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Geoffroy Raskin: Good noon, everyone, and thank you for joining us today. I'm Geoff Raskin from IR. I'm pleased to have with us Laurent Nielly, our new CEO; and Geert Peeters, our CFO, to present the 2025 results. Before that, let me remind you of the safe harbor regarding forward-looking statements. I will not read it out loud, but I will assume you will have duly noted it. With that cleared up, Laurent, over to you. Laurent Nielly: Thanks, Geoff. And before I dive into the results, allow me to say some words about me. First of all, let me share my appreciation for the Board and for our former CEO, Gustavo Calvo Paz, for the trust and the support in this transition. I'm honored to take over and realize the challenges ahead to both rebuild trust fast and to continue to work to unlock the interesting value of Ontex. I joined Ontex 8 years ago to help turn around the just acquired business in Brazil, then moved to Europe with a mission to bring strategic discipline, drive the business back to growth and to rebuild profitability after the inflationary shock in '22. I have a deep understanding of our company, and I share the passion for our purpose, mission and people. We have strong assets, potential, and I take on the assignment with high energy, but obviously also at a time of big disappointment after a challenging '25. As you know, the year did not evolve as we had anticipated at the start of '25, and we had to revise our outlook twice. The final results should be of no surprise to any of you being in line with the outlook we communicated early December. Revenue was 5% lower like-for-like in a challenging market and the adjusted EBITDA came down by 2 percentage points, mainly due to the impact of lower volume. The 10% margin level is still demonstrating resilience of the business in a difficult year. We did better than we anticipated for free cash flow, ending with a negative EUR 25 million. Net debt benefited from the divestment proceeds with lower adjusted EBITDA, our leverage rose to 3.3x. Let me expand a bit on the main elements that drove our results in the year on the next slide. Clearly, our volumes, which are the backbone of our business, did not meet our ambition with 3 key factors. We faced a softer demand in '25, especially in Baby Care. We could not pivot on some of the growing segment as fast as we wanted in the midst of our transformation in Europe that limited temporarily our flexibility, and this was amplified by some disruption in supply that we had discussed in previous quarters. And in North America, we experienced much more repeat decline in our contract manufacturing sales. Against this backdrop, we continue to preserve our competitive position, signing and starting delivery of new contracts, thereby maintaining our positive contract gain and loss balance for the year. We also continue to innovate in all 3 categories and are recognized on our sustainability performance, as illustrated recently with an A score from CDP. Most importantly, we reached some key milestones in our transformation journey. We completed the divestment of our emerging business. Our Belgium footprint work is progressing well. And in North America, we added production line in our North Carolina factory. Before I pass over to Geert on the financial analysis of the year, I'll quickly touch base on the fourth quarter performance. Our revenue came down by 7.6% like-for-like in Q4 versus a strong quarter last year. This is 2% lower than our third quarter of '25 with demand softening further, especially in Baby Care, both in Europe and North America. You can see in the chart that the decrease and the volatility of revenue in the last 8 quarters is mostly linked to our Baby Care business. whereas Adult has consistently grown and in the last quarter, represents 47% of our revenues. The lower volume in Q4 impacted the profitability, especially as we had anticipated growth and the adjusted EBITDA margin, therefore, dropped 3 percentage points versus last year to 9%, which is 2.4 points decline quarter-on-quarter. While Q4 was again below our expectation, it is important for me to stress the many progresses made on our transformation journey, which are strengthening the company and which will bear fruits in the months and years to come. Yet it is equally clear that more is needed to improve back our trajectory. With this, I pass over to Geert for a more detailed analysis on our full year results. Geert Peeters: Thanks a lot, Laurent, and hello, everyone. In the financial review, I will focus on the full year results and start, of course, with the revenue. On this slide, you will find the full year revenue bridge showing the 5% revenue decrease, which was almost entirely due to the volume decline by EUR 93 million. As Laurent already explained, this was caused mainly by the lower demand for retailer brands in Baby Care and specifically in North America, the decline of contract manufacturing causing Baby Care volumes to drop by 12%. Feminine Care sales volumes were 2% lower, which largely reflects the market trends. We benefited from the continuing growth of the adult care market, albeit with a modest 1% volume growth Reason is that we have a large exposure to the more stable healthcare channel. To capture further growth in the retail channel, we're currently ramping up the capacity. Our sales prices were slightly lower, reflecting the carryover from the lower sales price in '24 as well as some targeted price investments and our product mix improved at the same time and more than compensated for this. ForEx fluctuations had a small negative impact, mostly linked to the depreciation of the British pound, the Australian dollar and especially the U.S. dollar. Let's move now to the adjusted EBITDA bridge on the next slide. On the EBITDA bridge, you can see that EUR 40 million impact of the lower revenue on adjusted EBITDA. It includes also lower absorption of fixed costs. Positive is that our cost transformation journey continues. And this year, we generated EUR 69 million net savings, creating a 5% efficiency gain on our operating base. This encompasses efforts across the organization and includes the first benefits from the Belgium footprint transformation. We could have done more had volumes been higher. These continued efforts compensated most of the cost increases but leaving an EUR 8 million negative net cost impact. Raw materials prices rose by about 4%, mainly driven by higher indices. The impact was across inputs, but especially in packaging, superabsorbent polymers and fluff. Raw material price indices spiked in H1, but came down since, but on average, they're still higher than in '24. Other operating costs rose by about 8%. A large part is linked to inflation of salaries, logistics and other services. some were also caused by the supply chain inefficiencies we faced mainly in the first half of the year, think for example, outage of our Segovia plants. Despite all these challenges in '25, we managed to keep an adjusted EBITDA margin of 10%, which is 2 percentage points lower than last year. How this revenue and margin translates in net profit and also including the divested emerging markets can be seen on the next slide. Adjusted EBITDA -- sorry, adjusted profit from continuing operations was EUR 34 million as compared to EUR 76 million in '24. The decline can be fully explained by the lower adjusted EBITDA. In '25, we had much lower restructuring costs as compared to '24. This represented some EUR 19 million and were mostly noncash caused by impairments of obsolete assets and intangibles. Profits from continuing operations, which includes also the nonrecurring costs, thereby amounted to plus EUR 60 million and is, therefore, more or less in line with '24, which ended at EUR 21 million. As to the emerging markets, we posted EUR 190 million loss for Brazil and Turkey, and this loss is entirely caused by the noncash accounting impact from currency translation reserves. These were accumulated over the many years in the past, and these are recycled through the P&L once the divestment is completed, and this caused EUR 210 million combined loss in '25. But as I repeated already, it's noncash. With the last divestments executed only the core business is left. The result is much stronger -- is a much stronger balance sheet with lower debt, which we will discuss later. Let's now move to the cash flow on the next slide. Here, you'll find the bridge explaining how the adjusted EBITDA of EUR 184 million translates in a free cash flow of minus EUR 25 million. Net working capital changes were largely neutral, with an increase in discontinued operations, offset by an improvement in our core business. That latter core business improved from 5.4% to 5.1% over sales, mainly thanks to lower inventories, lower receivables and higher factoring. We have a EUR 12 million negative impact from employee liability changes as we accrued lower variable remuneration in the EBITDA of '25, which will lead, of course, to lower cash payout in '26. CapEx was EUR 81 million, representing 4.5% of the revenue of our core business and a nonrecurring cash out amounted to EUR 30 million mainly due to the already provisioned Belgium footprint restructuring. This brings the free cash flow before financing to plus EUR 18 million. Cash out related to financing was EUR 43 million, higher than in '24 due to the high-yield bond refinancing and a favorable interest rate swap, which came at maturity end of '24. This brings the free cash flow to equity holders to the minus EUR 25 million, as I told you before. Let me go to the net debt. Our net debt reduced by 6% from EUR 612 million end '24 to EUR 577 million end '25. Apart from the free cash flow, which I explained on the previous slide, we finalized the divestments of the Brazilian and Turkish business, which brought EUR 131 million net proceeds. We, however, had to reclassify EUR 34 million of cash residing in Algeria, dating from the divestment in '24, and it was reclassified as a financial asset. But currently, we're making good progress in repatriating this money. We also had an increase in lease liabilities and some other noncash elements, which amounted to EUR 27 million and relates to future commitments related to the renewal of some real estate leases. Next, we have the share buyback program, which was launched in '24 whereby we acquired 1.5 million shares to cover the future potential option plans with an impact of EUR 11 million in '25. This brings us thus year-on-year to the reduction of net debt by 6% and gross debt by 12%. And just to summarize, if we look at our gross debt, which is EUR 647 million, it's at the right side of the slide, you can see it consists of EUR 145 million of leases, of course, a EUR 400 million of high-yield bonds. And then we have the revolving credit facility, of which we had drawn EUR 100 million, which is a bit more than 1/3 of the total facility. And then before I pass the word back to Laurent, we can have a look at the leverage ratio. And in this graph, you can see the evolution since the end of '22. The net debt you can find in the middle in green and has reduced year-over-year by constantly deleveraging the net debt. The last 12 months adjusted EBITDA, which is at the top in blue, improved consistently year-over-year until the end of '24. In '25, we have the decline because of the challenging year, but also, of course, the scope reduction following the different divestments. In yellow then at the bottom, you find the ratio of both representing the leverage ratio. It improved from 6.4x at the end of 2022 to 3.3x at the end of '23, 2.5x the end of '24, and now we returned back just above 3x at 3.3x at the end of '25. Nevertheless, the balance sheet remains healthy. The leverage ratio remains below the 3.5x covenant, which is a threshold in the RCF, and important to stress is that we have ample liquidity, namely EUR 240 million, which is the cash of EUR 70 million and about 2/3 of the RCF, which is undrawn. The maturity of our debt is extended to at least '29. Now I'm very pleased to pass the word back to Laurent. Laurent Nielly: Thanks, Geert. After 2 solid years in '23 and '24, '25 was more difficult. So how do we see '26. And I will start with the overall market conditions, that we anticipate to remain pretty similar to '25 overall with low consumer confidence and continued promotional activity by A brands. Yet we equally expect the Adult Care momentum to continue and overall retail brand to remain a compelling consumer proposition with opportunity to grow share. On top of this general setting, the following elements are reflected in our assumptions. We expect birth rates in Europe to drive overall Baby Care demand slightly lower as they did in '25. In North America, worth mentioning that our contract manufacturing current sales level will create a negative comparison in the first half of '26 and especially in the first quarter, whereas you might remember, we had anticipated shipments at the end of Q1 '25 ahead of the trade buyer threats between the U.S. and Mexico. And in the other smaller overseas business that we have, we continue to review our portfolio with targeted exits of unprofitable contracts. So let me now share how this will translate to our ambition for '26 year. We target adjusted EBITDA to improve by 10% as we accelerate our extended cost transformation program throughout the year, and progressively return to more stable operations. This EBITDA improvement will be gradual, starting from a soft first quarter which is expected in line with the fourth quarter of '25, but therefore, lower than the strong first quarter that we had in '25. This improvement is underpinned by overall largely stable revenue for the full year. And here again, you should expect a lower Q1 versus prior years for the reason that I just explained. And then volume growth to pick up in subsequent quarters. We expect free cash flow after financing to be back in positive waters, driven by this higher adjusted EBITDA, lower restructuring charges and a continued effort to drive our working capital down. This, in turn, will lead leverage down to 3x or better by the end of the year. To deliver this plan, our priorities are clear as presented in the next slide. First, resume volume growth. This includes ramping up the existing and newly secured contract as well as the benefit of the additional capacity we have added in Adult. Second, continue our productivity program with an extended cost transformation initiative which includes an adjustment of our organization to our new scope of business. And third, a laser focus on improving cash conversion. In parallel, we started a strategic review with a clear focus on value creation. We want to go fast, whether by improving delivery and speed of our current plan or by adding new elements to create incremental opportunities and we will update you on a regular basis as progress is being made. This closes our prepared remarks. Geert and I are now ready to take your questions. Geoffroy Raskin: [Operator Instructions] And the first question is coming from Wim Hoste. Your line is open. Please go ahead. Wim Hoste: I have a couple of ones. First one on the U.S. market. How should we think about revenue evolution in '26? You explained the situation with the contract manufacturing drop in preceding quarters. But will this contract manufacturing further drop in '26? How much support can you get from recently signed or started up contracts? Can you offer a little bit of clarity on that as well, please? So that's the first question. The second one is a more general one, pricing versus raw material evolution, if you can elaborate on that as well. And then a third and smaller one is how much CapEx budget have you included in the free cash flow guidance? That would also be helpful. Laurent Nielly: All right. Thank you, Wim, for your questions. I'll take on the first 2 questions and then Geert will address the third one. So on the U.S. market growth, as you know, we don't provide guidance of expected growth by region, but the dynamic that was described is what you should continue to expect, which is we're continuing to grow on our retail brand business. And yearon-over-year, our contract manufacturing sales in '26 will be lower than the full year '25. Overall, with the 2 blocks, we expect the U.S. to contribute more growth in Europe in '26. That's for your first question. On the second question on pricing versus raw material, we expect stable to slightly positive contribution of raw material in '26 versus '25. And at the same time, we expect that as we have some contract renewal or tenders that we participate to, we might strategically invest on targeted customers to secure our gains. So this is the dynamic that we always have, where we try to remain competitive as we see raw material cost evolution. And on CapEx, I will pass it on to Geert. Geert Peeters: On CapEx, yes, we keep, in fact, to the guidance we gave several times that at the end of '25, we wanted to go back to a level of 3.5% to 4.5% of CapEx to revenue. So that's what we're heading for and which is sufficient to execute our plans. Geoffroy Raskin: The next question comes from Karine Elias from Barclays. Karine Elias: Just going back to your -- the guidance on the full year EBITDA. Obviously, Q1 has been a tough comp. So I understand the decline that you mentioned, which would be similar to Q4. But just as we think through the year, what's your visibility like into Q2? Should we expect the EBITDA improvement to start showing from Q2 onwards? Because on my numbers, if we've got a EUR 50 million decline in Q1, that means a EUR 37 million improvement in Q2 through to Q4 to get to your guidance. Just wondering a little bit how we should think about the of the EBITDA. Geert Peeters: Thanks Karine, for your question. So the way we look at it and you phrased it well. So we expect Q1 in line with the last quarter of last year of '25 and then indeed, as we said in our guidance, we expect gradual improvements throughout the year. What are the drivers? Of course, there are different elements. First of all, it's the continuous productivity improvement, which we're constantly working on with the cost transformation program which we also had last year, but this year, we project a much more stable year because there was quite some instability coming from external factors that happened, but also the changes we did in our organization. So we have the Belgium footprint reorganization that we were executing that's ending at the end of Q1, so that's finalized, so that will bring a lot more stability. And also in North America, we had an important ramp-up as well in production as in sales and also there, we see much more stability, which will help us to drive that EBITDA growth. Karine Elias: Great. But just to clarify, so we would expect to start seeing that from Q2 onwards? Or is it going to be more back-ended? Geert Peeters: From Q2. So it's really throughout, it's step-by-step, quarter-by-quarter. Geoffroy Raskin: The next question comes from Usama Tariqfrom ABN AMRO ODDO BHF. Usama Tariq: I just have one set of questions. Could you provide some view on the nonrecurring cash outflow for next year. So this year was around EUR 30 million. So any guidance there or pointer there would be very helpful. And just my second question would be it's a bit more general, but please correct me if I'm wrong, Ontex still has some exposure to Russian assets. Would that also be considered into the strategic review going forward? Or if you could provide any pointers there, that would be really grateful. Geert Peeters: I take your first question on the nonrecurring. There, as a management, we have always had the intention to decrease our nonrecurring. So we also keep to that intention. That means that based on the plans we have at this moment, we still have about EUR 10 million of the last phase of the footprint in Belgium. So that's the big provision we made in '24 and what we gradually executed over the 1.5 years more or less. So there is EUR 10 million, but it's already in the P&L. So it's a cash out. And based on the current plans we have and the further transformation, we foresee more or less another EUR 10 million. Laurent Nielly: All right. And Usama, Laurent, I will tackle your second question. Yes, we still have our assets in Russia. You know our Russian business is about 5% of our total revenues. The strategic review is actually a pretty broad exercise where we're going to review where we compete in different categories, different markets and where we should allocate our resources to maximize value creation. And as part of this, if it's relevant to review our position with this market, we will, but it's way too early to preclude any conclusion. Geoffroy Raskin: [Operator Instructions] The next question comes from Fernand de Boer from Degroof Petercam. Fernand de Boer: Actually, I have one question. So you're guiding for a lower EBITDA in Q1 versus last year. So that means that on a 12-month basis, your EBITDA also comes down. What is your cash flow outflow expected for Q1 or first half because I think then you still are within the covenants, but if you look at that, then you could be very close. And what happens if you would drop below the -- above the 3.5x? Geert Peeters: Okay, Fernand. I will answer on that question. Yes, we're not giving guidance by quarter that you know on cash flow. But of course, we are very aware on the quarter-to-quarter. We have a slow onset, a very clear cash focus, so that will be -- it's something not we look at on a quarterly basis. It's on a weekly basis that we're on top of that. As to covenants, you know that we guide to the -- towards the end of the year to go below 3x. That will not be in the first half of the year. But the purpose is to go down. It's also for us, the covenant testing. I want to stress that one. It's always coming at the end of half year. So we feel confident that we are -- yes, we're doing well and we are within the target set. Fernand de Boer: Okay. Maybe I missed it, but did you give an amount of factoring? Geert Peeters: Yes, it's in the press release, but I can tell you, of course, it's EUR 185 million. Fernand de Boer: Yes. Sorry. Geert Peeters: No sorry. It's normal. You couldn't read everything. That's perfectly normal. Geoffroy Raskin: The next question comes from Rebecca Clements from JPMorgan. Rebecca Clements: Can you hear me? . Geoffroy Raskin: Yes, we hear you well. Rebecca Clements: Okay. Okay. Great. Just following up on the accounts receivable factoring. You said it was EUR 185 million used at year-end. Is that correct? Geert Peeters: Yes, that's right. Rebecca Clements: Okay. I think you had said last year that you expected some working capital pressure because of reduced receivables. It -- and I think that was related to the securitization facility. Could you just talk us through -- is that still the case? Or do you expect there to be some negative impact on the receivables side through at least part of 2026 due to the lower sales? That's my first question. Geert Peeters: Yes. Good question, Rebecca. But of course, working capital, we look to the total. So it's for us inventory accounts, payable accounts receivable. Factoring at year-end, it was a bit higher than normal because there was quite some invoicing just at the end of the year. So it's a bit accidental. That's also one of the reasons where our free cash flow was somewhat better than the guidance. But for the rest of our accounts payable, yes, you have seen we don't give guidance on revenue, but we expect it to stabilize, and that means that our accounts receivable will be following the same pattern and with a close follow-up, of course, on our DSO. Does it answer your question? Rebecca Clements: Okay. Sort of. I was just wondering, because of, I guess, reduced -- given who you're selling to and which receivables go into that facility. I just wasn't sure if there would be some sort of temporary potentially negative impact of not being able to submit receivables to that facility that could impact you midyear? . Geert Peeters: Not really. No, it's -- no, it's normal operation. Rebecca Clements: Okay. Okay. And then my second question is related to your visibility. So you said things are more stable now. I know last year, one of the challenges in the second half was that circumstances changed more quickly than you could react to and you ended up having some cost absorption issues from a manufacturing perspective. What gives you comfort that you feel the situation is more stable, whether it's North America Baby Care or European Baby Care? What gives you that sort of confidence in it being more stable because it seemed last year that it was quite difficult for you guys to predict kind of where volumes were going and plan accordingly. Laurent Nielly: Yes, Rebecca, thanks for the question. This is Laurent. I think when we talked about stability here, we were referring to our operations, not necessarily the sales pattern. We fundamentally -- what we're doing to be better prepared because we expect that there will still be some volatility from time to time in our sales, is to improve forecast accuracy and our ability to anticipate with leading indicators that would allow us to adjust our operation and our production ahead of time. And as at the same time, we're going to have less movements of start-up of new lines, relocation of lines from one factory to the other, et cetera, it will be in the context of a more stable operational framework, which will help us to be much more fluid and to create less inefficiency when you have some volatility in the demand pattern. Rebecca Clements: Okay. That's helpful. Can I get one more question in or no? Is that okay? Geoffroy Raskin: Yes, sorry. Rebecca Clements: Do you -- was most of the issues around not being able to react as quickly enough, was that North American Baby Care? Or was that across Baby Care globally for you? Laurent Nielly: It was across the care on both sides. Proportionately, obviously, it was a bigger impact on the U.S., but Europe also, we observed a change in behavior in the market. And our role is to partner with our customers to help them adapt to that situation. So we saw a much greater promotional activity from a brand in Europe. And we're talking to our key partners to share analysis with them and come up with ideas and proposition for them how best to be competitive in this new market reality to protect their position and for them to win on the marketplace. So on both sides. Geoffroy Raskin: The next question comes from Charles Eden from UBS. Charles, we are listening. Charles Eden: Two for me, please. Just firstly, on the EBITDA bridge, that 10% growth, which is what, EUR 17 million, EUR 18 million year-on-year. I hear you flat revenue. So I guess no real drop-through from the top line fluff and other inputs broadly stable, maybe EUR 1 million or EUR 2 million contribution. Is there anything else in the bridge? Or are you basically saying EUR 15 million of cost savings year-on-year gives you the growth? And maybe if that is true, where exactly are the cost savings coming from? Is it headcount reduction? Is it efficiencies? Is it a combination? Any color you could give us there would be appreciated. And then my second question is just on the strategic review and Laurent, firstly, welcome. But secondly, just in terms of expectations on the strategic review, obviously, the business has changed a lot over the last few years. What can we expect you to be focusing on doing a strategic review? I assume there's not change your portfolio top of the list. But what are the areas that are top of that list for that strategic review? Laurent Nielly: Sure. I'll address quickly your first question on the EBITDA. I think that you're right that our continued productivity will be the key driver of our margin expansion and therefore, EBITDA growth and the second element that you need to keep in mind is mix, we benefit from a favorable mix. So even within stable sales environment, the mix will be a positive contributor. On the building block of this cost productivity, they are the usual suspects in terms of we work with procurement on improving the mix of our suppliers. We work on manufacturing, on the efficiency of our lines. We are doing some re-networking analysis on logistics. We have the design-to-value initiative where we always cost optimize our product, and we're extending that in '26 to also include some adjustments on our organization design to generate additional savings. So those would be the key building blocks. On the strategy review question. It is a pretty broad effort, as you could have read in our press release in January, where we basically are stepping back and are looking at where best to allocate resources, capital to create maximum value for our shareholders, where we have the best chances to win and where it grows. We believe that all our categories have potential. We have already done a huge focused effort to focus on Europe and North America. There is -- both have potential. Yet what we're looking at is the new conditions to compete and how do we tweak, if you want, the formula between the focus on different categories, what it takes to compete and therefore, what is the proper footprint and organization to maximize our cost in order to be able to continue to grow volume in those categories. So a bit long answer to your questions because this is exactly the goal of that effort. And our commitment is that as we progress, we will share our conclusions in our subsequent earnings calls with you. Geoffroy Raskin: And the next question comes from Maxime Stranart from ING. Maxime Stranart: Hope you can hear me well. Two questions from my side, if I may. Apologies if it has been asked already. A bit of delay here. So first of all, looking at your EBITDA guidance and the cadence throughout the year, can you elaborate on when do you see inflection point coming in? Based on your guidance, I understand that EBITDA should decline by basically almost 20% in Q1. So just a view on how we should see the work panning out. Second question would be on restructuring. I think you announced previously that you wanted to accelerate savings and productivity improvement there. I think you mentioned EUR 40 million, of which some were to be included in SG&A and some restructuring. Any view you can share on that? That would be helpful. Geert Peeters: So Maxime, your first question, our EBITDA guidance is that our Q1 is in line with last quarter of '25, and then we see a gradual improvement quarter-by-quarter. Is that answering your question? Maxime Stranart: Yes, it does. Just want to cross check there. So basically, if I look at last year, Q1 was good, Q2 was bad, Q3 was good. So I just wanted to make sure I understand the phasing of your guidance correctly. Geert Peeters: Yes. But indeed last year was at a quite volatile pattern. That's not what we expect. And yes, as you have seen, we give guidance on EBITDA. So we're, of course, also focused on revenue. But for us, the productivity improvements are important. The mix improvements, the stability that we've built in the business, and that's what will drive that continuous growth throughout the quarter. Laurent Nielly: The second question was on restructuring. Maybe Geert, you can add on that as well in terms of what to expect. Geert Peeters: Yes. So restructuring, linking to what Laurent said before, for us, we have existing plans, which is on one hand a continuation of the plants in the past, but all with new initiatives because we're talking about add-on savings. And in the strategic review, they will look at what extra things they can untap as potential. But in the restructuring plan, which is part of the guidance we give, they -- yes, there's a whole bucket of savings with the restructuring costs that I mentioned before, of still above what we still have to pay on bringing out the Belgium footprint, we still have EUR 10 million of restructuring costs and there's another EUR 10 million we expect this year to execute the existing plans. Maxime Stranart: Okay. Got it. I apologize, I missed the beginning of the call. I just wanted to clarify then you basically expect a EUR 20 million basically cash outflow from restructuring. Just want to make sure. Geert Peeters: That's right. That's right. Based on the existing plans. Geoffroy Raskin: So there are no more questions. So I hand it back over to you, Laurent, for your closing remarks. Laurent Nielly: All right. Thank you, Geoff. 2025 was a year that did not live up to our expectations. Yet we continued to deliver on our transformation program, and we showed some solid resilience, including in our profitability and in our ability to compete in the marketplace. We remain upbeat on the potential we have in the different markets in which we participate. The strategic review is a needed step to sharpen our trajectory and focus even more on where we can create compelling value and we will share our conclusions and the year progresses. We have very clear priorities set to deliver our '26 plan with a laser focus on financial discipline and cash. We are confident we can start to rebound even in the first part of the year will continue to be subdued. The priorities we shared today are the ones of our close to 5,000 employees who give their best every day, so we deliver great proposition to our customers. They understand the need for us to rebuild trust and to adjust our journey to best reflect the market realities. With that, thank you for joining, and have a great day. Geoffroy Raskin: This concludes the call. Bye-bye. Geert Peeters: Bye-bye.
Operator: Hello, and welcome to the Organon Fourth Quarter and Full Year 2025 Earnings Call and webcast. [Operator Instructions]. I would now like to turn the conference over to Jennifer Halchak, Vice President, Investor Relations. You may begin. Jennifer Halchak: Thank you, operator. Good morning, everyone. With me today are Joe Morrissey, Organon's Interim Chief Executive Officer; and Matt Walsh, our Chief Financial Officer; Carrie Cox, Organon's Board Chair; and Juan Camilo Arjona Ferreira, Organon's Head of R&D, will also be joining for the Q&A portion of this call. Today, we are referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call on the Events and Presentations section of our Organon Investor Relations website. Please reference Slides 2 and 3 for a couple of brief reminders. I would like to caution listeners that certain information discussed by management during this call will include forward-looking statements. Forward-looking statements can be identified because they do not relate strictly to historical or current facts and use words such as potential, should, will, continue, expects, believe, future, estimates, believes, outlook and other words of similar meaning. Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission. This includes our most recent Form 10-K and Forms 10-Q and those amended forms. These statements are based on information as of today, February 12, 2026 and except as required by law, Organon undertakes no obligation to update or revise any of these forward-looking statements. In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. Descriptions of these measures and reconciliations to the comparable GAAP measures are included in today's earnings press release and conference call presentation, both of which are available on our Investor Relations website and have been furnished to the SEC on the current report on Form 8-K. I note that while our full year 2026 guidance measures other than revenue are provided on a non-GAAP basis, Organon does not provide GAAP financial measures on a forward-looking basis because we cannot predict with reasonable certainty and without unreasonable effort, the ultimate outcome of legal proceedings, unusual gains and losses, the occurrence of matters creating GAAP tax impacts and acquisition-related expenses. These items are uncertain, depend on various factors and could be material to our results computed in accordance with GAAP. I'd now like to turn the call over to Joe Morrissey. Joseph Morrissey: Thank you, Jen. Beginning on Slide 4. In 2025, Organon delivered $6.2 billion in revenue and $1.9 billion of adjusted EBITDA. Revenue was down 3% on both a reported and ex exchange basis. Relative to where we began the year, our biosimilar franchise performed better than expected, driven by solid performance in Hadlima as well as contributions from new launches. Vtama delivered $128 million of global revenue in 2025 and Emgality and our fertility business also grew strongly in 2025. That performance helped to offset the continued impact of the LOE of Atozet and headwinds in other parts of the business that emerged during the year. Those include policy-related changes in the U.S. for Nexplanon and a revision to medical guidelines in certain international markets that deprioritize the use of montelukast, which impacted Singulair. Though Nexplanon had its challenges this year, the FDA approved our sNDA to extend the duration of Nexplanon from 3 to 5 years. The study supporting the approval enrolled a population of women with varying body mass indices, including women with overweight or obesity, a testament to Organon's commitment to inclusive and comprehensive women's health care. This is a meaningful milestone for Organon and the Nexplanon brand as it potentially broadens the addressable market for this key product. The approval also includes a new risk evaluation and mitigation strategy program that will enhance Organon's existing clinical training program and controlled distribution program, which has been in place since 2006. One of the most important decisions the company made in 2025 was to lower our dividend payout ratio and apply those excess funds to debt reduction. We also divested the Jada system, resulting in approximately $390 million in net proceeds that will help us to reduce net debt in 2026. Together, these decisions mark our commitment to improving capacity in Organon's balance sheet to put us in a position to pursue growth opportunities in the future. At the same time, we have scrutinized our spending and had to consider tough but necessary changes to our business. In 2025, we were able to keep adjusted EBITDA margins essentially flat with 2024, despite 150 basis points of gross margin degradation. We achieved over $200 million in cost savings in 2025 through significant efforts, which offset investments in growth drivers like Vtama. We also discontinued early-stage clinical programs and are limiting spend to activities such as medical and regulatory affairs that support products already in the market. As we look across the portfolio, we expect revenue and adjusted EBITDA this year to be very much in line with 2025, which means at a high level, we expect to deliver about $6.2 billion of revenue and about $1.9 billion of adjusted EBITDA in 2026. We expect that the annual revenue foregone with the sale of the Jada system will be offset by an FX tailwind of about the same amount, which means we expect revenue to be about flat with prior year on a constant currency basis, pro forma for the Jada system divestiture. On the profitability front, we continue to thoughtfully curtail OpEx to offset what we believe is about 75 to 100 basis points of deterioration in gross margin in 2026 and that we can manage to an adjusted EBITDA figure of about $1.9 billion. I remain confident in our ability to deliver these results in 2026, and I'm deeply proud of the talented teams across Organon who are driving this work every day. With that, I hand it over to Matt. Matthew Walsh: Thank you, Joe. Beginning on Slide 5, let's talk about the main drivers of performance in women's health. Women's health was down 16% ex FX for the fourth quarter and down 2% for the year. Sales of Nexplanon decreased 20% ex FX in the fourth quarter and 4% for the full year, in line with what we discussed in November when we re-guided on the product. As we've talked about in previous quarters, in 2025, Nexplanon was impacted by several headwinds. Let's break it down between those we expect to continue versus those that we believe are onetime in nature. And starting with the onetime item. As we talked about last quarter, we expected an approximate $17 million negative impact in the fourth quarter related to the cessation of certain identified U.S. wholesaler sales practices identified in the Audit Committee's internal investigation disclosed in late October. The impact from that practice is contained to 2025. Now what do we think is likely to persist in 2026. We see 4 drivers. The first driver is in the U.S. and is macro in nature. Government policy-related access restrictions have impacted planned parenthood and federally qualified health centers where Nexplanon has a leading market share among LARCs, incorporated in our guidance is that this policy environment persists in 2026. The second driver. In 2025, we saw a developing weakness with smaller independent commercial clinics who are tightly managing their buy-and-bill purchasing with some choosing to switch to specialty pharmacy claims for each patient via assignment of benefits. While we expect this change to remain, we are actively engaging customers in this segment to support sustained and improved access to Nexplanon. Third driver. As we've discussed previously, in 2026, we will have a volume headwind from loss of reinsertions as we transition to the 5-year label. Fourth and final driver is an offsetting positive. We expect strong ex U.S. growth to compensate for the U.S., particularly in Latin America, where we are seeing improved access. Turning to fertility. Our fertility business declined 6% ex FX in the fourth quarter of 2025, primarily related to sales performance in China, where we are holding share, but socioeconomic trends are weighing on the broader fertility market. For the full year, the fertility business grew 8% ex FX, driven by performance in the U.S., particularly in the first half of 2025 as well as geographic footprint expansion which together offset declines in China. Fertility will likely be a headwind for us in 2026 as we expect an increasingly competitive environment in the U.S. brought on by a competitor's agreement with the administration's new Direct Access Program. And finally, the Jada system delivered $74 million of revenue in 2025. We completed the divestiture of Jada in January of this year. So that will represent a headwind of about 120 basis points to Organon's consolidated revenue in 2026. Turning now to biosimilars on Slide 6. For the fourth quarter and full year, the drivers in biosimilars are largely the same. Performance was driven by Hadlima, which grew 61% ex FX globally for the full year, reflecting the strong clinical profile of Hadlima and the effectiveness of our pricing strategy as well as expansion into Canada and Puerto Rico. To a lesser extent, biosimilars also benefited from our new denosumab biosimilars, which were approved by the FDA in August and launched in the U.S. in late September, and Tofidence, which the company acquired in the second quarter of 2025. In 2026, we expect biosimilars to deliver flat to modest growth with Hadlima and the contribution of new assets expected to at least offset the expected decline in Ontruzan and Renflexis, consistent with the maturity of those assets. As regards to future launches, we've entered into a settlement with Genentech that grants us a license to start launching our pertuzumab biosimilar asset in UCAN in 2027 and in the U.S. in 2028. Wrapping up the franchise discussion with established brands on Slide 7. Established brands revenue declined 5% ex FX in the fourth quarter of 2025 as well as for the full year. We've always said that the CAGR in established brands should be about flat ex FX and with some years above and some years below. In 2025, we navigated through the LOE of Atozet, which itself was an approximate 400 basis point headwind to established brands revenue. In 2026, we expect to return to flat performance. Contributions from Vtama and Emgality together with lapping the LOE of Atozet, should offset expected continued pressure in our respiratory franchise. Turning now to the fourth quarter revenue bridge on Slide 8. Revenue in the fourth quarter was $1.57 billion, down 8% at constant currency. Loss of exclusivity was about $20 million in the quarter, the lowest of the year and was related to lapping the Atozet LOE in the EU, which occurred in September of 2024. VBP was negligible for the quarter. Organon products were not included in any new rounds of China's national VBP program during 2025. We lost approximately $80 million on price in the fourth quarter. About $30 million of this was related to 4 separate gross to net adjustments that were onetime in nature. The remainder was primarily driven by pricing revisions in respiratory, expected competitive pricing pressures in fertility and biosimilars and the LOE of Atozet. Additionally, there was an increase in the U.S. rebate rate for Nexplanon in the quarter related to a change in patient mix tied to Medicaid usage claims. Volume declined about $10 million in the quarter, and that was mainly driven by lower volume for Nexplanon and in the respiratory portfolio, which was largely offset by volume growth in Vtama, Hadlima, Emgality and Arcoxia. In Supply other, here, we capture the lower-margin contract manufacturing arrangements that we have with Merck, which have been declining since the spin-off as expected. And lastly, foreign exchange translation had an approximate $35 million favorable impact for the quarter, which reflects the weaker U.S. dollar against the majority of foreign currencies in which we transact. Let's look at these same drivers now on a full year basis on Slide 9. Loss of volume from LOE was about $200 million, consistent with the range we've outlined all year and that was primarily related to the LOE of Atozet in the EU. As I mentioned, there was essentially no VBP impact in 2025. There was about $180 million of negative impact from price in 2025 or about 2.8%. Pricing headwinds for the full year were primarily in the respiratory portfolio with rate pressure in the U.S. for Dulera and mandatory price reductions in China for Nasonex and Singulair. To a lesser extent, we also felt price impacts stemming from the competitive environment in biosimilars and fertility in the U.S. Volume grew $200 million in 2025 or 3% for the year with contributions from Vtama and Emgality and growth in fertility and biosimilars, offsetting declines in the global respiratory portfolio and Nexplanon in the U.S. Now let's turn to Slide 10, where we show key non-GAAP P&L line items and metrics for the quarter. For reference, GAAP financials and reconciliations to the non-GAAP financial measures are included in our press release and the slides in the appendix of this presentation. For gross profit, we are excluding purchase accounting and amortization and onetime items from cost of goods sold, which can be seen in our appendix slides. Non-GAAP adjusted gross margin was 56.7% for the fourth quarter of 2025 compared to 60.6% in the fourth quarter of 2024. Pricing pressure and unfavorable product mix were notable drivers in the decline of non-GAAP adjusted gross margin. Adjusted gross margin for the full year 2025 was 60.1% compared with 61.6% for the full year 2024, with pricing pressure being the primary unfavorable driver in the year. Non-GAAP adjusted EBITDA margin was 25.4% in the fourth quarter of 2025 compared with 28.1% in the fourth quarter of 2024. The year-over-year decline in the fourth quarter 2025 adjusted EBITDA margin was primarily driven by the lower adjusted gross margin that was partially offset by a 5% reduction in non-GAAP operating expenses. Adjusted EBITDA margin was 30.7% for full year 2025, consistent with prior year as the decline in adjusted gross margin was substantially offset by lower R&D expense. Net loss for the fourth quarter of 2020 was $205 million or $0.79 per diluted share compared with net income of $109 million or $0.42 per diluted share in the fourth quarter of 2024. Net loss for the fourth quarter of 2025 includes a noncash goodwill impairment of $301 million or $1.16 per share related to the decline in the company's stock price and underperformance in the U.S. For the fourth quarter of 2025, non-GAAP adjusted net income was $165 million or $0.63 per diluted share compared with $235 million or $0.90 per diluted share in 2024. Non-GAAP adjusted net income was $954 million for full year 2025 or $3.66 per share compared with $1.065 billion or $4.11 per share in full year 2024. Turning to free cash flow now on Slide 11. For full year 2025, we delivered $960 million of free cash flow before onetime costs, consistent with prior year. Onetime costs related to the spin-off were completed in 2024, following the rollout of our global ERP system. What remains are margin-enhancing restructuring and manufacturing separation activities which were together about $270 million for 2025. For 2026, we expect costs associated with manufacturing separation activities to be about $100 million. We do expect an increase in CapEx associated with these activities as well as an increase in net working capital consumption driven largely by inventory in established brands and biosimilars, which means our free cash flow in 2026 will likely resemble what we delivered in both 2024 and 2025. Below the free cash flow line in 2025, we paid about $170 million related to contractual milestones for Vtama, Emgality and the biosimilar programs with Shanghai Henlius and made another $66 million in upfront payments, primarily related to acquiring the licensing rights for Tofidence and to a lesser extent, the purchase of the Oss bio manufacturing site. In 2026, we expect that commercial milestone payments will be similar to 2025 at approximately $170 million. Turning now to leverage on Slide 12. Net leverage at year-end was approximately 4.3x. Consistent with our priority to reduce leverage, during the year, we retired approximately $530 million of debt which included the open market repurchase and cancellation of $419 million of Organon's 5.125% notes due in 2031 including $177 million retired in the fourth quarter, the prepayment of a portion of the long-term debt assumed as part of the Dermavant acquisition and normal quarterly term loan payments. Given our outlook for approximately $1.9 billion in adjusted EBITDA in 2026, together with approximately $390 million of net proceeds from the Jada divestiture, we expect to be able to achieve net leverage below 4x by the end of the year. Now turning to the 2026 full year revenue bridge on Slide 13. For full year 2026, we expect revenue of about $6.2 billion. We expect LOE to be about $40 million related to a collection of smaller LOEs, for example, CLARINEX in Japan, as well as the potential for a generic of Dulera in the U.S. We expect VBP impact to be about $30 million and related to the inclusion of Fosamax in round 11. We expect headwinds from price to be about $75 million or about 1.2%, which is lower than what the portfolio has experienced in prior years and it's driven by several factors. First, lapping of the approximate $30 million in onetime gross to net adjustments in the fourth quarter of 2025. Second, we expect stability in U.S. gross to net in the U.S. in 2026. And three, less pricing erosion internationally, particularly in the EU as we lap the LOE of Atozet. And in Japan, as the majority of our portfolio there has already reached pricing parity with generics. We expect volume growth of about $150 million or about 2.4% will be driven by continued contribution from Vtama and Emgality and growth in biosimilars and Nexplanon ex U.S. And finally, we're estimating that a modest FX tailwind offsets the loss of Jada revenue. Turning to Slide 14. We expect adjusted gross margin in 2026 to be about 75 to 100 basis points lower than prior year. And while price will be a headwind as it has been in prior years, the main driver of the adjusted gross margin decline in 2026 is higher cost of goods sold related to the release of accumulated foreign exchange translation on inventory that has subsequently matched to revenue when the inventory is sold. For OpEx, our range for SG&A as a percentage of sales remains in the mid-20% area, and we expect the range for R&D spend to be in the mid-single-digit area. For below-the-line items, our estimate for full year 2026 interest expense is about $500 million, in line with 2025. In 2026, we expect to refinance certain 2028 maturities, which will offset the benefits of recent voluntary debt payments and lower variable interest rates. We expect depreciation of about $140 million for full year 2026 and expect approximately 265 million for our fully diluted share count. For 2026, we estimate our non-GAAP tax rate to be in the range of 27.5% to 29.5%. The uptick from 2025 is largely due to the full year impact of the implementation of OECD's Pillar 2, 15% global minimum tax, the absence of a tax amortization benefit and an increase in our nondeductible interest expense, offset by use of additional foreign tax credits. Pro forma for any divestitures, we expect cash taxes to be similar to 2025. As we think about the phasing of the quarters in 2026, we expect revenue growth to build throughout the year, but OpEx is more evenly spread through the quarters. So that means Q1 margin is likely to have the lowest margin of the year, and Q1 could wind up looking a lot like the quarter that we just reported in Q4 of 2025. In 2026, our primary objective is to maintain performance that aligns with last year. At the same time, we are committed to continuing to manage operating expenses and capital deployment in a disciplined fashion to achieve progress on our deleveraging efforts. Carrie Cox: This is Carrie. Before we go to Q&A, I'd just like to say that we won't be able to answer any questions today regarding the topic referred to in our press release under other matters that was brought to the attention of the Audit Committee yesterday. With that, operator, we are ready to begin Q&A. Operator: [Operator Instructions]. Your first question comes from Umer Raffat with Evercore ISI. Umer Raffat: And Carrie I want to be respectful for what you just said, but not relating to that specific issue on what exactly the specifics are of the purchasing. My question is more higher level. Remember last quarter, I asked you how can one -- anyone know that the channel behavior issues were limited to Nexplanon? And why was the Audit Committee investigation so limited in its scope only to Nexplanon? And I remember at the time, you said it did span beyond look through other product areas and found nothing else. Today, we're learning there was another issue. And this time, it's biosimilars purchasing and that too because it was brought up, meaning 5 other things could be brought up. How can we know that a comprehensive review has been taken? It almost looks like there's an unwillingness by the Board and the leadership to actually solve this for once and do it the right way so we can move on and look at fundamentals and pay down all the $9 billion in debt. Carrie Cox: Thanks, Umer. I'm sorry. We can't provide any additional color at this point. Operator: The next question comes from Mike Nedelcovych with TD Cowen. Michael Nedelcovych: I have 2. My first is on the biosimilar portfolio. Back in October, as you know, FDA released draft guidance limiting the requirement for comparative efficacy studies for biosimilars. So I'm curious what you consider to be the status of this policy in the U.S. What's your interpretation of that guidance? And what impact should we expect it to have on Organon's business, for example, does it open the biosimilar floodgates and hugely boost margins? Or is it more of an incremental change? And then my second question is on your 2026 guidance. Can you provide any more detail on the Nexplanon contribution that's contemplated in your 2026 sales guidance and will launch of the longer-acting Nexplanon implant be accretive to total Nexplanon sales this year? Joseph Morrissey: Mike, I think the first -- the first question on the biosimilars. We feel it would be more incremental. So we think our strategy with biosimilars is the right one of picking the right partners that are positioning their biosimilars in the right order of the ability to launch and building out those partnerships. We're excited about our opportunities in the U.S., continuing to grow Hadlima as well as with our launch of the denosumab biosimilars and expanding that in other markets around the world and continue to grow in that way. So we see that more incremental. Matthew Walsh: And on the second part of the question for 2026 guidance at Nexplanon, we believe Nexplanon will be roughly flat year-on-year. We've got pushes and pulls on the Nexplanon business. Ex U.S., the business will continue to grow nicely. We talked about improved access to Nexplanon in Latin American markets. In the United States, we'll have consistent with the launch of the 5-year label, we will have a bit of a dip due to no reinsertion. Roughly -- and we've said 10% to 15%, let's call it, 13% of insertions annually are actually reinsertions. So now with the move to 3 to 5 years, that will create a bit of an inflection point in volume there. And some of the channel issues that we experienced in the second half of the year will annualize. So net-net, the contribution of Nexplanon to our 2026 guidance is to summarize roughly the level with 2025. But we remain optimistic that the attractiveness of the 5-year label, especially for high BMI patients, and now with the duration making the product more attractive versus other long-acting reversible contraceptives, bode very well for the long-term growth of the product, both inside and outside the United States. Operator: The next question comes from Jason Gerberry with Bank of America. Bhavin Patel: This is Bhavin Patel on for Jason. Two questions from us. So the first is you're guiding to a flat 2026 adjusted EBITDA of $1.9 billion, and we have $275 million in annualized cost savings from the reset flowing into the P&L. So I guess if we strip out those savings, the underlying EBITDA performance appears to be declining. Maybe if you can help us bridge where that $275 million benefit is being absorbed. Is it purely the 75 to 100 bps of gross margin deterioration? Or are there a massive onetime reinvestments into Vtama and Nexplanon REMS program? And then my second question is to double-click on this REMS program that launches in a couple of weeks with a 6-month grace period ending in August. So does your 2026 Nexplanon outlook assume any volume bottlenecks or certification friction in the second half of the year once that mandate is fully enforced? And maybe does the REMS mandate distributor registration potentially provide you with like a cleaner data to monitor the wholesaler days of coverage? Matthew Walsh: So I'll take the first part of the question, Juan Camilo can take the REMS question. So on the operating expense savings, the $275 million we referred to when we spoke earlier in the year was all related to gross takeouts that we were going after in sort of the base administrative and structural elements of our cost structure. That was the gross number we were going after. That enabled us to take a portion of that and reinvest it, for example, in increased enhanced promotional activity for Vtama. So when you asked the question, you essentially answered it by saying that some of that $275 million would be redirected to revenue growth opportunities. I'll take a step back and say that the management team here continues to go after OpEx very aggressively. We've built another round of OpEx savings into our 2026 guidance, not quite as large as the 2025 effort, but certainly in the same ballpark. And it's just essential that we continue to rightsize the operating expense footprint of the company in light of what's happening in terms of our gross margins being compressed. Now I'll turn the question over to Juan Camilo for REMS. Juan Camilo Ferreira: Yes. Thank you, Matt, and thanks, Jason. Yes. We are pretty confident that with this window that we have and the efforts that we have already planned, we will be able to recertify the prescribers that constantly use or loyalty use of Nexplanon. This physicians that have been already certified before will have a very small requirement that will take them around 15 to 20 minutes to be certified. So we are pretty confident that we'll be able to maintain the volume based on the retraining that I believe was your question. The other factors are the ones that Matt and Joe already covered. Operator: The next question comes from Chris Schott with JPMorgan. Ethan Brown: This is Ethan on for Chris. Maybe just building on the margin commentary, just maybe taking a step back, what are your latest thoughts on what operating costs and margins can look like over time from here? And then on Nexplanon, very helpful commentary on the headwinds going to the 5-year indication. Just maybe how long should we think about that headwind -- about the duration of that headwind? And are there any potential offsets via price there? Matthew Walsh: So the first part of the question relates to OpEx. And I think the challenge for the company as we've seen gross margins compress since the spin is to continue to streamline, make the business more efficient, get economies of scale where we can. And I just make the broad comment that it's incumbent upon us to continue to do that. And -- but at the same time, make sure that we are not sacrificing OpEx where it can draw a clear line to revenue growth and value creation in the top line. So I don't have a numerical answer to the question. What I have is the philosophy here that we are deploying -- have been deploying as we try and manage a bottom line that optimizes what our opportunity is. On the 5-year and the reinsertion, I think this year will be the most pronounced for it, 2026. We might be talking about reinsertion risk in 2027. It should be at a fairly significantly lower level than what we're talking about this year. Operator: The next question comes from David Amsellem with Piper Sandler. Alexandra von Riesemann: This is Alex on for David. The first one is, can you talk to the pressure on established brands and how we should think about key established brand segments, not only in 2026 but also beyond? And how you're thinking about potential trouble spots such as respiratory? And then on Vtama, how are you thinking about competitive dynamics for the product given that growth has been slower than topical roflumilast? So with that in mind, how are you thinking about your support of the product? Matthew Walsh: So the first part of that question -- go ahead, Joe. Joseph Morrissey: Yes. Thanks, Matt. So I think, Alex, the first thing with the established brands, I think Matt said it in his commentary, right? We do think established brands are going to have some years where you have somewhat of a reset like we did with the respiratory in 2025 and then remaining backward flat. I think when we look at it, a lot of the respiratory risk, it may -- it will pull into this year but it's largely we're getting past that as well as some of the declines we had over the year and the prior year in Japan. And so when we look at them, the growth with products like Emgality plus Vtama and so forth, that's where we see stabilization in established brands, but it's still going to be somewhat chunky, I would say, in the future, where we'll have some challenges and then opportunities to offset that with growth. Matt, do you want to take Vtama? Matthew Walsh: Yes. So from a Vtama perspective, as it competes against steroidal nonsteroidal options, we see that 2026, the product is likely to grow in line with the other nonsteroidal topical. So in the 20%, 25% range year-on-year for Vtama. The only other thing I would add to Joe's comment on established brands is that we continue to add products there that capitalize on the global infrastructure that we have. So we -- the company made an announcement tail-end of last year that we will be marketing [ Nilemdo ] in the EU. Not a big product, but it can slide right in similar to Emgality, very little in the way of incremental operating expense necessary and once again, capitalizes on what's a unique asset and feature for Organon's business, which is this global infrastructure that enables us to sell either directly or directly into 140 countries around the globe. Operator: The next question comes from Terence Flynn with Morgan Stanley. Terence Flynn: Two for me. I was just wondering if you can give us any update on the search for a permanent CEO? And then the second one relates to the denosumab biosimilar that I know you guys launched end of December. I think Amgen has talked about being able to, on the Prolia side, at least, hold on some more share given they have Evenity as another option. So I guess as you think about your go-to-market strategy, on the denosumab biosimilar specifically for the osteoporosis setting. Anything you're doing differently to try to capture more share there? Carrie Cox: So I can take the one on the CEO search. You might recall there was a special committee of the Board formed last year. We've had a very robust process underway, but there's no public update to share right now. Matthew Walsh: And as far as the denosumab question, I think let's just talk about what we should be modeling and how investors should be thinking about Organon's opportunity for that product. And like a lot of the biosimilar partnered opportunities that we have will be competing against highly competitive markets, both from a volume and price perspective when we think about what the peak revenues might be for that denosumab product over both reference products, it's on the order of $100 million in total, let's say, over about a 5-year time frame. Operator: This concludes the question-and-answer session and we'll conclude today's conference call and webcast. Thank you for joining. You may now disconnect.
Operator: Good day, and welcome to the Nova Ltd. 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 Miri Segal, CEO of MS-IR. Please go ahead. Miri Segal-Scharia: Thanks, operator, and good day, everyone. I would like to welcome all of you to Nova's conference call. With us on the line today are Gaby Waisman, President and CEO; and Guy Kizner, CFO. Before we begin, I would like to remind our listeners that certain information provided on this call may contain forward-looking statements, and the safe harbor statement outlined in today's earnings release also pertains to this call. If you have not received a copy of the release, please view it in the Investor Relations section of the company's website. Gaby will begin the call with a business update, followed by Guy with an overview of the financials. We will then open the call for the question-and-answer session. I will now turn the call over to Gaby Waisman, Nova's President and CEO. Gaby, please go ahead. Gabriel Waisman: Thank you, Miri, and thank you all for joining us today. I will start the call by summarizing our fourth quarter and full year performance highlights. Following my commentary, Guy will review the quarterly and annual financial results in detail. 2025 was an exceptional year for Nova, delivering record performance across our business and strong execution in a rapidly expanding semiconductor landscape. We delivered record annual revenue of $880.6 million, up 31% year-over-year, along with record GAAP and non-GAAP profitability with earnings per share growing 29% year-over-year. Fourth quarter revenue exceeded the midpoint of our guidance, reaching $222.6 million, up 14% year-over-year. This performance highlights the depth of our portfolio, solid customer demand, our leading market position and our disciplined operational focus. It underscores Nova's strategic alignment with key vectors in the industry and strengthens our foundation as we move into another year of growth. We entered 2026 with a robust investment cycle, translating into accelerating demand for leading-edge nodes and steady investments in mature ones. It has manifested in capacity additions, higher-yield pressures and a need to maximize device performance. Rising design complexity is increasing the number of process steps and accelerating adoption of new integration methods such as backside power delivery and hybrid bonding. Coupled with faster time to market and yield requirements, it is broadening the need for precise metrology. Some manufacturers have already announced an increase in CapEx plans, contributing to the positive outlook. We are confident that our operational agility, flexibility and grit enable us to address our customer needs. An emerging segment fueled by the AI era is silicon photonics, a technology that uses light photons instead of electrons to transfer data, enabling ultrafast data transmission at lower power consumption. It requires very high accuracy measurements of optical structures such as waveguides and modulators, necessitating precise alignment and 3D characterization, which opens new opportunities for Nova. These market and technology dynamics are reinforcing our strategic alignment with the fastest-growing and most technically demanding segments of our industry. We are engaged with our customers to address their high-value challenges and are well positioned to capitalize on the opportunities they pose. We expect positive momentum to propel our performance in the coming quarters. One of the highlights of the fourth quarter was when a global leading logic customer selected Nova's integrated metrology portfolio for CMP applications across gate-all-around processes. Following a comprehensive evaluation, the customer adopted our full CMP product suite, extending their earlier back-end deployment into front-end high-volume manufacturing. Multiple orders have already been placed for 2026 with additional orders expected as capacity ramps. This win reflects our close collaboration with customers to accelerate time to market, support their technology roadmaps and enhance yields. Another highlight is our services organization, delivering record quarterly and annual revenues. This performance was driven by capacity installation, adoption of our value-added services to support yield improvement and a focus on shifting from Time and Materials towards annual service contracts. We are especially proud that our teams earned multiple service excellence awards from leading customers in Asia, underscoring our deep commitment to customer success. Nova's growth this year was broad-based. In gate-all-around processes, we are now firmly established as a foundational partner in the industry's transition to next-generation architectures and expect to see demand increase further in 2026. In advanced packaging, revenue rose more than 60% year-over-year, representing approximately 20% of product revenue. We saw strong traction across both dimensional and chemical metrology platforms and broad adoption of our dedicated products. And in memory, we saw record results driven primarily by DRAM applications where manufacturers expanded adoption of the materials and chemical metrology offering. Nova's advanced metrology solutions secured multiple strategic qualifications across leading global manufacturers, reinforcing our position as a trusted partner for next-generation technology inflections. A few examples include the ELIPSON materials metrology solution, which was selected as tool of record by a leading foundry for advanced gate-all-around production and recent adoption of the Metrion platform for gate-all-around as well as advanced 3D NAND and DRAM device manufacturing. At the same time, our Nova WMC optical metrology system gained traction in advanced packaging and high-bandwidth memory. On the technology front, we continue to invest in R&D, including a noble metrology solution that leverages our optical and materials metrology core competencies amplified by Nova's unique strengths in modeling and signal analysis. This new solution is designed to address emerging challenges associated with technology inflections such as gate-all-around, CFET and advanced memory. Nova's unique strengths in physical and AI-driven modeling will come together in this new solution, enabling precise measurement of individual nanoscale structures, improved parameter decorrelation for complex architectures and coverage of critical gaps left by existing metrology technologies. Looking ahead to 2026, we are entering the year with increasing confidence in the market environment. We see favorable trends across logic, advanced packaging and memory applications. Current order patterns point to another growth year for Nova with momentum expected to build through the first half and accelerate in the second half of the year. Our priorities for 2026 remain clear: continue to expand our leadership in advanced nodes, proliferate our materials metrology platforms, deepen our share in advanced packaging ecosystems and scale our operations to support increasing customer requirements. To that end, we are strengthening our operational foundation for the next phase of expansion, including the launch of a new state-of-the-art ERP system to manage growing volume of business with greater efficiency and scalability. We are also expanding our global manufacturing footprint by building new production capacity in Asia, enhancing cost efficiency while positioning us closer to key customers and supply chain partners. We remain focused on executing with discipline, capturing opportunities and outperforming WFE. I'm thankful to our employees for their dedication and commitment and to our customers and partners for their trust in Nova. For more details on the financials, let me hand over the call to Guy. Guy Kizner: Thanks, Gaby. Good day, everyone. I will begin by reviewing our financial achievements for the fourth quarter of 2025, then summarizing our performance for the full year and finally, provide guidance for the first quarter of 2026. In the fourth quarter of 2025, total revenues reached $222.6 million, above the guidance midpoint of $220 million. This performance reflects a growth of 14% year-over-year. Product revenue distribution was approximately 75% from logic and foundry and 25% from memory. Product revenue included 3 customers and 4 territories, which contributed each 10% or more to product revenues. In the fourth quarter, blended gross margins were 57.6% on a GAAP basis and 59.6% on a non-GAAP basis, in the upper end of our target model range of 57% to 60%. The high gross margin in the quarter was attributed to a favorable product mix. Operating expenses increased in the fourth quarter and came in at $67.5 million on a GAAP basis and $62 million on a non-GAAP basis. We continue to ramp up R&D and sales and marketing spending in targeted manner to advance our product roadmap and unlock future growth opportunities. Operating margins in the fourth quarter reached 27% on a GAAP basis and 32% on a non-GAAP basis. The effective tax rate in the fourth quarter was approximately 11% on a GAAP basis, primarily reflecting the release of uncertain tax positions following the completion of a tax assessment audit. The effective tax rate on a non-GAAP basis was approximately 16%. Earnings per share in the fourth quarter on a GAAP basis were $1.94 per diluted share, and earnings per share on a non-GAAP basis were $2.14 per diluted share, exceeding the midpoint of our fourth quarter guidance of $2.11. Moving on to the annual results of 2025. Revenues increased 31% year-over-year, reflecting our continued outperformance of the industry through disciplined execution of our strategy. We are also building the foundations to sustain this outperformance by gaining market share, qualifying our differentiated portfolio with strategic customers and advancing innovation through continued investment in R&D of more than 15% of revenues. The geographic revenue split in 2025 was as follows: China was 33%, Taiwan was 29%, Korea was 16%, U.S. was 9% and other territories contributed the remaining 13%. Gross margins for the year were 57.4% on a GAAP basis and 59% on a non-GAAP basis. Operating margin for the year came in at 29% on a GAAP basis and 33% on a non-GAAP basis, in the upper end of our target model range of 28% to 33%. These operating margins demonstrate the strong value proposition of our process control solutions and our consistent operational execution. Earnings per diluted share on an annual basis came in at $7.96 on a GAAP basis and $8.62 on a non-GAAP basis. Turning to the balance sheet. We ended 2025 with more than $1.6 billion in cash, cash equivalents, bank deposit and marketable securities. During 2025, the company generated $218 million in free cash flow and presented healthy parameters related to working capital management. Next, I would like to share the details of our guidance for the first quarter of 2026. We currently expect revenues for the quarter to be between $222 million and $232 million. GAAP earnings per diluted share to range from $1.90 to $2.02. Non-GAAP earnings per diluted share to range from $2.13 to $2.25. At the midpoint of our first quarter 2026 estimate, we anticipate the following: gross margins of approximately 56% on a GAAP basis and approximately 58% on a non-GAAP basis. Operating expenses on a GAAP basis to decrease to approximately $65 million; operating expenses on a non-GAAP basis to decrease to approximately $60 million. Financial income on a non-GAAP basis is expected to be approximately $16 million. Effective tax rate is expected to be approximately 16%. To conclude, our 2025 results reflect strong execution and continued progress against our strategy. As we look to 2026, we see positive momentum in the business and remain focused on investing in innovation, strategic customer relationship and capacity to support long-term performance. With that, we will be pleased to take your questions. Operator? Operator: [Operator Instructions] The first question comes from Blayne Curtis with Jefferies Ezra Weener: Ezra Weener on for Blayne. Just wanted to start by looking at your guidance. You've talked about the first quarter, but can you talk a little bit about the year, what you're seeing? We've heard a lot of different WFE outlooks and what you're seeing for your WFE outlook that you plan to outperform. Gabriel Waisman: So I believe that the most important, and thank you for the question, Ezra, factors in outperforming the WFE is having the right growth engine, and we are well positioned in that respect. With regards to WFE, we anticipate it to be in the low double digits based on, I assume the same data that you are seeing. So we definitely see a momentum gathering where we expect the second half of the year to accelerate. And we do see the first half of '26 higher than '25. So it's definitely progressing in the right direction. Ezra Weener: Got it. And then just a follow-up would be, if WFE does accelerate, do you have any bottlenecks in terms of your own production and being able to meet demand Gabriel Waisman: So it's a great question. First of all, we have made significant investments over the last year to expand our manufacturing capacity, and we have the sufficient one to support our growth outlook, including, of course, clean room capacity for advanced packaging in particular. And this year, we continue to invest in infrastructure, including new production capacity in Asia and also the investment in IT infrastructure, such as the ERP to improve the efficiency and scalability. And we believe that these actions give us the ability to manage higher volumes with better cost and time efficiency, being closer to the customers and providing greater transparency. Operator: The next question is from Matthew Prisco with Cantor. Matthew Prisco: Maybe just to start, can you offer any additional color on maybe how customer conversations have evolved over the past 3 months across each end market? And then those customer conversations, are those translating into actual orders at this point to support that second half inflection? Gabriel Waisman: So thank you, Matthew. So let me start with perhaps taking it into the growth engines, the primary growth engines and drivers for us this year and take it to the customers specifically. So we see '26 as another growth year with several key drivers. First is the advanced logic and gate-all-around. We see proliferation of gate-all-around across all leading manufacturers with increasing process control intensity. On DRAM and high-bandwidth memory, we see a healthy recovery in DRAM and continued build-out of HBM capacity. In advanced packaging, we see growing contribution from hybrid bonding. And of course, we support it with our both dimensional and chemical portfolio that we see significant growth over there. Overall, we see the increased capital investments as has been published by several of our customers. Of course, it takes time until this has turned out into WE orders and, of course, revenue for company. But we've seen those latest announcements as very encouraging and building the momentum getting to 2026. Matthew Prisco: Okay. That's helpful. And then maybe as a follow-up, can you walk us through share dynamics in your dimensional metrology business, both from the overall portfolio and that integrated CD opportunity you talked about? And maybe a specific focus on PRISM as well and Nova's positioning there and kind of adoption trends of those systems? Gabriel Waisman: So I hope I understand the question correctly. But if you're talking about the overall market share, so as per the Gartner latest report for 2024, we grew to become second in market share with an overall market share in CD and film film at about 25%. That represented an overall increase of about 25%, and we are seeing continued market share gains across our portfolio. In terms of the integrated metrology, we've I've mentioned the fact that we have a leading global logic customer adopting our integrated metrology portfolio and product suite for its gate-all-around CMP processes. We've also mentioned the fact that both ELIPSON and METRION has had an excellent year in '25 and are becoming important growth engines for the company. ELIPSON is a tool of record at a top foundry for advanced gate-all-around production with additional tools at another leading logic and memory customers. We also see repeat orders and proliferation from R&D into high-volume manufacturing. And on the METRION side, we have recently qualified at both gate-all-around logic customer and a leading memory manufacturing manufacturer as we have planned to and discussed, and this is a very significant milestone for the company. In both cases, of course, we are at the early phase of proliferation, and our goal is to evolve to become a multiple tool per fab similar to how we scaled XPS historically. And just as a side note, we've just shipped the 300th XPS tool, and it's definitely a reason to become -- to be optimistic. We also see share gain traction with our stand-alone OCD solutions for packaging and advanced packaging and also on the front-end copper dual damascene for our chemical portfolio. So definitely quite optimistic in terms of the share gain momentum as we enter 2026 Operator: The next question is from Michael Mani with Bank of America Securities. Michael Mani: Could you just clarify your view for the business this year between DRAM and foundry and logic, which one do you expect to grow faster? And thanks for your WFE view for 2026 of low double digits. I guess as you look out to this year, you said you'd be able to outperform, and that makes sense because you have the right product suite, gaining share. It's going to be a very leading edge heavy year. But does the degree of outperformance you expect this year look very different from the past couple of years? It feels like it should be stronger given all those dynamics, but would love to hear your view on that. Gabriel Waisman: Thank you for the question. We do see several vectors in growth this year, stemming especially from advanced logic and DRAM. We see significant growth coming from advanced packaging as well. I think that I mentioned the fact that we had about 60% growth in '25 in advanced packaging, bringing the total share out of the company's revenue to about 20%. And we believe that advanced packaging will still have a double-digit growth this year. So the major vectors for growth are both leading-edge advanced logic and DRAM as well as advanced packaging. In terms of NAND, we do see some signs of improvement, but we are waiting an inflection point similar to what we've seen on DRAM and HBM. And in terms of outperformance, of course, we are aiming to outperform WFE, but it's still early on this year to indicate any specific number. Michael Mani: Got it. And then on China, so I think you mentioned it came in at 33% of sales for 2025. I think that was a little higher than expected. So heading into this year, I mean, what's your view for the market? Is it flat? Is it slightly down? And any sort of color on what exactly you're seeing that might be driving that lack of growth? Gabriel Waisman: So we've had 39% of our business from China in 2024. And as you indicated, it normalized to about 33% last year. China is a large and very, very important territory for us, and we expect it to continue and represent around 30% of our sales. We do see shorter lead times in China, which reduced visibility, but we are seeing trends that make us believe that China will continue to have steady investments this year to maintain this proportion that I've just indicated as part of our overall sales. Naturally, as advanced nodes and DRAM invest more and China is focused on mature nodes, we'll see the relative portion of China go down even if the nominal sales remain flat, but we are seeing signs of improvement in the business in China as well. Operator: The next question is from Shane Brett with Morgan Stanley. Shane Brett: So my first question is on leading-edge logic. So how should I think about your share position in the context of your largest customer adding more 3-nanometer wafers this year? I'm asking this because your Taiwan revenue is up nearly 90% year-over-year in 2025, which is very reflective of your strong position. I'm just curious just how much better this can be for you in 2026. Gabriel Waisman: So I'm not sure I can discuss specific shares with a specific customer. But I can say that in terms of gate-all-around specifically, and we'll talk a bit more about the advanced nodes in gate-all-around, we're well positioned across all 4 players. And we see the growth this year and the momentum increasing compared to last one. In terms of 3-nanometer, of course, the intensity is not as high as it is in gate-all-around in the 2-nanometer, but it's still very significant. So any investment in advanced nodes is very beneficial for us. Shane Brett: Got it. And then for my follow-up, so for advanced packaging revenue, you kind of talked about low double digits. But I guess relative to some of the etch and dep players, that feels a little bit light, but it's kind of in line with your kind of metrology inspection peers. Just what's the dynamic that's going on in advanced packaging this year that's, I guess, leading to a bit of a moderation from 60% growth to kind of low double digits this year? Gabriel Waisman: So advanced packaging for us is relatively new, and we see the penetration of more and more products and gaining share in advanced packaging. So out of the 20% of product revenue that I indicated, about 1/4 to 1/3, depending on the quarter is high-bandwidth memory and the rest is logic. We do see strong double-digit growth this year as well. And since we are engaged with all players and introducing more and more solutions and capabilities, we believe that this is a great opportunity for us, and we'll see the growth continuing into this year as well. Operator: The next question is from Elizabeth Sun with Citi. Yiling Sun: This is Elizabeth for Atif. First question is for is for gross margin guidance for Q1 is 58% slightly is down sequentially. So I'm just wondering what's the puts and takes in the gross margin guide for Q1. Guy Kizner: Sure. So this quarter, we reported gross margin of 59.6%. Looking ahead for the next quarter, we are guiding gross margin of 58%, plus/minus 1% point. And this reflects the current specific product mix as we see it right now for the quarter. But as we always said, margins can fluctuate on a quarterly basis. And the right way to look on our margin profile is on the annual basis. So nothing really changed structurally. It's based on specific product mix in a specific quarter. Yiling Sun: Got it. And then on gate-all-around accumulative revenue of $500 million until '26. So we are already in '26. I'm just wondering like you have a lot of announcement recently. So I'm wondering for gate-all-around in total, are you seeing the accumulated revenue to be maybe above the $500 million level? Gabriel Waisman: So we do see the momentum. And as I mentioned, we are well positioned across all players, and we are on track with getting to the $500 million mark as an accumulated revenue for '24 to '26. Obviously, '26 is expected to be higher than '25. So we'll see how it goes. Right now, I can say that we're on track to getting to this target. Operator: The next question is from Charles Shi with Needham & Company. Yu Shi: Maybe 2. First one is regarding China, how -- it looks like you talked about a little bit reduced visibility, but overall looking strong. It sounds like probably second half should see some pickup in China revenue relative to second half as well, in line with the overall trend for what -- I mean what you guided for your overall revenue. Is that still the case? And how do you feel about sustaining maybe last year's China growth somewhere around 11% based on your -- the geographical breakdown you just provided? Any color would be great. Gabriel Waisman: Thank you, Charles. So overall, if we look at process control in China, at least according to the data that we have from external sources, process control in China actually went down. But as I mentioned before, for us, it nominally went up, and we're very encouraged about the position that we have there. Obviously, as I mentioned before, proportionally, it went down from 39% to 33%. And the more investment there is in advanced nodes, it's expected to continue to go down, whereas I believe that it will normalize around the 30%. So it will continue to be a dominant and key territory for us moving forward. In terms of the trends, we currently see the some increased visibility, even though in general, visibility went down in China as well. But what we see now gives us more confidence about at least the nominal level of business in China in '26. Yu Shi: Got it. The other question, I know this is actually a question I got asked a lot. One of your peers talked about rising memory prices having some impact on gross margin. Wondering if you are seeing any of that. I know it's kind of hard to compare what you see versus what your peer sees. And I just want to get some clarification. Is memory price creating any pressure on your gross margin? Gabriel Waisman: Not sure I fully understood the question. But overall, we don't see a correlation between memory pricing to our gross margin. No. Operator: The next question is from Vedvati Shrotre with Evercore ISI. Vedvati Shrotre: I think most of my questions have been answered. So the one I had was, can you talk about how your lead times have changed maybe 3 months versus now? And within that, your peers talked about the optical components being constrained. Does that impact you as well as you go through the year? Gabriel Waisman: Yes. So thank you for the question,. I agree with the fact that there is more pressure on the lead times. which, of course, impacts visibility as well. But that pressure on lead times calls for our operational agility to improve, which we're doing, as I previously mentioned. We're working with our suppliers and with our supply chain to make sure that we have both the material and to have the capacity to support the business and the anticipated growth this year. So there is additional pressure on the lead times, but we are making ourselves more agile in order to accommodate for that. Vedvati Shrotre: And is the optical component a driver of that lead time pressure? Gabriel Waisman: No. I think that the lead time pressure is coming from the customers that they have to turn CapEx into WFE and to actual deliveries into the fab. It's across the board, meaning that it impacts both the material, chemical and dimensional metrology portfolio that we have. There's no difference in the requests that we have from different components of our portfolio. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Gaby Waisman, Nova's President and CFO -- CEO, excuse me, for closing remarks. Gabriel Waisman: Thank you, operator, and thank you all for joining our call today. Operator: The conference has concluded. Thank you for attending today's presentation. You may now disconnect.
Kiira Froberg: Good morning, and welcome to Kemira's Q4 and Full Year '25 Earnings Conference. My name is Kiira Froberg, and I'm the Head of Investor Relations at Kemira. Here with me today, I have our President and CEO, Antti Salminen; and our CFO, Petri Castren. This will be actually Petri's last and 50th earnings webcast as Kemira's CFO. Before we start the actual presentation, I would like to remind you that our presentation today includes forward-looking statements. Next, Antti will cover our full year '25 and Q4 highlights, after which he will discuss Kemira's group level performance. After that, Petri will talk about business unit performance and cover financials in a bit more detail. And then in the end, before the Q&A, Antti will discuss Kemira's strategic focus areas in 2026 and also talk about our financial outlook for the year. But now Antti, the stage is yours. Please go ahead. Thank you. Antti Salminen: Thank you, Kiira. Good morning on my behalf as well. It's great pleasure to present Kemira's '25 results as well as, of course, in a bit more detail the Q4 results. And the year was challenging for us. Markets were soft and uncertain, which is visible in the numbers. So really challenging market environment, which then resulted in a clear revenue decline for the full year as well as for the Q4. But I'm very proud of the organization. We managed to maintain our profitability in a very healthy level. Operative EBITDA being over 19% for the full year, which I think is a really good achievement under these market conditions. And it enabled us to continue to invest into our strategy execution. So building the future growth for the company. And basically, in water business, we announced earlier in the year the acquisition of Water Engineering in North America, which is a really good platform investment into a fast-growing water services market in North America. We also invested or started an investment project in Helsingborg, Sweden for building an activated carbon reactivation capacity, which is part of our strategy to step into the fast-growing micropollutants removal market. And we have now been working for more than 6 months with the Cambridge U.K.-based AI material science company, CuspAI to significantly accelerate and basically change the way innovation is done on this area. And also that work is focusing on this fast-growing micropollutants area. So soft markets, but good profitability performance, which enables us to continue to invest into our growth initiatives. Also, our customers have been very committed, and I have to thank all the customers for the long-term partnership and commitment. We had all-time high Net Promoter Score, which I think tells about our capability to be dependable and trustworthy also in the volatile uncertain market environment. And our employees continue to stay very engaged, which, again, is the platform on which we can build the strategy execution going forward. So despite of the challenging environment, putting a lot of stress and pressure on the organization, the organizational changes that we've been going through, the organization is committed and engaged. We also made good progress on our sustainability targets. This is in the heart and core of what we do and our strategy. So we increased our score in the CDP, both in Water Security and Climate Change. reaching the A- level, which is -- which has been our target. We increased our score in EcoVadis rating, and we continue to reduce the CO2 emissions exactly according to our SBTi commitments. Again, really solid improvement there. And on February 20, when we will publish our Sustainability Statement, we will publish the new positive water impact target, which will be then guiding our way forward in terms of water stewardship. Then if we look at the Q4 in a bit more detail. So as mentioned already, the markets were soft and this market softening and uncertainty actually accelerated towards the end of the year. As a result, the Q4 revenues were 8% below the previous year, and the revenues declined in all the 3 business units. Operative EBITDA margin, however, solid at over 18% and actually increasing in Packaging & Hygiene Solutions, where basically we have continued the self-help program to improve the underlying profitability of the business and results are visible there. The strategy execution continued, as I already mentioned, and actually accelerated during the Q4. So the Water Engineering acquisition happened in Q4. And then we were working during Q4 on the first bolt-on acquisition on this platform, AquaBlue, company, which we then finalized the acquisition in early January. So this is first in the row of several such bolt-ons that we are planning to build on the platform of Water Engineering. And we have a really healthy pipeline, which we are working on. So basically kind of executing a programmatic acquisition-driven growth in the water business there. And then the latest announcement just a couple of days ago, announcing the acquisition of SIDRA Wasserchemie in Germany. And this is then strengthening our position in the most profitable and resilient part of the business, i.e., the coagulant business in the Europe. So basically building on the core, strengthening the Water Solutions business core part, strengthening our position in Western and Central Europe. So market softness accelerated in Q4, but we accelerated also our actions to continue to invest in the future growth of the company. Revenue, as you see, basically, again, just the numbers kind of proving the acceleration of the softening of the market towards the end of the year here. And it's good to remember here that there's also quite significant FX impact in these numbers, and Petri will soon elaborate a bit more on that. And then looking at the profitability, healthy, over 18% profitability, as I mentioned in the Q4. Q4 typically is the weakest quarter for us. There's the underlying seasonality of the businesses you'll see it in the previous years as well. So under these conditions, I'm happy with -- happy about the ability of company to maintain this level of profitability. And especially happy to see that our self-help actions in the Packaging & Hygiene Solutions are bearing fruit, and we have been improving the profitability of that business. There's quite some items affecting the comparability in the Q4, totaling more than EUR 30 million, mostly coming from the restructuring and streamlining costs. So working actively to basically balance the softer top line and keep the profitability on a healthy level. And those costs are there. And again, Petri will soon elaborate a bit more on those. And it also included then the transaction cost of the Water Engineering transaction. And then as a result of this -- all this, the full year '25 earnings per share totaled EUR 1.18. And if we then look at, finally, the financial long-term targets that we have set. So clearly, we are below the organic growth target, driven by the soft demand from the markets, but we are within our target range, both in terms of operative EBITDA and return on capital employed. Of course, the capital employed going closer to the target threshold. There you see clearly the impact of the acquisition of the Water Engineering, which is then basically increasing the capital employed there. But with this, I will pass it on to Petri, who will elaborate a bit more on the financials for the very last time for Kemira. Petri Castrén: Let's assume that my voice is audible. So as Antti said, we made good progress in our strategy execution during the year and also during the first quarter. The other headline, I think, from this report, of course, is that the market has been weak, but we have been able to defend and protect our profitability quite well. I'll go directly to the variance analysis next. Headline revenue declined 8%, really 3 components that Antti already mentioned. It's the -- all negative now. Volumes were declining. Negative FX impact, mostly it's the weakening of the U.S. dollar, which is -- everybody knows about it and everybody has paid attention to it. But yes, it has been impacting us quite severely. And also a little bit on the product pricing as well about 1% on average for the quarter. Of course, these are the same components that impact profitability. In addition, there was a little bit of a higher variable costs impacting primarily our Fiber Essentials, and I will come back to that when I talk about the business unit comments. Fixed cost savings that Antti already alluded to regarding Packaging & Hygiene Solutions, where we really have had headcount reductions. But obviously, there have been fixed cost saving actions throughout the company that we have been doing to really protect the profitability during the quarter and for the year. Full year story, same component again. Of course, there, you have the addition that there is still the tail in the comparison period of the oil and gas business. So if you eliminate that part, the comparable decline 5%. And again, biggest contributors being the volume development and the U.S. dollar weakening. Then if we look at the year in totality, and we look at sort of the various components. Obviously, it's clear that the volume decline is more impactful during the second half of the year. So there was an acceleration in the business decline. And again, I will come back to those during the business comments. Sales prices actually have been relatively stable for the year. But in the first part of the year, the year-on-year comparison was quite negative. But if you look at the 1-year comparison, meaning Q4 '25 to Q4 2024, it's 1% decline. So overall, we are in a pretty stable pricing environment. It's really a volume issue that we are dealing with. And of course, this slide actually tells the same story. Prices and variable costs have significantly stabilized during the last 4 or 5 quarters. So you'll see that there's a fairly flat line when we had this huge peak during the COVID and supply chain problem years. Energy costs were sky high in '21, '22, but we are sort of putting that period of time into history, and we are now in a much more stable environment. And our crystal ball as far as we can say or see doesn't really indicate much of changes to this. I mentioned this comment after Q3, but I do it again. So it's really a volume game now for us. Volume increase the key to driving our profitability now and for us that is largely market dependent and it applies to all of our business units. We have capacity available in most of our plants and so any additional volume we can process without really adding any fixed costs for infrastructure. This means that if and hopefully when the markets improve, the operating leverage will help us with the bottom line. Having said that, you'll see that in the assumptions we are not yet foreseeing really a market recovery at this time. Antti mentioned the items affecting comparability. It's really -- we are also -- we are taking action because of the lower volumes. So we're taking action on our manufacturing assets. We're ramping down our production entirely in our Teesport U.K. site, resulting in an asset write-down, restructuring and closing provisions. We're also making an efficiency and automation investment in our Botlek site, resulting in a reduction of manual work and the related -- restructuring costs related to that as well. Fortunately, we had EUR 12 million environmental provision for a site that has been closed long time ago -- many years ago. More than decade ago in Finland where we actually disagree with the authorities of how the land remediation should be done. The land has been remediated and the polluted land impacted soil has been taken away, but there is a difference of opinion how that soil should be treated. We'll probably continue that dispute for a while. But we have now taken a provision for that -- for the worst-case scenario, least put it this way. All-in-all, this restructuring, streamlining and transaction costs add up to EUR 32 million within EBITDA and EUR 43.8 million within EBIT. And of course, the impact of that is driving EPS down for the quarter to just EUR 0.07 per share. And for the year, EUR 1.18, below previous years of EUR 1.61. Next, I'll go to the business unit commentary, as I promised, and I'll start with the Water Solutions. So first of all, let's start with a reminder of the basics. So in Water Solutions, we do have seasonality. So our particular municipal customers do treat less wastewater during the winter months and they require less of our chemicals. So that creates the seasonality that is within our Water Solutions business. Having said that, revenue was weak, particularly it was weaker in the industrial side. The revenue was down 9%. That's quite a significant decline. But more than half of that is attributable to our contracting volumes that we received from our oil and gas business acquirer. And their customer has had an operational issue. So it's not a loss of customer, it's a loss of -- its not a loss of business, but an operational issue that has dragged on longer than anybody expected. There was also some general weakness on the industrial side. Industrial production, in general, has been weak, in particular in Europe, and there are many processes where there are some wastewaters created that impact us in the industrial side. Urban water service in Europe was very stable. It is a very resilient business. There was a 4% organic decline in North America. And of course, in euro terms, clearly bigger in our numbers. So lower volumes impact the overall profitability, so that the operative EBITDA declined by 7%. Still operative margin at 18.5% for the business unit, slightly below the level of that last year. Next comments on PHS, Packaging & Hygiene Solutions. So challenging market continued. And year-on-year, the market was clearly softer and volumes impacted. Organic revenue declined 6%. Profitability has been protected by the measures that we have taken. We also have received and gained some new customer wins. So that has been helpful, but the market -- underlying market has been really soft. But the important point is that the market has now seems to it has bottomed up. It has not gotten any worse since Q3. It is not any better either. We saw, in fact, very little volume or very little price changes from Q3 to Q4. Profitability in Q4, slightly lower than in Q3, mainly due to product mix type of issues. I think, I commented that the product mix in Q3 was favorable. Now it was less favorable than in Q4. Q4 was less favorable than in Q3. And we're not done with the profitability improvement actions. So we are just implementing the new operating model as of beginning of this year, and we will be seeing benefits of that in the coming quarters as that is being implemented. Regarding regions, fair to say that APAC continues to be the biggest challenge. We see a particularly weak market in China with weak demand and with the local oversupply situation leading to much depressed prices and volumes. Regarding Fiber Essentials, environment has been weak for pulp chemicals, particularly here in the Nordics, which is a key market to us. Also market prices for base chemicals have remained low. For example, caustic soda is relatively important for us. For Fiber Essentials, there we have seen some price -- I'm sorry, variable cost increases -- raw material cost increases in the second half of the year. So it's really isolated to our sulfur products, but the increase has been quite significant. And that's the sort of one area where there is significant inflationary pressures. And it's enough that it's visible in the Fiber Essentials margins to some extent in the second half of the year. So again, looking at the full year, the volume decline, it's really in the second half of the year. And you see that the quarterly revenues have been -- have fallen to EUR 132 million, EUR 134 million range, whereas before that, we were clearly in the EUR 145 million, EUR 150-ish million per quarter run rate. And as the drop-through impact is quite significant, these are good gross margin products, but high fixed cost operating plans. So the volume -- any volume increase would have, obviously, positive impact to our profitability should -- and if and when that hopefully happens. All right. Moving to balance sheet. Now during '25, our net debt level has increased due to the acquisition of the Water Engineering and of course, the share buyback program that we had on the second half of the year. Then the smaller addition is that we actually inaugurated our new R&D facility in Espoo, here in Finland, with a 15-year lease. So that's added to our lease liabilities and reported as a part of debt obligations. ROCE that Antti was already talking about, return on capital employed, has come down to 16.5% due to this Water Engineering acquisitions. But of course, it's also heavily impacted by the reported EBIT or operative EBIT that we have, and those 2 components clearly impacting there. Cash flow from operations, EUR 127 million during the quarter and EUR 373 million for the year. Maybe a comment on the cash flow component. So our net working capital increased from previous year. We perhaps were not quite successful in reducing our inventory levels with the reduced volumes as the business was -- that business was experiencing. So obviously, trade payables are coming down, but if inventory levels remain roughly at the same level, it reflect as an increase in net working capital. And therefore, inventory levels will now need to be and are in the focus for us going into '26. There is some opportunity to tighten inventory rotation. CapEx fell just about where we expected and how we guided, slightly below EUR 200 million in '25. And now estimated '24, '26, it will increase slightly. We have some growth investments ongoing. And then, we are doing these modernization investments. I mentioned, the Botlek, but we have a few others as ongoing as well. Dividend, we have a strong track record of increasing our dividend. And now we are proposing increasing our dividend to EUR 0.76 to our Annual General Meeting. This increase is consistent with our dividend policy of paying a competitive dividend as well as increasing the dividend over time. And in recent years, the dividend has been paid in 2 installments, and we'll continue that practice. In addition to increasing our dividend, we're continuing to return capital to our shareholders through share buyback program. The purpose is to continue to optimize our capital structure. We have received almost universally positive feedback for the program that we initiated last year, and we feel that it's important that we continue to serve the interest of our diverse shareholder base. However, this is not limiting our desire or our ability to continue to execute our growth strategy. And again, it's evidenced by the 2 acquisitions that we have already done or announced -- and well, the first one is already completed. But the second one that we announced yesterday, we will continue to invest into organic growth opportunities when they are -- as well as inorganic growth opportunities. And again, this acquisition of SIDRA Wasserchemie for EUR 75 million approximately is a proof point of that. I will turn next to Antti, but before I do, I reflect a little. So this -- as Kiira said, it is my 50th and it's my last quarterly announcement. As announced, I will leave my position as Kemira's CFO at the end of March. So March 31, will be my last day of work. Looking back, I'm very proud of what Kemira has been and what Kemira has become during those 12.5 years. Kemira is much stronger, much better company, and I believe that Kemira has a really bright future. In this forum with you, our analysts and investors, there's one group of Kemira employees that I want to thank, and it's the IR officers. I had the privilege of working with during the years. So when I joined, started working with Tero Huovinen, then continued to work with Olli Turunen. Then up to quite recently with Mikko Pohjala, and now most recently with Kiira. Kemira's IR team has always been top-notch, and it's been my intention only to recruit the best that I can find in the market and been successful with that. And we've been able to maintain a top-notch IR practice for Kemira. And I'm really proud of that. And besides, the team has always been fun to work with. So thank you all. With that, now I'll turn to Antti. Antti Salminen: Thank you, Petri. Yes. So then I'll finally say a couple of words about the strategy execution a bit more. Petri already quite nicely talked about the kind of the latest announced investment and how we are really committed to grow the company via both organic and inorganic investments. I'll elaborate a bit more on that. But just to remind everybody that these 3 cornerstones are the focus areas of the strategy. So expanding the water business, there's plenty of evidence of that, and we continue to work on that. Then building our presence as the leading provider of renewable chemistry in our target markets and even more widely. So clearly, we have been recognized as one of the big leaders in the world on this area, and we continue to work on that. We have a lot of good progress on innovation projects, both in-house and with external partners on that domain and solutions that have been proven not only in lab, but in extensive customer trials. So I'm expecting quite a lot of positive things to come back for the future growth in coming years. And then thirdly, investing kind of into these new adjacent high-growth market areas, tapping or unlocking the growth potential from those areas where we have clear right to win, which are part of kind of our domain, but where we have been historically out of. And the NVS, New Ventures & Services, unit has been actively working on this, and there's a lot of good stuff in the pipeline there as well for the future growth. Then looking at a bit on a time line, basically the time since '22 when we have been executing the growth strategy, which we then sharpened 2 years ago a bit more. But basically, we've been constantly investing into the focus growth areas stated in the strategy. It started from the acquisition of the SimAnalytics, which basically has strengthened our position in the digital services area for the water business, so being present and growing our position in there. Then continued with organic investments into coagulant capacity, so that's the core -- the resilient core of our water business, so we continuously invest in there. And as Petri said then, we have capacity, we are able to benefit from the market recovery when it happens without adding fixed costs as we are -- have been building the capacity for that. Then entering into the micropollutants removal area, so small first acquisition in the U.K. and then continuing with organic investments for that area. So clear commitment to grow in that area as well. And then lately, the entry into the fast-growing industrial water services market in North America via Water Engineering. And as I already mentioned, that's a platform acquisition. So we have a really healthy pipeline of small and also some bit bigger bolt-on acquisitions and first example already happened in the first week of January. So progressing very well on that area. And then the last announcement 2 days ago regarding SIDRA. So again, strengthening the core, increasing our position -- improving our position in the water business and basically on the path to grow the significance of water business in our portfolio. So lot of things have happened, and our aim is to further accelerate the execution of strategy, so working on these growth initiatives, which is enabled by our strong financials and strong profitability despite the weak market. So I think this is exactly the time when the markets are soft, when basically we need to continue to believe in our strategy and invest in these growth activities to make us able to capitalize on the growth when the markets get healthier. So this is clearly essential for us, and we continue to be committed to that. So the 3 business units have clearly separate, different roles in the strategy execution, as mentioned already, Water Solutions being the growth engine. We will continue to invest both organically and inorganically to growth in Water Solutions. Short-term Packaging & Hygiene Solutions, the profitability improvement is the key target. But then also the packaging board markets which we serve are now in the basically historical low point and the world will need packaging materials. So that business unit has growth potential when the market ultimately recovers. And then Fiber Essentials, clearly a profitable cash flow generation unit, enabling us to invest into growth in other areas. So to close this with our outlook for '26, amid the uncertainty and fussiness of all the possible crystal balls, our -- we expect the revenue to be between EUR 2.6 billion and EUR 3 billion and the EBITDA -- operative EBITDA between EUR 470 million and EUR 570 million. So clearly, kind of you will see from here as well that it's very difficult to predict the market, but this is our outlook to the year. It assumes this continuation of global economic uncertainty and the softer volumes and basically, especially the impact being heavy on pulp and paper, but also on the industrial water markets. We assume stable raw material environment, as Petri already alluded to, so basically no big swings from there. And thus, this is the outlook that we give for this ongoing year. So with this, thank you very much. And finally, once more big thanks to Petri. He's been elementary in this growth journey and making the company the good company it is today, completely different compared to 12 years ago, as he mentioned already. But I have to personally thank Petri for the past 2 years because he's been the kind of a brick wall that I could always lean on as a new CEO and giving me the confidence that no matter if I miss some details here or there, he will always be there to support me and correct me. So very big thanks, Petri, for these past 2 years. And then with this, we move on to Q&A. Kiira Froberg: Okay. Thank you, Antti, and thank you also, Petri. And now we are then ready for the questions. So I think we could start from the line. So operator, please go ahead. And we will, of course, also take questions through the chat. So those will be coming also. Operator: [Operator Instructions] The next question comes from Andres Castanos from Berenberg. Andres Castanos-Mollor: Petri, first of all, best of wishes for the future. And also congratulations to the company and to you on all the bold actions on the finance side, M&A, buybacks, dividend increase, the full lot. So well done there. My question will be first one on M&A, please. Can you please put some numbers to the U.S. pipeline, the water pipeline there? How much money can you possibly deploy there in the next year ahead? Also, I would love a comment on the Germany deal that you announced yesterday. It seems like a rare opportunity. Do you think this could be replicated similar deals like this one? Antti Salminen: Well, I'll start, and then I'll let Petri comment on the kind of -- especially how much we can allocate to this. But as I mentioned, the pipeline is very healthy. And we've already mentioned that these kind of small bolt-ons like -- the AquaBlue is a very good example of roughly size of a single deal. So they are in the range of EUR 10 million annual revenue type of -- hovering a bit lower, a bit higher typically. And I've also mentioned earlier that we have a solid pipeline, and the aim is to execute several of those every year going forward, so that's basically giving you the basic -- the idea. And then there are couple of bigger ones also in the pipeline, which then would change the pattern. But basically, it's a solid programmatic growth ambition that we have there. And then regarding the SIDRA type, so we've -- all the time, we have said that we actively look at the base business, coagulant market and look for opportunities. There are not too many, but each and every one, we will act on. You already saw that Thatcher in North America earlier. And then we have now the SIDRA, which is, I think, really good strengthening of our Central European business. So we will -- we are actively monitoring the market. We know all the players there. And when something is suitable becomes available, we will promptly act on that. Petri Castrén: Yes. I don't know if I have much to add. But the AquaBlue type companies, there are probably a couple of hundred or a few hundreds in North America. And theoretically, almost everyone -- not everyone, but -- so it's the beginning of the pipeline. Then as the pipeline is progressed. But I have seen long lists that have 20, 30 names in it. Currently, short list is obviously shorter. It needs to be shorter. But like Antti said, these type of deals is really where we have the strong natural platform executing the EUR 10 million, EUR 20 million type revenue companies, and there are multiple those cases. And of course, from the finances point of view, balance sheet point of view, we have no restrictions on executing on that one. And so that certainly continues. Obviously, if we are looking at the Water Engineering pipe, which was well over EUR 100 million type of investment, then those would be looked at little bit differently. There's -- that's progressed in a different way in our M&A process. Andres Castanos-Mollor: A second question, if I may, please, on margin trajectory in the water business. You mentioned some seasonality, and I wonder is that it? Should we see a rebound in Q1 versus Q4 on margins? And also, can you comment on the margins of the acquired companies that you have acquired so far? Are they accretive to the current water business margins? Petri Castrén: Well, I can start with... Antti Salminen: With the seasonality... Petri Castrén: Yes, in water business. Antti Salminen: And then again pass on to you. So basically, the water business has this natural seasonality because big part of the water business is especially on the urban municipal side is weather dependent. And -- but there are also other things, and I will talk a little bit more about them. But basically, typically, the summer months are the strongest or the summer quarters are the strongest quarters. And then the winter quarters are always a bit weaker, and especially Q4 being typically historically and especially in North America, the weakest one. So it's partly weather dependent. There's less water in the systems, but especially kind of entering into this water -- industrial water services business, there's also the industrial patterns because a lot of that business is in cooling towers, for instance. And when you have cold months, you have less need for cooling in industrial applications. Also, there's a lot of business in the services part business, which has to do with the -- there's a lot of pools in U.S. So basically, again, pools are not used in winter time and so forth. So it will only strengthen the seasonality, I think, in the water business, this entry into the services area. Petri Castrén: And so Andres, if your question was really regarding the pipeline of these services companies, they actually vary quite a bit. They vary from the low teens to 40% EBITDA margin in the business. And it often depends on how much product and possibly equipment sales they have in it or whether it's pure services where the margins tend to be higher. So I don't think I can give you an universal answer on the types of margins that you see. But philosophically, we don't want to dilute our profitability with these acquisitions. So even if the coming in margin is lower than ours, there needs to be synergies that get to our sort of at least average group margins. Operator: The next question comes from Tomi Railo from DNB Carnegie. Tomi Railo: It's Tomi from DNB Carnegie. And thank you also Petri from my side it's been absolutely a pleasure to present a short while... Kiira Froberg: Now we can't really hear you, Tomi. Could you please repeat your question? Tomi Railo: Can you hear me now better? Kiira Froberg: Yes, we can hear you now. We heard the thank you part. But then when you started to ask your question, we lost you. Tomi Railo: Okay. Maybe that's a signal. But the question is simply, was there something still extraordinary in the water clean that you booked kind of in the clean EBITDA? You mentioned some of the items, but or was it just a very clean, clean number what you reported? Petri Castrén: I would say that it's clean. And of course, during the Q4, you always tend to look at your inventories and you tend to get some invoices from your customer -- suppliers that hadn't been accrued for small amounts. So we have a fondness of talking about 13th month, it's not 13th month. But there is typically some new expenses that come in December time frame we usually plan for -- or we plan for that, but there's a little bit of unknown. But I would call that in -- put that in the level of noise, particularly for Water Solutions. Tomi Railo: Okay. And the second question on the outlook. I'm just trying to make a sense. You mentioned that kind of the softness accelerated in the fourth quarter from the third quarter. But then when I'm reading your kind of outlook commentary, it doesn't really sound that the market has changed for worse. Actually, you also mentioned yourself that it's stable. So kind of is the market now stable, what you believe? Or is there still some further weakening? Petri Castrén: Let me correct first -- correct me first and then I think it's more appropriate that Antti talks about the outlook. I probably may have miscommunicated a bit poorly. What I meant to say that the volume decline was higher in the second half versus the first half. And this was clearly driven in Nordics by the pulp mill, not closures, but... Kiira Froberg: Downtime. Petri Castrén: Downtime -- thank you for the word -- as well as the contracting volume decline in industrial. And then perhaps there was some more industrial decline in water service in second half. But if you sort of -- I recognize accelerate is probably the wrong word. So it was not accelerating. So third quarter to fourth quarter, there was no acceleration. So let me correct that if I communicated that poorly. But then I'll let Antti talk about the outlook. Antti Salminen: Yes, yes. And as I said when I introduced the outlook, so basically, if anything, the visibility is really poor. So commenting to this or that direction, whether we see kind of an improvement or declining, it is -- the visibility is really poor. But as Petri mentioned, I think many indicators from the market show that this -- we believe that this is kind of the bottom level. We haven't seen any significant further weakening, but we haven't seen really any kind of bright signs for -- at least for the first half of the year either. And there, I would, again, as we discussed earlier, so Tomi, I would recommend to look at what our big key customers have stated about market because, of course, they see it first and we get hit in kind of upper in the value chain of those phenomenon. So basically, you can read that, and that's the kind of crystal ball we have. Tomi Railo: Of course. Just a follow-up. If you could give kind of price and volume assumptions into '26, what you are saying? I hear you that kind of it's a volume game, but would you assume that pricing is down or stable in this environment? Or what's kind of price and volume assumption, maybe if there's something. Petri Castrén: I already offered my view of the crystal ball, and it's pretty stable, and it has been stable for the last 4 or 5 quarters, and we don't see changes to that. And that applies both to pricing environment and the variable cost environment. Kiira Froberg: Thank you. Let's now take the next question from the line, please. Operator: The next question comes from Joni Sandvall from Nordea. Joni Sandvall: A couple of questions from my side. In BHS, you mentioned the continued improvement, what you have started now with the new operating model kicking in from '26. So if I remember correctly, you maybe have mentioned around 15% EBITDA margin target by end of '26 is still valid with the current market environment? Antti Salminen: Market environment, of course, plays a role there, but that's the ambition level that we have been talking about. So I mean, if you look at from the group perspective, that's the expectation. Now whether the market support reaching that exactly during the last quarter of '26 or later in '27, that depends, but that's the ambition level that we have set for. Joni Sandvall: Okay. That's clear. Then maybe a question on the energy prices have been spiking both in the Nordics and in Europe. Are you seeing any support for yourself through the pricing now in H1? Petri Castrén: Well, the weather forecast, I was looking for it to be snowy for the weekend, but then I heard that the weather forecast changed. It's not getting more snow. I'm looking for the cross-country skiing next weekend. Honestly, let's not get excited about -- too excited about a 1 month of cold weather in Finland and Europe. So I think we have to look at the bigger picture and longer period of time. It is true that in the Fiber Essentials, typically, our customers do benefit -- also customers benefit of high energy because they do produce energy, electricity while their pulp mills are operating. So that's sort of an ongoing market commentary that I can say. But really regarding a crystal ball for the weather, for the remaining of the year, don't know -- we don't have that. Joni Sandvall: Okay. That's clear. Then maybe on the Fiber Essentials, also a question on -- because your sales were declining now in Q4, so could you give any indication how large part of this was driven by lower utilization ratios of the Nordic pulp mills in Q4, which is -- it's not typical that those are curtailed during Q4? Petri Castrén: It's not typical, but they were. So Latin America, there's no change. There's, obviously, some currency impacts year-on-year from North America. But honestly, I would -- I don't have the data now, the breakdown in my head. But it's mostly Europe. It's mostly Nordic. Antti Salminen: It is really mostly Europe. So basically, the -- as Petri said, the Latin America, there was no change quarter-on-quarter in terms of our delivery volumes. In North America, we actually improved a bit in quarter 4, if anything. So it's really coming predominantly from the Nordics. Joni Sandvall: Okay. And then maybe lastly, quickly and for Petri about your supplementary pension fund returns expectations for '26? Petri Castrén: Well, we are expecting to receive another EUR 10 million of return from capital because the fund is roughly EUR 100 million overfunded. So we are unwinding the overfunding slowly and gradually. Obviously, continue to invest smartly. And I trust my successors will continue to do that. So the pension fund is in good shape. So no issue there. Kiira Froberg: Thank you, Joni. We now have a few minutes time to take some questions from the chat. And I think that we could start with the Fiber Essentials team. So the question is, do you expect volume recovery in Fiber Essentials in early '26, given that pulp wood prices in the Nordic area are clearly down, supporting profitability of pulp mills in the region? Antti Salminen: Well, I mean, again, I would refer back to what our customers in that business have announced and said. But clearly, I mean, as Petri already mentioned, it's favorable for the Nordic pulp mills to run as full as possible in the cold winter months as they produce electricity as well. So basically, typically, the first quarter is volume-wise a strong one. And then, of course, the kind of decreased wood prices should be supporting the business of our customers also going further into the year. So of course, we dearly and truly hope that the volumes are improving as a result of this phenomena. But it's really up to our customers. Kiira Froberg: Yes. There's another question, which is related to the Water Solutions business, and I think that we've covered the seasonality part yet. But this is related now to the measures or the kind of like items affecting comparability. That's how I read this. So could you come back on the measures to increase production capacity in the Water division and why these measures make sense despite the lower volumes and lackluster demand in water. So maybe kind of like why these sites and... Petri Castrén: So let me -- I'll cover the 2 items affecting comparability. So Teesport U.K. has been a site with low-capacity utilization for quite some time. Let's be honest about that one. And we have reviewed -- and now what we have made a decision that it's sort of now falling below the threshold, and we are moving the production from particularly some deformers from that site to another site in Europe. So we are closing that site entirely. So we are obviously reducing fixed cost significantly with the closure of that site. So I think that's fairly obvious. Then in Botlek, Netherlands, we are not closing a site. We're actually investing into a site. But it's a site with a relatively high fixed cost because -- I mean, it's Netherlands. The salaries are relatively high there. And we are doing an automation investment. So what has been a fairly manual process, we are automating and, in the process, we are eliminating manual work and its fairly significant or big enough number of employees that it actually makes a difference. And so it's -- there, we -- I'm not sure if we are investing into capacity addition. I think it's, we call it improvement and automation investment. So it's not capacity constrained that particular site. It's really an efficiency improvement with a quite decent payback period. Antti Salminen: Exactly. And then if I continue on the -- if you look at the kind of couple of years' timeline and the coagulant investments that we have been doing into Water Solutions. So we have been there. I mean, the growth -- the population in Europe is not growing. The per capita water consumption is not growing, but the regulation is getting tighter. So basically, we have been doing this investment or initiating them when we see the regulation on certain part of Europe changing. It's not same even if the EU regulation is the same, but the application in jurisdictions is different. So that's why we have twice expanded the coagulant capacity in U.K. The first one, we sold immediately to practically full utilization, that's why we did the second capacity expansion. Same goes for the Iberia, the Tarragona site. So there are certain factors in the regulation and the market that drive the demand. And we do kind of very targeted, relatively small add-on capacity investments on existing site to capitalize on those pockets of market that we see the growth potentially. Kiira Froberg: Thank you. Let's now take one last question from the chat, and it's about the Packaging & Hygiene Solutions profitability program or profitability improvement program. So can you comment on the progress? How much more work is there to be done? And when are you expecting the full impact to kick in? Antti Salminen: Well, I'll start and then if there's something that Petri wants to add. But basically, I mean, it has progressed in phase. So what we did last year is that we basically found the kind of so-called low-hanging fruit in terms of cost both in the business unit itself and then on the operations side that are supporting it, and those we kind of had implemented. So the run rate should be kind of built into this year's numbers. We similarly found some kind of new add on top line, which basically was realized. Those contracts were negotiated and closed last year. So basically, again, us, the customers change suppliers, we should see the revenues in this year's numbers. But then the next phase of that is the new operating model, which we have implemented where we basically changed also the structure and basically how we serve the customers, giving better service for our key customers, the key accounts and then streamlining the service levels for the kind of tail end. That work, the implementation is going -- ongoing as we speak. So that happens during the Q1 and then the results would be visible later in the year. And then the business unit management has in pipeline the next round as well because this is a kind of continuous process of when we kind of put something in the shape, then we realize that there are other things that can be further improved. So we will continuously work on that. But gradually during the year those benefits will be visible. And some of them in '27 only also. So this is a long process. Kiira Froberg: Yes. Thank you. Unfortunately, we are running out of time. So we will start to conclude the conference. And if there are any other questions you know where to find the Investor Relations. So please be in touch. And we have a pretty full roadshow agenda coming in now after the earnings. So we will start with Petri next week in Geneva. So there are still plenty of opportunities to meet also Petri. And Antti and myself, we will be back here in our results studio in connection with our Q1 report, which will be published on April 24. And we, of course, hope that Petri will be cheering for us maybe from the golf course or I don't know. Thank you all. Have a great day. Antti Salminen: Thank you. Petri Castrén: Thank you.
Operator: Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pacific Gas & Electric Co. Fourth Quarter 2025 Earnings Release. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the call over to Jonathan Arnold, vice president of investor relations. Please go ahead. Good morning, everyone. Jonathan Arnold: And thank you for joining us for Pacific Gas & Electric Co.’s fourth quarter and year-end 2025 earnings call. With us today are Patricia Kessler Poppe, Chief Executive Officer, and Carolyn J. Burke, executive vice president and chief financial officer. We also have other members of the leadership team here with us in our Oakland headquarters. First, I should remind you that today’s discussion will include forward-looking statements about our outlook for future financial results. These statements are based on information currently available to management. Some of the important factors which could affect our actual financial results are described on the second page of today’s earnings presentation. The presentation also includes a reconciliation between non-GAAP and GAAP financial measures. The slides, along with other relevant information, can be found online at investors.pgecorp.com. We would also encourage you to review our annual report on Form 10-K for the year ended 12/31/2025. With that, it is my pleasure to hand the call over to our CEO, Patricia Kessler Poppe. Patricia Kessler Poppe: Thank you, Jonathan. Morning, everyone, and thanks for joining us. This morning, we are reporting full-year 2025 core earnings of $1.50 per share at the midpoint of our EPS guidance range and up 10% over 2024. This marks our fourth consecutive year of double-digit core EPS growth. I am proud of how our team stayed focused on our highest priorities: safe, reliable, and affordable service for our customers while at the same time delivering strong results for investors. Looking ahead, we are raising and tightening our 2026 core EPS guidance range. We are increasing the low end by $0.02 which brings the range to $1.64 to $1.66. At the midpoint, our 2026 guidance implies 10% EPS growth. Looking further out, I am pleased to reaffirm our growth outlook of 9% plus annually from 2027 to 2030. As you have come to expect, we will also continue our practice of basing future growth on our actual earnings. As previously announced, last month, I began the five-year extension of my contract as CEO, which runs through 2030. I am energized by the work ahead. Our priorities are clear: safely keep the lights on and the gas flowing, and keep making bills more affordable. It is a safety, reliability, and affordability trifecta that we are delivering here at Pacific Gas & Electric Co. On the safety front, in 2025, we had a 43% reduction in serious injuries and fatalities compared to 2024, and our serious preventable motor vehicle incident rate improved by 30%, achieving some of our best-ever safety metrics. On reliability, our systemwide performance improved by 19% from 2024. And on affordability, it is our consistent execution on our plan—our simple, affordable model—which is allowing us to chart a differentiated path for our customers. On January 1, we delivered our fourth reduction in electric rates in two years, with our gas rates also going down. Combined with prior decreases, our bundled residential electric rates are now 11% lower than January 2024, with the typical customer paying about $20 less per month. That is progress customers can feel. If our pending 2027 GRC were to be approved as filed, combined gas and electric bills would be flat to down compared to 2025. And we are going to keep pushing because fighting for customer affordability is core to our strategy. Looking ahead, we see opportunities to further improve this trajectory through the addition of rate-reducing load, from data centers and other electric growth. This new load can deliver a win-win for California—economic development and affordability. Slide four should be familiar by now and summarizes our consistent execution track record. Each year brings different headwinds and tailwinds, but our approach is unchanged: plan conservatively and execute relentlessly to deliver consistent, predictable results over the long term. In 2025, we confronted early headwinds with strong execution during the year, particularly on the cost side, ultimately putting us ahead of plan. This allowed us to redeploy and pull ahead costs in the back half of the year. That is our model doing exactly what it is designed to do—deliver consistent results for owners while redeploying outperformance to benefit our customers. As shown on the slide, over the past four years, savings generated under our simple, affordable model have allowed us to redeploy over $700 million for the benefit of customers while still delivering for our investors. These are dollars which could have shown up as higher profits but which we chose instead to deploy toward better customer outcomes and derisking future years. Said another way, profits and customer savings go hand in hand. Turning to slide five. We remain intensely focused on helping California find a path to address the state’s wildfire challenge. We will stay constructive and tenacious until we reach a more sustainable, safer, and affordable future for our customers, for our communities, for our state, and for those who commit their capital to us. Since our last call, the California Earthquake Authority stakeholder process for SB 254 phase two has been progressing, and they are tracking towards submission of their report and recommendations to the governor and legislature April 1. I should note that the April 1 CEA report will not be the end of the road for phase two. In fact, it will mark the beginning of the legislative process. We are not getting specific today on which policy choices might be most effective, but be reassured our team is actively engaged. In terms of core principles, our goal is to address the open-ended and unknown risks which the current construct puts on the IOUs and our customers. For California to attract much-needed capital, you must be able to quantify and price the risk. Our customers and hometowns need us to access affordable capital as a prerequisite for the safe, resilient, and clean energy system they expect. Turning to slide six. Ignitions were down 43%, which resulted in a third year without a major fire caused by our equipment. This was achieved despite elevated fire activity statewide. As we do every year, we are looking to drive further safety in 2026. We expect to further expand our continuous monitoring capabilities, including our smart meters, which are helping us get ahead of potential issues—anticipating failures before they happen. In late January, we announced the launch of EmberPoint, a new venture between Lockheed Martin and Pacific Gas & Electric Co. Marking a critical milestone in our mission to end catastrophic wildfires, EmberPoint is intended to integrate next-generation wildfire solutions and set a new standard of wildfire safety. With our regulator’s approval, we can bring our wildfire mitigation experience and proven layers of protection while Lockheed Martin brings its cutting-edge prediction and detection along with military-grade equipment and tools to help our firefighters stay safe while putting out fires faster. We can accelerate at scale the deployment of technology at the lowest societal cost, the goal being speed to safety—making our system and others safer faster. In addition, EmberPoint gives us a pathway to flow some savings back to our customers over time. Also in January, five finalists were announced in the autonomous response track of XPRIZE Wildfire where Pacific Gas & Electric Co. is the main sponsor. This summer, the five finalists will be tasked with demonstrating autonomous systems which can detect and fully suppress a high-risk fire in a 1,000 square kilometer test zone within minutes while leaving decoy fires untouched. We could not be more excited to be helping advance real-world adoption of game-changing solutions. On the regulatory front, in December, the CPUC voted out revised guidelines for utility undergrounding plans. This is a key step that moves us toward initiating our ten-year plan filing with OEIS, likely in the third quarter of this year. Earlier this week, we and the other IOUs made a required filing with the CPUC to establish the benefit-cost ratio methodology. Aligned with that, the CPUC guidelines provide us a path for us to file for approximately 5,000 miles of additional undergrounding over ten years starting in 2028. These miles will represent the next phase of our undergrounding journey and will add to the 1,900 miles we expect to have completed by 2027. Combined with overhead hardening, this would bring our total system hardening plans through 2037 to almost 11,000 miles and more than three-quarters of the high fire threat miles we plan to harden based on our current modeling. The remainder of our overhead system in the HFTDs will be protected with operational controls like PSPS, EPSS, maintenance including vegetation management, and continuous monitoring, as it is today. As illustrated on slide seven, we see Pacific Gas & Electric Co.’s affordability story as our story of the year. As I mentioned earlier, on January 1, we lowered our bundled residential rates for the fourth time in two years, and our average bills for those customers are now 11% lower than in January 2024. That is a headline worth repeating. We hear a lot of discussion of affordability in absolute terms, but what gets less attention is that our bills, as measured by share of wallet, are below the U.S. average. Our value proposition relative to income levels is therefore better than average. Our prices are moving in the right direction, and we believe this will become easier for policymakers to recognize going forward. As our 2027 GRC proposal laid out, our simple, affordable model allows us to make needed investments while holding our bill increases at or below typical inflation. Back in 2024, we started talking about our simple, affordable model, amplified. This showed an opportunity for further improvement in each of the key elements, our goal being to bend our future customer bill trajectory down even further. Today, as shown here on slide eight, I am excited to share with you that we are officially updating our simple, affordable model to show a new target future bill trajectory of 0% to 3%. You heard me—0% increase in our bills is in sight. We have amplified two key enablers: our non-fuel O&M savings and electric load growth. Our confidence in the Pacific Gas & Electric Co. performance playbook and in our ability to drive savings has continued to grow. We still see plenty of headroom for savings, as indicated by our capital-to-expense ratio, which has improved from 0.8 to 1.0 over the past two years. While improving, our ratio remains well below our peer group average of 2.0, while top-decile performers are close to 3.0. Turning to our rate-reducing load story here on slide nine. Since our third quarter update, we have seen significant growth in projects moving into the final engineering stage, which now stands at almost 3.6 gigawatts. That is up two gigawatts, more than doubling from last quarter. We are excited by the opportunity to bring on large load and deliver savings to our bundled customer base while enabling growth and economic prosperity for our state. In January, Carla Peterman represented us at a ribbon-cutting ceremony at the Equinix Great Oaks South Data Center, the first data center to come online under our joint implementation agreement with the City of San Jose. This was an opportunity to demonstrate that Pacific Gas & Electric Co. is delivering on our promise to provide fast, reliable power to large energy users. For each gigawatt of large loads, we see the potential to drive savings of 1% or more on average monthly electric bills. In order to do this, it is actually quite simple. We just need to get the pricing right. And while the relationship between data centers and customer affordability is now receiving a lot of attention at the national level, demonstrating savings for our core customers has been nonnegotiable for us from the beginning and continues to be so. With that, I will hand it over to Carolyn. Carolyn J. Burke: Thank you, Patty, and good morning, everyone. Here on slide 10, we are showing you our 2025 earnings walk for the full year. Core earnings per share are $1.50, at the midpoint of our guidance and up 10% from 2024. We have added $0.07 from our customer capital investment, deploying critical capital on behalf of our customers for safety, resiliency, reliability, capacity, and new customer connections. In fact, with respect to new connections, by late 2025, we had cut application intake time by 40%, from a 2023 average of 76 days to just 45 calendar days. And our engineering design times are down by one-third, thanks to our performance playbook. Our operating and maintenance savings came in at $0.20 for the year, and we were able to redeploy $0.09 back into our system for the benefit of our customers. We had over 160 waste-elimination initiatives in 2025, which came from across Pacific Gas & Electric Co., from our front line to the back office. And we are not done yet, as this is a muscle we are continuing to strengthen. Timing items reversed for the full year, with “other” here mainly reflecting benefits from smart tax planning, as we shared on the third quarter call. Turning to slide 11. There is no change to our $73 billion five-year capital plan. We still see at least $5 billion outside the plan, much of which is FERC-jurisdictional capital, which can enable rate-reducing growth. Here on slide 12, I am pleased to share our five-year financing plan. On the third quarter call, I shared our financing guideposts. Those principles have not changed and are reflected here. Importantly, our plan is built to require no new common equity through 2030. We continue to prioritize investment-grade ratings, including sustaining FFO to debt in the mid-teens. And we still target reaching a dividend payout of 20% by 2028 and holding that level through 2030. As you likely saw, we doubled our annual share dividend to $0.20 for 2026, and based on our payout guidance, you can expect consistent increases in the next two years. This plan offers flexibility over the five-year period and is based on conservative assumptions. On this slide, we are also showing our expected 2026 utility debt issuance of up to $4.6 billion. Our plan includes a modest additional parent-level debt financing, which may include efficient tools such as junior subordinated notes. Overall, we expect our percentage of parent debt to remain below 10% through 2030, which is on the lower end of sector norms. While this need is more towards the back end of the plan, we will always be opportunistic in terms of timing our market access. Given uncertainty on timing and indeed whether the contingent contributions to the continuation account will be called, we have not explicitly included these in our waterfall. If these were called, Pacific Gas & Electric Co.’s share would be $373 million annually over five years, which we would plan to debt finance and still maintain our mid-teens credit metric. Turning to slide 13. Achieving investment-grade ratings and efficient financing are key principles of our financing plan. With investment-grade credit, we would be able to access lower-cost debt, unlocking a key incremental affordability driver for our customers. Regarding capital allocation, consistent with what we have said before, we are in the midst of a state-led process on wildfire policy reform, and we continue to see our current investment plan as the one that best delivers for our customers and investors. Now is not the time to make a change. That said, as you would expect, we will have a disciplined approach, and if we reach a point where we are not seeing clear signs of progress on the legislative front, then you can be certain we will take a hard look at all aspects of our plan. Here on slide 14, now this is where I get really excited. We reduced non-fuel O&M by 2.5% in 2025, meaning we have now exceeded our target for four years in a row. And we are definitely not done yet. As Patty mentioned, we have updated our simple, affordable model on this call to reflect O&M savings in the 2% to 4% range, up from the previous target of 2%. And as a reminder, this savings target is after we have absorbed inflation and other cost pressures. Slide 15 highlights our upcoming legislative and regulatory calendar. The California legislative session is already underway, and as you know, the wildfire fund administrator’s report is due April 1. On the regulatory front, our general rate case process continues with intervenor testimony tomorrow and hearings in April. We expect to file our ten-year undergrounding plan with OEIS in the third quarter, and we are tracking towards a November proposed decision in the Kincaid and Dixie cost recovery proceeding. I will end here on slide 16 with our value proposition. It is a reminder that the simple, affordable model works. The concept is simple, but it is our differentiated performance that is unlocking benefits for both customers and investors. And now I will hand it back to Patty. Patricia Kessler Poppe: Thank you, Carolyn. We understand that the state’s work on wildfire risk in SB 254 phase two remains the critical variable for many investors, and we are fully committed to finding an outcome which delivers on key priorities. These include continuing to accelerate our reduction of wildfire risk while also delivering on affordability for our customers and attracting investment for California energy infrastructure. Before we take your questions, let me recap some highlights from this past year. We achieved a significant reduction in serious injury and motor vehicle incidents, resulting in some of our best-ever safety performance. We reduced ignitions by over 40%, resulting in our third consecutive year with no major fires caused by our equipment. We improved electric reliability by 19% year over year. We now have 3.6 gigawatts of data center demand in the final engineering stage, positioning us to capture rate-reducing load growth. Our customer transaction score, which we measure every day, is up, and our field crews are being scored 9.5 out of 10 by our customers when they interact with our frontline team. Our brand trust is up. We reduced O&M by 2.5%. We delivered another year of double-digit earnings growth, further extending our execution track record. And with all of that, we have lowered bills again, with our now amplified, simple, affordable model offering a pathway to zero bill inflation. Now that is a year to be proud of. With that, operator, please open the lines for questions. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. As we enter Q&A, we ask that you please limit your input to one question and one follow-up. As a reminder, to ask a question, please press the star button followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Your first question comes from the line of Nicholas Joseph Campanella of Barclays. Please go ahead. Nicholas Joseph Campanella: Good morning, everyone. Thank you. Morning. Operator: Great to see progress overall, and you know, definitely hear you on the 0% to 3% bill growth on the refresh plan, so thanks for that. Maybe just kind of if you were to kind of reflect on the CEA process, what is most encouraging to you? And then what is your view on just having something done legislatively in June versus September just given the summer recesses? You know, historically, I think things have gone the full distance into September. I am wondering if there is broad enough alignment in your view to maybe get something done sooner than that. And any comments on timing? Thank you. Patricia Kessler Poppe: Yeah. Thanks, Nick. I will start with timing questions. Look, this is a complex legislative effort, and we definitely want to support taking the time to get it right and getting the right outcomes. And, obviously, the sooner, the better, but we want to make sure the most important thing is getting something right done this year. So we are very much intent of, you know, really helping make sure that we are on the right footing, that we have got the right information, and that the decision makers have the information they need to make decisions well. And so that leads to the CEA process, and I would say that they are right where they are supposed to be in terms of timing in the process. They are doing what they said they were going to do. We are encouraged by that. And you know, as they closed their latest webinar, the CEA said they are focused on actionable, viable, and durable solution. Boy, we really support that. Because we know our customers and our investors bear an outweighed cost of the current construct, and it is regressive. Our most vulnerable citizens are paying too much for this current construct, and so we definitely support the actions that are being considered. You know, we do think that the most important criteria for us as we look at it is making sure that we continue to focus on risk reduction on recovery outcomes for costs that are borne, affordability obviously needs to be a key component of whatever solution there is. And today, the current model is not affordable for our customers, and so we need to fix that and make sure then that, most importantly for the audience on this call, is that we continue and are able to be investable and that you can price the downside risk associated with the legal construct here in California. So we are very much focused on getting the right outcomes and taking the time required to do that here in this legislative session. Nicholas Joseph Campanella: Thanks for the thoughts there. And then, you know, I know in the prepared there was also kind of discussion about, you know, you would relook at the overall plan, depending on the signs of progress and legislation overall. Can you just, if it does not go the way it is planned, can you just give us a sense of some of the items or just how you would kind of rank what takes priority in capital allocation, whether it is the capital investment, dividend, or otherwise that you would be looking at first. Patricia Kessler Poppe: Well, let us just back up for a little bit about capital allocation just in general. As Carolyn reiterated, and I will just reiterate for everyone on the call that, look. We see what you see. We too can do the math. The current valuation is absolutely not sustainable. And we are ringing that bell in every corner of California that we can find and in every conversation to make sure that people understand the value of the investor-owned utility model and how important attracting low-cost, high-quality investment is to spread out the cost of infrastructure for customers over the long haul. And that means we need to have an attractive legislative construct. Therefore, that is what makes SB 254 phase two so important. Now we say that, and as I said earlier, we do think that they are right where they are supposed to be, and people are following through on what they said they were going to, so we feel good about that. But as we think about capital allocation today, because we are encouraged by that progress, because we are having the right conversations, and because we are delivering everything that I talked about on the call—performance is power here—this is no time for us to pull back on serving our customers. Look. As I mentioned, our safety has continued to improve. Our reliability has improved 19% year over year. Our customer satisfaction is up. Our trust is up. Our rates are down. All of that to say, there is no time to change the model. However, to your ultimate question, Nick, if progress stops or derails or we feel that the state has lost interest in getting to the right outcome on SB 254, then obviously all aspects of our plan must be and will be on the table. We will not continue to sustain this valuation. And so, you know, today, that could take a lot of different forms, and I am not going to rack and stack them here on the call. But there is a lot of different ways to approach that problem, and the entire plan will be on the table if we do not see progress or if it stops and derails. Nicholas Joseph Campanella: Appreciate the thought. Thank you. Jonathan Arnold: Thanks, Nick. Operator: Your next question comes from the line of Steven Isaac Fleishman of Wolfe Research. Please go ahead. Jonathan Arnold: Hey. Morning, Steve. Patricia Kessler Poppe: Hi, Steve. Hi, Patty. Excuse me. Good morning. Good morning, Carolyn. Operator: So yeah. So just maybe following on the CEA process, we did get this view from the CPUC last week, and I am kind of curious your take on that and how influential they might be with the legislature in this process? Patricia Kessler Poppe: Yeah. You know, the CPUC sees what we see—that this current model is regressive, and it is putting excessive burden on our electric IOUs and our customers. And so I appreciated them sharing their points of view. They, I think, support what we support, which is a whole-society approach. People will definitely listen to what the CPUC thinks. They are the state agency whose job is to confirm that we have financially healthy utilities and rates and affordability for customers. And given our performance and our ability to lower rates while we are continuing to improve the service customers, we hope that it makes it easier for the CPUC to fully advocate for the reforms that we think are necessary in SB 254 phase two. Operator: Okay. Great. And then just going back to the simple, affordable model changes. So on the growth level, is this basically, with this better visibility from the data centers, you now have kind of line of sight to higher growth? Patricia Kessler Poppe: Yeah. I would say prediction that it is going to be higher. Yes. Yes. We definitely see. And as we shared, 3.6 gigawatts in final engineering. We had previously said about 1.5 of that would be online by 2030. Now we are saying it is closer to 1.8 gigawatts that will be online by 2030. Obviously, that continues to change and evolve. And as we get more applications and we can combine projects and bring things online faster, obviously, we would accelerate that. But the good news is that we do see that real load growth in project stages that makes it very real, and we have lots of confidence about that. We said 2% to 4% load growth in the simple, affordable model. That 4% is more at the back end of the five-year plan, but we definitely see it in there. And we also see, as Carolyn shared, an opportunity to continue to increase our O&M reductions as we continue to better serve customers. So it is really a combination. I will also say that we are still seeing EV load penetration. We had 18% EV penetration in the final quarter of the year, even after the incentives went away. So we definitely are still seeing increased EV demand as well, and that is an additional load driver. Jonathan Arnold: Okay. Operator: Great. Thank you. Your next question comes from the line of Shar Pourreza of Wells Fargo. Please go ahead. Patricia Kessler Poppe: Good morning. This is Marcella Petiprant on for Shar. Thanks for taking our question. Operator: Hi, Marcella. Patricia Kessler Poppe: Hi, Marcella. Patricia Kessler Poppe: Hey. Good morning. Maybe following up on that data center piece, how should we be thinking about the timeline for ramp beyond 2026? And then is that, just to clarify, final engineering stage fully incorporated into the 0% to 3% bill growth and CapEx opportunities on transmission or would be incremental when it reaches construction stage? Patricia Kessler Poppe: Yeah. So our load growth is part of the 0% to 3%. So to get to zero, we would need to see more of that load growth online. And so as I was sharing, as we look at the ramp to 2030, we can see about 50% of that 3.6 gigawatts online by the end of that range, so 2030. And so that is in that zone of 2% to 4% within that five-year time period. So consider that a ramp in that period. There are other things, though, that we have got in the hopper to help drive affordability. In addition to, you know, we talk about O&M and load growth on that, but the other line, you know, we held at 2%, but there are other parts of the bill, like supply costs. We had a good reduction in our supply costs here this year over year, thanks to our incredible supply team and work they have been doing to make the energy that we purchase and procure and produce more affordable. So there is a lot that goes into a customer’s bill that can help get us to that 0% to 3% range and trying real hard to bias as close to zero as we can get. And so we are going to keep working that every day. Jonathan Arnold: Great. Carolyn J. Burke: And then pivoting a little bit to credit metrics, investment grade one agency, how much incentive is there for continued balance sheet improvement? And then any line of sight to multi-agency investment grade? Yeah. So I will take that. This is Carolyn. So a couple of things just to remember. Fitch just upgraded us this past fall to investment grade. Patricia Kessler Poppe: Both Moody’s and S&P have said that our financial metrics are meeting the investment-grade criteria. What they are really looking at is, again, progress on SB 254, less of continued improvement in our balance sheet. With that said, we remain very committed to mid-teens FFO-to-debt metrics, and we continue to look at building a very sustainable financing plan to continue to meet those metrics. Carolyn J. Burke: Perfect. Got it. Thanks so much. Operator: Your next question comes from the line of Anthony Crowdell of Mizuho. Please go ahead. Anthony Crowdell: Hey. Good morning. Thanks for taking my—excuse me. How is it going? Just I wanted to follow up on Steve’s question. I only had one. On the legislature, there are some new faces or maybe old faces in new places in the state senate. Senator Limón is a pro tem of the senate, also new head of the energy committee. Just curious if you had any discussion with them. Just wondering if you think that may be a required big portion of support of getting something across the finish line. Patricia Kessler Poppe: Well, of course, we have been in conversation with the leadership, and we continue to be. And, you know, I think one of the hard things is our business model is hard to understand. And it is hard for people to believe and see that you can raise profits and lower rates all at the same time. That is why our performance is so important and why our mantra that performance is power really holds true at this time as we work to educate all of the legislators, including the leaders as well as others, that we can, in fact, invest in long-term infrastructure, make the system safe, make the system resilient, and lower costs. I think affordability is top of mind for all the legislature, and I think they are going to want to understand that as they make decisions on SB 254 and can see that SB 254 is actually contributing to the affordability issues for their constituents puts us on very much common ground. We want the same thing. We want a safe state. We want the ability for resources to respond when there is an incident and spread is taking place, but that our customers should not be subject to this regressive policy that has them bearing both the cost of the hardening of the infrastructure and claims then that follow when we were, in fact, prudent and capable operators. And so I think that that problem takes a long form to explain to people. And so the more we work with the legislators to help them understand the full picture, the better. So we look forward to engaging with those leaders to help make sure that they are making the best decisions for the people they represent, which happen to be the people that we serve. Anthony Crowdell: Great. That is all I had. Thanks again. Carolyn J. Burke: Thanks, Anthony. Operator: Your next question comes from the line of Julien Patrick Dumoulin-Smith of Jefferies. Please go ahead. Carolyn J. Burke: Morning, Julien. Julien Patrick Dumoulin-Smith: Hey. Good morning, team. Hey. Thank you guys very much. Appreciate it, Patty, team. Look. Hey. Hey. Just wanted to come back on the upside capital you guys have here, and look, away from SB 254, how do you think about that $5 billion and when you would be in a position to around that? Right? And as much as, obviously, you guys are talking about sales, and that trending in the right direction, I would love to hear how you think about upside of the $73 billion CapEx plan. Then in tandem, how do you think about financing that to the extent to which you were ever to go down that rabbit hole? I imagine that there is debt capacity that is latent to be able to accommodate that upside capital that you guys are identifying? And or how do you think about JSON? Carolyn J. Burke: Yeah. Hey, Julien. This is Carolyn. I will answer that. As we think about the additional $5 billion, as we have said in the past, we see three options. The first option is you can make the plan bigger. Right? You could increase your $73 billion. But that is probably the least likely given our current valuation discount. Then there is the potential to make the plan better. And when we say better, we mean in terms of affordability in particular. And an example of that is prioritizing certain capital that is associated with new load that could improve upon our bill trajectory. And then the third option is we could simply make it longer in terms of extending our above-average growth runway. So where we sit today and seeing the pipeline for load growth, the way we think about that $5 billion is if there is any additional capital coming in, it is probably option two, where we are looking to make the plan better, keeping to the $73 billion envelope of our capital plan, but ensuring that we can drive affordability for our customers with that additional capital. In terms of financing, I will just say that we continue to prioritize avoiding the need for equity at today’s low values and maintaining the FFO-to-debt to mid-teens. So as we look at financing that, those are two of our key principles. Julien Patrick Dumoulin-Smith: Awesome. Excellent. And then just if I could follow up a little bit on the process front. Any specific milestones after April 1 that you would be looking towards? I mean, I know at times it gets pretty dark and opaque through the summer months. But anything in particular you would flag here at least at the outset beyond the April 1 recommendation? Patricia Kessler Poppe: Yeah. I think that there are no specific milestones I would point to. I think there will be ongoing conversations, and it remains to be seen how much of those political conversations will be public, or will they be handled by a subcommittee or however the legislature intends to take on process once they have been given recommendations. Operator: Okay. I get it. Well, best of luck, Patty. Carolyn J. Burke: Thanks, Julien. Operator: Your next question comes from the line of Carly S. Davenport of Goldman Sachs. Please go ahead. Carolyn J. Burke: Hey. Good morning. Thank you for taking my questions. Carly S. Davenport: Hey. Just a couple of quick follow-ups to some other questions. Firstly, just on the data center pipeline, great to see that growth in the final engineering and the under construction. Just any color on the movement in the overall pipeline? Is that a high grading? Or are you seeing any shifts in sort of overall tone on demand? Patricia Kessler Poppe: Yeah. I would say that that will continue to move. As we mentioned, we just, or at least we said on the slide, we have just hired a Chief Commercial Officer. We are seeing lots of opportunity. You do not think about California when you think about manufacturing, but let me remind everyone on this call that California manufactures more products than any other state in the nation. California has more manufacturing jobs than any other state in the nation. I expect that those companies intend to grow, and so we are working to make sure that we can supply their growth as well, whether it is robotics or silicon manufacturing equipment and chip manufacturing equipment. That all lives here. And there is an electric bus company in—these companies intend to grow, and so we want to make sure that we grow for them as well. So I would say that number is a moment in time, and I expect over time when people realize that we have the capacity, that we can, in fact, deliver the timelines that they want and make sure that what we deliver is then affordable for all of our customers, that we are going to continue to be a key enabler to California’s prosperity, and that requires growth. And we are excited to power it. Carly S. Davenport: Really clear. Thank you for that. And then just back on the wildfire policy reform, just as you talked about given the urgency, but also the complexity here, I guess, is it your expectation that this will be sort of in this legislative session? Or do you see any potential for other processes to sort of be borne out of this one? Patricia Kessler Poppe: We are very hopeful that this is resolved. The substantive risk and cost allocation—we are very hopeful that this is resolved during this legislative session. That would be—this is the second phase of a two-phase process, a two-year session. And we have gotten—you know, I think we have seen what everyone has seen—that they are right where they said they were going to be. The process is working as planned, and the CEA is a very professional organization. I am impressed by the actions that they have taken and them following through on what they said they were going to do. Carly S. Davenport: Great. Thank you for all the color. Jonathan Arnold: Thanks, Carly. Operator: Your next question comes from the line of Gregg Gillander Orrill of UBS. Please go ahead. Yeah. Good morning. Thank you. Congratulations on the results. Patricia Kessler Poppe: Thank you. Just—I was wondering if you could talk about what you are expecting from the Kincaid and Dixie cost recovery proceedings, who handles that, and, you know, what you are expecting to see out of that. Carolyn J. Burke: Yeah. So we filed in November 2025 the first catastrophic wildfire proceeding that involves the presumption of prudency. What we submitted is a review of the costs that were paid by the Wildfire Fund associated with Dixie and Kincaid. That is the over $1 billion in claims. That is about $674 million. We are also looking for recovery of WEMA costs, which is about $1.6 billion, and that is primarily—if you think about this, remember, we did not have the self-insurance at that time. Patricia Kessler Poppe: And so it is the donut hole between what we recovered from insurance versus up to the $1 billion threshold before we can have access to the Wildfire Fund. So we are looking for—that is the second thing we are looking for recovery from, and then we are looking for recovery from CEMA costs, which are about $314 million. Carolyn J. Burke: So that is what we are looking for. I will just remind you that with Kincaid and with Dixie, we had a valid safety certificate, which is— Patricia Kessler Poppe: So we are deemed reasonable in terms of our prudency. We think we have made a strong case, and we believe the facts support our case. Gregg Gillander Orrill: Sounds good. Thank you. Operator: Your next question comes from the line of Ryan Michael Levine of Citi. Please go ahead. Had one clarifying question around some of your comments. Are you looking to accelerate the prudency determination through the CEA process for future liabilities or future claims? Is the CEA process— Patricia Kessler Poppe: Yeah. Ryan, there are a lot of things that we are looking at through the CEA process. So, really, not specifics. It is going to be a bundle of options and improvements and construct. And so I hesitate to have a specific outcome that we want. We want to make sure that the downside risk is knowable and affordable for both customers and investors. And there is probably a lot of ways to make that happen. Operator: Okay. Thanks for taking my question. Patricia Kessler Poppe: Yep. Thanks, Ryan. There are no further questions at this time. And with that, I will now turn the call over to Patricia Kessler Poppe, CEO, for closing remarks. Please go ahead. Patricia Kessler Poppe: Thank you, Kelvin. Thanks, everyone, for joining us today. I will just hit the high points. Look, our safety has improved. Our reliability has improved. Our customer satisfaction has improved. Our earnings have improved, and our rates are down. And at the fundamental aspect of running a great utility, I could not be more proud of this team and the work that they have done. And for a company that leads with love, happy Valentine’s Day. I hope you have big plans for tomorrow. Enjoy your time. Thanks so much. We will see you soon. Operator: Ladies and gentlemen, this concludes today’s call. We thank you for participating. You may now disconnect your lines.
Operator: Greetings, and welcome to the First American Financial Corporation Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. A copy of today’s press release is available on First American Financial Corporation’s website, investors.firstam.com. Please note that the call is being recorded and will be available for replay from the company’s investor website and for a short time by dialing (877) 660-6853 or (201) 612-7415 and entering the conference ID 13758180. I will now turn the call over to Craig J. Barberio, Vice President, Investor Relations, to make an introductory statement. Thank you, Operator. Good morning, everyone, and welcome to First American Financial Corporation’s earnings conference call for the fourth quarter and full year of 2025. Craig J. Barberio: Joining us today on the call will be our Chief Executive Officer, Mark Edward Seaton, and Matthew Feivish Wajner, Executive Vice President and Chief Financial Officer. Some of the statements made today may contain forward-looking statements that do not relate strictly to historical or current fact. These forward-looking statements are only as of the date they are made, and the company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. Risks and uncertainties exist that may cause results to differ materially from those set forth in these forward-looking statements. For more information on these risks and uncertainties, please refer to yesterday’s earnings release and the risk factors discussed in our Form 10-K and subsequent SEC filings. Our presentation today contains certain non-GAAP financial measures that we believe provide additional insight into the operational efficiency and performance of the company relative to earlier periods and relative to the company’s competitors. For more details on these non-GAAP financial measures, including presentation with and reconciliation to the most directly comparable GAAP financials, please refer to yesterday’s earnings release, which is available on our website at investors.firstam.com. I will now turn the call over to Mark Edward Seaton. Thank you, Craig. The fourth quarter was a strong one for First American Financial Corporation. We generated adjusted EPS of $1.99, a 47% improvement from the prior year. Mark Edward Seaton: In the fourth quarter, we experienced trends similar to those we saw throughout 2025: a strong commercial market contrasted with a sluggish residential market. On the commercial side, revenue grew 35% as we saw improvement in nine of the 11 asset classes we track. Several positive dynamics are driving this growth. We achieved price stability in 2025, which provides a solid foundation for future transaction activity. We have seen a persistent increase in sales volumes, rising commercial lending, and higher levels of refinance activity. Historically, refinance activity accounted for about 30% of our commercial premiums. In 2025, that figure increased to roughly 40%. Some lenders are choosing to write shorter maturities, which naturally leads to more refinance activity. Our commercial revenue growth was driven by both higher average revenue per order and transaction volumes. Commercial ARPU increased by 22% while closed orders increased by 10%. On the residential side, conditions remain challenging. Existing home sales are running approximately 4,000,000 units, well below the 5,500,000 units we consider to be a normalized level, as the rate lock-in effect discouraged homeowners from selling and therefore also not buying, and affordability remains constrained. One benefit of operating in a trough market is it creates an opportunity to implement meaningful change. In December, we reached an important milestone with the launch of Endpoint; in one office, we closed the industry’s first AI-powered escrow. As of last week, we have opened 153 orders and closed 47 on the Endpoint platform. While the volumes are immaterial today, the learnings are highly consequential. Endpoint improves every day, and we plan to roll it out nationally over the next two years. We believe the capabilities we are building over time will be a durable competitive advantage. On the refinance side, revenue grew 47%. While refinance volumes remain at relatively low levels, the recent drop in mortgage rates has given us some optimism. Continuing on the technology theme, in the fourth quarter, we launched our enhanced AI-powered—excuse me—Sequoia title production engine for refinance transactions. Sequoia AI is now live in Phoenix, Arizona, and three markets in Southern California. In these markets, we have achieved 40% automation rates of the search and examination functions for the products that are supported. By Q2, we expect to roll out Sequoia AI purchase capabilities in these markets, with plans to expand Sequoia across California and Florida by year-end, followed by a broader national rollout in 2027. As with Endpoint, we are learning and improving every day. Over time, we expect geographic expansion, higher capture rates, and improved operating leverage as marketing initiatives improve while reducing risk, cost, and cycle time. Craig J. Barberio: I also want to highlight another strategic initiative we are excited about. Mark Edward Seaton: The Owner’s Portal. In the 25 states where we have direct operations, customers who close with First American Financial Corporation receive free property title monitoring and fraud alert service, providing an important layer of protection for homeowners amid rising real estate fraud risk. Today, we have approximately 53,000 users on the platform, which has grown 580% just over last quarter. At our bank, First American Trust, we recently launched our 1031 exchange product. Historically, we have managed savings and checking deposits at First American Trust. Now we are also supporting 1031 exchange deposits. We ended the year with $94,000,000 in 1031 deposits, and have quickly grown to over $300,000,000 today. We expect to be closer to $1,000,000,000 by year-end. The growth in deposits will help offset the impact to investment income related to lower short-term interest rates. Looking ahead to 2026, we expect growth across each of our major revenue drivers: commercial, purchase, and refinance. On the commercial side, we expect a record revenue year, exceeding our prior peak in 2022. While uncertainty remains, our pipeline is strong. On the purchase side, we are less optimistic than some industry forecasts. We are calling for 7% to 8% growth. We do expect improvement in 2026 as the rate lock-in effect discouraging homeowners from selling and buying fades, and slow house price appreciation allows affordability to modestly improve in many markets. Open purchase orders were down 7% in the fourth quarter, implying continued weakness in purchase revenue in the first quarter. January open orders were essentially flat, with growth expected to emerge later in the year. Refinance activity is hard to predict, but refinance open orders were up 72% in January, a good sign for a seasonally weak first quarter. In closing, we remain focused on being the best title and escrow company in the industry. Based on the most recent ALTA data, we have gained 90 basis points of organic market share over the last 12 months, with additional initiatives underway to expand that further. We are reimagining our core title and escrow business by building modern AI-powered products that improve the experience for our customers, amplify the work of our employees, and ultimately create long-term value for our shareholders. Our adjacent businesses also enhance our competitive advantage and contribute to our earnings growth. Our data assets become more valuable over time. In 2025, we delivered record earnings at our bank, in home warranty, at ServiceMac, and at First Funding. With that, I will turn the call over to Matt for a more detailed review of our financial results. Matthew Feivish Wajner: Thank you, Mark. This quarter, we generated GAAP earnings of $2.05 per diluted share. Our adjusted earnings, which exclude the impact of net investment gains and purchase-related intangible amortization, were $1.99 per diluted share. Both our GAAP and adjusted earnings include one-time benefits of $28,000,000, or $0.20 per diluted share. The one-time benefits are comprised of a $13,000,000, or $0.09 per diluted share, reserve release in Canada recorded in the Title segment and a $15,000,000, or $0.11 per diluted share, insurance recovery recorded in the Corporate segment. Adjusted revenue in our Title segment was $1,900,000,000, up 14% compared with the same quarter of 2024. Looking at the components of title revenue, commercial revenue was $339,000,000, a 35% increase over last year. Our closed orders increased 10% from the prior year and our average revenue per order was up 22%, setting a record at $18,600 per closing. Purchase revenue was down 4% during the quarter, driven by a 7% decline in closed orders, partially offset by a 4% improvement in the average revenue per order, reflecting the ongoing softness in the residential market. Refinance revenue was up 47% compared with last year, driven by a 44% increase in closed orders and a 2% increase in the average revenue per order. Mark Edward Seaton: Refinance accounted for just 7% of our direct revenue this Matthew Feivish Wajner: quarter and highlights how challenged this market continues to be compared to historic levels. In the agency business, revenue was $790,000,000, up 13% from last year. Given the reporting lag in agent revenues of approximately one quarter, these results primarily reflect remittances related to third quarter economic activity. Mark Edward Seaton: Information and other revenues were $274,000,000 during the quarter, Matthew Feivish Wajner: up 15% compared with last year. The increase was driven by refinance activity in the company’s Canadian operations, revenue growth at ServiceMac, the company’s subservicing business, and higher demand for non-insured information products and services. Mark Edward Seaton: Investment income was $157,000,000 in the Matthew Feivish Wajner: fourth quarter, up 1% compared with the same quarter last year despite the Fed cutting rates five times since the beginning of 2024. Mark Edward Seaton: The impact of declining interest rates was offset by higher average balances driven by commercial activity Matthew Feivish Wajner: and by our bank subsidiary shifting its asset mix to fixed-income securities, which are less sensitive to changes in short-term interest rates. Net investment gains were $28,000,000 in the current quarter, compared with net investment losses of $62,000,000 in 2024. Mark Edward Seaton: The net investment gains in the current quarter were primarily due to recognized gains in the venture portfolio. Matthew Feivish Wajner: While net investment losses last year were primarily due to asset impairments. Personnel costs were $581,000,000 in the fourth quarter, up 11% compared with the same quarter of 2024. The increase was mainly due to incentive compensation expense as a result of improved financial performance. Other operating expenses were $282,000,000 in the quarter, up 7% compared with last year, primarily attributable to higher production expense driven by higher volumes and increased software expense. These higher costs were partly offset by the previously mentioned $13,000,000 reserve release in Canada. Our success ratio for the quarter was 47%. The provision for policy losses and other claims was $44,000,000 in the fourth quarter, or 3% of title premiums and escrow fees, Mark Edward Seaton: unchanged from the prior year. Matthew Feivish Wajner: The fourth quarter rate reflects an ultimate loss rate of 3.75% for the current policy year and a net decrease of $11,000,000 in the loss reserve estimate for prior policy years. Mark Edward Seaton: Pretax margin in the Title segment was 14.9%, or 14% on an adjusted basis. Matthew Feivish Wajner: Turning to 2026, in January, closed orders per day were down 7% for purchase, up 13% for commercial, and up 48% for refinance. Open orders per day were essentially flat for purchase and commercial and up 72% for refinance. Moving to the Home Warranty segment, total revenue was $110,000,000 this quarter, up 7% compared with last year. Mark Edward Seaton: The loss ratio was 40%, down from 44% in 2024. The improvement in the loss ratio was mainly due to fewer claims, partly offset by higher claim severity. Matthew Feivish Wajner: Pretax margin in the Home Warranty segment was 21.1%, or 21% on an adjusted basis. Mark Edward Seaton: The effective tax rate in the quarter Matthew Feivish Wajner: of 25.7% was higher than the company’s normalized tax rate of 24%, primarily attributable to higher income from the company’s non-insurance businesses, which are taxed at a higher rate relative to its insurance businesses, which pay state premium tax in lieu of income tax. Our debt-to-capital ratio was 30.7%. Excluding secured financings payable, our debt-to-capital ratio was 21.9%. Now I would like to turn the call back over to the Operator to take your questions. Thank you. Operator: We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question comes from the line of Bose Thomas George with KBW. Please proceed with your question. Matthew Feivish Wajner: Hey, guys. Good morning. I just wanted to go back to your—Mark—the comment just about commercial hitting a record year in 2026. Can you help us think about the potential improvement over 2025? I mean, if you look at the 2022 number, you have already, I guess, just about 4% away from that in, you know, in 2025. Your year-over-year growth is 35% the year in 2025. So, yeah, just based on your pipeline, you know, where do you think it is trending now versus over 2025? Mark Edward Seaton: It is—you know, thanks for the question, Bose—it is hard to say. One thing I would say about commercial is, you know, it is always something we have a hard time forecasting. But I will tell you, we are very optimistic about what 2026 is shaping out. I talked about some of the trends we are seeing in my prepared remarks, but there is just a lot of momentum in commercial, broad-based strength. We are getting a lot of refinance transactions. There are a lot of data center deals we are doing. There are a lot of big energy deals we are doing. And I would just say the team is probably as confident as I have ever seen in terms of how the year is going to shape out. Now is that 5%? Is it 10%? Is it higher than that? We just do not know. We do not know. But I think we have a lot of conviction that it is going to be, I would say, definitely growth over 2025, an all-time record relative to 2022. We are just going to have to see how it plays out. But I will tell you, the first, you know, six weeks of the year are looking really, really good for commercial. We will just see if it is sustained. So I do not have a number to give out, though. Operator: That is helpful. Thanks. And then Matthew Feivish Wajner: actually, in terms of the contribution from data centers to commercial premiums, is there a way to kind of quantify what that is? Mark Edward Seaton: There has been a lot of growth in data centers, as I am sure you could imagine, and we are involved in all, or many, of those, just because, you know, if customers need to underwrite big transactions, I mean, they have to go to us or Fidelity, really. And so we are really involved in all these data center transactions. Last year, it was roughly 10% of our premiums. And so we have seen a big growth in it. And, again, we have a big pipeline heading into this year. So I would say data center is kind of this new asset class that we have just started to track because it has really emerged. But it is a lot more broad-based than just data centers, though. I mean, when you look at—again, I talked about earlier—nine of the 11 asset classes were up last quarter. And data centers is one of them, but it is really broad-based beyond that. But really, right now it is about 10% of premiums. Matthew Feivish Wajner: And, Bose, this is Matt. Just to—Matt. Sorry, Bose. Just to clarify, it is 10% of our commercial premiums. Bose Thomas George: Yep. Matthew Feivish Wajner: Oh, okay. Perfect. So okay. Great. Thanks. Mark Edward Seaton: Thanks, Bose. Operator: Our next question comes from the line of Terry Ma with Barclays. Please proceed with your question. Mark Edward Seaton: Hey, thank you. Good morning. Maybe just to touch on Sequoia and then Endpoint. I appreciate the color on the rollout and expansion timeline. Any way to think about the impact to the margin Matthew Feivish Wajner: just from the drag that you guys had previously kind of talked about subsiding over the next two years? How should we think about that? Mark Edward Seaton: The drag on the margin is going to gradually alleviate itself, and we are already starting to see it as we invest more in our modern platforms—which Endpoint and Sequoia, like you point out—and we just invest less in the legacy platforms, and we are going to start to see that play out. You can see we had a really strong success ratio this quarter, and at least some of that is because we are reducing our investment in these legacy platforms. And so the margin drag will just dissipate over time. And I would just say we are really excited about both platforms. We reached a big milestone with Endpoint this quarter. It is live now. It is really hard to get that first order onto the system. But it is working now. It is in one market. We learn every day. And we have significant plans for Endpoint. Ultimately, what we are trying to do is we are really trying to improve the experience for employees. We are trying to reduce a lot of the tasks that you just have to do to close a transaction. I think the work-life balance of our team will be better. I think they will be able to close more transactions, and they will be paid more. I think it is going to be a better experience for our customers, that we are going to have modern technology that we can update very, very frequently, and it is just going to be a system that the industry has not seen before. I think it will be a real competitive advantage for us for a long time. Same thing for Sequoia on the title side, too. I mean, Sequoia—we really marched with Sequoia to try to do instant title for purchase transactions. And we think that we are going to achieve that vision next month of having instant title for purchase Matthew Feivish Wajner: transactions. Mark Edward Seaton: And it is just going to get better and better over time. When we roll something out, it is not going to be a 10 out of 10 day one. But over time, we just continue to get better and better. I think over the next two years, we are going to show some real progress. We have talked about the success ratio of 60% being a target for us, but I think we can beat that over the next couple of years with these new tools we are rolling out. Got it. That is helpful. And then, maybe just following up on commercial. You guys mentioned kind of broad-based trends Terry Ma: but also kind of called out larger deals on the energy side, and obviously data center is big. As I look at ARPU, at $18,600 this past quarter, and, you know, we roll forward to 2026, do you think more of the revenue growth comes from order count increase, or is it more ARPU? Any color on that? Mark Edward Seaton: I think it will be a mix. I think, as a general statement, when you look into 2026, we are expecting the mix to be higher transaction growth as opposed to ARPU growth. We will see if that plays out. But I think when we look at the growth in commercial, more of a higher percentage will come from more orders as opposed to ARPU. Matthew Feivish Wajner: Got it. Thank you. Operator: Our next question comes from the line of Mark Hughes with Truist Securities. Please proceed with your question. Mark Hughes: Yes. Thank you. Good morning and good afternoon. The 90 basis points you talked about, the organic market share—is that a mix issue, geography issue? What would you say is driving that? Mark Edward Seaton: There are two big drivers to that. They are both roughly equally weighted. One is we are gaining market share in our Agency division. And the second is we are gaining market share in Commercial. Those are the two things I would point to and say that is where the market share is coming from. We are really proud of that. And then your refi ARPU is up a little. It had been down pretty meaningfully in the last few quarters. I guess you have probably lapped some of that downdraft. Mark Christian DeVries: You think that stays in positive territory? Any visibility there? Matthew Feivish Wajner: Hey, Mark. This is Matt. So, yes, ARPU for refi was up a little bit this quarter year-over-year. I will point you to—in Q4, we revised some of our refi order counts, which also impacted historic ARPU. So if you look at the revised numbers, you will see that the trend is very similar. Mark Christian DeVries: Okay. Alright. Very good. And then in the purchase, purchase ARPU has been up three to three and a half percent the last couple of quarters. You talked about maybe pressure on housing prices benefiting affordability that could impact volume. Do you think that ARPU maybe comes under a little pressure through the year? Matthew Feivish Wajner: Yes. So in the way we are thinking about Mark Edward Seaton: 2026, we do think ARPU is going to moderate. We still think it will be positive in 2026, but it will be less than what we saw in 2025. Operator: The growth. Mark Edward Seaton: Sorry. Operator: Yeah. Mark Christian DeVries: Okay. Alright. Thank you very much. Terry Ma: Thanks, Mark. Operator: As a reminder, if you would like to ask a question, press star-1 on your telephone keypad. Our next question comes from the line of Oscar Nieves with Stephens. Please proceed with your question. Matthew Feivish Wajner: Hey, good morning. I have a question on the Title segment’s adjusted pretax margin. This quarter, it reached its highest level since, I think, Q2 2022. Can you break down the primary drivers of that expansion, Mark Edward Seaton: whether that was volume mix, pricing, expense control, or other? Oscar Nieves: Thanks, Oscar. There are a few—one of the things is we absolutely have commercial tailwinds at our backs. The margin is higher than it has been because we are getting some revenue Terry Ma: tailwinds. Mark Edward Seaton: And we are managing our expenses well. And also, the fact that the commercial market is doing very, very well right now, and commercial just has a higher margin relative to some other lines of business. There is a little bit of a mix issue there, too. There are a lot of factors, but I think that is the key driver. That is helpful. And as a follow-up to that, you have talked about Sequoia and Endpoint already. But since you referenced in the past Matthew Feivish Wajner: a 100 basis point drag from Mark Edward Seaton: the technology costs from those initiatives. Has that headwind now largely rolled off, or is some of that assumed better in the margin profile? The reason I am asking is we are looking at 14% plus margins, so I wonder if there is still some upside from Matthew Feivish Wajner: those investments rolling off. Mark Edward Seaton: I think there is significant upside with those investments for a couple of reasons. Number one is we have achieved big milestones with both Endpoint and Sequoia in the sense that they are both live in markets, working. But they are really beta versions, I will call it. They do not have many orders running through them now. We are testing it. We are learning. We are improving every day. But we are still running our business on other platforms. We have two benefits that are going to be realized over the next couple of years. One is the fact that once we transition all of our work to the new platforms, we can decommission the old technology, and there will be a benefit to that. That is already starting because we are not investing as much in the old technology, but there will be more benefit over time. The second thing is once we do get national scale on those two platforms, we do think that we will have productivity improvements, and that definitely has not shown up in the numbers yet. Over time, it is not going to just happen in one quarter all of a sudden, but we will have incremental gains over time as we roll these platforms out nationally. And once we roll it out nationally, the builds continue to improve from then, too. We feel like this is going to be a long-term benefit for margin improvement. Great. And if I can ask Terry Ma: just one last one on Matthew Feivish Wajner: capital allocation. What are the priorities Mark Edward Seaton: heading into 2026? Our first priorities are dividends, buybacks, bank investments, and potentially M&A. It is something we think a lot about. Our first priority is we want to make sure that we are investing in our core business. We want to make sure that we equip our employees, our team members, with the best tools and the best products in the industry. That is the first priority: building our technology, building out our databases, investing in the future. But I will say we do not need to ramp that up. Everything we are building is already at a run rate. If you look at our capital expenditures the last three years, they have been falling every single year. When you look at our CapEx this year in 2025, they were $188,000,000. Last year, in 2024, was $218,000,000. The year before that was $263,000,000. So we have been lowering our CapEx every year despite the fact that our operating cash has been increasing every single year. The second priority is acquisitions. The acquisition pipeline, at least the last couple of years, has been pretty dry. I think we did $2,500,000 of M&A in 2025. We talked about gaining 90 basis points of market share. We did that with only investing $2.5 million in M&A. We look at buying title companies and we look at buying businesses that are outside of title but adjacent to our core title business. I would say that is the second priority. We do not have anything material in the pipeline. Things can always change, but that is the second priority. The third priority is returning capital back to the shareholders. At the end of the day, we are trying to generate good returns to our shareholders organically or through M&A. If we cannot do that, we will give it back to shareholders. We do that through dividends or buybacks. In 2025, our payout ratio—our dividend payout ratio—was 36%. That is a priority for us. We have typically raised it a penny the last couple of years because we have been in the trough market. Our target is 40%, and we are running a little bit below that. Dividend is a priority. With buybacks, we are opportunistic. In 2025, we bought back the equivalent of about 20% of our net income in buybacks. When you look at the 20% for buybacks and 36% for dividends, we returned 56% of our net income to shareholders last year. We are focused on doing that. The last thing I would say on capital management is we think that AI is going to have a big impact. It is hard to see exactly what the impact is going to be, but our cash flow has been really improving. We want to build a little bit of dry powder. I am not saying we need to do that to strengthen our balance sheet—our balance sheet is already strong enough. But there are a lot of things moving around with AI. Everything we do, whether it is the buyback or M&A, we look through an AI lens now that we did not have before. We are going to try to keep a little bit more dry powder here just to pounce on opportunities that may arise in the future. That is how we are thinking about heading into 2026. Super helpful. Thank you. Mark Hughes: Thanks, Oscar. Operator: Our next question comes from the line of Geoffrey Dunn with Dowling & Partners. Please proceed with your question. Geoffrey Dunn: Thanks. Good morning, Mark. Is the size of some of the commercial deals tempering the appetite to upstream capital from the operating company? And how do you think about striking a balance between the necessary balance sheet strength and returning excess capital? Mark Edward Seaton: The big deals that we are doing—there is no thought of making sure that we, for example, do not pay dividends at our First American Financial Corporation title insurance company, that we need more capital in the underwriter to support these big deals. There is no thought of that. We have adequate ratings. Underwriting these big deals is not going to prevent us from maximizing our dividends. I will just say we have a very robust reinsurance program, and we feel very comfortable with the risk that we are running. Operator: Okay. And then Geoffrey Dunn: as we think about potential margin improvement as the tech investment comes down and Endpoint rolls out, is it truly gradual or more of a cliff improvement given the rollout costs that you might incur? Mark Edward Seaton: It is going to be gradual. And remember, we have other— as you know, Jeff, we are really talking about our direct division. I think these will benefit our Agency division, particularly Sequoia. It is not every single piece of the company that Endpoint and Sequoia are going to benefit. But it is going to be gradual, and we are already starting to see it. I have talked about this where we are not investing as much in our legacy platforms. Otherwise, if we did not have Endpoint and Sequoia, we would have to do that. Eventually, we will decommission legacy platforms. Eventually, our productivity will continue to improve. It really will be gradual every single quarter for a while. It will not be a cliff benefit. The important thing to note is we just continue to hit our milestones. We laid out a plan a year ago for our new AI-powered version. I am really pleased with how we are sticking to that plan. We talked about a national Mark Christian DeVries: rollout Mark Edward Seaton: by 2027, and we are still on track for that. Sorry. Go ahead. Go ahead, John. Geoffrey Dunn: Last question just on the loss provision. Expectation for it to remain steady at 3.75%? Matthew Feivish Wajner: Hey, Jeff. This is Matt. Mark Edward Seaton: So Matthew Feivish Wajner: you know, it is too early to say because it is obviously based on the way claims come in, and we reevaluate every quarter. But, as you know, the policy rate for this year was 3.75%. We had 75 basis points of reserve release for prior periods, which put the calendar rate at 3.0%, and that is consistent with the prior year. I would say that, as you know, the normalized loss rate is closer to 5%. So I do think it is likely that sometime here in the future, we will stop releasing prior year or slow down the release of prior year. But a 3.75% policy year loss rate feels kind of right and near the normalized rate. We are not seeing any claims pressures or any adverse claims activity that makes me think we will see significant changes here soon. Operator: Alright. Appreciate it. Thank you. Mark Edward Seaton: Thanks, Jeff. Operator: Our next question is from Mark Christian DeVries with Deutsche Bank. Please proceed with your question. Geoffrey Dunn: Another question for you on the tech investments. So far in the markets where you started to roll out Sequoia and Endpoint, are the productivity benefits that you are seeing kind of comparable to what you saw in the pilot stage? Mark Christian DeVries: And then Geoffrey Dunn: also, Mark, are you able to go on record as to the margin lifts you think we could get over the next couple of years as you fully roll these out? Mark Edward Seaton: Yes. So, Mark, I would say with Endpoint—let me just start there—it is in one office in Washington. The AI-powered version is in one office in Washington. When we roll it out, it is a beta version; it is not going to work perfectly. I would say it is probably better than our expectations, though, than what we thought when we rolled it out. I would not say it is ready to be rolled out nationally right now. We still have a lot of work to do. That is what we are doing right now. The plan with Endpoint is to continue to work on the product and make it better. The plan is in the second quarter, we are going to launch it to 15 escrow teams in the state of Washington. Before we do that, we have to make the product a little bit better, and we also need to fine-tune our change management. By the end of this year, we will have it in a few other states launched. We want to have most of the company on it at the end of next year. I would say the technology is a little bit better than what we thought it was going to be, but we still have work to do. On the Sequoia side, when we are getting 40% automation rates for refinance transactions for the products that we support in those four markets, we are seeing savings. We have completely automated the search. We have completely automated the examination. We are still doing some QC, just because we are checking to make sure the product is working. We are seeing benefits. But it is very small numbers at this point. I would say with both Sequoia and Endpoint, both are in line, maybe a little bit better than our expectations. In terms of guiding to what this means, we need to show the benefit at more of a scale. We just have not had that yet. Once we roll these out to, I would say, a statistically significant sample size, we can share those numbers. But right now, in one office in the case of Endpoint and four markets in the case of Sequoia, it is just too small to share those right now. Mark Christian DeVries: Okay. Got it. And I think, Mark, earlier, you alluded to Mark Edward Seaton: having some of the investments roll off and some of the efficiency gains Maxwell Fritscher: could keep the efficiency ratio at a pretty attractive level. I guess it was 47 this quarter. You said at least for the next couple of years. Is there any reason to think it is not just going to be kind of structurally better than it has been, and the 60% target is out the window? Mark Edward Seaton: I think that it can be better than 60%, as I mentioned. I have not really thought hard about what is the new guidance. But I do think that the 60% was in, I would say, a very labor-intensive model. Now we are transitioning parts of our business. We are always going to be a people business. We are always going to be labor-intensive, but it is going to be more data-driven, and you will have better operating leverage in that model. We just need to prove it out. We have to prove it out. We are hitting milestones. We have products in the market. We have to prove it out over the next couple of years. But I do think that, based on what we believe and what we know, we can do better than that 60% for a period of time. Maxwell Fritscher: Okay. Great. And then just one last one. On the commercial volumes, I think you indicated that the refi activity has been kind of higher than normal recently. I think you alluded to lenders doing shorter-duration loans. Is that just a product of where rates are—borrowers less excited about locking in at high rates? And if so, are we looking at a multiyear tailwind here on the refi side? Mark Edward Seaton: I believe so. I have talked to life insurance companies and lenders that typically went five- to seven-year maturities, and they have moved to two to three years. When you think about that, there is just more frequency of refinance activity—they are putting two- to three-year loans on right now. It is sort of the opposite of what is happening on the residential side. I do think there will be a refi tailwind here on the commercial business for a few years. As you know, for our commercial business, our premiums are basically the same for purchase and refinance, so that is a big benefit to us. Operator: Got it. Thank you. Mark Christian DeVries: Thanks, Mark. Operator: Our next question is a follow-up from Oscar Nieves with Stephens. Please proceed with your question. Geoffrey Dunn: Thanks for taking my questions. Texas recently implemented a title insurance rate reduction. Can you quantify the expected revenue impact under current volume and other operating assumptions? Matthew Feivish Wajner: Hey, Oscar. This is Matt. If we assume similar volumes to 2025—if we just basically assume that the rate change went in at 2025—it would lower the total revenue and net operating revenue in the Title segment by about 50 basis points. Operator: Okay. Matthew Feivish Wajner: That is helpful. And as a follow-up to that, Geoffrey Dunn: as we think about your Texas exposure, how much is Matthew Feivish Wajner: residential versus commercial? And are there any offsets, Mark Edward Seaton: because, obviously, the rate reductions bring down your premiums, but they should also bring down how much you pay to your agents, right? Geoffrey Dunn: In terms of Mark Edward Seaton: the offsets, I would not count on too many offsets. The premium is where most of the economics are, as opposed to the escrow fees or other fees. I would not assume that we are going to get anything material on the offsets. We do not have this broad-based plan to just raise rates on other products. I would not really assume anything on that. With Texas, some states we do better, some states we do worse. Texas—we are underweight market share, particularly on the residential side, but we do very well in commercial. I do not have the numbers in front of me, but I would just say we do really well in commercial in Texas. In residential, it is something that we are really focused on, but we are underweight market share on the residential side. That is useful. Thank you so much. Okay. Thanks a lot, Oscar. Operator: Our next question is also a follow-up from Mark Hughes with Truist. Please proceed with your question. Mark Christian DeVries: Thank you. I am sorry if I missed this, but did you give guidance for investment income for Q1 or for the full year? Geoffrey Dunn: Hi, Mark. Matthew Feivish Wajner: We did not give guidance, but where we sit today, the way we are thinking about investment income for full year 2026 is that it is going to come in roughly flat with what we saw in 2025 for the Title segment. Mark Edward Seaton: I will just add to that, Mark. I think this is a big win for us because we have talked about how every time the Fed lowers rates, we are going to lose investment income. We have talked about that for a long time, and we really have not. We have not because of a couple reasons. One is commercial balances have been higher. Second is we have gone longer in the bank’s portfolio, which kind of insulates us from that risk. A third thing, which I talked about in my comments, is that now we are capturing 1031 exchange deposits at the bank. All those factors mean we have really been able to defend our investment income. We think we can continue to defend it if the Fed lowers rates a couple times this year. I think that is a big win relative to where we were a couple of years ago. Matthew Feivish Wajner: Appreciate it. Mark Christian DeVries: Thank you. Operator: Our next question is a follow-up from Bose Thomas George with KBW. Please proceed with your question. Matthew Feivish Wajner: Hey, guys. Actually, a follow-up on the regulatory side. Craig J. Barberio: There has always been a lot of noise about affordability from the White House and the FHFA. Have you heard anything specific from D.C. about potential changes to title insurance? Mark Edward Seaton: We have not heard anything directly or new about any changes to title insurance, no. We have talked about AOEs in the past. We have talked about the title waiver pilot with Fannie Mae that is still continuing and it is going to be up in May. But there is nothing new. We look at a couple of these bills going through Congress. The House passed the Housing for the 21st Century bill. The Senate passed the Road to Housing Act. Our industry trade association, the ALTA, supports both bills. There is a lot going on with housing, but to answer your question, there is nothing new or noteworthy that we are aware of around title insurance directly. Craig J. Barberio: Okay. Great. And then actually one more on the commercial. Geoffrey Dunn: You noted the shorter expected duration because of these loan sizes. Craig J. Barberio: But I assume that does not impact the premium, so the premiums are similar even if Mark Edward Seaton: these are going to roll off more quickly? Operator: That is right. Geoffrey Dunn: Correct. Okay. Great. Thanks. Mark Edward Seaton: Thanks a lot, Bose. Operator: There are no additional questions at this time. That concludes this morning’s call. We would like to remind listeners that today’s call will be available for replay on the company’s website or by dialing (877) 660-6853 or (201) 612-7415 and entering the conference ID 13758180. The company would like to thank you for your participation. This concludes today’s teleconference. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Copa Holdings, S.A. Fourth Quarter Earnings Call. During the presentation, all participants will be in listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, you will have to press star one one on your touch tone phone. As a reminder, this call is being webcast and recorded on February 12, 2026. Now, we will turn the conference call over to Daniel Tapia, Director of Investor Relations. Sir, you may begin. Thank you, Marvin, and welcome everyone, to our fourth quarter and full year earnings call. Joining me today are Mr. Pedro Heilbron, CEO of Copa Holdings, S.A., and Peter Donkersloot Ponce, our CFO. First, Pedro will go through our fourth quarter and full year highlights. Followed by Peter, who will discuss our financial results in more detail. Immediately after, we will open the call for questions from analysts. As a reminder, Copa Holdings, S.A.’s financial reports have been prepared in accordance with International Financial Reporting Standards. In today's call, we will discuss certain non-IFRS financial measures. A reconciliation of these measures to comparable IFRS measures can be found in our earnings release, which is available on our website. Our discussion today will also contain forward-looking statements, not limited to historical facts, that reflect the company's current beliefs, expectations, and/or intentions regarding future events and results. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially and are based on assumptions subject to change. Many of these are discussed in our annual report filed with the SEC. Now I would like to turn the call over to our CEO, Pedro Heilbron. Thank you, Daniel. Good morning, and thank you for joining us for our fourth quarter earnings call. Before we begin, I want to recognize our more than 8,000 coworkers. Their hard work and commitment are fundamental to Copa's strong operational performance, and continued leadership in our industry. To them, as always, my sincere appreciation and respect. We delivered another quarter and full year of strong financial and operational results, reaffirming the strength of our business model and the structural advantage of operating the best positioned and most efficient hub for international travel in The Americas. Our results reflect strong demand trends across the region, continued discipline in our cost execution, and our relentless focus on operational excellence. As a testament to our operational performance, in January, Copa Airlines was recognized by Cirium for the eleventh time as the most on-time airline in Latin America in 2025, with an on-time performance of 90.75%, the highest of any carrier in The Americas, and the second best in the world. Once again, I want to recognize our team. Without their commitment and dedication, it would not be possible to consistently deliver this level of excellence, which our customers expect from us. Now I will go over our fourth quarter highlights. We increased capacity by 9.9% year over year, while passenger traffic increased by 10.1%. As a result, our load factor increased 0.2 percentage points to 86.4%. RASM came in at 11.3¢, flat versus fourth quarter 2024. We reported CASM of 8.8¢, and an ex-fuel CASM of 5.9¢, a 1.6% year over year increase, respectively. Excluding a $7,200,000 non-cash adjustment to the provision for future lease return obligations, ex-fuel CASM for the quarter would have been 5.8¢. Operating margin came in at 21.8%. Excluding the non-cash maintenance adjustment, we would have reported an operating margin of 22.5%. Turning now to the main highlights for the full year 2025. Capacity in ASMs grew 7.8% year over year while passenger traffic, measured in RPMs, increased by 8.6%. As a result, our load factor increased 0.7 percentage points to 87%. Unit revenues, or RASM, decreased 2.6% to 11.2¢. Unit cost, or CASM, decreased 3.6% to 8.6¢ and CASM, excluding fuel, decreased 0.7% to 5.8¢. And as mentioned before, we delivered full year operating margin of 22.6%. Turning now to our network. Between December and January, we started service from our Hub of The Americas in Panama to Los Cabos, Mexico, Puerto Plata and Santiago in the Dominican Republic, Maracaibo in Venezuela, and Salvador Bahia in Brazil, further strengthening our position as the most complete and convenient connecting hub for travel within The Americas. Regarding our fleet, during the quarter, we took delivery of four Boeing 737 MAX 8 aircraft and ended the year with a total of 125 aircraft. Earlier this year, Boeing updated the fleet delivery schedule for 2026 and we now anticipate adding eight Boeing 737 MAX 8 this year and now expect to end the year with a total fleet of 133 aircraft. We continue to see a strong demand environment in our network as we enter 2026. Booking trends remain solid, supported by healthy travel activity throughout the region, which allow us to leverage the advantages of our Hub of The Americas. The current demand environment gives us confidence in our growth plan and reinforces the foundation for another year of strong margins in 2026. Consistent with the guidance shared in our earnings release, we expect to grow capacity in the range of 11% to 13% in the year. As detailed in December at our Investor Day, approximately half of the growth is the full year impact of capacity added in 2025, with an additional 40% coming from added frequencies in existing markets, and the remaining 10% from new destinations. To summarize, we delivered strong fourth quarter and full year results for 2025, Copa was recognized for the eleventh time by Cirium as the most on-time airline in Latin America and second best in the world. We continue to improve our already low and competitive cost structure which remains a core pillar of our business model. We continue expanding our network, adding frequencies and new cities to our Hub of The Americas, and we are well positioned to deliver another year of profitable growth and strong margins in 2026. Now I will turn the call over to Peter, who will walk us through the financials in more detail. Peter Donkersloot Ponce: Thank you, Pedro. Good morning, everybody, and thank you for joining the call today. I would like to start by reinforcing Pedro’s recognition of our team's continued dedication to delivering industry-leading results. Their commitment remains essential to our strong operational and financial performance. Let me begin by going over the fourth quarter highlights. We reported a net profit for the quarter of $172,600,000, or $4.18 per share, a 5.3% increase in earnings per share compared to fourth quarter 2024. Operating profit came in at $209,600,000 and we delivered an operating margin of 21.8% for the quarter. I would like to highlight that our fourth quarter results include a $7,200,000 non-cash adjustment in the maintenance, material and repairs line related to the provision for future leased aircraft return obligations. This adjustment was driven by a reduction in the discount rate used to calculate the present value of expected end-of-lease costs, as the applicable reference rate declined during the period. Additionally, during the quarter, we reported a foreign currency loss of $6,000,000, mainly as a result of the devaluation of the Brazilian real, which has since recovered in early 2026. Excluding these two items, we would have reported a net profit for the quarter of $184,100,000, or $4.46 per share, and we would have reported an operating profit of $216,800,000 and an operating margin of 22.5%. With regards to our costs for the quarter, unit cost, or CASM, decreased 1.6% year over year to 8.8¢, and CASM excluding fuel increased 0.7% year over year to 5.9¢. Excluding the non-cash maintenance-related adjustment, we would have reported an ex-fuel CASM of 5.8¢, flat year over year. Moving on to our full year 2025 financial highlights. We reported a net profit of $671,600,000, or $16.28 per share, which represented an 11.9% year over year increase in earnings per share. Operating income reached $819,000,000, 8.8% higher year over year. Operating margins came in at 22.6%, 0.8 percentage points higher than in 2024. Our consistent delivery of industry-leading operating margins underscores the strength of our business model and disciplined execution. Now I would like to spend some time discussing our balance sheet and liquidity. As of the end of the fourth quarter, total cash, short-term and long-term investments stood at $1,600,000,000, representing 44% of last twelve-month revenues. Further demonstrating our financial strength and flexibility, we also have approximately $500,000,000 in pre-delivery deposits. We currently have 47 unencumbered aircraft in our fleet. Total debt stood at $2,300,000,000, and we ended the quarter with an adjusted net debt to EBITDA ratio of 0.6x, reflecting our strong financial position. I would like to highlight that our average cost of debt, comprised solely of aircraft-related financing, remains highly competitive at 3.6%. Turning now to return of value to our shareholders. I am pleased to announce that for 2026, the Board of Directors has approved a quarterly dividend payment of $1.71 per share to be paid in March, June, September, and December, subject to Board ratification each quarter. The first quarterly payment will be made on March 13 to all shareholders of record as of February 27. Finally, turning to our outlook. We can provide the following guidance for the full year 2026. We expect to increase our capacity in ASMs within the range of 11% to 13% year over year. And as Pedro shared earlier, around 90% of this growth comes from the full year impact of capacity added in 2025 and additional frequencies in existing markets, and we expect to deliver an operating margin within the range of 22% to 24%. We are basing our outlook on the following assumptions. A load factor of approximately 87%, unit revenues of approximately 11¢ to 12¢, CASM ex-fuel of approximately 5.7¢, consistent with our long-term target of delivering a CASM ex-fuel of 5.6¢ by 2028, and we are expecting an all-in fuel price of $2.50 per gallon. Thank you, and we will now open the call for questions from the analysts. Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1 1 again. Please limit yourself to one question and a follow-up. Please standby while we compile the Q&A roster. Our first question comes from the line of Savanthi Syth of Raymond James. Your line is now open. Hey, good morning. Savanthi Syth: Just wondering if you could, with the developments in Venezuela, just talk about if there was any demand impact in the region and then what your service there is and kind of the view for that. Pedro Heilbron: Yeah. Okay. So hi, Savanthi. We are back flying to Venezuela, of course. And actually, we only exited the market for a short period. We are flying twice daily to Caracas, and we are also flying to Maracaibo, which is almost daily, a little bit less than daily. Before we had to stop flying to Venezuela last year, we were serving five cities, and we expect to go back to those cities gradually. It will not happen right away, but we will be adding capacity throughout 2026. That is helpful. And if I might, you mentioned, announced offering Wi-Fi. Have you chosen a provider, and is that going to be for paid Wi-Fi or free, or any thoughts on how you provide the Wi-Fi service? Pedro Heilbron: Yes. We have chosen a provider. We have not made it public yet. We will do so, I think, in April. We will make it public, but we are confident that our product is going to satisfy all the needs and expectations of our clients. Savanthi Syth: Very helpful. Thanks. Looking forward to it. Operator: Thank you. One moment for our next question. Our next question comes from the line of Duane Pfennigwerth of Evercore ISI. Your line is now open. Duane Pfennigwerth: Hey. Good morning. Wanted to ask you about stronger local currencies. Currencies move, maybe people do not feel it right away, but over time, purchasing power improves, and you might see some demand pickup in relation to that in some of the markets that you serve. So I wonder, are you seeing any early improvement from stronger local currencies in some of your markets? Pedro Heilbron: Correct. Yeah. So two answers to that. And we have talked about this before in previous calls, and we have always said, and it holds true today, that we do better when currencies are stronger in South America, in particular. And yes, we are seeing improved demand and better yields as a result of the stronger currencies right now. Duane Pfennigwerth: Okay. And then maybe just as a follow-up with respect to your full year guidance, which I think assumes flattish unit revenue, is that what you are seeing now, or are you starting the year stronger than flattish? Pedro Heilbron: Well, we are guiding for the full year. And the first quarter is usually a strong quarter. The first and, I mean, all of our four quarters are strong, of course. We do not have the huge seasonal swing. But quarter one and quarter three are usually the strongest, and quarter one lately has been the strongest quarter. So, of course, we are seeing stronger numbers, but we are guiding for the full year, and it is really early. So we are standing by our RASM guidance. And we are also adding, you know, double-digit capacity this year. We take that into account also. Duane Pfennigwerth: Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Guilherme G. Mendes of JPMorgan. Your line is now open. Guilherme G. Mendes: Yes, thank you. Hi, Pedro, Peter, thanks for taking my question. I have a follow-up on the RASM guidance. We were possibly surprised to see the flattish number despite the increase in capacity, the more appreciated local currencies. Pedro, do you mind sharing more details on what is behind that assumption? For— Pedro Heilbron: Yeah. It is a few things. Of course, we are confident on our demand outlook right now, and that is behind our RASM guidance. But also, there are a few other factors. One is that 50% of that ASM growth in 2026 is the full year of our growth in 2025. So that has already spooled up, most of it. Another 40% is new frequencies, which are going to go mostly or all of it in markets where we need additional capacity. And we need to keep in mind also that we have been catching up in terms of Boeing deliveries. Now we are getting the deliveries that we need and that have been promised. But in previous years, in particular, in 2024 and 2023, we were behind quite a bit in deliveries. We also had some catch up to do in markets that, in many cases, are unique to us. And we were not able to deploy enough capacity. Operator: Thank you. One moment for our next question. Our next question comes from the line of Filipe Ferreira Nielsen of Citi. Your line is now open. Filipe Ferreira Nielsen, your line is now open. Filipe Ferreira Nielsen: Hey. Hello, guys. Sorry. I was on mute. Thanks for taking my question. I wanted to explore in a little more detail the guidance on the cost side. I remember in third quarter, you guided for CASM ex-fuel between 5.7 and 5.8. And now you are assuming a 5.7¢ in the guidance. Just wondering if there are any factors that made you a little more optimistic about targeting the lower range of the previous guidance? And how do you see this CASM ex evolving throughout the year? Thank you. Peter Donkersloot Ponce: Thank you, Filipe. Hey. This is Peter now. So for 2025, we reported a CASM ex-fuel of 5.8. But, of course, we report to one decimal. When you look at the full number and you add a couple decimals, you see we would be close to the middle of the range between 5.7 and 5.8. So that also gives us confidence for the 5.7. And we have a lot of initiatives, some going on and some new initiatives. Like we talked about, the full year effect of sales and distribution that still has some extra savings to come in. We have got a full effect of some densification projects that are going in. We have got the growth, 11% to 13% growth. It is something that is not with the fixed cost. And we also have new initiatives that we are working on. And despite the fact that none of them make the headlines, the combination of all these initiatives does add a couple of additional points. So I would say, hey, what is embedded in the guidance is all those initiatives, slightly offset by some inflation and some FX headwinds that we are seeing. Filipe Ferreira Nielsen: Great. And just want a follow-up. I just wanted to hear a little more from you. How do you see capacity evolving on a quarter-by-quarter basis? We know that there is some carry from the deliveries that you took late last year. Just wondering if we should see stronger growth in the first half of the year and then moderating second half. Maybe if you give a little color on that, please. Peter Donkersloot Ponce: Yes. You are right. As most of the 50% of the capacity comes from full year effect of last year's deliveries and services we launched, it is slightly front-loaded. So we are going to see being more above the range in the first half, then slightly on the lower end of the range in the second half. Operator: Thank you. Thank you. One moment for our next question. Our next question comes from the line of Michael John Linenberg of Deutsche Bank. Your line is now open. Yes. Pedro, just on the Venezuela service, when you listed the markets, does that actually include Wingo? And I have sort of a question tied to Wingo on how you see that business this year. Is it sort of steady on the fleet size, or is there potential growth in 2026 at Wingo? Pedro Heilbron: Okay. So sorry for that. I am sorry to our Wingo coworkers. I left Wingo out. Wingo has gone back in with their own seven weekly frequencies from Bogota to Caracas. And they will be restarting Medellin to Caracas in the very near future. So I did not include Wingo. Wingo received a tenth 737-800 in the second half of last year. And then they went through a number of C checks, so they had to use that aircraft as backup for the C check. So we will see the impact of their tenth aircraft this year. But, otherwise, it is stable. Wingo will not be growing much this year, and they will continue in that same path we saw last year. Michael John Linenberg: Great. And then just a quick second one here, Pedro. I know that Cuba is not the biggest market for you, but you have always had longstanding service there. Seeing a lot of international carriers either cut the service or maybe being forced to make tech stops. Do you have the ability to fly in with enough fuel from Panama City so you do not have to make a tech stop on a round trip flight to Cuba? Where are you on that? Thanks for taking my questions. Pedro Heilbron: Yeah. Thank you, Mike. Given that Panama is sea level, and the distance from here to Cuba, to Havana—we fly to two cities, but mostly to Havana—we can tanker in Panama and not take any fuel in Cuba, and that is what we are doing, with a minimal impact to our passenger capacity. So we do have to reduce the number of passengers, but very little. I think it is by 10 or 15, something like that, passengers. And then we are holding back from sending belly cargo. So those are the two things, the two adjustments to be able to tanker in Panama. Then Wingo—I will not miss Wingo this time—Wingo flies from Bogota to Havana, and they need to make a tech stop in somewhere in Colombia, in Barranquilla, which is sea level. Michael John Linenberg: And that is because Bogota is hot and high. Pedro Heilbron: They made a stop in Barranquilla, sea level. Michael John Linenberg: Okay. Okay. Thanks for that. Operator: Thank you. One moment for our next question. Next question comes from the line of Rafael Simonetti of UBS BB. Hello, and thanks for taking my question. It is a simple question regarding the codeshare with Volaris. I wanted to know if the partnership remains with the potential deal between Volaris and Viva. Pedro Heilbron: Thank you. Yes. Well, our codeshare with Volaris started in November, so it is still spooling up. And we have not really addressed the Volaris-Viva merger. At least I am not aware that we have addressed that. We expect the codeshare to continue. And in any case, it is not going to be a significant part of our business. Makes sense. Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Daniel McKenzie of Seaport Global. Your line is now open. Hey, guys. Thanks for the time here. Pedro, I am wondering if you can provide some partner perspective, so either the percent of revenue or the volume of passengers from your partners in 2025 versus what it was, say, pre-pandemic. And what I am trying to get at is how big a piece of the revenue story are the portfolio of partners? Is it more than 10%, less than 10%? Anything you can share? Pedro Heilbron: Yeah. That is not a number we share. But what I can say is that our numbers are not above pre-pandemic. If anything, they are below or slightly below. Our main partner, of course, is United. We codeshare in many U.S. routes, and we are also partners in Star Alliance. But we had a partnership even before that. And that partnership is healthy, is strong, and United is doing extremely well themselves, so we know that. But no, the numbers have not changed, have not grown really post-pandemic. Daniel McKenzie: Mhmm. Yeah. Partner United, definitely a healthy partner. Second question here, just going back to Venezuela. As you think about the risk-reward of the country as part of the network, I am wondering what its size as a percent of overall flying could ultimately look like, say, in two to three years. Pedro Heilbron: Well, you know, of course, we have been born and raised in the middle of Latin America. And if there is something we know how to do, it is how to deal with changing situations, crises of many kinds. We have proven to be very resilient in every market we serve. And I think we were the better airline in managing this whole Venezuela crisis that is taking quite a while. And we are also very loyal to the countries and cities we serve because we are loyal to our passengers, and we understand the importance of the connectivity we provide through the Hub of The Americas in Panama. And sorry for this promo ad, but we are confident that we are managing capacity the right way, that we understand the market, and we are going to be there in the future in a successful way. Along the way, we might need to make adjustments, and that is kind of part of our day to day in Latin America, making adjustments. And we have enough opportunity to move around capacity. Right now, it is from other markets to Venezuela. Before, it was from Venezuela to other markets. And we have continued returning strong demand even though we always have to make those adjustments. It is kind of our daily living and, you know, the team. You know, this is not like I have the magic wand, but we have a team that knows how to deal with changing times and changing situations. Daniel McKenzie: Yeah. Very good. Thanks for the time, you guys. Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Stephen Trent of Barclays. Your line is now open. Stephen Trent: Hi, good morning. Thanks for taking my question. Pedro Heilbron: Again, on Venezuela, is any of these destinations included differently in this year guidance? Pablo Montele: Or it is just basically business as usual now. Just wanted to understand if perhaps you think improvement as well that we might see some upside there or probably will have some incremental cost if you are thinking about expanding Venezuela at some point this year. So I just wanted to understand the impact of Venezuela in your guidance on the unit cost? Pedro Heilbron: Yeah. Thank you, Stephen. It is not much material. I mean, we are not guiding to Venezuela changing our results. There will not be any material changes either way. I mean, there could be upside, of course, but not what we are expecting right now. We are expecting our service to Venezuela to be very similar to the rest of the things we do throughout our network. And if we grow there or we grow in another market, it will not change our guidance in a significant way. Stephen Trent: Perfect. And if I can add one follow-up, just out of curiosity, have you seen any interesting trends on the World Cup this year for the summer? Pedro Heilbron: Yeah. Well, that is an interesting topic. Because, you know, World Cups in our region do not happen even every four years. So demand patterns are going to change due to the World Cup. And it is going to be different to what we are used to dealing with, and we are working hard to try to minimize the potential surprises from flights being very full in one direction, maybe not in the other, and then passengers that were going to vacation in Cancun or Punta Cana now are going to go to the World Cup in the U.S. or Mexico or Canada. So all of those changing patterns are a challenge to deal with, and we have a team working on that right now. We will fly extra sections to Toronto, where Panama is playing its first two games. Michael John Linenberg: The third game is in New York, Pedro Heilbron: Not sure where we will play after that, if we qualify and keep on moving. Not sure where—oh, the finals are in New York. So hopefully we will be there. But— Duane Pfennigwerth: Let us not laugh. You never know. Operator: So— Pedro Heilbron: That is true. But, of course, the other teams are the favorites. I am not changing that. The favorites are very strong. So anyway, we will have extra sections, quite a number of extra sections to Toronto. And then we are managing the rest of the network in the best possible way. And, hopefully, in the final, at least, even if it is not Panama, there are countries that we serve. That will be fantastic. There are many. Yeah. So good. Stephen Trent: Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Jen Spies of Morgan Stanley. Your line is now open. Jen Spies: Hi, everyone. So we have noticed that you are planning to increase capacity in Argentina and actually reducing a bit of capacity in Colombia. So I have a two-part question here. First, if you could please comment on the demand dynamics you are seeing in both of those countries. I think you already alluded a bit on Colombia, but also interesting to see what you are seeing in Argentina and how excited you are about those routes and demand in that market? And secondly, considering how nimbly you are allocating capacity, is it maybe fair to assume that, all else equal, your load factor guidance is actually conservative? Just putting that out. Thank you. Pedro Heilbron: Okay. I will start with the second one first. Because some team members, especially from the commercial department, are here on the call, and they already feel challenged by our goals. So we think our guidance tends to be realistic, and we are always very close to guidance, year in and year out, because we make it realistic, and it is the same guidance that our team has, and a chunk of their compensation is based on us reaching those goals. So everything is well aligned. And for that reason, we need to be realistic. So I would say our guidance is realistic, and when there is upside, it is because there are other external factors that may, you know, be tailwinds that make things easier. So once in a while that happens, of course. In terms of Colombia and Argentina, I should say that right now, all of our markets are looking well. Argentina is fine. Of course, it is not as strong as a year ago, because, as I mentioned in the previous call, a lot of capacity came in during 2025, but it is still a very strong market. It is still doing well, only that year over year there is a lot more capacity from everyone. But we are doing well in Argentina. We serve a number of cities. Our new cities, which started last year, are doing well too. And Colombia is also doing okay also. Jen Spies: Alright. Perfect. Thank you, and congrats on the results. Pedro Heilbron: Thank you. Thanks. Operator: Thank you. Thank you. One moment for our next question. Our next question comes from the line of Rogério Araújo of Bank of America. Your line is now open. Rogério Araújo: Hi, guys. Thanks for the opportunity. I have a couple here. First one, you already mentioned that the local currencies have been supporting yields. Is this the only reason why Copa has expectations for a flat RASM, despite a double-digit capacity expansion? Or in your view, are there other strengths in the region that could explain that, or maybe some supply rationality? If you could give some color on that. That is my first one. Thank you. Pedro Heilbron: Yeah. The potential currency strength or tailwind is not something that we are banking on for the full year. We know the volatility of a lot of currencies in our region. And when we put together our growth plan, currencies were not as strong as they are right now. So no, that is not—it is not only not part of the plan. It could be a windfall. It is a tailwind right now, but it is not what we are betting on for growth or for having a strong year. Rogério Araújo: Okay. Perfect. Thank you. And also, it felt to me a little bit challenging on arriving to the CASM ex-fuel guidance looking at my model and playing with the variables. So any color you could provide on which lines we could reduce further or that you see more opportunities? Anything you could share here would be greatly appreciated as well. Thank you. Peter Donkersloot Ponce: So thank you for the question. This is Peter again. I would say that our guidance, what has embedded, is some benefit for the growth. So those lines that are fixed or semi-fixed will see a better benefit—part of the salary, wages and benefits, that part that is not operational driven. And we are very disciplined to not grow overhead in the same line that we grow capacity. So we are going to see some benefits in there. And we should be able to see additional benefits in the sales and distribution. So I think if I would call out, I would say those were two particular lines that we could call out right now. Rogério Araújo: Okay. Very clear. Thanks so much. Peter Donkersloot Ponce: Thank you. Operator: Thank you. One moment for our next question. And our next question comes from the line of Guilherme Mendes of JPMorgan. Your line is now open. Guilherme Mendes: Yes. Thank you so much, guys, for the follow-up. I got cut after my first question. But the second one is regarding the buyback program. Peter, if you could remind us where you are on the buyback, how much you have executed so far? Peter Donkersloot Ponce: Thank you, Guilherme. We have the buyback program approved by the Board of $200,000,000. We have executed more or less half of it, and we have the other half remaining open. No end date is placed. And whenever we do finalize it, we ask for a new one. Guilherme Mendes: Perfect. Thank you so much. Operator: Thank you. One moment for our next question. And our last question comes from the line of Alberto Valerio of UBS. Your line is now open. Alberto Valerio: Hi, Pedro and Peter. Thank you for taking my questions. My question comes from Brazil here. We heard that there is a project to suspend the Resolution 400 in Brazil, which would be good in terms of lawsuits from the consumers to the airline. I would like to see if you already see any positive impact on the liabilities of Copa with the Brazilian consumers and if, with approval of this Resolution 400, what we can see in terms of upside to the future? Thank you. Pedro Heilbron: Yeah. Thank you. So the impact is going to be on cost, of course. And many might not be aware of this, but I think something close to, like, 90% of passenger/consumer lawsuits in the world come out of Brazil. And so that is going to be welcomed by the industry because the numbers just do not make sense and are not fair to airlines or to the reality of our industry. So there will be cost savings from that if it does pass. Alberto Valerio: Thank you, Pedro. If I am not mistaken, it is already suspended, is it not? You are not being charged for the lawsuits since the end of last year. Correct me if I am wrong. Do you have any impact already from this or not? Pedro Heilbron: Well, we have the impact from the lawsuits. We all have the impact from lawsuits. I mean, to be transparent, I am not very familiar with the specifics of the law, the resolution, and what is going to change. Of course, I am aware of it, and it has been discussed. But one of those things that I want to see it to believe it. And it would be a positive. I have not been very involved in the details of it, but it will be really important for the industry. It will be very positive. And, especially, it will be fair to the industry. And it will result in savings, of course. Alberto Valerio: Fantastic. Fantastic. Thank you very much. Pedro Heilbron: Thank you. Thank you. Thank you. Operator: This concludes the question and answer session. I would now like to turn it back to Pedro Heilbron for closing remarks. Pedro Heilbron: Thank you. Thank you all. This concludes our earnings call. Of course, thank you for being with us. And as always, thank you for your continued support. Have a great day. Operator: Thank you for your participation in today's conference. This concludes the program. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to Ipsen's Conference Call and Webcast on full year 2025 results. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Loew, Ipsen's CEO. Please go ahead. David Loew: Thank you, operator, and hello, everyone. I'm delighted to welcome you to our presentation this afternoon, which can also be found on ipsen.com. I want to use the time we have together to focus on the progress Ipsen delivered in 2025 and on the future opportunities and platforms for growth. Please turn to Slide 2. Please take note of our forward-looking statements, which outline the routine risks and uncertainties contained within this presentation. Also, all of my comments on growth will be based on constant exchange rates. Please turn to Slide 3. I'm going to take you through the presentation of our latest business update followed by our CFO, Aymeric Le Chatelier, who will take you through the financials. And finally, I will provide an R&D update. At the end of the presentation, we will open the Q&A session. Let's begin by looking at today's highlights. Please turn to Slide 4. Turn to Slide 5. Today's headlines illustrates how we are continuing to deliver strong and sustainable growth. In 2025, total sales grew double digits by 10.9% and performance driven mostly by the strong performance of our portfolio, excluding Somatuline, which grew by 14.2% over the year. Regarding margin, we delivered a core operating margin of 35.2% of total sales. Turning to regulatory highlights. This year was marked by the EMA regulatory submission of tovorafenib for pediatric low-grade glioma in the first quarter. EU approval of Cabometyx in neuroendocrine tumors in July and importantly, by the announcement of the first data for our first-in-class differentiated long-acting molecule IPN10200 in September. Looking ahead, 2026 promises to be another exciting year for our pipeline with 5 key milestones, which includes 3 pivotal readouts in addition to the highly anticipated full data presentation of the Phase II data for IPN10200 in first aesthetics indication Glabellar lines at an upcoming medical meeting. Lastly, we are expecting another year of double-digit sales growth for 2026, supported by accelerated performance across the entire portfolio and the better outlook for Somatuline given the production challenges faced by generic competition. Aymeric will provide more details in his section. Please turn to Slide 6. Our full year sales delivered a solid 10.9% growth and 7.5% in Q4 fueled by all 3 therapeutic areas with an improvement of performance for neuroscience and rare disease this year compared to last year. The portfolio, excluding Somatuline, grew at 14.2% this year and by 19.6% in Q4. Oncology performed well with sales growth of 4.1% but were down in the last quarter due to a decline in Somatuline sales versus a very high baseline in 2024. Rare disease performed very well with sales doubling this year. Neuroscience with Dysport continued to deliver high single-digit growth. I'll now turn to oncology for more detail. Please turn to Slide 7. Starting with Somatuline, sales were up by 4.3% for the full year. Both Europe and the U.S. continue to benefit from shortages of generic lanreotide, and we saw a strong performance in Rest of World. As we have previously communicated, we are aware of recent updates on the potential challenges with regards to the manufacturing and availability of generic lanreotide in several markets, and this is factored in our guidance. Cabometyx sales were up by 5.1% with solid performance in Europe, driven by renal cell carcinoma growth and boosted by the neuroendocrine tumor launch despite increased competition in rest of world. Decapeptyl sales were up by 2.7% as we experienced volume growth in Europe and China despite continued competition and some pricing pressure in some countries. Onivyde sales grew by 6.2%, with expansion of use in the U.S. driven by the first-line metastatic pancreatic ductal adenocarcinoma indication. We expect sales to continue to grow modestly, but acknowledge that we are now unlikely to reach EUR 500 million in peak sales. Now let's turn to rare disease. Let's go to Slide 8. On rare disease, Bylvay continues to perform well with annual sales of EUR 180 million, growing by 36.3%. Growth was driven by both PFIC and Alagille syndrome indications in the U.S. Additionally, we saw a strong double-digit growth in both Europe and in Rest of World. Q4 sales growth was impacted by ongoing competitive challenges in the PFIC indication and we expect to see the positive effect of the new pediatric field force we put recently in place in the coming months in the U.S. Iqirvo continues to track very well with annual sales of EUR 184 million, with growth coming from all regions. Let me go into a bit more detail on the next slide. Please turn to Slide 9. As you can see, we have demonstrated strong quarter-on-quarter growth since the launch just over 1.5 years ago. In the U.S., we have seen a significant number of Ocaliva patients switching to Iqirvo, on top of a growing PPAR market. We believe that the new data published at AASLD this year has further strengthened Iqirvo's profile as a drug with both long-term efficacy and safety, including improvements in pruritus, fatigue and fibrosis. In Europe, we are continuing the launch across many countries. We're also very pleased with how well the launches are progressing, capturing new patients and contributing to expand the market. Moving to neuroscience, please turn to Slide 10. Dysport delivered another year of solid performance with sales growth of 9.7% for the full year. In aesthetics, sales grew by 13.7%, driven by continued strong sales in most territories, including the U.S. and rest of the world and by strong performance from our partner, Galderma, who continued to gain market share in key countries and a solid growth in our Ipsen territories. On the therapeutic side, Dysport grew by 4.2%, driven by strong growth in the U.S. and Europe. Reported sales were, however, down in rest of world impacted by adverse phasing of orders in Brazil. That concludes the review of sales. I'll now hand over to Aymeric, who will provide you more details on our full year financials. Please turn to Slide 11. Aymeric Le Chatelier: Thank you, David, and hello to everybody. I will now take you through more details of our 2025 financial performance and our guidance for 2026. Please turn to Slide 12. We delivered another set of strong financial results this year across sales, profitability and cash flow. First, our total sales, which exceeded EUR 3.6 billion, grew by 10.9% at constant exchange rate. Our core operating income grew by 16.7% to EUR 1.3 billion, in line with our free cash flow increasing by 29% to reach EUR 1 billion. Given the strong performance and our solid balance sheet with no debt, we had EUR 3.2 billion of firepower available for external innovation. Let's take now a closer look at those financials in the next slide. Please turn to Slide 13. Starting with the P&L to core operating income. I would like to highlight that we implemented this year a slight reclassification of our distribution expenses. These costs have been moved from SG&A to cost of sales and therefore now impact our gross margin. This change brings our reporting in line with common practices of most of our industry peers. You have all the details in the appendix of that presentation. Now if we look at the figures, the growth in total sales of 10.9% at constant exchange rate translated into 8.1% at current rates, given the adverse currency movements. Gross margin increased by 2.1 points driven by the earlier level of other revenue by EUR 80 million, mainly due to commercial and regulatory milestone received from ex U.S. partner for Onivyde and some other products and the growth in royalties received primarily from Dysport partner. SG&A costs increased by only 6.9%, with a ratio to sales at 31.6% improving by 0.3 points, reflecting an increased investment to support the launches, especially Iqirvo and Bylvay and the impact of our ongoing efficiency program. R&D costs increased by 9.8% to reach 20.5% of total sales, driven mainly by increased investment to support the development, mainly in neuroscience and early-stage oncology assets. As a consequence, our core operating income increased by 16.7% with a core operating margin standing at 35.2%, increasing by 2.6 points. Please turn to Slide 14. Turning to IFRS consolidated net profit. This year, we recognized impairment losses for about EUR 350 million before tax mainly driven by, first, Tazverik for which we no longer expect to achieve the EUR 500 million peak sales given the recent competitive developments. Secondly, by fidrisertiband following the negative readout in December 2025 of the pivotal Phase II trial and thirdly, by the discontinuation of some of our early-stage assets. Despite this impairment, IFRS operating income and consolidated net profit increased by 26% and 28%, respectively. Please turn to Slide 15. Finally, on cash flow. We continue to generate strong free cash flow this year and maintain a solid balance sheet with a cash position of more than EUR 500 million at the end of December. Free cash flow increased by 29% to EUR 1 billion, driven by EBITDA growth, sound management of capital expenditures and working capital. Net investments included the acquisition of ImCheck Therapeutic for about EUR 350 million and some regulatory and commercial milestones. As a consequence, with a net cash position of exactly EUR 560 million at the end of December and based on the maximum of 2x net debt-to-EBITDA we had an available firepower of EUR 3.2 billion for external innovation at the end of 2025. Let's now move to 2026 guidance. Please turn to Slide 16. For this year, we anticipate another year of double-digit sales growth with a high level of profitability. For total sales, we expect growth of more than 13% at constant exchange rates. This year, we also anticipate adverse impact of around 2% from currency based on the January exchange rate. This guidance on sales is assuming an accelerated sales growth of the portfolio, excluding Somatuline. This will be driven by Iqirvo, Bylvay, Dysport but also Cabometyx as well as the continued growth from Somatuline. Given the recent challenges with regard to the manufacturing and availability of generic lanreotide, we assume limited generic supply in 2026 with a potential entrant only in the second half of this year. On profitability now, we anticipate a core operating margin greater than 35% of total sales. We will continue to leverage our top line growth with moderate increase in SG&A and R&D ratio to stay around 20% of sales. However, currency rates and a lower level of other revenue will have an adverse impact on our margin in 2026. Regarding our midterm outlook, we are highly confident to exceed our total sales average growth of at least 7% per year for the period '23 to '27 and our 2027 core operating margin greater than 32% given the higher-than-expected Somatuline sales due to continued generic loyalty challenges and the stronger performance of our broader portfolio across our 3 therapeutic areas. With that, I will now hand over to David. Please turn to Slide 17. David Loew: Thank you, Aymeric. I will now provide an update on our R&D efforts. Please turn to Slide 18. We have another exciting year for our pipeline. We have seen strong expansion in oncology with 4 active Phase I programs evaluating promising new modalities in solid tumors and the addition of IPN60340 formally known as ICT01, which came through the acquisition of ImCheck. In rare disease, following the positive Phase II trial, we have opened a Phase III program evaluating elafibranor in primary sclerosing cholangitis, which I will share more on in a moment. In neuroscience, our broad programs continue to advance across both Dysport and our long-acting molecule IPN10200 with new Phase III programs expected to open in H1. Please turn to Slide 19. In oncology, a growing focus of our pipeline is on precisely modulating the immune system through multiple synergistic routes. I would like to highlight a couple of new molecules entering Phase I. Our antibody drug conjugates, IPN60300 targets a novel tumor antigen known to be expressed on multiple solid tumor types, and we are pleased to confirm first patients have been dosed in this trial. We also have our T-cell activator IPN01203, a potential first-in-class asset that selectively activates V beta 6 T cells through TCR and IL-15 R pathways. Please turn to Slide 20. Moving to rare disease and primary sclerosing cholangitis or PSC, an area with no approved treatment options and the majority of patients requiring a liver transplant. Following the promising Phase II data, we are excited to announce a Phase III study, elascope, which will be the only global study in PSC looking at the long-term clinical outcomes as primary objective. Elascope will evaluate the efficacy and safety of elafibranor 120 milligrams versus placebo in patients with PSC based on time to first occurrence of clinical outcome events and multiple secondary endpoints. Please turn to Slide 21. Turning to neuroscience following the announcement of our Phase II first proof of concept in Glabellar lines in September '25. We are on track to open 2 global Phase III trials for IPN10200 in Glabellar lines. Both trials will evaluate the efficacy and safety of IPN10200 at week 4 and 24 with key secondary endpoints, including patient satisfaction scores and onset of action. Please turn to Slide 22. We remain diligent in our external innovation efforts and announced strong additions to the oncology pipeline as we closed '25. We are delighted that the lead program IPN60340 from our acquisition of ImCheck Therapeutics was awarded U.S. FDA Breakthrough Therapy designation in January, recognizing investigational therapies with evidence of a substantial clinical improvement. A global licensing with Simcere Zaiming outside of Greater China brings another antibody drug conjugate into our pipeline, which is expected to enter Phase I soon. Finally, reinforcing the strength of our ongoing partnership, we added further 2 research programs with IRICoR, evaluating MAPK-related inhibition. Please turn to Slide 23. As you can see, we have several milestones to look forward to over the coming years. Firstly, we await the EU regulatory decision for tovorafenib in the first half. In the second half, we see many Phase III unblindings for Bylvay in biliary atresia, Iqirvo for PBC patients with an ALP of between 1 and 1.67 and Dysport in migraine and also for the Phase II data for IPN10200 in forehead lines and lateral cancer lines. Then as we look to next year, we have more proof-of-concept readouts for our long-acting neuromodulator, IPN10200 in the therapeutic indication as well as Phase III unblinding for Tazverik and tovorafenib. With that, please turn to Slide 24. We continue on our strong momentum and remain firmly on track to achieve our ambitions. I'd like to leave you with 2 key messages. First, we delivered strong '25 results with double-digit sales and profit growth fueled by the performance of our existing portfolio and launches. This consistent growth reflects our focus on execution and our ability to deliver across both commercial and medical fronts. We will further strengthen our R&D investments and grow our internal pipeline while investing to support our current and future commercial launches. Secondly, the outlook to 2026 is strong with double-digit sales growth guidance, multiple regulatory and clinical milestones to come and significant firepower to pursue external innovation. We look forward to another year of accelerated growth as we continue on our transformation. Turn to Slide 25. This concludes our presentation, and we will now take your questions. Operator, over to you. Operator: [Operator Instructions] We will now take our first question from the line of Charles Pitman King from Barclays. Charles Pitman: Charles King from Barclays. Two questions from me, please. Firstly, just on your guidance, I think it's quite noteworthy that your guidance in FY '26 is significantly ahead of that midterm growth outlook. So firstly, just is it fair to say your guidance philosophy is less conservative this year? And given the double-digit growth in FY '25 and guided to '26, just wondering kind of why you're not looking to readdress and raise that midterm target into '27? Then just secondly, on the kind of aesthetics neurotox business, can you just confirm -- in the press release, you talked about product mix dynamics seen in the U.S. given this is a single product, I'm just wondering kind of what these are, if you could provide a little bit more clarity. And then beyond that, I know you're unlikely to comment, but just if you're able to give us any further thoughts on the potential partnership discussions you're having with Ipsen 10200 within the aesthetics indication, that would be great. David Loew: Okay. Thank you, Charles. I will let Aymeric answer on your guidance question. Aymeric Le Chatelier: Yes. So thanks for the questions, and maybe I will clarify. I think that our guidance is today our best estimates regarding first Somatuline on one side. for which we are still expecting potentially some generics to be able to be on the market in the second half of the year. So I will say we are pretty balanced. And I think we have also a great ambition to continue a very strong growth of the portfolio ex Somatuline, where we expect to be able to accelerate the growth, and we deliver 14% growth this year. Regarding the midterm target, as you remember, the midterm target was to exceed 7% annual growth and to exceed 32% margin by 2027. So I think the message today is very clear that we are highly confident we're going to do better than this number, but this is still going to be exceeding. And I don't think we want to provide 2 guidance for 2 consequential year. So we are clearly highly confident to 2027. I will provide a guidance for 2027 when it's going to be time in a year time. On the product mix, maybe I can just answer the product mix and let you answer. So I think the product mix is more related to the product and sample of Dysport in aesthetic as you know, we're providing our partner with both products and sample and the economics are slightly different. That explains what we qualify as a product mix in our communication. David Loew: Then on your third question on our long-acting neurotoxin. As you know, in January 26, the arbitral tribunal of the International Chamber of Commerce issued a final decision in favor of Ipsen dismissing the claims brought by Galderma in connection with Ipsen's termination of the R&D agreement. And so the Tribunal confirmed also Ipsen's full rights to its clinical stage toxin programs in the aesthetics field, including therefore, the IPN10200 that you were alluding to. So basically, we continue to assess all options and we can't give you more information at this point, but we're going to come back as soon as we have made progress on this. Operator: We will now take the next question from the line of Xian Deng from UBS. Xian Deng: It's Xian from UBS. Two questions, please. So both on Iqirvo. So just wondering, the first question -- the first question is just wondering, Iqirvo previously you guided for EUR 500 million peak sales. And -- but of course, now the drug is doing really, really well. So I was just wondering, would you say now your peak sale guidance there is very conservative? And if you could maybe give us some color on what assumptions did you have when you set the guidance and what has changed since then? So that's the first question. And the second one is also on Iqirvo. Actually, just wondering about the patent or exclusivity situation. So my understanding is that the compound patent has already expired in the U.S. right now is protected by offer exclusivity on PBC. So just wondering, given now you are also running -- you already started the Phase III in PSC. So just wondering how should we think about the exclusivity/patent protection on this one, please? Sorry, just can I just quickly clarify -- did I hear that right? You mentioned on Somatuline you are expecting potential generics to come back in second half this year. So is that conservative as well? Have I heard that right? David Loew: Okay. Thank you, Xian. So on Iqirvo, the EUR 500 million peak sales guidance. So yes, we are very pleased with the performance, I have to say. We are going to observe how this goes. And especially also we have the ELSPIRE trial, which is going to read out in the mid of this year. And then subsequently, once we have seen that, we're going to look at potentially looking at changing the guidance if required. For now, we say it's above EUR 500 million. But I have to say we're extremely pleased with what we are seeing and with the performance that we have in the U.S. and ex U.S., yes. On your -- on the exclusivity question, we have orphan drug protection until '31. There are additional patents, which exist as well. Just to help you also on PSC on that question because PSC, and I think you're alluding to this, might report shortly before that date of the '31 that you have given. You need to keep in mind that, first, we have gotten orphan drug designation for PSC so there is a separate protection for PSC. It's a different dose. It's 120 milligrams, not 80. So that's already very different. There will be a different tablet as well. It's a different packaging, et cetera. So we think this is going to confirm quite good protection, and this is why we have given a go to that trial besides being excited about the data, obviously. And then on your third question regarding Somatuline, H2, it's hard always to exactly know what's happening with these generic companies. What I can say is that we have said that in the past, and I think it becomes very obvious, it's a very difficult product to produce because the gel is very viscous. It shouldn't be too viscous. It shouldn't be too liquid. So it's hard to produce. You have also seen that there have been FDA 483s and [indiscernible] on some of our competitors. So I think -- for the moment, it is reasonable to say that we're anticipating generics entering in H2. Operator: We will now take the next question from the line of Simon Baker from Rothschild & Co Redburn. Simon Baker: Three, if I may, please. Just going back to Somatuline. You've indicated that at best, there will be some generics later in this year. But I'm looking at this from a slightly different perspective, where does this leave you in terms of long-term contracting with your customers? Because it's all fine and dandy to have a generic available at a significant discount. But if the manufacturer can't deliver and can't manufacture it, it's rather academic for the customer and creates a lot of inconvenience. So does this really open up the possibility for tying in your customers into long-term contracting where you alone in the market can guarantee quality and supply. Any thoughts on that would be very helpful. And then just a couple of quick ones. You gave us the patient incidents of PSC in the state. I just wondered if you could give us a little bit more detail on and point us on how big you think this opportunity is. Some have suggested this is a $1 billion opportunity. And as you say, there are no existing treatments. So any thoughts there would be helpful. And then finally, on Iqirvo, if you could just give us an update on the sort of commercial dynamics share of voice in that category because your competitor there is rather preoccupied with launching another product in another category. I just wanted to see if you -- if there's been any change to marketing intensity by competitors in that space. David Loew: Thank you, Simon. On Somatuline, we, of course, do contracting with several of the customers, especially in the U.S., of course, that's a current practice, I would say. And this has, in the past, already helped to mitigate somewhat the penetration of the generics. So I would say we have done this already before, and you have seen the effect of it. So it all comes down, I would say, can they actually deliver or not and in what kind of quantities. On your second question, to give you a feeling on PSC. PSC is about the same market opportunity as PBC. And why do I say this? In PBC, it's a second-line indication that we and Gilead are having currently and so we are talking roughly 30,000 patients in the above 1.67 and about 20,000 in the below 1.67. And then in PSC, you have 40,000 patients, prevalent patients. And so that means that today, all these prevalent patients, they have no solution in PSC and we're actually going to be first line contrary to PBC where we are a second line. So basically, that explains why the market opportunity is about equal as the whole PBC pool. So for us, quite an exciting opportunity, I would say. And then on your third question, the dynamic share of voice. So for the moment, we don't see a change on Gilead's presence. They are heavily present, I would say, so as we are, right? So I think we performed very well, and we are very pleased with the performance that we are seeing. Operator: We will now take the next question from the line of Richard Vosser from JPMorgan. Richard Vosser: A few, please. Just returning to Somatuline. I wonder if you could just talk about price and volume thoughts in '26. Clearly, lack of generics means potentially you could raise price. So if you could talk about that and how that might impact also on '27. And for '27 on Somatuline, you talked about exceeding the margins. Just -- any thoughts to the extent of generic competition of Somatuline you might be thinking in '27 would also be helpful. Second question, just on Iqirvo as well. Just thinking about the growth, which has been stellar, what bolus do you think you've got from Ocaliva and how that might feed into growth expectations for the second half of '26. And then finally, on business development M&A, you've highlighted the EUR 3.2 billion firepower. And I think previously, you've highlighted thinking about strengthening the oncology business. But maybe you could give us an idea of latest thoughts around business development and what you're looking for and how that might impact R&D spend going forward. David Loew: Yes. Thank you, Richard. So on Somatuline price volume, I'll let Aymeric answer. Aymeric Le Chatelier: Yes. So Richard, on Somatuline, I'm not going to be able to provide you all the detail of our assumption. But clearly, the lack of competition will allow you to -- will allow us to regain volume both in Europe and in the U.S. I think that's the trend on top of a very dynamic market that we see for NET, where it's still a market that is growing in the 4% to 5% per year with very strong position for lanreotide. On the price side, I think there are opportunities, probably more in the U.S., and David was talking about on the prior questions regarding the contracting. As you know, there is significant rebate which have been negotiating in the U.S. We have also passed a price increase at the beginning of the year. Ex U.S., I will say the situation is more complicated. In many countries, it's probably difficult to change the pricing, and there may be some markets where we have tenders, and we are still assessing that opportunity. The second part of your question was regarding the margin in 2027. So as I said, I'm not going to provide a guidance for 2027. As you know, we are very confident to exceed the outlook. Now the shape of 2027 will depend at what pace the generics are going to be able to make it, how many generics are going to be able to make it, if any, in the second half of this year and in 2027 and that could have an impact on the level of profitability. But we are very confident that in any case, we will be exceeding to some extent, the 32% target that we gave. David Loew: Then on your third question regarding Iqirvo growth and the bolus of Ocaliva. So what you have seen in terms of sales acceleration from September to December, is really the delta in terms of the acceleration came from the Ocaliva switches. We think the Ocaliva switches are mostly done. So we are on a higher level and that higher level should carry forward, of course, into 2026 because we are seeing still new patients, which are new to second line coming on to Iqirvo. So we're very pleased with that. And this is why we are very confident on Iqirvo and we observe a very strong dynamic. On mergers and acquisitions. So as you pointed out, we have a bit more than EUR 3.2 billion of firepower. We intend to use this if we see the right opportunities. As I stated before, at JPMorgan, we are looking at oncology late-stage opportunities that we want to bring on board. And then, of course, in our guidance, as you remember, we already include the preclinical and early clinical in that guidance and in the margin. So you will also see us use part of this firepower for some of the earlier deals. Operator: We will now take the next question from the line of Victor Floch from BNP Paribas. Victor Floch: Victor from BNP Paribas. A couple of questions on IPN10200. So I mean, I think it's fair to say that the optimal target profile for that one differs quite a lot between aesthetics and therapeutic use and notably when it comes to duration of action. So now that you have the full Phase II data in hand, I was just wondering whether you can discuss whether IPN10200 delivered an optimal profile, keeping its commercial potential impact in both opportunities. And then I understand that you don't really want to discuss your option, but I mean just to understand what would be like the tipping point when it comes to either go with a partner or either go with yourself? Is it just about like economics and whether that you want to protect at least the kind of economics you have on Dysport with that one? And finally, on M&A, I was just wondering whether you can discuss whether you would be open to potentially stretch your firepower in your balance sheet beyond 2x EBITDA, if the right opportunity arise. David Loew: Perhaps, Victor, on your first question, can you just clarify why you are saying that the optimal target profile will be different. That's not something that we would subscribe to. Victor Floch: Okay. I mean I think it's -- I mean what do we understand in the past that for aesthetics use, I mean physicians were pretty happy with the 6 months duration of dosing, even though at the same time for therapeutic use, I think we're all looking for the longer duration as possible. So maybe you don't agree with that, but so I was just wondering whether you could discuss the target profile you've seen with the IPN10200. David Loew: Yes. First, I would like to bring this back to data, right? When you look at none or mild in aesthetics at 6 months. Most of the bond As have actually shown that you can go and look at the labels of these different drugs, most of them are between 20% and 30%. And so here, what we have said is we have seen a majority of patients achieving none or mild. And so that data is going to be presented. So in that sense, why many companies are saying, well, some patients are satisfied or they see still some effects and et cetera, I would just bring this back to the endpoints of none or mild because that's usually what is being measured in the clinical trials. So in that sense, with that statement, I think the profile that we want to see in aesthetics and therapeutics is actually the same. You want to see a very rapid onset of action. You want to see a good 1 month efficacy and you want to see a prolonged duration. This is important, not just in aesthetics, but also in therapeutics, obviously, for example, in spasticity, migraine or cervical dystonia, where it can also help alleviate the health care system utilization because patients need to get less often to the doctor. So I don't know if that answers your question. Victor Floch: Definitely. David Loew: Then on your second, as I said, we are looking at all options. We are not going to comment on this right now. And then on your third question on the use of our firepower, I'll let Aymeric comment on the stretching the firepower. Aymeric Le Chatelier: Yes. So Victor, just to clarify, we are today operating clearly on the maximum debt of 2x EBITDA, which is fully in line with our investment-grade rating. This gives us a EUR 3.2 billion firepower on top of our very strong free cash flow, EUR 1 billion this year with a very ambitious guidance that we have this EUR 1 billion should even increase 2026. So we don't see any reason for using more than the 2x EBITDA. Having said that, the Board has always said that we consider if there were to be a unique opportunity and ability to slightly stretch that, but this is not today our priority. Operator: We will now take the next question from the line of Lucy Codrington from Jefferies. Lucy-Emma Codrington-Bartlett: Just I was wondering if you could go into a bit more detail in terms of your expectations that Dysport this year, both in terms of aesthetics and therapeutics. And with that, any potential impact that you might expect as the Relfydess launches continue. And then any update on what the aesthetics environment is like in the U.S. and other markets at the moment? And secondly, on Somatuline when you talked about the guide, you said growth. So I know you're -- it's somewhat dependent on the entry of generics, but should we be expecting growth on the numbers reported in 2025? Or still some decline? And then second -- finally, any milestones that we should be factoring in for this year? David Loew: Thank you, Lucy. On Dysport, we are expecting good high single-digit growth in both markets, aesthetics and therapeutics. We do not anticipate any impact from Relfydess because that's a -- it's a different market. There is a market segment, which is open for liquids. I would say the majority of the market is on great constitution because many of the physicians actually like to dilute to their liking. We have seen this with the Alluzience launch as well. So we don't really foresee any cannibalization. It's quite the contrary. I think both are going to drive growth. Then on aesthetics in the U.S. The market has slowed down a little bit, but our partner, Galderma is performing very, very well, gaining market share. So we are very pleased with that performance. On Somatuline, yes, we do anticipate growth versus 2025 because of what Aymeric just said before is you have -- of course, the volume gain of the generics not being there, but you also have some potential pricing upside. So there is this kind of double effect, if you want, versus the baseline of '25. And then I wasn't quite sure I understood your milestone question. Aymeric Le Chatelier: I think I get the question on milestone. I think this is related to our other revenue which, as I said during the presentation, have increased significantly in 2025. Our other revenue are made of both royalties that we received from partners and some milestones -- some of the milestones are nonrecurring. That's why we were indicating that our margin in 2026 is going to be slightly impacted by a slightly lower level of milestones and other level of other revenue, while we still continue to have a strong dynamic on the royalty side which is directly linked to the high single-digit expected growth for Dysport with our partner. David Loew: Thank you, Lucy. I think we have no more questions. So this wraps up our 2025 conference. Thank you for your attendance. Back to you, operator. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Legrand 2025 Full Year Results Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Benoit Coquart, CEO of Legrand. Please go ahead. Benoît Coquart: Thank you. Good morning, everybody. Franck Lemery, Ronan Marc and myself are happy to welcome you to the Legrand 2025 Full Year Results Conference Call and Webcast. As you know, this call is recorded. We have published today our press release, financial statements and a slide show to which we will refer. I begin on Page 4 with the 3 key highlights of this release. First, Legrand delivered a remarkable performance with record sales growth, high profitability and a strong achievement of its CSR objectives. Second, the group continued the successful deployment of its strategic road map towards EUR 15 billion of sales by 2030. Third, Legrand is targeting further sales growth of between plus 10% and plus 15% in 2026, excluding currency effects. Starting on Page 6 of the deck, we fully achieved our annual targets for 2025, which we will detail further by key topic during this presentation. Moving to Page 7, I will start with an overview of sales. In 2025, excluding currency effects, our sales grew by plus 13.1%. This includes an organic growth of plus 7.7%. This growth is driven by an outstanding performance in data centers with an organic growth of close to plus 40% this year. And regarding our sales in buildings, we are resisting very well despite a still muted market over the year. On top of organic growth, we benefit from a positive scope effect of plus 5.1%. I will come back later on acquisitions. Of course, now based on the acquisitions announced and the likely date of consolidation, the 2026 full year scope impact would be close to plus 6%. As for exchange rates, the effect was a negative minus 3.1% in 2025. And based on the rates of the month of Jan, it will be around minus 2.5% for the full year 2026. On Page 8, you will find the key takeaways per geography on a like-for-like basis. In Europe, in a market that remains mixed overall, sales were up plus 1.9% over the year, including, for example, in Germany, Italy, the Netherlands and the U.K. In North and Central America, sales were up a strong plus 16%, driven by an outstanding performance in data centers. Finally, in the Rest of the World, sales increased by plus 2.7% with good growth in Asia Pacific, Africa and the Middle East, partly offset by a retreat in South America. These were the main comments I wanted to share on sales. I will now hand over to Franck for more color on our financial performance. Franck Lemery: Thank you, Benoit, and good morning to all of you. I will start on Page 9 with adjusted operating margin. We recorded in 2025 a very solid adjusted operating margin of 20.7% of sales after acquisitions. This represents a plus 20 basis point increase year-on-year, including a 10 basis point organic improvement and a plus 10 basis point favorable impact from acquisitions. The group's high profitability demonstrates once again the strength of our strategic model and our solid capacity to execute and adapt I think notably of the volatile environment linked to the U.S. custom policies, which increased the group cost base by around $100 million. Going now to Page 10. The net profit attributable to the group stood at EUR 1.2 billion, represented 13.1% of our sales. The increase coming from the operating profit is partially offset by the impact of financial results, while the corporate income tax rate remained stable. The free cash flow came to a solid EUR 1.3 billion at 14% of sales and a conversion rate of 107% supporting the sustained acquisition momentum of Legrand while preserving balance sheet strength with financial leverage kept under control at 1.9 at the end of December 2025. This is it with the key financial topics I wanted to share with you this morning. I'm now handing over back to Benoit. Benoît Coquart: Thank you, Franck. Let me now move to our 2025 CSR performance. On Page 11, in 2025, Legrand reached an achievement rate of 110% on the targets set for the first year of its 2025-2027 CSR road map. You will find on Page 12, a few illustrative examples highlighting this performance. For example, Legrand outperformed its targets in terms of Scope 1 and 2 CO2 emission reduction, plastic packaging reduction or use of sustainable materials. All the achievements confirm the strong integration of sustainability into the group's strategy. I'm now moving to Page 13 to conclude on 2025 performance with our dividend. The approval of the payment of a dividend of EUR 2.38 per share will be proposed to the next General Meeting of Shareholders. This represents a rise of plus 8.2% from 2024 and a payout ratio of 50%. Let's now move to the second key topic of this release, our strategic road map. In 2025, Legrand actively deployed its strategic road map towards EUR 15 billion of sales by 2030, combining accelerated growth and value creation. As shown on Page 15, this is first illustrated by the reinforced positioning of the group in energy and digital transition offerings which now represent 53% of our sales compared with 47% for essential infrastructure solutions. Data centers at the heart of the group's growth strategy represented sales of EUR 2.4 billion at year-end 2025, i.e., 26% of group sales to compare with EUR 0.7 billion in 2020. Legrand is recognized as an undisputed major player in this field of activity with a deep offering that is perfectly suited to the deployment of infrastructure for artificial intelligence. Building on nearly 30 acquisitions completed in this field, Legrand has become a leading player and a preferred partner for major industry participants. The side positive impact of all the acquisitions we made in data centers is that they also strengthened the group's existing position in critical power with other verticals driven by electrification, such as infrastructure, industry, telecom, oil and gas and microgrids. I am now moving to Page 16 to 18. As you know, innovation is really the DNA of Legrand. We highlight on those slides a number of product launches carried out in 2025, which illustrates the sustained momentum in innovation across the group's segments and geographies. On Page 19, we underline the group's continued focus on digital initiatives and customer experience with high and improving customer satisfaction in 2025. Finally, on Page 20, we detail Legrand's particularly active M&A strategy with 7 acquisitions announced in 2025, representing EUR 500 million of annualized sales, all in the fields of energy and digital transition. This momentum extends into 2026, as shown on Page 21, with the announcement today of 2 additional acquisitions in data center in the U.S. with Curtis Industries and in Brazil with Green4T. Maybe one thing to add that is not in the slide actually, but in the press release, we recently invested in Accelsius in the U.S., a pioneer in 2-phase direct-to-chip liquid cooling. This investment will further strengthen the group's portfolio of solutions for AI and HPC data centers. Let's now move quickly to the third part of this release with our targets. On Page 23, regarding '26, Legrand will continue to accelerate its profitable and responsible growth momentum in line with its strategic road map. Taking into account the current global macroeconomic outlook, a very strong data center market and a modest recovery in the building sector, Legrand is targeting the following in 2026, sales growth, excluding currency effects of between plus 10% and plus 15%, comprising organic growth of between plus 4% and plus 7% and growth through acquisitions of between plus 6% and plus 8%. Adjusted operating margin after acquisitions of 20.5% to 21% of sales, CSR achievement rate of at least 100% for the second year of its 2025-2027 road map. On Page 24, regarding our 2030 ambitions -- sorry, building on its achievements and taking into account both observed and expected market trends, Legrand is confident in its ability to reach the upper end of its 2030 sales target range around EUR 15 billion with average annual sales growth of close to 10%, excluding exchange rate effects and average adjusted operating margin above 20% of sales compared with the previously targeted level of around 20% in average. This is it for the key topics of this release. Last word before we move to the Q&A session. You will find on Page 26 to 28, our corporate access agenda for 2026 should you wish [Technical Difficulty] management. Let's now switch to Q&A. Operator: [Operator Instructions] And we're going to take our first question. And it comes from the line of Daniela Costa from Goldman Sachs. Daniela Costa: Thank you so much for taking my question and the follow-up. I will do them one at a time. But starting on the guidance for 2026, can you give us some help on the building blocks, particularly how much data center growth are you factoring in? And how much of that comes from a backlog you already have? And what pricing are you factoring in there? Benoît Coquart: Daniela, so our organic guidance, the 4% to 7% growth is basically built this way, a growth in data center of between plus 10% and plus 20% and for the rest of the activity, i.e., the building activity, something basically more or less flat in volume with a bit of pricing. Those are the building blocks. Well, how confident are we on the fact that we're going to grow from plus 10% to plus 20% in data center? I have to say that we are very confident. Not much based on the orders. The lesson of last year is that it's difficult to anticipate what we're going to do based on the orders in hand. Last year in Feb, we -- based on the orders we had in hand, we targeted plus 10% to plus 20%. And at the end of the year, we did plus 40% or close to plus 40%. So it's a bit difficult to that. So we have to rely not only on orders, which are very good, not only on the book-to-bill, which is above 1, but we also have to rely on the feedback we get from the market and the CapEx plans announced by the hyperscalers and so on and so forth. And based on those information, we are very confident on our ability to do something between plus 10% and plus 20%. As far as pricing is concerned, overall, not specifically on data center nor specifically on building, we are shooting for pricing somewhere between plus 1% and plus 2%. Now it is based on our scenario when it comes to the raw mats and components. So we believe that the price of raw mats and components will be up between plus 1% and plus 2% this year. But of course, it can change. And if for whatever reason, the price of raw mats and components was to be higher than expected, of course, we would do a bit more pricing. But based on the scenario we have in hand today, we believe that the plus 1% to plus 2% price should be enough. Daniela Costa: And then just following up just a bit on the acquisitions and the investments that you have been doing. I think one of the deals today has more of a power distribution medium voltage component, which I believe you hadn't done too much in the past. And then the Accelsius was into liquid cooling, although I guess it's just an investment rather than a full consolidation. But can you talk us through sort of how you're pivoting the portfolio in data centers? Do you want to go into medium voltage? How far out are you in the gray space right now, just to get a bit of a shift on the mix? Benoît Coquart: Well, it's -- thank you for asking the question that you have because I sometimes feel that we haven't done a job good enough in explaining how deep our portfolio in data center was. So a few numbers. For example, we are already a bit in medium voltage. We've been selling for quite some time, medium voltage, low voltage transformers, cascading transformers to data centers and to a number of other spaces. So -- but maybe let me give you a few numbers. The split between white space and gray space would be something like in 2025, 75% white space, 25% gray space. You could note that gray space was 5% 3 years back, and it's now 25%. So we've been able to rebalance, if I may say, our portfolio as we committed to do at the last CMD. Now the split between gray and white doesn't give full justice to the breadth of portfolio we've been able to build, which is composed of close to 55,000 SKUs for data centers, standard SKUs. And if we put together the customized SKUs, close to 100,000 SKUs. So maybe the best way to look at it is to break down it by type of applications. So in 2025, we had about 35% of our data center sales, which was for critical power. So critical power, it's medium voltage, low-voltage transformers. It's UPS, switchgear, busbar, busway, remote power panels and a few other products. So 35% critical power. 50% of our sales relates to compute infrastructure with approximately half of that would typically be physical infrastructure. So racks, tap-off box, feeders, cable management, stuff like that. And half of that would be typically compute management. It's about monitoring PDU, rPDUs, KVM, consoles, transceivers and a few other products. So 35%, 50%. We have 5% of advanced cooling, which is rear door exchangers, containment, and now we have the ability to be more active on 2 phase direct to chip. And then we have 10% which is testing and life cycle services. That's where we have the power banks, have [indiscernible] power banks, but we also have installation, commissioning, monitoring, field services and so on and so forth. So you see we really have a complete set of products. So yes, we are a bit into medium voltage switchgear. We are already a bit into medium voltage transformers, but it goes down to rack components and even field services. I believe today, we have probably one of the most comprehensive range in the data center industry. And it is set to continue. We have a lot of ideas, both organically and inorganically to continue to build a strong catalog. Operator: Now we take our next question. And the question comes from the line of George Featherstone from Barclays. George Featherstone: Maybe I'll start with a follow-up because the color you just gave there was super interesting. And in the context maybe of the way the business will evolve to the 800-volt DC architecture. And perhaps you could give a little bit of color on what that means for you and how you're going to address this new technology in the future. Benoît Coquart: Well, thank you very much for asking this question because I sometimes feel that the analyst community is a bit lost with these new architectures, and it's the opportunity to maybe a bit fear. So what is basically 800-volt architecture. You have a concept, which is sort of grid-to-chip concept, which we call in the industry, the holy grail, which is still on the drawing board and won't be at scale before 2030, 2031, 2032. What is currently almost ready, if I may say, is a sort of is 800-volt architecture, but slightly different than this grid-to-chip. It is based on what we call a side car. So how does it work? Basically, you have a powertrain with AC components that feed a power side car, which is located in the white space. This power side car convert from AC to DC, then feed a number of racks, and that's where you have the compute components, the cooling and so on and so forth. So 3 characteristics: increased power density up to 500 or 600 kilowatt per rack, use of DC components in addition to AC in the electrical powertrain and a sort of decoupling of power and energy storage from the IT rack and those components are moved into a side car serving one or several racks. So this is the architecture, which is almost ready and possibly at scale in a few years. How will the architecture impact Legrand? We have made a number of analyses, and we think that it will have a neutral to negative impact on about 20% of Legrand sales and a neutral to positive impact on 80% of Legrand sales. So the negative impact typically could be on rack PDUs, for example. It could be on UPS because UPS is replaced by sort of battery storage within the side car. It could be on a few other components. And the positive impact, well, it's on the AC powertrain because you will need more power, more amperage. It could be on the physical compute infrastructure because you'll have a wider racks. It will be on cooling, of course. And especially, it will push 2-phase direct-to-chip cooling. You will have rear door cooling for residual cooling, including actually in the side car. It will be good for commissioning and for Avtron products because not only you will need to commission the electrical infrastructure. But on top of that, you need to commission heat rejection units, CDUs and so on and so forth. So to summarize the impact it could have on Legrand, it could imply for us the theoretical accessible market, let's say, would be between USD 3 million and USD 4 million per megawatt. Now this being said, I wouldn't like you to get too excited by the opportunity because it won't be at scale before '20 or you won't hit our P&L before, let's say, '28 or '29. And more importantly, this is one amongst many architecture. And you have to understand that we are in a world where you have tens and tens of different architecture. And what is important is not for a company like Legrand is to be architecture agnostic. In other words, to have the ability to work with all the hyperscalers, all -- every single co-locators so that our product launches stick to the architecture that they're going to launch rather than betting that the winning architecture will be X, X or Y. And I have the feeling that we have the right relationship with all of those guys. I mean we are working with Meta, the Google, the Oracle, the Microsoft, the [indiscernible] of the world and the QTS and the Equinix and so on and so forth. So in a nutshell, it should have quite a positive impact on Legrand, but not for now, within 2 or 3 years. And again, it will be one amongst many different architecture. Sorry, I've been a bit long, but I thought it was worth taking some time because those topics are complex topics, and we need to bring as much clarity as we can to the market. George Featherstone: That's very helpful. Maybe just another question on your guidance for data center growth this year. Previously, you've sort of benchmarked yourself to Vertiv and their growth is quite a bit above what you're saying that yours will be this year. Perhaps could you explain what the difference would be this year for you? Benoît Coquart: Well, I hope they are right. To make a long story short. But I mean, well, this year, we grew close to 40%, which is significantly higher than their growth, right? Because if my reading was correct, they grew 26%. So we did a fantastic performance. And actually, this plus -- close to plus 40% is probably significantly above the market growth. Well, if the market is not growing 10%, 12%, 14% next -- this year in 2026, but much more than that, then fine. Our objective, as we did last year, is to overperform the market. So if the market is growing 20% instead of growing 10%, all good for Legrand. There's no structural reason why Vertiv should grow faster than Legrand. In '26, we grew 40% against '26. And if you look at the past 2 years, the performance is also significant. So again, we are all different animals in this business. So comparing one with the other might not be the right way to do. What I can confirm is that again, we're going to experience a nice growth in 2026 in data centers. We have the right product offering. We have the ability, should we miss something, we have the ability to develop it organically or to buy it. And I think we have developed a great expertise in buying data center assets at reasonable prices. We have the right relationships with the customers. We've been able to scale our business by adding capacity whenever needed. So we are ready to capture any market growth that will come. Operator: The next question comes from the line of Phil Buller from JPMorgan. Philip Buller: Thank you for all of the data center disclosure. Just to try and extract one more data point, if I can. You mentioned $3 million to $4 million per megawatt in a higher density architecture, if I heard that correctly. What is the current megawatt in a current architecture, if you will? Benoît Coquart: Well, it's probably -- now it's between $2 million and $3 million, but probably closer to $3 million now than to $2 million, given the latest acquisitions we have made. So -- well, between $2 million and $3 million, but closer to $3 million. Philip Buller: Perfect. And then on the guidance, I understood that we are expecting flat volume in buildings. I think that, that makes sense as a planning assumption. Would you see any signs from the ground that there's an improving situation in end markets such as residential in Europe or U.S. office? Any kind of on-the-ground commentary on some of those key markets would be great, please. Benoît Coquart: Well, you're right to say that the world shouldn't be limited to data centers. It's worth also having a look at building. Well, we're a bit more optimistic for buildings, we're a bit more optimistic for Europe than for the U.S. Typically, for the U.S., we believe that -- and we have embedded into our guidance a slightly negative building market overall. We see no short-term positive signals on resi. But it's only 15% of our sales in the U.S. As far as non-resi is concerned, we also remain quite cautious and the statistics tend to show that the market should be slightly down. So overall, building in the U.S., slightly negative. Now bear in mind that in the U.S., 40% to 45% of our sales is now represented by data centers. So only slightly more than 50% is represented by building. As far as Europe is concerned, we have embedded something flat to slightly positive if you look at the various KPIs, as far as the resi is concerned, well, completions are moving from minus 9% in 2025 or should move from minus 9% in 2025 to plus 2% in '26. Permit should be slightly up by plus 4% in 2026. Renovation should be slightly up by plus 1%. So we start to see positive indicators that of course, we are late cycle. So those indicators do not immediately translate into Legrand sales, but those are rather positive signs that the market should get better. As far as non-resi is concerned, recent updates from experts also suggest some sort of recovery in 2026 with renovation remaining slightly positive and new build also. So in other words, negative building -- slightly negative building business in the U.S. and flat to slightly positive in Europe. As far as the rest of the world is concerned, what is quite a mixed situation. We don't expect a recovery in China yet on the building side. And Africa, Middle East and India should remain quite supportive. Philip Buller: That's great. There's no pocket of the business that you're concerned about being in a significant contraction territory. Benoît Coquart: No. I mean it depends what you call significant contraction. The risk is always a bit China because China has experienced a minus 50% decline in the residential business over the past 3 or 4 years. Now China, it's only 2% of our sales. So whatever happens to the resi market in China won't impact much Legrand numbers. So I don't see any reason why there would be contraction somewhere. Operator: And we'll proceed with our next question, just moment. And the question comes from the line of Gael de-Bray from Deutsche Bank. Gael de-Bray: Can I follow up on the 800-volt DC discussion? I wondered how you're addressing this potential shift from a technological standpoint, I mean, especially around the potential change from electromechanical circuit breakers to solid-state circuit breakers. And also still in relation to 800-volt DC, can I -- can you go a bit deeper into the breakdown you provided, I mean, especially around the revenue base you have in the rack PDU segment and what the impact could be on this part of the portfolio going forward? Benoît Coquart: Of course, again, Gael, there's a misunderstanding between what the 800-volt DC architecture, which is ready for deployment, which is the one with the side car and the sort of full DC holy grail type of architecture, which is not ready for deployment, won't be before 2030, 2031, if it is, and which is a full DC architecture. We are addressing both by 2 ways. Number one, by developing products whenever needed. So for example, we are developing OCP type of -- and we presented well actually 6 months back at the trade show of racks by working on DC busways and a number of other things. And number two, whenever we feel that we have a gap, then we fulfill the gap by partnering or buying companies. Good example being the 2-phase direct-to-chip liquid cooling investment we made in Accelsius, which is not only an investment, financial investments, but which is also a commercial and technological partnership that will give us the ability to sell a very interesting product offering to high-density data centers. So you have to keep in mind that Legrand is the only company in this business, which has built from scratch a product offering which is AI ready. Our competitors were either pure play of data centers ready or ready [indiscernible] and so on and so forth. When we started back in 2017, we were doing sales of EUR 300 million in data centers, of which a few PDUs and a few racks. But it was 9 years ago. Since then, we have built product offering almost from scratch by doing 30 acquisitions by developing organic products, which, again, is very suited to high-density data centers. So I don't have the best answer to tell you. We're going to keep developing products. We will keep working hard with the design teams of our customers to make sure that our products are suitable to their needs. We do a lot of ETO engineering to orders. And whenever needed, we'll partner, we'll invest in partners if needed or we'll buy companies, and it will make Legrand perfectly in good shape to tackle the challenges of the new architecture that are going to come. Now as far as PDUs, I cannot be more precise than I was. I don't want to give you sales by product families. I told you that everything which was related to compute management was about 25% of our sales. And within this 25% of data center sales, you have many things, including rPDUs, but not only rPDUs, you have also monitoring devices. You have keyboard video mouse, you have transceivers, you have the console business that we bought a couple of years back. That's it. And it's -- the PDU business is part of the 20% of our sales that should be negatively impacted by indeed 800-volt architecture. But again, you have many products or families of products that will be positively impacted, 80% of our sales. This is our estimate today. Gael de-Bray: That's great. Can I also ask about what happened in Q4? I think the outcome in terms of organic growth was certainly a bit higher than what you had anticipated yourself. So what surprised you on the upside? Was it just data center related? Or are you also already seeing residential demand in Europe taking higher here relative to the last time as well. Benoît Coquart: Yes, it's mostly data center again. Yes, the Q4 is optically better in Europe than the full year, but it also comes from data center actually. Don't forget that data center, it's not only a U.S. business, but it's also Europe and rest of the world. And actually, -- maybe data that I can share with you. I told you that we grew in data center close to 40%. This growth is close to 50% in the U.S. and it's about 20% plus in Europe and 20% in the rest of the world. So we are growing significantly everywhere in data center, even though the growth is stronger in the U.S. and elsewhere. Now to answer -- short answer to your question, we did not anticipate so much sales and actually so much orders in data center in Q4. Operator: The next question comes from the line of Max Yates from Morgan Stanley. Max Yates: Just my first question is around your pricing. And when you say that's based on your kind of current assumptions, could you give us a feel for kind of what those current assumptions are? Because obviously, it's difficult with kind of copper prices and silver prices. We know they're quite sort of big drivers of direct raw materials. So could you give us a feel of -- are you doing that with kind of $13,000, $14,000 copper in mind? Are you doing that with current steel prices? Or if we do see raw materials stay at current prices, will that number be quite a bit higher? Benoît Coquart: Well, Max, it's a fair question because -- but frankly speaking, we have so many different -- we are not dependent upon one single raw mat, copper, silver or something else. And bear in mind that the vast majority of our purchases are components. Out of the 35% of raw mats and components, it's about 10% raw mats and 25% components. So it's a mix of many, many things. So we do it with our purchasing team on a very professional manner. We look at experts, specialists. We embed, of course, productivity into that, and it leads to a central scenario. And based on this central scenario, we do the appropriate pricing. The end of the game would be to adapt. The best analogy I can give you is what we did last year for tariff, U.S. tariff. I remember when we did the same call a year ago, we told you that we have embedded only USD 30 million of tariff into our guidance. But I also told you that should there be more tariff we will do more pricing. And that's what happened. At the end of the year, we had USD 100 million of tariff to compensate for. It's actually the reality is that we had $140 million. We compensated $40 million by optimizing our supply chain, making sure that more products were eligible to the USMCA agreement and so on. And the remaining $100 million of tariff were compensated through pricing in value. So the same story with raw mats and components, we have a central scenario. We might be wrong, we may be right. If copper price was to go even up and then the steel and plastic, oil, components, labor and so on and so forth. And if we needed to do more pricing in order to deliver our profitability target, we will do more pricing. And I mean, we've been demonstrating over the years that we have the ability to do so. Max Yates: Okay. And just maybe a very quick follow-up on your North America growth rate of 7% in the quarter. I'm really trying or really struggling to understand that because you're sort of saying that data centers was better. If I look at your kind of full year data center number for the group, it feels like you did roughly 30% in the fourth quarter for the group. So U.S. must have been higher than that. You're now saying data centers is sort of 40% of your business in the U.S. I know it wasn't that last year, but your data center business should have been growing -- like that should have been a double-digit contributor to growth. So I'm trying to back out how we get back to 7%. Benoît Coquart: No, no. Actually, in Q4, our data center grew by about 10%. The reason -- so it seems to be slow. But bear in mind that we had a very, very strong Q4 2024. So as early as July '25, we told you that in H2, you would have an optical deceleration, but which was not a deceleration, which was purely coming from the basis for comparison. So this is the point. I mean, about plus 10% in Q4 on a plus 30% last year, I mean, the year before and full year close to plus 40%. Max Yates: Okay. So -- but then was your -- is your 40% data center growth this year, is that an organic number? Or is that a... Benoît Coquart: Yes, close to 40% is for the full year, it's an organic number. Max Yates: [indiscernible] in the fourth quarter. Benoît Coquart: Yes. But again, the basis for comparison makes the number a bit tricky because we had a very, very easy Q1 comp because of the great pause, which happened back in Q1 2024. And we had a very, very demanding Q4. Now be careful, don't extrapolate one way or the other, there's no such concept as an exit rate in data center, right? So don't extrapolate good Q4 or slow Q4 into 2026. I can confirm that the performance was great in the U.S. and elsewhere in Q4 that we have a lot of orders that are sustaining our guidance for 2026 and that we should see very exciting growth in data centers this year. Operator: The next question comes from the line of Kulwinder Rajpal from AlphaValue. Kulwinder Rajpal: So I also wanted to follow up a little bit on the data center side. So we have been discussing about the 800-volt system, but I wanted to actually dig a little bit into the PUE side of things. I mean I know the demand for standard offerings is high. But are you also seeing a traction for your PUE offerings because we know that Europe is already short on power -- to power all the data centers. And then is there a dedicated part of the portfolio that is dedicated to these high-efficiency offerings? And is there something that you can add through acquisitions also? Benoît Coquart: It's a good question. Indeed, we estimate that we have approximately 40% of our data center sales, which help or can be used to reduce the energy bill of a data center. And it's not only about compute monitoring. It's also, of course, about efficiency within the powertrain and amongst another -- a number of companies. So today, I think the average PUE on a worldwide basis is probably something like 1.5. We know that theoretically, it can go down -- I mean, the best PUE ever, I think, was recorded was 1.025, if I'm correct. So we have a lot of opportunities to help our customers cutting their PUE from 1.5, 1.6 down to 1.4, 1.3, 1.2 if needed. So it is clearly a very important driver behind our data center business, and it should continue to be. Now this being said, it is a fact that you have geographies where access to grid is a constraint. And we -- there are some countries where it can take up to 2, 3, 4 years for a data center to get connected to the grid. That's why you have to take with a certain cautiousness, the numbers, the CapEx numbers, which are disclosed by our customers because some of those CapEx will not be spent in 2026 or not even in 2027 just because they will need to get the access to the grid. So to make a long story short, I confirm that it is an industry challenge to get the energy. It may translate into some data centers being opened rather in '28 than in '26. But we are part of the solution, not of the problem because a large part of our product portfolio help cutting down the PUE. Kulwinder Rajpal: Right. And so just to follow up a little bit on this. So is there a specific treatment that you get in terms of pricing with the portfolio and also if it helps the profitability? I know that most of the products are centered around the group profitability, but I just wanted to understand if there is a specific advantage that you can get from this particular set of products. Benoît Coquart: No. I mean we -- I'm not aware of any significant pricing approach between data center and building. Of course, our products in data center are mission-critical. They are extremely important for our customers to deliver their performance, not only in terms of PUE, but also in terms of reliability, compute performance and so on and so forth. But at the same time, there are big customers are negotiating tough on price, and they want to make sure that they have good value for money. So we are not taking advantage of product shortage or the criticality of our products to do additional pricing. We are doing the same pricing. We are doing elsewhere. Operator: The next question comes from the line of Eric Lemarie from CIC CIB. Eric Lemarié: My first question on the construction cycle. You mentioned that Legrand is more late cycle, and it's certainly very true for the new build. But is it really the case for renovation? Because I suspect that if I need to renovate my house, I will probably start with some electrical equipment. Benoît Coquart: No, you are right, Eric. Indeed, for new, you have to -- it depends on the building, but it could be 6, 12 or 18 months lag between the time a permit is issued and the time we sell our products. For renovation, the shorter -- the cycles are a lot shorter even though it depends on the type of renovation. If it is renovating one room, it's almost immediate. If it is renovating a full house, then it takes a full -- a few months now. This being said, the renovation numbers for Europe in 2026 are not very bullish. According to, I think it's your construct. They plan for the residential renovation to be up 1%. So it's a very light increase, let's say. Again, we can have good surprises. We'll see. But so far, nobody expects the renovation market in Europe to rebound sharply. That's not what we have embedded in our guidance. We have embedded, as I said, flat to slightly positive building market in Europe. Eric Lemarié: And a follow-up on data center. You mentioned this close to 40% growth for the full year in 2025 and 10% for Q4. Could you remind us Q1, Q2, Q3, how was it the growth on an organic basis for data centers for Legrand? Benoît Coquart: Yes. So we said that it was well above 30% in Q1, well above 30% in H1. So I'll let you, Eric, do your own computation, above 30% in 9 months and 10% in Q4. And that everything was coming from the basis for comparison and that we have kept building a very nice order book over the year. And again, we have a very strong backlog and order book at the end of 2025, which give us full confidence in our ability to deliver our data center targets for '26. And maybe just a word because I want you to avoid a misunderstanding. So the close to plus 40% is really organic. If you were to put together FX and acquisitions, this close to plus 40% would become plus 50%. So the close to plus 40% is really purely like-for-like sales increase in data centers in 2025. Eric Lemarié: Okay. But the close -- well above 30% you mentioned for the 9 months, it was actually well above 40%, I suspect? Benoît Coquart: 40% is above 30%. Eric Lemarié: And just if I may... Benoît Coquart: I'm glad to give you more disclosure, Eric, but you should have the same level of disclosure to all companies. I have the feeling that we sometimes disclose a lot more than anybody else in data centers. Eric Lemarié: This is certainly true. And if I may, a last one on margin. Your guidance on margin, do you include in your margin guidance for 2026, some positive impact from acquisition or negative impact from acquisition? Benoît Coquart: Well, actually -- so first comment, when looking at our guidance, we start from a high base, which is a 2025 margin. And we basically include a bit of leverage, organic leverage, not a lot, I have to admit. But I have to say that we have given a clear priority to growth in 2026 and to sustain growth while you have inefficiencies, you have amortization, you have expenses to do. So a bit of leverage and a few 10 bps of dilution coming from acquisitions. It could be minus 10, it could be minus 20. Those are the order of magnitude. And all that leads to the 20.5% to 21% adjusted EBIT margin after acquisitions, which we have embedded into our guidance. And I'm sure that you have also noticed, Eric, that we have upgraded a bit our 2030 EBIT margin target because at the CMD, we said that we were looking for an average EBIT margin of about 20%. And now we make it clear that the average will be above 20%. Operator: The next question comes from the line of Martin Wilkie from Citi. Martin Wilkie: It's Martin from Citi. I don't want to labor the point too much, but just to come back to the data center growth in the fourth quarter, and I appreciate there are obviously some comp effects, both from the very high growth in Q4 and also because of some of the acquisition effects as well. Could you give us -- you've obviously given the EUR 2.4 billion in absolute terms for the year. But in euro terms for Q4, are we right in thinking that data center sales in euro terms were sort of close to EUR 700 million? Just so we can make sure we sort of square the circle in terms of how big data center was in the fourth quarter. Benoît Coquart: Well, actually, I don't have this level of granularity. And it's a bit complicated because you have to embed FX, which is strongly negative in Q4 because of the dollar versus euro. You have to embed acquisitions and -- so it's a bit complicated to say. But it seems like you are surprised by the plus 10% in Q4, which is far better than what we guided for back in November for the last. And again, you shouldn't look at the data center business as if it was a distributed business, right? One quarter is impacted by the comps by the project and so on. If your question is, is your target plus 10% in data center in 2026? The answer is no. Our guidance is 10% to 20%. But of course, we are targeting to grow as fast as possible. So I wouldn't read the plus 10% in Q4 as any indication of what it would be for 2026. What I can tell you, again, and this is confirmed by the publication of our peers, this is confirmed by the huge CapEx plan from hyperscalers where the CapEx is growing from 50% to 100% between '25 and '26. It is confirmed by industry experts. It is confirmed by the backlog we have. It is confirmed by the book which we have. 2026 is going to be another very good year in data centers. Martin Wilkie: We obviously see the strength of the orders. I think the debate or the confusion with the Q4 numbers is that the full year seems to be a lot better than people had expected. And therefore, we would have thought the Q4 growth rate would have been higher. But I'll go through the math afterwards. I know there's a lot of moving parts on acquisitions and foreign exchange and these kind of things. Perhaps if I could just have one follow-up on data center. Obviously, you started off the year with a lower guidance. When the surprise comes, is it literally sort of an overnight surprise to you? Just -- I mean, I know obviously, there's a difference between backlog and pipeline. But in terms of when you're having those conversations with your customers, what sort of pipeline visibility do you have? Benoît Coquart: Well, it's very complicated because, again, we are not as experts as others in reading the pipeline. But again, the connection between backlog and sales it's not that easy because orders are -- can be canceled, they can be moved. If we have to -- most of the contracts do have a pricing clause whereby you can adjust the price up or down depending on the price of raw material and components. The orders we have are usually not 3 years orders. We have an ability -- our lead times are typically 8, 10 or 12 weeks for most of our products. We have almost no products where you have a longer lead time or lead time as high as 8 months, 10 months or 12 months. So customers do not need to pass orders 1.5 years in advance. So most of the backlog we have will have to be delivered in 2026, not in '27 and '28. So it's not solid enough as a leading indicator to tell you precisely, yes, we intend to grow 18.5% in data centers in 2026 because the backlog would support that kind of growth. It's more a trend topic. And this trend topic, again, confirmed the very good '26. I cannot be more precise than that. So in other words, to make the long story short, number one, we shouldn't try to read too much from the backlog even though the numbers are very good. Number two, having a backlog of orders in hand is not a problem to pass on price increase if we needed to. Operator: Now we're going to take our next question and the question comes from the line of Alasdair Leslie from Bernstein. Alasdair Leslie: So a couple of follow-up ones on data centers, please. I mean, obviously, it sounds like you saw a similar surge in data center demand to your peers. I kind of -- I appreciate the comments about not overstating the importance of the backlog, but you obviously do talk about a promising order book there. Does that surge in Q4 demand, does that really give you a sort of fast start to 2026 as well? I was just wondering what the outlook for Q1 data center growth was. Obviously, just last year, reflecting on 2025, it can be a little bit lumpy from one quarter to another. So just to help us kind of calibrate expectations for the first quarter. Benoît Coquart: Well, we're not guiding on quarterly sales or profit, neither on data centers nor for the rest. And again, an exit rate doesn't mean much in the data center business. So no specific guidance to give you, Alasdair, for Q1. We stick to our yearly guidance. Alasdair Leslie: Okay. And then maybe just the second question was on capacity to meet higher demand in data centers. I mean we hear commentary, it sounds like constraints are creeping back in and on the rise again, obviously, because of the surge in demand. But one of your slides mentioned solid capacity to execute and adapt. I appreciate that's probably a broader level across the group. But -- and it feels like the ability to meet demand, short lead times, that's still very much a kind of competitive advantage right now in the industry. So just wondering if you could comment there in terms of how you assess yourselves relative to the competition on industry. Benoît Coquart: Yes. So far, the teams have done a very good job, I have to say. So we have doubled our capacity investment on data center in '24 compared to '23 and doubled again in '25 compared to '24, still remaining actually within the 3% to 3.5% CapEx to sales level. So we are not increasing the CapEx guidance. And we believe we will still do a good job. So yes, it's a challenge, and the teams are working hard to meet the demand. But this is a business which is not capital intensive. So you can increase capacity by working on your supply chain, by working with a subcontractor, by adding shifts. You don't have to spend millions and millions in CapEx. So it remains a challenge. We've been able to do a good job in the past 2 or 3 years, and I'm fully confident that it will not be a bottleneck for our business in '26. Operator: Now we'll proceed with our next question, and it comes from the line of Andre Kukhnin from UBS. Andre Kukhnin: Can I just clarify a couple of things first, and then I have one question. On -- and sorry to come back to 800-volt DC. But in terms of -- when you talked about AC powertrain being neutral to positive within the 80% of your business, do you see that as in dollars per megawatt or just in absolute terms, given there's going to be a lot more megawatts when we go to that architecture? Benoît Coquart: Well, it's also dollar per megawatt but again, I'm ready to have the discussion with your experts if you wish to. But yes, we see much more solid redundant with more intensity AC powertrain. So it should contribute to the higher -- slightly higher dollar per megawatt. And on top of that, you will have gigawatt data centers and not megawatt data centers. So for data centers as a whole, it's also a good news. Andre Kukhnin: Yes, we have no doubt in the growth in megawatts or gigawatts in absolute. It's just a couple of people we spoke to basically suggest that there's at least one stage of switching that disappears in the DC 800V architecture, and that's the AC switching. So I was just intrigued to hear that you see that... Benoît Coquart: So you have a bit more -- you have less UPS, which is true. But we are not -- we have a very small market share in UPS in data centers, I have to say. But again, it depends which DC architecture you're talking to. If it is the next grid to chip, then it's about DC and no longer AC. But again, this architecture is in the books today. And yes -- so in the architecture, which is currently considered for '28, '29 in some of the data centers, it's still an AC powertrain. Andre Kukhnin: Got it. And just related to that... Benoît Coquart: There's a focus on this new architecture, which again is a pretty good news for Legrand, not a bad news, which is too strong from the financial community. You are missing, I think, one point. which is the fact that, number one, many architectures will continue. And even if this one has a meaningful market share, this market share is going to be 10%, 12%, 15%, not 100%. And it will probably be made of different type of sub-architecture. So many architecture will coexist. If you take one hyperscaler, if you talk to one hyperscaler, I will tell you that over the past 10 or 12 years, they probably have 6, 7, 8 different architectures by hyperscaler. So in total, you have 10 different architecture coexisting. There's not one that's going to prevail in the years to come, number one. Number two, you consider a company such as Legrand as static animals, which do have a product portfolio, which we're not able to adapt and to adjust. Again, look at what Legrand did over the past 8 years. So if there's something new coming, in the architecture, if there's one piece missing that we don't have, we will develop it, we'll partner to get it or we will buy it by [indiscernible] company. It shouldn't be such a concern. So it's interesting to see that 1/4 of the questions on this call were on 800-volt DC. I think there's too much emphasis putting on that topic. Andre Kukhnin: Fair enough. I completely take it. I just -- on that kind of nonstatic animal, I guess that's what you're saying on the solid-state switching and braking that you do not have it right now, but you're confident you will develop it or be able to buy it. Benoît Coquart: Well, I don't want to be specific on one product family or the other. But again, if we feel that there's something that we absolutely need to have, we will have it. But most importantly, the current Legrand portfolio can address 99% of the needs for the next -- at least the next 5 years. That's a very important message that I want to channel to you. Now what will come in 6 or 7 years, it's a different story, but we will adapt. We will adapt. And if we are ready to tackle only 70% or 80% of the architecture that will come in 8 years, but we will do what it takes to address the remaining 20%, and that's it. But we have a product offering, which is suitable for 99% of the architecture that will come in the next 4, 5 years. Andre Kukhnin: Can I just ask on that change to the margin ambition for 2030 from around 20% to above 20%. I guess we learned on this call, above 30% can be 45%. So just wanted to understand whether that above 20% is an ambition to continuously improve margin from here? Or is it kind of, hey, the margin is above 20% now and we are kind of okay with it now? Benoît Coquart: No, we are not guiding more precisely than that because, of course, it depends on the acquisitions we're going to do. I mean, last year, our acquisitions were accretive, but they could very much be dilutive by 30, 40 bps. It depends on the growth rate and so on and so forth. So I don't want to shoot a number. If you look at the past 6 years, -- so '21 to '25, we've been consistently above 20%. And the average of the 5 years, if I'm correct, is 20.6%. I'm not saying that this is a new standard or new benchmark, but it means that it could be 20.2%, it could be 20.5%, it could be 21%. It will not be 35%, if this is your question. So no, we're not shooting a new target, just that it's going to be above 20%. Operator: The next question comes from the line of Ben Uglow from Oxcap Analytics. Benedict Uglow: I had a couple. I think a previous question assumed or sort of said you've had an order surge. Maybe I missed it in your opening remarks. But can you just give us a sense of your order development, obviously, in data centers in the fourth quarter? And the reason why we ask is your phasing and your time line in projects can be a little bit different from others. If I look at Eaton, Vertiv others that have reported, they've seen a kind of almost doubling of their orders between the third and fourth quarters and up by 200% plus year-over-year. I guess my question is, have you seen -- I don't want a specific number, but are you seeing exactly that kind of trend qualitatively? And when I think about the phasing of your growth in the current year, is it correct to assume that, that growth, whether it's 10% to 20% or 30% is back-end loaded? I guess what I'm thinking about is how quickly we see any orders come through in the next 6 months. Benoît Coquart: Ben, well, I'm a bit embarrassed because -- we have seen some order flowing, some backlog building, but I don't want to shoot a number because, again, I don't believe that it will help in any way to forecast what the 2026 sales is going to be. And actually, when we look at our competitors, I don't know, yes, ABB shot an increase in backlog, but they are guiding for growth in data center, which is in the teens. Vertiv, if I correct, is saying that you shouldn't extrapolate anymore the orders and that they will not give it anymore on quarter-by-quarter basis. So I think everybody is more in line to tell you, be careful. You cannot extrapolate an order inflow, a backlog or an order book into the next 12 months sales. Also more for Legrand, as again, we don't have the same order pattern as an ABB, Eaton, Schneider or Vertiv. We don't have orders, and we've never had in data centers orders above a year. 95% of our orders should be in even '26. So it's the very nature of our business, the fact that we have short lead time, maybe the products we are in, I don't know, maybe the geographies we are in, that makes it -- that makes me a bit uncomfortable to extrapolate the orders we have into sales. So I know you don't like the answer, but unfortunately, I cannot give a better answer than that. Benedict Uglow: No, understood. And by the way, I appreciate all the disclosure. It goes around and around in circles, but I think we're all trying to get to the same thing. The second kind of question is just around North America on the margin side putting 4Q to one side, it's a pretty healthy evolution year-over-year, but we do have -- still have moving parts in terms of raw material tariffs, et cetera. Is there any reason for us to think about the drop-through or the potential growth in North American margin, obviously, given your top line. Is there any reason to think about it differently this year than last year, i.e., that all else equal, we should be seeing some decent drop-through to your margin? Or are there any qualifying effects? Benoît Coquart: Well, I will let Franck to take this one. Go ahead, Franck. Franck Lemery: Yes. Ben. Well, as you noted, effectively, the margin on Q4 alone for North and South America is a little bit weak. There is absolutely nothing sustainable. There are many moving pieces in that margin with the mix of business with new acquisition with some one-timers. So what I would -- the way I'm reading the performance is more looking at H2 with the gross margin around 50%, with adjusted EBIT around 20%, which makes North and Central America very profitable. And on a year-on-year basis, the margin is improving a lot despite the tariff challenge that we already shared. And second, as you rightly said interestingly, it's the value, the year-on-year growth, 24% of improvement in value of the adjusted EBIT margin between '25 and '24, and that's in euros, it's close to 30%. So bottom line, a very good performance of our U.S. colleagues. Operator: Now we take our next question and the question comes from the line of William Mackie from Kepler Cheuvreux. William Mackie: I have 2 questions, one relating to the structure of your guidance. One, if I can harness your continued generosity on the data center discussion to talk about the definition of the business. So firstly, with data -- you've talked a lot about the profile of the business here and the growth rates. Could you just touch on the customer profile? We've seen a lot of growth across an announcements from hyperscalers, but there's a broad base of customers. So how is your customer footprint positioned between the large scale and the broader cloud providers and other providers? And how is the growth trends differing between the different DC type customers? Benoît Coquart: Yes. Well, we are a mix of customers that more or less replicate the market that the feeling we have. So it's probably -- it's not always easy to know them, but it's probably 1/3, a big 1/3 to half on the hyperscaler and then cloud 20%, 25% and then on-premise, maybe 25%, 30%. Those are the orders of magnitude. But if you take the market, there's no reason why our sales wouldn't replicate the market. Of course, the hyperscalers have been the one investing the most. So we are growing very nicely on hyperscalers. Now the growth is also very good on co-locators, either serving hyperscalers or retail co-locators. The one segment of the market, which is not growing at the same pace is clearly on-premise data centers, which have a much slower growth rate. But when it comes to cloud, new cloud, hyperscalers, [indiscernible] retail or, those are growing very nicely. William Mackie: And then maybe moving across to the segmentation detail that you provide annually on Slide 15. Could you talk a little about your expectations going forward for the growth rates across the energy transition category? We've talked about buildings, which largely fall for essential infrastructure. Benoît Coquart: Yes. Well, let's maybe a word on '25. So on '25, I told you that the data center grew close to 40%, which implies that the rest is slightly growing only. And out of the rest, you have energy transition growing a little bit more. You have digital lifestyle down with Connected Health growing, but Connected Home being down, and this is a result of the housing market in Europe. And essential infrastructure is basically flat. So plus for energy transition, flat for essential, slightly down for digital lifestyle. When it comes to 2026, it's difficult to be very precise because it will depend on the underlying markets. Now I see no reason why energy transition shouldn't do better than essential because it is boosted by structural trend. The fact that the world is electrifying and moving from fossil energies to electricity is a structural trend that is here to last. So it should do a bit better than essential, but by a few points, not by 10 or 15 points. This is our central scenario. A word -- I'm not sure it was completely clear on the press release, which is very interesting. When we buy companies related to the critical power into data centers, it's Linkk company we bought in Malaysia. It's Avtron in the U.S. it's Curtis Industries in the U.S. and it's a few others. Usually, they're not doing 100% of their sales in data center. They are doing 50%, 60%, 70% of their sales in data center and the rest of their sales is made in microgrids, in infra, in industries and so on and so forth. So it helps us building an energy transition footprint in verticals in which we were not. We already had critical power in education, commercial buildings, office buildings, but we did not have critical power into microgrid or industries. So it's a sort of side effect of our acquisitions in data centers, not only builds our position in data centers. But on top of that, it also reinforces and build our position in energy transition. William Mackie: Maybe a last final follow-up relating to prospects. We've talked broadly about Europe, but I think Rexel last night printed 3.3% growth in France. I know they win market share. What are your thoughts about some of the major European companies -- countries and particularly France? Benoît Coquart: For 2026, well, number one, we are not growing in France but we're not losing market share. And clearly, Rexel has been massively gaining market share in France for quite some time. So it's a tribute to the teams. For '26, we start to be somehow a bit more positive than we were on France. I'm sure you have heard about this [indiscernible], this housing plan, the so-called Bazooka plan, which the French authorities have stated that they intend to build 400,000 houses a year, which would be a surge compared to the current 270,000. Now we are a bit cautious because so far, it's an announcement. We don't know yet the specifics about this plan, how will it be financed? What will be the measures that will be implemented in order to support this plan. But at least, it signals a change of mood in France and the fact that now housing is considered again as a priority where it was not. So we are slightly more positive on the mood at least. We'll see about the numbers. When it comes to Germany, the Bazooka plan should start to have a bit of impact. Southern Europe has been pretty healthy. We did nice growth last year in Italy, for example. Spain is okay. So again, I don't want to sound too optimistic because we've been waiting for the rebound for 2 years, and it did not really happen yet. But again, the signals start to be a bit more positive. Now before starting to upload, we have to wait for the construction KPIs to flow into our numbers, which is not yet the case. Operator: Dear speakers, there are no further questions for today. I would now like to hand the conference over to your speaker, Benoit Coquart, for any closing remarks. Benoît Coquart: Well, I just wanted to thank you for your interest in Legrand. Thank you for the clarity of your questions. And should you have more questions and not only on the 800-volt DC, do not hesitate to call the IR team. We'll be happy to answer. Thanks a lot. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Kip Meintzer: Greetings, and welcome to Check Point Software's 2025 Fourth Quarter and Full Year Financial Results Video Conference. I'm Kip Meintzer , Global Head of Investor Relations. And joining me today are Chief Executive Officer and Nadav Zafrir; and our Chief Financial Officer, Roei Golan. Before we begin, I'd like to remind everyone that the conference is being recorded and will be available for replay on our website at checkpoint.com. During this presentation, Check Point's representatives may make forward-looking statements. Forward-looking statements generally relate to future events or our future financial and/or operating performance, including statements related to the anticipated ratification of the Israeli government Research and Development Incentive Program and potential impact of these grants on our financial results. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Any forward-looking statements made speak only as of the date hereof, and Check Point Software undertakes no obligation to update publicly any forward-looking statements. In our press release, which has been posted on our website, we present GAAP and non-GAAP results, along with a reconciliation of such results as well as the reasons for our presentation of non-GAAP information. If you have any questions after the call, please feel free to contact Investor Relations by e-mail at kip@checkpoint.com. And now I'd like to turn the call over to Nadav for. Thank you, Kip. It's great to be with everyone here today. Nadav Zafrir: I want to begin with a recap of 2025, followed by our plans for 2026 and beyond. We printed solid 2025 fourth quarter and full year results. During the year, we delivered consistent execution while building a stronger foundation for our long-term sustainable growth. We expanded our platform with 2 new pillars, security for AI and exposure management. We're building both organically and through targeted acquisitions. We also strengthened our go-to-market engine. We expanded and flattened our C-suite structure and aligned it to our operating model. We're laser-focused on strategic customers, new logo acquisition and partner leverage. And our sales are focused and designed to develop deeper enterprise penetration, a broader portfolio adoption and increased new logo wins. We also enhanced our financial flexibility with a $2 billion 0 coupon convertible notes offering, strengthening our balance sheet and creating the capacity to invest in our highest conviction priorities. Looking ahead to 2026 and beyond, we are positioning the company to lead the AI era of cybersecurity. As you're keenly aware, AI is fundamentally changing the threat landscape, and this requires organizations to revisit their core security assumption and revalidate their security foundations. In fact, decades of corporate infrastructure is now vulnerable because the very nature of attacks is changing. And so security leaders must revalidate their existing security foundations, protect new attack surfaces that are driven by the adoption of new capabilities and tools as well as embrace AI as a force multiplier just to remain competitive. And our mission at Check Point is very clear. We secure our customers' AI transformation. That means we continuously update our existing security solutions to defend against evolving threats. We're securing the expanding AI-driven attack surface with purpose-built capabilities and leveraging AI to simplify and automate security management and operations. And we do this by applying a proactive prevention-first approach, which leverages our superior capabilities and continuously research, discover and build solutions to anticipate the evolving threats. We secure our customers' AI transformation through 4 strategic solution pillars, each one of them a platform of its own. hybrid mesh network security, securing the infrastructure, workspace security, securing the employees, exposure management that provides situational awareness and then finally, AI security across all of these pillars. We secure the hybrid mesh infrastructure across data centers, hybrid cloud, branch and SASE. And we have a very clear market differentiation for hybrid mesh. And our advantages are we have the superior proactive prevention, second to none, a hybrid architecture that optimizes user experience at the edge, an unparalleled ability to scale and then finally, an AI-powered unified management. As you know, AI is embedded everywhere. And so that the attacks can originate from everywhere, from anywhere. And so we're building an integrated and unified workspace platform that's spanning across devices, browser, e-mail SaaS applications and remote access. We believe that our recognized leadership position in e-mail security and superior phishing prevention capability is a springboard to lead the way in exposure management. Managed service providers, or MSPs also represent an important opportunity in the Workspace security pillar. We identified Rotate as a provider of a comprehensive platform purpose-built for MSPs. We acquired the team of Rotate to build momentum in the MSP market, leverage our position as a leading MSP e-mail security provider. Next, we established exposure management as a new strategic pillar, and we believe we're uniquely positioned to expand our market share in the coming few years. Security teams are challenged by the overwhelming volumes of vulnerability, disconnected intelligence, shrinking remediation windows. And in an AI-driven threat landscape, weeks-long resolution cycle for critical vulnerabilities are no longer viable. At Check Point, we deliver real-time situational awareness unified across threat intelligence, attack surface visibility, providing context and automated remediation. Today, I'm also excited to announce the acquisition of SyCOps, a cyber asset attack surface management company that brings AI-driven asset discovery to enable accurate vulnerability context and risk prioritization. Cyclops strengthens our exposure management platform and delivers robust CTAM offering that includes threat intelligence, vulnerability scanning and prioritization and at the end of the day, also actionable and safe remediation. And finally, as organizations rush to adopt AI, just to remain relevant, this breakneck pace of AI adoption prevents many new risks to organization. We get data leakage via prompts, the uploading of sensitive data, AI threats like jailbreaking or model inversion. And lastly, agents with uncontrolled autonomy, sometimes acting beyond their scope. AI security is a foundational pillar of our strategy. Our comprehensive AI security stack protects employee usage, enterprise application, agents and models. Late last year, we made the acquisition of Lakira to deliver runtime protection across AI applications and agents based on an industry-leading foundational model. You know that this is evolving faster than anything we've ever seen and requires design partnerships and open Gardner and the ability to track and acquire the innovators. And so today, I'm happy to announce the acquisition of Siyata, specializing in discovering and understanding and ultimately governing autonomous AI agents. Siyata extends our platform by protecting the emerging AI workforce, enabling organizations to safely accelerate their AI transformation. In summary, 2025, as you know, my first year as CEO of Check Point. During the year, we strengthened our leadership team. We improved our go-to-market execution and enhanced our financial flexibility, all while delivering solid results. I believe during my first year, we built a foundation that positions us to accelerate our growth over the next few years. And looking ahead, our strategy is focused and aligned. Organizations around the world are accelerating adoption, and our mission is to secure their AI transformation. Through our 4 strategic pillars, we are addressing the expanding AI-driven attack surface and bringing critical innovation to customers. The recent acquisition of Sightclub, Siyata and Browthase Talent further enhance our capabilities in exposure management, AI security and workspace. And these acquisitions strengthen our competitive position and ultimately support our long-term growth ambitions. We're executing with discipline, investing behind our highest conviction opportunities and driving greater value for customers, partners and shareholders in 2026 and beyond. And with that, I'll turn to Roei Golan on to address our financials. Roei Golan: Thank you, Nadav. One moment. Can you see my slides? Nadav Zafrir: Yes. Roei Golan: Okay. So thank you, Nadav, and thank you, everyone, for joining the call. As Nadav said, we had a solid -- fourth quarter was a solid quarter with 6% growth in revenues, driven by 11% growth in our subscription revenues. Our revenues reached $745 million and were $1 million above the midpoint of our projections. Our non-GAAP EPS was $3.40 per diluted share and exceeded our guidance. The figure includes a onetime tax benefit of approximately $0.52 related to a reduction in our corporate tax rate in Israel that impacted prior periods income taxes and also updates into our tax reserves. Excluding the onetime benefit, EPS exceeded the top end of our projection by approximately $0.08. As for the full year, our revenues reached $2.725 billion and were $5 million above the midpoint of our original projections. Our non-GAAP EPS was $11.89 per diluted share and exceeded our guidance. This figure includes a tax benefit of approximately $1.90 related to a reduction in our corporate tax rate that impacted prior year income taxes and uplift in our tax results also due to the tax settlement that we announced last quarter. Excluding onetime benefit, EPS exceeded the midpoint of our projection by approximately $0.09. As mentioned, our revenues grew by 6% year-over-year, while deferred revenues grew by 9% to $2.18 billion. It is important to note that our product revenues growth was moderated in the quarter, mainly as a result of our subscription price increase that we announced in July 2025, which shifted a larger portion of bundled hardware deals towards subscription. This resulted in a headwind of $6 million to our product revenues in this quarter as we allocated relatively smaller product component without changing overall deal value. We do expect to see this impact also in Q1 of approximately $4 million to $5 million on our product revenues. We expect the benefits of this strategy to increasingly materialize in subscription revenue during Q1 and throughout 2026, while also the product price increase that we have effectively from 1/1/2026 of 5%, expect to support our product growth primarily from the second quarter of 2026. When we are looking on our calculated billings, they totaled to $1.039 billion, reflecting an 8% year-over-year growth, while our current calculated billing grew by 6%. Our remaining performance obligation, RPO grew by 8% to $2.7 billion. On an annual perspective, our revenue grew by 6% year-over-year, while our calculated billing grew by 9% to $2.9 billion. Our current calculated billing totaled to $2.784 billion, reflecting a 6% growth year-over-year. When we are looking on our recurring calculated billing, which represents the calculated billing from subscription and maintenance and update, this grew by 10% year-over-year. As we mentioned, our growth this quarter was driven by our subscription revenues. We continue to experience strong demand for our emerging product portfolio, which remains the primary driver for our revenues. In this quarter, in Q4, we had a growth across all our pillars, CEM, Workspace and hybrid mesh, while our emerging products, e-mail security, SASE and ERM exceeded 40% -- more than 40% growth in ARR. When now looking on the global revenue distribution, so we did see growth in all regions. 48% of our revenues came from EMEA, and that grew by 5% year-over-year. 40% of the revenues came from America, which had 6% growth year-over-year, while the remaining 12% came from Asia Pacific that grew 9% year-over-year. When I'm looking at the full year 2025, so actually saw 46% of our revenue came from EMEA, grew by 5%. 42% of the revenues came from America, and that grew 7%, while the remaining 12% came from Asia Pacific and that grew double digit, 11% year-year -- looking into our P&L in this quarter. So our gross profit increased from $623 million to $660 million, representing a gross margin of 89%. Our operating expenses increased by 13% to $358 million. On a constant currency basis, our OpEx increased by 11%. The increase is primarily as a result of increase in our workforce and investment in sales and marketing and channel programs. Our non-GAAP operating income continues to be strong at $302 million or 41% operating margin. Our non-GAAP net income increased by 21%, mainly as a result of a onetime tax benefit that I mentioned in the beginning of this deck in connection with reduction in tax rate and updated tax reserves. The non-GAAP EPS grew by 26%, while the onetime benefit contributed approximately $0.52. Our GAAP net income reached $305 million, an increase of 18% year-over-year, while our GAAP EPS was $2.81 and grew by 22% year-over-year. When I'm looking on the full year, so our gross profit increased to $2.4 billion, and that represents a gross margin of 88%. When I'm looking ahead into 2026, we all know the memory price increase, the recent memory price increase that we have in the market over the past few months. And it is expected to have an impact also on our gross margin in 2026. We estimate this impact to be approximately 1 point for the full year, 1 point on our gross margin for the full year, with most of the impact expected in the second half of 2026 as we have enough inventory -- sufficient inventory to support the needs for the first half of 2026. We will continue to closely monitor supply and pricing dynamics into the second half of the year and adjust our procurement strategy as needed, including potential product price increase. Our operating expenses increased by 10%, mainly as a result of our continued investment in our workforce organically and also the impact related to Cyber acquisition that we closed back in September 2024 and the acquisition that we've done during 2025 of Verity and Laqera. Our non-GAAP operating income was $1.140 billion or 41% operating margin. Looking ahead to 2026, we continue to actively hedge our foreign exchange exposure. However, not all currency are fully covered. As we disclosed in the previous earnings calls, if current exchange levels persist, we anticipate an additional headwind of approximately 1 to 1.5 points on our operating margin for next year. Our financial income increased to $114 million in 2025 as we kept reinvested our cash in higher rates compared to 2024. In December 2025, as Nadav mentioned, we completed a $2 billion convertible notes offering. As a result, we expect higher financial income in 2026 that's estimated to be between $40 million to -- the financial income in 2026 is expected to be $40 million to $40 million per quarter. In 2025, we had income tax benefit of $79 million, which included the benefit of approximately $209 million or $1.90 non-GAAP EPS in connection with updating our tax reserve due to the tax settlement and also the reduction of the tax rate for prior years. As for 2026 taxes, it is important to update that in December 2025, Israel enacted the OECD Pillar 2 framework, established a 15% global minimum effective tax rate for large multinational groups effective for taxes beginning in 2026. As a result, we currently estimate that our tax rate for 2026 will be between 16% to 17%. In parallel, a complementary Israeli government R&D incentive program was initially approved in January 2026. The outcome from this program that is expected to be effective from January 2026 can be approximately $50 million benefit into our operating income. This program is expected to be finally approved by the end of Q1 2026. Our outlook reflects this development as part of our forward-looking statements, including the anticipated certification of the R&D incentive program and the potential financial impact of related grants on our future financial results. One moment -- moving into our cash flow and our cash position. Our cash balances as of the end of the quarter was $4.3 billion. As a reminder, on December 2025, we also announced a $2 billion, and we received $1.8 billion net proceeds net of issuance costs and the purchase of the Capco. Also during October 2025, we acquired Laera for approximately $190 million of net cash consideration. Our operating cash flow was very strong this quarter with $310 million, 24% growth year-over-year and representing 42% of our revenues in Q4. We also continued our buyback program and purchased 2.2 million shares for $425 million at an average price of $193 per share. On an annual perspective, our operating cash flow grew by 17% to $1.234 billion, while important to note that this includes $66 million tax payment, onetime tax payment that related to our tax settlement that we signed in Q3, while our balance sheet hedge transaction resulted from the other end, the benefit of $51 million in 2025. Also as a reminder, during 2025, we completed the $160 million payment for the land purchase associated with the new Check Point campus that we are building here in Tel Aviv. We do not expect any significant additional payment in connection with this new campus in 2026. So to summarize, our revenues were above the midpoint of our projection and the EPS exceeded our projection. We do see continued strong demand for emerging technologies, it's e-mail, if it's SE, SASE, and we had another quarter and another year of strong operating cash flow and strong profitability. Now moving to the business outlook to our projection for Q1 and for the full year. So for Q1 and the full year, I'll start with the revenues. So first, our revenues is expected to be between $655 million to $685 million in Q1 2026. I remind you the short-term headwind that we have only specifically in Q1 in terms of product revenues. For the full year, we expect our revenues to be between $2.83 billion to $2.950 billion, between 4% to 8%, while the midpoint is 6%. This time, we're also going to give you the subscription revenue guidance which expected to accelerate to continue to accelerate. As for Q1, we do expect it to be between $318 million to $328 million, while as for the full year, we expect it to be between 10% to 14%, which means that the midpoint expect to be 12% growth. Our non-GAAP EPS, including -- it takes into effect the expected grants, the R&D incentive program that needs to be completed by the end of Q1. This take into account and the EPS is between $2.35 to $2.45, while the full year EPS, non-GAAP EPS expected to be between $10.05 and $10.85. GAAP EPS for Q1 expected to be $0.64 less, while for the full year is expected to be $2.58 less. Also, we're going to share with you guidance projections, sorry, for adjusted free cash flow for Q1 and for the full year. This is the operating cash flow minus CapEx, minus any acquisition-related costs. And we are -- in Q1, we expect to have a strong adjusted free cash flow between $420 million to $460 million, which represents 66% of our midpoint, the expected revenues in Q1. While for the full year, we expect it to be 42% of the revenues in the midpoint, which is $1.150 billion to $1.250 billion. That's it. And we keep, the floor is yours. Kip Meintzer: All right. So for Q&A, today, first up, we're going to have Adam Tindle from Raymond James. Adam Tindle: All right. Can you hear me? Nadav Zafrir: Yes. Kip Meintzer: And we'll be followed by Shaul Lal from TD Cowen. Adam Tindle: Nadav, I wanted to ask AI security is obviously a clear focus in your script today. And it sounds like you're investing both organically and inorganically with some of the acquisitions here. I wonder, this is sort of a high-level strategic question for you. The heart of it is to kind of compare and contrast your view of AI security versus how cloud security played out. And with the context being that you made the very smart decision in cloud security to choose to partner with Wiz, essentially exiting Check Point's efforts in organically as the ROI wasn't there. Again, in hindsight, very smart given the cloud security market has been problematic for your competitors, bad pricing, bad profitability there. And I see some similarities in cloud security and AI security. So I guess what's different about AI security that got you more comfortable to invest here versus the decision to invest in cloud? And how big do you think this could be for Check Point over time? Nadav Zafrir: Yes. No, great question. And the sort of the analogy is in place. However, in my opinion, the AI transformation is both more foundational. It's not shift and lift your activities from on-prem to the cloud, but rather it's a real shift in the way you use technology, do business, employ people, et cetera. And the second change, in my humble opinion, is that it's -- we're seeing it already, but I expect this to accelerate. So it's happening much faster. So in my opinion, you can look at the cloud analogy, but you need to have it as a reference for difference. The second thing I'll say is that -- here are 2 fundamental issues. Number one, attackers are using AI much faster than defenders. This is just the nature of this asymmetry between offense and defense and in this learning competition and how, unfortunately, for several reasons, the attackers can adapt faster. And so what we're seeing is larger scale, more precision and a real change in the nature of attacks, right? And so that's one angle that we need to look at. The other is -- and that's sort of the nature of what we're seeing right now. Every organization on the planet is racing to adopt AI to stay relevant. And as they're doing that, they're sort of creating a new attack surface. When you look at these 2 things separately, in my humble opinion, this is time to revalidate security altogether. We think we're really well positioned to lead the way to secure our customers' AI transformation based on the 4 pillars that we were talking about, based on the fact that we truly have the best prevention -- proactive prevention security, which has always been important, but it's now becoming critical. And so building we have decade data 100,000 customers, 4 pillars, a vision that I believe is very specific to secure AI transformation. This is a must for us. We're making acquisitions. We're building organically. And we really believe this is our time and our space to challenge the status quo. Kip Meintzer: Next up is Shaul Lal, followed by Joseph Gallo of Jefferies. Apologies for some background noise. Joseph Gallo: Question for Roei. How should we be thinking about ASP hikes from a linearity perspective? Are we seeing them coming in the first half of the year? Are we seeing them coming in the second half of the year? Can you just help us out a little bit? Roei Golan: Yes. So we did several price increase. One of them was in July only for the subscription, the firewall subscription. And in January, we've done it for all the firewall, which including client hardware, subscription and support. In general, usually, it takes to see the ASP going up. It takes -- usually it's a quarter. I mean, if I'm looking at about, for example, appliances, we talked about the appliances. So we -- of course, it's effective from January 1. But from a revenues perspective, that's something that usually we see the main impact coming from the quarter afterwards because certain revenues that are recognizing in Q1 are coming from bookings that came from prior periods. And also, we have -- we are expecting quotes that being delivered to our customers before the effective price increase. So most of the effects usually come in -- we should expect to see from Q2 this year. Kip Meintzer: All right. Next up is Brian Essex Rob Owens, followed by Brian Essex, pardon me. Unknown Analyst: Am I in here first, Ki or... Kip Meintzer: You are in first, Joseph, I'm sorry. Joseph Gallo: I appreciate that. It was great to see the strength in subscription, but I just wanted to ask on product in 4Q. I know there was some mix shift and reallocation in large deals, but is there anything else we should be aware of? And then I believe your product guide for '26 implies approximately flat. Just any comments on remaining refresh cycle available? Or have you seen customers change their buying behaviors ahead of these incoming price increases? Roei Golan: Yes. So I think Q4, we had a good quarter for product. Again, it was less good than what we've seen in the first 3 quarters, but still, we did see a good quarter for the demand for our product. If I'm looking ahead for 2026, 2026, I think we still have -- we see good funnel for hardware, specifically in the second half of the year. I do have to say that in the -- you are right that when you're talking -- when you're taking into consideration what I gave for subscriptions, so product is around flat to low single digit. In our guidance, we took more prudent approach, mainly because not we don't see the funnel, mainly because we are taking a more prudent approach of what's going on the macro with the memory shortages that we see everywhere price increase, not specifically only on memories, by the way, on all raw materials, and that might affect some customer behavior that's postponing some CapEx projects. So we took it into account. But definitely, again, we want to be more than that. We want to be higher than that. I think we continue to see refresh. And -- but again, we cannot ignore what's going on in the market with the memory situation. Kip Meintzer: All right. Next up is Todd Weller -- or Brian Essex, followed by Todd Weller. Sorry about that, Brian. Brian Essex: All right. Joe, I wasn't going to let him pass you by. Really, another question on guidance. Would love to understand maybe the puts and takes embedded in operating margins. What -- if we were to back into operating margins, what are the implicit margins in your guidance? And how do you think about spending? And then maybe one for Nadav, basically back on that, the dynamics around the hardware price increases, are you hearing any shift in spending intentions from your customers anticipating maybe firewall and server prices accelerating on the back of the memory pricing. So one for each of you. Roei Golan: So the margin that we took into account in our guide, it's between 39% to 40%. So that's the operating margin. We're taking into account all the headwinds that we get from the memories from the FX on the other hand, the expected grants from the government. So all of that was taken into account, that puts you in the 39% to 40%. av... Nadav Zafrir: Yes. Look, with regard to the hardware, as Re said, we don't see any change as of now. As Roei said, we do need to be prudent looking into what's happening this year. I actually think for us, this could be a competitive advantage. We have the supply for the first 2 quarters. We're going to figure out how to take advantage of the situation. I don't see this as being a huge headwind, except for what Marie said about the 1 point in the margin that we just spoke about. Obviously, very encouraged by the high growth in the subscription rate that we're seeing and projecting. Brian Essex: And no shift towards SASE or other types of architecture. Nadav Zafrir: Exactly. Exactly. Our SaaS products are becoming a -- our SaaS products and subscription is becoming a much bigger part of our overall cake, and we intend to continue growing that, again, across the different pillars. So in hybrid mesh, SASE, Workspace is completely SASE, so is exposure management. And this year, for the first time, a true North Star around security for AI around the AI security pillar. Kip Meintzer: All right. Next up is Todd Weller, followed by Jan Siddiqui. Todd Weller: Nadav, you outlined all the changes that were implemented in 2025. What would be the 2 or 3 specific ones you think will most positively impact the growth trajectory in '26? And when do you expect to see those start kind of showing up in the numbers? Nadav Zafrir: Yes. Look, I think that we laid the foundations, right? The most importantly is the C-suite and the new leadership we had and the way we are reorganizing and refocusing our go-to-market. That's number one. And the second thing that I'm very excited about is going to the market with these 4 pillars. Each one of them is a platform in itself. Some of our customers are going to choose to use one pillar as their platform, let's say, for Workspace. Others are still using the hybrid mesh pillar and some are using everything, and it's an open garden so we can play with the others. So if you ask me, these are the 2 main things. Number one is the 4-pillar approach. Number two is the leadership in the C-suite change and the refocusing of the go-to-market. And above everything else, I am a true believer that we need to revalidate security. Attackers are moving at an extreme speed. I think we have the foundations. But as you can see, we're also making the acquisitions. We have the right design partnerships. We want to do this as an ecosystem play. So the third thing, of course, is security for AI. The race is on, and we're in it. Kip Meintzer: Thanks, Todd. Next up is Junaid, followed by Keith Bachman from BMO. Junaid Siddiqui: Just wanted to talk about the progress on the SASE front. You mentioned ARR grew around 40%. In the past, you've talked about making it much more enterprise-ready, moving to a unified policy. How is that tracking? And is the focus right now mostly on upselling the existing customers? Nadav Zafrir: Yes. So great question. As you can see, the SASE now is a part of our hybrid mesh pillar. We're maturing the product. We made significant investments organically in 2025, and the product is maturing, and we're integrating it as a part of the hybrid mesh pillar and platform like you said, with our unified management. Now in terms of our sales motion, we are integrating the -- what used to be the -- what we used to call a rocket. We're now integrating this into the hybrid mesh pillar. We're also putting together the sales overlay of our CloudGuard network security with SASE to better integrate that into the overall motion. You're right that I would say that 2/3 is upsell to existing customers, but that's not the only one. We're also seeing new customers that are actually buying our SASE, and we hope to actually move them to our firewall business to create the full capability of a hybrid mesh pillar. Kip Meintzer: All right. Next up is Keith Bachman, followed by Shrenik Kattharis of Baird. Keith Bachman: Nadav, I want to put this to you, and it sort of reflects incoming comments already this morning. investors are looking for an acceleration of growth. You're basically guiding to 6% plus or minus total revenue growth, which is consistent with what's happened in the last 2 years. So while subscription is improving, which is nice -- it's nice to see, total growth isn't improving, right? So how do you sort of respond to -- because you're asking investors to be patient about this notion of acceleration. So how do you respond to that comment? And then consistent with that, Roei, any comments you want us to think about for total billings growth in light of the midpoint of rev growth? Nadav Zafrir: Yes, sure. Thanks. Look, we laid the foundations. Now it's all about execution. I think we have the 4-pillar approach. We have the foundations. We have the right people in place. We have the financial flexibility to make acquisitions. Now it's all about execution. And you're right that it's not an overnight acceleration, but I think we're on the right trajectory. I think also what we have in terms of product solutions around our superior ability to proactively prevent the acquisitions that we're making and the -- what we're building in the AI security is putting us in the right trajectory. And now it's all about execution. Roei Golan: And as for the total billings, similar to the revenues growth around high single digit, 6%, 7%, that's expectation in order to achieve the midpoint. Kip Meintzer: All right. Next up is... Unknown Analyst: So, you just mentioned financial flexibility, ended 4Q with $4 billion in cash and you have added $2 billion in convert. Just in terms of so far, you mentioned about favoring smaller AI native integrations and the announcements you made. Just on the large-scale M&A, right, just -- can you just talk to as some of the other peers are kind of going after platform convergence waves, aggressively chasing few things. So what kind of sort of scale IP or adjacency would actually justify more transformative sort of AI-driven bet for you guys, if at all? Nadav Zafrir: Yes. So yes, we have the flexibility and we have the vision. And now in each one of those pillars, we need to be very disciplined and identify the targets. They could be tuck-ins, they could be larger, but the ones that actually take us to be a podium player in each one of those pillars specifically. So the target needs to have the right technology, the right people, the right culture and so that we can see that we can integrate it and move fast to create a real platform. In my humble opinion, just buying more and more products and putting sort of a supermarket approach is not what our customers are looking for when they look through consolidation. They look for a real integrated for us pillar. And each one of those pillars, we're looking at as its own platform play. So if you take exposure management, we are looking to create the #1 exposure management system. Some of the acquisitions are smaller. We're also looking at larger ones all the time, but we're going to be disciplined about it. And again, through the -- looking at each pillar separately, we're not stopping. We're moving fast. Kip Meintzer: It looks like you just stopped playing a game when you came on. Good see you. Next up is Joshua Tilton, followed by Roger Boyd from UBS. Joshua Tilton: Maybe, Roei, for you, any way to think about how much the acquisitions that you announced today are contributing to the guidance that you provided for 2026? And maybe outside of pricing, could you just talk to why or what gives you conviction in the belief that guiding to, I think, what you said flat to low single-digit growth for product is prudent from your perspective? Roei Golan: Okay. So first, in terms of the acquisitions, so of course, it's part of the guidance, and that it should have an effect of approximately 0.5 point in our margin because it's mainly right now in 2026, we expect it to have many costs, many dilution to our margin. That's approximately 0.5 point to the operating margin. As for the pricing and the product, so I think, again, I'm looking -- when we are -- of course, we are working on the guidance and of course, working for our plan on 2026, we're looking on the funnel. We are looking on the potential. We're looking, of course, on the price increase that we've done in January 1. And I think that, again, we can do -- we should -- I mean, we need to continue the strong demand that we've seen in 2025. We see good final also for hardware mainly in the second half of the year, also in the first half, but mainly in the second half of the year. And I think that definitely also the price increase and the effect that we've seen that the discounts this year were actually even improved compared to last year in 2025 compared to 2024. So if we manage to continue that and maintain the discounts, we also can benefit from this price increase. I do have to say, it's important to say we didn't take into account in our guidance any additional price increase. Because of the memory shortages, there might, of course, we might consider additional price increase during the year, but that was not a factor in the guidance right now. Joshua Tilton: And just to be clear, that 0.5 point is in the 39% to 40% margin... Roei Golan: Part of the guidance I provided you. Joshua Tilton: And any way to think about the top line contribution from the acquisitions? Nadav Zafrir: Minimal. Roei Golan: Minimal to, I would say, a few millions or even a few millions of dollars. Kip Meintzer: All right. Next up is Roger Boyd from UBS, followed by Peter Levine from Evercore. Roger Boyd: Awesome Nadav, I wanted to hit on rotate. They have a lot on their platform. So I guess in addition to the MSP enablement tools that you talked about and some of the exposure management technology, how much interest is there in the rest of their portfolio, which I think includes some native technology for detection across endpoint and some other attack services. And when you think about MSPs in general, can you just talk about the -- what percent of revenue they represent today and how you see that evolving? How important is that in terms of your channel strategy this year? Nadav Zafrir: Yes. Thanks. So today, I think it's -- I don't -- it's still relatively small, but I think it's a high potential growth for us in 2026 and beyond. The MSP, we're going to consolidate everything under Workspace under Gil Friedrich. And the Rotate technology and the folks that are coming with it are going to enable us to actually streamline everything to the MSPs, and that's where the opportunity is. And you're right, it's not -- it's e-mail, it's endpoint, it's browser, it's SASE, all put together for the smaller customers, working with our partners and the MSPs. And so this acquisition is -- will allow us to accelerate to move faster into a consolidated unified ability to work with those MSPs. Kip Meintzer: All right. Thanks, Roger. Next up is Peter Levine with Evercore, followed by Saket Kalia from Barclays. Peter Levine: What's changed in customer demand that makes kind of exposure management more of a priority today? You touched upon it on the call in your prepared remarks, but are customers explicitly asking for like a united exposure visibility across network, cloud, identity, whatever it is? And then maybe just, Rory, help us understand like how meaningful could this category be over the next, call it, 2 or 3 years in terms of revenue contribution? Nadav Zafrir: Yes. So first, I can't resist to answer Rory's question. It's meaningful. It's not huge right now, but we see great potential in it. When I look at this -- I come from the trenches ultimately. When I look at this as a practitioner, you've got to have this situational awareness. And so yes, we're seeing more and more demand, and we're seeing it going upstream as our capabilities become more and more mature. And what we're building is the full gamut. So on the one hand, based on an acquisition that we made a year before last around Cyberin, we have the intelligence. Now with Cyclops, we can see the posture and we can prioritize based on what we're seeing CVEs, dark web stuff. We're seeing what's coming. And from the inside, we're seeing what's vulnerable. And with the Verity acquisition, we can actually do the automatic remediation. And so what our customers find us once they deploy that is that a lot of the things that are coming at them are no longer in danger and because we can block it automatically before it even happens. In my opinion, again, looking at this as a practitioner, there's -- one of the shifts is that attackers can actually weaponize vulnerabilities much, much faster. And they can also use autonomous agents that are doing their -- once there is a breach, they operate much, much faster. And so having that proactive prevention has become more important than ever and building this triage around these 3 components, I think, is unique in the industry, and I think will carry more and more traction. For us at Check Point, it's also important because it allows us to go outside of our installed base right now to new customers and hopefully upsell and cross-sell once we go beyond that. And so yes, we see this as something which is becoming a core pillar and an important part of the 4-pillar strategy that we're going with. The last thing I'll say about it is that when we do the remediation, the automatic remediation, -- we don't do it just for checkpoint products. And that's the beauty of it. This is where an open platform, open guarding comes in. When we see vulnerability, some of our customers are not using Check Point products to secure their hybrid mesh, but we can go in and fix the other vendors' vulnerabilities when we can -- after we prioritize them. And at the end of the day, I think it gives our customers better security. Kip Meintzer: Thanks, Peter. Next up is Saket Kalia, followed by Brad Zelnick from Deutsche Bank. Saket Kalia: Okay. And by the way, I appreciate the additional detail on guidance. Maybe a question for both Nadav and Roei. Nadav Zafrir: The 4 pillars are really helpful framework for thinking about the business. Saket Kalia: Roy, for you, are there any guardrails that you can give us just on the mixes across those 4, high level, of course. And Nadav, what are you changing from either a contracting or sales comp perspective to drive higher growth across those smaller, maybe faster-growing pillars? Does that make sense? Roei Golan: Yes. So I think if you're looking on the 4 pillars, so of course, the most significant one is Diab mesh, which includes also our firewall, which is still a significant part of our business. It's growing, of course, mainly driven by the SASE and our cloud network. That's mainly driving the growth. Both of them SASE and cloud network sitting on the subscription line item. And that's part of the acceleration that we see in the subscription line item. And the others that I think have the highest growth that we see today are Workspace and STEM. STEM, we talked a lot about it in this call. We do see very strong demand. Of course, still small numbers from total Checkpoint, but very strong demand, which started when we acquired Cyberin, then we added other acquisitions that we've done and included in the offering. And again, when we are looking on the funnel for next year, definitely will be -- it's expected to be even in 2026, a major driver for our subscription line item. And also e-mail e-mails continue to be very strong. We talked about the numbers, I think, talked about the numbers a few quarters for the few quarters. I mean we already passed the $160 million ARR and continue to grow in very strong double digit. So definitely, we're aiming to pass the $200 million this year. And I think that's the main driver that we -- that's why you see our subscription revenues continue to accelerate, and we expect it to accelerate every quarter. Of course, with the contribution for -- also from firewall, again, contribution that it's a mix of the price increase, but also gaining new logos and expanding our market share in the firewall. So that's in total picture how it translates into our revenues. Nadav, you want to... Nadav Zafrir: Yes. The 4 pillars is strategic, as you said. In the first one, it's the infrastructure and the network. The second one is your employees. The third one is the situational awareness. And then finally, security for AI, which is as a stand-alone, but also embedded in the 3 others, and we have the services that engulf all that. To your question, to grow these pillars faster, we're doing a few things. Number one, in each pillar, we are trying to see what is a differentiated advantage, right? So like I said, for the hybrid mesh, it's the prevention first, it's the scalability. It's the unified management and it's the hybrid architecture. But there are other things that we want to improve. And so some of them we're doing organically, some we're looking for acquisitions. We're doing the same thing for each one of those pillars. The second thing is from our go-to-market focus, -- we are moving to a multi-pillar, multi-platform company so that our front liner sellers can sell each one of those pillars. And of course, in each one of them, there's also different products, and we're better aligning our account managers with the specialists that can come in and support them. And that's a major change in the way we're going to market as of literally now. The one thing I want to add is that in each one of those pillars, we're also going to challenge. We're going to challenge some of the existing status quo in the market. So we're going to we're challenging status quo around supermarket approach consolidation through a real platform approach. We're challenging a closed garden to an open garden. We're challenging complexity. So in each one of these, we're not just building our own security platform pillar, but also challenging the existing status quo. Again, some of it with existing capabilities that I think are critical and becoming more important and in others, by building new stuff and making acquisitions. And at the end of the day, I think we need to realize that especially the world we're going into, every morning, there is a new reality and a new threat. So we need to constantly evolve. We need to constantly see the road map of our customers. We need to constantly look around the corner so we can truly be their companion for a secure AI transformation. Kip Meintzer: All right. Next up is Brad Zelnick, followed by Shyam Patil from Susquehanna. Brad Zelnick: Nadav, I've heard you loud and clear, the foundation is in place. It now comes down to execution. And I take that to mean more go-to-market than product because Check Point has always had great product and you're acquiring high-quality tuck-ins that only strengthen your offerings in the position that you're in. But where do we stand from a go-to-market perspective? How much more ramp distribution capacity do you have heading into 2026? And maybe for Rohe to chime in, what needs to happen to exit '26 growing double digit and to get us to double-digit growth for the full year in '27? Nadav Zafrir: Yes. Thank you for that. So you're right that it's about go-to-market execution. It starts with a louder voice around our marketing effort. It's about the focus. And as I described, we're going to be focusing on large enterprise. We're going to be focusing on new logos. We're going to be focusing on a -- on the multi-pillar, multiproduct company approach. We're going to be focusing on hiring the best people in the industry. So it's a plethora of things that we're doing to create a better execution as we go to market. And lastly, it's also about challenging the status quo. I think this is a time where the nature of security is changing. I think the criticality of the basis of what security means has become more critical than ever. And we're going to take advantage of some of the assets that we already have. We're going to take advantage of where we are situated. We are seeing all the innovators, and we're trying them out as designed -- with our design partners on the customer side. We've got new leaders in marketing. We've got new leaders in sales, and we're going to continue bringing in the best of the best in the industry to join us to do exactly what you said by the end of the year. Roei Golan: As for the double-digit question. So I think -- again, I think we need to show -- first, we need to continue the strong momentum, the strong demand that we've seen for the -- we mentioned the CTM. We mentioned the e-mail security, the workspace and SASE. So definitely, we need to see here. We need to see specifically in e-mail and CTEM continued strong demand there. As we see already, we see it in the funnel. We saw it last year. We saw it in the last few years, but e-mail in the last years, but CTM specifically in 2025 and also in the funnel for next year. for 2026. But definitely, in order to be double digits, we need to grow even faster than firewall. I mean we are positioned much better today on the firewall than what we've been 2 years ago or 3 years ago, I think we did a significant improvement both on the product side, also on the go-to-market and on the go-to-market. I think we brought -- we have great leadership in the go-to-market. And I think we are positioned much better today to accelerate our growth on the firewall. Definitely, mid- to high single digit in the firewall, together with the continued strong momentum that we have in the other pillars that should bring us to double digit. Kip Meintzer: All right. Next up is Shyam Patil, followed by Ben Bollin of Cleveland Research. Shyam Patil: This is Dan on for Shyam. I guess with the price of memory increasing significantly of late, just I know you talked about potentially increasing prices, but what levers do you have to maybe try to get better deals from suppliers? And how are you looking at that as we progress through the year and try to get through sort of the shortages? Roei Golan: So I think we are working 24/7 with suppliers around the world to get better pricing. I think we are doing -- we have a great team that's doing an amazing job in order to get the best pricing, I think. But still, we cannot avoid the situation that there is a price that the price of the memory has increased significantly. So even if we're getting better pricing, it's still significantly higher than what we used to pay a few months ago before this trend starts. But definitely, we are investing a lot on that on getting the best pricing. And again, we're doing it. We have teams around the world that's exploring opportunities in order to get the best pricing in the market. Of course, we can -- we always want to do even better, but I think definitely, we are doing a great job there. Kip Meintzer: All right. Our last caller is going to be Patrick Colville. Ben Bolin is not on the call today. Patrick, nice to show up. Patrick Edwin Colville: I'll make it a good one to close. It's actually a clarification question. Can you just, Roei, please just go over again what drove the product revenue to be a little bit softer than we might have hoped in 4Q? And then can you just also just reclarify why the pricing benefit doesn't really hit in 1Q and then why it builds throughout the year? Roei Golan: So for product, most of our hardware that we are selling today, that is a significant portion of our product revenues is sold as a bundle to bundle together with the software subscriptions actually with subscription. And when we announced the subscription price increase back in July, so we announced only pricing for subscription without increasing the appliances price. From an accounting perspective, that's more accounting, we need to allocate because the stand-alone subscription price was increased without the total price. So the allocation of the revenues are smaller to the product, to the bare hardware is allocated is smaller, and that impacts mainly Q4 because in Q3, we just announced it. Some of the deals were not recognized as revenues. But in Q4, we already saw that, and that had -- again, it's mainly short-term headwind. It's not going to affect our total revenues. It's more kind of headwind on our short-term product revenues, and we're going to see the benefit from the subscription over time. So again, that's in general. And your question on the price increase, so let's separate between billings and revenues. Billings, most of it, you're going to see it in the same quarter that we did the price increase. From a revenues perspective, sometimes like in Infinity, in some other ELAs that we have -- we have deals that have been closed before we -- I mean, in prior quarters, and we are recognized -- it's part of our backlog, and we are recognizing the revenues in future periods. So in that factor, you don't see the price increase in the revenues. You're not going to see that. You might see billings for new deals, but you're not going to see the main impact in the same quarter. So as I said, the main impact we start to see from the quarter -- from Q2, which is the quarter after the price increase on the revenues, not on the billings. Kip Meintzer: All right. Thank you, everybody, for joining us. We appreciate it, and we'll see you throughout the quarter and then obviously, next quarter. Have a great day. Bye-bye. Roei Golan: Bye. Thank you.
Operator: Greetings, and welcome to the Antero Resources Corporation Fourth Quarter 2025 Earnings Call. At this time, participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note that this conference is being recorded. I will now turn the conference over to your host, Dan Katzenberg, Finance Director. Thank you. Please go ahead. Dan Katzenberg: Thank you for joining us for Antero Resources Corporation’s fourth quarter 2025 investor conference call. We will spend a few minutes going through the financial and operating highlights and then we will open it up for Q&A. I would also like to direct you to the homepage of our website at anteroresources.com, where we have provided a separate earnings call presentation that will be reviewed during today’s call. Today’s call may contain certain non-GAAP financial measures. Please refer to our earnings press release for important disclosures regarding such measures. Joining me on the call today are Michael N. Kennedy, CEO and President; Brendan E. Krueger, CFO; David A. Cannelongo, Senior Vice President of Liquids Marketing and Transportation; and Justin B. Fowler, Senior Vice President of Natural Gas Marketing. I will now turn the call over to Michael N. Kennedy. Thank you, Dan, and good morning, everyone. Michael N. Kennedy: I would like to start my comments by recognizing the outstanding performance from both our upstream and midstream teams during the recent winter storm event. Despite subzero temperatures and significant snowfall, we did not experience any shut-in volumes during the period. In fact, our team was able to turn in line a seven-well pad during that time. A truly remarkable achievement by our people in the field enabling Antero Resources Corporation to deliver critical natural gas to the various regions that desperately needed it. In addition to navigating through the winter, we had a very successful last few months on other fronts. Last week, we announced the closing of the HG Energy acquisition ahead of our original expectations. This acquisition, combined with the sale of our Ohio Utica asset, solidifies Antero Resources Corporation as the premier natural gas and NGL producer in West Virginia. We are also excited that in January, we issued our inaugural investment grade bonds. This offering provides substantial flexibility along with our free cash flow generation during this period that exceeded our initial expectations. Next, let us turn to Slide three titled “Antero’s Strategic Initiatives.” Dan Katzenberg: Last quarter, we introduced our long-term vision and strategic initiatives. The HG acquisition marked significant progress towards Michael N. Kennedy: all of the goals we highlighted. These include expanding our core Marcellus position in West Virginia. This transaction added 385,000 net acres and over 400 drilling locations, extending our core inventory life by five years. Increasing our dry gas exposure, our larger production and inventory base positions Antero Resources Corporation to capture the significant demand opportunities from LNG exports in the Gulf Coast and data centers and natural gas-fired power plants regionally. Dan Katzenberg: Adding hedges to lock in attractive free cash flow yields Michael N. Kennedy: providing high confidence in our free cash flow outlook over the next several years. Dan Katzenberg: Reducing our cash costs and expanding margins. Michael N. Kennedy: The transaction lowers our cost structure by nearly 10% assuming no changes to commodity prices and expands margins. This in turn lowers our peer-leading breakeven prices even further. Lastly, it highlights the benefits of Antero’s integrated structure with Antero Midstream. Now to touch on the current liquids and NGL fundamentals, I am going to turn it over to our Senior Vice President of Liquids Marketing and Transportation, Dan Katzenberg: David A. Cannelongo, for his comments. Thanks, Mike. The NGL market faced various headwinds in 2025, but many of these issues were singular events or trends that are expected to improve over the coming Operator: quarters. Dan Katzenberg: When looking back on 2025, three main fundamental forces caused propane inventories to move higher than market expectations. Slide four titled “U.S. Propane Stocks and Propane Days of Supply” identifies these factors on the chart on the left. As we enter 2025, propane inventory levels were trending with the historic five-year average. However, U.S. trade tensions with China, the resulting reshuffling of U.S. propane exports to different destinations impacted U.S. export volumes. Additionally, this tariff shakeup came at a time when export expansions at existing terminals in the Gulf Coast were facing start-up delays or operational issues. Importantly, the chart on the right-hand of the slide highlights the demand pull that persisted in the propane market last year despite these identified headwinds. Days of supply in 2025 consistently trended within the five-year range, due to strong export and domestic demand. Turning to the supply side, while NGL supply is expected to continue to increase over the coming years, the rate of growth will likely moderate due to weaker oil prices. As shown on Slide five titled “U.S. C3+ Supply Growth Slows,” the chart on the left displays year-over-year U.S. supply growth decreasing from 328,000 barrels per day in 2024 to 131,000 barrels per day in 2026 and further to 45,000 barrels per day year-over-year in 2027. This deceleration is expected due to the lower oil price environment and the resulting reduction in oil-focused drilling activity, especially in the Permian Basin. This trend is likely to continue in the current WTI price environment. Turning to exports, significant LPG export capacity expansion was added in 2025 and there is more to come in 2026, entirely removing any potential market bottlenecks. Slide number six titled “Timely In-Service Dates for LPG Export Expansions” illustrates that LPG export capacity should be unconstrained through at least 2028, allowing U.S. barrels to continue to clear the market. Slide number seven illustrates the significant global NGL demand growth that is forecast for 2026. Following several years of declining demand growth, 2026 demand is expected to grow 563,000 barrels per day, the largest annual increase since 2021, driven by LPG increases in the steam crackers, rising PDH demand, and annual ResCom growth. On the bottom of the slide, you can see the C3+ NGL price going back to 2021. Today, prices are above $35 per barrel. But with the backwardated strip, the annual average is $33.50 per barrel. To put pricing in context, a $5 move in C3+ NGL pricing equates to $225,000,000 in annual free cash flow. All of these factors lead third-party analysts to forecast propane storage levels returning to within the normal five-year range by 2026, which should result in improving prices throughout the year. With that, I will now turn it over to our Senior Vice President of Natural Gas Marketing, Justin B. Fowler, to discuss the natural gas markets. Thanks, Dave. I will start on Slide number eight, which shows the winter-to-date residential and commercial demand. This winter, ResCom demand has been extremely strong, with November through February averaging nearly 42 Bcf per day. This results in an incremental 350 Bcf of natural gas demand compared to the five-year average and is over 1 Bcf above last year. Further, January demand averaged over 50 Bcf, ranking it as the third strongest January ResCom demand on record. January also saw the highest level of industrial natural gas demand on record dating back to 2005, which we believe to be in part related to the continued growth in behind-the-meter power demand for data centers. Turning to Slide number nine titled “Natural Gas Storage.” The result of this strong winter demand has been a dramatic flip in storage levels. At the start of the winter in November, storage was approximately 200 Bcf above the five-year level. Today, we are approximately 140 Bcf below the five-year level. This should result in exiting withdrawal season below the five-year average. Last year, we experienced mild summer demand, which drove storage levels to the high end of the five-year range by the fall. Operator: We Dan Katzenberg: believe substantially higher LNG demand, which is up over 5 Bcf per day from a year ago, even before the imminent startup of Golden Pass, along with an increase in gas-fired power demand year-over-year, will likely moderate storage injections in 2026 relative to historical levels. Supporting strong LNG export demand this year are the European storage level deficits versus the five-year average that continue to widen, currently at approximately 600 Bcf below the average, and are now approaching the historic low levels of 2022. This should incentivize robust U.S. LNG exports to Europe throughout this coming summer. Next, on Slide number 10, let us look at the pricing improvements at some of the hubs that we sell significant gas to. The chart on the left-hand side of the slide shows the TGP 500L basis strength. With the Plaquemines LNG facility consistently averaging feed gas of over 4 Bcf per day, we have seen increasing demand along our TGP 500L firm transport path, driving a higher premium at the delivery point relative to Henry Hub. For the full year 2026, the premium is now plus $0.66 to Henry Hub, the highest level we have seen on an annualized basis. Next, the chart on the right of the slide shows local basis pricing relative to Henry Hub. Local pricing for 2026 is currently $0.74 back of Henry Hub, compared to the $0.88 differential over the past five years on average. We believe this local basis differential could tighten further driven by East Region storage that is more than 13% below the five-year average. As an example, the recent winter weather event combined with this low storage in the East led to February PECO prices settling at just approximately $0.15 differential to Henry Hub, the tightest February differential in ten years. Our acquisition of HG Energy substantially increases our exposure to strengthening local prices driven by the significant regional demand growth. Historically low storage in the East combined with this regional demand growth could result in a need for increased supply, supporting a decision for our growth capital that Mike detailed earlier. This significant regional demand growth is driven by new natural gas power generation and data center projects being announced throughout our region and along our firm transportation corridor. All of these projects will be competing for natural gas that could face supply challenges in that short timeframe. The HG acquisition increases Antero’s dry gas production and drilling inventory, boosting our exposure to this regional demand. Our coordination with Antero Midstream’s ability to build out infrastructure and supply the substantial water needs at these facilities, combined with our extensive land team, puts Antero at competitive advantage in participating in these projects. With that, I will turn over to Brendan E. Krueger, CFO of Antero Resources Corporation. Thanks, Justin. Michael N. Kennedy: I will start with Slide number 11, which highlights our 2025 financial and operating results. Our operational performance in 2025 was one of our best years yet. Dan Katzenberg: As we set numerous company records. During the fourth quarter, we achieved a new stages-per-day company record for a single completion crew, hitting 19 stages in a day. Michael N. Kennedy: For the full year, we averaged over 14 stages per day, Dan Katzenberg: an 8% increase from the 2024 average. Our drilling team achieved its best annual rate Michael N. Kennedy: averaging under five drilling days per 10,000 feet, 4% faster than the 2024 average. The chart on the right-hand side of the slide highlights our 2025 financial highlights. Dan Katzenberg: During the year, we generated over $750,000,000 in free cash flow. Michael N. Kennedy: We used this free cash flow to reduce debt by over $300,000,000, repurchase $136,000,000 of stock, and invest more than $250,000,000 in accretive Operator: acquisitions. Michael N. Kennedy: The strength of our balance sheet and the consistency of our free cash flow generation supports an opportunistic return of capital strategy. Dan Katzenberg: Where we can pivot between debt reduction, buybacks, and accretive transactions, or a portfolio approach to all of these, in order to drive shareholder value. Michael N. Kennedy: Next, Slide 12 highlights our 2026 production and capital outlook. Dan Katzenberg: Starting with the capital table at the top of the slide. Our drilling and completion capital budget is $1,000,000,000. This includes $900,000,000 for maintenance capital, Michael N. Kennedy: and $100,000,000 from the higher working interest as a result of foregoing a drilling joint venture partner this year. Dan Katzenberg: Additionally, we have an incremental three pads that we could develop in 2026 that would add up to $200,000,000 of growth capital during the year and drive further 2027 production growth. The bottom of the slide highlights our production outlook. In 2025, we averaged 3.4 Bcfe per day. For 2026, we forecast 4.1 Bcfe per day of production. This maintenance production level reflects the early February close of the HG acquisition and the expectation that the Ohio Utica divestiture closes in February. Next, as we have discussed, we laid out growth Michael N. Kennedy: to 4.3 Bcfe per day in 2027 due to not having a drilling JV this year Dan Katzenberg: and a growth option that could increase our 2027 production up to 4.5 Bcfe per day. Michael N. Kennedy: This discretionary growth option will be based on the outlook for natural gas prices and in-basin demand during the year. Now let us turn to Slide 13 to discuss our updated hedge program. Dan Katzenberg: To de-risk the acquisition of HG, Michael N. Kennedy: hedge those volumes Dan Katzenberg: to provide a clear path to funding the transaction in just three years using the free cash flow from those hedges Michael N. Kennedy: along with the divestiture of our Ohio Utica assets. Dan Katzenberg: In 2026 and 2027, we are hedged with a combination of swaps and wide collars. We have approximately 40% of our 2026 natural gas volumes hedged with swaps at a price of $3.92 per MMBtu. We have another 20% hedged with wide collars between $3.24 and $5.70 per MMBtu. Our hedge book allows us to protect the downside by locking in a portion of our free cash flow Michael N. Kennedy: while at the same time maintaining attractive exposure to higher natural gas prices. Dan Katzenberg: I will close by commenting that while our equity value remains near levels from before the HG acquisition, our company is much stronger today. Through the transaction, we increased our production base by over 30%, extended our Marcellus core inventory by five years, reduced our cash cost by nearly 10%, and substantially increased our free cash flow. Michael N. Kennedy: We achieved all of this without using any of our equity. And we expect leverage by 2026 to be similar to where we were prior to the Operator: acquisition. Dan Katzenberg: Which was just below one times. Looking forward, we are well positioned to capitalize on the significant natural gas demand growth Operator: expected. Dan Katzenberg: Both on the LNG front in the Gulf Coast and from the Michael N. Kennedy: significant power demand that we see occurring regionally. With that, I will now turn the call over to the operator for questions. Thank you. And at this time, we will conduct a question and answer session. First question comes from John Christopher Freeman with Raymond James. Please state your question. Operator: Thank you. Good morning, guys. The first topic, just on growth capital, just want to know if you all could kind of provide a little bit more color on sort of what kind of in-basin demand gas price assumptions you all would need to kind of support that growth plan, kind of relative to the current strip and outlook? Dan Katzenberg: Yes, John. Our goal is always have the most capital efficient development program and we do have that Michael N. Kennedy: but what that leads us to is to try to have a steady state program. So we are running three rigs and two completion crews right now. So maintaining that would result in growth not only in 2027 at a couple hundred million a day, but also in the further out years. But an attraction of this, though, is that it is flexible. We have the ability just to do our maintenance capital program with leading and drilling two or three less pads and still maintaining production, and then deferring those pads in the future years. You saw us do that in 2024 when you had kind of a $2 gas environment or $2 plus. Then when the natural gas returned to more kind of the $3 plus level, we completed those pads. So that is kind of the expectation here. All of that has the ability to be deferred. It is all second half capital. So we can call an audible then. But if you saw a $3 plus gas, as Brendan mentioned in his comments, the local differentials being so tight that continues. You would probably see us complete those pads and drill those pads. But if it was lower gas environment, we would defer those into future years. Dan Katzenberg: The other nice thing on this capital, this growth, is it is not based on any commitments Michael N. Kennedy: so it truly is flexible. It truly is an option value for us. No commitments with that. It is all local gas. And with discussions we are having and the prices we are seeing, and we have actually already entered into some Dan Katzenberg: sales to utilities off of MVP. As those continue, we will complete those pads into those opportunities. Operator: That is great. Very helpful. And then just follow-up. On Slide 11, you all showed kind of the breakdown of the uses of the free cash flow last year. Roughly about 20% of the free cash flow went to buybacks and, as Brendan, as you mentioned, you know, leverage will be back below one times before the end of the year. Is there any sort of, like, just sort of absolute debt target or something like that that we should be looking at to where you would then potentially maybe more aggressively shift toward buybacks? I mean, I know you are going to be opportunistic, but if there is just some sort of metrics we should be following. Dan Katzenberg: No. Yeah. You know, there are no metrics Michael N. Kennedy: I think we are better positioned now than ever to be countercyclical in buying back shares. With our hedge position, size, and scale, very comfortable buying back shares regardless of where our debt is right now. But with that said, paying down the debt is normally when we actually perform the best from an equity standpoint, de-risking the business, getting it under one times as a result of this year’s activity. But if there is an ability to opportunistically buy back shares and be countercyclical, that is something that we would take advantage of. Operator: Thanks. Appreciate it. Michael N. Kennedy: Your next question comes from Arun Jayaram with JPMorgan. Please state your question. Dan Katzenberg: Yes, good morning, Mike, you have had Michael N. Kennedy: it has been just over 60 days since you announced the HG deal. And I was wondering if, as you look a little bit more under the hood Operator: thoughts on potential upside Dan Katzenberg: potential to the synergy Michael N. Kennedy: number. I think you identified $950,000,000 of PV-10 synergies. Just maybe thoughts on where you stand regarding synergies and how do you think about potential upside or better capital efficiency even as we look at 2026. Operator: Yes, Arun. It is actually better than our expectations Michael N. Kennedy: I was actually out there last week. What is really apparent when you go out there, it is part of our field. It is adjacent. We are the natural developer of it. It just extends our field south to that southern row Dan Katzenberg: of dry gas and liquids opportunities, a little flatter down there. Bigger pads, ability to Michael N. Kennedy: have wider spacing, do bigger completions, have terrific recoveries. Other thing that has come to our attention is just an improvement in our cost structure that is coinciding with all this local gas demand and better in-basin pricing, which we did not underwrite and did not have. So there will be some upside on the pricing, I think. And then I think there will be further upside on the cost structure and recoveries and expanding our margins. Great. Mike, and just maybe a follow-up. I believe on the third quarter call, you highlighted how Antero was completing one of its kind of first dry gas pads in a number of years. I was wondering if you could give us any sense, if you have enough data to maybe to give us some thoughts on how the results played out relative to your expectations and does this set up more of an opportunity for Antero Resources Corporation on the dry gas side? The completion crew right now is on that pad, the Flanagan pad. So it just went on there this week, Arun. Dan Katzenberg: Moving from the Shin pad over to that. So Michael N. Kennedy: still early on that, but we have high expectations for it and very confident in its results. Great. I jumped again on my question. Thanks a lot, Mike. Appreciate it. Yep. Dan Katzenberg: Next quarter. Michael N. Kennedy: Your next question comes from Kevin Moreland MacCurdy with Pickering Energy Partners. Please state your question. Dan Katzenberg: It is Kevin McCurdy. Thanks for taking my question. As we look at the production ramp this year, you end up at the same spot, but the ramp is maybe a touch lower than we were expecting. I wonder if you could maybe touch on the variables that impact that ramp and is that ramp mainly on the acquired assets? Yes. On the production, it is not a Michael N. Kennedy: touch lower. It is as expected. We gave some quarterly performance. We closed it quicker than we thought. Dan Katzenberg: When we mentioned the 4.2% on the initial Michael N. Kennedy: call, that was from Q2 to Q4. It is still 4.2%. It is 4.1% now in Q2 with a turn in line happening Dan Katzenberg: the middle of the quarter that pushes that up to 4.2%. So it is as expected. So cadence is terrific. Michael N. Kennedy: And then goes to 4.3 in 2027, then with the growth capital that we have, if we execute on that plan, we would be at 4.5% in 2027. Great. Thank you for the detail on that. Dan Katzenberg: And maybe shifting to NGLs, as we track the C3 prices, Antero, it looks like domestic prices have not moved much this year, but international prices have been driving your forecast as C3 price for the year up a little bit. I wonder if you can touch on maybe what do you think is driving that arbitrage and how you think that progresses through the year? And maybe is Mont Belvieu fully debottlenecked now or are we waiting on further expansions this year? Yes, Kevin, this is Dave. I will take that one. So on your first question on what is driving the international pricing, typically we see this time of year of the winter propane prices really kind of rise relative to naphtha. So we are seeing levels that are kind of in line with what we have seen in prior winters. But certainly some of the issues that we had on the U.S. export infrastructure side, kind of a lower or a later start on some of the expansion capacity than maybe we had anticipated. Some challenges that some folks have with refrigeration units, as I mentioned in my comments, kind of led us to see the inventories in the U.S. kind of go a little higher than what folks are modeling and expecting at that point in time. So I think here in the first quarter we are seeing those issues resolve. We typically have some fog challenges in the winter as we always do. But strong domestic demand is kind of keeping that from being too noticeable in the inventory levels. But just the usual international markets having a strong desire for U.S. LPG, and when they see any kind of hiccup at the dock in kind of peak demand season of the winter, you see that flip through in the pricing while we always see that appreciation versus naphtha. And then, yes, on the export side, I would say really seeing, even though we kind of talked about expansions in 2025, did not really see the effect of those until we get into calendar year 2026, and then further expansion is coming. So view us really at the front end of that debottlenecking in the Gulf Coast right now. Thank you. I appreciate the answer. Michael N. Kennedy: Your next question comes from Greta Dreskoye with Goldman Sachs Asset Management. Please state your question. Operator: Good morning, all, and thank you for taking my questions. My first is just Greta Dreskoye: on the winter gas realizations. Given the volatility in both the Gulf Coast and Northeast pricing this winter we have seen so far, can you speak a little bit more about your outlook for gas realizations in this quarter in particular? And just key considerations to keep in mind in the context of your scale of your volumetric exposure at the Gulf Coast and the moving pieces of the two transactions. Dan Katzenberg: Yes. Hi, Greta. Yes, I mentioned in my initial Michael N. Kennedy: comments, we did not have any curtailment. So, obviously, we participated in the pricing that occurred in the region and on the Gulf Coast in the first quarter. So we typically have 80% first of the month and 20% on the day. So we were able to sell 20% daily pricing during the quarter. Greta Dreskoye: Great. Thank you. And then a quick follow-up as well. Just on hedges, given the amount of volatility that we have seen at the start of the year, can you just talk a little bit about your current view on potentially layering in incremental hedges in 2027 or beyond if the forward curve gives you that opportunity? Michael N. Kennedy: Yes. I think you said that well. 2026 we are set. 60% hedged, and a high $3 level and some wide collars. 2027, we have some room to go. We are about 900,000 MMBtu per day hedged. So about 30% hedged in that high $3 level. I think high $3 level is, you know, a good area to target. The other thing to note is the M2 basis has really come in. I think it is the tightest it has been on a forward-looking curve in, you know, ten years. Ability to hedge that at about $0.75–$0.76 back level. So if high $3 and hedge the local basis at $0.75–$0.76, lock in Dan Katzenberg: $3 realizations at the wellhead locally. Michael N. Kennedy: That is an attractive level for us. So I think we continue to layer some of those in. Greta Dreskoye: Thank you. Dan Katzenberg: Mhmm. Michael N. Kennedy: Thank you. And your next question comes from Josh with UBS. Please state your question. Just going back to the cost structure, can you talk about how this may change throughout the course of the year? I believe you talked about $0.25 per Mcfe margin improvement due to GP&T costs start higher that declines, so you also see a benefit into 2027 versus 1Q of this year. Sort of direction there would be helpful. Thanks. I think you touched on it. $0.25 is a good level. Dan Katzenberg: Obviously, there is some variable component to our cost structure. You recall with every dollar up, Michael N. Kennedy: in the natural gas price is about a $0.10 variable just on production taxes and transport costs on our FT. Dan Katzenberg: So you had a little bit of that up compared to when we Michael N. Kennedy: mentioned December because the gas curve is actually up $0.60, up $0.26, so you saw about a $0.06 increase from there. But conversely, our realizations as well are still in that $0.10 to $0.20 premium, whereas we thought would be more flat. So the ability to add 800,000 Mcf per day of local dry gas and still have a $0.00 to $0.20 premium to NYMEX for 2026 is terrific. So looking good there, but think you hit on it, about a 10% reduction in our cost structure, about $0.25. Got it. And then just wanted to shift over towards any sort of potential power supply deals and see how those are progressing with the new HG volumes and some of the interconnects that you now have a little bit better in West Virginia, how would those maybe be developing? You have talked about now improving kind of local basis as well. How you may look to structure these? Dan Katzenberg: Thanks. Hey, Josh, this is Brendan. So overall, I think on power side, Operator: as Mike mentioned, think in his Dan Katzenberg: prepared remarks, Michael N. Kennedy: we are selling some of that gas already to utilities Operator: that are buying for a lot of this gas-fired power demand that we are seeing. I think on top of that, we continue to see RFPs come in quite frequently on additional gas supply. Dan Katzenberg: The next several years. I think as they get closer to being in service, they then turn to some of the larger gas producers and particularly investment grade gas producers in the region to look to lock in some of that supply. So we are seeing a lot of Operator: interesting conversations there and Dan Katzenberg: we will look to continue to lock in some of that pricing over time here. Greta Dreskoye: Thank you. Michael N. Kennedy: And your next question comes from Phillip J. Jungwirth with BMO Capital Markets. Please state your question. Dan Katzenberg: Thanks. Good morning. Your FT portfolio, it has always Michael N. Kennedy: delivered leading realizations, smoothed out price volatility. Most of this was signed up a long time ago. So I was just hoping you could talk about how you see yourself managing this FT position through the decade, including that associated with ethane, C3+. Is there any you do not feel the need to keep? And is there just a long-term margin optimization story here through recontracting or maybe even picking up different FTs from others who do not have inventory? Dan Katzenberg: Yes, good question. Definitely an optimization. I mean, we are so well positioned right now. We can pick and choose the best path going forward. Also now with the flexibility in the local dry gas Michael N. Kennedy: so we can do both. Dan Katzenberg: And that is an opportunity for us over the next couple of years if some of these long-term agreements come to the end of their original agreement, we will assess whether it makes sense. But Michael N. Kennedy: that is a great story for us on a go forward and definitely upside, our ability to optimize those Dan Katzenberg: transport paths and optimize our cost structure. Michael N. Kennedy: Okay, great. And then as we think about the organic just leasing program, hoping you could kind of frame the competitive moat you have here in terms of existing footprint or infrastructure. There are still some smaller players in and around you, and just what is the pathway for some of these smaller E&Ps to efficiently develop their position? Or have you made it pretty prohibitive for them to do that given your large footprint and surrounding footprint? Dan Katzenberg: No, we are obviously the West Virginia natural gas and NGL producer, and our size and scale makes it a lot more efficient for us to develop the asset compared to others. So I think you will continue to see us build upon that. Whether through organic leasing or small transactions, continue to just consolidate our position in West Virginia. And that will continue to drive our capital efficiency and lower cost structure and margins. Michael N. Kennedy: Great. Thanks, guys. Your next question comes from Leo Paul Mariani with Roth. Please state your question. Yes. Hi, guys. Just wanted to follow up a little bit on the growth CapEx question. Obviously, you guys kind of cited that this $3 plus world is sufficient for you guys to go ahead and spend some of that growth CapEx. Leo Paul Mariani: Just wanted to kind of clarify, is that a $3 Henry Hub price? Or is that more of a $3 kind of in-basin price, which seems like you are fairly close to that given the tightening basis as we roll into next year? And then if you do decide to the capital, could you just provide a little bit of color in terms of what that looks like in the second half? Is most of that CapEx kind of fourth quarter and then production starts to ramp kind of early in 2027? Just any kind of moving pieces around that would be great. Dan Katzenberg: Yeah. First part is more NYMEX based. You know, like you cited, we can right now, the market is at, say, $3 in-basin for 2027. Even if you had $3 NYMEX and that $0.70 back, you would be in the Michael N. Kennedy: high-$2s in-basin and you are talking $1 cost structure on this gas, so you are $1.50 margin even in that level. It is $0.50 F&D. So you are still having terrific returns. These are all local dry gas pads. The optionality here is kind of one of the key points, flexible. There are no commitments around it. So we can judge it at the time and we can hedge it as we have been Dan Katzenberg: as well. So $3 plus kind of NYMEX is more where our head was at with that type basis. The second part is it is all second half capital. Michael N. Kennedy: You will not see any of the production ramp until 2027. Obviously, you have a six to nine month kind of cycle on drilling, completing, and turn-in-line date. So there will be second half capital. We looked at it, it is almost all second half capital. It is like 95% all second half on these two to three pads. And then the production comes on in 2027. Okay. Appreciate that. Leo Paul Mariani: And just with respect to the buyback here, I was getting a sense, correct me if I am wrong, do not want to put words in your mouth, that the debt paydown is maybe a little bit more of a priority just given the fact that you kind of added some leverage, you obviously have some nice hedges to take care of that. And the buyback is going to be maybe a little bit secondary and fairly opportunistic as well. Dan Katzenberg: Yeah. It is fair at this level. But if you do see any sort of opportunities on the equity, you should be Michael N. Kennedy: pretty confident we would take advantage of that. Leo Paul Mariani: Okay. Thank you. Operator: Your next question Michael N. Kennedy: comes from Kaleinoheaokealaula Akamine with Bank of America. Please state your question. Just played a Dan Katzenberg: good morning, guys. Thanks for taking my question. Kaleinoheaokealaula Akamine: My first question is on the growth option. I am wondering if that investment sets you up for 4.5 Bcf/d early in 2027. And what the new maintenance capital number is associated with that volume level. Dan Katzenberg: That would be early in 2027, and that is not a maintenance capital. Running three rigs and Michael N. Kennedy: two completion crews would add a couple of hundred million a day of growth 2028 and 2029. So you continue to grow at that kind of $1,200,000,000 capital. Our maintenance capital would still continue to be $900,000,000-ish. That is kind of what we were looking at this morning. It is pretty remarkable. So maintenance capital stays relatively flat even at those levels. Just highly, highly capital efficient development program. Got it. I appreciate that. And for my second question, just kind of based on your comments, it sounds like the growth option will be on the Kaleinoheaokealaula Akamine: dry gas acreage, Michael N. Kennedy: whether that is legacy Harrison County or the new HG that you picked up. Just kind of wondering if there is sufficient egress to move those growth volumes around the basin Kaleinoheaokealaula Akamine: or if you will be spending additional midterm capital at Antero Midstream. Dan Katzenberg: No. Antero Midstream does have some capital. It is Michael N. Kennedy: around $20,000,000 this year to build out our dry gas eastern connect, all the various pipes, and that will provide enough egress, and there is Dan Katzenberg: so much local demand that you will be able to sell the gas locally. Thank you, Mike. This year. Michael N. Kennedy: Thank you. And your next question comes from Subash Chandra with DolanX. Please state your question. Yes. Hi. So just curious, maybe the question is for Dave. What is the Subhas Chandra: PDH outlook in China in 2026? Dan Katzenberg: Yes. So right now, I mean, the current infrastructure is running in the 65% to 70% utilization range. We did have four plants that came on in 2025, so kind of continuing to see the absolute amount of volume that is capacity that is available to ramp into is in that 300,000 to 400,000 barrels a day Operator: range. Dan Katzenberg: And then two additional plants right now on the schedule to turn in line—or come online, sorry—in 2026. And those total about another 55,000 barrels a day of PDH demand. Subhas Chandra: Perfect. Excellent. Thank you. And then it seems like, you know, the completions in 2026 guidance is longer laterals than 2025. Just curious if is any of that HG related? Or is that going to be more influential in 2027? Dan Katzenberg: It is pretty much all HG related, actually. That is one of the attractions Michael N. Kennedy: here. I mentioned it is a row, but they were able to design it as a very efficient row that basically goes north and south 20,000 feet both ways. It is kind of their average. So that takes us up to that Dan Katzenberg: 15,000 feet level from our typical 13,000 feet. So definitely accretive on a lateral length, the HG development. Subhas Chandra: Great. Thank you. Michael N. Kennedy: Thanks. And your next question comes from John Abbott with Wolfe Research. Please state your Subhas Chandra: Thank you for taking our questions. I want to go back to the question, go back to growth. And the HG transaction has added to your inventory. We have already sat here and discussed John Abbott: you have the option to get to 4.5 Bcf per day in 2027, you could grow beyond that. I guess, when you sort of think about your inventory in hand, and when you think about NGLs and dry gas, how do you think about the extent that you are willing to grow? Just given your visibility on that for user and how you think about that? Michael N. Kennedy: Yes, quite a bit. I mean, we are the ones that should grow. We have the most capital John Abbott: program. We have the FT that goes to the LNG exports. We have the local dry gas where it goes to where all the data centers and that gas-fired generation is coming. So all the demand centers that everyone projects that is coming over the next five years, we are the best positioned for it, and we have the best rock. So that is kind of where our head was at, is why would we, you know, navigate through this by strictly enforcing ourselves at maintenance capital. We want to be the most capital efficient Michael N. Kennedy: developer, and that is always our goal. And so a steady state program is always the way to achieve that. So just running three rigs, John Abbott: and two completion crews flat will result in the most capital efficient development, and to toggle away from that based on monthly swap prices is not something that we would probably do. Michael N. Kennedy: And when you put that into our development plan, that results in this growth. So that is kind of where we came to on this. We are the ones that should be growing and meeting this upcoming demand, and we are the best positioned for it. John Abbott: I appreciate it. And then the follow-up question here, I guess, would be for Justin. So you were, in the slide, you are highlighting the tightening of basis. I mean, I guess the growth option here from bringing on the dry gas wells, you are to hedge that. But I guess when you sort of look at basis and tightening, how do you think about basis in growing into that basis? How do you think about your impact to basis? And the decision to grow? Yeah. We are not—I mean, we are talking a couple hundred million a day of growth. I mean, the demand numbers you are seeing are well in excess of that. So on a percentage basis, it is probably—we are actually probably not adding to or detracting from the supply and demand picture. So Michael N. Kennedy: this is not strictly material. You are talking 200,000,000 a day of John Abbott: gas production growth versus Bcf per day of gas demand. All right. Appreciate it. Thank you for taking our questions. Michael N. Kennedy: Your next question comes from Sam Margolin with Wells Fargo. Please state your question. Subhas Chandra: Hi, thanks for taking the question. John Abbott: Back to your Dan Katzenberg: point on capital efficiency, it looks like just from your John Abbott: production guidance and your activity guidance that HG had a Dan Katzenberg: positive impact on your corporate decline rate. Is that accurate? And if so, could you help quantify that a little bit? I am John Abbott: looking at the Michael N. Kennedy: production outcome from this spending. Yes. Our capital decline actually was John Abbott: in the low 20s. Hers is a little bit above that, kind of mid-20s. But what we have, it is Dan Katzenberg: have a flatter production profile. You have some John Abbott: and an HG flatter—the midstream system has more of kind of a flat production profile in the wells in the first couple of years, whereas ours was more well plumbed. So it is fairly similar, but a lot of their production has had a constraint just around midstream. And so it has got a flatter production profile in its first couple of years. Got it. Okay. Thank you. And then just on the commercial side, there is a lot of focus on power, but the industrial piece along some of your firm transport destinations also has some growth prospects. Are there commercial or fixed Dan Katzenberg: gas supply opportunities in that category? Yes. Good morning. This is Justin. We have spoken about this in previous calls, but Antero’s firm transport book is set up with approximately 2 Bcf that heads down to the Gulf Coast, which Mike mentioned. That gets into the LNG corridor. And within that path, not to mention what the local growth will be, and we have different capacity that will pass by those end users. Just if you think geographically—Kentucky, Tennessee, Mississippi, all the way down to the LNG corridor—we have identified potentially 4 to 6 Bcf of different demand that would be a potential fit with the Antero firm transport delivery. So we continue to have those conversations. As Brendan mentioned, we continue to get RFPs for different supply for these data centers and power projects. John Abbott: And, you know, we have touched on this in the past as well, but Dan Katzenberg: the competition for that volume southbound continues to increase over the next couple of years. Subhas Chandra: Thanks so much. Operator: Thank you. Michael N. Kennedy: And we have reached the end of our question and answer session. So I will now hand the floor back to Dan Katzenberg for closing remarks. Dan Katzenberg: Thank you for joining us on the conference call today. Please reach out with any further questions that you have. Have a good day. Operator: This concludes today’s call. All parties may disconnect.
Operator: Welcome to the NIBE Q4 Presentation for 2025. [Operator Instructions]. Now I will hand the conference over to the CEO, Eric Lindquist; and CFO, Hans Backman. Please go ahead. Gerteric Lindquist: Thank you very much. Good morning or good afternoon to all of you out there. Hello also from my side. We appreciate you calling in. And just for the sake of order, we would like to present the report now in 20, 25 minutes at most, and then allow for questions, of course. And then we have, as a target, to stop the whole interview here around 12:00 o'clock. And just another sake of order, we could possibly allow 2 questions per analyst or per person and then you have to queue up again to allow as many as possible to put questions to us. All right. With that said, once again, welcome. And we're going to go through a number of slides. And I think that the headline as such gives a pretty good picture of what we're going to talk about, and we hope that you read the report. And of course, it's been a very transparent year to you regarding our recovery, if we call it. And we saw the signs already at the end of '24, and then gradually quarter-after-quarter, we've seen the improvement. And then with the fourth quarter, which is typically a good quarter for us when we return to seasonality, it's a very robust development. Of course, there have been hindrances out there, political and tariffs and what have you and Swedish currency, which is very good to note on one foot that it has strengthened, but it's been, of course, also quite dramatic when you invoice in other currencies. Nevertheless, that's our task to solve or work with these issues. And there are no excuses, but rather saying, okay, we have arrived where we are, given all the conditions in the world. And if we just have a quick look at the figures themselves, there you see, of course, the quarter and you see the year as such. And the summary is, when we look at the figures, that the growth is fairly modest. It is even minus in the fourth quarter. But taking into account the currency effects on the full year, it's a little bit better than 5% growth. And in the quarter, it's even more than, so it's like just under 7%, I think, which means that we are truly recovering and the margin is with us. The operating margin has come from just north of 10% in the quarter to 13.1%, which we think is fairly solid. And also for the year, as such, we are back on track with 10.5% versus the 8% that we weren't so pleased with a year ago. But again, solid demonstration of strength. And we're going to go through respective business area. And we look at these bars here in the graphs that you have ahead of you, of course, they are a little bit diminished by the fact that the currency has been so strong. The last years, I think, cut down with SEK 1.8 billion. So that graph would have been different had we had a fixed currency ratio. And it's -- here, when we look at the profit after financial items, there, of course, they are not directly influenced of -- course, they are influenced, but to a lesser degree. Now we see that the curve is going in the right direction again, which is very pleasing. And we see also that the seasonality is reinstalled. And we've been talking about that quite a bit, because unless you've been following us for several years, the years '21, '22, '23 weren't really, if you call it, normal because the seasonality was not pronounced at all. But prior to that, we had a curve just like we more or less have had '25. On Climate Solutions, which is the business area that you look at the most perhaps, and sometimes we even call the heat pump company, which we'd rather be called like -- something else, like a heating technology company, because that is, again, diminishing the other 2 business areas. And even Climate Solutions is not 100% heat pumps. Nevertheless, it's been a good year for us. And of course, we have fulfilled all the investments in product research and product development, and our factories and our equipment is up spick and span, which means that we are very ready to take on the challenges coming in the future. So that's a very positive attitude within the whole group, what we have achieved together. And it's -- I mentioned that earlier this morning when I had a short interview saying, well, this is really a very good demonstration of strength. Hans and I can only do so much, but we have a phenomenal organization behind us that fully understand -- who understands the task, and we have been working together, now for many years together, of course. And we had a slowdown in '24. We just said, let's analyze that, make a program and then charge ahead again. And that's pretty much what you see in -- during the year and during the quarter for Climate Solutions and also the other business areas, which we're going to come to. And if we just have a quick look at the figures for the year for Climate Solutions, we see that -- of course, again, the modest might look not so phenomenal, but it's actually a growth of 7.6%. And for the quarter, it's just under 9%, which, of course, is contributing to the margin of 13%, which we have been working so hard to achieve and which we're also going to show you on the next slide that -- of course, it was not very pleasing to be under even 10%, which is the immediate target for all business areas. But to be under, that was a little bit painful we had to admit. And now we're back on 13%. And it's a very clear signal in the report that we don't aim to stand there, but rather move into this, I'll say, broad span in the future and already this year where we're standing. Looking at Element, same thing, it's been a challenging year for them. But some sectors are good. The heat pump sector, the semiconductor sector has really improved during the last months. We had a weak period in the third quarter, and that was one of the main reasons why we couldn't really catch up to the targeted 8% operating margin. And we indicated that already in November. Other than that, they are working very determinedly. And with all the challenges that we've all had, so I won't dwell on each bullet point here. But, of course, there, again, we like to be back within the span of 11% to 10% -- 8% to 11%. So growth and margin recovery, I mean, those are the headlines for the year to come. And here again, it's a very narrow expansion if you look of growth. But if we look at it from a fixed currency point of view, then we have a growth of 6% for the year. And also for the full year, it's -- or for the full quarter, it's well above 5%. So it's catching up. Here, of course -- there, we have the icicle sticking down 2005, where we had a very difficult year, but there was some money set aside. But now we've had 2 years below 8%, and we are very determined to bring it back within that span, as I just mentioned a few minutes ago here. And looking at Stoves, of course, they've been dragging. And there, we misinterpreted the market come back, we can say. Stoves hit the tougher situation a little bit later than the other 2. And even the first quarter '25 was not so bad really. But then, of course, consumers were certainly influenced by all the worries in the world. And we've taken away costs, of course. And we are fully determined also here to return to a margin that we are more used to. And if we look at that -- the precise figures, we can say that the growth, of course, was very, very modest, is even minus, and we are not really used to that. It was 5 percentage units drop if we discount the currency. But still, even the fourth quarter was just on the verge being equal, taking the currency effect away. We feel that we are scraping the bottom, and we hope now that it will be a big leap jumping into that span, but that's certainly our target, together with, of course, a volume increase or organic growth. And before Hans comes in, I'd like to just look at or show you the bars that we typically show. And of course, we had a phenomenal growth there, '22, '23, even '21. And then we dropped down painfully so. And now we are even including the real currency effects, just passing the previous year. But of course, had we add another SEK 18.8 billion there, we would have been at a different situation. Profit after financial items, we have a bit to go there. They are determined to come back as far as the margin improvements we've said already. And of course, that's a combination of being very frugal with cost, utilizing our investments that we've had now, so determinedly fulfilled, and of course, being very aggressive in the market. So that's the good old usual tools. And we hope to be able to show you better bars as the years are coming by. When it comes to sales distribution, it's fairly much the same as in the past, where 2/3 roughly come from Climate Solutions and Element 1/3 and Stoves a little bit less than 10%. And of course, with Climate Solutions coming out with a fairly good margin, the result, as such, is, of course, dominated by that, and with Stoves fairly marginalized because of the relatively weak performance during the year. Geographically, last slide before Hans steps in here, it's, yes, North America, 31%; the Nordic country, we consider being our home market, it's like less than 20%; and then 45% in Europe outside the Nordic countries. So that's fairly stable we'd say. So I think I hand over the range to you, Hans, there. Hans Backman: Thank you very much, Eric. Yes, I'll continue as usual, so to speak, and then we'll, of course, leave room for the questions. Just one comment on the group before I head into the divisions again and then the balance sheet and so forth. As you saw, we have adjusted numbers. That's something we very seldom have really. We like to present exactly what we have performed. So in reality, we've only made adjustments twice, and that was back in 2005, as you mentioned, when we had a savings program back then, and then for '24 for that savings program. This year, we did, however, decide to mention that these acquisition-related revaluations of contingent liabilities would need to be mentioned separately because they have very little to do with the underlying operations, so to speak, the SEK 178 million, SEK 179 million. That's what we do every fourth quarter every year for all of our future payments for remaining shares in companies that we owned. And they are, of course, based on future projections. And this year, we had a very fortunate situation in a way, where a couple of companies and owners wanted to remain on board as owners for a number of more years and not step out soon, so to speak. And we always welcome that because we want the people to be involved with flesh and blood. So that was the reason for that adjustment. Now heading into Climate Solutions again. I mean, as Eric mentioned, we had a good and strong finish to the year by performing quite well in the fourth quarter, almost a little bit better than I had expected since December was the last December now for many years which was employer-friendly, so to speak. You could take a few days off and get a long vacation. But that did not hinder our companies from continuing to deliver and perform, which was very pleasing to see. So it was a good finish to the year, where we had good sales in the Nordics, especially Sweden, Denmark kicking in, and then Germany and the Netherlands, and to some extent the U.K. as well. And then in North America, with the commercial sector being very strong, so to speak, or relatively seen strong -- that's our bigger area over there, but also U.S. being a very stable country in terms of business. So that contributed to this good performance. And thanks to the volume coming in then, which you don't see due to the currency, but Eric went through it quite in detail. I mean, we've had an underlying good organic growth. And that, in combination with the savings program that we launched and where we have been really focusing on holding on to costs, have generated both a better gross margin, up by some 3, 3.5 more percentage units from Q4 of last year, and then holding on to the SG&A costs as well, making it possible for us to deliver a growth in operating profit of some 34-plus percent, coming in at this margin of 15.7%. So quite an achievement coming up from the 12% of last year and then landing in the full year for Climate Solutions at 13%, up from the 9.3%. So we're back on track. And as Eric mentioned, we, of course, want to continue to develop from this level. In terms of split of sales per geography, there have not been many movements. We're very stable in this situation. The Nordics always represent just below 1/4. The rest of Europe is basically half, and then North America is about the same as the Nordics or slightly, slightly bigger. Moving on into Element. Also had a relatively strong finish to the year, almost coming in at 8%, which is the bottom range of the interval where we want to be. And this was not a given in a sense as this is the, as we typically say, our most global business area where we are exposed both to many geographies and also many segments, where the majority have been stable, some have been growing nicely or kicked in again. HVAC with heat pumps being one of them. Of course, semiconductors coming back in the quarter. They were up in the first part of the year but then had a decline in Q3 and came back. Whereas white goods, automotive in Europe and industrial still are in a slightly more challenging situation. But all in all, we were able to increase gross margin here as well in the quarter by some 2 percentage units. The operating profit coming in almost 17% above from last year, leading us then to landing a full year at 7% operating margin with a slightly better gross margin, keeping the SG stable. But still a little bit of road to go to get back into the 8%, but clearly on the right track. In terms of split of geographies per sale, as I said, this is the most global business area. Not so much of movements within this area. It's the others portion that has grown or changed a little, you can say, being the Asian part, which declined slightly, since the other ones have grown or come back, you can say. But no major changes here. Stoves then, as you all know, the business area is still struggling a little bit due to a difficult market. I mean, on the one hand, the low new build rates, people being a little bit uncertain due to the geopolitical situation and so forth have been holding on to these types of products. But one should not either forget that we come from a very special situation in the sense that during the pandemic and the homeowner trend that followed, we had a very strong demand in the business area, which then was continued once again, you can say, when Russia invaded Ukraine and people were really looking for a heating device which was not dependent on anything else than wood, so to speak. So with that in mind, we think that the business definitely will come back, but that it still is lagging a little bit behind before it will kick up. But also here, we have obviously been working on cost control and focusing on trying to grow the business and keeping up the profit. And gross margin improved by 2 percentage units almost or 1.5% at least in Q4, and we were able to basically maintain the profit and coming in at an operating margin just north of 10%. And for the full year, the 4% that Eric mentioned before. In terms of geography or sale per geography, no big movements. Since quite some years back now, as you know, we have a big operation in North America based in Canada, in the Vancouver area, and that has developed quite well in terms of sales. But of course, the tariffs have hit us in that respect. If we then move on to the balance sheet and eventually cash flow statement and so forth, you see that the total assets have actually declined from SEK 70 billion to SEK 65 billion. A lot of this has to do with currency. If you see the intangible assets there, they have come down from SEK 32 billion to SEK 29 billion. There's a good portion of currency in there. But of course, also a result of depreciation, and that goes also for tangible assets. Although we have continued to look at acquisition opportunities and always do, we have not brought so many companies on board. So we have not had any add-ons here in the same way as before, where the balance sheet always has expanded. And you basically see the same effects on the equity and liability side, where equity is lower than before, but that is very much a result of these currency translation effects that I just mentioned. But also the fact that we have handed out dividends, and you have the bridge on this in the report on Page 12, I believe it is. Pleasing to see is that both the long- and short-term interest-bearing liabilities have come down. We've amortized on our loans. So we've reduced those by some roughly SEK 2.2 billion, which has improved our financial strength, you can say, for future acquisitions. And very pleasing to see is that the cash flow has from the underlying operations generated some SEK 400 million more than compared to last year, which is pleasing in itself. But we've also now had a release in working capital that we have been talking about. And in previous quarters, we've had a good development on inventories. We've step-by-step reduced those. We've slightly increased our payables, which also has had a good effect. But we didn't in Q2 and Q3 get the immediate effect of our increased sales. Typically, we invoice a lot at the end of the month, and then it takes a little while before the effect of that kicks in. But a good portion of that did kick in now in Q4. So we released some SEK 700 million then, leading us up to having a good cash flow from operations after change in working capital of close to SEK 4.9 billion. The investment in current operations has come down and will come down even further following the big investment program that we have gone through and are just about to finish. And then a small portion there on acquisitions. And then the financing activities, that's, of course, repaying debt and also paying out dividends. So the fact that the change in liquid assets is slightly negative there, that's fully planned. So I think a very good and strong cash flow behind us. And just a few key financial numbers here. We still have a good portion of cash on hand. It's at SEK 5.9 billion basically, slightly down, but just for the reasons that I mentioned, that we have used part of the cash to amortize on our loans. And as you see, the interest-bearing liabilities in relation to equity has further come down. And very pleasing to see is that the net debt to EBITDA has now come down even further from the 2.9 in the previous quarter to 2.7. And regardless of us having adjusted that number or not, the number is basically the same. It's either 2.72 or 2.67. So it's a very small difference coming from that effect. And then an improved equity assets ratio, making us a solid company. And the working capital, we're continuously looking into that and working on that. It's given a good effect during the year. We have as an intermediate target to land in at 20%. We came close here with the 21.2%, but having taken it down about -- well, from the 22.8%, as you see there in the picture. So that's also heading in the right direction. And just the very last key financial numbers. Obviously, return on capital employed and return on equity still have some ways to go to meet our targets, but they have definitely taken a step, both of them, in the right direction. So that's what we are continuing to focus upon. And with this year behind us, we're well positioned for that improvement. And the very last page here is a little bit of a summary of what I just talked about in terms of these financial numbers, where you can see the development of these key financials over the years. And up until the very special year 2024, we've gradually improved both the operating margin and the net margin and also the equity assets ratio. Return on equity has been suffering a little bit, but that is, of course, due to the strong equity in a way, it's communicating vessels in a way. But following now the recovery here in 2025, we think we are heading in the right direction again to continuously improve these numbers. And by that, I think we are basically ready for questions. And would you like to add something, Eric? Gerteric Lindquist: No, no, no. I think that we are -- we spent 26 minutes all in all. So now we have 34 for questions. And I was trying to speed up as much as I possibly could. Perhaps I was too short in some instances, but you covered nicely, Hans. So that's fine. You go ahead with your questions, please. Operator: [Operator Instructions]. The next question comes from Christian Hinderaker from Goldman Sachs. Christian Hinderaker: My first question is on the cost base. It looks like the margin improvement is mostly coming through in the gross margin line, as you talked to cost of goods sold in the quarter down from 69% last year to 66% of sales. Can you help us break down that cost a little bit? Interested how much of your cost base is driven by raw materials like copper and steel, for instance, and how much is labor? And then how we think about the moving parts year-on-year? Gerteric Lindquist: All right. Well, when it comes to -- as we say, we have a more intensive cooperation between both the companies in Climate Solutions and between Element and Climate Solutions. And that is bearing fruit, both when it comes to raw material reductions -- and also our new facilities, of course, they also allow us to be more rational, although the volumes are not totally satisfying yet. But those are the 2 major factors that I would say. And we kept pretty much the fixed cost at a level that is a little too high in the spring time and not too low in the fall, but the seasonality is very important. That's why we point on that. We have to have a very stable R&D fleet of people and so forth, and we can't diminish them and go up in the fall. We have to have a fairly even amount of indirect and clerks and developers and so forth. I hope I answered some of your issues there. Christian Hinderaker: Yes. Just maybe any comment there in terms of your copper mix exposure? Gerteric Lindquist: Well, copper is, of course, an important factor. But we are mitigating that to a point with vessels now being, to a larger degree, also produced in stainless steel. So that is -- and the alloys there are not hindering the mix to be slightly more positive. Christian Hinderaker: Okay. Maybe just secondly, I was interested in the North America performance for Climate Solutions. It looks like flat revenues year-on-year at around SEK 6.8 billion. If we look at the data from AHRI, that's showing a 37% decline year-on-year in November in volumes. Interested in what's behind that outperformance versus the market? Is it a timing dynamic? And any thoughts on the North American business would be great. Gerteric Lindquist: Well, I think that -- I mean, there are perhaps many or several factors. But one factor we believe is that we've been fairly quick to monitor and to adjust the refrigerants to the market demands. In North America, it's not so much propane or 290, but rather the 454. I think that's one factor where the assortment has been adapted to the market, presumably a bit quicker than some of our colleagues in the industry. And also the fact that the commercial segment has really been positively developing. So those are 2 factors that I think that makes our performance fairly stable. Operator: The next question comes from Uma Samlin from Bank of America. Uma Samlin: So my question is on the Climate Solutions margin. So you had this nice chart in the presentation where you could see the historical margin levels. And you also guided that 13% to 15% in 2026. So I guess my question is, from where we stand today, what do we need to have to get to the historical level of like 14% to even close to 15% margins? You talked about that you have a bit more efficiencies in your new factories. I guess that should help you to get a bit easier than it was in the past. So what are your sort of expectations for volume growth to get there? And do you see any further benefit from efficiency gains or cost cutting in the past 2 years to contribute to the margin improvement in 2026? Hans Backman: Well, of course, the factories are more efficient. But then, of course, we have to realize that the depreciations are kicking in. So we are mitigating that with the higher efficiency. And to bring it further into the interval of the span, that is a combination, of course, of growth and polishing even further on productivity and maintaining cost. That might be a hide and seek answer, but that's exactly how it is. It was painful to bring down the cost. We are doing our utmost to keep it at that. And of course, when we add cost, we know that, that is for a very good purpose. And realistically, productivity is coming along as the volumes grow. Not saying that, well, we have to wait several years. We believe that we are on the growth pattern, and we believe that the growth, continued cost control and increased efficiency, although dampened a little bit by depreciation, will bring us into that interval. That's the whole organization's target when it comes to Climate Solutions. Uma Samlin: That's helpful. My second question is around market share and pricing. So just wondering if you have any comments you could share in terms of your ambitions on market share? And what are the pricing trends you have seen in Q4 and going forward? Hans Backman: Well, we believe -- now it's very difficult to comment on the whole industry, but we are not very much friends of decreasing prices. And that's why we have always said that the price decreases we've seen in the market, they've been mostly linked to inventories being sold out, which we -- and we believe that's been a fair analysis in the past. And we believe also that once those overstocking items are out through the distribution channel, we have a more realistic pricing situation. So we do not believe that there is any dramatic activities on that line. And in some instances, we even recognize that there will be some slight increases of pricing. So I think it's been matured, if I may use the word, when it comes to the pricing situation. I hope I answered your question there, Uma. Or was that fulfilled or... Uma Samlin: Yes, yes, yes, absolutely. And any commentary you can have on market share? Hans Backman: Well, we believe that we are definitely not losing market share, but to say that we are gaining tremendously. But we are on a very solid ground with the assortment, our activities. And we also understand and acknowledge that our partners out there in the market, they appreciate that we've been disciplined with our prices, with our product launches. And the feeling is that we are on the right track when it comes to also gaining market shares. But I'd like to be more humble about an overall comment on that. Operator: The next question comes from Carl Deijenberg from DNB Carnegie. Carl Deijenberg: So 2 questions from my side. And first of all, if I could come back a little bit to the U.S. and the commercial offering. I wanted to ask a little bit -- I mean, I see that you're mentioning, for example, [ shellers ] being a product that is in good demand for you right now. And I can also see, when I look, for example, in water furnace, that you seem to have a product portfolio that is suitable for data centers. So just asking, has that been a positive growth driver for you in the U.S. that could explain the discrepancy in the last couple of quarters relative to the data points that were mentioned in an earlier question here on the call? Gerteric Lindquist: Well, we must say that we haven't really concentrated on data centers. We've rather been very strict when it comes to penetrating those segments, where we are historically relatively strong. But that doesn't mean that we don't have the ability, but there are so many companies rushing into that. So we are not standing by the side and saying, well, we wait and see. But we've been continuously preparing our products for the very suitable market in hospitals, educational centers and so forth and also governmental buildings, not neglecting perhaps the data centers. But we couldn't say that we have really put massive efforts in there, but rather maintain where we are and, of course, gradually looking at that and moving in there without forgetting at all our customers and our segments that we've been working so hard and working up or fostering, you can say. That was a long answer to because we know that, that is, of course, very inspiring. But I think that is still to be further developed by us. That's not the reason why we have seen the growth that we've seen. Carl Deijenberg: Okay. Good. Then I also wanted to ask, you mentioned Italy here as a market that is seeing sort of a return to growth, and I think this is the first time this year you're mentioning that country. And from what I know, you also predominantly have a more of a commercial offering in that market with Rhoss and so on. But just wanted to hear a little bit, are you seeing better residential dynamics in that market as well? Or could you spend some extra time on that also given the size of that market from a European standpoint? Gerteric Lindquist: Well, on the commercial side, we see an uptick, and that again has to do with the product ranges that we have now launched with modern refrigerants and the appetite from the market to install those. So I think we've been fortunate when it comes to the R&D. On the residential side, we don't see any major change really. So it's predominantly on the commercial one. But Hans has a comment. Hans Backman: Well, I mean, we often talk about people, so to speak. And of course, you do need to have a company that is in good shape and obviously very good products, but you also need very good people running the businesses. And I think we have been very fortunate to get good people on board in that country to drive the business, taking the portfolio, the assortment that we have and penetrating the market. And that has definitely contributed also to a good development over there. Gerteric Lindquist: You're absolutely right, Hans. I'm always a little bit concerned about mentioning that because then the headhunters are out there trying to recruit people from us. Hans Backman: I'm sorry. Gerteric Lindquist: No, no. No, no, no. I'm saying that jokingly. The whole success we started with that is built on people and that we've been able to improve now. It's just the 2 of us here. But the other 21,000 people out there, they are the one that -- they are the ones that make a difference. And we appreciate -- of course, the management in Italy is very, very good. Both the companies, in Climate Solution and also the people on the Element side, very professional, very devoted. So I'd just like to underline what you said. Thank you for bringing it about, okay? Carl Deijenberg: Yes, yes, absolutely. They're probably all listening into the call as well. Operator: The next question comes from Karl Bokvist from ABG Sundal Collier. Karl Bokvist: So first one is just on the talk -- we've talked a little bit about what you've done on the product side in North America. But in the report, you do mention the cross collaborations, et cetera. So when looking at the European market, any particular product categories worth mentioning? For example, you talked about the potential to expand into size-wise, smaller heat pump products by using CFL, for example. So just curious to hear your -- what you've done on that side. Gerteric Lindquist: That is very much to come. The figures for '25 had not been really influenced. Of course, we've started, but that's really to come during '26. So that is one factor that is -- we believe is positive. But we have to be cautious here not to mention too much compared to what we mentioned in the report. But of course, product presence and cross collaboration is important. We already mentioned purchasing and also R&D. That is coming -- really coming on very good. And Winston Churchill, if you like to refer to him today, he said there shouldn't be any crisis that you shouldn't use for a purpose that you -- that's necessary. And we believe that we have come closer to one another, both within the Climate Solution and within the Element and across. So the psychology -- and, of course, stoves, they also benefit from the material savings programs. So I mean, we always felt that we were tight, but I must say -- we must say that we're even tighter today than we were before '24. So that is to come as far as more to be seen. And if you attend the show in Stockholm in 2 months, I'm sure you're going to see that what we are talking about today. Karl Bokvist: Understood. And then the second question and a follow-up on that is perhaps more directed towards Hans. The investment level when looking at capital expenditure, just above or roughly SEK 2.1 billion for the year. And either in how you view it in relation to sales or in absolute monetary terms, how one should think about investments into the next couple of years? And then I have a follow-up on that. Hans Backman: Yes. I think we've been fairly clear on this, that we had in a way an exceptional period now of investments that was launched some 5 years ago of SEK 10 billion that we have basically come to an end with. Prior to that period, our investments typically were at some 3.5% of sales, and depreciation about the same. So we kept a stability between the 2 categories. And now in terms of investments going forward, we're finishing off these larger investment programs and will come down to a more normalized level in terms of investments in percentage to sales as before, you can say. It will be, of course, a little bit of a step-wise way coming there. But as Eric mentioned, of course, depreciations will kick in instead now when these programs are being launched or these facilities and product programs are being taken into production. But all in all, I mean, after this period, we aim at coming back to the historical levels, you can say. Karl Bokvist: Understood. So -- because on a quarterly level for the group, capital expenditure was up a few hundred million on a group level, but in Climate, it was up from around SEK 300 million to I believe, SEK 1.2 billion. So is this related to finalization of something or something else that we should keep in mind into '26? Hans Backman: No, it's very much a matter of finalizing projects that have been going on. It takes quite some time to build a factory, for example, or take a new building into operation. And then depending on what the market looks like, we have been adjusting the investment in the equipment, the machinery and everything according to market demand. And when we see that there is such an opportunity, so to speak, we go. And so it can be -- or it is linked rather to such finalizations. Operator: The next question comes from Anders Roslund from Pareto Securities. Anders Roslund: I have 2 questions regarding growth in Climate Solutions for this year. I assume that you -- some of the growth -- organic growth last year was due to that you have heavy destocking in '24. And now in '26, you will confront the sort of normalized demand. However, you saw a little bit of uptick in the second 9% organic growth, and we also know that we've seen quite dramatic increases in gas prices, but also in electricity prices. But overall, a cold climate here in Europe, et cetera, that drives maybe a higher replacement. How do you see this short-term development here, but also if you can manage to see organic growth in '26 on a similar level as last year, even though you have a tougher comparison? Gerteric Lindquist: Well, that was a long question. See if we can chop that up into a number of answers. To start with, I mean, if you talk about the destocking, we believe that the market now knows that the industry as such and the manufacturers they can deliver. So we believe that whatever comes in as orders goes out fairly quickly. So there is no buffer. I mean, when I say there's no buffer, those days are over. And of course, the market knows that we are all able to deliver. That's what I'm saying. Gas prices, of course, they are one factor when it comes to installment of heat pumps, but it's also linked to the price of electricity. If we just look strictly at gas and electricity and say, well, electricity goes up and then gas goes up equally, well, then nothing has been gained. So I think it's when you see that gas is going up and electricity is being reduced that you really see the effect. And I think that, that's still in the -- should I say, in the politicians' hand how should we maneuver or how should they handle gas prices knowing that the gas still is not totally free of hands in the eastern part of our world. Gas is still coming in. So I think that's a political issue. We believe that people in general -- I mean, that's an analysis that perhaps is too quick to make. But we believe anyway that people are looking into the way of using electricity and heat pumps rather than gas. We believe that, that understanding is there now. And that's what we see in Germany. That's what we see in Holland. That's what we've seen in a long time in Sweden. I don't know whether you like to add anything. It was a long question. I hope I answered that as good as I possibly could. Anders Roslund: Yes. My question was specifically if energy prices in general are on the rise, maybe you start to look at more energy-efficient solutions, even if the relation of electricity, gas has not changed. Gerteric Lindquist: Yes. No. I mean we talk about the spark spread, and that's -- perhaps we are so influenced by the difference between gas and electricity. But of course, if energy takes a larger part of your -- of the economy for each family, I mean, everyone would say, well, what should we do about it? And then, of course, a heat pump comes in very naturally saying, well, I'm going to save energy. We are going to save energy in our household, and then you start looking at that. So that is correct, that, if energy prices are going up, then the interest is stirred by installing something more efficient. Hans Backman: And we've typically said, and I think you know this, that if the spark spread is more than 2.5, 3, we believe that -- it should be at that level or below to really be helpful or trigger the sales of heat pumps. The electricity price can be much higher than the gas price and you're still very efficient or saving costs with the heat pump. But it cannot -- the difference shouldn't be too high. And here, we also, to some extent, need the help from politicians to be a little bit more bold to make sure that these fossil heating devices pay for the damage they do, so to speak. Anders Roslund: But do you see any of those effects coming into force in the beginning of this year? Hans Backman: Sorry, your connection is a little bit... Anders Roslund: If you see any of this demand increase coming to be seen in the beginning of this year? Hans Backman: Well, I mean, in all respect, we do not make forecasting month-by-month. I think that you have to read the last sentence in our report, and the aim is to continue to grow and increase the margins. I don't think it's fair to say anything today that we haven't said in a report because we have although a very healthy portion of people calling in, we have to have that fairness to all investors. Operator: The next question comes from an unknown person. Cedar Ekblom: It's Cedar Ekblom calling from Morgan Stanley. Apologies. I don't know why my registration didn't come through. I've got 2 questions specifically on the cash flow statement, please. So in the fourth quarter, you benefited from quite an attractive working capital inflow, which is very encouraging. And I know that you've had an ambition to continue to reduce working capital. I'd like to understand how we should think about the working capital expectations into 2026, if we should continue to expect this to decline relative to revenues, because obviously that's quite helpful for margins? So that's the first question. And then the second question relates to your cash flow from investing activities. Just a little bit of confusion here for me in terms of what's in the slides and what is in your report. So in the slides, you allude to acquisition spend of SEK 943 million in 2025. But in your report, you talk about your investments being SEK 179 million. So I just wanted to understand, is the difference between what is in the report and what is in the slides contingent consideration for acquisitions that you've already done in the past? I'm just trying to understand that delta because it's quite large. That would be helpful for a bit of color. Hans Backman: All right. On the first question -- I mean, I need to refer to what Eric just said, that we can't really give any projections here for the future, that only a portion of you here, so to speak. But I think we were fairly clear on this anyway that we as an intermediate target have to reach a working capital that is 20%. We came in at 21.2% or 21.3% this year. So I mean, obviously, we're continuing to look into working capital to bring it down, to turn the inventory quicker and so forth. So that is the next step. Then we won't be happy with that. I mean we would like to bring it down even further. But it takes quite some time and it's a stepwise process, if you like. But I think that's as much as we can say on the goal or target for the coming year in terms of working capital. Then on your second question, I think it's important to point out that these contingent considerations, so to speak -- I mean, the ones -- the SEK 178 million, SEK 179 million that I mentioned earlier, they don't have any effect at all on the cash flow, obviously. I mean that's a liability that we're booking for future possible payouts. What these payouts will be will be determined upon the performance of these companies, and that is several years down the road. But then, of course, we have during the year had some payouts for if we have bought another 10% or what have you according to the contract. So they, of course, run through the cash flow statement. But I won't suggest that -- we can take this in a call this afternoon or tomorrow to run through them. Cedar Ekblom: That's great, Hans. Yes, that's perfect. And just on the write-down that you took or the acquisition-related impact that was not in the reported or in the underlying numbers. I know that that's been taken through the central line. Could you give us some details, though, on what those assets actually are? Was it assets that have been acquired for the Climate Solutions business? Or is it assets that have been acquired for Element? Because there's really no detail in the release on what that charge relates to. So just a little bit of color on the business units or the division that, that actually -- I know it's centrally taken, but which division it actually is aligned with. Hans Backman: First of all, it was not a write-down of any sort. We've not written down any assets or anything like that. This is just a consequence of -- we have a contract. For example, we've purchased or we own 60% of the company, and we have both option and obligation to acquire the remaining 40% in a couple of years. That's typically how we set up deals when acquisitions come on board. Then we sometimes renegotiate these. And in this case, we had a couple of companies and owners saying we would like to be owners for our 40% or what have you for the -- for another -- for a number of more years. And then we need according to IFRS and all the accounting rules to predict a possible payout going -- or looking into the future. So that's the money, so to speak. We made an adjustment or a calculation and then adjusted the liabilities according to that. So it's a positive thing in a way. And that's the funny thing. If you think that things are going to develop better, you will have a cost. If things are going to develop worse, you might need to dissolve one of these contingent liabilities and then they have a positive effect. So that's on the methodology, if I was halfway clear there. Then, yes, we do take them on central level. Years back, and it's quite some years, we had them on each and every business area. But that distorted reading the numbers for each and every business area. So we changed the accounting principle there on recommendation from the auditors actually to take them centrally. And that's what we do then basically once per year, where we make these adjustments when we have a budget in place, a 3-year plan so that we feel a stability with the numbers. But they relate to acquisitions within the 3 different business areas. In this case, we made adjustments relating to 2 companies belonging to Climate Solutions. Well, there were more adjustments made, but the ones having a larger impact were 2 companies within Climate Solutions. And one adjustment, so to speak, or a payout that we did during the year was to get a further portion of the Turkish company, Untes, on board, which we acquired quite some years back, which has been a very good investment for us. So there was a payout related to that. But if you like to do the number crunching, we can do that in a separate call. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Gerteric Lindquist: Well, thank you very much for calling in. Really appreciate that. And as usual, we try to be as transparent as possible. Sometimes we believe that the ethics would discipline us and say, well, we can't really answer that fully. But we really appreciate having the ability or the possibility to talk to you and try to answer your questions. And as Hans said, if it isn't totally clear, you can always contact us directly. So now we have another year ahead of us, and we are just charging ahead. Thank you. Hans Backman: Thank you very much.
Kiira Froberg: Good morning, and welcome to Kemira's Q4 and Full Year '25 Earnings Conference. My name is Kiira Froberg, and I'm the Head of Investor Relations at Kemira. Here with me today, I have our President and CEO, Antti Salminen; and our CFO, Petri Castren. This will be actually Petri's last and 50th earnings webcast as Kemira's CFO. Before we start the actual presentation, I would like to remind you that our presentation today includes forward-looking statements. Next, Antti will cover our full year '25 and Q4 highlights, after which he will discuss Kemira's group level performance. After that, Petri will talk about business unit performance and cover financials in a bit more detail. And then in the end, before the Q&A, Antti will discuss Kemira's strategic focus areas in 2026 and also talk about our financial outlook for the year. But now Antti, the stage is yours. Please go ahead. Thank you. Antti Salminen: Thank you, Kiira. Good morning on my behalf as well. It's great pleasure to present Kemira's '25 results as well as, of course, in a bit more detail the Q4 results. And the year was challenging for us. Markets were soft and uncertain, which is visible in the numbers. So really challenging market environment, which then resulted in a clear revenue decline for the full year as well as for the Q4. But I'm very proud of the organization. We managed to maintain our profitability in a very healthy level. Operative EBITDA being over 19% for the full year, which I think is a really good achievement under these market conditions. And it enabled us to continue to invest into our strategy execution. So building the future growth for the company. And basically, in water business, we announced earlier in the year the acquisition of Water Engineering in North America, which is a really good platform investment into a fast-growing water services market in North America. We also invested or started an investment project in Helsingborg, Sweden for building an activated carbon reactivation capacity, which is part of our strategy to step into the fast-growing micropollutants removal market. And we have now been working for more than 6 months with the Cambridge U.K.-based AI material science company, CuspAI to significantly accelerate and basically change the way innovation is done on this area. And also that work is focusing on this fast-growing micropollutants area. So soft markets, but good profitability performance, which enables us to continue to invest into our growth initiatives. Also, our customers have been very committed, and I have to thank all the customers for the long-term partnership and commitment. We had all-time high Net Promoter Score, which I think tells about our capability to be dependable and trustworthy also in the volatile uncertain market environment. And our employees continue to stay very engaged, which, again, is the platform on which we can build the strategy execution going forward. So despite of the challenging environment, putting a lot of stress and pressure on the organization, the organizational changes that we've been going through, the organization is committed and engaged. We also made good progress on our sustainability targets. This is in the heart and core of what we do and our strategy. So we increased our score in the CDP, both in Water Security and Climate Change. reaching the A- level, which is -- which has been our target. We increased our score in EcoVadis rating, and we continue to reduce the CO2 emissions exactly according to our SBTi commitments. Again, really solid improvement there. And on February 20, when we will publish our Sustainability Statement, we will publish the new positive water impact target, which will be then guiding our way forward in terms of water stewardship. Then if we look at the Q4 in a bit more detail. So as mentioned already, the markets were soft and this market softening and uncertainty actually accelerated towards the end of the year. As a result, the Q4 revenues were 8% below the previous year, and the revenues declined in all the 3 business units. Operative EBITDA margin, however, solid at over 18% and actually increasing in Packaging & Hygiene Solutions, where basically we have continued the self-help program to improve the underlying profitability of the business and results are visible there. The strategy execution continued, as I already mentioned, and actually accelerated during the Q4. So the Water Engineering acquisition happened in Q4. And then we were working during Q4 on the first bolt-on acquisition on this platform, AquaBlue, company, which we then finalized the acquisition in early January. So this is first in the row of several such bolt-ons that we are planning to build on the platform of Water Engineering. And we have a really healthy pipeline, which we are working on. So basically kind of executing a programmatic acquisition-driven growth in the water business there. And then the latest announcement just a couple of days ago, announcing the acquisition of SIDRA Wasserchemie in Germany. And this is then strengthening our position in the most profitable and resilient part of the business, i.e., the coagulant business in the Europe. So basically building on the core, strengthening the Water Solutions business core part, strengthening our position in Western and Central Europe. So market softness accelerated in Q4, but we accelerated also our actions to continue to invest in the future growth of the company. Revenue, as you see, basically, again, just the numbers kind of proving the acceleration of the softening of the market towards the end of the year here. And it's good to remember here that there's also quite significant FX impact in these numbers, and Petri will soon elaborate a bit more on that. And then looking at the profitability, healthy, over 18% profitability, as I mentioned in the Q4. Q4 typically is the weakest quarter for us. There's the underlying seasonality of the businesses you'll see it in the previous years as well. So under these conditions, I'm happy with -- happy about the ability of company to maintain this level of profitability. And especially happy to see that our self-help actions in the Packaging & Hygiene Solutions are bearing fruit, and we have been improving the profitability of that business. There's quite some items affecting the comparability in the Q4, totaling more than EUR 30 million, mostly coming from the restructuring and streamlining costs. So working actively to basically balance the softer top line and keep the profitability on a healthy level. And those costs are there. And again, Petri will soon elaborate a bit more on those. And it also included then the transaction cost of the Water Engineering transaction. And then as a result of this -- all this, the full year '25 earnings per share totaled EUR 1.18. And if we then look at, finally, the financial long-term targets that we have set. So clearly, we are below the organic growth target, driven by the soft demand from the markets, but we are within our target range, both in terms of operative EBITDA and return on capital employed. Of course, the capital employed going closer to the target threshold. There you see clearly the impact of the acquisition of the Water Engineering, which is then basically increasing the capital employed there. But with this, I will pass it on to Petri, who will elaborate a bit more on the financials for the very last time for Kemira. Petri Castrén: Let's assume that my voice is audible. So as Antti said, we made good progress in our strategy execution during the year and also during the first quarter. The other headline, I think, from this report, of course, is that the market has been weak, but we have been able to defend and protect our profitability quite well. I'll go directly to the variance analysis next. Headline revenue declined 8%, really 3 components that Antti already mentioned. It's the -- all negative now. Volumes were declining. Negative FX impact, mostly it's the weakening of the U.S. dollar, which is -- everybody knows about it and everybody has paid attention to it. But yes, it has been impacting us quite severely. And also a little bit on the product pricing as well about 1% on average for the quarter. Of course, these are the same components that impact profitability. In addition, there was a little bit of a higher variable costs impacting primarily our Fiber Essentials, and I will come back to that when I talk about the business unit comments. Fixed cost savings that Antti already alluded to regarding Packaging & Hygiene Solutions, where we really have had headcount reductions. But obviously, there have been fixed cost saving actions throughout the company that we have been doing to really protect the profitability during the quarter and for the year. Full year story, same component again. Of course, there, you have the addition that there is still the tail in the comparison period of the oil and gas business. So if you eliminate that part, the comparable decline 5%. And again, biggest contributors being the volume development and the U.S. dollar weakening. Then if we look at the year in totality, and we look at sort of the various components. Obviously, it's clear that the volume decline is more impactful during the second half of the year. So there was an acceleration in the business decline. And again, I will come back to those during the business comments. Sales prices actually have been relatively stable for the year. But in the first part of the year, the year-on-year comparison was quite negative. But if you look at the 1-year comparison, meaning Q4 '25 to Q4 2024, it's 1% decline. So overall, we are in a pretty stable pricing environment. It's really a volume issue that we are dealing with. And of course, this slide actually tells the same story. Prices and variable costs have significantly stabilized during the last 4 or 5 quarters. So you'll see that there's a fairly flat line when we had this huge peak during the COVID and supply chain problem years. Energy costs were sky high in '21, '22, but we are sort of putting that period of time into history, and we are now in a much more stable environment. And our crystal ball as far as we can say or see doesn't really indicate much of changes to this. I mentioned this comment after Q3, but I do it again. So it's really a volume game now for us. Volume increase the key to driving our profitability now and for us that is largely market dependent and it applies to all of our business units. We have capacity available in most of our plants and so any additional volume we can process without really adding any fixed costs for infrastructure. This means that if and hopefully when the markets improve, the operating leverage will help us with the bottom line. Having said that, you'll see that in the assumptions we are not yet foreseeing really a market recovery at this time. Antti mentioned the items affecting comparability. It's really -- we are also -- we are taking action because of the lower volumes. So we're taking action on our manufacturing assets. We're ramping down our production entirely in our Teesport U.K. site, resulting in an asset write-down, restructuring and closing provisions. We're also making an efficiency and automation investment in our Botlek site, resulting in a reduction of manual work and the related -- restructuring costs related to that as well. Fortunately, we had EUR 12 million environmental provision for a site that has been closed long time ago -- many years ago. More than decade ago in Finland where we actually disagree with the authorities of how the land remediation should be done. The land has been remediated and the polluted land impacted soil has been taken away, but there is a difference of opinion how that soil should be treated. We'll probably continue that dispute for a while. But we have now taken a provision for that -- for the worst-case scenario, least put it this way. All-in-all, this restructuring, streamlining and transaction costs add up to EUR 32 million within EBITDA and EUR 43.8 million within EBIT. And of course, the impact of that is driving EPS down for the quarter to just EUR 0.07 per share. And for the year, EUR 1.18, below previous years of EUR 1.61. Next, I'll go to the business unit commentary, as I promised, and I'll start with the Water Solutions. So first of all, let's start with a reminder of the basics. So in Water Solutions, we do have seasonality. So our particular municipal customers do treat less wastewater during the winter months and they require less of our chemicals. So that creates the seasonality that is within our Water Solutions business. Having said that, revenue was weak, particularly it was weaker in the industrial side. The revenue was down 9%. That's quite a significant decline. But more than half of that is attributable to our contracting volumes that we received from our oil and gas business acquirer. And their customer has had an operational issue. So it's not a loss of customer, it's a loss of -- its not a loss of business, but an operational issue that has dragged on longer than anybody expected. There was also some general weakness on the industrial side. Industrial production, in general, has been weak, in particular in Europe, and there are many processes where there are some wastewaters created that impact us in the industrial side. Urban water service in Europe was very stable. It is a very resilient business. There was a 4% organic decline in North America. And of course, in euro terms, clearly bigger in our numbers. So lower volumes impact the overall profitability, so that the operative EBITDA declined by 7%. Still operative margin at 18.5% for the business unit, slightly below the level of that last year. Next comments on PHS, Packaging & Hygiene Solutions. So challenging market continued. And year-on-year, the market was clearly softer and volumes impacted. Organic revenue declined 6%. Profitability has been protected by the measures that we have taken. We also have received and gained some new customer wins. So that has been helpful, but the market -- underlying market has been really soft. But the important point is that the market has now seems to it has bottomed up. It has not gotten any worse since Q3. It is not any better either. We saw, in fact, very little volume or very little price changes from Q3 to Q4. Profitability in Q4, slightly lower than in Q3, mainly due to product mix type of issues. I think, I commented that the product mix in Q3 was favorable. Now it was less favorable than in Q4. Q4 was less favorable than in Q3. And we're not done with the profitability improvement actions. So we are just implementing the new operating model as of beginning of this year, and we will be seeing benefits of that in the coming quarters as that is being implemented. Regarding regions, fair to say that APAC continues to be the biggest challenge. We see a particularly weak market in China with weak demand and with the local oversupply situation leading to much depressed prices and volumes. Regarding Fiber Essentials, environment has been weak for pulp chemicals, particularly here in the Nordics, which is a key market to us. Also market prices for base chemicals have remained low. For example, caustic soda is relatively important for us. For Fiber Essentials, there we have seen some price -- I'm sorry, variable cost increases -- raw material cost increases in the second half of the year. So it's really isolated to our sulfur products, but the increase has been quite significant. And that's the sort of one area where there is significant inflationary pressures. And it's enough that it's visible in the Fiber Essentials margins to some extent in the second half of the year. So again, looking at the full year, the volume decline, it's really in the second half of the year. And you see that the quarterly revenues have been -- have fallen to EUR 132 million, EUR 134 million range, whereas before that, we were clearly in the EUR 145 million, EUR 150-ish million per quarter run rate. And as the drop-through impact is quite significant, these are good gross margin products, but high fixed cost operating plans. So the volume -- any volume increase would have, obviously, positive impact to our profitability should -- and if and when that hopefully happens. All right. Moving to balance sheet. Now during '25, our net debt level has increased due to the acquisition of the Water Engineering and of course, the share buyback program that we had on the second half of the year. Then the smaller addition is that we actually inaugurated our new R&D facility in Espoo, here in Finland, with a 15-year lease. So that's added to our lease liabilities and reported as a part of debt obligations. ROCE that Antti was already talking about, return on capital employed, has come down to 16.5% due to this Water Engineering acquisitions. But of course, it's also heavily impacted by the reported EBIT or operative EBIT that we have, and those 2 components clearly impacting there. Cash flow from operations, EUR 127 million during the quarter and EUR 373 million for the year. Maybe a comment on the cash flow component. So our net working capital increased from previous year. We perhaps were not quite successful in reducing our inventory levels with the reduced volumes as the business was -- that business was experiencing. So obviously, trade payables are coming down, but if inventory levels remain roughly at the same level, it reflect as an increase in net working capital. And therefore, inventory levels will now need to be and are in the focus for us going into '26. There is some opportunity to tighten inventory rotation. CapEx fell just about where we expected and how we guided, slightly below EUR 200 million in '25. And now estimated '24, '26, it will increase slightly. We have some growth investments ongoing. And then, we are doing these modernization investments. I mentioned, the Botlek, but we have a few others as ongoing as well. Dividend, we have a strong track record of increasing our dividend. And now we are proposing increasing our dividend to EUR 0.76 to our Annual General Meeting. This increase is consistent with our dividend policy of paying a competitive dividend as well as increasing the dividend over time. And in recent years, the dividend has been paid in 2 installments, and we'll continue that practice. In addition to increasing our dividend, we're continuing to return capital to our shareholders through share buyback program. The purpose is to continue to optimize our capital structure. We have received almost universally positive feedback for the program that we initiated last year, and we feel that it's important that we continue to serve the interest of our diverse shareholder base. However, this is not limiting our desire or our ability to continue to execute our growth strategy. And again, it's evidenced by the 2 acquisitions that we have already done or announced -- and well, the first one is already completed. But the second one that we announced yesterday, we will continue to invest into organic growth opportunities when they are -- as well as inorganic growth opportunities. And again, this acquisition of SIDRA Wasserchemie for EUR 75 million approximately is a proof point of that. I will turn next to Antti, but before I do, I reflect a little. So this -- as Kiira said, it is my 50th and it's my last quarterly announcement. As announced, I will leave my position as Kemira's CFO at the end of March. So March 31, will be my last day of work. Looking back, I'm very proud of what Kemira has been and what Kemira has become during those 12.5 years. Kemira is much stronger, much better company, and I believe that Kemira has a really bright future. In this forum with you, our analysts and investors, there's one group of Kemira employees that I want to thank, and it's the IR officers. I had the privilege of working with during the years. So when I joined, started working with Tero Huovinen, then continued to work with Olli Turunen. Then up to quite recently with Mikko Pohjala, and now most recently with Kiira. Kemira's IR team has always been top-notch, and it's been my intention only to recruit the best that I can find in the market and been successful with that. And we've been able to maintain a top-notch IR practice for Kemira. And I'm really proud of that. And besides, the team has always been fun to work with. So thank you all. With that, now I'll turn to Antti. Antti Salminen: Thank you, Petri. Yes. So then I'll finally say a couple of words about the strategy execution a bit more. Petri already quite nicely talked about the kind of the latest announced investment and how we are really committed to grow the company via both organic and inorganic investments. I'll elaborate a bit more on that. But just to remind everybody that these 3 cornerstones are the focus areas of the strategy. So expanding the water business, there's plenty of evidence of that, and we continue to work on that. Then building our presence as the leading provider of renewable chemistry in our target markets and even more widely. So clearly, we have been recognized as one of the big leaders in the world on this area, and we continue to work on that. We have a lot of good progress on innovation projects, both in-house and with external partners on that domain and solutions that have been proven not only in lab, but in extensive customer trials. So I'm expecting quite a lot of positive things to come back for the future growth in coming years. And then thirdly, investing kind of into these new adjacent high-growth market areas, tapping or unlocking the growth potential from those areas where we have clear right to win, which are part of kind of our domain, but where we have been historically out of. And the NVS, New Ventures & Services, unit has been actively working on this, and there's a lot of good stuff in the pipeline there as well for the future growth. Then looking at a bit on a time line, basically the time since '22 when we have been executing the growth strategy, which we then sharpened 2 years ago a bit more. But basically, we've been constantly investing into the focus growth areas stated in the strategy. It started from the acquisition of the SimAnalytics, which basically has strengthened our position in the digital services area for the water business, so being present and growing our position in there. Then continued with organic investments into coagulant capacity, so that's the core -- the resilient core of our water business, so we continuously invest in there. And as Petri said then, we have capacity, we are able to benefit from the market recovery when it happens without adding fixed costs as we are -- have been building the capacity for that. Then entering into the micropollutants removal area, so small first acquisition in the U.K. and then continuing with organic investments for that area. So clear commitment to grow in that area as well. And then lately, the entry into the fast-growing industrial water services market in North America via Water Engineering. And as I already mentioned, that's a platform acquisition. So we have a really healthy pipeline of small and also some bit bigger bolt-on acquisitions and first example already happened in the first week of January. So progressing very well on that area. And then the last announcement 2 days ago regarding SIDRA. So again, strengthening the core, increasing our position -- improving our position in the water business and basically on the path to grow the significance of water business in our portfolio. So lot of things have happened, and our aim is to further accelerate the execution of strategy, so working on these growth initiatives, which is enabled by our strong financials and strong profitability despite the weak market. So I think this is exactly the time when the markets are soft, when basically we need to continue to believe in our strategy and invest in these growth activities to make us able to capitalize on the growth when the markets get healthier. So this is clearly essential for us, and we continue to be committed to that. So the 3 business units have clearly separate, different roles in the strategy execution, as mentioned already, Water Solutions being the growth engine. We will continue to invest both organically and inorganically to growth in Water Solutions. Short-term Packaging & Hygiene Solutions, the profitability improvement is the key target. But then also the packaging board markets which we serve are now in the basically historical low point and the world will need packaging materials. So that business unit has growth potential when the market ultimately recovers. And then Fiber Essentials, clearly a profitable cash flow generation unit, enabling us to invest into growth in other areas. So to close this with our outlook for '26, amid the uncertainty and fussiness of all the possible crystal balls, our -- we expect the revenue to be between EUR 2.6 billion and EUR 3 billion and the EBITDA -- operative EBITDA between EUR 470 million and EUR 570 million. So clearly, kind of you will see from here as well that it's very difficult to predict the market, but this is our outlook to the year. It assumes this continuation of global economic uncertainty and the softer volumes and basically, especially the impact being heavy on pulp and paper, but also on the industrial water markets. We assume stable raw material environment, as Petri already alluded to, so basically no big swings from there. And thus, this is the outlook that we give for this ongoing year. So with this, thank you very much. And finally, once more big thanks to Petri. He's been elementary in this growth journey and making the company the good company it is today, completely different compared to 12 years ago, as he mentioned already. But I have to personally thank Petri for the past 2 years because he's been the kind of a brick wall that I could always lean on as a new CEO and giving me the confidence that no matter if I miss some details here or there, he will always be there to support me and correct me. So very big thanks, Petri, for these past 2 years. And then with this, we move on to Q&A. Kiira Froberg: Okay. Thank you, Antti, and thank you also, Petri. And now we are then ready for the questions. So I think we could start from the line. So operator, please go ahead. And we will, of course, also take questions through the chat. So those will be coming also. Operator: [Operator Instructions] The next question comes from Andres Castanos from Berenberg. Andres Castanos-Mollor: Petri, first of all, best of wishes for the future. And also congratulations to the company and to you on all the bold actions on the finance side, M&A, buybacks, dividend increase, the full lot. So well done there. My question will be first one on M&A, please. Can you please put some numbers to the U.S. pipeline, the water pipeline there? How much money can you possibly deploy there in the next year ahead? Also, I would love a comment on the Germany deal that you announced yesterday. It seems like a rare opportunity. Do you think this could be replicated similar deals like this one? Antti Salminen: Well, I'll start, and then I'll let Petri comment on the kind of -- especially how much we can allocate to this. But as I mentioned, the pipeline is very healthy. And we've already mentioned that these kind of small bolt-ons like -- the AquaBlue is a very good example of roughly size of a single deal. So they are in the range of EUR 10 million annual revenue type of -- hovering a bit lower, a bit higher typically. And I've also mentioned earlier that we have a solid pipeline, and the aim is to execute several of those every year going forward, so that's basically giving you the basic -- the idea. And then there are couple of bigger ones also in the pipeline, which then would change the pattern. But basically, it's a solid programmatic growth ambition that we have there. And then regarding the SIDRA type, so we've -- all the time, we have said that we actively look at the base business, coagulant market and look for opportunities. There are not too many, but each and every one, we will act on. You already saw that Thatcher in North America earlier. And then we have now the SIDRA, which is, I think, really good strengthening of our Central European business. So we will -- we are actively monitoring the market. We know all the players there. And when something is suitable becomes available, we will promptly act on that. Petri Castrén: Yes. I don't know if I have much to add. But the AquaBlue type companies, there are probably a couple of hundred or a few hundreds in North America. And theoretically, almost everyone -- not everyone, but -- so it's the beginning of the pipeline. Then as the pipeline is progressed. But I have seen long lists that have 20, 30 names in it. Currently, short list is obviously shorter. It needs to be shorter. But like Antti said, these type of deals is really where we have the strong natural platform executing the EUR 10 million, EUR 20 million type revenue companies, and there are multiple those cases. And of course, from the finances point of view, balance sheet point of view, we have no restrictions on executing on that one. And so that certainly continues. Obviously, if we are looking at the Water Engineering pipe, which was well over EUR 100 million type of investment, then those would be looked at little bit differently. There's -- that's progressed in a different way in our M&A process. Andres Castanos-Mollor: A second question, if I may, please, on margin trajectory in the water business. You mentioned some seasonality, and I wonder is that it? Should we see a rebound in Q1 versus Q4 on margins? And also, can you comment on the margins of the acquired companies that you have acquired so far? Are they accretive to the current water business margins? Petri Castrén: Well, I can start with... Antti Salminen: With the seasonality... Petri Castrén: Yes, in water business. Antti Salminen: And then again pass on to you. So basically, the water business has this natural seasonality because big part of the water business is especially on the urban municipal side is weather dependent. And -- but there are also other things, and I will talk a little bit more about them. But basically, typically, the summer months are the strongest or the summer quarters are the strongest quarters. And then the winter quarters are always a bit weaker, and especially Q4 being typically historically and especially in North America, the weakest one. So it's partly weather dependent. There's less water in the systems, but especially kind of entering into this water -- industrial water services business, there's also the industrial patterns because a lot of that business is in cooling towers, for instance. And when you have cold months, you have less need for cooling in industrial applications. Also, there's a lot of business in the services part business, which has to do with the -- there's a lot of pools in U.S. So basically, again, pools are not used in winter time and so forth. So it will only strengthen the seasonality, I think, in the water business, this entry into the services area. Petri Castrén: And so Andres, if your question was really regarding the pipeline of these services companies, they actually vary quite a bit. They vary from the low teens to 40% EBITDA margin in the business. And it often depends on how much product and possibly equipment sales they have in it or whether it's pure services where the margins tend to be higher. So I don't think I can give you an universal answer on the types of margins that you see. But philosophically, we don't want to dilute our profitability with these acquisitions. So even if the coming in margin is lower than ours, there needs to be synergies that get to our sort of at least average group margins. Operator: The next question comes from Tomi Railo from DNB Carnegie. Tomi Railo: It's Tomi from DNB Carnegie. And thank you also Petri from my side it's been absolutely a pleasure to present a short while... Kiira Froberg: Now we can't really hear you, Tomi. Could you please repeat your question? Tomi Railo: Can you hear me now better? Kiira Froberg: Yes, we can hear you now. We heard the thank you part. But then when you started to ask your question, we lost you. Tomi Railo: Okay. Maybe that's a signal. But the question is simply, was there something still extraordinary in the water clean that you booked kind of in the clean EBITDA? You mentioned some of the items, but or was it just a very clean, clean number what you reported? Petri Castrén: I would say that it's clean. And of course, during the Q4, you always tend to look at your inventories and you tend to get some invoices from your customer -- suppliers that hadn't been accrued for small amounts. So we have a fondness of talking about 13th month, it's not 13th month. But there is typically some new expenses that come in December time frame we usually plan for -- or we plan for that, but there's a little bit of unknown. But I would call that in -- put that in the level of noise, particularly for Water Solutions. Tomi Railo: Okay. And the second question on the outlook. I'm just trying to make a sense. You mentioned that kind of the softness accelerated in the fourth quarter from the third quarter. But then when I'm reading your kind of outlook commentary, it doesn't really sound that the market has changed for worse. Actually, you also mentioned yourself that it's stable. So kind of is the market now stable, what you believe? Or is there still some further weakening? Petri Castrén: Let me correct first -- correct me first and then I think it's more appropriate that Antti talks about the outlook. I probably may have miscommunicated a bit poorly. What I meant to say that the volume decline was higher in the second half versus the first half. And this was clearly driven in Nordics by the pulp mill, not closures, but... Kiira Froberg: Downtime. Petri Castrén: Downtime -- thank you for the word -- as well as the contracting volume decline in industrial. And then perhaps there was some more industrial decline in water service in second half. But if you sort of -- I recognize accelerate is probably the wrong word. So it was not accelerating. So third quarter to fourth quarter, there was no acceleration. So let me correct that if I communicated that poorly. But then I'll let Antti talk about the outlook. Antti Salminen: Yes, yes. And as I said when I introduced the outlook, so basically, if anything, the visibility is really poor. So commenting to this or that direction, whether we see kind of an improvement or declining, it is -- the visibility is really poor. But as Petri mentioned, I think many indicators from the market show that this -- we believe that this is kind of the bottom level. We haven't seen any significant further weakening, but we haven't seen really any kind of bright signs for -- at least for the first half of the year either. And there, I would, again, as we discussed earlier, so Tomi, I would recommend to look at what our big key customers have stated about market because, of course, they see it first and we get hit in kind of upper in the value chain of those phenomenon. So basically, you can read that, and that's the kind of crystal ball we have. Tomi Railo: Of course. Just a follow-up. If you could give kind of price and volume assumptions into '26, what you are saying? I hear you that kind of it's a volume game, but would you assume that pricing is down or stable in this environment? Or what's kind of price and volume assumption, maybe if there's something. Petri Castrén: I already offered my view of the crystal ball, and it's pretty stable, and it has been stable for the last 4 or 5 quarters, and we don't see changes to that. And that applies both to pricing environment and the variable cost environment. Kiira Froberg: Thank you. Let's now take the next question from the line, please. Operator: The next question comes from Joni Sandvall from Nordea. Joni Sandvall: A couple of questions from my side. In BHS, you mentioned the continued improvement, what you have started now with the new operating model kicking in from '26. So if I remember correctly, you maybe have mentioned around 15% EBITDA margin target by end of '26 is still valid with the current market environment? Antti Salminen: Market environment, of course, plays a role there, but that's the ambition level that we have been talking about. So I mean, if you look at from the group perspective, that's the expectation. Now whether the market support reaching that exactly during the last quarter of '26 or later in '27, that depends, but that's the ambition level that we have set for. Joni Sandvall: Okay. That's clear. Then maybe a question on the energy prices have been spiking both in the Nordics and in Europe. Are you seeing any support for yourself through the pricing now in H1? Petri Castrén: Well, the weather forecast, I was looking for it to be snowy for the weekend, but then I heard that the weather forecast changed. It's not getting more snow. I'm looking for the cross-country skiing next weekend. Honestly, let's not get excited about -- too excited about a 1 month of cold weather in Finland and Europe. So I think we have to look at the bigger picture and longer period of time. It is true that in the Fiber Essentials, typically, our customers do benefit -- also customers benefit of high energy because they do produce energy, electricity while their pulp mills are operating. So that's sort of an ongoing market commentary that I can say. But really regarding a crystal ball for the weather, for the remaining of the year, don't know -- we don't have that. Joni Sandvall: Okay. That's clear. Then maybe on the Fiber Essentials, also a question on -- because your sales were declining now in Q4, so could you give any indication how large part of this was driven by lower utilization ratios of the Nordic pulp mills in Q4, which is -- it's not typical that those are curtailed during Q4? Petri Castrén: It's not typical, but they were. So Latin America, there's no change. There's, obviously, some currency impacts year-on-year from North America. But honestly, I would -- I don't have the data now, the breakdown in my head. But it's mostly Europe. It's mostly Nordic. Antti Salminen: It is really mostly Europe. So basically, the -- as Petri said, the Latin America, there was no change quarter-on-quarter in terms of our delivery volumes. In North America, we actually improved a bit in quarter 4, if anything. So it's really coming predominantly from the Nordics. Joni Sandvall: Okay. And then maybe lastly, quickly and for Petri about your supplementary pension fund returns expectations for '26? Petri Castrén: Well, we are expecting to receive another EUR 10 million of return from capital because the fund is roughly EUR 100 million overfunded. So we are unwinding the overfunding slowly and gradually. Obviously, continue to invest smartly. And I trust my successors will continue to do that. So the pension fund is in good shape. So no issue there. Kiira Froberg: Thank you, Joni. We now have a few minutes time to take some questions from the chat. And I think that we could start with the Fiber Essentials team. So the question is, do you expect volume recovery in Fiber Essentials in early '26, given that pulp wood prices in the Nordic area are clearly down, supporting profitability of pulp mills in the region? Antti Salminen: Well, I mean, again, I would refer back to what our customers in that business have announced and said. But clearly, I mean, as Petri already mentioned, it's favorable for the Nordic pulp mills to run as full as possible in the cold winter months as they produce electricity as well. So basically, typically, the first quarter is volume-wise a strong one. And then, of course, the kind of decreased wood prices should be supporting the business of our customers also going further into the year. So of course, we dearly and truly hope that the volumes are improving as a result of this phenomena. But it's really up to our customers. Kiira Froberg: Yes. There's another question, which is related to the Water Solutions business, and I think that we've covered the seasonality part yet. But this is related now to the measures or the kind of like items affecting comparability. That's how I read this. So could you come back on the measures to increase production capacity in the Water division and why these measures make sense despite the lower volumes and lackluster demand in water. So maybe kind of like why these sites and... Petri Castrén: So let me -- I'll cover the 2 items affecting comparability. So Teesport U.K. has been a site with low-capacity utilization for quite some time. Let's be honest about that one. And we have reviewed -- and now what we have made a decision that it's sort of now falling below the threshold, and we are moving the production from particularly some deformers from that site to another site in Europe. So we are closing that site entirely. So we are obviously reducing fixed cost significantly with the closure of that site. So I think that's fairly obvious. Then in Botlek, Netherlands, we are not closing a site. We're actually investing into a site. But it's a site with a relatively high fixed cost because -- I mean, it's Netherlands. The salaries are relatively high there. And we are doing an automation investment. So what has been a fairly manual process, we are automating and, in the process, we are eliminating manual work and its fairly significant or big enough number of employees that it actually makes a difference. And so it's -- there, we -- I'm not sure if we are investing into capacity addition. I think it's, we call it improvement and automation investment. So it's not capacity constrained that particular site. It's really an efficiency improvement with a quite decent payback period. Antti Salminen: Exactly. And then if I continue on the -- if you look at the kind of couple of years' timeline and the coagulant investments that we have been doing into Water Solutions. So we have been there. I mean, the growth -- the population in Europe is not growing. The per capita water consumption is not growing, but the regulation is getting tighter. So basically, we have been doing this investment or initiating them when we see the regulation on certain part of Europe changing. It's not same even if the EU regulation is the same, but the application in jurisdictions is different. So that's why we have twice expanded the coagulant capacity in U.K. The first one, we sold immediately to practically full utilization, that's why we did the second capacity expansion. Same goes for the Iberia, the Tarragona site. So there are certain factors in the regulation and the market that drive the demand. And we do kind of very targeted, relatively small add-on capacity investments on existing site to capitalize on those pockets of market that we see the growth potentially. Kiira Froberg: Thank you. Let's now take one last question from the chat, and it's about the Packaging & Hygiene Solutions profitability program or profitability improvement program. So can you comment on the progress? How much more work is there to be done? And when are you expecting the full impact to kick in? Antti Salminen: Well, I'll start and then if there's something that Petri wants to add. But basically, I mean, it has progressed in phase. So what we did last year is that we basically found the kind of so-called low-hanging fruit in terms of cost both in the business unit itself and then on the operations side that are supporting it, and those we kind of had implemented. So the run rate should be kind of built into this year's numbers. We similarly found some kind of new add on top line, which basically was realized. Those contracts were negotiated and closed last year. So basically, again, us, the customers change suppliers, we should see the revenues in this year's numbers. But then the next phase of that is the new operating model, which we have implemented where we basically changed also the structure and basically how we serve the customers, giving better service for our key customers, the key accounts and then streamlining the service levels for the kind of tail end. That work, the implementation is going -- ongoing as we speak. So that happens during the Q1 and then the results would be visible later in the year. And then the business unit management has in pipeline the next round as well because this is a kind of continuous process of when we kind of put something in the shape, then we realize that there are other things that can be further improved. So we will continuously work on that. But gradually during the year those benefits will be visible. And some of them in '27 only also. So this is a long process. Kiira Froberg: Yes. Thank you. Unfortunately, we are running out of time. So we will start to conclude the conference. And if there are any other questions you know where to find the Investor Relations. So please be in touch. And we have a pretty full roadshow agenda coming in now after the earnings. So we will start with Petri next week in Geneva. So there are still plenty of opportunities to meet also Petri. And Antti and myself, we will be back here in our results studio in connection with our Q1 report, which will be published on April 24. And we, of course, hope that Petri will be cheering for us maybe from the golf course or I don't know. Thank you all. Have a great day. Antti Salminen: Thank you. Petri Castrén: Thank you.
Operator: Good day, and welcome to the Nova Ltd. 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 Miri Segal, CEO of MS-IR. Please go ahead. Miri Segal-Scharia: Thanks, operator, and good day, everyone. I would like to welcome all of you to Nova's conference call. With us on the line today are Gaby Waisman, President and CEO; and Guy Kizner, CFO. Before we begin, I would like to remind our listeners that certain information provided on this call may contain forward-looking statements, and the safe harbor statement outlined in today's earnings release also pertains to this call. If you have not received a copy of the release, please view it in the Investor Relations section of the company's website. Gaby will begin the call with a business update, followed by Guy with an overview of the financials. We will then open the call for the question-and-answer session. I will now turn the call over to Gaby Waisman, Nova's President and CEO. Gaby, please go ahead. Gabriel Waisman: Thank you, Miri, and thank you all for joining us today. I will start the call by summarizing our fourth quarter and full year performance highlights. Following my commentary, Guy will review the quarterly and annual financial results in detail. 2025 was an exceptional year for Nova, delivering record performance across our business and strong execution in a rapidly expanding semiconductor landscape. We delivered record annual revenue of $880.6 million, up 31% year-over-year, along with record GAAP and non-GAAP profitability with earnings per share growing 29% year-over-year. Fourth quarter revenue exceeded the midpoint of our guidance, reaching $222.6 million, up 14% year-over-year. This performance highlights the depth of our portfolio, solid customer demand, our leading market position and our disciplined operational focus. It underscores Nova's strategic alignment with key vectors in the industry and strengthens our foundation as we move into another year of growth. We entered 2026 with a robust investment cycle, translating into accelerating demand for leading-edge nodes and steady investments in mature ones. It has manifested in capacity additions, higher-yield pressures and a need to maximize device performance. Rising design complexity is increasing the number of process steps and accelerating adoption of new integration methods such as backside power delivery and hybrid bonding. Coupled with faster time to market and yield requirements, it is broadening the need for precise metrology. Some manufacturers have already announced an increase in CapEx plans, contributing to the positive outlook. We are confident that our operational agility, flexibility and grit enable us to address our customer needs. An emerging segment fueled by the AI era is silicon photonics, a technology that uses light photons instead of electrons to transfer data, enabling ultrafast data transmission at lower power consumption. It requires very high accuracy measurements of optical structures such as waveguides and modulators, necessitating precise alignment and 3D characterization, which opens new opportunities for Nova. These market and technology dynamics are reinforcing our strategic alignment with the fastest-growing and most technically demanding segments of our industry. We are engaged with our customers to address their high-value challenges and are well positioned to capitalize on the opportunities they pose. We expect positive momentum to propel our performance in the coming quarters. One of the highlights of the fourth quarter was when a global leading logic customer selected Nova's integrated metrology portfolio for CMP applications across gate-all-around processes. Following a comprehensive evaluation, the customer adopted our full CMP product suite, extending their earlier back-end deployment into front-end high-volume manufacturing. Multiple orders have already been placed for 2026 with additional orders expected as capacity ramps. This win reflects our close collaboration with customers to accelerate time to market, support their technology roadmaps and enhance yields. Another highlight is our services organization, delivering record quarterly and annual revenues. This performance was driven by capacity installation, adoption of our value-added services to support yield improvement and a focus on shifting from Time and Materials towards annual service contracts. We are especially proud that our teams earned multiple service excellence awards from leading customers in Asia, underscoring our deep commitment to customer success. Nova's growth this year was broad-based. In gate-all-around processes, we are now firmly established as a foundational partner in the industry's transition to next-generation architectures and expect to see demand increase further in 2026. In advanced packaging, revenue rose more than 60% year-over-year, representing approximately 20% of product revenue. We saw strong traction across both dimensional and chemical metrology platforms and broad adoption of our dedicated products. And in memory, we saw record results driven primarily by DRAM applications where manufacturers expanded adoption of the materials and chemical metrology offering. Nova's advanced metrology solutions secured multiple strategic qualifications across leading global manufacturers, reinforcing our position as a trusted partner for next-generation technology inflections. A few examples include the ELIPSON materials metrology solution, which was selected as tool of record by a leading foundry for advanced gate-all-around production and recent adoption of the Metrion platform for gate-all-around as well as advanced 3D NAND and DRAM device manufacturing. At the same time, our Nova WMC optical metrology system gained traction in advanced packaging and high-bandwidth memory. On the technology front, we continue to invest in R&D, including a noble metrology solution that leverages our optical and materials metrology core competencies amplified by Nova's unique strengths in modeling and signal analysis. This new solution is designed to address emerging challenges associated with technology inflections such as gate-all-around, CFET and advanced memory. Nova's unique strengths in physical and AI-driven modeling will come together in this new solution, enabling precise measurement of individual nanoscale structures, improved parameter decorrelation for complex architectures and coverage of critical gaps left by existing metrology technologies. Looking ahead to 2026, we are entering the year with increasing confidence in the market environment. We see favorable trends across logic, advanced packaging and memory applications. Current order patterns point to another growth year for Nova with momentum expected to build through the first half and accelerate in the second half of the year. Our priorities for 2026 remain clear: continue to expand our leadership in advanced nodes, proliferate our materials metrology platforms, deepen our share in advanced packaging ecosystems and scale our operations to support increasing customer requirements. To that end, we are strengthening our operational foundation for the next phase of expansion, including the launch of a new state-of-the-art ERP system to manage growing volume of business with greater efficiency and scalability. We are also expanding our global manufacturing footprint by building new production capacity in Asia, enhancing cost efficiency while positioning us closer to key customers and supply chain partners. We remain focused on executing with discipline, capturing opportunities and outperforming WFE. I'm thankful to our employees for their dedication and commitment and to our customers and partners for their trust in Nova. For more details on the financials, let me hand over the call to Guy. Guy Kizner: Thanks, Gaby. Good day, everyone. I will begin by reviewing our financial achievements for the fourth quarter of 2025, then summarizing our performance for the full year and finally, provide guidance for the first quarter of 2026. In the fourth quarter of 2025, total revenues reached $222.6 million, above the guidance midpoint of $220 million. This performance reflects a growth of 14% year-over-year. Product revenue distribution was approximately 75% from logic and foundry and 25% from memory. Product revenue included 3 customers and 4 territories, which contributed each 10% or more to product revenues. In the fourth quarter, blended gross margins were 57.6% on a GAAP basis and 59.6% on a non-GAAP basis, in the upper end of our target model range of 57% to 60%. The high gross margin in the quarter was attributed to a favorable product mix. Operating expenses increased in the fourth quarter and came in at $67.5 million on a GAAP basis and $62 million on a non-GAAP basis. We continue to ramp up R&D and sales and marketing spending in targeted manner to advance our product roadmap and unlock future growth opportunities. Operating margins in the fourth quarter reached 27% on a GAAP basis and 32% on a non-GAAP basis. The effective tax rate in the fourth quarter was approximately 11% on a GAAP basis, primarily reflecting the release of uncertain tax positions following the completion of a tax assessment audit. The effective tax rate on a non-GAAP basis was approximately 16%. Earnings per share in the fourth quarter on a GAAP basis were $1.94 per diluted share, and earnings per share on a non-GAAP basis were $2.14 per diluted share, exceeding the midpoint of our fourth quarter guidance of $2.11. Moving on to the annual results of 2025. Revenues increased 31% year-over-year, reflecting our continued outperformance of the industry through disciplined execution of our strategy. We are also building the foundations to sustain this outperformance by gaining market share, qualifying our differentiated portfolio with strategic customers and advancing innovation through continued investment in R&D of more than 15% of revenues. The geographic revenue split in 2025 was as follows: China was 33%, Taiwan was 29%, Korea was 16%, U.S. was 9% and other territories contributed the remaining 13%. Gross margins for the year were 57.4% on a GAAP basis and 59% on a non-GAAP basis. Operating margin for the year came in at 29% on a GAAP basis and 33% on a non-GAAP basis, in the upper end of our target model range of 28% to 33%. These operating margins demonstrate the strong value proposition of our process control solutions and our consistent operational execution. Earnings per diluted share on an annual basis came in at $7.96 on a GAAP basis and $8.62 on a non-GAAP basis. Turning to the balance sheet. We ended 2025 with more than $1.6 billion in cash, cash equivalents, bank deposit and marketable securities. During 2025, the company generated $218 million in free cash flow and presented healthy parameters related to working capital management. Next, I would like to share the details of our guidance for the first quarter of 2026. We currently expect revenues for the quarter to be between $222 million and $232 million. GAAP earnings per diluted share to range from $1.90 to $2.02. Non-GAAP earnings per diluted share to range from $2.13 to $2.25. At the midpoint of our first quarter 2026 estimate, we anticipate the following: gross margins of approximately 56% on a GAAP basis and approximately 58% on a non-GAAP basis. Operating expenses on a GAAP basis to decrease to approximately $65 million; operating expenses on a non-GAAP basis to decrease to approximately $60 million. Financial income on a non-GAAP basis is expected to be approximately $16 million. Effective tax rate is expected to be approximately 16%. To conclude, our 2025 results reflect strong execution and continued progress against our strategy. As we look to 2026, we see positive momentum in the business and remain focused on investing in innovation, strategic customer relationship and capacity to support long-term performance. With that, we will be pleased to take your questions. Operator? Operator: [Operator Instructions] The first question comes from Blayne Curtis with Jefferies Ezra Weener: Ezra Weener on for Blayne. Just wanted to start by looking at your guidance. You've talked about the first quarter, but can you talk a little bit about the year, what you're seeing? We've heard a lot of different WFE outlooks and what you're seeing for your WFE outlook that you plan to outperform. Gabriel Waisman: So I believe that the most important, and thank you for the question, Ezra, factors in outperforming the WFE is having the right growth engine, and we are well positioned in that respect. With regards to WFE, we anticipate it to be in the low double digits based on, I assume the same data that you are seeing. So we definitely see a momentum gathering where we expect the second half of the year to accelerate. And we do see the first half of '26 higher than '25. So it's definitely progressing in the right direction. Ezra Weener: Got it. And then just a follow-up would be, if WFE does accelerate, do you have any bottlenecks in terms of your own production and being able to meet demand Gabriel Waisman: So it's a great question. First of all, we have made significant investments over the last year to expand our manufacturing capacity, and we have the sufficient one to support our growth outlook, including, of course, clean room capacity for advanced packaging in particular. And this year, we continue to invest in infrastructure, including new production capacity in Asia and also the investment in IT infrastructure, such as the ERP to improve the efficiency and scalability. And we believe that these actions give us the ability to manage higher volumes with better cost and time efficiency, being closer to the customers and providing greater transparency. Operator: The next question is from Matthew Prisco with Cantor. Matthew Prisco: Maybe just to start, can you offer any additional color on maybe how customer conversations have evolved over the past 3 months across each end market? And then those customer conversations, are those translating into actual orders at this point to support that second half inflection? Gabriel Waisman: So thank you, Matthew. So let me start with perhaps taking it into the growth engines, the primary growth engines and drivers for us this year and take it to the customers specifically. So we see '26 as another growth year with several key drivers. First is the advanced logic and gate-all-around. We see proliferation of gate-all-around across all leading manufacturers with increasing process control intensity. On DRAM and high-bandwidth memory, we see a healthy recovery in DRAM and continued build-out of HBM capacity. In advanced packaging, we see growing contribution from hybrid bonding. And of course, we support it with our both dimensional and chemical portfolio that we see significant growth over there. Overall, we see the increased capital investments as has been published by several of our customers. Of course, it takes time until this has turned out into WE orders and, of course, revenue for company. But we've seen those latest announcements as very encouraging and building the momentum getting to 2026. Matthew Prisco: Okay. That's helpful. And then maybe as a follow-up, can you walk us through share dynamics in your dimensional metrology business, both from the overall portfolio and that integrated CD opportunity you talked about? And maybe a specific focus on PRISM as well and Nova's positioning there and kind of adoption trends of those systems? Gabriel Waisman: So I hope I understand the question correctly. But if you're talking about the overall market share, so as per the Gartner latest report for 2024, we grew to become second in market share with an overall market share in CD and film film at about 25%. That represented an overall increase of about 25%, and we are seeing continued market share gains across our portfolio. In terms of the integrated metrology, we've I've mentioned the fact that we have a leading global logic customer adopting our integrated metrology portfolio and product suite for its gate-all-around CMP processes. We've also mentioned the fact that both ELIPSON and METRION has had an excellent year in '25 and are becoming important growth engines for the company. ELIPSON is a tool of record at a top foundry for advanced gate-all-around production with additional tools at another leading logic and memory customers. We also see repeat orders and proliferation from R&D into high-volume manufacturing. And on the METRION side, we have recently qualified at both gate-all-around logic customer and a leading memory manufacturing manufacturer as we have planned to and discussed, and this is a very significant milestone for the company. In both cases, of course, we are at the early phase of proliferation, and our goal is to evolve to become a multiple tool per fab similar to how we scaled XPS historically. And just as a side note, we've just shipped the 300th XPS tool, and it's definitely a reason to become -- to be optimistic. We also see share gain traction with our stand-alone OCD solutions for packaging and advanced packaging and also on the front-end copper dual damascene for our chemical portfolio. So definitely quite optimistic in terms of the share gain momentum as we enter 2026 Operator: The next question is from Michael Mani with Bank of America Securities. Michael Mani: Could you just clarify your view for the business this year between DRAM and foundry and logic, which one do you expect to grow faster? And thanks for your WFE view for 2026 of low double digits. I guess as you look out to this year, you said you'd be able to outperform, and that makes sense because you have the right product suite, gaining share. It's going to be a very leading edge heavy year. But does the degree of outperformance you expect this year look very different from the past couple of years? It feels like it should be stronger given all those dynamics, but would love to hear your view on that. Gabriel Waisman: Thank you for the question. We do see several vectors in growth this year, stemming especially from advanced logic and DRAM. We see significant growth coming from advanced packaging as well. I think that I mentioned the fact that we had about 60% growth in '25 in advanced packaging, bringing the total share out of the company's revenue to about 20%. And we believe that advanced packaging will still have a double-digit growth this year. So the major vectors for growth are both leading-edge advanced logic and DRAM as well as advanced packaging. In terms of NAND, we do see some signs of improvement, but we are waiting an inflection point similar to what we've seen on DRAM and HBM. And in terms of outperformance, of course, we are aiming to outperform WFE, but it's still early on this year to indicate any specific number. Michael Mani: Got it. And then on China, so I think you mentioned it came in at 33% of sales for 2025. I think that was a little higher than expected. So heading into this year, I mean, what's your view for the market? Is it flat? Is it slightly down? And any sort of color on what exactly you're seeing that might be driving that lack of growth? Gabriel Waisman: So we've had 39% of our business from China in 2024. And as you indicated, it normalized to about 33% last year. China is a large and very, very important territory for us, and we expect it to continue and represent around 30% of our sales. We do see shorter lead times in China, which reduced visibility, but we are seeing trends that make us believe that China will continue to have steady investments this year to maintain this proportion that I've just indicated as part of our overall sales. Naturally, as advanced nodes and DRAM invest more and China is focused on mature nodes, we'll see the relative portion of China go down even if the nominal sales remain flat, but we are seeing signs of improvement in the business in China as well. Operator: The next question is from Shane Brett with Morgan Stanley. Shane Brett: So my first question is on leading-edge logic. So how should I think about your share position in the context of your largest customer adding more 3-nanometer wafers this year? I'm asking this because your Taiwan revenue is up nearly 90% year-over-year in 2025, which is very reflective of your strong position. I'm just curious just how much better this can be for you in 2026. Gabriel Waisman: So I'm not sure I can discuss specific shares with a specific customer. But I can say that in terms of gate-all-around specifically, and we'll talk a bit more about the advanced nodes in gate-all-around, we're well positioned across all 4 players. And we see the growth this year and the momentum increasing compared to last one. In terms of 3-nanometer, of course, the intensity is not as high as it is in gate-all-around in the 2-nanometer, but it's still very significant. So any investment in advanced nodes is very beneficial for us. Shane Brett: Got it. And then for my follow-up, so for advanced packaging revenue, you kind of talked about low double digits. But I guess relative to some of the etch and dep players, that feels a little bit light, but it's kind of in line with your kind of metrology inspection peers. Just what's the dynamic that's going on in advanced packaging this year that's, I guess, leading to a bit of a moderation from 60% growth to kind of low double digits this year? Gabriel Waisman: So advanced packaging for us is relatively new, and we see the penetration of more and more products and gaining share in advanced packaging. So out of the 20% of product revenue that I indicated, about 1/4 to 1/3, depending on the quarter is high-bandwidth memory and the rest is logic. We do see strong double-digit growth this year as well. And since we are engaged with all players and introducing more and more solutions and capabilities, we believe that this is a great opportunity for us, and we'll see the growth continuing into this year as well. Operator: The next question is from Elizabeth Sun with Citi. Yiling Sun: This is Elizabeth for Atif. First question is for is for gross margin guidance for Q1 is 58% slightly is down sequentially. So I'm just wondering what's the puts and takes in the gross margin guide for Q1. Guy Kizner: Sure. So this quarter, we reported gross margin of 59.6%. Looking ahead for the next quarter, we are guiding gross margin of 58%, plus/minus 1% point. And this reflects the current specific product mix as we see it right now for the quarter. But as we always said, margins can fluctuate on a quarterly basis. And the right way to look on our margin profile is on the annual basis. So nothing really changed structurally. It's based on specific product mix in a specific quarter. Yiling Sun: Got it. And then on gate-all-around accumulative revenue of $500 million until '26. So we are already in '26. I'm just wondering like you have a lot of announcement recently. So I'm wondering for gate-all-around in total, are you seeing the accumulated revenue to be maybe above the $500 million level? Gabriel Waisman: So we do see the momentum. And as I mentioned, we are well positioned across all players, and we are on track with getting to the $500 million mark as an accumulated revenue for '24 to '26. Obviously, '26 is expected to be higher than '25. So we'll see how it goes. Right now, I can say that we're on track to getting to this target. Operator: The next question is from Charles Shi with Needham & Company. Yu Shi: Maybe 2. First one is regarding China, how -- it looks like you talked about a little bit reduced visibility, but overall looking strong. It sounds like probably second half should see some pickup in China revenue relative to second half as well, in line with the overall trend for what -- I mean what you guided for your overall revenue. Is that still the case? And how do you feel about sustaining maybe last year's China growth somewhere around 11% based on your -- the geographical breakdown you just provided? Any color would be great. Gabriel Waisman: Thank you, Charles. So overall, if we look at process control in China, at least according to the data that we have from external sources, process control in China actually went down. But as I mentioned before, for us, it nominally went up, and we're very encouraged about the position that we have there. Obviously, as I mentioned before, proportionally, it went down from 39% to 33%. And the more investment there is in advanced nodes, it's expected to continue to go down, whereas I believe that it will normalize around the 30%. So it will continue to be a dominant and key territory for us moving forward. In terms of the trends, we currently see the some increased visibility, even though in general, visibility went down in China as well. But what we see now gives us more confidence about at least the nominal level of business in China in '26. Yu Shi: Got it. The other question, I know this is actually a question I got asked a lot. One of your peers talked about rising memory prices having some impact on gross margin. Wondering if you are seeing any of that. I know it's kind of hard to compare what you see versus what your peer sees. And I just want to get some clarification. Is memory price creating any pressure on your gross margin? Gabriel Waisman: Not sure I fully understood the question. But overall, we don't see a correlation between memory pricing to our gross margin. No. Operator: The next question is from Vedvati Shrotre with Evercore ISI. Vedvati Shrotre: I think most of my questions have been answered. So the one I had was, can you talk about how your lead times have changed maybe 3 months versus now? And within that, your peers talked about the optical components being constrained. Does that impact you as well as you go through the year? Gabriel Waisman: Yes. So thank you for the question,. I agree with the fact that there is more pressure on the lead times. which, of course, impacts visibility as well. But that pressure on lead times calls for our operational agility to improve, which we're doing, as I previously mentioned. We're working with our suppliers and with our supply chain to make sure that we have both the material and to have the capacity to support the business and the anticipated growth this year. So there is additional pressure on the lead times, but we are making ourselves more agile in order to accommodate for that. Vedvati Shrotre: And is the optical component a driver of that lead time pressure? Gabriel Waisman: No. I think that the lead time pressure is coming from the customers that they have to turn CapEx into WFE and to actual deliveries into the fab. It's across the board, meaning that it impacts both the material, chemical and dimensional metrology portfolio that we have. There's no difference in the requests that we have from different components of our portfolio. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Gaby Waisman, Nova's President and CFO -- CEO, excuse me, for closing remarks. Gabriel Waisman: Thank you, operator, and thank you all for joining our call today. Operator: The conference has concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Legrand 2025 Full Year Results Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Benoit Coquart, CEO of Legrand. Please go ahead. Benoît Coquart: Thank you. Good morning, everybody. Franck Lemery, Ronan Marc and myself are happy to welcome you to the Legrand 2025 Full Year Results Conference Call and Webcast. As you know, this call is recorded. We have published today our press release, financial statements and a slide show to which we will refer. I begin on Page 4 with the 3 key highlights of this release. First, Legrand delivered a remarkable performance with record sales growth, high profitability and a strong achievement of its CSR objectives. Second, the group continued the successful deployment of its strategic road map towards EUR 15 billion of sales by 2030. Third, Legrand is targeting further sales growth of between plus 10% and plus 15% in 2026, excluding currency effects. Starting on Page 6 of the deck, we fully achieved our annual targets for 2025, which we will detail further by key topic during this presentation. Moving to Page 7, I will start with an overview of sales. In 2025, excluding currency effects, our sales grew by plus 13.1%. This includes an organic growth of plus 7.7%. This growth is driven by an outstanding performance in data centers with an organic growth of close to plus 40% this year. And regarding our sales in buildings, we are resisting very well despite a still muted market over the year. On top of organic growth, we benefit from a positive scope effect of plus 5.1%. I will come back later on acquisitions. Of course, now based on the acquisitions announced and the likely date of consolidation, the 2026 full year scope impact would be close to plus 6%. As for exchange rates, the effect was a negative minus 3.1% in 2025. And based on the rates of the month of Jan, it will be around minus 2.5% for the full year 2026. On Page 8, you will find the key takeaways per geography on a like-for-like basis. In Europe, in a market that remains mixed overall, sales were up plus 1.9% over the year, including, for example, in Germany, Italy, the Netherlands and the U.K. In North and Central America, sales were up a strong plus 16%, driven by an outstanding performance in data centers. Finally, in the Rest of the World, sales increased by plus 2.7% with good growth in Asia Pacific, Africa and the Middle East, partly offset by a retreat in South America. These were the main comments I wanted to share on sales. I will now hand over to Franck for more color on our financial performance. Franck Lemery: Thank you, Benoit, and good morning to all of you. I will start on Page 9 with adjusted operating margin. We recorded in 2025 a very solid adjusted operating margin of 20.7% of sales after acquisitions. This represents a plus 20 basis point increase year-on-year, including a 10 basis point organic improvement and a plus 10 basis point favorable impact from acquisitions. The group's high profitability demonstrates once again the strength of our strategic model and our solid capacity to execute and adapt I think notably of the volatile environment linked to the U.S. custom policies, which increased the group cost base by around $100 million. Going now to Page 10. The net profit attributable to the group stood at EUR 1.2 billion, represented 13.1% of our sales. The increase coming from the operating profit is partially offset by the impact of financial results, while the corporate income tax rate remained stable. The free cash flow came to a solid EUR 1.3 billion at 14% of sales and a conversion rate of 107% supporting the sustained acquisition momentum of Legrand while preserving balance sheet strength with financial leverage kept under control at 1.9 at the end of December 2025. This is it with the key financial topics I wanted to share with you this morning. I'm now handing over back to Benoit. Benoît Coquart: Thank you, Franck. Let me now move to our 2025 CSR performance. On Page 11, in 2025, Legrand reached an achievement rate of 110% on the targets set for the first year of its 2025-2027 CSR road map. You will find on Page 12, a few illustrative examples highlighting this performance. For example, Legrand outperformed its targets in terms of Scope 1 and 2 CO2 emission reduction, plastic packaging reduction or use of sustainable materials. All the achievements confirm the strong integration of sustainability into the group's strategy. I'm now moving to Page 13 to conclude on 2025 performance with our dividend. The approval of the payment of a dividend of EUR 2.38 per share will be proposed to the next General Meeting of Shareholders. This represents a rise of plus 8.2% from 2024 and a payout ratio of 50%. Let's now move to the second key topic of this release, our strategic road map. In 2025, Legrand actively deployed its strategic road map towards EUR 15 billion of sales by 2030, combining accelerated growth and value creation. As shown on Page 15, this is first illustrated by the reinforced positioning of the group in energy and digital transition offerings which now represent 53% of our sales compared with 47% for essential infrastructure solutions. Data centers at the heart of the group's growth strategy represented sales of EUR 2.4 billion at year-end 2025, i.e., 26% of group sales to compare with EUR 0.7 billion in 2020. Legrand is recognized as an undisputed major player in this field of activity with a deep offering that is perfectly suited to the deployment of infrastructure for artificial intelligence. Building on nearly 30 acquisitions completed in this field, Legrand has become a leading player and a preferred partner for major industry participants. The side positive impact of all the acquisitions we made in data centers is that they also strengthened the group's existing position in critical power with other verticals driven by electrification, such as infrastructure, industry, telecom, oil and gas and microgrids. I am now moving to Page 16 to 18. As you know, innovation is really the DNA of Legrand. We highlight on those slides a number of product launches carried out in 2025, which illustrates the sustained momentum in innovation across the group's segments and geographies. On Page 19, we underline the group's continued focus on digital initiatives and customer experience with high and improving customer satisfaction in 2025. Finally, on Page 20, we detail Legrand's particularly active M&A strategy with 7 acquisitions announced in 2025, representing EUR 500 million of annualized sales, all in the fields of energy and digital transition. This momentum extends into 2026, as shown on Page 21, with the announcement today of 2 additional acquisitions in data center in the U.S. with Curtis Industries and in Brazil with Green4T. Maybe one thing to add that is not in the slide actually, but in the press release, we recently invested in Accelsius in the U.S., a pioneer in 2-phase direct-to-chip liquid cooling. This investment will further strengthen the group's portfolio of solutions for AI and HPC data centers. Let's now move quickly to the third part of this release with our targets. On Page 23, regarding '26, Legrand will continue to accelerate its profitable and responsible growth momentum in line with its strategic road map. Taking into account the current global macroeconomic outlook, a very strong data center market and a modest recovery in the building sector, Legrand is targeting the following in 2026, sales growth, excluding currency effects of between plus 10% and plus 15%, comprising organic growth of between plus 4% and plus 7% and growth through acquisitions of between plus 6% and plus 8%. Adjusted operating margin after acquisitions of 20.5% to 21% of sales, CSR achievement rate of at least 100% for the second year of its 2025-2027 road map. On Page 24, regarding our 2030 ambitions -- sorry, building on its achievements and taking into account both observed and expected market trends, Legrand is confident in its ability to reach the upper end of its 2030 sales target range around EUR 15 billion with average annual sales growth of close to 10%, excluding exchange rate effects and average adjusted operating margin above 20% of sales compared with the previously targeted level of around 20% in average. This is it for the key topics of this release. Last word before we move to the Q&A session. You will find on Page 26 to 28, our corporate access agenda for 2026 should you wish [Technical Difficulty] management. Let's now switch to Q&A. Operator: [Operator Instructions] And we're going to take our first question. And it comes from the line of Daniela Costa from Goldman Sachs. Daniela Costa: Thank you so much for taking my question and the follow-up. I will do them one at a time. But starting on the guidance for 2026, can you give us some help on the building blocks, particularly how much data center growth are you factoring in? And how much of that comes from a backlog you already have? And what pricing are you factoring in there? Benoît Coquart: Daniela, so our organic guidance, the 4% to 7% growth is basically built this way, a growth in data center of between plus 10% and plus 20% and for the rest of the activity, i.e., the building activity, something basically more or less flat in volume with a bit of pricing. Those are the building blocks. Well, how confident are we on the fact that we're going to grow from plus 10% to plus 20% in data center? I have to say that we are very confident. Not much based on the orders. The lesson of last year is that it's difficult to anticipate what we're going to do based on the orders in hand. Last year in Feb, we -- based on the orders we had in hand, we targeted plus 10% to plus 20%. And at the end of the year, we did plus 40% or close to plus 40%. So it's a bit difficult to that. So we have to rely not only on orders, which are very good, not only on the book-to-bill, which is above 1, but we also have to rely on the feedback we get from the market and the CapEx plans announced by the hyperscalers and so on and so forth. And based on those information, we are very confident on our ability to do something between plus 10% and plus 20%. As far as pricing is concerned, overall, not specifically on data center nor specifically on building, we are shooting for pricing somewhere between plus 1% and plus 2%. Now it is based on our scenario when it comes to the raw mats and components. So we believe that the price of raw mats and components will be up between plus 1% and plus 2% this year. But of course, it can change. And if for whatever reason, the price of raw mats and components was to be higher than expected, of course, we would do a bit more pricing. But based on the scenario we have in hand today, we believe that the plus 1% to plus 2% price should be enough. Daniela Costa: And then just following up just a bit on the acquisitions and the investments that you have been doing. I think one of the deals today has more of a power distribution medium voltage component, which I believe you hadn't done too much in the past. And then the Accelsius was into liquid cooling, although I guess it's just an investment rather than a full consolidation. But can you talk us through sort of how you're pivoting the portfolio in data centers? Do you want to go into medium voltage? How far out are you in the gray space right now, just to get a bit of a shift on the mix? Benoît Coquart: Well, it's -- thank you for asking the question that you have because I sometimes feel that we haven't done a job good enough in explaining how deep our portfolio in data center was. So a few numbers. For example, we are already a bit in medium voltage. We've been selling for quite some time, medium voltage, low voltage transformers, cascading transformers to data centers and to a number of other spaces. So -- but maybe let me give you a few numbers. The split between white space and gray space would be something like in 2025, 75% white space, 25% gray space. You could note that gray space was 5% 3 years back, and it's now 25%. So we've been able to rebalance, if I may say, our portfolio as we committed to do at the last CMD. Now the split between gray and white doesn't give full justice to the breadth of portfolio we've been able to build, which is composed of close to 55,000 SKUs for data centers, standard SKUs. And if we put together the customized SKUs, close to 100,000 SKUs. So maybe the best way to look at it is to break down it by type of applications. So in 2025, we had about 35% of our data center sales, which was for critical power. So critical power, it's medium voltage, low-voltage transformers. It's UPS, switchgear, busbar, busway, remote power panels and a few other products. So 35% critical power. 50% of our sales relates to compute infrastructure with approximately half of that would typically be physical infrastructure. So racks, tap-off box, feeders, cable management, stuff like that. And half of that would be typically compute management. It's about monitoring PDU, rPDUs, KVM, consoles, transceivers and a few other products. So 35%, 50%. We have 5% of advanced cooling, which is rear door exchangers, containment, and now we have the ability to be more active on 2 phase direct to chip. And then we have 10% which is testing and life cycle services. That's where we have the power banks, have [indiscernible] power banks, but we also have installation, commissioning, monitoring, field services and so on and so forth. So you see we really have a complete set of products. So yes, we are a bit into medium voltage switchgear. We are already a bit into medium voltage transformers, but it goes down to rack components and even field services. I believe today, we have probably one of the most comprehensive range in the data center industry. And it is set to continue. We have a lot of ideas, both organically and inorganically to continue to build a strong catalog. Operator: Now we take our next question. And the question comes from the line of George Featherstone from Barclays. George Featherstone: Maybe I'll start with a follow-up because the color you just gave there was super interesting. And in the context maybe of the way the business will evolve to the 800-volt DC architecture. And perhaps you could give a little bit of color on what that means for you and how you're going to address this new technology in the future. Benoît Coquart: Well, thank you very much for asking this question because I sometimes feel that the analyst community is a bit lost with these new architectures, and it's the opportunity to maybe a bit fear. So what is basically 800-volt architecture. You have a concept, which is sort of grid-to-chip concept, which we call in the industry, the holy grail, which is still on the drawing board and won't be at scale before 2030, 2031, 2032. What is currently almost ready, if I may say, is a sort of is 800-volt architecture, but slightly different than this grid-to-chip. It is based on what we call a side car. So how does it work? Basically, you have a powertrain with AC components that feed a power side car, which is located in the white space. This power side car convert from AC to DC, then feed a number of racks, and that's where you have the compute components, the cooling and so on and so forth. So 3 characteristics: increased power density up to 500 or 600 kilowatt per rack, use of DC components in addition to AC in the electrical powertrain and a sort of decoupling of power and energy storage from the IT rack and those components are moved into a side car serving one or several racks. So this is the architecture, which is almost ready and possibly at scale in a few years. How will the architecture impact Legrand? We have made a number of analyses, and we think that it will have a neutral to negative impact on about 20% of Legrand sales and a neutral to positive impact on 80% of Legrand sales. So the negative impact typically could be on rack PDUs, for example. It could be on UPS because UPS is replaced by sort of battery storage within the side car. It could be on a few other components. And the positive impact, well, it's on the AC powertrain because you will need more power, more amperage. It could be on the physical compute infrastructure because you'll have a wider racks. It will be on cooling, of course. And especially, it will push 2-phase direct-to-chip cooling. You will have rear door cooling for residual cooling, including actually in the side car. It will be good for commissioning and for Avtron products because not only you will need to commission the electrical infrastructure. But on top of that, you need to commission heat rejection units, CDUs and so on and so forth. So to summarize the impact it could have on Legrand, it could imply for us the theoretical accessible market, let's say, would be between USD 3 million and USD 4 million per megawatt. Now this being said, I wouldn't like you to get too excited by the opportunity because it won't be at scale before '20 or you won't hit our P&L before, let's say, '28 or '29. And more importantly, this is one amongst many architecture. And you have to understand that we are in a world where you have tens and tens of different architecture. And what is important is not for a company like Legrand is to be architecture agnostic. In other words, to have the ability to work with all the hyperscalers, all -- every single co-locators so that our product launches stick to the architecture that they're going to launch rather than betting that the winning architecture will be X, X or Y. And I have the feeling that we have the right relationship with all of those guys. I mean we are working with Meta, the Google, the Oracle, the Microsoft, the [indiscernible] of the world and the QTS and the Equinix and so on and so forth. So in a nutshell, it should have quite a positive impact on Legrand, but not for now, within 2 or 3 years. And again, it will be one amongst many different architecture. Sorry, I've been a bit long, but I thought it was worth taking some time because those topics are complex topics, and we need to bring as much clarity as we can to the market. George Featherstone: That's very helpful. Maybe just another question on your guidance for data center growth this year. Previously, you've sort of benchmarked yourself to Vertiv and their growth is quite a bit above what you're saying that yours will be this year. Perhaps could you explain what the difference would be this year for you? Benoît Coquart: Well, I hope they are right. To make a long story short. But I mean, well, this year, we grew close to 40%, which is significantly higher than their growth, right? Because if my reading was correct, they grew 26%. So we did a fantastic performance. And actually, this plus -- close to plus 40% is probably significantly above the market growth. Well, if the market is not growing 10%, 12%, 14% next -- this year in 2026, but much more than that, then fine. Our objective, as we did last year, is to overperform the market. So if the market is growing 20% instead of growing 10%, all good for Legrand. There's no structural reason why Vertiv should grow faster than Legrand. In '26, we grew 40% against '26. And if you look at the past 2 years, the performance is also significant. So again, we are all different animals in this business. So comparing one with the other might not be the right way to do. What I can confirm is that again, we're going to experience a nice growth in 2026 in data centers. We have the right product offering. We have the ability, should we miss something, we have the ability to develop it organically or to buy it. And I think we have developed a great expertise in buying data center assets at reasonable prices. We have the right relationships with the customers. We've been able to scale our business by adding capacity whenever needed. So we are ready to capture any market growth that will come. Operator: The next question comes from the line of Phil Buller from JPMorgan. Philip Buller: Thank you for all of the data center disclosure. Just to try and extract one more data point, if I can. You mentioned $3 million to $4 million per megawatt in a higher density architecture, if I heard that correctly. What is the current megawatt in a current architecture, if you will? Benoît Coquart: Well, it's probably -- now it's between $2 million and $3 million, but probably closer to $3 million now than to $2 million, given the latest acquisitions we have made. So -- well, between $2 million and $3 million, but closer to $3 million. Philip Buller: Perfect. And then on the guidance, I understood that we are expecting flat volume in buildings. I think that, that makes sense as a planning assumption. Would you see any signs from the ground that there's an improving situation in end markets such as residential in Europe or U.S. office? Any kind of on-the-ground commentary on some of those key markets would be great, please. Benoît Coquart: Well, you're right to say that the world shouldn't be limited to data centers. It's worth also having a look at building. Well, we're a bit more optimistic for buildings, we're a bit more optimistic for Europe than for the U.S. Typically, for the U.S., we believe that -- and we have embedded into our guidance a slightly negative building market overall. We see no short-term positive signals on resi. But it's only 15% of our sales in the U.S. As far as non-resi is concerned, we also remain quite cautious and the statistics tend to show that the market should be slightly down. So overall, building in the U.S., slightly negative. Now bear in mind that in the U.S., 40% to 45% of our sales is now represented by data centers. So only slightly more than 50% is represented by building. As far as Europe is concerned, we have embedded something flat to slightly positive if you look at the various KPIs, as far as the resi is concerned, well, completions are moving from minus 9% in 2025 or should move from minus 9% in 2025 to plus 2% in '26. Permit should be slightly up by plus 4% in 2026. Renovation should be slightly up by plus 1%. So we start to see positive indicators that of course, we are late cycle. So those indicators do not immediately translate into Legrand sales, but those are rather positive signs that the market should get better. As far as non-resi is concerned, recent updates from experts also suggest some sort of recovery in 2026 with renovation remaining slightly positive and new build also. So in other words, negative building -- slightly negative building business in the U.S. and flat to slightly positive in Europe. As far as the rest of the world is concerned, what is quite a mixed situation. We don't expect a recovery in China yet on the building side. And Africa, Middle East and India should remain quite supportive. Philip Buller: That's great. There's no pocket of the business that you're concerned about being in a significant contraction territory. Benoît Coquart: No. I mean it depends what you call significant contraction. The risk is always a bit China because China has experienced a minus 50% decline in the residential business over the past 3 or 4 years. Now China, it's only 2% of our sales. So whatever happens to the resi market in China won't impact much Legrand numbers. So I don't see any reason why there would be contraction somewhere. Operator: And we'll proceed with our next question, just moment. And the question comes from the line of Gael de-Bray from Deutsche Bank. Gael de-Bray: Can I follow up on the 800-volt DC discussion? I wondered how you're addressing this potential shift from a technological standpoint, I mean, especially around the potential change from electromechanical circuit breakers to solid-state circuit breakers. And also still in relation to 800-volt DC, can I -- can you go a bit deeper into the breakdown you provided, I mean, especially around the revenue base you have in the rack PDU segment and what the impact could be on this part of the portfolio going forward? Benoît Coquart: Of course, again, Gael, there's a misunderstanding between what the 800-volt DC architecture, which is ready for deployment, which is the one with the side car and the sort of full DC holy grail type of architecture, which is not ready for deployment, won't be before 2030, 2031, if it is, and which is a full DC architecture. We are addressing both by 2 ways. Number one, by developing products whenever needed. So for example, we are developing OCP type of -- and we presented well actually 6 months back at the trade show of racks by working on DC busways and a number of other things. And number two, whenever we feel that we have a gap, then we fulfill the gap by partnering or buying companies. Good example being the 2-phase direct-to-chip liquid cooling investment we made in Accelsius, which is not only an investment, financial investments, but which is also a commercial and technological partnership that will give us the ability to sell a very interesting product offering to high-density data centers. So you have to keep in mind that Legrand is the only company in this business, which has built from scratch a product offering which is AI ready. Our competitors were either pure play of data centers ready or ready [indiscernible] and so on and so forth. When we started back in 2017, we were doing sales of EUR 300 million in data centers, of which a few PDUs and a few racks. But it was 9 years ago. Since then, we have built product offering almost from scratch by doing 30 acquisitions by developing organic products, which, again, is very suited to high-density data centers. So I don't have the best answer to tell you. We're going to keep developing products. We will keep working hard with the design teams of our customers to make sure that our products are suitable to their needs. We do a lot of ETO engineering to orders. And whenever needed, we'll partner, we'll invest in partners if needed or we'll buy companies, and it will make Legrand perfectly in good shape to tackle the challenges of the new architecture that are going to come. Now as far as PDUs, I cannot be more precise than I was. I don't want to give you sales by product families. I told you that everything which was related to compute management was about 25% of our sales. And within this 25% of data center sales, you have many things, including rPDUs, but not only rPDUs, you have also monitoring devices. You have keyboard video mouse, you have transceivers, you have the console business that we bought a couple of years back. That's it. And it's -- the PDU business is part of the 20% of our sales that should be negatively impacted by indeed 800-volt architecture. But again, you have many products or families of products that will be positively impacted, 80% of our sales. This is our estimate today. Gael de-Bray: That's great. Can I also ask about what happened in Q4? I think the outcome in terms of organic growth was certainly a bit higher than what you had anticipated yourself. So what surprised you on the upside? Was it just data center related? Or are you also already seeing residential demand in Europe taking higher here relative to the last time as well. Benoît Coquart: Yes, it's mostly data center again. Yes, the Q4 is optically better in Europe than the full year, but it also comes from data center actually. Don't forget that data center, it's not only a U.S. business, but it's also Europe and rest of the world. And actually, -- maybe data that I can share with you. I told you that we grew in data center close to 40%. This growth is close to 50% in the U.S. and it's about 20% plus in Europe and 20% in the rest of the world. So we are growing significantly everywhere in data center, even though the growth is stronger in the U.S. and elsewhere. Now to answer -- short answer to your question, we did not anticipate so much sales and actually so much orders in data center in Q4. Operator: The next question comes from the line of Max Yates from Morgan Stanley. Max Yates: Just my first question is around your pricing. And when you say that's based on your kind of current assumptions, could you give us a feel for kind of what those current assumptions are? Because obviously, it's difficult with kind of copper prices and silver prices. We know they're quite sort of big drivers of direct raw materials. So could you give us a feel of -- are you doing that with kind of $13,000, $14,000 copper in mind? Are you doing that with current steel prices? Or if we do see raw materials stay at current prices, will that number be quite a bit higher? Benoît Coquart: Well, Max, it's a fair question because -- but frankly speaking, we have so many different -- we are not dependent upon one single raw mat, copper, silver or something else. And bear in mind that the vast majority of our purchases are components. Out of the 35% of raw mats and components, it's about 10% raw mats and 25% components. So it's a mix of many, many things. So we do it with our purchasing team on a very professional manner. We look at experts, specialists. We embed, of course, productivity into that, and it leads to a central scenario. And based on this central scenario, we do the appropriate pricing. The end of the game would be to adapt. The best analogy I can give you is what we did last year for tariff, U.S. tariff. I remember when we did the same call a year ago, we told you that we have embedded only USD 30 million of tariff into our guidance. But I also told you that should there be more tariff we will do more pricing. And that's what happened. At the end of the year, we had USD 100 million of tariff to compensate for. It's actually the reality is that we had $140 million. We compensated $40 million by optimizing our supply chain, making sure that more products were eligible to the USMCA agreement and so on. And the remaining $100 million of tariff were compensated through pricing in value. So the same story with raw mats and components, we have a central scenario. We might be wrong, we may be right. If copper price was to go even up and then the steel and plastic, oil, components, labor and so on and so forth. And if we needed to do more pricing in order to deliver our profitability target, we will do more pricing. And I mean, we've been demonstrating over the years that we have the ability to do so. Max Yates: Okay. And just maybe a very quick follow-up on your North America growth rate of 7% in the quarter. I'm really trying or really struggling to understand that because you're sort of saying that data centers was better. If I look at your kind of full year data center number for the group, it feels like you did roughly 30% in the fourth quarter for the group. So U.S. must have been higher than that. You're now saying data centers is sort of 40% of your business in the U.S. I know it wasn't that last year, but your data center business should have been growing -- like that should have been a double-digit contributor to growth. So I'm trying to back out how we get back to 7%. Benoît Coquart: No, no. Actually, in Q4, our data center grew by about 10%. The reason -- so it seems to be slow. But bear in mind that we had a very, very strong Q4 2024. So as early as July '25, we told you that in H2, you would have an optical deceleration, but which was not a deceleration, which was purely coming from the basis for comparison. So this is the point. I mean, about plus 10% in Q4 on a plus 30% last year, I mean, the year before and full year close to plus 40%. Max Yates: Okay. So -- but then was your -- is your 40% data center growth this year, is that an organic number? Or is that a... Benoît Coquart: Yes, close to 40% is for the full year, it's an organic number. Max Yates: [indiscernible] in the fourth quarter. Benoît Coquart: Yes. But again, the basis for comparison makes the number a bit tricky because we had a very, very easy Q1 comp because of the great pause, which happened back in Q1 2024. And we had a very, very demanding Q4. Now be careful, don't extrapolate one way or the other, there's no such concept as an exit rate in data center, right? So don't extrapolate good Q4 or slow Q4 into 2026. I can confirm that the performance was great in the U.S. and elsewhere in Q4 that we have a lot of orders that are sustaining our guidance for 2026 and that we should see very exciting growth in data centers this year. Operator: The next question comes from the line of Kulwinder Rajpal from AlphaValue. Kulwinder Rajpal: So I also wanted to follow up a little bit on the data center side. So we have been discussing about the 800-volt system, but I wanted to actually dig a little bit into the PUE side of things. I mean I know the demand for standard offerings is high. But are you also seeing a traction for your PUE offerings because we know that Europe is already short on power -- to power all the data centers. And then is there a dedicated part of the portfolio that is dedicated to these high-efficiency offerings? And is there something that you can add through acquisitions also? Benoît Coquart: It's a good question. Indeed, we estimate that we have approximately 40% of our data center sales, which help or can be used to reduce the energy bill of a data center. And it's not only about compute monitoring. It's also, of course, about efficiency within the powertrain and amongst another -- a number of companies. So today, I think the average PUE on a worldwide basis is probably something like 1.5. We know that theoretically, it can go down -- I mean, the best PUE ever, I think, was recorded was 1.025, if I'm correct. So we have a lot of opportunities to help our customers cutting their PUE from 1.5, 1.6 down to 1.4, 1.3, 1.2 if needed. So it is clearly a very important driver behind our data center business, and it should continue to be. Now this being said, it is a fact that you have geographies where access to grid is a constraint. And we -- there are some countries where it can take up to 2, 3, 4 years for a data center to get connected to the grid. That's why you have to take with a certain cautiousness, the numbers, the CapEx numbers, which are disclosed by our customers because some of those CapEx will not be spent in 2026 or not even in 2027 just because they will need to get the access to the grid. So to make a long story short, I confirm that it is an industry challenge to get the energy. It may translate into some data centers being opened rather in '28 than in '26. But we are part of the solution, not of the problem because a large part of our product portfolio help cutting down the PUE. Kulwinder Rajpal: Right. And so just to follow up a little bit on this. So is there a specific treatment that you get in terms of pricing with the portfolio and also if it helps the profitability? I know that most of the products are centered around the group profitability, but I just wanted to understand if there is a specific advantage that you can get from this particular set of products. Benoît Coquart: No. I mean we -- I'm not aware of any significant pricing approach between data center and building. Of course, our products in data center are mission-critical. They are extremely important for our customers to deliver their performance, not only in terms of PUE, but also in terms of reliability, compute performance and so on and so forth. But at the same time, there are big customers are negotiating tough on price, and they want to make sure that they have good value for money. So we are not taking advantage of product shortage or the criticality of our products to do additional pricing. We are doing the same pricing. We are doing elsewhere. Operator: The next question comes from the line of Eric Lemarie from CIC CIB. Eric Lemarié: My first question on the construction cycle. You mentioned that Legrand is more late cycle, and it's certainly very true for the new build. But is it really the case for renovation? Because I suspect that if I need to renovate my house, I will probably start with some electrical equipment. Benoît Coquart: No, you are right, Eric. Indeed, for new, you have to -- it depends on the building, but it could be 6, 12 or 18 months lag between the time a permit is issued and the time we sell our products. For renovation, the shorter -- the cycles are a lot shorter even though it depends on the type of renovation. If it is renovating one room, it's almost immediate. If it is renovating a full house, then it takes a full -- a few months now. This being said, the renovation numbers for Europe in 2026 are not very bullish. According to, I think it's your construct. They plan for the residential renovation to be up 1%. So it's a very light increase, let's say. Again, we can have good surprises. We'll see. But so far, nobody expects the renovation market in Europe to rebound sharply. That's not what we have embedded in our guidance. We have embedded, as I said, flat to slightly positive building market in Europe. Eric Lemarié: And a follow-up on data center. You mentioned this close to 40% growth for the full year in 2025 and 10% for Q4. Could you remind us Q1, Q2, Q3, how was it the growth on an organic basis for data centers for Legrand? Benoît Coquart: Yes. So we said that it was well above 30% in Q1, well above 30% in H1. So I'll let you, Eric, do your own computation, above 30% in 9 months and 10% in Q4. And that everything was coming from the basis for comparison and that we have kept building a very nice order book over the year. And again, we have a very strong backlog and order book at the end of 2025, which give us full confidence in our ability to deliver our data center targets for '26. And maybe just a word because I want you to avoid a misunderstanding. So the close to plus 40% is really organic. If you were to put together FX and acquisitions, this close to plus 40% would become plus 50%. So the close to plus 40% is really purely like-for-like sales increase in data centers in 2025. Eric Lemarié: Okay. But the close -- well above 30% you mentioned for the 9 months, it was actually well above 40%, I suspect? Benoît Coquart: 40% is above 30%. Eric Lemarié: And just if I may... Benoît Coquart: I'm glad to give you more disclosure, Eric, but you should have the same level of disclosure to all companies. I have the feeling that we sometimes disclose a lot more than anybody else in data centers. Eric Lemarié: This is certainly true. And if I may, a last one on margin. Your guidance on margin, do you include in your margin guidance for 2026, some positive impact from acquisition or negative impact from acquisition? Benoît Coquart: Well, actually -- so first comment, when looking at our guidance, we start from a high base, which is a 2025 margin. And we basically include a bit of leverage, organic leverage, not a lot, I have to admit. But I have to say that we have given a clear priority to growth in 2026 and to sustain growth while you have inefficiencies, you have amortization, you have expenses to do. So a bit of leverage and a few 10 bps of dilution coming from acquisitions. It could be minus 10, it could be minus 20. Those are the order of magnitude. And all that leads to the 20.5% to 21% adjusted EBIT margin after acquisitions, which we have embedded into our guidance. And I'm sure that you have also noticed, Eric, that we have upgraded a bit our 2030 EBIT margin target because at the CMD, we said that we were looking for an average EBIT margin of about 20%. And now we make it clear that the average will be above 20%. Operator: The next question comes from the line of Martin Wilkie from Citi. Martin Wilkie: It's Martin from Citi. I don't want to labor the point too much, but just to come back to the data center growth in the fourth quarter, and I appreciate there are obviously some comp effects, both from the very high growth in Q4 and also because of some of the acquisition effects as well. Could you give us -- you've obviously given the EUR 2.4 billion in absolute terms for the year. But in euro terms for Q4, are we right in thinking that data center sales in euro terms were sort of close to EUR 700 million? Just so we can make sure we sort of square the circle in terms of how big data center was in the fourth quarter. Benoît Coquart: Well, actually, I don't have this level of granularity. And it's a bit complicated because you have to embed FX, which is strongly negative in Q4 because of the dollar versus euro. You have to embed acquisitions and -- so it's a bit complicated to say. But it seems like you are surprised by the plus 10% in Q4, which is far better than what we guided for back in November for the last. And again, you shouldn't look at the data center business as if it was a distributed business, right? One quarter is impacted by the comps by the project and so on. If your question is, is your target plus 10% in data center in 2026? The answer is no. Our guidance is 10% to 20%. But of course, we are targeting to grow as fast as possible. So I wouldn't read the plus 10% in Q4 as any indication of what it would be for 2026. What I can tell you, again, and this is confirmed by the publication of our peers, this is confirmed by the huge CapEx plan from hyperscalers where the CapEx is growing from 50% to 100% between '25 and '26. It is confirmed by industry experts. It is confirmed by the backlog we have. It is confirmed by the book which we have. 2026 is going to be another very good year in data centers. Martin Wilkie: We obviously see the strength of the orders. I think the debate or the confusion with the Q4 numbers is that the full year seems to be a lot better than people had expected. And therefore, we would have thought the Q4 growth rate would have been higher. But I'll go through the math afterwards. I know there's a lot of moving parts on acquisitions and foreign exchange and these kind of things. Perhaps if I could just have one follow-up on data center. Obviously, you started off the year with a lower guidance. When the surprise comes, is it literally sort of an overnight surprise to you? Just -- I mean, I know obviously, there's a difference between backlog and pipeline. But in terms of when you're having those conversations with your customers, what sort of pipeline visibility do you have? Benoît Coquart: Well, it's very complicated because, again, we are not as experts as others in reading the pipeline. But again, the connection between backlog and sales it's not that easy because orders are -- can be canceled, they can be moved. If we have to -- most of the contracts do have a pricing clause whereby you can adjust the price up or down depending on the price of raw material and components. The orders we have are usually not 3 years orders. We have an ability -- our lead times are typically 8, 10 or 12 weeks for most of our products. We have almost no products where you have a longer lead time or lead time as high as 8 months, 10 months or 12 months. So customers do not need to pass orders 1.5 years in advance. So most of the backlog we have will have to be delivered in 2026, not in '27 and '28. So it's not solid enough as a leading indicator to tell you precisely, yes, we intend to grow 18.5% in data centers in 2026 because the backlog would support that kind of growth. It's more a trend topic. And this trend topic, again, confirmed the very good '26. I cannot be more precise than that. So in other words, to make the long story short, number one, we shouldn't try to read too much from the backlog even though the numbers are very good. Number two, having a backlog of orders in hand is not a problem to pass on price increase if we needed to. Operator: Now we're going to take our next question and the question comes from the line of Alasdair Leslie from Bernstein. Alasdair Leslie: So a couple of follow-up ones on data centers, please. I mean, obviously, it sounds like you saw a similar surge in data center demand to your peers. I kind of -- I appreciate the comments about not overstating the importance of the backlog, but you obviously do talk about a promising order book there. Does that surge in Q4 demand, does that really give you a sort of fast start to 2026 as well? I was just wondering what the outlook for Q1 data center growth was. Obviously, just last year, reflecting on 2025, it can be a little bit lumpy from one quarter to another. So just to help us kind of calibrate expectations for the first quarter. Benoît Coquart: Well, we're not guiding on quarterly sales or profit, neither on data centers nor for the rest. And again, an exit rate doesn't mean much in the data center business. So no specific guidance to give you, Alasdair, for Q1. We stick to our yearly guidance. Alasdair Leslie: Okay. And then maybe just the second question was on capacity to meet higher demand in data centers. I mean we hear commentary, it sounds like constraints are creeping back in and on the rise again, obviously, because of the surge in demand. But one of your slides mentioned solid capacity to execute and adapt. I appreciate that's probably a broader level across the group. But -- and it feels like the ability to meet demand, short lead times, that's still very much a kind of competitive advantage right now in the industry. So just wondering if you could comment there in terms of how you assess yourselves relative to the competition on industry. Benoît Coquart: Yes. So far, the teams have done a very good job, I have to say. So we have doubled our capacity investment on data center in '24 compared to '23 and doubled again in '25 compared to '24, still remaining actually within the 3% to 3.5% CapEx to sales level. So we are not increasing the CapEx guidance. And we believe we will still do a good job. So yes, it's a challenge, and the teams are working hard to meet the demand. But this is a business which is not capital intensive. So you can increase capacity by working on your supply chain, by working with a subcontractor, by adding shifts. You don't have to spend millions and millions in CapEx. So it remains a challenge. We've been able to do a good job in the past 2 or 3 years, and I'm fully confident that it will not be a bottleneck for our business in '26. Operator: Now we'll proceed with our next question, and it comes from the line of Andre Kukhnin from UBS. Andre Kukhnin: Can I just clarify a couple of things first, and then I have one question. On -- and sorry to come back to 800-volt DC. But in terms of -- when you talked about AC powertrain being neutral to positive within the 80% of your business, do you see that as in dollars per megawatt or just in absolute terms, given there's going to be a lot more megawatts when we go to that architecture? Benoît Coquart: Well, it's also dollar per megawatt but again, I'm ready to have the discussion with your experts if you wish to. But yes, we see much more solid redundant with more intensity AC powertrain. So it should contribute to the higher -- slightly higher dollar per megawatt. And on top of that, you will have gigawatt data centers and not megawatt data centers. So for data centers as a whole, it's also a good news. Andre Kukhnin: Yes, we have no doubt in the growth in megawatts or gigawatts in absolute. It's just a couple of people we spoke to basically suggest that there's at least one stage of switching that disappears in the DC 800V architecture, and that's the AC switching. So I was just intrigued to hear that you see that... Benoît Coquart: So you have a bit more -- you have less UPS, which is true. But we are not -- we have a very small market share in UPS in data centers, I have to say. But again, it depends which DC architecture you're talking to. If it is the next grid to chip, then it's about DC and no longer AC. But again, this architecture is in the books today. And yes -- so in the architecture, which is currently considered for '28, '29 in some of the data centers, it's still an AC powertrain. Andre Kukhnin: Got it. And just related to that... Benoît Coquart: There's a focus on this new architecture, which again is a pretty good news for Legrand, not a bad news, which is too strong from the financial community. You are missing, I think, one point. which is the fact that, number one, many architectures will continue. And even if this one has a meaningful market share, this market share is going to be 10%, 12%, 15%, not 100%. And it will probably be made of different type of sub-architecture. So many architecture will coexist. If you take one hyperscaler, if you talk to one hyperscaler, I will tell you that over the past 10 or 12 years, they probably have 6, 7, 8 different architectures by hyperscaler. So in total, you have 10 different architecture coexisting. There's not one that's going to prevail in the years to come, number one. Number two, you consider a company such as Legrand as static animals, which do have a product portfolio, which we're not able to adapt and to adjust. Again, look at what Legrand did over the past 8 years. So if there's something new coming, in the architecture, if there's one piece missing that we don't have, we will develop it, we'll partner to get it or we will buy it by [indiscernible] company. It shouldn't be such a concern. So it's interesting to see that 1/4 of the questions on this call were on 800-volt DC. I think there's too much emphasis putting on that topic. Andre Kukhnin: Fair enough. I completely take it. I just -- on that kind of nonstatic animal, I guess that's what you're saying on the solid-state switching and braking that you do not have it right now, but you're confident you will develop it or be able to buy it. Benoît Coquart: Well, I don't want to be specific on one product family or the other. But again, if we feel that there's something that we absolutely need to have, we will have it. But most importantly, the current Legrand portfolio can address 99% of the needs for the next -- at least the next 5 years. That's a very important message that I want to channel to you. Now what will come in 6 or 7 years, it's a different story, but we will adapt. We will adapt. And if we are ready to tackle only 70% or 80% of the architecture that will come in 8 years, but we will do what it takes to address the remaining 20%, and that's it. But we have a product offering, which is suitable for 99% of the architecture that will come in the next 4, 5 years. Andre Kukhnin: Can I just ask on that change to the margin ambition for 2030 from around 20% to above 20%. I guess we learned on this call, above 30% can be 45%. So just wanted to understand whether that above 20% is an ambition to continuously improve margin from here? Or is it kind of, hey, the margin is above 20% now and we are kind of okay with it now? Benoît Coquart: No, we are not guiding more precisely than that because, of course, it depends on the acquisitions we're going to do. I mean, last year, our acquisitions were accretive, but they could very much be dilutive by 30, 40 bps. It depends on the growth rate and so on and so forth. So I don't want to shoot a number. If you look at the past 6 years, -- so '21 to '25, we've been consistently above 20%. And the average of the 5 years, if I'm correct, is 20.6%. I'm not saying that this is a new standard or new benchmark, but it means that it could be 20.2%, it could be 20.5%, it could be 21%. It will not be 35%, if this is your question. So no, we're not shooting a new target, just that it's going to be above 20%. Operator: The next question comes from the line of Ben Uglow from Oxcap Analytics. Benedict Uglow: I had a couple. I think a previous question assumed or sort of said you've had an order surge. Maybe I missed it in your opening remarks. But can you just give us a sense of your order development, obviously, in data centers in the fourth quarter? And the reason why we ask is your phasing and your time line in projects can be a little bit different from others. If I look at Eaton, Vertiv others that have reported, they've seen a kind of almost doubling of their orders between the third and fourth quarters and up by 200% plus year-over-year. I guess my question is, have you seen -- I don't want a specific number, but are you seeing exactly that kind of trend qualitatively? And when I think about the phasing of your growth in the current year, is it correct to assume that, that growth, whether it's 10% to 20% or 30% is back-end loaded? I guess what I'm thinking about is how quickly we see any orders come through in the next 6 months. Benoît Coquart: Ben, well, I'm a bit embarrassed because -- we have seen some order flowing, some backlog building, but I don't want to shoot a number because, again, I don't believe that it will help in any way to forecast what the 2026 sales is going to be. And actually, when we look at our competitors, I don't know, yes, ABB shot an increase in backlog, but they are guiding for growth in data center, which is in the teens. Vertiv, if I correct, is saying that you shouldn't extrapolate anymore the orders and that they will not give it anymore on quarter-by-quarter basis. So I think everybody is more in line to tell you, be careful. You cannot extrapolate an order inflow, a backlog or an order book into the next 12 months sales. Also more for Legrand, as again, we don't have the same order pattern as an ABB, Eaton, Schneider or Vertiv. We don't have orders, and we've never had in data centers orders above a year. 95% of our orders should be in even '26. So it's the very nature of our business, the fact that we have short lead time, maybe the products we are in, I don't know, maybe the geographies we are in, that makes it -- that makes me a bit uncomfortable to extrapolate the orders we have into sales. So I know you don't like the answer, but unfortunately, I cannot give a better answer than that. Benedict Uglow: No, understood. And by the way, I appreciate all the disclosure. It goes around and around in circles, but I think we're all trying to get to the same thing. The second kind of question is just around North America on the margin side putting 4Q to one side, it's a pretty healthy evolution year-over-year, but we do have -- still have moving parts in terms of raw material tariffs, et cetera. Is there any reason for us to think about the drop-through or the potential growth in North American margin, obviously, given your top line. Is there any reason to think about it differently this year than last year, i.e., that all else equal, we should be seeing some decent drop-through to your margin? Or are there any qualifying effects? Benoît Coquart: Well, I will let Franck to take this one. Go ahead, Franck. Franck Lemery: Yes. Ben. Well, as you noted, effectively, the margin on Q4 alone for North and South America is a little bit weak. There is absolutely nothing sustainable. There are many moving pieces in that margin with the mix of business with new acquisition with some one-timers. So what I would -- the way I'm reading the performance is more looking at H2 with the gross margin around 50%, with adjusted EBIT around 20%, which makes North and Central America very profitable. And on a year-on-year basis, the margin is improving a lot despite the tariff challenge that we already shared. And second, as you rightly said interestingly, it's the value, the year-on-year growth, 24% of improvement in value of the adjusted EBIT margin between '25 and '24, and that's in euros, it's close to 30%. So bottom line, a very good performance of our U.S. colleagues. Operator: Now we take our next question and the question comes from the line of William Mackie from Kepler Cheuvreux. William Mackie: I have 2 questions, one relating to the structure of your guidance. One, if I can harness your continued generosity on the data center discussion to talk about the definition of the business. So firstly, with data -- you've talked a lot about the profile of the business here and the growth rates. Could you just touch on the customer profile? We've seen a lot of growth across an announcements from hyperscalers, but there's a broad base of customers. So how is your customer footprint positioned between the large scale and the broader cloud providers and other providers? And how is the growth trends differing between the different DC type customers? Benoît Coquart: Yes. Well, we are a mix of customers that more or less replicate the market that the feeling we have. So it's probably -- it's not always easy to know them, but it's probably 1/3, a big 1/3 to half on the hyperscaler and then cloud 20%, 25% and then on-premise, maybe 25%, 30%. Those are the orders of magnitude. But if you take the market, there's no reason why our sales wouldn't replicate the market. Of course, the hyperscalers have been the one investing the most. So we are growing very nicely on hyperscalers. Now the growth is also very good on co-locators, either serving hyperscalers or retail co-locators. The one segment of the market, which is not growing at the same pace is clearly on-premise data centers, which have a much slower growth rate. But when it comes to cloud, new cloud, hyperscalers, [indiscernible] retail or, those are growing very nicely. William Mackie: And then maybe moving across to the segmentation detail that you provide annually on Slide 15. Could you talk a little about your expectations going forward for the growth rates across the energy transition category? We've talked about buildings, which largely fall for essential infrastructure. Benoît Coquart: Yes. Well, let's maybe a word on '25. So on '25, I told you that the data center grew close to 40%, which implies that the rest is slightly growing only. And out of the rest, you have energy transition growing a little bit more. You have digital lifestyle down with Connected Health growing, but Connected Home being down, and this is a result of the housing market in Europe. And essential infrastructure is basically flat. So plus for energy transition, flat for essential, slightly down for digital lifestyle. When it comes to 2026, it's difficult to be very precise because it will depend on the underlying markets. Now I see no reason why energy transition shouldn't do better than essential because it is boosted by structural trend. The fact that the world is electrifying and moving from fossil energies to electricity is a structural trend that is here to last. So it should do a bit better than essential, but by a few points, not by 10 or 15 points. This is our central scenario. A word -- I'm not sure it was completely clear on the press release, which is very interesting. When we buy companies related to the critical power into data centers, it's Linkk company we bought in Malaysia. It's Avtron in the U.S. it's Curtis Industries in the U.S. and it's a few others. Usually, they're not doing 100% of their sales in data center. They are doing 50%, 60%, 70% of their sales in data center and the rest of their sales is made in microgrids, in infra, in industries and so on and so forth. So it helps us building an energy transition footprint in verticals in which we were not. We already had critical power in education, commercial buildings, office buildings, but we did not have critical power into microgrid or industries. So it's a sort of side effect of our acquisitions in data centers, not only builds our position in data centers. But on top of that, it also reinforces and build our position in energy transition. William Mackie: Maybe a last final follow-up relating to prospects. We've talked broadly about Europe, but I think Rexel last night printed 3.3% growth in France. I know they win market share. What are your thoughts about some of the major European companies -- countries and particularly France? Benoît Coquart: For 2026, well, number one, we are not growing in France but we're not losing market share. And clearly, Rexel has been massively gaining market share in France for quite some time. So it's a tribute to the teams. For '26, we start to be somehow a bit more positive than we were on France. I'm sure you have heard about this [indiscernible], this housing plan, the so-called Bazooka plan, which the French authorities have stated that they intend to build 400,000 houses a year, which would be a surge compared to the current 270,000. Now we are a bit cautious because so far, it's an announcement. We don't know yet the specifics about this plan, how will it be financed? What will be the measures that will be implemented in order to support this plan. But at least, it signals a change of mood in France and the fact that now housing is considered again as a priority where it was not. So we are slightly more positive on the mood at least. We'll see about the numbers. When it comes to Germany, the Bazooka plan should start to have a bit of impact. Southern Europe has been pretty healthy. We did nice growth last year in Italy, for example. Spain is okay. So again, I don't want to sound too optimistic because we've been waiting for the rebound for 2 years, and it did not really happen yet. But again, the signals start to be a bit more positive. Now before starting to upload, we have to wait for the construction KPIs to flow into our numbers, which is not yet the case. Operator: Dear speakers, there are no further questions for today. I would now like to hand the conference over to your speaker, Benoit Coquart, for any closing remarks. Benoît Coquart: Well, I just wanted to thank you for your interest in Legrand. Thank you for the clarity of your questions. And should you have more questions and not only on the 800-volt DC, do not hesitate to call the IR team. We'll be happy to answer. Thanks a lot. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Richard Oldfield: Good morning, everyone. It's great to see so many familiar faces at our annual results 2025. Thanks for investing your time with us this morning. Not really a normal annual results presentation. But importantly, I hope you have all read the results that we put out because I am really proud of the amazing results that we delivered for the first year of a 3-year transformation program. We've shown we can do what we told you we would do and deliver against the plan, and we've got conviction in what we're doing. It's been pleasing to see the momentum that we can see in our building being reflected in our share price. So thank you, everyone, for buying the shares and driving them up 12% so far this year. But I think that's a real reinforcement that actually the business is coming from a position of strength. But of course, you've also seen the quite seismic news of the announcement this morning in relation to the all-cash offer by Nuveen. But let's start off by talking about what that really means for our shareholders. So the Schroders Board unanimously is recommending the offer to shareholders. And after a series of approaches by Nuveen, we've reached a point where the terms being offered up to GBP 6.12 in cash and dividends represents attractive and importantly, certain value for shareholders. This reflects the combined acceleration in the value that we would otherwise have delivered from the transformation plan. That was what I was thinking about, transformation plan as a stand-alone company as we execute on that strategy. But importantly, it also reflects the benefits that we expect to get from this combination with Nuveen over the longer term. The terms, of course, are comprised of GBP 5. 90 in cash consideration and up to GBP 0.22 in permitted dividends. And that implies a really attractive multiple on earnings of 17x the 2025 fully diluted adjusted operating EPS. Now the companies -- the other companies who have done transactions, this compares really favorably. And the premium is 34% above yesterday's closing share price of GBP 4.56, 47% over the last 3 months VWAP and 61% over the 12-month VWAP. So it might be compelling for shareholders, but I also wanted to explain why I think this is an exciting opportunity for Schroders. It accelerates our plans for this group, and it passes the 3 tests that I hope I've been consistent with you on since I've been CEO. It's good for our clients. It's good for our people. And as I outlined, it's really good for our shareholders. Now while I'm sure you're all focused on the deal, I am going to dive into the detail in more of a second. I want to spend some time after that on the results. And that's because of an important context to the announcement that we made this morning. So going back to the deal, Nuveen is a scaled international asset manager with over GBP 1 trillion of assets under management and operations in 26 countries with deep expertise in a range of public to private investments. TIAA, Nuveen's parent, is the sixth largest insurer in the U.S., providing secure retirements to millions of people and thousands of institutions. So together with Schroders, the combined business will have assets under management in excess of $1.8 trillion. So I want quickly to run through why this combination makes so much sense to us and why putting our 2 businesses together delivers more than either of us could do on our own. In my view, these really are 2 jigsaw pieces that fit together, not just in terms of industrial logic, but also in terms of culture and values. We're creating a global active asset and Wealth Management powerhouse, operating a comprehensive public to private platform with global reach and distribution. Nuveen's excellence in fixed income complements Schroders' history in Public Markets. And importantly, we have a combined Private Markets capability of GBP 307 billion, which will have growth supported by the patient capital provided by TIAA. Now geographically, Nuveen's footprint is in the U.S. and Middle East and ours is in the U.K., Europe and Asia. Together, we actually create a business with a footprint that is very well matched to the global asset pools that we seek to serve. And we're evenly balanced across both institutional and wealth channels. And our own wealth business is going to benefit from being part of a group with a wider range of products and with an organization with such a strong U.S. wealth platform. So our businesses both have strong heritages and really long histories with Schroders, Nuveen and TIAA being founded in 1804, 1898 and 1918, respectively. When you put all of that together, we've all been around for a very long time. And thanks to the long-standing commitment of the Schroders family, we've always had the ability here to take a long-term view. And Nuveen's history means they share that long-term thinking. We've got a strong commitment to investment performance, client service excellence, leadership in sustainability and innovation. Now shared values are important because they are the things that make families work. And those shared values are why I'm absolutely convinced this combination is going to work. And as part of the offer, Nuveen has made several important commitments to our brand, our people and importantly, the U.K. So during this year, we retained our place as the fifth most recognized brand in Asset Management globally. I'm really proud of that given the amount of change that we put through the business. There's clearly a very strong intention in this offer to retain the brand, reflecting its value, its heritage and the history. Together, the combined organization has a really important role to play here in the U.K., and we remain committed to being a critical provider of long-term capital into the U.K. economy. London is going to be the non-U.S. headquarters of the combined business and the opportunities for our people will be enhanced by being part of a larger, more global organization. Nuveen intends to maintain Schroders' existing investment and client teams across both asset and Wealth Management, and that's right the way across the world. And that's going to enable clients to benefit from continuity and best-in-class client service. So this combination has clear and compelling strategic rationale. It's going to provide scale, not really just for scale's sake, but with resources that come with a GBP 1.8 trillion asset manager, we can invest in those areas that are really important to our future. So AI, broader technology, data and the combined business has true global reach being in more than 40 markets globally. And it's a business that has exceptional capabilities with a GBP 1.3 trillion in Public Markets, and I said, GBP 307 billion in Private Markets. And that's supported by a AAA-rated insurance parent company that has a GBP 239 billion general account. So members of the Principal Shareholder Group have provided an irrevocable undertaking regarding the acquisition and the details of that, you can all read in the 2.7. And from here, the transaction is subject to the normal conditions you'd expect of regulatory and legal approvals, and we expect the deal to complete in the fourth quarter of this year. Now no doubt you all have questions for me. I'm very glad I've got my General Counsel in the front of me. So he will tell me I can only respond to things that are in the 2.7, but I'm very happy to take those questions. But before I do that, I'm going to turn to our 2025 results. As we've done a trading update recently, I think you all had the punchlines before we came in here. But with operating profit up 25%, it's pretty clear that we've had a really strong year, and our strategic progress is reflected in these financials. But rather than just focusing on the numbers, I'm going to tell you the 3 things that I take away and I'm proud of when I think about what the management team here have done with all of our employees in 2025. The first thing, we got our assets back into growth. AUM reached a record high of GBP 824 billion. That's up 6%. Now of course, that growth is partly driven by markets and investment performance, but it also reflects really strong positive flows that we generated. Gross inflows were up 9% to GBP 142 billion, resulting in GBP 11.2 billion of net inflows. And I'm really proud of all of our investors because they have delivered excellent investment performance with over 70% of our assets outperforming over 1, 3 and 5 years. And thirdly, we have significantly improved our operating leverage. We're delivering on our cost savings early, making GBP 75 million of our in-year savings, that's net of reinvestments just in year 1. This, together with the strong growth we saw this year, has enabled the business to increase EPS by 29%. It's a great start. But look, I also know there's a lot more that needs to happen to deliver growth on a sustainable basis. So I mentioned client investment performance. And the last time you saw a chart like this, by the way, was at the end of 2021. In an unpredictable and volatile environment, I cannot think of a better advertisement as to why active matters than this chart. And importantly, in a year where we have delivered real change in our business, I hope it shows that we've been absolutely focused on what is most important, our investment franchise, driving performance so that we can deliver the standards that our clients demand. So on to net new business. So we focus this year on strengthening client relationships, and our engagement has actually increased by 30%, and that's translated directly into both gross and net flows. So if we start in Public Markets, our 9 leading capabilities generated GBP 8.1 billion of net new inflows. We saw strongest demand in global equities, credit and in core solutions, and these were partially offset by outflows that we saw in regional equity strategies and Asian bonds, and that resulted in that net GBP 3.7 billion of net new business. So insurers capital, net new business was actually GBP 4.1 billion, plus we had GBP 0.5 billion for the first contribution from future growth capital, which you see coming through the joint ventures line. We had positive flows across all of the pillars, except real estate, where we were broadly flat. In Wealth Management, our inflows were GBP 3.4 billion with a good performance from the U.K. private wealth clients, and I'll come back in a little while to unpack that. And in joint ventures, we saw an outflow of GBP 5 billion, and that was principally driven by our Chinese joint venture fund management company. So let's just spend a bit of time because it's important to understand the dynamics of the business on how the dynamics on region and channel turned out. So if you look on this left-hand chart, you can see the improvement in our intermediary flows. They're up actually from less than GBP 3 billion in 2024 to more than GBP 4.5 billion in 2025. And that really picked up in the fourth quarter when we saw the strongest intermediary flows that we've actually seen since the beginning of 2021, and that gives us a good tailwind as we go into 2026. That improvement was predominantly driven in EMEA and in Asia Pacific, which are typically higher-margin regions for us. Now I'm really delighted actually by the Asia performance, where our focus and renewed leadership has completely changed the momentum in the business. And in EMEA, this is a brilliant example, client meeting activity actually increased by 40%. And that helped drive an additional GBP 6 billion of gross sales last year, and that gave a GBP 9.2 billion of net inflows. Now that to me is a very clear illustration of how deeper client engagement is directly drives momentum, commercial momentum in our business. And on the institutional side, net new business was up across all of the regions. We saw the strongest improvement in the U.K. The GBP 4.5 billion includes a large OCIO mandate win from E.ON and the St. James Place win from the first half. And that actually is still net of GBP 7 billion of outflows that we experienced from Scottish Widows. In EMEA, the GBP 3.5 billion of net flows included the sustainable equity solutions mandate we told you about from PGGM. So we're 1 year into our 3-year program to return to organic earnings growth. Now you are very familiar with this slide and the targets. So I'm just going to quickly run through progress. So on Public Markets, our priority was really clear, to stabilize revenues. We anticipated revenues would come down before we got them back up to the 2024 levels. But of course, I'm really pleased to say that actually we grew operating revenue by 5%. Of course, markets played their part, but this result is actually really driven by that return to organic growth. And it's also partly because of the resources, the focus and the commitment that we put behind those 9 leading capabilities we talked about last March. And in Schroders Capital, where we said net new business would accelerate as we go through our 3-year plan, look, our net new business performance in 2025 was a little softer than we would have liked, but we have successfully delivered on our commitment to have a team of 40 specialist salespeople who are going to drive the demand -- sorry, drive increased momentum in fundraising as we go through '26 and '27. Now in wealth, net new business run rate was at 2.7% below our target. So let's unpack that a little bit. As I mentioned earlier, I'm really pleased that our U.K. private client business has performed really strongly, and it was running at a 5.2% growth rate. That was within our target range. However, total net new business was impacted by other aspects of the portfolio. So while our charities team actually saw increased gross inflows, we told you in the third quarter that they were also experiencing drawdowns on reserve portfolios as charities adjusted to a difficult fundraising environment. We also, in the fourth quarter, unusually saw some low-margin outflows that offset the strength of those gross sales. Pleasingly, that charities team, they're a brilliant team, actually maintained market share in excess of 14%. While in Benchmark, where macro and policy uncertainties probably most felt, the net new business rate actually dropped to 2.9%, and we also saw some outflows in our international business. But if you take all of that together, what you've seen is a 6% growth in the top line with our control of costs really delivering that increase in adjusted operating earnings per share of 29%. But I'm going to quickly run through the milestones that drove that performance. And you've seen this slide from the half year, and I'm not, therefore, going to repeat all the things we've shown you before about how we are simplifying, how we are scaling and how we're delivering against the commitments we gave you. But what I do hope you're taking away is that we haven't slowed down, and we have kept the pace of change and momentum through the second half. So in July, we said that we needed to simplify the business, and that requires some tough and disciplined choices. Since then, we've announced the exit from 2 more markets. We are carefully transitioning our businesses in Brazil and Indonesia to local partners, and that allows us to redeploy capital, both financial and frankly, management time into areas where we can deliver better long-term strategic outcomes. And we've also been thoughtful about how we reshape some really important parts of our portfolio. We strengthened our wealth business by taking full control of Cazenove Capital in exchange for our stake in Schroders Personal Wealth. We're also, as part of that deal, going to continue to manage the SPW assets, Scottish Widows assets and importantly, keep referrals coming into Cazenove Capital. And we're scaling our investment capabilities by increasing access as well as launching new strategies where client demand is pretty clear. Take the launch of our active ETFs in Europe in 4 months, we are now in excess of USD 1 billion of active UCITS ETF assets. And look, we have got more launches to come in 2026. We're also driving innovation, particularly in evergreen products where we've got a great leading position, whether that's our recently announced partnership with Apollo or our LTAFs that we launched in collaboration with Hargreaves Lansdown for a wider audience of investors. Finally, a central feature of positioning the group for future growth has been reinvesting in the people and capabilities that actually make it all happen. We continue to attract great talent to Schroders with 15% of our leadership teams now being new to our business in the last year, a further 26% are internal promotions into new roles. So we have more than 40% of our leadership teams are brand new in role, and these appointments have strengthened our ability to deliver across the group. And throughout all of that, we've been focused on maintaining a really strong culture and remaining the home of exceptional talent. So the statistic I am definitely most proud of is that we've retained over 95% of employees who received our highest performance rating this year. So when you take a step all the way back, the work we've done in 2025 has shown good progress in creating a simpler, more focused and a better positioned business. We've seen a fast start to delivering on what we committed to you, and I'm really pleased with the progress, albeit I know we've got more to do when we look at Schroders Capital and Wealth Management. But with that, Meagen, why don't you unpack the numbers in a bit more detail? Meagen Burnett: Thank you, Richard, and good morning, everyone. When I spoke to you last year, I set out 3 priorities: improving the transparency in our financial reporting, tightening our cost control and improving on our capital discipline so we could deliver change at scale. And I'm really pleased to share the results and the focus of how that's coming through the numbers today. So let's start with the numbers. Starting with income. Our adjusted operating income was up 6%, driven primarily by markets, mix and strong investment performance, which together delivered GBP 146 million. This was partially offset by FX, particularly the weaker U.S. dollar, which reduced our net operating income by GBP 28 million. The net new business was slightly negative, largely reflecting the headwinds for 2024 and the timing of this year's inflows. Our annualized net new revenue for the year was positive, weighted towards the end of the year, providing good momentum as we enter 2026. Our performance fees and net carried interest came in higher than expected and increased by GBP 16 million. And finally, gains on seed investments and seed and co-investment were up GBP 14 million, a reflection of the improved market conditions. So overall, this bridge reflects strong underlying performance. Now let me talk you through the performance of our operating segments, starting with Asset Management, which performed particularly well. On the top chart, you can see that the net operating revenue of the segment increased 4%, that was partially supported by markets and investment performance, but we also benefited from positive mix shift towards the end of the year. On the bottom left, you can see that the as markets improved, outflows moderated and equities increased as a proportion of the total assets by 1.5%. Given equities are a higher-margin business, that had a positive impact on our management fees. Now turning to annualized net new revenue on the right. This is a really important metric for us as it assesses the true commercial value of our business in a business where both margins and scale dynamics are good indicators of sustainable, profitable growth. So during the year, we saw really encouraging improvement in our Public Markets. This was driven by a stronger demand from the intermediary channel and particularly in the fourth quarter. In Schroders Capital, the annualized net new revenue was slightly lower, and this reflects the lower net sales over the year. However, if we look at Asset Management as a whole, you can see a clear shift in momentum. We moved from minus GBP 46 million in 2024 to a positive GBP 15 million in 2025. So while this momentum is encouraging, we know we can't be complacent. So turning to Public Markets. The net operating revenues were up 5% year-on-year, driven by markets and investment performance. In total, Public Markets net new business shifted from negative GBP 21 billion last year to GBP 3.7 billion this year. And in terms of margins, the equity margin was up 1 basis point as we continue to see the rotation from regional to global products. Equity margins for the year exited at 44 basis points. In fixed income, we were broadly flat. The intermediary channel was strong, but this was offset by the loss of some low-margin mandates. The increase in the intermediary flows also contributed to the improvement in net operating margin from an exit rate of 33 basis points at the half year to 36 at the year-end. For multi-asset, net outflows reduced through the year, reflecting the absence of the several large mandate losses we've seen in 2024. There was a reduction in the December exit rates as a result of the transfer of the lower-margin assets we continue to manage on behalf of SPW. Now up until the sale of that business, those assets were included in our Wealth Management segment. And finally, core solutions had another strong year in net flows. But as you know, this is a lumpy and lower-margin business. So our best guidance for margins continues to be the exit rates that you can see on the table on the bottom right. Moving on to Schroders Capital. The net operating revenue was up 3% for the year, a modest improvement. On the bottom left, you can see that the gross fundraising for the year was at GBP 10.9 billion, flat on the prior year and the equivalent of 16% on our opening AUM. The margin at the end of the year was 57 basis points, which is 1 basis point higher than the half year, and that improvement reflects a favorable mix shift where we saw in the second half of the year flows into our private equity business, which has higher margin. And finally, fee (sic) [ non-fee ] earning dry powder increased by GBP 0.7 billion to GBP 4.9 billion. Now while this gives us flexibility, it also underlines the importance of accelerating deployment and improving the conversion of our fundraising to net new business as we want to scale this business further. Now moving on to wealth. As Richard has already said, this was a tougher year for our Wealth Management business in terms of net new business growth. That said, the business continues to deliver and remains highly accretive to the group. The net operating revenue was up 10% and adjusted operating revenue 12% with a 3-year CAGR of 15%, which really demonstrates the strength of the underlying franchise. And you can see an improvement in the exit margins this year. That's really driven by 2 factors. Firstly, the transfer of the lower-margin SPW assets into Public Markets that I just mentioned; and secondly, because of the lower margin outflows from our charities business, which Richard just mentioned. So overall, while the year was more challenging from a flow perspective, Wealth Management continues to deliver strong profitability, improving margins and attractive returns for the group. Moving on to operating expenses. Now our adjusted operating expenses were flat year-on-year, but there are several moving parts that deserve a mention. Firstly, our gross transformational savings for the year was GBP 94 million. This was offset by GBP 19 million that we reinvested back into growth. Inflation, FX and AUM-related items increased the base by GBP 54 million. And finally, unanticipated building repairs in our non-compensation pushed that up by GBP 20 million. Now let me unpack our cost-to-income ratio. This is a key metric for us. The bridge here shows you how we're using a combination of cost control, transformation and revenue growth to build operating leverage, which will enable us to grow profitably. We set out actions at the start of the year, which would take 1% out of the cost-to-income ratio. Further management actions to accelerate our transformation drove even greater improvement and the favorable market conditions enabled us to generate higher revenue, which also supported an improvement in the ratio. Some of this gets used to reward our people through a higher variable compensation. But the net result due to the measures we have taken to improve operating leverage means that the majority dropped to the bottom line, and we ended with a 71% ratio. So hopefully, this is -- sorry, hopefully, this is clear on how we're improving the operating leverage in our business. There will be upside in times of favorable market conditions and of course, the reverse during times of falling markets. So for 2026, we expect further reduction in the ratio as we head towards 70% as we continue to focus on the transformation savings and cost control, and this is subject to normal market conditions. Now as you know, our target remains below 70% for the full year 2027. Now moving on to capital. Our capital surplus at the end of the year was GBP 865 million. This after allowing for the effect of an estimate of GBP 250 million for the impact of Basel 3.1. Now we are in discussions with the PRA on how the specifics of these requirements will impact us, but this is our best estimate today of a full implementation based on our current balance sheet position. We will continue to allocate surplus capital in line with our guidance on our capital management framework that I outlined last year. Now finally, given its importance to this year's outcome and to our targets, let me take a moment on transformation. We were clear that this was a program that was not about blunt cost out. It was about reshaping the operating model, reducing cost and complexity with precision and building a sustainable operating leverage for our business. So in 2025, we accelerated our delivery and outperformed our targets, delivering GBP 75 million of in-year savings and around GBP 100 million annualized of our net savings target. Our decisions to redesign our outsourcing contract approach, accelerate service model changes across client service, operations and technology meant these savings materialized earlier. Together, these all contributed to a headcount reduction of 10%. Now alongside this, we delivered non-compensation savings across research, data and global technology. We focused on supplier rationalization, which meant we reduced our supplier base by 12% year-on-year. So what next? The focus now shifts from accelerating cost savings to disciplined execution of transformation for modernization and growth. In terms of savings, we're targeting GBP 25 million reduction out of our operating expenses net of investments. And while this seems lower than the GBP 75 million in the plan this year, the plan was always to deliver the initial targets with efficiency upfront and the harder transition of new operating models, technology platform implementations take longer to implement. So overall, transformation in 2026 is about building progress on what we've done in 2025, embedding the cost discipline and delivering our net savings target while investing for growth. This will ensure that we exit the year with a full line of sight of achieving our GBP 150 million net annualized savings by 2027. So looking forward, we're only 1 year into our transformation program, and I'm really pleased with where we've ended. Ultimately, we're here with one purpose, to be the best active manager for our clients. So to do that, we are going to continue to do exactly what we said we would, and we will be laser-focused on delivery. So what does that mean in terms of actions for 2026 aside from the transaction? We will be activating our sales teams that we've built in Schroders Capital to turn client engagement into sustained net new business delivery. We'll continue to innovate, expanding on our ETF suite across Europe this year. And in wealth, we're investing in technology and our people to ensure that, that business can deliver to its full potential. What happens to markets and FX and geopolitics out of our control. But what we can control is we will continue to deliver against our strategic plans. So in summary, great progress this year, which has given us a strong platform to be able to increase the value and delivery to our shareholders. So with that, I'll ask Richard to return for some Q&A. Richard Oldfield: Thanks, Meagen. And what's really clear to me, I hope clear to you that we're not taking our foot of the gas, and we're absolutely focused on delivering the transformation plan that we outlined. But I just wanted to leave you with a thought on the transaction before we get to Q&A. Through the proposed transaction that you have seen with Nuveen that we talked about this morning, we're going to significantly accelerate our growth plans to create the leading public to private platform with enhanced geographic reach and importantly, a strengthened balance sheet, while remaining relentlessly focused on what matters to our business, delivering strong active investment returns for our clients. And look, given this audience, I can't underscore the importance that this transaction is going to deliver an attractive premium in cash to our shareholders, reflecting the value of the delivery of our strategy that we've outlined pretty clearly today and our future prospects together. It creates certainty and it creates value for shareholders. So with that, let's go over to you for Q&A. As usual, we'll start in the room. If you can start by telling us your name and where you're from, as usual, that would be really helpful. Isobel Hettrick: It's Isobel Hettrick from Autonomous Research. So I have 2, please. First, you touched on the improving flow trends and momentum in the fourth quarter of last year. Can you provide us any color if these have continued so far in 2026? And then second, you touched on the need to increase the pace of deployment and conversion of dry powder within Schroders Capital. And what is needed here? Is it just a lack of attractive targets in the area? Or do you need to deepen and maybe broaden your origination pipeline from teams? Richard Oldfield: So Isobel, I'm going to answer this question with a big caveat that we're on at February 12, and 6 weeks does not present a forecast what might happen in the future. But look, the positive momentum we saw in the fourth quarter was definitely carried into January. I also think on the Schroders Capital point, we do need to increase the pace, and that is about how we, for example, in our private equity business, put more people into that business so that we can get more of our clients' money deployed. It's a great area, by the way, that I'm super proud of the team for taking AI and embedding it in their processes so they can get through more opportunities more quickly. But that's the sort of thing we need to do to accelerate deployment. Isobel Hettrick: [indiscernible]. Richard Oldfield: Thank you for helping me out. Hubert Lam: It's Hubert Lam, from Bank of America. Two questions. Firstly, on Wealth Management. I guess in the last few days, you've seen some of sell-off across the Asset Management space -- sorry, the Wealth Management space on fears around AI, the risk of disruption within Wealth Management. Just wondering what your thoughts of that are, how much you're investing in AI, how much your wealth managers are using AI and how much you're spending within Wealth Management for AI tools? Richard Oldfield: Well, in a second, I'll let Meagen talk about the details on the AI. But first of all, AI is going to transform everything. So not just Wealth Management. And the only people that seem to have not worked out, it was going to impact Wealth and Asset Management or the investors. So we've known that for a long time, and that's why over the last 4 years, we have been active in deploying different technology solutions using AI. And by the way what I've said internally is AI is the hammer. What we actually need to do is think about the blueprint of how we're reconfiguring the business. And we'll use lots of different tools, be that DLT, be that using data in a different way and tokenization, be that AI. So I think we have been hard at that for a number of years. We are using it in how we show up to clients. We are using it in how we change operations. We are using it in how we think about research. We are using it in terms of how we think about portfolios and products that we can sell. So it doesn't matter whether it's Wealth Management or Asset Management. This industry is going to look super difficult -- sorry, not difficult, different going forward. It might get difficult as well, by the way, but it's going to be very different. But one of the reasons why we like this transaction so much is because it actually gives us a bigger balance sheet, it gives us more firepower to invest in this transformation as we go forward. Do you want to just touch on... Meagen Burnett: Yes. I'll just add a bit of context. I think firstly, you mentioned it in the context of wealth, and Oliver is with us in the room. And since the day he stepped into our business, he's been very front-footed in terms of AI and the benefits that can bring us. And if you look at it in our transformation program, a huge portion of that in the second part -- the second 2 years is around really accelerating that wealth program, investing in modernization of our client interfaces and making sure that we can leverage it. So as Richard says, it's a combination of AI, data and DLT. We see the 3 coming together and absolutely transforming not only the wealth business, but how the business operates together. Hubert Lam: In terms of investments, how much are you putting into technology into AI specifically? Meagen Burnett: We're not specifically only investing in AI. There's a huge portion of our remaining transformation cost that is associated with technology, the data platforms that underpin all that. So we have a remaining plan. Hubert Lam: And the other question is around your partnership with Apollo. Maybe just talk a little bit about it, in terms of expectations, like, why Apollo, the products that you have. I think you mentioned the products that you're launching there, expectations in terms of... Richard Oldfield: So I think I've been pretty clear with people over the year that actually are at partnering in this industry is important. You've seen a lots of people enter into partnership. It is important to us, so that we can be innovative, we can fill capability gaps where we think those are demands in the market place. What is exciting about this proposition is actually to see within the UK wealth channel, whether we can create an interesting public to private credit product, and that's what we are pushing on further. Of course, we've also talked about the ability to launch some income retirement solutions for DC channels in the UK. So it's a good example of how we are using that partnership to try and drive innovation more broadly. David McCann: It's David McCann from Deutsche Bank. A couple from me, please. So I think you touched on in the remarks that Nuveen approached you more than once during this process. Can you touch on, did others approach you? Was this the only person that was interested in the business? I guess that's the first question. Second one, just to be clear on the comments on shareholder value that you made, if you had fully executed on the plans that you outlined a year ago, do you think this deal represents more value for shareholders than you would have achieved kind of normally? And the third one, we've obviously seen a bit more detail in the numbers today than you gave us in the trading update a few weeks ago. We wouldn't have been aware of the numbers that obviously, quite a lot of the beat versus consensus at the time was from performance fees and carried interest. Were you sort of conscious of that when they made the ultimate offer? Richard Oldfield: Well, let me answer the first one -- last one first, David. Nuveen has not been party to the insider information on our financials at any point during this process. So they were not aware of our trading update or anything since then. I think that would have been inappropriate. But I think it would be normal by the way that you would expect in a transaction of this nature there should be multiple conversations, that's how we get to what the best value price is for our shareholders. But I want to be really clear that this business has never been up for sale. We are confident in the plan that we discussed with the Board. We were confident in our execution capability. We remain, by the way, pretty confident in our execution capability. So it's never been up for sale. What emerged as we had conversations with Nuveen was that we felt this was a very complementary business that could accelerate our aspirations by, candidly, I think, a decade. And that's why when we had the conversation, it became clear that we could create something pretty unique in the industry. And that's how we came to receiving an offer, I think, in the earlier part of this year. And the Board thought quite carefully about value through multiple lenses. Of course, the lenses that I talked about today, obviously, when we think about the premium to the earnings that we announced for 2025, whether it's relative to spot or whether it's relative to the VWAP. We've looked at all of those, and we also, as you would have expected, took the Board through our 5 year plans with a clear aim of demonstrating the value that we could create to the shareholders. So I'm not going to take you through the details of that plan, but rest assured in the Board making their unanimous recommendation, they concluded that this was the best option for all shareholders, and that's really how we've ended up here, and that's why I think you're going to get certainty, you're going to get cash, and you're going get paid not just for the delivery of the plans that we've got, but actually for some upside that this transaction will undoubtedly give us through growth. Right if -- are any other questions in the room? If not, we will go to online. No. Do we have any questions online? Meagen Burnett: Yes, we have one question online from Nick. Nicholas Herman: It's Nicholas Herman from Citi. Can you hear me all right? Richard Oldfield: Yes. Perfect, Nick. Nicholas Herman: Great. So firstly, I guess, congrats on a storming 2025, clearly helped by markets, but also still very strong execution. And I'll probably say this, it is an opportunity to say that, I'll be sorry to lose traders as a listed company, but I can appreciate that this is also a very attractive deal for shareholders. Two questions from my side. Firstly, on Asset Management margins. You've given us the exit margins. Can I ask just for the Public Markets business, is there any difference in the exit margins to the margins on your inflows? And perhaps you could help us understand the difference there in the margins on your inflows versus the margins on your outflows there? And then the second question was -- sorry, if I missed this before, my connection was a bit questionable, but you said that it allows you to accelerate your growth ambitions by a decade. Would you able to flesh that out a bit, please? Richard Oldfield: Shall I comment on the last one, and then come to you. So a couple of reflections, Nick. I understand that people will be sorry to see Schroders shares not listed on the London Stock Exchange. But I think about this in a different way. Actually, our commitment to London is actually enhanced through this transaction. There's clear commitment about maintaining the headquarters here. There is clear commitment about our investment capabilities here and retaining jobs through this deal, we should be able to channel more money into the U.K. economy. We will continue to play as we have done for the last 200 years, an important part in bringing people to market and actually creating U.K. wealth. So I actually think we are better as a result of this or create a better impact for London at the end of this because of our increased size and ability to influence the market. So whilst people may be sorry about the listing, I think our commitment to London is undiminished, and we're excited about actually the increased growth delivering more and better outcomes. So if you think about what we've done, as I said, when you bring these 2 organizations together, you're really bringing together Nuveen's really broad Private Markets capability, which has a very supportive parent that brings private capital and a U.S. distribution. Now here at Schroders, we don't have patient capital. We have a smaller -- much smaller distribution capability in the U.S. We don't have some products that you would want in the total Private Market suite. But you're combining that with this phenomenal heritage here at Schroders of a Public Markets business with great distribution across pretty much the rest of the world outside of the U.S. And we have amazing capabilities in discrete parts of Private Markets. So when you stick these 2 things together, what we do is create better products that we can actually put down all of the pipes to actually support our clients and make us relevant to them. So that's why this isn't about a cost out. There aren't big cost savings in this deal. It's about growth because we can actually give more of our combined products to our respective clients. And that's the excitement. That's why this, I think, should be seen as a great opportunity for our people and our clients. It would have taken us a long time for us to buy that capability in Private Markets, build that distribution capability in the U.S. And that's why I think it accelerates our plans that we had outlined last year by at least a decade. But maybe, Meagen, you want to pick up on the... Meagen Burnett: Yes. Thanks, Nick. I'll pick up on the Public Markets margin point. As we mentioned, this is really around channel and the specific product that is going down that channel. So really, our margins are driven by where the client demand is. And I think 2 great examples of that are really looking at our fixed income, where we exited 4 basis points higher. That's because we're selling that product on the intermediary channel in Europe versus more in the institutional channel. Likewise, on equities, we saw that drop down by 1 basis point. We do expect a general -- there's a general market trend in terms of the sticker price there, but we're also seeing dynamics between the global product and the regional product where investors are moving more out of regional and into global. Richard Oldfield: Do we have any other questions, Katie, online? Katie Wagstaff: No more questions at the moment. [Operator Instructions]. Richard Oldfield: Brilliant. Well, we've got no more questions. I just wanted to draw it to a close and say thank you very much for coming this morning. We'll be around for a little bit longer. So if you've got any other questions, don't hesitate to doorstep us or any member of the Group Executive Committee. And please join us for coffee. That would be great. Thank you.
Richard Oldfield: Good morning, everyone. It's great to see so many familiar faces at our annual results 2025. Thanks for investing your time with us this morning. Not really a normal annual results presentation. But importantly, I hope you have all read the results that we put out because I am really proud of the amazing results that we delivered for the first year of a 3-year transformation program. We've shown we can do what we told you we would do and deliver against the plan, and we've got conviction in what we're doing. It's been pleasing to see the momentum that we can see in our building being reflected in our share price. So thank you, everyone, for buying the shares and driving them up 12% so far this year. But I think that's a real reinforcement that actually the business is coming from a position of strength. But of course, you've also seen the quite seismic news of the announcement this morning in relation to the all-cash offer by Nuveen. But let's start off by talking about what that really means for our shareholders. So the Schroders Board unanimously is recommending the offer to shareholders. And after a series of approaches by Nuveen, we've reached a point where the terms being offered up to GBP 6.12 in cash and dividends represents attractive and importantly, certain value for shareholders. This reflects the combined acceleration in the value that we would otherwise have delivered from the transformation plan. That was what I was thinking about, transformation plan as a stand-alone company as we execute on that strategy. But importantly, it also reflects the benefits that we expect to get from this combination with Nuveen over the longer term. The terms, of course, are comprised of GBP 5. 90 in cash consideration and up to GBP 0.22 in permitted dividends. And that implies a really attractive multiple on earnings of 17x the 2025 fully diluted adjusted operating EPS. Now the companies -- the other companies who have done transactions, this compares really favorably. And the premium is 34% above yesterday's closing share price of GBP 4.56, 47% over the last 3 months VWAP and 61% over the 12-month VWAP. So it might be compelling for shareholders, but I also wanted to explain why I think this is an exciting opportunity for Schroders. It accelerates our plans for this group, and it passes the 3 tests that I hope I've been consistent with you on since I've been CEO. It's good for our clients. It's good for our people. And as I outlined, it's really good for our shareholders. Now while I'm sure you're all focused on the deal, I am going to dive into the detail in more of a second. I want to spend some time after that on the results. And that's because of an important context to the announcement that we made this morning. So going back to the deal, Nuveen is a scaled international asset manager with over GBP 1 trillion of assets under management and operations in 26 countries with deep expertise in a range of public to private investments. TIAA, Nuveen's parent, is the sixth largest insurer in the U.S., providing secure retirements to millions of people and thousands of institutions. So together with Schroders, the combined business will have assets under management in excess of $1.8 trillion. So I want quickly to run through why this combination makes so much sense to us and why putting our 2 businesses together delivers more than either of us could do on our own. In my view, these really are 2 jigsaw pieces that fit together, not just in terms of industrial logic, but also in terms of culture and values. We're creating a global active asset and Wealth Management powerhouse, operating a comprehensive public to private platform with global reach and distribution. Nuveen's excellence in fixed income complements Schroders' history in Public Markets. And importantly, we have a combined Private Markets capability of GBP 307 billion, which will have growth supported by the patient capital provided by TIAA. Now geographically, Nuveen's footprint is in the U.S. and Middle East and ours is in the U.K., Europe and Asia. Together, we actually create a business with a footprint that is very well matched to the global asset pools that we seek to serve. And we're evenly balanced across both institutional and wealth channels. And our own wealth business is going to benefit from being part of a group with a wider range of products and with an organization with such a strong U.S. wealth platform. So our businesses both have strong heritages and really long histories with Schroders, Nuveen and TIAA being founded in 1804, 1898 and 1918, respectively. When you put all of that together, we've all been around for a very long time. And thanks to the long-standing commitment of the Schroders family, we've always had the ability here to take a long-term view. And Nuveen's history means they share that long-term thinking. We've got a strong commitment to investment performance, client service excellence, leadership in sustainability and innovation. Now shared values are important because they are the things that make families work. And those shared values are why I'm absolutely convinced this combination is going to work. And as part of the offer, Nuveen has made several important commitments to our brand, our people and importantly, the U.K. So during this year, we retained our place as the fifth most recognized brand in Asset Management globally. I'm really proud of that given the amount of change that we put through the business. There's clearly a very strong intention in this offer to retain the brand, reflecting its value, its heritage and the history. Together, the combined organization has a really important role to play here in the U.K., and we remain committed to being a critical provider of long-term capital into the U.K. economy. London is going to be the non-U.S. headquarters of the combined business and the opportunities for our people will be enhanced by being part of a larger, more global organization. Nuveen intends to maintain Schroders' existing investment and client teams across both asset and Wealth Management, and that's right the way across the world. And that's going to enable clients to benefit from continuity and best-in-class client service. So this combination has clear and compelling strategic rationale. It's going to provide scale, not really just for scale's sake, but with resources that come with a GBP 1.8 trillion asset manager, we can invest in those areas that are really important to our future. So AI, broader technology, data and the combined business has true global reach being in more than 40 markets globally. And it's a business that has exceptional capabilities with a GBP 1.3 trillion in Public Markets, and I said, GBP 307 billion in Private Markets. And that's supported by a AAA-rated insurance parent company that has a GBP 239 billion general account. So members of the Principal Shareholder Group have provided an irrevocable undertaking regarding the acquisition and the details of that, you can all read in the 2.7. And from here, the transaction is subject to the normal conditions you'd expect of regulatory and legal approvals, and we expect the deal to complete in the fourth quarter of this year. Now no doubt you all have questions for me. I'm very glad I've got my General Counsel in the front of me. So he will tell me I can only respond to things that are in the 2.7, but I'm very happy to take those questions. But before I do that, I'm going to turn to our 2025 results. As we've done a trading update recently, I think you all had the punchlines before we came in here. But with operating profit up 25%, it's pretty clear that we've had a really strong year, and our strategic progress is reflected in these financials. But rather than just focusing on the numbers, I'm going to tell you the 3 things that I take away and I'm proud of when I think about what the management team here have done with all of our employees in 2025. The first thing, we got our assets back into growth. AUM reached a record high of GBP 824 billion. That's up 6%. Now of course, that growth is partly driven by markets and investment performance, but it also reflects really strong positive flows that we generated. Gross inflows were up 9% to GBP 142 billion, resulting in GBP 11.2 billion of net inflows. And I'm really proud of all of our investors because they have delivered excellent investment performance with over 70% of our assets outperforming over 1, 3 and 5 years. And thirdly, we have significantly improved our operating leverage. We're delivering on our cost savings early, making GBP 75 million of our in-year savings, that's net of reinvestments just in year 1. This, together with the strong growth we saw this year, has enabled the business to increase EPS by 29%. It's a great start. But look, I also know there's a lot more that needs to happen to deliver growth on a sustainable basis. So I mentioned client investment performance. And the last time you saw a chart like this, by the way, was at the end of 2021. In an unpredictable and volatile environment, I cannot think of a better advertisement as to why active matters than this chart. And importantly, in a year where we have delivered real change in our business, I hope it shows that we've been absolutely focused on what is most important, our investment franchise, driving performance so that we can deliver the standards that our clients demand. So on to net new business. So we focus this year on strengthening client relationships, and our engagement has actually increased by 30%, and that's translated directly into both gross and net flows. So if we start in Public Markets, our 9 leading capabilities generated GBP 8.1 billion of net new inflows. We saw strongest demand in global equities, credit and in core solutions, and these were partially offset by outflows that we saw in regional equity strategies and Asian bonds, and that resulted in that net GBP 3.7 billion of net new business. So insurers capital, net new business was actually GBP 4.1 billion, plus we had GBP 0.5 billion for the first contribution from future growth capital, which you see coming through the joint ventures line. We had positive flows across all of the pillars, except real estate, where we were broadly flat. In Wealth Management, our inflows were GBP 3.4 billion with a good performance from the U.K. private wealth clients, and I'll come back in a little while to unpack that. And in joint ventures, we saw an outflow of GBP 5 billion, and that was principally driven by our Chinese joint venture fund management company. So let's just spend a bit of time because it's important to understand the dynamics of the business on how the dynamics on region and channel turned out. So if you look on this left-hand chart, you can see the improvement in our intermediary flows. They're up actually from less than GBP 3 billion in 2024 to more than GBP 4.5 billion in 2025. And that really picked up in the fourth quarter when we saw the strongest intermediary flows that we've actually seen since the beginning of 2021, and that gives us a good tailwind as we go into 2026. That improvement was predominantly driven in EMEA and in Asia Pacific, which are typically higher-margin regions for us. Now I'm really delighted actually by the Asia performance, where our focus and renewed leadership has completely changed the momentum in the business. And in EMEA, this is a brilliant example, client meeting activity actually increased by 40%. And that helped drive an additional GBP 6 billion of gross sales last year, and that gave a GBP 9.2 billion of net inflows. Now that to me is a very clear illustration of how deeper client engagement is directly drives momentum, commercial momentum in our business. And on the institutional side, net new business was up across all of the regions. We saw the strongest improvement in the U.K. The GBP 4.5 billion includes a large OCIO mandate win from E.ON and the St. James Place win from the first half. And that actually is still net of GBP 7 billion of outflows that we experienced from Scottish Widows. In EMEA, the GBP 3.5 billion of net flows included the sustainable equity solutions mandate we told you about from PGGM. So we're 1 year into our 3-year program to return to organic earnings growth. Now you are very familiar with this slide and the targets. So I'm just going to quickly run through progress. So on Public Markets, our priority was really clear, to stabilize revenues. We anticipated revenues would come down before we got them back up to the 2024 levels. But of course, I'm really pleased to say that actually we grew operating revenue by 5%. Of course, markets played their part, but this result is actually really driven by that return to organic growth. And it's also partly because of the resources, the focus and the commitment that we put behind those 9 leading capabilities we talked about last March. And in Schroders Capital, where we said net new business would accelerate as we go through our 3-year plan, look, our net new business performance in 2025 was a little softer than we would have liked, but we have successfully delivered on our commitment to have a team of 40 specialist salespeople who are going to drive the demand -- sorry, drive increased momentum in fundraising as we go through '26 and '27. Now in wealth, net new business run rate was at 2.7% below our target. So let's unpack that a little bit. As I mentioned earlier, I'm really pleased that our U.K. private client business has performed really strongly, and it was running at a 5.2% growth rate. That was within our target range. However, total net new business was impacted by other aspects of the portfolio. So while our charities team actually saw increased gross inflows, we told you in the third quarter that they were also experiencing drawdowns on reserve portfolios as charities adjusted to a difficult fundraising environment. We also, in the fourth quarter, unusually saw some low-margin outflows that offset the strength of those gross sales. Pleasingly, that charities team, they're a brilliant team, actually maintained market share in excess of 14%. While in Benchmark, where macro and policy uncertainties probably most felt, the net new business rate actually dropped to 2.9%, and we also saw some outflows in our international business. But if you take all of that together, what you've seen is a 6% growth in the top line with our control of costs really delivering that increase in adjusted operating earnings per share of 29%. But I'm going to quickly run through the milestones that drove that performance. And you've seen this slide from the half year, and I'm not, therefore, going to repeat all the things we've shown you before about how we are simplifying, how we are scaling and how we're delivering against the commitments we gave you. But what I do hope you're taking away is that we haven't slowed down, and we have kept the pace of change and momentum through the second half. So in July, we said that we needed to simplify the business, and that requires some tough and disciplined choices. Since then, we've announced the exit from 2 more markets. We are carefully transitioning our businesses in Brazil and Indonesia to local partners, and that allows us to redeploy capital, both financial and frankly, management time into areas where we can deliver better long-term strategic outcomes. And we've also been thoughtful about how we reshape some really important parts of our portfolio. We strengthened our wealth business by taking full control of Cazenove Capital in exchange for our stake in Schroders Personal Wealth. We're also, as part of that deal, going to continue to manage the SPW assets, Scottish Widows assets and importantly, keep referrals coming into Cazenove Capital. And we're scaling our investment capabilities by increasing access as well as launching new strategies where client demand is pretty clear. Take the launch of our active ETFs in Europe in 4 months, we are now in excess of USD 1 billion of active UCITS ETF assets. And look, we have got more launches to come in 2026. We're also driving innovation, particularly in evergreen products where we've got a great leading position, whether that's our recently announced partnership with Apollo or our LTAFs that we launched in collaboration with Hargreaves Lansdown for a wider audience of investors. Finally, a central feature of positioning the group for future growth has been reinvesting in the people and capabilities that actually make it all happen. We continue to attract great talent to Schroders with 15% of our leadership teams now being new to our business in the last year, a further 26% are internal promotions into new roles. So we have more than 40% of our leadership teams are brand new in role, and these appointments have strengthened our ability to deliver across the group. And throughout all of that, we've been focused on maintaining a really strong culture and remaining the home of exceptional talent. So the statistic I am definitely most proud of is that we've retained over 95% of employees who received our highest performance rating this year. So when you take a step all the way back, the work we've done in 2025 has shown good progress in creating a simpler, more focused and a better positioned business. We've seen a fast start to delivering on what we committed to you, and I'm really pleased with the progress, albeit I know we've got more to do when we look at Schroders Capital and Wealth Management. But with that, Meagen, why don't you unpack the numbers in a bit more detail? Meagen Burnett: Thank you, Richard, and good morning, everyone. When I spoke to you last year, I set out 3 priorities: improving the transparency in our financial reporting, tightening our cost control and improving on our capital discipline so we could deliver change at scale. And I'm really pleased to share the results and the focus of how that's coming through the numbers today. So let's start with the numbers. Starting with income. Our adjusted operating income was up 6%, driven primarily by markets, mix and strong investment performance, which together delivered GBP 146 million. This was partially offset by FX, particularly the weaker U.S. dollar, which reduced our net operating income by GBP 28 million. The net new business was slightly negative, largely reflecting the headwinds for 2024 and the timing of this year's inflows. Our annualized net new revenue for the year was positive, weighted towards the end of the year, providing good momentum as we enter 2026. Our performance fees and net carried interest came in higher than expected and increased by GBP 16 million. And finally, gains on seed investments and seed and co-investment were up GBP 14 million, a reflection of the improved market conditions. So overall, this bridge reflects strong underlying performance. Now let me talk you through the performance of our operating segments, starting with Asset Management, which performed particularly well. On the top chart, you can see that the net operating revenue of the segment increased 4%, that was partially supported by markets and investment performance, but we also benefited from positive mix shift towards the end of the year. On the bottom left, you can see that the as markets improved, outflows moderated and equities increased as a proportion of the total assets by 1.5%. Given equities are a higher-margin business, that had a positive impact on our management fees. Now turning to annualized net new revenue on the right. This is a really important metric for us as it assesses the true commercial value of our business in a business where both margins and scale dynamics are good indicators of sustainable, profitable growth. So during the year, we saw really encouraging improvement in our Public Markets. This was driven by a stronger demand from the intermediary channel and particularly in the fourth quarter. In Schroders Capital, the annualized net new revenue was slightly lower, and this reflects the lower net sales over the year. However, if we look at Asset Management as a whole, you can see a clear shift in momentum. We moved from minus GBP 46 million in 2024 to a positive GBP 15 million in 2025. So while this momentum is encouraging, we know we can't be complacent. So turning to Public Markets. The net operating revenues were up 5% year-on-year, driven by markets and investment performance. In total, Public Markets net new business shifted from negative GBP 21 billion last year to GBP 3.7 billion this year. And in terms of margins, the equity margin was up 1 basis point as we continue to see the rotation from regional to global products. Equity margins for the year exited at 44 basis points. In fixed income, we were broadly flat. The intermediary channel was strong, but this was offset by the loss of some low-margin mandates. The increase in the intermediary flows also contributed to the improvement in net operating margin from an exit rate of 33 basis points at the half year to 36 at the year-end. For multi-asset, net outflows reduced through the year, reflecting the absence of the several large mandate losses we've seen in 2024. There was a reduction in the December exit rates as a result of the transfer of the lower-margin assets we continue to manage on behalf of SPW. Now up until the sale of that business, those assets were included in our Wealth Management segment. And finally, core solutions had another strong year in net flows. But as you know, this is a lumpy and lower-margin business. So our best guidance for margins continues to be the exit rates that you can see on the table on the bottom right. Moving on to Schroders Capital. The net operating revenue was up 3% for the year, a modest improvement. On the bottom left, you can see that the gross fundraising for the year was at GBP 10.9 billion, flat on the prior year and the equivalent of 16% on our opening AUM. The margin at the end of the year was 57 basis points, which is 1 basis point higher than the half year, and that improvement reflects a favorable mix shift where we saw in the second half of the year flows into our private equity business, which has higher margin. And finally, fee (sic) [ non-fee ] earning dry powder increased by GBP 0.7 billion to GBP 4.9 billion. Now while this gives us flexibility, it also underlines the importance of accelerating deployment and improving the conversion of our fundraising to net new business as we want to scale this business further. Now moving on to wealth. As Richard has already said, this was a tougher year for our Wealth Management business in terms of net new business growth. That said, the business continues to deliver and remains highly accretive to the group. The net operating revenue was up 10% and adjusted operating revenue 12% with a 3-year CAGR of 15%, which really demonstrates the strength of the underlying franchise. And you can see an improvement in the exit margins this year. That's really driven by 2 factors. Firstly, the transfer of the lower-margin SPW assets into Public Markets that I just mentioned; and secondly, because of the lower margin outflows from our charities business, which Richard just mentioned. So overall, while the year was more challenging from a flow perspective, Wealth Management continues to deliver strong profitability, improving margins and attractive returns for the group. Moving on to operating expenses. Now our adjusted operating expenses were flat year-on-year, but there are several moving parts that deserve a mention. Firstly, our gross transformational savings for the year was GBP 94 million. This was offset by GBP 19 million that we reinvested back into growth. Inflation, FX and AUM-related items increased the base by GBP 54 million. And finally, unanticipated building repairs in our non-compensation pushed that up by GBP 20 million. Now let me unpack our cost-to-income ratio. This is a key metric for us. The bridge here shows you how we're using a combination of cost control, transformation and revenue growth to build operating leverage, which will enable us to grow profitably. We set out actions at the start of the year, which would take 1% out of the cost-to-income ratio. Further management actions to accelerate our transformation drove even greater improvement and the favorable market conditions enabled us to generate higher revenue, which also supported an improvement in the ratio. Some of this gets used to reward our people through a higher variable compensation. But the net result due to the measures we have taken to improve operating leverage means that the majority dropped to the bottom line, and we ended with a 71% ratio. So hopefully, this is -- sorry, hopefully, this is clear on how we're improving the operating leverage in our business. There will be upside in times of favorable market conditions and of course, the reverse during times of falling markets. So for 2026, we expect further reduction in the ratio as we head towards 70% as we continue to focus on the transformation savings and cost control, and this is subject to normal market conditions. Now as you know, our target remains below 70% for the full year 2027. Now moving on to capital. Our capital surplus at the end of the year was GBP 865 million. This after allowing for the effect of an estimate of GBP 250 million for the impact of Basel 3.1. Now we are in discussions with the PRA on how the specifics of these requirements will impact us, but this is our best estimate today of a full implementation based on our current balance sheet position. We will continue to allocate surplus capital in line with our guidance on our capital management framework that I outlined last year. Now finally, given its importance to this year's outcome and to our targets, let me take a moment on transformation. We were clear that this was a program that was not about blunt cost out. It was about reshaping the operating model, reducing cost and complexity with precision and building a sustainable operating leverage for our business. So in 2025, we accelerated our delivery and outperformed our targets, delivering GBP 75 million of in-year savings and around GBP 100 million annualized of our net savings target. Our decisions to redesign our outsourcing contract approach, accelerate service model changes across client service, operations and technology meant these savings materialized earlier. Together, these all contributed to a headcount reduction of 10%. Now alongside this, we delivered non-compensation savings across research, data and global technology. We focused on supplier rationalization, which meant we reduced our supplier base by 12% year-on-year. So what next? The focus now shifts from accelerating cost savings to disciplined execution of transformation for modernization and growth. In terms of savings, we're targeting GBP 25 million reduction out of our operating expenses net of investments. And while this seems lower than the GBP 75 million in the plan this year, the plan was always to deliver the initial targets with efficiency upfront and the harder transition of new operating models, technology platform implementations take longer to implement. So overall, transformation in 2026 is about building progress on what we've done in 2025, embedding the cost discipline and delivering our net savings target while investing for growth. This will ensure that we exit the year with a full line of sight of achieving our GBP 150 million net annualized savings by 2027. So looking forward, we're only 1 year into our transformation program, and I'm really pleased with where we've ended. Ultimately, we're here with one purpose, to be the best active manager for our clients. So to do that, we are going to continue to do exactly what we said we would, and we will be laser-focused on delivery. So what does that mean in terms of actions for 2026 aside from the transaction? We will be activating our sales teams that we've built in Schroders Capital to turn client engagement into sustained net new business delivery. We'll continue to innovate, expanding on our ETF suite across Europe this year. And in wealth, we're investing in technology and our people to ensure that, that business can deliver to its full potential. What happens to markets and FX and geopolitics out of our control. But what we can control is we will continue to deliver against our strategic plans. So in summary, great progress this year, which has given us a strong platform to be able to increase the value and delivery to our shareholders. So with that, I'll ask Richard to return for some Q&A. Richard Oldfield: Thanks, Meagen. And what's really clear to me, I hope clear to you that we're not taking our foot of the gas, and we're absolutely focused on delivering the transformation plan that we outlined. But I just wanted to leave you with a thought on the transaction before we get to Q&A. Through the proposed transaction that you have seen with Nuveen that we talked about this morning, we're going to significantly accelerate our growth plans to create the leading public to private platform with enhanced geographic reach and importantly, a strengthened balance sheet, while remaining relentlessly focused on what matters to our business, delivering strong active investment returns for our clients. And look, given this audience, I can't underscore the importance that this transaction is going to deliver an attractive premium in cash to our shareholders, reflecting the value of the delivery of our strategy that we've outlined pretty clearly today and our future prospects together. It creates certainty and it creates value for shareholders. So with that, let's go over to you for Q&A. As usual, we'll start in the room. If you can start by telling us your name and where you're from, as usual, that would be really helpful. Isobel Hettrick: It's Isobel Hettrick from Autonomous Research. So I have 2, please. First, you touched on the improving flow trends and momentum in the fourth quarter of last year. Can you provide us any color if these have continued so far in 2026? And then second, you touched on the need to increase the pace of deployment and conversion of dry powder within Schroders Capital. And what is needed here? Is it just a lack of attractive targets in the area? Or do you need to deepen and maybe broaden your origination pipeline from teams? Richard Oldfield: So Isobel, I'm going to answer this question with a big caveat that we're on at February 12, and 6 weeks does not present a forecast what might happen in the future. But look, the positive momentum we saw in the fourth quarter was definitely carried into January. I also think on the Schroders Capital point, we do need to increase the pace, and that is about how we, for example, in our private equity business, put more people into that business so that we can get more of our clients' money deployed. It's a great area, by the way, that I'm super proud of the team for taking AI and embedding it in their processes so they can get through more opportunities more quickly. But that's the sort of thing we need to do to accelerate deployment. Isobel Hettrick: [indiscernible]. Richard Oldfield: Thank you for helping me out. Hubert Lam: It's Hubert Lam, from Bank of America. Two questions. Firstly, on Wealth Management. I guess in the last few days, you've seen some of sell-off across the Asset Management space -- sorry, the Wealth Management space on fears around AI, the risk of disruption within Wealth Management. Just wondering what your thoughts of that are, how much you're investing in AI, how much your wealth managers are using AI and how much you're spending within Wealth Management for AI tools? Richard Oldfield: Well, in a second, I'll let Meagen talk about the details on the AI. But first of all, AI is going to transform everything. So not just Wealth Management. And the only people that seem to have not worked out, it was going to impact Wealth and Asset Management or the investors. So we've known that for a long time, and that's why over the last 4 years, we have been active in deploying different technology solutions using AI. And by the way what I've said internally is AI is the hammer. What we actually need to do is think about the blueprint of how we're reconfiguring the business. And we'll use lots of different tools, be that DLT, be that using data in a different way and tokenization, be that AI. So I think we have been hard at that for a number of years. We are using it in how we show up to clients. We are using it in how we change operations. We are using it in how we think about research. We are using it in terms of how we think about portfolios and products that we can sell. So it doesn't matter whether it's Wealth Management or Asset Management. This industry is going to look super difficult -- sorry, not difficult, different going forward. It might get difficult as well, by the way, but it's going to be very different. But one of the reasons why we like this transaction so much is because it actually gives us a bigger balance sheet, it gives us more firepower to invest in this transformation as we go forward. Do you want to just touch on... Meagen Burnett: Yes. I'll just add a bit of context. I think firstly, you mentioned it in the context of wealth, and Oliver is with us in the room. And since the day he stepped into our business, he's been very front-footed in terms of AI and the benefits that can bring us. And if you look at it in our transformation program, a huge portion of that in the second part -- the second 2 years is around really accelerating that wealth program, investing in modernization of our client interfaces and making sure that we can leverage it. So as Richard says, it's a combination of AI, data and DLT. We see the 3 coming together and absolutely transforming not only the wealth business, but how the business operates together. Hubert Lam: In terms of investments, how much are you putting into technology into AI specifically? Meagen Burnett: We're not specifically only investing in AI. There's a huge portion of our remaining transformation cost that is associated with technology, the data platforms that underpin all that. So we have a remaining plan. Hubert Lam: And the other question is around your partnership with Apollo. Maybe just talk a little bit about it, in terms of expectations, like, why Apollo, the products that you have. I think you mentioned the products that you're launching there, expectations in terms of... Richard Oldfield: So I think I've been pretty clear with people over the year that actually are at partnering in this industry is important. You've seen a lots of people enter into partnership. It is important to us, so that we can be innovative, we can fill capability gaps where we think those are demands in the market place. What is exciting about this proposition is actually to see within the UK wealth channel, whether we can create an interesting public to private credit product, and that's what we are pushing on further. Of course, we've also talked about the ability to launch some income retirement solutions for DC channels in the UK. So it's a good example of how we are using that partnership to try and drive innovation more broadly. David McCann: It's David McCann from Deutsche Bank. A couple from me, please. So I think you touched on in the remarks that Nuveen approached you more than once during this process. Can you touch on, did others approach you? Was this the only person that was interested in the business? I guess that's the first question. Second one, just to be clear on the comments on shareholder value that you made, if you had fully executed on the plans that you outlined a year ago, do you think this deal represents more value for shareholders than you would have achieved kind of normally? And the third one, we've obviously seen a bit more detail in the numbers today than you gave us in the trading update a few weeks ago. We wouldn't have been aware of the numbers that obviously, quite a lot of the beat versus consensus at the time was from performance fees and carried interest. Were you sort of conscious of that when they made the ultimate offer? Richard Oldfield: Well, let me answer the first one -- last one first, David. Nuveen has not been party to the insider information on our financials at any point during this process. So they were not aware of our trading update or anything since then. I think that would have been inappropriate. But I think it would be normal by the way that you would expect in a transaction of this nature there should be multiple conversations, that's how we get to what the best value price is for our shareholders. But I want to be really clear that this business has never been up for sale. We are confident in the plan that we discussed with the Board. We were confident in our execution capability. We remain, by the way, pretty confident in our execution capability. So it's never been up for sale. What emerged as we had conversations with Nuveen was that we felt this was a very complementary business that could accelerate our aspirations by, candidly, I think, a decade. And that's why when we had the conversation, it became clear that we could create something pretty unique in the industry. And that's how we came to receiving an offer, I think, in the earlier part of this year. And the Board thought quite carefully about value through multiple lenses. Of course, the lenses that I talked about today, obviously, when we think about the premium to the earnings that we announced for 2025, whether it's relative to spot or whether it's relative to the VWAP. We've looked at all of those, and we also, as you would have expected, took the Board through our 5 year plans with a clear aim of demonstrating the value that we could create to the shareholders. So I'm not going to take you through the details of that plan, but rest assured in the Board making their unanimous recommendation, they concluded that this was the best option for all shareholders, and that's really how we've ended up here, and that's why I think you're going to get certainty, you're going to get cash, and you're going get paid not just for the delivery of the plans that we've got, but actually for some upside that this transaction will undoubtedly give us through growth. Right if -- are any other questions in the room? If not, we will go to online. No. Do we have any questions online? Meagen Burnett: Yes, we have one question online from Nick. Nicholas Herman: It's Nicholas Herman from Citi. Can you hear me all right? Richard Oldfield: Yes. Perfect, Nick. Nicholas Herman: Great. So firstly, I guess, congrats on a storming 2025, clearly helped by markets, but also still very strong execution. And I'll probably say this, it is an opportunity to say that, I'll be sorry to lose traders as a listed company, but I can appreciate that this is also a very attractive deal for shareholders. Two questions from my side. Firstly, on Asset Management margins. You've given us the exit margins. Can I ask just for the Public Markets business, is there any difference in the exit margins to the margins on your inflows? And perhaps you could help us understand the difference there in the margins on your inflows versus the margins on your outflows there? And then the second question was -- sorry, if I missed this before, my connection was a bit questionable, but you said that it allows you to accelerate your growth ambitions by a decade. Would you able to flesh that out a bit, please? Richard Oldfield: Shall I comment on the last one, and then come to you. So a couple of reflections, Nick. I understand that people will be sorry to see Schroders shares not listed on the London Stock Exchange. But I think about this in a different way. Actually, our commitment to London is actually enhanced through this transaction. There's clear commitment about maintaining the headquarters here. There is clear commitment about our investment capabilities here and retaining jobs through this deal, we should be able to channel more money into the U.K. economy. We will continue to play as we have done for the last 200 years, an important part in bringing people to market and actually creating U.K. wealth. So I actually think we are better as a result of this or create a better impact for London at the end of this because of our increased size and ability to influence the market. So whilst people may be sorry about the listing, I think our commitment to London is undiminished, and we're excited about actually the increased growth delivering more and better outcomes. So if you think about what we've done, as I said, when you bring these 2 organizations together, you're really bringing together Nuveen's really broad Private Markets capability, which has a very supportive parent that brings private capital and a U.S. distribution. Now here at Schroders, we don't have patient capital. We have a smaller -- much smaller distribution capability in the U.S. We don't have some products that you would want in the total Private Market suite. But you're combining that with this phenomenal heritage here at Schroders of a Public Markets business with great distribution across pretty much the rest of the world outside of the U.S. And we have amazing capabilities in discrete parts of Private Markets. So when you stick these 2 things together, what we do is create better products that we can actually put down all of the pipes to actually support our clients and make us relevant to them. So that's why this isn't about a cost out. There aren't big cost savings in this deal. It's about growth because we can actually give more of our combined products to our respective clients. And that's the excitement. That's why this, I think, should be seen as a great opportunity for our people and our clients. It would have taken us a long time for us to buy that capability in Private Markets, build that distribution capability in the U.S. And that's why I think it accelerates our plans that we had outlined last year by at least a decade. But maybe, Meagen, you want to pick up on the... Meagen Burnett: Yes. Thanks, Nick. I'll pick up on the Public Markets margin point. As we mentioned, this is really around channel and the specific product that is going down that channel. So really, our margins are driven by where the client demand is. And I think 2 great examples of that are really looking at our fixed income, where we exited 4 basis points higher. That's because we're selling that product on the intermediary channel in Europe versus more in the institutional channel. Likewise, on equities, we saw that drop down by 1 basis point. We do expect a general -- there's a general market trend in terms of the sticker price there, but we're also seeing dynamics between the global product and the regional product where investors are moving more out of regional and into global. Richard Oldfield: Do we have any other questions, Katie, online? Katie Wagstaff: No more questions at the moment. [Operator Instructions]. Richard Oldfield: Brilliant. Well, we've got no more questions. I just wanted to draw it to a close and say thank you very much for coming this morning. We'll be around for a little bit longer. So if you've got any other questions, don't hesitate to doorstep us or any member of the Group Executive Committee. And please join us for coffee. That would be great. Thank you.
Operator: Ladies and gentlemen, thank you for participating in the fourth quarter 2025 earnings conference call of Melco Resorts & Entertainment Limited. After the call, we will conduct a question and answer session. Today's conference is being recorded. I would now like to turn the call over to Jeanny Kim, Senior Vice President and Group Treasurer of Melco Resorts & Entertainment Limited. Please go ahead. Jeanny Kim: Thank you, Operator, and thank you all for joining us today for our fourth quarter 2025 earnings call. On the call are Lawrence Ho, Geoffrey Stuart Davis, Evan Andrew Winkler, and our property presidents in Macau, Manila, and Cyprus. Before we get started, please note that today's discussion may contain forward-looking statements made under the Safe Harbor provision of federal securities laws. Our actual results could differ from our anticipated results. In addition, we may discuss non-GAAP measures. A definition and reconciliation of each of these measures to the most comparable GAAP financial measures are included in the earnings release. Finally, please note that our supplementary earnings slides are posted on our investor website at investors.melco-resorts.com. With that, I will turn the call over to Lawrence Ho. Lawrence Ho: Thank you, Jeanny, and thank you all for joining us today. 2025 was a year of growth and recovery supported by disciplined cost management and margin expansion. We recorded $1.4 billion in group property EBITDA for the full year of 2025, growing by 17% compared to 2024. In Macau, our dedicated efforts to enhance the customer experience have proven to be a strategic focus, with fourth quarter Macau property EBITDA growing 24% year over year and full year Macau property EBITDA growing 25% compared to 2024. We have had a strong start to 2026 with Macau market GGR up by 24% year over year and our market share increasing so far in 2026. Chinese New Year looks strong, with higher-yielding cash ADRs compared to 2025. We have a pipeline of new initiatives that we are planning to implement in 2026 to further differentiate our offerings, with the largest project being the opening of the renovated Countdown Hotel. We are on track to progressively start opening in 2026. The completed hotel is expected to introduce a truly distinctive experience and set a new benchmark in Macau. We have also started on a revamp of the retail area at COD and have plans to upgrade our F&B offerings, continuing to further enhance our product quality. In the Philippines, competitive pressures and industry headwinds continued to impact our performance in 2025. However, we are encouraged by the positive developments in that market, including visa-free travel for Chinese nationals, upgrades to the Manila Airport to facilitate increasing international tourism, and rationalization of the online gaming market. We have also concluded our evaluation of the strategic alternatives for COD Manila. Although we considered various alternatives, we did not feel that any of those options would allow the value and potential of the property to be fully realized. We are confident that business will rebound and we may reevaluate the situation in the future. Moving on to Cyprus, City of Dreams Mediterranean and the satellite casinos in Cyprus achieved 78% year-over-year growth in property EBITDA to $21 million for 2025, despite seasonality typically being slower in these months. And finally, in Sri Lanka, we continue to focus our efforts to progressively ramp up operations and have seen promising green shoots so far in 2026. With that, I will turn the call over to Geoff. Geoffrey Stuart Davis: Thank you, Lawrence. Our group-wide adjusted property EBITDA for 2025 grew 12% year over year to approximately $331 million. Adjusted for VIP hold, our property EBITDA was approximately $323 million. Favorable win rates at COD Macau and COD Manila had positive impacts on our property EBITDA by approximately $7 million and $3 million, respectively. We had guided in the prior quarterly call that OpEx in Macau increased in the fourth quarter compared to the prior quarter, primarily due to events including the China National Games, Studio City's tenth anniversary, and the Macau Grand Prix. Excluding these fourth quarter events as well as House of Dancing Water, Macau OpEx was approximately $3.1 million per day. EBITDA in 2025 was also impacted by additional bad debt provisions that were taken as a result of a settlement that we reached with one of the previous junket operators. Adjusting for these event-driven costs, Macau's property EBITDA margin for 2025 would have been over 27% on an actual basis. Looking forward to 2026, we expect Macau daily OpEx excluding House of Dancing Water to come in at approximately $3.2 million given increased marketing activity around Chinese New Year and new brand campaigns across our Macau properties. Turning to our balance sheet, our liquidity position remains robust. We had available liquidity of approximately $2.4 billion with consolidated cash on hand of approximately $1.2 billion as of 2025. Melco, excluding its operations at Studio City, the Philippines, Cyprus, and Sri Lanka, accounted for approximately $550 million of the consolidated cash on hand. In 2025, Melco redeemed the remaining $358 million of the senior notes due 2026. In addition, we repaid $210 million in debt at Melco and $32 million at Studio City. In total, the Melco Group paid down approximately $400 million of debt over the course of 2025, and we continue to reduce debt in 2026. Melco has repaid $35 million in debt in January and will repay a further $25 million this month. The group does not have any material amount of debt maturing in 2026. Before we move on to the non-operating line items, we thought it would be helpful to take a few minutes to provide information on the trademarks license agreement with Melco International. Melco International owns and manages certain trademarks utilized by Melco Resorts and its operations. The terms of the trademark license agreement were negotiated on an arm's length basis, factoring in the ranges of fees typically observed in the industry. The agreement has an initial term of ten years, which commenced on 01/01/2024, and thereafter is automatically renewed for consecutive periods of twelve months unless either party gives prior notice of nonrenewal. Under the agreement, the trademark license fee payable is up to 1.5% of the gross revenues of City of Dreams Macau, excluding Grand Hyatt, unless agreed otherwise by the parties to the agreement. The trademark license fee was 1% in 2025 and will increase to 1.5% from 2026. The agreement does not include an annual cap, but the total fees for the full year of 2025 amounted to approximately $33 million, dramatically lower than those of our peers. The trademarks owned by Melco International are integral to the long-term strategy and brand identity of Melco Resorts, and the formalized agreement facilitates a standard approach as we continue to grow and expand the portfolio. And finally, as we normally do, we will give you some guidance on non-operating line items for the upcoming 2026. Total depreciation and amortization expense is expected to be approximately $140 million to $145 million. Corporate expense is expected to come in at approximately $35 million. And consolidated net interest expense is expected to be approximately $115 million to $120 million. This includes finance liability interest of around $6 million relating to fees payable in relation to the Macau gaming concession and the Cyprus gaming license, and finance lease interest of approximately $5 million relating to City of Dreams Manila. That concludes our prepared remarks. Operator, back to you for the Q&A. Operator: Thank you. If you wish to ask a question, please press 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press 2. If you are on a speakerphone, please pick up the handset to ask your questions. We do ask that you please limit yourself to one question. We will now open for questions. Today's first question comes from Joseph Robert Stauff at Susquehanna. Please go ahead. Joseph Robert Stauff: Thank you. Good morning. I wanted to ask about the additional traffic obviously being generated by House of Dancing Water and where you are with respect to being able to convert that additional daily visitation into both gaming and, obviously, other parts of your business. What is the opportunity from here as we think about that? Lawrence Ho: Hi, Joe. It is Lawrence. Since we reopened House of Dancing Water in May, we have seen meaningful uptick in property visitation. The show is open pretty much twice a day for five days of the week, and during those shows, 1,800 to 1,900 people attend. So that drives additional headcount into the property. I think we are seeing meaningfully good spend across non-gaming during and after the show. And even on our mass drop, from pre-May to post-May, we have seen a decent uptick. As with any non-gaming entertainment, concerts, attractions in Macau, how can we directly track that scientifically? I do not think we have an answer for that. I will maybe let Evan talk about it. But I think overall, we see it driving traffic and energy into the building and it is a little more, as Lawrence has pointed out, a little more difficult from a direct drive standpoint. Evan Andrew Winkler: It is very helpful in activating the property. We do see a big uptick, obviously, in food and beverage spending on property during the show. Generally, when people are coming from outside the property to the show for that initial event, sometimes they are coming with family and friends, so a very small percentage go from that directly to gaming. The benefit we have is it does introduce thousands of more people with each show to the property and to COD, to our product, to food and beverage. And so I think over time, it is generating repeat visits back to the property, but it is hard to go from who exited the show that day to who comes back later on. So I think we drive, but we do not have a direct formula that we can give you. Because if you look at the individual people coming out of the show on the night that they go to see the show, that is not a high number. But overall, we are seeing uplift in the business. Joseph Robert Stauff: Okay. Understand. Thanks, Lawrence. Evan, thank you. Operator: Our next question today comes from Timothy Chao at Citigroup. Please go ahead. Timothy Chao: Hi, management. Lawrence Ho: Excuse me. Can I listen? Can you hear me clearly, please? Timothy Chao: Yes, we can hear you. Alright. Hi. Sorry. So question for me. What is your view on the competitive intensity in Macau? And more specifically, what are your expectations on your EBITDA margins, particularly in Macau this year, please? Thank you. Lawrence Ho: Hey, Timothy. It is Lawrence. Maybe I will start, and then I will hand it over to Evan and Geoff. I think the competition is still very intense in Macau, but that can be expected. I would say that we anticipate this level of competition to be what we will expect for the rest of the year. In terms of mass, it is still growing, so we are comfortable with our margin. We have been very disciplined throughout 2025 in terms of our reinvestment. We have seen some of our competitors ratchet it up throughout the year. I think we are, unless there is anything more to supplement other than— Evan Andrew Winkler: From where we are sitting coming out of Q4 and into this quarter, we are not seeing a ratchet up in terms of levels of spend directly on gaming programs from where we are now. Competition remains, as Lawrence said, intense within the marketplace. We are not looking at any catalyst that would immediately bring that down. The hope that we always have is, as people look at things, that you have easing up among players. As Lawrence has said and I have said in the past, we do not ever drive up in the marketplace. We tend to be very disciplined. We will make strategic moves at times when we need to look at market share or move around with individual segments. But we certainly would never lead the market up. Based on what we are seeing now, I think we are stable. I do not see anything that will bring us down in the near term, but I also do not see anything that will ratchet it up. Lawrence Ho: On margin, we have done a pretty good job in terms of managing our operating costs throughout 2025. That is part of the company philosophy as well. You will see that ongoing throughout 2026. Timothy Chao: Thank you so much. Thank you for the color. Operator: Thank you. Our next question today comes from D.S. Kim at JPMorgan. Please go ahead. D.S. Kim: Hi, everyone. Good evening, and Happy New Year. My first question is regarding the operating expense. As Geoff mentioned earlier, I think we had quite a bit of nonrecurring items this quarter—ten-year anniversary, National Games, and even junket-related bad debt. Can you help quantifying each of these in dollar terms for us, if it is possible? And can I confirm the spending related to National Games and Grand Prix were included in OpEx—operating expense—above EBITDA line and not in the corporate expense? Geoffrey Stuart Davis: Those expenses are in our property margins. The additional bad debt was approximately $5 million for the quarter, and we expect that to come back down to more normal levels going forward. And then we had about $6 million for the anniversary. D.S. Kim: Thank you. Operator: Our next question today comes from John G. DeCree at CBRE. Please go ahead. John G. DeCree: Maybe just one on CapEx. Geoff, I apologize if I missed it. Could you give us the CapEx number for the year? And could you break it out for major projects—maybe by COD or Studio City—at the property level, what we should expect? Geoffrey Stuart Davis: Sure. Our total CapEx for this year, which reflects a little bit of carry forward from money we anticipated spending in 2025 that has pushed into 2026, is $450 million. The only material one that I would call out would be the Countdown Hotel, which is approximately $100 million for 2026. Broken out by jurisdiction, the total CapEx in Macau is roughly $375 million, $35 million to $40 million in Manila, and $35 million to $40 million in Cyprus. John G. DeCree: Perfect. Geoffrey Stuart Davis: You are welcome. Operator: Thank you. That concludes the question and answer session. I would like to turn the conference back over to Jeanny Kim for any closing remarks. Jeanny Kim: Thank you, Operator, and thank you all for joining. We will see you next quarter. Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Welcome to the NIBE Q4 Presentation for 2025. [Operator Instructions]. Now I will hand the conference over to the CEO, Eric Lindquist; and CFO, Hans Backman. Please go ahead. Gerteric Lindquist: Thank you very much. Good morning or good afternoon to all of you out there. Hello also from my side. We appreciate you calling in. And just for the sake of order, we would like to present the report now in 20, 25 minutes at most, and then allow for questions, of course. And then we have, as a target, to stop the whole interview here around 12:00 o'clock. And just another sake of order, we could possibly allow 2 questions per analyst or per person and then you have to queue up again to allow as many as possible to put questions to us. All right. With that said, once again, welcome. And we're going to go through a number of slides. And I think that the headline as such gives a pretty good picture of what we're going to talk about, and we hope that you read the report. And of course, it's been a very transparent year to you regarding our recovery, if we call it. And we saw the signs already at the end of '24, and then gradually quarter-after-quarter, we've seen the improvement. And then with the fourth quarter, which is typically a good quarter for us when we return to seasonality, it's a very robust development. Of course, there have been hindrances out there, political and tariffs and what have you and Swedish currency, which is very good to note on one foot that it has strengthened, but it's been, of course, also quite dramatic when you invoice in other currencies. Nevertheless, that's our task to solve or work with these issues. And there are no excuses, but rather saying, okay, we have arrived where we are, given all the conditions in the world. And if we just have a quick look at the figures themselves, there you see, of course, the quarter and you see the year as such. And the summary is, when we look at the figures, that the growth is fairly modest. It is even minus in the fourth quarter. But taking into account the currency effects on the full year, it's a little bit better than 5% growth. And in the quarter, it's even more than, so it's like just under 7%, I think, which means that we are truly recovering and the margin is with us. The operating margin has come from just north of 10% in the quarter to 13.1%, which we think is fairly solid. And also for the year, as such, we are back on track with 10.5% versus the 8% that we weren't so pleased with a year ago. But again, solid demonstration of strength. And we're going to go through respective business area. And we look at these bars here in the graphs that you have ahead of you, of course, they are a little bit diminished by the fact that the currency has been so strong. The last years, I think, cut down with SEK 1.8 billion. So that graph would have been different had we had a fixed currency ratio. And it's -- here, when we look at the profit after financial items, there, of course, they are not directly influenced of -- course, they are influenced, but to a lesser degree. Now we see that the curve is going in the right direction again, which is very pleasing. And we see also that the seasonality is reinstalled. And we've been talking about that quite a bit, because unless you've been following us for several years, the years '21, '22, '23 weren't really, if you call it, normal because the seasonality was not pronounced at all. But prior to that, we had a curve just like we more or less have had '25. On Climate Solutions, which is the business area that you look at the most perhaps, and sometimes we even call the heat pump company, which we'd rather be called like -- something else, like a heating technology company, because that is, again, diminishing the other 2 business areas. And even Climate Solutions is not 100% heat pumps. Nevertheless, it's been a good year for us. And of course, we have fulfilled all the investments in product research and product development, and our factories and our equipment is up spick and span, which means that we are very ready to take on the challenges coming in the future. So that's a very positive attitude within the whole group, what we have achieved together. And it's -- I mentioned that earlier this morning when I had a short interview saying, well, this is really a very good demonstration of strength. Hans and I can only do so much, but we have a phenomenal organization behind us that fully understand -- who understands the task, and we have been working together, now for many years together, of course. And we had a slowdown in '24. We just said, let's analyze that, make a program and then charge ahead again. And that's pretty much what you see in -- during the year and during the quarter for Climate Solutions and also the other business areas, which we're going to come to. And if we just have a quick look at the figures for the year for Climate Solutions, we see that -- of course, again, the modest might look not so phenomenal, but it's actually a growth of 7.6%. And for the quarter, it's just under 9%, which, of course, is contributing to the margin of 13%, which we have been working so hard to achieve and which we're also going to show you on the next slide that -- of course, it was not very pleasing to be under even 10%, which is the immediate target for all business areas. But to be under, that was a little bit painful we had to admit. And now we're back on 13%. And it's a very clear signal in the report that we don't aim to stand there, but rather move into this, I'll say, broad span in the future and already this year where we're standing. Looking at Element, same thing, it's been a challenging year for them. But some sectors are good. The heat pump sector, the semiconductor sector has really improved during the last months. We had a weak period in the third quarter, and that was one of the main reasons why we couldn't really catch up to the targeted 8% operating margin. And we indicated that already in November. Other than that, they are working very determinedly. And with all the challenges that we've all had, so I won't dwell on each bullet point here. But, of course, there, again, we like to be back within the span of 11% to 10% -- 8% to 11%. So growth and margin recovery, I mean, those are the headlines for the year to come. And here again, it's a very narrow expansion if you look of growth. But if we look at it from a fixed currency point of view, then we have a growth of 6% for the year. And also for the full year, it's -- or for the full quarter, it's well above 5%. So it's catching up. Here, of course -- there, we have the icicle sticking down 2005, where we had a very difficult year, but there was some money set aside. But now we've had 2 years below 8%, and we are very determined to bring it back within that span, as I just mentioned a few minutes ago here. And looking at Stoves, of course, they've been dragging. And there, we misinterpreted the market come back, we can say. Stoves hit the tougher situation a little bit later than the other 2. And even the first quarter '25 was not so bad really. But then, of course, consumers were certainly influenced by all the worries in the world. And we've taken away costs, of course. And we are fully determined also here to return to a margin that we are more used to. And if we look at that -- the precise figures, we can say that the growth, of course, was very, very modest, is even minus, and we are not really used to that. It was 5 percentage units drop if we discount the currency. But still, even the fourth quarter was just on the verge being equal, taking the currency effect away. We feel that we are scraping the bottom, and we hope now that it will be a big leap jumping into that span, but that's certainly our target, together with, of course, a volume increase or organic growth. And before Hans comes in, I'd like to just look at or show you the bars that we typically show. And of course, we had a phenomenal growth there, '22, '23, even '21. And then we dropped down painfully so. And now we are even including the real currency effects, just passing the previous year. But of course, had we add another SEK 18.8 billion there, we would have been at a different situation. Profit after financial items, we have a bit to go there. They are determined to come back as far as the margin improvements we've said already. And of course, that's a combination of being very frugal with cost, utilizing our investments that we've had now, so determinedly fulfilled, and of course, being very aggressive in the market. So that's the good old usual tools. And we hope to be able to show you better bars as the years are coming by. When it comes to sales distribution, it's fairly much the same as in the past, where 2/3 roughly come from Climate Solutions and Element 1/3 and Stoves a little bit less than 10%. And of course, with Climate Solutions coming out with a fairly good margin, the result, as such, is, of course, dominated by that, and with Stoves fairly marginalized because of the relatively weak performance during the year. Geographically, last slide before Hans steps in here, it's, yes, North America, 31%; the Nordic country, we consider being our home market, it's like less than 20%; and then 45% in Europe outside the Nordic countries. So that's fairly stable we'd say. So I think I hand over the range to you, Hans, there. Hans Backman: Thank you very much, Eric. Yes, I'll continue as usual, so to speak, and then we'll, of course, leave room for the questions. Just one comment on the group before I head into the divisions again and then the balance sheet and so forth. As you saw, we have adjusted numbers. That's something we very seldom have really. We like to present exactly what we have performed. So in reality, we've only made adjustments twice, and that was back in 2005, as you mentioned, when we had a savings program back then, and then for '24 for that savings program. This year, we did, however, decide to mention that these acquisition-related revaluations of contingent liabilities would need to be mentioned separately because they have very little to do with the underlying operations, so to speak, the SEK 178 million, SEK 179 million. That's what we do every fourth quarter every year for all of our future payments for remaining shares in companies that we owned. And they are, of course, based on future projections. And this year, we had a very fortunate situation in a way, where a couple of companies and owners wanted to remain on board as owners for a number of more years and not step out soon, so to speak. And we always welcome that because we want the people to be involved with flesh and blood. So that was the reason for that adjustment. Now heading into Climate Solutions again. I mean, as Eric mentioned, we had a good and strong finish to the year by performing quite well in the fourth quarter, almost a little bit better than I had expected since December was the last December now for many years which was employer-friendly, so to speak. You could take a few days off and get a long vacation. But that did not hinder our companies from continuing to deliver and perform, which was very pleasing to see. So it was a good finish to the year, where we had good sales in the Nordics, especially Sweden, Denmark kicking in, and then Germany and the Netherlands, and to some extent the U.K. as well. And then in North America, with the commercial sector being very strong, so to speak, or relatively seen strong -- that's our bigger area over there, but also U.S. being a very stable country in terms of business. So that contributed to this good performance. And thanks to the volume coming in then, which you don't see due to the currency, but Eric went through it quite in detail. I mean, we've had an underlying good organic growth. And that, in combination with the savings program that we launched and where we have been really focusing on holding on to costs, have generated both a better gross margin, up by some 3, 3.5 more percentage units from Q4 of last year, and then holding on to the SG&A costs as well, making it possible for us to deliver a growth in operating profit of some 34-plus percent, coming in at this margin of 15.7%. So quite an achievement coming up from the 12% of last year and then landing in the full year for Climate Solutions at 13%, up from the 9.3%. So we're back on track. And as Eric mentioned, we, of course, want to continue to develop from this level. In terms of split of sales per geography, there have not been many movements. We're very stable in this situation. The Nordics always represent just below 1/4. The rest of Europe is basically half, and then North America is about the same as the Nordics or slightly, slightly bigger. Moving on into Element. Also had a relatively strong finish to the year, almost coming in at 8%, which is the bottom range of the interval where we want to be. And this was not a given in a sense as this is the, as we typically say, our most global business area where we are exposed both to many geographies and also many segments, where the majority have been stable, some have been growing nicely or kicked in again. HVAC with heat pumps being one of them. Of course, semiconductors coming back in the quarter. They were up in the first part of the year but then had a decline in Q3 and came back. Whereas white goods, automotive in Europe and industrial still are in a slightly more challenging situation. But all in all, we were able to increase gross margin here as well in the quarter by some 2 percentage units. The operating profit coming in almost 17% above from last year, leading us then to landing a full year at 7% operating margin with a slightly better gross margin, keeping the SG stable. But still a little bit of road to go to get back into the 8%, but clearly on the right track. In terms of split of geographies per sale, as I said, this is the most global business area. Not so much of movements within this area. It's the others portion that has grown or changed a little, you can say, being the Asian part, which declined slightly, since the other ones have grown or come back, you can say. But no major changes here. Stoves then, as you all know, the business area is still struggling a little bit due to a difficult market. I mean, on the one hand, the low new build rates, people being a little bit uncertain due to the geopolitical situation and so forth have been holding on to these types of products. But one should not either forget that we come from a very special situation in the sense that during the pandemic and the homeowner trend that followed, we had a very strong demand in the business area, which then was continued once again, you can say, when Russia invaded Ukraine and people were really looking for a heating device which was not dependent on anything else than wood, so to speak. So with that in mind, we think that the business definitely will come back, but that it still is lagging a little bit behind before it will kick up. But also here, we have obviously been working on cost control and focusing on trying to grow the business and keeping up the profit. And gross margin improved by 2 percentage units almost or 1.5% at least in Q4, and we were able to basically maintain the profit and coming in at an operating margin just north of 10%. And for the full year, the 4% that Eric mentioned before. In terms of geography or sale per geography, no big movements. Since quite some years back now, as you know, we have a big operation in North America based in Canada, in the Vancouver area, and that has developed quite well in terms of sales. But of course, the tariffs have hit us in that respect. If we then move on to the balance sheet and eventually cash flow statement and so forth, you see that the total assets have actually declined from SEK 70 billion to SEK 65 billion. A lot of this has to do with currency. If you see the intangible assets there, they have come down from SEK 32 billion to SEK 29 billion. There's a good portion of currency in there. But of course, also a result of depreciation, and that goes also for tangible assets. Although we have continued to look at acquisition opportunities and always do, we have not brought so many companies on board. So we have not had any add-ons here in the same way as before, where the balance sheet always has expanded. And you basically see the same effects on the equity and liability side, where equity is lower than before, but that is very much a result of these currency translation effects that I just mentioned. But also the fact that we have handed out dividends, and you have the bridge on this in the report on Page 12, I believe it is. Pleasing to see is that both the long- and short-term interest-bearing liabilities have come down. We've amortized on our loans. So we've reduced those by some roughly SEK 2.2 billion, which has improved our financial strength, you can say, for future acquisitions. And very pleasing to see is that the cash flow has from the underlying operations generated some SEK 400 million more than compared to last year, which is pleasing in itself. But we've also now had a release in working capital that we have been talking about. And in previous quarters, we've had a good development on inventories. We've step-by-step reduced those. We've slightly increased our payables, which also has had a good effect. But we didn't in Q2 and Q3 get the immediate effect of our increased sales. Typically, we invoice a lot at the end of the month, and then it takes a little while before the effect of that kicks in. But a good portion of that did kick in now in Q4. So we released some SEK 700 million then, leading us up to having a good cash flow from operations after change in working capital of close to SEK 4.9 billion. The investment in current operations has come down and will come down even further following the big investment program that we have gone through and are just about to finish. And then a small portion there on acquisitions. And then the financing activities, that's, of course, repaying debt and also paying out dividends. So the fact that the change in liquid assets is slightly negative there, that's fully planned. So I think a very good and strong cash flow behind us. And just a few key financial numbers here. We still have a good portion of cash on hand. It's at SEK 5.9 billion basically, slightly down, but just for the reasons that I mentioned, that we have used part of the cash to amortize on our loans. And as you see, the interest-bearing liabilities in relation to equity has further come down. And very pleasing to see is that the net debt to EBITDA has now come down even further from the 2.9 in the previous quarter to 2.7. And regardless of us having adjusted that number or not, the number is basically the same. It's either 2.72 or 2.67. So it's a very small difference coming from that effect. And then an improved equity assets ratio, making us a solid company. And the working capital, we're continuously looking into that and working on that. It's given a good effect during the year. We have as an intermediate target to land in at 20%. We came close here with the 21.2%, but having taken it down about -- well, from the 22.8%, as you see there in the picture. So that's also heading in the right direction. And just the very last key financial numbers. Obviously, return on capital employed and return on equity still have some ways to go to meet our targets, but they have definitely taken a step, both of them, in the right direction. So that's what we are continuing to focus upon. And with this year behind us, we're well positioned for that improvement. And the very last page here is a little bit of a summary of what I just talked about in terms of these financial numbers, where you can see the development of these key financials over the years. And up until the very special year 2024, we've gradually improved both the operating margin and the net margin and also the equity assets ratio. Return on equity has been suffering a little bit, but that is, of course, due to the strong equity in a way, it's communicating vessels in a way. But following now the recovery here in 2025, we think we are heading in the right direction again to continuously improve these numbers. And by that, I think we are basically ready for questions. And would you like to add something, Eric? Gerteric Lindquist: No, no, no. I think that we are -- we spent 26 minutes all in all. So now we have 34 for questions. And I was trying to speed up as much as I possibly could. Perhaps I was too short in some instances, but you covered nicely, Hans. So that's fine. You go ahead with your questions, please. Operator: [Operator Instructions]. The next question comes from Christian Hinderaker from Goldman Sachs. Christian Hinderaker: My first question is on the cost base. It looks like the margin improvement is mostly coming through in the gross margin line, as you talked to cost of goods sold in the quarter down from 69% last year to 66% of sales. Can you help us break down that cost a little bit? Interested how much of your cost base is driven by raw materials like copper and steel, for instance, and how much is labor? And then how we think about the moving parts year-on-year? Gerteric Lindquist: All right. Well, when it comes to -- as we say, we have a more intensive cooperation between both the companies in Climate Solutions and between Element and Climate Solutions. And that is bearing fruit, both when it comes to raw material reductions -- and also our new facilities, of course, they also allow us to be more rational, although the volumes are not totally satisfying yet. But those are the 2 major factors that I would say. And we kept pretty much the fixed cost at a level that is a little too high in the spring time and not too low in the fall, but the seasonality is very important. That's why we point on that. We have to have a very stable R&D fleet of people and so forth, and we can't diminish them and go up in the fall. We have to have a fairly even amount of indirect and clerks and developers and so forth. I hope I answered some of your issues there. Christian Hinderaker: Yes. Just maybe any comment there in terms of your copper mix exposure? Gerteric Lindquist: Well, copper is, of course, an important factor. But we are mitigating that to a point with vessels now being, to a larger degree, also produced in stainless steel. So that is -- and the alloys there are not hindering the mix to be slightly more positive. Christian Hinderaker: Okay. Maybe just secondly, I was interested in the North America performance for Climate Solutions. It looks like flat revenues year-on-year at around SEK 6.8 billion. If we look at the data from AHRI, that's showing a 37% decline year-on-year in November in volumes. Interested in what's behind that outperformance versus the market? Is it a timing dynamic? And any thoughts on the North American business would be great. Gerteric Lindquist: Well, I think that -- I mean, there are perhaps many or several factors. But one factor we believe is that we've been fairly quick to monitor and to adjust the refrigerants to the market demands. In North America, it's not so much propane or 290, but rather the 454. I think that's one factor where the assortment has been adapted to the market, presumably a bit quicker than some of our colleagues in the industry. And also the fact that the commercial segment has really been positively developing. So those are 2 factors that I think that makes our performance fairly stable. Operator: The next question comes from Uma Samlin from Bank of America. Uma Samlin: So my question is on the Climate Solutions margin. So you had this nice chart in the presentation where you could see the historical margin levels. And you also guided that 13% to 15% in 2026. So I guess my question is, from where we stand today, what do we need to have to get to the historical level of like 14% to even close to 15% margins? You talked about that you have a bit more efficiencies in your new factories. I guess that should help you to get a bit easier than it was in the past. So what are your sort of expectations for volume growth to get there? And do you see any further benefit from efficiency gains or cost cutting in the past 2 years to contribute to the margin improvement in 2026? Hans Backman: Well, of course, the factories are more efficient. But then, of course, we have to realize that the depreciations are kicking in. So we are mitigating that with the higher efficiency. And to bring it further into the interval of the span, that is a combination, of course, of growth and polishing even further on productivity and maintaining cost. That might be a hide and seek answer, but that's exactly how it is. It was painful to bring down the cost. We are doing our utmost to keep it at that. And of course, when we add cost, we know that, that is for a very good purpose. And realistically, productivity is coming along as the volumes grow. Not saying that, well, we have to wait several years. We believe that we are on the growth pattern, and we believe that the growth, continued cost control and increased efficiency, although dampened a little bit by depreciation, will bring us into that interval. That's the whole organization's target when it comes to Climate Solutions. Uma Samlin: That's helpful. My second question is around market share and pricing. So just wondering if you have any comments you could share in terms of your ambitions on market share? And what are the pricing trends you have seen in Q4 and going forward? Hans Backman: Well, we believe -- now it's very difficult to comment on the whole industry, but we are not very much friends of decreasing prices. And that's why we have always said that the price decreases we've seen in the market, they've been mostly linked to inventories being sold out, which we -- and we believe that's been a fair analysis in the past. And we believe also that once those overstocking items are out through the distribution channel, we have a more realistic pricing situation. So we do not believe that there is any dramatic activities on that line. And in some instances, we even recognize that there will be some slight increases of pricing. So I think it's been matured, if I may use the word, when it comes to the pricing situation. I hope I answered your question there, Uma. Or was that fulfilled or... Uma Samlin: Yes, yes, yes, absolutely. And any commentary you can have on market share? Hans Backman: Well, we believe that we are definitely not losing market share, but to say that we are gaining tremendously. But we are on a very solid ground with the assortment, our activities. And we also understand and acknowledge that our partners out there in the market, they appreciate that we've been disciplined with our prices, with our product launches. And the feeling is that we are on the right track when it comes to also gaining market shares. But I'd like to be more humble about an overall comment on that. Operator: The next question comes from Carl Deijenberg from DNB Carnegie. Carl Deijenberg: So 2 questions from my side. And first of all, if I could come back a little bit to the U.S. and the commercial offering. I wanted to ask a little bit -- I mean, I see that you're mentioning, for example, [ shellers ] being a product that is in good demand for you right now. And I can also see, when I look, for example, in water furnace, that you seem to have a product portfolio that is suitable for data centers. So just asking, has that been a positive growth driver for you in the U.S. that could explain the discrepancy in the last couple of quarters relative to the data points that were mentioned in an earlier question here on the call? Gerteric Lindquist: Well, we must say that we haven't really concentrated on data centers. We've rather been very strict when it comes to penetrating those segments, where we are historically relatively strong. But that doesn't mean that we don't have the ability, but there are so many companies rushing into that. So we are not standing by the side and saying, well, we wait and see. But we've been continuously preparing our products for the very suitable market in hospitals, educational centers and so forth and also governmental buildings, not neglecting perhaps the data centers. But we couldn't say that we have really put massive efforts in there, but rather maintain where we are and, of course, gradually looking at that and moving in there without forgetting at all our customers and our segments that we've been working so hard and working up or fostering, you can say. That was a long answer to because we know that, that is, of course, very inspiring. But I think that is still to be further developed by us. That's not the reason why we have seen the growth that we've seen. Carl Deijenberg: Okay. Good. Then I also wanted to ask, you mentioned Italy here as a market that is seeing sort of a return to growth, and I think this is the first time this year you're mentioning that country. And from what I know, you also predominantly have a more of a commercial offering in that market with Rhoss and so on. But just wanted to hear a little bit, are you seeing better residential dynamics in that market as well? Or could you spend some extra time on that also given the size of that market from a European standpoint? Gerteric Lindquist: Well, on the commercial side, we see an uptick, and that again has to do with the product ranges that we have now launched with modern refrigerants and the appetite from the market to install those. So I think we've been fortunate when it comes to the R&D. On the residential side, we don't see any major change really. So it's predominantly on the commercial one. But Hans has a comment. Hans Backman: Well, I mean, we often talk about people, so to speak. And of course, you do need to have a company that is in good shape and obviously very good products, but you also need very good people running the businesses. And I think we have been very fortunate to get good people on board in that country to drive the business, taking the portfolio, the assortment that we have and penetrating the market. And that has definitely contributed also to a good development over there. Gerteric Lindquist: You're absolutely right, Hans. I'm always a little bit concerned about mentioning that because then the headhunters are out there trying to recruit people from us. Hans Backman: I'm sorry. Gerteric Lindquist: No, no. No, no, no. I'm saying that jokingly. The whole success we started with that is built on people and that we've been able to improve now. It's just the 2 of us here. But the other 21,000 people out there, they are the one that -- they are the ones that make a difference. And we appreciate -- of course, the management in Italy is very, very good. Both the companies, in Climate Solution and also the people on the Element side, very professional, very devoted. So I'd just like to underline what you said. Thank you for bringing it about, okay? Carl Deijenberg: Yes, yes, absolutely. They're probably all listening into the call as well. Operator: The next question comes from Karl Bokvist from ABG Sundal Collier. Karl Bokvist: So first one is just on the talk -- we've talked a little bit about what you've done on the product side in North America. But in the report, you do mention the cross collaborations, et cetera. So when looking at the European market, any particular product categories worth mentioning? For example, you talked about the potential to expand into size-wise, smaller heat pump products by using CFL, for example. So just curious to hear your -- what you've done on that side. Gerteric Lindquist: That is very much to come. The figures for '25 had not been really influenced. Of course, we've started, but that's really to come during '26. So that is one factor that is -- we believe is positive. But we have to be cautious here not to mention too much compared to what we mentioned in the report. But of course, product presence and cross collaboration is important. We already mentioned purchasing and also R&D. That is coming -- really coming on very good. And Winston Churchill, if you like to refer to him today, he said there shouldn't be any crisis that you shouldn't use for a purpose that you -- that's necessary. And we believe that we have come closer to one another, both within the Climate Solution and within the Element and across. So the psychology -- and, of course, stoves, they also benefit from the material savings programs. So I mean, we always felt that we were tight, but I must say -- we must say that we're even tighter today than we were before '24. So that is to come as far as more to be seen. And if you attend the show in Stockholm in 2 months, I'm sure you're going to see that what we are talking about today. Karl Bokvist: Understood. And then the second question and a follow-up on that is perhaps more directed towards Hans. The investment level when looking at capital expenditure, just above or roughly SEK 2.1 billion for the year. And either in how you view it in relation to sales or in absolute monetary terms, how one should think about investments into the next couple of years? And then I have a follow-up on that. Hans Backman: Yes. I think we've been fairly clear on this, that we had in a way an exceptional period now of investments that was launched some 5 years ago of SEK 10 billion that we have basically come to an end with. Prior to that period, our investments typically were at some 3.5% of sales, and depreciation about the same. So we kept a stability between the 2 categories. And now in terms of investments going forward, we're finishing off these larger investment programs and will come down to a more normalized level in terms of investments in percentage to sales as before, you can say. It will be, of course, a little bit of a step-wise way coming there. But as Eric mentioned, of course, depreciations will kick in instead now when these programs are being launched or these facilities and product programs are being taken into production. But all in all, I mean, after this period, we aim at coming back to the historical levels, you can say. Karl Bokvist: Understood. So -- because on a quarterly level for the group, capital expenditure was up a few hundred million on a group level, but in Climate, it was up from around SEK 300 million to I believe, SEK 1.2 billion. So is this related to finalization of something or something else that we should keep in mind into '26? Hans Backman: No, it's very much a matter of finalizing projects that have been going on. It takes quite some time to build a factory, for example, or take a new building into operation. And then depending on what the market looks like, we have been adjusting the investment in the equipment, the machinery and everything according to market demand. And when we see that there is such an opportunity, so to speak, we go. And so it can be -- or it is linked rather to such finalizations. Operator: The next question comes from Anders Roslund from Pareto Securities. Anders Roslund: I have 2 questions regarding growth in Climate Solutions for this year. I assume that you -- some of the growth -- organic growth last year was due to that you have heavy destocking in '24. And now in '26, you will confront the sort of normalized demand. However, you saw a little bit of uptick in the second 9% organic growth, and we also know that we've seen quite dramatic increases in gas prices, but also in electricity prices. But overall, a cold climate here in Europe, et cetera, that drives maybe a higher replacement. How do you see this short-term development here, but also if you can manage to see organic growth in '26 on a similar level as last year, even though you have a tougher comparison? Gerteric Lindquist: Well, that was a long question. See if we can chop that up into a number of answers. To start with, I mean, if you talk about the destocking, we believe that the market now knows that the industry as such and the manufacturers they can deliver. So we believe that whatever comes in as orders goes out fairly quickly. So there is no buffer. I mean, when I say there's no buffer, those days are over. And of course, the market knows that we are all able to deliver. That's what I'm saying. Gas prices, of course, they are one factor when it comes to installment of heat pumps, but it's also linked to the price of electricity. If we just look strictly at gas and electricity and say, well, electricity goes up and then gas goes up equally, well, then nothing has been gained. So I think it's when you see that gas is going up and electricity is being reduced that you really see the effect. And I think that, that's still in the -- should I say, in the politicians' hand how should we maneuver or how should they handle gas prices knowing that the gas still is not totally free of hands in the eastern part of our world. Gas is still coming in. So I think that's a political issue. We believe that people in general -- I mean, that's an analysis that perhaps is too quick to make. But we believe anyway that people are looking into the way of using electricity and heat pumps rather than gas. We believe that, that understanding is there now. And that's what we see in Germany. That's what we see in Holland. That's what we've seen in a long time in Sweden. I don't know whether you like to add anything. It was a long question. I hope I answered that as good as I possibly could. Anders Roslund: Yes. My question was specifically if energy prices in general are on the rise, maybe you start to look at more energy-efficient solutions, even if the relation of electricity, gas has not changed. Gerteric Lindquist: Yes. No. I mean we talk about the spark spread, and that's -- perhaps we are so influenced by the difference between gas and electricity. But of course, if energy takes a larger part of your -- of the economy for each family, I mean, everyone would say, well, what should we do about it? And then, of course, a heat pump comes in very naturally saying, well, I'm going to save energy. We are going to save energy in our household, and then you start looking at that. So that is correct, that, if energy prices are going up, then the interest is stirred by installing something more efficient. Hans Backman: And we've typically said, and I think you know this, that if the spark spread is more than 2.5, 3, we believe that -- it should be at that level or below to really be helpful or trigger the sales of heat pumps. The electricity price can be much higher than the gas price and you're still very efficient or saving costs with the heat pump. But it cannot -- the difference shouldn't be too high. And here, we also, to some extent, need the help from politicians to be a little bit more bold to make sure that these fossil heating devices pay for the damage they do, so to speak. Anders Roslund: But do you see any of those effects coming into force in the beginning of this year? Hans Backman: Sorry, your connection is a little bit... Anders Roslund: If you see any of this demand increase coming to be seen in the beginning of this year? Hans Backman: Well, I mean, in all respect, we do not make forecasting month-by-month. I think that you have to read the last sentence in our report, and the aim is to continue to grow and increase the margins. I don't think it's fair to say anything today that we haven't said in a report because we have although a very healthy portion of people calling in, we have to have that fairness to all investors. Operator: The next question comes from an unknown person. Cedar Ekblom: It's Cedar Ekblom calling from Morgan Stanley. Apologies. I don't know why my registration didn't come through. I've got 2 questions specifically on the cash flow statement, please. So in the fourth quarter, you benefited from quite an attractive working capital inflow, which is very encouraging. And I know that you've had an ambition to continue to reduce working capital. I'd like to understand how we should think about the working capital expectations into 2026, if we should continue to expect this to decline relative to revenues, because obviously that's quite helpful for margins? So that's the first question. And then the second question relates to your cash flow from investing activities. Just a little bit of confusion here for me in terms of what's in the slides and what is in your report. So in the slides, you allude to acquisition spend of SEK 943 million in 2025. But in your report, you talk about your investments being SEK 179 million. So I just wanted to understand, is the difference between what is in the report and what is in the slides contingent consideration for acquisitions that you've already done in the past? I'm just trying to understand that delta because it's quite large. That would be helpful for a bit of color. Hans Backman: All right. On the first question -- I mean, I need to refer to what Eric just said, that we can't really give any projections here for the future, that only a portion of you here, so to speak. But I think we were fairly clear on this anyway that we as an intermediate target have to reach a working capital that is 20%. We came in at 21.2% or 21.3% this year. So I mean, obviously, we're continuing to look into working capital to bring it down, to turn the inventory quicker and so forth. So that is the next step. Then we won't be happy with that. I mean we would like to bring it down even further. But it takes quite some time and it's a stepwise process, if you like. But I think that's as much as we can say on the goal or target for the coming year in terms of working capital. Then on your second question, I think it's important to point out that these contingent considerations, so to speak -- I mean, the ones -- the SEK 178 million, SEK 179 million that I mentioned earlier, they don't have any effect at all on the cash flow, obviously. I mean that's a liability that we're booking for future possible payouts. What these payouts will be will be determined upon the performance of these companies, and that is several years down the road. But then, of course, we have during the year had some payouts for if we have bought another 10% or what have you according to the contract. So they, of course, run through the cash flow statement. But I won't suggest that -- we can take this in a call this afternoon or tomorrow to run through them. Cedar Ekblom: That's great, Hans. Yes, that's perfect. And just on the write-down that you took or the acquisition-related impact that was not in the reported or in the underlying numbers. I know that that's been taken through the central line. Could you give us some details, though, on what those assets actually are? Was it assets that have been acquired for the Climate Solutions business? Or is it assets that have been acquired for Element? Because there's really no detail in the release on what that charge relates to. So just a little bit of color on the business units or the division that, that actually -- I know it's centrally taken, but which division it actually is aligned with. Hans Backman: First of all, it was not a write-down of any sort. We've not written down any assets or anything like that. This is just a consequence of -- we have a contract. For example, we've purchased or we own 60% of the company, and we have both option and obligation to acquire the remaining 40% in a couple of years. That's typically how we set up deals when acquisitions come on board. Then we sometimes renegotiate these. And in this case, we had a couple of companies and owners saying we would like to be owners for our 40% or what have you for the -- for another -- for a number of more years. And then we need according to IFRS and all the accounting rules to predict a possible payout going -- or looking into the future. So that's the money, so to speak. We made an adjustment or a calculation and then adjusted the liabilities according to that. So it's a positive thing in a way. And that's the funny thing. If you think that things are going to develop better, you will have a cost. If things are going to develop worse, you might need to dissolve one of these contingent liabilities and then they have a positive effect. So that's on the methodology, if I was halfway clear there. Then, yes, we do take them on central level. Years back, and it's quite some years, we had them on each and every business area. But that distorted reading the numbers for each and every business area. So we changed the accounting principle there on recommendation from the auditors actually to take them centrally. And that's what we do then basically once per year, where we make these adjustments when we have a budget in place, a 3-year plan so that we feel a stability with the numbers. But they relate to acquisitions within the 3 different business areas. In this case, we made adjustments relating to 2 companies belonging to Climate Solutions. Well, there were more adjustments made, but the ones having a larger impact were 2 companies within Climate Solutions. And one adjustment, so to speak, or a payout that we did during the year was to get a further portion of the Turkish company, Untes, on board, which we acquired quite some years back, which has been a very good investment for us. So there was a payout related to that. But if you like to do the number crunching, we can do that in a separate call. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Gerteric Lindquist: Well, thank you very much for calling in. Really appreciate that. And as usual, we try to be as transparent as possible. Sometimes we believe that the ethics would discipline us and say, well, we can't really answer that fully. But we really appreciate having the ability or the possibility to talk to you and try to answer your questions. And as Hans said, if it isn't totally clear, you can always contact us directly. So now we have another year ahead of us, and we are just charging ahead. Thank you. Hans Backman: Thank you very much.
Emma Nordgren: Welcome to the presentation of Swedencare's year-end report, led by our CEO, Hakan Lagerberg; and CFO, Jenny Graflind. And we are pleased to have North America's CCO, Brian Nugent, joining us with the presentation during today's webinar. And as usual, we will have a Q&A after the presentation. [Operator Instructions]. Over to you, Jenny and Hakan. Hakan Lagerberg: Thank you very much, Emma, Hakan Lagerberg here and Jenny in a snowy Malmö. Yes, Q4 2025, a disappointing end of the year when it comes to profitability. And I'm very displeased with myself for not being able to predict this. There were lots of uncertainties coming in at the very end, but I apologize, and we are doing everything we can to improve our internal processes and forecasting. Double-digit growth, happy with that, 11%. But of course, I expected a bit higher also when it comes to the organic growth. But overall, we're happy as long as it's double digit. The lower profitability, mainly caused by one-offs, but of course, we have gone through everything in detail and lots of follow-ups and action plans with the group companies that underdelivered, lots of focus on profitability going into 2026, and we should never have a quarter like this going forward. We have also made some organizational improvements end of last year and beginning of this year, and I will be happy to present those later on in coming quarterly reports. We presented our new long-term financial targets. I will come back to that later in the presentation. The Board has proposed a dividend of SEK 0.28 per share, an increase compared to last year, and we will also come back to that in the financial -- with the financial targets. But summarizing the end of the quarter when it comes to sales, of course, not all gloom. We're very happy that NaturVet really has taken off, 33% growth in the quarter, albeit the quarter last year, Q4 was a weak quarter for NaturVet. But overall, we have 15% on a yearly basis for NaturVet. And as many of you know, the first half year was slow dependent on the rebranding. So we're happy that we were tracking at really high growth numbers for NaturVet. ProDen PlaqueOff continues to grow high double digits, 17% organic growth, 29% year-on-year, a bit lower in Q4, and that was mainly caused by, as many of you know also, the bit lumpiness in the international sales. So some larger international orders came in are delivering now in Q1. But overall, we are very happy with 17% growth also for the quarter. Looking at the different channels, it's online continued to grow a lot. Pet retail also solid, including the Big Box retailers there. And also when we look at our branded products in the vet channel grew, but a soft quarter for contract manufacturing, especially for liquid dermatology, and I'm coming back to that later on. Some explanations of the profitability hit in Q4 that was more of a one-off. Higher marketing costs on Amazon related to transition of NaturVet and Brand Protection will still have some impact in this first half year, but basically getting better month by month. One important thing is that we have started to implement the transparency program for the major NaturVet SKUs here in Q1, and that will have a big impact on that. And Brian Nugent will later on describe that more in detail. We had an ERP implementation in NaturVet. The cost interruptions that affected gross margin and volumes. No impact going forward. We are very happy with the ERP system as is right now. It started functioning really well end of Q4 and no issues now in Q1. So we're happy with the transition. But of course, the implementation caused more problems and took longer time than we expected. Marketing spend to support the Big Box partners. Of course, we knew that was coming. And -- and we have continued, let's say, implementing marketing spend, and we have seen results in increased sales, as you saw, but there was not enough, let's say, control of the actual marketing spend. And going forward, we will definitely have better control on the spending in 2026. Also, as you see on the picture here, we're very happy with the actual display campaign that we have launched in Walmart over 2,000 stores. We are in the ordinary shelves in 1,400 stores, expanded to 600 more. now in January. So we're happy with that. We're not happy with the outcome of the actual cost for the campaign, not a big hit for the quarter. But still, there were some unexpected costs for delivering and setting that up. But all in all, happy with the outcome. I will come back to that. Also, one of our Pet retail-focused brands, Vet Worthy, also have been launching second half year of '25. And the outcome we're happy with, but not the actual cost for it. So going forward, definitely, spend will be aligned with sales growth going forward. Also, we ended up with some higher inventory write-offs than for the other quarters. And we -- like in '24, we had a very average write-off, nothing exceptional, and that is also what we expect going forward into 2026. Jenny, over to you. Jenny Graflind: Yes. Some financial highlights. So revenue for the quarter amounted to SEK 682 million. So for the quarter, it was a 3% growth, which 11% was organic. We had a negative 12% of currency impact for the quarter and 4% was acquired growth. The large currency impact is coming from the stronger krone against the USD, which is the largest currency for the group. However, both the euro and the pound has also weakened quarter-by-quarter in '25. The acquired growth came from Summit, which we acquired in April. So for the full year '25, the net revenue amounted to SEK 2.7 billion. This is compared to SEK 2.5 billion last year. So we had an organic growth of 9% for the full year. The operational gross margin is at 56.8%. There are 2 main reasons for the lower margin. Hakan mentioned a little bit of it. There was, first of all, additional write-offs this quarter compared to other quarters when it comes to inventory. This partly is due to discontinued product lines or products, for example, human products that we don't focus so much on anymore. There was some acquired inventory that we had to write off and then a well issue with one of the brands, which will -- we'll be focusing much more on NaturVet by Swedencare in 2026. The second reason is this low-margin display campaign that you just saw the picture of Walmart. So these 2 together, these 2 reasons had an impact of about 1.5 percentage points. So otherwise, we would have been slightly above 58%, which is the level that we have been at for the last, I would say, 2 years. The external cost is increasing, as we have mentioned before, with the growth of Amazon, there's costs which are directly linked to the sales. However, in addition, this quarter, there was also the significant marketing initiatives in connection with the Big Box launch. And there's also additional marketing costs linked to Black Week, which occurs in Q4. Personal cost is stable, in line with the percentage of sales for the full year 2025. So as a result, the operational EBITDA amounts to SEK 109 million for the quarter. This is a decrease of 25% compared to Q4 last year and a margin of 15.9%. For the full year 2025, operating EBITDA is SEK 511 million and a margin of 19%. Cash and our net debt to EBITDA. Our net debt to EBITDA is at 2.9% at year-end or 2.9% at year-end. This is an increase both compared to a year ago due to the acquisition that we made in Q2 this year, and it's also an increase compared to Q3 due to the fact that we had a lower EBITDA this quarter. Our cash conversion was at 41% for the quarter. There was only very minor changes to the working capital in the quarter. However, we have made larger tax payments this quarter, which is impacting this operating cash flow. During the quarter, we have repaid SEK 65 million on our external long-term debt loans. And for the full year, we have repaid SEK 233 million. With the cash pool structure that we have in place, it's complete in the U.S., and we also have a good progress in Europe. We are able to operate with a lower cash level. So we have been able to reduce this by SEK 83 million during the year. So instead of this cash -- having a large operating cash, we can now use it to decrease our debt level, which is, of course, resulting in lower financing costs. Our CapEx is below 2% of net sales, both for the quarter and for the full year. Rolling 4 quarters. As you can see, the revenue for the rolling 12 months is increasing. However, both the operating EBITDA and the EBITDA has decreased due to this weaker profitability that we have in Q4. In 2025, the majority of the difference between the reporting EBITDA and operational EBITDA is the fair market adjustment that we have made with acquired inventory for Summit. That amounts to SEK 48 million for the year. Product and brand split. These graphs are not -- so the graphs and the amounts are not adjusted for acquisition or currency. However, as you can see, we have added a line below the graphs for organic growth because it's more of a fair comparison as everything has basically a large negative currency impact this year. So if we look to the left, you can see that there's a double-digit growth in nutraceuticals, partly due to the good private label sales. We also have good growth in Dental, 23% organic, mainly ProDen PlaqueOff, but there is also good improvements in both the toothpaste and the dental wipes. We get a decline in topicals. This is mainly linked to the decrease that we have in contract manufacturing business. Hakan will come back to that. In pharma, that has the largest increase in growth, which is due to the acquisition of Summit, but it has a decline in organic growth due to the delayed pharma projects. If you look on the right to the brand split, there's the same thing here. Graph is not currency adjusted, but the organic is -- the organic one is, of course, currency adjusted. So NaturVet, PlaqueOff and, NaturVet and Riley's are the fastest-growing brands in this group for the quarter, all has about 50% organic growth. Contract manufacturing has decreased due to the weaker vet channel and delayed pharma projects. Note, however, that the internal revenue in our manufacturing facility has increased with about 15% for the quarter. So when we move and we increase production in-house, this supports the other segments, but it affects the Production segment's organic growth negative because it's eliminated on a group level. Private label has also had good growth this quarter with larger orders at the end of the year. And the reason why other has strong growth, but low organic is that the growth is coming from Summit. Now over to Lagerberg. Hakan Lagerberg: Yes. Looking at the different segments. Net sales for North America, SEK 410 million, 7% growth, not currency adjusted and organic 22%. So the strongest quarter for the year by far. And on a yearly average -- a yearly number, it's 12% growth for North America. So we are very happy that North America has started to bounce back at very high growth numbers. Predominantly, online and Pet retail business -- Big Box retailers are the drivers. As we mentioned before, NaturVet, ProDen PlaqueOff and Riley's all had very strong quarters. The NaturVet big display campaign that we did send out in Q4 and had the cost and the sales didn't affect Q4, but we have seen an immediate impact on the out-the-door sales at Walmart. So almost doubling sales in store from first week of January and the trend continues in Q4 or in February. So we're very happy with that and also, of course, have made lots of influencers and social media campaigns about this that we are available in even more Walmart stores. Vet Worthy, as I mentioned, now present in plus 500 retail stores and also, I think, 6 or 7 distributors nationwide. So lots of focus on that as well, not as costly when it comes to marketing, but still more focused on moms and pop stores, and we saw a gap in the market for a new brand or a relaunch of that brand. Private label, as Jenny said, a strong quarter and really focused on that as well, evenly out our, let's say, manufacturing capabilities and -- going forward, we do have both concluded some new deals and also in negotiations. So we see private label as an important part of our product offering, and we do see it's an advantage when discussing branded products in -- with bigger retailers and Big Box retailers. Treats, interesting and keep on growing. It's actually some of the products that we don't manufacture ourselves. So we have had some supply issues that could have been an even stronger quarter. So we are looking into widening our supply for these kind of organic treats. Europe has had a strong year overall and also Q4 was double digit, 10% and on an average for the year, 14%. I expect going forward that Europe will continue to grow fast and actually a bit more than the 10%. But we're very happy with as long as it's double digit, as you know. Overall, all of the group companies in U.K., where we have NaturVet, we have Swedencare U.K. focusing nowadays more on online sales, but also they have joint projects together for the Pet retail side, has been performing really, really well. We have kept on building out the Amazon team. The Amazon team in U.K. is responsible for all marketing and sales in the rest of EU as well. But as some of you perhaps remember, we have satellites out in Europe. We think it's very important to have a local presence. So we have 1 or 2 based in different European countries responsible for sales and marketing on social media and Amazon, and it has turned out as really good, and we will continue to look at different markets there. Italy had a very strong profitability, like always, basically, single-digit growth, basically growing at -- like the market, but the comps from last year was the strongest quarter last year. So happy with that, even though it wasn't double digit. And looking at -- and here in the European sales, we also add our international export sales for mainly ProDen PlaqueOff. As I said previously, a bit weaker quarter, but some big orders came in late and will be shipped out in January and has been shipped out in January and will go out this quarter. Yes. And then looking at production, SEK 112 million in sales. and the organic growth was minus 16%. And it's still a cautious vet market for contract manufacturer. We do see some lowering in prebooked orders and also pushing some orders. So we are working together with our major customers there. See an improvement later this year, not already in Q1, but Q2 definitely picking up. So hopefully, we have been at the lowest market for that. But as Jenny said, we are also focusing a lot on internal projects, new launches there and have agreed with some new customers for new product lines. I will present that in the next slide. Also something that was the flavor of 2025, some delays in pharma projects, very annoying, but happy to say that we've now kicked off 2026 really well and expect all the quarters in the sector to be a stronger quarter than last year. So we're very happy with that. And that's one of the entities where we made some organizational changes to better respond to the customer demand and from our internal, let's say, project planning. So looking forward to 2026 when it comes to pharma development and manufacturing. On that topic, we have now in Q1 signed 2 new material projects. One of them is the ophthalmic facility that we presented that we were investing in. That is on track, completed in Q1, Q2. First customer now signed if we had an had, let's say, understanding and an agreement for development, but now we also have signed for the tech transfer and the manufacturing that will start in end of Q2, hopefully, or early Q3. So that's a big milestone for us. And when we have started the manufacturing for this first project, we do have other customers in line and discussing this. This seems to be a lack of, let's say, capacity on this when it comes to the pharma side. Also increase of internal revenue of 15% eliminated on group level, like Jenny said, and it's also relating to the growth we've had in our branded sales, but also preparing for 2026. Looking at next quarter, Vetio U.K., Ireland and North, all bounced back with increase of external customers. And as I said, when it comes to the liquids, still a bit challenging, but looking a lot better from Q2. And we are trying to push some of that -- those projects into Q1, working hard on that. Lots of product launches when it comes to 2026. I won't go through all of these, but I want to highlight Calmaiia (sic) [ Calmalia ] from Innovet. As many of you know, it's -- Innovet is our, let's say, most R&D-focused organization, lots of IP and lots of clinicals in every launch there. So we have a new and innovative patented combination of Trytofan (sic) [ Tryptophan ] and PEA Ultra Micronized and have had really, really good clinicals on that. So we are eagerly awaiting the launch for that. And then also, I would like to highlight the stretch for a completely new and improved K2C product line. That's a legacy line with plus 15 different SKUs and has always been a strong seller, both from a branded perspective, but also when it comes to private label solutions. And we have now been working in almost 2 years to improve that and adding a special ceramide solution called CeraGuard, also with excellent clinicals, expanding the reach and the effectiveness of the product. And we have just started to launch it with lots of interest from the market and have basically signed all of the major customers to revamp their private label solutions to this offering. So that will have a big impact for us in 2026. Our new financial targets that we presented, we're adding another target. So we have annual double-digit organic growth going forward. And also, we have said that we will establish an operative EBITDA margin above 26% midterm. And what midterm means is during 2028. We see these new financial targets as a 5-year plan from '26. Dividend, 40% of net profit adjusted for nonoperating costs. And we will take into account, of course, consolidation and investment needs, liquidity and financial position. And speaking about our dividends since our first pay 2021, historically, we have increased it annually between 5% and 25%. This year's proposal of SEK 0.28 is 13% of the net profit adjusted for nonoperating costs. Net debt to EBITDA being under 2, the long-term target with flexibility for acquisitions. And we do have room for utilizing our credit lines up to around 3.5. So -- going forward, we will continue as we have. We have continued to amortize. So that will be one factor to getting the net debt down, of course. But also, like Jenny said, this quarter where we went up from 2.7 to 2.9 was -- even though we did amortize SEK 65 million was due to the lower EBITDA. And what we see going forward is, of course, the increased EBITDA together with amortizations, we will be working towards 2.0. We are not stressed, but you should expect that we continue to get the net debt down. Structural key growth drivers for the coming years. Yes, for looking at Swedencare as a group, we've been very active when it comes to M&A up until 2022. Going forward, it is a bit more challenging for us to find interesting M&A targets. We do like to add unique companies and product lines to the group like we did with Summit Vet earlier 2025. But going forward, M&A will not be as important for our growth driver as it has been. So what we see in the coming years is definitely our Pharma division is expected to be one of the fastest-growing product groups, supported by a strong pipeline and good visibility from contracted projects. And it's basically that the manufacturing grows a lot. We -- a couple of years ago, we were basically only doing development work with a very, very minor manufacturing capabilities. Now we have built that out, and we continue to do that. And we see that it is a very good add-on to the -- of course, to our growth. The Big Box retailers, big channel opportunity, the same size as traditional Pet retail and we will continue to work on that. We have just started, and it's a long-term project. So we see lots of opportunities there. Amazon will continue. D2C, what we call D2C is when we sell direct to the consumer, not through the platforms. As you know, we are heavy on platforms collaborations, Amazon, Chewy, the Zooplus in Europe. We do investigate and see the D2C as a very interesting part as well, not only to increase sales, but also to get more direct contact with end consumers. Product portfolio and innovation, of course, product portfolio expansion is one of the key elements for Swedencare is that we take innovative good products that we sell under one brand and expand that to other brands. And then, of course, continue to come out with new products in a fast way like we always have. Then finally, pricing opportunities. We do see that selective pricing initiatives remain available, supported by strong brands and limited historical price increases. And also, I would like to say that comparing products, we do have, I would say, on average, we do have high-quality products, mostly priced at a bit lower level than comparable competitors. So we do see opportunities for us there. And yes, over to Brian. Brian Nugent: Good morning. I'm Brian Nugent, Chief Commercial Officer for Swedencare North America, and I have oversight of our North American veterinary and online operations. Today, we'll be discussing Swedencare North America's online division, Pet MD. Swedencare's online mission statement, while seemingly wordy, can be simply summarized by saying we will meet pet parents where it's convenient for them. Our North American online division is Pet MD. Acquired by Swedencare in 2021, Pet MD was founded by Ed Holden, who continues to manage both Pet MD, the company as well as the online sales of other Swedencare owned brands. Pet MD is coming off year-over-year online growth of 20%. It's important to note that the original Pet MD team is still intact and continue to utilize its proprietary systems and in-house algorithms created to assess advertising and ad resource allocation, respectively. This consistency is important for maximum optimization. Pet MD primarily sells through leading online players like Chewy and Amazon and to a lesser extent, D2C and other e-tailers. We also handle all the creative for Pet MD and other Swedencare online brands in-house. This includes photos, videos and all creative enhanced brand content. Our primary focus is to leverage Swedencare owned brands and support the products that we manufacture within Swedencare, which, of course, gives us the highest margin opportunity. We'll now run through the top Swedencare brands Pet MD handles. The main brand, of course, is Pet MD, which we acquired in 2021, as I said, and continues to grow year-over-year. The Pet MD brand acts as the train tracks for Swedencare's other online brands. That is we utilize all the Pet MD systems that we built to manage our other Swedencare brands. Pet MD is mature, has great recognition, and it's important to note that this brand also has only been available online. It's never been sold in the retail outlet. We are, however, exploring options related to this in the near future. The next brand is ProDen PlaqueOff, Swedencare's core and flagship product. PlaqueOff is the premium oral health care product for pets and it's a high-margin operator. Because of the uniqueness and high margin of PlaqueOff, great focus is paid on this brand. PlaqueOff grew 30% online year-over-year, and we expect it will continue with additional focus and support. Riley's is Swedencare's entry into the premium treat category. We acquired Riley's in 2024 and for good reason as premium treats are a really interesting category to us because they have high reorder and subscribe and save rates. The average premium treat buyer is purchasing 16x a year. That high frequency drives strong customer lifetime value and extreme brand loyalty. Riley's also grew online 30% year-over-year. Rx Vitamins is unique in that its original -- its origin is in a veterinary brand that's sold in over 5,000 hospitals. It has unique evidence-based science formulations, which pet owners are very loyal to. Often, these pet owners want to reorder online. And as our simplified mission states noted, we will meet the pet parents wherever they would like to meet, in this case, online. VetClassics is a science-based line as well, and it was a brand that was acquired through the Garmon NaturVet acquisition. Pet MD handles the online sales of VetClassics, and it has a range of unique delivery forms consisting of powders, tablets and soft chews. Like Rx Vitamins, it is primarily sold through veterinary hospitals as it was originally developed by a veterinarian. And finally, NaturVet. It's Swedencare's premium retail brand. It's currently sold in PetSmart, PETCO, Walmart, Tractor Supply as well as other national retailers, as Hakan previously said. The NaturVet range was previously sold on Amazon and Chewy via a third-party relationship. Pet MD completed the takeover of Amazon sales in April of 2025. Full margins are now being fully recognized following the sell-through of the acquired inventory. But that's not to say we haven't had our challenges with NaturVet. While we were able to learn lessons from when we took over ProDen PlaqueOff, NaturVet provided some unexpected issues. Some of these issues we have sorted through and some we are still sorting through. An example is the rebranding of old labels versus new labels. When you're rebranding an Amazon listing, it's a very tedious process, and you want to ensure that you keep your reviews and your ratings as a lot of things can go wrong during the changeover process. We're happy to report that this process is now 98% complete. Another challenge is rogue sellers or third parties that purchase the product via distribution and attempt to sell on Amazon platform without conforming to MAP pricing. As of January, we have adjusted for 2026 MAP pricing increases and of course, going back to third parties, we are just now implementing an Amazon anti-counterfeit program called transparency, which Hakan mentioned previously. We are now in the middle of getting this program launched on the majority of NaturVet products, and this will ensure that there will be no third parties or counterfeit sellers of NaturVet products on the Amazon platform. Pet MD's continued initiatives to market and to grow the Swedencare brands online with a focus on launching internally manufactured products under existing brands via line extensions. Also to continue to be selective and acquire brand assets when opportunities arise. Once acquired, we can quickly plug those acquired assets into the Pet MD model in order to scale growth. It's the plug-and-play model similar to what was achieved with Riley's. And finally, we're going to continue the optimization of advertising efficiency, aiming to scale online brand sales while efficiently monitoring ad spend. And with that, I'll turn it back to Hakan and Jenny. Thanks for your time. Emma Nordgren: Thank you, Brian. And by that, we are open for questions. And your first one comes from [ Johan ]. Unknown Analyst: A few ones from my side. First off, if we continue on the topic of NaturVet's Amazon account. So what happened during Q4 specifically? You took over the account earlier this year and sort of what went wrong specifically in Q4 that hurt your margins so badly? And if possible, could you quantify the loss in -- both in terms of revenue and margins in the quarter? Hakan Lagerberg: I can start and then you can Jenney and Brian, if you have anything. It's mainly related to, like Brian said, the rogue sellers coming in. And when we establish programs launch or promoting the trademark, the actual brand, then we take the costs for that and expect to get the top line sales for all of those marketing initiatives. Amazon has different programs. You have a certain percentage that you pay when you sell a product, and that's fine. But since we are owning the brand, we're owning the product line, we make investments and programs and then all of a sudden, someone comes in and lowers the price and get the so-called buy box. And if we want to get the buy box back, then we need to lower our prices and then you're in a, let's say, spiraling down project. So it's been very tedious and tough and a lot tougher in Q4 than the previous quarters for different reasons. It could be that some distributors were selling products out to rogue sellers that didn't do that during Q2 and Q3. And yes, otherwise. But to quantify -- I don't want to quantify it, but it has had a substantial impact on our profitability. I would like to say that. I don't know if you have anything to add, Brian. Brian Nugent: No, as Hakan said it. I think that we bottomed on that. And as I said, we're just now in the process of setting up the transparency program, which will help eliminate third parties from being able to do that in the future. Unknown Analyst: Okay. Got it. Got it. And so 98% of the products are relabeled. So the only sort of issue, so to speak, should be the rouge sellers going forward, right? Do you have any sort of time line on the transparency program? And again, what kind of margin drag do you expect from the coming quarters? Hakan Lagerberg: Yes, the program as such as it works is that when we have launched a transparency code on a product, special SKU, then the same products that are in the Amazon warehouses, they are allowed to be sold out, but they are not allowed to be shipped any new ones in. And we don't have full access of the volumes. We -- for some, we can see the volumes. But I would expect that the programs will have come into full force in Q2, not in Q1, but we will see improvements in Q1. Unknown Analyst: Okay. Cool. Got it. And on the NaturVet, the Big Box Walmart launch, you stated that sales almost doubled in January, which, of course, is impressive, but says very little to us outsiders as we don't know from what base. So to give some depth to that statement, what kind of sales contribution from Walmart thus far are we talking about? Hakan Lagerberg: I mean second half year of '25, we sold a bit over SEK 3 million, SEK 3.5 million, I think. roughly to Amazon. And to calculate how much they have sold, we don't have that exact number. So -- but half year, plus SEK 3 million of sales for second half year for Swedencare to Walmart. Unknown Analyst: Got it. Cool. And the second -- or third question actually is on the gross margin. So you quantified the impact from low-margin display campaigns and inventory to roughly 1.5 percentage points in the quarter. The latter, of course, you stated it was nonrecurring, but how will the sort of negative mix effect from the display campaigns impact your gross margins in Q2 and Q1? Jenny Graflind: How the display campaign is going to impact in Q1? It's not going to impact in Q1. It's done. Hakan Lagerberg: So that was only product relating to Q4 sales that... Jenny Graflind: Yes. Hakan Lagerberg: … the full contribution margin from Q1. Jenny Graflind: Yes. It was just a specific campaign. It was just more expensive to both produce and to ship those -- the nice picture that we showed you. Unknown Analyst: Okay. Got it. So all else being equal, then we should see gross margins in 2026 recovering to the sort of adjusted gross margin level that we saw in 2025? Jenny Graflind: Yes. Unknown Analyst: Got it. And continuing another question for you, Jenny, perhaps. Any chance that you could break down the external cost increase in the quarter? How much of external costs in the quarter were related to marketing, for example? Jenny Graflind: No, no. But I mean, the majority of the increase is linked to marketing. It's both linked to this Amazon marketing, as I was mentioning, for example, the Black Week, for example, it would have more -- it's more expensive to market on Amazon in Q4. And then it's this additional marketing initiatives with Big Box. Unknown Analyst: Okay. So how should one think about your marketing spend coming quarters then? Jenny Graflind: Well, the marketing spend, we're not going to have this one-off campaign in Q1. However, marketing spend to Big Box is going to continue to increase. However, we are expecting the volume to be more matched. We didn't have the volume. We didn't have the revenue to match the campaigns. However, marketing is going to continue. Unknown Analyst: Okay. Got it. And then a final one, if I may. So Production segment sales fell by 16% in Q4, partly due to contract manufacturing, but also postponement of pharma projects into 2026. Focusing on pharma here specifically, you sounded very optimistic on the conference call. And of course, you've stated that this is a key top line and margin driver in 2026. But given that we saw another postponement here in Q4, what makes you confident that 2026 will be different? Hakan Lagerberg: It is that we have already started a couple of big projects in Q1, and they will continue in Q2. And as I said, the ophthalmic project that we have -- that we are in the process of getting all set there, we also have signed a contract with a customer that is in, let's say, in hurry. They want us to start manufacturing as soon as we can. So we're working really hard on that. So there are no external factors that could change those facts. Unknown Analyst: Okay. Got it. And on sort of the timing of those projects, the ones that started in Q1, what sort of -- what time frames are we talking here before we can see a contribution to sales? Hakan Lagerberg: In the pharma for Vetio North, you will see a strong performance already in Q1 compared to last year when it comes to sales, definitely. Unknown Analyst: Got it. Lovely. If I may, one final just clarification on your targets. You stated during the call that the targets are for midterm, which implies 5 years. But you then said that in the same sentence that you expect to reach your margin target by 2028. So just to clarify... Hakan Lagerberg: What I meant with midterm, midterm of the 5 years. Unknown Analyst: Okay. So the 2028 doesn't -- it's a 2030 target? Hakan Lagerberg: No. I expect – Jenny Graflind: It's a 5-year plan. Hakan Lagerberg: It's a 5-year plan. But from 2028, I expect us to be on that target. Emma Nordgren: Your next question comes from [ Adrian ]. Unknown Analyst: And a few questions from me as well, please. Just want to begin here with 2026. It looks like a strong year when it comes to the growth rate with everything going on here. But I guess the recent deviation here, at least in recent history has been in terms of margins, right? You can explain that a lot of these margins are kind of one-off-ish. But how can you -- how -- like what should we expect for the cost or when it comes to the margin looking into 2026? Like how confident can you be that you don't meet any other short-term marketing campaigns that you have to do? How can we have confidence in basically the cost remaining low here? Hakan Lagerberg: I mean it's -- this -- as I explained a couple of these, it's been -- some of these launch campaigns, of course, has been needed to do, and we did that in Q4. We don't have the same launches first half next year. We -- as Jenny said, we will continue to market and collaborate with our customers. But it will be in line with the sales in a much better way than we did -- were able to do in Q4. And it's a combination of the actual projects. It's a combination of, as I said, we made some organizational changes, better control. And some of this, like you said, it was campaigns that we needed to do for the agreements that we did -- that we have with our customers. But those launch campaigns are done for '25. We don't foresee them in '26, first half year at least, then it dependent on if we sign any new major customers, then we have learned the lesson how we handle this quarter. And I would like to add also that there -- I mean, it was a quarter that, as I said, I'm very disappointed how we handled it when it comes to the cost structure, and it won't be repeated. We are going through everything, and we have lots of cost initiatives when it comes to projects and increased profitability. So the team is really motivated and we are on it a lot better than we did. We definitely failed in Q4. And now we have to rebuild the trust. And the way to rebuild that trust is that we show a couple of quarters with improved margins and improved EBITDA, of course. Unknown Analyst: Yes. Right. Exactly. So kind of a follow-up question here. Like what visibility do you have for the marketing budget throughout the entire year? Do you know already today what the marketing budget will be throughout 2026? Or can there be unexpected marketing investments during a short-term time frame? Hakan Lagerberg: The only unexpected, I would say, is if sales grow even faster than we anticipated in our budgets, then, of course, the marketing spend will increase, but it will be in line with profitability. So we will grow with keeping the targeted profitability what we have set for this year. Unknown Analyst: Perfect. And another question here. You mentioned that you doubled sales here in January, right? And I can I assume that some of this is driven at least by this low gross margin display campaign. You explained that you took the cost in Q4 and that the gross margin going ahead should be good. But when this campaign runs out, I expect you should see some difficult comps from that maybe on a sequential basis. Could you give us any color on sort of the normal sort of Walmart's release here, excluding the onetime display thing [indiscernible] performing? Hakan Lagerberg: Yes, displays campaigns are important, of course, because when looking at retailers in the U.S., you put up products, most of the retailer does. They put up products under therapy area. So Joint product is lumped together with all of the different brands, then you have dental products, all of the different brands, et cetera. The problem when launching a new brand into a retailer is, of course, to get the customers to see your product. And of course, displays campaign, like you saw on the picture, is extremely important to -- and we are very happy and it's not an easy thing to get an agreement with Walmart for such a big display. So it's a big display, but on a different part of -- in the stores, showing all of the products that we have in the ordinary assortment, all of those products are in the display. So like you said, it's -- we do it because we want to really enlighten the customers that we are present at Walmart buy our product there. So if they take a product from the display campaign, next time when they come back 2 months later, the display is not there, but then they will find exactly the same product in the ordinary shelves. So that's the whole reasoning by these display campaigns. Then coming back to what Jenny said, next time we will make a display campaign, it won't have such a big impact on the gross margin. We will make it smarter and better next time. Unknown Analyst: Fair enough. Another question here on the inventory write-offs. They were kind of bigger than expected, I suppose. Could you confirm that these are nonrecurring? And kind of what happened there that made them such a deviation from your expectations? Jenny Graflind: Well, there's always going to be some level of write-offs every year and every quarter. It's just that this year, about 50% of the inventory write-off came in Q4. There was a couple of product lines. There was a couple of acquired inventory that we have to write off. So it was just a higher level this quarter than we normally have in Q4. Hakan Lagerberg: And that became visible very late in the quarter. Jenny Graflind: Yes. Unknown Analyst: You mean 50% of the year inventory write-off? Jenny Graflind: Yes. Unknown Analyst: Right. Okay. Last question, if that's fine. So going back to the midterm operational EBITDA margin here of some 26% -- you mentioned the time line here, but could we have some color on kind of the contribution? Like where do we expect the margin to come from? Is this really driven by the Production segment, which is margin accretive or the gross margin? Or how should we think about it? Hakan Lagerberg: No, I would say that coming back to normal margins from our biggest brand, NaturVet, that has had a big impact for us in 2025. So just by coming back to ordinary margins of what we expect for NaturVet, that's the biggest driver, I would say, short term, the coming 2 years. And then, of course, getting our Amazon sales in line with the expected profitability. That's -- since online sales is now well over SEK 100 million I mean, there was '25, and it will grow even more in '26. Of course, every percentage, we improve profitability when it comes to our online sales, primarily on Amazon has a huge impact. But then we have our, let's say, smaller entities, including pharma, where we have significantly higher margin compared to, let's say, group average. That is, of course, very accretive to our overall profitability increase when we can -- when we manage to grow those, let's say, smaller entities into higher growth targets -- numbers, sorry. Emma Nordgren: And your next question comes from Adela. Adela Dashian: Adela from Jefferies. I guess I'm also going to stay on this track trying to figure out what exactly happened in Q4. I'm assuming that you had some sort of marketing budget set ahead of the year, ahead of the quarter. So was this just -- I mean, how was this not flagged on a group level earlier? And is this an individual team that was in charge of this and it just was sideways and what, I guess, reporting, what type of measures are you now implementing so that this never happens again? Hakan Lagerberg: Yes. I mean it's a couple of, let's say, things affecting. Like Brian explained, the problem for us that hit the -- it is -- you could call it marketing, but when selling on Amazon, when we get a higher cost there, we can't just shut it up because it's our brand. If we shut down, let's say, the branded marketing for our products, then competing brands will take those sales. So we can't really shut that down. And that's -- or we can, but then we will lose sales on -- both on the short term, but also definitely on the longer term. So even though you have a budget and linked to the metrics when it comes to Amazon sales, it is very tough when getting hit with all of these rouge sellers. So that's harder to, let's say, forecast and foresee. When it comes to the launch campaigns linked to the Big Box retailers, it's definitely that that there was a lack in control in the organization on the actual spend linked to the sales orders and all of that. So we have -- we took immediate effect with some organizational changes. And then we have also implemented and following up a lot closer when it comes to spend. So I'm confident going forward that we now have the organization that is not only focused on, let's say, sales and marketing, but very much linked to the actual profitability of the brand. So -- but coming back to that, we need to show it, and that's what we intend to do going forward. Adela Dashian: Hakan, but just to clarify then, so there has been changes to the organization and the team has been replaced? Hakan Lagerberg: Yes, not the whole team, but there has been changes, yes, and improvements. Adela Dashian: Okay. All right. There's already been a lot of questions answered. So I'll just stop there. Emma Nordgren: Our last question comes from [ Christian ]. Unknown Analyst: I'm not sure if I captured if you mentioned the amount of one-off items in Q4. So would it be possible to disclose the underlying operational EBITDA margin in Q4, excluding these one-off items? Jenny Graflind: No. No, we're not going to do that. We're not going to adjust for it because part of it is operational. So no, and for example, like I said, even though the marketing spend has been high, yes, we have mentioned in the gross margin, how much the display campaign affect the gross margin and the inventory as well. However, the marketing on the Big Box, it will continue. It's just that we are expecting more sales connected to it. So it's not like a one-off marketing spend on Big Box. It will continue. Unknown Analyst: Okay. Great. And you also mentioned that the ERP implementation caused disruptions that affected the gross margin and volumes. Could you quantify the impact on Q4 sales? Jenny Graflind: Again, it's difficult to quantify when you have disruptions and you have things that takes a little bit longer time. But of course, if we did not have this ERP change in Q4, we probably would have got out a lot of more orders in the beginning of October, which would have expected to have reorders from those kind of customers already in Q4. So now we didn't get those because there was delays due to the implementation of the ERP. A lot of people are busy with it, and there's a learning curve, et cetera. But it's not going to be quantified. Emma Nordgren: It seems like Adela have one more question. Adela Dashian: Just a follow-up on marketing spend. You mentioned, Hakan earlier that the only reason marketing spend could be significantly higher again in '26 is if you have higher volumes, higher than what you're expecting. Could you just, I guess, explain that reasoning? Like if you already are seeing good growth, good numbers, then why do you need to spend more on marketing? Hakan Lagerberg: No. What I meant -- I don't mean more in percentage of the sales. I mean in actual dollars or kroner it will be higher. Jenny Graflind: It could be linked to, for example, if we get another new retailers, et cetera, as well. Emma Nordgren: Thank you. That concludes our Q&A session. So back to you guys for any closing comments. Hakan Lagerberg: Thank you so much. I just want to close out with underlining our, let's say, disappointment with the quarter when it comes to profitability. And rest assured that you all know that the Board and many lots in the organizations are important shareholders of Swedencare, and we're very focused on shareholder value and creating that. So we are disappointed, but are actively working very hard and looking over everything, and we will try to come back and be -- and surprise the market this year. So we stay tuned, and I thank you for your support. And as I want to underline once again, we are very focused in improving profitability going forward. Emma Nordgren: Thank you very much. Hakan Lagerberg: Thank you. Bye. Jenny Graflind: Bye. Brian Nugent: Bye.