.9 million, equivalent to 4.5p per share. The proposed final dividend of 2.1p per share takes the dividend for the year to 4p, up 14% year-on-year. Our leasing activity contributed to an increase in ERV of 6.2% over the year to GBP 270 million. As illustrated in the chart, there is the opportunity to grow passing rent significantly given the 26% uplift as we move through from annualized gross income on the left to current market rents on the right. There is embedded reversion in our portfolio and good visibility on the income growth potential in each of our locations. This includes almost GBP 16 million of income, which is contracted or relates to rent-free periods, the majority of which will convert to running income over the next 12 months. So turning now to the balance sheet. The market value of properties under management was up 6.6% to GBP 5.4 billion. Net debt has been taken down from GBP 1.4 billion to GBP 0.8 billion on a group share basis with loan-to-value of 17%. NTA was up 7% over the year to [ 2.15p ] per share, driven primarily by the valuation movement. The main driver for the uplift in property valuations was rental growth with ERV up across all sectors and in all of our estates with retail and Carnaby Soho being the strongest performers. Yields moved in marginally by 2 basis points to 4.43% overall, and the commercial portfolio is valued at an equivalent yield of 4.6%. Our assets continue to demonstrate attractiveness and affordability to our customers with average ERV for the portfolio under GBP 100 per square foot and customer sales significantly ahead of 2019 levels, outstripping ERVs. The balance sheet is in a strong position with low leverage and access to significant liquidity. With loan-to-value under 20% and the EBITDA multiple under 7x, there is flexibility to deploy capital towards growing our business through investment in existing assets and new opportunities. In October 2025, we entered into a new 5-year loan facility of GBP 300 million for Covent Garden. The maturity of the group's other banking facilities totaling GBP 450 million of undrawn firepower has been extended to 2029 and 2030. We've also taken the opportunity to reduce the margins on these facilities to better reflect current market conditions and the strengthened position of the group. Part of the proceeds from the Covent Garden partnership were used to reduce gross debt and we are positioned for repayment of the GBP 275 million of exchangeable bonds, which mature at the end of March '26. As well as the new financing extensions and repricing, we have protected finance costs from interest rate movements by capping GBP 300 million of SONIA exposure at 3% for this year. We will continue to review financing opportunities, taking advantage of the attractive credit profile of the group. So to summarize, financial performance has been strong, and we have enhanced flexibility. Total accounting and property returns of 9% and 10% have been achieved in 2025, driven by growth in ERV and cash rents, which, together with cost management, have resulted in good progression in our key financial metrics. We will continue to focus on our priority areas: earnings and dividend growth, deploying capital accretively and balance sheet strength and flexibility. And with that, I will hand back to Ian. Ian Hawksworth: Thanks very much, Situl. I can tell you a little bit about the portfolio, a little bit of color for you. We own an impossible to replicate portfolio. It's located in some of the most iconic destinations across London's West End, Covent Garden, Carnaby Soho and Chinatown. The GBP 5.4 billion portfolio under management comprises 2.8 million square feet of lettable space across 640 predominantly freehold buildings with approximately 1,900 individual lettable units. Portfolio is broadly 1/3 retail, 1/3 F&B, with the balance in the upper floors, which offer office and residential accommodation. Portfolio offers a diverse occupational mix and variety of income streams with a range of unit sizes and rental tones. Occupational demand continues to prioritize the best locations. Availability now on many of our streets is at near record lows, and this supports competitive pricing. Leasing success has been achieved across the portfolio with continued ERV growth. This slide shows some of the new brands introduced, which are attracted by the 7 days a week footfall and trading environment. 434 leasing transactions completed in the year, representing nearly GBP 40 million of contracted rent. They were achieved at an average of about 10% ahead of December '24 ERV and 14% ahead of previous passing rents. Vacancy is very low at 2.6%. The team's active and creative approach, which is informed by a deep knowledge of the West End, positions Shaftesbury Capital to deliver further rental growth. Seeing very strong conditions in leasing -- in retail. Leasing demand is very positive and trading conditions are good. In recent months, we welcomed a number of new brands to Carnaby Street as we enhance the customer mix there. Charlotte Tilbury opened a new flagship store, and they'll shortly be joined by Sephora and also by Edikted over the coming months. Covent Garden continues to attract new high-quality brands, including Nespresso and Byredo, which were introduced during the course of the year. All of this has contributed to a 10.4% retail valuation growth across the portfolio. We're home to approximately 400 food and beverage outlets. Operators are attracted to the vibrant pedestrian-friendly, well-managed estates. And there have been a number of signings across Covent Garden, including Borough in Floral Court, Harry's Restaurant and Bar on the Piazza and Buvette in Neal's Yard. There continues to be strong demand for Soho for the Soho portfolio with the introduction of several new concepts, including Padella and the Shaston Arms. In Chinatown, we've introduced more variety to the area, increasing the pan-Asian offering at a range of price points. So across the portfolio, 37 new lettings and renewals signed 15.7% ahead of December 2024 ERV. Our vibrant locations and the quality of accommodation continue to attract leasing demand for office space. The Carnaby and Covent Garden portfolios offer high amenity value and excellent environmental credentials. And we continue to see customers relocating from other parts of Central London as employers recognize the importance of location and amenity value in attracting and retaining talent. The residential portfolio continues to perform well. During the year, 285 transactions were completed with rents achieved around about 4% ahead of previous passing rents. We have the ability to add value through capital initiatives to our 640 properties. Our pipeline of asset management and refurbishment activities represents 4.2% of ERV, and it's expected to be delivered over the coming 12 to 18 months. The scale of our holdings also help us to shape not just the buildings, but the spaces around them, and we're working with local stakeholders to enhance the public realm across our destinations, making them greener and more enjoyable for everybody. Covent Garden's Henrietta Street public realm is currently being transformed, and we're also undertaking early engagement on improvements to Carnaby Street to enhance the visitor experience whilst preserving the area's unique character. We continue to rotate capital, improving the quality of our exceptional portfolio. And in this year, we disposed of GBP 12 million of assets and invested GBP 80 million in targeted acquisitions. As I said earlier, we have a number of properties under review. Situl mentioned that we introduced sovereign capital to Covent Garden this year. And by partnering with NBIM, leverages our operational expertise and property portfolio, providing investment and expansion opportunities. So our growth prospects are underpinned by strong fundamentals. The West End market has delivered attractive predictable growth over the long term with an annualized rental growth rate of approximately 4% per annum. Our portfolio has outperformed that with nearly 7% ERV growth delivered since 2010. And this is supported by consistently high occupancy and the scarcity value of the West End, where limited new supply continues to drive demand. A strength of the portfolio is its adaptable mixed-use nature, which allows us to evolve space in line with changing demand and importantly, to do so with relatively low CapEx requirements. We benefit from aggregated ownership, enabling us to enhance the public realm and shape our places, supported by data-led customer and marketing approach. And finally, we actively manage the portfolio through capital rotation, focusing investment on our chosen assets and improving performance through refurbishment initiatives. So overall, these factors drive consistent long-term rental growth and valuation progression. I'd like to take a moment to thank everybody involved, including our customers, partners and our very experienced team in delivering this strong performance in 2025. Some of our senior leadership colleagues are with us today, and I hope you'll have the opportunity to meet with them afterwards if you didn't see them during coffee. So in summary, we've had a successful year, and we've made a very good start to 2026. There are obviously a number of challenges in the economy, but the West End continues to perform with high footfall, customer sales growth and low vacancy. There are excellent levels of activity and a strong leasing pipeline. We're confident in our outlook and targets for rental growth of 5% to 7%, a total property return of 7% to 9% and a total accounting return of 8% to 10%. Through active management of our prime West End portfolio, the strength of our operating platform, and we're focused on sustained long-term growth in rental income, value earnings and dividends. And backed by our strong balance sheet, we're well positioned to grow and take advantage of market opportunities. So that concludes the presentation. We're going to move now to Q&A. For those of you that are on the phones, if you could let the operator know that you'd like to ask a question, we'll come to you. But if somebody likes to start the ball rolling in the room, that would be great. Max? Maxwell Nimmo: It's Max Nimmo at Deutsche Numis. Just a couple of questions, if I can. One on Carnaby and the ERV growth was exceptionally strong there. Do you expect that, that is likely to continue as you -- as it sort of catches up with some of the other villages within your portfolio, kind of extracting that low-hanging fruit? Should we expect that to be the strongest growth in the near term? And then secondly, just around kind of firepower with where you're at 17% LTV today. Obviously, fully acknowledge you're trying to manage the interest cost for the business, but how you see that and the relationship with Norges and what that does for their ambition to grow as well? Ian Hawksworth: Thanks, Yes, we're really pleased with the progress we've made on Carnaby Street. I think what gives us confidence that it will continue to perform really well is the brands that we brought into the estate are trading at significantly higher sales densities than some of the previous incumbents. And that gives us confidence that it will support rental growth over the medium to long term. And we are seeing reasonably positive improvements in Zone A rents, which is, as you know, is how the market actually looks at it. But they're still well below other locations within our portfolio and well behind the general tone in the West End. So yes, I do think you'll see significant growth, but we're delivering growth across the portfolio. Covent Garden is doing very well as is Chinatown. But yes, we've got high hopes for Carnaby Street, definitely. Do you want to? Situl Jobanputra: Yes, sure. On your point about firepower leverage growth, I think we're in a very strong position. And that's a deliberate strategy so that we are well protected on the downside. And as you say, we're managing interest costs, but it means that we can put money to work when we see interesting opportunities. And one of our priorities is deploying that capital accretively. So there's plenty of room within our leverage ratios and our liquidity to do that. And as you also observed, the formation of the partnership is a further source of capital for growth in Covent Garden. So we see opportunities across all of our estates. James Carswell: It's James Carswell from Peel Hunt. Maybe just one on -- following on from Max's question. You've got the firepower. What are you seeing in terms of acquisition opportunities? I mean I appreciate the small buildings pretty liquid in your kind of markets. But I mean, are you seeing any [indiscernible] of the larger lot sizes? Do you think that will kind of bring you some opportunities? Ian Hawksworth: Yes. The team has got quite a lot of real estate that they're tracking. Obviously, whilst there's a lot of activity in the West End buildings that are adjacent to our portfolios don't trade very often. So we are focused really on driving value out of the 640 buildings that we've got and being in a position to move quickly when real estate does come available. We bought 1 or 2 things last week -- last year. They are sort of acquisitions that add value to the individual components of the estate. But clearly, at some point, we'd like to expand our ownerships substantially. And I think those opportunities will arise. Oliver Woodall: Oli Woodall from Kolytics. Congratulations on the strong set of results across the board, particularly your office segment seem to have very strong like-for-like rents. I wonder if you could give an outlook for the demand here for office and then separately for food and beverage and retail looking forward, kind of what your outlook is? Ian Hawksworth: Yes. Thanks very much. Well, all parts of the portfolio are performing well. I mean office is about 20% of what we have split into 2 categories, really sort of purpose-built offices and then converted sort of Georgian properties. And as I said in the presentation, the demand is there, not just because the buildings are good and they're well managed, but the locations are really in demand. So we're seeing strong levels of demand, and I think we'll see continued rental growth in those components of the portfolio. But the bulk of what we do is retail and hospitality and retail demand is continues to be very strong. I mean many commentators are saying the retail leasing market is as strong as they've ever seen it. I think there was one of the brokers put out a report recently saying demand is significantly higher than it's been for many, many years. So that supports the prime locations that we have. And you can see that in the number of new transactions that we've done and the pipeline. I think Will Oliver is somewhere in the room. He's in charge of leasing. So he's a very busy man at the moment. So I think you'll see continued activity in that area. F&B also very positive. There's virtually nothing available. And where we do get something available, there's multiple operators want to take the space on. So yes, very, very, very positive conditions across the board at the moment. Thank you very much. Any questions on the telephones? We've got a nod. We hand over to you Nimmo, excellent. Maxwell Nimmo: Okay. We do have one question on the telephone we've taken now. The question will be coming from Zachary Gauge of UBS. Zachary Gauge: Just a quick one from me. Looking at the sort of the consensus numbers for earnings in 2026. I think it's currently at 5p. So assuming a pretty similar growth rate to the one you saw in 2025. I know you don't give formal guidance, but just thinking considering the exchangeable bond refinancing at the end of March and obviously, interest rates in the U.K. probably coming in a little bit over the year with a slight headwind on cash. Do you think that kind of growth rate is in the right ballpark for the year considering that refinancing headwind? Situl Jobanputra: Let's talk about the building blocks, Zach. As you said, we don't normally comment on consensus forecast, and there is a bit of a range. So if we go through the main components that we think about, rental income growth, we talked about aiming to grow that cash rents in line with ERV growth, and we have an ERV growth target of 5% to 7%. On the other components, you'll see continued improvement over the next couple of years in the property level net to gross, and there are a number of initiatives that underpin that. And then on admin costs, we've been quite definitive on the guidance around that in terms of bringing down the cash cost element of that. And then the finance cost is, as you say, you've got some maturities and refinancing or repayment of that, and you've got lower leverage in terms of the effects of the transaction from last year. So our target with the current level of leverage is for the finance costs overall to be flat. So hopefully, that gives you a guide on some of the moving parts. Maxwell Nimmo: Ian, I will turn the call back over to you as we have no further telephone questions. Ian Hawksworth: Thank you very much. Okay, short and sweet. If you'd like to hang around for coffee, Peel Hunt will be very happy to give you one. Thank you very much, Peel Hunt, for the use of the facilities. We'll be around for a little bit. I'd say most of the team are here, asset management team, investment team, marketing team. If you'd like to spend some time with them, please feel free to do so. Otherwise, we look forward to seeing you down on the estate. The sun is out. There's plenty of nice places for you to go and eat and drink, plenty of places for you to go shop. So thank you very much for your attention, and we hope you have a good day. And if there are any questions, just call any of us as the day goes on. So thank you very much.
Operator: Good morning, everyone, and welcome to the XPEL Inc. Fourth Quarter and Year-End 2025 Earnings Call. [Operator Instructions]. Please note, this conference is being recorded. I will now turn the conference over to your host, Jen Belodeau of IMS Investor Relations. Jen, the floor is yours. Jennifer Belodeau: Thank you. Good morning, and welcome to our conference call to discuss XPEL's Fourth quarter and year-end 2025 financial results. On the call today, Ryan Pape, XPEL's President and Chief Executive Officer; and Barry Wood, XPEL's Senior Vice President and Chief Financial Officer, will provide an overview of the business operations and review the company's financial results. Immediately after the prepared comments, we will take questions from our call participants. A transcript of this call will be available on the company's website after the call. I'll take a moment now to read the safe harbor statement. During the course of this call, we will make certain forward-looking statements regarding XPEL, Inc. and its business, which may include, but are not limited to, anticipated use of proceeds from capital transactions, expansion into new markets and execution of the company's growth strategy. Such statements are based on our current expectations and assumptions, which are subject to known and unknown risk factors and uncertainties that could cause our actual results to be materially different from those expressed in these statements. Some of these factors are discussed in detail in our most recent Form 10-K, including under Item 1A Risk Factors filed with the SEC. XPEL undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. With that out of the way, I'll turn the call over to Ryan. Please go ahead, Ryan. Ryan Pape: Thank you, Jen, and good morning, everyone, and welcome from me also to the fourth quarter 2025 and year-end conference call. '25 was a significant year for us. We accomplished a lot, including our long-planned China distribution acquisition, significant completion of our plans to have a direct position in the largest car markets of the world and then also positioning ourselves for significant change going forward with planned investments in manufacturing and supply chain. We closed out the year with good momentum Q4 revenue growing 13.7% and Q4 EBITDA growing 37.6%. Our U.S. region, which is the largest, saw revenue growth of 11% in the quarter, which is a good result in light of sort of all the ongoing dynamics, which sort of largely unchanged. The corporate stores, dealership service business and aftermarket all saw growth in their various piece parts. I think our results are probably consistent with the macro car sales trends, Q4 being sequentially down in terms of units, reflecting normalization of earlier strength in the year and attempts to front-run tariffs and then get ahead of the EV credit expiration. In our case, we likely saw a greater-than-expected negative impact in Q4 for the U.S. as a result of that EV pull forward due to the expiring credits. Compared to what we were expecting, it probably cost us $1 million to $2 million of end product demand from our referral program channel alone, not including the rest of the market. And that referral program has really been a bright spot this year. So we saw that manifest with just outstanding revenue performance in September and October, which would have correlated with the end of the EV credits and then the following month, which is really replenishment cycle for our dealers. And then the demand in the referral program was down sharply for the rest of the year. But we're seeing signs of that recovering this year. The correlation between our buyer and the EV buyer writ large remains a little bit elusive for us. So obviously, the credit expiration is known and many have prognosticated on what that would be, but extrapolating exactly how that impacts the sales through our channels has proven a little bit harder. But we see significant rebound in the EV sales through the referral channel, obviously, in the slower part of the year. So we're pretty optimistic for that going forward. We definitely felt that in the U.S. in the fourth quarter. Q4 was our first full quarter of post-acquisition China revenue came in at $14 million, probably a little bit higher than we expected, well underway in our integration efforts in the region. And as I mentioned previously, our team is doing a great job. Our acquisition here sets the stage really for growth in 3 segments of the business, the aftermarket, which for the longest time, had been the entirety of our business in China, 4S or dealership and then further OEM partnerships, which we've been engaged in for the past 18 months. As had been the case all year long, continue to see headwinds in Canada, revenue declining slightly compared to the prior year. Canada has been tough all year. You saw car sales in Canada down sequentially 13% Q4 from Q3. So it's obviously not helpful. Europe was a bright spot in Q4, revenue growing 26.8% in the quarter. really strong performance in our different multiple channels there. India and Middle East was good, although timing of distributor orders was a bit of a drag in the quarter, but very bullish about what we're doing there, and we're seeing the beginnings of activation in India in all of our channel types, not just the aftermarket. So that's really encouraging. Latin America was flat. Weakness there we saw in Q3 continued into Q4. A big part of that is conversion of Brazil into a direct market, which is really our last or close to last market where we want a direct presence. Our expectation for Q1 revenue is in the $112 million to $114 million range. This assumes ongoing U.S. trend, continued softness in Canada and then obviously, considerations for the impact of Chinese New Year, which is historically always impacts Q1. We'll see that a little bit differently now where we're selling directly versus the sell-in, so get through that quarter and then really our China sales will really start matching sort of the end market demand. So we're happy to see that. Our gross margin in the quarter finished at 41.9%, relatively flat to Q3. As we discussed in last quarter's call, we're managing through some price increases, which have largely been mitigated as well as selling through acquired inventory that we acquired in the China distributor purchase. So that's obviously at a stepped-up cost basis, so lower margin as we sell through that. We exited the quarter in an upward trend in terms of gross margin and expect gross margins to improve as the year progresses, consistent with our comments on the previous call. As I alluded to earlier, we saw good operating leverage in the quarter, EBITDA growing 37.6%. As we've been discussing, we continue to expect to gain leverage on our added channel costs as we grow all of these operations. Reflecting on the year, I'm happy with our overall performance. Top line growth of 13.3% was solid relative to the environment. We've done a nice job managing through some of these headwinds in gross margin and being able to largely complete our strategy of being direct in these top car markets. I think that's going to be a significant accomplishment and represents significant expense that we've added that now the team is going to grow through that for us. We continue to advance our DAP platform. This has become more integrated and continues to become more integrated into the business of our customers. We're getting great feedback really on the accelerated rate of development here. And that's, I think, due to a couple of factors being the bulk of our sort of legacy tech debt being eliminated for having been in this business a long time. And also, we're certainly seeing productivity gains from AI like many are talking about, specifically in that field. We've sharpened our product strategy to focus really on our core products and just the immediate adjacencies and improvements to the core products that comprise most of our sales and where we have the technical competence. I would say, overall, we've probably focused on too many incremental product adds rather than the full focus on selling more of our core. And I don't think these are things we talk about on this call, the products we've talked about here that we've launched like the colored films, windshield films. These are really straight to the core. But sort of behind the curtain, there's been a desire to sort of be all things to our customers and supplying them everything they might need to run their business. And reflecting on that, we really pulled back on that because we're not adding a lot of value there and the effort really needs to be on selling more of the core product. So I think we've successfully made that pivot this year, and I think that's actually quite important. We started the year with an incredible dealer conference despite terrible weather at the time really across the country and in Texas, where we host the conference. We had 720, I believe, registered attendees, all-time record. pretty amazing in my mind, given the fact that we've added international conferences since we started, which obviously takes some of the demand for the main conference and in spite of the weakness in the aftermarket. So either way, it was really great and good validation. And it's a fire hose to our team of customer input that really helps us sharpen what we're doing. In terms of our previously discussed investments in manufacturing and supply chain, our work there continues. We expect to have more to discuss over the next several months. But as compared to our previous call, there's really no further update for today, except to say the plan and strategy remains on track. We're excited and optimistic about '26. I think this is a sentiment shared by our team and many of our customers. certainly as we hear their feedback in person at our conference. And we'll see how that plays out. I think it's an open question exactly what drives that relative optimism that we see, but I think it's encouraging, nevertheless. And we've got strong prospects for growth in every part of our channel in every customer type in every geography. And as you know, we've got retail customers, we've got aftermarket installers. We've got car dealers, we've got car manufacturers. And we're seeing opportunities in really all of those customer types around the world. So I think it's really a validation of the strategy of why we need the presence that we've built. And to that end, our regional leaders and P&L owners, they're all budgeted to grow their operating leverage this year. And then combined with the gross margin growth that we expect, we'll see benefits at the operating line of the business. And obviously, that's net of any incremental costs we might add pursuing our manufacturing and supply chain, should we add costs prior to manifesting in any COGS savings. But if and when that happens, we'll certainly talk about that. So overall, our team is doing an amazing job. I really couldn't be happier, and we've really seen incredible focus on what's going to be important for us going forward and I want to thank all of them. So with that, I'll turn it over to Barry. Barry, go ahead. Barry Wood: Thanks, Ryan, and good morning, everyone. As Ryan said before, it was really a solid revenue quarter for us. And just to note a couple of the components. Our total window film product line grew 10%, which is a good result given the seasonality of the product. And for the year, total window film grew 21.7%, which was primarily driven by market share gains in auto, along with a nice lift from windshield protection film, our new product. Our total insulation revenue increased a little over 17% in the quarter and 17.2% for the year with, again, solid performance in each of our core channels within that line item. Our gross margin in the quarter grew 17.1% and for the year, grew 13.3%, which I think are really good results in light of some of the headwinds we faced in the quarter and during the year. Our total SG&A expenses grew 13.9% in the quarter to $35.7 million, representing 29.2% of total revenue. And this was relatively flat to Q3, which I think is a good result as we have elevated SG&A in Q4 due to our largest trade show of the year that occurs each November. And we saw, as we expected, our SG&A growth rates moderate during the second half of the year. And as Ryan mentioned, we still have some leverageable costs in our cost structure, which we will -- we realize as we continue to grow. And for the year, our SG&A grew 17.1% and represented 29.1% of revenue. Our EBITDA grew 37.6% versus prior quarter to $19.6 million, which was essentially flat versus Q3 despite lower Q4 sequential revenue. Our EBITDA margin finished at 16%. And for the year, our EBITDA grew 11.4% to $77.4 million, and our 2025 EBITDA margin finished at 16.3%. Our effective tax rate in the quarter was a little under 14% as we took advantage of some provisions in the new legislation and other onetime items that were booked in Q4. So for future planning purposes, you can assume 21% effective rate going forward. But this, along with some FX effects drove some of our net income attributable to stockholders growth in the quarter, which increased 50.7% to $13.4 million, reflecting 11% net income margin. Our operating income, which doesn't have that noise, increased 25.4% in the quarter. EPS for the quarter was $0.48 per share. And for the year, net income attributable to stockholders grew 12.6% to $51.2 million, reflecting a 10.8% net income margin, and our 2025 EPS closed out at $1.85 per share. Early in the quarter, we did buy back a relatively small amount of shares to the tune of approximately $3 million. As we've discussed on our last call, our capital allocation strategy is centered on investing in the core of the business, including manufacturing and supply chain. We'll continue to evaluate further buybacks relative to our planned investments in M&A and M&A, I should say, with an appetite for modest leverage to accelerate our returns. Our cash flow provided by ops was $2.7 million for the quarter and $66.9 million for the year, which was a little over 86% of our total EBITDA and right at 40% higher than last year. The cyclicality of our operating cash flows is similar to our revenue cycle where our highest cash flow quarters typically occur in the second and third quarter, and this year was certainly no different. And just a reminder on the revenue cyclicality, Q1 is typically our lowest quarter of the year. Q2 and Q3 are our highest quarters, and Q4 is usually lower than Q2 and Q3, but not as low as Q1. So really good year for the company, and we're excited for what the future holds for us here at XPEL. And with that, operator, we'll now open the call up for questions. Operator: [Operator Instructions]. Our first question is coming from Steve Dyer of Craig-Hallum. Matthew Raab: This is Matthew Raab on for Steve. Just want to ask what's contemplated in the Q1 revenue guide, which was in line to our estimate, at least. We saw auto demand was a little bit weaker in Q4. It feels like that continued into January, and we'll see how Q1 shakes out. We had some weather impacts recently. Ryan called out the EV mix changes. Luxury was a little worse. So quite a few puts and takes there. Are you able to parse through kind of what all that means for you guys? I'm just trying to get a sense of where you're seeing some headwinds and maybe if there are some more transitory elements in the very near term. Ryan Pape: Yes. Well, it's a great question. I mean I think the answer is, to your question, is really half yes and half no. I mean I think if you look at our business across all the different customer types, I think in '25, if I'm saying the number correctly, we have something like 20,000 customers that we've transacted with in some form or fashion across all the different customer types. And that's obviously grown through the increase in our referral program. We're actually selling to more individuals with that. All of these things have just fundamentally different drivers. If you're looking at the OEM business, we're, for the most part, at the mercy of production versus sales. If you look at the dealership business, half of it's driven by sales in terms of F&I, half of it's derived from inventory and growth or reduction in inventory on the ground when products are being preloaded. Distributor pieces are subject to timing impacts in the quarter, all that's a much smaller part of our business now. And then the aftermarket is typically more consistent, but ordering on such an infrequent cycle that you could really only extrapolate from recent ordering. So I guess all that to say that we have a process that we use to forecast the business, and it continues to improve over time, but it hasn't largely changed. And so as things change off of their run rate, in particular, either that method of doing that is more vulnerable to having a wider outcome. So I think to your point, I mean, obviously, the weather has been bad. You've seen -- you've seen lost days in some places, days of sales that may be shifted into the rest of the year. So we do our best to capture all that in that guide. But subject to limitations there are. And then the other part, as Barry mentioned, in terms of seasonality is March is really the month every year that sort of makes the quarter -- for the first quarter because it's really when you start to see the aftermarket pieces come alive. So a lot of what happens depends on March. But I think we've -- within the constraints of what we have, we've factored a lot of that in. Matthew Raab: That's great. Maybe switching over to the in-house manufacturing. I'm curious how you see that playing out over time. Do you think it's a gradual build-out over the next several years where you guys are adding capacity as you go along? Or are there opportunities for adding bigger chunks? I guess I'm trying to get a sense of the cadence of margin expansion as we look out over the next couple of years. Is it a step function change as you add capacity? Or is it maybe more linear with a more gradual build-out over time? Ryan Pape: Yes. That's a great question. And I think the answer is depending on the final decisions that are taken, it could be either of those or both. And we really we talked before that as we get kind of into the March and April time line, we're going to be making decisions around that. If there's more sort of internal new build, there's probably a more incremental change, step change and then more incremental. But as we pursue -- if we were to pursue M&A and some of the JV opportunities we see, then there's more of an opportunity for more pronounced step change. So I think it's still a little bit too early to say, and we'll certainly keep everybody updated on that. But there's an opportunity for either or both or some combination of the two. Operator: Our next question is coming from Jeff Van Sinderen of B. Riley. Jeff Van Sinderen: Just kind of more of a housekeeping question to start with. I think the DSOs were up a little bit. Maybe you can speak to what's going on there. And then also kind of a 2-part question here, maybe add a bit more color on what underpins your optimism for 2026. Ryan Pape: Yes. I mean I'll defer the first question to Barry, if you've got a comment on that. I don't think there's anything significant reflected there. Barry Wood: There's no -- there's nothing significant going on with the DSOs. It is trending up a little bit. And probably if I'm going to attribute that to anything, it's going to be some of the OEM business that we've been getting the new OEM business as the terms on those are a little longer than than what you historically see, but that would probably be the main thing that's caused it to tick up, but nothing alarming to see there. Ryan Pape: Yes. And I would add to that, I think a question that we would get occasionally is sort of just when you look at the aftermarket and the health of the aftermarket over time, are we seeing a degradation in sort of the timely pay and things like that, just if there's stress in any of the channel. And the answer there is really no. I think it's been quite healthy even as you've seen all those customers sort of off their peak. And then yes, if you could repeat your other question, sorry. Jeff Van Sinderen: Yes, sure. No problem. Just a bit more color on what underpins your optimism for 2026. Ryan Pape: Well, I mean, I think that like we talked about with the previous question, I mean, you have so many different inputs in the data and then you have all of these other sort of more subjective factors. And I see -- I just see increased optimism from our team and from our customers in general, just in talking with them and visiting them that isn't a qualitative factor in the data. And I think you have to weigh that in how you look at the market and the opportunity, mainly because they're a pretty good indicator many times of what you can't always measure and forecast. And I think you saw that when you really saw the aftermarket slow in the beginning of 2024. As that happened, you start to hear from people, wow, I've not been this slow. I've not seen my shop this empty. And those are all anecdotes. But when you take them together, I think that they're not immaterial. I think if you want to look at sort of more structural things, I mean, there's probably some optimism to be had in terms of the overall sort of vehicle affordability. I mean there's plans to really trade down content to get pricing right, the tariff thing, who knows? I mean, I guess that's changed even within the past week. So I think that's really an open question, but was maybe some sort of certainty there was previously generating some type of optimism and then rates and things are down from their peak. So I think all of those are better going into this year than perhaps the year before. So I think it's a combination of all of those. And then the added piece that we have is just looking at our pipeline of customers and new customer wins and why are we winning, who are we winning business from. All of that's been quite positive. And this is really against a backdrop, which I think is hard to appreciate from the outside looking in. And when we talk to suppliers and component suppliers and different people in the industry, demand for many people and many of our competitors is down. It's not a factor of wishing growth is higher. It's a factor of demand is down. And so I think you've got to weigh that against what we see in our results and our pipeline, and that's another tick of the box in terms of being optimistic. And I think for me, obviously, I want good numbers in this quarter or that quarter or this year or that year. But way more important than that, I want to know that we're doing a better job as a company next year than this year. We're providing more value. We're providing better service. We're doing more things our customers want us to do. That's my top priority. Jeff Van Sinderen: Okay. That's all really helpful. If I could squeeze one more in. How do you expect gross margin to trend this year? Maybe any thoughts on Q1 gross margin? And then I know you mentioned getting some leverage through the P&L. Maybe just touch on OpEx, if you have any thoughts there. Ryan Pape: Yes. I would go back really to our comments from last quarter in the sense that as we get through Q1, we'll see those gross margin headwinds really abate being some pricing issues that we've talked about and then sell-through of that lower -- higher cost acquired China inventory rather. So our expectation would be as we get into Q2, we're posting gross margins at or above sort of the best that we've been. Directionally, I don't know exactly when that phases in if we see that in March or we see that in May. But there's definitely a [indiscernible] our corporate SG&A has really been wrangled better over the past 18 months. Most of the investment has been sort of in the field in the other operations, costs incurred from the M&A, costs incurred from these distribution businesses. There'll be some incremental costs on those. But as I mentioned in my remarks, when we look at how we've got our region leaders budgeted, they're all driving increased operating margins, budgeted to drive increased operating margins this year into all those regions and all of that expense. So I think that's that's good upside for us. And then the only thing that could impact that would be any decisions made in any of these different modalities around the supply chain and manufacturing and what impact that could have in the -- immediately or over time. But that will all be sort of well described at the appropriate time. Operator: Thank you very much. Well, we appear to have reached the end of our question-and-answer session. So I will now hand back over to Ryan for any closing comments. Ryan Pape: I'd just like to thank everybody for your time today and for joining us on the call. Have a great day. Operator: Thank you very much, everyone. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. We thank you for your participation.
Operator: Good day, and welcome to the Solaris Q4 2025 Earnings Teleconference and Webcast. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Yvonne Fletcher, Senior Vice President of Finance and Investor Relations. Please go ahead. Yvonne Fletcher: Thank you, operator. Good morning, and welcome to the Solaris Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining us today are our Chairman and Co-CEO, Bill Zartler; our Co-CEO and Director, Amanda Brock; our President, Kyle Ramachandran; and our CFO, Steve Tompsett. Before we begin, I'd like to remind you of our standard cautionary remarks regarding the forward-looking nature of some of the statements that we will make today. Such forward-looking statements may include comments regarding future financial results and reflect a number of known and unknown risks. Please refer to our press release issued yesterday, along with other recent public filings with the Securities and Exchange Commission that outline those risks. We also encourage you to refer to our earnings supplement slide deck, which was published last night on the Investor Relations section of our website under Events and Presentations. I would like to point out that our earnings release and today's conference call will contain discussion of non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in our earnings release, which is posted in the News section on our website. For more details on the company's earnings guidance, please refer to the earnings supplement slide deck published on our website. I'll now turn the call over to our Chairman and Co-CEO, Bill Zartler. William Zartler: Thank you, Yvonne, and thank you, everyone, for joining us this morning. 2025 marked a meaningful step forward for Solaris. We showed that we are successfully executing our strategy of growing and establishing a more diversified services and solutions business with accelerated earnings growth, improved long-term visibility and multiple pathways for meaningful expansion. Through new products, services and targeted investments, both organic and inorganic, we've strengthened our engineering, manufacturing and operational capabilities. This has positioned us to deliver reliable, integrated power solutions to meet our customers' rapidly escalating needs. Coming out of 2025, we're serving a much wider customer base, with active contracts and deployments now spanning multiple data centers, energy infrastructure and diverse industrial and commercial end markets with generation, distribution and full turnkey power. Our 2025 financial results highlight the success of our diversified strategy. Full year 2025 revenue nearly doubled year-over-year to $622 million, while adjusted EBITDA of $244 million more than doubled. Both of our Power and Logistics segments contributed meaningfully to these results. This is just the beginning of additional step change growth that we believe will accelerate through '26 and '27. Starting with our Power Solutions segment, which has become the primary growth engine for Solaris. Power now accounts for roughly 70% of our earnings and is heading to 90% contribution as we've consistently grown the business, expanding our capabilities and built on a strong track record of execution. Solaris is capitalizing on the rapid demand growth for power, particularly to support data center compute needs. Our solutions have enabled customers to deploy power quickly and cost effectively, while delivering the operational reliability, high uptime and efficiency they require whether as an alternative or as a supplement to the grid. We have strategically positioned Solaris across the power life cycle from molecule to electron. This integrated approach delivers true turnkey power for our customers. We can handle sourcing and delivery of clean natural gas at the right volumes and pressure, convert it through multiple generation sources and manage the distribution, storage and final delivery of electrons, all engineered as a cohesive system to meet the most complex and demanding load profiles. Our strategy has translated into commercial success with both existing and new customers. In 2025, we significantly expanded our partnership with our initial major data center customer. We finalized a 15-year joint venture and upsized the associated long-term power agreement for approximately 500 to 900 megawatts, providing greater visibility with substantial committed capacity for years ahead. We also acquired a specialty provider of voltage distribution and control equipment that has now been integrated into Solaris Power Solutions. This strategic acquisition has deepened our capabilities and accelerated market penetration, enabling us to deliver integrated equipment and engineered solutions to at least 6 different data centers across the U.S. as well as in numerous industrial and commercial sites. Building on our success, I'm excited to highlight a significant new long-term contracted customer which further validates our strategy and reputation in the behind-the-meter power market. In early February, we announced a 10-year agreement, with a 5-year extension option, to provide leading investment-grade, global technology company with over 500 megawatts of power generation tailored to their compute needs. The initial 10-year term begins January 1, 2027, with energization targeted to be phased in, in the beginning of the Q1 of 2027. This agreement validates our strategy of sourcing generation capacity in advance of a contract so that we can successfully deliver behind-the-meter power on aggressive time lines. We are actively working with this customer to deliver more services related to balance-of-plant equipment such as full power control, storage and delivery infrastructure, engineering and site preparation. As we move forward expanding our scope, we will deploy additional capital, which will provide Solaris with enhanced returns through the contracted period. We believe that we are well positioned to continue to work with this customer on behind the meter solutions to meet their growing compute needs. Underscoring the opportunity ahead, the 4 largest global technology companies have recently guided to combined capital expenditures exceeding $600 billion in 2026, focused primarily on data center infrastructure and compute. That's roughly a 70% increase from 2025 levels and nearly double the spending seen in 2024. With data center and compute power investments accelerating rapidly, Solaris is exceptionally well-positioned to capitalize on the surging demand for reliable, scalable power. Our proven solutions enable us to partner effectively with leading technology companies who are contracting directly for behind-the-meter options to meet their urgent compute needs. I would also like to highlight the continued performance of our Logistics Solutions segment, which is performing well and contributed over $80 million of free cash flow in 2025. In the fourth quarter, we saw activity levels for both the industry and Solaris increase, with Solaris' success driven in part by increasing adoption of our top-fill systems. Our top-fill system utilization rate was in the mid-90% in the fourth quarter and now nearing 100% in the first quarter. This momentum is expected to carry through for the first half of 2026, supporting consistent utilization and margins while generating cash to fund our broader growth initiatives across the company. In summary, 2025 was a year of successful execution which positions Solaris for even greater success in 2026. We are extremely focused on delivering value for our customers and shareholders, and we're excited about 2026, which is already shaping up as another year of significant growth, new opportunities, continued execution and results. With that, I'll turn it over to Amanda. Amanda Brock: Thank you, Bill, and thank you, everyone, for joining us this morning. We want to spend a few minutes sharing with you how we see our opportunities evolving in the power sector. 2025 was a year of rapid change and significant tailwinds for the company. Our customer base expanded and we grew our capabilities to meet our customers increased demand for turnkey behind the meter power. We focused not only on building on our proven track record in generation, but also distribution, offering a comprehensive power solution, which we refer to as molecule to electron. We're strategically building our capabilities through organic growth and targeted acquisitions like HVMVLV, which Bill mentioned which has already exceeded expectations since closing last summer. This brings in-house expertise to design, manufacture, refurbish, sell and rent specialized control and distribution equipment, such as transformers, switchgear, e-houses and this also deepens our engineering expertise across voltages and related applications. The result is broader reach to data centers, industrials, utilities and beyond, delivering tailored power solutions regardless of source or setup. For example, Solaris is now providing equipment and engineering support to customers where grid connections are delayed due to utility equipment and interconnection challenges. This type of diversification creates real value and expands our opportunity set significantly, beyond just generation. We will continue to look for opportunities like this to expand our capabilities as a comprehensive provider of critical power infrastructure. As we evaluate opportunities across the power spectrum, emissions controls is another area of focus where Solaris has invested both organically and inorganically to enhance our capabilities. We view being best-in-class in emissions management as essential to our own operations and customer priorities. Organically, we've drawn on our growing internal engineering and manufacturing teams to refine and customize selective catalytic reduction, or SCR, designs for improved flexibility and mobility. Additionally, we recently made a small inorganic investment in an SCR manufacturer, bolstering our ability to further integrate these technologies. Our emissions control technologies are well aligned with the EPA's recent subpart KKKKa, quad k, amendments to the New Source Performance Standards. These changes provide clarification and support for operating modular and mobile turbines in temporary applications for up to 24 months, bridging the gap before permanent behind-the-meter air permits or grid connections are secured. Combined with our vertical integration in emissions controls, this gives us significantly greater flexibility to deliver fast, reliable and compliant deployments for our customers. We're continuing to see strong regulatory tailwinds from ERCOT whose recent push to batch large-load studies for requests over 75 megawatts is a necessary step forward to clearing the estimated 230 gigawatt queue backlog fueled by data center demand. However, it also spotlights the growing delays and scrutiny facing grid-based projects. Our rapid deployment behind-the-meter solutions mitigate these challenges for technology companies attempting to quickly deploy compute capability. Starting a project in island mode, fully behind the meter can avoid significant delays associated with connecting to the grid. The growing demand for power, combined with these regulatory tailwinds, our demonstrated track record of execution and our expanded capabilities have accelerated our ongoing discussions with multiple end users to deploy more capacity. We're in advanced negotiations to contract our remaining open capacity and are actively pursuing new capacity additions to support incremental opportunities. Simply put, we believe we have more demand than we have capacity and are actively exploring innovative ways to access new capacity to ensure we can meet the growing needs of all our existing and potential new partners. We are particularly encouraged by the accelerated pace of these opportunities and the credibility we have earned through nearly 2 years of successful at-scale operations, including the rapid commissioning of multiple large data centers. This proven foundation gives us a clear edge as we scale further and continue to grow in the coming years. With that, I will turn the call over to Kyle for a detailed financial review. Kyle Ramachandran: Thanks, Bill and Amanda, and good morning, everyone. Solaris' fourth quarter demonstrated solid execution in our Power Solutions segment as well as continued execution and strong free cash flow generation in our Logistics Solutions segment. For the full year, growth was tremendous across the Power Solutions platform, and we're excited to continue to grow this segment as well as the total company. 2025 was also a year in which we strategically positioned Solaris for growth from a financing perspective. We strengthened the balance sheet by raising capital through 2 convertible bond issuances, established financing for our joint venture partnership with a key customer and repaid our 2024 term loan. The combination of these activities has driven significant interest cost savings and financial flexibility for the company. As a result of these recent financings and the ongoing cash flow generation from the business, we are currently fully funded for all of our expected deliveries to reach 2,200 megawatts of power generation we expect to have pro forma for all the scheduled equipment deliveries. This leaves our secured borrowing capacity outside of the JV completely available as an option to fund future growth outside of our planned deliveries. Our financial profile has also improved significantly with our recent commercial success. Adding a new investment-grade customer for a minimum 10-year term for over 500 megawatts adds significant visibility to our earnings and cash flow profile, providing additional financial flexibility. Turning now to a review of our fourth quarter results and our outlook for the next 2 quarters. During the fourth quarter, Solaris generated revenue of nearly $180 million and adjusted EBITDA of $69 million on a consolidated basis. Our adjusted EBITDA increased slightly from the prior quarter and nearly doubled as compared to the same quarter of 2024, driven by the acceleration of our Power Solutions segment. During the quarter, Logistics Solutions benefited from an increase in completions activity as well as continued adoption of our top-fill solution, which more than offset a modest decline in Power Solutions due to a less favorable project mix and related timing impacts on costs. We generated revenue from approximately 780 megawatts of capacity during the fourth quarter, relatively flat with the prior quarter. Segment adjusted EBITDA for the Power Solutions segment was $53 million, a modest decrease from the third quarter due to costs associated with timing and mix impact as owned generation units rotated off a utility resiliency project and into planned refurbishment before being redeployed under a long-term contract in the first quarter of 2026. This impact was more than offset by an increase in the continued selective use of third-party power generation capacity as activity continued to ramp at our second data center site, which also contributed to a lower margin mix. We expect Power segment adjusted EBITDA for the first quarter to increase by more than 20%, as both owned and third-party leased capacity generating revenue should increase. In our Logistics segment, we averaged 93 fully utilized systems, an increase of 11% from the third quarter. Fourth quarter segment adjusted EBITDA was approximately $23 million. We expect our Logistics segment adjusted EBITDA to remain relatively flat for the next 2 quarters. Netting these factors and considering corporate and other expenses, total adjusted EBITDA guidance for the first quarter is now $72 million to $77 million, up from the prior guidance of $70 million to $75 million and a sequential increase from the fourth quarter. We are also introducing our second quarter 2026 total adjusted EBITDA guidance of $76 million to $84 million. Accounting for expected longer-term tenor on our fully delivered 2,200 megawatt generation capacity and our recent acquisition, we continue to expect pro forma total company earnings of over $600 million, before considering any additional project scope or growth with our existing customers or new opportunities. Finally, I'd like to introduce and welcome Steve Tompsett, who officially joined earlier this month as Solaris' new Chief Financial Officer. Steve brings a strong record as a financial executive with deep expertise in capital markets, building and leading high-performance finance and accounting teams and guiding companies through periods of significant transformation and growth. Many members of our management team, Board, employees and investors have worked with Steve before, and we are confident he will exemplify the Solaris culture and deliver substantial value to the company. I am excited to continue as President of the company and will be able to allocate increased focus on our strategic priorities of advancing our overall growth strategy, strengthening operations and driving long-term value for our stakeholders. With that, we'd now be happy to take your questions. Operator: [Operator Instructions] Our first question will come from David Arcaro with Morgan Stanley. David Arcaro: Congratulations on the new customer announcement here, but I do have to ask, where do negotiations stand with additional customers now to allocate your remaining capacity, if you could elaborate on that and what potential timing might be possible? William Zartler: Well, we're in very active dialogue, and I think it tees up the discussion. We really have the history and operating philosophy of focusing on announcing deals when they're completed and done. The pipeline is extremely active. We have lots of paper flying back and forth with multiple customers, but our goal is to deliver to the public and to our shareholders signed and completed contracts that have a lot of meat in them. So the dialogue is active, and we feel very confident that we've got plenty more demand than supply, as Amanda referred to, and that we'll be seeing things unfold in due time. Amanda Brock: David, these are not discussions. We were very deliberate in our wording. These are active negotiations. So we expect to have good news here in the near future. David Arcaro: Okay. Excellent. Understood. That makes sense. And then I was curious, you had mentioned increasing scope here that you are seeing opportunities for. Wondering if you could just maybe characterize how much of a value uplift you could realize relative to maybe like the EBITDA stream in the baseline power offering if you're starting to consider those things like balance of plant emissions control, et cetera. And I'm wondering if that could apply to your current contracted fleet as well? Are there kind of almost upsale opportunities there? William Zartler: Yes. I think the notion of adding additional distribution equipment and battery systems to the offering is real. I think with the current customer that with the most recent announcement, the intent is to build out that system and deliver a full turnkey power service. So as that develops, we continue to believe return on capital is the way we look at that and the return on incremental capital will be there. And I think the range is anywhere between 20% and 50% per megawatt depending on how that scope varies and how far upstream to the gas handling it goes and how far downstream to the actual distribution and transformation of the power goes. Operator: Our next question comes from Derrick Whitfield with Texas Capital. Derrick Whitfield: Also congrats on your recent hyperscaler contract. Perhaps Amanda, in your prepared remarks, you noted you're in advanced negotiations to contract your remaining open capacity and are actively pursuing new capacity additions to support incremental opportunities. Regarding the new capacity, are you attempting to solve for new capacity in 2027 or early 2028? And then secondly, is that really to expand with your current customers? Or is it really to add a third hyperscaler to the opportunity set? Amanda Brock: Thanks for the question, Derrick. And yes, capacity is something we've been talking about for a long time. We made it very clear that the 2.2 gigawatts was not where we were going to stop. We also, as you know, have talked about through all of our acquisitions, got a lot of domain knowledge through MER and HP in terms of where there is additional capacity. We are looking and have line of sight for capacity -- additional capacity in '27 and '28. And this capacity will be for additional opportunities. We have enough capacity for the opportunities that we have signed up for at this time, even though we also expect that to expand over time. Derrick Whitfield: Terrific. And then maybe, Amanda, just staying with you on EPA's recent quad K amendment, it seems like a very positive development for your business and speed to market. How should we think about its practical impact for what you're facing today? And while I understand permits aren't your issue per se, there has been some noise or concerns around the Mississippi operations. So I guess, in your view, a, what's your view on the business impact with quad K amendment? And then secondly, how are you thinking about what's taking place right now on Mississippian, and if that will likely take the same direction than Memphis did? Amanda Brock: So quad K is a clarification and further sort of enabling certainty. And so it comes up as a regulatory tailwind. We see this as something that we expected to come through. We were very pleased to see the 24 months, so expanding the temporary ability to be there from 12 to 24. That is certainly something that very much favors the behind-the-meter options and alternatives that we offer, particularly in an environment in which speed to compute is incredibly important. So this is great for us and having this clarification. In terms of Mississippi, we really don't comment on that. And moving on to another question, where you referred to our responsibility from a permit perspective, I will say that we track that very carefully. And there are circumstances in which we are in discussions where we will, at certain locations, work with our customers as it relates to ensuring that the appropriate permits are there. Customers are increasingly ask us to take on additional scope. We are talking about this as molecule to electron. In Bill's remarks, he referred to doing more on the gas side and obviously, as part of that, we may be doing more on the permitting side. So quad K, great tailwinds for us. Operator: Our next question comes from Bobby Brooks with Northland. Unknown Analyst: This is [ Ketan Chokshi ] on for Bobby. Other companies providing or planning to provide behind-the-meter power have come out and announced targets to where their peak capacity will grow to. For example, they might be at 100 megawatts today with another 300 megawatts ordered because they talked about getting to a full gigawatt by 2030. What are your thoughts on that, firstly? And then secondly, could you discuss maybe how you think about your capacity evolving through the end of the decade? William Zartler: That's a good question. I mean I think I alluded to it a little bit earlier. I mean that the pipeline of opportunities is just giant. And we have come out when we bought MER 2 years ago and said we'd be at 2 gigs now. We didn't do that, but we did it. So I think our philosophy on how we operate is communicate to our shareholders when we have deals across the finish line and not spike the ball too early. But the pipeline of opportunities and the opportunity set is very large. I'm very confident that we will have more than we have today in a couple of years. And if you look forward, it continues to grow. There's a lot of tailwinds, both in how power should work in this country for these large loads and what the right mechanical setup is for that generation behind the meter. And I think we'll play a significant role in how this evolves with our partner customers that understand how to position this, how to position it within the greater power infrastructure and ecosystem to enable it to be there for the development of data centers as well as trying not to impact consumer pricing in a negative way. Kyle Ramachandran: Yes. And just to follow up, and we alluded to the note on the call around the hyperscalers capital spending, but this is a massive investment cycle, and we've got really attractive opportunities to build infrastructure to support their underlying investments at rates of returns that are very attractive to us under long-term contracts. And to the last point Bill made there, clearly, last night in the state of the union, affordability with respect to energy prices broadly is paramount to the administration as well as to the consumer. And I think what's very clear here is what we're offering is both economically attractive relative to the long-term cost of adding additional power onto the grid. And secondly, from a time to power perspective, it's a really valuable strategic opportunity for our customers to have in their quiver. Unknown Analyst: Great. Very helpful additional color. And then secondly, for another follow-up. It was great to see the 500 megawatts come off the board with an investor-grade technology leader. What I was curious to hear was if you could provide any further color around how the deal came to fruition and the associated time line of that deal? William Zartler: Well, every deal -- every transaction has its own life cycle. I think we've been in communication with most of the major customers for the past 6 months to a year, and they evolve, their needs have evolved and the recognition of where they need kind of takes a while. These are big decisions. So at the end of the day, the contract tenor length requires a high level of approval within a very large organization. So we're nimble and quick, and we'll go at the pace at which our customers can go and need the power. So they -- I would, on average, say that the industry would agree they're taking slightly longer to put together than anyone might have expected, but they're happening and deals are closing. Kyle Ramachandran: And we've been at this strategy and operation for roughly 2 years. And I would say the first year was certainly in stealth mode. And more and more of the sort of track record that we developed is being well understood by the other participants in this market. And so that has just been a process for that track record to get unfolded, and I think that's really resonating with customers. William Zartler: Yes. And philosophically, our notion of underpromising and overdelivering, both from a delivery of information to the Street as well as from an operational perspective, our operational capabilities and engineering capabilities and execution capabilities have dramatically improved as we've built that out over the last year. And so that gives us a lot more confidence on how we build out the balance of plan and how we deploy the equipment. Amanda Brock: Ketan, to be a little specific, we do make the comment that these conversations are accelerating as people are looking at sites, as people are getting comfortable in island in mode, complex deals and that we've been dealing directly with the hyperscalers themselves, which is an advantage, and these deals and the time lines are accelerating. Operator: Our next question comes from Derek Podhaizer with Piper Sandler. Derek Podhaizer: Just wanted to go back to the capacity expansion commentary. Obviously, I know you need more than the 2.2 gigawatts that you have today. But maybe on the funding side, just how should we think about the funding mechanisms that are available to you? You obviously noted that you freed up your secured borrowing capacity. But just thinking about as you progress towards 3 gigawatts, 4 gigawatts, wherever that target may migrate over time. Maybe just help us understand further as far as what funding we can expect as we continue to push the capacity targets higher? Kyle Ramachandran: Yes. I think we really cleaned up the balance sheet quite well at the end of last year and added significant liquidity into the system. That liquidity is already proving to be very advantageous from a strategic execution standpoint. We did that last year, obviously, with a couple of convertible bonds. As the maturity and the contract profile continues to grow and the notion of potentially multiple investment-grade counterparties, we really think the secured financing options for the business, both in the bank market as well as the sort of term debt market are ample. Bringing in Stephen has been a huge help with that regard. Steve has got extensive experience in getting out game rated, getting notes issued on behalf of companies. And that bandwidth is critical for us as we look at the long-term opportunities for us to finance the business. So I think as we look at it going forward, we've got really attractive cost of capital options relative to where we've been over the last couple of years. Stephan Tompsett: Yes. This is Steve. I'll just add on to that. There's quite a bit of appetite out there in the market, as Kyle alluded to, both bank market, term loan market, high yield and project finance. So I think you're going to see our cost of capital is improving, and that's just going to accrete to the bottom line. Derek Podhaizer: Got it. Okay. No, that's great. I appreciate the color. And then maybe thinking about the integrated power solution, you've talked about molecule to electron. Just thinking about how you optimize your turnkey solution with the grid longer term. Obviously, we're behind the meter. We're island power today. But maybe longer term, how do you think about potentially integrating with the grid, just say, as we move further into the 2030s, just how do you see your turnkey solution evolving with an integrated strategy and optimization with the grid over a longer period of time? William Zartler: Well, we certainly believe that, that will be potentially excess power ability at times to move back into the grid, complicated interconnection agreements and all that stuff. Mechanically, we have supported the grid in many ways with our equipment before. So we know how to form to the grid and perform all that. It's a matter of working closely with the utility and the regulators to ensure that what we can provide from the interconnection agreement. What we focus on today, however, is getting that power up and running at speed. The timing for those agreements is not fast. And -- but over time, we do think it may evolve that direction. Operator: The next question will come from Scott Gruber with Citigroup. Scott Gruber: I'll echo the congrats on the latest contract. So how do you think about getting back into the queue for additional equipment? Do you wait to contract the additional 400 megawatts? Do you get into the queue soon? And what are your thoughts on diversifying your supplier base, just as backlog is still across the supplier base? Kyle Ramachandran: I think we've been pretty clear from the beginning that as capacity gets contracted, we will be back obtaining more capacity in multiple different options in that regard. So to your point, there's OEMs. We have to date been tied pretty closely to one OEM. They've been a great partner. We'll continue to work with them. But we're obviously looking at other options. There are other new product lines coming into the market that look quite similar to the sort of workhorse asset that we've got in our generation fleet. And so we're evaluating all of those options. And clearly, while we were working in conjunction with our new customer, we were also working supply chain. So this isn't like a standing start. We've had these conversations warm for quite some time, and those dialogues are very healthy. I think we've demonstrated to be a very good customer to suppliers, paying on time, doing what we say we will do and generally being pretty cooperative with that whole mix. So we are being consistent with what Bill mentioned of doing what we say. And so with respect to more capacity, that's more of the same. And so we are actively analyzing those opportunities and expect to be able to provide updates in due course. Scott Gruber: I appreciate that. It was nice to see the 1Q EBITDA bump and 2Q grows, but it's a little bit more slowly than expectations across the Street and maybe the Street was just a bit ahead of itself. But Logistics, that segment is looking better. So can you just walk us through the kind of megawatts deployed across 1Q and into 2Q? And is there any uncertainty around the deployment schedule at Colossus 2 into 2Q? Or are you just embedding some conservatism until you get better line of sight? Kyle Ramachandran: Well, I mean, I think generally, as we look at providing guidance, we always try to embed some level of conservatism, rational and reasonable, but some level of conservatism. I mean when it comes to the timing of equipment getting deployed, most of that is out of our control. That's obviously subject to the OEM. And if you look at how we even shaped sort of the capital guidance for the fourth quarter relative to what happened, we assumed in the guidance that we would be receiving installment invoices ahead of when we actually did. And so some of this is a function of the supply chain and where they sit with their processes. We feel very good about the Colossus 2 project with respect to the total 900 megawatts that will be deployed there. The exact prescriptive timing week-to-week, month-to-month, quarter-to-quarter is going to be somewhat in flux depending on OEM deliveries. It's a massive project that's being built in real time. And so there's lots of civil work that needs to take place there as well. So there are lots of puts and takes that are outside of our control, quite frankly. And so that's driving may be somewhat of the guidance, but I don't think it has any impact whatsoever with respect to the run rate as we look at it. And we're still on track for Q1 of next year to be at the full 900 megawatts at Colossus 2. And then just finally, we have been able to use and to Amanda's point, with respect to some of the new regulatory analysis, an ability to put more power out there on a temporary basis to allow the customer to ramp their demand potentially ahead of when the permanent power comes into play. Operator: Our next question comes from Stephen Gengaro with Stifel. Stephen Gengaro: I think 2 for me. The first, and I'm not sure how much color you can add. But when you talk about discussions that are out there for that, I guess, roughly incremental 400 megawatts, are we talking about like discussions that are in the gigawatt range where you have multiple conversations going on? Or is it -- are they more sort of isolated discussions with specific customers? I guess is there any way to think about and kind of quantify sort of the near-term demand for that power? William Zartler: Stephen, I think the discussions are as widely varies as we need 100 megawatts to we need 2 to 3 gigawatts and how does that roll out over the course of '27, '28, '29 kind of time frame, and it's with multiple customers or a single customer. So the opportunity set, as Amanda mentioned, is significant. It's large. I think where we will focus on is closing with 1 or 2 customers in that 400-megawatt kind of range. Amanda Brock: What happens in these negotiations, which, like we've said, are negotiations not discussions, is we will maybe start with the 400 megawatts, but because of how electrification is phased in, we will then add over time. Stephen Gengaro: Okay. That's helpful. And the other question, when you think about the price of power, and I know like when you were first deploying assets and -- because you're basically at the customer site, you're kind of -- your cost of power is pretty close to grid power. And it feels like grid power or even at or below grid power. But as we have these kind of conversations about rising electricity costs over time, how do you price the power? Like are you able to take advantage or at least leverage the fact that power prices are likely rising over the next decade when you're signing these longer-term contracts? Like how does that discussion go? William Zartler: Yes. I mean I think customers intuitively understand this and how the shape of barcode. We're really focused on return on capital, focused on protecting our costs with colo. We're, in most cases, not buying the gas. The customers are buying their gas. So we're not at risk for that part of the expense going up, but we do see maintenance and all the regular costs that can increase over time. But I think this is a -- you can lock it up now and just like you might with a big power, you could do a capacity deal with some variable, which is what we're seeing both on this kind of behind-the-meter scale as well as colocated scale and protect and hedge for the next 10 to 20 years as it does. Operator: Our next question comes from Michael Dudas with Vertical Research. Michael Dudas: As you indicated in your prepared remarks and certainly, as we've seen in the market, demand seems to be much greater than supply and capacity. How is that evolving relative to the moat that you're creating given the momentum you've put together over the past couple of years? And how does that impact relative to what you want to do in the uplift to the other services to provide for your integration? Is the acquisition market or the opportunities there, are there quickly enough for you to generate the value from that just to really solidify your solutions profile? William Zartler: Yes. I mean I think, number one, this is a very big market. We will not be alone in development power for this industry, right? The numbers are staggering. So our moat and our offering is one of experience of operations, of knowledge of ensuring as reliable power as possible at attractive pricing. As we build out our offering, the more capital we can put to work and the more services we offer that we can get paid for is valuable and I think valuable to the customer and that what we're doing ultimately is just ensuring that they get the power where they need it, when they need it at the right voltage and type. And that will give us the amount of runway that this business needs to continue to grow very rapidly over the next several years. Operator: Our next question comes from Jeff LeBlanc with TPH. Jeffrey LeBlanc: In SLS, you're guiding to flat EBITDA on a sequential basis, while the pressure pumpers are flagging the winter storm fern, excuse me, is having a sizable impact on Q1 profitability, can you expand upon how your rentals business is insulating SEI from these types of disruptions? William Zartler: Well, we did see some downtime during the storm. So what we also see is additional growth in the business that's offsetting that. So I think we are growing maybe faster than the current pressure pumping market is just in terms of touch, the top-fill offering and the savings that it offers for some of these large frac jobs is real. And so we continue to see demand there, and we're virtually sold out, as I mentioned on the call, with that equipment. So given the growth in that from quarter-over-quarter, that's going to offset some of the declines that we saw in -- or most of the declines we saw in the storm. Operator: Our next question comes from Don Crist with Johnson Rice. Donald Crist: One macro question for me. As you're having these discussions, given all the state of the world right now with energy prices and the consumer-facing kind of aspects of that, how many of your discussions are 100% behind the meter versus kind of a hybrid approach with grid versus behind the meter? Is it more -- is it shifting more to where you're going to be a stand-alone island power plant for the life of the data center? Or is it still kind of a hybrid approach? William Zartler: I think there's a little -- there's still a bit of a hybrid. It's probably weighted toward behind the meter for the life of the plant, although we're having discussions with a few customers around having a mobile kit that they may rent for the next 10 years that we set up in advance of grid connections that they hope to get there over some period of time. And so the mobile nature and the service of being able to set up power quickly, the tailwinds with the quad K regulations, which is allowing some of that to happen on a temporary basis, kind of gives a couple of pieces of this offering. One is the pure behind the meter that may end up being co-located over time or we can go in and are looking for long-term contracts to be a bridge provider, which would mean that we may sit on sites between 1 and 2 years, but we have a contract with that customer for multiple years beyond that to move to site to site as they recognize that connections are slow and they're building out locations maybe faster than the grid can connect to them and they need a solution like that to complement their rapid growth. Amanda Brock: Don, we are seeing, as we said, there's acceleration of discussions. The tailwinds here, one, greater tenor on contracts. We always like to see that. Two, people in the last quarter, customers and end users getting very comfortable that they can be in fully islanded mode, successfully, reliably for a 10-plus year contract. So it's all of the above, but definitely a tailwind toward people getting comfortable that maybe they don't have to connect to the grid. And we think that last night, state of the union address with the ratepayer protection pledge, these discussions will continue to gain traction. Donald Crist: Yes, that makes a lot of sense. And just one further one for me. Obviously, the fourth quarter had some maintenance issues or not issues, but maintenance costs that were elevated as you had to kind of update your equipment. But how do we look at it going forward as you add a whole lot more new equipment, is that maintenance schedule kind of de minimis going forward? Or do you have another wave of stuff coming through in the next 12 to 15 months or so that need to go through that process? Kyle Ramachandran: Yes, Don, I think the color on the fourth quarter was around some equipment coming off of a utility project that was relatively short term in nature, and we're doing some modifications to that equipment to get it ready for a long-term contract to serve a microgrid in West Texas area. So that was sort of, I'd say, more of a kind of a one-off in nature. As we've talked about historically, this equipment has an overhaul cycle, which is episodic relative to the number of hours run in the engines. And on average, they're roughly 30,000 hour overhaul cycle. So it's every 4-ish kind of year time frame depending on the fired hours per day or per year for those engines. So yes, we're obviously in a period here where we're not seeing significant maintenance capital. Over time, that will be running through the business, and that's several years out from now. And then the other thing in the fourth quarter was we did secure some additional third-party equipment to meet an accelerated ramp schedule for one of our larger projects. And so we pulled that in a little bit ahead of when the equipment was deployed on to site. And so that was just some additional cost that was transitory in nature in the fourth quarter. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Bill Zartler for any closing remarks. William Zartler: Thank you all for joining us today. We're excited about the strong momentum we've built in all aspects of our business in 2025 and the significant opportunities ahead. It's rewarding to see our team grow and deliver real value in this fast-evolving market. And to take a big thank you to our dedicated employees, our trusted customers and valued supplier partners. Your commitment makes it all possible. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Ian Hawksworth: Thank you very much. Okay. Yes, we've got the thumbs up. So if we're ready, we'll start. I know you've all got a very busy day and a very busy week. So very much appreciate you coming to our third set of annual results this morning. So we're really very pleased with the results for this year. Another excellent year of progress and performance. I think we're delivering growth as we said we would do. The agenda for this morning, fairly straightforward. I'll give you a bit of an overview of the results. Situl will then go through the financial review. I'll then update on what's going on in the portfolio, and we'll finish with a summary and outlook and some Q&A. So as I said, another very successful year, delivering strong performance, an increase in rents, values, income and dividends while strengthening our financial position and creating significant optionality for the group. Obviously, macroeconomic issues and geopolitical risks have been well documented. However, I'm pleased to say that conditions across the West End are very active. We continue to see positive trends in footfall and sales across our prime portfolio, and the team is successfully delivering leasing well ahead of ERV with excellent levels of activity, limited vacancy and a strong pipeline. During the year, we were pleased to have formed a long-term partnership on Covent Garden with the Norwegian Sovereign Wealth Fund, which highlights the fundamental value and attractiveness of our portfolio. We continue to expand over GBP 100 million invested through acquisitions and capital expenditure and a number of properties are currently under review. And with enhanced liquidity, we're well positioned to take advantage of market opportunities. As one of the largest property owners in London's West End, we play an important role in shaping the area's long-term future. Visitors continue to be drawn to the West End's exceptional cultural, retail and entertainment offering, reinforcing its position as a leading destination for experience-led travel. The portfolio is benefiting from record international arrivals to London airports. Hotel occupancy remains strong, whilst the Elizabeth line continues to broaden catchment for visitors and workers alike. Shaftesbury Capital's irreplaceable portfolio of properties located at the heart of the West End provides high occupancy, low capital requirements and reliable growing long-term cash flows. Turning to results. Our valuation increased 6.6% like-for-like to GBP 5.4 billion. This was led by a 6% increase in ERV and a small 2 basis point inward yield movement. Total accounting return and total property return of 9.1% and 10.1%, which is in line with our medium-term targets. We continue to deliver rental growth, which increased by 6% and every effort continues to be made to enhance customer service whilst delivering meaningful cost savings. Underlying earnings are up 12%, and the Board has proposed a final dividend of 2.1p per share, which brings the total dividend to 4p per share, which is an increase of 14% for the year. We have a very strong balance sheet and access to significant liquidity with low leverage. I think the performance overall demonstrates the exceptional qualities of the portfolio, delivering growth in cash rents, dividends, ERV and valuation. So I'll now hand over to Situl for the financial review. Situl Jobanputra: Thanks, Ian. Good morning, everyone. As you've heard, financial performance was positive in 2025 with growth in rental income, earnings, dividends, valuations and net tangible assets. In addition, we have strengthened our balance sheet and enhanced the group's financial flexibility. So starting with the income statement. The main points are that over the year, there was growth in rental income of 6%, earnings were 12% higher, and we've increased the dividend by 14%. We focus here on group share numbers, that is including Covent Garden at 75% post the transaction with Norges Bank. As is completed partway through the year, we've included in the appendix on Slide 43, a summary of how this affects year-on-year comparisons. Adjusting for this, gross rents were up 5.9% like-for-like to GBP 195.6 million, reflecting a successful year of leasing and asset management. In aggregate, lettings and renewals were 10% ahead of ERV and 14% up on previous passing rents. Management fees from Covent Garden for Q2 to Q4 represent the other income of GBP 3 million. Administration costs of GBP 41 million reflects an increased share option charge, which was up by nearly GBP 5 million compared with last year. Excluding this, costs were effectively 8% lower. Notwithstanding upward pressures, we are targeting further reductions in the absolute level of cash costs over the next 2 years. During the year, the cash receipt from the Covent Garden transaction lowered net debt significantly. As a result, finance costs have been reduced by almost 30% to GBP 41.4 million. This year, we will refinance or repay GBP 400 million of maturing debt. However, based on current levels of borrowing, we are targeting finance costs to be broadly flat overall. All of these movements taken together resulted in a 12% increase in underlying earnings to GBP 81.9 million, equivalent to 4.5p per share. The proposed final dividend of 2.1p per share takes the dividend for the year to 4p, up 14% year-on-year. Our leasing activity contributed to an increase in ERV of 6.2% over the year to GBP 270 million. As illustrated in the chart, there is the opportunity to grow passing rent significantly given the 26% uplift as we move through from annualized gross income on the left to current market rents on the right. There is embedded reversion in our portfolio and good visibility on the income growth potential in each of our locations. This includes almost GBP 16 million of income, which is contracted or relates to rent-free periods, the majority of which will convert to running income over the next 12 months. So turning now to the balance sheet. The market value of properties under management was up 6.6% to GBP 5.4 billion. Net debt has been taken down from GBP 1.4 billion to GBP 0.8 billion on a group share basis with loan-to-value of 17%. NTA was up 7% over the year to [ 2.15p ] per share, driven primarily by the valuation movement. The main driver for the uplift in property valuations was rental growth with ERV up across all sectors and in all of our estates with retail and Carnaby Soho being the strongest performers. Yields moved in marginally by 2 basis points to 4.43% overall, and the commercial portfolio is valued at an equivalent yield of 4.6%. Our assets continue to demonstrate attractiveness and affordability to our customers with average ERV for the portfolio under GBP 100 per square foot and customer sales significantly ahead of 2019 levels, outstripping ERVs. The balance sheet is in a strong position with low leverage and access to significant liquidity. With loan-to-value under 20% and the EBITDA multiple under 7x, there is flexibility to deploy capital towards growing our business through investment in existing assets and new opportunities. In October 2025, we entered into a new 5-year loan facility of GBP 300 million for Covent Garden. The maturity of the group's other banking facilities totaling GBP 450 million of undrawn firepower has been extended to 2029 and 2030. We've also taken the opportunity to reduce the margins on these facilities to better reflect current market conditions and the strengthened position of the group. Part of the proceeds from the Covent Garden partnership were used to reduce gross debt and we are positioned for repayment of the GBP 275 million of exchangeable bonds, which mature at the end of March '26. As well as the new financing extensions and repricing, we have protected finance costs from interest rate movements by capping GBP 300 million of SONIA exposure at 3% for this year. We will continue to review financing opportunities, taking advantage of the attractive credit profile of the group. So to summarize, financial performance has been strong, and we have enhanced flexibility. Total accounting and property returns of 9% and 10% have been achieved in 2025, driven by growth in ERV and cash rents, which, together with cost management, have resulted in good progression in our key financial metrics. We will continue to focus on our priority areas: earnings and dividend growth, deploying capital accretively and balance sheet strength and flexibility. And with that, I will hand back to Ian. Ian Hawksworth: Thanks very much, Situl. I can tell you a little bit about the portfolio, a little bit of color for you. We own an impossible to replicate portfolio. It's located in some of the most iconic destinations across London's West End, Covent Garden, Carnaby Soho and Chinatown. The GBP 5.4 billion portfolio under management comprises 2.8 million square feet of lettable space across 640 predominantly freehold buildings with approximately 1,900 individual lettable units. Portfolio is broadly 1/3 retail, 1/3 F&B, with the balance in the upper floors, which offer office and residential accommodation. Portfolio offers a diverse occupational mix and variety of income streams with a range of unit sizes and rental tones. Occupational demand continues to prioritize the best locations. Availability now on many of our streets is at near record lows, and this supports competitive pricing. Leasing success has been achieved across the portfolio with continued ERV growth. This slide shows some of the new brands introduced, which are attracted by the 7 days a week footfall and trading environment. 434 leasing transactions completed in the year, representing nearly GBP 40 million of contracted rent. They were achieved at an average of about 10% ahead of December '24 ERV and 14% ahead of previous passing rents. Vacancy is very low at 2.6%. The team's active and creative approach, which is informed by a deep knowledge of the West End, positions Shaftesbury Capital to deliver further rental growth. Seeing very strong conditions in leasing -- in retail. Leasing demand is very positive and trading conditions are good. In recent months, we welcomed a number of new brands to Carnaby Street as we enhance the customer mix there. Charlotte Tilbury opened a new flagship store, and they'll shortly be joined by Sephora and also by Edikted over the coming months. Covent Garden continues to attract new high-quality brands, including Nespresso and Byredo, which were introduced during the course of the year. All of this has contributed to a 10.4% retail valuation growth across the portfolio. We're home to approximately 400 food and beverage outlets. Operators are attracted to the vibrant pedestrian-friendly, well-managed estates. And there have been a number of signings across Covent Garden, including Borough in Floral Court, Harry's Restaurant and Bar on the Piazza and Buvette in Neal's Yard. There continues to be strong demand for Soho for the Soho portfolio with the introduction of several new concepts, including Padella and the Shaston Arms. In Chinatown, we've introduced more variety to the area, increasing the pan-Asian offering at a range of price points. So across the portfolio, 37 new lettings and renewals signed 15.7% ahead of December 2024 ERV. Our vibrant locations and the quality of accommodation continue to attract leasing demand for office space. The Carnaby and Covent Garden portfolios offer high amenity value and excellent environmental credentials. And we continue to see customers relocating from other parts of Central London as employers recognize the importance of location and amenity value in attracting and retaining talent. The residential portfolio continues to perform well. During the year, 285 transactions were completed with rents achieved around about 4% ahead of previous passing rents. We have the ability to add value through capital initiatives to our 640 properties. Our pipeline of asset management and refurbishment activities represents 4.2% of ERV, and it's expected to be delivered over the coming 12 to 18 months. The scale of our holdings also help us to shape not just the buildings, but the spaces around them, and we're working with local stakeholders to enhance the public realm across our destinations, making them greener and more enjoyable for everybody. Covent Garden's Henrietta Street public realm is currently being transformed, and we're also undertaking early engagement on improvements to Carnaby Street to enhance the visitor experience whilst preserving the area's unique character. We continue to rotate capital, improving the quality of our exceptional portfolio. And in this year, we disposed of GBP 12 million of assets and invested GBP 80 million in targeted acquisitions. As I said earlier, we have a number of properties under review. Situl mentioned that we introduced sovereign capital to Covent Garden this year. And by partnering with NBIM, leverages our operational expertise and property portfolio, providing investment and expansion opportunities. So our growth prospects are underpinned by strong fundamentals. The West End market has delivered attractive predictable growth over the long term with an annualized rental growth rate of approximately 4% per annum. Our portfolio has outperformed that with nearly 7% ERV growth delivered since 2010. And this is supported by consistently high occupancy and the scarcity value of the West End, where limited new supply continues to drive demand. A strength of the portfolio is its adaptable mixed-use nature, which allows us to evolve space in line with changing demand and importantly, to do so with relatively low CapEx requirements. We benefit from aggregated ownership, enabling us to enhance the public realm and shape our places, supported by data-led customer and marketing approach. And finally, we actively manage the portfolio through capital rotation, focusing investment on our chosen assets and improving performance through refurbishment initiatives. So overall, these factors drive consistent long-term rental growth and valuation progression. I'd like to take a moment to thank everybody involved, including our customers, partners and our very experienced team in delivering this strong performance in 2025. Some of our senior leadership colleagues are with us today, and I hope you'll have the opportunity to meet with them afterwards if you didn't see them during coffee. So in summary, we've had a successful year, and we've made a very good start to 2026. There are obviously a number of challenges in the economy, but the West End continues to perform with high footfall, customer sales growth and low vacancy. There are excellent levels of activity and a strong leasing pipeline. We're confident in our outlook and targets for rental growth of 5% to 7%, a total property return of 7% to 9% and a total accounting return of 8% to 10%. Through active management of our prime West End portfolio, the strength of our operating platform, and we're focused on sustained long-term growth in rental income, value earnings and dividends. And backed by our strong balance sheet, we're well positioned to grow and take advantage of market opportunities. So that concludes the presentation. We're going to move now to Q&A. For those of you that are on the phones, if you could let the operator know that you'd like to ask a question, we'll come to you. But if somebody likes to start the ball rolling in the room, that would be great. Max? Maxwell Nimmo: It's Max Nimmo at Deutsche Numis. Just a couple of questions, if I can. One on Carnaby and the ERV growth was exceptionally strong there. Do you expect that, that is likely to continue as you -- as it sort of catches up with some of the other villages within your portfolio, kind of extracting that low-hanging fruit? Should we expect that to be the strongest growth in the near term? And then secondly, just around kind of firepower with where you're at 17% LTV today. Obviously, fully acknowledge you're trying to manage the interest cost for the business, but how you see that and the relationship with Norges and what that does for their ambition to grow as well? Ian Hawksworth: Thanks, Yes, we're really pleased with the progress we've made on Carnaby Street. I think what gives us confidence that it will continue to perform really well is the brands that we brought into the estate are trading at significantly higher sales densities than some of the previous incumbents. And that gives us confidence that it will support rental growth over the medium to long term. And we are seeing reasonably positive improvements in Zone A rents, which is, as you know, is how the market actually looks at it. But they're still well below other locations within our portfolio and well behind the general tone in the West End. So yes, I do think you'll see significant growth, but we're delivering growth across the portfolio. Covent Garden is doing very well as is Chinatown. But yes, we've got high hopes for Carnaby Street, definitely. Do you want to? Situl Jobanputra: Yes, sure. On your point about firepower leverage growth, I think we're in a very strong position. And that's a deliberate strategy so that we are well protected on the downside. And as you say, we're managing interest costs, but it means that we can put money to work when we see interesting opportunities. And one of our priorities is deploying that capital accretively. So there's plenty of room within our leverage ratios and our liquidity to do that. And as you also observed, the formation of the partnership is a further source of capital for growth in Covent Garden. So we see opportunities across all of our estates. James Carswell: It's James Carswell from Peel Hunt. Maybe just one on -- following on from Max's question. You've got the firepower. What are you seeing in terms of acquisition opportunities? I mean I appreciate the small buildings pretty liquid in your kind of markets. But I mean, are you seeing any [indiscernible] of the larger lot sizes? Do you think that will kind of bring you some opportunities? Ian Hawksworth: Yes. The team has got quite a lot of real estate that they're tracking. Obviously, whilst there's a lot of activity in the West End buildings that are adjacent to our portfolios don't trade very often. So we are focused really on driving value out of the 640 buildings that we've got and being in a position to move quickly when real estate does come available. We bought 1 or 2 things last week -- last year. They are sort of acquisitions that add value to the individual components of the estate. But clearly, at some point, we'd like to expand our ownerships substantially. And I think those opportunities will arise. Oliver Woodall: Oli Woodall from Kolytics. Congratulations on the strong set of results across the board, particularly your office segment seem to have very strong like-for-like rents. I wonder if you could give an outlook for the demand here for office and then separately for food and beverage and retail looking forward, kind of what your outlook is? Ian Hawksworth: Yes. Thanks very much. Well, all parts of the portfolio are performing well. I mean office is about 20% of what we have split into 2 categories, really sort of purpose-built offices and then converted sort of Georgian properties. And as I said in the presentation, the demand is there, not just because the buildings are good and they're well managed, but the locations are really in demand. So we're seeing strong levels of demand, and I think we'll see continued rental growth in those components of the portfolio. But the bulk of what we do is retail and hospitality and retail demand is continues to be very strong. I mean many commentators are saying the retail leasing market is as strong as they've ever seen it. I think there was one of the brokers put out a report recently saying demand is significantly higher than it's been for many, many years. So that supports the prime locations that we have. And you can see that in the number of new transactions that we've done and the pipeline. I think Will Oliver is somewhere in the room. He's in charge of leasing. So he's a very busy man at the moment. So I think you'll see continued activity in that area. F&B also very positive. There's virtually nothing available. And where we do get something available, there's multiple operators want to take the space on. So yes, very, very, very positive conditions across the board at the moment. Thank you very much. Any questions on the telephones? We've got a nod. We hand over to you Nimmo, excellent. Maxwell Nimmo: Okay. We do have one question on the telephone we've taken now. The question will be coming from Zachary Gauge of UBS. Zachary Gauge: Just a quick one from me. Looking at the sort of the consensus numbers for earnings in 2026. I think it's currently at 5p. So assuming a pretty similar growth rate to the one you saw in 2025. I know you don't give formal guidance, but just thinking considering the exchangeable bond refinancing at the end of March and obviously, interest rates in the U.K. probably coming in a little bit over the year with a slight headwind on cash. Do you think that kind of growth rate is in the right ballpark for the year considering that refinancing headwind? Situl Jobanputra: Let's talk about the building blocks, Zach. As you said, we don't normally comment on consensus forecast, and there is a bit of a range. So if we go through the main components that we think about, rental income growth, we talked about aiming to grow that cash rents in line with ERV growth, and we have an ERV growth target of 5% to 7%. On the other components, you'll see continued improvement over the next couple of years in the property level net to gross, and there are a number of initiatives that underpin that. And then on admin costs, we've been quite definitive on the guidance around that in terms of bringing down the cash cost element of that. And then the finance cost is, as you say, you've got some maturities and refinancing or repayment of that, and you've got lower leverage in terms of the effects of the transaction from last year. So our target with the current level of leverage is for the finance costs overall to be flat. So hopefully, that gives you a guide on some of the moving parts. Maxwell Nimmo: Ian, I will turn the call back over to you as we have no further telephone questions. Ian Hawksworth: Thank you very much. Okay, short and sweet. If you'd like to hang around for coffee, Peel Hunt will be very happy to give you one. Thank you very much, Peel Hunt, for the use of the facilities. We'll be around for a little bit. I'd say most of the team are here, asset management team, investment team, marketing team. If you'd like to spend some time with them, please feel free to do so. Otherwise, we look forward to seeing you down on the estate. The sun is out. There's plenty of nice places for you to go and eat and drink, plenty of places for you to go shop. So thank you very much for your attention, and we hope you have a good day. And if there are any questions, just call any of us as the day goes on. So thank you very much.
Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sun Communities, Inc. Fourth Quarter and Year-End 2025 Earnings Conference Call. Permit me to inform you that certain statements made during this call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although the company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the company can provide no assurance that its expectations will be achieved. Factors and risks that could cause actual results to differ materially from expectations are detailed in today's press release and from time to time in the company's periodic filings with the SEC. The company undertakes no obligation to advise or update any forward-looking statements to reflect events or circumstances after the date of this release. Having said that, I would like to introduce management with us today: Charles Young, Chief Executive Officer; John McLaren, President; Fernando Castro-Caratini, Chief Financial Officer; and Aaron Weiss, Executive Vice President of Corporate Strategy and Business Development. After their remarks, there will be an opportunity to ask questions. For those who would like to participate in the question-and-answer session, management asks that you limit yourself to one question so everyone who would like to participate has ample opportunity. As a reminder, this call is being recorded. I will now turn the call over to Charles Young, Chief Executive Officer. Mr. Young, you may begin. Charles Young: Good morning, and thank you for joining us today. I am pleased to report our fourth quarter and full-year 2025 results. We concluded the year with strong operational momentum, delivering core FFO per share of $1.40 for the quarter and $6.68 for the full year, both above the high end of our guidance ranges. The strength of our performance and optimism in our outlook is grounded in the durable fundamentals of the sectors in which we operate. We provide attainable housing and affordable vacationing to our residents and guests in our manufactured housing and recreational vehicle communities. Our operational model is anchored in high resident and guest engagement, which facilitates the recurring and predictable rental streams our properties generate. That stability reflects strong demand, limited new supply, and the value proposition our communities provide, as demonstrated by our same property MH portfolio’s 98.1% occupancy. Affordability is a core attribute of our business model. Manufactured housing offers a high-quality living environment at a cost significantly below traditional housing alternatives, while our RV communities provide accessible short and long-term vacation stays that resonate with today's consumer. After spending time at our MH and RV communities over the past few months, what stands out to me is the sense of community that we create, which I believe is a meaningful competitive advantage for our platform. In MH, our residents are members of active, connected environments that foster long-term relationships and loyalty. In RV, our long-stay guests value the flexibility and lifestyle our properties offer, using them as seasonal homes or year-round destinations. Our results this past year demonstrate these favorable dynamics. North American same property NOI growth was 7.9% for the quarter and 5.7% for the full year, reflecting strong revenue growth and disciplined expense management. From a capital allocation standpoint, 2025 was a year of meaningful positive change. Following the Safe Harbor sale, we significantly reduced leverage and enhanced our financial flexibility. We ended the year at 3.4x net debt to EBITDA, which provides substantial financial stability and a foundation for pursuing attractive, accretive growth opportunities. Importantly, we returned over $1.5 billion of capital to shareholders in 2025. Building on that, as detailed in our recent press release, our Board approved an approximate 8%, or $0.08 per share, increase to our quarterly distribution rate. This reflects our confidence in the consistency of cash flow our portfolio generates, our strong operating performance, and the strength of our balance sheet. As we enter 2026, we are building on our strong foundation and taking a focused, practical approach to long-term value creation. This is not a departure from what has worked; rather, it builds upon and further refines Sun Communities, Inc.'s strong in-place platform, with the emphasis on sharpening execution, enhancing performance, and strategically targeting capital investment. We remain confident in the strength and durability of our core manufactured housing and annual RV businesses. These segments provide recurring, predictable cash flows which we believe will continue to generate steady earnings growth and margin improvement over time. At the same time, we are focused on maximizing the performance of our RV platform to enhance growth and reduce volatility, both within the segment and as an important feeder to growing annual RV. That work is centered on improving operational execution, leveraging better data and technology, and driving greater discipline across the portfolio. Our strategy embodies thoughtful and strategic evolution and involves continued focus on what has positioned Sun Communities, Inc. well, while sharpening our focus on enhancing execution and driving sustainable long-term growth. There are three core pillars that support our strategy to drive long-term outperformance. First, thoughtful capital allocation: maintaining a strong and flexible balance sheet while delivering growth. With our best-in-class balance sheet, we will manage capital prudently while seeking to enhance growth. Second, continued optimization of our operating platform: driving greater consistency, accountability, and efficiency across the organization. And third, strategic investment in our communities, our infrastructure, and a unified digital backbone that will enhance our resident and guest experience and enable better, faster, and data-driven decision-making across the business. We have made meaningful progress over the past year simplifying the business and strengthening the balance sheet, and we believe our strategy positions us to capitalize on the opportunities ahead in our core platform. We look forward to sharing more details and updates as we advance our strategic priorities and actions. I want to thank the entire Sun Communities, Inc. team for the warm welcome over the past few months. I am proud to be a part of this organization and grateful for our team members' commitment to serving our residents and guests every day. With that, I will turn the call over to John and Fernando to discuss results in more detail. John McLaren: Thank you, Charles. For our fourth quarter results, our team executed exceptionally well and our performance reflects that. Total North American same property NOI increased 7.9% year over year, driven by 5.9% revenue growth and 2% expense growth, with blended occupancy over 99%. Within manufactured housing, same property NOI increased 8.8%, driven primarily by exceptional MH performance and disciplined expense management. Revenue grew 7.3%, while operating expenses increased 3.2%, reflecting continued focus on balance, efficiency, and cost control. In RV, same property NOI increased 5%, driven by 2.7% revenue growth and strong expense discipline, with operating expenses up only 60 basis points. Revenue growth reflected higher RV contract rates, with transient performance in line with our expectations. For the full year, North American same property NOI increased 5.7%, driven by 4.5% revenue growth and partially offset by a 2.2% increase in expenses. We exceeded our guidance in manufactured housing, delivering 8.9% same property NOI growth for the year. In RV, same property NOI declined 1.4%, which was within our guidance range. Turning to the UK, fourth quarter same property NOI declined approximately $500,000, reflecting ongoing macroeconomic pressures, including the national minimum wage increase. For the full year, UK same property NOI increased 3.5%, supported by 5% revenue growth driven by higher MH and transient income, partially offset by a 6.6% increase in operating expenses. UK home sales volumes were down 4.9% compared to 2024's record levels. Across the organization, we remain focused on operational excellence, disciplined cost management, and leveraging technology and data to enhance efficiency and the resident and guest experience. Having been a part of Sun Communities, Inc. for nearly 24 years, I can tell you now is truly one of the most exciting times I have experienced as we carry the strong momentum we built in 2025 into 2026. Our 2025 performance reflects the dedication, skill, and focus of our team throughout the portfolio. It is a privilege to be part of it, to service and operational excellence, and I want to thank our team members for their continued commitment. As we enter 2026, we remain focused on consistent execution, driving steady revenue growth, and maintaining expense discipline. With that, I will turn the call over to Fernando to walk through our financial results and 2026 guidance. Fernando? Fernando Castro-Caratini: Thank you, John. In the fourth quarter, core FFO per share was $1.40, beating the high end of our guidance range by $0.10. For the full year, core FFO per share was $6.68, also $0.01 above the high end of our guidance range. During 2025, we continued executing on our simplification strategy, selling over $200 million of non-strategic assets and land parcels. We also deployed 1031 exchange proceeds to acquire 14 manufactured housing and annual RV communities totaling $457 million, further enhancing the quality and growth profile of our portfolio. We purchased the titles to 32 UK properties that were previously controlled through ground leases for approximately $387 million. As a result of the ground lease purchases, Sun Communities, Inc. now holds a freehold interest in nearly all our UK property, further strengthening our long-term financial position and strategic flexibility. 2025 was a transformational year for our balance sheet. During the year, we repaid more than $3.3 billion of total debt. We ended 2025 with net debt to trailing twelve-month recurring EBITDA of 3.4x, no floating rate exposure, a weighted average interest rate of 3.4%, and a 7.1-year weighted average maturity. Following these transactions, we now have a well-laddered debt maturity profile: $492 million maturing in 2026, and no maturities until 2028. As of 12/31/2025, we had $636 million of total cash on the balance sheet. In September, we closed on a new $2.0 billion five-year credit facility, undrawn at year end, further enhancing our liquidity and overall financial flexibility. Importantly, we received two credit rating upgrades in 2025: S&P raised Sun Communities, Inc. to BBB+, and Moody's upgraded us to Baa2, reflecting the strength of our balance sheet and credit profile. Turning to capital return, for the full year we repurchased 4,300,000 shares at an average price of $125.62 per share, representing approximately $539 million of repurchase activity. After year end and through February 24, we repurchased an additional 456,000 shares totaling $57.3 million. These actions reflect a disciplined and balanced capital allocation framework, showcasing our strong financial position while returning capital to shareholders. Turning to 2026 guidance, we are establishing full-year core FFO per share guidance at a midpoint of $6.93 with a range of $6.83 to $7.03. For the first quarter of 2026, we are guiding to $1.28 at the midpoint. Within North America, we expect full-year same property NOI growth of approximately 4.5%. Breaking that down further, manufactured housing is expected to grow by 5.9% and RV is expected to grow by 0.9%. In the UK, we expect approximately 2.2% same property NOI growth for 2026. FFO from UK home sales is anticipated to be approximately $50 million at the midpoint for the year. For additional details regarding our assumptions and the components of guidance, please refer to our supplemental disclosures. Our guidance reflects completed acquisitions, dispositions, and capital markets activity through February 24. Of note, it does not assume future acquisitions, additional share repurchases, or other capital markets activity, which is often reflected in analyst estimates for the year. With that, I will turn the call back to Charles for closing remarks. Charles Young: I would like to take a moment to reflect on what I have learned and where we are headed. These first few months, I have been focused on listening and learning deeply with our team members and our business. I spent time across Michigan, Texas, Florida, and South Carolina visiting our communities and meeting with team members on the ground. Those conversations have reinforced both the strength of Sun Communities, Inc.'s culture and the opportunity ahead to further sharpen focus, strengthen execution, and build for long-term growth. I am energized by what I have seen so far and excited about the next chapter as we turn insights into action and build on Sun Communities, Inc.'s strong foundation together. For 2026, we are focused on three core pillars: disciplined capital allocation, executing consistently across our operations, and investing in our core MH and RV platform. We look forward to keeping you updated on our progress. We will now open the line to questions. Operator: Thank you. We will now conduct a question-and-answer session. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment as we poll for the first question. The first question comes from Steve Sakwa with Evercore. Please proceed. Steve Sakwa: Yes. Charles, or maybe John, could you talk a little bit about the data? Charles, in your opening remarks, you talked a lot about how you are using data and want to make better decisions. Are there concrete things that you can discuss with us that you have implemented, or are there things that you are currently working on that you expect to implement in 2027? Charles Young: Hey, Steve. It is Charles. I will take it, and maybe I will throw it to John if he wants to add in a little bit more. As I said, I have had a chance to go deep within the organization out in the field, and I just want to take a moment and thank the organization for the warm welcome. Specifically to your question, I refer to it as our unified digital backbone. What I will be able to tell you is it is building off of the foundation that was put in place a couple years ago with the NetSuite implementation, and as I watched that, that really became the beginning of our digital journey, if you will, which is a big piece of what I want to try to build on and encourage us to build on. Today, if I talk to the team members around the table here with me, we have more real-time access to data than we have ever had, but there is more there as we really start to build out the platform, which is solid, but there is more from beginning to end that we do. So one of the things I will share that is a focus in my core pillars for this year is starting with the customer journey by enhancing the systems and centralizing some of the contact center work in terms of how we engage with the consumer, eventually on the MH side and our guests. Specifically, I think it will be a help on the RV side. That is one piece that I will give you, but there is a lot more to be done. The bigger picture as you think forward around where the world is going today with AI and otherwise is to continue to build on this foundation, and it needs to be around the data architecture and infrastructure that allows us then to unlock that in the future. John McLaren: Yeah, Steve, I will just add to that. One of the things I shared with everybody last year was just really the focus on the transparency within our sales and leasing funnels, and applying that transparency because of the data that we have across with the implementation of our new ERP that we put in 2024. We can take that data and apply it across all different kinds of transactions and have that transparency, be able to deliver it to the team, be able to rank it with the team so we know better what we are doing at any moment in time. That is one application. Another one is going deeper into where the traffic comes from and being able to link where it is coming from all the way to who actually converts to a transaction, and being more targeted versus broad in terms of the campaigns that we can develop around that. That is what is taking place right now. Operator: The next question comes from Eric Wolfe with Citibank. Please proceed. Eric Jon Wolfe: Hey, thanks. At December, maybe Charles, you talked about slowing down buybacks, but then, of course, saw the $57 million of buybacks year to date. Could you just talk about the approach to repurchases and capital allocation this year? What you are assuming in guidance as far as the use of that $630 million of cash as well? Thanks. Charles Young: Great. I will start. Thanks for the question. I will let Fernando come in on what is in our guidance. When it comes to capital allocation, our objective is straightforward: we want to allocate capital where it generates the best long-term risk-adjusted returns for shareholders. Where we are today as we enter 2026, I joined in a really kind of special time in the company’s history. The strength of our balance sheet, the reduced leverage that we have, we positioned ourselves with manageable maturities and significant liquidity. So there is a lot of flexibility. As I think about capital allocation for the year, we have a balanced toolkit as our approach. One is, as I talked about in my core pillars, investing in our communities and our operating platform. The ability to invest in our strength—the core portfolio, the people, and the systems—is one of those toolkits. The other is pursuing thoughtful and disciplined, accretive external growth opportunities that align with our strategy of MH and RV. So we will continue to look for opportunities there. And then, as you are talking about with the share repurchases, there is returning capital to shareholders and using share repurchases thoughtfully when they represent compelling value. These are all parts of our toolkit. We are going to be balanced as we go through the year, use our flexibility to be prudent with that use, and we will continuously evaluate what is going to add shareholder value. Fernando, you just want to give forward guidance in terms of what we have in there? Fernando Castro-Caratini: And so, Eric, consistent with prior years, we are not assuming capital markets deployment of the cash on hand or our operational cash flow that we generate over the course of this year. So you can assume that the over $600 million of cash on the balance sheet today is generating interest income as it is used for the business. Any acquisitions that we would find and transact on, or any share repurchases, would be incremental to the baseline guidance we provided. Eric Jon Wolfe: Thanks. And then, just a quick follow-up. The $57 million of acquisitions that are in escrow, can you just talk about what those are, the initial yields on them, and then the unlevered returns that you are targeting? Aaron Weiss: Yeah. Thanks. It is Aaron Weiss. Thanks for the question. In terms of what we have on the balance sheet as of year end, we did talk about closing one acquisition in the January period at sort of the consistent yield range we have talked about previously in the mid-4% yield range. In terms of the remaining acquisitions, those are simply held on the balance sheet as 1031s but have not yet been closed. So we will continue to look to identify those and update the market as we see them. As Fernando indicated, to the extent that we do not ultimately close on those 1031 proceeds as occurred in 2025, that would simply move into our unrestricted cash balance. Operator: Our next question comes from Brad Heffern from RBC Capital. Bradley Barrett Heffern: Yes. Thanks. Good morning, everybody. Charles, can you give any updated thoughts on the UK and how it fits into the portfolio? Charles Young: Absolutely. I appreciate the question. I have had a chance to spend some time with the UK team, get over there, and what I have observed is a high-quality operation, best-in-class portfolio, strong assets, and a very talented and capable team. I am impressed with our operational execution. That being said, they are performing well in a challenging UK macro. We all see that, and John can spend a little bit of time around some of the details and what the expense numbers have been in Q4. As I look at the business and as we just talked about being disciplined capital allocators, we continue to evaluate our entire portfolio to determine how best to create long-term shareholder value, and the UK is no different. We are going to continuously evaluate, but right now, our near-term focus is on maximizing value through disciplined execution, strengthening performance, and driving growth where we can, and maintaining cost control and flexibility. So we will continuously assess the UK in the context of our overall strategy and capital allocation priority. John McLaren: The only thing that I would add, Brad, is that we put out in our guidance a 4.1% rent increase in the UK. That is running ahead of inflation in the UK. I think 2025 represents a really good year of home sales. We had close to 95% of the prior record that we had the year before that. When you look at it from a market share perspective, we have a team of people in the communities and locations that we have who are executing brilliantly in the face of it all. The only thing that offsets that a little bit is what Charles said on the expense side, but a lot of that is attributed to the national minimum wage, and everybody is in that boat. It is really pleasing to us to see them execute through that despite it all. Operator: Thank you. Our next question comes from Wes Golladay with Baird. Please proceed. Wes Golladay: Hey, everyone. How do you see the annual RV conversions this year? I think last year was just around 600. Can you give your view on 2026? John McLaren: Hey, Wes. Appreciate the question. I think we are looking at something similar to what we saw last year. We are really pleased with how last year played out, and I am really pleased, especially as I have shared before, that the strategy we took with respect to retention within our RV annual business really took hold. We are seeing that emerge in the form of the renewal rates that we have now in comparison to this time last year, where we are running ahead. So that is how we look at it. It is going to be similar to what we experienced last year. Wes Golladay: Okay. Thanks for that. And then, can you give your view on the transient RV? How does the pace look? John McLaren: It is good. It is pacing well. A little bit about 2025: our RV same property NOI performance in the year finished within the guidance range. I do want to emphasize that we like to work on the entire business, so we are really focused on bottom-line results. Specific to transient RV, I will reiterate that some of what we experienced in 2025 is a direct result of the success we have had and the strategy of reducing the number of transient sites and converting them to annual guests. That was demonstrated by a 9.8% annual RV growth number and the 600 network conversions you referenced. For 2026, we continue to see better signs of stability with improved booking trends in RV. We remain thoughtful and disciplined in our approach, as demonstrated by our guidance, which reflects what we are seeing in our pace at this point in time. To emphasize further, some of the things that we are doing that are seamless to what Charles has talked about with our core pillars: we have several target initiatives in RV, which include OTA expansions—or said differently, booking channel expansions—digital booking enhancements, data-leveraging opportunities. There is a lot to unpack there, and I look forward to having those conversations as the year progresses. A lot of this lines up with what we are seeing. If you look at how we tracked in RV in 2024 versus 2025 versus what we are putting out there in 2026, you are starting to see that stabilization take hold. Operator: Thank you. The next question comes from Jamie Feldman with Wells Fargo. Please proceed. Jamie Feldman: Great. Charles, appreciate your comments to close the call about where you are thinking through the company. Can you give an update on where you are in the process of settling in? I think people expected maybe a noisier print for April, but you pretty much took one impairment in the UK, and everything else seems to be humming along. Then, of course, you had some management changes to start the year. Would you say at this point you are settled in and this is the story going forward? I know the UK, as you guys commented before, still watching it and seeing where the opportunity is long term. But would you say you are pretty much settled in at this point and not a lot to still review big picture, or there is still a lot to work through as you are thinking about the future of the company? Charles Young: Thanks for the question. It is a good question. I am past my listening and learning tour, if you will. I used to be counting in days and then months, and I am in now. I am settled. The team knows who I am. I cannot say enough how special the culture here is at Sun Communities, Inc. and how welcoming it is, and I felt like I have just slid right in, and you can see it from our results that we are working well together. But there is work to be done, and the core pillars, as I laid out, are where the opportunity is ahead. That is why I cannot say I have settled in, but we have work to do in terms of investing in our communities and our infrastructure and optimizing our platform. That is where the work will be done and will continue to be done. I am busy, but I am loving it. I am getting in the flow at this point and enjoying every minute of it. I can go into more details, but at this point, what you are seeing right now: the team put up great numbers for the quarter, we have good guidance, and we are going to execute for the rest of the year. The simplification strategy that the team put in last year—I am building off of that with this core focus and laser focus on the core. That is what it is about, and that is what is going to get us into the rhythm that everybody expects us to do given the nature of this business and the affordability and attainable experiences that we provide for our residents and guests. Operator: Thank you. The next question comes from Michael Goldsmith with UBS. Please proceed. Michael Goldsmith: Good morning. Thanks all for taking my question. Questions on the RV guidance. Can you break down what the underlying expectations are for annual and transient, and then maybe break down what needs to happen to get to the upper end or lower end of that range? Also, a little color about what you have been noticing with the Canadian customer? Thank you. Fernando Castro-Caratini: Thank you, Michael. I think John and I will tag-team that question. At the midpoint of our range, we do have a rental increase for our annual guests of 4%. As John mentioned earlier, we are expecting transient conversions to annual contracts of about 600 over the course of the year. From a transient revenue growth perspective, at the midpoint of the range, we are expecting about a 1.5% decline in transient revenue year over year. This would compare to a 9% decline in 2025 year over year over 2024. That points to, as John was mentioning, some stabilization as it relates to the transient side of the business. John McLaren: I will start, Michael, on the Canadian side, which we shared before. We did experience softness in Q1 and Q3 of last year with Canadian guests. The interesting thing about that is last year we shared that Canada represented about 5% of the RV business. That represents about 3.5% of our total RV transient and annual business today. In other words, what we experienced last year with Canadian guests, combined with some of the offsetting that we did with domestic guests, has been mitigated to some degree versus what we had in 2025. It is really more about what I said earlier, and you alluded to it with the question: what are the strategies we can push on the RV side? We recently added two additional booking channels on the RV side toward the end of 2025, which should bear some fruit in 2026 in that strategies-to-push perspective. On the digital booking side, it is about contact or guest routing enhancements, easing the booking process, and process enhancements, which dovetails into leveraging the tech like Charles was talking about to capitalize on a nimble booking window that aligns more seamlessly with our revenue management capabilities that we have today. If you take it a step further, enhancing the guest journey overall—enhanced and targeted placement. This is not about the old days of RV, broadly throwing things out there, but being targeted and thoughtful in the approach and listening to the data and what it is telling us to do to pick where we want to place it, to help us find those guests, easing the booking process, the on-the-ground experience, the rebooking that happens because of a great on-the-ground experience, and ultimately the referrals that you get from that. Similar to what I have said on the MH side, building the sales force on the RV side for Sun Communities, Inc. Operator: Our next question comes from Jana Galan with Bank of America. Please proceed. Jana Galan: Thank you. Following up on the transaction market, given Sun Communities, Inc. has been very active in the past year, can you provide some details on product in the market, even if it is not in your buy box? Is there more or less volume today than last year in MH or RV? Any significant differences in cap rates across regions, or between age-restricted and all-age? Aaron Weiss: Hey, great question. It is Aaron talking. We were really fortunate to move through 2025 and execute on primarily MH and also some annual RV acquisitions. As we have long said, the cap rate ranges are in that 4% to 5% range. We have not seen a massive change across the years. It is a high-quality asset class, and so the higher-quality MH communities that are probably not transacting are still being asked at sub-4% cap rates. Their quality, the quality of the cash flows—the current sellers believe that is appropriately valued. We are focused on assets in markets in which we operate. Strategically for us, we want to buy portfolios or assets in markets where we have operating leverage and an understanding of the market over the long term, and that is where we have been focused to date. What we are seeing is generally consistent with the past. We do believe the transaction market is picking up. There is a more constructive backdrop in the financing market. Certainly, the lower rate environment today versus 12 to 18 months ago is more conducive to transactional activity, but I would say generally consistent, high-quality assets. Most of what we are seeing continues to be in the single-asset, small-portfolio, local owner-operator environment, and we do not expect that to change. There are very few large portfolio owners to begin with, and while those happen episodically, we would say the market backdrop is constructive. We are generally pleased with what we are seeing in our pipeline, but it is very consistent with what we executed in 2025. Operator: The next question comes from Jason Wayne with Barclays. Jason Adam Wayne: Hi. Good morning. Just looking at home sales volumes that are down year over year in 2025, can you walk through your home sales assumptions for this year and how that gets baked into G&A? John McLaren: Yes. Jason, thanks for the question. What you are seeing when you talk about the home sales for 2025 is that our focus is on real property income. Home sales expectations are really a product of enjoying nearly 98% occupancy in the portfolio, as well as very low resident turnover, which ultimately leads to stability of long-term cash flow from rent. The contribution of home sales is not really as material to FFO as the other things that we are working on. Volumes and margins for this year will be similar to what we experienced in 2025. Jason Adam Wayne: Got it. And then it looks like the ancillary NOI guidance changed a bit as well. Just wondering how much of that is due to marinas coming out of the portfolio? Aaron Weiss: The guidance provided is ex-marina as it relates to the contribution. So it would be contributions from our RV portfolio primarily, and then also contributions from the UK platform. Operator: The next question comes from John Kim with BMO Capital Markets. Please proceed. John P. Kim: Thank you. I wanted to ask if you could provide some of the building blocks for the 7.2% same-store revenue growth that you achieved in MH in 2025. It looks like you had 5.2% rental growth. You had a little bit of an uplift from occupancy, but what really made the difference to get from there to 7.2%? If you could provide the same building blocks for 2026 as far as MH same-store revenue. Fernando Castro-Caratini: John, they will be pretty similar, as our rental increase in 2025 was just above 5%. We had occupancy gains of about 600 on the MH side last year, and then, as you can see in our supplemental, we did have some strong performance from the 10% of the business. Our rental program did drive additional growth to build to that 7%. As John has alluded to earlier, as we look into 2026, we have a rental increase back of 5%. Enjoying 98% occupancy in manufactured housing, we do still expect gains from an occupancy perspective in the 500 to 600 site range, and then there could be some additional revenue. The building blocks are very much similar over the course of both years. Operator: Thank you. The next question comes from David Siegel with Green Street. Please proceed. David Siegel: Hi. Thank you. It looks like the rate of move-outs has been increasing over the last couple of years. I am curious if you can provide some color on what is driving that, and if you can bifurcate it between the MH portfolio and the annual RV portfolio. John McLaren: Yeah, great question, David. Appreciate it. For 2025, the rate of move-out was mainly attributed to RV, and a lot of that had to do with some of the Canadian impact that we experienced in 2025. This is precisely why we focused so much of our attention toward retention over the course of this year, replacing those move-outs with more domestic movements. It is paying off because we are seeing it in the form of the renewal rates that we have now as well. One thing of note: typically in an MH property, when we have a move-out, it is going to be a resident moving out versus a home moving out of the community, and so oftentimes we have a part in that transaction in the form of being able to generate a commission from a brokered home sale, which would be a part of that process and that transaction as well. David Siegel: Great. Thank you. And then can you just briefly talk about what is driving the higher expenses in the UK recently? John McLaren: I think much of it has been attributed to what has taken place nationally, especially the national minimum wage, and really falling more in the payroll line of things than anything else as a result of that, David. Fernando Castro-Caratini: And that is consistent with the expectations for 2026 as well. We do have elevated expense growth in our guidance range, with the midpoint of 2.2% NOI growth, but leading the way as it relates to that increase is the national minimum wage increase that will go into effect in April. Operator: The next question comes from Linda Tsai with Jefferies. With year-end net debt to EBITDA at 3.4x, do you have a targeted range for leverage going forward? Fernando Castro-Caratini: Sure. We stated with the closing of the Safe Harbor transaction and all of the activity we had from a debt paydown perspective that our long-term leverage target will sit between 3.5x and 4.5x net debt to EBITDA. To get to that midpoint, there is some releveraging to do. Linda Tsai: Do you have a view on what it would look like by year end? Fernando Castro-Caratini: From a guidance perspective, we do not include share buybacks or any additional acquisition activity. In the guide today, we would be ending the year pretty similar to how we started. Charles Young: Thank you. I will just jump in. It goes back to my answer earlier on capital allocation and really being balanced in terms of our approach and the tools that we have in our toolkit in terms of external growth—finding accretive opportunities there—having the flexibility with share buybacks, on top of the core pillars we talked about in terms of investing in our infrastructure, in our communities, and in our internal systems. Operator: Thank you. At this time, I would like to turn the call back to Mr. Young for closing comments. Charles Young: Great. Thank you for the conversation. We appreciate everyone's interest and we look forward to seeing everyone at the upcoming conferences. Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Have a great day.
Operator: Good morning, everyone, and welcome to Lowe's Companies Fourth Quarter 2025 Earnings Conference Call. My name is Rob, and I'll be your operator for today's call. As a reminder, this conference is being recorded. I'll now turn the call over to Kate Pearlman, Vice President of Investor Relations and Treasurer. Kate Pearlman: Thank you, and good morning. Here with me today are Marvin Ellison, Chairman and Chief Executive Officer; Bill Boltz, our Executive Vice President, Merchandising; Joe McFarland, our Executive Vice President, Stores; and Brandon Sink, our Executive Vice President and Chief Financial Officer. I would like to remind you that our notice regarding forward-looking statements is included in our press release this morning, which can be found on Lowe's Investor Relations website. During this call, we will be making comments that are forward-looking, including our expectations for fiscal 2026. Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties and important factors, including those discussed in the risk factors, MD&A and other sections of our annual report on Form 10-K and our other SEC filings. Additionally, we'll be discussing certain non-GAAP financial measures. A reconciliation of these items to U.S. GAAP can be found in the quarterly earnings section of our Investor Relations website. Before turning the call over to Marvin, I'd like to ask that you please hold December 9 for 2026 Analyst and Investor Conference, which will take place in New York City. Now I'll turn the call over to Marvin. Marvin Ellison: Thank you, Kate. Good morning, everyone, and thank you for joining us today. In the fourth quarter, sales were $20.6 billion and comparable sales increased 1.3%. For fiscal year 2025, we delivered sales of $86.3 billion, positive comparable sales of 0.2% and adjusted operating margin of 12.1%. This led to adjusted earnings per share of $12.28, a 2% increase over last year. Despite a challenging industry backdrop, our relentless focus on expense management allowed us to hold adjusted operating margins flat to the prior year when excluding the impact of our recent acquisitions. While our outperformance in the fourth quarter demonstrates our team's disciplined execution, our outlook for 2026 remains cautious given the persistent volatility in housing macro. This uncertainty continues to pressure big-ticket discretionary DIY projects as many consumers are reluctant to make significant investments in their homes. Within this challenging macro environment, it is imperative to remain focused on our perpetual productivity improvement or PPI initiatives. This commitment to PPI is at the center of the announcement we made recently to eliminate approximately 600 corporate and support roles. Although these are difficult decisions to make, this workforce reduction will help us create greater financial agility within our dynamic industry while continuing to invest in customer-facing areas of the company. We will continue to manage what is within our control, which is reflected in the strength we delivered across Pro, online and home services as our total home strategic initiatives are resonating with our small to medium Pro and DIY customers alike. Starting with our Pro results, we delivered another quarter of growth as we continue to gain traction with our transformed offering. Our Pro customers are responding to our compelling brand and product assortment, investments in inventory, job site delivery, enhanced service levels and a tailored digital experience, and we're further enhancing our Pro brand offering by extending our assortment of the #1 power tool brand, DEWALT, the tool of choice for Pros for over 100 years. We are excited that we now carry the largest selection of the walk power tools and accessories in our stores and online. Moving to online. We delivered a 10.5% growth this quarter and set new sales records this holiday season on both Black Friday and Cyber Monday. Both DIY and Pro customers continue to shift their shopping online as our enhanced user experience and fulfillment options offer the ease and convenience they are seeking. In fact, on Black Friday, our Lowe's app was so popular that it was the #1 free app in the shopping category on Apple's App Store in the U.S. This level of engagement reflects the investments we've made to create a seamless omnichannel shopping experience. And as customers continue to integrate AI into their shopping habits, we are collaborating with leading digital platform so that we are well positioned to participate in Agentic commerce. Now turning to home services, where we delivered high single-digit growth. This is another example of a customer experience that we have overhauled at Lowe's by removing the friction for what was a time-consuming process through digital tools and enhanced service to create an intuitive installation solution for our do-it-for-me customers. Let me now shift to our view of the broader macro environment. Consumer confidence remains subdued given inflationary pressures and overall economic uncertainty. And despite modest relief in short-term interest rates and market expectation for additional Fed cuts, mortgage rates remain elevated. As a result, a persistent lock-in effect remains in place keeping housing turnover and new home stars under pressure, leading us to expect improvement in both the housing and home improvement markets to be gradual. That said, the structural demand drivers of the home improvement industry remain strong with home equity setting new record levels and homes continuing to age, averaging 44 years old. With the chronic supply-demand imbalance in housing, analysts continue to expect that approximately 16 million new homes will be needed in the United States over the next decade. Despite near-term industry headwinds, we're pleased that our investments in our total home strategy and operational excellence are paying dividends. Our compelling product assortments, flexible fulfillment options, innovative installation solutions, and best-in-class digital experiences are appealing to both the value-conscious homeowner and the busy pro. We're confident that these investments position the company to outperform the market, regardless of macro conditions. With the recent acquisitions of Foundation Building Materials, or FBM, and Artisan Design Group, or ADG, we are well-positioned to participate in the expected recovery in housing. As we start the year with these two companies, our integration efforts are on track, and we're focused on capturing cost synergies by leveraging our combined scale. We're also developing solutions to support cross-selling opportunities that will enhance our offering to our respective pro customers by capitalizing on complementary product offerings. While FBM and ADG are navigating a challenging residential construction market, we expect them to build on their leadership position this year, leveraging their reputation for exceptional customer service while maintaining operational discipline. In addition, we're pleased with FBM's commercial business, which represents roughly half of its revenue, as they continue to win new data center contracts, which reflects the benefits of a diverse customer base. Before I close, I want to take a moment to recognize our frontline associates who continue to show up every day with a strong sense of ownership and commitment to serving our customers and communities. As a demonstration of our appreciation for their efforts, we awarded a discretionary bonus of $125 million to our dedicated frontline associates for their outstanding performance in the fourth quarter. This includes our assistant store managers, department supervisors, and hourly associates in our stores and distribution centers. It's an honor for me to continue to support these hardworking men and women. Our dedicated frontline associates are the primary reason Lowe's was recently recognized as Fortune's #1 most admired specialty retailer. This honor truly belongs to them. I'd like to congratulate our team for delivering another year of outstanding customer service. With that, I'll turn it over to Bill. William Boltz: Thanks, Marvin. Good morning. We're pleased with our sales performance this quarter as we delivered positive comps in 9 of our 14 merchandising divisions. Our teams remain focused on offering value and innovation to consumers who continue to be mindful about their home improvement spending. This holiday season, we helped our customers celebrate with exciting offers and deals on appliances, tools, Trim-A-Tree, and more, making Lowe's a popular destination for holiday shoppers, both in-store and online. Starting with building Products. We delivered broad-based growth, driven by solid performance in both Pro and home services. Rough plumbing was a standout, with continued strength in water heaters, water treatment, and HVAC, along with strength in other Pro-focused areas within our plumbing assortments. This includes a new merchandising display for SharkBite PEX pipe and fittings. It showcases straight pipes stacked upright, which Pros prefer over coiled Product, as it makes it easier for them to use on the job site. We delivered positive comps in millwork with strong performance, especially in windows and doors, supported by leading brands such as Pella, Therma-Tru, and LARSON, which are exclusive to Lowe's in the Home Center channel. Our convenient installation solutions, combined with our affordable credit offers, are helping customers manage these larger replacement projects. Turning to home decor, where we delivered positive comps across kitchens and bath, paint, and in appliances, where we continue to build on our market leadership position. With the widest assortment of leading brands, competitive pricing, and rapid delivery, consumers are turning to Lowe's more often for their appliance needs, whether urgent or planned. As a reminder, Lowe's remains the only retailer that can deliver and install major appliances next day in virtually every zip code in the U.S. In kitchens and bath, our recent reset in bathroom vanities continues to drive results as customers appreciate the improved shopping experience and the easier access to big and bulky products. Within our bath program, we're pleased that we've been selected by TOTO to be the first big box retailer to offer their innovative toilets as we leverage our larger showrooms to feature their premium product, which will be exclusive to Lowe's in the Home Center channel. This quarter, we were also encouraged by our results in paint, where we delivered positive comps with broad-based growth across interior and exterior paint, primers, stain, and attachments, as customers took advantage of milder weather earlier in the quarter to work on outdoor projects. We're off to a great start with the new Sherwin-Williams ProBlock Quick Dry Primers, which we introduced in Q3. Pros are responding to the superior quality and performance versus the competition, helping to drive double-digit Pro comps in primers in Q4. Looking now at hardlines. We delivered growth in hardware, seasonal and outdoor living, and lawn and garden, driven by strong holiday and gift-giving assortments, along with storm-related demand. It was exciting to see customers line up at our stores early on Black Friday, inspired by our creator network, to take advantage of our My Lowe's Rewards Blue Bucket giveaway, including a chance to win a golden ticket for a free appliance priced at $2,000 or less. Our holiday Trim-A-Tree assortment was also a hit, driven by our strength in animatronics, and customers also responded to great deals in the Tools Gift Center with values from Klein, DEWALT, Bosch, and Kobalt. We also had compelling member-only deals online as well, where we delivered yet another record for the Black Friday/Cyber Monday weekend, along with several viral moments that centered around our bucket giveaway and trending Products like mini buckets, teeny totes, and mini toolboxes. In January, we helped customers prepare for winter storms Fern and Gianna with generators, snowblowers, ice melt, flashlights, and gas cans, which contributed to positive comps in seasonal and outdoor living and lawn and garden. In the quarter, we also completed the rollout of pet and workwear to more than 1,000 stores as we continue to expand our offering of convenience items that help our busy customers make the most of their shopping trips. Given the solid results from these new assortments, we'll be expanding them to the remainder of our stores in 2026. Shifting gears, our teams are delivering against our ongoing perpetual productivity improvement, or PPI initiatives, which I outlined at our last Analyst and Investor Conference. These include disciplined product cost management, improving inventory productivity, maintaining a disciplined approach to pricing and promotions, and expanding Lowe's Media Network. This year, our supply chain, merchandising, and finance teams drove inventory productivity and completed our multiyear SKU rationalization initiative, while also effectively navigating an unprecedented volume of tariffs and ensuring strong in-stocks to drive sales. We are growing our Lowe's Media Network as we help our suppliers better connect with our shared customers, leveraging insights gained through our loyalty programs. As we look ahead into 2026, we'll empower our merchants with new AI tools that make their workday more efficient, freeing up time for them to focus on driving sales and optimizing our product assortments. We will also introduce new tools to our merchandising services team, or MST associates, that will direct them to service the right base at the right time based on the sales trends of their store. Looking ahead to spring, we're ready to capitalize on the demand driven by our biggest season of the year with great values, the best products and brands, and strong in-stocks to help our customers tackle all their spring projects. We have an unmatched outdoor power equipment lineup in the home center channel, the only one to offer Toro, the leading gas-powered brand, and EGO, the leading battery-powered brand. We have a wide array of grills to choose from across Weber, Char-Broil, Blackstone, Pit Boss, along with our own private brand, Master Forge. Our new patio lineup is stronger than ever, designed to help our customers enjoy their outdoor living spaces in style. We will also continue to earn customer loyalty through our DIY loyalty Program, My Lowe's Rewards. We recently introduced a new perk for members, My Lowe's Rewards Kids Club, featuring in-store workshops, family engagement events, and giveaways for young DIYers, helping us connect with the next generation of homeowners. As part of these efforts, we are also excited to expand our relationship with the number one influencer in the world, MrBeast. Later this spring, you'll see us activate this partnership across family experiences, merchandise, and more. As I close, I want to thank our merchants, MST associates, and vendor partners for their hard work and partnership this year. Their focus on delivering the best for our customers really sets the bar, and we value the important role that all of them play in helping to drive our success. With that, I'll now turn the call over to Joe. Joseph McFarland: Thank you, Bill. Good morning, everyone. I'd like to begin by thanking our frontline associates and store leaders for their outstanding work, supporting our customers impacted by Winter Storms Fern and Gianna, reflecting the critical role our stores play during hard-hitting weather events. Their commitment matters. It is just one example of the ongoing focus on customer service that our associates deliver day in and day out. Once again, this quarter, we drove improved customer satisfaction for both DIY and Pro customers, including during another busy Black Friday and Cyber Monday weekend. Customers appreciated our flexible fulfillment options during the busy holiday season, as they relied especially on same-day gig delivery to meet last-minute shopping needs. Turning to our fourth quarter performance, I'm pleased that we delivered another quarter of growth in Pro. We are building on our momentum by expanding our Pro sales force, which allows us to reach new customers while also growing share of wallet with existing Pros, including in their planned spend. With the recent rollout of our new AI-enabled Pro Companion, we're giving our Pro sales team even more opportunities for success. This new capability helps sales associates quickly prepare for conversations with Pros by enabling rapid access to relevant information so they can walk in with recommendations already in hand, leading to more effective customer interactions. We're helping the sales associates at the Pro desk serve complex orders through the Pro Extended Aisle, which is a direct interface to our suppliers' catalogs. We've just introduced a new feature that allows us to stage job site delivery, so Pros can get what they need immediately and then deliver the rest of the order at a later date based on their schedule. This new capability not only improves the customer experience, it replaces what was a time-consuming process for our associates with a single click. I'm also excited to share that Lowe's is now the exclusive national home improvement partner to the National Association of Home Builders, or NAHB. This allows us to connect with their 140,000-plus Pros and offer member-only savings. Looking ahead, in our recent survey, our core Pro customer indicate they continue to work on smaller-ticket repair projects and that their backlogs remain stable. Now, let me discuss the progress we've made this year against our perpetual Productivity improvement initiatives or PPI. As a reminder, each year, our store operations teams tackle a number of productivity initiatives. Let me give you a couple of highlights from 2025. In the fourth quarter, we completed the rollout of our front-end transformation across our store portfolio. This multiyear effort meaningfully improves the checkout experience for customers while freeing up labor hours, so associates can spend more time serving customers in the aisle. The transformed front end includes an expanded buy online, pickup in store area that makes it faster and easier for our customers to grab their online orders, helping us better serve the continued shift to omni-channel shopping. We've also enhanced our freight flow as part of our PPI work. By redesigning the process and leveraging tech-driven solutions, we've made meaningful gains in labor productivity as we more efficiently move product from the truck to the sales floor. Looking ahead to fiscal 2026, we're already working on our next set of PPI initiatives. One priority is to even further enhance our stocking through an initiative we're calling Freight Flow 3.0, which allows us to better sequence inbound inventory from our distribution centers. Overnight teams will focus on stocking the highest priority product immediately, while early morning teams arrive earlier to manage the remaining product flow. This approach means more associates are available to help our Pro customers when they arrive early to shop before heading to their job sites. These changes are already yielding better inventory accuracy and in-stocks, while also supporting customer service. Another PPI goal this year is our new full shelf replenishment initiative, which launched across all stores last month. Using real-time data to identify out-of-stocks, this AI-enabled technology sends stores a prioritized list of the most critical items to restock, which helps ensure that products are available where and when customers need them. These enhancements are improving both the associate and customer experience. With better visibility, smarter prioritization, and more product on the shelf when it's needed, our stores are becoming easier to shop every day. Finally, as Marvin mentioned, we are recognizing our frontline teams in our stores and supply chains for their critical contributions to our results in the fourth quarter and this year with a discretionary bonus. Assistant store managers will receive $5,000, and hourly associates will receive bonuses ranging from $150 to $700. These bonuses are on top of their normal incentive plans. These associates show up every day with a relentless focus on customers and eagerness to embrace new technology and a commitment to helping one another succeed. This bonus is a reflection of a culture of winning together that we have created. That's what sets Lowe's apart. With that, I will turn the call over to Brandon. Brandon Sink: Thank you, Joe. Good morning. Starting with our fourth quarter results, we generated GAAP diluted earnings per share of $1.78. In the quarter, we recognized $149 million in non-GAAP charges associated with the acquisitions of Foundation Building Materials, or FBM, and Artisan Design Group, or ADG. Keep in mind, in the fourth quarter of last year, we also recorded a pre-tax gain of $80 million associated with the 2022 sale of our Canadian retail business. Excluding these impacts, we delivered strong results for the quarter with adjusted diluted earnings per share of $1.98. My comments from this point forward will include certain non-GAAP comparisons that exclude these impacts, where applicable. Fourth quarter sales were $20.6 billion, with comparable sales up 1.3%, driven by growth in Pro, online, and home services, as well as winter storm activity. We estimate that the demand related to winter storms Fern and Gianna positively impacted Q4 comp sales by approximately 50 basis points. With a strong start to the holiday season, we delivered positive comps of 0.4% in November. Comps were down 1% in December, then accelerated to 5.8% in January, lifted by storm-related demand. Comparable average ticket increased 3.6%, driven by price increases and a mix into Pro and appliances, while comparable transactions declined 2.3%. For the fourth quarter, adjusted gross margin was 32.7%, down 18 basis points as the dilutive impact of FBM and ADG was nearly offset by higher credit revenue, multiple PPI initiatives, and favorable Product mix. Adjusted SG&A was 21.4% of sales, deleveraging 37 basis points as higher frontline discretionary bonuses and annual incentive payouts, as well as sales-driving actions, were partly offset by the accretive impact from the acquisitions. Adjusted operating margin rate of 9% was down 41 basis points versus prior year, and the adjusted effective tax rate of 23.6% was consistent with the prior year rate. Consistent with our expectations, FBM and ADG operating results were accretive to adjusted EPS for the fourth quarter, while diluting operating margin by approximately 30 basis points. Inventory ended Q4 at $17.3 billion, in line with prior year, despite the inclusion of approximately $500 million in inventory from acquisitions as well as higher tariffs. We continue to execute on multiple inventory productivity initiatives through AI-enabled solutions while also benefiting from SKU rationalization. These outstanding results demonstrate the strategic alignment and collaboration we're driving across the organization. Shifting gears to capital allocation. In 2025, we generated $7.7 billion in free cash flow and returned $2.6 billion to shareholders through dividends, which includes a dividend of $1.20 per share in the fourth quarter, totaling $673 million. We invested approximately $3 billion in cash for the acquisitions of ADG and FBM, and borrowed $7 billion to finance the remainder of the purchase price of FBM. During the year, we also repaid $2.5 billion in bond maturities. Capital expenditures totaled $2.2 billion for the year, driven by investments in our Total Home strategic initiatives. Adjusted debt to EBITDA was 3.31 times at the end of the quarter. We ended the quarter with $982 million of cash and cash equivalents and delivered return on invested capital of 26.1% for the year. I would like to discuss our 2026 financial outlook. While short-term interest rates have been coming down, affordability and the lock-in effect continue to pressure demand. Consumers are still cautious about discretionary big-ticket purchases. While many homeowners will receive larger refunds this year, it is unclear how much of that will be spent on home improvement. It is also unclear when mortgage rates will ease, which will continue to exert pressure on existing home sales and new home construction. Taking all of this into account, we forecast the home improvement market to be roughly flat this year in a range of down 1% to up 1%. We remain confident in the continued execution of our Total Home strategy, which will enable us to grow faster than the market and take share. With that, we are expecting 2026 sales ranging from $92 billion to $94 billion, with comparable sales in a range of flat to up 2%. We anticipate that ADG and FBM will contribute approximately $8 billion to sales. We expect operating margin in a range of 11.2% to 11.4% and adjusted operating margin in a range of 11.6% to 11.8%. This includes 30 basis points of dilution related to the wrap of FBM and ADG in 2026. As a reminder, the acquisitions drive approximately 50 basis points of dilution on an annualized basis. We expect gross margin to decline approximately 75 basis points compared to the prior year when we factor in the dilution related to the acquisitions. However, the acquisitions are accretive to consolidated SG&A as a % of sales. We will continue to drive our perpetual productivity improvement, or PPI initiatives, across the enterprise with a target of roughly $1 billion of productivity again this year. This includes the impact from the workforce reduction that Marvin mentioned earlier. This productivity will offset pressure from merit increases and general operating cost inflation and continued investments in our Total Home strategic initiatives. Additionally, we expect net interest expense of approximately $1.6 billion as we absorb incremental expense related to the FBM acquisition, partly offset by planned repayment of $2.3 billion of bond maturities in the first quarter. These assumptions result in expected full-year diluted earnings per share of $11.75 to $12.25. We expect adjusted diluted earnings per share of approximately $12.25 to $12.75. This includes the impact from FBM and ADG, which is expected to be accretive to adjusted EPS for the year. We also expect capital expenditures of approximately $2.5 billion for the year as we invest in our strategic imperatives to drive growth. This will be heavily concentrated in our retail business. Finally, to assist you with your modeling for the first quarter, here are a few points to keep in mind. Given severe winter storm activity in February, we are now expecting Q1 comp sales to be below the midpoint of our full-year guide. Adjusted operating margin rate is expected to be approximately 20 basis points below the bottom end of our full-year guide due to the dilutive impact of the acquisitions. In closing, we're pleased with our track record of disciplined execution and that our DIY and Pro initiatives are gaining momentum. Looking ahead, we are confident that we're making the right investments to deliver long-term sales growth and sustainable shareholder value. With that, we will open it up for your questions. Operator: [Operator Instructions] Our first question is from the line of Peter Benedict with Baird. Peter Benedict: I guess my first one is just on the Pro Extended Aisle efforts that you guys started to kind of roll out last year. Just maybe give us a sense for where you are with that. It got a brief mention in the prepared marks, but I'm just curious kind of where you sit with that, what the opportunity is going forward. That's my first question. Marvin Ellison: Peter, this is Marvin. Look, we continue a multiyear build-out for 2026. We're very pleased. It's actually exceeding all expectations. And we're adding new suppliers, new markets every single week, and we'll do that throughout 2026. You know, this is helping us create more traction with planned Pro spend. That's something that has been on our playbook for quite a while. We're excited to get new products like vinyl siding, building materials, doors, flooring, electrical wiring. Overall, we feel really good about this. We're not yet providing specific financial results other than to say, this is exceeding expectations, assisting with the planned Pro spin, and something we're excited about, and we think it will help to drive our Pro business for the balance of this year. Peter Benedict: I guess my follow-up would be maybe for Brandon, just how should we think about the incremental margins here once we get past, you know, integrating the acquisitions and the noise that's kind of related with that? I think there's a question out there in terms of, you know, as sales eventually start to recover, you know, what the flow through is gonna look like. Any updates to your thoughts there? Just level set us on what your view is there. Brandon Sink: Yes. Sure, Peter. I'll start with the fact that, you know, we're very pleased here with our Q4 performance progression of the year. We had positive comps here for the last 3 quarters. Marvin announced a payout to our frontline associates of $125 million in discretionary bonuses, delivered another $1 billion in productivity, delivered flat operating margin on the core business for the year. That all being said, as we look ahead to operating margin for 2026, as we've referenced, and as I said in my earlier comments, FBM/ADG is creating an additional 30 basis points of dilution related to the RAP, 50 basis points on an annualized basis. We are generating $1 billion incrementally in productivity for 2026, as we outlined at our AIC last year. We are seeing some modest incremental cost pressures that we haven't previously anticipated that are also embedded within that. I also mentioned that we're continuing to invest in a number of sales-driving initiatives that are tailored to, you know, value-conscious consumer, investing in fulfillment options, member benefit. All that's reflected in our updated expectations for 2026. The last thing I'll say, Peter, you know, I think this team's demonstrated a history of disciplined execution. We believe it's a hallmark differentiator for us and expect that to continue here in 2026 as we focus on landing that number. Operator: Our next question is from the line of Chris Horvers with JPMorgan. Christopher Horvers: So my first question is just thinking about demand. I know you said Fern and Gianna were 50 basis points benefit to the quarter. You know, that would still suggest like a 2 or 3 in January. If you look at the 2-year run rate, you know, that also improved in both December and January. For the quarter, and you were lapping, I think, a 70 basis point headwind relative to the hurricane recovery last year. You know, at a big picture level, do you think the demand in the category is just starting to elevate at the margin? Could you maybe try to put together the narrative around the winter storms versus lapping polar vortexes versus lapping also hurricanes last year? You know, some detail there on sort of the net weather, and elevate to a high level, how you think about whether or not maybe the demand's just getting better at the margin? Brandon Sink: Yes, sure, Chris, this is Brandon. A lot to unpack, as you mentioned here for Q4. I'll start with... you know, you referenced we had 100 basis points of headwind from Hurricane Selena and Milton last year. That has been in part offset by the benefits. I called out 50 basis points for Fern and Gianna here in Q4. We also referenced on the call last year an easier lap from the ice storms that played out over the course of January. As it's specific to the month of January, the 50 basis points on the quarter for Fern and Gianna was about 200 basis points on the month. Sorta cutting through all of that noise, we're still very pleased with the underlying demand trends, and traction that we're seeing across all areas of the business, Pro, DIY, DIFM. As that translates, looking at Q1, we do expect the demand drivers that we've seen, the underlying consistency, to be again consistent with what we've seen in Q4. We are seeing some level of disruption here out of the gates with the aftereffects of Fern and Gianna to start the month of February and now Hernando up in the northeast, here to end the month. You know, we're managing spring over the course of the first half, looking at it as a first-half event. Excited about everything we have locked and loaded. We have the biggest weeks ahead of us, and for the first half of the year, focused on, you know, delivering at the midpoint of the guide. Bill, you may want to reference just some underlying strength across categories that are separate from sort of the weather demand that we've seen. William Boltz: Yes. Thanks, Brandon. I think, you know, when you look at January and you set the weather aside, you know, we saw strength across, you know, as was called out in our prepared remarks, these pro-related categories, millwork, lumber, building materials, electrical. Then we continued to see strength in paint, garden businesses outside of ice melt, hardware, soft surface flooring, which is carpet, kitchens and bath, rough plumbing. You know, those are all built around the foundation, and, you know, we're gonna leverage those as we go into the first half of the year and continue to drive those. Christopher Horvers: And then my follow-up question is as you think about sort of the post-storm and post-tough winter recovery and lawn and landscape and even exterior of homes, we haven't had a winter like this in perhaps a decade. You also have a larger relative, you know, outdoor business relative to your peers. Is there an analog? How are you thinking about the potential pickup in sales in the first half of the year as it relates to the tough winter that we've had? Marvin Ellison: Chris, this is Marvin. Look, we're optimistic, and we've tried to build all of that into our guidance. Candidly, we've also tried to take a conservative approach. I think, it's pretty obvious, and I'll state the obvious, that this is a pretty unique environment with unpredictable tariffs, high interest rates, and a consumer demand that is not as sustained as we would like it on the DIY side. We feel really good about our plan for spring. We feel great about our plan for 2026, and part of that is the fact that we have the best in-stock that we've had in my tenure here going into spring. We have the best garden strategy that we've had in my tenure here going into spring. We have a lot of things working in our favor, not to mention that we have, you know, 30 million and growing members of our MyLowe's Rewards loyalty program that gives us a unique opportunity to message to those members. We are optimistic, but we're also cautiously optimistic just because there's lots of uncertainty out there. But we are very confident that whatever the macro environment provides, we will outperform the macro. We will take share. We took share in the fourth quarter. We took share in the third quarter. We'll take share in 2026. Operator: Our next question is from the line of Kate McShane with Goldman Sachs. Katharine McShane: We wanted to drill down on the comment that you'll be investing in sales, driving initiatives for the cost-cautious customer in 2026. What could that look like? Are you looking at price investment, promotion, some combination of both? How does that compare to how you managed through that in 2025? Marvin Ellison: Kate, this is Marvin. Thank you for the question. Kate, there's really no major change coming to our strategy relative to price or promotion. We manage price on a portfolio basis in this really volatile tariff environment. We'll continue to do that. We will be very specific on what we call tier one promotional events. You know, think the launch of spring, you know, think Labor Day, Memorial Day, Fourth of July. You'll see us leaning hard on some of those time frames, but other than that, we don't plan to be more promotional than any years past. What I will tell you, and I hand it over to Bill, is that we're really excited about offering the customer value and making sure that the cost-conscious homeowner can look to Lowe's, both in-store and online, to find anything they want at a value and also find anything they want that could be more of a premium item. I'll let Bill talk about some of the things we have in store for spring in 2026. William Boltz: Yes. Thanks, Marvin. You know, Kate, I think as we look at 2026, it's, you know, largely reflective of what we tried to do in Q4. That was, you know, meet the customer where they want to be met. Both online and in-store, offering these values for both a DIY and a pro customer, be out there, be relevant, with seasonally relevant products, which is very similar to what we've been doing and working on over the last few years. We're excited about what we've got planned in our lawn and garden business. We're excited about the new that we have, the innovation that we have across the store. The merchant teams have done just a really nice job of bringing new, exclusive and innovative values that we can put in front of the consumer. We've got great brands, we've got great partners with our vendors. You know, we're starting from deep south to north, and we'll take it as the season comes and as spring starts to, you know, come alive. We want to be there and meet the customer where they're at. We'll just have great offers out there, throughout the spring season. Joseph McFarland: Kate, I'll just add, in addition to that, you know, we mentioned the Pro Extended Aisle, and we continue to make the investments. This is a multi-year build-out, and so as we think about that, meaningful growth opportunity is still ahead of us. The investments that we have made, with our transform offerings in our home services business, and so, and continuing to make the investments in the Total Home strategy. Katharine McShane: Then I just wondered if we could follow up with Brandon, how we should be thinking about the cadence of transaction versus ticket throughout 2026? Brandon Sink: Yes. Sure, Kate. I think when we look at 26 and what's embedded with the guide, similar to the second half of 2025 that we saw, we do expect the growth to be more weighted towards ticket in the first half of 26, and that's primarily as we, as we wrap the tariff price increases that we've been implementing. As we move into the second half, we do expect to see transaction trends to improve. We're gonna start cycling that over the second half of the year and expect that to move more in line with neutral again as we, as we start looking at the second half of the year. Operator: Our next question comes from the line of Simeon Gutman with Morgan Stanley. Unknown Analyst: This is Zach on for Simeon. Thanks for taking our question. What are the strategic priorities for the wholesale distribution business? Can you give us an update on the integration of FBM and ADG with the core Lowe's business? Marvin Ellison: This is Marvin. I'll take the first part, and then I'll let Brandon jump in. First, what I would say is that we're really excited about the integration activities and the progress that we're making with both FBM and ADG. When you think about the future of acquisitions, we've already made a few tuck-in acquisitions for both FBM and ADG, and we feel as though we'll continue to do that to ensure that we're building out this interior solutions platform that we talked about. Our objective is to have the ability, when you combine Lowe's, ADG, and FBM, to provide the home builder with virtually everything they need for the interior space of the home. You know, think doors, windows, ceiling systems, insulation, appliances, cabinets, countertops. That is the strategic vision that we're building out for both. As we think about, you know, future tuck-ins, they will be more than likely in that direction to ensure we're building out that portfolio of companies and products and services so we can serve that larger home builder. I'll let Brandon provide some additional context. Brandon Sink: Yes, sure, Zach. As we put some financials to this, as we look ahead to 2026, I mentioned we're gonna have revenue, we're guiding revenue of about $8 billion combined for ADG and FBM. That does represent organically low single-digit positive growth, solidly accretive to adjusted EPS as we look at 2026. We like what we're seeing on the commercial side with FBM, as we manage through sort of the cyclicality of what we're seeing, some of the near-term pressure we're seeing on the home building side. As Marvin mentioned, we've activated our integration teams. We continue to work together with both FBM and ADG on our strategies and plans to realize synergies. We're making really nice early progress, specifically, you know, work that we've done with vendors on product costs, looking at SG&A, logistics, back office, and then at the same time, really looking go forward at the cross-selling opportunities that exist across all three of these businesses. Really nice progress. Excited about what's ahead for 2026. We'll continue to manage this and continue to get after it. Unknown Analyst: That's helpful. And then just as a quick follow-up, if we adjust for the mix impact of these acquisitions, can you speak to what you're expecting for the core on core EBIT margin in 2026, both at the low end and the high end of the range, and how that relates to the rule of thumb, if you will? Brandon Sink: Yes, sure, Zach. I think I mentioned earlier, you know, stripping this out, really it's just a function of top line. Excluding the 30 basis points of step back, again, you're gonna see at the high end a reflection on our 2% comp, and that's if we see, you know, upside traction that we have with some of our sales-driving initiatives, you know, potential for tax refunds. Then the low end is essentially on a flat comp for the core business is gonna be at the low end. Really just a reflection. We mentioned the investment and the sales-driving initiatives, and then where we fall within that range is just gonna be a function of how the top line plays out. Operator: Our next question comes from the line of Michael Lasser with UBS. Michael Lasser: The guidance you provided spans a bit broader of a range than Lowe's has historically provided. If 2026 turns out to be meaningfully better or worse than that range, what internal and external key performance indicators would have told you that first, and what is that KPI saying today? Marvin Ellison: Michael, this is Marvin. I'll take the first part of that. I think the best way to think about your question is, whatever we get from a macro perspective in housing, we intend to outperform it. That is our internal expectation every year, and I think consistently, we've been able to do that. We're basically forecasting home improvement macro to be relatively flat, looking at 2026, and therefore, we set a guidance from 0%-2%, with the expectation that we'll outperform the macro and we'll take share against any competitor, small or large, and we think that we demonstrated that in the back half of this year. Having said that, there are always indicators in merchandising categories, certain financial metrics we're looking at. Obviously, the one thing that we look at closely relative to the DIY are big-ticket, discretionary purchases. When we start to see a sustained number of discretionary big-ticket purchases from the DIY, that's gonna give us an indication that the consumer is getting healthier, and they're more confident in making those purchases. I'll let Brandon add any additional context. Brandon Sink: Yes, Michael, I would just add a 2% spread has been pretty consistent the last couple of years as we've come out with the guide. In an uncertain environment like this, I'll just add a little bit more color to what Marvin said. This is really for us, I think where we fall is purely sort of indicative of, you know, overall home improvement in the macro and what plays out versus what doesn't. I think on the low end, probably an environment where we're seeing elasticity is a bit more pressured, deteriorating consumer sentiment, you know, the continued deferral of big-ticket spend, which we've been experiencing now for a number of years. On the high end, I think potentially some uptick in big-ticket discretionary projects, potential benefit from the tax refunds, HELOC activity, which we think is an opportunity for us, and then, you know, obviously continued momentum in some of the core areas of the business, you know, primarily pro with some of the planned spend initiatives. That's just to give you an indication, sort of on the high end and the low end, as to how the macro could play out and how that translates to where we fall within the guide. Michael Lasser: That's very helpful. And my follow-up question is a bit broader of a question, but Marvin, there's a lot of focus in the market and in the economy as of late, about what all of the technological innovation is gonna mean, both for companies as well as industries. The home improvement sector seems to be perceived to be a bit more insulated, at least as of today. How are you thinking about the broader impact of artificial intelligence on home improvement? How is Lowe's looking at the potential positive versus the drawbacks from deploying all this technology, both from a demand perspective as well as how it's evolving the cost structure over the next couple of years? Marvin Ellison: No, well, Michael, I appreciate the question. I think for us, we set an internal framework that AI will help us improve how we sell, shop, and work. Basically, as we think about AI internally, we frame it around those three strategic areas of our business. As a result of that, we're very focused on employing AI to help our associates sell, to improve the shopping environment for our customers, both in-store and online, and creating productivity in the workspace, both in-store and at our store support center. Some examples of that are things like our Mylow Companion, which we are leveraging as a virtual assistant, not only for customers, but also as a companion tool for our associates. We've seen roughly 1 million questions a month come through this virtual assistant and this companion tool. We built this on an OpenAI platform. It learns, and it gets better with every interaction. It helps our associates do the most difficult part of transition to a home improvement world, and that is product knowledge. One of the biggest challenges that Joe faces and our HR team faces whenever we bring on a new associate, is giving them the confidence they can be on the sales floor, engage a customer, and provide specific product knowledge. Not only does this platform and this assistant allow that to happen, it also now can do it in Spanish. That helps to break the language gap that we may have in certain geographic areas. We've seen dramatic improvements in customer service in a 200 basis points range in our stores where associates are adopting this, and we're seeing our conversion rates online roughly double when customers engage with Mylow. That is just one tangible example of how we're taking AI and we're making it work, not in a philosophical, you know, not in a theoretical perspective, but in a very tangible perspective. As Joe mentioned in his prepared comments, we're leveraging this in Pro. We've now built a Pro Companion tool, which gives our Pro team the ability to understand exactly how to prepare for customer conversations. When they engage with a large pre-planned Pro, they can be informed, they can have great advice and counsel, and they can provide good direction. I can give you 50 examples of how Bill is leveraging this from the merchant team, how we're freeing up his merchants from being task-driven and now being more strategically driven, working with suppliers on how we can drive revenue, how the tech team is using AI tools for development and code review, and they're seeing double-digit productivity gains and increasing speed to market. We are embracing this as a net positive, and we're understanding that it's coming and we're on the cutting edge of working with it, and we're excited about some of the work we're doing in agentic commerce with some of the leading tech platforms out there as well. It's something, as a large company, that we understand is critically important to our current state and our future, and we're embracing it. Operator: The next question is from the line of Jonathan Matuszewski with Jefferies. Jonathan Matuszewski: Marvin, if you adjust for the weather and put the storms aside, are there commonalities in markets where you're seeing comp sales underperforming and where they're outperforming? Basically, can you draw any conclusions from home prices or white-collar employment or other factors on a market-by-market basis? Marvin Ellison: Jonathan, thank you for the question. I can say that there are really no material differences that we're seeing in geographies if you strip out weather. Now, we understand that there are housing dynamics across the country, we've seen no material difference in our overall financial performance in these geographies thus far. Jonathan Matuszewski: And then a follow-up question, you know, you referenced Lowe's Media Network. Was hoping you could share an update there in terms of how that's contributing from a P&L standpoint, and how you see any tailwinds to the gross margin guide in 2026, Brandon, as that continues to grow? Marvin Ellison: Well, I can tell you we're really excited about the media network. It's something that we've been investing in for a while. We've now hired a new leader. We've improved our technology platform, and what I'll do is I'll let both Bill and Brandon talk about how we're leveraging it from our supplier partnerships on Bill's side, then I'll let Brandon provide any financial perspective. William Boltz: Yes. Marvin, I'll jump in here. Just, you know, a couple of things. We're leveraging insights from our customers from both our loyalty platforms, both the Pro and the DIY, you know, which has given us a key differentiator for our Media Network. We're expanding channels, looking at creator networks, as I mentioned in my prepared remarks, across our sports marketing, connected TV, and online video. We're also looking at how we provide visibility and measurable results to our suppliers, leveraging, you know, the value creation that we can drive here. 'Cause we think, you know, with our Media Network, we open up a number of different avenues for these guys to be able to tap into. So, we're excited about kind of where we're going and the early results of it, and we're in the early innings, but we're off and running. Brandon Sink: And Jonathan, this is Brandon. Last thing I'll say, just the benefits of Lowe's Media Network, the advertising revenue, the growth, is reflected in our expectation of $1 billion of productivity into 2026. That's roughly split evenly into gross margin, which would include the benefits from the Lowe's Media Network, and then the other half in expense. Again, factored in the growth, it's scaling in line with our expectations and gonna be a big part of what we expect to deliver for 2026. Operator: The next question is from the line of Brian Nagel with Oppenheimer. Brian Nagel: So First question I have, I guess it's from a macro standpoint. You know, a lot of thought lately, including on today's call, about the ongoing stagnation in the U.S. housing market and, you know, the headwind of higher rates. The question I want to ask, you know, we're starting to maybe see rates move lower, you know, in the data. As you're watching your data, are you seeing? You know, again, recognizing it's early, are you seeing some type of, you know, benefit, you know, as rates have started to move lower? If not, are you starting to see I guess the other question, would you be seeing some type of break, and what would that normally be, that relationship between rates and your business? Marvin Ellison: Brian, this is Marvin. I'll take the first part of that. Look, I would, you know, say that we are obviously watching this really close, but you said it's just a little too early to have any definitive point of view that there's a correlation between rates going down of late and any type of demand changes in the marketplace. Look, we think intuitively that when you get rates down on a sustainable basis below 6%, we think that that's gonna be as much of a psychological unlock as anything else. It's just too early for me to sit here today and give you a definitive financial point of view on it. I'll let Brandon provide some thoughts. Brandon Sink: Yes. Brian, I'll just add, you know, we've looked at the Fed cut 175 basis points in the last 18 months. There's a consensus of a couple of more cuts, 50 basis points, this coming year in 2026. The near term impact that is easing the burden for consumers in areas like, you know, credit cards, auto loans, HELOCs. Watching the long end of the curve, more particularly, which is, as you know, pegged to the 10-year, which has been hovering somewhere around 4% to 4.5%. We do look at sub 6% rates as potentially stimulating demand. We saw that this week, for the first time, dip just below 6%. Translating all of that into the guide, there is a delay, as Marvin referenced. We don't know exactly when that's gonna start to take shape and how that's gonna impact consumer spending. Again, for us, that's what's resulted in us having a little bit wider range, just given the opportunity and some of the uncertainty that continues to be out there. Brian Nagel: That's helpful. I appreciate it. And then my follow-up question, I guess, also bigger picture, but just with respect to tariffs, you know, you and your sector have done a very good job of managing the tariffs we've seen. We've gotten, I guess we'd say, new news and maybe some from certain further shifts in tariff rates. Again, recognizing this is also early, but, you know, any thoughts on, you know, what we're seeing now and, you know, what the adjustments that could spur within your business? Marvin Ellison: So Brian, I'll state the obvious, the tariff policy is fluid. We're currently reviewing all the new rules like everyone else. What I will tell you is that we remain confident in our full year guide regarding the top and bottom line. In the meantime, we're just gonna continue to execute our global sourcing playbook, and we're gonna just be in tune to everything that is changing and adjusting. Again, it's just such a fluid situation. It's just too early, again, to have a really specific point of view other than we have a very, very effective playbook. We're gonna manage that playbook, and we're gonna be very, very alert to any other changes that happen. Brian Nagel: I appreciate it. Thanks, Marvin. Marvin Ellison: So everyone that's our final question, and I'd like to close with a couple of comments. First, I'd like to take a moment to recognize Kate Pearlman, our VP of Investor Relations and Treasurer, after a distinguished tenure with Lowe's, Kate has decided it's the right time to embark on a new chapter of her Professional journey. While we are sad to see her go, she leaves us on the highest note having built a world-class IR and treasury function. So we want you to join us in thanking Kate for her years of dedication to Lowe's, wishing her nothing but grace favor and blessings in our future endeavors. And we now look forward to speaking with you again on our May 20 earnings call. So Rob, that's all we have. Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for joining us for the Lowe's fourth quarter 2025 earnings call. Thank you.
Operator: Ladies and gentlemen, good morning, and welcome to TIM preliminary 2025 Results and 2026 Update Presentation. Paolo Lesbo, Head of Investor Relations, will introduce the event. Paolo Lesbo: Ladies and gentlemen, good morning, and welcome to TIM Full Year 2025 Preliminary Results and 2026 Update Presentation. I am pleased to be here with the CEO, Pietro Labriola; the CFO, Piergiorgio Peluso; and the rest of the management team. We will start with Pietro, who will outline the key messages and strategic highlights of today's presentation. We will then review our 2025 operating and financial performance before addressing selected topics that are particularly relevant to understanding the evolution of the group. Finally, we will provide an update on our 2026 targets and priorities going forward. As usual, we will conclude with a Q&A session. Please refer to the safe harbor statement included in the annex for details on the reporting perimeter. With that, I will now hand over to Pietro. Pietro, the floor is yours. Pietro Labriola: Thank you, Paolo, and good morning, everyone. 2025 marked another key milestone in our journey to make TIM a normal company, operational discipline, strategically consistent and financially predictable. We delivered on our guidance for the fourth consecutive year, reinforcing our track record of execution and credibility with the market. At the beginning of the year, process investment in TIM strengthened our shareholder base, enhancing governance stability and providing full alignment behind the group's strategic direction. We also reached a positive outcome in the 20-plus year long legal dispute regarding the 1998 concession fee, fully in line with our expectation and removing a longstanding source of uncertainty. TIM shareholders recently approved a significant overhaul of our capital structure. This will simplify our equity and increase strategic and financial flexibility going forward. Importantly, the 2026 guidance and growth trajectory presented last year are confirmed. Looking ahead, we plan to host a Capital Market Day in the second half after the summer once we have full visibility on several key developments, including the outcome of the savings share conversion, the expected approval of the rent sharing agreement with Fastweb plus Vodafone and the definition of the full synergy perimeter with Poste. Let's start with the full year results. In 2025, group delivered solid growth across all key financial metrics, confirming the strength of our operational execution and financial discipline. Revenues increased by 2.7% to EUR 13.7 billion, supported by continued commercial momentum across our core businesses. EBITDA after lease grew by 6.5% to EUR 3.7 billion, reflecting operating leverage and tight cost control. CapEx remained disciplined at below 14% of revenues amounting to EUR 1.9 billion fully consistent with our investment framework. As a result, EBITDA after lease minus CapEx increased by 17% to EUR 1.8 billion translating into stronger cash generation. Equity free cash flow after lease reached EUR 0.7 billion, further reinforcing our deleveraging profile. Net debt after lease stood at EUR 7.9 billion with leverage at 1.86x in line with our targets and capital structure objectives. Geographically, performance was strong in both our markets. In Italy, despite continued competitive intensity, we reported a resilient and improving financial profile. Revenues increased by 1.9% to EUR 9.5 billion. EBITDA after lease reached EUR 2 billion, up 5.1% year-on-year. CapEx on revenues was just above 12%. EBITDA after lease minus CapEx increased by 18%, reaching EUR 0.8 billion. In Brazil, the market environment remains rational, allowing us to continue delivering sustainable growth and profitable expansion. Overall, the year confirms that the post NetCo team is structurally stronger, more cash generative and better positioned to deliver sustainable value creation. For the fourth consecutive year, both group and domestic results were fully in line with guidance across all metrics and unprecedented achievement in TIM's recent history and a clear testament to the consistency of our execution. In the next slides, I will focus on EBITDA after lease, equity free cash flow and leverage, outlining the key operational and financial drivers behind this performance. Starting with EBITDA after lease, full year growth was fully in line with our guidance at both group and domestic level. In Italy, the year-on-year acceleration progressed as expected. The improvement was sorted by initial comparison base and by positive drivers materializing in Q4. Notably, the full contribution from the back book price adjustments and the typical seasonality of the enterprise business. At group level, Italy and Brazil contributed almost heavily to EBITDA growth. Revenues accelerated at a faster pace than operating costs, resulting in operating leverage and a 1 percentage point margin expansion year-on-year. On segment profitability, we are currently revising the cost allocation framework between TIM Consumer and TIM Enterprise to better reflect their economics. The objective is to provide a more precise representation of the underlying profitability of each business, even considering the mutual intercompany contribution. Given that this work is ongoing and to avoid unnecessary comparability noise, we prefer to disclose segment profitability metrics based on the revised allocation framework at the upcoming Capital Market Day. Cash generation in the year was robust and fully supportive of the reduction in net debt after lease. Equity free cash flow amounted to EUR 0.7 billion, materially above target. The outperformance was driven by 2 distinct components. First, the underlying core performance generated approximately EUR 0.55 billion, around 10% above target. This was primarily supported by stronger operating free cash flow in line with the trajectory we had anticipated in previous earnings calls. Second, in addition, EUR 0.2 billion derived from nonrepeatable items. This included the early collection at year-end of certain public administration receivables originally due in 2026. This timing effect will reverse in 2026. The positive cash impact related to the stock split and stock grouping at TIM Brasil. Turning to net debt after lease shown on the right-hand side of the slide, the reduction was in line if anything, slightly better than expected. The main drivers were 3, the first one. The stronger equity free cash flow just discussed. The second approximately EUR 0.1 billion cash proceeds from the divestment of 2 financial assets completed in Q4. Third, the distribution by TIM Brasil of earnings totaling BRL 2.2 billion in December 2025. This represented an advance of shareholder remuneration originally due in 2026 and resulted in an additional dividend leakage to TIM Brasil minorities of approximately EUR 0.1 billion. Overall, total dividend leakage to TIM Brasil minorities in 2025 amounted to EUR 0.3 billion. As a result, net debt after lease at year-end stood at EUR 6.9 billion with leverage at 1.86x fully consistent with our deleveraging path and capital structure objectives. Turning to TIM Consumer. In the fourth quarter, total revenues and service revenue declined by 2.3%, primarily reflecting a lower contribution from wholesale. The MVNO business experienced volatility with Fastweb and CoopVoce exiting. Retail performance remained stable. For the full year, total revenues amounted to EUR 6 billion, down 0.9% year-on-year, while service revenue were broadly stable, a meaningful outcome in a still competitive environment. A key driver of this stability was our repricing campaign. In 2025, we implemented price increases across more than 8 million fixed and mobile consumer lines. The impact was visible across all KPIs. Wireline ARPU increased by 5.1% year-on-year. Mobile ARPU was up 0.4%. Churn remained firmly under control despite multiple pricing action over time. This performance confirms the effectiveness of our volume-to-value strategy launched in 2022. Notably, similar pricing initiatives have recently been announced by other market players starting in 2026, reinforcing the sustainability of this approach. On the commercial front, wireline net adds improved in the full year with almost 25% fewer line losses compared to 2024, supported by the growing contribution of FTTH and 5G FWA. In mobile, net adds were broadly stable versus 2024. More importantly, number portability was neutral again in Q4, confirming the stabilization trend seen in previous quarters. During the quarter, we disconnected approximately 400,000 SIMs that had been inactive for more than 12 months with no impact on ARPU or service revenues. Finally, on our customer platform, TIM Vision service revenue continued to grow steadily, up almost 5% year-on-year. With the recent addition of HBO Max and Paramount Plus, TIM Vision now represents the most comprehensive content aggregation platform in the Italian market. The sustained top line momentum validates the strategic rationale of this positioning. Turning to TIM Enterprise, Q4 marked the 14th consecutive quarter of growth, with both total and service revenue increasing at double-digit rate, confirming the structural momentum of the business. For the full year, total revenues increased by 7% year-on-year to EUR 3.5 billion, while service revenue grew 9%, reflecting a favorable mix shift toward higher value-added services. Our strategic focus on ICT and digital platforms continues to deliver tangible results. Cloud was the clear growth engine, expanding by 24% year-on-year and representing more than 40% of TIM Enterprise service revenue in 2025. Connectivity evolved as expected, with a moderate overall decline. Within the mix, fixed connectivity remains stable, while mobile was affected by phaseout of a large public administration contract that we consciously decided not to renew in line with our disciplined approach to margin protection and avoidance of low-return tenders. Other IT services grew by 4%, supported by strong demand in cybersecurity and IoT. The integration of our infrastructure assets with advanced cloud, IoT and cybersecurity capability underpins TIM Enterprise competitive edge and market differentiation. Our ambition is clear: to leverage this foundation becomes Italy leading provider of sovereign digital services. In this context, the National Strategic Hub stands as Europe's first concrete example of a sovereign cloud initiative. TIM Enterprise revenues generated within this framework have doubled over the past 12 months, giving us a structural head start in a strategically critical segment. Moving to Brazil. Results once again confirm strong execution and disciplined management. The market remained healthy and rational and TIM Brasil continued to deliver profitable growth, reaffirming its position as the most efficient operator in the country. For the full year, top line growth was in the mid-single digits, driven by mobile service revenues. Monetization of the customer base remains a key priority, supported by successful upselling from prepaid to postpaid, resulting in the highest ARPU in the market. Efficient operational execution drove high single-digit EBITDA after its growth and margin expansion. Operating expenses remain below inflation while EBITDA after lease up nearly 9% year-on-year. The combination of EBITDA after lease growth and disciplined CapEx translated into double-digit growth in cash generation. These results demonstrate that the operational discipline and value-oriented approach that have driven success in Brazil are the same principle guiding the transformation of our domestic business. Across both markets, the formula is consistent, focused efficiency and value creation and the results speak for themselves. I will now hand over to Piergiorgio for a detailed review of the financial results. Piergiorgio Peluso: Thank you, Pietro, and good morning, everyone. Let me start with a few comments on group CapEx and OpEx. Group OpEx rose modestly in 2025. Around 2/3 of the year-on-year growth was attributable to the domestic perimeter with the remaining 1/3 related to TIM Brasil, where cost growth remained well below inflation, confirming continued cost discipline. In Italy, the slight increase in OpEx was primarily driven by revenue-related components, namely higher cost of goods sold linked to ICT revenue growth as well as higher G&A and labor cost. These effects were partially offset by lower industrial costs, including savings in network operations and energy. OpEx related to FiberCop MSA reduced 11% year-on-year. Group CapEx declined 1.7% year-on-year to EUR 1.9 billion, with Brazil stable and Italy down 2.6%. CapEx intensity stood at around 14% of revenues. In Italy, about 25% of CapEx was customer-driven while 50% was allocated to infrastructure investment, including mobile network, IP backbone and data center, where we are expanding capacity to meet the surge in cloud demand. In Italy, our transformation plan continues to enforce strict OpEx and CapEx discipline. As a reminder, progress is tracked against the inertial OpEx and CapEx trajectory that is the cost baseline we would have incurred without the plan. Domestic transformation plan delivered to EUR 266 million in cash cost reduction versus inertia plan achieving 130% of the full year target. In previous earnings calls, we indicated that cash generation would accelerate in Q4 and that the group was on track to achieve and potentially exceed full year guidance. This is exactly what happened. Equity free cash flow came in materially above target, as already outlined by Pietro. In addition, Q4 included some nonrepeatable items below the equity free cash flow line. As a result, group net debt after lease decreased by EUR 0.4 billion over the last 12 months from EUR 7.3 billion to EUR 6.9 billion. This slide summarizes the main moving parts. Starting with equity free cash flow of EUR 0.7 billion resulting from EUR 2.0 billion of EBITDA after lease minus CapEx. This reported figures include the positive profit and loss impact of the concession fee and the negative profit and loss effect related to the reversal of wireline contract cost following the reassessment of deferral period implemented at year-end. I will address both items in the next slide. EUR 0.7 billion net working capital absorption. This figure includes both the concession fee and the reversal of wireline contract cost, but with the opposite cash effect compared to the profit and loss, resulting in a neutral net cash impact. Working capital also reflects cash out items such as preretirements and the final installment to DAZN. Excluding these extraordinary components, the change in underlying net working capital would have been broadly at breakeven. A detailed breakdown is provided in the annex. Below equity free cash flow, the main items were EUR 0.3 billion of dividend leakage related to TIM Brasil minorities, EUR 0.1 billion for the buyback in Brazil, EUR 0.1 billion of cash proceeds from the disposal of 2 financial assets completed in Q4. The resulting net debt after lease at year-end stood at EUR 6.9 billion with a leverage at 1.86x. Before moving to the 2026 update, I would like to address a few special topics that require attention. Please feel free to raise any clarification point during the Q&A session, should anything require further detail. The first topic relates to the '98 concession fee. As you know, last December, the Italian Court of Cassation ruled in favor of TIM, bringing to a close of a more than 20-year legal dispute and triggering approximately EUR 1 billion not appealable compensation. From an accounting perspective, this amount was recognized as other income within 2025 reported EBITDA. However, it was not reflected in the year-end net financial position. As previously communicated, in July, we anticipated the expected cash in through a factoring transaction. The related proceeds were temporarily recorded as financial debt and from an accounting standpoint with no impact on the net financial position. This liability will unwind in 2026 upon receipt of the payment from the Italian Government. The 1998 concession fee leads to the next special topic on Slide 16. On the 28th of January, ordinary and savings shareholders approved the 2 key resolutions aimed at simplifying our capital structure and increasing strategic flexibility. The first resolution concerning the reduction of share capital from almost EUR 12 billion to EUR 6 billion. This will not alter total value of net equity or economic substance. Rather, it will realign the equity structure and restore available reserve, thereby enhancing financial flexibility, including the potential for future shareholder remuneration. The figures shown in the slide refer to year-end 2024 and will be updated in March following the approval of the 2025 financial statement. The second resolution relates to the conversion of savings shares, a long anticipated step towards simplifying TIM capital structure. Moving to a single class of shares will improve stock liquidity and index relevance while eliminating preferential rights attached to saving shares and fully align the interest of all shareholders. Going forward, TIM's capital structure will be leaner, more efficient and more remuneration supportive. This slide outlines the time line for the conversion process. I will not go through each individual step. In summary, assuming no position from creditors to the share capital reduction, a scenario we do not expect, the conversion is anticipated to be completed by the end of May. The last special topic concerns the reassessment of the deferral period for the one-off cost related to wireline contracts introduced at year-end 2025. Let me start with industrial rationale. Following the disposal of the wireline access network in 2024 and the progressive implementation of our customer platform strategy, our business model has evolved. Customers are no longer identified by a single fixed line but by a broader ecosystem of services, connectivity, entertainment, energy, insurance and more. Consistently, our cost structure has shift from an infrastructure-based model to a more variable and service-driven structure. This new operating context require the reassessment of the deferral period of wireline one-off contract cost. There is no change for variable cost, which will be -- continue to be expensed in the profit and loss on an annual basis as long as the line remains active. Starting the 1st of January 2026, one-off cost will be no longer deferred over 8 years previously aligned with the average customer useful life, but over 4 years, reflecting the economic payback period. These one-off costs mainly include the subscriber acquisition and provisioning costs incurred at contract inception. Most importantly, this accounting change has no cash impact. The cash out associated with this cost is and will continue to be fully recognized in the year of activation. With the adoption of the revised deferral period, we aligned the previously deferred cost to the new 4-year amortization period. This led to a nonrecurring charge of approximately EUR 0.6 billion recognized in 2025 reported EBITDA. Starting from the 1st of January 2026, one-off activation cost will be amortized over 4 years with 1/4 of the amount recognized in the profit and loss each year. Overall, the net impact on EBITDA is expected to be broadly neutral over time. The initial headwind resulting from the shorter amortization period of new activation will be offset by the tailwind from lower residual deferred costs still to be released to the profit and loss. As I want to reiterate, this reassessment as 0 cash impact. Its rational is industrial and economic. Future efficiency in one-off cost will be reflected more rapidly in the profit and loss, improving the alignment between EBITDA performance and cash generation and enhancing the transparency of underlying profitability. A simplified illustrative example of new versus old treatment is provided in the annex. Before moving to the 2026 update, let me briefly recap the key messages on these special topics. The 1998 concession fee enhances our financial flexibility. In the short term, it will support the financing of the savings shares conversion. The positive impact on the net financial position will materialize in 2026 upon cash received. The new capital structure will be leaner, more efficient and better positioned to support shareholder remuneration, thanks to the restoration of the distributable reserve. The conversion to a single class of shares will eliminate preferential rights, fully aligned shareholder interest, improved stock liquidity and increased index relevance. The revised deferral period of wireline contract one-off cost has no cash impact and will improve the alignment between EBITDA and cash generation, increasing transparency on underlying profitability. One additional update yesterday, the Board of Directors approved a 10-for-1 reverse stock split. Subject to approval at the shareholders' meeting to be held on April 15, this measure is expected to reduce share price volatility and broaden the potential investor base. With that, I hand back to Pietro for the 2026 update. Pietro Labriola: Thank you, Piergiorgio. Before we move into 2026 outlook in detail, let me reiterate the key points. The strategic framework presented last year is fully confirmed. You will see some refinements in business assumptions, but the direction of the travel remains unchanged. To ensure full clarity, these slides summarize the main assumption underpinning our 2026 guidance. Starting with Italy. Equity free cash flow will include around EUR 1 billion related to the concession fee with a corresponding reduction in year-end net debt. We are assuming no material contribution from Poste synergies in 2026. I will elaborate further on this on Slide 26. The MVNO segment will remain somewhat volatile during the year. PosteMobile will progressively migrate inbound, reaching full contribution in Q4, while Fastweb and CoopVoce will complete their outbound migration in the first half. No material impact is assumed from the RAN sharing agreement with Fastweb and Vodafone, subject to expected approval by the National Regulatory Authority. Value of services provided to FiberCop will progressively scale down during 2026. Our guidance assumes 0 contribution from the NetCo earnout. We assume completion of the Sparkle disposal in Q2, reflecting timing in the authorization process. We are not concerned. This is merely a matter of time. In terms of shareholder remuneration, our assumptions are: a cash-out of approximately EUR 0.7 billion in May representing the cash component of the savings share conversion. The declaration of a dividend of approximately EUR 0.5 billion for fiscal year 2026 payable in 2027. The launch of a share buyback after Sparkle disposal closing for an amount equal to 50% of the transaction proceeds. Turning to Brazil. We assume cash-out of approximately EUR 0.2 billion related to the acquisition of the remaining 51% stake in I-Systems. On shareholder remuneration, TIM Brasil has maintained a trajectory of sequential improvements. Let's now review the priorities for our 3 entities. For each, the strategic focus outlined last year remains confirmed. TIM Consumer, we expect a stable retail top line and the reduction in MVNO as previously explained. Profitability will be supported by disciplined cost control. CapEx will remain focused on 5G deployment and the customer platform. TIM Enterprise. Growth above market is expected to continue. Our priorities include further margin improvement through cost efficiency and optimize mix versus by mix. Investments will focus on data center and AI capabilities progressively position TIM Enterprise as the Italian champion in sovereign cloud. TIM Brasil, the focus is on delivering EBITDA growth above inflation. Will still strengthen the mobile value proposition, deploy targeted offers and expand ancillary revenues while maintaining selective broadband investment and accelerating B2B connectivity, IoT and ICT services. Across the group, our ESG agenda remains a structural pillar of long-term value creation, fully embedded in our industrial strategy rather than treated as a parallel initiative. In 2026, we will focus on 3 clear priorities. First, on the environmental front, we'll present our environmental transition plan setting up a structural pathway to decarbonization with defined milestone and accountability. At the same time, we will address execution challenge, increasing transparency and control over remission that historically sit outside direct telco boundaries, particularly Scope 3 and supply-related emission by strengthening tracking engagement and governance mechanisms across the value chain. Second, on the social dimension, we'll continue to advance gender balance across all levels of the organization. Our objective is not incremental improvement, but measurable progress in leadership and critical roles, reflecting a deeper and lasting culture shift. And finally, on governance. In strong alignment with TIM Enterprise's strategic positioning, we will reinforce our commitment to digital sovereignty. This means enhancing secure, resilient and trusted digital infrastructure and services, contributing to a more robust and strategically autonomous digital ecosystem. Let me now turn to one of the most important structural shift shaping our industry. The evolution from cloud adoption to cloud governance. For years, cloud was primarily about efficiency, about scale, speed and cost optimization. Enterprises migrated workloads to global hyperscaler to gain flexibility and reduce infrastructure complexity. Adoption saw the scale challenge. Today, the conversation has fundamental change. Cloud is no longer just about computing power. It is about control, control over data, operation and technology. We are witnessing a clear transition from the old model '21. Previously, business drivers were scale and speed. Today, they are controlling resilience. Customer priorities are shifting from pure cost efficiency to risk mitigation. Architecture are moving from global centralized hyperscale model to jurisdiction aware distributed designs. Most importantly, companies and public administrations are rethinking control over their data, moving from vendor concentration toward multilayer sovereignty. In short, adoption solved scale. Governance now addresses risk. This shift is particularly relevant in Europe and in regulated industries, including public administration, finance, health care, and critical infrastructure, where data sovereignty, compliance and operational resilience are strategic imperatives. This is exactly where TIM is uniquely positioned. We are not just a connectivity provider. We operate critical national infrastructure, understand regulatory framework, manage secure network at scale and already serve the most sensitive segments of the economy by leveraging our existing sovereign infrastructure, combining secure data -- secure data center, advanced cloud capabilities, edge computing and trusted partnership we are building a compelling sovereign cloud proposition. And this is not theoretical. It is already translating into commercial momentum and long-term contracts, strengthening the quality and resilience of our revenue base. Let me briefly highlight another structural shift shaping our performance and future growth, the move from volume-based to value-based connectivity. In the past, the industry competed mainly on price per gigabyte. Network were largely best effort and demand was driven primarily by video and social media. In that context, connectivity risk becoming a commodity. Today, the paradigm is shifting. Latency, symmetry, resilience and reliability are now critical. Both consumers and enterprises increasingly demand guaranteed performance not just data volume. We are moving from price per gigabyte to price per call for quality. Application as cloud gaming, 4K live streaming, smart home security, industrial IoT, edge computing and AI workloads all require ultra low latency, jitter control, stronger uplink capacity and built-in redundancy. Performance metrics now define value. This shift plays directly to our strengths. Investment in 5G stand-alone and network modernization are enabling ultra-high-performance connectivity, allowing us to differentiate introduced premium proposition and improve monetization. For enterprise customer, in particular, connectivity is becoming mission-critical infrastructure, supporting longer contracts, higher quality revenues and stronger margin. We are not talking about the access. We are talking about the backbone, the electronic in our network. In 2025, we continue to enhance network quality and expand coverage, reinforcing our positioning in other segments. This message is simple. As connectivity becomes strategic, value creation increases, our high-performance network and backbone is a key enabler of sustainable growth going forward. Before moving to the guidance, let's briefly review the strategic partnership we're developing with Poste. Conceptually, the expected synergy can be grouped into 3 main areas. MVNO contract at the full run rate, this is expected to generate high-margin revenues of approximately EUR 100 million per year, representing a clear derisking of the business plan. TIM Consumer and TIM Enterprise initiatives, several projects are already underway with others to be launched shortly. We expect a positive impact on EBITDA after lease of approximately EUR 50 million per year at full run rate. Additional transformation project, these initiatives are still under evaluation. They have significant potential, but we need time to finalize them. We will provide further details at the upcoming Capital Market Day. Now I leave the stage to Alberto Griselli, Chief Executive Officer of TIM Brasil to talk about the Brazilian guidance for 2026. Alberto Griselli: Thank you, Pietro. Good morning, everyone. I'm Alberto Griselli, CEO of TIM Brasil. Pietro has just outlined our results. We delivered a strong quarter and closed year with solid performance, reflecting consistent execution and discipline across the business. Importantly, 2025 marked a key milestone for TIM Brasil. Our return on invested capital exceeded the consensus cost of capital, confirming that our strategy is translating into tangible value creation. As we move into 2026, our direction is clear. We continue to focus on value creation across mobile, B2B and broadband supported by 3 company-wide enablers, artificial intelligence, efficiency and ESG. TIM Mobile profitability remains the priority, supported by a customer-first approach. In B2B, our increasingly scalable portfolio positions us well to capture new growth opportunities. In broadband, we entered the year with a more efficient operating model and a portfolio line with disciplined expansion. Across the company, artificial intelligence is becoming a core lever to improve productivity and decision-making, while efficiency and capital discipline remains central to protecting margins and cash generation. This brings us to our guidance, which reflects continuity and discipline. Service revenues are expected to grow in real terms, supported by resilient mobile performance, a recovery in fixed and redevelopment of new revenue streams. EBITDA is expected to grow faster than revenues with margin expansion driven by OpEx efficiency, digitalization and the progressive materialization of artificial intelligence-related gains. Investments will remain disciplined, guided by an efficient capital allocation framework, focused on network quality and technological evolution. We will continue to strengthen our revenue to cash conversion through a holistic approach to operational efficiency. Finally, taken together, these elements support a faster expansion of shareholder returns fully aligned with cash flow growth. Back to you, Pietro. Pietro Labriola: Thanks, Alberto. Let me walk you through our 2026 guidance at group and domestic level. Group total revenues are expected to grow by 2%, 3% with domestic growth in the range of 1% to 2%. Group EBITDA after lease is expected to increase between 5% and 6% with domestic growing at around 4%. As already mentioned, domestic revenue and EBITDA trends incorporate the temporary volatility in the MVNO segment. PosteMobile will progressively reach full run rate during 2026, becoming a structural tailwind from 2027 onwards. CapEx on revenue is expected to remain below 14% at group level and around 12% for domestic, confirming our disciplined investment framework. In terms of cash generation, we expect equity free cash flow after lease of around EUR 1.8 billion, excluding the net cash in from the concession fee, which will contribute below EUR 1 billion post tax and taking into account reversal of public administration invoices anticipated in Q4 2025, we are confirming the EUR 0.9 billion target announced last year despite the weaker foreign exchange rate. Leverage will remain below the maximum threshold of 1.7x that we committed to last year. I will provide further detail on this in the next slide. Turning to shareholder remuneration for fiscal year 2026, we envisage 3 components: a dividend of approximately EUR 0.5 billion corresponding to 70% of equity free cash flow after lease, net of concession fee and dividend to TIM Brasil minorities. The payment will occur in 2027. A share buyback equal to 50% of the proceeds from the Sparkle disposal to be launched following completion of the transaction. A cash payment of up to EUR 0.7 billion to current savings shareholders in connection with the share conversion with completion expected by the end of May. Let's now take a final look at 2026 cash dynamics. There will be 3 main sources of cash. Equity free cash flow after lease, the cash related to the 1998 concession fee, proceeds from the Sparkle disposal. After distributing dividend to TIM Brasil minorities and executing the share buyback in Italy, part of this financial flexibility will be allocated to finance the cash component of the savings share conversion and the acquisition of a 51% stake of I-Systems in Brazil. The 2026 year-end net debt will remain below 1.7x, a level we consider optimal for our capital structure and one that positions TIM in a best-in-class peer comparison. Additional financial flexibility may be deployed to accelerate both organic and inorganic growth. On the ESG, this slide shows a very clear progression, strong execution against our 2025 targets and a more focused agenda for 2026. On the environmental side, we have reached 100% green energy, a significant operational milestone supporting our decarbonization pathway. In parallel, we are strengthening Scope 2 measurement capabilities laying the groundwork for a more structural rollout in 2026. On social dimension, progress is tangible. Women has reached 52.3% our target trajectory and women in leadership position increased to 33.5%, moving steadily toward our 2027 objectives. In 2026, the focus remains on sustaining this momentum both in hiring and in leadership representation. On governance and digital transformation, Italy is delivering high operational targets, advanced digital solutions grew by 22%, exceeding the 17% target for 2025. One, digital identity services reached 34% outperforming expectations. In 2026, we aim to scale the public administration governance platform with more than 30% new customer versus full year 2025 activation, and to expand sovereign services with around 20% year-on-year growth in commercialized services. In Brazil, we continue to invest in people and capabilities. We have already upskilled 60% of the workforce in digital competencies and plan to train at, at least 20% more employees in 2026 compared with 2025 levels. Overall, execution remains disciplined and measurable with clear operational milestones supporting our broader ESG framework. Let's now move to the closing remarks to wrap up. Looking back and considering TIM's reputation in the financial community in past year, it is noteworthy that we have achieved our targets for 4 consecutive years. I want to emphasize again that the new governance has brought greater stability and full support to the group strategy, enabling planning with much higher visibility than before. The near-term outlook is clear. The 2026 trajectory is solid and fully aligned with the guidance we announced 1 year ago. Execution will continue with consistency and discipline. Guidance is confirmed. Looking beyond 2026, the best is yet to come. Details will be shared at our upcoming Capital Market Day. With that, we are ready to take your questions after some few seconds of rest. Operator: [Operator Instructions] The first question is from David Wright at Bank of America. David Wright: I hope you can hear me well. So I just need a little bit of help with the numbers. You talked about the exit of MVNOs, including Fastweb and then the onboarding of Poste. So I just wondered how much in euro terms of revenue are we losing in 2026 from the exiting MVNOs, how much are we gaining from Poste? I think you suggested full run rate in Q4, but if you could just balance those numbers for us a little. And I guess that's suggesting some weaker H1, stronger H2 phasing in the domestic run rate. That's question 1. And then question 2 on the Enterprise business. The prepayment of revenues that came in, in Q4, it looks to me that's give or take sort of EUR 100 million of revenues. Is that right? And should we then expect full year '26 growth to be equally weaker? So again, we're going to get 6% '24, 9% '25. Are we going to go back down to sort of 3% levels in 2026 before we normalize again in '27. So I'm just trying to understand the phasing a little and any numbers you can give me on that would be super useful. Sorry for being a bit more technical. Pietro Labriola: Thank you, David. I think that you want me to explain what we should stated during the call because exactly what we'll have is that we'll have a weaker first half 2026 compared to the first half of 2025 and a stronger second half 2026 compared to the second half 2025. Why that? If we look also in the Excel number that we shared with all of you, the first quarter 2025 was the highest one in terms of MVNO revenues. Then it was shading through all the 2025 and this is something quite normal. The PosteMobile phasing we started at the beginning of the second quarter 2026 and we reach a regime situation in the third quarter 2026. What it will mean? And so it's very important to say to everybody that you will see a weak EBITDA in the first half 2026 compared to the previous year. Just for this movement, no panic, no hurry. It's a normal trend of the revenues. At the same time, you will see a first quarter of 2027, stronger in terms of comparison year-over-year because you will have in the first quarter 2027, a complete amount of the MVNO of Poste. So everything was under control. And these are the dynamics of this component. And this explain also reading also some of the comments, a weaker EBITDA growth year-over-year at 4%, but this was mainly related to the delay of the, let me say, phase in, phase out between the MVNO contract. Overall, what is -- we're talking about a contract that is closed between EUR 80 million and EUR 100 million on a yearly basis. I hope that on this point is more clear now before to move to the second question. Is it? David Wright: Yes. That's cool. Pietro Labriola: But again, I want to stress that we want to be a transplant company or better, as you mentioned in one of your report, a more normal company, no surprise, the first quarter, the EBITDA will be weaker not because we are stupid. And the first quarter 2027 will be better, not because we are superman. Then when we move to Enterprise, what we are mentioning that is a prepayment has no impact on the competence and so on the revenue year-over-year, on the EBITDA year-over-year because it's an anticipation of payment and it allow us to explain also the trend of the equity free cash flow. We are closing better the 2025. It's important to highlight that is not a lottery ticket, the better result of 2025 because also if we have some nonrecurring activity. I have to remember to everybody that it's quite normal that the company has a guidance and an internal budget. In TIM, I'm used to give to my team a budget and the target that is higher than the guidance because we want to put the market on a safe side without surprise. So this result of 2025 is the result of the activity of the TIM. Then when we compare the result of 2025 towards the guidance of 2026. What's happened? In 2026, we are putting EUR 1.8 billion. Of this EUR 1.8 billion, around EUR 950 million is related to the [indiscernible] the concession fee. So it remains EUR 850 million. Our previous guidance was EUR 900 million, but we will have in the first quarter of 2026, the reverse of the anticipation that we had in the last quarter of 2025 by the public administration. And in the meantime, if you look at the currency rate that we are using for our plan 2026 is worse than the 2025 assumption. It means that if we should compare on an equal basis, the real -- or let me say, the organic equity free cash flow -- equity free cash flow number in absolute value for 2026 should have been EUR 950 million. So in some way, is as we are declaring that we are upgrading the fact our guidance, absorbing these 2 movements. Is it more clear now, David? David Wright: Yes. Yes. That's super. Operator: The next question is from Mathieu Robilliard of Barclays. Mathieu Robilliard: Hopefully, you can hear me well. I had a question first on the front book back book. I mean you've done quite a bit of price increases on fixed and mobile throughout 2025. It has had no impact, no visible impact on churn. So I guess this is probably or possibly because of the front book and back book gap continues to be quite reduced. If you can give us a bit of color into that, that would be helpful. The second question was about NSH. So very strong growth between '24 and '25. Should we assume that this type of growth -- this magnitude of growth can continue in '26? And lastly, I mean, you're starting to have a rich company problem with leverage coming now with leverage coming down a lot in 2025, and we fast forward to 2026, it's going to be extremely low. So how should we think about capital allocation? Of course, you reinstated the dividends. But even with that, it seems you have a lot of flexibility or will have a lot of flexibility. Pietro Labriola: Okay. Thank you, Mathieu. I will leave Andrea to answer to the first question to give some more colors. But what is important that today, we are performing very well compensating the line erosion with the price. But as we put in the presentation, we think that the next challenge for all the telco in Europe in the following years will be the market consolidation and in some way, I'm answering also to last your question, we must be ready to be part of this process. And the second to be able to ask for a premium for the better quality of our services. I want to highlight this point. This is not something that will happen in 2026. But if you look at 2027, 2028, the quality of the network will become key for the end user services. You will need more latency, you will need more uplink, but you need also a much better backbone. And we are the player in Italy today that is positioned in the best way to try to exploit this opportunity. But I leave to Andrea to give more color. Andrea Rossini: Thank you, Pietro. Thank you, Mathieu. You're right. We did quite a lot of work on the back book price up, especially during '25, we said several times that we had an impact of around EUR 100 million from the back book price up. The impact on churn was actually compensated by several items, meaning that we worked on convergence. We worked on the diffusion of TIM Vision. The TIM Vision-based increased quite a bit and this contributed to somehow stabilize the impact of price up on back book that is inherently generating some impact of churn. The most important thing is also to notice that as regards the front book trend, we see some positive evidence from the market. So after the merger between Vodafone and Fastweb, we actually see some rationality in pricing. And we see along the second half of the year also some action on back book price up. So this is a positive outcome. The other thing is on mobile, we do see a reduction of the rotational churn in the market. And this is contributing to stabilize the churn effect. Meaning that as we said several times, the impact of Iliad in the market is decreasing and the impact of Fastweb that was acting like a disruptor until 2020, 2024 has come down. Therefore, this contributes to create a positive scenario for the stabilization of the churn effect. Pietro Labriola: About the second question, I'll leave Elio to give you some more details. Elio Schiavo: So sorry for my voice. I hope you can you hear me? Pietro Labriola: Yes. Elio Schiavo: Okay. Good. So we don't see any discontinuity in revenue generation. Actually, we feel very positive about 2026. Just to let you understand why we registered this 9%. Actually, we have a lot of seasonality in quarter 4, as we told you many times. And what happens here is that we got an extraordinary quarter 4 because, let's say, if we compare quarter 4 '25 versus '24 is EUR 144 million higher. And in the year -- in the previous year was only -- the difference was only EUR 56 million and when we look at the difference between quarter 3 and quarter 4, in 2024. It was EUR 180 million. In 2025 was EUR 310 million. But just to let you feel good about our revenue forecast for 2026. We got backlog at a level of EUR 4.2 billion of revenues that we have already secured for the years going forward. And in 2026, the fraction of this backlog, which represents revenues already secured is above 60%. So we don't see the trajectory of our revenues to go down for no reasons. Pietro Labriola: Mathieu, and now I will take the third one. First of all, again, we are really [indiscernible] because if you look at our presentation of the last year in our Capital Market Day, we're already showing that after the cash-in of the concession fee, we should have reached a level of leverage where our target should have been 1.7 as rational, and the remaining part should be financial flexibility. We are reaching this target in advance compared to the previous plan. And it will help us in terms of capital allocation, then I will leave to Piergiorgio to elaborate more on that, to work on the possibility that could arrive to be part of a potential market consolidation because I continue to bet on the fact that it will happen, and I completely subscribe the position of Mario Draghi at the European level, something that was also subscribed by the GSMA. We must try and the time is now to catch the opportunity of the sovereign cloud and digital sovereignty. This is not an Italian clean. It's an European point on which everybody are putting pressure and to be a company, a team that now is considered a national champion for us it will be much easier to do that. And then there's a matter of capital allocation also on the internal project. But I'll leave to Piergiorgio to give some more colors on that. Piergiorgio Peluso: Thanks, Pietro. Good morning to everyone. The point of the capital allocation, as you can imagine, is a crucial point that we are analyzing and working on since the -- since a few months. I would say first comment, we have already decided to execute certain transaction considering the capital allocation that has been available, thanks to the concession and to the potential sale of Sparkle. So I would say first answer to your question, Mathieu is that the acquisition in Brazil of IHS in the region of EUR 200 million plus the savings share conversion and the shareholder moderation that we are already envisaging in our current guidance is already a first answer to your point on how we look at the capital allocation in the future. Of course, we consider dividend distribution in terms of a sustainable remuneration to the shareholder, while having or limiting buyback to certain extraordinary items in order to have, let's say, a shareholder remuneration based on the recurring profitability through dividend. In terms of, let's say, more in general on capital allocation, I would say that we have started a work and allocating EUR 200 million of CapEx in 2026, included in our guidance in order to execute a certain transformation project, and I don't know, just to make simple example, back office automation in customer care or reduction of legacy services or platform decommissioning and supplier consolidation, digitalization of procurement. And I mean, it could be as long as you want. But as you can imagine, with -- in this moment, there are several opportunities that we can work on. And this is the first time that the company is allocating, let's say, an important amount of money dedicated to those projects. Of course, this will have a limited impact in 2026 and it will be much more evident in 2027 and so on, but this will be more part of the presentation that we will have in the Capital Market Day already with the initial results of these projects. The idea is I just want to anticipate one point, which is crucial. The idea is to consider, let's say, much more the profitability of Telecom Italia and the domestic business, particularly based on the cash EBIT result, let's say, net operating profit after tax compared to the cost of capital in order to identify clearly the legacy that we have in our net invested capital and clearly present to you a set of KPIs where we'll be managing and switching off all these legacy. So this is a journey that we have started, and I think it's part of our transformation effort that we are already launching. Mathieu Robilliard: If I can follow up, maybe Pietro, you talked about consolidation. How could that be source of capital allocation from your point of view? It doesn't seem in Italy, you would be involved in something major, but maybe I'm wrong. Are you talking maybe about small adjusted businesses in Italy? Pietro Labriola: But about market consolidation, I don't want to speculate it on that, but the number of all the players are quite clear. So if you want to be sustainable in the market, in the medium, long run, you must look for market consolidation because there will be an optimization at network level, at all the different cost level and you could have also a more rational approach. But I'm not saying something that is different from what you are experiencing in France, in Spain, what's happened in U.K. Europe is in the same situation. The only way to recover in terms of profitability is the market consolidation where market consolidation doesn't mean price increase, but a much better level of efficiency at all the levels. The second that is not related to the market consolidation is. Are you using AI? Well, if you are using AI, you will need a higher level of latency. If you want to be in a stadium and been able to do something on your mobile while you have a crowded stadium with 70,000 spectators you have to pay for a premium. Just to give you an idea, we put as first chart. The first chart was the Milano Cortina sponsorship that we did. We were able to put in the hands of all the different spectators, but also all the athletes, mobile lens that we're able to navigate and serve and experience a very good network quality because of our network. I think that this is the trend. Then we are always open to look at all the opportunity that generate value. And for us, value as Piergiorgio was explaining, is not growth on EBITDA, but cash generation because this is the main driver. I hope that was clear, Mathieu? Operator: The next question is from Ajay Soni at JPM. Ajay Soni: Hope you can hear me. I've just got a couple. First is on Poste synergies of EUR 50 million. So what are your time lines on this? And any costs that will be incurred to deliver these synergies? You mentioned the MSA OpEx accounts for 22% of your domestic OpEx, and that's reduced 11%. So is this just due to fewer lines? What are the moving parts here? And what are your expectations for this cost line into '26 and '27? Pietro Labriola: Thank you. About if I catch in the right way your first question is related to the synergy with Poste, if I'm not wrong. In such a case, what we show is mainly procurement synergy that will enter in 2027 and will be a regime in 2028, just because being procurement synergy, you must wait that the previous contract will end to do some joint activity or some contract, but we are working on further other activities. Some of them are transformation that we'll disclose in the second half. About the MSA OpEx. The optimization of the MSA is not only related to the fact that you will have a reduction of the line because this is a variable component. For sure, I would like to not do a kind of saving on the cost line because they will keep for me the customer. But there are other areas, for example, we have to choose between FWA, FTTH, FTTC and the level price of each of this technology is different. With different level of CapEx, margin and cash generation. So be very clever in managing that is an opportunity. Then in the meantime, we have also some part of the MSA that is related to the use of some services. And we are optimizing. This is not a 1-year work because you have to remember to everybody that by 2029, there will be a good part of the MSA that will completely expire, and we will have to decide if we have to renegotiate or not. In such -- in this case, we have to highlight that we are also working on the use of AI because of some of this activity. AI could substitute that kind of activity. So it's difficult to say. Stay tuned until then to see some transformation. But it's important to show to everybody that we're a company that is not working anymore. Just for the next quarter, but for the financial sustainability of the company in the medium, long run. Ajay Soni: Follow-up. So then it's reduced 11% this year or 2025. What are you expecting for '26 and if you have numbers for '27, that would be great. Pietro Labriola: We have in our number, a reduction of the cost that is related to 2 components, as I was mentioning to you. The one is a volume-driven approach. If we will lose further line, we'll have that. And another part that is an optimization. But in any case, I cannot disclose the number, but there will be a reduction also 2026 on 2025 and also 2027 on 2026 on the MSA cost. Operator: The next question is from Joshua Mills at Exane. Joshua Mills: Hopefully, you can hear me now. Sorry about that. Two questions from my side. One is just on the FY '27 numbers. So I know that you're not reiterating the free cash flow guidance today and you're waiting for the Capital Markets Day in the second half to give more detail. But just if we think about the building blocks you've laid out for 2026 and what looks to be an implied uplift to the free cash flow guidance this year when you adjust for the pull forward of the nonrepeating items. Are there any headwinds that we should think about or potential challenges yes, headwinds to free cash flow in '27 that might negatively affect the EUR 1.1 billion number that was put out previously? But am I right to infer that as you walked through this presentation and talking about opportunities and cost savings, et cetera, that the risk is probably to the upside on the EUR 1.1 billion. That's the first question. And then secondly, I wanted to get a sense of how you're thinking about the RAN sharing deal with Swisscom. I note that in the presentation, you're referring to potential cost savings, but do you also expect there to be a network impact and improvement in network quality? And if so, how meaningful do you think that might be in the medium term? Pietro Labriola: Okay. About the first question, we don't see any kind of risk or headwind for the 2027. We delivered a better result for 2025. We are confirming the result for 2026. And so we will continue with the same path that we told also the previous year for 2027. So we don't see any risk or headwind. Related to the RAN sharing, as we told to the market about the JV, the joint venture with Vodafone Fastweb, we were saying that we see that result of the activity we started to be exploited ahead in the -- if I'm not wrong, 2029, we'll start to see some savings for the JV about that. And in our number, what is happening is that we are considering the actual CapEx, also part of the CapEx to start that activity. So in some way, what is happening is that we are doing better than what was forecasted because in the previous plan, it was not included. Now if Elio elaborate -- want to elaborate some more on that. Elio Schiavo: Sure. Thank you, Pietro. Yes, we are expecting the approval from the AGCom that is the authority. And we start this year, this RAN sharing agreement. At the beginning, we have to invest to consolidate the network. And we expect, as Pietro mentioned, to have the running cost saving in 2029, but we started to see some results already in 2027, 2028 else longer we proceed with this kind of agreement. Remember that we are talking about to have a JV that every company will keep the asset along and we will share the energy cost and the investment for the 5G. So when you're talking about the benefits, we will be cost saving, but our CapEx avoidance as well. Pietro Labriola: But Joshua, what is important is that respecting the previous guidance when the JV was not planned, we are maintaining the same level of CapEx absorbing in that level of CapEx, the investment needed to pursue the saving that we will have from the JV. Is it clear? Joshua Mills: Yes. Great. Operator: The next question is from Domenico Ghilotti at Equita. Domenico Ghilotti: Can you hear me? Pietro Labriola: Yes. Domenico Ghilotti: Okay, fine. So a few questions. The first is on Sparkle. We have seen another delay. So just to get your comments, your color on what's going on there. And if you can confirm the expected proceeds that were around EUR 700 million. Second is on the decision to use the buyback as a shareholder remuneration for '26 instead of a dividend distribution based on the Sparkle proceeds. If you can elaborate on this decision given the strong rally maybe it was more interesting to give a buyback dividend. And third, on the price hikes, I wanted to know if you are planning for additional price hikes on the back book also for 2026? Pietro Labriola: Thank you, Domenico. About Sparkle, we are -- what is happening is that we are waiting for the approval mainly in 2 countries. European Union and U.S. In the U.S., there's a delay because several shutdowns that happened in the public administration in the U.S. delayed the process. At European level, we are confident that we will receive the approval by the end of April. So we are quite optimistic. What was happening that we gave a first request, then we change some of the details and we answer to the question of the European Union. And so now we are waiting to deliver the final notification but the process is under control. About the price, as we mentioned, we think that the cash in, but we have to wait the closing of everything should be in the -- around EUR 700 million, as we always stated. Then about the buyback. So let's remember that today, and then I will leave to Piergiorgio, if you want to elaborate more on that. Something that is related to an extraordinary activity that is the sale of Sparkle and something that is related to the natural and normal cash generation of the company. We gave a dividend policy for what is the normal cash generation of the company with the guidance that is exactly the one that we gave last year, 70% of the equity free cash flow. Instead, about the Sparkle sale, what is happening that as Piergiorgio is teaching me every day that we have to work on the capital allocation, what is better today in terms of capital allocation to buy our stake, our stake where you have to consider that we are still below the multiple of EBITDA of our peers. We still have to show the potential synergy coming from Poste. All the market is betting on the fact that there will be a market consolidation. So in such a case, I have a rational approach to divide it by 2, the shareholder remuneration, the one that is related to the traditional flow of cash that give you a dividend policy. And the use of buyback, we think that is the best way to do the interest of all the shareholders and of the company. And about -- if Piergiorgio has nothing to say, I will leave to Andrea to talk about price hike. Andrea Rossini: Thank you, Pietro. Very quickly, Domenico. We plan to continue the price hikes. We -- as I said in the previous answer, we see an opportunity in the market, and we actually see also a positive trend that also some other operators are coming along on the back book price up. So we see an opportunity and the amount of price hikes will be broadly similar to the one in 2025. The phasing will be slightly different in the quarter. But the overall impact in here will be broadly the same. Operator: The next question is from James Ratzer at New Street. James Ratzer: Hopefully you can hear me okay? Pietro Labriola: Yes, perfectly. James Ratzer: Great. Yes, Pietro, I have 2 please. So the first one was sorry to come back to just your guidance, which I'm pretty sure you're reiterating. But the EBITDA in 2025 was plus 4% in the domestic business. You're guiding for around 4% for 2026. So to get to the bottom of your range for EBITDA growth to 2027 at 5% to 6%, that would imply that your EBITDA growth in 2027 needs to reaccelerate back up to 6% or more. Is that what you are kind of implying with the comments today? And then the second question was just coming back to the point that was just discussed about price hikes. You've been able to increase pricing and ARPU during a period where FiberCop's prices to you have largely been unchanged, and that's allowed you to expand your margins. I think the new AGCom rulings will allow FiberCop now to increase their wholesale pricing, which I understand that they plan to do. So does that mean you now need to raise pricing at an even faster level? Or does this imply that your margins could start to get squeezed a little bit? Pietro Labriola: Thank you, James. About the first question, you are completely right. We'll have an acceleration in 2027, but it's not just an Excel exercise. If you remember at the beginning of the call, I explained that in 2026, we'll have a first quarter in which we will have the lack of part of the revenues and EBITDA coming from the MVNO. So mathematically, when in the first quarter 2027, I will have the overall Poste MVNO, you will have an increase of EBITDA in 2027 compared to 2026. We are talking about something close to EUR 30 million. I have to remember to everybody that today in the number of team, 1 percentage point of EBITDA means EUR 20 million of EBITDA. So just to give you a rough number, exactly the math is right, 5% in 2025, 4% in 2026 and 6% in 2027, roughly. About the price hikes. Once FiberCop, we start to increase the price and then we have to talk about our MSA with FiberCop that allowed to keep some price flat. What will happen that everybody will receive this price increase. So my question is in front of this price increase, I will react the energy player that are the most aggressive one in the market today. Can they subsidize in the telco with the energy, the telco business, I think that this is something very interesting that will put in the market more rationality. But we have the MSA with for certain components the price are already defined, the MSA was approved. And then for the rest, the increase of price will be for everybody. So let me say, more aggressive players, I will react to that kind of price increase. I look at that not as a threat, but an opportunity to have a more regional market. But I leave to Andrea that is responsible for that number to answer on that. Andrea Rossini: Thank you, Pietro. So in terms of the trend we see, our ARPU scale up is due to several factors, not only price hikes. Notably, we have done upselling, cross-selling action and also the TIM Vision business has contributed quite a bit. So we see an opportunity to increase revenues not only due to price hikes. As Pietro said, we do believe that the possible price increase on FiberCop and fiber in general may bring some rationality in the players. So we see an opportunity on the front book pricing trend in the market. Also, we reinforced with market consolidation, but also before market consolidation, probably some rationality may arise. I hope that's clarified. Operator: The next question is from Giorgio Tavolini at Intermonte. Giorgio Tavolini: I have 3 questions from my side. The first one is on the renewal of the spectrum licensing expiring in 2029. When should we expect greater clarity on the next steps? The second one is on the cash financial charges in your free cash flow below EUR 600 million. I was wondering if there was any one-off and what is the trajectory for 2026? And the third question is on AI adoption. I guess it may create opportunity for further acceleration of your transformational plan. But at the same time, I was wondering if you see any AI disruption risk, for example, potential disintermediation in certain processes related to TIM Enterprise. For example, the consultancy activities following an increase in sourcing by clients. Pietro Labriola: So Giorgio, about renewal, our expectation and our hope is that by the beginning of the second half, we will have some more clarity. About the second question, I will leave to Piergiorgio to give you some more details. About the third one before to leave to Elio, it's important to understand that today is not only a matter of the use of AI to sell in the market. But AI could be also a further accelerator of efficiency inside of our company. Because what is happening today is that, for example, for a company like our that for historical reason has legacies, you are not obliged today to move to new system, but you can use AI to have what they call, I don't want to see and polite, digital sleeve to facilitate some activity that until today will be expensive, timely and needed for a lot of human being be done for a very cheap cost by some AI. And it will be one of the points on which we'll bet for our transformation improvement. Then about the enterprise impact I leave to Elio to give you more color and then Piergiorgio will answer on the cash financial charges. Elio Schiavo: Thanks, Pietro. Thanks Giorgio, for the question. So we see this as a very interesting opportunities instead because as you probably know, we buy from the market about 2 billion services and products. So actually, the more AI will penetrate the market, the less we believe we will pay for the services that we are currently buying. So let's say, on the consultancy spectrum, we are on the good side of the equation because we buy services. And so if AI will generate efficiency on that side, we will benefit from that process. More in general, we believe that for adoption of the new technology, which will cost a lot of money, you need to have a very large shoulder has it happens to TIM Enterprise. And so we believe that we will be a main actor in that space. We look at this with 2 different lens. One is how much efficiency we can generate by adopting those technologies. On the other side, how much we can contribute to large enterprise and public administration to let them to adopt new technologies that we could buy from large players and resell to our customers. But let's say, all in all, we see a very positive trend in front of us. And as I said before, I see that the point that you mentioned, you mentioned on consultancy actually plays in our favor. Piergiorgio Peluso: Thank you, Giorgio. On the net financial charges after lease, which is more or less in line with the cash interest that you see in the cash flow analysis. I would say there are no material difference between 2025 and 2026. It is just a fact that the Italian component is lowering in terms of average cost, while, of course, the Brazilian one is slightly increasing. And as you know, in Brazil, there is, let's say, a slight increase in leverage, given that we also have a portion of leverage in Brazil that we use it as a cash flow range for our Brazilian stake. But I would say there are no material difference. In 2026, we expect a slightly lower number in terms of cash interest. Operator: The next question is from Fabio Pavan of Mediobanca. Fabio Pavan: Yes. A couple questions. First one is a follow-up. So we're looking at '27 targets provided you will give us some more color after the summer. My question is, should we think about the equity free cash flow target previously disclosed as the number which makes sense from '27. Second question is for -- on enterprise [indiscernible] cloud after the 24% growth we had in 2025. How are you thinking about '26 and '27 grow? And again, on this, are you still scouting some option for JVs on partnerships? This seems to be the trend for the sector. Very last question for Pietro. You mentioned noncontribution from earnouts has been assumed. Should we see this as you are not expecting any contribution or you are simply adopting a more prudent step at this stage? Pietro Labriola: Thank you, Fabio. About this question is we did all the things that we promised in 2022. So now the earnout is not included in our number, but it's something that we'll continue to pursue because we think that it's something that is still achievable. Then about '27 targets, the direction is that one. So there's no reason to change the target that we had also in the previous plan. And the second one is on Elio? I hope the answer in the meantime for the first 2? Elio Schiavo: Yes. Thanks, Pietro, and thanks, Fabio, for the questions. So Fabio, as you said, let's say, we are registering a very, very high growth on cloud. The market is running around 17%, 18%, we are above 25%. And this is mainly driven by the position that we have on public administration because as a matter of fact, the National Strategic Hub is performing much better than we were expecting at the beginning. And this is creating further acceleration on the cloud business. As Pietro said at the beginning, let's say, we do see also the opportunity of sovereignty going forward because it is clear that the more the market will go toward the theoretical disintermediation of hyperscaler, the more this business will become a make business and margins will become higher and higher. So if you look at the world, the market is foreseen for sovereignty, the growth for banks, insurance, large enterprises and public administration is twice higher than it is today. And this is a space where clearly we can play a very important role because we have all the assets. We have backbone colocation data centers, a very capillar large sales force, and we are part of the National Strategic Hub. So as I used to say very often in this kind of conversation, so we are likely because we grow in the market growing, but clearly, our positioning is a premium positioning. So I don't see cloud to change the trajectory. Operator: The next question is from Andrew Lee at Goldman Sachs. Andrew Lee: I had 2 questions. The first question was a bit of a follow-up on your expectations for Italian growth drivers. And the second one was on Italian CapEx intensity. Thanks for your help in understanding the MVNO impact in 2026, which sounds like it's suppressing the growth a little bit in 2026 in Italy. Are you anticipating the underlying trends through 2026 outside of that MVNO impact are the same, i.e., continued cloud growth versus connectivity declines? And do you expect those trends to continue into 2027 absent any consolidation? Just trying to think about what we should be thinking about for structural growth once those MVNO impacts dissolve. And then second question, just on CapEx intensity. It's clearly been coming down. You're guiding for 12% in 2026. What we're clearly seeing is there's a little bit of a sitting on hands moment for Italian mobile operators while you wait to see how and when and whether consolidation plays out. Do you see that 12% CapEx intensity as a new kind of structural norm? Or is this just a temporary suppression in your CapEx ahead of having greater clarity on the market structure? Pietro Labriola: So about the first question, adjusted. Can you repeat. Yes. Okay. So because I didn't try to. I was forgetting the team will remember me. Now our business model is quite clear. In the Consumer segment, if you will not have the market consolidation and if you will have no opportunity to increase the price for the increase of the quality, the opportunity that we have for the first time in the last 15 years because for the first time, you have customers that are starting to use services, cloud gaming, application, AI that requests a larger quality. This is an opportunity to increase our revenues and to improve our EBITDA because it's not necessarily driven by CapEx intensity. But if it will not happen, and if you will have no market consolidation, we must be very transparent. The life of Andrea and me in the Consumer segment, but not only in Italy, in Europe will be tougher because you cannot think that you can continue forever to exchange lines erosion with price increase. But again, this is not something strange. This is the reality in which everybody today in Europe are struggling and are asking a loud voice for market consolidation. Or if you will have no market consolidation in terms of M&A, you have to work at the network level. You have to allow JV as the one that we are doing with Vodafone Fastweb because putting together part of the network will allow to have efficiency. This is something that will be needed for 2026. No, our trajectory, 2026, 2027 is already defined, but if you ask me something about '29, '30, it's clear that something in the Consumer segment have to change. When we move in the Enterprise segment, what is happening is that we are not working on AI. That is become a disruptor. We are not working on software development where AI is disrupting. What is happening is that everybody will need cloud, connectivity and cybersecurity. And these 3 components are not looking for geography scale, the backbone is in Italy, you cannot have a synergy because you are a backbone in Italy, in France and in Germany. The backbone needed today for some of these services, must be in Italy. The cloud and data center cannot be remotely in Denmark or Norway because to exploit some services you need the range of 300 kilometers. And cybersecurity system but must be national, cannot be foreigner for a matter of digital sovereignty. Why I'm mentioning that? Because while in the past was showing you the increase in the growth coming from the cloud today, the part will become sovereignty. So these are the driver of our plan. If you image at a certain time in the consumer, there will be a market consolidation. It is quite clear that everything will change and repeat. The market consolidation can come from the merge between player or for a situation which you put together the network infrastructure at the mobile level. Then about the CapEx intensity today, our CapEx intensity, as you can see, we were able to confirm the guidance absorbing in our CapEx intensity, the increase of investment for the JV. So we don't foresee in the next 2, 3 years, the need for an increase of CapEx intensity to deliver our plan. Then if we start about new business model or something like that many or whatever. At that time, we'll do all the evaluation, having in mind that we must be market-friendly, cash-driven and not look only at the return on investment in the long term, because this sometimes was a mistake in the telco environment. If you look at our ROIC versus our WACC, the issue is that a good part of our investment was made when the ARPU was double than today and the technology was changing every 10 years. Now the ARPU is very low. So we have only opportunity for the increase. But the technology change every 1 or 2 years. So we must be very careful in new activity. That doesn't mean avoid or to put obstacle to the innovation, but be very clear in understanding the right wave that we have to serve. Hope that was clear. Andrew Lee: Yes. That's really clear. So it sounds like do you think that at least existing operational intentions that you can maintain the CapEx intensity that you're guiding to for 2026 and then your -- the growth guidance or the underlying trends in terms of your growth in Italy, the key drivers are going to continue as they are unless we see consolidation. Andrea Rossini: Andrew, this is Andrea. We do see the following assumption. We believe that the underlying trend on the retail side will be broadly stable, net, therefore, so separated from the effect of the MVNO impact. So we do see this opportunity. Pietro clearly highlighted that there will be further opportunity, of course, if market consolidation comes and if we see an acceleration in the front book price up due to network quality differentiation. But we do believe that the underlying trend on the consumer and SMB side will be broadly stable. Operator: The last question is from Paul Sidney at Berenberg. Paul Sidney: Obviously, a lot of questions have been asked already. So just a couple of big picture questions, please, on the domestic market. Firstly, in Consumer. You mentioned Iliad is less of a disruptor, Fastweb be more rational. You're clearly following a value-over-volume strategy, which is a phrase we hear time and again from operators across Europe and the U.S. value over volume. And the question is, in your view, is the telecom value -- sorry, volume game over? And then on Enterprise, your growth is substantially higher than your European peers. I know you gave huge insight to that fantastic event in Milan last year. But could you just remind us what is different to you versus your peers? Is it something you're doing differently operationally? Or is it something different about the Italian market structure? Pietro Labriola: Okay. We cannot say that our formula can be applied everywhere. When we are in the consumer and mobile ARPU that is the lowest of the world. And also on the fixed, we are among the 3 lowest in the world. The cost of acquisition gives you a breakeven in 3, 4 years. So we are not more clever than the other. But in such a game, spend money to acquire a customer, when the cost of acquisition is a breakeven of 2, 3 years, makes some sense. So it oblige everybody to move in that direction. We declared in 2022, but the SIM declaration was made by the Chief Executive Officer of Swisscom when they acquired Vodafone. They expressly stated in Italy, there's no return on investment to play a game that is based on the volume. So this is the Italian situation and letting that I'm seeing more or less throughout Europe everybody that are starting to say that the strategy is to move from volume to value. Then in U.S. with an ARPU of $50, I don't know because it's something different compared to our ARPU. So this is the main difference in Italy. And in some way, starting from a level of ARPU that is so low, I think that compared to other country, we have some more opportunity. I have to remember to everybody that EUR 1 that is less than a coffee in room is not in New York or in London because there the coffee has a cost of EUR 7, but each euro of increasing price means EUR 160 million of equity free cash flow. And this shows the opportunity that can come from a more rational market. When we move to the Enterprise segment, is the difference that, for example, if you compare us with some other peers, they prefer to sell the data center and to keep the last mile. Due to the regulation, we did exactly the contrary. We don't think that the last mile is a competitive advantage because when you have to offer that last mile to everybody with the same price, putting you the CapEx upfront to do that is no more a competitive advantage. We own the data center and they have to remember that we are the only player in Italy with 8 Tier 4 data center. The future services, Enterprise and Consumer will need a ray of the presence of the customer below 300- and 400-kilometer to experience that kind of service. We have in Italy, the widest backbone compared to the other players. We have, in Italy, a company 100% owned by us that is [indiscernible] in the perimeter of area -- that is a company that works on security, not only for the private market, but also for the Italian National Security. We serve the communication between the Italian Embassy and the foreign minister. These are all elements -- sorry, and we were the first one to sign agreement with some of the hyperscaler to have cloud region with -- in Italy with the cryptography in the hands of an Italian company. So these are the element that makes us different from the other player and the other country. Then in some way, the digital sovereignty that is becoming a must at the European level. If you see in France, the French government want to forbid the use of Microsoft Teams. In Denmark, they don't want to use Microsoft Office. In Germany, they don't want to use public cloud solution. In France, too. I think that it is a trend. And thanks to God we started to work on these things not now, but 4 years ago. Paul Sidney: Just a quick follow-up. I totally agree with you on the ARPU point at EUR 10. It's just crazy when you think about a coffee or a local bread and stuff you buy every day. But is there any reason why ARPUs can't move to 15 or 20 years on mobile in Italy over time? Pietro Labriola: But I was discussing with my team and they will do to you an example. The main mistake was of the telco, because we were unable to show to everybody understand to everybody how much is important the connectivity. We cannot work in terms of strike. I cannot do a strike of 1 day without mobile because I will be in jail. But I will do exactly this example. In Milan in San Siro will cover the stadium with a much better quality. Now if you go in the San Siro Stadium, you will see a pop-up on our mobile, let's say. Do we want to serve at the right pace, you can click here. Today, I'm not asking money. But in the future, I won't cost money for that. Why the customer should clean? If you go to San Siro you pay the coke, 3 times of the price that you should pay out of San Siro. If you buy a sandwich, you will pay 3 times the price that you buy outside. If you get the coffee, you pay 3 times. Why as a tech operator, we were so stupid and idiot to not allow the customer to understand that. A coffee per month is something that you can avoid, but the quality of the network is something that is mission-critical for your personal life. I think that the call is end. So I want to say thank you to everybody. It's important to remember to everybody that this is not the journey that we started 4 years ago is not ended, but now start a second journey because we are able to bring the company in a more normal condition, but the toughest job is starting now. So I want to say thank you to all the team. And we will follow up in the next day to our IR. And thank you to everybody for the trust and thanks to the team. Operator: Ladies and gentlemen, the conference is over. Thank you.
Suzanne Ennis: Good morning, and welcome to Hut 8's Full Year 2025 Financial Results Conference Call. Joining us today are our CEO, Asher Genoot; and our CFO, Sean Glennan. Following the presentation, we will open the line for questions. This event is being recorded, and a transcript will be made available on our website. In addition to the press release issued earlier today, our full annual report on Form 10-K is available at hut8.com, on our EDGAR profile at sec.gov, and on our SEDAR+ profile at sedarplus.ca. Unless otherwise indicated, all figures discussed today are in U.S. dollars. Certain statements made during this call may constitute forward-looking statements within the meaning of applicable securities laws. These statements reflect current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. Certain key risks are detailed in our Form 10-K for the year ended December 31, 2025, and our other continuous disclosure documents. Except as required by law, we assume no obligation to update or revise any forward-looking statements. During the call, management may reference non-GAAP measures such as adjusted EBITDA. We believe these metrics alongside GAAP results provide valuable insight into our performance. Reconciliations of GAAP and non-GAAP results are included in the tables accompanying today's press release available on our website. We will begin with a moderated Q&A session with our CEO, Asher Genoot, followed by a detailed financial review from our CFO, Sean Glennan. Okay, everyone. So let's get started. So to start Asher, fiscal 2025 was a big year for Hut 8. We executed on several important milestones, including the carve-out of our legacy Bitcoin mining business and the execution of our first AI data-center transaction. So what were the guiding principles that enabled us to achieve these outcomes in your mind in 2025? Asher Genoot: 2025 was about rebuilding Honey around capital efficiency and durable cash flow. So 2 years ago, we rebuilt the company from a first principles approach after our merger with Hut 8 and going public. And everything started with the electron. We chase megawatts, not chips, and we want to control the power layer first. And so we don't view electrons as a commodity, but rather strategic assets, and the ABC carve-out shifted us from cyclical CapEx exposure to contracted infrastructure like cash flow. So that was a big theme of last year. We also reallocated capital from volatility to long-duration agreements, and with ABC being able to self-fund on itself on the mining and Hut 8 providing the infrastructure. And then River Bend validated that model. We had a true greenfield development. We didn't convert a site. We developed the site from the ground up by a power-first thinking. It was really the first domino to fall under an AI infrastructure platform. And we focus only on what compounds, power control, scalable campuses, disciplined capital structure and repeatable execution. And so 2025 was about building the right foundation, and now we compound and we scale going into 2026. Suzanne Ennis: In your mind, what specific operational and strategic milestones were prerequisites before the business could meaningfully accelerate? Asher Genoot: 2024, as I shared a little earlier, was about restructuring. We started a company, we merged with Hut 8, and then I took over shortly after. And it was restructuring the business and creating the ability for us to create a foundation. 2025 was about building credibility and so credibility started with our shareholders. In 2024, when I took over the helm, our institutional ownership was sub-10%. We're at approximately 70% today. And some of our earliest shareholders, who invested in us when we started the company 5 years ago, still hold a large percentage of the stock. There's -- we've given shareholders, disciplined capital allocation that they've seen through us in the years and with us in the public markets. And then honestly, transparent execution, we told people what we were going to do, and we focus on getting that done and delivering a fully built solution when we execute, and we intend to do the same. We built credibility with team members. We scaled intentionally. We institutionalized processes while maintaining an entrepreneurial speed. I think that's critical. As you grow, you naturally build bureaucracy, and having the mindset to say, you know what, we will continue to operate as a lean culture, even as we build an institutionalized process. I spent a lot of my time thinking about that in terms of how do we scale at the same rate that we have historically. Credibility with financing partners is really important for us to secure Tier 1 lenders with JPMorgan, Goldman Sachs to lock in nonrecourse project financing. It was harder, but we believe it's the better path. And we believe early investors in us like Coatue, they backed us before the theme was a consensus. And I'm glad that they're happy, right? I meaningfully spoke on a panel the other week, and I'm glad that we're able to drive a good return on their investments. And lastly, credibility with our partners. That's local partners, for example, at River Bend with Entergy, Louisiana, West Feliciana Parish, the Governor's office and being able to deliver on them and our commitments to them when they took a bet on us. And so acceleration only happens when credibility is on, and we would like to compound on that as the years go by. Suzanne Ennis: So you were under a lot of pressure last year to talk about a deal and guide the market to when it would come, what it would look like, but we kept our cards very close to our chest. So can you talk about why we were patient in what we wanted to see come together first? Asher Genoot: So I'll separate my role in speaking to the public markets and our shareholders, and my role in running the operating business and making sure we're able to build that over the long term. In my role in the public markets, I knew what shareholders wanted. They wanted a deal. They want to know that we can build the data center infrastructure platform, and they wanted to see what that would look like and to build the first domino as a part of the platform. For the business itself, we weren't waiting to announce a deal. We were really building a fully locked and executable program. And so for us, we didn't feel like there was a reason to add public market complexity, while negotiating a super complex structure with a lot of moving pieces. We didn't want to just announce a headline. We wanted a complete financeable program. We wanted demand secured, financing secured, execution partners aligned on construction, delivery, engineering, long lead time items. We wanted our power path defined, and we wanted risk allocated properly across counterparties. So instead of guiding towards a deal that's coming, which everyone knew we were working hard at, we optimized for building the right structure for the company in the long term. And when everything was negotiated and aligned, we announced the full framework in one step. And I think that discipline hopefully reinforces the credibility that we're building with our shareholder base. And as we move forward, we're going to be really thoughtful about what we share with the market versus how we think about those impacts to our customers as well. Suzanne Ennis: So our first AI data center transaction generated significant market attention. And how should investors think about this transaction in the context of our broader strategic evolution without over-indexing on a single data point? Asher Genoot: I think this is a fair market deal. It was designed to compound relationships and not to maximize one transaction. And so we structured that market clearing economics. A lot of private deals are getting done, we believe, are done in a similar range. We focus on long-term creditworthy counterparties that can grow with us. And we built to scale the program beyond just the first phase across our customers and across our financing counterparties, execution partners, supply chain partners. And so it took a very customer-centric approach on how do we de-risk execute and give them confidence, we're not optimizing for headlines. We're trying to build repeatable partnerships because that's going to be the secret sauce in our ability to grow and scale. Suzanne Ennis: So let's drill down into River Bend, then. As we look at River Bend even more holistically as well, can you update us on the progress of some of those power expansion discussions with Entergy? And how is construction tracking? Asher Genoot: Look, 2026 is 1,000% going to be about execution and delivery. That's going to be the theme of the market, in my opinion. And so we're super high for its construction right now, it's tracking according to plan. We have tight coordination with Jacobs Engineering and Vertiv. Long lead time procurement is progressing and getting manufacturing delivered. Our customer engagement is really, really high with Fluidstack and Anthropic. We have many working sessions a week, multiple standups on-site in their offices, and really strong collaboration as we move towards delivery. The 1 gigawatt expansion plan at River Bend, the power is there. It's not about if, it's about when. And so now, we're optimizing on delivery time lines and cost scenarios in terms of collateral upfront to make sure the rate base doesn't get impacted. We're working through different structuring paths to maximize efficiency and speed, meanwhile solving for what we're looking for and also what Entergy is trying to solve for, for their constituents. And so the focus now is simple: execute, deliver and derisk. Suzanne Ennis: So how should investors think about long-term expansion opportunity at some of our other sites like Corpus Christi? Obviously, we've been seeing an uptick in pushback with respect to data centers getting done. We've seen new rules proposed out of ERCOT. How should investors think about the expansion? Asher Genoot: Something I've been saying for years is we're building an energy infrastructure platform on digital infrastructure. Our edge is power-first development. And oftentimes in markets that others overlook, and so our Corpus Christi site that we announced, we have an approved interconnect in ERCOT that's increasingly valuable. And it was put in before all of these recent changes in batch studies. It was put in 2023, in a changing regulatory environment, permitted power and transmission access matter more than ever. The interconnect and the permitting matrix at Corpus Christi, I think, gives us a structural advantage to be able to build quickly and get an access to power quickly. So if we were using the traditional developer playbook, we wouldn't have a low redundant data center solution for Bitcoin security as our tool for our underwriting assets. And we probably would have passed on this 1 gigawatt interconnect like many others did, but we didn't because we have multiple use cases of our megawatts as we develop the platform. It's really similar to what happened about 1.5 years ago in Louisiana. When we first talked about the site, started marketing the site, people thought we were crazy. I thought we were early, and I think, we were right. We really validated the thesis of what we believe in terms of the value and the assets in the power and how much you can get at scale in the local regulatory environments that you're building this infrastructure at. And now you see that in Louisiana, you have other hyperscalers like Meta and AWS that I have announced projects there as well. And I don't want the market to forget that alongside our River Bend announcement, we also announced a strategic partnership with Anthropic. And so they're a partner that we continue to look at opportunities with alongside other demand signals that we've built along the last 2 years as well. And so if you look at our development pipeline, we have 8.5 gigawatts across various stages of development. We are energy developers first. We understand grid dynamics, regulatory shifts and permitting realities. And that's what gives us confidence that we can navigate the evolving environments. It's a lot easier to go and build a large-scale data center with the dollars that we're bringing into these economies than it was developing Bitcoin mining facilities when no one wanted Bitcoin in their neighborhoods. And so we've navigated through different environments. We've gone through changing ERCOT procedures. We've done this for the last 5 years since we started the business. And this is just another hurdle that comes along the way as demand continues to increase and we need to continue to show our competitive edge in developing power assets. Suzanne Ennis: So you often referenced first principles and value engineering and innovation as a core edge for Hut. Can you walk us through how Vega delivering 180 kilowatts direct liquid-to-chip at $455,000 per megawatt from scratch and our codeveloped infrastructure design with Vertiv that we're using at River Bend. How do those two things reflect that philosophy and effectively position us for the future? Asher Genoot: We think that no one has fundamentally challenged, how data center infrastructure, I guess, now AI infrastructure is built. And that's our opportunity. We reject the status quo. In the short term, there's a huge supply and demand imbalance that allows us to get deals done from a power perspective, and that's our competitive moat. In the medium term, the differentiation will come from value engineering and the infrastructure stack innovation as supply and demand reach equilibrium. And so Vega is a great example, too, because Vega, we developed 180 kilowatts per rack direct-to chip cooling technology earlier last year when NVIDIA was only at 120 kilowatts per rack. And the reason we did it was to show the markets we could develop that type of infrastructure as you see on the screen here, but most importantly, we were able to develop that for $455,000 per megawatt. And I'd like to tell customers when we show them the site that, that includes the office furniture, the whiteboards and everything and the fit out in the data center. And the reason we were able to do that is because we built the site from a grass field from scratch. There were no legacy constraints. We figured out what areas of the infrastructure stack switch gears, PDUs, the rack conveying structure that we want to vertically integrate, design ourselves and contract manufacturer, what areas of the construction we want to self-perform and manage ourselves? And that's what I'm really excited for. Once we can get the next couple of deals done and we get to a large multi-gigawatt platform in terms of data center, how do we think about the next phase of our competitive moat. And that's around innovation and that's around value engineering. The Vertiv partnership is a good example of our early kind of stages into that. We codesigned the approach, the architecture with them and with Jacobs to show not only supply chain visibility, but how do we take risk off of the site how do we speed the efficiencies of these development, these builds, so we can have them in controlled environments for a lot of the infrastructure that we're building and how do we have long lead time mitigation risk. I had the opportunity to keynote Vertiv's main event earlier in January this year, because we believe that that's where the edge will live in the second phase, as we monetize the power assets in our pipeline in this first phase. And so when demand and supply normalize, infrastructure efficiency will matter more and more, and I think, we're perfectly positioned for that, and it's a story and a theme that people haven't really even delving under the Hut today. Suzanne Ennis: So we're executing on large and complex infrastructure projects that require significant capital and coordination. And obviously, with that kind of scale comes risk. How are we structurally mitigating down that exposure and protecting equity if things don't go according to plan? And how is your experience, how you got here and how you think about things like this? You talk a lot about being a credit guy. Can you elaborate on that? Asher Genoot: So I actually don't talk a lot about being a credit guy. Sean talks a lot about me being a credit guy. He's like, for your age, you're really more of a credit guy than anything else when we talk about underwriting these sites. And I think, the stars that I've gained from living in kind of the business and building infrastructure around Bitcoin has really rooted us in how we think about underwriting opportunities, how we think about building the business long term. We lived through cycles, for example, in 2022, where Bitcoin prices crashes, our only revenue; energy prices skyrocketed, because Russia attacked Ukraine and profits were squeezed and we had fixed debt and amortization payments. I sat as a chair at UCC committees of companies going through restructuring and bankruptcy. We were the planned sponsor of taking Celsius out of -- taking a business segment they had out of bankruptcy and turning into a company. So I learned firsthand meeting with creditors on what could go wrong when you're building in a hypergrowth environment and the music stops thing. And so that sticks with me honestly, forever. And so as we think about these projects, what I always told the team is, if we have the privilege to sign a data center deal, that contract is a liability until we deliver and start generating cash flow, and that's why we're so thoughtful in how we structured this deal. We didn't just want to announce a deal and then figure out the rest afterwards. We want to announce a deal that was able to have financing, execution, manual labor, steel for the buildings, long lead-time items, regulatory permitting, all secured when we announced it to the market. And that was a key part of the timing and the things we want to get done. And so as we think about debt obligations, construction risk, power risk delivery, counterparty risks, those were all the things that we've mitigated through on long lead time contracted cash flows, creditworthy counterparties, structuring nonrecourse financing and really disciplined underwriting as we look at kind of the T's and C's of how we thought about the overall risk framework between us and our counterparties and what we were committing and what we were all receiving. I think durable credit really compounds. If you want to build a business over the long term, it's about compounding value over time and about continuously doing that. And I feel like over the last 2 years, we've done that, and we've already seen the rewards of those actions, and we're really just getting started. Another element that I'd like to note is if you look at our balance sheet, I think we have one of the cleanest balance sheets in the market today. We -- if you think about the debt structure that we have, we have three pieces of paper at the parent level. The first is our Coatue convertible note that we did almost 2 years ago. That's heavily in the money and most likely gets converted out this year. That's the only parent recourse piece of debt we have. The other 2 pieces that we have is 1 coin base, which is recoursed against the Bitcoin only without parent resource, and the next one is the one we have with NextEra at King Mountain, which is recoursed against our equity stake in that 50% JV on the Bitcoin mining facility and does not have parent recourse. And so as we really think about it with Coatue heavily in the money, we have no recourse debt on our balance sheet. We're bringing on great financing in terms of the projects, but as we think about growth, we're thinking about growth in credit really, really well to manage through kind of these markets and hopefully be able to grow at a faster and faster rate. Suzanne Ennis: So Sean is going to walk us through our results shortly. We're going to do a little Q&A with him. But let's touch on a few areas in our results. G&A, for example, what drove that this year. Asher Genoot: Stock-based compensation aligns everyone with the long-term and long-term value creation. So at the company, every single person has equity from our site-level team members to the CEO, myself and the CFO, Sean. So real ownership culture and skin in the game is something we've optimized from day 1 and continue to do so even in the public nature that we have. And so total G&A was about $122.8 million this fiscal year compared to $72.9 million. Stock-based comp was around $57.8 million versus $20.8 million in the year prior. And that has to do with a lot of the upscaling that we had in the investment in our engineering, development, institutional infrastructure team. The cash SG&A only rose from $52 million to about $65 million in the year, and that includes all of those transactions we did from the carve-out of American Bitcoin to the deals that we've done. And so our belief is that we're building the team and investing in the team for the future financial profile of where we're going, a lot of the dollars we're spending are on growth, not on managing the current business, not on even executing River Bend, on the growth of all of the sites that we're looking to execute and commercialize. And we don't believe you can scale a multi-gigawatt infrastructure platform without building and training that team in advance. And so we're rightsizing for where we believe the company is going. Suzanne Ennis: So before we wrap up with you and move on to Sean, is there anything we haven't covered that you want investors to keep in mind. Specifically, there's been a lot of internal discussion around moving from simply building infrastructure for AI, to actually building infrastructure with AI. How are you thinking about that evolution? And why is it strategically important for us over the long term? Asher Genoot: Yes. We're sequencing the business pretty deliberately. And the next layer of our advantage is technological convergence. So Phase 1, which is about 1 to 2 years in my mind, is lock in the right deals, establish durable counterparties, build the right financing framework and monetize our power capabilities. Phase 2 in the 2- to 5-year range is value engineering the infrastructure stack, driving cost down per megawatt, improving speed, efficiency and repeatability. And then Phase 3 is more in the 5- to 10-year range, which is be at the forefront of how AI and robotics reshape infrastructure development. We're not just building infrastructure for AI, we have to be building infrastructure with AI and leveraging it to change in how we think about charging our innovation cycles. So we're deeply thinking about how AI integrates into our business. From a workforce perspective, increasing productivity across the organization, and from a design and engineering perspective, I mean hundreds of thousands of engineering hours go into these builds. AI is going to fundamentally change the way that, that work can be done. We can model, simulate and optimize every variable for capital is deployed. And in the build process, we're in the early stages of exploring robotics and automation embedded directly into construction workflows. This is not a distraction. It's an awareness of where the technology curve is heading and we intend to meet it at the moment of real inflection when it meaningfully changes how infrastructure is built at scale, and that will be the next compounding layer of advantage after the first two, I've spoken about earlier in this call. Suzanne Ennis: That's super exciting. So with that foundation set, 2026 shifts us from prove to scale, right? So what should investors look to from us moving forward? Asher Genoot: 2026 is about execution and delivery, full stop. Converting the pipeline to additional contracted revenue, advancing power origination, delivering River Bend on time and on budget, maintaining capital discipline, no trend chasing. The foundation is built. Now we execute and we scale. Suzanne Ennis: All right. Now let's move on to Sean. Sean. So let's walk through the results. Maybe we can start with what defined fiscal 2025 performance? Sean Glennan: Yes. Thanks, Sue. I think there's 2 main things that really define fiscal 2025. First, I want to talk about margin expansion and operating leverage and second is bottom line results. On the first topic, revenue grew 45% to $235.1 million, driven primarily by our compute segment, while cost of revenue grew by 24% to $107.8 million. This resulted in gross margin expansion from 47% to 54%. I also want to highlight sequential Q4 2025 over Q4 2024 results where revenues grew by 179% and gross margin expanded from 36% to 60%. I think each of these data points highlights and is indicative of enhanced operating leverage in the business. In other words, the foundation is sound and what we've set in place will compound over time. Next, moving to bottom line results. Net loss was $248 million, and we had an adjusted EBITDA loss of $135.4 million, compared to net income of $331.4 million and adjusted EBITDA of $555.7 million in 2024. importantly, I think to note, that swing was largely due to a $220 million primarily unrealized mark-to-market loss in 2025 of our Bitcoin stack versus a $509.3 million gain in the prior year. Suzanne Ennis: Now let's walk through segment by segment. Can you walk us through the power digital infrastructure and then compute segment results? Sean Glennan: Absolutely. In our power layer, revenue was $23.2 million versus $56.6 million in 2024. Cost of revenue declined to $20.5 million from $21.5 million in the year prior. The revenue decline reflects the termination of our ionic digital agreement in managed services. This was somewhat offset by increased revenues in our Far North segment due to increasing power market tightness, which I think that power market tightness is kind of some of the fundamental underpinnings of the business. So it's showing up in other places, too. On digital infrastructure, revenue was $9.6 million compared to $17.5 million last year. Cost of revenue declined to $8.9 million from $15.6 million last year, and margins improved sequentially as Vega entered commercialization, and we transitioned to colocation-based payments from American Bitcoin. And finally, compute. This was the real growth engine. Revenue more than doubled to $202.3 million from $80.7 million the year prior. Cost of revenue increased to $78.4 million from $45 million in the year prior. And this was driven by infrastructure upgrades, higher deployed hash rate and a full year of steady-state operations of Highrise AI, which added $7.4 million year-over-year. I think important to note also from -- as we talk about operating leverage, here, segment margins expanded from 44% to 61%. Suzanne Ennis: Now let's get into capital structure and strategy. How are we thinking about our capital structure evolution? Sean Glennan: Yes. I think 2025 was an incredibly important year for capital structure evolution. Spinning out our Bitcoin mining business through our American Bitcoin subsidiary, shifted us from a very high cost of capital, high CapEx cyclicality business to a much lower cost of capital business with a lot more focus on infrastructure, low cost of capital lower, risk and longer duration. Suzanne Ennis: Okay. And then heading into 2026, what are some of your top financing priorities? Sean Glennan: Yes. I think about this is what I spend most of my days thinking about. And as I think about looking into 2026, there's four main things I'm really focused on. One is protecting shareholder value through disciplined equity use. Two is minimizing enterprise risk; three, diversifying liquidity sources, including private markets; and then four, maintaining strong balance sheet that allows for strategic flexibility and a path towards an investment-grade rating. I think one thing that's important to note is we continue to evaluate all financing options and we say no to a lot of things. We're not just trying to get capital wherever it's available. We're looking for the lowest cost of capital. And I probably got 10 things across my desk every day, most of which I say no to because we want to continue to drive that and be innovators on capital structure rather than just following the back. Suzanne Ennis: So then, to wrap up, how would you, as the CFO, summarize our position heading into 2026? Sean Glennan: Yes. So I mean, it's amazing to think relative to when I joined 1.5 years ago where we are entering 2026. We have greater scale, both from an exahash market cap and future cash flow position. We have improved margin durability, which I think the numbers speak for themselves. We're declining cost of capital. And I think the project financing we're working on with JPMorgan and Goldman Sachs is indicative of that. That's the lowest cost of capital that anyone in our sector has raised ready to support AI infrastructure growth to date. And then I think as I kind of mentioned in your first question in the section, a capital structure that's aligned with long-term value creation. And I think those are the things that are really kind of setting us apart, and it's very exciting to be in this position, and we feel grateful to our shareholders for entrusting us with their capital as we go into 2026. So with that, I think we'll go into Q&A. Suzanne Ennis: Yes. Let's go into the Q&A here. Asher Genoot: Well, Sue, looks at some of the questions, we want to shake things up this earnings a little bit, go on a video style, so we'll get feedback from our investors if they enjoy today or not. We're also if we keep the video format, we'll -- I want to be able to hear people when they ask questions, and we talked a bit about that. And as we set-up this first structure, Sue is going to kind of read the answers that people are submitting, we weren't able to with the platform today to be able to allow for that for today. But if people like this current format, then I really want to hear them and see them if possible as well. So we'll look at that on the next earnings calls. But hopefully, you guys enjoy the new shake up here and approaching this from first-principles as well. Our goal was to use this call to have you to really get to know us, get to know how we think about the world, how we think about problem solving. You guys can look at our financials and our business through our public filings, but the purpose of this call, when we really broke it down from first principles, was speaking to our shareholders in very direct honest, transparent way, and we hope this new format helps drive closer to that as well. Suzanne Ennis: Okay. So let's get into it. So from Greg Miller at Citizens, will the company be defining what portion of its pipeline will be allocated to Bitcoin mining and what percentage will be allocated to HPC as the 2 represent very different value propositions? Asher Genoot: That's very fair. If we look at our existing capacity under management in the gigawatt that we're managing today, we have 300 megawatts of power generation that we've told the markets that we're selling to TransAlta, and we have -- that we've closed on that transaction, and we have 700 megawatts of compute that currently support American Bitcoin. In our capacity under construction, we have 330 megawatts of utility that's River Bend Phase 1. And then we have a multi-gigawatt pipeline as you go further and further up the development cycle. And so currently, the core focus is converting those sites for AI use cases. Having Bitcoin as an alternative use case, allows us to continue to develop confidently in building the substations on the land that we acquire in interconnections knowing that we'll have a consumer there in all scenarios rather than just have risk development capital. And I think that's a unique edge that we have. So our key focus around our current full development pipeline is around AI utilization and development, and we're seeing more and more focus on just power at scale and location really being a lower and lower factor in that as well. And so as we talk about all of the sites that we're developing right now, the primary goal is development around traditional data centers for AI computing. Suzanne Ennis: Okay. So George Sutton from Craig-Hallum, can you give any detail behind the $163 million deposit for future sites? Asher Genoot: Yes. Sean, do you want to jump into that? Sean Glennan: Sure. So as we look at kind of developing some of the future sites, we have lots of land options, and we're also procuring long lead time equipment at some of these sites. So I don't want to get into the detail as to how much dollars are for which sites. I think that will give away some of our secret sauce, very competitive industry, but effectively, that's kind of what the -- those dollars are allocated towards. Asher Genoot: And one key thing to know on how we approach development, historically, and moving forward, when we think about risk dollars out there, whether it be land options or they'd be developing, we've historically been very, very low upfront until there's real feasibility, right? So a big portion of those long lead time items are malleable pieces of equipment that we can allocate specifically around high to medium voltage breakers at the substation, different transformers once we set things down to 34.5 kV. And so malleable infrastructure that we can allocate across multiple campuses. And then the investments we do at the early stage of development are really lower in terms of development, unless it's a kayak payment or an infrastructure upgrade as we locked in the power. And as we see collateral payments kind of increasing, we're also looking at other kind of project level financing and balance sheet borrowing that we're looking at doing to drive down our cost of capital as well, but we're very, very thoughtful in what dollars we're spending, what's truly at risk and what's malleable. Suzanne Ennis: All right. So from Brett at Cantor, you guys effectively set the market with your Fluidstack and Anthropic deal. Can you talk about how pricing has changed since then? Do you think the next deal will see a step-up in economics? Asher Genoot: I don't think we set the market. I think the majority of transactions in the market happened in the private markets. Everyone is kind of focusing on the public companies, but feels like 80% plus of the transactions are happening in the private markets with kind of the private equity funded development platforms on the data center side. And so I think our deal was market. It was middle of the fairway, and it was structured appropriately. And so as we continue to talk to customers about the deal and deal economics, we think that these are kind of market terms in the private markets, and we've held ourselves to the standard of a blue-chip data center development company. I think, I've brought in the partners to validate that thought process and that approach as well. Suzanne Ennis: Okay. So from Stephen Glagola at KBW, a recent job posting pointed to a potential scale up of the Highrise AI GPU platform from roughly 1,000 GPUs to 20,000 GPUs. Can you provide more detail on your growth plans for the Highrise AI cloud business? And how do you envision scaling that trajectory. Asher Genoot: So Hut 8, the parent company builds in the power layer and build in the digital infrastructure layer, front meter, behind-the-meter interconnects, obviously, we own power generation, and we build digital infrastructure on top of that, i.e., the River Bend campus we announced. In a lot of these deals, there's an opportunity where we can fund the compute as well. The funding compute and ASICs on the American Bitcoin side GPUs on the AI side are fundamentally different cost and risk profiles, which is why those businesses are separate companies, ABTC, being a public company now on its own and then Highrise still being a private company that is growing. And so what's really unique about Highrise, we've been pretty quiet about it because we've been building the foundation of that business. It's not just the story is and we're managing a little over 1,100 GPUs, the story is we built a cloud network. We built a software stack. We offer bare metals. We offer multi-tenant solutions. And we announced this in one of our press releases in Highrise, but the current CTO of that business ran AI in the IDF and was there for a decade and half. And so as we look at different opportunities, there are opportunities in these data center deals where Highrise can come in and provide the financing around the GPU stack, provide the services and technologies that I can build on top of the chip stack as well. And so Highrise is our new cloud business. It's one that we haven't spoken much about because as everyone knows, we're much more about talking about things when they come into fruition rather than what's on the come. But across the whole board, we are building the company and hiring people to the place that we're going, and that's where you see a lot of that investment in talent into the business that we're going to be building and scaling into. Suzanne Ennis: Okay, so another one from George here that I really like because I don't think we talk enough about this in the market. So Anthropic is the major -- is a mega disruptor in the space. How important is our existing relationship with them as part of the Phase II and Phase III opportunities? Asher Genoot: They're great, right? And they're very open to thinking about things from a first principles approach. It's not a company where we have to do it this way just because. It's a company where we can talk about what are we trying to solve for and what is the best way to be able to solve for that. So if you think about Phase 1, give additional capacity, get additional power converted for our customers. Phase 2 is how do we drive down costs with really thinking about value engineering. And value engineering is 2 ways. One is, how do we engineer and more efficiently drive the cost down for our existing infrastructure stack. The second is, how do we think about the actual demands that a customer has, which is also why we have Highrise to understand the full stack from electron to compute, from megawatt to token. And so by understanding that, we can more optimize the infrastructure to support for really what's needed, and we can have open discussions and discussions with Anthropic have been great in terms of solutions and malleability over how things are built to get to the final outcome. And the last one in terms of AI and robotics, obviously, that they're at the forefront of building the technologies that support all industries. And so we're excited to continue to build those relations and compound, but I'm really, really excited for Phase III. We have to build Phase 1 and 2 to have the privilege for me to work on Phase III, but this year will be focused on Phase I and really scaling up our data center platform. Suzanne Ennis: So I've got one here from Kevin Dede at H.C. Wainwright. Trump in his State of the Union last night asked the big tech -- asked big tech to commit to building their own power. How do you think your customers, partners and Hut 8 react -- will react to that should it become law? Asher Genoot: It's a natural progression of where things are going. If we think about the overall sentiment and what should happen right now is when a data center is built that should be net positive to the community and the environment and the actual energy grids that you're impacting, right? And so when we think about sites like River Bend or Corpus Christi, we pay for the system upgrades that pull the power to where we are. We commit to the capacity on the energy side. And so that's kind of table stakes in my mind in the world that we're developing today and smaller utilities have gotten infinitely more sophisticated on that which is or to see kind of collateral coming in. I think in some places, it's getting overindexed and will kind of come back to the mean. But in general, that's the general sentiment. As power generation gets constrained as more and more demand comes on to the grid, I think what you'll see more often is not island generation or bridge generation, where you kind of wait for the interconnect, but when you're building a load asset, you want the redundancy from the grid. There is value in that. When building a generation asset, you want the grid and the demand that's in the grid for the power. And so I think more and more what will happen in the markets, is people will bring load and people will bring generation. And so we're trying to kind of have a net equal impact into the grid, but interconnect that all in the long term. And so then you'll have power generation increasing in the grid, you have load increasing. A lot of that will be financed and capitalized through the demand of the end customers and users and we think that's the best way to be able to scale and compete in the AI race on the global markets. Suzanne Ennis: So from John Todaro at Needham, can you walk us through where you stand on the OSA negotiations with Fluidstack and more broadly, give us an update on construction cadence. How many data falls in the initial phase? And are you seeing any supply chain or contractor bottlenecks? Maybe we can talk about where we're at as well on the procurement side at River Bend. Asher Genoot: Sure. Happy to do so. When we announced the deal, everything we locked in from people, contractors, long lead time items, equipment. And so all of that was locked in. There was nothing open when we announced the deal at the end of last year. On the delivery and the execution itself, as we mentioned, and we guided towards. When in the beginning of Q2, we'll have the first data center coming online, and then we'll have a data center coming online every 60 days thereafter. There are 4 data centers in this data hall. And so as we think about the actual construction right now, everything is going really, really well. People are very excited. There's a lot of local talent in Louisiana because of the heavy industry that was there before. And so that's really, really great. Jacobs has been a great partner. Vertiv is fully cranking on the long lead time items that they're bringing and procuring for this project. So overall, from a constructability and delivery perspective, feel very, very good. And we gave ourselves a healthy time line to deliver this as well. And so we're not crunching every single thing. We put buffer in. We hope to deliver earlier if we can. And so that's how we've really developed this program. From a financing perspective, things are going very well as well. We announced that we're going to target 75% -- 85% LTC at a SOFR plus 225 rate. We've recently been able to improve that to 90% LTC at SOFR plus 240 to account for the increased loan-to-cost ratio. But we've been able to get more project financing on the projects and something that Sean and I like to talk about, even when a deal is done, we still like to further improve and figure out how to make it better. And so overall, in terms of delivery, feeling very, very good. We're currently in active negotiations on the OSA in terms of operations and delivery, but we have some time until we actually are operating in the campus so working through those kind of contracts now as well? Suzanne Ennis: So maybe just to quickly piggyback on that from one of our new friends, Robert Boucai at Newbrook. In considering future deals, do you require credit enhancements as with Google on the Fluidstack deal? Or would you be willing to have one of the LLMs be a counterparty? How much of a gating issue would this be? Asher Genoot: I think overall, it's really thinking about our overall platform that we're building and the exposure that we're taking on investment-grade counterparties on non-investment-grade counterparties and really everything kind of in between. And so as we think about developing our platform, we want to make sure that the cash flows that we have and that we're projecting to be able to fund the growth and the expansion of our business are durable and are reliable. And obviously, that affects cost of capital and financing and LTCs as well. And so as we look at future growth opportunities, we're obviously optimizing towards investment-grade counterparties, but it's really about, like any portfolio anyone has including all the shareholders on this call, it's about risk allocation, what percentage of your platform is on high growth, high-risk companies that have kind of a ton of upside. What percentage is on stability on the platform as well. And so I think for us, it's not binary. It has to be this or that, but it's around risk allocation. And obviously, as we've kind of told and shown in the market, we have a heavy lenience towards folks with investment-grade counterparty and as we think about financing on the debt and the equity investments as well, but there's always a place in the portfolio for high-growth companies as well, but it's all about percentage exposure that we have to them. And every time we announce a deal, we'll walk through the thought processes in those. But right now, we continue to be focused on investment-grade counterparties that we're financing towards. Suzanne Ennis: Okay. So a question from Mike Grondahl at Northland. Can you describe the demand environment and how it's evolved over the last 90 days for HPC? Obviously, there's a few new dynamics that have transpired in the market. So how has that evolved in terms of your guys' customer conversations? Asher Genoot: It's really interesting. I mean, last year on the same time, this DeepSeek news came out, right? And everyone was scared that the demand has gone and the markets were scared. The Microsoft has traded down a lot. But the reality is at that time, we were still seeing the demand and demand signals. And you saw a heavy uptake towards the end of the year. I think right now, especially with the Agentic AI and a lot of -- I mean, the Mac Minis are sold out across the U.S. If we look at Highrise, the utilization on our cloud is at record highs. And so the actual applications and use cases are continuing to grow and increase in pickup. I think that will result in the compute that's needed. And so where we are today is also a little bit different than where we were last year. We have much deeper relationships with a variety of counterparties because of the last two years of relations that we built. We've gone through a lot of negotiations on the actual contracting multiple counterparties. We've gone through engineering design drawings for months with multiple counterparties. River Bend wasn't one counterparty that we worked with for 1.5 years. We went through multiple iterations with multiple counterparties, and we had one that got to finish line first. And so those relationships are stronger than ever. And what's nice from where we are today and the credibility that we have as well is, we can have a lot more frank and meaningful discussions around, what is their capacity demand over the long term? How do we play into that? How do we support them? And so for us, honestly paying less attention to the stock market these days and spending way more time on the customers, what are their demands and how do we build the competitive moats, because that is what's going to drive our business and grow and compound over time. But I think all the noise you're seeing, we're seeing really the exact opposite. The demand is still there, demand is still strong, people are still growing. You see that with some of the announcements like yesterday with Meta and AMD in terms of additional capacity. They just announced a deal with NVIDIA for that. And so overall, I think demand is healthy. A bigger theme that we're seeing that's real is that power is becoming more constrained, right? You're seeing every utility, every transmission operator trying to go through and restudy and change the approach that they're going in terms of the study. And I think that's healthy as well because you have so many developers that may not have the balance sheet or the capabilities to actually develop sites, and all they're trying to do is lock in an interconnect and then flip it to someone else to buy it. We get -- Sean talks about getting 10 inbounds on financings, probably get 100 inbounds on sites for us to look at from an M&A perspective. And so clearing out some of that FUD, I think we'll actually make the queues better. And then also from a development perspective in terms of land development, you're seeing some places that don't want this in their backyards and some places that do. And so I think you're seeing consistent strong demand on the demand side, and then I think you're seeing kind of volatility on the supply side in the markets, which make us excited. Suzanne Ennis: Yes. Agree, we support any sort of initiative that helps trim some of the fat in these queues, and also education is key in some of these new markets where we're seeing stakeholder pushback for data center development. Okay. So from our friend, Greg Lewis at BTIG. He wants to know what I'm sure a lot of people want to know is any update on the power that is under exclusivity and steps and processes needed to move that into development? It doesn't seem like we saw a lot of that happen in the current queue. Asher Genoot: Yes. Currently working through it, we obviously have a pretty big amount of capacity in development right now to trying to move that into commercializing and signing those agreements and signing them, because if you think about our stages in the pipeline, we go from capacity under diligence, which is we have a large energy origination development team, and they're out there, they're hunting, they're negotiating and they're looking at opportunities that make sense for us. Then we get into capacity under exclusivity. That's where we're investing more dollars from a team perspective and legal dollars perspective as well. In those scenarios, we have exclusivity, land options. We're investing into legal resources, preconstruction resources, high-voltage transmission engineering resources. And then when we get into capacity under development, that's when we're actually buying the land or locking in the kind of contractual agreements on the power and putting in the kayak payments or any collateral obligations. And then from there, we go into commercialization, construction and then ultimately, management and operations. And so I think we have a strong amount of megawatts over 1 gigawatt in capacity under development right now that we're working on commercializing and the capacity exclusivity will kind of be following that as well. And so if you think about timing, capacity and exclusivity, we have an exclusive access on that opportunity, whether it be the land, the power or both. And in that scenario, like why go and spend the money if you still have option value there and work on commercializing the things that you already spent money on. And so when you think about those and how they interplay together, that's kind of a big part of it. And so from a timing perspective, it's really getting more sites commercialized and having that funnel continue to grow and increasing the capacity under exclusivity from the capacity under diligence. And so as we continue within this year, there will be a lot more conversations about the pipeline, how we think about conversion, more transparency into the sites that we have under capacity under development as well. And so we're excited as we mentioned, we're building a robust energy infrastructure platform in the digital infrastructure world and River Bend, again, to remind everybody, was a site that started at capacity under diligence and went -- made it all the way through to capacity under construction within the last 2 years during the theme and during the market rush of power. This was not a site that we converted from the Bitcoin mining days when it was less competitive to get power. And so we've shown that we can do it once, and we will continue to do it. Suzanne Ennis: Thank you. So from our friend, Chris Brendler at Rosenblatt Securities. On funding River Bend CapEx, any early read on the project level financing deal given the recent volatility in the market? And how do you view your Bitcoin holdings as a potential source of funding for the equity portion? Asher Genoot: We feel very good. So the equity as of right now is already fully funded, because we've had to fund the projects, our deposits with Vertiv and so forth. So when the project financing actually completes, we're going to get a multi-hundred million dollar cash out of the transaction, then we'll fund our 10% on an ongoing basis. And so as we mentioned, we went from 85% LTC to 90% LTC on the financing. We're pushing aggressively towards closing. JPMorgan and Goldman are committed. They wouldn't have given us quotes and put us on the press release when we announced to see it was just an idea. And so we're very excited, we're very committed. And we have connectivity at the highest levels. I've had lunches with the CEOs of the firms. And so I'm very, very excited that we have partners, not only to finance this project, but on go-forward projects to replicate this program on a go forward. From a Bitcoin perspective, our balance sheet and our Bitcoin on the balance sheet in the beginning of last year was core to us executing on throughout last year. Being able to tell customers, don't worry about our ability to finance with this amount of Bitcoin on the balance sheet was really important. Where we are this year, Bitcoin on the balance sheet is not -- it doesn't -- it's not the focus. It doesn't matter. It's just like asset on our balance sheet. And so the reality is we're going to remove Bitcoin exposure on our balance sheet as we move forward. And how we do it is what we're focused on right now. And our exposure will be through the equity ownership that we have in American Bitcoin. And so the Bitcoin on the Hut 8 balance sheet is not going to be a thing that we continue to hold for the long term. And the beauty is we're able to hold that exposure through the equity that we were able to create in American Bitcoin for incubating and building that business. I think we're really good at creating value and our focus is how do we drive down cost of capital and continue to create value by building businesses and what we're excited for building Hut 8, building ABC, building Highrise. And so that's a big change in focus on kind of the importance of Bitcoin on our balance sheet and our perspective on it on a go-forward basis. But River Bend, currently, from an equity portion, we don't need any more equity funding. We've already funded the projects. We're actually getting cash back once the financing closes, and hopefully, we can talk about it in our upcoming earnings call. Suzanne Ennis: Great. Okay. So let's talk about, we touched on this a little bit. But why don't we talk about, where is the -- I'm just trying to find where Brett was asking us a question. Okay. So it seems like co-locating generation on-site with data centers is going to be more prevalent. We did touch on this a little bit. What are we doing specifically to participate in this trend? Asher Genoot: You're saying -- sorry, repeat colocation data centers, is that traditional colo you mean instead of single kind of campuses? Suzanne Ennis: No single tenant campuses, yes. Asher Genoot: Sorry, repeat the question. Suzanne Ennis: It seems like co-locating generation, single-tenant campuses on site with -- yes, is going to be more from doing to participate in this trend. Asher Genoot: So let's use River Bend, that's a perfect example. The Entergy Louisiana has given us a plan in terms of when they can deliver power, right? And we're talking about the full gigawatt and there -- they want to build generation added to their rate base, have us be able to make sure we commit to it, so they're not taking spec dollars at play here. We're having discussions around them of maybe we can bring the generation faster to the site to drive the full gigawatt at a faster time frame, right? We don't want to wait 5 years, what if we brought it in a lot earlier? And so as you think about the sequencing, what percentage of the gigawatt can we pull from the open markets in terms of capacity, and what percentage do we have to build that new generation, right? And so that's first, not -- the 4 gigawatt is not treated as the same. And so the discussions we're having is how do we think about bringing generation to this campus. We have a lot of land. We have the ability to scale to almost 3,000 acres. We have access to pipelines and the ability to generate and to produce. And so as I mentioned in earlier Q&A or in the actual fireside chat, bringing generation with load, we think is going to be a bigger part of the story, a bigger part of the development. And luckily, we have those capabilities in-house. We manage 4 natural gas power plants with Macquarie as a partner, and we not only manage those, that's another asset. Those were 4 assets that we bought out of bankruptcy. We turned around. We signed long-term offtake agreements with the utility in Ontario, and we sold them to TransAlta, which is a large utility in Canada. And so we have the expertise in-house. We're continuing to build and compound on the expertise we already have, but it's going to be a bigger and bigger part of the story. I don't think it's going to be around island generation. I think it's going to be around bridging and having load and generation interconnected to the grid at your campuses. Suzanne Ennis: Okay. So we are coming up on the hour here. So we're going to do one more... Asher Genoot: We have like 31 questions in the queue. So I think we'll reduce that number when we get people to come on stage with us next time. Suzanne Ennis: That's right. So we talk a lot about the importance of our energy origination team of diversifying the pipeline of not being overweighted to a single market. Can you, and maybe, Sean, talk about some of the areas where we are still finding pockets of opportunity. For example, in a previous conference, we talked about how we were interested in studying a development in Pennsylvania. Maybe just talk a little bit about sort of some of the areas that we're looking at well outside of ERCOT. Asher Genoot: We're looking across the whole U.S. Every single area in the U.S., as we mentioned, power and land in a regulatory environment that allows for building this infrastructure at scale are the key pieces in building, right? Fiber has been less of a bottleneck. We've been able to bring fiber to a lot of the campuses that we're developing and that we're building. And so it's following the power. It's taking a first principle approach to where is their power. Using River Bend as another example because I think it's our first fully kind of vetted case study, and we can do the same about future sites that we announced. But that project was around the transmission lines. That project was around the generation near that campus. Then we came together and we pieced multiple pieces of land that were held for generations as kind of hunting properties by people, and we built this 3,000 acre opportunity to go build a large-scale mega campus. And so we're looking at those similar characteristics as we look across the whole United States and we look at its ability to scale power, its ability to build with a friendly regulatory environment that wants this project there and see the impact and the benefit that we can bring, a place that we can have talent to actually execute and build these projects and do so with the speeds that we're looking to build them at. And so our team -- the reason why we're scaling is we're continuing to increase the breadth and the depth across our energy origination pipeline across the full United States. And there are some areas that are more complex than others, obviously, that aren't kind of traditional data center markets. And so we're kind of focusing on Tier 1, Tier 2 and Tier 3 markets. and there's a little bit of a different allocation of priority risk capital that we put on to each of them, based on our confidence level of commercializing them. In some sites, we know that we'll always have kind of another market through American Bitcoin has a demand of a captive consumer that we have with the power where the energy prices work. In other areas, we know that this is primarily built and there is no backup option for developing this campus. And so overall, we're excited. I think, we're one of the first to talk about our development pipeline and our energy pipeline because that was a core focus. And now we're 2 years into that journey. We've been able to take one project fully through the getting to almost near the end of the process. Now, we got to get it to capacity under management, but we'll start having more sites kind of coming through that pipeline. And it takes time to develop these projects and you're starting to see some of those come to fruition as they move down the pipeline as we start talking about them more. Suzanne Ennis: Awesome. So... Asher Genoot: More projects -- similar, I guess, to River Bend, we've had a lot more projects get into the press than we've shared with the markets because of all the local zoning and panels that we do. So you guys will see that as well if you keep your news alerts on Hut 8. Suzanne Ennis: Okay. So we've got one minute left in this call. Maybe any closing thoughts, Sean and Asher that you want to leave our audience with. Asher Genoot: I've talked a lot, Sean, why don't you close this out? Sean Glennan: Yes. Happy to. Thanks, Asher. Look, I think Asher said a lot of it, but this is a year about execution, this is the year about growth and scaling the company. We're excited about the foundation we've built. Like when I started, I told Asher, I felt like where we are now is inevitable. And I feel like the growth of the company is inevitable. We put it together a really good development business, a really good funding mechanism, and we're looking to continue to repeat and compound that over time. So we're excited to have you along as shareholders. We hopefully do believe we've done you well so far, and we look forward to continuing to do so in the future. Suzanne Ennis: Thanks, Sean. Okay. Operator, you can close the line. Thank you, everybody.
Enrique Martinez: Good evening to all. I'm very pleased to be with you today to comment on our 2025 annual results, a defining year for the group, with, of course, the launch of the Beyond Everyday plan. I'll begin by presenting the highlights of the year, and then Jean-Brieuc, our CFO, will detail our financial results. The figures we're presenting today follow-on from the preview of the 26th of January after the EP Group tender offer. Lastly, I'll come back for the conclusion and will be available, both of us, to take your questions. So if you're following the Slide #4, our revenues are up 0.7% on the year, notably driven by services, posting a double-digit growth across the majority of geographies. Trends and consumption, the situation is contrasted. We have a challenging consumption situation in France, notably in Q4. In this context, we're nevertheless up. It's a good performance that we believe 2 points above the market trend according to the figures published by the Bank of France at the end of January. The rest of Europe, we're delivering strong growth of plus 1.1%, driven by very good performance in Spain and Portugal. Our results are, therefore, solid with current operating income of EUR 203 million, that's 2% of our revenue, and a very solid free cash flow at EUR 145 million. As I said, Jean-Brieuc will return in detail on these figures in a few minutes. We presented back in June 2025, our new strategic plan Beyond Everyday through 2030. This plan follows on the successful previous plan. Last year, as you know, early '26, EP Group, a leading shareholder through its subsidiary, VESA, announced the planned tender offer on our company. Over the years, we've built a trustful relationship with them. And we welcome this expression of interest. Moving to Slide 5. After the success of our Everyday plan, Beyond Everyday projects us into the future, resting on 3 strategic pillars that we'll recall. To become the benchmark play on high value-added products and to accelerate the rollout of subscription services with circularity is the main focus. Secondly, define the market standards in terms of customer experience across all touch points. And lastly, develop our expertise with our partners and across all geographies through 2030. We've also defined ambitious objectives at group level and notably in financial terms with a growth of our operating margin to reach at least 3% in 2030 and cumulative free cash flow of at least EUR 1.2 billion over the period 2025, 2030. Regarding the first pillar that's focused on the rollout of subscription services and circularity, we got specific indicators to measure our progress and reach our objectives. We're aiming for 4 million subscribers by the end of 2030. At the end of 2025, we've already reached 2.4 million subscribers. We aim a twofold increase of our revenue on 2nd Life offer. In 2025, we recorded growth of 24% over 2024 on the same offer. Lastly, at the end of 2030, a contribution of service activities to our growth margin from 25% to 30%. We're already at 27% at the end of '25. That's a growth of 200 basis points over 2024. Develop the reflect of repair and purchase of the reconditioned products requires very proactive initiatives. To strengthen transparency on household products and to remove obstacles to 2nd Life products, early 2026, we launched the Digital Passport for large household products, and we aim for the deployment of 1 million products by the end of the year. Moving to Slide 7. On Pilar 2 of the Beyond Everyday plan, we want to define the market standards in terms of customer experience across all touch points. This requires investing in our stores of the duration. We plan to renovate over 200 stores and to open 150 stores over the lifetime of the plan. This year, we've already reopened Fnac at Callao, center of Madrid, the new store of Barcelona transferred to the Ramblas, and the new Fnac in Dijon. For Darty, we've opened Rouen in the Docks 76 shopping center, still benefiting from the latest innovations. The momentum of openings will continue in Portugal, where, at the end of the year, we launched the Darty brand that we plan to develop. The brand is already benefit, great spontaneous recognition amongst household and consumer electronics in just a few months. Store traffic is up 4% and revenue is up 10% since the change in the brand. Return to Pillar 3, we'll deploy our expertise with our partners and across all geographies. Online sales are up almost 6% in '25, with an increase in traffic and volumes, representing 22% of total group sales today. Click & Collect continues to confirm its success. It represents over 50% of our online sales. And we, in fact, have more than 9 million products recovered in stores in 2025. This figure shows the power of our model. We've seen a very dynamic activity in 2025 in our marketplace activities of the Reverse Marketplace, and our JV for logistics, weavenn, held equally, that's continuing to grow strongly. 2nd Life activities, both with Fnac and Darty represent an important share of this momentum. All in all, its sale growth of close on 10% on these channels. A word of Unieuro integration. 2024, the acquisition of Unieuro in Italy was a defining deal for the group. Integration is progressing very well. [indiscernible], the French and Italian teams are working hand-in-hand on deploying the plan Beyond Everyday, both digital logistics with the new warehouse opened at Colleferro near Rome, renovation of points of sale and store openings. We're also developing large-scale Ledwall store windows for retail media we've done in France. The objective, at least EUR 20 million in synergies by the end of 2026 is confirmed and has already begun to materialize this year. Operating performance of Italy is very satisfactory and alone accounts for over 60% of the COI growth of the rest of Europe. A word on the current takeover bid, and to conclude my section of Part 1, I'll return to the announcement of the EP Group that communicated on an all-cash offer for Fnac Darty shares. EP Group has been our major shareholders since 2023, and through its subsidiary, VESA, owns 28.5% of our capital. The offer price, EUR 36 per share, represents a 19% premium before the closing prior to the offer January '23 and premiums, respectively, of 24%, 26% of the average price of the 1 month and 3 months. This is, of course, submitted to a mandatory threshold of 50% of the capital voting rights by the [indiscernible], subject to the regulatory authorities in terms of competition law and control of foreign investment. EP Group has indicated that it didn't plan to solicit a mandatory withdrawal after the offer. After an in-depth examination of the proposed offer, the Board favorably received the operation unanimously. It will deliver its recent opinion in the coming weeks after the report of the independent expert, Ledouble, and the advisory opinion of the staff committee. The filing of the offer is expected in the coming weeks before the end of Q1. On Slide 11, the EP's offer continues on the solid partnership we forged together for several years now. It's a major milestone to accompany the acceleration of our strategic plan Beyond Everyday. In the current environment, marked by profound changes of expectations and consumer behavior, the support of a long-term stable shareholder is a great asset. Lastly, I'd like to emphasize that our dividend policy remains unchanged with a payout ratio above 40%. Over to Jean-Brieuc, our CFO, to detail our results. Jean-Brieuc Le Tinier: Thank you, Enrique. Good evening, everyone. Thank you for being here with us. Let's start with Slide 13. You have the new basis for 2024 for our financial statements because of 2 items. The first item is the IFRS 5 restatement of Nature & Decouvertes at the bottom of the income statement because the -- since the COVID crisis, that business, Nature & Decouvertes, faced significant pressure on household purchasing powers and the emergence of online players offering very low cost products. The model Nature & Decouvertes needs to be adjusted to the turnaround plan that we've been implementing for 12 months or so, and unfortunately, didn't come to fruition, and so we started looking for a partner that seems necessary if we want to have a rigorous management of our portfolio. The effect that you see on the slide is related to the results of 2024. It's minus EUR 172 million on revenue, a bit positive on COP to the tune of EUR 14 million. I'll give you comments in a few minutes, few details about 2025. The second restatement is more marginal. It's about Unieuro. With the recording of goodwill as per purchase price allocation to the tune of EUR 6 million in 2024 allocated to the rest of Europe because it is about Italy, the amount for 2025 is roughly identical. And so the developments that I will comment in a moment are based on these restated figures for 2024, that is revenue EUR 10.3 billion and current operating profit EUR 200 million. Let's look at the results for 2025, Slide 14. You can see on this slide the key figures for 2025. As Enrique pointed out a few moments ago, we are pleased with the group's performance in view of a very challenging context in France for the retail industry with significant pressure on consumption and household's confidence. Revenue of the group at end 2025 was slightly up, plus 0.7% like-for-like at EUR 10.3 billion. Gross margin kept growing, reflecting the robustness of the omnichannel model. Operating margin was 2% at end December 2025, up compared to 2024. With a good management of WCR, operating free cash flow, not including IFRS, was EUR 145 million, up from 2024, not including disposals. Slide 15 now. Enrique pointed out that online sales grew significantly, 6%. They account for 22% of revenue and about 50% -- and 50% of them are done through Click & Collect. Let's go through categories. Services kept growing with double-digit growth in most countries because of an enriched offer and the rolling out of Darty Max and Fnac Vie Digitale. With all services, we had 2.4 million subscribers at end 2025 compared to 2 million at end 2024. Our ambition is to reach 4 million by 2030. Diversification remains also dynamic with a double-digit growth for Toys and Games and Stationery. Beds that started in our integrated stores at the beginning of the year, enjoyed rapid growth, just like fully equipped kitchens that are gaining popularity. Domestic appliances were up. Small appliances kept growing with beauty tech and floor cleaning equipment. Large appliances were driven by favorable weather conditions for refrigerators, air conditioning and fans. Editorial products enjoyed the good launch of the Switch Console 2 early in June 2025, 150,000 units sold. Books were slightly down because there were no major novelties. And finally, technical products declined because of fewer television and new phone sales. However, reconditioned phones enjoyed significant growth. Personal computers went up, returned to growth with the termination of support services for Windows 10 and the new cycle of new products has announced tablets, connected glasses and cameras also enjoyed growth. And then IT components with fnac.com in 2025 were very successful. We now are the lead players in all gaming categories. We're trying a new dedicated department for these components in some pilot stores and on the darty.com. Let's look at revenues per geography. France had -- sales were up on the like-for-like basis, plus 0.5%, but they were down 0.6% in Q4. As we said, business suffered in December, in particular, in stores. And that, of course, drove down the performance in Q4. The numbers published by the French Central Bank confirmed a very challenging context in 2025 for the retail industry with significant pressure on consumption and household confidence. Let's look at the rest of Europe. This give a very satisfactory performance. Like-for-like growth of sales, plus 1.1% for the full year, plus 1% in Q4. In Italy, revenue were down 1.1%, but -- and Q4 was down 2.1% because of significant competitive pressure on phones and a high basis of comparison for television, but this had no significant consequence on COP growth. Belgium and Luxembourg enjoyed plus 1.8% growth over the year, 3.9% in Q4. That confirmed the good momentum in online sales. Portugal, significant growth like-for-like, plus 7.3%, 8.7% in Q4. The 2 brands, Fnac and Darty did well both on web and in stores. And as Enrique pointed out, a very good performance of stores that recently joined the Darty brand. Spain displayed an LFL growth of 6.6% for the year and 7.3% for the fourth quarter alone. All categories were up over the period, and services had double-digit growth. The scope effect for Spain reflected the temporary closing of stores for renovations, but they all reopened by year-end. Finally, in Switzerland, LFL revenue was up 5.2%, including 4.1% in Q4, driven by fine both online and in stores and of course, the growth of services. Let's look at gross margin on Slide 17. Over the 2025, this was up 50 basis points and 60 basis points not including the dilutive effect of the franchise. This reflected the good performance of services and Darty Max, in particular. Let's look at other items of the income statement on Slide 18. As I said, the gross margin was up at end December. OpEx, including D&A was EUR 2.26 billion at end 2026 -- 2025, up EUR 38 million compared to 2024 restated. The higher property cost and inflation on other cost were offset by the performance plans. And so EBITDA at end 2025 was up EUR 15 million, and current operating profit, COP, stood at EUR 203 million compared to EUR 200 million at end 2024 restated because of higher depreciation allowances related to leases and IFRS 16. Per area, business in France in December had a negative effect on profitability, but the rest of Europe had a significant improvement in COP, about EUR 15 million. In Italy, that accounted for 60% of the full growth for the region at end 2025, EUR 4 million in synergies were recorded. As Enrique pointed out, the objective of EUR 20 million was confirmed by to 2026. One-off items stood at minus EUR 123 million compared to minus EUR 27 million at end 2024. This is because of the impairment of intangible assets, no cash effect, EUR 96 million, and the recognition of restructuring costs for the same amount as for 2024. Operating profit stood at EUR 80 million at end 2025. Financial expenditures stood at EUR 118 million, up EUR 21 million compared to 2024. This is because of the higher cost of debt -- of net debt, the new financing conditions and the increases of IFRS 16 charges. Taxes stood at EUR 25 million, and that included EUR 10 million extra tax for large companies in France. So net income for continuing activities for the group stood at minus EUR 67 million, a degradation compared to 2024, where it stood at EUR 43 million. But if you restate this for noncurrent items with no cash effects, the EUR 96 million I just mentioned, the net income attributable to the group of continuing activities would have stood at plus EUR 28 million at end 2025. The EUR 78 million charge for held-for-sale activities is because of the restatement of Nature & Decouvertes as a held-for-sale business. Most of this is goodwill amortization to the tune of EUR 60 million. And net loss of the business for 2025, EUR 18 million. In 2024, on that line, you had a loss of EUR 19 million for Nature & Decouvertes, in line with IFRS 5, plus an income of EUR 2 million because of the resolution of the Comet dispute. If you look at cash flow, operating free cash flow, not including IFRS 16, stood at EUR 145 million compared to EUR 210 million in 2024 restated, in line with our expectations. In 2024, net CapEx included disposals including a logistics warehouse in the Paris area, the EUR 93 million, a change in WCR stood at EUR 75 million, and this reflects the good management of that in spite of the challenging Q4 in France. The increase in CapEx is in line with our ambitions. It affects our stores, our supply chain, our IT systems. Italy had increased CapEx with the opening of a new warehouse in Colleferro, which Enrique talked about, and several new stores or renewed stores. The financial position of the group is sound, as you can see in Slide 20. Net financial debt excluding IFRS 16 stood at EUR 958 million with 2 bonds, EUR 550 million due in 2029 and EUR 300 million due in 2032, and the remainder of the OCEANES issue, EUR 46 million at end 2025. The net cash position stood at EUR 146 million, plus undrawn credit lines, the RCF and DDTL worth EUR 600 million. This undrawn line covers both the issue of 2029 in volume and the 2032 issue in maturity. Finally, the S&P Global, Fitch ratings and Scope rating agencies published their ratings, respectively, BB+, BB+ and BBB- with a stable outlook. So we have a sound long-term cash profile. Finally, about the balance sheet. We have an agreement with the trustee of the Comet Pension Fund in the U.K. and Canada Life U.K. to cover all liabilities of the scheme, this pension scheme, with the full buy-in worth GBP 330 million. This operation did not and will not have any significant impact on the group's cash position. And now I'll give the floor back to Enrique. Enrique Martinez: Thank you very much, Jean-Brieuc. In conclusion, I'd like to acknowledge the unfailing commitment of our 30,000 partners and staff serving our customers' expectations, seeking out all growth opportunities. A word on the financial outlook. At our shareholders meeting in May, we'll propose a payment of a dividend EUR 1 per share, equivalent to last year, consistent with our shareholder return policy. The ex date of the dividend will be 3rd of June. In volatile and still uncertain context, we nevertheless expect an increase in our current operating margin and also our free cash flow. And of course, we confirm our 2030 objectives that I announced at the presentation of our Beyond Everyday plan in June 2025. Thank you for your attention. And with Jean-Brieuc, we're now ready to take all your questions. Operator: We have a first question from [ Laurent ]. Did you have expressions of interest for Nature & Decouvertes? Should we expect a cash impact on the disposal? Unknown Executive: Well, I can answer that. Nature & Decouvertes, we launched the disposal process that's formalized. We chosen a bank and an expert to support us for the financial side. At this stage, it's premature to mention the first expressions of interest we've already received. It's too soon to tell you about that. Yes, we've had some expressions of interest, the cash impact on the disposal. We'll get back to you when we have more formal expressions. And as you said, too soon to say. And once again, we confirm our commitment to continue to maintain the activity in stores and all our activities around Nature & Decouvertes continuity until we find a right solution, and we have time. Operator: We got a second question. Bank of France figures in January are not in a good trend. Are you confirming that similar trend? Unknown Executive: Well, thank you. As you know, well, we generally do better than the Bank of France figures. Unfortunately, I cannot confirm what was the -- what the performance is today, but we'll see that for the quarter. But I'd say the group continues to expand confidently in a context that we know well that we're mastering and doesn't, in any way, jeopardize the guidance we've given for 2026. So not good figures from the Bank of France, but let's wait the quarterly results to give the market figures. Operator: We have a question in English. I'll read it in English from [ Marcos ]. Unknown Executive: Well, thanks for that question. As part of the activities that are significant group-wide, that we classify in the services, give vouchers, experience packs, we're not going to give any specific outlook, but we're a leader in this and standard setup for ticketing, well, these segments that are seeing a major expansion of activity. And for shows, these are actually markets that have a great appetite for consumers still in 2026. And thanks to [ Marco ] for his question once again. Operator: Waiting as the questions come in. We will allow a bit more time for questions. Otherwise, we'll wrap up the session. Our teams, Laura, et cetera, are available to -- there's a new question just come in on the guidance. Jeremy Garnier. Question on the guidance of the operating margin, free cash flow. Excluding the synergies or the Unieuro, what could be an improvement, it's upside and scale? Unknown Executive: Well, thanks for the question. Obviously, if we include synergies, levers of our Everyday strategic plan, services, commercial dynamic that's pretty solid across countries, notably in the South. We saw the figures, Portugal, Spain. So we're continuing to benefit from that. Hopefully, consumption dynamism in France will be a bit more favorable, lower inflation and possibly opportunities for exchanging products, the World Cup in July. And of course, the real estate market will perhaps show some signs of recovery, the big and the small are already in this reequipment phase, everything for robotics and floor care, et cetera. There are a lot of good activities that will drive the business forward. And we project the profitability through 2030 at 3%. So we need to travel the path and the difficulty in 2026 is to boost free cash flow generation on activity to deliver our commitments in 2030. Operator: We have a question from [indiscernible], what level of investment should we expect 2026 in the coming years? Unknown Executive: Well, '26, we can expect a level that will be broadly similar to that at 2025, maybe slightly higher. And then we guided on 2030 of investment around EUR 200 million on average. So as we said back then slightly up versus what we were doing historically to incorporate development of IT services, store refurbishment, an important part of the Beyond Everyday plan. Operator: We have another question, Justin, on WCR. Question on WCR chain, plus EUR 75 million. Is there a strong contribution of Italy that explains that high number? Unknown Executive: Italy contributed, I won't give the exact figure, for quite a substantial share, but not the majority of that growth. All countries contributed EUR 75 million, including Italy, like the other countries. Wait a couple more seconds. We can close this session. Of course, we remain available should you require further information and interaction and see you for the next presentation in April and the AGM and following events on the offer that's underway. Thank you for your attention. Pleasant evening. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Enrique Martinez: Good evening to all. I'm very pleased to be with you today to comment on our 2025 annual results, a defining year for the group, with, of course, the launch of the Beyond Everyday plan. I'll begin by presenting the highlights of the year, and then Jean-Brieuc, our CFO, will detail our financial results. The figures we're presenting today follow-on from the preview of the 26th of January after the EP Group tender offer. Lastly, I'll come back for the conclusion and will be available, both of us, to take your questions. So if you're following the Slide #4, our revenues are up 0.7% on the year, notably driven by services, posting a double-digit growth across the majority of geographies. Trends and consumption, the situation is contrasted. We have a challenging consumption situation in France, notably in Q4. In this context, we're nevertheless up. It's a good performance that we believe 2 points above the market trend according to the figures published by the Bank of France at the end of January. The rest of Europe, we're delivering strong growth of plus 1.1%, driven by very good performance in Spain and Portugal. Our results are, therefore, solid with current operating income of EUR 203 million, that's 2% of our revenue, and a very solid free cash flow at EUR 145 million. As I said, Jean-Brieuc will return in detail on these figures in a few minutes. We presented back in June 2025, our new strategic plan Beyond Everyday through 2030. This plan follows on the successful previous plan. Last year, as you know, early '26, EP Group, a leading shareholder through its subsidiary, VESA, announced the planned tender offer on our company. Over the years, we've built a trustful relationship with them. And we welcome this expression of interest. Moving to Slide 5. After the success of our Everyday plan, Beyond Everyday projects us into the future, resting on 3 strategic pillars that we'll recall. To become the benchmark play on high value-added products and to accelerate the rollout of subscription services with circularity is the main focus. Secondly, define the market standards in terms of customer experience across all touch points. And lastly, develop our expertise with our partners and across all geographies through 2030. We've also defined ambitious objectives at group level and notably in financial terms with a growth of our operating margin to reach at least 3% in 2030 and cumulative free cash flow of at least EUR 1.2 billion over the period 2025, 2030. Regarding the first pillar that's focused on the rollout of subscription services and circularity, we got specific indicators to measure our progress and reach our objectives. We're aiming for 4 million subscribers by the end of 2030. At the end of 2025, we've already reached 2.4 million subscribers. We aim a twofold increase of our revenue on 2nd Life offer. In 2025, we recorded growth of 24% over 2024 on the same offer. Lastly, at the end of 2030, a contribution of service activities to our growth margin from 25% to 30%. We're already at 27% at the end of '25. That's a growth of 200 basis points over 2024. Develop the reflect of repair and purchase of the reconditioned products requires very proactive initiatives. To strengthen transparency on household products and to remove obstacles to 2nd Life products, early 2026, we launched the Digital Passport for large household products, and we aim for the deployment of 1 million products by the end of the year. Moving to Slide 7. On Pilar 2 of the Beyond Everyday plan, we want to define the market standards in terms of customer experience across all touch points. This requires investing in our stores of the duration. We plan to renovate over 200 stores and to open 150 stores over the lifetime of the plan. This year, we've already reopened Fnac at Callao, center of Madrid, the new store of Barcelona transferred to the Ramblas, and the new Fnac in Dijon. For Darty, we've opened Rouen in the Docks 76 shopping center, still benefiting from the latest innovations. The momentum of openings will continue in Portugal, where, at the end of the year, we launched the Darty brand that we plan to develop. The brand is already benefit, great spontaneous recognition amongst household and consumer electronics in just a few months. Store traffic is up 4% and revenue is up 10% since the change in the brand. Return to Pillar 3, we'll deploy our expertise with our partners and across all geographies. Online sales are up almost 6% in '25, with an increase in traffic and volumes, representing 22% of total group sales today. Click & Collect continues to confirm its success. It represents over 50% of our online sales. And we, in fact, have more than 9 million products recovered in stores in 2025. This figure shows the power of our model. We've seen a very dynamic activity in 2025 in our marketplace activities of the Reverse Marketplace, and our JV for logistics, weavenn, held equally, that's continuing to grow strongly. 2nd Life activities, both with Fnac and Darty represent an important share of this momentum. All in all, its sale growth of close on 10% on these channels. A word of Unieuro integration. 2024, the acquisition of Unieuro in Italy was a defining deal for the group. Integration is progressing very well. [indiscernible], the French and Italian teams are working hand-in-hand on deploying the plan Beyond Everyday, both digital logistics with the new warehouse opened at Colleferro near Rome, renovation of points of sale and store openings. We're also developing large-scale Ledwall store windows for retail media we've done in France. The objective, at least EUR 20 million in synergies by the end of 2026 is confirmed and has already begun to materialize this year. Operating performance of Italy is very satisfactory and alone accounts for over 60% of the COI growth of the rest of Europe. A word on the current takeover bid, and to conclude my section of Part 1, I'll return to the announcement of the EP Group that communicated on an all-cash offer for Fnac Darty shares. EP Group has been our major shareholders since 2023, and through its subsidiary, VESA, owns 28.5% of our capital. The offer price, EUR 36 per share, represents a 19% premium before the closing prior to the offer January '23 and premiums, respectively, of 24%, 26% of the average price of the 1 month and 3 months. This is, of course, submitted to a mandatory threshold of 50% of the capital voting rights by the [indiscernible], subject to the regulatory authorities in terms of competition law and control of foreign investment. EP Group has indicated that it didn't plan to solicit a mandatory withdrawal after the offer. After an in-depth examination of the proposed offer, the Board favorably received the operation unanimously. It will deliver its recent opinion in the coming weeks after the report of the independent expert, Ledouble, and the advisory opinion of the staff committee. The filing of the offer is expected in the coming weeks before the end of Q1. On Slide 11, the EP's offer continues on the solid partnership we forged together for several years now. It's a major milestone to accompany the acceleration of our strategic plan Beyond Everyday. In the current environment, marked by profound changes of expectations and consumer behavior, the support of a long-term stable shareholder is a great asset. Lastly, I'd like to emphasize that our dividend policy remains unchanged with a payout ratio above 40%. Over to Jean-Brieuc, our CFO, to detail our results. Jean-Brieuc Le Tinier: Thank you, Enrique. Good evening, everyone. Thank you for being here with us. Let's start with Slide 13. You have the new basis for 2024 for our financial statements because of 2 items. The first item is the IFRS 5 restatement of Nature & Decouvertes at the bottom of the income statement because the -- since the COVID crisis, that business, Nature & Decouvertes, faced significant pressure on household purchasing powers and the emergence of online players offering very low cost products. The model Nature & Decouvertes needs to be adjusted to the turnaround plan that we've been implementing for 12 months or so, and unfortunately, didn't come to fruition, and so we started looking for a partner that seems necessary if we want to have a rigorous management of our portfolio. The effect that you see on the slide is related to the results of 2024. It's minus EUR 172 million on revenue, a bit positive on COP to the tune of EUR 14 million. I'll give you comments in a few minutes, few details about 2025. The second restatement is more marginal. It's about Unieuro. With the recording of goodwill as per purchase price allocation to the tune of EUR 6 million in 2024 allocated to the rest of Europe because it is about Italy, the amount for 2025 is roughly identical. And so the developments that I will comment in a moment are based on these restated figures for 2024, that is revenue EUR 10.3 billion and current operating profit EUR 200 million. Let's look at the results for 2025, Slide 14. You can see on this slide the key figures for 2025. As Enrique pointed out a few moments ago, we are pleased with the group's performance in view of a very challenging context in France for the retail industry with significant pressure on consumption and household's confidence. Revenue of the group at end 2025 was slightly up, plus 0.7% like-for-like at EUR 10.3 billion. Gross margin kept growing, reflecting the robustness of the omnichannel model. Operating margin was 2% at end December 2025, up compared to 2024. With a good management of WCR, operating free cash flow, not including IFRS, was EUR 145 million, up from 2024, not including disposals. Slide 15 now. Enrique pointed out that online sales grew significantly, 6%. They account for 22% of revenue and about 50% -- and 50% of them are done through Click & Collect. Let's go through categories. Services kept growing with double-digit growth in most countries because of an enriched offer and the rolling out of Darty Max and Fnac Vie Digitale. With all services, we had 2.4 million subscribers at end 2025 compared to 2 million at end 2024. Our ambition is to reach 4 million by 2030. Diversification remains also dynamic with a double-digit growth for Toys and Games and Stationery. Beds that started in our integrated stores at the beginning of the year, enjoyed rapid growth, just like fully equipped kitchens that are gaining popularity. Domestic appliances were up. Small appliances kept growing with beauty tech and floor cleaning equipment. Large appliances were driven by favorable weather conditions for refrigerators, air conditioning and fans. Editorial products enjoyed the good launch of the Switch Console 2 early in June 2025, 150,000 units sold. Books were slightly down because there were no major novelties. And finally, technical products declined because of fewer television and new phone sales. However, reconditioned phones enjoyed significant growth. Personal computers went up, returned to growth with the termination of support services for Windows 10 and the new cycle of new products has announced tablets, connected glasses and cameras also enjoyed growth. And then IT components with fnac.com in 2025 were very successful. We now are the lead players in all gaming categories. We're trying a new dedicated department for these components in some pilot stores and on the darty.com. Let's look at revenues per geography. France had -- sales were up on the like-for-like basis, plus 0.5%, but they were down 0.6% in Q4. As we said, business suffered in December, in particular, in stores. And that, of course, drove down the performance in Q4. The numbers published by the French Central Bank confirmed a very challenging context in 2025 for the retail industry with significant pressure on consumption and household confidence. Let's look at the rest of Europe. This give a very satisfactory performance. Like-for-like growth of sales, plus 1.1% for the full year, plus 1% in Q4. In Italy, revenue were down 1.1%, but -- and Q4 was down 2.1% because of significant competitive pressure on phones and a high basis of comparison for television, but this had no significant consequence on COP growth. Belgium and Luxembourg enjoyed plus 1.8% growth over the year, 3.9% in Q4. That confirmed the good momentum in online sales. Portugal, significant growth like-for-like, plus 7.3%, 8.7% in Q4. The 2 brands, Fnac and Darty did well both on web and in stores. And as Enrique pointed out, a very good performance of stores that recently joined the Darty brand. Spain displayed an LFL growth of 6.6% for the year and 7.3% for the fourth quarter alone. All categories were up over the period, and services had double-digit growth. The scope effect for Spain reflected the temporary closing of stores for renovations, but they all reopened by year-end. Finally, in Switzerland, LFL revenue was up 5.2%, including 4.1% in Q4, driven by fine both online and in stores and of course, the growth of services. Let's look at gross margin on Slide 17. Over the 2025, this was up 50 basis points and 60 basis points not including the dilutive effect of the franchise. This reflected the good performance of services and Darty Max, in particular. Let's look at other items of the income statement on Slide 18. As I said, the gross margin was up at end December. OpEx, including D&A was EUR 2.26 billion at end 2026 -- 2025, up EUR 38 million compared to 2024 restated. The higher property cost and inflation on other cost were offset by the performance plans. And so EBITDA at end 2025 was up EUR 15 million, and current operating profit, COP, stood at EUR 203 million compared to EUR 200 million at end 2024 restated because of higher depreciation allowances related to leases and IFRS 16. Per area, business in France in December had a negative effect on profitability, but the rest of Europe had a significant improvement in COP, about EUR 15 million. In Italy, that accounted for 60% of the full growth for the region at end 2025, EUR 4 million in synergies were recorded. As Enrique pointed out, the objective of EUR 20 million was confirmed by to 2026. One-off items stood at minus EUR 123 million compared to minus EUR 27 million at end 2024. This is because of the impairment of intangible assets, no cash effect, EUR 96 million, and the recognition of restructuring costs for the same amount as for 2024. Operating profit stood at EUR 80 million at end 2025. Financial expenditures stood at EUR 118 million, up EUR 21 million compared to 2024. This is because of the higher cost of debt -- of net debt, the new financing conditions and the increases of IFRS 16 charges. Taxes stood at EUR 25 million, and that included EUR 10 million extra tax for large companies in France. So net income for continuing activities for the group stood at minus EUR 67 million, a degradation compared to 2024, where it stood at EUR 43 million. But if you restate this for noncurrent items with no cash effects, the EUR 96 million I just mentioned, the net income attributable to the group of continuing activities would have stood at plus EUR 28 million at end 2025. The EUR 78 million charge for held-for-sale activities is because of the restatement of Nature & Decouvertes as a held-for-sale business. Most of this is goodwill amortization to the tune of EUR 60 million. And net loss of the business for 2025, EUR 18 million. In 2024, on that line, you had a loss of EUR 19 million for Nature & Decouvertes, in line with IFRS 5, plus an income of EUR 2 million because of the resolution of the Comet dispute. If you look at cash flow, operating free cash flow, not including IFRS 16, stood at EUR 145 million compared to EUR 210 million in 2024 restated, in line with our expectations. In 2024, net CapEx included disposals including a logistics warehouse in the Paris area, the EUR 93 million, a change in WCR stood at EUR 75 million, and this reflects the good management of that in spite of the challenging Q4 in France. The increase in CapEx is in line with our ambitions. It affects our stores, our supply chain, our IT systems. Italy had increased CapEx with the opening of a new warehouse in Colleferro, which Enrique talked about, and several new stores or renewed stores. The financial position of the group is sound, as you can see in Slide 20. Net financial debt excluding IFRS 16 stood at EUR 958 million with 2 bonds, EUR 550 million due in 2029 and EUR 300 million due in 2032, and the remainder of the OCEANES issue, EUR 46 million at end 2025. The net cash position stood at EUR 146 million, plus undrawn credit lines, the RCF and DDTL worth EUR 600 million. This undrawn line covers both the issue of 2029 in volume and the 2032 issue in maturity. Finally, the S&P Global, Fitch ratings and Scope rating agencies published their ratings, respectively, BB+, BB+ and BBB- with a stable outlook. So we have a sound long-term cash profile. Finally, about the balance sheet. We have an agreement with the trustee of the Comet Pension Fund in the U.K. and Canada Life U.K. to cover all liabilities of the scheme, this pension scheme, with the full buy-in worth GBP 330 million. This operation did not and will not have any significant impact on the group's cash position. And now I'll give the floor back to Enrique. Enrique Martinez: Thank you very much, Jean-Brieuc. In conclusion, I'd like to acknowledge the unfailing commitment of our 30,000 partners and staff serving our customers' expectations, seeking out all growth opportunities. A word on the financial outlook. At our shareholders meeting in May, we'll propose a payment of a dividend EUR 1 per share, equivalent to last year, consistent with our shareholder return policy. The ex date of the dividend will be 3rd of June. In volatile and still uncertain context, we nevertheless expect an increase in our current operating margin and also our free cash flow. And of course, we confirm our 2030 objectives that I announced at the presentation of our Beyond Everyday plan in June 2025. Thank you for your attention. And with Jean-Brieuc, we're now ready to take all your questions. Operator: We have a first question from [ Laurent ]. Did you have expressions of interest for Nature & Decouvertes? Should we expect a cash impact on the disposal? Unknown Executive: Well, I can answer that. Nature & Decouvertes, we launched the disposal process that's formalized. We chosen a bank and an expert to support us for the financial side. At this stage, it's premature to mention the first expressions of interest we've already received. It's too soon to tell you about that. Yes, we've had some expressions of interest, the cash impact on the disposal. We'll get back to you when we have more formal expressions. And as you said, too soon to say. And once again, we confirm our commitment to continue to maintain the activity in stores and all our activities around Nature & Decouvertes continuity until we find a right solution, and we have time. Operator: We got a second question. Bank of France figures in January are not in a good trend. Are you confirming that similar trend? Unknown Executive: Well, thank you. As you know, well, we generally do better than the Bank of France figures. Unfortunately, I cannot confirm what was the -- what the performance is today, but we'll see that for the quarter. But I'd say the group continues to expand confidently in a context that we know well that we're mastering and doesn't, in any way, jeopardize the guidance we've given for 2026. So not good figures from the Bank of France, but let's wait the quarterly results to give the market figures. Operator: We have a question in English. I'll read it in English from [ Marcos ]. Unknown Executive: Well, thanks for that question. As part of the activities that are significant group-wide, that we classify in the services, give vouchers, experience packs, we're not going to give any specific outlook, but we're a leader in this and standard setup for ticketing, well, these segments that are seeing a major expansion of activity. And for shows, these are actually markets that have a great appetite for consumers still in 2026. And thanks to [ Marco ] for his question once again. Operator: Waiting as the questions come in. We will allow a bit more time for questions. Otherwise, we'll wrap up the session. Our teams, Laura, et cetera, are available to -- there's a new question just come in on the guidance. Jeremy Garnier. Question on the guidance of the operating margin, free cash flow. Excluding the synergies or the Unieuro, what could be an improvement, it's upside and scale? Unknown Executive: Well, thanks for the question. Obviously, if we include synergies, levers of our Everyday strategic plan, services, commercial dynamic that's pretty solid across countries, notably in the South. We saw the figures, Portugal, Spain. So we're continuing to benefit from that. Hopefully, consumption dynamism in France will be a bit more favorable, lower inflation and possibly opportunities for exchanging products, the World Cup in July. And of course, the real estate market will perhaps show some signs of recovery, the big and the small are already in this reequipment phase, everything for robotics and floor care, et cetera. There are a lot of good activities that will drive the business forward. And we project the profitability through 2030 at 3%. So we need to travel the path and the difficulty in 2026 is to boost free cash flow generation on activity to deliver our commitments in 2030. Operator: We have a question from [indiscernible], what level of investment should we expect 2026 in the coming years? Unknown Executive: Well, '26, we can expect a level that will be broadly similar to that at 2025, maybe slightly higher. And then we guided on 2030 of investment around EUR 200 million on average. So as we said back then slightly up versus what we were doing historically to incorporate development of IT services, store refurbishment, an important part of the Beyond Everyday plan. Operator: We have another question, Justin, on WCR. Question on WCR chain, plus EUR 75 million. Is there a strong contribution of Italy that explains that high number? Unknown Executive: Italy contributed, I won't give the exact figure, for quite a substantial share, but not the majority of that growth. All countries contributed EUR 75 million, including Italy, like the other countries. Wait a couple more seconds. We can close this session. Of course, we remain available should you require further information and interaction and see you for the next presentation in April and the AGM and following events on the offer that's underway. Thank you for your attention. Pleasant evening. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good morning. My name is Stephanie, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Trinity Capital's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to Ben Malcolmson, Trinity Capital's Head of Investor Relations. Please go ahead. Ben Malcolmson: Thank you, and welcome to Trinity Capital's Fourth Quarter 2025 Earnings Conference Call. Speaking on today's call are Kyle Brown, Chief Executive Officer; Michael Testa, Chief Financial Officer; and Gerry Harder, Chief Operating Officer. Joining us for the Q&A portion of the call are Ron Kundich, Chief Credit Officer; and Sarah Stanton, General Counsel and Chief Compliance Officer. Earlier today, we released our financial results, which are available on our website at ir.trinitycapital.com. Before we begin, please note that certain statements made during this call may be considered forward looking under federal securities laws. Please review our most recent SEC filings for further information on the risks and uncertainties related to these statements. With that, please allow me to turn the call over to Trinity Capital's CEO, Kyle Brown. Kyle Brown: Thank you, Ben, and thanks, everyone, for joining us today. Trinity Capital is experiencing strong momentum right now, and our investors are seeing the benefits from our diversified platform, our internally managed structure and our continued growth. 2025 was a banner year for us. We achieved records in many major operating categories. Our 5 complementary verticals continue to drive real diversification and our internally managed structure creates accretive value for shareholders. Together, those advantages clearly differentiate Trinity in the private credit space. Major highlights from 2025 include excellent operating results with record-setting net investment income of $144 million, or $2.08 per share, a transition of monthly dividends, providing more frequent income for shareholders as well as continued consistency of our distributions. Sustained momentum with our originations engine as we achieved a record $1.5 billion of fundings and $2.1 billion of commitments and significant growth of our managed funds business through the establishment of several co-investment vehicles, which provide new liquidity to the platform and incremental income to Trinity shareholders. We finished the year with an especially strong fourth quarter. Here are some of the highlights from Q4. We delivered $40 million in net investment income, a 15% increase compared to Q4 of last year. Our net asset value grew 10% quarter-over-quarter to a record $1.1 billion. Platform AUM increased to more than $2.8 billion, up 38% year-over-year. We maintained strong credit quality with non-accruals at less than 1% of the portfolio at fair value. Trinity paid a fourth quarter cash dividend of $0.51 per share and announced a $0.17 per month distribution for the first quarter. Trinity shareholders have now been the beneficiaries of more than 6 consecutive years of a consistent or increased dividend. Trinity Capital continues to outperform in key metrics. Our return on equity and effective yield rank at or near the top in the BDC space. Our NAV has grown 33% year-over-year, while our credit metrics have remained strong and consistent. Since our IPO 5 years ago, TRIN stock has delivered a cumulative total return of 109%, far outpacing both the peer average of 70% and the S&P 500's 82% over that same time period. Looking forward, we have an ever-growing managed funds business as well as 209 warrant positions and 130 portfolio companies, which have the potential to provide incremental upside to our shareholders. We have entered 2026 with strong momentum. In Q4, we funded $435 million, bringing full year investments to $1.5 billion, 21% more than the prior year's total. Our investment pipeline remains robust with $1.2 billion in total unfunded commitments as of year-end. As a point of emphasis, 93% of our unfunded commitments remain subject to rigorous ongoing diligence and investment committee approval, while only 7% of these commitments are unconditional. Our originations activity reflects consistent growth in all of our verticals across the Trinity platform, powered by an elite team of originators and underwriters. We are a direct lender. We own the pipeline. We do not depend on syndicated deals, and we have immaterial overlap with other BDCs, all of which give our investors access to a highly differentiated portfolio of investments through our 5 business verticals. All the while, we remain deeply committed and disciplined to our underwriting approach and credit performance, which are crucial to our long-term success. I'd like to share a few thoughts that are newsworthy topics of late regarding AI and the software space. Really anyone saying that AI is going to end software is off base and anyone saying AI will not change software is also off base. The recent overreaction around AI's impact on the software industry is not new to us. We've been dealing with AI-driven disruption for more than 3 years and we've made thoughtful decisions to strategically diversify our portfolio and opportunistically invest in adjacent sectors to the AI space. Enterprise SaaS is currently 9% of our portfolio. Many of those are private equity backed lower middle market companies that have, over the last few years, introduced new AI tools to their offerings. Software and particularly incumbent and trusted software is the means of integrating these new AI efficiencies. The strongest companies continue to adapt and perform well. We're not seeing any weakness in our software investments. The companies with the best management teams, the strongest moats and most versatile strategies continue to separate themselves from the pack. More importantly, we're also not placing bets on individual AI winners and losers. We are proactively marketing our services to SaaS companies that want to on-prem their compute. Our equipment finance business has been active in the space for multiple years and has the ability and experience to provide CapEx financing for data centers, GPUs, CPUs and power generation equipment. We're investing in the picks and shovels that power the entire ecosystem. This is the infrastructure that every AI application depends on regardless of which companies rise or fall in the application layer. We strongly believe that AI versus SaaS debate is not a zero-sum game. We'll continue to keep the portfolio diversified, and our investment approach nimble as we identify new and underserved markets to generate alpha returns for our shareholders. Moving to rate cuts. So far, they've had a little impact on our business. Based on our modeling, additional cuts would likely have a muted effect on our earnings power. Unlike most other lenders, the majority of our loans have interest rate floors set at or near the original levels. So when rates come down, our income does not fall proportionately. In fact, much of the portfolio is already at those floors. Further cuts could actually accelerate early repayments, allowing us to capture prepayment or restructuring fees. And at the same time, lowering rates would reduce the interest expense on our floating rate credit facility, lowering our cost of capital. And lastly, PIK continues to be a nominal portion of our income with less than 2% of our income based on PIK, another one of TRIN's differentiators in the BDC space. We continue to strategically raise equity, debt and off-balance sheet capital to fuel our growth. In 2025, the first quarter of 2026, we closed several co-investment vehicles with leading asset managers, adding liquidity and generating management fees. We also converted a separate vehicle into a private BDC that is actively raising capital. At the same time, we're seeing strong momentum in capital raising efforts for our third SBIC fund, which will provide attractive low-cost leverage and is expected to add more than $260 million of incremental capacity to the platform once scaled. Together, these initiatives demonstrate our ability to thoughtfully grow, expand investment capacity and further diversify our capital base. What we are building is not your typical BDC. Our wholly owned managed fund business oversees third-party capital and generates new income, above and beyond the interest and equity returns from our BDC's portfolio investments. TRIN shareholders benefit from these fees collected by our managed funds business. We are building a platform that can scale while driving up earnings and NAV. We believe our consistent performance is driven by 3 things: our differentiated structure, disciplined underwriting and world-class team. Our 5 complementary verticals, sponsor finance, equipment finance, tech lending, asset-based lending and life sciences allow us to stay diversified while operating squarely within our core competencies. Each vertical has dedicated originators, underwriters and portfolio managers, creating a scalable and highly effective operating model. Structurally, as an internally managed BDC, our employees, management and board own the same shares as our investors, increasing alignment and a shared commitment to consistent dividends and long-term value creation. That structure also supports a premium valuation because shareholders own both the management company and the underlying assets. The management and incentive fees generated through our managed fund business flow directly to the BDC, creating incremental income, enhancing value, fueling growth, all for the benefit of our shareholders. From a talent perspective, we're passionate about fostering a vibrant culture rooted in humility, trust, integrity, uncommon care and continuous learning with an entrepreneurial spirit. Our unique culture enables us to attract, retain the best people in the industry, which fuels our continued growth trajectory. From day one, our objective has been simple, consistently outearn the dividend while growing the BDC, and we continue to execute on that commitment. Trinity is strategically positioned to capitalize on the opportunities ahead, supported by a diversified pipeline, disciplined underwriting, and an expanding managed funds platform. We are not your typical BDC and that differentiation matters. We're building more than a portfolio, we're building a durable, aligned and scalable platform, designed to compound value over time. And as we look to 2026 and beyond, we believe our best days are still ahead. With that, I'll turn the call over to our CFO, Michael Testa, to discuss our financial results in more detail. Michael? Michael Testa: Thanks, Kyle. Our operational and financial performance remained strong in the fourth quarter. We generated $83 million in total investment income, a 17.5% year-over-year increase and $40 million in net investment income or $0.52 per basic share, representing 102% coverage of our quarterly distribution. Beginning in January 2026, we transitioned to a monthly dividend of $0.17 per share, maintaining the same aggregate quarterly payout and aligning the timing of our distributions with the recurring nature of our investment income. Estimated undistributed taxable income is approximately $69 million or $0.84 per share, which we continue to reinvest for the benefit of our shareholders, while maintaining a consistent and meaningful distribution. Our platform continues to deliver top-tier performance, generating 15.3% return on average equity, among the highest in the BDC space. And our weighted average effective portfolio yield remained strong at 15.2% for the quarter despite the declining rate environment. Net asset value per share increased from $13.31 at the end of Q3 to $13.42 at the end of Q4, reflecting accretive capital raises. Full NAV rose 10% to $1.1 billion, up from $998 million at the end of Q3. We further strengthened our capital base by raising $95 million through our equity ATM program during the quarter, at an average premium to NAV of 12%. During the quarter, we also entered into a new secured term loan, extending the maturity profile of our liabilities and further diversifying our capital base. The facility was priced at a spread below our existing revolving credit facility, contributing to an improvement in our overall cost of debt. Additionally, in Q4, we raised $28 million of gross proceeds through our debt ATM program at a 1% premium to par. Our co-investment vehicles continue to enhance returns contributing approximately $3.1 million or $0.04 per share of incremental net investment income benefit in Q4. We syndicated $47 million to these vehicles during the quarter, and as of December 31, we managed $400 million in assets across our private vehicles. Our net leverage ratio remained consistent at 1.18x at quarter end, with strong liquidity, diversified capital sources and capacity across the Trinity platform, we are well positioned to underwrite a robust pipeline, maintain strict credit discipline and deploy capital in high conviction opportunities. To discuss our portfolio performance in more detail, I'll now pass the call over to our COO, Gerry Harder. Gerry? Gerald Harder: Thank you, Michael. Our portfolio continues to demonstrate exceptional strength driven by broad diversification across 22 industries with no single borrower representing more than 3.9% of total exposure. Our largest industry concentration, finance and insurance, accounts for 14.6% of the portfolio at cost and is diversified across 25 portfolio companies. Credit quality remained consistent quarter-over-quarter with over 99% of debt investments performing at fair value. On our 1 to 5 scale, where 5 indicates very strong performance, the average internal credit rating was 2.9, consistent with prior quarters and reflecting the addition of high-quality originations and continued strong portfolio management. Quarter-over-quarter, the number of portfolio companies on nonaccrual remained at 4. During Q4, 2 relatively small debt financings were added to nonaccrual status while 2 prior nonaccrual investments were realized and rolled off. As of December 31, non-accruals totaled $15.2 million at fair value, representing less than 1% of the total debt portfolio. At quarter end, 85% of total principal was secured by first position liens on enterprise value equipment or both. For enterprise backed loans, the weighted average loan-to-value remained consistent at 17%. During 2025, our portfolio companies collectively raised more than $7.8 billion in equity emphasizing the strength of our borrowers and their continued access to capital. Across our 5 business verticals, we're seeing deployment begin to smooth out more evenly, a trend we expect to continue in future quarters. The approximate breakdown of our fundings in Q4 was as follows: 27% to sponsor finance, 25% to Equipment Financing, 20% to Life Sciences, 15% to Tech Lending and 13% to Asset-backed Lending. Looking ahead, our portfolio remains defensively positioned with a strong first lien bias and low loan to values. Our momentum, disciplined underwriting and diversified platform allow us to continue delivering consistent dividends and NAV growth. With a shareholder-first mindset, our team remains focused on building a best-in-class BDC that generates sustained long-term value for our investors. Before we conclude our call, we'd like to open the line for questions. Operator? Operator: [Operator Instructions] Our first question comes from Casey Alexander of Compass Point. Casey Alexander: On most of these calls so far this quarter, we've been talking a lot more defense than offense. But I think Trinity appears to be in a position to play offense. And because of your 5 verticals, your software position appears to be indexed below most of the peer group. So I'm wondering is there an opportunity that is going to be arising for you to take advantage of the turmoil if other platforms are unwilling or unlikely to continue with software loans, is there an opportunity to convert some of those to equipment finance loans where you have a collateralized position on it in front of the enterprise value and thereby earn some better spreads and better risk-adjusted rates of return. Kyle Brown: Yes. Casey, thanks for the question. Yes, we see it that way. I mean, one of the reasons why our percentage of assets in that category is low is because we entered that space really in earnest in the last 2 years. And that's because valuations were significantly too high and pricing was very low. And we decided to enter when we did as valuations started to come down. And we thought that was a great entry point. Our attachment rates could be lower. We could have more aggressive pricing and -- so we are being opportunistic right now. I think, in particular, our kind of sponsor finance, I think, $3 million to $30 million of EBITDA, lower middle market software companies with AI -- that are AI-enabled, it's a massive opportunity. We think there's going to be a lot of consolidation of a lot of these companies that maybe couldn't get to scale. And so with access to the capital markets, with access in our fund management business to private capital, we have liquidity, and we will continue to be opportunistic there. Operator: We'll take our next question from Doug Harter of UBS. Cory Johnson: This is Cory Johnson on for Doug. So I was just wondering, are there any parts of your portfolio that give you any concern or either -- perhaps areas that you've lent to traditionally, but you're a bit more cautious around currently? And are there any verticals that you're particularly looking to lean into a bit more during the time? Kyle Brown: Cory, thanks for the question. So historically, we focus on industries that are emerging that are disrupt -- have disruptive technology, moats around that technology. They are well capitalized. Equity dollars are flowing into that particular industry that has always been part of our underwriting, and that hasn't changed. So our investment philosophy and kind of where we direct dollars continues to evolve and change over time as new and emerging technologies kind of ramp up. And so we'll just continue to see where the market is going, where equity dollars are flowing. And then, of course, with our loans being shorter-term duration and fully amortizing, in many cases, we continue to get paid off where industries are evolving and maybe not receiving as much equity dollars. And so that continues to bleed off in industries that are not getting the attention they used to and new dollars are being deployed into emerging markets. And so that has been our philosophy. That continues to be the philosophy going forward. Operator: We'll take our next question from Brian McKenna with Citizens. Brian Mckenna: Okay. Great. So I know the focus today is continuing to go deeper across all 5 of your verticals. I'm curious, though, and you touched on the deployment environment a little bit, but given the pickup in volatility, there's clearly dislocation across the sector. I mean, would you ever think about leaning into any strategic opportunities here if the environment stays like this. You clearly have a strong and liquid balance sheet. You have access to debt and equity capital. So I'm wondering if this would be a period where we could actually see go from 5 verticals to 6. Kyle Brown: Great question. And Sarah is kicking me no forward-looking statements here. So it's a great point. We are going to continue to be opportunistic. I mean, we are making sure that we have plenty of ample liquidity available to us so that in a market where there is volatility. And I would say most of the volatility that we're seeing so far has a little to do with kind of portfolio volatility, but much more to do with kind of valuation volatility. Our game plan all along has been to make sure that we have liquidity to take advantage of markets when there is less liquidity, less competition, maybe private companies with funds that have reached their duration where we can be opportunistic and jump in there. And so the answer is absolutely yes, and we'll continue to kind of keep our eyes open and be opportunistic as opportunities present themselves. Brian Mckenna: Okay. That's helpful, Kyle. And then one more, if I may. I know growth of the RIA and your third-party asset management business is a big focus area for this year. What are you hearing from these LPs, potential investors in some of these third-party funds with all the focus, all the volatility in and around private credit today. And I'm trying to figure out for Trinity, could this actually be a positive for this business related fundraising, related growth as some of these allocators maybe look to diversify away from some of the larger players in the upper middle markets. And really, as folks look to kind of have more exposure to uncorrelated assets and performance. Kyle Brown: Yes. I mean I personally love the volatility. There has been a massive amount of inflows for years going into just a small number of upper middle market firms and with rates low, they've been able to deploy and deliver decent returns. Well, that's changed. And now we have an opportunity to stand out in a unique way by delivering outperforming results. And I think investors they're going to love that. And we have the ability to generate higher returns, and we've been doing it consistently. And so there's outflows happening. You're seeing in the news often now. I think what we're seeing is more and more interest and more inflows as we continue to build out our fund management business. So I see this as a really great year and opportunity for us to stand out in a unique way in what has been a crowded space for the last 5 years. And so that's what we're hoping to achieve. And as we wrap up kind of SBIC fund and roll into kind of future fundraising, we're really positive on it right now. Operator: [Operator Instructions] We'll take our next question from Erik Zwick with Lucid Capital Markets. Erik Zwick: Just as I take a look at the kind of breakdown of your fourth quarter originations, both in terms of absolute amount in dollar terms more weighted towards the existing portfolio, which I think is just a testament that you selected solar companies to invest in, they're growing and have more needs. Curious looking towards the pipeline today? Is the mix still weighted maybe more heavily towards existing portfolio needs versus new needs and kind of curious also what that might mean in terms of your perception of the quality of new investments that you're looking at, whether tighten spreads or more competition has impacted the attractiveness there? Kyle Brown: Yes. I think over the last year, we've been focused on new logos and new investments, and that has been the majority of our deployment and then I think our portfolio is unique. When we are deploying to our current portfolio, a lot of that is going to be equipment financing facilities where they have multiple draw schedules. And if they're hitting their milestones and growing, then we're building out more capacity or if they're delayed draw term loans, these companies have reached some, again, hit milestones, hit hurdles and earned their ability to receive more capital. So it's all new investments to growing companies, and that's the vast majority of our fundings, and that's not going to change. I don't think you guys want to add anything to that? Ben Malcolmson: Yes. I mean, Erik, our backlog, as you've seen, it's over $1 billion, 1/3 of that is to our equipment channel. So as they build out their manufacturing lines, they're going to fund alongside that. And a small percentage of that $1 billion is subject to legal miles -- legally-binding -- most of it is subject to milestones or additional due diligence. Michael Testa: I think it would be fair to the number of -- the number of new logos in Q4 was relatively small, right? And so I think that's idiosyncratic. So I don't expect that to continue at that level. But we're pleased to deploy to those existing portfolio companies. Erik Zwick: I appreciate the commentary from all of you there. Just turning to credit quality a little bit. It's nice to see that nonaccrual still remain very low and well below peer averages, as you mentioned, did have 2 realizations, but then 2 new credits added to the nonaccrual. To the extent that you can comment on ZUUM and 3DEO. Anything noteworthy in their developments there that have been moved to nonaccrual and then how you are approaching working with them to get them through the difficulties. Ronald Kundich: Thanks, Erik. This is Ron. Yes, those two clients, those are legacy borrowers. They've been in the portfolio for quite some time. They're a bit storied and at the highest level, they got in positions where they stop making payments in Q4. So they're put on the nonaccrual list. We're actively working them as we speak. And we expect to have -- as of today, we'll see what the outcomes are. Operator: We'll move now to Christopher Nolan with Ladenburg Thalmann. Christopher Nolan: Gerry -- I think it was Gerry or Ron. You mentioned that you're seeing portfolio companies raise more capital equity. Can you give a little color? Is this private equity sales or these follow-on investments from existing investors, are these things mostly or tangentially related to AI. Gerald Harder: Well, it's all of the above, right? We've got some portfolio companies accessing the public markets. We've got other portfolio companies raising through their VC or PE sponsors. I don't know that within our portfolio, I would say much is directly related to AI. Ronald Kundich: I mean, yes, I've nothing to add to that. Kyle Brown: Yes. This -- I mean, I think what you're seeing is just what you've been seeing for years now, which is the VC market is robust. There's nearly $100 billion deployed in Q4. And so the companies we're lending to, they're growing, they're raising capital and so it's just -- it's really not a surprise that they were able to raise it with the size of the market where it is today. Christopher Nolan: Yes. The only issue with that point is 70% of the VC dollars going towards AI or AI-related stuff. So it seems to be pretty concentrated. Michael Testa: Yes, I would agree with that, Chris, except if you think about it, right, because our portfolio, we enter at that growth stage, right? So we're entering in businesses that are actively growing revenue base, right, and not sort of new entrants into a space. So I think maybe some of the newer VC dollars are going into AI-driven companies, but companies that were founded, say, 5 years ago that are now in growth stage and are raising equity, that's more what the trend portfolio looks like. Christopher Nolan: Great. And then as a follow-up question, given all the turmoil that's affecting software and things like that, is there any consideration of having the entire investment portfolio valued more frequently than currently is? Kyle Brown: Yes. I mean the answer is no. And I think maybe that would make more sense if you had a significantly larger exposure to enterprise SaaS. Our exposure is relatively low and it's relatively new. With -- in every 1 of those deals already had an AI filter and underwriting filter put into it. So meaning we are looking at these companies and understanding their moat, right, understanding how and what their AI road map looks like and so the investments we've been making, I mean, 2.5 years ago, they called the machine learning, and that's what we were looking at. And now it's called AI, right? And so I think AI will continue to evolve, and it will continue to be tools that a lot of our companies are utilizing, but it's not necessarily changing. And we have not seen within our portfolio any detriment to those companies. Michael Testa: Yes. And I would add, Chris, as Kyle said in his prepared remarks, right, enterprise software is about 9% of our assets. About 3/4 of that is originated by our sponsor finance team, so these will be 18 months or newer cohorts and backed by private equity, where we're in front of their dollars, right? They've got significant cash in these businesses. So from a valuation standpoint, we feel good about where we are in a first lien role there. Now has their equity valuation changed? Probably, right? But from our debt standpoint, we don't see degradation in the debt valuations in that case. Operator: We'll take our next question from Mickey Schleien with Clear Street. Mickey Schleien: Most of the high-level questions have been asked. Just one high-level question on my behalf. We see different ways of defining portfolios in terms of industry segments across the space. I do see your software allocation that you mentioned of, what was it, 9.3%? Is there software buried elsewhere in the portfolio or is that the total amount? Kyle Brown: Yes. I mean the answer is that is the total amount of enterprise software companies that we are currently invested into. Michael Testa: Yes. I mean that's the concentration of where Software-as-a-Service business model, right? Certainly, within other types of portfolio companies, they're going to be using software and AI and machine learning tools. And so yes, there is some embedded inclusion there. But this is something that as we underwrite these companies, we're keenly aware of that they've got to show how this AI revolution is accretive to them and not an imminent threat in underwriting. So yes, pure SaaS, 9.3% embedded elsewhere, sure. I couldn't tell you exactly where and how much, though. Mickey Schleien: I understand. Could you also give us a sense of the proportion of the portfolio that's invested in second lien investments? Michael Testa: Yes, it's 15%. I think that was in the prepared remarks. So we're going to be 85% attached to first lien on enterprise, equipment or both. Mickey Schleien: Terrific. And lastly, was there anything nonrecurring in interest expense for the quarter because interest expense went up more than your debt balances and the incremental debt was at lower cost. So I'm just trying to triangulate that. Michael Testa: Yes, Mickey, this is Mike. There was a tick up in early repayments this quarter. So you'll see there was some acceleration of OID included in interest income. Mickey Schleien: I was referring to interest expense. Michael Testa: On the expense side? No. I mean, I think you'll see that tick up with average outstanding loan balance of our revolver. But yes, on the expense side, it's been -- we actually improved our cost of debt this quarter with the secured term financing. But that's going to be fluctuated. The floating rate is the revolver in the term loan. Operator: At this time, we've reached our allotted time for questions. I'll now turn the call to Kyle Brown for any additional or closing remarks. Kyle Brown: Well, on behalf of the Trinity Capital team, thank you for joining us today. Now we appreciate your continued interest and investment in Trinity Capital, and we look forward to updating you on Q1 results during our next earnings call on May 6. Have a great day. Thanks. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Suzanne Ennis: Good morning, and welcome to Hut 8's Full Year 2025 Financial Results Conference Call. Joining us today are our CEO, Asher Genoot; and our CFO, Sean Glennan. Following the presentation, we will open the line for questions. This event is being recorded, and a transcript will be made available on our website. In addition to the press release issued earlier today, our full annual report on Form 10-K is available at hut8.com, on our EDGAR profile at sec.gov, and on our SEDAR+ profile at sedarplus.ca. Unless otherwise indicated, all figures discussed today are in U.S. dollars. Certain statements made during this call may constitute forward-looking statements within the meaning of applicable securities laws. These statements reflect current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. Certain key risks are detailed in our Form 10-K for the year ended December 31, 2025, and our other continuous disclosure documents. Except as required by law, we assume no obligation to update or revise any forward-looking statements. During the call, management may reference non-GAAP measures such as adjusted EBITDA. We believe these metrics alongside GAAP results provide valuable insight into our performance. Reconciliations of GAAP and non-GAAP results are included in the tables accompanying today's press release available on our website. We will begin with a moderated Q&A session with our CEO, Asher Genoot, followed by a detailed financial review from our CFO, Sean Glennan. Okay, everyone. So let's get started. So to start Asher, fiscal 2025 was a big year for Hut 8. We executed on several important milestones, including the carve-out of our legacy Bitcoin mining business and the execution of our first AI data-center transaction. So what were the guiding principles that enabled us to achieve these outcomes in your mind in 2025? Asher Genoot: 2025 was about rebuilding Honey around capital efficiency and durable cash flow. So 2 years ago, we rebuilt the company from a first principles approach after our merger with Hut 8 and going public. And everything started with the electron. We chase megawatts, not chips, and we want to control the power layer first. And so we don't view electrons as a commodity, but rather strategic assets, and the ABC carve-out shifted us from cyclical CapEx exposure to contracted infrastructure like cash flow. So that was a big theme of last year. We also reallocated capital from volatility to long-duration agreements, and with ABC being able to self-fund on itself on the mining and Hut 8 providing the infrastructure. And then River Bend validated that model. We had a true greenfield development. We didn't convert a site. We developed the site from the ground up by a power-first thinking. It was really the first domino to fall under an AI infrastructure platform. And we focus only on what compounds, power control, scalable campuses, disciplined capital structure and repeatable execution. And so 2025 was about building the right foundation, and now we compound and we scale going into 2026. Suzanne Ennis: In your mind, what specific operational and strategic milestones were prerequisites before the business could meaningfully accelerate? Asher Genoot: 2024, as I shared a little earlier, was about restructuring. We started a company, we merged with Hut 8, and then I took over shortly after. And it was restructuring the business and creating the ability for us to create a foundation. 2025 was about building credibility and so credibility started with our shareholders. In 2024, when I took over the helm, our institutional ownership was sub-10%. We're at approximately 70% today. And some of our earliest shareholders, who invested in us when we started the company 5 years ago, still hold a large percentage of the stock. There's -- we've given shareholders, disciplined capital allocation that they've seen through us in the years and with us in the public markets. And then honestly, transparent execution, we told people what we were going to do, and we focus on getting that done and delivering a fully built solution when we execute, and we intend to do the same. We built credibility with team members. We scaled intentionally. We institutionalized processes while maintaining an entrepreneurial speed. I think that's critical. As you grow, you naturally build bureaucracy, and having the mindset to say, you know what, we will continue to operate as a lean culture, even as we build an institutionalized process. I spent a lot of my time thinking about that in terms of how do we scale at the same rate that we have historically. Credibility with financing partners is really important for us to secure Tier 1 lenders with JPMorgan, Goldman Sachs to lock in nonrecourse project financing. It was harder, but we believe it's the better path. And we believe early investors in us like Coatue, they backed us before the theme was a consensus. And I'm glad that they're happy, right? I meaningfully spoke on a panel the other week, and I'm glad that we're able to drive a good return on their investments. And lastly, credibility with our partners. That's local partners, for example, at River Bend with Entergy, Louisiana, West Feliciana Parish, the Governor's office and being able to deliver on them and our commitments to them when they took a bet on us. And so acceleration only happens when credibility is on, and we would like to compound on that as the years go by. Suzanne Ennis: So you were under a lot of pressure last year to talk about a deal and guide the market to when it would come, what it would look like, but we kept our cards very close to our chest. So can you talk about why we were patient in what we wanted to see come together first? Asher Genoot: So I'll separate my role in speaking to the public markets and our shareholders, and my role in running the operating business and making sure we're able to build that over the long term. In my role in the public markets, I knew what shareholders wanted. They wanted a deal. They want to know that we can build the data center infrastructure platform, and they wanted to see what that would look like and to build the first domino as a part of the platform. For the business itself, we weren't waiting to announce a deal. We were really building a fully locked and executable program. And so for us, we didn't feel like there was a reason to add public market complexity, while negotiating a super complex structure with a lot of moving pieces. We didn't want to just announce a headline. We wanted a complete financeable program. We wanted demand secured, financing secured, execution partners aligned on construction, delivery, engineering, long lead time items. We wanted our power path defined, and we wanted risk allocated properly across counterparties. So instead of guiding towards a deal that's coming, which everyone knew we were working hard at, we optimized for building the right structure for the company in the long term. And when everything was negotiated and aligned, we announced the full framework in one step. And I think that discipline hopefully reinforces the credibility that we're building with our shareholder base. And as we move forward, we're going to be really thoughtful about what we share with the market versus how we think about those impacts to our customers as well. Suzanne Ennis: So our first AI data center transaction generated significant market attention. And how should investors think about this transaction in the context of our broader strategic evolution without over-indexing on a single data point? Asher Genoot: I think this is a fair market deal. It was designed to compound relationships and not to maximize one transaction. And so we structured that market clearing economics. A lot of private deals are getting done, we believe, are done in a similar range. We focus on long-term creditworthy counterparties that can grow with us. And we built to scale the program beyond just the first phase across our customers and across our financing counterparties, execution partners, supply chain partners. And so it took a very customer-centric approach on how do we de-risk execute and give them confidence, we're not optimizing for headlines. We're trying to build repeatable partnerships because that's going to be the secret sauce in our ability to grow and scale. Suzanne Ennis: So let's drill down into River Bend, then. As we look at River Bend even more holistically as well, can you update us on the progress of some of those power expansion discussions with Entergy? And how is construction tracking? Asher Genoot: Look, 2026 is 1,000% going to be about execution and delivery. That's going to be the theme of the market, in my opinion. And so we're super high for its construction right now, it's tracking according to plan. We have tight coordination with Jacobs Engineering and Vertiv. Long lead time procurement is progressing and getting manufacturing delivered. Our customer engagement is really, really high with Fluidstack and Anthropic. We have many working sessions a week, multiple standups on-site in their offices, and really strong collaboration as we move towards delivery. The 1 gigawatt expansion plan at River Bend, the power is there. It's not about if, it's about when. And so now, we're optimizing on delivery time lines and cost scenarios in terms of collateral upfront to make sure the rate base doesn't get impacted. We're working through different structuring paths to maximize efficiency and speed, meanwhile solving for what we're looking for and also what Entergy is trying to solve for, for their constituents. And so the focus now is simple: execute, deliver and derisk. Suzanne Ennis: So how should investors think about long-term expansion opportunity at some of our other sites like Corpus Christi? Obviously, we've been seeing an uptick in pushback with respect to data centers getting done. We've seen new rules proposed out of ERCOT. How should investors think about the expansion? Asher Genoot: Something I've been saying for years is we're building an energy infrastructure platform on digital infrastructure. Our edge is power-first development. And oftentimes in markets that others overlook, and so our Corpus Christi site that we announced, we have an approved interconnect in ERCOT that's increasingly valuable. And it was put in before all of these recent changes in batch studies. It was put in 2023, in a changing regulatory environment, permitted power and transmission access matter more than ever. The interconnect and the permitting matrix at Corpus Christi, I think, gives us a structural advantage to be able to build quickly and get an access to power quickly. So if we were using the traditional developer playbook, we wouldn't have a low redundant data center solution for Bitcoin security as our tool for our underwriting assets. And we probably would have passed on this 1 gigawatt interconnect like many others did, but we didn't because we have multiple use cases of our megawatts as we develop the platform. It's really similar to what happened about 1.5 years ago in Louisiana. When we first talked about the site, started marketing the site, people thought we were crazy. I thought we were early, and I think, we were right. We really validated the thesis of what we believe in terms of the value and the assets in the power and how much you can get at scale in the local regulatory environments that you're building this infrastructure at. And now you see that in Louisiana, you have other hyperscalers like Meta and AWS that I have announced projects there as well. And I don't want the market to forget that alongside our River Bend announcement, we also announced a strategic partnership with Anthropic. And so they're a partner that we continue to look at opportunities with alongside other demand signals that we've built along the last 2 years as well. And so if you look at our development pipeline, we have 8.5 gigawatts across various stages of development. We are energy developers first. We understand grid dynamics, regulatory shifts and permitting realities. And that's what gives us confidence that we can navigate the evolving environments. It's a lot easier to go and build a large-scale data center with the dollars that we're bringing into these economies than it was developing Bitcoin mining facilities when no one wanted Bitcoin in their neighborhoods. And so we've navigated through different environments. We've gone through changing ERCOT procedures. We've done this for the last 5 years since we started the business. And this is just another hurdle that comes along the way as demand continues to increase and we need to continue to show our competitive edge in developing power assets. Suzanne Ennis: So you often referenced first principles and value engineering and innovation as a core edge for Hut. Can you walk us through how Vega delivering 180 kilowatts direct liquid-to-chip at $455,000 per megawatt from scratch and our codeveloped infrastructure design with Vertiv that we're using at River Bend. How do those two things reflect that philosophy and effectively position us for the future? Asher Genoot: We think that no one has fundamentally challenged, how data center infrastructure, I guess, now AI infrastructure is built. And that's our opportunity. We reject the status quo. In the short term, there's a huge supply and demand imbalance that allows us to get deals done from a power perspective, and that's our competitive moat. In the medium term, the differentiation will come from value engineering and the infrastructure stack innovation as supply and demand reach equilibrium. And so Vega is a great example, too, because Vega, we developed 180 kilowatts per rack direct-to chip cooling technology earlier last year when NVIDIA was only at 120 kilowatts per rack. And the reason we did it was to show the markets we could develop that type of infrastructure as you see on the screen here, but most importantly, we were able to develop that for $455,000 per megawatt. And I'd like to tell customers when we show them the site that, that includes the office furniture, the whiteboards and everything and the fit out in the data center. And the reason we were able to do that is because we built the site from a grass field from scratch. There were no legacy constraints. We figured out what areas of the infrastructure stack switch gears, PDUs, the rack conveying structure that we want to vertically integrate, design ourselves and contract manufacturer, what areas of the construction we want to self-perform and manage ourselves? And that's what I'm really excited for. Once we can get the next couple of deals done and we get to a large multi-gigawatt platform in terms of data center, how do we think about the next phase of our competitive moat. And that's around innovation and that's around value engineering. The Vertiv partnership is a good example of our early kind of stages into that. We codesigned the approach, the architecture with them and with Jacobs to show not only supply chain visibility, but how do we take risk off of the site how do we speed the efficiencies of these development, these builds, so we can have them in controlled environments for a lot of the infrastructure that we're building and how do we have long lead time mitigation risk. I had the opportunity to keynote Vertiv's main event earlier in January this year, because we believe that that's where the edge will live in the second phase, as we monetize the power assets in our pipeline in this first phase. And so when demand and supply normalize, infrastructure efficiency will matter more and more, and I think, we're perfectly positioned for that, and it's a story and a theme that people haven't really even delving under the Hut today. Suzanne Ennis: So we're executing on large and complex infrastructure projects that require significant capital and coordination. And obviously, with that kind of scale comes risk. How are we structurally mitigating down that exposure and protecting equity if things don't go according to plan? And how is your experience, how you got here and how you think about things like this? You talk a lot about being a credit guy. Can you elaborate on that? Asher Genoot: So I actually don't talk a lot about being a credit guy. Sean talks a lot about me being a credit guy. He's like, for your age, you're really more of a credit guy than anything else when we talk about underwriting these sites. And I think, the stars that I've gained from living in kind of the business and building infrastructure around Bitcoin has really rooted us in how we think about underwriting opportunities, how we think about building the business long term. We lived through cycles, for example, in 2022, where Bitcoin prices crashes, our only revenue; energy prices skyrocketed, because Russia attacked Ukraine and profits were squeezed and we had fixed debt and amortization payments. I sat as a chair at UCC committees of companies going through restructuring and bankruptcy. We were the planned sponsor of taking Celsius out of -- taking a business segment they had out of bankruptcy and turning into a company. So I learned firsthand meeting with creditors on what could go wrong when you're building in a hypergrowth environment and the music stops thing. And so that sticks with me honestly, forever. And so as we think about these projects, what I always told the team is, if we have the privilege to sign a data center deal, that contract is a liability until we deliver and start generating cash flow, and that's why we're so thoughtful in how we structured this deal. We didn't just want to announce a deal and then figure out the rest afterwards. We want to announce a deal that was able to have financing, execution, manual labor, steel for the buildings, long lead-time items, regulatory permitting, all secured when we announced it to the market. And that was a key part of the timing and the things we want to get done. And so as we think about debt obligations, construction risk, power risk delivery, counterparty risks, those were all the things that we've mitigated through on long lead time contracted cash flows, creditworthy counterparties, structuring nonrecourse financing and really disciplined underwriting as we look at kind of the T's and C's of how we thought about the overall risk framework between us and our counterparties and what we were committing and what we were all receiving. I think durable credit really compounds. If you want to build a business over the long term, it's about compounding value over time and about continuously doing that. And I feel like over the last 2 years, we've done that, and we've already seen the rewards of those actions, and we're really just getting started. Another element that I'd like to note is if you look at our balance sheet, I think we have one of the cleanest balance sheets in the market today. We -- if you think about the debt structure that we have, we have three pieces of paper at the parent level. The first is our Coatue convertible note that we did almost 2 years ago. That's heavily in the money and most likely gets converted out this year. That's the only parent recourse piece of debt we have. The other 2 pieces that we have is 1 coin base, which is recoursed against the Bitcoin only without parent resource, and the next one is the one we have with NextEra at King Mountain, which is recoursed against our equity stake in that 50% JV on the Bitcoin mining facility and does not have parent recourse. And so as we really think about it with Coatue heavily in the money, we have no recourse debt on our balance sheet. We're bringing on great financing in terms of the projects, but as we think about growth, we're thinking about growth in credit really, really well to manage through kind of these markets and hopefully be able to grow at a faster and faster rate. Suzanne Ennis: So Sean is going to walk us through our results shortly. We're going to do a little Q&A with him. But let's touch on a few areas in our results. G&A, for example, what drove that this year. Asher Genoot: Stock-based compensation aligns everyone with the long-term and long-term value creation. So at the company, every single person has equity from our site-level team members to the CEO, myself and the CFO, Sean. So real ownership culture and skin in the game is something we've optimized from day 1 and continue to do so even in the public nature that we have. And so total G&A was about $122.8 million this fiscal year compared to $72.9 million. Stock-based comp was around $57.8 million versus $20.8 million in the year prior. And that has to do with a lot of the upscaling that we had in the investment in our engineering, development, institutional infrastructure team. The cash SG&A only rose from $52 million to about $65 million in the year, and that includes all of those transactions we did from the carve-out of American Bitcoin to the deals that we've done. And so our belief is that we're building the team and investing in the team for the future financial profile of where we're going, a lot of the dollars we're spending are on growth, not on managing the current business, not on even executing River Bend, on the growth of all of the sites that we're looking to execute and commercialize. And we don't believe you can scale a multi-gigawatt infrastructure platform without building and training that team in advance. And so we're rightsizing for where we believe the company is going. Suzanne Ennis: So before we wrap up with you and move on to Sean, is there anything we haven't covered that you want investors to keep in mind. Specifically, there's been a lot of internal discussion around moving from simply building infrastructure for AI, to actually building infrastructure with AI. How are you thinking about that evolution? And why is it strategically important for us over the long term? Asher Genoot: Yes. We're sequencing the business pretty deliberately. And the next layer of our advantage is technological convergence. So Phase 1, which is about 1 to 2 years in my mind, is lock in the right deals, establish durable counterparties, build the right financing framework and monetize our power capabilities. Phase 2 in the 2- to 5-year range is value engineering the infrastructure stack, driving cost down per megawatt, improving speed, efficiency and repeatability. And then Phase 3 is more in the 5- to 10-year range, which is be at the forefront of how AI and robotics reshape infrastructure development. We're not just building infrastructure for AI, we have to be building infrastructure with AI and leveraging it to change in how we think about charging our innovation cycles. So we're deeply thinking about how AI integrates into our business. From a workforce perspective, increasing productivity across the organization, and from a design and engineering perspective, I mean hundreds of thousands of engineering hours go into these builds. AI is going to fundamentally change the way that, that work can be done. We can model, simulate and optimize every variable for capital is deployed. And in the build process, we're in the early stages of exploring robotics and automation embedded directly into construction workflows. This is not a distraction. It's an awareness of where the technology curve is heading and we intend to meet it at the moment of real inflection when it meaningfully changes how infrastructure is built at scale, and that will be the next compounding layer of advantage after the first two, I've spoken about earlier in this call. Suzanne Ennis: That's super exciting. So with that foundation set, 2026 shifts us from prove to scale, right? So what should investors look to from us moving forward? Asher Genoot: 2026 is about execution and delivery, full stop. Converting the pipeline to additional contracted revenue, advancing power origination, delivering River Bend on time and on budget, maintaining capital discipline, no trend chasing. The foundation is built. Now we execute and we scale. Suzanne Ennis: All right. Now let's move on to Sean. Sean. So let's walk through the results. Maybe we can start with what defined fiscal 2025 performance? Sean Glennan: Yes. Thanks, Sue. I think there's 2 main things that really define fiscal 2025. First, I want to talk about margin expansion and operating leverage and second is bottom line results. On the first topic, revenue grew 45% to $235.1 million, driven primarily by our compute segment, while cost of revenue grew by 24% to $107.8 million. This resulted in gross margin expansion from 47% to 54%. I also want to highlight sequential Q4 2025 over Q4 2024 results where revenues grew by 179% and gross margin expanded from 36% to 60%. I think each of these data points highlights and is indicative of enhanced operating leverage in the business. In other words, the foundation is sound and what we've set in place will compound over time. Next, moving to bottom line results. Net loss was $248 million, and we had an adjusted EBITDA loss of $135.4 million, compared to net income of $331.4 million and adjusted EBITDA of $555.7 million in 2024. importantly, I think to note, that swing was largely due to a $220 million primarily unrealized mark-to-market loss in 2025 of our Bitcoin stack versus a $509.3 million gain in the prior year. Suzanne Ennis: Now let's walk through segment by segment. Can you walk us through the power digital infrastructure and then compute segment results? Sean Glennan: Absolutely. In our power layer, revenue was $23.2 million versus $56.6 million in 2024. Cost of revenue declined to $20.5 million from $21.5 million in the year prior. The revenue decline reflects the termination of our ionic digital agreement in managed services. This was somewhat offset by increased revenues in our Far North segment due to increasing power market tightness, which I think that power market tightness is kind of some of the fundamental underpinnings of the business. So it's showing up in other places, too. On digital infrastructure, revenue was $9.6 million compared to $17.5 million last year. Cost of revenue declined to $8.9 million from $15.6 million last year, and margins improved sequentially as Vega entered commercialization, and we transitioned to colocation-based payments from American Bitcoin. And finally, compute. This was the real growth engine. Revenue more than doubled to $202.3 million from $80.7 million the year prior. Cost of revenue increased to $78.4 million from $45 million in the year prior. And this was driven by infrastructure upgrades, higher deployed hash rate and a full year of steady-state operations of Highrise AI, which added $7.4 million year-over-year. I think important to note also from -- as we talk about operating leverage, here, segment margins expanded from 44% to 61%. Suzanne Ennis: Now let's get into capital structure and strategy. How are we thinking about our capital structure evolution? Sean Glennan: Yes. I think 2025 was an incredibly important year for capital structure evolution. Spinning out our Bitcoin mining business through our American Bitcoin subsidiary, shifted us from a very high cost of capital, high CapEx cyclicality business to a much lower cost of capital business with a lot more focus on infrastructure, low cost of capital lower, risk and longer duration. Suzanne Ennis: Okay. And then heading into 2026, what are some of your top financing priorities? Sean Glennan: Yes. I think about this is what I spend most of my days thinking about. And as I think about looking into 2026, there's four main things I'm really focused on. One is protecting shareholder value through disciplined equity use. Two is minimizing enterprise risk; three, diversifying liquidity sources, including private markets; and then four, maintaining strong balance sheet that allows for strategic flexibility and a path towards an investment-grade rating. I think one thing that's important to note is we continue to evaluate all financing options and we say no to a lot of things. We're not just trying to get capital wherever it's available. We're looking for the lowest cost of capital. And I probably got 10 things across my desk every day, most of which I say no to because we want to continue to drive that and be innovators on capital structure rather than just following the back. Suzanne Ennis: So then, to wrap up, how would you, as the CFO, summarize our position heading into 2026? Sean Glennan: Yes. So I mean, it's amazing to think relative to when I joined 1.5 years ago where we are entering 2026. We have greater scale, both from an exahash market cap and future cash flow position. We have improved margin durability, which I think the numbers speak for themselves. We're declining cost of capital. And I think the project financing we're working on with JPMorgan and Goldman Sachs is indicative of that. That's the lowest cost of capital that anyone in our sector has raised ready to support AI infrastructure growth to date. And then I think as I kind of mentioned in your first question in the section, a capital structure that's aligned with long-term value creation. And I think those are the things that are really kind of setting us apart, and it's very exciting to be in this position, and we feel grateful to our shareholders for entrusting us with their capital as we go into 2026. So with that, I think we'll go into Q&A. Suzanne Ennis: Yes. Let's go into the Q&A here. Asher Genoot: Well, Sue, looks at some of the questions, we want to shake things up this earnings a little bit, go on a video style, so we'll get feedback from our investors if they enjoy today or not. We're also if we keep the video format, we'll -- I want to be able to hear people when they ask questions, and we talked a bit about that. And as we set-up this first structure, Sue is going to kind of read the answers that people are submitting, we weren't able to with the platform today to be able to allow for that for today. But if people like this current format, then I really want to hear them and see them if possible as well. So we'll look at that on the next earnings calls. But hopefully, you guys enjoy the new shake up here and approaching this from first-principles as well. Our goal was to use this call to have you to really get to know us, get to know how we think about the world, how we think about problem solving. You guys can look at our financials and our business through our public filings, but the purpose of this call, when we really broke it down from first principles, was speaking to our shareholders in very direct honest, transparent way, and we hope this new format helps drive closer to that as well. Suzanne Ennis: Okay. So let's get into it. So from Greg Miller at Citizens, will the company be defining what portion of its pipeline will be allocated to Bitcoin mining and what percentage will be allocated to HPC as the 2 represent very different value propositions? Asher Genoot: That's very fair. If we look at our existing capacity under management in the gigawatt that we're managing today, we have 300 megawatts of power generation that we've told the markets that we're selling to TransAlta, and we have -- that we've closed on that transaction, and we have 700 megawatts of compute that currently support American Bitcoin. In our capacity under construction, we have 330 megawatts of utility that's River Bend Phase 1. And then we have a multi-gigawatt pipeline as you go further and further up the development cycle. And so currently, the core focus is converting those sites for AI use cases. Having Bitcoin as an alternative use case, allows us to continue to develop confidently in building the substations on the land that we acquire in interconnections knowing that we'll have a consumer there in all scenarios rather than just have risk development capital. And I think that's a unique edge that we have. So our key focus around our current full development pipeline is around AI utilization and development, and we're seeing more and more focus on just power at scale and location really being a lower and lower factor in that as well. And so as we talk about all of the sites that we're developing right now, the primary goal is development around traditional data centers for AI computing. Suzanne Ennis: Okay. So George Sutton from Craig-Hallum, can you give any detail behind the $163 million deposit for future sites? Asher Genoot: Yes. Sean, do you want to jump into that? Sean Glennan: Sure. So as we look at kind of developing some of the future sites, we have lots of land options, and we're also procuring long lead time equipment at some of these sites. So I don't want to get into the detail as to how much dollars are for which sites. I think that will give away some of our secret sauce, very competitive industry, but effectively, that's kind of what the -- those dollars are allocated towards. Asher Genoot: And one key thing to know on how we approach development, historically, and moving forward, when we think about risk dollars out there, whether it be land options or they'd be developing, we've historically been very, very low upfront until there's real feasibility, right? So a big portion of those long lead time items are malleable pieces of equipment that we can allocate specifically around high to medium voltage breakers at the substation, different transformers once we set things down to 34.5 kV. And so malleable infrastructure that we can allocate across multiple campuses. And then the investments we do at the early stage of development are really lower in terms of development, unless it's a kayak payment or an infrastructure upgrade as we locked in the power. And as we see collateral payments kind of increasing, we're also looking at other kind of project level financing and balance sheet borrowing that we're looking at doing to drive down our cost of capital as well, but we're very, very thoughtful in what dollars we're spending, what's truly at risk and what's malleable. Suzanne Ennis: All right. So from Brett at Cantor, you guys effectively set the market with your Fluidstack and Anthropic deal. Can you talk about how pricing has changed since then? Do you think the next deal will see a step-up in economics? Asher Genoot: I don't think we set the market. I think the majority of transactions in the market happened in the private markets. Everyone is kind of focusing on the public companies, but feels like 80% plus of the transactions are happening in the private markets with kind of the private equity funded development platforms on the data center side. And so I think our deal was market. It was middle of the fairway, and it was structured appropriately. And so as we continue to talk to customers about the deal and deal economics, we think that these are kind of market terms in the private markets, and we've held ourselves to the standard of a blue-chip data center development company. I think, I've brought in the partners to validate that thought process and that approach as well. Suzanne Ennis: Okay. So from Stephen Glagola at KBW, a recent job posting pointed to a potential scale up of the Highrise AI GPU platform from roughly 1,000 GPUs to 20,000 GPUs. Can you provide more detail on your growth plans for the Highrise AI cloud business? And how do you envision scaling that trajectory. Asher Genoot: So Hut 8, the parent company builds in the power layer and build in the digital infrastructure layer, front meter, behind-the-meter interconnects, obviously, we own power generation, and we build digital infrastructure on top of that, i.e., the River Bend campus we announced. In a lot of these deals, there's an opportunity where we can fund the compute as well. The funding compute and ASICs on the American Bitcoin side GPUs on the AI side are fundamentally different cost and risk profiles, which is why those businesses are separate companies, ABTC, being a public company now on its own and then Highrise still being a private company that is growing. And so what's really unique about Highrise, we've been pretty quiet about it because we've been building the foundation of that business. It's not just the story is and we're managing a little over 1,100 GPUs, the story is we built a cloud network. We built a software stack. We offer bare metals. We offer multi-tenant solutions. And we announced this in one of our press releases in Highrise, but the current CTO of that business ran AI in the IDF and was there for a decade and half. And so as we look at different opportunities, there are opportunities in these data center deals where Highrise can come in and provide the financing around the GPU stack, provide the services and technologies that I can build on top of the chip stack as well. And so Highrise is our new cloud business. It's one that we haven't spoken much about because as everyone knows, we're much more about talking about things when they come into fruition rather than what's on the come. But across the whole board, we are building the company and hiring people to the place that we're going, and that's where you see a lot of that investment in talent into the business that we're going to be building and scaling into. Suzanne Ennis: Okay, so another one from George here that I really like because I don't think we talk enough about this in the market. So Anthropic is the major -- is a mega disruptor in the space. How important is our existing relationship with them as part of the Phase II and Phase III opportunities? Asher Genoot: They're great, right? And they're very open to thinking about things from a first principles approach. It's not a company where we have to do it this way just because. It's a company where we can talk about what are we trying to solve for and what is the best way to be able to solve for that. So if you think about Phase 1, give additional capacity, get additional power converted for our customers. Phase 2 is how do we drive down costs with really thinking about value engineering. And value engineering is 2 ways. One is, how do we engineer and more efficiently drive the cost down for our existing infrastructure stack. The second is, how do we think about the actual demands that a customer has, which is also why we have Highrise to understand the full stack from electron to compute, from megawatt to token. And so by understanding that, we can more optimize the infrastructure to support for really what's needed, and we can have open discussions and discussions with Anthropic have been great in terms of solutions and malleability over how things are built to get to the final outcome. And the last one in terms of AI and robotics, obviously, that they're at the forefront of building the technologies that support all industries. And so we're excited to continue to build those relations and compound, but I'm really, really excited for Phase III. We have to build Phase 1 and 2 to have the privilege for me to work on Phase III, but this year will be focused on Phase I and really scaling up our data center platform. Suzanne Ennis: So I've got one here from Kevin Dede at H.C. Wainwright. Trump in his State of the Union last night asked the big tech -- asked big tech to commit to building their own power. How do you think your customers, partners and Hut 8 react -- will react to that should it become law? Asher Genoot: It's a natural progression of where things are going. If we think about the overall sentiment and what should happen right now is when a data center is built that should be net positive to the community and the environment and the actual energy grids that you're impacting, right? And so when we think about sites like River Bend or Corpus Christi, we pay for the system upgrades that pull the power to where we are. We commit to the capacity on the energy side. And so that's kind of table stakes in my mind in the world that we're developing today and smaller utilities have gotten infinitely more sophisticated on that which is or to see kind of collateral coming in. I think in some places, it's getting overindexed and will kind of come back to the mean. But in general, that's the general sentiment. As power generation gets constrained as more and more demand comes on to the grid, I think what you'll see more often is not island generation or bridge generation, where you kind of wait for the interconnect, but when you're building a load asset, you want the redundancy from the grid. There is value in that. When building a generation asset, you want the grid and the demand that's in the grid for the power. And so I think more and more what will happen in the markets, is people will bring load and people will bring generation. And so we're trying to kind of have a net equal impact into the grid, but interconnect that all in the long term. And so then you'll have power generation increasing in the grid, you have load increasing. A lot of that will be financed and capitalized through the demand of the end customers and users and we think that's the best way to be able to scale and compete in the AI race on the global markets. Suzanne Ennis: So from John Todaro at Needham, can you walk us through where you stand on the OSA negotiations with Fluidstack and more broadly, give us an update on construction cadence. How many data falls in the initial phase? And are you seeing any supply chain or contractor bottlenecks? Maybe we can talk about where we're at as well on the procurement side at River Bend. Asher Genoot: Sure. Happy to do so. When we announced the deal, everything we locked in from people, contractors, long lead time items, equipment. And so all of that was locked in. There was nothing open when we announced the deal at the end of last year. On the delivery and the execution itself, as we mentioned, and we guided towards. When in the beginning of Q2, we'll have the first data center coming online, and then we'll have a data center coming online every 60 days thereafter. There are 4 data centers in this data hall. And so as we think about the actual construction right now, everything is going really, really well. People are very excited. There's a lot of local talent in Louisiana because of the heavy industry that was there before. And so that's really, really great. Jacobs has been a great partner. Vertiv is fully cranking on the long lead time items that they're bringing and procuring for this project. So overall, from a constructability and delivery perspective, feel very, very good. And we gave ourselves a healthy time line to deliver this as well. And so we're not crunching every single thing. We put buffer in. We hope to deliver earlier if we can. And so that's how we've really developed this program. From a financing perspective, things are going very well as well. We announced that we're going to target 75% -- 85% LTC at a SOFR plus 225 rate. We've recently been able to improve that to 90% LTC at SOFR plus 240 to account for the increased loan-to-cost ratio. But we've been able to get more project financing on the projects and something that Sean and I like to talk about, even when a deal is done, we still like to further improve and figure out how to make it better. And so overall, in terms of delivery, feeling very, very good. We're currently in active negotiations on the OSA in terms of operations and delivery, but we have some time until we actually are operating in the campus so working through those kind of contracts now as well? Suzanne Ennis: So maybe just to quickly piggyback on that from one of our new friends, Robert Boucai at Newbrook. In considering future deals, do you require credit enhancements as with Google on the Fluidstack deal? Or would you be willing to have one of the LLMs be a counterparty? How much of a gating issue would this be? Asher Genoot: I think overall, it's really thinking about our overall platform that we're building and the exposure that we're taking on investment-grade counterparties on non-investment-grade counterparties and really everything kind of in between. And so as we think about developing our platform, we want to make sure that the cash flows that we have and that we're projecting to be able to fund the growth and the expansion of our business are durable and are reliable. And obviously, that affects cost of capital and financing and LTCs as well. And so as we look at future growth opportunities, we're obviously optimizing towards investment-grade counterparties, but it's really about, like any portfolio anyone has including all the shareholders on this call, it's about risk allocation, what percentage of your platform is on high growth, high-risk companies that have kind of a ton of upside. What percentage is on stability on the platform as well. And so I think for us, it's not binary. It has to be this or that, but it's around risk allocation. And obviously, as we've kind of told and shown in the market, we have a heavy lenience towards folks with investment-grade counterparty and as we think about financing on the debt and the equity investments as well, but there's always a place in the portfolio for high-growth companies as well, but it's all about percentage exposure that we have to them. And every time we announce a deal, we'll walk through the thought processes in those. But right now, we continue to be focused on investment-grade counterparties that we're financing towards. Suzanne Ennis: Okay. So a question from Mike Grondahl at Northland. Can you describe the demand environment and how it's evolved over the last 90 days for HPC? Obviously, there's a few new dynamics that have transpired in the market. So how has that evolved in terms of your guys' customer conversations? Asher Genoot: It's really interesting. I mean, last year on the same time, this DeepSeek news came out, right? And everyone was scared that the demand has gone and the markets were scared. The Microsoft has traded down a lot. But the reality is at that time, we were still seeing the demand and demand signals. And you saw a heavy uptake towards the end of the year. I think right now, especially with the Agentic AI and a lot of -- I mean, the Mac Minis are sold out across the U.S. If we look at Highrise, the utilization on our cloud is at record highs. And so the actual applications and use cases are continuing to grow and increase in pickup. I think that will result in the compute that's needed. And so where we are today is also a little bit different than where we were last year. We have much deeper relationships with a variety of counterparties because of the last two years of relations that we built. We've gone through a lot of negotiations on the actual contracting multiple counterparties. We've gone through engineering design drawings for months with multiple counterparties. River Bend wasn't one counterparty that we worked with for 1.5 years. We went through multiple iterations with multiple counterparties, and we had one that got to finish line first. And so those relationships are stronger than ever. And what's nice from where we are today and the credibility that we have as well is, we can have a lot more frank and meaningful discussions around, what is their capacity demand over the long term? How do we play into that? How do we support them? And so for us, honestly paying less attention to the stock market these days and spending way more time on the customers, what are their demands and how do we build the competitive moats, because that is what's going to drive our business and grow and compound over time. But I think all the noise you're seeing, we're seeing really the exact opposite. The demand is still there, demand is still strong, people are still growing. You see that with some of the announcements like yesterday with Meta and AMD in terms of additional capacity. They just announced a deal with NVIDIA for that. And so overall, I think demand is healthy. A bigger theme that we're seeing that's real is that power is becoming more constrained, right? You're seeing every utility, every transmission operator trying to go through and restudy and change the approach that they're going in terms of the study. And I think that's healthy as well because you have so many developers that may not have the balance sheet or the capabilities to actually develop sites, and all they're trying to do is lock in an interconnect and then flip it to someone else to buy it. We get -- Sean talks about getting 10 inbounds on financings, probably get 100 inbounds on sites for us to look at from an M&A perspective. And so clearing out some of that FUD, I think we'll actually make the queues better. And then also from a development perspective in terms of land development, you're seeing some places that don't want this in their backyards and some places that do. And so I think you're seeing consistent strong demand on the demand side, and then I think you're seeing kind of volatility on the supply side in the markets, which make us excited. Suzanne Ennis: Yes. Agree, we support any sort of initiative that helps trim some of the fat in these queues, and also education is key in some of these new markets where we're seeing stakeholder pushback for data center development. Okay. So from our friend, Greg Lewis at BTIG. He wants to know what I'm sure a lot of people want to know is any update on the power that is under exclusivity and steps and processes needed to move that into development? It doesn't seem like we saw a lot of that happen in the current queue. Asher Genoot: Yes. Currently working through it, we obviously have a pretty big amount of capacity in development right now to trying to move that into commercializing and signing those agreements and signing them, because if you think about our stages in the pipeline, we go from capacity under diligence, which is we have a large energy origination development team, and they're out there, they're hunting, they're negotiating and they're looking at opportunities that make sense for us. Then we get into capacity under exclusivity. That's where we're investing more dollars from a team perspective and legal dollars perspective as well. In those scenarios, we have exclusivity, land options. We're investing into legal resources, preconstruction resources, high-voltage transmission engineering resources. And then when we get into capacity under development, that's when we're actually buying the land or locking in the kind of contractual agreements on the power and putting in the kayak payments or any collateral obligations. And then from there, we go into commercialization, construction and then ultimately, management and operations. And so I think we have a strong amount of megawatts over 1 gigawatt in capacity under development right now that we're working on commercializing and the capacity exclusivity will kind of be following that as well. And so if you think about timing, capacity and exclusivity, we have an exclusive access on that opportunity, whether it be the land, the power or both. And in that scenario, like why go and spend the money if you still have option value there and work on commercializing the things that you already spent money on. And so when you think about those and how they interplay together, that's kind of a big part of it. And so from a timing perspective, it's really getting more sites commercialized and having that funnel continue to grow and increasing the capacity under exclusivity from the capacity under diligence. And so as we continue within this year, there will be a lot more conversations about the pipeline, how we think about conversion, more transparency into the sites that we have under capacity under development as well. And so we're excited as we mentioned, we're building a robust energy infrastructure platform in the digital infrastructure world and River Bend, again, to remind everybody, was a site that started at capacity under diligence and went -- made it all the way through to capacity under construction within the last 2 years during the theme and during the market rush of power. This was not a site that we converted from the Bitcoin mining days when it was less competitive to get power. And so we've shown that we can do it once, and we will continue to do it. Suzanne Ennis: Thank you. So from our friend, Chris Brendler at Rosenblatt Securities. On funding River Bend CapEx, any early read on the project level financing deal given the recent volatility in the market? And how do you view your Bitcoin holdings as a potential source of funding for the equity portion? Asher Genoot: We feel very good. So the equity as of right now is already fully funded, because we've had to fund the projects, our deposits with Vertiv and so forth. So when the project financing actually completes, we're going to get a multi-hundred million dollar cash out of the transaction, then we'll fund our 10% on an ongoing basis. And so as we mentioned, we went from 85% LTC to 90% LTC on the financing. We're pushing aggressively towards closing. JPMorgan and Goldman are committed. They wouldn't have given us quotes and put us on the press release when we announced to see it was just an idea. And so we're very excited, we're very committed. And we have connectivity at the highest levels. I've had lunches with the CEOs of the firms. And so I'm very, very excited that we have partners, not only to finance this project, but on go-forward projects to replicate this program on a go forward. From a Bitcoin perspective, our balance sheet and our Bitcoin on the balance sheet in the beginning of last year was core to us executing on throughout last year. Being able to tell customers, don't worry about our ability to finance with this amount of Bitcoin on the balance sheet was really important. Where we are this year, Bitcoin on the balance sheet is not -- it doesn't -- it's not the focus. It doesn't matter. It's just like asset on our balance sheet. And so the reality is we're going to remove Bitcoin exposure on our balance sheet as we move forward. And how we do it is what we're focused on right now. And our exposure will be through the equity ownership that we have in American Bitcoin. And so the Bitcoin on the Hut 8 balance sheet is not going to be a thing that we continue to hold for the long term. And the beauty is we're able to hold that exposure through the equity that we were able to create in American Bitcoin for incubating and building that business. I think we're really good at creating value and our focus is how do we drive down cost of capital and continue to create value by building businesses and what we're excited for building Hut 8, building ABC, building Highrise. And so that's a big change in focus on kind of the importance of Bitcoin on our balance sheet and our perspective on it on a go-forward basis. But River Bend, currently, from an equity portion, we don't need any more equity funding. We've already funded the projects. We're actually getting cash back once the financing closes, and hopefully, we can talk about it in our upcoming earnings call. Suzanne Ennis: Great. Okay. So let's talk about, we touched on this a little bit. But why don't we talk about, where is the -- I'm just trying to find where Brett was asking us a question. Okay. So it seems like co-locating generation on-site with data centers is going to be more prevalent. We did touch on this a little bit. What are we doing specifically to participate in this trend? Asher Genoot: You're saying -- sorry, repeat colocation data centers, is that traditional colo you mean instead of single kind of campuses? Suzanne Ennis: No single tenant campuses, yes. Asher Genoot: Sorry, repeat the question. Suzanne Ennis: It seems like co-locating generation, single-tenant campuses on site with -- yes, is going to be more from doing to participate in this trend. Asher Genoot: So let's use River Bend, that's a perfect example. The Entergy Louisiana has given us a plan in terms of when they can deliver power, right? And we're talking about the full gigawatt and there -- they want to build generation added to their rate base, have us be able to make sure we commit to it, so they're not taking spec dollars at play here. We're having discussions around them of maybe we can bring the generation faster to the site to drive the full gigawatt at a faster time frame, right? We don't want to wait 5 years, what if we brought it in a lot earlier? And so as you think about the sequencing, what percentage of the gigawatt can we pull from the open markets in terms of capacity, and what percentage do we have to build that new generation, right? And so that's first, not -- the 4 gigawatt is not treated as the same. And so the discussions we're having is how do we think about bringing generation to this campus. We have a lot of land. We have the ability to scale to almost 3,000 acres. We have access to pipelines and the ability to generate and to produce. And so as I mentioned in earlier Q&A or in the actual fireside chat, bringing generation with load, we think is going to be a bigger part of the story, a bigger part of the development. And luckily, we have those capabilities in-house. We manage 4 natural gas power plants with Macquarie as a partner, and we not only manage those, that's another asset. Those were 4 assets that we bought out of bankruptcy. We turned around. We signed long-term offtake agreements with the utility in Ontario, and we sold them to TransAlta, which is a large utility in Canada. And so we have the expertise in-house. We're continuing to build and compound on the expertise we already have, but it's going to be a bigger and bigger part of the story. I don't think it's going to be around island generation. I think it's going to be around bridging and having load and generation interconnected to the grid at your campuses. Suzanne Ennis: Okay. So we are coming up on the hour here. So we're going to do one more... Asher Genoot: We have like 31 questions in the queue. So I think we'll reduce that number when we get people to come on stage with us next time. Suzanne Ennis: That's right. So we talk a lot about the importance of our energy origination team of diversifying the pipeline of not being overweighted to a single market. Can you, and maybe, Sean, talk about some of the areas where we are still finding pockets of opportunity. For example, in a previous conference, we talked about how we were interested in studying a development in Pennsylvania. Maybe just talk a little bit about sort of some of the areas that we're looking at well outside of ERCOT. Asher Genoot: We're looking across the whole U.S. Every single area in the U.S., as we mentioned, power and land in a regulatory environment that allows for building this infrastructure at scale are the key pieces in building, right? Fiber has been less of a bottleneck. We've been able to bring fiber to a lot of the campuses that we're developing and that we're building. And so it's following the power. It's taking a first principle approach to where is their power. Using River Bend as another example because I think it's our first fully kind of vetted case study, and we can do the same about future sites that we announced. But that project was around the transmission lines. That project was around the generation near that campus. Then we came together and we pieced multiple pieces of land that were held for generations as kind of hunting properties by people, and we built this 3,000 acre opportunity to go build a large-scale mega campus. And so we're looking at those similar characteristics as we look across the whole United States and we look at its ability to scale power, its ability to build with a friendly regulatory environment that wants this project there and see the impact and the benefit that we can bring, a place that we can have talent to actually execute and build these projects and do so with the speeds that we're looking to build them at. And so our team -- the reason why we're scaling is we're continuing to increase the breadth and the depth across our energy origination pipeline across the full United States. And there are some areas that are more complex than others, obviously, that aren't kind of traditional data center markets. And so we're kind of focusing on Tier 1, Tier 2 and Tier 3 markets. and there's a little bit of a different allocation of priority risk capital that we put on to each of them, based on our confidence level of commercializing them. In some sites, we know that we'll always have kind of another market through American Bitcoin has a demand of a captive consumer that we have with the power where the energy prices work. In other areas, we know that this is primarily built and there is no backup option for developing this campus. And so overall, we're excited. I think, we're one of the first to talk about our development pipeline and our energy pipeline because that was a core focus. And now we're 2 years into that journey. We've been able to take one project fully through the getting to almost near the end of the process. Now, we got to get it to capacity under management, but we'll start having more sites kind of coming through that pipeline. And it takes time to develop these projects and you're starting to see some of those come to fruition as they move down the pipeline as we start talking about them more. Suzanne Ennis: Awesome. So... Asher Genoot: More projects -- similar, I guess, to River Bend, we've had a lot more projects get into the press than we've shared with the markets because of all the local zoning and panels that we do. So you guys will see that as well if you keep your news alerts on Hut 8. Suzanne Ennis: Okay. So we've got one minute left in this call. Maybe any closing thoughts, Sean and Asher that you want to leave our audience with. Asher Genoot: I've talked a lot, Sean, why don't you close this out? Sean Glennan: Yes. Happy to. Thanks, Asher. Look, I think Asher said a lot of it, but this is a year about execution, this is the year about growth and scaling the company. We're excited about the foundation we've built. Like when I started, I told Asher, I felt like where we are now is inevitable. And I feel like the growth of the company is inevitable. We put it together a really good development business, a really good funding mechanism, and we're looking to continue to repeat and compound that over time. So we're excited to have you along as shareholders. We hopefully do believe we've done you well so far, and we look forward to continuing to do so in the future. Suzanne Ennis: Thanks, Sean. Okay. Operator, you can close the line. Thank you, everybody.
Operator: Ladies and gentlemen, good morning, and welcome to TIM preliminary 2025 Results and 2026 Update Presentation. Paolo Lesbo, Head of Investor Relations, will introduce the event. Paolo Lesbo: Ladies and gentlemen, good morning, and welcome to TIM Full Year 2025 Preliminary Results and 2026 Update Presentation. I am pleased to be here with the CEO, Pietro Labriola; the CFO, Piergiorgio Peluso; and the rest of the management team. We will start with Pietro, who will outline the key messages and strategic highlights of today's presentation. We will then review our 2025 operating and financial performance before addressing selected topics that are particularly relevant to understanding the evolution of the group. Finally, we will provide an update on our 2026 targets and priorities going forward. As usual, we will conclude with a Q&A session. Please refer to the safe harbor statement included in the annex for details on the reporting perimeter. With that, I will now hand over to Pietro. Pietro, the floor is yours. Pietro Labriola: Thank you, Paolo, and good morning, everyone. 2025 marked another key milestone in our journey to make TIM a normal company, operational discipline, strategically consistent and financially predictable. We delivered on our guidance for the fourth consecutive year, reinforcing our track record of execution and credibility with the market. At the beginning of the year, process investment in TIM strengthened our shareholder base, enhancing governance stability and providing full alignment behind the group's strategic direction. We also reached a positive outcome in the 20-plus year long legal dispute regarding the 1998 concession fee, fully in line with our expectation and removing a longstanding source of uncertainty. TIM shareholders recently approved a significant overhaul of our capital structure. This will simplify our equity and increase strategic and financial flexibility going forward. Importantly, the 2026 guidance and growth trajectory presented last year are confirmed. Looking ahead, we plan to host a Capital Market Day in the second half after the summer once we have full visibility on several key developments, including the outcome of the savings share conversion, the expected approval of the rent sharing agreement with Fastweb plus Vodafone and the definition of the full synergy perimeter with Poste. Let's start with the full year results. In 2025, group delivered solid growth across all key financial metrics, confirming the strength of our operational execution and financial discipline. Revenues increased by 2.7% to EUR 13.7 billion, supported by continued commercial momentum across our core businesses. EBITDA after lease grew by 6.5% to EUR 3.7 billion, reflecting operating leverage and tight cost control. CapEx remained disciplined at below 14% of revenues amounting to EUR 1.9 billion fully consistent with our investment framework. As a result, EBITDA after lease minus CapEx increased by 17% to EUR 1.8 billion translating into stronger cash generation. Equity free cash flow after lease reached EUR 0.7 billion, further reinforcing our deleveraging profile. Net debt after lease stood at EUR 7.9 billion with leverage at 1.86x in line with our targets and capital structure objectives. Geographically, performance was strong in both our markets. In Italy, despite continued competitive intensity, we reported a resilient and improving financial profile. Revenues increased by 1.9% to EUR 9.5 billion. EBITDA after lease reached EUR 2 billion, up 5.1% year-on-year. CapEx on revenues was just above 12%. EBITDA after lease minus CapEx increased by 18%, reaching EUR 0.8 billion. In Brazil, the market environment remains rational, allowing us to continue delivering sustainable growth and profitable expansion. Overall, the year confirms that the post NetCo team is structurally stronger, more cash generative and better positioned to deliver sustainable value creation. For the fourth consecutive year, both group and domestic results were fully in line with guidance across all metrics and unprecedented achievement in TIM's recent history and a clear testament to the consistency of our execution. In the next slides, I will focus on EBITDA after lease, equity free cash flow and leverage, outlining the key operational and financial drivers behind this performance. Starting with EBITDA after lease, full year growth was fully in line with our guidance at both group and domestic level. In Italy, the year-on-year acceleration progressed as expected. The improvement was sorted by initial comparison base and by positive drivers materializing in Q4. Notably, the full contribution from the back book price adjustments and the typical seasonality of the enterprise business. At group level, Italy and Brazil contributed almost heavily to EBITDA growth. Revenues accelerated at a faster pace than operating costs, resulting in operating leverage and a 1 percentage point margin expansion year-on-year. On segment profitability, we are currently revising the cost allocation framework between TIM Consumer and TIM Enterprise to better reflect their economics. The objective is to provide a more precise representation of the underlying profitability of each business, even considering the mutual intercompany contribution. Given that this work is ongoing and to avoid unnecessary comparability noise, we prefer to disclose segment profitability metrics based on the revised allocation framework at the upcoming Capital Market Day. Cash generation in the year was robust and fully supportive of the reduction in net debt after lease. Equity free cash flow amounted to EUR 0.7 billion, materially above target. The outperformance was driven by 2 distinct components. First, the underlying core performance generated approximately EUR 0.55 billion, around 10% above target. This was primarily supported by stronger operating free cash flow in line with the trajectory we had anticipated in previous earnings calls. Second, in addition, EUR 0.2 billion derived from nonrepeatable items. This included the early collection at year-end of certain public administration receivables originally due in 2026. This timing effect will reverse in 2026. The positive cash impact related to the stock split and stock grouping at TIM Brasil. Turning to net debt after lease shown on the right-hand side of the slide, the reduction was in line if anything, slightly better than expected. The main drivers were 3, the first one. The stronger equity free cash flow just discussed. The second approximately EUR 0.1 billion cash proceeds from the divestment of 2 financial assets completed in Q4. Third, the distribution by TIM Brasil of earnings totaling BRL 2.2 billion in December 2025. This represented an advance of shareholder remuneration originally due in 2026 and resulted in an additional dividend leakage to TIM Brasil minorities of approximately EUR 0.1 billion. Overall, total dividend leakage to TIM Brasil minorities in 2025 amounted to EUR 0.3 billion. As a result, net debt after lease at year-end stood at EUR 6.9 billion with leverage at 1.86x fully consistent with our deleveraging path and capital structure objectives. Turning to TIM Consumer. In the fourth quarter, total revenues and service revenue declined by 2.3%, primarily reflecting a lower contribution from wholesale. The MVNO business experienced volatility with Fastweb and CoopVoce exiting. Retail performance remained stable. For the full year, total revenues amounted to EUR 6 billion, down 0.9% year-on-year, while service revenue were broadly stable, a meaningful outcome in a still competitive environment. A key driver of this stability was our repricing campaign. In 2025, we implemented price increases across more than 8 million fixed and mobile consumer lines. The impact was visible across all KPIs. Wireline ARPU increased by 5.1% year-on-year. Mobile ARPU was up 0.4%. Churn remained firmly under control despite multiple pricing action over time. This performance confirms the effectiveness of our volume-to-value strategy launched in 2022. Notably, similar pricing initiatives have recently been announced by other market players starting in 2026, reinforcing the sustainability of this approach. On the commercial front, wireline net adds improved in the full year with almost 25% fewer line losses compared to 2024, supported by the growing contribution of FTTH and 5G FWA. In mobile, net adds were broadly stable versus 2024. More importantly, number portability was neutral again in Q4, confirming the stabilization trend seen in previous quarters. During the quarter, we disconnected approximately 400,000 SIMs that had been inactive for more than 12 months with no impact on ARPU or service revenues. Finally, on our customer platform, TIM Vision service revenue continued to grow steadily, up almost 5% year-on-year. With the recent addition of HBO Max and Paramount Plus, TIM Vision now represents the most comprehensive content aggregation platform in the Italian market. The sustained top line momentum validates the strategic rationale of this positioning. Turning to TIM Enterprise, Q4 marked the 14th consecutive quarter of growth, with both total and service revenue increasing at double-digit rate, confirming the structural momentum of the business. For the full year, total revenues increased by 7% year-on-year to EUR 3.5 billion, while service revenue grew 9%, reflecting a favorable mix shift toward higher value-added services. Our strategic focus on ICT and digital platforms continues to deliver tangible results. Cloud was the clear growth engine, expanding by 24% year-on-year and representing more than 40% of TIM Enterprise service revenue in 2025. Connectivity evolved as expected, with a moderate overall decline. Within the mix, fixed connectivity remains stable, while mobile was affected by phaseout of a large public administration contract that we consciously decided not to renew in line with our disciplined approach to margin protection and avoidance of low-return tenders. Other IT services grew by 4%, supported by strong demand in cybersecurity and IoT. The integration of our infrastructure assets with advanced cloud, IoT and cybersecurity capability underpins TIM Enterprise competitive edge and market differentiation. Our ambition is clear: to leverage this foundation becomes Italy leading provider of sovereign digital services. In this context, the National Strategic Hub stands as Europe's first concrete example of a sovereign cloud initiative. TIM Enterprise revenues generated within this framework have doubled over the past 12 months, giving us a structural head start in a strategically critical segment. Moving to Brazil. Results once again confirm strong execution and disciplined management. The market remained healthy and rational and TIM Brasil continued to deliver profitable growth, reaffirming its position as the most efficient operator in the country. For the full year, top line growth was in the mid-single digits, driven by mobile service revenues. Monetization of the customer base remains a key priority, supported by successful upselling from prepaid to postpaid, resulting in the highest ARPU in the market. Efficient operational execution drove high single-digit EBITDA after its growth and margin expansion. Operating expenses remain below inflation while EBITDA after lease up nearly 9% year-on-year. The combination of EBITDA after lease growth and disciplined CapEx translated into double-digit growth in cash generation. These results demonstrate that the operational discipline and value-oriented approach that have driven success in Brazil are the same principle guiding the transformation of our domestic business. Across both markets, the formula is consistent, focused efficiency and value creation and the results speak for themselves. I will now hand over to Piergiorgio for a detailed review of the financial results. Piergiorgio Peluso: Thank you, Pietro, and good morning, everyone. Let me start with a few comments on group CapEx and OpEx. Group OpEx rose modestly in 2025. Around 2/3 of the year-on-year growth was attributable to the domestic perimeter with the remaining 1/3 related to TIM Brasil, where cost growth remained well below inflation, confirming continued cost discipline. In Italy, the slight increase in OpEx was primarily driven by revenue-related components, namely higher cost of goods sold linked to ICT revenue growth as well as higher G&A and labor cost. These effects were partially offset by lower industrial costs, including savings in network operations and energy. OpEx related to FiberCop MSA reduced 11% year-on-year. Group CapEx declined 1.7% year-on-year to EUR 1.9 billion, with Brazil stable and Italy down 2.6%. CapEx intensity stood at around 14% of revenues. In Italy, about 25% of CapEx was customer-driven while 50% was allocated to infrastructure investment, including mobile network, IP backbone and data center, where we are expanding capacity to meet the surge in cloud demand. In Italy, our transformation plan continues to enforce strict OpEx and CapEx discipline. As a reminder, progress is tracked against the inertial OpEx and CapEx trajectory that is the cost baseline we would have incurred without the plan. Domestic transformation plan delivered to EUR 266 million in cash cost reduction versus inertia plan achieving 130% of the full year target. In previous earnings calls, we indicated that cash generation would accelerate in Q4 and that the group was on track to achieve and potentially exceed full year guidance. This is exactly what happened. Equity free cash flow came in materially above target, as already outlined by Pietro. In addition, Q4 included some nonrepeatable items below the equity free cash flow line. As a result, group net debt after lease decreased by EUR 0.4 billion over the last 12 months from EUR 7.3 billion to EUR 6.9 billion. This slide summarizes the main moving parts. Starting with equity free cash flow of EUR 0.7 billion resulting from EUR 2.0 billion of EBITDA after lease minus CapEx. This reported figures include the positive profit and loss impact of the concession fee and the negative profit and loss effect related to the reversal of wireline contract cost following the reassessment of deferral period implemented at year-end. I will address both items in the next slide. EUR 0.7 billion net working capital absorption. This figure includes both the concession fee and the reversal of wireline contract cost, but with the opposite cash effect compared to the profit and loss, resulting in a neutral net cash impact. Working capital also reflects cash out items such as preretirements and the final installment to DAZN. Excluding these extraordinary components, the change in underlying net working capital would have been broadly at breakeven. A detailed breakdown is provided in the annex. Below equity free cash flow, the main items were EUR 0.3 billion of dividend leakage related to TIM Brasil minorities, EUR 0.1 billion for the buyback in Brazil, EUR 0.1 billion of cash proceeds from the disposal of 2 financial assets completed in Q4. The resulting net debt after lease at year-end stood at EUR 6.9 billion with a leverage at 1.86x. Before moving to the 2026 update, I would like to address a few special topics that require attention. Please feel free to raise any clarification point during the Q&A session, should anything require further detail. The first topic relates to the '98 concession fee. As you know, last December, the Italian Court of Cassation ruled in favor of TIM, bringing to a close of a more than 20-year legal dispute and triggering approximately EUR 1 billion not appealable compensation. From an accounting perspective, this amount was recognized as other income within 2025 reported EBITDA. However, it was not reflected in the year-end net financial position. As previously communicated, in July, we anticipated the expected cash in through a factoring transaction. The related proceeds were temporarily recorded as financial debt and from an accounting standpoint with no impact on the net financial position. This liability will unwind in 2026 upon receipt of the payment from the Italian Government. The 1998 concession fee leads to the next special topic on Slide 16. On the 28th of January, ordinary and savings shareholders approved the 2 key resolutions aimed at simplifying our capital structure and increasing strategic flexibility. The first resolution concerning the reduction of share capital from almost EUR 12 billion to EUR 6 billion. This will not alter total value of net equity or economic substance. Rather, it will realign the equity structure and restore available reserve, thereby enhancing financial flexibility, including the potential for future shareholder remuneration. The figures shown in the slide refer to year-end 2024 and will be updated in March following the approval of the 2025 financial statement. The second resolution relates to the conversion of savings shares, a long anticipated step towards simplifying TIM capital structure. Moving to a single class of shares will improve stock liquidity and index relevance while eliminating preferential rights attached to saving shares and fully align the interest of all shareholders. Going forward, TIM's capital structure will be leaner, more efficient and more remuneration supportive. This slide outlines the time line for the conversion process. I will not go through each individual step. In summary, assuming no position from creditors to the share capital reduction, a scenario we do not expect, the conversion is anticipated to be completed by the end of May. The last special topic concerns the reassessment of the deferral period for the one-off cost related to wireline contracts introduced at year-end 2025. Let me start with industrial rationale. Following the disposal of the wireline access network in 2024 and the progressive implementation of our customer platform strategy, our business model has evolved. Customers are no longer identified by a single fixed line but by a broader ecosystem of services, connectivity, entertainment, energy, insurance and more. Consistently, our cost structure has shift from an infrastructure-based model to a more variable and service-driven structure. This new operating context require the reassessment of the deferral period of wireline one-off contract cost. There is no change for variable cost, which will be -- continue to be expensed in the profit and loss on an annual basis as long as the line remains active. Starting the 1st of January 2026, one-off cost will be no longer deferred over 8 years previously aligned with the average customer useful life, but over 4 years, reflecting the economic payback period. These one-off costs mainly include the subscriber acquisition and provisioning costs incurred at contract inception. Most importantly, this accounting change has no cash impact. The cash out associated with this cost is and will continue to be fully recognized in the year of activation. With the adoption of the revised deferral period, we aligned the previously deferred cost to the new 4-year amortization period. This led to a nonrecurring charge of approximately EUR 0.6 billion recognized in 2025 reported EBITDA. Starting from the 1st of January 2026, one-off activation cost will be amortized over 4 years with 1/4 of the amount recognized in the profit and loss each year. Overall, the net impact on EBITDA is expected to be broadly neutral over time. The initial headwind resulting from the shorter amortization period of new activation will be offset by the tailwind from lower residual deferred costs still to be released to the profit and loss. As I want to reiterate, this reassessment as 0 cash impact. Its rational is industrial and economic. Future efficiency in one-off cost will be reflected more rapidly in the profit and loss, improving the alignment between EBITDA performance and cash generation and enhancing the transparency of underlying profitability. A simplified illustrative example of new versus old treatment is provided in the annex. Before moving to the 2026 update, let me briefly recap the key messages on these special topics. The 1998 concession fee enhances our financial flexibility. In the short term, it will support the financing of the savings shares conversion. The positive impact on the net financial position will materialize in 2026 upon cash received. The new capital structure will be leaner, more efficient and better positioned to support shareholder remuneration, thanks to the restoration of the distributable reserve. The conversion to a single class of shares will eliminate preferential rights, fully aligned shareholder interest, improved stock liquidity and increased index relevance. The revised deferral period of wireline contract one-off cost has no cash impact and will improve the alignment between EBITDA and cash generation, increasing transparency on underlying profitability. One additional update yesterday, the Board of Directors approved a 10-for-1 reverse stock split. Subject to approval at the shareholders' meeting to be held on April 15, this measure is expected to reduce share price volatility and broaden the potential investor base. With that, I hand back to Pietro for the 2026 update. Pietro Labriola: Thank you, Piergiorgio. Before we move into 2026 outlook in detail, let me reiterate the key points. The strategic framework presented last year is fully confirmed. You will see some refinements in business assumptions, but the direction of the travel remains unchanged. To ensure full clarity, these slides summarize the main assumption underpinning our 2026 guidance. Starting with Italy. Equity free cash flow will include around EUR 1 billion related to the concession fee with a corresponding reduction in year-end net debt. We are assuming no material contribution from Poste synergies in 2026. I will elaborate further on this on Slide 26. The MVNO segment will remain somewhat volatile during the year. PosteMobile will progressively migrate inbound, reaching full contribution in Q4, while Fastweb and CoopVoce will complete their outbound migration in the first half. No material impact is assumed from the RAN sharing agreement with Fastweb and Vodafone, subject to expected approval by the National Regulatory Authority. Value of services provided to FiberCop will progressively scale down during 2026. Our guidance assumes 0 contribution from the NetCo earnout. We assume completion of the Sparkle disposal in Q2, reflecting timing in the authorization process. We are not concerned. This is merely a matter of time. In terms of shareholder remuneration, our assumptions are: a cash-out of approximately EUR 0.7 billion in May representing the cash component of the savings share conversion. The declaration of a dividend of approximately EUR 0.5 billion for fiscal year 2026 payable in 2027. The launch of a share buyback after Sparkle disposal closing for an amount equal to 50% of the transaction proceeds. Turning to Brazil. We assume cash-out of approximately EUR 0.2 billion related to the acquisition of the remaining 51% stake in I-Systems. On shareholder remuneration, TIM Brasil has maintained a trajectory of sequential improvements. Let's now review the priorities for our 3 entities. For each, the strategic focus outlined last year remains confirmed. TIM Consumer, we expect a stable retail top line and the reduction in MVNO as previously explained. Profitability will be supported by disciplined cost control. CapEx will remain focused on 5G deployment and the customer platform. TIM Enterprise. Growth above market is expected to continue. Our priorities include further margin improvement through cost efficiency and optimize mix versus by mix. Investments will focus on data center and AI capabilities progressively position TIM Enterprise as the Italian champion in sovereign cloud. TIM Brasil, the focus is on delivering EBITDA growth above inflation. Will still strengthen the mobile value proposition, deploy targeted offers and expand ancillary revenues while maintaining selective broadband investment and accelerating B2B connectivity, IoT and ICT services. Across the group, our ESG agenda remains a structural pillar of long-term value creation, fully embedded in our industrial strategy rather than treated as a parallel initiative. In 2026, we will focus on 3 clear priorities. First, on the environmental front, we'll present our environmental transition plan setting up a structural pathway to decarbonization with defined milestone and accountability. At the same time, we will address execution challenge, increasing transparency and control over remission that historically sit outside direct telco boundaries, particularly Scope 3 and supply-related emission by strengthening tracking engagement and governance mechanisms across the value chain. Second, on the social dimension, we'll continue to advance gender balance across all levels of the organization. Our objective is not incremental improvement, but measurable progress in leadership and critical roles, reflecting a deeper and lasting culture shift. And finally, on governance. In strong alignment with TIM Enterprise's strategic positioning, we will reinforce our commitment to digital sovereignty. This means enhancing secure, resilient and trusted digital infrastructure and services, contributing to a more robust and strategically autonomous digital ecosystem. Let me now turn to one of the most important structural shift shaping our industry. The evolution from cloud adoption to cloud governance. For years, cloud was primarily about efficiency, about scale, speed and cost optimization. Enterprises migrated workloads to global hyperscaler to gain flexibility and reduce infrastructure complexity. Adoption saw the scale challenge. Today, the conversation has fundamental change. Cloud is no longer just about computing power. It is about control, control over data, operation and technology. We are witnessing a clear transition from the old model '21. Previously, business drivers were scale and speed. Today, they are controlling resilience. Customer priorities are shifting from pure cost efficiency to risk mitigation. Architecture are moving from global centralized hyperscale model to jurisdiction aware distributed designs. Most importantly, companies and public administrations are rethinking control over their data, moving from vendor concentration toward multilayer sovereignty. In short, adoption solved scale. Governance now addresses risk. This shift is particularly relevant in Europe and in regulated industries, including public administration, finance, health care, and critical infrastructure, where data sovereignty, compliance and operational resilience are strategic imperatives. This is exactly where TIM is uniquely positioned. We are not just a connectivity provider. We operate critical national infrastructure, understand regulatory framework, manage secure network at scale and already serve the most sensitive segments of the economy by leveraging our existing sovereign infrastructure, combining secure data -- secure data center, advanced cloud capabilities, edge computing and trusted partnership we are building a compelling sovereign cloud proposition. And this is not theoretical. It is already translating into commercial momentum and long-term contracts, strengthening the quality and resilience of our revenue base. Let me briefly highlight another structural shift shaping our performance and future growth, the move from volume-based to value-based connectivity. In the past, the industry competed mainly on price per gigabyte. Network were largely best effort and demand was driven primarily by video and social media. In that context, connectivity risk becoming a commodity. Today, the paradigm is shifting. Latency, symmetry, resilience and reliability are now critical. Both consumers and enterprises increasingly demand guaranteed performance not just data volume. We are moving from price per gigabyte to price per call for quality. Application as cloud gaming, 4K live streaming, smart home security, industrial IoT, edge computing and AI workloads all require ultra low latency, jitter control, stronger uplink capacity and built-in redundancy. Performance metrics now define value. This shift plays directly to our strengths. Investment in 5G stand-alone and network modernization are enabling ultra-high-performance connectivity, allowing us to differentiate introduced premium proposition and improve monetization. For enterprise customer, in particular, connectivity is becoming mission-critical infrastructure, supporting longer contracts, higher quality revenues and stronger margin. We are not talking about the access. We are talking about the backbone, the electronic in our network. In 2025, we continue to enhance network quality and expand coverage, reinforcing our positioning in other segments. This message is simple. As connectivity becomes strategic, value creation increases, our high-performance network and backbone is a key enabler of sustainable growth going forward. Before moving to the guidance, let's briefly review the strategic partnership we're developing with Poste. Conceptually, the expected synergy can be grouped into 3 main areas. MVNO contract at the full run rate, this is expected to generate high-margin revenues of approximately EUR 100 million per year, representing a clear derisking of the business plan. TIM Consumer and TIM Enterprise initiatives, several projects are already underway with others to be launched shortly. We expect a positive impact on EBITDA after lease of approximately EUR 50 million per year at full run rate. Additional transformation project, these initiatives are still under evaluation. They have significant potential, but we need time to finalize them. We will provide further details at the upcoming Capital Market Day. Now I leave the stage to Alberto Griselli, Chief Executive Officer of TIM Brasil to talk about the Brazilian guidance for 2026. Alberto Griselli: Thank you, Pietro. Good morning, everyone. I'm Alberto Griselli, CEO of TIM Brasil. Pietro has just outlined our results. We delivered a strong quarter and closed year with solid performance, reflecting consistent execution and discipline across the business. Importantly, 2025 marked a key milestone for TIM Brasil. Our return on invested capital exceeded the consensus cost of capital, confirming that our strategy is translating into tangible value creation. As we move into 2026, our direction is clear. We continue to focus on value creation across mobile, B2B and broadband supported by 3 company-wide enablers, artificial intelligence, efficiency and ESG. TIM Mobile profitability remains the priority, supported by a customer-first approach. In B2B, our increasingly scalable portfolio positions us well to capture new growth opportunities. In broadband, we entered the year with a more efficient operating model and a portfolio line with disciplined expansion. Across the company, artificial intelligence is becoming a core lever to improve productivity and decision-making, while efficiency and capital discipline remains central to protecting margins and cash generation. This brings us to our guidance, which reflects continuity and discipline. Service revenues are expected to grow in real terms, supported by resilient mobile performance, a recovery in fixed and redevelopment of new revenue streams. EBITDA is expected to grow faster than revenues with margin expansion driven by OpEx efficiency, digitalization and the progressive materialization of artificial intelligence-related gains. Investments will remain disciplined, guided by an efficient capital allocation framework, focused on network quality and technological evolution. We will continue to strengthen our revenue to cash conversion through a holistic approach to operational efficiency. Finally, taken together, these elements support a faster expansion of shareholder returns fully aligned with cash flow growth. Back to you, Pietro. Pietro Labriola: Thanks, Alberto. Let me walk you through our 2026 guidance at group and domestic level. Group total revenues are expected to grow by 2%, 3% with domestic growth in the range of 1% to 2%. Group EBITDA after lease is expected to increase between 5% and 6% with domestic growing at around 4%. As already mentioned, domestic revenue and EBITDA trends incorporate the temporary volatility in the MVNO segment. PosteMobile will progressively reach full run rate during 2026, becoming a structural tailwind from 2027 onwards. CapEx on revenue is expected to remain below 14% at group level and around 12% for domestic, confirming our disciplined investment framework. In terms of cash generation, we expect equity free cash flow after lease of around EUR 1.8 billion, excluding the net cash in from the concession fee, which will contribute below EUR 1 billion post tax and taking into account reversal of public administration invoices anticipated in Q4 2025, we are confirming the EUR 0.9 billion target announced last year despite the weaker foreign exchange rate. Leverage will remain below the maximum threshold of 1.7x that we committed to last year. I will provide further detail on this in the next slide. Turning to shareholder remuneration for fiscal year 2026, we envisage 3 components: a dividend of approximately EUR 0.5 billion corresponding to 70% of equity free cash flow after lease, net of concession fee and dividend to TIM Brasil minorities. The payment will occur in 2027. A share buyback equal to 50% of the proceeds from the Sparkle disposal to be launched following completion of the transaction. A cash payment of up to EUR 0.7 billion to current savings shareholders in connection with the share conversion with completion expected by the end of May. Let's now take a final look at 2026 cash dynamics. There will be 3 main sources of cash. Equity free cash flow after lease, the cash related to the 1998 concession fee, proceeds from the Sparkle disposal. After distributing dividend to TIM Brasil minorities and executing the share buyback in Italy, part of this financial flexibility will be allocated to finance the cash component of the savings share conversion and the acquisition of a 51% stake of I-Systems in Brazil. The 2026 year-end net debt will remain below 1.7x, a level we consider optimal for our capital structure and one that positions TIM in a best-in-class peer comparison. Additional financial flexibility may be deployed to accelerate both organic and inorganic growth. On the ESG, this slide shows a very clear progression, strong execution against our 2025 targets and a more focused agenda for 2026. On the environmental side, we have reached 100% green energy, a significant operational milestone supporting our decarbonization pathway. In parallel, we are strengthening Scope 2 measurement capabilities laying the groundwork for a more structural rollout in 2026. On social dimension, progress is tangible. Women has reached 52.3% our target trajectory and women in leadership position increased to 33.5%, moving steadily toward our 2027 objectives. In 2026, the focus remains on sustaining this momentum both in hiring and in leadership representation. On governance and digital transformation, Italy is delivering high operational targets, advanced digital solutions grew by 22%, exceeding the 17% target for 2025. One, digital identity services reached 34% outperforming expectations. In 2026, we aim to scale the public administration governance platform with more than 30% new customer versus full year 2025 activation, and to expand sovereign services with around 20% year-on-year growth in commercialized services. In Brazil, we continue to invest in people and capabilities. We have already upskilled 60% of the workforce in digital competencies and plan to train at, at least 20% more employees in 2026 compared with 2025 levels. Overall, execution remains disciplined and measurable with clear operational milestones supporting our broader ESG framework. Let's now move to the closing remarks to wrap up. Looking back and considering TIM's reputation in the financial community in past year, it is noteworthy that we have achieved our targets for 4 consecutive years. I want to emphasize again that the new governance has brought greater stability and full support to the group strategy, enabling planning with much higher visibility than before. The near-term outlook is clear. The 2026 trajectory is solid and fully aligned with the guidance we announced 1 year ago. Execution will continue with consistency and discipline. Guidance is confirmed. Looking beyond 2026, the best is yet to come. Details will be shared at our upcoming Capital Market Day. With that, we are ready to take your questions after some few seconds of rest. Operator: [Operator Instructions] The first question is from David Wright at Bank of America. David Wright: I hope you can hear me well. So I just need a little bit of help with the numbers. You talked about the exit of MVNOs, including Fastweb and then the onboarding of Poste. So I just wondered how much in euro terms of revenue are we losing in 2026 from the exiting MVNOs, how much are we gaining from Poste? I think you suggested full run rate in Q4, but if you could just balance those numbers for us a little. And I guess that's suggesting some weaker H1, stronger H2 phasing in the domestic run rate. That's question 1. And then question 2 on the Enterprise business. The prepayment of revenues that came in, in Q4, it looks to me that's give or take sort of EUR 100 million of revenues. Is that right? And should we then expect full year '26 growth to be equally weaker? So again, we're going to get 6% '24, 9% '25. Are we going to go back down to sort of 3% levels in 2026 before we normalize again in '27. So I'm just trying to understand the phasing a little and any numbers you can give me on that would be super useful. Sorry for being a bit more technical. Pietro Labriola: Thank you, David. I think that you want me to explain what we should stated during the call because exactly what we'll have is that we'll have a weaker first half 2026 compared to the first half of 2025 and a stronger second half 2026 compared to the second half 2025. Why that? If we look also in the Excel number that we shared with all of you, the first quarter 2025 was the highest one in terms of MVNO revenues. Then it was shading through all the 2025 and this is something quite normal. The PosteMobile phasing we started at the beginning of the second quarter 2026 and we reach a regime situation in the third quarter 2026. What it will mean? And so it's very important to say to everybody that you will see a weak EBITDA in the first half 2026 compared to the previous year. Just for this movement, no panic, no hurry. It's a normal trend of the revenues. At the same time, you will see a first quarter of 2027, stronger in terms of comparison year-over-year because you will have in the first quarter 2027, a complete amount of the MVNO of Poste. So everything was under control. And these are the dynamics of this component. And this explain also reading also some of the comments, a weaker EBITDA growth year-over-year at 4%, but this was mainly related to the delay of the, let me say, phase in, phase out between the MVNO contract. Overall, what is -- we're talking about a contract that is closed between EUR 80 million and EUR 100 million on a yearly basis. I hope that on this point is more clear now before to move to the second question. Is it? David Wright: Yes. That's cool. Pietro Labriola: But again, I want to stress that we want to be a transplant company or better, as you mentioned in one of your report, a more normal company, no surprise, the first quarter, the EBITDA will be weaker not because we are stupid. And the first quarter 2027 will be better, not because we are superman. Then when we move to Enterprise, what we are mentioning that is a prepayment has no impact on the competence and so on the revenue year-over-year, on the EBITDA year-over-year because it's an anticipation of payment and it allow us to explain also the trend of the equity free cash flow. We are closing better the 2025. It's important to highlight that is not a lottery ticket, the better result of 2025 because also if we have some nonrecurring activity. I have to remember to everybody that it's quite normal that the company has a guidance and an internal budget. In TIM, I'm used to give to my team a budget and the target that is higher than the guidance because we want to put the market on a safe side without surprise. So this result of 2025 is the result of the activity of the TIM. Then when we compare the result of 2025 towards the guidance of 2026. What's happened? In 2026, we are putting EUR 1.8 billion. Of this EUR 1.8 billion, around EUR 950 million is related to the [indiscernible] the concession fee. So it remains EUR 850 million. Our previous guidance was EUR 900 million, but we will have in the first quarter of 2026, the reverse of the anticipation that we had in the last quarter of 2025 by the public administration. And in the meantime, if you look at the currency rate that we are using for our plan 2026 is worse than the 2025 assumption. It means that if we should compare on an equal basis, the real -- or let me say, the organic equity free cash flow -- equity free cash flow number in absolute value for 2026 should have been EUR 950 million. So in some way, is as we are declaring that we are upgrading the fact our guidance, absorbing these 2 movements. Is it more clear now, David? David Wright: Yes. Yes. That's super. Operator: The next question is from Mathieu Robilliard of Barclays. Mathieu Robilliard: Hopefully, you can hear me well. I had a question first on the front book back book. I mean you've done quite a bit of price increases on fixed and mobile throughout 2025. It has had no impact, no visible impact on churn. So I guess this is probably or possibly because of the front book and back book gap continues to be quite reduced. If you can give us a bit of color into that, that would be helpful. The second question was about NSH. So very strong growth between '24 and '25. Should we assume that this type of growth -- this magnitude of growth can continue in '26? And lastly, I mean, you're starting to have a rich company problem with leverage coming now with leverage coming down a lot in 2025, and we fast forward to 2026, it's going to be extremely low. So how should we think about capital allocation? Of course, you reinstated the dividends. But even with that, it seems you have a lot of flexibility or will have a lot of flexibility. Pietro Labriola: Okay. Thank you, Mathieu. I will leave Andrea to answer to the first question to give some more colors. But what is important that today, we are performing very well compensating the line erosion with the price. But as we put in the presentation, we think that the next challenge for all the telco in Europe in the following years will be the market consolidation and in some way, I'm answering also to last your question, we must be ready to be part of this process. And the second to be able to ask for a premium for the better quality of our services. I want to highlight this point. This is not something that will happen in 2026. But if you look at 2027, 2028, the quality of the network will become key for the end user services. You will need more latency, you will need more uplink, but you need also a much better backbone. And we are the player in Italy today that is positioned in the best way to try to exploit this opportunity. But I leave to Andrea to give more color. Andrea Rossini: Thank you, Pietro. Thank you, Mathieu. You're right. We did quite a lot of work on the back book price up, especially during '25, we said several times that we had an impact of around EUR 100 million from the back book price up. The impact on churn was actually compensated by several items, meaning that we worked on convergence. We worked on the diffusion of TIM Vision. The TIM Vision-based increased quite a bit and this contributed to somehow stabilize the impact of price up on back book that is inherently generating some impact of churn. The most important thing is also to notice that as regards the front book trend, we see some positive evidence from the market. So after the merger between Vodafone and Fastweb, we actually see some rationality in pricing. And we see along the second half of the year also some action on back book price up. So this is a positive outcome. The other thing is on mobile, we do see a reduction of the rotational churn in the market. And this is contributing to stabilize the churn effect. Meaning that as we said several times, the impact of Iliad in the market is decreasing and the impact of Fastweb that was acting like a disruptor until 2020, 2024 has come down. Therefore, this contributes to create a positive scenario for the stabilization of the churn effect. Pietro Labriola: About the second question, I'll leave Elio to give you some more details. Elio Schiavo: So sorry for my voice. I hope you can you hear me? Pietro Labriola: Yes. Elio Schiavo: Okay. Good. So we don't see any discontinuity in revenue generation. Actually, we feel very positive about 2026. Just to let you understand why we registered this 9%. Actually, we have a lot of seasonality in quarter 4, as we told you many times. And what happens here is that we got an extraordinary quarter 4 because, let's say, if we compare quarter 4 '25 versus '24 is EUR 144 million higher. And in the year -- in the previous year was only -- the difference was only EUR 56 million and when we look at the difference between quarter 3 and quarter 4, in 2024. It was EUR 180 million. In 2025 was EUR 310 million. But just to let you feel good about our revenue forecast for 2026. We got backlog at a level of EUR 4.2 billion of revenues that we have already secured for the years going forward. And in 2026, the fraction of this backlog, which represents revenues already secured is above 60%. So we don't see the trajectory of our revenues to go down for no reasons. Pietro Labriola: Mathieu, and now I will take the third one. First of all, again, we are really [indiscernible] because if you look at our presentation of the last year in our Capital Market Day, we're already showing that after the cash-in of the concession fee, we should have reached a level of leverage where our target should have been 1.7 as rational, and the remaining part should be financial flexibility. We are reaching this target in advance compared to the previous plan. And it will help us in terms of capital allocation, then I will leave to Piergiorgio to elaborate more on that, to work on the possibility that could arrive to be part of a potential market consolidation because I continue to bet on the fact that it will happen, and I completely subscribe the position of Mario Draghi at the European level, something that was also subscribed by the GSMA. We must try and the time is now to catch the opportunity of the sovereign cloud and digital sovereignty. This is not an Italian clean. It's an European point on which everybody are putting pressure and to be a company, a team that now is considered a national champion for us it will be much easier to do that. And then there's a matter of capital allocation also on the internal project. But I'll leave to Piergiorgio to give some more colors on that. Piergiorgio Peluso: Thanks, Pietro. Good morning to everyone. The point of the capital allocation, as you can imagine, is a crucial point that we are analyzing and working on since the -- since a few months. I would say first comment, we have already decided to execute certain transaction considering the capital allocation that has been available, thanks to the concession and to the potential sale of Sparkle. So I would say first answer to your question, Mathieu is that the acquisition in Brazil of IHS in the region of EUR 200 million plus the savings share conversion and the shareholder moderation that we are already envisaging in our current guidance is already a first answer to your point on how we look at the capital allocation in the future. Of course, we consider dividend distribution in terms of a sustainable remuneration to the shareholder, while having or limiting buyback to certain extraordinary items in order to have, let's say, a shareholder remuneration based on the recurring profitability through dividend. In terms of, let's say, more in general on capital allocation, I would say that we have started a work and allocating EUR 200 million of CapEx in 2026, included in our guidance in order to execute a certain transformation project, and I don't know, just to make simple example, back office automation in customer care or reduction of legacy services or platform decommissioning and supplier consolidation, digitalization of procurement. And I mean, it could be as long as you want. But as you can imagine, with -- in this moment, there are several opportunities that we can work on. And this is the first time that the company is allocating, let's say, an important amount of money dedicated to those projects. Of course, this will have a limited impact in 2026 and it will be much more evident in 2027 and so on, but this will be more part of the presentation that we will have in the Capital Market Day already with the initial results of these projects. The idea is I just want to anticipate one point, which is crucial. The idea is to consider, let's say, much more the profitability of Telecom Italia and the domestic business, particularly based on the cash EBIT result, let's say, net operating profit after tax compared to the cost of capital in order to identify clearly the legacy that we have in our net invested capital and clearly present to you a set of KPIs where we'll be managing and switching off all these legacy. So this is a journey that we have started, and I think it's part of our transformation effort that we are already launching. Mathieu Robilliard: If I can follow up, maybe Pietro, you talked about consolidation. How could that be source of capital allocation from your point of view? It doesn't seem in Italy, you would be involved in something major, but maybe I'm wrong. Are you talking maybe about small adjusted businesses in Italy? Pietro Labriola: But about market consolidation, I don't want to speculate it on that, but the number of all the players are quite clear. So if you want to be sustainable in the market, in the medium, long run, you must look for market consolidation because there will be an optimization at network level, at all the different cost level and you could have also a more rational approach. But I'm not saying something that is different from what you are experiencing in France, in Spain, what's happened in U.K. Europe is in the same situation. The only way to recover in terms of profitability is the market consolidation where market consolidation doesn't mean price increase, but a much better level of efficiency at all the levels. The second that is not related to the market consolidation is. Are you using AI? Well, if you are using AI, you will need a higher level of latency. If you want to be in a stadium and been able to do something on your mobile while you have a crowded stadium with 70,000 spectators you have to pay for a premium. Just to give you an idea, we put as first chart. The first chart was the Milano Cortina sponsorship that we did. We were able to put in the hands of all the different spectators, but also all the athletes, mobile lens that we're able to navigate and serve and experience a very good network quality because of our network. I think that this is the trend. Then we are always open to look at all the opportunity that generate value. And for us, value as Piergiorgio was explaining, is not growth on EBITDA, but cash generation because this is the main driver. I hope that was clear, Mathieu? Operator: The next question is from Ajay Soni at JPM. Ajay Soni: Hope you can hear me. I've just got a couple. First is on Poste synergies of EUR 50 million. So what are your time lines on this? And any costs that will be incurred to deliver these synergies? You mentioned the MSA OpEx accounts for 22% of your domestic OpEx, and that's reduced 11%. So is this just due to fewer lines? What are the moving parts here? And what are your expectations for this cost line into '26 and '27? Pietro Labriola: Thank you. About if I catch in the right way your first question is related to the synergy with Poste, if I'm not wrong. In such a case, what we show is mainly procurement synergy that will enter in 2027 and will be a regime in 2028, just because being procurement synergy, you must wait that the previous contract will end to do some joint activity or some contract, but we are working on further other activities. Some of them are transformation that we'll disclose in the second half. About the MSA OpEx. The optimization of the MSA is not only related to the fact that you will have a reduction of the line because this is a variable component. For sure, I would like to not do a kind of saving on the cost line because they will keep for me the customer. But there are other areas, for example, we have to choose between FWA, FTTH, FTTC and the level price of each of this technology is different. With different level of CapEx, margin and cash generation. So be very clever in managing that is an opportunity. Then in the meantime, we have also some part of the MSA that is related to the use of some services. And we are optimizing. This is not a 1-year work because you have to remember to everybody that by 2029, there will be a good part of the MSA that will completely expire, and we will have to decide if we have to renegotiate or not. In such -- in this case, we have to highlight that we are also working on the use of AI because of some of this activity. AI could substitute that kind of activity. So it's difficult to say. Stay tuned until then to see some transformation. But it's important to show to everybody that we're a company that is not working anymore. Just for the next quarter, but for the financial sustainability of the company in the medium, long run. Ajay Soni: Follow-up. So then it's reduced 11% this year or 2025. What are you expecting for '26 and if you have numbers for '27, that would be great. Pietro Labriola: We have in our number, a reduction of the cost that is related to 2 components, as I was mentioning to you. The one is a volume-driven approach. If we will lose further line, we'll have that. And another part that is an optimization. But in any case, I cannot disclose the number, but there will be a reduction also 2026 on 2025 and also 2027 on 2026 on the MSA cost. Operator: The next question is from Joshua Mills at Exane. Joshua Mills: Hopefully, you can hear me now. Sorry about that. Two questions from my side. One is just on the FY '27 numbers. So I know that you're not reiterating the free cash flow guidance today and you're waiting for the Capital Markets Day in the second half to give more detail. But just if we think about the building blocks you've laid out for 2026 and what looks to be an implied uplift to the free cash flow guidance this year when you adjust for the pull forward of the nonrepeating items. Are there any headwinds that we should think about or potential challenges yes, headwinds to free cash flow in '27 that might negatively affect the EUR 1.1 billion number that was put out previously? But am I right to infer that as you walked through this presentation and talking about opportunities and cost savings, et cetera, that the risk is probably to the upside on the EUR 1.1 billion. That's the first question. And then secondly, I wanted to get a sense of how you're thinking about the RAN sharing deal with Swisscom. I note that in the presentation, you're referring to potential cost savings, but do you also expect there to be a network impact and improvement in network quality? And if so, how meaningful do you think that might be in the medium term? Pietro Labriola: Okay. About the first question, we don't see any kind of risk or headwind for the 2027. We delivered a better result for 2025. We are confirming the result for 2026. And so we will continue with the same path that we told also the previous year for 2027. So we don't see any risk or headwind. Related to the RAN sharing, as we told to the market about the JV, the joint venture with Vodafone Fastweb, we were saying that we see that result of the activity we started to be exploited ahead in the -- if I'm not wrong, 2029, we'll start to see some savings for the JV about that. And in our number, what is happening is that we are considering the actual CapEx, also part of the CapEx to start that activity. So in some way, what is happening is that we are doing better than what was forecasted because in the previous plan, it was not included. Now if Elio elaborate -- want to elaborate some more on that. Elio Schiavo: Sure. Thank you, Pietro. Yes, we are expecting the approval from the AGCom that is the authority. And we start this year, this RAN sharing agreement. At the beginning, we have to invest to consolidate the network. And we expect, as Pietro mentioned, to have the running cost saving in 2029, but we started to see some results already in 2027, 2028 else longer we proceed with this kind of agreement. Remember that we are talking about to have a JV that every company will keep the asset along and we will share the energy cost and the investment for the 5G. So when you're talking about the benefits, we will be cost saving, but our CapEx avoidance as well. Pietro Labriola: But Joshua, what is important is that respecting the previous guidance when the JV was not planned, we are maintaining the same level of CapEx absorbing in that level of CapEx, the investment needed to pursue the saving that we will have from the JV. Is it clear? Joshua Mills: Yes. Great. Operator: The next question is from Domenico Ghilotti at Equita. Domenico Ghilotti: Can you hear me? Pietro Labriola: Yes. Domenico Ghilotti: Okay, fine. So a few questions. The first is on Sparkle. We have seen another delay. So just to get your comments, your color on what's going on there. And if you can confirm the expected proceeds that were around EUR 700 million. Second is on the decision to use the buyback as a shareholder remuneration for '26 instead of a dividend distribution based on the Sparkle proceeds. If you can elaborate on this decision given the strong rally maybe it was more interesting to give a buyback dividend. And third, on the price hikes, I wanted to know if you are planning for additional price hikes on the back book also for 2026? Pietro Labriola: Thank you, Domenico. About Sparkle, we are -- what is happening is that we are waiting for the approval mainly in 2 countries. European Union and U.S. In the U.S., there's a delay because several shutdowns that happened in the public administration in the U.S. delayed the process. At European level, we are confident that we will receive the approval by the end of April. So we are quite optimistic. What was happening that we gave a first request, then we change some of the details and we answer to the question of the European Union. And so now we are waiting to deliver the final notification but the process is under control. About the price, as we mentioned, we think that the cash in, but we have to wait the closing of everything should be in the -- around EUR 700 million, as we always stated. Then about the buyback. So let's remember that today, and then I will leave to Piergiorgio, if you want to elaborate more on that. Something that is related to an extraordinary activity that is the sale of Sparkle and something that is related to the natural and normal cash generation of the company. We gave a dividend policy for what is the normal cash generation of the company with the guidance that is exactly the one that we gave last year, 70% of the equity free cash flow. Instead, about the Sparkle sale, what is happening that as Piergiorgio is teaching me every day that we have to work on the capital allocation, what is better today in terms of capital allocation to buy our stake, our stake where you have to consider that we are still below the multiple of EBITDA of our peers. We still have to show the potential synergy coming from Poste. All the market is betting on the fact that there will be a market consolidation. So in such a case, I have a rational approach to divide it by 2, the shareholder remuneration, the one that is related to the traditional flow of cash that give you a dividend policy. And the use of buyback, we think that is the best way to do the interest of all the shareholders and of the company. And about -- if Piergiorgio has nothing to say, I will leave to Andrea to talk about price hike. Andrea Rossini: Thank you, Pietro. Very quickly, Domenico. We plan to continue the price hikes. We -- as I said in the previous answer, we see an opportunity in the market, and we actually see also a positive trend that also some other operators are coming along on the back book price up. So we see an opportunity and the amount of price hikes will be broadly similar to the one in 2025. The phasing will be slightly different in the quarter. But the overall impact in here will be broadly the same. Operator: The next question is from James Ratzer at New Street. James Ratzer: Hopefully you can hear me okay? Pietro Labriola: Yes, perfectly. James Ratzer: Great. Yes, Pietro, I have 2 please. So the first one was sorry to come back to just your guidance, which I'm pretty sure you're reiterating. But the EBITDA in 2025 was plus 4% in the domestic business. You're guiding for around 4% for 2026. So to get to the bottom of your range for EBITDA growth to 2027 at 5% to 6%, that would imply that your EBITDA growth in 2027 needs to reaccelerate back up to 6% or more. Is that what you are kind of implying with the comments today? And then the second question was just coming back to the point that was just discussed about price hikes. You've been able to increase pricing and ARPU during a period where FiberCop's prices to you have largely been unchanged, and that's allowed you to expand your margins. I think the new AGCom rulings will allow FiberCop now to increase their wholesale pricing, which I understand that they plan to do. So does that mean you now need to raise pricing at an even faster level? Or does this imply that your margins could start to get squeezed a little bit? Pietro Labriola: Thank you, James. About the first question, you are completely right. We'll have an acceleration in 2027, but it's not just an Excel exercise. If you remember at the beginning of the call, I explained that in 2026, we'll have a first quarter in which we will have the lack of part of the revenues and EBITDA coming from the MVNO. So mathematically, when in the first quarter 2027, I will have the overall Poste MVNO, you will have an increase of EBITDA in 2027 compared to 2026. We are talking about something close to EUR 30 million. I have to remember to everybody that today in the number of team, 1 percentage point of EBITDA means EUR 20 million of EBITDA. So just to give you a rough number, exactly the math is right, 5% in 2025, 4% in 2026 and 6% in 2027, roughly. About the price hikes. Once FiberCop, we start to increase the price and then we have to talk about our MSA with FiberCop that allowed to keep some price flat. What will happen that everybody will receive this price increase. So my question is in front of this price increase, I will react the energy player that are the most aggressive one in the market today. Can they subsidize in the telco with the energy, the telco business, I think that this is something very interesting that will put in the market more rationality. But we have the MSA with for certain components the price are already defined, the MSA was approved. And then for the rest, the increase of price will be for everybody. So let me say, more aggressive players, I will react to that kind of price increase. I look at that not as a threat, but an opportunity to have a more regional market. But I leave to Andrea that is responsible for that number to answer on that. Andrea Rossini: Thank you, Pietro. So in terms of the trend we see, our ARPU scale up is due to several factors, not only price hikes. Notably, we have done upselling, cross-selling action and also the TIM Vision business has contributed quite a bit. So we see an opportunity to increase revenues not only due to price hikes. As Pietro said, we do believe that the possible price increase on FiberCop and fiber in general may bring some rationality in the players. So we see an opportunity on the front book pricing trend in the market. Also, we reinforced with market consolidation, but also before market consolidation, probably some rationality may arise. I hope that's clarified. Operator: The next question is from Giorgio Tavolini at Intermonte. Giorgio Tavolini: I have 3 questions from my side. The first one is on the renewal of the spectrum licensing expiring in 2029. When should we expect greater clarity on the next steps? The second one is on the cash financial charges in your free cash flow below EUR 600 million. I was wondering if there was any one-off and what is the trajectory for 2026? And the third question is on AI adoption. I guess it may create opportunity for further acceleration of your transformational plan. But at the same time, I was wondering if you see any AI disruption risk, for example, potential disintermediation in certain processes related to TIM Enterprise. For example, the consultancy activities following an increase in sourcing by clients. Pietro Labriola: So Giorgio, about renewal, our expectation and our hope is that by the beginning of the second half, we will have some more clarity. About the second question, I will leave to Piergiorgio to give you some more details. About the third one before to leave to Elio, it's important to understand that today is not only a matter of the use of AI to sell in the market. But AI could be also a further accelerator of efficiency inside of our company. Because what is happening today is that, for example, for a company like our that for historical reason has legacies, you are not obliged today to move to new system, but you can use AI to have what they call, I don't want to see and polite, digital sleeve to facilitate some activity that until today will be expensive, timely and needed for a lot of human being be done for a very cheap cost by some AI. And it will be one of the points on which we'll bet for our transformation improvement. Then about the enterprise impact I leave to Elio to give you more color and then Piergiorgio will answer on the cash financial charges. Elio Schiavo: Thanks, Pietro. Thanks Giorgio, for the question. So we see this as a very interesting opportunities instead because as you probably know, we buy from the market about 2 billion services and products. So actually, the more AI will penetrate the market, the less we believe we will pay for the services that we are currently buying. So let's say, on the consultancy spectrum, we are on the good side of the equation because we buy services. And so if AI will generate efficiency on that side, we will benefit from that process. More in general, we believe that for adoption of the new technology, which will cost a lot of money, you need to have a very large shoulder has it happens to TIM Enterprise. And so we believe that we will be a main actor in that space. We look at this with 2 different lens. One is how much efficiency we can generate by adopting those technologies. On the other side, how much we can contribute to large enterprise and public administration to let them to adopt new technologies that we could buy from large players and resell to our customers. But let's say, all in all, we see a very positive trend in front of us. And as I said before, I see that the point that you mentioned, you mentioned on consultancy actually plays in our favor. Piergiorgio Peluso: Thank you, Giorgio. On the net financial charges after lease, which is more or less in line with the cash interest that you see in the cash flow analysis. I would say there are no material difference between 2025 and 2026. It is just a fact that the Italian component is lowering in terms of average cost, while, of course, the Brazilian one is slightly increasing. And as you know, in Brazil, there is, let's say, a slight increase in leverage, given that we also have a portion of leverage in Brazil that we use it as a cash flow range for our Brazilian stake. But I would say there are no material difference. In 2026, we expect a slightly lower number in terms of cash interest. Operator: The next question is from Fabio Pavan of Mediobanca. Fabio Pavan: Yes. A couple questions. First one is a follow-up. So we're looking at '27 targets provided you will give us some more color after the summer. My question is, should we think about the equity free cash flow target previously disclosed as the number which makes sense from '27. Second question is for -- on enterprise [indiscernible] cloud after the 24% growth we had in 2025. How are you thinking about '26 and '27 grow? And again, on this, are you still scouting some option for JVs on partnerships? This seems to be the trend for the sector. Very last question for Pietro. You mentioned noncontribution from earnouts has been assumed. Should we see this as you are not expecting any contribution or you are simply adopting a more prudent step at this stage? Pietro Labriola: Thank you, Fabio. About this question is we did all the things that we promised in 2022. So now the earnout is not included in our number, but it's something that we'll continue to pursue because we think that it's something that is still achievable. Then about '27 targets, the direction is that one. So there's no reason to change the target that we had also in the previous plan. And the second one is on Elio? I hope the answer in the meantime for the first 2? Elio Schiavo: Yes. Thanks, Pietro, and thanks, Fabio, for the questions. So Fabio, as you said, let's say, we are registering a very, very high growth on cloud. The market is running around 17%, 18%, we are above 25%. And this is mainly driven by the position that we have on public administration because as a matter of fact, the National Strategic Hub is performing much better than we were expecting at the beginning. And this is creating further acceleration on the cloud business. As Pietro said at the beginning, let's say, we do see also the opportunity of sovereignty going forward because it is clear that the more the market will go toward the theoretical disintermediation of hyperscaler, the more this business will become a make business and margins will become higher and higher. So if you look at the world, the market is foreseen for sovereignty, the growth for banks, insurance, large enterprises and public administration is twice higher than it is today. And this is a space where clearly we can play a very important role because we have all the assets. We have backbone colocation data centers, a very capillar large sales force, and we are part of the National Strategic Hub. So as I used to say very often in this kind of conversation, so we are likely because we grow in the market growing, but clearly, our positioning is a premium positioning. So I don't see cloud to change the trajectory. Operator: The next question is from Andrew Lee at Goldman Sachs. Andrew Lee: I had 2 questions. The first question was a bit of a follow-up on your expectations for Italian growth drivers. And the second one was on Italian CapEx intensity. Thanks for your help in understanding the MVNO impact in 2026, which sounds like it's suppressing the growth a little bit in 2026 in Italy. Are you anticipating the underlying trends through 2026 outside of that MVNO impact are the same, i.e., continued cloud growth versus connectivity declines? And do you expect those trends to continue into 2027 absent any consolidation? Just trying to think about what we should be thinking about for structural growth once those MVNO impacts dissolve. And then second question, just on CapEx intensity. It's clearly been coming down. You're guiding for 12% in 2026. What we're clearly seeing is there's a little bit of a sitting on hands moment for Italian mobile operators while you wait to see how and when and whether consolidation plays out. Do you see that 12% CapEx intensity as a new kind of structural norm? Or is this just a temporary suppression in your CapEx ahead of having greater clarity on the market structure? Pietro Labriola: So about the first question, adjusted. Can you repeat. Yes. Okay. So because I didn't try to. I was forgetting the team will remember me. Now our business model is quite clear. In the Consumer segment, if you will not have the market consolidation and if you will have no opportunity to increase the price for the increase of the quality, the opportunity that we have for the first time in the last 15 years because for the first time, you have customers that are starting to use services, cloud gaming, application, AI that requests a larger quality. This is an opportunity to increase our revenues and to improve our EBITDA because it's not necessarily driven by CapEx intensity. But if it will not happen, and if you will have no market consolidation, we must be very transparent. The life of Andrea and me in the Consumer segment, but not only in Italy, in Europe will be tougher because you cannot think that you can continue forever to exchange lines erosion with price increase. But again, this is not something strange. This is the reality in which everybody today in Europe are struggling and are asking a loud voice for market consolidation. Or if you will have no market consolidation in terms of M&A, you have to work at the network level. You have to allow JV as the one that we are doing with Vodafone Fastweb because putting together part of the network will allow to have efficiency. This is something that will be needed for 2026. No, our trajectory, 2026, 2027 is already defined, but if you ask me something about '29, '30, it's clear that something in the Consumer segment have to change. When we move in the Enterprise segment, what is happening is that we are not working on AI. That is become a disruptor. We are not working on software development where AI is disrupting. What is happening is that everybody will need cloud, connectivity and cybersecurity. And these 3 components are not looking for geography scale, the backbone is in Italy, you cannot have a synergy because you are a backbone in Italy, in France and in Germany. The backbone needed today for some of these services, must be in Italy. The cloud and data center cannot be remotely in Denmark or Norway because to exploit some services you need the range of 300 kilometers. And cybersecurity system but must be national, cannot be foreigner for a matter of digital sovereignty. Why I'm mentioning that? Because while in the past was showing you the increase in the growth coming from the cloud today, the part will become sovereignty. So these are the driver of our plan. If you image at a certain time in the consumer, there will be a market consolidation. It is quite clear that everything will change and repeat. The market consolidation can come from the merge between player or for a situation which you put together the network infrastructure at the mobile level. Then about the CapEx intensity today, our CapEx intensity, as you can see, we were able to confirm the guidance absorbing in our CapEx intensity, the increase of investment for the JV. So we don't foresee in the next 2, 3 years, the need for an increase of CapEx intensity to deliver our plan. Then if we start about new business model or something like that many or whatever. At that time, we'll do all the evaluation, having in mind that we must be market-friendly, cash-driven and not look only at the return on investment in the long term, because this sometimes was a mistake in the telco environment. If you look at our ROIC versus our WACC, the issue is that a good part of our investment was made when the ARPU was double than today and the technology was changing every 10 years. Now the ARPU is very low. So we have only opportunity for the increase. But the technology change every 1 or 2 years. So we must be very careful in new activity. That doesn't mean avoid or to put obstacle to the innovation, but be very clear in understanding the right wave that we have to serve. Hope that was clear. Andrew Lee: Yes. That's really clear. So it sounds like do you think that at least existing operational intentions that you can maintain the CapEx intensity that you're guiding to for 2026 and then your -- the growth guidance or the underlying trends in terms of your growth in Italy, the key drivers are going to continue as they are unless we see consolidation. Andrea Rossini: Andrew, this is Andrea. We do see the following assumption. We believe that the underlying trend on the retail side will be broadly stable, net, therefore, so separated from the effect of the MVNO impact. So we do see this opportunity. Pietro clearly highlighted that there will be further opportunity, of course, if market consolidation comes and if we see an acceleration in the front book price up due to network quality differentiation. But we do believe that the underlying trend on the consumer and SMB side will be broadly stable. Operator: The last question is from Paul Sidney at Berenberg. Paul Sidney: Obviously, a lot of questions have been asked already. So just a couple of big picture questions, please, on the domestic market. Firstly, in Consumer. You mentioned Iliad is less of a disruptor, Fastweb be more rational. You're clearly following a value-over-volume strategy, which is a phrase we hear time and again from operators across Europe and the U.S. value over volume. And the question is, in your view, is the telecom value -- sorry, volume game over? And then on Enterprise, your growth is substantially higher than your European peers. I know you gave huge insight to that fantastic event in Milan last year. But could you just remind us what is different to you versus your peers? Is it something you're doing differently operationally? Or is it something different about the Italian market structure? Pietro Labriola: Okay. We cannot say that our formula can be applied everywhere. When we are in the consumer and mobile ARPU that is the lowest of the world. And also on the fixed, we are among the 3 lowest in the world. The cost of acquisition gives you a breakeven in 3, 4 years. So we are not more clever than the other. But in such a game, spend money to acquire a customer, when the cost of acquisition is a breakeven of 2, 3 years, makes some sense. So it oblige everybody to move in that direction. We declared in 2022, but the SIM declaration was made by the Chief Executive Officer of Swisscom when they acquired Vodafone. They expressly stated in Italy, there's no return on investment to play a game that is based on the volume. So this is the Italian situation and letting that I'm seeing more or less throughout Europe everybody that are starting to say that the strategy is to move from volume to value. Then in U.S. with an ARPU of $50, I don't know because it's something different compared to our ARPU. So this is the main difference in Italy. And in some way, starting from a level of ARPU that is so low, I think that compared to other country, we have some more opportunity. I have to remember to everybody that EUR 1 that is less than a coffee in room is not in New York or in London because there the coffee has a cost of EUR 7, but each euro of increasing price means EUR 160 million of equity free cash flow. And this shows the opportunity that can come from a more rational market. When we move to the Enterprise segment, is the difference that, for example, if you compare us with some other peers, they prefer to sell the data center and to keep the last mile. Due to the regulation, we did exactly the contrary. We don't think that the last mile is a competitive advantage because when you have to offer that last mile to everybody with the same price, putting you the CapEx upfront to do that is no more a competitive advantage. We own the data center and they have to remember that we are the only player in Italy with 8 Tier 4 data center. The future services, Enterprise and Consumer will need a ray of the presence of the customer below 300- and 400-kilometer to experience that kind of service. We have in Italy, the widest backbone compared to the other players. We have, in Italy, a company 100% owned by us that is [indiscernible] in the perimeter of area -- that is a company that works on security, not only for the private market, but also for the Italian National Security. We serve the communication between the Italian Embassy and the foreign minister. These are all elements -- sorry, and we were the first one to sign agreement with some of the hyperscaler to have cloud region with -- in Italy with the cryptography in the hands of an Italian company. So these are the element that makes us different from the other player and the other country. Then in some way, the digital sovereignty that is becoming a must at the European level. If you see in France, the French government want to forbid the use of Microsoft Teams. In Denmark, they don't want to use Microsoft Office. In Germany, they don't want to use public cloud solution. In France, too. I think that it is a trend. And thanks to God we started to work on these things not now, but 4 years ago. Paul Sidney: Just a quick follow-up. I totally agree with you on the ARPU point at EUR 10. It's just crazy when you think about a coffee or a local bread and stuff you buy every day. But is there any reason why ARPUs can't move to 15 or 20 years on mobile in Italy over time? Pietro Labriola: But I was discussing with my team and they will do to you an example. The main mistake was of the telco, because we were unable to show to everybody understand to everybody how much is important the connectivity. We cannot work in terms of strike. I cannot do a strike of 1 day without mobile because I will be in jail. But I will do exactly this example. In Milan in San Siro will cover the stadium with a much better quality. Now if you go in the San Siro Stadium, you will see a pop-up on our mobile, let's say. Do we want to serve at the right pace, you can click here. Today, I'm not asking money. But in the future, I won't cost money for that. Why the customer should clean? If you go to San Siro you pay the coke, 3 times of the price that you should pay out of San Siro. If you buy a sandwich, you will pay 3 times the price that you buy outside. If you get the coffee, you pay 3 times. Why as a tech operator, we were so stupid and idiot to not allow the customer to understand that. A coffee per month is something that you can avoid, but the quality of the network is something that is mission-critical for your personal life. I think that the call is end. So I want to say thank you to everybody. It's important to remember to everybody that this is not the journey that we started 4 years ago is not ended, but now start a second journey because we are able to bring the company in a more normal condition, but the toughest job is starting now. So I want to say thank you to all the team. And we will follow up in the next day to our IR. And thank you to everybody for the trust and thanks to the team. Operator: Ladies and gentlemen, the conference is over. Thank you.
Hamayou Hussain: Well, good morning, everyone. It's wonderful to see you all, and thank you for joining us. 2025 has been a pivotal year for Hiscox. In May, we set out our strategy going deeper into our retail business and making several important commitments. We're executing on that strategy and delivering on those commitments with pace and energy. Our diversified portfolio is built for this market. Growth is accelerating with premiums up $275 million or 6% year-over-year. This is high-quality profitable growth across each of our businesses, driven by product innovation, expanded distribution and customer growth built on our specialty expertise and technology capabilities. and we're expanding our margins. Our undiscounted combined ratio of 87.8% is the best in a decade, and our record insurance service result is the fifth consecutive year of underwriting earnings growth. And growth is translating into a larger asset base, underpinning a record investment result and contributing to a third consecutive year of record profit before tax. We are delivering excellent returns with a 12% growth in book value per share and an operating RoTE of 21%, materially above our target. This strong performance, continuing momentum and execution of our strategy enables us to reward shareholders through a new $300 million share buyback and a further 20% step-up in the final dividend per share as we announced at the CMD last year. This excellent performance, combined with our diversified portfolio makes our business strongly capital generative. Indeed, over the last 3 years, we have organically generated over 100 points of regulatory capital, enabling us to deploy capital in an unconstrained way to pursue profitable growth in each of our businesses and reward our shareholders with returns of $1.1 billion over the last 3 years. Now turning to our results by segment. Retail added almost $200 million of premium as the pace of growth increased to 6.3%, a continuation of our multiyear acceleration. This growth is broad-based across each of our retail businesses, driven by strong customer growth of 7.5% and crucially not rate dependent. And most importantly, this is profitable growth. The retail undiscounted combined ratio at 92.6% is the strongest since 2016. In London Market, we are successfully navigating a competitive environment, returning to growth through product and distribution innovation, while delivering a combined ratio in the 80s for the sixth consecutive year. And in reinsurance, we selectively deployed additional capital to support 6% growth, mostly in specialty lines. And the quality of our reinsurance business is demonstrated by a combined ratio in the 60s for the third consecutive year. Now let's take a look at how we delivered that growth. And frankly, the pace, energy and innovation of our colleagues has resulted in premiums from growth initiatives increasing fivefold in 2025 compared to the previous year. Supported by the launch of more new products than in the last 5 years and expansion of distribution. As we set out at the CMD, there is a huge structural growth opportunity in Retail. And we're capturing this through entering more segments, launching more products, expanding distribution and more markets. Retail is on a multiyear growth acceleration journey. We grew 4% in 2023, 5% in 2024 and over 6% in 2025 and plan to step up growth to 8% for the full year 2026. We have set the course to achieve double-digit growth in 2028. In London Market, we are leveraging our deep underwriting expertise to expand into new adjacencies while deploying AI augmented technology platforms to access new markets. In reinsurance, we have captured the opportunities of the hard market, increasing our net premium by 180% since 2020. Now the ability to innovate is a crucial part of our Hiscox DNA. It has and will continue to open up new growth opportunities in every part of our business. Now let's take a look at innovation in action at Hiscox. Now what you can see here is a sample of the initiatives we've taken in the last year to expand our business and drive growth. We're executing on these with pace and energy, launching new products at an excellent rate. Some of these you may remember as work in progress at the half year. These have now been launched, and we have refilled the pipeline with new products and opportunities that will begin production in 2026. For instance, in the U.S., one of our largest DPD partners has expanded our access to their agent network. And in the U.K., we followed up on the signing of one of our largest ever distribution deals in 2025 with an even larger opportunity that will begin producing premium in the first half of this year. In France, we successfully launched our new cyber product in the fourth quarter. This will be rolled out across all of retail in due course. These actions and many more are accelerating retail growth and enabling us to capture more of the $317 billion target addressable market. And in big ticket, our innovation is moderating the impact of cycle management in certain lines. During the year, we leveraged our existing technologies to grow into SME cargo and U.S. middle market property. In addition, using our underwriting expertise, we expanded into new adjacencies such as tech E&O and financial institutions. The blend of technology and underwriting expertise gives us the confidence to pursue new opportunities with more initiatives set to appear on this list over the coming periods. Now let's turn to the transformative force that is beginning to reshape our industry. Now with the advent of generative artificial intelligence, we are seeing the beginnings of profound changes in society and our market. The way consumers and small businesses are buying insurance is beginning to evolve. Large language models, LLMs are increasingly a key part of the buying process. Now with our experience, decades experience of providing specialist insurance directly to customers, we have an established competitive advantage from our trusted and distinctive brand to our leading Net Promoter Scores and high-quality service. These objective strengths stand out even more in the world of AI, where agents -- AI agents can evaluate a policy quickly on more than just price. We've been investing in technology for many years, building out our core systems and improving data quality. We have a leading global digital platform for small commercial insurance, now approaching $900 million of premium at almost 900,000 customers. These investments enable us to implement AI tools relatively quickly at a modest cost. We're excited about the efficiency and growth opportunities that AI brings. And we're not standing still. This year, we will begin to roll out new, more powerful customer and broker portals in the U.S. and in Europe. These will enable us to personalize the purchasing journey and help customers identify their insurance needs and simplify and speed up processes for brokers. As of this month, in fact, I think it's today, we are deploying AI agents into our U.S. customer contact centers to create real-time feedback loop for our operations and marketing teams on customer experience and sentiment. And if a customer wants to make a claim, an AI agent will be there to help. We are embracing generative AI for the benefit of our customers, our colleagues and our shareholders, and I believe Hiscox is well positioned to win. Now turning back to today's results. We've delivered on our promises in 2025. Retail has grown 6.3%. This growth will accelerate in 2026, building to 8% for the year before reaching double digits in 2028. Our operating RoTE of 21% is materially above our mid-teens through-the-cycle target. The change program has delivered a P&L benefit in the year of $29 million and is on track to deliver $75 million of benefit in 2026. Paul will provide further details on this. And our shareholders benefit from our growth and earnings with a 20% increase in the final dividend per share and a new $300 million share buyback. With that, I'll now hand over to Paul. Paul Cooper: Thanks, Aki, and good morning. It's great to be here with you all today presenting another strong set of results. We have achieved high-quality growth across each of our segments with ICWP up $275 million or 5.9% against the backdrop of falling rates, demonstrating the strength of our diversified growth. Importantly, we have delivered excellent profitability alongside this growth. The undiscounted combined ratio of 87.8% drove a record insurance service result of $614 million. The group's profit is supported by the record investment result of $443 million, underpinned by increased AUM following stronger premium growth. Our superb underwriting and investment results have translated into a record profit before tax of $733 million, up 6.9% and delivered an attractive RoTE of 20.9%. This is despite a 2.5% drag from the increase in the effective tax rate. The group's excellent profitability has driven substantial capital generation with a year-end estimated BSCR of 233%. And this is after returning over $400 million of capital over the course of 2025. As a result of our strong capital generation and balance sheet, the Board has ratified the 20% step-up in the final dividend per share announced at the CMD. In addition, we will be returning $300 million to shareholders through a new buyback, resulting in total returns of over $450 million in respect of 2025. Delving into these results a little further, starting with our Retail segment. In line with guidance, Retail ICWP grew by 6.3% in constant currency to over $2.6 billion. This growth has been broad-based across all markets as management actions delivered results. Growth has been accompanied by an improvement in the undiscounted combined ratio to 92.6 partially due to early benefits from the change program. Importantly, retail growth is transforming the shape of the group's earnings profile with retail representing nearly half of the group's PBT, up from just over 40% in 2023. Moving on to London Market. London Market returned to growth with ICWP increasing by 1.6%. In a competitive market, the business benefited from product innovation and opportunities arising from London Market's diverse portfolio. Profitability continues to be strong with an undiscounted combined ratio of 85.9%. This is testament to our underwriting discipline, risk selection and pricing as we navigate the market's micro cycles. Turning to reinsurance. Net ICWP grew by 7.9%, driven by growth in pro rata and specialty lines, including our climate resilience portfolio, mortgage and surety. The quality of our risk selection is demonstrated by an insurance service result of $189 million and an undiscounted combined ratio of 67.4%. Fee income of $109 million is very healthy, above $100 million for the third consecutive year. And we continue to see strong interest in our ILS funds with more than $330 million raised in the last year and a robust pipeline for 2026. ILS AUM on the 1st of January 2026 is $1.5 billion. As we continue to see strong capital inflows from third parties, while managing our own net exposure to property cat perils, the earnings mix between fee income and underwriting will continue to evolve. Moving on to our change program. We're making strong progress. On this slide, you can see examples of achievements against our ambition and some of the actions that will deliver benefits in 2026. We have significantly increased fraud detection rates through new capabilities, representing a real cash saving in 2025. However, given our conservative reserving philosophy, much of the benefit is yet to be recognized in the P&L. We have in-sourced over 100 roles in our Lisbon Tech Hub, enhancing the capabilities that drive our competitive advantage while leveraging the use of a lower-cost location. In 2026, we will build on this, rolling out more centers of excellence and further extending the scope of outsourcing where we benefit from the greater scale that specialist providers, partners provide. In procurement, we have reduced our property footprint and continue to consolidate our suppliers, enabling us to negotiate better terms. Over the coming year, we will double down on this, increasing the number of strategic partnerships and preferred suppliers while better managing demand within the group through improved cost governance. Finally, in technology, we decommissioned 20% of our applications in 2025 while launching new automation tools across the value chain, which will help to drive scale into the business. This will continue in 2026 as we launch new automation tools that will deliver efficiency benefits alongside driving revenue growth. Looking at the benefits. We're on track with our change program and we have achieved a benefit of $29 million at a cost of $24 million. And while we're slightly ahead of our 2025 benefit guidance, there is no change to our targets. We remain on track to deliver a $75 million benefit in 2026 as we optimize processes, sourcing and procurement, fraud detection and recoveries. We expect the cost to achieve to be $75 million, which includes costs associated with in-sourcing and outsourcing, legal expenses and tech implementation costs, including some of the exciting new capabilities that Aki referred to earlier. And these will help to deliver a $200 million P&L benefit in 2028. Let's look at how this is impacting the P&L. Disciplined cost management and savings from our change program means that our underlying expense base has increased by just $6 million. This is despite inflation and changes in variable comp and the investment in growth and technology initiatives highlighted by Aki. This, in turn, is driving improvement in our operating jaws with a 0.8% increase in underlying expenses comparing favorably to a 5% growth in premium in constant currency. Overall, this is very pleasing progress. Now turning to investments. Our record investment result benefited from strong yields and increasing assets under management as growth in the business translated into more assets on the balance sheet. As we go forward, that increase in AUM will help to offset the small reduction in the reinvestment yield to 4%. As such, strong investment returns should continue to provide a tailwind for the group. The quality of the fixed income portfolio remains high with an average credit rating of A, and the business is conservatively positioned on the asset side. Looking at reserves. Our conservative reserving philosophy is unchanged with a risk adjustment of $345 million, representing an increase in the confidence level to 86%, slightly above our target range. And this is despite a healthy level of prior year releases and reflects the point where we are in the cycle, the quality of our underwriting and the conservatism of our reserves. Over time, we expect the confidence level to return to within the 75% to 85% range. The conservative nature of our reserving has enabled us to release $293 million or 7.2% of opening reserves for 2025, continuing our long history of an uninterrupted positive reserve development. All accident years are below the initial estimate and continue to run off favorably. Finally, an update on capital. The group has delivered outstanding organic capital generation of 34 points. This has supported both investment in the business and returns to shareholders of 22 points of capital, resulting in a year-end BSCR of 233%. Following the payment of our final 2025 dividend and our new $300 million share buyback, we have a pro forma BSCR of 211. This compares favorably to our through-the-cycle operating range of 190 to 200, providing us with the flexibility to capture opportunities as they arise in a rapidly changing market. Thanks for listening. And with that, I will now hand over to Jo, who will provide you with an update on underwriting. Joanne Musselle: Thank you, Paul, and good morning, all. So our underwriting results reflect disciplined cycle management, profitable expansion and a strategic investment in both data and capability to continue to build a balanced and diversified portfolio, which you can see on this next slide. Our retail compound growth is anchored in profitable underwriting, delivering a core of 92.6%. In the U.K., Private Client is up double digits as we continue to benefit from our market-leading expertise. Commercial growth is due to an expanded customer base and a sharper sector focus. In Europe, France and Germany are leading the charge as we continue to go deeper into our chosen segments and deliver new products tailor-made to our customer needs. And in the U.S., Digital Direct is continuing its excellent growth. Momentum in partnership is building and broker once again expanding as we have delivered improved service delivery and a slightly broader appetite. Turning to the London market, where our ability to manage those micro cycles has remained a key differentiator, and we've once again delivered a combined operating ratio in the 80s. So property has seen some growth fueled by a U.S. high net worth portfolio and the tech-enabled expansion into mid-market. And this is offsetting some intentional cycle management in major property and commercial lines. We've seen some modest growth in casualty. We've had some rate tailwinds in general liability and a successful launch of financial institutions and technology E&O. And this is mitigating some declines in cyber and D&O as those markets continue to soften. And then lastly, reinsurance, a slightly softer market in 2025, but still a really favorable market. And despite another year of over $100 billion in industry losses, our risk selection, our robust reserves and a benign second half has enabled us to deliver a core in the 60s. So where are we in the cycle and how favorable is the market? So this next slide, hopefully, a familiar slide to you. So the chart on the left is our rates indexed back to 2018 for our segments. The purple line, which is Retail, is just less sensitive when it comes to the rate cycle. Rates were up in aggregate 2% and pricing across U.K., Europe and the U.S. remains strong. In 2025 for the first year in many saw aggregate rate declines for both London Market and reinsurance, although we remained in an attractive market. So the blue line is our property cat reinsurance rates come down 4%. This moderated as we went through the year as our midyear renewals, particularly those loss affected, attracted some rate increases. Across the whole of the reinsurance segment, rates were down about 5%, but still up 83% since 2018. And we saw a similar story in London Market, a 4% dip in 2025, but still at 67% since 2018. And that softening has continued in 2026. So our January renewals saw London Market come down another 4% and reinsurance down 13%, particularly in the areas of property, cat and retro. So the chart on the right gives you an indication of what we believe that does to the rate adequacy of our portfolios. So as a reminder, adequate means we believe it's adequately priced to deliver a good return in a mean loss environment. Adequate plus means we've got margin in addition and low, still profitable, but just below our target underwriting reserves. And you can see, despite the softening, we believe that much of the portfolio is still really well positioned to deliver a good return. And we benefited from some tailwinds in our own outwards reinsurance purchasing. So mastering changing markets and managing micro cycles is not new to us, and we continue to have many different portfolios in many different parts of the markets. And you can see this on the next slide. So the London Market rate environment is highly nuanced both at a line and a divisional level. And you can see the divisional picture on the right-hand side is quite different to the London Market headline. During this period, casualty rates have declined, whilst property rates have seen significant gains, and we've acted decisively. So during the same period, our average exposure per policy and casualty has reduced by 20%. And more recently, we've added over $100 million of property income. This laser focus on exposure management and profitable expansion has been the key to that consistency in that combined operating ratio. So we've learned from lessons of the past and our enhanced cycle management is really focused on 4 things. Firstly, a forward-looking view of risk, really understanding those inflationary trends, whether they be economic, societal or climate. A market in transition framework. This is a framework that's honed to capture the position of each one of our lines in the market and proactively respond to evolving conditions. Exposure management, we absolutely know -- need to know when to trim when we don't believe we're getting paid to take that risk, but also when to expand when we believe the expected returns justify the exposure. And lastly, new, of course, we want to actively manage the portfolio that we have and seize new opportunities for profitable growth. So this next slide gives you a little bit more information on our market and transition framework. So what you can see here, each bubble represents a line of business in London Market. So this is a proprietary framework. We built it around 10 quantitative type metrics, things like technical index, exposure deductible. And we add to that 5 more subjective metrics on the market. These could be things like broker interaction or terms and conditions. So for London Market, we're monitoring 285 metrics on a quarterly basis, and we have a very similar framework for our reinsurance business. Now each metric has an expectation or a tolerance and flags for investigation if it's outside of that. Now not all investigations will result in underwriting action. Most often when we look, the underwriting action has actually already been taken. But when it is required, responding really quickly is key, and that could be reducing your line size as an example. So in summary, a transitioning market, but a largely attractive market. So unlike our big-ticket businesses that flex with the cycle in Retail, we're looking for compound growth through the cycle, all anchored in consistent profitable loss ratios, and you can see that from the chart on the left-hand side. We've built out a specialist underwriting ecosystem from risk selection through to claims management, all underpinned by investment in brand, technology and capability. Our focus is squarely on customer value. We invest in our segments for the long term. We maximize value through market-leading retention and product penetration. After decades of investments, the majority of our retail customers already benefit from being auto underwritten, but we have ambition to go much further. And lastly, new, we want to deliver new products and services to existing customers, go deeper into our segments to attract new and boldly go into new markets. So as I look forward to 2026, my 3 priorities are clear. Firstly, a relentless focus on managing our portfolio, knowing when to trim, but also knowing when to expand when the outlook is compelling. Turbocharge innovation. We want to find quicker ways to bring new products, new services and expanded appetite to market. And lastly, capability. We want to blend humans with the best humans with advanced technology to really amplify our specialist underwriting expertise. And we want to train our underwriters for skills for the future so they've got data fluency and a practitioner at their core. Thanks very much. I'll now hand back to Aki. Hamayou Hussain: Thank you very much, Jo. So looking ahead to this year, as a result of the pace, energy and innovation we've generated, this year is positioned to be another really exciting year for Hiscox. Retail growth momentum will continue into 2026, building to 8% for the full year and on track for double digits in 2028. In big ticket, we expect innovation and new opportunities will moderate the impact on growth from our disciplined cycle management activities. And in reinsurance, following strong growth in recent years, in 2026, we expect to maintain our natural catastrophe exposures broadly flat on a net basis, while we are continuing to seek out growth opportunities in specialty classes. And finally, as you've heard from Paul, our change program remains on track to deliver $75 million of P&L benefit this year. So in closing, 2025 has been a pivotal year, a year of record underwriting results record investment results, record profits, and momentum has been building over the last few years and is set to continue. The group's combined ratio is the best in the decade. Retail's margin continues to expand. London Market has delivered a combined ratio in the 60s -- sorry, in the 80s, I wish 60s, 80s for the sixth consecutive year and reinsurance in the 60s for the third consecutive year. And in our change program, we are delivering expense efficiency and a significant build-out of capabilities with more to come. Our operating ROTE of 21% is materially above our through-the-cycle target. And our capital generation has been strong, enabling us to deploy capital in an unconstrained way to pursue high-quality growth in each of our businesses and to reward our shareholders with capital returns of $1.1 billion over the last 3 years. We look forward with confidence and optimism. These are exciting times at Hiscox. Thank you for listening. And now we'll take questions. Okay. Why don't we go right to left. So Shanti? Shanti Kang: It's Shanti from Bank of America. The first question was just on the retail growth outlook, that step up to 8% in '26. Where is that really being driven from by region? A walk of how to get there from the 6% that you've done this year would be quite helpful. And then I was just looking at the claims ratio in Retail this year, and it looked like that deteriorated a little bit year-on-year based on the restatement. Is there any reason for that deterioration? Is that really on more conservative initial loss picks? That would just be helpful. Hamayou Hussain: Okay. So kind of taking each of those in turn. In terms of the growth outlook, okay, I think context is important as well. So we've already taken the business from what was 4% growth in 2023 to 5% and then over 6%. And as you say, we're guiding to 8%. This is broad-based growth. There's no one single action that's driving this. It ranges from the effectiveness of our distribution teams and our distribution functions. And as you've heard me say many times before, we are increasingly winning positions on broker panels. We're winning new opportunities, new distribution deals. In fact, the U.K. has been leading the charge across the group on that. In our U.S. business, we're adding more partners. This year or in 2025, we added a further 23 partners. So as those gain traction and build production as well as growth from our existing partners. We're continuing to invest in marketing. In 2025, we increased the investment by 9%. I think we're now at about $109 million. You can expect that to go up by a further 10%. This is a great investment. We get very good returns from the step-up. We have stepped up our product innovation and expansion into adjacencies. And you can see that reflected in the 5x growth from new initiatives. We've turned around the U.S. broker business. That is now growing. So it's a range of different factors that are driving that -- that are achieving that growth. And as I mentioned earlier, and this is not rate dependent. In fact, rates have been going the other way. We have now come off the rate step-up that we were seeing in the Retail business as a result of inflation as inflation has abated. And if you go back to 2023, the rate increase was about 7%. Now the rate increase is 2%. At the same time, the growth has grown from 4% to 6%. You can see what the underlying is doing here. This is a volume-driven growth story here, and it's largely about the effectiveness of the management actions we've deployed over the years. In terms of loss ratio, look, we don't land this on the head of a pin. That is a market-leading loss ratio for the Retail business, we're very pleased with it. Andreas, I know this will and keep going. Andreas de Groot van Embden: Yes, Andreas van Embden, Peel Hunt. Just on cycle management. It sounds like we're going to continue growing exposures into a softening cycle in the next few years. I just wonder if you take a 3-year view through this planning cycle, what are your assumptions about the increases in capital requirements across the business. Is that going to be a gentle sort of rise over time as you grow exposures or will you, at some point, de-risk that property cat book and will capital requirements come down again? That's the first question. And the second question is on your reserve buffer. You're now at the top end or slightly above the top end of the range. Is this something that will be released in the future? Are you being sort of extra cautious or will inflation eat into those buffers, so it will naturally erode within that 75%, 85% range? Hamayou Hussain: Okay. Thank you, Andreas. So I think there are kind of a number of parts to that question. In terms of how we expect the big-ticket business to evolve over the next period, I think we've spoken about the fact that our product innovation and expansion into adjacencies will moderate the cycle management activities. I think Jo can provide a little bit more detail on that. In terms of capital requirements, as we expect them to evolve and the reserve buffer, Paul will address that. Joanne Musselle: Yes. Thanks, Aki. So as I said, we are a disciplined underwriter, you can see that in terms of our track record. So what we didn't say was we're looking to grow exposures, there's lots of lines where actually we have actively and decisively shrunk exposures. So we talked about some of the casualty lines where the rate has been decreasing. We've been actively taking -- reducing our exposure during that time. And as we look forward, we're seeing some softening in our property lines. And clearly, if that continues, we'll trim. So first and foremost, we are a disciplined cycle manager in our big-ticket businesses, albeit we are still in an attractive market today. And obviously, the rate adequacy slide show that in the majority of the portfolios, we still have rate adequacy. So that's -- but I think what we did say is what we've managed to do, particularly in 2025 is we've just mitigated some of that intentional cycle management action by some of the new things that we've been doing. And that's the launches of adjacencies. So we mentioned a couple in casualty. I mentioned the sort of mid-market property expansion as an example. That is offsetting some intentional reduction elsewhere. In casualty, we launched technology E&O. Now we've been a tech E&O writer for a couple of decades across all of our Retail business. It's a real heartland for us. And we launched a new product in our London market business. So this is to capture the slightly larger customers, find their way to London, written on a subscription basis. So that's what we're talking about in terms of that cycle management. Of course, we are a disciplined writer. I always say our job is to make money in the market that's in front of us, not the market that we'd like to have in front of us. So we'll react accordingly, and we're looking for new opportunities to profitably grow. And it's the combination of those 2 things. So it's actually really underpinned that consistency you see particularly in the London market with an 80s combined for the last few years. Paul Cooper: Yes. Building on that and how that translates into capital. So I think there's kind of 3 drivers. One is market conditions looking ahead of us, the second is the retail business and the third is cat P&L. And I think if you look at sort of consumption over, say, the last 2 years, it started to moderate. Now the reason that started to moderate is we've really held our cat P&Ls constant, but at the same -- and that's off of, obviously, a very high base as rates of strength. And you heard that we've increased our premium income 180% from a capital perspective over the last 5 years. So we sort of hold that constant. But what you've seen is the retail business accelerate in terms of its momentum. And looking forward, we've talked about 8% in 2026 and double digit for 2028. Now clearly, that requires more capital. Retail is the least capital intensive part of the business, but it still requires some capital on the balance sheet to grow. And so what I'd expect is that degree of moderation looking ahead now, clearly, the third dynamic is what happens with market conditions and also what happens about these opportunities that Jo has talked to around innovation, that will dictate whether we sort of need less capital and reduce exposure or actually need more because we're taking advantage of these opportunities. So that's sort of the outlook ahead of us from a capital perspective. I think from a reserving perspective, I think the important aspect around inflation is it's built into our loss picks. So we do have a cautious approach to reserving. We have a cautious approach to our loss picks, and that does obviously generate redundancy coming forward. Now our positioning at 2025 from a year-end perspective has been quite deliberate. We obviously have built on that sort of conservatism that we've talked about by increasing the confidence level. We are at 86% from 83% but we've also increased the level of margin in the reserves. And I think that puts us in a great position in terms of where we are at this point in the cycle. And you're absolutely right, Andreas, that looking prospectively, we've got a range of 75% to 85%. I'd expect us to trend back within that range. And I don't think inflation as we currently see is an issue because it's already built into the loss picks. Hamayou Hussain: Will? William Hardcastle: Will Hardcastle, UBS. If I can try and pin you down slightly on one of those answers, Paul. You mentioned the capital consumption. I think it was 13 points in that solvency bridge last year. Just linking it with Andreas' question, is that likely to be a relatively stable number? And I know there's a bit of a range around that? Or is it likely to go more likely down than up next year? Then on the LLM impact into the SME distribution, I guess you touched on it in the conversation, Aki, but I'm really trying to understand whether you -- what are the risks, what are the threats and what are the opportunities for Hiscox to really take advantage and why? And it's really thinking about broker disintermediation by the LLMs. Hamayou Hussain: Okay. Paul, if you address the capital point, but let me cover the LLM point first. I guess, first and foremost, we are pretty excited about the ability and the prospect of using LLMs and frankly, the emerging world, which is not quite here yet of agentic e-commerce. We have a long track record of investing in technology and being on the front foot, particularly when it comes to that small commercial business segment, which is a heartland for the retail business. And again, if you look at the context, we've been investing in that business in terms of technology, et cetera, for decades. We have a market-leading global platform now that covers 12 countries, U.K., U.S. and Europe, with $900 million of premium flowing through it and serving 900,000 customers roughly, which is highly automated with all the underwriting automated. So in excess of 99% of the risks that flow through that platform are auto underwritten. So we've invested in the technology. We've been ripping out core systems and replacing them with new. We've been cleaning up the data for many, many years. And actually, that puts us into a fantastic position now that with the advent of Gen AI, we can actually build our own or adapt -- adopt rather the AI tooling relatively quickly and for a relatively modest cost. And that's exactly what we've been doing across the business. So we're excited about the efficiencies that this will bring, but we're also really excited about the growth opportunity, the expansion of our reach into our customer -- into our prospective customer base and also the opportunity to develop new products that, frankly, just didn't exist before, and I think that's going to be a real opportunity for us as well. I mentioned earlier that we're deploying AI today, right? So there's things that we've just done. There are things that are in development that we are doing. And what we've done, we're already using AI agents in our marketing analytics. We're using it to triage broker submissions in the U.K., and that's going to be rolled out across the whole of the group. We were first to launch an AI augmented lead underwriting platform in London market. That was the first for Lloyd's. Again, we were able to do that because we've already invested in the tech and the data. The emerging things that we are doing, which are really going to open up the funnel for growth. It will take a bit of time because it does require customer adoption as well. So we have -- I think it's today or yesterday, we've launched AI agents into our U.S. call centers. That will give us, I think, as I mentioned earlier, real-time feedback, immediate feedback to our operations teams on customer sentiment and experience and also feed directly into our ads platform, right, which then dictates how we then market back to those customers. If you think about the strength that we've built up over the last decade, which is having a trusted and distinctive brand, market-leading claims service. We have an NPS score, which is in the 70s and 80s. The market average is materially lower than that. Our world-class customer service, the tailored coverage that we provide, these are all objective strengths, which in the world of AI agents and agentic e-commerce stand out, right? In the old world or -- sorry, in the current world, really, if you go online, the only thing you can really compare on is price. We don't trade on price. In the prospective world, as a new person who's buying insurance for their small business, you can get much more information. And in that world, I think we open up the platform. I think we will stand out much more, and we are readying our platform for the world of agentic e-commerce. As I said, we're in the process of building for deployment later on this year, new, much more powerful portals. These will sit alongside. If you think back about the strategy that we've had, we have an omni-channel distribution approach, right? We are building leading platforms to enable us to access and trade with brokers. We trade with partners and we go direct. This agentic e-commerce channel as it were, certainly for the moment, will just sit alongside depending on customers' preference. So we're pretty excited about it. But a lot of the hard work has been done, and now it's about implementing these new tools and seeing how they're adopted, both internally and externally. Paul Cooper: Just on consumption, yes, to knock that one off. Yes, so based on the conditions we see ahead of us today, consumption will be lower. Hamayou Hussain: Ivan? Ivan Bokhmat: I've got one big AI question and 2 small finance questions, please. So on the big AI question, I'll start with that. I think there's a perception that for reinsurers, the underwriting edge is essentially the moat that can protect you from being disrupted. So I was just wondering if you could maybe provide some of your views on this. And if you think about your data and what's out there in the market for available for underwriting, how much of it is publicly available, like cat models or cyber models or whatever it might be? How much of it is proprietary? And how much of it is unstructured proprietary that you could still tap on, but maybe where you are in that journey versus peers? So that's question one. And then question two, I mean, I've noticed that across your growth initiatives, and this has been a trend for a little while now, you don't really have like AI CapEx, data centers and all that. And I was just wondering what your thoughts on that might be? Is it the next leg for you to expand in? Or is there a reason why you haven't really been pushing there? And the third question is, I mean, on the capital ratio, obviously, you have to 11% now, 13% stress. It gives us 180% post-stress ratio, which I think in the past was like a good guide for how you would manage your capital. Is this still the case? Or any developments there? Hamayou Hussain: Okay. Thank you for those questions, Ivan. So what's our underwriting edge in reinsurance? I think that's one for Jo. In terms of underwriting appetite then in terms of data centers, et cetera, again, another one for Jo. And Paul, if you want to address the question on capital and how we manage that within the ranges? Joanne Musselle: Yes. Thanks, Aki. So I think in answer to the question, it is a combination. So what we rely on is, of course, and I talked about it, we, of course, rely on in that reinsurance world, the best external models as an example. We take what's available, but then we blend and we overlay what we call a Hiscox view of risk. And we do that across both our reinsurance and indeed, all of our other insurances. And that is really important, and that is proprietary, where we are utilizing our own proprietary information, our own bespoke data sets, building in things like that forward-looking view of inflation. It's really important for us to get ahead of some of these trends and price forward. So I'd say in terms of the edge, it is a combination. We are utilizing the best external data, but also blending that with our own internal data. And of course, we're using technology, have been for many years in that underwriting process to do 1 of 3 things, either to make us easier to do business with. So take the reinsurance example, how can we consume submissions quicker. Clearly, the advance of technology enables us to consume more submissions in a much shorter time, much better in terms of response time back to, in that instance, brokers or indeed more broadly, customers, we're utilizing it there, absolutely utilizing it to make better decisions. So whether that is ingesting third-party data, make us -- make better underwriting decisions, underwriting of pricing decisions, that's sort of the second area that we're utilizing and clearly making us more efficient. So I'd say it's a combination. It definitely is looking outside and taking the best external information that exists and then blend into our own proprietary data sets. So with regard to data centers, yes, absolutely. I mean, data centers is definitely becoming a significant area. We talk -- there's a lot of talk about it being a structural growth opportunity, and it really is underpinning that digital economy. We're really thoughtful. We're really thoughtful. We have lent into that. We're curious. We've deployed some capacity in both our primary and our London market business and in our reinsurance business. But at the moment, we're thoughtful because one of the significant areas that we need to get a head around is accumulation. And we're also investing at the same time, deploying a little bit of capacity. We're also investing in building our own accumulation model. So we're really clear around where these accumulations lie, and we can actually manage them -- managing them ourselves. So yes, watching it, deploying some capacity, but also thoughtful in terms of accumulation. Paul Cooper: On capital, at the CMD, we announced our target operating range through the cycle of 190% to 200%. You'd see the 211% on a pro-forma basis is a bit outside that. So sometimes you can expect through the cycle we will be outside it. I think it's a small amount above. I think we've struck the right balance between the increased share buyback that we have announced today of $300 million and retaining the optionality for further opportunities for growth. We are a growth business, if you look at our capital management framework, the first priority is growing the business. Hamayou Hussain: Okay. Let's keep going along. Abid? Abid Hussain: It's Abid Hussain from Panmure Liberum. I've got 3 questions. The first one is on the pricing cycle. Just wondering if you could talk to your past experience on previous soft cycles and that move from adequate pricing to inadequate pricing. Is that typically gradual? Or does it happen in a sort of cliff edge moment? And if so, are you looking forward, are you sort of seeing potentially any cliff edges on any key lines of business, so that's the first question. The second one, just coming back on the reserving philosophy. So you're reserving now at 86% above the 75% to 85% confidence interval that you set yourself as a target. And it sounds like you're saying you're just being conservative because pricing is softening. Just wondering if there were indeed any areas where you saw loss picks deteriorating, any sort of concerns at all? Or is it just genuinely just being conservative? And then just sort of how quickly would you expect yourselves to trend back to around 80%. So that's the second one. And then just finally, very quickly, the final question on M&A. Are there any areas where you benefit from participating in M&A? So I'm thinking really sort of adding new capability, new sort of product sets in adjacent areas to help you accelerate growth in adjacent areas. Hamayou Hussain: Okay. Thank you, Abid. So in terms of the evolution of the pricing cycle, Jo will take that. In terms of reserving, Paul will provide commentary. In terms of M&A, I guess the first thing to say for our business, as you can see from the results today and from previous years and the diversification within our portfolio is we don't need M&A for growth. We have a fantastic retail franchise, where I think last year, we set out the extraordinary growth opportunity. And what you can see is over the years, we are accelerating the pace at which we're capturing that opportunity, and we're very confident and optimistic, frankly, about getting to 8% in 2026 and extending that up to double digits in 2028. And in our big-ticket business, again, we've demonstrated we are leading class in terms of cycle management. At the same time, we are -- we've stepped up the product innovation, and we are expanding into adjacent classes to moderate the impact of cycle management. Now again, if you look at the history, we're approaching $5 billion of premium. That is almost exclusively organic growth. That is the predominant form of growth that we will achieve. But what you also saw from 2025 is where there's a strong strategic rationale and the financial metrics make sense, we will consider small bolt-ons. Of course, we purchased a very small entity called Lokky in Italy, which we closed in the second half of last year. That gave us a toehold into the country. Frankly, no premium, but it gave us a system, and it's given us 23 people who understand the local market. It was a pretty new start-up. And we are now consolidating that and that we will move forward from there. Pleasingly, we are getting premium in 2026. And then we also deepened our presence in the U.S. where we made, again, a very small acquisition. And just building on your point, Abid, that did give us access to a couple of classes of business that were on our to-do list, but it's given us quality underwriters, some engineering capability and access to life sciences and tech start-ups. And it's also given us the beginnings of a tech platform for our broker intermediated channel as well. Over to Jo on the pricing cycle. Joanne Musselle: Thanks, Aki. And maybe if we can just bring up that pricing chart because I think it's a helpful backdrop. I'm not going to give any predictions on the pricing cycle going forward, but just maybe just some observations on the cycle that we've already been in. I think this has been a very different pricing -- a hard market or hardening market than we've had historically. I think if you look at that slide, I mean, we've had gradual increases over many, many years across different lines. And I think that's because it's been driven by lots of different things. So it's not just been driven by significant cat activity. It's been driven by lots of things, whether it be low interest rates, whether it's high inflation, geopolitical uncertainty, emerging risk, climate change. There have been so many different factors that have driven this current cycle that it's been really, really prolonged. So it's difficult to see one thing disappearing and the market changing overnight. I think the other thing about this cycle, which has been very unusual is it was actually primary insurance led. So normally, cycles are reinsurance rates led, reinsurance rates go up and therefore, you have to put your primary rates up. Actually, you can see that red line, which is our London market lines. I mean, they moved significantly quicker than the blue line, which is property. And actually, during that early period, '18, '19, '20, I mean, we were calling for a harder market in reinsurance because we just didn't believe we were getting paid to take the risk. And so we were actually very vocal in terms of that. The other thing on the red line, and I showed you with the sort of underneath is that's an aggregate view. What actually was happening with those early rate rises was casualty. So casualty was the early rate rises. Casualty has now softened, but rates went up 200%, 300% for some lines, and now they're moderating. Property lines really started to move in sort of 2023. And I think the other really important thing about rating is what you can't see on this slide is terms and conditions. We all talk about the rates going up or down. We talk about rate adequacy, but actually terms and conditions are really significant. So the biggest driver of the '23 blue line, yes, of course, rates went up 30%, 40%. But actually, terms and conditions materially changed, particularly attachment points in reinsurance and terms and conditions tighter around the coverage and those have largely been maintained. So when we look back at this softer part of the cycle as in '26, where rates have come off, actually, it was a price-led softening. Terms and conditions, attachment points have largely maintained, which is why there's a vast majority of that. So I talked about it being a really active year, over $100 billion, $120 billion of industry losses in 2025, but a lot of them didn't make their way to the reinsurance because of that attachment point. So yes, no predictions for the future other than to say it's difficult because it's being driven by so many different things. I can't think of if one thing changed overnight that obviously, the cycle would dramatically change in one go. Paul Cooper: Its a good segue across to the reserving. I think -- so what I'd say is and what we said consistently is our conservative reserving approach remains the same. So it's unchanged. We have a prudent best estimate, and we've built upon it. I think the important point for 2025 is we're coming at this from a position of strength, the increase in the margin and the increase in the confidence level to 86%. And that really builds on what Jo has just said. We're coming at this from a point where we've got high-quality underwriting. I mean, look at the loss ratios that we've delivered across each of our business segments. So the quality of the underwriting, the diversity of the portfolio enables us to do what we've done in 2025. I think in terms of the pace of the -- getting back within the range, I'm not going to guide to that, but we will be back within it. Hamayou Hussain: Just to add to Paul's point, if you flip back to the slide which shows the reserve releases, where you can see we're in a, I guess, in a fantastic position where you've seen stronger reserve releases predicated on, frankly, every accident year seeing a positive trend and at the same time, increasing reserve redundancy. And that's something just to kind of factor in as a package. That's what you're seeing here. Daniel? Daniel Wilson-Omordia: Daniel, Morgan Stanley. Encouraging to see the change program coming through as expected this year. I'm just wondering the actions you put through this year, do you see them as quick wins or easier than the actions to follow from here? Or is there any -- another way to phrase the question, is there anything that's been harder to achieve this year than you expected or anything that's coming up that you think will be harder to achieve than what you put through this year? Hamayou Hussain: Okay. Paul will cover kind of the detail of that. Let me just give you a kind of overarching comment. The overall program, I think we laid out the categories last year, is tech rationalization, capability buildup, procurement and operational excellence. The program is underpinned by tens of initiatives. There's no one single initiative that's going to kind of drive the savings. And reality is not everything is going to work. But that's kind of factored into the number of listings we have, which if they all work, the sales will be a little bit more than what we set out. So there's some contingency built into that, but I'll let Paul get to the meat of the issue. Paul Cooper: Yes, absolutely. Thanks. So I think the important thing to bear in mind is what we're trying to achieve. So it is all about really driving scale, improving productivity across the business and the $200 million falls out of the back of that. If you look at what we've done for 2025, the $29 million gives us a really good baseline going into 2026, and we've got a clear line of sight of that $75 million that we'll deliver by the end of this year. There are, of course, some quick wins within this. So setting up a procurement function is one aspect where you can renegotiate some contracts. I mean, I say it's easy, but there's obviously a lot of work in understanding how you get to that point. But I'd say to Aki's point, the number of initiatives that we've got on and the strong sponsorship and the program management around this gives us strong confidence in those areas. So we talked about the benefits and the visibility that we're seeing around, say, fraud and recovery, we have in-sourced as you can see there, more than 100 roles to Lisbon that is at a lower cost. So that is already sort of underway. We're sort of in the middle of outsourcing since certain components. And again, good line of sight on track in terms of that component. So I'd say the program is well established. You can see the areas that we are tackling. It will give us a business that is much, much more scalable than it is today. Hamayou Hussain: James? James Shuck: It's James Shuck from Citi. I just wanted to ask about the Google Cloud relationship. It's a multiyear relationship and up to this point, it's really been focused on kind of efficiency gains and underwriting. With the pace of change that we're seeing, it's not clear to me what else they can bring to the table, the larger language models that are emerging, whether it's agentic AI. Since you kind of started that agreement, sort of what are your views on how far that relationship can develop and what else can they bring to the table? We start to use unstructured external data? Where else can it be applied to? That's the first question. And secondly, probably the only accounting question today. But on Slide 51, just interested in the reinsurance receivables, which remain very elevated. I presume some of that is COVID-related. In which case, I'm kind of wondering at this point why we haven't reverted back down to the 10% average that we've seen prior to COVID? If we did see that 15% reinsurance recoverable come back down to the 10%, does that have any implications for the solvency? Hamayou Hussain: Okay. So I think the accounting one is directed to you, Paul. So in terms of Google Cloud, et cetera, look, we have strong and deep relationships with a number of, I guess, leading software and cloud companies, including Microsoft and Google. Look, they -- those partnerships extend to a range of different factors. So firstly, we have a lot of our applications and software on the cloud. And I think with the advent of gen AI and agentic e-commerce, et cetera, I don't think that's going to change. Those are facilities that frankly, those 2 companies and others invest billions and billions of dollars in, in terms of making sure they're high-tech secure, et cetera. Where else do we use the skills of those companies? Those organizations have tens of thousands, if not hundreds of thousand software engineers. And what they can help us do is accelerate the journey that we're on. Now what do we bring to the party? I said -- the thing that we bring to the party are kind of 3 things. One, we have invested significantly in our technology over the years. This is not something new to us. It's already within the P&L. You can see it. We have spent years gradually cleaning up our data. It's never perfect, but it's in pretty good condition. And the third thing is ambition and culture. So we have a culture that's a business builder culture. So we're looking for new opportunities. We're continuously experimenting. So we use the state-of-the-art AI tooling these days that they are bringing, but we already have a system where we can integrate it and build it and start to develop real use cases within our business. So for instance, in our London market business, they're using, was it Google X, which is, again, one of the divisions within the Google business. And we're using some of the technology there to help us underwrite some of the risks in the U.S. and the property risks in the U.S. with some really, what we think is high-quality, very granular data with a very long history. We're using these organizations to help build some of the base technology for the new powerful portals. Now once we build those, we can do a lot of things ourselves. So that partnership, I think, will continue. The shape of it, of course, evolves over time. But the key thing they bring to us is capability and acceleration of our own ambitions, which we can then amplify with our own capabilities. Paul Cooper: Yes. And then I think on reinsurance recoveries, I think it's sort of multifaceted. I think the first point is around actual reinsurance collections that are COVID related have gone very, very well. We're very happy with that perspective. I think what's happening and what you can see in terms of the recovery is versus, let's say, 10 years ago is book mix. So one is it's going to be much more shorter tail business 10 years ago than it is today. But also think about the re and -- well, now re-mix, so the third-party capital is obviously greater than it was 10 years ago, and therefore, you've got a natural level of additional recoveries on the balance sheet that you'd have a decade ago. So I think that's that in terms of implications for solvency I mean as that comes down, obviously, the credit risk charge comes down. It's pretty modest in terms of our overall sort of capital. It's not a big driver at all, but clearly, there will be a modest benefit as that comes down. Hamayou Hussain: Okay. Vash? Vash Gosalia: This is Vash Gosalia from Goldman Sachs. I have 2 questions. One on the retail business. So you've announced or you've delivered 6.3% constant currency growth in '25. But at the same time, you've had benefit on the rate 2% and then policy count of growth of 7.5%. So could you just help us square those numbers as to -- and I'm guessing the difference comes from mix shift, but then where exactly or which product line is it that you grew in or what geography and maybe how are each different from the other? That's the first one. And the second one, just on reserves again. Trying -- so honestly, we were a bit surprised by the reserve release that we saw in the second half. So could you unpack as to where those reserve release have come from, either accident years or any particular events that you saw improve? Hamayou Hussain: Okay. So Paul will comment on the reserve releases. In terms of retail, I think you hit the nail on the head. It is entirely mix. So yes, we did receive -- we did see a 2% rate accretion across the retail portfolio and 7.5% increase in policy count within the 2 big kind of segments are the digitally traded business, so largely direct and through partners. There, the average premium is kind of $1,000 or slightly less. That is simply growing faster and therefore, adding more policy count than the broker business. I think as you would expect, healthy growth in both, but the digital platform is growing a little bit faster. Paul Cooper: Yes, just in terms of reserving H2, it was basically all years, you could see actually on the chart, all years and all segments, so really across the business. I think it comes back and we can't state enough that this is a manifestation of conservative reserving -- conservative loss picks. So if you're strong on the way in, clearly, you're going to be strong on the way out from a redundancy perspective, and you can see that in all of those years trending down. And Aki is right, you sort of bear in mind that point about strong releases are a manifestation of increasing redundancy. Hamayou Hussain: Okay. Ben and then Kamran. Benjamin Cohen: Ben Cohen, RBC. I had 2 related questions. Firstly, could you say how much kind of good fortune was in the result in the second half of the year because that's quite hard to unpack? And secondly, when we look at the rate declines that you've announced for January renewals, how should we think about that in terms of -- how that's likely to feed through into the combined ratio over the next couple of years? Hamayou Hussain: Okay. In terms of good fortune, well, we all need some, I think. And I think Jo will kind of provide a bit of commentary on that. I guess my overarching comment is we've not received any more good fortune than anybody else, so we're very pleased with the outcome, but Jo will comment on that. In terms of rate declines and how that might impact the combined ratios and so on. Let me kind of just kind of deal with that. Again, just for completeness, retail business, we continue to forecast 8% growth and a combined ratio within the 89% to 94% range and with a gradual improvement within that range as operating leverage and the efficiency program continues to deliver. In terms of our big-ticket business, look, it's -- the eventual combined ratio will be a factor of many, many things. I think the key thing I would ask just kind of bear in mind is if you go back to Jo's slide on rates and the quality of the portfolio, the majority of the portfolio, both for reinsurance and London market is in a very, very good place. So -- and therefore, the potential for strong earnings growth or earnings in 2026 remains pretty high. Joanne Musselle: Yes. Thanks, Aki. So absolutely, I think when we look at the year as a whole, there was still $120 billion of industry losses. We started January with the really tragic events in California. We ourselves reserved $170 million for that event. Majority of that was in our reinsurance. So of course, when we talk about the sort of benign second half, yes, absolutely, that particularly the North American wind season was more benign. And so looking at the totality of the year, it was still a pretty active year. I think the thing that I always look at, though, is the underlying because the wind can blow or not. And clearly, we respond. But actually, it's the underlying health of the portfolio. And so looking at the attritional loss ratio, looking at the risk loss ratio. And across all of our segments, whether that's London market reinsurance and indeed retail, all within expectation. And that for me is the real health of the portfolio is that attritional loss ratio. So yes, pretty pleased with that underlying claims performance being within expectation. Hamayou Hussain: Thank you, Jo. And Kamran. Kamran Hossain: It's Kamran Hossain from JPMorgan. First question is on retail. So clearly, kind of 9 months into the new strategy, the new plan, things seem to be going very well. Just trying to work out whether actually your historic kind of retail combined ratio range now probably looks quite conservative. If I think of the tailwinds you've got this year seems to have gone quite well. You're clearly very excited about the potential benefits from AI. You probably should have taken a point off that range anyway for DirectAsia last year. If I assume a lot of the expense savings come into that, it feels like the historic range seems a little bit cautious. You're 9 months in, so I understand that. So just interested in whether you feel kind of more or less confident on delivering maybe outperforming that number at some stage. The second question is on share buyback versus dividend. Clearly, the step-up in the buyback was great. I think it reflects the confidence you have in the business. At some stage, do you expect to change the mix between dividend and buyback? Because at the moment, I think it's not unlike peers, but at the moment, the buyback is quite a lot bigger than the dividend. And one last question. I know we talked about AI and data centers. We didn't talk about data centers in space, but that's probably for another day. But what's the -- there's clearly going to be product demand for AI errors, admissions, hallucinations. What are you seeing in the market for that at the moment? Hamayou Hussain: Okay. Very good. Thank you, Kamran. So in terms of underwriting data centers in space and AI hallucinations, et cetera, and how we deal with it from an underwriting perspective, Jo will cover that. In terms of share buybacks versus dividend, Paul will cover some of the detail. But suffice to say, I think certainly for the moment, we are very happy. And I think we -- again, we -- this is all about balance. I think we're striking the right balance in the form and quantum of capital return that we're providing to shareholders and balancing that against also the investment that we're putting into the business for both near- and long-term growth. In terms of the retail core, the guidance is 89% to 94%. We expect to improve within that range. We have ideas where we have been at the upper end of that range. We are providing guidance that we expect over the next few years that we will edge towards the lower end of that range as the business continues to grow and deliver operating leverage and the expense efficiency program and the build-out of capabilities that Paul has laid out delivers. But why don't we go to Jo first on data centers in space. And then Paul, any more color you want to add to that. Joanne Musselle: Yes, absolutely. I think I'll focus on the AI part. Hamayou Hussain: Well, that was the core of the question. Joanne Musselle: Look, we talked a lot today about our own use of AI and maybe our customers' use of AI. But just to be clear, we have just as much thought going into how our customers are using AI and that's going to change the nature of the risks that we insure. So this absolutely is an emerging risk. There's going to be some areas of risk that actually gets better because some of it is still driven by fat finger and actually with an AI that is more consistent in terms of decision-making, maybe some of those errors and emissions actually improve. But there's definitely new areas of risk for sure. And we're being really thoughtful about that. Certainly, from our point of view, we're not going down the route of blanket exclusions. We're being really thoughtful around the risks that they present, understanding those risks and then indeed accommodating those risks, either pricing for them or providing sort of affirmative coverage. So a good example would be in our U.K. portfolio and our technology. We were one of the first to confirm affirmative AI coverage within that policy. I think the other area that we think about is not just the risk, but actually the opportunity. So we are an insurer, a specialty insurer for emerging economies, for new economies. There's a lot of people. There's a lot of investment in AI and data centers and that attached to this digital world that all need insurance. And we're really well placed to be able to provide insurance for the consultant who happens to be in that AI world. So we're also thinking about it from an opportunity point of view. How do we understand the risk, how do we develop our own products and services to help our customers with that risk and then also how do we broaden our appetite to capture some of this more new economy in terms of their own insurance needs. But yes, a lot going on, on that space internally. Paul Cooper: Yes. Thanks, Jo. And so the nature form structure of capital returns fits squarely within the capital management framework. So we will prioritize growth. We'll maintain a strong balance sheet. We'll have a progressive dividend. Now you've seen that we've increased our final dividend per share 20% in each of the last 2 years and then have a progressive dividend thereafter. When we've done all of that, then the surplus that's left after that will be returned to shareholders, and that remains the condition. Hamayou Hussain: Okay. Chris? Chris Hartwell: Chris Hartwell from Autonomous. Just 2 very quick questions, hopefully. First of all, just on the recent reorganization within Hiscox Re, I was wondering if you can talk about what advantages you think that brings? And in particular, on Hiscox Capital Partners, where would you like to see the fee element of Re going over the next few years and particularly if it's the right time or a good time in the cycle to be doing that? And then it's probably my lack of understanding or lack of knowledge rather, just on tax and Bermuda. A lot of your Bermuda peers have been sort of talking about the tax credits that they will accrue from the recent tax reforms in Bermuda. And I guess sort of 2 parts to the question. First of all, if you could help me understand what is your, I guess, on island expenses or headcount or something where I could sort of think about that? And if there's anything you can do to to really take advantage of that? Hamayou Hussain: Okay. In terms of Bermuda tax, Paul will cover that. In terms of Hiscox Re and the sort of reorganization to create Hiscox Capital Partners. Look, as you know, we've had a long-term strategy using third-party capital that wants to access, frankly, the fantastic underwriting capability of our Hiscox reinsurance business. And we've had a number of different sort of verticals. We've had traditional capital in the form of quota share providers, partners rather. We created ILS funds just over sort of 10 years ago, and those have evolved. We have a number of ILS funds with different sort of risk levels. We have an SPV. We have sidecars. We've also then expanded into cat bond fund capabilities. And frankly, the Re and ILS was a nomenclature, which no longer describes what we actually do. It is much more mature and much more sophisticated in terms of the different capital basis that we're managing. And that's a reason for -- first reason for kind of using the new nomenclature. And in terms of -- at this point in the cycle, we are -- frankly, last year and this year, we have seen increased interest in third-party capital coming in to benefit from our underwriting. I think you heard from Paul earlier, the AUM, the one thing we quote, which is ILS AUM has increased from, I think, $1.4 billion at the start of last year to $1.5 billion at the start of this year, albeit that deployable capital has gone up a little bit more because we had some outflows and then some new money coming in. In terms of fees, again, as you heard from Paul, the last 3 years of fees have been in excess of $100 million. So a nice contributor to the reinsurance business and to the overall group. The fees are structured essentially, as you can imagine, two-fold. So you have a fixed component and you have a profit commission component. And over the last few years, because of the underwriting results, the profit commission component has increased quite significantly, getting us to over $100 million. What we have done actually over the last couple of years is also gradually restructured some of those fees. So now the majority are fixed. In terms of where that fee income will go, well, there's 2 major drivers. One is the quantum of third-party capital that we're able to deploy. And I think that is going to grow. So that will kind of push the fee income up, but then it's down to the actual results. Whilst the majority is now fixed versus PC, profit commission. The PC is still pretty significant, and that will be determined by the outcome of in-year results. Paul ? Paul Cooper: So yes, the Bermuda-based tax credits, I mean, they're small, they're sort of single-digit millions. They're absolutely dwarfed by the introduction of the global minimum tax this year. And you can see that our tax rate has gone from 8.5% to like 17.6%, so that's a big uplift. What can we do more in order to sort of maximize that benefit? Essentially employ more people on Ireland that don't need a work permit. That that's the sort of driver that will trigger more benefits. The reality of it is, it's caped at around 150 people. So there is a limit to sort of how much additional benefit you can get out of that. That's the biggest driver for it. Hamayou Hussain: Okay. I think we're done. So guys, thank you very much. This is a time of change, right? I think it's time for the nimble and the bold and those who can really turn imaginative ideas into operational reality. And I think that describes the culture and capabilities at Hiscox. These are really exciting times for us. So thank you very much.
Nini Arshakuni: [indiscernible] joining Lion Finance Group PLC's results call. Today, we are presenting our results for the fourth quarter and the full year of 2025. My name is Nini Arshakuni. I'm Head of IR, and I'll be moderating today's call. I'm joined, as always, by the Group CEO, Archil Gachechiladze. We also have on the line the CFO of Ameriabank, our banking subsidiary in Armenia, Hovhannes Toroyan; and our Group Economist, Akaki Liqokeli. First, we'll start with the presentations. And in the second session of this call, you will be able to ask your questions. And with that, I will hand over to Archil first for opening remarks, and then we'll dive into our performance and the operating environment. Archil, you can go ahead. Archil Gachechiladze: Thank you, Nini. Hello, everyone. Thank you for joining the call. I will just have opening remarks followed by the macro review by Akaki. So as you can see, we have delivered a record quarter and a record year, in fact, with our net income growing by 20.9%, just shy of GEL 2.2 billion, delivering 28.4% return on equity. And in the quarter, that was just above 30% return on equity with 35.5% cost-to-income ratio and cost of risk, which is about half of what we usually expect through the cycle. So for the quarter, it was 0.3%, but then for the full year, it was 0.4%. Both of the strong franchises have delivered very good increase in the quality of the franchise, which we measure by the satisfaction of the customers as well as the pickup of the monthly active users on the retail front. And also, both of the franchises delivered above average or above expected or above guidance growth in our portfolio, especially on the credit side, but also on the deposit side. So we are quite happy with the results, and I would like to thank our Armenian and Georgian colleagues who have done a very good job in 2025. And as a kind reminder, Ameriabank full year -- in 2025 was the first year when Ameriabank was the -- for the full year part of the Lion Finance Group, hence, the renaming, as you know. And as you can see, it has delivered substantial good growth, not only on the balance sheet side, but also on the retail coverage side. With this bright note, I would like Akaki to cover our macro. As you know, both of the countries have enjoyed a record-breaking macro performance over the last few years, which is continuing year-by-year. So Akaki, would you tell us what to expect? Akaki Liqokeli: Thank you, Archil. Hello, everyone. I will be presenting the macroeconomic update for our core markets, Georgia and Armenia. Starting with growth performance, 2025 was another strong year for both countries. The Georgian economy expanded by 7.5%, fully in line with our expectations and supported by strong consumption spending and resilient external inflows. Meanwhile, Armenia surprised on the upside, delivering 7.2% real GDP growth. For 2026, we expect this strong growth momentum to persist, supported by ongoing strength of services and public capital expenditure. Real GDP growth in Georgia is expected at 6% and within the range of 5.5% to 6% in Armenia. Due to this strong growth in recent years, as you can see on the right-hand side, per capita income levels in both economies have been steadily growing and converging towards Central and Eastern European peers. While the baseline outlook remains positive, uncertainty is still elevated. Geopolitical tensions in the region creates downside risks. However, both economies are well positioned to withstand potential shocks, supported by solid macroeconomic buffers and prudent policy frameworks. Upside opportunities could also emerge, especially from the ongoing implementation of the historic peace agreement between Armenia and Azerbaijan. Solid external inflows have also supported local currency strength. Georgian Lari and Armenian Dram have been relatively stable in recent years, recording modest but consistent gains against the U.S. dollar. Notably, real effective exchange rates for both currencies have stabilized, reinforcing our assessment of that currency valuations are broadly in line with fundamentals and supporting stable medium-term outlook. Currency strength is also important for low and stable inflation, which the 2 countries have enjoyed in recent years. The recent headline inflation uptick in Georgia is mostly related to food price pressures and core inflation remains low, reflecting well-anchored inflation expectations. Over 2026, we expect inflation to stay close to the Central Bank's 3% targets in both countries, underpinned by prudent monetary policies. In the second half of this year, we see a room for around 50 basis points cuts by National Bank of Georgia, while the policy rate of the Central Bank of Armenia is expected to remain unchanged as the current policy stance is assessed as broadly neutral. Both central banks have been very active in accumulating foreign currency reserves due to strong foreign currency inflows and stable exchange rates. By the end of 2025, current exchange -- foreign currency reserves reached record high levels of USD 6.2 billion in Georgia and USD 5.1 billion in Armenia. Importantly, the current reserve levels are above the minimum adequacy thresholds, and they continue to increase. Another key pillar for macroeconomic stability is prudent management of public finances. Georgia and Armenia have demonstrated fiscal discipline over the years. The Georgian government remains on a consolidation path with tight management of fiscal deficits at 2.5% of GDP and declining debt-to-GDP ratio. Meanwhile, the Armenian authorities have been successful in balancing ongoing spending needs with fiscal sustainability objectives. Despite elevated fiscal deficits in recent years, they managed to keep debt-to-GDP ratio broadly unchanged. This year, we expect fiscal policies in both countries to remain sound and supportive to growth, particularly through sustained public capital expenditure. And lastly, financial sectors in both countries have benefited from favorable macroeconomic environment and continue to support growth. We observed solid and strong expansion of lending, lower levels of loan dollarization and solid capital buffers. So this concludes my part. Back to you, Nini. Nini Arshakuni: Thank you, Akaki, for the overview. Now we're back to Archil, who will discuss our performance first in Georgia. Archil Gachechiladze: Just one second, let me share the presentation. So in Georgia, the numbers were, as we said, ahead of our expectations. So our net profit for the quarter was just shy of GEL 460 million, which was 17% growth on year-on-year and return on equity of 32.7%. And in terms of loan book growth, we were at 16.1%. As you may remember, we guide 10-plus percent. So 16% was a strong showing. And our digital monthly active users continued to grow by 15% year-on-year, reaching 1.8 million. We have our retail app and the business mobile app, both quite capable applications that do a lot of different things, and we have a list here. But what's interesting is that second year in a row, we won the World's Best Digital Bank by Global Finance. And there were very big names in the run-up at the end, big mobile digital banks basically, the biggest in Europe. So in terms of the monthly active users, you can say that we are up by 15%, but also on a daily active, it's up by more than that, which was 24%, achieving just shy of 1 million customers, which gives you an idea that the engagement is increasing. Customer engagement is ever increasing number, which is very good showing. Also on the legal side, so on the company side, we had increase of 14% year-on-year, achieving 133,000 companies that use our mobile application. And obviously, Internet then is used there as well. We are increasing our sales with digital and there, we have achieved new highs of 71% in the fourth quarter, achieving 71% of all products are being sold digitally. And you can see that in loans as well in deposits, we are increasing the share of sales which are done digitally. And that is based on small differences or small improvements that we do through to each product. On the Net Promoter Score, which is part of our DNA, no customer satisfaction and the focus on that is part of the DNA. And this NPS is more like a quick measure of how we are doing overall. We have achieved new highs of 76 showing at the end of December and it just shows you that our franchise is enjoying a high moment or the highest quality it has ever been, in fact. In terms of our payments acquiring volumes, we are up by 22.6% and market share of 55.8%, 0.1% down year-on-year. But basically, it's the strongest showing. As you can see, what makes me also very happy is number of people using our Visa, Mastercard or, let's say, the cards, not just Visa, Mastercard -- Visa, Mastercard and AmEx, because AmEx debit is something that we do as well. It's up by 13% year-on-year to 1.64 million people in Georgia, which is -- it keeps us -- it makes us happy to see that although we are a leading retail franchise in the country and in the region, we can say -- is also we can say that it's still increasing double-digit number of people using our cards on a monthly active user basis, which is something that makes us happy and lays a strong ground for further growth going forward. Our loan portfolio, as we discussed, grew by 15.9% or 16.1% in constant currency basis. On a quarterly basis, that was 4.5%. Deposits continued to grow 13.6%. Having said that, and we'll discuss it later that high liquidity is weighting on our NIM. So we would like to go below 40% market share. We are at 41% and we would like to do it so that we don't hurt the franchise so that people still have Bank of Georgia as the top choice for keeping their money. On the capital position side, as you can see, there are very strong buffers there on the liquidity side, slightly higher than we usually keep. On this note, I would like to ask Hovhannes to cover the Armenian side, which has delivered fantastic results, please. Hovhannes Toroyan: Thank you, Archil, and greetings, everyone. I'll be showing the presentation. Yes. So as Archil mentioned, this quarter was another breaking record quarter for us in terms of performance. Our net profit for the quarter grew 38% and annualized stand-alone net profit grew about like 24%. Our return on equity was 26.8%. And the loan portfolio growth was also astonishing 28% in constant currency basis, and this was very diversified between both retail and corporate portfolios. Our time deposits grew 33% year-over-year, showing the very strong trust of our customers towards our franchise. Total attractions from customers grew 22% on a constant currency basis. And again, we are very happy with this. All these are well above the benchmarks and guidelines that we have shared earlier. We are very happy also to mark that our MAU and DAU ratios are growing at astonishing over 25% per annum. In terms of digital infrastructure, we do continue to heavily invest into improving our digital infrastructure, both internally as well as customer-facing part. And our mobile app has already incorporated most of the beyond banking services. So it has become a very good ecosystem for our customers to meet a number of their needs, including investments in terms of brokerage, my home, my car and so on and so forth. We have enhanced the digital payments in our ecosystem and mobile application. And technically, the number of transactions through our online banking have more than doubled within 1 year's span. We have launched our loyalty program in Q4 of 2025, and we are very happy and enthusiastic about it. We hear a lot of compliments from customers already. So we do believe that it's going to be another very strong pillar for us to bond our long-term relationship with our customers. And again, we do continue to invest heavily into financial education, both for the kids as well as for the adults. And MyAmeria Star is the application targeting kids and mostly educational part of that. And we are very happy to see the uptake on that as well. We do have very positive dynamics in terms of coverage of retail sector. Here, you can see more than 45% of growth for MAUs and DAUs. And we are currently serving 1/3 of the adult population of Armenia, and this gives us much bigger opportunities for growth in the local market, and we are very happy with it. At the same time, I cannot fail mentioning about very positive dynamics of digital uptake and engagement ratios that show that whatever improvements we are doing into our systems are actually to the benefit of our customer base. In terms of portfolios, the very strong macroeconomic situation in the country leads to very healthy and positive demand for loans. And you can see that we were able to increase our loan portfolio by 28% in Q4 of 2025 year-over-year. And we do expect to see very positive dynamics going into 2026 as well. As I mentioned, the growth has been very balanced between retail and corporate. But within retail portfolio, we see that the share of consumer loans is growing a bit faster than mortgages that constitute about half of the portfolio of the retail banking in Armenia. Deposits and attractions from customers are also growing very, very fast. And we can see that 22% roughly growth of total attraction from customers comes to prove it. It's very important also to note that 60% of our deposits already constitute deposits in AMD. And this is a result of a rapid increase of the number of customers. Over the last year only, we have increased the number of customers by 33%. At the same time, it is also a result of the very stable macroeconomic situation and very stable currency of Armenian Dram. Ameriabank has been continuing to improve its market share. We are at 21.7% in terms of loans and 19.5% in terms of deposits. And as we have announced earlier, this really shows the additional growth opportunities that we see in the local market. In Q4 alone, 96% of all the loans disbursed by Ameriabank retail sector were loans that were underwritten through our online channels, technically AI and machine learning based underwriting algorithms that cover it. That gives us opportunity to reach out to technically any Armenian citizen across the country with very low costs. In terms of liquidity, just like the Georgian peer, we have been over liquid towards end of the year. You can see from the ratios. And at the same time, in terms of capital position, I want to mention that while technically, the capital position was tight by the end of the year, we did enhance our capital position already in December. It just came into factor in January when Central Bank of Armenia approved it as part of our regulatory equity. We're talking about EUR 30 million. And effectively, by end of January, our capital position was only 17.5%. And later in early February, we were able to do the first inaugural USD 50 million AT1 notes that will elevate our capital position by another 86 basis points further. So we are very confident on both in terms of our capital position and liquidity position. This is very short. I'm going to hand it over back to Archil. Thank you. Archil Gachechiladze: Thank you, Hovhannes. Those are very impressive results from Armenia and Armenia is continuing to deliver very strong results also on the macro side. And as Hovhannes mentioned, it's very good that we are increasing the number of customers that we are serving. And having said that, we only serve about 1/3 of the adult population in Armenia. So there's plenty of growth that can happen there. So now I will summarize what it means for the group results. So overall, the operating income up by 16.4% in the quarter and by 20.8% for the year, as you can see here, the net interest income was very strong showing of 19.9% for the quarter and 25.9% for the year. The reason why we don't show Armenia here for the year is that in the base year of 2024, 1 quarter is omitted. So it will not be a right comparison. As you remember, we acquired the bank end of March in 2024. So net noninterest income was up by 10% for the quarter and by 10.8% for the year. And I'll discuss a little bit there because there was some details there that we should discuss. And we did disclose it in the results. But I'll just mention that in the fourth quarter, net fee and commission income was up by 33.8%, but that was partly due to the fact that we got a new deal from the system providers for the card payment system providers, which was starting from the 1st of April. So it covered the last 3 quarters. In fact, it was booked in 2020 in the fourth quarter. So we got a few questions earlier today that what should you think going forward? And on the net fee and commission income side, I think going forward, we should expect growth to be somewhere between 15% and 20%, so on the high teens side because it -- not only we benefited for the last 3 quarters, but we benefit for the next 5 years with improved terms with the system providers. On the net FX side, we have seen a decrease in both markets. On an annual basis, it's up by 5.1%. So there, I think it's important to note that both of the currencies have been very stable. So we make more money at better margins when the volatility is there. volatility has been down. The competition has increased as well in Georgia specifically. But especially when you have a one-sided bet when the currency is getting stronger and the National Bank provided a backstop to about GEL 2.7, GEL 2.68 per dollar. That basically is a one-sided bet. It's hard to make money there. So that's what we have been experiencing, similar kind of trends in Armenia as well. But if there is volatility, we'll make more money. If there's no volatility, we will be flattish to slightly increasing going forward. So I think it's already reflected that low volatility is already reflected in the numbers. And going forward, we expect positive dynamics. Operating expenses were up by 14% for the group on the Georgian side, slightly higher than the revenue. But going forward, as we said, that overall as a group, we are expecting to have neutral or positive operating leverage. As you can see, in the fourth quarter, the group was 35.2% cost income, but notably, Armenian side was 40.5%. That kind of drop is partly for the cost control and partly due to the fact that third quarter was the last one where we amortized the retention bonus arrangement that we had with the key managers of the bank. So going forward, as I said, we expect neutral to slightly positive operating leverage going forward. Loan portfolio growth was well ahead of our guidance, close to 20%, 19.7% and the last quarter was 5.8% where Georgia, as we said, contributed 4%, 4.5% and quarter-over-quarter growth in Armenia was 8.5%, which was very significant. Overall, I think Hovhannes did mention that 28% was ahead of our expectation in Armenia in terms of growth. But what's interesting also is that last quarter -- fourth quarter of 2024 was a very big jump in loan growth. So with that high base to grow at 28%, especially on a Q-over-Q basis, you get the idea that the activity was very strong. Armenia overall is -- there's a lot of positive dynamic happening there and a lot of businesses are expecting to grow. So on the deposit side, we grew 17.3%, as you can see the breakdown there as well. Both of the franchises are enjoying very high liquidity, which shows strength on one side, but it also is a weight on our cost of interest. Net interest margin was slightly reduced in fourth quarter, as I said, partly due to the fact that it was increased cost in Lari and AMD. So local currency is becoming both markets, in fact, higher proportion and the costs there have been a bit higher. That will be a big focus going forward over the next couple of quarters. Cost of risk, we were down at 0.3%. So for the annual costs came 40 basis points. Our NPL ratio remained 2.1%. And although we had a slight increase in Armenia, but slight decrease in Georgia. So overall, as a group, we are at 2.1% NPL ratio, which is just fine. In terms of NPL coverage, mainly the decrease there is automatic. We didn't change any rules. In fact, the main reason why that change happens is because the proportion of the NPL ratio is increasingly towards the unsecured. So there, basically that's what it's resulting. Profit before one-offs, as you can see, we had 22.7% growth in the quarter. So it was a very strong quarter, in fact, a record quarter. And for the annual growth was also by 20.9%, which is very strong and Armenia played a very good role there. With return on equity for the quarter at 30.1%. Nowadays, every time return on equity starts with 3%, I'm relatively happy. And for the full year, I was less happy because it was 28.4% and not starting with 3%, but who knows. Return on average assets, as you can see, was up slightly from the previous quarter and for the full year, it was 4%. All in all, I think it's something to note that leverage ratios in Georgia and Armenia are very low. So we have almost twice as much capital as our peers in Eastern Europe. As a result of this, we have declared a dividend, which is an increase for the full year of 16.7%. Having said that, we are laying significant buffers in both banks for strong growth because we have been -- over the last 3 years, in fact, we have been growing more than we indicated as our medium-term guidance, and we want to be able to have that flexibility of deploying capital where the growth opportunities are. For example, in Armenia, we did indicate at the acquisition that we were going to deploy the retained earnings, which are quite strong, to fund the growth. And that is very important to have that flexibility and ability as a group, which is well funded, on one side, to pay dividends, which is growing year-by-year and a CAGR of 28.8%. But just last year was 16.7%. And going forward, we expect positive dynamics there as well as ability to deploy our capital in growth opportunities, be it organic or inorganic if it comes along. That's basically that. And as a reminder, our strategy is to be the main bank for our customers and be excellent in customer experience and with our eyes on profitability with annual book growth of about 15% and profitability of 20-plus percent, over the last few years has been closer to 28% to 30% and dividend payout ratio between 30% and 50%. And there, we have, as indicated, in fact, a couple of years ago, we've been on the lower side, which reflects our higher than guided growth over the last 3 years. That about that. And let's open up for questions because I think questions -- Q&A is usually the most interesting part, not only for our audience, but also for us. Nini Arshakuni: Yes. So we can open the floor for questions, and we have a few raised hands from the analysts. So the first will be Sheel Shah from JPMorgan. Sheel Shah: Great. I've got two questions, please, if you can help me. First, can I ask about the NIM outlook for the business going forward in the context of rate cuts coming in Georgia or expected some of the funding pressures you've seen in the fourth quarter. And then you've also said the local currency deposits, you're going to be focusing on those, I presume on the cost of those going forward. So I'd be interested to hear, firstly, on the NIM outlook of the business going forward. And then secondly, I'd like to know a bit more about the tech infrastructure of the bank because we can clearly see the output of the tech in terms of the NPS score, the growth in the number of mobile active customers, the number of sales on the digital channel. But I'd be interested in how many of your applications are on the cloud? What sort of platforms are you using? How many core banking systems are you using? What are you doing in terms of AI, which I noticed is newly on the slide. So a bit more information on the tech stack would be interesting, please. Archil Gachechiladze: So on the NIM side, you did mention all the negatives, and you didn't mention the positive, which is deploying this extra liquidity. I mean, we are drowning in extra liquidity, which we either will deploy or push out of the bank. So that's -- so on balance, we'll either be flat to slightly positive on the NIM side, and that's in both markets. On tech side, we are either the largest or second largest technology company in the whole region. We employ 1,000-plus tech specialists either or digital specialists, in fact, be it on the programming side or just digital workers. We have translated that into the good numbers as well on the customer acquisition side as well as the balance sheet growth. A few years ago, we basically -- first of all, our core banking in Bank of Georgia is homemade. So it's fully homemade as well as the main applications, the retail app and the -- on the mobile app on retail as well as business. In Armenia, I'll ask Hovhannes to cover it in a couple of minutes, but mostly homegrown there as well. But basically, we have a few years ago, said that we want to be on cloud or cloud ready. So about 3, 4 years ago, we started to integrate that thinking in the design and everyday development, and we have been chopping up our core system into smaller pieces connected with APIs, which allows for the scale up not to be too expensive in different parts of the business. So it's -- many parts of our data is on cloud and the rest can be on cloud any minute, but it's a cost-benefit exercise on which case because -- yes, that's because it's not cheap. But otherwise, in terms of technical capability of putting everything on cloud and having it in smaller pieces, 90% is done. I mean there are small pieces that we are rewriting and changing. But otherwise, it's very well developed. Also on the AI side, we are experimenting in many different directions. Chatbot is the most obvious one, but we have done a lot of different testing of different capability now in the processing, payments processing, AML and other types of applications as well as on the risk and underwriting. So there's -- while we focus on AI, a lot of times, we understood that there's more to be done on the automation side. So there's a lot of work going there. But not much more to report there. Only thing I can say is that it's a big focus and going forward, it will deliver efficiency, but also more importantly, the speed of execution and quality, which will benefit our customers. Hovhannes? Hovhannes Toroyan: Yes. In the Armenian operations, we are using the 2 major software from third parties. The core banking is from the leading provider in the country. And at the same time, CRM is one of the leading international solutions that we use. Other than that, the other major parts, namely mobile banking, online banking are internally developed. At the same time, we are also technically one of the largest technological companies in the country despite tech being one of the strategically important sectors for the country with a number of employees engaged into tech development that we have. And we also have this agile framework. So product teams are working through this agile mechanism. And we do deploy machine learning and AI in certain areas, namely in a number of areas to improve internal efficiency as well as to improve the customer experience. For example, one of the latest beta types of the AI applications we've seen internally was analyzing the needs or potential needs of the customers to be able to come up with the best next offer for the customers. As I mentioned, 96% of all the retail loans that we've disbursed in fourth quarter were through our online and automated models, machine learning and AI models. So technically, for us, that means, a, underwriting process is 38x cheaper than it would have been through conventional lending technique; and b, it also means outreach to technically anybody on the territory of Armenia. And obviously, I mean, that's another perspective that we look at it. And clearly, we are also at the doorsteps on unleashing all the opportunities that these new technologies in hand for our sector. So we are very optimistic that we're going to be using AI in general wider with better benefits. Sheel Shah: That's very helpful. If I can have just one quick follow-up. When you say that you have the potential for outreach to all of Armenia or all of Georgia, is this a direct-to-consumer method? Or are you using sort of online tools -- online aggregators? What's your method of distribution of these loans? Hovhannes Toroyan: In case of Armenia, it's technically mostly direct. We are rarely using other platforms as an aggregator to outreach our customer base. But technologically, and we do have a number of customers today that can become a customer of Ameriabank remotely sitting on their couch. They can apply for a loan remotely sitting at their home or office. So this actually -- with the pretty significant penetration ratio of mobile and Internet usage across population, we see our digital platforms, our own digital platforms gaining very good and positive traction over the last few years. And that's actually also being represented by more than 45% growth of our MAUs and DAUS. As I said, our transactions more than doubled, 96% of retail loans through online platforms. So all these are kind of early indicators that whatever we have been doing for the last 4 or 5 years are actually kind of giving their results already. Archil Gachechiladze: I'll cover the Georgian side. So we have 1 million users daily in the country of 3.7 million people. So short answer is, yes, we do it directly. And the long answer is that we are the biggest brand, not only in the financial intermediation where the top of mind is 57%. But we are the biggest brand in the country, period. I mean, it's bigger than any other brand. So when we say, do we do it directly or not, yes, we do it directly. We still have a very significant branch network, very significant ATM network. And we are the biggest brand in the country overall and plus in finance. So that basically gives you an idea that we are not the back office or some kind of intermediary, but we are the main intermediary in the country. Nini Arshakuni: So the next question is from Alex Kantarovich from Roemer. Alexander Kantarovich: Yes. Can we please differentiate between outlook for loans between Georgia and Armenia. Clearly, the dynamics are somewhat different. This is my first question. Yes, and I'll follow up with the second one. Archil Gachechiladze: [indiscernible] I'll do it. So 10-plus in Georgia, 20-plus in Armenia. Alexander Kantarovich: That's very short and sweet. And if I can address the elephant in the room, inclusion in FTSE 100, do you expect it to happen imminently? Archil Gachechiladze: As economists like to say, all else being equal, yes. Alexander Kantarovich: Yes, that's great. That's great. And finally, I appreciate that you deploy your capital very, very efficiently. But is there a scope for increasing the levels of distribution from 30%. Archil Gachechiladze: Absolutely. But as long as we grow at 20% instead of 15%, as long as we are open to the M&A opportunities being major banks and smaller economies, and such opportunities may come along, we would like to keep a little bit of buffers there. If either one or the other don't play out for a longer period of time and we grow at, I don't know, 12%, 13% instead of 20%, like we have been growing over the last 3 years, then of course, we will return more capital and our distribution is between 30% and 50%. So I think it's a mirror image. So either we grow more and we deploy capital. And I think we have been very disciplined and showed to our investors that we don't throw around the money. So we either deploy it in businesses which are generating 25% to 30% return on equity or we are looking at acquisitions of similar kind of returns. So if this doesn't happen, then of course, we will return more. But I hope it will happen. So until those things are happening, we will be on the lower side of the distribution guidance of 30% to 50%. And if it happens less, then we'll grow capital returns. Nini Arshakuni: The next question is from Jens Ehrenberg. Jens Ehrenberg: A couple of questions from my side. Firstly, just on Armenia, I suppose it's very good to see more sort of digital uptake there. It feels like with sort of 11% of penetration, the growth headroom there is still really enormous. Is that the right way to think about it, given you're sort of roughly 47% in Georgia. Is the opportunity really that big. Secondly, on Armenia, I think we've had quite a material improvement in the cost-to-income ratio in the fourth quarter. And I appreciate you touched on that earlier. But just going forward, is sort of the low 40s level, do you reckon that is sustainable for Armenia going forward? And then lastly, I suppose, on the Georgian side, I believe we had -- one of your key competitors talk about their strategy yesterday and the intention to try and grow more on the retail side in Georgia. Just curious to see how you see the competitive situation on the ground at the moment and really what you expect going forward there? Archil Gachechiladze: Hovhannes, do you want to take the opportunities of growth on the Armenia side? Hovhannes Toroyan: Sure. We have indicated earlier that currently for midterm, we do envisage to grow our market share to 30%. So this is our midterm strategic objective as of today. Obviously, I mean, that's going to be a moving target as we go forward. And you have seen that over the last few years, we have improved our market share significantly. And we do anticipate to be outperforming the market in the year 2026 and next 2 years as well. So in that case, theoretically, maybe in a bit longer term, we could get closer to the market share where our Georgian peers are, but current target is at 30%. So that's kind of where we want to be first, and then we'll see how it goes. In terms of cost-to-income ratio, we do believe that the ratio that we have reported in fourth quarter is more than sustainable. Moreover, as I mentioned, a number of initiatives that we've done within the bank have significantly improved our cost base. So we do expect to continue in that direction further. So I would say I would not be very surprised to see the higher 30s in terms of our cost-to-income ratio in the coming years. Archil Gachechiladze: Yes. Regarding the competition, I think, first of all, I cannot comment on competitors' statements. The only thing I can say is that competition on the ground in each and every direction is nothing new. So as you can see, over the last 20 years, there has been a pretty strong competition between the 2. Having said that, I think both players have been cognizant of the fact that they don't want to destroy the profitability. So I think we are seeing a significant push and effort on the side of the quality, in terms of user experience, in terms of easiness of use, et cetera, et cetera. And all of that, I think, will continue. Having said that, we believe that we are very well placed to continue delivering the strong numbers well ahead of the whole banking system. Nini Arshakuni: So we have the next question from Ben Maher from KBW. Benjamin Maher: Yes. Just got a couple of questions. The first one is on market shares. Obviously, you mentioned you've been growing it in Armenia. I noticed there was a small decrease in the quarter in Georgia. I was just wondering if there's a particular reason for this? And also, could you just please clarify your -- I think there was a point on liquidity where you said you wanted to keep the deposit market share below 40% in Georgia. And my second question is just on consumer lending. It has been very strong through the year. Is this just household releveraging? Or do you think that's potentially early signs of some financial strain. I will say asset quality has been doing very well. So just interested in your thoughts. And then on the share of time deposits in Armenia, that's risen year-on-year, although it was down slightly in the quarter. How do you expect the share of these deposits to evolve in 2026? Archil Gachechiladze: I think, Ben, I would not read too much into the quarterly changes of market shares. They are rather volatile. So let me show you the -- what you're referring to. So you're referring to this change here, the last quarter. And I would say, look at the longer term, look at 10 years or more. For this particular year, you can see that 37.6% has become 37.8% for the full year. So it's flat to slightly increasing and competitors' numbers are different. So that's that. And in terms of the retail deposit market share also is very strong. Here, on the total deposits, we're trying to decrease it below 40% without losing the preferred status in people's mind in terms of keeping their money. So we feel very strong on the local market, in fact. So when you look at the -- I think the key characteristics when you look at the quality of the franchise is the NPS score, which kind of is like a body temperature measuring the health of the service. But inside, there are a lot of different subsegments. Top of mind, most trusted, those are some of the things that we are watching at, and all of those are basically at record highs. So we are in a very, very strong position. I can say that probably the strongest position that the franchise has ever been in terms of the quality of the franchise. And that's on the back of a very strong macro performance over the last few years and double-digit growth of average incomes as the unemployment rate comes down. So overall, very strong macro and a very strong franchise. So that's the combination that we have and very similar in Armenia. Hovhannes? Hovhannes Toroyan: Yes. It's very similar technically in Armenia, but we do expect to grow, obviously, our market share in the coming years, as I already mentioned. In terms of the structure of deposits, I think it would be fair to anticipate similar changes in coming years because we do anticipate very stable macroeconomic performance and FX exchange rate in the country. At the same time, the more we cover retail segment, the more AMD-denominated deposits share is going to grow over years. So I'm not sure about the same dynamics in terms of the speed of change, but it would be fair to expect that in the coming years, share of AMD deposits and current accounts will be slightly growing. Jens Ehrenberg: Great. Sorry, on the consumer lending, strong growth. Is there any obvious reasons behind that you see in both markets? Archil Gachechiladze: So consumer growth in both markets has been very strong. In Ameriabank, I think it's partly due to the fact that our offering has become much higher quality in terms of the user experience and the reach in terms of offering has been much wider as well. In Georgia, we are in a leading position, and we have seen Georgian consumer, their incomes growing double digit 5 years in a row and first 2 years was high teens as well. So I think it's a very strong base. We are not seeing any signs of any credit quality deterioration. We watch it very carefully in different subsegments of credit. So yes, so no signs whatsoever at this point. And in fact, if anything, there are very, very strong signs on the credit quality side on all around. The only part where we saw a little bit of issues were smaller hotels in the regions, which is like 1% of portfolio or less. And there, we have tightened the underwriting 2 years ago, and we described it in different qualities. But in terms of the large corporate, in terms of real estate, in fact, there was a big focus, and we have seen a much stronger performance than anticipated. In terms of all different types of consumption, investment, there has been a very, very strong performance all around. And in fact, people underestimate the amount of investment portfolio that is geared up to invest in a lot of different segments in Georgia, especially on the energy side, especially on the logistics side and other things. And Armenia is slightly different sectors, but same. Please, Hovhannes? Hovhannes Toroyan: Yes. I mean, I'm totally in the same line. So technically, the disposable income of the households over the last 5, 6 years have grown immensely. And as Archil mentioned, our digital propositions have improved. But also, please keep into consideration that during the last 2 years, we have doubled the number of customers that we're serving. So technically, in our case, we have also this very significant growth of the customer base. And clearly, this also is additional market for us to go out there and present our different propositions, including consumer finance opportunities. Nini Arshakuni: So we have another question from [ Dmitry Vlasov ]. Unknown Analyst: Congrats on a very strong set of results. So my first question is about cost of risk. You have a guidance of around 100 basis points over the cycle. And my question is, do you have a view for 2026? And how will it be different for Armenia and Georgia? The second question is about the potential M&A. Is my logic correct that it's mostly about the right opportunity, right timing and the right price rather than you waiting to maybe scale Ameria first and then sort of deploy capital elsewhere. Yes, those are the two questions. Archil Gachechiladze: On the cost of risk side, you rightly said that between 80 to 100 basis points is through the cycle guidance that we provide. Having said that, we've been well below those numbers when the macro growth has been bigger and the performance has been much stronger than average in the history for both countries. And I think you can apply that rule. In terms of the M&A, you're absolutely right. I mean, we are opportunistic. So we scan different markets, and we look for the right opportunity and right price, and we are quite disciplined about it. So we don't have to do any M&A. But if the right opportunity comes up, we would like to be in a position to do that. So that's our approach. So it may be that we do something and maybe we don't do anything. And in terms of what we are looking for, we are looking for major players and that by -- just by our scale, that means that we're looking at smaller markets, unfortunately. But we do prefer to look at well-established players. And in fact, if we can add value in terms of applying our approach to customer care and technology, usually, we do, we like those kind of stories where it's a well-established player, and we can add value by putting some of the approaches that we have to customer care and technology in place. And that, I think, can be very beneficial for the franchise, for the country where we may be going as well as for our shareholders. Also, we look at -- we don't like turnaround stories. So banking is a leveraged business. So we are very careful there. And we like good teams. We are very lucky with the team in Armenia. It's a fantastic team, and we have done everything possible to retain the whole team, and we are very happy to see them stay and deliver fantastic results. We may not get as lucky every time, but that would be the idea. Unknown Analyst: That's very clear. Maybe one small additional question, if I may, about how 2026 started for you so far? Is it in line or maybe even a bit above your expectations? Archil Gachechiladze: 2026 started very well. So a strong start. Nini Arshakuni: We have one more question from Simon Nellis. Simon Nellis: Apologies if this question has already been asked because I had to drop off just for a little bit. It's around your capital return strategy going forward because I think you've been at the lower end of your guidance range as you reinvest into the Armenia business. Is that still the case? Or are you going to up the payout over time? Archil Gachechiladze: Until we are able to grow at the rates which we have been growing, which is blended 20%, probably we will be on the lower side of the capital returns. Also, I think our buffers allow for us to be a bit more opportunistic if nonorganic comes along. If one or the other of those do not happen, then obviously, we would be increasing to the higher side of that guidance, which is between 30% and 50%. So we've been on the 30% side. But obviously, as things mature, then we will be increasing that significantly. But Short term, I think we are luckily in a situation where we're growing well above our midterm guidance. Simon Nellis: And are you still reinvesting the dividends into -- I mean, you're not paying dividends out of Armenia and you don't intend to. Archil Gachechiladze: We have not, but we will be looking at slight upstreaming, especially because we have had ability to put the Tier 1 instrument in place, which provides significant buffers there. But we'll be watching the growth opportunities there. Quite frankly, I believe that Armenia has been doing very well. In fact, as a macro story and geopolitically, they are huge positive moves. And when big investments happen, I mean, there have been just a couple of big investments, so honestly, you want to mention that have been announced. Hovhannes Toroyan: Yes. Very recently, the Vice President of the U.S. was in Armenia and around this whole peace treaty and TRIPP corridor, there have been mentioned several very significant investments into AI, data center, technology institutions, nuclear power plant and a number of other infrastructure projects like railway, roads and so on. So we are talking about USD 4 billion to USD 9 billion of potential investments into the country. And for our economy, it's really huge and the potential positive impact of that on the economy and subsequently on the financial sector could be really very decisive in the coming years. Archil Gachechiladze: So Simon, all of these positive things, they need banking, and we want to be able to bank them properly without much limitations. And I think our capital position and liquidity position allows us to be flexible. And if we find that we are growing at, I don't know, 12% instead of 25%, then we return more capital. I mean we are quite cost conscious and quite disciplined on capital side, and we act as shareholders, in fact. So yes, I mean, so far, we have been growing more than we guided medium term, and that's true for the last 3 years in a row, almost 20% growth of balance sheet. And going forward, if that continues, we'll be returning capital, but on the lower side. And if we grow less, then we'll return more capital. Nini Arshakuni: So I don't see raised hands. There is just -- maybe two questions that I'll read. One is on Armenia. Can you please confirm the growth in Armenia is self-funded? And also if there are any inorganic growth opportunities in Armenia. So there is two questions. Archil Gachechiladze: Yes and no. Hovhannes Toroyan: In Armenia, we are self-funded in terms of not receiving any funds from within the group. So there are not any intra-group funding allocations or capital allocation as of today. But at the same time, we are also very actively working with a number of development financial institutions. And in 2025 alone, we were able to attract USD 400 million equivalent funding from the DFIs that also improved our liquidity position in foreign currencies. It's kind of long-term financing for us to be able to serve the needs of our customers. So technically, as a fully independent entity, yes, we are funded by the funds of our customer base as well as our partner DFIs, if that's the question. Nini Arshakuni: And then this question is for Archil on MBS. So it says a couple of years ago, you said you won't push on MBS as hard given the costs associated with it, but yet it keeps improving. How did you do it? Archil Gachechiladze: Just can't help it. It's part of DNA now. I think customer satisfaction and the focus on that is key to long-term success of any franchise, especially when you are touching lives of millions of people. So I would keep that focus. Nini Arshakuni: We don't have any more questions. Archil Gachechiladze: Excellent. On this bright note, I would like to thank you for your interest and for your support that we have felt not just today, but over the long period of time, for your trust. And I would like to thank the Armenian and Georgian team and the whole Lion Finance Group team for really doing your best and delivering consistently very good results. As long as we make our customers' lives better, I think we'll be in business and going well. So thank you for your support, and let's look forward to a very strong start of the year, and I hope some good news very soon as well. So thank you. Nini Arshakuni: Thank you, everyone, and see you next time. Thank you. Take care.
Denise Reyes: Good morning, everyone, and welcome to Nemak's Fourth Quarter 2025 Earnings Webcast. I am Denise Reyes, Nemak's Investor Relations Officer, and I am pleased to host today's call along with Armando Tamez, Nemak's CEO; and Alberto Sada, CFO, who are here this morning to discuss the company's business performance and answer any questions that you may have. As a reminder, today's event is being recorded and will be available on the company's Investor Relations website. Armando Tamez, our CEO, will lead off today's call by providing an overview of business and financial highlights for 2025 and the company's outlook for 2026. Alberto Sada, our CFO, will then discuss our financial results in more detail. Afterwards, we will open for a Q&A session, which participants may join live or submit written questions using the Q&A function. Before we get started, let me remind you that information discussed on today's call may include forward-looking statements regarding the company's future financial performance and prospects, which are subject to risks and uncertainties. Actual results may differ materially, and the company cautions you not to place undue reliance on these forward-looking statements. Nemak undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise. I will now turn the call over to Armando Tamez. Armando Tamez Martínez: Thank you, Denise. Hello, everyone, and welcome to Nemak's Fourth Quarter 2025 Earnings Webcast. I will begin with an overview of our 2025 results and strategy execution before moving on to our 2026 guidance. Throughout 2025, Nemak remained focused on strategic and financial objectives, demonstrating resilience amid an increasingly complex trade environment. Supported by a solid commercial position, the company successfully navigated shifting external conditions while continuing to advance financial priorities. Given the slower pace of electrification, Nemak leveraged opportunities in the ICE powertrain segment while also maintaining a steady progress in the e-mobility, structure and chassis application segment, ensuring a balanced and adaptable market position. Full year EBITDA was within our guidance range at $591 million, reflecting the company's continued focus on operational discipline and profitability. The top line remained stable at $4.9 billion, supported by resilient customer demand despite the changes in the global trade landscape. Continued efforts to enhance operational efficiency contribute to generating positive cash flow and reducing our debt by $130 million year-over-year. A key highlight of 2025 was the announcement of the agreement to acquire Georg Fischer Casting Solutions. This acquisition is a milestone and represents a significant step forward in strengthening Nemak's long-term strategic position. The business brings highly complementary capabilities in lightweighting, enhances our skills in high-pressure die casting and expands our offering of complex aluminum and magnesium components for the e-mobility structure and chassis application segment. In addition, the acquisition broadens our global footprint and customer reach, particularly by providing meaningful access to leading Chinese manufacturers. Building on this strategic step, in February 2026, the acquisition received full regulatory approval and closed successfully. I would like to extend a warm welcome to all GF Casting Solutions employees joining Nemak. We're excited to bring together two highly talented and complementary teams. With the transaction now completed, we are fully focused on executing a disciplined integration plan, which is essential to realizing the full value of this acquisition. Effective integration will allow us to align operational processes, capture cost synergies, accelerate technology sharing and ensure continuity and service excellence for our global customers. By combining the strengths of the two organizations, we are positioned to unlock meaningful operational, commercial and innovation opportunities in the years ahead. Another important remark for the year is the successful ramp-up of production at our new facility in the Czech Republic, dedicated to e-mobility components. This plant incorporates advanced joining and assembly technologies and is now manufacturing highly complex engineering components that support our customers' electrification programs. This achievement underscores our ability to adapt to evolving market needs, strengthen our global footprint and expand our advanced manufacturing capabilities. In 2025, we secured $440 million in annual revenue from awarded business across our global operations, of which 85% corresponded to ICE powertrain programs and 15% to e-mobility, Structure & Chassis applications. The significant amount of ICE business awarded underscores the extended life cycle of this segment while still capturing opportunities in e-mobility and Structure & Chassis components. Importantly, most of these programs will utilize existing assets, reinforcing our disciplined approach to capital allocation and helping drive a meaningful reduction in CapEx. In parallel, we are pursuing a robust pipeline of approximately $1.9 billion in new business, positioning ourselves to capture future growth opportunities across our key segments. We remain firmly committed to delivering competitive and cost-effective solutions to our customers, reinforcing our focus on operational excellence and long-term value creation. Moving on to innovation. Throughout the year, we continued to build on our technological capabilities, advancing key initiatives to enhance process efficiency and expand our technical toolkit. Across our operations, we made meaningful progress in improving the high-pressure die casting process, implementing efficiency and cost optimization measures and scaling these improvements across additional facilities to broaden their impact. We also enhanced our real-time job floor information system, adding an AI-powered layer designed to transform complex operation data into actionable insights. This reflects our ongoing commitment to leverage advanced technologies to strengthen process control and improve our competitive position. Moving on to sustainability. I am pleased to share that Nemak achieved an A- rating from the Carbon Disclosure Project for the second consecutive year, once again, placing us within the leadership band, which is the highest tier of CDP's scoring system. This recognition reflects the company's strong environmental governance, our comprehensive science-based actions to reduce emissions and our commitment to transparent climate disclosure. We are proud to see our efforts consistently recognized at this level. Once again, we pledge our long-term dedication to responsible operations and climate stewardship. In addition to progress on climate initiatives, Nemak was again recognized for its commitment to people and workplace excellence, earning top employer certification in Brazil, Germany, Mexico, Poland and the United States. Notably, Nemak ranked in the top 5 certified companies in Brazil. This distinction reflects the strength of our people-focused practices, including talent development, organizational culture and employee well-being. Achievements such as these underscore the importance we place on creating an environment in which our teams can grow, innovate and contribute to long-term value creation. We recognize the key role our employees play in advancing the company's strategy. And despite our high marks, we continually seek to improve. This concludes my initial remarks. Thank you for your attention. I will now hand the call over to Alberto. Alberto Sada Medina: Thank you, Armando, and good morning, everyone. I will begin with an overview of Nemak's business performance for the full year and fourth quarter of 2025, followed by a summary of industry developments and financial results. During 2025, we continue to prioritize free cash flow generation through sustainable margin improvements and disciplined capital allocation. On the results front, both the fourth quarter and the full year 2025 had a high comparison base versus the same periods of last year due to customers' onetime compensation. During the year, we saw stable industry performance across our main markets as global light vehicle sales increased 3% to 91.7 million vehicles, while light vehicle production increased 4% to 92.9 million units. From a regional perspective, during the fourth quarter, the seasonally adjusted annual rate for light vehicle sales in the U.S. was 15.7 million units, 5% lower than last year, mainly due to the rollback of the EV tax credits. For the full year 2025, this metric increased 2% to 16.4 million units as consumers continued showing resilience amidst affordability concerns, partially offset by OEM incentives. Light vehicle production in North America during the fourth quarter decreased 2% year-over-year to 3.6 million units amid cautious production schedules and certain supply chain disruptions with inventories stable at 46 days of sales. For the full year 2025, production was 15.2 million units, 1% below the 15.5 million units in 2024 due to the same factors. In Europe, light vehicle seasonally adjusted annualized sales increased 7% in the fourth quarter to 17.4 million units due mainly to increased imports and higher sales of entry-level vehicles, supported by stable macroeconomic conditions. For the full year, light vehicle sales were 16.4 million units, up 2% year-over-year, driven by similar dynamics. During the fourth quarter, light vehicle production in the region decreased 2% year-over-year to 3.8 million units, due mainly to reduced export demand as well as supply chain constraints, particularly microchip shortages. For the full year 2025, light vehicle production totaled 15.4 million units, 2% lower than last year due to the same factors. In China, the seasonally adjusted annual rate of light vehicle sales declined 4% year-over-year in the fourth quarter to 27.2 million units, due mainly to the expiration of local government incentives. For the full year, light vehicle sales in China were 27.1 million units, 6% up compared to the previous year. This is attributed to intense competition among local OEMs and government trading incentives as well as export activity. In terms of light vehicle production, China posted 1% and 10% year-over-year increases for the fourth quarter and full year 2025, respectively, amounting to 9.6 million and 32.7 million units, driven by domestic and export demand. In Brazil, the seasonally adjusted annual rate of light vehicle sales for the fourth quarter and full year 2025 was 2.9 million and 2.6 million units, respectively, reflecting a steady growth in the quarter and a 3% year-over-year increase for 2025 on resilient consumer behavior. South America's light vehicle production experienced a 4% decrease year-over-year in the fourth quarter of '25, amounting to 0.8 million units due to calendar effects. On a full year basis, light vehicle production in the region increased 2% year-over-year to 3.0 million units due mainly to stable local demand and higher exports. Turning to our financials. Volume increased 2% and decreased 3% compared to the fourth quarter and full year 2024, totaling 9.2 million and 38.4 million equivalent units, respectively. This was due mainly to customer inventory management strategies due to geopolitical pressures and the declining e-mobility adoption rates among our customers during the year. Despite this, full year volume exceeded the high end of our guidance of 37 million units. Revenue in the fourth quarter of 2025 totaled $1.2 billion, 1% higher than during the same period of 2024 due to higher volume and higher aluminum prices. For the full year, revenue was $4.9 billion, stable year-over-year. Lower volume was partially offset by higher aluminum prices, the carryover effect from repricing achieved in previous years as well as favorable effect from the euro appreciation. During 2025, we continue to navigate alongside our customers, the transition between ICE and electric powertrains, relying in our talent, footprint and technology, which enable us to deliver solutions independently of the propulsion system of the vehicle. Our electric mobility, structure and chassis applications segment accounted for 9% of our total revenue, highlighting our ability to adapt across different electrification scenarios. EBITDA for the fourth quarter and full year 2025 decreased 25% and 7% year-over-year, totaling $117 million and $591 million, respectively. This reduction was related to extraordinary launching expenses and currency effects in North America in addition to high comparison effect from commercial negotiations recorded in the fourth quarter of 2024. In turn, EBITDA per equivalent unit for the fourth quarter and full year were $12.8 and $15.4, respectively, down 26% and 4% year-over-year, respectively. During the fourth quarter, we recorded impairments and reorganization expenses for $85 million related to footprint optimization initiatives. This included the write-off of assets in our facilities in Monclova, Mexico and most in the Czech Republic, where we are ramping down and ceasing operations and we relocate production to nearby facilities, respectively. This amount compares against $83 million in 2024. All this said, during the fourth quarter, the company recorded a $56 million operating loss compared to $39 million loss in the same period of last year related to the aforementioned impairments and reorganization expenses. For the full year, operating income was $97 million, which compares to $145 million in 2024 due to the same factors. During the quarter, Nemak reported a net loss of $100 million compared to a $51 million loss in the same period of the previous year. Net result for the year was a $116 million loss compared to a $25 million profit in 2024, mainly due to the combination of the aforementioned impairments and foreign exchange losses mainly related to the effect on our liabilities of the appreciation of the euro against the dollar. Excluding these noncash effects of impairments and foreign exchange losses, the net result for the full year would have been a $75 million profit. Turning to our financial position. Our net debt at the end of the quarter was $1.4 billion, a sequential improvement of $190 million and 9% lower year-over-year. Cash flow generation during the quarter was strong, driven by extraordinary favorable seasonal net working capital dynamics. Our cash balance as of the end of December was $516 million. Our net debt-to-EBITDA ratio was 2.4x, stable versus 2.4x in the previous year. In turn, the interest coverage ratio improved to 5.5x from 4.9x at the end of the same period of last year. Capital expenditures in the fourth quarter and full year 2025 were $99 million and $306 million, respectively, a 9% and 21% reduction compared to the same period of 2024. We remain committed to streamlining our capital investments. Moving to our regional results during the quarter. In North America, revenues declined 1% year-over-year to $653 million due to high comparison base associated with onetime commercial negotiations in the fourth quarter of '24. EBITDA was $43 million compared to $121 million in the same quarter of last year. The year-over-year reduction reflects extraordinary operating expenses of approximately $30 million in the fourth quarter of 2025, primarily related to production ramp-ups and the appreciation of the Mexican peso, combined with the high comparison base from onetime commercial negotiations recorded in the fourth quarter of 2024. In Europe, revenue increased 5% year-over-year to $410 million despite lower volume due to the translation effect of the appreciation of the euro. In turn, EBITDA in this region was $55 million compared to $19 million in the prior year, reflecting improved operating efficiencies and a favorable currency translation effect. Revenue in the rest of the world was $160 million, up 2% compared to the fourth quarter of '24, due mainly to favorable volume and product mix. EBITDA in this region increased to $20 million, benefiting from the same factors. Related to capital allocation, during 2025, we repurchased around 68 million shares. And by the end of December of 2025, the shares held in treasury represents approximately 6.8% of our total outstanding shares. We will propose the cancellation of these shares in an extraordinary shareholders' meeting, whose date we will announce in due time. As a reminder, our Annual General Meeting will take place on Wednesday, March 4. We kindly invite you as shareholders and to ensure your shares are represented. For any questions or inquiries, please contact our Investor Relations department. As recently announced, we successfully closed the acquisition of Georg Fischer Casting Solutions automotive business for an enterprise value of $336 million on a cash-free and debt-free basis. The upfront closing payment amounted to $216 million funded with existing cash. This reflects the agreed base purchase price, the inclusion of $113 million of cash at closing and customary adjustments, including the assumption of $44 million of financial liabilities. The remaining consideration consists of holdbacks and a portion of vendor financing to be paid over a 5-year term. We are very pleased with the successful completion of this transaction, which strengthens our strategic positioning, expands our technological capabilities and enhances our overall business profile. We will start consolidating Georg Fischer Casting Solutions operations effective February 1, 2026. As our product portfolio has significantly evolved over the years from primarily cylinder heads in the 1990s to a broader range of products, including engine blocks, transmission components, structural parts, battery housing assemblies and now even additional materials such as magnesium and other alloys through the integration of Georg Fischer Casting Solutions, the relevance and comparability of our historical equivalent volume metric has diminished. Given the increasing diversity of products and materials, calculating a meaningful head equivalent measure has become less representative of our business. Accordingly, starting this year, we will discontinue reporting equivalent volume and instead provide further visibility into our revenue by segment. Our financial guidance will focus on revenue, EBITDA and capital expenditures, which we believe better reflect the performance and strategic direction of the company. In summary, during 2025, we continued executing our disciplined financial agenda, reducing net debt, streamlining capital investments and strengthening free cash flow generation. With the integration of Georg Fischer Casting Solutions, we are reinforcing our competitive position and advancing our ability to create sustainable long-term value for our stakeholders. This concludes my remarks. I will now turn the call over to Armando. Armando Tamez Martínez: Thank you, Alberto. I will now provide an update on our outlook for this year. We expect to see a resilient industry environment with stable volumes across our main regions. Trade dynamics will continue to play a relevant role throughout the year; however, we are well prepared to face these developments as we will continue to rely on our solid commercial foundation, prudent financial decisions and close communication and collaboration with our long-standing customers. Effective consolidation of GF Casting Solutions began in February, and it is incorporated accordingly in our full year guidance. This integration strengthens our portfolio and further positions us to meet customer needs across regions. Nemak will maintain a selective and strategically focused investment approach, consistent with our capital allocation priorities. In parallel, the incorporation of GF Casting Solutions will require additional capital to advance the completion of a new manufacturing facility in the United States. Given these considerations, I would like to announce our guidance range for 2026. Revenue in the range of $5.3 billion to $5.5 billion, EBITDA in the range of $630 million to $650 million and CapEx ranging from $385 million to $395 million. As we close, I would like to briefly address the leadership transition announced earlier this year. After 42 years at Nemak, including 13 years serving as CEO, I will be concluding my tenure in this role by the end of March. This planned succession reflects our commitment to long-term value creation and strategic execution, and I am confident that Nemak is well positioned for the road ahead. The Board has appointed Herve Boyer as CEO effective April 1, 2026. Herve brings extensive global experience in the automotive industry, and I am certain he will provide strong leadership as Nemak enters its next chapter. I want to express my appreciation to our entire team, customers, suppliers, shareholders, financial analysts and all the stakeholders for the trust and partnership throughout my tenure. It has been a privilege to work together to advance Nemak's strategic priorities and strengthen our position in the industry. My passion for the automotive industry remains strong, and I look forward to watching Nemak thrive. With that, we conclude our presentation and would now like to turn the call over to Denise to open the Q&A session. Denise Reyes: Thank you, Armando. We are now ready to move on to the Q&A portion of the event. [Operator Instructions] The first question is from Alfonso Salazar from Scotiabank. Alfonso Salazar: Armando, first of all, congratulations for all these years in Nemak. We will be missed without any question, but a great job in very challenging times that have apparently will continue. The first question that I have, I have 7 questions. I will not use my time with that many. I will have only a few. The first one is, if I understand correctly, you mentioned that you will not report volumes anymore. So this is something that -- is this correct? Because definitely, we need to have a metric on volume going forward to understand what's going on in the company. So I just want to clarify that point. The second is if you can provide some color on what happened with the working capital in 2025 was very strong. So I just want to understand what drove that. Apparently, part of that was working capital. And what is your expectations for the first half of the year, maybe? And finally, any comment on the [ USMCA ] renegotiation outlook? This is very important, as you know, in July, we have to come up to see if there is any conclusion of this process. It's going to start. But what is your view on how this could drive the North American business unit of Nemak if there is no -- especially if there is no agreement. And with that, I will stop for now my questions. Armando Tamez Martínez: Thank you, Alfonso, for your kind words. Related to volumes, one of the things, and this has to do a lot with the recent acquisition of GF Casting Solutions. As we have mentioned before, the company -- the acquired company is producing a lot of different components that are, for instance, even in different materials, including aluminum, magnesium and iron. And it was very, very difficult to homologate to the current, let's say, parts that we are making. So for that reason, we are deciding to only report volumes -- I'm sorry, revenues, EBITDA and CapEx going forward. We tried several exercises, but it was almost impossible to really homologate what we are doing today. Alberto Sada Medina: Yes. And Alfonso, this is Alberto. Related to your second question on working capital, certainly, we had a very favorable closing of the year on the working capital accounts. And as you know, I mean, as a company, we always are looking for ways how to optimize our cash needs. In this particular end of the quarter, we had extraordinary benefits on the working capital side that would revert most likely on the first quarter. So around the entire, let's say, turnaround of working capital, which normally on a seasonal basis is lower in the end of the year, about $60 million would be most likely reversed on the first quarter of 2026. So it's -- part of it is temporary and other part is part of our push towards improving improvements in working capital. And then related to your third question on USMCA, we'll have to see how everything evolves. I think it's also important to highlight that our products are all compliant. Everything that we do in Mexico that gets exported to the U.S. either directly or indirectly is fully compliant with USMCA rules. So I mean, so long as everything stays the same, we shouldn't see any impact in the development of our business in North America. Yes, we're close to the administration to make sure that everything is correctly incorporated into the negotiations. Alfonso Salazar: That's very clear. But yes, the volume thing, we need to talk later about it because we really need to have some metric to work with. Alberto Sada Medina: For sure, Alfonso, but as Armando highlighted, it becomes very difficult to give a head equivalent measure. In the past, one or two products was fine, but now with multiple products with multiple value adds the weight relationship doesn't have any more a correlation with the revenue. But we'll give a little bit more color on different segments on the revenue side. So I hope that, that can help better on your models going forward. Denise Reyes: The next question is Jonathan Koutras from JPMorgan. Jonathan Koutras: I also have three questions on my side. So please bear with me. The first one of the $85 million in charges in the quarter, right, if you could walk us through how much of this is recurring and if you expect these markdowns to continue in the coming quarters or years. This has been impacting results in the last 3 years or so, as you know. So just wanted to understand where we are in this process of reassessing assets. And the second question, on gross margins. Fourth quarter is historically softer given seasonality and there was no commercial negotiations or tailwinds in this quarter. So should we assume the last two quarters of gross margin at around 9% is somewhat the new normal for Nemak post these one-offs? Or do you see recovering back to the 11% level in the next quarters or so? And if that is the case, how come? And the third one -- last one as well on CapEx full year came in slightly above the guidance range. So if you could shed some light on this as well, please? Alberto Sada Medina: Yes. Thanks, Jonathan, for the questions. Related to the first one on the impairments and extraordinary charges that we registered this year, these are fully aligned with the need to realign and reallocate capacity where we have -- volumes where we have capacity. So based on that, we had to take certain footprint decisions to optimize our operation. And therefore, we had to write off a few of those capital assets on our books. We do that all the time. We had a similar figure last year where we had to write off certain of our EV assets. In this case, there was other ones. And yes, going forward, as of now, I mean, we see smaller figures, but we will have obviously to assess how everything develops. And yes, based on how some of the volumes move on, we will see if there is a need to do something else on the right side or not. But for now, I think most of it was done for now. Related to your second question on margins, yes, as you correctly point out, last year, particularly in the fourth quarter, it was heavily influenced by one-offs commercial claims that we closed with certain customers. So meaning 2024. In 2025, there was less activity on that front as of the closing. So at the end, the EBITDA margins that we're expecting should fall between the 12% range going forward on average based on revenue. And that essentially takes care, yes, all the combined effects that we see going forward. On one side, we saw that there were extraordinary expenses this last quarter related to special costs that we had in our operations in North America. But also there are things that may have both positive and negative effects related to how the evolution of the exchange rate happens as well as on the mix effects. So I think on an EBITDA basis, around between 11.5% to 12.5% would be what we would expect for the year. And last on the CapEx guidance. On the CapEx side, it is certainly calendarization effect. It's hard really to put it down to the last million. I think at the end, we closed pretty much within the guidance, plus/minus a few millions. So if we are a little bit higher, a little bit lower, most of it has to do with calendarization of the CapEx. Denise Reyes: We will proceed with the next question from Andres Cardona from Citi. Andres Cardona: Regarding the EBITDA CapEx, could you give us a sense of how much of the EBITDA is coming from the recently closed acquisition, so we can have also a picture of the legacy business. Alberto Sada Medina: So your question, Andres, is on the CapEx for guidance? Andres Cardona: No, EBITDA, the EBITDA, like how much of the EBITDA is coming from the new business and how much is coming from the legacy business? Alberto Sada Medina: Well, yes, I mean, we will certainly give you a little bit more color around how everything evolves in 2026. As indicated, it's both the EBITDA from Nemak and 11 months of Georg Fischer. So at this point, we're not breaking down the EBITDA on, let's say, on the both effects. We'll certainly be sharing a little bit more color about that on a regional basis as we move along the year. But you can easily make probably a little bit of calculations based on what we performed last year, perhaps a little bit less of associated claims and then everything on top of the number that we're giving is associated with Georg Fischer. Denise Reyes: The next question is from Alejandro Azar from GBM. Alejandro Azar Wabi: Alberto, Armando, before my questions, just to add my congratulations to Armando on an outstanding 42-year run at the company, wishing you the best in your next ventures, Armando. Now switching to my questions, and I have 3. The first is a follow-up on working capital, Alberto. How much of the benefit is structural and sustainable versus timing related and potentially reversing in 2026? That would be the first one. The second one is on GF Casting Solutions integration. If in your guidance, you are accounting for synergies you already noticed. And if not, if you can share with us the top 2, 3 levers that we should see? And how should we expect synergies to show up in EBITDA maybe in 2026 or perhaps 2027? And my last one is on AI and automation. If you can share a bit more color on where are you most advanced on these topics across your footprint? And if you are seeing meaningful productivity or cost benefits yet? Any examples would be really helpful, guys. Alberto Sada Medina: I'll take the first question, Alex, related to working capital. As we have seen in previous years, there is seasonality on how working capital moves up and down. And what we see normally at the end of the year is the reflection of, let's say, reduced activity at our customer plants as they stop for holidays and they do scheduled maintenance and the like. So a portion of that seasonality picks up again in the first quarter. So we will see a reversal as we have seen in previous years. And on top of that, we will see about $60 million of additional, let's say, of those extraordinary elements that we saw in December reversing most likely in the first quarter. So on a, let's say, seasonal basis, we see a recovery of working capital. And then part of that -- or let's say, on top of that, we will see a little bit of the one-offs that we saw in December coming back. Alejandro Azar Wabi: So for the full 2026, you expect to require additional amounts of working capital? Alberto Sada Medina: For the full ' 26, at least the $60 million that we saw on an extraordinary basis, unless there is any extraordinary happening at the end of -- or, let's say, during the year, we will see, yes, at least $60 million, let's say, benefit that we saw this year. Armando Tamez Martínez: Yes. Thank you, Alex, for your nice words. I appreciate it. Related to the GF integration and synergies, this is a very important point for us, Alex. We retained a firm that has been helping us in the past, in the major acquisitions that we have made to really focus in a very dedicated team and plan to get the best integration possible. We are true believers that integration of acquired companies is key. We already, for instance, contracted this or hired this external adviser with a lot of experience not only in the industry, but also with Nemak. And we already started actually since last year, to plan ahead what were the main, for instance, potential synergies. We visited all the GF Casting Solutions plants that they have in Europe as well as in China and the facility that is under construction and planning to be launched this summer in the U.S. And certainly, that has a cost, but also we are expecting in the midterm to reach synergies in the range of about $30 million to $40 million. We are fully committed. The company is fully committed to achieve those synergies. Of course, it will take some time. The main drivers for those synergies are related to sharing best practice and improving productivity, also best practices and sharing on the commercial front, how we can, for instance, get better pricing with some customers as well as better contracts as well as CapEx avoidance, which I think is very important in this industry, especially to, again, better use existing capacity. So those are some of the areas, Alex, that we are targeting. Of course, there will be some additional synergies. And if we find any redundancies, certainly, we would try to become leaner. So you will see, again, in the midterm, or expected, for instance, synergies, as I indicated, in the range of $30 million to $40 million that will be added value, in addition to getting, for instance, a relationship with very important Chinese OEMs and improving also our market position. So those are -- related to your last question in the AI, and this is an area that Nemak has devoted a lot of technical resources, and we're making very good inroads and very solid progress in terms of using, for instance, AI. We have invested heavily over the last probably 14 years in our company in installing a monitoring system in which we have a real-time data that it is available. We can, for instance, get every single facility, every single product line with real-time information of the products that we're making. That has been helping us a lot because we have a lot of different parameters that we need to control. And certainly, that has helped us in terms of getting better, for instance, quality, getting better productivity and so on. And with the help of the artificial intelligence, now what we are doing is in some of the plants, we are using these techniques and facilities to help us predict potential issues that we may have in the operations. And that has been already deployed in some of our facilities in Europe as well as North America. And certainly, we are planning to install similar approach in our facilities in China as well as the new facilities that we are acquiring from Georg Fischer. So those are some of the areas that we are taking advantage. This is on the operational side. In addition to that, of course, on the administrative side, we are using AI to help us again get some of the operations that we are normally doing in a much faster way. And certainly, that is helping us to reduce cost and optimize resources. Alejandro Azar Wabi: If I may go back, Armando, the $30 million to $40 million in synergies, do you think it's better to think that as free cash flow given you talked about CapEx? Armando Tamez Martínez: I think it's a combination of both CapEx avoidance as well as, for instance, also improving our productivity, improving our cost position, improve our commercial front. So it will be a combination of both increasing EBITDA in the midterm as well as reducing CapEx. Denise Reyes: Thank you, Alex, and thank you, Armando. We will move on to the written questions. We have one question from [ Pablo Dominguez from ION Group. ] The question reads, how -- does the 2026 CapEx guidance include the upfront payment of the GF acquisition? Also, does it include the additional CapEx needed for GF U.S. plant under construction? And if not, how much CapEx will the plant require during 2026? Alberto Sada Medina: Yes. The CapEx guidance for 2026, it's only associated with the capital expenditures of both the Nemak legacy business and Georg Fischer. So it includes the investments that Georg Fischer has for the new -- or let's say, the old Georg Fischer has for the new facility in the U.S. in Augusta. And the payment for the acquisition is not included in the CapEx guidance. Denise Reyes: Thank you, Alberto. We received another live question from [ Isaac Gonzalez from GBM. ] Unknown Analyst: I have a last question. I'd like to ask you by taking out volumes on the revenue, are you willing to open by segment or by EV/SC and ICE? Is it possible? Alberto Sada Medina: Yes, [ Isaac, ] thanks for the question. And as I highlighted before, I think in order for everyone to get a little bit more granularity on how the business develops, we'll share the revenue on a per segment basis. So I think that will help see how the business is evolving. With the cooperation of Georg Fischer, that segment grows significantly. So you'll start seeing some of the -- yes, how the revenue develops both on the legacy as well as on the new segments. Denise Reyes: The next question is from Alfonso Salazar from Scotiabank. Alfonso Salazar: Yes. Just a follow-up. Well, one, this is more than a question, a request. Years ago, Nemak had a very interesting guidance on how the breakdown of future sales between legacy business ICE and EV markets will unfold over time. It was very helpful. I mean it was very important for us to understand. In the end, the situation -- the market situation was very different to what you were expecting, what we all were expecting. But it would be a great way to understand, especially with the integration of GF Casting to see or to have some sense on where is Nemak going from here and what are your expectations regarding future growth, both in the legacy and new business lines. So that is more than a question -- a request that would be very interesting to see. The second -- the question is only regarding dividends. We see buybacks, but any comments on when dividends would be back? Armando Tamez Martínez: Thanks for the question, Alfonso. I think in the past, certainly, we were informing on a quarterly basis, for instance, how our EV and structural, components portfolio was growing. I think we will need to recalculate based on certain volume reductions that we have seen in different regions of the world. As I indicated, we are seeing a significant higher appetite in the industry overall for ICEs. So I think we will need to recalculate and also add I think 80% of revenues that are coming with the acquisition of GF are for the new products or the EV and structural components. So only 20% is in the powertrain. So I think the team, certainly, we will be able to recalculate and provide certain guidance on the two main components that the company is making. So certainly, we will share that. Alfonso Salazar: That will be fantastic, really helpful. And any comment on the dividend? Armando Tamez Martínez: Yes. I think the company certainly before the pandemic was giving a substantial amount of money in terms of dividends. Now I think the entire Board and the management team have been a little bit more prudent in terms of, again, first, looking how we can reduce our leverage. And then, of course, once the company is in a more reasonable leverage, which is below 2x net debt divided by EBITDA, I think the company will be in a position. And certainly, in our projections, we are looking that the company will be able to generate enough free cash flow to reduce our debt as well as pay dividends, but not this year. Denise Reyes: The next question is from [ Hinden Barredo ] from PGIM Group. Unknown Analyst: Just two quick ones for me. Can you remind us what the -- how much the closing payment is for the GF acquisition? And also, are you planning on issuing possibly new debt for the new manufacturing plant? Or are you just thinking about generating that with internal cash flows? Alberto Sada Medina: Yes, just to remind us, it was highlighted before, the payment that we did for Georg Fischer was $216 million, a little bit higher than what we had said before because we acquired the company with cash on their balance sheet and acquired a little bit of loans that they had on their balance sheet. And then on your second question, can you just repeat that, please? Unknown Analyst: And the second question is for the new manufacturing plant in the U.S., are you planning on maybe issuing new debt for that? Or are you just going to fund that with internal cash... Alberto Sada Medina: Yes. No, good question. With the CapEx that we have on our guidance, we should be able to cover that with our own cash and generation of the company. So no, we will not issue any substantial debt other than just maybe some liability management here and there. Denise Reyes: We will move on to another written question that we have from [indiscernible]. Hello, everyone. What is the expected free cash flow in 2026? And with a market value of less than $600 million, are you expecting to ramp up on buybacks? Alberto Sada Medina: Yes. Well, thanks for the question, Diego. We don't give any guidance on the free cash flow for the year. We expect it obviously to be positive. And for that reason, we'll continue with our share buyback in the same way that we did in 2025. We'll present that on our next general assembly for approval, but it will be consistent with what we have done in the past. Denise Reyes: Thank you, Alberto. There are no further questions at this time. And with that, we conclude today's event. I would just like to take this opportunity to thank everyone for participating. Please feel free to contact us if you have any follow-up questions or comments. This does conclude today's earnings webcast. Have a good day.
Nini Arshakuni: [indiscernible] joining Lion Finance Group PLC's results call. Today, we are presenting our results for the fourth quarter and the full year of 2025. My name is Nini Arshakuni. I'm Head of IR, and I'll be moderating today's call. I'm joined, as always, by the Group CEO, Archil Gachechiladze. We also have on the line the CFO of Ameriabank, our banking subsidiary in Armenia, Hovhannes Toroyan; and our Group Economist, Akaki Liqokeli. First, we'll start with the presentations. And in the second session of this call, you will be able to ask your questions. And with that, I will hand over to Archil first for opening remarks, and then we'll dive into our performance and the operating environment. Archil, you can go ahead. Archil Gachechiladze: Thank you, Nini. Hello, everyone. Thank you for joining the call. I will just have opening remarks followed by the macro review by Akaki. So as you can see, we have delivered a record quarter and a record year, in fact, with our net income growing by 20.9%, just shy of GEL 2.2 billion, delivering 28.4% return on equity. And in the quarter, that was just above 30% return on equity with 35.5% cost-to-income ratio and cost of risk, which is about half of what we usually expect through the cycle. So for the quarter, it was 0.3%, but then for the full year, it was 0.4%. Both of the strong franchises have delivered very good increase in the quality of the franchise, which we measure by the satisfaction of the customers as well as the pickup of the monthly active users on the retail front. And also, both of the franchises delivered above average or above expected or above guidance growth in our portfolio, especially on the credit side, but also on the deposit side. So we are quite happy with the results, and I would like to thank our Armenian and Georgian colleagues who have done a very good job in 2025. And as a kind reminder, Ameriabank full year -- in 2025 was the first year when Ameriabank was the -- for the full year part of the Lion Finance Group, hence, the renaming, as you know. And as you can see, it has delivered substantial good growth, not only on the balance sheet side, but also on the retail coverage side. With this bright note, I would like Akaki to cover our macro. As you know, both of the countries have enjoyed a record-breaking macro performance over the last few years, which is continuing year-by-year. So Akaki, would you tell us what to expect? Akaki Liqokeli: Thank you, Archil. Hello, everyone. I will be presenting the macroeconomic update for our core markets, Georgia and Armenia. Starting with growth performance, 2025 was another strong year for both countries. The Georgian economy expanded by 7.5%, fully in line with our expectations and supported by strong consumption spending and resilient external inflows. Meanwhile, Armenia surprised on the upside, delivering 7.2% real GDP growth. For 2026, we expect this strong growth momentum to persist, supported by ongoing strength of services and public capital expenditure. Real GDP growth in Georgia is expected at 6% and within the range of 5.5% to 6% in Armenia. Due to this strong growth in recent years, as you can see on the right-hand side, per capita income levels in both economies have been steadily growing and converging towards Central and Eastern European peers. While the baseline outlook remains positive, uncertainty is still elevated. Geopolitical tensions in the region creates downside risks. However, both economies are well positioned to withstand potential shocks, supported by solid macroeconomic buffers and prudent policy frameworks. Upside opportunities could also emerge, especially from the ongoing implementation of the historic peace agreement between Armenia and Azerbaijan. Solid external inflows have also supported local currency strength. Georgian Lari and Armenian Dram have been relatively stable in recent years, recording modest but consistent gains against the U.S. dollar. Notably, real effective exchange rates for both currencies have stabilized, reinforcing our assessment of that currency valuations are broadly in line with fundamentals and supporting stable medium-term outlook. Currency strength is also important for low and stable inflation, which the 2 countries have enjoyed in recent years. The recent headline inflation uptick in Georgia is mostly related to food price pressures and core inflation remains low, reflecting well-anchored inflation expectations. Over 2026, we expect inflation to stay close to the Central Bank's 3% targets in both countries, underpinned by prudent monetary policies. In the second half of this year, we see a room for around 50 basis points cuts by National Bank of Georgia, while the policy rate of the Central Bank of Armenia is expected to remain unchanged as the current policy stance is assessed as broadly neutral. Both central banks have been very active in accumulating foreign currency reserves due to strong foreign currency inflows and stable exchange rates. By the end of 2025, current exchange -- foreign currency reserves reached record high levels of USD 6.2 billion in Georgia and USD 5.1 billion in Armenia. Importantly, the current reserve levels are above the minimum adequacy thresholds, and they continue to increase. Another key pillar for macroeconomic stability is prudent management of public finances. Georgia and Armenia have demonstrated fiscal discipline over the years. The Georgian government remains on a consolidation path with tight management of fiscal deficits at 2.5% of GDP and declining debt-to-GDP ratio. Meanwhile, the Armenian authorities have been successful in balancing ongoing spending needs with fiscal sustainability objectives. Despite elevated fiscal deficits in recent years, they managed to keep debt-to-GDP ratio broadly unchanged. This year, we expect fiscal policies in both countries to remain sound and supportive to growth, particularly through sustained public capital expenditure. And lastly, financial sectors in both countries have benefited from favorable macroeconomic environment and continue to support growth. We observed solid and strong expansion of lending, lower levels of loan dollarization and solid capital buffers. So this concludes my part. Back to you, Nini. Nini Arshakuni: Thank you, Akaki, for the overview. Now we're back to Archil, who will discuss our performance first in Georgia. Archil Gachechiladze: Just one second, let me share the presentation. So in Georgia, the numbers were, as we said, ahead of our expectations. So our net profit for the quarter was just shy of GEL 460 million, which was 17% growth on year-on-year and return on equity of 32.7%. And in terms of loan book growth, we were at 16.1%. As you may remember, we guide 10-plus percent. So 16% was a strong showing. And our digital monthly active users continued to grow by 15% year-on-year, reaching 1.8 million. We have our retail app and the business mobile app, both quite capable applications that do a lot of different things, and we have a list here. But what's interesting is that second year in a row, we won the World's Best Digital Bank by Global Finance. And there were very big names in the run-up at the end, big mobile digital banks basically, the biggest in Europe. So in terms of the monthly active users, you can say that we are up by 15%, but also on a daily active, it's up by more than that, which was 24%, achieving just shy of 1 million customers, which gives you an idea that the engagement is increasing. Customer engagement is ever increasing number, which is very good showing. Also on the legal side, so on the company side, we had increase of 14% year-on-year, achieving 133,000 companies that use our mobile application. And obviously, Internet then is used there as well. We are increasing our sales with digital and there, we have achieved new highs of 71% in the fourth quarter, achieving 71% of all products are being sold digitally. And you can see that in loans as well in deposits, we are increasing the share of sales which are done digitally. And that is based on small differences or small improvements that we do through to each product. On the Net Promoter Score, which is part of our DNA, no customer satisfaction and the focus on that is part of the DNA. And this NPS is more like a quick measure of how we are doing overall. We have achieved new highs of 76 showing at the end of December and it just shows you that our franchise is enjoying a high moment or the highest quality it has ever been, in fact. In terms of our payments acquiring volumes, we are up by 22.6% and market share of 55.8%, 0.1% down year-on-year. But basically, it's the strongest showing. As you can see, what makes me also very happy is number of people using our Visa, Mastercard or, let's say, the cards, not just Visa, Mastercard -- Visa, Mastercard and AmEx, because AmEx debit is something that we do as well. It's up by 13% year-on-year to 1.64 million people in Georgia, which is -- it keeps us -- it makes us happy to see that although we are a leading retail franchise in the country and in the region, we can say -- is also we can say that it's still increasing double-digit number of people using our cards on a monthly active user basis, which is something that makes us happy and lays a strong ground for further growth going forward. Our loan portfolio, as we discussed, grew by 15.9% or 16.1% in constant currency basis. On a quarterly basis, that was 4.5%. Deposits continued to grow 13.6%. Having said that, and we'll discuss it later that high liquidity is weighting on our NIM. So we would like to go below 40% market share. We are at 41% and we would like to do it so that we don't hurt the franchise so that people still have Bank of Georgia as the top choice for keeping their money. On the capital position side, as you can see, there are very strong buffers there on the liquidity side, slightly higher than we usually keep. On this note, I would like to ask Hovhannes to cover the Armenian side, which has delivered fantastic results, please. Hovhannes Toroyan: Thank you, Archil, and greetings, everyone. I'll be showing the presentation. Yes. So as Archil mentioned, this quarter was another breaking record quarter for us in terms of performance. Our net profit for the quarter grew 38% and annualized stand-alone net profit grew about like 24%. Our return on equity was 26.8%. And the loan portfolio growth was also astonishing 28% in constant currency basis, and this was very diversified between both retail and corporate portfolios. Our time deposits grew 33% year-over-year, showing the very strong trust of our customers towards our franchise. Total attractions from customers grew 22% on a constant currency basis. And again, we are very happy with this. All these are well above the benchmarks and guidelines that we have shared earlier. We are very happy also to mark that our MAU and DAU ratios are growing at astonishing over 25% per annum. In terms of digital infrastructure, we do continue to heavily invest into improving our digital infrastructure, both internally as well as customer-facing part. And our mobile app has already incorporated most of the beyond banking services. So it has become a very good ecosystem for our customers to meet a number of their needs, including investments in terms of brokerage, my home, my car and so on and so forth. We have enhanced the digital payments in our ecosystem and mobile application. And technically, the number of transactions through our online banking have more than doubled within 1 year's span. We have launched our loyalty program in Q4 of 2025, and we are very happy and enthusiastic about it. We hear a lot of compliments from customers already. So we do believe that it's going to be another very strong pillar for us to bond our long-term relationship with our customers. And again, we do continue to invest heavily into financial education, both for the kids as well as for the adults. And MyAmeria Star is the application targeting kids and mostly educational part of that. And we are very happy to see the uptake on that as well. We do have very positive dynamics in terms of coverage of retail sector. Here, you can see more than 45% of growth for MAUs and DAUs. And we are currently serving 1/3 of the adult population of Armenia, and this gives us much bigger opportunities for growth in the local market, and we are very happy with it. At the same time, I cannot fail mentioning about very positive dynamics of digital uptake and engagement ratios that show that whatever improvements we are doing into our systems are actually to the benefit of our customer base. In terms of portfolios, the very strong macroeconomic situation in the country leads to very healthy and positive demand for loans. And you can see that we were able to increase our loan portfolio by 28% in Q4 of 2025 year-over-year. And we do expect to see very positive dynamics going into 2026 as well. As I mentioned, the growth has been very balanced between retail and corporate. But within retail portfolio, we see that the share of consumer loans is growing a bit faster than mortgages that constitute about half of the portfolio of the retail banking in Armenia. Deposits and attractions from customers are also growing very, very fast. And we can see that 22% roughly growth of total attraction from customers comes to prove it. It's very important also to note that 60% of our deposits already constitute deposits in AMD. And this is a result of a rapid increase of the number of customers. Over the last year only, we have increased the number of customers by 33%. At the same time, it is also a result of the very stable macroeconomic situation and very stable currency of Armenian Dram. Ameriabank has been continuing to improve its market share. We are at 21.7% in terms of loans and 19.5% in terms of deposits. And as we have announced earlier, this really shows the additional growth opportunities that we see in the local market. In Q4 alone, 96% of all the loans disbursed by Ameriabank retail sector were loans that were underwritten through our online channels, technically AI and machine learning based underwriting algorithms that cover it. That gives us opportunity to reach out to technically any Armenian citizen across the country with very low costs. In terms of liquidity, just like the Georgian peer, we have been over liquid towards end of the year. You can see from the ratios. And at the same time, in terms of capital position, I want to mention that while technically, the capital position was tight by the end of the year, we did enhance our capital position already in December. It just came into factor in January when Central Bank of Armenia approved it as part of our regulatory equity. We're talking about EUR 30 million. And effectively, by end of January, our capital position was only 17.5%. And later in early February, we were able to do the first inaugural USD 50 million AT1 notes that will elevate our capital position by another 86 basis points further. So we are very confident on both in terms of our capital position and liquidity position. This is very short. I'm going to hand it over back to Archil. Thank you. Archil Gachechiladze: Thank you, Hovhannes. Those are very impressive results from Armenia and Armenia is continuing to deliver very strong results also on the macro side. And as Hovhannes mentioned, it's very good that we are increasing the number of customers that we are serving. And having said that, we only serve about 1/3 of the adult population in Armenia. So there's plenty of growth that can happen there. So now I will summarize what it means for the group results. So overall, the operating income up by 16.4% in the quarter and by 20.8% for the year, as you can see here, the net interest income was very strong showing of 19.9% for the quarter and 25.9% for the year. The reason why we don't show Armenia here for the year is that in the base year of 2024, 1 quarter is omitted. So it will not be a right comparison. As you remember, we acquired the bank end of March in 2024. So net noninterest income was up by 10% for the quarter and by 10.8% for the year. And I'll discuss a little bit there because there was some details there that we should discuss. And we did disclose it in the results. But I'll just mention that in the fourth quarter, net fee and commission income was up by 33.8%, but that was partly due to the fact that we got a new deal from the system providers for the card payment system providers, which was starting from the 1st of April. So it covered the last 3 quarters. In fact, it was booked in 2020 in the fourth quarter. So we got a few questions earlier today that what should you think going forward? And on the net fee and commission income side, I think going forward, we should expect growth to be somewhere between 15% and 20%, so on the high teens side because it -- not only we benefited for the last 3 quarters, but we benefit for the next 5 years with improved terms with the system providers. On the net FX side, we have seen a decrease in both markets. On an annual basis, it's up by 5.1%. So there, I think it's important to note that both of the currencies have been very stable. So we make more money at better margins when the volatility is there. volatility has been down. The competition has increased as well in Georgia specifically. But especially when you have a one-sided bet when the currency is getting stronger and the National Bank provided a backstop to about GEL 2.7, GEL 2.68 per dollar. That basically is a one-sided bet. It's hard to make money there. So that's what we have been experiencing, similar kind of trends in Armenia as well. But if there is volatility, we'll make more money. If there's no volatility, we will be flattish to slightly increasing going forward. So I think it's already reflected that low volatility is already reflected in the numbers. And going forward, we expect positive dynamics. Operating expenses were up by 14% for the group on the Georgian side, slightly higher than the revenue. But going forward, as we said, that overall as a group, we are expecting to have neutral or positive operating leverage. As you can see, in the fourth quarter, the group was 35.2% cost income, but notably, Armenian side was 40.5%. That kind of drop is partly for the cost control and partly due to the fact that third quarter was the last one where we amortized the retention bonus arrangement that we had with the key managers of the bank. So going forward, as I said, we expect neutral to slightly positive operating leverage going forward. Loan portfolio growth was well ahead of our guidance, close to 20%, 19.7% and the last quarter was 5.8% where Georgia, as we said, contributed 4%, 4.5% and quarter-over-quarter growth in Armenia was 8.5%, which was very significant. Overall, I think Hovhannes did mention that 28% was ahead of our expectation in Armenia in terms of growth. But what's interesting also is that last quarter -- fourth quarter of 2024 was a very big jump in loan growth. So with that high base to grow at 28%, especially on a Q-over-Q basis, you get the idea that the activity was very strong. Armenia overall is -- there's a lot of positive dynamic happening there and a lot of businesses are expecting to grow. So on the deposit side, we grew 17.3%, as you can see the breakdown there as well. Both of the franchises are enjoying very high liquidity, which shows strength on one side, but it also is a weight on our cost of interest. Net interest margin was slightly reduced in fourth quarter, as I said, partly due to the fact that it was increased cost in Lari and AMD. So local currency is becoming both markets, in fact, higher proportion and the costs there have been a bit higher. That will be a big focus going forward over the next couple of quarters. Cost of risk, we were down at 0.3%. So for the annual costs came 40 basis points. Our NPL ratio remained 2.1%. And although we had a slight increase in Armenia, but slight decrease in Georgia. So overall, as a group, we are at 2.1% NPL ratio, which is just fine. In terms of NPL coverage, mainly the decrease there is automatic. We didn't change any rules. In fact, the main reason why that change happens is because the proportion of the NPL ratio is increasingly towards the unsecured. So there, basically that's what it's resulting. Profit before one-offs, as you can see, we had 22.7% growth in the quarter. So it was a very strong quarter, in fact, a record quarter. And for the annual growth was also by 20.9%, which is very strong and Armenia played a very good role there. With return on equity for the quarter at 30.1%. Nowadays, every time return on equity starts with 3%, I'm relatively happy. And for the full year, I was less happy because it was 28.4% and not starting with 3%, but who knows. Return on average assets, as you can see, was up slightly from the previous quarter and for the full year, it was 4%. All in all, I think it's something to note that leverage ratios in Georgia and Armenia are very low. So we have almost twice as much capital as our peers in Eastern Europe. As a result of this, we have declared a dividend, which is an increase for the full year of 16.7%. Having said that, we are laying significant buffers in both banks for strong growth because we have been -- over the last 3 years, in fact, we have been growing more than we indicated as our medium-term guidance, and we want to be able to have that flexibility of deploying capital where the growth opportunities are. For example, in Armenia, we did indicate at the acquisition that we were going to deploy the retained earnings, which are quite strong, to fund the growth. And that is very important to have that flexibility and ability as a group, which is well funded, on one side, to pay dividends, which is growing year-by-year and a CAGR of 28.8%. But just last year was 16.7%. And going forward, we expect positive dynamics there as well as ability to deploy our capital in growth opportunities, be it organic or inorganic if it comes along. That's basically that. And as a reminder, our strategy is to be the main bank for our customers and be excellent in customer experience and with our eyes on profitability with annual book growth of about 15% and profitability of 20-plus percent, over the last few years has been closer to 28% to 30% and dividend payout ratio between 30% and 50%. And there, we have, as indicated, in fact, a couple of years ago, we've been on the lower side, which reflects our higher than guided growth over the last 3 years. That about that. And let's open up for questions because I think questions -- Q&A is usually the most interesting part, not only for our audience, but also for us. Nini Arshakuni: Yes. So we can open the floor for questions, and we have a few raised hands from the analysts. So the first will be Sheel Shah from JPMorgan. Sheel Shah: Great. I've got two questions, please, if you can help me. First, can I ask about the NIM outlook for the business going forward in the context of rate cuts coming in Georgia or expected some of the funding pressures you've seen in the fourth quarter. And then you've also said the local currency deposits, you're going to be focusing on those, I presume on the cost of those going forward. So I'd be interested to hear, firstly, on the NIM outlook of the business going forward. And then secondly, I'd like to know a bit more about the tech infrastructure of the bank because we can clearly see the output of the tech in terms of the NPS score, the growth in the number of mobile active customers, the number of sales on the digital channel. But I'd be interested in how many of your applications are on the cloud? What sort of platforms are you using? How many core banking systems are you using? What are you doing in terms of AI, which I noticed is newly on the slide. So a bit more information on the tech stack would be interesting, please. Archil Gachechiladze: So on the NIM side, you did mention all the negatives, and you didn't mention the positive, which is deploying this extra liquidity. I mean, we are drowning in extra liquidity, which we either will deploy or push out of the bank. So that's -- so on balance, we'll either be flat to slightly positive on the NIM side, and that's in both markets. On tech side, we are either the largest or second largest technology company in the whole region. We employ 1,000-plus tech specialists either or digital specialists, in fact, be it on the programming side or just digital workers. We have translated that into the good numbers as well on the customer acquisition side as well as the balance sheet growth. A few years ago, we basically -- first of all, our core banking in Bank of Georgia is homemade. So it's fully homemade as well as the main applications, the retail app and the -- on the mobile app on retail as well as business. In Armenia, I'll ask Hovhannes to cover it in a couple of minutes, but mostly homegrown there as well. But basically, we have a few years ago, said that we want to be on cloud or cloud ready. So about 3, 4 years ago, we started to integrate that thinking in the design and everyday development, and we have been chopping up our core system into smaller pieces connected with APIs, which allows for the scale up not to be too expensive in different parts of the business. So it's -- many parts of our data is on cloud and the rest can be on cloud any minute, but it's a cost-benefit exercise on which case because -- yes, that's because it's not cheap. But otherwise, in terms of technical capability of putting everything on cloud and having it in smaller pieces, 90% is done. I mean there are small pieces that we are rewriting and changing. But otherwise, it's very well developed. Also on the AI side, we are experimenting in many different directions. Chatbot is the most obvious one, but we have done a lot of different testing of different capability now in the processing, payments processing, AML and other types of applications as well as on the risk and underwriting. So there's -- while we focus on AI, a lot of times, we understood that there's more to be done on the automation side. So there's a lot of work going there. But not much more to report there. Only thing I can say is that it's a big focus and going forward, it will deliver efficiency, but also more importantly, the speed of execution and quality, which will benefit our customers. Hovhannes? Hovhannes Toroyan: Yes. In the Armenian operations, we are using the 2 major software from third parties. The core banking is from the leading provider in the country. And at the same time, CRM is one of the leading international solutions that we use. Other than that, the other major parts, namely mobile banking, online banking are internally developed. At the same time, we are also technically one of the largest technological companies in the country despite tech being one of the strategically important sectors for the country with a number of employees engaged into tech development that we have. And we also have this agile framework. So product teams are working through this agile mechanism. And we do deploy machine learning and AI in certain areas, namely in a number of areas to improve internal efficiency as well as to improve the customer experience. For example, one of the latest beta types of the AI applications we've seen internally was analyzing the needs or potential needs of the customers to be able to come up with the best next offer for the customers. As I mentioned, 96% of all the retail loans that we've disbursed in fourth quarter were through our online and automated models, machine learning and AI models. So technically, for us, that means, a, underwriting process is 38x cheaper than it would have been through conventional lending technique; and b, it also means outreach to technically anybody on the territory of Armenia. And obviously, I mean, that's another perspective that we look at it. And clearly, we are also at the doorsteps on unleashing all the opportunities that these new technologies in hand for our sector. So we are very optimistic that we're going to be using AI in general wider with better benefits. Sheel Shah: That's very helpful. If I can have just one quick follow-up. When you say that you have the potential for outreach to all of Armenia or all of Georgia, is this a direct-to-consumer method? Or are you using sort of online tools -- online aggregators? What's your method of distribution of these loans? Hovhannes Toroyan: In case of Armenia, it's technically mostly direct. We are rarely using other platforms as an aggregator to outreach our customer base. But technologically, and we do have a number of customers today that can become a customer of Ameriabank remotely sitting on their couch. They can apply for a loan remotely sitting at their home or office. So this actually -- with the pretty significant penetration ratio of mobile and Internet usage across population, we see our digital platforms, our own digital platforms gaining very good and positive traction over the last few years. And that's actually also being represented by more than 45% growth of our MAUs and DAUS. As I said, our transactions more than doubled, 96% of retail loans through online platforms. So all these are kind of early indicators that whatever we have been doing for the last 4 or 5 years are actually kind of giving their results already. Archil Gachechiladze: I'll cover the Georgian side. So we have 1 million users daily in the country of 3.7 million people. So short answer is, yes, we do it directly. And the long answer is that we are the biggest brand, not only in the financial intermediation where the top of mind is 57%. But we are the biggest brand in the country, period. I mean, it's bigger than any other brand. So when we say, do we do it directly or not, yes, we do it directly. We still have a very significant branch network, very significant ATM network. And we are the biggest brand in the country overall and plus in finance. So that basically gives you an idea that we are not the back office or some kind of intermediary, but we are the main intermediary in the country. Nini Arshakuni: So the next question is from Alex Kantarovich from Roemer. Alexander Kantarovich: Yes. Can we please differentiate between outlook for loans between Georgia and Armenia. Clearly, the dynamics are somewhat different. This is my first question. Yes, and I'll follow up with the second one. Archil Gachechiladze: [indiscernible] I'll do it. So 10-plus in Georgia, 20-plus in Armenia. Alexander Kantarovich: That's very short and sweet. And if I can address the elephant in the room, inclusion in FTSE 100, do you expect it to happen imminently? Archil Gachechiladze: As economists like to say, all else being equal, yes. Alexander Kantarovich: Yes, that's great. That's great. And finally, I appreciate that you deploy your capital very, very efficiently. But is there a scope for increasing the levels of distribution from 30%. Archil Gachechiladze: Absolutely. But as long as we grow at 20% instead of 15%, as long as we are open to the M&A opportunities being major banks and smaller economies, and such opportunities may come along, we would like to keep a little bit of buffers there. If either one or the other don't play out for a longer period of time and we grow at, I don't know, 12%, 13% instead of 20%, like we have been growing over the last 3 years, then of course, we will return more capital and our distribution is between 30% and 50%. So I think it's a mirror image. So either we grow more and we deploy capital. And I think we have been very disciplined and showed to our investors that we don't throw around the money. So we either deploy it in businesses which are generating 25% to 30% return on equity or we are looking at acquisitions of similar kind of returns. So if this doesn't happen, then of course, we will return more. But I hope it will happen. So until those things are happening, we will be on the lower side of the distribution guidance of 30% to 50%. And if it happens less, then we'll grow capital returns. Nini Arshakuni: The next question is from Jens Ehrenberg. Jens Ehrenberg: A couple of questions from my side. Firstly, just on Armenia, I suppose it's very good to see more sort of digital uptake there. It feels like with sort of 11% of penetration, the growth headroom there is still really enormous. Is that the right way to think about it, given you're sort of roughly 47% in Georgia. Is the opportunity really that big. Secondly, on Armenia, I think we've had quite a material improvement in the cost-to-income ratio in the fourth quarter. And I appreciate you touched on that earlier. But just going forward, is sort of the low 40s level, do you reckon that is sustainable for Armenia going forward? And then lastly, I suppose, on the Georgian side, I believe we had -- one of your key competitors talk about their strategy yesterday and the intention to try and grow more on the retail side in Georgia. Just curious to see how you see the competitive situation on the ground at the moment and really what you expect going forward there? Archil Gachechiladze: Hovhannes, do you want to take the opportunities of growth on the Armenia side? Hovhannes Toroyan: Sure. We have indicated earlier that currently for midterm, we do envisage to grow our market share to 30%. So this is our midterm strategic objective as of today. Obviously, I mean, that's going to be a moving target as we go forward. And you have seen that over the last few years, we have improved our market share significantly. And we do anticipate to be outperforming the market in the year 2026 and next 2 years as well. So in that case, theoretically, maybe in a bit longer term, we could get closer to the market share where our Georgian peers are, but current target is at 30%. So that's kind of where we want to be first, and then we'll see how it goes. In terms of cost-to-income ratio, we do believe that the ratio that we have reported in fourth quarter is more than sustainable. Moreover, as I mentioned, a number of initiatives that we've done within the bank have significantly improved our cost base. So we do expect to continue in that direction further. So I would say I would not be very surprised to see the higher 30s in terms of our cost-to-income ratio in the coming years. Archil Gachechiladze: Yes. Regarding the competition, I think, first of all, I cannot comment on competitors' statements. The only thing I can say is that competition on the ground in each and every direction is nothing new. So as you can see, over the last 20 years, there has been a pretty strong competition between the 2. Having said that, I think both players have been cognizant of the fact that they don't want to destroy the profitability. So I think we are seeing a significant push and effort on the side of the quality, in terms of user experience, in terms of easiness of use, et cetera, et cetera. And all of that, I think, will continue. Having said that, we believe that we are very well placed to continue delivering the strong numbers well ahead of the whole banking system. Nini Arshakuni: So we have the next question from Ben Maher from KBW. Benjamin Maher: Yes. Just got a couple of questions. The first one is on market shares. Obviously, you mentioned you've been growing it in Armenia. I noticed there was a small decrease in the quarter in Georgia. I was just wondering if there's a particular reason for this? And also, could you just please clarify your -- I think there was a point on liquidity where you said you wanted to keep the deposit market share below 40% in Georgia. And my second question is just on consumer lending. It has been very strong through the year. Is this just household releveraging? Or do you think that's potentially early signs of some financial strain. I will say asset quality has been doing very well. So just interested in your thoughts. And then on the share of time deposits in Armenia, that's risen year-on-year, although it was down slightly in the quarter. How do you expect the share of these deposits to evolve in 2026? Archil Gachechiladze: I think, Ben, I would not read too much into the quarterly changes of market shares. They are rather volatile. So let me show you the -- what you're referring to. So you're referring to this change here, the last quarter. And I would say, look at the longer term, look at 10 years or more. For this particular year, you can see that 37.6% has become 37.8% for the full year. So it's flat to slightly increasing and competitors' numbers are different. So that's that. And in terms of the retail deposit market share also is very strong. Here, on the total deposits, we're trying to decrease it below 40% without losing the preferred status in people's mind in terms of keeping their money. So we feel very strong on the local market, in fact. So when you look at the -- I think the key characteristics when you look at the quality of the franchise is the NPS score, which kind of is like a body temperature measuring the health of the service. But inside, there are a lot of different subsegments. Top of mind, most trusted, those are some of the things that we are watching at, and all of those are basically at record highs. So we are in a very, very strong position. I can say that probably the strongest position that the franchise has ever been in terms of the quality of the franchise. And that's on the back of a very strong macro performance over the last few years and double-digit growth of average incomes as the unemployment rate comes down. So overall, very strong macro and a very strong franchise. So that's the combination that we have and very similar in Armenia. Hovhannes? Hovhannes Toroyan: Yes. It's very similar technically in Armenia, but we do expect to grow, obviously, our market share in the coming years, as I already mentioned. In terms of the structure of deposits, I think it would be fair to anticipate similar changes in coming years because we do anticipate very stable macroeconomic performance and FX exchange rate in the country. At the same time, the more we cover retail segment, the more AMD-denominated deposits share is going to grow over years. So I'm not sure about the same dynamics in terms of the speed of change, but it would be fair to expect that in the coming years, share of AMD deposits and current accounts will be slightly growing. Jens Ehrenberg: Great. Sorry, on the consumer lending, strong growth. Is there any obvious reasons behind that you see in both markets? Archil Gachechiladze: So consumer growth in both markets has been very strong. In Ameriabank, I think it's partly due to the fact that our offering has become much higher quality in terms of the user experience and the reach in terms of offering has been much wider as well. In Georgia, we are in a leading position, and we have seen Georgian consumer, their incomes growing double digit 5 years in a row and first 2 years was high teens as well. So I think it's a very strong base. We are not seeing any signs of any credit quality deterioration. We watch it very carefully in different subsegments of credit. So yes, so no signs whatsoever at this point. And in fact, if anything, there are very, very strong signs on the credit quality side on all around. The only part where we saw a little bit of issues were smaller hotels in the regions, which is like 1% of portfolio or less. And there, we have tightened the underwriting 2 years ago, and we described it in different qualities. But in terms of the large corporate, in terms of real estate, in fact, there was a big focus, and we have seen a much stronger performance than anticipated. In terms of all different types of consumption, investment, there has been a very, very strong performance all around. And in fact, people underestimate the amount of investment portfolio that is geared up to invest in a lot of different segments in Georgia, especially on the energy side, especially on the logistics side and other things. And Armenia is slightly different sectors, but same. Please, Hovhannes? Hovhannes Toroyan: Yes. I mean, I'm totally in the same line. So technically, the disposable income of the households over the last 5, 6 years have grown immensely. And as Archil mentioned, our digital propositions have improved. But also, please keep into consideration that during the last 2 years, we have doubled the number of customers that we're serving. So technically, in our case, we have also this very significant growth of the customer base. And clearly, this also is additional market for us to go out there and present our different propositions, including consumer finance opportunities. Nini Arshakuni: So we have another question from [ Dmitry Vlasov ]. Unknown Analyst: Congrats on a very strong set of results. So my first question is about cost of risk. You have a guidance of around 100 basis points over the cycle. And my question is, do you have a view for 2026? And how will it be different for Armenia and Georgia? The second question is about the potential M&A. Is my logic correct that it's mostly about the right opportunity, right timing and the right price rather than you waiting to maybe scale Ameria first and then sort of deploy capital elsewhere. Yes, those are the two questions. Archil Gachechiladze: On the cost of risk side, you rightly said that between 80 to 100 basis points is through the cycle guidance that we provide. Having said that, we've been well below those numbers when the macro growth has been bigger and the performance has been much stronger than average in the history for both countries. And I think you can apply that rule. In terms of the M&A, you're absolutely right. I mean, we are opportunistic. So we scan different markets, and we look for the right opportunity and right price, and we are quite disciplined about it. So we don't have to do any M&A. But if the right opportunity comes up, we would like to be in a position to do that. So that's our approach. So it may be that we do something and maybe we don't do anything. And in terms of what we are looking for, we are looking for major players and that by -- just by our scale, that means that we're looking at smaller markets, unfortunately. But we do prefer to look at well-established players. And in fact, if we can add value in terms of applying our approach to customer care and technology, usually, we do, we like those kind of stories where it's a well-established player, and we can add value by putting some of the approaches that we have to customer care and technology in place. And that, I think, can be very beneficial for the franchise, for the country where we may be going as well as for our shareholders. Also, we look at -- we don't like turnaround stories. So banking is a leveraged business. So we are very careful there. And we like good teams. We are very lucky with the team in Armenia. It's a fantastic team, and we have done everything possible to retain the whole team, and we are very happy to see them stay and deliver fantastic results. We may not get as lucky every time, but that would be the idea. Unknown Analyst: That's very clear. Maybe one small additional question, if I may, about how 2026 started for you so far? Is it in line or maybe even a bit above your expectations? Archil Gachechiladze: 2026 started very well. So a strong start. Nini Arshakuni: We have one more question from Simon Nellis. Simon Nellis: Apologies if this question has already been asked because I had to drop off just for a little bit. It's around your capital return strategy going forward because I think you've been at the lower end of your guidance range as you reinvest into the Armenia business. Is that still the case? Or are you going to up the payout over time? Archil Gachechiladze: Until we are able to grow at the rates which we have been growing, which is blended 20%, probably we will be on the lower side of the capital returns. Also, I think our buffers allow for us to be a bit more opportunistic if nonorganic comes along. If one or the other of those do not happen, then obviously, we would be increasing to the higher side of that guidance, which is between 30% and 50%. So we've been on the 30% side. But obviously, as things mature, then we will be increasing that significantly. But Short term, I think we are luckily in a situation where we're growing well above our midterm guidance. Simon Nellis: And are you still reinvesting the dividends into -- I mean, you're not paying dividends out of Armenia and you don't intend to. Archil Gachechiladze: We have not, but we will be looking at slight upstreaming, especially because we have had ability to put the Tier 1 instrument in place, which provides significant buffers there. But we'll be watching the growth opportunities there. Quite frankly, I believe that Armenia has been doing very well. In fact, as a macro story and geopolitically, they are huge positive moves. And when big investments happen, I mean, there have been just a couple of big investments, so honestly, you want to mention that have been announced. Hovhannes Toroyan: Yes. Very recently, the Vice President of the U.S. was in Armenia and around this whole peace treaty and TRIPP corridor, there have been mentioned several very significant investments into AI, data center, technology institutions, nuclear power plant and a number of other infrastructure projects like railway, roads and so on. So we are talking about USD 4 billion to USD 9 billion of potential investments into the country. And for our economy, it's really huge and the potential positive impact of that on the economy and subsequently on the financial sector could be really very decisive in the coming years. Archil Gachechiladze: So Simon, all of these positive things, they need banking, and we want to be able to bank them properly without much limitations. And I think our capital position and liquidity position allows us to be flexible. And if we find that we are growing at, I don't know, 12% instead of 25%, then we return more capital. I mean we are quite cost conscious and quite disciplined on capital side, and we act as shareholders, in fact. So yes, I mean, so far, we have been growing more than we guided medium term, and that's true for the last 3 years in a row, almost 20% growth of balance sheet. And going forward, if that continues, we'll be returning capital, but on the lower side. And if we grow less, then we'll return more capital. Nini Arshakuni: So I don't see raised hands. There is just -- maybe two questions that I'll read. One is on Armenia. Can you please confirm the growth in Armenia is self-funded? And also if there are any inorganic growth opportunities in Armenia. So there is two questions. Archil Gachechiladze: Yes and no. Hovhannes Toroyan: In Armenia, we are self-funded in terms of not receiving any funds from within the group. So there are not any intra-group funding allocations or capital allocation as of today. But at the same time, we are also very actively working with a number of development financial institutions. And in 2025 alone, we were able to attract USD 400 million equivalent funding from the DFIs that also improved our liquidity position in foreign currencies. It's kind of long-term financing for us to be able to serve the needs of our customers. So technically, as a fully independent entity, yes, we are funded by the funds of our customer base as well as our partner DFIs, if that's the question. Nini Arshakuni: And then this question is for Archil on MBS. So it says a couple of years ago, you said you won't push on MBS as hard given the costs associated with it, but yet it keeps improving. How did you do it? Archil Gachechiladze: Just can't help it. It's part of DNA now. I think customer satisfaction and the focus on that is key to long-term success of any franchise, especially when you are touching lives of millions of people. So I would keep that focus. Nini Arshakuni: We don't have any more questions. Archil Gachechiladze: Excellent. On this bright note, I would like to thank you for your interest and for your support that we have felt not just today, but over the long period of time, for your trust. And I would like to thank the Armenian and Georgian team and the whole Lion Finance Group team for really doing your best and delivering consistently very good results. As long as we make our customers' lives better, I think we'll be in business and going well. So thank you for your support, and let's look forward to a very strong start of the year, and I hope some good news very soon as well. So thank you. Nini Arshakuni: Thank you, everyone, and see you next time. Thank you. Take care.
Hamayou Hussain: Well, good morning, everyone. It's wonderful to see you all, and thank you for joining us. 2025 has been a pivotal year for Hiscox. In May, we set out our strategy going deeper into our retail business and making several important commitments. We're executing on that strategy and delivering on those commitments with pace and energy. Our diversified portfolio is built for this market. Growth is accelerating with premiums up $275 million or 6% year-over-year. This is high-quality profitable growth across each of our businesses, driven by product innovation, expanded distribution and customer growth built on our specialty expertise and technology capabilities. and we're expanding our margins. Our undiscounted combined ratio of 87.8% is the best in a decade, and our record insurance service result is the fifth consecutive year of underwriting earnings growth. And growth is translating into a larger asset base, underpinning a record investment result and contributing to a third consecutive year of record profit before tax. We are delivering excellent returns with a 12% growth in book value per share and an operating RoTE of 21%, materially above our target. This strong performance, continuing momentum and execution of our strategy enables us to reward shareholders through a new $300 million share buyback and a further 20% step-up in the final dividend per share as we announced at the CMD last year. This excellent performance, combined with our diversified portfolio makes our business strongly capital generative. Indeed, over the last 3 years, we have organically generated over 100 points of regulatory capital, enabling us to deploy capital in an unconstrained way to pursue profitable growth in each of our businesses and reward our shareholders with returns of $1.1 billion over the last 3 years. Now turning to our results by segment. Retail added almost $200 million of premium as the pace of growth increased to 6.3%, a continuation of our multiyear acceleration. This growth is broad-based across each of our retail businesses, driven by strong customer growth of 7.5% and crucially not rate dependent. And most importantly, this is profitable growth. The retail undiscounted combined ratio at 92.6% is the strongest since 2016. In London Market, we are successfully navigating a competitive environment, returning to growth through product and distribution innovation, while delivering a combined ratio in the 80s for the sixth consecutive year. And in reinsurance, we selectively deployed additional capital to support 6% growth, mostly in specialty lines. And the quality of our reinsurance business is demonstrated by a combined ratio in the 60s for the third consecutive year. Now let's take a look at how we delivered that growth. And frankly, the pace, energy and innovation of our colleagues has resulted in premiums from growth initiatives increasing fivefold in 2025 compared to the previous year. Supported by the launch of more new products than in the last 5 years and expansion of distribution. As we set out at the CMD, there is a huge structural growth opportunity in Retail. And we're capturing this through entering more segments, launching more products, expanding distribution and more markets. Retail is on a multiyear growth acceleration journey. We grew 4% in 2023, 5% in 2024 and over 6% in 2025 and plan to step up growth to 8% for the full year 2026. We have set the course to achieve double-digit growth in 2028. In London Market, we are leveraging our deep underwriting expertise to expand into new adjacencies while deploying AI augmented technology platforms to access new markets. In reinsurance, we have captured the opportunities of the hard market, increasing our net premium by 180% since 2020. Now the ability to innovate is a crucial part of our Hiscox DNA. It has and will continue to open up new growth opportunities in every part of our business. Now let's take a look at innovation in action at Hiscox. Now what you can see here is a sample of the initiatives we've taken in the last year to expand our business and drive growth. We're executing on these with pace and energy, launching new products at an excellent rate. Some of these you may remember as work in progress at the half year. These have now been launched, and we have refilled the pipeline with new products and opportunities that will begin production in 2026. For instance, in the U.S., one of our largest DPD partners has expanded our access to their agent network. And in the U.K., we followed up on the signing of one of our largest ever distribution deals in 2025 with an even larger opportunity that will begin producing premium in the first half of this year. In France, we successfully launched our new cyber product in the fourth quarter. This will be rolled out across all of retail in due course. These actions and many more are accelerating retail growth and enabling us to capture more of the $317 billion target addressable market. And in big ticket, our innovation is moderating the impact of cycle management in certain lines. During the year, we leveraged our existing technologies to grow into SME cargo and U.S. middle market property. In addition, using our underwriting expertise, we expanded into new adjacencies such as tech E&O and financial institutions. The blend of technology and underwriting expertise gives us the confidence to pursue new opportunities with more initiatives set to appear on this list over the coming periods. Now let's turn to the transformative force that is beginning to reshape our industry. Now with the advent of generative artificial intelligence, we are seeing the beginnings of profound changes in society and our market. The way consumers and small businesses are buying insurance is beginning to evolve. Large language models, LLMs are increasingly a key part of the buying process. Now with our experience, decades experience of providing specialist insurance directly to customers, we have an established competitive advantage from our trusted and distinctive brand to our leading Net Promoter Scores and high-quality service. These objective strengths stand out even more in the world of AI, where agents -- AI agents can evaluate a policy quickly on more than just price. We've been investing in technology for many years, building out our core systems and improving data quality. We have a leading global digital platform for small commercial insurance, now approaching $900 million of premium at almost 900,000 customers. These investments enable us to implement AI tools relatively quickly at a modest cost. We're excited about the efficiency and growth opportunities that AI brings. And we're not standing still. This year, we will begin to roll out new, more powerful customer and broker portals in the U.S. and in Europe. These will enable us to personalize the purchasing journey and help customers identify their insurance needs and simplify and speed up processes for brokers. As of this month, in fact, I think it's today, we are deploying AI agents into our U.S. customer contact centers to create real-time feedback loop for our operations and marketing teams on customer experience and sentiment. And if a customer wants to make a claim, an AI agent will be there to help. We are embracing generative AI for the benefit of our customers, our colleagues and our shareholders, and I believe Hiscox is well positioned to win. Now turning back to today's results. We've delivered on our promises in 2025. Retail has grown 6.3%. This growth will accelerate in 2026, building to 8% for the year before reaching double digits in 2028. Our operating RoTE of 21% is materially above our mid-teens through-the-cycle target. The change program has delivered a P&L benefit in the year of $29 million and is on track to deliver $75 million of benefit in 2026. Paul will provide further details on this. And our shareholders benefit from our growth and earnings with a 20% increase in the final dividend per share and a new $300 million share buyback. With that, I'll now hand over to Paul. Paul Cooper: Thanks, Aki, and good morning. It's great to be here with you all today presenting another strong set of results. We have achieved high-quality growth across each of our segments with ICWP up $275 million or 5.9% against the backdrop of falling rates, demonstrating the strength of our diversified growth. Importantly, we have delivered excellent profitability alongside this growth. The undiscounted combined ratio of 87.8% drove a record insurance service result of $614 million. The group's profit is supported by the record investment result of $443 million, underpinned by increased AUM following stronger premium growth. Our superb underwriting and investment results have translated into a record profit before tax of $733 million, up 6.9% and delivered an attractive RoTE of 20.9%. This is despite a 2.5% drag from the increase in the effective tax rate. The group's excellent profitability has driven substantial capital generation with a year-end estimated BSCR of 233%. And this is after returning over $400 million of capital over the course of 2025. As a result of our strong capital generation and balance sheet, the Board has ratified the 20% step-up in the final dividend per share announced at the CMD. In addition, we will be returning $300 million to shareholders through a new buyback, resulting in total returns of over $450 million in respect of 2025. Delving into these results a little further, starting with our Retail segment. In line with guidance, Retail ICWP grew by 6.3% in constant currency to over $2.6 billion. This growth has been broad-based across all markets as management actions delivered results. Growth has been accompanied by an improvement in the undiscounted combined ratio to 92.6 partially due to early benefits from the change program. Importantly, retail growth is transforming the shape of the group's earnings profile with retail representing nearly half of the group's PBT, up from just over 40% in 2023. Moving on to London Market. London Market returned to growth with ICWP increasing by 1.6%. In a competitive market, the business benefited from product innovation and opportunities arising from London Market's diverse portfolio. Profitability continues to be strong with an undiscounted combined ratio of 85.9%. This is testament to our underwriting discipline, risk selection and pricing as we navigate the market's micro cycles. Turning to reinsurance. Net ICWP grew by 7.9%, driven by growth in pro rata and specialty lines, including our climate resilience portfolio, mortgage and surety. The quality of our risk selection is demonstrated by an insurance service result of $189 million and an undiscounted combined ratio of 67.4%. Fee income of $109 million is very healthy, above $100 million for the third consecutive year. And we continue to see strong interest in our ILS funds with more than $330 million raised in the last year and a robust pipeline for 2026. ILS AUM on the 1st of January 2026 is $1.5 billion. As we continue to see strong capital inflows from third parties, while managing our own net exposure to property cat perils, the earnings mix between fee income and underwriting will continue to evolve. Moving on to our change program. We're making strong progress. On this slide, you can see examples of achievements against our ambition and some of the actions that will deliver benefits in 2026. We have significantly increased fraud detection rates through new capabilities, representing a real cash saving in 2025. However, given our conservative reserving philosophy, much of the benefit is yet to be recognized in the P&L. We have in-sourced over 100 roles in our Lisbon Tech Hub, enhancing the capabilities that drive our competitive advantage while leveraging the use of a lower-cost location. In 2026, we will build on this, rolling out more centers of excellence and further extending the scope of outsourcing where we benefit from the greater scale that specialist providers, partners provide. In procurement, we have reduced our property footprint and continue to consolidate our suppliers, enabling us to negotiate better terms. Over the coming year, we will double down on this, increasing the number of strategic partnerships and preferred suppliers while better managing demand within the group through improved cost governance. Finally, in technology, we decommissioned 20% of our applications in 2025 while launching new automation tools across the value chain, which will help to drive scale into the business. This will continue in 2026 as we launch new automation tools that will deliver efficiency benefits alongside driving revenue growth. Looking at the benefits. We're on track with our change program and we have achieved a benefit of $29 million at a cost of $24 million. And while we're slightly ahead of our 2025 benefit guidance, there is no change to our targets. We remain on track to deliver a $75 million benefit in 2026 as we optimize processes, sourcing and procurement, fraud detection and recoveries. We expect the cost to achieve to be $75 million, which includes costs associated with in-sourcing and outsourcing, legal expenses and tech implementation costs, including some of the exciting new capabilities that Aki referred to earlier. And these will help to deliver a $200 million P&L benefit in 2028. Let's look at how this is impacting the P&L. Disciplined cost management and savings from our change program means that our underlying expense base has increased by just $6 million. This is despite inflation and changes in variable comp and the investment in growth and technology initiatives highlighted by Aki. This, in turn, is driving improvement in our operating jaws with a 0.8% increase in underlying expenses comparing favorably to a 5% growth in premium in constant currency. Overall, this is very pleasing progress. Now turning to investments. Our record investment result benefited from strong yields and increasing assets under management as growth in the business translated into more assets on the balance sheet. As we go forward, that increase in AUM will help to offset the small reduction in the reinvestment yield to 4%. As such, strong investment returns should continue to provide a tailwind for the group. The quality of the fixed income portfolio remains high with an average credit rating of A, and the business is conservatively positioned on the asset side. Looking at reserves. Our conservative reserving philosophy is unchanged with a risk adjustment of $345 million, representing an increase in the confidence level to 86%, slightly above our target range. And this is despite a healthy level of prior year releases and reflects the point where we are in the cycle, the quality of our underwriting and the conservatism of our reserves. Over time, we expect the confidence level to return to within the 75% to 85% range. The conservative nature of our reserving has enabled us to release $293 million or 7.2% of opening reserves for 2025, continuing our long history of an uninterrupted positive reserve development. All accident years are below the initial estimate and continue to run off favorably. Finally, an update on capital. The group has delivered outstanding organic capital generation of 34 points. This has supported both investment in the business and returns to shareholders of 22 points of capital, resulting in a year-end BSCR of 233%. Following the payment of our final 2025 dividend and our new $300 million share buyback, we have a pro forma BSCR of 211. This compares favorably to our through-the-cycle operating range of 190 to 200, providing us with the flexibility to capture opportunities as they arise in a rapidly changing market. Thanks for listening. And with that, I will now hand over to Jo, who will provide you with an update on underwriting. Joanne Musselle: Thank you, Paul, and good morning, all. So our underwriting results reflect disciplined cycle management, profitable expansion and a strategic investment in both data and capability to continue to build a balanced and diversified portfolio, which you can see on this next slide. Our retail compound growth is anchored in profitable underwriting, delivering a core of 92.6%. In the U.K., Private Client is up double digits as we continue to benefit from our market-leading expertise. Commercial growth is due to an expanded customer base and a sharper sector focus. In Europe, France and Germany are leading the charge as we continue to go deeper into our chosen segments and deliver new products tailor-made to our customer needs. And in the U.S., Digital Direct is continuing its excellent growth. Momentum in partnership is building and broker once again expanding as we have delivered improved service delivery and a slightly broader appetite. Turning to the London market, where our ability to manage those micro cycles has remained a key differentiator, and we've once again delivered a combined operating ratio in the 80s. So property has seen some growth fueled by a U.S. high net worth portfolio and the tech-enabled expansion into mid-market. And this is offsetting some intentional cycle management in major property and commercial lines. We've seen some modest growth in casualty. We've had some rate tailwinds in general liability and a successful launch of financial institutions and technology E&O. And this is mitigating some declines in cyber and D&O as those markets continue to soften. And then lastly, reinsurance, a slightly softer market in 2025, but still a really favorable market. And despite another year of over $100 billion in industry losses, our risk selection, our robust reserves and a benign second half has enabled us to deliver a core in the 60s. So where are we in the cycle and how favorable is the market? So this next slide, hopefully, a familiar slide to you. So the chart on the left is our rates indexed back to 2018 for our segments. The purple line, which is Retail, is just less sensitive when it comes to the rate cycle. Rates were up in aggregate 2% and pricing across U.K., Europe and the U.S. remains strong. In 2025 for the first year in many saw aggregate rate declines for both London Market and reinsurance, although we remained in an attractive market. So the blue line is our property cat reinsurance rates come down 4%. This moderated as we went through the year as our midyear renewals, particularly those loss affected, attracted some rate increases. Across the whole of the reinsurance segment, rates were down about 5%, but still up 83% since 2018. And we saw a similar story in London Market, a 4% dip in 2025, but still at 67% since 2018. And that softening has continued in 2026. So our January renewals saw London Market come down another 4% and reinsurance down 13%, particularly in the areas of property, cat and retro. So the chart on the right gives you an indication of what we believe that does to the rate adequacy of our portfolios. So as a reminder, adequate means we believe it's adequately priced to deliver a good return in a mean loss environment. Adequate plus means we've got margin in addition and low, still profitable, but just below our target underwriting reserves. And you can see, despite the softening, we believe that much of the portfolio is still really well positioned to deliver a good return. And we benefited from some tailwinds in our own outwards reinsurance purchasing. So mastering changing markets and managing micro cycles is not new to us, and we continue to have many different portfolios in many different parts of the markets. And you can see this on the next slide. So the London Market rate environment is highly nuanced both at a line and a divisional level. And you can see the divisional picture on the right-hand side is quite different to the London Market headline. During this period, casualty rates have declined, whilst property rates have seen significant gains, and we've acted decisively. So during the same period, our average exposure per policy and casualty has reduced by 20%. And more recently, we've added over $100 million of property income. This laser focus on exposure management and profitable expansion has been the key to that consistency in that combined operating ratio. So we've learned from lessons of the past and our enhanced cycle management is really focused on 4 things. Firstly, a forward-looking view of risk, really understanding those inflationary trends, whether they be economic, societal or climate. A market in transition framework. This is a framework that's honed to capture the position of each one of our lines in the market and proactively respond to evolving conditions. Exposure management, we absolutely know -- need to know when to trim when we don't believe we're getting paid to take that risk, but also when to expand when we believe the expected returns justify the exposure. And lastly, new, of course, we want to actively manage the portfolio that we have and seize new opportunities for profitable growth. So this next slide gives you a little bit more information on our market and transition framework. So what you can see here, each bubble represents a line of business in London Market. So this is a proprietary framework. We built it around 10 quantitative type metrics, things like technical index, exposure deductible. And we add to that 5 more subjective metrics on the market. These could be things like broker interaction or terms and conditions. So for London Market, we're monitoring 285 metrics on a quarterly basis, and we have a very similar framework for our reinsurance business. Now each metric has an expectation or a tolerance and flags for investigation if it's outside of that. Now not all investigations will result in underwriting action. Most often when we look, the underwriting action has actually already been taken. But when it is required, responding really quickly is key, and that could be reducing your line size as an example. So in summary, a transitioning market, but a largely attractive market. So unlike our big-ticket businesses that flex with the cycle in Retail, we're looking for compound growth through the cycle, all anchored in consistent profitable loss ratios, and you can see that from the chart on the left-hand side. We've built out a specialist underwriting ecosystem from risk selection through to claims management, all underpinned by investment in brand, technology and capability. Our focus is squarely on customer value. We invest in our segments for the long term. We maximize value through market-leading retention and product penetration. After decades of investments, the majority of our retail customers already benefit from being auto underwritten, but we have ambition to go much further. And lastly, new, we want to deliver new products and services to existing customers, go deeper into our segments to attract new and boldly go into new markets. So as I look forward to 2026, my 3 priorities are clear. Firstly, a relentless focus on managing our portfolio, knowing when to trim, but also knowing when to expand when the outlook is compelling. Turbocharge innovation. We want to find quicker ways to bring new products, new services and expanded appetite to market. And lastly, capability. We want to blend humans with the best humans with advanced technology to really amplify our specialist underwriting expertise. And we want to train our underwriters for skills for the future so they've got data fluency and a practitioner at their core. Thanks very much. I'll now hand back to Aki. Hamayou Hussain: Thank you very much, Jo. So looking ahead to this year, as a result of the pace, energy and innovation we've generated, this year is positioned to be another really exciting year for Hiscox. Retail growth momentum will continue into 2026, building to 8% for the full year and on track for double digits in 2028. In big ticket, we expect innovation and new opportunities will moderate the impact on growth from our disciplined cycle management activities. And in reinsurance, following strong growth in recent years, in 2026, we expect to maintain our natural catastrophe exposures broadly flat on a net basis, while we are continuing to seek out growth opportunities in specialty classes. And finally, as you've heard from Paul, our change program remains on track to deliver $75 million of P&L benefit this year. So in closing, 2025 has been a pivotal year, a year of record underwriting results record investment results, record profits, and momentum has been building over the last few years and is set to continue. The group's combined ratio is the best in the decade. Retail's margin continues to expand. London Market has delivered a combined ratio in the 60s -- sorry, in the 80s, I wish 60s, 80s for the sixth consecutive year and reinsurance in the 60s for the third consecutive year. And in our change program, we are delivering expense efficiency and a significant build-out of capabilities with more to come. Our operating ROTE of 21% is materially above our through-the-cycle target. And our capital generation has been strong, enabling us to deploy capital in an unconstrained way to pursue high-quality growth in each of our businesses and to reward our shareholders with capital returns of $1.1 billion over the last 3 years. We look forward with confidence and optimism. These are exciting times at Hiscox. Thank you for listening. And now we'll take questions. Okay. Why don't we go right to left. So Shanti? Shanti Kang: It's Shanti from Bank of America. The first question was just on the retail growth outlook, that step up to 8% in '26. Where is that really being driven from by region? A walk of how to get there from the 6% that you've done this year would be quite helpful. And then I was just looking at the claims ratio in Retail this year, and it looked like that deteriorated a little bit year-on-year based on the restatement. Is there any reason for that deterioration? Is that really on more conservative initial loss picks? That would just be helpful. Hamayou Hussain: Okay. So kind of taking each of those in turn. In terms of the growth outlook, okay, I think context is important as well. So we've already taken the business from what was 4% growth in 2023 to 5% and then over 6%. And as you say, we're guiding to 8%. This is broad-based growth. There's no one single action that's driving this. It ranges from the effectiveness of our distribution teams and our distribution functions. And as you've heard me say many times before, we are increasingly winning positions on broker panels. We're winning new opportunities, new distribution deals. In fact, the U.K. has been leading the charge across the group on that. In our U.S. business, we're adding more partners. This year or in 2025, we added a further 23 partners. So as those gain traction and build production as well as growth from our existing partners. We're continuing to invest in marketing. In 2025, we increased the investment by 9%. I think we're now at about $109 million. You can expect that to go up by a further 10%. This is a great investment. We get very good returns from the step-up. We have stepped up our product innovation and expansion into adjacencies. And you can see that reflected in the 5x growth from new initiatives. We've turned around the U.S. broker business. That is now growing. So it's a range of different factors that are driving that -- that are achieving that growth. And as I mentioned earlier, and this is not rate dependent. In fact, rates have been going the other way. We have now come off the rate step-up that we were seeing in the Retail business as a result of inflation as inflation has abated. And if you go back to 2023, the rate increase was about 7%. Now the rate increase is 2%. At the same time, the growth has grown from 4% to 6%. You can see what the underlying is doing here. This is a volume-driven growth story here, and it's largely about the effectiveness of the management actions we've deployed over the years. In terms of loss ratio, look, we don't land this on the head of a pin. That is a market-leading loss ratio for the Retail business, we're very pleased with it. Andreas, I know this will and keep going. Andreas de Groot van Embden: Yes, Andreas van Embden, Peel Hunt. Just on cycle management. It sounds like we're going to continue growing exposures into a softening cycle in the next few years. I just wonder if you take a 3-year view through this planning cycle, what are your assumptions about the increases in capital requirements across the business. Is that going to be a gentle sort of rise over time as you grow exposures or will you, at some point, de-risk that property cat book and will capital requirements come down again? That's the first question. And the second question is on your reserve buffer. You're now at the top end or slightly above the top end of the range. Is this something that will be released in the future? Are you being sort of extra cautious or will inflation eat into those buffers, so it will naturally erode within that 75%, 85% range? Hamayou Hussain: Okay. Thank you, Andreas. So I think there are kind of a number of parts to that question. In terms of how we expect the big-ticket business to evolve over the next period, I think we've spoken about the fact that our product innovation and expansion into adjacencies will moderate the cycle management activities. I think Jo can provide a little bit more detail on that. In terms of capital requirements, as we expect them to evolve and the reserve buffer, Paul will address that. Joanne Musselle: Yes. Thanks, Aki. So as I said, we are a disciplined underwriter, you can see that in terms of our track record. So what we didn't say was we're looking to grow exposures, there's lots of lines where actually we have actively and decisively shrunk exposures. So we talked about some of the casualty lines where the rate has been decreasing. We've been actively taking -- reducing our exposure during that time. And as we look forward, we're seeing some softening in our property lines. And clearly, if that continues, we'll trim. So first and foremost, we are a disciplined cycle manager in our big-ticket businesses, albeit we are still in an attractive market today. And obviously, the rate adequacy slide show that in the majority of the portfolios, we still have rate adequacy. So that's -- but I think what we did say is what we've managed to do, particularly in 2025 is we've just mitigated some of that intentional cycle management action by some of the new things that we've been doing. And that's the launches of adjacencies. So we mentioned a couple in casualty. I mentioned the sort of mid-market property expansion as an example. That is offsetting some intentional reduction elsewhere. In casualty, we launched technology E&O. Now we've been a tech E&O writer for a couple of decades across all of our Retail business. It's a real heartland for us. And we launched a new product in our London market business. So this is to capture the slightly larger customers, find their way to London, written on a subscription basis. So that's what we're talking about in terms of that cycle management. Of course, we are a disciplined writer. I always say our job is to make money in the market that's in front of us, not the market that we'd like to have in front of us. So we'll react accordingly, and we're looking for new opportunities to profitably grow. And it's the combination of those 2 things. So it's actually really underpinned that consistency you see particularly in the London market with an 80s combined for the last few years. Paul Cooper: Yes. Building on that and how that translates into capital. So I think there's kind of 3 drivers. One is market conditions looking ahead of us, the second is the retail business and the third is cat P&L. And I think if you look at sort of consumption over, say, the last 2 years, it started to moderate. Now the reason that started to moderate is we've really held our cat P&Ls constant, but at the same -- and that's off of, obviously, a very high base as rates of strength. And you heard that we've increased our premium income 180% from a capital perspective over the last 5 years. So we sort of hold that constant. But what you've seen is the retail business accelerate in terms of its momentum. And looking forward, we've talked about 8% in 2026 and double digit for 2028. Now clearly, that requires more capital. Retail is the least capital intensive part of the business, but it still requires some capital on the balance sheet to grow. And so what I'd expect is that degree of moderation looking ahead now, clearly, the third dynamic is what happens with market conditions and also what happens about these opportunities that Jo has talked to around innovation, that will dictate whether we sort of need less capital and reduce exposure or actually need more because we're taking advantage of these opportunities. So that's sort of the outlook ahead of us from a capital perspective. I think from a reserving perspective, I think the important aspect around inflation is it's built into our loss picks. So we do have a cautious approach to reserving. We have a cautious approach to our loss picks, and that does obviously generate redundancy coming forward. Now our positioning at 2025 from a year-end perspective has been quite deliberate. We obviously have built on that sort of conservatism that we've talked about by increasing the confidence level. We are at 86% from 83% but we've also increased the level of margin in the reserves. And I think that puts us in a great position in terms of where we are at this point in the cycle. And you're absolutely right, Andreas, that looking prospectively, we've got a range of 75% to 85%. I'd expect us to trend back within that range. And I don't think inflation as we currently see is an issue because it's already built into the loss picks. Hamayou Hussain: Will? William Hardcastle: Will Hardcastle, UBS. If I can try and pin you down slightly on one of those answers, Paul. You mentioned the capital consumption. I think it was 13 points in that solvency bridge last year. Just linking it with Andreas' question, is that likely to be a relatively stable number? And I know there's a bit of a range around that? Or is it likely to go more likely down than up next year? Then on the LLM impact into the SME distribution, I guess you touched on it in the conversation, Aki, but I'm really trying to understand whether you -- what are the risks, what are the threats and what are the opportunities for Hiscox to really take advantage and why? And it's really thinking about broker disintermediation by the LLMs. Hamayou Hussain: Okay. Paul, if you address the capital point, but let me cover the LLM point first. I guess, first and foremost, we are pretty excited about the ability and the prospect of using LLMs and frankly, the emerging world, which is not quite here yet of agentic e-commerce. We have a long track record of investing in technology and being on the front foot, particularly when it comes to that small commercial business segment, which is a heartland for the retail business. And again, if you look at the context, we've been investing in that business in terms of technology, et cetera, for decades. We have a market-leading global platform now that covers 12 countries, U.K., U.S. and Europe, with $900 million of premium flowing through it and serving 900,000 customers roughly, which is highly automated with all the underwriting automated. So in excess of 99% of the risks that flow through that platform are auto underwritten. So we've invested in the technology. We've been ripping out core systems and replacing them with new. We've been cleaning up the data for many, many years. And actually, that puts us into a fantastic position now that with the advent of Gen AI, we can actually build our own or adapt -- adopt rather the AI tooling relatively quickly and for a relatively modest cost. And that's exactly what we've been doing across the business. So we're excited about the efficiencies that this will bring, but we're also really excited about the growth opportunity, the expansion of our reach into our customer -- into our prospective customer base and also the opportunity to develop new products that, frankly, just didn't exist before, and I think that's going to be a real opportunity for us as well. I mentioned earlier that we're deploying AI today, right? So there's things that we've just done. There are things that are in development that we are doing. And what we've done, we're already using AI agents in our marketing analytics. We're using it to triage broker submissions in the U.K., and that's going to be rolled out across the whole of the group. We were first to launch an AI augmented lead underwriting platform in London market. That was the first for Lloyd's. Again, we were able to do that because we've already invested in the tech and the data. The emerging things that we are doing, which are really going to open up the funnel for growth. It will take a bit of time because it does require customer adoption as well. So we have -- I think it's today or yesterday, we've launched AI agents into our U.S. call centers. That will give us, I think, as I mentioned earlier, real-time feedback, immediate feedback to our operations teams on customer sentiment and experience and also feed directly into our ads platform, right, which then dictates how we then market back to those customers. If you think about the strength that we've built up over the last decade, which is having a trusted and distinctive brand, market-leading claims service. We have an NPS score, which is in the 70s and 80s. The market average is materially lower than that. Our world-class customer service, the tailored coverage that we provide, these are all objective strengths, which in the world of AI agents and agentic e-commerce stand out, right? In the old world or -- sorry, in the current world, really, if you go online, the only thing you can really compare on is price. We don't trade on price. In the prospective world, as a new person who's buying insurance for their small business, you can get much more information. And in that world, I think we open up the platform. I think we will stand out much more, and we are readying our platform for the world of agentic e-commerce. As I said, we're in the process of building for deployment later on this year, new, much more powerful portals. These will sit alongside. If you think back about the strategy that we've had, we have an omni-channel distribution approach, right? We are building leading platforms to enable us to access and trade with brokers. We trade with partners and we go direct. This agentic e-commerce channel as it were, certainly for the moment, will just sit alongside depending on customers' preference. So we're pretty excited about it. But a lot of the hard work has been done, and now it's about implementing these new tools and seeing how they're adopted, both internally and externally. Paul Cooper: Just on consumption, yes, to knock that one off. Yes, so based on the conditions we see ahead of us today, consumption will be lower. Hamayou Hussain: Ivan? Ivan Bokhmat: I've got one big AI question and 2 small finance questions, please. So on the big AI question, I'll start with that. I think there's a perception that for reinsurers, the underwriting edge is essentially the moat that can protect you from being disrupted. So I was just wondering if you could maybe provide some of your views on this. And if you think about your data and what's out there in the market for available for underwriting, how much of it is publicly available, like cat models or cyber models or whatever it might be? How much of it is proprietary? And how much of it is unstructured proprietary that you could still tap on, but maybe where you are in that journey versus peers? So that's question one. And then question two, I mean, I've noticed that across your growth initiatives, and this has been a trend for a little while now, you don't really have like AI CapEx, data centers and all that. And I was just wondering what your thoughts on that might be? Is it the next leg for you to expand in? Or is there a reason why you haven't really been pushing there? And the third question is, I mean, on the capital ratio, obviously, you have to 11% now, 13% stress. It gives us 180% post-stress ratio, which I think in the past was like a good guide for how you would manage your capital. Is this still the case? Or any developments there? Hamayou Hussain: Okay. Thank you for those questions, Ivan. So what's our underwriting edge in reinsurance? I think that's one for Jo. In terms of underwriting appetite then in terms of data centers, et cetera, again, another one for Jo. And Paul, if you want to address the question on capital and how we manage that within the ranges? Joanne Musselle: Yes. Thanks, Aki. So I think in answer to the question, it is a combination. So what we rely on is, of course, and I talked about it, we, of course, rely on in that reinsurance world, the best external models as an example. We take what's available, but then we blend and we overlay what we call a Hiscox view of risk. And we do that across both our reinsurance and indeed, all of our other insurances. And that is really important, and that is proprietary, where we are utilizing our own proprietary information, our own bespoke data sets, building in things like that forward-looking view of inflation. It's really important for us to get ahead of some of these trends and price forward. So I'd say in terms of the edge, it is a combination. We are utilizing the best external data, but also blending that with our own internal data. And of course, we're using technology, have been for many years in that underwriting process to do 1 of 3 things, either to make us easier to do business with. So take the reinsurance example, how can we consume submissions quicker. Clearly, the advance of technology enables us to consume more submissions in a much shorter time, much better in terms of response time back to, in that instance, brokers or indeed more broadly, customers, we're utilizing it there, absolutely utilizing it to make better decisions. So whether that is ingesting third-party data, make us -- make better underwriting decisions, underwriting of pricing decisions, that's sort of the second area that we're utilizing and clearly making us more efficient. So I'd say it's a combination. It definitely is looking outside and taking the best external information that exists and then blend into our own proprietary data sets. So with regard to data centers, yes, absolutely. I mean, data centers is definitely becoming a significant area. We talk -- there's a lot of talk about it being a structural growth opportunity, and it really is underpinning that digital economy. We're really thoughtful. We're really thoughtful. We have lent into that. We're curious. We've deployed some capacity in both our primary and our London market business and in our reinsurance business. But at the moment, we're thoughtful because one of the significant areas that we need to get a head around is accumulation. And we're also investing at the same time, deploying a little bit of capacity. We're also investing in building our own accumulation model. So we're really clear around where these accumulations lie, and we can actually manage them -- managing them ourselves. So yes, watching it, deploying some capacity, but also thoughtful in terms of accumulation. Paul Cooper: On capital, at the CMD, we announced our target operating range through the cycle of 190% to 200%. You'd see the 211% on a pro-forma basis is a bit outside that. So sometimes you can expect through the cycle we will be outside it. I think it's a small amount above. I think we've struck the right balance between the increased share buyback that we have announced today of $300 million and retaining the optionality for further opportunities for growth. We are a growth business, if you look at our capital management framework, the first priority is growing the business. Hamayou Hussain: Okay. Let's keep going along. Abid? Abid Hussain: It's Abid Hussain from Panmure Liberum. I've got 3 questions. The first one is on the pricing cycle. Just wondering if you could talk to your past experience on previous soft cycles and that move from adequate pricing to inadequate pricing. Is that typically gradual? Or does it happen in a sort of cliff edge moment? And if so, are you looking forward, are you sort of seeing potentially any cliff edges on any key lines of business, so that's the first question. The second one, just coming back on the reserving philosophy. So you're reserving now at 86% above the 75% to 85% confidence interval that you set yourself as a target. And it sounds like you're saying you're just being conservative because pricing is softening. Just wondering if there were indeed any areas where you saw loss picks deteriorating, any sort of concerns at all? Or is it just genuinely just being conservative? And then just sort of how quickly would you expect yourselves to trend back to around 80%. So that's the second one. And then just finally, very quickly, the final question on M&A. Are there any areas where you benefit from participating in M&A? So I'm thinking really sort of adding new capability, new sort of product sets in adjacent areas to help you accelerate growth in adjacent areas. Hamayou Hussain: Okay. Thank you, Abid. So in terms of the evolution of the pricing cycle, Jo will take that. In terms of reserving, Paul will provide commentary. In terms of M&A, I guess the first thing to say for our business, as you can see from the results today and from previous years and the diversification within our portfolio is we don't need M&A for growth. We have a fantastic retail franchise, where I think last year, we set out the extraordinary growth opportunity. And what you can see is over the years, we are accelerating the pace at which we're capturing that opportunity, and we're very confident and optimistic, frankly, about getting to 8% in 2026 and extending that up to double digits in 2028. And in our big-ticket business, again, we've demonstrated we are leading class in terms of cycle management. At the same time, we are -- we've stepped up the product innovation, and we are expanding into adjacent classes to moderate the impact of cycle management. Now again, if you look at the history, we're approaching $5 billion of premium. That is almost exclusively organic growth. That is the predominant form of growth that we will achieve. But what you also saw from 2025 is where there's a strong strategic rationale and the financial metrics make sense, we will consider small bolt-ons. Of course, we purchased a very small entity called Lokky in Italy, which we closed in the second half of last year. That gave us a toehold into the country. Frankly, no premium, but it gave us a system, and it's given us 23 people who understand the local market. It was a pretty new start-up. And we are now consolidating that and that we will move forward from there. Pleasingly, we are getting premium in 2026. And then we also deepened our presence in the U.S. where we made, again, a very small acquisition. And just building on your point, Abid, that did give us access to a couple of classes of business that were on our to-do list, but it's given us quality underwriters, some engineering capability and access to life sciences and tech start-ups. And it's also given us the beginnings of a tech platform for our broker intermediated channel as well. Over to Jo on the pricing cycle. Joanne Musselle: Thanks, Aki. And maybe if we can just bring up that pricing chart because I think it's a helpful backdrop. I'm not going to give any predictions on the pricing cycle going forward, but just maybe just some observations on the cycle that we've already been in. I think this has been a very different pricing -- a hard market or hardening market than we've had historically. I think if you look at that slide, I mean, we've had gradual increases over many, many years across different lines. And I think that's because it's been driven by lots of different things. So it's not just been driven by significant cat activity. It's been driven by lots of things, whether it be low interest rates, whether it's high inflation, geopolitical uncertainty, emerging risk, climate change. There have been so many different factors that have driven this current cycle that it's been really, really prolonged. So it's difficult to see one thing disappearing and the market changing overnight. I think the other thing about this cycle, which has been very unusual is it was actually primary insurance led. So normally, cycles are reinsurance rates led, reinsurance rates go up and therefore, you have to put your primary rates up. Actually, you can see that red line, which is our London market lines. I mean, they moved significantly quicker than the blue line, which is property. And actually, during that early period, '18, '19, '20, I mean, we were calling for a harder market in reinsurance because we just didn't believe we were getting paid to take the risk. And so we were actually very vocal in terms of that. The other thing on the red line, and I showed you with the sort of underneath is that's an aggregate view. What actually was happening with those early rate rises was casualty. So casualty was the early rate rises. Casualty has now softened, but rates went up 200%, 300% for some lines, and now they're moderating. Property lines really started to move in sort of 2023. And I think the other really important thing about rating is what you can't see on this slide is terms and conditions. We all talk about the rates going up or down. We talk about rate adequacy, but actually terms and conditions are really significant. So the biggest driver of the '23 blue line, yes, of course, rates went up 30%, 40%. But actually, terms and conditions materially changed, particularly attachment points in reinsurance and terms and conditions tighter around the coverage and those have largely been maintained. So when we look back at this softer part of the cycle as in '26, where rates have come off, actually, it was a price-led softening. Terms and conditions, attachment points have largely maintained, which is why there's a vast majority of that. So I talked about it being a really active year, over $100 billion, $120 billion of industry losses in 2025, but a lot of them didn't make their way to the reinsurance because of that attachment point. So yes, no predictions for the future other than to say it's difficult because it's being driven by so many different things. I can't think of if one thing changed overnight that obviously, the cycle would dramatically change in one go. Paul Cooper: Its a good segue across to the reserving. I think -- so what I'd say is and what we said consistently is our conservative reserving approach remains the same. So it's unchanged. We have a prudent best estimate, and we've built upon it. I think the important point for 2025 is we're coming at this from a position of strength, the increase in the margin and the increase in the confidence level to 86%. And that really builds on what Jo has just said. We're coming at this from a point where we've got high-quality underwriting. I mean, look at the loss ratios that we've delivered across each of our business segments. So the quality of the underwriting, the diversity of the portfolio enables us to do what we've done in 2025. I think in terms of the pace of the -- getting back within the range, I'm not going to guide to that, but we will be back within it. Hamayou Hussain: Just to add to Paul's point, if you flip back to the slide which shows the reserve releases, where you can see we're in a, I guess, in a fantastic position where you've seen stronger reserve releases predicated on, frankly, every accident year seeing a positive trend and at the same time, increasing reserve redundancy. And that's something just to kind of factor in as a package. That's what you're seeing here. Daniel? Daniel Wilson-Omordia: Daniel, Morgan Stanley. Encouraging to see the change program coming through as expected this year. I'm just wondering the actions you put through this year, do you see them as quick wins or easier than the actions to follow from here? Or is there any -- another way to phrase the question, is there anything that's been harder to achieve this year than you expected or anything that's coming up that you think will be harder to achieve than what you put through this year? Hamayou Hussain: Okay. Paul will cover kind of the detail of that. Let me just give you a kind of overarching comment. The overall program, I think we laid out the categories last year, is tech rationalization, capability buildup, procurement and operational excellence. The program is underpinned by tens of initiatives. There's no one single initiative that's going to kind of drive the savings. And reality is not everything is going to work. But that's kind of factored into the number of listings we have, which if they all work, the sales will be a little bit more than what we set out. So there's some contingency built into that, but I'll let Paul get to the meat of the issue. Paul Cooper: Yes, absolutely. Thanks. So I think the important thing to bear in mind is what we're trying to achieve. So it is all about really driving scale, improving productivity across the business and the $200 million falls out of the back of that. If you look at what we've done for 2025, the $29 million gives us a really good baseline going into 2026, and we've got a clear line of sight of that $75 million that we'll deliver by the end of this year. There are, of course, some quick wins within this. So setting up a procurement function is one aspect where you can renegotiate some contracts. I mean, I say it's easy, but there's obviously a lot of work in understanding how you get to that point. But I'd say to Aki's point, the number of initiatives that we've got on and the strong sponsorship and the program management around this gives us strong confidence in those areas. So we talked about the benefits and the visibility that we're seeing around, say, fraud and recovery, we have in-sourced as you can see there, more than 100 roles to Lisbon that is at a lower cost. So that is already sort of underway. We're sort of in the middle of outsourcing since certain components. And again, good line of sight on track in terms of that component. So I'd say the program is well established. You can see the areas that we are tackling. It will give us a business that is much, much more scalable than it is today. Hamayou Hussain: James? James Shuck: It's James Shuck from Citi. I just wanted to ask about the Google Cloud relationship. It's a multiyear relationship and up to this point, it's really been focused on kind of efficiency gains and underwriting. With the pace of change that we're seeing, it's not clear to me what else they can bring to the table, the larger language models that are emerging, whether it's agentic AI. Since you kind of started that agreement, sort of what are your views on how far that relationship can develop and what else can they bring to the table? We start to use unstructured external data? Where else can it be applied to? That's the first question. And secondly, probably the only accounting question today. But on Slide 51, just interested in the reinsurance receivables, which remain very elevated. I presume some of that is COVID-related. In which case, I'm kind of wondering at this point why we haven't reverted back down to the 10% average that we've seen prior to COVID? If we did see that 15% reinsurance recoverable come back down to the 10%, does that have any implications for the solvency? Hamayou Hussain: Okay. So I think the accounting one is directed to you, Paul. So in terms of Google Cloud, et cetera, look, we have strong and deep relationships with a number of, I guess, leading software and cloud companies, including Microsoft and Google. Look, they -- those partnerships extend to a range of different factors. So firstly, we have a lot of our applications and software on the cloud. And I think with the advent of gen AI and agentic e-commerce, et cetera, I don't think that's going to change. Those are facilities that frankly, those 2 companies and others invest billions and billions of dollars in, in terms of making sure they're high-tech secure, et cetera. Where else do we use the skills of those companies? Those organizations have tens of thousands, if not hundreds of thousand software engineers. And what they can help us do is accelerate the journey that we're on. Now what do we bring to the party? I said -- the thing that we bring to the party are kind of 3 things. One, we have invested significantly in our technology over the years. This is not something new to us. It's already within the P&L. You can see it. We have spent years gradually cleaning up our data. It's never perfect, but it's in pretty good condition. And the third thing is ambition and culture. So we have a culture that's a business builder culture. So we're looking for new opportunities. We're continuously experimenting. So we use the state-of-the-art AI tooling these days that they are bringing, but we already have a system where we can integrate it and build it and start to develop real use cases within our business. So for instance, in our London market business, they're using, was it Google X, which is, again, one of the divisions within the Google business. And we're using some of the technology there to help us underwrite some of the risks in the U.S. and the property risks in the U.S. with some really, what we think is high-quality, very granular data with a very long history. We're using these organizations to help build some of the base technology for the new powerful portals. Now once we build those, we can do a lot of things ourselves. So that partnership, I think, will continue. The shape of it, of course, evolves over time. But the key thing they bring to us is capability and acceleration of our own ambitions, which we can then amplify with our own capabilities. Paul Cooper: Yes. And then I think on reinsurance recoveries, I think it's sort of multifaceted. I think the first point is around actual reinsurance collections that are COVID related have gone very, very well. We're very happy with that perspective. I think what's happening and what you can see in terms of the recovery is versus, let's say, 10 years ago is book mix. So one is it's going to be much more shorter tail business 10 years ago than it is today. But also think about the re and -- well, now re-mix, so the third-party capital is obviously greater than it was 10 years ago, and therefore, you've got a natural level of additional recoveries on the balance sheet that you'd have a decade ago. So I think that's that in terms of implications for solvency I mean as that comes down, obviously, the credit risk charge comes down. It's pretty modest in terms of our overall sort of capital. It's not a big driver at all, but clearly, there will be a modest benefit as that comes down. Hamayou Hussain: Okay. Vash? Vash Gosalia: This is Vash Gosalia from Goldman Sachs. I have 2 questions. One on the retail business. So you've announced or you've delivered 6.3% constant currency growth in '25. But at the same time, you've had benefit on the rate 2% and then policy count of growth of 7.5%. So could you just help us square those numbers as to -- and I'm guessing the difference comes from mix shift, but then where exactly or which product line is it that you grew in or what geography and maybe how are each different from the other? That's the first one. And the second one, just on reserves again. Trying -- so honestly, we were a bit surprised by the reserve release that we saw in the second half. So could you unpack as to where those reserve release have come from, either accident years or any particular events that you saw improve? Hamayou Hussain: Okay. So Paul will comment on the reserve releases. In terms of retail, I think you hit the nail on the head. It is entirely mix. So yes, we did receive -- we did see a 2% rate accretion across the retail portfolio and 7.5% increase in policy count within the 2 big kind of segments are the digitally traded business, so largely direct and through partners. There, the average premium is kind of $1,000 or slightly less. That is simply growing faster and therefore, adding more policy count than the broker business. I think as you would expect, healthy growth in both, but the digital platform is growing a little bit faster. Paul Cooper: Yes, just in terms of reserving H2, it was basically all years, you could see actually on the chart, all years and all segments, so really across the business. I think it comes back and we can't state enough that this is a manifestation of conservative reserving -- conservative loss picks. So if you're strong on the way in, clearly, you're going to be strong on the way out from a redundancy perspective, and you can see that in all of those years trending down. And Aki is right, you sort of bear in mind that point about strong releases are a manifestation of increasing redundancy. Hamayou Hussain: Okay. Ben and then Kamran. Benjamin Cohen: Ben Cohen, RBC. I had 2 related questions. Firstly, could you say how much kind of good fortune was in the result in the second half of the year because that's quite hard to unpack? And secondly, when we look at the rate declines that you've announced for January renewals, how should we think about that in terms of -- how that's likely to feed through into the combined ratio over the next couple of years? Hamayou Hussain: Okay. In terms of good fortune, well, we all need some, I think. And I think Jo will kind of provide a bit of commentary on that. I guess my overarching comment is we've not received any more good fortune than anybody else, so we're very pleased with the outcome, but Jo will comment on that. In terms of rate declines and how that might impact the combined ratios and so on. Let me kind of just kind of deal with that. Again, just for completeness, retail business, we continue to forecast 8% growth and a combined ratio within the 89% to 94% range and with a gradual improvement within that range as operating leverage and the efficiency program continues to deliver. In terms of our big-ticket business, look, it's -- the eventual combined ratio will be a factor of many, many things. I think the key thing I would ask just kind of bear in mind is if you go back to Jo's slide on rates and the quality of the portfolio, the majority of the portfolio, both for reinsurance and London market is in a very, very good place. So -- and therefore, the potential for strong earnings growth or earnings in 2026 remains pretty high. Joanne Musselle: Yes. Thanks, Aki. So absolutely, I think when we look at the year as a whole, there was still $120 billion of industry losses. We started January with the really tragic events in California. We ourselves reserved $170 million for that event. Majority of that was in our reinsurance. So of course, when we talk about the sort of benign second half, yes, absolutely, that particularly the North American wind season was more benign. And so looking at the totality of the year, it was still a pretty active year. I think the thing that I always look at, though, is the underlying because the wind can blow or not. And clearly, we respond. But actually, it's the underlying health of the portfolio. And so looking at the attritional loss ratio, looking at the risk loss ratio. And across all of our segments, whether that's London market reinsurance and indeed retail, all within expectation. And that for me is the real health of the portfolio is that attritional loss ratio. So yes, pretty pleased with that underlying claims performance being within expectation. Hamayou Hussain: Thank you, Jo. And Kamran. Kamran Hossain: It's Kamran Hossain from JPMorgan. First question is on retail. So clearly, kind of 9 months into the new strategy, the new plan, things seem to be going very well. Just trying to work out whether actually your historic kind of retail combined ratio range now probably looks quite conservative. If I think of the tailwinds you've got this year seems to have gone quite well. You're clearly very excited about the potential benefits from AI. You probably should have taken a point off that range anyway for DirectAsia last year. If I assume a lot of the expense savings come into that, it feels like the historic range seems a little bit cautious. You're 9 months in, so I understand that. So just interested in whether you feel kind of more or less confident on delivering maybe outperforming that number at some stage. The second question is on share buyback versus dividend. Clearly, the step-up in the buyback was great. I think it reflects the confidence you have in the business. At some stage, do you expect to change the mix between dividend and buyback? Because at the moment, I think it's not unlike peers, but at the moment, the buyback is quite a lot bigger than the dividend. And one last question. I know we talked about AI and data centers. We didn't talk about data centers in space, but that's probably for another day. But what's the -- there's clearly going to be product demand for AI errors, admissions, hallucinations. What are you seeing in the market for that at the moment? Hamayou Hussain: Okay. Very good. Thank you, Kamran. So in terms of underwriting data centers in space and AI hallucinations, et cetera, and how we deal with it from an underwriting perspective, Jo will cover that. In terms of share buybacks versus dividend, Paul will cover some of the detail. But suffice to say, I think certainly for the moment, we are very happy. And I think we -- again, we -- this is all about balance. I think we're striking the right balance in the form and quantum of capital return that we're providing to shareholders and balancing that against also the investment that we're putting into the business for both near- and long-term growth. In terms of the retail core, the guidance is 89% to 94%. We expect to improve within that range. We have ideas where we have been at the upper end of that range. We are providing guidance that we expect over the next few years that we will edge towards the lower end of that range as the business continues to grow and deliver operating leverage and the expense efficiency program and the build-out of capabilities that Paul has laid out delivers. But why don't we go to Jo first on data centers in space. And then Paul, any more color you want to add to that. Joanne Musselle: Yes, absolutely. I think I'll focus on the AI part. Hamayou Hussain: Well, that was the core of the question. Joanne Musselle: Look, we talked a lot today about our own use of AI and maybe our customers' use of AI. But just to be clear, we have just as much thought going into how our customers are using AI and that's going to change the nature of the risks that we insure. So this absolutely is an emerging risk. There's going to be some areas of risk that actually gets better because some of it is still driven by fat finger and actually with an AI that is more consistent in terms of decision-making, maybe some of those errors and emissions actually improve. But there's definitely new areas of risk for sure. And we're being really thoughtful about that. Certainly, from our point of view, we're not going down the route of blanket exclusions. We're being really thoughtful around the risks that they present, understanding those risks and then indeed accommodating those risks, either pricing for them or providing sort of affirmative coverage. So a good example would be in our U.K. portfolio and our technology. We were one of the first to confirm affirmative AI coverage within that policy. I think the other area that we think about is not just the risk, but actually the opportunity. So we are an insurer, a specialty insurer for emerging economies, for new economies. There's a lot of people. There's a lot of investment in AI and data centers and that attached to this digital world that all need insurance. And we're really well placed to be able to provide insurance for the consultant who happens to be in that AI world. So we're also thinking about it from an opportunity point of view. How do we understand the risk, how do we develop our own products and services to help our customers with that risk and then also how do we broaden our appetite to capture some of this more new economy in terms of their own insurance needs. But yes, a lot going on, on that space internally. Paul Cooper: Yes. Thanks, Jo. And so the nature form structure of capital returns fits squarely within the capital management framework. So we will prioritize growth. We'll maintain a strong balance sheet. We'll have a progressive dividend. Now you've seen that we've increased our final dividend per share 20% in each of the last 2 years and then have a progressive dividend thereafter. When we've done all of that, then the surplus that's left after that will be returned to shareholders, and that remains the condition. Hamayou Hussain: Okay. Chris? Chris Hartwell: Chris Hartwell from Autonomous. Just 2 very quick questions, hopefully. First of all, just on the recent reorganization within Hiscox Re, I was wondering if you can talk about what advantages you think that brings? And in particular, on Hiscox Capital Partners, where would you like to see the fee element of Re going over the next few years and particularly if it's the right time or a good time in the cycle to be doing that? And then it's probably my lack of understanding or lack of knowledge rather, just on tax and Bermuda. A lot of your Bermuda peers have been sort of talking about the tax credits that they will accrue from the recent tax reforms in Bermuda. And I guess sort of 2 parts to the question. First of all, if you could help me understand what is your, I guess, on island expenses or headcount or something where I could sort of think about that? And if there's anything you can do to to really take advantage of that? Hamayou Hussain: Okay. In terms of Bermuda tax, Paul will cover that. In terms of Hiscox Re and the sort of reorganization to create Hiscox Capital Partners. Look, as you know, we've had a long-term strategy using third-party capital that wants to access, frankly, the fantastic underwriting capability of our Hiscox reinsurance business. And we've had a number of different sort of verticals. We've had traditional capital in the form of quota share providers, partners rather. We created ILS funds just over sort of 10 years ago, and those have evolved. We have a number of ILS funds with different sort of risk levels. We have an SPV. We have sidecars. We've also then expanded into cat bond fund capabilities. And frankly, the Re and ILS was a nomenclature, which no longer describes what we actually do. It is much more mature and much more sophisticated in terms of the different capital basis that we're managing. And that's a reason for -- first reason for kind of using the new nomenclature. And in terms of -- at this point in the cycle, we are -- frankly, last year and this year, we have seen increased interest in third-party capital coming in to benefit from our underwriting. I think you heard from Paul earlier, the AUM, the one thing we quote, which is ILS AUM has increased from, I think, $1.4 billion at the start of last year to $1.5 billion at the start of this year, albeit that deployable capital has gone up a little bit more because we had some outflows and then some new money coming in. In terms of fees, again, as you heard from Paul, the last 3 years of fees have been in excess of $100 million. So a nice contributor to the reinsurance business and to the overall group. The fees are structured essentially, as you can imagine, two-fold. So you have a fixed component and you have a profit commission component. And over the last few years, because of the underwriting results, the profit commission component has increased quite significantly, getting us to over $100 million. What we have done actually over the last couple of years is also gradually restructured some of those fees. So now the majority are fixed. In terms of where that fee income will go, well, there's 2 major drivers. One is the quantum of third-party capital that we're able to deploy. And I think that is going to grow. So that will kind of push the fee income up, but then it's down to the actual results. Whilst the majority is now fixed versus PC, profit commission. The PC is still pretty significant, and that will be determined by the outcome of in-year results. Paul ? Paul Cooper: So yes, the Bermuda-based tax credits, I mean, they're small, they're sort of single-digit millions. They're absolutely dwarfed by the introduction of the global minimum tax this year. And you can see that our tax rate has gone from 8.5% to like 17.6%, so that's a big uplift. What can we do more in order to sort of maximize that benefit? Essentially employ more people on Ireland that don't need a work permit. That that's the sort of driver that will trigger more benefits. The reality of it is, it's caped at around 150 people. So there is a limit to sort of how much additional benefit you can get out of that. That's the biggest driver for it. Hamayou Hussain: Okay. I think we're done. So guys, thank you very much. This is a time of change, right? I think it's time for the nimble and the bold and those who can really turn imaginative ideas into operational reality. And I think that describes the culture and capabilities at Hiscox. These are really exciting times for us. So thank you very much.