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Operator: Greetings, and welcome to the Park Hotels & Resorts Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Press star-zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Ian Weissman, Senior Vice President, Corporate Strategy. Please go ahead. Ian Weissman: Thank you, operator, and welcome, everyone, to the Park Hotels & Resorts Inc. Fourth Quarter and Full Year 2025 earnings call. Before we begin, I would like to remind everyone that many of the comments made today are considered forward-looking statements under federal securities laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and we are not obligated to publicly update or revise these forward-looking statements. Actual future performance, outcomes, and results may differ materially from those expressed in forward-looking statements. Please refer to the documents filed by Park Hotels & Resorts Inc. with the SEC, specifically the most recent reports on Forms 10-K and 10-Q, which identify important risk factors that could cause actual results to differ from those contained in forward-looking statements. In addition, on today's call, we will discuss certain non-GAAP financial information, such as Adjusted FFO and Adjusted EBITDA. You can find this information together with reconciliations to the most directly comparable GAAP financial measure in yesterday's earnings release as well as in our 8-Ks filed with the SEC and the supplemental financial information available on our website at pkhotelsandresorts.com. Additionally, unless otherwise stated, all operating results will be presented on a comparable hotel basis. This morning, Thomas Jeremiah Baltimore, our Chairman and Chief Executive Officer, will update on our strategic initiatives, review Park Hotels & Resorts Inc.'s fourth quarter and full year performance, and provide an outlook for 2026, while Sean M. Dell'Orto, our Chief Operating Officer and Chief Financial Officer, will provide additional color on fourth quarter and full year results, our plan to address our upcoming debt maturities later this year, and further details on guidance. Following our prepared remarks, we will open the call for questions. With that, I would like to turn the call over to Thomas Jeremiah Baltimore. Thomas Jeremiah Baltimore: Thanks, Ian. And welcome, everyone. 2025 was another very productive year for Park Hotels & Resorts Inc., one marked by meaningful progress against our strategic priorities and continued execution across the core portfolio. Throughout the year, we remained laser-focused on reshaping and upgrading the portfolio and reinvesting in our highest-quality hotels, all with the goal of positioning the company for sustained long-term success. Our strategy has been both consistent and deliberate, concentrating our ownership in 21 core hotels with superior growth prospects, aggressively exiting non-core assets, and allocating capital toward high-impact redevelopment projects with the potential to unlock meaningful embedded value across the core portfolio with ROI opportunities exceeding $1,000,000,000. In 2025, we executed more than $120,000,000 in non-core sales at a blended multiple of 21 times. These transactions included the sale of the Hyatt Centric Fisherman's Wharf and our 25% joint venture interest in the Capital Hilton as well as exiting three hotels sitting on expiring ground leases that produced no earnings on a combined basis. As we entered 2026, we continue to make steady progress toward completing our remaining non-core asset dispositions. In January, we closed on the sale of the 193-room Hilton Checkers in Downtown Los Angeles for approximately $13,000,000, representing over 17 times 2025 EBITDA. We have established a strong track record of successfully recycling capital, having sold or disposed of 51 hotels for over $3,000,000,000 over the past nine years, and despite a challenging transaction environment, we have sold or disposed of 13 hotels since 2023, increasing portfolio-wide nominal RevPAR by nearly 8% and hotel Adjusted EBITDA margins by over 275 basis points. While the timing of non-core dispositions may be uneven, we remain firmly committed to materially reducing our exposure to our non-core portfolio by year-end. Active workstreams are currently underway across all remaining non-core properties as we continue to advance this objective. Additionally, building on the success of our development team, we launched our sixth major redevelopment in seven years, the $108,000,000 transformation of the Royal Palm South Beach, while making significant progress on enhancing the overall quality of our Hawaii and New Orleans properties through extensive guest room renovations. Together, these projects reinforce our conviction that reinvesting in the core portfolio remains the highest use of capital, which will best position Park Hotels & Resorts Inc. to deliver outsized earnings growth and enhanced shareholder value over time. Turning to operations. I remain encouraged by the relative outperformance of our core portfolio, which delivered a solid 3.2% increase in RevPAR during the fourth quarter, or 5.7% excluding the Royal Palm, representing nearly 1,500 basis points of outperformance versus our non-core portfolio. That trend was consistent throughout much of the year, with RevPAR growth from our core portfolio outperforming the non-core hotels by an average of 480 basis points in 2025, further reinforcing our stated strategy. During the fourth quarter, group performance stood out, supported by convention demand in Hawaii and New York, and solid corporate group activity in Orlando. Fourth quarter group revenue for our core portfolio increased 13% year over year, complemented by double-digit growth in banquet and catering revenues across several key markets, including Hawaii, Chicago, Orlando, and Denver, reflecting broad-based strength across key markets. Among our core hotels, Hilton Hawaiian Village was one of our strongest performers during the fourth quarter, generating 22% RevPAR growth, benefiting from easier year-over-year comparisons following last year's labor disruption. We are increasingly encouraged by the outlook for both properties following the completion of the Rainbow Tower renovation at Hilton Hawaiian Village and the Palace Tower at Waikoloa Village. Following the renovation, both resorts will be operating with significantly upgraded product and should be well positioned for a step-up in performance as demand trends are forecasted to improve and we lap an otherwise challenged 2025, which our resorts were meaningfully impacted by the disruption from Liberation Day and the government shutdown, the continued softness in Canadian demand, and renovation displacement. As we look ahead, we expect a multiyear recovery towards prior peak levels in Hawaii. We are beginning to see that recovery take shape, with momentum building into the second quarter. As Hawaii continues to normalize, we expect it to be one of the most meaningful contributors to earnings growth across the portfolio. Additional standouts in the portfolio include Orlando, which delivered exceptional results, with our Bonnet Creek complex generating a record fourth quarter RevPAR, up nearly 9% year over year, driven by a 15% increase in group revenues as the complex continues to benefit from its expanded meeting platform and renovated room product. I am also pleased to share that the Waldorf Astoria Bonnet Creek has been named the number one hotel in Orlando by U.S. News & World Report. The property was also ranked number eight in Florida and within the top 100 of all hotels nationally, reflecting meaningful improvements over last year's ranking. I want to acknowledge the entire Bonnet Creek team for this achievement, which further highlights the quality and benefits of unlocking embedded value within our core portfolio. New York remained another top performer, delivering its highest fourth quarter group revenue in hotel history, up over 8% year over year, while the Hilton Chicago hotel posted a nearly 4% increase in group revenue despite a challenging citywide calendar supported by improved short-term pickup strategies and in-house group. Turning to our Royal Palm renovation. We continue to make meaningful progress on this transformational project with more than half of the guest rooms complete, and key public areas such as the lobby lounge, event terrace, and pool deck taking shape. Our best-in-class design and construction team is working hard to deliver the hotel by June, and we are laser-focused on achieving that goal. Overall, Miami remains one of the strongest hotel markets in the country, and I am incredibly excited about the long-term outlook for this asset. We continue to expect to realize a 15% to 20% return on our invested capital, with the hotel forecasted to more than double its EBITDA from $14,000,000 to nearly $28,000,000 once stabilized. We look forward to hosting many of you at the property during next month's Citi conference to showcase this world-class asset and the remarkable transformation underway. Looking ahead to 2026, we see several factors that could support an improving lodging environment. From a macro perspective, the U.S. economy remains on relatively firm footing with modestly higher growth expectations, easing inflation, and ongoing fiscal stimulus, all of which should provide incremental support to the U.S. consumer. In addition, easier year-over-year comparisons as we lap last year's government demand disruptions, together with the anticipated lift from major events such as the World Cup, and the America 250 celebrations in New York, Boston, and Washington, D.C., are expected to benefit demand across several of our core markets. Furthermore, new hotel construction remains muted, keeping supply growth at historical lows, and supporting healthy operating fundamentals for the next several years. While we remain optimistic about the setup for the year, with easier year-over-year comparisons and major event-driven demand, our guidance remains cautious, with the potential for geopolitical or macroeconomic volatility continuing to drive uncertainty around booking decisions and impacting short-term group pickup trends and international inbound demand, particularly from Canada. Sean will provide additional detail on earnings guidance later in the call. In summary, 2025 was another year of meaningful progress for Park Hotels & Resorts Inc., one in which we advanced our strategic priorities, continued to reshape the portfolio, and strengthened the foundation for long-term growth. Our disciplined approach to capital allocation by accelerating non-core dispositions or reinvesting in our highest-quality assets continues to unlock embedded value across the core portfolio. The transformation underway at Royal Palm, the substantial renovation work at our two iconic Hawaiian resorts and New Orleans, and a broader base momentum across several of our core markets further reinforce our conviction in the earnings power of our core portfolio. As we move into 2026, we remain laser-focused on completing our transition to a streamlined portfolio of 21 high-quality hotels located in premium gateway cities and resort markets, and we are confident in the long-term growth opportunities for Park Hotels & Resorts Inc. And with that, I will turn the call over to Sean M. Dell'Orto. Sean M. Dell'Orto: Thanks, Tom. For the fourth quarter, RevPAR was approximately $182, representing a nearly 1% year-over-year increase, nearly 3% when excluding Royal Palm. The core portfolio excluding Royal Palm continued to demonstrate meaningful operational strength, delivering a RevPAR increase of 6% to nearly $216, or nearly 1,500 basis points higher than our non-core portfolio, underscoring the resilience of our highest-quality assets. Core hotel Adjusted EBITDA margin also improved materially, expanding 230 basis points to 30%, in sharp contrast to the non-core portfolio, which recorded a 280 basis point contraction to 10%. Overall, core hotel Adjusted EBITDA increased 13%, or nearly $18,000,000 over the prior-year period, despite an over $4,000,000 headwind from Royal Palm being closed, while the non-core portfolio declined 28%, creating an approximately $4,000,000 drag on quarterly earnings. These results underscore the strength and durability of our core portfolio and highlight the value-accretive nature of our portfolio reshaping initiative. For the full year, RevPAR came in slightly ahead of expectations, declining 2% versus 2024, while hotel Adjusted EBITDA margin was 26.5%, reflecting a 130 basis point reduction from the prior year. As expected, the Royal Palm renovation remained the primary headwind, contributing a 110 basis point drag to full year RevPAR growth and approximately 15 basis points of margin pressure. From a CapEx standpoint, in 2025, we invested nearly $300,000,000 across the portfolio, including roughly $110,000,000 during the fourth quarter. Earlier in the year, we completed nearly $75,000,000 of guest room renovations that began in 2024 at our two Hawaiian properties, the Rainbow Tower at Hilton Hawaiian Village and the Palace Tower at Hilton Waikoloa Village. The second and final phase of guest room renovations for the Rainbow Tower, which commenced in Q3 of last year, is expected to be completed in a few weeks, while the final phase for the Palace Tower, which also commenced in Q3 last year, delivered last month, bringing the total investment to the second phase across both Hawaii properties to approximately $85,000,000. In addition, we completed the second of three renovation phases totaling more than $30,000,000 at the Hilton New Orleans Riverside last month, with the third and final phase scheduled for completion in December. Looking ahead, we expect a lower level of capital investment for 2026, with $230,000,000 to $260,000,000 of spend planned, which includes completing the $108,000,000 comprehensive redevelopment of the Royal Palm. In addition, we are excited to launch a full-scale renovation of the Ali'i Tower at Hilton Hawaiian Village, expected to encompass all 348 guest rooms, the tower lobby, its private pool, and the addition of three new keys. Total investment for the project is expected to be approximately $96,000,000. To expedite the construction schedule, we plan to suspend operations in the self-contained tower beginning in the third quarter of this year, with a reopening planned for the middle of next year. Overall, we expect renovation-related disruption at Hilton Hawaiian Village to be $1,000,000 to $2,000,000 in 2026, representing a 10 basis point impact to portfolio RevPAR. Once completed, nearly 80% of the resort’s nearly 2,900 rooms will have been newly renovated, materially enhancing the long-term competitiveness of our iconic resort. Turning to the balance sheet, as of year-end 2025, our liquidity was approximately $2,000,000,000, including $200,000,000 of cash, $1,000,000,000 of available capacity under our revolver, and $800,000,000 of an undrawn delayed-draw term loan. As we noted last quarter, we continue to make meaningful progress towards strengthening our balance sheet. While our long-term focus remains on further reducing leverage, as we execute non-core asset sales, proceeds are expected to be used to pay down debt, while organic growth from our core portfolio is expected to further reduce leverage toward our targeted goal of below five times over the next couple of years. With respect to our 2026 maturities, we intend to draw on the delayed-draw term loan to fully repay the $121,000,000 mortgage loan secured by the Hyatt Regency Boston in June, and then draw the remaining capacity in September in combination with proceeds from a planned mortgage financing for our Bonnet Creek complex in order to fully repay the $1,275,000,000 CMBS financing on Hilton Hawaiian Village which matures in early November. We are currently in active discussions to originate a $650,000,000 floating-rate delayed-draw mortgage for our Bonnet Creek complex, including both the Signia and Waldorf Astoria properties, and expect closing to occur later this quarter. We expect the blended spread over SOFR between the Bonnet Creek mortgage loan and the term loan to be approximately 220 to 225 basis points. Turning to guidance, as Tom noted, we are establishing a full-year 2026 RevPAR growth range of flat to up 2%, with expense growth expected to be low single digits for the full year. With respect to earnings, Adjusted EBITDA is forecast to be $580,000,000 to $610,000,000, and Adjusted FFO per share is expected to be in the range of $1.73 to $1.89. We expect Q1 to be the most challenging quarter of the year due to difficult year-over-year comparisons. New Orleans, due to lapping the Super Bowl last year, and Miami together represent an expected 450 basis point drag on RevPAR during the quarter, translating to an approximate $12,000,000 headwind to earnings relative to last year. Partially offsetting this pressure, we expect double-digit RevPAR growth at Bonnet Creek, Puerto Rico, and San Francisco, supported by strong group pace for each along with the Super Bowl in the Bay Area, as well as low single-digit growth at both of our Hawaii hotels driven by improving leisure transient demand following their extensive room renovations. There are also a few key assumptions embedded in our guidance that are worth highlighting. First, with respect to the Royal Palm reopening and its impact on 2026 results, as Tom mentioned earlier, we are working diligently toward a targeted grand opening in early June. However, given the challenges associated with securing advanced bookings without absolute certainty to opening ahead of the World Cup matches beginning in mid-June, our guidance does not assume any material benefit from World Cup-related demand at the hotel. Overall, we expect Royal Palm to generate approximately $3,000,000 to $4,000,000 of hotel Adjusted EBITDA this year compared to the nearly $28,000,000 expected at stabilization, and approximately $5,000,000 reported in 2025 when the hotel was opened during high season prior to its closure in May. Second, with respect to asset sales, our guidance excludes any impact from potential non-core dispositions in 2026 outside of what we have already closed. While we remain fully committed to selling the majority of our non-core hotels during the year, the timing of transactions remains uncertain, making the earnings impact difficult to estimate. For context, the remaining 13 non-core hotels generated approximately $60,000,000 of hotel Adjusted EBITDA in 2025, or just 9% of total hotel Adjusted EBITDA. Finally, Adjusted FFO guidance reflects the successful refinancing of approximately $1,400,000,000 of debt during the back half of the year at a blended interest rate of approximately 5.5%. On an annualized basis, this refinancing is expected to increase interest expense by roughly $20,000,000, of which $9,000,000 is included in our guidance given the anticipated timing of the refinancing. Finally, in 2025, we returned a total of $245,000,000 of capital between $200,000,000 of dividends and $45,000,000 of share repurchases. And over the past three years, we have returned $1,300,000,000 of capital, including stock repurchases of over 12% of total outstanding shares. With respect to this year's first quarter dividend, on February 13, we declared a cash dividend of $0.25 per share to be paid on April 15 to stockholders of record as of March 31. At current trading levels, this quarterly fixed dividend translates to an annual yield of over 8.5%. This concludes our prepared remarks. We will now open the line for questions. Operator, may we have the first question, please? Operator: Ladies and gentlemen, we will now begin the question-and-answer session. Our first question comes from the line of Smedes Rose with Citi. Please proceed. Smedes Rose: Hi. Good morning. Or good afternoon rather. I wanted to ask you just a little bit more about how you think earnings could roll out over the course of the year at your Hawaii properties? I know, obviously, the fourth quarter was a pretty easy comp. But just in terms of how you're looking at group pace, given, I think, the convention center is closed in Honolulu. Just kind of what are you seeing on the trajectory? And the real question is what do you think those properties can contribute this year in terms of EBITDA? Sean M. Dell'Orto: Yes, Smedes. So this is Sean. You know, yes, certainly had a good comp in Q4 for Hawaii. With the convention center closed, that is about 50,000 room nights typically that the property gets from citywide commission-related business. We have probably done a good job, though, of replacing that as best possible with about 60% of that lost or at least ultimately converted into in-house group, as well as about 20,000 room nights booked through crew business, contract business. They have done a good job to kind of replace that for this year. You know, in the end, I think Hawaii, both Hawaiian Village and Waikoloa combined, should be kind of on the higher end of our guide of RevPAR growth, the 2% range. You know, again, with the convention center being out, and kind of some early disruption from the ending of phase two at Hawaiian Village, I think you will see some rate growth, but not tremendous, again, just given the mix change there. I think you will see certainly some decent growth overall at the EBITDA level, kind of in the mid-single digits or so growth combined for the properties. Waikoloa certainly has an easier comp, certainly had challenges last year, and we certainly expect to see that materialize into probably low double-digit growth on the EBITDA level for Waikoloa overall. Blended together, again, kind of a top-line top of the end of the range, 2% growth plus or minus on the RevPAR, translating into kind of mid-single digit growth for the combined properties. Thomas Jeremiah Baltimore: It is Thomas Jeremiah Baltimore. Agree with everything that Sean just outlined. If I could just add a comment about Japanese visitation, obviously, relatively flat last year. But we are seeing some green shoots and certainly believe that we will be in kind of mid-single digit growth in terms of visitation, perhaps somewhere in the 750,000 visitors to Hawaii, which is certainly continued progress. Obviously, we would like for that to accelerate as much as possible, but we are seeing green shoots there. And as we sort of look at and get the data on various forecasts, it looks like that continues at 5% to 6% into 2027 as well. So we see both of those as certainly encouraging tailwinds as well. Smedes Rose: Great. And then, Tom, could you maybe just comment portfolio-wise, just kind of like what you are seeing on the pace of group revenues for this year? Thomas Jeremiah Baltimore: Portfolio-wide, if you exclude, obviously, Miami and Hilton Hawaiian Village and obviously a tough comp in New Orleans, up about 3% for the year in 2026. And then if you look out to 2027, just our core portfolio alone, we are about 4%, 4.5%. So very encouraging from that standpoint. Smedes Rose: Okay. Thank you. Appreciate it. Operator: The next question comes from the line of Duane Pfennigwerth with Evercore ISI. Please proceed. Duane Pfennigwerth: Hey. Thanks. Good morning. And sorry if I am making you repeat anything. But just on the sequential for Hilton Hawaiian Village, I think we are going from, like, a plus 20 to a low single. So can you just speak to what would be driving that specifically for March? Sean M. Dell'Orto: For the Q1, Duane? Duane Pfennigwerth: Yes. Aren't we pacing at a very high rate in 4Q to a low single-digit rate? So just why the change sequentially? Sean M. Dell'Orto: You have a group pace down in Hawaiian Village. Again, speaking to while they have replaced business here and there from the convention center, but pace down 37% in Hawaiian Village for Q1, certainly a big driver there for kind of how, even though it certainly is lapping Q1's performance, it is roughly kind of in that flattish range for the quarter. Duane Pfennigwerth: Okay. That is helpful. And then just on Miami, can you talk about any refinement to your estimate on when that will be up and running? And how do you think about capturing some of the World Cup demand just given you may reopen kind of close to that time frame. In other words, it is probably hard to commit to that now. But maybe, you know, as you gain confidence in the reopening, just how you think about that from a positioning and revenue management perspective? Thomas Jeremiah Baltimore: Yes. A couple things, Duane. I have been down to Miami quite a bit and toured the property, and I—obviously, I say this with humility, but also with great confidence. I think we have demonstrated a track record really second to none in our sector in terms of being able to handle these types of very complex projects. If you think about Bonnet Creek and the success and the complexity of that, this really mirrors that. Carl Mayfield, who heads our design and construction team, is personally on-site at least two or three days a week. We have got somewhere between 275 and 325 construction workers working six days a week, one to two shifts, and they are very confident doing everything humanly possible to get done in that June time frame. I will be down there this weekend and touring again Monday morning. So as Sean said in his prepared remarks, as you think about us opening in early June plus or minus, then obviously the World Cup. You know, the ability to be able to sell and commit, that makes it a little more challenging, just given the amount of demand expected and how well, I think, we all believe Miami will do. With the World Cup, we think, obviously, getting open, we will be able to capture and certainly be able to capture at very attractive rates. So very, very bullish. Very excited about the project. And as Sean also noted, I mean, we are not being overly ambitious in terms of the impact that this hotel will have on the overall performance for the year. So if anything, we have been conservative. That is intentional. And we are certainly hoping that we can exceed that. But, again, remain enthusiastically excited about this transformation. We cannot wait to host many of you next weekend as you can see for yourself the progress and the real-time work that is underway there. And we are, you know, a hundred days plus or minus from completion, and doing everything we can to make that happen. Duane Pfennigwerth: Okay. Thank you. Operator: The next question comes from the line of Rich Hightower with Barclays. Please proceed. Rich Hightower: Hey, good afternoon, guys. Good afternoon. Good to be on the Park Hotels & Resorts Inc. call again. So, Sean, I know that you kind of laid out a little bit of the color on the first quarter specifically with respect to the cadence of growth in 2026. And then obviously, there was some color on Hawaii specifically. But if you guys would not mind, maybe just help us understand how that works kind of, you know, broadly for the portfolio over the course of all the different quarters of the year within the context of that flat to 2% RevPAR guide. Sean M. Dell'Orto: Sure, Rich, and welcome back. Great to hear your voice on the call here. Yes, with respect to kind of the quarterly cadence, as you think about, you know, Q1 is certainly one where we think it is the weaker quarter of the year where it is probably performing a little bit better than expected, but certainly came in the year with a kind of a belief that it would be down slightly. Maybe it ultimately gets to flat. We will see, but it is certainly in the bottom end of the range. As we think about, it certainly should pick up. You are lapping some of this Q1. Q2 and Q3 disruption from last year’s, you know, policy initiatives, whether it is tariff-related, Doge, obviously, the Canadians and their kind of decline in travel into the states. You know, you start to see those impacts of that in Q2 and Q3. And so while lapping that on top of a World Cup that we believe, you know, our exposure in New York and Boston particularly, could probably drive about 30 to 35 basis points for the year. So certainly, it is some positive impact we are thinking of as well. So those should ultimately drive towards, in kind of Q2 into Q3, you know, the higher end of the range, I should say, for the year. And then Q4 is one where we have got group pace down 8%. So as Tom mentioned, you know, if you exclude a couple of properties, you know, we are certainly up, but I would say overall portfolio is down slightly. The big driver for that is Q4. And so while there is work to be done and there is certainly some potential upside in terms of pickup, in-the-year, for-the-year pickup, I think that is kind of where our conservatism comes in as well. We certainly think we have got about $20,000,000 or so of revenue more pickup than last year. And so when we have seen kind of last couple of years how things have gone, we certainly want to take a little bit more cautious tone to that, looking at the pace being down about 8% for group in Q4. So that ends up, you know, making Q4 a little bit more closer, we think, to the bottom of the range for sure. Rich Hightower: That is great color. Thank you. And I guess my follow-up is a follow-up on the expense side of it. So you have got a 2% to 3% kind of total OpEx guidance for the year. I think we heard earlier in the week that, you know, labor, you know, could run around four to five. And so just how do you feel about the potential flex on that guidance range? And also, think within the context of a union renegotiation in New York later this year. Thanks. Sean M. Dell'Orto: Yes, you are right. We are in that low single-digit kind of growth. And certainly, with the CBAs that have been renewed or ultimately upcoming, we certainly see something in the mid-single digits type growth as you talk about with labor. But offsetting that, you have got, again, if you are kind of looking at top line and revenue-based type of fees and everything else, you are going to see lower end of the range there. We talked about doing deep dives at our properties last year. A lot of that came through multiple, you know, kind of the back half of the year, and so we certainly get the benefit of the full-year impact of that this year. So that is a nice little offset, we think, as well, to the labor growth, as well as, I think, fixed costs will continue to be one where we see certainly below inflationary type growth. Insurance, you know, another good year. You know, no big claims certainly from us, but, you know, I think across the board there, with events from hurricanes and the like. Absent the fires in LA in the beginning of the year, but ultimately, it is not to a point where I think, you know, underwriters will need to kind of look to grow their premiums. I think it will certainly be a favorable market. We certainly expect to see continued improvement there as well along with, you know, with taxes, we think would ultimately, while it can be choppy at times, you know, ultimately be in check for the year. So those are, I think, sort of some of the offsets that get us down to what we are talking about. Rich Hightower: That is great. And congrats on the big promotion, by the way. Sean M. Dell'Orto: Thank you. Appreciate that. Operator: The next question comes from the line of Ari Klein with BMO Capital Markets. Please proceed. Ari Klein: Thanks and good afternoon. Just a little on the non-core asset sales, what is the level of interest you are seeing in those assets? And how quickly do you think you can move there? And then obviously, focus is on selling those non-core hotels. But is there or could there be some consideration to selling any of the core hotels if an opportunity arose? Thomas Jeremiah Baltimore: Ari, a lot to unpack there. Let me try to frame it a little bit for you. We have been laser-focused, as we said, I think, a couple times in the prepared remarks, in continuing to really reshape the portfolio. I think it is important to remind listeners, you know, the core hotels account for 90% of the EBITDA in the company and 90% of the value. If you take sort of RevPAR, the core RevPAR is around $215 to $218. That is about 69% plus or minus higher than the non-core. The core hotels generate about $40,000 in EBITDA per key and 30% EBITDA margins, whereas non-core RevPAR of approximately $129 plus or minus, and about 14% margins and about $10,000 in EBITDA per key. So, I mean, a really stark contrast, hence the reason that we are so aggressively working, and we have been working. I think it is also important to note, you know, we have sold or disposed of 51 assets. And I think people sometimes forget that includes 14 international joint ventures in Dublin, in Brazil, two in Germany, The Netherlands, South Africa, many complex assets here in the U.S. So the team is skilled. The team is experienced. We have done it in the worst of times. We were selling during the pandemic. We have been selling post-pandemic. There are buyers. I think everybody knows that we are a net seller. And so in some situations, some of the assets have short-term ground leases or joint ventures or low tax basis. So, you know, every single one has a story. But we have got aggressive workstreams underway. Our investments team and our legal team are working incredibly hard. And we are confident that we are going to get it solved. We have made significant progress before. We can handle this. And the goal is to get as many of them, if not all of them, done this year. We do have a few that are involved in a dispute, obviously. So those will probably lag. But the other 10 hotels, we are aggressively working every day late into the evenings, and multiple discussions are underway. And we look forward to keeping investors informed, and we look for, most importantly, closing them, using those proceeds to pay down debt, and really reinvest back into the core portfolio where we are confident we can generate outsized returns. We believe, obviously, that we can generate higher yields from development projects than we can from acquisition projects at this time. Ari Klein: Thanks for that color. And then maybe just a follow-up on Miami and the Royal Palm. How quickly or how much in front of the actual opening can you actually start to take bookings? Especially in front of a massive event like the World Cup? And then just the pathway towards getting to those stabilized EBITDA levels. How long do you think it takes to get there? Is it 2027, 2028, or beyond, I suppose? Thomas Jeremiah Baltimore: Yes. Well, we are, I guess, first, we are confident obviously in being able to take what was $14,000,000 in EBITDA from a tired and certainly an asset that needed really a transformational renovation to $28,000,000 on a stabilized basis. We certainly would think a couple of years is not unreasonable, just given the extraordinary amount of development and activity occurring, and I do not need to tell anyone on this phone not only from a business standpoint, but the number of people relocating to the region as well. And proximate to us is probably $4,000,000,000 of development activity, not all of that hotels, but other asset classes as well. So we remain very, very bullish on Miami as we look out. Regarding your question, obviously, as to how quickly we can get open, we are in frequent contact, obviously, with both planning, both the approval process from the regulators, and as soon as we are ready and as soon as we get the signal, we will be up and running. We have kept, obviously, our general manager who is on every day. We have kept, obviously, the key leadership team of the operating group. So we will be able to pivot and move very quickly. And, again, as Sean noted in his prepared remarks, you know, north of 50% of the guest rooms are already complete. So we are making great progress and are working around the clock and going to do everything we can to make that date. Operator: The next question comes from the line of David Brian Katz with Jefferies. Please proceed. David Brian Katz: Morning or afternoon. Thanks for taking my question. If we are laying out a 2026 where you are likely to be successful getting divested of your non-core hotels, my expectation is those earnings levels are such where they would be meaningfully delevering events for Park Hotels & Resorts Inc. Do you think—without getting ahead of ourselves—2027 could be a year of potentially playing offense and maybe getting ready to buy something? Thomas Jeremiah Baltimore: Nothing, David, would make me and this team more excited than to be able to make that pivot from playing defense to offense. And I think you really hit the nail on the head. We have been working our tails off, and as you know, you have been along the journey with us. And you have watched the effort. And I think there are a few doubters out there, but I think you can remind people through the pen of just the hard work and the heavy lifting and the complexity of work that we have done in reshaping, not only the 51 hotels that we have sold, but also keep in mind, we were self-operating five hotels, and we also had three laundry facilities that have subsequently been closed. So the team is tested. It is experienced. We share that belief. And the sooner we can substantially reduce the non-core so that it is no longer not only an overhang but even a discussion point, gives us the opportunity, I think, for consideration for rerating of the company, hopefully our multiple, and allows us to go on offense. There are a lot of interesting opportunities that I think are out there today, and I think there will be more in the future. And I think getting down to low twenties in terms of our core portfolio gives us a lot of optionality. The other thing to keep in mind is, you think about some of our core assets in Bonnet Creek and the two iconic resorts in Hawaii and all the capital that we are putting—I think about also what we are doing in Miami—we own all of that fee simple. Very rare. And all of that, we think, is also going to be advantageous for Park Hotels & Resorts Inc. and gives us a lot of optionality as we can think about where it makes sense to continue to grow and, in some cases, to monetize, if that makes sense. David Brian Katz: It does. And it sounds like a couple of the assets are in some form of dispute, but is it reasonable to expect that most of the assets that are non-core are going to get done within 2026? Thomas Jeremiah Baltimore: Yes. Yes. That is the goal. That is the mission. We know what is at stake, and we are working as hard as we can. Obviously, there are things that happen beyond our control, David, but I think you have seen the effort. You and others have witnessed the amount of work that we have done in this respect. And it has not been easy, but we are up to the task. David Brian Katz: Got it. Thank you. Operator: The next question comes from the line of Chris Jon Woronka with Deutsche Bank. Please proceed. Chris Jon Woronka: Hey, good afternoon, guys. Thanks for taking the question. Maybe just to double-click back to the asset sales. I guess, Tom, is there a way—you are really talking about 10 hotels if we exclude the three leases. Is there a way you could maybe bucket the type of buyers that you are working with or characterize them? We see headlines about isolated struggles on the private side, and investors are wondering whether any of that is a roadblock to moving any of those assets. Thomas Jeremiah Baltimore: Yes, Chris, it is a great question. I would say one thing globally. There is plenty of equity capital. That is the first comment. The second, there is plenty of debt capital and private credit. So there is no issue there. There are also interested buyers, whether they be small family offices, owner-operators, or deep value entrepreneurs. And look, some of the buyers tend to have a little sharper elbows in this kind of situation because they realize in some cases these are deeper turns and some reposition opportunities. But there is more than an adequate buyer pool out there. Some markets are a little tougher. I would say, obviously, Chicago and LA are a little tougher than San Francisco right now for all the obvious reasons. But there are buyers. Not our first rodeo. It is up to us to figure it out and solve it. You do not want to hear excuses. Our investors do not want to hear excuses. And we know what is required to do. And at the same time, we have got to make sure that we are getting fair value and that we are executing as quickly and as efficiently as we can. But there are workstreams underway on all of them. There are some that have short-term ground leases or low tax basis. It is a little bit of all of that. But that is no different than what we experienced candidly within the 51 assets that we have sold, particularly some of those more complicated international assets that we sold a few years ago. Chris Jon Woronka: Fair enough. Thanks, Tom. Then as a follow-up, obviously, you have the New York labor contract coming up. I think, Tom, you might have mentioned in the past that once you get through that and you kind of understand what the new math looks like, you might consider a longer-term plan there. That could include a lot of different things, maybe conversation with Hilton. Is there anything you could add to that at this point, as we move closer to the union reset? Thomas Jeremiah Baltimore: Yes. Obviously, I am going to be careful here, Chris. You can imagine. I would make a couple of observations. We have got an excellent operating team on-site. You saw the results that we delivered last year. New York was incredibly strong. Record fourth quarter, up, you know, 5% to 7% for the year. We are encouraged as we sort of look out here in 2026. I do not think it is in anybody's best interest across the city for protracted negotiations or any kind of strike. We are one seat at the table. There are a lot of other owners also involved in this. You have also got, obviously, the World Cup, and we are going to be on the world stage. And I think, you know, as we think about tailwinds for us, being the largest hotel in the city, there is probably a little bit of upside opportunity there from a demand standpoint. So we are encouraged. We think it will get done. We have assumptions in our guidance as to what we think that impact will be. And obviously, we are not going to negotiate publicly, but we think we have got it covered from that. And as we think about the hotel, we are doing some modernization work on the infrastructure. We will then huddle with Hilton. We will look internally as to what we think makes the most sense. But no doubt, when you think about you have only got really two big boxes in New York that can handle large groups, we think that gives us a unique positioning and a unique opportunity for us over the intermediate and long term. And, again, we had an outstanding year in 2025, and we are very, very encouraged as we look out 2026 for the New York Midtown. Chris Jon Woronka: Very good. Appreciate all that color. Thanks. Operator: The next question comes from the line of Daniel Brian Politzer with JPMorgan. Please proceed. Daniel Brian Politzer: Hey, good afternoon, everyone, and thanks for taking my questions. First, I just want to touch on the RevPAR range. It came in a little bit lower than we were expecting. It sounds like there is a fair degree of conservatism in there. You are baking in the possibility of macro and political uncertainty. But perhaps you could paint a picture of the areas of conservatism in the guide, specifically as it relates to some of the properties or markets where you are most excited. Sean M. Dell'Orto: Certainly. Look, I think again, I will start with just from a macro standpoint in terms of—I talked about the quarterly cadence with Rich earlier and just kind of what that and it being down 8% means. When you think about Q4, that is kind of where a good point of conservatism would be. You think about where we see some of that softness in Q4. It is back to Hawaiian Village. It is down about 50% on pace in Q4. Midtown, while it has got a good setup for the year overall, down 6% for the year in pace. Its weakest quarter is Q4. So I think going into that, that is where we kind of feel—they are obviously bigger impact hotels. We continue to find a way to make sure that we use caution against some of the near-term in-the-year, for-the-year pickup trends as we get through the rest of the year. But, yes, there is certainly a case to be made that things could be better. Ultimately, based on what we have seen in the past, those are the time period and markets we are a little bit more hesitant on right now. Thomas Jeremiah Baltimore: I would also add, if you sort of step back, you can paint a rosier picture. The tailwinds for 2026 are encouraging. We all expect a more accommodative Fed and perhaps lower interest rates. We are lapping Doge, Liberation Day, government shutdown. You have got the major events, obviously, World Cup. You have got America 250 celebrations. Deregulation, fiscal stimulus, that is all encouraging. We have got the massive AI investment cycle, and what we all hope and expect will be productivity gains at some point. Easing inflation—did not show quite that way today in the PCE report—but there are also risks out there. You have got geopolitical, inflationary pressures are still there. International travel really has not rebounded yet. We are seeing some green shoots, but we are certainly still down pre-pandemic. And the consumer is cautious, and we have got a K-shaped economy right now. So we think it was prudent to be conservative and cautious for all the reasons that Sean outlined, particularly quarter by quarter, and the macro. Yes, you should think about tailwinds, but there are some headwinds out there. And if you think about what has happened the last few years in the sector, the first quarter came out to be pretty good. And then, for many of us, if not all of us, we saw somewhat of a downward trend. So we think right now it makes sense to just be a little more measured, a little more cautious coming out of the box. But we are crystal clear as to the business priorities for Park Hotels & Resorts Inc., what we are focused on: selling non-core, investing in our core portfolio, paying down debt, looking for all of the operational efficiencies we can, and really outperforming. We would rather have a lower bar and outperform. And we are aligned as a management team there and really focused on continuing to deliver for shareholders. Daniel Brian Politzer: Got it. Thank you. That is helpful. And then just for my follow-up, on capital allocation and leverage. Sean, you mentioned the target of five times in the next couple of years. How do you think about the near-term allocation of capital between project and investment opportunities, share repurchases, or even the dividend? Sean M. Dell'Orto: Well, I think as we sell the non-core, we have been focused on redeploying that capital towards deleveraging. So that is the main focus and certainly helps bring us to that target. With that, the investments we made already and that we continue to make with things like Royal Palm and some other projects we have lined up, we think those drive nice returns for us, and over the next couple of years as those ramp up along with a longer recovery in Hawaii back to kind of where we were, achieving EBITDA levels in 2023. Those are the things that we think organically get the growth to help bring us towards that five times target. Daniel Brian Politzer: Got it. Thanks so much. Operator: The next question comes from the line of Cooper R. Clark with Wells Fargo. Please proceed. Cooper R. Clark: Great. Thanks for taking the question. Curious if you could speak to the RevPAR uplift from the World Cup and America 250 celebration that is currently embedded in guide and if, on the World Cup, that uplift is mainly just coming from the Hilton Midtown asset? Sean M. Dell'Orto: Yes. I think for the full year, for the portfolio, the impact, we estimate somewhere in that 30 to 35 basis points. Probably about 20 of that or so would come from New York, another, call it, 10 from Boston and five from kind of other markets that are not as big for us but that ultimately obviously have matches going on there. Cooper R. Clark: Great. Thanks. And then appreciate some of the earlier color on individual projects and puts and takes, but curious if you could talk about the total RevPAR disruption and EBITDA disruption from renovations this year. How that compares to 2025? And then maybe how we should be thinking about potential tailwinds from renovation in 2027 as you look out? Sean M. Dell'Orto: Yes. Certainly. I mean, obviously, Royal Palm is the big one. It is certainly a big benefit. It certainly helps the portfolio in the back half of the year after it opens up. In the first part of the year, you are talking about 300 basis points of RevPAR impact within the quarters. Altogether, though, if you kind of remove Miami, it just has about a 30 basis point impact to the full-year guide. So it is a little bit of first half, second half there. Other projects are not nearly as disruptive to the portfolio, maybe to the tune of 20 to 30 basis points of impact. Certainly, going forward, clearly, Miami will continue to have an outsized impact to the portfolio. We certainly expect to see that in kind of 100-plus basis point positive impact to the portfolio going forward as it ramps back up. And I think certainly we expect to see some nice recovery in the Hawaiian assets from the investments we made, and New Orleans already is getting good reception for meeting planners, winning business based on the product we have there. We certainly expect that to be a nice tailwind for us over the next year or two. Cooper R. Clark: Great. Thank you. Operator: The next question comes from the line of Robin Margaret Farley with UBS. Please proceed. Robin Margaret Farley: Great. Thanks. I just wanted to get a little more color around the new project in Hawaii, the renovation. You mentioned $1,000,000 to $2,000,000 of disruption in 2026. So I think that starts midyear. If we think about what that tower specifically generates in EBITDA, would that mean sort of $3,000,000 to $4,000,000? And where do you think that goes after the renovation? And then, if I remember at Hilton Hawaiian Village, there is an underdeveloped parcel there. If there were stores or something on it that I think you have talked about as being a site for potential future development. Does the additional renovation here in Hawaii suggest more investment going forward in Hawaii? Thomas Jeremiah Baltimore: Yes, Robin, lots to unpack there. Listen, I think the big message is we are absolutely committed to Hawaii, particularly Hilton Hawaiian Village. Twenty-three acres, fee simple, iconic. We have obviously renovated the Tapa Tower, 1,100 keys. We have just finished Rainbow Tower, north of 800 keys, plus or minus. Ali'i Tower, as Sean mentioned, 351 keys. We think we can add another three keys there. It is self-contained, so it is a higher-end product on the campus at the village there. And so we really think that this is the window to renovate that. Obviously, there is a gym, a self-contained restaurant. So we really believe that the window that we have identified, that the disruption will be minor, the couple million dollars that we mentioned, and that this is the window to get it done. So excited about it. Thrilled about it. It is really separate from the AMB Tower. The AMB Tower is more opportunistic. We wanted to grab that last site. We are still finishing up the final entitlements. We have no intention of proceeding with that project at any time soon until, obviously, demand has fully recovered. We think that is a long-term, and I emphasize long-term, play at a future date. We have no intention of proceeding with that at this point. But Ali'i Tower, we think, is prudent. We think that is going to continue to really give not only tailwind but significant lift and a way to distinguish the property even further from its competitive set. So we are excited about getting that done. And as Sean noted in his prepared remarks, north of 80% of the rooms at what is already a 2,900-room campus and village would be completed and fully renovated, which we think really helps us as we look to 2027 and beyond. So, hopefully, that gives you a good framework. Robin Margaret Farley: Very helpful. Thank you. Just one quick follow-up on the Ali'i Tower. If I remember, it has its own entrance and pool area. Is there a thought or potential for that to be a different brand or like a different price point after the renovation, a hotel within a hotel? Thomas Jeremiah Baltimore: Yes. It is certainly something that we have looked at from time to time. No doubt it will have an elevated price point. Whether or not it is a hotel within a hotel is something that the asset management team here at Park Hotels & Resorts Inc. and our operating partners at Hilton will look at. We have studied that from time to time. It clearly is the most elevated product, and we are going to take it to the next level. And I am really, really excited about the work that is going to commence there and get done, certainly by 2027. Robin Margaret Farley: Great. Thank you. Operator: The next question comes from the line of Jay Kornreich with Cantor Fitzgerald. Please proceed. Jay Kornreich: Hey, thanks so much. Obviously, a lot of ground already covered here, but just curious on the out-of-room F&B spend, which has been quite strong. What are you seeing from customers and groups there and how much revenue growth could there be from the out-of-room spend this year? Sean M. Dell'Orto: Yes. Sure. I mean, you are right. It has been very strong. I would say on total, it is probably about 40 to 50 basis points above where our RevPAR is, translating to total RevPAR. And we think the same this year as we think about the guide as well. Big drivers: in-house group as well as even SMERF will help to drive banquet and catering a decent amount this year. Outlet spend in the resorts has been strong, headlined by our Dorada restaurant, for example, in Casa Marina, which we opened up last year and drove outlet spend up 40% in that property. It is now fully open for the high season this year. So we expect to see continued growth in those areas. Other things are a little bit more in line—single-digit, low single-digit type growth—whether it is parking and other fees. But for the most part, it is banquet and catering. The groups continue to spend. We do not see much pressure from that, as well as in the resorts—certainly the higher-end properties—you see the benefits of the higher-income guests who are spending in the outlets. Jay Kornreich: Okay. Great. I appreciate the color. I will leave it there. Thank you. Operator: This concludes the question-and-answer session. I would like to turn the call back over to Thomas Jeremiah Baltimore for closing remarks. Thomas Jeremiah Baltimore: Well, I appreciate all of you taking time today. I look forward to seeing many of you at the Citi Conference in another week or so. And I also just want to take a moment to congratulate my partner, Sean Dell’Orto, on his promotion. Well deserved. Sean has been just an extraordinary CFO, a great business partner, great leader. I know that I speak for the Board and myself. We are thrilled that Sean is taking on the COO title in addition to the CFO title. I look forward to working with him for many years to come. So congratulations, Sean. And I look forward to seeing all of you in the near future. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, and welcome to Fidelity National Financial, Inc.'s Fourth Quarter and Full Year 2025 Earnings Call. During today's presentation, all callers will be placed in listen-only mode. Following management's prepared remarks, the conference will be opened for questions with instructions to follow at that time. I would now like to turn the call over to Lisa Foxworthy-Parker, Senior Vice President, Investor and External Relations. Please go ahead. Lisa Foxworthy-Parker: Thanks, operator, and welcome, everyone. I am joined today by Mike Nolan, CEO, and Anthony Park, CFO. We look forward to addressing your questions following our prepared remarks. F&G's management team, including Christopher Blunt, CEO, and Conor Murphy, President and CFO, will also be available for Q&A. Today's earnings call may include forward-looking statements and projections under the Private Securities Litigation Reform Act, which do not guarantee future events or performance. We do not undertake any duty to revise or update such statements to reflect new information, subsequent events, or changes in strategy. Please refer to our most recent quarterly and annual reports and other SEC filings for details on important factors that could cause actual results to differ materially from those expressed or implied. This morning's discussion also includes non-GAAP measures, which management believes are relevant in assessing the financial performance of the business. Non-GAAP measures have been reconciled to GAAP where required and in accordance with SEC rules within our earnings materials available on the company's investor website. Please note that today's call is being recorded and will be available for webcast replay. I will now turn the call over to Mike Nolan. Mike Nolan: Thank you, Lisa, and good morning. The fourth quarter results rounded out an excellent year for our Title and F&G business both in terms of results and execution. Our Title business delivered outstanding results in the current environment. We had adjusted pretax Title earnings of $401,000,000 in the fourth quarter and $1,400,000,000 for the full year. This generated industry-leading adjusted pretax Title margins of 17.5% in the fourth quarter and 15.9% for the full year. Our fourth quarter results reflect strong performance across the business highlighted by exceptional strength in our direct commercial business. Additionally, our disciplined expense management drove strong incremental margins. Our achievements are a testament to our employees, the best Title professionals in the industry. I would like to extend a profound thanks for all that they do to consistently deliver industry-leading results, provide innovative solutions to our customers, and ensure secure and efficient real estate transactions. Mike Nolan: We have transformed our business through decades of pioneering technology solutions and investments in the business, driving efficiencies, and helping Fidelity National Financial, Inc. maintain a competitive edge. As a result, we have expanded our margins over the last three years and significantly outperformed prior cyclical lows. 2025 was no exception, and we are excited to further enhance our industry-leading technology capabilities, which I will speak to further in a few minutes. Looking at our Title results more closely, on the purchase front, we are successfully navigating the low transactional environment, with purchase orders opened of 3,200 per day in the fourth quarter, in line with 2024 and reflecting normal seasonality. For the month of January, our daily purchase orders opened were up 1% versus the prior year and up 31% versus December. On the refinance front, volumes continue to be responsive as 30-year mortgage rates decreased during the fourth quarter. This generated refinance orders opened of 1,700 per day in the fourth quarter, up from 1,600 in the sequential quarter. Our refinance orders opened per day were up 38% over 2024, up 75% for the month of January versus the prior year, and up 28% for the month of January versus December. On the commercial front, we delivered direct commercial revenue of nearly $1,500,000,000 for the full year, which was our third-best year on record, trailing only the exceptional markets of 2021 and 2022. For the fourth quarter, direct commercial revenue was $479,000,000, a 27% increase over 2024. This was driven by a 33% increase in national revenues and a 20% increase in local revenues. National daily orders opened were up 9% over 2024, and local market daily orders opened were up 8% over 2024. Total commercial orders opened were 815 per day, up 8% over 2024, and up 11% for the month of January versus the prior year. We continue to see growth in commercial activity driven by a broad set of asset classes including industrial, multifamily, affordable housing, retail, and energy. This year's performance is especially notable given minimal contribution from the office sector, which remains subdued but is showing signs of improvement. We have also seen a 21% increase in commercial refinance orders opened for the full year 2025 over the prior year. Looking ahead, we have entered 2026 with a strong inventory of commercial deals to close, and the office sector is a potential added element as we move throughout the year. Overall, total orders opened averaged 5,300 per day in the fourth quarter, with October at 5,700, November at 5,600, and December at 4,600. For the month of January, total orders opened were 5,900 per day, up 29% over December. Our Title business is performing extremely well in what is still a low transactional environment. The National Association of Realtors, or NAR, has ranked 2025 home sales among the lowest levels since 1995 due to high mortgage rates and a housing shortage. Notably, the U.S. population has grown by over 70,000,000 people over the last three decades. According to NAR, home sales have been close to 4,000,000 per year since 2023, well short of the 5,100,000 average over the last thirty years. Over the next few years, we anticipate home sales will trend back toward the historical average. We are well positioned for the current market and poised to benefit from a potential turn in the housing market should mortgage rates drop further in 2026 and beyond. We remain bullish on the long-term prospects for the Title insurance business even in the current environment. Our disciplined operating model is centered on managing our business to the trend in open orders to deliver industry-leading results. Over the long term, this discipline has generated a steady level of free cash flow, allowing us to continuously invest in our business through attractive acquisitions and technology initiatives. We had a number of accomplishments in 2025, advancing our technology and innovation. To provide a few highlights, our inHere digital transaction platform has scaled to a fully deployed enterprise solution, engaging 80% of our residential sale transactions and reaching nearly 2,800,000 unique users throughout 2025, demonstrating deep integration into daily workflows. This foundational technology drives efficiency, transparency, and a superior customer experience in the escrow closing process with built-in compliance and enhanced fraud protection. We also expanded our identity verification processes and technology to streamline and secure customer authentication, helping combat the rise in impersonation and wire fraud in property sales. We rolled out AI tools enterprise-wide in 2025, deploying practical tools to enhance productivity and margin efficiency. We have made significant progress in building AI literacy across the company, and teams are using AI to streamline workflows, increase efficiency, and unlock new ways to better serve our customers. Finally, our curated data and technology touched over 90% of our total volume, supported by our proprietary title plans and patented title automation that is integrated into our centralized workflows. Our approach of leveraging title automation tools and data at scale has led to significant productivity improvements and been an important driver of our technology strategy. These successful investments in technology have played a critical role in our ability to maintain our industry-leading position for adjusted pretax Title margin. Over time, we believe that our ongoing investment in technology, combined with our robust curated data, will lead to increased efficiency and productivity in our operations that will continue to support our market-leading pretax Title margin. Turning now to our F&G segment. F&G's assets under management before flow reinsurance have grown to $73,100,000,000 at year end, up 12% over the prior year. On a stand-alone basis, F&G reported GAAP equity excluding AOCI of $6,000,000,000 at year end and has grown its book value per share excluding AOCI to $44.43, up 62% since the 2020 acquisition. On December 31, Fidelity National Financial, Inc. completed the distribution of approximately 12% of the outstanding shares of F&G's common stock to Fidelity National Financial, Inc. shareholders, returning approximately $500,000,000 of tangible value to Fidelity National Financial, Inc. shareholders. Following the distribution, Fidelity National Financial, Inc. retains control and majority ownership with approximately 70% of the outstanding shares in F&G. This has increased F&G's public float from approximately 18% to approximately 30% after the distribution, strengthening F&G's positioning within the equity markets and facilitating greater institutional ownership. This distribution reflects our confidence in F&G's long-term prospects and is intended to unlock shareholder value by enhancing market liquidity and broadening investor access to F&G's shares. F&G has increased its quarterly common stock dividend by 14% in the fourth quarter, supported by its strong and growing cash generation as it transitions to be more fee-based, higher margin, and less capital intensive. Going forward, expect F&G to be a meaningful source of capital to Fidelity National Financial, Inc. through its $112,000,000 annual common and preferred dividends, at the 70% ownership level, which indirectly benefits Fidelity National Financial, Inc. shareholders. With that, let me now turn the call over to Anthony Park to review Fidelity National Financial, Inc.'s fourth quarter and full-year financial performance and provide additional insights. Anthony Park: Thank you, Mike. Starting with our consolidated results, we generated fourth quarter total revenue of $4,100,000,000. Excluding net recognized gains and losses, our total revenue was $4,100,000,000 as compared with $4,000,000,000 in 2024. The net recognized gains and losses in each period are primarily due to mark-to-market accounting treatment of equity and preferred stock securities, whether the securities were disposed of in the quarter or continue to be held in our investment portfolio. We reported a fourth quarter net loss of $117,000,000 including net recognized losses of $47,000,000 compared with net earnings of $450,000,000 including net recognized losses of $373,000,000 in 2024. Fourth quarter results include a $471,000,000 noncash deferred income tax charge resulting from our year-end distribution of F&G shares to Fidelity National Financial, Inc. shareholders, which reduced our ownership of F&G below 80%. This distribution triggered an accounting requirement to recognize a deferred tax liability on the accumulated difference between our book and tax basis in F&G. This noncash charge has no impact on our current cash position, operations, or liquidity and represents a potential future tax obligation that would arise only if we were to sell or distribute additional shares of F&G in the future. This item is excluded from adjusted net earnings, along with other mark-to-market effects and nonrecurring items. Adjusted net earnings were $382,000,000, or $1.41 per diluted share, compared with $366,000,000, or $1.34 per share, for 2024. The Title segment contributed $306,000,000, the F&G segment contributed $104,000,000, and the Corporate segment contributed $4,000,000 before eliminating $32,000,000 of dividend income from F&G in the consolidated financial statements. For the full year 2025, we saw strong performance for both the Title segment and the F&G segment, which together generated solid profitability. Total revenue, excluding gains and losses, was $500,000,000 in the full year 2025, and reflects a 7% increase over the full year 2024. We delivered $1,400,000,000 in adjusted net earnings, an increase of 7% over $1,300,000,000 in full year 2024. The Title segment contributed over $1,000,000,000, the F&G segment contributed $412,000,000, and the Corporate segment contributed $3,000,000 before eliminating $117,000,000 of dividend income from F&G in the consolidated financial statements. Turning to fourth quarter financial highlights specific to the Title segment, our Title segment generated $2,300,000,000 in total revenue in the fourth quarter, excluding net recognized losses of $58,000,000, compared with $2,100,000,000 in 2024. Direct premiums increased 21% over the prior year, agency premiums increased 7%, and escrow, title-related and other fees increased 9%. Personnel costs increased 12%, and other operating expenses increased 9%. All in, the Title business generated adjusted pretax Title earnings of $401,000,000 compared with $343,000,000 for 2024, and a 17.5% adjusted pretax Title margin for the quarter versus 16.6% in the prior-year quarter. As Mike said earlier, these results were driven by strong performance across the business as well as disciplined expense management. Our Title and Corporate investment portfolio totaled $4,900,000,000 at December 31. Interest and investment income in the Title and Corporate segments was $102,000,000, excluding income from F&G dividends to the holding company. This was down 6% from the prior-year quarter due to the impact of the Fed funds rate cuts throughout 2024 and 2025. Looking ahead, we expect a range of $95,000,000 to $100,000,000 in interest and investment income per quarter during 2026, assuming two 25 basis-point Fed rate cuts during the year. In addition, we expect approximately $112,000,000 of annual common and preferred dividend income from F&G to the Corporate segment. Our Title claims paid of $80,000,000 were $8,000,000 higher than our provision of $72,000,000 for the fourth quarter. The carried reserve for Title claim losses is approximately $34,000,000, or 2% above the 4.5% of total Title premiums. Next, turning to financial highlights specific to the F&G segment. Since F&G hosted its earnings call earlier this morning and provided a thorough update, I will provide a few key highlights. F&G's AUM before flow reinsurance increased to $73,100,000,000 at December 31, up 12% over the prior year. This includes retained assets under management of $57,600,000,000, up 7% over the prior year. F&G reported gross sales of $14,600,000,000 for the full year, including $3,400,000,000 in the fourth quarter. This marks one of our best sales years in history, driven by favorable market conditions and strong demand for retirement savings. F&G generated core sales of $9,000,000,000 for the full year, which includes indexed annuities, indexed life, and pension risk transfer, and had $5,600,000,000 of funding agreements and multiyear guaranteed annuities, two products we view as opportunistic depending on economics and market opportunity. F&G's net sales were $10,000,000,000 for the full year, including $2,300,000,000 in the fourth quarter. This reflects flow reinsurance at varying ceded amounts in line with capital targets for multiyear guaranteed annuities and fixed indexed annuities. Adjusted net earnings for the F&G segment were $412,000,000 for the full year. This included $104,000,000 of adjusted net earnings in 2025. F&G's operating performance from their underlying spread-based and fee-based businesses continues to be strong. F&G continues to provide an important complement to our Title business. The F&G segment contributed 30% of Fidelity National Financial, Inc.'s adjusted net earnings for the full year 2025, as compared to 38% in 2024, 30% in 2023, and 23% in 2022. From a capital and liquidity perspective, Fidelity National Financial, Inc. continues to maintain a strong balance sheet and balanced capital allocation strategy. Fidelity National Financial, Inc. has returned approximately $800,000,000 of capital to shareholders during the full year 2025. This reflects common dividends of $546,000,000 for the full year, including $140,000,000 in the fourth quarter, as well as share repurchases of $251,000,000 for the full year, including $30,000,000 in the fourth quarter. In November, our Board of Directors approved a 4% increase in the quarterly cash dividend to $0.52 per common share. From a capital allocation perspective, we ended 2024 with $786,000,000 in cash and short-term liquid investments at the holding company. During 2025, the business generated cash to fund our $550,000,000 common dividend, paid $75,000,000 of holding company interest expense, $150,000,000 investment in the F&G common equity raise, and $250,000,000 in share repurchases, all while keeping pace with wage inflation and funding the continued higher spend in risk and technology required in today's landscape. We ended the year with $659,000,000 in cash and short-term liquid investments at the holding company, which is about 85% of the amount held at year-end 2024. This concludes our prepared remarks, and let me now turn the call back to our operator for questions. Operator: Thank you. And at this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press 2 if you would like to remove your question from the queue. One moment while we poll for questions. Our first question comes from Bose Thomas George with KBW. Please state your question. Bose Thomas George: The first question is just on the margin. You guys did a great 15.9% margin this year. You know, as you look into 2026, how do you see the margin trending? It looks like your guidance on interest income suggests that will not be really much of a headwind in this, given what you are seeing in commercial and residential. Just thoughts on the margin as we enter '26? Mike Nolan: Sure, Bose. It is Mike, and good morning. I think our outlook on '26 is certainly more optimistic than when we came into '25. You know, the base case coming into '25 was pretty much like '24, and then we got outperformance in commercial and a little bit in refi, and good expense management to drive a nice beat over the prior year. The positive here is we are entering a year now where rates are in the low six or even six. I think I saw a headline today that said we are at the lowest rates we have had in the last three or four years, and I think that should drive more volume in purchase, which was flat in '25 over '24. So we would expect to see an uptick there. I think MBA and Fannie Mae are estimating about 10% more existing home sales in '26, and then the refi opportunity should be much better in '26 as well. And commercial should be as good or better. I think we have a lot of momentum still in commercial with orders up in the fourth quarter, up in January, and a nice pipeline as we go through the year. Bose Thomas George: Okay. Perfect. Thanks. And then actually, on the agent split, it looks like it went up a little bit this quarter or, I guess, declined in favor of the agents. So did that just reflect, like, a geographic mix, or was there something else to call out there? Mike Nolan: Yeah. I do not think it moved too much. It was probably just geography there. We have been you know, we watch that pretty closely and actually have been very consistent for several years now. You might note that our agency premiums were not up as much as our direct premiums, and that is really more a function of the mix of business, the fact that we have a very strong commercial presence on the direct side. And we do on the agency side as well. But that delta, if you will, between, I do not know, a 21% increase in direct premiums and a 7% increase in agency is primarily related to commercial. Bose Thomas George: Okay. Great. That is helpful. Thanks a lot. Mike Nolan: Thanks. Operator: Your next question comes from Mark Douglas Hughes with Truist Securities. Please state your question. Mark Douglas Hughes: Yeah. Thank you. Good afternoon. Good morning. In the commercial fee per file in '26 that you described, do you think it is as good or better overall for the coming year? Anything about the deal size that you are seeing in the pipeline that gives you some indication about fee per file? Mike Nolan: Yeah, Mark. It is Mike. I would say that certainly in the fourth quarter, we saw bigger transactions that closed maybe vis-à-vis, you know, the fourth quarter of last year, and our national commercial fee per file was up significantly, as you know. I would say we still have nice deals in the pipeline that should generate strong fee per files. I did not I do not think I said that I expect the commercial fee per file in '26 to be as good or better. I think I said that that is a bit more of the wild card because you do not really know the mix. But there are a lot of good deals in the pipeline. Mark Douglas Hughes: Yeah. Understood. I was referring to I think your overall guidance was as good or better in terms of the commercial volume. The inHere platform, you talked about, I think, 80% engagement. That has been I think last quarter, you might have said 85%, but assuming kind of relatively stable, do you think the engagement has kind of stabilized? Anything structural around those engagement numbers we should look for to hold steady or increase? Mike Nolan: Yeah. Good question. I would expect them to increase. The engagement has been great. The goal is really to be over 90%. And the reason the numbers change around a bit, we were still migrating operations to the SoftPro platform as we went through the year, even through into the fourth quarter. And so as new operations get on, their engagement levels are lower, and then they build up over time. So in the operations that are a bit more mature on the platform, we are getting engagement plus 90%. Mark Douglas Hughes: Yeah. Very good. And then finally, anything new on the regulatory front? On the pilot program or anything from the FHFA that you would throw out? Mike Nolan: I would say it has been quiet. The pilot still exists. I have not heard a lot about what the plans are. It is my understanding it is set to expire in May, maybe gets extended. I do not think we know. But it just does not really seem to have impacted our deal flow, I would say, on the refi side. Mark Douglas Hughes: Thank you very much. Mike Nolan: Thanks, Mark. Operator: To remove your question from the queue, you can press 2. Next question comes from Geoffrey Dunn with Deutsche Bank. Please state your question. Geoffrey Dunn: Just wanted to follow up on Bose's question. Hey. On the Title margin, you know, just given you ended the year so strong, do you still feel like that 15% to 20% normalized range is the right range, even with the AI efficiencies and the technology piece? Then sounds like just given the recent trends, you still think that '26 should continue moving closer towards the midpoint of that range if we assume Fannie and MBA forecast. Is that right? Mike Nolan: Yeah, Mike. It is Mike. So, I would say long term, as we see the impacts of more efficiencies in AI and things like that, we might consider maybe not even long term, but we might consider changing the range. Right now, it still seems appropriate because even though we expect the year to be better, it is still a very volatile environment, I think, as we all know. And we are still at existing home sales at 30-year lows for the last three years. So you have got that as a backdrop. With improvement in volumes like the Fannie Mae and MBA forecast and more refi, I do think we could move into that more to that middle range of margin. But remember, we have got to get through the first quarter, and that is the historically soft quarter for the industry, and that always presents a little bit of a challenge around just where you can get on your full-year margin. Geoffrey Dunn: Got it. Thanks. And then I just wanted to check in on capital real quick. I know you and F&G both raised the dividend towards the end of the year. Could you just check back in on how you are thinking about capital allocation going forward and the types of businesses you might regularly be looking at from an M&A perspective? Anthony Park: Sure, Mike. This is Tony. I will start, Mike can pitch in. I mean, capital is pretty consistent in terms of what our normal capital allocation would be, which is the dividend, which to your point, we raised it in the fourth quarter as we typically do, and we expect to spend probably $560,000,000 or so in cash to pay our common dividend. Our interest expense runs about $75,000,000, so very modest there. Obviously, we are reinvesting in the business on a regular basis and continue to do that on the technology side and the efficiency side, and that really occurs before we even upstream anything to the holding company. And then beyond that, it becomes more opportunistic. We look at acquisitions, to your question, we look at stock buybacks. I expect us to be active in both of those areas. I think you will see more acquisition activity in '26 versus what we have seen in the last few years. I think that our cash flow has been strong. I think there are probably more opportunities in the title agent space and possibly some other areas as well. And then on the buyback front, we like to have a consistent cadence of buybacks as we work our way through the year when we are not blacked out. But we are also opportunistic, and to the extent we see weakness in the share price, I expect us to be more aggressive like we were back in the second quarter. I think overall, I think I mentioned earlier, we returned about $800,000,000 to shareholders in the form of dividends and buybacks in 2025. And I would expect another very strong cash flow generation year in 2026. Mike, I do not know if you wanted to touch on M&A at all, or are we good? Mike Nolan: I would just agree. I think there will be more opportunities in the M&A space as we go into '26 and beyond. It has been fairly quiet for the past few years. So we are excited about some opportunities there. Operator: Your next question comes from Jeffrey Dunn with Dowling & Partners. Please state your question. Jeffrey Dunn: Good morning. Good morning. Tony, what are your expectations for dividends up from operations in '26, both from regulated and unregulated? Anthony Park: The regulated number is probably in the $400,000,000 to $450,000,000 range. That one, because it is related to the prior-year results on a statutory basis, that one is certainly easier to estimate. The other operations is much more difficult. I think last year it was somewhere in the $600,000,000 or $650,000,000 range, and I would not be surprised to see that number or better in 2026. But, again, that is on real-time results, which obviously we would have to project that out. Jeffrey Dunn: Got it. And then just following up on M&A. Curious if there are any tech initiatives in the market that stand out as a need or opportunity and more attractive to buy than build. Mike Nolan: Good question, Jeff. I would say from a tech stack standpoint, we feel comfortable about where we are at. We will be investing more in our SoftPro platform as we go forward, and obviously we have got the inHere really rolled out well. But if we saw things certainly in the tech space that would be helpful, we would buy it. Jeffrey Dunn: Does anything particular stand out on the back end? In terms of any need, I mean, for example, I think you have been renting your online notary services. You know, anything like that that makes more sense to bring in-house? Mike Nolan: I do not really think so on the notary side. You have got various plug-ins there that we can take advantage of, and to own a notary company I do not think adds a lot of value, and then you are in some notary businesses typically that are not title-related, and you have got to think about whether you want to do that. So no. I think we are good in that space. Jeffrey Dunn: Okay. Thanks. Mike Nolan: Thanks. Operator: And this will conclude our question-and-answer session. I will now turn the conference back over to CEO Mike Nolan for closing remarks. Mike Nolan: Thanks for joining our call this morning. We have delivered outstanding performance in 2025, with our complementary businesses executing well in the current market. The Title segment is performing well in what is still a low transactional environment and is capitalizing on stronger commercial activity. We are well positioned for the current market and remain poised to benefit from a potential turn in the housing market should mortgage rates drop further in 2026 and beyond. We remain bullish and continue to invest in the business for the long term while delivering industry-leading margins. Likewise, F&G is executing on its strategy that is focused on balancing continued growth in its spread-based business alongside the fee-based flow reinsurance, middle-market life insurance, and owned distribution strategies, as they focus on delivering long-term shareholder value. Thanks for your time this morning. We appreciate your interest in Fidelity National Financial, Inc., and look forward to updating you on our first quarter earnings call. Operator: Thank you for attending today's presentation. The conference call has concluded. You may now disconnect.
Operator: Good morning, and welcome, everyone, to the fourth quarter 2025 earnings call for Employers Holdings, Inc. Today's call is being recorded and webcast from the Investors section of our website, where a replay will be available following the call. Statements made during this conference call that are not based on historical facts are considered forward-looking statements. These statements are made in reliance on the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Although we believe the expectations expressed in our forward-looking statements are reasonable, risks and uncertainties could cause actual results to be materially different from our expectations, including the risks set forth in our filings with the Securities and Exchange Commission. All remarks made during the call are current only at the time of the call and will not be updated to reflect subsequent developments. The company also uses its website as a means of disclosing material nonpublic information and for complying with disclosure obligations under the SEC’s Regulation FD. Such disclosures will be included in the Investors section of our website. Accordingly, investors should monitor that portion of our website in addition to following our press releases, SEC filings, public conference calls, and webcasts. In our earnings press release, and in our remarks or responses to questions, we may use non-GAAP financial measures. Reconciliations of these non-GAAP measures to our GAAP results are included in our financial supplement as an attachment to our earnings press release, our investor presentation, and any other materials available in the Investors section of our website. I will now turn the call over to Katherine Holt Antonello, our Chief Executive Officer. Katherine Holt Antonello: Good morning, everyone, and welcome to our fourth quarter 2025 earnings call. Joining me is Michael Aldo Pedraja, our Chief Financial Officer. During today's call, I will begin by providing highlights of our fourth quarter 2025 results and then hand it over to Michael for more details on our financials. Before our Q&A, I will come back to you with some additional thoughts. I would like to begin with how we are actively addressing the elevated frequency of California cumulative trauma claims. To be clear, this remains a California-specific issue. Claim frequency in our other states and within non-CT claims in California continues to trend favorably. We recognized early that the CT environment was creating a hard market in California, and we moved decisively, have implemented rate increases, and tightened underwriting on several classes of business. We are not waiting for legislative reform, though we do believe the growing impact on California businesses and public budgets will make the case for reform increasingly difficult to ignore. While we are confident that these California pricing and underwriting actions, along with the steps we are taking across the country, will strengthen our underwriting profitability, they are also likely to reduce written premium in 2026. It is worth highlighting that our small commercial franchise maintained strong retention rates throughout 2025, a clear sign the investments we have made in automation and ease of use are genuinely resonating. I am also pleased to report that our standard fourth quarter full actuarial assessment concluded that no additional reserve strengthening or adjustments to our current accident year loss and LAE ratio was necessary. In addition to our internal analysis, we engaged a market-leading actuarial firm to independently assess our estimated ultimate loss, and they concluded that our carried reserves were well within the range of reasonable estimates. We believe the outcome of these two analyses confirms the actions we took in the third quarter adequately addressed recent workers’ compensation trends. I am excited to discuss our new workers’ compensation product, which represents a strategic expansion of our capabilities. By leveraging our core workers’ compensation expertise into the excess layer, we are creating new growth avenues while diversifying our risk profile. Our aggressive adoption of AI tools has accelerated the product’s development, and I am pleased to report that we are now accepting submissions. The early market response has been strong, and we expect this product will deepen our distribution partner relationships while expanding our addressable market. We continued to execute on our commitment to returning capital to stockholders by delivering $215,000,000 of share repurchases and regular quarterly dividends in 2025. In January, we completed the $125,000,000 capital recapitalization plan that we announced in the third quarter. These capital management steps reflect our continued confidence in our financial position and our commitment to delivering value to shareholders. Along with our operational performance, these actions increased our book value per share, including the gain, by 11% to $51.31. We believe our focus on disciplined underwriting, prudent risk management, and strategic investments continues to position us strongly in the workers’ compensation insurance market, which is evidenced by A.M. Best’s recent reaffirmation of our insurance companies’ financial strength rating of A. With that, Michael will now provide a deeper dive into our fourth quarter financial results, and then I will return to provide my closing remarks. Michael? Michael Aldo Pedraja: Thank you, Katherine. Gross premiums written were $156,800,000 compared to $176,300,000 for the prior-year quarter, a decrease of 11% due primarily to a decrease in new business writings and lower final audit premiums, partially offset by higher renewal business premium. Our losses and LAE were $134,400,000 versus $113,200,000 a year ago, an increase of 18.7% due primarily to an increase in the accident year 2025 selected loss and LAE ratio and the absence of favorable developments in the fourth quarter of this year. Commission expense was $25,800,000 for the quarter versus $24,400,000 for the prior year, an increase of 5.7% driven by nonrecurring adjustments. Underwriting expenses were $39,800,000 for the quarter versus $44,200,000 for the prior year, a decrease of 10%. The improvement in underwriting expenses for the fourth quarter was due primarily to continued expense management efforts, including reduced personnel costs and other variable costs, such as policyholder dividends and bad debt. Net investment income was $31,400,000 for the quarter compared to $26,700,000 for the prior year, an increase of 17.6%, due mostly to private equity investment return distributions and an overall higher book yield on our fixed income portfolio. As Katherine mentioned, we executed an investment rebalancing to address several strategic goals, including reducing our equity investment allocation to target levels and increasing our overall portfolio yield. Our equity investments, like most in the market, have appreciated very nicely and reached 16% of our investment portfolio versus a target allocation of approximately 10%. As part of the investment rebalancing, we also sold low-yielding fixed income securities to offset the associated equity gains and redeploy the proceeds into higher-yielding fixed income investments. The investment rebalancing accomplished several goals, including reducing our equity investments to target allocation, increasing our overall investment portfolio yield by a net 40 basis points, extracting an estimated net present value gain of $16,000,000, and reducing our required capital. The sale of fixed income investments produced an after-tax realized loss of $40,000,000, which reduced net income and adjusted book value per share during the quarter. Our stockholders’ equity and book value per share were not impacted by the investment rebalancing. Our fixed maturities maintain a modified duration of 4.4 with strong average credit quality of A+. Aided by our investment rebalancing, our weighted average book yield increased to 4.9% at quarter end compared to 4.5% for the prior year. Our adjusted net income, which excludes net realized and unrealized investment gains and losses and the benefit of our LPT deferred gain amortization, was $14,500,000 for the quarter, compared to $28,700,000 last year. During the fourth quarter, we repurchased almost 2,400,000 shares of our common stock at an average price of $40.94 per share, or $97,000,000. The average repurchase price represented a 20% discount to our book value per share, including the deferred gain, and adjusted book value per share. During the period from January 1 through February 18 of this year, the company repurchased a further 898,594 shares of its common stock at an average price of $44.28 per share. Our remaining share repurchase authorization is $53,100,000. As we have highlighted, we aim to be good stewards of our shareholders’ capital. At current price levels, we are convinced that the Employers Holdings, Inc. stock is meaningfully undervalued, and executing share repurchases at these price levels produces a significant return on investment and generates significant value for our continuing shareholders. I will now turn the call back to Katherine. Katherine Holt Antonello: Thank you, Michael. Yesterday, our Board of Directors declared a first quarter 2026 quarterly dividend of $0.32 per share. The dividend is payable on March 18 to stockholders of record on March 4. As evidenced by the recapitalization plan, we remain confident in Employers Holdings, Inc.’s financial strength and financial prospects and will continue to manage our capital strategically. We returned $104,100,000 to our stockholders in the fourth quarter through a combination of regular quarterly dividends and share repurchases at an average price that was highly accretive to our book value per share. Our focus on operational excellence is unwavering. In 2025, we drove our expense ratio down 180 basis points to 21.7%, and we believe it will continue to decline with our wide deployment of AI. In addition to our new excess workers’ compensation risk management tools, which are comprised of dozens of specialized AI agents, AI has helped us internally develop a significant claims platform enhancement and other new claim capabilities backed by our agentic ecosystem. Our mindset around the adoption of AI is not just about efficiency; it is also about creating a sustainable competitive advantage for the company. As we look ahead, we are confident that we are operating from a position of strength: solid reserves validated by independent analysis, improving expense ratios, expanding product capabilities, and a solid balance sheet. We believe we are making deliberate strategic choices to position Employers Holdings, Inc. for the future, and we are executing with discipline and urgency. We are absolutely confident in the path that we are on. Before we take questions, I want to take a moment to thank the entire Employers Holdings, Inc. team. This was a demanding year, and the way this team rose to meet it speaks volumes about who we are as a company. From our underwriting and claims teams navigating the challenging California market, to the technology teams whose AI initiatives are already delivering measurable results, to our finance, operations, and support teams who keep us running efficiently every day, none of what we have accomplished would be possible without you. We will now open for questions. Operator: Thank you. Star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. Our first question comes from Mark Douglas Hughes of Truist. Your line is open. Mark Douglas Hughes: Yes, thank you. Good morning. Katherine, anything about the trajectory of CT claims seems like once the lawyers get a new shiny object in front of them, they just keep piling in. Are you seeing any further acceleration? Has it is it on a relatively even keel? Katherine Holt Antonello: That is a great question, Mark. We are seeing throughout 2025 that the acceleration of the frequency that we saw in early 2025 and throughout 2024 as those accident years emerged late, we are seeing that acceleration slow down and flatten quite a bit. So that has been good news. Having said that, CT claims as a percentage of overall claims is still quite elevated relative to what we have seen in the past. But what we are seeing now—I am not ready to claim victory yet—is that the acceleration of the frequency has flattened. Mark Douglas Hughes: And you mentioned in 2026, likely to see reduced written premium. You talked about a hardening market, which implies that others are recognizing the issue, but it seems like there are still competitors taking share. Could you maybe just talk about that dynamic again, kind of hardening market, but you are still being cautious about it? Katherine Holt Antonello: When I talk about a hardening market, I think it is specific mostly to California, where the bureau took a rate increase. We saw a significant increase that was also filed in Nevada. So most of it is happening in the West. But I would characterize the California market as hardening. Generally speaking, though, across the country, the environment is still fairly competitive. We are seeing pockets, though, carriers that are exiting certain states or certain classes of business, definitely seeing tightening of risk selection, especially in states where you do not have a lot of flexibility in pricing like Florida. I would not characterize it as a major trend. I do not believe all companies are as forward-looking as we are in some of these aspects. But we have decided we are just not going to play in some of the areas where we feel like pricing margins have become too thin. I can give you just some high-level numbers of what we are seeing in our book. Countrywide in the fourth quarter, payrolls were basically flat for our renewal book, but we are seeing an average rate on renewal increase a little over 5% for our entire book. Mark Douglas Hughes: How is that California versus non-California? Katherine Holt Antonello: California is driving quite a bit of that. But we are seeing, like I said, certain states that are pushing rate higher. I mentioned Nevada earlier, but there are other states where we are more focused on risk selection than on pricing being the lever that we are pulling. Mark Douglas Hughes: What is your view on buybacks for 2026? We still have quite a bit left in our share repurchase authority that we did quite a bit in the ’25. And as we just mentioned in our prepared remarks, in January and early February. Katherine Holt Antonello: I do expect it will return to a normal level of repurchase authority in 2026, absent some change. But we are trying to be very opportunistic in terms of when we buy our shares back. Mark Douglas Hughes: And then your expense ratio, if top line is down in 2026, can you still get improvement in the expense ratio? Katherine Holt Antonello: We are hoping to still get improvement. As I mentioned, we have a lot of AI initiatives that are underway. We put an AI roadmap in place in 2025 and are setting the stage to get all of our data into Databricks. We started utilizing AI a couple of years ago when we embedded a large language model in our new digital first notice of loss tool. We are rolling out Anthropic’s Claude to the entire organization. Our developers are enhancing their productivity by using AI code assistance. We have started with the claims area, where we are incorporating AI into over 40 to 50 identified use cases, but I would say our latest achievement is definitely our excess workers’ compensation product that we just rolled out. We used voice transcription that was ingested by Claude to build the tool, and it iterated daily for about four weeks, and we were ready to launch months earlier than we initially expected. Results were truly remarkable. We have more tools going in place in the first quarter that are more claims-focused: a caseload summary tool for our claims adjusters that is going to provide better continuity of care when an injured worker’s claim gets passed from one adjuster to another. We have an agentic assistant that we are hoping to put into production for our premium auditors. All of these things we feel like are going to help our expense ratio in the long run. These are real. These are not just tests that we have going on behind the scenes, and that is where we are hopeful we are going to get more expense savings. Mark Douglas Hughes: Very good. Thank you. Katherine Holt Antonello: Thanks, Mark. Our next question comes from Robert Edward Farnam at Green Capital. Your line is open. Good morning, Robert. Some more a couple more questions on the excess workers’ comp. Can you still hear me? Robert Edward Farnam: Yes. Okay. So, obviously, there are competitors that are already entrenched in this business. How do you expect to win business? Is it more the fact that you can do it more efficiently because of the use of AI, or are there other factors you think that can be successful for you? Katherine Holt Antonello: We do feel like there are areas that we are going to focus on within the product that are not provided by other carriers in an efficient way. In talking about loss control, the ingestion of the data, we do feel like we are going to be able to provide quotes in a faster manner because of the AI tool that we are going to be using to ingest all of the data when we get a submission and to process the loss runs that can go back 10 to 15 years on excess workers’ comp. This is part of our diversification effort. We have been researching new products for about a year. In excess, we felt like it was the right place to start. Because of our extensive expertise in workers’ comp, we felt like it was just a natural extension of what we do now. We do feel like while there are carriers that are entrenched in the space, there are not a lot of carriers that do it on a significant basis—that it is a significant amount of their portfolio. So we felt like there was room for another carrier to enter the market, and we do feel like we are going to make a difference that is going to put us ahead of the pack. Robert Edward Farnam: Okay. Obviously, you have done a lot of research on this. So what type of performance does this product perform, I should say? In terms of combined ratio, and is there a difference between the expense ratio component and loss ratio? In other words, is it more of a higher expense ratio or lower loss ratio type product? And just to get a feel for going forward—not necessarily in 2026, but when it gets up to full speed—what type of impact that might have relative to your traditional book? Katherine Holt Antonello: Relative to the guaranteed cost business that we have written for forever, the excess comp space, while it is a bit, what I would say, lumpier, overall, we feel like it is going to perform in the mid-80s in terms of a combined ratio. The way we built it and the way that we are using AI to underwrite it, we do feel like our expense ratio will be strong and competitive in the space. And then the loss ratio is just typically less than what you would see in the guaranteed cost space. Robert Edward Farnam: And it is still driven by state loss costs and, you know, the same way that the primary workers’ comp system is? Is it still priced the same way? Katherine Holt Antonello: The pricing is a little bit different. The underlying pricing, you still start with the state loss cost like you do with guaranteed cost, but because the self-insured retention can be anywhere from $500,000 to $2,000,000, you are eliminating a lot of the frequency that comes along with the guaranteed cost book of business, so it is more severity-driven than frequency-driven. We think that is one of the things that is a nice play to put excess along with the guaranteed cost. It is very similar to large deductible. Robert Edward Farnam: Right. Right. Okay. And last one for me. You may not be able to give any specification here, but once a few years down the road when this is kind of up to speed, what do you envision in terms of the proportion of your total premium that could be coming from excess versus the primary book? Katherine Holt Antonello: It is a good question. We do not give guidance, as you know, but we would love to see this be 10% of our overall written premium over the next, you know, four to seven years, say, and I know I am being very broad in my projection there. Robert Edward Farnam: I expect nothing but broad right now. Katherine Holt Antonello: So, yes, that is kind of what we are hoping for. We will obviously keep everyone apprised of our progress there. Robert Edward Farnam: That is it for me. Thanks. Katherine Holt Antonello: Thanks, Robert. Operator: There are no further questions at this time. I would now like to turn the call back to Katherine Holt Antonello for closing remarks. Katherine Holt Antonello: Thank you all for joining us this morning. We very much look forward to meeting with you again in April. This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Q4 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 again. Please be advised that today’s conference is being recorded. I would now like to turn the call over to the speaker for today, Julie S. Shaeff, Chief Accounting Officer. Please go ahead. Thanks, Lisa. Good morning. Julie S. Shaeff: Welcome to Comfort Systems USA, Inc.’s fourth quarter and full year 2025 earnings call. Our comments today, as well as our press releases, contain forward-looking statements within the meaning of the applicable securities laws and regulations. What we will say today is based upon the current plans and expectations of Comfort Systems USA, Inc. Those plans and expectations include risks and uncertainties that might cause actual future activities and results of our operations to be materially different from those in our comments. You can read a detailed listing and commentary concerning our specific risk factors in our most recent Form 10-Ks, as well as in our press release covering these earnings. A slide presentation is provided as a companion to our remarks and is posted on the Investor Relations section of the company’s website found at comfortsystemsusa.com. Joining me on the call today are Brian E. Lane, Chief Executive Officer, Trent T. McKenna, President and Chief Operating Officer, and William George, Chief Financial Officer. Operator: Brian will open our remarks. Brian E. Lane: Alright. Thanks, Julie. Good morning, everyone, and thank you for joining us today. Last night, we reported record earnings and backlog and exceptional cash flow thanks to best-in-class execution by our teams across the United States. Same-store revenue growth for the fourth quarter was 35% and our quarterly gross margin exceeded 25% for the first time in company history. We are reporting $9.37 per share this quarter, up 129% from last year and we earned $28.88 per share for the year compared to $14.60 in 2024. Backlog increased to a new all-time high of $12,000,000,000 thanks to fantastic bookings in the quarter. Backlog growth was especially strong with technology customers, but our bookings and pipelines are strong in practically every sector. 2025 operating cash flow is $1,200,000,000 laying a strong foundation for continued investment and net cash flow demonstrates strong trends in our execution, customer relationships, and prospects. Our modular capacity is currently around 3,000,000 square feet and we expect to increase this to approximately 4,000,000 square feet by the end of 2026 weighed more heavily to the first half of the year. Gross profit was $675,000,000 for 2025, a $241,000,000 increase compared to a year ago. Our gross profit percentage grew to 25.5% this quarter, as compared to 23.2% for 2024. This margin improvement was achieved through excellent execution within both of our segments. The quarterly gross profit percentage in our mechanical segment improved to 24.9% compared to 22.4% last year, and margins in our electrical segment continued to climb to 26.9%. Full-year gross profit increased by $719,000,000 and our annual gross profit margin was 24.1%, as compared to 21% in 2024. Our electrical margin was 26.7% for 2025 while mechanical was 23.6%. As we look to 2026, we are optimistic that gross profit margins will continue in the strong ranges that we have achieved over the last several quarters. Although we expect that, as usual, our margins will be seasonably lower in the first quarter compared to the full year. SG&A expense in the fourth quarter was $248,000,000, or 9.4% of revenue, compared to $208,000,000, 11.1% of revenue, in the same quarter of 2024. For the full year, SG&A expense as a percentage of revenue was 9.7%, down from 10.4% in 2024. In 2025, our SG&A increased by $153,000,000, as we invested to support our much higher activity levels. Quarterly operating income increased by 89% from $226,000,000 in 2024 to $427,000,000 for 2025. Thanks to the jump in gross profit margins, and good SG&A leverage, our quarterly operating income percentage increased to 16.1% from 12.1% in the prior year. For the full year, our operating income was $1,300,000,000, and we achieved a noteworthy operating income percentage of 14.4%. Our 2025 tax rate was 20.9%. Our effective tax rate was lower last year due to interest we received on a delayed refund for 2022, and we estimate that our tax rate in 2026 will be around 23%. After considering all these factors, net income for 2025 was $331,000,000 or $9.37 per share. This is a 129% improvement in quarterly earnings per share from last year. Our full-year earnings per share for 2025 were $28.88 as compared to $14.60 per share in the prior year. So our annual EPS grew by 98%. EBITDA increased 78% to $464,000,000 this quarter, from $261,000,000 in 2024. Same-store quarterly EBITDA increased by over 70%. Full-year 2025 EBITDA was $1,450,000,000 and our EBITDA margin was 16%. Full-year free cash flow was a record $1,000,000,000. CapEx in 2025 was $155,000,000, just over 1.7% of revenues. We continue to invest in our operations, expand our modular capacity, and purchase vehicles to support the growth in our service business. We increased our investment in share repurchases in 2025 and returned more than $200,000,000 to shareholders by purchasing over 440,000 shares at an average price of $489 per share. Since inception, our share purchase program has retired 10,900,000 shares at an average price of $50.15. We have returned more than $546,000,000 to you, our owners. That is all I have got, Trent. Thanks, Bill. I am now going to discuss our business and outlook. Julie S. Shaeff: Backlog at the end of the fourth quarter was $11,900,000,000, a same-store increase in both sequential and year-over-year backlog. Same-store sequential backlog increased $2,400,000,000, or 26%, driven by bookings within the technology sector in both traditional construction and modular. More than one-half our sequential backlog increase was new modular bookings and with the continuing increase in modular and larger project backlog, the duration of our backlog continues to extend. Since last year, our backlog has doubled with an increase of $6,000,000,000 on a same and on a same-store basis, our backlog is 93% higher than at this time last year. Our revenue mix continues to be led by the industrial sector, which includes technology, and industrial accounted for 67% of our volume in 2025. Technology, dominated by data center work, was 45% of our revenue, an increase from 33% the prior year. Industrial, and especially technology, is the largest driver of pipeline and backlog. Institutional markets, including education, health care, and government, are also strong and represent 21% of our revenue. Commercial service markets are active for us. However, our commercial construction is now a small portion of our overall construction business. Construction accounted for 86% of our revenue, with projects for new buildings representing 63% and existing building construction, 23%. We include modular in new building construction and year to date, modular was 18% of our revenue. Service revenue increased by 12% this year, but with faster growth in construction, service is now 14% of our total revenue. Our overall service business achieved a record $1,200,000,000 in revenue for 2025, and service continues to be a growing and reliable source of profit and cash flow. With unprecedented backlog and strong project pipelines, and given the confidence we feel in our best-in-class workforce, we expect continued strong performance in 2026. And we feel confident in our prospects. I want to take this opportunity to close by thanking our over 22,000 employees for their hard work and dedication. Our success is a direct result of the people that serve our customers every single day. I will now turn it back over to Lisa for questions. Thank you. Thank you. As a reminder, if you would like to ask a question, please press Operator: 11 on your telephone. To remove yourself from the queue, press 11 again. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. We will now open for questions. Our first question today will be coming from the line of Timothy Mulrooney of William Blair. Your line is open. Timothy Mulrooney: Yeah. Good morning, Brian, Bill, Trent. Thanks for taking my questions. Wanted to ask a clarification question on the backlog, and then I have one for Trent about labor. But first, on the backlog, I think folks are going to look at your backlog, and they see that growth accelerating there. They are curious what that is really based on. So could you talk a little bit more about how this all really works? Like, is your technology backlog today, is that reflective of the recent spike in CapEx that we have seen at the major hyperscalers recently, those announcements the last couple of weeks, or is your backlog today reflective of hyperscaler spending plans last year or two years ago? In other words, are you early cycle or later cycle on the CapEx announcements that we see? William George: Thanks, Tim. So if we put something into backlog, it means that we have the binding legal commitment, a price, and a scope. In order for us to meet those three requirements, a building has to have been planned a year or two ago. Right? We are not booking backlog for things that are being committed to today. The backlog we book is for stuff that is already—the holes have been dug, things are being built. So, you know, for a long time, people have thought of construction in a rubric of there are the early cycle players—that is mostly engineers and architects. There are the mid-cycle players—it is the people who start, you know, dig the hole, start the building—and then we are what is called a late-cycle player. So by the time we are booking backlog and especially by the time we are booking revenue, we are really working on things that came up at, you know, one to two and a half years ago. So for these gigantic projects, you know, I think as you were kind of implying, we will see whatever commitments they are making now, we will see that in 2027, 2028 in our revenue. Timothy Mulrooney: Okay. That is very clear, Bill. Thank you. That is exactly what I was asking about. So thank you for clarifying that. And then just shifting gears completely. I wanted to ask about the labor shortage situation because I have seen, you know, you have added more than 7,000 employees over the 24 months according to your SEC filings. So it is a lot. So I guess my question is, are you able to still source enough talent to fulfill all this demand? Or are you seeing more bottlenecks these days? And can you talk about the different things that you are doing as an organization to build and retain this critical talent pool? Thank you. Brian E. Lane: Yeah. Thanks, Tim, for that question. First, I think first and foremost, you know, our operating companies are really great places to work. They attract best-in-class craft professionals and leaders in the industry. And that is, you know, across the board, Comfort Systems companies, you know, all meet that description. And then, you know, one of the things that we have talked about in the past and we continue to invest in and grow is our in-house capacity to provide contract craft professionals on a traveling basis, and that is in Kodiak and Pivot. And, you know, Pivot brought to us also a technology stack that has really helped us grow that piece of what we are building to be able to meet the labor needs of our customers. And this, you know, really gives our business leaders at a local level greater flexibility to pursue work either in remote geographies or work that would otherwise have had too large of a peak staffing requirement for them to have previously, you know, gone after. So when you see those numbers, you know, one, it is an all-of-the-above approach to hire, and then two, it is a novel and new approach for us with regard to contract craft professionals. And we are currently, you know, approaching this demand environment where we have a lot of work to chase. Timothy Mulrooney: Understood. Thanks for that detail. And congrats on a nice quarter. Operator: Thank you. One moment for the next question. Our next question will be coming from the line of Adam Robert Thalhimer of Thompson Davis. Your line is open. Adam Robert Thalhimer: Hey. Good morning, guys. Congrats on another wave of record results. Julie S. Shaeff: Thanks, Adam. Brent Edward Thielman: Hey. Similar question to Tim, but I was hoping you could give us more color on the bookings in Q4. What kind of projects are those? And when will those start construction? William George: So if you look at the enormous sequential increase of $2,600,000,000 in bookings, a little over half of that was new bookings in modular. So, in past years, we have sometimes had a lot of year-end purchase orders in modular. And as the business has scaled up, that has scaled up too. That work is—a huge proportion of the work that was actually booked this quarter is going to perform in 2027. Some of it will be in 2026 in the new buildings that we have committed to. And some of it actually goes into 2028. For the rest of the business, the well over a billion dollars of new construction project bookings—that is highly generally reflective of the most busy sectors, which is by far data centers, is the most busy of those sectors. Although there is really good activity in manufacturing, in pharma, and in other verticals such as food processing. But the projects are really big now. And so that means that they get into—they sit in backlog for a longer period of time. And I think some of what you saw with those bookings was people trying to get us signed up for their project as soon as possible because I think there is a general understanding with the demand right now for construction services in the United States. Not everybody who wants a building gets one. So it is a busy time and it is, you know, it is a great opportunity for us to really reward the people who are great partners for us. Brent Edward Thielman: Perfect. And then, I wanted to ask about the modular expansion, the 3,000,000 to 4,000,000 square feet. Does all of that come online at 2026, or does that kind of come online throughout 2026? You know, what is your ability to add square footage beyond that, and then how does that impact CapEx this year? William George: So the single biggest procurement of space will close at February. We will be doing something in that space within a month or two. But it will not be fully productive till the end of the year. So I would say it is more—it is a gradual addition over the course of the year. But I think some of that space will be productive, especially final assembly space. We can be productive in that very, very quickly. Brent Edward Thielman: And do you have a forecast for 2026 CapEx, Bill? William George: If I had to—so a lot of it will depend on whether we sign leases or purchase buildings. We are doing one very large building purchase in the first quarter. We are looking at both leasing and purchasing for another very big that we will probably be making in North Carolina. So I really do not. If I were forced to, I would say the 1.7% you just saw is kind of a baseline rate for us right now. And then, you know, if you buy a building and it is $60,000,000 or $70,000,000, that is going to move the meter, you know, a couple tenths of a percent. Brent Edward Thielman: You know? William George: So that is what I have got for you. Brent Edward Thielman: Got it. Okay. Hey. Congrats again. Thank you. See you. Thanks. Operator: Thank you. One moment for the next question. Our next question is coming from the line of Julio Romero of Sidoti & Company. Your line is open. Julio Romero: Thanks. Hey. Good morning, guys. My first question is on the same-store sales growth expectation of mid to high teens year over year in 2026, more weighted in the first half. Could you give us a sense of how much of the full-year contribution is weighted to that first half? In other words, are we looking at a particularly strong first and second quarter, where the same-store sales growth is similar to what you saw in Q1 2023 and Q4 2024 in that 30% growth range? Or how would you have us think about that growth in the first half? It is interesting. It is not so much that the growth is heavier in the first half as that the comparables last year are steeper in the second half of this year. So I think we are going to grow consistently through the year. But you saw—although the extra growth you saw third and fourth quarter of last year just makes it a steeper comparable. So, essentially, we looked at—we budget. Right? We just had our year-end budgeting process. We look really hard at what of the new backlog and of the existing backlog we think will come through. We think about our service business. We think about our modular capacity. And we come up with sort of a full-year revenue number. But then when you just say, okay. Well, yeah. And, you know, so that has a percentage, let us say, in the mid to high teens. Then when you look at that, you have to take into account that last year, the pattern was a pretty steep ramp up. And so the first two quarters just—you know, the number you are going to compare to is proportionately a little smaller. Super helpful there. And then you know, I had one other one about, you know, as data centers continue to increase in density, you are obviously seeing increase in scope and in project complexity. Can you maybe dive a little bit into how that improves the project economics for Comfort Systems. In other words, if scope is increasing three to four times versus five years ago, given the scarcity of skilled contractors that can kind of tackle that. Fair to assume your project economics are outpacing the increasing density of data centers? William George: Yeah. Well, it certainly has been doing that over the last several quarters, right, as evidenced by the results that we just demonstrated. We definitely have an opportunity to, you know, demand that we be rewarded for the risk and for the commitment of scarce resources to people. At Comfort, we do not price primarily based on, you know, gross profit per hour worked. We put a very, very heavy emphasis on work that will be good for our people, places where, you know, they can get to it without stressing their family. They can find a place to live. They can get lunch. The other contractors on the job who are their friends. So there is a—you know, when your workforce is as scarce as ours is, if you thought about it, I do not think it would surprise you to know that being good to your workforce is almost more important than making sure that you optimize something that is in a spreadsheet. Right? Because the spreadsheet is no good if the people are not there. Brian E. Lane: And, Julio, one more thing. I mean, even when they are getting bigger, which they are, getting a lot bigger. The work is still the same for us. Is this more of it? Julie S. Shaeff: And I really do think it helps with your productivity and your planning. At least the ones I have seen. So William George: I think it does help our economics in terms of how fast we can go as well. Julio Romero: Very helpful. I will pass it on. Thank you. Julie S. Shaeff: Thanks. Thanks, Julio. Operator: Thank you. One moment for the next question. Question comes from the line of Brent Edward Thielman of D.A. Davidson & Company. Your line is open. Brent Edward Thielman: Hey, y’all. Great quarter again. I guess just a question. I mean, it looks like you saw a measurable increase in modular contribution in the fourth quarter and happened to see pretty meaningful operating leverage here as well. SG&A as a percentage of revenue—Bill, I mean, I think it is the lowest I think you have ever seen for a fourth quarter that I can remember. Did the two go hand in hand? Anything else that you would say is driving that operating leverage that, you know, ultimately reflecting this benefit at the fixed overhead at Modular this quarter. William George: So I will start with the second one and say something brief about your first question, and then let us see if anybody else has anything they want to say. You know, that SG&A leverage—we increased our SG&A expenditures by $155,000,000—is a lot of money in the real world. That is a lot of human beings and computers and it is just that our revenue is growing so much faster that we are still getting leverage, and, you know, I think we just talked about pretty strong revenue growth next year. If we were to hit that revenue growth, I do not think our SG&A would grow quite as fast. So there is some of that still available to us. Now as far as the prior question goes, and, you know, if I do not answer it, I think it is pretty down-to-earth answer. It is, you know, it is execution. It is getting good pricing. It is just having an opportunity to go out and, you know, let our people do what they are great at. And having them have enough money in the job to account for the risks and to take care of, you know, take care of their people. I know. Maybe I did not answer your first question, but that is what I am thinking. Brian E. Lane: Okay. Well, to be continued there, Bill, I guess. Brent Edward Thielman: Maybe another question just on modular. You guys had a number of initial—I mean, even before talking about this 4,000,000 square footage, a lot of initiatives in terms of growing physical space, upgrading equipment, so I think all were intended to help you kind of debottleneck. Where would you say you are in terms of leveraging the investments you already made there at Modular? And are there still some of these things coming online through this year before the square footage increase that, you know, you maybe you have not fully realized the benefits of today? William George: I mean, yeah. I mean, we are on a fantastic journey. Right? One of the interesting things—you heard me talk about how we might be buying more buildings. One of the reasons we are looking at buying buildings rather than leasing them—you know, we do not want to be in the real estate business—is because the amount of money we are putting into these buildings in the form of robotics, and, you know, other optimizations using automation, makes it so that you really do not want to drop $30,000,000 into a $60,000,000 building you do not own. I think we are making great progress. I think that it is really—it is extraordinary to see what is being accomplished by those guys. The last thing I want to do is just come back to the beginning of your question. The other thing is, you know, modular grew precipitously. And if you look in the MD&A, you can see, you know, it grew precipitously on both revenue and the profitability side. But it is still only 18% of Comfort. The rest of Comfort is growing pretty much the same. Modular is an extraordinary, wonderful ingredient for our success, but it is one ingredient and everything else is doing great as well. Brian E. Lane: Yeah. If I could, I would like to just commend that team. You know, what the modular teams at Comfort Systems have been able to accomplish is really quite extraordinary with the expansion and also performance that they are continuing. Brent Edward Thielman: Yeah. For sure. One more if I could. Just, I mean, it looks like you saw, like, a $1,600,000,000 increase in backlog for your, I guess, non-modular Texas operations for the year. Could you just talk about markets outside of data center and Texas? Or should we just be talking about data center and Texas to the stick build operations? Just adds a few questions there. Brian E. Lane: Yeah. No. I mean, if you are talking about Texas, it is a combination of modular and stick build. William George: We are getting a lot of electrical work. As you know, we have the largest electrical contractor here in Texas for sure. We are going out more west—they are building in bigger, so we—you know, that has grown considerably. But, also, the other electricals we have are just doing—are outstanding as well throughout the country. So, you know, I know modular gets a lot of attention. But the stick build is still a very popular build—how people are building either data or other facilities. Brian E. Lane: Yeah. And, you know, like, advanced technology, which for us, at least in the last twelve months, is almost—it is overwhelmingly data center. That went from 33% of our revenue to, like, 45% of our revenue year over year. So the reality is it is a lot in Texas—data center is just coming and demanding the construction resources that we have. And, you know, the good partners are making it worth our while to dedicate the overwhelming majority of our resources to that vertical. William George: Yeah. I am just going to—the Texas situation is really probably unique in the country with the amount of build that they are going—West Texas, there is a lot of, obviously, energy, et cetera that is out there. Brian E. Lane: But the amount of opportunities we are looking at, you know, is really outstanding. Julie S. Shaeff: Yep. Alright. Thanks a lot. Appreciate it. Operator: Thank you. One moment for the next question, please. Our next question is coming from the line of Joshua K. Chan of UBS. Please go ahead. Joshua K. Chan: Hi. Good morning, Brian, Trent, Bill, Julie. Congrats on a really strong quarter. Thank you. Yeah. I guess, Brian, you have talked for a long time about, you know, not overcommitting to jobs. And so do you feel like your subsidiaries still understand that? Do you feel like there is any push from them to take more jobs than you are comfortable with? Just kind of how is that kind of progressing so far? Brian E. Lane: Yeah. Given—hey, Josh. That is a good question. You know, we have talked about this a long time. I think it is a great question. We remain very disciplined. You know, we go through, on the acquisition side of a job, a detailed process where we lay out our labor projections on our current work, in the future work we are looking at—when is it going to start, who is going to be available, how many are going to be available, the supervision for that work. So we are right now in a very good position to handle all our backlog and assess what is coming that we can do to make sure we keep our profitability up, productivity up, and keep everybody safe. So, no, we have not—people are not pushing over their skis. The work we have, we can handle. Joshua K. Chan: That is great to hear. Yeah. Thanks, Brian. And then, I guess, on your outlook, you did call out stronger growth in the first half. Obviously, there was an ice storm in a lot of the South and Southeast in Q1. So I just want to make sure that the operations kind of, you know, handled that well and that that is not a concern in the near term, I guess. William George: So we did have some of our biggest operations who had jobs shut down for multiple days in January. That is why we are seasonally lower. Right? That is why every year, we are seasonally lower. There is always something like that. So I do not think there is anything—you know, there are ice storms every year. It is just what you would normally see. You know? And while we are talking about this, you know, if you look at the weather, particularly up in the North with temperatures we had, really want to applaud our guys for working through it. They did a heck of a job, you know, in very challenging conditions for sure. Joshua K. Chan: Yeah. That is right. Okay. Yeah. Congrats on a good quarter and a strong outlook. Thanks. Operator: One moment for the next question. And our next question is coming from the line of Brian Daniel Brophy of Stifel. Your line is open. Brian Daniel Brophy: Congrats on a nice quarter. Right. Obviously, there was some discussion about a month ago on some potential changes to cooling requirements on next-generation chips. Just any color on how that may impact your business and any notable implications we should be thinking about. William George: I would say not at all. You know, the new chip stuff—they said, okay, we can use 45-degree water. Still needs pipe. Still needs water. Forty-five-degree water is not naturally occurring for 99% of the year, and 99% of the places. So I do not—you know, if you just talk to our smartest people, until they figure out how to run the servers without electricity, they are going to have heat. And, yeah, we just think people are going to need electricians and pipe fitters, honestly. Brian E. Lane: Far more impactful for the OEMs than for us. Brian Daniel Brophy: Noted. That is helpful. And then just wanted to ask about the M&A pipeline and cash deployment. You guys are obviously generating a lot of cash. A very large cash balance at this point. Seems like your cash generation may be outpacing your ability to deploy into M&A. Maybe that is true. Maybe that is not. But just big picture, how are you also thinking about other avenues on the capital deployment side? Thanks. William George: So the pipeline is good. But the cash flow is relentless. Sweet. You know, we like our pipeline. We will get some done. You might have noticed we spent a couple $100,000,000 buying shares this past year. You know, two consecutive $0.10 increases to our dividend is almost a 50% increase to our dividend. I know our stock price keeps running away from it. At the same time, proportionately, if you look at the cash that we have and at least project to have this year, given the M&A—we, you know, with, you know, the range of M&A we might do—we are not going to have an unprecedented amount of cash as compared to the size of Comfort Systems. There have been times in the past—when the financial crisis started, we had more cash proportionately than we think we are going to have in the next little while. And that is why we have some of the great companies we have today. So we are definitely of a mindset to continue to have very, very high demands for conviction when we do acquisitions. We are certainly paying more for companies than we ever have. Because they are worth more. You know, a company with hundreds of electricians that have worked together as a team for years, for decades, is worth more than it was in the past. But at some point, you know, we do actually think, you know, we are building for a multi-decade period. And just want to have people that come in and that are good peers to the amazing companies we have. You know? One of the reasons Comfort is so successful is we have so many companies that have—they have been building data centers for decades. Right? There is nobody on the planet that has, you know, a better pedigree than us in building data centers. And, you know, we want to keep the quality of our group of companies, you know, very high. And so with acquisitions, we have to choose between, you know, between conviction and sort of making spreadsheets happy—we are going to stick with conviction. It has done well for us in the past. Brian Daniel Brophy: Understood. That is helpful color. I will pass it on. Operator: Thank you. And the next question is coming from the line of Sangita Jain of KeyBanc. Your line is open. So I have a question on the backlog duration becoming longer, which is kind of a little bit different from what has been the case for you guys. Since we still have the supply chain and tariff uncertainties, are you having to contract for this longer-duration backlog a little bit differently so that you know you are protecting your return when you deliver them, let us say, in 2028? William George: You know, if you look across our cost—like, if you look at our cost of goods sold and you look across our cost—there really are not—we do not quote equipment or anything that is highly spec, which on this scale of work, it is all highly spec, without getting a quote from someone else. And so that really has not changed. We are actually being released, even on these long jobs, to purchase stuff very, very early. Sometimes being released to—we are being given enough of a commitment to purchase stuff before the work even goes into our backlog. The rest of our cost and where we take all of our risk is labor. You know, there is no such thing as, you know, sort of four-year price locks for labor. So what we rely on there is that we have the best people in the country at knowing that they are going to have to take care of their people and making sure that they put the money in the jobs that they are going to need to take care of their people. Trent T. McKenna: And, Sangita, Bill and I—this is Trent. Bill and I, as recovering attorneys, both appreciate how much our legal team does to make sure that we have the right contract terms to protect us as we go forward with all this work. And they do a really, really great job making sure that we are protected contractually. William George: They are doing better than they did when Trent and I were general counsel. Without a doubt. Trent T. McKenna: Without a doubt. I will certify that. William George: Possible we have a little more bargaining power. Sangita Jain: Got it. Let me ask one more on the modular capacity increase. Can you kind of walk us through your decision on going from 3,000,000 to 4,000,000? Is that a function of a specific customer coming and asking you for additional capacity? Or is it more you kind of seeing the runway ahead? William George: You know, it is primarily us taking steps to meet more of the demand from our two largest customers. They would buy more if they could, and we really want to do everything we can. They have been great partners for us. We want to be great partners for them. We have added a few customers, but none of them are at scale. And if you look at the new buildings, and you say, okay. What is going to be built in those buildings? The floor space right now is planned for those two large hyperscaler customers who have been so good to us. Sangita Jain: Appreciate that. Thank you. Julie S. Shaeff: Thanks. Operator: Thank you. I would now like to turn the call back over to Brian Lane for closing remarks. Please go ahead, Brian. Brian E. Lane: Alright. Thank you. In closing, I really want to thank our amazing employees again. They are truly outstanding. We had a great 2025. And we are really excited about 2026. Thanks for your interest in Comfort Systems USA, Inc. We look forward to seeing you on the road soon, and hope you all have a great weekend. Operator: This does conclude today’s conference call. You may all disconnect.
Operator: Good morning, ladies and gentlemen. Welcome to the Forum Energy Technologies, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Gigi, and I will be your coordinator for today's call. There is a process for entering the question-and-answer queue. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. A link with instructions can be found on the company's Investor Relations under the Events section. All lines have been placed on mute to prevent any background noise. This conference call is being recorded for replay purposes and will be available on the company's website. I will now turn the conference over to Rob Kukla, Director of Investor Relations. Please proceed, sir. Thank you, Gigi. Good morning, everyone. Rob Kukla: And welcome to Forum Energy Technologies, Inc.'s fourth quarter and full year 2025 Earnings Conference Call. With me today are Neal A. Lux, our President and Chief Executive Officer, and David Lyle Williams, our Chief Financial Officer. Yesterday, we issued our earnings release, which is available on our website. We are relying on federal safe harbor protections for forward-looking statements. Listeners are cautioned that our remarks today will contain information other than historical information. These remarks should be considered in the context of all factors that affect our business, including those disclosed in Forum Energy Technologies, Inc.'s Form 10-Ks and other SEC filings. Finally, management's statements may include non-GAAP financial measures. For reconciliations of these measures, please refer to our earnings release and website. During today's call, all statements related to EBITDA refer to adjusted EBITDA. And unless otherwise noted, all comparisons are fourth quarter 2025 to third quarter 2025. I will now turn the call over to Neal A. Lux. Thank you, Rob, and good morning, everyone. Our fourth quarter and full year results once again display why Forum Energy Technologies, Inc. is a great business and a compelling long-term investment. Despite a challenging backdrop, including lower global drilling activity, tariffs and geopolitical uncertainty. Our teams executed with discipline and focus. I am extremely proud of what we achieved in 2025. And we are on the right track to realize our strategic vision FET 2030. Let me discuss some of the highlights from last year, starting with market share gains. We continued to execute our beat the market strategy. Through customer engagement, product innovation, and geographic expansion. Since the strategy's inception in 2022, revenue per global rig has grown 20%. In 2025, we increased it again despite a sizable decline in global rig count. These gains reflect disciplined commercial execution, a product portfolio that continues to resonate with customers and the benefits of our global footprint. Our commercial teams delivered a full year book to bill of 113%, with orders well diversified across products, end markets, and geographies. The Subsea product line performed exceptionally well, with a nearly 190% book to bill, supported by awards in the energy and defense markets. Also, capital equipment orders for drilling products increased internationally while we saw continued strength in wireline, coil tubing, and sand and flow control products. As a result, we enter 2026 with our highest year-end backlog in eleven years, up 46% since the start of 2025. Providing both visibility and resilience. A key driver of our market share gains and backlog growth is innovation. New product development remains central to our ability to beat the market and expand our addressable markets. During 2025, we commercialized 10 new products by collaborating with our customers to address specific operational challenges and improve their efficiencies. One innovative example is our Secura Series stage collars, which helped us rapidly grow share in the Middle East with one of the largest oil companies in the world. We are expanding on that line with SecuraSlim, the smallest diameter stage collar in the industry, designed for complex wells. With SecuraSlim, our customers can eliminate a casing string, significantly reducing costs and improving efficiency while maintaining well integrity. Another important product launch was DuraCoil 95, a differentiated coil tubing solution for improved performance in corrosive environments. Developed with Middle East applications in mind, DuraCoil 95 expands our portfolio and supports continued international share gains. The last example I will provide is our DuraLine manifold system, which allows operators and service companies to rig up significantly faster and more safely with far fewer man-hours. This is made possible by proprietary DuraLock connectors, high-pressure hoses, and patent-pending crane systems. We recently commissioned a system for shale development in Argentina and have line of sight for additional sales. Collectively, these innovations strengthen our technology pipeline and support future growth. In addition to our focus on growth, we are maintaining our margin and cost discipline. During the year, our teams mitigated trade and tariff policy impacts through pricing actions, supply chain optimization, and leveraging our global manufacturing footprint. In parallel, we executed significant structural cost reductions and consolidated four manufacturing plants into two. These actions deliver approximately $15,000,000 of ongoing annualized savings. The combination of market share gains, innovation, and cost discipline have translated directly into strong financial results. Free cash flow generation was a defining strength in 2025. Over the course of the year, we delivered $80,000,000 of free cash flow, the top end of our increased guidance range. This performance enables disciplined execution of our capital returns framework. We reduced net debt by 28% and repurchased approximately 11% of our shares outstanding. This is an incredible result for our investors. Looking to the future, we remain confident in our bullish long-term outlook. Over the next five years, oil demand is expected to increase along with global economic growth. And natural gas demand is forecast to grow rapidly through LNG exports and AI-driven electricity demand. The energy industry must supply these needs while also overcoming rapid declines in existing production. To meet this enormous challenge, our customers need to be significantly more efficient while also adding new capacity. Under this scenario, Forum Energy Technologies, Inc.'s addressable markets would expand by more than 50%. This expansion combined with our targeted market share gains could double revenue in five years. And with our strong operating leverage and capital-light business model, our EBITDA and free cash flow would grow significantly. The next step in this exciting journey starts now. While the general consensus for our industry is relatively flat activity, we expect to beat the market through share gains, strong backlog conversion, and benefits from structural cost reductions. We are forecasting revenue growth of 6% and EBITDA to increase by 16%. For full year 2026, we are guiding revenue between $808,880,000 and EBITDA of $90,000,000 to $110,000,000. For adjusted net income, we are guiding between $18,000,000 and $38,000,000. In addition, we expect to convert 65% of EBITDA into free cash flow, or between $55,000,000 and $75,000,000. This is a great start to executing FET 2030. To provide more detail on our fourth quarter results and near-term outlook, I will now turn the call over to David Lyle Williams. Thank you, Neal. David Lyle Williams: I will begin today with a review of our fourth quarter results, and first quarter guidance. Then shift to a discussion of cash flow and our capital allocation strategy. Fourth quarter revenue of $202,000,000 exceeded the top end of our guidance range and increased 3% sequentially. This performance outpaced a flat global rig count and reflects continued strength in offshore and international markets where our revenue increased 78%, respectively. This is the second consecutive quarter when international exceeded U.S. revenue, which declined 2% due to project timing, and softer demand for valves and artificial lift products. Adjusted EBITDA for the quarter reached the top end of our guidance range at $23,000,000. Higher revenue and cost reduction overcame less favorable product mix and modest increases in healthcare costs and professional fees. Also, income tax expense in the quarter includes $3,000,000 of a foreign tax settlement related to tax years 2017 through 2020. The majority of the expense is from a noncash reduction in deferred tax assets. Fourth quarter book to bill was 93%, primarily reflecting order timing in the Drilling and Completion segment following two exceptionally strong quarters for subsea and international drilling-related equipment. Let me continue with additional color on our segment results. Drilling and Completion revenue was $127,000,000, up 8%. The Subsea product line increased 25% as we recognized revenue on ROV projects and the sizable rescue submarine order announced in June. Coiled tubing revenue was up 13% with strong tubing sales in North America, as well as continued momentum for coiled line pipe. Drilling product line revenue increased 11% supported by international capital equipment demand. Segment EBITDA was essentially flat as cost savings offset unfavorable product mix. Artificial Lift and Downhole delivered a fourth quarter book to bill of 107% driven by large orders for natural gas processing units. And segment revenue was $75,000,000, down 4% sequentially on lower shipments by the Production Equipment product line. Downhole and Valve Solutions revenues were relatively stable, and segment EBITDA was flat, with margin improvement of approximately 90 basis points supported by favorable mix and cost reductions. Free cash flow remained strong in the fourth quarter, totaling $22,000,000 and resulting in full year free cash flow of $80,000,000. Through the year, our teams generated cash of nearly $34,000,000 from working capital efficiencies. We also completed two real estate sale-leaseback transactions that generated another $15,000,000 in net cash proceeds. Excluding this $15,000,000, our 2025 free cash flow conversion would have been an impressive 76%, and a yield of nearly 15% on our year-ending market capitalization. We ended the year with net debt of $107,000,000 and a net leverage ratio of 1.2x. Liquidity of $108,000,000 remains strong, with $73,000,000 available under our revolving credit facility. Subsequent to quarter end, we extended our credit facility maturity to February 2031, with improved pricing and increased letters of credit capacity. The credit facility tenor, plus commitments totaling $250,000,000 provides significant flexibility for Forum Energy Technologies, Inc. to fund strategic initiatives, including long-term debt retirement, organic growth, and acquisitions. We appreciate the long, continued support of our bank group. With this flexible financing structure and our fortified balance sheet, we are well positioned for the future. Looking ahead to the first quarter, we expect activity to remain relatively stable with the fourth quarter. Therefore, our guidance for revenue is $190,000,000 to $210,000,000 and EBITDA is $21,000,000 to $25,000,000. The midpoint of our EBITDA guidance is up about 15% on a year-over-year basis despite a projected 5% decline in global rig count. We are also guiding adjusted net income of between $5,000,000 and $9,000,000. We expect to generate positive free cash flow this quarter. I would like to remind investors that our first quarter is seasonally lower due to annual incentive compensation and property tax payments. Now let me turn to 2026 free cash flow and capital allocation expectations. Our 2026 free cash flow guidance is consistent with our FET 2030 target and reflective of our capital-light operating model. We forecast interest and cash taxes of $35,000,000, capital expenditures of $10,000,000, and a further net working capital reduction of $10,000,000, for full year free cash flow of $55,000,000 to $75,000,000. On a comparable basis to 2025, excluding net working capital and sale-leaseback proceeds, the midpoint of our 2026 cash flow guidance is about 75% higher. Let me provide a bit more color on uses of our free cash flow. The capital returns framework followed in 2025 was incredibly successful. During the year, we returned $35,000,000 to shareholders by repurchasing nearly 1,400,000 shares, 11% of shares outstanding at the beginning of the year. We repurchased these shares at an average price under $25, less than half of the current Forum Energy Technologies, Inc. share price. And we reduced our net debt by $42,000,000, or 28% through the year. Because our balance sheet is in such great shape, we believe any further net leverage reduction should be viewed as dry powder for incremental strategic investments. In fact, with our balance sheet flexibility and capacity, we have the ability to increase net leverage modestly to fund the right acquisition. Forum Energy Technologies, Inc. has a long history of increasing our addressable market through acquisitions. Our criteria identifies companies with differentiated products that compete in targeted markets and would be accretive to Forum Energy Technologies, Inc. per-share metrics. We evaluate these investments in comparison to repurchasing Forum Energy Technologies, Inc. shares. This year, our bonds allow repurchases of around $30,000,000 as long as our net leverage remains below 1.5x. We believe Forum Energy Technologies, Inc., with a forward free cash flow yield around 10%, remains a compelling investment. In summary, 2026 builds upon the success we demonstrated in 2025. Market share gains supporting EBITDA and meaningful free cash flow enabling exciting opportunities for outsized returns. With that, I will now turn the call back to Neal A. Lux for closing remarks. Neal A. Lux: Thank you, Lyle. To conclude, I want to reiterate how proud I am of the team's execution in 2025. They delivered strong operational performance, meaningful free cash flow, and disciplined capital allocation, positioning Forum Energy Technologies, Inc. with momentum as we enter 2026. While near-term market conditions remain dynamic, our backlog, market share gains, and structural cost savings give us confidence in the year ahead. More importantly, our long-term vision remains unchanged. With our beat the market strategy and FET 2030 as our North Star, the next five years have the potential to be truly special for Forum Energy Technologies, Inc. and its investors. Thank you for joining us today. Gigi, please take the first question. Operator: Thank you. As a reminder, to ask a question, please press 11 on your telephone, and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Jeffrey Woolf Robertson from Water Tower Research. Jeffrey Woolf Robertson: Thank you. Good morning. Neal, can you talk about the trajectory that you see in 2026 and 2027 in the Subsea business? And then, secondly, in terms of products, if you see more unconventional oil or gas development globally, where do you see the biggest benefit for Forum Energy Technologies, Inc.? Neal A. Lux: Yeah. Great, great question. So, you know, with Subsea, you know, we have had a, you know, great bookings here in the last year. So, you know, I think in 2025, we had a 190% book to bill. And we are executing on our, you know, multiyear submarine program. You know, this is a strategic growth area for us, and, you know, we expect strong demand, you know, energy and defense. So, you know, as we look ahead, you know, 2026 will be a year where we are going to convert a lot of our backlog and look to add on for 2027 and beyond. Thinking about international, you know, unconventionals, you know, we mentioned in our call the delivery of our DuraLine system to Argentina. So this is unconventional work where they are adopting really the latest technology that, quite frankly, even the U.S. guys have not quite gotten yet. So we are delivering the newest and greatest to Argentina. I think another area will be Saudi Arabia for the unconventional gas projects there. Both areas where we have, you know, continued to export our technology. And as we think, you know, ultimately about the trajectory of 2030, where we are going to get the most gains is by attacking our growth markets and getting the adoption of the solutions that we have had in the U.S. and have those adopted internationally. I have talked about this example a lot, but I think it just it means so much that we think about our artificial lift product line. We have high share in the U.S., and the value proposition is, you know, more oil at lower cost. Well, I think that value proposition resonates internationally as well. And, you know, it is going to be a time to get there, but I think that is probably a fantastic opportunity and one we will continue to push. Jeffrey Woolf Robertson: With respect to acquisitions, are there any product lines or just maybe any other areas that have industrial logic to Forum Energy Technologies, Inc. currently that make the most sense to target from an acquisition or maybe even an adjacent industry? Neal A. Lux: You know, our last acquisition was Veraperm. You know, great, great buy. Right? We were able to acquire it, you know, at under four times with high margins, incredibly accretive. I think another downhole-type business would be interesting. I think for us, the main criteria, though, is, is it a great business? Are we adding something to us that, you know, has differentiated solutions that is targeted market, you know, be accretive to Forum Energy Technologies, Inc. without, you know, you know, stressing the balance sheet. Right? So that is where our focus is. If we can find that adjacent where there is good industrial logic or if we can expand an existing product line, if it hits those criteria, we are really interested. Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Stephen Michael Ferazani from Sidoti. Good morning, everyone. Appreciate all the detail on the call this morning. Stephen Michael Ferazani: Neal, I just wanted to ask, you came in at the very high end of the guidance range. Where were the pluses and the minuses in the quarter? What came in better than you were expecting? Neal A. Lux: Yeah. I think it was just I will, I mean, I will start and let Lyle add in. You know, I think the team is just really solidly. You know, coming into Q4, you know, we are always concerned about just the holidays and a slowdown. And we really did not have that impact this year. So I do not know if it is kind of the plus or minuses of what came in. I think it was really we just did not have that end-of-the-year slowdown, you know, around Christmas, call it frac holiday in years past. We did not see that. David Lyle Williams: Yeah, Steve. I agree with Neal on that comment. And, you know, really good revenue growth in the Subsea product line that we saw, that 25% increase. So executing on backlog. And remember that most of our Subsea revenue is percentage-of-completion accounting, so based on how much we can execute during the quarter, that can move that number around a bit. So a little bit of maybe ahead of the game on Subsea projects, which was positive. And we had really good flow-through in terms of profitability in Artificial Lift and Downhole segment with good favorable mix. Really benefited us. So I think, as Neal mentioned, we did not see quite the activity drop-off that we might have been afraid of, but also did see some good execution by all of our teams. Stephen Michael Ferazani: That is great. In terms of the Q1 guide, very strong given probably Q1 is probably going to be the worst year-over-year change in rig count. Maybe 2Q is a little bit worse. Where is the 15% growth? We are so far into the quarter, you already know timing of deliveries. How are you outperforming by this much, the change in rig count in Q1 specifically? Neal A. Lux: I think it is a continuation, right, of our beat the market strategy. We are gaining share and expanding on that. And thinking about the overall guide for 2026, we have backlog coming in in the year. That gives us benefit. We also have the structural cost savings that we executed the back half of last year. And so that is helpful as well. Stephen Michael Ferazani: I think the last thing, have you fully realized that at this point? Have we seen the full realization? There is more— Neal A. Lux: Not quite. Not quite, Steve, but I think the back half of the year will have 100%. But we are about two-thirds of the way. Stephen Michael Ferazani: Got it. On the strong free cash flow guidance, clearly, part of the benefit you have had last two years has been your really significant actions on working capital. Easier to do in a declining or flat market; in a growth market, maintaining, you know, constraining working capital is a lot more challenging. I am just trying to think about the pieces because that is pretty strong free cash flow guidance for next year. I am assuming CapEx remains around this level. Can you just walk through a little bit of how you get to that really good number? David Lyle Williams: I appreciate the comments on the number, but also on the working capital challenge as we grow. So maybe key components that we talked about in the script, just as a reminder, walking from EBITDA down, $35,000,000 of cash taxes and interest, then $10,000,000 of CapEx. So really in line with what we have done the last few years, and a $10,000,000 release or source of cash from working capital. So good job by our teams to continue to do that with revenue growth. I think a lot of that focus is around the area of inventory. If you look at last year, we released about $34,000,000 of cash from working capital. Great moves in the area of DSOs and receivables, also good on inventory. So I think next year is a continuation of that. And, really, as we think about that cash flow, one of the ways that we have done that is by looking at year-over-year comparison excluding the sale-leasebacks that we had in 2025 and also excluding net working capital benefit in both years. If you do that, then on a comparable basis, the 2026 number is 75% more cash flow than the 2025 number. So as you mentioned, pretty strong, pretty strong growth there, and confident in our team's ability to squeeze some more value out of working capital. Stephen Michael Ferazani: If I can get one last quick one in. We just looked at the average share count; it did not really move much in 4Q. Can you talk about the timing of the buyback in 4Q? And then how we are thinking about timing in 2026? Typically, cash flow is better in the second half; reasonable to think that is the more likely period you might execute? David Lyle Williams: Steve, I think you are on there. We did repurchase about 400,000 shares, just over 400,000 shares in the fourth quarter, and we did that. I think as we think about our buyback strategy and how we have that in place, if you remember last year, we were trying to buy about use about half of our cash for share repurchases. We wanted to see that cash flow come in. So while we are really confident in this 2026 number, I think a more back-end weighted, like we did in 2025, might be appropriate. One of the things that is different this year than last is the 1.5x net leverage ratio constraint. So at the beginning of 2025, we were limited on share buybacks because we had leverage. We have effectively pulled that down to 1.2x at the end of 2025. So a little more of an open window there. But, yeah, I would think that buybacks may be a little more back-end loaded this year. Stephen Michael Ferazani: Got it. Thanks, everyone. Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Daniel Ray Pickering from Pickering Energy Partners. Daniel Ray Pickering: Hey, thanks for taking my question. What do you expect kind of your largest growth avenues to be here over the next few years inside of your D&C business and kind of artificial lift and in your downhole tools as well. Neal A. Lux: Yeah. You know, I think, you know, over several quarters, right, we have talked about Subsea. I think that is, you know, as part of our Drilling and Completion segment. You know, again, we have had meaningful bookings. You know, it has a little bit more diversity outside of oil and gas too. You know, we had our large defense booking last year. So I think there is some good runway there. Then you also mentioned the artificial lift. Again, what is exciting for us is these products, you know, extend the life of downhole pumps, you know, and, you know, reducing costs and increasing production. So our strong share in the U.S., where we have, you know, a solid value proposition, solid market share. I think that also resonates, you know, internationally. So I think we have a bigger opportunity international, so it is taking that value prop, taking our equipment, our products, and then utilizing our global footprint to really get national oil companies to adopt the technology that has proven itself in the U.S. So I think that is a big, big part of where we want to go. We also, this, kind of finish that thought too. You know, in our last couple calls, we talked about our, you know, our kind of our the aggregation of our market. So we have looked at our growth markets and we have identified areas where, again, bigger than, you know, our leadership markets, but one where we have lower share. Again, this is maybe, you know, newer adoption or regional. We think over that time, we can double our share in our growth markets, and that is going to be a big driver of future revenue growth and ultimately, you know, free cash flow and EBITDA. Daniel Ray Pickering: Yeah. That is awesome. Very helpful. And then my follow-up on that is just, you know, you guys have had some pretty significant orders here over the last year. Are you still seeing margin improvement on those new orders that are coming in? And then, in relation to orders as well, what is the average lead time for different orders that you receive? Like, what is the time from when you get an order to whenever it shows up in the business and revenue? Neal A. Lux: Yeah. It really split it out. So I think, you know, about 75% of our revenue is activity-based consumables. So that when we receive that order, we are going to turn that quick. We are going to turn that very quickly. So that could be a day to, you know, let us call it three to four months. That is quick-turn. On the capital side, the other quarter of our revenue, that will vary. You know, in general, I would say it is a six-month from book to deliver on that. I think as we get more volume generally, we are going to see we are going to get more incremental margin. So our goal is a 30% incremental EBITDA margin. One, let us just say, there. On the Subsea side, as we have been growing that, their mix is not quite as strong on the margin side because of some of the pass-through items. However, by the, I think, the amount of bookings that we have received in Subsea, we already get some good economies of scale in our facilities and hopefully overcome that a little bit. So, you know, again, manufacturing, you know, we have good operating leverage. So the more volume we get through our plants, you know, overall, the better. And again, our goal is to have a 30% incremental EBITDA margin on the revenue we add. Daniel Ray Pickering: I will turn it back. That is very helpful. Thanks for taking my questions. Neal A. Lux: Thanks, Dan. Operator: Thank you. One moment for our next question. Our next question comes from the line of John Daniel from Daniel Energy Partners. John Daniel: Hey, guys. Thanks for including me. First, just a congratulations on the tremendous improvement in the stock price. Impressive. Was hoping you could elaborate a little bit on just the opportunities that you guys are seeing for M&A opportunities and maybe valuation expectations on the part of sellers today? David Lyle Williams: Hey, John. Lyle, thanks for calling in, and thanks for that question. Really, over the past few quarters, we have seen an increase in the number of companies being marketed for sale. So the opportunity set is getting larger. And several of those are really interesting and fit the acquisition criteria that we talked about, and Neal elaborated on earlier. So we are looking at those and evaluating those. I think as we look for those great investments, we want to make sure that they fit with our strategy. And with our forward free cash flow yield that we talked about. That is a compelling alternative to M&A. Maybe think about expectations. As you mentioned, we have seen some lift in seller expectations. Primarily, they have seen public company stock multiples increase. So that has increased some expectation there as well. So I would not be surprised to see some deals get done at a little bit of a higher margin. For us, I think discipline around our balance sheet is really key. So we will keep looking at what is a pretty good opportunity set and be cautious and targeted in what we move on. John Daniel: Okay. And that preference offshore versus land, international, North America, any color there would be it. That is all for me. Thank you. Neal A. Lux: Yeah. No. I think, again, earlier, just find the best business possible, John. Okay. And whether it is land, offshore, or, you know, it really fits our mix. K. Thanks for including me, guys. David Lyle Williams: Thanks, John. Operator: One moment for our next question. Our next question comes from the line of Eric Carlson. Eric Carlson: Morning. I guess maybe start, did not spend a lot of time on U.S., but when you think about, I mean, you have basically proven in the market that you have diversified and kind of right-sized the business to be a very good performer, kind of despite what we have seen in the rig count over the past few years. I think U.S. rig count down 30%, frac spread down about 50% from kind of peak late 2022, early 2023. And can you just maybe describe the torque available in just if the U.S. rebounds even marginally? I mean, what is the significance that the business— Neal A. Lux: Yeah. Yeah. I think in the U.S., our revenue per rig is significantly higher than international. So if there is a rebound in U.S. rig count, it will be a tremendous torque for us. You know? Obviously, high service intensity. I think as you were laying out kind of the historical trend there, Eric, I think it is interesting to note that, you know, rig count down, frac fleets down, but I think total footage drilled, you know, let us call it the length of the wells, is maybe up, and stages completed is up. So I think that is the service intensity. And as we think about that, we view that increased service intensity as more demand for activity-based consumables. So I think that is a bonus there. I think maybe the other part that adds on to that for U.S. land is the equipment is getting older. Right? You know, Lyle and I were talking the other day about when is the last time we have delivered a catwalk for U.S. land, and he has been here longer than me, and he had to scratch his head to try to remember. So it has been probably over ten years. So what we are starting to see from our customers, though, is interest in upgrading their capital, you know, whether it is drilling rigs or frac fleets. And I think for those who are not as familiar with our story, you know, we do not build entire drilling rigs or build entire frac fleets. We provide, you know, kind of the key components for them. So as the customer base in the U.S. continues to increase the intensity of the assets they have, they are going to need to upgrade and add, you know, add our equipment. A great example is our FR120, you know, the iron roughneck, which, for those that follow the show Landman, they were able to see it on the season two, episode six. You know, the roughnecks of Amtex Oil called our product the future. So that was good to see. Eric Carlson: Yeah. I appreciate that. And, yeah, I did catch that. And then maybe just when you think about kind of the core OFS equipment business versus some of these newer opportunities, whether it is kind of Subsea, not directly related to oil and gas, or maybe kind of one of the recent conversations I had was with kind of a large data center real estate investor, and they said, I mean, people are moving and just trying to find mobile power generation to kind of bridge the gap, kind of as they wait for kind of firm baseload to be delivered by the utility. And I know you guys offer, like, some, whether it is kind of the radiators or whatever it might be. Can you talk about some of maybe just the markets that are non-oil-and-gas-related and kind of are those early stages? Is there a really big opportunity there? Is it, I mean, marginally better? Just provide some feedback there. Be interesting. Neal A. Lux: Yeah. You mentioned Subsea. I will just start, but think the data center one is obviously very interesting too. But, you know, on Subsea defense, you know, we think that is a long-term growth opportunity. Right? We provide key equipment. We were already in that business. I think as other countries around the world rearm and look to avoid satellite detection, working underwater is incredible. So it is a key part of their defense capabilities. So I think that is a long-term growth area, and I think it is a great opportunity. The data center side, you mentioned mobile power. So we do provide key heat exchangers, radiators, for that market. Again, we have taken the lead, or the great product we had for heat exchangers in mobile frac, and those customers are now adopting that for mobile power generation. You know, we also see the fixed radiator possibility as a huge market, and it is one that we are looking at developing products for. I think it is early on. We want to see if it fits our engineering and supply chain manufacturing wheelhouse. But that would be a key area for us as well. And then, you know, maybe last area would be a good example is coiled line pipe. You know, we have talked about that in prior calls, but we are providing that product into non-oil-and-gas applications, you know, renewable natural gas, you know, opportunities like that. So that has been a good add to our nontraditional base. But, you know, overall, thinking about the data center opportunity, kind of view it as more of a second-derivative growth for us. I think the increase in gas demand overall, whether it is LNG, data centers, that is going to drive U.S. Drilling and Completion. And I think that is where we are going to really see the benefit as well. Eric Carlson: Great. And then maybe shift to the capital returns framework, which you kind of laid out. I mean, when you guys look at acquisitions, I mean, are things still trading around that 3x to 5x EBITDA multiple? Like, if someone is holding something privately or you can carve something out of someone else who is public that wants to shed a legacy business or a private equity firm that has been holding a business for the last dozen years that needs an exit. I mean, do you have any sense of, like, what are multiples looking like on either EBITDA or cash flow or both? I am just curious if you are kind of looking at your pipeline. David Lyle Williams: No, Eric. Great question. And like I mentioned earlier, we have seen deals getting done with a little bit more of an elevated enterprise value to EBITDA multiple. And, you know, we are seeing that. I think relative to public company comps, those are still lower. But we have seen some move up from where they are. It is very situational as to what that deal is. And you mentioned some of the kinds of sellers that are out there, whether it is family-owned businesses, whether it is some carve-outs, or it is private equity owners that have been long in the tooth making the sale. So definitely a good opportunity set out there as far as technology would fit well within our portfolio and that we think we could leverage and would be incremental to our story. And that is what we are looking for, but we are also going to be careful and make sure we do not get out over our skis on any deal. Eric Carlson: Right. Then maybe in that lens, I mean, I have looked at it, and I have heard you present kind of the FET 2030 story and the potential there. I mean, obviously, buying stock back today is not the same as buying it at $25, and we can argue you should ever have that opportunity or not. But when you think about I can buy my stock today, invest in my own organic growth, and just let the story play out through 2030. If I am buying today, that looks like a pretty good investment longer term. I mean, like, is there a hurdle rate where you say, like, I mean, buying our own stock, we know our own business. It costs us nothing to integrate. We do not have the risk of getting over-levered versus going out and trying to buy somebody. Like, how do you guys think about the risk-reward there? Like, how much better does acquiring somebody have to be versus just saying, we will just buy our own stock and we could return cash in a multitude of ways in the future as we kind of build this base towards the 2030 growth plan. Neal A. Lux: Yeah. Again, we have started that FET 2030 growth plan really from the bottoms up, right? Looking at all of our businesses, what we could do organically. I think about an acquisition and adding on to that as a way to really supercharge that as well. So can we add somebody that we have, you know, revenue synergies? Can we have some cost synergies? And, you know, by having this type of product, could we then, you know, grow faster our existing organic story? So I think there are definitely opportunities out there like that. And I think you have to look at them on an individual basis. You know, we have our criteria that I think we have talked about a lot. You know, it has got to be differentiated. You know, it has got to be a targeted market. And we want to have it accretive to our financial measures. So you are right, though. The story, you know, buying our own stock, has played out really well. It has been a good use of capital. And, you know, our investors have taken notice. But I think it is one part of our capital allocation strategy. I think M&A is another. I think overall, as long as the acquisition hits the criteria and adds to our FET 2030 story, we will take a serious look at it. Eric Carlson: Great. That is helpful. Okay. I have two more questions, then I will shut up. When you think about, I mean, so Veraperm, heavy oil sands in Canada primarily. There are obviously international indications to that. I mean, and this is very early stages, but, like, is Veraperm something that can be used in Venezuela eventually or something like that if a market like that would open up? Neal A. Lux: Yeah. Yeah. That is a great question. They have, Veraperm has sold their products into Latin America for heavy oil applications in the past. So I think there is an application. I guess we, as Venezuela develops, we will learn more about, you know, whether they will, you know, go more towards a product development like we would have. I think maybe, on a bigger picture of Venezuela, you know, there has been a lot of public company commentary, you know, some of our biggest customers have been saying how enthusiastic they are. When they deploy equipment down there, they are going to need our consumables to run. Again, that is coil tubing, wireline, casing hardware, artificial lift products. I want to say even just this week, you know, we received legal approval to book a coil tubing order for Venezuela. So I think that opportunity is starting to move, and a great way for us to participate in it is with our customer base who is going to deploy their equipment down there. Eric Carlson: Interesting. And then last question would be two parts. So just, I mean, think about the tariff ruling today. What do you think is the net impact to that? And then also kind of on the financial side, I mean, projecting positive net income in a pretty meaningful way this year and, obviously, large deferred tax assets. I am no expert in that. But when you think about those on a go-forward basis, I mean, what is the incremental benefit of some of those if you can either write them up or, I mean, maybe explain to me that a little bit as well. Neal A. Lux: I will start with the tariffs and let Lyle take the tax part. Yeah. So the ruling today, so we really kind of, let us call it, three categories of tariffs. We have the Section 232, Section 301, and what is referred to as the IEPA tariffs. The Supreme Court decision this morning just struck down the IEPA tariffs. So the 232s and 301s are going to remain in place. So for us, those are the more impactful ones. We have had those in place, though, since, I think, 2017, and they have impacted more of our steel, so steel supply. So we still have a good amount of tariffs still in place. Again, we have done what we can to mitigate those. David Lyle Williams: Yeah. Let me talk about taxes a little bit. Eric, definitely something that we are focused on as we have grown our profitability, especially outside the U.S. That is where we pay taxes. And so our tax bill is getting bigger as we do that and have that success. A lot of our tax assets, deferred tax assets, sit in the U.S. And so we have a lot of tax shield here. Kind of put all that together, it makes a really wonky tax rate, and you think about our tax. We are paying tax outside the U.S., and we are not here in the U.S. So as we look to the future and look at increasing our taxable income in different countries, then it is about how could we optimize where that comes from, whether that is in the U.S., which would be more of an advantage for us, or in other countries as we grow. So something that is on our radar screen and definitely focused on as we look ahead and make sure we are doing appropriate execution. But also now that we are paying taxes in countries, making sure that we are maintaining good compliance and keeping up with all the rules as they change around the world. Eric Carlson: That is helpful. Alright. Great. Thanks. Operator: Thank you. At this time, I would now like to turn the conference back over to Neal A. Lux for closing remarks. Neal A. Lux: Alright. Well, thank you for your support and participation on today's call. We look forward to our next meeting in May to discuss Forum Energy Technologies, Inc.'s first quarter 2026 results. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the SECURE Waste Infrastructure Corp. 2025 Q4 and Annual Conference Call. [Operator Instructions] This call is being recorded on Friday, February 20, 2026. And I would now like to turn the conference over to Mr. Chad Magus. Thank you. Please go ahead. Chad Magus: Thank you, and good morning to everyone who is listening to the call. Welcome to SECURE Waste Infrastructure Corp.'s Conference Call to discuss our Fourth Quarter and Full Year 2025 Results. I'm Chad Magus, Chief Financial Officer. And joining me on the call today are Allen Gransch, our President and Chief Executive Officer; and Corey Higham, our Chief Operating Officer. During the call, we will make forward-looking statements related to future performance and refer to certain non-GAAP financial measures that do not have standardized meanings under IFRS and may not be comparable to similar measures disclosed by other companies. Forward-looking statements reflect management's current expectations and are based on assumptions that we believe are reasonable. However, actual results may differ materially due to a number of risks and uncertainties. Please refer to our press release, management's discussion and analysis and annual financial statements for the year ended December 31, 2025, all available on SEDAR+ for a discussion of these risks and for definitions and reconciliations of non-GAAP measures. Today, we'll review our financial and operational results for the 3 and 12 months ended December 31, 2025, and provide our outlook for 2026. I will now turn the call over to Allen. Allen Gransch: Thanks, Chad. Good morning, and thank you for joining today's call. 2025 was a year that clearly demonstrated the resilience, durability and quality of SECURE Waste Management and energy infrastructure business. Despite lower commodity prices, reduced industry activity and significant volatility across several end markets, we delivered full year adjusted EBITDA of $501 million, representing 5% growth year-over-year on a pro forma basis. Just as importantly, we generated strong discretionary free cash flow and continue to execute on our disciplined capital allocation strategy. At a high level, our performance in 2025 reflects 3 core strengths of our business model. First, the majority of our earnings are driven by reoccurring infrastructure-backed volumes. Approximately 80% of our adjusted EBITDA is tied to ongoing production and industrial activity with only about 20% linked to drilling and completion activity. That mix provides stability across cycles and limits our exposure to short-term swings in upstream activity. Second, we operate long-life permitted assets, permitted assets with high barriers to entry. Our facilities are difficult to replicate, capital intensive and require unique operating capabilities. Additionally, many of our assets are embedded in our customers' operations. Overall, these factors provide us with strong competitive advantage and support consistent utilization and pricing over time. Third, we remain highly disciplined in how we allocate capital. We invest where customers need capacity, where returns are attractive and where projects are supported by long-term contracts or clear demand and market signals. Turning to the fourth quarter specifically. We delivered adjusted EBITDA of $135 million, up 15% year-over-year and up 24% on a per share basis. This performance reflects contributions from assets placed in service during the year, disciplined pricing across key service lines and continued optimization across our network and the benefit of share repurchases. For the full year, we returned $373 million to shareholders through dividends and share buybacks. In total, we repurchased nearly 19 million shares at an average price below $15, representing approximately 8% of our outstanding shares. From a growth and investment standpoint, 2025 was an important year. We deployed $138 million of organic growth capital above our original plan of $75 million as customer demand accelerated and project scopes expanded. These investments were primarily directed toward produced water infrastructure in the Montney as well as an industrial waste processing and continued optimization of our metal recycling business. A key milestone during the year was the commissioning of our first 2 fully contracted produced water disposal facilities in the Montney region with the second facility expected to come online in March. These are long-cycle infrastructure assets supported by strong counterparties and long-term agreements, and they will contribute meaningful to earnings going forward. In metal recycling, 2025 was a difficult year due to the implementation of a 50% tariff by the U.S. on finished steel, which significantly reduced domestic demand in Canada. In response, we repositioned over 90% of our scrap volumes into the U.S. markets. This required building new customer relationships, expanding rail capacity and working through inventory and transportation constraints. While this transition created near-term headwinds, the strategy is now largely in place and positions the business well for improved performance in 2026 as logistic improvements take effect and inventory levels normalize throughout the first half of the year. Before turning the call over to Chad, I want to emphasize that our outlook for 2026 is grounded in what we see and control. While macro conditions remain volatile, our guidance is supported by contracted projects, infrastructure-backed cash flows and assets that are already built or nearing completion. With that, I'll turn it back over to Chad to walk through the financial results and an important accounting update. Chad Magus: Thanks, Allen. I'll start with a brief review of our financial performance for the fourth quarter and full year. For the fourth quarter, revenue was $372 million, up 10% year-over-year. Adjusted EBITDA was $135 million, with margins remaining strong and consistent with our infrastructure-driven model. Funds flow from operations was $118 million and discretionary free cash flow was $84 million, supporting continued investment, dividends and share repurchases. For the full year, adjusted EBITDA was $501 million, funds flow from operations was $378 million and discretionary free cash flow was $273 million. While discretionary free cash flow declined modestly year-over-year, this was primarily due to higher interest expense and cash taxes, and we continue to deliver industry-leading conversion of over 50%. Our balance sheet remains very strong. We ended the year with total debt to adjusted EBITDA of 2.1x or 1.8x, excluding leases. During the fourth quarter, we also refinanced a portion of our debt with the issuance of $300 million of senior unsecured notes due in 2032, further extending our maturity profile and enhancing financial flexibility. Turning now to the voluntary accounting policy change we implemented in the fourth quarter related to the presentation of our oil purchase and resale activities and certain commodity-related derivative instruments. Under the updated policy, we now present realized and unrealized gains and losses from physically settled commodity contracts and related derivatives on a net basis within revenue rather than presenting gross proceeds and offsetting costs. We believe this change better reflects the economic substance of these activities. It also provides financial statement users with a clearer view of SECURE's underlying infrastructure-driven earnings and improve the transparency and comparability of our reported results relative to our peers. Importantly, there is no impact to net income, adjusted EBITDA, cash flow or the statement of financial position for any period. The change affects only the presentation of revenue and cost of sales and prior periods have been restated for comparability. Finally, in relation to this restatement and as part of our improving transparency and alignment with our business model, we intend to pursue changes to our industry classification with S&P and MSCI to better reflect our positioning as a waste infrastructure business. With that, I'll turn it over to Corey to review our operational performance. Corey Higham: Thanks, Chad. Operationally, our teams delivered consistent and reliable performance across our 80 location infrastructure network in the fourth quarter and throughout 2025 despite a challenging operating environment. Safety and environmental stewardship remain foundational to how we operate. In 2025, we continue to advance our safety performance metrics, invest in environmental controls across our facilities and strengthen engagement within the communities in which we operate. Sustainability remains embedded in our daily operations and long-term strategic planning. Across the waste management network in 2025, we disposed approximately 95,000 barrels per day of produced water, processed approximately 38,000 barrels per day of liquid waste, recovered roughly 1 million barrels of oil from waste streams and safely disposed of approximately 3.2 million tons of solid waste. In our Energy Infrastructure segment, we handle over 133,000 barrels per day of crude oil across 13 terminals and 3 gathering pipelines. These figures reinforce the scale and critical nature of our platform and the repeatable infrastructure-backed cash flows that underpin our results. Across our waste management network, produced water volumes remained stable, reflecting ongoing production activity. Waste processing, oil recovery and landfill volumes did see some year-over-year declines, primarily due to reduced exploration activities and lower discretionary spending by our customers. As Allen mentioned, approximately 20% of our business is tied to energy exploration. When WTI oil prices move into the high 50s and low 60s range, we typically see producers become more cautious, slowing discretionary work and pacing activity. That dynamic was evident in 2025 and contributed to volume declines in certain service lines. Importantly, these declines are partially offset by pricing actions, operational efficiencies and contributions from the new capacity brought online during the year. In Energy Infrastructure, pipeline and terminalling volumes increased modestly, supported by the Clearwater terminal expansion and the introduction of emulsion treating capabilities. These assets continue to operate under long-term agreements and provide stable fee-based cash flows. From a capital standpoint, we ended the year with a strong portfolio of projects either commissioned or nearing completion. As we think about volumes across the network, it's helpful to consider the broader production backdrop. Western Canadian energy production is expected to grow approximately 2% annually through 2030 and will be enabled by significant investments into LNG projects, petrochemical industry expansions, AI data center build-outs and baseline energy demand growth. Given the commodity price environment that existed in 2025 and is forecasted into 2026, we believe this is baseline activity and volume for our operating areas due to production profiles and declines in the basin. This gives us a great deal of confidence in the stability of our business, but also emphasizes the future volume growth within our infrastructure as a result of the significant energy investments being made in Western Canada. This growth underscores the importance of network density, pricing discipline and safe operations. We will continue to optimize performance facility by facility, align capacity with customer demand and support growth activity -- support growth where activity is strongest, while maintaining cost discipline and operational consistency across the system. Our capital deployment continues to be selective and customer-driven, where demand exceeds current capacity, we will continue to invest and ensure reliability and long-term efficiency. These projects are all are aligned with customer activity and in many cases, supported by commercial agreements that provide visibility into future volumes. With that, I'll turn the call back to Allen for closing remarks. Allen Gransch: Thanks, Corey. To wrap up, 2025 reinforced why SECURE is different. We are a waste infrastructure business built around long-life assets, reoccurring volumes and disciplined execution. Even in a volatile macro environment, we delivered stable earnings, strong cash flow and meaningful shareholder returns. Looking ahead to 2026, we are entering a year with solid momentum supported by structural production growth and the densification of our infrastructure network. Canadian crude oil supply is anticipated to increase on average approximately 2.5% per year to 2030 and regulatory-driven reclamation and abandonment programs continue to support reoccurring industrial and landfill volumes regardless of short-term commodity volatility. Additionally, managing significant produced water volumes is a material operational and cost consideration for producers. As water handling remains complex, regulated and capital intensive, we continue to see a structural shift towards outsourcing, supporting long-term demand for third-party disposal infrastructure. Within the macro backdrop, our strategy remains disciplined, deploy capital where production is growing, where we can continue to support our customers and where returns exceed our hurdle rates. Several growth projects advanced in 2025, we will continue to contribute to 2026 results. Metal recycling performance is expected to improve as the logistics normalize, and our core waste network continues to benefit from stable production and industrial activity. For 2026, we are providing adjusted EBITDA guidance of $520 million to $550 million. While macro conditions remain uncertain, our guidance is supported by contracted infrastructure, reoccurring production back volumes and assets already built or nearing completion. From a quarterly cadence perspective, we expect the first quarter to be broadly consistent with the fourth quarter of 2025, reflecting similar macro conditions and activity levels. As the year progresses, we anticipate incremental improvement relative to prior year quarters, driven by contributions from projects commissioned in late 2025 and early '26 as well as improving performance in metal recycling as logistics continue to normalize. Our capital allocation priorities for 2026 include investing in high-return infrastructure-backed growth projects. We anticipate spending $75 million in organic growth projects, and we believe we can continue to build on that amount during 2026, including completion of our previously announced projects, incremental water disposal capacity at 2 existing facilities in the Montney region and optimization projects and equipment at various facilities, including the investment of a pre-shredding infrastructure for the Edmonton metal recycling facility to enhance throughput and reduce downtime on the mega shredder. We will also continue to evaluate tuck-in acquisition opportunities that complement our existing business. All of our investing activities, whether organic growth or M&A, will continue to strengthen our core business and create long-term value. Growing our dividend by 5% to $0.42 per share annualized beginning with the second quarter of 2026 in April. This increase reflects our confidence in the durability of our cash flows and the strength of our balance sheet while preserving significant financial flexibility to execute on our capital allocation priorities and continuing to grow the dividend over time. Preserving financial flexibility to pursue high-return organic projects and strategic acquisitions in a disciplined and selective manner, focusing on high-quality assets that are strategically aligned, accretive to cash flow and offering clear integration and synergy potential while continuing to opportunistically buy back shares where we see a meaningful dislocation in our share price. Since renewing our NCIB in December, we have repurchased 1.1 million shares at a weighted average price of $17.10. With the portfolio simplification largely complete and our positioning as a waste infrastructure company firmly established, 2026 will be about execution, consistency and incremental growth. I want to thank our employees for their hard work and commitment throughout a demanding year and our shareholders for their continued support. That concludes our prepared remarks. Operator, we're now happy to take questions. Operator: [Operator Instructions] Your first question comes from the line of Konark Gupta from Scotiabank. Konark Gupta: Maybe the first one on the commodity price. I think there's a clear evidence of commodity price volatility not having a similar impact on your fundamentals. But the volumes, we saw some impact on the waste processing side, as you mentioned. Would you say the impact from those commodity prices be relatively similar on EBITDA as well compared to the volumes or would be less? Allen Gransch: Yes. So when we think about the volumes in 2025, we -- when you have a lower commodity price, specifically with WTI being off 14% throughout the year, you generally see our customers slow down in their activity. And that's not a surprise to us. I mean we do have a portion that is centered around the exploration activity. And so when they slow down, they're going to have less discretionary spending, they're going to do less exploration, and they're going to be focused solely on optimizing their infrastructure. And so we saw that on a pro forma basis, we saw that on our landfill volumes specifically tied to that, and we also saw that in our waste processing volumes. But it's really consistent to what we expected would happen with that -- what I would consider the trough of the cycle. When you look at breakevens for not only the Canadian basin, but in the U.S., I mean, you're in the 50s, mid-50s. And so when you get a high $50 WTI price, low $60, you can imagine that they're optimizing what they currently are producing. And so when I think about EBITDA and where EBITDA kind of changed year-over-year, I mean, it's reflective of the pricing increases we did in Q4 of 2024, and we saw that contribute in 2025. And then we came out with some price increases in Q4 this year as well, which will contribute to EBITDA growth in 2025 -- 2026. So yes, so I think generally, and I'll maybe pass it over to Corey to give you a little bit more intel on the volumes, but that's generally what we saw in '25 and kind of what we're seeing here as we start 2026. Corey Higham: Yes, Konark, volumes in '25 reflected everything Allen just mentioned around lower exploration activities, a decrease in discretionary spend, but that production-based volumes, which is really the backbone of our network remains pretty stable. Specific to produced water volumes at about 95,000 barrels per day in the quarter, it truly reflects the resilient of the production-based volumes in our network. And when you do get into that mid-50s, you're starting to lose some of those services. But that's exactly what we would expect in that 20% of the EBITDA that is tied to exploration-linked services. So these volumes that had -- that we saw in the $50 WTI environment, we see these as close to baseline volumes. So it just gives us a lot of confidence in the stability of the business as we look forward. Konark Gupta: And on the metal recycling side, I mean, it sounds like, I mean, your additional railcars helped you reach or broaden the reach to the U.S. market. I think I heard 90% of the volumes are now going to the U.S. In 2026, as things probably stabilize from an inventory perspective, do you see some sort of balance into the Canadian market? Or you're still kind of waiting for clarity given the tariff situation here? Corey Higham: Yes, Konark, it's Corey again. I would characterize the back half of 2025 as performing through some volatility. As you mentioned, we shipped 90% of our volume to Canadian-based mills up until middle of 2024. We had to pivot pretty quickly to find new markets. And through Q3 into Q4, we shipped all of that volume or 90% of the volume into U.S. markets and the investments that we made in the railcars through 2025, and we took on an additional 50 railcars in Q4 has helped to normalize our logistics and help us work through the inventory that had built in the back half. So we see that inventory that was built sort of get back to normal levels by the end of the second half -- beginning of the -- end of the first half of 2026. And this improvement is a combination of both just normalized throughput and better operating efficiencies. But we don't really have any sort of clear expectations when Canadian mills are going to get it back up and running. It really depends on Canadian steel manufacturing and Federal Government projects. So we're pretty comfortable with the railcar movements from logistics into the U.S. mills, and we're obviously keeping our finger on the pulse of all the developments in that market. Konark Gupta: That's great. And last one for me before I turn over. On the CapEx side, I think you guys pulled forward some CapEx in December on the 2 produced water facilities you're building. Any sense as to what led you to do that? I mean, was it more required based on demand? Or was just the timing of the activity levels, et cetera? And then are you waiting for any incremental growth CapEx subject to green lighting by any of your customers? Allen Gransch: It's Allen here. Yes. So let's start with 2025. And I think we came out last year when we put out our guidance, we announced that our capital program was $75 million, and it would grow. I would say that similar situation exists for 2026. As you progress through the year, you're talking with your customers, you're working through your engineering and your scoping. And so it does take time for that to come to fruition. But we have a lot of projects in the hopper that we continue to work through this quarter and through the rest of the year. So you'll see updates every quarter as these projects get closer to what we call sanctioned and get Board approval on, we will announce. When I think about what we wanted to spend, obviously, we raised our $75 million in 2025 to $125 mimillion and that was primarily consisted of these 2 new water disposal facilities, one -- both of them in the Montney. One of them came online in Q4. The other one is going to come online here very shortly. There's very little capital we've spent on that project here in 2026. We also have Redwater Phase 1 and Phase 2, and we decided to do it all as one tranche. But I would characterize it as the Phase 1 is now completed now and part of our capital program here in 2026 is completing that Phase 2 for that has industrial facility, which will come online in Q2. And then we bought some railcars and equipment. And so the pre-investment, this $13 million that we invested in December, it was primarily access to equipment. Things are tied up long term. And if you can get access to equipment to be able to access and drill these disposal wells. So we drilled 2 disposal wells in December, got access. We were planning on doing it in Q1. So it helps advance getting those wells drilled already. And so there will be a pipeline and basically some other infrastructure and equipment required to tie all that in, and we'll provide more clarity throughout 2026 as we get there. But essentially, I think we very successful $125 million capital deployment, very contract-backed. And then as we think about the program here for 2026, we got 2 expansions. And then we've invested in some pre-shred equipment. So this would go in front of the mega shredder in Edmonton. And the purpose of that is just to run through some of the scrap material in advance of it hitting in the mega shredder. And we want to make sure whatever goes into the shredder has already been processed to a certain point where it doesn't require the shredder to have any sort of downtime or maintenance because of a large piece or because of certain components that might make their way in. So we're pretty excited about the growth opportunities. I said the hopper is quite large here for us as we think about 2026 and more to come on that as we progress through the year. Operator: And your next question comes from the line of Steven Hansen from Raymond James. Steven Hansen: I know it's not disclosed specifically, but can you give us like really rough magnitudes in terms of how big of a hit the metals business took in '25 on an EBITDA basis? Like was it down 10%, 20%? Just want to get a rough flavor of magnitude as we think about the recovery. Allen Gransch: Yes. So on the metals business, I think there's a couple of things that we work through. We were obviously repositioning some of our, what we call hub and spoke. So we were moving some of our metal -- scrap metal from some of our yards directly into Edmonton to utilize the mega shredder. So we had some synergies that we were working on in integration. At the same time, we had to balance that with some railcars that we needed to move that product into the U.S. And so I would say roughly 10% to 15% would have been impacted by not only what we saw in Q3 and partly into Q2 as well. But really, we were building inventory and then you've got this transition time that takes you from your cycle time of what you can get your inventory processed and through into the U.S. just over 30 days. And as we've said in the past, we don't like taking commodity risk. We want to process our inventory and ship it out on a 30-day basis. And so that's what Corey and his team are going to work on here through 2026. We're in a slower period for metals in the winter months as spring hits and you start to see more scrap metal roll into the yards. We want to make sure we've got our logistics balance and at the same time, monitor the Canadian market to see whether or not these mills are going to get operational again, and there will be some opportunities for us there. But I would say that would be my rough estimate of the magnitude. So we'll get some of that back here into 2026, which is great. Steven Hansen: That's great color. I appreciate that. As it happens, copper and some of these other metals have rallied quite nicely in the meantime. So perhaps there's some benefit there. Just wanted to circle back to Konark's earlier question around the volume side. And it's more just that recognizing you've already given some pretty good color so far. But how have you seen the pattern shift, if at all, as we started into '26 here, crude is not at 50 anymore. So I'm just trying to get a sense if you're starting to see that recovery in activity take place? Or is it probably more of maybe a second or third quarter type benefit? Corey Higham: Yes. I think if we could see sustained mid-$60 WTI, we'll see some slow improvement. But right now, we're a month into 2026. There hasn't been a whole lot of change from the activity levels that we saw in Q4. Operator: And your next question comes from the line of Arthur Nagorny from RBC Capital Markets. Arthur Nagorny: Maybe just starting with the 2026 adjusted EBITDA guide. Can you maybe give us some perspective on what your assumptions might look like between the high and the low end of the range? Chad Magus: Arthur, it's Chad here. Yes, it's a similar range size to last year. And when we take a look at the macro and all of our different service lines of what can change, obviously, what we've seen in the past and that we are still, I'd say, have a little uncertainty around it is just metals operations and what happens there with tariffs and how we've been able to acquire more railcars and the logistics around that. And even if we could acquire more railcars, that can help improve that number. Obviously, field activity is the biggest impact especially with new drilling and completion activities that can have an impact. Obviously, we saw that decline in 2025. So that obviously can swing the ultimate range of what we come in at. Allen Gransch: Yes. I mean, so right now, we're at the midpoint. And I think all signs are pointing to very similar first half 2026 to the back half of 2025. So you're going to have that kind of being consistent. I do think a lot of our customers, they came out with their budgets in December and a lot of them are calling for 3% to 5% growth. And a lot of them have planned out what they wanted to do in Q1 and Q2. So even though you've seen the uptick in the commodity doesn't really change what they planned on doing. I think that's more of a back half story. So I think depending on where we see that going, they can make changes and shifts in what they want to do in Q3 and Q4. That's primarily you get out of spring breakup and they can start to get access to some of these locations, and we'll see activity pick up. And that's our expectation. And so you'll see us go above that midpoint when that activity level starts to percolate. And so we'll have more clarity on that as we get through Q1 and get into how does the spring-like conditions look like. But that would be your upside scenario just on activity levels in the back half of 2026. Arthur Nagorny: All right. That's helpful. And then I believe you mentioned you took some price in the back half of last year. Have you completed your pricing discussions already for 2026? And if so, can you give us an idea of kind of what that looks like across the business lines? Allen Gransch: Yes. We have had multiple discussions with our customers. I mean when you look at inflation in Canada, it was up over 3%. A lot of our price increases [ on Q1 ], you want to cover your inflationary costs, but also we want to make sure that we're cognizant of where our customers are at. And so it was a bit of a balanced approach, I would say, in Q4, and we were selective on certain service lines where we felt like we needed to increase prices more significantly. And it was a lot of detailed conversations with our customers, but we did manage to get that done in Q4. We don't plan on doing anything in the near term here. I think all those discussions have been settled. For us, right now, our primary focus is on operations, getting this facility commissioned here in the next couple of weeks in the Montney and then obviously turning our attention to some other growth projects and some tuck-in M&A. I think I've talked about M&A in the past just on -- there's a few more metal recycling locations we're looking at. And so that might come to fruition here in 2026 if we can get to the appropriate valuations. We also have some other complementary businesses that I think would fit well into SECURE's network. And so we're looking at those as well. And so you'll see a balance of our focus on some of the growth capital, but also on some of this tuck-in M&A that we think could be very complementary to 2026 and 2027. Arthur Nagorny: Got it. And then maybe on the metals recycling business, you mentioned the kind of inventory that you're working through given the disruption from last year. And just wondering kind of, I guess, where you're at with that? And maybe as a follow-up, I think near the end of the year, the Canadian government announced some measures to support the Canadian market. So just wondering if you're seeing any improvements in the [ Nomesta ] market yet and maybe how you're thinking about your go-forward positioning given some of these changes? Corey Higham: Yes. A couple of questions there. The first one would be really around how do we -- how we're working through our inventory. As I mentioned previously, I think we'll get through back to normal inventory levels and inventory turns by the midpoint of this year. So everything is going to plan. With respect to what are we seeing in the Canadian markets, we haven't seen much demand pull into the Canadian mills as of yet. There has been small orders here and there. But I think what we've done in our business with the railcar infrastructure, when and if there are buy signals from Canadian mills, we are well positioned to ship to Canadian mills as well as the U.S. mills. So now we have a lot of outlets for our scrap. So we feel very comfortable where we're at today, Arthur. Arthur Nagorny: All right. And then last question for me. Just curious how the Specialty Chemicals business did in Q4, if you can give some perspective on maybe volume or pricing or revenue, sorry. Allen Gransch: Yes. I mean on the specialty chem side, we're continually seeing more of our production chemistry being really a useful tool, specifically on the paraffins on the wax side of things. And so we've got quite a few programs now where we're assisting some of our customers with taking some of that wax out of their production streams. And so we saw a continuation of that in Q4. That's a pattern that we do have that we're quite happy to promote with our customers. Activity levels, I would say, Q3 over Q4 were relatively similar on the fluids and the equipment side. There wasn't really much of a change. I think it was really just as expected of what our customers wanted to do in the last quarter. But I would say we got the benefit on the production chemistry side and that side continues to perform very, very well as we roll out some of the new initiatives we have on not only the paraffin side, but there's also some on emulsion breakers and scale, and that seems to be going very, very well. I don't know, Chad, do you want to add? Chad Magus: Yes. Just looking at kind of year-over-year, again, I think similar to what Allen said, just probably up a couple of percent Q4 versus Q4 of the prior year. Allen Gransch: I think you would have also noticed as well, we had disclosed this lawsuit that we have with CES. And really, we're at the point now where it's gone through the federal courts and the Supreme Court recently concluded that we own this patent. And we put into our disclosure the potential claim of $100 million, and that's really based off of -- this goes back to 2018 and really the sale that relates directly -- the sale of fluids that relate directly to this patent as well as did you get the work because of that patent. And so the $100 million claim, I think that's something we're going to pursue here over the next couple of years. And it's really going to go back to how -- what will the courts do in terms of the timing of when that patent was concluded at SECURE's as well as are we including just the sale of the patent or also other fluid sales that are included in that. So that $100 million will be determined by the courts in some future manner, but that's also ongoing. Operator: And your next question comes from the line of John Gibson from BMO Capital Markets. John Gibson: Just in terms of the growth CapEx for '26, how much of it will be focused on your energy end markets versus more of the metals recycling or conventional waste businesses? And is this mix materially different than last year? Allen Gransch: No. The mix will be relatively similar. I think it's primarily weighted to our waste management business. On the metal side, we're calling it around the $10 million level. We've got the pre-shred and some equipment and then we've been leasing some railcars. But primarily, it's related to waste expansion at our facilities. When you look at certain areas like the Montney, it's busier. We haven't spent a lot on expansion capital here over the last few years. A lot of the capital we've directed more in closer to production within a specific customer. And so this is now looking at some of our facilities where we're getting to the point where it's almost a bottleneck and we need to expand to allow more volumes to come in. And so you see a little bit more of expansion capital in 2026 just because we're at that point in certain facilities that will need that required capital. John Gibson: Got it. Just in regards to your move to ship steel products to the U.S., what is the incremental cost on doing so? And I guess you mentioned the business was impacted by roughly 15%. Just wondering how much of this you can recapture with these improved logistics if volumes are similar? Chad Magus: John, there is obviously an incremental cost. It's just moving it further by rail. However, we've been able to recoup some of that by getting a better price by just having a bigger market to ship it to. So I think when you net those 2, there's maybe been a percent margin erosion, but we're continuing to work with markets to try to improve that. What was the second part of the question? John Gibson: No, that's great. That answers it. I appreciate it, and I'll turn it back. Operator: And your next question comes from the line of Maxim Sytchev from National Bank Capital. Maxim Sytchev: I had one quick follow-up on metals recycling, if I can. There was some speculation that perhaps some of the tariffs will be rolled back and administration sort of walked that down. But in case of the were to happen, can you maybe walk through how much of a tailwind that could be for the overall business right now that you have fully built out the capacity in the U.S. and Canada, obviously, on the metal side of things? Allen Gransch: Yes, I think we've been monitoring what's been happening in the U.S., and we've got a lot of relationships with a lot of the mills and we figured out the turnaround times and logistics for our railcars. And so if the Canadian market remains challenged, that's really giving us a competitive advantage over our competitors here in Western Canada. A lot of them don't have railcars, which we do. And so the fact that we're already 90% gives us that competitive edge. And from our standpoint, when we factor in the additional transportation cost to obviously get the scrap further down into the U.S. market, we have to reduce the price that we're willing to pay across the scale because we want to maintain our margin spread. And so from our perspective, at some point, that will turn where you're going to see that inventory that we may have paid a lower value for being realized in the Canadian market. And so all of a sudden, that shipping cost is going to go down, and you're going to realize some of that. And I think that's kind of what you're driving at. Difficult to predict. I mean it's just been -- we haven't seemed to make any ground on where we're going to go with the tariffs here in the U.S. And so our focus is really about getting the scrap in, getting it processed efficiently and turning it around into the U.S. I mean this whole electric arc furnace change has been substantial. The demand for scrap, we've seen it pick up. And I think Steve made the comment just on the commodities on copper on the nonferrous side is very strong. And I think even on the ferrous side, we're just seeing more and more demand for it from our perspective. And so I think the market is getting very, very robust, which is really, really good. And I think there will be a moment in time here as things play out where I think some of the things will be on the benefit of our side as we think about inventory levels and how activity is going to progress throughout 2026. Operator: And your last question comes from the line of Konark Gupta from Scotiabank. Konark Gupta: Just a few follow-ups. On the tuck-ins, I just wanted to clarify, the EBITDA guidance, the range does not embed any of the tuck-ins that you might do this year, right? Allen Gransch: That's correct. Yes. No, it does not embed any tuck-ins at this point. And that's something that -- because you never really know if you can get to a definitive agreement and get everything tied up to the way you want. So as that progresses and as we get potential opportunities coming across our desk, that's when we'll start thinking about, okay, what is this going to contribute to '26. So we -- I guess, long story short, we'll provide guidance when the acquisitions happen and what that means for 2026. Konark Gupta: Okay. Great. And on the cash flow side, I don't think I heard too much today. So just like in terms of any outlook for ranges, et cetera. I mean your EBITDA at the midpoint is up $35 million, I think, and CapEx -- total CapEx is down about $65 million. So that's $100 million together. I mean, should we simply add that $100 million to the cash flow? Or should we consider any other factors this year, like taxes, et cetera? Chad Magus: Yes. I mean there's not -- I would say the remaining items will be relatively in line with what we saw in 2025. I think, obviously, cash interest will change a little bit depending on our leverage ratio. And then cash taxes, we're still kind of in a transition year in 2025. So it will be slightly higher as a percent, if you look at it, I guess, on adjusted EBITDA, slightly higher next -- in 2026. But still probably not above that $60 million mark for the full year. And then when we just look at the conversion ratio, we're still going to come out higher than 50% discretionary free cash flow conversion from adjusted EBITDA. Konark Gupta: That's helpful. And last one, on the GICS, I heard you guys talked about the S&P and MSCI discussions. I mean with the accounting change, I mean, that reduces a substantial portion of your sort of commodity revenue, right? And what would be some of the GICS options that might be available to you? I mean I know you cannot choose, but what you might qualify for D&O at this point? Chad Magus: Yes. Thanks, Konark. Yes, good question in the past, we can make certain recommendations, but obviously, they ultimately decide. But definitely, it should result in a change. Next steps will be all of our information will be updated. I definitely think they will change it. I don't know how long it will take to change it. But I mean, more of an industrial type [ GICS ] code, there is when you look at all the different waste peers, there is a number of different ones. They're not all exactly the same. But we think any of those would be more relevant than where we are today. Allen Gransch: I think, too, I mean, this accounting change will be very helpful for investors and shareholders. I think when you go on Bloomberg and you're looking at our financials, you're now looking at all of the margins are where they need to be, and we've got the highest margins out of all of our waste peers. We've got the highest discretionary free cash flow per share, return on capital. We've increased the dividend as well. Just showing that you come out of a trough year like 2025, and we've got the conviction to not only push up the dividend, we've been buying back stock, just showing that the value of the business is -- there's more to go. And when we compare to some of our waste peers and you look at some of these key metrics, we stack up very, very well. So we're pretty excited. We're happy that we came off of 2025 and here we go in 2026. So that's a lot. Operator: That ends our question-and-answer session. I will now hand the call back to Allen Gransch for any closing remarks. Allen Gransch: Well, thank you for your time today and your continued support of SECURE. We look forward to talking with you again at the end of April with our Q1 results. Operator: This concludes today's call. Thank you for participating. You may all disconnect.
Operator: Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Unipol Full Year 2025 Preliminary Results Conference Call. At this time, I would like to turn the conference over to Mr. Matteo Laterza, CEO of Unipol, for a brief introduction. Please go ahead, sir. Matteo Laterza: Good morning. Thank you to all of you for participating to this call. Before opening, as usual, the floor to the questions. Let me make some remarks on the number that we disclosed this morning. We closed the first year of the industrial plan achieving results mainly above our targets in all the principal, industrial and financial KPIs. First of all, in P&C, as you have seen, premium performed very well, both in motor and in non-motor, where in non-motor, as usual, the main driver was the health insurance, where we are following a very solid and important trend in the Italian market. The combined ratio closed at 92.9% that is in line with our target. But I think it's important to underline once again the prudence that we decided to adopt in assessing our technical reserve and in particular, in defining the loss component related to natcat event in the property line of business, which explains in a big part, the impact of natcat event of 9 percentage points in a year where, as a matter of fact, was quite benign in terms of natcat. In Life, we had a very strong performance in terms of premium driven both by agents, distribution network and bancassurance. And at the same time, we reached our target of new business value and contractual service margin. So also in Life, we performed very well. In terms of investments, we had a very robust contribution coming from the ordinary yield, which means coupons and dividends coming from our investments. And it has been a very important driver for the result that we achieved in 2025. As a result of all these items, we reported a consolidated result, as you have seen, of more than EUR 1.5 billion, which reflects, of course, a positive impact, also the positive impact coming from the participation to the tender offer that BPER launched in Banca Popolare di Sondrio. But much more important for us, and you have to focus on the insurance group net result that was above EUR 1.2 billion because it represents the contribution coming from the insurance business. And it gives to you the idea in a sort of sense of the cash remittance of the group. We think this number is very robust in terms of quality of all the items that contributed to produce this number. And this is the reason why we decided to pay and to propose a dividend of EUR 1.12 per share, which means more than 70% of the insurance group result. We think it is a very solid number. That can be considered a floor in terms of dividend that can be paid also for the year that we last in the present industrial plan. It is a very solid number also considering the very strong solvency that we reported, 233% that, as you know, is burdened by the very expensive contribution coming from the -- our banking stakes. If you look at the number of the insurance group, we are at 281%, which is a very solid number. And again, the main contribution to the solvency number come from the organic capital generation that we achieved in 2025 that once deducted the EUR 804 million of dividend is close to EUR 500 million. That is more or less half of the capital generation -- net capital generation target of all the industrial plan. So summing up all this number, we are above the first year KPIs in terms of industrial and financial numbers. Of course, we are still in the first year of the industrial plan. We have still 2 years ahead of us. But our commitment, as we said, when we disclosed and we published industrial plan is to deliver and hopefully over-deliver the number that we have as KPIs and that we disclosed 1 year ago. Having said that, with Enrico San Pietro, we are open to answer to your questions. Operator: [Operator Instructions] The first question is from Tommaso Nieddu of Kepler Cheuvreux. Tommaso Nieddu: The first one would be on dividend distribution. As you said, you moved the payout to around 71% of insurance group earnings, which I believe surprised the market. But how should we see it going forward? Also given that you have had a very strong capital generation, a lot of excess of capital, why shouldn't we consider 70% the new structural payout? And -- but even if we consider the EUR 0.12 dividend per share would be already well above the cumulative guidance of the industrial plan. So either perhaps you can either give us a bit more color on the payout or on the cumulative guidance? The second question is on technical profitability. It was very strong, but with, as you said, slightly higher natcat load in non-motor. So my question is, are you running with additional prudency buffer. And why is that? I thought you were already very, very prudent. And the last one on solvency. Yes, there was a very strong factor coming from organic capital generation, but part of this strong number also seemed due to lower SCR, can you explain us the dynamics there? Was it all due to BPER. Matteo Laterza: Thank you to you. First of all, in terms of distribution, as I said, we look very closely to the insurance group result because it gives to you the idea of the cash remittance of the group. 71% is a very solid number. And we think that going forward, we are able to consider it as a sort of floor in terms of dividends also for the next couple of years. As you can see, it is above the target that we disclosed in the industrial plan. And so consequently, concerning at least the dividend, we are working on an overdelivery compared to the EUR 2.2 billion of dividend accumulated in the industrial plan. You talk about excess capital. I don't think it is excess capital. I think that we must be always in the condition to have capital and to raise capital when there are good market opportunities to do it because once you need it, you must have in your balance sheet, the capital to finance the growth in the business in which you want to grow like bancassurance or health insurance or for whatever opportunity that you can have in the future. Because when you have the opportunity, you must have also the capital. It is not suggestible on our point of view to take in consideration the opportunity without having the capital in your balance sheet. And this is the reason why I don't consider it excess capital, but only a good buffer that we can have in order to face any kind of scenario. Also the fact that we are in a very good situation in terms of performance of financial market. And consequently, you can also have in the future a risk of period for financial market that can have also a negative implication on your solvency. Concerning solvency, you said correctly that the main driver is the organic capital generation. There has been something also in the reduction of SCR, mainly driven by some change in the solvency capital requirement coming from the banking business in the final quarter of the year. But mainly the increase in the solvency is due to the organic capital generation, and there is also a positive contribution from the economic variance as a consequence of the fact that financial markets performed very, very well. On the technical profitability, I said that we were very prudent in both in motor and in non-motor, but I leave Enrico to elaborate on it. Enrico Pietro: Yes. So as far as nat cat is concerned, we decided to take a very prudent approach on what is, as we all know, a very volatile risk. So basically, we calculated the risk adjustment on this specific risk, taking the distribution curve of the expected loss and put at the 92nd percentile the figures that amounts around EUR 220 million of additional risk adjustment. This is probably the most visible prudent move, but the overall technical profitability was very good, both on motor and non-motor business. Operator: The next question comes from Andrea Lisi with Equita. Andrea Lisi: The first question comes back on the solvency, which increased significantly in the quarter. we know that then you issued an AT1 at the beginning of the year. And so this will further increase the capital position. So just to understand what are you planning to do with such a level of capital? I understood that it is not considered excess capital for you because you won't have a wide buffer. But also to understand if you currently see M&A opportunities in the sector or other ways to deploy to accelerate organic growth? And related to that, we have seen that you already achieved EUR 0.5 billion of excess organic capital generation this half of your business plan target. Can we consider medium debt to be distributed to shareholders at some point? The other question is on the evolution of the business. We have seen a really good dynamic on non-motor premium, while a bit of deceleration on motor. I think this is mostly related to comparison basis. But just to have a bit more insight about what are you observing in the industry currently. Matteo Laterza: Thank you to you, Andrea. And yes, we issued restricted Tier 1 in January that, of course, strengthen further our capital position today. As I said before, when there are opportunities in the market, we tend to take advantage of them. And the credit market situation at the end of last year, beginning of this is very positive. We were able to issue a restricted Tier 1 where we had plenty of room of computability -- was executed at a very moderate cost, 6% of coupon. And we took advantage of it. And of course, we have a very, very strong capital position, and it will be used to finance our opportunities of organic growth in excess of our assumption of the industrial plan. You know that we are growing very fast in health insurance, in bancassurance. There are no M&A transaction on the table. But once you have and this could be an opportunity in the future, as I said before, you must have the capital to exploit it. And finally, we are in a very positive situation in terms of financial market, but you never know. The geopolitical situation is very uncertain today, and we must prepare ourselves to the worst. And this is the reason why we decided to take advantage also following a lot of insight that we received from our investors to take advantage of the very positive situation of financial market. This is not excess capital. So of course, the redistribution of capital to our -- to the shareholders is not an alternative for us at the moment. We recently raised EUR 1 billion, and the reason why we did it are the one that I mentioned before. Concerning the trend in P&C before leaving the floor to Enrico. As I said before, the main driver is health insurance, but all the line of business grew in the P&C area, both in motor and in non-motor. Of course, our commitment is to combine this strategy of growth of premium with our commitment in maintaining a decent level of technical profitability in all the lines of business. But on this, I leave -- I let Enrico to elaborate on it. Enrico Pietro: Okay. So as Matteo just said, we had growth in all our business lines. Of course, in non-motor, the main driver of growth for us, but also for the market is health that is growing double digit in this period and in which we are a market leader. And we can add also that property business is growing. Property business is growing for the market and also for us. There is, of course, an impact related to the compulsory nat cat cover for Italian companies. And this is something that is driving growth on all our distribution channels. So good growth on property for Unipol and agency network, but also on Arca, so means BPER network. As far as Motor is concerned, we have a growth of 2.6% in motor third-party liability that is the result of an increase above 3% in the average premium and a small -- very small decrease in the number of contracts and solid growth in motor other damages, 6.7% that is due both to a price effect and also an increase in the demand of motor other damages cover. Operator: The next question is from Michael Huttner of Berenberg. Michael Huttner: I had 4, please. Two of them on Motor, one on health and one on the CSM. On Motor, my first question is on the frequency benefit, the 12 bps, which you mentioned in the slide. I just wanted to understand how to measure that. It sounds big, but I don't know what the base number is. Is it like a 5% improvement or 10%. In other words, 12% divided by what? And maybe you can give a feel for how sustainable this is? In other words, is it structural or cyclical? Then on motor pricing, I wonder if you can give us a quick update of where we are now. On Health, just to understand the business better, can you outline what the product is. It's just to understand what the risk is. The feeling I have is it's an annual policy. It's not a lifetime policy. And therefore, the pricing, therefore, resets, and it gives cover for hospital and medical care. I mean, a fairly standard thing. But just to understand. And then the final thing, you didn't mention it, but I just wondered whether you can give a little bit more color. The CSM is up, I think, 15%. A large chunk of that is the economic variance. And I can just -- I just wondered if you can give us a bit of color of where it's coming from. Matteo Laterza: Yes. On CSM, I will answer and then I will leave Enrico to answer on motor and health. The increase in CSM is driven by the -- also by the economic variance. Of course, the contribution to economic variance comes from the change in the assumption in financial -- and the assumption in the trend of financial market concerning the solvency, I said that also in this case, economic variance gave a positive contribution as a consequence of the fact that equity market, credit market, the spread of government bonds narrowed versus the bond. And as a consequence of that, we had a very positive contribution coming from the economic variance. Also in the case of CSM, we had a positive contribution coming from the trend of financial market. And in particular, the contribution come from the widening -- sorry, narrowing of the spread, contribution of equity and consequently from the mark-to-market value of the financial guarantee. Enrico Pietro: Michael, So as you have seen, we had very good results in terms of technical profitability as far as motor business is concerned. As I told a few minutes ago, there was a relevant contribution in this improvement related to motor other damages classes that is not only growing at a quite fast pace, but also improving the technical profitability since, of course, 2025 was a very benign year for nat cat events, but also for the overall business line. But also in motor third-party liability, we were able to improve our loss ratio in the loss ratio has improved since -- basically, we were able to offset the increase of the average cost of the claim with the increase of the average premium. And we can consider about your question that the increase in loss frequency, the improvement in loss frequency, sorry, was something that is explaining the improvement in the current year loss ratio in motor third-party liability. We also have to add that in motor business, there was a more positive evolution of prior year reserves compared to 2024. So a couple of points are about this issue in which -- in 2024, we suffered a little bit in motor other damages because our reserves of the nat cat event of Summer '23 were not perfect. And so we didn't have the positive evolution we usually have in this kind of business. So this is about the overall result in motor. But if you can go to the second one. Second question is about motor pricing. The market had an overall average increase of prices related what happened on Milan Court schemes for permanent disability indemnization. Now we are entering a new phase in which prices are still going up, but at a very slow pace. So basically, my opinion is that we are in a very good situation. Our profitability is above our expectation in the strategic plan. So we are now below the 95% of combined ratio that is our target. And I expect that in 2026, price increase continue to be quite low because also the other players were able to recover profitability. As far as health insurance is concerned, there are different kind of product line we offer. The main one is related to corporate big businesses. So UniSalute was set up 30 years ago, 1995, believing that the Italian market will need some health insurance cover to have with a faster way services that the national health system is more and more in trouble in delivering. So what's happening is that for many years, this was the main business line for health, for UniSalute, so big agreements with trade unions, but also big corporation and funds. And we were able to grow this way. We are still growing. Now of course, there is also a relevant price effect on that because the loss frequency is increasing, and we are one step ahead increasing prices and changing condition to keep the profitability good enough. But in recent years, there is another relevant growth engine in the individual offer, both with bancassurance and our agency network that are individual products that cover basically all your possible health needs. So diagnostic examination visits for specialists, doctor specialists and of course, also if you need surgery or other medical services. So the big part of the portfolio is still corporate business, but the individual business is growing at a very fast pace. Operator: The next question comes from Gian Luca Ferrari of Mediobanca. Gian Ferrari: Sorry to come back on solvency and economic variances. I was trying to reconcile the 15 points increase, thanks to the economic variances. And I understood, Matteo, you mentioned BTP bond spreads going down, but actually, they went down 50 basis, which means 5.5 points, if I look at your sensitivities. Equities up could have added another couple of points. So I can reconcile only half of these 15 points. So if you can help us with all the moving parts to rebuild this impact. The second is I cannot find any more the PVNBP and the new business value in the presentation in the press release. I was wondering if you don't consider these KPIs any relevant? And if there are just somewhere else, if you can provide us the numbers. The third is some write-downs in Q4. I think it is as usual, linked to some realignment of real estate assets. But if you can give us some color on what are these write-downs in Q4 in the P&C segment. And I cannot avoid asking you the hot questions of the moment, which is about autonomous driving and AI, how these 2 factors can change your industry going forward, if you see only threats or also opportunities? Matteo Laterza: Thank you to you, Gian Luca, concerning the economic variance, this is the breakdown of the economic variance versus the number at September '25. We had a positive contribution in the whereabout of EUR 300 million plus, where we had a positive contribution of EUR 240 million coming from the spread. The EUR 200 million coming from equity plus our noninsurance stakes and the negative contribution coming from interest rates of EUR 131 million. Maybe you were misleaded by the fact that there were also negative contribution coming from interest rates. Then if you have -- want to have more color on that, you can ask our IR to have more color on it. The other question was the new business value. New business value is a very important KPI for us. It is not a secondary Tier 2 industrial CPI. I said this in the introduction of -- to the result. We achieved a new business value that is in line with our target. And for us, it is important because you know that in Life, it is not so important. On our point of view, to be #1 in terms of premium collected, but it is much more important to the quality of the premium that you collect. And a proxy of this quality is the new business value that is, of course, strongly related to the contractual service margin that you produce with the new production. And it is a number where we reached our target overall. I have to say that in 2025, we grew in Life premium more than 20% also because of the 2 very important and very big contracts in the pension funds. Pension funds is a very interesting business, but with a very low profitability in terms of new business margin. So what we have to do going forward is to work more on the high profitability line of business like term premium, annual premium, where I think that we have room for improvement. Finally, on AI, autonomous driving, there is also some study, if I remember well, concerning the AI applied to the brokerage business that had a negative impact on the performance of the sector. We are discussing for a very long time on the implication of the autonomous driving on the Motor TPL business. Of course, there is this trend. As usual, there are threats, but also opportunities. I'm not very worried about it, both concerning the autonomous car and the use of artificial intelligence for the brokerage. But on this, maybe Enrico is much more skilled to answer to this issue than me. So I leave the floor to him. Concerning the real estate, yes, we took the opportunity to make some provision on the real estate portfolio above all in some of the building that we have, in particular, there is -- the headquarter that we have in Milano, San Donato, there is a tower that is not used as instrumental but is rented. And this rent has got to maturity, and we are looking for a new tenant. And in the meantime, we took this opportunity to restate the value of the tower to the fair value of the asset, and we took a charge in this case of EUR 20 million. On top of that, we did other restatement of a little bit less than EUR 10 million, but are very fragmented in a lot of buildings. The main one is the one that I mentioned. Enrico Pietro: Gian Luca, so let me add something about both autonomous driving and AI. On autonomous driving, yes, I remember we were able to organize in 2015 an International Congress in Rome that was named Mobility 2025. So international expert coming from U.S.A. and of course, all over Europe about what could be the evolution of autonomous driving. And what can we see now after 10 years and is that -- this phenomenon was slower than expected. Of course, it's limited today to shared mobility. So the Waymo taxi in San Francisco that now are expanding in other 10 cities in U.S. but is what we understood in this period that is slower and probably strictly related to a change in the pattern of mobility. So much more keen to used for shared mobility solution and not yet visible for private vehicles mobility solutions. So in the end, we are -- we still are really interested in this, but I see something that will have a very limited impact on our business and very, very slow impact on our business. As far as Gen AI is concerned, we can probably discuss about the impact on our business in terms of distribution changes. And of course, we are interested in what's happening, but I think that the impact, the perception of this issue was really exaggerated. Basically, what is concerned is for the Italian market, digital distribution that never became a real relevant distribution channel. And so I don't think we will have a visible impact on the Italian market for a very long time. On the other side, Gen AI is a very important new technology in which we are investing -- already investing both to become more efficient, but also to be able to serve better our customers. Operator: The next question is from Elena Perini of Intesa Sanpaolo. Elena Perini: I've got 2 of them and then 2 follow-ups. The first question is about your dividend. You mentioned the possibility of over delivering versus your EUR 2.2 billion cumulated target. Are you also considering the possibility of introducing potentially an interim dividend? The second question is about your combined ratio evolution. Considering that you have already overachieved compared to your target for the motor business. Do you expect the convergence to your 2027 consolidated target to be driven from -- by the non-motor business, also considering the higher weight of higher margin businesses like the bancassurance and also the health. And how could the property business produce some noise in this. Then about the 2 follow-ups, I was wondering whether the pension funds mandates, which impacted the first quarter for Life were limited to the first quarter? Or did you have something also in the final part of the year? And then on the real estate, I was wondering whether the write-offs impacted only the other sector or in some aspects also the P&C business. Matteo Laterza: Thank you, Elena. Concerning the dividend, we said quite clearly that EUR 800 million is for us a floor going forward. So we are already today in a sort of overdelivery mood in the dividends. So it is not a possibility, but it is a thing in which we are working on. And we are in the condition to say that we can propose this number also for the next couple of years, EUR 1.2 billion of insurance group result is a very good number above all, if you consider the quality of the number in terms of contribution coming from the technical profitability, the investment income and whatever. So we are in the condition to say that EUR 800 million is today the floor of -- in terms of dividend payment in cash. The interim dividend, of course, it has not an economic impact, but also not only a financial one. I know that the market likes this kind of payment strategy. We have to consider if our bylaw, I don't think that allow us today to do it. But in the future, we can -- by changing the bylaw, we can think about doing it. It is not a strategy that is on the table today. I can't exclude it in the future. Concerning the combined ratio evolution, I leave the floor to Enrico and then I will answer maybe to the other one later. Enrico Pietro: Elena, so the motor combined ratio is already better than our target. But still, I think it's prudent to keep the 95% combined ratio target for the plan, considering that we had a very good year for motor other damages and also that market condition in MTPL can change in the next 2 years. And as far as the non-motor is concerned, the relevant growth, both in bancassurance and in health, of course, is a very good news, but it was already for a very big part included in our strategic plan. So our aim is to grow where profitability is high and volatility is low. And so both of those businesses are perfectly fit in this strategy. So maybe it could be a little better, but the biggest part was already included. And the third question was about the property business. Yes, can produce some noise because, of course, nat cat is volatile, but we are very careful in growing in property and especially in cat nat, very careful to avoid risk concentration, both geographical risk concentration and also peak risk concentration. And last but not least, we have a very solid reinsurance coverage. So we don't -- we added to our traditional reinsurance program about the excess of loss treaties. The aggregate treaty that protect us also from frequent medium-sized events that can be below the attachment point of the reinsurance treaty in excess of loss. So it could happen, but I think in this case, we will be able to deliver good results anyway. Matteo Laterza: Elena, concerning the pension funds, we had, as you said, the impact in the first quarter of the year. But also in the final quarter of the year, there was an impact as well. And concerning the contractual service margin overall, the contribution to the CSM is overall coming from the pension fund is EUR 25 million on a total of EUR 287 million of total new production profitability. And finally, concerning the provisions, there are part in the P&C business, in particular, EUR 20 million concerning the tower in San Donato that I mentioned before. But also in P&C, there are EUR 30 million of charge that we very prudently booked on the financial investment in fiscal credit coming from the bonus 105%. Very prudently, we decided to put this further EUR 30 million. So total, EUR 50 million. And other EUR 10 million are in the other activities. Then there is in Life also more or less EUR 10 million coming from the integration of Cronos that, as you know, we incorporated in the final part of the year. Operator: The next question is from Antonio Gianfrancesco of Intermonte. Antonio Gianfrancesco: Two from my side. The first one is on the financial investment yields. You reported a gross financial investment yield of 5.2% in 2025 with a 4.2% running yield. So given the current rate environment and your asset allocation, how should we think about the forward-looking running yield for the next 2, 3 years? And I was wondering if -- do you see scope for improvement. Or should we assume a sort of stabilization around current levels? And the second one, sorry for that is a follow-up on the CSM because I understand that in 2025, there was -- there were some, let's say, one-off, for example, Cronos integration and extremely favorable economic variances. But looking ahead, how should we think about the sustainable growth rate of the CSM? For example, 15% growth year-on-year before release could be a reasonable assumption, also considering your -- what you said about the driver for the life premiums in the future? Matteo Laterza: Thank you to you. Concerning the financial investment yield, looking forward, you should trust on the ordinary component of the investment yield because you never know, and we never do assumption neither positive nor negative on the performance of financial markets. So we tend to assume no capital gain or capital loss coming from the mark-to-market of financial assets. And consequently, the 4% running yield could be assumed as a proxy also of the ordinary contribution coming from the investment. Having said that, in the history, we always succeeded in producing additional alpha on that, but it is not, of course, a certain event. And so prudently, you can maintain the 4%. Concerning the CSM, our target, and that is the -- what we achieved in the past, is to have a final CSM that is in line or higher than the opening CSM. It means that the CSM creating from the new production plus the expected return that is a part of the organic and ordinary CSM is in line or above the CSM released. We don't consider the economic variance component because it is something that has nothing to do with the performance of the company because it is a byproduct of performance of financial market. And as you correctly said, in 2025, there was the extraordinary contribution coming from the CSM that we inherited from Cronos that is a one-off. In Life, we are working on the quality of the production in order to increase the contribution coming from annual premium, terms product and all the line of business where we can have a profitability that is a multiple of the profitability that we can have from investment product. We look forward as a consequence of that, to increase the contribution coming from CSM, but it is a very long path that you have to follow through a strategy focused on the quality of the product, the kind of product that we distribute, the quality of the distribution with our agents that are all drivers in which we are fully committed to execute an improvement of the quality of the production in Life. But in general, what we look forward is to produce with the expected return more than we release. Operator: The next question is from August Marcan of UBS. August Marcan: My first one is on your reinsurance renewals. Some of the -- your European peers were saying they could either get quite better terms and conditions or lower prices. So I was just wondering if you have any comments on how your renewals went. The second one is, I just wanted to get your thoughts on -- it seems that the dividend is going to run ahead of the target. The motor combined ratio already is ahead of target. I was just wondering, have you considered internally just upgrading the '27 targets? And then finally, on capital, I think you made it quite clear that you want to be ready if there's any inorganic opportunity on the market. But my question is, if it's the case that there is no opportunities by end of the plan, would you then consider returning that capital to shareholders? Matteo Laterza: Okay. I start answering to the first question about reinsurance renewals. Yes, the market has evolved after a couple of years of hard market started a new phase of softening market for reinsurance cover, especially, of course, nat cat covers that accounts for the vast majority of the premium. We are paying to reinsurer to cover our profit and loss account and our capital position. So yes, it was a year in which due to the improving results of the reinsurance market on a global base, but also on our homework on our risk management activity, we were able to obtain a risk-adjusted decrease of low double-digit decrease. Of course, at the same time, there was an increase in the amount of risk we have to cover, and this partially offset this decrease in the cost of the main treaties that is the excess of loss in properties. So for the near future, we expect that there could be another period in which if things on nat cat business continue to go this way, we could obtain a further reduction in prices and improving in condition of reinsurance treaties. Enrico Pietro: On the other question, again, on dividends, it is not in our attitude to restate target in any way. our commitment is in over-delivering the target. We said quite clearly several times that EUR 800 million is a floor. So by multiplying by 3, EUR 800 million, you can understand what our target is today. It is not necessary to restate target. But what is important is the substance of the concept that says that EUR 800 million is a sustainable number in our industrial plan. On the capital, I've been doing this job for more than 30 years, and I have been also a portfolio manager, and I did the same question several times to the CEO of the company. Believe me, it is not a good situation being my shoes to be short of capital when you need it. So asking to restate capital to a company could be in the short term, a very positive action for the stock price, but it is not a good idea in the medium, long term because when you are in a situation like the COVID that we had a few years ago or the Lehman bankruptcy in 2008, being short of capital is a very awful situation for a CEO of the company and asking for capital in a very bad situation in financial market is not very easy. And so it is not an option for us. We are committed to use this capital in a very profitable way. It is a duty of an administrator or a CEO of a company. And this is the commitment in which I can assure that this capital will give -- will deliver a very good and satisfactory remuneration for the shareholders. Operator: The next question is from Alessia Magni of Barclays. Alessia Magni: Last question from me on -- the others have been asked. On capital, if you have to invest outside, so inorganically, what would be the areas of interest that you potentially look at? And would you also look for assets outside Italy? Matteo Laterza: Yes, we are interested to all the opportunities that can create value for our shareholders, of course. And in our country, there are not so many opportunities in the market also because we are the first player in P&C. And so there are not so many -- no opportunities at the moment to use the capital that we have. It doesn't mean that in the future that can -- we can have some opportunities that we can exploit in the insurance business where we are -- we have our core business. Outside the country, as we have always said, we look at all the opportunities that can create value. It is quite difficult to create synergies in the cross-border transaction. But nevertheless, and it is a commitment that we have already had in the past, we don't have a bias in an area or in another. Of course, we are interested to our core business that is P&C. And if we would have an opportunity to look at, we would do it with interest. At the moment, there are not also in this case, interesting opportunities also because in this moment, in the other area outside Italy, again, we don't have transaction that can be -- in which we can be interested, too. Operator: [Operator Instructions] Mr. Laterza, there are no more questions registered at this time. Matteo Laterza: Thank you very much to all of you, and we will see again in May for the first quarter. Thank you very much. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.
Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Hudbay Fourth Quarter 2025 Results Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, February 20, at 11:00 a.m. Eastern Time. I would now like to turn the conference over to Candace Brule, Vice President, Capital Markets and Corporate Affairs. Please go ahead. Candace Brule: Thank you, operator. Good morning, and welcome to Hudbay's Fourth Quarter and Full Year 2025 Results Conference Call. Hudbay's financial results were issued this morning and are available on our website at www.hudbay.com. A corresponding PowerPoint presentation is available in the Investor Events section of our website, and we encourage you to refer to it during this call. Our presenters today are Peter Kukielski, Hudbay's President and Chief Executive Officer; and Eugene Lei, our Chief Financial Officer. Accompanying Peter and Eugene for the Q&A portion of the call will be Andre Lauzon, our Chief Operating Officer. Please note that comments made on today's call may contain forward-looking information, and this information, by its nature, is subject to risks and uncertainties, and as such, actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the company's relevant filings on SEDAR+ and EDGAR. These documents are also available on our website. As a reminder, all amounts discussed on today's call are in U.S. dollars unless otherwise noted. And now I'll pass the call over to Peter Kukielski. Peter Gerald Kukielski: Thank you, Candace. Good morning, everyone, and thank you for joining us for today's call. 2025 was a transformative year for Hudbay as we achieved the third consecutive year of record financial performance. We delivered record annual revenues of more than $2 billion, record annual adjusted EBITDA of over $1 billion and record annual free cash flow generation of more than $380 million. Our diversified operating platform demonstrated resilience and enabled us to deliver our 11th consecutive year of achieving copper production guidance and fifth consecutive year of achieving gold production guidance. We also outperformed our twice improved consolidated cash cost guidance, demonstrating industry-leading cost performance. These achievements are even more remarkable considering the significant challenges we had to overcome with wildfire evacuations in Manitoba and social unrest in Peru last year. We are delighted to have secured Mitsubishi as a premier long-term partner for our Copper World project in a precedent-setting joint venture transaction. This transaction enables us to unlock significant value in our copper growth pipeline, further solidifies our financial strength and significantly reduces our share of future equity contributions for the development of Copper World. Our prudent strategic financial planning and execution has enabled us to achieve our balance sheet deleveraging goals ahead of schedule and lowered our cost of capital. We now have the financial flexibility to sanction Copper World in 2026, embark on generational investments in our operating portfolio and commence increases in shareholder returns with our first-ever dividend increase as part of our holistic capital allocation framework. This will allow us to continue to deliver attractive growth and maximize long-term risk-adjusted returns for our stakeholders. Slide 4 provides an overview of our fourth quarter operational and financial performance. The fourth quarter underscored our commitment to operational excellence with standout performance in Peru, driven by high-grade Pampacancha ore, record monthly throughput achieved at the New Britannia mill in Manitoba and the successful completion of the SAG mill feed system in British Columbia. We achieved $733 million in record revenues and $386 million in record adjusted EBITDA during the fourth quarter. We produced 33,000 tonnes of copper and 84,000 ounces of gold in the quarter despite an 8-day power outage in Manitoba and lower throughput levels in British Columbia. Our operations in Peru had a strong finish to the year with a final quarter of Pampacancha mining activities. Fourth quarter net earnings were $128 million or $0.32 per share, reflecting strong gross margins as a result of higher metal prices and $25 million received for business interruption insurance from the mandatory wildfire evacuations in Manitoba. After adjusting for the insurance proceeds and other noncash items, fourth quarter adjusted earnings was $0.22 per share. We continue to demonstrate industry-leading cost performance in the fourth quarter with consolidated cash costs of negative $0.63 per pound and consolidated sustaining cash cost of $0.94 per pound. These costs significantly improved compared to the third quarter, primarily as a result of higher copper production and higher gold byproduct credits. Turning to Slide 5. Hudbay's unique diversification in copper and gold, coupled with our relentless commitment to cost control, enables us to maintain industry-leading margins and deliver strong and reliable cash flows. Operating cash flow before change in noncash working capital was $337 million in the quarter, a meaningful increase compared to the third quarter, reflecting higher copper and gold sales volumes from normalized operations after the temporary interruptions and higher metal prices. After accounting for the capital investments to sustain production, we generated $228 million in free cash flow during the quarter, bringing annual free cash flow to $388 million in 2025 and achieving new quarterly and annual record levels. While the majority of revenues continue to be derived from copper, revenue from gold continues to represent a growing portion of total revenues with 41% of gold revenues in the fourth quarter. Our deleveraging efforts continued in the fourth quarter as we repurchased and retired an additional $39 million of senior unsecured notes through open market purchases at a discount to par. We are proud to say that since the end of 2024, we have reduced our long-term debt by $185 million, bringing our total debt levels to $1 billion today. We ended the quarter with total liquidity of $994 million, including $569 million in cash and cash equivalents and undrawn availability of $425 million under our revolving credit facilities. Our net debt-to-EBITDA ratio further improved to 0.4x at the end of December. After year-end, our cash and cash equivalents balance increased to $992 million with the closing of the Copper World joint venture transaction in early January. This increases our adjusted total liquidity to over $1.4 billion and further lowers our net leverage ratio to 0x. This financial transformation demonstrates the benefits of our diversified operating platform, industry-leading costs and prudent balance sheet management. We are extremely well positioned to prudently reinvest in our portfolio of attractive, high-return brownfield and greenfield opportunities to drive production growth and long-term value creation. In Peru, we exceeded the top end of the annual gold production guidance range and achieved the copper production guidance range despite the impact of a temporary operational interruption due to social unrest as shown on Slide 6. Our Peru operations had the strongest quarter of the year in the fourth quarter as we continued to see strong copper and gold grades from Pampacancha, and we processed less ore from low-grade stockpiles compared to the prior quarter. We continue to optimize the mine plan with more ore mined from Pampacancha during the quarter than previously expected, resulting in the accelerated depletion of Pampacancha in late December as opposed to early 2026. The operations produced 25,000 tonnes of copper, 33,000 ounces of gold, 731,000 ounces of silver and 325 tonnes of molybdenum during the quarter. Production of copper, gold and silver increased by 38%, 25% and 27%, respectively, compared to the third quarter due to higher ore milled as the third quarter was impacted by the temporary operational interruption. Mill throughput increased to 7.6 million tonnes in the quarter due to higher mill availability than the third quarter, partially offset by the scheduled semiannual mill maintenance shutdown in the fourth quarter. Milled copper grades increased by 26% compared to the third quarter with higher grades from Pampacancha and less ore processed from stockpiles. Milled gold grades also increased with a strong gold contribution from Pampacancha. Mill recoveries were in line with our metallurgical models based on the ore being processed. Fourth quarter cash costs in Peru were $0.57 per pound of copper, decreasing by 56% compared to the third quarter with the benefit of higher gold byproduct credits, partially offsetting higher profit sharing. Full year cash costs in Peru outperformed the low end of the guidance range and improved by 8% from 2024 due to lower treatment and refining charges and higher by-product credits. Fourth quarter metal sold was higher than the prior quarter as some copper concentrate sales in the third quarter were impacted by ocean swells and were deferred to the fourth quarter. While copper concentrate inventory levels normalized at the end of last year, there were elevated levels of precious metals contained in the inventory concentrate due to a higher portion of Pampacancha production in the second half of the year, resulting in a shift of some precious metal sales from December 2025 to 2026. We continue to advance the installation of pebble crushers in Peru to increase mill throughput rates starting in the second half of 2026, which will allow Constancia to deliver steady annual copper production despite lower grades from the depletion of Pampacancha. These efforts align with the Peru Ministry of Energy and Mines regulatory change to allow mining companies to operate up to 10% above permitted levels. Turning to Slide 7. Our Manitoba operations were previously tracking within the 2025 guidance ranges despite the wildfire impacts. However, as a result of the weather-related power outage in October and the subsequent ramp-up period required to restore full operations, gold and zinc production fell below the low end of the respective ranges. That said, we successfully achieved guidance for copper and silver despite these interruptions. Performance in the fourth quarter demonstrates that our Manitoba operations have normalized following the significant wildfire disruptions. Our Manitoba operations produced 47,000 ounces of gold, 3,000 tonnes of copper, 6,000 tonnes of zinc and 214,000 ounces of silver in the quarter. Full year production in Manitoba was lower than the prior year as a result of production deferrals from the wildfires, the weather-related power outage and associated ramp-up to restore full operations. However, we continue to focus on safety and achieved a 15% reduction in total recordable injury frequency in 2025. At the Lalor mine, the focus was on stabilizing production after resuming operations. Lalor averaged over 4,200 tonnes per operating day in the quarter, strategically prioritizing mining from the gold zones to ensure feed for the New Britannia mill. Gold grades slightly increased compared to the third quarter as we continue to improve ore quality and focus on prioritizing gold zones at Lalor. Consistent with our strategy of allocating more Lalor ore feeds to New Britannia to maximize gold recoveries, the New Britannia mill achieved average throughput of approximately 2,300 tonnes per day in December, reaching a new monthly throughput record. Stall mill continued to focus on process optimization and enhancing gold recovery initiatives, which resulted in achieving over 70% gold recovery from our base metal ore stream. The Stall mill processed significantly less ore in 2025 compared to 2024 in alignment with our strategy to allocate more Lalor ore feed to New Britannia. The 1901 deposit delivered 6,600 tonnes of development ore in 2025 as the project progresses towards full production in 2027. During the year, the team focused on establishing 1901 underground infrastructure and haulage and exploration drifts. Manitoba sales volumes in the fourth quarter reflect a rebuild of inventory levels as operations normalized. Manitoba Gold cash costs in the fourth quarter were $705 per ounce, increasing compared to the third quarter, primarily due to higher overall costs in the quarter as operations normalized. Despite the production headwinds in 2025, full year gold cash costs were $549 per ounce, a 9% improvement from 2024 and outperforming the lower end of the cash cost guidance range. The strong cost performance was supported by the prioritization of high-margin gold production over byproduct zinc production. In British Columbia, we continue to focus on advancing our multi-year optimization plan centered on ramping up mining activities and implementing standardized operating practices as shown on Slide 8. We produced 4,700 tonnes of copper, 4,000 ounces of gold and 57,000 ounces of silver in British Columbia in the fourth quarter. Production was lower compared to the prior quarter, primarily reflecting reduced mill throughput caused by unplanned maintenance on the primary SAG mill. Full year production achieved the guidance range for gold and silver, while copper production fell below the low end of the guidance range because of the impact of the primary SAG mill unplanned maintenance and a higher amount of low-grade stockpiled ore processed throughout the year. Mining activities continue to focus on executing a 3-year accelerated stripping program to unlock higher-grade ore starting in 2027. Total ore mined in the fourth quarter was 2.4 million tonnes, a 32% increase from the third quarter as we optimized the mining sequence and enhanced maintenance practices, which increased mining rates to a targeted 300,000 tonnes per day in December. To sustain this momentum, a new production loader was commissioned in January 2026, and the new shovel is currently scheduled for deployment in March. Mill enhancement initiatives continued in the fourth quarter with the successful completion of the permanent feeder for the second SAG mill in December. The second SAG mill continued to demonstrate positive contributions to overall throughput in the fourth quarter. The mill processed 27% less ore in the fourth quarter compared to the third as a result of unplanned maintenance on the primary SAG mill to address localized damage to the feed and head. Operations were further constrained by elevated clay content in the ore and the planned decrease in feed pile to accommodate the construction and tie-ins for the second SAG expansion project. The team implemented several additional initiatives in 2025 to mitigate further challenges and build long-term mill reliability, including completing crushing circuit chute modifications, installing advanced grinding control instrumentation and a redesigned SAG liner package. Despite throughput constraints, fourth quarter milled copper grades were 18% higher than the third quarter, driven by higher grades in ore mined. Copper recoveries improved to 78% and gold recoveries saw a 7% increase over the third quarter. While the primary SAG mill continues to operate under a reduced load, it is being rigorously monitored ahead of a feed and head replacement in mid-2026. The mill remains on track to achieve its permitted capacity of 50,000 tonnes per day in the second half of 2026. British Columbia cash costs and sustaining cash costs were higher than the prior quarter, largely driven by the ramp-up of mining activities advancing the accelerated stripping program, combined with the impact of lower production and byproduct credits due to the lower mill availability. Despite the headwinds in the second half of 2025, the business unit demonstrated strong cost discipline, enabling the operations to achieve the full year cash cost guidance range. I'm now going to turn it over to Eugene Lei to introduce our capital allocation framework. Eugene? Chi-Yen Lei: Thank you, Peter. Turning to Slide 9. Hudbay has a proven track record of prudently allocating capital to high-return brownfield investments such as New Britannia gold mill refurbishment project and the development of the high-grade Pampacancha satellite deposit. Both these investments have delivered significant free cash flows and contributed to our recent deleveraging efforts. These deleveraging achievements have been part of our financial transformation over the past 3 years. Hudbay has moved from being overleveraged and capital constrained to a preferred position where we can strategically allocate capital across the portfolio to maximize value and generate the highest risk-adjusted returns, creating long-term sustainable value for all our stakeholders. Three years ago, when I became CFO, we put in place our 3 prerequisites plan known as the 3P plan, outlining financial criteria needed to be achieved prior to sanctioning Copper World. We have successfully executed all of the financial elements of the 3P plan and with prudent strategic financial planning over the last few years, we have completed the deleveraging of our balance sheet. We are proud to have the strongest balance sheet in more than a decade and are one of the lowest debt leverage companies in our peer group. Together with the strategic investment by Mitsubishi, Hudbay is very well positioned to both sanction the Copper World project and embark on generational investments in our operating portfolio in 2026. These investments include allocating capital to high-return brownfields projects at our 3 operating mines and advancing our world-class development and exploration pipeline. To provide transparency and continued financial discipline, we have implemented an enhanced capital allocation framework to provide a holistic approach around capital allocation decisions. This includes growth capital reinvestments in the business through near-term brownfields projects, long-term greenfield projects, strategic investments and exploration, while also considering debt repurchases, share buybacks and dividends. Our capital allocation framework is embedded in our annual financial planning cycle. The framework assesses capital allocation opportunities against key elements such as preserving a strong balance sheet, strategic fit for growth and diversification, accretion across key financial metrics, performing a rigorous risk assessment and applying accountable investment governance practices. Consistent with our capital allocation framework and our recent financial transformation, we are now in a position to commence increases in shareholder returns in the form of a quarterly dividend. We are pleased to introduce a new quarterly dividend of $0.01 per share, which represents an annual increase of 100% over our former semi-annual $0.01 dividend. This increases our total annual dividend amount to $0.04 per share. Thanks, and I'll hand it back to Peter for our 2026 strategic objectives. Peter Gerald Kukielski: Thank you, Eugene. Our key company objectives for 2026 are summarized on Slide 10. We continue to focus on operational excellence, advancing organic growth opportunities and prudently allocating capital to deliver attractive high-return growth. At the core, we intend to demonstrate continued operational excellence to enable substantial free cash flow generation while maintaining industry-leading cost performance. We plan to achieve this by investing in high-return brownfield growth opportunities across our operating platform, such as the mill throughput enhancement projects. We plan to prudently invest in our attractive organic growth pipeline to deliver long-term production increases. This includes completing the Copper World definitive feasibility study, progressing the New Ingerbelle permitting and development, advancing studies on our regional satellite properties in Snow Lake, executing our large Snow Lake exploration program to look for new anchor deposits, initiating a pre-feasibility study at Mason, advancing Flin Flon tailings reprocessing project analysis and preparing for Maria Reyna and Caballito exploration to provide significant long-term upside potential in Peru. With a strengthened balance sheet and our first ever dividend increase, we entered the year with unmatched financial flexibility. In 2026, we intend to maintain strong financial discipline by implementing our capital allocation framework to maximize returns. This will be achieved by continuing to reduce total debt, sourcing efficient project level financing for Copper World and evaluating all types of capital redeployment opportunities to generate the highest risk-adjusted returns. Turning to Slide 11. As I mentioned earlier, 2025 represents the 11th consecutive year in which Hudbay achieved its annual consolidated copper production guidance, which includes every year since Constancia declared commercial production. 2025 also represents the fifth consecutive year achieving our annual consolidated gold production guidance since establishing stand-alone gold production guidance after Snow Lake became a primary gold-producing operation. In 2026, consolidated copper production is expected to increase by 5% to 124,000 tonnes using the midpoint of the guidance range. This is driven by higher expected production in British Columbia as a result of mill throughput ramping up to the target 50,000 tonnes per day in the second half of the year, partially offset by the depletion of Pampacancha in December 2025. Consolidated gold production in 2026 is expected to decrease by 9% to 244,500 ounces as a result of the depletion of Pampacancha. However, unstreamed gold production is expected to increase in 2026 with higher gold production in Manitoba as operations normalize following the wildfires, and we continued to achieve strong performance at the New Britannia mill. In Peru, 2026 copper production is expected to be relatively consistent year-over-year at 82,500 tonnes as higher mill throughput is expected to largely offset the grade decline with the depletion of Pampacancha. Peru gold production is expected to decline to 17,500 ounces with the depletion of Pampacancha. The short-term mine plan changes in 2025 to optimize the mine plan during the period of social unrest resulted in reduced stripping activities in 2025, which has caused some grade resequencing in 2026, but we expected higher copper production in Peru in 2027 and 2028. In Manitoba, 2026 gold production is expected to be 200,000 ounces, reflecting a 15% year-over-year increase as the operations normalize after the unprecedented wildfires. We expect to see continued strong mill throughput at New Britannia continue to operate above 2,000 tonnes per day in 2026, far exceeding its original design capacity of 1,500 tonnes per day. In British Columbia, 2026 copper production is expected to be 30,000 tonnes, representing a 26% increase from 2025 production levels. This increase will be driven by the throughput improvements in the second half of the year. We expect to release an updated 3-year production outlook with our annual mineral reserve and resource update in late March. Slide 12 summarizes our cost guidance. 2026 consolidated cash costs are expected to remain at historically low levels within a range of negative $0.30 to negative $0.10 per pound of copper. Cash costs this year will continue to benefit from higher gold production as a byproduct and our continued focus on maintaining strong operating cost control across the business. Sustaining cash cost guidance for 2026 is expected to be within $1.70 to $2.10 per pound of copper, benefiting from higher copper production and higher byproduct credits, offset by higher expected sustaining capital expenditures. In Peru, 2026 copper cash costs are expected to be between $1.70 and $2.10 per pound, reflecting steady unit operating cost performance, offset by lower byproduct credits with the depletion of Pampacancha. Peru cash costs will benefit positively from lower treatment and refining charges and lower electricity rates with a new renewable power contract in effect. In Manitoba, gold cash costs are expected to be between $500 and $800 per ounce in 2026, remaining at industry low levels, driving strong margins at current gold prices. In British Columbia, copper cash costs are expected to decrease in 2026 to a range of $1.50 to $2.50 per pound. The decrease will be driven by higher copper production, higher by-product credits and higher capitalized stripping related to the accelerated stripping activities. Capital expenditures in 2026 include approximately $96 million of capital deferrals from 2025, higher growth capital spending as we reinvest in several high-return growth projects and onetime sustaining capital expenditures. Total sustaining capital expenditures are expected to be $435 million and total growth capital expenditures at the operations are expected to be $140 million, excluding Copper World joint venture spending. The growth capital for Copper World is expected to be $135 million. In Peru, 2026 sustaining capital is expected to be maintained at $140 million, which includes about $20 million of deferrals from last year and $18 million in onetime heavy civil work projects, offset by lower spending on tailings dam raises. Growth capital in Peru of $40 million relates to the installation of 2 pebble crushers to increase mill throughput starting in the second half of 2026 and includes $13 million of capital deferrals from 2025. In Manitoba, sustaining capital expenditures are expected to temporarily increase to $105 million in 2026, including $5 million of deferred capital, $20 million in onetime expenditures related to a project at New Britannia to lower nitrogen levels and $12 million for an accelerated 1-year construction project for a dam raise at our Anderson tailings facility. Underground capitalized development at Lalor is expected to return to normal levels after reduced levels in 2025 from the wildfires. Manitoba growth capital is expected to be $15 million this year related primarily to the development of exploration platforms and haulage drifts at the 1901 deposit. In British Columbia, 2026 sustaining capital expenditures are expected to be $60 million, an increase compared to 2025, including a $5 million onetime expenditure for the replacement of the feed and head of the primary SAG mill as well as $13 million in capital deferrals from 2025. We expect to incur $130 million of capitalized stripping costs in 2026 related to the continued accelerated stripping program. BC growth capital expenditures are expected to increase to $85 million, including $10 million in capital deferrals with the remaining capital related to early works and infrastructure development for New Ingerbelle. As we continue to advance Copper World towards a sanction decision, we expect capital expenditures to be $135 million, excluding post-sanctioning construction costs. This growth capital has been largely funded by the proceeds from the Mitsubishi joint venture received in January 2026 and relates to feasibility study costs and continued derisking until a sanctioning decision. It includes $35 million of capital deferrals from 2025 and approximately $60 million for accelerated long lead items and derisking activities. Post-sanctioned construction costs will be updated at the time of project sanction. Looking at exploration expenditures in 2026, we expect an increase in spending to $60 million as we continue to execute the multi-year extensive geophysics and drilling program in Snow Lake as well as spending allocated to New Ingerbelle inferred resource conversion efforts. As part of our long-term growth pipeline, Slide 13 summarizes the threefold strategy we are executing in Snow Lake as part of the largest exploration program in the company's history in Manitoba. The first objective is to execute near-mine exploration, including underground and surface drilling at Lalor. This past year's significant progress was made with the completion of the initial exploration drift at the 1901 deposit, which saw positive step-out drilling and delivered some zinc development ore to the Stall mill. Underground drilling is planned for 1901 from the new exploration drift to upgrade and expand the mineral reserve and resource estimates. Activities at 1901 over the next 2 years will focus on exploration, definition drilling, ore body access and establishing critical infrastructure for full production in 2027. We also plan to complete underground and surface drilling at Lalor to continue expanding mineral resource and reserve estimates. The second strategic focus area is on testing regional satellite deposits within trucking distance of the Snow Lake processing infrastructure to identify potential additional ore feed to fully utilize the available processing capacity. In 2026, we plan to advance activities at many of our satellite deposits, including Talbot, New Britannia and Rail, testing for both base metal and gold potential. We will touch more on Talbot, a highly prospective target on the next slide. And the third strategic focus area is on exploring our large land package for a new potential anchor deposit to significantly extend the mine life of our Snow Lake operations. In 2026, we will continue the ground electromagnetic survey and extensive airborne geophysics survey. In early January, we announced the signing of an amended option agreement with JOGMEC and Marubeni to expand the Flin Flon exploration partnership for 3 projects in the Flin Flon region, including Cuprus-White Lake, West Arm and North Star. Turning to Slide 14. In July, we commenced an extensive summer drill program at the copper-gold-zinc Talbot deposit focused on expanding the known mineralization at depth. Talbot is located within trucking distance of the Snow Lake processing facilities, making it an ideal deposit to potentially provide supplemental feed to our mills. As part of the initial drilling program in 2025, Hudbay drilled 6 holes to test the continuity of the Talbot deposit at depth with all the holes yielding positive results and 4 of them returning mineralized intercepts with economic potential. The image shows a 3D view of the deep holes drilled at Talbot confirming continuation of the mineralization at depth. As shown in the image on the slide, the drill results indicate that the mineralized footprint of Talbot has doubled. We have commenced the 2026 drilling program in January with 6 drill rigs turning, including 1 rig focused on continuing to expand the footprint of the deposit at depth. An additional hole provided a significant intercept of visible copper mineralization over approximately 20 meters and assays are pending. This year, we plan to progress a PFS and prepare an updated mineral resource estimate utilizing our standard method that has a high reserve conversion rate. Turning to Slide 15. Our Copper World project in Arizona continues to achieve key milestones to progress towards sanctioning later this year. The closing of the strategic joint venture partnership with Mitsubishi validates the attractive long-term value of Copper World as a top-tier copper asset and endorses the strong technical capabilities of Hudbay. Together, we will continue to advance this high-quality copper project and unlock significant value for all of our stakeholders. With the closing of the transaction, Mitsubishi's initial cash inflow of $420 million will be used to fund the remaining feasibility study and pre-sanctioned spending in addition to initial project development costs for Copper World once we sanction. Mitsubishi will also contribute the remaining $180 million within 18 months to complete its initial 30% stake and will continue to fund its pro rata 30% share of future capital contributions. Copper World feasibility activities are underway, and we are on track for the completion of a definitive feasibility study in mid-2026. We have allocated growth capital expenditures in 2026 for accelerated detailed engineering, certain long lead items and other derisking activities, and we continue to expect to make a sanction decision in 2026. We are very well positioned to build one of the next major copper mines in the United States while continuing to maintain a strong balance sheet and reinvesting in other growth opportunities across our portfolio. Before we conclude, I want to take a moment to highlight the New Ingerbelle expansion permits at our Copper Mountain Mine just received and announced. This is a very exciting milestone for the British Columbia team as we expand growth optionality for Copper Mountain. The receipt of these permits is an important step to enhance the copper and gold production profile at Copper Mountain. It secures a longer mine life, preserves more than 800 jobs and ensures continued economic benefits and long-term financial stability for the region. We received the amended Mines Act and Environmental Management Act permits through the coordinated authorizations process managed by the British Columbia Major Mines Office. Throughout the permitting process, we proactively engaged with the local communities and the upper and lower Similkameen Indian band to ensure transparency. We recently finalized refreshed participation agreements with the bands, reinforcing our commitment to strong Indigenous partnerships. The New Ingerbelle permit ensures that we'll be able to advance this BC major project and extend our partnership with the local communities to facilitate additional growth investments at Copper Mountain and further add to our 99 years of successful operations in Canada. Concluding on Slide 16. 2025 demonstrated the benefits of Hudbay's diversified operating base, our unique copper and gold exposure and our operating resilience. I'm extremely proud of the performance we were able to achieve despite the many operational interruptions. Our continued focus on cost control enables us to maintain industry-leading margins and deliver strong and stable cash flows. Once Copper World is in production, we expect our annual copper production to grow by more than 50% from current levels. This will reinforce our position as one of the largest Americas-focused copper producers with a well-balanced and geographically diversified portfolio of assets. Our expected production will be weighted approximately one-third each in Canada, the United States and Peru and further enhanced Hudbay's exposure to copper, representing more than 70% of consolidated production and revenue. I have no doubt that we will continue to see more transformations as we execute on our growth strategy and prudently invest in our world-class pipeline to deliver the highest risk-adjusted returns for our stakeholders. And with that, we're pleased to take your questions. Operator: [Operator Instructions] The first question is from Ralph Profiti with Stifel Financial. Ralph Profiti: Peter and Eugene, this capital allocation framework is coming at a time when we're seeing the biggest spread between actual metal prices and spot metal prices and consensus metal prices. And when you talk a little bit about some of the commodity price scenarios, I'm just wondering how would you characterize your approach versus the past on some of the scenario analysis that you do? And how are you going to balance crowding out opportunities versus metal prices being used versus buy versus build context? I'd like a little bit on that, please. Chi-Yen Lei: Thanks for your question. And I think this is an ideal time to unveil this capital allocation framework because of the volatile markets that you described. So as you know, we have a proven track record of allocating capital to high-return opportunities. That's what netted us the New Brit gold mill and then the Pampacancha investment, and that's achieved 25% IRRs over the past few years and helped us deleverage our balance sheet. Now with Mitsubishi on board, that really essentially helps us fully fund the Copper World project. And so we're going to be able to go into the end of this decade, having delevered the company, funded and built Copper World and now have the opportunity to fund greenfield projects and brownfield high-return projects at each of our operating sites. When we run and to best determine how to allocate that capital, running this process allows us to run various scenarios, use varying prices and even opportunities to finance some of this growth. And so when we use this holistic approach, we are able to balance the growth aspects and prudently fund them, but while also keeping an eye to capital returns. And so we're ramping into the first dividend increase in our company's history. It's nominal, but it's a start. And as you saw last year, when we implemented the NCIB, these options or opportunities are on the board to be compared with reinvestment in our portfolio. So we're going to test these as these opportunities as they come. As you know, we have a very skilled technical services team and our operations are always looking for ways to enhance production and enhance mine life, and we'll weigh those opportunities at varying prices to the balance sheet and have an opportunity to increase returns to shareholders once we've determined the optimal structure. Ralph Profiti: Helpful. I appreciate the descriptive answer. And if I can just switch more to a technical question. Peter, what is Q3 going to look like in British Columbia on the SAG rehabilitation work? What does downtime look like? How does it -- what is tie-in time required? And I'm just wondering what happens to sort of throughput in that scenario in that quarter. Peter Gerald Kukielski: Thanks, I mean, great question. I think that as I mentioned in the comments that the planned replacement of the feed head will be early in the third quarter. So we continue to operate pretty carefully in the interim. But we still expect the operations to stabilize and improve progressively through that period. There will be a project period of, I imagine, several weeks during which we replace that head. But I don't expect there to be anything abnormal that's not provided for in our guidance. But Andre, do you want to perhaps elaborate on it a little bit? Andre Lauzon: Sure, sure. So the team is doing an excellent job. The parts are procured. So we've cast 4 sections, 2 have passed QA/QC, and we have a team over there inspecting there as we speak. Tentatively, as Peter mentioned, it's about a month of work. We'll be able to continue to run our SAG2 at the same time, and the teams are working through the details of that. It's scheduled, like you said at the beginning of Q3, which is probably straddling around July, August. We're looking for opportunities to pull that forward. We don't know exactly what that is right now. It's still they're inspecting, looking at shipping and all of the details of getting that in place. And so as we get to report next quarter, I think we'll definitely have a lot more clarity on the timing of that is like the opportunity of pulling it forward if we're able to do that is obviously ramping up the higher throughput sooner, which will improve our -- what we're forecasting for the year. But right now, it's scheduled on that end. But right now, as it stands, the back end of the year is probably about, call it, 20-ish percent higher than what the front half is of the year on a total metal. So if you want to give that sort of cadence, but the improvement, if we can pull it forward a bit as we know, then that will be a positive to the year. Operator: The next question is from George Eadie with UBS. George Eadie: Can I ask at Manitoba, just clarifying the updated 3-year production guide, that won't include any new drilling, will it? And secondly, just when we -- when exactly in the year will we get the next tech report for Manitoba, potentially bringing in Talbot and some other satellites? Peter Gerald Kukielski: Thanks for the question. So we haven't decided that we're producing a tech report for Manitoba this year. A lot of what we're doing, I mean, the current technical report is still valid in terms of production at Lalor. And our thinking with respect to another revised technical report at some point would be in order to bring in some of the other -- the results of other drilling that we're performing in the region, but it's not determined yet when that would be. Andre, perhaps you could elaborate. Andre Lauzon: Yes, sure. So it's a great question. I'd say is there's so much going on in Manitoba right now. And it's on all fronts. So we've seen some positive success with drilling 17 zone, the high-grade gold down plunge of Lalor. We now know the plunge direction. And so we'll be targeting an exploration drift to do this year to get to that area. The Talbot area is very exciting. There are 6 drills going at site right now. About 5 of them are doing definition drilling to prepare to be able to have that, call it, maiden Hudbay reserve for that. So the teams are working actively on pre-feasibility studies to be able to understand how we're going to mine it, ramp versus shaft, all of those details in optimizing it. And to date, the drilling as indicated, like Peter had mentioned, doubling the footprint of what we know, and it's open in many directions still. So that's also very exciting. The gold, there's a ton of optimization going on right now around New Britannia. We're looking at improving our flash flotation. And what that allows us to do, like although we have a permit at 2,500 tonnes per day, we're seeing some really high copper grades, which is great. And what we have to do is slow down the mill a little bit during when we're seeing those really high grades. And so the teams are looking on optimization there at New Britannia. We have a SART plant coming in at the end of the year, and that's also going to reduce our costs with reduction in cyanide, but also improvements on recoveries. We have some additional things we're looking at Stall. And if I complicate it even more, New Brit mill is sitting on top of New Brit mine. And that mine for close to 20 years, about 1.5 million ounces. And we -- since with the real run-up in gold prices, probably wasn't on our radar for a number of years. And so now we have teams actively looking at putting together a plan is like what do we actually have and what's the potential? And there'll be a lot more to come on New Britannia mine. So that's quite exciting. So why I say all of that is there's so many moving parts on how do you fit all of that into a technical report. And so it's just around how -- what's the timing to do that? And so I think we'll be able to give snippets later this year around what does it starts to look like. But to put all that in, we're very, very confident on sustaining about 185,000 ounces per year profile at a really good all-in sustaining, probably less than $1,200 an ounce long into the future. And I didn't mention as well as we're looking at optimization of cut-off within the mine as well. And that also has the potential to bring low-cost capital good grade ounces that were on the cusp before at $2,000 or so an ounce now at much higher prices. So we're looking at a lot of things. And so hold tight, I guess, is what I'd say is there's going to be some really good stuff coming. Chi-Yen Lei: If I could add with some comments in terms of catalysts, the 3-year guidance will be released along with our reserve and resource update at the end of March, and that will show this extension of this higher gold production at Lalor and Snow Lake that Andre speaks of at 185,000 ounces, well beyond kind of what was contemplated in the technical report. As Peter highlighted, we're looking at ways to daylight what would be the longer-term profile and with all the opportunities that Andre highlighted, we hope by the end of the year that we'll be able to catalyze many of those projects and be able to provide the market with this 5- to 10-year outlook at these new levels, and we think they'll be very value creating for Manitoba and Hudbay. George Eadie: Yes. No, that's super detailed and helpful, guys. Thanks very much. And maybe just one more, if I can sneak in kind of similar, but Mason, like the comments about that in the release, the PFS, like when could that be completed? And will we see the outcomes, I guess? And any updates on a potential partner even there? Peter Gerald Kukielski: Sure. So we're currently starting to work on Mason. We're building the team. We're kicking into pre-feasibility study work. I would expect that we would complete a pre-feasibility study in Mason later on next year. For sure, we would not contemplate partnering Mason at this early stage. But as we progress through the pre-feasibility study, we would look at opportunities to do that based on the work that we do. But partnering is not something that we're contemplating there right now. Andre Lauzon: Yes. It's the right time. It's the right time right now. Eugene mentioned about our capital allocation framework and investing in different opportunities. It was somewhat parked for 2 reasons. One, because our availability of capital to spend on doing that because we have to do geotechnical drilling, hydrology, getting all of the key things to really put a robust pre-feasibility together. And we are waiting for some clarity with the federal government around the placing waste rock and tails on federal land. That has now been resolved. And so with both of those in our back right now is we are ramping up like as what Peter said, and building the team to accelerate that project because it is the next to copper world, like it's the next largest undeveloped copper deposit there in the U.S. It's a great project. Operator: The next question is from Fahad Tariq with Jefferies. Fahad Tariq: Maybe just on Peru, can you let us know what the latest is on the Maria Reyna and Caballito permits and what's happening there? Peter Gerald Kukielski: Yes, absolutely, for sure. It's -- there's been no change to the remaining steps for the drill programs, which includes the government's prior consultation process with the local community. And given the environment in Peru right now, I think this process is likely delayed. Remember that this is an election year coming up. We've had a change in President. So the time lines are quite difficult to predict as we've learned from Pampacancha several years ago. I think that predicting -- although we can't predict the permitting time lines, I think let's get through the elections. We're confident we will get the permit. I just can't tell you when it will be. But I am extremely confident that Maria Reyna and Caballito play a big part in value creation at Peru in the future. But at the moment, I can't provide you with an accurate time line. Fahad Tariq: Okay. I understand. And then maybe just switching gears to Copper World. I know we're still waiting for the feasibility study, but just thoughts around the copper price assumption that you might be using or how we should be thinking about CapEx relative to the $1.3 billion, which is the current estimate? Chi-Yen Lei: I can address the copper price assumption. And as you saw in the PFS, this is a very robust project. It generated close to 20% IRR at $3.75 copper. It is the highest-grade undeveloped copper deposit in the Americas. And as we update the pricing for the feasibility study, we'll be moving toward consensus prices, which is today moved from -- moved in the area of $4.50 to $4.75 per pound of copper. We'll obviously do various pricing scenario analysis around those prices, but I would expect that it would be in that range at this moment. Peter Gerald Kukielski: And on the CapEx side, I would say, recall that the PFS was issued in October of '23, so 2.5 years have passed. So of course, there's going to be a little bit of escalation. There's been some tariffs introduced on key equipment that might be procured from outside the country. So we expect there to be some escalation, but we don't expect it to be material. Andre Lauzon: Yes. And different than the response from Maria Reyna with the government, like this is fully in our control to deliver the feasibility and the team is doing an excellent job. Like we're within 1.5% of our schedule. So we're tracking right now at about 67% out of about 68%. And so the team is doing an excellent job building a world-class feasibility. And so we expect it to come to FID at the times that we had forecast. Chi-Yen Lei: And the collaboration with our JV partner, Mitsubishi has been excellent. We've had our first JV Board meeting. They're on site with all of the decisions and have contributed. And so for those that were worried that this would delay the DFS, it does not, as Andre said, we're right on schedule. Peter Gerald Kukielski: Sorry, I'll just go back to the Maria Reyna and Caballito question. I think I was saying I can't predict when it's going to be. It's going to happen for sure. It's going to happen, but it may not be this year, but it's coming. And what I can say is that our communities and our partners are incredibly eager to get going on it. It's just a process that's got to be followed. And we know how Peru goes, especially during an election year. It's still a great copper destination, will continue to be. So just hold tight it's going to happen. Andre Lauzon: Yes. And we've refreshed the team, too, right? So brand-new minted Vice President down there in South America, very familiar with the area, coming out of some of the challenges that we had through the summer with some of the communities. We refreshed the team for Uchucarcco and Chilloroya. And so those are the people that will carry this through to the final. Operator: The next question is from Orest Wowkodaw with Scotiabank. Orest Wowkodaw: A couple of follow-ups. Your CapEx guidance for this year at Copper World, $135 million, should we anticipate that, that could increase if you FID the project in the second half of the year? Or will that just start in '27? Chi-Yen Lei: The CapEx guidance that we provided of $135 million is basically the feasibility study plus the early works we need to continue to keep schedule for potential first production in early 2029. With the FID, we'll provide sort of the rest of the spend for the year, but I do not expect that to exceed the $420 million that we've already received from Mitsubishi. So if you think about sort of the funding, I would say that we would expect Copper World to be cash flow positive from a Hudbay consolidated perspective this year. The $420 million contribution obviously came in January. We're going to spend about $135 million leading into the FID decision. On FID, the Wheaton payment becomes due, the first $180 million. And so we expect to be in a very good position from a funding perspective. So that's why one of the reasons we carved out the Copper World JV spending from the growth CapEx of the company because it's more than fully funded. Orest Wowkodaw: So that $135 million, that's basically all pre-FID. Chi-Yen Lei: It would be -- it will be all pre-FID, but it's -- some of the spend would have been post FID. So it's basically ensuring that we move the project along as soon as possible, and we have the endorsement with Mitsubishi to proceed in this manner. Orest Wowkodaw: Okay. And then just shifting gears, I just wanted to clarify something you said earlier. Did I hear correct that you're suggesting that you can maintain 185,000 ounces of gold in Manitoba for the next 5 to 10 years? Chi-Yen Lei: That's the goal. And we'll be able to tell you that number for the next 3 years with our 3-year guidance. And the opportunity this year is to pull all of the projects that Andre speaks of and put them in buckets so that we can talk about the long-term production horizon of Snow Lake, which is targeted to be at that level for the next 5 to 10 years. Orest Wowkodaw: Okay. And the end of March then update will just be the 3-year guide, and then we'll have to wait for the rest after. Is that right? Peter Gerald Kukielski: More to come. Operator: The next question is from Emerson [indiscernible] with Goldman Sachs. Unknown Analyst: So I have 2 questions here. First one, just trying to understand, I mean, what is the pecking order of the projects that the company have right now? I mean there are a lot of stuff going on. So Copper World is obviously a priority, but then you have Ingerbelle expansion, 1901 development deposits, Mason project right now. And also -- so just trying to understand here what is the priorities apart from Copper World? And also on Copper World, just trying to understand here if you guys could bring forward the concentrator leach facility that was expected by 2032. Just because, I mean, you have been seeing U.S. administration putting copper as a critical mineral. So I think could make sense, right, to bring that project forward so you can sell copper cathode domestically? And just a final question on Manitoba. Just trying to understand here how could the asset's economics profile change with this ramp-up in production coming from 1901, Talbot, et cetera. So would we still see the same level of all-in cash cost for the asset or that could change in light of this new ore coming from those deposits? Peter Gerald Kukielski: These are great questions, thank you. So in terms of priorities, you're absolutely right. So Copper World is just such a transformational project for our company that it is. So it's a clear priority in terms of the activities that are underway by the U.S. business unit. And of course, it occupies a lot of attention from corporate management, from our Board, et cetera. But it is a U.S. business unit priority and a company priority. That said, as Eugene described in his words about capital allocation, given the company's situation balance sheet-wise, the strength of our balance sheet going into this year, we do have capital available for the lowest risk-adjusted return projects at each business unit, and we want each business unit to push projects forward for consideration in that pecking order. So yes, you spoke about New Ingerbelle. We're super excited to have received the New Ingerbelle permit yesterday. And of course, that will be a priority in British Columbia once the SAG mill 2 and second SAG mill project has been completed fully and ramped up, it will become a priority there. In Peru, of course, the priority is getting the pebble crushing circuit done and then looking forward towards getting permits whereby we could further expand production over there. Manitoba, of course, you've heard about what our priorities there is that we're growing that whole asset up into something pretty amazing. So in terms of your question with respect to the economic profile there, we would target and expect that the economic profile or all-in sustaining costs would remain roughly of the same order of, let's say, $1,200 or so an ounce because we don't have to develop any new infrastructure. Everything is close to infrastructure. And then with your question with respect to Copper World and concentrate leaching and bringing that forward, we certainly would consider bringing it forward, but we don't want to start construction of that facility while we're still building the Copper World mine itself because we don't want to divert the attention of the project team. But it may make sense as we progress through construction that we look at bringing it forward so that we can actually continue to utilize the same team that's actually building the mine out itself. So I would say more to come on that. So Andre, would you -- anything that you would add? Andre Lauzon: I think you characterized it really well. It just feels like a $15 billion company. There's a lot of things going on in all areas and lots of growth going on in each different business unit. And so it's not -- they're all competing for capital. But the way, as Eugene set it up earlier on is we set ourselves up so that we can invest in all of the different areas. We have great projects in each of the different areas. And so it's just a really exciting time. And yes, there's a lot going on. Chi-Yen Lei: Maybe to summarize, Emerson, the budget for 2026 and the guidance for 2026 for growth capital includes funding for all of these projects already. And so they have been -- they've gone through the process. These are the best projects that are in each of the business units, and they're accounted for. So for example, there's $80 million of growth capital for British Columbia allocated to advance New Ingerbelle. For example, there's $40 million of growth capital allocated to Peru for the pebble crusher and $50 million to $60 million of exploration and development work in Manitoba for 1901 and exploration. So we are going to be able to build Copper World and fund advancements and increases in throughput and high-return projects at each of our business units to be able to come out of the decade with not only a new mine, but also refreshed and improved mines at 3 of our existing sites. Operator: The next question is from Craig Hutchison with TD Cowen. Craig Hutchison: I just want to follow back on Eugene's comments and Orest's question on Manitoba. The extension of the production and grade profile for gold for the next 5 to 10 years, is that being driven by resource conversion? Is it more just the exploration step out? Or do you also include some mill throughput expansions there? Andre Lauzon: All of those. All of those. So there's -- we've been drilling and exploring around Lalor mine for the last couple of years, right? And we've been pretty silent on what we've been finding, but we've been getting success. And so part of that is conversion of resource to reserve. Some of it is some new discovery. We talked about the satellites. So Talbot would be considered a satellite. There's a number of other ones in our portfolio. The real unknown is obviously New Britannia mine, right? So the best place to find is right in the shadow of a headframe and like that itself is a company maker. And so if you take all of that and then what you said is around the improvements. So we're challenging recovery. We're up over 70% recovery at Stall. We're looking at it with, like I said, the SART process at New Britannia, which is in our project for the end of the year. Hot tails as we look at the opportunity to get even more from Stall and even precious metal reprocessing from the tailings there. And then the Flin Flon one that someone mentioned earlier on that we didn't talk about, we're into the depths of pre-feas. We're working on and we're in the final stages of solving how to get the precious metals out of the zinc plant residue. And that is like the solution for the back end of the Flin Flon tails and the team is working on a really unique, but it's a process to convert pyrite to pyrrhotite and run it through our autoclaves and then use the solution that we have for the zinc plant. So that's moving along quite well, too. And so yes, no, we have a lot of -- there's a lot of gold to add to our portfolio from new discovery all the way through to getting better at recovering it and bringing new deposits online. So yes, it's an exciting few years ahead of us for sure. Craig Hutchison: Great, guys. And just maybe on New Ingerbelle, now that you guys have the permit in hand. Is that something that could positively impact your production in, say, 2028? Is there much capital to bring that project into play? Andre Lauzon: You're talking New Ingerbelle mine or the mill. Craig Hutchison: New Ingerbelle, the permits. Andre Lauzon: New Ingerbelle, sorry, and still on goal. Peter Gerald Kukielski: You're still in Manitoba. Andre Lauzon: I'm still in Manitoba. So -- yes, new Ingerbelle, yes, absolutely. So we have about 2 years of construction we have to do. It's very straightforward, haul roads, East haul road, West haul road, build the bridge, some ponds to build and then we'll be into it. And what's really neat about it, and we alluded in the press release is it's pretty much if you look at the long term, the copper grade is a little bit lower, but it's very close. But it's almost 60% to 100% higher gold grade. It's a really, really big improvement in grade. And the stripping is like we're running at almost like a 5:1 strip right now, it's about 3x less. And so from a profitability standpoint, not only are we increasing the gold through that increased throughput, but we're going to be spending a lot less on stripping. So it's -- New Ingerbelle is -- will be transformational for Copper Mountain in the 2028 range. Peter Gerald Kukielski: And there's also exploration upside at New Ingerbelle too. So we could... Andre Lauzon: $20 million of drilling going on, and we're exploring at Ingerbelle for upside potential to expand that high-grade gold, copper resource and -- as well as there's some targets on the Copper Mountain side as well, too. So yes. Craig Hutchison: So it sounds like that something could come into 2028 time frame based on the 2-year build. Andre Lauzon: That would be the plan, I would think, is where we'd be, yes. Craig Hutchison: And just one last question for me. Just on costs. It looks like you guys are using pretty conservative metal prices for your C1 calculations. Can you tell us what you're using for your TCRC costs just to get a sense of whether there's some potential upside there from a C1 cost perspective? Chi-Yen Lei: They didn't seem that conservative at the beginning of the year, but they are today. So we're definitely enjoying the benefits of the higher prices. On the TCRC front, we're -- our assumption is 0. So again, we're entering into deals that are lower -- that are below 0. So again, there could be a little bit of upside there. Operator: The next question is from Anita Soni with CIBC World Markets. Anita Soni: Most of them have been asked and answered, but I just want to clarify on BC. With the tie-in in the second half of the year, do you expect there'll be any impact into 2027 from the, I guess, the delay in that tie-in? Andre Lauzon: No, not at all. No, it's scheduled to ramp up, like there's -- like right now, even with the reduced mill capacity, we're seeing upwards sometimes above 40,000 tonnes per day at the current -- with the current restrictions that we placed on it. And so all of our processes are all being prepared right now for that ramp-up once we have that new feed-in shell in place. So we don't anticipate anything that's really problematic. Like -- there's no new feeders, nothing. It's just changing it and running at a heavier loading rate in the mill. So right now, we're being conservative on the bearing pressure in terms of the amount that we actually feed into the mill, but it's literally turning up the dial. And the mine itself has made some really, really great strides to increasing their production rate. So we're seeing averaging around 280,000 tonnes per day, which is unlocking high-grade copper coming in, in the mid part of the year as well, too. Anita Soni: Okay. So then on Jan 1, 2027, what's the throughput rate we should be using? Andre Lauzon: We should be using 50,000 tonnes a day. That's where we anticipate to be. Operator: And our last question is from Martin Pradier with Veritas Investment Research. I'm sorry, Martin, we're unable to hear you. It's a very corrupted line. Are you speaking directly into your microphone? Okay. Unfortunately, I think we're going to have to move on. So I would like to hand the conference back over to Candace Brule for closing remarks. Candace Brule: Thank you, operator. And Martin, please feel free to e-mail us your questions given the technical difficulties there. But thank you, everyone, for joining us today. If you have any further questions, please feel free to contact our Investor Relations team. Thank you and have a great day. Operator: This concludes the conference call for today. You may now disconnect your lines. Thank you for participating and have a pleasant day.
Operator: Greetings, ladies and gentlemen. Welcome to the Vesta Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. It is now my pleasure to introduce your host, Fernanda Bettinger, Investor Relations Officer. Please go ahead. Fernanda Bettinger: Good morning, everyone, and welcome to our review of the fourth quarter 2025 earnings results. Presenting today with me is Lorenzo Dominique Berho, Chief Executive Officer; and Juan Sottil, our Chief Financial Officer. The earnings release detailing our fourth quarter 2025 results was released yesterday after market closed and is available on Vesta's IR website, along with our supplemental package. It's important to note that on today's call, management remarks and answers to your questions may contain forward-looking statements. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ. For more information on these risk factors, please review our public filings. Vesta assumes no obligation to update any forward-looking statements in the future. Additionally, note that all figures were prepared in accordance with IFRS, which differs in certain significant respects from U.S. GAAP. All information should be read in conjunction with and is qualified in its entirety by reference to our financial statements, including the notes thereto and are stated in U.S. dollars, unless otherwise noted. I'll now turn the call over to Lorenzo Berho. Lorenzo Dominique Berho Carranza: Good morning, everyone, and thank you for joining us. 2025 was a year of disciplined execution and strategic positioning for Vesta. We strengthened our platform advance, Route 2030 on schedule and made decisive decisions, which enabled Vesta to capture what we believe will be a powerful demand cycle beginning in 2026 and accelerating into 2027. Early in the year, uncertainty slowed decision-making, but we stayed focused on operational discipline. During the year, our conviction to opportunistically deepen Vesta's presence in Mexico's most dynamic markets, specifically Mexico City, Guadalajara and Monterrey has proven decisive. The strategic steps we implemented throughout 2025 have materially strengthened Vesta's portfolio and positioned us to outperform. Throughout this transition, our focus did not change. We remain disciplined in capital allocation, selective in development and stay close to our clients while adapting with agility to capture unique opportunities as market conditions evolve. This defines Vesta, long-term strategic clarity with the operational flexibility required to perform across cycles. We're not building for 1 quarter. We're building for the long term. And in 2025, we set our sights on the next cycle with improved visibility by the end of 2025. We're seeing momentum return, particularly in the second half when leasing activity accelerated. We saw roughly 1.4 million square feet in new leasing during the second half of the year compared to 0.5 million square feet during the first semester. This reinforces our view that the market has likely reached a turning point. Vesta also delivered solid financial results for the full year 2025, which Juan will touch upon in more detail. We exceeded guidance with rental revenues increasing 11.8% to reach $274 million, while adjusted full year 2025 NOI margin reached 94.8% and adjusted EBITDA margin reached 84.4%. Vesta FFO totaled $174.9 million in 2025, a 9.2% year-on-year increase. Let me share an overview of leasing and portfolio fundamentals in 2025. As I noted, leasing activity strengthened substantially in the second half of the year. Full year leasing activity reached 6.9 million square feet with a weighted average lease term of 7 years, which includes 1.9 million square feet in new leases and $5.0 million in lease renewals, representing the highest level of renewals recorded over the last 3 years. During 2025, renewals and re-leasing activity reached 5.4 million square feet with a trailing 12-month weighted average leasing spread of 10.8%. Importantly, manufacturing returned with conviction in 2025. 86% of Vesta's new leases were manufacturing-related with electronics leading this activity. I have commented previously that Mexico has overtaken China as the largest exporter of electrical and electronic equipment to the United States. And we are seeing that reflected directly in our leasing pipeline. This represents a notable shift from prior years when e-commerce was the dominant driver. Today, we're benefiting from dual engines of demand, the resilient logistics and e-commerce space, combined with a powerful resurgence in advanced manufacturing. AI-driven infrastructure is becoming an important structural demand driver for Vesta. Data center expansions in the U.S. has translated into real manufacturing demand for related peripheral equipment. This includes producers of HVAC systems, racking, tabling and microchip-related assembly. Guadalajara continues to benefit from these structural trends with sustained demand from global manufacturing tenants. Existing clients, including Foxconn, are actively expanding their footprint, reinforcing the market strategic importance within our portfolio. From a development standpoint, we invested approximately $330 million in projects during the year on a cash flow basis. These investments are directly aligned with our Route 2030 strategy and our focus on high conviction markets where we see sustained absorption. Turning to our fourth quarter results. Leasing activity reached 1.9 million square feet, including 770,000 square feet of new leases with both existing and new Vesta tenants across the electronics, aerospace and automotive sectors, reflecting the improving market dynamics I discussed. Lease renewals totaled 1.2 million square feet with a weighted average lease term of approximately 5 years. Total portfolio occupancy stood at 89.7% at quarter end, while stabilized and same-store occupancy reached 93.6% and 95%, respectively. We began construction on 2 new buildings during the quarter, one inventory building in Guadalajara and one build-to-suit in Queretaro. We ended the quarter with 800,000 square feet under construction with an estimated investment of approximately $60 million and an expected yield on cost of 9.9%. Let me walk you through leasing momentum and share insight on market dynamics across our regions. Occupancy moderated in certain submarkets due to normal tenant rotation and isolated shutdowns during the year. This is not a structural shift. It's part of the normal rotation of tenants in a dynamic market. Vacancy levels remain healthy, and we're already seeing strong backfill activity, including assets with multiple bidders. The Monterrey market continues to stand out with leasing momentum building in this high demand market, and we expect a continued increase during 2026. Vesta Park Apodaca, which was completed in the third quarter of this year, is now in active marketing. Three state-of-the-art buildings are drawing strong interest, particularly from advanced manufacturing and logistics tenants. And as a related update, the Vesta Park Apodaca Building 8 was awarded first place in the GRI Global Awards 2025 Industrial & Logistics Project of the Year category. The award is considered one of the global real estate industry's highest distinctions, recognizing the most visionary projects and companies worldwide for excellence in design, sustainability, innovation and contribution to the urban environment. Also in Monterrey, infrastructure is scheduled to begin in the first half of 2026 on the 330 acres we acquired in the high-demand Airport Highway corridor as announced in October. Ciudad Juarez reached what we described last quarter as an inflection point. Activity has strengthened, interest from electronics and supply chain integration tenants is robust. This market experienced the cyclical adjustments throughout 2025 that I described, but the fundamentals remain intact. Tijuana has stabilized, and we are seeing constructive tenant dialogue, including notable leasing activity with global companies during the fourth quarter. It's important to mention we continue seeing rents increasing across our markets, supported by disciplined supply. Guadalajara remains a structural leader for Vesta, and we are seeing a growing number of high-tech electronics companies seeking large-scale projects. Many are leveraging the strong ecosystem that has developed in the region, including specialized talent, established supply chains and existing industry clusters. This continued momentum reinforces Guadalajara's position as the leading technology and advanced manufacturing hub in Mexico, often referred to as the Silicon Valley of Mexico. Guadalajara also benefits from the manufacturing support data centers and AI demand, which I have described. Mexico City continues to benefit from its scale, consumption base and logistics importance. We're actively engaged in discussions with major players, particularly in the logistics sector. Our project in the Vesta Park Punta Norte ramp up to become the largest cross-docking operation in Latin America of all e-commerce players in the region. Turning to capital allocation. In 2025, we secured strategic land positions at attractive terms during periods of market uncertainty in 2025. These acquisitions will support the next 4 years of Route 2030 execution. We are 2 years into our 6-year Route 2030 plan and are ahead of schedule in terms of capital deployment. That said, Vesta's growth will continue to be prudent and measured. As always, our development pace in 2026 will be calibrated carefully to demand and absorption levels in each market. We're clearly optimistic, but we remain disciplined. Protecting long-term returns is not negotiable. Our balance sheet remains strong, liquidity is solid and leverage metrics are trending as expected. In closing, 2025 marked a transition year. While the environment required patience early on, the broader macro backdrop is increasingly constructive as we look toward a renewed acceleration in demand. Mexico's fundamentals remain compelling. According to preliminary data from INEGI, exports grew 7.6% year-over-year to approximately $664.8 billion, marking a second consecutive year in which trade served as a key engine of economic growth. Meanwhile, imports also reached record levels, rising 4.4% to over $664 billion. These figures underscore the scale, depth and resilience of Mexico's integration within North American supply chains. Despite uncertainty, this integration into North American trade flows supports sustained export momentum into the U.S., validating Mexico's role as a strategic manufacturing and logistics hub. Top-tier global companies continue to view Mexico as a critical platform for serving North American demand. Foreign direct investment and exports reached record levels in 2025, while cumulative foreign direct investment inflows through the third quarter running 10.9% above full year 2024, reinforcing the structural drivers of growth that underpin Mexico in general and Vesta's market in particular. Setting our Route 2030 strategy in 2024 and executing with precision in 2025 has been fundamental to positioning Vesta for 2026 and beyond. We're beginning to see the benefits of those decisions translate into stronger fundamentals, and we are confident that this momentum will continue to drive growth, underpinned by structural tailwinds, reinforcing our confidence in the long-term opportunity ahead. Our optimism is grounded in discipline. Even in the context of high occupancy and solid demand, we remain rigorous in how we allocate capital and underwrite new developments. We are closely monitoring supply pipelines and vacancy trends in each of our core markets, ensuring that growth remains balanced and value accretive. With that, let me pass the conversation to Juan. Juan Felipe Sottil Achuttegui: Thank you, Lorenzo. Good day, everyone. Vesta closed the year with very solid financial results, as Lorenzo noted. Our total rental income increased to $283.2 million, while rental revenues reached $273.6 million, an 11.8% year-on-year increase and exceeding the upper end of our full year revenue guidance of 10% to 11%. Adjusted NOI margin exceeded our revised guidance of 94.5%, reaching 94.8%, while adjusted EBITDA margin was in line with our guidance at 84.4%. Vesta's FFO ended 2025 at $174.9 million, a 9.2% increase compared to $160.1 million in 2024. Now let me walk you through our fourth quarter results. Starting with our top line, total revenues were up 17.2% year-over-year, reaching $76.4 million, primarily driven by rental income from new leases and inflationary adjustments across our rental portfolio. As for our current mix, 89.9% of our fourth quarter 2025 rental revenues were denominated in U.S. dollars, up from 88.7% in the fourth quarter 2024. Turning to profitability. Adjusted net operating income increased 17.2% to $69.4 million. Our adjusted NOI margin remained strong at 94.6%, up 88 basis points from the prior year, reflecting higher revenue growth with stable cost. Adjusted EBITDA totaled $61.1 million, an 18.2% increase year-over-year with a margin expansion of 155 basis points to 83.3%, driven by a lower proportion of administrative expenses relative to revenue during the fourth quarter 2025. Vesta FFO excluding current tax was $39.3 million compared to $41.1 million in the fourth quarter 2024. The decrease was primarily due to higher interest expense in the fourth quarter of 2025 compared to the same period of 2024. We closed the quarter with pretax income of $98.5 million compared to $81.2 million in 2024. This increase was primarily due to higher gains on revaluation of investment properties as well as a positive variance in exchange gains and higher interest income. This was partially offset by higher interest expense, reflecting the increase in debt balance during the period. Turning to our capital structure and balance sheet. We ended the year with $337 million in cash and cash equivalents and total debt of $1.28 billion. Net debt-to-EBITDA was 4.4x, and our loan-to-value ratio was 28.1%. Subsequent to quarter's end on February, we prepaid the remaining Metlife III facility of $118 million. This repayment leaves us with no secured debt, enhancing our financial flexibility and completing our transition to a fully unsecured capital structure. In terms of capital allocation, during 2025, we strengthened our land reserves, positioning us well to capture future development opportunity, as Lauren discussed. Looking ahead, we will maintain our disciplined investment approach, deploying capital selectively in markets where we see strong demand fundamentals. Our share repurchase program also remains a key pillar of our capital allocation strategy. We will continue to execute opportunistically as we have done successfully in the past with the objective of maximizing long-term shareholder value. Moreover, consistent with our balanced capital allocation approach on January 15, 2026, we paid a cash dividend for the fourth quarter of $0.38 per ordinary share. Finally, I would like to discuss the outlook for the year. We are expecting to increase rental revenues between 10% to 11% year-on-year, while we expect to achieve 93.5% adjusted NOI margin and 83% adjusted EBITDA margin for the full year 2026. This concludes our fourth quarter 2025 review. Operator, could you please open the floor for questions. Operator: [Operator Instructions] Your first question comes from the line of Juan Ponce of Bradesco BBI. Juan Ponce: It was interesting to see that 86% of 2025 leases were manufacturing related, which seems to be imperative. So in a scenario where the USMCA review does not reach an agreement in 2026 and transitions into annual reviews, how resilient is your current development pipeline under that environment? And specifically, how confident are you in leasing ongoing projects in Guadalajara and Queretaro if trade visibility becomes more limited? Lorenzo Dominique Berho Carranza: Juan, thank you very much for being on today's call. Well, we have experienced uncertainty regarding trade for the last years. And that has been not only seen in industries like -- in markets -- in industry like ours, but also other corporates, in other industries and even in other regions of the world are facing similar challenges, whereas the manufacturing footprint -- the global manufacturing footprint is adjusting and adapting. We believe that Mexico has invested for many years, maybe since NAFTA to establish a more integrated supply chain in North America together with U.S., Canada. But in the end, I think that, that will continue thriving on top of whatever negotiations might take place regarding revisions of the USMCA, different scenarios. I think it's more about the strong supplier base that Mexico has actually very -- for different manufacturing industries and how important and how well linked it is to the U.S. Guadalajara is an excellent example of how the electronics sector has evolved, has been growing rapidly, and it's actually a good signal how the global manufacturing footprint for electronics is moving. And I think for that reason, we are very optimistic. That's why we started new buildings. We have a strong pipeline building up in Guadalajara. And eventually, actually, we have acquired more land for future projects. So we're very optimistic. We think these are long-term investments. Many of these global companies continue to have strong bets on Mexico. And for that reason, we see a positive trend. Very similar to Queretaro where actually we have seen, in this case, the auto sector very active in renewals and also very active in looking for new space, pipeline building up. Aerospace sector, a similar case where many European companies have established long-term operations. We just expanded another operation with the Safran Group out of France. And this is another important case and good signal how committed global companies are to Mexico. Maybe just on the lease-up stage, we're confident that there's a stronger pipeline. We have available space that has been currently -- recently developed in Monterrey, for example, where we have -- where we developed the last buildings of the Apodaca project and pipeline is building up well in different industries, logistics, e-commerce, manufacturing. So I'm pretty sure that 2026 is going to be a very successful year and leasing will continue the same trend that we have seen, particularly in the last half of 2025. Operator: Next question comes from the line of Andre Mazini. André Mazini: Two questions. The first one on leasing in recently completed development projects. How much was executed in the quarter and in the year? And how much is baked into 2026? So another way of asking, what's the occupancy of the stuff to deliver in 2025 you expect in 2026? Maybe that's another way of asking that. And the second one is about the huge land bank acquisition in Monterrey. Almost no land there last quarter. Now it's the biggest single region, right, in which you guys have land. Is that land all paid in cash? Is it paid in cash and land swaps as well in which the landowners end up having a portion of the project? So how is kind of the payment, the consideration there for this huge land bank acquisition that you guys had in Monterrey? And congrats for that acquisition. Lorenzo Dominique Berho Carranza: [Foreign Language] Andre, and thank you very much for being on the call. I will start with your second question. Yes, last quarter, we were able to buy after a long negotiation, a strategic land parcel. This is in Apodaca corridor right next to the airport. The initial phase is 330 acres. So this matches perfectly to our long-term strategy in what we -- in the largest industrial market in Mexico where we will continue to grow. We will have -- the most part of the capital deployment towards 2030 will be Monterrey, and this is going to be a cornerstone project for the 2030 Route. The Apodaca corridor has been fantastic for companies in the e-commerce sector. It's a great logistic corridor, but also manufacturing continues to expand in the area. The area has good access to the main corridors towards the U.S., good access to the city. It actually has a good infrastructure in terms of energy, which is very helpful. And maybe just -- the only thing we can say about the transaction is that the payment was not done all at once. We got seller financing, which is helpful for a development project and for the whole -- for the development process. And eventually, we also have conditions to extend the land for a second phase. So we're very excited, and we will be more than happy to welcome you soon when we kick off the construction of this new site. Regarding your first question on leasing, well, current -- remember that our main focus is stabilized portfolio occupancy, which currently stands at 93.8%, I believe, a little bit lower than 95%. Definitely, the occupancy number is a little bit lower than before. We were coming from record high numbers. But what we feel confident is that most of our buildings are actually brand new, and we have seen that demand interest coming from outstanding companies. So we're very happy that the buildings are there and the demand is coming along. So I'm pretty sure that Queretaro and Monterrey will be very successful projects, and we're confident that this will lease up well throughout 2026. Remember that another important thing is that we grow with existing clients. So we're in close contact with them in order to be able to grow with them. So hopefully, we can continue expanding our relationships. But more importantly is that we will continue with the discipline of having outstanding companies. strong credit rating companies, long-term leases, well balanced between e-commerce, logistics, manufacturing sectors. So that discipline will prevail. And hopefully, we can start getting some good results soon. Thank you, Andre. Operator: Question comes from the line of Jorel Guilloty of Goldman Sachs. Wilfredo Jorel Guilloty: I have 2. So first one on your guidance. I just wanted to get a sense of what the occupancy expectations are embedded in this guidance. And also if it envisions any more development launches going forward? And then the second question, I'm sorry if you answered this earlier, I wanted to get a sense of the income tax expense for the quarter. It was around $36 million or so if I remember correctly. I wanted to understand what drove this and what we should expect tax-wise going forward? Juan Felipe Sottil Achuttegui: Sure. Let me answer the second one briefly. It is related to the appreciation of the peso. As you know, that generates some significant profit from our debt, which is incurred in dollars, and that accounts for most of the income tax impact that we saw on the income statement. As the peso stabilizes, starting with a very low peso-dollar exchange rate closed at the end of the year, I think that will be eliminated in 2026. As for the first question? Lorenzo Dominique Berho Carranza: Sure. We don't give any guidance on occupancy numbers, Jorel. However, if you see the trend on the occupancy towards the last quarter's years and having an understanding on the lease-up activity, we definitely think that even that it's a lower number, we are confident that, that number will somehow pick up throughout the year. We think it's a healthy number and understanding that we're a development company, we have a strong stabilized portfolio that generates important income. But also we have anticipated with good buildings on a spec basis that I'm pretty sure that we will continue to lease up throughout the year and that occupancy will improve. We have been in cycles like this one, and we have outperformed and benefited from anticipating through -- on the development front. So we're confident that being proactive on the asset management part is going to help us. Secondly, we think even that last year was started as a slower leasing activity, we have seen rents actually have increased in the year, some markets more than others. However, all of them with positive trends. So as long as we continue to see demand excelling throughout 2026, and we see that rents continue to be increasing, I think that we will benefit from that and take advantage and eventually be able to have better occupancy, better rental revenue and also have a positive impact in our -- eventually net asset value from having good tenants inside of our buildings. Wilfredo Jorel Guilloty: And a quick follow-up on the guidance, does it envision more launches, more developments going forward? Or is it just envisioning your company as it is today? Lorenzo Dominique Berho Carranza: That's a good point, Jorel, regarding development. Well, again, without the guidance, we don't give guidance specific on CapEx as well as development and other numbers. But what we can say is that we prepare -- we presented the 2030 Route in 2024, which we have been executing successfully. We -- 2025 was very important to secure land as the one I mentioned in Monterrey, but also in Mexico City, but also in Guadalajara and in other markets. So that land has to be still developed. We think that as long as we continue to see in a disciplined way, more demand in certain markets and where we can start leasing up, we will definitely like to start construction soon. So 2025 -- 2026 will be a year where we will start construction on the land that we have acquired and follow through our 2030 Route. And hopefully, we can be able to develop build-to-suit, spec buildings and eventually be able to replicate the success that we have had in Vesta Park projects such as the ones in Guadalajara, in Apodaca, Tijuana, Ciudad Juarez, Mexico City. So it's another cycle. We're entering a different stage. We're optimistic on 2026 and 2027. For that reason, I think that CapEx will continue to be important as well as development starts. Operator: Your next question comes from the line of Enrique Cantu of GBM. Enrique Cantu Garza: Congrats on the results. I just have one question on your revenue growth guidance. What are the main drivers behind that outlook? Is it primarily additional GLA from developments, rent increases or higher occupancy from leasing vacant space? Juan Felipe Sottil Achuttegui: Look, the guidance -- as you know, guidance, we make the guidance very carefully. We are assuming taking into account the buildings that we leased up until December that will begin paying rent on the -- beginning in the first months of 2026 as well as the stabilization of the buildings that we have unoccupied where we have a strong pipeline, and I think there were significant tenants coming up on -- starting on the first quarter. So taking that into account, we feel confident to give you the guidance that we give you now. I think that 2026 is a promising year. I think that we have a strong pipeline. I think that we're well advanced in talking to potential clients, and we are very optimistic indeed. Enrique Cantu Garza: Perfect. Lorenzo Dominique Berho Carranza: I would add that we have also been able to renew leases and get mark-to-market rents that has been on the existing portfolio that has been -- we have been very successful. So the existing portfolio is not only the mark-to-market on renewals, but also year-over-year. Remember that our leases are indexed to inflation. So the combination of existing leases at each anniversary indexed to inflation plus mark-to-market on certain contracts, plus our ability to lease up vacant building together with new development, all combined is part of how we forecast revenue growth and therefore, guidance. Operator: Your next question comes from line of Gordon Lee. Gordon Lee: A question a little bit more on the operating side, Lorenzo. I was wondering, if you look at some of the northern markets, right, thinking of Tijuana, Ciudad Juarez, Monterrey, it's -- I've been surprised, I think it's been remarkable how stable rents have been even as vacancy numbers have increased for the market as a whole. I was wondering what do you attribute that to? And do you see any risk of that changing for the worse in the quarters to come? Lorenzo Dominique Berho Carranza: Can you repeat the question, please just -- I think you broke up a bit. Gordon Lee: Okay. No, I was just -- my question was, if you look at some -- if you look at Monterrey, Ciudad Juarez, what I think has been really interesting is market rents have stayed pretty stable even with rising vacancies. So I was wondering what do you attribute that to and whether you see a risk to that going forward? Lorenzo Dominique Berho Carranza: That's -- okay. I got it. Thank you, Gordon. That's a good question. So we believe that what we experienced last year was a little bit somehow unexpected where we saw a slowdown at the beginning of the year. And you might remember January, U.S. President taking office, liberation date and the high uncertainty that we experienced made a lot of companies not making any decisions and not making any -- not leasing any space. Normally, in an environment where you have a slower demand, normally, you could see a reduction in rents. However, in this case, there was the market was just stout. So there was not even a need to reduce rents by any of our competitors. So for that reason, what we think is that demand started coming up back, and it was not a matter of supply and demand. It was just a matter that there were no leases at the beginning. And suddenly, when they came back, we think that vacancy is actually not that high. And that's why we continue to see that replacement costs of several buildings continue to be high and returns have to be expected. Developers have been disciplined and the vacancy and occupancy and vacancies among most of the markets are at healthy numbers, even that they are somehow higher than before, but we were at record low levels -- but if you look at a longer period of time, we are still in a good numbers. Going forward, I think that we will start to see more demand. We think that rents -- I don't see a major risk regarding rents, frankly. I think that rents will hold up well or maybe even increase. But in the end, I think that over the long term, we think that rents are still competitive. Companies are in Mexico for its competitive advantage, particularly on manufacturing. And in terms of logistics, these are cities that continue growing. Consumer habits are still changing and more consumers are adapting to e-commerce to logistics, more demand. So we're very optimistic and positive on most of the markets. So we don't see any potential risks on rents. Operator: Your next question comes from the line of Pablo Ricalde of Itau. Pablo Ricalde Martinez: I have a question on the development pipeline. So we finally see you like coming back into the build-to-suit projects with the Safran building. So maybe going forward, how should we think about the development pipeline of mix between build-to-suit and spec-to-suit building? Lorenzo Dominique Berho Carranza: Great. Thank you, Pablo. So we will continue to see build-to-suits and spec buildings well balanced. We -- I think that what is more important is that now that we believe we are hitting a pivotal moment where we will continue to see more demand. We will continue our strategy on spec buildings. It has paid off well to have spec buildings and then turn them into somehow build-to-suit, we call them spec-to-suit because we're able to pre-lease the buildings and in the meantime, make final adjustments for the tenants. But importantly is that we are able to kick off or to start the buildings in advance and anticipate to potential demand. However, we currently have some buildings in the market. So we have -- we want to have discipline. So as long as we continue to see demand and leasing coming up, I'm pretty sure that we will start with some other spec buildings. And build-to-suits, we are constantly looking for them. We recently closed an expansion with Safran. That's a good example. So I think that being close to our clients, close in the markets with the real estate community and broker community, I think that we're going to be able to continue to do both, particularly because the land acquisitions that we recently did is so well located that I'm sure that there's going to be many companies that would like to establish their operations in high-quality parks with great infrastructure with access to energy. And I think that will be a huge benefit for companies going forward. This year will be very important to focus on the development execution, particularly to get all the infrastructure and organization of the land that we acquired in place and try to get ready so that when demand and projects continue to kick in, we have a -- we're already a step forward and take advantage of those opportunities. And I think that's what makes Vesta different. We are an institutional portfolio manager, asset manager of industrial assets, but also we like to take advantage and capture the growth opportunities on the development front where we can continue to see returns at 10% or even higher return on cost and that vis-a-vis acquisition cap rates in the 6% range are -- we think that there's a lot of spread that we can capture on the development front on new buildings. And I think that's a huge benefit for companies wanting to establish operations in Mexico. Operator: Our next question comes from Pablo Monsivais of Barclays. Pablo Monsivais: Just a question on Aguascalientes. There's been some news that Nissan is planning to sell the COMPAS plant in Aguascalientes. And since you have big operations there and a considerable land bank, what's your take in this? And that divestment could impact a little bit the dynamics in that region or probably not if the taker is a company that is growing? Just want to pick your brain on that news flow. Lorenzo Dominique Berho Carranza: Thank you, Pablo, for being on the call, and thank you for your question. Yes, there's a lot of speculation on what might happen with that particular COMPASS plant. I think that whatever happens, it's going to be very positive for the sector, particularly because it's a -- that plant, it's, I would say, brand new or state-of-the-art. It was developed together between Mercedes-Benz and Nissan. So it has a combination on German technology and Japanese innovation. So I think it was a fantastic project, which for whatever reason, didn't work out. However, I think that, that's why it has a lot of interest from different players. So again, without getting too much into the speculation, we think that Aguascalientes is a fantastic city where companies have been successful. And I think that understanding that Mexico continues to be an attractive manufacturing front, I think that definitely somebody will benefit from that plant. And actually, we think that eventually that will bring new suppliers from a new company and Vesta will continue to be there. I think that for Vesta, Aguascalientes is becoming every time a less relevant market. However, we think -- we believe in long-term relationships. We have good relationships with several suppliers in the auto industry. And for that reason, we think that there could be some good upside to the new plant -- or I'm sorry, to a potential buyer of the new plant. Pablo Monsivais: Okay. And if I can squeeze another question there. Just want to understand, it is my understanding that your guidance for 2026 has a slightly lower margin versus 2025. What's the reason for that? Juan Felipe Sottil Achuttegui: Pablo, this is Juan Sottil. As you know, the peso-dollar exchange rate is -- well, it's a little bit punitive to the company given the fact that we sell everything in dollars and all of our expenses mostly are in pesos, basically our employee cost. So it's going to be a difficult year. It's a year where we will continue a very strong discipline on cost control. We're very successful doing that last year. And we will continue to focus on cost control and being very mindful of the operation needs in terms of people and the location of those people. So it is a challenging year in terms of operating costs, but we will keep the discipline. Operator: Next question comes from the line of Abraham Fuentes of Santander. Abraham Fuentes Salinas: So I wonder if -- are you considering any asset recycling during 2026? And the second 1 will be what could we expect in terms of dividends also for this year. Juan Felipe Sottil Achuttegui: This is Juan Sottil again. Thank you for the question. Look, asset recycle is something that we will continue to do. It is an opportunity that we will garner in our portfolio. We'll keep on the lookout. We scope our portfolio. We believe that we are in the best regions in Mexico. We believe that we have very successful buildings. But we also believe that recycling older buildings or buildings that have accrued a good stabilization status they represent an opportunity to sell them. There's other players that like to buy those type of stabilized assets, and we will take advantage of that. So we will be on the lookout to sell buildings. That's an integral part of our development plan, of our growth plan, and we will be on the lookout. Regarding dividends, dividend is a part of our compensation to shareholders. We believe in total relative -- in total return. Total return implies our effort to grow the company so that the market recognizes that in terms of appreciation of the stock price. And dividends are just an integral part of that total return. We will continue to pay dividends. We will continue to grow judiciously the dividend flow for the incoming year. You will see our dividend policy as soon as we have our shareholder meeting in the next month or so. So that's very much. I think you should consider. Lorenzo Dominique Berho Carranza: If I may add, I think it's consistency on what we have done in the past, and that consistency will continue to be there going forward for dividends as well as for asset recycling. Operator: Your next question comes from the line of David Soto of Scotiabank. David Soto Soto: Just 2 quick ones. The first is related to your vacant buildings. Could you provide more detail about the marketing efforts and the current status of ongoing negotiations of those buildings? And what kind of tenants are interested on such assets? And the second question is related to your leasing spreads. During 2025, you reported double-digit leasing spreads. Is it reasonable to assume that this could be maintained during 2026 and which regions could have this double-digit leasing spreads? Lorenzo Dominique Berho Carranza: Thank you, David, for your question. Maybe on the second one, I think that definitely, we will continue to see the upward trend on the leasing spreads, particularly because this is a bit of a -- it will continue to be an opportunity in the upcoming years as some of the leases continue to hit their maturities, and that's when we have the ability to catch up. So that's something that has happened last year, will continue this year and maybe even the upcoming years as long as some of these long-term leases that were done some years ago hit their maturity stages. And we think that, that's a great opportunity to -- and we've been very, very active on that front. And then on your second question -- on your first question regarding vacant buildings, well, we are very confident that the pipeline is building up. We are very happy with the projects that we have developed. Just as mentioned before, just to give you an example, we have been getting awards on the Vesta Park Apodaca project, particularly in one building, Building 8, we got awarded the GRI Global Award of Industrial & Logistics Project of the Year. And I think that competing with other countries, with other developers across the globe, this is a very, very nice recognition and award. And so we do our best to develop the best projects. And I think that eventually will turn out into having a higher benefit with companies that want to be in the best projects in the most dynamic markets. The buildings that we develop on top of the certain specifications on design, sustainability, innovation, these are very flexible buildings. So we can accommodate e-commerce clients as well as logistics as well as light manufacturing. So I think that strategy on spec buildings will be very helpful where we can be competitive in terms of cost in markets where we can have good access to labor, where we can have good infrastructure. So we -- for that reason, we are confident that the vacant buildings we have today are great buildings that will be leased up eventually. Operator: Question comes from the line of Felipe Barragan. Unknown Analyst: So it's been a year -- a little over a year now that Claudia is in office. She announced an infrastructure program a few weeks ago. So I just want to get your sense if there's -- I mean comparing two years ago to where we're at today, what strides have you guys seen that are tangible on sort of getting permitting, electricity and whatnot for developments? Lorenzo Dominique Berho Carranza: Great. Thank you for your question. We -- frankly, I think that there has been a lot of very proactiveness towards our industry and our business coming from the Claudia Sheinbaum administration. As you know, Claudia Sheinbaum has been the only President or the first President to include industrial parks as part of a long-term infrastructure plan. She has considered 100 projects to be developed. Well, many of those are actually Vesta's projects. And we have been having great access to some of their economic development councils as well as corresponding secretaries to have the best permitting and licensing and support in order to make these projects work. I think that she has a very good understanding on the opportunity that Mexico has to develop together with the private sector, good industrial infrastructure that creates better jobs, better paid jobs, which is very important for her as for the welfare and in terms of support for the people. So in the end, I think that there's a strong alignment, there's good support. And I think that for them having companies that are institutional and well organized like Vesta is also a good recognition to our sector. Through the Mexican Association of Industrial Parks which I happen to be at the Board, and I was previously a President, we have also a very close contact and very good access to the government agencies so that the presidency is successful, the country is successful and we developers contribute a lot to that success. Operator: Your next question comes from the line of [indiscernible] of GBM. Unknown Analyst: Congratulations on your results. I just have one question. How are you thinking about the pace of developments in 2026, given the current occupancy levels and broader market uncertainty? Lorenzo Dominique Berho Carranza: Thank you for your question, Pablo. Well, I think that Vesta will continue monitoring the markets and defining where we can start projects. I think a good example for that is Guadalajara, where we recently started 2 spec buildings end of last year. The reason of that being that we have leased up our existing buildings. We see -- we continue to see strong demand, and we want to anticipate to that particular demand. So we have -- in order to how do we -- the way we monitor it is through the real estate community, the broker community as well as our existing clients. So I think that, that same example will be used for the rest of the market. We think that there are some good success stories in Juarez, in Tijuana, where we were able to lease up the second half of last year. That's going to be helpful in order to eventually start new buildings. And the same for Monterrey. Well, Monterrey, we did that large acquisition on the Apodaca on the new land next to the airport in the Apodaca corridor. So we will kick start with the infrastructure. And eventually, when we see leasing -- some closings on the leasing front on the current project, we will pick up with new projects. So we are definitely going to be more active than 2025, but we would like to continue being cautious and disciplined and in line to whatever we see a potential demand and not being oversupplying the market. And actually, as you know, development front and development cycles are long. I think that being able to acquire land last year and this year focus on infrastructure and some new buildings will put us in a great spot for 2027 to start generating income on those projects. And eventually, our main focus will continue to be the 2030 Route. So we're optimistic. We see the market positively, and we think we have the capabilities to pick up some good development projects throughout the year. Operator: Your next question comes from the line of Federico [indiscernible]. Unknown Analyst: Congrats for the results. Two questions in particular. For [indiscernible] in capital allocation, you used the buyback last year. I assume that you will cancel that this year and extend the maturity of the debt, et cetera. But thinking in the long-term strategic book of 2030, what do you find in terms of acquisition of land development, et cetera, et cetera, not on consolidated basis, is thinking more in regional basis. That are the 2 questions. Sorry, and the last one, Juan, what is the Mexican peso that are using for the budget and the guidance for this year? Juan Felipe Sottil Achuttegui: Well, look, the Mexican peso is surprisingly strong. So we made our forecast at MXN 17.50, but we have been -- that has been proving a little bit too short. Again, the theme of the year in terms of the administration is cost control. And we will be keen on continuing to do that as the peso is very strong compared to the previous years. Now in terms of capital allocation, look, I think that we have acquired about 90% of the land that the plan requires. So I don't think that this year, we will -- I mean, there's always opportunistic acquisitions. Mexico is one an important market where we will continue to look for important land. But the bulk of the land we have, this is a year of, as Lorenzo has said, infrastructure investments. These great plots of land need to be made shovel-ready, and we are prepared to do that. We have to be ready for the upcoming demand, which we can see on our pipeline. So capital allocation will be mostly focused on making the land shovel-ready, opportunistic investments in land in places like Mexico City. And as I said before, if there's opportunities to sell part of the portfolio, we will. So that's just keeping Vesta running as a smooth company and taking every opportunity to provide good results that the market will recognize. Unknown Analyst: Congrats again for the results. Juan Felipe Sottil Achuttegui: Thank you. Operator: There are no further questions. I'd now like to turn the call back over to Mr. Berho for his concluding remarks. Please go ahead, sir. Lorenzo Dominique Berho Carranza: Thank you, everyone, for joining us today. As we look ahead, we are confident in the opportunity and equally confident in our ability to execute with prudence across cycles. If the next strong economic phase accelerates into 2027, as we believe it will, Vesta is uniquely positioned to capture that growth responsibly and at scale as supply has moderated and pipeline conversations point to improving visibility over the next 12 to 24 months. Thank you all, and have a nice day. Operator: Thank you for attending today's call. You may now disconnect. Goodbye.
Conversation: Unknown Executive: Good morning, everyone. Welcome to Thai Union's Analyst Meeting for the Fiscal Year of 2025 Results Announcement. My name is [ Malanyali Jadulong ] and I will be your MC today. First of all, I would like to introduce our management. First Khun Thiraphong Chansiri, President and CEO; Khun Ludovic Regis Garnier, our Group CFO; and Khun Pinyada Saengsakdaharn, Head of Investor Relations. Today's session will take around 1.5 hours, including Q&A session, and then followed by a 10-minute break before we begin the TFM Analyst Meeting. Without further ado, I would like to invite Khun Thiraphong to begin the presentation. Thiraphong Chansiri: Good morning to all the analysts and the executives from financial institutions joining us today. Today, we're going to share our performance results with you for the fourth quarter of last year as well as for the full year of 2025. 2025 was a year that is very memorable for us because we have so many stories, important stories, whether it's in terms of the reciprocal tariffs, which was something quite new for us, and also the exchange rate for the Thai baht, which has strengthened. The appreciation of the Thai baht is one issue, but what is important is that our neighbors, their currencies have weakened. And this is a challenge -- this was a challenge that we faced in the past year. Nonetheless, I believe that thanks to our adjustments, and which we have continued to adjust, we've been continuously adjusting. Over the past 2 years, we have put in place our Sonar program, our transformation initiatives, our Tailwind program for [ item ] to improve our PetCare profitability, and this has helped us achieve or be able to manage our costs in terms of productions and SG&A as well in the past year. Thus, in the past year, we have prepared for growth in 2026. If we take a look at our transformation program, you will see that we have our Sonar program where the goal is to achieve savings at USD 25 million, and our Tailwind project, where we want to have an operating profit of USD 20 million. And these 2 projects, we are on track. In terms of cost resetting, we have a target to reduce our cost by USD 118 million by the year 2027. And in the past year, we have had refinancing worth THB 24 billion. And this led to a decrease in our interest expenses significantly. And we also have our portfolio focus where we have adjusted our portfolio to emphasize on higher profit margin products. Innovation is also extremely important for us. Every business unit of ours, we have launched new products, whether it's our Ambient branded in America and in Europe. In the pipeline, the products in our pipeline that we're seeing significant achievement in that area. We have our innovation hub in Netherlands -- in the Netherlands. In the PetCare business, innovation is also extremely important as a key driver for the sales growth for ITL. In our Frozen business and the culinary-ready meals, this is something that we have seen major development in the past year. If we take a look at the full year results, you can see that in terms of Thai baht, the sales went down by 4.1%. But what is positive is that our volume has returned to growth at 2.5%. The overall volume that we have produced and exported is at 900,000 tonnes and the demand is very positive for Frozen feed and PetCare products. And with the feed, this is another business of ours where we have achieved a new record high in terms of market share and sales and profitability. And later on, Thai and Pinyada will present their performance results for you. And we also have PetCare positive results. So we've done very well in the past year in that regard. Our gross profit margin is at a high level, although it is below our target. With 19%, the drop is because of the foreign exchange impact. Another issue that I believe is something that is a highlight for us is despite our net income decreasing year-on-year, our earnings per share, or EPS, has grown compared to -- comparing year-on-year, it's gone up 7.2%. And this has enabled us to pay dividends, higher dividends. And on the next page, you can see that our EPS has grown from THB 1.8 to -- THB 1.08 to THB 1.16. And our adjusted net profit has gone down by 3.1% despite that. And this is something that we are very happy with. We are able to provide that earnings to our shareholders, and it continues to remain at a constant rate, more or less constant rate. And on the next page, you can see that our sales is at THB 35 billion. The advantages here are if we do not include the foreign exchange impact, our sales have gone 0.7%, which is a strong momentum in the fourth quarter. Our gross profit is at 18.3%. This is mostly due to the tariffs -- the increase in tariffs as well as the higher selling prices in the fourth quarter in Europe. Our adjusted net profit is at THB -- adjusted operating profit is THB 1.65 billion. Operating profit margin is 4.7%, and our adjusted net profit has gone down 22.7% in the fourth quarter. And on the next page, we'd like to point out our track record in terms of consistent dividend payouts. Ever since we founded the company, we have been able to provide dividends, and our policy has been no less than 50%, and we have paid at this high level, ever since the founding of the company. From 2023 onwards, 2024, you can see that we have -- can pay -- continue to pay out higher and higher dividends. And in 2024, it was 0.66 and in 2025, it is 0.7. And in this year, we have already paid TWD 0.35 per share. And in the second half of this year, we will pay TWD 0.35 per share as well. The ex-dividend date is on the 2nd of March and the record date is on the 4th of March and the payment date is on the 24th of April. And that's all of the details regarding dividends. And the reason for our higher EPS is our share repurchase program, which today, we have repurchased about 10%, most recently, at the beginning on the 8th of January, we lowered our shares by 200 million shares. We have 400 million shares remaining. That is our last program, and we will be implementing that plan in the future. And here, you can see, as always, we continue to be awarded and receive recognition from various organizations. And we received the leadership award from the Thai government and also from the Stock Exchange of Thailand. And also our products have been recognized, whether it's ECOTWIST that we launched in the U.K., we received an award. It's a Packaging award in the past year that we are proud of. And another recent news that we're very proud of is our sustainability recognition. We have received ranking in the top 1% globally by S&P Global. So we're included in the S&P Global Sustainability Yearbook for 2026. And this is something that we continue to be a pioneer and leader in. We have been upgraded in terms of our ESG ratings by FTSE Russell ESG. The climate disclosure, we have been upgraded from B to A. And from the SET, Exchange of Thailand, we have been -- our rating has improved to AA in Agro & Food. And there are other awards and recognitions that you can see from the presentation. And as for the financial performance for the fourth quarter 2025, I would like to hand things over to LUDO to share those details with you. Ludovic Garnier: Thank you, Khun Thiraphong. Good morning, everyone. Very happy to be with you. I will start with our usual 5 years picture on the sales and the GP margin. The few takeaways for you are, we are extremely proud this year to achieve our best performance ever in terms of GP margin for the whole year, just below 19%. We're expecting to reach 19%. We are just below for the whole year. And you can see achieving this performance in such a volatile environment with the U.S. tariff and the FX playing against us, I think we can be very happy about that. Of course, we don't want to deny that over the past 2 quarters, we have been under pressure because of the U.S. tariff. You can clearly see that in our numbers. However, the full year performance is very encouraging, and I think this is something we have to acknowledge. The second one is, please have a look at the sales development quarter after quarter. For you to remember, we started Q1 with a decrease by 10%, mostly because of the FX, and then in Q2, minus 5%; Q3, minus 1% and almost stable in Q4. We are very close to be flat or even back to growth. But I think all of these are very encouraging KPI that we are looking for. If I deep dive on the FX impact, and you know the FX has been a very strong impact for us. You can see here, we have a small table. In Q4 alone, the USD versus Thai baht has been deteriorating by 5%. The same for the GBP by 2%. Euro has been the opposite way by 3%. So it's partially offsetting this impact. So we are facing even in Q4, some very strong FX impact compared to last year. And this is something we have to keep in mind, even if we do a lot of hedging, of course, we have our U.S. operations, which are affected by this one. And Khun Thiraphong mentioned this one. One of the issue is all our competitors in the countries around Thailand have been -- have not seen such an increase of their own local currency. okay? So we are one of the only one where the local currency has been strengthening so much versus USD over the year. So here a few things. What is important for me is the dark blue, okay? The dark blue is the organic growth. You can see now it's 2 quarters where the organic growth is positive. I think this is encouraging. If you look at the light blue also, this is the FX impact. And the good news is the FX impact is reducing quarter after quarter, okay? You can see in Q1, it was significant Q2 also, Q3 dropping a bit, and then Q4 now, it's almost nothing, but it's offsetting our organic growth in Q4. One good takeaway also from this slide is our volume growth, okay? We told you when we've been facing with the U.S. tariff in Q2, we have been facing one of the key question mark will be the reaction on the demand in the U.S. You can see here, we have been generating some volume growth consistently every quarter, every quarter. Of course, we have different pictures depending on the category, and Khun Kuan will elaborate on this one, but I think this is also a very encouraging signal for all of us. Next slide, you can see our raw material prices. I think, overall, it has been under control. This year, we have been facing a bit of inflation. You can see in Q4, we had $1,573 for Skipjack, increasing a bit compared to last year, but overall, within our comfort zone of $1,400 to $1,700. Shrimps also has been increasing overall quarter-on-quarter, but still an acceptable range. And the salmon also, I think, is also more steady compared to where it had been the years before. So I think we have been quite happy with the salmon development. You have also, for each of these raw materials, our assumption in terms of budget for the year '26, of course, what we provide is always the average for the whole year. You can have some ups and downs during the year depending on the quarters. But overall, we don't plan for very significant changes in terms of raw materials next year. In tuna, the same in salmon, the same in shrimps, okay? We do expect a bit of inflation, but nothing dramatic for the business. So next one is regarding the FX. And I think this is the most important slide that we do have. Of course, the deterioration of the USD versus Thai baht. I mentioned this one has been impacting our business. You can see in Q4, we are 32.2%. In Q1, it is deteriorating a bit further on this one. This is one of the key components of the performance, and it was quite far away from our budget assumptions for the year '25, which was much higher than this level. Euro, there were some ups and downs. Euro has been increasing over the past 2 quarters. So I think we're in a better shape here. GBP also has been deteriorating versus Thai baht. Japanese yen, I don't need to comment. We know it's very weak versus all currencies. If I now move to our net debt bridge, '24, '25. The first thing is our net debt has been increasing in '25 from THB 53 billion at the end of '24 to THB 61 billion, okay? Let me walk you through the key components of this one. First of all, the EBITDA, I think the EBITDA is quite aligned with our expectation, THB 12 billion, THB 13 billion. This is where we are usually. But then next to the EBITDA, you can see we have a big box, which is net working capital, increasing by THB 6 billion. That was kind of a surprise for us, especially in Q4. Our inventories, our AR have been increasing in Q4. A few drivers for that. First of all, the U.S. tariff now are inflating our inventories in the U.S. on average by 20%, 25%. In the U.S., we import a lot of product coming from Thailand, from Indonesia, but also from India. The average tariff rate that we have is something close between 20% to 25%, depending on the mix country. So this is one of the reasons. We have been facing also some good issues, a lot of orders in our U.S. Frozen business at the end of the year. So we built up a lot of inventories at the end of the year to face with this situation. Also, our sales in December were high. So our AR are also higher compared to what we have usually, okay? So the impact of all of this THB 26 billion over the full year. CapEx are under control. For you to remember, at the beginning of the year, the guidance for '25 was THB 4.5 billion to THB 5 billion. When we have been facing with the tariff, we have been reducing our guidance, we say we want to keep under control. And then after we have been loosening a bit the CapEx, okay? But still, we have been spending below our guidance for the full year. And you will see when Khun Thiraphong will talk about our guidance '26 for the CapEx, we are catching up a bit of CapEx, which have been delayed from '25 to the year '26. All the rest, tax, dividend is kind of normal. You can see, of course, on the right, we have also one box, which is very unusual, which is our treasury share buyback for THB 4.3 billion, which is the last program we have been doing in the year '25. So the consequence is our net debt to equity has been increasing. It was below 1 at the end of '24. It's 118, 118 at the end of 2025. There is one good news. The cost of debt has been decreasing, okay? It was 3.65% last year. In '25, it was 3.31%. Here, you can see the impact of the interest rates gradually reducing in the world. We have a clear action plan for '26. We are not happy with our cash performance in the year '25. So we have a clear action plan to improve and to generate more cash in '26 and especially to reduce our net working capital across all our locations, okay? I think we can understand '25 with the tariff, we had to build up a lot of inventories, but now the tariffs are becoming part of the routine. We have also some good news. You heard that India, the tariff for India are reducing from 50% to 19%. We do have a lot of inventories in the U.S. coming from India. So that will help us to decrease also our level of inventories next year. So you can see here the impact in terms of ratio, the inventory days. You can see here clearly the inventories in terms of absolute amount have been increasing by THB 4 billion. In terms of inventories, inventory days, we have been gaining 3 days, and the same roughly for our net working capital, okay? In terms of ratio, net debt-to-EBITDA, we are exceeding 5x, okay? We are not happy with that. And again, I mentioned to you that we have an action plan. The goal for us will be to reduce our net debt, and our net working capital during the year '26. We want to get back very close to 1.1, okay, by the end of 2026. And also in terms of net debt to EBITDA, right now, we are at 5. We want to go more in the territories of 4.5, 4.4x at the end of 2026. Very strong actions are expecting next year on that part. Now I move to the transformation program. You know about Sonar. You know about Tailwind. You know this is the end of the Sonar program. We told you it was a 2-year program, '24, '25. I think we are on track. We are slightly exceeding our target in terms of savings for the year 2025. We did achieve $20 million versus a target of $15 million. For you to remember, next year, we are planning to have even more savings because we have the full year annualized savings coming from this one. We did give you here some few initiatives we have been doing in Sonar, okay? One of the most important one for us was to move to one global non-fish procurement organization, okay? For you to remember before, our procurement organization was very fragmented by regions or even by companies or even by factories. Here, we moved to one global one, and we have been consolidating a lot of our purchase, okay, especially in terms of fees, in terms of olive oil. Now we are doing some purchases for the whole group. And of course, our bargaining power is much stronger. So we had some very interesting savings coming from that. You can see especially the impact in our Feed business, okay? Please stay for the TFM Analyst Meeting right after this meeting. There are a lot of good and exciting news to share with you. But you can see the performance has been really improving in '25. And clearly, Sonar is one component of that. For you to remember, our Feed business, the lead time is very short, okay? We have all our operations in Thailand. We are selling in Thailand. So you see directly the impact in our P&L. This is different for our Ambient and Frozen product where our factories are quite far away from our market. So we have very often 6 months lead time between the production, the transportation to the market, and then the sale to our customers. You have also a few examples of initiatives we've been doing in terms of production. We have been shifting some SKU across the factories from the U.S. to Africa. It's the first time that we have some -- our factories in Africa producing for the U.S. So we are becoming more agile, okay? And of course, we did all of this when we were facing the risk of 38%. Now that we're at 19%, of course, we don't need to do dramatic changes in our supply chain. However, I do believe that we became much more agile this year, okay? Our factories in Africa, especially at PFC in Ghana, they can source for the U.S. So for us, it's more one more interesting sourcing. We want to stay ready. Of course, the tariff situation is extremely volatile. Every morning, we are watching the news about what did they say in the U.S. There could be some positive news also, but we are careful also on that. Tailwind, Tailwind is a 3 years program. So there is one more year in 2026. Again, I think in terms of pure savings, we are on track. We slightly over deliver compared to our expectations. For you to remember, there is 3 work streams in this one, the commercial, the operation and the procurement. Also in this one, we are happy about the results, okay? Of course, for you to remember, we told you in '24, the combination of the 2 program will be a net negative, okay? The costs were higher than the savings in '24. In '25, we told you it's kind of a wash. We have kind of the same amount between the cost and the savings. '26, we would expect a different situation because, of course, the cost related to Sonar will almost disappear, but then all the savings will be here. So it will turn to be positive in '26, but we will still have some costs on the tailwind program. And then '27, we don't have any more all the transformation costs. And then we expect that we will maximize the profit on this one. Of course, all these savings are partially being offset by the inflation, okay? So you don't expect to see the savings directly floating in our bottom line. We have some inflation, the tariff also here. So you can see directly the $20 million in our bottom line. But overall, I think we are moving in the right direction. We told you also since last quarter that we did launch the cost reset program. And in fact, the cost reset is just a transition from Sonar, which was a very specific 2 years window to a continuous improvement. okay? Cost reset is some initiatives we have been launching on the COGS and on the SG&A. We started in the middle of the year to face with the U.S. tariff. And the idea is also to continue to slash our cost and to reduce our commercial cost, and our cost in the factories. We put here some few initiatives. Again, the cost reset is applicable across all our categories within the business. The target for '26 is around $60 million, 6-0. There is a part which is duplicated with Tailwind, okay? So we have $50 million, which is also in Tailwind. So if you want to focus only in -- on the cost reset, it's more in the range of $45 million. Again, that will help us to face with the inflation to face with the impact of the U.S. tariff. I think we have a lot of good initiatives going on right now for this one. This program, very clearly, we are capitalizing on Sonar, okay? I think through Sonar, we have been learning a methodology, which is not applicable for the whole group. And we just want to transition now to continuous improvement. We don't have any more the support from the consulting firm. We do it by ourselves, but we take it very seriously. And clearly, this is one of the key initiatives that the GLT is following within the group. I wanted to share also with you just one slide on the impact of tariff. So you can see here, of course, all our operations in the U.S. are being impacted by the tariff. Also, our operations in Thailand are also impacted because we do export a lot in the U.S. Pricing, we told you from the beginning, the strategy for us is to transfer the impact of the tariff to our customers and to the consumers. So far, we can see we could not do it across all our category, okay? Why? Because we have to watch out what our competitors are doing. We are not the only one, of course, in this market. Depending on the competitors, depending on the category, we are facing different situation. We are also monitoring what is happening in the other proteins, okay? So here, we cannot say the tariff go up by 20%. We just increased our prices by 20%. That will be too easy, okay? So we do some gradual increase. We did a bit in '25. We'll continue to do more in '26, but it will be gradual, okay? Quarter after quarter, we increase the prices to finally, at the end of the day, push everything to the consumers. One thing also you need to have in mind, and maybe it's not clear for everyone, the vast majority of our business in the U.S. is FOB, okay, meaning the buyer will take care of all the tariff impact. There is one exception, which is in our Frozen Thailand business, okay? In our Frozen Thailand business, we are DDP, okay, meaning we take care of the tariff basically, okay? So the impact for us, it will trigger an increase of our SG&A because of the tariff impact. And of course, we increase our prices, so our sales will increase, okay? So you will see that our GP margin is being inflated by the tariff impact in our Frozen business. That's why Khun Kuan will comment after a record high GP margin for our Frozen business. But our SG&A are also increasing coming from that, okay? So it's almost a wash in our OP margin, but you have a bit of inflation for these two. And of course, in the Ambient in the PetCare, as long as we are not able to transfer all the impact of the tariff to the customers, our GP margin is a bit under pressure. We have been trying to estimate just an estimate the negative impact on our OP for the full year '25, we estimate it's around THB 350 million, okay? It's not a small amount for you to remember, it's mostly Q4 and Q3. There was nothing before that time. That is a hit for us of around THB 350 million. Again, it's an estimate. It's very complex to have a detailed calculation, but it provides a good overview, I think, about where we are. One more thing also, and I think maybe we were not vocal enough during the year. We told you since the past 5 years that we have been very active now in our portfolio management. And we continue to do that in '25. And here, we -- I just wanted to give you an overview about a few divestments we have been doing in '25. We did not really talk about this one because the impact are very small. These were small businesses and very often, we sell very close to net book value. So you don't have any large gain or loss in our P&L. But we sold our shares in our factory we have in PNG in Papua, New Guinea. We sold our shares also in our supplement business in Q3. And the same for a small joint venture, who we are having in Thailand together with Interpharma. And finally, you heard the Feed business saying that they sold their factory in Pakistan. These are small things, but we told you from the past few years that now we are clearly addressing all the loss-making businesses, okay? There was one common point to all these businesses, they were all loss-making. Okay? So clearly, we are fixing them. We have less and less loss-making businesses within the group. I think it's a good thing, it's a good sign. We still have a few of them to be focused on, and we are working very actively on this one. But I think it's a good, it also avoids some distraction, okay? Even if sometimes the business are very small, it always creates some distractions of business, and we want to focus on what is having some impact. Finally, the last part for me. We just wanted to give you a heads-up regarding the top-up tax. It was a lot of triggering a lot of questions from your side all along the year. We told you last time the impact will be between THB 100 million and THB 150 million. Finally, it's THB 91 million, THB 91 million for the whole year. For you to remember, the impact for us is only in Thailand, okay? In Thailand, we have an effective tax rate, which is close to 10%, 10.5%. So we have to bridge the 15%. So we have a top-up tax, which is between 4% to 5%. And this is THB 91 million, you can see here. However, you can see that for '26, we expect the impact to be higher. And here, we expect the top of ETR impact to be around 1% to 2% and the amount to be again back in the range of THB 100 million and THB 150 million, okay? For you to remember, we are still waiting for some compensation from the Thai authorities. We know they are working on that. It takes time. At that stage, we have no visibility about when they will release anything, but we do expect at one stage, they will get back with some compensation measures, especially for the exporters business like we are. And now, I will give the head to Khun Kuan to go through the business performance. Pinyada Saengsakdaharn: Hello, everyone. For our business performance, as always, we're looking at it by category. In 2025, the company had sales of about THB 132.7 billion. This is mostly impacted by foreign exchange. And if we take a look in specific areas, just our sales volume, as Mr. Thiraphong told you earlier, we have a sales volume that has increased by 2.5%. And in the graph on the bottom slide, you can see our sales volume. They are driven by our Frozen and PetCare categories. In our gross profit margin numbers, this year, we have a record high gross profit margin at 19.8%. And in every category, we have gross profit margin numbers that are in line with our guidance that we provided earlier. Let's begin with a look at the fourth quarter in the Ambient category, our sales is at THB 15.67 billion going down around 2% year-on-year, and this is mostly due to the negative FX impact that led to lower average selling prices. However, if we take a look at the bottom left, you can see the sales volume in the fourth quarter for the Ambient category increased by 1.7% year-on-year. This is mostly because of increasing demand in Europe and the Americas and in Thailand. In terms of gross profit margin, it is at 18.4%, going down by 2.2% year-on-year. The reason -- the primary reason for the decline is the U.S. tariffs, which have led to increasing cost for us, while the prices -- our selling prices were not adjusted to cover those costs. And we were also impacted by the raw material prices for tuna, which increased by about 3% year-on-year. We have plans in place to deal with this risk because we have increased our prices for products in America and the American continent since the third quarter of last year. And in January of 2026, we also increased product prices to mitigate that risk that has led to a lowering margin. And for the full year for Ambient, our sales have gone down 6% year-on-year, and this is mainly due to the FX impact. The sales volume also went down by 2% year-on-year. In 2025, the company we -- our customers in the U.S. were waiting to see the situation regarding U.S. tariffs. Taking a look at our gross profit margin, you can see that our gross profit margin was able to achieve a level of 19.8%, and this is very close to our target range that we provided in our guidance of 20% to 22%. In the fourth quarter for the Frozen business, our sales was at about THB 12 billion, increasing 3.4% year-on-year, and this is due to sales volume increasing by 5.6%. Our sales volume that has increased is from the Feed business for the most part. And Thai Union Feed Mill will be providing more information on their business operations that have led to an all-time high. And the sales volume for the U.S., you can see that it is still soft due to the U.S. tariff impact. Nonetheless, we have a gross profit margin for the Frozen business that is the best ever. It's an all-time high, quarterly high at 14.5%. And this is thanks to our increasing selling prices in the U.S. and the costs were relatively stable. As our executive shared with you, the Frozen Thailand exports to the U.S., we have increasing SG&As because of the inco terms or the logistics terms, which are delivery, duty paid or DDP, where we had to absorb those freight costs. Our margins, however, continue to expand, and our Feed business has provided support in this regard. For the full year, in the past 5 years, we have had low range sales, but we have plans to remove the low-margin businesses as well as those companies that are not generating any profit. We informed you last year that our new baseline for the Frozen business will be at around THB 42 billion. And this year, we have a drop by about 2.5% due to the FX impact. Our sales volume for the Frozen business for the entire year increased by 7.6% year-on-year. And this is mostly due to the volume from the Feed business, which increased gross profit margin has also improved to an all-time high of 13.2%. As for our PetCare business, you can see that in the fourth quarter, we had sales at about THB 4.69 billion, increasing 1.4% year-on-year. If we take a look at the sales volume, it increased by 2.8% year-on-year. And the lowering sales opposed to the increasing volume is a result of the FX impact as well. In U.S. dollar terms alone, our sales have increased by 6.7% year-on-year, and this is due to improving volume in the market in the U.S. and in Europe. And the gross profit margin for the PetCare business is at 26.3%. And this is, we have exceeded the range that was provided 3 quarters in a row. And this is a reflection of strong operations. The PetCare results for the full year, our sales went up 2.8% year-on-year, driven by the increase in sales volume. If we take a look at the -- take a look at this in USD terms, PetCare increased by 9.2%, while the gross profit margin continued to be in line with the target range of 23% to 25%. And lastly, as for the sales for value-added in the fourth quarter, sales dropped by 9.2%. And this is mostly a result of demand in the U.S. market. Under the value-added category, the various products, there's a big mix, which include Ambient and Frozen value-added products as well as packaging ingredients, byproducts and also other products. When our sales decreased, it was mostly due to the value-added in Frozen sales, which reflected lowering demand in the U.S. Our gross profit margin for value-added went down to 21.8% and the full year performance for the value-added business went down by 9.5% year-on-year. It went down in every category, as I explained earlier, but the ingredient business has done quite well. And the gross profit margin for the value-added was also favorable at 25.4% for gross profit margin. This is higher than our market range. It's above the target guidance of 25%. I'd like to return the presentation to Mr. Thiraphong now. Thiraphong Chansiri: In 2025, we have reset our baseline, and it was a year for us where our sales went down. But in 2026, we expect to see growth -- a return to growth. And we had set a target for sales at 3% to 4%, and we expect growth in every category, especially high growth in the PetCare for ITL and also our Feed business from TFM. The sales growth will be mainly driven by higher volumes, not just the prices. And our assumption that we're using in 2026, the FX rate is at THB 32.5. This is based on the financial institutions, and we have not adjusted that number so far. Our gross profit margin, the guidance, we are committed to improving the gross profit margin to a level of about 20%. Our guidance is 19% to 20% for this year, and we expect that the margin will increase in the Ambient and Frozen and PetCare value-added. SG&A is at 13.5% to 14.5%. I feel that this is an appropriate level because we are at our branded businesses -- we've included our branded businesses, and we have our lower transformation costs, and we will not -- not in the transformation cost, in the Sonar function. CapEx is at THB 5.5 billion [indiscernible]. This is primarily due to increases primarily due to our projects that continue on from last year. We had a lower CapEx for last year, lower than our target. In addition, we are investing in other areas, such as the Feed Mill in Ecuador, which we have been recognizing CapEx numbers this year. We have an automated warehouse for PetCare as well, which has been completed, and we will see CapEx numbers regarding that as well. We have a new facility for Packaging, whether it's cans, Asia Pacific can, that's one of the businesses and also our printed materials, graphics, where we continue to invest. Our dividend policy remains at least 50% twice a year. And that is the guidance for 2026. Unknown Executive: Thank you very much for joining us today. We will now take a 10-minute break before TFM session again. Thank you very much. [Break] Unknown Executive: The Sonar cost which almost disappear, okay? And we expect roughly transformation cost to decrease by half. However, we do expect this positive impact to be offset by the negative impact coming from the full year impact of the U.S. tariff in the U.S. in our frozen business. That's why when you saw the guidance provided by Konrapong, it's almost a wash, okay? We keep the guidance quite close compared to what we have been doing in '25, decrease of our transformation cost, increase of the tariff impact. We want also to increase further our marketing expenses in our P&L. And that's why you see our guidance. We don't see any drastic improvement of our SG&A to sales compared to what we have been doing in '25. Pinyada Saengsakdaharn: Okay. Now we will have only one question from the online. Regarding the 400 million share repurchase in the first half of 2025, does management still intend to proceed with the planned capital reduction? Or is there any possibility of the reselling and treasury share to help reduce debt to equity in the range? Thiraphong Chansiri: Still have plans to reduce our cost. Nothing has changed. We still have 400 million more shares. If we're going to make any changes, we will inform you, of course. But at this moment, there is nothing -- no changes in our plans. Pinyada Saengsakdaharn: As there are no further questions, we will conclude today's session today. Thank you very much for joining us today. We will now take a 10-minute break before our TFM session again. Thank you very much. [Break] Pinyada Saengsakdaharn: And welcome to everyone for the results [indiscernible] the executives who are joining us today. Our CEO; and our CFO. And without further ado, I would like to ask our to go ahead and share the details of our performance results. Thiraphong Chansiri: Hello to all of the analysts and the investors joining us today. I would like to begin with our meeting. Slide shows that even though the Aquaculture industry in Thailand in the past has faced many challenges many areas, whether it's outbreak in shrimp raw material prices and the global economic uncertainty. The company have been able to maintain strong growth we have delivered performance that have are the best ever best of business too and at the business and we have been able to increase our market share and shrimp feed and fish feed was seen growth in Thailand and in our exports consists strategies in the past TM. We have adjusted in our strategy to include a [indiscernible] of 51% stake and AMG-TFM, which [indiscernible] area that has been Pakistan resulting in our [indiscernible] and this allows TFM to focus on our resources on main businesses and strong markets and to take advantage of PetCare growth [indiscernible] One of the symptoms that are commitment to ESG and sustainability TFM [indiscernible] and managing news to everyone. We have many projects in the lower carbon shrimp project, which helps farmers -- shrimp farmers to reduce their costs and to lower their greenhouse gas emissions from the farms. This is to improve the farming efficiency and effectiveness and to bolster their long-term competitiveness as well. TFM is the first animal feed producer in Asia that has been certified by ASC. It's the ASC Feed Standard [indiscernible] high level. And this reflects our leadership in sustainability and [indiscernible] feed. In addition, to this we had innovation it prevents which are [indiscernible] feed almost to have remain to reduce the last [indiscernible] and the [indiscernible] breaking apart. [indiscernible] sustainability and regain to receive the [indiscernible] in 2025 and it was a year 2025 was a great year for us and this re-emphasizes that TFM in the past with past ex-sustainability in a core front [indiscernible]. In the next line, we tried to talk [indiscernible] for 2025 [indiscernible] increased 4.5% fishes in business except for [indiscernible] animal feed [indiscernible] 16.2% [indiscernible] increasing 33.4% [indiscernible] 22.2%, which is higher than 2022, 18.7% and this is the result of shrimp cage [indiscernible] strong profitability [indiscernible] and raw materials management as well. Since the result on 2025 we had [indiscernible] which is 19% compared to last year. [indiscernible] to our strong business operation. [indiscernible] we have done a track record for gross profit and net profit in the past 2 years and they [indiscernible] gross margin and high-level of [indiscernible] and our net margin of 11.5% [indiscernible] in our business operation that continue on [indiscernible] trade industry and [indiscernible] TFM, were our shrimp feed on 2025 has increased from the [indiscernible] market share including OEM products this in '25, 7% to 8% [indiscernible] exports in Indonesia growing by 25.6% from the [indiscernible] and this is thanks to our increasing share [indiscernible] on shrimp feed -- quality shrimp feed together with providing technical support to the farmers sharing that with them. And this has allowed shrimp farmers to be more successful in the operations and lower costs. On the next slide, you can see the overall operations for the country. In Thailand, we are now going very well, been able to capture more market share in shrimp feed and fish feed. Thanks to our sales team and our technical support team. In Indonesia we faced [indiscernible] pricing in the fourth quarter. We, it was also, the issue of [indiscernible] activity and the shrimp and there also FX in the U.S. market and in the fourth quarter we had sales affecting our value chain and the strong business in Pakistan. We still have sales producing due to the [indiscernible] business model to OEM [indiscernible] 2024. Overall it is now [indiscernible] because it's the small business size [indiscernible] shares in AMG-TFM to throw the partners. In terms to exports to other countries, we are seeing increasing from the [indiscernible] and this is one of the main targets. We have a target [indiscernible] on our portfolio, [indiscernible] we also have new partners in other countries share that with you in the Q&A session. Our exports, we still see a lot of room for growth and a lot of opportunity for sales. Unknown Executive: This is about the dividend payout in the second half of the year for 2025. We announced THB 0.30 per share dividend has to be approved by the Annual Shareholders meeting first. The dividend pay is at 81.8%, which is higher than our policy guideline of no less than 50%. Record date is the 27th of February, and the payment date is the 21st of April. [indiscernible] and update on the employees that we have received in the past [indiscernible] our outstanding innovative. There was nothing innovative company [indiscernible]. This project that we were awarded from and something that we had shared [indiscernible] ever since 2024. We started that end of the year. We have been able to create [indiscernible] small sized [indiscernible] for young shrimp and this small is called [indiscernible] very small and we are the very first organization in Thailand to be able to do this. And this product helps both the production cost and the farming for the shrimp farmers pollution environment -- and this has led to us receiving this outstanding innovative company award. Let's take a look at the details in our performance for the fourth quarter, beginning with sales. Our sales is at THB 1.6 billion, growing year-on-year by 14.3%. You can remember right that this time last year, we said that in the fourth quarter of 2024, there was unusual season with low season 2024 instead of being a low season, that fourth quarter was a high season due to the prices of shrimp, which are very, very high, very, very strong. And even though we have that baseline in 2024, the high baseline, we're still growing 14.3% more. And this is mostly due to the results in Thailand and our exports because our Srilankan products recovered from flooding and we also have new customers from other countries as well. This growth is mostly from the shrimp feed together with the seabass feed. And our gross profit margin is at 22.3% and this has grown year-on-year as well and this is due to many reasons, whether it's raw material prices or the product mix has changed, this had the increasing shrimp feed contribution and SG&A. [indiscernible] has gone up [indiscernible] we have been able to [indiscernible] compared to last year, which was at 10.2%. And for the entire year, you can see, which we have been able to control our cost of sales. Usually, we take our customers -- if they achieve the targets, we take them for a trip and that increases our sales. But overall for the entire year, we have done quite well. There is one special item, which is the sales [indiscernible] TFM in the third quarter, we reported that impairment and in the fourth quarter, the actual sales took place, we had recorded another loss. Despite this doubtful debt due to the shrimp situation, whether it's outbreak. This is outbreak or radio activity in Indonesia to a high level of doubtful debt in the fourth quarter. Nonetheless, our profit margin reached the level of 11.2%, growing 22.1% year-on-year. If you wait and see the contribution from the different fields, shrimp feed has had 65.5% and increasing from [indiscernible] and shrimp feed goes to product [indiscernible] and this is the main source at the [indiscernible]. Once take a look at details on the different products of shrimp feed you can see and we have grown relatively well especially here in Thailand. The volume in Thailand, increasing volume in the fourth quarter by 26%. 26% thanks to the technical support and other measures we have taken. Shrimp prices are also at the level that the farmers are very happy with and you share after they have recovered in the third quarter from the disease outbreak in the first half of the year. They didn't had radiation issues and that led to a quick capture of shrimp, which affected their exports to America, which is their major export market. [indiscernible] month of last year, there was disruption in the value chain for Indonesia and the situation gradually improved. But the farmers they held back on shrimp raising and that led to an impact on our shrimp feed for Indonesia in the fourth quarter, but the situation is improving. In terms of our gross profit compared to last year, it improved and this is thanks to the raw material prices that have improved, especially in terms of soybean meal and fish meal, though the price has increased significantly in quarter 4. On to fish feed, we have seen growth in this respect as well. It's increased year-on-year by 6.7%. This is mainly due to the Seabass, which has grown 26.1% year-on-year. We have been #1 for Seabass feed for quite some time now, but we continue to grow and this -- for this feed compared to our competitiveness. And we are seeing -- and we have consistent quality and for other fish feed, the categories have declined a bit due to many reasons that gourami fish had disease outbreak and the market size decreased. This too working with the farmers to deal with this issue. And we have someapnea fish also risk for [indiscernible] for different kinds of fish and these are reasons credit concerns and this is reason for a decline in that fish feed other fish feed. We continue to work in this area. We've been working for several years now, but we are happy with the formulation and we're going to implement sales promotions to hopefully lead to increasing sales in other fish feed. And our livestock feed, this is a small contribution to our sales, but if you take a look at the volume, volume has increased and this is because of the lowering sales price. This is in line with the raw material prices. The margin is still at a very satisfactory level, and we will continue with this here, the net profit bridge, we've seen an improvement from THB 151 million in the fourth quarter, THB 151 million in the fourth quarter of 2024 have a stronger since we have a stronger margin due to many reasons. So, SG&A in absolute terms increased, but we have been able to control our costs quite well. And there are a few problems with the doubtful debt. And in Indonesia, they are working on resolving that issue. They are following up on debt that resulted from the radiation and disease outbreak. And AMG-TFG had disposals with feed. We also had that and we have taxes, which have improved and thanks to the [indiscernible] benefits, which we regained in the end of August and this is the summary of [indiscernible] this year that's very similar to the year before. We have been able to have a greater [indiscernible] that is strong and we [indiscernible] and the majority that you see here is that [indiscernible] projects and we renowned shrimp the factory and then [indiscernible] factory and also [indiscernible] dividend payment, which doesn't improved the addition that is [indiscernible] per share. We have a low debt level. These ratios are the cash conversion ratio. And we are very happy with the numbers. The cash conversion cycle is at about 35%, dropping a bit from the quarter before and interest-bearing debt to equity is still at a very low level at 0.09. And I'd like to hand this back to Mr. Peerasak. Peerasak Boonmechote: As for the outlook for this year, we expect sales and we expect continuous growth at 8% to 10% and be main driver for be this [indiscernible] in Shrimp feed and fish feed here in Thailand who see a lot of [indiscernible] and who see a lot of in [indiscernible] opportunities. This profit is at 18% to 20% and this is thanks to our [indiscernible] to maintain quality production and our portfolio on fish focuses on [indiscernible] products. SG&A remains the same [indiscernible] CapEx is [indiscernible] and this is from our new [indiscernible] Ecuador. Hence will be informed the [indiscernible] for operational developments going on [indiscernible] Indonesia. Thank you to our executives, we are at the presentation and has anyone has questions [indiscernible] participants. Unknown Analyst: I like to ask about Ecuador. First of all, Ecuador in the Group, are they important to certain producers? Ecuador has a very large shrimp market and one of the biggest in the world. Our entrance into that market, is it due to the fact that we already have customers or have we been invited into the market? Because I understand that the market there is quite large. You're investing THB 680 million and the capacity you would increase 80%. Is it going to be a construction phase by phase or will be all at once? Peerasak Boonmechote: Let's take it question by question. Of course, the investment in Ecuador is in accordance with our road map. If the analysts and investors would be remembering, if you've been following at the news we shared our road map all the way to 2030. The organic growth, we're expecting organic growth of 8% to 10% yearly and joint ventures to up to THB 10 billion in the past few years. That's we have been sharing with you and the road map that we've made for ourselves, we are on track. In terms of opportunity while we looking at Ecuador -- it's because of the market size and the production yield. Ecuador has a 1.5 million tonnes shrimp farmings. They are growing over 10% every year and if we apply with the conversion rate -- conversion ratio, the numbers are very large. And that is why TFM was looking at this market as a great potential of opportunity. At the investment size is about the same that we had been driven 80% is for the production that can grow end to end and [indiscernible] continue to produce at 80% of the market. Second question is about relationship with partners. There are opportunities and risks, of course we're looking at is the partners. It's just like our investment with [indiscernible] in India. Our partners in Ecuador have great networks. And our partner has not just the network, but also the volume, the value. I don't want to share too much detail yet. But we do have a partner that is directly involved in the industry and also has a supply chain network that is very strong. And I think that's all I can share with you about that. In Ecuador, the shrimp farmers, you have your ASC certification. In Ecuador, they are certified as well because their largest export market is the U.S. And the shrimp that they export is world class at a world-class level. Its players to America or China or Europe, and they have tax benefits, benefit in terms of various barriers. They have all the certification. Unknown Analyst: And the margin compared to us -- the gross margin, the average is not different? Peerasak Boonmechote: Not that different, it depends on the situation. The margin was affected by many different things. It's the portfolio, the product mix, the raw material costs, the factory management, the debt that we believe is quite similar. Unknown Analyst: You said 18% to 20% for the gross profit margin in your guidance compared to last year. I know that last year was a special year. The assumption that you're using, what's the assumption for fish meal and the soybean meal? Why are you able to achieve 18% to 20% for gross profit margin? Peerasak Boonmechote: The first quarter is a low season. We adjust our guidance every quarter, but this is standard and it depends on the real-time performance as long. Some raw materials increase prices, some raw materials decrease, they offset one another. So our costs are relatively stable [indiscernible] in the first quarter, it's a low season and will peak in the second and third and fourth quarters. Unknown Analyst: That means that the margin is according to your guidance, right? In the second third and fourth quarter, you'll adjust -- so how -- what is the outlook for the first quarter. Peerasak Boonmechote: For the first quarter will be a low season relative to the [indiscernible] end of the year to the gross profit. There's a small volume. The volume increases in the following quarters, the gross profit will increase. The main variable is the prices of the fish meal, which is on an upward trend. It may not increase as high as in the fourth quarter as we saw earlier. Other raw material prices are not changing that much. Unknown Analyst: You look at low season, right? We're looking at a decrease in the prices the profit for the first quarter year-on-year, what do you expect? Peerasak Boonmechote: We expect growth in line with our guidance. Pinyada Saengsakdaharn: Are there any other questions? Unknown Analyst: Look at production [indiscernible] what percentage do you expect total capacity in Ecuador. Peerasak Boonmechote: Looking at 8% to 10% [Technical Difficulty] would like to update as the [indiscernible] 2026. The strategies for this year was indicated before we are looking at 8% to 10% growth. Last year was an average of 12% to 15%. We will continue to grow this year as well. We will grow in the high margin products. Our shrimp feed share in Thailand production is not increasing towards 250,000, that's flat. Since this year to be about 250,000 as well. We're looking at about 320,000 [indiscernible] for our shrimp [indiscernible] market share, means we have to increase our shrimp feed with care. Despite the fact that shrimp feed is not increasing overall. We will capture more of the market share. Seabass feed is about [indiscernible] we will continue to [indiscernible] to achieve in that area. We will include our market share and seafood, Seabass feed and we want 10% to 15% and is our final destination and for exports. There are many things for us to consider and we will talk more about that in the second quarter. We will be able to provide a better picture for the [indiscernible] we have many countries. [indiscernible] portfolio whether shrimp feed or fish feed, [indiscernible] every portfolio for us is growing. We are looking to move to focus on sustainability and on innovation in line with our scientific and our world class businesses [indiscernible] the entire group, so that our globe rate [indiscernible]. More concerned about our sustainability [indiscernible] communication to farmers and [indiscernible]. In the next quarter and we are taking more action [indiscernible] with the farmers and we are working [indiscernible] demand, the supply chain and we are wondering well our [indiscernible] in the various reasons and to help the farmers and [indiscernible] we work closer with the farmers. That is our key pillar because we want the farmers to be confident in us to help them build the market. If the farmers can grow and the exports can grow, the supply chain can grow. Therefore, we have to make sure that everything in terms of the farmers in the country are strong. This will support our portfolio. And our investors in Ecuador [indiscernible] is another pillar for us. This is depending with SKUs for abroad looking at risk management. Everything is according to our road map. We are still on track, [indiscernible] the road map that we shared with you a few years before. We want to achieve our 2030 targets, and that is our game plan. Unknown Analyst: In the past 2 years, your dividend payout was quite high. It was 100% and then 80%. And after this, you have projects where you will be using -- you need a lot of funding. So how will -- what will your dividend payout look like? Thiraphong Chansiri: We'll have to balance investment and dividend payout, of course, but we will not be lowering our dividends lower than 50%. Of course, it will not be lower than 50%, even though we're going to be investing for the future. We will continue to follow our policy of no less than 50% dividend payout. Unknown Analyst: I'd like to ask about the target market share, especially for the market share for the shrimp business for 2024 and 2025, 2026, [indiscernible] Seabass for 2024, which are 38%, 45% is still in 2025 [indiscernible]? Peerasak Boonmechote: [indiscernible] in 2024 was only 7%, [indiscernible] expect growth every year. The size and the productivity in Thailand is not increasing and for shrimp feed we continue to see growth in the past few years, we had that. In 2024, the market share was about 27%, if I remember correctly. Have 16% [indiscernible] A challenge to increase to 120,000 tonnes overall sea sales in Thailand is 250,000 tonnes. We want to provide about 120,000 tonnes that [indiscernible] that's how we're going to drive the margin for our seabass feed and shrimp feed together with our portfolio management for our foreign investments or for our foreign clients and our exports and we will continue to engage with the farmers. We had our BOI investment last year. The game plan for this year is to use our production capacity and we will increase production without having to invest more in production. We already did so in the year before. If we have a product mix -- a favorable product mix, and we can continue to grow in shrimp feed and fish feed, we will have more volume in the freshwater fish. Our capacity will be able to maximize the utilization of our capacity. So overhead, of course, will go down. And the overall cost will reduce. The keyword for us is to maintain the level of SG&A. Selling prices are not changing and this will allow us to achieve our target. That is the game plan that I like to share with you. Pinyada Saengsakdaharn: Are there any other questions? We have no aligned question. [indiscernible] for 2026, this will transfer the prices. Raw material prices, as we indicated before, the fish price is increasing. We continue to monitor weekly and [indiscernible] soybean meal and wheat flour prices are stable, and we also continue to keep an eye on these two. We try to lock in the prices 3 to 6 months in advance so that we can control raw material costs at a manageable level. We're not hoping to buy at the cheapest price, but at a price that is acceptable to our operations. As there are no further questions, this is [indiscernible] for 2025 and 2026. So for today, we would like to conclude this session. Thank you for joining us. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Ladies and gentlemen, welcome to Sienna Senior Living Inc.'s Q4 2025 Conference Call. Today's call is hosted by Nitin Jain, President and Chief Executive Officer; and David Hung, Chief Financial Officer and Executive Vice President, Investments of Sienna Senior Living Inc. Please be aware that certain statements or information discussed today are forward-looking, and actual results could differ materially. The company does not undertake to update any forward-looking statement or information. Please refer to the forward-looking information and Risk Factors section in the company's public filings, including its most recent MD&A and AIF for more information. You will also find a more fulsome discussion of the company's results in its MD&A and financial statements for the period, which are posted on SEDAR+ and can be found on the company's website, siennaliving.ca. Today's call is being recorded, and a replay will be available. Instructions for accessing the call are posted on the company's website, and the details are provided in the company's news release. The company has posted slides, which accompany the host remarks on the company website under Events and Presentations. With that, I will turn the call to Mr. Jain. Please go ahead, Mr. Jain. Nitin Jain: Thank you, Audra. Good morning, everyone, and thank you for joining us today. 2025 was a year of long-term value creation for Sienna. We added over $800 million of assets to our platform, ended the year with strong organic growth for the 12th consecutive quarter and enhanced Sienna's balance sheet with the continued support of the capital markets. We issued nearly $700 million of equity and debt with each issuance being met with strong investor demand. We also expanded our workforce by adding approximately 2,000 team members and further deepen our impact in the communities we serve. These achievements have increased the scale and quality of Sienna's diversified platform and positioned the company well for continued growth at a compelling time in Canadian senior living. During the fourth quarter, both operating platforms delivered strong results and continued to -- and contributed to the successful finish to the year. Same-property NOI increased by 15.4% in the Retirement segment and by 5.6% in Long-Term Care. Key driver of the double-digit increase in the Retirement segment were the continued occupancy increase and rental rate growth. Average same-property occupancy was up by 180 basis points year-over-year and has reached 94.7% in the fourth quarter. Following the quarter, monthly occupancy was 95.2% in January. The result of Sienna's Retirement segment also reflect higher care revenue. We apply our expertise in clinical care at our Retirement platform, which allows residents to stay with us longer as their care needs change. Beyond the strong same-property performance in our Retirement segment, we are pleased with the results of the company's optimization portfolio. This portfolio includes assets that are undergoing renovations, changes in service offerings or the addition of new services. Occupancy increased by 790 basis points year-over-year in the optimization portfolio in Q4 and NOI grew by 22.1%. Our focus on better positioning assets within the local markets is clearly delivering results. Additional key driver behind the strong performance of Retirement operations are a robust sales platform and focused marketing campaigns. Year-over-year, call center leads grew by over 50% in the fourth quarter, and the number of tours in our properties have increased each quarter in 2025. We also maintain a robust focus on hospital outreach and excellent relationships with health care partners in the local communities where we operate. All of these initiatives are expected to drive strong lead generation and future move-ins. With respect to Sienna's Long-Term Care operations, fully occupied homes with growing wait lists, higher revenue from private accommodations and annual inflationary government funding increases all added to the strength of the results. Sienna's government-funded Long-Term Care operations add significant value to our business and provide stability given that they are largely insulated from market volatility or economic uncertainty. Now moving to Slide 6. In Q4, we started to see the contributions from 2 recently completed development projects. We opened our redeveloped long-term care community in North Bay in September, followed by our campus of care in Brantford in October. Large-scale development projects require deep expertise and trusted partnerships. With both in place, we are excited to move forward with our next project, which will be our first in the city of Toronto. Located at our existing Glen Rouge site in Scarborough, it will be Sienna's largest project to date with 448 beds and an estimated development cost of about $250 million. The development yield for this project is approximately 7.5% to 8%. After several years of planning, the significant government funding improvements for projects in the GTA were a key driver for us to move forward. The Glen Rouge redevelopment, which is expected to be completed in 2030, will replace 363 existing beds and add 85 much needed new beds in the Scarborough community. With this development, we will further modernize and strengthen Sienna's Ontario platform and support the continued growth of company's Long-Term Care business. 2025 has been a very active year on the acquisition front. With the acquisition of 10 properties across 3 provinces, we added nearly 1,800 beds and suites to our asset base. During the fourth quarter, we finalized 3 acquisitions in Ontario, including Cawthra Gardens, a 192-bed long-term care community and LaSalle Park, 123-suite retirement residence, both located in the Greater Toronto area. In addition, we acquired Hygate, a 213-suite retirement residence in Waterloo, Ontario. These acquisitions added $193 million of assets during the final quarter of 2025, and we carried the growth momentum into 2026. Since the beginning of the year, we added another $79 million through acquisitions. We finalized the purchase of interest in 2 of our majority-owned properties in Ontario and British Columbia and signed a purchase agreement for the Bartlett, a 129-suite retirement residence in the Greater Toronto area for approximately $59.4 million, which will be financed with cash on hand. Sienna's acquisition pipeline remains strong, and we are confident to continue our significant acquisition pace in 2026. Moving to our team members. As we continue to grow, investing in Sienna's team members is fundamental to our success. With over 15,000 employees, we recognize the importance of programs that support the company's growing workforce. Sienna's strong culture of ownership and engagement played a key role in the continued reduction in turnover. Average company-wide turnover has reached a record level low of approximately 19% in 2025. Along with programs focused on team member development, recognition and rewards, our initiatives also resulted in the fifth consecutive year of increased team member engagement and further strengthen Sienna's operations. It puts us in a strong position to attract and retain the best in Canadian senior living. We are extremely proud of these achievements. They reinforce our belief that if we take good care of our team members, they will provide exceptional service to our residents and support the company's strong operating performance. Our focus on enhancing the work experience for Sienna's team members and improving resident quality of life is reflected in our most recent accreditation results from CARF, where we maintained the highest achievement status and exceeded every benchmark. This commitment is also evident in the continued improvement in the company's Net Promoter Score, which measures residents' likelihood to recommend our homes. Since introducing this measure at our retirement residences in 2023, scores have increased by well over 30% each and every year. With that, I'll turn it over to David for an update on our financial results. David Hung: Thank you, Nitin, and good morning, everyone. I will start on Slide 10 for financial results. In my commentary, in accordance with our MD&A disclosure, I will make reference to our operating results, excluding onetime items. In Q4 2025, revenue on a proportionate basis increased by 14.2% year-over-year to $278.4 million. This increase was largely due to occupancy and rental rate growth as well as increased care revenue in the Retirement segment. Adding to the increase were the contributions from our long-term care platform, including higher flow-through funding for direct care, increased private accommodation revenue and additional revenue from acquisitions and developments completed in 2025. Same-property NOI increased by 10.1% to $47.4 million in Q4 2025, including by 15.4% in our Retirement segment and by 5.6% in our Long-Term Care segment. In the Retirement segment, same-property NOI increased by $3 million in Q4 2025 compared to last year, largely as a result of improved occupancy and rate growth. In addition, higher care revenue and maintaining a strict focus on operating expenses supported the year-over-year 300 basis point improvement in our same-property operating margin. We are also making good progress with respect to our asset optimization initiatives, which included 5 assets in the company's retirement portfolio. Q4 NOI in the optimization portfolio increased by over 22% year-over-year compared to the same period in 2024. Effective January 1, 2026, we updated the composition of the optimization portfolio and included 2 additional assets while returning 1 asset to our same-property portfolio after its successful renovation. Occupancy in this property increased from the low 80% range before its renovation to over 95% today. Based on the updated same-property portfolio composition, average monthly occupancy reached or exceeded 95% since last September. In the Long-Term Care segment, same-property NOI increased by $1.3 million. Continued improvements in private occupancy were the key driver behind the year-over-year growth. During Q4 2025, operating funds from operations increased by 24% to $34.2 million compared to last year, primarily due to higher NOI as a result of organic growth in addition to contributions from acquisitions and developments completed in 2025. Adjusted funds from operations increased by 19.8% to $27.9 million compared to last year. The increase was mainly due to higher OFFO, offset by an increase in maintenance capital expenditures. On a per share basis, OFFO and AFFO increased by 7.5% and 3.9%, respectively, in Q4 2025. Sienna's Q4 2025 AFFO payout ratio was 80.7% compared to 83.1% in Q4 2024. This improvement highlights Sienna's strong operating results and the disciplined use of capital the company raised to fund its growth. Sienna delivered consistently strong results throughout 2025. In line with Siena's 2025 growth targets, same-property NOI for the full year increased by 14.3% in the Retirement segment and by 4.8% in Long-Term Care. In addition, Sienna's strong results are reflected in the company's OFFO and AFFO in 2025, which increased by 27.1% and 25.7%, respectively, or by 5.8% and 4.7% on a per share basis. Moving to Slide 12. Throughout 2025, Sienna maintained a strong financial position and balance sheet. We ended the year with over $500 million in liquidity and $1.5 billion of unencumbered assets. We continue to have access to a broad range of capital and demand for Sienna's equity and debt remains exceptionally strong. To support Siena's growth momentum and refinance our debt, we issued $250 million of unsecured debentures in December, and we repaid our $175 million expiring debenture. With this repayment, the company has no major debt maturities until 2027. We also fully deployed our at-the-market distribution program, issuing shares for gross proceeds of approximately $101 million in Q4. And just yesterday, we announced the renewal of the ATM program. This allows the company to issue another $150 million of shares to finance its continued growth initiatives. We will carefully evaluate each opportunity and continue to finance Sienna's growth in a very disciplined manner. With that, I will turn the call back to Nitin for his closing remarks. Nitin Jain: Thank you, David. While the broader economic and geopolitical environment remains uncertain, one long-term trend is very clear. Canada's senior population is set to grow significantly over the next 2 decades with the oldest baby boomer turning 80 this year. At the same time, senior housing is already operating at high occupancy levels in most markets and new supply is expected to remain limited for many several years. Against this backdrop, Sienna's asset increased by nearly 30% with the addition of over $800 million through acquisitions and developments. This has allowed us to add meaningful scale to Sienna's long-term care and retirement platforms, supporting both stability and attractive growth opportunities. With our operating depth, strong balance sheet and the organizational capability to execute, we believe Sienna is in the early stages of a multiyear growth phase. In the near term, this is reflected in Sienna's growth targets for 2026. We expect same-property NOI growth in excess of 10% in the Retirement segment and in the low single digits in Long-Term Care. We also expect to continue this company's significant growth through acquisitions and further strengthen Sienna's position in the sector. On behalf of our entire team and our Board of Directors, I want to thank all of you for this call and for your continued support. Operator: [Operator Instructions] We'll take our first question from Lorne Kalmar at Desjardins. Lorne Kalmar: Just quickly on the same-property NOI growth expectations for Retirement. Can you maybe give some color in terms of the rent growth expectations that are underpinning that? Nitin Jain: Thank you, Lorne. Our 10% plus is made up of rental growth, care revenue increase and potential further increase in our occupancy targets. Our rental growths have been quite consistent in the 4% range, and we expect them to stay there. And we will continue to see more care revenue as residents are choosing to stay longer with us, given our -- that we are not afraid of providing more care with our depth of expertise in Long-Term Care. Lorne Kalmar: Okay. And then maybe just turning to the growth and optimization portfolio. I think you guys are what about 13 homes now. How much NOI upside is there in that portfolio? And how long do you think it will take to realize that? David Hung: Yes, that's a great question, Lorne. So just to clarify, within our growth and optimization portfolio, we only have 6 properties within the optimization portfolio. The others are assets that we acquired in 2025. And in terms of the potential, our margins within the optimization portfolio were around 24% in Q4, and we would expect over the medium term that they would get back towards our same-property margins. Lorne Kalmar: Okay. And then I guess on the -- I guess the growth is kind of the ones in lease-up and the acquisitions. All right. And then maybe just quickly turning to the Glen Rouge announcement. If I read correctly, I think is Glen Rouge only 159 beds? And if so, is this development replacing multiple Class C homes? Nitin Jain: Correct, Lorne. So it replaces Glen Rouge, and it also replaces another home nearby and adds additional capacity. We have quite a bit of land on the site, which is difficult to find in GTA. So we have 4 acres of land at Glen Rouge. So it will be combining 2 homes and adding additional beds. Lorne Kalmar: Okay. And then maybe just one last quick one. In terms of just how do you plan to fund that development? Would that be on the operating line? David Hung: Yes. We would be looking at some form of debt, whether it's on the operating line, potentially a construction loan or other form of debt. Operator: And next, we'll move to Jonathan Kelcher at TD Cowen. Jonathan Kelcher: Just continuing on the Glen Rouge development. Fair size development. Do you envision starting any more developments this year? Or is this going to be sort of given the size, it's just going to sort of carry you through for the next few years? Nitin Jain: Jonathan, we have 2 other projects, which are getting close to shovel-ready. And so we will look at those. One of the commitments we have is not to have our balance sheet too much into development. So that is something we'll continue to manage. We're also not 30% bigger since where we were last year. So we might have a capacity to add another project. But those are some of the things we are assessing against the potential return of these new developments. So I think too early for us to commit. It's only February, but we might have an opportunity to add another one later in the year. Jonathan Kelcher: Okay. And assuming you continue growing then next year probably for sure, just given that you'll likely be that much bigger. Is that the way to think about it? Nitin Jain: Correct. And also, these projects take multiple years. So when you start Glen Rouge, this is going to take 2 to 3 years to complete. So if you have 2 or 3 projects at the go, we have Keswick, which we expect to complete in the later half of next year. So when that completes, it gives us more capacity to add something. So for us, it is a bit of a rolling thing of as projects get completed, we'll get started on the new ones. Jonathan Kelcher: Okay. And I guess just switching gears on the cash taxes were a little bit lower than we had anticipated in Q4. And I guess part of that is due to the timing of acquisitions. Can you maybe give a little bit of color on that? And assuming you're going to be acquiring a similar amount of assets this year, how should we think about cash taxes in 2026? David Hung: Sure. That's a good question, Jonathan. You're absolutely right. Our cash taxes got the benefit of the acquisitions of Hygate and LaSalle, which we did close in December of 2025. And so with the acquisition of those 2 properties, we were able to take a full year of capital cost allowance deduction and able to get a benefit of around $2 million to lower our cash taxes in Q4 of 2025. I think when -- as you -- as we're thinking about 2026, the way that I would think about it is taking 2024, which had no acquisitions and 2025, which had $800 million of acquisitions and redevelopment and using a cash tax rate that is somewhere in between those 2 years. And then, of course, we don't have any kind of forecast in terms of acquisitions for 2026. So that any additional CCA would have to be layered on top of that for potential acquisitions in this upcoming year. Operator: We'll go next to Mark Rothschild at Canaccord Genuity. Mark Rothschild: Maybe starting just following up on your comments with regard to Lorne to the 10% growth. What is assumed as far as occupancy increase in that? And how much more improvement in occupancy do you think you can get? So I understand the breakdown in the 10% growth from rent growth versus occupancy. Nitin Jain: Mark, welcome to Sienna's first call for you, and thank you for your coverage. The 10%, it is a combination of those 3. And your question is very fair on where occupancy can go from here. We are, for lack of a better word, in unchartered territory because 95% occupancy has not happened in Retirement before. We continue to believe there is some opportunity to add more, whether that number is 96% or 96.5%, frankly, it's a bit too early to tell. And part of it is that at 95% occupancy, we have many homes, which are at 100%, 99%, they're running at full occupancy and then we have a few which are 93%, 94%. So I would say, at this stage, I think saying that we will be around 95% is probably a better answer than to say where it could go from here. Mark Rothschild: Okay. Great. And maybe just one more for me. As far as the acquisitions, which clearly picked up over the past year, just talk a little bit about how the accretion would look -- potential accretion would look on acquisitions in the current environment at the cap rates that you're going to have to pay. To what extent does the cost of equity, a higher share price that you have now help or is needed for these acquisitions? And also, does the fact that you can use partners, maybe earn additional fees, what helps push it into be more accretive? Nitin Jain: I think your answer is in the question you asked, Mark, it's a combination of quite a few of those things. We are very sensitive about partners. We have very few select partners that we continue to work with, including Sabra, which is our biggest partnership and with Reichmann, where we have now 2 partnerships where it's difficult to find people who think the same way and are aligned, but we're fortunate to have 2 partners such as those. So I wouldn't see us getting big into partnerships just to earn management fees. I think our goal would be to do partnership that makes strategic sense. End of the day, we are owners and operators of senior living. And cap rates reflect what is happening in the public market as well. And whenever we underwrite something, we're underwriting it for the long term. So we're very focused on ensuring each property is assessed on a debt-neutral basis because it is always easy to buy something just on debt. So I think it's, for a lack of better word, business as usual. We see a decline in cap rates. We just bought the senior apartment building at 5.75% cap rate, which we would not have done 4 years back because we were trading differently. But market is recognizing that there is a cap rate differential. And we feel there is still a big gap into where long-term care cap rates are, for example, and where -- what we're seeing in the public space where a lot of people will assess it in 7% plus, and we haven't found a single long-term care home for sale above 7%. They're more in the 6.5% to 6.75% range. Operator: We'll move next to Tom Callaghan at BMO Capital Markets. Tom Callaghan: Maybe just sticking with the acquisition side of things. Can you just talk a little bit about the pipeline today and whether or not that's weighted towards one side of the business versus the other? And then maybe just geographically speaking, where you see the most opportunity? David Hung: Yes. No, thanks, Tom, for that question. Because we are a diversified company, we operate both in Long-Term Care and Retirement. We actually are seeing opportunities in both lines of businesses, and we continue to pursue acquisitions in both lines of businesses. In terms of where we're finding opportunities, they actually are across all the provinces that we operate, Ontario, Alberta, BC. And we are quite selective in terms of what we're looking for. But the pipeline remains robust, and we continue to be actively looking for opportunities. Tom Callaghan: Okay. Got it. And then maybe just to build on that, like do you have a preference geographically speaking, like when you evaluate these different opportunities? Obviously, almost a year ago now, you entered into Alberta. So just how are you thinking about capital allocation from a geographic perspective as you work through these opportunities? Nitin Jain: Tom, we don't really have an allocation at this stage. But I guess, broadly speaking, we don't -- we have 1 retirement home in Alberta, which we manage for Sabra. We don't own any. So I think if you buy 2, we'll suddenly grow up by 200% there. So we find Alberta to have a lot of opportunity because we're not there yet. We only have 4 Long-Term Care homes. In Ontario, we have quite a bit of Long-Term Care and Retirement homes. But there are also a lot more opportunities in Ontario. So I think it's a bit hard to tell you. For us, the bigger focus is making sure it's a big enough building, the age of the building, the location of the building, the size of the population that is in the market area. So for us, that is more important versus which geography we might be in. And as David mentioned, the fact we can drive on both lanes on the highway of Long-Term Care and Retirement, that has been very effective for us. Tom Callaghan: Got it. Makes sense. Maybe just last one for me on the expense side of things, like growth has clearly moderated there, agency staffing down materially. And Nitin, I think you mentioned turnover at record loads in Q4 there. So just how are you thinking about overall expense growth into 2026? And are there areas where you see opportunity for further efficiency gains? David Hung: Yes. I mean the way we're looking at 2026 is that our operating expenses would be relatively in line with inflation. We think we've done a really good job at being efficient with respect to our expenses. So I wouldn't say that there'd be a lot more areas of opportunity, let's say, in agency or whatnot. But we would continue to be very disciplined with our costs, and it would grow in line with inflation. Operator: And we'll go next to Himanshu Gupta at Scotiabank. Himanshu Gupta: So first on Retirement home occupancy, anything on the flu season? How did that impact? How did you handle? And then how is the February or March occupancy looking like? Nitin Jain: Himanshu, so we are not seeing a huge impact of the flu season seasonality. We haven't disclosed February and March results yet. We might see some softness here or there. And I think I would say this would be across the whole year in question which was asked earlier, where do we go from here? In our mind, when you're at 95% occupancy, you're running pretty close to perfection. So if we -- let's say, if we have a month which is 94.5%, and I'm not foreshadowing what February, March would be, I'm using it as an example, I would think more of it is that this is just -- in our mind, 94.5% or 95.5% is pretty close to what 95% occupancy looks like. And the goal is to inch towards an average of 96% throughout the year as we progress because that would be the next milestone, I guess. So -- but we don't think that's more seasonality. I would say that's just more an idea of you have many homes which are running at 100% if they run at 98%, they're still excellent operations, but it might reduce your occupancy by a few 10, 20 basis points. Himanshu Gupta: Okay. Fair enough. So nothing meaningful at such impact from flu season. Okay. Fair enough. And then moving from stabilized to kind of growth portfolio, how is the lease-up coming on the Hygate property in Waterloo? Like what kind of expectation do you have for stabilization there? Nitin Jain: We don't really get into individual property, but we are -- we had a certain expectation from underwriting, let's say, it's 18 months or so to stabilize from 60% to 95% plus. We are well on our way. We had some good early wins on that property. So it's tracking what we -- where we thought it would be, if not a little bit better. Himanshu Gupta: Got it. I mean the reason I ask, is that like a template for your kind of growth portfolio, like the time frame to stabilize this property from like 65% or 70% to like 95%, like 18 months or so, like fair to say that? Nitin Jain: I guess it is fair to say that, but the reality is this is a one-off. And what I mean by that is rest of the properties we bought were way ahead in occupancy. The Bartlett is close to 97%. So if you find something a lower occupancy, yes, I think that's a reasonable thing that we can potentially get at least a faster given our scale, if you're buying from an individual owner operator. But it really is a mix of things in Hygate, we think that opportunity exists. But for many others, we bought them at near stabilization. And I think that's a good diverse mix where you have some which are accretive right away, and there's some which will have accretion in 18 months or 24 months, but you will have an opportunity to have a bit extra, which is -- would be the case in Hygate. Himanshu Gupta: Got it. Okay. And then on the optimization, I think, David, you mentioned 24% margins in Q4. And did you give any time frame of getting to that like similar to same property margin? David Hung: No, we haven't given any time frames. But what I would say is that we are continually working on our optimization portfolio. Case in point, we had one property that we did significant renovations to, and we were able to get the occupancy from 80% to 95%. And so we've moved that out of the portfolio. Now that being said, we also moved 2 in. So we're going to, on an ongoing basis, have maybe 1 or 2 movements within the optimization portfolio. But our intention is to get them out of the optimization portfolio as soon as possible. Himanshu Gupta: Got it. Okay. Fantastic. Maybe just the last question now. I mean, the Popular Toronto Glen Rouge project you announced. I mean if I look at the development yield, it's very similar to North Bay or maybe slightly lower than North Bay. While the government funding has increased significantly in that project in GDA now. I mean, I would have thought like yield would have been even higher than North Bay. Just can you elaborate, is there a reason it's 7.5% to 8% here? Nitin Jain: Sure, Himanshu. The whole idea is I think we should expect similar yields what we saw in North Bay, which was close to 8%. We would see similar for GTA projects. When the funding went up significantly, it wasn't that projects had a 7% yield and the idea was to get them to 10%. The reason government increased the construction funding significantly is that prior to that increase, projects were not viable, like your yields were 4%. So doubling it will get it to 7.5%, 8%. And some of it, it just -- this will take a bit longer. The number of beds, you're adding new versus old. So that all goes into the math. But in our mind, if you are around in that 8% range, that's probably a good expectation, what you should expect from Long-Term Care projects development regardless of where they are in the province. And the funding reflects that. Operator: We'll go next to Giuliano Thornhill at National Bank. Giuliano Thornhill: I just had a question on the guidance. Might not provide something more like tighten? And is this you being cautious? Or are you kind of more unsure of the improvements in the remainder of the same property portfolio that's unoccupied? Nitin Jain: Giuliano, I wouldn't call it cautious. I mean this is beginning of the year, we expect 10% plus Retirement thing, which in our mind is realistic and low single digits for Long-Term Care. And without getting into, is it exactly $600 million and $200 million of development, our idea is that last year was not an anomaly, and we should expect a year of growth. So I wouldn't call it conservative or optimistic. I would call it realistic at this stage. And if numbers get better, we'll update our outlook at that point. Giuliano Thornhill: And would you describe the kind of unoccupied portfolio as similar quality as the already occupied kind of stuff? Or is it -- like is the pace of leasing going to be similar to what we've seen historically? Nitin Jain: Yes, the pace of leasing would be similar. And case in point would be we had one property which we removed from optimization because it got fully optimized. And we put 2 new in. And there's a chance that something which is running at 95% plus in 4 years from now might go back into optimization portfolio. Case in point, we have a property in Ottawa -- sorry, in Kingston, which is doing well, but we realize there's a good amount of competition. We need to add more care. It needs a much intense renovation, which is hard to do without closing down the suites. So we put it back into optimization. And when it will come back, our goal is it will get to 95% plus. So some of it is continued occupancy gains in the homes, which are not 90%. Some of it might be of homes which are delivering at 95% plus. But we know all of them have a life cycle in especially Retirement homes. Similar to hotels, you need to go through renovations at a certain period of time, and we will continue to see that in our Retirement portfolio. Giuliano Thornhill: And yes, just going to the optimization portfolio. I'm just wondering, is that win that you had during the year, that 10% kind of occupancy uptick, is that like out of the normal? Can you expect that for the remainder that are in there? Or like over 12 months, that's a pretty big increase. So I'm just wondering if that's what we should expect for what's being moved into there. David Hung: Yes. I think that -- I mean, it was a significant increase over the last year. But that being said, I mean, we were working off of a relatively low base. So the fact that we increased our NOI by 22% year-over-year was off of a low base. We would expect that going forward, we would continue to have outsized growth relative to our same-property portfolio just because there's so much more opportunity in those properties. Giuliano Thornhill: Okay. And just the last one that I had is I'm just wondering for the GTA project that was announced, are any of the costs recognized for the land recognized on your balance sheet? And also, where did the incremental beds come from? David Hung: I can comment on the land, which the land is on existing land for the property that we own. So there is no incremental cost for that. We already own it. So that's just part of our inherent cost. Nitin Jain: And this project, we put an application -- we have been working on this project for the last 4 years. So we put an application for 448 beds 4 years ago with the intention one day that things will work out and we will build, and that has happened now. So we had the additional licenses that were given to us to build this. Operator: Next, we'll move to Sairam Srinivas at ATB Cormark Capital Markets. Sairam Srinivas: Congrats on a good quarter. Most of my questions have already been answered over here, but I just want to ask a quick question on supply. There's a bit of a narrative that we are seeing -- starting to see some starts this year with hope that you'll probably see some buildup in supply towards '29, '30. Going with your experience on development and retirement, are you seeing economic trends finally pan up to a point where we could see supply take off? And are you seeing supply kind of build up in some of your markets here? Nitin Jain: On the question of supply, there was quite a bit that is coming on supply. I would just maybe talk about 4 or 5 different things. One is, as numbers get better, there would be an opportunity to develop, and we just did one in Brantford, which is open, which is a campus of care. Given our demographics, knowing that Retirement homes at 95% occupancy, and there are quite a few Retirement homes which will get obsolete. We don't own any one of them. The reality is we do need more Retirement homes. So I think new supply is not a bad thing just from a community perspective because we need more Retirement space. We are not seeing massive builds of Retirement build. These projects do take a long period of time. So if you and I put our money together and we buy land, I think it's probably 18 months from today to start construction and then 24 months after that for it to open. So even if there was a lot of supply, which we're not seeing at that moment, you are 3 years away from it impacting any part of the market. And again, we have to factor in the demographic change because we are now in a place where baby boomers are coming into senior living. And we also have to factor in the obsolete retirement homes, which would no longer be needed. So I think it's -- getting new supply is a good thing. It is not coming in fast. The other thing which has changed is we remember buying an 80-bed Retirement home for $16 million. So it was a very different cost to build. It was a very different cost to buy. We are now buying properties close to $100 million a home. So it is not a development business for someone who sold something and now wants to get into Retirement business, these projects have become complex. They have become bigger. They have become a lot more expensive. So you will see a lot more sophisticated senior living providers started to build. And for them, they want to make sure the numbers pan out. So I think there will be a lot more discipline than you might have seen in the past. Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good day, ladies and gentlemen, and thank you all for joining us for today's Farmer Mac 2025 Earnings Results Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to Senior Director of Investor Relations, Jalpa Nazareth. Welcome, Jalpa. Jalpa Nazareth: Good afternoon, and thank you for joining us for our fourth quarter and full year 2025 earnings conference call. I'm Jalpa Nazareth, Senior Director of Investor Relations and Finance Strategy here at Farmer Mac. As we begin, please note that the information provided during this call may contain forward-looking statements about the company's business, strategies and prospects. These statements are based on management's current expectations and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected. Please refer to Farmer Mac's 2025 annual report on Form 10-K and subsequent SEC filings for a full discussion of the company's risk factors. On today's call, we will also be discussing certain non-GAAP financial measures. Disclosures and reconciliations of these non-GAAP measures can be found in the most recent Form 10-K and earnings release posted on our website. Joining me today are Chief Executive Officer, Brad Nordholm; our President and Chief Operating Officer, Zack Carpenter; and Chief Financial Officer and Treasurer, Matt Pullins. At this time, I'll turn the call over to our CEO, Brad Nordholm. Brad? Bradford Nordholm: Thanks very much, Jalpa. Good afternoon, everyone, and thank you very much for joining us. 2025 was another strong year for Farmer Mac. We surpassed $33 billion in outstanding business volume, achieved record revenue of $410 million, a 13% increase relative to the prior year and produced $183 million in core earnings, our 10th consecutive year of record annual core earnings. We thoughtfully balanced returning capital to our shareholders with investing for future growth while continuing to execute on our mission of providing vital liquidity to agriculture and rural America. As you saw in this afternoon's earnings release, we announced a $0.10 per share increase in our quarterly dividend to $1.60 per share. This is our 15th consecutive annual increase, reflecting our confidence in the durability of our earnings profile and our long-term cash flow generation. We were active in share repurchase program in the fourth quarter, which was modified last August by Board of Directors to approve share repurchases of up to $50 million of Farmer Mac's Class C common stock. During the fourth quarter, we completed $12.9 million under the amended program, and we have $37.1 million remaining under the current authorization. In total, we returned $78 million to shareholders through dividends and share repurchases in 2025. Looking ahead, we remain committed to this balanced capital allocation approach that prioritizes prudent growth, balance sheet strength and consistent shareholder returns. During the quarter, we also completed our seventh Farm securitization transaction, further building liquidity and efficiency in the agricultural mortgage-based securitization market. This risk transfer tool strengthens our ability to optimize capital and enhance the amount of market liquidity we can provide through our businesses. By transferring a portion of the underlying credit exposure to investors, we free up capital, which is then available to be redeployed into new mission-aligned lending activities. We are very pleased with the tremendous support we've seen for this program, and we look forward to exploring other credit risk transfer opportunities in order to grow our platform while continuing to deliver high-quality opportunities to our various classes of investors. We anticipate introducing a new product in the market this year that will support the strong investor demand for agricultural assets, while also remaining in alignment with our mission fulfillment. The agricultural real estate market remains very active. The USDA expects demand for real estate mortgages will remain robust in 2026, with the total volume of transactions projected to increase by 5% this year relative to 2025 levels. As it relates to our portfolio, we were pleased to see a very positive outcome from recent property sales for a distressed borrower, which we expect will result in recognizing previously unaccrued fees and interest and meaningfully reducing our 90-plus day delinquencies during the first half of 2026. Despite the volatility and uncertainty in today's environment, whether from interest rate movement, commodity price fluctuation, supply chain disruptions, consumer behavior changes or broader geopolitical and policy dynamics, Farmer Mac continues to be resilient. Our diversified business model, strong capital position and disciplined risk management position allows us to provide vital liquidity to agriculture and rural infrastructure sectors in all economic environments. Matt Pullins, who joined us as our new Chief Financial Officer in mid-December, will review our financial results in more detail, but I want to hasten to add that we are thrilled to have Matt join the team. He brings more than 2 decades of experience in corporate finance, capital markets and strategic planning, paired with a personal connection to American agriculture. His combination of deep financial expertise and authentic understanding of rural America makes him an exceptional addition to Farmer Mac, and we're excited for the impact he will have on our organization. Now I'll turn the call over to Zack, our President and Chief Operating Officer, to discuss our customers and market developments in more detail. Zack? Zachary Carpenter: Thanks, Brad, and good afternoon, everyone. Our results continue to demonstrate the benefits of the strategy we have been executing for several years now, diversifying our portfolio into higher spread mission-aligned businesses while maintaining strong underwriting standards and disciplined risk management. Serving agricultural businesses and providing liquidity to enhance and enable rural infrastructure are both critical to our mission of driving economic opportunity to rural America. Farmer Mac is broadening the pursuit of its mission in response to the evolving economic landscape in rural America, and this proactive business diversification continues to deliver meaningful benefits to the communities we serve. Our team delivered another outstanding year of business volume activity with broad-based net volume growth in every segment, reflecting strong customer demand and the continued relevance of our secondary market solutions. We achieved a record $3.8 billion of net new business volume in 2025, resulting in total outstanding business volume of $33.4 billion as of year-end. The net volume increase highlights quality asset growth across all our product sets, which in turn drove significant growth in net effective spread. Our agricultural finance outstanding business volume grew $1 billion last year with our Farm & Ranch segment accounting for nearly all of that net growth. Activity in Farm & Ranch accelerated meaningfully in the fourth quarter and has carried over into 2026, which reinforces the momentum we're seeing in this business. We expect loan purchase growth to continue as tighter agricultural conditions driven by higher input costs, trade and tariff concerns and low commodity prices, increased producers' need for liquidity. The Farm & Ranch segment is core to our mission, and we remain committed to bringing our customers products that provide capital and risk management solutions, which support their borrowers' financial needs. Our Farm & Ranch AgVantage securities portfolio reached an inflection point in the fourth quarter as the portfolio reversed the runoff trend and grew $500 million. As we discussed on our prior call, this increase reflects the additional fundings we anticipated after closing a new $4.3 billion facility with a large agricultural counterparty. We expect this momentum to continue in 2026 and remain on track to return to sustained net growth in this product as we work closely with new and existing counterparties to determine the right timing for refinancing maturing securities or providing incremental financing based on market conditions and return on capital objectives. We remain steadfast in our commitment to deliver a broad spectrum of financial solutions to the agricultural community by working alongside our growing customer base. Our Corporate AgFinance segment saw a net growth of $63 million during 2025, reflecting our continued efforts to support larger, more complex agribusinesses that span the food, fuel and fiber supply chain. We anticipate seeing more activity in this segment in the first quarter of 2026 as deal flow activity levels are higher relative to prior years. However, ongoing refinancings and maturities will continue to create a headwind going forward. Turning to our infrastructure finance line of business. Outstanding business volume increased to $11.8 billion at year-end 2025, up over $2.8 billion from the prior year, with all 3 segments contributing significantly to net growth. This is a continuation of the strong interest and investment in data centers, broadband expansion as well as the construction and completion of renewable energy projects, coupled with the overall need for significant energy generation and transmission capacity for rural America. Volume in our Power & Utilities segment grew by over $1 billion, largely due to strong load purchase activity and net new advantage security issuances, supporting investment needs of rural electric generation, transmission and distribution cooperatives. Our Renewable Energy segment also grew more than $1 billion last year, supported by strong deal flow, accelerated construction deadlines and continued project finance momentum. Despite increased policy uncertainty across the renewable power investment market, we expect to continue participating in renewable energy transactions for both new projects and refinancings of existing projects, utilizing the same strong credit standards. Looking ahead, while we anticipate another construction-related rush in the first half of this year, primarily tied to the July 4 deadline included H.R. 1, we believe the substantial need for new power generation will continue to drive growth in this segment. We're seeing strong deal flow, allowing us to be selective with our capital deployment in this sector to pursue deals that are appropriately structured with strong counterparties, which underscores the strength of our reputation in the market. Beyond 2027, we anticipate activity in this space to be more market-driven rather than policy-driven as the underlying driver remains the same, a massive surge in power demand, requiring significant new power supply. Our Broadband Infrastructure segment grew by $700 million in 2025, more than double the prior year's growth with nearly 90% of volume growth tied to data center-related demand. We anticipate increased financing opportunities in this segment for data center build-outs given the increasing investment in capacity to support AI, cloud storage and enterprise digitization, particularly by large hyperscalers, and we will continue to emphasize diversification across geographies, sponsors and tenants. We believe these developments are crucial for rural economic growth and support the historically strong market demand for connectivity needs across rural America. Growing business volume in our Infrastructure Finance segment remains a top priority, and we will continue to focus on strategic investments and resources in these areas to build our expertise and capacity as market opportunities arise. Despite this backdrop of broader market uncertainties stemming from factors such as interest rates, regulatory shifts and trade policy changes, we are confident in our ability to continue to deliver growth and consistent results. Our total portfolio is well diversified by both commodity and geography, and we remain confident in the overall health of our portfolio as evidenced by our continued strong asset quality metrics. To summarize, 2025 was a year of strong, broad-based disciplined volume and net effective spread growth across all of our operating segments, and our pipelines remain strong as we move into 2026. We expect continued customer demand for liquidity, capital efficiency and long-term funding solutions as market conditions evolve. Our robust capital and liquidity, along with our strong underwriting criteria, position us to capitalize on this opportunity. Importantly, we are confident in our ability to continue to deliver consistent results as we support rural America through this economic cycle and beyond. With that, I'll turn it over to Matt Pullins, our new Chief Financial Officer. I'm thrilled to welcome him to Farmer Mac and to the leadership team as we continue to advance our long-term strategic priorities and position Farmer Mac for its next phase of growth. Matt? Matthew Pullins: Thank you, Zack. I'd like to begin by saying how pleased I am to be here and to help lead this mission-driven organization. Growing up on a family farm in Western Ohio and remaining deeply connected to production agriculture today make it especially meaningful and energizing to support an institution whose mission is so closely aligned with my own background and values. First, I'd like to touch on our fourth quarter 2025 results. Our net effective spread was $101.4 million, reflecting a 16% increase over the prior year quarter and an all-time quarterly record. Net effective spread as a percentage was 122 basis points, reflecting the portfolio mix shift to more accretive assets and continued disciplined funding execution. Core earnings were $40 million for the fourth quarter, a $3.6 million decline from the prior year period. Fourth quarter core earnings results were negatively impacted by credit provisions related to a small number of loans originated from 2021 to 2023 in the Corporate AgFinance and Broadband Infrastructure segments. The charges impacting these specific loans this quarter were concentrated within a few borrowers facing business-specific obstacles. We do not believe the charges are indicative of a meaningful change in the high credit quality that persists across our portfolios. If these charges were not concentrated to the fourth quarter, we estimate core earnings would have reflected a 20% increase over the prior year period. Now turning to our full year results. 2025 was another year of strong financial and operational execution for Farmer Mac. We delivered a record net effective spread of $383 million, an increase of $43.5 million or 13% from the prior year. As Zack mentioned, the company's strategic decision to diversify our loan portfolio into newer lines of business that play to our competitive advantages in intermediate and long-term financing solutions such as Renewable Energy, Broadband Infrastructure and Corporate AgFinance has been a key priority. The broadening of our business is benefiting us through changing market cycles. Also contributing to our net effective spread growth is our effective asset liability management and funding execution. The strengthening of our capital position through retained earnings growth and preferred stock issuance supports our balance sheet management strategies, which are fundamental to the resilience of our business model as these strategies enable us to be nimble and responsive to changing market conditions. Core earnings for the full year were $182.9 million, up 6.6% compared to the prior year, reflecting strong revenue growth, partially offset by elevated credit expenses and higher operating costs. Also reflected in our 2025 core earnings results is the purchase of $61.5 million of renewable energy investment tax credits, resulting in a $4.8 million benefit in 2025. As of year-end, we had approximately $80 million of remaining capacity to use renewable energy tax credits. We will continue to evaluate future tax credit purchase opportunities in relation to our tax capacity. Partially offsetting strong earnings growth was a 14% increase in operating expenses over the prior year. This increase was largely due to resources and investments needed to support increased business volume, such as transaction-related legal costs, technology investments and hiring-related expenses. We maintain our deliberate approach to expense management by proactively monitoring and managing expense growth against incoming revenue streams. We will continue making targeted investments in business development and our operational and technology platforms to support future growth and scalability while managing expenses within our long-term efficiency ratio target of 30%. We experienced $32.9 million of provision for credit loss expense in 2025. The provision expense reflects $19.6 million attributable to certain individually significant credit deteriorations in our Corporate AgFinance and Broadband Infrastructure portfolios. Outstanding business volume growth across our business segments accounted for an additional $9.6 million provision expense. Corporate AgFinance, Renewable Energy and Broadband Infrastructure segments accounted for 84% of the total provision expense attributed to new business. It's important to note that when diversifying into these different segments, Farmer Mac developed underwriting standards consistent with industry practices, acquired significant expertise in these newer segments and implemented a comprehensive framework that appropriately aligns with our risk appetite. As these portfolios continue to season, we may see credit costs trend higher than the levels historically observed in our Farm & Ranch and Power & Utility segments. Importantly, these portfolios earn higher yields commensurate with the underlying risk return profile. Charge-offs totaled $20.9 million in 2025, the majority of which occurred in the fourth quarter and were primarily related to borrowers facing business-specific headwinds. The total allowance for losses as of December 31, 2025, was $39.7 million or 17% of nonaccrual assets as of year-end. This compares with $25.3 million or 15% of nonaccrual assets as of December 31, 2024. This metric is useful for evaluating the level of our allowance relative to accounts for which it is probable, we will not be able to collect all amounts due under the loan agreement. We are comfortable with the level of the allowance given the value of the collateral that is supporting these loans. The fundamentals of our underwriting and risk analytics enable us to continue to effectively navigate the current volatility and uncertainty in the agricultural cycle. While credit losses are inherent in lending, we anticipate the strength and diversity of our overall portfolio will moderate the potential impact of a credit cycle on our overall business. Farmer Mac's core capital increased by $204 million in 2025 to $1.7 billion, which exceeded our statutory requirement by $678 million or 66%. Core capital increased $13 million in the fourth quarter, largely due to higher retained earnings. Our Tier 1 capital ratio was 13.3% as of December 31, 2025, compared to 14.2% as of the prior year period. The change in our Tier 1 capital reflects the effect of strong loan purchase volume growth in our agriculture finance and infrastructure finance portfolios. Our strong capital position has enabled us to grow and diversify our revenue streams, remain resilient through volatile credit environments and continue providing competitively priced liquidity to our customers and their borrowers. Looking ahead, we will maintain a thoughtful and balanced approach to managing our overall capital position. Organic capital generation, selective capital issuance and the use of risk transfer tools will help ensure we have sufficient capital to support future growth, particularly in more accretive segments, which are more capital intensive. In conclusion, our strong earnings performance, effective balance sheet management, robust capital position and solid liquidity levels underscore the strength and resilience of Farmer Mac's business model. The results this year reflect disciplined execution across our enterprise and the continued benefit of a diversified platform that deepens our value to lenders, borrowers and investors across rural America. I am grateful for the opportunity to join this organization at such an important moment, and I look forward to partnering closely with the leadership team as we continue advancing Farmer Mac's mission and long-term strategic priorities. And with that, I'd like to turn the call back over to Brad. Bradford Nordholm: Good. Well, thank you very much, Matt. As we look ahead, we are excited about the opportunities in front of us and confidence that the depth and capability of our management team positions us well to continue executing on our long-term strategic priorities. Before we begin the Q&A period, I'd also like to remind everyone that we will be hosting our Investor Day on March 18 in New York at the New York Stock Exchange. We look forward to providing a deeper dive into our strategy, growth initiatives and the future of Farmer Mac and actually having some formal and informal conversations with you. We hope to see many of you there. And now, operator, I'd like to see if we have questions from anyone on the line today. Operator: [Operator Instructions] We'll hear first today from Bose George at KBW. Bose George: Welcome, Matt. The first question I had was on the credit issues. While you note that these losses are customer specific, is there a good way for us to think about the run rate provision just based on the changing mix? Like is the 2025 annual level a decent number if we kind of spread that out over a full year? Bradford Nordholm: Bose, nice to hear from you today. Keep in mind that when Matt took you through the numbers, the $32 million, of that $13 million was attributable to automatic provisions that are added through our CECL modeling attributable to the growth in the portfolio. And so looking forward, we're actually starting out 2026 in strong fashion. And while we don't have specific allocations across portfolios, we're continuing to see a very nice mix across portfolios. So there's going to be a core level of automatic provisioning reflecting the growth in 2026. So that's kind of the first piece of it. The second piece of it, any special provisions associated with individual credits, that's much, much harder for us to forecast. I guess all I could say today is that we don't foresee see anything today that would cause us to think that, that number would be going up. There's nothing that we're identifying as of this time. Bose George: Okay. Great. That's helpful. And then just one on the spread expectation for the year. Is the current spread levels sort of a reasonable number based on your expectations? Zachary Carpenter: Bose, this is Zack Carpenter. Good question. I think really, this boils down to volume mix. In 2025, it was a year of substantial growth across our newer segments. And as we've talked about in our script, those carry more accretive yields than some of our legacy or other assets that didn't grow as fast in 2025. We talked about an inflection point in AgVantage in 2024. We see strong momentum heading into the first part of this year. And just given the strength of the counterparties, those assets carry much tighter credit spreads than some of the other products. So it's really hard to pinpoint where we anticipate spreads going. It really focuses on product mix and growth opportunities. And as we look out to the first part or at least the first half of 2026, we see strong and sizable growth across all of our segments and products. And so the size of that growth will impact the overall -- any net effective spread percentage. That being said, we're really focused on growing the revenues or the total net effective dollar amount. And we feel confident that just given our risk profile of these assets and the growth opportunities, we'll see strong growth there as well. Operator: Our next question will come from Bill Ryan at Seaport Research Partners. William Ryan: I'd also like to extend my congratulations to Matt. Question following up on the last one on the provision. Historically, the credit provisioning has been kind of related to some idiosyncratic events, but it sounded like there may have been a little bit more going on in the portfolio. You highlighted broadband, a few small credits and also in Corporate AgFinance. I was wondering if you might be able to unpack that a little bit more to say -- to kind of let us know, is there something kind of going on with these smaller credits that caused a little bit more disruption in the fourth quarter? Or is it just kind of like a one-off event that you, again, concentrated among these credits? Bradford Nordholm: Yes. Zack will give you additional color on that, Bill. I guess the one thing I would just say at the outset is that we're quite emphatic that there's nothing systemic here in the portfolio. Zachary Carpenter: Yes. When we talk about a few small credits here, I do want to highlight it is a few loans compared to thousands and thousands of loans we have on our balance sheet. And I do want to highlight, if you look at our financials, the acceptable loan quality is very high across all of our segments. So we feel very confident that there's no systemic or portfolio-wide issues that we're not aware of. As it pertains to a few of these individual loans, it is very borrower specific. In the lending space, you're going to have operational issues, management issues, market changes, market dynamics and consumer changes that all impact businesses. As we noted in the script, some of these loans were purchased right out outside of COVID and things have changed post-COVID and some businesses are just dealing with that and struggling to rightsize their operations. And for a few of these loans, I think it was those type of market dynamics that created the risks that we saw in 2025. We've been monitoring these loans for some time now. So we were aware. Things just transpired in the fourth quarter that created further deterioration. That being said, it's a few borrowers, and this was very borrower specific. And overall, we feel very confident with the quality of our portfolios. William Ryan: Okay. And one follow-up on credit, just a couple more questions. In the Farm & Ranch business, I believe the loan payments are due January 1 and July 1 each year. And I was wondering if you can might be able to give us some indication. Obviously, farm credit has been in the headlines for the past several months. Is there anything of note that took place when these payments came due on January 1? And kind of following up on that, I believe there's going to be a disbursement of market stabilization payments from the government in February, which should help out the farmers as well. Zachary Carpenter: Yes, it's great. January 1 and July 1 are typically our large prepayment periods. The January 1 prepayment cycle was in line with January 1, 2025. There was nothing unique about this payment cycle. In fact, we've seen significantly more growth during the month of January than prepayments, which shows, again, the momentum that we've had in the space. You're right, as it pertains to government program payments, the projected 2026 net cash farm income is going to be supported by a significant amount of government payments. And there's a couple of components to that. First, in H.R. 1, there were some farm bill enhancements primarily related to price triggered commodity programs. It's about $13 billion in 2026 that will be going out later. Some of the ad hoc and disaster aids, about $24 billion. Some of this was a carryover from 2025 as those start going out. So we have seen some of those being dispersed. They are supporting the tight Ag economy cycle right now, especially in the row crop space. So those will be a benefit going forward just given the substantial amount of government payments going out in 2026. William Ryan: Okay. And just one last question. I'll try and get one more in here. On the expense outlook, obviously, a bump up in expenses on some of the things that you highlighted over the course of the year, transaction expenses, personnel investments. Fourth quarter number looked like it came back down quite a bit year-over-year. How should we be thinking about expense growth in 2026? Matthew Pullins: Bill, this is Matt. To give you a little bit of insight into expense growth, a couple of things to keep in mind. There is some modest seasonality that factored into the slowing of expense growth in the fourth quarter. When we turn the page and turn the calendar into 2026, the first quarter tends to have higher personnel expenses as we look at resetting things like payroll taxes and the like. That's one factor to keep in mind. More broadly for the business, as we look to 2026, there will be a level of expense growth that will be incurred as we continue to grow outstanding business volume. There are transaction-related expenses, operational expenses and the need for incremental personnel to support the growing business. We will also be looking for strategic investments, particularly in the technology platform as well as selective investments in business development to further enhance the growth and take advantage of the market opportunities that are present at this point in time. So with that being said, we are being very mindful of making sure that we continue to operate within the target efficiency ratio of 30%. And you'll see that we were over 2% below that here in the quarter, and we will continue to balance making investments while operating very efficiently in the future. Operator: We'll move forward to Brendan McCarthy at Sidoti. Brendan Michael McCarthy: Just want to start off on your outlook for the volume mix heading into 2026. I know you mentioned you're pretty positive outlook for broad gains across the portfolio. Are you able to kind of dissect that outlook a little bit more as to which specific segments or lines of business you're more bullish on relative to others? Zachary Carpenter: Brendan, it's Zack Carpenter here. Yes, I think it's a very consistent theme with one notable exception that we experienced in 2025. So first and foremost, the pipelines across our infrastructure finance line of business continue to remain at very strong and elevated levels. We talked about that a little in the script. It's just a function of the need for energy that's coming from all sources of our segments as well as the strong growth in data centers. So for the foreseeable future, at least the next couple of quarters, we see very, very strong pipelines across all 3 of those segments, which is just a continuation of what we saw in 2025. Looking over on the agricultural finance line of business, as I noted, Farm & Ranch continues to perform at a very, very elevated level. Loans submissions, approvals were a record in January. So a lot of the momentum we saw in the second half of 2025 continues to roll over just given the dynamics in the agricultural environment as well as our customers, financial institutions managing capital, liquidity, et cetera. So continue to expect to see strong growth in Farm & Ranch. And I think the one notable exception from 2025 is really Farm & Ranch AgVantage. We had a very strong fourth quarter. We're having very strong conversations right now with our counterparties plus new counterparties. So we anticipate that growth trend increasing in 2026, starting very early. And so I think from a mix perspective, it's a little bit all over the board across all segments with one notable exception being we see some pretty strong growth in Farm & Ranch AgVantage, which, as you've known, has been in kind of a decline mode over the last couple of years. Brendan Michael McCarthy: Great. I appreciate that detail. And just as a follow-up there with the AgVantage business. I know that's more kind of like a relative value proposition, and it sounds like that relative value might be increasing. What's really driving that? Is this maybe lower rates? Or is it just what you're able to offer counterparties? Zachary Carpenter: There's a lot of components to that question, but I think there's a couple of key requirements that I think are driving the opportunity set here. First is some of these counterparties, these new counterparties that we've talking about, their facilities have closed. I mean these are very complex, time-consuming facilities and in many instances, require counterparty regulatory approval, and that could take months. And so as those approvals have started coming in, there is now a closed facility where these counterparties want to leverage our relative value versus other opportunities and pledge the collateral to support their growth and their balance sheet. The second is, as we've modified certain facilities with existing counterparties that have provided more value or more available capacity, they're seeing more utilization as they continue to grow and originate loans. So I guess what I would say is fourth quarter was kind of the inflection point where a lot of these components that we've been talking about over the last 12 to 18 months have come to fruition and concluded, and now we're seeing the benefits of that, just given the relative value of this product set versus other liquidity sources in the market. Brendan Michael McCarthy: Understood. And one more question for me. Just really looking at the credit side, I believe that, Brad, I believe you mentioned there may be a recovery in the outlook there. Did I hear that correctly? Zachary Carpenter: Yes, Brendan, this is Zack again. That's correct. As we've disclosed in our financials and talked about over the last couple of years, clearly, the permanent planting, specifically almonds in California experienced a stressed environment. On the positive side, in 2025, we've seen some improvement in pricing. And as Brad noted in the call, a borrower that had experienced stress in our portfolio, we are seeing some resolve in that transaction, which we believe in the first half of this year will result in a meaningful reduction in our 90-plus day delinquencies as well as some recoupment of fees and interest income that we've been holding back given the status of that loan. Matthew Pullins: Brendan, this is Matt. If I could just add one additional point there is the specific borrower that was referenced in Brad's comments and that Zack just touched on, that is actually not going to meaningfully impact credit costs or recoveries as we have not charged any of that borrowers' assets off at this point. The positive financial impact for that particular borrower will be recognized through an increase in net effective spread as that asset has been on nonaccrual for some period of time. Operator: And we'll take a question from the line of Gary Gordon. Gary Gordon: A couple of things. One, the dividend increase of 7%. I think historically it is on the low side. I mean, is some of your thinking that you're laying out strong business growth and also the repurchase opportunity. So the assumption that more of your capital than normal would be used to fund the balance sheet growth and potentially share repurchase. Bradford Nordholm: Yes. Gary, obviously, we have a number of tools for managing capital growth, including earnings, dividends from that, preferred stock issuances, securitizations, which can change relative requirements rather than notional requirements. And so we look at all the tools that we have available to us. And probably the most significant factor in kind of looking at what's the appropriate amount of dividend increase this year is the fact that our growth has been very, very strong. And our growth has been very, very strong in segments of business that consume a bit more capital. And so you see that reflected. For the long-term financial strength and performance of Farmer Mac, that's a very, very positive thing. Gary Gordon: Okay. Two, on the problem loans, you said they were from '21 to '23. You said they were one-offs, but were there lessons learned there that affected your underwriting today? Zachary Carpenter: Yes, Gary, we can constantly evolve and monitor markets and adjust our philosophy and underwriting. We don't change our standards, but we update our thought process based on what we've seen in the markets. For a couple of these, especially the one originated in 2021, dramatically different times in COVID and out of COVID and certain markets reacted differently and certain supply and demand dynamics changed. And I think a couple of these individual borrowers experienced some of those market changes, consumer behavior changes and just frankly, some operational issues that management struggled working through. I think when you take a step back from an underwriting standpoint, our primary focus is, first and foremost, having the right expertise in-house. You've seen our increase in headcount. A lot of that is to get the right personnel to adjudicate and understand the risk and monitor the risk in these newer segments, which we've done. And the second is, as markets evolve and we see transactions like this, it does help in future adjudication of transactions to take a step back and see what's transpired in the markets. Every market is operating differently, and we want to use the most up-to-date information to make appropriate credit decisions as we move forward. So I think the long answer is yes, we continue to assess markets and borrow-specific issues and adjust our thinking in risk adjudication when that comes up. Gary Gordon: Okay. Last thing is the data center demand. Has that had any material and sort of general impact on farmland prices. And if so, I can imagine for existing loans, that would be a positive, but it could create a little more risk lending today. Zachary Carpenter: Gary, the opportunities that we've seen in the data center space have been in really rural areas, not necessarily in productive farmland areas. I know there's been some out there and some articles that have highlighted the interaction between arable and productive farmland versus renewable energy projects and data centers. We haven't seen that or experienced that in our portfolio. From a farmland value perspective, it's been relatively stable. We've seen some declines just given the overall commodity cycle in some of the regions that we have loans in our portfolio. But we really haven't seen a correlation between data center investments and constructions and changes in -- or increases in farmland values. Operator: And thank you to our audience members who had shared your questions. Mr. Nordholm, I'm pleased to turn it back to you, sir, for any additional or closing remarks. Bradford Nordholm: Great. Well, thank you. Thank you all very much for joining us. And thanks for your patience. I think we had a couple of situations with background sirens today. And our office here at 2100 Pennsylvania Avenue, a couple of blocks from the White House, occasionally, especially when there are a lot of foreign dignitaries in town for events, results in motorcades and ambulances, and thank you for -- thank you for bearing with us today. But I would like to conclude by thanking everyone for listening in on the call. We'll, of course, be having our regular scheduled call again in May to report our first quarter results. We look forward to sharing information with you at that time. But in the meantime, please do consider joining us for our Investor Day in New York, and please follow up with Jalpa with any other questions that you may have. With that, thanks again. And operator, we will conclude the call. Operator: Ladies and gentlemen, this does conclude today's Farmer Mac 2025 Earnings Results Conference Call. And we do thank you all for your participation. You may now disconnect your lines. Please enjoy the rest of your day.
Operator: Good afternoon. Thank you for attending the Century Aluminum Company Fourth Quarter 2025 Earnings Conference Call. My name is Matt, and I'll your moderator for today's call [Operator Instructions] I'd now like to pass the conference over to our host, Chad Rigg, Vice President of Finance and Treasurer. Chad Rigg: Thank you, operator. Good afternoon, everyone, and welcome to the fourth quarter conference call. I'm joined here today by Jesse Gary, Century's President and Chief Executive Officer; and Peter Trpkovski, Executive Vice President and Chief Financial Officer. After our prepared comments, we will take your questions. As a reminder, today's presentation is available on our website at www.centuryaluminum.com. We use our website as a means of disclosing material information about the company and for complying with Regulation FD. Turning to Slide 2. Please take a moment to review the cautionary statements with respect to forward-looking statements and non-GAAP financial measures in today's discussion. And with that, I'll hand the call to Jesse. Jesse Gary: Thanks, Chad. Thanks to everyone for joining. I'll start today with a discussion of Century's leading position in the American aluminum market, including exciting developments on our Oklahoma smelter partnership with EGA and the redevelopment of the Hawesville site into an AI digital infrastructure campus. I'll then review our Q4 operational performance, including good news on the timing of the restart of Line 2 at Grundartangi before concluding my initial remarks with a review of the outstanding global market conditions that we are operating in today. Pete will then walk you through our Q4 results and Q1 outlook. Before I conclude the call with a discussion on the significant tailwinds we see for the company in 2026, including our Mt. Holly expansion project. No company is more dedicated to U.S. aluminum production than Century. Century is already the largest producer of aluminum in the United States, smelting nearly 60% of the country's primary aluminum, employing more American primary aluminum workers than any other company, and thanks to President Trump's leadership and the Section 232 program, we plan to invest billions more in new and expanded production at Mt. Holly and our Oklahoma smelter project. This has all been enabled by President Trump and the administration's policies, including the Section 232 program, which continues to be enforced with no exceptions and no exemptions. This sacred program has leveled the playing field for American aluminum producers and workers. And now for the first time in a generation, is leading to the reshoring of production of this critical mineral and a new modern smelter in Oklahoma. Century is grateful to President Trump for his leadership and we intend to continue to invest in America as the largest supplier of this critical mineral in the United States for decades to come. To this end, Century made substantial progress on our new smelter project in 2025, culminating in our recently announced partnership with EGA to build the first new smelter in the U.S. in nearly 50 years. By combining efforts with EGA, we will pair Century's significant operating and supply chain expertise in the U.S. with EGA's world-class expertise in aluminum smelting technology, construction and operation. As partners in Oklahoma smelter, EGA will own 60% and Century will own 40% and the project will benefit from our previously announced $500 million grant from the U.S. Department of Energy. The project recently retained Bechtel to complete the next stage of engineering work, which should enable a final investment decision in groundbreaking by the end of the year. In addition, the Oklahoma smelter will be the first new smelter built with EGA's state-of-the-art EX smelting technology, which will integrate cutting-edge Industry 4.0 and AI applications into the design and operation of the smelter and is expected to improve production capacity by over 20% from previous technology. This has allowed us to increase the expected size of the smelter to 750,000 metric tons which alone will more than double total U.S. aluminum production and expand Century's position as the largest American producer. Truly, once built, the Oklahoma smelter will be amongst the most efficient and advanced in the world and the crown jewel of the U.S. industrial base. We were also very pleased earlier this month to announce the sale and redevelopment of the Hawesville site into a digital infrastructure campus, supporting high-performance computing and artificial intelligence workloads by TeraWulf. This was an excellent result for the site and the community, which will benefit from the significant investment in job creation that will come from the data center development. Under the terms of the transaction, Century received $200 million in cash and a 6.8% interest in the completed data center. We are very glad to retain the stake in the future of the Hawesville site which will allow us to participate in the value creation of a cutting-edge AI data center with ready access to 482 megawatts of immediately available power. The speed to power possibilities of the site have driven lots of immediate demand from hyperscalers and should drive desirable lease rates for the site and TeraWulf has indicated it could have a data center online by the second half of 2027. We are confident that this equity stake should provide returns well in excess of the initial cash payment. Our 6.8% interest does not require any additional funding towards the multibillion-dollar data center build-out, and we have the right to put our interest to TeraWulf on the first anniversary of data center operations commencing, providing a certainty of exit should we so choose. Turning to Page 4 on operations. We saw excellent performance across our smelter assets in the fourth quarter with Grundartangi quickly and safely restoring stability following the outage of potline 2 and Mt. Holly returning to the strong performance we have come to expect from the plan. I would like to take a specific moment to commend the team at Sebree, who battled through some tough weather in the fourth quarter to conclude a record year for the smelter across a suite of KPIs and profitability metrics. To be able to achieve record performance after 50 years of operations is a testament to plant management and our entire workforce at Sebree. Congratulations to all. At Jamalco, as everyone knows, in late October, Hurricane Melissa made landfall in Jamaica as a Category 5 hurricane. Our team did a good job preparing the plan, which included exercising their precautionary shutdown procedures ahead of the storm. This preparedness paid off as the refinery made it through the storm without significant damage and without separating a single injury. Following the storm, the plant was able to quickly restart basic operations. Damage to the broader Jamaican grid, however, did create significant instability in the supply of electrical power to the refinery, including lengthy periods where the refinery was without external power at all. This instability in electrical supply led to higher-than-expected costs in November and December and lower production volumes from a number of outages and a slower return to full capacity. Good news is the refinery is now well on its way to full and stable production. Importantly, at Jamalco, we are also nearing completion of our first major capital improvement project at the plant with the installation of our new on-site power generation turbine known as TG4 on track to be completed in April. Once complete, TG4 will enable us to run the refinery with entirely self-generated energy, eliminating expensive purchases from the Jamaican grid and allowing us to run the entire refinery independently. The completion of TG4, which will gradually ramp up over the second quarter, will substantially lower the cost structure of the refinery and is a big part of our overall goal of returning the refinery to the second quartile of the global cost curve. Nice job to the Jamalco team on keeping this project safe and on track despite the hurricane. Turning to Iceland. We have good news to report at Grundartangi, where our global team is working tirelessly to return the smelter to full production much faster than originally anticipated. As we announced in October, the Grundartangi smelter was forced to temporarily stop production in potline 2 following the failure of 3 of its electrical transformers and the time line for restart was dependent on how quickly replacement transformers could be manufactured, shipped and installed at Grundartangi. With global supply chains for transformers stressed by the unprecedented demand from global data center construction, we continue to expect it will take until Q4 of this year for the new replacement transformers to be installed. The replacement transformers have all been ordered and are being manufactured now. The good news here is we now expect that we will be able to repair some of the damage transformers and begin to restart Line 2 at the end of April, about 6 months sooner than originally anticipated. We still plan to install the new replacement transformers once they are completed, but we are confident that the repair transformers will allow us to return the line to close to full production in the interim. While we will be conservative in our ramp-up plans and operations to avoid undue stress on the repair transformers, we expect that Line 2 and Grundartangi as a whole, will return to close to full production by the end of July. This schedule and our anticipated production is included in our full year volume guidance shown on Page 12. Finally, our insurers have now confirmed coverage from the event and the subsequent business interruption as we anticipated. We have recently received our first payment under these insurance policies, and we expect to receive additional payments under the policies on a lag as the claim is processed month by month through the end of the year. Pete will keep you updated as the cash comes in. If you turn to Page 5, let's take a minute to review the excellent market conditions that we find ourselves in before I turn it over to Pete. Aluminum prices continue to rise in Q4 and into Q1 as global demand [ growth ] paired with a persistently challenged supply side, drove aluminum prices to a 4-year high of $3,325 in January, with spot prices today of approximately $3,100. The concurrent rally in copper and other industrial metals are providing additional support to the aluminum price rally. As you can see on Page 6, we continue to project global deficit of aluminum units in 2026, driving further contraction of global inventories to another post financial crisis low and leaving the market exposed to further supply disruptions. A good example of the supply side challenges is the recent confirmation that the 580,000 metric ton Mozal smelter in Mozambique will curtail full operations in March causing a further drop in global inventories in order to replace those units in the market. The Mozal closure is likely to have the largest impact on the European regional premium as it is one of the largest suppliers of low-carbon aluminum to Continental Europe. Mozal like Grundartangi benefits from tariff-free access to the EU market but replacement units will likely need to be sourced from tariff countries, putting further upward pressure on the EU duty paid premium and providing a benefit to other European producers like Grundartangi. The European premium has already begun rising following the initial implementation of Europe's Carbon Border Adjustment Tax, otherwise known as CBAM. In the U.S., the increasing strength of the U.S. economy, as demonstrated by strong industrial manufacturing activity and end user demand, and improving building and construction data has continued to drive the Midwest premium higher in Q4 and into Q1. Power and data infrastructure build-out should continue to drive additional aluminum demand in both the U.S. and globally. Midwest and European spot premiums have climbed to $1.04 per pound and $365 per ton, respectively, as of today. Pete will now take you through our financial performance for Q1 and full year outlook. Peter Trpkovski: Thank you, Jesse. I will start by outlining our year-end financial results and cash flow. I'll then address the timing of cash flows from the business interruption losses in Iceland, followed by a discussion of proceeds from Hawesville, including our joint venture stake in the new data center project. Finally, I'll provide our Q1 outlook and highlight key expectations for the full year 2026. Let's turn to Slide 8 and review our Q4 performance. On a consolidated basis, fourth quarter shipments totaled approximately 140,000 tons, a decrease from the prior quarter due to the line loss in Iceland. Net sales for the quarter were $634 million, a $2 million increase sequentially, primarily due to higher realized LME and Midwest premium, partially offset by lower shipments. For the quarter, we reported net income of $1.8 million or $0.02 per share. Our adjusted net income was $128 million or $1.25 per share, excluding exceptional items. Exceptional items mainly comprised of adjustments for share-based compensation, unrealized losses on derivative contracts, business interruption losses in Iceland and the impact of Hurricane Melissa in Jamaica. Adjusted EBITDA for the quarter was $171 million, primarily attributable to higher LME and regional premiums as well as improved operating expenses and increased volume at Mt. Holly from Q3 levels. During the quarter, we continued to strengthen our balance sheet. We ended the period with a cash balance of $134 million. As previously communicated, the proceeds from the refinancing of senior notes were utilized to fully repay the remaining Iceland casthouse facility debt in Q4, further simplifying our capital structure and reducing net debt to $421 million. Now let's turn to Page 9, and I'll provide a breakdown of adjusted EBITDA results from Q3 to Q4. Adjusted EBITDA for the fourth quarter increased $70 million to $171 million. Realized LME of $2,615 per ton was up $105 versus prior quarter, realized U.S. Midwest premium of $0.80 a pound or $1,775 per ton was up $350 and higher European premium was up $35 per ton to $230. Taken together, LME and regional premium pricing contributed an incremental $59 million compared with the prior quarter. Energy costs were flat in Q4 as anticipated. Alumina and our other key raw materials were in line with our previously provided outlook. As mentioned on our last call, improved operational performance at Mt. Holly, increased volume and lowered operating costs, improving adjusted EBITDA by $10 million and $5 million, respectively, compared to Q3. Now let's turn to Slide 10 for a look at cash flow. We began the quarter with $151 million in cash. During the fourth quarter, we generated operating cash flow of $170 million and received our 45x check for fiscal year '24 in the amount of $75 million, as mentioned on our last call. We continue to accrue 45x tax credits. As of December 31, we have a receivable of $173 million related to full year 2023 and 2025 U.S. production. We expect to receive the majority of this credit in cash shortly after our tax filing sometime in Q2. During the fourth quarter, we reduced net debt by $54 million. This reduction was primarily due to the repayment of the outstanding Iceland casthouse notes, partially offset by the mismatch in timing from lost margin at Grundartangi. The Iceland revolver draw reflects increased working capital needs as business interruption losses started to accumulate when Grundartangi line went down in late October. As Jesse mentioned, we now have confirmation of coverage from our insurers at Grundartangi, and we will have received a reimbursement of close to $40 million in Q1. We expect to receive insurance reimbursements on about a 1- to 2-quarter lag from our realized business interruption losses. We funded $34 million of capital expenditures in the quarter that went towards the new power generator and other ongoing investments at Jamalco, the initial payments for new replacement transformers in Iceland as well as sustaining CapEx at the smelters. We had $15 million in hedge settlements during the quarter. At year-end, the company paid $18 million in withholding taxes on share-based compensation. Finally, we had a working capital build this quarter due to the timing of LME-linked alumina shipments. We ended Q4 with $134 million in cash and strong liquidity in place to support our continued focus on restarting idle capacity at Mt. Holly to increase U.S. aluminum production by 10%. As Jesse mentioned, we made good progress in Q4 on planning the restart of Line 2 at Grundartangi, where, amongst other things, we ordered 3 new transformers to replace the failed units. The cash flow timing mismatch from Grundartangi restart spend and lost margin in Q4 and the insurance recoveries received in Q1 left us short of our capital allocation targets at year-end. We are on track to exceed those capital allocation targets in Q1, and we would expect to come back to you on our Q1 call with detail on our go-forward capital allocation plans in line with the guidance Jesse shared with you all on our Q3 call. Our year-end cash does not include the $200 million from the recent sale of Hawesville, which closed in February. In addition, we retained a 6.8% non-dilutive stake in the fully completed data center at the site. Based on current lease pricing, TeraWulf operating margins for data center colocation facilities and prevailing sector valuation multiples, we believe our 6.8% interest is worth well in excess of our initial cash proceeds. Importantly, Century has no obligation to fund development costs at Hawesville. Now let's turn to Slide 11 and look ahead to the next 90 days. For Q1, the lagged LME of $2,850 per ton is expected to be up about $230 versus Q4 realized prices. The Q1 lagged U.S. Midwest premium of $2,140 per ton or about $0.97 per pound is up $365 per ton versus Q4. The European duty paid premium is expected to be about $315 per ton in Q1 or about -- up about $80. Taken together, the lagged LME and delivery premium changes are expected to have a $70 million to $80 million increase to Q1 adjusted EBITDA when compared with Q4 levels, partially offsetting improved revenues was a temporary U.S. energy price spike that lasted about 2 weeks from winter storm Fern that impacted prices at Sebree. This approximate 2-week impact had a $20 million adjusted EBITDA headwind at Sebree. As a reminder, we do have financial hedges that sit below the line and out of adjusted EBITDA that will have a cash settlement. For Q1, we had hedged approximately 25% of our Indiana Hub exposure. Thus, the net cash impact of this 2-week impact is approximately $15 million after considering $5 million of positive hedge settlements. Temperatures have now improved across the Midwest and energy prices have already returned to historical levels. Looking at our raw materials, we continue to see moderate increases in our coke, pitch and caustic prices. Taken together, we see a small headwind of about $0 to $5 million sequentially. We expect OpEx to be a headwind of $0 to $5 million into Q1 and as we prepare to bring back all of our idle production in Q2. Volume and sales mix should also improve by $5 million as our new sales contracts begin to reflect an uplift in billet sales, as indicated on our last call. All told, at expected realized prices, we expect Q1 adjusted EBITDA in the range of $215 million to $235 million. Consistent with prior practice, we also include the estimated hedge and tax impacts to help model our business at the bottom of the page. We expect a $10 million to $15 million headwind from realized hedge settlements and a $0 million to $5 million tax expense, both flowing through our Q1 P&L and impacting adjusted net income and adjusted earnings per share. Our appendix details the full hedge book and continues to show the vast majority of LME and regional premium volumes are exposed to market prices. Finally, before I hand it back to Jesse, I'd like to walk through our fiscal year 2026 outlook, which is summarized on Page 12. We expect to ship approximately 630,000 tons of primary aluminum this year. This reflects the partial impact of restarting the remaining 90 pots at Mt. Holly and bringing back Line 2 at Grundartangi earlier than previously anticipated. Once completed, our total annualized production levels would be closer to 750,000 tons per year. Turning to capital spending. We expect total CapEx for the year in the range of $115 million to $125 million for both sustaining and investment. This includes $45 million to bring back the last 90 pots at Mt. Pali. This does not include the investment in transformer replacements at Iceland as this capital is expected to be largely offset by insurance proceeds net applicable deductibles. Across our portfolio, we are making positive high-return investments to improve the performance and profitability of our asset base, including growing production at Mt. Holly and continuing to lower the cost structure of our Jamalco investment. Finally, we expect cash interest to decline in 2026, reflecting lower coupon on our senior notes and simplified capital structure. And with that, I'll hand the call back to Jesse. Jesse Gary: Thanks, Pete. Century has an exciting 2026 ahead of us. Strong demand conditions, combined with fundamentally short U.S. and European markets have created large global aluminum deficits and historically low inventory levels. This environment creates a unique opportunity for Century to be able to add production in a market that is otherwise becoming increasingly short. In Europe, our improved restart time line in Iceland should enable Grundartangi to supply additional metal units into a rising EDPP environment caused by the initial implementation of CBAM, and production shortfalls in both Zambique and elsewhere. In the U.S., our Mt. Holly restart project is on track to increase U.S. aluminum production by nearly 10% in 2026. The project is progressing on time and on budget, and we expect to begin restarting production in April and to be complete by the end of June. We've already hired over 100 incremental workers who are undergoing training to support the additional production and preparation in the pot lines and other areas of the plant are well advanced. Combined with our Oklahoma smelter project, no one is investing more in American primary aluminum than Century. We are proud to follow President Trump's lead and to do our part to reindustrialize the U.S. and restore American aluminum expertise and support American workers. It's hard not to peek forward to this summer, where for the first time in over a decade, all of Century's assets will be operating at full production capacity. These units have never been more needed and valuable than in today's resource-constrained world. Our new and existing production will benefit from strong spot aluminum prices flowing through our contractual lags, driving higher realized prices than we have seen at any point in 2025 or year-to-date. At the same time, our total cost structure should be improved as the addition of the TG4 power turbine at Jamalco will be complete, lowering Jamalco energy costs and U.S. power prices should have returned to normal following winter storm Fern. 2026 is setting up to be a historic year for Century, and we are laser-focused on execution to benefit from the opportunities that are in front of us. Thanks for your time, and we look forward to taking your questions today. Operator: [Operator Instructions] First question is from the line of Nick Giles with B. Riley. Nick Giles: Guys congrats on getting the Hawesville done deal with say a leading player like TeraWulf, that was really good to see. My first question, maybe just to clarify, one, the Q1 guide to $15 million to $235 million, that does add back to EBITDA that would have been recognized from Grundartangi, correct? Peter Trpkovski: Nick, it's Pete. That's correct. Similar to how we did on the last call. We are adding back the loss margin at Grundartangi and including that here in our guide. So no further adjustments are required. Nick Giles: Okay. Great. Great. Appreciate that. Maybe a broader question. Metal tariffs seem well intact here. Midwest premium remains at record high. So it's nice to see you guys continue to benefit from this. But investors really have varying views of whether tariffs hold, where MWP goes? So my question is, can you just give us a sense of earnings power, not only in the current environment, but maybe other price environments? And what this means for your capital allocation approach? Peter Trpkovski: Yes. Thanks, Nick. It's Pete again. And it's a great question. As we did on Page 11, we gave you what that $215 million to $235 million gets you from a realized price perspective. And you may have saw in our appendix on Page 18, we included our sensitivities for the major inputs for our business. But just a quick highlights to point out again, referencing Page 11, if you look at our realized LME in that guide of $2,850 per ton. And you sort of marked it to spot price today, LME is around $3,100 a ton. That's about a $250 per ton increase and you can use the sensitivity to see what that mark is. And continuing on the revenue side, Midwest, again, we used $0.97 per pound in our guide on a realized basis today, it's about $1.04 per pound and that increase will also equate to an uplift in Midwest. And there is a little bit of an uptick in EDPP, the European Duty-Paid Premium, we used the $315 million per expectation on the guide. I think spot price today is around $365 per ton. So that's another $50 per ton. So for the 3 major revenue components, again, if you took our midpoint of our guide of $225 million. I think that's just a little bit over $50 million, $5-0 million of uplift when you mark the 3 revenue components to spot. And then don't forget, we had the winter storm Fern impact in the first quarter already behind us with temperatures already moderating. But as you see here, again, on Page 11, we had an Indiana hub for Sebree power price of around $69 estimated. I think if you look at where we are today, it's February 19, we have a good idea of where we are in Q1 and just assume a forward for the balance of Q1 and maybe the forward price looking into Q2, it's about $40 on the screen. So that's about a $30 improvement in Indiana Hub power price, and that sensitivity is going to be just over $20 million. So sorry, long-winded answer, but just to sum it up for you, in revenue and in power combined, that's about a $75 million uplift from our midpoint if you're taking the guide of $225 million to spot. Nick Giles: That's super helpful. I really appreciate that. Maybe my next question, just you're making progress in Oklahoma, good to hear, Bechtel is involved. Obviously, 1 of the key aspects will be an energy contract. I think in your initial press release, you used the word progressing. So I was curious if there's anything you can share on that front? How would you expect that asset to compare to energy costs in the rest of your portfolio? Anything you can add on that process would be really helpful. Jesse Gary: Sure, Nick, it's Jesse. And obviously, we're super excited about the Oklahoma project, super excited to be joining with EGA in that joint venture and really -- I think there's a bright future ahead for that project and what's to come. As we mentioned, we are working on finalizing that power contract with EGA and with PSO, who is the power provider, utility in that region. And we've been engaged, making good progress. There's a lot of support from the state, including from Governor Stitt. And so we just really need to do the work there and get where we need to be. In terms of where we end up on the pricing side, I'm not going to give any guidance there. But what I will say is, obviously, for an investment of this size, that power contract needs to be enabling and attractive to make sure that we can get the return on the investment that's required, and that's obviously a key aspect for us and something that we're driving towards with PSO. Operator: Next question is from the line of Katja Jancic with BMO. Katja Jancic: Maybe starting on the new smelter. So when you look ahead, what are some of the next milestones beyond the power contracts that we should be looking out for? Jesse Gary: Sure, Katja. Thanks. So as I said, working with EGA and as we recently announced, we've hired Bechtel to do the engineering work there. So next steps are, finalize that power contract work with Bechtel to finish the next stage of engineering work, finalize our cost and CapEx structure and as you might imagine, there's a number of other work streams there. But those are really the big ones, finalizing that. Our contract working through the final stages of engineering work, making some progress on the financing for the project and working towards making a final investment decision in Q4 of this year. Katja Jancic: And regarding financing options, are you in any discussions with potentially with the government to get or do you qualify for any government type of project level finance beyond the DOE money that you got? Jesse Gary: There are a number of financing options available to us, Katja, some of which are potentially available from the government. So we're working down all those paths simultaneously to find whatever is the most attractive package. But we are excited about the various different options outstanding. We do think they will be attractive in the end. And we just need to do the work to bring those to fruition. Katja Jancic: Maybe just 1 quick one. I don't know if I missed this, but did you tell us what the assumed margin loss in first Q is for the Iceland in the guidance? Peter Trpkovski: Katja, no, I didn't say the number specifically. But as you recall, and I think what you saw in the cash flow [ walk ], we have lost margin of $40 million to $50 million in the fourth quarter. And as the prices continue to rise higher, that could have an impact on that number. So no specific guidance on that, but we're just mainly looking at price changes quarter-to-quarter. And just a reminder, Katja, we did start to get the insurance proceeds to offset that lack of cash margin in the quarter. So we will have the cash in the first quarter, sort of lines up nicely with the Q4 loss margin. And as I said on the call earlier, continue to expect those insurance proceeds to come sort of on a 1- to 2-quarter lag basis. Operator: Next question is from the line of Matthew K. with Texas Capital. Matthew Key: I wanted to touch on the outage at Iceland. What type of capacity utilization should we be expecting over the first half of '26 kind of while we wait for the new transformers? I'm just trying to get a sense for shipment cadence out of there. Jesse Gary: Yes. So until that Line 2 comes back up, Nick, and you're looking right now Line 1, it's producing about 1/3 of the overall Grundartangi volume. So if you just take our normal run rate of 315,000 to 320,000, I take that as 1/3, that's about where we're getting out of Iceland until Line 2 is back up and running. And then also just keep in mind, in Q2, we're going to be restarting those additional Mt. Holly tons, and so those will come on over the course of that quarter, returning that plant to full production. So really, if you take both Grundartangi and Mt. Holly, take yourself to with respect to Mt. Holly end of June, with respect to Grundartangi, end of July, we should be entering August running at full production, 100% utilization capacity across the smelters. Matthew Key: Got it. Okay. That's helpful. And just in regards to the sale of Hawesville and the put option on that data center ownership, do you expect to utilize that ownership or that put option for the ownership to fund the new smelter? Or should we be thinking that -- thinking of that as more of a long-term investment for the company, based on the timing of when those -- both of those projects are expected to come online, I imagine it would be pretty tight window there. But I just wanted to get your thoughts on that. Jesse Gary: Yes, Matt. I think that it does provide a great liquidity option for us and certainty that we will be able to exit should we so choose. But as you can see and even just using the walk that Pete just did, marking our current outlook to spot, we will be generating significant EBITDA and cash flow just from the regular operation of the business that should be more than sufficient to cover any financing needs that we need for the new Oklahoma smelter over this time period. But -- so we will just continue then to maximize the value of that Hawesville stake in whatever format it needs to be. But the put option is nice because it does give us certainty of exit should we so wish. We actually are very hopeful that, that stake is going to be quite valuable, and we will continue to either hold that if that's what makes the most sense or we can look to sell or exit to a third party as well if that happens to be what makes sense. So we'll just value maximize there over time. But we're excited to own it. I think it's a great way for us to stay a participant in Hawesville and also create -- should hopefully create a lot of value for shareholders. Operator: Next question is a follow-up from Nick Giles. Nick Giles: Jesse, on the point of when you start to annualize the Q1 guide, it is a significant amount of EBITDA and cash flow. I know there's a lot of noise in the cash flow statement this year with all that's happening, but you're not really going to be spending a lot of the cash in Oklahoma until I assume 2027 at the earliest. So what do you plan to do with the cash in the meantime? Would you be willing to pay down incremental debt between now and then? Would shareholder returns be on the table? Just appreciate any commentary around timing? Jesse Gary: Sure, Nick. Thanks. Great question. And obviously, on Slide 22 of the appendix, we do have our capital allocation slide, and you have our capital allocation targets. Now as Pete mentioned, in Q1, we should achieve those targets. And as you just said, we should be generating significant cash flow. So we always have the capability to pay down debt. We'll run down and continue to fund our organic CapEx as we have those opportunities. Good examples there, Mt. Holly Restart or TG4 at Jamalco, and we'll continue to be opportunistic when looking at M&A. And then if we do have cash left over, we will look at returns to shareholders. And as I laid out on our Q3 call to give you some idea of the type of returns that we might be looking at. Nick Giles: Awesome. Awesome. It's good to hear. Maybe just 1 more while I have you. I'm sure it's more obvious to others than it is to me. But -- can you just talk about the logical alumina supply for Oklahoma? Or just kind of what -- remind us what type of excess capacity that you have at your disposal and we can make our assumptions about where that would go. Jesse Gary: Sure. As you know, our current book consists of our own production out of Jamalco, which is a great refinery, great quality of alumina. And so that would be one source that's available. We're also the largest customer of the Gramercy refinery in Louisiana. And we have a number of third-party contracts that we source alumina from. So all of those are potential sources for the new smelter, and we'll work with EGA to determine the best source for the new EX technology there and make sure we're running alumina sources through that maximize the value of that really high-caliber technology we're installing in Oklahoma. But basic answer to your question, Nick, I think there's a number of sources that should be available, including sources within our own control. Operator: [Operator Instructions] There are currently no further questions registered. There are no additional questions waiting at this time. So I'll pass the call back to the management team for any closing remarks. Jesse Gary: Thanks, everyone, for joining. Super excited about what 2026 holds for Century and look forward to talking to you all again on the Q1 call. Thanks lot. Bye. Operator: That concludes the conference call. Thank you for your participation. You may now disconnect your lines.
Filippa Bolz: Hello, everyone, and welcome to Klarna Fourth Quarter 2025 Earnings Call. My name is Filippa Bolz, Head of Communications at Klarna, and I'm joined today by Sebastian Siemiatkowski and Niclas Neglen. Our Q4 results were released at around 7:30 a.m. Eastern Time, and they are available on our Investor Relations website. During this call, we will discuss our business outlook and make forward-looking statements. These statements are based on our current expectations and assumptions as of today. Actual results may differ materially due to various risks and uncertainties, including those described in our most recent filings with the SEC. During this call, we will present both IFRS and non-IFRS financial measures. A reconciliation of non-IFRS to IFRS measures is included in today's earnings press release, which is distributed and available to the public through our Investor Relations website as well as filed with the SEC. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period in 2024. [Operator Instructions] Before we move to Q&A, we will begin with a short presentation. Sebastian, please go ahead. Sebastian Siemiatkowski: Thank you for joining Klarna's Q4 earnings call. Klarna is accelerating its growth of our banking relationships and our revenue per customer. Millions of consumers are adopting more of our services, the Klarna Card, Klarna's Deposit accounts, Klarna Fair Financing products and, of course, our well-known buy now, pay later services. Now this is exactly what we had planned for and wanted to achieve. And in Q4 2025, the adoption of these products accelerated beyond our expectations. As we scale this business, delivering on profitability is a key priority. In Q4, we delivered. Active consumers reached 118 million, up 28% year-over-year. Merchants grew to 966,000, up 42% year-over-year. GMV came in at $38.7 billion, above the top end of our guidance and revenue grew 38% to over $1 billion, also beating guidance. Now let's put these numbers in perspective. We are a bank with an exceptional network that is growing at 38% revenue year-over-year. In '25, we did over $127 billion worth of volume across 26 markets and across 3 continents. And we're growing exceptionally well on every top line metric, cementing our U.S. as well as our global leadership position. Transaction margin dollars before provisions grew 31% to $622 million, an acceleration of $107 million versus prior quarter. And after provisions, transaction margin dollar was $372 million, up 17% year-over-year and up 28% sequentially from Q3. Now the fact that transaction margin accelerated quarter-over-quarter points to the compounding nature of our model as more of our cohort's mature revenue and it's compounding at a faster rate. Now I want to be direct and transparent. This quarter's transaction margin dollar result did not land where we guided. We take that seriously. The acceleration in lending growth is the primary driver of that outcome. Now let's look at an illustrative example of that to understand the impact I'm speaking about. In this example, we have about $1 billion of loans originated. The lifetime profit of these loans, you can see on the left-hand side is $100 million in revenue, while your provision would be about $40 million and you would have other costs of $25 million, resulting in a net profit of $35 million. Now like all banks, we recognize these loan cohorts over a period of time. In the first quarter, as you can see on the right-hand side, we would recognize a fraction of the revenue, but we would recognize all of the expected provisioning upfront. This results in a first quarter transaction margin dollar drag of $25 million, as you can see on the red there. During the remaining quarters, we recognize the remaining revenue as well as the other costs. So the resulting lifetime net profit remains the same $35 million. It is simply spread over time and we see a $60 million positive impact on the P&L for the remaining quarters. This effect in the first quarter happens even when the underlying economics are strong and credit quality is stable. This is value creation that is deferred. For every provision we book today, we gain a future profit stream. Now let's take a Klarna example. For $2.5 billion of U.S. Fair Financing portfolio originated this quarter, Q4 '25, we booked $80 million in provisions upfront, and we recognized $40 million in revenue. So yes, this quarter, that's a $40 million headwind. But there's an additional $180 million of interest income still to come, while the cost, the expected credit losses have been provisioned for already. Just to repeat, faster growth, faster adoption means lower upfront transaction margins and operating profit. So when you look at our Q4 transaction margin dollars of $372 million, this primarily reflects the fact that the adoption of our expanding set of banking services are growing faster than we expected, including Fair Financing, GMV currently growing at 165% annually. At the same time, to support our accelerating growth in a capital-efficient manner, we ramped up our loan sales. And in Q4 '25, we initiated our first Fair Financing forward flow with $73 million of gain on sales recognized in Q4 '25. Continuing this strategy will further accelerate our profitability improvement in '26. Now let me speak to exactly what that growth looks like and why we're so confident in our strategy. Our partnership strategy, as described on our previous earnings call, continues to compound and support our long-term strategy of being ubiquitous everywhere as our payments network expands its acceptance points. Over the year, we added 285,000 merchants, up 42% year-over-year. We continued to scale our default relationship with Stripe. We began the default-on rollout with Nexi through Paytrail, and we expanded Apple Pay and Google Pay into additional markets. We also launched new partnerships with Emirates, LEGO, Vinted and StockX, while further deepening our relationship with large global merchants such as Walmart, Lufthansa and Etsy. At the same time, we're accelerating our product ubiquity, ensuring that we have relevant payment options wherever the consumer shops. We doubled the amount of merchants where fare financing is available and continue to expand our pay in full product to almost half of our total merchant base. The benefit of building that network, close to 1 million merchants globally across 26 markets, online and offline, is that we've already captured the hardest thing to win, the consumers everyday spend. The checkout moments where trust is built, and that is the foundation. And now we're leveraging it. Once you have the everyday spending relationship, once the consumer is using Klarna 10, 15, 20 times a year at checkout, the step into a banking relationship is natural, low friction and extraordinarily cost effective. There is no cold start. We already know these customers, and they already trust us. And in Q4, this played out at an accelerating pace. Active card users grew to 4.2 million, up 288% year-over-year. Consumer deposits reached $13 billion, up 37%. And our most engaged consumers, the Klarna banking customers, reached 15.8 million, growing at 101% year-over-year. This growth is not linear. It is compounding as we build deeper relationship with our consumers. Let's deep dive into a comparison of that total consumer base versus the banking consumers that have adopted more of those banking products. Our base of 180 million Klarna consumers is growing at 28% year-over-year and transact about 10x a year with us. They have an average revenue per user of about $30. But now look at what happens when that relationship expands into a deeper banking relationship. Those 15.8 million consumers transact nearly 3x as often, 28.5x a year with an ARPU of $107. The average deposits jumps from $64 for our paying customers to $475 for our banking customers. And credit balances remain modest. Compare that to any credit card bank that would usually be at about $6,500 or 10x as much. And the charge-off rate moves from 0.6% to just 1.1%, a fraction of the 4% to 5% you would see at normal standard credit card banks. So more engagement, more revenue, disciplined risk. That's the conversion we're driving, and it's why we're leaning into this growth despite the near-term provisioning drag. Now this expansion of our banking product is built on our transaction relationship with our consumers and the knowledge we have built around risk management for the past 20 years. Our proprietary underwriting systems that we've developed underwrite every single transaction. We don't issue revolving credit, and we leverage our deep understanding of our consumer spending habits as well as external data. The result is consistent and stable charge-off profiles as evidenced by the stable 3% to 4% charge-off rates for our U.S. Fair Financing product. And we are delivering all of this with a fundamentally different operating model. Leading into technology allows Klarna to deliver a range of services with a headcount that is a fraction of the size of a traditional bank. Klarna's success is built on talent density and relentless focus on efficiency, and we believe this is a lasting competitive advantage. Now look at this, revenue per employee now reached $1.24 million in '25, a 3.6x increase since '22. And critically, we've reinvested some of these savings back into our talent. That's the operating leverage that compounds alongside the banking growth I've just described. Since 2022, we have accelerated our revenue growing 104%, while at the same time, managing our adjusted operating expenses effectively as it has declined by 8%. In 2026, we expect to continue to expand revenues faster than our operating costs as we focus on building the consumer bank of the future. As we provide 2026 guidance for the first time, we are incorporating this growth trajectory and the associated timing effects, while being disciplined and realistic in how we frame expectations. The underlying trajectory, revenue compounding, cohorts maturing, a lean cost base give us confidence in the path ahead. Thank you. Filippa Bolz: Thank you for that presentation. We'll start with 3 investor questions from Say Technologies. The first question is from Shubhayan. When are you planning to become profitable? Klarna's share price has declined since the IPO and investors aren't happy. What changes do you think may be needed in the organization or the product? Sebastian Siemiatkowski: That's a great question. So as our illustrative example showed, this is how the dynamics work in general. Every additional $1 billion in loans that we add in a single quarter will reduce TMD or transaction margin dollars by something like $25 million that same quarter, but it will increase transaction margin dollars by $60 million in the upcoming quarters. So the more we grow in these books, especially the more profit we're generating for the future. So the real question is simply, do we want to make more money even if it means slightly less today to make significantly more tomorrow. You might also though ask, obviously, for how long. Well, the good news is we have natural cushions. As we sell more loan portfolios where revenue and costs are recognized immediately, the timing effect diminishes. We did $4.5 billion in Fair Financing last year, growing 165%, winning deals like Walmart and rolling out across all Stripe merchants and so forth. So as these growth rates obviously eventually will normalize, so will this dynamic. Some of you may even remember JPMorgan Chase faced this, Jamie Dimon famously said on the Sapphire card that he wish he taken twice the losses. This was 2017, slightly different rules, but the same concept. So the question becomes, given that we can issue those additional loans, should we? And as a shareholder, at least my answer is an absolute yes. Klarna has issued over $0.5 trillion in loans over 20 years with record low losses across that entire period. That's a proven underwriting machine. And when we have the opportunity to deploy that machine and create significant value, we should. In addition to that, to answer the question even more specifically, Niclas will speak about our guidance soon to give you a more concrete answer for this year. Filippa Bolz: Thank you. The second question is from Marc. How will you prioritize capital allocation between reinvestment, debt reduction and shareholder returns over the next 12 to 24 months? Sebastian Siemiatkowski: Well, I think it's -- we're seeing really fantastic growth here, and we're seeing an amazing acceleration in the adoption of our banking products. And you may, at the same time, some of you may have picked up that we have a rapid product announcements, and we're basically quickly closing any feature gaps to both neobanks and incumbents alike. All of this while being disciplined on costs. So the outcome of this translates to more revenue and more profit. And when it is in the books, we can also discuss what we will do with it. Filippa Bolz: And the third and final question is from Adam. With the 102% surge in credit loss provisions reported in Q3 '25 still weighing on sentiment, what are the latest delinquency trends? And how confident are you that provisions will stabilize or decline as a percentage of GMV heading into 2026? Niclas Neglen: Thanks, Filippa. That's a great question. From a credit perspective, what we're seeing is actually stability, not a deterioration. Provision credit -- for credit losses actually declined in Q4 versus Q3 from 0.72% of GMV to 0.65%. And that really reflects both a stable delinquency trend and an impact of the increased loan sales that Sebastian previously explained. Filippa Bolz: Thank you. We will now move to questions from the analysts. [Operator Instructions] Our first question comes from Sanjay Sakhrani at KBW. Sanjay Sakhrani: I appreciate all the commentary. Niclas, do you mind just digging a little bit deeper into this quarter's impact from the excess loan growth? I'm just trying to parse apart sort of the provision related to credit versus the provision related to growth that sort of speaks to that mitigating impact on transaction margin dollars. And then maybe if you could talk about how it might affect 2026, that would be great, too. Niclas Neglen: Great. Thanks. Sanjay, thanks for the question. Look, I mean, in Q4 '25, and I think the dynamics are here are twofold, right? You're seeing a very strong growth and seasonality that drove significantly higher pay later volumes, and those are on our noninterest-bearing loan product, right? These are actually classified as sold or held for sale as part of the cost of funds, which you can see in the broken-out report that you have on the CFO letter, right? And these loans are actually primarily sold through our forward flow programs. And so those loans are measured at fair value. And so the result is that you get a fair value adjustment that is substantially offset by a corresponding reduction in the provisions for credit losses. And while you then see the credit losses that we have today, primarily then driven by Fair Financing. And if you think about it, right, and we've broken out the Fair Financing volume as well in the back end of the paper. But ultimately, what you're seeing is a mix shift towards Fair Financing that was stronger than what we had expected as we're seeing more and more banking consumers coming with more banking product with us. And that's really what's been driving that. '26, we have a guidance there, and I can take you through the details of that. But ultimately, we're seeing similar trends there. Year-to-date in January, we're seeing good, moderately stronger growth than in Q4 '25. And so I think we're heading in that right direction from that perspective. Filippa Bolz: Perfect. Thank you so much. Sanjay Sakhrani: Okay, great. Maybe just one follow-up. Filippa Bolz: Okay. Go ahead. Niclas Neglen: Go ahead. Go ahead, Sanjay. Sanjay Sakhrani: Sorry, I didn't know if I could ask to. Maybe just one quick follow-up for Sebastian. I mean maybe just how you feel like the Walmart rollout has played out, if you're happy with it and sort of any traction otherwise you're seeing in the United States? Sebastian Siemiatkowski: No, I think Walmart is obviously one great accomplishment, and it's looking really well when you look at the rollout. But I think that what excites me the most is the strategy that we set up that we're executing on, which is to become a truly third-party network and rely even stronger on the distribution of our partners, be it JPMorgan Chase, be it Stripe, be it Adyen and so forth. And that's why you're seeing these acceptance points and merchant numbers coming up so much. This is also why you're seeing Fair Financing growth because not all of our merchants historically have that. And the way we now work with our distributors is we try to make sure that they offer all of our payment methods. So not only is it about number of merchants that accept us, it's also about making sure that pay now, pay in later as well as Fair Financing is available at every checkout. So there's always a relevant payment option independently of what the retailer might be selling, everything from furniture to games. And so -- and that's really what's kind of -- what is the foundation of this growth. But at the same point in time, it's early days. A lot of these large distributors of ours are still implementing, still taking us live and so forth. And that's why we're very pleased about this because we know that this will continue to drive very solid growth for us in the coming years. So very happy about what we've seen so far with Walmart and also generally seeing the effect of this both in the U.S. and then globally as well. Filippa Bolz: The next question comes from Will Nance at Goldman Sachs. William Nance: I was wondering if we could drill down into the transaction margin expectations for the coming year. As we look at the guidance that you guys have laid out, it seems like transaction margin is coming in roughly 10% or so below current consensus expectations and hear you on sort of the front-loading impact of provisions in GMV. But when we look at the first quarter, GMV was much closer to the guide, whereas transaction margin was something like 3, 4 points below. So I guess with that context, can you talk about the transaction margin trajectory that you are expecting now versus what you had previously expected? What are the changes? And how do you think about the path to getting towards transaction margins in the kind of 115% to 120% range where the company had operated historically prior to the big expansion in lending? Niclas Neglen: Sure, Will. Thanks a lot for the question. I appreciate that. So maybe just before kind of answering you specifically, I think it's good for me to just take you through our thoughts on the guidance and how we've kind of thought about it. So I'll start with that a little bit. Start with the first quarter, right? So we've -- like I said, already entered 2026 with a strong momentum. We're tracking modestly ahead of Q4 '25 levels already. The banking products, fare financing, the Klarna card, et cetera, remains the primary driver of that growth, and we're seeing that continued strong adoption, right? So that is one element of what we're seeing into '26, right? Our forward flow programs, which are providing that kind of capital-light foundation for the sustained higher growth, we actually expect to continue to execute some of these agreements throughout the year, including one in Q1, and that's actually reflected in our transaction margin dollars and our adjusted operating income ranges for Q1 as well. Transaction margin dollars as a percentage of JV is also expected to be broadly consistent with Q4 '25 as we continue that investment in supporting the rapid scaling, right? And so what you should be able to see then when we get into 2026 in full year, right, you're going to see that GMV growth and revenue growth in line with 2025, which on the context of $127 billion worth of volume this year, I think, is very, very healthy growth. As the mix of maturing Fair Financing cohorts increase, what you're going to see is revenue compounding through the year and transaction margin growth accelerating into the second half. And that's really the natural payoff of that upfront provisioning model, which you highlighted yourself, right? So adjusted operating income margin is expected then to become greater than about 6.9% as we continue to have that revenue and TMD outpace the growth of our operating costs, right? So ultimately, in very simple terms, when you look at transaction margin dollars, it is really a mix question of the geographies we're growing in, but also in regards to how much Fair Financing that we're doing as part of that banking evolution that Sebastian spoke about. William Nance: That's great. I appreciate all that color. And just you mentioned the offloading dynamics starting in the first quarter, likely continuing for the year. I was wondering if you could provide your latest thoughts on just expected offloading on the Fair Financing book in the U.S., maybe relative to the amount of loans sold in the quarter. Is there any kind of parameters around percentage of production sold that you guys are targeting for the full year as we just try to true up that part of the model? Niclas Neglen: Yes. So we're not going to give exact guidance because we are really commercial in the way that we think about this. We have some great partners that we work with in this regard, but we also want to be sure that we balance it, right? So my expectation is that we're looking at the transaction in Q1. If you look at Q4, we sold about $1.6 billion. This transaction will be slightly smaller than that, right? And so what we'll see is through the year, as and when it makes sense to do these sales, we will be executing them, and that might change depending on quarter-to-quarter, right? So that's probably the best I can answer at this stage. Filippa Bolz: Over to our next question, which comes from Jason Kupferberg at Wells Fargo. Jason Kupferberg: So can you just talk maybe a little bit more specifically about what you're embedding in the guidance for 2026 for Fair Financing, specifically just in terms of loan growth there? I mean, obviously, you're going to lap Walmart later this year, but I would like to get a sense of what's assumed in the initial outlook here. Niclas Neglen: Yes. So we're not going to give a specific split, but what I can say is that we're going to, from an absolute volume base, accelerate in comparison to 2025. Now as we go through the year, just given the fact that we started where we started and have been scaling so quickly, the year-over-year percentage comps through the year will kind of pan out or it kind of decelerate to some extent, right? But that's from a percentage perspective. On an absolute basis, we're continuing to compound. Jason Kupferberg: Okay. Understood. And then maybe one for Sebastian, just big picture. On agentic commerce, I think a lot of debate out there about what branded button presentment and prominence might look like in a truly agentic world where transactions are being completed natively on an AI platform. How is Klarna thinking about that, preparing for it? Obviously, you guys have announced some partnerships, but would just love to get a sense of what your crystal ball is in terms of what consumer checkout experience might look like in that scenario down the road. Sebastian Siemiatkowski: Thank you, Jason. Fantastic question. Look, I think there are many ways to answer that. I try to keep it short. But first and foremost is that like we have believe that this is the evolution of e-commerce for a long period of time. That's been part of our thinking. As a consequence of that, we have thought it was very important to have the partnerships and distribution of people like Stripe and Adyen since those are often the companies that people go to, to implement agentic commerce. And so by making ourselves default and always available in all these points, that makes us like always available in those points as well. In addition to that, you see things like we launched with Apple Pay and Google Pay makes us again available everywhere where those are being used, which again then gives us additional coverage in this. But then obviously, we also court the big AI companies, and I can't promise anything there, but like obviously, that's part of what we do as well in that sense. I think the additional thing that I find very promising is that the conviction that we have which is that buy now, pay later is a healthier form of credit than credit cards. The fact that it's interest-free, fixed installments and so forth. This is truth. And then sometimes people write about different things in media this and that. But the truth is if you go and ask even the big AI companies, which form of credit should I be using, which is the one that's most healthy. It will recognize the benefits that buy now, pay later provides. And so we think the fact that we have a healthier product also means that even AI will recommend to rather use this one than revolve at 30%, right? So I think like all of these combined, these are the -- we feel that we're very well prepared and that we are in a great position as this agentic commerce rolls out. Filippa Bolz: Our next question comes from Harshita Rawat at Bernstein. Harshita Rawat: So I want to ask about the competitive environment. Some of your peers have talked about intensified dynamics in Europe and the U.S. Maybe talk about what you're seeing in the market? And then also maybe comment separately on the consumer kind of I think there's concern around continued kind of pressure on the low-income consumer. What are you seeing and hearing from your customer base, both in the U.S. and Europe? Sebastian Siemiatkowski: Harshita, Sebastian, I'll jump in on that one. Let's start with competitive. I think that the -- I feel very, very confident on this topic. And the reason again comes back to what we said about our partnerships. It was always very critical to me to become a global payment solution. So many times, we talk to merchants in different markets, and they look for global solutions. And now Klarna is perceived as a global solution, which means that we get tremendous benefit from working with everyone from an H&M to Shein to a Walmart to Sephora. The fact is that they can work with one party that can offer pay now -- buy now, pay later and fare financing across all of these jurisdictions. This has not been -- even look at the big home electronics manufacturers, none -- that has never been possible before. So the geographic coverage means a lot when it comes to signing these deals, and it's unparalleled. Nobody else in the industry has the geographical coverage of Klarna. So you will always find individual companies and individual markets, but that is just giving us such a tremendous strategic advantage that we see. And that's also super critical when we work with the Stripe and the Adyen of the world because there -- it's also for them much more interesting to launch with somebody that can offer their services at such high global coverage. So I feel very, very confident in our continuous ability to grow and preserve margins throughout. Now when it comes to the consumer, we are very confident and feel very solid here as well. What we're seeing is that, again, the audience that uses our product is an audience that is what we call the selfaware avoiders. These are financially conscious, both American consumers and European consumers who are actively keeping away from credit cards, who are borrowing much less. Their average balance may be on a credit card, people would have $4,000, $5,000. As you saw in our presentation, a pay, what we call a Klarna paying customer has $100. A Klarna banking may have $400 or $500. So it's actually 10%. And so these are financially conscious customers. They enjoy the fact that our products are 0 interest, fixed installments. They find them as a healthier alternative, and they're also keeping their economy in better shape. So we see good performance. We see that they are shopping as they used to, they're spending as they used to, and they are also borrowing responsibly, which we appreciate and find is important. Filippa Bolz: The next question comes from Darrin Peller at Wolfe Research. Darrin Peller: I really just want to go in a little bit more maybe for Sebastian on the tools. But basically, the idea of where you believe the right balance should be between lending and interest income and transactional streams. Just as far as the company's longer-term goals, I understand it's demand driven to some degree and to the most degree. But anything you could help us with and where you see that sort of leveling off? And then Niclas, just maybe on a short-term basis, we're also trying to understand where we expect to see the inflection on provisions offloaded to a degree that it actually does help the TMD grow at a faster rate this year potentially. Sebastian Siemiatkowski: Maybe you want to start, Niclas? Niclas Neglen: Yes, sure. Thanks, Darrin. I appreciate it. I think it's a good question. If you look at it, what we actually are looking at from a TMD perspective is a significant uptick in growth, right? And you've seen that kind of sequential increase both from Q3 into Q4 now, right, with TMD. And I think as we continue to compound through the year, like I said earlier, Q1 definitely still has a lot of that rapid growth coming in. And then you start kind of cycling into an absolute growth balance, but then the percentages from a comp perspective kind of recede a bit into the second half of the year, right, which is kind of what I said. So I think that is kind of the short answer to that. And I think you're going to see that continuous TMD acceleration through kind of the second half of the year, as I said earlier. Filippa Bolz: Thank you, Niclas. Sorry, Darrin. Would you mind just repeating your question for Sebastian? Darrin Peller: Yes. I was just trying to figure out what do you guys' think is the right mix sort of in a steady state? Obviously, you're in hyper growth right now around Fair Financing in your banking products, but trying to get a better sense of where you think that should level off, where you'd like it to level off, thinking about interest income as a percentage of the mix of the business versus other revenue streams. Sebastian Siemiatkowski: Yes, it's a great question. That's -- I think as a rule of thumb, even for myself, when I look at those provision for credit losses, the rule of thumb is that 80% of it is associated for kind of forward-looking, while 20% is kind of backwards looking. So to your point, obviously, as we're growing Fair Financing right now, and we're kind of in that phase of that being a high-growth product at this point in time. But I don't think that is necessarily always going to be the case. When we look and compare ourselves to other neobanks, some of the other neobanks are much -- most of them are much smaller on the lending side and much bigger on deposits, on subscriptions, on tiers, et cetera. So partially, what we're seeing right now is just the effect of the strategy that we implemented a few years back to, again, have our partners distribute us. And you saw that number as well in the presentation that still only about 200,000 merchants offer Fair Financing of the total 800,000. So there will probably be some continuous growth there as more and more offer that product. But I'm very keen on growing the other revenue lines as well, the marketing revenue, the subscriptions revenue and so forth. And I think that finding a healthy balance as well as deposit revenue as well. So I think over time, it's probably going to skew more again towards the other revenue lines, but that is a little bit more -- takes a little bit longer time. And it takes time, obviously, because we're a fairly big bank right now. So like even if we make changes to our products and so forth before you fully see that materialize in the numbers is a little bit further out. Filippa Bolz: Next question comes from Tien-Tsin Huang at JPMorgan. Tien-Tsin Huang: I want to ask on the processing cost side, if you don't mind, a model question. Lots of moving pieces, I know with partner and product ramps as we've discussed here. But how should that processing line trend in relation to GMV? Any insight there to share? Niclas Neglen: Sure. Yes. Thanks, Jason. I think in -- the reality is like partially, this is a mix question with regards to how much volume is coming in from the U.S., et cetera, as well as the type of product that you take on and the tender of that product. So in the short term, you're going to see something similar to this that you've seen through 2025. But I think the evolution of this in the longer term or medium to long-term, right, is very much one of the -- and you've heard Sebastian say this before, one of our focus areas is really to find ways to improve that line, right? And so we are actively looking to find ways to get that trend line to move in the opposite direction, not only purely from a mix perspective, but actually getting things like now that we -- now we have a current account, we have the balance, et cetera, and we're starting to see refunds come into our accounts, which obviously then reduces the requirement for us to use other rails. What we have slightly working against that right now is also that we have more card issuance, right, as more and more consumers are using us. So similar to some extent, similar to the Fair Financing upfront provisioning, we are making some investments here with now over 4.2 million active card users, right? We are seeing a lot of growth, and that obviously has a bit of cost in the upfront. But what we actually are creating is a very sticky consumer that's going to help us then to be able to drive more of the transactions within our own rails, which will help to reduce that processing and servicing line. Sebastian Siemiatkowski: And I think to add to that quickly, Tien-Tsin Huang, is that, I mean, we -- in this case, we're coming from Europe where payment and funding costs were virtually 0 or very low. And then we move into the U.S., and we've seen significant growth. And we know looking at other fintechs and competitors that are larger and originating in the U.S. that there are smart ways to fix this. But it's going to be a continuous focus for us to do that, obviously, because to your point, there's tons of potential in there, but we need to execute it, implement it and see the results in the financials. Tien-Tsin Huang: Understood. So it's a work in progress. Good to know. Just quickly on the -- I think, Niclas, you mentioned stable delinquency trends. It looks like from the charts in the shareholder letter that some of the newer vintages on the delinquency side are a little steeper and higher than prior vintages. I'm just curious if there's any surprises there. Or I just want to better understand those trends. Niclas Neglen: No, there are no surprises there, right? If you look at it, again, you have to understand that we're obviously ramping quite quickly through these processes. But at the same time, you're seeing that it's very much within the trend base that we expected. And as you go -- your models, as you scale, get better and better. And you can see that's why I actually included not only the 60 days past due view, right, which is we've been showing consistently, but I also show you the 30 days past due, where you can see that those trends are normalizing over time, right? And I think that is a really key point here, right? We underwrite every single transaction. We've been doing this for 20 years. Yes, we are scaling the business, but what we're actually doing is doing that in a very disciplined fashion. And we have the ability with our low average order values and short durations to be able to manage and flex these models consistently, and that's really what we're showing on that page. Sebastian Siemiatkowski: I think in addition to that, what's also important is that we -- the way we think about it is that we prefer starting with buy now, pay later and pay now with small value transactions, $50, $100, build a big audience of customers that we get to know that we've underwritten, that we've seen their payments performance. And then we're scaling like we're doing now for financing, where a large proportion of those Fair Financing volumes are existing customers that we already have relationships and doing underwriting for a few years. And that's a critical part of our thesis, which we think is very special to Klarna that it's important for us to be in those daily transactions, both because it grows a stronger relationship with the customer, but also means that we understand them better. We follow them for a longer period of time, and it makes -- it helps a lot in the underwriting decision. Niclas Neglen: Yes. I would say that the vast majority of our Fair Financing that's being underwritten is with consumers that have had products -- other types of products in advance. Filippa Bolz: Moving on to Mihir Bhatia from Bank of America. Mihir Bhatia: Maybe first question I had, I just wanted to start going with the Klarna card. Can you just talk a little bit more about how consumers are using the card? Is it actually becoming a top of the wallet card? Or is it just being pulled out more for financing transactions? Are you seeing differences in geographies or the types of customers use -- in -- how they're using the card? Sebastian Siemiatkowski: Yes. Mihir, it's Sebastian. So I -- we are excited about it a lot. I mean I think that I probably -- I was trying to find a bank issuer that had launched a card with this kind of number of active users on such a short period of time since this basically started rolling out in summer. I think it's actually unprecedented, which is pretty cool. We see very good usage of this product, both in the U.S. and Europe. What we're happy to see is that it isn't, to your point, only a -- or as you mentioned, it isn't just being used for like a pay later or Fair Financing card. It is actually has a very healthy proportion that's being used for debit transactions for day-to-day spend, which is exactly what we wanted to do. So when we think about this, again, like when we move consumers that we call them the Klarna payers to the Klarna bankers, we want them to adopt more of our financial products. And that is both deposits, debit spending as well as credit to some degree and other -- the subscription tiers and the loyalty cards and the cash back offers that we do and so forth. So we're very optimistic about what we've seen so far in regards to that. Niclas Neglen: Could I just add something there, Sebastian. I think it's really critical point to make that what we're seeing is a high teens growth even in established markets like Sweden, where we have 80% population penetration. And that is very much because of the card, right? You're seeing that people are adopting us both online and offline here. And I think that's a very unique positioning for us to find ways to grow with our customers in the way that Sebastian described, but also then ability to expand that monetization opportunity as well. Mihir Bhatia: Got it. And then if I could just follow-up, I want to go back to the questions around the trajectory of transaction margin as a percent of GMV or revenues, however, you want to answer it. But look, I think I hear you regarding the mix and the Fair Financing growth pressuring 2026 margins a bit. But I guess, like when does the delayed profit from the back book start to offset some of that growth? Like how are you thinking about those margins maybe as you go out a couple of years? Where do you think transaction margins should settle out? Like your competitor has obviously given some guidance. And I was just wondering if you have a view on that, like where transaction margin as a percent of GMV should settle out medium to long-term? Niclas Neglen: Okay. So I think TMD, generally speaking, right, is now moving towards -- and we're not going to give like longer-term guidance and beyond 2026. But I think we gave some frameworks previously -- and we've talked about the range of somewhere between 1.5, 2 percentage points. But again, like the key thing here is the mix of the revenues that we've got, right? And so the way I would think about this is that we can really think about what is the trajectory of the Fair Financing element of this and how that is moving forward and scaling. And I think as we get an understanding of the abilities of balances of this, we will see how those things proceed. Filippa Bolz: Moving on to Robert... Sebastian Siemiatkowski: Maybe I can add something on the topic, just if you like -- I mean, generally speaking, Klarna has always seen over my 20 years is that you either go through high-growth phases. When you go to high-growth phases, you always see slight temporary deterioration in GMV and margins, et cetera. And then as you kind of mature a little bit and growth comes down, then profit transaction margin dollars return. So this is always a continuous discussion because when you grow faster, then as we've seen, for example, the accounting that was described and so forth, and this always results in these kind of effects. So that creates a lot of confidence for me. Niclas Neglen: Sorry, I think -- yes, that's a much better answer to the question. I think from the perspective of long-term guidance, I think the key thing is we're focusing on '26 right now and how we're thinking about the transaction margin there is really how you should all be thinking about it. Filippa Bolz: Moving on to Robert Wildhack at Autonomous Research. Robert Wildhack: You've talked a lot about the upfront provision for banking services. And I guess in the letter, those banking services include Fair Financing, but you've also got some products in there that at least to me, would seem lower loss like the card and savings. So that's -- I think the thing I'm having trouble understanding is like how does -- fare financing was always going to grow this year, but then you're going to also grow into products that would seem to have a lower blended loss content, yet there's more pressure on the transaction margin, not pressure, but it doesn't go up as much in '26. So how do you square those 2 things? Sebastian Siemiatkowski: Yes. Thank you, Robert. Great question. Look, I think that the 2 things are important here. The -- what surprised us was the embracement of Fair Financing among our customer base. So more people took up this product than we expected. And hence, on the transaction margin dollar, you saw more negative pressure because of that upfront booking, which is the primary driver of that. So that is it. But to your point, we're also seeing all these other products growing really well, the card, the subscriptions. Now ironically, they also come with a slight additional upfront cost. For example, every time we issue a card, there's costs associated with that at the front end of it. So each one of those, but those effects are obviously more limited. So we think that you're going to see a positive impact that's going to come as those products have also been growing. I mean the subscription products and so forth. So I feel quite optimistic here on this topic as well. I don't know if you want to add anything, Niclas to that. Niclas Neglen: Yes. No, I agree. I mean the subscription; we're already seeing a huge amount of people coming in. We have about 3.5 million already, and we're seeing that just expand on a monthly basis. So those revenues will start building up over time through 2026 as well. Robert Wildhack: Okay. And then I see the negative fair value adjustment on pay later in the funding costs. Given the short duration there and your ability to grow deposits and the balance sheet capacity you have, what's the benefit of selling pay later at a discount? Niclas Neglen: So the vast majority of the economics of that actually sits in the merchant discount rate, right? And so the purpose of this is really from a liquidity as well as from a capital perspective. We've done a few of those, and we may do some more in the future. But ultimately, the key thing here is really to be able to balance how much return I get from every asset that I get in. So there's also a value to Sebastian's earlier point of holding Fair Financing that generates a higher yield as well. So it's constantly a mix of ensuring that we keep ourselves capital light that we can continue to grow and expand as much as possible. But we want every tool in the toolkit, and that's why we've leveraged this type of transaction. Filippa Bolz: Moving on to Nate Svensson at Deutsche Bank Securities. Christopher Svensson: Maybe I'll sneak in 2 here. Then some questions on the competitive environment, agentic placement. Maybe a related question on that is just the topic of exclusivity, which I think is probably worth exploring in light of some recent comments from your competitors in the U.S. I guess our understanding is that exclusivity is more the exception than the rule in the industry. Obviously, you guys have Walmart. I guess just in light of what we're hearing from competitors, do you think that dynamic is going to change? Is Klarna going to try to go after more exclusive deals? Or is something like Walmart once again kind of more the exception than the rule? And then briefly, maybe this one is for Niclas. Just on funding costs. I know earlier in the Q&A talking about funding costs moving from Europe to the U.S. that went up again quarter-over-quarter in 4Q, presumably because of the continued fast growth in the U.S. Just wondering how we should think about funding costs as a percentage of GMV in 2026 as the year progresses. Sebastian Siemiatkowski: I can start. Nate, thank you for the question. Look, I think it is -- I think that this exclusivity -- I mean, sometimes it makes sense to sign those, but I always tell my sales guys that like the best competitive advantage comes if we're the most preferred payment method in the checkout by the consumers. And so as much as sometimes it could make sense tactically to enter such deals, we don't mind being side-by-side with others, just like Visa has been side-by-side with Mastercard or Amex has been side-by-side with them for a long period of time. So instead, what we focus on primarily is that there's always customer preference. And we know by experience that there are some merchants that even offer 3 options, for example, within the buy now, pay later space, and we see that we get -- we grab the highest share of checkout among consumers. And that, to me, is like the primary thing to keep an eye on. Then tactically, occasionally, it could make sense to be exclusive, nonexclusive, et cetera. But also in addition, I mean, we see what's amazing now with Apple Pay, for example, is that anyone in the U.S. that has any card from any bank can use Klarna buy now, pay later as an example, on any merchant without -- so I think that's the right way to think about it. Build consumer preference is the key long-term strategic objective. Over to you, Niclas. Niclas Neglen: Yes. Great. Look, the reality is if you look into some of the details in the notes, you can see that what you'll see with cost of funds because we model it in accordance with the forward views on interest rates, et cetera, you would expect that to decline in line with forward interest rates, assuming that they are correct, right? And that's really how we model it. And then like I said, we have a stable outlook with regards to the forward flows that we're doing. So those are there already practically speaking. So to me, that should be support an improvement over time, depending obviously on the interest rate base that you see, right? So that's simply where I'd say. I think the key thing is also just to note on your comment with regards to the U.S. I think it's important to appreciate that it's not really just the fact that we're moving or we're expanding more volume in the U.S. It's actually we're expanding our volume across the board, right? We have very, very healthy growth, both in Southern Europe, but also like I mentioned earlier, in our established markets because we are expanding that banking services that we were speaking about. Filippa Bolz: Your next question comes from James Faucette at Morgan Stanley. James Faucette: Appreciate all the commentary here. I wanted to follow-up on a couple of points that were made earlier. I guess on -- I want to go back to the TMD and that kind of thing. Is there a point -- and I recognize that the pace of Fair Financing growth will naturally drive [ BQs ] higher. But I'm wondering if you could talk to us about how we should be thinking about a delinquency high watermark where you might -- if you got to that, you might feel like you were compelled to pull back on GMV. Just helping us bracket how we should think about that, especially as you continue to ramp their financing and some of the other initiatives. Sebastian Siemiatkowski: I'll let Niclas answer that. James, but again, like I think it's important to remember, Klarna under the time I've been here, has underwritten $0.5 trillion with record low credit losses for that, right? So we are -- we have an extremely strong confidence into our underwriting, into our proprietary models and so forth. And as we've highlighted here, we see this as predominantly a question about timing than nothing else. And that's the same that we think about here going forward. So yes, so I think that's the beginning, and maybe you want to jump in more specifically. Niclas Neglen: Yes, sure. James, I think the key thing when you want to think about this is that because we, firstly, underwrite relatively low average order values, and we do so on very short tenures. We have the ability to constantly adjust the portfolio, which is what we do. So it's not so much a question of like, oh, well, there's this bar for something. It's more a question of how comfortable do we feel with those continuous cohorts that we're looking at. And we're not just looking at cohorts on a quarter or a month or something. We're looking at the cohorts literally on a weekly basis, right, and understanding the performance of that. And that's what we've been doing for 20 years. That's what we're going to continue to do, right? And so I think we've evidenced historically, and we've talked about it before with regards to how can we adjust this and what are the impacts of those adjustments as we go along. So that's really how we think about it. And obviously, we're always trying to keep an eye on that profitability and ensuring that we do this in a balanced fashion, right? And I think we've evidenced that we can do so over the last 20 years. Sebastian Siemiatkowski: Yes. I think like underwrite primarily to existing customers keep low average balances per customer, again, $100 versus $500 on the banking versus like the big banks being at like $5,000 on a credit card. So keep like -- keep low tickets per on average and then have very short duration in general compared to other banks, right? Like they sit with credit card volumes that are commitments for -- like continuously, we have very, very short durations and have great abilities to adjust our underwriting to macroeconomical conditions. James Faucette: Got it. And then I wanted to follow-up on more of a thematic question. I know most of this conversation today has been around kind of the mechanics here. But any initial takes on how unit economics in agentic e-commerce will evolve for Klarna, especially in an environment where it seems like some of the labs are charging merchants as much as 4% or more. Sebastian Siemiatkowski: No, I don't think really, we have a comment on that. I mean, again, what we've seen is that like we have great distribution and we're growing. And we have -- we generally still see U.S. as a higher margin opportunity because Europe is used to seeing lower cost of payments, and that's where we've been coming competing from. Filippa Bolz: Next question comes from Harry Bartlett at Rothschild & Co Redburn. Harry Bartlett: I just had a question on the GMV guide. I mean it implies kind of a minor decel. But I just wanted to touch on your comments around the U.S. Fair Financing, Klarna card all kind of coming in above your expectations and a year-on-year acceleration. So I guess, does that imply that maybe there's a bit of an offset in some other products or other regions? And maybe you could just give some color there. Niclas Neglen: Sure. Thanks. Harry. Look, when you look at the '25 versus '26, we are literally growing at the same pace off the back of a significant amount of volume, right? So ultimately, when we look at these guides for '26, like I said before, we are very much focused on ensuring that we get the -- continue to grow at those paces across all these markets. And I think we're seeing very good growth across all of them. Sebastian Siemiatkowski: Yes. And I would just add again, since we're coming a little bit to the end here, Harry. I think, look, looking at Klarna, we set out as an ambition to grow a global retail bank. And when I look at this quarter, I see that we're on a fantastic trajectory towards that. We have 120 -- almost 120 million users globally, growing at 28%. We have 15 million now banking, growing at over 100%. We're seeing all the different new revenue lines, such as subscriptions such as the card and also Fair Financing growing at a very, very healthy rate. And I think it's very likely that Klarna, if it continues on this trajectory, will become one of the major retail banks in the world. I mean, if you even look at the current card growth rate and you just say that you extrapolate that forward, you are very soon to be one of the bigger issuers of credit cards and cards in the world. So I think that, that is -- we're very excited about what we're seeing. And then we -- yes. Filippa Bolz: Thank you. We now have time for one final question, which comes from Timothy Chiodo at UBS. Timothy Chiodo: I want to hit one around TAM expansion and the topic of 0% loans to consumers merchant funded for the longer term. You mentioned earlier talking about sort of starting with smaller loans for new customers as you build, I'm just assuming in the U.S. market. But as we look at TAM expansion going to higher income consumers, maybe with better credit profiles, it's a bigger topic for your competitor. I was hoping you could just give an update on where this sits within your mix of GMV and where it could go in terms of offering longer-term pay later merchant-funded loans to consumers? And then I have a follow-up on the U.S. business. Sebastian Siemiatkowski: All right. Thank you. That's a great question. Look, I don't think it's necessarily a smaller topic with us. We just have a lot of topics to cover. So I think that like from our perspective, our experience from Europe is that Klarna over time becomes an everyday spending partner for every consumer. I mean you have to remember, in a lot of our original markets like the German-speaking ones or the Nordic-speaking ones or the Nordic ones, we're seeing like a population penetration of like 70%, 80% or 50%. So it's really everyone using this product of every background and type. And we believe that the same will over time happen in the U.S. as well, and then you will adjust your offering. 0% financing for that is a fantastic offering. And we see great demand among global retailers and global brands, again, because they're looking for that kind of offering across the globe. They want to work with a provider that can do that with them in all markets. If you're a home electronics or a phone manufacturer or whatever it might be, you find it interesting that you can sign one contract and work with one team, and then get this live in more than 20 markets. So very much of a big priority for -- Sykes, who's not here today, our Chief Commercial Officer, but not necessarily what we covered mostly today on the call. So yes. And the last question, maybe Niclas, I don't know if... Niclas Neglen: Tim, you didn't ask... Sebastian Siemiatkowski: No, he didn't ask the last one, Tim, sorry. Timothy Chiodo: That's okay. Yes. It was on the U.S. volume growth. If there were any undercurrents that you could talk about. We would have expected a slightly faster growth in the U.S. in Q4, given Q3 had a partial contribution from Walmart and Q4 had a complete or full or close to full contribution from Walmart. And we were just wondering if there were other factors that might have led to that lack of acceleration in U.S. volume. Sebastian Siemiatkowski: I must say that I'm happy to hear that you have high expectations on us. Personally, I'm very, very pleased with the performance in the U.S. And -- but what I do know is that when it comes to all these big strategic partnerships like that, there's always fixing this, fixing that, a little bit extra this and that, and you work on kind of continuously doing that. And that will continue to happen in regards to all these partnerships, both the ones you mentioned as well as the ones I've been talking about like the Stripes of the world and the Adyens of the world and so forth. So there is continuous more work getting done there, and we're seeing fantastic results. Filippa Bolz: And with that, we conclude the call. Thank you so much, everyone. Niclas Neglen: Thanks, everybody. Sebastian Siemiatkowski: Thank you so much.
Operator: Ladies and gentlemen, welcome to the Covivio 2025 Full Year Results Presentation. I am Mathilde, the Chorus Call operator. [Operator Instructions]. The conference is being recorded. [Operator Instructions]. At this time, it's my pleasure to hand over to Christophe Kullmann, CEO of Covivio. Please go ahead. Christophe Kullmann: Thank you. Good morning, everyone. I'm happy with Paul to present our full year '25 results. And let me kick off with our profile, Page 2. You know our diversified business model, but this diversification, which relies on leading platforms has been incremental to our growth in '25. See Page 3, the main KPI of '25. Performance has been very solid on operating side, as you see on the left part, on financial results as well, as you see with plus 6% in recurring results per share, plus 7% in dividend and plus 4% in NAV per share. On the balance sheet with a new year of debt ratio improvements. Let's go more into details our operating performance first with Office, Page 7. In a market where the key question is whether we are on the right part of the polarization in the office market, we have been able to demonstrate another time that Covivio is on the right side. We benefit from a high qualitative portfolio. The best proof of that is simply to look at the occupancy rate, 95.7% for city center assets, 95.6% for the one in the major business hubs. Thanks to this portfolio quality and to our approach of real estate as a service, we were able to record a very active year in terms of lettings. Page 8, 135,000 square meters of lettings and renewals, on which 81,000 square meters of new lettings. We flag a few examples there. example, let me focus on CB 21 Tower. You remember that Suez vacated 44,000 square meters in this tower in July '25. 6 months after only, we already secured 50% of those surfaces. Another great achievement is in Milan, moving to Page 9. We are among the leaders of office in Milan with a EUR 2.1 billion portfolio. This is 27% of our office portfolio. The Milan market is very dynamic. See the market figures on the bottom right of the slide, a take-up above the 10-year average and a lack of Grade A building, while 75% of Milan take-up is focused on those assets. In '25, we benefited from this positive environment in 2 ways. First, through renewal, we secured 20,780 square meters of renewals with a plus 19% increase versus passing rent. Second, through redevelopment, see Page 10. We launched 3 projects in '25 for EUR 139 million with a 7% yield on cost. Let me focus on one of those 3, Vitae in Symbiosis area. Fastweb already our tenant needed more spaces. We managed to extend the existing link for 8.5 years and to pre-let for Fastweb, 75% of this new development with a 12-year lease at delivery in '27. Moving now to hotel. '24 was about M&A, '25 was about extracting growth from the portfolio. Moving to Page 12. Remember, our deal with S&D, we made at the end of '24. We bought the OpCo of 43 hotels to S&D in order to merge and the propcos of those hotels and get the full ownership. On top of the high quality of this portfolio, there were 2 rationales in this deal. The first one was to transform obsolete assets into new hotels. And the second one is to optimize the contract with the operator and to choose the right brand. '25 results show the success of this deal, 7.9% yield, 13% value creation extracted in '25, but there is more to come. See Page 13. We didn't catch yet most of the value of this portfolio. It will come in the years to come, thanks to the CapEx program we plan to implement on 20 of those hotels. It is a EUR 760 million portfolio value. We plan to invest EUR 330 million of CapEx by '28 to '29, thanks to that, our target is to catch EUR 46 million of additional revenues and EUR 300 million of value creation. 5 projects are already committed and 15 will be in '26 or in '27. Another driver for growth in hotels is in optimizing the rental contract, see Page 14. there is many ways to improve the revenue by changing the contract. We can move from management contract to lease. This is what we did with Radisson Blu Roissy signing a 12-year new lease, which will bring 50% additional revenues. In our management contract portfolio, we can also decide to change the brands. See the example in the middle in Paris [ Montparnasse ] hotel, we will increase our RevPAR by 25% by changing Ibis to Moxy. We can finally change the operator and optimize the contract. We have 2 discussions ongoing with EUR 6 million target saving here. Operated real estate is a strength for our industry. It enables us to be closer to the end user wishes and evolutions to be more efficient. In hotels, our operated real estate model is illustrated by our own hotel platform. We are not a hotel operator and it is 10% of our hotel portfolio, but this skill is key to get closer to the final customer and to be stronger when it comes to negotiate with hotel operators. This platform already delivered good performance, thanks to a plus 7% EBITDA growth and a 30% operating margin. Moving to residential, Page 17. We pursue our growth by leveraging our 4 drivers: Rental growth. On average, we were able to get plus 24% rental uplift on new leases, modernization CapEx with a 7% average yield on CapEx Privatization, we sold 186 flats for EUR 72 million above, with 30% margin and on the last appraisal value and also ancillary revenue with EUR 15 million additional revenue, see the detailed Page 18. The revenue are made of build-to-sell development. This has generated EUR 6 million of margin in '25, but also service to client with energy trading, insurance brokerage, connectivity services. This brings already EUR 9 million of revenues. Last but not least, in resi as well, we intend to push on operated real estate. See Page 19. Operated resi is a long term following more single-person households and students' needs. It is also a profitable one. See the 30% average operating margin we catch already on this activity. At Covivio, we already managed 420 units in Berlin and want to accelerate. We will do it with 308 new service apartments into our Alexanderplatz development to be delivered in the second half of next year. And now I let the floor to Paul to present the results. Paul Arkwright: Thank you, Christophe. Good morning, everyone. So this positive performance of the year is also illustrated by our financial results. Let me start first with the portfolio and capital rotation you see on Page 22. So we continued in 2025, our qualitative asset rotation activity by selling EUR 463 million of assets 72% of it is offices. And in parallel, we invested EUR 446 million, mostly in CapEx programs in order to increase the quality of our portfolio. Acquisition relates mostly to the opportunistic acquisition of the minority shares in our CB21 tower for less than EUR 3,000 per square meter. The value creation of this acquisition is not included in the like-for-like value growth of the portfolio. We will now present and you see Page 23. So moving to the portfolio, we stand at EUR 16 billion group share at the end of '25. After more than 2 years of value decrease, our value starts to grow again by plus 2.1% on a like-for-like basis. In office first, the polarization continues. City center assets are growing by 1.7%, thanks to Paris and Milan, while major business hubs are impacted by a lack of liquidity and especially in Germany. German residential then is gaining 4.9% following the increase of the rents. And hotel is growing by 3.7% on a like-for-like basis. We have here the plus 13% value creation on the former SND portfolio, and we benefit from the good performance in South part of Europe. Let's move now to the financial results and directly to Page 25 with our rental revenues, which includes the operating results of the hotel -- those revenues has grown by 3.7%. The main driver you see it in the right part of the slide, it's the 3.4% like-for-like growth, which is thanks to 1.9% of indexation, thanks also to the increase in occupancy rate, 1 point and to the rental uplift for 50 bps. Looking by activity, office rents are benefiting from the drivers I just mentioned before and are growing also by 3.4% on a like-for-like basis. Hotels revenues increased by 1.6% on a like-for-like basis despite the negative base effect of the Olympic game and of the Euro football game in Germany in 2024. So variable revenues are improving in Q4 when we compare to Q3, showing a positive trend for 2026. Those figures also does not take into account the good performance of the former S&D portfolio, which recorded a 3% growth in EBITDA in 2025. Finally, rents in German residential are growing and are showing an acceleration with a plus 4.8% growth in rents versus 4.3% in 2024. So this rental performance has been the main driver of the earnings growth. You can see Page 26. We recorded in 2025, a plus 10% growth in our earning -- recurring earnings in million euros. On a per share basis, this growth stands at plus 6% as it takes into account the full effect of the new shares created in 2024. Looking at the main block of the bridge you see in this slide, first of all, portfolio rotation has a positive effect to the results, which is thanks to the reinforcement in hotels made in 2024, thanks also to the acquisition of the former S&D hotels and to the acquisition of the minority shares of CB21. Rental activity brings the bulk of the growth, EUR 20.5 million of additional results. Ancillary revenues also has been a good driver, plus EUR 12 million, benefited from EUR 10 million of additional property development margin and EUR 2 million of additional asset management fees. Finally, net financial expenses are better than in 2024. This is due to the fact that we capitalized more financial costs in 2025 following the increase of the development pipeline and the increase of the cost of the debt. This effect will be negative in 2026 with the deliveries of large development projects such as Beige in Paris or ICON delivered in Dusseldorf at the end of '25. Page 27. Moving to the balance sheet. So in parallel of the increase in the results, we continue to reduce the leverage of the company. EPRA LTV is decreasing from 43.5% to 42.9% -- if we include the EUR 386 million of disposal agreements that are yet to be cashed in mostly in '26, that leads to an EPRA LTV below 40% -- 42%. Net debt to EBITDA is also decreasing from 11.4x to 10.7x. As you see on the right part of the slide, our balance sheet is well secured and our rating has been confirmed by S&P at BBB+ stable outlook. Staying on the balance sheet and with net asset value, Page 28. The growth in earnings despite the dividend payment brings EUR 1.3 per share additional Value creation of CB21 brings EUR 0.4 and the growth in values, EUR 1.8, which leads to a plus EUR 3 per share increase in NTA and plus 4% year-on-year at EUR 82.9 per share. You notice on the right part of the slide that the NDV is growing faster by 5% due to the positive effect of the deferred taxes decrease linked to the decrease of the German tax from 15% to 10% from 2027 to 2032, which is included in our deferred tax accounts. The outcome of those strong results and of the sound balance sheet is a significant increase in the dividend, as you can see, Page 29. So we will propose to the general meeting a dividend of EUR 3.75 per share in cash, which leads to a growth of 7%. In order to linearize the dividend payment and in line with the practice of our peers, we will pay this dividend in 2 installments, one in March and the other in July. Let's now focus to 2026. Our priorities. First, Page 31, we want to pursue the portfolio rebalancing. That means more hotels and more city center offices. To this extent, we have a strong start to the year, as you can see in the right part of the slide. Let's focus on the 3 main news in the next slide. First of all, Page 32. So we signed at the end of December 2025, a new partnership with Blue Owl, an alternative asset manager for closing expected at the beginning of Q2 2026. This partnership confirms the creation of a JV owning the Thales buildings in our Velizy campus for a valuation of EUR 503 million. Blue Owl will take 49% of the JV buying part of Covivio existing shares and also the Credit Agricole Insurance (sic) [ Assurance ] shares in the building Helios 1. This transaction for Covivio means the disposal of EUR 138 million of peripheral assets at a 6.4% yield net of incentives. This transaction confirms the attractiveness of our portfolio. It brings additional revenues and it participates to reach 80% of office in city centers, and it's also the start of a new partnership. Secondly, in parallel, we are increasing our stake into hotels. First of all, with the Page 33. So we have 5 projects ongoing of transformation of offices into hotels in Paris and in Bologna in Italy, that represents EUR 407 million of cost, including the land value of those assets. Those deals will enable us to increase exposure to hotel, but also to improve the portfolio quality and to increase the profitability with incremental yield on CapEx of above 9% Hotel reinforcement is also about acquisition, as you can see, Page 34. So in parallel of increasing through transformation, we also are reinforcing through acquisition and especially in the south part of Europe. South part of Europe, it's 17% of our hotel portfolio today. We target 1/3 over time. So we are under final stage of buying EUR 300 million of hotels in Italy and in Spain. It's actually mostly city center hotel with long-term leases and a 6% minimum yield. If we include the variable part, we target a 7% yield for those acquisitions that we expect to sign by the end of Q1 2026. All this means that considering the recent asset rotation, we will increase by 2 points our exposure to hotel, as you can see, Page 35. That means if we look versus 2022, a 50% growth in exposure to the hotel business between 2022 and 2026. Thank you. Now I let the floor to Christophe for the key takeaways. Christophe Kullmann: Thank you, Paul. So just to sum up what we say this morning before the Q&A session. First, we are on track on our target sharing that we shared during the Capital Market Day, last Capital Market Day in terms of portfolio shaping, in terms of new businesses, in terms of ESG leadership and in terms also on growth targets. Really for us, 2025 is really an important year for us. We are starting really a new EPS growth phase fueled by 4 drivers. First one is hotel reinforcement that means also higher yield than other asset classes, but also asset management then, especially with the hotel CapEx program at 15% average yield. Ancillary revenues are part of our business model and will continue to grow. Finally, hospitality and operated real estate model drive occupancy, but also profitability. So that leads to another year of growth for '26. See the detail of our guidance, Page 39. So we target a 4% growth in recurring result per share, thanks to the pursuit of good operating performance, active asset management and further growth in ancillary revenues. You see that this guidance includes also some headwinds. We expect that 2 of them, indexation of CB21 letting and indexation are actually transitory and should reverse positively in '27. So to sum up and before taking your questions, what should we keep from this result publication? First, '25 has been a strong year for growth. And also for implementing structural tailwinds for future EPS growth. We enter into '26 with a good momentum, thanks to the work achieved in '25 and thanks to the first achievement of the first week of the year that Paul just described before. Thanks for your listening, and we are not now available also with Paul, but also to [indiscernible], Hotel CEO; and Olivier Esteve, our Deputy CEO, to answer your questions. Operator: [Operator Instructions]. The first question comes from the line of Valerie Jacob from Bernstein. Valerie Jacob Guezi: Congratulations on your results. My first question is looking at your 2026 guidance, I just wanted to clarify a few things. The first one is, I assume that the EUR 300 million of acquisition in hotels are in this guideline. And I guess my question is, I just wanted to understand what are the building blocks in your opinion, leading to the 4% increase per share because you said that the capital impact are going to be -- to contribute negatively in 2026. So I just wanted to -- if you could sort of tell us what's coming from acquisition disposals, is there anything beyond this EUR 300 million and what's coming from the different part of the business? Christophe Kullmann: Thank you, Valerie, we don't give full details of the future budget, but Paul will try to give you some points. Paul Arkwright: Valerie, of course, I mean, first of all, going to your first question on asset rotation, the hotel acquisition is included, but it will be signed progressively over the year. And in parallel, as you noticed, we have EUR 386 million of disposal agreement to be cashed in. So asset rotation is actually quite even in terms of impact to the guidance 2026. The main effect is more on revenue growth following also the fact that the performance of Q4 in terms of letting for offices has been strong. Hotels in Q4 has been better. So here also, we are positive. And you notice that the like-for-like rental growth in German residential is strong. So that's, let's say, the first and main block. Then we will continue to increase ancillary revenues. Those 2 things will compensate the full effect of the CB21 departure of Suez. We are relating, but it's the departure of the lease are progressive and higher financing costs, less capitalized interest and a bit more cost of the debt. Valerie Jacob Guezi: Okay. And my second question is on your capital rotation strategy. I mean you've been very successful lately and congratulations on that. And I just wanted to understand given what you're seeing today on the market, do you think that you will be able to do sort of similar volume this year or even more? What is your take at the moment in terms of rotating offices into hotels? Christophe Kullmann: In terms of rotation and capital allocation, what is important is that we have this roughly EUR 400 million of disposal that had already signed that need to be cashed in. So that will support the financing on the CapEx that we have imagined to spend in '26, mainly in office, but now we're also starting to spend an important amount of CapEx in hotels. And the disposal we imagine to deliver in '26 could be roughly the same amount that we have in '25, mostly linked to office, not in central location. That's where we want to continue to dispose mostly office today. Also flats in German resi, we want to increase progressively our privatization program and some hotels mostly in Northern Europe. With this disposal, we'll be able to continue to invest in hotels because the acquisition will be focused on hotels in '26. Operator: The next question comes from the line of Vanessa Guy from JPMorgan. Vanessa Maria Guy Vazquez: I had 2 questions. The first one is a follow-up to Valerie's one on what is driving the guidance for 2026. Is it mainly from the hotel? I'm just trying to figure out if there are any underlying trends that have improved, which is getting you to this guidance? And also, my second question is on your disposal versus investment strategy dynamic and how this plays out. Obviously, you have a lot of investments planned in the future, as you mentioned in your Capital Markets Day. And I was wondering, you have to draw a fine line to maintain that 40% LTV target. So how much of disposals do you have in order to provide the firepower for investments going forward. Are they enough? Or will you have to pull other levers in order to do this? Christophe Kullmann: I don't know if Paul, you want to give more color on what you said, but it's difficult to give more detail as of today. Paul Arkwright: I mean, it's more across the board than specifically linked to one activity out of the -- of one other. So without repeating myself. Christophe Kullmann: On your question on the capital allocation and so on, our long-term target is to go to 1/3, 1/3, 1/3 in terms of allocation. But what we say also in the Capital Market Day and as I will continue to stress today, it will take time. We are really not in a hurry. We are not the first buyer. We will do that progressively through financing through disposals. But also you know that we have this idea to increase our stake into our subsidiary in hotels by exchanging shares as we have done that in the past. So we will see how that will be put in place. Really keep in mind that what we want to do is always accretive acquisition per share, and we want also to keep our LTV below 40%. That's really our target. And so that's why it will perhaps take more time, I don't know. But really, the direction is this one. We will take opportunities. What is really important and what we try to demonstrate during this presentation is that we have a lot of drivers -- and we will push on one and on the other that will depending on the opportunities also where we stand exactly on each topic. Operator: We now have a question from the line of Jonathan Kownator from Goldman Sachs. Jonathan Kownator: Perhaps a question for Tugdual. But it would be great to have your outlook on your hotel market. I mean obviously like-for-like rent growth came a bit down this year. That's just a higher level in the previous years. Can you give us maybe some color on where you're seeing trends, RevPAR and any countries in particular that you're seeing strong and obviously, you're expanding to Southern Europe? And the second question on the German resi, obviously, very strong growth this year. Are you expecting this to be relatively stable? Are you expecting growth to accelerate? And do you see more CapEx opportunities there to further boost that growth? Tugdual Millet: Okay. On the outlook and what we see on the market in terms of operating performances, I think that starting with what we've seen in '25 is a good starting point for '26, which means that the trends that has been strong on Spain and Italy will continue to be there. And what we see beginning of this year is still those areas and also cities like Paris, cities like South of France continue to be strong. We see that on the books. We see that on the preliminary results of January. Probably what could change a bit, and that's also taken into account in our, I would say, forecast is after a difficult year in Germany, Germany should improve in '26. It's been a tough year there in most of the cities, and we've seen that on the performance of our operating portfolio. And this is probably where we are a bit more optimistic. And then leading the U.K. at the end, it's been quite decent year last year effectively and mostly based on London and Edinburgh, where we have most of the portfolio today. So quite positive. And I have to say that, yes, the beginning of the year is quite encouraging and validating what we are expecting. Jonathan Kownator: Any exposure to the -- I mean, U.S. consumers obviously got a weaker dollar to deal with. Is that any impact on your portfolio? Is that a factor at all? Tugdual Millet: Yes. So basically, the U.S. customers, it has been a big question last year mostly. And we've seen that nothing has changed. Even it's been stronger. It's been strong in south part of France. It's been still strong in Paris or cities mostly exposed to the U.S. customers. So no drastic trends there. Europe is still cheap for the U.S. customer, I have to say. And probably what could be a bit different is -- so for the U.S., it has been quite tough last year. And probably it would be a bit better for them, but for the inbound clients going to the U.S. But as far as we see, U.S. customers is still there and eager to travel to the most European cities. Operator: The next question comes from the line of Veronique Meertens from Kempen. Veronique Meertens: Congratulations on the results. A few questions from my side. So first, another follow-up on the guidance. I think a big chunk of the beat is also explained by your net financial costs. So could you give some color on how much did the capital -- capitalized interest costs actually increase this year? And can you also give some more guidance on what you expect for next year? And did you also change the way of capitalizing interest? Or is it purely the volume that changed? Paul Arkwright: Yes. So we didn't change the methodology. It's a methodology which is validated by auditors, so we don't change it. It's simply the volume and the rate as well. You notice that the cost of debt is increasing. In terms of amount, so we have an increase in 2025 by EUR 8 million, and we expect this to decrease by roughly the same amount in 2026. So this is included in the guidance. Veronique Meertens: Okay. That's very helpful. And in terms of the development pipeline, could you give some additional color on how you see the pre-let going for Beige, for instance, and some of the other projects? Unknown Executive: So on the development side, on for example, we have a lot of pending discussion. And it's fair to say that it's a refurbishment project, so difficult for the future tenant to project themselves in the building, but now we are really in the market, and we have, I would say, last week, for example, we have one visit per day, so we're quite optimistic the fact we'll be able to fulfill this building along the year. Veronique Meertens: It looks like there is quite some pressure on rent levels. Obviously, in Paris, would you say when you look at your pipeline that you can still achieve the rent levels that you've underwritten these project for? Unknown Executive: No, no, no, no. We have -- effectively, what you mentioned is right. There is a little bit more supply in Paris, but also more polarization and giving the quality of the building. And I can say that today, the discussion we have are totally in line with our expectation on the rents. Operator: We now have a question from the line of Aakanksha Anand from Citi. Aakanksha Anand: I have 3, and I'll take them one by one. The first one is on the acquisition opportunities in hotels. Could you just give some color on the kind of opportunities that you've been able to find that suits your return hurdles? Or is it reasonable to expect that the development pipeline, the conversions, et cetera, are expected to contribute more significantly to the portfolio rebalancing target to the 1/3 for hotels? Christophe Kullmann: Tugdual? Tugdual Millet: So for the opportunity. So basically, I hope that we will be able to give some more detail in the next few weeks on the pipeline that we have secured today. It's a mix of different things. Obviously, we are focusing on Southern Europe. So the most important market are Spain and Italy with 2 very different structure. Spain is very organized, quite and very liquid. So we have been there for, let's say, 10 years. We know quite well all the hotel operator and investor. And here, we are mostly focusing on investment either on resort on urban. So there is quite a decent level of opportunity even if I would say this is probably one of the most competitive market we have today because of liquidity and, I would say, professionalism of the sector, which is a bit different from what we see in Italy, where there's probably a bit more opportunities for us, considering our long-term view there, the fact that we, as Covivio are quite strong there, so establishing quite nice relationship. And here, the opportunities are more coming from kind of sale and leaseback opportunities. This is part of the discussion that we have with historical owner that wants to team up with real estate investor and able to sign long-term lease with a mix of fixed and variable. And I have to say that so far, the opportunities there are quite interesting and sometimes branding the hotel and sometimes keeping those hotels with, I would say, a group of families, et cetera. So that's the part of the opportunities that we have. Aakanksha Anand: That's clear. The second question is just on the cash. So there is about EUR 1 billion of cash on the balance sheet, and that has been the case for the past few years, kind of moving between the EUR 0.5 billion to EUR 1 billion. And it feels like there is surplus cash if we consider the recurring earnings, level of disposals and then the dividend and CapEx obligations. I just wanted to understand what are the priorities for the allocation of this cash? So probably split between from what I can see right now, is it the debt repayment to reach the 40% LTV an increase in acquisitions? Or could a share buyback also be under consideration? Christophe Kullmann: Paul, will let you answer this. Paul Arkwright: First of all, in terms of metrics, LTV is on net debt. So it already takes into account this cash. This cash is here mostly to reimburse debt that comes to maturity in 2026. And we have a positive arbitrage in terms of remuneration versus the existing cost of this debt that we took a long time ago with a cheap cost. So it's mostly the explanation of why we have so much cash. It's really to get an opportunity in terms of remuneration versus the cost. Christophe Kullmann: And as of today, we are not intending to implement a share buyback program. We consider that we have to finance our development at good conditions, and we don't imagine to do that in the short term. Aakanksha Anand: Understood. And the third one, just on the hotels like-for-like. So obviously, there has been a base effect for this year. But how should we look at a steady-state level of like-for-like rent growth in hotels? Christophe Kullmann: Can you repeat Anand, please? Aakanksha Anand: I'm just trying to understand the -- for the hotels like-for-like rent growth, there's always -- there's obviously been a base effect, an unfavorable base effect for this year, where the like-for-like is up, I think, around 1%, 1.6%. I'm just trying to understand, going forward, what do you think is a more steady-state like-for-like rent growth that we can expect from hotels? Christophe Kullmann: Yes, I'll take it, and Tugdual will complete. Tugdual Millet: So this year was 1.6%. We expect that to be above this level. As we've seen, in fact, in the past is growth -- overall revenue growth on hotel was always above inflation. So that's the target when we invest in hotels is to overall to beat inflation trends and being able, thanks to the long-term macro very positive view to, thanks to the asset management and the choice that we've made in terms of hotel mix to have performance above inflation. Christophe Kullmann: Yes, what is not taking account is these figures is really all the asset management matters that we will put in place that will help us significantly to do -- to have higher growth in hotels, and that's what we expect for the next years, really thanks to all what we have today in-house. And some of the example was given by Paul before. So we are really positive on the evolution on the hotel sector in terms of like-for-like despite the fact that this year, inflation is low and because we see this significative trend, especially really in Southern Europe, and we imagine that will really continue there, but also in France. Operator: The next question comes from the line of Florent Laroche-Joubert from ODDO BHF. Florent Laroche-Joubert: I will have maybe some 2 or 3 questions. Maybe the question -- a follow-up question on the guidance. So at the end, so could you please tell us what you take into account in terms of variable revenues for 2026 and you don't take into account and that mean that what could be an improvement later in the year? So that would be my first question. Christophe Kullmann: Really, we don't give a full detail on the P&L because after that, I understand your point, it's probably difficult for you to reconciliate the data today. But I think we are confident on this guidance. You know that in the past, we are always confident. It's a lot of different topics that are inside. We're also working a lot on the cost side, what Paul said in terms of also improvement on EBITDA margin linked to renegotiation of fees. We have also a lot of topics that are linked to the fact that we are reviewing all the fees with all the partnership that we have that really will be supportive. We have this new partnership that we put in place starting in '26 in German resi, but also with Blue. All of those topics are taken into account in the guidance. After that, we will not give you the full detail line by line of this budget because we have also -- there are also risks in this guidance, as you imagine, and positive and negative topics. So sorry for that, but we can give more detail. Florent Laroche-Joubert: No, I can understand. And then so I would have 2 more questions. The first one on the CB21 tower. So would it be possible to have more color on where you are today on the letting process. And after that, the last question would be in hotels. So I understand that you are strongly committed in acquisition to come. But after that, are you already looking for further opportunities later in the year? Unknown Executive: On CB21, if I understand correctly, the question is how we are doing on the field. I think we have very positive results with 22,500 square meters already relate after the departure of Suez. It's also a very, I would say, dynamic approach of the market with a tailor-made solution for different tenants. And we have targeted also medium-sized, I would say, demand. And if you compare with some competitors are still focusing on very large demand, I think it's the heart of the market of La Defense today, and we have been able to provide to the people, of course, comfort with the product they will have at the end in CB20, which is one of the best located assets in La Defense and gives also all the amenities needed by tenants today. And I think we are successful. We are still discussing on other, I would say, with other tenant potential. And I think we'll be able to have the same trends in '26 on that asset. Paul Arkwright: And just to remember, as of today, we don't let the higher part of the tower, which is the best part because we will put there more works. And we -- so that's the part that will arrive later on in terms of letting. Could you add in terms of other acquisition in hotels that you are looking? Tugdual Millet: It's, I would say, the summary of what I described before, a mix of different opportunities around Spain and Italy. Basically, the target for us is I would say, minimum size of EUR 30 million to EUR 50 million hotel, obviously, good location and target yield of 6%, which made the return quite attractive for this asset class. It's mostly leased, but we are also looking for quite selective acquisition in terms of operated hotel also in this destination and in France and with this same objective of increasing return and exposure to this asset class. Operator: We now have a question from the line of Markus Kulessa from Bank of America. Markus Kulessa: First question on -- as usual, on your disposals, which is always clear. Can you tell us what's the effective disposals in '25 and what is signed and which is coming in H1 '26? This would be my first question, please. Christophe Kullmann: Effective disposal, you have that in the slide, EUR 463 million. And in 2026, we will have most part of the EUR 386 million that remains to be cashed in. After that, let's say, spread over the year, I would say. Markus Kulessa: Okay. And yes, I'm following up a little bit on the guidance. I know you can't help much. But if I got it right, it's just to understand how you get to the, let's say, 19p EPS growth while everyone expected -- so if I understand right, your like-for-like rent growth impact compensates your higher cost of funding. So the difference comes all from developments, which means you're going to have higher contribution from developments than expected. So is it due to the timing of your development pipeline letting? Or is it the hotels refurbishment, which are already coming in this year? And so what's part of the question? Second one is just to reconfirm, so there's no acquisition or disposal in this guidance. Christophe Kullmann: We have some acquisition clearly on top of what is already taken into account and also the disposal plan that I explained before that is also there. There is really also what you say, development is really a strong contributor of this positive evolution, thanks to the letting that we expect to do or that we already have done in terms of office, but also margin development, especially on the -- also on the disposal on that has a positive impact -- will have a positive impact in terms of results in '26. Markus Kulessa: What will have -- sorry, what did you should say what will have a positive impact? Christophe Kullmann: The disposal with the stake that we will sell -- that we announced beginning of the year that we will stake to Blue Owl has also a positive impact in terms of development margin in '26. Markus Kulessa: So how does it contribute to your EPRA EPS? Christophe Kullmann: You will see that in June because it will be done. We need to finalize the disposal, but it will have positive impact. As of today, we will give more color on that, I imagine in June. Operator: We now have a question from the line of Stephanie Dossmann from Jefferies. Stephanie Dossmann: Just a follow-up on the guidance still. Maybe in other words, I was wondering about the development of the flex office revenues. How do they develop currently? And what should we expect in '26, please? Christophe Kullmann: Really, what we can say is that really it's a positive contribution and '25 was really good and '26. We imagine that will be better. Just to give you an example, in Lat, our headquarter, we record this year close to EUR 1 million of extra revenue, thanks to what we let on top of the flex part, thanks to all the amenities that we get. It's something that's really developing. We will push more and more on that. And it's really for us a way really to increase structurally our results. What we see today is really the demand for office is really different than it was before. And our capacity to have this in-house skills today is really a point of strength that really what we implement also in CP21, I have to say, and the fact that we are able to relet significantly in a market which is not so easy in a short-term period. It thanks to all this hospitality approach that we put in the office sector. You know that we started that 10 years ago. So now it's a long story. It was not easy initially because it was an investment phase, but now it's delivering, and we want to continue to push on that in the future, and it's really -- it will have a positive impact in '26 on top of our '25 results. Stephanie Dossmann: All right. Could you give the magnitude in euro million? Paul Arkwright: This activity is roughly EUR 15 million of revenues. It includes the fact that we let the flexible spaces in the different sites in France and in Milan. Operator: [Operator Instructions] The next question comes from the line of Celine Soo-Huynh from Barclays. Celine Huynh: Just one question for me, please. There was a EUR 10 million increase in your income from other activities. Could you help us understand where this growth is coming from? Paul Arkwright: Yes. So it's coming from 2 things. The main one is the property development margin. We delivered assets in Paris and in Milan. So we've got the margin on build-to-sell. And the second one, as Christophe described, is the increase in the flexible workspaces activities. Celine Huynh: Okay. What's the development margin you're achieving in those countries? Can you remind us? Paul Arkwright: So this line, other activities, half is coming from the flexible workspaces activities and half in million euros is coming from the property development activities. Celine Huynh: Okay. It's a little bit hard for us to forecast. Can you help us for next year, what should that number look like? Paul Arkwright: That's basically what Christophe said. It's this line will increase in 2026, especially also due to the fact that we have this development of Roissy new asset to Thales, which is shared with Blue. We'll give more figures in June, waiting for the closing of this transaction before giving specific details, but you can count on the growth for this line. Operator: We have a follow-up question from the line of Veronique Meertens from Kempen. Veronique Meertens: Sorry, one follow-up question from my side because I realize we haven't touched up on one topic, and that's German resi and the Berlin elections. Could you give some color on where you see downside risk, how those discussions are ongoing? And if Covivio is also involved in some of the political discussions and yes, how you view the elections in Berlin? Christophe Kullmann: It's always regulation election is always a topic for German resi -- during the last 20 years, it was the case. Well, we are involved. We are -- all the association of all the lenders is working to explain the situation. And the question is really the lack of products and not the current regulation of the rent that is a problem. I should say, they are debate in Berlin as usual before the election arrived. But what is the feeling of today is that really is really continue to support mainly the activity of landlord, and we imagine that they will be part of the new coalition. And if it's not the case, it could also arrive, but it's really not what we imagine. As of today, we saw in the past that the Federal court was really strong to refuse the things like the meat and Nickel story or story like that. So we imagine that it will be the case if such ideas will come back in the field. So we don't -- there is a question uncertainty as usual, but we have not a lot of fears directly linked to that. Operator: Ladies and gentlemen, that was the last question from the phone. I would now like to turn the conference back over to Christophe Kullmann for any closing remarks. Christophe Kullmann: Thanks a lot for all your questions, especially on the guidance. And see you everybody during the roadshow in the coming days. Bye-bye. Thanks a lot. Operator: Ladies and gentlemen, the conference is now over. Thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Hello, and welcome, everyone, to the TBC 4Q and FY 2025 IFRS Results Conference Call. My name is Becky, and I will be your operator today. [Operator Instructions]. I will now hand over to your host, Andrew Keeley, Director of Investor Relations to begin. Please go ahead. Andrew Keeley: Thanks very much, Becky, and welcome, everybody, to TBC Group's 4Q and Full Year 2025 Results Call. It's great to have you with us today. As usual, I'm joined on the call today by our Group CEO, Vakhtang Butskhrikidze; our Group CFO, Giorgi Megrelishvili; and we'll also be joined for Q&A by Oliver Hughes, our Head of International Business. We'll also start with a presentation from Vakhtang and Giorgi and then go to Q&A. And with that, I'll hand over to Vakhtang. Thank you. Vakhtang Butskhrikidze: Thank you, Andrew. Hello, everyone, and thank you for joining us today. I am pleased to present our results for the fourth quarter and the full year of 2025. Overall, we had a very good final quarter, bringing 2025 to a successful conclusion. For the full year, the group delivered over GEL 1.4 billion net profit, up by 9% year-on-year with 24.2% return on equity. As for the final quarter, it was a record quarter in which we also printed our highest return of equity of the year with almost GEL 390 million net profit and 24.9% return of equity. It was an excellent final quarter for our core Georgian franchise with net profit up by 15% year-on-year and 25.7% return on equity, driven by a strong combination of robust loan growth and net interest margin and low cost of risk and strong cost controls. The quarter was more mixed in Uzbekistan as the changes in regulations that I have previously discussed meant the slight contraction in lending, impacting revenues and earnings. That said, taking the year as a whole, the team made a huge progress in scaling up the business, including 45% loan growth year-over-year, 67% revenue growth and almost 1 million daily banking Salom card issued and digital MAU topping 6 million. As a result of our strong operating performance and the solid capital position, the Board has declared a final dividend of GEL 3.87 per share, bringing the total 2025 dividend to GEL 8.87, which is a 10% increase year-on-year. I won't dwell too long on this slide, but the main point I want to get across is that 2025 is another example of the TBC's long-term track record of delivering a nice combination of growth, profitability and returns. Moving to our 2025 targets. Overall delivery against most of the -- overall, delivery against most of these targets has been good. Our digital monthly active user numbers have almost doubled over the past 3 years to 7.3 million. We have also consistently maintained return of equity above our 23% target level. Similarly, we have been paying out at the top of our guided range. As we discussed at the third quarter results, unfortunately, net profit in 2025 came in lower than targeted due to some challenges in Uzbekistan. That said, taking the past 3 years as a whole, we have still grown our group's earnings by over 40%. We also delivered 90% loan CAGR in Uzbekistan above our target and comfortably surpassed our 5 million monthly active users target. Turning now to Georgia. As you can see, the Georgian economy remains strong with the real GDP growth standing at 7.5% in 2025. We see growth starting to normalize, but our economies and IFIs like Monetary Fund and the World Bank still expect around 5% growth in 2026, which is not a bad figure at all. The inflation rate is slightly above NBG's 3% target, driven by the combination of a low base of effect from 2024 and elevated domestic and global pressures on food prices. That said, we expect the NBG to resume cutting rate this year as inflation trends back down. 2025 was a strong year for our business in Georgia. We had a number of good operational achievements through the year. This included our flagship daily banking TBC card hitting almost 1 million cards in issuance, a doubling of our retail brokerage customer base to over 100,000 and 50% growth in our market-leading affluent product, TBC Concept. We also saw a number of tangible developments driven by AI with our mobile application chatbot launched in September and already handling over 100,000 iterations a month with a 50% of floating rate. I like the next slide as it shows the highly consistent performance of our Georgian Financial Services business over the past 3 years as we continually delivering mid-20% return of equity. We continue to be a leading player across most of the key banking segments in Georgia. In 2025, our gross loans were up by 11% year-on-year. I'd like to highlight particularly strong performance in cash loans, a key focus area for us, where our loan book portfolio grew by 36%. Meanwhile, our Georgian customer deposits decreased by 12% over the same period. Digital engagement among our retail customers in Georgia continues to grow. Having brought our core banking technology platform in-house, 2025 was a year when we started to clearly see the benefits of having full control over all aspects of our digital banking. With faster deployments and the revamped customer experience, we have been strongly increasing our digital customer base. We added over 250,000 customers during the year, growth of 24% year-over-year. Engagement levels also remain very high with a 47% DAU to MAU ratio, and we continue to see very high levels of digital unsecured loans and deposit issuance. Now let's turn to our Uzbek businesses. Starting with the economy. The Uzbek economy remains highly dynamic with real GDP growth of 7.7% in 2025. Inflation continued to decline to 7.3% in December. Importantly, seasonally adjusted annualized monthly inflation is now below the CBU's 5% target, which we think will help enable interest rate cuts this year. Next slide highlights some of the key milestones in our Uzbek business in 2025. We scaled up our business in a number of areas during this year. In business lending, we have issued over 130,000 loans, while our BILLZ acquisition gives us access to more than 3,000 retail merchants, processing over $1.4 billion of transactions. At the same time, payment volumes have increased over 60% year-on-year to $9.2 billion. We have also had a great take-up of our daily banking products such as Salom and Osmon cards. We also now have an excellent 600,000 Payme Plus subscribers as we deepen engagement with our ecosystem customers. On the next slide, we have an overview of Uzbekistan's progress over the past 3 years. During this time, we have more than doubled our registered users to 23 million, and we have hit 6 million monthly active users. As I mentioned earlier, our loan book has grown at 90% 3-year CAGR, while our retail deposits have increased at 65% 3-year CAGR to around $550 million. As mentioned previously, we saw a softening of operating income and the net profit in the final quarter. But for 2025 as a whole, operating income grew at excellent 67%, while we returned our 18% return of equity. Next slide shows Uzbekistan increasing market share and the material contribution to the group. By the end of 2025, our market share of our retail loans and deposits stood at 4.2% and 3.8%, respectively, as TBC established itself as a top 10 bank in both retail loans and deposits. In 2025, Uzbekistan contributed 9% of the group's net profit and 20% of the total operating income. Before handing over to Giorgi, I'd like to mention a couple of other important pieces of recent news. As you may have seen, we recently announced some changes to our management team. I have decided to commit my time fully to my role as the Group CEO, which will enable me to focus more closely on overall group strategy, including our business in Georgia and Uzbekistan as well as exploring international opportunities. As a result, Goga Tkhelidze will take over from me as the CEO of TBC Group Georgian subsidiary, Joint Stock Company TBC Bank, effective from the 1st of March, subject to the regulatory approval. Goga has been Deputy CEO for 12 years, the last 10 years of which he has been running CIB and Wealth Management. During this time, he has built these businesses into a dominant franchise player today. I'm very confident that Goga will be a great leader for our Georgian business. The other news, as you probably already know, is that we will be holding our Strategy Day next week in New York on Tuesday, 24th of February. I very much like forward to welcoming you to this event. And for those who are unable to join in person, there will be a live webcast as well. With that, I hand over to Giorgi. Giorgi Megrelishvili: Thank you, Vakhtang, and thanks, everyone, for joining our call today. Now I'm going to take you through our full year and Q4 results. Andrew, if we move to the Slide 20, that shows our strong profitability. So the first quarter was a record quarter, again, where we delivered GEL 387 million net profit, up by 16% year-on-year. That translated into a very solid 24.9% return on equity and full year profit exceeded GEL 1.4 billion, up by 9%. And again, our return on equity was about 24%, precisely 24.2%. Now if we move to the next slide, Slide 21, that actually shows one of the key drivers of our solid profitability. Our top line increased by 15% in Q4 year-on-year. That was mainly driven by excellent performance in our net interest income. It was up by 23%. Our noninterest income remains flat, but that was mainly driven by very high FX revenues in Q4 last year, as you may remember. And on a full year basis, we also have a great 20% increase year-on-year, and that was driven both by net interest and fee and commission income. So now if we move to the Slide 22, like I'm very glad to see NIM actually retains at a very solid level, 7%, broadly stable quarter-over-quarter. That was supported by 6% Georgia NIM that actually stood its ground. And on a full year basis, we saw NIM increasing by 30 basis points. That was mainly driven by increasing share of TBC into our portfolio. So moving now next slide, Slide 23. So we are very much focused on our cost. As you can see, growth was very well contained both for the quarter and for the full year. In Q4 on year-on-year basis, it increased just 10% and on a full year basis, 18%. That translated into a decrease in cost-to-income ratio, both for the quarter and full year. On a full year basis, it landed at 37.5%, down by 40 basis points. Now moving to the Slide 24. I would like to touch on our credit risk. It's like we saw our cost of risk declining by 50 basis points to 1.1%. We saw this decrease in both Georgia and TBC Uzbekistan. That's a very nice dynamic to see. I would like to comment a bit on the Georgian cost of risk that was below our normalized level. The better risk profile was supported by model recalibration and higher recoveries. In '26, we do expect Georgian cost of risk to be at the lower end of our normalized range, around 80 basis points. Now move to Slide 25, our balance sheet growth. We see that also we had great growth into both our loan and customer funding side. Loans increased 12%, customer funding 13%, both on constant currency basis. However, the Q4 was also exceptionally strong by 5% up year-on-year and driven by Georgia an increase of 6%. Now next slide, Slide 26, our capital positions. And despite the high growth, we do maintain very healthy capital levels, well above regulatory limits in both countries. And now moving to Slide 27. Exactly the strong capital position allows us to distribute a decent level of capital to our shareholders. As Vakhtang mentioned, our Board has approved GEL 387 final dividend that brings full year dividend to GEL 8.87, 10% up year-on-year, bringing dividend payout ratio to 35%. However, we also completed -- just completed GEL 75 million buyback. And with this, we returned 40% capital back. On this note, I would like to thank you and open for Q&A. Andrew Keeley: [Operator Instructions] And yes, the first question is from Alex Kantarovich of Roemer Capital. Alexander Kantarovich: My first question is on OpEx. It was kind of flattish in Q4, which is fairly unusual given that normally banks have elevated OpEx in Q4 and so did you historically in the previous years. So can you comment on that? Second question is, can you give us a bit more color on cost of risk? It seems like NPLs were sort of steady and a bit elevated. And in Uzbekistan, cost of risk, whatever it was in the quarter, 8%, 9%, and you obviously guide higher cost of risk for 2026. So suddenly, you have this drop in Q4, which kind of caught my eye. And third question is on capital restrictions on cash loans. And clearly, your loan portfolio actually dropped quarter-on-quarter in Uzbekistan. If you can comment on the details, how cash loans compared to SME as kind of substitute and what we can expect going forward? Giorgi Megrelishvili: So Oliver, I'll take the first question on the cost and probably you can cover Uzbekistan cost of risk and cash loans. So to start on OpEx, it increased in Q4 10% year-on-year for Georgia, 18% for the group. But as I mentioned, we managed our cost very consciously. We spread our costs throughout the year. So it is what it is. It actually indicates our strong control of the cost that results in our very strong profitability. Oliver Hughes: Alex, it's good to speak again. Yes, on cost of risk, as you said, NPLs ticked up throughout the year. But in terms of cost of risk, if you compare third quarter to fourth quarter, as we previously signaled, it was -- it topped out in quarter 2, quarter 3 and then started to come down in quarter 4. So that was exactly as planned and communicated. So basically, we had a lot of tests that we've done in the latter part of, let's say, the second half of 2024, early '25 as we pushed into thin file segments, stuff that we've communicated thoroughly in the past, and that started to mature and come through the numbers in -- from quarter 2 onwards in Uzbekistan. So that topped out, started to come down. And the trend when you look at all of our leading indicators, means that, that will continue. There is some volatility for sure. Some of it is seasonal. So for example, in quarter 1, you always see a bit of an uptick, so numbers can be softer in quarter 1 for seasonal reasons, and that will be true again this year, but it will still be within our range, the corridor that we've provided of 7% to 10% in terms of cost of risk, and that trend will continue throughout the year. However, it has to be said that we are moving, pivoting during the first half of this year, as again previously communicated. So the loan book in terms of what we call ICL, instant cash loans, which is called micro loans in Uzbekistan is running off on the bank side, and I'll come on to that in a second when I answer your third question. And we are scaling up other products. So credit cards, business loans, and we'll be launching secured loans, hopefully, second quarter going into the third quarter, starting with auto loans. So the mix of the loan book is changing. Some of those are products which have been around for a while, but we're scaling. Others are new products, which we'll be learning and there'll be a different loan book mix and therefore, stuff moving around a little bit on the cost of risk side as we build and scale those businesses. But as I say, we expect our cost of risk to come in within the corridor as previously guided of 7% to 10%. On the third question, so we had some regulatory changes as obviously, we discussed a lot over the last couple of quarters in Uzbekistan. The Central Bank for a number of different reasons, including tackling inflation and bringing that down, including stimulating the growth of SME lending, including preventing the longer-term buildup of potential risks in consumer lending in the country, decided to cap the portfolio shares of various unsecured asset classes. So that covered auto loans, which have been -- the portfolio cap of 25% have been in place for a while. That added to that portfolio cap 25% caps on micro loans, credit cards, and that happened in April last year. And then in November, they decided to accelerate that by announcing risk weights, which have been reintroduced, also based on portfolio shares, and they come into force the new risk weights from the 1st of July this year. Again, we talked about this on the last call. So we are basically pivoting. So we've done a few things in order to make sure that we climb into the new structure of our loan book that the Central Bank wants to see in the medium term. So the share of ICLs, micro loans has been declining as we run off our loan book in that particular class on the bank's balance sheet. We have been ramping up credit cards. We've been ramping up business loans, and there's a couple of different products in terms of business loans. We'll be adding more during the course of this year. And as I said, we'll be launching secured loans in the next couple of quarters. So this means that the loan book is changing. That also explains what you saw coming through in terms of the numbers on the loan book, which dropped in quarter 4 last year. We expect that in the first half of this year, it will be -- maybe diminishing, maybe reducing a little bit more, the loan book or flat. And then as we go into the second half of the year, that will pick up again and we'll go back into growth. And we expect growth to be, maybe around 20%, maybe more for this year in total for the year of the gross loan book. Alexander Kantarovich: Okay. That's actually quite positive. So 20% for the year is positive. Andrew Keeley: Next question is from Piers Brown of Investec. Piers, can you hear us? Can you go ahead. Giorgi Megrelishvili: We can't hear you, Piers. Andrew Keeley: We can't hear you. Giorgi Megrelishvili: Yes, we may take another question and... Andrew Keeley: Yes. We'll come back to you, Piers, because we can't hear you. Can we have Dmitry from Wood. Dmitry Vlasov: Congrats on the results. I have 2 general questions, if I may. The first one is at this moment of time, I mean, at least in the end of the 2025, how many percentage of deposits in Georgia are still opened by Russians, Ukrainians and Belarusians? And since we are in the process of the negotiations, how much would that close if we would see a ceasefire or the end of the war? That's the first question. And the second one, I noticed that on your macro forecast for Georgia, specifically, you are a bit more conservative than IMF and World Bank and [indiscernible], you are more bullish. I was just wondering why is that? What are the main reasons for that? Vakhtang Butskhrikidze: Giorgi, please answer the first question and the second question, I will take. Giorgi Megrelishvili: Okay. So generally, before the war, our total share of nonresident deposits were around 35%, 40%. Nowadays, it's around 60%, 70%. Therefore, we don't have any major concentration to the deposits from migrants as we call them, and we don't have any dependency on the liquidity. Therefore, even if suddenly like whoever put deposit with a minimum number decides to kind of walk away, we won't have any liquidity. So that's -- hopefully, that answers your question. Vakhtang Butskhrikidze: Yes. To answer on the second question about the growth for the GDP. So as I mentioned already in my part of the presentation, our internal target 5%. I agree, probably it looks pessimistic assumption. And just to remember in 2025, 2 times we made upgrade of the forecast for 2025. But what we see, we are already February, probably it looks that economy will grow more. But for the budgeting purposes, we prefer to have a more pessimistic assumptions for our targets and for our guidance. Andrew Keeley: Next question is from Rahim at Cavendish. Rahim Karim: Three questions, if I may. The first was just to get a sense on the outlook for NIMs, if I can, in the 2 jurisdictions. I mean, Oliver, you talked a little bit about cost of risk movements in Uzbekistan because of the loan book shift. So it would be useful to understand that from a NIM perspective and then obviously the same for Georgia. The second question was just on Uzbekistan in terms of the regulatory changes. I was just wondering if there was any remorse from the Central Bank or any other emotions that came out as a result of the changes that they've implemented, any regret or how have they received the changes to the industry's or the response to the industry's activity there? And then just third, Vakhtang, thanks for your comments with respect to your evolving role. Just a sense on how you see opportunities with respect to M&A in the international business as well and how your increased focus on that is, how we should think about that over the next year or so? Giorgi Megrelishvili: Thanks, Rahim. Good to see you again on the call. So now I'll take the first question on the NIM. So Georgia NIM, we expect to remain at the same level as it is around 6%, high 5s. We don't expect material changes. On Uzbekistan side, generally, we've seen like high teens in Q4. That's the level probably we may continue in Q1, Q2, but it will gradually start picking up to high -- to around 20s, high teens, that would be our expectations as gradually funding costs will tick down over the period. There is a timing lag and that will be kind of will be caught up. That's on the NIM side, and I'll hand over to Oliver to go on the exchanges. Oliver Hughes: Sure, yes. Maybe just to spell out the outlook for Uzbekistan as we see it today. And again, please bear in mind that things are still moving around in an environment which is a little bit fluid, as we've said. So as Giorgi just explained, we expect to finish the year with NIMs recovering to around 20% for the year. We expect the loan book to grow by 20% plus, and that will be backloaded in the second half of the year, as I said earlier. Thirdly, we expect our ROEs to be at least what they were last year, if not higher, and we'll see how it goes in the rest of the year. In terms of the regulatory backdrop, so it's pretty busy, let's put it that way. So there's a lot going on as the regulator implemented varying new policies. So there's actually been more regulation coming out since we had our last call. Some of it in payments, some of it in consumer lending on secured and unsecured, including the introduction of DTI, so debt-to-income ratios on top of payment-to-income ratios, PTI. There's lots of stuff happening on the anti-fraud side on cybersecurity. So it's busy. In terms of emotions of the regulator, I'm not sure if the regulators are supposed to have emotions, but they obviously have an agenda. The agenda is quite a forthright one. This is the environment in which we're in. This happens in different markets, especially markets that are learning and adjusting and let's say, frontier/emerging markets. Again, this goes with the territory. So organizations such as ourselves, which are high growth and high adaptation do well in these environments. We deliberately chose this country because it has some challenges, which makes it interesting, but also lots of upside when you get it right. And we have a very good execution track record. We adapt this year. We've talked about this a lot. And we're already doing lots of stuff to respond, get ourselves back on the front foot and launching tons of new products and services, and we like the direction of travel. But it remains a little bit interesting, let's put it that way. Vakhtang Butskhrikidze: Yes. And to take -- I will take the last question, what are our plans for international expansion? We don't have any specific timing in mind. But on the other hand, we are open and looking at different international opportunities. And we believe that we have our competitive advantages, taking digital, retail, SME and other type of competitive advantages. Andrew Keeley: And we'll go back to Piers at Investec. Piers. Let's have another go. Piers Brown: Yes, I've got one probably for Giorgi and one for Oliver. Maybe just on the question for Oliver. Just a clarification on Uzbekistan. You've given a very helpful slide on Page 27, which gives the current breakdown of the loan book as per the Central Bank methodology, and you've got sort of 71% there in micro loans. Is that the number that we need to look at that needs to move to 25%? And as I sort of understood it from your earlier answer, you sort of think you can get there by just rebalancing the book, i.e., growing the other businesses rather than shrinking necessarily the absolute level of outstanding micro loans. So if you could just clarify if that's the right understanding. And the second question for Georgia on the Georgian business. Just on the retail cash loans progress, I mean that's 36% growth year-on-year. The book is now at GEL 2.4 billion. How should we think about the future opportunity there? What sort of market share have you got? What's the size of the market? Where do you think the market share could get to? And is that GEL 2.4 billion number going to get a lot bigger? Is it still got a lot of growth potential ahead of it? Oliver Hughes: Thanks for the questions, Piers. So I'll start. So on that slide, which you referred to, I think, is 27, there are 2 parts to it. On the left-hand side, you can see the consolidated numbers, which is very important. So that's the group-wide -- Uzbekistan group-wide numbers, which I'll come back to in a second. And on the right-hand side, the text at the bottom is what you're asking about, which is the Central Bank view because that's -- they look at the bank's balance sheet. So we got our -- the share of our micro loans down to 70% by the end of the year from what was over 90% at the beginning of the year. The direction of travel is downwards because it has to be. And we believe we will be below 50%. That's what we're aiming for on the bank's balance sheet by the end of the year. And thereafter, it will decline more because obviously, we have to get to the 25% target by the 1st of January 2029, if not before. So that's the bank view of the answer to your question. However, we have a group. So we have lots of -- well, not lot of, but several other balance sheets. We have the microfinance organization. We have TBC Nasiya, which is installment loans or installment finance. And we also have a new company that we're using for BNPL. So there are different balance sheets that we can deploy. And we've actually restarted micro loans or instant cash loans, as we call them, on the MFO balance sheet. We're doing this in a very gentle way, just building it up and restarting the machine, which means that you will see one of the sources of growth coming back into the overall consolidated balance sheet view this year from the microfinance organization's balance sheet off the bank's balance sheet. So I think the short answer to your question is on the bank's balance sheet, this is our way of climbing into the structure below 50% ICL share -- micro loan share by the end of this year. But the growth will be coming from other non-micro loan asset classes that we're building in the bank or we're scaling up, example, credit cards, which is already 7% of the bank's balance sheet and stuff which is off the bank's balance sheet. So there's plenty going on. Giorgi Megrelishvili: Now to go to your cash loan side. Probably I will hold back the answer on these questions for 2 days. When during Strategy Day, my colleagues will cover it in more details, our strategic goals and directions. I don't want to put a spoiler. What I can say we have a big focus on cash loans. It will be a big driver of our profitability, and we are very comfortable making a great progress. How and exact targets to come in 2 or 3 days' time, 24th, on Tuesday. And I'm pretty certain you will be pleased with what you hear. Andrew Keeley: Thank you, Piers. It doesn't seem like there's any further questions in the queue at the moment. Becky, do we have any on the phone line? Operator: We currently have no questions on the phone line. Andrew Keeley: Okay. Then all it remains for me to say is thank you very much for joining our full year call. It's great to see so much interest. And just to reiterate, we hope we will meet again shortly next Tuesday in New York and via the webcast for our Strategy Day. So thank you very much. And with that, it's goodbye from us. Thank you. Giorgi Megrelishvili: Thank you. Vakhtang Butskhrikidze: Thank you. See you see you next week. Bye. Operator: This concludes today's webinar. Thank you, everyone, for joining. You may now disconnect your lines.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the SEEK Limited Half Year Results Call for 2026. [Operator Instructions]. I will now hand the call over to SEEK Limited CEO, Ian Narev. Please go ahead. Ian Narev: Thank you. Good morning, all. We are here on the lands of the Wurundjeri Woiwurrung people of the Kulin Nation. I'd like to pay my respects to the elders past, present and emerging. We've got the usual crew here, Kendra, Peter, Simon, Grant, Dan and Pat. And thank you all very much for joining us. I'd only to tell you that these results happen at a pretty volatile time in terms of equity markets and today is not a sales job. The numbers are going to speak for themselves. And we'll add to that our perspective on the main drivers of the numbers and what that means for the future. In terms of our take, I've been generally encouraged by our Board to overcome my natural conservatism and talk about the business. So let me say that over the next hour and in the course of discussions we'll have with many of you over the coming days, I think it will be clear that as a management team, we have a very strong sense of confidence in the position of the business today and in its prospects for the future. We've got a combination of market leadership positions, brand strength, customer trust, technology backbone, product depth and breadth and perhaps most importantly, the data that come from all of those strengths. And that puts us in a unique position to continue and accelerate years of innovation. That takes a lot of hard work, but we've got as good a starting point as we could want. And the momentum, as I said, is clear from the results. As you can see from Slide 6, shares up, yields up, operating leverage is clear. We've got a record dividend. The balance sheet is strong. We know that the translation to the bottom line still needs to come a bit more. And particularly, we can answer questions about the Zhaopin write down in Q&A if people want to know more, but we are well on the way. This is the latest in a series of results we've delivered exactly what we said we would and probably a bit more. This is the best of that series of results. And as we discussed at our Board meeting yesterday, it's probably as good a set of operational results as SEEK has ever delivered. So the momentum is accelerating. I won't go into the detail on Slide 7 and 9, but the message there is very clear. Short-term results are as planned. Progress against our core strategic priorities is very strong. More important than that are the drivers of those results, and I'll just spend a minute on Page 10 because those drivers of the result are the connection between the strength of the results and the confidence in the future. On the top box, put very simply, we are 1 decade on from the establishment of our AI function with that name. We're 2 years on from elevating the function to my direct reporting line, and we can see the benefits of years of doing that investment right through the results. And you can see hundreds of product releases in the last 6 months using AI capability, placement share and yield growth, not prospects, but delivered these results. A high proportion of the benefits come from the data advantage we have. And a very important part of, again, not what we think, but what we've learned is that in this environment, and we believe in the period ahead, competitive advantage doesn't come from AI models. It comes from the extent to which the models can access unique proprietary data that other models can't, and that translates into tangible benefits for customers who, as a result, choose you and will pay for what you offer. You understand SEEK well enough to know we run a marketplace with very complex preferences, not on one side, but on 2 sides of the market. So using data to help elicit those preferences and more significantly to match them creates the value that, as I said, makes people choose us and pay, and that's not a thesis. The evidence is right through the results. It's evident in placement share, it's evident in yield growth, and we've got a long way to go. And you can see that in the second box there, we talk about having roughly 0.75 billion data points, most of which can't be replicated and scraped. And we know from daily experience how to translate that into the products that matter to customers. The last thing I'll say before handing to Grant is that the matching that we're seeing is better than ever, and we really feel we are still only at the start of what we can do. And I just want to dwell on one point, particular words in that first bullet point where we say the most obvious benefits from proprietary data, not just what customers want, but how realistic is it. And I think there's one thought to keep in your head here. There are many models, interfaces that can do a good job of having conversations with people to decide what they want. The big question is what do you need to show people how realistic that is and where they should target their attention. Likewise, on the hirer side, great to have the tools, and we're building them and to elicit what the hirer needs. The question is who are the people out there, how do you target them and how do you get the best person possible. That depends on marketplace data, not on conversational interfaces. You need both. But with the interfaces without the data, you just cannot deliver that experience. The last thing I'll say and that Kendra will talk about this more a bit later, because we've learned so much over a long period of time, we know which investment works. We do more of that less than the other stuff, and we retain our confidence that we continue the investment we need within the target cost envelope. With that, I'll hand over to Grant to carry on for us. Grant Wright: Thanks, Ian. So Slide 11 speaks in a bit more detail to what Ian mentioned about how unique data and our AI capability is driving our 3 strategic priorities of placements yield and operating leverage. If I start with placements, our marketplace, as Ian said, is fundamentally about facilitating 2-sided trusted connections. The candidates trust us to deliver relevant results, but also provide realistic feedback about competition and their chances of getting the role. Hirers always want to understand what's out there, but also who's available and interested right now. That distinction between what looks good on paper to one side versus what's real and agreed to on both sides is critical to reducing wasted effort creating placements. And as AI noise increases in the market, this becomes even more important to generate placements. That's where we have unique data that cannot be scraped to DMZ. We see close to 1 billion and decisions on our marketplace every day. So that's candidates becoming active and being open to looking at opportunities. It's the jobs they review and save. It's what they apply to and then the jobs that they prioritize as their preferred applications that they're very interested in. It's the criteria that hires want to target on. It's who they search for, who they review, who they shortlist and who they contact. That data drives better matching, which leads to more activity, which leads to more data and therefore, drives better matching. So these actions that reveal people's real availability, intent and priorities drive those placements and create even more activity on our platform. That same 2-sided data also enables us to sustainably grow yield because we see real hiring activity and competition. We can predict, understand and manage performance and price. Our pricing system monitors supply and demand for about 45,000 labor market segments across APAC. That data enables us to provide attractive options for hirers to pay for more performance and the choices they make between those options and the performance they want gives us data on willingness to pay, which allows us to then further improve our pricing models. Lastly, on operating leverage, as Ian said, we've been investing in for over a decade. So we're not starting from scratch here. We've got advanced capability in building, deploying and optimizing AI models as well as a strong focus on responsible AI to make sure that we manage risk and retain trust with our users. And we're continuing to experiment and test to ensure that the innovations and algorithms we deliver have real customer impact. So that combination of existing capability, including applying AI internally for efficiency and then the experimentation to make sure that the innovation we're delivering is delivering real customer value enables us to deliver placement and yield growth while maintaining our operating targets -- operating leverage targets. Slide 12 then demonstrates how our proprietary data and AI capability are creating real value today, particularly through personalized matching and AI targeting. Our key inputs on the slide speak to the proprietary data that I talked about previously on both sides of the marketplace. The conversational AI products, live tracking of actions on our platform, verification through CPaaS and reputational products like reviews and reference checks give us a complete view of the requirements, preferences and importantly, the trade-offs and willingness to pay that both sides are willing to make a match. We then use that data in a wide range of AI models. So that includes proprietary ML models that we build in-house. It's LLMs fine-tuned on seat data and it's new technology emerging like sequence models, which is essentially the concept of a large language model that applied to behavioral data. So rather than predicting the next word, aims to predict the next action. We're also experimenting with agentic search systems to further advance our search capability. These prediction models are then used across the marketplace to deliver capabilities, including recommending targeting criteria to hirers based on what we know matters, to predict and manage performance outcomes and set our prices, to deliver highly personalized matches to candidates that manage both what they're interested in and what they're a good fit for. Our increasing ability to predict fit also allows us to target high candidates through exclusive outreach products for advanced and premium ads. And then we explain those matches using generative AI on both sides of the marketplace to increase confidence and encourage people to engage with the opportunities that will drive a placement. And it's this combination of the unique 2-sided data and our AI capability that's continuing to show up in increased value for customers. So candidates are now 1.5x more likely to see and apply for relevant jobs due to the quality of our matching and explanations, and that's underpinned our placement share growth of 7 percentage points over the last 3 years in ANZ. On the hirer side, hires are seeing the benefits of increased performance in advanced and premium ads by high targeting and they're opting to pay for increased performance, increasing depth adoption, which has grown 2.7x over 3 years and underpinning our ability to grow yield sustainably at 15% compound over the last 3 years. So we're seeing these results really show up for customers in our investment in AI. I turn to Simon on Page 13 to talk about how that shows up across our product suite. Simon Lusted: Thanks, Grant. Moving to Page 13. I want to take this opportunity to drill into a little bit more detail on how this AI and data capability is showing up in examples of actual features delivered on SEEK over the last few years. We've broken this into the candidate side and the hirer side. What we're going to talk about is all live product in market that's been delivering for candidates. I want to give you a bit more flavor of the type of impact we're seeing from these capabilities. And our long-run investment in AI infrastructure, we were pretty really to integrating LLMs and natural language search into our core job search discovery experience. That delivered immediate uplift, which continue to compound as Grant and his team retrain models on our data today. But perhaps more important, it put us in a position to experiment pretty aggressively over the last few years with a range of different conversational experiences. We have 2 pretty exciting experiences in market right now, and we plan to use this learning to evolve and improve our candidate search and discovery experience over the next few quarters. While we were doing that, we also saw the opportunity in these capabilities just to do more of the work on behalf of candidates. So we launched our intelligent career feed, which uses candidates profile data, their behavior, all the data Grant talked about to do more of the reasoning on behalf of candidates. And that's given us a really big lift in the number of applications that come from this very low effort engagement experience. In fact, it's less than half the effort to find a relevant job through using our career feed than it is in manual job search. In addition, as our recommendations have become more precise, it's putting us in a position to talk to candidates off our platform with much higher fidelity, much higher cut through. We've really driven huge improvements in our -- the way we notify candidates, and that's allowed us to tap into monitoring job seekers who perhaps aren't active enough to be on SEEK at that time, but are willing and open to engage in new opportunities. That's delivered a 2x growth in channel performance in just a couple of years. And as Ian mentioned, it's not just whether the job is available, it's whether that job is right for you and whether you're a fit and whether the person on the other side is likely to want to shortlist you or progress you. And so we've been doing a lot to help explain to candidates how and in what ways they might be a fit. This has been particularly pleasing because what we found is that many candidates are a little bit hesitant to step outside their frame of reference. And when we can share with them that they actually are potentially a strong and high fit for this role, we're driving much greater levels of engagement and application, which is driving placements. And as mentioned, we've been investing in trust for a long time now. We've always thought that the labor market was sort of noisier than it had to be. And we've got a big team in [ APAC ] over 100 people now. We're in every market across APAC, and we're really scaling our ability to verify trust with new AI models that allow us to add authority, check identity and really deeply understand who is real and whether what they're saying on our marketplace is a genuine claim. And as Grant mentioned, the new products like Strong interest where candidates are able to nominate a few jobs that are their particular priorities. That's all underpinned rather by our trust infrastructure. On the hirer side, we're becoming more of an adviser through the job ad posting process. We're using our market data to explain the marketplace, help hirers build more quality ads, reducing effort, and that's driving up conversion of new hires to job posting. We've made big step-ups in our dynamic job ad pricing accuracy. And what that means is we're better able to understand whether a candidate's actions and the ad they're buying will lead to a placement. That's given us a lot of confidence to align prices to value. Grant mentioned our AI targeting. That's really been central to our ad ladder refresh. We've got an AI targeting feature that's bundled into the advanced ad and the premium ad, which really delivers a material difference in placement outcomes. And similarly, we're explaining to hirers why a candidate might be a great fit. So we're not only saving them time, but we're improving the chances that they make a placement by connecting them with candidates that they might not have considered otherwise. We're also getting further into the placement process. We launched in the last half our reference checking product, which is a full voice agent, a voice agent will interview a referee. It cuts the time to give a reference in half. It generates higher quality data, and it takes what was previously a messy offline event and brings it into our platform in a structured and actionable way. And this is the kind of data and the kind of trust that an intermediary can leverage to help both parties in a way that we don't think many can. So as individual features, I've tried to give you a flavor of how we're applying these capabilities to improve in many different places. But taken together as a system, I think I'm hoping to give you a flavor of how these benefits compound in each other. They lead to stronger, deeper understanding of our candidates and hire preferences, better matching not just more placements, but higher quality placements that drives ROI for hirers and that drives up their willingness to pay. So we're really excited about the progress we've made. But as Ian mentioned, we do still feel like we're just at the start, and we've got more opportunity opening up over the next few years, and it's an exciting time for us. Peter Bithos: Thanks, Simon. I get the privilege of talking about how the data and products that Grant Simon just talked about, pull through into the actual numbers in each of the regions. And just a reminder, kind of the system that we're trying to build here is great data plus great products equal more jobs. And then you combine that with a great brand and great on-ground execution in every single country, and you hopefully drive results across APAC. And actually, that's what I get to talk about here today. So I'll start with ANZ. For those of you who remember last time, I kind of noted last time was actually first time where in a down market, we were able to drive ANZ growth and gain share. This time, actually, the results are even better. So it remains a down market, we were able to drive double-digit revenue growth, gain share, highest share in recent history in ANZ with a 17% yield uplift. So volume is slightly down due to macro, but share up yields and revenue growth well into the double digits. How that happened is explained on the bottom right-hand side of Slide 15, which I won't go into the details, but essentially, it was product driven. So a large chunk of the revenue and yield performance you can see is a dramatic shift in the types of products being offered and taken up by our customers. And those are the products that Grant and Simon just talked to. So you see a dramatic step-up in depth penetration, driving both placements and yield. If I go to Slide 16 and talk about the macros for a minute, it still remains a slightly down market. But I would say the biggest news positive on Slide 16 is the dash on the upper left, where we're seeing New Zealand turnaround after a period of substantial decline over 2 or 3 years. So we're pleased to see New Zealand volumes up on PCP. As for the rest of the slides, you can see the macro kind of stabilizing across ANZ from the previous few years. So good to see a relatively stable macro environment in an area where we can really drive share and drive the business pretty hard. That translates to now not just an increasing share, but importantly, an increasingly large gap in ANZ between us and the second largest competitor. So not only is it at record levels, but the delta between us and competition is now at record levels. And so whether it's the core variable pricing, the depth, the AI products, we're really pleased. It's a very strong result for ANZ. For those of you who have been following the Asia journey, would know we're going through quite a lot of commercial transformation, launching and rolling out freemium, which I'll talk to in a couple of slides. This half continued that journey. We had a full 6 months of Singapore, which we launched late in the second half, and we launched Hong Kong, our largest market. And I think if you kind of took a step back and you said if we were able to generate real revenue growth and launch 2 of our largest markets in freemium as well as have a full year effect of all the emerging markets and produce the results we have, we'd be very, very pleased. So we think it's a really strong performance. You can see paid volumes down. I'll talk to that in a little bit. Revenue up. Placement share as the survey calls it slightly down. But the survey, it's within the statistical variability and noise. We're kind of pleased with the long-term trajectory and all the other indicators that we crosscheck are really strong. And so we're pleased with that result. Paid ad yield, very similar story, and this is very consistent with what we've been doing since unification. Any benefits we're able to launch, we roll it out across APAC, and we seek to get those benefits across APAC. So you can see the advanced and the depth penetration equally shifting in Asia, just the same. You can see Slide 19 and then a few slides later on Slide 20 and 21, really tell the story of freemium as we go. So if you look at Slide 19, you can see the monthly ad volumes on the right-hand side. You can see the total ads increasing as we roll out the markets. You can see the mix shift slightly changed between paid and free between the pink line and the purple line. But then you can start to see now the monthly unique hires, which we've called out as a leading indicator that we need to get right longer term, now 18% up PCP, very pleased. So -- and then as we get more ads on the platform, the marketplace strengthens, we get more unique visitors, and you can see that in the bottom left. So strengthening of the flywheel in the Asian markets is occurring, and you can see it in multiple metrics on Slide 19. Slide 20 just talks to the placement and yield, which I talked to you previously. I'd note across APAC, for those of you that follow the placement over time, every 2 to 3 years, probably 3 to 4 years, we reset the sample size and also supplier. We'll be doing that. That's kind of a normal part of the cycle, and we'll reset the survey in the next set of results. So that's just a note for those of you that follow that. And then last, Slide 21 just talks to the progress in the rollout of freemium. Two weeks ago, we launched Malaysia. It was our last market. So we are now freemium in all markets. So when we get to FY '27, it's a clean full year. We're excited about that, but we're right now, I'm just happy with the results that we've gotten and shows the strength of the business and everything Grant and Sean spoke of. So I'll hand over to Kendra. Kendra Banks: Thank you, Peter. Good morning, everyone. I'll begin with Slide 23 and talk to how all of this you just heard results in our finances for the first half. So we reported revenue of $601 million. That's up 12% compared to the same period last year or 11% when you exclude Sidekicker, which was not included in our prior period results. We delivered again on our commitment to operating leverage as total costs grew 8%, excluding Sidekicker, 3 percentage points lower than the revenue growth rate. This operating leverage is going straight to earnings growth. EBITDA was up 19% and adjusted profit of $104 million, up 35% for continuing operations. We reported, as you know, a $356 million impairment charge against our investment split across continuing and discontinued ops. The appendix slide outlines the details showing how the Zhaopin investment as accounted in our books went from $529 million in June down to $182 million this period. This is a noncash impairment and reflects changes in the last 6 months, which will help set the business up for a stronger future. Back to our core business. Our financial performance and trajectory are strong, and this provides the Board confidence to announce a record dividend amount of $0.27 per share. That's an increase of 13% from the prior year. Turning to Slide 24. Our commitment to operating leverage is clearly evident in these results. As I mentioned, excluding Sidekicker, revenue of growth of 11% exceeded total cost growth of 3%. We primarily focus that increased expenditure on our ongoing and growing investment in AI product and tech and the IT infrastructure and compute costs, which support the product experience. We fund this increased investment by being efficient with our run-the-business costs so that the total cost growth continues to be contained in our mid- to high single-digit total targets. As a reminder, we think about costs as a management team on total cost of OpEx and CapEx to create the right incentives. But of course, we do account for it split into OpEx and CapEx according to the accounting standards. The result for this half is a 7% increase in OpEx and 24% increase in CapEx, and that weighting isn't really a surprise with the prioritization towards grow the business activities, particularly the AI-focused product development that's delivering tangible results. Slide 25 talks to the drivers of adjusted profit, up 35% from last year. The growth was led by strong EBITDA performance, partially offset by a few below-the-line factors. The D&A was higher in line with the increase in CapEx over the platform unification years. Share-based payments expense increased. This included a one-off share grant to all employees and also includes the accounting standards requirement to value share payments on the date of grant, which happen to be close to a recent peak in our share price. Partly offsetting these were lower interest costs and a partial reversal of the Zhaopin performance fee following the impairment. Slide 26 is cash flow performance. I won't go through the detail here other than to say there's nothing unexpected. And as I said earlier, strong cash flows enabled higher dividend returns to shareholders. On Slide 27, our debt position was broadly stable. Our net leverage ratio continues to improve. It's down from 2.3x a year ago to 2 and is well within our target of less than 2.5x. And of course, that's driven by growth in EBITDA. Slide 28 outlines the performance of the SEEK Growth Fund. A reminder, we look at total portfolio value, including the portfolio valuation plus distributions from the fund. As of the 31st of December, this value was up 1% year-on-year. The fund's return on invested capital since inception is now about 33% with an IRR of 8%. There's more detailed appendix on the fund's 4 largest businesses as always. Also considering the fund, you'll have seen in the press today their announcement that they are commencing a process to sell their stake in Employment Hero. On Slide 29 is our capital management framework, which remains unchanged. Strong operating cash flows providing capacity to execute on our strategic priorities and provide dividend growth. Looking ahead, as you know, the fund opens a liquidity window in the 2026 calendar year, following which they must use reasonable endeavors to fulfill a liquidity request within the next 12 to 24 months. In the lead up to this, the Fund's Trustee Board is in active discussions on the optimal approach to maximize long-term value, and we will update you as the year progresses. Finally, briefly on Slide 30, our sustainability commitment continues to be a priority. Employment platforms like SEEK are uniquely positioned to drive fair hiring, and we're continuing to evolve our strategy and approach to expand our impact, strengthening platform controls using AI, working with other experts and organizations to continue to elevate fair hiring standards. Perfect. Ian to touch on the outlook. Ian Narev: Thank you, Kendra. I'll be quick because we want to get to questions and I've learned over time, stick to what's on the page where we talk about guidance. The headlines are here, as you would expect in the half, we tightened the range. And as you will see on the right-hand side, that means for those of you who like to work to the midpoint, which we know many of you do. The guidance is a range, but it gives you a sense of where the midpoint ends up. And the only additional commentary on that, as you can see here is that the revenue and EBITDA is expected to be in the top half of the original guidance. So range contracted. We've done some on the midpoint for your benefit, but it remains a range, but we expect to be in the top half of the original guidance for the revenue and the EBITDA. So look, I think you heard here, I mean, I'll just quickly summarize a very strong result for us. There are no guarantees of success in this business, and we're going to need sustained hard work to maintain the momentum and to make the most of the opportunities. But we've got the foundations we need. And to come back to where I started, I think you'll hear a very strong sense of confidence from the management team based on the results we've seen and the assets we know we've got. And now it's up to us to continue executing. So with that, I'll hand over to Q&A. Operator: [Operator Instructions] Your first question comes from the line of Eric Choi from Barrenjoey. Eric Choi: So my 2 questions. The first one is just on monetizing placement share. So your placement share has obviously gone up to 36% now, but I think SEEK is probably only still doing 15% to 20% share of total placement costs in Australia. So my question is, can SEEK evolve its revenue model to be less reliant on total job ad volumes, but instead more on placement outcomes? Because I guess that might make you less impacted from any AI disruption of job volumes and it kind of still suggests there's plenty of scope to grow your yield over a long period of time. Ian Narev: I'll quickly answer that, Eric, and then hand over to see if Simon wants to add anything. The short answer is if you -- this is quite important for the business. If you look top down at the amount any business is paying for successful placement, all our research shows we have plenty of room to move. Every bit of research shows that what we get for a placement is at the very low end of people's propensity to pay if it's a good match. That gives us a lot of confidence as long as we deliver the match. So we are nowhere near what we would consider to be a ceiling. At the moment, you can also see from here the combination of placement share and yield growth means there's a lot of money value we can create and value we can share through our current model. So we don't see an enormous need to evolve urgently, but we keep looking for ways to share the value with the customers. The team spend enormous amount of time on that. And at the moment, we're happy with what we've got, but we've got other things in the pipeline that we can experiment with and see how they go. I don't know, Simon, whether you want to add to that? Simon Lusted: Yes. Yes, I do. I think we obviously think about this a lot, Eric. The key unlock for us for so much of our marketplace is knowing that a placement happens. I mean the real -- what we want to earn as much or generate as much value as we can when our customers make a placement and less when they don't. And so a lot comes down to our ability to predict whether a placement is going to occur given all the factors. And there's really 2 ways we're coming at that. We talked a little bit about that today. We've got great prediction engines. We've got the opportunity to play further down in the selection process. So we see more about how far candidates get. And that allows us to understand, well, how much value are we creating? And then the other way is just to play directly in the placement. We're doing that with guaranteed hire with SmartHire, which we talked about. Sidekicker is obviously in the placement. So we're thinking about these things. But the real unlock is the degree to which we can drive up our confidence in that placement probability. And we feel like we're making really good progress there, and there's a lot more to do, opportunities opening up for us in lots of different areas. Eric Choi: Lusted, quick follow-up. I'm dumber than you. So can I just ask something a follow-up in dumb terms? Like everyone is worried about AI agents connecting employees and candidates directly. Just listening to your reasoning, like if there's a noisy world where employees are getting spammed thousands of applications by AI bots, it's -- you seem to be suggesting you're going to be giving higher quality matches probably because you've got, I don't know, intent availability data. So are you sort of saying your placements become more valuable in that world? Simon Lusted: Yes. I mean I think what the matching is about sending strong signals of intent and quality. And if that gets easy to imitate at scale, then the role for an intermediary who can reinforce the rules, add trust and help candidates and hirers negotiate in a high-trust environment. That goes up, not down, granted. Operator: Your next question comes from the line of [ David ] from [ Fabris ]. Unknown Analyst: Can I firstly ask about the ad ladder pricing model and strategy? I mean I appreciate you touched on it through the presentation. But can you help us understand whether you're running periodic price increases and then augmenting this with dynamic pricing? Or you're leaning much harder on dynamic pricing now and have moved away from those periodic price rises? Peter Bithos: Yes. So actually, that's a really great question that gets to the heart of this result. This particular result, whether it is both Asia or ANZ, on about half of the yield uplift is being driven by product take-up of new products, right? So it's customers reacting to the probability to place expressed in, say, the advanced ad, saying, "I want that, I'm willing to pay for it," and they're making that decision by themselves. And our job is to educate the customer on the choices that they have. So this is not -- we continue always on the journey of variable pricing and making sure we price to the value we're creating. But this particular result is actually the strongest led by the products that we've actually created. Ian Narev: I'll just add one point to that. Those of you who have been following since we did the dynamic pricing in 2019 know that the probability to place is a driver of the dynamic pricing model. So in the nonproduct-driven parts of it, the more confidence we've got in the propensity to place, the more the dynamic pricing model creates more value when we share in it. So even the nonproduct part, don't think of that as blood price increases. A big part of that is the data on the marketplace utilizing the dynamic pricing model to increase the value and the price because of the confidence in the placement. And that is a really important part of understanding the confluence of investments we've made over a long period of time. Unknown Analyst: Yes. Got it. And then just continuing on, I guess, with the products here. Just that ANZ ad ladder penetration, I mean, if you look at the advanced tier, it looks like it's settling around mid-teens. And I think it was there in July, it was there in December and it was there through the period. Can you share with us where you think that optimal level of penetration may be and how you get there? Or on the flip side, what levers do you have to improve that penetration? Peter Bithos: Yes. So that uplift -- so there's 2 things. One, we think there's further upside. Simon and Grant are working on new stuff, and we look forward to the customers taking that up, too, right? So like increasingly, depth is kind of part of the core revenue. It's not the thing on top. So -- and you can see that in the results. Advanced Ad in particular, pleasingly, we saw growth through the half, driven as our sales channels and marketing channels educated the customer and the product tweaks that we presented. So it's not a one-off. It's something we're driving into the business, and then we're looking forward to further improvements in to come. So this is kind of a -- we can do more of this, and we have very high confidence in that. Ian Narev: Can I just add another thing for the benefit of a bit of historic context for questions you've asked for years? We've had questions for years, if volumes go down, do you get a procyclical effect on yield. Page 15 shows volumes down to yield up 17% and a really very strong performance from what we called the depth products. Now what does that tell us? Even when the volumes are coming down in this kind of economy, what we've learned is when these products transparently show a hirer that they've got a greater chance of a good placement more quickly, they pay for it. And we don't think that's anywhere near exhausted. And we're learning and there's more to go that it's probably less dependent on the economic cycles than we thought, and that's a really good message for everybody to a question we've all been talking about now beyond the 7 years I've been around. Operator: Your next question comes from the line of Bob Chen from JPMorgan. Bob Chen: Two questions from me. I mean just firstly, a clarifying one. Just looking at your cash flows, especially on the free cash flow line, it's obviously sort of come off a little bit. It looks like there is a bit of seasonality in there. Do we expect that to sort of normalize into the second half? Kendra Banks: Yes. So cash conversion is always lower in the first half than the second because -- primarily because we pay out our employee bonus in the first half and revenue seasonally is slightly higher in the second. So that's what we expect to see. And the shift year-on-year is because we did pay a slightly higher bonus that came out of cash in this half than we had the previous year. Bob Chen: Okay. Cool. And then maybe a more sort of general question around AI as well as that investment and monetization. Are we to sort of expect that the monetization of this investment in AI is largely through your depth of tiering as opposed to additional AI products on top? Simon Lusted: I'll have a go at that. I think largely, we think, as Peter outlined, we launched a new ad ladder, and we said at the time, there's a lot of room for us to build new features, especially AI-driven features and enhance those ad ladders and drive more depth. So that is a big part of our future. In the last half, we launched a new add-on called assist. That add-on is really focused on monetizing the value we plan to deliver through things like automating reference checks, better ranking, helping people complete the hiring process more efficiently. I think that's more a long-term product lever, but we are trying to create a frame through which to monetize the efficiency elements of the AI work that we plan to do over the next little while. Operator: Your next question comes from the line of Lucy Huang from UBS. Lucy Huang: I've got 2 questions as well. So firstly, just looking into FY '27, how should we be thinking about the contribution from some of the growth drivers on yields, given like this year, we've had advanced ads, new product like next year, there won't be new advanced ads. So will we be leveraging more on dynamic pricing? Or do you think advanced ad penetration could still be a larger component of the growth there? Peter Bithos: Yes. Lucy, it's Peter. I'll pull you up one level, which is instead of advanced ads specifically, the profit growth, which is we have new products and new constructs that allow buyers to get placements in various high confident ways. And we take those products and constructs and drive it into the base through our sales channels and our brand and our presentation through the product. That is a formula we want to continue. So advanced ad will be complemented by other things over time. But the underlying dynamic that you now have a system of for base price, we have sophistication in the way we price to value as we increase the probability to place. And we now have a system across 8 markets to produce products that are taken up in a very aggressive and fast way. And we're bullish that system will continue. Lucy Huang: Understood. And then also recently, we've noticed you've got a people search tab on the SEEK Australia website. Just wondering if you can talk through how that feeds into the strategy for the company moving forward? And any early kind of statistics you can share on how many profiles there are, how often people are tapping into this database? Simon Lusted: Great question. So we've got within the APAC Group, 45 million candidate profiles until now largely been only accessible to hires who purchased our premium talent search product. We've made the decision that a candidate profile should very much be at the core of the SEEK experience, and we can add trust to that. We want to make that profile more useful for candidates all through the hiring process. They should be able to share it with others, find each other, et cetera. So we made the decision to make candidate profiles free and publicly searchable for candidates who opt into it. We're really pleased with the rate at which candidates are opting in. It's really encouraging. And we think overall, it will not only strengthen our flywheel, candidates be more likely to keep their profiles up to date, invest in adding trust to it. It will drive and improve their job-seeking experience. But we also think that will drive freshness and depth, which will allow us to monetize through a more premium talent search offering, which we plan to launch in FY '27. So it's part of a broader strategic play to put the candidate much more at the center of our marketplace, not just the job, but the candidate, and it's going very well. Operator: Your next question comes from the line of Entcho Raykovski from E&P. Entcho Raykovski: So my first question is around the cost base and your comment that there are efficiencies in the cost base that are enabling greater growth investment. I wonder if you're able to quantify the extent of those efficiencies. I may be difficult, but is it sort of thinking 10%, 20% savings, sort of what that does to the velocity of product rollout. And I'm curious whether there's been a further step change over the past 6 months in those efficiencies with the developments we're seeing in AI. Kendra Banks: Sure. Thanks, Entcho. So when we talk about efficiencies in the cost base, I'd point to a few things. The first is still seeing the benefits of the APAC unification, particularly in the commercial areas, where Peter's teams now run APAC sales and service marketing and all the kind of associated tools and corporate costs that support APAC, still seeing that benefit coming through in terms of tighter functions. The second is across the business in every function, we have very high take-up of AI as a core -- the AI tools internally as a core part of people's workflows. And we are seeing there -- it's a few points of efficiency in lots of different areas that's driving cost efficiency and allowing us to reinvest in the grow the business areas. And then in the grow the business areas, so product tech and AI, we certainly are seeing accelerated product development velocity. We haven't kind of disclosed a particular number there. But certainly, you can see it in the kind of pace of AI product rollout, while we are getting efficiency in terms of that product velocity flow and reinvesting it in continuing to develop our products. Entcho Raykovski: Okay. And my second question is around the employment sell-down. Are you able to talk about the rationale for it given it's obviously a fairly weak underlying market for high-growth stocks in theory, might have been a better time 6 months ago. And then is the fund running an open process or do they have a buyer lined up already? I'm conscious that KKR was the buyer 12 months ago. So not sure if they're the ones who are looking to up their investment. Ian Narev: I'd just say a couple of things. The decision to sell is entirely the funds. We don't control it. When asked our opinion, it's consistent with our goals as an investor to get liquidity over time, so we're fully supportive. Number two, the assets, terrific business done very well for the fund. It's obviously subject to value. And after this long and with this degree of understanding, they will sell if and only if they get a price that they think is good value. But number three, there's really no evidence at this stage that what we've seen in public markets, which has got all sorts of other drivers has translated into private markets. If it really has to this extent, that means the process wouldn't be successful. There's no evidence of that at the moment, and they'll find it out. In terms of who the likely buyers are, et cetera, that's something we have no visibility over. Operator: Your next question comes from the line of Fraser McLeish from MST Marquee. Fraser Mcleish: Great. Just a couple. Just firstly, on SME volumes. I don't think you've given your normal update on what percentage of your volumes are coming from the various customers? Have you got update on that? And then my sort of related question is to what extent, particularly in your SME volumes, do you think they are -- you've got unique listings that aren't going on to other platforms? That's my first one. And then just also, you've obviously outperformed -- you're going to outperform your high single-digit yield target again this year. You're just confirming that sort of over the cycle, high single-digit yield growth is still the target? Peter Bithos: I'll let Kendra speak to the second question of the long-term yield growth. On the first question on SME, actually, when you get into the details, you're right, we didn't disclose it here, but partly because actually, there's nothing distinct or different in SME volumes to what the overall story in ANZ is. I'm assuming you're talking about ANZ. Actually, if anything, the depth penetration was a little bit stronger in SME. And the volumes are pretty consistent with the overall market. So share is up in SME, yield is up in SME, and we're very pleased with the results and SME wasn't differentially performing in any notable way. Fraser Mcleish: Do we have unique ads? Peter Bithos: In terms of our unique ads position, very similar to the flywheel, slightly strengthening, but again, not uniquely against our other segments. Kendra Banks: Fraser, thanks on your question on high single-digit medium-term outlook for yield. We are still maintaining that as our medium-term outlook. We remain very confident, as already discussed, in the ongoing fast to future yield growth and that core dynamic that our customers are not that price sensitive when they're making a solid good placement, and we've talked a lot about how we plan to continue improving that delivery. However, as you know, we will always manage our pricing and yield to ensure marketplace health alongside. And therefore, despite delivering double-digit yield growth now multiple periods in a row, we're maintaining our high single-digit yield growth medium-term guidance there. Fraser Mcleish: Great. Sorry, can I follow up very quickly just on that unique ads? I guess where I'm coming from is just with AI proliferation and having unique listings is potentially going to be more important. So I'm just wanting to try and understand the extent you have unique listings that aren't necessarily on other platforms. Peter Bithos: Yes. So what we look at when we call unique listing, we then double-click and say, is it a unique listing that is directly on our platform versus pointing to a different place. So anybody can scrape and point to a different place and do that. Having said that, the large competitors in the marketplace don't scrape the direct ads from each other. And so we have a large corpus of unique ads that are available on SEEK, and that's remaining constant and consistent over the past few halves. Operator: Your next question comes from the line of Tom Beadle from Jarden. Thomas Beadle: Just my first question is just a follow up from [ choice ] on the cost side. I mean it's obviously nice to see that you've got your costs well under control and the positive [ choice ]. I mean if we take the breakdown of your cost base that you provided at your Investor Day, that growth in BAU bucket, I mean, what level of growth did you see in each bucket? And I guess I'm interested to hear any commentary you have around AI-related cost growth and just any other cost pressures in areas that are worth highlighting? Kendra Banks: Sure. Thanks, Tom. So if we look at that run the business, grow the business split, I sound run the business for very low single digits, and then you can kind of do the math on the rest in terms of high single, low double in terms of our grow the business investment. And that includes all of the AI cost that we're facing into in terms of the cost of the team, the models we use, the compute cost, et cetera. So we still feel confident that the AI cost growth that probably is noticeable in the coming years, we can, at this point, confidently say is within our total cost growth target. Ian Narev: And the other thing I think is your question, I'm looking at Grant here. We have under Grant's leadership, a protracted long-term piece of work just on using the same understanding of technology that drives our customer-facing platform to look for productivity opportunities inside SEEK. I mean you might want to just talk about a couple of areas, Grant, that we're really focused on. Grant Wright: Yes. So Kendra mentioned supplying and encouraging AI tools for everyone at SEEK through their individual processes. We have an internal AI tool for that. We also use Glean, which provides enterprise search and agents and our staff are running about 5,000 agents a month at the moment to help with those individual tasks. The bigger opportunity we see is really reengineering the big processes in the business. And so we now have a team going into those core processes to help people map define them and do good process excellence work as well as bring those AI tools into that. So that's in train as well as then looking at our big opportunities for transformation in sales and service and product development and AI coding. What you tend to find in AI coding is that you can get big efficiencies today in writing the code, but writing the code is only a proportion of that cost base. So we're also looking at how we reinvent that process to become more efficient. Some of the examples of things we're doing sales meeting prep agents to drastically lower the time to pull the information and have a high-quality conversation. So raising the quality of conversation across the board and reducing time and effort. Real-time customer feedback monitoring and products. So we just get much more insight to all our product managers about what's happening over time, which previously was a big time sink and also meant that you couldn't get all that feedback synthesized. So this is showing up all over the business in these sort of processes. We've automated credit checks for our external things through agents. So there's lots of examples of more a process opportunity, and we really want to, in the next year, take that to our big processes and think about how we reengineer them with AI. Ian Narev: The other thing I'd do just to add to that, our beloved Head of Engineering, James Ross, this is what I did in the holidays video that he sent to a bunch of us was a 1-hour video showing him experimenting with the latest developer productivity tools. They're very meaningful. So all these evolutions and revolutions on coding productivity, which the market is sort of looking at a gas and wondering whether they will disrupt our business. Well, we've made clear on the customer side that the data is the advantage. On the internal side, we've got people experimenting with these things as they come out. And as Grant said, we now want to map that to a really good process capability, but we think the opportunity is very meaningful. Thomas Beadle: Great. And just, I guess, the second question just on volumes. I realize there's a little bit of caution in your commentary. I mean, can you just give an update on what you're seeing on volumes over the first 6 or so weeks of the second half across your markets? Kendra Banks: Well, our January SEEK employment report will come out, I think, in a couple of days' time, and we'll give that insight. But as you can see from our guidance, at least on AU, it's very likely that volumes stay about where they are for the foreseeable future, and that's built into our guidance. Operator: Your next question comes from the line of Nick Basile from CLSA. Nicholas Basile: First question on placement share in ANZ. I think there was a stat there that SEEK now has a 4.9x lead versus the nearest competitor, which is, I think, up nicely on some more recent data points. So I'm just interested if you can sort of help us crystallize what you think the key to that result is and how we think about the sustainability of it going forward, I guess, particularly given you're telling us you're going to reset the data points or the survey data you collect, would just be helpful to understand how you're thinking about it. Peter Bithos: Yes. So the key is actually everything that Grant and Simon talked about in their part of the presentation. So effectively, the product and the platforms and you can kind of look at it as a line item product like Advance where the platform overall as the system all of it is getting better. And it's getting better differentially against all other options in the market. And pleasingly, in our recent results, it's getting better against our next largest competitor and so all of that is happening. And it's happening because of the underlying data and AI and the capabilities. And because it's happening because of that, there is nothing that we would see would change that trajectory. Ian Narev: I would just add with the normal point that we make, look at the placement share over a number of periods. And particularly now we're going to refine the methodology, we'll see what happens. It's a great story, both in Asia and ANZ. We probably are concerned less about movements half-on-half, more over 3, 4, 5 periods. That's what we'll continue to look at, but the signs are very good. Nicholas Basile: Okay. Great. And a second question, just on the growth fund. I guess curious how you are sort of rating the performance of the growth fund. I think the IRR of 8% perhaps wouldn't necessarily suggest it's adding a huge amount of value relative to other investment alternatives. But of course, interested to know how you think about perhaps the intangibles associated with this strategy that investors need to consider, for example, playing in the start-up space is an important strategic consideration for SEEK and/or somewhat of a cost of doing business. Ian Narev: Yes. Look, I think the IRR in and of itself looked at in the absence of anything else, is probably less than many people might think it would have been against the benchmarks of what other like funds have done over that period of time. It's actually not bad at all. And we have the capability inside, the team is very strong. So that is what it is. Interestingly, and I'll just remind people, in 2021, we were fielding calls about the valuations that the assets have gone to the fund, the fund is going to have a windfall and we said no. These are very fair market prices at the time. It was always going to be hard to earn the carry, and it's been hard to earn the carry. But we feel that the team is doing a very good job of it. And as a major investor, we're very confident in them. I don't think the informal connections are in and of themselves a rationale to be in the fund or not in the fund, but we talk a lot, and there's a very helpful and healthy 2-way dialogue on that, which I think is good for both us and for the fund. Operator: Due to time constraints, we will now end our Q&A session. I will now turn it back to Ian. Please continue. Ian Narev: Yes. Look, again, thank you all for your time. I think you've heard the main messages. The only thing I'd like to say just at the end is that there are a couple of people who have contributed to this result, who will be departing. Number one, Graham Goldsmith has done an absolutely outstanding job for all of our shareholders as Chair of SEEK and from a management team has provided a really great balance of challenging us and supporting us, and we will really miss him. Luckily, the Board has done a very good job in finding a successor. And likewise, as much as people know, it will pain me to say so, Dan McKenna has really done a great job as our Head of IR, and you've all interacted with him. This is his last result, and he's been a terrific contributor. So we want to thank him before he heads off overseas. And again, in Pat, we've got a ready successor standing in. So I just want to acknowledge the 2 of them. Thank you all again for your time, and we'll no doubt catch up with many of you over the coming days. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Peter Stierli: Good afternoon. Nice to see you all again here in Zurich. A warm welcome also to the participants in the webcast. My name is Peter Stierli, I'm the Head of Communications and IR. And with me is, as always, Marcel Imwinkelried, our CEO; and Reto Suter, our CFO. Marcel will first give us a summary of our numbers, then Reto will talk about the financials a little more detail. And then Marcel will elaborate more on what's ahead next for us in the coming months this year. At the end, we will have a Q&A session. And for those who dialed in through the webcast, you can ask your questions through the audio or video call. With that, Marcel, I'd like to hand over to you. Marcel Imwinkelried: Thank you very much, Peter. I'm really happy. You know why? It's for me the first time that I'm presenting the full year results of Siegfried under my full responsibility for the full year. I'm really proud what we have accomplished as a team, and I'm standing as the CEO in front of the entire team of Siegfried, and I'm telling you why. Most of you, I met 18 months ago in Barcelona, and I was introducing the new strategy, EVOLVE+. Great news. We are making progress. In most of the dimensions, we are ahead of the game, ahead of the plan. I will tell you more in the upcoming minutes. Now I think, let's first look back what's the result of the full year 2025. Not functioning. Maybe somebody can help me to -- Yes. Thanks a lot. I would like to highlight, first of all, the profitable growth. For us, a big opportunity, and Reto will give you more insights, but when I joined Siegfried, 5 years ago, we were at 17-ish percentage of EBITDA. We're coming up step-by-step, year-over-year. And this is really important that we are coming up to the high 20s. I'm confident to do so, because operational excellence, which we have introduced in the last 2 years is the trigger that we are achieving such a high number at the core EBITDA margin. I think 23.5% is a very good result. Of course, we need to consider a one-timer of CHF 7.5 billion. Despite this one-timer, we are still above the 23 percentage with 23.05%, which is good. We have a strong plan in place also to keep this momentum and further improve our margin. Secondly, we kept and we met our guidance with a growth of 4.3% in local currency versus last year. And last but not least, what's really important, not yet reflected also in the outlook in this presentation is the new acquisition of Noramco and Extractas, which will contribute significantly in top line and bottom line already this year, but also the next year. But this year, it depends when the closing will happen. Outlook. I think here, really important also to show that Drug Product, we have created the momentum. We have an outlook for 2026 of high single-digit growth. This is also much more compared to 2025. So we have created the momentum there. In Drug Substance, low single-digit growth. This is reflecting a prudent uncertainty or assumption regarding one large product for one company. Now also to clarify that a little bit, this doesn't mean that this product is -- will be gone or is still in. It's one-timer because our customer doesn't know yet how the demand will evolve further because it's an in-market product. So this will continue. And also in the future, this will be also an important product for us as well. In a nutshell, then low single-digit growth for the group and of course, the core EBITDA margin, we are confident to be above the 23%. Of course, this is excluding the acquisition. It depends. This can happen end of March, so starting off the second quarter or at the third quarter this year. As soon as we have the clarity when the closing will happen, we will give the new guidance will, of course, increase significantly than the guidance at the top line. And also you can expect something at the bottom line as well because as already outlined, during the acquisition presentation, there is no dilution coming through due to this acquisition. As already also shared with you, we have a momentum created due to commercial excellence. We have adapted our organization, and we have also defined and implemented the new go-to-market strategy. Good news. And that's also the reason why I really confident that we can keep and that I can confirm the positive midterm outlook for the next years. Due to the fact, I've already shared with many of you also during the conferences that we were able to win additional RFPs inflows by 30%, but really good news, we won in 2025, 30% more projects, new customers in both clusters in Drug Substance as well as Drug Product versus 2024. Now I would like to give you a flavor about operational highlights, 2025. As you know, safety is really close to our heart. And we are making progress also year-over-year in this dimension as well. We have reduced the lost time frequency -- injury frequency rate by 25% and further implemented the Class A project, which is the prerequisite to make sure that we are becoming a really top-notch supplier for our customers. We have 6 out of 13 sites already certified. So the last 7 sites, and then, of course, the newcomers will also be part of this. Quality. Quality is the permit to operate in our industry. And especially also, you need to know that the FDA, the U.S. health authorities are raising the bar. One of the other competitors of us are struggling. But we have not only a great track record, we passed also successfully four FDA audits in the last year, which is prerequisite to win and to get new customers and products. Sustainability highlights, 2025 further progressed. Compared to 2020, we have reduced close to 50% our carbon ambition. The same also for reduction of energy. This was also highlights over the last years. We're continuing to make progress on this as well. To come back to EVOLVE+ strategy. We are investing quite heavily to be prepared for our near-term and midterm growth. We are making progress. As you know, in El Masnou, we are working and in a niche with the ophtha production and good news since 2 years, the ophthalmic growth is high single digit. If you are comparing that to the last decade, it was at the low single digit, and we are one of the market leaders for the ophtha business. That's the reason and the good news that we can and that we are doing, investing and expanding in our site in El Masnou for sterile ointments and also for droptainers. Also to capture the new trend in the steriles, which are prefilled syringe and cartridges, we are installing as we speak. Two new lines. One is already installed. The operation is starting the qualification. The second one will come operationally by end of this year. Minden. Minden, the transfers are underway. I told you we will get the first revenues in 2025. This happened. Now the ramp-up is coming through, and we will do the integration mid of the year as quite a lot of trades are already in operation at this time. DINAMIQS, another highlight. Here, we did the integration last September with -- in Sweden close here to Zurich for the final vectors. Good news, we could not include that this in this presentation. 36 hours ago, we successfully passed the Swissmedic inspection to get the permit, the certificate that we can start with the GMP production, which is a great achievement. Now I would like to hand over to Reto, he will give you more insights about the financial numbers. Reto Suter: Thank you very much, Marcel. Good afternoon, everybody, [Foreign Language] and thank you for joining us today. 2025 was another year of continued growth, structural margin expansion and strong cash generation for Siegfried. We delivered a really record profitability. And at the same time, we continued to invest and deploy capital in a meaningful way into capacity expansion into new technologies and obviously also into new capabilities. The results that we achieved confirmed three very important elements of our business strategy. First, strength from a diversified portfolio across customers as well as products. Secondly, a significant impact from operational efficiency measures and portfolio optimization. And third, a contribution from diligent financial management, and also a diligent deployment of fresh capital to new opportunities. So despite significant currency headwinds and also, let's say, a challenging macroeconomic environment, we in 2025, delivered the best set of financial numbers in the history of Siegfried. Now having said all this, and as we look now into 2026, we apply a very careful approach to guiding due to this outstanding confirmation of one single customer for one single product. This diligence and this prudence reflect honesty and also transparency. It's by no means a change in the structural growth trajectory of Siegfried as a company. Now let's dive into the numbers, starting with sales. We grew by 4.3% in local currencies for the group to CHF 1.33 billion. That growth was equally spread along the two business lines, 4.3% in Drug Substances and then 4.3% as well in Drug Products. We saw the more pronounced seasonality that we announced a year ago, 53% of revenue was captured in H2. And of course -- not a surprise, a very heavy ForEx headwind as well, especially in the dollar and, of course, also in the euro. The currency split, as you see, it's more or less unchanged to the last year. This is transactional analysis. So really contract-by-contract underlying currency, 50% of what we do is in the euro, 13% in the dollar, the remainder is in Swiss francs. Good news here, as in the past, we had no impact on the margin and the bottom line through these volatile currency environment. Then the tariff exposure, as mentioned also throughout all of last year, minimal, we saw less than CHF 5 million of sales being affected by import duties, tariffs, et cetera. So optimally set up as well now to go into 2026. Let me spend just a few words here on the reconciliation between the reported numbers under our accounting framework, Swiss GAAP versus the core EBITDA. These are the numbers that we and the team use to manage and stay our business. You will see that in 2025, core numbers are below the reported numbers as it may be the case from time-to-time. Due to one fact, we have this pension liability in Germany mainly, which became smaller during 2025 as interest rates increased. And this CHF 10 million gain, we basically took out. And then we did what we always do, CHF 2.9 million of running current net interest, we basically transferred down to financial expenses. And then we adjusted for CHF 0.8 million of transaction cost. This is cost for a transaction where we had a serious look at, but did not ultimately consume it. So -- and that's that. Now I would like to basically bring the 2025 results a bit into a broader context. Driven by organic growth and smart acquisitions, we have expanded the business and grew it profitably quite a bit. So sales grew from 2020 to 2025 from CHF 145 million to CHF 1.33 billion in this year. This is in Swiss francs. That's a CAGR of 9.5%. Would we do it in local currencies? So basically adding the currency headwinds, the absolute currency headwinds to the 2025 numbers, we are at 11.7%. In total, over this period, we have lost CHF 140 million for currencies. That's around the effect of the acquisition that we had in Spain. So it's significant. From a margin point of view, this didn't impact us. We grew the margin from 17.7% to 23.5%. And this wasn't an easy environment to operate in. So this growth in sales, but also specifically in the margin, we managed despite the few disruption elements. So we have COVID, which was, of course, also an opportunity for us. We saw inflation. We saw destocking. We saw disruptions in supply chains. We saw currency wall and obviously also some elements of geopolitics. It's a resilient growth that we have been able to demonstrate and that we are going to demonstrate also going forward. Specifically, we have proven the ability to as well replace substantially large components of our revenue streams. I'm referring here to the COVID vaccines, which we had, and then obviously, which went away luckily. The margin expansion was structural, and it was driven by basically three things. The one was portfolio optimization, which we started in 2021 on the Drug Substances side, which we have now expanded to Drug Products, but where you see the effects in Drug Products not yet. Then operational excellence, which added efficiency in a quite a significant scale year-on-year. Also, this will continue. And then, of course, effects of scale, where we brought onstream idle capacities, which then developed into basically revenues and also profits. The growth was balanced. You know that. Mostly organic, and then the acquisition effect of the acquisition in Spain. And that's the plan also going forward. If you go to the margins now comparing '24 numbers to '25 numbers, you see that at each margin level, we reached new record highs. So we translated the growth in Swiss francs of 2.6% to substantially larger expansions across the margin aggregates. So core gross profit was driven mainly by cost discipline portfolio optimization. Operational excellence increased to CHF 354 million plus 7.6%. Core EBITDA, which includes, of course, the drivers for the gross profit margin plus the operating expenses, which we kept in check, 9.3% higher at 312.3%. And on it goes. Obviously, if you have a look at core net profit and core EBIT, this reflects the fact that we have invested into capacities, which are, as the case maybe not yet fully ramped up. So that will correct over time. Diversification. It's a crucial key element in our business strategy and our business setup. We are well diversified relating to customers as well as to products. So we have no dominant customer dominating our revenue base. And the same is true for the products. This is largely the same numbers that I have presented to you a year ago. Customer one, this is Novartis, 13% to 17%, largely diversified portfolio of products, and customer 2 at 10%, customer 3 to 10 at 31%. With the products, the top product at 6%, product 2 to 10 at 26%. We continue to generate the vast majority of our revenues in the commercial phase, 96%. So we're not exposed to early phase financing risks, important to understand. This gives us the stability in order to continue to grow in a structured way. On profitability, just a few additions to things which I have already mentioned. Operating expenses remain disciplined at now 11.4% of sales. Despite some changes in the perimeter, we have added the acceleration hub and of course, also invested into capabilities, digitalization, et cetera. The other operating income, as mentioned by Marcel, includes a one-off payment, which we don't expect to reoccur next year, CHF 7.5 million, which related to a 2021 incident of fraudulent payments. That's good news. We have all the money back. So we just follow through on these type of things. Core financial expenses remained under control. We had, throughout the year, a bit higher level of debt but we kept the financial expenses in check. Effective tax rate still below 20%. We significantly improved the cash flow, the operating cash flow, 35% up year-on-year, driven by higher profitability and disciplined working on the net working capital. We continued to focus on net working capital. We saw some timing effects of revenue recognition. So by year-end, we had the vast majority of the invoices in December. And of course, that goes against net working capital freeing up. I will say one word about this when I come to net debt-to-EBITDA ratio. Strategic investments at CHF 231 million, that's tangible plus intangibles or brick-and-motor plus IT systems, which will support the future growth that we will see also going forward. On the financing side, we have placed successfully a CHF 300 million bond and we have introduced the factoring solution, a non-recourse factoring solution, which we used in an amount for CHF 40 million over year-end. Now why did I do that? Factoring allows me to flatten net working capital consumption throughout the year. And I can do that if I compare the cost of this solution to other financing instruments at very attractive conditions. So I absolutely needed to do that. The balance sheet now prior to the acquisition is solid at year-end at 1.5x net debt to core EBITDA which allows me to maintain financial flexibility also for the future. As of yesterday, a few days after the close, net debt-to-EBITDA is at 1.0x, which means that around CHF 150 million of accounts receivable have by now been converted into cash. It gives you a bit of an idea on how net working capital consumption fluctuates throughout the year. This means that even after the funding of the announced acquisition, I will be able to continue to basically have a balance sheet to continue to invest. Now based on this very strong financial numbers and the commitment of our Board of Directors to shareholder returns, we have decided to increase the distribution to shareholders. The proposal to the AGM, which will take place on April 16 this year will include the proposal of a par value repayment of CHF 0.4 per share. Now let me summarize 2025. We saw continued growth for both businesses. We saw a structural expansion of the margin. We saw a record profitability, strong cash generation and a strong -- now even more flexible balance sheet. All of the factors which contribute to our structural growth trajectory remain in place. One, the diversification; two, the contribution from operational excellence and optimization of the portfolio, which we now expand also into Drug Products; and three, the strong balance sheet and the careful application of new capital to new opportunities. So Siegfried is well positioned to capture all the opportunities which lie ahead of us and will continue to be the steady compounder that we have been in the past. And with that, thank you very much for the attention. And I hand back to Marcel. Marcel Imwinkelried: Thank you very much, Reto. Now let's talk about our future. And here, I'm really excited. I will give you some insights why I'm doing so. EVOLVE+ strategy, I think already highlighted, it's now really coming through, and it's resulting also in the results, which we have presented just now with operational excellence, which is the key contributor at the end for the EBITDA margin uplift. And secondly, really, what we see is the inflow and also the wins or the wins for new products and also projects and customers. Now I would like to come to another topic and which I was asked several times in the past about M&A. It was always repeating M&A is always on, but really, you need to have the patience to find the right tool and to get it for an affordable price. That's something which is the secret of success of Siegfried, what we did, and we will continue. We found such a tool. It took quite some time to make that happen. And it was obviously also according to our EVOLVE's strategy to further grow on the existing core with Drug Substance, small molecules and then, of course, due to the current recent situation, which will not disappear in the near future for the U.S. supply points. I'm constantly in touch with our customers, and they are telling me since 12 months. Marcel, I need to have a second supply point out of U.S. for U.S. It's not predictable for us anymore what will happen. It's independent of the administration in U.S. what will happen. All pharmaceutical companies are preparing this future setup, not only U.S. ones, also the European ones, they're asking for it. They are looking really to expand it. But what happened over the last 30 years. In U.S., the pharmaceutical companies and also CDMO, they were investing in large molecules, Drug Substance, followed by sterile fill and finish locations, supply points in U.S. and also in new modalities like cell and gene. But over the last 3 decades, Drug Substance small molecules was transferred out of U.S. to China, to India and also to Europe and of course, we are participating accordingly. However, the game is changing now. They are looking for it, and it's not a surprise, read the news, and you will find out the big pharmaceutical companies they are investing or were looking also for acquisitions in U.S. to get a hub, a location to produce Drug Substance small molecules. We did the same. But at the end, you need to find something which is really unique what you can offer compared to the community or also the competitors. And what we found at the end, we found such a tool. First, you need to know there are less than 15 large-scale CDMO locations available in U.S. We did a lot of due diligence. I was several times in U.S. was watching and look how these sites were recapitalized, but very often very poor outed facilities and, of course, also missing capabilities. When I was the first time in the U.S., I found a strong location in Delaware and the second one in Georgia, excuse me. And of course, I think the unique opportunity, but why we got it is so affordable at the end, Siegfried was the only company which is able to keep the production supply of this essential controlled substance also in the future. Now if we are looking at the case, we have with this acquisition, a very stable market and also portfolio which we are taking over. Strong contribution also at EBITDA, protect market also for the future, because you're not allowed to import from somewhere else to this -- to U.S. for such controlled substances, a moderate growth. But for us, what's really on top of it is really the opportunity to gain exclusive business with this setup. Wilmington, this would be the new site from Noramco together with the existing Pennsville site, which is just 20 minutes away by car. They are really, really close to each other, but even more important, also the product portfolio is overlapping. We are talking here about controlled substance. We know the products. We know the processes from each other because Noramco was also a customer of us and vice versa. Some of the people we even know already also from the past and vice versa. And there is -- will be very soon one approach for both sides. And what we can do is really to optimize this controlled substance portfolio in the Pennsville site. And then we will free up Facility #5, where 80 cubic meters are installed there to go for exclusive business. Athens and Grafton. As you know, 1.5 years ago, we have acquired Grafton as an acceleration hub to start with early development activities for Drug Substance small molecules. With Athens also, by the way, like Wilmington, a previous J&J facility. So it was not a surprise to find two sites at the end with strong people, capable people, very well regarding process, which are in place, very well maintained and also high automation what we found there. There are also an add-on with Athens compared to Grafton because Grafton is really strong in Phase I and Phase II. Athens is even stronger in early phase activities. So it's for us at the end, an add-on. We have a sweet spot and a big opportunity, and that's why I'm really truly excited about this deal. One is from closing of the day when we have the deal, we have a strong contribution, top line and bottom line immediately. However, the exciting case is really then to fill this capacity, which we are freeing up in the next 2 years. And of course, to bring in new customers, new business, it will also take 2 years. So we will do that in parallel. So after 2028, on top of the base case, which we have also shared with you, we are looking forward to further increase the top line and also the bottom line. As you can imagine, also the pricing is very interesting because supply constraints to push demand, it's a different position which you have. So we will do the ramp-up after 2028. And I'm really excited, but I'm not alone. I'm not alone. Many of our colleagues in our organization who are waiting for it. And I would like also now to give some quotes and voices also of my colleagues. [Presentation] Marcel Imwinkelried: We are really excited. Now we are ready. We have the plan in place to make that happen independent when the closing will happen. If we are looking out at the entire network of Siegfried for Drug Substance, small molecules, we are complete now. This doesn't mean that we're not further looking also to expand. However, if you are looking from early phase preclinical up to commercial, we are very well positioned. We have all capabilities for all development phases in place. And if you're looking backwards, especially then from Phase III commercial and then out of patent, you see that we have seven sites in all three continents: China, Europe and also U.S. to make that happen. Whatever the demand is from the different customers and the demand is there. So the dual supply points are given for the future, and this is a great achievement for us. Now I would like to share with you something else about an exciting new molecule mechanism platform. It's called protein degraders. It's a new mechanism, which is coming through. Of course, the research we were working since 2 decades on that. But now in the upcoming months, you will see the first approval for big products coming through. Why is this so exciting for Siegfried? We are perfectly set up exactly for this kind of products. They need Drug Substance small molecules where we have the entire network in place, which I have just shared with you. But secondly, they need and will end up then in tablets or in capsules. So that means for Malta, but especially for Barbera, that's the place to be. So we can really offer for big pharmaceutical companies, but especially also for the small and mid-caps, the entire service what they need. Just recently, over the last 5 weeks, we won three new products and three new customers directly linked with the same mechanism, what I'm sharing here with you. One -- by the way, is not the same molecule when I'm talking about these three, we are talking about three different molecules. We're talking about three different customers. One is in Phase III, very interesting. So this will become quite soon, it will get approval. The other ones are a little bit earlier, but this will be a changer for the entire industry, a game changer and also a game changer for the company of Siegfried. And we will -- we are really full in there. Happy to share with you more. And I'm sure in 3 years, we will talk more about this protein degraders. Now capital allocation. I think, we are really disciplined on that. So if we are able to do an M&A acquisition and very often in the past, and we did it again to do acquisition and to buy new assets for half of the price, which is always then helping us at the mid- and long term to fill then the sites and also to gain the revenues really profitable. This is still on because I was also asked what does this mean with this acquisition now of Noramco and also Extractas. And also outlined by Reto, we still have firepower ready to use if we find one another tool what I was sharing with you. So this is ongoing, but you need to be patient. And it's not predictable at the end. We will see how this will evolve, but it's still on. Now we are really set up to outpace the market growth, just also what I was sharing with you, inflow is great, 3%. This will come through also then midterm-wise as well. And for 2026, it depends because what I'm guiding you now will change definitely. It's just a question by when. Will it be in the second quarter or will it be in the third quarter? Because with the new acquisition after closing, we will significantly improve our guidance for 2026. So far for Drug Products, high single-digit growth. So compared to last year, much better, much higher, doubled. Secondly, Drug Substance low single digit due to the missing, pending confirmation for a product which is in-market product. So it's just fluctuation, but it will also support us in the midterm as well. That's for sure. And for the group, also reflected then in a low single-digit growth. We are confident. And this is really important because the bottom line is absolutely key for me. Not just to growth, I want to over proportionally grow in the bottom line. And that's what we have shown up you as well, which is proven, and we will continue on that. And you can expect also then a core EBITDA margin above 23%. We have a strong plan in place, and we will make it happen. Thanks a lot for your attention, and now happy to go for question and answers. Peter Stierli: Thank you, Marcel. We'll now start with the Q&A session. Of course, many questions from the room here, but those who are joining us through the webcast, who would like to ask a question, please do that through the audio or video call, and you will be directed to the operator. Laura Pfeifer-Rossi: I'm Laura Pfeifer from Octavian. Maybe first on Drug Products. Here, you're guiding for an acceleration to high single digit. So to what extent is this growth driven by the large originator contract you have previously announced? I think it was 1 year ago or so. And also, could you provide more detail on the size and ramp-up time line for this contract? And maybe also what are the key terms? Is this a multiyear arrangement? And then, I think the second one is more on Slide 21. You highlighted the protein degraders, but you also show obesity metabolic as a complex small molecule area. So can you provide us just an idea on your current overall exposure to metabolic GLP-1 programs across your overall business. So both -- all clusters, all service offerings and also what share of revenue this could represent over the next couple of years? Thank you. Peter Stierli: Marcel? Marcel Imwinkelried: Yes. Sure. Thanks a lot. Let's first start with the project, which we have announced 1 year ago. This is one part. But to be honest, we are growing in most of the -- really of the different dosage forms in Drug Product. So we are moving also upwards in Hameln especially in El Masnou. That's also the reason why I was sharing with you the expansion. This is significantly also coming up now. Also the new lines which we are investing in there are already more or less fully utilized by the new contracts, which is helping as well. Also the other portfolio in line is developing very nicely. It's in line with what I was highlighting with the ophtha growth and also in Barbera and in Malta, we are also coming up nice step-by-step. And I think it's a contribution broadly across all different dosage forms and all different sites, which is great. That's -- it's ending up then in this high single digit, more to come because, as I already outlined, with the additional wins of 30% to 2024, you can assume that further growth will come in the upcoming years. Then ramp up. With this -- what I was highlighting with the three new products, which we won over the last 4 weeks, it's -- this is really coming through then in 2027. The first one is Phase III. The other two ones, which are early, they are coming through them in 2028 and afterwards, but this will help us. And that's why I'm so confident for the midterm outlook independent from the acquisition that we have really the momentum and the inflow in the pipeline that you will take off. Yes. Protein degrader, this is something exactly in line with what I was just sharing with these products, more is coming if you are looking and always -- and this gives you also a little bit of flavor. We are not the followers and waiting is like a CMO that somebody is coming to us and are you ready to send us no offer. We are doing that really proactively. What kind of technologies? What are the next future or the next trend in the industry to capture that and to read it also to proactively to approach them and tell them, listen, we can provide the full service what you need. And that's a different approach compared to the past, and this is helping us now. Now to the GLP-1 exposure, I think this goes -- I think, of course, we were explaining that the GLP-1 exposure products -- molecules, they are really complex. But the same protein degraders, which I'm highlighting are also so complex like this. And I'm really happy that the third part of the true story that we have invested and decided to invest in the spray drying because the common approach for all of these different molecules, they need to have this spray drying, bridging technology in place. And here, we are unique that we can offer end-to-end or I'm preferring to use the word from beginning to the end. Laura Pfeifer-Rossi: Just, sorry, to clarify, so I'm now a bit confused. So the three new products that you have won over the last 5 weeks, these were all protein degraders or these were all... Marcel Imwinkelried: Yes. Protein degraders. Yes. Laura Pfeifer-Rossi: Okay. And then, but then you did not really answer my question then on the obesity exposure. So do you already have established contracts for whatever Drug Product, Drug Substance? Marcel Imwinkelried: We are not talking about obesity exposure. You know that Laura, because if I would share something related to that, and it's clear then I would highlight a product or also a company. That's what we are not doing. Peter Stierli: Sibylle. Sibylle Bischofberger Frick: Sibylle Bischofberger from Vontobel. I have two questions. First, about the past. Sales from Wisconsin and the DINAMIQS should have increased in 2025, and they should more and more support sales growth also in 2026. If you could say something about these two parts of your business? And then secondly, 2026, the outlook about the phasing between first half and second half. And if you could say something about the currency effects, how much they would affect sales on the top line if currencies would stay as they are at the moment? Marcel Imwinkelried: Yes, I will take the first one, and Reto will take the second one. DINAMIQS here, of course, we were really successful. I think, I shared that also in the conferences as well. So we won 10 additional customers over the last -- in the last year, one in Australia, four in U.S. and the rest in Europe. However, here, we are talking about development activities. The growth rate is quite significant with 30% what we can plus/minus. However, 30% of a very low amount is still not a game changer or will change dramatically. That's the reason. But the prerequisite was exactly what I was highlighting during the presentation. First of all, we need to get the permit, the certificate from the Swissmedic Health Authority to operate and to start then with the GMP production. And as also outlined in the order presentation during the financial part, the money is really in there as soon as we can start with the GMP commercial production. So it's coming. But this setup is coming through then next year, mainly what you see then step-by-step coming up then. For this year, it will be not significant growth for us as a company. Wisconsin also here, I think that's stable. Of course, this is not a game changer related to the top line or bottom line. So here, we are looking to develop 10, 15 projects on a yearly basis, but this is the funnel for the pipeline. So we are getting, of course, for the service we get paid and also the margin. But this is not a contributor at the end for our growth top line and bottom line. This is just filling then from now in 3 to 5 years to get one of these products, commercial, which ends up then really also visible in the P&L. Peter Stierli: Thanks, Marcel. Reto, seasonality and FX impact. Reto Suter: No, absolutely. I think we had this question quite a few times. So let's clarify. Obviously, we do have, again, in 2026, we expect a negative impact on the top line by currencies. Looking at the first 7 weeks of the year, comparing that to last year, I see a currency headwind of a bit more than 2% for the year. Now obviously, for the first half, this effect is stronger as degrading of the dollar only started after Liberation Day, sometimes at the beginning of April. So for the first half, it's actually closer to 3%. So I'm at 2.8% for the group. On seasonality, while we are still working on that. The indications are that this is very similar to what we have been observing in 2025. So more like 47% to 53% instead of 48% to 52%. Peter Stierli: The next question is from Charles Weston. Charles, can you hear us? Charles Weston: Two topics, if I can. First of all, on the product that has meant the sort of lower Drug Substance guidance. It's quite unusual to see such a sort of a change and volatility like this in a large on-market product. So is there any further color you can provide on this? Is your customer destocking? How confident are you that, that customer will come back? And then because it's so late, ordinarily contracts would be -- would include some sort of compensation payments or take-or-pay payments. So perhaps you can just touch on that for 2026. And then the second question, please, is on the non-recourse debt. Is that off balance sheet? And you talked about CHF 40 million. Is it still CHF 40 million? Or is it going to be increasing going forward? Marcel Imwinkelried: Okay. I will take the first one, and Reto will take the second one. For the first one, we are pending for the order confirmation. So he has also -- he is not sure how the demand, what he needs also short to midterm. That's the reason why we are waiting to get the final agreement on that. I think it's -- by the way, it's a customer which we are working together since 30 years. So it's not a question if the customer will come back. We have really strong relationship together since 30 years. And I think he has quite currently some volatility in the market regarding this product and he needs to figure out what does this mean. So that's also what I was highlighting. This market will remain in this very big more product also in the future as well. Now if this not what come through, that the demand will be at lower than expected. Of course, you need to know that's a good question, Charles, that contractually, we are protected from the margin point of view. So maybe we would get a smaller hit than at the top line, but the bottom line is fully protected. Reto Suter: Yes. If I may, the second question, basically, the factoring solution. Basically, you sell accounts receivable, you receive cash, this affected the cash position in a positive way about CHF 40 million at year-end. This facility has a total size of CHF 50 million. So yes, I could go higher CHF 10 million. And as mentioned, this is not used for window dressing. It's really used to flatten out net working capital consumption throughout the year, which will then automatically mean that I can size the funding contracts accordingly lower. And as this facility comes in a better condition than usual funding contract, it's a net gain from the cost of debt point of view. Charles Weston: Okay. So we should just assume a similar rate going forward for that, should we? Reto Suter: Yes. Not more than CHF 50 million, yes. Peter Stierli: Next question, Tanya? Tanya Hansalik: Just to follow-up on this outstanding product confirmation. So I was surprised by the size of the magnitude of the product volumes that are missing or need to be confirmed. What are the implications if the demand stays lower in 2027? Do you also get a compensation or then it takes a while to ramp up the new product? Would there be a gap there in 2027? And then my second question is on free cash flow. If you could provide some sort of guidance on that with your Project FALCON and then the non-recourse factoring, you mentioned, yes, when we can basically expect free cash flows to be positive? Marcel Imwinkelried: As usual, I take the first one, and let Reto take the second one. First one, so I think for 2027, I think this will come back because it's a onetime. They have to look at the stock level and how the latest forecast for there looks like. However, we have always a little bit some fluctuations. Some products are going through the roof, then you need to be flexible and to capture that, some of them are coming a little bit down. It depends, of course, we have also frozen horizon. That's the reason why we are protected also for this product from a margin point of view. But as I just outlined ,with the win of this very important protein degrader for Barbera, where we are doing then the filling of the capsules. Then next year, this can already help to the potentially to fill if something like this, this would happen. So I think in a nutshell, this will not change our outlook for 2027. It's small fluctuation. It's, of course, a bigger product. It's not a very small one. But at the outlook also for '27 and afterwards, this will not change our view. Reto Suter: Yes. On the second question relating to free cash flow, that's obviously the result of two distinct topics. The one is how much operating cash flow do you achieve? And then secondly, what do you spend for investments? Now I address these one by one, and then the combination is the answer. The operating cash flow in 2025 was, of course, masked and impacted by a very low revenue recognition. And this has obviously destroyed a lot of the good work that we had done when we speak about Project FALCON. I was sharing that as of yesterday, net debt-to-EBITDA is at 1.0, which means that CHF 150 million of accounts receivable have by now converted into cash. So, ceteris paribus, if I will close the books now, my operating cash flow would be about around CHF 120 million higher than the one that I showed to you. So that's really dependent on when you close the book. The second is, of course, we now had two very heavy years of investments, mid-teens. This year, it was actually 16% more like. This will now return and come back to low teens. As mentioned by Marcel, this is our guidance for 2026 and also for the years to come. So you see both parameters somewhat go into the right direction. I'm not worried around cash conversion, around cash generation, around the quality of the balance sheet and the flexibility that we have to fund further investments, not at all. Tanya Hansalik: I just wanted to follow up on the replacing with the protein degrader. So you mean the API part of the contract or because you said you had the drug oral dosage form and also the API, maybe on the time lines of these two when they... Marcel Imwinkelried: Yes, we're working on. I want to have everything from beginning to end. But we are very successful in both in Drug Product. Here, you can maybe imagine that if a big pharmaceutic company has developed such a product, where they are producing Drug Substance by themselves and then they are looking for somebody like Siegfried, who is then providing the service for the finished drug product. That's in this case. But in the other cases, here is really Drug Substance, but we are also in discussion to go then for the Drug Product as well. And that's exactly in line with the end -- beginning to end strategy that we can provide that. Peter Stierli: Next question is from Fynn from Deutsche Bank. Fynn Scherzler: I also have a follow-up question on the product that's awaiting the confirmation. So, you said it's an in-market product. Can you help us maybe with the size of the order that you are awaiting? So essentially asking what would growth look like with the product coming through? And could you clarify, is this an all-or-nothing situation? So did you either get the full amount? Or do you maybe want to get it partially? And then -- sorry, more on that, do you have any indication on timing of that? So when do you expect to hear back from the customer? And do you have any idea for the odds of this actually coming through? Marcel Imwinkelried: Yes. Happy to answer this question, sure. I think the magnitude -- of course, it's somehow a little bit impacting or impacting us. Otherwise, I stand in front of many strong analysts here, and they have their models. Of course, we would guide different or give a different guidance mid-single digit for Drug Substance. That's also according to the model, also what we had in our mind. And that's why we have taken the conservative approach this pending missing confirmation, but we will see how this will evolve. I think for this customer and this product is a little bit unique because it's -- the fluctuation is quite tough. I cannot share you with you with which kind of treatment, we are talking here about. Otherwise, it's clear for which product and customer you're talking about. But this will maintain and going on. So of course, this product will be also important for the customer in the near future in 2027 and afterwards and also for Siegfried. Fynn Scherzler: Okay. So if I can just follow up on timing. Do we expect to hear back from you on this specific measure before half year results? Or is this an ad hoc event? Or how should we think about it? Marcel Imwinkelried: Yes. It's -- we have strong, strong relationship with these customers all 3 decades. We were growing together significantly. We had a lot of fun, but also you need to work if you have a little bit uncertainty like this in this moment. And we are continuously in touch with them, and he needs to figure out that we have already next week, the next exchange meeting. And as soon as we know more, then, of course, we will share then also to the external role as well. Fynn Scherzler: Perfect. Second -- sorry, just one final question on the first Barbera contract that you've told us about already earlier that is supposed to start ramping in the second half of this year, if I understand correctly. Can you maybe expand a bit on how the preparations are going there? And maybe also what sort of magnitude of revenue we should expect from that in 2026? Marcel Imwinkelried: This is coming through. So we are starting with commercial production has also announced that this will happen in '27 -- '26, excuse me. And then afterwards ramp-up in '27 and more. This is exactly according to plan, which is great. We had also the second one there as well, which we don't have so prominently announced, but we are filling now step-by-step also Barbera and with the new news, which I have just shared with this protein degrader. I'm looking forward also really for a bright future in Barbera as well. So this is according to plan. Reto Suter: I think it's important to understand, Marcel has answered that in his first answer to the first question, that the momentum in Drug Products is much larger than just one product in one site. It affects all of the dosage forms across all the sites and is broadly diversified and does not just rely on one or two contracts. I think that's important for the general understanding. Peter Stierli: Next question from Daniel. Daniel Jelovcan: Daniel Jelovcan, Zurcher KB. So, still a bit parceled about this order confirmation. I mean, it's -- I heard that for the first time. And when I look at the exit rate from the second half, the momentum, 6.5%, which per se was a bit disappointing, to be honest. When I extrapolate that to the '26 growth, 6.5%, there's a delta of, let's say, 3 percentage points versus your guidance now. So we talk about the CHF 40 million product on a yearly base. So it's significant when I look at your diversification. So, and I'm a bit puzzled how come? I mean, you need the tech transfer and everything you need the approvals from Swissmedic FDA EMEA, and that takes 18 months. So that means that the product is already set up with Siegfried. So is that correct, the assumption? It's only dependent when the customer gives the green light and then you start just to be very sure. Is it more complex? Reto Suter: I can maybe take the technical elements of that, if I may. No. First, I don't buy into the concept of exit valuation, as much of the growth that we see is 1 year compared to the other year, as you know, we have long manufacturing cycles. So you can't take the revenue recognized in the second half and say that's the growth rate that we can assume then also for the first half of the following year. So that's that. On the calculation of the magnitude, yes, of course. I mean, it was significantly large enough for us to change the guidance. And that gives you a bit of an indication and your number is not totally wrong. And then thirdly, your assumption on the product, of course, it's an in-market product, which we already in the last year and the year before manufactured, and which we will continue to manufacture, as Marcel has mentioned. But now due to demand effects on that specific product for that specific customer in specific market there's uncertainty, but we are ready to go as soon as we have the confirmation. Daniel Jelovcan: So it's an existing product? Reto Suter: Yes. Daniel Jelovcan: You already do? Reto Suter: Yes. Since many years. Daniel Jelovcan: This product is then very successful. Reto Suter: Obviously, yes. Daniel Jelovcan: Okay. Marcel Imwinkelried: But maybe our customer thinking it would be even more successful. That's exactly currently the demand. Daniel Jelovcan: That's good to hear. And then the protein degrader. I mean, I'm not a chemist. So is that something which you can patent, I guess, not production process. And then your competition, let's say, I mean, the Chinese, the WuXi AppTec -- as the world, they are all over the place. Can they do that as well? Marcel Imwinkelried: Sure. I think, first of all, we cannot do the patent because that's a mechanism of the -- for the research to do the -- to find the molecules and then to appropriate that. So this has nothing directly to do with us, with Siegfried. It's a new mechanism how to treat because this kind of proteins in the past, they were really successful always to push back the treatment of the APIs. That's also why you have then to build up very specific molecule chains. With this new treatment, you can destroy such proteins. And then you can directly treat with the API then the patients. And that's the revolution and the game changer. But this is at the research companies, big pharma, small mid-sized pharmaceutical research companies. So we cannot patent. However, the unique situation of the setup is really what we have, it's Drug Substance small molecule. Second, due to the fact that so complex, you need to have spray drying, but it's for the majority of the small molecules nowadays. And thirdly, these products are ending up as a tablet or as a capsule. And we have for the colleagues which also have visited 1.5 year ago, Barcelona, Barbera, that's the perfect setup, what we can offer to this kind of product families, which is coming through now. That's the unique position. Daniel Jelovcan: Competition? You can certainly do that as well. Marcel Imwinkelried: Yes, sure. But I think, competition-wise, you don't have a setup like Siegfried who can do everything with small -- Drug Substance small molecules. Of course, we have also -- we have competitors there. With spray drying, also competitors. However, in combination in order to have both Drug Substance plus spray drying we are quite alone. And if you're talking about them to add the tablets and capsule manufacturing, you can research and ask also ChatGPT, you will not find so many. Daniel Jelovcan: Okay. Great. And last question. You still haven't answered to why the second half was to us, to the market, I mean consensus was higher for sales growth. And you were quite vocal in November and December at various events. And so that's why the market was quite bullish. And now you have the 6.5%, which is not bad, but below expectations. So were there some batch delays from December into January, which is quite typical in your industry or any specific reason? Marcel Imwinkelried: No, nothing specifically. I think we have delivered according to our guidance. I know that the market expectation was a bit higher. But for us, it was perfect. And at the end, for us, it's important to come back to look really at the profitable growth and not just at the top line. And I think top line-wise, you have expected a little bit more, but I think we were doing much better than the bottom line. So at the end, for me, it was great. Peter Stierli: Laura, again. Yes. Laura Pfeifer-Rossi: Maybe a question on the EBITDA margin guidance here. You guide for above 23%. So what are the drivers and the headwinds we should consider this year? I mean, will there be kind of a negative impact from -- if we assume this order is not coming through? So this could be one of the headwinds. Just keen to listen to your thoughts here. And then also when we use 23.0% as the clean base from '25, is there still the possibility for 60 to 100 basis points uplift as you did in the past? Reto Suter: Yes. I mean, for 2025, you guided ahead of 22%. So we define somewhat the floor. And our concept of guiding has not changed from 1 year to the other. Then secondly, on the positive side, what will we see as tailwinds for the guidance. It's, of course, commercial excellence, efforts of portfolio optimization, it's continuing process excellence, it's continuing operational excellence, and it's a bit of scale. That's what we're going to see on the tailwind side. On the headwind side, of course, cost of doing business also in 2026 will increase. So we have continued inflation in the U.S. We have continued inflation in Germany. Both countries, we will have 700 in the U.S. We will have 1,000 -- continue to have 1,000 in Germany. That hurts a bit. So there, we will need to become more efficient, increase prices a little bit. And that's what allows us to also, as in the past, increase the margin from '26 compared to '25. Marcel Imwinkelried: May to add that, the first question about this product, will this have also an impact on EBITDA? No. Also in the worst case, contractually, we are protected for the margin. So this will have any way no impact at the bottom line, and that's -- I'm really convinced that we will be above the 23%. Peter Stierli: Next question, we have online from Ed Hall. Ed, can you hear us? Edward Hall: Yes. I think maybe switching gears up. I was curious if you can talk about the outlook of multiclient versus exclusive. And we've seen another year where multiclient performance in the double digits and [indiscernible] business as a structural trend. Is there how much pricing is associated with this growth? That would be my first question. Reto Suter: No. The question was on the split between multiclient and exclusive products, if I got that right. Whether there is a structural shift or so, something taking place. No, we just also have quite an attractive set of multiclient products that we manufacture. I think that's the answer. Is this something which is structural? No, I don't think so. I honestly believe that over time, in the midterm, we will have and see a quicker growth in the exclusive part versus the multiclient part, which will, all-in-all, remain stable. However, from period-to-period in the short term, there can be a little fluctuations around that, but it's nothing which is structural. Edward Hall: Okay. And you mentioned pricing a little, just last question. And how much is pricing that contributed to growth when [indiscernible] Reto Suter: Honestly, we can't hear you. You sound like you spend your time in a wine seller or somewhere. Could you please repeat and maybe move a little closer to the microphone, Ed. Edward Hall: Is that a little bit better? Okay, perfect. Yes, I was just curious about the contribution of pricing to the generics and compare that to maybe some of the exclusive business. Reto Suter: Honestly, I don't think that there is a pricing difference between exclusive and the generics business. On top of my head, I don't have the numbers with me currently. Pricing impact on the 2025 numbers was not dominant. To be fair, we have in price here and there, but it was mostly efficiency gains and as well portfolio management, which helped us to increase the margin. Peter Stierli: Good. Is that all, Ed? Or do you have a third question? Edward Hall: Sorry. One final question. I was wondering if you could just share the capabilities that you're looking to bring to the market when we think about these two drugs more holistically. Marcel Imwinkelried: Sorry, we really -- we are having difficulties to understand. The capabilities... Edward Hall: I'll send an e-mail. Marcel Imwinkelried: Yes, please send an e-mail, and then we will answer to you for sure. Peter Stierli: Then we have another online question from Kristina. Kristina Blaschek: It's Kristina Blaschek on for Max Smock, William Blair. I just wanted to circle back on the large Drug Substance contract driving uncertainty in your guide. Curious what's leading to a large range of outcomes in the customers' demand outlook for the already commercial product in the short term. And given your very strong RFPs in 2025 in Drug Substance and assuming likely strong backlog. Here's why you cannot so in some of the project work to offset potentially lower volumes from this one large contract in 2026. It was just a timing and ramp consideration. I'm really trying to get at if the contract ends up on the low end of volumes, will you be able to offset the shortfall with current projects in hand for 2027? Or will it require some more contract wins to offset? Reto Suter: Yes. No, a very good question. And Marcel was indeed referring to some project wins that we had. Now obviously, if you win a project of an exclusive product, this is still in the development phases, which means that the equipment that you use is mostly small scale, pilot scale and not commercial. The same is also true for the revenue expectation. These products gain size as they enter the commercial manufacturing. So the product and the wins that Marcel was referring to, these are products which are still in clinical phases, II entering III maybe. So even if we wanted, we couldn't slot them in, in the large commercial equipment that we use to produce this other product in question. Peter Stierli: And the first question was whether if we would win or if the customer gets green light for the DS product, would we be closer to the consensus expense? Reto Suter: Yes, of course, yes. Immediately. Kristina Blaschek: Got it. And then, [indiscernible] The second and final question is on the recent acquisition. In terms of valuation, I know you've said impressive under 10x EBITDA multiple. But wondering if you can give the purchase price and also expected incremental capacity and revenue on an annualized basis. I realize it's not exactly clear when the acquisition will close, just if it were to close on January 1. Marcel Imwinkelried: I take it. Yes, I think I understood it. Regarding the acquisition, here, I think -- first of all, the price. We were sharing the evaluation compared to the EBITDA that we are paying or will pay less than 10. So really an affordable multiple. Now I think you need also to understand that we have not incorporated any synergies. So that's exactly what I was highlighting during the presentation to free up this 80 cubic meter capacity for the exclusive business. This would be on top, but this is not included in the price. So for us, that's why I'm so exciting. It's one of the top corporate targets for 2026 to make that happen, to free up the capacity and to start then to ramp up in 2028. That's the big opportunity what we have, and we will make -- we will take care to make that happen, yes. Peter Stierli: Good. There is no more question from the webcast. Is there any other questions here from the room? If not, then thank you so much. For those who still have some time, we would like to invite you for a drink and some snacks here around the corner. It would be great to meet as many as possible. Then yes, we're looking forward to see all of you again at the half year results on August 26. Thank you so much. Marcel Imwinkelried: Hopefully, earlier for the closing and new guidance. Thanks a lot for your attention.
Daniel Thorsson: Okay. Good morning, everyone, and welcome to Q4 presentation with BTS. My name is Daniel Thorsson, analyst at ABG Sundal Collier. And with us today, we have Jessica Skon, CEO of BTS. So I'll let you present the fourth quarter. I will have a couple of questions afterwards. And for both analysts and investors joining the call, feel free to add questions in the chat, and I will ask Jessica the questions afterwards. Jessica Parisi: Perfect. Thank you. Hi, everybody. Good morning. So let me start with an executive summary. Q4 marks a turning point for us. It brings an end to our quarter-over-quarter decline in profit results for the last 3 quarters. Just to remind you, 2 out of our 3 units delivered growth in 2025, and we expect Europe and other markets to continue to deliver the revenue and profit growth during 2026. The North America turnaround, which has been all of our focus for the last 2 quarters, is progressing very well. The unit is expected to return to moderate organic revenue growth and significantly improved quarter-over-quarter EBITDA performance already in the first quarter. We have continued to have breakthrough AI innovations during 2025, which is benefiting us in 3 significant very strategic ways. Number one, we have a much more competitive portfolio, one that we are getting daily feedback from our clients that is ahead of our competition within our space. Number two, we have implemented and pushed new services that help our clients with their own AI maturity and adoption going from initial training to workflow reinvention. And number three, which has just been absolutely profound, and we're learning from ourselves and bringing it to the market, is we continue to, I would call it, radical simplification of our internal operations. And in the fourth quarter, we even had a second wave of breakthroughs, which led to productivity gains. And we expect to reestablish earnings growth throughout 2026. We go into more details. The fourth quarter 2025, yes, it was a continued weak revenue performance in BTS North America, which we're very disappointed by, which resulted in a poor quarter. This wasn't a surprise. It was seen for the last few quarters, but it marks an end to that trend. Almost half of the Q4 profit decline was due to noncore things. So it was due to a mix of currency headwinds and then the severance that was related to our AI-based rationalization in the fourth quarter. BTS Europe had a revenue slowdown in the fourth quarter, but that was temporary. And Q4, the year before was an exceptionally strong quarter. BTS Other Markets had solid growth, but profit decline, which was due to BTS operations in Asia and specifically in our Thailand operations, Korea and China. If we're looking forward to the full year or if you look go backwards to the fiscal year 2025, obviously, this was a very disappointing year for us with no growth, a 25% decline in EBITDA. But it's important, I think, to remember the real story of 2025. It's a mixed picture. BTS operates in 3 units. 2 of the units, which is half of the business performed very well, very well, and you could say in a tough market, especially in Europe. So with continued growth in BTS Europe and BTS Other markets in both top line and bottom line. Half of the business did poorly. That was North America, with very weak revenue and profit performance. We've made a lot of organizational shifts back in June and the organizational turnaround is progressing very well, both from bookings when rates are up, opportunity pipeline is growing and so forth. We are very proud of the year. It was not wasted in true BTS fashion. We are, I think, can be very proud of our internal AI innovations and our external ones, and we're bringing those learnings to the market. So if we look forward into 2026, as I mentioned, the BTS North America turnaround is progressing very well. The unit we expect will return to organic revenue growth in the first quarter with significantly improved profit already in the first quarter, which should be 1 quarter ahead of schedule. We expect BTS Europe and other markets to continue to deliver on revenue and bottom line performance in 2026, and the AI innovation will continue to benefit us in 2026. If I double-click into the AI innovations of the year, I've made a time line for you all. Basically, we made a Wonderway acquisition in 2024, which you remember. That gave us kind of an AI technology platform that does AI conversational practice. In the first 4 quarters, basically of its existence, we have it in 115 different projects, 28,000 users, and we have clients who are now doing self-service on that platform. But in addition to that, we've launched an AI super companion coach that goes across our leadership development initiatives. On our executive communication practice, we've launched a Digital Mirror. To support our end-to-end coaching portfolio, we have AI coaching fit for purpose, 3 different offerings for our clients. And these AI coaching offerings are not stand-alone. They're also integrated in Teams, Slack and Salesforce CRM. We have retrofitted and completely changed our simulation platforms across the business, giving our clients the ability to enjoy speed to develop, scale to deploy and for some clients who want to, they can build their own simulations. And within our CRM offering, we've also launched an agentic practice offering for our go-to-market sales clients. It was a really big year of innovation for BTS. If you add up the revenue associated with our AI services and our AI technology, it was $19.6 million in bookings last year, which will obviously carry forward into 2026. And so now as we -- when we talk to our clients about partnering with them, we have our traditional practices, which you're used to seeing, and we've built those out with your support over the years. And now we're overlaying essentially our own AI technology offering across our practice areas. And the feedback that we're getting in the market is, yes, there's plenty of shiny objects and HR tech start-ups, but most of our large clients are looking for an integrator. They're consolidating. They're looking for less vendors. And I think BTS is very well positioned to play that role. We have been innovating with companies for 40 years, how they learn, how they drive change, how they improve performance, and now it feels like the beginning of the next era. Of course, the AI productivity gains that we did in 2025 are going to have a material impact on 2026. So just to remind you, the total severance that was paid in 2025 was SEK 8 million in Q2 and Q3 and another SEK 10 million in December. Resulting in 2026, $5 million reduction in costs from our May AI breakthroughs and $2.6 million reduction in operating costs based on our Phase II AI breakthroughs, and we expect more to come. I would say a realistic conservative estimate in 2026 is probably about USD 1 million, SEK 10 million. And best feel on that right now is the majority of that would start to hit in the third quarter. So given all of this, we believe that our results will be better than 2025. This would be consistent with how BTS historically starts the year. Thank you very much. Daniel Thorsson: Excellent. Thank you very much, Jessica. I have a couple of questions, but just to let everybody know that if you have questions, feel free to write them in the chat and the Q&A field, and I will ask them to Jessica. But I start off with one in North America in Q1. You are extremely clear on recovering to growth in Q1 and also see profit going up in the first quarter versus last year. Is that driven by what you have seen in January, February or what you expect to see in March kind of... Jessica Parisi: Both. Daniel Thorsson: Both. Okay. So it has started off well and you expect to see it continue throughout Q1. It's not only that you started off slower in January, but you see that we're going to do a lot in March, and that's going to save the day. Jessica Parisi: No. we're not hoping for a hockey stick in March. Daniel Thorsson: Yes. I see. That's very clear. And on the guidance in 2026, would you consider the EBITDA guidance to be driven mainly by sales growth or lower costs if you have to divide them? It's obviously both. But which is the biggest one. Jessica Parisi: You can imagine how good it's going to be with good growth, right? So -- but it's -- I would say it is 50-50. We expect double-digit revenue growth in Europe and other markets to continue. And we expect North America, at least in the first half to have moderate organic growth. And because we did so much cost savings, that's kind of the cherry on top, right? So... Daniel Thorsson: I see. And on AI, you share very interesting proofs here with numbers, et cetera. While we can all see the reality that the global stock markets are extremely fared about AI for global management consulting firms, software firms, everything. And all the companies I talk to at least, they haven't really seen anything on the threat downside, but they see all the favors they can do internally. So where do you think the reality is on what you see? Do you see that your customers have a lower demand because of AI recently? Or do you only see that you can favor from it? Because there's a big discrepancy. Jessica Parisi: I mean, obviously, there's things that are in favor for BTS, and there are things that are posing challenges for us. Some interesting proof points, and I didn't mention this yet in the presentations, but an additional advantage for BTS is a new client base opportunities. So if you think of the AI hypergrowth companies to go after as clients, our West Coast office, in particular, is doing a great job of that. In fact, I can tell you that Anthropic has chosen us as their go-to-market enablement partner. That's the company behind Claude, for example. And they're using us both for our approach to driving change and enablement, but also using our technology as kind of an evidence point that there's also a new customer base, which is very exciting for our team. If I think about how the clients are reacting to the moment, I would say they shifted quite a lot over the course of the year. They started the year being very apprehensive, very slow to adopt AI. Many of the buyers saying we can't have it yet in our function and IT is on lockdown and they're only giving everybody one tool. By the end of the year, we saw much more of a stronger appetite to experiment, right? In terms of how can we do leadership development differently? How can we drive scale change? What should we do for our sellers? And BTS do have ideas on how to do things differently. I think they're still slow in general, but I think the appetite is changing. Yes, maybe I'll let you ask follow-up questions because there's probably a lot to... Daniel Thorsson: No, that's fair. We'll take one from the chat here from Oscar Ronnkvist from SEB. You say significantly improved EBITDA already in Q1. Can you specify what it means in terms of EBITDA year-over-year when it's up significantly and not only quarter-over-quarter in absolute terms? Jessica Parisi: I mean we're basically doing what we've historically done, right, which is we start the year if we see it, look better than as a forecast, and then we learn more as the months progress. But North America, in particular, because of the cost savings that we did in 2025, plus the return to moderate organic growth in the first quarter is what gives us the confidence. And for us, significantly better is 15% or higher. Daniel Thorsson: Okay. That's clear. The second question from Johan Sunden. It's related to this as well. How good visibility do you have for EBITDA outcome in North America in Q1 '26? It's probably similar to my question already. But the follow-up is how is license revenue expected to develop quarter-over-quarter and also year-over-year in North America in Q1? Jessica Parisi: We have good visibility. We're halfway into the quarter right now in terms of cost and revenue. In terms of license development quarter-over-quarter in North America, it's a mixed story on license. It's like old school and new school, right? So on the old school stuff, fortunately, for us, only about 2% of the company's total revenue is related to content license, and I kind of think that market is dead, right? And so we don't have that much more license for our clients to cancel from us on the content side. And at the same time, growth in our Verity product from the Wonderway acquisition and those AI technologies that I shared with you are progressing very well. So there will be a turning point sometime in 2026, where the license of the new products helps our overall license picture grow, right? My best gut feel is that will probably happen by the third quarter, but it's -- it will be a mixed bag until then. You don't anticipate any major decline in license, let me just to be clear. So it's more iterations here or there client by client. Daniel Thorsson: Yes, because licenses were down in Q3 and Q4 year-over-year. Jessica Parisi: Yes, yes. Daniel Thorsson: Okay. So not much more from this level down. Johan Sunden also had a follow-up on the EBITDA margins in North America, how they are expected to develop year-over-year in Q1. You already answered that by saying profits up more than 15%. I don't know if you would like to add anything on margins, but... Jessica Parisi: Not really, but it will be significantly better. Daniel Thorsson: Yes. No, true. We have another one on capital allocation. With a record low valuation, trading at 7x the EBITDA you actually did in 2025 and you expect growth in 2026. Why does the Board not consider buybacks as an alternative to drive extra growth? Jessica Parisi: Yes, yes, we've been talking about that. Daniel Thorsson: Okay. And what was the conclusion? Jessica Parisi: We have not concluded yet. It's been discussed. Daniel Thorsson: Okay. Discussed not concluded yet. I see. And then we have a question from Jonathan [indiscernible]. Could you please help one understand dynamics in the license sales as a percentage of revenue? It has historically been around 10% of sales, but it is now 7% and total sales are down. So that's down even more. Jessica Parisi: This is specifically unique to the North American market. And in the fourth quarter, there was one deal that we had done in the last 3 years with one more traditional software company, not an AI growth company. And they did not renew that in the fourth quarter. Instead, they said, we're not going to work this way with you because it was a new buyer, new budgets, but you're going to continue to be our partner this year. So we couldn't take that revenue in the fourth quarter like we had year-over-year. That's the real reason behind the decline in the fourth quarter. Daniel Thorsson: Do you think licenses will be back to 10% of sales over time? Jessica Parisi: They do. Daniel Thorsson: Yes, over time, in detail? Jessica Parisi: Yes, because we have a whole bunch of new technology now that's unique and in demand and supportive of the value proposition. So... Daniel Thorsson: Excellent. We have another one from Oscar Ronnkvist at SEB. Can you add some color on the magnitude or quantify the positive orders in North America? I guess it is up year-over-year. Jessica Parisi: Sure. I mean I think, I think the data point I can share with everybody here is that the bookings in North America in the fourth quarter was around 25% or 26% higher than the fourth quarter the year before. It was actually over 40%, but then when I took out the decline from that one renewal, we brought it down to 26%, 27%. That's probably the best data point I can give you in terms of increased demand coming into the -- into 2026. Daniel Thorsson: Perfect. We'll see. I think we have a couple of more here. License revenue, again, they are still under pressure. How important are these for your margins going forward? Jessica Parisi: This is going to sound silly, but not that important in the short term. And with, if the AI tech can take off in terms of the portfolio of the new products, it will be significant upside. Daniel Thorsson: Okay. Clear. And can you elaborate a bit on how your license revenue works? Are there -- are these onetime fees for perpetual licenses? Or are those recurring? Jessica Parisi: Thank you for the clarification. The license -- the old school license, which is the majority of our license, do not have a renewal date on them typically. Maybe that's 5% of them did that, right? Most of them were initiative based, and it was clients saying, okay, we want you to build a custom simulation for us, but we want to bring it in-house and deliver it and do the rollout, and we'll pay you license for the use of that simulation as a onetime event. And typically, they use it then for somewhere between 3 to 12 months and then it's over. The new tech offering has renewal dates, and it's just a different -- slightly different, more sticky service. Daniel Thorsson: Okay. That's clear. How should we think about employee growth in 2026? You are still a consulting firm, have been driven by a number of employees historically, maybe less so in the future, but how do you think? Jessica Parisi: Yes. So there's 2 categories of employees. There's our billable consultants who generate revenues for us and then there's the operational staff, right? And the operational staff about a year ago was 41% of our total employee base, and we could see we are going to have quite improvements in that total percentage. So I expect the number of operational staff to continue to decline, and we are expecting to increase the number of our billable consultants and revenue generators in all 3 markets this year. Daniel Thorsson: Okay. So net-net, you feel rightsized if we exclude future M&A, obviously, but on an organic basis? Jessica Parisi: In terms of total headcount delta, the interesting... Daniel Thorsson: In '26. Jessica Parisi: Yes. Obviously, the billable consultants are more expensive than the operational ones. We have plenty and low market as well. It's probably going to be about flat, to be honest. Daniel Thorsson: Cool. Fair enough. And we have another question from Jon Hyltner. You say that you expect growth in Q1 '26. That refers to year-over-year growth, I assume, you said. And is that both for the group and for North America? Jessica Parisi: Correct. That's quarter compared to Q1 the year before, and that would be both for North America and for the group. Daniel Thorsson: For the group. Excellent. That's clear. We have another one here. Could you elaborate a bit on how your unit economics have changed after this new AI revolution in BTS? Jessica Parisi: Not that much yet. So if you look at the average pricing across our services, we have had very little change, both in the fees we're charging to build and customize and co-create and the fees that we're using to deploy. That said, given the new simulation platforms, it is faster for us to do the customization and the co-creation process, right? So I think that our speed will yield smaller upfront fees in some cases, which will allow us to deploy faster. And for us, the revenue is in the deployment. So that's the profitable part of the business, and our clients usually want to move quickly. So I think overall, it will be beneficial to us to get to deploy faster than to quickly customize or co-create. That will be the biggest change. And then with the AI technology with much higher margins on that offering, that would obviously be the other one. Daniel Thorsson: I see. I also have a question on the full year guidance on '26 that EBITDA will be better than last year. If we look at the nonrecurring items in 2025, only -- if we assume 0 in '26 as a base case, that will drive 10% EBITDA growth. Jessica Parisi: Correct. Daniel Thorsson: On a flat underlying performance, and you already guide for growth in Q1 and for lower costs full year '26. Jessica Parisi: Yes. Daniel Thorsson: Doesn't it sound like a significantly better EBITDA guidance rather than a better EBITDA guidance? Jessica Parisi: Sure does. And we always start the year this way. Daniel Thorsson: I know. Excellent. I will see if we have any final questions in the chat. No, we don't. And I had the opportunity to have mine, and we got all the questions from the chat as well. So -- thank you very much. If you would like to have any final words, otherwise, I think this Q4 presentation is finalized with BTS. Jessica Parisi: Super. Thank you. Daniel Thorsson: Thank you very much.
Operator: Good day, and welcome to Sensata's Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] please note this event is being recorded. I would now like to turn the conference over to James Entwistle, Senior Director of Investor Relations. Please go ahead. James Entwistle: Thank you, operator, and good afternoon, everyone. I'm James Entwistle, Senior Director of Investor Relations for Sensata, and I would like to welcome you to Sensata's Fourth Quarter and Full Year 2025 Financial Results Conference Call. Joining me on today's call are Stephan Von Schuckmann, Sensata's Chief Executive Officer; and Andrew Lynch, Sensata's Chief Financial Officer. In addition to the financial results press release we issued earlier today, we will be referencing a slide presentation during today's conference call. The PDF of this presentation can be downloaded from Sensata's Investor Relations website. This conference call is being recorded, and we will post a replay on our Investor Relations website. As we begin, I would like to reference Sensata's safe harbor statement on Slide 2. During this conference call, we will make forward-looking statements regarding future events or the financial performance of the company that involve certain risks and uncertainties. The company's actual results may differ materially from the projections described in such statements. Factors that might cause such differences include, but are not limited to, those discussed in our Forms 10-Q and 10-K as well as other filings with the SEC. We encourage you to review our GAAP financial statements in addition to today's presentation. Much of the information that we will discuss during today's call will relate to non-GAAP financial measures. Our GAAP and non-GAAP financial measures, including reconciliations, are included in our earnings release, in the appendices of our presentation materials and in our SEC filings. Stephan will begin the call today with comments on the business. Andrew will cover our results for the fourth quarter and full year of 2025 as well as our financial outlook for the first quarter of 2026. Stephan will then return for closing remarks. We will then take your questions. Now I would like to turn the call over to Sensata's Chief Executive Officer, Stephan Von Schuckmann. Stephan Von Schuckmann: Thank you, James, and good afternoon, everyone. Let's begin on Slide 3. As I typically do at the start of our earnings calls, I would like to begin today with an update on Sensata's transformation journey. Throughout the year, I've spoken about our transformation through a framework of 3 key pillars: operational excellence, capital allocation and growth, along with the various initiatives which underpin them. These key pillars for value creation are fundamental to everything we do. Initiatives that we discussed this year are simply building blocks, laying a foundation on which we build our future. As we enter 2026, I'm proud of the work we did to put those building blocks firmly in place, and I'm excited to share more about the next phase of our transformation. Before we get to the next phase of our transformation, I would like to take a moment to acknowledge the magnitude of what we accomplished this year and to thank the Sensata team for their tremendous work. Our team demonstrated resilience and determination to perform, continuously overcoming the many challenges that came our way and always delivered on our commitments. I'll share more proof points in a moment, but at a high level, as we reflect on the year, the outcome of our 3-pillar approach is compelling. With our focus on operational excellence, we reported results at or above the midpoint of our guidance ranges every quarter this year. With our focus on capital allocation, we created urgency to improve cash generation, reducing both gross and net leverage and returning capital to shareholders. And with our focus on returning to growth, we overcame structural challenges in our business and end market mix, ultimately returning to outgrowth in the second half of 2025 and returning to revenue growth in the fourth quarter. We have a structured way of working, starting with a measure-based approach to prioritize hitting our targets. To compound value over time, we continuously raised the bar, setting new targets incrementally higher than the previous ones. This way of working is now ingrained in our organization and is embedded in everything that we do. Maintaining this rigor requires determined, resilient leadership. Let's turn to Slide 4, as I would like to highlight the industry-leading executive team we have assembled over the past year. Our leadership team is a balanced mix of new talent with best-in-class industry experience and proven Sensata performance. The team has demonstrated that they will rise to meet the challenge of the moment, and I'm confident that we have the right team in place to lead us through the next phase of our transformation journey. With that, let's turn to Slide 5, and I'll share a bit more about this past year's transformation. This year's performance demonstrates not only the progress we made, it also sets a benchmark for the organization we expect to be. We finished 2025 with a strong fourth quarter, capping off a year in which we met or exceeded our expectations across each of our key metrics for 4 consecutive quarters. The results are proof points for the progress we made across each of our key pillars. Let's start with operational excellence. We exited the year with Q4 adjusted operating margin of 19.6%, representing 30 basis points of year-over-year margin expansion despite headwinds from tariffs. With that strong finish in 2025, we delivered on our commitment of 19% adjusted operating margin for the year. This was a major inflection point for us and it was the first year since 2021 without year-over-year margin contraction. This is a testament to the resilience we have installed in this business and the seriousness with which we take our commitment to our margin floor of 19%. Free cash flow has been an area of significant focus, and we believe our progress is a leading indicator of the impact to come from the operational improvements we are making. We made significant strides in improving free cash flow this year, generating a record $490 million at a 97% conversion rate. This conversion rate was an improvement of 21 percentage points from prior year and is significantly higher than any year in our history aside from the abnormal 2020 pandemic year. With our strong free cash flow, we accelerated value creation through our capital allocation pillar, returning $191 million to shareholders through buybacks and dividends while also retiring $354 million of long-term debt in the fourth quarter. Our net leverage now stands at 2.7x trailing 12 months adjusted EBITDA and with $573 million of cash on hand as of December 31, we have ample liquidity. Our third key pillar is growth. In our long-cycle business, the initiatives we took this year to drive growth will show up in the quarters and years ahead, and we're already seeing compelling signs of progress. We delivered on our commitment to return to outgrowth in the second half of 2025, outgrowing production in Q3 and delivering 4% organic growth in Q4. With this progress, we are doubling down on our growth mandate moving forward. I'm tremendously pleased with the transformation that we've executed this year and the value we created in our first year on this journey. I also want to be clear that we are not done. What we have accomplished sets the foundation for an even brighter future. I'm excited to share more about the next phase of our transformation. Turn to Slide 6, and I will start by more clearly defining Sensata. Sensata is a uniquely diversified business. We install sensing and electrical protection products into multiple end markets with automotive being our largest market. This at times creates confusion. Some see Sensata as an automotive business with exposure to other end markets. Others see Sensata as a diversified Industrial business with outsized Automotive exposure. Neither view is entirely accurate. As we look towards the next phase of our transformation, we reconsidered how we are organized. We looked at factors such as business cycles, market cycles, customer mix and go-to-market strategy. After careful evaluation, we reorganized Sensata into 3 operating segments, each with a distinct mandate for value creation and growth. These 3 segments are Automotive, which was approximately 57% of 2025 revenue; Industrials, which was approximately 21% of 2025 revenue; and Aerospace, Defense and Commercial Equipment, which was approximately 22% of 2025 revenue. Each operating segment is aligned to market verticals that are clearly delineated by customers, sales channels, growth drivers and business cycles. Automotive is a relatively mature end market with limited underlying production growth, making this a market outgrowth-driven segment. We enjoy high volumes and revenue certainty tied to underlying vehicle production because our products are designed in on long-lived vehicle platforms. We outgrow production by increasing our content on vehicle platforms and by positioning the business to succeed on all propulsion technologies. Our ability to grow regardless of propulsion type is an enviable position in the automotive market compared to many of our peers and competitors who are levered primarily to either ICE or EV. This also positions us to grow in all geographies despite differing powertrain trends. Industrials is a highly diversified and primarily short-cycle business with a mix of direct to OEM distribution channel and project-based sales. Our Industrial segment includes derivatives of sensor products from our other end markets as well as products developed specifically for Industrial applications such as gas leak detection and certain electrical protection devices. Because the Industrial segment is so diversified, it offers the most growth opportunity in terms of new applications or markets for our products. This includes several areas with secular growth such as thermal management, grid hardening and data centers. Aerospace, Defense and Commercial Equipment is also highly diversified, but is more long cycle and platform-driven. The end markets we serve include commercial aviation, defense, commercial trucking, construction equipment and agricultural equipment. The platform lives in these markets are significantly longer than in automotive, often spanning multiple decades. The applications for our products cyclically support long service lives often in harsh environments, leading to much higher specifications and at premium price point for higher durability. Each of the markets we serve in this segment experienced cyclical growth. The cyclicality is influenced by macroeconomic factors as well as by government policies such as defense spending, environmental standards, tax incentives and farm subsidies. As a result, we see a confluence of different cycles, often affording us the flexibility to manage the segment by balancing contracyclicality. Historically, the market thought of Sensata as having high automotive concentration and therefore, being a market outgrowth business in a low-growth market. Sensata's growth history has, to a certain extent, reinforced that view. As we think about value creation moving forward, we see a much wider field of opportunity, which is best summarized in our 3-part growth framework. Let's turn to Slide 7. First, we design, produce and sell sensing and electrical protection products in multiple end markets, each with the different growth dynamics I just described. Second, we leverage our automotive scale and pedigree to our advantage. The high volumes and production certainty afford us the flexibility to manage through market volatility in our other end markets while underwriting growth investment. And the high quality and delivery standards in automotive enable us to win in other markets. Third, we use the common characteristics of our most successful programs to set clear guardrails for new business opportunities. That means we stick to our core products and technologies while focusing on high-volume platform-driven business opportunities, serving mission-critical or regulated applications. As we develop growth strategies for each of our segments, we have been disciplined about filtering the market for growth opportunities that fit this framework, and we're excited about the opportunities we see. With that, I would now like to offer a glimpse into the next phase of our transformation, accelerating value creation by delivering growth in each of our segments. Let's turn to Slide 8, and I will discuss our Automotive segment, where our mandate is to foster our core business while delivering growth across all propulsion types. Recently, we have seen content accretive business opportunities on plug-in hybrid vehicles or PHEVs, and extended range electric vehicles or EREFs. This vehicle type is particularly attractive for Sensata. Allow me to illustrate as we turn to Slide 9. Approximately half of the dollar value of content that we have on a traditional ICE vehicle is outside of the powertrain and thus is still relevant on an EV. This includes sensor sockets in the air conditioning and brake systems as well as tire pressure sensors. On a typical EV, we see these same sensor sockets as well as additional content opportunity from electrical protection sockets in the electric powertrain and charging architecture. In aggregate, our content per vehicle opportunity on an EV is approximately double that of an ICE. In between ICE and EV are various hybrid platforms. A mild hybrid will look more like an ICE vehicle, while a plug-in hybrid or range extender will be more like an electric vehicle. Let's turn to Slide 10 to unpack this further. In 2026, in an automotive market that is expected to be approximately flat, PHEV and EREV production is expected to grow 17%. And over the balance of the decade, we expect a 12% CAGR for these vehicle types. The content potential on a plug-in hybrid or range extender is attractive due to the availability of all 3 socket categories: ICE powertrain, high-voltage electrical protection and sensor content outside of the powertrain. As these vehicles win in the market, we expect they will emerge as a meaningful outgrowth driver for us and yet another proof point for our competitive advantage in not being indexed to any single propulsion technology. Now let's turn to Slide 11 and take a look at Industrials. Our Industrial segment has a strategic mandate to deliver growth across 3 key technology areas: power and peak management, thermal management and electrical protection. We see demand over these products in multiple areas, including HVAC, appliances, buildings and microgrid. One of the most compelling growth vectors is data centers, and I'd like to briefly click down to share more about where we see opportunity. Let's turn to Slide 12. In the past, we have shared that we have some content in data centers today, but that we are underpenetrated in this market. These opportunities span our key Industrial product areas. As you can see illustrated on this page, the content opportunity inside the data center is significant. Turning to Slide 13. There are meaningful opportunities outside the data center as well. One of our growth initiatives in 2026 is to expand our share in data centers. What I can share today is that in the fourth quarter of 2025, we stood up an initiative to deliver growth in data centers. We allocated some of our top performers to this critical growth initiative. And as we demonstrated in 2025, we take execution of our initiatives seriously. I look forward to sharing positive update here as the year progresses. Lastly, I will discuss our Aerospace, Defense and Commercial Equipment segment, starting on Slide 14. We serve multiple market verticals in this segment, which can be grouped as aviation, ground transportation and off-highway equipment. We have a dual mandate for this segment to position the business to weather market cycles and to grow our aerospace and defense business into a more meaningful part of the portfolio. We see ample opportunities for revenue growth in the super cycle that is developing across both commercial aviation and defense. With that, again, I will briefly click down to share a bit more about where we play and where we see opportunity. Let's turn to Slide 15. Aerospace is one of our smaller and often overlooked market verticals today, yet it is one of the darlings of our portfolio with high margins and outstanding growth potential. Earlier, I talked about our automotive pedigree. In aerospace, pedigree matters too, being in flight on commercial airliners is the gold standard, and we're in flight today, both with position sensors and aircraft circuit breakers. Given the backlog for commercial aircraft, we expect meaningful growth from this part of our portfolio. With increased defense spending as a clear secular trend, let's turn to Slide 16 and take a look at that sector. UAVs offer high-volume platform-driven opportunities for both sensing and electrical protection products, perfectly aligned to the growth framework I described. We look forward on future calls to sharing more about our progress on accelerating growth in this key end market. With that, I will now turn the call over to Andrew to offer more insights into Q4 and full year results as well as to share our outlook for 2026 and guidance for the first quarter. Andrew Lynch: Thank you, Stephan, and good afternoon, everyone. Let's begin on Slide 18. As Stephan mentioned earlier, 2025 was a transformative year for us as we rolled out new initiatives framed around 3 key pillars. Our Q4 and full year results are proof points for the progress we made. We reported revenue of $918 million for the fourth quarter of 2025, which exceeded the midpoint of our guidance range by $13 million. Fourth quarter revenue represented an increase of $10 million or approximately 1% compared to $908 million in the fourth quarter of 2024. This was the first year-over-year quarterly revenue increase since the first quarter of 2024. On an organic basis, revenue increased approximately 4% year-over-year in the fourth quarter. We delivered adjusted operating income of $180 million and adjusted operating margin of 19.6% in the fourth quarter of 2025, an increase of 30 basis points, both sequentially and year-over-year. Adjusted operating margin was diluted by approximately 30 basis points due to approximately $15 million of 0 margin pass-through revenues related to tariff recovery. Excluding the dilutive impact of tariff pass-through, fourth quarter adjusted operating margin increased by 60 basis points year-over-year and 40 basis points sequentially. Tariff pass-through revenues did not meaningfully impact sequential performance as we recorded similar levels of tariff cost and pass-through revenues in both the third and fourth quarter of 2025. Adjusted earnings per share of $0.88 in the fourth quarter of 2025 increased by $0.14 year-over-year as we delivered on our margin expansion plans. Adjusted net income was $130 million in the fourth quarter of 2025, an increase of approximately 16% year-over-year. We recorded approximately $50 million of restructuring-related and other charges in the fourth quarter. While these charges primarily related to our ongoing transformation efforts, they also included approximately $16 million of primarily noncash charges related to an electric vehicle program cancellation by an OEM customer. These costs were excluded from our non-GAAP financial metrics. Now let's turn to Slide 19 to review our financial performance for the full year 2025. 2025 revenue was $3.70 billion compared to $3.93 billion in 2024, a decrease of 6%, primarily due to our previously disclosed divestitures and product life cycle management actions. On an organic basis, revenues were approximately flat year-over-year against a challenging market backdrop. We delivered $705 million of adjusted operating income in 2025, which was a decrease of 6% from $749 million in 2024, primarily due to lower revenue. Adjusted operating margin was 19.0%, flat to 2024 despite the 6% lower revenue as our productivity gains offset any deleveraging impacts. 2025 adjusted operating margin was diluted by approximately 20 basis points due to approximately $40 million of 0 margin pass-through revenues related to tariff recovery. Excluding the dilutive impact from tariff recovery, 2025 adjusted operating margin increased by 20 basis points year-over-year. 2025 adjusted earnings per share of $3.42 decreased by $0.02 year-over-year and 2025 adjusted net income of $503 million decreased by approximately $16 million year-over-year. The primary driver of these decreases was lower net revenue due to product divestitures. Adjusted net income as a percentage of net revenue increased by 40 basis points year-over-year from 13.2% in 2024 to 13.6% in 2025. Now let's turn to Slide 20 to discuss our free cash flow performance. We delivered record free cash flow of $490 million in 2025, an increase of 25% compared to 2024 free cash flow of $393 million. Free cash flow conversion was 97% of adjusted net income, an increase of 21 percentage points year-over-year. In 2025, we reduced net leverage from 3.0x trailing 12 months adjusted EBITDA as of December 31, 2024, to 2.7x as of December 31, 2025. In the fourth quarter, we took advantage of favorable bond market conditions to retire $354 million of our long-term debt. In connection with this transaction, we recorded a net gain of approximately $3 million, which we excluded from our adjusted operating results. Turning to Slide 21. We returned $191 million to shareholders in 2025, which consisted of $121 million in share buybacks and $70 million in dividend payments. Last month, we announced our first quarter 2026 dividend of $0.12 per share payable on February 25 to shareholders of record as of February 11. Our capital allocation strategy continues to prioritize deleveraging as a means to compound value for our shareholders. ROIC in the fourth quarter increased to 10.6%, which is an improvement of 40 basis points year-over-year compared to the fourth quarter of 2024. Now let's turn to Slide 22, and I will walk through the results for our segments for the fourth quarter of 2025. In connection with the reorganization that Stephan described, our reporting segments are now Automotive, Industrials and Aerospace, Defense and Commercial Equipment. This new segmentation reflects a reorganization of our business and leadership to align with our strategic imperatives and to most effectively execute our strategy. With this new reporting structure, we look forward to giving investors enhanced visibility into our business results and the ongoing progress of our transformation journey. Growth is an increasingly important metric for us as we move to this next phase of our transformation journey. We were pleased that each of our segments delivered year-over-year organic revenue growth in the fourth quarter. Automotive segment net revenue was $527 million in the fourth quarter of 2025, a decrease of approximately 1% year-over-year on a reported basis, primarily due to product divestitures. Organically, revenue increased approximately 1% year-over-year, which was approximately in line with the market. Segment adjusted operating income was approximately $129 million in the fourth quarter of 2025 or 24.4% of segment revenue, representing year-over-year margin expansion of 100 basis points. Industrial segment net revenue was $191 million in the fourth quarter of 2025, an increase of 6% year-over-year on a reported basis and 8% organically. This strong year-over-year growth was driven by continued growth in our gas leak detection business. Segment adjusted operating income was $59 million in the fourth quarter of 2025 or 30.9% of segment revenue, representing year-over-year margin expansion of 620 basis points. Finally, Aerospace, Defense and Commercial Equipment segment net revenue in the fourth quarter of 2025 was $199 million, which grew approximately 4% year-over-year on a reported basis and 7% organically. Segment adjusted operating income was approximately $56 million in the fourth quarter of 2025 or 28.1% of segment revenue, representing year-over-year margin expansion of 310 basis points. Adjusted corporate and other costs include higher variable compensation costs associated with the improved segment performance. Before we get to our guidance for the first quarter of 2026 and outlook for the year, I will share what we are seeing in our end markets. Let's turn to Slide 23. In automotive, we saw Q4 light vehicle production growth of a modest 2%. For the year, we saw light vehicle production growth of nearly 4% with the market in China growing 10%, while production in the West, where we have higher content per vehicle, decreased by 1%. Looking ahead to 2026, we expect global light vehicle production to be flat to down 1% with similar trends across each region. In Q1, we expect global light vehicle production to decrease by 3% to 4%, and then we expect modest year-on-year production growth each quarter thereafter. In our Industrial segment, 2025 GDP growth was just under 2% in the West and just over 4% in Asia. We expect similar regional growth differences in 2026, including in the first quarter. Our Industrial business is primarily indexed to housing, construction and HVAC, and we continue to see soft end market demand and limited year-on-year market growth as the market works through the drawdown of inventory that was built up in response to tariffs and regulatory changes. We expect this drawdown to continue through the first half of 2026 and we are optimistic that market expectations for lower interest rates set up a second half recovery. In our Aerospace, Defense and Commercial Equipment segment, North America On-Road truck production decreased 26% year-over-year in 2025 and decreased 22% in the fourth quarter. We are expecting similar decreases through the first half of 2026, followed by modest recovery in the second half with an overall production decrease in the mid-single digits for the year. However, as this end market recovers in the second half of 2026 and ramps sequentially from the first half, it will be margin accretive for us. In Aerospace and Defense, we saw low single-digit blended growth for both Q4 and full year 2025, and we are expecting similar growth throughout 2026. With that, let's turn to Slide 24, and I will walk through our expectations for the first quarter of 2026. We expect first quarter revenue of $917 million to $937 million, adjusted operating income of $168 million to $175 million, adjusted operating margins of 18.4% to 18.6%. Adjusted net income of $118 million to $125 million and adjusted earnings per share of $0.81 to $0.85. At the midpoint of our guidance range, we expect year-over-year revenue growth of approximately 2%, year-over-year adjusted operating income growth of approximately 3%, year-over-year adjusted operating margin expansion of 20 basis points and year-over-year EPS growth of $0.05 per share. At the midpoint of our guidance range, we have assumed approximately $12 million of tariff costs and pass-through revenues. As noted in our press release and earnings materials, our guidance and tariff assumptions are based on trade policies and tariff rates in effect as of February 18, 2026, and do not incorporate any impacts from potential changes to trade policies. As we discussed last quarter, our Q1 guidance range reflects Q4 to Q1 margin seasonality related to the timing of customer pricing, supply chain productivity and inventory turns. We have taken measures to improve this dynamic, which is reflected in the 110 basis point step down at the midpoint of our guide compared to the approximately 200 basis points experienced during the reference period of 2015 to 2019. Similar to 2025, we expect margins to normalize to 19% or better in the second quarter and then expand each quarter thereafter. While we are not providing full year guidance, I would like to share some early thoughts on our outlook for 2026. We currently expect low single digits year-over-year revenue growth. We expect to participate in market growth in both our Industrials and Aerospace, Defense and Commercial Equipment segments, and we expect to deliver market outgrowth in our Automotive segment. Precious metals pricing has emerged as a headwind for us to mitigate in 2026. Our most significant exposures are silver, gold and platinum, all of which we hedge, affording us time to work through pricing with our customers. With the work we did to mitigate tariffs last year, we developed a toolkit of measures, which we are now deploying to manage precious metals inflation. We do not see risk to our Q1 guide associated with metals. On a full year basis, we expect to offset any precious metals headwinds through a combination of supply chain optimization, product redesign and pass-through of these costs to our customers. Our cost recovery muscle is well developed, and we take margin resilience seriously. We reiterate our annual margin floor of 19%. However, we are targeting margin expansion of at least 20 basis points on a full year basis. Finally, with respect to free cash flow, we were thrilled with our 2025 free cash flow performance, converting at 97% of adjusted net income, which allowed us to accelerate the execution of our deleveraging plans. As we look ahead to 2026, we may see slightly lower free cash flow conversion than what we delivered in 2025, particularly in the first half of the year. First quarter seasonality is impacted by variable compensation payments related to prior year performance, which in 2026 are approximately $20 million higher than they were in 2025 due to the stronger underlying performance. We have additional seasonality related to interest payments, which are largest in the first and third quarter. Consequently, we expect Q1 free cash flow conversion to be our seasonally lowest quarter and likely below our 2025 result, primarily due to the higher variable compensation payments. On a full year basis, we are targeting performance in the high 80s, well above the 80% floor that we established last year. With that, I will now turn the call back to Stephan. Stephan Von Schuckmann: Thank you, Andrew. Let's turn to Slide 25, and I'll make a few closing remarks. I'm tremendously pleased with the 2025 results that Andrew just shared. We are in the early stages of what we expect will be a multiyear transformation journey. However, these results are evidence of just how significantly our business has changed for the better in such a short period of time. As we look ahead to 2026, we are in a fundamentally different place than we were a year ago. We have built an organization that is intently focused on execution, and we have adopted a highly structured way of working. We start with KPIs that are designed to create value. We underpin those KPIs with targets that are benchmark-driven always against best-in-class performance. For each target, we define metrics against which we regularly evaluate progress. And behind those metrics are a pipeline of measures, each with accountable owners. The structured style of working is deeply ingrained in our organization. While 2025 was indeed a compelling proof point that our approach is working, maximizing value creation must always be our goal. Unlocking value means continuously raising the bar. As we turn the corner into 2026, we must build upon the foundation we laid in 2025. We have taken bold steps to do exactly that. We have reorganized our business into 3 distinct operating segments, each with unique growth and end market characteristics and specific growth mandates. We developed a clear framework through which to pursue growth, and we installed the right leadership team, including new segment leaders to execute the next phase of our transformation journey. As with everything we do, the goal of this transformation is value creation, and that is how we will measure our success. I could not be more excited for what is ahead. The future is bright, and I look forward to updating you on our progress along the way. I'll turn the call back to James for Q&A. James Entwistle: Thank you, Stephan and Andrew. We will now move to Q&A. In order to ensure adequate time for all participants to ask a question, we will limit each participant to one question. Should you wish to ask a follow-up question, please reenter the queue. Operator, please introduce the first question. Operator: [Operator Instructions] The first question today comes from Wamsi Mohan with Bank of America. Wamsi Mohan: Stephan, given the transformation underway where you've made a lot of progress here, can you just talk about how you see the longer-term revenue potential of the portfolio? I appreciate your 2026 guidance that you have given. But how should investors think about the ultimate like revenue growth potential here over a longer period of time, especially since you emphasized how key it is to your strategy? Stephan Von Schuckmann: Wamsi, thanks for the question. So I think it's very important to mention that the overall growth opportunity that we've shown you on the slides today and especially in the call and in the different segments, that is real. So it's definitely real growth. We have different products, different solutions for each segment. So we feel that's real, and that's definitely also the next building block of value creation. Secondly, we have a very clear growth mandate per segment. And also equally important to mention, we have the right team in place to execute this growth. So we've had our proof points, as we've mentioned in the call, and Sensata has returned back to growth in the second half of 2025. And -- additionally to that, we have a broad opportunity for growth across all products and all segments. So if you ask me, I feel really good about the growth opportunities that we have in 2025 (sic) [ 2026 ], and I feel equally optimistic around the growth opportunities that we've shown in each and every segment in 2027 and onwards. Yes, there's still a lot of work to do. And we still need to penetrate some of these markets and some we're in, like I've mentioned. But I feel very confident that we're on a good track, and I feel very confident about growth going forward in 2027 and onwards. Operator: The next question comes from Joe Giordano with TD Cowen. Joseph Giordano: Look, I think you guys explained the segmentation well in terms of like the thought process behind it. My first initial thought when I saw it was, okay, 2 of these segments are fairly small, and this is a company like focused on efficiency. So Stephan, can you talk to me how you balance like, okay, now we have 3 reporting structures, 3 presidents, you kind of add a little, like -- I don't want, bureaucracy is the wrong word there, clearly. But like you add more kind of fixed structure there. How do you weigh that against what you're getting by separating it this way? Stephan Von Schuckmann: Let me let Andrew start on the fixed cost structure part on the overhead, and then I'll jump in. Thanks, Joe. Andrew Lynch: Yes. So Joe, I mean, just from a cost perspective, you're right. We've added a little bit of cost to the overhead structure here in our corporate costs, and we expect that to be sort of the normalized run rate moving forward, take variable compensation costs out. That was a little higher in Q4. But in general, we expect the second half run rate to sort of be our normalized run rate moving forward. We expect that to pay for itself. I mean the expectation is that, that's an investment. And with that investment, we will drive growth and margin expansion in each of our segments that more than offset that incremental cost. And I'll let Stephan talk to the thinking around strategy here. Stephan Von Schuckmann: Exactly. So Joe, I see it as this, the resegmentation, and we mentioned it in the script, is all about value creation. And we've been executing, which is the first building block around value creation. But if you look at the second building block, which is everything around growth, we felt that with this segmentation, this gives us this level of opportunity. And allow me to order that a bit strategically. So the resegmentation is anchored in our end markets. And I think that's very important around value creation. It also reflects how we structurally manage and operate the business at Sensata despite now having 3 instead of 2 segments. What it also does, it strengthens alignment with our strategic pillars. So driving focused growth and again, operational excellence, which was a focus in 2025, and does this by recognizing the distinct characteristics and value drivers of each segment. That alone is for me, value creating. And additionally to that, each segment now operates with a clear growth mandate and defined accountability, supported by designated leadership, which is responsible for executing these very segment-specific strategies. So that's our path to value creation by splitting up into 3 segments coming from 2 in the past. Operator: The next question comes from Mark Delaney with Goldman Sachs. Unknown Analyst: You have [ Vermont ] on for Mark. The company mentioned that they're targeting low single-digit outgrowth in the Auto segment in 2026. And you previously talked about targeting bookings with domestic OEMs in Asia and in China. Can you maybe talk a little more about how those bookings with the domestics have been tracking and to what extent that and other factors are underpinning the low single-digit outgrowth expectation in 2026? Andrew Lynch: Yes. Absolutely. Thanks for the question. Do you want to start? Stephan Von Schuckmann: So let me jump in first and then Andrew, please add. So to the point in winning additional business in Asia, let me explain it the following way. So since the last call -- so let me start differently. So what we've done, and this has been very supportive in the business development in these last couple of months, is first of all, we've strengthened our Asia team from an organizational point of view. So we've implemented a China President, and you saw that in the beginning, a gentleman called Jackie. Jackie has been highly successful within China in winning new business. And since the last call that we had together, Jackie has won additional business, specifically with Chinese OEMs. So it's been very successful, and I feel very bullish about that. We've been winning business with contactors, but also with other content around sensing. And it's been a great part for us, utilizing our plants and -- with broad business wins. Now addition to that, so if I look at the -- allow me to look at the region maybe a little bit more from a broader perspective. We've also won good solid business in Japan. And let me give you one specific example. So we have doubled our revenue with a leading Japanese OEM, and we've also won further business in Japan in these recent months. I've actually just been in Japan, and it was very, very good to see what business the team has won there and exciting to see that. And then I've actually -- while I was down there, I traveled over to South Korea to meet our team in South Korea. And we've also won good business with customers in South Korea. And think about it from this point of view, the content per vehicle of the business that we've now won in South Korea with local customers has exceeded the North American OEM content and -- content per vehicle. And that is obviously traditionally the highest content per vehicle for Sensata, and we've now managed to exceed that in South America. So overall, I think we've made good progress there. Look, again, a lot of work to do, and we have a great ambition for 2026 to win further business, but I'm very, very happy with the progress that we've made in China and Japan and South Korea and overall in Southeast Asia. Andrew, any point you wanted to add? Andrew Lynch: Yes. I'll just add on the content per vehicle dynamic. As you noted, we had a challenge earlier in the year with our mix and our exposure to local OEMs. The enabler for us returning to outgrowth in Q3 was effectively that we've overcome that headwind. We won enough business with local OEMs in China that if you take the top 10 to 20 OEMs in that market and compare them to the multinationals where we've historically had really strong content, we're effectively at parity. And so we've overcome that mix headwind in China, which has enabled us to outgrow that market in the back half. And then more broadly, the automotive market as a whole, we saw production start to normalize in the sense that China was not outgrowing the broader market by such a rate that it made it impossible to outgrow the market. And we expect similar in '26. We expect market growth across regions to be more or less similar. And so our content difference in China will be less relevant because of the similar market growth in each region. Operator: The next question comes from Robert Jamieson with Vertical Research. Robert Jamieson: Just want to focus back on the new segment structure. And I think the separation obviously makes a lot of sense. And as Joe alluded to, there's obviously some costs that come with that. But as we think about this as we go forward, does this potentially help you become more nimble from an organic reinvestment standpoint in the different segments where you see fit given you have dedicated leadership and potentially have them -- have a higher ability to capture opportunities as they arise, more quickly to drive growth through the cycle, particularly given the focus on winning with the right products and customers across the portfolio? Is that the right way to think about part of this change? Stephan Von Schuckmann: To keep it short, that's exactly the right way to see it, yes. That's exactly the thinking behind it. Each segment that we've defined is unique for itself and each segment has ample opportunity for growth. And with a very strong and partially new leadership team in place, we feel very confident that we can generate values by doing that. I think this is -- you summarized it very well. Robert Jamieson: Okay. Perfect. And then sorry, just one quick follow-up there, too. Stephan, as you've traveled quite a bit across the globe, any new learnings or areas of focus outside of what you've discussed today that you'd like to improve upon just across any of the new segments? Stephan Von Schuckmann: So one big learning is, especially now that I've also been to Southeast Asia and I met my teams in Japan and Korea -- and I'll still travel on beyond that. To be open, I'm even more confident with what I see and the strong team that we have and the capabilities that we have. This is really, I think, something that stands out with Sensata in comparison to others. When I travel to Japan, we have a long, long-standing team with a great amount of experience and have been with the company for many years. So they know exactly how to generate business and how to generate value there. With the right guidance and with the right leadership now in place and especially with the new team, I really feel good about that. So that's basically been a reconfirmation of what I have seen in other areas that I visited, for example, in China, which I see a similar picture or even in Mexico and other regions. I wouldn't list them all up now, but that's been very encouraging. And I think that foundation gives us the opportunity around value creation and growth and everything that we have ahead of us. Operator: The next question comes from Joseph Spak with UBS. Joseph Spak: I wanted to touch, Stephan, on some of the opportunities you mentioned in the data center, and I know you have some content in and outside, as you highlighted on the slides. And some of that actually looks new for '26. But I guess the question is, as you sort of form this team to focus more on the opportunity, is that expected to deliver mostly organic results? And if so, is that leveraging existing tech and finding new uses? Or does that mean new R&D? Or will there be some inorganic opportunities potentially that present themselves? And then I guess just a quick aside to that as well. Like I know you've taken like almost $400 million of write-downs on Dynapower, but were those -- were any of those asset write-downs, meaning that if you start to leverage that tech for these opportunities, the margin accretion could be quite good? Stephan Von Schuckmann: Thanks for the question. Let me elaborate a bit how we see data centers and what organic growth opportunities we have with them. So I think, first of all, very important to mention that we have -- that our products are in data centers today. So in existing data centers that are up and running. And I'll say that for products that are both inside data centers and outside of data centers. And that's really broad. So inside data centers, we're talking about electrical protection. So we're talking about circuit protection, circuit breakers, fuses, content. Those are all existing products. Think of sensing, so pressure and temperature sensing, think of refrigerant leak detection and so on. Those are all existing products within data centers today. They are designed in hyperscalers that design those Sensata products into data centers that exist. The same applies to products outside of data centers or Sensata products outside of data centers. So we're talking about power and peak management, which is converters, inverters. We're talking about electrical protection, so like contactors, motor protection and so on. So these are all existing products inside of the data center. That's very important. So this is all organic -- organic growth if we grow with -- if data centers are growing, we grow with them if they're designed into the concept. Now beyond that, it's still within the range of organic growth. We're also designed into future data center concepts. So you have the hyperscalers that specify the Tier 3 components. And basically, once they specified and once they're approved, they're designed into these future concepts. So we're designed into future data concepts with certain hyperscalers. So not all, but with certain. And on the other hand, we're in deep discussions with others. So we obviously have the ambition within 2026 to try and get design into most hyperscaler concepts of the Googles and Amazons and Meta and so on. And now beyond that, we want to leverage our sensing capabilities to develop further unique products to broaden the product portfolio that we have today, everything that I've just mentioned, which is organic growth, we're going to broaden that, and that is related to own R&D. And you could see on some of the slides, that's, for example -- one example is flow sensors. So that's within our own development, and we're going to design a specific flow sensor for data centers and going to design that in the future data centers that we're currently discussing. So that's just -- that's it. And then we have -- within data centers, we have specific focus areas, like liquid cooling for data center racks where we feel we have a very competitive position. So overall, strong position with existing products, a lot of ideas for future products that we're currently working on, and that will give us ample opportunity to grow within the data center segment -- market. Andrew Lynch: And on the Dynapower question, just to add some clarity there. So the charge that we took was a goodwill impairment charge. And so we won't see any margin lift associated with lower amortization or depreciation for that example. But I think it does raise an important point, which is how we think about margin expansion and productivity. And we're focused on real margin expansion. And so when we say we're looking to expand margin at least 20 basis points next year, we're focused on doing that through a combination of improved volume and volume leverage and productivity. One of the things that will help margins over time is the fact that we've gotten more disciplined about our capital expenditures and deploying flexible line concepts to keep CapEx lean, and we expect that will show up in lower depreciation expenses over time. But our focus is on real margin expansion and not write-offs. Operator: The next question comes from Luke Junk with Baird. Luke Junk: Just curious about a couple of the newer areas that you unearthed tonight, specifically data center and defense. Just wondering if you'd be able to speak to materiality for both of those in terms of percentage of sales today. And then just as we're trying to think about the growth profile potential, I don't know if you could speak to any historical growth in terms of recent growth trends or maybe put a finer point on some of the opportunity from here? Andrew Lynch: Sure, Luke. I'll take the first part of that question on the size of the segment. So Aerospace, Defense and Commercial Equipment segment in total is about $800 million of revenue on an annualized basis. If you break that down, there's obviously multiple market verticals that we serve within that segment. I'll give you sort of a high-level breakdown. About 40% of that is on-road truck across the 3 key regions that we serve there. Another roughly 25% tied to the construction end market. Another roughly 10% tied to the agricultural market. The balance of that segment would be in other off-road vehicles as well as commercial aviation, defense, aftermarket, distribution. Those all break down pretty equally in sort of the 7% to 10% size range each. So pretty diversified. And within those, we see the highest growth opportunity from end markets in commercial aviation and defense given the higher level of spend. And then on top of the end market growth opportunity, there's obviously opportunity around new content that we called out. And I'll turn it over to Stephan to talk a little bit more about the growth that we see. Stephan Von Schuckmann: Exactly. So let me explain the growth opportunity around defense in a bit more detail. So here, I think it's important to mention, we also said it in the script, we're obviously in a period of a super cycle growth of EU and U.S. Defense spending. And Sensata has a fantastic opportunity to participate in this growth. And today, there are multiple defense applications being served with our products across fighter jets, helicopters, ground transportation vehicles. These are obviously all strongly growing applications. And then we have the emerging UAV, or unmanned aerial vehicle market, where we really see significant growth opportunities. And you also saw in the slide that within those UAVs, we really have existing business with all different types of products in powertrain systems and precision sensing and feedback, flight control and actuation systems and mission systems and targeting, where we have a broad range of products within the actual drones or UAVs today. And because this market where we expect a double-digit percent CAGR is growing significantly, we feel we're going to participate with our products in that growth. Luke Junk: Andrew, it would be possible just to break down the Industrials segment as well, similar from an end market standpoint, quick? Andrew Lynch: Sure thing. Industrials, as you know, is -- we've historically talked about that in terms of commercial versus residential. And I think that split still largely applies. We're focused on those verticals rather than applications, like HVAC and appliance, like, we've previously disclosed. So I'll just give you the breakdown here. So that resi and commercial sort of combined would be about 80% of the segment and then the remaining 20% would be the clean energy opportunities that we see around, for example, Dynapower microgrid applications outside of the data center as well as electrical protection components that we sell into grid hardening applications. Operator: The next question comes from Samik Chatterjee with JPMorgan. Manmohanpreet Singh: This is M.P. on behalf of Samik Chatterjee. I just wanted to ask how much of the industrial growth during 4Q was linked -- sorry, during the full year was linked to A2L gas leak detection sensors and how did the rest of the Industrial business track during the year? And also we'll squeeze in another one there, you will be launching this flow sensors in 2026. Will that be a similar contribution like the A2L this year? Andrew Lynch: Yes, I'll take the first part of the question on the size. So we launched A2L last year -- in 2024. We saw somewhere in the order of magnitude of $10 million to $15 million of revenue primarily in the fourth quarter of 2024. And then that ramps significantly to about $70 million in 2025. So you could think of the year-on-year growth is somewhere in the order of magnitude of $50 million to $60 million. And then we think that matures at north of $100 million annualized run rate business as our incremental wins continue to stack and as we see that market mature. Stephan Von Schuckmann: And let me add to that. So that's actually been a success story in 2025. We've won 2 major new businesses with OEMs long term -- with long-term agreements with A2L. So that's, I think, was a really, really good success in 2025. The team has done a fantastic job to fill our order books, and we have a really high market share in North America. And what's quite interesting with this business is -- and that's something we also discussed now during the trip in Japan and in Korea, obviously, depending on regulation, we see great opportunities there as well. And if you're looking at a market size, a SAM in North America of roughly $150 million, you see the same amount of sizable business in Southeast Asia. So in this case, more in Japan and in South Korea. So that's a great opportunity. And by the way, with A3, similar size of business that we're working on. So great growth in '25, and we're going to see continued growth in '26 onwards and especially now if South Korea and Japan comes in, that will be good for us as well. Operator: The next question comes from Konsta Tasoulis with Wells Fargo. Konstandinos Tasoulis: Just going back to the data centers. How long have you guys been working on the opportunity there? And where do you feel the bigger value-add opportunity is? And where are you more differentiated? Is it more like electrical protection side? Or is it the sensors? And is that something that could be another -- in terms of dollars, look like A2L, the leak detectors in the next year or 2? Stephan Von Schuckmann: So we've been working on this quite some time. We've spent a lot of time in 2025 where we've intensified our efforts. And look, it's pretty broad. So I wouldn't say it's based on a single group of products, be it electrical protection sensors. It's pretty broad. I mean we want to -- when we speak about designing into future data center concepts, we don't only want to do that with a specific group of products. We're looking at all opportunities that we have and all the opportunities that I've just mentioned in this call, so inside and outside of data centers. Look, give us some time, this is developing, and we'll be more precise once we go further through the calls of every quarter. But it's got a lot of opportunity, and we feel very confident that this could be a significant growth driver for the segment and for Sensata. Operator: The next question comes from Steven Fox with Fox Advisors. Steven Fox: I was just curious if you could provide any more color around the segment margins from the aspects of where do you see the most opportunity for margin expansion and maybe where the incremental margins may differ? Andrew Lynch: Yes. So I mean, we're focused on operating margin expansion across all of our segments over time. Now certainly, growth is going to be an element of that operating margin expansion, and we see higher growth opportunity in Industrials and Aerospace, Defense and Commercial Equipment, given the stronger underlying market growth that we expect in those sectors over time. So I would say Automotive will continue to be sort of our -- we'll look to outgrow the market by a couple of percentage points, and we'll look for variable contribution margin in the 20% to 30% range on that business, depending on the product mix and region. Industrials and Aerospace would be similar, but with higher growth rates. Stephan Von Schuckmann: When it gets to strengthening our margins, we don't differentiate between segments. So when we speak about improving productivity or plant performance irrespective of the individual segment, we do that across all segments. When we speak about reducing product costs, we tackle all our products in every single segment. We don't only focus on specific products per segment. So it's an exercise that we've been pushing very hard in 2025 overall businesses that we have with Sensata, and we're going to do exactly the same, if not, even harder in 2026 going forward. So it's not a specific segment-related exercise. This is a very, very broad initiative to push on margin improvement. Operator: The next question comes from Shreyas Patil with Wolfe Research. Shreyas Patil: So looking at Q4, you mentioned organic -- Auto organic growth was 1%, but it looks like industry production was up 2%. So it looks like you underperformed the market by about 1 point. You're pointing to low single-digit outgrowth in '26. Just thinking maybe if you could help give us some of the drivers of outgrowth for this year? And are there opportunities to add content in areas outside of the powertrain, such as domain consolidation or autonomy? Andrew Lynch: Yes, sure. I'll take the first part of that question. So a little bit of this is a function of using whole numbers here on the percent. But yes, you're right, the Auto production rounds to 2% and our revenue rounded to 1%. Biggest reason for that is, again, regional mix. So if you unpack the growth rates in Auto production in the fourth quarter, China grew about 4% year-over-year in Q4. The North America and Europe both decreased by about 0.5%. Korea, where we mentioned we now have even higher content per vehicle, dropped by about 6% year-on-year in the fourth quarter. And so while there was average market growth of close to 2%, the market mix of where that growth occurred was not in our favor from a content per vehicle perspective. Looking ahead to 2026, as we look at third-party production forecasts as well as what we're hearing from our customers and seeing in our order book, we're seeing relatively similar growth rates in every region. And so we don't expect this regional mix dynamic to be meaningful in 2026. And that's important because as the regional mix and growth rates normalize, our underlying content growth will be the true driver of our market outgrowth. Stephan Von Schuckmann: And let me add to that. I think you asked the question around growth opportunities. And let me start a bit broader. And I think it's -- in this case, it's important to mention that Sensata is in a really desirable position. And let me explain that. Let me explain why I call it a desirable position, is because we can literally grow in any region with any type of application, and that's really irrespective of it's an ICE, hybrid or EV related. So what does that ultimately mean? We can follow any pace of electrification. If it speeds up or if it slows down, we will follow that pace. So take an example where we have a high push in content. Andrew mentioned the content increase, for example, in China. Strong push towards electrification. We benefit from that. We have doubled the content of an ICE. If we win business, that obviously supports our growth path in China. Around plug-in hybrids and EVs, we also said we have growth potential in that market. I mean that's actually a strong growing application where we see a 12% CAGR overall. And if we win business with PHEVs or EREVs, we will grow with the market depending where PHEVs and EREVs are sold the most. So that is another area where we see a content bridge opportunity for Sensata to grow. Operator: The next question comes from Joe Giordano with TD Cowen. Joseph Giordano: I appreciate the follow-up here. One thing I just wanted to like a more existential question, I guess. But Sensata in the past got itself into trouble by chasing the shiny thing, right, and then ending up with a bunch of businesses that were subscale. So as you talk about small businesses today into attractive markets like data center and grid hardening and all these things, I think we all appreciate why Sensata would want to chase that. But how do you make a decision and be confident that these are businesses that we should win, that we can participate in profitably and then we can ultimately have scale and kind of prevent the same issues that we all kind of saw years ago? Stephan Von Schuckmann: So I think in this case, it's important that a lot of these products exist really today with Sensata. So these are an existing product range within our portfolio. It could be within Auto. They could be within other areas of business. So it's not a new development of a product. It might be a slight adaption of a product, but we have high standards, high-quality products that we can apply out of, for example, Auto and apply into other applications, be it data centers. So I would say, in that case, the risk is manageable. The second thing is, Joe, if you look at our growth framework that we've set for ourselves. So we say we want to maximize value from our core products, as I've just mentioned, that is maximizing because we're using an existing product portfolio. And then we'll leverage our scale and pedigree. So a lot of these products that are already produced at high scale, where we have existing production line and existing equipment that we can use in this case, no additional assets required. No additional plant structure is required. We use our competitive footprint around the world, and we produce our products as we do every day, just for a new type of segment. And then, look, we've also defined rigorous standards for this new business. So it's not just an area where we would step in. It needs to be high volume. It needs to be platform-driven business. It needs to be -- they need to be mission-critical. They need to be regulated socket. That's important for us. And they also need to be hard-to-do applications. I think that's also important. So it's not something that you can copy that easily. So we have, I think, a high standard that we've set ourselves before we enter these markets or we enter new markets within the segments to manage that risk accordingly. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to James Entwistle for any closing remarks. James Entwistle: Thanks, everyone, for joining today's presentation. This concludes our fourth quarter and full year 2025 earnings conference call. Operator, you may now end the call. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.