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Lachlan McCann: Good morning, ladies and gentlemen, and welcome to the ARB Corporation 2026 Half Year Financial Results Presentation. To all of those online, thank you for taking the time to join us this morning. My name is Lachlan McCann, Chief Executive Officer at ARB. And joining me today to present is Damon Page, ARB's Chief Financial Officer and Company Secretary. Today, Damon will take you through the financial update of the half year results, and I'll present an update to the company's sales and operations. [Operator Instructions] At the conclusion of today's presentation, Damon and I will answer these questions. I'll now hand over to Damon, who will take you through a financial update. Damon Page: Thanks, Lachlan, and good morning, everybody. Thank you for joining us as we present ARB's results for the 6 months ended 31 December, 2025, for the first half of the financial year ending 30 June, 2026. This presentation follows the company's market update released to the ASX on 20 January, 2026. The final market -- the final report released to the ASX this morning and forming the basis of this presentation is consistent with that market update release dated 20 January, 2026. If we move to Slide 3, we see an outline of the company's sales revenue, profit before tax and profit after tax. To the left of the slide, ARB sales declined 1% in the first half of the 2026 financial year, generating total sales revenue of $358 million. The sales environment in the past 6 months was challenging with the sale of new vehicles declining globally and consumer sentiment constrained. Sales into the U.S. were the standout contributor with growth of 26.1%. Performance by sales channel is outlined on the following slide. ARB's reported profit before tax of $57.1 million declined 18.8% compared with last year. After adjusting for one-off items, including gains from real estate sales and costs associated with the termination of the Thule distribution agreement, the profit before tax decline was 16.3%. Lower sales margins driven by the weaker Australian dollar compared with the Thai baht and lower factory overhead recoveries were the key factors driving the decline in profitability. We will cover this in more depth on Slide 6. Costs were otherwise relatively contained with the exception of non-cash depreciation resulting from the company's recent elevated capital expenditure program. Reported profit before tax represents 15.8% of total revenue, below the 19.4% achieved last year. Driving sales growth and focusing on restoring margins is key to achieving the company's target of 20% profit before tax to sales. To the left of the slide, reported profit after tax of $42.2 million declined 17.2% compared with last year, marginally better than the company's reported profit before tax result and earnings per share declined 17.9%. Slide 4 outlines sales performance by channel. And we see there the sales into the Australian aftermarket declined 1.7% in the first half, affected by lower new vehicle sales for ARB's core model platforms and the ongoing shortage of accessory fitment resources. Sales were marginally down in all states, except for in Western Australia. ARB's retail store network grew by 4 stores to a total of 79. 5 new stores were opened in Mittagong and Griffith in New South Wales, in Mildura in Victoria and in Rockingham and Midland in Western Australia, whilst the store in Burnie, Tasmania was sold but continues to trade as a private stockist. While sales declined during the half, customer demand remains at historical highs and the open order book ended the half year 5% higher than at December 2024. Export sales increased 8.8% during the half. Sales grew -- sales growth of 26.1% was achieved in the U.S. driven by the strategic relationship with Toyota U.S., the eCommerce site in the U.S. and growth through the ORW and 4-Wheel Part retail networks. Other export markets were impacted by lower new vehicle volumes and reduced government funding to the aid and relief sector. The decline in sales to original equipment manufacturer customers of 38.2% or $11.2 million reflects increased inventory levels held by the OEMs, resulting from lower new vehicle sales and slower sell-through of inventories purchased previously. Across on to Slide 5, we see the company's profit and loss statement for the financial half year ended 31 December, 2025. It highlights sales revenue was down 1%. Underlying profit before tax was down 16.3% and reported profit before tax was down 18.8%. Some key items to call out include the combination of a decline in sales revenue of $3.7 million and the increase in materials and consumables used of $6.9 million, representing a $10.6 million reduction in gross profits and accounts for most of the $11.3 million decline in underlying profit before tax. The 2 factors driving the decline in ARB's gross margin being the significantly weaker Australian dollar against the Thai baht and lower factory recoveries as inventory levels materially increased in the prior comparable period are covered in more detail on the following slide. Consequently, materials and consumables used represented 43.7% of sales, which compared with a historically low 41.4% of sales achieved in the prior half year. Costs were otherwise relatively well contained with the exception of depreciation expense, which increased $2.4 million or 16%, resulting from ARB's elevated capital expenditure program over recent years. Also of note, employee expenses were flat at $90.5 million. Operating expenses, including advertising, distribution, finance and maintenance expenses, all declined marginally over last year. Pleasingly, ARB's recorded its $777,000 share of equity accounted profits from its investment, primarily in ORW and 4 Wheel Parts. Regular monthly profits recorded by ORW are ahead of the business case. Overall, the underlying profit of the business declined $11.3 million or 16.3%, of which $10.3 million relates to lower gross profits resulting from the 1% decline in sales and lower sales margins. Adjustments to profit include a $1.3 million gain on the sale of a retail store following a relocation to a larger flagship site and costs associated with the discontinuation of the Thule distribution agreement with Thule choosing to operate in the Australian market directly. Sales and profits associated with Thule were not material to the business. Slide 6 provides more detail around the reduction in gross profits referred to earlier in the presentation. Firstly, ARB manufactures the majority of its fabricated products in one of its 3 Thai factories where the costs are denominated in Thai bahts. Unfortunately, the Thai baht traded at its historically strongest range, i.e., between THB 21 to THB 21.5 to the Australian dollar throughout all of calendar 2025. Based on a 3-month lag, representing inventory holdings and timing of creditor payments, the baht averaged THB 21.17 to the Australian dollar in the first half of FY 2026. This compares with THB 23.71 to the Australian dollar in the comparative first half of FY 2025. This represents an 11% decrease in the purchasing power of the Australian dollar against the Thai baht, meaning the Thai manufactured product was significantly more expensive in the first half of FY 2026, which is reflected in the lower sales margins and ultimately, the lower company profit achieved. Secondly, factory overhead recoveries in the first half of FY 2026 were lower than in the first half of FY 2025. During that period -- during that prior period, ARB's inventory levels increased materially from $240 million to $278 million, resulting in an over-recovery of factory costs. Inventory was subsequently reduced in second half FY 2025 and again in the first half of FY 2026, leading to lower factory cost recoveries and contributing to the overall decline in profitability in the first half of FY 2026 compared with the prior December half year. On a positive note, the company has largely hedged its Thai baht exposure for the second half of FY 2026 at rates slightly more favorable than those contracted in the prior corresponding period and overhead recoveries are forecast to be consistent with second half FY 2025. Consequently, sales margins in second half FY 2026 are expected to be broadly in line with those achieved in the second half of FY 2025. Slide 7 calls out major company cash flows during the year. The company generated cash from operating activities of $63.9 million, which is marginally higher than the profit after tax of $41.2 million and the non-cash depreciation and amortization expense of $17.8 million, reflecting relatively flat working capital. The company invested $11.7 million on property, plant and equipment during the half year, $5.2 million on land and buildings and $6.5 million on factory plants and equipment. The company paid $59.3 million in 2 dividends during the period, net of dividend reinvestments. The final dividend of $0.35 for FY 2026 was a cash outflow of $24.2 million and the $0.50 special dividend was a cash outflow of $35.1 million. Both dividends were fully franked at 30%. The company was holding $59.4 million in cash at the end of the half year and has no debt. This was a decrease of $9.8 million from 30 June 2025, reflecting the special dividend paid. Slide 8. The Board has declared an interim fully franked dividend of $0.34 per share. This is consistent with last year and represents a payout ratio of 67.2%. The dividend reinvestment plan and bonus share plan will both be in operation for this dividend with a 2% discounts and will be paid on 17 April, 2026. I'll now hand the time back to Lachlan. Lachlan McCann: Thank you very much, Damon. Let's begin with new vehicle sales in the 6 months to the end of December 2025, and on to Slide 10. New vehicle sales for 4x4 pickup and SUV variants where ARB has its highest attachment rate was challenged. This not only affected the Australian aftermarket business, but also ARB's OEM channel. Given ARB's association with Ford through our Licensed Accessory Program, we watch the Ranger and Everest sales very closely. Despite a strong month in December for the Ford Ranger, it finished the year -- the half year down by 1%, while the Everest was down 9% on the prior corresponding period. ARB produces aftermarket and OEM products for Isuzu and Mazda. In the half, the D-Max, MU-X and BT-50 all declined over the prior 6 months, most notably the D-Max pickup sales were down 13%. Toyota recovered its Prado 250 sales in the half with a 67% increase, comping off the model change in the prior corresponding period. The iconic Land Cruiser 70 series and 300 series both experienced soft sales. While ARB continues to invest in existing and new product for the BYD Shark, models where we are confident of higher accessory attachment rates such as the new Ford Super Duty and Toyota HiLux have been prioritized through the business. Unfortunately, January 2026 new vehicle sales continued this negative trajectory, which we will hope to see recover during the balance of the financial year. On to Slide 11. Touching on the Australian aftermarket. And today, ARB's store network comprises of 79 stores nationally, up from 75 stores this time last year. In line with new vehicle sales in the first half of the financial year, the ARB domestic aftermarket declined by 1.7%, which now represents 56.9% of total sales. With resolute confidence in the future of the business, ARB and our independent store owner network continue to invest in the future expansion, which I'll dive into further in the following slide. As Damon has commented, the back order -- the order book at the end of the half finished up 5% compared to December 2024, which gives us confidence as we head into the second half of the financial year. In lockstep with our independent store owners, ARB is exploring expansion opportunities for specialized resellers for specific products where ARB may not necessarily access a customer through our ARB store network. Specialized mechanical driveline shops for our air locking differentials or auto electrical stores for ARB's aftermarket lighting lineup are examples which we are currently pursuing. The partnership between Ford Motor Company and ARB continues to flourish. Whether it's on a Ford national television advertising campaign or driving pass the Victorian Police Ford Ranger adorned with ARB product, the solution Ford and ARB provides to our collective customer base has definitely resonated with the market. In later slides, I'll speak to the launch of the Super Duty platform, which has now been integrated to the FLA program. Moving on to Slide 12. In the half, we completed one upgrade of a flagship corporate site and added 2 all-new independent flagship stores. Confident in the future of ARB and the profitability of these stores, our mapping of Australia combining new vehicle sales, distribution of wealth by postcode and other key inputs suggests there remains a lot of headroom for store expansion. To our partners, James Whitworth and the team in Mildura, Mildura Victoria and to Matt Powalski and the team in Griffiths, New South Wales, thank you for your commitment and effort to launch all new flagship showrooms. It's deeply appreciated. To our ARB corporate team members in Launceston Tasmania and to our new employees in Warragul, Victoria, we appreciate your contributions to the business in bringing your stores to market in the last 6 months. Pleasingly, for the balance of 2026, we have 2 priority development. Globally, ARB's largest footprint store in Townsville, Queensland will launch in FY 2026, in addition to an all-new corporate site in Metro Sydney region. In FY 2027, the expansion continues with 2 all new stores and 3 flagship upgrades. Moving on to Slide 13 and our eCommerce program. When COVID arrived on our doorstep 5 years ago, there was a reflection point on our retail strategy in Australia as we were unable to transact with customers online. While we're far from a box-in, box-out business given the need for our -- the majority of our products to be fitted, there is a customer demographic that either prefers to shop online or are capable of DIY fitting that do make our products less accessible by exclusively being a brick-and-mortar retailer. This really challenged ARB's management during COVID with an incredible temptation to stand up a simple eCommerce platform. After careful consideration, we knew there was a much bigger long-term play in designing a best-in-class integrated 4x4 accessory e-com site that provides a seamless customer interaction online with the incremental benefit of our omnichannel offering where a digital experience is complemented by our in-store customer service. The road to a best-in-class site required significant investment in proprietary tools that supported the success of this site. These include an e-catalog, which provides a guaranteed fit of ARB parts to the complex car park in Australia. We've worked extensively with our independent store network to ensure their business is integrated to the new site and their primary market area is respected online. We've also worked with premium vendors to ensure our site uses best-in-class technology. As referenced on screen, we have 1 million unique visitors to the ARB USA -- the arb.com.au website today, which with quick calculations referencing our eCommerce site in the U.S.A. based on average order value and conversion rates suggest this will become an important commercial channel for ARB. Additionally, we note that the different demographic between an in-store customer to those browsing the ARB website where over 60% are aged between 29 to 44, suggesting opportunities to reach new customer demographic and bring these guys into the brand. The store is now live as of last week. We've traded seamlessly through our first weekend. Orders and quotes are strong, and we're looking forward to a brave new world for ARB. I'll play the following video shortly, which will give you a quick recap of the features of this brand-new site. [Presentation] Lachlan McCann: Excellent. To all those online, please jump on the new website and have a browse. We think it's pretty special. Just a quick update on the Ford license accessory program. Just as a reminder, this is where we've partnered with Ford Australia and Ford globally to deliver in excess of 180 branded accessory products for the Ford Ranger and Everest platforms available through Ford dealerships with a full 5-year Ford-backed warranty. As an extension of the partnership, Ford and ARB have collaborated on a special interest pack for Raptor. These special interest packs support an OEM's mid-model life cycle strategy to reignite excitement in a model that is in the middle of its lifetime. In the half, Ford released the Ford Raptor Desert Pack, which features ARB branded sports bar, 4 NACHO Quatro lights, along with a number of other Ford upgrades. The Desert Raptor Pack is now available to order for dealerships. Again, the Ranger Super Duty is now in market. Our FLA partnership has flowed through this model. And as presented at the AGM, we believe is a customer profile directly in the bull's eye for ARB product. Early indications suggest accessory attachment rates are high and in some products exceeding our expectations. We continue to discuss with Ford further product expansion opportunities for this model. Later in the presentation, I'll quickly touch on ARB's marketing push for the Super Duty. Moving on to our international business. And on Slide 17, we see ARB's export business achieved 8.8% growth in the half and now represents 38% of our total business. Asia, New Zealand and the Pacific region performed well with 6% growth. Unfortunately, our European, Middle East and African business declined 6.9%, which I'll speak to later in the presentation. The U.S.A. again outperformed, achieving a fantastic 26.1% growth to the half. Despite very challenging economic and political environments with the recent tariff news is seemingly going to continue, we're dedicated with the progress of our sales, marketing and distribution channels in the Americas. It's important to note that the Off Road warehouse for parts and NACHO revenue is not consolidated, and therefore, this revenue is excluded in the outdoor sales of the ARB U.S.A. business. Moving on to Slide 18. And again, as a quick recap, on September 9, 2004 -- 2024, my apologies, ARB announced that Off Road Warehouse, ARB's associate company in the U.S.A. had entered into an asset purchase agreement to acquire the 4 Parts business, which includes 42 retail stores in the U.S. alongside associated IP, including the 4 Parts eCommerce business. The acquisition was finalized on the 18th of October, 2024 for a provisional amount of USD 30 million, which was subsequently adjusted down by USD 4 million as a result of excess and obsolete inventory. Combined with ORW's existing 11 stores, this significantly expanded the retail network of -- to 53 stores and provided ARB with the majority opportunity for a long-term brand and sales expansion in the U.S. To facilitate ORA's funding of the acquisition, ARB increased its ownership interest from 30% to 50% for $16.7 million and provided a loan to ORW of $7.5 million. The main shareholder partner of Off Road Warehouse is Greg Adler. Greg's family founded 4 Parts in the 1960s. Greg has spent the majority of his time -- sorry, my apologies. Greg has spent the majority of his working life in the business, including over 2 decades as CEO of 4 Parts and is happily back at the driving wheel running the family business to its former glory. Moving on to an update on Slide 19. In the 8 months of trading, 4 Parts has successfully integrated over 500 employees to the business, transitioned the ERP system, closed a total of 5 stores, 3 of which were geographically close to other stores and 2 are underperforming. The business now has a total of 48 stores. We've restructured a loss-making eCommerce business back to profitability. And as a result, the business has achieved a net profit before tax shift of USD 3.5 million from the second half of 2025, noting that we acquired a loss-making business. At 30 of June 2025, ORW had a positive cash balance of USD 14.5 million and as reported by Damon, has repaid its ARB debt facility in full. With all of that, the comeback has just started. Through a lot of operational heavy lifting, Greg and the team have begun to raise their eyes to grow the business. Optimization of existing store network remains a strategic priority. And while we're better in many of these stores, there's a lot of room for improvement. We have fantastic engagement with our supply partners who are eager for a deeper engagement with a fresh looking forward parts business. TruckFests have been a long-term known strategy where the business plans and executes customer-facing retail shows to provide access for manufacturers directly to the retail public. Four events have been planned for 2026 and with great excitement from our retail customers and valued suppliers alike. And then expansion opportunities across new locations and possibly specific house branded categories are being considered. Moving on to Slide 20, which speaks to the ARB product sales inside ORW in 4 Parts stores and again, a good news story where ARB product sales have achieved excellent results. The product exposure and education are a priority through the retail and eCommerce sites, both of which have significantly improved. On a like-for-like store basis, ARB product sales through the ORW 4 Parts channels are growing at over 100% on prior corresponding periods. I'm pleased to report that the store-in-store ARB displays past probation, and we now move on to our next batch of 6 stores, which include in April, Kearny Mesa, California, Las Vegas, Nevada, Denver, Colorado; and then in May 2026, Dallas, Texas and Orlando and Doral in Florida. Following the completion of these stores, we will assess the timing and activation of our next bunch of store developments. ARB, of course, will also have a fantastic presence within the TruckFests, presented on the previous slide. Moving on to Slide 21. And with great credit to our team at ARB U.S.A. led by Rich Botello, we're delighted by our continued growth of 26.1% in the half and the continued strengthening of the ARB brand in the U.S. market. All sales channels performed well in the U.S., Latin America and Canada, including our strengthening partnership with Toyota U.S.A. On to Poison Spyder, and as a part of the Wheel Pros Chapter 11 process, there was an opportunity to acquire an iconic Off road brand in the U.S.A., which is close to the hearts of Jeep enthusiasts and rock crawlers alike. This is Poison Spyder. Rock crawling legend, Larry McRae, drove the brand to its original heights after various ownership changes, including time as a part of the 4 Parts family, the sleeping icon has laid dormant or semi dormant for a number of years. Under ARB's ownership, the brand has now relaunched with much excitement, both online and at events such as King of the Hammers in Johnson Valley, California. Product is now in market. Demand has exceeded original expectations, and we're in back order. The dedicated eCommerce site has now launched, and we're looking for product expansion opportunities. Watch this space. To finish, ARB USA updated the -- sorry, to finish the U.S. update, ARB has leased an 8,100 square meter facility in Norco, California, which is approximately 80 kilometers from downtown L.A. The expansion site will support ARB's future growth on the U.S. West Coast, housing engineering, Poison Spyder, the expansion of 4 Parts ORW and new products ARB will bring to the market in coming months and years. Unsurprisingly, today, our largest single market on the West Coast of East California, we're servicing this market from our current Seattle location, is slow and expensive. As a result of this, we will close the Seattle distribution center, but retain a core team of marketing, product management, operations and administration in Seattle. Moving on to Slide 22 and talking through further international business. Planning for ARB's presence in China through our wholly owned foreign entity remains on track, confident with this presence, we will stabilize and grow this important market. Opening is planned for April 2026, where customers, OEM partners and key dignitaries will attend the event. Product is on the water, and we look forward to providing sales updates in future presentations. An important miss for the half was our business in Europe, Middle East and Africa. The business was materially impacted by 3 factors: a reduction in customer demand in the aid and relief sector. ARB has previously reported our framed agreements with organizations such as the UNHCR, World Food Program, Medecins Sans Frontieres, all have experienced cuts to their funding in the last 6 months. Isolated non-recurring issues with key customers in Africa have also weakened the first half trading, in addition to which lower 4x4 pickup sales in key European markets affected sales, as reported by Damon. Offsetting the lower aid and relief sector spending, we've seen increased tendering and contracts in the defense space, which we anticipate will support improved sales in this region in the second half of the financial year. Truckman in the U.K. performed well in achieving 5.2% lift in revenue. This result was achieved despite a 13% reduction in registrations of pickup models, key to the Truckman business in the first half of the financial year. ARB product sales, combined with additional defense spending, supported this growth. Moving on to Slide 23 and ARB's OEM channel. The OEM channel -- so the next slide, sorry, 24. Thank you. The OEM channel has had a tough 6 months with a 38.2% decline. While we previously flagged a reduction in sales, a combination of increased inventory holdings by OEM partners and lower vehicle sales affected platforms and compounded this result. The result does not reflect the loss of any OEM contracts. It does indicate softening of specific models key to ARB's OEM and aftermarket business. In the prior corresponding period, ARB was delivering Toyota Genuine Prado bull bars at this -- which as this vehicle ramped up, exacerbated the decline in revenue in this first half. Given the multiyear time frame of these OEM programs, ARB is actively pursuing business with both new and existing OEM customers. Moving on to Slide 25. Consistent with our Trailhunter program in the U.S., investors will have seen an increase in ARB brand partnership collaborations with Toyota markets outside Australia. ARB has been working with Toyota for over 40 years and is immensely proud of this partnership. ARB is delivering branded content on the recently released FJ Cruiser in the top right-hand corner of the screen, which is a platform restricted to specific markets outside Australia. We also collaborated closely with Toyota Thailand on the release of the HiLux vehicle, which we hope to see further commercial opportunities into the future. Now I'll move on to our product section. And firstly, to Slide 27 on the winch. ARB has respected our long-term partnership with Warn Industries, the global leader in the design and manufacture of electric recovery winches. This relationship was specific to the Australian market, but in markets outside Australia, where the recovery winch remains an important accessory, we didn't offer a solution to our customers. Given ARB's investments in distribution, particularly retail-facing channels, this is an incredibly important accessory to complement our bull bar offering. Over the last 2 years, our engineering team have been working on innovation in this product category to bring something new to market. The ARB winch in addition to its fantastic styling also integrates the contactor pack back into the winch to enhance both performance and the ease of installation to vehicle platforms. Demand has again exceeded initial forecast where we have prioritized our international business units. First shipments will begin arriving with customers in March 2026. Now the next few slides, we won't move slides yet, speak to the application engineering, which has consumed the lion's share of our development resource over the last 6 to 8 months. Speed to market is everything in our industry, and we're incredibly fortunate not only to have an outstanding design and production engineering team in Kilsyth to get products ready, but also a highly capable factory that lets us build first units in Australia to put product in customers' hands as close to vehicle launch as possible. The next video showcases the already mentioned Ford Super Duty. If we can please play the video. [Presentation] Lachlan McCann: From our Summit Mark II (sic) [ MKII ] bull bar to the Slimline BASE Rack, Old Man Emu suspension and our MITS Alloy service body, thanks to our partnership with Ford, ARB was ready at vehicle launch with a full complement of products. These products were incredibly well received by customers, which today is converting to very strong product demand. Moving to Slide 30. Just in market is the facelift Toyota HiLux. Again, ARB benefited through our association with Toyota Corporate with early access to vehicle data and a physical vehicle to prepare for launch. Conscious of the differences in vehicles between international markets in Australia and also to integrate our offering, we have taken time with an Australian specification, HiLux, to fine-tune designs of products and as such -- such as the bull bar canopy and suspension. These products are now in production in Kilsyth and shortly in Thailand. Deliveries to customer back orders are now imminent. While there has been differing opinions in the market to the new pickup vehicle, it's a Toyota, and those loyal to the quality of product and the service offered by Toyota will continue to buy HiLux. When the ARB offering was presented to market, it was very well received, which we're seeing come through now in initial customer orders. On to Slide 31 and to recap ARB's 50-year celebration. From our very humble beginnings out of the family garage in Croydon, Victoria in 1975, the company has come a long way in 50 years to be a true global leader in the design, manufacture, marketing and distribution of our 4x4 accessories to outdoor and off road enthusiasts around the world. We used 2025 to thank our employees, suppliers and also engage with our incredible customer base who follow ARB's journey. The 50th year celebration gave us the opportunity through various digital channels to explore our most popular Australian destinations, but also provide aspirational insights to operating in far-reaching locations, such as Mongolia, South Africa, the UAE and Morocco. As you can see on screen, the engagement with our fan base was remarkable and will serve as a great springboard as we strive to grow brand awareness of ARB through the next 50 years. And finally, on to the outlook. Sales margins in the second half of 2026 financial year are expected to be broadly in line with the first half. As explained by Damon, in recent weeks, we've taken the opportunity with the strengthening Australian dollar to hedge our Thai baht exposure, largely removing this headwind in the second half. The Australian aftermarket remains a challenge. We actively monitor through OEM partners new vehicle supply. In the second half, we see the Super Duty and HiLux as a tailwind, although we remain concerned about the supply of models such as the 70 Series Land Cruiser and 300 Series Land Cruiser. The customer order book remains strong and looking beyond the next 4 months, ARB's investments in new store developments as well as new channels such as eCommerce will be incremental to ARB's revenue growth over time. The outlook in export is positive. We're confident headwinds experienced in the first half are behind us. The order book in export is well ahead of December 2024, and we continue to see a long runway for growth in the U.S.A. as a result of strategic investments made in recent years. The OEM result in the second half will largely depend on new vehicle sales of those models ARB supports our partners with. The OEMs have reduced their inventory levels, which vehicle sales dependent should support improved sales in the second half. Overall, ARB's financial performance in the second half is expected to improve relative to the first half of FY 2026 and trade closer to the prior corresponding period. Closing the half with a very strong balance sheet and $59 million of cash in the bank puts us in a very strong position to invest in our future. ARB management and the Board remain positive about the long-term growth prospects of the business. An increasing population of 4x4 pickup vehicles, the best distribution network for specialized 4x4 accessories in the world, a strong and growing global brand and a high-performing management team, remain very excited about the future of the business. That concludes today's presentations. Again, thank you very much for everybody online for taking the time to join us. I'll now hand back over to Damon for -- to answer some questions that have come through. Damon Page: Thanks, Lachlan. A number of questions coming through on margin impact. So I'll just consolidate an answer to cover all of that thereof. If we could perhaps just go back to Slide 6 in the presentation, and I'll just address the impact of the foreign exchange on the margins going forward. So on Slide 6, on the left-hand side, you'll see the average exchange rates for the half year. So second half FY 2025 being January to June 2025, you'll see that the average exchange rate over that period is THB 21.7. So we bought THB 21.7 to the Australian dollar at that time. Now we've locked in the majority of our currency requirements for the second half this year at a rate just slightly above that 21.7 (sic) [ 21.70 ]. You do lose some forward points as you move your forwards out to May and June. And so in terms of the exchange rate, we expect the exchange rate will -- we expect that the exchange rate will be very consistent with the second half of last financial year. We do have a little bit more to lock in, but it's not going to materially change that impact. In terms of the price increase that went through in February, that price increase -- it was suggested on one of the questions that it was a large price increase of 4% to 5%. It was an average price increase of about 3%. That price increase went through in February. We expect to see the benefit of that flowing through the back end of the second half, so probably through that late April, May and June period there. So we will get a little bit of uplift from the price increase, but it will take approximately 3 months to flow through, February, March and April, before we see the benefit of that flowing through to our results given the order book we have and the open and back orders in place. Just again, in terms of the Thai baht, look, if the Thai baht stays where it is, we'll obviously start at some stage looking to take cover into the first half of the next financial year into that July and post-July period. And we should see some favorable impact as we move forward into the new financial year. A question here about, as GP margins deleverage with the weaker baht and lower factory absorption, shouldn't we see those -- shouldn't we see it reverse should those conditions change? The answer is yes. But the Thai baht is now trading back below THB 22. So it won't be as material a change upward as it was on the way down when it went from THB 23.7 last year to THB 21.1 this year. So we -- if the Thai baht strengthens back to THB 23, we'll see a complete reversal of what has occurred in this first half. If it sits where it currently is, then obviously, those margins will continue forward, and we'll get some price -- some improvement in gross profits from the price that was taken in February for the price increase. A question around second half financial performance being closer to the prior period, that's in reference to absolute dollars rather than to profit before tax margin percentage. So just to be clear, that's in reference to absolute dollars. I think that's it by way of margins and financial questions. Lachlan, if any more come through, I'll pick those up, but I'll just hand back to you to respond to the other questions. Lachlan McCann: Okay. So thanks, everybody, for the questions that have come in. I'll just start with one around the timing and the release of the ramp-up of the Toyota Asia partnership in terms of supplying product. In limited quantities, product has commenced supply. There's a number of products if you've got a K9, including the roof rack and a couple of other things on the FJ Cruiser. We have further products that we have been contracted with, on that model, that have not yet commenced supply, but a limited number of accessories have commenced supply into Toyota Asia, which is fantastic. The next question relates to the BYD Shark. ARB is watching BYD Shark accessory uptake. How does it compare currently to, say, ARB's key models? How do you balance having product ready for Shark versus the uncertainty on accessory take-up? There is a finite engineering resource at ARB. We do not -- we do believe BYD as clearly an opportunity in market, which is obvious. They've done a great job in bringing that vehicle to market. Do we see the attachment rates on a BYD Shark as high as platforms like the Super Duty and like the HiLux? And clearly, the answer to that is no. We have prioritized those 2 models as examples of product that we have pushed through our design and production engineering teams. With that said, and as has been presented to market previously, product is available for the BYD Shark today through ARB channels, and we'll continue to increase that offering on that platform. Again, just conscious, with constrained engineering resources, we have taken the decision to prioritize those other 2 platforms. So I certainly would suggest that we don't ignore the success of the BYD Shark. We just know with confidence that both the Super Duty and the HiLux have higher attachment rates. How confident are you, is the next question, in your growth earnings for FY 2027? I think in the outlook, we've provided enough update as we're prepared to give. So hopefully, that gives you some indication as to where we sit both for the balance of the year and hopefully, some indications about where we see the future. The next question, where you say the Australian aftermarket, the company's order book remains healthy with daily sales and order intake close to historical highs, are you implying that revenues are on track towards $201 million? So again, there, we've given, I think, as much information as we're prepared to provide on the outlook slide. So that hopefully covers that one off. Can you explain further to what drove the softer results within EMEA, spoke to unassociated challenges versus non-recurring? Yes. I suppose with transparency, it does speak to a major distributor who had a significant health concern during the year, which slowed the business down, which on reflection, it's a succession planning and corporate management piece that we have to organize. That health condition is behind the owner of that business. The business has started to pick up, but it does highlight for the business some weakness or susceptibility with respect to succession that when a single individual goes out of the business, we can have that type of slowdown. So that's certainly something we're looking to address going forward. Can you provide further details on the composition of export business within EMEA? How is the split between military, foreign and independent retail? It's a very good question. What I would speak to in my exposure in the 25 years to those markets is, there has been a shift away from retail to fleet. Fleet is a growing and important part of those businesses and something that we have actually invested in dedicated resources in that space, including the OEM channel for the European market so that we can continue to grow. I wouldn't say by any stretch that means that the retail market in Europe is softening. There are certain product commodities that continue to be very, very positive. Our product offering, given its practical use application, is definitely more targeted towards that fleet demographic and is a part of the growth of our European business, in particular, over the last sort of decade or so. I think I've covered off the European questions. What percentage of total export sales does ARB USA currently represent? The answer to that is 43%, covers that off. Toyota has commenced calendar year 2026 at a slower rate. Are you seeing supply impacts within Toyota? Or has the HiLux launch been a little lacklustre relative to prior new generation launches? Do you expect Toyota volumes to improve over the next 6 months? Look, there's publicly available information, for example, on the Land Cruiser 70 series where Toyota has actually indicated they've stopped taking orders. We are -- we receive forecast from OEMs, which are their best view of the future. What I would say is, my understanding is Toyota is supply constrained, not demand constrained. Every model that we know of, that Toyota has, is back ordered within the system. We actively monitor key models such as the 300 series, the 70 series, the HiLux and the Prado. And on a lot of those months, you are waiting many months, up to 6 to 8 months for a new vehicle if ordered today. Now the soup of Toyota and how they decide in their way of playing [ golf ] between their international markets is quite confusing. The Land Cruiser Prado, which is built in Japan for the U.S. market, has been incredibly popular and has outperformed expectations, which may have a supply impact to the Australian market, possibly. We see models like the Toyota HiLux, which is now in market in Australia. We know that, that vehicle is not going to be available to purchase in the U.K., for example, until the back end of this calendar year. So like the person who wrote this question, we too are quite confused in some instances about how Toyota decides to allocate vehicles to market. There's compliance issues. There's all sorts of things that I'm sure go into their thinking there, but it's something we obviously, certainly watch a lot. Can -- the next question, can you please discuss how the vehicle model changes affects the OEM revenues and aftermarket revenue timing? This is something not well understood, and it also opens up on Europe impact of vehicle supply patchiness, et cetera, et cetera. I think in answering the last question, that is sort of covered off. I'd really again take the time to highlight -- and this is not only something that's relevant to Toyota, but certainly, Ford fights this as well, where it's not always a question of demand in the market. It's definitely a question of supply. We know for a handful of those models, and certainly for the Super Duty right now, if Ford could build more vehicles and send them to Australia, they'd be selling more vehicles, which is a good news story. I don't know how to translate this question. Just to clarify the 100% product sales with reference to the entire 4 Parts network. Okay. So this question just is seeking to clarify our doubling effectively of ARB product sales through the 4 Parts ORW network. So this does not just represent the one to 2 stores. This is a year-on-year comparison to the prior corresponding period. Through the 48 stores, our sales have doubled. We have to highlight that they are coming off a weaker volume, but we're seeing incredibly strong penetration through those stores. The next question speaks to the probation, which is interesting wording, probation set for the 2 stores? So there were some commercial decisions wrapped around those 2 stores on probation. There was some customer experience that we baked into the decision to move ahead with further stores. There was certainly a lot of feedback from the store managers that we baked into our decision. There's also us making sure that the experience resonated with the customers. We call it bull bar, bull bar, they call it a [ bumper ]. There's different ways that they present suspension to market, et cetera, et cetera. So we just wanted to make sure that the physical representation of our products into those stores resonated with the market, which we're confident that it has. And so again, we move forward, which is incredibly exciting. Have ARB products needed to stop the U.S. door in store rollout being booked in sales? It would -- if it was, it would be immaterial to the business. So I don't think that's necessarily relevant in terms of revenue and our good [ accountants ] would probably capitalize that investment anyway. There is one more question. Any comment on the tour impact on aftermarket sales and profitability? Immaterial on both fronts, yes. So that covers that question off. Damon, do you have any more? Damon Page: Look, Lachlan, I just wanted to -- I'm conscious you haven't seen these, but just wanted to give you an opportunity just to respond to whether it's worth investing more in engineering capability given the changes in the car park? Lachlan McCann: Yes. Good question. And look, there's a couple of answers to that. Number one, we've presented before the market the investments that we are making in the U.S. And so yes, and we certainly are planning for further engineering expansion in Australia. I suppose the best way to speak to that is the explosion of models and the proliferation of new entrants to the market, means that we have to have more engineering resources to get more product to market. And it would be a fair criticism to say we've had to prioritize HiLux and Super Duty over BYD Shark. Why can't we do all of them at once, and we would accept that feedback. And of course, including the Kia Tasman, which has also come to market recently. Damon Page: Lachlan, we've cited fitment resources as a headwind to results again. Question is around, have we increased the number of fitment bays in flagship stores and focused on labor? So does this get resolved is the question? Lachlan McCann: Yes. Look, it was only because we see it as a perennial issue facing the business on a go-forward basis. We've restructured the incentive plan for fitters in the first half of the financial year, where there's some performance-based incentives, which we really only finalized the rollout in December. And the effect of that has been really positive. We're actually seeing retention rates improve. But rather than speak to that with limited data in this half year results presentation, we wanted the time to have that mature in the second half of the financial year, so we can report back more specifically. Initiatives across the board, again, the Filipino fitters and the international fitters continue to be a focus. Our onboarding of team members is a weak point that we need to improve so that we get better engagement earlier and retain those fitters. So as always, there's a raft of measures that we're undertaking through HR and through the business to continue to improve in that space. And I would say, in the first half of the financial year, we have made inroads, particularly to holding on to those staff members that join us. We hope to be able to present further to this in the full year presentation. Okay. We're nearly 1 hour in. So that will conclude today's presentation. Both Damon and I, again, would like to really take the time to thank you all for joining online, and we look forward to seeing you at the next presentation. Thank you again.
Anthony Lombardo: Good morning, and thank you for joining the Lendlease 2026 Half Year Results Presentation. I'm Tony Lombardo, Group Chief Executive Officer and Managing Director of Lendlease. With me is Simon Dixon, Group Chief Financial Officer. Sitting here at Barangaroo in Sydney, we're on the land of the Gadigal people, and I extend my respects to their elders past and present. Today, I'll provide an overview of our half year 2026 results. Simon will talk through the financials, and I will then cover the outlook and strategy. We'll then open for questions. Starting on Slide 4. FY '26 is a transitional year for Lendlease as the strategy reset announced in May 2024 continues to be executed. There are 3 core components of the strategy that I want to highlight today. The group is being repositioned to focus on our market-leading Australian operations and international investments platform, reported as Investments Development and Construction, or IDC. These businesses have historically delivered double-digit returns on equity through the cycle and continue to show strong operating momentum. The other core element of our strategy was the establishment of the Capital Release Unit, or CRU, to facilitate the recycling of capital from underperforming or non-core parts of the group. At the May 2024 strategy update, we announced that $2.8 billion of CRU assets were on the market alongside a further $1.7 billion of CRU assets identified as being available for sale. We have now announced or completed the exit of $2.8 billion of CRU assets. In addition, we've made strong progress with advancing the remaining asset pool with a further $1.5 billion of assets targeted for the second half. In May 2024, we also announced our intent to launch a securities buyback subject to specified preconditions. The main outstanding condition is achieving a clear contractual visibility to a sustainable underlying gearing level of 15%. In the first half, we've increased that contractual visibility through the signing of the announced TRX transaction and are progressing the satisfaction of conditions precedent for both the joint venture with the Crown Estate and the sale of our TRX interest. The divestment process for Keyton Retirement Living, the U.K. build-to-rent assets and the recapitalization of APPF Retail are all now in exclusivity. Capital recycling initiatives for our Victoria Cross investment and many other assets are also underway. We are targeting the completion of $3 billion in announced and active transactions in the second half of 2026 across both IDC operations and CRU. The 15% gearing threshold is assessed on a forward-looking basis and requires a degree of contractual certainty on the receipt of sale proceeds translating into net debt reduction. As that certainty increases, we should be in a position to commence the buyback. The group maintains a strong financial position with $3.3 billion of liquidity and flexibility provided by the recent hybrid issuances. This position enables us to take a measured approach to capital recycling. Turning now to Slide 5 and our half year financial performance. As anticipated, with limited completions in development and lower transaction earnings in investments, the IDC segment EBITDA of $204 million was down from $341 million with an improved performance from the Construction segment being a highlight. Moving to CRU. As we have stated, the segment's primary purpose is capital recycling with $500 million of further progress made in the period. At the group level, a statutory loss for the half of $318 million was recorded, including $118 million of noncash negative investment property revaluation and impairments, primarily in the U.S., U.K. and Singapore. The group operating loss after tax of $200 million included a positive $87 million contribution from IDC and a loss of $287 million from CRU. The CRU operating loss included a $95 million write-down of community land parcels as previously flagged last calendar year, and that is after tax, $95 million, and a further $44 million provision in relation to tail risks in the exited international construction businesses. Reported statutory gearing was 25.8%, benefiting from the hybrid issuance. The group continues to target underlying gearing of 15% by the end of FY '26 subject to the completion of targeted recycling initiatives across both CRU and IDC. Simon will talk to our balance sheet position and capital management later in the presentation. Our Investment segment earnings highlighted on Slide 7 are derived from funds under management and contributions from our directly held co-investment portfolio. Our team's focus is on performance, liquidity and growth to drive positive outcomes for our investors. Funds under management was stable at $48.7 billion and included $1.5 billion of additions. The group held $2.9 billion of co-investment capital at the half. We continue to actively manage this position to support an appropriate balance between capital alignment and our role as manager of third-party capital. Portfolio movements in the period included increasing our investment in the APPF Industrial Fund and downweighting ownership in LREIT. The co-investment portfolio remains well diversified with a primary weighting to workplace and retail assets. The co-investment yield driven by underlying asset performance remained consistent with a gross yield of 4.4%. Our investments platform continues to grow with more than 80 investors. We have $2.8 billion of capital available to deploy across existing mandates. And we have $4.7 billion of capital being raised for a Japan value-add mandate, a new Australian private credit partnership and existing funds and develop to call product. We remain highly active in the market, completing $4.4 billion of gross property transactions across our investment platform in the period. Turning to development on Slide 8. There were $1.3 billion of development completions this half, including Victoria Cross in North Sydney. Across our residential business, gross apartment presales increased to $3.3 billion with settlements weighted to FY '27, expected to deliver gross cash proceeds to Lendlease of circa $1 billion. We've made strong progress growing the Australian development pipeline with more than $4.7 billion of new projects secured in the half, and we remain well positioned to achieve our $10 billion target for this financial year. Sydney Metro Hunter Street West Over Station development was secured as was the luxury residential project 175 Liverpool Street in Sydney, alongside existing partners, Mitsubishi Estate Asia and Nippon Steel Kowa Real Estate. We are focused on unlocking $12 billion of future development opportunities from balance sheet holdings at the RNA Showgrounds in Brisbane and our Roselle Bay site in Sydney. We currently have 2 residential opportunities that we are pursuing in Melbourne, representing a further $4 billion of project and value. In the half, we secured a role as Master Development Manager for C Capital for the rezoning of land in Victoria for industrial use, leveraging Lendlease's development planning capabilities. Lendlease expects to earn new development management fee streams with rezoning targeted by FY '28. Lendlease has the option to secure all or part of the industrial land post rezoning, which is expected to have an end value of around $4.5 billion. Our origination efforts remain focused in Australia, deploying a capital-light joint venture partnering model. Together with our strong liquidity position, this enables us to remain well capitalized to pursue new development opportunities as we continue to replenish the development pipeline. Moving now to the Construction segment on Slide 9. Revenue growth for the half was strong, up 22%, driven by new project commencements such as the new Melton Hospital and multiple data center projects. Disciplined project execution saw an EBITDA margin of 3.7% recorded for the half. There was $4 billion of new work secured, another very strong result led by the Hunter Street West Over Station development contract following $3.8 billion secured in the prior period. New wins contributed to a strong Australian backlog revenue position of $8 billion, up 36% on FY '25, with an existing social infrastructure and defense backlog. We continue to pursue and win high-quality work with an additional $9 billion of active bids underway, including major transport, social infrastructure and data center projects. This backlog revenue, together with a preferred work book of $6.9 billion places the business in a strong position to increase its future revenues and earnings with circa $15 billion of secured and preferred work. Before I hand over to Simon, I'd like to make a few remarks. Today's financial result will be Simon's last for Lendlease, with Simon finishing in his role as Group Chief Financial Officer at the end of February as he relocates to Asia. I'd like to take this opportunity to thank him for his dedication and contribution to the organization and wish him every success in his future endeavors. I would also like to welcome Andrew Nieland into the role from the 1st of March. I look forward to working with him in his new capacity. I'll now hand over to Simon to talk through the financials. Simon Collier Dixon: Thanks, Tony, for your kind words, and good morning, everyone. I'd like to acknowledge what a privilege it has been to spend the last 4.5 years working at Lendlease. I firmly believe the strategy that we have in place is the right strategy for the benefit of our security holders, customers and our people, and I wish the team every success in continuing to execute it. Starting with the group's financial performance on Slide 11. As Tony mentioned earlier, limited completions in development and lower transaction earnings in investments led to a lower IDC segment EBITDA of $204 million, down from $341 million with an improved performance from construction. In Investments, segment EBITDA of $101 million reflected a stable underlying operating performance with the prior period including transaction earnings associated with the formation of the Vita Partners joint venture of $129 million. In Development, segment EBITDA of $34 million reflected the timing of major completions with the prior period including $118 million from Residences Two, One Sydney Harbour. In Construction, segment EBITDA of $69 million was driven by 22% higher revenues and improved project performance. The CRU segment reported an EBITDA loss of $284 million, down from a prior period gain of $34 million, reflecting previously mentioned noncash write-downs and provisions and the limited completion of capital recycling transactions. Group corporate costs decreased 4% to $55 million, reflecting cost savings from downsizing and productivity improvements, partially offset by elevated costs of finance transformation. Operating EBITDA fell to a loss of $135 million compared with a gain of $318 million in the prior period. Depreciation and amortization reduced materially as IT amortization wound down and tenancies were exited following the simplification of the group. Net finance costs decreased to $85 million, reflecting a lower average cost of debt and lower average net debt levels. The group recorded an OPAT loss of $200 million compared to a gain of $122 million in the prior period. This includes an $87 million positive contribution from IDC operations, representing $0.126 per security. Moving to a summary of segment performance on Slide 12, beginning with the Investment segment. The segment performance was stable across key measures. Total EBITDA of $101 million reflected a stable underlying performance. Management EBITDA from funds management activities reduced modestly to $48 million, reflecting lower fees and margins in Australia, offset by a stronger performance in Asia. Management EBITDA margin of 40.7% reduced from the prior period, although was comparable to FY '25's full year margin of 40.6%. Co-investment EBITDA of $42 million was lower due to a lower level of co-investment as a result of asset divestments and recapitalizations. In the Development segment, a return on invested capital of 3.2% was achieved as there were limited completions in FY '26 to date as anticipated. Capital was also transferred to the segment from CRU in the period in relation to the announced development joint venture with the Crown Estate and the Comcentre project in Singapore, which is a joint venture with Singtel and along with production capital spend during the period resulted in a $1 billion increase in the development capital balance to $2.1 billion. In the Construction segment, revenue increased by 22% on the prior period, reflecting a higher level of project activity, including commencement of the New Melton Hospital and a number of data center projects. EBITDA increased to $69 million. The segment achieved an EBITDA margin of 3.7%, demonstrating continued strong performance from the second half of FY '25. Turning now to Slide 13. The primary role of the Capital Release Unit is to accelerate the release of capital. To date, we've completed or announced $2.8 billion of CRU capital recycling initiatives, including $500 million of new asset sales this half. CRU recorded an EBITDA loss of $284 million, which included the write-down of Communities development land of $136 million pretax, provisions taken in relation to tail risks in the exited international construction businesses of $44 million and the underlying cost base, which includes people costs, IT costs, legal costs, insurance and other overhead. The segment loss for the period compares to first half FY '25 gain of $34 million that included profits on capital recycling and land sales of $160 million that were not repeated this half. The CRU cost base is expected to reduce progressively as capital recycling completes and retained risks are resolved, although it is expected to remain elevated in the second half of FY '26. As we complete the remaining CRU initiatives, the release of capital will be a key enabler for our capital management priorities. This includes further reducing gearing, returning capital to security holders and creating capacity for disciplined reinvestment in accordance with our capital allocation framework. Moving now to Slide 14, which highlights our cost savings achievements. Net overheads reduced $58 million to $197 million, a run rate of below $400 million. This reflects the full run rate benefit of FY '25 cost savings and the early impact from further cost initiatives actioned in FY '26. In the half, we actioned pretax run rate savings of $21 million with further cost savings to be actioned by the end of FY '26. The full benefit of our $50 million in savings target is expected to be realized in FY '27 with a targeted exit run rate for overheads of circa $350 million at the end of FY '26. This will be achieved through the completion of asset divestments and productivity initiatives, including the removal of technology costs. Turning now to net debt on Slide 15. We have provided a walk summarizing key cash flows for the period, rounded to the nearest $100 million and outline the key cash inflows and outflows for each of the IDC segments and CRU segment. Reported net debt, excluding capital from hybrid securities, closed the period at $3.3 billion. Net debt is anticipated to reduce in FY '26 due to $3 billion of CRU and IDC transactions that are announced and underway. These include the targeted completion of announced TRX and The Crown Estate transactions. Transactions under exclusivity for Keyton Retirement Living, U.K. build-to-rent assets and the recapitalization of our APPF retail fund and capital recycling on Victoria Cross Tower. Offsetting these inflows across CRU and IDC are expected net production spend, interest costs, corporate costs and other. Achievement of our group gearing target of 15% by the end of FY '26 is subject to successful completion of these outlined initiatives this year. Turning now to Slide 16, covering group debt and liquidity. Half year '26 reported gearing was 25.8%, including the benefit of hybrid issuance in the half. Excluding this benefit, underlying group gearing was 32.9%. The group maintained strong available liquidity of $3.3 billion, comprising $2.7 billion of committed available undrawn debt and $600 million of cash and cash equivalents, providing balance sheet flexibility as further capital recycling is progressed. Debt maturities are well balanced with an average maturity of 2.5 years. Maintaining our investment-grade credit ratings remains a priority. I'll now hand back to Tony. Anthony Lombardo: Moving now to Slide 18, the FY '26 financial outlook. FY '26 remains a transitional year with IDC earnings guidance maintained at $0.28 to $0.34 per security. The second half of earnings for IDC is expected to be stronger than the first half, supported by a similar underlying performance and anticipated transactional profits. IDC earnings are expected to further recover in FY '27, supported by major development completions, a strong construction pipeline and growth initiatives across investments. As transactions complete, CRU earnings volatility and associated financing costs are expected to reduce progressively, supporting the strengthening of the balance sheet. As such, no guidance has been provided for CRU earnings per security in FY '26 as the segment's focus remains accelerating capital recycling while balancing value realization and speed of execution for security holders. We are well progressed on our capital recycling initiatives and are targeting a total of $2 billion of CRU capital recycling in FY '26. Additionally, the group's strong liquidity position enables us to balance executing our recycling program with realizing value for security holders. Underlying group gearing is targeted to reduce to 15% by the end of FY '26, subject to the completion of our capital recycling initiatives. On costs, we are targeting an exit run rate of $350 million at the end of FY '26, reflecting $50 million of targeted cost-saving initiatives to be actioned throughout FY '26. Our current priorities remain strengthening our balance sheet, returning capital to security holders and importantly, redeploying capital for future growth in earnings in our IDC segment. Moving to Slide 19 and our medium-term growth and earnings profile from FY '27 onwards. In Investments, we expect to see management EBITDA margins above 40% in FY '27 and growing towards 50% by FY '30. We anticipate average FUM growth of 8% to 10% annually through the cycle, delivering scale benefits across the platform. We currently have $2.8 billion of available capital to deploy in the near term. We are raising more than $4.7 billion of further capital, supporting FUM and future earnings growth. Investor demand remains strong in a number of our key markets and sectors, including our core funds and mandates, where we have demonstrated capabilities and a proven track record, allowing Lendlease to deliver differentiated investment products. In Development, we're looking to secure more than $5 billion of development projects in the second half of FY '26 to achieve our $10 billion-plus target. We expect this momentum to continue with $4 billion of origination targeted per annum in FY '27 and beyond. In FY '27, we're on track for $4.5 billion of development completions, expecting to receive cash and profits from the settlement of One Circular Quay in Sydney and the Regatta in Victoria Harbour. We'll also generate new development management fee streams as a capital-light Master Developer on both the joint venture with the Crown Estate and Victorian Northern Freight Project for C Capital. In FY '28, there are $3.9 billion of completions targeted, including Comcentre in Singapore and One Darling Point. Lendlease should earn ongoing development management fees from its joint venture with the Crown Estate once completed. The JV also expects to earn profits from plot sales and will unlock potential development opportunities from its $50 billion development pipeline. This includes more than $20 billion of future investment product. In Construction, annual revenues are expected to reach over $4.5 billion in FY '27, stepping up to over $5 billion by FY '28, supported by strong backlog revenues and preferred work. We also expect to sustainably deliver EBITDA margins within the target range of 3% to 4% while pursuing both a disciplined approach to pricing and risk profile of future work. Additionally, the group will benefit from working capital inflows as the business grows. These key drivers provide confidence in the outlook for the group. Moving to Slide 20. In closing, my management team and I remain committed to delivering on our May 2024 strategy and our stated FY '26 objectives. We continue to build momentum across our investments, development and construction segments. Throughout the half, we continue to execute on strategic initiatives that we announced in May 2024. And we continue to lay the groundwork for FY '27 and beyond and have strong visibility to earnings in coming years. The group's strategic direction remains unchanged with a continued focus on disciplined execution, performance and long-term value creation for our customers, investors and security holders. Finally, I want to thank our hard-working and talented Lendlease people for their ongoing commitment to turning this great company around. Their efforts in delivering on our strategic priorities are vital to the future success of the business. And I'm personally committed to doing my part to ensure we achieve our FY '26 targets and continue building the momentum needed for long-term success. We'll now open up for analyst questions. Operator: The first question will come from David Pobucky with Macquarie Group. David Pobucky: And best of luck to you, Simon, going forward. Just in relation to the guidance range for IDC, the $0.28 to $0.34. If you could just talk to the moving parts between now and the end of the year that kind of drives the top and the bottom end of that range, please? Simon Collier Dixon: Perhaps I'll have first go at that. The -- in the first half, IDC delivered $0.126 per security. To achieve the $0.28 to $0.34 per security range for IDC, mathematically, the second half has to deliver $0.154 to $0.214 per security. So the outcome of that range is primarily dependent on firstly, the continued underlying operational delivery across Investments, Development and Construction, completion timing of TRX and the completion timing of the Crown Estate joint venture. So the bottom of the range assumes more conservative settlement timing whilst the top of the range assumes those major completions occur in FY '26. David Pobucky: And my second one on the provisions and the write-downs announced in the period. Firstly, could you just reiterate how much of that is noncash? And then secondly, in terms of the Communities land parcel, have discussions with the land parcel owner stopped in terms of negotiating an outcome? Anthony Lombardo: So the noncash was $180 million. So it was $136 million for the Communities parcel pretax and $44 million in provisions on the international construction. In terms of the land parcel, we continue to have discussions with the landowner. Simon Collier Dixon: And I would note that the write-down of the Communities parcel is absolutely noncash writing down of the existing balance. The provisioning on the international construction provision whilst there will be a timing difference, that will flow into cash outflows in the future. Operator: Your next question will come from Simon Chan with Morgan Stanley. Simon Chan: There was a lot of detail in the presentation regarding asset sales, et cetera, and you called out a $3 billion number, right, for the second half. But if I were to get you to dumb it down for me guys, and split the $3 billion just into 3 simple buckets. Can you give me an indication as to how much of the $3 billion is locked in and you just need to wait for the cash to come in through the door? How much of the $3 billion is in the final stages of discussions? And how much of the $3 billion is probably closer to the start or the middle of the sale campaign? Anthony Lombardo: So firstly, the joint ventures with Crown Estates and TRX are contracted, and we're working through the CP. So that's some $640-odd million there. We've announced 3 exclusive transactions. So that is Keyton, the U.K. build-to-rent and the recapitalization of APPF, which will deliver over $1 billion. And then we've called out Victoria Cross, which we've now completed around looking to recycle some of our capital in that asset and a number of other investments. So that other group makes up the remainder. All those transactions are underway at the moment. Simon Chan: Okay. That's quite clear. Next question, just on the actual results, there are 2 things I was hoping to get some more details on. One, I think you called out there was an interest expense benefit as a result of the hybrid in the first half. Can I just get an indication as to the P&L impact of that benefit? And part 2 of my question, I saw that there was a $47 million benefit from a reversal of a prior period impairment that came through in the first half. Can you give me some color as to what that is? Simon Collier Dixon: So for the -- Simon, thank you. I'll take the first part. The hybrid benefit in the first half is $9 million. That was kind of relatively late issuances in terms of the -- during the second quarter that we issued. Simon Chan: Okay. That's fine. And $9 million was booked through as a dividend rather than interest. Simon Collier Dixon: That's right. Yes, just like all the other hybrids in the market. Anthony Lombardo: And just on development, as we're progressing a number of unlocking our different development projects, there has been some provisions which have reversed through the period. And as we continue to progress those, we'll keep the market informed. Simon Chan: So did the $47 million increase your NPAT -- I guess, sorry. So your NPAT increased by $47 million in the first half because of that reversal. Is that a fair way of looking at it? Anthony Lombardo: That's the way to look at it. Simon Chan: And just a final one, just a follow-up on the previous guy's question, Simon. I think when you were talking about the outcome for the second half, you talked about continued underlying operational delivery across investments and completion of TRX and Crown Estate, I thought TRX was in Crown. Am I wrong? Anthony Lombardo: No. So CRU, we flagged that once the TRX completes, it will then move across as a funds management product. There was negligible profits as we called out on the asset. It was on the ASX slide. Simon Collier Dixon: That's right. And it's part of it comes down also to timing around capital and the impact that has on interest expense. The Crown Estate JV is now clearly in IDC. You're right, the bulk of TRX sits within CRU, but the residual element of that will transfer into IDC. So in terms of ordering, it would be, firstly, continued underlying operational delivery across IDC; second, completion timing of the Crown Estate JV; third, completion timing of TRX for the kind of the 3 major components. Operator: The next question will come from Ben Brayshaw with Barrenjoey. Benjamin Brayshaw: I just got a question for Simon. Could you clarify the construction provision of the $44 million post tax, what does that relate to? And secondly, is that a net number inclusive of reversals of prior provisions? Simon Collier Dixon: It's not a net number. It's a new provision. It relates to a long-standing project that have previously been delivered where we had ongoing liability. We've been able to assess and quantify that liability sort of late in the period. Benjamin Brayshaw: And secondly, on APPF Retail, there's obviously been a lot of media commentary on the current situation with respect to providing unitholders with liquidity. Could you just give an update on the situation and also comment on whether Lendlease intends to retain its $200 million stake in the fund? Anthony Lombardo: Yes. So we flagged today that the team had been working through liquidity. We're pleased that we have now in exclusivity with the party to recapitalize the APPF fund. And we intend to, as part of that, sell down our stake in that fund as part of the recapitalization, as I noted earlier. Benjamin Brayshaw: And could that come through, just to clarify, in the second half? Or is it just too early to say of transaction timing? Anthony Lombardo: We're anticipating to complete the recapitalization in the next few months. Operator: The next question will come from James Druce with CLSA. James Druce: Simon, best wishes with your new endeavor. I just want to get a sense what's the -- with CRU, what's the underlying expenses per annum if you see that in capital profits that you just need to sort of bear, like it looks like it's sort of over $100 million for the half. How do we think about that if you're not actually -- just literally the expense, if you're not actually delivering any capital profit through the year? Simon Collier Dixon: I think a couple of -- yes, you're right, that's roughly the number if you back out the provisions. About 3/4 of that really is kind of direct expense, which is relates to employees, tenancy-related overhead. There's another sort of allocation, central allocation. Clearly, there's a lot of involvement from the center in managing out CRU. Those balances are required or those costs are required to manage the capital. There's still substantial capital and very large sort of projects being delivered within CRU and risk being managed within CRU. But clearly, we're watching that very closely. And one would expect progressively that will be managed down as capital is recycled. Tony, I'm not sure if there's anything you want to add. Anthony Lombardo: No. Look, I think the key focus there is they are people, as to Simon, people, insurance, legal, technology costs that are making that up. As we round down and aim to complete the CRU divestments over the next coming 6 months, we will be progressively be targeting that cost base. We've already targeted costs to come down overall by another $50 million, and we'll continue to work through that as we progressively execute on CRU. James Druce: Yes. So you provided a pretty helpful sort of medium-term thinking -- or '27, '28 thinking in your prepared remarks, Tony. So for CRU next year, you're talking about an aggressive cost reduction. Is that sort of what we should take away just from your comments then? Anthony Lombardo: Yes. I think, CRU, the purpose of the CRU was intended for capital recycling. So that's its primary purpose. So we're very focused on completing that. We set ourselves a target this year of $2 billion. As we talked about, we've progressed $500 million. We've got $1.5 billion to still complete and so there's the focus. At the same time, we're completing that, we are looking at progressively taking that cost out. And so we are focused as a team to get that cost down to a more manageable base for next year going forward. Simon Collier Dixon: James, this is Simon, we're acutely aware, obviously, of the holding costs associated with CRU and those management costs. We're also acutely aware of our cost of capital, which is why we are looking at any way possible really to accelerate that capital recycling through CRU through FY '26 and FY '27. James Druce: Okay. And my second question is just around sort of management changes at the leadership level. Obviously, it's been publicly announced, Simon and Tony. But you've also had the Head of CEO of Construction move on, I believe, the Chief Risk Officer, the CEO of Development as well. Is there anyone else at that senior leadership that I'm missing there? And I'm just trying to get a sense of the confidence in the turnaround, some of this challenging sort of turnover that you guys have had? Anthony Lombardo: Look, each of the executives that we've announced, there's either been retirement, personal or exploring other opportunities. So we've got a great depth of talent. I would say our new CFO, Andrew, spent over 18 years in the business. He was previously the Controller, and he's currently the CFO of the Investment Management. So he now steps up into the CFO role. Construction, Steph Graham has been in the organization for greater than 20 years. She actually had been running the Australian Construction operations for the last 18 months. Of course, as we've exited all international construction, that was the right time for Steph to now step up to the CLT in that role. Claire Johnson, who was running the CEO of the U.S. and as we finish up those, she was looking to relocate back to Australia. And pleasingly, Claire now steps into the role as our Head of Development for the organization. So there has been a number of moves in terms of leadership, but we've got the right leadership in place to take the business forward for many years to come. Simon will stay on in a capacity as an advisory role. He's going to help chair the CRU, as we called out, just to make sure we continue that focus on executing our capital recycling plan. Operator: Your next question will come from Richard Jones with JPMorgan. Richard Jones: Gearing is, I think, pretty consistently been higher than where you've guided. Can you provide some color as to what production spend and interest and overheads you anticipate in the second half? Simon Collier Dixon: Sure. Thanks, Richard. I'll have a go at that. So we obviously didn't guide so much to kind of the half year until we gave a bit of an update sort of pre-blackout. We've kind of landed pretty much where we said we would in terms of the balance sheet. Clearly, it's very linked to the timing of the capital recycling transactions, many of which will progress, as Tony has alluded to. If we kind of roll forward to -- and again, this sort of is how to sort of think about the confidence levels around on a forward-looking basis of getting down to 15% gearing, excluding the benefit of the hybrids. But clearly, we have the $3 billion of CRU and IDC transactions, which are announced or underway, which we'll benefit from when they settle. On the -- in terms of the outflows, within IDC and CRU, it's pretty -- within IDC, it's a relatively standardized sort of outflow for the second half. In terms of net production spend, it's expected to be approximately $400 million. On the CRU side, we've got net production spend of approximately $200 million going out the door. Those amounts are fully incorporated into our gearing forecast. So there's nothing particularly unusual about those. The key is in terms of that forward-looking gearing is really around capital recycling and making sure that we continue to progress those transactions. Operator: The next question will come from Suraj Nebhani with Citi. Suraj Nebhani: Firstly, a quick one on the impairments, this period. Can you just talk a bit more about that? And also... Anthony Lombardo: Suraj, can you please just repeat because it just broke up. Suraj Nebhani: Sorry, can you hear me now? Anthony Lombardo: Yes. Suraj Nebhani: Yes. Sorry about that. So just the impairments in Amenities and the Construction division, Simon talked about earlier. Looking forward, can you give us a bit more comfort around the non-recurrence of this? And firstly, give us a bit more detail on what drove the Communities impairment, please and whether you sort of sure this is it? Anthony Lombardo: So I will just repeat that question just to make sure because it's come a bit broken up. You've talked about the provisions that we have taken, in particular, the Communities, gross provision of $136 and the Construction -- international construction provision of $44 million. So just in relation to both of those, Suraj. So firstly, Communities, we did flag, we talked about we're in the courts on a parcel on Communities for the land in Gilead. The courts have found adversely against that. And therefore, we had flagged the risk around that $136 million. So we have now taken a provision against that, which is a noncash item. What we are doing is we're still in discussions with the landowner as we are trying to come up with a position to work that forward. So that's the Communities land parcel. On the International construction, we did call out, as Simon mentioned earlier, there was a risk around a project in the sold and exited parts of the business. We've now taken a provision of $44 million against that based on those known risks as of today. So that's the 2 key matters and the provisions we've taken in this period. Suraj Nebhani: And Tony, just looking forward, how do you think about the provision-related risk in the business? Obviously, things can be uncertain, but just keen to get a sense of whether there's any potential businesses where you see some risk maybe something on that? Anthony Lombardo: Look, again, I think it is breaking up a bit, Suraj. But in terms of you're asking of go-forward risk, what I would say is based on the known risk we know today, we've taken the known and appropriate provisions for the organization to cover that risk. What I would say is as we complete out a number of those contracts and different things that are ongoing, I'd say that risk is diminishing. Calling out that we recently completed the Melbourne Metro main part of the project. There is still some works that are ongoing there. But again, that's remained within the provisions that we had provided for as a group. So... Simon Collier Dixon: Similar with the Building Safety Act in the U.K., similar story. Through the passage of time, those risks do diminish. But clearly, we'll continue to monitor and assess any other emerging risks in the balance of the portfolio as we move forward. But through the passage of time, these risks either dissipate or they become real and accessible. Operator: The next question will come from Richard Jones with JPMorgan. Richard Jones: Sorry, just a follow-up. Is 15% gearing target, is that predicated on $2 billion or $3 billion of divestments? Anthony Lombardo: It's predicated on $3 billion, of which $2 billion is in the CRU and $1 billion in our IDC. But as I think there was a question asked is that it's broken into 3 categories: $640 million relating to contracted JVs with the Crown Estate and then the TRX we're completing CP, $1 billion related to the exclusivities of both 3 things that was Retirement Living, Keyton, APPF R recapitalization, U.K. build-to-rent. So that was over $1 billion. And then we are looking to recapitalize Victoria Cross now that's completed and a number of other transactions that make up that $3 billion. Richard Jones: Okay. Can I then just ask on Slide 42, you've got the breakdown on the CRU invested capital. There seems to be limited progress on international land and inventory international JV projects looks like you've invested about $500 million once you adjust for the moving of the Crown Estates and Comcentre to development. And then the team projects and other haven't shown any progress either. Can you just provide some color as to what's happening in each of those buckets and when you might start getting some of that capital back as well? Anthony Lombardo: Yes. I mean there are a number of projects that we called out at the Strategy Day that said we needed some $1 billion of further capital that needed to be invested and they related to things like Habitat, that related to 1 Java, that related to the Italian joint ventures that we've got underway, where we've got various things occurring at MIND in partnership with capital partners and also Elephant Park. So it's not a static balance. So you can't look at it that way, Richard, because there's capital and production capital that's being spent. Simon called out a further $200 million of production capital in the CRU that needs to be spent in the period. So as we've called out previously, in this period alone, there was some $100 million of capital that we recycled from land holdings that sit within the joint ventures. Now as a number of assets do complete like Habitat and Java, we will be looking to work out ways to best recycle some of that capital, same with some of the assets that are under development at MIND. Richard Jones: Okay. Can you maybe give a bit more color just in terms of when the timing on more of that capital is going to get released because it's obviously a big drag on group earnings. Yes, so I don't know whether you can give us any more color... Anthony Lombardo: So Richard, as we previously announced in the guidance, $2 billion of accrued capital that we're aiming to recycle this year, $500 million of that we've already announced in the period, and that was $400 million relating to TRX and $100 million relating to other land sales. So that was the $500 million we've achieved. We're targeting another $1.5 billion in the second half of this year. Operator: There are no further questions at this time. I would like to hand the call back over to Mr. Lombardo for any closing remarks. Please go ahead, sir. Anthony Lombardo: Again, thank you for joining today's half year results call. And again, I just wanted to thank Simon for his support over the last 4.5 years, and I look forward to catching up with our investors and analysts over the coming weeks. So thank you.
Jonas Warrer: Hi, welcome to Gentoo Media's quarterly presentation for Q4 2025. My name is Jonas Warrer. I'm the CEO of Gentoo Media, and I've been looking forward to present our business and our business results to you today. Gentoo Media is a leading affiliate in the iGaming industry. We help online Sportsbooks and casinos acquire higher-value players, acting as the bridge between players and operators. Affiliates are a vital part of the iGaming ecosystem. For many operators, affiliates are the main driver for player intake. You can say that we have the online stores that players visit before they decide where to place a bet or open an account. Getting to the Q4 2025 executive summary. Strongest quarter of 2025 for revenue, profitability and cash flow generation. Margin expansion driven by a structurally stronger cost base and disciplined execution. Q4 delivered record end user deposits. We also strengthened visibility across search, emerging AI-powered platforms and paid campaigns, supported by product enhancements and a positive December Google Core update. We see strong EBITDA to operating cash flow conversion, delivering full year operating cash flow of EUR 33 million. Q4 demonstrated operational resilience in a year impacted by Brazil regulation and market volatility. Revenue generation in 2025 is not where we wanted to be, and it has disappointed us. However, with the actions taken during the year, we enter 2026 with a structurally stronger business, with clear growth opportunities across core markets and continued focus on cash generation. It has been a rough year, but it has also been a year that has made us stronger. Going to the financial highlights of the quarter. Q4 delivered the strongest revenue and EBITDA performance of the year. Revenue ended at EUR 25.6 million, down 16% year-on-year, but up 13% quarter-over-quarter. The shortfall versus expectations was driven by softer December sports margins, while the year-over-year decline also reflects the sunset of low-margin activities in Q4 2024. Personnel and other OpEx ended down 33% year-over-year, reflecting the benefits of earlier cost rightsizing activities that were executed during the year. Year-end adjustments increased other OpEx by EUR 0.9 million in the quarter. Marketing spend was EUR 5.7 million, down 38% year-over-year, with the marketing ratio improving to 22%. EBITDA before special items reached EUR 14.9 million versus EUR 10.1 million in Q4 last year and up 16% -- 60% quarter-over-quarter. Special items totaled EUR 1.6 million. Cash flow from operations was EUR 11.4 million versus EUR 7.3 million in Q4 last year. If we look at Q4 this year and compare to Q4 last year, we can see that we have seen a decline in revenue, but we have also seen an increase in EBITDA. Going into revenue and a bit into the revenue details, 59% of revenue come from recurring revenue share agreements. Revenue in Europe decreased by 20% compared to Q4 2024, although revenue generated by the Nordic market remained stable. Revenue in the Americas declined by 11% year-over-year, with North America revenue growing over 40% year-over-year and reaching record levels. If we look at Q4 and compare to the previous quarter, all notable regions grew quarter-over-quarter with North America leading at 62% quarterly growth. Europe and the Americas contributed respectively, 56% and 22% of quarterly revenue, remaining core focus regions for the business, in line with previous quarters. Looking into player intake and value of deposits. Player intake reached 102,900 FTDs in Q4 2025. North America player intake more than doubled year-over-year and now accounts for nearly 20% of Q4 intake. Player intake from Europe declined year-on-year with the Nordics remaining broadly stable. The development reflects continued focus on higher-value markets and a more consolidated website portfolio following the strategic realignment that was executed earlier in the year. When we look at value of deposits, Q4 deposit values reached an all-time high of EUR 202 million. Full year deposit value reached EUR 774 million, slightly above 2024 numbers despite this being a year with Brazil regulation and the absence of major summer sports events. Going to the operational highlights. If we look into Publishing business, revenue grew 8% quarter-over-quarter with notably fixed fees improving. Publishing revenue experienced a softer-than-expected seasonal uplift in December, impacted by lower sports margins. The December Google Core update had a net positive impact. Flagship brands, including AskGamblers, saw traffic recovery following targeted SEO and content optimizations. We also piloted our next-generation WordPress platform, improving page speed and technical performance. The wider portfolio will benefit throughout 2026 as the platform is rolled out. CRO and product capabilities expanded alongside continued focus on omnichannel visibility across both search as well as emerging AI-driven platforms. Publishing enters 2026 with improved visibility, a stronger technical foundation and a more scalable platform. Moving to Paid and Paid highlights. Quarterly revenue increased 36%, driven by U.S. market expansion and broad channel improvements. Year-over-year, revenue declined 22%, reflecting the sunset of lower-margin Q4 2024 activities and the effects of the Brazil regulation. Following a strong October and November performance, December revenue was softer than expected due to lower sports margins. A larger share of marketing spend was allocated to the U.S. in the quarter, focusing on opportunities within Prediction Markets and DFS. Paid and Publishing strengthened cross-functional collaboration with the aim to improve and grow our CRM channel in Paid. Paid moved from reset to rebuild during 2025, improving unit economics and entering 2026 in a stronger position. Looking at events post quarter, in late January, Gentoo Media initiated a refinancing process of its existing bond. The net proceeds are expected to repay the current Bond and RCF facility. Management is currently evaluating whether the potential new bond terms are attractive for Gentoo Media and for its shareholders, comparing with alternative financing options. We will inform the market as soon as a decision is made. Summing up on the quarter, strongest quarter of 2025 for revenue, profitability and cash generation, demonstrating a structurally improved operating model and a structurally stronger business. A stronger cost base, drove margin expansion and improved cash conversion. Record end-user deposits and healthy underlying activity confirms continued strength in traffic quality and continued strength in our commercial engine. Visibility across key brands improved across search, paid channels and emerging AI-driven platforms, supported by product enhancements and a positive December Google Core update. Paid and Publishing exited 2025 with stronger unit economics, with closer commercial alignment and a more scalable operating platform. As said in the beginning, revenue generation for 2025 is not where we want it to be. However, with the actions taken during the year, Gentoo Media enters 2026 structurally stronger with improved visibility, a stronger underlying business and a scalable platform to drive sustainable cash-generative growth going forward. Thank you for listening in. This concludes our quarterly presentation. I would like to take this opportunity to thank our employees for their hard work and dedication in a demanding year. Next, I would also like to thank our shareholders for their trust and support throughout the year. We have an exciting year ahead of us. Gentoo Media enters 2026 as a stronger business. Our publishing portfolio demonstrates higher quality and our paid division now operates with higher efficiency. This year will also bring the largest sports event in human history with the World Cup this summer as a key growth driver for 2026. Lastly, I would like to thank you, the listener, for taking your time to hear this presentation. Thank you, and see you next quarter. Hjalmar Ahlberg: Okay. And now we move over to Q&A. So welcome, Jonas and Mads. Maybe starting a few questions on the headline numbers. Maybe Q4 for top line, you mentioned sports win margin. I mean that varies from time to time. But would you say that December was kind of an exceptional impact, if you could quantify something? Or is it more a normal variation there? Jonas Warrer: I would say December was lower than we normally see and lower than expected, definitely. And then in broader terms, I think also for -- notably for our Publishing portfolio, we saw a gentler seasonal uplift than we normally do in December. So we had a very strong October and November, but December fell short of expectations there, both in sports margins and then also a little bit lighter, as I said, gentler seasonal uplift than expected. Hjalmar Ahlberg: Yes. And you saw solid profitability here, good cost control. How should you look for the OpEx from here? Will you start investing more for growth again? Or do we see more opportunities to optimize the cost structure? Jonas Warrer: I think the main focus is what I would call disciplined growth. Of course, we have really optimized the business, and I think we have a structurally much stronger cost base. Is there room to optimize further things? Maybe. But I think the focus now is, of course, of cash generation and a token in that respect, an important factor in that respect is, of course, also that going forward that we manage to grow revenue going forward. So I would call it disciplined growth and disciplined investments. We should go where we see opportunities and where we see that we can generate revenue with high margins. Hjalmar Ahlberg: Makes sense. And also a question on how to understand this. You had a kind of a positive impact from the derecognition of a customer liability. Is this something that happens from time to time in the business? Or if you can give some more information how to view that number? Mads Albrechtsen: Yes. It happens from time to time in our business. It was just a quite high amount in this quarter, and that was why we felt that it was more fair to show it separately on one line item. But yes, it is something that happens in a daily business. Hjalmar Ahlberg: All right. And you highlighted there in the presentation, a few slides on the regional development there. And it was impressive to see North America growing quite quickly, and you mentioned Paid media there. Could you elaborate a bit more on what drove that growth in North America? Jonas Warrer: Yes. So we made movements within the DFS and Predictions Markets. I would say, material movements in Q4 for Paid. So very excited about that. And now North America nearly makes up in the Q4, 20% of our player intake. So of course very positive about that. So going into 2026, exciting to see what we can get out of that. Of course, with the note that the U.S. and North America is also characterized by seasonality. So -- but it's very positive to see that we have made a breakthrough into North American market. Hjalmar Ahlberg: And interesting about the Prediction Markets. I mean how do you see that business compared to traditional betting operators? Can you elaborate a bit on how you get paid? I mean, is it very similar model where you fly a new client and you get paid? Or if you can give us some information on how it works if it's different compared to betting? Jonas Warrer: Yes sure. A very similar setup. Of course, it's a new area for us. So if we -- as you know, in Paid, we can move fast and if we want to make a move in our publishing business, it's about building up assets and websites that ranks right. So this is something we are working on and have also worked on in the start of 2026. It's equivalent to ranking well for casino or sports betting keywords. So for Publishing, it will be a little bit of a longer journey, but it's something we are working on and are excited about. And of course, then also very happy to see that we have this, if I can call it, luxury situation where we can both use Paid for the short term first and then move in with Publishing when we see the positive results we have seen. Hjalmar Ahlberg: And also -- I mean, on South America or LatAm Brazil, I have a few questions here coming from the audience as well. I mean, how should we view that market from here? Do you think it has stabilized? And I mean, what's your view on South America in general, I guess, as well? Jonas Warrer: I think the market has stabilized in Brazil now in the sense that we have seen material improvements throughout 2025. If we talk specifically about Brazil, of course, it's a market that we think has strong potential. It's a market that we can generate good business in. But of course, also looking at how the situation has been in '25, it's not a market where we're going all in. So again, disciplined approach here. We are growing there, and we see partners performing better. But we are, of course, also cautious to not overinvest based on the volatility that we have seen in 2025. On the broader lines, I would say Latin America is, of course, interesting market. I think the value for Latin America will go up for us over the next years as more and more of the market adapts into casino. What you normally see, at least what we have seen in other markets is that you start out with sports betting and then later, the broader market adapts into casino. And as you know, this is where we are strong right in casino. So I think longer term, the Latin American market will have more and more value for us. Hjalmar Ahlberg: Got it. And also a question on Europe. You mentioned that you were down 20%, I think, year-over-year. Anything particular happening there? Or if you could give some flavor on that number? Jonas Warrer: Yes. No, I would say the main flavor to give is that the Nordics remains a stable market for us. Also in the Nordic region, we saw some volatility in more what you call Central Europe. So of course, trying to see what we can do about that. Some of the players there that we did also had, I would say, lower value. So also as part of our strategy to focus the portfolio, there was an effect from that. So there is a lot of players being made from the strategic realignment that we did in April. So you can say short term, we have probably said no to some revenue and to some player intake short term with the goal of making more revenue longer term. Hjalmar Ahlberg: Understood. And also, I mean, Google update always changes every quarter. It sounds like you had a positive effect overall this quarter. Anything you want to add there? Or is it a typical update, which can impact in various ways, I guess? Jonas Warrer: Yes. It was an update we have been waiting a long time for and one we prepared very much for. So very positive to see that we benefit from it. The latest update before that was in September, and that came a little bit as a surprise to us that a few of our assets got negatively impacted there. So of course, very happy to see that we managed to do a fast turnaround and can prove that we consistently are able to deal with search volatility and to maintain strong visibility in search. Hjalmar Ahlberg: Okay. And you also mentioned investments in AI-driven platforms. Is that the kind of experimentation or do you see, I mean, material effects of those investments in terms of am I getting anything after this? Jonas Warrer: No, that's a very good question. Very interesting question, of course. We don't see any changes in search behavior right now, notably when it comes to transactional searches where users are just before they decide to place a bet on an open account with an operator. We haven't seen that impacted. But of course, we know that AI-driven platforms might take over and will take over some parts of users. So of course, we have also started optimizing for that. And I think a very clear message here that I think is important to note is that when you optimize for traditional search -- do traditional search optimizations, actually, to a very large degree, you're also optimizing for strong visibility in AI-driven platforms. Then there is a few nuances that you can say that you need to do when you -- if you want to have higher rankings or high rankings in AI-driven platforms. But a lot of the groundwork is the same. So I think we have actually in most of 2025 been on that journey. We will probably add a few extra things to activities now. And honestly, I see this more as a hedge. If the users are turning more and more into AI, we also want to be there. We haven't seen that movement yet, but we know that what we are doing and what we are working on will have a positive effect on ensuring high rankings, if I can say that, a high visibility in AI-driven platforms. I did a test myself some days ago to see to what degree our sites are used as sources, for instance, on ChatGPT. And that was a very positive result, I would say, for me personally when I saw that our sites are seen as authority websites. So will continue what we do, add a bit extra flavor and then ensure that we have maintained high visibility, whether it is in traditional search or in AI-driven platforms. Hjalmar Ahlberg: And also a question here from the audience that there's one person that sees that industry-focaled sites like maybe NEXT.io or getting premiered by Google. Is that something you see? Is it something that you reflect on when you put content on your site, so to say? Mads Albrechtsen: I think that reflects right that there has been a move from Google to use, you can say, reward at 40 websites. It's in line with what we already do. And we also have strong at 40 websites. Next.io is just another competitor joining out of many. Nothing specific there, anything notable there beyond, of course, that they have managed to do good in the market, so yes... Hjalmar Ahlberg: Interesting. And then moving over to the guidance for 2026. I mean it implies that you're returning to growth. I guess one question is, I mean, you mentioned the Football World Cup, of course. How important is that for the growth just as one part? Or is that maybe that the year will be more seasonality driven by the quarters during the World Cup? Or how big is that event for your outlook for 2026? Jonas Warrer: I would say the event that's a bit of extra sugar in the summer months that normally are very low season for us. So what we see or what we expect from the World Cup this summer is that instead of having very low summer months, we have very good summer months. We also use an event like the World Cup internally to strengthen our position within sports and to drive our sports assets forward. So there's a lot of positive, you can say, more indirect thing coming out of a big event like that. And then, of course, as we know, as we have seen before with bigger summer events that when the event is over, players have active player accounts or funded player accounts. And then we normally also see a benefit on our casino earnings after that. But it's not that the World Cup is going to save the year for us. It's an extra benefit and extra driver, but it is, of course, a sustained push throughout the year that will drive Gentoo Media forward. Hjalmar Ahlberg: And also a few questions from the audience here, if you can comment anything more on January and February this far. I think you mentioned some input in the preliminary announcement of the results. But if you have any flavor, that would be interesting. Mads Albrechtsen: January ended in line with expectations, maybe a little bit higher. Then February started out softer with lower sports margins. I think that's a thing that has been noted in the industry now that the sports margins that started in February were low. So we have to see how the remaining part of February plays out. And then, of course, very excited for March ahead of us. Hjalmar Ahlberg: And looking at the EBITDA guidance and the implied margin, it looks like you're aiming for a recovery as well. Do you also see, I guess, less special items this year because you had a lot of things going on this year, if you could update on that? Mads Albrechtsen: Yes. I think if we take the special item bucket, they mainly covers 3 different items. One thing is the redundancy part, which has been, of course, natural in a year where we had to, unfortunately, say goodbye to a lot of employees due to reorganization exercise in April. That bucket will naturally go away going forward. Then we have had a lot of investments coming out of the split. The split was made in Q4 '24. So there was also cost running into '25 related to split. That bucket will naturally also -- goes down. And then we will have a third bucket, which is more or less normal if people are resigning and not being replaced or there is important operational projects or whatever, but the bucket overall is expected to go materially down. Jonas Warrer: If I can add also, historically, we have always had very strong EBITDA margins. And I think what we have now seen is that we have restored the strong EBITDA margins that we have. And I think that's, of course, also an aim for the future, so yes. Hjalmar Ahlberg: And also, if you can -- I mean, look longer term, I mean, now you have said that growth is coming back in 2026. What do you think about the longer-term growth rates? I mean, should you look at the kind of online gambling industry for what should be reasonable for your business as well? Or if you can give some input on that would be interesting to say as well. Jonas Warrer: I think we have enough opportunities in 2026 to stay within iGaming, if that's what you're asking. That's a lot of interesting markets, a lot of interesting opportunities. Alone as we said, there's Prediction Markets now in the U.S. We also saw positive movements in DFS, sweepstakes. We can still grow in some of the markets that we have been in for many years. So I would say for '26, it's about the disciplined execution, getting more out of our websites, intensifying the conversion rate optimization efforts we do, so we can monetize our user base even better. We have just launched a loyalty program on AskGamblers. Then, of course, we need to ensure that we monetize that to the fullest. So you can say there is a lot of initiatives that we are doing and have done that we just need to keep on doing and do better and better. And then I think there's enough opportunity in the market for us right now in '26. Beyond that, the iGaming market continues to grow. But of course, we are aware that we have very strong capabilities, I would say, both in search or sale and also in paid campaigns, right? So of course, there is an opportunity at one point to look beside the iGaming market. But I don't see that happening, at least not in 2026. We have a lot of opportunities that we want to take, claim and also gain market share. Hjalmar Ahlberg: Got it. And also my question on the EBITDA margin guidance or the EBITDA guidance. What kind of -- what can drive the upside, downside? And I mean, looking at this year, the guidance compared to maybe last year's guidance, how convinced or certain are you that you will be able to deliver on the guidance? Mads Albrechtsen: I think we are fairly convinced and quite conservative. We have also provided a quite big of a range to the market, making sure that, of course, we are quite early on giving this guidance to the market. And as Jonas was saying, we need some room to do investments if that's needed to drive revenue and opportunities. But of course, it's also evident if we look at our current cost base, we can actually just take the cost base in Q3, which is maybe a bit more structurally reflected where the business long term is looking like on the cost side. Then if we take that cost base and apply on a full year basis, then we can add EUR 5 million to EUR 6 million on top of our EBITDA performance in '25. And then we are quite close to what we have guided to the market, I would say, for next year. So we are convinced that we can reach within this guidance. And I can say that with the cost base we have today, we can also look into a first quarter where margins are significantly better than Q1 '25. Hjalmar Ahlberg: All right. And if you look at the '26 year -- I mean, 2025, you had the change to Brazilian regulation, which impacted a lot. If you look at the different regions you are active in during 2026, do you see any countries or regions where there are any material changes that you know as of now that could have any impact this year? Jonas Warrer: There's, of course, a tax change coming in the U.K. that we think will have a marginal effect on us. I think there, it's more about understanding which way our operators going, our partners and which operators they want to stay or invest even more and who wants to maybe scale down after that change. So that's something we are looking into and engaging with partners on. Then is it in the summer of '27, there will be a change probably in Finland. But I think that would be the 2 main markets right now I would highlight as where we see a change, at least the markets that matters to us. Hjalmar Ahlberg: Okay. And also interesting there that you have your refinancing that it looks to progress well and you state that you are evaluating bond versus other types of financing. I don't know how much you can tell us, but is it the cost of the debt, the maturity? Or what are you evaluating, so to say? Mads Albrechtsen: We are evaluating all kind of the buckets there, both pricing terms, general conditions. We have been in the bond market very long, and we have -- we are pleased to have seen all the support we have given from bond investors throughout many years. But of course, there's always a price and attack to everything, and that's why we're currently evaluating what would be the best solution for the company going forward. Preferable, of course, it could have been good to go out today and tell the market about our considerations and where we are. We are not there right now. We need to assess this very carefully, and that's why we are giving, you can call it, the announcement today that we are evaluating the options we have on the table, and we will share the news with the market within due course. Hjalmar Ahlberg: And I mean, looking at the guidance for '26 and the pretty solid cash flow you had now in Q4, how do you think we should view leverage going forward? Do you think it's good to have a sort of leverage in your business? Or are you aiming to have only a margin leverage longer term, if you can give some input on that? Mads Albrechtsen: Yes. I think it's fair to say that throughout '25, of course, our leverage climbed above 3 for the first time, at least for many years for the business. We preferred leveraging close to 2.5, something in that ballpark. We think that that's good for our business that we always have some room for growth and investments, which we have done in the past as well. So I would say, from a structural point of view, in the bucket, close to 2.5 would be a preferable leverage for us. By year-end, we have climbed down again below 3, and we expect the numbers to come further down throughout '26 and especially the first half of '26, impacting by 2 main things. Of course, that our profitability is getting better. We are still -- if we look at last 12 months numbers, we are still heavily impacted by the first 2 quarters of '25 with kind of a low profitability compared to second half of the year and especially profitability in Q4. And the other thing is that we have taken the amount of cash flow we have generated here in Q4 and reduced our debt position as well, overall with EUR 5.5 million throughout the quarter. So I would say, on both ends, we expect leverage to climb down to a structural level 2.5 in a mix between higher profitability and reducing debt. Hjalmar Ahlberg: All right. And also, it would be interesting to hear something about if you can give some view on the M&A market. I mean both -- I mean, you've historically done some acquisitions, which have been good. And also interested to hear Genius Sports acquired Legend. So it seems like new players are entering the media affiliate space. If you have any interesting comments on that would be nice there as well. Jonas Warrer: Yes, that was, of course, a very interesting movement. There is a lot of opportunity, I would say, right now in the industry for M&A. But I think we have a very clear opinion here that we are not there right now. We have a focus on disciplined growth now, derisking the company, being very cash generative. And I think that's the focus. Then of course, if an opportunity comes up that is too good to say no to, then of course, it's something that the Board will need to discuss together with us and then things can change. But I would say at this stage, M&A is not something that is, I would say, relevant for us, we would rather continue the discipline that we have always been very good at, which is growing the business organically. We have also done some good M&As, right, but we have always been very good at growing the business organically, and that's a focus also now for '26. It's interesting to see that new players, of course, are joining the market as acquirers. I think that's probably positive for the market for obvious reasons. So yes, interesting to see how that will play out also in '26. Hjalmar Ahlberg: All right. Thank you very much, guys. Jonas Warrer: Thank you very much.
Catherine Strong: Hello, and welcome, everyone, to the Nanosonics Half Year Results for FY '26. My name is Catherine Strong, and I'm Head of Investor Relations & Corporate Communications here at Nanosonics. As we start the webinar, all participants will be in listen-only mode, and we'll have a presentation of the results from Michael Kavanagh, Chief Executive Officer & President; and Jason Burriss, Chief Financial Officer. During the presentation, the management team will speak to a selection of the slides lodged with the ASX earlier this morning, which we will display via the webinar. If you've joined by conference call only, you may prefer to join via the webinar in addition. [Operator Instructions] I would now like to hand the call over to Michael Kavanagh. Michael Kavanagh: Thank you very much, Catherine. And a very good morning, everybody, and thank you all for joining us. By now, I assume, many of you will have seen and had an opportunity to have a quick browse through our first half results, which I believe demonstrates another really good and positive half, both financially and operationally for the organization. And there's a lot of detail in all the materials that have been submitted. And before we get into some of those details, there really are a number of key takeaway points I'd like to highlight first. The first being, the company does continue to deliver disciplined growth. You'll have seen revenue increase 9% versus pcp, while operating margin expanded 27%, and that's driven by disciplined cost growth of just 4%. Our recurring revenue from consumables and service continue to grow and all of that's underpinned, of course, by continued expansion of our installed base of the trophon devices. And you'll have seen that upgrades now are also becoming quite meaningful to our growth. In fact, in the half, we delivered 20% total unit installation growth in the half, and that's reflecting both strong new installed base placements and a record level of upgrades in North America. This performance highlights sustained customer preference for the trophon solution. And it is worth pointing out that in the first half, the majority of the upgrades worked actually to trophon2, noting that our next-generation platform, the trophon3 was launched midway through the period and that many of the units in our pipeline were well progressed in the budget approval process. So they stuck with the trophon2. And while this mix together with large volume deals moderated the average selling prices in the near term, these trophon2 installations, they can certainly meaningfully continue to expand our recurring revenue opportunity base and certainly positions us well for software-led value capture over time because those trophon2s now have access to trophon T2 Plus, which effectively gives them the opportunity to upgrade with software to the trophon3 platform. Hence, why many of them decided to go with the trophon2 based on where they were at in the budget approval process. The CORIS commercialization, that's progressing as planned with key milestones during the half being met. And you will have seen our announcement on Friday about the commencement of the Controlled Market Release in the U.K. which, of course, marks a really important milestone and of course, more to follow in the not-too-distant future. And finally, we reaffirm our guidance for the full year. We expect continued growth in core consumables and services alongside ongoing growth in capital unit volumes. So we reaffirm our guidance for the full year. So before we get into some of the details, I think as a brief reminder, and certainly for those of you who may be new to the story. The Nanosonics, every year, our technologies help protect millions of people globally from the risk of cross-contamination through our leadership in our ultrasound probe reprocessing through our trophon platform. And with -- just over 38,000 trophon devices installed worldwide, we now continue to see the power of a large and growing installed base driving recurring revenue, but also capital revenue as well as we continue now driving upgrades and continue to deliver value to our customers. And at the same time, with our innovative endoscope cleaning device, CORIS, so now entering the phased commercialization, we believe that we have a compelling opportunity to extend this -- our proven reprocessing and automation expertise into the endoscope reprocessing, and hopefully unlock a significant new growth avenue for the business. So moving on to a quick overview of some of the financial highlights. The first half delivered very solid operating performance, generating revenue of $102 million, and that was up 9% compared to pcp or 8% in constant currency. And this outcome reflects continued momentum across both our recurring and capital revenue streams. As we predicted and outlined at our full year results in August, gross profit margin percentage, it did moderate a bit down to 76.3% for the half, and that was driven by tariffs, but also, we did have some increased air freights and the product mix between capital and consumables as we're seeing that capital, and particularly the upgrades, beginning to kick in. But importantly, those impacts on the gross margin were anticipated and managed within our broader financial framework. And in doing so, we maintained a disciplined approach to cost management and operating expenses increased by just 4% to $69.5 million. And that's also important that we continue to invest to support our ongoing growth strategy across R&D and our key growth priorities for the business. This operating leverage, it translated into a 27% expansion in operating margin for the business and with operating profit reaching $8.5 million. EBIT on a consolidated basis was $8.4 million, and that represents a 3% decline on a reported basis. However, on a constant currency basis, EBIT actually increased 15%, and that does demonstrate the strong underlying performance of the business. The constant currency view, of course, takes into consideration the impact of foreign currency movements in the first half where there was a net loss of $0.7 million versus a gain of $1.3 million in the prior corresponding period. So there was a $2 million swing in the realized net foreign FX movements. Similarly, profit before tax, that was $8.4 million (sic) [ $10.6 million ], and which was an increase of 13% actually at constant currency. So I think overall, these results, they do highlight the strength and the resilience of our overall business model with revenue growth and disciplined cost management translating into meaningful earnings for the half. But it's not just about the financial performance. The first half also saw strong operating progress across innovation in our operations and digitalization with each initiative reinforcing the foundations for sustained growth into the future. The slide that you'll see just shows a selection of some of the achievements in the half. And from an innovation perspective, as you all know, we advanced the trophon platform with the launch of the next-generation trophon3 and the trophon2 software upgrade halfway through the period. And that's helping and will continue to help capital sales growth volume moving forward. We also achieved important milestones with CORIS, securing our regulatory registrations across Australia, Europe and the U.K. and making important steps towards the phased commercial rollout of the product. In addition, we submitted our first 510(k) application for expanded scope indications. And again, that further strengthens the long-term growth pathway for CORIS, and thus 510(k) is currently under review by the FDA. Operationally, a couple of important achievements as well in the first half. We secured and signed for a new headquarter site, and that move is planned for around April 2027. And this new headquarters, which also includes an expanded manufacturing and technical facility that will significantly strengthen our global operating backbone really, and position us to scale efficiently as the business continues to grow. And importantly, in the half as well, we also appointed new leadership talent to lead key parts of the business through our next phase of growth, and that includes a new Regional President for North America, Bill Haydon, as well as a new Chief Marketing Officer and Head of Asia Pacific, Kimberly Hill. And finally, we made meaningful progress also across from a digital perspective, so successfully implementing and launching the new ERP system and going live with our cloud-based traceability solutions. And these cloud-based solutions -- the initiatives, they really enhance visibility, efficiency and customer engagement while creating a strong digital foundation to support future growth. So overall, I think that the progress we made in the first half reflects the business that's executing well. We're investing with discipline and also continuing to build capabilities to deliver ongoing scalable, profitable growth over the long term. But I'll hand over now to Jason to go through some of those financials in a little bit more detail. Jason? Jason Burriss: Thanks, Michael, and good morning, everyone. On this slide, you can see the continued strength of our core business model. We ended the half with 38,080 devices in the global installed base, up 6% on the prior corresponding period, reflecting sustained momentum in new installed base devices. That expanding footprint is fundamental to how we grow the business and importantly how we protect patients. Today, that installed base supports the protection of approximately 29 million patients each year. This scale is translating directly into recurring revenue growth. Recurring revenue increased 9% on pcp, driven by solid performance across consumables and service. Core consumables grew in line with the installed base. Ecosystem consumables continued to expand and service and repairs grew strongly at 24%, reflecting deeper customer engagement and the maturity of the fleet. Spare parts, as you can see, declined 23% on pcp, largely due to customer inventory dynamics and lower replacement requirements as more customers upgrade to newer generation systems. Moving on to the installations. This highlights the strength of our installation activity in the half and the quality of the demand we are seeing across our customer base. Total installations increased 20% on the prior period to 2,070 devices, reflecting continued momentum in new placements and importantly, a record level of upgrade activity in North America. That upgrade cycle is a key driver of our long-term value creation. It refreshes the installed base, extends customer relationships and supports recurring revenue through consumables, service and our new connectivity offerings. As Michael mentioned, during the half, the majority of these upgrades were to trophon2 devices, remembering that trophon3 was launched midway through the period and customer budget approvals for trophon2 upgrades were already well progressed. Capital revenue growth was 9% on the previous period to $26.5 million in the half. This included several large-scale upgrade agreements and the capital revenue growth reflects volume-based pricing, which saw a slightly lower average selling price for trophon. Importantly, these trophon2 upgrades are expected to underpin software-led value capture over time with the trophon2 Plus software offerings. Turning to the P&L. We continue to demonstrate strong operating leverage with operating margin growing faster than revenue, reflecting the ongoing discipline in how we manage and scale the business. As Michael already mentioned, total revenue grew 9%, reaching $102.2 million for the half, with growth in both recurring and capital revenue. Gross profit margin was 76.3%. This, as expected, is down 2.2 points on the prior year, reflecting the impacts of tariffs in the U.S. and some headwinds on air freight and product mix impacts. At the same time, we maintained tight operating expense discipline with OpEx growing just 4%, well below revenue growth, while continuing to invest in our priority areas, including R&D. As major development programs mature, R&D has stepped down as a percentage of revenue, demonstrating increasing efficiency while preserving our commitment to innovation. EBIT was $8.4 million, down 3%. The decline in reporting EBIT reflects FX movements with a net FX loss this half versus a gain last year. On a constant currency basis, EBIT improved 15%. I'll just take a moment to expand a little on that last point. In H1 '26, EBIT was impacted by an FX loss of $0.7 million. This relates to the revaluation of non-Australian dollar asset balances, mainly U.S. dollar asset balances as of 31 December, '25. The loss was driven by a strengthening Aussie dollar versus U.S. dollar to 0.67 or approximately 2%, the majority of which is unrealized FX losses. Profit before tax was $10.6 million, down 3%, but again, up at constant currency, plus 13% -- improving operating leverage. On this slide, we're showing the way in which we're driving operating margin expansion through gross margin and cost control. Gross profit margin grew by 6% to $78 million. At the same time, we maintained tight operating expense discipline with OpEx growth held to 4%, well below revenue growth, while continuing to invest in our priority growth initiatives. This combination delivered meaningful operating margin expansion with operating margin increasing 27% to $8.5 million in the half, demonstrating our ability to scale the business, manage cost pressures and continue to expand margins through disciplined execution. We continue to separate out the trophon-only business, highlighting its strength and scalability. The trophon-only business delivered operating margin of $25.6 million, representing 20% growth on the prior period. This business also delivered 9% EBIT growth. Importantly, operating margin as a percentage of sales expanded to 25%, up from 22.9%. This demonstrates the operating leverage inherent in the trophon business model with high-margin recurring revenue continuing to scale efficiently as the installed base grows. The trophon business also continues to generate significant cash, providing funding capacity for working capital, ongoing investment in CORIS and our broader long-term growth strategy while maintaining strong financial flexibility. And with that, just turning briefly to cash and the balance sheet. During the half, cash flow was a modest outflow of about $1.4 million, which reflects our planned investment in inventory as we ramp up for CORIS, continued investment in the CORIS system and the commencement of our share buyback. It also reflected the timing of receivables, which we've seen already improve in January. We've executed around $4 million of our buyback and expect to resume following the blackout period in the coming days. Importantly, we remain debt-free with a strong cash balance of $159.8 million, providing flexibility to fund growth initiatives, support CORIS commercialization and continued disciplined capital management. I'll now hand back to Michael, who will talk briefly about our growth drivers for the trophon business, provide an update on CORIS and take you through our reaffirmed financial guidance for '26. Michael Kavanagh: Thanks, Jason. We've previously talked about the 7 growth drivers of our trophon business. On the capital side, you've got the new installed base and upgrade sales. And we've now just recently introduced a new capital software upgrade opportunity for all existing and new trophon2 users with the trophon2 Plus. And that software upgrade brings many of the new benefits of trophon3 to them via the upgrade. Then on consumables, we have the core disinfecting consumables and a broader set of ecosystem consumables necessary for the full reprocessing process such as wipes and clean probe covers, et cetera. Then of course, there is the service component, both service contracts or PAYG for those that don't have a service contract. And service, as you all know, comes into place a year after purchase because there's a 1-year warranty period on the device. And then, of course, we've got the -- with the trophon3 and trophon T2 Plus, we've got new and broader traceability solutions within connectivity. So there's a robust ecosystem of growth drivers for the trophon business. And on the next slide, this slide sort of brings them together by illustrating the applicability of each of the growth drivers over the lifetime of the device. Now each trophon device has a typical life span of up to 10 years or sometimes 7 to 10 years and sometimes longer. After which customers, of course, then can upgrade to the latest generation, and we're seeing that now with the EPRs being upgraded to T2 to T3. But from the day a unit is installed, it begins to generate high-quality recurring revenue through those core and ecosystem consumables. And those can scale with customer procedure volumes, so if ultrasound procedure volumes increase, well, then those consumable products increase. And then over time, that's complemented by the service and repair contracts. And that obviously helps customers protect their devices and uptime and overall performance of the technology. And of course, then looking ahead, just mentioned that connectivity and software-based subscriptions can further enhance this model. And these offerings, for the customer, they really support compliance, traceability and workflow efficiency while adding another layer, of course, to our recurring revenue. So together, this combination of capital, upgrades, multiple recurring revenue streams that truly does underpin the strength and resilience and scalability of the trophon franchise. And as Jason highlighted, the performance of the trophon-only business itself is an excellent performance in the first half. Moving quickly to CORIS. As I've already mentioned, during the half, we successfully achieved a number of key milestones. We submitted the first 510(k) for expanded scope indications, and that's in the U.S. And we are currently awaiting the FDA's determination on that. We achieved European, U.K. and ANZ regulatory registrations for the device. And of course, subsequent to the period, just recently, we commenced a Controlled Market Release. And looking ahead, the milestones in front of us include additional regulatory submissions with the FDA for even broader scope expansion of indications. We will be starting further CMRs shortly here in Australia and some more in Europe with the U.S. will commence after the 510(k) -- the first 510(k), and we'll probably wait and get some preliminary insights as well from the initial CMRs prior to commencing. And broader commercialization is then likely to start on a region-by-region basis based on when the CMRs are completed. But as previously indicated, we expect commercialization to start in FY '27. So overall, the CORIS is now executing to plan with clear progress achieved and well-defined steps ahead as we move towards full commercialization. And the image that you see there in the slide is actually the first unit at our first CMR site in the U.K. And I can say that customers over there are quite excited. You can see by the quote, they are definitely expecting to see a lot of benefits coming from the device over time. So we're quite excited by the start of that first CMO. Finally, I'll just move on to our guidance. And as I mentioned at the beginning, we are reaffirming our '26 guidance at constant currency. And that reflects continued confidence in the underlying performance of the business. With that, we expect ongoing capital unit growth half-on-half, noting that the capital average selling price we saw in the first half could be expected to continue into H2, and that will totally depend on the T2, T3 mix and the size of upgrade deals. And we're very, very happy to look at -- there are a number of deals that are quite large. And of course, it's quite customary to do volume-based pricing for deals like that. We're also expecting recurring revenue to continue to grow. And so all of that together, we expect the overall revenue to be within the 8% to 12% as guided back in August. Gross margins, again, we are expected to be in the range of 75% to 77%, and that guidance assumes tariff rates to remain at the H1 levels. We also will continue our focus on operating expense discipline into the second half, whilst maintaining the investments that we're making, not only in CORIS, but also with other priority growth projects that we're investing in. So overall, our guidance reflects a balance of continued growth, disciplined cost management and investment for the long term. It is worth noting, of course, that the guidance is based on FX rates that we provided in 20 August, and that was at the USD 0.65. We do have, as you all know, an ongoing currency hedging program in place. And we also all know that the Australian dollar has strengthened. And if revenue range were recast using an average exchange rate of approximately $0.70 for the second half, then taking into -- taking hedging into consideration, then the revenue range would be approximately 3% lower. So in summary, I think the first half saw the company deliver a very solid operational and financial performance, and we're in a strong position, not only for the growth into the second half, but into the future. So with that, I'll now hand back to the operator for any questions. Operator: [Operator Instructions] And your first question comes from the line of Shane Storey with Canaccord Genuity. Shane Storey: I'm going to start with Jason, please. Thanks for the way of, I guess, looking at the revenue guidance under sort of altered FX conditions. Maybe could you help us understand, I mean -- and also thanks for the detail around how the FX played into the EBIT. But if rates were to stay sort of around current levels, can you give us a feel for how those non-Australian dollar asset balances and I guess, other sort of effects might play through the EBIT line? Jason Burriss: Thanks for the question, Shane. Yes, I think on the constant currency translations and FX, you'll see that page in the appendix. And what we've tried to do is separate out the 2 different impacts of FX. So on that page, you'll see points one and two, we have the FX impacts on the P&L on a monthly basis, and that will obviously impact our revenue and offsetting that slightly our operating expenses. But the second element to the constant currency is the revaluation as at balance date of the non-Australian dollar asset balances. So in the discussion that I just shared with you, we had a 2% movement in that currency from the last balance date, and that cost us around $700,000. So if you then compute that to a rate of around $0.70, that's a 4%, 4.5% sort of movement. So you can do the math and work out that the impact that we would have on an unrealized FX balance in the second half is more than likely 2x, 2.5x what we saw in the first half. Shane Storey: That's very helpful. Last question I had was really just, I guess, I suppose to Michael and in relation to the recurring revenue in the USA. Could you give us maybe some further insights just how the other parts of the ecosystem grew, say, excluding just the Nanosonics' consumable in isolation, please? Michael Kavanagh: Yes. The service side of the business grew quite strongly. So that was up 24% on pcp. Obviously, you saw the core consumables, they were up about 9% on pcp, and the ecosystem that was up about 6% on pcp. Included in that recurring revenue in the past has always been spare parts as well. And as Jason explained, spare parts came down in the half. That was sort of anticipated because as we have no upgrades to newer machines, but then the requirement for spare parts dropped temporarily. So the spare parts were down about 23%. Operator: And your next question comes from the line of Davin Thillainathan with Goldman Sachs. Davinthra Thillainathan: I guess I just wanted to understand your revenue guidance range of 8% to 12% at a constant currency level. I think in the first half, revenues grew about 8% on a constant currency basis. So for us to sort of think about that growth rate potentially stepping up towards the midpoint of that guidance range. Could you sort of help us understand what drivers you're looking at for the second half, please? Jason Burriss: Yes. So again, we're reaffirming that we'll be within that guidance. And I think to -- you saw upgrades come through quite strong. So if we see continued strong momentum in upgrades, that can certainly help get you into the midranges. There's normally a H2 pop-up in service revenue as well and that's just associated with the timing of service contracts that happen and when the revenue is realized. So really to get into the mid-ranges or upper ranges of that guidance it just really means performance across really the majority of the growth levers that I outlined in the presentation. Davinthra Thillainathan: And my next question is on the new installed base in the U.S. I think you did 1,080 units for the half, and that's grown, which is, I guess, good to see. Could you sort of help us understand the ability for you to keep that level of units into the second half? Just sort of any sort of other dynamics that we should be thinking about from a half-on-half perspective, please? Michael Kavanagh: I think, Davin, we've sort of always guided in recent years that in the U.S. that we'd like to think that we can do between 1,800 and 2,000 new installed base on an annual basis. And we feel confident in that with the U.S. We've got visibility of what the pipeline looks like. But what you can expect to see is that the number of upgrades just in capital units will surpass or begin to surpass the number of new installed base. But importantly, what we're doing is getting growth on both. Operator: And your next question comes from the line of Josh Kannourakis with Barrenjoey. Josh Kannourakis: Just first question, obviously, quite a bit of activity in terms of both the upgrades and installed base in the period. And you mentioned -- called out around the higher volume deals that you did. As you look into the second half with some of that visibility, how do you think that breakdown looks in terms of the split, I guess, in terms of some of those higher volume deals versus potentially a bit of a recurrence to some of the more regular as is? Or are the upgrades likely to be just higher because I guess it's earlier in the trajectory in some of the original customers? Michael Kavanagh: Yes, for the upgrades, it's about 9,000 EPRs still out there. And many of the hospitals had adopted the EPR as their standard of care. So there's still great opportunity for some high-volume deals. And sometimes they take a bit longer, because they're enterprise-wide, but there's still great opportunity for some high-volume deals. And indeed, there's a number of them in our pipeline. And they're all supplemented with those deals for 2, 3, 4, 5 sort of units as well. But we do expect to see more high-volume deals coming through in the second half. And so that's why when we look at our capital revenue, even though we don't break those things out from a guidance perspective, we're mentioning that the ASPs that we were achieving in the first half could be similar in the second half because of that mix. Josh Kannourakis: Got it. And then you also mentioned a good point with regard to the -- I guess, the additional add-ons and ability to upsell those customers over time into the broader ecosystem. How do you think about from a sales process, just, I guess, the life cycle of those clients when you do bring them on, how quickly do you think you can potentially add some of those additional features and functionality? Michael Kavanagh: Yes, that's a great question. I think that's a really important point to emphasize is, if somebody has just upgraded to a trophon2 and even if you've got a lower price associated with that because of volumes or trade-ins and things like that. But the reality of it is, we can still add value, further value for that customer through that software upgrade. Now it's unlikely that they're going to do it immediately. And to be honest, we would prefer that our sales force are out there driving all those capital upgrades as fast as possible and then go back. And our new regional president over there is certainly looking at these things infrastructurally as to what sort of structure he puts in to make sure we're driving across the whole 7 growth drivers. But your point is extremely valid that even if we've got a lower ASP, there's a high opportunity for us to capture back some of that plus more associated with the software upgrades over time. And I think you're going to start seeing an uptick in those. There'll be some in the second half, but I think I'm anticipating a lot more in FY '27. Josh Kannourakis: Great. And then just one for Jason, final one on OpEx. So good cost control there in the period, and you've given obviously the guidance there as well. As we think and we look to the CORIS commercialization, as you mentioned, in '27. Maybe you can just give us a little bit of a framework for how we should be thinking about OpEx there. I know, obviously, that's been a focus for the market, but you've got obviously a pretty established base in terms of infrastructure there already. So any extra context you can give on how we should think about incremental sort of OpEx as we get closer to commercialization would be very helpful. Jason Burriss: Thanks Josh. Yes, look, I think it will continue as we are today. You'll see in our first half results. But the trophon OpEx was plus 1%, whereas the increase in OpEx was driven by CORIS, which was plus 16% half-on-half. And so what we've said previously still continues today, which is, as we ramp up with CORIS, we will gradually add resources that will supplement the existing sales teams. They may be people that help us out with installations and project management, things that will come out of the Controlled Market Release that we will learn that will help us direct where we need to do the resource investment to roll out CORIS as smoothly and as quickly as possible. But they will be supplemental and we continue to try and drive the operating leverage, which we've been able to achieve in previous halves. And we'll look to continue that certainly in the trophon business as we go through fiscal year '27. Josh Kannourakis: Got it. So just, I guess, to confirm there, though, Jason, like in terms of -- as we're thinking, it's not a big step-up necessarily into '27, it's a more gradual progression from the half-on-half that we'll see going forward? Jason Burriss: Correct. Operator: And our next question comes from the line of Taj Wesson with RBC Capital Markets. Taj Wesson: I'm just curious as to what makes you confident around the customer base, fully understanding the trophon3 value proposition relative to trophon2? And extension to that, maybe if you could provide some more color around the composition of upgrades into the second half, so trophon2, trophon2 Plus and trophon3? Michael Kavanagh: If I understand the question, it's more what makes us confident in the customer understanding the trophon3 value proposition. But really, that comes down to the marketing and the sales and ensuring when we're in front of customers, that's their job is to help everybody understand. And also, remember, a lot of what's in trophon3 was driven by customer insights as well. In terms of the composition between T2 and T3 in the second half, we expect that to start moving towards T3 over time. A lot of what's dictating at the moment, the mix on T2 is just based on where approvals are in budget approval processes with the hospitals. But ultimately, over time, we expect the absolute majority to be moving towards trophon3. One other point I'll make on that is, don't -- not to underestimate there's over 25,000-plus trophon2s in the market today as well. So it's not just about talking to customers who are the original EPR customers about trophon3, it's also talking over time to all existing trophon2 users because they now have the opportunity to upgrade with that software -- the T2 Plus software to enable them access a lot of the benefits of trophon3 as well. And that's a significant opportunity when you think there's 20,000 to over 25,000 of those T2s in operation. Taj Wesson: Great. I guess what I was just trying to understand is, if there is any friction around the pricing of trophon3 relative to trophon2 and customers maybe not understanding that premium that could potentially be unlocked? Michael Kavanagh: We're not seeing that at the moment. No. Taj Wesson: And then just around the larger volume deals and sort of the ASP sort of impacts of that. I was just wondering if that extends to consumables as well if there's any concessions provided as a part of those deals. Michael Kavanagh: No. All right. I think that's the last question in. Again, I want to thank everybody for taking -- I know it's a busy morning on the markets this morning. But I think in summary, again, I think we, as the company has delivered a very solid operational and financial performance in the half. And we're in a strong position, reaffirming our guidance for the second half, but not just for the second half, but all the foundations that are in place for the future as well. And I look forward to catching up with many of you over the coming days. Thanks very much. Operator: Thank you. That does conclude the conference for today. Thank you for participating. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Hello, and welcome to the MediaAlpha Inc. Q4 2025 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the call over to our Investor Relations, Alex Liloia. Please go ahead. Alex Liloia: Thanks, Dustin. Good afternoon, and thank you for joining us. With me are Co-Founder and CEO, Steve Yi; and CFO, Pat Thompson. On today's call, we'll make forward-looking statements relating to our business and outlook for future financial results, including our financial guidance for the first quarter of 2026. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings, including our annual report on Form 10-K and quarterly reports on Form 10-Q for a fuller explanation of those risks and uncertainties and the limits applicable to forward-looking statements. All the forward-looking statements we make on this call reflect our assumptions and beliefs as of today, and we disclaim any obligation to update such statements, except as required by law. Today's discussion will include non-GAAP financial measures, which are not a substitute for GAAP results. Reconciliations of these non-GAAP financial measures to the corresponding GAAP measures can be found in our press release and investor supplement issued today, which are available on the Investor Relations section of our website. I'll now turn the call over to Steve. Steven Yi: Thanks, Alex. Hi, everyone. Thank you for joining us. 2025 was a pivotal year for MediaAlpha. We delivered exceptional results in our P&C insurance vertical as auto insurance carriers and agents accelerated advertising spend, and we captured more than our fair share of that growth. At the same time, we narrowed the scope of our Under-65 health insurance business, improving our risk profile and sharpening our strategic focus. We generated significant free cash flow, reflecting the strength of our operating model and our disciplined approach to expense management. We returned a significant portion of that capital to shareholders, completing $47.3 million worth of share repurchases or roughly 7% of shares outstanding. Our fourth quarter results were strong with adjusted EBITDA above the high end of our guidance range. While transaction value came in modestly below guidance due to more normalized seasonality in our P&C vertical, open marketplace demand partners leaned in, driving solid revenue growth and a higher-than-expected take rate during the quarter. Our P&C business is off to a strong start in 2026, and we expect continued positive momentum for the full year and beyond. Carriers remain solidly profitable and are increasingly focusing on growing their customer base. As is typical in the early stages of a soft market, competition is beginning to intensify with many carriers lowering rates to gain share. Beyond pricing, advertising is the other primary growth lever available to carriers, and we expect advertising budgets to continue to increase. Given our unmatched scale and targeting capabilities across hundreds of supply partners, we expect carriers to allocate a growing share of wallet to our platform. We're particularly focused on the significant opportunity to scale underpenetrated carriers in our marketplace, helping them optimize their campaigns and drive profitable policy growth. As these partnerships ramp, we expect our transaction value mix to shift gradually to our open marketplace where we offer highly differentiated, predictive AI-driven optimizations for our partners. Looking ahead, I want to address the rapid pace of AI innovation and the tailwinds it's creating for our business. AI-driven search is emerging as an important new starting point for insurance shopping. Against the backdrop of accelerating LLM-driven traffic growth, we increased P&C click volume by more than 20% year-over-year in the fourth quarter, and we expect even stronger growth in Q1. This performance reflects our role as a core infrastructure layer, connecting carriers with high-intent shoppers regardless of where they start their journey. At the same time, we're embedding AI across our platform to price media with far greater precision, leveraging our massive proprietary data set as the largest marketplace in the category. This allows us to price traffic more granularly, improving publisher yield while simultaneously delivering strong return on ad spend for carriers and agents. Our industry-leading scale and data advantage make these AI systems increasingly more effective over time, further strengthening our already powerful network effects. As we think about the potential for AI to reshape the insurance shopping and purchase experience, it's important to distinguish between how a consumer initiates a search and how a transaction is ultimately completed. Quoting and binding require real-time integration with proprietary carrier rating systems and carriers are highly protective about how and where their rates are displayed. Major carriers invest billions each year in their brands, underwriting and distribution, and they have historically resisted any model that commoditizes their product into a side-by-side price comparison or transfers transactional control to a third-party technology platform. As a result, we believe that most major carriers will continue to keep their pricing from being freely accessible through third parties, including through LLMs. While AI is likely to influence where and how shopping begins and create incremental advertising-based acquisition channels, we believe the infrastructure we provide to connect online shoppers to carrier-controlled quoting and binding systems will remain essential and highly defensible. Taken together, we believe the current industry backdrop, including the evolution of AI, is strengthening our role in the ecosystem. As demand expands and distribution channels evolve, scale, data and performance will matter more, not less, and we believe we're well-positioned to capture that opportunity and to continue delivering sustainable, profitable growth in the years to come. With that, I'll hand it over to Pat. Patrick Thompson: Thanks, Steve. I'll start with some full year highlights, followed by key drivers of our Q4 results and then cover our outlook. 2025 was a record year. We crossed several significant milestones, $2 billion of transaction value, $1 billion of revenue and $100 million of adjusted EBITDA, all for the first time. Transaction value grew 45%, driven by 65% growth in our P&C vertical, which was more than -- which more than offset the expected reset in Under-65 Health. Excluding contribution from Under-65 Health, our core business delivered adjusted EBITDA growth of approximately 55%. Turning to the fourth quarter. Transaction value was $613 million, up 23% year-over-year. Our P&C vertical grew 38% year-over-year, while our health vertical declined 40%. Revenue was $291 million, down 3% year-over-year as reported, but up 9%, excluding Under-65 Health. Health declines were mostly offset by P&C growth. Under-65 Health contributed approximately $7 million of revenue in 2025, down from $41 million in 2024. Adjusted EBITDA was $30.8 million, down 16% year-over-year. Excluding contribution from Under-65 Health, our core business delivered adjusted EBITDA growth of approximately 10%, reflecting the strong momentum in our P&C vertical. We converted 66% of contribution to adjusted EBITDA, which reflects our efficient operating model. Our Q4 take rate was 7.6%, slightly above expectations, driven by favorable open marketplace mix. We expect take rates in Q1 to be above Q4 levels. Moving to the balance sheet and cash flow. In 2025, we generated $99 million of free cash flow, which for us is operating cash flow less CapEx, excluding the FTC payment of $34 million or $65 million on a net basis. We ended the year with $47 million in cash, providing us with continued financial flexibility to support our strategic priorities. Also on the balance sheet, we met the U.S. GAAP requirements to release the valuation allowance on our deferred tax assets and recognize the related tax receivable agreement liability, resulting in a gross up to our balance sheet. As a reminder, our long-standing Up-C structure generates tax benefits from which we retain 15% of the savings through basis step-ups over the next 15 years. On capital allocation, we remain committed to returning capital to shareholders through share repurchases. In Q4, we repurchased approximately 1.1 million shares for $14 million. Full year share repurchases were $47 million, representing approximately 7% of the company. Based on our strong and growing free cash flow outlook, our Board has authorized a $50 million increase in our share repurchase program to $100 million. We expect to complete the vast majority of this program in 2026. Now turning to Q1 guidance. We expect transaction value of $570 million to $595 million. up approximately 23% year-over-year at the midpoint, with P&C growing approximately 35% year-over-year, driven by strong carrier demand and continued share gains. We expect first quarter transaction value in our health insurance vertical to decline approximately 50% year-over-year, driven primarily by Under-65 Health. Revenue, we expect to be $285 million to $305 million, up approximately 12% year-over-year at the midpoint. We expect adjusted EBITDA of $29.5 million to $31.5 million, up approximately 4% at the midpoint. Excluding contribution from Under-65 Health, adjusted EBITDA is expected to grow approximately 25% year-over-year at the midpoint of the guidance range. And finally, we expect contribution less adjusted EBITDA to be approximately $500,000 to $1 million higher than in the fourth quarter of 2025. And while we're not giving formal 2026 annual guidance today, let me frame how we're thinking about the year. We expect P&C transaction value will continue driving growth with healthy year-over-year gains as carriers increasingly seek to grow in this attractive soft market operating environment. In Health, our transformation into a smaller, more focused operation is ongoing. While we expect this vertical to account for a mid-single-digit percentage of total transaction value this year, we continue to believe Medicare Advantage represents a meaningful long-term growth opportunity. Finally, we expect to generate $90 million to $100 million in free cash flow, including the final $11.5 million FTC payment we made in January. This gives us plenty of firepower as we look to execute on the vast majority of our $100 million buyback program in 2026. With that, operator, we are ready to take the first question. Operator: [Operator Instructions] And we will take our first question from Tommy McJoynt of KBW. Thomas Mcjoynt-Griffith: Yes. My first question, I appreciate some of your comments around some of the changes that are happening through the developments in AI. I want to expand on that. Does anything functionally or financially change with your role and your value proposition to carriers when a consumer starts their search with an LLM rather than through Google? Steven Yi: Well, yes, I'll take that, Tommy. I mean the short answer is no. What we expect AI -- the impact that we expect AI to have is really focused on the upper part of the funnel, the research and shopping experience. I think what really what you have to understand is that no matter really where they start their shopping experience, ultimately, as they start to get closer to the quote and the buying, that's where the carriers really want to maintain control over where their quotes are displayed and obviously, where their policies are bound. And so typically and historically, well over 2/3 of the marketplace made up by direct -- the big direct-to-consumer carriers, as well as the captive agent carriers, have been very reluctant to let their rates be shown anywhere else on third-party sites, particularly in a side-by-side rate comparison environment. And certainly, they've been very reluctant to let anyone bind their policies anywhere other than through their agents or their websites. And so ultimately, we're the infrastructure that facilitates that handoff between the insurance shoppers and the publishers where that insurance shopping activity takes place with the quoting and binding infrastructure that the carriers maintain. And regardless of whether they start their search on Google or on an insurance comparison site or on an LLM, ultimately, that connection and handoff has to be made. And so at the end of the day, we believe that the ecosystem with the LLMs, again, being an important starting point for insurance search is going to look a lot more like the current system than not. Thomas Mcjoynt-Griffith: And to clarify, so did the LLMs become their own supply partners, or did the supply partners that you currently partner with, perhaps they will integrate within the LLMs directly? Steven Yi: I think it's a good question. I see either possibilities happening. I think, we think it's more likely that it's more of the latter, that the LLMs become a traffic source for most of our existing supply partners. I mean, certainly, some of our supply partners may not make the adjustment and are not able to acquire traffic in an efficient way from the LLMs. But once the LLMs layer on an advertising model, we think that, that could be a tremendous tailwind for our supply partners as that introduces an incremental advertising traffic acquisition source for them. Right now, I think they're making some good headway in acquiring traffic from the LLMs. I think anecdotally, our supply partners are telling us that somewhere in the mid- to high single digits of their traffic is coming from the LLMs, and this is in the early stages. I think as you've seen a couple of our supply partners have introduced apps for the LLMs. We're certainly benefiting from that because the traffic is hitting their site ultimately that we're monetizing on their behalf. And so as our publishers and the supply partners get smarter about doing that and building more apps, finding ways to be discovered by the LLMs and then ultimately, taking advantage of the advertising ecosystem that the LLMs are going to create, we think that ecosystem is going to look a lot more like the current Google ecosystem than one where the LLMs are connecting directly with us as a supply partner. I mean, certainly, we've had discussions with them. And if they are open to doing that, we would welcome that. But again, our guess is that the LLMs will evolve into something more like Google than one of our supply partners. Thomas Mcjoynt-Griffith: Got it. That all makes sense. And then just my second topic of questions here. You made some encouraging remarks about continuing to scale with the underpenetrated carriers in the marketplace. Is there anything different about your go-to-market strategy or sales pitch that's getting more of these underpenetrated carriers to sign up? What's resonating with them that, that works around the cycle? Steven Yi: Well, I think that's a great question, and I appreciate that. It's -- there is a different message, right? And that's where we're investing heavily into our platform solutions capabilities. And really, what that means is that we're moving beyond just creating a marketplace layer for the media that's transacted and really working directly with these carriers who have been, again, historically underpenetrated in our channel to provide more of a platform where we own parts of the pre-quote conversion process so that we can optimize more of that conversion funnel for them. As you can imagine, we have capabilities and we have access to data that enable us to do that very well and oftentimes better than a lot of carriers who are less experienced in that area. And so the ability for us to really go in and again, not just offer media from our marketplace, but also to offer a hosted optimized conversion experience that, again, takes the first 1 to 2 to 3 steps of that conversion process and really optimize that on behalf of a lot of these historically underpenetrated carriers, I think has gone over really well, has enabled us to optimize their campaigns in our marketplace really well and enable them to be a lot more competitive in our marketplace than they otherwise would have been had we not offered these types of solutions. Operator: Our next question comes from the line of Mike Zaremski from BMO Capital Markets. Michael Zaremski: First question is on the P&C side, on seasonality, and I appreciating it's already late February. So I'm just -- so your guidance is clearly robust. But are we not seeing as much seasonality as you had maybe thought 6 months ago or 3 months ago? Or is this kind of the normal expectations you'd say? Patrick Thompson: Yes. And Mike, this is Pat. I would say that I think the last few years, we've seen pretty robust volume in Q4. I would say Q4 of this year maybe was a little bit less robust than we maybe thought it would be, but it was robust. And kind of what we've seen in Q1 is probably a little bit muted versus what we maybe have seen in some past years. Having said that, what we've seen is some of the smaller carriers that have underpunched their weight historically in our marketplace, being the ones that have really been leaning in so far in Q1 and some of the bigger ones have maybe taken their foot off the gas just a tiny bit on it. And we're in a spot where it's been probably a number of years since we've had a really normal year from a seasonality standpoint. And we feel like Q1 is off to a good start. We're feeling pretty good about where the rest of February and March are going to end up, and we're feeling optimistic about the year. So we're obviously feeling pretty good, although it's still early overall in the year. Michael Zaremski: Got it. That's helpful. And moving back to, I know it's not easy to forecast the future in regards to AI and your comments have been very thoughtful so far. If we were to kind of bucket up into a profile of insurance carrier that was much more sophisticated data-wise than peers and also offered on average, a much lower cost or a lower cost policy on average, would that profile make that insurance carrier more likely to test the waters to offer their pricing to third parties and LLMs? Or I don't know if there's any kind of way to maybe differentiate your broad strokes to kind of a certain subset of insurance carriers? Steven Yi: Yes, and infact -- yes, I think the I think you can think about the universe of auto insurance carriers as being split up into the captive agent carriers where you have exclusive agents. The State Farm is a typical example that you think of that a network of agents who only sell State Farm policies. And so you have the captive agent carriers, you have the direct-to-consumer carriers or the direct writers, again, big brands like GEICO and Progressive. And then typically, you have a lot of smaller carriers that write through independent agents. And so it's as you think about historically, the carriers that have allowed their rates to be aggregated and put into a comparison environment, something akin to a kayak for auto insurance, right? It's really been those smaller midsized independent agent carriers that are used to selling in, in a multi-carrier environment through independent agents. And so what we expect is that to the extent that the LLMs start to pull in rates, right, typically by working with an insurance agency, right, that the rates that they'll be pulling in are going to be limited largely to those rates from independent agent carriers. And again, the captive agents and the direct agents -- direct-to-consumer model make up over 2/3 of the overall ecosystem. And so what you'll see is some rates, but you'll see really a subset of the carriers that the typical consumer is looking for. And to analogize it back to Kayak, it would be like doing a search on Kayak for airfare and seeing rates from a couple of -- a handful of carriers, but really missing the rates from an American Airlines, United Airlines and Delta Airlines. And so it's a good consumer experience. Some of our publishers have that type of consumer experience. But by no means is it a complete and holistic search. And so to the extent that rates are pulled into an LLM environment, we expect that it's going to remain similar to what it is now, which is -- and being limited to those independent agency carriers. Patrick Thompson That's helpful. And just lastly for Pat, on some free cash flow, quick clarification. The $90 million to $100 million, is that subtracting the final payment? So we should -- and also, is there any cash taxes or cash receivable payments within the $90 million or whatever that's the number you're guiding. Patrick Thompson: Yes. And Mike, the guidance is for $90 million to $100 million of free cash flow this year, and that includes the $11.5 million payment that was made to the FTC. So kind of absent that, we would be at $101 million to $111 million. And from a cash tax standpoint, there is a TRA payment that's going out in Q1. It's kind of a mid-single-digit millions payment going out, and that's kind of the star of the show from a cash tax standpoint for calendar 2026. Operator: Our next question comes from the line of Andrew Kligerman from TD Cowen. Andrew Kligerman: And I'm a little confused still from your response to Mike's question about 2/3 of the market being tied up in captive and direct -- and that it would be just focused on the LLMs would be just focused on the smaller midsized independent carriers. Because if I think of the large ones, that do go independent. And I'm not necessarily pointing to them, but Progressive has a big independent channel. Allstate has a growing independent channel. I think GEICO might be starting to dip into that. So my question is, is it possible down the road, or is it actually happening now that big names such as the ones that I mentioned, and it doesn't have to be those specifically. Is it possible that they're already in the mix and starting in these early stages with the LLMs? And why wouldn't that be the case a few years from now regardless? Steven Yi: Sure. It's a great question. And so we talk to our carrier partners. And by and large, most of them -- and these are the carriers that, again, are the typical large brand captive agent carriers as well as the primarily direct-to-consumer direct writing model that you referred to. And really, I don't think that they're in any hurry to make their rates available through the LLMs. Again, I think that what you have to understand is that these carriers spend billions of dollars, right, every year in being part of a small consideration set through brand advertising. And they invest similar amounts, right, in building their underwriting capabilities and the distribution capabilities. And to the extent that they make their rates available through the LLMs, really the only reason that they would want to do that or an LLM would want to do that is to make that comparison, that rate comparison model right, much more readily available. And that's really the model that the carriers have really fought strenuously against for the past 20 years. The technology to be able to pull in rates into a third-party environment has been there for 20-plus years, right? The technology to actually have rates be compared side by side has been there for 20-some years. It's really the carriers and those carriers that I mentioned and their reluctance to see that type of a model really evolve in the United States, which has been the limiting factor in actually offering a Kayak for auto insurance model. And there's some real good business reasons for that as well because it's extraordinarily hard to actually get a bindable rate across multiple carriers through one user experience. And I think the carriers are justifiably concerned not just about being commoditized just to the lowest price, right, but also making sure that the consumers aren't being shown one price when really after all the inputs have been answered that the carrier specifically needs to deliver a bindable quote that there is no significant change from the quote that they saw when they started that process. And so overall, you're right in that some of these carriers are building independent agency capabilities or the capability of selling through those agencies. But I think at the end of the day, those big direct writers, the big captive agent carriers are going to prevent rates from their major brands, right? Maybe their subsidiary brands might be included, but they're certainly going to prevent rates from their big brands from being aggregated onto the LLMs. Andrew Kligerman: And then the other question, I think Pat mentioned earlier that he sees Med Advantage being a strong long-term growth opportunity. And I know it's been a tough -- I don't know, I want to say 3, maybe 4 years -- no probably 3 -- yes, 3 or 4 years of pressures in that area for distribution. Could you talk a little bit about why you kind of -- it sounds like you're seeing an inflection point now. And why do you see that? And how do you see the trajectory of Med Advantage business on your platform? Patrick Thompson: Yes. And this is Pat. I'm happy to take that one. So I think we're probably now in the fourth year of a challenging market for Medicare. I think '23 was probably when it started. And I think this year is going to be another challenging year in Medicare. And looking at the crystal ball, I think early signs point to next year being challenging as well given some of the reimbursement news that's out there. And I would say for our health vertical, we've given the guidance for this year that we expect it to be a mid-single-digit percentage of total transaction value, so a very small portion of the mix. Having said that, when we look at Medicare Advantage, this is a large product that there are tens of millions of consumers that have opted into Medicare Advantage. It is a product set where the number of eligible people is growing and the number of people opting in are growing. In terms of total spend on Medicare Advantage premiums, it's a bigger market than personal auto. And it's a market that has the wind at its back in terms of seniors aging into Medicare, you are much more likely to look to the Internet either as part of their shopping journey or their first port of call when it comes to shopping. And so while the market backdrop for Medicare has been and likely will continue to be challenging for the next year or 2, we look at all of these market dynamics and all of these wins are blowing in the right direction and in a direction that suits us very well. And so as a result, we're long-term bullish, but not banking on kind of significant financial contribution from that business in the short term. Andrew Kligerman: Got it. And maybe I could sneak one more in. Do you see the proprietary component kind of continuing to pick up? Or do you see that -- because I guess private this quarter was about 53.7%, up from 41% last year and the full year was a similar pickup. So it's been happening. Where do you see the private percentage of transaction value leveling out? Are we there yet? Or does it get bigger? Patrick Thompson: Yes. And we're in a spot where I think the trend is the guidance for Q1 envisions the business move shifting a bit private or a bit open, apologies, towards the open marketplace and away from private. And I think we talked pretty consistently in our earnings calls and our materials last year that we have this view that as kind of more carriers caught up in terms of rate adequacy that we would see some of the smaller and midsized carriers and some of the folks that historically underpunch their weight in our marketplace start to lean in. And we saw that kind of happen as we went through Q4 of this year, and we've seen kind of a furtherance of that trend thus far in Q1, and we've envisaged that in our guidance for Q1. And so we're feeling like we're in a pretty good spot as far as that goes. We, as a company, go quarter-to-quarter with guidance, so we don't give long-term numbers on that, but we feel pretty good kind of about where we're at, at this point in time. Andrew Kligerman: I see. So that would be the driver of why guidance in revenue is like $285 million to $305 million against a consensus number that's lower than the lower end of the range. That's kind of the bigger piece of why you have such really solid guidance going forward, correct? Yeah. Patrick Thompson: That would be correct. Yes, that the business is effectively more open than folks may have been expecting. Operator: Our next question comes from the line of Eric Sheridan from Goldman Sachs. Eric Sheridan: I'll just really ask one. As you see this underpenetrated opportunity playing out in the coming quarters, how much of it is a dynamic in which you need to execute on putting the right tools and mechanisms in place of folks across the carrier landscape to incent them to come on to the platform, invest in the platform? And how much of it is just an output of some of the competitive environment we're seeing today? It's sort of the in your control, out of your control component of scaling the underpenetrated opportunity. Steven Yi: Yes, Eric, that's a great question. I think ultimately, it's both, but I would say that the more important factor is the fact that just the overall market ecosystem, the competitive dynamics at play there. I think that the -- as our numbers are starting to reflect, I think it is a broadly growth-oriented marketplace, and it's to an extent that I certainly haven't seen in my history at a company. And so I think that after several years of really not acquiring new policies and over the last 1.5 years to 2 years, we've really seen a softening of the market as a very small number of carriers started to lean into growth and spend heavily to acquire new policies. The vast majority of carriers just didn't do that. And so I think this year, what you're seeing is that the overall personal auto marketplace is firmly in a soft market cycle. And you have essentially every single carrier really leaning into growth and finding ways to actually increase their policy count and being open to new ways of doing that and new partnerships to really accelerate their -- the impact that they can have by investing in a channel like ours. And so really, where we come in with our platform solutions, as well as the AI that we apply to enable these carriers to bid far more efficiently than they could on their own, right, in our marketplace. That really stems from our ability and our willingness to really help them scale up their spend once they make the decisions to really lean in. And so I don't know which one is more important. I would say maybe the latter is more important and that market forces are certainly driving them to lean into marketing and customer acquisition, and we expect those market forces to last for the next 2 to 3 years. But certainly, I think our capabilities, both with predictive AI and the experience that we have and the scale that we have to be able to offer the platform solutions that no one else can, certainly is, I think, has a really big part in helping these advertisers and these carriers, these underpenetrated carriers really scale much more effectively than they would otherwise on their own. Operator: Thank you. There are no further questions. That concludes our question-and-answer session. That also concludes our call for today. Thank you all for joining. You may now disconnect.
Operator: Good day and welcome to the Fourth Quarter and Full Year 2025 Paymentus Earnings Conference Call. This call is being recorded. [Operator Instructions]. At this time, I will now turn the call over to David Hanover, Investor Relations. Please go ahead. David Hanover: Thank you, operator. Good afternoon. Welcome, and thank you for joining the webcast to review our fourth quarter and full year 2025 results. Our earnings release documents are available on the Investor Relations section of the paymentus.com website. They include the earnings presentation that we'll make reference to during this webcast. This webcast is being recorded. I hope everyone's had a chance to review those documents. Our Founder and CEO, Dushyant Sharma, will make some opening comments before Sanjay Kalra, our CFO, discusses the details of the fourth quarter and full year and our guidance. Following our prepared remarks, we'll take questions. Let me just remind you that we may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and we refer to non-GAAP financial measures during the webcast. Forward-looking statements are based on management's current expectations and assumptions that are subject to risks and uncertainties. Factors that may cause our actual results to differ materially from expectations are detailed in our earnings materials and our SEC filings that are available on both the SEC and our websites. Information about non-GAAP financial measures, including reconciliations to U.S. GAAP, can also be found in our earnings materials that are available on the website. With that, I'd like to turn the webcast over to Dushyant Sharma. Dushyant? Dushyant Sharma: Thanks, David. We had a phenomenal fourth quarter and full year 2025. We are looking forward to a great 2026 and feeling even better about our business beyond that based on the durability of our growth algorithm and the broad spectrum of our innovation framework. Now that we have been public for about 5 years, I will provide additional color on how we are feeling about the next 5. 2025 was a significant milestone year for us, where for the first time, we delivered top line revenue exceeding $1 billion. I think that's particularly inspiring because if you recall, we exited 2023 with just over $600 million of top line revenue. And if you look back just 5 years ago to our IPO, we had a little over $300 million of revenue for 2020. So that would imply 100% revenue growth over 3 years. And if you then put our 2025 top line of $1.2 billion against our 2023 revenue, that's another instance of 100% revenue growth, but this time in just 2 years. This was done despite the backdrop of unprecedented inflation and other macroeconomic factors. In other words, we have quadrupled -- quadrupled of our business in the last 5 years, far ahead of our long-term CAGR model of 20% top line growth. And if I go back 10 years, we have grown the business 25x. The reason I'm sharing this context is because I believe this type of growth is possible due to our innovative DNA and thoughtful execution of a long-term business strategy. In the process of achieving this scale and strategic position, I want to point out the level of disruption already caused by Paymentus to the status quo of legacy infrastructure through our ever-growing innovation footprint. At our inception, the vast majority of all digital bill payments occurred through all school banks bill pay. And today, vintage bank bill pay represents a fraction of the overall bill payment volume. At the same time, what is now deemed as the legacy infrastructure of in-house and third-party biller-direct solutions used to be considered large and thriving bill payment solutions. This change is not an accident. This was a result of a carefully crafted long-term business strategy, executed with focus on long-term shareholder value creation, by first creating customer value through an ever-growing customer value proposition. So as you're now observing some discomfort with the broader fintech landscape, where increasingly more sophisticated buyers are rejecting strategic complacence of their service providers or not accepting niche business models. Paymentus on the other hand, is getting even more excited as that is not a surprise to us. We see this as a great opportunity for further disruption just as we saw at our inception. Compounding our excitement is the advent of GenAI that is further challenging the old-school software business models. We believe the world is moving more towards us. As a result, despite being a large-scale billion-dollar company, it is my distinct belief that we are still just getting started and the larger value will be created from here on out. I believe we are strategically better positioned now than we were even just a few years ago. We have a state-of-the-art platform, innovative DNA and a broad-based innovation footprint. We have a diverse, large existing and growing client base. We serve a large portion of U.S. households and businesses using our platform, which is becoming increasingly more pervasive. Furthermore, the industry appears right for further disruption. And as a result, I believe we have a big market opportunity and our best is yet to come. But of course, as we all know, the talk is cheap. We will still have to keep our heads down, execute and perform as we have done in the past. With that backdrop, I'm also looking forward to this year. Our initial revenue guidance of 2026, which Sanjay will cover shortly, is over $1.4 billion in revenue at the top end, which we believe we can deliver without signing any new clients. And our story is not complete without talking about profitability and margin expansion. At the same time as we are delivering this top line growth. For example, we generated $125 million of free cash flow in 2025 and exited with over $320 million of cash without any debt. In addition, for 2026, we are expecting adjusted EBITDA of $167 million at top end of our guidance, which also implies a non-GAAP net income of over $100 million, which is exciting in itself. With that, let me go into our quarterly business update. Paymentus reported both fourth quarter and full year 2025 results that surpassed our expectations. Furthermore, Paymentus ended the year with a strong bookings and backlog, which gives us a strong visibility as we head into 2026. What makes me even more excited is that we were able to achieve this year-over-year growth even with the strong results we reported in the fourth quarter of 2024. Our team continues to demonstrate solid execution when it comes to onboarding activities. Additionally, while we expected to see growth from the rising portion of large enterprise customers, the beneficial impact we saw in Q4 was even greater than we had originally anticipated. Also, as our customer mix is shifting more towards enterprise and large and mid-market clients, our revenue and contribution profit per transaction has continued to grow substantially. I'm also pleased with the growth in our adjusted EBITDA, which was 46.3% year-over-year. I think these results display the tremendous operating leverage we have in our business. They also show how we understand the economics and profitability of each piece of new business we bring in, including the large enterprise billers we signed up in the second half of 2025. In addition, our results clearly highlight our capacity to manage and calibrate our business to meet or exceed our long-term CAGR model. We have consistently shown our ability to achieve this even if we experience variability and noise of our secondary metrics from quarter-to-quarter. Now let's briefly recap our fourth quarter and full year 2025 results. Fourth quarter revenue was a record $330.5 million, an increase of 28.1% year-over-year. At the same time, contribution profit was $106.9 million, up 24% year-over-year. Adjusted EBITDA was a record $39.9 million for the quarter, representing a 37.3% margin and 46.3% growth year-over-year. Similar to the past quarters, the majority of our year-over-year growth in contribution profit fell to our bottom line. And once again, we exceeded the Rule of 40 for the quarter, coming in at 61% versus 59% last quarter. This reflects our team's solid execution and our focus on delivering consistent revenue growth alongside high-quality earnings. For the full year 2025, revenue increased 37.3% year-over-year to reach $1.2 billion. Contribution profit for the full year was $386.3 million, a year-over-year increase of 23.8%. Adjusted EBITDA was $137.4 million, representing a 35.6% margin and a 45.9% growth year-over-year. Now I'll review our fourth quarter business highlights and accomplishments. In terms of bookings, we had a very strong quarter and finished the year with a significant backlog. As I mentioned earlier, during the quarter, we saw particular strength in the large enterprise segment of the market. These large enterprise customers continue to represent a growing component of our client base. We also continue to expand and diversify our customer base by signing clients in several industry verticals, including utilities, telecommunications, government agencies, educational institutions, banking, property management, health care and insurance, among others. As a reminder, we handle both consumer and business payments for our clients and serve B2C and B2B clients and handle both inbound and outbound payment workflows based on the sophisticated platform we have created. Complementing this, we signed additional channel partners in various industry verticals to deepen our partner ecosystem. These verticals include consumer finance and utilities. In addition, onboarding of our substantial backlog remains a priority for us. During the fourth quarter, we onboarded several large enterprises. We also onboarded clients throughout multiple verticals, including insurance, utilities, government agencies, telecommunications and health care. Now I'll turn it over to Sanjay to review our financial results in more detail. Sanjay Kalra: Thanks, Dushyant, and thank you all for joining us today. Before I discuss our quarterly and full year 2025 results as well as our outlook for 2026, I'd like to remind everyone that the financial results I'll be referring to include non-GAAP financial measures. Turning to Slide 5. We ended 2025 with fourth quarter and full year results that again surpassed the top end of our guidance range across our key financial metrics. Our fourth quarter results included record revenue of $330.5 million, up 28.1% year-over-year. Contribution profit of $106.9 million, up 24%, and adjusted EBITDA of $39.9 million, up 46.3%. On the Rule of 40 basis, for Q4, we came in at 61%. During the quarter, we also continued to experience strong customer activity and demand, consistent with what we experienced throughout 2025. This solid momentum drove strong bookings and we exited the year with a significant backlog and strong free cash flow generation to support our continued growth strategies in 2026. Now let's review our fourth quarter financials in more detail. As mentioned earlier, fourth quarter revenue grew 28.1% year-over-year to $330.5 million. This higher-than-anticipated growth was driven by 2 key factors: first, the successful launch of new billers. The fourth quarter was the first full quarter where we realized the benefits from large enterprise customers that launched in the prior quarter. And second, increased same-store sales from existing billers. In the fourth quarter, we derived more revenue from these newly launched large enterprise customers with higher average payment amounts, contributing to higher revenues. While our original fourth quarter guidance did contain some upside, we took a prudent approach because it was still a bit early to gauge the precise magnitude of this beneficial effect. As you can see, it was quite substantial. Complementing this, in the fourth quarter, the number of transactions we processed grew to $192.7 million, up 16.1% year-over-year. Our average price per transaction also increased during the fourth quarter to $1.72, up over 11% from $1.55 in the prior year period. This was mainly due to the biller mix or more specifically, the large enterprise billers that launched in the third quarter with higher average payment amounts. Fourth quarter 2025 contribution profit increased 24% year-over-year to $106.9 million. This growth exceeded transaction expansion as the large enterprise billers I discussed earlier, generated a higher contribution profit per transaction. Contribution profit per transaction for the fourth quarter was $0.55, up sequentially from $0.54 in the prior quarter and also up from $0.52 in the prior year period, demonstrating our ability to capture market share while improving overall profitability. Contribution margin was 32.3% for the fourth quarter compared to 31.6% last quarter and 33.4% in the prior year period, reflecting the continued addition of large high-volume enterprise customers during the past year with healthy margins. We generated a record adjusted EBITDA margin of 37.3% as both our contribution profit per transaction and operating expense margin improved year-over-year by 5.8% and 2.4%, respectively. Furthermore, our improved contribution profit per transaction together with our strong operating leverage, generated an incremental adjusted EBITDA margin of 61.1%. As we continue to grow and diversify our client base, and add large clients to the mix, we expect to see some quarterly variability in pricing and contribution profit. As we have noted in the past, variables that are outside of our control, such as an increase in the average payment amount, or changes in the payment mix can affect contribution profit on a quarter-to-quarter basis. And therefore, we treat this as a secondary metric while our total revenue and adjusted EBITDA remain primary metrics for us. Fourth quarter adjusted gross profit grew 25% year-over-year to $89.8 million. We experienced adjusted gross profit growth that was greater than our contribution profit growth, reflecting the increased economies of scale. Fourth quarter non-GAAP operating expenses were up 11.4% year-over-year to $52.7 million, primarily reflecting higher sales and marketing as well as research and development expenses. These increases were consistent with our expectations and mainly driven by increased hiring and higher agency fees for business from resellers and partners. This enabled us to convert our strong pipeline into bookings as evidenced by our results and also to enhance our technical strengths. Using a non-GAAP tax rate of 25%, our fourth quarter non-GAAP net income was $25.4 million or $0.20 per share compared to non-GAAP net income of $16.3 million or $0.13 per share in the prior year period. Fourth quarter adjusted EBITDA grew 46.3% to $39.9 million compared to $27.3 million in the prior year period. Adjusted EBITDA also represented a record 37.3% of contribution profit for the quarter compared to 31.6% in the prior year period. This strong adjusted EBITDA performance was due to the same combination of positive factors I talked about earlier, all of which came together in the quarter. As I mentioned previously, incremental adjusted EBITDA margin was 61.1% in the quarter. Interest income from our bank deposits was $2.5 million in the fourth quarter, improved from $2 million in the prior year period as a result of our increased average cash balance and effective cash management. Related to our performance, as mentioned earlier, we once again exceeded the Rule of 40 for the quarter, coming in at 61% compared to 59% last quarter and 62% in the prior year period. Now turning to Slide 6. I will summarize the highlights of our full year 2025 results, which also came in higher than we projected. Revenue for the full year increased 37.3% to $1.2 billion, driven by a 21.3% increase in transactions, primarily from new billers as well as transaction growth from existing billers. Contribution profit increased 23.8% to $386.3 million, mainly from increased transactions. Non-GAAP operating expenses increased to $195.4 million, up 11.1% year-over-year due to higher sales and marketing and research and development expenses, as we continue to focus resources on executing our go-to-market strategy. Non-GAAP net income increased 51.2% to $84.9 million and diluted EPS increased 50% to $0.66 per share compared to the prior year. Full year adjusted EBITDA increased 45.9% to $137.4 million. We exceeded the Rule of 40 for the full year coming in at 59% for 2025, pretty much comparable to 2024 when we ended at 60%. We are also proud to report that in fiscal year 2025, $43.2 million out of $74.2 million contribution profit increase flowed through to adjusted EBITDA, representing a 58.2% incremental adjusted EBITDA margin. Now I'll discuss our quarter end balance sheet and quarterly liquidity improvement highlights on Slide 7. We ended 2025 with total cash of $324.5 million compared to $291.5 million at the end of the third quarter. The $33 million sequential increase is primarily comprised of $45.1 million of cash generated from operations, offset by $8.7 million used in investing activities primarily for capitalized software and $3.5 million spent in the net settlement of employee RSUs. Free cash flow generated during the fourth quarter was $35.7 million, and the company does not have any debt. Our days sales outstanding at the end of the fourth quarter was 28 days compared to 31 days last quarter. The sequential improvement is due to overall improvement in payment terms from our billers. Now I'll discuss our year-end balance sheet and annual liquidity improvement highlights on Slide 8. For the full year 2025, $324.5 million of total cash reflects an annual increase of $115.1 million. Free cash flow generated during the year was $125 million, representing a growth over 360% year-over-year. Our days sales outstanding at the end of the fourth quarter was 28 days compared to 43 days last year. This annual improvement in DSO is primarily due to increase in the mix from large enterprise customers with favorable payment terms. It is noteworthy that while revenues have increased 37.3% this year, our DSO has declined 35% year-over-year, which we believe implies that our working capital cycle, which is already operating efficiently has significantly improved. We paid $14.9 million in income taxes during 2025 and also generated $9.5 million from interest income. In 2026, our cash deployment priorities are unchanged. Driving organic growth remains our primary focus. Our strong cash position gives us considerable financial flexibility for working capital investments as we scale. Additionally, our strong balance sheet enables us to explore attractive M&A opportunities that may arise in order to further increase our growth prospects. That concludes my financial review. Now I'll turn to our non-GAAP guidance for the first quarter and full year 2026 on Slide 9. Before discussing our 2026 guidance in detail, as mentioned on our last earnings call, we are continuing to follow the same prudent approach to our first quarter and full year 2026 guidance that we followed throughout 2025, which I believe has served us well. Now to details. For the first quarter 2026, we expect revenues to be in the range of $330 million to $340 million. representing approximately 22% year-over-year growth at the midpoint and approximately 24% at the high end. Contribution profit to range from $103 million to $105 million, which represents approximately 19% year-over-year growth at the midpoint and approximately 20% at the high end. Adjusted EBITDA of $36 million to $38 million representing approximately 23% year-over-year growth at the midpoint and approximately 27% at the high end. This also represents a 35.6% margin at the midpoint. And a 36.2% margin at the high end. On a Rule of 40 basis, for the first quarter of 2026, our guidance implies a range of 52% to 56% ahead of the implied Rule of 40 initial guide we provided for the first quarter of 2025 around the same time last year. Now on specific details turning for the full year 2026, we expect revenue in the range of $1.39 billion to $1.41 billion, which represents 17% growth from the prior year at the midpoint and 17.8% growth at the high end. This reflects our increasing market share and diversifying customer base at scale. And as a reminder of Dushyant's earlier remarks, we can deliver the top end of this guidance without signing any new clients. Contribution profit in the range of $442 million to $452 million. This guidance represents 15.7% year-over-year growth at the midpoint and 17% at the high end. Our expected 2026 contribution profit growth at the midpoint and high end is very similar to the initial guidance we provided for 2025 contribution profit growth around the same time last year. Adjusted EBITDA to range from $157 million to $167 million. This guidance represents approximately 17.9% year-over-year growth at the midpoint and 21.5% at the high end. This also represents a 36.2% margin at the midpoint and a 36.9% margin at the high end. A non-GAAP tax rate of 25% and on a Rule of 40 basis for the full year 2026, our guidance implies a range of 50% to 54%, significantly higher than the implied Rule of the 40 initial guide we provided for 2025 around the same time last year. Once again, we are quite pleased with our 2025 results. Importantly, based on the strength of these results, our substantial bookings, sizable backlog and strong free cash flow generation, we believe we are well placed to once again deliver solid growth in this year. We are entering 2026 with considerable momentum in our business and we intend to continue this during the course of the year. Thank you, everyone, and now I'll turn it back to Dushyant. Dushyant Sharma: Thanks, Sanjay. In closing, we ended 2025 with another quarter of outsized performance that exceeded our expectations. We ended the year with a substantial backlog, giving us considerable visibility as we look forward to 2026 and beyond. In addition to our results, I remain confident in Paymentus continued success due to a number of factors, including our strong business model, which has repeatedly shown our ability to meet or exceed our long-term CAGR model of 20% top line growth and 20% to 30% adjusted EBITDA dollar growth. Our unique and ever-growing technology footprint and our ecosystem, our large, diversified and growing customer base, and the vast nondiscretionary and is still relatively untapped bill payment market that we serve. With that, I want to recognize and thank all of my team at Paymentus who have helped to make all of our success possible. That concludes our prepared remarks. I'll now open up the line for questions. Operator: [Operator Instructions] The first question comes from the line of Madison Suhr with Raymond James. Madison Suhr: I just wanted to start at a high level around AI, given the market dynamics. Can you just touch on where you see potential opportunity for AI, but then also where you see potential risks related to AI. Dushyant Sharma: Thank you, Madison. Great question, by the way. And I think given all what's transpiring in the market, I think it's good to talk about it. We feel great about what AI represents for Paymentus. We actually believe if we are going to be the ultimate beneficiary of the AI revolution in some ways, in our space anyway. The key factors are very simple. Our business is designed -- our business model is designed in a way where we offer a world-class platform to our clients, which handles all their security compliance 24/7 state-of-the-art necessity of being a central nervous system for revenue collection for our clients where they are putting very high premium on making sure that they are not trying to save pennies to lose dollars. And we provide all this platform at no cost to our clients. On top of that, right from the very beginning, we also -- our -- we designed our business model in some ways for this day actually, where a client can use the entire -- use the entirety of our platform and get the full benefit of it in their existing infrastructure as it is present today aligning Paymentus' platform to their entire existing workflows in a way that they don't have to change anything on their end, the entirety of the work is done at Paymentus, and we don't charge anything for it. So in some ways, since a company doesn't have any revenues associated with software or software components, there's no hourly income we are generating from our clients, we are only getting paid for consumption of our platform, we feel very good about where this is headed. In fact, in some ways, we believe the world is moving more towards us, where the old-school software and SaaS models were -- in some ways, if I may say it this way, are companies who were relying on the fact that they can charge a lot of subscription fees to the customers and hope customers never use it so that their margins look even better than they actually are, will pay a bigger price for it. The companies like Paymentus who actually designed its entire operating stack and expense structure in a way that it comes into a picture when someone uses this platform and only get paid when someone is consuming our services to our clients, whether it was AI, whether Paymentus was using AI or other no-code platforms, or whatever Paymentus was doing is entirely up to Paymentus. But as far as our clients were concerned, they were getting the full benefit of our platform without paying anything for it other than what is in terms of the transactions what we get paid. Now to the opportunities -- so this is a defensibility part. But the opportunity for us is phenomenal. Where AI has, in some ways, they opened the floodgates of opportunity for Paymentus. Everywhere we look, we are seeing opportunities. We are, after all, a technology company. We have been making investments in no-code platforms and have a great software stack and have been very focused on AI for a long period of time. I've shared this publicly, actually, we almost attempted to buy an AI company. It didn't work out many, many years ago. So for us, AI has been on top of our minds. So we see AI bringing a lot more opportunities as we have thousands of clients, and we are serving them and serving their needs of running as a central nervous system for their revenue collections, we see a lot more opportunities for us. And AI will play a big role in that. So we are feeling great about where this is all headed. And in some ways, we like our chances as AI becomes -- the world becomes more agentic and AI becomes a little bit more pervasive. Madison Suhr: Okay. That's awesome. I appreciate all the details there. Just a quick follow-up on numbers. The 2026 guide implies an incremental margin of just over 40% at the midpoint. You guys just said 61% in the quarter, 58% for the year. Totally appreciate the conservative outlook. But just anything to call out in terms of incremental investments? Or why you think incremental margins would kind of decelerate from here? Dushyant Sharma: So Madison, I'll point out 2 things. Number one, in Q3, we launched large enterprise customers, and we had experience of half a quarter approximately for Q3 and full quarter for Q4. We have kind of 1.5 quarters of experience with these large billers, and we follow a prudent approach that not to make the same run rate for 1.5 quarters for the next full year. We want to see seasonality. We want to see how the trends move. We really need an experience for 4 full quarters before we can bake into our guidance and forecast properly. And as you know, from historical trends, we don't count eggs before they hatch. So we need proper experience. Hence, our guidance is prudent. At the same time, at the high end, which we have guided today that can be achieved without booking any new customer. I understand your question is mainly on the incremental adjusted EBITDA margins, we also are factoring in decent operating expense for sales and marketing at this point in time because the opportunity in front of us is massive. The pipeline is massive for us. We are diversifying into more verticals than we were. In fact, there are a couple more new verticals, which we have not named it yet, but we have seen an entry into that in this quarter. So we want to expand our horizons there as well and see how more, how quickly we can scale. We are already disrupting the market at a very decent pace. In fact, achieving 37.3% growth annually in top line, despite of improving margins. I think that's remarkable. But we want to see if we can continue this trend. So on the guidance side, we remain prudent. Although at the same time, we have raised the guidance from what we proactively provided in the previous call, especially on adjusted EBITDA margin. But we stay grounded when it comes to guidance. Second thing I said was operating expense, we are also prudent in planning for more because we want to expand our horizons on a few other vertical. Otherwise, we remain committed to deliver great results and maintain the momentum of what our trends indicate. Operator: Next question comes from the line of Darrin Peller with Wolfe Research. Darrin Peller: Congrats on the good year. I guess I want to follow up for a minute on guidance because I know you always try to be somewhat conservative around it just the way you -- the nature of your guide. But just given the recurring revenue nature of your business and the magnitude of how much you see every exiting the year, especially on the bookings front, I'd love to hear a little bit more on just where you've embedded some conservatism? Is it around transaction growth, enterprise ramp timing perhaps or payment mix or margin and then obviously, on the other side of that, what would need to go right operationally or commercially for you to outperform the guidance as the year progresses. We'll just start there, and then I have a follow-up on the enterprise side, if that's okay. Dushyant Sharma: Yes, Darrin. So it entails a lot of things. I would say it's a confluence of multiple factors on why we are prudent and why we feel bullish at the same time on how the business is. I'll start with bookings. The bookings are very good. In fact, the composition of bookings is more intriguing to us because we are diversifying into multiple verticals. That is helpful. At the same time, the pipeline is also very big. And you already know we operate in a very large TAM. And we have around 4.3% market share at the end of 2025. So a pretty small share and a large market to capture and the pace at which we are, I think things are looking very good. The visibility is very high. But we remain grounded as I said to earlier question from Madison. But at the same time, I think delivering good results is our goal. And at the end of the day, the free cash flow generation we have, which we have seen especially in the last quarter and last year has given us a further boost to stay grounded and execute, and that's where this confidence is coming from. Darrin Peller: Okay. Understood. Can I follow up on -- in the past, you've outlined, I think it's really about 4 different growth vectors. When we think about new biller launches, same-store sales, enterprise, go-lives and then the IPN. Could you just maybe rank order the contributors you're seeing this quarter? And then which of those do you expect to be the primary drivers going forward to '26, especially those that you exited the year with the most momentum around? Dushyant Sharma: Yes. So new implementations is generally the largest vector and will continue to remain the same. I would say the second vector would be same-store sales, which actually is doing really well. And in fact, as we have launched the new large enterprise billers since past few quarters, we are analyzing their trends as well. And that also the same-store sales continues to be very strong. And early implementations is one thing which could provide an upside. At the same time, any new customer bookings if they happen. And if they get long, the timing works in a way, that could provide an upside. But at the same time, IPN continues to be a strong vector as well. We have actually done really well in the past few years on IPN, and that also is a very important vector. So upsides could are possible, but we keep fingers crossed, and we don't count the egg before the hatch, as I said. Operator: Next question comes from the line of Tien-Tsin Huang with JPMorgan. Tien-Tsin Huang: Great results. Just following up on Darrin's question with same-store sales, maybe on the penetration side. I'm curious how much more room is there left for say, AutoPay amongst your larger billers that are in the -- more in the back book than the recent additions. It sounds like there's still a lot more to go, but I just wanted to get an update there. Dushyant Sharma: Yes. Actually, thank you, Tien-Tsin, for the question. We see tremendous opportunity there. In fact, as we have shared publicly, we could more than double our business in our existing customer base and it's still not be done 100%. There's a lot of opportunities still left. So same-store sales remains a big focus for us, continued adoption. So if you think about it from the way to look at it is, we have only recognized 4.3% of the revenues from the customers we have -- of the total TAM, but there is a lot more TAM to be captured even in our existing customer base as we go from here. So that, combined with all of the open opportunities and the wide open market as the way we think of it. And frankly, in some ways, the ever growing TAM based on all the areas you're expanding into, it gives us a lot of confidence that our best is very much ahead of us. Tien-Tsin Huang: Great. And just my follow-up, just on the -- I know I always ask about the pipeline, but I'm just curious about where that stands today versus this time last year. I know large enterprise has been a big contributor to growth. How does that look today versus last year when you qualify the pipeline? Dushyant Sharma: We're feeling great. Pipeline is looking great. Backlog is strong. I think all of the aspects you would want to see in a business which is doing well and growing and it's all moving in the right direction. We are feeling great. Operator: The next question comes from the line of Will Nance with Goldman Sachs. William Nance: I wanted to follow up on a couple of comments you made around the large enterprise billers. I think at several points, you talked about that being one of the drivers between the increased revenue per transaction. And I was hoping you could unpack that. I think when most people think about more enterprise in that market, they think about kind of revenue compression. But I think the way you're characterizing it, you're speaking more about, I don't know, higher -- larger transaction sizes, driving higher revenues. So I was wondering if you could maybe unpack that a bit. What is driving that? What verticals are maybe contributing to the growth that's causing the average transaction sizes to increase? And just how do you think about the mix shift embedded in kind of outlook or pipelines today from like a vertical perspective? Dushyant Sharma: Yes. Well, I'll start with -- we are -- we feel really good about how the revenue per transaction is trending, achieving an 11% growth year-over-year is very interesting to us. And actually, that's reflective of the disruption we are causing in the marketplace by increasing our market share and gaining large enterprise customers. Some of them are household names. The average price per transaction for some of them is actually high, as you alluded to in your question, and that's also contributing to increase in revenue price -- revenue per transaction. And that's boiling down to contribution profit also per transaction, which, as you noted, that's also improved year-over-year by 5.8%. So all headed in the right direction. In terms of breakup, it's many verticals, I would say, definitely, utilities is our backbone. Utilities is there. Insurance is there. So there are a few verticals, which actually, in a combination get to this revenue per transaction improvement. William Nance: Got it. That's helpful. And just maybe following up on the AI discussion. I think you did a nice job addressing some of the concerns out there from a software perspective. Just from a payments perspective, I was hoping you could talk a little bit about how you guys see agentic payments. It would seem that bill pay could be a good candidate for more agentic transactions over time. They're fairly low risk. They're highly recurring in nature. So just how have you guys engaged with the Googles, the Stripes and the other kind of sponsorships of sort of agentic protocols? And how do you -- how far off do you think we are from seeing more agentic penetration in the bill pay space? Dushyant Sharma: I think we see agentic AI playing a big role in bill payments for all the reasons you talked about. Our approach is going to be very much customer-centric. It will be about innovating around customer experience and providing customers a totally unique and differentiated experience using the help of AI. So we'll have more to come more to say on that later on. But I think we -- the key message I could just simply provide here is our approach is not frankly, brochure wear or press releases or putting a bunch of stuff on the website for the name sake. Our approach has always been very substantive improvements to customer experience and value creation there by improving the customer experience itself and through innovation. So we feel -- we believe bill payments, representing a majority of a typical household spend will be a big factor when it comes to improving the lives of customers and frankly, even businesses as well. As I shared in my opening remarks, we serve tens of millions of -- a big portion of actually, a substantial portion of U.S. households and businesses, they're already interacting on our platform. So it's top of our mind, and we will -- we are making progress in that area. We'll talk more about that in the future. Operator: Next question comes from the line of Craig Maurer with FT Partners. Craig Maurer: Just a quick modeling question. OpEx was a little higher than we had expected, and you mentioned that was consistent with spending to convert the pipeline. So I was just hoping you could help us with thinking about cadence for the year. in terms of how you expect that spending to progress through '26? Dushyant Sharma: Sure, Craig. I would say if you look at the trends of the past quarters, say, '24 and '25. And I think using that particular trend will be useful to draw a line, if you want kind of the quarterly trend, I'm understanding for 2026, how does the OpEx grow from Q1 to Q4, I think if you make a gradual improvement over the quarters, that would be reasonable. We definitely always analyze how the pipeline is at any end of -- particular end of the month and where we want to deploy the resources of sales and marketing. So that could fluctuate, but that kind of fluctuation, I think, is reasonable. But at this point in time, at the beginning of the year, it's fair to use the past trends to analyze the quarterly growth. Operator: There are currently no questions registered. [Operator Instructions] There are no further questions waiting at this time. I would now like to pass the conference back for any closing remarks. Dushyant Sharma: Well, thank you, everyone. I appreciate your time. Have a great day. Operator: That concludes today's call. Thank you for your participation, and enjoy the rest of your day.
Operator: Thank you for joining us for the V2X Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. Today's call is being recorded. My name is Gary, and I'll be the operator for today's call. [Operator Instructions] And now I'll pass the call over to your host, Mike Smith, Vice President of Treasury, Investor Relations and Corporate Development at V2X. Please go ahead. Michael Smith: Thank you. Good afternoon, everyone. Welcome to the V2X Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining us today are Jeremy Wensinger, President and Chief Executive Officer; and Shawn Mural, senior Vice President and Chief Financial Officer. Slides for today's presentation are available on the Investor Relations section of our website, gov2x.com. Please turn to Slide 2. During today's presentation, management will be making forward-looking statements pursuant to the safe harbor provisions of the federal securities laws. Please review our safe harbor statements in our press release and presentation materials for a description of some of the factors that may cause actual results to differ materially from the results contemplated by these forward-looking statements. The company assumes no obligation to update its forward-looking statements. In addition, in today's remarks, we will refer to certain non-GAAP financial measures because management believes such measures are useful to investors. You can find a reconciliation of these measures to the most comparable measure calculated and presented in accordance with GAAP on our slide presentation and in our earnings release filed with the SEC, both of which are available on the Investor Relations section of our website. At this time, I would like to turn the call over to Jeremy. Jeremy Wensinger: Thank you, Mike, and good afternoon, everyone. Thank you for joining us today. Please turn to Slide 3. Today, we'll be providing a recap of our fourth quarter and full year financials for 2025. We will also share more on our positioning and expectations for 2026. I'm pleased with the team's execution and our financial performance, which underscores the strength of our strategy and alignment with national security priorities for readiness and modernization. Looking to the future, we are focused on leading with innovation. We are continuing to prioritize investments and expanded partnerships to deliver innovative solutions that anticipate and fulfill our customer requirements. These growth priorities are further supported by the strength of our capital structure. We continue to see momentum across the business coming through contract wins in our key growth areas, and we are encouraged by the ongoing demand for our mission solutions. As we continue to execute our strategy and innovate the base, we are doing so from a strong position. Our focus on cash generation has yielded positive results. We have a strong capital structure and the flexibility to strategically deploy capital. We believe V2X is well positioned to continue delivering enhanced value for both customers and shareholders in 2026 as supported by the financial outlook we provided today. With that, let's turn to Slide 4, with more detail around the fourth quarter and full year 2025 results and the progress we've made. We reported solid top line growth and strong operating performance. In the fourth quarter, we drove record quarterly revenue, adjusted EBITDA and adjusted cash flow. This is a testament to our commitment to generate value. Revenue increased 5% year-over-year to a record $1.22 billion. For the full year, revenue grew 4% to $4.48 billion, hitting the upper end of our 2025 guidance range. Adjusted EBITDA was $88.7 million for the quarter, a record for the company, and exceeding our expectations, we delivered a full year adjusted EBITDA of $323.3 million with a margin of 7.2%. Adjusted net income was $49.3 million and adjusted EPS was $1.56, both representing double-digit year-over-year growth. Adjusted net income was $166.8 million for the full year, representing a 20% increase year-over-year. Adjusted diluted EPS was $5.24 for 2025 and increasing 21% year-over-year. Our ongoing emphasis on reducing debt and generating cash allowed us to improve our net debt by $116 million, compared to last year. As a result, our net leverage ratio now stands at 2.2x. Shawn will share more of our financials and our outlook later in the presentation. Turning to Slide 5. The progress we have made this year exemplifies how our readiness enabled solutions continue to support our customers' evolving requirements and create tailwinds for continued growth. We have won a number of recent contracts across key growth areas, reflecting both the depth of our customer relationships and our ability to deliver at scale complex high-consequence missions. In 2025, we delivered 2 contract wins valued at more than $1 billion each and 10 awards each exceeding $100 million. In supporting mission readiness, the successful T-6 Aircraft award represents approximately $4.3 billion and underscores customer confidence in our execution and industry-leading readiness rates. Similarly, the F-16 Modernization and Services award reflects our ability to support fleet readiness through modernization, sustainment, integrated support and capabilities that remain essential to our customers' mission priorities. We are also seeing continued traction in training and services. The more than $100 million General Motors training award demonstrates how our core competency translates effectively across both defense and commercial environments. In advanced capabilities, the MDA Shield IDIQ award positions us to extend our space domain awareness and emerging missile defense priorities. The Advanced Technology Support Program IDIQ, reflects our growing role in rapid development and fielding of emerging technologies, an area where speed, integration and trust matter deeply. For National Security Programs, our classified awards across cyber operations and systems reinforce the relevance of our capabilities in highly sensitive mission-critical environments. Looking ahead, our qualified pipeline stands at more than $60 billion, reflecting both scale of opportunities and demand for our offerings. We talked through 2025 about an increase of 50% in bid velocity, and that's exactly what we did. Our continued investment in people, process and technology have allowed us to pursue expanded opportunities. In 2026, we are targeting an additional 30% increase as we further leverage investments to capture larger and more complex programs. We are confident in our momentum exiting 2025 and our ability to carry it forward. We are aligned with well-funded priorities, have secured long duration programs and are positioned with customers who value proven execution. Before we move on, I want to note that this slide really represents a company that's winning. V2X excels in mission-critical work with long-term customers and areas aligned with national security priorities. As we look ahead, we believe this foundation positions V2X well for continued growth. Turning to Slide 6. I'd like to discuss something that we are very excited about and the transformation it represents. We are continuing to build our technology first foundation, including targeted investment and best-in-class partnerships. These efforts are driving innovation across our base and improving outcomes for our customers. Let me walk through how we think about this. Our investments are focused on high-growth opportunities, where technology can accelerate modernization and strengthen our technical depth for customers. These investments are designed to use data to move us faster from concept to deployment while remaining tightly aligned with mission needs. Second, we are partnering with the best. We recognize that innovation at scale requires access to world-class platforms and capabilities. That's why we've established partnerships with leading technology companies that bring AI, data automation and advanced robotic capabilities to deliver mission outcomes. Recently, we announced a partnership with Amazon Web Services to advance smart warehousing and global logistics automation. This partnership helps modernize supply chains, improve visibility and enhance resilience across distributed operations. We also recently partnered with Google public sector to deploy secure, responsible AI solutions in a way that meets the stringent security and compliance requirements of our customers. These partnerships allow our customers to benefit from proven scalable platforms. And V2X provides a mission context, integration experience and operational know-how needed to deploy them effectively at speed. These initiatives allow us to apply top-tier innovation across our base. We will be able to innovate program execution through predictive data-enabled solutions to improve decision-making, increase speed and drive more consistent outcomes. Simply put, we are deepening our bias for innovation. We are transforming our global presence into a true global persistence through speed and execution, with operations expanding some of the most complex environments in the world, speed matters. By connecting data, systems and teams across geographies, we will be able to execute faster, respond quicker and deliver consistent performance at scale. We are turning our footprint into a strategic advantage. When we put it all together, you can see how our capabilities come to life. This is what we mean by technology first solutions, mission tested engineering and global persistent operations working together. No one is better positioned than V2X to meet the mission needs of our customers today and tomorrow. Our recent progress reflects our strategy and as we continue to invest, partner and innovate with discipline, we believe V2X is uniquely positioned to extend that momentum, delivering greater value for our customers and creating sustainable long-term value for our shareholders. With that, I'll turn the call over to Shawn for a review of our financials. Shawn Mural: Thank you, Jeremy. Good afternoon, everyone. Please turn to Slide 7. The value V2X delivers for its customers was clearly demonstrated in the fourth quarter, with notable top line growth and strong operating performance. Revenue in the fourth quarter increased 5% to $1.219 billion. Growth was primarily fueled by our training, foreign military sales and rapid prototyping programs. Adjusted EBITDA in the quarter was $88.7 million, a record for the company. Adjusted EBITDA margin was 7.3%. Interest expense in the fourth quarter was $19.6 million. Cash interest expense was $18 million, improving $4.7 million year-over-year. Net income for the quarter was $22.8 million. Adjusted net income was $49.3 million, up 16% year-over-year. Fourth quarter diluted EPS was $0.72, based on 31.6 million weighted average shares. Adjusted diluted EPS in the quarter increased approximately 17% year-over-year to a record $1.56. Adjusted operating cash flow in the fourth quarter was $172.4 million. I feel an important to highlight that the extended government shutdown did not have a material effect on our financial results in the fourth quarter, further demonstrating the enduring and mission-aligned nature of our business. Please turn to Slide 8, where I'll discuss our full year results. Revenue in 2025 increased 4% on a year-over-year basis to $4.480 billion. Adjusted EBITDA for the year was $323.3 million, exceeding the high end of our guidance range. Interest expense for the year was $79.9 million. Cash interest expense was $73.7 million, improving approximately $27 million compared to the prior year period, demonstrating our proactive repricing activities, debt pay down and cash flow generation. Net income for the year was $77.9 million. Adjusted net income was $166.8 million, increasing 20% year-over-year. Diluted EPS for the year was $2.45. Adjusted diluted EPS increased 21% year-over-year to $5.24 exceeding the high end of our range. Year-to-date net cash provided by operating activities was $182 million. Adjusted net cash provided by operating activities was $148.3 million. The ability to generate strong cash is an important characteristic of our business and is further highlighted on Slide 9. In 2025, our solid cash flow generation drove a $116 million year-over-year improvement in net debt to $758 million. This positive performance yielded a net leverage ratio of 2.2x, representing over 1 full turn of improvement in just 24 months. We thought it important to highlight that we achieved this success while executing our capital allocation strategy, which included deploying over $50 million in the second half of the year to accelerate value creation. The strength of our balance sheet and cash flow provides substantial flexibility and optionality to deploy capital, including internal investments and to strategically acquire complementary capabilities, access to new channels and solutions that accelerate our growth strategy. In summary, we are executing on the capital allocation strategy, we outlined in the second quarter and see further opportunities in 2026 and beyond. Please turn to Slide 10. Our backlog and recent wins provide a clear path to revenue growth as we look into 2026. Our backlog at the end of the year was $11.1 billion. Funded backlog improved slightly from the last quarter to $2.3 billion. Important to note that our backlog at the end of the year does not include the approximate $4 billion T-6 award. Subsequent to the fourth quarter, the award decision to V2X was upheld, and we expect to book this award to backlog in the first quarter. This is a great outcome for V2X, representing a milestone program that we expect to add positively to our backlog and revenue visibility. We look forward to delivering our industry-leading mission readiness rates for this important training platform. The book-to-bill ratio for the trailing 12 months was 0.9, in line with our expectations and consistent with our commentary last quarter. Also, as previously mentioned, we expect book-to-bill will be above 1 in 2026. Please turn to Slide 11. We made exceptional progress executing our strategy in 2025. Looking ahead, we believe our recent wins, backlog, limited recompetes and solutions that are transforming the speed with which our customers can achieve mission readiness positions us to continue this momentum. For 2026, revenue is expected to be $4.675 billion to $4.825 billion. We expect revenue growth to accelerate to 6% or $4.75 billion at the midpoint, which compares favorably when taking into account 2025 revenue was at the upper end of our guidance range. Revenue in 2026 incorporates the incremental contribution from our training, foreign military sales and rapid prototyping programs as well as the initial ramp on T-6 and completion of previously referenced certain mission support activities in the Middle East. Additionally, a percent of revenue expected to come from recompetes has improved going into 2026 and now represents approximately 3% of revenue at the midpoint of the guide. Adjusted EBITDA is estimated at $335 million to $350 million. Adjusted EBITDA contemplates the above-mentioned items as well as some internal investments. Adjusted diluted earnings per share guidance is $5.50 to $5.90, representing 9% growth at the midpoint. We expect adjusted net cash provided by operating activities to be $150 million to $170 million. Cash flow in 2026 assumes one additional payroll in 2025, which is estimated at approximately $50 million. We believe cash flow should be in line with our normal seasonal pattern and cash generation occurring in the second half of the year. Cash interest expense is expected to be approximately $69 million with other expenses of $15 million. Capital expenditures for the year are estimated at approximately $25 million. In summary, 2025 was a successful year on many fronts, in both supporting our customers' missions and achieving our commitments to our shareholders and employees. We are well positioned going into 2026 and look forward to discussing our progress with you throughout the year. Jeremy, back over to you. Joseph Gomes: Thanks, Shawn. 2025 was a great year for V2X. We are accelerating our position as a leading provider of mission capabilities. Before I turn it over to Q&A, I'd like to take a moment of appreciation for over 16,000 employees across the globe. Their execution and commitment to our customers' mission propels V2X forward, and prepares us today to take on the missions of tomorrow. With that, I'd like to open it up for questions. Operator: [Operator Instructions] Our first question today is from Tobey Sommer with Truist. Tobey Sommer: I was wondering if you could comment on what has been the trajectory of the company's revenue and activity in the Middle East region with the shifting of resources that direction towards Iran? Shawn Mural: Yes. Good to hear from you, Tobey. Thanks. Yes. So at this time, obviously, the situation is, I'll say, fluid. Our priority right now is to make sure everyone's safe. I'd like to think that we'll participate in whatever the outcome looks like eventually. But today, it's like I said, fairly fluid with ensuring the safety of all of our employees in the region that we have throughout that area. So we'll certainly see how things evolve as time progresses, but that's kind of where we are today. Jeremy Wensinger: Tobey, it's Jeremy. I think the one thing I'd add to that Shawn is right. We were highly concerned for our employees. And we have actually an activity every day that allows us to understand where everybody is. But I do think presence matters. And we talk about that all the time. I think being in the region allowing and supporting our customer in terms of what they're going to do in the region is something that's very important. Whatever happens there, I think presence matters. But the single most important thing we're doing right now, and I think everybody needs to keep this in mind, is that our employee safety and our concern for them is number one. Tobey Sommer: And how much contribution do you expect from the T-6 contract? And is that -- do you think that there will be additional legal hurdles to that transition? Shawn Mural: And I can't speculate on legal hurdles, Tobey. I'll tell you the assumptions that we've made. So you heard what we said in the prepared remarks, we will effectively start that program on March 1, where transition will be complete. You may recall, we began executing that in the mid-third quarter through the fourth quarter, we were paused for a brief period after the first of the year. And so now we'll pick it up in March. From a planning standpoint, here's a little bit about the assumption that we've made on that. There's an inherent lag. This is a largely material receipts job for us, at least at first. And there's a 90- to 120-day type of lag. So in the guide that we gave at the midpoint, you should think it's somewhere around $140 million to $160 million of revenue for us this year. Tobey Sommer: I appreciate that. And what are you seeing in your intel business, which kind of the exposures are relatively new to you, but you had some classified work announced not too long ago. What's the trajectory of that in your guide. Is that area sort of a source of accretive growth there? Jeremy Wensinger: Yes. I think what we did with the QinetiQ's acquisition was positioning us well to augment what we do today. We're excited about what that business brings to us. I'm excited about the fact that it builds on a pipeline that is going to only grow. So I think that is a business that we're very excited about. Operator: The next question is from Andre Madrid with BTIG. Andre Madrid: So I know last year, we had -- you guys have called out 5, $1-plus billion opportunities that you were targeting. On Slide 5, I know you called out $2 billion being awarded. Is there a status update that you can give on the remaining opportunities? Are those still stuff that you're actively bidding on? Or any color there? Jeremy Wensinger: I think the 2 that we retired, obviously, we're thrilled about. We obviously have that plus we've added to that portfolio this year in terms of where we're bidding when we talk about a 30% increase in overall bid velocity. But yes, we're waiting on adjudication on the remaining 3 that we feel very good about. But again, we got to wait for adjudication. But again, the fact that we were able to retire 2 of them. in the fiscal year plus the [ 10-plus $100 million one ], I think those bode well for the business in terms of not only this velocity, but also our ability to win. So I think those bode well for the company. Shawn Mural: Yes Andre, to put a fine point on it. So 1 of those was bid in the fall. 1 of the 3 was bid in the fall, 2 were captured as exactly as Jeremy said and then there's 1 to be bid this year and 1 to be bid in '27. And there's about a year lag between the time the bid goes in and any award assumption that we would have on those things, not counting any protest periods or anything like that. So very modest to any impact in '26 as a result of any of those captures. We'll be talking about those for some time to come, I suspect, but remain very happy with where we're positioned on those. Teams worked extremely hard to put together wonderful offerings and teammates. Andre Madrid: That's very helpful. And then, I mean, pivoting -- it seems like everybody wants to talk about the Middle East, but I know you guys called out the Indo Pacific as a growth area for you throughout much of 2025. Any updates that you could provide there as to how that market is materializing? Shawn Mural: Yes. When you look at the breakdown in the details that we provided, it was flat to slightly down, and we're seeing that, I'll say, continue into '26. So folks may recall, 20 odd-numbered years tends to be training years in the region. We didn't necessarily see that materialize to the volume that we had historically seen. Now we saw an increase in, I'll say, requests to put things in front of customers, they didn't necessarily materialize. So we'll see how things play out in '26. But as I sit here today thinking about where the growth will come from, how we're positioned. There's very good ops tempo. We're really happy with the positioning. Jeremy consistently talks about presence and there's not a month that goes by that we don't talk about opportunity sets in the region. I don't know if there's anything imminent, as I sit here today, Andre, and we think about kind of early 2026. But we'll see. It's -- we're just starting with early innings. Operator: The next question is from Peter Arment with Baird. Peter Arment: Jeremy, Shawn, Mike, nice results. Jeremy, On the -- you had a really strong year in kind of ramping up the bid velocity and you talk about a big pipeline. How should we think about -- are there more like opportunities the size of the T-6 of the world? Or is this going to be more kind of the ones you mentioned where you had 10, $100-plus million awards. How should we think about just the pipeline and what you're bidding on? Jeremy Wensinger: No, it's a really good question, Peter, because I think we're trying to balance it. We're trying to balance what I call big game hunting with singles and doubles. And I think both of them sit in the portfolio very well. But clearly, the administration and prior administrations have kind of consolidated some of these buys into bigger buys, which at our scale allows us to compete. But again, I think the singles and doubles are just as important and I think they add to the overall value of the company. And so when I look at it, candidly, I look at big velocity as the metric. As long as I'm getting the bid volume out the door, it could be big ones, it could be small ones, it can be intermediate ones. And I think that's important to the company because I think that's what feeds the system. Peter Arment: That's helpful. And then just also, there were some pursuits around that you guys have had a lot of opportunities to think about contracts, maybe moving to fixed price or things of that nature. Has there been any kind of further advancing of that with the administration now kind of more, I guess, up and running with the Department of War. Are there opportunities you think you're pursuing on a fixed price basis? Jeremy Wensinger: Yes. I think we're seeing more fixed price opportunities than we have in the past. I don't know, Shawn, if you want to add to that. But yes, I think it's clearly an avenue for us, which we're really good at. Shawn Mural: Customers that have historically been cost type have approached us. It hasn't translated into an award yet as fixed price, Peter. But between, I'll call it, late -- mid- to late fourth quarter and as we sit here today, we've seen a higher ops tempo with customers asking and soliciting those type of offerings from us. So we'll see how that plays out. But encouraging to see, I'll say, some more traction around getting contracts and the appropriate parties that would make that happen engage. So it's gone from more than just talk to words on paper. Peter Arment: And just lastly, Shawn, on the net leverage, you guys have done an incredible job, obviously, setting yourselves up. How are we thinking about kind of the go forward? Is it further reduction? Or are you looking at other pursuits on an M&A perspective? Shawn Mural: Yes. Listen, I think we've said we'll look at all options for value creation for the shareholders. And that remains the case, Peter, right? We're extremely happy with the leverage that the company is at. And Jeremy said consistently, that opens up optionality. I think I highlighted it in the remarks, really happy to deliver $2.2 billion while deploying $40 million, $50 million of capital last year to further enhance shareholder value. So we'll see how '26 plays out, but it's a good spot for us to be in to have those options in front of us. Operator: The next question is from Trevor Walsh with Citizens JMP. Trevor Walsh: I wanted to start with the AI partnerships with Google and AWS. Can you maybe just click in one level deeper around what those opportunities look like kind of broadly as you look at them going forward? Are they more technology-centric type of implementations with the smart warehousing? Or is it more just traditional IT system integrator type work? Just trying to get a sense of what that could look like? And then kind of relatedly, how does that maybe shift by opportunity around like what the margin contract kind of profile might be of those opportunities? Jeremy Wensinger: No, it's a really good question, and I appreciate you asking it. I think AWS was an opportunity for us to look at somebody who does some of the smart -- the best smart warehousing around the globe and use them on things that we do every day. I mean if you think about everywhere we are around the globe, there's a warehouse. And I think AWS is 1 of the best in the world at the ability to manage a warehouse and put their smart warehouse and capability in play. We own all the data. And what they own is the process. And so I think the combination between us and AWS and us and Google, who is clearly invested in AI is taking our data and using our data in a way that's going to enable my customer to have better outcomes, faster outcomes, better outcomes and more efficient outcomes. So I wanted to put myself in a position where I was partnered with the best in the industry to deliver these capabilities because all the data I have and I own. And so they're going to use my data to deliver better outcomes for my customer using their technology. And I think at the end, it ended up being a perfect partnership between them. If you think about AWS, Google and IBM, it was a perfect partnership for us to go with. Shawn Mural: And there's a speed-to-market aspect here, too, right, in terms of how quickly we can deploy things you've heard us talk about the global footprint, right? So don't think about it only from a pursuit standpoint, but capability that we have that we can deploy in a broad scale today, and we'll see how things evolve. But exactly, as Jeremy said, a wonderful partnership to go forward and deliver, we think, enhanced capability to our customers at speed and at scale. Jeremy Wensinger: I mean we're already doing on the WTRS program, where we're giving them capability that they've never had before, and I'm looking forward to extending that to other customers. Trevor Walsh: Great. That's fantastic. Shawn, maybe just a quick follow-up then for you. On the T-6 contract, appreciate that color that you gave around the revenue. Can you maybe provide a little bit of color as well on how that's going to affect backlog? I realize the whole amount will go into backlog in Q1, as you mentioned. But could you maybe give us a sense of what would be funded or unfunded if you have like maybe a high level take just as we think about that? Shawn Mural: I don't have the funding and unfunded portion yet. We're working through that with the customer. But if it's like other programs we have, it wouldn't shock me if it was funded annually or slightly less. In terms of the -- what we would get incrementally, that's not at all unusual in these type of programs. I do think the booking that we will take in Q4 will not be the entire value that we were awarded. There's options in there that cannot all be exercised. And I say that it's kind of one or the other from an optionality standpoint, Trevor, right? So we'll -- the team is going through that right now from a bookings and backlog practice, you should all think of this as being tying our booking to what our performance obligations on the contract to include the options will be. And that's what we'll end up in our backlog here at the end of the quarter. Operator: The next question is from Jonathan Siegmann with Stifel. Sebastian Rivera: This is actually Sebastian Rivera on the line for Jon Siegmann. Congrats on the strong print here. I guess I just wanted to start with a broader question. There's kind of been some AI existential threat jitters recently to service names and I kind of wanted to just get your glass half full view, if you will, on how AI will be a lever for the company over the short to medium term and kind of perhaps in the context of some of your recent wins and partnership announcements. Jeremy Wensinger: Yes. I think Sebastian that's why we lean forward with partnerships that we have. We decided that we wanted to be on with partners whose critical path was the future of AI. And I think Google is that. And I think Google also recognized that we have the information that makes AI operate. And so when I look at the transformational aspect of AI in our business, I wanted to partner with somebody who brought a tool, and I brought the data and I brought to mission capability and I want that in the context and the contract that enable that AI to work. So it was a natural partnership that occurred and I'm thrilled to have that part of the team. I'm thrilled to have Amazon part of the team. I'm thrilled to have IBM part of the team. I think our business is going to be enabled by this transformational technology because we have all the mission know-how. I mean I'm the guy on the ground. I'm the guy doing all the work. And they're going to enable me to network much better, much faster and much more efficient and delivering my customer a much better outcome. So we're excited about that. Shawn Mural: And Sebastian, I'll say that think of this in increments, right? There's not a big bang here. There's incremental filtering, sorting, sourcing, those types of things that can be done to demonstrate speed and agility to our customers by using capabilities that already exist. And exactly as Jeremy again has said before, we have data, we have presence. So let's leverage those things and make incremental progress on this -- the adoption of these tools and capabilities as we go forward. Sebastian Rivera: Yes. That's super helpful. And then on the back of the recent Shield IDIQ. Can you maybe provide some more high-level color on kind of where you see the company kind of positioning with regard to Golden Dome requirements over time, I guess, kind of beyond the COBRA DANE and COBRA KING if you have that visibility today. Shawn Mural: I think that's going to be a long-term play. Again, I would call presence and also contract vehicles as the key to participating. Obviously, getting on the contract, having the presence on the ground, having the presence at the local facilities is everything. So as this thing evolves, our goal was to get into the mix that allow us to be a participant to enable the government to deliver Golden Dome, and we think we're well positioned to do that. Operator: The next question is from John Godyn with Citi. John Godyn: I wanted to follow up on the commentary about book-to-bill and just to make sure I understand it. The T-6 award is hitting in the first quarter. Is that correct? Jeremy Wensinger: Correct. Yes, we will book it. The protest was resolved here in the first quarter, and so we will reflect it in our backlog at the end of Q1. John Godyn: And the pipeline, some of the commentary around that, it seems very positive and optimistic. I was curious the guidance of being above a 1x book-to-bill for the full year. Is that -- would that still be the case if we excluded the T-6 award -- or is the T6 award kind of critical in hitting the greater than 1x book-to-bill for the full year? Shawn Mural: Yes, I'd say the T-6 award we should certainly be above 1 with the T-6. Like I said earlier, it's early innings in the year. We will see how some things played out, but we're confident that we'll be at one. There's opportunity to be well above 1, 1.4, 1.5 or more, depending on how some other things play out. But we'll see the timing of certain awards as they play out in the year. We can never -- we can never predict those things perfectly and protest factors and such. But again, feel very comfortable, where we sit today with the guide that we've put out. Jeremy Wensinger: I think, John, the thing I would probably burn your calories on is we bid 50% more last year than we did the year before. We're projecting to mid 30% more this year than we did last year. Our win rates are -- I'll stand them up against anybody in the industry. That's an easy way for you to think about it. John Godyn: But it sounds like we need that T-6 award in the number to be above 1x book-to-bill. Is that -- am I hearing that right? Shawn Mural: Yes, that's a fair interpretation. John Godyn: And then if we just look at the full year guidance, just simple question about kind of the sensitivity or just the range around kind of low end versus high end. Maybe you guys can talk a little bit about on the revenue and the margin side, what drives the sort of midpoint versus the high end of the guide. Shawn Mural: Yes, mostly timing of things, right? So I think we put out there we only -- we're down to about 3% of the revenue at the midpoint is up for recompete. And so timing of other new business activities or on-contract growth, things of that could sway it right relative to that ops tempo and when we might see some things materialize, we're feeling very good as we sit here today, for the line of sight we have to the total year, but specifically in the first half, and we'll see the timing of awards. But it's nothing more than that, really. Operator: The next question is from Ken Herbert with RBC. Kenneth Herbert: Just wanted to follow up maybe -- just wanted to follow up on the margin discussion. How do we think about with the T-6 and incremental bookings you're seeing this year, what's the potential to see better than sort of the flattish margins in '26? Or what are maybe the key puts and takes as we think about potential margin upside? Shawn Mural: Yes. So I'll go to the many of our programs that start out early, and we've got several this year that are contributing to growth. They start out at margins that are somewhat dilutive to the company composite, and then they grow. And so T-6 in the early phases, we'll see. We're going to do the EAC here in Q1, and we'll see. But it wouldn't shock me if it follows the profile for most of our programs that are like that, that we tend to grow into the margins. It takes a little bit of time because what you do is you reengineer the process around delivering those industry-leading readiness rates that we have across the majority of the platforms that we have. And so you've kind of got to tear things down and then build them back up. You've got the supply base. All of those things that go into it, but we're really happy with the performance that we ultimately get. So I don't know that I look at that as being a real margin enhancement activity here in 2026. But I think we have full confidence that the team will deliver to the commitments, 100%. Jeremy Wensinger: Look, I think Shawn is right. I think every program kind of goes through its life cycle. But once my team gets in and they're able to get a hold of the supply chain, and they're able to get a hold of the employment base and they're able to understand what's the best-in-class way to do things, to deliver the readiness rates that we deliver. I have all confidence in that team's ability to do this. Does it take us a little bit of time to do it? Yes, because you're taking over someone else's preexisting program, but it takes us a moment to just conform it to the way we do business. And once we do, we do exceptionally well. Kenneth Herbert: Yes. That's great. If I could, Jeremy, maybe just obviously, the scale of what you're bidding is up significantly, and I can appreciate then the tailwinds on the top line. Is it fair to say that the stuff you're bidding today to the extent to which you're successful on it would support sort of a structural step-up in margins over time, obviously, as the new work ramps? Jeremy Wensinger: I would say we're bidding work that's accretive to the overall business as a norm to do our posture going forward. That is our posture. Now to Shawn's point, well, we have programs that start out because of where we inherit something that is not accretive day 1, but it grows into itself, absolutely. But as a corporate policy and process, we are -- we have a strong conviction around growing margins. Operator: Next question is from Noah Poponak with Goldman Sachs. Noah Poponak: Last year and the year prior, the top line growth was stronger in the back half than the first half. I'm just curious if that holds this year or if with the much easier compares in the first half and then tougher compares in the back half if the shape of this year is different? Shawn Mural: Yes, it is a little bit different. This year, I think it's more balanced. No, I think it's more 50-50 in terms of what that profile looks like on the revenue side. Noah Poponak: Helpful. And Shawn, can you just walk us through the moving pieces on cash flow as you wrapped up '25, you had the -- you sort of flagged the possibility of collections related to government shutdown, ended up coming in fairly close to the low end of the original range. I guess I would have thought '26 would have maybe grown from the '25 original range and then also had that working capital catch up. Can you maybe just bridge us through that? Or just sort of where should we think of -- how should we think of converting the EBITDA to the free cash flow going forward? Shawn Mural: Yes. Yes. So I think -- yes, you're right, '25 did come in a little bit, certainly higher than the midpoint of the guide that we gave at the $148 million, having a couple of extra days, we saw significant receipts, I'll say, right at the end. And candidly, that's why we adjusted because there was timing that was, I'll call it, somewhat unpredictable. In terms of 2026, I think when we look at -- we have an extra pay period in 2026 that is worth about $50 million. And I think when we think about net income conversion at the midpoint of the guide, we put out, we're about 115% net income conversion. So I think it's -- I think we're pretty good this year. There are some -- that we will be cash negative in the first half of the year. As always, the profile will look probably very similar to what played out in 2025. Noah Poponak: And then just maybe zooming out and thinking about long-term growth, you have some new programs ramping this year that drives a pretty good looking growth rate relative to the industry. That has to keep growing. And then you've discussed a pretty healthy bid pipeline. Can you grow what you're forecasting this year for multiple years? Or do you start to hit just a higher base and tougher compares that drives it to decelerate from here? Jeremy Wensinger: No. I think we're sitting on a target-rich environment. When I look at the pipeline, we are very, very selective about what ends up in the pipeline. And it is all around our ability to capture and win and not burn unnecessary resources on something that's a flier. And so when I look at that pipeline that Roger has put together and I look at the win rates that are reflective of that, I feel very good about the fact that we can continue to grow. We are -- we have -- look, we're not touching the vast majority of what's an addressable market. And we have nothing but opportunity in front of us. We continue to build out Roger's organization in terms of growth. We continue to hire new people all the time. That is the least of my concerns about having something to grow on is trying to make sure that we're prepared for that growth. That's where my focus is. Operator: The next question is from Mariana Perez Mora with Bank of America. Mariana Perez Mora: So first one on '26 guidance, could you mind discussing for the midpoint, what kind of recompete risk you are thinking about? And then like what are the major programs like that are driving this growth? Like this WTRS ramping that much or even within like you mentioned FMS and international with [indiscernible] IDIQ also expanding? Like what are the main drivers for that midpoint? Shawn Mural: Yes, sure. So I'll give you color around what I said in the prepared remarks. So from an FMS standpoint, we're growing from a range standpoint, think of $150 million to $170 million in that area. From a training standpoint, year-over-year, we're about $130 million to $150 million. I mentioned the T-6. We do have, and I previously mentioned some Middle East mission support activities that are concluding and kind of ramping down. And so when you net all those things together, you get the midpoint year-over-year growth of about 6%. You hit on recompetes. Recompetes are about 3% today of the revenue -- projected revenue growth at the midpoint. Mariana Perez Mora: And then how should we think about like at the midpoint, how much is already covered by the funded backlog? And how much you guys have to still go on like get. And then as a link to that, the context or the framework for this question is, we have seen a shutdown. We are getting into a year where we'll see midterm elections later in the year, like how is the award environment and how that could affect this range for '26? Shawn Mural: Sure. So I'll answer your question on the backlog, the revenue in backlog, although I would distinguish its total. It's not necessarily funded at this time because funded has seasonality to it when contract performance is flipped in the middle of the year and that sort of stuff. But approximately 85% of the total year's revenue is backlog today. That, of course, excludes T-6 that I mentioned earlier because we will book that in Q1. From an award cadence standpoint, I think the fourth quarter played out almost exactly as we thought in terms of where we ended up. The first quarter is playing out kind of very, very similar. We'll see how the stuff progresses throughout the year. But I'll go back even a year ago, when we play -- when 2025 played out, the booking cadence was, by and large, on plan in terms of what we saw. Will that persist for all the reasons that you just mentioned, Mariana, I don't know. But in terms of cadence, in terms of an expectation and aligned with what our internal plans have been, I think it's been pretty consistent. Jeremy Wensinger: Yes. I think Mariana is the way you need to think about us is persistence at the mission level requires somebody to be there. And almost entirely what we did is keeping aircraft in the air, keeping the base running delivering technology and capability, those things. And yes, they could be influenced by an election that could be influenced by budgets, whatever you want to do. But candidly, we saw very little implications associated with the government shutdown associated with the fact that every -- people want to keep aircraft in the air. People want to keep bases running. People want to have technology delivered. We saw very few implications with that. And so do I think we could be impacted by politics, absolutely. Did we see it to Shawn's point, No, everything pretty much stayed on schedule, which we were pleasantly surprised by. Mariana Perez Mora: All right. And last 1 from me. You mentioned throughout the call how you want to use capital deployment and partnerships to be prepared to get to, I don't know, support is like more complex and larger programs and particularly around rapid development and fielding of these new technologies. Could you mind discussing number one, if you already -- how strong is the M&A pipeline? And number two, any particular efforts that you can highlight that you are doing internally to be able to support these things and to have the best technologies? Shawn Mural: Yes. I think 1 of the things that we're really happy about from an investment standpoint and the way things have played out for us has been some of our rapid prototyping activities, right? We talked about that last year. The team's ability to field assets go from a paper design to field an asset in a very short period of time has just been remarkable. We measure that in months or weeks in some cases, right? So that speaks to some of the investments that we've made internally as well as -- and people might not think of it this much, but we get co-investment from our customers or CRAD dollars to help support those rapid prototyping, that development work, certainly low risk to us, but speaks to our ability to get things fielded in a very timely manner that we think distinguishes us in the marketplace. Jeremy Wensinger: I would agree with that. But I would also tell you, Mariana, we decided in August of '24 to make fundamental shift in how we think about the next 3 to 5 years in the business. And I think when you saw the announcements that we put out, it was because we made those investments. We made those investments in the future of the company. And those investments are going to pay dividends because we believe that our ability to be effective for our customer means that we are going to deliver technology into our mission. And that is the only way in which our customer is going to benefit long term is taking advantage of what is commercially available to everybody else, and we're leveraging it into what we do today. Operator: The next question is from Joe Gomes with NOBLE Capital. Joseph Gomes: Most of which have already been asked, but I'll throw this one out there. So lot of positives. But as you look at '26, what do you see as kind of the biggest risks for the company through achieving the '26 guidance? Jeremy Wensinger: Joe, it's a great question because I think it always comes down to -- we are a very responsive company. And if the customer tells us to move left, we move left. If they tell us to move right, we move right. We don't always get to see like in the Middle East, what may or may not happen. So that is not always a benefit in terms of foresight for us. But I do think that it creates opportunity for us and it has for a long time because we're so responsive. I don't view it as risks as much as it is being prepared, making sure our recruiting team is prepared, making sure that our team is prepared on the ground, making sure we're able to move when the customer needs us to move, building whatever they need us to build, making sure the aircraft is in the air. Those are things that we are very good at. I don't see the risk in '26 as much as -- it keeps me up at night is making sure we're prepared for that customer when they move at that moment's notice on those mission requirements that we're there to support them at the time and the speed at which they need us to be. That's what keeps me up at night. Operator: The next question is from Kristine Liwag with Morgan Stanley. Kristine Liwag: Just following up on Noah's question earlier on cash flow. When we look at adjusting the operating cash divided by adjusted EBITDA, it looks like 2024 was a higher watermark 52% of that conversion versus 46% last year. And the midpoint of your guide for this year implies 47%. I guess I would have thought that this would have been trending higher, especially as the leverage comes down and you get some tailwind from interest expense. So how should we think about these metrics? Is this the right way to think about the cash generation of the business? Is there anything that's changing in the cash cycle or cash milestones that we should think about? Shawn Mural: No, it's really just the additional payroll that we have this year, which is worth about $50 million. So if you adjust it for that on the midpoint of the guide, the conversion would be about 115% against net income. And so it's really nothing more than that. Kristine Liwag: And then does that mean for 2027 with the extra payroll for '26, you should see a higher number for that conversion for that following year. Would that be fair? Shawn Mural: All else being equal, yes. Kristine Liwag: Great. And following up on what you said on the Middle East, you've got some contracts that are sunsetting that's factored into your guidance. Depending on how we see Iran play out this year, is there potentially more upside to that opportunity set in the region? And how do you think about potential timing or magnitude if anything does materialize? Shawn Mural: No, no, no. It's very early. So our guide doesn't contemplate anything today because we don't have any requirements to react to, right? As we said earlier in the call, we're ensuring the safety of all of our employees in the region. Could things develop? Yes, they have in the past. And those things it would purely be speculative at this point, Kristine, to think about what that could turn into or where it might be. We know that there's a very large mobilization effort going on in the region. I think they said the highest amount since 20 -- or since 2003 in terms of assets in the region. So could there be some space for us. Yes, we have not contemplated any of it today. No. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Jeremy Wensinger for any closing remarks. Jeremy Wensinger: Thank you for joining us today. I really appreciate you taking the time to share with us what we did in 2025. I'm so proud of the team. I'm proud of the 16,000-plus employees and what they do for us every day. And I appreciate your interest in V2X. And I hope that we were fulsome and clear in our remarks. So thank you so much. Take care. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
William Winters: Good morning and good afternoon, everyone, and welcome to our full year 2025 results call. I'm joined here in London by Pete Burrill, our Interim Group CFO; and Manus Costello, our Global Head of Investor Relations. We'll take you through our results and outlook before opening up for questions. Now 2025 was an extraordinary year by any measure. It tested the resilience of the global system and the relevance of institutions operating within it. It was a year shaped by heightened geopolitical tension, tariff announcements and periods of significant financial market volatility across multiple asset classes. But it was also a year that demonstrated something fundamental, that global trade, capital flows and economic connectivity endure and even thrive and that institutions built to support them responsibly and at scale matter more than ever. Now when I spoke to you at our first quarter results in the immediate aftermath of the tariff announcements, I said that we were entering that period of global volatility from a position of strength. Our results for 2025 demonstrate exactly what that strength looks like in practice. Our underlying return on tangible equity for the year was 14.7%. This is not just a financial outcome. It's evidence of a strategy that's working and a franchise that's delivering with consistency. We delivered record annual income of $20.9 billion, up 8% year-on-year. That growth was very broad-based. Global Markets and Global Banking both achieved double-digit growth for the year. Our Wealth business grew by 24%, supported by record net new money of $52 billion. Importantly, this growth was delivered despite interest rate headwinds and a softer fourth quarter for episodic income in markets. It speaks to the depth of our client relationships, the relevance of our capabilities and our ability to deploy them precisely where our clients need us most. And whilst it's early days, we're encouraged by the start of 2026 across the engines of non-NII growth, even against what was the strong first quarter last year. Our strong capital position allows us to grow while continuing to deliver attractive returns to shareholders. Today, we're announcing a further share buyback of $1.5 billion, which will start imminently. We're also proposing a full year dividend per share up 65% year-on-year. And as you'd expect, we're stepping up our shareholder distributions while maintaining a full investment program intended to build on the strong momentum in our business. The outcomes we delivered in 2025 mean that across income growth, return on tangible equity and shareholder distributions, we've achieved the objectives of our 3-year plan, and we've done so a year earlier than initially guided. Our 2025 underlying return on tangible equity was well above the target we set ourselves for 2026 and income met our 2026 guidance a year early. And we did this while achieving strong underlying positive income to cost jaws in both 2024 and 2025. We've returned significant value to our shareholders by announcing distributions exceeding the $8 billion target since February 2024. These results highlight our strong financial performance and the success of our strategy. As we have exceeded our 2024 to 2026 group targets already, we're introducing new guidance for 2026, which we'll set out later. Additionally, going forward, we'll be presenting our results on a reported basis, shifting away from underlying financials. This move has been in the pipeline for some time. We intend for this to provide ever more focus on a single set of financial outcomes. We believe it will provide a clearer and more consistent framework for both our financial disclosures and future guidance. Our performance is the result of sustained execution over a long period of time. It reflects long-term strategic choices, disciplined focus and an increasingly high performance culture that prioritizes collaboration and delivery across markets, products and sectors. But this plan was only ever a milestone for us. Reaching it sooner is significant because it encourages us to pursue our ambitions with even greater determination. I want to thank our clients for the trust they place in us. I want to thank our partners for working with us in increasingly integrated ways. And I want to thank our colleagues across the group for their professionalism, resilience and commitment. These results are a direct reflection of their efforts. 2025 marks our fifth consecutive year of improvement in both underlying and statutory return on tangible equity. We've taken advantage of a generally supported business environment with shifts in trade and investment flows working in our favor and growth remaining strong in most of our key markets. But we've amplified these long-term trends by growing our franchise in a focused, disciplined and responsible way, by managing costs and capital rigorously and by communicating clearly and transparently with all of our stakeholders. I am committed to maintaining that focus so that we continue to deliver sustainably higher shareholder value over the long term. At our event in May, I and our team will set out our strategy and associated medium-term targets in more detail. We'll explain how we see the evolution of the global economy and trading systems, as I set out in the annual report. We'll discuss how these themes affect us and how we intend to build on the momentum that we have created, how Standard Chartered is playing an increasingly distinctive and valuable role in the global financial system, and we are doing so profitably. We'll discuss how our footprint and connectivity, our expertise and our differentiated capabilities position us well, not just to perform, but to lead in the environment ahead. Pete will now take you through the 2025 performance in more detail and the outlook for 2026. I'll then return to discuss how we continue to support our clients across our business segments, after which, Pete, Manus and I will be happy to take your questions. Pete, over to you. Peter Burrill: Thanks, Bill. Good morning and good afternoon, everyone. I will now take you through our 2025 4th quarter and full year results. In my remarks, I will be comparing underlying performance year-on-year at constant currency, unless otherwise stated. Our full year 2025 income was $20.9 billion, up 6% or 8% excluding notable items. The performance was primarily attributable to our growth drivers of Wealth Solutions, Global Markets and Global Banking. These areas delivered strong results, underlying our ability to capture opportunities in our targeted business segments. Q4 income was broadly flat due to weaker Global Markets, which I will talk about in more detail on the CIB slide. On a full year basis, costs were up 4%, and we delivered 4% positive income-to-cost jaws. Profit before tax for the year was up 18% to $7.9 billion, and our underlying return on tangible equity was 14.7%, including around 70 basis points of FVOCI gains from Ventures. Our reported profit before tax was up 18% to $7 billion in 2025 with a statutory return on tangible equity of 11.9%. Our earnings per share increase of 37% reflects the strong underlying performance and ongoing reduction in share count. Now let's look at the performance components in detail. Fourth quarter NII came in slightly higher than expected and was up around $200 million quarter-on-quarter. This is primarily due to the movement in HIBOR during the quarter, where we benefited from both improved CASA pass-through rates and treasury-related timing differences. As a result, our full year NII was $11.2 billion, up 1% with a negative impact from rates and WRB portfolio actions, offset by volume growth and mix improvement. In 2026, we expect NII to be broadly flat year-on-year based on several factors. First, as mentioned, NII in Q4 was higher than anticipated due to HIBOR increases. This has already reversed in Q1. Second, we outperformed on pass-through rates during 2025, but we expect these to normalize over time. Third, our currency weighted average rate outlook indicates a 44 basis point reduction in 2026 and, consequently, we anticipate a continued headwind due to movements in interest rates throughout the year. Lastly, the impact from WRB portfolio actions is expected to be around a 2% headwind to NII this year. These impacts will be mitigated by volume growth, but the pace and extent of volume growth remains uncertain. Moving on to non-NII. In 2025, our non-NII increased 13% year-on-year or 17% excluding notable items. This robust growth was primarily driven by the strong performance in Wealth Solutions, Global Markets and Global Banking. In addition, the year's performance benefited from gains realized on the SOLV transaction. I'll talk to the products performance in more detail when I come to the business segments. Now turning to expenses. Q4 operating expenses were higher quarter-on-quarter, driven by a number of factors. First, we continue to invest in our people and businesses. Second, we took some regulatory charges related to a pension code change in India and a PRA rule allowing accelerated vesting of shares. Lastly, during the quarter, we had an increase due to the rise in our share price and the associated impact on deferred compensation costs. In some of our markets, regulatory restrictions such as exchange controls prevent us from settling deferred compensation in the form of shares. In such instances, we settle those awards in cash, and therefore, the material increase in the share price witnessed in 2025 and especially in the last 2 months of the year impacted deferred compensation costs. As a result, full year 2025 operating expenses were up 4% with the increase from business growth and inflation partly offset by Fit for Growth savings. We delivered 4% positive income-to-cost jaws excluding notable items, and our underlying cost/income ratio improved 80 basis points to 59%. Our Fit for Growth program continued to progress with over 300 initiatives driving simplification, standardization and digitization. We have spent close to $700 million in cost to achieve, or CTA, since its inception and have achieved over $700 million in run rate savings. As we have been explicit in the past, we have remained disciplined on how we spend the CTA, ensuring that we deliver one-for-one return on investment in FFG and finish the program in 2026. As we enter the final year of the FFG program and we reflect on the broader investment opportunities across our business, some of which were not visible at the outset of the program, we have revised our estimates of both CTA and savings from FFG. We now expect FFG savings and total CTA to be around $1.3 billion rather than our initial expectation of $1.5 billion. As a reminder, from 2026, all financial results and guidance will be based on reported figures. However, to clarify how our costs will evolve this year, we have shown on this page that our 2026 underlying costs would have been $12.6 billion at constant currency compared to the $12.3 billion in the previous plan. Two things drive the increase. Our business has demonstrated strong performance, consistently exceeding our established targets, including significantly positive income-to-cost jaws. That gives us confidence to invest into initiatives which will deliver both productivity and growth benefits in the years ahead, such as data infrastructure and AI enablement. This represents the majority of the difference. The remainder is due to higher performance rated costs, for example, the need to pay our relationship managers for exceptional performance in affluent. As we move toward a reported basis this year, we are now targeting costs to be broadly flat in 2026 at constant currency, which would mean around $13.3 billion. Credit impairment for 2025 was $676 million, up around $100 million as 2024 included significant net recoveries in CIB. The level of impairment in WRB improved year-on-year, reflecting the impact of portfolio optimization actions, while CIB impairment remained benign at $4 million. Our overall loan loss rate of 19 basis points was broadly flat year-on-year. We expect this to normalize towards the historical through-the-cycle 30 to 35 basis points over time. Asset quality remains resilient in the face of a volatile environment and our high-risk assets were down $1 billion quarter-on-quarter. The $1.5 billion reduction in early alerts was due to a combination of client upgrades, repayments and a sovereign downgrade from early alerts into stage 3. We continue to monitor our credit portfolio closely, and we are not seeing any significant signs of new stress emerging across the group. Moving on to the balance sheet. Underlying customer deposits were up 12% in the year with growth in CASA and term deposits across WRB and CIB. Turning now to capital. Risk-weighted assets were $258 billion, up 4% in 2025. As previously guided, we took the annual increase in operational risk RWA in the fourth quarter, which we would usually have taken in the first quarter of the following year. This has resulted in 2 increases in operational risk RWA in 2025. Going forward, this will be taken every fourth quarter. We closed the year with a CET1 ratio of 14.1%. And as Bill mentioned, we are announcing a new $1.5 billion share buyback, which will take our pro forma CET1 ratio to 13.5%. Since the beginning of 2024, we have announced $9.1 billion of shareholder distributions, including the buyback and dividends announced today. This exceeds our 3-year target of at least $8 billion ahead of schedule. On a per share basis, we have increased our full year dividend and tangible book value by 65% and 12%, respectively. Now let's take a look at our business segments. CIB income for the year was $12.4 billion, up 4%. Global Banking was up 15% driven by strong growth in both origination and distribution. The 7% decline in Transaction Services was a result of lower rates. Global Markets was up 12% as we delivered consistent growth in flow income above our long-term trajectory. Episodic income was a small negative in Q4 and down significantly from last year. This was due to the timing of large client deals and broad-based market movements across a range of asset classes, which impacted inventory held for client activity towards the end of the year. As we've noted in the past, episodic income is less predictable and can be volatile from quarter-to-quarter. But on a 12-month rolling basis, it continues to be within its historical range and remains a meaningful contributor to our Global Markets income. Moving to WRB. 2025 income of $8.5 billion was up 6% driven by consistent strong growth in Wealth Solutions, up 24%. During Q4, we generated $10 billion in affluent net new money. This contributed to a cumulative total of $52 billion net new money for 2025, equivalent to 14% growth in affluent AUM, reflecting excellent momentum in the affluent segment. We onboarded 275,000 new-to-bank affluent clients in the year and up-tiered over 300,000 individual clients across the continuum. As I mentioned earlier, we will be making some changes to our financial disclosures effective from the first quarter of 2026. We will be moving away from presenting our financials on an underlying basis by allocating restructuring and other items from below the line to above the line. We are also going to report our Digital Banks within WRB and SC Ventures will be reported within the Central & other segment. We will publish a data pack showing the representation of financial data on this basis prior to our Q1 results. So to conclude, we expect 2026 year-on-year income growth to be around bottom end of our historical 5% to 7% range at constant currency with adjusted NII expected to be broadly flat. Our reported costs for 2026 are expected to be broadly flat at constant currency. We will no longer provide underlying cost disclosures. And we are now targeting a statutory return on tangible equity of greater than 12% in 2026. Our medium-term financial framework will be provided at our investor event in May. With that, I will hand back to Bill to give you an update on our strategic progress. Over to you, Bill. William Winters: Thank you, Pete. First, let me talk about CIB. At Q1, we told you that our network business, which represents around 60% of our CIB income, is highly diversified, resilient and agile. And that has continued to be the case. Our strength in providing network services in and around China, payments, FX, financing, et cetera, has been a key part of our outperformance as Chinese and international corporates diversify manufacturing and ship their supply chains. We often play a central role in those shifts as demonstrated in our China corridors to markets across Asia and South Asia, the Middle East and Africa. Trade and investment flows are also picking up pace as regions seek elements of self-sufficiency, in search for more resilient middle power status. Regional and bilateral trade pacts in South Asia, the Middle East, Africa, and ASEAN will support growth in trade and investments across our footprint markets, playing to our core cross-border strengths. Now as you can see, our network income remains diversified by product. It's not just trade. And despite interest rate headwinds in Transaction Banking, our network business has continued to grow. We also have continued to see growth in income from financial institution clients, and we've made further progress towards our 60% medium-term target. The financial institutions client segment, which generally delivers a higher return on risk-weighted assets, remains an attractive area for Standard Chartered. We stand out in serving financial institution clients due to our differentiated products, extensive local market and global networks and specialized capabilities in areas like security services, financial markets and financing. These trends enable us to meet the diverse needs of a wide range of clients, including banks and broker-dealers, investors, sponsors, insurers and sovereign wealth funds. Meanwhile, we've remained disciplined in managing resources within CIB to make sure that we were focusing on serving our top tier clients and doing so more effectively. These are the ones where we can provide more value. In 2024, we spoke about how we were planning to exit around 3,000 clients by the end of 2025, and I can confirm that we have hit this target with minimal loss to income. Our focus on optimization does not end here, and we continue to manage our RWAs in order to maximize the returns for shareholders and invest to serve our client needs. Now if I can shift to our wealth and retail business. We announced just over a year ago that we were targeting $200 billion of net new money over 5 years. In the first year, we've been ahead of that pace, delivering $52 billion, which is equivalent to 14% growth of AUM and makes us the fastest-growing wealth manager in Asia. We also now rank as the #3 wealth manager overall across Asia with affluent AUM of $447 billion. Our Wealth Solutions income continues to grow strongly across asset classes. Our product innovation and advisory capabilities, including initiatives in AI, put us in a great position to capture market opportunities and cater to changing client preferences. The growth in Wealth Solutions, combined with the decisions we made to exit single product relationships and the entirety of our retail operations in certain markets, have helped us drive affluent to 70% of WRB income. This is great progress towards our 75% medium-term target. Turning to Ventures. We have made strong progress across the digital banks. In 2025, Mox continued its strong growth trajectory, achieving a 15% year-on-year increase in customer base and reaching around 750,000 customers. Trust Bank also continued its momentum with customer numbers up 15% year-on-year, reaching over 1 million customers and taking its share of the adult population of Singapore beyond 20%. Within our SC Ventures portfolio, we're building ecosystems in areas of the future of finance, including digital assets, tokenization and blockchain settlements as well as data and technology capabilities that will serve our bank and our clients well in future years. We actively manage the portfolio, building ongoing momentum across a number of fronts. You'll recall that we had a successful merger of SOLV India into Jumbotail in the first half of 2025. We've also seen unrealized gains, particularly from our stakes in Ripple and Toss, which have contributed around 70 basis points to our underlying RoTE in 2025. Now as Pete mentioned earlier, this is the final quarter that we're reporting the Ventures segment separately. We'll be reporting Digital Banks as a product within WRB, reflecting how they're managed within the group and the increasing synergy we see between the Digital Banks and the rest of our WRB business. Given the maturity of the portfolio of investments, SC Ventures will be reported as part of Central & other going forward, but we'll continue to call out key investments, gains and disposals as and when they occur. Now if you only listen to the noise in the markets, you might think that sustainable and transition finance was going the way of the dodo. This could not be further from the truth. Our clients are sticking with their commitments and our capabilities continue to improve. We've exceeded our income target of at least $1 billion in 2025 and see further growth from here. With $157 billion mobilized in sustainable finance since the beginning of 2021, we're over halfway towards our commitment to mobilize $300 billion by 2030. Highlights in the year include our EUR 1 billion inaugural green senior bond, and we're proud to be ranked first in the Global Bank Climate Adaptation Assessment 2025, ranking the world's 50 largest commercial banks on their adaptation maturity. Bottom line, we're committed to our sustainable finance agenda, seeking to do the right thing and earn good returns doing that. So to conclude, 2025 including Q4 was very strong for us, and we're delighted with the outcome even with some noise in the fourth quarter. We completed our 3-year plan in just 2 years, which speaks to our disciplined execution and momentum. We started the first quarter of 2026 strongly, particularly across our growth engines in CIB and WRB, where we see continued client activity and opportunity. We're announcing a new $1.5 billion share buyback and a 65% increase in full year dividend per share. This is a clear signal of confidence in our performance today and in the strength of our outlook. We're targeting a statutory RoTE of over 12% in 2026. Before we move to questions, I want to lift the lens and look ahead a bit. As mentioned earlier and in the annual report, we see a number of major structural trends, long-term shifts that are reshaping global trade, capital flows and growth. These are not short cycle opportunities. They're powerful forces that will play out over many years and will play directly to our strengths. We've already positioned against those trends. And importantly, we continue to invest in and sharpen our focus on our critical and relevant competitive advantages. Our ambition is clear: to create an ever more distinctive, exciting and high-performing Standard Chartered, one that delivers growth across every dimension that matters for our clients, for our communities, for our top line, our bottom line and, of course, for our shareholders. We'll go into this in much greater detail in May. But the direction of travel is clear. The momentum is real, and we're building a business that is set up for sustained high-quality growth. And with that, I'm going to hand you over to the operator, and Pete, Manus and I can take your questions. Operator: [Operator Instructions] And we're going to take the first question on audio line. And it comes to line of Joseph Dickerson from Jefferies. Joseph Dickerson: Two questions, if I may. The first, on the investments that you're making in the business, I guess, is the 60,000 per quarter of accounts that you opened in Wealth, is that capacity constrained? And if so, are some of the investments that you intend to make or are making designed to remove processing constraints and effectively increase account opening capacity on the Wealth side? And then secondly, if I can invite you to comment further on the start to the year on Wealth. Is this coming from the deposit side of the equation? Or the investment side of the equation or both? And I guess do you have an outlook for this year on the deposit side given there's a fair amount of maturities on the Mainland that will be happening this year that could send further flow your direction in Hong Kong? William Winters: Great. Thanks for the question, Joe. I'm going to start it off, I'm going to pass to Manus for some color. And first of all, it's a pleasure for me to be sitting here with Manus and Pete, just to call that out, because it's not the same as last time. So first on the investment in the business. So of course, we're delivering the 60,000 of clients with the current capacity. So it's not something that we're experiencing any particular constraints. We're significantly adding both tech and RMs. That's the $1.5 billion program that we announced last year that we're well on the way to deploying, and I think we will continue to make those investments, which should not so much increased capacity, it will, of course, but remove bottlenecks along the way. We still have a largely RM-driven business model, and we're increasingly supporting those RMs with technologies and AI and otherwise, which is going really well for us. But we see the RMs as a critical part of the future and as they are an essential part of the present. And any capacity constraints that we've got our bottlenecks, we are going to remove. Anyway, it's not a constraint today. The start of the year in Wealth has been broad-based as we've seen a reasonably predictable now migration from deposit products into wealth products. And we're seeing that continue into the first part of this year. I won't get too much more detail because, obviously, we're just 7 weeks in or something like that. But the start of the year is both substantial in quantity but also quality. Manus? Manus James Costello: Thanks, Bill, and thanks, Joe, for the question. I'll note that in the fourth quarter, we actually delivered 72,000 new clients into WRB, into the affluent segment. So it was actually a very good end of the year. And that momentum has continued into Q1, as Bill said. I think if we look forward, you'll see that in the fourth quarter, we actually delivered a slightly higher mix of wealth versus deposits than we did in the fourth quarter of last year. And we have said that, over time, we do think that we will continue to grow that Wealth business as quickly as possible and likely ahead of the deposit piece. So we're continuing that momentum. It will change quarter-by-quarter, obviously, but we're confident in how we ended last year and how we started this year. Operator: The question comes from the line of Jason Napier from UBS. Jason Napier: Bill, Pete and Manus, the first one, just on episodic income. Quite clearly, I think the fourth quarter print, disappointing relative to the bank's expectations sort of as shared earlier in the fourth quarter. I wonder whether you can just provide additional color on what happened there and whether it actually means anything for the business model or for the approach going forward, what it says about the business as it's being conducted? And then secondly, somewhat inevitably, and I'm sorry, it's regretful, but the move to stated costs in '26 has prompted some questions from investors as to whether this gives you room to spend more in '27, if you, in consensus, have restructuring expenses going from $800 million to $200 million in '27 whether you are actually going to deliver an absolute decline in costs in '27. So without putting too fine a point on it, I wonder whether you could just talk about without Fit for Growth continuing, whether it would be our expectation, the cost could be flat or perhaps slightly down in '27 in line with existing consensus? William Winters: Great. Thanks very much, Jason. I'll take the FM question and move to Pete for the cost question. So as we said a few times as we set up here, we do break out our income between episodic and flow. The flow, it tends to be transactions that are ordinary course coming from our clients, frequently but not exclusively, coming from our transaction banking franchise broadly. But they tend to be operating flows. That flow income has been growing at a pretty steady 10%, plus or minus just a little bit, as was the case in the fourth quarter as well and as we are starting off well in Q1 of 2026. The episodic is really comprised of two things. First is large customer transactions, so the kind of things that we called out are deal contingent forwards, where there's a possibility for higher profitability, higher returns. There's also the possibility that you can lose money in some cases. The fourth quarter for us in client, these large client transactions was weak. The first 3 quarters of the year were strong. The first half in particular was very strong. So overall, the episodic income for the year is good. The second component, though, of episodic is gain or losses on risk position. So we play a very important role in the markets in which we operate, in particular in the emerging markets with less developed underlying currency and hedging instruments. And when we get delivered customer transactions, we warehouse that risk until we can work it out over a period of time. And while we had no large losses in Q4, we had no gains either. And small losses, some small gains, it netted out to approximately 0. So you had minus $16 million. Change in business model? Absolutely not. I mean, we're super happy with the growth of our FM business. Good strong growth year-on-year. Yes, fourth quarter was weak. But this is not a quarter-to-quarter business. We've been building a franchise for the very long term. We have delivered that substantial increase both in profitability levels, both income and bottom line returns. And it comes from being able to warehouse risk in these markets on behalf of our clients. That's what we're doing. We do it well. 2025 was a good year. 2026 is starting off very well both in flow income and episodic. Absolutely no discomfort with the business model. I can tell you, we have an A team. The financial markets team that we are running today is as good as any I've seen, and I've been doing this stuff one way or another for 3 decades. It is an excellent, excellent team, very differentiated positions in our market. It doesn't mean to get it right on every trade in every market. But overall, we're super happy with '25. Pete, do you want to take the cost question? Peter Burrill: Thanks, Bill. Thanks, Jason, for the question. Thinking about costs, maybe a couple of thoughts here. First, zooming back on the change from underlying to reported. And I know in the way you phrased your question, you're asking if it gives us more room. We're doing this because this is what shareholders have been asking for. We think it's a positive. The benefit of being able to focus on one set of numbers both internally and externally, we think, is a big benefit. What we tried to do is, on Slide 11, give you the component parts, as you've pointed out, on how to think about costs. So we provide kind of a onetime bridge on an old underlying basis. And you can see the moving pieces that we've got there. To your point, in '27, while I'm not going to comment on specific direction of travel, you should think that, yes, we will continue to invest in business growth as we see the opportunities in front of us that Bill's already spoken about. The FFG CTA will go away. There's usually some level of other restructuring, which, obviously, we'll only call out if and when it's material. But I do want to leave two thoughts. We maintain focus on positive jaws, we maintain focus on improving our cost-to-income ratio, and we maintain focus on productivity. So don't read too much into the move to statutory. We think it's just an overall benefit and something our investors have been asking for. And we've tried to give you as much transparency as we can about how we think about costs. But any guidance beyond 2026, you're going to have to wait for our discussions in May. William Winters: I just want to give a little color on the accounting change, the presentation change. We're going to find it really useful to have a single set of numbers that our team focuses on. And the idea that there was the above the line, below the line, the suggestion which was never the where we operated, but nevertheless you wonder, is somebody thinking that below the line doesn't count or I get a freebie or it's not going to affect my bonus pool. It wasn't in my LTIP. So in theory, I was incentivized to jam stuff below the line as was the previous CFO. The new CFO will not be incentivized that way because we've just got a single measure. It is above the line. Everything is above the line. I just think we're going to get focused. And of course, that's what you, shareholders and analysts, have been encouraging us to do as well. So I'm glad that we got there. And on Fit for Growth as well, I want to say, that program was a success. I mean, we've deployed $1.3 billion of capital in an accelerated way. Extremely rigorous at the outset in terms of defining the benefit cases and extremely rigorous in terms of tracking whether those benefits are coming through. Two years into the program, I think we all looked at that and said, yes, first of all, we constrained ourselves in terms of the productivity investments that we're making around a particular set of program guidelines. We don't need to have those guardrails in place anymore. We do need to internalize completely that discipline in terms of the way that we both measure and then track our investments. And I think that we can safely say that, that is now BAU for us. So as Pete said, the productivity gains that we've generated through the Fit for Growth program, we would expect to generate in an accelerating way with future investments into our business. With that, we will go back to the operator for the next question. Operator: We're going to take our next question, and it comes from the line Andrew Coombs from Citi. Andrew Coombs: If I just start with net interest income. You talked about timing benefit in Treasury income and how also the move in HIBOR temporarily improved your pass-through metrics. Perhaps you can just elaborate there on the magnitude of the temporary benefit across those factors. And linked to that, are you kind of alluding to the fact that Q4 is not an appropriate jumping off point from which we should extrapolate? We should be more thinking Q3 rather than Q4? And then the second question is a more specific one. I was slightly surprised that you called out Ripple and Toss as being a 70 basis point benefit. I think previously, you talked about $72 million unrealized gain on that in the first half. So can you just help us how you get to the 70 basis points? William Winters: Great, Andy, I'm going to turn to Manus for both of those. Just a couple of headline comments for me. First is we're really quite happy. The combination of a sort of pass-through rate management and volume growth has allowed us to keep our NII in the zone of flats, including '26 guidance despite some obvious headwinds. We consider that to be a good outcome. And second, of course, the 70 basis point RoTE benefit of Ripple and Toss is part of the 14.7% RoTE outturn, which is a really good number as far as we're concerned. But yes, I mean, we want to call out anything that's specific. And as we get into -- I know this wasn't your question, but as we get into the separation of the Ventures segment into WRB for the Digital Banks, Mox and Trust, and the Central & other for the rest of SC Ventures, we will continue to call out these kinds of things so that you get the same color that you're getting now while it's separately reported. But Manus, please. Manus James Costello: Thanks, Bill. Yes, on the NII move and the impact of HIBOR, you should have seen that the majority of the increase quarter-on-quarter was the result of that HIBOR move. It was split between treasury, as you point out, where there were some timing differences between repricing of liabilities and assets. And some of it came through in retail within our deposit and mortgages line as we delivered strong PTRs in that quarter. As you think about where we go to '26, we're using 2025 as a full year as the base because there were a number of different moves in HIBOR during the course of 2025 in different directions. So taking any given quarter as a jump-off point, certainly the fourth quarter, would not be the right approach, which is why when you think about how to roll forward NII using our guidance that we provided for you, you should really take the full year '25 and then apply the different metrics that we've given you there. So hopefully, that gives you a bit more color, Andy. William Winters: Do you want to comment on the 70 basis points from Ripple and Toss? Manus James Costello: It's included within the way that we report the underlying RoTE, as we've stated before in the past. It's not included in the statutory RoTE in the way that we talk about it. And clearly, we will continue to call out any gains that we have in the future, but it's not included in the measure of statutory RoTE that we put in for '25 or that we're guiding to in '26. William Winters: Maybe it's worth noting that while Ripple has observable market prices, we're not fully marched to the last transaction. We form a judgment based on a combination of broker quotes, actual traded volumes in that company, and we have positioned historically conservatively against whatever the last price is. Obviously, cryptocurrencies and XRP in particular, have dropped quite a bit since the last valuation. We still think we're appropriately valued at this point. Toss is a private company, Toss Bank, in which we helped create that bank in Korea. It's an outstanding bank. It does have a peer that's public, just Kakao Bank. And Toss Bank is performing extremely well. And again, very little observable volume in terms of share transactions. So these are both judgment calls. I think you've come to understand that we're quite conservative in terms of the way that we assess these things where there's judgement required. Operator: And the question comes line of Perlie Mong from Bank of America. . Pui Mong: I'm just trying to understand the guidance a little bit better. So the income guidance is bottom end of the 5% to 7% range. I suppose, firstly, what will make it higher versus lower. And then within that, because NII is relatively flat in the year '26. And that would imply that noninterest income, it's probably double digit and obviously with the SOLV India in '25. So if you strip that out, it's probably going closer to 14%, 15%. And I would just love to hear about how you're thinking about the different business lines. So episodic, a bit weaker in Q4, but flow income is up 15%. So would you expect something similar? Is it 15% across the majority of the main business lines? Or are you expecting something closer to, say, 20% for Wealth, given your comments on how strong the front-end flows are and maybe a little bit more conservative on banking and markets just because of the natural volatility in those lines. So that's number one. And then number two, just quickly on distribution. Dividend is one of big [indiscernible] of today and it's now looking at about 30% payout ratio to reported EPS. Is that roughly right? So would you expect that to be something that you would continue doing and do more dividends versus buyback? William Winters: Great. Perlie, thanks for the question. For some reason, your audio quality was quite poor. So I'm not sure we got everything correct that. I'll try to repeat some of the questions because I'm not sure that others on the line could hear either. I think your first question was on guidance. I'm going to turn it to Manus in a moment. We're at the lower end of the 5% to 7% range. You note with NII roughly flat, that must mean double-digit growth in the non-NII. That is mathematically correct. And of course, that's what we've been doing for some time, is really strong double-digit growth in non-NII. And maybe to one of your subsequent questions, yes, the early part of the year also supports -- the early part of 2026 supports that trend, and we're extremely happy with that progress. I'll go to Manus, just quickly running through the questions, your second was around episodic, which was weaker in Q4. For sure. I commented on that earlier. I'm not sure I mentioned I've repeated what we said in the past, which is that the episodic will tend to vary between 0% of income, where we came out in Q4, and 50%, was up by $16 million at the bottom end, it was 0 because we obviously lost a little bit of money. Maybe we'll be off up by $16 million in some future quarter, I don't know, at the top end. But it is volatile. But it's a decreasing percentage of our overall FM income. And you can see from Page 29 in the deck, the steady progression, this sort of 10% compound rate in flow income, not quite a straight line, but pretty close, with the episodic on a rolling 12-month basis being more volatile, a shrinking percentage, but still a meaningful contributor to our business and extremely important for facilitating customer flows. So we're very happy with the overall mix. And then... Pui Mong: I'm sorry about that. Can you hear me better now? I don't know what happened with my headset. William Winters: We can hear you better now. Pui Mong: No, I was just going to say, with implied noninterest income looking to be up maybe 15% if you exclude SOLV India, where is that going to come from? Is it more wealth versus more markets and banking? Episodic was a bit weaker, but obviously flows are very strong, still about plus 15% year-on-year. So are we thinking about maybe 15% across markets as well as wealth? Or are we going to see a bit more from wealth, maybe closer to 20% and maybe a little bit less on markets given the natural volatility in that business? William Winters: Well, I'm going to let Manus take the details of the question. I think you're right in terms of the sources of growth. I mean, the good news is in 2025, wealth banking, financial markets and key elements of transaction banking, especially when you strip out the interest rate impact, we're all firing. And in fact, our bank is firing on all strategic cylinders. And while we had a weak fourth quarter in episodic income, flow is firing across the board and financial markets year-on-year for the full year is very strong. And that has continued into '26. Manus, fill in the gaps? Manus James Costello: Yes. To carry on from where you left off, Bill, I mean, we had a very strong year in 2025. Wealth was up 24%. Markets was up 12%. Banking was up 15%. As you know, the majority of those businesses is noninterest income, and we're saying that we started the year well. What we're really trying to say is across all of those 3 engines, as Bill said, they're all firing. They're all doing well, and we're comfortable with broad-based growth across all of them. What you should not take away is that there's anything hidden or any kind of individual element which is driving that guidance to 2026. It just speaks really to our confidence in how we ended last year and how we're coming into this year and how we're set up for the business going forward. Pui Mong: Understood. And my second question was just on distribution because dividend was a lot higher than expected. It will be about 30% payout ratio. Is that something that you would expect to continue? And given the share price has done very well in the last 12, 18 months, would you expect to do more dividends versus buyback? Or how are you thinking about distribution? William Winters: Thanks again for that. I'll start on this and let Manus finish up. Obviously, we've got quite a healthy buyback as well. $1.5 billion, I think it's a little bit higher than what the market was probably expecting with a substantial increase in the dividend. And we think we're getting to something like a 30% payout ratio in this environment makes sense. And we have every intention of continuing to grow our earnings and continuing to grow our dividend. We'll give a little bit more color on the way we're thinking about capital allocation in the capital markets event in May. But clearly, we've had a substantial increase in dividends, which I think positions us well in a number of regards, together with a big potential share buyback after completing a very robust aggregate investment program in our business. So the organic investments have been at record levels for our banks. So we're really not scrimping on anything at the moment. But Manus, anything to add? Manus James Costello: Just as you say, we'll talk about it in more detail in May, obviously, about our capital allocation priority, Perlie. I think you should just see the increase that we have delivered so far in total distributions, both dividends and buybacks, as evidence of our confidence in our ability to generate capital and as evidence of our discipline in distributing that capital when we're not using it. We're a business that can deliver strong top line growth and distribute plenty of capital at the same time, and we'll update you more on that in May. Operator: Now we're going to take our next question, and the question comes from the line of Aman Rakkar from Barclays. Aman Rakkar: Hopefully, you can hear me fine. I had 2.5 questions, I'm going to try. On net interest income, could you just help us with -- you've referenced this deposit be to catch-up or kind of normalization of pass-through rates for a number of quarters now, primarily on the CIB, but now presumably in the retail business as well. Could you help us kind of put numbers on this? I know you've given us sensitivities before about 1% shifted pass-through assuming 100 bp cut. Can you just kind of quantify the range of potential outcomes here on this deposit beta catch up, please? Because it just feels like a big source of uncertainty that's very hard to quantify. The related question on the interest income, the deposit growth, 12% deposit growth, we actually completely glossed over it in the presentation. It's a standout number. And I'm struggling to work out what to do with this data point because it doesn't really seem to be informing any confidence around the NII outlook. And I'm not really sure why. I mean, it's presumably because you're investing in markets and some of it's going to go into wealth. But can you help us kind of think about quantifying the forward look on this deposit base? How sustainable is that as a growth rate going forward? And what's the benefit to your P&L from deposits. It is major driver of net interest income, and I'm struggling to work out what to do with that. There was a question on costs around Fit for Growth. I was just kind of reviewing the 2023 full year results update when Diego kind of announced the Fit for Growth plan. And there's a lot of talk around needing to address the inherent complexity and inefficiency in the business. So it is kind of curious that there was an investment envelope that we're not actually putting fully to work. And just taking a step back from the numbers, I'm just kind of I'm interested in your take around what is it you're telling us about how efficient Standard Chartered is from here that actually we tried to spend this money, but we can't because we're actually -- we're very efficient or whatever? It'd be good to kind of hear about the kind of approach and philosophy to the kind of the operational makeup of the business. And my half question was just on Ventures, the $200 million of cumulative losses. I think you've basically done something like $170 million to date. So does that mean there's not much coming from here on in? Or it's going to be very hard for us to kind of assess that going forward? So if you could just kind of update us on that would be great. William Winters: Super. I'll just give a couple of editorial comments upfront. I may come back with some color at the end. I think your 2.5 questions was actually 3.5, but that's okay. And you use terms like feeling uncertain, lacking confidence. I'm going to say, what feels uncertain to you just feels good to us. And the lacking confidence, we hope, is a track record that can be evidenced through time so that you can feel very confident about the quality of the business that we're generating, in particular on the deposit side. But I'm going to turn to Manus on the NII, Pete on the cost, and then maybe I'll add some color on the NII, and I can comment on Fit for Growth as well if they don't cover it. Manus? Manus James Costello: Thanks. So on the NII on the PTRs, the deposit beta as you call it Aman, first of all, it's primarily in the CIB segment that we're talking about this. And you're right that we've said that we are above the ranges that we've guided to in the past for CIB of 60% to 75%, and we expect that to normalize again through 2026. The truth is market is quite conducive. It's been conducive for a while for us to maintain those PTRs at very disciplined levels. We obviously hope that could continue, but we think it's conservative and prudent for us to assume that we come back within the longer-term ranges that we've seen in the past. I'm not going to quantify it exactly. If you go through the maths of the guidance we've given, you can kind of work out where you think the gap will be that PTRs would fill. But of course, there's give and take about different parts of that guidance. And what I would say on that as well, over time, longer term, and this links to your second question actually, is that we continue to improve the quality of our liabilities, both in CIB, where we're focusing on operating accounts, and across the bank as a whole, where our deposit growth, to segue into that, as you pointed out, was 12% for the year. And the majority of that or a lot of that was driven actually in the WRB business. I don't think that, that necessarily speaks to directly a correlation with NII into the course of 2026. A lot of that deposit growth in wealth is obviously driven as future wealth flows. A lot of money comes into the bank through deposits, which is then converted into wealth. But I do think it speaks about the improving liability mix of the bank overall that we're continuing to attract these deposits, and there could be benefits from a mix perspective going forward. But all of these, you have to place against the backdrop, of course, of the fact that we do have headwinds within NII from the rate environment, as we've called out, that 44 basis points. And we do also have a couple of percentage points of headwind from the actions we're taking in WRB. So it all goes into the mix but with an underlying story of a longer-term improvement in liability, Aman. Peter Burrill: And to pick up on your questions on FFG in costs, I guess, a few things. FFG was always intended to simplify, standardize and digitize the bank. And we're really happy with the progress that we've made to date. You can see we've got over 300 initiatives in flight, delivering a broad range of benefits. And that's really been the focus that we've had. When it comes to the spending, we wanted to ensure that we kept to a kind of -- we were focused on productive spending and that we could keep the 1:1 ratio spend to save. And we also didn't want it to be an everlasting program. So it was important to us that FFG as a program and as a series of programs comes to a conclusion in 2026. We will continue to invest in productivity initiatives to simplify the bank from an ongoing basis. And again, made some really good progress. We've got some of our mortgage platforms. The turnaround times have gone from 14 days to 5 days in some of our largest markets. We've significantly reduced the number of applications that we have within the bank. We've taken third-party risk systems from 10 systems to 1 system. So a lot of really productive investments. We're happy with where it is. I wouldn't take it that we couldn't spend it. I think it was just about discipline and looking beyond 2026 as far as future opportunities. William Winters: Yes. We're very happy with Fit for Growth, the progress that we've made. And while that program is going to stop at $1.3 billion, and we have some big execution still to do in 2026, we've got plenty of other programs for creating productivity in the bank, including things that are much longer term in duration, so outside of the scope of Fit for Growth. We also, since the time that we announced this program or started conceiving it 2.5 years ago or so, we have had plenty of new information about the things that we should be deploying our shareholder dollars into. And whether that's into some other longer-term productivity opportunities, whether it's related to AI or other things, where we've got some super interesting and exciting projects underway that will produce productivity type returns that match anything that we could be doing otherwise within a more constrained, heavily guardrailed Fit for Growth project. We just said this is the right time to complete the first phase of this productivity agenda, bringing all of that into our business as usual for continuous improvement and then obviously shift some of our resources on the margin to these other longer-term or other projects that will make us much more productive through time. So no big story here. But I think you would expect us to reflect and adjust our business approach as circumstances change. This one is a success. And we're on to the next one. The last question you asked, the last half question was on SC Ventures, the $200 million of losses. Obviously, the bulk of the Venture segment has been the Digital Banks. That's been the biggest single component. And those have always been managed by the WRB management chain, so up into Judy Hsu. We're increasingly looking at and acting on the opportunities between the Digital Banks and the main bank. So the distinction became a little bit more artificial than has been the case. And those banks are mature. They're doing very well, and we will continue to evolve those. And you'll see them in terms of the breakout within the WRB presentations. The rest of SC Ventures is a collection of things, including stakes and, as we mentioned earlier, companies like Toss and Ripple, including ventures that we built, like SOLV, which we've merged in Jumbotail but continue to have a stake in the resulting company. And our digital assets businesses, Zodia Markets, Zodia Custody, Libeara, et cetera. And as we reposition that into Central & other, of course, we'll continue to call out anything that's of any note. But you would want us and expect us to invest in things that are leveraging the key strengths that we've got. And you would want us and you would expect us to manage that portfolio actively. So cutting out either things that aren't working out, which we do regularly. I mean, we've had thousands of ideas that have been killed at different points of gestation, hundreds that we put more than $20,000 into that we've killed and, of course, the ones that have succeeded we've run with. So the constraints -- I mean the $200 million is fine. We'll be within that level by almost any measure. But the value of calling that out as a specific metric is just not so relevant anymore. Operator: [Operator Instructions] And now we're going to take our next question on the audio line. And it comes from the line of Ed Firth from KBW. Edward Hugo Firth: I have two questions on costs actually. I mean the first one was in Q4. I just wondered what the costs were related to episodic income because you pulled that out on the revenue line, but it doesn't seem to be any mention in the cost line. I would have thought it would have a highly variable cost base related to that. So I just wondered why that's not the case? Or could you give us some quantum of the sort of costs that go with that revenue and whether or not it is variable? That would be my first question. And then the second question is back to Jason's question at the beginning. If I look at Slide 10 and looking at your Fit for Growth, it looks to me -- I know you're going to want to talk about this more in May, but I guess we have to fill in numbers before then. You've broadly got about $600 million of CTA cost dropping away and about $300 million of savings next year. So am I right that when I look at my '27 cost base to start with, the sort of lumpiness should take just short of $1 billion out of the cost base. And that other than that, it should just be there's no other lumpiness that we should know about or think about when we look at '27 costs and beyond? But that is the sort of right base level, somewhere around $1 billion below the $13.3 billion, I think you said for this year. William Winters: Well, again, I'll make a couple of comments upfront and hand to Pete for both questions. On the cost associated with episodic, it's not really the way we run the business. I think what you might have in mind is that traders get paid bonuses that are a function of results. And if they don't make money in trading, their bonuses will go down. That's true. That is a truism, in fact. But cost base -- the cost -- the resources supporting the episodic income are the cost of the financial markets. So we don't allocate the cost between what's flow and what's episodic in any macro way. Pete, you can offer some more color on that if you have it. And then on the Fit for Growth, I mean, we're running a business here. And while the productivity investments and then associated savings coming in current in the later periods are material associated with Fit for Growth, we will continue to be investing in productivity-related initiatives, which will continue to produce savings and expense and also produce income in terms of revenue. So I'm definitely not guiding to $1 billion out of the cost base. But Pete? Peter Burrill: Thanks, Bill. Bill covered most of this when it comes to any cost related to episodic. And when we do look at markets, we look at it on a whole year basis rather than a particular quarter-on-quarter, and markets had a very strong year in 2025. So I wouldn't read anything into quarterly volatility in that number and no direct read across to the cost base. When it comes to your question on how to think about 2027 costs, you noted all the downs, and I noticed you kind of somewhat skipped the ups on Slide 11. So there's two areas to think about, right, which is we've called out -- you called out the FFG CTA going away and the ongoing savings. We will invest and continue to invest in business growth. We see great opportunities and we're going to make sure that we invest into those and lean into those, not least of which in our affluent and wealth space. And secondly, what we've termed other restructuring in there is kind of our historical run rate of other stuff we don't have below the line anymore. So that will be above the line. But I just want to make sure you're thinking about all the various components rather than just the FFG-specific CTA and savings in 2027. So I hope that helps. William Winters: Unless anybody think -- I was just going to say unless anybody think otherwise, we're still very focused on generating positive jaws. Operator: Now we're going to take our next question, and the question comes from line of Alastair Warr from Autonomous Research. Alastair Warr: Just a couple of detailed questions really. Could you just say, sticking with this cost point, was there anything you actually pulled the plug on in the Fit for Growth program, programs you've been working on, lots of granular stuff you flagged before in the last year or 2. Is there anything that dropped off the list? And then just a couple of things on asset quality. Could you add any color or anything on the outlook in relation to that sovereign downgrade, anything we should be extrapolating or be concerned about or just one lump? And finally, a couple of your peers in Singapore, Bank of East Asia saw some movement on Hong Kong property, something you have called out a little bit before but not at this time. Is that just nothing to report here as a topic? William Winters: That's great. Thanks, Al. I'm going to turn to Pete for all of those. Certainly, the headline on the second set of questions, there's nothing to call out. We're just in good shape all around. The sovereign downgrade is what it is. It's a sovereign downgrade you've seen not associated with any material ECL that you can fill in the blanks there. Pete? Peter Burrill: Thanks. So focusing on the first one on FFG, yes, of course. I mean, it was a dynamic portfolio. I think important, if you look at the types of areas that we've laid out on Slide 10, those are broadly the similar proportion as what we laid out originally that we thought we had a hypothesis. But of course, you test and learn and you try some. They don't work out and you stop them. So yes, it was a very dynamic portfolio. 343 initiatives currently in the pipeline that we're focused on executing in 2026. But yes, there were some that came in and out of that portfolio over time. On asset quality, I mean, Bill gave the headlines. We've provided a bit more detail in some of our slides with regards to Hong Kong and China CRE, where the overall view is things have gotten slightly better. It's not a major issue. We've still got overlays. So we feel quite comfortable with that. When it comes to the sovereign downgrade, as Bill mentioned, no significant ECL in Q4 as a result of that downgrade. So it moves the numbers as far as the what we call high-risk accounts. But we feel quite comfortable and confident and no significant areas to point out that we're concerned about heading into 2026. Thanks for the question. Operator: And the next question comes from the line of Amit Goel from Mediobanca. Amit Goel: So 2 kind of follow-ups from me. But firstly, just on the income guidance for '26 to be around the bottom end of the kind of 5% to 7% growth range. Just want to double check, is 5% kind of like the floor? So you would expect to be 5% or better? Or are you thinking that the income depending on obviously external variables, it could actually be a touch below the 5% as well as being potentially above the 5%? And then secondly, again, just following up on the costs. So obviously, a large part of the delta was the investment into initiatives in terms of cost of '26 underlying. Would you mind just giving me a little bit more color in terms of what those investments initiatives were and how that will help productivity and growth in the future? So what's the kind of payoff or what exactly have you invested in there? William Winters: Great. I'll turn to Manus on the guidance question and Pete on cost. But let me say, I'm pretty sure that our bankers, RMs, traders don't pay a lot of attention to the guidance that we're discussing on this call. They don't shoot for 5.0% and then take the rest of the day off. These guys are, all of them, ladies and gentlemen, are very focused on generating growth. Super excited about the growth that we've generated so far, which has been well ahead of the guidance that we set out. And I can tell you, every undertaking will be to continue to do the same. Then we get into levels of precision that are probably not so meaningful given what's going on in the rest of the world. Manus? Manus James Costello: Yes. No, I'm not going to add those levels of precision either. I would just say the guidance is around 5%. It's neither a floor nor a ceiling. It's how we see things at the moment. We'll obviously update you during the course of the year on how that progresses. But that you shouldn't take it as either a floor or a ceiling specifically, Amit. William Winters: And Pete, do you want to talk about the change in investments? Peter Burrill: Yes. Thanks for the question. When looking at '26 and the business investments, it's a variety of things, as you pointed out, both productivity and growth oriented. So on the growth side, we've been talking about our investments into wealth management and affluent. And those, we want to continue. And so those are a key component of that. On the productivity and growth side, you've got enabling technologies as well as data infrastructure and AI initiatives to really take advantage both to grow as well as to become more efficient. So that's a few types of examples of the things that we're leaning into in 2026 with the confidence that we've got in the business momentum. Operator: And now we're going to take our final question for today, and it comes the line of Chen Li from China Securities. Unknown Analyst: This is Chen Li from China Securities. The first question about the credit cost. Although through the cycle, credit costs are 30 to 35 bps, but it has remained at around 20 bps in the past few years. So what is your outlook for the credit cost trend in 2026? And the second question is about Global Markets. Since Global Markets revenue tends to fluctuate significantly with market conditions, so what about the trend of the net interest comp about the Global Markets in 2026? William Winters: Great. Thanks for the question, Chen Li. I'm going to turn to Pete on the credit question, but I'll just again give a little bit of a high level first pass. The 30 to 35 basis points is what we estimate are through the cycle credit cost to be. Of course, we've not been operating at that level for some time. And we see nothing in the portfolio today that gives us any particular cause for concern. We've also substantially improved the credit quality of the portfolio over the past, call it, 10 years, but I think continuing over the past, call it, the post-COVID environment, with over 70% of our portfolio being investment grade, et cetera, with much lower concentrations than we've had at times in the past. So none of this is to say that our guidance of 30 to 35 basis points is inaccurate. It's just we haven't been tested in a down credit cycle with our current portfolio. I guess kind of it's a truism. But I will say that I think we've managed our capital allocation quite carefully. So I would hope that we can demonstrate an outperformance relative to the guidance that we've given. But we can't prudently suggest anything other than what our data analysis would suggest we should be prudently guiding towards. And I think we covered it before on the financial markets. The flow income is not that volatile. It's actually quite steady. It's been growing 10% year after year after year after year after year, including 2025 and into the start of 2026. That's 70% pushing to 75% or, possibly over some period of time, 80% of financial markets income. The remainder is volatile. But it's tended to be volatile above 0. And you can give us a big old knock for being $16 million negative in the fourth quarter of 2025, still a good overall episodic year for the full year 2025. Volatile but positive and with the underlying core of the business being very stable and growing quite nicely. Pete, do you want to add anything on either of those? Peter Burrill: I think you covered the Global Markets. On the credit cost, just a couple of data points. If you look at our CIB portfolio, we actually had only $4 million of credit cost this year and a net recovery last year. We don't see anything concerning on the radar screen. But we're just cautious that expecting net recoveries or virtually 0, we want to be aware that situations can change. But read into that along through the cycle rather than anything specific looking at 2026. So feel comfortable with where we are there. William Winters: Good. Well, I think we've exhausted the questions for this morning. And thank you enormously for the time that you spent with us. I know it's been a long earnings season, and no doubt, you've got a lot to do for the rest of the week. But I really appreciate the focus and attention. Just a couple of parting thoughts for me just in case you didn't pick it up from our earlier answer or the presentation. We feel super good about the franchise right now. It is firing on all cylinders. Really anything that matters strategically, we're doing well. We're investing in the things that are producing those kinds of results. We have an excellent team, of course, starting with the gentlemen on either side of me. But the rest of the management team, as I've said, is as good as any -- I'll say better, than any team I've ever worked with. And that's the team that's generated these results. So we are full speed ahead. I personally am full speed ahead. I may not look like it, but I definitely am. And I look forward to future outings where we can continue to talk about the great progress that we're making on our cross-border and affluent strategy. Thanks.
Operator: Ladies and gentlemen, welcome to today's conference call of Wienerberger's Full Year 2025 Results. I am Judith, your operator for today. [Operator Instructions]. The conference is being recorded. [Operator Instructions]. We are looking forward to the presentation. And with this, I hand over to Therese Jander. Therese Jander: Good morning, everyone, and a warm welcome to the Wienerberger Full Year 2025 Results Presentation. My name is Therese Jander, and I'm pleased to host this call today from London. And I'm joined by our CEO, Heimo Scheuch; and our CFO, Dagmar Steinert. We will begin with the presentation of our key developments of 2025 and the financials of the year and an update of today's news as well and an outlook for 2026. And afterwards, we will open up for your questions. So with that, I hand over to Mr. Heimo Scheuch. Heimo Scheuch: Thank you very much, and lovely good morning from our side from Wienerberger's team. I'm glad to have you on the call. Let's walk quickly through the results of 2025, here. You have received them actually a week ago, so I just focus on the most essential points. If we look at '25, I think it was again a year that has to be characterized by a lot of volatility, politically speaking, financially speaking and also business-wise. The guidance that we actually delivered to you midyear with the EBITDA number has been fully reached. We have -- considering the circumstances that we operate in, I think, shown a high degree of profitability with an EBITDA margin, which is more or less flat compared to last year, 16.5%. Keep in mind that all of this comes at the market level when we talk a combined market level new build, new residential housing, infrastructure and renovation that even dropped compared to the year before. So we had a drop in the relevant markets from about 70%. You remember that we give indication that '21 is our reference here was 100%, so we dropped to 70% in '24 and to 65% in -- when we talk about '25. And again, here, Wienerberger has shown basically through the very strong cost discipline and the efficiency improvement, this strong margin in the year 2005 (sic) [ 2025 ]. Keep also in mind, and Dagmar will elaborate on that a little bit more, that we had quite a substantial cost inflation also last year, which we could counter with these measures, in order to keep the level of profitability. Profit after tax, very good and strong performance. We more or less doubled it to EUR 168 million. And the free cash flow, this is, I think, a very important step forward to reach nearly EUR 500 million last year, so again, we showed here the discipline in managing cash, managing the capital allocation throughout the business, especially and therefore, being able also to reduce debt further. So let's move on a little bit when we look at the debt structure as such. We came in at net debt level about EUR 1.6 billion. So that's 2.2x, considering what we have achieved with the acquisition of Terreal a year before and digesting it, it shows actually, again, the strength of Wienerberger to self-finance such transactions, to digest them, to integrate them and especially also financially also to be able to handle those. Again, one of the important step next to the cost discipline, next to the efficiency improvements throughout the business, which contributed largely to these strong numbers was the reduction of working capital to 20%. Also, again, a very important step in this volatile time to focus clearly on working capital. So this -- all of this, I consider that has been a very strong approach, very firm approach of Wienerberger on the discipline side when it comes to the financials. I already explained a little bit the market decline. And here, we have obviously the market decline when we talk about new residential housing. Here, again, you see that we have seen further declines in 2005 (sic) [ 2025 ] that have occurred, especially in the second half of the year. And we come obviously already when we look at the current status, with a lower level into '26 compared to the year before, '24 to '25. And again, at this stage, I just want to draw your attention because probably we are the first ones in the sector, but I don't shy away to make frank comments because it's no use to sort of wait and see. We had very harsh winter this year. It's an extremely strong winter, not only in North America, but also all around Europe with not only cold weather, freezing, snow, ice, but also flooding. So all of this has to be digested in the first quarter and will certainly have its effect in the second quarter as well. So all in all, I think when we talk then a little later during the call about the outlook, which is, again, a strong outlook that Wienerberger will provide, but it comes in at the basis of, I call it, a weaker start in the year due to the weather conditions, the harsh one that we have to face this year. Let's move on then a little bit to the different regions where we have seen in West, I think, I call it a stabilization throughout the different businesses. And you see also that, again, Wienerberger from a housing perspective and the new build segment outperformed the market with 2% volume increase. So very disciplined approach on renovation and new build when it comes to this part of the ceramic business, and also the pricing was very much in line with our expectations. Again, also on the piping front, we were able to improve our performance, grabbing some market shares left and right. But again, you see here that the Western Europe has performed considering the market as such, very well. And you see also the share of the business, which is, I think, very important to show that Wienerberger has emerged as a player, not only new resi, but also one in a stronger and even increasing share in infrastructure and in renovation. If we move now a little bit to the East, a little different picture. Obviously, depressed markets when we come to the new resi markets, with about 2% down. But again, here, we have sort of increased our activity and being a little bit more active in the market when it comes to volumes, so a plus 1% here and also from a pricing an okay situation throughout the year '25. I would say on the piping front, the minus 3% in volume effects, yes, that's due to some of the projects get delayed when the European funds don't finance in certain countries where there's political turmoil. So these projects, the bigger ones tend to get delayed. So this has an impact on the volume. And therefore, the minus 3% when it comes to the volume in piping. And here, you see also that we have already from a revenue split, improved our revenues in renovation and infrastructure, but not to the extent that we've done it in other areas. So this is some work in progress, I would say, as far as the share of different activities is concerned in Eastern Europe. Now let's move across the Atlantic to North America. I would say a very -- from our perspective, was a very tough environment that we faced throughout the year, '25, in North America, both in the U.S. and especially in Canada. And in Canada, we had a drop of new resi of more than 30% to digest in the market. So that was rather dramatic, I would say; and also in the U.S., around 9%, 10%, depending on the states that we operated in. So this affected obviously our new residential housing business essentially facing bricks. And you see it also on the revenue split that we are very much exposed to this sector yet or still in North America. The piping operations are doing well. We consider in this context that we only have one pipe factory in North America, but performing very well on the volume side. We extended our presence there due to investments in the production. So we grabbed a little bit of market share again in the Piping segment. And above all, I think we performed even in this market where the margins are coming down from this very high level during the last couple -- 2 years now to a normal one and a very satisfactory trend still in the piping business in North America. So all in all, I think driven by weak markets, North America suffered the most in our portfolio, and this is obviously then to be seen also in the profitability. But still, they have done a good job North American management in managing efficiencies and cost structure. I think when you look to summarize the introduction, before I hand over to Dagmar, you see the strong development, how we have improved, again, our share in the different segments and Wienerberger is now emerging as a strong player when it comes to the piping business in infrastructure, especially in the water management and energy management and in the renovation due to our strong growth in the roofing business. So this is, I think, from my side, this introduction, and I hand over to you, Dagmar. Dagmar Steinert: Thank you, Heimo. Yes, a warm welcome from my side as well, and I will give you a deeper insight into our financials. It's now 12 months I'm with the company, and it's my first conference call for a full year, and I've seen how resilient and strong our business model is, and we delivered a solid set of results and that even in this really tough market. So having a look at our revenues and operating EBITDA, we are delivering. We are delivering our guidance. We've seen a stable profitability with still a remarkable margin of 16.5%, despite quite a high cost inflation. On the revenue side, Heimo already elaborated a bit about the market situation, about the volume overall for the whole group. On average, volumes are flat; as well as prices. But of course, we managed to again increase our revenues with innovative products, which are now standing at 34%. And that, of course, is as well paying in for our profitability. If we now go on further to the bridges, revenue bridge and operating EBITDA bridge. That well, is dominated in 2025 by our growing exposure to our roofing business, especially in Western Europe, which pays into our strategy and shows that we are growing in renovation. On the revenue side, yes, it's a flat development with overall plus 1% and a negative organic growth. So we already explained the volume softness in different markets, especially in North America. We've had some modest headwind from the currency side and the scope, the EUR 120 million scope that reflect our increasing exposure in roofing. On the operating EBITDA, we delivered. We delivered despite these rough markets and again, markets coming down, remarkable earnings, and we managed to absorb the overall cost inflation we faced, and that is a very strong result. So how did we do that? Of course, overall cost inflation was plus 4% in the year 2025, and that accounts for more than EUR 100 million. And that's quite a big chunk we should -- we had to manage. This cost inflation was mainly driven by higher labor and energy costs, as we elaborated during all our conference calls already. We managed to have EUR 30 million overhead savings from ongoing strict cost discipline. That is something which we are doing since years, focusing on a strict cost discipline. And if you have a look at the markets, which are softening year-by-year, it's quite a challenge to really deliver out of that some gains. What did we do? We delivered from structural simplifications, and we had a high focus on tighter spendings. And with that, as already said, we managed somehow to deliver EUR 30 million savings. Additionally, we are focusing on operational excellence. What does that mean? We have a look at production measures and capacity optimization, especially in the ceramic business in Europe. We improved our operational performance through improved shift patterns, improved throughput and of course, one or the other energy savings. That helped quite a lot. And on the other hand, we started our program Fit for Growth in the third quarter 2025. Fit for Growth is about streamlining processes from holding to operations so that we are improving our culture, how we work together, that we become much more agile, that we are faster and that everything is towards the customer in a better optimized structure and way. With that, of course, we will have -- we will see annual savings in the range of EUR 15 million to EUR 20 million once it is in a full swing. We haven't seen EUR 15 million to EUR 20 million in 2025. It was a bit less, but overall, that is sustainable and it will continue. Coming now to our operating segments, starting with Western Europe. Western Europe had a really good performance in 2025 due to roofing and the renovation portion of that business. Renovation accounts for nearly 50% of the business in Western Europe, and it's dominated by our roofing business. On the operating EBITDA on the profitability, of course, we had beside our strict cost control, we took capacity out, and we managed to have a higher utilization. We showed a strong operational excellence and with our well-balanced portfolio in Western Europe, as already mentioned, the roofing business is the main contributor. In Eastern Europe, the picture is a little bit different. Markets are dominated by our new build business, our wall business, and that's a difference compared with Western Europe. Our exposure towards renovation and infrastructure is less. But anyhow, we managed to keep our revenues on previous year's level. And regarding the profitability, we had quite to digest a big jump from inflation, but we managed to have a recent operating EBITDA margin was 18.1%. We focused a lot on cost efficiency and on capacity reductions, where we had one or the other winter still stand as well. Coming now to North America, that is our segment where we have the highest exposure towards new build and Heimo already mentioned that the market is in 2025 in North America and Canada, especially -- well, a disaster. So markets have been down significantly. And on the piping business, which accounts for roughly 20% of our business, we've seen volume increases. But on the pricing side, we faced due to deflation in raw materials, price decreases; therefore, our revenues are significantly down by 12%. Of course, that has a high impact on operating EBITDA, on the profitability, and we came in with EUR 132 million operating EBITDA and a remarkable strong margin of 19.0%. And with that, I would like to go further to our free cash flow. Our free cash flow is the second highest free cash flow in the company history, and it's the second year in a row with a remarkable free cash flow. And I would like to put your attention on the change in working capital. We managed again to have a significant cash inflow from the reduction of our working capital. And that, of course, a high free cash flow is the basis to reduce net debt and to be ready for further growth. With that, I would like to elaborate a little bit about our net debt development. We managed to reduce our net debt by roughly EUR 120 million, and therefore, our leverage by the year-end is 2.2. Beside our really good free cash flow, we had a strong focus on growth CapEx because we focused on high return projects, and that underpins again our future growth, which will be self-funded. We've seen some smaller bolt-on acquisitions where we paid in total EUR 24 million in 2025. And of course, we, as always, have a significant amount, which we pay on dividends and share buybacks to our shareholders. And with all of that, I must say, we have a disciplined CapEx and cash management, and that is ongoing. If we have a look at our balance sheet, don't look at all these numbers. It's just to give you an impression that we have -- that our fundamentals are in a really good shape. We have a robust balance sheet, a solid balance sheet, and we even managed to improve our equity ratio by 1% from 45% to 46%, despite different headwinds we faced. One headwind, of course, the really weak market and the other headwind regarding our equity ratio, the swing in negative currency impact. On the other hand, positive, we reduced our gross debt by 10%. We reduced our net debt by 7%. And that, of course, goes hand-in-hand with the reduction of working capital where we improved the ratio towards revenues to 20%, coming from 24%. So as you can see, our fundamentals are in a really good shape. We have an attractive shareholder return, paying dividends, which are solid, steady and reliable. Our dividend proposal for the year 2025 is EUR 0.95 per share, as we had in the last year. As you can see, if you look at the development of our dividend payout and share buyback, our dividend is stable and is stable or is even growing and never comes down. Our payout ratio is 28% of the free cash flow, and that is in line with our 20% to 40% range. Now I would like to come to our outlook. What are the key assumptions? If we have the macroeconomic view, we expect, again, flat residential markets, no structural recovery. We see flat infrastructure and renovation markets, so there will be no real movement. And as well, we don't see any decline in long-term interest rates. Markets stay difficult, volatile and are not growing. Inflation is expected to be around 2.5%, and we will cover that by price increases up to 2%. What are we doing to manage all these key assumptions? We focus again on optimization and efficiency measures. First, I would like to mention our Fit for Growth program. That is a cultural transformation. Our people are empowered to take on more responsibility and accountability to be more responsive and agile with a view to delivering future growth and profitability. We will see further consolidation of our plant network, and of course, we will see a payback of expanding our industrial footprint with new products. Just to remind you, we are growing year-by-year our share of revenues from our innovative products. But we will have some special topics in 2026. And one I would really like to point out, put your focus on, is our energy inflation because that energy inflation is Wienerberger specific. It will be a burden of EUR 30 million in 2026. We faced highest energy costs of the past 10 years, and we will be not able to compensate these higher energy costs through price increases. It's not homemade, it's externally driven, and I will explain on the next chart why. Here, you can see the development of the market price. Natural gas, which is a most important energy we use and the price we pay in our portfolio. As you can see, the market price came down from 2025 from EUR 37 in '26 to EUR 33 on an average. What we pay or paid for our portfolio in 2025 was an average price of EUR 24, and that goes up to EUR 32, maybe EUR 33, so it goes up to the market price. And out of that, we face this EUR 30 million extra one-off energy inflation, which we are not able to compensate. If you look at the capital expenditure, we expect overall EUR 280 million, EUR 100 million will be growth CapEx for high profitable projects. On the other hand, we will spend roughly EUR 180 million, which is with EUR 160 million maintenance CapEx and additionally EUR 20 million for improving our Secure Zone Action Plan, which is to support the safety of all our plant workers. A little view again on the market. Our assumptions are: we don't see a recovery of the market. 2026 will be flat, not only in new build as well, but as well in renovation and infrastructure. I would like to draw your attention on the development during the year 2026. We start at a very low level in the first quarter and the first quarter due to these really bad weather conditions will be a quite weak quarter. And therefore, we expect the first half 2026 to be below the second half 2026. And of course, the first half 2026 will be below the first half of the previous year. But that's all in line with the development of a flat market. So coming now to the numbers of our outlook for the ongoing business. You can see here a bridge starting at our delivered guidance 2025, the EUR 754 million operating EBITDA. You will see out of organization and profitability measures, EUR 36 million, that includes everything, like our Fit for Growth, our operational excellence, what we do regarding operations, where we are improving our profitability in our processes towards better shifts, better mix and better utilization. Then we would have an operating EBITDA of EUR 790 million. But unfortunately, we have this one-off in 2026 regarding our own energy inflation. And therefore, our guidance for our ongoing business for the year 2026 is with the assumption of flat markets, EUR 760 million operating EBITDA. But of course, that's not all because the future is going on, and we have our next chapter, and that's a growth chapter. And with that, I would like to hand over again to Heimo. Heimo Scheuch: Thank you, Dagmar. And ladies and gentlemen, I think what you have seen in the presentation of Dagmar is very clear. We have performed very well in the light of declining markets, in the light of sluggish, I call it, recession development over the last couple of years. Wienerberger has been very good. And on a personal note, with sadness, I sit here in this call because I remember 4 years ago, this dreadful invasion of the Ukraine by the Russians. And a lot of things have changed in business, not only energy costs, and not only the way how we do business, but we had to adjust in a lot of aspects of the business, and we adjusted very well as Wienerberger. If you look at the performance of North America that Dagmar has shown in detail, I mean, when I compare the housing starts that we had last year in Canada and the U.S. and the performance of EBITDA wise to the ones that we have 5, 6 years ago, how strong we have been able to improve our EBITDA performance, our margins in North America, it's impressive. Impressive how we work on this every day, and our people put a lot of effort in making our business even more performant in the future. Secondly, and that's also, I think, something to really -- before we go into the new chapter to stress is the innovation rate. It's a very strong rate above 30%, actually around 34% that we have in the group. We push through our systems more successfully. Otherwise, actually, if you sell only bricks, pipes, roof tiles, we wouldn't be able to make these margins in such depressed markets. So that's the system approach that helps us to increase margins, and we continuously do so. Thirdly, and most importantly, you see also the strict discipline when we come to M&A. We have delivered over the last 10 years, a lot of deals coming in, very disciplined when it comes to the pricing of the deals and also the payback. And every cent has been paid back, and that's why we have to strong performance. If we look now at the new growth chapter that comes our way, we have the ideal fit for our business to grow and to improve when we talk about the Italcer acquisition. Why? And let me just summarize this in a nutshell. This is -- Italcer is the leading business when it comes to high-end solutions for tiles, for floors, for walls, for facades, for the inside, for the outside and especially in the Renovation segment, which is very highly performing, modern production hubs in Italy and Spain. They are growing, not only in the local market, but especially with respect to exports. It's not a new business for Wienerberger. I call it an adjacent business. Why? Because actually, we use the same raw material. It's clay. We have more or less the same technology. Obviously, these colleagues in the wall and floor tile industry are more specific, highly technology when it comes to the surface treatments, the colors, the structures. So this is a great addition to our facing business that is obviously very strong in North America, Western Europe and also increasingly strong in the renovation. Here, we have an ideal sort of growth space for the future in order to improve our footprint there. Clients are more or less the same in a lot of countries. So we can sort of improve our footprint in the Southern European Hemisphere and also in the Western Hemisphere. And obviously, Italcer is a leading company when it comes to technology, as I said before, in manufacturing; also in capturing CO2 and improving the footprint there. They have the first kiln when it comes to electrified kilns in Spain, high performance. And again, you see it's an ideal fit for Wienerberger on the growth path in the future and gives us a more and even stronger performance and a footprint in the renovation part of the business. So as I said, these are the reasons from our perspective to enter Italcer. We have here the leading company, solid growth, outperforming the markets over the last couple of years, very strong and committed management team that will stay in place and fits culturally and also from a performance very well with ours, so it's an easy integration, if I may say. So we will put the guys also on our platforms and integrate them as we did in the past with others on our back offices and business support centers and then therefore, ensure obviously, the growth in the future. When we look further to this business, the transaction structure that we have put here and Dagmar has stressed this item very carefully and duly when we talk about financing. Again, we focus here on self-financing and support. So this is, again, an acquisition that we realized in this way in order to ensure this financing, buying 50% plus 1 share now. And then we will have the necessary approvals that are for such transactions. They are not the EU application as it's only in Germany and Austria and in other countries. So this will run through rather smoothly. We all expect that and then start the consolidation from Q2 onwards. So again, it's a fully cash transaction funded from our existing liquidity. We have all the facilities in place in order to finance this transaction. When we look at the -- from our perspective, the integration as such, as I said, it's going to be a rather quick one on the back office side, on the front office side because in these markets, Italcer is very strong. We can obviously help them in order to improve the business throughout Europe and also in North America, where they have a strong business also exporting to the U.S. and our strong footprint with our outlets and sales offices throughout the country will help us to improve the performance. On the financial front here, we see about EUR 10 million of synergies rather quickly to be grabbed here on the commercial side and a little bit on the cost side. But more will come in the future, but this is, I think, a good starting point. When we summarize, again, in a nutshell, it's an ideal sort of addition to our portfolio. It's easy to manage, easy to integrate. We understand the business. We can handle it in our product assortment, can use it to improve our footprint in the facade business throughout the world, actually. It will strengthen our footprint also in the renovation segment, which is very strong. It helps us with architects, with planners, with designers in order to have here even a better footprint for Wienerberger when it comes to new build, but especially renovation. We will get quite a substantial amount of synergies in, as I said, very quickly. It's a highly attractive financial profile because from a perspective of EBITDA about multiples, we have here about EUR 82 million EBITDA that Italcer will provide us full year in 2026. We will come to this in a minute, but a strong sort of performance here, which gives us a multiple a little higher than 6, but nothing sort of that we look at comparable transaction in the past. So very attractive for us. We'll bring it down when we look at the EUR 100 million that we think we were able to achieve rather quickly to a multiple in the 5-ish for such an acquisition, I think, a very strong track record, again. So let's move on to the next slide. And here, you see from what has been presented by Dagmar on the outlook of the ongoing Wienerberger business, now the integration of Italcer. Obviously, when you look at the outstanding performance in 2025, all these measures that Dagmar has explained will make us performing in this scenario rather well. Let me say one thing on this. Dagmar and myself used the word flattish, stable markets. Yes, that's an assumption. If the markets gets better and if something happens this year, we are ready. Don't worry about that. We have capacity in place, we have structure in place to satisfy. Only if you see all this volatility, and I think it's wise at this stage of the year to say clearly, let's see what comes our way, but we, as Wienerberger, we don't wait for the cycle. We create our own growth by doing the right things and improving our portfolio, focusing on the cost side, focusing on the organic growth side and therefore, reaching then the EUR 790 million when you talk about performance. The EUR 30 million of one-off effects on the energy front, I think you have understood that. It's a result of our buying-forward strategy. Basically, it helps us in a long time, and then it comes a little bit against us, but I think it's a one-off, we digest it. So the EUR 760 million is a strong guidance for this year operating wise, and we will add the EUR 50 million coming from Italcer on top. That's, as I said earlier, provided that we get the necessary approvals in Q2, and then we will consolidate the EUR 550 million from this date onwards and then at the operating EBITDA guidance of EUR 810 million for the whole year of 2026. If we look at a very important point because some of you will obviously ask these questions anyway. On the financing, Dagmar has clearly explained how we have brought down our debt in '25 to 2.2. The Italcer acquisition will bring in additional debt of about EUR 400 million. So we'll end up a little bit above EUR 2 billion of debt, it's about 2.5. If I then calculate the EUR 810 million as a reference already, and then we bring it down as to -- with very specific measures, as you have seen in '25. We have now already in place, our reduction in working capital. We have also the CapEx adjustments that we will bring in and some real estate transactions where we have nonoperating real estate that we will sell off. All of this brings in about EUR 220 million. So we will reduce towards the year-end 2026, again, our debt level to about EUR 1.8 billion. You see a very disciplined approach and how we can finance such a transaction and expansion of our portfolio rather quickly, fast and very efficiently throughout this year. Again, when we look at the EUR 810 million outlook, it's in the light of persist geopolitical and macroeconomical uncertainty that we face. Guys, all of you that are listening in every day, there are other news on tariffs, on other things. We need to live with this. And this is something I think we have learned to do so, and therefore, we remain very optimistic, very positive and just do our work well and cut costs where we can, focus on margins. And as I said, we assume right now that there's no real big recovery in the new residential housing market. There's somehow flattish infrastructure and renovation market. It might be better than towards the mid of the year. We will see. But as I said, we are prepared. We have a lot of attention to grow fast and react very quickly. But at this moment, the financing environment, the banking, how they react with real estate, I think, remains very restrictive. So there's not the green light that I see here or the tailwind that some of you talk about that is here in the market in order to boost the business. Again, we will outperform, by this guidance, our markets. We'll focus on the debt reduction that we told you. Strong cash generation, obviously, goes by itself and integration of Italcer and therefore, expanding our earnings base. So a strong focus on the business again this year. I think from my side, this is -- summarizes the year 2026. We will obviously have our Capital Markets Day a little later this morning, where we'll elaborate about the strategy in much more detail in the future. But this is, I think, from a perspective of year '25-'26 what we had to tell you today. So I hand over to all of you for further questions. Operator: [Operator Instructions]. The first question comes from the line of Cedar Ekblom from Morgan Stanley. Cedar Ekblom: Can you hear me now? Heimo Scheuch: Yes, we can. Cedar Ekblom: Perfect. That took a while on my side. So I've got a couple of questions, please. Can we just go back to Italcer? I'd like to get some final details around the purchase consideration on a 100% basis and the implied multiples pre and post synergy. I appreciate in the slides, you've got the cash impact of EUR 400 million in 2026. But my understanding is that is only for the initial 50% plus 1 share. And so it would be helpful to get a sort of a fully acquired impact to the gearing and the multiple and the cash impact. Do we multiply EUR 400 million by 2 to get to the sort of 100% EV implications for the business? So that's question one. Question two, also around Italcer. To be honest, I'm not 100% sure on the sort of channel overlap here on the products. Maybe you can talk a little bit more about it. My understanding is that Italcer's products are sort of luxury high-end ceramic products for internal sort of design applications, fancy bathrooms, fancy tiles, et cetera. I don't get that how that overlaps with your external brick roofing product categories. I get that there's a regional overlap, but I don't see the end market overlap there. So a bit more color around how you see the fit would be helpful. So those are the 2 questions on Italcer. And then there's 2 questions just on sort of the outlook or financials. Can you confirm if you had any benefits from carbon credit sales in the 2025 results, any positive impact there? And then just on the energy side of things, you have guided to this EUR 30 million impact, which I understand is around the way you purchase energy. Is there any way that you could soften that impact by doing some contracts, some hedging, et cetera, that you wouldn't normally do in order to try and soften some of that headwind? So quite a lot to unpack there. Those are my 4 questions. Heimo Scheuch: Thank you, Cedar, for the questions. I will hand over and then come in if it's needed on the Italcer financials because Dagmar will take over right now, and then I will answer the rest. Dagmar Steinert: Yes. Well, regarding on the Italcer financials and the additional EUR 400 million debt we will put on our balance sheet. Of course, we buy 50% plus 1 share. And with that, we are going to fully consolidate the whole group. And with that, we are taking debt over. Therefore, in 2027, when we make the second step to acquire the minorities, it will be far, far less than EUR 400 million. We see overall equity value of EUR 560 million. And with that, I'm very confident that we will not only manage to bring our leverage by the year-end '26, again, down to 2.2, but we will see further improvement in the years to come, 2027 and ongoing. Cedar Ekblom: Sorry, Dagmar, just before you go on, apologies. So I just want to be 100% clear here. You're saying EUR 560 million equity value? Heimo Scheuch: No. Enterprise value. Dagmar Steinert: Enterprise value. No, enterprise value. Cedar Ekblom: Enterprise value. Okay. So EUR 560 million. That's helpful. Apologies, carry on. Heimo Scheuch: And as I said, Cedar, it's EUR 82 million full year EBITDA contribution from Italcer in '26, yes? And we will only consolidate EUR 50 million because we have the processes to go through on the approval side from antitrust authorities in Germany and Austria. Understood? Cedar Ekblom: Understood. Heimo Scheuch: Thank you. And let's now go into the 1 -- you had 2 questions, actually. The one was the channel question, distribution; and the other one was obviously the positioning of Italcer. First of all, let me start with the positioning. Yes, they started with the sort of -- I wouldn't call it only luxury but high-end sort of applications, tiles for floors, for walls and in the inside and renovation. Yes, you are right. This is a business which is strong in renovation. There are some special dealers around Europe that sell those products, but they are also big distributors. I will refer to, for example, to a French one that is very well known to you. It's POINT.P, the Saint-Gobain distribution structure in France that sells all of their products. So here, Wienerberger products and Italcer products goes through the same channels. Also in Italy, for example, we have the same. Also in the U.S. So there's a lot of common when we talk about distribution as such. Obviously, we will have a specific sales force as we have for facing bricks or for clay blocks or for also the roof tiles. So we will have the special and continue to have the special sales force for the tiles in Italcer. On top of it, and this is, I think, a very important aspect, I said that strategically, you will see emerging very strongly in the next couple of years. This company is leading when it comes to treatments of services, digital printing, colors, et cetera. So where do we need it? We see that the facing brick business moves towards a thinner product business. That means the bricks get thinner and thinner. We call them thin bricks or slips or whatever throughout the different markets. So here, we have a very ideal addition to our business where we can produce these products and replicate old bricks very easily through the Italcer channel. So there's a lot of manufacturing synergies there and where we can improve the business because there's a lot of renovation work going to be on the outside in Europe of the old housing stock. So replicate those bricks we do today burn in our kilns traditionally, cut them, have some waste and then put it into the market. We can produce it much quicker, much faster through the manufacturing base of Italcer. So this is something -- a growing business already for them. So they have here a business, a good business already, and due to the addition to ours, in Western Europe, especially and, above all, also in North America, this will play out as a very strong growing business for Wienerberger in the future. So I hope I have addressed this part of Italcer for you strategically. Dagmar Steinert: You had some questions about our energy pricing and ask if you are able to fix energy at lower prices with like future contracts. Of course, we do that. We did that in the past, but always like ongoing for the next years to come. And in the face of decreasing energy prices, of course, our level, what we fix is below what we did in the past. And we feel quite comfortable how we manage our risks and what actions we are taking. But 2026 will stay as it is. We will pay energy prices on market level. And the years to come, of course, it highly depends how our energy prices are developing, what is going on with the war and so on. So that's a volatile environment. Heimo Scheuch: But to add something what -- Dagmar, what Cedar has asked, there is no softening possibility of this EUR 30 million. Dagmar Steinert: No. No, that's not. Heimo Scheuch: This is, I think, what she wanted to understand. And here, we have done the utmost in order to bring it down to EUR 30 million. Yes? Dagmar Steinert: Yes. Cedar Ekblom: And could we get some color just on the carbon credit sales? I'm not sure if you disclose these numbers, but it would be helpful to know if you have been selling excess credits in the market in the last couple of years and put some numbers around what those benefits might have been? Dagmar Steinert: Well, we are always selling some carbon credits, which we don't need for our ongoing business. And we have some gains out of that, but that's normal business, nothing unusual. Cedar Ekblom: And what is the quantum there? Are we talking EUR 50 million or... Heimo Scheuch: No, no, no. By no means, such high numbers. No. It's -- as Dagmar said, it's a normal sort of ongoing business thing. So it's not a few million euros. It's a double-digit amount, if I may say so, but nothing in the range of what you were referring to. Operator: We now have a question from the line of Markus Remis from ODDO BHF Securities. Markus Remis: Can you hear me now? Heimo Scheuch: Yes. Markus Remis: Okay. Excellent. I'd also like to start with a question on the '25 financial statement. And I'm trying to better understand the cash conversions because when I look at the receivables, the ratio compared to sales was the lowest since 2010. So can you maybe disclose the level of factoring by year-end to get an understanding to which extent this was operationally driven or how much financial engineering stands behind the receivables reduction? Dagmar Steinert: Well, we have 2 effects on our receivables. First of all, regarding our working capital management, we focused on our trade payables and receivables, and we faced lower -- much lower sales volumes in the months November and December. That, of course, was one aspect of a reduction of receivables. On the other hand, we increased our factoring by roughly EUR 30 million towards year-end, but that's normal operating business as we had our Terreal acquisition integrated in our group and therefore, a bigger portion of that refers to the integration of Terreal into our factoring business. And the focus -- just to add, the focus for the year 2026 for the reduction of working capital is strongly on inventories. Markus Remis: Okay. And so factoring at year-end '25 was then close to EUR 200 million? Dagmar Steinert: Yes. Markus Remis: Okay. That's very helpful. And then if I may follow up on the cost inflation part, you've flagged 2.5% of cost inflation, excluding this energy burden, this EUR 30 million. Can you shed some light on the remaining drivers? How that 2.5% is composed? Some indications here would be helpful. And then on the other hand of the price cost equation, for which parts of the business are you most upbeat to raise prices to get to this 2% on the group level? Heimo Scheuch: Well, I can answer that. For example, we are certainly on the roofing segment, which is a stronger segment in resident than the new residential housing right now. So there, obviously, I think, we will have no problems bringing up the prices. Dagmar Steinert: The 2.5% on an average inflation, it's just a normal inflation you face more or less in every country. In some, it's below. In some, it's even higher. And therefore, it's an average number, 2.5%. You see it on personnel expenses. You see it on -- yes, on everything more or less. So nothing specific, nothing... Heimo Scheuch: Labor is the most important one. Dagmar Steinert: Yes. Markus Remis: All right. And then the last question, again, to get it straight on Italcer. The EBITDA multiple that you mentioned. So it's like just over 6x. I think that was just mentioned, how is that derived? Because if I take the equity value and then assume something like... Dagmar Steinert: Enterprise value. Heimo Scheuch: Enterprise value. Markus Remis: Sorry, enterprise value. The EUR 70 million of current EBITDA, I get to quite a different... Heimo Scheuch: No, no, you take EUR 82 million EBITDA, EUR 82 million. Markus Remis: Okay. So that's the kind of annualized contribution in the current year. Heimo Scheuch: Correct. Correct. Operator: And next in the line is Isaac Ocio from On Field Research. Isaac Ocio: Can you hear me? Heimo Scheuch: Perfectly well. Isaac Ocio: So 2 questions regarding maybe '26 and 2030. So the first one would be, so is the current inability to pass on cost inflation behind us after the EUR 30 million hit in '26? And maybe my second question would be what is the pace of recovery in European residential construction you're expecting since we're seeing kind of some green shoots in Germany and France and maybe give a bit more color regarding that. Heimo Scheuch: Thank you for the 2 questions. Yes, I agree with you that this one-off, as Dagmar has explained it, the EUR 30 million energy is then this one-off that we have to deal with this year. The rest is then a more, call it, stable development when it comes to inflation that we can digest with price increases on a yearly basis, in the years to come. Now from the future and if I may, we will do it, and I will speak about this in the Capital Markets Day presentation in more detail. But I've given you a base case that you will see in the presentation, where basically I say, it's a stable case in the future, where we, Wienerberger, can generate growth and don't wait for green shoes, as you have explained or you have referred to in France and Germany, et cetera. So we say Wienerberger has the capacity to digest and to grow very quickly when it comes to better markets or stronger markets in new residential infrastructure and renovation because we have the capacity there. We have also, if the Ukraine war ends and there's more demand, also the possibility to substantially grow our business quickly, and that will have a huge financial impact. But at this very moment, obviously, these are things that might occur. We don't know when and how and there's a lot of volatility. So we don't want to put our business model only on this. But as I tried to explain on our own strengths and what we can influence and drive, therefore, the growth independently for this. And you will see the numbers that I'll present to you in a minute. Operator: And I am moving on to Julian Radlinger from UBS Limited. Julian Radlinger: So a couple for me. First of all, could you help us with some of the moving parts in the 2026 guidance, please? What should we assume for D&A and net interest costs? I'd love to better understand the implied EPS guidance, either excluding Italcer or preferably including it? And then secondly, so you're alluding to H1 '26 being particularly tough for a lot of reasons that makes sense. Could you elaborate on that a little bit, please? So historically, your adjusted EBITDA seasonality H1 versus H2, something like 48%, 52% of full year EBITDA. Are we thinking something like 45%, 46%? Is that the right kind of ballpark or should we think about it differently? Dagmar Steinert: Well, first of all, I would like to start with our interest costs. Our interest costs in the year 2025 amount to EUR 100 million, and we usually build up during the year working capital. Therefore, we take more debt during the year on our balance sheet to bring it down by the year-end. And so the EUR 100 million, of course, are, first of all, like the basis. And then we will see additional EUR 400 million in the second quarter. And our interest costs on average are between like 3.5% and 4%. So the impact will be digestible. But of course, you have to refinance the net debt of Italcer. Italcer pays a much higher interest rate. Therefore, we will see overall for 2026, of course, higher interest rate. Julian Radlinger: Okay. That's helpful. And the D&A? Dagmar Steinert: The D&A, of course, is increasing as well. But if we look at the P&L of Italcer and the strong margin they are delivering that will be less -- yes, I would say, a little bit less impact than we have on average in our business. Julian Radlinger: So that you're saying they have lower D&A as a percentage of sales than you do? Dagmar Steinert: Slightly. But of course, we have to see regarding the purchase price allocation, what we identify in assets which we have to amortize. So what is like the split between goodwill and like customer lists and know-how and so on. And that work isn't done so far. So therefore, it's still a little bit, of course, of a slightly black box for us. Julian Radlinger: Understood. And then regarding the H1 '26, please? Dagmar Steinert: H1 '26, yes. Heimo Scheuch: Yes, you mean your EBITDA split. I think historically, you're right, you can deduct this from all the information that you have available. But I wouldn't sort of count on this for this year. It's a very different year. We have never seen such a winter for the last 20 years or so. So I think we'll have to cope with it in the sense of how the business will start in March, when it starts, how quickly it takes off and how it develops, we will see. I think I don't want to make too many predictions. As we said, we give you a clear guidance for the year, which is already, I think, a very strong message from ourselves in this volatile market. Operator: Thank you very much. There are no more questions at this time. I would now like to turn the conference back over to Therese Jander for any closing remarks. Therese Jander: Thank you very much, and thank you for joining and your interest in Wienerberger. And we hope you -- we welcome you back again in the first quarter call in May 13. And I hope you will also find a lot of usual information around our Capital Markets Day that you will now receive on our website. So thank you, everyone, and goodbye. Operator: Ladies and gentlemen, the conference is now over. You may now disconnect your lines. Goodbye.
Operator: To update any forward looking statements discussed today. For more information, please refer to our earnings release the risk factors discussed in our most recent Form 10 ks which will be filed with the SEC later today. Consistent with previous quarters, we will be discussing our Q4 and full year performance on a non GAAP adjusted basis. Which reflects constant currency growth rates and excludes items affecting comparability. Definitions and reconciliations to the most directly comparable GAAP metrics are included in our earnings materials. Here with us today to discuss our results are Keurig Dr Pepper Inc.'s chief executive officer, Tim Cofer chief financial officer, Anthony DiSalvestro and SVP of strategic finance and capital markets, Jane Gelfand. I'll now turn it over to Tim. Tim Cofer: Thanks, Chethan Mallela, and good morning, everyone. 2025 was a strong year for Keurig Dr Pepper Inc.. We delivered healthy results that achieved our annual guidance. We drove winning innovation and commercial performance, generating the fastest US retail sales growth among top food and beverage manufacturers. With market share gains across our portfolio. And we laid the groundwork through the announced acquisition for Keurig Dr Pepper Inc.'s transformational next chapter of JDE Peet's and planned separation into two leading pure play companies, Beverage Co and Global Coffee Co. Said differently, we navigated a dynamic operating environment with agility while strengthening our foundation. For the long term. And the same can be said for JDE Peet's, which earlier this morning issued 2025 results that demonstrated solid financial performance and strong progress. Advancing its refreshed strategy. In 2026, we will build upon our momentum with a focus on three objectives that should translate to shareholder value creation. First, delivering our low double digit full year EPS growth guidance in a high quality way. Second, closing and seamlessly integrating JDE Peet's And ultimately, establishing two advantaged stand alone businesses positioned for success. At our recent Investor Day, we outlined our milestone based approach to executing our transformation work streams. Let me share updates. On a few of these milestones. Starting with the JDE Peet's acquisition we have secured key regulatory approvals and launched the tender offer. Positioning us to close the acquisition in early April. We've already made significant progress on integration planning, including multiple active work streams spearheaded by leaders from both companies and capable advisers with deep and relevant experience. Our teams are collaborating well to establish joint ways of working and a unified operating philosophy, all while exhibiting strategic alignment, shared purpose, and a palpable excitement to build a global coffee leader. At the same time, we're taking steps to ensure operational readiness to separate by the end. Of 2026. We're ready to implement a combined Keurig Dr Pepper Inc. operating structure for the interim period between deal close and separation, which will facilitate near term performance while supporting a steady transition towards our future state as stand alones. We're also advancing work streams to deliver against key separation milestones including capturing initial deal related synergies, appointing independent leadership teams and boards, and establishing appropriate capital structures for the two pure play companies. Our precise separation timing will depend on a number of considerations, including market conditions, but we are progressing well. Against all elements within our control. Turning to our results. We are pleased with our 2025 enterprise performance. Net sales increased almost 9% driven by approximately five points of growth from our base business and a nearly four point ghost contribution. And EPS grew 7%. On a segment basis, US refreshment beverages was the standout performer, delivering double digit net sales growth and high single digit operating income growth. International was resilient in the face of dynamic macro trends growing on both a top and bottom line basis. And as expected, US coffee trends were softer in aggregate. But demonstrated underlying progress. Keurig Dr Pepper Inc.'s 2025 included multiple noteworthy commercial achievements to name just a few. We gained market share in Dr Pepper for the ninth consecutive year. Driven by the category leading Dr Pepper BlackBerry innovation our college football Fansville activation, as well as the brand's continued broad consumer resonance which was most recently demonstrated by the viral jingle Dr Pepper, baby, it's good and nice. That lit up social media and became a cultural moment. Our agile marketing team quickly incorporated this user generated creativity into a college football national championship ad spot. as the most engaged And Dr Pepper strengthened its position CSD brand on TikTok. We seamlessly integrated Ghost, and successfully transitioned it to our DSD network, accelerating the brand's market share as we expanded distribution and display while maintaining high on shelf productivity. We elevated our agile digitally led approach to marketing, leveraging data and technology to enable more powerful and more effective real time insights, more precise segmentation, marketing content across consumer and shopper media. As evident in emerging proof points that I will discuss shortly. And we significantly progressed the development of our disruptive Keurig Alta next generation coffee platform, completing a series of successful beta tests and building critical capabilities to support a targeted late 2026 launch. Collectively, these highlights not only mark substantial achievements for 2025, but also provide benefits that will carry forward into future years. Moving now to our Q4 results. Net sales grew 10%, led by mid single digit net price realization, including positive contributions from each segment. Volume mix grew against a difficult comparison driven by an incremental contribution from Ghost and modest base business growth. As we anticipated, profit flow through in the quarter was limited by cost pressures. And higher reinvestment spending. These factors along with modest below the line headwinds, more than offset strong productivity savings and continued overhead discipline. As a result, 42%. Diving into the segments, US refreshment beverages demonstrated continued top and bottom line momentum in the quarter. Net sales grew at a low double digit rate through both volume mix and net price realization. And operating income increased at a high single digit rate. We drove these results with a combination of healthy core portfolio trends and contributions from emerging growth areas. Starting with our core, the carbonated soft drink category remains strong despite the uneven consumer environment. As innovation, brand activity, and an attractive value proposition resonated. Our portfolio performed well within the category, driven by several factors. We had winning innovations. Not just for brand Dr Pepper, but also through offerings. Like 7UPs, Seasonal Shirley Temple, LTO, and BloomPop, in the prebiotic CSD space. We leveraged our newly enhanced precision marketing capabilities to apply personalization at scale for our largest campaign Fansville, generating more than 3,000 unique creative units driving optimized consumer conversion paths and attracting new brand buyers for the Dr Pepper franchise at a high ROI. And we managed a well executed transition of Dr Pepper to our DSD network in parts of California, Nevada, and the Midwest quickly and effectively putting resources in place to ensure high quality service and continuity. Customer feedback and support has been positive. The near term financial performance is tracking to our plans. And we will continue to unlock additional benefits from our enhanced scale in the future. We saw strong performances in some of our emerging growth areas. Beyond the core in Q4, Our multi branded energy platform of C4 Ghost, Bloom, and Black Rifle once again outperformed the category with market share increasing nearly 1.5 points. We are seeing momentum across brands. Supported by distribution gains, increased cold vault penetration, and healthy velocities and we remain on track to achieve our double digit market share goal in the coming years. Outside of energy, we drove continued robust growth for Electrolit. Which was the sports hydration category's largest And Vita Coco, Share gainer in Q4. the established leader in coconut water that nonetheless grew retail sales in excess of 20%. Emerging categories and brands already contribute meaningfully to our US refreshment beverages growth and we expect them to play an even larger role as they scale. We also intend to deploy our flexible build by partner model to expand into a additional white space areas over time, including through capital light structures. And this should further enhance our portfolio's growth potential. Moving now to US coffee. While Q4 was a softer quarter, let me contextualize our performance with three observations. First, segment revenue increased 4%, reflecting solid category and market share trends. Second, we are managing through cyclical cost pressures which is having a temporary but meaningful impact on profitability. And third, despite the cost backdrop, we are investing to position our business for long term success. I'll unpack each of these in turn. First, coffee category trends remain resilient despite some challenges. With the Keurig compatible pod category growing retail dollars at a mid single digit rate in Q4 while category growth admittedly remains pricing led, elasticities have been manageable, and consumers remain engaged. Both of which bode well for volumes once cost pressures normalize. Within the category, both owned and licensed brands and Keurig manufactured pods gained share in Q4, contributing to US coffee's solid top line results. However, our top line growth did not translate to Q4 operating income, which declined at a high single digit rate. This brings me to the second point, cost pressure. Our intention to offset inflation over the commodity cycle is unchanged. But there are always periods when the timing of costs and implemented mitigations do not align As expected, we saw this play out in Q4 when significant cost pressure flowed through our P&L without a proportionate offset. Weighing on profitability. As Anthony will discuss, we anticipate this temporary imbalance to persist in the 2026 before easing over the course of the year. Moving to my third point, we recognize our current pricing driven growth in coffee, is more cyclical in nature. And we are actively investing to position our business for sustainable long term volume and mix growth. Importantly, we have chosen to protect these investments even as we navigate an inflationary period, which is creating some additional near term profit pressure but should pay future dividends. Let me discuss a couple of our Q4 investment areas in more detail. During the quarter, we applied our enhanced marketing capabilities to launch a new Keurig brand equity campaign the first such activation in multiple years. This data driven Anthem campaign showcases the benefits of brewing coffee with the Keurig system and was delivered to consumers through targeted storytelling across thousands of ad permutations informed by their coffee purchase history and our rich insight into demand spaces. The campaign exceeded our targets, on key KPIs like brand attention and return on ad spend. And produced halo benefits that we are beginning to see across our entire coffee business. We intend to extend this marketing approach as we step up our brand building investment in 2026. We also advanced preparations for the upcoming launch of our next generation Keurig Alta platform. Including the development of our final brewer model and building out multiyear commercialization and go to market plans. Consumer testing has validated that this system delivers a great tasting, superior experience across an unmatched variety of coffee, and espresso based beverages. We see significant long term potential for this platform and have and will continue to invest ahead of scale to capture this opportunity. So to summarize the key themes resilient pod category and Keurig Dr Pepper Inc. top line trends, we saw for US coffee in Q4, elevated cost inflation, and continued investment to support long term initiatives. While the same factors are also likely to translate into subdued financial results, in 2026, particularly early in the year when cost headwinds peak and we manage through some retailer inventory adjustments, we have built our plans accordingly. While pursuing the right actions to secure healthy, longer term performance. Turning now to international. We delivered a very strong quarter. With mid teens constant currency net sales growth and 20% operating income growth, which was partly aided by timing. Momentum was led by our business in Mexico. Where our cold drinks continued to outperform as the economy began to find its footing after a challenging 2025. Strong brands and effective commercial execution including ongoing DSD expansion translated to share gains across the portfolio. Peñafiel aids and twist extensions and Dr Pepper All Grew Nicely. In Canada, performance was led by healthy coffee trends as our significant pricing actions in pods, and traditional coffee have so far translated into only minimal volume elasticity. In 2026, we will continue to invest in this growth segment, including building capabilities that will help the business scale well beyond the current year. Though we'll need to navigate continued input cost inflation, and new developments like an increased Mexico beverage tax early in the year, we remain focused on sustaining our relative strength in both Canada and Mexico. At the enterprise level, we have bold innovation plans for 2026 to power our continued portfolio momentum. In refreshment beverages, our slate is anchored by meaningful activity, in CSDs. We will welcome back a record setting Dr Pepper creamy coconut LTO. Extend our successful Canada Dry fruit splash line into a second flavor, strawberry. Expand our presence in prebiotics. With new BloomPop flavors, and activate other key brands with seasonal LTOs. In energy drinks, we are building off a very successful 2025 with exciting flavor innovation, for C4. Ghost Bloom, and Black Rifle. While also extending Ghost's portfolio into 8.4 ounce small cans, opening up new channels, and new occasions for the brand. In still beverages, we have big plans for some of our icons, including a Snapple brand refresh and a first ever zero sugar beverage offering from Mott's. And in our fast growing sports hydration segment, we have new flavors for our Electrolit partner brand. Moving to coffee, our innovation suite spans our full portfolio. In brewers, along with the disruptive Keurig Alta system, I mentioned earlier, we are launching a new version of our K Supreme which will have additional features and a refreshed design. And introducing K Mini Mate Plus, a new model. In our mini line. In pods, our big bet for 2026 is the Keurig Coffee Collective. Which marks the Keurig brand's first entry into coffee. This expertly crafted, premium offering has been enthusiastically embraced by retailers and early consumer sell through is encouraging. We also have significant product activity for The Original Donut Shop. Including a watermelon breeze variety of our popular refreshers line, and new innovation that extends the brand into matcha. A consumer preferred high growth white space. Finally, in ready to drink, we will build on our partnership momentum with La Colombe, through the introduction of great tasting, seasonal, draft latte flavors. We are partnering closely with retailers to help consumers find, engage with, and experience this great set of new products, including through incremental shelf space and compelling programming. In total, our innovation, in store activations, and marketing investments are not only important to supporting our 2026 results, but also ensuring our refreshment beverage and coffee portfolios are healthy and well positioned heading into separation. In closing, our 2025 performance was strong. As we delivered on our commitments. While laying the foundation for our exciting next chapter as two pure play companies. We intend to continue executing on this vision in 2026 while reinforcing our base business momentum with three key objectives for the year. Delivering on our low double digit EPS growth plans, unlocking initial combination benefits as we integrate JDE Peet's and executing critical milestones as we drive towards a successful separation into Beverage Co, and Global Coffee Co. Now before turning the call, to our new CFO, Anthony DiSalvestro, let me first formally introduce him. Anthony is a seasoned consumer sector executive with over forty years of industry experience, including in areas relevant to Keurig Dr Pepper Inc.'s current priorities, such as M&A integrations, cost saving programs, and balance sheet recapitalizations. He has hit the ground running in his first few months, quickly coming up to speed on our business and transformation work streams. And we are already benefiting from his financial leadership and acumen. I'm looking forward to continuing to partner closely with him as we guide Keurig Dr Pepper Inc. through an exciting and pivotal time. For our company. With that, I'll pass it on to Anthony. To walk through our financial performance and 2026 outlook before I return with closing thoughts. Anthony DiSilvestro: Thanks, Tim, and good morning, everyone. It's a pleasure to be here with you today. I was drawn to Keurig Dr Pepper Inc. by its iconic brand portfolio, a leadership team and strategy I believe in, and what I see as a unique value creation opportunity. Over the past three months since I joined, my conviction in the company's direction, people, and potential has only grown. I'm energized to partner with Tim and the entire executive team to position both Keurig Dr Pepper Inc. and the forthcoming separate companies for future success. I'll now review financial performance in more detail. Beginning with the full year. We delivered healthy results consistent with our 2025 guidance. On a constant currency basis, we grew net sales 8.6% operating income 4.9%, and EPS, 7.3%. All while navigating a challenging industry backdrop to shape Keurig Dr Pepper Inc.'s and beginning to execute our transformation agenda next chapter. Moving to the quarter. We finished the year with a solid Q4. Net sales increased 9.9% with growth in all three segments led by strong performances in US refreshment beverages, and international. Net price realization was a significant growth driver contributing six percentage points to the top line. Volume mix added 3.9 points, reflecting 3.6 points from the addition of Ghost as well as a modest increase on the base business. Gross margin contracted 150 basis points as elevated inflationary pressures were partly offset by net price realization and productivity savings. On the other hand, 80 basis points as a percent of sales primarily due to overhead efficiencies. All in, Q4 operating income grew 4.8% and incorporating headwinds from interest expense and a slightly higher tax rate EPS increased 1.7% to $0.60. Moving on to our segments. US refreshment beverages delivered a strong performance growing net sales 11.5%. Volume mix contributed seven points primarily driven by the addition of Ghost coupled with modest gains on the base business. Net pricing added 4.5 points led by CST increases taken earlier in the year. Segment operating income increased 8.7% driven by double digit net sales growth and productivity savings. Partly offset by cost inflation higher SG&A costs, and the impact of a lapping a C4 performance incentive in the prior year. Looking ahead, with continued momentum in both our core and quickly scaling growth platforms, we expect US refreshment beverages to deliver another year of strong top and bottom line growth in 2026. However, it is worth noting that our innovation cadence differs slightly from last year. Most notably, our Dr Pepper creamy coconut LTO will launch in Q2. Which compares to the Dr Pepper BlackBerry line extension that launched in Q1 2025. This timing difference could impact Dr Pepper's market share comparisons early the year but we expect good full year performance. In US coffee, net sales grew 3.9%. Net price realization added eight percentage points with inflation driven increases across both pods and brewers. Biomix was a partial offset declining 4.1 percentage points. Odd shipments, were down a modest 2.8%, demonstrating resiliency as pricing increased. Brewer shipments declined 16.8% reflecting higher price elasticity and reductions in retail inventory levels similar to the last few quarters. Segment operating income declined 8.8% as the impacts of cost inflation, and volume mix decline were only partly offset by net price realization and productivity savings. The elevated inflation in the quarter reflects the meaningful lag before coffee market price changes and tariffs affect our cost of goods sold. Given our hedging activity, and the time frame that inputs are held in inventory. Looking ahead, we expect profit to remain under some pressure for U. S. Coffee in 2026 largely reflecting two factors. First, year over year cost headwinds primarily due to increased coffee price and tariff impacts which should be most pronounced in Q1 before easing over the course of the year particularly in the back half. Second, we are also planning significant marketing and other investment spending in 2026 to support the growth initiatives Tim discussed earlier. Such as the Keurig coffee collective rollout, and the launch of 16% constant currency net sales increase. Growth was balanced with net price realization contributing 9.2 points and volume mix adding 6.8 points. Factoring in a favorable FX translation benefit, reported net sales increased 21%. Q4 segment operating income increased 20% driven by sales growth and productivity savings. Which more than offset continued inflationary pressures. These exceptional Q4 results reflected the combination of base business momentum as well as some timing benefits. For example, in Mexico, we saw some buying ahead of a significant beverage tax increase that took effect at the 2026. Though the reversal of these benefits will result in a softer start to this segment in Q1, Our full year plan for international incorporates healthy top and bottom line delivery. Moving to the balance sheet and cash flow. We remain committed to a strong balance sheet with investment grade ratings for total Keurig Dr Pepper Inc. and for the future beverage company and global coffee company upon separation. These objectives will first and foremost be underpinned by our ability to generate significant cash flow. In 2025, our free cash flow was $1,519,000,000 Notably, this included the unfavorable impact of onetime $225,000,000 gross distribution termination payments early in the year. We feel good about our underlying performance and expect standalone Keurig Dr Pepper Inc. free cash flow to increase in 2026 to approximately $2,000,000,000. We will update this target to include expected JDE Peet's free cash flow when we report next in April. The free cash flow of the combined businesses should enable swift deleveraging post deal close. As you saw in our announcement yesterday, we have also further refined the financing structure for the JDE Pete's acquisition to deliver and facilitate a timely separation First, based on strong demand, we have chosen to increase the size of our beverage company convertible preferred equity raise to 4,500,000,000.0 versus the previously announced $3,000,000,000 Second, we have finalized and are preparing to close our $4,000,000,000 global coffee company pod manufacturing JV. Third, we plan to fund the balance of the acquisition through debt. And fourth, we will continue to assess noncore asset divestitures to accelerate deleveraging. With the refined financing plans in place, we will no longer consider a partial IPO, a beverage company, in the future. Turning now to our 2026 P&L guidance, which we are providing inclusive of the JDE Peet's acquisition. Based on the expectation of an early April close and using current FX rates. We expect net sales in a range of 25.9 to $26,400,000,000 This outlook assumes continued momentum in US refreshment beverages, healthy trends in international as well as growth in US coffee. It also embeds an incremental contribution from JDE Peet beginning in Q2 which we expect to add approximately 8.5 to $8,700,000,000 to net sales. On the bottom line, we expect low double digit EPS growth in constant currency. This includes an anticipated six to seven percentage points contribution from JDE Peet on a three quarter basis. Consistent with our unchanged outlook for approximately 10% accretion in the first year after acquisition close. For stand alone Keurig Dr Pepper Inc., our outlook embeds 4% to 6% net sales growth and 4% to 6% EPS growth both in constant currency. Based on current rates, we anticipate that FX will represent an approximate one percentage point tailwind to stand alone Keurig Dr Pepper Inc. net sales and EPS growth. For the full year. To help with your below the line modeling, we expect the following for 2026. Interest expense of approximately 1.07 to $1,120,000,000 an effective tax rate of approximately 2223%, and approximately 1,370,000,000.00 diluted weighted average shares outstanding. Once the JDEEP's acquisition closes, we will also have two new impacts on the P&L to reflect the pod manufacturing JV and the convertible preferred security. Assuming an early April deal close, we expect the following impacts over the last March 2026. Approximately $190,000,000 in pretax coffee JV cost which will flow through the noncontrolling interest line and convertible preferred costs that will flow through below net income and will be calculated each quarter as the greater of the roughly $53,000,000 quarterly preferred dividend or the securities approximately 8% proportionate share of earnings. Pre separation, we expect the calculation to default to the proportionate share of earnings. Now let's discuss quarterly space. While we are planning for healthy EPS growth on a full year basis, we expect Q1 EPS to be in the range of $0.36 to $0.37 compared to $0.42 in the year ago quarter. This is due to three primary drivers. First, the unfavorable comparison of lapping a $0.02 per share lighter cocoa gain in Q1 2025. Second, a peak year over year cost headwind in Q1 driven by the impact of green coffee inflation and tariffs, on cost of goods sold. And third, anticipated retailer inventory adjustments that will negatively impact top and bottom line performance in US coffee. We expect these transitory EPS pressures to begin to ease after Q1 and in the case of coffee costs more meaningfully improve in the back half. As a result, we have good visibility that stand alone Keurig Dr Pepper Inc. EPS growth will be positive in Q2 and accelerate further in the second half. In addition, we will start to benefit from accretion once the JDEP deal closes in early Q2 further enhancing EPS growth for our combined company. In closing, 2025 was an important year for Keurig Dr Pepper Inc.. We extended market share gains in key areas, made strides on multiple strategic initiatives, and set the stage for a transformative next chapter all while delivering on our financial commitments. We will look to build on this performance in 2026 and are fully focused on executing with excellence to achieve our base business integration, and separation objectives. With that, I will turn the call back to Tim for closing remarks. Tim Cofer: Thank you, Anthony. As Keurig Dr Pepper Inc. transitions into a new chapter, and we prepare for our separation into two pure play companies, our board and governance are also evolving. At the end of Q1, Pamela Patsley, Steps off the board. our lead independent director will assume the role of board chair as Robert Gamgort's. Bob has been a core part of making Keurig Dr Pepper Inc. into the formidable company it is today and a mentor and partner to me for the last two and a half years. We are grateful to him for his many years of service and countless contributions to the company. At the same time, Pam is uniquely suited to step into the chair role. She knows Keurig Dr Pepper Inc. deeply. And has very strong board and executive experience. While I look forward to working with her in this new capacity, as we lead Keurig Dr Pepper Inc. through a transformative period, Pam has already been a great partner to me as chair of the nominating committee in director recruitment and board structure. In addition, as recently announced, we are pleased to add two new independent directors to our board in early March. Amy Teiner, Alphabet's corporate controller and chief accounting officer and Bill Newlands, Constellation Brands president and chief executive officer. Amy and Bill are both highly accomplished and experienced executives who will bring valuable capabilities and perspectives to our boardroom. Finally, we are separating our existing remuneration and nominating committee into newly created nominating and governance and compensation committees. Which will further align our governance with best practices Each of these steps will support the company's ongoing transformation and will help us to ultimately establish two world class boards for Beverage Co and Global Coffee Co with more announcements to come. Over time. So in closing, I'd like to thank our more than 30,000 Keurig Dr Pepper Inc. colleagues for their focus and adaptability through a period of significant change. And I look forward to welcoming our more than 21,000 new JDE teammates to the company in the coming months and to successfully executing on our shared vision in 2026 and beyond. With that, we're now happy to take your questions. Operator: We will now begin the question and answer session. To ask a question, you may press star then 1. On your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the key. If at any time your question has been addressed, and you would like to withdraw your question, please press star then 2. We ask that you please limit yourself to one question. At this time, we will pause momentarily to assemble our roster. The first question today comes from Chris Carey with Wells Fargo. Please go ahead. Chris Carey: Hi. Good morning, everyone. Thanks so much for the question. I wanted to just start with some context on the top line performance for stand alone Keurig Dr Pepper Inc. specifically contribution from The US refreshment business. Relative to the rest of your your businesses. It it does seem to imply a pretty solid outlook for the top line in US refreshment. I wonder if you could just maybe help us understand pricing, contribution, of your partner assets, and then kind of base business performance within The US refreshment business specifically? And then just if I could add know, follow-up, it would be what are the assumptions that you're embedding for the JDEP business within this, you know, six to seven percentage point EPS contribution that you flagged when you think about 2026, whether top line or margins? Thank you. Anthony DiSilvestro: Thank you. I'll start on that one. Let me go back to the overall guide. We are expecting low double digit EPS growth, and we're doing this on a combined basis. So obviously, Keurig Dr Pepper Inc. base for twelve months and then adding three quarters of the incremental impact of the JDE Pizza acquisition that we expect to close in in early April. When you unpack that, the Keurig Dr Pepper Inc. stand alone guidance is four to 6% top line and four to 6% EPS growth all on a constant currency basis. And when you look at the top line, a combination of pricing and fall mix gains, with sales growth expected across each segment. The most significant driver is expected to be US refreshment beverage. We expect a strong top and bottom line performance following equal equally strong, results in 2025. And as Tim, you know, talked about, know, we're seeing a lot of innovation. You know, we've been gaining share in CSDs. Sports hydration, and energy. So those growth vectors together with our core business. Driven by innovation, and some pricing expected to continue to grow into 2026. The second part of your question was around the contribution from JD PEAT. And, you know, what we said in the guidance, is 8.5 to $8,700,000,000 of incremental revenue and, you know, the related operating income contribution. We have you know, this is all informed together with JDEP, and they're kinda baseline planning for, you know, 2026. We can't get too much into detail given that JDEPs is still a you know, a stand alone business. But net net, when you add the revenue, the operating income related to that, early gains on our synergy capture towards the $400,000,000 three year target when you incorporate, the incremental, you know, financing cost across the convertible preferred, the pod manufacturing joint venture, and the incremental debt that we've talked about, it all nets down to a six to seven point EPS benefit in 2026. Consistent with our previous outlook for 10% accretion on a a full year basis post acquisition. Operator: The next question comes from Steve Powers with Deutsche Bank. Please go ahead. Stephen Robert Powers: Great. And good morning, Dan. Good morning, Anthony. Question for each of you, if I could. The first one, Anthony, on, you know, the with the updated capital structure news from from overnight. I think a lot of the pieces are coming into into view. One thing that I am left questioning, is the existing Keurig Dr Pepper Inc. debt. And how that is to be allocated across future bev versus CoffeeCo. So any any thoughts on that would be very very helpful. And then, Tim, on on energy, you talked about you know, the strong momentum and and the confidence going forward, including including future space gains in '26. I guess I'm curious a bit of of kinda where that space is coming from. Is it really a function of the category gaining space? Are you gaining disproportionate share within category expansions? And is there any element of the energy gains that you're foreseeing that might come out of other aspects of your portfolio? Thank you. Anthony DiSilvestro: I'll take the first part of that question. And as you saw, we did announce an updated financing plan yesterday. It included a few elements. An upsize on the beverage company convertible preferred equity to 4,500,000,000.0 The finalization of the coffee pod manufacturing JV that's $4,000,000,000 and then $9,000,000,000 of debt which is a combination of senior debt, and we're gonna draw under the existing term loan facility, and that'll get repaid with junior subordinated notes at a future date. And then, also, you know, we'll be assuming $5,000,000,000 of the existing JDEP debt. Now that 9,000,000,000 incremental and the 5,000,000,000 rollover will stay with CopyCode. The existing Keurig Dr Pepper Inc. debt will stay with Beverage Company together with the 4 and a half billion convertible preferred Tim Cofer: Yes, Steve. I'll take your second question on energy. You you've heard us say before, we're big believers in this category. We like this category. It's why we did the Ghost acquisition and have assembled this portfolio of four great and quite distinct brands. I think this category overall has multiple structural growth drivers that will keep it fueled for growth for many years to come. I think there's continued distribution, expansion for energy in aggregate at a category. I think there's household penetration gains that we can still cap at a category and brand level. Occasion gains, price pack architecture, a channel distribution opportunities. We're seeing with a couple other brands in our Bloom brand, the incremental female consumer coming into the category. So we continue to like this. And that's why it's a you know, a $28,000,000,000 category that's growing in the teens You saw that in '25, and you see that continue into 2026. We like our portfolio, 1.5 share points last year and we believe we will continue to grow share this year. We've got a great innovation lineup across all four brands. Some really exciting new flavors, some some partner flavors. 8.4 ounce cans, which I think opens up a lot of new occasions and and formats. Regarding specifically your comment on shelf space, we've had a very good sell in for our energy portfolio. A across our customer base, both C store and larger format, and we are expecting significant incremental distribution points particularly in convenience. With expanded space there. Across our brand. So I think the punch line to your specific shelf space question is, I would expect both energy in aggregate as a category to gain shelf space relative to other LRBs. And Keurig Dr Pepper Inc. in particular to add shelf space. Do I think it is cannibalistic to the balance of our portfolio? No. I think you'll see that continue to grow and add to the Keurig Dr Pepper Inc. sales. Steve Powers: Great. Thank you both. Appreciate it. Operator: The next question comes from Filippo Falorni with Citi. Please go ahead. Filippo Falorni: Hi, good morning everyone. I wanted to ask more about the the coffee business. Tim and Anthony, both you guys mentioned that the first half of the year, there's gonna be more commodity headwinds given your hedging. But, obviously, the commodity has come in quite a bit from the peak. So when, based on your hedging, should we start to see some more relief, from the commodity? Is it really late in 2026? Or, could it come in a little bit early kinda, like, in Q3 time frame? And then on the pricing side, some of your competitors have talked about potentially giving back some of the commodity benefit in the form of lower prices. What are your pricing plans in coffee? Do you think you can hold the price, take more price? If you can give us a sense there, that will be helpful. Thank you. Anthony DiSilvestro: Yeah. I'll start on this one. As we look at the coffee business for 2026, we do expect some, you know, phasing as we go through. I would start by saying, you know, we expect you know, the year over year cost headwinds, both green coffee prices and tariffs to be most impactful in the first quarter of the year. And as part of the reason why we're guiding to what we are for the you know, the the first quarter. And it reflects a couple things. One is there is about a six to nine month time lag between market price changes and when you see it throw through our P&L. And that's a combination of two things. One, you know, the time that input costs sit in inventory. And second, our forward hedging activities. And, you know, so it will be probably the latter part of the second half before we see the current market prices come through. But should it Sequentially improve, right, there'll be a headwind in Q1. A lesser headwind in Q2 and flip in the second half And it's somewhat mechanical at this point because, obviously, we know the costs that are sitting in inventory. We know our forward hedging costs, and we can look to the forward market price for green coffee to see what'll impact our P&L in the latter part of the year. Tim Cofer: Yeah. Maybe I'll build on that, Filippo. Just to say, look. We're certainly well aware that pricing has been a big topic, a conversation across the industry. Our goal obviously is to drive sustainable volume and mix led growth. Across all of our categories. At the same time, it's important for us to offset inflation when it occurs to protect that ability to continue to reinvest in our business for the long term. And so if you think about US coffee, there's no doubt that the category and Keurig Dr Pepper Inc., we've taken some meaningful pricing. In recent years and in and in '25. And we passed through some significant inflation as C price hit unprecedented levels early last year and as tariffs were implemented. Despite this, you've seen the consumers remain highly engaged with the coffee category, We feel very good about our elasticity. It's tracking to our expectations, and it remains healthy. And so, you know, we don't believe the category is overpriced. And we expect year over year cost headwinds as Anthony just reinforced, to persist going into early twenty six given that hedge and inventory timing lags. But that will ease as the year goes on and I think put us in a good position to see the coffee category return to solid top line performance with volume and mix meaningfully contributing. Operator: The next question comes from Peter Grom with UBS. Please go ahead. Peter Grom: Great. Thank you. Good morning, everyone. Maybe two for me. Just first, on the phasing of the year, You provided some good color on what to expect in the first quarter from an earnings standpoint. But just given some of the retail inventory dynamics and some of the timing nuance you outlined in U. S. Beverages and international, curious how you see organic sales growth in the first quarter in the context of the full year guidance and relatively strong 4Q exit rate? And then just a second question, just on the partner brands and the broader strategy. It's obviously been a a strong driver of growth. I would love to get your perspective on this strategy as you go through this transition over the next, you know, several months I guess, asked another way, what's your willingness to add more brands as as you go through the separation? Thanks. Anthony DiSilvestro: Yeah. So, let me address the first part of the question and thinking about the gating of our top line. On a full year basis, the base KD KDP business, 4% to 6% top line growth. And I would say fairly stable, a little bit of pressure in Q1. Around retail inventory adjustments, particularly in coffee. And and pods. And it's you know, that impact is one of the three reasons that the bottom line will be under a little bit of pressure in Q1. Obviously, we're wrapping the Vita Cocoa $0.02 gain. Expect, you know, the cost headwinds in coffee in particular to be peaking in Q1 relative to the balance of the year. And secondly, there is some anticipated retail inventory adjustments in coffee, as I mentioned. Impact. So, obviously, that's a top line as well as a bottom line. That said, you know, we have very good visibility to EPS growth in Q2 and a further acceleration in in the back half. Obviously, the VITAL COCO issue is behind us. The cost headwinds, as I just mentioned, are going to moderate as we move through the year. The inventory adjustments will impact the first quarter to a lesser extent Q2 and then kind of get more in balance as we go into the to the second half. And we should also benefit you know, from the innovation and stepped up marketing activities that Tim mentioned in his remarks. Tim Cofer: Yeah, Peter. I'll I'll take your second question on partners. Look, first, I'd say it's important for us to have a healthy balance between core brand growth and partnerships. Both have featured well in the growth history of Keurig Dr Pepper Inc., and I expect both will continue to going forward. You saw that last year. When you look at the kind of decomp of our growth you saw a healthy base business growth in our core positions led by CSDs. And you saw contribution from partner brands. Think brands like Electrolit and Vita Coco and and some of the Nutrabolt brands. As you know, at Keurig Dr Pepper Inc., we really pride ourselves on a flexible buy build partner model as we think about capturing white space opportunities. And, you know, one of the reasons I love this beverage industry, is how dynamic it is. Consumer preferences will continue to evolve, and that will always create interesting growth spaces for us. And we've got a flexible model that allows us to capture those through buy, build, or partner. Think we also have a track record of creative and highly capital efficient ways to tap into that. A recent example that was you know, produced meaningful growth last year and will again this year is our Electrolene partnership. That is a a no capital partnership where we're the distribution partner of the the largest share gainer in sports hydration. One that we've got continued confidence will grow. So I think you'll see that flexibility going forward, and you'll see us continue to tap into white spaces. And you'll see us continue to put a premium on a balanced approach of base business. Growth and partnership growth. Peter Grom: Great. Thank you so much. Operator: The next question comes Lauren Lieberman with Barclays. Please go ahead. Lauren Lieberman: Great. Thanks so much. Two things I wanted to check-in on. One was just the comments both on 1Q then you're saying, yes, we'll get to growth in 2Q. Implies a very, very big ramp on EPS growth for underlying KVP in the back half. So just wanted to kind of confirm that, and it know, even with that, like, strong double digit, you'd have to do that in order to get to the low end of that four to six. So I just wanna make sure I'm thinking about that the right way. And then just any update on leadership search for coffee Co and kind of what it you know, who the board is is looking for profile wise, Is this an endeavor that underway and being led by the Keurig Dr Pepper Inc. board? I was just kinda curious on how that would fit. And then finally, sorry, last thing, is any thoughts on free cash flow? I know it's tough to kind of mush two companies together and comment on free cash before you're together. But just any thoughts on that for '26? Thanks. Anthony DiSilvestro: Okay. I'll I'll start. Mean, just confirming, yes, we do expect accelerating EPS growth on the base KD business as we go through the year. And the primary swing item, does relate, to, coffee cost and tariff impact on the P&L and the sequencing of those you know, through the year. And also, the addition of JDEP and the six to seven points of accretion, obviously, is quarters q Q2 through Q4. So obviously, that's a back half weighted impact. Before going back to Tim, I'll comment on free cash flow. First, you know, this is a important metric for us, a focus area. As we look to continue to delever post acquisition. Did 1,500,000,000.0 of free cash flow in 2025. And are forecasting $2,000,000,000 of free cash flow in 2026. So a significant improvement Part of that is we're lapping some distribution payments related to ghosts. But also growth in EBITDA better performance on working capital, particularly inventory will contribute to that. When we get to the next quarter, we'll be able to incorporate the JDE Peet's outlook. They had a very good year on free cash flow in 2025, exceeding €1,100,000,000 in terms of free cash flow generation. So both of these businesses are highly cash generative. Which gives it obviously a lot of strength and an ability to delever going forward and as well as post separation. Tim Cofer: second question. Yeah. I'll take the Lauren. Obviously, one of our top priorities And as we signaled back on Investor Day, one of our separation prerequisites is establishing strong leadership teams and boards of directors for each of our future pure play companies. Specific to the Global Coffee Co CEO, I tell you we're in the final stages of our internal and external search. And we will plan to have a public announcement by deal close. That process is being led by the Keurig Dr Pepper Inc. board specifically by Pamela Patsley. Our incoming chair and chair of the non gov committee, and me. And with involvement of the entire Keurig Dr Pepper Inc. board. And I am confident we will appoint a CEO with the right set of capabilities and background to position Global Coffee Co. For long term success. Operator: The next question comes from Peter Galbo with Bank of America. Please go ahead. Peter Galbo: Anthony, thanks for all the modeling detail. Tim, I wanted to maybe focus back on refreshment beverage and particularly just what's been happening through the start of the year on some of SNAP waiver adjustments in certain states. Obviously, there's a few big states that start to roll on. In the spring. So just any early reads on kind of what you have seen and and whether or not the guidance, at least on the CSD side, incorporates any sort of disruption as Texas and Florida kind of start to roll into that waiver program? Thanks very much. Tim Cofer: Yes, Peter. As you can imagine, we are looking at that dynamic very closely, including a state by state analysis that I actually review with our teams every other week. And, you know, when it comes to SNAP restrictions, I would say you know, kind of think about it in two two areas. One is you know, category eligibility of SNAP benefits, and the other is more broader across the board SNAP benefit changes in in magnitude. As it relates to first bucket, we see changes to categories eligible for SNAP as more likely to drive really shifts in the payment method versus necessarily resulting in in a meaningful change in consumption. So when you think about CSDs in particular, we know that CSDs have prominent kind of top five role in grocery bills for both SNAP recipients and non SNAP households. We also know that SNAP recipients fund their grocery bills through a combination of SNAP benefits and their own money. And so we've seen that there is a often a reallocation left pocket, right pocket as it relates to that. On the other hand, I think history would suggest that if there are meaningful changes in the magnitude of SNAP benefits in aggregate that can be more impactful on certain grocery purchasing power for consumers and and can merit some trade off decisions. So the way we're thinking about it is obviously closely monitoring the situation, including the five or six states that have already implemented that eligibility SNAP restrictions. We're monitoring that closely. I think it's too early to draw firm conclusions. We're seeing some mixed signals. Quite honestly, across the specific states. We've baked in some allowance into our 2026 plans, but I think the overall impact on the business is gonna be manageable, and you should expect us to respond as we learn more in a way that prioritizes, you know, delivering our plans, and effectively serving our consumers, which can include offering other price architecture and and affordability options, you know, mini cans, two liter value packs, certain promotions, etcetera. So we'll stay dynamic as we continue to monitor, but feel good that we've got our arms around this in the guide that we've shared today. Operator: This concludes our question and answer session. I would like to turn the conference back over for any closing remarks. Operator: Great. Just want to thank everybody for their time and attention this morning. And the IR team is around if you have any follow-up. Thanks so much. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Super Group (SGHC) Limited Earnings Call – Q4 and Full Year 2025 Nkem Ojougboh: Hello, everyone, and thank you for joining the Super Group (SGHC) Limited fourth quarter and full year 2025 earnings webcast and conference call. My name is Lucy, and I will be coordinating your call today. During the presentation, you can register a question by pressing star followed by. It is now my pleasure to hand over to your host, Nkem Ojougboh, Head of Investor Relations, to begin. Please go ahead. Good morning, everyone. And thank you for joining us today to discuss Super Group (SGHC) Limited's results for the fourth quarter and full year 2025. During this call, Super Group (SGHC) Limited may make comments of a forward-looking nature that is subject to risk, uncertainties, and other factors discussed further in its SEC filings that would cause its actual results to differ materially from historical results, or from the company's forecast. Super Group (SGHC) Limited assumes no responsibility to update forward-looking statements other than as required by law. On today's call, Super Group (SGHC) Limited may refer to certain non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for measures of financial performance prepared in accordance with GAAP. Super Group (SGHC) Limited has provided a reconciliation of the non-GAAP financial measures to the most comparable GAAP figures in the press release issued yesterday and available in the Investor Relations page of Super Group (SGHC) Limited's website. Super Group (SGHC) Limited recommends that investors refer to its supplementary presentation posted to the company's website. Today, I am joined by Neal Menashe, Chief Executive Officer, and Alinda Van Wyk, Chief Financial Officer. After our prepared remarks, we will open the call up for questions. I will now turn the call over to Neal. Neal Menashe: Thank you, Nkem. Nkem Ojougboh: Good morning, everyone. 2025 was a standout year for Super Group (SGHC) Limited. We refined our portfolio by exiting US iGaming, Neal Menashe: allowing us to focus on markets where we expect clear durable advantages and where we believe we can win decisively. Concentrating resources in our core regions in this manner has paved the way for the record growth and operating leverage that we continue to see today. Despite some unfavorable sports outcomes late in the year, Q4 was another record-breaking period. Monthly active customers exceeded 6,000,000, a new record, and deposits also reached new highs. In preparation for a strong 2026, we successfully launched ZAR Supercoin in South Africa, the first step in our broader digital payment infrastructure. We are also pleased that we have received the final regulatory approval of the Apricot transaction, which strengthens our Sportsbook technology platform and begins the process of real-life cost savings. Turning to operational performance, we closed the year with significant momentum across priority markets. Europe saw strong revenue growth this quarter, up 23% year over year, led by a 37% increase in the UK. In Spain, revenue grew 5% on the back of strong retention and product improvements. In Germany, we remain encouraged by the upcoming H1 slots launch and the operational efficiencies we continue to implement across the market. Africa grew 27% for the full year against 2024, with Botswana outperforming since launch and South Africa delivering strong wagering growth and record casino volumes. Compared to fourth quarter 2024, Africa was up 7%. This was a very solid result given last year's robust sports margin and this year's customer-friendly outcomes. The underlying strength of our Africa business is highlighted by 31% growth in sports wagers and 52% growth in casino wagers year over year. Overall, Africa remains a powerful growth engine supported by continued customer momentum and high brand loyalty across the region. And we continue to assess our strategy in Nigeria. In North America, Canada ex-Ontario increased 15%, supported by strong customer retention and acquisition coupled with improved product rollout. In Ontario, product improvements also drove record engagement and deposits. Alberta continues to show solid growth, and we are preparing for regulation in Q2. Overall, North America, excluding the US, grew 10%. APAC revenue rose 6% year over year despite New Zealand's 5% dip, reflecting our disciplined wait on the sidelines ahead of the long-anticipated local regulations framework. We continue to undertake product innovations in support of future growth. During the quarter, we improved sports promotional mechanics for Betway x Africa, leading to a 400 basis points sequential increase in the Sportsbook parlay wager mix. In Africa, in the beginning of this year, we completed the technology migration in all our markets. We are now implementing AI-driven hyper-personalized bet pricing to translate real-time liability analysis, market data, and customer behavior insights into dynamic odds. We are confident that this will improve our trading efficiency and help to mitigate volatility. These upgrades are all part of our broader focus on improving customer engagement, optimizing the efficiency of our promotional mechanics, and building scalable features that support long-term margin quality. In South Africa, ZAR Supercoin has two significant catalysts expected in the coming months. First, the launch of the Supercoin wallet, which will give customers a seamless way to acquire, hold, and redeem directly within our ecosystem. We expect this to increase engagement. Second, we are preparing additional exchange listings to broaden access, deepen liquidity, and expand distribution. We believe that together, these developments will position us well for this year. With that, I will turn it over to Alinda. Alinda Van Wyk: Thank you, Neal. 2025 was truly exceptional. Our total revenue for the year reached $2,200,000,000, reflecting a 22% increase compared to the previous year. Adjusted EBITDA saw an increase of 57% year over year, amounting to $560,000,000. This represents an impressive margin of around 25%, compared with 19% in the prior year. Despite the challenging year-over-year benchmark, total revenue grew 8% to $578,000,000 during the fourth quarter, with adjusted EBITDA up 11% to $139,000,000. Record deposits were driven by casino momentum and an active sports calendar. Total wagering activity remained robust with an increase of 20% for sports and 17% for casino compared to last year. In addition, average monthly active customers reached an all-time high of 6,100,000 for the quarter, a 16% jump from the same period in 2024. Our results demonstrate a commitment to cost discipline, and we maintained operational and marketing efficiencies. This is supported by further AI-enabled improvements. Enhancements in customer support, product customization, and sports trading are ongoing. The consistent strength of our business lies in our effective conversion of EBITDA to free cash flow, as shown by this year's impressive 72% conversion rate. We closed the year with $513,000,000 in cash, up 32% year over year, an increase that underscores the resilience and durability of our business model. Our capital allocation strategy includes a commitment to rewarding our shareholders. Over the course of 2025, we returned $156,000,000 to shareholders, including $20,000,000 in Q4, with an additional special dividend of $125,000,000 by this month. Our robust cash generation allows us to maintain this discipline while funding organic growth. Turning to guidance, 2026 is off to a strong start, aided by impressive active customer numbers even higher than last quarter. After an unusually high performance in January, sports hold has returned to levels in line with our trailing twelve-month average of last year. For 2026, we are guiding to total revenue of at least $2,550,000,000 and adjusted EBITDA of more than $680,000,000. This reflects purely organic growth, continued customer engagement, and a FIFA World Cup uplift. Notably, this guidance assumes ongoing marketing discipline at roughly 22% of revenue, UK tax increases taking effect from April, Alberta regulating locally from midyear, and continued operating leverage supported by a strong balance sheet. We are pleased to share that the board approved an increase of our minimum quarterly dividend target from $0.04 to $0.05 per share. The first payment will be made towards March, with the board reviewing this on a quarterly basis thereafter. To conclude, we expect to release full financial statements in April, consistent with prior periods. I will now hand back to Neal for closing remarks. Neal Menashe: Thanks, Alinda. Looking ahead, we are excited to continue scaling our strongest markets, exploring expansion into new African territories, and we believe that our teams are well prepared for upcoming regulation. The expanded World Cup schedule offers a driver for global engagement, setting the stage for a strong 2026. To our employees, thank you for an exceptional year. And to our shareholders, thank you for your ongoing support. I will now hand over to the operator to open the call up for questions. Nkem Ojougboh: Operator? Thank you. Operator: To ask a question, please press star followed by 1 on your telephone keypad now. When preparing to ask your question, please ensure your device is unmuted locally. The first question comes from Ryan Sigdahl of Craig-Hallum Capital Group. Your line is now open. Please go ahead. Ryan Ronald Sigdahl: Neal, Alinda, good day. Congrats on the strong business trends. I want to start with the customer-friendly outcomes in December. Curious how much that impacted results, if you can quantify that. And then secondly, how that has translated into potentially greater recycling of profits in play as you look at January and February, and if there are any notable trend differences to call out between sports and casino as we start the new year? Neal Menashe: Okay. So hi, Ryan. Great job. So the quarter started off really great, but obviously in December sports outcomes were made more customer friendly. Obviously, in Africa, a couple of Nations, Champions League, and the English Premier League. You recall Q4 2024, we had a hard comp of 16%, and we ended the quarter with sports at 11.4. December was meaningful, given that we estimated it was probably about a $20,000,000 EBITDA impact from these outcomes. But obviously, it did flow through on our side in January. As Alinda said, we really had a fantastic January. But again, you know, it is all about the favorites and drawing or losing, but this is what we sell. We sell that the favorite obviously sometimes can win all the time. And we see lots of activity in our casino. If you compare casino Q4 2025 to the prior period, it is up significantly. Ryan Ronald Sigdahl: Great. Just given the strength of the business, and some recent news, I guess, can you explain what the company is doing from a charitable standpoint with Betway Cares, reinvestment in the community? I saw Mr. Beast yesterday. Certainly seems like a lot of good things you guys are working on. It has been spun a little bit negatively by certain people. So curious just to level set what you guys are doing with your communities and reinvestment. And then secondly, Alinda, if you can just explain at a high level how those expenses and the spending flow through the income statement. Perfect. Nkem Ojougboh: Before I hand it to Alinda on the accounting, let me give some context of Betway Cares. At a high level, Betway Cares is our charitable trust in South Africa dedicated to community initiatives, clean drinking water, sports development, art, cultural access, and with the goal of driving long-term impact. So we do vast amounts of charities across the spectrum. Alinda can now talk to how that flows through our income statement. Alinda Van Wyk: Yes. Thanks, Ryan. On the accounting side, IFRS requires us to consolidate 100% of the earnings of the South African entity, as well as 100% of the expenses of the minority, which is Betway Cares. And the operating expenses of Betway Cares are expensed as general and administrative expenses, and what we spend is shown as restricted cash on the balance sheet. Ryan Ronald Sigdahl: Great. Nkem Ojougboh: Thanks, guys. Good luck. Ryan Ronald Sigdahl: Bye. Nkem Ojougboh: Thank you. Operator: The next question comes from Jordan Bender of Citi. Your line is now open. Please go ahead. Good morning, everyone. Thanks for the questions. Two for me. One on South Africa, we saw potential flare up in tax changes towards the end of last year. Are you able to help us just better understand what you are hearing and seeing on the ground and maybe the outlook for that? And then the second question, so we have 2026 guidance. You guys gave us your 2028 targets at your Investor Day a couple months ago, or back in September. From what the guidance range maybe tells us is you can potentially get to the low end of your 2028 targets by this year. So are you able to just help us understand what you are seeing might be running better than expected when you gave that outlook back in September? Thank you. Neal Menashe: Okay. So I will start with South Africa. There is obviously no new update. All the operators in South Africa expect to submit their responses in February to the government paper, and then go through different committees. So we will see how that goes. From our perspective, when it comes to all these countries, it is all about operating efficiently, right? And that is what you will see in our guidance and our margin. So it is all about that operating leverage that we keep talking about in this business. Also that extra revenue coming in at almost 50% to 60% to our bottom line. So from the guidance for next year at $680,000,000, we hope by 2027–2028, we will increase that as the operating leverage kicks in and our marketing efficiencies across the world start playing out. Alinda Van Wyk: Maybe just to add to that, we made specific reference to long-term goals more than guidance. And what we had to embed this quarter for the guidance of 2026, and when we put it all together, it is just to keep in mind the effect of the UK tax that is in effect in April of 2026 as well as the change over to a regulation in Alberta, which we embedded in the guidance of 2026 halfway through the year. The interesting thing as well is we build our guidance on our continued customer momentum. I think we spoke a lot about our cohorts, and that is even though we have a lot of confidence in what already exists within our business, we remain quite conservative in how we roll it out in the next couple of years. Jordan Maxwell Bender: Understood. Thank you very much. Operator: The next question comes from Bernie McTernan of Needham & Company. Your line is now open. Please go ahead. Bernard Jerome McTernan: Great. Thanks for taking the questions. Maybe just to start, I have two. Just wanted to ask on Nigeria. So the slide deck mentioned assessing a new plan in Nigeria. So just wanted to get a sense in terms of what is contemplated in the guide, and what is the timeline of the rollout of that new plan. And then also discussion on the final regulatory approval for Apricot. So I just wanted to make sure, was Apricot always treated at arm's length since the original deal announcement, I think a couple years ago at this point? And more importantly, what will you be able to do now with that final regulatory approval that you were not able to before? Neal Menashe: Okay. So just obviously in Africa, we continue to operationalize in all the countries within Africa. And we are still refining our strategy in Nigeria. We expect low single-digit World Cup tailwind there. Right? So Nigeria is more to decide what we are doing, which part of the market we are setting, and we have one or two other African countries we are looking at there. But we see lots of low-hanging fruit in all our other African markets. Operationalize it in the same way we have operationalized the other markets across the world. When it comes to Apricot, as you know, we purchased the Sportsbook technology, bringing it in-house. Just to explain that Sportsbook technology is for Betway outside of Africa. We now have full control over it. So it means that all the staff, etc., come into our organization and then we can even do more product enhancements with the software because now we own that part of the product. Alinda Van Wyk: Yeah. And maybe just to add to that, even though the transaction was reported on and detailed, explained in the 20-F that we previously published last year, we only could complete the transaction now when we had regulatory approval to operate this product in different jurisdictions. Bernard Jerome McTernan: Got it. Thank you both. Operator: The next question comes from Jason Tilchen of Canaccord. Your line is now open. Please go ahead. Jason Ross Tilchen: Good afternoon where you guys are. Good morning from here in New York. Just wanted to start with a question. You obviously provided some extra balance sheet flexibility. Wondering if you could just remind us a little bit of what some of the key, as you contemplate potential M&A opportunities, are? What would be the type of acquisition you would be focused on here in the near term? Is there any sort of country or region in particular you feel you could be strengthened via M&A? Neal Menashe: Okay. So as you know, when it comes to M&A, we always are highly selective. We do not really need M&A to hit our plans. And obviously, if they are bolt-on, improve tech, our products, or market position with attractive returns, we will engage. But I think the real key for us is we are not overpaying. We have seen lots of our competitors overpay, and that is not what we do. It has to make strategic sense for us. And the businesses we acquire have to either be standalone or, if they are coming into our world, we can then take them to another level. So that has always been how we look to it. Alinda Van Wyk: And yes, Jason, you made reference to a nice amount of cash on the balance sheet. So how we deploy that is discipline first and flexibility next. Organic growth has always been important to us with a clear eye on return on investment. And then you have noticed we pay regular and special dividends. So, and as Neal said, we will only select bolt-on opportunities that strengthen our core. Jason Ross Tilchen: Very helpful. And then just one quick follow-up. I am wondering if you could share a little bit more on the strategy in Alberta, and how you are taking learnings from the Ontario transition and applying them to improve performance here this time around? Neal Menashe: Okay. So as we know, Alberta is expected to regulate in Q2 2026. I mean, I will say this, we are ready. We have learned our lessons from Ontario of how to migrate the customers from our .com product to now Alberta. We have also enhanced our rest of Canada product and Ontario products, so all those features will now come into the Alberta product. I think we saw lots of heavy marketing activity early on in Ontario. I am not sure that all the competitors can keep spending as they have been spending. So we think that will be a more rational competitive environment. And as you know, we have already got the revenue. So we spend X percentage of our marketing on revenue, we already have that revenue, so we are ready to see it as soon as all the regs come and we are ready to go. We go for— Jason Ross Tilchen: helpful. Thanks very much. Nkem Ojougboh: The next question comes from Clark Lampen of BTIG. Operator: Your line is now open. Please go ahead. Clark Lampen: Thank you. Good morning, everyone. I wanted to follow up on Bernie's question before around Nigeria, but maybe in a broader context. I think back to what you laid out for us in September, I think there were up to four markets that were targeted potentially for expansion. Are any of those encompassed in the plan for 2026 or embedded in guidance? Or, yes or no, maybe you could give us an update on which of them seem most addressable or, I guess, most actionable near term. Alinda Van Wyk: Yes. Thank you for your question. The only market in expansion into Africa that is included in the guidance is Namibia at this point in time. We did call out one or two other markets as well in Investor Day like you have mentioned. But we also remain disciplined to have a strategic roll-up plan and make sure that how we operate in Africa is 100% effective and we also obtain that operating leverage there. Neal Menashe: And I will just add to that is, remember, the charge of that one country, we are obviously rolling out our Jackpot City brand as a pure-play casino in more African markets. And we have got a few of them coming online. And then at the same time, operationalize the existing products and teams that we have got in those regions. Clark Lampen: Understood. And a very quick follow-up, if I may. Neal, I think you called out a low single-digit benefit in Nigeria from the World Cup. Would it be possible to quantify how big the tournament could be for your sports business in 2026 from a handle standpoint— Nkem Ojougboh: Yep. Go ahead. Sorry. Yeah. Neal Menashe: Okay. So what we said is generally in our budget, we have got low single-digit World Cup tailwinds across. I mean, just to put it in perspective, 40% of the countries we operate in are participating in the World Cup. So the World Cup is obviously in expanded format. So what it can mean in the beginning part of the World Cup, you will have really good teams against not such good teams. That might mean we have more favorites winning in this World Cup, but it is a longer tournament with a lot more games. So we believe the engagement over time is going to be really good. And obviously, the World Cup is at a time when we normally would not have many sporting events. So that is really going to fill the calendar for us from a net perspective. Clark Lampen: Thank you very much. Operator: Thank you. The next question comes from Mike Hickey of StoneX. Your line is now open. Please go ahead. Mike Hickey: Hey, Neal, Alinda, Nkem. Great job, guys, on a stellar 2025. Just a few questions from us. First on Apricot. I think, Alinda, you were sort of penciling out $35,000,000 in EBITDA savings from the deal and integration. Is that still the number you are thinking about in 2026? And how much have you baked into your guidance now that you have completed or have the official approval to complete this deal? Alinda Van Wyk: Yes. Thanks, Mike. During Investor Day, we called out $35,000,000. This is not a day-one saving. This is an annualized saving projection. And these savings will come from reduced royalty fees, infrastructure enhancements, and most importantly, bringing staff closer to Super Group (SGHC) Limited. So we are starting to bring the team together. The savings definitely already started, but this is the annualized number that we called out. And we will update you on progress as we continue and execute according to our plans. Mike Hickey: Alinda, just to confirm, you have put the presumed savings now into your guide, correct? Alinda Van Wyk: That is correct. The savings that we are realizing in 2026 is in the guide. Correct. Mike Hickey: Okay. Awesome. I guess next, just to stay on the guide, Alinda, did you also bake in presumed savings on the Supercoin initiative as well? Or is that something that you would look to just earn as you continue to roll out the product? I guess the next big step would be the wallet. Neal Menashe: So obviously, the last two of the launch in South Africa and obviously it is a step towards broader payment and engagement. It will take us time. Obviously, you cannot just switch the lights on and it just happens. Customers have to test it. So one is we have the customer base. Two is we have the product that our African customers love. So we are going to start as soon as the wallet comes in in the first half of this year, be able to incentivize to that. But it is already helping us save on other banking fees from the different suppliers we use. So we are already seeing a benefit. So some of that is obviously into our guidance. Okay. Last question. On the World Cup, I mean, it is pretty obvious to see how strong of a catalyst that is going to be for you guys. Onboarding players here and the cross-sell to iGaming is significant. I think you said 60-plus percent. Just, I guess, reflecting on the Africa Cup and the pressure on hold that you experienced at the beginning of that event. Given that the World Cup this year has expanded significantly, how do you assess early tournament risk on hold and what you would do to mitigate that if that is a factor that we should be thinking about? Neal Menashe: Yeah. So listen. I think it is better that there are more teams. In all the past World Cups, we have always found in early rounds some of the favorites do not win, either win or draw. Sometimes they do not even qualify for the next round. What we have done and will do is that we are all over our incentives and our boosts that we give the customers in the tournament, especially in the early rounds. So this is all a massive exercise of working out where the volatility lies. And as you can imagine, especially from Africa Cup of Nations, we have learned some clever lessons there. Also, what does happen is you saw what happened in December, and then it all flowed through in January where the sports results went the other way. So then you get nirvana. You get brilliant sports margin, and you get your constant casino. So together, that helps us. And also, we have got all the new AI pricing, new initiatives we are embedding from our traders, etc. So we are all over this. And the World Cup, I think, is going to be a real catalyst. It is all about the customer engagement. Remember, it is not about the customer just in the first week or two of the World Cup. It is keeping his or her engagement going forward. And that is what our whole business is about. And then the cohort analysis that Spencer kept on showing on our Investor Day is how the cake is layering. This just helps layering the cake even more. And just to conclude, remember, our sport is 20% of our business. 80% is casino. So we like to believe that the 80% casino being casino-focused gives us the ability to navigate the ups and downs of sports. Michael Joseph Hickey: Absolutely. Good luck, guys. Thank you. Neal Menashe: Thank you. Thanks, Mike. Operator: The next question comes from Jed Kelly of Oppenheimer. Your line is now open. Please go ahead. Jed Kelly: Great. And thanks for taking my question. Just looking into your guidance, can you just talk about, you know, some of the risks which would be returning with their aspect to direct—okay—there is a new—pedal around on—broke. You know, anything we should be. Thank you. Neal Menashe: So, Jed, you are just breaking up. We got some of it, not all of it. Do you want me to just—sorry. Just repeat that. Sorry. We heard every second word. Jed Kelly: Yeah. Could you just talk about some of the risk in terms of potentially the, you know, some of the risk in the guidance on why it could come in under your, you know, under— Nkem Ojougboh: expectations. Alinda Van Wyk: I think the risk around any guidance is usually the variance, and the variance would cut both ways. So over time, hopefully, like we just mentioned, the sports results will normalize, and we feel comfortable that that will even be the effect of our 2026 guide. And we have already started to see that because January was exceptional, more than we have ever seen, but it has already normalized to our trailing twelve-month average of the results in February. And we just have to make sure that we look at, like my reference is to launch more of the Jackpot City in different countries so we have that uplift in growth. Neal Menashe: And then I think to answer some of the questions I thought we got was in the guide, we have done a normalized sports—yes, sports margin is embedded into the guide. Nkem Ojougboh: Yeah. And maybe there is always that risk of sudden regulatory shift like taxes, but that we have been navigating for the last twenty years. So we take a conservative approach around including that in the guide. Jed Kelly: Great. Thanks. And then if you can hear me alright, I will sneak one more in. Any regions outside of Africa we should be watching that could potentially open up? Neal Menashe: The—listen. I mean, obviously, Brazil was last year or the year before. There is talk of UAE, etc., coming. So again, it is all about the numbers. It is all about what are the taxes, what you can do in those markets, what product, is it sports, is it casino? Nkem Ojougboh: So— Neal Menashe: from that perspective, that one. Most of the European countries, as you know, are all regulated today. And there are one or two African countries that are starting to regulate over time. So we are all over it. Nkem Ojougboh: Thank you. Good luck. Neal Menashe: Any more questions from anyone? Operator: We have no further questions. Neal Menashe: Okay. So again, thank you everyone for joining today's call. We are really, really super proud of our performance in 2025 and the start of the new year. We will speak to you again soon. Thank you. Operator: This concludes today's call. Thank you all for joining. You may now disconnect your line.
Operator: Welcome to JBT Marel's Earnings Conference Call for the Fourth Quarter and Full Year 2025. My name is Ellen, and I will be your conference operator today. As a reminder, today's call is being recorded. [Operator Instructions] I will now turn the call over to JBT Marel's Senior Director of Investor Relations, Marlee Spangler to begin today's conference. Marlee Spangler: Thank you, Ellen. Good morning, everyone, and thank you for joining our year-end 2025 conference call. With me on the call is our Chief Executive Officer, Brian Deck; President, Arni Sigurdsson; and Chief Financial Officer, Matt Meister. In today's call, we will use forward-looking statements that are subject to the safe harbor language in yesterday's press release and 8-K filing. JBT Marel's periodic SEC filings also contain information regarding risk factors that may have an impact on our results. These documents are available on the IR website. Also, our discussion today includes references to certain non-GAAP measures. A reconciliation of these measures to the most comparable GAAP measure can be found on our IR website. With that, I'll turn the call over to Brian. Brian Deck: Thanks, Marlee, and good morning. What a remarkable year 2025 has been as we completed our first year as JBT Marel. I can proudly say we are meeting our commitments we made and are realizing the tremendous benefits of the JBT and Marel combination. As a combined organization, we posted strong revenue growth and significant margin expansion. We capitalized on the anticipated recovery in protein demand with robust investment from the poultry industry. At the same time, we took decisive actions to improve the profitability of our meat and fish businesses. We realized meaningful synergy savings. Additionally, we saw an acceleration in our ability to capture order synergies over the course of 2025 as we integrated our complementary product and service capabilities. On the financial side, we achieved our goal of delivering adjusted EPS accretion within the first year of the transaction, and we exceeded the targeted deleveraging of our balance sheet. Looking ahead, we believe our continued strong orders reflect the exceptional value proposition JBT Marel brings to our customers. I'll let Arni elaborate. Arni Sigurdsson: Thanks, Brian. From a demand standpoint, we benefited from our diversified portfolio and attractive end market exposure with full year orders of $3.8 billion and more than $1 billion in the fourth quarter. As anticipated, that performance was led by exceptional strength in orders from the protein end markets, especially poultry, which has seen a sharp recovery following roughly 2 years of underinvestment. For the year, meat, beverages and pharma were also strong growth contributors, while Prepared Foods showed improvement in the fourth quarter compared to previous quarters. Geographically, we enjoyed gains across all regions in 2025. From a consumer and secular perspective, poultry continues to be a winning food category due to its affordability versus other proteins, its versatility in flavor adaptation and overall health benefits. In response to strong consumer demand and good economics from price/cost spreads, our global processing customers invested in core JBT [indiscernible] solutions that enhance production performance, improve yield and reduce labor costs. We are pleased that our customer-focused go-to-market strategy coupled with our comprehensive solutions spanning integrated lines, service, aftermarket support and digital connectivity led to order synergies. In fact, our ability to capture cross-selling benefits accelerated over the course of the year as our organizational design, product training, unified marketing and branding efforts took hold. For example, our complementary technology in Prepared Foods allowed us to secure orders that included integrated JBT and model solutions for chicken nugget and hamburger processing lines. Our ability to provide leading technology across these full value chains is a key differentiator, helping customers create high-quality products with enhanced uptime and efficiency. As such, an important part of our strategy is to invest to strengthen our offering to provide integrated solutions across all key product lines. All in, we captured $30 million in order synergies for the full year with more than half realized in the fourth quarter. Those orders are then expected to convert to revenue in 2026. Let me turn the call over to Matt to discuss our earnings performance in 2025 and provide guidance for 2026, which reflects another year of solid growth. Matthew Meister: Thanks, Arni. As Brian said, 2025 was a year of strong growth and excellent overall performance for JBT Marel. And as previewed last quarter, we recently released our new segment reporting, reflecting our go-forward organizational structure. The Protein Solutions segment includes businesses serving the initial stages of processing and harvesting of animal proteins. Prepared Food & Beverage Solutions segment predominantly focuses on downstream value-added preparation, preservation and packaging of foods and beverages into ready-to-eat or drink products. Now moving to a discussion of our results. Full year consolidated revenue of $3.8 billion exceeded the high end of our guidance as we successfully converted backlog to revenue, experienced solid demand for service and aftermarket solutions and continue to benefit from recovery in the poultry industry. The favorable year-over-year foreign exchange translation impact of $77 million was in line with our expectations. On a segment basis, revenues were $1.7 billion for Protein Solutions and $2.1 billion for Prepared Food & Beverage Solutions. For the year, we generated consolidated adjusted EBITDA of $600 million, representing a margin of 15.8%, which was at the midpoint of our guidance. On a segment basis, adjusted EBITDA margin for Protein Solutions was 20.1% and Food & Beverage Solutions margins were 17.2%. Overall, we delivered synergy savings as forecasted, realizing a $43 million year-over-year benefit, while we exited the year with run rate savings of approximately $85 million versus our 2024 baseline. Our savings were primarily driven by the initial efforts related to streamlining our organizational structure, optimizing public company and overlapping third-party costs and consolidating our spend with our supply base. Based on our solid execution for the first year, we are confident in our ability to achieve our goal of generating $150 million of run rate synergy savings as we exit 2027. Offsetting some of the synergy benefits was the impact of the higher tariff environment that we have experienced since April 2025. The cost to JBT Marel for the year was approximately $43 million, which is net of $15 million of cost avoidance through supplier negotiations and other cost mitigation efforts. After pricing actions, we estimate tariffs had an approximately 50 basis point impact on adjusted EBITDA margins in 2025. As forecasted, fourth quarter adjusted EBITDA margin of 16% declined sequentially due to the acceleration of tariff costs, along with investments we made to support our growth plans for 2026. Full year 2025 adjusted earnings per share was $6.41. As Brian pointed out, we are extremely pleased as this represents first year earnings accretion relative to legacy JBT's 2024 adjusted earnings of $6.15 per share. Turning to the balance sheet. When we completed the JBT Marel transaction in January 2025, our leverage ratio was just below 4x. At that time, we had a goal of bringing the leverage ratio down to 3x at year-end 2025. In fact, we ended the year with a leverage ratio of less than 2.9x, demonstrating the earnings and cash flow power of the combined company. Looking ahead to full year 2026, we expect healthy year-over-year growth in revenue, margins and earnings. Our consolidated guidance includes revenue growth of 5% to 7%, including a 1% foreign exchange benefit. Adjusted EBITDA margins are estimated at 17% to 17.5%. That represents year-over-year improvement of 145 basis points at the midpoint, with margin progression anticipated for both Protein Solutions and Prepared Food & Beverage segments. Included in our adjusted EBITDA guidance is the ongoing impact of tariffs, including Section 232, which remains in place. With the recent Supreme Court news on base reciprocal tariffs, we have begun to assess the potential impact this will have on our cost structure in 2026, and we will continue to monitor what appears to be a constantly moving target. Currently in our forecast, we have included approximately $45 million of higher full year tariff costs before pricing actions, with most of the increase occurring in the front half of 2026. Independently, we will continue to execute on our synergy savings, which we expect to realize year-over-year benefit of approximately $60 million. With that, we project adjusted earnings per share of $8 to $8.50 in 2026, a year-over-year increase of 29% at the midpoint, driven by EBITDA improvement and lower interest expense from the successful deleveraging of our balance sheet and low-cost capital structure. GAAP earnings per share guidance is expected to be $4.70 to $5.15. For the first quarter, which is typically our seasonally slowest, we are forecasting revenue of $920 million to $940 million and adjusted EBITDA margin of 14% to 15%. At the midpoint, this represents year-over-year growth of 9% in revenue and adjusted EBITDA margin improvement of 150 basis points. With that, let me turn the call back to Brian. Brian Deck: Thanks, Matt. As Arni and Matt detailed, we executed well against our synergy plan for 2025. Looking forward, we expect to realize incremental benefits from supplier consolidation and value-add engineering projects designed to take out parts complexity and cost. We will also continue back-office resource optimization and have a road map for select manufacturing and distribution footprint rationalization. This allows us to leverage previous investments made in state-of-the-art distribution and low-cost manufacturing, further improving customer service and our cost position. We got off to a great start in 2026 with our presence at IPPE, the world's largest poultry expo. For the first time, JBT Marel's full integrated solutions were on public display, which demonstrated the value of our comprehensive product portfolio. Customers' response to the benefits of our integrated systems, service connectivity and know-how was very positive. Given the conversations about demand trends with poultry industry leaders, we have confidence in the continued investment momentum, including renewed investment on the prepared food side. That, combined with favorable economics of the industry, makes us optimistic that the strength in poultry equipment demand will continue into 2026. As you can see, we are excited about the growth path ahead. We plan to provide further details on our strategic growth priorities and financial targets at our upcoming Investor Day, which will be held on Thursday, March 26 in New York City. A live stream webcast and replay of the event will be available on our IR website. Meanwhile, I am very proud of the progress our organization has made in achieving our first year goals for the integration of JBT and Marel. We are capitalizing on our enhanced customer value proposition and scale. And financially, we achieved the objectives we established. Of course, none of this was easy, requiring hard work and deep commitment at all levels of the organization. To our teams across the globe, thank you. Together, we are transforming the future of food. Now let's open the call to questions. Operator? Operator: [Operator Instructions] Our first question comes from Ross Sparenblek with William Blair. Ross Sparenblek: Maybe just starting off with the order dynamics in the fourth quarter. Can you give us a sense of what end markets stood out? It seemed like AGVs are maybe flat in the third quarter. We're starting to kind of turn into 2026, whereas the fruit and vegetable looks like it's down for the year. I don't know if that's expected to continue. Brian Deck: Sure. I would say, generally speaking, poultry remains the leader across all of our categories. and I would say, followed by beverages in 2020 -- as we ended the year 2025. Meat remains supportive as does fish. And we're starting to see some real momentum on the pet food side as well. And as you suggested, we do expect a nice recovery in AGV as we go into next year. So as we think about our ending backlog, we feel really good about the position we're in. And to further emphasize the poultry side, so when you look at our poultry orders, typically, and it was a very strong year, as you saw, Typically, that's somewhere in the range of 75% that goes to the poultry segment and then about 25% typically would go to the Prepared Food and Beverage segment. So it covers both segments just for informational purposes. And again, I think what we're going to see is continued investment on the front end and increased investment on the back end on the Prepared Food side. Ross Sparenblek: Okay. That's helpful. And then maybe just, Matt, in the fourth quarter, did you guys call out the synergies between the R&D and SG&A? And then also, can you just maybe provide the expectations for R&D and SG&A for 2026? Matthew Meister: Yes. We did not call out the synergies specifically to either R&D and SG&A. I mean -- but in general, the synergy savings that we saw in 2025 was predominantly in the SG&A part of OpEx, not in R&D. Going forward, our -- we split out SG&A and R&D in our segment disclosures. So you'll see that in the K going forward, but we aren't providing that guidance as a percent for 2026. Brian Deck: The one thing I would just add on the -- sorry, just real quick, Ross, one thing that we are doing on the R&D side is harmonizing the accounting treatment between the 2 businesses, legacy businesses. So you'll see a little bit different structure. Quite a bit of JBT's -- legacy JBT's R&D, if you will, was in cost of goods sold. and whereas Marel is kind of all in one spot. So we're going to re-harmonize that according to GAAP. We made that change in Q4, and we'll make that adjustment quarterly, yes. Ross Sparenblek: Okay. So this is the first quarter where we're going to have a full apples-to-apples as we think about... Brian Deck: Yes. Q4. Operator: Our next question comes from Mig Dobre with RW Baird. Mircea Dobre: Just looking at the new segment reporting structure, maybe a couple of points of clarification here. I don't know if I missed this, but when you're thinking about the top line growth for '26, is there a way to differentiate between Protein Solutions and Prepared Food & Beverage? And related to this, I would imagine that a lot of the margin expansion that's factored into the overall guidance would flow through the Protein Solutions segment just because optically, it looks to me like this is where a good chunk of the Marel business is now housed. Do correct me if I'm wrong there? And maybe you can comment a little bit about margins perhaps for both segments. . Matthew Meister: Yes, Mig, on the first part of your question on revenue for 2026, again, we're guiding to a 5% to 7% range overall. And for Protein Solutions, it's probably at the higher end of that range and for Prepared Food & Beverage, probably at the lower end of that range, which kind of gets you to that midpoint that we have in our forecast. And then from a margin perspective, we're expecting to see margin improvement in both segments, obviously, from the benefit of the higher volume as well as from the continued benefits from the synergy actions that we are taking. To be honest, they're relatively the same in terms of improvement with slightly higher improvement actually in Prepared Food & Beverage just because of some of the impacts that we saw at the end of 2025. We're correcting some of those issues and getting a little bit better flow-through in 2026. Mircea Dobre: Got it. And you anticipated something else I wanted to ask about. You called out some -- maybe some inefficiencies in prepared food and beverage. Can you put a finer point on this in terms of what's been going on there? Is this the legacy JBT business? Is there something else? And what's the line of sight on getting that improvement operationally there? Matthew Meister: Yes. As we somewhat forecasted in the last call that we had after Q3, we did have some challenges primarily on the AGV side. And we did see that impact us in Q4 as we predicted. And A lot of that is driven by some of their impacts from the end market from the higher tariffs, and that's impacting them more significantly just because they have a little bit of a more broader end market focus than the rest of the business. But we expect to see our ability through that -- those issues through Q1 and early Q2. So it should be relatively contained the first quarter, maybe a little bit bleed into the early part of the second quarter. Mircea Dobre: All right. My final question on tariffs. So you sized the drag for 2026, but that was, as I understood it, sort of the gross number, it's ex pricing or any other mitigation. And I'm sort of curious, how are you thinking about pricing? I mean, are you in a position where a good chunk of this figure can actually be mitigated as the year progresses or not? Brian Deck: Yes, Mig, it's Brian. So we have included in our forecast some mitigation on the pricing side. We do think that there will be still some net negative benefit perhaps in the 25 basis points range for the full year, maybe somewhere between 25 and 50 basis points. It really kind of depends on the status of the markets, right? We don't feel it's 100% on the customers' backs to take on these cost increases. So we're doing everything that we can on the cost side to mitigate that. So we'll continue to do that. But we are intentional -- we'll be intentional on select price increases where we think it's supportive from the market perspective. Operator: Our next question comes from Justin Ages with CJS Securities. Justin Ages: Just a question on capital allocation. Good progress on getting leverage below the target for the first year here. Just wanted to know how you guys are thinking about what to do with the capacity with the convertible coming up in May. Any detail there would be helpful. Brian Deck: Yes. Well, let me start. I'll just say this, we are laser-focused on completing the integration, right? We still have some time to go there. So we don't want to get ahead of ourselves. We certainly want to get into that 2 to 2.5x leverage range before we start thinking seriously. That said, and I'll let Arni elaborate a little bit, there will be a time when we think we can get some of the benefits of what we've done on the protein side in other areas of the business. Arni Sigurdsson: Yes. And I mean, how we are thinking about it and it kind of feeds through our messaging all along and the strategic rationale for the merger of JBT and [ Marel ] is, we see a lot of benefit when we have a broader portfolio that is serving an end market or a particular customer. So those kind of integrated lines and integrated solutions, that's where we see where the customer needs are, the opportunity to improve the operation of our customers and improve the value proposition. So kind of as things evolve and kind of we feel the timing is right, kind of as Brian said, kind of you can -- that's kind of an area that we'll probably be very much focused on to look at kind of where are the opportunities to strengthen our value proposition and be able to work better with our customers to partner with them on their journey. Matthew Meister: Justin, just to touch on 2026 specifically, we did the convertible in September of 2025 to prefund the financing to retire the notes in May. So we're in a really good position here. We expect to be able to leverage the liquidity that we have on our revolving credit facility to be able to take out the convert that plus the cash flow that we will generate this year, we do expect all things sort of staying the way they are, that we'll be in the range of 2 to 2.5x leverage by the end of 2026. And then we'll see where we go from there from an M&A perspective, like Brian and Arni discussed. Justin Ages: Very helpful. And then switching to tariffs. Can you give us a little more detail on where you are in the supply chain regionalization? I know you mentioned looking at some factories in the U.S. And then along with that, can you also comment on -- and I know it's a moving target, customers and their orders being impacted by this kind of moving tariff regime? Brian Deck: Sure. So from a supply chain perspective, it's still relatively early days. We have already started moving parts suppliers. to -- from Europe to the U.S. where it's feasible. That takes a little bit of time just with product testing and first articles, et cetera. So that's further along, if you will. From a manufacturing side, we certainly are very busy filling our backlog. So we are starting that process as well. So that will be a continuum during the course of 2026. But I don't think we will be complete with that until more likely the 2027 time frame. Arni Sigurdsson: Yes. And just to kind of emphasize like we do have, for example, on the poultry side, we do have a plant that kind of mirrors in the U.S. that mirrors a plant in Europe. So that's where we can kind of move faster, which is kind of really good because of how the poultry market is evolving. So that's kind of an area that we can maybe get some short-term benefit. But obviously, if you want to do more structural things, it will take longer. And then we also have strong distribution centers regionally in the U.S. that we're leveraging more and more directly for the local market. Brian Deck: On the parts side, in particular. Operator: Your next question comes from Walter Liptak with Seaport Research. Walter Liptak: I wanted to ask about the sales synergies for 2025. Was that to your expectations at $30 million? And do you have a guidance number or an expectation for 2026? Brian Deck: Sure. As we mentioned on the prepared remarks, it did -- the benefits on the synergies revenue side did accelerate through the year. And it's essentially as you might think, right? You get the organizational structure in place first, then you start training, get marketing, and it really did pick up through the course of the year. So again, $30 million with approximately half in the fourth quarter alone. So I would -- and that will convert to revenue in 2026. So I would say we are ahead of pace on our original $75 million cumulative revenue synergies by 2027. We haven't put a new number out there, but we will as part of the Investor Day at the end of March. But clearly, we're ahead of pace. Operator: [Operator Instructions] There are no further questions at this time. I will now turn the call back to Brian Deck for closing remarks. Brian Deck: Thank you all for joining us this morning. As always, the IR team will be available if you have any additional questions, and I look forward to seeing you at our upcoming Investor Day. Operator: This concludes today's call. Thank you for attending. You may now disconnect. f
Operator: Good morning, everyone. My name is Jamie, and I will be your conference operator today. At this time, I would like to welcome everyone to Novanta Inc. Fourth Quarter and Full Year 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. To ask a question, you may press star and then 1 on your touch-tone telephones. To withdraw your questions, you may press star and 2. Please also note today’s event is being recorded. At this time, I would like to turn the conference call over to Ray Nash, Corporate Finance Leader for Novanta Inc. Please go ahead. Ray Nash: Thank you very much. Good morning, and welcome to Novanta Inc.’s fourth quarter and full year 2025 earnings conference call. This is Ray Nash, Corporate Finance Leader for Novanta Inc. With me on today’s call is our Chair and Chief Executive Officer, Matthijs Glastra, and our Chief Financial Officer, Robert J. Buckley. If you have not received a copy of our earnings press release issued last night, you may obtain it from the Investor Relations section of our website at www.novanta.com. Please note this call is being webcast live and will be archived on our website shortly after the call. Before we begin, we need to remind everyone of the Safe Harbor for forward-looking statements that we have outlined in our earnings press release issued last night and also those in our SEC filings. We may make some comments today, both in our prepared remarks and in our responses to questions, that may include forward-looking statements. These involve inherent assumptions with known and unknown risks and other factors that could cause our future results to differ materially from our current expectations. Any forward-looking statements made today represent our views only as of this time. We disclaim any obligation to update forward-looking statements in the future, even if our estimates change. So you should not rely on any of these forward-looking statements as representing our views as of any time after this call. During this call, we will be referring to certain non-GAAP financial measures. A reconciliation of such non-GAAP financial measures to the most directly comparable GAAP measures is available as an attachment to our earnings press release. To the extent that we use non-GAAP financial measures during the call that are not reconciled to GAAP measures in the earnings press release, we will provide reconciliations promptly on the Investor Relations section of our website after this call. I am now pleased to introduce the Chair and Chief Executive Officer of Novanta Inc., Matthijs Glastra. Matthijs Glastra: Thank you, Ray. Good morning, everybody, and thanks for joining our call. We said we would return to organic growth and double-digit profit growth in the fourth quarter, and we delivered. Novanta Inc. posted record revenue in the fourth quarter with 9% reported growth, 2% organic growth, and 4% sequential growth. Bookings surged 25% year over year and 12% sequentially with a book-to-bill of 1.11. Every single business delivered double-digit bookings growth, and a positive book-to-bill in the same quarter. That is the first time that has happened since 2022. For the full year, we hit $981 million in revenue, our biggest year ever. Full year bookings grew 14%, 60% in the full year, including over 80% growth in the fourth quarter, exceeding our expectations as our commercial excellence and innovation investments are paying off. These results set us well for mid-single-digit organic growth in 2026. We also demonstrated strong double-digit year-over-year profit performance in the quarter with adjusted EBITDA growing by 17% and adjusted diluted EPS growing by 20%. While these are strong results, margins and cash flow came in below the expectations we set on our third quarter call. This came down to a single deliberate decision. As we moved through the quarter, we prioritized customer deliveries over the pace of our regional manufacturing transfers. That was the right call for our customers, and it created a temporary period of higher dual running cost and elevated inventory. We have already acted on this in January, and Robert will walk through the specifics and our confidence in the recovery. Given the very highly dynamic environment, I am very proud of our business performance and our team’s ability to stay resilient and deliver these strong results. Taking a step back, Novanta Inc.’s long-term growth strategy remains focused on winning in high-growth end markets with durable secular tailwinds: AI-driven robotics and automation, minimally invasive and robotic surgery, digital manufacturing, and precision medicine. We hold leading technology positions in these markets with exclusive design and product relationships that typically last up to a decade on our customers’ platforms. We have established these unique long-term collaborative partnerships with the leading OEM customers across the world by solving their most complex needs with proprietary technologies and solutions while leveraging the Novanta Growth System to deliver on-time, high-quality products at the lowest possible cost. While our products typically represent no more than 10% of our customers’ bill of materials, they enable differentiation and innovation in their systems for their customers, improving clinical outcome, throughput, yield, cost per procedure or part, or never-before-possible performance. We have made disciplined, focused investments in the areas we believe will drive the majority of our innovation-driven growth: next-generation insufflation and POPS, robotic surgery technologies, intelligent physical AI solutions for care, warehouse automation, humanoids, and precision robotics, and intelligent subsystems for laser beam steering and precision medicine. These growth platforms represent a $4 billion incremental market opportunity by 2030. Our strategic focus is to continue to expand our business mix and technology leadership in medical technologies, medical consumables, and embedded software, further strengthening a portfolio that delivers predictable, sustainable, and consistent revenue, profit, and cash flow growth. With customer destocking behind us, and accelerating new product and commercial excellence momentum, we are well on the path to get back to our long-term algorithm: mid to high single-digit organic growth, with less cyclicality, better resilience to geopolitical risks, more consistent performance regardless of the market conditions. Acquisitions are the second pillar of our growth strategy, driving double-digit reported revenue growth and compounding cash flows. The setup here has never been stronger. Our teams have built the largest acquisition pipeline in my tenure as CEO, focused on mid to larger opportunities in medical technologies, medical consumables, bioprocessing, and embedded software. In November, we raised more than $600 million specifically because of our confidence in this pipeline. With nearly $1.5 billion in total acquisition capacity and a proven track record of disciplined value creation, we are actively working opportunities and expect to deploy meaningful capital in 2026. Now here is what we are seeing across our end markets and businesses. Our sales into minimally invasive and robotic surgery have remained consistently strong with mid-teens double-digit growth in our advanced surgery business this past year. Our next-generation insufflators set the industry standard, improving patient safety, addressing smoke evacuation requirements, and optimizing surgical workflows. We are poised for another year of double-digit revenue growth in 2026, as our new product launches from 2025 continue to scale up and also with additional launches that are happening in 2026 itself. Long term, the business is on track to achieve approximately $400 million in revenue by 2030, driven by continued momentum in insufflation, expansion into robotic surgery and arthroscopy, and a rapidly scaling medical consumable business. Our robotics and automation business continues to see a sustainable growth outlook with three distinct GenAI-driven tailwinds. First, Novanta Inc.’s technology leadership in physical AI applications: unique capabilities that enable the perception and reaction of precision robotics in the physical world and to do so safely. In 2026, we are ramping several new product launches including content we recently won in the warehouse robotics space. Second, a recovering semiconductor wafer fab equipment market where we are seeing signs of an upcycle starting to take shape. And third, a highly specific and compelling opportunity in GPU drilling. Our air bearing spindles are currently the only qualified supplier for drilling AI-driven GPU boards, a direct beneficiary of the ongoing buildout of AI compute infrastructure, and this is growing at a strong double-digit rate. Together, these three drivers underpin our confidence in high single-digit growth for this business in 2026. Next, our precision manufacturing business has seen four consecutive quarters of double-digit bookings growth and accelerating sequential revenue momentum in 2025, driven by strong activity in our target markets. This gives us confidence in seeing mid-single-digit growth in the business in 2026. The long-term growth driver in this market is clear. Customers are digitizing and automating their manufacturing lines with ever-increasing demands for throughput, productivity, smaller form factors, and higher tolerances. This is a durable multiyear tailwind for Novanta Inc. What particularly excites me is our launches of intelligent laser beam steering subsystems with unique proprietary capabilities that we have been building for several years. We are hitting the market at exactly the right time as new digital and AI-enabled manufacturing capabilities are moving from early adoption into broader deployment. Finally, our precision medicine business experienced another quarter of sequential revenue growth in the fourth quarter. This business continues to gradually digest the lows. In 2026, we expect sales to be roughly flat in this business, with some shifts in demand between our different product categories. Our investments in intelligent RFID solutions and advanced vision technologies are helping to stabilize the outlook for the business this year, and have strong long-term growth prospects. In particular, we are pleased with the recent Keyon acquisition, which is already outperforming versus our early expectations and helping to offer both near and long-term growth opportunities for this business. Now let me give you a brief update on how we are building a stronger foundation for future growth as an organization. First, the Novanta Growth System continues to become a deeper and more permanent way of working across the company, our continuous improvement engine embedded in our Novanta Way culture. NGS is a competitive differentiator that drives customer success and operational efficiency simultaneously, and that combination is difficult to replicate. Here is what that looks like in practice. This very week we have over a dozen simultaneous Kaizen events happening across nine different global locations with over 150 employees participating, from senior leaders to frontline operators, working together on commercial excellence, innovation roadmaps, supply chain optimization, on-time delivery, and our site regionalization initiatives. On that last point, our regionalized manufacturing initiative is designed to solidify and expand our preferred supplier status with leading OEMs globally, helping our customers thrive in a deglobalizing world by manufacturing our products in the regions where they sell theirs. We are building manufacturing competence centers with better scale, stronger systems, and deeper talent with full in-region-for-region capability. The strategic logic is clear. The customer response is very positive, and the long-term benefits to profitability, cash flow, and resilience will be durable. To conclude, I am very proud of our team’s performance in 2025. As we look ahead, our top three priorities for 2026 are clear. First, drive mid-single-digit organic growth on the back of record bookings, new product launches, and commercial momentum. Second, acquisitions, deploying our $1.5 billion capacity into larger opportunities in our target markets. And third, completing our manufacturing foundation, finishing the regional transfers, scaling competence centers, and embedding the Novanta Growth System across the organization. I will now turn the call over to Robert to provide more details on our operations and financial performance. Robert? Robert J. Buckley: Thank you, Matthijs. I will start by reviewing some of the key performance metrics of the company. In the fourth quarter, Novanta Inc. bookings increased 25% year over year and 12% sequentially, with a book-to-bill of 1.11, indicating a stronger backlog and a positive outlook. All of Novanta Inc.’s businesses had double-digit bookings growth and all had a positive book-to-bill in the fourth quarter. As Matthijs mentioned, this has not happened in a single quarter since 2022, and is strong empirical evidence that our organic growth outlook for 2026 is demand-driven and not aspirational. For the full year, bookings increased 14% and the book-to-bill was 1.01. New product sales in the fourth quarter grew over 80% year over year, raising the vitality index to 24% of sales, and for the full year, new product sales grew over 60% versus the prior year, and the full year vitality index was 22%. Our design wins were also strong, with company-wide design wins for the full year up over 20% versus the prior year. For both the fourth quarter and full year, our sales to the medical end markets represented 53% of total sales, while sales in advanced industrial markets were 47%. Also, for the full year, our medical consumable sales were 15% of total company sales with this category growing at a strong double-digit rate versus the prior year, due to the high attachment rate we see in our next-generation insufflator product launches. Now moving on to the financial results. Our fourth quarter 2025 non-GAAP adjusted gross profit was $118 million or 45.5% adjusted gross margin compared to $112 million or 47% adjusted gross margin in 2024. Adjusted gross margins were down 150 basis points year over year and down sequentially by 100 basis points. Gross margins came in below our November guidance, a direct consequence of the decision Matthijs described. Prioritizing customer deliveries over transfer timing created higher dual running costs in the quarter, with more than a 100 basis point impact to gross margin and a 400 basis point increase to net working capital as a percent of sales. In January, we adjusted the cost structure without disrupting deliveries or revenue momentum. Gross margins are expected to step up sequentially in the first quarter and the transfer will be completed by the end of the second quarter. As a result, our full year 2026 gross margin expansion target of approximately 100 basis points of expansion versus 2025 is intact. For the full year of 2025, non-GAAP adjusted gross profit was $452 million or 46% adjusted gross margin compared to $442 million or 46.5% adjusted gross margin. Moving on to the fourth quarter, R&D expenses were $23 million or approximately 9% of sales. For the full year, R&D expenses were $95 million or approximately 10% of sales. Fourth quarter SG&A expenses, excluding certain adjustments, were $46 million or approximately 18% of sales. Full year SG&A expenses, excluding certain adjustments, were $181 million or approximately 18% of sales. Adjusted EBITDA was $61 million in the quarter, demonstrating strong growth of 17% year over year and achieving a 23.5% adjusted EBITDA margin. On the tax front, our non-GAAP tax rate in 2025 was 20.5% versus 24% in 2024. Our tax rate for the full year was 21% versus 20% in the prior year, and our tax rate increased year over year due to jurisdictional mix of pre-tax income. Our non-GAAP adjusted earnings per share were $0.91 in the fourth quarter, up 20% versus the prior year. This result was achieved despite adding 2.7 million incremental shares to our diluted share count from the November equity fundraise. For the full year 2025, our non-GAAP adjusted EPS was $3.29, an increase of 7% versus the prior year. Operating cash flow in the fourth quarter was $9 million compared to $62 million in 2024. For the full year, operating cash flow was $64 million. Cash flow was impacted by the same regional manufacturing dynamics, higher inventory builds, and temporary accounts receivable timing items, most of which have already been collected in January. As these site moves complete in the first half, we expect a significant inventory drawdown and strong cash rebound. Operating cash flow guidance for the full year is $145 million to $185 million, more than double our 2025 results. We ended the fourth quarter with gross debt of $260 million and a gross leverage ratio of 1.2 times. Our cash balance at year end was $381 million, and so our net debt was negative $121 million, giving us a net leverage ratio of negative 0.5 times, which means we are in a positive net cash position for the first time in over a decade. Our debt balance was significantly reduced during the fourth quarter as we used the proceeds from the November fundraise to pay down over $300 million of our revolving credit facility, giving us near-term savings in interest expense. Partly offsetting this revolver paydown is the addition of the amortizing notes that were issued as part of the November offering, which added approximately $111 million in debt to our balance sheet. The remaining funds from the November offering are shown as an increase in the equity section of the balance sheet. In the fourth quarter, we repurchased $19 million worth of company stock, and for the full year, we repurchased nearly $40 million of shares. While acquisitions remain our top capital allocation priority, we will still repurchase shares under our approved repurchase program when the value of purchasing the stock gives us a greater cash return versus the intrinsic future value of Novanta Inc. I will now share some details on the operating expenses. In the fourth quarter, Automation Enabling Technologies segment revenue grew by 2% year over year, better than expected. The book-to-bill in this segment was 1.16, and bookings were up 33% year over year. For the full year, Automation Enabling Technologies grew sales by 2%, and bookings grew by 20%, and the full year book-to-bill was 1.02. Our precision manufacturing business, which mainly serves the industrial equipment market, saw year-over-year revenue decline of 3% in the fourth quarter. However, this business saw sequential revenue growth of 8% and double-digit growth in bookings in the quarter, and we continue to see momentum build in this business. Our robotics and automation business grew revenues 6% year over year in the fourth quarter, and 2% sequentially. We continue to see a healthy outlook in this business with solid demand for advanced robotic applications and increasing strength in some semiconductor applications benefiting from the investment in artificial intelligence. For the Automation Enabling Technologies segment, adjusted gross margins were 49%, up sequentially but down year over year, driven by the site regionalization dynamics as discussed. For the full year, adjusted gross margins were 49%, roughly flat year over year. New product revenue for the segment grew over 80% year over year in the quarter, and nearly 90% for the full year. Customer design wins for the full year grew over 30% on the back of both innovation and stronger commercial execution by our team. In addition, the vitality index was above 20% in the fourth quarter and high-teens percent for the full year. This is double last year’s performance. Moving on to Medical Solutions segment. Revenue in this segment grew 16% year over year. This segment saw a book-to-bill of 1.07 in the fourth quarter, and bookings were up 17% year over year. For the full year, Medical Solutions grew sales by 5%. Bookings grew by 8%, and the book-to-bill was 1.01. New product sales in the fourth quarter grew by nearly 80% year over year, and the vitality index in this segment was nearly 28% of sales. For the full year, new product sales grew by over 50% and the vitality index was 27% of sales. Our advanced surgery business experienced 15% growth year over year, driven by both strong patient procedural surgical growth rates and from our new product launches of our second-generation insufflators, which continue to see favorable demand from our OEM customers. These growth dynamics are expected to continue into 2026 and beyond. In our precision medicine business, which serves the life science and multiomics market, sales in the fourth quarter grew by 16% year over year and grew sequentially by 4%. The year-over-year growth in this business was largely driven by the Keyon acquisition, as well as some favorable year-over-year comparables. In the Medical Solutions segment, adjusted gross margins were approximately 43%, which is roughly flat year over year. The margin performance was impacted by the manufacturing site dynamics as discussed. Now turning to guidance. We see steady improvement in customer sentiment for capital equipment demand as OEMs and end users have largely adjusted to the current macroeconomic dynamics. As Matthijs covered in his remarks, we see a very favorable growth outlook for three of the four businesses in 2026. For the full year of 2026, we expect GAAP revenue to be approximately $1,030 million to $1,050 million, which represents 4% to 6% organic revenue growth. Within the full year range, we expect to see sequentially increasing momentum in our quarterly organic growth. In the first quarter, we expect to see organic growth in the positive 1% to positive 3% range, and in the second quarter, we expect to see organic growth in the positive 5% to positive 7%, with a similar level of organic growth in the back half of the year. This confidence in the faster pace of organic revenue growth in the second quarter and beyond is driven by the good visibility we have in the recent booking strength and a growing backlog. For adjusted gross margins for the full year, we expect to achieve approximately 47%, which is 100 basis points of expansion year over year. This expansion is coming from completing the regional manufacturing production moves in the second quarter. Based on progress made thus far in the quarter, we feel good about the momentum we have here. We expect R&D and SG&A expenses for the full year to be approximately $294 million to $298 million. This represents roughly 28% of sales. This guidance excludes expected costs associated with our manufacturing MRP system, which is being deployed to support our regional manufacturing initiative and to position Novanta Inc. for further site consolidations and reduced complexity. Depreciation expense will be approximately $17 million in the full year, and we expect this to be approximately evenly split in each quarter. Stock compensation expense will be nearly $38 million for the full year, but the quarterly amount will vary due to the specific timing of some of our equity awards, including the one-time award that was granted in mid-2025 to replace the normal employee cash bonus program for that year. In the first quarter, we expect approximately $12 million of stock expense. In the second quarter, we expect approximately $11 million of stock compensation expense, and then fall to approximately $8 million a quarter in 2026. For adjusted EBITDA in the full year 2026, we expect to be between $245 million and $250 million, representing a low double-digit increase year over year, and we expect to achieve approximately a 24% EBITDA margin. Interest expense, net of interest income, is expected to be roughly $8 million for the full year of 2026, excluding any material changes in debt balances. This includes the interest expense associated with the recently issued amortizing notes. We expect our non-GAAP tax rate to be around 21% for the full year of 2026, roughly in line with 2025. Diluted weighted average shares outstanding will be approximately 41 million shares in 2026. This includes an estimate for the dilutive effect of our equity offering. As explained in detail in our filings, the dilutive effect of the equity offering can vary based on the market price of Novanta Inc.’s common shares, and so this guidance only factors in an estimate for dilution based on our recent share price performance and does not anticipate material declines in our share price in the future. For the full year, we expect diluted earnings per share to be in the range of $3.50 and $3.65, representing growth of up to 11% year over year. Included in this guidance is the unfavorable impact from our equity fundraise in the range of $0.22 to $0.24, spread evenly through the first four quarters. This reflects the impact of the higher share count, partially offset by lower interest expense. Also included in the guidance is the temporary unfavorable impact due to the one-time 2025 all-employee equity grant, which I just discussed. This was a $0.14 impact in 2026 only. Cash flow conversion for the full year is expected to rebound versus 2025. Full year 2026 operating cash flow will be approximately $145 million to $185 million, with the bottom end of the range driven by higher inventory levels to mitigate risk of manufacturing moves and vendor disruptions, and the upper end of the range representing the successful mitigation of these risks. Turning to the first quarter of 2026, we expect GAAP revenues to be in a range of $250 million to $255 million, which represents a year-over-year organic growth of positive 1% to positive 3%, and reported revenue growth of positive 7% to positive 9%. Looking at growth in our segments in the first quarter, Automation Enabling Technologies segment is expected to achieve low to mid-single-digit growth versus the prior year, which represents an acceleration in growth rate versus the fourth quarter based on the building momentum we see in the businesses, bookings, and backlog. Medical Solutions segment is expected to achieve high single-digit to low double-digit reported growth in the quarter. On a sequential basis, the Medical Solutions segment is expected to see a normal decline in the first quarter versus the fourth quarter due to seasonality. However, this business will still see solid year-over-year growth in the first quarter, and as already mentioned, the full year outlook for this business is extremely strong. For adjusted gross margin, we expect to achieve approximately 46.5% in the first quarter. This is a sequential step up from the fourth quarter and roughly flat year over year, representing the progress we have already made in the regional manufacturing moves. And as indicated in our full year guide, we expect stronger year-over-year margin expansion in the second quarter and beyond. We expect R&D and SG&A expenses in the first quarter to be approximately $76 million to $77 million, which represents roughly 30% of sales. This is a higher percent of sales than the rest of the year will be based on two factors. First, we are aggressively deploying artificial intelligence tools and resources to our teams to deliver upside to our productivity goals for the year. We are seeing great progress in the adoption of these tools to help us with many different areas, including selling processes, R&D programs, regulatory programs, and back-office processes. Second, there is a higher impact from the stock compensation expense associated with the all-employee grant that only impacts the first half. Depreciation expense and stock compensation expense in the first quarter will be in line with what I covered in the full year guidance. For adjusted EBITDA for the first quarter, we expect a range of $56 million to $58 million, which represents plus 12% to plus 17% growth year over year, and an adjusted EBITDA margin roughly 100 basis points higher than the prior year. Interest expense will be approximately $2 million in the first quarter. We expect our non-GAAP tax rate to be between 19% and 20% in the first quarter, lower than the full year based on the timing of recognition of certain tax benefits. Diluted weighted average shares outstanding will be in line with what was covered in the full year guidance. For the first quarter, we expect adjusted diluted earnings per share to be in the range of $0.75 to $0.80, growing up 8% year over year. Again, this growth rate is impacted by both the share count increase from the equity issuance and the timing of stock compensation expense in the quarter. Cash flow conversion in the first quarter should improve versus the fourth quarter and should achieve our goal of hitting cash conversion of greater than 100% of GAAP net income. However, with regionalization site initiatives still underway, we see stronger cash flow materializing after these are completed in the second quarter. In summary, we remain confident in our long-term strategy and business model. We see growing momentum which will help us achieve mid-single-digit organic growth for the full year. We are excited about our customer wins, our bookings growth, and the continued momentum of our new product launches. We continue to make progress in high-growth markets, particularly in medical technology markets and physical AI robotic markets. And finally, with the successful fundraise we have nearly $1.5 billion in acquisition capacity. This fundraise has unlocked our ability to explore multiple large potential opportunities and we have a very robust acquisition pipeline. Combined with our track record and discipline of acquiring businesses that exceed our cost of capital within five years and are free cash flow accretive day one, we feel confident in our ability to deploy meaningful capital in 2026 that will drive strong long-term shareholder returns. This concludes our prepared remarks. We will now open the call up for questions. Operator: We will now begin the question and answer session. To ask a question, you may press star and then 1 on your touch-tone phones. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and 2. Once again, that is star and then 1 to join the question queue. Our first question today comes from Lee M. Jagoda from CJS Securities. Please go ahead with your question. Lee M. Jagoda: Good morning. So looking at the Automation Enabling Technology segment first and just the sequential increase in bookings of about $30 million, can you go through sort of what businesses and what product categories are driving that increase? And how much of those bookings are longer lead time versus more book and ship within a quarter or two? Matthijs Glastra: Yeah, Lee. It is pretty broad-based. Right? We commented that all our businesses, so including also the Medical Solutions businesses, had double-digit bookings growth and a positive book-to-bill for the first time since 2022. And we also commented that, actually, particular momentum was building in the AET businesses where you see a continued strong momentum building in robotics and automation driven by the drivers that I mentioned. So we have precision robotics, where you need more perception and reaction for end of arm, which is both in automation, but also surgical robotics, as well as, you know, humanoids and kind of a larger segment of precision robotics. Secondly, we expect to see momentum in the semiconductor capital equipment market improving, and you see some bookings starting to come in. And third, we have, you know, we are the sole-source supplier for drilling in GPU boards for artificial intelligence, and that business is gaining strong momentum as well. So that is on the robotics and automation side. And on the precision manufacturing side, there is a combination of multiple drivers. That business has shown double-digit bookings growth for four consecutive quarters last year. And revenue started to sequentially build, really in the 8% sequential growth in Q4. Now that business is still modestly negative year over year in the fourth quarter, but we are very confident that business will turn to mid-single-digit growth in 2026 driven by a few dynamics. One is customer destocking, which has been a headwind for this business for the last two years, has subsided. So that is one. Secondly, this business has very strong design win performance, and these design wins are coming up to speed in 2026 with bookings starting to appear. And then third, this business has been working for multiple years on intelligent subsystems of laser beam steering, and these product launches that started to happen, you know, in the latter part of last year are starting to hit in 2026, which is primarily driven by a variety of, yeah, let us say, manufacturing, advanced manufacturing markets that need extreme precision and throughput, whether it is laser additive manufacturing, micromachining, actually supporting processes for GenAI infrastructure, but also you see some reshoring happening where the precision and throughput and productivity improvements are required to offset, let us say, productivity losses as a result of the reshoring. So we see multiple drivers in that business. We feel good about that business momentum building sequentially. And I think the core message is it is broad-based. It is not, you know, a single driver per se of a single business, and we feel good where we are. Robert J. Buckley: Hey, Lee. Let me give you a couple pieces of data that might help. So on the precision manufacturing business, the book-to-bill was 1.2. That represented nearly 50% growth in bookings at a backlog amount of about a little over $100 million. So you could see that backlog is about two times that of revenue. In the robotics and automation area of the business unit, the book-to-bill was 1.13. That was close to 25% growth in the quarter. And our backlog there is also roughly one and a half times our actual quarterly revenue. The advanced surgery business, which I might as well just go through that segment, had 1.12 book-to-bill. The backlog is roughly two times that of quarterly revenue. And that business had close to 15% quarterly growth on a year-over-year basis. And our precision medicine business had a book-to-bill of 1.01 with a backlog of nearly two times that of our quarterly revenue, and it had bookings growth of 22% year over year. Lee M. Jagoda: Got it. No, that is all very helpful. One more and I will just hop back in the queue. On the industrial robotics order you announced, is there any update there, any revenue expectations for 2026? And then any additional follow-through orders after you kind of disclose that order, either that customer or potentially other robotics customers? Matthijs Glastra: Yeah. I mean, we see that momentum building very steadily. And, you know, our remarks stay consistent with what we have said before, Lee. So it is a first phase of ramp, which will be modest this year, and then it will be sequentially building from there. I think the key takeaway is that it is just a testament to our technology leadership. In this area that leading players are selecting us and that then creates a halo effect for other opportunities. So I think what I am most excited about is just the broad-based precision robotics, end-of-arm, physical AI opportunity for this business, which is both in surgical robotics, warehouse automation, humanoids, as well as other precision robotics applications. So that is what we are seeing, which is why we are seeing the momentum of that business sequentially building. So it is just one part of multiple drivers. Robert J. Buckley: I will say that you saw a couple announcements last year around both our servo drives, which are a key enabler of precision motion control within automation, within warehouse robotics, and within humanoids. We are working with the industry as well as the ISO organizations to help set the standard around how robots operate safely in a manufacturing environment as well as the home. We are well-positioned with that technology and our force torque technology in humanoids and in warehouse automation. We feel it is really superior to anything out there from a competitive perspective. And you can see we are working with pretty much everybody out there when it comes to the humanoid markets and the leading players in warehouse automation. So we feel really good about that technology. As Matthijs said, it will take a little time to kind of fully materialize. And, of course, on the humanoid side, a little bit binary in the short term. But we could not be better positioned both industry-wise and customer-wise and hoping to grapple on to that opportunity. Lee M. Jagoda: Great. Thanks very much. Matthijs Glastra: Thanks, Lee. Operator: Our next question comes from Brian Paul Drab from William Blair. Please go ahead with your question. Brian Paul Drab: Thanks. I mean, so much momentum on the top line, the bookings, the orders, and, you know, backlog. Can you just again maybe this is for Robert, just bridge that momentum and kind of reconcile that with your expectation for, at the midpoint, I think it is about 9% EPS growth, and just maybe rank order the investments again that are happening this year that will kind of result in what might be perceived as a little bit of restrained earnings growth? Robert J. Buckley: Yeah, I would say, so the EPS growth, do not forget, we did the fundraise. Right? And so the fundraise generated $0.22 to $0.24 of a headwind. Obviously, we do not want that headwind to materialize. We would like to deploy the capital that we raised towards acquisitions. And so I would look at that as a temporary headwind with the likelihood that we deploy that capital and generate income through the acquisition of a new business. But roughly the fundraise itself is $0.22 to $0.24. And then there is the all-employee grant that went out to all employees other than the executive team, and that had about a $0.14 headwind that only impacts the first half of the year. So if you think about the EPS growth of roughly, you know, 10%, it is growing 10% year over year despite the dilution from the fundraise and despite the dilution from that equity grant. And so the organic element of that EPS growth is obviously much bigger. Brian Paul Drab: Right. Okay. And thanks for stepping through that. And then you mentioned a number of opportunities here, and one of them that stood out to me was the GPU boards opportunity. Is that something that kind of surprised you that has popped up that is new? Or I have not heard you talk about that one before, and it sounds like that could be a big deal and kind of revive that air bearing spindle business. Matthijs Glastra: Yeah. I mean, listen. We have not talked about this business for a little while. We are really, by far, the leader in this space in drilling really thick boards very precisely. And it so happens that the material set in GenAI and GPU boards are getting tougher and thicker. And the only way you can really do this with throughput at precision, it turns out, is with our spindles. And, of course, the visibility is starting to increase around that, you know, starting to increase in the second half of the year. Of course, these boards can be drilled in a variety of applications. But it became clear that the leader in GPUs, you know, had a personal interest in this in terms of scaling that. So that is why we are mentioning it. The business is really starting to be on a tear, and therefore, we felt it was good to start to mention it. We see a multiyear trajectory here that is exciting. And, nevertheless, of course, there are many other drivers in the company that we have been investing in. But this is a leadership position that we have always had. It is a really cool capability that we have had and it typically was applied in a more cyclical part of the semiconductor space. It so happens that it is also needed now to drill these really thick boards, and we are the only ones who can do it. So that is why we thought we would mention it. Brian Paul Drab: And are you finding that opportunity is coming from new customers or existing customers that are ramping up to meet the end market demand? Matthijs Glastra: Yeah. Let us say, end users. Let us put it this way. So the way to think about it is you have the OEMs, the equipment makers. That set of customers is similar. I mean, we have been working with those customers over decades. It is a strong relationship. And those customers have been approached to provide, you know, the support for drilling these boards. So these applications have been developed with us and together with our customers. But it is really the end users that, of course, are more geared towards that GPU space. So that is how to see it. Our customers are the same. But the application is, of course, rapidly evolving. Brian Paul Drab: And then just one last quick question. You said book-to-bill was positive across all of the businesses. Are, just to put a finer point on it, we are talking about the two segments or all four sub-segments or what do we mean by that? Robert J. Buckley: Yeah. So all four business units and then the two segments. So book-to-bill was positive. That was the numbers that I was giving Lee in the beginning. Yeah. So positive book-to-bill is every business line. And then obviously, as a consequence of aggregation, the two segments had a positive book-to-bill and then the entire company. Brian Paul Drab: Okay. So nice momentum, you know, building backlog, double-digit bookings in each of the business units. And then obviously, significant progress in new product revenues, significant progress in design wins. So the teams are really hitting their stride. Matthijs Glastra: Yeah. And the key takeaway, Brian, is that it just supports the sequential momentum that is building and that is broad-based, based on structural drivers that are not only, you know, some of it is market, but actually a lot of it is really innovation, commercial excellence, being at the right place, winning business with the right customers in the right market. Right? So that is the takeaway. Operator: Thank you. Our next question comes from Robert W. Mason from Baird. Please go ahead with your question. Robert W. Mason: Good morning, Matthijs, Robert. I think you made a comment, Matthijs, just around the robustness of the M&A pipeline and the capital raise kind of signaled that as well. You know, as you think about your areas of priority and, you know, it seems like your bias to medical. You have also talked about consumables, embedded software. Obviously, there is a lot of discussion around software, but embedded software seems to infer itself a high degree of stickiness. But could you just maybe elaborate on the filtering process you are going through to make sure anything along those lines has the right level of protection and moat around it? You know, how should we think about that? And, also, maybe just any comment on valuation fluidity there as well. Matthijs Glastra: Yeah. Yeah, Rob. Great question. So I think we have been pretty consistent in where the focus is and why, but let me kind of just go through that. You know, over the last decade under my tenure, we have really grown the medical exposure to now close to 55% of revenue, up from 10%. So that direction of travel is expected to continue, both organically and through M&A. So that is first and foremost, and we are working with all the key leading OEMs in both the life sciences as well as the med tech space. So we now have a competitive moat also around customer access and relationships. And the more and more products we can offer our customers and the more and more solutions or problems we can solve will be received very well by the executives of those OEMs because they need capable suppliers that solve more problems for them. Rather than educating individual niche suppliers, they are looking at suppliers like us that have the scale, that have the regulatory performance and sustainability to really work with them over the long term. So that is the context. Within that, of course, we have a very strong franchise with the advanced surgery business, and that splits into two. One is basically endoscopy and arthroscopy space, and we are starting to build category leadership around that, but that is only 10% of the minimally invasive surgery market. Right? So if you think about it, there is huge expansion potential in surrounding applications to the same customer. Right? So the same customer base. So that is one, and that will be received as very positive. The second piece is that I think we have now built a medical consumables business of 15% of revenue that is growing double digits. A very strong franchise where you need quality and regulatory and operations chops to deliver these products that, mind you, will be delivered in procedures. Right? So you cannot really falter on delivery performance because otherwise, patients will not get their surgeries. And so that requires a certain level of skill and competence that we feel we now have built. So that is the second pedestal. That is the competence area of medical consumables that we feel is a great jump-off point to add more competencies to that. Right? So that is a very logical evolutionary next step. And then there are some surrounding applications that we can further build around that. And then the third on your third question, on embedded software, yeah, I know there is a lot of chatter and concern around the whole software space. Think about it as our intelligent subsystems where you have embedded software and hardware into subsystems. So you combine just the next layer on top of the hardware. That is what we are talking about. Right? This is not the application layer. This is intrinsically combining hardware and software to create functionality. Thirty percent of our business and probably 80% of our product launches are linked to a combination of embedded software and algorithms that work on the hardware. Right? That is what we speak about. So there are certain businesses where we are very progressed around this, like the advanced surgery business where almost everything is intelligent subsystems. You heard me talk about the beam steering side where we are now entering the market with these new capabilities that, quite frankly, achieve never-before-possible capabilities that are three to five times better than what is out there in the market just by combining the different competencies together. So that is what we are talking about as more of an added competence on top of the hardware that we have that is a vertical integration that solves problems cheaper, better, faster for our customers. And we feel that it is very well protected. It requires some deep proprietary know-how of the application that is not public. And it really runs directly on the hardware and then the firmware. So for us, that is what we are talking about. And we feel it is a very protected area, and we are growing rapidly in that area as we speak. Robert J. Buckley: Rob, let me answer your question on the financial side. So, you know, first and foremost, a bolt-on transaction for us, we have been very consistent. It has to have a return on invested capital that exceeds our cost of capital by year two, and a larger one by year five. The metric of return on invested capital for us is after-tax cash flow has to exceed the investment from a ratio perspective. Right? So think of it as like free cash flow accretive and growing at a faster rate than Novanta Inc. So, at the very top level, we want businesses that are growing their top line faster than ours. We want gross margins that are non-dilutive, so therefore, you know, 50% and above type of gross margin, and that cash flow really growing at a faster rate. The other metric we tend to look at is the asset intensity of the business. So you can maximize your return multiple ways. The best way that we feel is doing that is acquiring a high cash conversion business, so a conversion ratio higher than Novanta Inc., meaning its cash earnings exceed its asset intensity, and grow at a faster rate than Novanta Inc. is. And then lastly, you know, we are not looking to overleverage the company, and so we try to keep that leverage ratio below three, three and a half. Obviously, we will bias it to things that are less cyclical than our portfolio and therefore generate stronger alpha with less beta. And we have been pretty consistent about that, but I think, you know, regardless of what type of deal we are looking at or the size of deal that we are looking at, you should think of us as being highly disciplined around those metrics. Matthijs Glastra: Yeah. And then maybe just to put a final point to this, if you look at our advanced surgery business that we can agree is doing extremely well, I mean, we follow exactly the same framework there. Right? And just by cross-selling to joint companies or to cross customers, sorry, further investing in innovation and further adding the Novanta Growth System to that business, that business has doubled and will double again in the remaining part of the decade. So we feel we can add something to those companies with those returns that Robert talked about so that longer term, we can really drive these strategic opportunities and make those businesses better. Robert W. Mason: Understood. That is very helpful. Maybe I will just ask a quick follow-up. You talked about how Keyon has kind of outperformed plan thus far. I know that is a project-oriented business to some degree and project pipeline has been pretty healthy there. But just what does the first quarter contribution look like in that business before it goes into the organic bucket? Robert J. Buckley: It does help if you are trying to get at, you know, what is, obviously, you could see the delta between the reported revenue and the organic revenue that we gave. That delta is driven pretty much all by the Keyon acquisition. A little bit of FX in there, but for the most part, the Keyon acquisition. You are right in this project business. Delivered about $9 million of incremental revenue. It had an element of project-based business, but it also has a recurring revenue stream associated with it as well. So each of the individual customers that we work at, we actually sell a software-type of solution package to them that is, for all intents and purposes, middleware. It is not an application. And so we, you know, control and own the data that we gather from those readers. And then that data gets sold on to the customer through a recurring revenue stream that they then go out and either mine themselves with artificial intelligence or buy some sort of packaged application solution that overlays onto it to give them the insights that they are looking for to maximize those stores. It is that concept and that strategic element of it that really got us attracted to the business and why we see the applicability in the hospital environment and why we are excited about that. I should mention, we did a very small, you will probably see it in the 10-K, minority investment into a similar business in Spain that has got frontline access to the hospital environment there to allow us to start beta testing our products in that environment and really understanding the best way to penetrate that market and deal with the regulatory hurdles around data privacy and then patient privacy and how best to package a solution to that marketplace. So we are making progress in the strategic core, which is around the medical field. We continue to feel that we are well-positioned to do that. Then simultaneously, the business is really strongly positioned in its base customers around retail. We continue to make design win progress, continue to win new products, new customers, and have that momentum. The growth driver around that, we expect it to exceed the deal model. Not only did it do that in 2025, it will exceed the deal model in 2026. We feel very good that that momentum has continued to be present. Robert W. Mason: Very good. Thank you. That is helpful. Operator: With that, everyone, we will be concluding today’s question and answer session. I would like to turn the floor back over to Matthijs for closing remarks. Matthijs Glastra: Thank you, operator, and thank you, everyone, for your questions. In closing, as always, I would like to thank our customers, our shareholders, and especially our dedicated employees for their ongoing support. We appreciate your interest in the company and your participation in today’s call. I look forward to joining all of you soon at our first quarter 2026 earnings call. Operator: And with that, everyone, we will conclude today’s conference call. We thank you for attending today’s presentation. You may now disconnect your lines.
Operator: Thank you for standing by. Name is Jael, and I will be your conference operator today. At this time, I would like to welcome everyone to the Amer Sports Fourth Quarter Full Year Fiscal Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question at this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. I would now like to turn the conference over to Omar Saad, Head of Investor Relations. You may begin. Hello, everyone. Omar Saad: Thanks for joining Amer Sports earnings call for 2025. Earlier this morning, we announced our financial results for the quarter and year ended 12/31/2025, and the release can be found on our IR website investors.amersports.com. A quick reminder to everyone that today's call will contain forward looking statements within the meaning of the federal securities laws. These forward looking statements reflect our current expectations and beliefs only, and are subject to certain risks and uncertainties that could cause actual results to differ materially. Please see the safe harbor statement in our earnings release and SEC filings. We will also discuss certain non-IFRS financial measures. Please refer to our earnings release for important information regarding such non-IFRS financial measures, including reconciliations to the most comparable IFRS financial measures. We will begin with prepared remarks from our CEO, James Zheng, and CFO, Andrew Page, followed by a Q&A session until approximately 9AM Eastern. James will cover key operational and brand highlights, then Andrew will provide a financial review at both the group and segment level and also walk through our guidance for the first quarter and full year 2026. Arc’teryx CEO, Stuart Haselden, and Salomon CEO, Guillaume Meyzenq, will join for the Q&A session. With that, I'll turn the call over to James. Operator: Thanks, Omar. James Zheng: Fourth quarter was a great finish to a breakout year for Amer Sports. Our growth was led by our flagship Arc’teryx brand, and the rising star, Salomon, which recently surpassed the $2,000,000,000 US dollar sales bar. In 2025, we generated 27% revenue growth to $6,600,000,000 and a 170 basis point adjusted operating margin expansion to 12.8%, with double digit growth across all segments, regions, and channels. In the fourth quarter, we grew sales 28%, and the strong momentum continues into Q1. Our performance was led by technical apparel and outdoor performance, with solid contribution from winter sports equipment and ball and racket. All four regions achieved solid double digit revenue growth. Although we generated solid gross margin expansion in Q4, adjusted operating margin declined 110 basis points. This was entirely due to accelerated SG&A investments to support key growth opportunities, particularly for Salomon. Looking forward, we believe we are well positioned for strong and profitable growth within the premium sports and outdoor market, which continues to be one of the healthiest segments in all of consumer. Several factors give me confidence in our outlook. First, we own a unique portfolio of premium innovation-driven sports and outdoor brands. Second, Arc’teryx is a breakout brand with leading growth and profitability for the outdoor industry driven by its disruptive direct to consumer model. Third, Salomon footwear has a compelling and unique brand position but still only a small share of the global sneaker market. Fourth, our Wilson and winter sports equipment franchises already have leading market positions and will deliver slower long-term growth, except for Wilson soft goods, which has significant growth potential. And fifth, we have a strong differentiated platform in Greater China, where we continue to deliver best-in-class performance across brands. Before I turn it over to Andrew, I will briefly recap key highlights from our three segments. Starting with technical apparel. Arc’teryx delivered another excellent quarter of broad-based strength across regions, channels, and categories, especially footwear and women’s. Technical apparel generated a very solid 16% omni-comp driven by strong full-price growth and also healthy segment margin expansion year over year. Technical apparel sales up 34% was our highest growth quarter of the year. We continue to envision Arc’teryx as a truly global brand with significant runway in all major markets and we’re encouraged that the brand is generating double-digit omni-comps across all four regions. Women’s was Arc’teryx’s fastest growing category in Q4 with 40% growth. We continue to enjoy rising brand awareness with women across regions as we improve fit, style, color, function, and newness. We created a significant amount of newness in women’s this past quarter, which drove notable incremental growth in key product categories. We saw especially strong momentum in ski and insulation with the Atom SV, and also the new Andessa Down jacket, which is a warm waterproof ski jacket at a pinnacle price point. Women’s bottoms also continued to be popular following the successful launch of the Clarke Pant, the Outeir, and the Neopant in 2025. Moving to footwear, which grew nearly 40% driven by strong growth in all markets. Top performing models were the Norvan LD4 trail shoe, our most successful launch to date, followed by the Kopek GORE-TEX hiking shoe. Looking forward, Arc’teryx has an exciting pipeline of shoe launches for 2026, and we continue to believe footwear will be a large and profitable growth avenue for Arc’teryx. Our Veilance sub-brand is still small, but it grew strong double digits in Q4, and we are very excited for the future of this unique brand. Veilance drew a lot of interest at Paris Fashion Week, with showroom appointments tripling from last year. We expect strong double-digit growth from Veilance in 2026 as we further develop our collections and expand distribution. Circularity and ReBird continue to be at the heart of our brand. We opened eight new ReBird centers in Q4, bringing the total to 43. We increased the credit customers receive in Q4 when they trade in used Arc’teryx product to 30% from 15% previously, which has driven a notable jump in trade-in activity. I would also like to highlight recent leadership announcements at Arc’teryx. First, we welcome Avery Baker, our first-ever Chief Brand Officer, who joined most recently from Tommy Hilfiger. Avery is stepping into a newly created enterprise-wide role that will bring together global marketing strategy as well as consumer experience, insight, and analytics teams. We also welcome Tobias Prvedere, our new Head of EMEA. Tobias brings more than twenty years of international leadership experience across EMEA and APAC, most recently at The North Face and Gucci. I would also like to mention Peak Performance, our other technical apparel brand, which delivered solid growth in Q4. 2025 marked the brand’s return to growth with sales increasing across all regions and channels. The brand also continued to improve profitability driven by our concentrated efforts to reduce promotions and increase full-price selling. Moving to the outdoor performance segment, which was led by another outstanding quarter from Salomon footwear and apparel, and a solid performance from winter sports equipment. 2025 was a breakout year for the 77-year-old Salomon brand, which grew 35% to more than $2,000,000,000 of sales. Footwear momentum continues across all regions, especially Asia, with high demand for sportstyle and performance. There are several ongoing factors that give us confidence that Salomon footwear is well positioned for significant profitable growth in the years ahead. Number one, global sportstyle momentum continues. One of Salomon’s unique strengths as an outdoor brand is that we are connecting with women and younger consumers in a way traditional outdoor brands haven’t. Sportstyle is critical to Salomon’s position as the modern outdoor sneaker brand, and the success of XT-Whisper is the first example of how we can successfully expand focus beyond the XT-6 franchise. Second, our performance and running lines are also having great success. We continue to believe our new DRIVER franchise is helping to unlock the run category for Salomon like never before. Salomon is gaining traction in the run specialty channel in North America and EMEA, and even China, which has been a sportstyle-centric market, is seeing strong traction in performance product. Third, we installed amazing brand equity in Greater China and Asia, where we believe we operate the most productive and profitable sneaker shops in the industry. In 2025, Salomon grew sales very strong double digits in Greater China, driven by both sportstyle and performance, as well as strong growth in apparel. Beyond Greater China, Salomon is experiencing surging demand in Korea and Japan, both large sneaker markets. Fourth, our epicenter strategy is working. Our strategy to open a handful of brand stores and refine strategic elevated wholesale distribution in key metro markets is critical to elevate Salomon’s presence and awareness globally. Epicenter cities include Paris, London, Shanghai, Beijing, New York, LA, Milan, and more to come. Fifth is the strong pull demand we are seeing from consumers in Europe, Salomon’s home market, driving strong reorders, preorders, and sell-through. Sportstyle continues to be the growth driver, but we have also seen a real inflection in trail in Europe, supported by marketing campaigns, in-store events, and running activations. We are seeing especially strong performance in European epicenters like Paris and London, with strong double-digit omni-comps. Also, Salomon opened its first ever office and showroom in Paris, which is designed to elevate our brand presence in the city, strengthen our connection with buyers and the community, as well as support top talent acquisition. Sixth is North America, which is still a much smaller sneaker market for us compared to Europe or Asia. North America growth accelerated in Q4 driven by sportstyle. We remain focused on ramping up our North America direct-to-consumer and wholesale expansion with key strategic partners. Early signs are positive as our North America order book is experiencing strong growth. Salomon is also making key investments in leadership. In January, we appointed our first-ever Creative Director, Haki Salomon. Haki arrives following a tenure at Diesel and most recently MM6, and will lead both product design and brand creative direction. Lastly, I also want to mention our winter sports equipment franchise, which had a very strong Q4 despite challenging weather conditions. The market remains healthy despite low snow in certain regions. Bookings, participation, and enthusiasm for ski and snowboard are at record levels this winter. The recent Milano-Cortina Winter Olympic Games were a big moment for Amer Sports Group, especially Salomon, who outfitted all 27,000 official staff and volunteers head-to-toe. Between Salomon, Arc’teryx, Peak Performance, Armada, and Atomic, which is already one of the most successful alpine ski racing brands in history, our brands sponsored more than 200 athletes at the Games, winning an incredible 59 medals. A dominant performance. Congratulations to our athletes and teams. Moving to ball and racket, which had a strong Q4. Sales grew 14% driven by continued strength in softgoods, a return to growth in baseball, and an acceleration in golf. Wilson softgoods continued its explosive growth in 2025, including very strong double-digit growth in Q4. Our Wilson softgoods offering is resonating with consumers in both wholesale and direct-to-consumer channels and across all major regions. Wilson is unique in its ability to outfit tennis athletes from head to toe, including rackets and accessories. And we are excited to have signed six new Wilson Tennis 360 athletes on tour, including World Top 10 player Alex De Minaur, bringing our total count to 16 players. Beyond tennis, we also saw a return to growth in baseball, driven by strong bat sales, led by the Louisville Slugger Supra and five other bats among the top 10 this season. Lastly, before I turn it over to Andrew, I'm pleased to announce Carrie as the next President and CEO of Wilson brand, effective March 1. Carrie is a proven brand CEO and C-suite executive with great experience in global softgoods, sports, and outdoor industries, including Helly Hansen, Levi’s, and Nike. She began her career as an officer in the United States Navy, serving both in the US and abroad. We are excited to welcome Carrie to the Wilson and Amer Sports team. With that, I will turn it over to Andrew. Thanks, James. Andrew Page: We had another strong performance in Q4 with healthy sales growth, gross margin expansion, and EPS, despite our decision to accelerate investment behind Salomon. The strong sales and profitability of the Amer Sports portfolio allows us to accelerate resources behind the large Salomon sneaker opportunity, while still delivering great results at the group level. Let's first take a moment to reflect on the key highlights of 2025. Amer Sports Group delivered 27% growth in 2025, with broad-based strength across brands, segments, regions, channels, and categories. James Zheng: Arc’teryx continued its very strong trajectory, Salomon softgoods entered rapid growth mode, and Wilson Tennis 360 moved the needle in our ball and racket segment. Andrew Page: We delivered meaningful adjusted operating margin expansion from 11.1% in 2024 to 12.8% in 2025. We also continued to reduce our leverage ratio, effective tax rate, and annual interest expense leading to strong operating and free cash flow generation. Now turning to our Q4 results. Amer Sports grew sales 28% in Q4 on a reported basis, 26% in constant currency. James Zheng: The strong group sales performance was led by technical apparel and outdoor performance, while ball and racket also delivered solid growth in the quarter. Andrew Page: By channel, the group continued to be led by D2C, which grew 38% led by Salomon softgoods. Wholesale grew 18% globally, which was led by Arc’teryx. Regional growth was led by Asia Pacific, which grew 53%, followed by Greater China, which increased 42%. EMEA grew 21%, and the Americas generated 18% growth. Moving down the P&L. Adjusted gross margin increased 140 basis points to 57.8% in Q4, primarily driven by positive segment, regional, and channel mix shift. Adjusted SG&A expense as a percentage of revenue deleveraged by 220 basis points and represented 45.5% of revenues in Q4 versus 43.3% of revenues last year. The deleverage was primarily driven by outdoor performance, as Salomon made the decision in Q4 to accelerate investments to support healthy long-term growth. Also, the strong growth of Wilson softgoods continues to drive elevated SG&A investment within ball and racket. These factors were partially offset by technical apparel, which achieved SG&A leverage in Q4. Driven by the higher SG&A investments, as well as lower other operating income, our adjusted operating margin declined 110 basis points from 13.6% last year to 12.5% in Q4. Corporate expenses were $40,000,000, up from $12,000,000 in Q4 last year, driven by higher share-based compensation. In addition, last year in Q4, corporate expenses benefited from certain one-time accounting reclassifications related to net finance costs. D&A was $106,000,000, which includes $48,000,000 of ROU depreciation. Adjusted net finance cost in the quarter was $21,000,000, which comprised primarily of $20,000,000 of interest expense. In the quarter, our adjusted income tax expense was $65,000,000 which equates to an adjusted effective tax rate of 27%, compared to $90,000,000 in the prior year period. Adjusted net income was $176,000,000 in Q4. Adjusted diluted earnings per share was $0.31, compared to $0.17 last year. Turning to segment results. Technical apparel revenues increased 34% to $1,000,000,000 led by Arc’teryx. Growth was fueled by both 37% wholesale growth and 34% D2C expansion. Technical apparel generated a strong 16% omni-comp, led by full-price selling as we intentionally pulled back our participation in key promotional events, including Black Friday and Double 11. Guillaume Meyzenq: Regionally, the technical apparel growth rate was led by Asia Pacific, Greater China, the Americas, and EMEA. All regions grew strong double digits. Q4 was the first full quarter post the Korea distributor acquisition, which contributed a low to mid single digit percentage to technical apparel’s growth rate in Q4. In Q4, Arc’teryx opened 15 net new stores, with 21 openings offset by the closure of six legacy locations as part of our ongoing strategy to optimize the quality and productivity of our store fleet. New store openings included the new Arc’teryx Alpha store in Rockefeller Center in New York City, and Mountain Town stores in Aspen and Park City. Arc’teryx also opened stores in Canada, Japan, Australia, and China in the quarter. Looking back at full year 2025, we opened 24 net new stores excluding the Korea acquisition, and we plan to open 25 to 30 net new Arc’teryx stores in 2026, with the largest number coming in North America and also China. Our store opening plan incorporates a similar level of gross new stores as in 2025, partially offset by the continued closure of certain outlets and other suboptimal locations. In Greater China, as planned, we had slight net store closures in 2025, which includes partner stores. However, we still grew our own store count and overall square footage in China by opening larger format, higher quality, more productive locations. James Zheng: In North America, I want to highlight our second New York City Alpha store, which opened in October on 5th Avenue at Rockefeller Center. The store is the most pinnacle expression of the brand in the US, and we are encouraged by the strong sales this winter. The newly opened Mountain Town stores in Aspen and Park City are also off to great starts. We were very pleased by technical apparel’s strong operating margin expansion in Q4. Adjusted operating margin expanded 160 basis points to 25.9%, driven by strong flow-through of revenue upside in the form of SG&A leverage. This is a great proof point behind our confidence in the scalability of Arc’teryx’s highly productive store model as they comp positively over time. Moving to our outdoor performance segment, which saw revenues increase 29% to $764,000,000 driven by very strong performance in Salomon footwear, apparel, bags, and socks, and also supported by strong double-digit growth in winter sports equipment. By channel, outdoor performance D2C grew 55%, led by new doors and higher productivity across markets in APAC and Greater China. Outdoor performance generated a 28% omni-comp with strength in both stores and online. Wholesale grew 17% driven especially by strong results in Greater China and EMEA. Regionally, the outdoor performance growth rate was led by APAC and Greater China, followed by EMEA and the Americas. The popularity of Salomon footwear continues to inflect globally, and we are doing everything we can to ensure we are well positioned to fully develop this large opportunity over time. Salomon is positioned for significant growth in all three major consumer regions, and we are working hard to build the right team, operational, go-to-market, and brand-building functions to support our growth. In Asia, D2C continues to be the critical growth channel for Salomon, led by our highly productive Salomon compact shop format. We opened 33 net new Salomon shops in Greater China this quarter, including both owned stores and partner stores, bringing our total count at year end to 286 stores, adding nearly 100 new doors in 2025. In 2026, we expect to continue store expansion in Greater China, but at a more moderate rate adding approximately 35 net stores to the fleet. In December, we reopened the Salomon flagship store in Chengdu. The store design is inspired by local Sichuan mountain scenery and it is the first flagship store combining winter sports and trail running. In APAC, we opened net eight new Salomon stores in Q4, including Japan, Australia, and Korea. The region finished the year with 113 Salomon stores, including partner stores, with 44 net new openings in 2025. Overall brand awareness and demand for Salomon footwear is growing rapidly across Asia. Andrew Page: In the Americas, Salomon softgoods growth further accelerated as we continue to lay the groundwork to support significant future growth. We are excited to see very strong order books for both Spring/Summer and Fall/Winter for 2026 with growing demand across a variety of high-quality retail partners, including REI, Nordstrom, JD Sports, run specialty shops, and other specialty retailers. We also have improved our inventory position to answer the growing demand. Our brand awareness continues to rise across the greater New York area as our shop in SoHo continues to show great traction with consumers, and we opened our second New York store in Williamsburg, Brooklyn in Q4. The Williamsburg location strengthens our presence in the core New York epicenter, performing very well out the gate. Globally and in North America, we will continue to focus on our epicenter strategy in 2026 and beyond, particularly New York, Los Angeles, and Miami. We currently plan to open seven to ten new Salomon shops in the US this year. In EMEA, we continue to expand our store fleet in key epicenters, including a third brand store in Milan and a fourth in London, and we will further develop our Europe epicenter into Spain, Germany, and other key UK cities in 2026. For our winter sports equipment brands, Q4 was a strong quarter, with double-digit growth despite lower snow levels in the Alps and the Rockies. In addition to strong market share in our core ski, boot, and binding franchises, we continue to see incremental growth opportunities in areas such as snowboarding and protective equipment. Moving to outdoor performance P&L. Adjusted operating profit margin contracted 490 basis points to 6.2% as Salomon made the decision to accelerate SG&A investments to support its significant growth opportunity in the global softgoods market. Outdoor performance gross margin continued to expand driven by positive mix shift across product, region, and channel. This was more than offset by higher SG&A in Q4, driven by key investments to fuel Salomon’s long-term global growth. These investments include impactful marketing campaigns to drive long-term brand awareness, including XT-Whisper and gravel running, Olympics-related marketing, accelerated retail expansion, and increased investment in talent and operations, especially in China where we opened 25 net new brand stores in Q4, including higher incentive compensation given Salomon’s performance versus plan, new talent acquisitions such as our new Creative Director and his team, and opening Salomon’s new Paris hub. I want to emphasize that we're seeing tangible benefit and high returns from our accelerated investments, including meaningful uplifts in Salomon’s brand awareness since 2023, which has increased 15 points globally, including plus 15 points in Paris and plus 10 points in London. Moving to ball and racket. Revenue increased 14% to $337,000,000 driven by softgoods, baseball, and golf. We continue to see very strong momentum in Wilson Tennis 360 globally. By category, the growth was led by softgoods, up very strong double digits with continued momentum in all regions. Softgoods now represents approximately 15% of segment revenue. Rackets had slower growth in the quarter due to timing of product launches and wholesale shipments, while underlying demand remained strong. With double-digit growth, 2025 was a great year for rackets, and we have exciting performance racket launches in 2026. Baseball returned to growth driven by strong performance in bats, driven by successful product launches in 2025, and golf ended the year with improved margins and solid growth, especially in EMEA and APAC driven by a strong product offering. In other categories, we saw inflatables stabilizing in Q4 and returning to slight growth following a challenging first nine months. James Zheng: We had 10 new owned Wilson brand stores opening globally in Q4. Unknown Executive: Wilson Tennis 360 shops are performing well in China and we opened 13 new shops in Q4, including partner doors. This brings the total owned and partner store count to 77. And in 2026, we plan to open approximately 30 Wilson Tennis 360 shops in China, between owned and partner doors. APAC also continues to drive meaningful Wilson softgoods growth. Our first store in Japan, in Tokyo's Marunouchi district, and two stores in Melbourne, Australia are off to great starts. In North America, improving ball and racket growth was led by baseball and softgoods. In softgoods, we saw strong ecommerce comp growth in the region. Our expansion into warmer southern markets is continuing to drive strong results. Our Dallas NorthPark mall store continues to perform very well, and we continue to expand our new Tennis 360 concept store into more southern and coastal locations, including our new shops in Beverly Hills and Miami. We also continue to expand our Tennis 360 offering into more Dick's Sporting Goods locations, including House of Sport. Ball and Racket segment adjusted operating profit margin improved 110 basis points to negative 2.6% driven by solid gross margin expansion related to less promotional activity and better regional and channel mix. This was partially offset by SG&A deleverage due to investments in softgoods. Now turning to the group balance sheet. We ended 2025 with $291,000,000 of net debt, and only 0.3 times net leverage; our financial foundation has never been stronger. We generated $730,000,000 of operating cash flow in 2025 compared to $425,000,000 last year, driven by strong profit growth and disciplined working capital management. James Zheng: Additionally, given our strong financial position, post year end in January, we announced a redemption of $80,000,000 of our outstanding $800,000,000 6.75% senior secured notes at a redemption price of $1.03. We ended 2025 with inventories up 33% year over year, slightly elevated compared to our 27% sales growth, as expected. We remain very comfortable with the level and quality of our inventory. The higher inventory growth is primarily related to four factors. Number one, earlier receipt of seasonal Arc’teryx merchandise to prepare for better in-stock position. Two, higher Arc’teryx goods in transit resulting from the greater use of ocean shipping versus air freight. Three, FX translations from the weaker US dollar. And four, the addition of the Arc’teryx Korea inventory following the recent acquisition. We expect inventory growth rate to normalize beginning in 2026 as we start to cycle our improved in-stock positions and the higher use of ocean freight. A quick housekeeping item as we turn to guidance. Beginning in Q1 2026, we will discontinue allocating certain corporate expenses that are not directly attributable to the operating performance of our reportable segments. There will be no impact to our overall group adjusted operating profit margin. It is simply reallocating certain costs from segments to corporate. For the full year of 2026, we expect group corporate expenses to increase by approximately 60 basis points or approximately $50,000,000 related to costs reallocated from the segments. These cost reallocations to corporate will most benefit the outdoor performance and ball and racket segment margins, and have a much more muted benefit to technical apparel. Now turning to guidance. Guidance assumes the latest tariff rates on all countries will stay in place for the remainder of 2026 and beyond. James Zheng: 2026 is off to a strong start. Unknown Executive: And given the continued momentum from our highest margin Arc’teryx franchise, accelerating into ’26. For the full year, we expect reported group revenue growth between 16–18%, which assumes a 200 basis point benefit from favorable FX impact at current exchange rates. We expect group adjusted gross margin of approximately 59% for the full year, with the margin expansion continuing to be driven by mix shift benefits. As we said in the past, we are confident in our position to manage through a variety of tariff scenarios given our relatively low exposure to the US, strong brand portfolio with pricing power, and clean balance sheet. We continue to expect an immaterial impact on our group P&L from higher tariffs in 2026. We expect adjusted operating margin of 13.1% to 13.3%, towards the low end of our long-term guidance of 30 to 50 bps of improvement, primarily due to the accelerating Salomon investment—opting for long-duration profitable growth over near-term profit flow-through. We are committed to investing behind the large growth opportunities in front of Arc’teryx, Salomon, and Wilson Tennis 360, while still delivering against our long-term financial algorithms. Arc’teryx’s size and profitability and our strong sales growth and gross margin expansion at the group level allow us the flexibility to invest behind Salomon and Wilson Tennis 360 in a way they could not as stand-alone entities. We believe this is a unique advantage of our portfolio. James Zheng: Corporate expense is expected to be approximately $225,000,000, which includes approximately $50,000,000 of costs previously allocated to the segments that I mentioned above. We assume full year net finance costs of $105,000,000 to $110,000,000, higher than 2025 due to a normalizing FX impact on the revaluation of certain nonmonetary assets as well as higher imputed interest expense on store leases as our retail network grows. The effective tax rate is expected to be approximately 28%. This is an increase from 2025 as we generate a higher percentage of our taxable income in higher tax jurisdictions, and also as we cycle a one-time discrete tax benefit in 2025. Andrew Page: We expect adjusted diluted EPS of $1.10 to $1.15, which is based on approximately 564,000,000 fully diluted shares. Also, we are assuming depreciation and amortization of approximately $400,000,000 including approximately $170,000,000 of ROU depreciation. CapEx is expected to be approximately $400,000,000 versus $310,000,000 in 2025. The increase is mainly driven by increasing key investments in IT infrastructure and retail expansion. Turning to the segments. Our full year sales forecast incorporates 18% to 20% growth in technical apparel, 18% to 20% growth in outdoor performance, and 7% to 9% growth in ball and racket. For technical apparel, we expect adjusted operating margin of approximately 22%. We expect outdoor performance segment margin of 14.5% to 14.8% and we expect ball and racket margin of 4.7% to 5%. All three segments should generate gross margin expansion driven by mix shift partially offset by higher SG&A reinvestment. While we don't usually provide quarterly segment guidance, given the Q4 2025 margin fluctuation in outdoor performance resulting from accelerated Salomon investments, I want to provide a little extra margin color for Q1 2026. Although we will continue to invest heavily to support Salomon’s growth, we do expect outdoor performance to return to modest year-over-year margin expansion in Q1. Turning to first quarter guidance. We expect reported revenue growth for the group in the range of 22% to 24%, which assumes a 500 basis point benefit from favorable FX impact at current exchange rates. We expect adjusted gross margin to be approximately 59% in Q1 2026, adjusted operating profit margin to be 14% to 14.5%. Our net finance cost for the quarter will be approximately $27,000,000 and the effective tax rate would be approximately 28%. We expect adjusted diluted earnings per share of $0.28 to $0.30. Lastly, I would note that should strong trends continue, and better than anticipated demand materialize, we believe we are well positioned to deliver financial performance ahead of our expectations. With that, I'll turn it back to the operator for Q&A. Operator: Thank you. The floor is now open for questions. Please join the queue. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. And we do request for today's session that you please limit yourself to one question and one follow-up. Your first question comes from the line of Michael Binetti of Evercore ISI. Your line is open. Michael Binetti: Oh, hey, guys. Thanks for taking our question here. Appreciate all the help. A couple of technical ones for the model here. The fourth quarter gross margin is usually a little bit above third quarter in the past. I'm just curious because there's a lot of moving parts here. Is there something structural that we should consider going forward in fourth quarter? Or were there any one-timers in one of the segments that we should consider as we model going forward? And then I guess, Andrew, the Salomon investments in 4Q, it sounds like those are the reason for the operating margin guidance in 2026 to be at the lower end of the long-term algorithm. So those investments from 4Q continue in the first quarter. Just curious if maybe you could walk us through what some of the investments are in the first quarter. And then bigger picture, as you think about the Salomon investments and the incremental growth to the algorithm you presented, are the investments incremental to the algorithm that you've talked about with us? Or it sounds like there's at least an element of it being pulled forward, and I'm wondering if you're stepping up these investments if that means there’s an element of gating the margin expansion today because you can imagine a bigger brand revenue level for Salomon than what you've talked about with us in the past. Andrew Page: A lot to unpack there, Michael. Happy to address a bunch of these. So as you think about the fourth quarter gross margin versus third quarter, keep in mind that the fourth quarter, as you think about outdoor performance, is our largest quarter for winter sports equipment. James Zheng: Winter sports equipment actually outperformed as well in the fourth quarter, and so that is going to create a bit of a drag on gross margin. Obviously, strong business, but the fact is it’s a lower gross margin business. When it outperforms, it affects it. The other thing you also want to think about is on a comparative basis, recall that in 2023, we stood up a cost optimization program. You started to see the impact of that cost optimization in outdoor performance in the back half of 2024. And then in 2025 you saw the anniversary of that cost optimization. So through 2025, you saw material margin expansion in outdoor performance, and then it anniversaried itself because now you’ve reset the gross margin to its new go-forward cycle. As you think about your first question around Salomon investments, Unknown Executive: In the fourth quarter, we opportunistically made key investments behind strong momentum of Salomon. Over recent years, we’ve had one big brand—Arc’teryx—on fire, and we’ve made key investments behind that growth. Now we have multiple high-return opportunities to invest in, especially with Salomon really inflecting right now. Also keep in mind in Q1, you will see Salomon margins return to moderate growth. Again, Q4, we opportunistically made the right investments behind that accelerated momentum. This is the power of our portfolio. We run what we call our brand-direct offense, and because of that, we can get behind accelerating momentum in our brands in ways that these brands can’t do on an individual stand-alone basis. We continue to be committed to investing appropriately behind large growth opportunities in front of Arc’teryx, Salomon, and Wilson Tennis 360, and we’ll continue prioritizing long-duration opportunities over near-term profit flow-through. James Zheng: The last thing I want to say about that is that the gross margin mix, including outdoor performance, continues. Q4 had healthy gross margin mix shift at the product, region, and channel level. Full-year op margin for the portfolio—recall—expanded 160 basis points for the full year, after consideration of the key investments we made in fourth quarter. Long-term, we still expect SG&A leverage. I’ll turn it over to Guillaume to give you some color on discrete investments we made. Guillaume Meyzenq: Good morning, everybody. Yes, we took the opportunistic decision to choose Salomon’s long-term expansion in Q4, and we have a few strong examples where we decided to accelerate our positioning in the market. First, we are driving a few marketing campaigns in some key areas, supporting XT-Whisper, which, as James explained, helps us build a portfolio of key franchise products. On top of XT-6, we need a variety of product expressions, and XT-Whisper looks like a very promising opportunity. We are pushing the same for gravel running, which is our point of difference in the market. Finally, we prepared for the Milano-Cortina Olympics—you see the results now—and there was preparation in Q4. On top of that, we continued retail expansion. We opened several stores in China in the quarter. You mentioned Los Angeles, where we opened the store in Melrose, and at the same time we were building a campaign. This shows how we build the ecosystem in every city where we open a store. We partner with our B2B partners—Shoe Palace, for example, which is present in Los Angeles—and then we drive media and campaigns to attract consumers, and it was very successful. This model requires some resources at the beginning in the epicenters. The last one is about talent and organization investments. Salomon grew 35% in ’25, and we need to structure the company for a new scale. We supported incentive compensation and started new talent acquisition. The example of appointing a Creative Director is a very good signal of the level of ambition we have for Salomon. Another was the opening of the Salomon Paris hub. We have our roots in Annecy in the Alps, and we keep that, but the scale of the company requires more facilities in different places, and Paris was an obvious opportunity for us. It’s a place where we can capture trends and world-class talents in the future. Michael Binetti: Okay. Thanks for a lot of this color. James Zheng: Michael, I’ll just wrap on one point, because I think the last one we talked about was whether there is something structurally different about our algo. It’s not. As I said, we delivered 160 basis points to the bottom line after that investment. Our algo has consistently been 30 to 50 basis points plus on the bottom line. We opened this year with our guide at 30 bps. We believe that’s responsible. It does not reflect a structural change in our investment. As Guillaume highlighted, we will opportunistically get behind growth momentum while still continuing to maintain our earnings outlook. It’s early in the year, and should strong trends continue and greater demand materialize, we see no reason why we can’t outperform our guidance. Andrew Page: Just want to clarify. 30 to 50 bps. 30 to 50 is the range. Yep. Michael Binetti: Alright. Okay. Thanks everybody for all the help. Lot of detail. Appreciate it. Operator: Your next question comes from the line of Matthew Boss of JPMorgan. Your line is open. Matthew Boss: Great. Thanks and congrats on another nice quarter. So, James, following the breakout year that you cited for the portfolio, could you elaborate on the current momentum entering the first quarter? Maybe what opportunities do you see for the Salomon brand to accelerate market share further in ’26? And, Stuart, have you seen any change in top-line momentum at Arc’teryx relative to the fourth quarter? Or what's embedded to moderate within the 18% to 20% full-year forecast relative to mid-thirties that we just saw exiting 2025? Andrew Page: Matt, we're going to have Guillaume answer your question on Salomon. James will talk global outlook for the space, including China, and then Stuart will finish on Arc’teryx. Guillaume Meyzenq: When we speak about the Salomon momentum itself, we see a very strong outcome. 2025 was the year we confirmed that we are winning in all regions. You saw the traction in China and in Asia Pacific, but our domestic market—Europe—was really coming back strongly. All the investment we have been making in epicenter strategy with Paris, with London, and now looking to Milan, is starting to pay off. We see that we have the right strategy to drive momentum in both sportstyle and performance. Lately, we also see that the US is becoming a new place of growth. We are still quite small compared to the market, which is on one hand a challenge, but also a great opportunity. We see early momentum in sportstyle. The epicenter strategy in New York and LA, and we opened a store in Chicago which is performing very well. Through our data we see other US cities starting to pop up. Lastly, we see early positive signals for running in the US. If we are able to combine sportstyle and running in the US, then Salomon could have very promising growth. James Zheng: Good morning, Matt. Thank you for your questions. As I mentioned, strong trends have continued worldwide across borders. We already gave guidance for our Q1, with top line expected to grow between 22% to 24%. Our three segments all have very good forecasts to achieve their targets. Specifically, I want to mention performance in China during the Chinese New Year. We saw very positive consumer trends during the holiday in our brands, and also for the whole sports market overall. Consumption was very strong, and I think later on you will get similar color from other brands in their reports. It’s a good moment for us. However, it’s still a bit too early for us to say this is a very bullish situation in China. At least, we are off to a good start in 2026. Stuart? Stuart Haselden: Hey, Matt. It’s Stuart. Off to a fast start in the first quarter, really pleased with the trends that we're seeing across all our regions. We’re seeing especially strong momentum in North America over the last few weeks. That’s contemplated in the guidance that Andrew shared. On your question versus the 18% to 20% guide, this is consistent with our prior practices. We view this as responsible guidance for investors. There’s nothing structural that would prevent us from capturing higher sales should demand materialize. We’re well positioned, with a strong inventory position as Andrew noted, to convert upside should it materialize. We’re happy with the trends we’re seeing and confident in the outlook for 2026. Operator: Your next question comes from the line of Paul Lejuez of Citigroup. Your line is open. Paul Lejuez: Thanks. Curious if you could talk a little bit more about the wholesale expansion opportunity in the US within the Salomon business? And what sort of growth should we expect with Salomon’s wholesale versus DTC this year? And then, Stuart, also curious if you're thinking about adding any new wholesale partner doors for Arc’teryx this year? How should we think about growth there? Andrew Page: First, Guillaume, then Stuart. Guillaume Meyzenq: Thanks, Paul, for asking. Clearly, our strategy is about omnichannel. If we want to become a large sneaker and footwear brand in the US, we absolutely need to partner with the key players. We speak a lot about our D2C and ecommerce because this is where we can express Salomon best, but the strategy is truly to become omnichannel and partner with key players. We have renewed support with REI, our historical partner in the US when we were focused on winter sports equipment and outdoor, and now we are back on track with them. In parallel, we have Nordstrom, JD Sports, and most of the run specialty shops as current targets to drive growth. We are not building a big push all at once, but working door by door, city by city, with close partnerships and good business foundations. We drive demand with them. We think this is the best way to win the share battle, and expand doors over time. The key driver in the end is consumer demand and how we work with partners to drive it. Stuart Haselden: From an Arc’teryx standpoint, wholesale is emerging as an important channel across three of our key growth strategies: footwear, Veilance, and women’s. In footwear, this is an important channel of distribution, different from apparel, so we see the need to have a stronger strategy here. We’ve been building a sales team as part of our footwear business unit in Portland, and we’re engaging with specialty run accounts and premium big-box retailers, all on the premium high end with very technical positioning. For Veilance, premium wholesale—tier zero as we call it—will help create higher brand awareness and drive the business. And for women’s, we see wholesale as an interesting expansion of our distribution footprint to be relevant where she shops. Across those three strategies, we continue to evolve our wholesale approach. Operator: Next question comes from the line of Brooke Siler Roach of Goldman Sachs. Your line is open. Brooke Siler Roach: Good morning, and thank you for taking the question. At Salomon, I was hoping that you could unpack the proportion of growth that you expect to realize by region for the brand in 2026. And then if there are any specific regions that will receive an outsized SG&A investment this year. As a follow-up, how much of the growth at Salomon do you expect to come from existing distribution partners versus new distribution partners in 2026? Thank you. Guillaume Meyzenq: We expect to have growth in all regions in 2026. Asia and Greater China continue to show very strong momentum, EMEA is really back on track with high-quality sales at premium price points, and North America is definitely small scale today but very high growth and high demand, especially from the last quarter, and we see that momentum well engaged for 2026. On existing versus new distribution, we see existing partners growing with the momentum, and we also have a new strategy in Europe and the US because we have entered the sneaker market with sportstyle, which requires some new types of doors. For example, JD was not a customer of Salomon five years ago and now is becoming one of the strategic partners. So we will add new distribution in Europe despite already strong numeric distribution, and of course in the US as we build distribution there. Operator: Your next question comes from the line of Ike Boruchow of Wells Fargo. Your line is open. Ike Boruchow: Hey. Thanks. Congrats, everyone. So, obviously, revenues solid. Some questions this morning on the margin. Andrew, can we just dive in a little bit on the cadence of the investment? You've got about 200 basis points plus of deleverage in Q1. But based on the full year, it does seem like you should start to be scaling the investments, especially in the ones you talked to for 4Q. Can you comment on that? Does it seem like the business should be scaling and leveraging the expense base in the back half of the year, specifically in Q4? And does that give us some visibility to scale in the out years and beyond? Thanks. Andrew Page: One of the things embedded that is not easily seen: some of the Q1 deleverage on a comparable basis is driven by the fact that Q1 last year in ball and racket had meaningful pull-forward because of the threat of tariffs that was on the horizon. So Q1 last year, compared to Q1 this year, last year was a lot more pull-forward; this year is more normal. You saw a lot more profitability in Q1 last year. So it looks like deleverage, but underneath that, as we talked about, both Arc’teryx and outdoor performance are performing well. Outdoor performance is expected to show margin expansion. So it’s much more of a Q1 comp issue related to ball and racket in the prior year. Ike Boruchow: That is helpful. But my bigger question is about the pacing of the expense into the back half. Are you planning to start scaling those as you exit the year? Does that give better visibility into SG&A leverage as you exit and into fiscal 2027? Andrew Page: In 2025, we invested a lot—opportunistically—in Q4. Empirically, that would suggest that the Q4 2026 comp is going to be pretty easy. So yes, we’d expect better scaling and leverage as we exit the year, all else equal. Operator: Your next question comes from the line of Jay Sole of UBS. Your line is open. Jay Sole: Great. Thank you so much. My question is for Stuart. Stuart, give us a little bit of an update on how some of the initiatives around women’s and footwear have gone for Arc’teryx in the quarter and what your outlook is for this year? And also, just with all the news on tariffs over the last few weeks, how has the landscape changed? How might it impact the company? Thank you. Stuart Haselden: Thanks, Jay. On tariffs, it’s not nothing, but it’s a modest impact for Arc’teryx. It is not influencing how we’re pricing our products or operating the company, and we see it as an opportunity to take share from companies that might respond differently. We feel we’re in a good spot managing the tariff situation. On women’s and footwear, as James mentioned in the prepared remarks, both are really healthy—each grew about 40% in the fourth quarter. In women’s, continued strength across new products, including women’s-only pants—the Clarke Pant, the Loose, and the Neopant—offering a new lever of growth. We also saw strength in ski and insulation with the Atom SV and the Andessa Down, two new products we introduced in the quarter. Women’s continues to grow faster than the overall company; we expect it to exceed 30% of total sales by 2030. In footwear, top models included the Norvan LD4, our top seller, and fast sales in our Kopek hike shoe. We’re launching the new Sylens 2 on March 6—our pinnacle trail running shoe—with strong athlete feedback already. And within footwear, our Portland-based footwear business unit—sales and marketing—continues to come together nicely. We’re very bullish; footwear is an important pillar of growth for us for some time. Andrew Page: Hey, Jay—this is Andrew—just to wrap on tariffs at the group level. We’re confident in our position to manage through a variety of tariff scenarios given our low level of US exposure, strong brand portfolio and pricing power, and clean balance sheet. The two businesses most impacted would be ball and racket and winter sports equipment. We are aware of the recent Supreme Court decision and follow-up presidential action to impose the 15%, but looking at high-level scenarios, our position does not change. Andrew Page: We have time for one more question. Operator: Your last question comes from the line of Lorraine Hutchinson of Bank of America. Your line is open. Lorraine Hutchinson: Thanks. Good morning. Andrew, now that the leverage is down to 0.3 times, can you talk a little bit about your expectations for the capital structure and uses of cash going forward? Andrew Page: Yes. In 2026, CapEx is guided to $400,000,000. We still believe a high-return use of our cash is to grow our business—investing in IT, retail expansion, and strategic capabilities. We also believe it is an efficient use of cash to pay down inefficient debt, as it does not provide the requisite tax shield. We’ll continue to focus on growth, and continue to pay down inefficient debt. We like our leverage position as it stands now—close to zero. Operator: That concludes our Q&A session. I will now turn the conference back over to management for closing remarks. Andrew Page: Thanks everyone for joining. We'll see you in three months. Have a great spring. Operator: This concludes today's conference call. You may now disconnect.