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Operator: Welcome to AB InBev's Full Year 2025 Earnings Conference Call and Webcast. Hosting the call today from AB InBev are Mr. Michel Doukeris, Chief Executive Officer; and Mr. Fernando Tennenbaum, Chief Financial Officer. [Operator Instructions] Today's webcast will be available for on-demand playback later today. [Operator Instructions] Some of the information provided during the conference call may contain statements of future expectations and other forward-looking statements. These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties. It is possible that AB InBev's actual results and financial condition may differ, possibly materially from the anticipated results and financial condition indicated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect AB InBev's future results, see risk factors in the company's latest annual report on Form 20-F filed with the Securities and Exchange Commission on March 12, 2025. AB InBev assumes no obligation to update or revise any forward-looking information provided during the conference call and shall not be liable for any action taken in reliance upon such information. It is now my pleasure to turn the floor over to Mr. Michel Doukeris. Sir, you may begin. Michel Doukeris: Thank you, and welcome, everyone, to our full year 2025 earnings call. It is a great pleasure to be speaking with you all today. Today, Fernando and I will take you through our operating highlights and provide you with an update on the progress we have made in executing our strategic priorities. After that, we'll be happy to answer your questions. Let's start with the key highlights for the year. In 2025, we executed our strategy with discipline, delivering another year of dollar-based EPS growth, continued margin expansion and solid free cash flow generation, even as we navigated a dynamic consumer environment. As we reflect on the year, we are encouraged with the consistency of our financial performance, the durability of our strategy and the resilience of our business. While near-term demand across many CPG categories was impacted by a constrained consumer environment and unseasonal weather, we continue to invest in our strategic priorities. We remain disciplined in our revenue management choices and delivered EBITDA growth within our outlook. We continue to make progress this year. We strengthened our operating model and increased our portfolio brand power. We also formed new long-term partnerships to extend the reach of our brands and deepen the connection to our consumers. The momentum of our growth priorities continued. Our mega brands and premium portfolio grew ahead of our overall business. The growth of our Beyond Beer and non-alcohol beer portfolios accelerated, increasing revenue by 23% and 34%, respectively. And BEES Marketplace GMV increased by 61% to now reach $3.5 billion. Solid free cash flow generation enabled us to increase the size of our share buyback program, pay an interim dividend and propose a final dividend that combined represents a 15% increase versus last year and further strengthened our balance sheet. We exit 2025 with improving momentum across many of our key markets, and we entered 2026 well positioned to engage consumers and accelerate growth. Turning to our operating performance. While our overall volumes for the year were below potential, momentum across many of our key markets accelerated through the fourth quarter with improved volume performance in December. The combination of our disciplined revenue management and portfolio of mega brands that command a premium price drove a revenue per hectoliter increase of 4.4% this year, resulting in top line growth of 2%. Our productivity initiatives more than offset transactional FX headwinds to drive an EBITDA increase of 4.9% with margin expansion of 101 basis points. The strength of our diversified geographic footprint enables us to navigate the current environment and deliver consistent profitable growth. Revenue increased in 65% of our markets this year, and we delivered EBITDA growth in 4 of our 5 operating regions. Our footprint also positions us well to capture a disproportionate share of future industry growth with a diversified mix of currencies. Around 70% of our EBITDA is generated in emerging and developing markets that are projected to account for more than 80% of the beer category volume growth through 2029. Now I will take a few minutes to walk you through the operational highlights for the year from our key regions, starting with North America. In the U.S., our business continues to build momentum, and we gained share in both beer and spirits in 2025. Our beer performance was led by Michelob Ultra and Busch Light, which were the top 2 volume share gainers in the industry. In Beyond Beer, our portfolio growth accelerated. Revenue increased in the high 30s, led by Cutwater, which grew revenue in the triple digits. While industry volumes were below trend in 2025, we are encouraged by the start to 2026. Beer industry volumes and revenues grew in January. And later this year, we look forward to celebrating the 150 years anniversary of Budweiser and activating the category at the FIFA World Cup. This past weekend also provided us a good opportunity to engage with our consumers in one of the most watched live sporting events in the U.S., the Super Bowl. We continue to invest behind our brands to fuel momentum, and the creativity and effectiveness of our marketing was once again recognized by consumers. Budweiser, Michelob Ultra and Bud Light were named as 3 of the top 10 ads according to the USA Today Ad Meter with Budweiser taking the top spot for the second year in a row. Now let's turn to Middle Americas. In Mexico, our business momentum continued, delivering a mid-single-digit top and bottom-line increase with our above core beer portfolio leading our growth. In Colombia, record high volumes and margin expansion drove double-digit EBITDA growth with revenue increasing across all price segments of our portfolio. In Brazil, our momentum improved in the fourth quarter as we gained market share and our volumes returned to growth in December as weather normalized. Our premium and super premium beer brands delivered high teens volume growth in 2025 and gained share to now lead the premium segment. In Europe, market share gains and premiumization partially offset the softer industry with performance driven by our mega brands and non-alcohol beer. In South Africa, our momentum continued with market share gains in beer and Beyond Beer and disciplined revenue and cost management driving mid-single-digit top and bottom-line growth. Now moving to APAC. In China, revenue declined by low teens with our volumes underperforming a more stable industry as we adjusted inventory levels and focus areas to better reflect the channel and geographic shift. In Q4, our market share trend improved to be flat versus last year, driven by improvements in Budweiser brand power and our in-home channel performance. As we move forward, we continue to focus on rebuilding momentum and reigniting growth. Now I would like to take a few minutes to reflect on the beer category and progress we have made in executing our strategy. Let's start with the category. Beer plays an important role in bringing people together and creating moments of celebration, and we believe beer has a long runway for future volume growth across our footprint, supported by favorable demographics, economic growth and opportunities to increase category penetration. According to IWSR, the beer and Beyond Beer category is forecast to continue to gain share of alcohol beverages in 2025 and has now gained more than 200 basis points since 2021. And looking ahead, beer is expected to grow volumes globally and continue to gain share of alcohol beverage. In 2025, we invested $7.4 billion in sales and marketing and have averaged more than $7 billion per year since 2021. Our marketing effectiveness continues to strengthen, and our mega brands and mega platform approach were key contributors to the brand power of our portfolio, reaching a record high in 2025. Our mega brands led our growth and have increased revenue at a CAGR of 10% since 2021 and now represent 57% of our total revenues. We are the leader in the premium beer segment globally and see significant headroom for category to continue to premiumize. Premium beer is forecast to grow volumes across all geographic clusters and at more than double the rate of the category overall. And the best example of premium execution in our portfolio is Corona. In 2025, Corona celebrated 100 years since its original launch and 2026 is off to a fast start with the brand sharing the golden moments at the Milan Cortina Winter Olympics. Since 2018, the volumes of Corona have doubled. And in 2025, volume increased by double digits in 30 markets. The quality, brand power and consumer preference for Corona has earned the right for a premium price point. Corona sells on average at a 20% premium to the nearest competitor. And in 2025, was again ranked as the most valuable beer brand in the world. We continue to lead the development of the category and expand occasions to meet consumer trends. Our balanced choice portfolio includes options for consumers seeking low carb, low calories, sugar-free, gluten-free and non-alcohol alternatives. This portfolio is growing ahead of the overall beer category and momentum continued in 2025. Led by Corona Cero globally and Michelob ULTRA Zero in the U.S., our non-alcohol beer portfolio delivered a 34% revenue increase, and we estimate to gaining share in 70% of our top 14 non-alcohol beer markets. While non-alcohol beer is currently a relatively small portion of our global beer volume, it is a key opportunity to develop new consumption occasions and increase participation, and we are investing and innovating to lead the growth. In Beyond Beer, the growth of our portfolio accelerated, increasing revenue by 23% in 2025. Our performance was led by Cutwater in the U.S., which grew revenue in the triple digits and was the #1 share gaining brand in the total spirits industry in the fourth quarter. After the successful rollout in Africa, our flavored beer Flying Fish is now expanding to Europe and the Americas. Beyond Beer now accounts for 3% of the total revenue of our business, and the category is projected to grow volumes at double the rate of the overall beer category. The strength of our brands, route-to-market capabilities and innovation pipeline gives us a strong right to win in this segment. Discipline and incremental innovation is a key enabler of our growth. In 2025, our innovations across packaging, brands and liquids contributed 11% of our total revenue. In the U.S., we led the industry innovation with 3 of the top 5 innovations of the year, with Michelob ULTRA Zero and Busch Light Apple, the top 2. In China, we launched a 1-liter can for Budweiser and a Corona full-open lid can to bring the iconic lime ritual into the in-home channel. In South Korea, we launched the country's first 4 Zero beer with great taste, zero alcohol, zero sugar, zero calories and zero gluten. And in Beyond Beer, we are expanding our winning propositions globally and innovating with flavor varieties to provide consumers with choice. Let's now turn to our second strategic pillar, digitize and monetize our ecosystem. In 2025, BEES captured $53 billion in gross merchandising value, a 12% increase versus last year. The growth of BEES Marketplace accelerated and delivered $3.5 billion of GMV this year, a 61% increase versus last year. The Marketplace on BEES has grown rapidly since we initially started developing the platform in 2021. We recognized early that many of our customers could benefit from a one-stop shop for their business and similarly, that many consumer goods partners could benefit from leveraging the breadth and efficiency of the digital connection we have with our customers. The marketplace has grown to $3.5 billion in GMV business from a standing start 5 years ago, and we continue to explore the opportunities to scale and enhance profitability. We are still early in the marketplace journey, but we are encouraged by the progress we have made and see a clear opportunity to continue the growth momentum while solving a pain point for our customers and partners. In DTC, our digital platforms continue to enable a one-to-one connection with our consumers and developing new consumption occasions. In 2025, we continue to grow our consumer base, now serving 12.3 million consumers, an 11% increase versus 2024. With that, I would like to hand it over to Fernando to discuss the third pillar of our strategy, optimize our business. Fernando Tennenbaum: Thank you, Michel. Good morning, good afternoon, everyone. I will take a few minutes to discuss the progress we have made on 4 key areas of focus in optimizing our business, improving margins, compounding dollar EPS and free cash flow growth, making disciplined capital allocation choices and advancing our sustainability priorities. Our EBITDA margin improved by 101 basis points this year with margin expansion across 4 of our 5 operating regions. While each year has unique dynamics, we are confident that the combination of our leadership advantages, disciplined revenue management, continued premiumization and efficient operating model creates an opportunity for further margin expansion over time. Moving on to EPS. This year, we delivered underlying profit growth of $350 million. Underlying EPS was $3.73 per share, a 6% increase versus last year's in dollars and a 9.4% increase in constant currency. Dollar-based EPS has now grown at a CAGR of 6.7% since 2021. EBITDA growth accounted for a $0.46 per share increase this year. Lower net interest expense from active debt management and continued deleveraging contributed $0.09 per share but was partially offset by a higher cost of hedging and FX movements. We maintained this level through a combination of EBITDA growth and margin expansion, reducing our net interest expense through deleveraging, and maintaining our disciplined resource allocation. Looking ahead, we are encouraged about the opportunities to grow from this base. With this solid cash generation, we continue to strengthen our balance sheet. We repurchased $2.7 billion of debt. And despite a $2.8 billion FX headwind on our net debt from a stronger euro, we reached a leverage ratio of 2.87x. In 2025, we improved our debt maturity profile while maintaining our weighted average coupon. Our bond portfolio remains well distributed with no relevant medium-term refinancing needs. We have no bonds maturing in 2026, a weighted average maturity of 13 years and no financial covenants. As we continue to deleverage, we have increased flexibility in our capital allocation choices. We have raised our dividend every year since 2021, including the payment of an interim dividend in 2025. We have completed $3.2 billion of share buybacks and are currently executing a further $6 billion program. For 2025, the Board has proposed a final dividend of EUR 1 per share. Combined with the interim dividend announced in October, this represents a total dividend increase of 15% year-over-year with the ambition to continue a progressive dividend over time. Now turning to sustainability. Our 2025 goals were set in 2018 to drive impact and efficiency across our value chain. As our business is closely tied to the natural environment and the local communities, we focus on areas that are relevant to us, water, agriculture, climate and packaging. We achieved our water and agriculture goals and made strong progress against our climate and packaging objectives over the past 8 years. We are proud of the progress made, and we'll continue building on our strong foundation in these areas. As we look ahead to 2026, we expect EBITDA to grow between 4% and 8% on an organic basis, in line with our medium-term outlook. As we continue to invest to execute our strategy while optimizing our resource allocation, we expect net CapEx to be between $3.5 billion and $4 billion, and we expect our normalized effective tax rate to be between 26% and 28%. With that, I would like to hand it back to Michel for some final comments. Michel Doukeris: Thanks, Fernando. Before opening for Q&A, I would like to take a moment to recap on our performance for the year. It's fair to say the operating environment in 2025 was dynamic. Despite this backdrop, the disciplined execution of our strategy delivered consistent financial results. EBITDA grew within our outlook. Underlying EPS increased by 6% in U.S. dollars, and we delivered another year of solid free cash flow generation. We strengthened our balance sheet and increased our capital allocation flexibility, enabling a progressive increase in our dividend and announcement of a larger share buyback program. While our volume performance was below our potential in 2025, we are encouraged with the momentum we saw as we exited the fourth quarter. Our volume trend improved in December, and we gained or maintained share in 80% of our markets in the quarter. The combination of our mega brands with an unparalleled lineup of mega platforms is a powerful opportunity to lead and grow the category. This past weekend, we kicked off an exciting calendar of events with both the Super Bowl and the opening of the Winter Olympics. And then the summer will bring FIFA World Cup in North America. With 104 games across 3 countries, each game is an opportunity to bring beer and sports together to create unforgettable moments for fans around the world. We entered 2026 with improving momentum, and we are well positioned to activate the category and engage consumers. With that, I'll hand it back to the operator for the Q&A. Operator: [Operator Instructions] Our first questions come from the line of Edward Mundy with Jefferies. Edward Mundy: Two questions, please. So last year, you wrote that beer is a passion point for consumers and a vibrant category globally. And this year, you're starting off with beer plays an important role in bringing people together and creating moments of celebration. I'd love to get a bit more context into this nuance. And to what extent can you, as industry leader, help to bring across a more balanced message around the positive attributes of moderate consumption and getting people together is my first question. And my follow-up, again, for Michel. You're sounding a little bit more optimistic about the prospects for 2026. How much of this owes to sort of consistent application and progress with your strategy? And how much of this owes to some very early green shoots that you might be seeing from a cyclical standpoint? Michel Doukeris: Thanks for the question. I think that on the first point, they are actually both right. Beer is a passion point for consumers, but beer always brings people together around moments of celebration and enjoyment. And I often say that we listen to a lot of things that are happening and everything gets better when people get together and drink a beer. So the world really needs a beer. And this is important as we get people to exchange ideas, to socialize, to enjoy moments as we saw this weekend with Super Bowl or during the Olympic Winter Games in Milan Cortina, everybody was enjoying the sessions and having the opportunity to be together with friends and drink a beer. So I'm extremely optimistic about the role that our product plays and how we can always enable memorable moments for our consumers. That's why we invest in the platforms that we invest on our brands, and we keep pushing the category forward with innovation. In terms of the tone for 2026, let's say, I think that 2025 was definitely a very complicated year with many dynamics impacting different markets, industry and consumer goods in general, right? And beer was not insulated from what happened last year. As we saw most of the impact for beer came on the second half of the year. But as we phased the year towards the end of the year, we saw momentum reaccelerating, especially in December. And this momentum is carrying on now early in January in majority of the markets. We have a very good year in terms of opportunities to activate and land our innovations. And I think that if you look forward during the summer, the World Cup always presents a unique opportunity for us and the fact that's going to happen in the Americas, 104 games plus across the world is going to be great. And in connection with our strategy, of course, despite of everything that happened last year, you've seen the numbers, we continue to invest on our strategy, always focusing on the long term. Our growth accelerators and growth drivers like balanced choices, premiumization, non-alcohol beer, Beyond Beer and BEES marketplace are all working as per plan. And therefore, the more the mix contribution of these initiatives and the more solid the execution behind our 3 pillars of this strategy becomes, the more optimism, of course, we build and continue to deliver our midterm outlook. That's why it's unchanged for 2026. Thank you for the question. Operator: Our next questions come from the line of Rob Ottenstein with Evercore... Robert Ottenstein: Michel, you've done a terrific job turning around the U.S. market, and it really looks like it's in the best position to grow in many, many years. Can you first maybe kind of give us a sense of the key elements of that turnaround and what you've learned from that? And then perhaps even more importantly, can you talk about other major markets around the world where you can apply those learnings, those strategies, tactics to put the markets on a better trajectory and maybe specify particular actions along that front that perhaps you started in '25 or plan to start in '26, so we can get a sense of how you can take what you've learned and the momentum in the U.S. and move it around the world. Michel Doukeris: Thanks for the question. So to start with, I think that the team is doing a great job in the U.S. So they are working really hard on things that we agreed and those things are turning the results around. I think that we have been in a long journey in the U.S. since 2008. We got a business that had structural disadvantage because the portfolio was concentrated in segments that were not growing. You remember that since 2017, when I arrived in the U.S., there was this idea of rebalancing our portfolio for growth and the idea that, of course, this rebalance will not happen overnight. So we continue to be very focused on this strategy, investing in the right segmentation and in the right brands, innovating in the segments where we had low or no participation. And the biggest learning, I think, for everybody in the U.S., including myself, is the power of consistency. So the U.S. is a market that moves on the long horizon. It doesn't move overnight. Investments, that's why we continue to heavy up our investments in the U.S. and hard work. And I'm very glad to see the team working very hard to execute this strategy and start harvesting some of the efforts that they are making over the last 3, 5 years in this market. So we are very focused. We are very consistent. We are investing, and we are working hard in getting this strategy to benefit our business and our wholesalers and our customers in the U.S. When you think about other markets, you know that we have a very large footprint. So every day is a different day. It's never boring. But if I would choose only one market at this moment where we are very focused in turning around is China. So China went from a big accommodation of the industry first re-accommodating. This industry plays different by region, as you know. So the east part of China suffered much more than the inland. The on-trade channels declined much more than the off-trade. And because our business had a very large footprint in the East and in the on-trade, we had to reorganize ourselves. So we took last year a huge effort to keep the business healthy, especially in inventories, cash flow for our wholesalers, while we start to reorganize towards off-trade and more inland distribution as well. I think the recipe for the China business is the same. It starts with right focus and moving at the speed that we need, which was not the case before. Execute with consistency. We have a great portfolio in China. invest on the right channels, which we are doing now and making sure that the team is working as hard and with the sense of urgency that we need. And I'm glad to see that quarter 4 share was stable, Budweiser was in a better place. And now in 2026, we need to continue to work on this direction so we can reignite growth there. Thanks for the question. Operator: Our next questions come from the line of Sanjeet Aujla with UBS. Sanjeet Aujla: Two from me, please. I'd like to follow up on China there, please. And maybe just a little bit more of an update on your commercial execution. How far or how much progress do you think you've made in terms of penetrating the off-trade channel? Are you now gaining share within that channel? And just tied to that, what are you seeing in the on-trade channel? Any signs of some of the anti-extravaganza measures in your key provinces starting to ease at all? That's my first question on China. And secondly, just on Brazil, it's been a tough year in Brazil from a category standpoint. You spoke about December returning to growth. Has that also continued into January? And just your -- the competitive dynamics in the market. I think you alluded to some share gains in Q4. It would be great to dig deeper into that. Michel Doukeris: Thanks for the questions. So I think that in China, the 2 questions. First, the off-trade in China is changing very quickly. So the biggest acceleration of all is this O2O channel, but it's a very sophisticated O2O channel because it's very dynamic. It serves different channels from the O2O. And this was a channel that we used to lead in China. We were lagging behind now, and we are accelerating big time gaining share of this channel. And then there is the large off-premise, which we had to adjust distribution, pack assortment, price and promotion. And this is evolving, but there is a lot of room there for us to improve. The on-trade is not improving, but I think that the good news is that it's not getting worse either. So I saw relative stabilization on the industry last year in China, which is a good signal. The industry was let's call it, minus 1%. I think that this opens an opportunity for this year to have a more positive outlook for the industry. Chinese New Year moved, right? So it's a little bit later, should help as well, another 2, 3 weeks of Chinese New Year loading in sales to consumers within 2026. So let's see. It's early to say. I was there in January. I liked what I saw in terms of industry consumption and our execution, but it's too early to call. And in terms of Brazil, I think that we discussed during the calls last year, there were actually 3 things playing into the dynamics of Brazil. One was part of the consumers under stress in disposable income because of the high inflation. There was a very abnormal weather. So we call them seasonal weather but was really cold and rainy through a big portion of the middle of the year in Brazil. And then as we kept running our revenue management agenda, there were like relative price gaps in Brazil hanging there for over a year. I think that during the year and especially at the end of the year, the weather improved a big time, and that was the biggest change in the dynamics in the market. But also, I think that the gaps in terms of relative start to close. And then the power of our brands and the level of our execution start to speak louder, and we ended the year with very good momentum. As we look at the beginning of the year, weather remains normal. Normal is good for us. And our brands continue to have very strong demand. So the beginning of the year has been so far positive. Thank you for the questions. Operator: Our next questions come from the line of Trevor Stirling with Bernstein. Trevor Stirling: One question for me, but probably a longer one. Fernando, I appreciate you're not going to give guidance on margins. But if I look at 2025, despite the problems in volumes in many regions, you still delivered 100 bps of margin expansion. As I look forward to 2026, as Michel has commented, the outlook for volumes is looking better than it has for probably quite a few years in terms of both momentum as you exit 2025 and the FIFA World Cup coming. So that's looking positive. COGS outlook to me looks similar to 2026, there's moving parts in different countries in Midwest premium, but probably similar, but albeit probably a little bit more pressure in the first half than the second half because of currency hedges. A&P, you're probably going to spend more because of all the activation but knowing you guys will be disciplined spend. Price/mix looks solid. That looks like a pretty good outlook for margins for 2026 as well. Am I reading things the wrong way? Fernando Tennenbaum: Trevor, so very comprehensive analysis. I think what you are saying and what we saw happening in 2025 is not anyhow different than what we've been discussing for a while. When we look at our business, when we look structurally our business, we continue to see opportunities to drive further margin expansion. And as you said very well, kind of every quarter, every year has its unique dynamics. But on a year where you see your cost dynamics more of a normal year, like 2025 was more of a normal year and 2026 as well and hopefully, going forward, we have to see more normal years by driving efficiency, by making sure that we continue to invest behind our brands, which command a premium with all these components, we continue to see further opportunities to expand margin, okay? So -- and then when you talk about the cost of goods sold, you are right because you have the FX curves kind of given what happened last year, we always hedge 1 year later. You know that there is going to be a little bit more pressure on the first half than on the second half. In terms of investment, this year is somehow different because we have the World Cup. So we have some more concentration of investments of sales and marketing in the second and third quarter. But overall, kind of business is healthy. We are excited with the opportunities, and we'll continue to invest behind it. But maybe even giving more high-level view, the fundamental drivers of our margin at the end of the day are the iconic mega brands, the unique global footprint, the meaningful leadership positions that we have, this very efficient operating model that we keep looking for further opportunities and the financial discipline and ownership culture. So I still believe we have room to further improve on that. Operator: Our next questions come from the line of Andrea Pistacchi. Andrea Pistacchi: I also have 2, please. And sorry about my voice, which is a bit low. First one is on Beyond Beer in the U.S., please. Now you referenced your capabilities and route-to-market advantage that clearly gives you a right to win in Beyond Beer. So focusing on the U.S., where your prepared cocktails are growing very strongly, and you've also launched Phorm Energy this year, again, leveraging your competitive advantages. So the question is, if you could share some thoughts maybe on what you think your Beyond Beer business could look like in the U.S. 3, 5 years from now, what the long-term or medium-term innovation pipeline looks like? Are you planning to bring new brands to market? Are you open to more M&A like the BeatBox deal? And ultimately, how large do you think -- what's the ambition? How large could Beyond Beer be in, say, 5 years' time in the U.S.? The second question actually is also on the U.S., a bit more specific on margins going to Trevor's point, I guess. So COGS inflation in the U.S. increased a bit in Q4. I think it will increase a bit further this year. So in light of that, can you share something on your revenue management strategy in the U.S. this year? And what are the levers do you have to protect to help margins in the U.S. this year? Michel Doukeris: Andrea, no issues with the voice. I think we are both on the same page here. So mine is a little bit under the weather as well. Thank you for the questions. U.S. Beyond Beer. So this is something that we've been discussing as well since 2017 as we start to rebalance our portfolio and invest in segments that we under-index. And definitely, these ready-to-drink beverages that source from other alcohol beverages and other occasions, they are a great opportunity for our business in the U.S., and we've been investing and building capabilities and brands in this segment. So today, this represents a little bit less than 3% of our business in the U.S., but it is growing very fast. And if you look at the brands that we are building, these brands today are ranking top 10, top 20 in the spirits industry in general in the U.S. and Cutwater specifically is ranking at the top of the fastest-growing brands in the industry for last year and the fastest one for the quarter 4. So I think that the headroom for growth is huge because they source from outside of the beer arena, and they are very incremental to our business. They are brands that we build from scratch. Therefore, they have still a lot of headroom for growth. As you said, we continue to complement this portfolio with BeatBox, for example, which is a different proposition for different occasions for different consumer cohorts, and our portfolio is getting stronger, but we still have a lot of headroom to grow in this area. Connecting this with the second point, they are also margin incremental. So as this mix continues to grow, as the mix of Michelob ULTRA continues to grow, this is all incremental to our margins. So we are managing our margins, not only from the cost productivity standpoint, but also from mix and revenue, as you said. And in terms of revenue, you all know we price in line with inflation. I think that COGS and the cost of goods sold will continue to fluctuate. That's why we hedge so we can have a more long-term perspective. And we'll continue to invest to accelerate the momentum of our business in the U.S. So we are moving in the right direction, still a lot that we need to continue to do. But so far, we are happy with the evolution, and we'll continue to execute in the way that we are executing so far. Operator: Our next questions come from the line of Mitch Collett with Deutsche Bank. Mitch, could you please check if you're self-muted. Mitchell Collett: Sorry, can you hear me now? Operator: We can hear you. Mitchell Collett: Okay. Apologies. So Michel, Fernando, I was just going to ask about your thoughts on phasing in 2026. Fernando, I think you've just given some of the components, but transactional FX, I guess, is more helpful in the second half. You've obviously got some phasing around your marketing and sales spend and some pretty uneven comps. So can you maybe just sort of tie that together and give us some thoughts on how we should think about phasing across 2026? And then my follow-up is on CapEx, which is still well below depreciation. And I think your guidance suggests that it will remain well below in '26. I know you've talked before about how you're using technology and AI and other tools to keep CapEx at a low level. Can you just comment on how you're doing that and how sustainable that level of CapEx is going forward? Fernando Tennenbaum: Mitch, so on the first question on phasing. So phasing, I think on the last question, we went over very well on that, but it's -- given what happened to the FX last year and kind of knowing that we hedge 1 year out, you know that last year, you had kind of -- you are going to have a bigger challenge in the first half of the year, especially in markets like Brazil and Mexico, where currency was really depreciated at the beginning of last year. And then you have kind of easier comps towards the second half of the year on cost of goods sold and transaction. So that is something definitely fair to say. And then of course, if you look at our financial filings like the 20-F, you look some of our exposures, you can get a good guess on how these things will behave kind of in the year of 2026. On sales and marketing, this is going to be somehow of a different year because since you have this World Cup, with a massive event in a lot of our markets, more towards Q2 and Q3. So one would expect some sales and marketing concentration. What is important to bear in mind is that even though kind of there are different dynamics in the year, we are going to manage the business to make sure we invest in the long term and create long-term value, not necessarily trying to cater to one quarter or another. But one would expect more concentration of sales and marketing investments in the second and the third quarter this year specifically. In terms of CapEx, it's not different than what we've been talking about. By looking at further efficiency opportunities, by looking on the role on technology, by kind of looking at every single different investment in our business, we are confident that we can kind of deliver the CapEx within the outlook for this year and still do everything that we need to do. We still have CapEx -- growth CapEx within this kind of envelope, anything that we need to support the business. So very comfortable with this level of CapEx. Operator: Our next questions come from the line of Gen Cross with BNP Paribas. Gen Cross: Just one question from me actually. It's actually on BEES marketplace. It looks like you've added over $1 billion in marketplace GMV in 2022. And interestingly, it looks like it's pretty much all driven by the 3P part of the business. I think, Michel, you mentioned looking at opportunities to scale and further increase profitability in marketplace. So I just wonder if you could give us some thoughts on the potential to scale marketplace further, particularly as the higher margin 3P part of the business becomes a bigger part of the mix. Michel Doukeris: Thanks for the question. So marketplace is a growth opportunity for us, as I've been highlighting over the last couple of years. and it's incremental to the beer business that we have. So it's a new revenue stream. And it's adjacent because actually, we built the technology product to serve better our customers. At the same time, we could increase this addressable market for our business by solving 2 pain points. One pain point is our customers. They were underserved by most of the CPGs because they are small, fragmented in distant areas. And on the other side, the CPGs need growth. They need to reach more customers. And the fact that we built this digital channel enables them to seamlessly reach a much broader and much more important base of customers. We always knew that the model would work. So we start testing and building the 1P. The 1P was using the capabilities that we have, the route to market, the trucks, the sales reps. But as we built the product and enhanced the technology, we always knew that the biggest opportunity is actually what we call 3P, which is touchless, right? So the app is downloaded by the bar owner. The bar owner sees an assortment that's much bigger than only the beer assortment or the products that we sell. They place the orders. The orders are then redirected to the different suppliers, and the suppliers take care of the delivery of these orders. And we, of course, in the middle, we are the product delivery and the marketplace for them to sell, to promote, to follow through with their sales team because the suite of products that this has is beyond only the app; we can also digitize our partners. And this is the part that is scaling fast and the most and is also the one that's the most profitable. The simple way to understand the opportunity is that on average on these retailers, beer accounts for 34% to 40% of what they sell. Therefore, there is a 1.5 to 2x addressable revenues that today we do not participate without the marketplace, and we can participate. And as you know, I think you were with us in Mexico, we are, in some cases, even increasing this addressable market because we are taking, for example, technology products like minutes for people to buy and operate their phones or paying their bills. So there is many incremental opportunities that can be built on top of that credit. We have partners today selling credit to these points of sales. So all of that builds on top of what the marketplace will directly build. So we are in early stage. It is scaling up at the pace that we want to scale up and it's becoming the business that we thought that could become. So very happy with the development, but a long way to go still. Thank you for the question. Operator: Our next questions come from the line of Sarah Simon with Morgan Stanley. Sarah Simon: I have 2 questions. First one was on Zero again. Your growth is extraordinarily high compared to peers. What do you think you're doing that they're not? And then the second one would be on RTDs. Your RTD business is obviously largely concentrated in the U.S. How are you thinking about that in the context of other markets and exporting it? Michel Doukeris: Thanks for the questions. I think I got both of them. If I didn't, please help me here at the end. So the non-alcohol beer, I think that we've been talking about that. We invested a lot in the technology. So making sure that we have superior products. And this investment was done in 2020, 2021, 2022. Many breakthroughs there. The liquids are fantastic. It's really great taste beer without alcohol, products that range from what we shared with you today in South Korea that is zero calorie and zero gluten and zero sugar, great taste to the fantastic Michelob ULTRA Zero in the U.S. that has only 29 calories, but it tastes delicious. So we invested first on the product and technology. Then we start to roll out this on our winning brands. So we have great brands across the globe. And every time that we put together a non-alcohol version of these brands, of course, consumers try and they choose the strong brands that we have. And then I think that the last point, we decided to invest and walk the talk. So just think about Olympic Games, a mega platform that we have globally that we sponsor with both Corona Cero and Michelob ULTRA Zero. So we got to get great product. We lined up the brands and innovation, and then we are investing behind that. And when we do all of together with our execution, which is superior execution, we can gain share quickly as we are gaining. We can expand categories, reach more consumers and get the growth that we are getting with this. So consumers are there. We are there for them, and we are gaining share in an accelerated way in this segment. In terms of RTD, actually, if you look at the numbers, RTD for us is bigger outside the U.S. than it is in the U.S. It's 3% of our global business, it's around 2 -- between 2% and 3% in the U.S. The most meaningful expansion that we are doing in this Beyond Beer space started last year, and we are rolling out this year is with Flying Fish, which is this beer liquid, but it's very different than beer. It's flavored. It has very different demographics that we reach with the product. It competes a lot outside of the beer space because of the taste profile, brings a lot of new consumers to the category because they are flavor seekers. They like sweetener liquids. They don't like too much the bitter. And then this is now going to 10 different countries. And in every country, we have a nice story to tell so far because this is fulfilling what the plans were and what we want to achieve. And then we also have Cutwater, which we are building in a very diligent way in the U.S., but we already started to expand to Canada, and there are some other markets coming in the lineup. And we have today a global portfolio, let's say, for Beyond beer that caters each of the segments within the Beyond Beer. So NUTRL, Brutal Fruit and Beats are also getting expanded globally to different countries. So there's more to come there. The opportunity is very big outside the U.S. and outside Africa, and we are just scratching the surface so far. So more to do. Thanks for the question. Operator: This was the final question. If your question has not been answered, please feel free to contact the Investor Relations team. I will now turn the floor back over to Mr. Michel Doukeris for closing remarks. Michel Doukeris: Thank you. Thank you, everyone, for the time today, for the ongoing partnership and support to the business. I hope you are all well, get some time to drink a beer. Cheers. Operator: Thank you. This does conclude today's earnings conference call and webcast. Please disconnect your lines at this time and have a wonderful day.
Andreas Trösch: Hello, everyone. This is Andreas Trosch from Investor Relations thyssenkrupp. Also on behalf of my entire team, I wish you a very warm welcome to our conference call on the first quarter results '25-'26. With me on the call are our CEO, Miguel Lopez; and our CFO, Axel Hamann. Before I hand over to the CEO and CFO for their presentations, I have some housekeeping. All the documents for this call are available in the IR section on the website. The call will be recorded, and a replay will be available shortly after the call. After the presentations, there will be the usual Q&A session for our analysts. we use Microsoft Teams for the call [Operator Instructions]. With that, I would like to hand over to our CEO, Miguel Lopez. Miguel Angel Lopez Borrego: Thank you, Andreas, and hello, everyone. Welcome to our first conference call in the current fiscal year. Let me start with an overview of our management priorities. First of all, portfolio. In terms of our strategic transformation, we continue to execute ACES 2030 with full focus also in order to establish thyssenkrupp as a lean financial holding company. With the successful spin-off of TKMS in October, a major milestone on our path towards this target picture, we created significant value for our shareholders. That is our clear ambition also for any portfolio actions ahead. For Materials Services, we push ahead for capital market readiness and their respective stand-alone setup. At Automotive Technology, we defined and implemented a new structure with clear focus on the core businesses. Moreover, we also initiated the sale of the noncore business unit, Automation Engineering, in November. At Steel Europe, negotiations with Jindal about the majority holding are ongoing and the respective due diligence is on its way. And let me remind you that we have reached a collective restructuring agreement with IG Metall Union in December, an historic milestone for thyssenkrupp. And in addition, actually another very important historical milestone just from last week, we have agreed on a term sheet on the new shareholder structure of HKM. Salzgitter plans to continue to operate HKM as the sole shareholder from June 1, 2026 onwards. That also means that the slab supply to thyssenkrupp Steel will already end in 2028. Regarding performance, Q1 marks a confirming start to the new financial year, even though our markets remain challenging across many of our customers' industries. Therefore, we confirm our group guidance for fiscal year '25, '26. On a relevant note, the likely positive implications from current political initiatives in Europe, such as CBAM or steel tariffs have not yet translated into measurable tangible effects, but they do present upside potential for our businesses going forward. On the green transformation side, we continue to build momentum. Let's start with the recent announcement. Uniper and Uhde have signed a framework agreement on ammonia cracking technology. The agreement covers up to 6 large-scale plants with a total capacity of 7,200 metric tonnes of ammonia per day. In addition, construction of the DRI plant at Steel Europe is moving ahead with full commitment. More from an ESG perspective, CDP -- so Carbon Disclosure Project, again honored thyssenkrupp for transparency and climate protection for the 10th consecutive year. With this result, thyssenkrupp has once again secured a place on the annual Climate A List, make it one of only 877 companies internationally with this distinction, including 34 companies from Germany. To summarize, a difficult market environment persists, but we are executing our strategy with discipline, reshaping our portfolio and improving our operational performance. Plus, we are confirming our full year guidance. Axel, the stage is yours for the financial section. Axel Hamann: Thanks, Miguel. Hello, everyone. This is Axel. Yes, let me turn now to the financial overview for the first quarter. Despite the macro environment you just have heard about, we achieved a promising and confirming start into the new fiscal year. We've increased our EBIT adjusted despite the top line headwinds, which continues to serve as a proof point that our internal efforts and the respective performance management are paying off. While sales decreased to EUR 7.2 billion, that means an 8% decline year-over-year. Our EBIT adjusted increased to EUR 211 million, which is EUR 20 million above last year's level. Net income came in at minus EUR 334 million, mainly [Audio Gap] We have experienced some technical issues here. Apologies for that. I believe that I was talking about the net income, which came in at minus EUR 334 million. And I explained that this was on the back of the expected restructuring expenses at Steel Europe. Now let me now turn to free cash flow. And as already flagged in our last conference call, you see a typical seasonal pattern here at the beginning of the fiscal year. And that's what you see at the minus EUR 1.5 billion free cash flow before M&A. And this is important to get it right, and I want to highlight it right here. Our free cash flow before M&A guidance for the entire year remains unchanged as we expect a reversal of this Q1 pattern in the course of the fiscal year, particularly in the second half. So that cash flow development led to a decrease in our net cash position. It's now at EUR 3.2 billion. That is still a very solid level that will also recover throughout the fiscal year as free cash flow before M&A is improving. Also some operational comments. We see tangible results from our restructuring and performance initiatives. Workforce reduction is progressing as planned, with FTE down by around 1,100 year-to-date, first quarter, 1 quarter. And a bit more from a broader perspective, the future economic development remains challenging overall from our point of view. And we do continue to face weak customer demand, particularly in Europe, but also uncertain upside potential that is related to the political framework in Europe. Now first quarter sales and EBIT adjusted development, which you see here in that chart. Most segments managed to improve or at least stabilize their performance despite weak demand conditions. I've already mentioned that the sales decline of more than EUR 600 million is more than offset in our EBIT adjusted. This is again a pretty clear proof point for our increased underlying resilience. With regard to sales, we saw declines of stagnation across all segments, with the decline mainly driven by three segments. First, Decarbon Technologies, still facing hesitant markets and some project postponements on the customer side. Then Material Services and Steel Europe, they both showed lower demand that, for example, you can see also at the trading business at our Materials Services segment. In terms of EBIT adjusted, we saw a number of improvements across the group with Steel Europe posting the biggest increase, which was also due to lower raw materials prices and some efficiency gains. Looking at DT, Decarbon Technologies, the negative first quarter resulted from lower sales and project-related additional costs at the cement business. Let's now talk a little bit about Automotive Technology. Overall, challenging market environment, soft demand levels also in Q1. Total, we had a sales decline of around about 3% year-over-year. However, if you adjust for the negative currency effects, sales were around about on prior year's level. Here, we experienced a growth in the serial business that was overshadowed by the declines in the project business as well as from our business unit, Springs & Stabilizers. Let's take a look at earnings. We saw per performance increase. EBIT adjusted came in at EUR 20 million. That's up by EUR 8 million year-over-year. So what we can see is here that our internal countermeasures such as volume compensations from customers, savings from restructuring, and efficiency initiatives are in place and are working. Ultimately, these efforts could more than offset the top line and currency headwinds. Let's look at -- business cash flow came in again in negative territory at around about minus EUR 70 million. That's mainly driven by restructuring cash outs and net working capital changes as expected. Let's turn to Decarbon Technologies. Overall, we continue to see an ongoing hesitant market environment with a number of project deferrals on the customer side. That translated into weak order intake and therefore, declining sales of minus 19% in our first quarter, especially in the water electrolyzers business at thyssenkrupp nucera and in the new build businesses at Chemicals. These lower sales led to the decrease of EBIT adjusted by minus EUR 33 million to minus EUR 16 million. In addition, some project-related additional costs at Polysius impacted that result. Performance measures and efficiency gains supported earnings, however, could not compensate the decrease. Also, the cash flow was hit by missing sales. The drop in business cash flow to minus EUR 162 million was driven by the lower top line as well as negative cash profiles in our project business at DT. Let's turn to Materials Services. Material Services delivered higher earnings despite a challenging market environment, particularly in Europe. Sales declined here by minus 6% year-over-year, mainly due to weaker performance in the direct-to-customer business, which also led to significantly lower shipments. At the same time, distribution and processing businesses in North America showed some solid growth. EBIT adjusted came in at EUR 50 million, with a strong performance of our processing business, especially in North America, more than offsetting the decline in European distribution and also supported by APEX cost reduction and efficiency measures. Business cash flow. Business cash flow was down year-over-year, reflecting the before mentioned typical seasonality with the net working capital buildup at the start of the fiscal year, also influenced by higher price levels that we particularly see at some commodities. Steel Europe. So for Steel, the market conditions in Europe remain challenging, with, for example, demand being still quite reluctant. Consequently, sales decreased by minus 10% and shipments fell by 4%. However, we also saw some higher volumes from our automotive customers and from steel service centers. Let's take a look at EBIT adjusted. Despite the lower top line, EBIT adjusted at Steel increased to EUR 216 million. That is due to more favorable raw material prices and also efficiency measures that was supporting the positive earnings development. Business cash flow at Steel decreased year-over-year, also, as mentioned, driven by a seasonal buildup of net working capital and here, mainly receivables and payables. Last but not least, Marine Systems, TKMS. Overall, we see ongoing strong demand for defense products across the product range. Order backlog continues to be impressive, stands now at a record level of EUR 18.7 billion. And so here only a couple of brief comments on Marine as a segment of thyssenkrupp because all operational details are available in the reporting of TKMS as of yesterday as they already conducted their earnings call. Important to mention is here for Marine Systems, all relevant will develop in line with our outlook, including the updated sales guidance. Now let's take a look at our EBIT adjusted to net income bridge. You can see here that we are also in a transition period. Let's take a special look at the special items. The first and largest portion of restructuring expenses of EUR 400 million, more specifically EUR 401 million at Steel Europe is now included in our first quarter, and the remainder will be booked in the course of the financial year '25-'26. In addition, we faced some impairment losses at Automotive Technology in connection with the signing of the sale of our business unit Automation Engineering. The remaining positions are rather straightforward. Overall, we saw a negative net income of EUR 334 million. Now what do we get from net income to our free cash flow before M&A. In essence, the delta between net income and free cash flow before M&A is the aforementioned seasonal net working capital swing, particularly within our materials businesses that will, as mentioned, reverse over the course of the fiscal year, particularly in the second half. Remaining positions, meaning cash flow from invest and M&A and these adjustments are also straightforward. So it's really -- it's the seasonal net working capital pattern. Again, also very important for me to highlight, we do confirm our free cash flow before M&A guidance for the entire year, which is a good segue to the next chart. So guidance. Miguel and also myself have already stressed that we confirm our group guidance. And that means in particularly, we expect sales in the range of minus 2% to plus 1% compared to prior year, so unchanged. EBIT adjusted, as previously guided, will end in the range between EUR 500 million and EUR 900 million. Free cash flow before M&A is expected to come in between minus EUR 600 million and minus EUR 300 million despite our Q1, as explained, including expected cash outflows from restructuring of up to EUR 350 million. So the EUR 350 million cash outflows from restructuring are already included in our guidance of minus EUR 600 million to minus EUR 300 million. Looking at investments, obviously, also a driver of free cash flow before M&A. Overall, we are pretty cautious with investments. And that means that we're orientating ourselves rather to the lower end of our guidance of EUR 1.4 billion to EUR 1.6 billion. Here, similar to the last financial year, there might be a possible revisit over the remainder of the year as we see clearer towards the end of the year. Last but not least, net income. Here, our unchanged guidance, minus EUR 800 million to minus EUR 400 million, including restructuring expenses, mainly at Steel Europe. So if you look at the segments, there are a couple of smaller changes, but those do balance out on a group perspective. For example, on sales, automotive -- the guidance now takes into account the initiated sale of Automation Engineering, the business unit, and we have now better or higher sales expectations for Marine Systems. But overall, group guidance is confirmed for all KPIs. With that, Miguel, I'd say it's up to you again. Miguel Angel Lopez Borrego: Thank you very much, Axel. Before we come to our Q&A, I would like to highlight some reflections and outline the way forward. That slide looks familiar to you. That's why I will keep it short. The overall key message is big decisions are behind us. Now it's about disciplined execution and implementation. As you all know, we are developing thyssenkrupp into a lean financial holding company. By doing so, we will strengthen the independence of our segments and increase their accountability as well as entrepreneurial freedom. I'm convinced that this will also encourage innovation and unlock additional growth prospects. I'm also convinced that this approach will ultimately translate into additional value for our shareholders. And by working with full steam towards the capital market readiness of Materials Services, we make sure that this may become an option to further develop thyssenkrupp towards our strategic goal of a financial holding. With that, we are at the end of today's presentation. Thank you all for your continued interest and trust. We are now ready to take your questions. Andreas, back to you. Andreas Trösch: Thank you very much, Miguel and Axel. As mentioned, we are now ready to take your questions, and we are opening the Q&A session for our analysts. The first one in line is Boris. Boris Bourdet: I have three. So the first one is on the general discussions. There were recent rumors that [ Salz ] might be interested also in the steel business. So I would be interested to get an update on the process. Where are you? And what's according to your knowledge, the most likely time line for a decision? Maybe the second one that would be on the political support you mentioned during the presentation, CBAM and TRQ and others. You pointed out the fact that there could be some upside going forward. So does your current guidance include those supports? And if not, what could be the potential uplift? The last one is on Steel Europe, pretty decent margin over the period in Q1. So I would be interested to know how much is the contribution from the energy compensation in Germany this quarter? Miguel Angel Lopez Borrego: Boris, for your questions -- I'll start with the first one. So we are in the due diligence process with Jindal Group, intense conversations. Of course, you always understand that we cannot do any kind of statements around timing. And of course, it's also important to understand that the highlight of last week has been HKM. So the agreement that Salzgitter will continue the company on its own. And of course, all this influences, of course, also the due diligence process because that's a new factor coming now in and certainly positive. So discussions ongoing, and we will let you know as soon as something is more concrete to be reported. Yes, it is expected -- your second question, it is expected that we will see improved, pricing after the tariffs will be introduced in Europe. And also the CBAM -- concrete CBAM actions will, I believe, also help. We will not see anything this fiscal year around it because we expect the European Union to decide on the tariffs around May, June. And until then everything is really getting into the orders, we will see an impact for sure next fiscal year. But the likelihood that we see this fiscal year some positive effects already in our view is, for the time being, very limited. For the third question, I hand over to Axel. Axel Hamann: Thanks, Miguel. Yes, Boris, you've asked for the electric compensation and what the share is for the, let's say, increase also in EBIT. It's basically 3 components that help us increasing the EBIT. It's raw material prices, it's efficiency gains. And as you said, it's the electrical price compensation, and that is a bit higher than last year. I hope that gives you an indication. Boris Bourdet: Can you just remind us how much that was last year? Axel Hamann: That was a low 3-digit million euro number. Andreas Trösch: Now the next question comes from Jason Fairclough. If not, then we try the next in line and come back to Jason in a second. Next in line is Alain Gabriel. Alain Gabriel: A couple of questions. On HKM, how do you see the cash outflows relating to the sale potentially being phased over the course of this year and beyond? That's the first question. The second one is still on HKM. Can you give us some indication of the pro forma Steel Europe EBITDA without HKM, potentially for '25 or even Q1 '26, just to help us quantify the impact of HKM or even if it's easier, if you can give us what would your guidance have been ex-HKM for '25, '26? Miguel Angel Lopez Borrego: All right. Thanks. First of all, cash outflow or I should say, potential cash outflow for HKM, a term sheet has been signed. And as we stated, it's going to be a low to mid-3-digit million euro number. The cash outflow pattern, what I can already provide you with as of now, it's going to be a minor part of this year, and we're going to stretch that out over at least 3 years. So you would see a sequential cash out, and we're going to start with a smaller part in this year in case we're going to close the deal, and that is expected for June of this year. Axel Hamann: With regard to guidance for HKM, we do not disclose, let's say, individual guidance for that business as part of our Steel segment. Alain Gabriel: But can you give us some indication if it's a positive EBITDA or negative EBITDA if we were to strip it out? Or even that you cannot give any color? Axel Hamann: Well, there's still a couple of variables also to be negotiated in terms of supply from HKM. So it's really -- it's too early to tell. Andreas Trösch: Now let's try Jason again, Jason Fairclough. Unmute yourself. All right. Well then, let's try again later. Now we're switching over to Bastian. Bastian Synagowitz. Can you unmute yourself Bastian? Bastian Synagowitz: Maybe firstly, starting off on the strategic plans you have for the Steel business. I guess maybe looking at the broader market, obviously, the -- I guess, the equity market has significantly rerated the valuation of any European steel asset given the very supportive policy backdrop. And if we overlay this with the talks you're currently having on the possible sale of the unit, this must be obviously a very different conversation today versus the talks which you probably had at the very early stage of that process. So can you confirm that you're basically seeing a positive momentum here in these talks? And -- or is there also a scenario where at least you may potentially crystallize the value of the steel unit in a different way? And has this become more likely? That's my first question. Miguel Angel Lopez Borrego: Obviously, a very relevant strategic question you raised. I mean, it is quite clear that the sentiment, and we have seen that -- you have seen that also in all the steel companies that are publicly listed. So the sentiment has turned into a positive one for the last 4 months. We have seen increases in the share prices of around 50% and more. So there is a clear positive sentiment. It is also clear that this is due to the tariff situation, as mentioned before, and the limitation also of the import quota for Europe. And of course, the idea of resilience -- and I've been reporting, you remember about the Steel summit with Chancellor Merz and also talks that we had directly with Ursula von der Leyen and her team. So yes, there is a clear positive sentiment here. And of course, that will have, for sure, to get into an input for the conversations with our colleagues from Jindal, no doubt about that. Bastian Synagowitz: Maybe just looking also at the recent news around the possible plans to delay the phaseout under the European ETS scheme. I would think that, that must be quite positive news for you as well in terms of like the CapEx perspective of the business. And in that sense, probably in the overall context, probably is another derisking factor for the unit. Would you agree with this? Miguel Angel Lopez Borrego: Yes, there are really good things happening, and this will have quite a different shape in terms of Steel for the future. Bastian Synagowitz: Then maybe lastly, one more technical question just on the restructuring costs you're expecting. I think you're now guiding for EUR 700 million to EUR 800 million of restructuring costs in total. Is this only related to Steel? Or does this already include something for the other units as well or maybe even for HKM? Or is this just Steel? Axel Hamann: Yes. Let me take that question, Bastian. The vast majority is Steel related. And we've also, let's say, provisioned -- not technically, but planned for some at HKM. And what is also included is a minor part for automotive. So vast majority is Steel. Bastian Synagowitz: The HKM portion, however, that does not include the low to mid-3-digit number you were referring to earlier, I suppose? Or does it include that one as well? Axel Hamann: It's not too far away, let me put it that way. Andreas Trösch: All right. Thank you, Bastian and now again, trying Jason. Jason Fairclough: Look, a couple of quick ones for me. First, I was wondering if you could just give us an update on Elevators. How are you thinking about the value of that stake? And what's the path to releasing that value? On Material Services, we've talked about this one before, huge working capital in this business. Do you think it's performing the way it needs to? And again, how do you think about releasing value? And Steel, is the vision to sell completely now? Or would you just be looking to sell a 51% stake? Axel Hamann: Let me maybe start with Elevator, Jason. You've probably seen currently booked at around about EUR 2 billion. I think there's a certain expectation in the market around, let's say, further developing TKE. So as of now, we're super happy with our share, and we're looking forward what the developments around TKE will be. Obviously, there are some, let's say, talk in the market around IPO. Let's see. We're happy with our share, and we're looking forward how this is going to develop. With regard to working capital, I think that's something we've touched upon also in the past for Materials Services. Are we happy with the performance? I think we're working towards capital market readiness, let me put it that way. And working capital efficiency is a part of it. And yes, so let's see when that business is going to be capital market ready, and so we will let you know once we're there. With regard to Steel, it's maybe a question for you, Miguel. If I recall you correctly, it was around whether we're going to sell or whether we intend to sell 100%, or whether we can think of any 50% structure. Miguel Angel Lopez Borrego: Okay. I was having technical problems for 30 seconds. Well, Jason, on your question around what portion of the business is -- of the Steel business is in discussion for selling. We continue to go the direction of to sell the majority of it. That's what is in the discussions with Jindal right now. Jason Fairclough: Can I just follow up on the Material Services. So it's an interesting phrase you used there, working towards capital market readiness. So should we read from that, that you're considering a potential IPO or sale of that business? Axel Hamann: No. I mean it's part of our overall strategy that we want to enable our businesses and then ultimately become a financial holding company. And that would encompass that the segments would eventually be also listed. That's something we've communicated and materials may be one of them. But as I said, no -- final decision not yet taken, but we're working hard on, let's say, getting all ducks in a row. Jason Fairclough: Okay. Glad we could make it for a third time. Thank you. Andreas Trösch: [Operator Instructions] Next follow-up question is coming from Alain Gabriel. Alain Gabriel: A couple of follow-ups. On Steel Europe, you are not too far from the bottom end of your guidance range just with the Q1 numbers. Should we see your full year number as conservative? Or are there any items that you expect to develop over the course of the year that would drag down the margins? That's one. The second question is on Steel Europe. Can you remind us what are the pension provisions allocated to Steel Europe? And on top of that, what are the other restructuring provisions that are booked as liabilities on your balance sheet for Steel Europe? Miguel Angel Lopez Borrego: Sure. Thank you. First of all, we've touched upon the guidance for steel after that promising start. As said, the reasons are threefold. It's efficiency gains -- it's lower raw material prices, and it's also the electrical price compensation. So I would not rule out at this point in time that we continue to see efficiency gains. And with regard to prices, let's see. But you see me rather, let's say, on the comfortable side, if I look at our guidance range for steel, let me put it that way. Then pension provisions for Steel should be around EUR 2.4 billion. And with regard to -- I think you also asked around for restructuring provisions, that is something we have guided around a mid- to high 3-digit million euro numbers for this year. Andreas Trösch: Thank you, Alan, for your questions. There seems to be no more questions currently in the call. If you have more questions, please contact the Investor Relations team, including myself. So thank you very much for participating in that call, and have a great day. Thanks. Miguel Angel Lopez Borrego: Thanks, everyone. Bye-bye. Bye.
Anna Tuominen: Good afternoon, ladies and gentlemen. My name is Anna Tuominen. I'm the IRO of Marimekko. Thank you for joining us today. We have the opportunity to hear our President and CEO, Tiina Alahuhta-Kasko, in a few minutes to go through Marimekko's Q4 and full year results from 2025. And after that, we have reserved some time for Q&A with Tiina and our CFO, Elina Anckar, answering your questions. You can type in your questions using the chat function already during the presentation and then we'll start going through them after we first heard Tiina's wise words. Tiina, please go ahead. Tiina Alahuhta-Kasko: Thank you so much, Anna, and good afternoon, everyone. It's my pleasure to share with you a few words about Marimekko's results in 2025. So let's get started with the fourth quarter of the year. As it pertains to our business development in the last quarter of the year, of course, the market situation continued to be challenging. But despite of that, our net sales grew from the comparison period's record level, fueled by our international sales and our operating profit margin was at a good level. Altogether, our net sales in the fourth quarter grew by 1% and totaled EUR 54.7 million. Our net sales were driven especially by increased retail and wholesale sales in the Asia Pacific region in spite of the globally uncertain market situation and the weak consumer confidence. In total, our international sales increased by 5%. Net sales in our home market in Finland were down by just 1% as retail sales declined in the environment that in Finland remained highly price sensitive and tactical. Then as it pertains to our profitability, our comparable operating profit totaled EUR 8.8 million, equaling to 16.1% of net sales. It was decreased by higher fixed costs, while then improved relative sales margin and increased net sales had a positive impact on profitability. Overall, our cash flow from operations strengthened and our financial position continued to be strong. Overall, as we now have entered to the 75th year of Marimekko's operations, our brand is as vibrant as ever. Then, of course, our strong financial position, paired with the sustained profitable growth and positive development of our business, they put us in a great position to continue scaling up the global brand -- Marimekko brand phenomenon growth also in the now started year. But let's have a closer look now behind the drivers in net sales and operating profit. So starting with the Q4 net sales, which increased by plus 1% to EUR 54.7 million and being boosted in particular by the increased retail and wholesale sales in the Asia Pacific region. Overall, the net sales in Finland were close to par to the comparison period as our retail sales declined in the highly price-sensitive and tactical operating environment. However, wholesale sales grew by 2% when the domestic nonrecurring promotional deliveries increased. In our second biggest market area, the Asia Pacific region, our net sales grew by 10% as retail sales in the region increased by a very strong 24% and wholesale sales by 9%. Internationally, overall, our retail sales also grew in all other market areas. And in total, our international retail sales grew very strongly, so plus 20%. And in total, our international net sales grew by 5%. Then when looking at the full year '25 performance, in total, our net sales increased by 4% to EUR 189.6 million, boosted especially by the growth of wholesale sales in the Asia Pacific region and in Europe as well as the increased retail sales in Scandinavia. The operating environment in Finland continued as challenging. And as estimated earlier, also the nonrecurring promotional deliveries in the domestic wholesale sales were considerably below the comparable year. But in spite of this, our net sales in Finland increased. Our retail sales in Finland were on par with the previous year's record level, while then wholesale sales increased by 1% and licensing income grew significantly. Then when we look at our second largest market area, the Asia Pacific region, that increased by 2% when both wholesale and retail sales grew. So while we had a good development in this core business of retail and wholesale in the Asia Pacific region, the net sales in that region was negatively impacted by the considerable decline in the licensing income in the region. Overall, when we look at the group net sales performance in the full year level, as estimated since the beginning of 2025, the licensing income was considerably lower than in the previous year. And that, of course, had a negative impact on the total net sales development as well. In total, sales grew by 7% with retail sales increasing in all and wholesale sales in almost all international market areas. So international sales, plus 7%. I think that's a good testament on us progressing well in our scaling journey despite the volatilities and uncertainties in the world economy and consumer confidence. Then when we look at our net sales breakdown per market area and by product line, no major differences or changes in the split by market area. So Finland continuing to be the strong home market and then Asia Pacific being the second largest market, but also solid kind of shares across Scandinavia, Europe and North America. When we look at the net sales split by product line, fashion is there the biggest product line. And actually on a full year level, we saw the strongest growth from the fashion product line, namely 12%. Our omnichannel store network also expanded in 2025. And today, 174 Marimekko stores around the world serve our customers. And our online store serves customers already also in 39 countries. Our brand sales in the full year amounted to EUR 385 million and 62% of our net sales came from the international markets. Then when we look into our profitability in the fourth quarter, our comparable operating profit margin -- profit was at a good level, amounting to 16.1% of net sales. Our operating profit was decreased by a higher fixed cost, while then the improved relative sales margin and increased net sales had a positive impact on our profitability. When we look at the drivers behind the fixed cost increase, they were due to, in particular, the higher marketing costs, but also due to increased personnel expenses. Then when we look at what is behind the increased personnel expenses, it is the general pay increases in different markets as well as the increased personnel costs in stores to support retail. The relative sales margin was improved by margins per product being at a good level as well as lower logistic costs than in the comparison period, while then the relative sales margin was weakened by higher discount. When we look at the situation cumulatively, our cumulative operating profit increased by 1%, and our comparable operating profit margin was at a good level, actually 17.1% of net sales, which I would say is a good outcome, especially in the volatility of the world situation. Our operating profit was, of course, boosted by the net sales growth, while then on the other hand, the higher fixed costs and weakened relative sales margin had a negative impact on the operating profit development. The fixed cost growth was attributable to, in particular, the increased personnel expenses, but also they were due to the investments in digital development. The reasons behind the personnel expenses increase were actually the same as in the fourth quarter. The relative sales margin was negatively affected then by especially higher discounts and as estimated by significantly lower licensing income. In addition, also unrealized exchange rate differences had a weakening impact on sales margin. while the relative sales margin was then supported by margins per product being at a good level. There were several key events that took place in the fourth and last quarter of the year that really show how we're progressing in scaling up the global Marimekko brand phenomenon and our growth. Let's have a look. First of all, at the end of October, we opened our historically first Paris flagship store. Paris is, of course, no doubt the most important fashion capital in the world whose impacts in brand awareness and positioning expand beyond Europe to also North America and Asia. This way, our presence in Paris supports the scaling of our brand phenomenon and long-term growth across channels and international markets. In the fourth quarter, also Marimekko store, originally opened in 2012, reopened as a flagship store in the same street in Hong Kong, which again allowed us to reinforce our brand awareness and positioning across the broader Asia region. Also, new Marimekko stores were opened in Tokyo and Bangkok along with 8 pop-up stores that delighted customers, mainly in Asia as well as a pop-up cafe, which all complement our omnichannel store network. We also progress and continue to invest in our digital business. We launched at the end of the fourth quarter, a new Marimekko app that really offers an inspiring shopping experience and a digital home for our renewed loyalty program. The app also allows people to peek behind the scenes into our printing factory, into our print archive. And this app really allows us to deepen the engagement of our loyal customers. So really much at the core of our D2C business. In the fourth quarter, we also hosted local collaborations, namely the JW Marriott Hotel in 9 places hosted Marimekko rooms as well as events as well as in Taichung in the Sundate Cafe, the experience was addressed in the Marimekko Prints. And these kind of creative brand experiences that really connect with the local culture and community, they really allow us to differentiate from the competitors and introduce our brand yet again to new audiences, in this case, in Asia. To close the year, the Field of Flowers touring exhibition that actually has been, during the course of the year, touring and visiting a total of 11 cities, especially in Asia, made stops in Shanghai and Sydney. The Field of Flowers exhibition showcases the newest Marimekko floral print design, production, and these touring exhibitions have also featured pop-up stores, where people have been able to buy a bit of the new designs to their homes. Sustainability is one of the key strategic success factors in our scale strategy, and we believe that determined efforts to develop sustainability support our long-term success. In 2025, we continued our progress in our sustainability work and actually achieved 3/4 of our very ambitious targets in our previous strategy, sustainability strategy term on the greenhouse gas emissions and water use reduction. Then moving on to the outlook of 2026. Just a few words in general to get started. Of course, there are significant uncertainties related to the development of the global economy, such as the tensions related to geopolitics and trade relations, and the rapid changes in the trade policies, as well as other uncertainties, are reflected in consumer confidence, purchasing power and behavior, and thus can have a weakening impact on Marimekko. In addition, also, possible disruptions in production and logistics chains, and changes in these chains caused by the uncertainties may also have a negative impact. But of course, as usual, we're always monitoring these situations and developments and will adjust our operations and plans accordingly if needed. A few words about seasonality. So due to the seasonal nature of our business, a major portion of our company's euro-denominated net sales and operating results are traditionally generated during the second half of the year. It's also good to remember that the timing between quarters of the non-recurring promotional deliveries in Finnish wholesale sales and their size typically vary on an annual basis. Licensing income in 2026, we forecast to be approximately at the level of the previous year. Then, continuing to the net sales development outlook for 2026, starting from Finland, our important home market. Despite the weak market situation, our net sales, in the domestic market, Finland, are expected to increase in 2026. Sales in our domestic market are impacted by the continued weak general economy and low consumer confidence, as well as the development of purchasing power and behavior. The operating environment continues to be tactical and price sensitive, which continues to have an impact on the business. What is good to note is that in 2026, the non-recurring promotional deliveries in wholesale sales are expected to grow from the comparable year, and they will be weighted in the second half of the year, as in 2025. What is also good to note is that the development of the domestic sales is estimated to be more muted in the first quarter of 2026. Then moving on to the international. Overall, international sales, we estimate to grow in 2026. When it comes to the Asia-Pacific region, our second largest market area, we expect our net sales to increase in 2026. However, it's good to note that due to timing reasons, the development of sales in the Asia-Pacific region is estimated to be more muted in the first quarter of the year. In 2026, the aim is to open approximately 10-15 new Marimekko stores and shop-in-shops, and most of the planned openings will be in Asia. When it comes to growth, investments, and costs, of course, we develop, as always, our business with a long-term view and aim to continue scaling our profitable growth in the upcoming years. Thus, our fixed costs are expected to be up on the previous year, so also the marketing expenses are expected to increase. When it comes to the tariffs in the U.S., maybe a few words about that. So the increased tariffs in the U.S. have a direct impact only on a small part of our business, as the entire North American market accounted for 6% of our net sales in 2025, and we as a company are taking diverse measures to minimize the negative impacts of the tariffs. Then the early commitments to product orders from partner suppliers, which is typical of our industry and partly further emphasized due to the different factors, weakens our company's ability to optimize our product orders and respond to rapid changes in demand and supply environment, and thus increases business risks. There are also uncertainties related to global production and logistics chains, but of course, we always work actively in various ways to ensure competitive and functioning production and logistics chains, to mitigate the increased costs and other negative impacts, and to avoid delays, and to enhance inventory management. When it comes to our financial guidance for 2026, we expect our net sales for 2026 to grow from the previous year, and our comparable operating profit margin is estimated to be approximately 16% to 19%. The development of consumer confidence and purchasing power in our main markets, in particular, cause significant volatility to the outlook for 2026, and this development is strongly impacted by rapid changes and uncertainties in geopolitics and global trade policy, among others. In addition, possible disruptions in global supply chains can cause volatility to the outlook. Then finally, a few words still about the proposal for dividend for 2025. Our board of directors is proposing to the AGM that a regular dividend of EUR 0.42 per share to be paid for 2025, and this is, of course, in line with our dividend policy, or actually higher than that. With these words, I would like to open up the Q&A. Thank you for listening. Anna Tuominen: Thank you, Tiina. And I would like to invite also our CFO, Elina Anckar, here for the Q&A. And just to remind you, you can still type in your questions using the chat function, and we'll go through them. But let's start with a couple of questions related to the events that you went through. There was a lot happening in Q4. So the Paris flagship store, has it met your expectations? Are you happy with the launch? Tiina Alahuhta-Kasko: So, of course, it's very early days still in Paris, as the opening took place at the end of October. I think that overall, as I mentioned in my presentation, taking the step to open a flagship store in Paris is a significant milestone in our scale journey, namely because of Paris being the fashion capital of the world, The store caters not only for the local consumer, and this way supports us, in our Europe strategy. Many of you, you might remember that, we are working on modernizing both our brand and our distribution network in Europe, but equally, Paris is a destination for tourists. So we see that, good, inspiring presence in Paris can also support our awareness and positioning efforts, more widely, including also in Asia and in North America. Anna Tuominen: What about the new Marimekko app? That was even more recent launched. But are you able to share some details on how that's developing? Can you see some impact on customer engagement or... Tiina Alahuhta-Kasko: So of course, the Marimekko app was launched even later at the end of the year. And we're very excited about the Marimekko app. We have a very strong technology team at Marimekko, and we work in various diverse ways how to advance further digitalization of Marimekko's business to even better serve our customers and to support our efficiencies. The app plays a really important role in our direct-to-consumer business as it allows us to have a deeper engagement with our loyal customers and also provide to them an even more personalized experience. So they're excited to continue on that journey. Anna Tuominen: Yes. A question related to sales, especially the Finnish sales. At least in Finland, one can see that there's been quite a lot of campaigns lately. Is this something that you consider necessary in this market environment? And the question -- and the person asking the question is asking also that assuming that fewer campaigns would result in higher profitability. Tiina Alahuhta-Kasko: So overall, if we look at the domestic market, like Finnish market sentiment over the course of the last couple of years. So of course, we know that the general economic situation in Finland has been quite gloomy and the consumer confidence has been very low. And all of these uncertainties have also reflected in general in the marketplace to highly tactical and price-sensitive behavior in the marketplace. So in order for us to be competitive, there are 2 things. We need to have commercial excellence so that we are relevant for the customers in the climate where we operate. And even more important is that we continuously invest into the desirability of our brands and the hype around it. So both are important to succeed in this kind of a more challenging market situation. Anna Tuominen: There needs to be a balance. Tiina Alahuhta-Kasko: Yes. Anna Tuominen: Another question related to sales, maybe for Elina, about the licensing income, especially licensing income in 2026, so this year. Is this level of licensing income that we saw in '25 and that you're guiding now for '26, is it sort of a new normal, or should this be viewed as particularly low level, or how should investors look at the licensing income going forward? Elina Anckar: Yes. Regarding licensing income, that is something that we actually give a market outlook every year. And for the year '26, we have said that the licensing income will be more or less in line with the '25 levels. But it's good to remember that when we look at backwards, years '23 and '24 were, like record high in terms of the licensing, but we will announce the outlook for the licensee fee every year. Anna Tuominen: There's also a couple of questions related to specifically marketing costs. So maybe I'll continue with the CFO. So you're guiding marketing costs to increase in '26. Is that in absolute terms or as a percentage of sales? And is there any way of giving a sort of guidance on how much they will increase? And what drives this kind of increase in '26? Elina Anckar: As Tiina has already talked about like the importance of us continuing like increasing the brand awareness and the brand loves and the hype and in overall like making sure that we do invest into the growth even if the market situations are a little bit tougher. So for that perspective and based on a very strong financial situation, we are increasing our financial spend. And we're talking about like euro values here in terms of like the spend. And if we look at backwards, year '26, we spent some 6% of the turnover to marketing and the year before, the same 6%. Tiina Alahuhta-Kasko: And maybe one addition to this is that when the market -- general market situation around the world is more challenging, it is also very much an opportunity for companies with a strong balance sheet and continued positive performance of our profitable growth and positive performance of our business to then invest into fueling our long-term growth. So we see that this also very much as an opportunity. Anna Tuominen: There actually was another question also related to this that why not adjust these fixed costs, especially marketing to be closer to the long-term target, but then you would lose the opportunity to invest in growth. Tiina Alahuhta-Kasko: Yes. We have a scale strategy. So we are all about building our long-term growth. Anna Tuominen: That was actually all the questions this time. So we would like to thank you for joining us, and we hope to see you next time as well. Tiina Alahuhta-Kasko: Thank you. Elina Anckar: Thank you.
Operator: Greetings. Welcome to the NewMarket Corporation Conference Call Webcast to Review Fourth Quarter and Full Year 2025 Financial Results. At this time, all participants are in a listen-only mode. Please note this conference is being recorded. I will now turn the conference over to your host, Timothy K. Fitzgerald, CFO at NewMarket Corporation. You may begin. Thank you, and thanks to everyone for joining me this afternoon. Timothy K. Fitzgerald: As a reminder, some of the statements made during this conference call may be forward-looking. Relevant factors that could cause actual results to differ materially from those forward-looking statements are contained in our earnings release and in our SEC filings, including our most recent Form 10-Ks. During this call, we will also discuss the non-GAAP financial included in our earnings release. Earnings release, which can be found on our website, includes a reconciliation of the non-GAAP financial measures to the closest comparable GAAP financial measures. Today, I will be referring to the data that was included in last night's press release. However, our 2025 10-K contains significantly more details on the operations and performance of our company. Pretax income for the 2025 was $113,000,000 compared to $134,000,000 for the 2024. For the full year, pretax income was $561,000,000 in 2025 compared to $584,000,000 for 2024, a decline of only 4%. We do not normally call out pretax income; it is notable now due to the significantly higher income taxes booked throughout the year, impacting our net income and EPS. Net income for the 2025 was $81,000,000 or $8.65 per share compared to net income of $111,000,000 or $11.56 per share for the 2024. Net income for the full year of 2025 was $419,000,000 or $44.44 per share compared to our net income of $462,000,000 or $48.22 per share for 2024. One of the primary drivers of the decline in net income was a higher effective tax rate in 2025 compared to 2024. The factors driving the increase in our effective tax rate are outlined in the 10-K. Petroleum additive sales for the 2025 were $585,000,000 compared to $626,000,000 for the same period in 2024. Petroleum additives operating profit for the 2025 was $107,000,000 compared to $136,000,000 for the 2024, which was a record fourth quarter for the segment. The decrease in operating profit compared to prior year was driven by a decline in shipments 6%, mainly due to market softness as well as a decline in selling prices. In addition, to manage inventory levels, operating profit in the fourth quarter was impacted by higher unit costs resulting from lower production volumes at our plants. For the full year of 2025, sales for the Petroleum Additives segment were $2,500,000,000 compared to $2,600,000,000 for 2024. Petroleum additives operating profit for 2025 was $520,000,000 compared to $592,000,000 in 2024. The drivers for the decrease in operating profit were consistent with those affecting the fourth quarter comparison. Shipments were down by 4.9% compared to last year, as we saw market softness throughout 2025 combined with our strategic decision to manage the profitability of our portfolio by reducing low margin business. We are very pleased with the performance of our petroleum additives business in 2025 compared to a record performance in 2024. However, we remain challenged by the ongoing inflationary environment and the impact of tariffs, as well as softness in the market impacting shipments. Continue to focus on investing in technology to meet customer needs, becoming more efficient in our operating costs, optimizing our inventory levels, and improving our portfolio profitability. We report the financial results of our AMPAC business and our newly acquired Calca Solutions business in our Specialty Materials segment. Specialty Materials sales for the 2025 were $49,000,000 compared to $27,000,000 for the same period in 2024. The increase in sales was mainly due to higher volume at Ampac and the inclusion of the Kalka business, which was acquired on 10/01/2025. Specialty Materials operating profit for the 2025 was $7,000,000 compared to about $2,000,000 for the 2024. As previously stated, we will see substantial variation in quarterly results for the Specialty Materials segment on an ongoing basis, due to the nature of the business. For the full year of 2025, sales for the Specialty Materials segment were $182,000,000, compared to $141,000,000 for 2024. Specialty materials operating profit for 2025 was $47,000,000 compared to $17,000,000 for 2024. The increase in operating profit was mainly driven by an increase in volume demand at Impact. As previously announced, through our acquisitions of Ampak, and Kalka and our investments to expand capacity at both operations, we have committed approximately $1,000,000,000 to this resilient high technology specialty materials segment. Our company generated solid cash flows throughout the year in 2025, which allowed us to return $183,000,000 to our shareholders through share repurchases of $77,000,000 and dividends of $106,000,000. We also reduced our total debt by $88,000,000 compared to 2024, which includes the borrowing for the Calca acquisition. As of 12/31/2025, our net debt to EBITDA ratio was 1.1 times, slightly down from 1.2 at the 2024. This strong cash flow performance enables us to continue to provide value to our shareholders through reinvestment of capital into our businesses for growth and efficiency, acquisitions, share repurchases, and dividends. We anticipate continued strength in our petroleum additives and specialty materials segment. We are committed to making decisions that promote long-term value for our shareholders while staying focused on our long-term objectives. We believe that the core principles guiding our business, a long-term perspective, a safety-first culture, customer-focused solutions, technology-driven products, and a world-class supply chain will continue to benefit all of our stakeholders. That concludes our planned comments. We are available for questions via email or by phone, so please feel free to contact me directly. Thank you all again, and we will talk to you next quarter. Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and welcome to The GEO Group Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Pablo Paez, Executive Vice President, Corporate Relations. Please go ahead. Pablo Paez: Thank you, operator. Good afternoon, everyone, and thank you for joining us for today's discussion of The GEO Group's Fourth Quarter 2025 earnings results. With us today are George Zoley, Executive Chairman of the Board; and Mark Suchinski, Chief Financial Officer. This morning, we will discuss our fourth quarter and full year results as well as our outlook. We will conclude the call with a question-and-answer session. This conference call is also being webcast live on our investor website at investors.geogroup.com. Today, we will discuss non-GAAP basis information. A reconciliation from non-GAAP basis information to GAAP basis results is included in the press release and the supplemental disclosure we issued this morning. Additionally, much of the information we will discuss today, including the answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within the safe harbor provisions of the securities laws. Our actual results may differ materially from those in the forward-looking statements as a result of various factors contained in our Securities and Exchange Commission filings, including the Form 10-K, 10-Q and 8-K reports. With that, please allow me to turn this call over to our Executive Chairman, George Zoley. George? George Zoley: Thank you, Pablo, and good afternoon to everyone. During the past year, we believe we've made significant progress towards meeting our financial and strategic objectives. Since the beginning of 2025, we've been awarded new or expanded contracts that represent up to approximately $520 million in new incremental annualized revenues that have staggered activation dates and are expected to primarily normalize by the end of this year. This represents the largest amount of new business we have won in a single year in our company's history. We've entered into new contracts to house ISD Panes at 4 facilities totaling approximately 6,000 beds, which include 3 company-owned facilities we announced in the first half of '25, the 1,000-bed Delaney Hall, New Jersey facility, the 1,800-bed North Lake facility in Michigan and the 1,868-bed D. Ray James facility in Georgia. And more recently, the 1,310-bed North Florida detention facility, which is a state-owned facility, where we are providing management services under a joint venture agreement that we announced in early October. The Florida contract arrangement demonstrates GEO's ability to provide management services through alternative solutions like the state of Florida's partnership with the federal government. During the third quarter, we also reactivated our 1,940-bed Adelanto ICE Processing Center in California, which was already under contract, but had been underutilized due to a long-standing COVID-related court case. The activation of these 5 facilities represent the largest start-up activity in our company's history with a combined annualized revenue value of approximately $400 million, and involve the hiring and training of approximately 2,000 new employees. The census across our active ICE facilities has continued to steadily increase from the third quarter at approximately 22,000 to presently approximately 24,000, which is the highest level of ICE populations we've ever had. This past year, we also significantly expanded the delivery of our secured transportation services on behalf of both ICE and the U.S. Marshals Service, valued at approximately $60 million in incremental annualized revenue. The increase in ICE enforcement and removal operations has resulted in an increased need for secured ground and air transportation services. In 2025, we entered into a new or amended contracts to expand secure ground transportation services at 4 existing ICE facilities and at our 3 newly activated ICE facilities. And the support services that we provide under our ICE air transportation subcontract continue to steadily increase throughout this past year. In addition to the secured ground transportation services we have historically provided for the U.S. Marshals, last year, we signed a new 5-year contract with the agency covering 26 federal judicial districts in spanning 14 states. At the state level, we were awarded 2 new management-only contracts in 2025 from the Florida Department of Corrections. The 1,884-bed Graceville facility and the 985-bed Bay facility are scheduled to transition to GEO-management on July 1 of this year and a combined annualized revenues of approximately $100 million. Of particular importance 2025, we also secured a new 2-year contract for the ISAP 5-program following a competitive procurement process. ISAP is the only ICE program currently in place to provide electronic monitoring and case management services for individuals on the 9 detain docket. It's mainly for people, ICE considers a higher flight risk or who have a pending asylum or removal cases but are still allowed to live in the community. The program relies on several forms of monitoring, including GPS ankle bracelets or risk worn devices that provide real-time tracking as well as a phone app which relies on facial recognition, voice ID and GPS to confirm a person's location during predetermined check-ins. The ISAP counts have declined slightly over the last year due to approximately 180,000 presently due to a decline in the use of a phone app called SmartLink, provided by GEO at a very nominal cost. Instead, we've had a steady increase in more intensive and higher-priced monitoring devices such as ankle monitors. The number of ISAP participants on GPS ankle monitors has increased from approximately 17,000 in early 2025 to more than 42,000 ankle monitors today. Correspondingly, the number of ISAP participants on the SmartLink mobile app has declined to less than 135,000 participants today. Currently, with this trend, we've also seen an increase in the number of ISAP participants additionally assigned to case management services, which involves staff interaction and monitoring for approximately 106,000 individuals at this time. If this trend continues, the technology and case management mix shift would increase the revenues and earnings generated under the ISAP contract even if overall volume remains constant. Thus, we continue to be optimistic about the importance and growth potential of the ICE contract. The new 2-year contract includes pricing for 361,000 participants year 1 and 465 participants in year 2. With the capital investment we made in 2025, we believe we have the capability in scaling monitoring devices and case management services to achieve those significantly increased participation levels and far beyond if desired by ICE. But of course, we cannot provide definitive assurance of future ISAP participation levels, which are determined by ICE management. In December of 2025, we were awarded a new 2-year contract by ICE for the provision of skip tracing services valued at up to $60 million in revenues per year. Skip tracing entails enhanced location research primarily with identifiable information and commercial data verification to verify current address information and investigate alternative address information for individuals on the non-data docket. This 2-year contract award follows initial skip tracing pilot contract that we successfully implemented, which generated approximately $10 million in revenues during the fourth quarter of 2025. Looking at our initial guidance for 2026, we believe there are several sources of potential upside, including additional growth in our Secure Services segment, additional volume increases or accelerated mix shift in our ISAP contract, additional growth in our secured transportation segment and the normalization of higher labor expenses at newly activated facilities. It is our understanding that the present ICE detention census is presently approximately 70,000 distributed over 225 separate locations, which are primarily short-term GEO facilities. We believe the federal government is continuing its focus to increase immigration detention capacity and looking for solutions as to how to upscale to 100,000 beds or more and consolidate to fewer larger facilities. As a 40-year partner to ICE, we expect to be part of this solution. We continue to be in active discussions with ICE regarding our remaining available capacity and are currently in discussions for the potential activation of additional facilities. We have approximately 6,000 idle beds at 6 company-owned facilities, which are primarily former U.S. Bureau Prisons facilities and are currently therefore, high security facilities making them ideally suited for the current needs of the federal government. At full capacity, these 6,000 beds would generate more than $300 million in combined incremental annualized revenues. We are obviously aware that ICE is exploring the purchase of several commercial warehouses that would be retrofitted to further increase retention capacity. This procurement process would result in the federal government owning these assets while contracting with private sector companies to retrofit and operate these potential sites. We are cautiously participating in this process and are evaluating select potential sites with the possibility of responding to this procurement opportunity. With respect to the federal government's annual appropriations process, the Department of Homeland Security is currently funded under a short-term continuing resolution that expires tomorrow night. If no additional appropriation bill is passed by Congress before the expiration of the current continuing resolution, there will be a partial government shutdown involving the Department of Homeland Security. It's important to note that this process only affects the annual appropriations ICE receives from Congress, which is approximately $10 billion. It does not impact the funding under the one big beautiful bill, which is available through September 30, 2029. Under that budget reconciliation bill, ICE was allocated approximately $75 billion, including $45 billion for detention. Historically, during government shutdowns, the services rendered under our contracts with ICE have continued uninterrupted as they are considered essential public safety services. However, the timing of payments and collections could be delayed, requiring us to carefully manage our liquidity and working capital needs. With the recent expansion of our revolving credit facility by $100 million, we believe we have substantial liquidity. While the exact timing of government actions, including congressional funding decisions and new contract awards, it's difficult to estimate, we expect the balance of 2026 to be very active. In addition to the opportunities at the federal level, we are pursuing additional opportunities at the state level, specifically in the field of mental health services. In Florida, we are currently participating in a procurement by the Department of Children families for the management contract at the South Florida valuation and Treatment Center, which is a state for psychiatric hospital, which -- at one time, we were the operator. In addition to our efforts to capture new growth, we believe we also have made significant progress towards strengthening our capital structure and enhancing shareholder value. Our efforts to strengthen our balance sheet were enhanced by the successful sale of the Lawton, Oklahoma fiscally for $312 million and the Hector Garza facility in Texas for $10 million. We used approximately $60 million of the Lawton facility sale gain to purchase the 770-bed downtown San Diego, California facility that we have operated for the U.S. Marshals Service for 25 years. In 2025, we also began returning capital to shareholders through a share repurchase program that was initiated in August and expanded to $500 million in November. As of year-end '25, we had repurchased approximately 5 million shares for approximately $91 million, bringing our total share outstanding to approximately $136 million. Given the intrinsic value of our assets, including 50,000 owned beds at 70 facilities, and our expected growth, we continue to believe our stock is significantly undervalued and offers a very attractive investment opportunity. Our stock is trading at a historically low multiple despite the significant growth opportunities we expect going forward. We recognize that this imbalance creates a unique opportunity to enhance value for our shareholders through share repurchases. At this time, I will turn the call over to our CFO, Mark Suchinski, to review our financial highlights and guidance. Mark Suchinski: Thank you, George, and good afternoon, everyone. For the fourth quarter of 2025, we reported net income attributable to GEO operations of approximately $32 million or $0.23 per diluted share on quarterly revenues of approximately $708 million. This compares to net income attributable to GEO operations of approximately $15.5 million or $0.11 per diluted share in the fourth quarter of 2024 on revenues of approximately $608 million. Excluding extraordinary items, we reported adjusted net income of approximately $35 million or $0.25 per diluted share for the fourth quarter of 2025 compared to approximately $18 million or $0.13 per diluted share for the prior year's fourth quarter. Adjusted EBITDA for the fourth quarter of 2025 was approximately $126 million, up from approximately $108 million reported for the prior year's fourth quarter. Looking at revenue trends. Our owned and leased secure service revenues increased by approximately $70 million or 23% in the fourth quarter of 2025 compared to the prior year's fourth quarter. This increase was primarily driven by the activation of our 3 company-owned facilities under new contracts with ICE, which was offset by revenue loss from the sale of the Lawton, Oklahoma facility and the population of the Lea County, New Mexico facility. Quarterly revenues for our managed-only contracts increased by approximately $26 million or 17% from the prior year's fourth quarter. This increase was primarily driven by the joint venture agreement for the management of the North Florida detention facility as well as certain transportation revenue increases that are reported in this segment. Quarterly revenues for our reentry services increased by approximately 3%, while quarterly revenues for our nonresidential services was largely unchanged compared to the prior year's fourth quarter. Finally, quarterly revenues for our electronic monitoring and supervision services increased by approximately 3% from the prior year's fourth quarter. Fourth quarter 2025 results for our electronic monitoring and supervision services reflect the reduced pricing for our ISAP 5 contract which was offset by favorable technology and case management mix shift and the skip tracing pilot contract that was implemented during the quarter. Additionally, our fourth quarter 2025 results for our electronic monitoring and supervision services was impacted by $1.6 million in employee severance costs as part of our efficiency initiative, which will lead to labor cost improvements in '26 of approximately $2 million to $3 million per quarter. Turning to our expenses. During the fourth quarter of 2025, our operating expenses increased by approximately 18.5% as a result of activation of our new ICE facility contracts and increased occupancy compared to the prior year's fourth quarter. Our general and administrative expenses for the fourth quarter of 2025 declined to 8.4% of revenue as compared to 10% of revenue in the prior year's fourth quarter. Our fourth quarter 2025 results reflect a year-over-year decrease in net interest expense of approximately $6 million as a result of our reduction in our net debt. Our effective tax rate for the fourth quarter of 2025 was approximately 35%. For the full year 2025, we reported net income attributable to GEO operations of approximately $254 million or $1.82 per diluted share on annual revenues of approximately $2.63 billion. This compares to net income attributable to GEO operations of approximately $32 million or $0.22 per diluted share on annual revenues of $2.42 billion for the full year 2024. In 2025, we completed the sale of our Lawton, Oklahoma facility for $312 million and the Hector Garza Texas facility for $10 million. These 2 transactions result in a $232 million pretax gain on asset sales during the third quarter. Additionally, during '25, we incurred a noncash contingent litigation reserve of approximately $38 million, which we disclosed last quarter. Excluding the noncash contingent litigation reserve, the gain on asset sales and extraordinary items, adjusted net income for the full year of 2025 was approximately $120 million or $0.86 per diluted share compared to approximately $101 million or $0.75 per diluted share for the full year 2024. Full year 2025 adjusted EBITDA was approximately $464 million, largely in line with the approximate $463 million reported for the full year 2024. Moving to our outlook. We have issued our initial financial guidance for the full year and first quarter of 2026. We expect full year 2026 GAAP net income to be in the range of $0.99 to $1.07 per diluted share on annual revenues of $2.9 billion to $3.1 billion and based on an effective tax rate of approximately 28%, inclusive of no discrete items. We expect full year 2026 adjusted EBITDA to be in the range of $490 million to $510 million. We expect capital -- total capital expenditures for the full year of 2026 to be between $120 million and $155 million. Our 2026 guidance includes an assumption for some modest organic growth in the second half of the year as well as the corresponding impact of start-up expenses. While the assumptions we have included in our 2026 guidance result in a temporary compression in our margins due to the impact of start-up expenses and the gradual nature of contract activations, we would expect our margins to normalize as growth begins to layer in, resulting in higher adjusted EBITDA run rate as we exit the year. For the first quarter of 2026, we expect GAAP net income to be in the range of $0.17 to $0.19 per diluted share on quarterly revenues of $680 million to $690 million. We expect first quarter 2026 adjusted EBITDA to be between $107 million and $112 million. Compared to the fourth quarter of 2025 results, our first quarter 2026 guidance reflects higher payroll tax expenses, which are front-loaded in the beginning of every year, 2 fewer days during the period and no revenue or earnings assumptions for the skip tracing contract as we transition from the pilot contract that was implemented in the fourth quarter to the new 2-year contract. As a result of these factors, along with the assumptions we have made in our guidance related to start-up expenses, our first quarter 2026 guidance reflects a decline from our fourth quarter '25 results. However, we would expect subsequent quarters in 2026 to reflect more normalized results. Moving to our balance sheet. We closed 2025 with approximately $70 million in cash on hand and approximately $1.65 billion in total debt. During the fourth quarter of 2025, we experienced a temporary increase in accounts receivable in part as a result of the federal government shutdown in October and November, which resulted in a temporary increase in our outstanding debt borrowings. In recent weeks, we have been able to significantly improve our accounts receivable position, further improving our liquidity, resulting in improvement in our current net debt balance to approximately $1.5 billion. With the recent expansion of our revolving credit facility by $100 million, which we announced last month, we believe we have adequate liquidity to support our diverse capital needs. Additionally, with the prospect of a potential partial government shutdown in the future, we believe we have strong support from our lenders and creditors to address our liquidity should it be necessary. The significant achievements in 2025 have allowed us to make good progress towards strengthening our balance sheet as we enter 2026. As a result of these efforts, we achieved an annual reduction in interest expense of approximately $30 million in 2025 compared to the prior year. We also believe we've made great progress towards enhancing long-term value for our shareholders through our share repurchase program, which we only initiated in August and was later increased to $500 million in November. As of year-end 2025, we had repurchased approximately 5 million shares for approximately $91 million leaving approximately $409 million available under our current stock buyback authorization. We recognize the unique opportunity to enhance value for our shareholders through our share repurchases given the current valuations of our stock, which reflects a historical low multiple despite the growth we have already captured and the significant growth opportunities we expect going forward. We believe that our strong cash flows will allow us to support all of our capital allocation priorities. At this time, I will turn the call back to George for some closing comments. George Zoley: Thank you, Mark. In closing, we are pleased with our strong fourth quarter results and the significant progress we've made in '25 towards meeting our financial and strategic objectives. Over the past year, we've captured new growth opportunities that we could generate up to $520 million in annualized revenues, making it the most successful period for new business wins in our company's history. We expect '26 to be as active as '25, and we believe we have upside potential across our diversified business segments. We have approximately 6,000 idle high-security beds that remain available and could generate in excess of $300 million in annualized revenues at full capacity. The continued shift in technology and case management mix and potential increases in accounts under our ISAP 5 contract could also provide upside throughout 2026. . We're also well positioned to continue to expand our delivery of secured ground and air transportation services for ICE and the U.S. Marshals Service. While the exact timing of government actions that including new contract awards is difficult to estimate, we remain focused on pursuing new growth opportunities and allocating capital to enhance long-term value for our shareholders. Finally, as we announced this morning, our CEO, Dave Donahue, has informed GEO of his decision to retire at the end of February. I'd like to thank Dave for his more than 11 years of service to GEO and wish him well in his retirement. I will be returning to my previous position of Chairman and CEO under an amended employment agreement effective through April 2, 2029. I look forward to working with our management team and our Board of Directors and leading our company through what we expect to be a very active period with significant growth opportunities that lie ahead. That completes our remarks, and we would be glad to take some questions. Operator: [Operator Instructions] The first question today comes from Joe Gomes with NOBLE Capital. Joseph Gomes: George, I know in the past, you've said that if ICE wanted to get to that 100,000-bed level it all couldn't come from the existing private that there would have to be alternatives out there. And with these warehouses I guess kind of the question is, I know you've talked about something that you are exploring, participating in. But do you see ICE's focus on this? Is that somewhat potentially behind the, I'll say, delay in awarding new contracts for currently idle facilities as they kind of taken their the focus off of that and moved it over there to the warehouses? George Zoley: Well, I think they're on a dual track to do both. But the warehouse initiative is large scale and its coast-to-coast and it's very complicated to find locations in areas that are suitable to their needs and would meet with the less political resistance. You got red states versus blue states issues go to solve through. But you're right. The private sector available bed capacity at this time, will not get them to the 100,000. I estimate they need to do at least 20,000 if they want to get to 100,000, and they may very well want to go beyond 100,000 and do 20,000, 30,000, 40,000 new beds. So we're looking at it. And we've been a long-term 4-decade partner with ICE. We want to be supportive in playing a role in this new initiative and hopefully see our idle facilities be utilized because, as I've said, most of our idle beds are prior BOP facilities, which are high-security facilities, which I think are very well suitable to their needs. Joseph Gomes: And on ISAP, yes, the populations have been slightly declining here over the past year about 180,000 as you mentioned. And then the new contract they talk about up to funding for, I think, up to like 360,000 in year 1 and 460-some-thousand in year 2. In the past, you did hit that 370,000 type of level. If ICE came to you and said, "Hey, in 2026, we want to start really increasing the number of people under ISAP to that -- get up to that 360,000 level." Are you set up that you could move quickly and get up to those levels? George Zoley: Absolutely. We've made the investments on all of our devices from ankle monitors to wrist-worn devices to the phone apps that we can reach. The levels you described that were included in the procurement as well as go beyond those levels. Joseph Gomes: Okay. Perfect. And then one last one for me. Looking at the stock price, and it's something that there's a lot of discussion about, but you hit a new 52-week low today, and you guys have done a great job on the buyback. But given where the stock is, is it possible or something that consider or maybe even be getting more aggressive on the buyback at these levels? George Zoley: Joe, as you said, I think we've done a great job. We launched our stock purchase program in August -- late August, and we were able to buy back over 5 million shares in a short period of time. And so our focus is to lean in hard when there are opportunities, as you just mentioned. And I think we've been very diligent about making sure that we manage our liquidity and take advantage of the stock buyback program when we can. And so we're going to lean into it hard. We're looking at it, and we'll continue to do that. But we're -- as I said, we've done a good job, and we'll continue to look at buying back stock and creating some value for our shareholders. But I think that's what we can say at this point. Operator: The next question comes from Matthew Erdner with JonesTrading. Matthew Erdner: I'd like to kind of touch on the monitoring as well. You mentioned the investments that you guys have made there kind of on the forefront. But I see the margin kind of coming down to around 42.5 from a little under 50, quarter-over-quarter. And I apologize if I missed it earlier, but is there a reason as to why the margin is compressing? Or is that just the mix shift change? George Zoley: It's primarily the mix shift change that is related to the reduction in the phone apps, which we have had in the past, and those have reduced what is increasing significantly are the ankle monitors. There's a desire to have a higher level of security for these individuals and as well as increased case management services. So the top-level numbers kind of obscure what's happening below those numbers. There's a mix change that's occurring that goes beyond the top-level numbers because the 100-and-some thousand people that get the case management services is really on top of the 180,000 participants. It's just another billing mechanism within the 180,000. So it's -- I don't know that the 180,000 is an accurate metric to be using any more when we have different -- they call them clans, and these are billing mechanisms of which there are 40 within that program, and they're kind of all emanated into that 180,000, but it's -- that's the top level number. But below that number, there's 40 different pricings that support the services that are rendered to the 180,000 participants. Matthew Erdner: Got it. And then I guess on a go-forward basis, I guess, assuming that say there's the 360,000 in year 1. I guess, what would the margin be if say that 360,000 was all on ankle monitors versus it's kind of a half split between SmartLink and ankle monitor? George Zoley: Well, the ankle monitors, I believe, is our most expensive monitor devices, so the margins would substantially increase because of that. And we are -- I think we are the largest providers of ankle monitors in the world. We make all of our devices in Boulder, Colorado, and we are -- we have properly resourced that company, which is called BI to scale up to whatever level services ICE wants, whether it's a few more hundred thousand or beyond that. We're ready to go. Matthew Erdner: Got it. Yes, that makes sense. And then last one for me and then I'll step out. In the guidance, it has about 134 million to 136 million for end of your share count. If you guys repurchased the same amount that you did in the fourth quarter, you'd already be at the low range of that target. Should we expect you guys to be a little more aggressive there? Or how are you thinking about capital allocation throughout the year? George Zoley: Again, we're going to -- we've talked about it in the past, we're going to look at the capital allocation process. We're very diligent about allocating capital to our growth needs. -- addressing paydown of debt and returning capital back to shareholders. And as you indicated, when the stock price goes low, there's opportunity for us to jump in the market and be more aggressive. And I think if you look at the last 5 months, we've done a pretty good job with that. Operator: The next question comes from Greg Gibas with Northland Securities. Gregory Gibas: First, with the midpoint of guidance set below your Q4 EBITDA run rate. It seems conservative when considering uplift in '26 from a number of items like ISAP cost savings that I think you previously said are $8 million to $12 million Adelanto cost normalization, ongoing mix shift in ISAP tech. And then those incremental Florida contracts. Is that fair? Or is there some offset to take into account there? Mark Suchinski: Greg, I wouldn't say there's nothing that we're aware of in the business that would create a big offset to that. I think we're starting out here. I think we're prudent as it relates to the guidance that we've provided here. The skip tracing contract that we talked that we won that's coming off a protest. So we don't think it will contribute much here in the first quarter. But we're starting the year. We're executing well. We've factored in some modest growth, particularly as it relates to ISAP, as George talked about, the mix shift, the GPS and higher case management services. We're looking at continued expansion and growth around our Marshalls transportation contract in ICE Air. We're going to factor -- we factor in some skip tracing later in the year. So it's earlier in the year. I think we've done a good job of balancing the risks and opportunities that we've looked at our forecast. And as you indicated, we know what our run rate was in the fourth quarter. But we think at this point in time, it's a well-balanced approach to guidance. And as the quarters unfold, and we continue to pursue these growth opportunities, we'll have opportunities to update that our guidance. Gregory Gibas: Great. And I wanted to touch on your commentary around participating in the process. I think you said on the potential warehouse managed-only opportunities. Wondering if you could maybe add any color there and kind of what phase those negotiations or bidding that process is in? George Zoley: Well, we have a relationship with the prime contractor that's listed as eligible to participate in that procurement. And we're looking at the some sites, predominantly in the Sun Belt states, predominantly in red states to be very frank about it. So we want to be careful as to where we extend our financial and operational commitments. Operator: The next question comes from Raj Sharma with Texas Capital Bank. Raj Sharma: Good quarter. Congratulations. I had a question on the guidance. Again, just trying to understand that fiscal '26 does seem that the guidance seems to have been sort of taken down from just about a quarter ago, even if the facilities get activated at pace and even outside of new activations, plus the ISAP dynamics in the ankle monitors. It seems like the numbers are conservative. And are you incorporating? And what sort of start-up expenses are you incorporating? Can you give more color on that? And I know you've talked about this earlier. We just wanted to understand if you're being more conservative than not. Mark Suchinski: Well, again, I think I tried to talk a little bit about the guidance with Greg's question a few moments ago. But the truth is, we're -- we still are incurring some level of start-up expenses on the activation of our idle facilities, particularly on the West Coast. So that's creating a little bit of headwind as we move into the year here. But as I said earlier, we expect the back half of the year to really normalize, and we expect to see some expansion of our margins as we get into the back half of the year. So I would say this, there's nothing inherently going on from a business standpoint. Fourth quarter was helped a little bit by the skip tracing contract, and we talked about the fact that we haven't built that into our first quarter forecast. So as I said earlier, I think it's a balance and prudent approach, and we'll look to update things as the business progresses over the coming quarters. Raj Sharma: Got it. Got it. And just the second, my next question is also you would kind of talked about this. So there were no new activations in Q4, was that sort of government shutdown or year-end related? And also, there's been a lot of talk of warehouses and given -- can you help us understand a little bit, given your favorable history with ICE and the low to reasonable sort of cost for detention bed shouldn't all your idle facilities be reactivated soon for ICE to meet their retention goals? George Zoley: Well, you're correct that there have been no new awards, but we are in active discussions with ICE about all of our facilities. They are aware of where the facilities are. They're assessing their facilities to their needs. So fourth quarter did have the shutdown and did have the conceptualization, let's say, of this new warehouse initiative. And all that takes time and the government, I guess, slowed down is a fair way of saying that in the fourth quarter, and may be a bit delayed if there's another shutdown. You can't say what exactly it's going to happen. But we do expect more activations in '26 and more activity that will drive our financial results. Raj Sharma: Right. I just wanted to kind of understand that, given the stock price reaction and trying to make sense of what the concerns are. And -- so I wanted to understand that even outside of this talk of warehouses, it's fairly certain that the pace of reactivations should continue given where ICE goals stand -- right, and so you're saying, yes. George Zoley: Yes. We're in discussions. We're hopeful of awards. So -- and these are high-security facilities, of which I believe, are more desirable by ICE compared to lower security facilities. And -- so as that plays out, we think there will be more awards sometime this year. Operator: The next question comes from Brendan McCarthy with Sidoti & Co. Brendan Michael McCarthy: I wanted to ask a follow-up on the facility reactivation side. I know in recent quarters, we had discussed certain headwinds around the fall government shutdown, maybe ICE staffing challenges and then the DHS policy around contract approvals. Do you still sense that those headwinds are in force today? Or what's your kind of sense around how that's impacting the contract or facility reactivations? George Zoley: Well, I think it's similar to what I just discussed. I think there was a slowdown because of the government shutdown, the time spent on conceptualizing this warehouse program. But we -- as I said, we are active discussions with ICE about our available facilities and they're high security, they're high quality, and they're -- I think, comparatively speaking, there very high quality compared to any other facilities in the country actually because they were formerly Bureau of Prisons facilities, Several of them are mostly cellular type facilities, not dormitories and I think they're well suited for ICE needs. And we just continue to have discussions with ICE about those things. And not only just the facilities, but what physical plant changes they want to those facilities, all of which takes time and it has to be evaluated by different sections of the department. You have the security section of the department. You have the health services section of the department. You have transportation. Putting -- standing up a new facility is a very complicated process. And particularly now as the objectives advice has expanded. They've hired another 10,000 staff. Those staff have to go somewhere. And in part, they will be going at to these facilities around the country. There's been a request to add more space at, I think, at most of our facilities actually. So that is part of the discussion, providing office space, courtroom space, transportation space, expanded health care space, all those things take time to be worked out and that we hope will eventually lead to more awards. Brendan Michael McCarthy: Understood there. I appreciate the detail. And I wanted to ask a question on the skip tracing contract. I think you mentioned that contract is included in guidance likely to have an impact in the back half of 2026. Just curious as to what kind of case volume assumptions you make with that contract? And maybe if you could provide detail on the margin profile there. Mark Suchinski: Brendan, we're not going to get into margins. We don't go to that level of specificity on these types of calls here. So we won't talk about that. And as George indicated, it's -- the award was a 2-year award for $121 million, approximately $60 million per year. We talked about the fact that the protest just was removed. We don't anticipate any activity on that here in the first quarter. We expect there to start to ramp up in the second quarter, but we expect it mainly to occur in the back half of the year. And so as that -- it's a new program for us. It's one that we don't have a lot of history with from a projection standpoint. So we're working closely with our with our client on that to understand their needs and help support them. So again, we've factored in some modest assumptions as it relates to this -- and then as we start to execute with our client, I think we'll be able to provide more specifics on that in the coming quarters. Brendan Michael McCarthy: Got it. And lastly, on capital allocation. I know that you mentioned net debt has stepped down to about $1.5 billion in recent weeks. What's your sense for how much debt you may look to pay down in 2026 just regarding your priorities. George Zoley: Yes. Again, we're going to focus on continuing to pay down debt. The goal here in 2026 is to get our net debt below 3x levered, right? And so we believe as we move through the course of the year, we'll be able to achieve that goal. Operator: The next question comes from Kirk Ludtke with Imperial Capital. Kirk Ludtke: you mentioned that ICE was looking to consolidate those 225 facilities, mostly short-term jail facilities. There's a lot of people in those -- as you know, a lot of people in those facilities. I'm just curious, what's the motivation there? Is it cost? Is it that those facilities don't do a good job? Or what -- is there any background you can share? Mark Suchinski: Well, the complexity of overseeing 225 facilities is enormous. I think just a human preference would be to have fewer facilities but they need some level of access because interior ICE enforcements occur throughout the country, and they need to have a relationship with county jails throughout the country. And that's what most of those things are. So they have a few beds here and a few beds there. But those people are in a short-term detention confinement. And most of them will eventually go to an ICE processing center for evaluation of their cases and most of them will be then deported outside the country, but they have to go through a process, which typically does not occur at the county jail level. They need to go to a formal ICE processing facilities. And of course, in the federal government prefer to enjoy economies of scale of having larger facilities rather than smaller facilities, which would be a force multiplier in the ability to process and detain and deport approximately 100,000 people per month. Kirk Ludtke: Yes. No, that all makes sense. I'm sure you would prefer to utilize your own beds first before you facilitated additional government-owned capacity. But the contracts to just operate the facilities, those are pretty attractive contracts, aren't they? I mean in terms of ROI, that's operating those facilities could be a pretty good business, right? George Zoley: Are you speaking of our facilities or the warehouses? Kirk Ludtke: The warehouses, just managing facilities? George Zoley: I think it's a reasonable opportunity that we're assessing. We've only had one experience in renovating a warehouse. And that occurred maybe 30 years ago. So it's more complicated than you may think. As far as the physical plant, renovations of a warehouse to get it operational, it's complicated. And then the operational implications of how you manage such a facility, particularly a large-scale facility is going to be concerning because our prior experience was only on -- I think it was a like 200-bed facility. What is being discussed are 500-bed facilities, 1,500-bed facilities and facilities of several thousands of beds, 7,000, 8,000 or 9,000 beds per facility, which is an enormous capacity and it has to be carefully evaluated as to how you would do that. Because those are larger numbers than any in existence. Now I think the largest facility is probably 2,500 beds, not more than 3,000 beds in the country. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to George Zoley for any closing remarks. George Zoley: Well, thank you for participating in today's call, and we look forward to addressing you on the next one. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, everyone, and welcome to Yatra's Fiscal Third Quarter 2026 Financial Results Call period ended December 31, 2025. Today's call is hosted by Yatra's Co-Founder and Executive Chairman, Dhruv Shringi; and CEO, Siddhartha Gupta. The following discussion, including responses to your questions, reflects management's views as of today, February 12, 2026. The company does not take any obligation to update or revise the information. Before they begin their formal remarks, please be reminded that certain statements made on this call may constitute forward-looking statements, which are based on Yatra management's current expectations and beliefs and are subject to several risks and uncertainties that could cause actual results -- for a description of these risks, please refer to Yatra's filings with the SEC and the press release filed earlier this morning on the IR section of Yatra website. With that, let me turn the call over to Yatra's Co-Founder and Executive Chairman, Dhruv Shringi. Dhruv, please go ahead. Dhruv Shringi: Thank you, operator. Good morning, everyone. Thank you for joining us on [Technical Difficulty] third quarter and 9 months ended fiscal year 2026 earnings. Let me start by briefing you first on the events that happened during the quarter, and how it has impacted the industry, and then our CEO, Siddhartha Gupta, will brief you on the operational performance and the financial performance in greater detail. The third quarter, which is typically a strong period for leisure travel in India, witnessed healthy demand across [Technical Difficulty] limitations which led to operational challenges for the airlines and a spike in cancellations across the entire country. Market data indicates that domestic [Technical Difficulty] and recovered in the second half of the month, and we've seen those factors continue to rise in the month of January and thereon. But the key positive during the period was the divergence between domestic and international travel trends. While domestic travel experienced short-term headwinds in December, international travel remained strong with healthy year-on-year and sequential growth. This reinforces that outbound and long-haul travel is in a structural up cycle, benefiting organized travel platforms like Yatra with strong corporate and international travel franchises. Also, the recent union budget sends a clear message and positive signal about the government's long-term commitment to the travel and tourism sector. By positioning tourism as a strategic growth engine linked to the employment generation, foreign exchange earnings, and regional development, the policy framework shifts from episodic support to building a more structural and sustainable ecosystem for travel and hospitality in the country. Key measures such as rationalization of tax collection at source on overseas tour packages to a uniform 2% rate, lower upfront cost improved outbound segment. In addition, increased emphasis on domestic connectivity through infrastructure investments, including high-speed rail corridors, waterways and regional access, among the initiatives to enhance hospitality capabilities through a National Institute of Hospitality and large-scale skilling programs, expand the talent pipeline for the tourism sector. There is a growing demand for Indian organizations to help digitize travel procurement while using AI-driven platforms that offer end-to-end automation, self-booking tools and integrated expense management, prioritizing compliance and cost savings. AI and predictive analytics platforms make travel procurement by forecasting demand, optimizing costs, enforcing policies and ensuring risks are attended in real time. AI-enabled self-booking tools can perform real-time policy compliance checks, flag risks like disruption or itinerary analysis and personalize itineraries with safety insights. The generative AI shifts from reactive auditing to predictive spend, cutting administrative friction and enabling productivity boosts in procurement. Yatra through its corporate self-booking platform, supported by AI bot and its richer expense management solution is taking the lead in driving this shift in industry dynamics. Moving on more specifically to our business for the quarter. Our B2C business, as was predicted earlier by us, [Technical Difficulty] is now still growing profitably. Additionally, our corporate and MICE business [Technical Difficulty] was well on track to deliver our strongest third quarter yet. With the exception of the recent inflation [Technical Difficulty] about our operational performance in the quarter. We remain richly supported by our continued focus on scaling the Corporate Travel business. The steady growth in corporate bookings, along with the increasing contribution from higher-margin hotels and MICE segments, positions us well for sustained margin expansion and improved profitability over the long term. With this, let me now introduce you to Mr. Siddhartha Gupta, who recently joined us as our new CEO. Siddhartha brings with him a wealth of experience across the B2B SaaS industry, and in his last role, was the President of Mercer Consulting in India and was also heading their SaaS-based talent acquisition business globally. Prior to this, Siddhartha has also held leadership roles in large tech and SaaS companies like SAP and HP. With that, let me hand you over to Siddhartha. Sid, over to you. Siddhartha Gupta: Thank you so much, Dhruv. Operator, I hope I am loud and clear on the line. Thank you so much, Dhruv, for giving a preamble on our quarter performance and the industry trends. A very good morning to everyone on the call. Adding to Dhruv's comments, despite an industry-wide disruption in the airline sector during the quarter, Yatra continued to deliver in its Air Ticketing business, supported by seasonally strong B2C travel demand. Gross bookings in the Air Ticketing increased 22% year-on-year, supported by 14% growth in air passenger, which far exceeds the industry growth of about 1%. Take rates also improved from 6.2% to 7.1% on account of the quarter being more B2C focused. In the Hotels and Packages segment, overall performance during the quarter remained healthy. However, we did see some temporary impact in the MICE and the Corporate Events subsegment, with a few bookings getting deferred due to flight disruptions. Just to remind listeners, it was the disruption in the IndiGo Airlines schedule in India. This resulted in a modest onetime impact on the quarter, part of which we expect to roll over in quarter 4, supported by the continued strength in underlying Corporate Travel demand. Gross bookings in the segment grew 20% year-on-year, excluding the impact of deferment of the MICE business. Hotels would have grown over 30% on a stand-alone basis, supported by strong growth in our corporate business and in our affiliate business. While gross take rates moderately -- moderated slightly from 12.2% to 11.7% year-on-year on account of change in business mix, gross margins improved further from 9.7% to 10.2% year-on-year, reflecting prudent discounting in B2C and better margin realization from suppliers for corporate hotels. Our B2B to B2C mix was approximately 60-40 for the quarter versus the 9-month average of 65-35 in favor of B2B. Our Corporate Travel business continues its strong momentum. We onboarded 40 new corporate clients in this quarter, collectively adding an annual billing potential of INR 2.2 billion. As mentioned earlier, the disruption happened during the highly productive first 2 weeks of December, when Corporate Travel usually peaks before holidays. We saw deferment of MICE travel into Q4 and subsequently, few of the groups moved to Q1 of the next financial year as a direct result of uncertainty in the travel during that period. This disruption not only adversely impacted our operating performance, but also led to incremental working capital deployment where advances had already been paid to vendors for MICE Groups. These impacts were largely limited to the month of December, and the business is back on track. In the Corporate business, there's more to cheer. The early response to our expense management solution has been very, very encouraging, and we have onboarded 8 customers now on our expense management platform. Early traction proves that Yatra understands the pulse of what our corporate customers need. This solution has not only become a door opener to get new accounts, but also gives us a huge upsell potential in our existing accounts. A few thoughts on what you can expect from Yatra in quarters ahead. Our consumer-focused line of business has returned to growth path while improving margins. This was a result of sharp execution, coupled with successfully tapping into partnerships and affiliates for demand generation. In the near future, you should hear more on organic demand generation projects making impact, helping us further improve margins in this line of business. Our corporate value proposition still has a huge headroom for growth. Online penetration is around 23%, and we have laid a strong foundation for chasing this potential. We have sharpened our go-to-market by establishing separate teams to chase large and small and medium enterprises. Demand generation is amplified by a new inside sales team now, which has started augmenting the efforts of the team on ground. Early signals are very promising. Beyond new customer acquisition, our farming team have won multiyear renewals from some of our largest customers this quarter, proving that corporates want trusted partners who can deliver value to them. Needless to say that our success is closely tied to the speed at which we can deliver tech innovation. Our early investments in adding talent to our product and tech team have started showing results. You can expect us to further add gap between us and what's available in the market. Hope that gives you a flavor of where we're headed. At this moment, I would have paused and handed over to Anuj Sethi, who is our CFO, to brief you on the financial performance for the quarter under review. He has got caught up in a medical emergency. Hence, I'll take you through the financial performance as well, and then me and Dhruv will take the questions together. On the financial performance, for the third quarter of financial year '26, on a consolidated basis, our revenue from operations grew 10% year-on-year to INR 2,577 million or approximately $29 million, driven by steady demand across our key segments with robust growth from air ticketing business. In terms of segmental performance, our Air Ticketing passenger volume grew 13% year-on-year to 1,491,000. However, gross bookings grew 22% year-on-year to INR 16,931 million or $188 million. And Air adjusted margins rose 40% year-on-year to INR 1,195 million, or $13 million with adjusted margin percentage improving from 6.2% to 7.1%. Under Hotels and Packages segment, hotel room nights grew by 22% year-on-year to 508,000. Gross bookings increased 20% year-on-year to INR 4,306 million or close to $47 million, with adjusted margins expanded 15% year-on-year to INR 502 million or $6 million. On the liquidity front, cash and cash equivalent and term deposits stood at INR 2,042 million or $23 million as of 31st December 2025. Gross debt has marginally increased from INR 546 million as of 31st March 2025 to INR 583 million or $6 million as of 31st December 2025. With this, I would like to hand back to the moderator and open up for question-and-answer session. Operator: [Operator Instructions] First question comes from Scott Buck with H.C. Wainwright. Scott Buck: First, I'm curious, the revenue growth deceleration in the quarter, is any of that structural? Or you're viewing that all as just kind of the ebbs and flow of managing some of the macro challenges that are out there? Dhruv Shringi: Scott, this is largely seasonal in nature. Quarter 3, if you would recall, is one of the lowest quarters for business travel, given the holidays that we have for Christmas, New Year and for Diwali, Dussehra, which both happen in this quarter. So effectively, you lose 1 month out of the 3 in holidays. And then it got compounded this year with the flight disruptions that happened during the first 2 weeks of December. So it's not a structural shift. It's just a one-off, given the disruption that happened in the industry. Scott Buck: Okay. That's fair. Second, I just want to ask about the MICE business. Are you seeing some of the macro challenges out there, whether it's tariffs or anything else, having an impact on that business? I know there were some headwinds in the quarter. Dhruv Shringi: No, we haven't really seen any impact of that, especially things like tariff and all. We do, in fact, expect that given that there is a new trade deal which is in place between India and the EU and India and the U.S., we will see business travel scale up even further when it comes to travel between both Europe and the U.S. But we're not really seeing any headwinds per se on account of these. Sid, if you want to add something extra on that? Siddhartha Gupta: Yes. So this MICE as a segment has grown and has tremendous potential for us to grow into. This was a very fragmented market about 3 to 4 years back. And now over the last 2 years, Yatra has become one of the top 3 players operating in this space in India. And Indian economy is one of the fastest-growing economies. So there are multiple industries where corporates are traveling, not only outside India, but within India as well. And hence, there is a huge headroom for growth. What we've seen is that this entire segment is getting more formalized. So instead of very small players operating these events for corporates, now the corporates prefer doing business with large vendors like ourselves. So I think there's a huge potential, and we don't see any disruption in this space at all. Scott Buck: Great. That's helpful color. And then last one for me, guys. You continue to do a really nice job adding new corporate partners on the travel side. I'm curious how many of those kind of obvious or low-hanging fruit opportunities are still out there? And at some point, do you need to change or pivot the way you're pitching some of these customers to continue to bring on that Corporate Travel business? Dhruv Shringi: I think at this time, we have got a lot of headroom in this. Our initial mapping had suggested close to about 13,000 organizations that we could target as part of this. We are still just in excess of about 1,000. So I think there is a lot of headroom for growth for us in this sector. I think Siddhartha coming on board will also sharpen our focus on how we go to market. And maybe Siddhartha can elaborate a bit more around how he's gone ahead in the short period of time in augmenting the sales team and putting in some new things in place, which will help us drive further growth. Siddhartha? Siddhartha Gupta: Yes. So to add, I concur with Dhruv completely. We have barely scratched the surface. There is a huge headroom for growth because the offline Corporate Travel still is the majority market and the value proposition of Yatra from providing an online Corporate Travel platform, which caters for all uniqueness of every corporate customer has a huge headroom for growth. To give you a parallel, in my days at SAP or Hewlett-Packard, corporate India itself has more than 30,000 companies, which are potential customers to Yatra. We have just about crossed 1,300 right now. So there's a huge headroom for growth for us. From a go-to-market standpoint, we have commenced a very ambitious and aggressive go-to-market sharpening exercise at Yatra. We have divided our go-to-market into 3 pillars. One is -- so we've separated these teams out. One is the elite sales team, which looks at only large enterprises and tries to get us more inroads into large corporates where travel spends are very high. Then we've got a separate team, which is looking at small and medium enterprises, which operates through digitally creating demand and then through an inside sales, landing it into our kitty. And the third bit is we are already one of the larger players in India from a large enterprise automation. So we have a very large existing account base. So we have a team called key account managers, and it's headed by a very senior leader here in India. And the mandate there is to upsell and grow our existing relationships where we are introducing newer solutions like expense management and other solutions and especially international hotels and travel so that we are able to upsell into our existing customer set as well. So overall, we are sharpening the go-to-market, running a very strong cadence on a weekly basis to ensure that spikes remain healthy and conversions remain healthy as well. So you should see momentum pick up from here, and we expect our strategy of leaning more towards B2E to grow Yatra being very successfully executed over the next 3 to 4 quarters. Operator: [Operator Instructions] We have no further questions, so I'll hand back to the management team for any final remarks. Dhruv Shringi: Thank you, operator. Siddhartha Gupta: Dhruv, would you like to.... Dhruv Shringi: And thank you, everyone, who joined the call today. And as always, we remain committed to driving shareholder value and being able to address any questions that you might have. Siddhartha and I are always available. Please feel free to reach out to us through our IR firm, ICR, and they can direct you to us. We look forward to engaging with you and continuing to deliver on the strong results that we have done for the last few quarters. Thank you for your time today. Siddhartha Gupta: Thank you so much, everyone. Operator: Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.
Operator: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to PodcastOne's Third Quarter Fiscal 2026 Financial Results and Business Update Conference Call. [Operator Instructions] I would now like to turn the conference over to Ryan Carhart, Chief Financial Officer. Please go ahead. Ryan Carhart: Good morning, and welcome to PodcastOne's Fiscal Third Quarter 2026 Conference Call. The earnings release, which we issued this morning, is available on our website at ir.podcastone.com under the News and Press Release tab. During today's presentation, all parties will be in a listen-only mode. Following the presentation, we will have a question and answer session. On the call today is Kit Gray, President and Founder of PodcastOne; and myself, Ryan Carhart, Chief Financial Officer. I would like to remind listeners that some of the statements made on today's call are forward-looking and based on current expectations, forecasts and assumptions that involve various risks and uncertainties. Actual results may differ materially. Please refer to PodcastOne's filing with the SEC for information about factors which could cause actual results to differ materially from these forward-looking statements. Reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed today are available in the company's earnings release on the Investor Relations website. This discussion, including responses to questions, contains time-sensitive information and reflects management's view as of February 12, 2026. Except as required by law, the company does not undertake any obligation to update this information after today's call. This call is being recorded and will be available via webcast replay on PodcastOne's Investor Relations website shortly following the conclusion of the call. Redistribution without the company's expressed written consent is strictly prohibited. With that, I would now like to turn the call over to PodcastOne's President, Kit Gray. Kit Gray: Thank you, Ryan, and welcome to our fiscal third quarter 2026 earnings call. As a reminder, our fiscal year begins on April 1. This quarter was defined by strategic partnerships, long-term talent renewals and meaningful expansion of our owned and original content network. PodcastOne continues to distinguish itself as the leading pure-play podcasting platform in the public markets through a vertically integrated model that combines talent development, content creation, distribution, analytics and monetization and operational efficiencies, all strengthened by our AI-powered infrastructure. Our AI toolkit continues to enhance performance across every aspect of the business. Flightpath drives predictive profitability, Booster scales advertising management and proposal recommendations. Adobe Audition ensures best-in-class audio quality. Pod Engine supports discoverability through SEO and insights. Magellan AI powers advertising attribution. And Opus Pro converts long-form video into short-form content that fuels audience growth across platforms. Our team consistently uses AI-based search components to discover new talent, match trending topics to specific content created on our programs and more. These tools directly support how we grow shows, monetize audiences and operate more efficiently at scale. This quarter, we announced one of the most significant strategic initiatives in PodcastOne's history through our partnership with Dr. Phil's Envoy Media Company. Together, we are launching a new podcast-based original and owned content network anchored by the all-new daily Dr. Phil podcast. This initiative expands PodcastOne beyond traditional podcast distribution into true multi-platform owned media, reinforcing our position as a content network rather than simply a podcast publisher. We also proudly renewed LadyGang in a multiyear agreement. This year marks 10 years of podcasting, 1,000 episodes and over 300 million downloads. Few podcasts in the industry demonstrate that level of longevity and audience loyalty. In health and wellness, the Dr. Gundry podcast continues to be a standout performer with 18 million all-time downloads across 548 episodes, educating millions globally on gut health, nutrition and longevity through science-backed insights. This show exemplifies the long-tail value of evergreen expert-driven content. Additionally, we renewed The Adam Carolla Show in a multiyear agreement with the show now joining The Megyn Kelly Channel on SiriusXM, extending its reach into new distribution channels and audiences. Further strengthening our slate, we renewed The Bitch Bible, Some More News and The Prosecutors and acquired For Your Amusement in a multiyear agreement, expanding both genre, diversity and monetization opportunities across the network. We also signed a multiyear partnership with AI-driven Listener.com, further advancing our data and audience intelligence capabilities. Our monetization engine continues to show measurable progress. PodRoll revenue increased more than 5% quarter-over-quarter, reflecting growing adoption of our Dynamic Ad Marketplace by brands and agencies seeking efficient access to premium podcast inventory at scale. This growth, paired with our talent renewals and owned content strategy continues to move PodcastOne into a higher revenue tier and reinforces the scalability of our platform. Lastly, Paramount's recent acquisition of Varnamtown from PodcastOne for development as a streaming project underscores the strength of PodcastOne's original IP and storytelling slate. Ryan, back to you for financial results. Ryan Carhart: Thank you, Kit. As a reminder, our fiscal year began on April 1. Revenue in the fiscal third quarter of 2026 was a record $15.9 million. Operating loss in the quarter was $153,000 compared to an operating loss of $1.6 million in the same year ago quarter. This improvement was driven primarily by higher advertising revenue and operational efficiencies across production and distribution. Net loss for the quarter was $154,000 or negative $0.01 per basic and diluted share compared to a net loss of $1.6 million or negative $0.06 per share in the year ago quarter. Adjusted EBITDA for the quarter was a record $2.8 million compared to a negative $670,000 in the same year ago quarter, driven by revenue growth and disciplined cost management. We ended the quarter with $3.4 million in cash and cash equivalents and no debt on the balance sheet. With that, I'll turn the call back over to Kit. Kit Gray: Thank you very much, Ryan. This quarter demonstrated PodcastOne's evolution into a true content and monetization network powered by technology, talent relationships and owned media strategy. From the launch of the Dr. Phil's network initiative to long-term renewals of legacy shows like LadyGang and The Adam Carolla to the growth of PodRoll and expansion of our AI capabilities through Listener.com, we are building durable assets that extend well beyond individual podcast titles. We remain focused on compelling content, strategic monetization and long-term partnerships with creators and advertisers. With our AI-powered infrastructure and growing portfolio of owned and original content, we are exceptionally well positioned for continued growth throughout fiscal 2026 and beyond. I want to thank our team, our creators, our partners and our shareholders for their continued dedication and trust. With that, we'll now open the line for questions. Operator? Operator: [Operator Instructions] Our first question will come from the line of Barry Sine with Litchfield Hills Research. Barry Sine: Two questions, if you don't mind. The first one is around Dr. Phil. Obviously, huge potential. We're, I think, about 1.5 months, maybe 2 months into his podcast on PodcastOne. What are you seeing in terms of streams and downloads from him? And then secondly, what has been the advertiser response as Sue McNamara goes out there to sell advertising on those -- on that program? Kit Gray: Barry, good to talk to you. Thanks for the questions. Appreciate it. Yes, we're all really excited about the Dr. Phil relationship, and he's got a lot of things going on that it's really exciting. You got the Dr. Phil podcast. You've got his Mystery and Murder podcast, which is doing great. And he's really getting his feet wet. We just had him on The Adam Carolla show. We have him scheduled over the next 1.5 months to go on some of the biggest podcast in the world in talking about his story. So he's well positioned for some great growth in the space. He is a pro, right? I mean there's not a bigger name in television history really than him. And advertisers are definitely listening and excited to hear more about his offerings as we go to market. But yes, his show is great. And I think we have some great projects that we're going to be launching over the next 3 to 6 months within that Envoy Media company. Dr. Phil has a really big Rolodex of great people that we're going to want to pull in to do video/audio content for us. So we're excited about that opportunity. But yes, all things are great so far, and we're really excited about it. Barry Sine: And the advertiser response so far? Kit Gray: Yes, it's been great. They want to know more about what we're going to be offering. So we've just started putting some presentations together and some offerings that not only just the podcast, but they've got a ton of distribution through some relationships that they have, too. So we're really working towards bigger deals that will include that as well as the podcast on YouTube and obviously, the RSS feeds that go out through iTunes and iHeartRadio and PodcastOne and all these different places. So it's exciting because we're a different company, as you guys know, we like to look at ourselves as thought leaders and game changers in the sense that no one else is going out doing this. We're going to include social media, video, audio, the podcast is TV distribution deals as well. So that's something that nobody else has done. So we're kind of educating the marketplace on those opportunities, and they're excited to hear from us. 15 years ago, no one even believed in podcasting and here we are. So we got to keep changing things and evolving and leading the way, and that's why advertisers always take your phone calls because of that. Barry Sine: Okay. My second question is around B2B deals. Rob talked extensively about what LiveOne is doing with B2B deals and their numbers, the number of active deals and the number in the pipeline. Some of those -- many of those include PodcastOne content, although I guess not all. Can you talk specifically about how B2B deals are impacting your current results? And then what is the outlook going forward for the impact on results from B2B deals that are in the works that will include podcasts? Kit Gray: Yes. I mean we have -- the Amazon ART19 deal is definitely one of the biggest deals we have in our company. That's continuing to do just great things for us. They're great partners. They've helped us in terms of efficiencies and cost cutting, but also being able to get different revenue channels, right? I've explained this in the past. We have our direct sales. We have the ART19 ad inventory marketplace where their sellers are including podcasting, runner network deals to their advertising relationships, which continue to expand. And then we have our access to the programmatic desk through them and relationships through them. So that has been tremendous, diversifying our ad sales revenue generation channels and being able to continue to grow and put pressure on our inventory. So we have moved up to a second tier with impressions that we are able to offer, which gives us a really nice minimum guarantee from them. And we continue to grow, that relationship continues to grow, and there'll be more money involved in that. So that's exciting. We have a great relationship with Pluto TV for years now and that also has been a great relationship and continues to evolve. We're now talking to them about doing our Pluto TV podcast, where we'll be reviewing their programming, new programming, historic programming that they give their -- in their platform. So those are really big deals that we have going on. Sue and her team continue to crack the code of new brands and new advertising relationships. I was just listening to The Adam Carolla and he was doing a live show up in Sugarloaf. And I just listened to it the other day at the gym and the amount of brands that are in there and Adam is doing fantastic reads for and they're great companies, it's amazing. They're different ones. They're new ones. So people are diving into the space on that front as well. And we have a lot of other relationships on the docket that will expand into this year and next. But yes, positioned pretty well there. Barry Sine: So specifically, Rob called out 3 major new ones that are just coming online. Do any of those include podcasts or do all of them or how many of them include podcasts? Kit Gray: Well, we work hand-in-hand with the Lot1 team on a bunch of initiatives. So yes, their talk about content development for some of those relationships as they create music channels for them. We would create podcast offerings, content offerings. A lot of them are in early discussions, so I can't really talk too much about them, but they're excited about it. I mean this is a new world where we have access to talent and great content and audience that we can now engage with those brands. Robert Ellin: Kit, if you don't mind, I'll jump in just for a second on that. Barry, as you know, when our app goes into any one of our partners, whether it's carriers, retailers and so on, podcasting is a big component of it. So if you can reach audiences of 50 million plus, our podcasts get a whole new audience, right, that happens as part of the deal, right? So all of a sudden, we don't count that in our revenues today. But if you reach 50 million people, all of our podcasts are in their hands as well. So any time the LiveOne app is there, our podcast, even though we have increments podcasts, our podcasts are always highlighted in the first position. So you get a new -- brand-new massive audience amongst those 3 B2B deals and more to come. Barry Sine: I'm well aware I have the LiveOne app on my iPhone, my iPad and my Apple TV. Operator: Our next question will come from the line of Sean McGowan with ROTH Capital. Sean McGowan: A couple of questions for me, too. So on cost of sales, a nice reduction in cost of sales as a percentage of revenue. And I imagine that some of that is revenue from things like selling programs like Varnamtown, where there really isn't a lot of incremental cost, but there's revenue. So can you give us a sense of if you excluded that kind of revenue with like really no cost associated with it, has there been another shift in cost of sales as a percentage of revenue? Or is the reduction pretty much due just to that mix issue? Kit Gray: Sure. Go ahead, Ryan. Ryan Carhart: Sean, so yes, it's a good question. I mean our margin generally has been slightly ticking up all year. So there is a little bit of just improvement based on all the hard work that Kit and his team is doing to improve that. Additionally, you know that there were onetime benefits coming through from certain things that were sold during the quarter. So yes, it was a strong quarter for us. There was one one-off item in there. But otherwise, it's positive and strong quarter-over-quarter. Sean McGowan: And kind of related to that, when -- I just love that Varnamtown. When do you think that would be kind of available for general consumer viewership with the partner? Robert Ellin: Guys, I'll jump in on that. You never know the date, but they're in for a lot of money. They've now spent at least -- at least $1.5 million, probably $2 million, right, on options, getting the rights to it. It's now at the streaming partner, right? If that gets greenlit, as you know, Sean, you've been around me for a long time when I did the movie 300, Spiderwick Chronicle, we did $1 billion of revenue in these. If you get a TV show on the air on a major streaming network, that can be millions to tens of millions of dollars with 0 additional cost to us. So we couldn't be more excited. And there's 4 of those, right, that have now been sold. There's 12 total -- I'm sorry, there's 15 total in the pipeline. In fact, we're going to market with another 2 of them shortly. We couldn't be really more exciting than that. We've always talked about original IP and what original IP can do for us and how it changes the dynamics of the industry dramatically. And those second windows of original programming to television and film, products owned in conjunction with the talent, which Kit is going to be talking about a lot more over the next couple of quarters and live shows, which is just exploding in podcast. As you know, whether it's all-in or it's Rogan or someone, the live shows are just expansive, and you're seeing so many people enter that live market as you saw Ari Emanuel just raised $2 billion to expand the market. And you see [indiscernible] in the market. The live market is robust and just opens up the floodgates for additional revenues and brings bigger margins for us going forward. Sean McGowan: And then Ryan, like you talked about that one-off on the cost of sales. How about some of the other cost trends? Would you expect G&A to kind of stay at this level? Or should we be looking for increases? Ryan Carhart: I would say you would expect G&A to stay at this level. Short term, there were some awards that are driving that right now in addition to sales and marketing, but it's mostly stock comp, which gets adjusted out. But I think the team has done a great job of containing -- not only containing costs, but Kit and team have done a really good job of doing a lot more with the same amount of resources and trimming costs wherever they can. So yes, you should expect more of the same going forward. Sean McGowan: Okay. So then in terms of cost of sales ex this one-off, and I know there'll be other one-offs and probably bigger down the road, but excluding that, would you expect the overall cost of sales as a percentage of revenue to kind of get back to where it was early -- kind of rise back up to where it was earlier in the fiscal year? Ryan Carhart: I mean that would be sort of like the normalized one that we're seeing going forward, maybe a blend of that and maybe a little bit better because we continue to improve on our contractual negotiations, but you'll see a creep up as those start flowing through. But yes, to your question, some of these one-offs, they're not exactly easy to predict the timing of, right? But yes, you should expect these coming through occasionally as we do more of these deals and they start coming to fruition. Sean McGowan: Okay. And then looking at stock-based comp, it was like roughly $2 million year-over-year increase. How does that divide out between G&A and cost of sales? Is some of that taken in cost of sales? Ryan Carhart: Yes, some of it sitting in cost of sales. So we have a contribution margin reconciliation that's in the queue that kind of breaks that out. So you can kind of see that breakout there. So I think if you're looking at the -- yes, so if you're looking at the quarter, it is north of $1 million, about $1.4 million coming out of cost of sales. Sean McGowan: Okay. And then my last question is you guys preannounced a couple of weeks ago, you came in a little bit better even than that in the fourth quarter. The guidance though -- I mean, in the third quarter, the guidance for the fourth quarter kind of implies a pretty significant deceleration. I think at the bottom end, it actually would be down. So what's driving that not raising the guidance for the March quarter? Kit Gray: I'm happy to take... Ryan Carhart: Kit, this is actually probably one for you to answer. So yes, go ahead. Kit Gray: Sure. No problem. So typically, calendar year of fourth quarter is always the biggest in terms of ad revenue spend, right? And we're still -- that's still a majority of our business. So as you go into the new year, advertisers really kind of slow down and then restart up, they've got ads in place and then they kind of ramp it up on what's working, what's not and kind of pivot from that. But yes, typically, if you look at all our history, it's always this Q4 fiscal year, calendar year in Q1 that January, February, those are usually our slower revenue ad generation months. So it's normalized. I think we're still going to beat what we did in last year's quarter, if I had to bet. But I think that's just kind of normal for all the businesses in media. Operator: And our final question comes from the line of Leo Carpio with Joseph Gunnar. Leo Carpio: I have a couple of questions. First, regarding the EBITDA, it seems like this quarter on an EBITDA basis, you kind of hit that pivot point, yet it sounds like there's a quarter benefit from a couple of one-offs. So the question is, looking into the fourth quarter and then looking into fiscal 2027, is it possible that the EBITDA is going to be breakeven again? And is it going to be like one-off driven or pure straight efficiency driven? Ryan Carhart: Leo, no, we expect adjusted EBITDA to continue into future quarters. The one-off this quarter wasn't driving all of the EBITDA by any stretch of the imagination. What you've seen in the first 2 quarters this year is minimally what we expect on top of what we did this quarter. So we expect it to kind of slowly continue and climb, and we put that out as well in this release. Leo Carpio: Okay. And then turning to the talent pool. Now that you've been successfully adding new shows and looking at bigger and better contracts and what is the talent environment out there in terms of are you able to find like good mid-tier talent that brings a solid franchise? And all the economics still favor or if is it still a buyer's market for you? Or is it beginning to shift? Kit Gray: Yes. It's a good question, Leo. What we're seeing, I actually read something this morning in the trades that in January, there were more new podcasts launched than last January, which is really a good sign for the health of the industry in the sense that more people are getting into the space and developing great content, which opens more opportunities for us, right? So that's a great sign. It's still competitive for sure. There are companies out there that will go low on margins and take what we would consider deals that we wouldn't take that I don't know. I could say they're bad deals or not, but they're not -- they wouldn't work for us. So we continue to flush forward with our method of making smart deals that work for us that we know we can grow. So we have a big funnel of shows and companies that we're still talking to on the M&A side that would be not just one-off shows here and there, but actual networks of programs, putting them in our systems, cutting some costs and growing those. And that's still a huge part of what we do. But we've been really lucky with some of our long-term relationships like even the Chrisley, right, they're launching another show with Todd and his 2 boys. And we are in talks with AME about not only continuing that relationship, which has been a 9-year relationship and a great one, where we've launched now 4 or 5 shows with them. We've got 3 or 4 with them as well. So there -- these relationships that we have are continuing to expand. I talked about the LadyGang show and them being with us for 10 years now. We're actually going to be launching a parenting program or segment in that show as well. So not only are we out there getting new podcasts, but the ones that we're doing -- having great success with are wanting to do more with us. They're seeing how profitable, how big in terms of creating communities it is for them. So yes, it's great. It's still challenging. I mean the agents are doing a great job of representing great podcasts and bringing them to us, but that makes it a competitive environment, but we're well positioned for success there as well. So yes, we're look -- we're really excited about where that stands right now. Leo Carpio: Okay. And then in terms of acquisitions, anything on your horizon that seems appealing to you? Or it's more a case of just looking at talent first and then acquisitions if there's an opportunity that comes about? Kit Gray: Yes, there's some great ones out there. We are in -- deep in talks with a couple of them, some that are bigger than us, believe it or not, and some that are smaller that would complement us. So we're really excited about those discussions and where those stand. Steve Layman and team are doing great things there. We're all having conversations. I think the -- there's a lot of these companies, not the big ones that are still trying to find their way and have great opportunities and great growth potential. So we're talking to all of them. And at the same time, our talent acquisition team is out there talking to individual shows every day. Leo Carpio: Okay. And then last question regarding the industry environment in general, how are you seeing advertiser spending? Is it still -- is it robust? Is it improving? And is it driven at any particular demographic group or show categories or style? Kit Gray: Yes. We're really fortunate. The media spending level is increasing. Every report I see it's continued growth, record growth. When you look at the companies that are out there and tracking who's spending in the space, you're looking at the Amazons of the world, the Progressives of the world, the State Farms of the world, these are big brands with big media budgets that are shifting their spend to this podcasting world. And they continue to believe in it. They continue to dive into it. And I think the medium is just exploding. And the technology, the ROI, the attribution, all of that allows these companies to not just spend blindly like they may have in the past with other mediums, they really have a true tell that this is working. Operator: And this concludes our question-and-answer session. I'll hand the call back over to Kit Gray for any closing comments. Kit Gray: Well, thank you very much, everybody. I really appreciate your time today. We had a really strong quarter and great results. I can't thank my team enough and all the people that believe in us in terms of investors and LiveOne for all their support. Ryan and Rob, I appreciate you guys, and we are excited to develop some great things moving forward and excited to talk to you throughout the year. Thank you very much, everyone. Appreciate it. Robert Ellin: Yes. And just before we hang up, I'm just going to add to that, I just want to thank you, Kit and Ryan, for a great job. This is a spectacular quarter. It's going to continue. And what I would tell you is that LiveOne, not only is a supporter, but we're buying back a lot of stock. We're going to continue to add to our position. And you'll see us -- I think we bought 657,000 shares recently. We'll be adding to that substantially success of this company, Kit has just done an absolutely spectacular job of delivering revenues and EBITDA. So I couldn't be prouder of my team, and you'll see us in the market very shortly as soon as we have approval from our attorneys to buy back more stock. Operator: Everyone, this will conclude our call today. Thank you all for joining. You may now disconnect.
Dave Huizing: Good morning, and thank you for joining today's call. I'm sitting here with Dimitri de Vreeze, our CEO; and Ralf Schmeitz, our CFO. This morning, we published our full year 2025 results on a restated basis, together with a presentation to investors, which you can find on our website. Here you can also find our disclaimers about forward-looking statements. Following Dimitri's and Ralf's opening comments, we will open the line for questions. [Operator Instructions]. Dimitri, the floor is yours. Dimitri de Vreeze: Thank you, Dave, and welcome to everybody here in this call. Nice to see you yet again, a busy week for us, busy week for you. The ANH call last Monday, now the full year results, and you've seen that there are a lot of numbers there. So Ralf will lead you through in a minute. And then next week, our integrated annual report. And as you've seen in the press release, we're also looking forward to host our investor event on March 12 about the next phase of DSM-Firmenich as a consumer company. Now let me go through a few of the highlights of the divestment of ANH to CVC. We explained that on Monday, but it was an important piece of our journey. And I think it's clear to say that it's really focusing on DSM-Firmenich to become a key player in Nutrition, Health and Beauty. And that's also where the value creation is. So an important point was the signing of the divestment of ANH to CVC. And we constructed a deal where we have mitigated the downside risks in the ANH business as well as the volatility, one of the strategic reasons that we announced that we wanted to divest, and we have implemented on that. Now we have created a deal structure that is not only mitigating those risks on downsides, but also creates an opportunity on upside. And that is also what we have announced last Monday, together with a favorable long-term supply agreement on vitamins. The EUR 2.2 billion, we found a fair value for the ANH business. I think it's a great business, but it has its volatility. We'll get proceeds at closing of EUR 1.2 billion and remained a 20% retained stake because we wanted to cater for a possible upside. The solutions core business, the specialty business is a really good resilient business going forward. So that whole multiplier on value we would like to capture, as well as the Essential co, which is predominantly the vitamins business, where I think CVC Capital Partners are a partner we work on different businesses with, and they are very much catered to make that business grow and add value and want to capture that 20% as well. Well, in the grand scheme of thing, 20% of EUR 2.2 billion is around EUR 0.5 billion. So it is also in terms of risk mitigation, not the biggest number. So please don't see the 20% is something where there's a direct link to our business, not anymore. It's deconsolidated. It has been out of our numbers. The EUR 9 billion is the DSM-Firmenich consumer scope that we're talking about. Now the earnout, the earnout is linked to business on solutions scope, very good business. So in that sense, I think the earnout is pretty much secure. And the part of the earnout is linked to Essential core. And then if that's half of the earnout, I think it's all been mitigated with CVC working diligently to bring that business up to [ thrive ]. And I think there are lots of opportunities with normalization over the business as we speak. Now what are we going to do with the money? Although let's make it very clear, the money only comes in towards the end of the year. As a sign of confidence, we will start our share buyback already in quarter 1 in addition to the EUR 1 billion that we have started and executed and completed for the Feed Enzyme business. And at the same time, not resetting the dividend, it remains stable also after the carve-out of ANH at 250. Now if we then go to the next slide that shows with ANH out of the way, we are on our journey where we merged the company, we delivered on the synergies. We have tuned our portfolio, and we have signed the deal to divest ANH. We're now into the next phase of DSM-Firmenich, the consumer company, and we're going to grow what we have. We're going to anchor what we do and going to deliver on our promises. On March 12, we'll give you that accelerate route with our BU President to get a bit of a feel on what we're growing and how fast we were growing. Under that journey, we have grown organic sales growth of 6% in '24 in the scope of DSM-Firmenich consumer related. And this year, we have announced the 3 years full year result, 3% growth on 2025 for that business in the environment we are in. So we're showing the resilience of that portfolio going forward. Now we then go to the next slide, a little bit the financials of that DSM-Firmenich consumer scope. If you move to the next slide, I'm going to show you a few numbers. Yes, here we go. So here are the numbers. Here, you can see we're a $9 billion company. We have grown that company 3% in '25, as we said, 6% in '24, if you go through the restate apples-with-apples comparison. An adjusted EBITDA of EUR 1.7 billion, EUR 1.8 billion, which was a 5% step up like-for-like. By the way, that's the same from '23 to '24. So it shows the resilience of that portfolio that we've built. With the trajectory of EBITDA margin, I think many of you asked the question, how do you come to the '22, '23 midterm targets? Well, we started with 18%. We moved it up to 19%, 19.6% for 2025. If you take the last 2 quarters, we're more closer to 20%. So also that trajectory will continue with a good generation of cash flow, the 10.5% conversion over sales in 2025. I already alluded on the dividend and on the share buyback and on the investor event on March 12th, where we're going to give you some insight on what the next phase of DSM-Firmenich is all about. Now last phase, last slide before I hand over to Ralf. In that whole trajectory, we stay true to our sustainability program. If you can go to the next slide, please. Then it's clearly that we also have made quite some progress on sustainability. It's important for our customers. So some people will say, well, why do you still work on sustainability? Well, apart from the fact that it's part of who we are, it is in the market we play in with customers important, 100% renewable ahead of plan and also some recent ratings of CDP, AA for climate and water, but also platinum metal for EcoVadis. It does matter. It is the company we're building. And we are proud that we also continued that during that merger. So we're well positioned to go into the next phase, which we call internally the accelerate phase, with growing what we have, anchor what we do and deliver. But before we go there, maybe let's look back for one more time in what we've done in 2025 before we move forward. And with that, I hand over to Ralf. Ralf Schmeitz: Well, thanks, Dimitri. And good morning, everybody. Before diving into all of the numbers, every number presented is, as Dimitri said, in accounting terms, a continuing operation. It represents the company we've been building over the past 2 years. And it's all about Perfumery & Beauty, Taste, Texture & Health; and our Health, Nutrition & Care business. As you'll see, ANH is not very much coming forward in the slides. It's now part of discontinued and the Dimitri and myself will be managing that business for cash until the closing has finalized, which we anticipate towards the end of the year. It will be positive in cash flow generation as well, and that's what we'll steer up on, and we'll continue to report on the cash performance going forward. Now a few things. Happy with the announcement on Monday, where obviously triggered the whole event of all of the restatements and we've been releasing the new numbers on Monday afternoon. So it is a lot to take in. We appreciate that. I think also if you look at our press release, we have been as elaborate as possible, giving you the full P&L, the balance sheet and the cash flow ahead of our annual report. In the Annex we've tried to bridge also between the total group and the continuing operations and show you all of the moving pieces. But we also appreciate that in a busy reporting season, maybe not everybody has restated it. In the Annex, on Page 21 and 22, we've basically also included a reporting as per the old world, including the divisions before restatement to accommodate you as much as possible. Now Dave and the team are happy to take your questions. The annual report next week, that Dimitri alluded to, will also be based on continuing operations that will allow you also to all adjust to the new world and then we move from there. Now let's dive in a bit how that new world has performed. But before we move there, I think this slide is an important one for me, where overall, you've seen the work and the outcome of all the activities around tuning of the portfolio, where on a group perspective, we've developed the group towards a 22% margin. It's very much in line with the trajectory that we envisage. But also you see the 3 BUs with P&B, TTH coming towards the lower end of our guidance, also very nice progress on those fronts. And HNC really showing a strong recovery towards that trajectory as well. And I'm happy, although that the restatement is a lot to take in, it does show that also going into '26, we've got the right reference on how we're doing as a company. Now let's dive in on the next page, please. Overall, the group, Dimitri already highlighted it, for full year overall 3% organic sales growth in not the easiest environment with a stronger H1 than H2, but encouraging growth throughout the year with the leverage in EBITDA, so a 5% step-up in EBITDA and has set the margin of 19.6%, very nice. But for me, it's more relevant as we're on a trajectory that the second half is at 20%. And that's something that we'll continue to improve on. If we look at Q4 specific for the group, overall, a 2% organic growth and a 3% step-up in EBITDA and a margin very much in line with prior. But I think it's more relevant to zoom in into the business units. But before we go there, also a highlight on cash. We delivered overall, remember that when we guided for a 10% target that, that was for the group. We've delivered upon that for the total group. So the total group was just over 10%, but also in the continuing operations, we've delivered upon that, and I'll comment that towards the end of my voice over. Another metric that I want to call out is that we talk about our capital returns. Overall, the core ROCE for continuing operations stood just over 11%, showing also the quality improvement on that front over the period. Now let's zoom in on the next slide, please, into the businesses, starting with Perfumery & Beauty. Overall, a 3% organic sales growth. Keep in mind that throughout '25, we obviously had the headwind in sun filters, where we've seen some softer conditions. Overall, adjusting for that, the sales growth is 1% to 2% higher throughout the year. And going into Q4, we've seen an improvement in sequential conditions with an overall 4% organic sales growth with a strong contribution of Fine Fragrance with a high single-digit growth and a more mid-single-digit growth and a more mid-single-digit growth in our Consumer Fragrance & Ingredients business, whilst the recovery in B&C did not come through yet, overall delivering a solid performance in our Perfumery & Beauty business. Margin overall, slightly impacted by FX and the mix effect as a result of that on a full year basis, very much in line at 22% on average despite a difficult exchange rate environment. Moving then on to the next page, please, to Taste, Texture & Health. Overall here, a very strong year. Again, 4% organic growth. Keep in mind, the comps of last year on the back of a very strong 2024, that translated again in a very nice step up in EBITDA of 7% year-over-year when adjusting for the FX. And also here, the margin is something we continue to improve margin positively, as said, towards the 21%, the lower end of the range, and we continue to progress from there. If we look at Q4, a bit impacted by softer conditions in the U.S. mainly. Overall, a 2% organic sales growth, still reflecting the contribution of synergies and very well positioned in the market, but we see, especially with our key accounts in the U.S., a bit of weaker. Overall, if you look at it from a segment basis, beverage, a bit softer, but dairy, baking at very strong and that continues. EBITDA quality very profound. Q4, a very nice step-up. Overall, a 10% step-up in EBITDA. And when adjusting for currencies and also the margin showed a very strong step-up versus prior, in line with the ambition that we have for this business overall. Then moving to Health, Nutrition & Care on the next page, please. Overall there, we often talk about the journey of Health, Nutrition & Care and also that journey continued. So on a full-year basis, continued growth of around 3% organic. A continued strong performance at the EBITDA side, a 4% step-up when adjusting for currency and also the margin continues to improve. You also see that in Q4, we again delivered a 20% margin for the business. The growth was somewhat impacted by timing of a bit more lumpy order in our pharma business. There is a bit of a shift there that overall, adjusting for that, the organic sales growth stood at 1% for the quarter, where we see a continued strong environment for Early Life Nutrition and our HMO business, but we also see the uncertain consumer behavior impacting a bit of higher dairy supplements and Eye health business in the fourth quarter. Overall, margin more or less flat as said in Q4. But overall, a continued trajectory of growth also in Health Nutrition & Care. Maybe then last, but not least, looking at cash, overall, important on the next page, please. Our cash performance -- sorry, before we go there, there was one more slide. I think here a lot of detail. I did want to come back on the overall performance of the group as well because I think that's important. It's a bit of a busy slide, but it's coming out of the press release. I think the key highlight here are two things. On the one hand, our adjusted EBITDA for the group, overall will land just below EUR 2.3 billion, in line with the guidance that we gave, set aside for a bit of weakness in Animal Nutrition in the fourth quarter and a deteriorating FX environment. Overall, we came in at EUR 22.80 billion for the total group, so very much in line from an overall perspective as well. And also on the tax side, you see that our rate is normalizing at 21% for the continuing operations where we aim to improve a bit further, I think, as relevant going forward. Then to the next page to our cash conversion. So overall, I think looking at a few drivers. Overall, working capital was below 29%, a little up versus prior when we talked about cash and the unwind of inventory in the second half. I'm pleased to report that our second half performance was very strong. Remember that we came out with the half year numbers with a softer performance in the first half, so happy to see that rebound. However, in the current environment, we were not able to fully absorb the uplift of inventory on the back of the tariffs and the carve-out activities that we've done. So that is to further unwind in '26 and causing us a bit of a percent in working capital. Overall, our sales to cash conversion for the continuing operations was also well above 10%. And there, we alluded to that in the first half, a bit of a shift, where in '24, you had a bit of a benefit from some timing of payments, including incentives, which is obviously then impacting '25. So -- but across the two years, a 12% performance, and we'll come back on that in the March 12th event where we will be stretching ourselves a bit further in terms of target setting on that front. But overall, an encouraging performance. And a good momentum going into '26. And maybe with that, Dave, we pause with the voice over and move to Q&A. Dave Huizing: Yes. Thanks, Ralf. Indeed, it is a good moment to start with the Q&A. [Operator Instructions]. And with that, operator, we can start. Operator: [Operator Instructions] Our first question comes from Nicola Tang with Exane BNP Paribas. Ming Tang: I want to start a bit with the outlook. I know you didn't give an outlook and we have to wait until 12th of March to get a bit more color. But I was wondering if you could talk a little bit about how the year has started across each of your continuing divisions. And you've given us a restatement for the past year, but is there anything to be aware of in terms of any changes in seasonality versus what we're used to for old DSM-Firmenich. I'll leave it there. Those will be my questions. Dimitri de Vreeze: Okay. Let me respond on that. Indeed, on March 12th, we'll give the formal outlook, but I can give you a little bit of color, and then you can prepare your outlook yourself before we go on March 12th. What you can expect from us on March 12 is that we'll go a little bit to industry standards. So we'll give you a bit of a range on where we see organic sales growth, the EBITDA quality as a percentage, and obviously, the cash percentage of which you were clearly indicating, all of you, that we felt that the 10% was right, conservative. So we're going to review that and come back to you in March on that. Well, a bit of color. What we have seen overall, before I dive in a little bit to the 3 business units and the 3 businesses. We've seen a bit of a cautious consumer behavior around the globe, but predominantly in North America, which is an impact on the Taste part of TTH and certainly dietary supplements and the eye health part in HNC. We'll come back to that in a minute when I'll give you a bit of color for BU. I think a 3% growth of the consumer in scope business for DSM-Firmenich is a good growth in the current market context, considering also the 6% growth we've done in the same scope in 2024. Now organic sales growth, 3% if that is in this current setup, we didn't see any change in trends from Q4 into Q1. So I think you can see that Q1, certainly for now half of February, we will not see a huge change from Q4 to Q1. We will know a little bit more in March. We'll give you the input, I think at the end of the day. A 3% in a year 2025 is a little bit the range where we've seen in a difficult market context, is what our business can bring, with a nice pipeline and growth going forward, still to the midterm target of 5% to 7%. And the BU presidents will also be there at March 12th to give you a bit of a feel of what is in the pipeline, what are the drivers? The fundamentals of the businesses are absolutely the same. We've all seen human mankind when uncertainty is there, they will start to be a bit more cautious. And there are two things of it. They either pile the stock or they destock. Pile stock, we saw during COVID. Now we see that destocking happening and then it normalizes over time. When it exactly will normalize, we don't know, but that normalization will take place, I think that is clear. Now, some color per business, Perfumery & Beauty. I think a good result in Fine Fragrance, high single digit. We see that continue. Mid single-digit growth in Consumer Fragrance, also there, with that trending doing well. Ingredients, for us, very good. Remember, mid single-digit growth after we've tuned the portfolio. We had a EUR 1.2 billion portfolio. We've tuned it, made deliberate choices where we want to grow. That ingredients we have are a big part, are specialty ingredients with mid single-digit growth in Q4. And Beauty & Care, the destocking effect fading out in Q4 and moving that into 2026, where we will see normalization going on. Now Taste, Texture & Health. Here, overall, a 2% growth in Q4, 4% for full year, with a 10% growth in the year before. So let's look a little bit about the 1 to 2 years trending with the comparison. Very good growth in pet food, in bakery and dairy. Also, dairy as a segment linked to healthy food. GLP, we really see a pickup there, a bit slow in beverages, but above all, in the North American region, that uncertainty has caused cautious behavior of consumers and therefore, also our customers, so we have seen North America being soft with destocking. Now then Health, Nutrition & Care. Health Nutrition & Care grew 3% for the full year, minus 1% for Q4, but you have to correct for that specific pharma order, which is sometimes in 1 quarter to another, it would have grown with 1%. Also here, predominantly the North America bit Dietary Supplement and Eye Health, Early Life Nutrition, Pharma, really, really doing well with good growth also on biomedical. So the fundamentals are still there. We've shown, build on what Ralf said, a 3% growth in a difficult market is creating a bit of confidence. So we're not giving an outlook, but we are giving you a lot of color to understand where we are heading for. Dave Huizing: Second question, Ralf? Ralf Schmeitz: Okay, yes. No, supplementing, I think Dimitri gave a better call. I think overall, Nicola, I think also, if you look at the Annex, then the impact of the restatement is very limited. So the regular seasonality will remain in place. Not that, that is very big, but on the back of the restatements, there's no fundamental change on that. Other than that, is that you now see the quality of the tuned portfolio. And if you look at the overall margin, fairly stable throughout the year and also from a growth perspective, not much of a deviation. Other than that, some of the a more volatile and weaker segments have now been restated. So that generally lifted the performance a little up. Operator: Our next question comes from Charles Eden with UBS. Charles Eden: My first question is more of a follow-up around sort of comments on Monday around the stranded cost of EUR 75 million that you mentioned. Would you expect this to mean that you start '27, I guess if we assume the deal closed at the end of '26, with a EUR 75 million headwind to continuing op EBITDA? Or do you expect to announce sort of another sort of top-up cost savings program to offset this amount, either fully or partially? And then second one, I'm just kind of follow up on the '26 guidance. And can I pressure a bit on the decision not to provide the guidance today. I guess, given the initial plan was to announce last summer, you've known the scope for a while when Ralf, as you mentioned, the restatement are pretty small for the continuing ops. So I'm slightly surprised you're waiting until March to give us that outlook. It just feels like it adds another period of uncertainty for your shareholders who've been patient and waiting for the disposal. So can you just help us understand that? Dimitri de Vreeze: Okay. Let me do the first one and then Ralf could explain the outlook. By the way, 12th of March is three weeks away. But apart from that, that's Ralf to respond. On the stranded costs, thanks for giving me the opportunity to elaborate on that. The stranded cost will have zero effect on our EBITDA. So we will compensate it for that. We have programs ready. We know when the TSA will run out. We'll take actions before. We've done it several times with many of the divestments we've done. So the EUR 75 million will be fully compensated for that. Maybe you see some small effects from one month to another, but we have road map, a road book where we exactly know what to do and how to phase that out. So that will not have any effect on our bottom line throughout the period. Ralf Schmeitz: All right. And let me then comment a bit further on the guidance. The short answer was of the Dimitri, it's only three weeks away. Now but on a serious tone, Charles, it's something that we looked at as well. But as you'll appreciate, we just closed the transaction literally over the weekend and then the restatement and the announcement of the deal. Obviously, when we want to guide, we want to guide for continuing operations. But I think also through the color that Dimitri gave is that we will be giving that guidance in full, including the BUs, but also about what is comprising of the businesseses, I think also a guidance today would kind of land in a territory where there's a lot of -- where people are still digesting all of the changes and going through. I mean, if you look at it, there's not even a consensus out there in terms of that around that new company. But rest assured, we are managing the business for growth. You said that it adds a period of uncertainty. I don't think so. I think with the voice of Dimitri, I mean, the color that we gave is in a difficult environment in '25, how we managed to deliver at least 3% growth. We will be managing the business for growth going forward. We will be tilting -- what Dimitri clearly said is that our guidance will be very much around organic growth, EBITDA, quality and cash where the cash target we will be uplifting, I think that is clear. And at the same time, the margin is a continued improvement story as well. We are happy with that the actions of tuning, also, if you look at the bridges that we presented at Capital Markets Day, there was a step-up of 2% of that. We have delivered on that. We're now at a 20% margin, but it's clear that we want to continue that trajectory also going into '26. So I think overall, there is comfort around that, managing the business for growth. We continue our margin trajectory and we'll be uplifting our cash performance. But then zooming in onto the full details and everybody had time to digest also the new reality and then we'll be bringing also the BUs that can then elaborate a bit more on our growth ambitions or innovation-driven ambitions. And with that, I think then, there's more purpose of giving you the outlook then on March 12. Charles Eden: Appreciate the color. I guess my point would just be we're going to recalibrate consensus now. And then maybe in 3 weeks, it needs to be recalibrated again. So it just creates a netbook. Anyway. I appreciate the color. Ralf Schmeitz: Yes. All right. Operator: Our next question comes from Matthew Yates with Bank of America Merrill Lynch. Matthew Yates: A couple of questions, please. The first one on the Perfumery & Beauty business. If I take the sort of continuing operations, I think the margins were down 80 basis points year-on-year. Can you just help us disaggregate that a little bit? You know, what was the FX impact on that? You talked about negative mix, but Fine was actually growing quite well. So, I guess, the mix isn't obviously a headwind unless, you're suggesting that beauty is a very, very high margin. And then the second question for Ralf around the cash flow. And I apologize, I'm not really sure how to phrase it because I haven't been through the accounts in a lot of detail. Your cash conversion was down about 3 percentage points year-on-year. It looks like about half of that is probably explained by working capital and then there's another half that I think, in your introductory remarks, you talked about timing. I'm just trying to understand, you're saying you're aiming to raise the cash flow conversion target. You've just done 10.5%. Like how would you honestly assess the cash conversion last year? What -- are there things that you think was depressing that conversion that we wouldn't necessarily extrapolate going forward? Just trying to get an assessment really about how much cash the business is generating? Ralf Schmeitz: Yeah. You want to take P&B? I'll take the cash. Dimitri de Vreeze: Yes. I think on P&B, it's rather clear. You basically said it's FX and it's mix. So remember that Fine Fragrance is around EUR 600 million out of the total. So obviously, we had a growth there. But Beauty & Care was lagging behind, softening, waiting for normalization. So it's a mix effect. That's about half and the other half is FX. Ralf Schmeitz: All right. And then building on the cash, and I appreciate the question, Matthew. Let me -- I think your assessment -- your quick assessment is a good one. So there's a few moving pieces around working capital. I commented on that in the opening words, around inventory, that we're not able to manage everything through. So we're carrying a bit about an elevated level. Inventory is about 1% differential. Last year, we continued to make good progress. This year, whilst the efforts were there to reduce it, I think, overall, the tariff environment and our carve-out activities cost an elevated level. Obviously, with a somewhat softer demand environment in the second half. So that's about EUR 100 million and accounts for half of it. The other moving pieces in working capital, generally on the payable side, I'm happy if you look at our DPO, it's slightly above 100. We're very much in line with prior. Receivables have been elevated as well. I think everybody is carefully managing the cash flow and that costs us a bit of half a point as well. So I think that assessment is absolutely fair. Half is working capital, and then I'm confident that we will be able to rebound that. And that's how I am also looking more at the cash flow over the 2-year period. If you look at the continuing operations, we included that in the press release, was 13% last year, now with 10.5% now on average, that lands very much at a 12% rate over this period. Now, what do I mean in terms of timing of payments? There's always a bit of an overflow from year-to-year. And sometimes that allows you to slightly perform better in one year, and then you see the rebounds next year. That's what we've seen. But if you go back to a half year call, I also explained that the incentives had an impact on that as well. On the one hand, '24 was a strong year, but the actual cash out is actually the year thereafter. So whilst at the same time, you have a bit of an elevated level of cash generation in '24 because you got the strong business results, but then obviously, you see a bit of a higher outflow in the first half of the year thereafter. So I think that's why you need to balance the cash over the 2 years to really see the current earnings performance, but at the same time, we have a continued step-up that we want to do in terms of working capital, but also CapEx. If you look at it, when we gave the prior guidance was always for the full group. We guided for 6% of sales. We landed spot on, on that figure. If you look for the continuing operations, it's slightly elevated because we're finishing the Bovaer plant, so that has, still a cash outlet this year and next year. But there's a potential that, that will normalize back to the 5% for the continuing operations, so that in itself was also 1.5% improvement. So I think we've got the levers. We'll elaborate a bit more on that on March 12th as well on what the programs are in place and where Dimitri and myself are focusing on and steering on, but there is a potential uplift for that target, and we know where that needs to come from. Operator: Our next question comes from Alex Sloane with Barclays Bank PLC. Alexander Sloane: Two questions from my side. First one on HNC, could you remind us roughly how much of the division ARA oil sales make up? And if you were to see significantly increased demand there from market share gains, given everything that's been happening, you know, can you talk to your capacity to service that demand and what that could potentially mean for HNC in '26? And then just the second one, just going back to Perfumery & Beauty and Matthew's question on the margin. I mean, was there any of that margin pressure that may be related to the kind of increased price competition in perfumery ingredients that we have seen at some of your peers. I think so far, you haven't really called that out, but just wondering if you can maybe touch upon that? Are you seeing any pressure on that front? Would you expect to see any pressure on that front? Dimitri de Vreeze: Thank you for those two questions. Let me elaborate on that. Thanks for the ingredients China part. You didn't hear us calling that out because it's not an issue for us. Now then you could do a follow-up question. Yes, but why are the others talking about it? Because we have tuned our portfolio already 2 years ago. Remember, we had a EUR 1.2 billion ingredient portfolio, where we have made deliberate decision not to rebuild Pinova. We have sold the aroma business. We have tuned down our portfolio. We've upgraded our portfolio and we have an EUR 800 million portfolio left in the ingredients, apart from the CapEx. So that EUR 800 million is predominantly specialties, fragmented, small molecules. And the pressure on China is on the big molecules, the menthol, the citral we were not in those big molecules because these big molecules, scale is important, cost is important, commodity type of elements are there. We don't want to play there. It's not our profile. We are in the Fragrance ingredients, in the fragmented ingredients, and therefore, you don't hear us call us out. And if you see at the results, the ingredients grow mid-single digit, and we're very happy with that. So that's why you didn't hear us calling it out because it's not an issue for us. Now then on your HNC part, I will be less specific because obviously, this is also a customer as well as competitive -- sensitive. We are the best-placed player in Early Life Nutrition. I think nobody would debate that. We are in ARA, we are in DHA. We now are absolutely the first entrants in HMO in China, but also more than HMOs in the pipeline to follow. And obviously, what we have seen on ARA is helping the story we tell Early Life Nutrition. Innovation is super important. Quality is super important. Credibility and reliability is super important. And I think DSM-Firmenich is always have -- always been that type of partner for our customers. And obviously, what is happening on the Early Life Nutrition market is helping us a little bit, and we will see a little bit of tailwind for that because I think it hints to what we want to be for the Early Life Nutrition phase. Now HMO, I spelled out earlier, that's a category where we see more than EUR 100 million-plus segment moving towards. And Early Life Nutrition, as part of our HNC business is around 25-plus percent of the portfolio. So it's definitely an area where we want to play, where innovation is important, where premiumization is important. Just to give you a bit of reference, everybody is always asking, oh, Dimitri, Early Life Nutrition is bad because birth rates are going down. The issue is that the premiumization with new ingredients is going up, the ingredients play into the Early Life Nutrition has seen very, very healthy growth in the last two, three years if you're there with the right innovation. Let me pause here. Operator: Our next question comes from Fernand de Boer with Degroof Petercam. Fernand de Boer: Yes, I also had a question on Early Life Nutrition, but that was answered. But on the new company of the continuing operations, how much of your cost base is actually in Swiss franc? Ralf Schmeitz: Great question. Overall, our FX profile improved. Well, normally, you get a slide from me with the housekeeping indicating that a bit as well. I think overall, the dollar exposure came down to about [ $13 million ] , that was previously closer to [ $15 million, $16 million ]. So that has somewhat improved. And on the Swiss franc, our overall exposure was CHF 800 million, it's now CHF 600 million exposure. Overall, the impact of [indiscernible] is about CHF 6 million, I think that was previously CHF 8 million. So somewhat improved profile on the FX side. Obviously, the current environment is not very helpful. So we will see an impact of that. But overall, the sensitivity has improved with the separation of ANH. Fernand de Boer: And maybe to come back on the guidance question. The fact that you don't give a guidance today for '26, absolutely does not mean that you are going to change your midterm guidance of ambitions? Dimitri de Vreeze: The answer is for 2, yes, and for 3, no. OSG, no change midterm. EBITDA, no change, midterm. And you wanted us to change the midterm guidance on cash because we said above 10%. And we got so much comment that, that was absolutely conservative, et cetera, and Ralf and myself, said listen, we are also building a company, so we start with more than 10%. And I think during that event, I also asked for a little bit of patience. Now, we have delivered 2x above the 10%. And I think I've heard Ralf saying that we would upward adjust that cash target. But let's have that for March 12. So 2 out of 3, absolutely, yes. And the third one, a yes, but it will be changed upward. Fernand de Boer: Midterm still the starting point is '24? Dimitri de Vreeze: The midterm starting point in '24... Fernand de Boer: Because actually in 2022 you gave the guidance for midterm and then in '24, you did actually the same for a smaller company, but not that you now mean with midterm, okay, we're going to have midterm targets, and then the starting point is '26. Dimitri de Vreeze: No, because we're already in '26. By the way, we've always said a midterm target starting run rate into '28. So that is what we said and that's still consistent. It's not a moving target. Yes, it's not like my son saying, I will pass my exam, but not this year, but next year. Fernand de Boer: Okay. Dimitri de Vreeze: You don't sound very convinced. Fernand de Boer: Well, what I said, we had '22 and then it was midterm and then in '24, it was also still midterm, and that's why I'm asking that -- okay, the answer is very clear, thank you. Dimitri de Vreeze: Yes. '22, the company didn't exist as we are today. So we started in May '23, that is... Operator: Our next question comes from Chetan Udeshi with JPMorgan Securities. Chetan Udeshi: I have two. The first one is quick. Is there any implications on your tax rate, excluding animal? I mean, I suppose animal wasn't making much money anyway. So -- I would guess, but just to clarify, the second question is your cash target, and I appreciate you'll probably upgrade that conversion target, which is good to see. But it's based on your adjusted numbers. And I'm just curious, as we go past this phase of restructuring and separation. What is the level of APM that we should have in mind that sort of leaks out from your adjusted cash? Because when I look at what you give us in terms of adjusted free cash flow versus what we can derive just taking your cash flow statement, the numbers are pretty different, and I would hope, over time, that gap reduces. So I'm just curious what would be the normal level of APM that we should have in mind? Ralf Schmeitz: Yes. Thanks for questions, Chetan. So on the tax side, overall, I made a quick comment in the opening statements. So overall, our effective tax rate for the continuing operations is at 21%. I think previously we guided for 21% to 22% for the total group. Happy that we came in on 21%, and we continue to aspire to minimize the leakage on that front, but this is very much in line with the guidance that we gave before. So the impact of the separation of ANH despite having, of course, its base in Switzerland didn't adversely impact the company, which is good. And again, I think that's also going to be the guidance going forward, in that same range that the tax will be around that 21% level. Now then, with respect to your APM questions. I think in the Annexes of the press release, you can actually see the APM development as well. Now obviously, throughout these tuning activities, you're rightly so, we had a bit of leakage. And normally, when you transform, there is a bit of a cost associated to that. We took that into account in the company that we want to build. But over time, from a cash perspective, you see it coming down. It's a constant point of attention, also for Dimitri and myself, we don't want any leakage on that front. We have substantially reduced it over the years from '23 to '24 to '25 also with some of the merger costs flowing out. And the guidance for '26 is that it should come down to below EUR 100 million, but we continue to stay focused on it to reduce it as much as we can. So the adjusted number comes closer and closer to the nonadjusted figure. Dave Huizing: We're now at the end, I think we are at the end of the Q&A session. Maybe closing remark, Dimitri, you want to make? Dimitri de Vreeze: No. Thanks, Dave. Indeed. Thanks for your time. Thanks for your understanding. Let's dive into the numbers. Please reach out to IR to really understand. I understand there's a little bit of pushback why we don't give an outlook. Now, you need to establish a full understanding of the base before you give an outlook. Imagine we've given an outlook, you would have asked based on what? So let's do step 1 first, March 12 is around the corner. We gave color on the business. I think at 3% in a difficult year. That's what we inspire to. So even to the midterm target, when business is normalizing, is absolutely in play with an EBITDA trajectory starting from 18% to 19%, close to 20% and we will not stop after 20%, we move towards the 20% to 23%. And I think with the cash we clearly indicated that we'll listen to you and that we'll come with a new midterm target on the cash as well as in the outlook for 2026. Now with all that, over the last 2.5 years, I think we worked diligently to bring DSM-Firmenich into the next phase, a EUR 9 billion business with today already at 20 -- around 20% EBITDA with good cash flow generation. To the point on what's a normalized APM is also linked to what is the next phase? The next phase will be accelerated. We will not go for big M&A, we're going to grow what we have. So we're happy with that portfolio. We're going to show that potential with an improved step-up still from the EBITDA from 20% to the range of 22% to 23% with good cash flow generation and with a clear understanding for our investors. We have paid around EUR 2 billion of dividend over the last 2 years. It is important to us. If we have additional leverage on the balance sheet, we are doing share buybacks. We finished the EUR 1 billion. We'll add another EUR 0.5 billion already in anticipation of the close towards the end of the year. So we also take that very seriously, and I hope we all see you on March 12 to show that what we have built has huge acceleration potential. And with that, let's close the call. Dave Huizing: Okay. Thank you, Dimitri. Thank you all for attending today's call. And with that, we can close the webcast. Any questions, as the gentleman already said, make times, please reach out to Investor Relations. We will pull a consensus ahead of 12th March, so that also we will then give basically an outlook on basis of that you've referenced to your estimates. Back to the operator, please. Operator: This concludes today's call. Thank you, everyone, for joining. You may now disconnect.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Mullen Group Limited Year-End and Fourth Quarter Earnings Conference Call and Webcast. [Operator Instructions] the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Murray K. Mullen, Chair, Senior Executive Officer and President. Please go ahead. Murray Mullen: Thank you. Welcome, everyone, to the year-end 2025 conference call. Now this morning, we released our results for 2025, along with the annual financial review and audited financial statements, which is a nice 120-page condensed document that's full of detailed numbers and analysis prepared by our team headed up by Carson Urlacher and Nik Woodworth. So we also uploaded the annual information form. It's a 60-page detailed document relating to Mullen Group. Now these documents contain updated information and are available on SEDAR+ and on our website, www.mullen-group.com. So this morning, I'm going to remind everyone that today's presentation and commentary contain forward-looking statements that are based upon current expectations and are subject to a number of risks and uncertainties. And as such, actual results may differ materially. Further information identifying the risks, uncertainties and assumptions can be found in the disclosure documents. This morning, I'm joined here in Okotoks with the entire senior executive team. I've got Richard Maloney, who is the Senior Operating Officer; Carson Urlacher, Senior Financial Officer; and Joanna Scott, who's our Senior Corporate Officer; and my name is Murray Mullen, I'm the senior Executive Officer. On today's call, I'm going to change things up in an effort to make this call as relevant to you as possible. We are going to head straight to the Q&A session because there's nothing new that we can add about 2025 that you haven't already heard, we haven't discussed or we haven't disclosed. So why repeat what we pre-released on January 19, 2026. Nothing has changed. 2025 was challenging across all four segments, no growth, basically -- which basically meant pricing came under pressure. So what did we do? Well, our business units had no choice but to tighten up. A measure that mitigated the downward pressures that we felt in the market. And at corporate, we completed two acquisitions. The net result was record revenues. And when the economy rebounds, when Canada and the U.S. come together again as friends and business partners and when Canada finally lives up to the nation building commitments, we will achieve record earnings. Okay, enough about '25. Some of you have joined the queue, and I don't want to keep anybody waiting. And besides, I do not like to waste people's time, especially this morning. So operator, let's open the Q&A session, please. Operator: [Operator Instructions] The first question comes from Cameron Doerksen with National Bank Financial. Cameron Doerksen: I guess I wanted to ask about the industry dynamics. One of the things you've kind of highlighted both in your 2026 outlook a few weeks ago, but also today is some industry capacity tightening. I wonder if you could talk a little bit more about what you're actually seeing out there in the market? Are you seeing some actual tangible evidence of this happening with the increased enforcement and maybe some financial difficulties with other players? Just any color you can provide on what you're seeing in the marketplace? Murray Mullen: Yes. Cameron, when we were preparing for this meeting, we thought that might be the question. One of the questions that would come from the analyst community is what is really happening out on the ground today -- and we highlighted that these things have to happen for supply and demand fundamentals to change. So January is really difficult to provide a full measure on, Cameron. First of all, you're coming out of the starting the year and everybody is on a diet of spending diet after spending everything in December. And so January is always a difficult month to judge. Secondly, you had some nasty weather back east that really impacted a lot of business. And so not a good judge. But I don't think we've seen anything up north that would tell us that capacity has tightened in a meaningful way. And we're waiting to see what will happen later. I think March is more of a telling quarter, Cameron, to be honest with you. January is a difficult, difficult month. February is a short month. We would need to see some meaningful recovery in demand in March. I think everybody is saying the same thing. Now let me just pivot for a second because we were down with our holistic folks down in the U.S. and it's a different story down there, Cameron, than up in Canada. There's no doubt capacity is tightening in the U.S. And there's no doubt that they have a stronger demand fundamentals. So we've heard evidence already that there's been some quite a significant change in the spot market pricing, not on contract pricing yet, but on spot market pricing down in the U.S. I haven't seen that in Canada yet. Hopefully, that helps. Cameron Doerksen: No, that does. I'm just wondering about maybe on the pricing front in Canada. I mean, obviously, still under pressure in fourth quarter, and it sounds like you're not seeing any major change yet. But I mean, I guess, any conversations you're having with some of your customers about what their expectation is for pricing in 2026? I mean, does it feel like it's potentially going to get better? Or are we at this point, sort of thinking that's going to be more flattish? Murray Mullen: Cameron, I honestly think that everybody is still kind of like the gear and the headlight scenario. We just don't know what to do because there's no clarity. So I'm concerned about that. We can't get anything from our customers. Yes, everybody is just sitting and waiting. We're waiting for something to happen rather than making things happen in this country, and I can understand why. I think everybody knows the -- all the dynamics that are going on. We don't have to beat that one to death. But I can say to you in discussions with our peers and with our customers and whatever, there's more optimism that's going to change. And maybe that's hope by midyear that, that changes. But for right now, it hasn't changed yet. Everybody is still sitting on their hands. So that's in Canada. It is significantly different down in the U.S. market. And of course, most of the data that you -- that we all look at, all of this comes from the U.S. market, all the and everything. But up here, it's still pretty loose up in Canada, Cameron. Operator: [Operator Instructions] The next question comes from Konark Gupta with Scotiabank. Konark Gupta: You mentioned, Murray, about the capacity situation in Canada and U.S. I mean, I understand, obviously, U.S. had moved a little bit faster maybe because they also saw the big surgence in capacity over the last few years. So it's a bigger peak and a deeper trough in that sense. But for Canada, like the driving situation seems like the government is trying to address that. I don't know how far they got there. But what's really the stick point in Canada on the capacity side? I mean, like did we not increase capacity so much that we don't have to decrease a lot? Or is it something else? Murray Mullen: I would think that the U.S. system is it's more geared toward animalistic instincts. I mean they -- if you're not surviving, there's been a lot more bankruptcies down in the U.S. than there has been in Canada. Now I mean, it's a bigger market. So you would expect that there would be more bankruptcies and more consolidation. But it's happening quite regularly and quite frequently in the U.S. that tightening the capacity just because it has been very, very competitive. And there have been a lot of failures down in the U.S. that tightens capacity. At the same time, they're addressing the English proficiency test and some other things that we're not doing -- we're not going to do that in Canada. That's not the way we do it. So I suspect the capacity won't tighten quite as fast in Canada as it will in the U.S. That's my expectation. But you need capacity to tighten to get rates up, Konark. That's just the reality. So is capacity going to tighten because we have a really strong economic growth in Canada? I don't think your firm or any firm that I've seen is predicting huge economic and growth in Canada in 2026. So is it going to tighten on the supply side? We've seen some failure. Not many, but a few, but not like you got in the state. -- they come in and see us and they talk to us when they get into trouble. But we haven't seen enough. I think that capacity -- we need to see a lot of tightening. And if we're waiting for the federal government and the governments to tighten the capacity, I'm not holding my breath on that. from that. But it's going to tighten this year. There's no doubt about it. I can't predict exactly when, but it is going to tighten because it is tough as nails out there on a lot of our competitors. Konark Gupta: Makes sense. And then on your 2026 outlook that you guys put out last month, I just want to understand how you're parsing out the top line growth drivers there. So I mean, I think you're assuming about, call it, 10% top line growth, give or take, in '26, and I think a good chunk of that, maybe 400 basis points or so is coming from the acquisitions that you have done last year, right? So the remainder, about 6 points of growth this year. Is it more dependent on new M&A or it's a market recovery that you're betting on? Murray Mullen: Well, Carson, I think, yes. It's -- we've got to do some M&A and on that note, we've already started with that. There's no -- Cameron or Konark, we've said for the last little bit, the only viable way to grow when the economy is not growing until capacity tightens as you got to do acquisitions, which we did last year, I suspect we'll have to do some more in 2026. And guess what, we put the balance sheet in a really good position, Carson, to make sure that we could grow at the corporate level, even though the economy is not giving us anything. And we did a couple already this year. Carson? Carson Urlacher: Yes, we did. And both of those being in the S&I segment, whereas we were not aggressive with doing acquisitions in the S&I segment in 2025. I think with respect to the guide that we came out with, Konark, that was really based on same-store sales. And if you kind of go division by division or segment by segment, LTLs, we're projecting relatively flat year 2026 versus 2025. Logistics and warehousing is going to be up, and that's really due to the timing of when we acquired Cole and the Cole Group. Specialized, we're showing a little bit of growth going into 2026 versus 2025 for a couple of reasons. You'll see there's a lot of CapEx that we put into that segment in the latter part of 2025 with our Envolve Energy Group to increase the capacity of our disposal facility. In 2026, we're projecting that there's going to be some additional turnaround work that was nonexistent in 2025 that producers basically pushed off our Canadian Dewatering group within the S&I segment, we're also positive with them on mining projects and the like that going into 2026. So those are types of the differences that we're seeing our U.S. 3PL segment, obviously, some growth in there as well, too. And that, again, is due to the timing of the acquisition of Coles. So most of it is growth that we're not seeing from new acquisitions. We've done a couple. We've done some tuck-ins that we -- in verticals that we like with fluid management with our Thrive group and a nice tuck-in in an area that we see is conducive to greater drilling activity going forward. Murray Mullen: On Thrive, I think investors and shareholders will recall that we we're an investor in thrive. And we completed the rest of that transaction with Brian, Eric and rest of the team and the shareholder group, and they joined our group. So we're now 100% owner of that business. And then in the water management business, primarily tied to some industrial but to the oil and gas sector. Carson Urlacher: More upstream related. Murray Mullen: Yes. So we really like -- these folks did a fantastic job of growing that business. That was one of our better private investments that we've ever done. just a great team. In fact, on that note, Brian is going to join our corporate team, and he's going to head up all of our water and fluid initiatives that we've got going on because that is a vertical that we think is investable and has good fundamentals to it. So we want to accelerate our investments in that sector. So we welcome the Thrive team, and we welcome Brian head up those initiatives on behalf of our organization. He's a pure -- he's an entrepreneur because he built it from nothing. So we like -- he joined us, so we're really happy with that. And if you look back at last year, we said, okay, you got to -- the segments that we have, we held our own in LTL. I think we'll hold our own again this year in LTL. L&W acquisitions drove that growth. U.S. 3PL acquisitions drove that growth. In the S&I segment, we didn't do any acquisitions. And guess what? It was tough as nails and it was down. Well, this year, we've already done two acquisitions in S&I. So we know that acquisitions is the way to position for the future. The key to acquisitions is it backfills revenue, as I said. It gives us revenue growth, but you're positioning for the future when it does tighten, when it does turn, when capital nation building projects go to working capital. That's when our shareholders will really benefit and they'll see the wisdom of why we did the acquisitions that we did. So that's coming, but you've got to get ahead of the curve, and we have. And thankfully, we have the balance sheet to do it. So we'll continue to do really thoughtful acquisitions this year, and that will drive our growth. And our business units that we've got our existing 42 up to 44 now. They will be out there, and they're going to grind it out. The -- we're in contact with them all the time. They know what the game plan is for this year until the market gives us a little bit of a better lift. Until then, you just got to grind it out, Konark. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Mullen for any closing remarks. Please go ahead. Murray Mullen: Okay. Thanks, folks for joining us. It was a quick meeting today. But as I said, everybody is -- we've debated the issues for too long. Everybody knows what's going on. We're 100% focused on what we have to do this year, and we look forward to chatting with everybody and giving an update in April as to how the first quarter worked out and how the rest of the year does. Until then, thank you very much for joining us. Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Good morning. My name is JL, and I will be your conference operator today. At this time, I would like to welcome everyone to the Entergy's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]. I will now turn the conference over to Liz Hunter, Vice President of Investor Relations for Entergy Corporation. Liz Hunter: Good morning. Thank you, JL, and thanks to everyone for joining this morning. We will begin today with comments from Entergy's Chair and CEO, Drew Marsh; and then Kimberly Fontan, our CFO, will review results. In today's call, management will make certain forward-looking statements. Actual results could differ materially from these forward-looking statements due to a number of factors, which are set forth in our earnings release, our slide presentation and our SEC filings. Entergy does not assume any obligation to update these forward-looking statements. Management will also discuss non-GAAP financial information. Reconciliations to the applicable GAAP measures are included in today's press release and slide presentation, both of which can be found on the Investor Relations section of our website. And now I will turn the call over to Drew. Andrew Marsh: Thank you, Liz, and good morning, everyone. The last couple of years have been transformational for Entergy. While 2024 reshaped our long-term expectations through historical new demand for power, 2025 was affirmational as our success has continued. Today, I'll highlight our 2025 achievements and discuss our ongoing efforts to successfully execute on our customer-first strategy that creates value for all stakeholders. Starting with the financial results. We are reporting 2025 adjusted earnings per share of $3.91, which is in the top half of our guidance range. We continue to expect greater than 8% adjusted EPS annual growth through 2029, and our transparent outlook provide specific expectations by year. Turning to the customer. Our initiatives to improve customer experience have yielded positive results. Based on J.D. Power data, Entergy's utility remains in first quartile for Net Promoter Score for both residential and business customers. Three jurisdictions were in the top quartile for residential NPS and Entergy Texas was ranked #1 in customer satisfaction for business electric service in the South among midsized utilities. Our work to meet our customers' needs while maintaining low rates is being recognized, and this will remain a key focus for us going forward. We had 4% sales growth in 2025, driven by a 7% increase in industrial sales, continuing a long history of strong growth rooted in the advantages of our service area. We anticipate the sales growth trend to accelerate an expected 8% compound annual growth rate through 2029 from 2025 and driven by 15% industrial growth. Last year, we signed electric service agreements totaling approximately 3.5 gigawatts. There were several noteworthy customer announcements, which give us confidence in our outlook for growth from data centers and traditional industrial segments. Customers achieved important development milestones, including those in the steel, petrochem and LNG sectors. In fact, with Hyundai Steel's $5.8 billion planned investment in Ascension Parish, Louisiana earned Business Facilities Platinum Deal of the Year, the first state to accomplish the feat 2 years in a row after the Meta AI data center project in 2024. We also had new data center announcements in Arkansas, Louisiana and Mississippi, including both colocation developers and hyperscalers. Entergy's service area remains attractive, starting with our low electricity rates and vertical integration, business-friendly environment, welcoming communities and proven workforce. Our geographic location provides access to diverse energy sources and robust infrastructure that are attractive to industrial customers. Our integrated stakeholder engagement is also an advantage as we bring parties together to discuss potential development solutions and a common understanding of benefits. We continue to have meaningful conversations with potential new customers to secure additional growth to benefit all of our stakeholders. And our pipeline is unchanged at 7 to 12 gigawatts for data centers and 3 to 5 gigawatts for other industries. We have clear line of sight on equipment to serve 8 gigawatts of incremental load above our current plan. We've also confirmed EPC engagement for projects in our outlooks and beyond. Entergy has distinguished itself with a long history of greater than 5% compound annual large industrial growth over the past 16 years. We know how to attract new business and serve new large low customers while delivering positive outcomes to all our stakeholders from operational execution to affordability. The economic development activity has paid off as all of our states achieved record employment milestones in 2025. From the beginning, our hyperscale electric service agreements were developed with guiding principles that account for both the new customers' goals and impacts for our existing customers and communities. For our residential customers, we estimate the data center contracts in place today will generate approximately $5 billion in rate offsets from their fair share of contributions to fixed costs during the life of the contracts. That equates to more than $5 per residential customer per month on average, and that has the potential to grow with additional data center contracts. Customers will also see improved reliability and resilience from new generation and transmission infrastructure built to the latest standards. In addition, new, more efficient power plants will lower fuel costs for all customers. Our operating companies have implemented programs such as Superpower Mississippi and Next Generation Arkansas made possible by data center revenues that will improve reliability and reduce outages for all customers in those jurisdictions. Our long-term data center contracts include early termination penalties and minimum bills to ensure that other customers aren't left to pay for investments needed as a result of adding large loads to the system. Plus, on their own, these customers will create real value for our communities, including benefits from jobs and increased tax base and economic development. These are just a few examples of how data center growth is enhancing Entergy's efforts to support customers and communities every day. Beyond data centers, our operating companies have implemented many other ways to help manage customer rates and benefit our communities. That starts with cost discipline, including an ongoing focus on O&M efficiency and scrubbing our capital projects to ensure the best outcomes for customers. Our teams work closely with regulators to manage bill levels and volatility, which includes use of tools like deferred fuel collections, state and federal grants, tax incentives, philanthropic support and securitization. Our operating companies also proactively engage customers to ensure they are aware of programs to help manage bills, including energy efficiency programs, LIHEAP funds for qualifying customers and our Power to Care program for low-income seniors. Currently, we are exploring new rate offerings such as demand response and time of use rates to complement our average bill and deferred payment options. This year, our employees delivered more than $100 million in economic benefits to the communities we serve through philanthropy, volunteerism and advocacy. That includes our employees volunteering for approximately 170,000 hours in our communities last year, the equivalent of roughly 81 full-time employees. Our employees are also focused on delivering benefits to customers from our 4-year capital plan. Because of our track record, we know what it takes to successfully execute large projects. With a $43 billion capital plan through 2029 to support customer needs, we have a sizable build cycle ahead. In 2025, we invested $8 billion to benefit customers with about half of that in generation. That includes significant work on Orange County Advanced Power Station, which is entering the final stages ahead of a summer in-service date and Delta Blues in Mississippi. Looking ahead, new generation is a big part of our customer-centric plan. We have several projects in early stages that will come online in the next few years, including Franklin Farms Units 1 and 2 and Waterford 5 in Louisiana, Legend and Lone Star in Texas, Ironwood in Arkansas and the Vicksburg Advanced Power Station and Trace View in Mississippi. We also have 5 owned and contracted solar resources approved or in progress totaling 740 megawatts. Including gas, solar and battery storage, we have nearly 9 gigawatts approved and under construction towards our planned 13 gigawatts of new capacity to serve and support customers over the next 4 years. In 2025, our nuclear fleet operated safely and reliably, achieving a 90% unit capability factor. All refueling outages, including major turbine and generator projects were completed on schedule. The team also delivered more than 35 megawatts, sorry, of additional clean capacity from plant upgrades and replacement of older equipment. Looking ahead, at Waterford 3, previous investments in low-pressure turbines have paved the way for a 45-megawatt upgrade later this year. Turning to energy delivery. We invested about $3.5 billion in 2025, which includes accelerated resilience projects to support customer growth and to improve reliability. Thus far, we have invested $800 million in approved accelerated resilience work, including 17 substation upgrades and 59 line hardening projects, upgrading more than 15,800 structures. In total, our 4-year $17 billion customer-led energy delivery capital plan includes new construction on more than 570 miles of 500 kV lines and 175 miles of other transmission lines as well as investment in new substations. This also includes $1.4 billion of approved projects to harden more than 45,000 assets. System resilience is a key area of focus, and we are planning to continue progress on delivering that value to customers. To that end, Entergy New Orleans filed an application for the second phase of its resilience program, requesting approval for up to $400 million in projects. While we have and will put forward recommendations for projects that have both resilience and cost benefit value for customers, we recognize it's important that we balance near-term affordability with the need to continue to strengthen our system. The topic of reliability is never more in focus for us and our customers than when faced with the storm. A couple of weeks ago, Winter Storm Fern affected our service area, particularly in North Louisiana and Mississippi. Throughout the event, we worked closely with state and local leaders to stay aligned on our restoration efforts. Our generation fleet operated well, providing critical energy to serve customers who could take power. At the same time, our distribution and transmission lines were impacted by significant ice accumulation well over an inch in some places. Fern disrupted 170,000 of our customers. But ultimately, we restored power for more than 360,000 cumulative outages because many customers were impacted multiple times due to ongoing tree damage from the heavy ice. Damage resembled a strong hurricane, but with more dangerous icy restoration conditions afterward. In fact, we replaced more poles, more miles of wire and repaired more substations than we did for Hurricanes Barrel or Francine in 2024. Our employees, contractors and mutual assistance workers performed very well in these dangerous and difficult conditions. I sincerely appreciate their hard work and dedication to safely and quickly bring power back to our affected customers. Legislative and regulatory processes support our ability to successfully execute initiatives to provide long-term benefits to our customers. In 2025, Arkansas passed the Generating Arkansas Jobs Act, which materially improves utilities' ability to make critical generation and transmission investments needed for economic development in the state. The act paved the way for assets like Jefferson Power Station and the Cypress Solar and Battery project. Meanwhile, Texas passed legislation enabling rider recovery of MISO capacity costs, which historically were recovered in base rates. A year ago, I said that our 2025 regulatory calendar would be busy, and it was. Our regulators made tremendous headway to benefit our communities and to advance customer growth. They approved routine updates to base rates and riders as well as major transmission projects and new generation, both modern gas and renewables. All of these projects will modernize our infrastructure, provide customer reliability benefits and support growth that's critical for our communities. Our regulators are considered -- also considered policy issues aimed to promote economic development. For example, the Louisiana Public Service Commission in December voted to adopt a policy proposal referred to as the Louisiana Lightning Initiative, which provides a path for utilities to efficiently meet the needs of large new loads. The rule allows for RFP exemptions and an expedited review in specified situations with all actions subject to prudence review. This policy will align with Louisiana's broader Lightning Speed initiative to better coordinate among critical state permitting offices, allow us to bring new customers online faster, which will attract new business to Louisiana. You may recall that Arkansas and Mississippi also adopted rules and processes to foster economic development and attract projects that have speed to market as a top priority. There are a few other regulatory updates since our last earnings call that I'd like to highlight. The Arkansas Public Service Commission approved the special rate contract for Google. They also approved construction of the Jefferson Power Station and established a benchmark against which to measure the cost. In December, Entergy Louisiana filed a request to acquire the Cottonwood facility with an upfront purchase price of $1.5 billion as well as $300 million of investment for maintenance and improvements. This is an attractive opportunity to acquire additional energy and capacity sooner and at a lower cost than a new build alternative as Louisiana continues to experience significant customer growth. We requested a decision from the LPSC by the end of this year to allow for an acquisition early next year. In November, Entergy Louisiana also filed a request for approval to construct the Segno and Votaw solar units. These projects were safe harbored earlier this year -- earlier last year and will be attractive resources to support customer clean energy demand. For our 2026 regulatory calendar, we're planning for another productive year. In addition to the projects I just mentioned, we have 4 major generation and transmission projects that are awaiting commission decisions in the year. Arkansas Cypress Solar with battery storage, the Babel to Webre 500 kV project and the Waterford 6 and Westlake combined cycles in Louisiana, which were filed yesterday. Later this month, Entergy Arkansas will file its first base rate case since 2015, following 10 years of formula rate plans. Our current expectation is to request a rate change of well below 3%, and it could be lower for residential customers, which will support our continued efforts to invest for the benefit of our customers while being mindful of affordability. Our goal is to receive a commission determination by the end of this year for rates effective at the beginning of 2027 and a renewed formula rate plan starting with the 2028 forward test year. The formula rate plan benefits our customers and other stakeholders through predictability and ease of implementation while supporting continuous regulatory oversight. In addition, we expect to implement the Generating Arkansas Jobs Act rider for the next few weeks, supporting economic development. And the combined total rate change for residential customers between the rider and the rate case is expected to be at or below recent FRP rate changes and also maintain Entergy Arkansas' competitive position with rates well below the national average. Mississippi, New Orleans and Louisiana will file their formula rate plans between now and May, and Entergy Texas expects to request updates to its transmission and distribution riders as needed. Entergy Texas also plans to utilize the generation rider after Orange County Power Station is placed in service, which will trigger a base rate case in 2027. 2025 was an affirmational year, building on our continuing transformation. I appreciate everything our employees have done to create value for our customers and as a result, all of our stakeholders. As we move into 2026, we will continue to put the customer first in everything that we do. Before I turn it over to Kimberly, I'm excited to announce that we will host an Investor Day on June 9 in New York City. We will continue the conversation on the significant opportunities that we see ahead, including 5-year outlooks as we've done in the past. And now Kimberly will review our 2025 financial results as well as our outlook. Kimberly Fontan: Thank you, Drew. Good morning, everyone. As Drew said, 2025 was another important year in our growth journey. I'll review our 2025 results and then provide an overview of 2026 and our longer-term outlook. Starting with earnings, our adjusted EPS for the year was $3.91, as shown on Slide 4. Our results reflected strong sales growth and the effects of investments made for our customers. The increases were partially offset by higher other O&M and an increase in our share count from settling equity forwards. Earnings contribution from sales growth for the year was positive, including the effects of weather. Excluding weather, retail sales increased approximately 4%. Industrial sales were the largest contributor at around 7%, including sales for new and expansion projects that continue to ramp up their operations. The highlights of our 4-year plan are shown on Slide 5. Our retail sales outlook remains very strong. Off of 2025 weather-adjusted results, we expect 8% retail sales compound annual growth, driven by 15% industrial growth through 2029. Data centers are the primary driver, along with growth from a variety of traditional Gulf South industries, including transportation or LNG, primary metals, industrial gases, petrochemicals and agricultural chemicals. As a reminder, we take a conservative approach with hyperscale data centers. We only include them in our plan once we have an ESA in place, and we include them at the minimum build levels. Our customer-centric capital plan is now $43 billion, $2 billion higher than our preliminary plan presented at EEI. The increase includes the investment for the Cottonwood Generating Station that Drew mentioned. For 2026, our capital plan is $11.6 billion, approximately $3.6 billion higher than 2025, reflecting the step-up in investment to support our customer growth. The equity associated with our 4-year plan is unchanged at $4.4 billion at the lower end of our target range of 10% to 15% of the total capital plan. Our forecast also includes $1 billion of hybrids in the back half of the forecast. We have been proactive in addressing our equity needs, selling forward contracts through our ATM program as well as the block transaction we executed last March. We've taken significant price risk off the table, and we have ample time to raise capital. For our 2026 through 2029 equity need, about 45% is already contracted, meaning we wouldn't need to transact again until well into 2027. In February, after year-end, we settled an additional $345 million or about 4.6 million shares. We are using those funds to continue to invest for the benefit of our customers. Slide 6 summarizes our credit ratings and affirms that our credit metric outlooks remain better than rating agency thresholds. For 2025, we estimate that Moody's cash flow from operations free working capital to debt is greater than 17% and S&P's FFO to debt is approximately 16%, both well above the agency's thresholds. Moody's metric includes approximately $550 million for nuclear PTCs that were monetized in 2025. Without the PTCs, 2025's estimated Moody's metric is still well above our 15% target. Based on final MISO prices and strong nuclear production, we also recorded nuclear production tax credits in our 2025 results. We plan to monetize these credits in 2026 and estimate that the net proceeds will be approximately $215 million. Tax credits will ultimately provide benefits to customers. Beyond 2025, our credit metric outlooks are strong with FFO to debt above our thresholds throughout the outlook period, achieving our 15% target for Moody's metric during the period, giving us capacity to manage events in the business as they occur. As a reminder, because the value of nuclear PTCs is highly dependent on average revenue per megawatt hour, we do not include cash benefits in our cash flow or credit metric outlooks beyond 2026. Our financial health is bolstered by all the work we've done to strengthen our balance sheet and create benefits for customers, including structuring large customer ESAs to protect existing customers and our credits, improving our pension funded status and receiving constructive regulatory mechanisms. As Drew discussed, in late January, Winter Storm Fern impacted our service area. Our preliminary estimate for restoration cost is up to $300 million for Louisiana, up to $200 million for Mississippi and approximately $60 million for Arkansas, the majority of the cost being capital. Our current expectation is that these costs will be recovered through normal mechanisms. Our adjusted EPS guidance and outlook are shown on Slide 7. Throughout the outlook period, we continue to see very strong growth, driven by our customer-centric capital plan and our long-term compound annual growth remains strong at greater than 8%. Slide 8 provides additional detail behind our guidance assumptions. For 2026, we expect continued benefits from strong sales growth, especially as data centers increase their usage. Our guidance also includes the effects of investments made for customers, including regulatory actions and increases in depreciation, property taxes and financing costs. Share effect will also be a driver as our fully diluted average share count increases. Additional information on specific drivers for the year as well as detailed quarterly considerations are included in the appendix of our earnings call presentation. We have a very strong growth story that supports our plans to invest in reliability and resilience to better serve our customers. We have a solid base plan consistent with our strategic objectives and a strong customer pipeline, including 7 to 12 gigawatts of data center opportunities. And we have secured critical equipment to bring additional customers online. We're very proud of what we have accomplished, and we are working hard to make 2026 another successful year, continuing to prioritize the needs of our customers to create value for all of our key stakeholders. We have a very unique growth opportunity before us, and we're excited about what the future holds. And now the Entergy team is available to answer questions. Operator: [Operator Instructions] Our first question comes from the line of Shar Pourreza of Wells Fargo. Shahriar Pourreza: Just on the large load ramp, Hut 8 was the most recent announcement. Was Phase 1 of that project already partially in plan and with the formal FID, does that kind of put some upward pressure on rate base growth? Or is Phase 2 the upside? I guess maybe just help us frame if there are other probably weighted projects in '26 and '27 as well. It's two-part question. Kimberly Fontan: Yes, sure. I would think about Hut 8 and similarly sized data centers like we think about our probability weighted industrial growth overall. So that would have been included in the probability weighting there. Certainly, we're seeing positive progress in that space. And so that increases that probability weighting, but it would not be a separate discrete item like a hyperscaler. Andrew Marsh: And also, first part of what they have announced doesn't add to the capital plan, but -- and I'm not sure what you mean by Phase 1 and Phase 2, but additional incremental growth in that customer would likely require incremental capital for capacity. Shahriar Pourreza: Got it. Yes, I guess there's going to be a second phase they've talked about that could be fairly material. Okay. And then Drew, I want to ask on the large load protections you have as you kind of put the CapEx into plan. I mean we've seen at least one data center walk away from a project despite having a signed ESA. Obviously, different state than yours, of course. Just remind us on the level of comfort, the collateral requirements, et cetera. You have some lumpy projects there, which can be sizable so that could move the needle should one of these customers walk. Just maybe overall, just on the ESA environment and the protections there. Kimberly Fontan: Sure, Shar. On the overall large load customers, including not just the hyperscalers, but also colocators like a Hut 8, we have significant credit requirements that require things like termination fees, that sort of thing as well as minimum bills. And what we've included in our forecast is only the minimum bill. So certainly, there's -- to the extent that they run up to their full capacity, there's opportunity there. But to the extent that they choose to not run or not continue, there's the termination payments that protect us there as well. And those are backstopped all the way up at their parents. Shahriar Pourreza: Okay. Got it. And then just maybe one quick one I'll squeeze in is, I know the prior update noted 4.5 gigs of power equipment associated with potential upside. Is any part of that spoken for at this point? Have you started to expand those expectations given continued large load expansions if Cottonwood potentially added to that number? Kimberly Fontan: Yes, Shar. We have about 8 gigawatts of turbines and other plant island equipment available for growth. We haven't turned those into specific projects tied to ESAs at that point. But if you recall that turbine schedule that we showed you, those are all the great projects there. We continue to have really positive conversations with our customers and would expect to be able to continue to grow our portfolio. But certainly, we haven't -- we don't have anything specific here. That is lumpy, as you well know, but we have the opportunity to add incremental. I will note that Cottonwood that was added into the capital plan does not replace one of those turbines. That's existing capacity that provides additional space in Louisiana to continue to meet customer needs, but it doesn't replace any of those turbines. Operator: Your next question comes from the line of Julien Dumoulin-Smith of Jefferies. Paul Zimbardo: It's Paul Zimbardo on for Julien. The first, just a quick clarification. I think you said the CapEx change increase is Cottonwood. Are there other major changes going on? Or is it really just the Cottonwood being rolled in? Kimberly Fontan: Paul, it's largely Cottonwood. There is a little bit of capital from '25 that rolled into '26. So the overall increase there is not fully incremental versus what we had in '25, but most of what's there is Cottonwood. Paul Zimbardo: Okay. Okay. Great. That's my thought. And then you had that comment around the $5 per month of customer bill savings from the data centers that you've kind of secured to date. Are there good ways to think about it? I know it's difficult rules of thumbs or just ways to think about potential future savings from that data center pipeline for customers. Kimberly Fontan: Yes. I would think about that as the data centers' contribution to embedded fixed cost. So there's not a good rule of thumb. It's going to depend on the size of the data center. But in general, what you're doing there is you're essentially -- you've got your embedded fixed cost that you're spreading over more kWh. So the size of their kWh is going to drive what that opportunity is. But there's not -- I don't have a good rule of thumb for you. Andrew Marsh: Yes. And I would add to that, Paul, that we think that, that's conservative because there are other things that the customers are benefiting from. And I listed some of those in my remarks, like fuel efficiency and things like that, that are important contributions, more reliability, more resilience from the new infrastructure, not to mention all the community benefits like taxes and so forth. So there is a lot of value for customers, but we thought it would be important to label that fixed cost contribution part because it is significant. Paul Zimbardo: Okay. That makes sense. And if I could squeeze in one more quick. Just on the -- after the Jefferson approval and the Texas generation approval, noting that Louisiana has that Lightning amendment, have you seen kind of customer preferences shifted between different states? Any color would be helpful there. Andrew Marsh: No real change among states. The customers that we have in our states are continuing to invest where they are, and they are very comfortable with the rules where they are. But I think it will help attract incremental customers potentially. And so we've seen some support for that as well. But I don't think it's causing hull from one of our jurisdictions to another jurisdiction at this point. Operator: Your next question comes from the line of Jeremy Tonet of JPMorgan. Diana Niles: This is Diana Niles on the call for Jeremy. Going back to the customer benefits from data centers and the $5 billion in rate base offsets. Could you provide some color on what buckets this covers, whether that's transition required for new load or previously complicated resilience investments? Any color there would be appreciated. Kimberly Fontan: As I said, I would think about that as contribution to incremental cost. So that is things like in Louisiana, they had storm costs that were already securitized the customers were paying for, they're paying a contribution to that. In Mississippi, we had announced Superpower Mississippi, where we added incremental capital with no increase in rates because the revenues coming in from the hyperscalers there were providing room to continue to invest in resilience and reliability. And then as you think about going forward, that incremental revenue is helping to offset future rate changes as you make investments over time. So it's those categories that I would think about. Diana Niles: Great. And one more, if I may. The Cottonwood addition to the plan. Is it already contemplated in your outlook going forward? Or to what extent do we need to look at future approvals to think about the inclusion in the plan? Kimberly Fontan: Yes. So Cottonwood is included. It's in our -- if we added it into our capital plan, it is pending regulatory approval. But from an EPS outlook perspective, it just moves us in the range, but it doesn't change our ranges. Operator: Your next question comes from the line of David Arcaro of Morgan Stanley. David Arcaro: I was wondering what updates should we expect at the Investor Day coming up in June? Is that a natural time when you might expect more data center contracting clarity to come in or capital projects to be approved and added to the plan? Any specific update that might be incremental in June? Andrew Marsh: Yes. So I appreciate that question, David. So we never know exactly when a data center contract might land. But certainly, we're going to give you more color around the data centers and how we're positioning ourselves and things like that. We'll give you a little bit of a longer outlook and you typically have been going out 5 years from that period. And we'll try to get a couple more of our leaders in front of you so that you have a chance to talk to a little more depth in our team. So you have a chance to really understand perhaps the various jurisdictions and what those mean and what they're trying to do. So those are the kind of things that we would try to update you on to give you more comfort around the plan that we've laid out. And if we're fortunate, maybe we'll have something to announce. But the timing, you never know about the timing for a large customer contract. David Arcaro: Yes. Got it. That makes sense. That's helpful. And then I'm just curious, what's -- more broadly, what's the latest feedback that you're getting from the political and regulatory standpoint related to data center activity? Are you seeing -- is it continued support here as you continue to accelerate? Or are you seeing increased pushback challenges locally to the activity that's popping up? Andrew Marsh: Yes. Thank you there. That's another good question. So the -- we still continue to have strong support for the data centers in our jurisdictions. The Lightning Initiative that I mentioned in Louisiana is a good example of that. That was just the end of last year. And we continue to see strong support in other jurisdictions, not to mention a lot of customer interest and a lot of customer activity. So we see a lot of positive movement, and it continues to bode well for the expectations that we've laid out for you all. In fact, I think they probably strengthened since we talked to you last quite a bit. There still is some concern about things like affordability and rates. And I outlined a lot of the things that we are doing. In fact, the comments about customer -- existing customer benefits from the contribution of fixed costs and other things are, we think, really important to continue to maintain the positive momentum in our jurisdictions. But right now, we continue to see very positive momentum from both customers and communities about data centers. Operator: [Operator Instructions] Your next question comes from the line of Andrew Weisel of Scotiabank. Andrew Weisel: I hope you guys are getting ready for Mardi Gras. First question, I wanted to clarify a little bit the forecast for retail sales growth on Page 5. I see you increased the CAGRs, but the numbers in the bar chart went down. Am I right, that's just because you roll forward the starting point from '24 to '25. And I know you're not showing the forecast in absolute terms, but if my math is correct, I think your forecast for '28 to '29 went up by about 2 terawatt hours or 4% to 5%. And if so, is that driven by a small number of specific projects? Or would you call that broad-based growth? Kimberly Fontan: Relative to the roll forward of the year and what you're seeing on the dimensions there on the chart. We can get you the specifics on '28 and '29 to confirm your terawatt number. But we have seen the step-up from '27, '28, '29 as these large customers continue to ramp, the ones that we've made significant announcements on. And then any adjustments to the probability weightings would also show up there. Andrew Weisel: Okay. But does that sound about right? Are they going up by about 5%? Kimberly Fontan: I think overall, I would look at the -- we looked at the 15% off of the '25 base. I don't have those other numbers right off the top of my head, but we can certainly double check them and circle back with you, Andrew. Andrew Weisel: Okay. Fair enough. Directionally, it seems like it's certainly going up, though. Next question, regarding the Meta contracts, help me understand the pushback or confusion around contract terms. It seems like Meta structured these leases as a series of 4-year subcontracts under an entity owned by Blue Owl with the ability to exit or renew every 4 years. Yet you and the regulators are describing it all as a 15-year structure. And of course, the new gas plants will have a much longer useful life of a few decades. I certainly don't want to put words in anyone's mouth, but help us understand the 2 different perspectives and how to reconcile these 4-year terms versus the 15 years and how that may or may not create risk for investors or rate payers and why there seems to be... Kimberly Fontan: Yes, I would think of as 2 separate transactions. So on the electric service agreement side, we have a 15-year term with a subsidiary of Meta backstopped all the way at the parent. That is the service agreement, and that has all the provisions that I mentioned earlier around termination fees and minimum bills and those sorts of things. On the -- separately, what Meta has pursued is a transaction with Blue Owl, where they are structuring the capital that they're spending on their side, that is where all of those terms that you're referencing are. And I don't have the details on all those terms, but they're separate and apart from the ESA that they have with us that backstop by their parent. Andrew Weisel: Okay. So who's the ultimate guarantor on your ESA? Kimberly Fontan: It is the parent. It is Meta all the way up. Andrew Marsh: And I don't know if you heard earlier, but there's -- we were worried that there might be sirens in the background because of all the Mardi Gras floats that are getting escorted around town right now. Operator: Your next question comes from the line of David Paz of Wolfe. David Paz: Just with the 8 gigawatts of gas turbine availability, what level of flexibility do you have in the equipment delivery period? So just thinking about the chart from EEI, I think there were some, let's call them, open slots in the '28 to '30 period. Are those -- to the extent you don't have a new announcement, say, this year, for instance, how would you kind of fill those in? Would you just push those out a little? And just can you maybe better explain how to think about the cadence? Andrew Marsh: David, this is Drew. So thanks for that question. First of all, we fully expect to utilize the turbines that we have ordered on the time line that we have them ordered. We have customers that would move them forward if they could. And we fully expect to utilize the turbines that we have. If for some reason, we don't have contractual arrangements, we don't have ESAs in place for customers when we need to make -- start making payments on these turbines, we're likely to get reimbursement agreements from customers. So that shouldn't be a problem for us financially. But we fully expect to meet the time line that those turbines are on. So that's -- I think that's where we are right now. Operator: There are no further questions at this time. Liz, I will now turn the call back over to you. Liz? Liz Hunter: Thank you, JL, and thanks to everyone for participating this morning. Our annual report on Form 10-K is due to the SEC on March 2 and provides more details and disclosures about our financial statements. Events that occur prior to the date of our 10-K filing that provide additional evidence of conditions that existed at the date of the balance sheet would be reflected in our financial statements in accordance with generally accepted accounting principles. Also, as a reminder, we maintain a web page as part of Entergy's Investor Relations website called Regulatory and Other Information, which provides key updates of regulatory proceedings and important milestones on our strategic execution. While some of this information may be considered material information, you should not rely exclusively on this page for all relevant company information. And this concludes our call. Thank you very much. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good day, and welcome to the MSA Safety Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Larry De Maria. Please go ahead. Lawrence De Maria: Thank you. Good morning, and welcome to MSA Safety's Fourth Quarter and Full Year 2025 Earnings Conference Call. This is Larry De Maria, Executive Director of Investor Relations. I'm joined by Steve Blanco, President and CEO; Julie Beck, Senior Vice President and CFO; and Stephanie Sciullo, President of our Americas segment. During today's call, we will discuss MSA's Fourth quarter and full year 2025 financial results and provide our full year 2026 outlook. Before we begin, I'd like to remind everyone that the matters discussed during this call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, all projections and anticipated levels of future performance. Forward-looking statements involve a number of risks, uncertainties and other factors that may cause our actual results to differ materially from those discussed today. These risks, uncertainties and other factors are detailed in our SEC filings. MSA Safety undertakes no duty to publicly update any forward-looking statements made on this call, except as required by law. We have included certain non-GAAP financial measures as part of our discussion this morning. The non-GAAP reconciliations are available in the appendix of today's presentation. The presentation and press release are available on our Investor Relations website at investors.msasafety.com. Moving on to today's agenda. Steve will first provide an update on the business. Julie will then review the fourth quarter and full year 2025 financial performance and 2026 outlook. Steve will then provide his strategic priorities for 2026 before giving closing remarks. We will then open the call for your questions. With that, I'll turn the call over to Steve Blanco. Steve? Steven Blanco: Thanks, Larry, and good morning, everyone. Thank you for your continued interest in MSA Safety. I'm on Slide 6. We executed well within a challenging environment for 2025. We had a solid finish to the year, guided by our Accelerate strategy, centered on serving MSA's mission for our customers and protecting over 40 million workers worldwide who trust the MSA brand. Just within the last month, I've learned about 2 separate customer save stories where our solutions helped save lives. First, a worker at a water treatment facility was alerted to a flammable gas alarm by his ALTAIR 5X portable gas detector, enabling evacuation before the fire occurred. It's why customers count on the MSA brand, fast response, reliability and durability in the real world. We also heard directly from a firefighter wearing our Globe turnout gear when he was engulfed by a flashover as he entered a structure. As he told us afterwards, "In a moment where everything went wrong, your gear did exactly what it was designed to do, and did it when it mattered most." Save stories like these remind us all at MSA, the importance of fulfilling our mission. Now for our business update on the fourth quarter and full year. Our fourth quarter results reflected strong free cash flow, low single-digit reported sales growth, mid-single-digit adjusted earnings growth and sequential improvement in operating margins. Quarterly consolidated reported sales growth was 2%, with a 3% organic decline, a 3% contribution from M&A and 2% favorable FX. Adjusted earnings per share were $2.38. Organic sales performance in the quarter was driven by continued strength in detection, which was offset by a decline in the fire service, while industrial PPE was up modestly. The M&C TechGroup acquisition contributed $15 million to the quarter. Looking at sales by product categories. Detection's 17% organic growth was driven especially by strength in fixed, while portable instruments also continued their growth. This growth was primarily driven by excellent performance in the Americas as we completed delivery of several large orders. Organic sales in fire service declined 21% year-over-year. The U.S. market dynamics surrounding AFG funding and the U.S. government shutdown impacted the timing of SCBA sales in the quarter as expected. We also faced the final tough year-over-year comparisons with U.S. Air Force deliveries. Organic sales of industrial PPE were up 1%. Fall protection moderated from the strong pace we saw in the previous quarters, though it retains a positive outlook. From a full year perspective, we effectively executed our strategy against a volatile operating environment. Net sales growth for the year was 4% on a reported basis, with 1% on an organic basis and a 2% contribution from M&A. We remain very pleased with M&C's performance and its integration into the MSA family. Order pace across our product categories was healthy, albeit mixed, in the low single digits year-over-year and reflected the timing dynamics in the fire service. Detection orders were about flat versus the strong FGFD comparison last year and industrial PPE orders decreased by low single digits, with fire service orders increasing by low single digits. Order flow improved from the third quarter following the NFPA approval of our newest G1 SCBA, the release of AFG grants and the reopening of the U.S. government in mid-November. Overall, backlog remains healthy and consistent with historical levels, and we have a solid commercial pipeline. Our overall book-to-bill was slightly below 1 and above the year ago period. Turning to Slide 7. You know how dedicated we are to serving our mission for our customers and delivering innovative products and solutions. As you can imagine, we also have our own MSA culture of safety that we live every day. I'd like to share a couple of highlights. In 2025, we delivered world-class safety levels across our organization, finishing the year with 0 lost time incidents. In addition, our total recordable incident rate was 0.25, the best rate we've achieved ever. These metrics demonstrate that we live our mission every day at MSA at every facility around the world, and further emphasize how doing so enables us to strengthen our culture of safety. I'm extremely proud of the MSA team. A sincere thank you to the team for their dedication and commitment in our endless journey of improvement. Moving to Slide 8. we expected 2025 to be a dynamic year when we outlined our Accelerate strategy and long-term targets in 2024, and it proved to be just that and more. However, we maintained our diligent focus on strategic execution. I'd like to share a few of our 2025 achievements. First, as we committed to, we delivered above-market growth in our key strategic growth accelerators, with detection up organically low double digits and fall protection up high single digits. Detection is now our largest product category, representing 41% of sales. In addition to the exceptional fixed detection performance, we continue to see growth in both MSA+ connected and traditional portable solutions. Second, we continue to innovate and bring industry-leading products and solutions to market. This included launch announcements for the ALTAIR io 6 portable gas detector which advances our MSA+ ecosystem, the new H2 Full Brim Type II hard hat, our newest Globe turnout gear, the, G-XTREME Pro jacket, and our latest generation 2025 G1 SCBA, which received NFPA approval in November. Finally, from a financial perspective, we utilized our consistent free cash flow to deploy nearly $0.5 billion into growth investments and returns to our shareholders. We welcome M&C into the MSA family, increased our share repurchases, raised our dividend for the 55th consecutive year. Going to Slide 9. Moving into 2026, we remain confident in our expectations for a number of key markets. That includes fire service for both our domestic and international segments. In North America, we're optimistic about the pipeline of opportunities and continued use of AFG grants in the U.S., which we expect customers to access throughout the first half of the year. Internationally, we continue to see opportunities to gain market share across our regions as our pipeline for our fire service solutions remain strong. In the energy sector, we anticipate strong underlying global demand in 2026 and beyond. We expect to leverage the various investments in this area as well as in the industrial markets. We are well positioned for opportunities across the entire detection portfolio as well as in fall and head protection. With that, I'd now like to turn the call over to Julie to walk through our fourth quarter and full year 2025 results in more detail and our '26 outlook. Julie? Julie Beck: Thank you, Steve, and good day, everyone. We appreciate you joining the call this morning. Starting on Slide 11 with the quarterly financial highlights. Fourth quarter sales were $511 million, an increase of 2% on a reported basis over the prior year. Sales were down 3% on an organic basis from the prior year, while M&C added 3% to overall growth and currency translation was a 2% tailwind. As expected, GAAP gross margins improved sequentially, rising to 46.9%, an increase of 40 basis points from the third quarter and remaining consistent with the previous year. Year-over-year gross margin reflects the mitigating effect of our pricing strategy on tariffs and inflation as well as positive mix and favorable transactional FX. As we have previously communicated, we remain focused on achieving price/cost neutrality in the first half of 2026. GAAP operating margin was 22.3%, with an adjusted operating margin of 23.9%, which was consistent from a year ago, as lower volume and gross margin pressures were largely offset by mitigating pricing actions, positive mix and favorable transactional FX. Sequentially, adjusted operating margins were up 180 basis points from the third quarter. Entering 2026, we remain diligently focused on SG&A productivity, pricing and tariff mitigation plans to counter headwinds and return to margin expansion. Quarterly GAAP net income totaled $87 million or $2.21 per diluted share. On an adjusted basis, diluted earnings per share were $2.38, up 6% from last year, which included a favorable adjusted effective tax rate of 23.2%, primarily due to a reduction in state income taxes. Now I'd like to review our segment performance. In our Americas segment, sales declined 1% year-over-year on a reported basis or 3% organic as mid-20s organic growth in detection was offset by a low 20s contraction in fire service. As Steve mentioned earlier, sales in the fire service were negatively affected by timing-related market conditions, while organic sales in our industrial PPE business were relatively consistent. M&C contributed to 1 point to total growth and currency translation added a 1% tailwind for the quarter. The adjusted operating margin was 31%, a 30 basis point increase compared to the previous year. The margin improvement was primarily due to pricing, favorable mix and effective SG&A management, partially offset by lower volumes, inflation and tariff pressures. In our International segment, sales increased by 8% year-over-year on a reported basis, with a 6% contribution from M&C and a 5% tailwind from FX. Organic sales declined 3% as mid-single-digit growth in detection and industrial PPE was offset by a double-digit contraction in fire service, which was primarily driven by orders being pushed into 2026. Adjusted operating margin was 16.8%, 80 basis points below last year. Margin contraction was mainly due to inflation, tariff pressures and volume, partially offset by pricing and SG&A management. Now moving on to Slide 12, where I'll review our full year results. Total net sales were $1.9 billion, up 4% or 1% on an organic basis versus last year. M&C contributed 2 points to overall growth and currency translation was a 1% tailwind. We saw double-digit growth in detection and low single-digit growth in industrial PPE. Growth in industrial PPE was primarily driven by strong performance in fall protection. Sales in fire service contracted due to the challenging market conditions we have talked about. Adjusted operating margin was 22.1%, down 80 basis points from last year on tariff, inflation and transactional FX pressures, partially offset by strategic pricing actions, positive mix and improved productivity. Adjusted diluted earnings per share were $7.93, up 3% over the prior year. M&C contributed $0.09 to adjusted earnings per share. We delivered a strong return on invested capital of 20%, which included the overall impact from our acquisition of M&C and far exceeds our cost of capital. Overall, MSA's financial performance was solid, given the challenging prior year comp and the dynamic operating environment that persisted throughout 2025. Now turning to Slide 13. We generated a strong free cash flow of $106 million in the fourth quarter, which is 122% of earnings, marking a 13% increase compared to a year ago. For the full year, free cash flow reached $295 million, up $53 million from last year, with 106% conversion rate that surpassed our annual target range of 90% to 100%. In the quarter, we returned $61 million to shareholders via $21 million of dividends and $40 million of share repurchases, in line with the increase we communicated last quarter. Repurchases in the fourth quarter were equal to our total repurchases throughout the first 3 quarters of the year. In addition to returning cash to shareholders, we invested $16 million in capital expenditures. For the year, capital deployment, excluding R&D investments, totaled approximately $420 million and included $189 million spent on the M&C acquisition. $162 million returned to our shareholders via share repurchases and dividends, and $68 million in CapEx, which includes our Cranberry expansion that will further support our Accelerate strategy priorities for growth and footprint optimization. We continue to reinvest in R&D, which represented 4.3% of 2025 sales, reinforcing our commitment to being a leading safety technology provider. Net debt at the end of the year totaled $416 million, down $43 million sequentially. As of year-end, we have repaid approximately $100 million of the $140 million we borrowed for the acquisition of M&C, and we ended the quarter with net leverage of 0.9x. Our weighted average interest rate at quarter end was 3.9%. Our strong balance sheet and ample liquidity of $1.2 billion continues to provide optionality and position us well to support our Accelerate strategy and invest in our business, while we maintain an active M&A pipeline entering 2026. Let's turn to our 2026 outlook on Slide 14. We are projecting mid-single-digit full year organic growth. Overall, our business remains healthy, and the pipeline is solid. Although the fourth quarter was affected by timing issues in the fire service and the U.S. government shutdown, we expect those delays to favorably impact the year as we carry over about 1% of annual business that was delayed. We anticipate ongoing momentum in detection and fall protection as key growth drivers, while pricing actions taken throughout 2025 and 2026 will be realized alongside moderate volume growth. We expect normal seasonal patterns throughout the year, including M&C, with the first quarter typically being the lowest of the year, implying approximately high 40s to low 50s sales split between the first and second half. In addition to our mid-single-digit organic growth outlook, we expect M&C to contribute approximately 1 percentage point to full year revenue growth. Other items below the line included interest expense of $28 million to $31 million and a tax rate in the mid-20s percent. In conclusion, there is no question that further uncertainty and volatility exists into 2026. We remain confident in our resilient business, our pipeline and our ability to navigate macro uncertainty and timing challenges as we execute our strategy and work towards our 2028 targets. With that, I'd like to pass it back to Steve. Steven Blanco: Thank you, Julie. I'm on Slide 16. Overall, we executed well in a very dynamic 2025. As we move into 2026, our strategic priorities remain rooted in our mission and disciplined execution of our strategy. We retain our focus on driving profitable growth while extending our leadership in the markets we serve. We continue to apply the principles of the MSA business system to drive continuous improvement in all we do. Our strong financial profile and balance sheet enabled effective capital allocation through organic and inorganic growth investments and returning capital to shareholders. We remain active and highly disciplined in our M&A approach as we continue to evaluate inorganic growth opportunities that meet our strategic and financial targets. Moving to Slide 17. I'm proud of our team's execution and thank all of our associates for their continued commitment to serving our singular mission of safety. While there are always new challenges, I'm optimistic that we will continue to grow both organically and through acquisitions, and that we have begun to exit some of the most difficult quarterly comparisons. With that, I'll turn the call back over to the operator for Q&A. Operator: [Operator Instructions] And the first question today will come from Rob Mason with Baird. Robert Mason: On detection, really strong quarter, obviously, and able to get some of these larger orders out the door before year-end. Steve, I seem to recall, we were thinking about that business being in the high single digit for '25 and I guess it grew 12% over on a local currency basis, does that delta -- is that explained by the large orders? Or did you have some other things come in, in the fourth quarter? Steven Blanco: Yes. Thanks for the question, Rob. I would say it was explained by the large orders. We had a couple of really nice orders come in. We had a customer in late Q3 that we -- that asked us to execute on an order that would have been this year. So we had an additional large order that came in. So if you took that out, it probably would have been a 10-ish number for the year instead of the 12. Obviously, very strong. We said high single digits, I think, pretty early in the year, and I think the team executed very well in that. But the underlying demand continues to be super strong across most of our regions, and we're expecting the investment category for some of the end markets to continue. I mean we're not going to have that same kind of year this year, certainly, but a really solid year. Robert Mason: Yes. Yes. And then trying to get past some of the well-documented headwinds in fire service in the fourth quarter. How do you see maybe the cadence in fire service playing out through the year? I'm sure those don't go away just on January 1, but between the first quarter and maybe you get by the midyear, what -- how does that play out, do you think? Steven Blanco: Yes, thanks. It's going to be interesting. So we really -- when you think of the delay, typically the fire service, when they receive the funding, they've got this built-in time horizon of year-end. And part of that is they recognize there's an opportunity, they've got funding and they want to get in their orders before the price increases that most manufacturers put in, in the first quarter. So that didn't transpire, right? They didn't have the funding, they weren't able to do that. So we have that pipeline. We're working through that with our customers. That's why we think most of those orders probably play out sometime in the first half for the ones that had the government delays. And then the remainder, it's probably going to be more like a normal fire service year, what you would typically expect, which would say that you would lean towards the second half again on the overall demand cycle here. So that's how we see this playing out -- excuse me, this year. I think that's the best way to look at it. Except that AFG delay, some of those will come in. We'll see some of that in the first half of the year. But the overall picture is more of a standard year, I think. Robert Mason: I see. Julie Beck: Just to add on to that, I would say that we would expect pretty consistent growth throughout the year in terms of the revenue growth for fire service. Operator: The next question will come from Mike Shlisky with D.A. Davidson. Michael Shlisky: I'll follow up on that -- on your answer for detection, very impressive in the quarter here. And it's been a trend, you've had some good numbers. Could you maybe comment on the order of [ magnitude ] of growth you'll be seeing here in 2026 for detection? Is there, at some point, where you start seeing tough comps? Or is there enough new product coming out here that there can be a strong tailwind this year? Steven Blanco: Yes. Thanks for the question, Mike. I think that last year, certainly, especially as you look at the latter half of the year, the fourth quarter, that's certainly going to be tough comps. And as I talked about with Rob's question, a couple of points that probably would have been in this year. We look at -- this is going to be a good year for detection. I probably -- it's early. But we would expect -- we'd probably look at this in -- at this stage in the mid-single-digit revenue growth year, even with the comps we had last year. And I think at this stage in the game in February, mid-Feb, that's how we would think about it and how we're looking at it for the year. And so the growth is there. We think the macro environment supports that. And certainly, our solutions in both categories of the fixed and the portable detection support that with our customer base. Michael Shlisky: Great. And I also wanted to turn to the margin outlook. When I think back, you've got that longer-term 30 to 50 basis points a year margin goal to gain every year through '28. Now that goal was released prior to the tariffs and things coming out more recently. But you did end up down a bit in 2025. Is there a catch-up that happens here in 2026 and then you add on top of that the 30 to 50 basis points of margin just as pricing catches up? Just some thoughts as to whether you could be seeing 100 basis points plus of margin in 2026, especially the run rate to exit the year. Steven Blanco: Well, it was a dynamic 2025, for sure. The tariff situation certainly played out to impact that as we talked about last year. I would just tell you, our overall approach on that continues to be a combination of efficiency and pricing. I think the business system has helped us. But as we've noted, as we noted last year, we've implemented some price increases, and we really -- for us, our focus was the long term and executing in a way that we position ourselves for neutralizing on the price cost in the first half of this year. And we are right where we anticipated we'd be. So you should see that continue to improve. You saw it sequentially in the fourth quarter. So you'll see that continue to go as we look forward. Julie Beck: Yes. I would expect -- just to add on to that, I would expect that our margins improve sequentially. So we recover that price/cost neutrality at the end of the second half, and we would expect to return to those 30% incremental margin targets this year. Operator: The next question will come from Ross Sparenblek with William Blair. Ross Sparenblek: Looking at Slide 9 on the end market assumptions. First off, thanks for providing that. I was curious to see that the infrastructure bucket is expected to be neutral this year. Energy and chemicals are up. Can you maybe just provide a little more color on the project activity you're seeing in the funnel? And anything else you can speak to that kind of underwrite those assumptions for the year? Steven Blanco: Yes. Thanks for the question, Ross. When we think of 2026 -- certainly '25 was choppy in industrial. We did see chemical and energy had continued investment. And the thesis was pretty good in most of the regions around the world. I would anticipate, and the team believes, what we're hearing and seeing is '26 will be similar. A couple of the margin -- or a couple of the regions, you'll probably see it build up in the second half. We know of some announced investments. If you think of Europe, for example there, they really haven't had as much investment going on, but we do see some of that playing out in the second half, probably some improvement in China with that regard. Middle East was strong all year. Expect that to continue most of this year, if not all. And the Americas is in a similar story as well. So we see that as some tailwinds. From a market dynamic perspective, there's a need for energy across the globe. And certainly, most of the players that -- our customers and others are really trying to make sure they're well prepared for that. And I just would say, the overall, at least in our view, when you compare or put together our activity in the Accelerate strategy along with the market dynamics we're expecting, we feel like we're in a pretty good place for '26. Ross Sparenblek: Okay. And then maybe just on the portables, it seems like it was a little bit more measured growth in the quarter. Anything stand out there as we think about maybe perhaps tougher comps? Or is it the switch over to io 6 that's causing a pause? Just -- yes, any updates around portable gas? Steven Blanco: Well, thanks. The portable business again, continued to grow in both categories, both -- when I say both categories, both 4 gas categories. So again, portables includes single dual gas and then the 5 gas, which we'll see the io 6 come out later to replace our 5X or be an option for the 5XR. So the 4 gas has been growing exceptionally well. Last year was our best year ever for units. And what's interesting is -- we're on a revenue for -- the revenue for the year, the io 4, the MSA+ piece of the business is in just over 10% of portables. But when you look at units, you're close to twice that, which gives you a little bit of color of that being something that's going to continue to pay dividends because of the subscriptions as we go forward. So that grew at a really nice rate. It was a fantastic business for us, and it's shaping up to do the same in 2026. Operator: The next question will come from Tomo Sano with JPMorgan Chase. Ethan Coyle: This is Ethan on for Tomo. My question would be -- how should we view the mid-single-digit growth outlook on pricing and a volume standpoint, considering roughly like 1 point of it is from the fire services delay? Steven Blanco: I think we're going to get contribution from both. So I would say you're going to see both probably lean more towards the price side, right, Julie? But you'll get contribution from both. A little bit more on the pricing side. Ethan Coyle: And would we expect this to be more of a first half weighted on a volume standpoint versus price? Or can we see like pricing due to tariffs flow through kind of in the first half? Julie Beck: Yes. So we'll have some more pricing early on because we have a carryover from last year and pricing actions that we took that are going to start to flow through at the beginning of the year here in the first 6 months, as we talked about. So we'll see it in the first half. Operator: The next question will come from Jeff Van Sinderen with B. Riley FBR. Jeff Van Sinderen: Most of my questions were answered. But I guess, when you look at the competitive landscape, how are you seeing that evolve in detection? What do you think the key factors are that are driving new business wins for you in detection? In other words, why do you believe your customers are choosing you versus competitors in latest wins? And then anything more you can say about product innovation that could drive upgrades or new business wins in detection? Steven Blanco: Yes. Thanks for the questions. So if I start with the landscape, there's some really strong competitors in this space. What we've really -- I feel like have done a nice job of is try to stay close to the customer and understanding our VOC, the voice of the customer, in a way where we create solutions based on the challenges they have. So when you look at our portfolio and you think about detection -- I'll break it out because I think it's a really interesting storyline. Detection and fixed, we've expanded through some great acquisition activity as well as matching up the needs from the voice of customers. So we've got this traditional gas detection that's been really a strength for the company. But then you add to that, last year, we launched a new flame detector that has really taken off and done very well. We've got the field server and the controller business that came from an SMC acquisition a few years ago. Now that's integrated with our platform. So it's now a holistic solution for the customer on how they can communicate for a site. And now you're adding to that, we're seeing some growth, and you should see more of that this year with our refrigeration businesses from Bacharach. And then last year, of course, we added M&C from the processing side. So the fixed side, we've continued to build out a business that has expanded some our TAM and also created an opportunity for us to have more holistic solutions for our customers. So it's really somewhat of a one-stop shop that they're able to access. And I think that's an advantage, and that's something that our customers appreciate. The portable side, this is a space where predominantly, most of them buy a discrete product, they have for a long time. We expect the piece of that business is to continue doing that. But then this connected work, the MSA+ we have on the io 4. There's not many competitors that have that. There are some that certainly are in the connected space, but we feel like our solutions match that VOC I talked about, ease of use, durable, very reliable product that is very accurate, and that's really what our customers are gravitating to. We're not the low cost, but we are really, when you look at it from a customer's eyes, we're typically the best when it comes to cost of ownership over the long term. So I think that's what we kind of look at and hopefully continue to do going forward, which really feeds into the second half of your question, the innovation. I talked about in the prepared remarks, a number of new product launches we had, all of those being informed by what our customers are telling us, and you'll see that continue to roll forward into 2026. As we think of how we allocate capital, it all starts with organic growth and rolls out from there, and we'll continue to do that. I think this year, our capital investments, 2/3 or more are related to growth investments, right, Julie? Julie Beck: That's correct, yes. Steven Blanco: So that -- hopefully, that helps give you a little color on that. Jeff Van Sinderen: No, that's great. And then just as a follow-up to that, I know you mentioned Bacharach. Is there anything, just in the refrigerant area, and I think about HVAC there, is there anything that you're doing there that's being applied in the data center area for new data center builds or even retrofits? Steven Blanco: There is a bit. I mean, we -- yes. The short answer is yes. When we think of data center build-out, certainly, for us, it would be more on the fixed monitoring and you hit the key area in the Bacharach area. So we do have opportunities there. We also have it in some other fixed monitoring, but that's the key category. We had a nice order a couple of weeks ago. It's not going to be the big change in our growth story, but it certainly is complementary to what we do. And when they build those sites, that's certainly an opportunity for us on the industrial PPE as well. Operator: The next question will come from Brian Brophy with Stifel. Brian Brophy: So just a modeling question. SG&A, how should we be thinking about that this year? Julie Beck: Yes. So SG&A, I would say, in the first quarter, kind of consistent with the fourth quarter. And I would say SG&A as a percentage of sales is relatively consistent for 2025 to 2026. We're going to have some nice growth projects that we're going to fund in SG&A this year, and so we're excited about that. Brian Brophy: Okay. That's helpful. And then just wanted to get an update on what you're seeing from some of your shorter-cycle businesses. Obviously, we've seen PMI flip back above 50, but then there's some more mixed signals from an employment standpoint. So just kind of curious what you're seeing there near term? Steven Blanco: Yes. Thanks for the question. So the fourth quarter was similar to '25 overall, choppy. You'd have a good month and kind of choppy and then it decelerate a little bit. We see '26 cautiously optimistic when it comes to that industrial space on the short cycle. We've seen improving demand so far play out, which actually is a really good thing. We're hoping that holds. The PMI you talked about is certainly -- we were pleased to see that. But the indicators from the channel seem to be that as well. There seems to be some building optimism of perhaps getting out of this, I'll just say, this choppiness that we've seen for, what, the last 18-plus months. So we're hopeful that's the case. Early indicators seem to support that. Brian Brophy: Okay. And then one last one, more of a big picture question. You touched on this a little bit, but obviously, you've had a lot of success with portables on the connectivity side. Curious how you're thinking about expanding connectivity across additional product lines and how we should be thinking about any progress on that front this year? Steven Blanco: Well, we -- thanks for the question. So we look at it as how do we interact in a way that the customer wants us to interact. It all starts with the customer as we think about how we're addressing those challenges I referenced earlier. We have -- every one of our G1 SCBAs is connected right now for availability for the customer to access. It's a matter of making sure that we continue to kind of build out that ecosystem in a way that enables value for the customer that we can support. I would expect that would be the next horizon that you might see some growth in, but it's really a longer-term play, Brian, as you think forward, I think we start with detection, portable specifically, and we're really -- we're having a lot of discussions where we're pulling customers for some of these workshops, some VOC workshops on where they want it to be informed in the longer term, for sure. And we'll be well prepared for that. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Larry De Maria for any closing remarks. Lawrence De Maria: Thank you. We appreciate you joining the call this morning and for your continued interest in MSA Safety. If you missed a portion of today's call, an audio replay will be made available later today on our Investor Relations website and will be available for the next 90 days. We look forward to updating you on our continued progress again next quarter. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Andreas Trösch: Hello, everyone. This is Andreas Trosch from Investor Relations thyssenkrupp. Also on behalf of my entire team, I wish you a very warm welcome to our conference call on the first quarter results '25-'26. With me on the call are our CEO, Miguel Lopez; and our CFO, Axel Hamann. Before I hand over to the CEO and CFO for their presentations, I have some housekeeping. All the documents for this call are available in the IR section on the website. The call will be recorded, and a replay will be available shortly after the call. After the presentations, there will be the usual Q&A session for our analysts. we use Microsoft Teams for the call [Operator Instructions]. With that, I would like to hand over to our CEO, Miguel Lopez. Miguel Angel Lopez Borrego: Thank you, Andreas, and hello, everyone. Welcome to our first conference call in the current fiscal year. Let me start with an overview of our management priorities. First of all, portfolio. In terms of our strategic transformation, we continue to execute ACES 2030 with full focus also in order to establish thyssenkrupp as a lean financial holding company. With the successful spin-off of TKMS in October, a major milestone on our path towards this target picture, we created significant value for our shareholders. That is our clear ambition also for any portfolio actions ahead. For Materials Services, we push ahead for capital market readiness and their respective stand-alone setup. At Automotive Technology, we defined and implemented a new structure with clear focus on the core businesses. Moreover, we also initiated the sale of the noncore business unit, Automation Engineering, in November. At Steel Europe, negotiations with Jindal about the majority holding are ongoing and the respective due diligence is on its way. And let me remind you that we have reached a collective restructuring agreement with IG Metall Union in December, an historic milestone for thyssenkrupp. And in addition, actually another very important historical milestone just from last week, we have agreed on a term sheet on the new shareholder structure of HKM. Salzgitter plans to continue to operate HKM as the sole shareholder from June 1, 2026 onwards. That also means that the slab supply to thyssenkrupp Steel will already end in 2028. Regarding performance, Q1 marks a confirming start to the new financial year, even though our markets remain challenging across many of our customers' industries. Therefore, we confirm our group guidance for fiscal year '25, '26. On a relevant note, the likely positive implications from current political initiatives in Europe, such as CBAM or steel tariffs have not yet translated into measurable tangible effects, but they do present upside potential for our businesses going forward. On the green transformation side, we continue to build momentum. Let's start with the recent announcement. Uniper and Uhde have signed a framework agreement on ammonia cracking technology. The agreement covers up to 6 large-scale plants with a total capacity of 7,200 metric tonnes of ammonia per day. In addition, construction of the DRI plant at Steel Europe is moving ahead with full commitment. More from an ESG perspective, CDP -- so Carbon Disclosure Project, again honored thyssenkrupp for transparency and climate protection for the 10th consecutive year. With this result, thyssenkrupp has once again secured a place on the annual Climate A List, make it one of only 877 companies internationally with this distinction, including 34 companies from Germany. To summarize, a difficult market environment persists, but we are executing our strategy with discipline, reshaping our portfolio and improving our operational performance. Plus, we are confirming our full year guidance. Axel, the stage is yours for the financial section. Axel Hamann: Thanks, Miguel. Hello, everyone. This is Axel. Yes, let me turn now to the financial overview for the first quarter. Despite the macro environment you just have heard about, we achieved a promising and confirming start into the new fiscal year. We've increased our EBIT adjusted despite the top line headwinds, which continues to serve as a proof point that our internal efforts and the respective performance management are paying off. While sales decreased to EUR 7.2 billion, that means an 8% decline year-over-year. Our EBIT adjusted increased to EUR 211 million, which is EUR 20 million above last year's level. Net income came in at minus EUR 334 million, mainly [Audio Gap] We have experienced some technical issues here. Apologies for that. I believe that I was talking about the net income, which came in at minus EUR 334 million. And I explained that this was on the back of the expected restructuring expenses at Steel Europe. Now let me now turn to free cash flow. And as already flagged in our last conference call, you see a typical seasonal pattern here at the beginning of the fiscal year. And that's what you see at the minus EUR 1.5 billion free cash flow before M&A. And this is important to get it right, and I want to highlight it right here. Our free cash flow before M&A guidance for the entire year remains unchanged as we expect a reversal of this Q1 pattern in the course of the fiscal year, particularly in the second half. So that cash flow development led to a decrease in our net cash position. It's now at EUR 3.2 billion. That is still a very solid level that will also recover throughout the fiscal year as free cash flow before M&A is improving. Also some operational comments. We see tangible results from our restructuring and performance initiatives. Workforce reduction is progressing as planned, with FTE down by around 1,100 year-to-date, first quarter, 1 quarter. And a bit more from a broader perspective, the future economic development remains challenging overall from our point of view. And we do continue to face weak customer demand, particularly in Europe, but also uncertain upside potential that is related to the political framework in Europe. Now first quarter sales and EBIT adjusted development, which you see here in that chart. Most segments managed to improve or at least stabilize their performance despite weak demand conditions. I've already mentioned that the sales decline of more than EUR 600 million is more than offset in our EBIT adjusted. This is again a pretty clear proof point for our increased underlying resilience. With regard to sales, we saw declines of stagnation across all segments, with the decline mainly driven by three segments. First, Decarbon Technologies, still facing hesitant markets and some project postponements on the customer side. Then Material Services and Steel Europe, they both showed lower demand that, for example, you can see also at the trading business at our Materials Services segment. In terms of EBIT adjusted, we saw a number of improvements across the group with Steel Europe posting the biggest increase, which was also due to lower raw materials prices and some efficiency gains. Looking at DT, Decarbon Technologies, the negative first quarter resulted from lower sales and project-related additional costs at the cement business. Let's now talk a little bit about Automotive Technology. Overall, challenging market environment, soft demand levels also in Q1. Total, we had a sales decline of around about 3% year-over-year. However, if you adjust for the negative currency effects, sales were around about on prior year's level. Here, we experienced a growth in the serial business that was overshadowed by the declines in the project business as well as from our business unit, Springs & Stabilizers. Let's take a look at earnings. We saw per performance increase. EBIT adjusted came in at EUR 20 million. That's up by EUR 8 million year-over-year. So what we can see is here that our internal countermeasures such as volume compensations from customers, savings from restructuring, and efficiency initiatives are in place and are working. Ultimately, these efforts could more than offset the top line and currency headwinds. Let's look at -- business cash flow came in again in negative territory at around about minus EUR 70 million. That's mainly driven by restructuring cash outs and net working capital changes as expected. Let's turn to Decarbon Technologies. Overall, we continue to see an ongoing hesitant market environment with a number of project deferrals on the customer side. That translated into weak order intake and therefore, declining sales of minus 19% in our first quarter, especially in the water electrolyzers business at thyssenkrupp nucera and in the new build businesses at Chemicals. These lower sales led to the decrease of EBIT adjusted by minus EUR 33 million to minus EUR 16 million. In addition, some project-related additional costs at Polysius impacted that result. Performance measures and efficiency gains supported earnings, however, could not compensate the decrease. Also, the cash flow was hit by missing sales. The drop in business cash flow to minus EUR 162 million was driven by the lower top line as well as negative cash profiles in our project business at DT. Let's turn to Materials Services. Material Services delivered higher earnings despite a challenging market environment, particularly in Europe. Sales declined here by minus 6% year-over-year, mainly due to weaker performance in the direct-to-customer business, which also led to significantly lower shipments. At the same time, distribution and processing businesses in North America showed some solid growth. EBIT adjusted came in at EUR 50 million, with a strong performance of our processing business, especially in North America, more than offsetting the decline in European distribution and also supported by APEX cost reduction and efficiency measures. Business cash flow. Business cash flow was down year-over-year, reflecting the before mentioned typical seasonality with the net working capital buildup at the start of the fiscal year, also influenced by higher price levels that we particularly see at some commodities. Steel Europe. So for Steel, the market conditions in Europe remain challenging, with, for example, demand being still quite reluctant. Consequently, sales decreased by minus 10% and shipments fell by 4%. However, we also saw some higher volumes from our automotive customers and from steel service centers. Let's take a look at EBIT adjusted. Despite the lower top line, EBIT adjusted at Steel increased to EUR 216 million. That is due to more favorable raw material prices and also efficiency measures that was supporting the positive earnings development. Business cash flow at Steel decreased year-over-year, also, as mentioned, driven by a seasonal buildup of net working capital and here, mainly receivables and payables. Last but not least, Marine Systems, TKMS. Overall, we see ongoing strong demand for defense products across the product range. Order backlog continues to be impressive, stands now at a record level of EUR 18.7 billion. And so here only a couple of brief comments on Marine as a segment of thyssenkrupp because all operational details are available in the reporting of TKMS as of yesterday as they already conducted their earnings call. Important to mention is here for Marine Systems, all relevant will develop in line with our outlook, including the updated sales guidance. Now let's take a look at our EBIT adjusted to net income bridge. You can see here that we are also in a transition period. Let's take a special look at the special items. The first and largest portion of restructuring expenses of EUR 400 million, more specifically EUR 401 million at Steel Europe is now included in our first quarter, and the remainder will be booked in the course of the financial year '25-'26. In addition, we faced some impairment losses at Automotive Technology in connection with the signing of the sale of our business unit Automation Engineering. The remaining positions are rather straightforward. Overall, we saw a negative net income of EUR 334 million. Now what do we get from net income to our free cash flow before M&A. In essence, the delta between net income and free cash flow before M&A is the aforementioned seasonal net working capital swing, particularly within our materials businesses that will, as mentioned, reverse over the course of the fiscal year, particularly in the second half. Remaining positions, meaning cash flow from invest and M&A and these adjustments are also straightforward. So it's really -- it's the seasonal net working capital pattern. Again, also very important for me to highlight, we do confirm our free cash flow before M&A guidance for the entire year, which is a good segue to the next chart. So guidance. Miguel and also myself have already stressed that we confirm our group guidance. And that means in particularly, we expect sales in the range of minus 2% to plus 1% compared to prior year, so unchanged. EBIT adjusted, as previously guided, will end in the range between EUR 500 million and EUR 900 million. Free cash flow before M&A is expected to come in between minus EUR 600 million and minus EUR 300 million despite our Q1, as explained, including expected cash outflows from restructuring of up to EUR 350 million. So the EUR 350 million cash outflows from restructuring are already included in our guidance of minus EUR 600 million to minus EUR 300 million. Looking at investments, obviously, also a driver of free cash flow before M&A. Overall, we are pretty cautious with investments. And that means that we're orientating ourselves rather to the lower end of our guidance of EUR 1.4 billion to EUR 1.6 billion. Here, similar to the last financial year, there might be a possible revisit over the remainder of the year as we see clearer towards the end of the year. Last but not least, net income. Here, our unchanged guidance, minus EUR 800 million to minus EUR 400 million, including restructuring expenses, mainly at Steel Europe. So if you look at the segments, there are a couple of smaller changes, but those do balance out on a group perspective. For example, on sales, automotive -- the guidance now takes into account the initiated sale of Automation Engineering, the business unit, and we have now better or higher sales expectations for Marine Systems. But overall, group guidance is confirmed for all KPIs. With that, Miguel, I'd say it's up to you again. Miguel Angel Lopez Borrego: Thank you very much, Axel. Before we come to our Q&A, I would like to highlight some reflections and outline the way forward. That slide looks familiar to you. That's why I will keep it short. The overall key message is big decisions are behind us. Now it's about disciplined execution and implementation. As you all know, we are developing thyssenkrupp into a lean financial holding company. By doing so, we will strengthen the independence of our segments and increase their accountability as well as entrepreneurial freedom. I'm convinced that this will also encourage innovation and unlock additional growth prospects. I'm also convinced that this approach will ultimately translate into additional value for our shareholders. And by working with full steam towards the capital market readiness of Materials Services, we make sure that this may become an option to further develop thyssenkrupp towards our strategic goal of a financial holding. With that, we are at the end of today's presentation. Thank you all for your continued interest and trust. We are now ready to take your questions. Andreas, back to you. Andreas Trösch: Thank you very much, Miguel and Axel. As mentioned, we are now ready to take your questions, and we are opening the Q&A session for our analysts. The first one in line is Boris. Boris Bourdet: I have three. So the first one is on the general discussions. There were recent rumors that [ Salz ] might be interested also in the steel business. So I would be interested to get an update on the process. Where are you? And what's according to your knowledge, the most likely time line for a decision? Maybe the second one that would be on the political support you mentioned during the presentation, CBAM and TRQ and others. You pointed out the fact that there could be some upside going forward. So does your current guidance include those supports? And if not, what could be the potential uplift? The last one is on Steel Europe, pretty decent margin over the period in Q1. So I would be interested to know how much is the contribution from the energy compensation in Germany this quarter? Miguel Angel Lopez Borrego: Boris, for your questions -- I'll start with the first one. So we are in the due diligence process with Jindal Group, intense conversations. Of course, you always understand that we cannot do any kind of statements around timing. And of course, it's also important to understand that the highlight of last week has been HKM. So the agreement that Salzgitter will continue the company on its own. And of course, all this influences, of course, also the due diligence process because that's a new factor coming now in and certainly positive. So discussions ongoing, and we will let you know as soon as something is more concrete to be reported. Yes, it is expected -- your second question, it is expected that we will see improved, pricing after the tariffs will be introduced in Europe. And also the CBAM -- concrete CBAM actions will, I believe, also help. We will not see anything this fiscal year around it because we expect the European Union to decide on the tariffs around May, June. And until then everything is really getting into the orders, we will see an impact for sure next fiscal year. But the likelihood that we see this fiscal year some positive effects already in our view is, for the time being, very limited. For the third question, I hand over to Axel. Axel Hamann: Thanks, Miguel. Yes, Boris, you've asked for the electric compensation and what the share is for the, let's say, increase also in EBIT. It's basically 3 components that help us increasing the EBIT. It's raw material prices, it's efficiency gains. And as you said, it's the electrical price compensation, and that is a bit higher than last year. I hope that gives you an indication. Boris Bourdet: Can you just remind us how much that was last year? Axel Hamann: That was a low 3-digit million euro number. Andreas Trösch: Now the next question comes from Jason Fairclough. If not, then we try the next in line and come back to Jason in a second. Next in line is Alain Gabriel. Alain Gabriel: A couple of questions. On HKM, how do you see the cash outflows relating to the sale potentially being phased over the course of this year and beyond? That's the first question. The second one is still on HKM. Can you give us some indication of the pro forma Steel Europe EBITDA without HKM, potentially for '25 or even Q1 '26, just to help us quantify the impact of HKM or even if it's easier, if you can give us what would your guidance have been ex-HKM for '25, '26? Miguel Angel Lopez Borrego: All right. Thanks. First of all, cash outflow or I should say, potential cash outflow for HKM, a term sheet has been signed. And as we stated, it's going to be a low to mid-3-digit million euro number. The cash outflow pattern, what I can already provide you with as of now, it's going to be a minor part of this year, and we're going to stretch that out over at least 3 years. So you would see a sequential cash out, and we're going to start with a smaller part in this year in case we're going to close the deal, and that is expected for June of this year. Axel Hamann: With regard to guidance for HKM, we do not disclose, let's say, individual guidance for that business as part of our Steel segment. Alain Gabriel: But can you give us some indication if it's a positive EBITDA or negative EBITDA if we were to strip it out? Or even that you cannot give any color? Axel Hamann: Well, there's still a couple of variables also to be negotiated in terms of supply from HKM. So it's really -- it's too early to tell. Andreas Trösch: Now let's try Jason again, Jason Fairclough. Unmute yourself. All right. Well then, let's try again later. Now we're switching over to Bastian. Bastian Synagowitz. Can you unmute yourself Bastian? Bastian Synagowitz: Maybe firstly, starting off on the strategic plans you have for the Steel business. I guess maybe looking at the broader market, obviously, the -- I guess, the equity market has significantly rerated the valuation of any European steel asset given the very supportive policy backdrop. And if we overlay this with the talks you're currently having on the possible sale of the unit, this must be obviously a very different conversation today versus the talks which you probably had at the very early stage of that process. So can you confirm that you're basically seeing a positive momentum here in these talks? And -- or is there also a scenario where at least you may potentially crystallize the value of the steel unit in a different way? And has this become more likely? That's my first question. Miguel Angel Lopez Borrego: Obviously, a very relevant strategic question you raised. I mean, it is quite clear that the sentiment, and we have seen that -- you have seen that also in all the steel companies that are publicly listed. So the sentiment has turned into a positive one for the last 4 months. We have seen increases in the share prices of around 50% and more. So there is a clear positive sentiment. It is also clear that this is due to the tariff situation, as mentioned before, and the limitation also of the import quota for Europe. And of course, the idea of resilience -- and I've been reporting, you remember about the Steel summit with Chancellor Merz and also talks that we had directly with Ursula von der Leyen and her team. So yes, there is a clear positive sentiment here. And of course, that will have, for sure, to get into an input for the conversations with our colleagues from Jindal, no doubt about that. Bastian Synagowitz: Maybe just looking also at the recent news around the possible plans to delay the phaseout under the European ETS scheme. I would think that, that must be quite positive news for you as well in terms of like the CapEx perspective of the business. And in that sense, probably in the overall context, probably is another derisking factor for the unit. Would you agree with this? Miguel Angel Lopez Borrego: Yes, there are really good things happening, and this will have quite a different shape in terms of Steel for the future. Bastian Synagowitz: Then maybe lastly, one more technical question just on the restructuring costs you're expecting. I think you're now guiding for EUR 700 million to EUR 800 million of restructuring costs in total. Is this only related to Steel? Or does this already include something for the other units as well or maybe even for HKM? Or is this just Steel? Axel Hamann: Yes. Let me take that question, Bastian. The vast majority is Steel related. And we've also, let's say, provisioned -- not technically, but planned for some at HKM. And what is also included is a minor part for automotive. So vast majority is Steel. Bastian Synagowitz: The HKM portion, however, that does not include the low to mid-3-digit number you were referring to earlier, I suppose? Or does it include that one as well? Axel Hamann: It's not too far away, let me put it that way. Andreas Trösch: All right. Thank you, Bastian and now again, trying Jason. Jason Fairclough: Look, a couple of quick ones for me. First, I was wondering if you could just give us an update on Elevators. How are you thinking about the value of that stake? And what's the path to releasing that value? On Material Services, we've talked about this one before, huge working capital in this business. Do you think it's performing the way it needs to? And again, how do you think about releasing value? And Steel, is the vision to sell completely now? Or would you just be looking to sell a 51% stake? Axel Hamann: Let me maybe start with Elevator, Jason. You've probably seen currently booked at around about EUR 2 billion. I think there's a certain expectation in the market around, let's say, further developing TKE. So as of now, we're super happy with our share, and we're looking forward what the developments around TKE will be. Obviously, there are some, let's say, talk in the market around IPO. Let's see. We're happy with our share, and we're looking forward how this is going to develop. With regard to working capital, I think that's something we've touched upon also in the past for Materials Services. Are we happy with the performance? I think we're working towards capital market readiness, let me put it that way. And working capital efficiency is a part of it. And yes, so let's see when that business is going to be capital market ready, and so we will let you know once we're there. With regard to Steel, it's maybe a question for you, Miguel. If I recall you correctly, it was around whether we're going to sell or whether we intend to sell 100%, or whether we can think of any 50% structure. Miguel Angel Lopez Borrego: Okay. I was having technical problems for 30 seconds. Well, Jason, on your question around what portion of the business is -- of the Steel business is in discussion for selling. We continue to go the direction of to sell the majority of it. That's what is in the discussions with Jindal right now. Jason Fairclough: Can I just follow up on the Material Services. So it's an interesting phrase you used there, working towards capital market readiness. So should we read from that, that you're considering a potential IPO or sale of that business? Axel Hamann: No. I mean it's part of our overall strategy that we want to enable our businesses and then ultimately become a financial holding company. And that would encompass that the segments would eventually be also listed. That's something we've communicated and materials may be one of them. But as I said, no -- final decision not yet taken, but we're working hard on, let's say, getting all ducks in a row. Jason Fairclough: Okay. Glad we could make it for a third time. Thank you. Andreas Trösch: [Operator Instructions] Next follow-up question is coming from Alain Gabriel. Alain Gabriel: A couple of follow-ups. On Steel Europe, you are not too far from the bottom end of your guidance range just with the Q1 numbers. Should we see your full year number as conservative? Or are there any items that you expect to develop over the course of the year that would drag down the margins? That's one. The second question is on Steel Europe. Can you remind us what are the pension provisions allocated to Steel Europe? And on top of that, what are the other restructuring provisions that are booked as liabilities on your balance sheet for Steel Europe? Miguel Angel Lopez Borrego: Sure. Thank you. First of all, we've touched upon the guidance for steel after that promising start. As said, the reasons are threefold. It's efficiency gains -- it's lower raw material prices, and it's also the electrical price compensation. So I would not rule out at this point in time that we continue to see efficiency gains. And with regard to prices, let's see. But you see me rather, let's say, on the comfortable side, if I look at our guidance range for steel, let me put it that way. Then pension provisions for Steel should be around EUR 2.4 billion. And with regard to -- I think you also asked around for restructuring provisions, that is something we have guided around a mid- to high 3-digit million euro numbers for this year. Andreas Trösch: Thank you, Alan, for your questions. There seems to be no more questions currently in the call. If you have more questions, please contact the Investor Relations team, including myself. So thank you very much for participating in that call, and have a great day. Thanks. Miguel Angel Lopez Borrego: Thanks, everyone. Bye-bye. Bye.
Felipe Navarro López de Chicheri: Good morning, and welcome to MAPFRE's Full Year 2025 Activity Update. This is Felipe Navarro, Deputy General Manager of the Finance area. We are pleased to have here with us, Antonio Huertas, the Group Executive Chairman. He will make a few opening remarks and will give an overview of business trends and developments. Following to that, José Luis Jiménez, the Group CFO, will give us a brief overview of the IFRS figures and will discuss the main financials under local accounting. I will walk us through the balance sheet and capital-related topics. Before we begin, just a few reminders. Interpretation services are available, both here and online. So feel free to choose the language you prefer, either English or Spanish. At the end of the presentation, we will open up the Q&A. Questions can be made in either language. I will now hand the floor over to Antonio Huertas. Antonio Huertas Mejías: Thank you, Felipe. Hello, everyone, and thank you for your time today, both of you here in person or those connected online. Firstly, I must express the Board of Directors' satisfaction with the results we have just presented. You have seen, 2025 was an excellent year for MAPFRE. It was a year in which we exceeded our main business targets with significant improvements in our main technical ratios as well as achieving significant strategic advances. In terms of net attributable profit, we had another record year with EUR 1.08 billion, representing an increase of almost 20%. But we must remember that gross profit exceeded EUR 2.4 billion, also representing a spectacular improvement of 20%. Premiums also reached an all-time high, exceeding EUR 29 billion, also up 20%. And we cannot forget to mention that total income, including financial income, exceeded EUR 34 billion for the first time. We have once again outperformed all the financial targets that we updated and presented in the last AGM despite the fact that the international economic environment has affected our growth in euros. In this context, exchange rate depreciations have negatively impacted our business volumes, especially those currencies that have the greatest weight in our accounts such as the Brazilian real, the U.S. dollar, the Turkish lira and other Latin American currencies. Premium grew by 3.6% in euros, but at constant exchange rates, this figure would more than double, reaching almost 8%. Non-Life, which is 3/4 of our business continues to benefit from technical improvements, growing 6% at constant exchange rates or 1.5% in euros to over EUR 22 billion. Life business is also up nearly 15% at constant exchange rates, almost 12% in euros to over EUR 6.6 billion. The Non-Life combined ratio now stands at an excellent 92.2%, representing a decrease of more than 2 points. This is the best combined ratio our group has achieved in the last 15 years. The technical improvement has been impressive with all geographical areas and all businesses showing a significant reduction in their combined ratio. Particularly notable is the sharp reduction in the claim ratio to 65%. ROE stands at a healthy 12.4%. Excluding noncash one-offs in the third quarter, profit would have exceeded EUR 1.1 billion and ROE would have been over 30%. Our capital base remains strong despite market volatility with shareholders' equity to up over 5% during the year, just shy of EUR 9 billion, and the solvency ratio was 210% at the end of September. These excellent results have enabled us to propose a final dividend of EUR 0.11 per share, fulfilling our commitment for another year to pay out at least 50% of our profits. Next, the following slide, allow me to comment on the key data from our most relevant activities, which shows excellent underlying trends. Starting with insurance operations in the different regions, Iberia has delivered an excellent technical and commercial performance and has once again achieved outstanding results, thanks to a solid and well-diversified business. Net profit was EUR 450 million, up 23% with significant contributions from both Life and Non-life businesses. Technical management continues to improve in all areas. The Motor business has experienced a clear change in trend, once again becoming a significant contributor to the result with a result up over EUR 100 million and the combined ratio that has fallen by almost 7 points to 98.5%. General Non-life and Accident & Health businesses are also solid with both combined ratios around 94%. LATAM also showed solid underlying results with a net profit of EUR 365 million. The combined ratio stands at 84.6% with most countries well below 100%. Brazil remains a key driver of profitability, supported by high financial income and solid technical margins. Net profit reached a record level of around EUR 270 million, an increase of 5%. North America also posted record results of nearly EUR 140 million, up 42%. The operational improvements implemented in recent years have paid off and combined ratios in the U.S. are now the best ever. Finally, MAPFRE RE recorded a profit of EUR 381 million, up 17% with a combined ratio of 91.2% indicating that both Reinsurance and Global Risk has performed excellently with historic results. It's true that it has not been a particularly intense year in terms of major catastrophes, but the frequency of weather events is not decreasing globally and the increase of secondary perils in the industry is significant. In our case, our technical rigor in underwriting and risk selection, our diversified business model and appropriate retrocession program have helped us to achieve these magnificent results. In addition, reserves remain close to the upper end of our confidence interval. We are extremely satisfied with this year's historic results and the Board of Directors has proposed a final dividend of EUR 0.11, representing a 15.8% increase to be approved at the AGM on March 13. This is the highest dividend paid ever and the fifth consecutive increase in 3 years, bringing the total dividend against 2025 to EUR 0.18, up 12.5%. Total dividends reached EUR 454 million with a payout of 51.4%. The average dividend yield for 2025 was 4.6%. The average dividend yield for -- okay, I already said. Over the last 5 years, MAPFRE has paid out EUR 2.3 billion to its shareholders, fully in cash. Now -- I will now hand the floor over to José Luis. José Jiménez Guajardo-Fajardo: Thank you, Antonio. Before moving into the details of the local figures, I would like to briefly comment on the main KPIs under IFRS compared to local GAAP, which are very aligned. Insurance revenue, which reached a little over EUR 26 billion is up over 3%. At constant exchange rates, growth is 7.6%. The net result stands at EUR 1,133 million under IFRS, EUR 54 million higher than local GAAP. IFRS 17 had a EUR 43 million positive impact. The impact of discounting and the risk margin offset a negative impact from the loss company, which mainly affected the Life business in Colombia during the year. IFRS 9 had a positive EUR 11 million impact, the positive impact of mutual fund valuation booked in P&L offset the realized gains on equity recorded under ICI. Shareholders' equity amounts to EUR 9.4 billion, and return on equity was 12.4% with similar trends under local GAAP. The growth CCM was EUR 2.6 billion, up almost 4% and was EUR 1.6 billion after taxes and minorities, mainly from the contribution of new business. The 90% combined ratio under IFRS is below the local figure. Mainly due to the discount factor, we had a 1.4 point impact. I will now discuss the key trends by region. In Iberia, total premiums are growing over 10% with solid momentum across most business lines. Non-Life is up 5%, while Life has increased over 23%, supported by remarkable performance in savings. The combined ratio has improved more than 3 points, reaching 95.8%. The return on equity is now over 2 points to 13.6%. Profitability in LATAM has been excellent with a return on equity of nearly 16% despite some one-off and currency depreciations. Brazil reached a record high result, posting a return on equity of close to 28%, with improved technical ratios and strong investment returns. The Non-Life combined ratio remains outstanding at 72%. In euros, premiums are down 10% with almost 7-point drag from foreign exchange rates. The decline reflects a slowdown in lending-linked products due to higher interest rates. In the rest of LATAM, premiums are over 5% in euros with a strong local currency growth in key markets like Mexico, Colombia and Peru. The combined ratio has improved in most countries standing at 98.8% for the region. The net result was EUR 97 million with 2 relevant negative impact. EUR 37 million in Mexico from the change to VAT treatment for insurance companies and EUR 57 million in Colombia due to the 23% minimum wage increase, mainly affecting annuities reference to inflation. Overall, trend across the region are still strong, and we are confident that the region will continue to prove resilient as we have been successfully operating in these markets for years. In North America, premiums are down over 4% in euros due to the U.S. dollar depreciation. In a record profit year, the combined ratio is down to 95.4%, improving 3 points. In EMEA, losses in Germany and Italy are down. The region is reporting its third consecutive quarter of positive numbers with a EUR 60 million profit compared to EUR 30 million in losses last year with an 8-point reduction in the combined ratio. Regarding MAPFRE RE, in terms of growth, premiums are in line with last year. The non-group Reinsurance business around 40% at constant exchange rates. In terms of profitability, it has been a good year after a very quiet hurricane season. There was a partial release of reserve in the fourth quarter. Some of this prudence was applied to claims on a case-by-case basis. The combined ratio includes around 2.5 points of total addition reserve prudence at year-end. There has also been a one-off tax impact for around EUR 45 million in the fourth quarter due to a prudent approach related to doubling position in some Latin American countries. MAWDY continues to contribute positively with a net result of EUR 6 million. Finally, I would like to comment that the net hyperinflation adjustment are down from EUR 60 million last year to EUR 31 million, mainly from the case of Argentina. General P&C lines continue to benefit from disciplined technical management, solid market presence and diversification. Premiums are down, affected by the Brazilian real and the U.S. dollar. The combined ratio remained excellent at 80%. In Iberia, premiums are up 7%, with a strong performance in key segments with commercial lines growing 10%. The combined ratio stands at 94%, thanks to diversification, a prudent underwriting approach and comprehensive reinsurance protection. In Brazil, premiums declined 8.5% in euros, mainly due to the currency depreciation. Furthermore, agricultural insurance remained affected by high interest rates, while other retail and industrial lines experienced notable growth. The combined ratio was stable and 63% supported by Agro. In North America, premiums are impacted by dollar depreciation while the combined rate has improved more than 5 points to 79%, supported by prior year tariff increases as well as lower weather-related claims. Regarding Motor, the fourth quarter result confirms the positive trends with significant advance in profitability in most markets. The combined ratio is below 100% with a 5-point improvement year-on-year. In Iberia, the combined ratio was 98.5%, improving 7 points. Premiums are growing 3%, with average premium up 7.5% compared to the market at 6%. In Brazil, premiums are down mainly due to the currency depreciation. The combined ratio remained stable, in line with higher interest rates. In North America, premiums also declined due to weaker currency. Profit amounts to EUR 72 million, up more than 80% with the combined ratio down more than 3 points. Regarding other regions, in other LATAM, almost all units reported combined ratios below 100%. In EMEA, the combined ratio is also down 11 points from 122 to 111, driven by an over 20-point reduction in Germany. In conclusion, technical management remains strong with measures continue to deliver. On the Life business, sorry -- that's it. On the life business, premiums are up 12% with the strong trends in Iberia and other LATAM. The Life business continues to be very profitable, adding almost EUR 200 million to the group results. In Iberia, premiums are growing 24% due to a strong performance in savings. The Protection business is up over 4%, in line with previous trends. The net result was EUR 132 million, down year-on-year, largely driven by lower financial gains. In Brazil, premiums are down 30%, impacted by the currency as well as the high interest rate environment, which affect lending and related Life Protection product demand. Earnings remained strong, up 5% with a combined ratio of 82%, down 2 points year-on-year. Regarding other markets, volumes were up 80% laid by other LATAM, with not wealthy performance in Mexico growing 40%. The loss in other largely reflects the increase in the minimum wage in Colombia. And now I will hand the floor over to Felipe to discuss the main balance sheet items. Felipe Navarro López de Chicheri: Thank you very much, José Luis. Shareholders' equity stands at strong at over EUR 8.9 billion, up more than 5% at year-end on the back of the excellent results that we're presenting. The improved valuation of the investment portfolio offsets negative conversion differences, mainly from the U.S. dollar, which is now down nearly 12%. Leverage is below 21% at the beginning of the year. We completed a dual tranche of 6- and 10-year senior transaction for a total of EUR 1 billion with 3.125 and 3.625 coupons. Leverage would increase temporarily, but still acceptable levels until we repay the upcoming senior bond maturity in May. We don't expect any other major changes in our capital structure in the near future. Our strong balance sheet supported by strong cash flow generation within MAPFRE Group. In 2025, EUR 900 million was upstreamed from subsidiaries, EUR 200 million higher than the previous year. Iberia remains the most important contributor with EUR 348 million. LATAM contributed EUR 300 million, including an extraordinary dividend of EUR 80 million in Brazil, corresponding to 2026, which was upstream to avoid fiscal changes that have taken effect this year. North America contributed over EUR 70 million. MAPFRE RE upstreamed almost EUR 150 million this year. In conclusion, our sources of cash generation are solid and well diversified. Total assets under management stand at almost EUR 65 billion, growing 9% year-on-year. Third-party assets now reach over EUR 16 billion, up 20%. In Spain, we remain among the top nonbank asset managers. We maintain our commitment to being a benchmark in financing planning. In 2025, MAPFRE was among the top 5 largest players in pension plans, leading growth with a rate of 8%. As for mutual funds, growth has been outstanding, reaching 32% year-on-year. Brazil was the main contributor to this expansion, nearly doubling assets under management throughout our local asset manager. In Spain, our own channel delivered double-digit growth with an increase of 16%, while the bancassurance channel posted a 39% increase. Our own investment portfolio amounts to EUR 48.4 billion with asset allocation stable throughout the year. It remains defensive with a focus on quality, diversification and high liquidity and with a low exposure in alternative assets. Regarding the euro area, investment portfolio yields are up over 50 basis points at MAPFRE RE, while Iberia yields and duration are slightly down. In other markets, Brazilian portfolio yields increased over 230 basis points during the year, reaching 12.7%. In North America, yields are up -- are also up around 25 basis points to over 3.2%. Realized gains and losses are very stable, around EUR 43 million as in Non-Life financial income. I would like to comment on a few exceptional items. In Iberia, there was a prudent accelerated amortization of intangibles, which had a EUR 24 million impact. And in North America, there was a reclassification of premium finance fees in line with market practice with around EUR 20 million impact. Financial income continues to be a tailwind, and our portfolios are well positioned to face market volatility. I will now hand the floor over to Antonio to make a few closing remarks. Antonio Huertas Mejías: Thank you, Felipe. The close of 2025 marks the end of the second year of our 2024-2026 strategic plan. We have continued to implement a strategy focusing on growth and results. MAPFRE has continued to enhance in technical excellence, improving productivity and leveraging its potential across all markets, while transforming our business. Referring to our financial commitments, we are very pleased with our achievements in the current plan. Over the last 2 years, average growth has been 3.1%, but at constant exchange rates, it would have been 7%, meaning we would have met our targets. Our average ROE target for the period is 11% to 12%, excluding extraordinary items, and we reached over 13% at the year-end. Combined ratio performance was also excellent in 2025 at 92.2%, well below the target range. These financial figures are on the local accounting, but we are very much in line with IFRS metrics. We remain highly committed to sustainability, having achieved notable improvements. We are now carbon neutral in 13 countries and improving from 10 in 2024. Over 93% of our portfolio is now ESG rated. Additionally, women now occupy 35.4% of top management positions globally. We have strengthened our underlying profits in all geographies and products. Those excellent results are mainly due to our geographical diversification. Results in Brazil, North America and MAPFRE RE have been outstanding, reaching historic highs. And Iberia has returned to normalized results, maintaining its position as the group's leading contributor. In addition, in terms of business development, MAPFRE continues to occupy leading positions in our main markets. The technical work carried out after the pandemic has borne fruit. We have reduced the combined ratio by more than 5 points since 2023 with improvement in technical management and disciplined underwriting, and we have increased prudence in our reserves. In addition to all this, improving efficiency remains a strategic pillar. We maintain a strict cost control despite inflation with a stable paying ratio. Finally, it's worth highlighting the strength of our balance sheet, which has allowed us over the years to absorb extraordinary events without a significant impact on the final results. To conclude, I would like to comment on our general expectations for 2026. First, despite a complex macroeconomic context, MAPFRE will continue to demonstrate its ability to navigate these circumstances successfully. This year, we will focus more on growth, especially in those segments where profitability has already reached acceptable levels, including Motor. In addition, the impact of currencies is expected to be more benign than in 2025. We believe that our new brand identity launched this year will also help the business to develop. Our ambition is now also being rolled out with a new global modern and digitally connected brand. This new corporate identity strengthens our positioning in the markets, bringing us closer to our customers and other stakeholders. Despite our excellent ratios and profitability levels, we believe that we can still grow profitably, thanks to our diversified business model and the effect of the entire transformation process we are undergoing. Financial income should also continue to be a favorable factor and the portfolios are well positioned to cope with possible interest rate declines. In conclusion, we are optimistic about MAPFRE's performance in 2026, as well we are prepared to face the challenges post by global uncertainty and the competitive insurance of reinsurance market. The dividends announced today reinforces our confidence in the future of our firm commitment to continue creating value for our shareholders. I will now give the floor to Felipe to start the Q&A session. Felipe Navarro López de Chicheri: Thank you very much, Antonio. Although most of you are already familiar with the process, let me quickly remind you of the details of the Q&A session. [Operator Instructions] And we will try to answer them as time allows. The IR team, I remind you that the IR team will be available for any pending questions after the call. And before that, I would like to apologize because of the information that we provided and the CNMV that was a little bit late this morning due to a technical issue with the connection with -- to the CNMV. I mean this is something that was out of our possibilities. So it is something that we could not do anything else. I would like to start with the floor in the room. Felipe Navarro López de Chicheri: [Interpreted] I'm switching over to Spanish now. [Operator Instructions] Maria Paz Ojeda Fernandez: [Interpreted] Can you hear me? Great. Maria Paz Ojeda from Banco Sabadell. Well, first of all, congratulations on your performance. It's really been outstanding for the past 18 months. I have three questions. First, about the Colombia regulation changes and those in Mexico, too. What do you foresee for 2026 and the future years because these changes, I'm sure, would affect your rating, right? So any possibilities to raise premiums or prices to offset that VAT-related cost increase and the new salaries? As for the business in North America, well, that 68% combined ratio sounds spectacular. I understand it takes support on milder weather with fewer claims. So what do you think the additional impact would be if a standard amount of weather events were to take place? And also, do you have any information on the firm storm that blew over the whole East Coast in January? And also, could you give us some flavor on the lawsuit or the differences in opinion with the AAA club vis-a-vis the contract renewal? And another question, we see that most of the targets, both the combined ratio and return on equity are being met easily in your strategic plan into next year. So what's your perspective on whether you can go more ambitious in your targets? Antonio Huertas Mejías: [Interpreted] Okay, I will start dealing with the one-offs in Mexico and Colombia, and then José Luis will deal with the rest of your question. Yes, certainly, these one-offs are not your usual run-of-the-mill one-offs. You come up with, as part of our business, like extreme weather events or similar circumstances leading to potential impairments or not. These circumstances are entirely out of our management's sphere. Well, in Colombia, we had the December 29 change in the salary in Mexico. We have a long-standing dispute with the Mexican tax administration, which demanded a legal review of VAT and insurance. And finally, the photo finish was that the industry negotiated with the Mexican government to get retroactive action to only 2025 and of course, from 2026 on. MAPFRE has already provisioned the total impact expected for 2025 and the expected impact for 2026. I'm sorry, but I cannot claim for fee or premium adjustments. But as soon as possible, when we start dealing with renewals after the second quarter, we will have full view of the total impact. And we will have fully transferred this to our clients. The total impact is calculated in over $1 billion for the Mexican insurance industry. And for us, it's a limited impact, but it's still part of that price transfer that we couldn't do in 2025. And as for the case in Colombia, the increase in minimum wage, 23% unexpected increase that affects only some specific product of life rent. And they're already in runoff in Colombia for MAPFRE. So we don't need to do much. We already have provisions to deal with this one-off, the new rates, which are after all indexed to the minimum wage. But I insist it's a runoff portfolio. So it won't have a huge impact. Well, the impact was relevant for the industry, particularly for very specific product, as I said. And then quickly, AAA agency. We know that in late 2026, our 20-year agreement with AAA would come to an end. We knew that 20 years ago, and we've done our best to continue to be exclusive distributors for AAA. From now on, we will not be exclusive since AAA is opening an insurance company panel. The distribution capacity for AAA is very relevant, but we have a lot of capacity beyond AAA to deal with this new circumstances that affect Nordisk, mostly in Massachusetts. The fact that they've been less than compliant during the past year is truly nonrelevant. And I'm sure we will come to an agreement so that this last year of the contract will be as smooth as possible. And then we have another agreement with another AAA, a joint venture we have in Washington and Oregon is totally unrelated because we're talking about federated separate institutions. Our joint venture for auto is growing as expected, and there's nothing to report there. José Jiménez Guajardo-Fajardo: [Interpreted] As for the storms, and the U.S. Maria path, we're not aware that there are any material things to report. This is just business as usual in the United States. Right now, their temperatures are minus 10, minus 20 Celsius. So nothing new to report. We're provisioning for it. Maybe at this time of the year, some weather events might affect California, too. But we -- only time will tell. We just know that the January storms have not had any material effects, nothing that is not usual in that considering the geography. About the performance of our strategy plan, we're more than pleased. We're over complying. It's been years of work to come to this point, and we're in a very healthy situation. However, it's too soon to tell. We would have to wait until the AGM to see if the new targets are, as you say, more demanding. Felipe Navarro López de Chicheri: [Interpreted] I will go over one of the questions that came in online about AI. Apparently, news is broken about an intermediary who was coming to an agreement with ChatGPT and changes in the distribution considering AI. Do we consider that this agreement between Tuio and ChatGPT might become credible disruption in the insurance distribution market? That's part of the question. And what we see as the general impact of AI on our business? So in sum, how could AI affect the business? And what consequences could it have on the general insurance business? Antonio Huertas Mejías: [Interpreted] Yes, maybe a few thoughts on the matter. Certainly, we've been following the news with great interest. It does not come as a surprise because the benefits of AI for the present and the near future of all businesses are very clear. We just need to continue to integrate AI into our distribution initiatives. But that's valid not only for the insurance business. I guess many of us have been using AI to prepare a holiday or to compare pricing in other products. So AI is likely to change our lives, most likely for the better, just for simplification purposes. I mean price comparative tables were already out there before AI. The new technology has enabled to compare prices for a long time. Obviously, AI can make things better and quicker. But dealing with distribution, well, MAPFRE is a multichannel group that works and will continue to work with all sorts of distributors. We were connected to many insurtechs that have tested different models. Well, they don't go directly into insurance because our installed capacities are beyond their means. But anything enabling financial and insurance inclusion, particularly in markets not served by traditional mediation are welcome. A large part of the world population, even European and Spanish population don't have access to simple products just because they don't understand products that seems so simple, but it might look like they don't deserve too much explanation. Products like Life, Risk, ensuring fundamental tools, for instance, MAPFRE has been using AI for some time now. Two years ago, we were the first company to generate our own manifesto to communicate our intention to work on AI and make that connection transparent. We contemplate a people-focused AI with the same values and principles, we have stood for in our face-to-face relationship with clients to make sure that our clients will always have a consultant mediator, a professional expert to walk them side by side and generate trust in the product. So long-live technology, and we welcome any company that can give greater access to citizens to generate better financial and insurance inclusion. José Jiménez Guajardo-Fajardo: [Interpreted] If I may, Antonio, we've been reading about stock performance of companies and some reports seem exaggerated. A company in Spain with a turnover of EUR 15 million shaking long-established companies in their boots doesn't seem to make a lot of sense. Maybe if we think back, remember the Lemonade case in the U.S., it felt very disruptive only 5 years ago, and look where we are now in terms of balance sheet and return on equity. I do understand that it's loud news and the industry has grown impressively in the past year, but that's all there is. Felipe Navarro López de Chicheri: [Interpreted] And an extension of this question. Do we expect to start selling small ticket products customized to the new possibilities, AI yields, simpler products, for instance? Antonio Huertas Mejías: [Interpreted] Well, we cannot answer that at this point. We -- like I said, we are working with several AI suppliers. We're just getting to know artificial intelligence, and we're using it for both back office and front office to offer our clients solutions that will truly have an impact on their real lives. Only in Spain, over 6 million users in Spain benefited from AI solutions to facilitate connectivity. And well, in Brazil and the United States, we have very interesting projects to keep growing that accessibility. But AI product distribution seems a little bit more distant in the future. When there's real capacity to do so in the future, we will consider it. But so far, our model remains based on being close to the ground and relying on experts because insurance products are very complicated, even the most traditional products like auto, we don't want to cheapen those products as they're enormously complicated in technical terms and in terms of third-party accountability and liability. Felipe Navarro López de Chicheri: [Interpreted] Well, I think this answers Ivan Bokhmat's, Maks Mishyn and David Barma's questions online. Back to the room. Do we have any hands raised? Juan Lopez Cobo: [Interpreted] Juan Pablo Lopez, from Santander. Two questions. The first one about your solvency ratio, which continues to do better and better, 8 percentage points throughout the year within your target range. So two questions. One, about the dividend. The dividend seems to keep growing, a payout of 51%. Have you, at any point, considered paying out more considering your extraordinary capital position? And second, about potential M&As. We've seen some news in Portugal, a company that might potentially go public or bank that went dual track, they tried to go public and then finally got sold. If there were that possibility for that dual track, would you be at all interested? And could you update or are you willing to update your position on M&A? And then about Reinsurance, you come from a particularly good quarter, particularly in Non-Life. So have you released any provisions? PBT was particularly solid. And then on tax. Tax line was a little bit high this quarter. I understand there are one-offs and catch-ups. Can you shed some light on that? José Jiménez Guajardo-Fajardo: [Interpreted] Well, you asked about our solvency ratio. We're pretty pleased that we're within the range of 1.75% to 2.25% established by the Board. We're approaching the top of the bracket, and we're feeling comfortable. About the dividend, well, today, we announced a dividend of EUR 0.18, the highest paid by this company so far and that stands for 12.5% above last year's number, and it's the fifth dividend raise in the past 5 years. The message the Board has always conveyed is that if the business does better, so will the dividend. And I believe we have maintained our promise. So the outlook is positive, and I believe that for this year -- well, this year is looking good. Certainly, last year, we had some headwinds on the side of currencies and these one-offs we've been mentioning in Colombia and Mexico, which should not be recurrent. No reason to do so. And in the case of Colombia, this was certainly a one-off. There's always been a slight scale when it comes to raising salaries. But this time, since there were Congress and presidential elections, there was a public policy decision made to raise the minimum salary above reasonable levels. Felipe Navarro López de Chicheri: [Interpreted] And I can say something maybe about the company, which is now going to trade in the Brazilian stock market. MAPFRE is not going to invest a minority stake in a company that's going through an IPO. Just -- it's not part of our core strategy. And then as for any M&A activity, our objectives are still the same as we've said over and over, we want more potential for distribution in Spain. We want to deploy a bit more capital in Europe. And one of our goals is definitely Germany, but we won't be opening up any more markets or companies. And in LATAM, we're always looking up for opportunities in Brazil and Mexico. And in Brazil, anything that doesn't, of course, impinge upon our agreement with Banco do Brasil. And in the U.S., if we find something that could complement a single-state company, for instance, that could be complementary to our current business in the U.S. And as for the Reinsurance topic, it's true that there is that tax impact of EUR 45 million, but that is because of an interpretation on the risk of double taxation, how that could affect Reinsurance. So we've provisioned those EUR 45 million from a purely prudential perspective. As for the reserves, you're right that there has been some release of provisions in the fourth quarter because of two basic effects. First, as we said throughout the year, we have been preparing for a hurricane season, which looked like it was going to be much longer or later. But in the end, it was almost nonexistent. And so it didn't affect our insured footprint and so we've released those provisions in a standard way. And then we strengthened provisions relative to some case-by-case claims. What we do at the end of the year is check and see how our case-by-case claims have evolved and we provision accordingly. So the releases are not that significant in terms of MAPFRE RE's figures. We still have very solid reserves with an impact of about 2.5 points in the combined ratio because of the reinforcement of these reserves and with amazing results in 2025. And now if you want, we can read out a question that has come in. The people who are following this online, they're asking, from Barclays, how do we expect to benefit from the reform of Solvency II? José Jiménez Guajardo-Fajardo: [Interpreted] Well, I think like most of the European insurance sector, the reforms, which will come into force if everything goes according to plan in June of 2027, will have a positive impact for most insurers. In our case, we're estimating initially that it could be between 3 and 5 additional points of solvency. Felipe Navarro López de Chicheri: [Interpreted] Thank you very much, José Luis. Another small question, which I might perhaps answer myself, if I may, because it's about Malta. They're asking about the estimated impact of storm Harry on Malta and Italy, and there probably will be some claims. Well, Malta is a country that has constantly been affected by these types of storms with winds, which are practically hurricane-forced winds and the company has sufficient financial resilience to cover such claims, and it's basically claims to do with property and house insurance near the other coast. As for the impact of Malta for the whole group, it's really not going to have any effect because Malta's figures are solid enough to cover of all this on its own. As for Italy, mostly there's an Auto portfolio, auto affected by the storm, where cars affected by -- vehicles affected by the storm were very few. So we don't expect it to have a significant impact. Questions from the room? Paco? Francisco Riquel: [Interpreted] Yes, I'm Francisco Riquel from Alantra. Antonio, you said that the priority for 2026 is to grow premiums, again, particularly in the Auto business. The number of policies has continued to drop in the main markets, Spain, Brazil, the U.S. How compatible is that with growing premiums profitably? Because in the case of Spain, your combined ratio for Auto is still 98.5%, which is the high end of your range. Do you think you can grow and still continue to improve profitability? And how? And the second question about Brazil. The yield curve anticipates a fall of 500 basis points in 2 years. You've reduced the tenor of your portfolio to 1.5 years. So -- but how sustainable is Brazil's profitability in general? Antonio Huertas Mejías: [Interpreted] Okay. Paco, let me start with the part about growth. I don't know if going back to growth is the right way to put it. It's about bolstering the growth because we've always had growth in policies, in customers, not in every market, but definitely in premiums. It's true that we have seen less growth in Europe in the consolidated accounts. But in local currency, except for Brazil, all the other markets grew even above inflation, which is no longer a major concern right now. And with our forecast, we can expect it to be for the next 2 or 3 years. Growing the number of customers is the biggest challenge, but that is our focus always, customer selection and risk selection processes as well as the market pricing we do to adjust the price to the risk we're taking on is our standard business. Auto, of course, is the business that was under more pressure in the last 4 years because of impairment in that line. Also, Health because of sector inflation, not the general inflation, but sector inflation were significant, and it probably is still somewhat high. We know of the pressures that are present in markets because manufacturers, OEMs are exposed to that with the inflow of Chinese cars at much lower prices. And electric, EV, which are very welcome and very necessary, also have much higher prices than their equivalent combustion engine cars. So that means that there's price on -- there's rising prices for insurance as well. But we don't contemplate seeing combined ratios in Spain or in other mature markets, like the ones we had back in the day. We trust that the combination of good customer selection, combining all their policies and other insurance needs and their MAPFRE brands make us feel that with reasonable technical profit, we can offer solutions that will make it worth their while to be in MAPFRE, where they have 2 cars, for instance, plus health insurance, plus property insurance and some life insurance products means we can be very good at pricing. The techniques we have to predict future claim rates for those customers also means that we can be very competitive and therefore, see higher growth rates for Auto in a very competitive market like Spain or Brazil or the U.S. But in general, we're satisfied. We made some tough decisions with some fleet business and some group business to improve that combined ratio, which will nevertheless continue to improve based on our forecast, based on our pricing calculations will continue to improve slightly. In the rest of the world with a high interest rate environment, you can have combined ratios around 100% or even a bit higher without any problem. But we are quite optimistic with regards to the growth of that segment, and we maintain our guidance in the strategic plan, although we are, of course, saying that that's for constant euros. But we do expect some tailwinds this next year with currency exchange and that both the dollar and the real and the Mexican peso might begin to recover, and that could also help drive our growth in current euros. José Jiménez Guajardo-Fajardo: [Interpreted] And as for Brazil, you were asking what's going to happen with the yield curve. It's already discounting lower rates, probably around 2, 3 points for the next months. And I would start by focusing on Brazil's excellent performance last year, even though it wasn't easy because of the currency depreciation effect. But remember that at some point, even the U.S. administration levied 50% tariff on Brazil imports when it's a net exporting -- commodity exporting economy to the U.S. and other markets. But I think that very negative context last year has, I think, turned around quite quickly. I would say that probably Latin America in general and Brazil especially could be some of the economies that will benefit the most during this year. And so I think it's what we're seeing in the forecast and reports of most of the major investment banks. Lower interest rates in Brazil would be a very positive outcome for us. Of course, maybe our investment portfolio, instead of having a gross yield of 15% might see that come down a couple of points. But the important thing is the growth of our business, particularly protection insurance, which is linked to credit. It's very difficult to sell credit when rates -- imagine if your reborrow was 15% here, very few people would ask for loans. But as rates come down, gradually, I think that will definitely drive sales. It's what we're seeing already. Our relationship with our partner, the Banco do Brasil is excellent. Our business with them is also growing very well, and we're seeing a recovery in commodity prices as well. So I think overall, this year for Brazil should be an excellent year. Felipe Navarro López de Chicheri: [Interpreted] And I think we've answered all the questions, right, except Francisco, maybe if you want to add anything? No. Thank you very much. I'm going to group some questions that have come in about the business in Spain. JB Capital, Maks is asking about the impact of the storms we've had this first quarter in Spain. Also asking about the target for the combined ratio in Iberia now that it's already improved and whether we will achieve a combined ratio group target with the Auto business in Iberia? And what kind of average premium hike are we implementing? And what do we expect from our policy portfolio? Do we expect it to grow or not? Antonio Huertas Mejías: [Interpreted] Okay. The storms are, of course, extremely unfortunate because they're happening one after another in some parts of the country. But luckily, in Spain, we do have one of the best systems for managing storm damage anywhere in the world since we have full coverage for everyone through the insurance compensation consortium when damage is caused by wind or flooding. And we've received about 40,000 claims in the last weeks to do with these storms and the number will continue to grow since there have been new storms coming in nonstop, although perhaps not as extreme, and they are unfortunately causing a lot of disruption in people's lives, and particularly in rural areas. MAPFRE is already responding personally to everything that is to do water damage covered by our policies and our internal numbers are not that significant and will not really have a material impact on our P&L with the information we have so far. But again, a lot of it is going to be covered by the consortium, which as we saw in the Valencia floods worked exemplary with over EUR 5 billion damages insured covered in just a year and a bit very successfully by the consortium and with no impact on the P&L of the sector. These were contributions that we have made to the consortium over the years and which were then paid out to cover those claims. And with the flood, we've not had to raise premiums to our clients because there was enough fund in that consortium pool to cover everything, and the same will happen now. José Jiménez Guajardo-Fajardo: [Interpreted] As for the other questions that Felipe summarized, I would say that, in general, for the group or for Spain, the ambition is to grow and to grow in euros. And last year, at the group level, we had this ForEx effect, but often in the currency markets, there's always a sort of regression to the mean as we're seeing in this year so far. And in Spain, the Life and the Non-Life segments are going to grow, but not at any price, of course, as we said in the strategic plan, we seek profitable growth. And so in the last few years, what we did was to adjust our portfolio sharply to go back to profitability. So reducing the combined ratio 7 points in Spain was the great achievement of this last year. And so our ambition to grow will focus on both the digital channels, but also the offices. And we have different levers we can use to have a positive result this year. As we said at the beginning, there's the whole rebranding and how that could boost the business, but also the over 3,000 offices. It's the second largest distribution network of the financial sector in Spain, and also with a new commercial structure, which was launched on January 1 as well, which was a major challenge, in order to help simplify and improve the efficiency for clients. And you were asking also about the Life Savings business. Yes, the strong growth, the over EUR 3 billion in premiums we've seen in Spain, will it continue? Well, we're doing everything we can to become a major actor in financial planning. And our ambition is still to grow. And to do that, apart from this network, we have over 10,000 professionals ready to advice and sell financial products, both insurers and the asset management side. And in 2026, we feel fairly optimistic. It's true that most of our competitors, which are banks, are not really competing very aggressively in this segment, and we are very close to the customers. And we think that just like in Non-Life, a personal touch and knowing your customer is particularly important, which doesn't mean we can't use digital channels and applications, but things are perfectly compatible with hybrid models, but ultimately, like everything in life, what really matters is the human touch and having someone who knows you, who knows what you need and who can help you do the best financial planning for your own personal needs. So we are ambitious with growth in that area. And in 2026, we expect to exceed the targets of 2025. Felipe Navarro López de Chicheri: [Interpreted] Thank you. I think that was a pretty good answer for the questions from UBS, from JB Capital, from Autonomous Research. And now we're going to move to the Reinsurance sector. There's lots of questions with respect to 2026. What do we think will be the trend for premiums? I think we've already explained about the releasing of provisions in the year and especially about renewals in this first part of the year and what we expect for next year. And an obvious question, which is how much have we saved or how the savings we've achieved in our reinsurance program affected our results? Antonio Huertas Mejías: [Interpreted] Yes, the early year campaign just ended. We have two, January and June. As for MAPFRE's hedging, well, most of it is about midyear and become effective in July. And then MAPFRE RE and group provisions are mostly placed in January. And yes, as expected, the market has grown rates substantially for the past 3 years, a circumstance that MAPFRE ceased to make a capital extension. And considering a benign performance of the weather, if we can call it that, we still have weather event, but perhaps in areas that have lower insuring and reinsuring effect. So this year, reduction -- an incipient reduction is observed, not a very relevant one because it allows us to accommodate for new coverage and grow MAPFRE's appetite with the possibility to integrate purchases for second or third-party event at practically no cost. Of course, this situation generates more tension in reinsurers because they need to seek new clients and fight over the existing ones with more competitive pricing, and that will entail small reductions in performance and, of course, make our -- or generate more competitiveness amongst our reinsurance businesses. But we have a solid footprint in different markets, and we have enough commercial products that have greater possibilities for reinsurance. As a matter of fact, we have nearly automatic coverage programs facilitated by MAPFRE RE to enhance business insurance, and it actually boosts our growth. As we have seen in the past, we haven't reached -- we haven't hit rock bottom in price terms. If large events take place next year, we will go back to previous numbers. And if we have to carry that out to clients or final consumers, we will do so with more thorough complicated products. And of course, we will work harder on our relationship with clients, but we do not see any threats on the horizon for the immediate performance of MAPFRE RE and Global RE, which may be more exposed to price reductions in certain businesses. We still have plenty of room to grow in terms of market share in several areas. Felipe Navarro López de Chicheri: [Interpreted] Thank you. I believe that with this, we've answered Carlos Peixoto, [ Max Migliorini ], and August Marcan on MAPFRE RE. We also have questions about Colombia. Is MAPFRE affected by the project to increase tax withholdings to nonresidents in Colombia? We have a question about Mexico. Is there any impact that carries over to next year? I think we already talked about the nondeductibility of VAT in Auto and Health. But anything to say, José Luis? José Jiménez Guajardo-Fajardo: [Interpreted] Just a reminder, in Mexico, the impact was EUR 37 million. What we did was take the impact recorded in 2025 in the last quarter last year to a possible impact on 2026 to move ahead of the impact, if you will. We are aware that the legislation in Colombia is subject to an appeal in the constitutional court, and we still don't know whether this will have an impact in the case of Colombia or in our business in Colombia. Felipe Navarro López de Chicheri: [Interpreted] Any further questions. I can't see any raised hands in the room. There seems to be none. We do have a question online, and it's a frequent question coming from Maks, JB Capital, about the expected combined ratio in Brazil for -- in 2026 and midterm. Well, the foundation is excellent, isn't it? Right, José Luis? José Jiménez Guajardo-Fajardo: [Interpreted] Well, we always say that things need to get worse for a little bit, but they haven't. We could expect combined ratios to go up a little bit, but at a very positive level for us. Just a few points up will not affect us significantly. Certainly, during the past couple of years, we've had an absence of great disasters in Brazil. Our portfolio is highly diversified per region per crop, and we're not expecting any major events. And if that trend continues, the ratio will be positive and very profitable. And about premiums, because we do see that premiums are more deeply affected by interest rates. Well, as we said during the presentation, we're talking about insurance policies indexed to loans. So a reduction in the interest rate for this kind of activity would be very positive. We cannot quantify the elasticity of this ratio. But in Brazil, we've seen years when levels remained around 2.5%, with strong growth and years where we've reached 15%, which is the real or the actual interest rate, the highest interest rate in the world as the Chair said during the presentation, 15%. As rates go down, well, we know that this would foster investment. And the agricultural sector in Brazil, which is such a relevant one, and with that reduction of tariffs and the foreign policy applied by United State, I think this places the industry in a very positive position. We don't know how long it will take, but it is looking good. Also, this year, presidential elections are scheduled in Brazil, and that will probably bring a new boost to the agricultural business in Brazil. Felipe Navarro López de Chicheri: [Interpreted] A question from [ Vicky Beata ] from Bank of America. Average premium and performance throughout the year and a possible reacceleration on Q4. And does that show a change in market conditions? Or is it rather a matter of product mix and seasonality affecting the fourth quarter? And in more general terms, they ask about pricing expectations for 2026. I understand the question is about Spain, right, particularly the Auto business. José Jiménez Guajardo-Fajardo: [Interpreted] Well, policy price is generated on a client-by-client basis based on risk profile. We're not a single channel company. Many of our clients are very satisfied with the service quality they are getting and price is not a deal breaker. Probably pricing will go above inflation to cover costs, but we do not expect any significant peaks in pricing this year now that the industry has gone back to balance, but we will continue to enhance the combined ratio as we've said a number of times. Felipe Navarro López de Chicheri: [Interpreted] Thank you, José Luis. And about local currency premiums in the U.S. This growth we're beginning to experience, will it be supported by the number of policies or average premiums? Question by Carlos Peixoto. José Jiménez Guajardo-Fajardo: [Interpreted] Well, the United States has a clear target of profitable growth, obviously, give or take currency fluctuations, but the trend we've been observing in the past few months is expected to be maintained in the near future. Felipe Navarro López de Chicheri: [Interpreted] Thank you, José Luis. And one last question from Alessia Magni from Barclays via the app. Alessia asks whether we expect any pressure on combined ratios in any of our markets in 2026? And maybe looking forward into the future, what can we expect for 2027? José Jiménez Guajardo-Fajardo: [Interpreted] Well, that's one very good question with a very difficult answer. Pressure, there will always be pressure on the combined ratio, right? Plenty of factors out there. It depends on competitors and the type of business. In reinsurance, as we said, well, there have been several years with fewer disasters, weather events, and that has led to a small adjustment in prices. But that could change in a matter of hours if anything serious happens. In other markets, at least in general, we've seen some serious ups and downs in Brazil, U.S., Spain, Germany, even Italy. But those fees have been gradually adapted to the actual cost of claims and combined ratios are stable. I cannot foresee any extra pressure anywhere, all things being equal. I mean we will probably run on inertia. Antonio Huertas Mejías: [Interpreted] At any rate, the diversification of the MAPFRE model causes general insurance and damages, insurance will affect our competitors more than it will affect us. And maybe our combined ratio could go up, but we still have margin in the Auto business, for instance where we're slightly below 100%. And I'm sure that as interest ratios go down, there will be pressure to reduce the technical ratio to maintain margins. So that diversification, that offset effect keeps us afloat. We're not optimistic -- that opportunistic to consider that 92% combined ratio will persist, but slightly above that, it's still perfectly acceptable. There are exceptional circumstances like the agriculture insurance in Brazil that has a nonsustainable combined ratio. I'm sure drought will take place in the future. But also we expect to grow in volume because this is a year where fewest policies have been acquired in Brazil because of the incentives that the Brazilian government used to grant agricultures were removed. These subsidies, actually, kept agricultures from getting insurance. I'm sure the premiums will go back up and the combined ratio will go slightly up. But all in all, the general bottom line will remain above expected. Felipe Navarro López de Chicheri: [Interpreted] We don't have any further questions online. Would you like to make any wrap-up comments? Antonio Huertas Mejías: [Interpreted] Well, I'd just like to thank you for following this presentation. It's been an excellent year having seen the best combined ratio ever, we say, over the last 15 years, but actually, it's the best ever since we have records as an international group. And that, I think, shows the consistency of our model. And of course, growth is always going to be the hardest thing to maintain, as you pointed out in your questions, but that's what we're focused on. And our outlook is to continue to grow organically. But of course, we could also take advantage of some M&A opportunities if they develop. Continuing with our traditional model of adding new distribution networks, banking networks to our distribution model through alliances and agreements also add additional capabilities that could help, but always, again, open to any M&A opportunity that might develop to integrate businesses that might be complementary to ours, but always in a consistent way and making sure that it's going to add value for our shareholders medium term. We're not planning to broaden our footprint. That's clear. And the M&A priorities Felipe described are the same. But with -- but knowing we have enough financial capabilities and support from the shareholders to continue to grow in the future. But mostly, the priority is to open up new distribution networks through new agreements and alliances in bancassurance or even through retail distribution like here in Spain with Carrefour, which will now distribute MAPFRE products in our main market, our home markets. So anyway, that's it for 2025. The AGM on March 23 in 2026, the prospects look really good, and we're working already to give you an update on our guidance during that General Shareholders' Meeting and also some indications of our new strategic plan, which will start in 2027. So anyway, I just encourage you that starting February 19, there's going to be a new beautiful exhibition in the MAPFRE Foundation next door here. Anders Zorn, who is an amazing Swedish painter, unknown in Spain, but who was known as the Swedish Sorolla and was extraordinarily important in Madrid's painting of the 19th century in Sweden. And so those of you who're following online might not have a chance to stay now for a drink and some appetizers, but the rest of you definitely invited to join us. And thank you for being here and for helping us be better every year. Thank you. Felipe Navarro López de Chicheri: [Interpreted] Thank you very much, Antonio. I'll remind you that all the documents are posted on our website and with -- and in the CNMV's website. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Thank you for standing by. Welcome, everyone, to the LiveOne, Inc. Third Quarter Fiscal 2026 Financial Results and Business Update. [Operator Instructions] I would now like to turn the call over to Ryan Carhart, Chief Financial Officer. You may begin, sir. Ryan Carhart: Thank you. Good morning, and welcome to LiveOne's Business Update and Financial Results Conference Call for the company's fiscal third quarter ended December 31, 2025. Presenting on today's call with me is Rob Ellin, CEO and Chairman of LiveOne. I would like to remind you that some of the statements made on today's call are forward-looking and are based on current expectations, forecasts and assumptions that involve various risks and uncertainties. These statements include, but are not limited to, statements regarding the future performance of the company, including expected future financial results and expected future growth in the business. Actual results may differ materially from those discussed on this call for a variety of reasons. Please refer to the company's filings with the SEC for information about factors which could cause the company's actual results to differ materially from these forward-looking statements, including those described in its annual report on Form 10-K for the year ended March 31, 2025, and subsequent SEC filings. You'll find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed today in the company's earnings release, which is posted on its Investor Relations website. The company encourages you to periodically visit its Investor Relations website for important content. The following discussion, including responses to your questions, contains time-sensitive information and reflects management's view as of the date of this call, February 12, 2026. And except as required by law, the company does not undertake any obligation to update or revise this information after the date of the call. I'd like to highlight to investors that this call is being recorded. The company is making it available to investors and media via webcast, and a replay will be available on its website in the Investor Relations section shortly following the conclusion of the call. Additionally, it is the property of the company and any redistribution, transmission or rebroadcast of this call or the webcast in any form without the company's expressed written consent is strictly prohibited. Now I would like to turn the call over to LiveOne's CEO, Rob Ellin. Robert Ellin: Good morning, everyone, and thank you for joining us. This quarter marks a clear inflection point for our company. We delivered over $58 million in revenues for the 9 months, including $20 million in Q3, most important, expanding our adjusted EBITDA and structurally transforming the business. Operating expenses reduced by over 52% year-over-year. Our organization was streamlined with the help of AI from 350 people to 88 team members. We strengthened our balance sheet, reduced our debt, expanded our capital flexibility. We've just paid off over $2.5 million of debt. These were permanent structural improvements designed to create a scalable margin expanding platform. Over the past several years, we navigated COVID shutdowns, the collapse in media and microcap valuations, the loss of key partnerships and a disruption in the automotive channel. Many companies in our sector did not survive. We did, and we are emerging leaner, more disciplined and positioned for the next major growth cycle. Our Audio Division generated $52.2 million in 9-month revenue and over $3.7 million in adjusted EBITDA, again, showcasing those cost savings and the use of AI to materially change the staffing of this company, including $18.6 million in revenue and $2.6 million of EBITDA in Q3 alone. Looking ahead, our preliminary fiscal guidance for the first time we are putting out $85 million to $95 million in revenues and $8 million to $10 million in adjusted EBITDA. We are scaling profitably and closing the earnings delivery gap as we move forward towards year-end. Very importantly to note, we have over $125 million in net operating loss carryforwards. As we move towards profitability at the end of the year, these NOLs represent significant long-term shareholder value and tax efficiencies as we grow earnings. Industry valuation dynamics are improving. We're trading at 60% of revenues. The industry is trading over 3x revenues. The private sector in both podcasting and audio as a whole is trading over 3.7x, and there are multiple transactions in the last 120 days at well above 5x revenues. Strategic buyers understand the value of recurring engagement, monetization leverage and behavioral data. As fundamentals have normalized, valuation frameworks are starting to adjust. Our B2B pipeline is now the largest in company history, up over 30% in the last 120 days with over 100 active enterprise opportunities with $1 billion to $1 trillion companies. We are expanding our partnerships across Amazon, Apple, Paramount, Pluto TV, Telly, DAX and Tesla. This year, we expect to launch 3 major Fortune 500 partnerships across a national retailer, a leading TV platform and a major carrier. Two of those partners alone have over 50 million monthly paying subscribers. These are scaled recurring enterprise relationships designed to materially expand margins and enterprise value. At the same time, we're executing a focused strategy to convert more than 1 million free and ad-supported subscribers, including our Tesla users into highly monetized tiers. That conversion opportunity alone represents meaningful incremental revenue and EBITDA. We are also seeing a sharp acceleration in inbound M&A opportunities. As the market stabilizes and valuations normalize, strategic combinations are becoming increasingly attractive. Inbound calls continue to increase dramatically. We are disciplined in evaluating opportunities and to look at all opportunities that will increase shareholder value dramatically. We continue to expand our original IP. We have now sold our fourth television series to a major streaming platform with 100% margin economics. The costs are already built in into rolling out our podcast. And when they sell to the streaming networks, we are immediately taking in cash flow earnings. Owning intellectual properties creates long-term asset value and high-margin revenue streams. We are focused on building and controlling premium content that can travel across audio, video, streaming and live formats. We now have over 15 original projects in the pipeline and growing. Live experience is also returning a major growth sector. Prior to COVID, live events represented 50% of our revenues. That market is reaccelerating. As you watch Ari Emanuel raise over $2 billion, you watch many partners in that space growing dramatically and capital being raised, our creator community, brand relationships and audience scale position us to dramatically expand live shows across podcast, music and live events. And we're increasingly focused on owning our own products, not distribution of content and products, but actually ownership with a database exceeding 65 million consumers and billions of impressions and downloads across our platforms, we have the ability to test, launch, scale proprietary products directly to our community. That level of owned audience and data provides a powerful testing engine and distribution channel, enabling us to drive our own product margins and recurring revenue streams. The structural shift is happening across all of the major media businesses. Netflix is entering the podcast business. TikTok is expanding aggressively into audio. Audio remains the stickiest behavior in media. No one turns off their music subscription, music listening generates powerful behavioral data. Time of day patterns, mood cycles, frequency and engagement depth. That data becomes fundamental in training materially for sophisticated AI models. AI is not a feature. It's an infrastructure. Our AI partnerships are growing and initiatives are focused on leveraging behavioral audio data, enhancing personalization, optimizing monetization, and powering enterprise engagement. That is why B2B demand is accelerating. That is why the pipeline is exploding. To fully capitalize on this opportunity, we are evolving our leadership structure. We have started the process and we will shortly announce a new President, an accomplished operating executive in again, who has built and scaled and sold billion-dollar public companies and brings deep public market expertise to our team. This leader will also assume day-to-day operational roles, allowing me to dedicate 100% of my time to B2B partnerships, M&A activity and accelerating, most important, our AI initiatives and pursuing strategic growth opportunities. It's a proactive decision aligned with scale and opportunity and the fact that the restructuring has now been complete and it is now time to really focus our energy on top line growth and bottom line EBITDA numbers. Finally, our capital allocation reflects our confidence. We believe our company is materially undervalued, trading at less than 1x revenues, well below the 3.7 industry trading today. Our NOLs of over $125 million and improving industry multiples. As a result, we are expanding our share repurchase program with approximately $6 million remaining under the authorization. We are investing in growth. We are investing in ourselves. We are no longer rebuilding, we are accelerating. Revenue is scaling, EBITDA is exploding. The earnings gap is closing. B2B partnerships are growing. AI initiatives are advancing. Live experiences are returning, own products are launching. M&A opportunities and increasing industry valuations are normalizing and capital is being returned through disciplined buybacks. We survived disruption, we rebuilt the foundation, and we're now positioned at the intersection of audio, enterprise distribution, behavioral data, AI, IT ownership and scalable monetization. The next chapter is disciplined margin expanding growth. I want to thank everyone for their support and appreciate your time today, and I look forward to any questions. At this point, I'm going to hand it off to Ryan Carhart, our CFO, who has done an exceptional job of delivering on these numbers. Thank you. Ryan Carhart: Thanks, Rob. I'll spend just a few minutes providing a very brief overview of our results for the fiscal third quarter ended December 31, 2025. Consolidated revenue for the 3-month period ended December 31, 2025, was $20.3 million. Our Audio Division posted revenue for Q3 of $18.6 million and adjusted EBITDA of $2.6 million. Consolidated adjusted EBITDA for the second quarter of fiscal year 2026 was a positive $1.6 million. On a U.S. GAAP basis, LiveOne posted a consolidated net loss of $4.1 million or $0.37 per diluted share in Q3 fiscal 2026. At the operating level, our PodcastOne subsidiary posted record revenue of $15.9 million and adjusted EBITDA of $2.8 million. Our Slacker subsidiary reported Q3 revenue of $2.8 million and adjusted EBITDA of negative $0.1 million. We are pleased to report continued record growth at PodcastOne subsidiary, which we expect to continue throughout the end of the year and into next year. Concurrently, we are advancing several strategic partnerships from our business development pipeline that we believe have the potential to drive long-term growth and value creation. As we look ahead to fiscal 2027, we believe the company is well positioned for transformational growth. Rob, I'll turn it back to you. Robert Ellin: Yes. Thanks, Ryan. I think we covered almost everything, and I think it's an opportunity for us to open up the floor for any questions. Again, we have said that we will be launching 3 massive initiatives for the company before year-end. We are looking forward to the guidance that we just put out for next year, showing again substantial growth opportunities. And with that, I'll open it up to any questions and look forward to it. Operator: [Operator Instructions] And your first question comes from the line of Barry Sine with Litchfield. Barry Sine: Two questions, if you don't mind. First, on the B2B business. It seems to me that no 2 deals are alike. Every single one seems to be customized. And it looks like you're doing that with AI because your staff is down pretty dramatically. I wonder if you could elaborate on that, talk a little bit about what you're doing in terms of customization, some of the options that you're giving customers. And then on a related note, the potential risk, one or the other music streaming companies comes into the B2B space. Robert Ellin: I think it's -- to start with, it's very hard for any of them to come into the B2B space in the fashion that we have. right? Number one, and you know my background also well, Barry, it's been built off of B2B deals, right, whether it was iWon, whether it's Digital Turbine, it's Majesco, all of them have built off these massive distributors who already have an audience, right? We're not in the business of chasing an individual and spending $86 a sub, right? So number one is none of those -- there's only a few, right? In the United States, only like 7. In the world, there's probably 12 altogether of what's called DSPs. All of those are massive in size, okay? And when you look at the competition in the U.S., they're all our partners, right, iHeart, Sirius, Spotify, Apple, Amazon, YouTube, okay? The smallest valuation is $6 billion, then it goes to $1 trillion, right? So -- and none of them are going to give up their brand. None of them are going to be able to white label and be a white label solution. So the best way I can describe as these B2B deals are being launched, right, we publicly said that our Amazon deal has grown to over $20 million from originally starting very small. Same thing with our streaming partner, Fortune 250 company grew from $2 million, it's now well over $26 million and growing, right? You're going to see the same type of transactions happening with those B2B partners. And when you look at the structure of them, number one, the reason that we're able to do this is we're the lowest price. We're the Walmart of the music space. Number two is we're the most nimble. Because of the size of the company, we have the capability of servicing them in a very different way. And then very important is the ability that we have to be able to white label, right? None of those companies are going to give up their brands. And part of the excitement and energy in this is all those competitors are partners of ours. We're all great friends and great partners, right? We're a small company, but our content is provided and put on to their platforms and their content is on our platforms. So really exciting to be in this time where the cycle is changing. And for any of you that have been in any of my companies, I talk about these cycles, the cycle is changing so fast. And with the initiatives of AI and what's happening and how critical data is, all these companies are competing with each other head on. It's kind of amazing to watch whether it's a retailer, whether it's social media, whether it's a streaming network, they're all crossing over each other's business in such a dynamic way. To think that Netflix has just entered the podcast space, right? Why are they entering? I humbly believe that you're going to see this year, one of the streaming platforms buy a music platform or maybe each one of them. It makes so much logical sense for them to acquire one and maybe that's why iHeart stock is up 6x. Maybe that's why Spotify was up $80 this week, right? It's so fundamentally makes so much sense for a streaming platform to buy one of the audio platforms because they're fighting to raise their ARPUs, right, by $0.50 or $1 every 2 years. Well, if they added audio, they could add $3 to $10 a month without any additional cost upfront. You don't have to make a movie, you don't have to make a television show, you don't have to spend $1 billion. Now here's the Wild West that is happening. Because of AI, every retailer, right? Everyone's got to compete with Amazon. So Amazon has got to compete with Walmart and Costco and Best Buy and Shopify, right? They're all competing. And now you've got Facebook entering the retail market doing billions of dollars and TikTok entering. Social media is entering, retail is entering. Anyone that has an online presence has to figure out how to keep that consumer engaged. There's no one on this call that doesn't have at least one music subscription. There's no one on this call that probably spends more time in media than anything other music because you can take the music with you, right, go everywhere, whether it's audio or video, you can take it everywhere. And especially as they've added podcasting into it and especially as you add video into it. So I think we're uniquely positioned as a B2B partner that we could either be a strategic partner. We could -- there could be a strategic investment from a major partner here across all those different verticals I just articulated, right, and the ones we're already partners with and there could be an M&A activity of someone trying to buy us. All of those are very possible, especially with us currently trading at this huge discount. Barry Sine: And that's great. If I could ask one more question just on Slacker. It seems to me that you have a huge largely untapped opportunity to sell advertising into that base of nonsubscription customers ad-supported. How is that going? I don't know if Ryan can give us the advertising revenue for Slacker in the quarter. I know you've added some partners in AI to kind of ramp that up. How is that process going? And what is the potential for ad revenue from Slacker ad-supported customers? Robert Ellin: I mean I'd be a little bit careful to separate just Slacker because we have a very robust advertising business, right, across audio with our podcasting. But specifically on our free subscribers, there's multiple reasons to have those free subscribers. Spotify claims that 60% of all of their free subscribers and the reason they have a free tier eventually convert to long-term subscription and paid subscription, right? I don't know whether it's over 3 months, 6 months, 12 months or over 3 years, but that's a staggering number. So when we see our base of over 1 million free subscribers, number one is we've added advertising. We partnered with DAX, the #1 programmatic advertising company in the world. We started with them only a couple of months ago. We've just raised our ARPUs by over 30%, right? And with that, it's just the beginning, right? It means that the inventory is getting filled, which means that people are listening, which is a great sign, and we'll continue to grow that. Now you do that as a loss leader for a couple of things. One is you drive revenues. Two is you're going to lose some subscribers, right, who are going to go away. But most important is you're going to convert subscribers into paid subscription. So we look at all of those. With that, because of the unique B2B deals that we're doing and because of the structure of these deals, you could also see your partners bringing their own advertisers into the fold that won't be about CPMs and CPAs, they'll be about a customer who's looking for those products and driving those products because of those relationships with that B2B partner. Operator: Next question comes from the line of Brian Kinstlinger with Alliance Global Partners. Brian Kinstlinger: Way to get back to profit. You highlighted the big streaming services will not white label their music, which gives you a competitive advantage. What is the competitive landscape to provide content for these brands look like? And are the Spotifys of the world trying to partner with the same large brands to offer a non-white label solution to brands? Robert Ellin: I mean there's a little bit of that, but it's very hard to do the same thing we're doing, right? Obviously, the music business has been built off the backs of carriers, right? And the carriers kind of lost their way and that they were in a robust market with low interest rates, right, where they're enjoying that low interest rate and it's okay for them. But the reality is as AI has exploded, everyone is waking up and saying, everybody is competing for every piece of the business. The crossover to think that Tesla, Elon Musk, Starlink could be competing with Verizon, T-Mobile and AT&T, right, is kind of scary, right? And that goes across almost everything as AI continues to expand. So I think what you're going to see is you're going to see a little bit of that where you may see some of the Spotify app, AT&T, Verizon, T-Mobile deals. But again, it's hard for them ever to white label or to be able to really offer them the same kind of offering that we give them with the flexibility or to service them in the same way because it's just not as meaningful, right? They've got a massive business, billions, billions of dollars, right? We got a small business. It's very important to us as we get those B2B deals to be able to service them and give their clients exactly what they need. Tailor the music, tailor the pricing, understand the needs of the exact consumer of each of those B2B partners and understand that AI data and what we can deliver with it. And so I think we're uniquely positioned. I don't think there's anybody else in the space that can do what we're doing right now. And I think that you're going to get some competition a little bit in carriers probably, but you're not going to really see it in the other verticals that we've talked about across streaming, social media, retailers. I don't think that, that's going to be a competitor because they want their own brands, right? We recently had a conversation with one of our B2B partners that we're launching and they were like we don't need you as a brand. We need you because of your service. You got 22 years of history, right? Remember, before we got here, that NOL was built by the likes of Columbia, Mission and Rho, who put in $180 million into Slacker Radio, right? So the infrastructure is built, right? It's all that -- all the labels, all the publishers, all the dynamics and all the payouts, right? You got to pay out 50 partners, right? It's a very complicated algorithm that if someone tried, in fact, Tesla tried it, and they realized afterwards, it's impossible. A, it's really hard to build and it costs hundreds of millions of dollars. The second is you got to deal with all these partners and be able to pay all of them. It's a very complicated algorithm. So I think we're uniquely positioned there as 1 of 10, right, really in the country and 1 of 12 in the world, right, who is doing this, that we're really uniquely positioned to be able to grab those B2B deals and have enough of them, right? We won't get every one of them. We only need a couple of them, right? A few more of these deals, you keep adding to Amazon and Paramount and Telly and Spotify and you add to these deals. These are all $10 million-plus deals. You keep growing those, and there's no reason you can't see this company doing $0.25 billion and getting back to that $25 million to $50 million of EBITDA over the next couple of years. Brian Kinstlinger: Great. And then can you share any more information on the B2B partnership with the 30 million-plus subscribers? Is that contract signed? What is the timing? What industry is this partner? And if it's not signed, what are the items that you need to get accomplished to get you over the finish line? Robert Ellin: Yes. So what I said was, and I'm going to be very careful in my words, but I crystal clear said, these are being launched, right? And what I crystal clear is these are already signed, right? And what I said on the call today was there are multiple partners, right, in there who have over 50 million. So I've increased that number from $30 million to over $50 million, right? So -- and that's about as much detail as I can give. But what you can start to do is you can start to -- like we did with Tesla, right, shockingly, right, out of 2 million cars, we re-signed 1.2 million approximately between free and paid, right? If you use a number, that's crazy. That's a 60% staggering number, right? If you use a 1% number, even 0.5% number, right, that signs up from these partners. And like I said, there are 3 of them of very serious sized Fortune 500 companies, and there's 100 more in the pipeline. When we last talked, Brian, that 100 was -- I think we were 65 or 70. That pipeline is increasingly and is staggeringly increasing. And it's not because we're so smart. It's because we're the only ones who can truly do this right now. And like I said, you're seeing Netflix and TikTok entering the podcast space. You're seeing the likes of audio businesses, these podcast businesses are getting bought up at aggressive, aggressive, aggressive valuation. It's 3x revenues, 5x revenues. A deal that just got done on Friday at 7x revenues, right? Why is that? The data is so critical. These are right? These are super humans, superstars who have super fans. When you can get that data, the super fans, it's really hard for any that are using AI, you're watching, you try to put things into the model now and things you used to be able to do. I put a little joke in from my daughter's wedding the other day where I wanted to put a picture from Scarface with my son who happens to be a great-looking kid. It literally looks like I was going to make them look like. You cannot do that anymore. So they're starting to block that content because all lawsuits are starting. The beauty of this is because we have the licenses, we have the capability of having the biggest stars in the world, right, the biggest musicians go across the board. You want Bad Bunny, you want Drake, you want Post Malone. If you go to sports, right, LeBron James can only play for the Lakers. In music, they're playing for everybody. And they play for Spotify, they play for Apple and they play for us. We have all the same music that anybody else has. We have all the same content. We have 46 patents around it. We have $125 million NOL, and we have the flexibility to provide a unique service because of our middle tier that we can price lower than anybody else. And because of our infrastructure, which is getting smaller and smaller and more powerful, it's getting better, right? It's not like the more people we had, the better we are at this. We're actually getting better at it every day. We're getting stronger at it. We're able to deliver more music channels with way less cost. So we're really well positioned that if we can stay in the game long enough, there are going to be enough B2B partners. I say this humbly, right? Everyone who is in Digital Turbine with me anyone who knows what I did with iWon, anyone who knows what we did with Majesco, they're all built off of 1 to 5 of these B2B deals that you're leveraging someone who already has built that massive audience holding their hands, right, literally giving a full 360, right? We do anything they need to do to make sure that we service them. And if we can just land a few more of those, right, who would imagine that Amazon has already grown to 20 and Paramount is over 26 now, right? These are growing fast. These are massive partners that have 10 million to 3 billion eyeballs like Facebook and just think of every one of them who is missing a music subscription, a podcast piece, an audience like ours, right? We have billions of impressions, right? You think about network's history historically. If you listen to the all-in podcast and Ari Emmanuel, he said, right now, you're watching the new future. Syndications coming back. There's only a few streaming partners, right? And then there's these trillion dollar companies of Apple, Amazon and YouTube, right? And they're all starting to buy Seinfeld. They're all starting to buy The Office. They're paying South Park, billions of dollars. But what is going to be the biggest syndication as always, is going to be talking heads. Who was the biggest before? Oprah, Dr. Phil. We just signed Dr. Film to our network. The biggest talent we've ever had in the history of our platform, okay? We got to grow them. We've got to build them again, right? He's just coming back to podcasting from the television side of it. But this was a guy who was paid $50 million to $70 million by CBS. Those talking heads are desperately needed on these platforms. You just watched the Red Network. It's now bought -- Fox has now brought up the Red Network. With that, they just bought Tucker Carlson and Megyn Kelly. They continue every week, take those talking heads. The consolidation back to the reality of where the business was, whether it was audio and video, audio and video come together in neat package, just like CBS Radio and CBS Television, right? Those talking heads across audio and video are going to be the largest pay base, just like Howard Stern, just like Ryan Seacrest, just like Joe Rogan is today. We're right in that sweet spot. So I think we have a very unique advantage of the proposition that we're offering and the pricing that we're offering. Brian Kinstlinger: Great. My last question is with the 3 massive B2B partnerships that are signed, maybe help us with how these might ramp. I think I heard you gave guidance of $85 million to $95 million for next fiscal year, coming from plus or minus $78 million this year, what's contemplating the high end and low end? Robert Ellin: Yes. I mean, again, we're trying to be super conservative in this because, again, we're running -- as you run the traps on these, right, if you have 2 partners over $50 million, right, and you have another partner with millions and millions, right, just take the $100 million. If you took 0.5% or 1% right on conversion, right? And you're going to have multiple different pricing tiers, just like every music subscription, just like LiveOne has been since the time I've acquired it and the 17 years before me, right? This company has had hundreds of millions of dollars of revenues from carriers. There have been hundreds of millions of dollars of revenues from the likes of Samsung way before I was involved in it, from Milk Studio, right? You're just going back to that cycle again right now. And as you ramp this up, take a super conservative model, take -- I just sat with one of your peers, right, in the industry and walked through it and I said, just take 0.5 to 1%, 1%, right? The 60% that we signed in free and paid from Tesla is staggering. We're all shocked, right? We thought it would be like 25% maximum. It's been 60%. But if you sign 1%, 0.5% to 1% of those numbers, you're going to rebuild way past where we were with Tesla. We lost $56 million of revenues. We're ramping back up and catching back up on those. We got a little bit of ways to go, but you can easily see this year and next year, this company heading towards well over $100 million on its way to $0.25 billion by just getting a little tiny percentage of these partnerships. Operator: [Operator Instructions] And your next question comes from the line of Sean McGowan with ROTH Capital Partners. Sean McGowan: You're able to hear me? Robert Ellin: Yes, I can hear you. It's a little bit quiet, but I can hear you. Sean McGowan: Okay. Will try to speak up. A couple of quick questions. So when will the 10-Qs be out for both LiveOne and Podcast? Ryan Carhart: Should be out tomorrow. Yes, Sean, they should be out tomorrow. Sean McGowan: Tomorrow. Okay. Great. That's helpful. Shifting to costs, a big part of the story here is a massive positive inflection in EBITDA relative to revenue. So can you help us with how sustainable the various cost buckets are at these current levels that we're seeing really for both companies, but let's say, in the aggregate for LiveOne. Like do you think G&A at this level is what we should expect for the next several quarters on a quarterly basis? Ryan Carhart: Yes, Sean, thank you. Yes, I think you should absolutely model that forward, if not down. We continue to do everything we can to reduce that. It's an ongoing effort. So our expectation is that next quarter, the G&A should go down even further. But where we're at right now reflects something we're sitting on positive EBITDA. But yes, I would expect that to go down next quarter slightly, and we'll continue to fine-tune that as we go forward. Sean McGowan: And same question for sales and marketing? Ryan Carhart: Yes, same. It's really a reflection of all of OpEx, Sean. Sean McGowan: Okay. Well, some of the ones that get added back for EBITDA, I'm also interested in. So depreciation and amortization seems to be leveling up. Should we expect that to increase? Ryan Carhart: Nothing material. Really, the depreciation and amortization is going to be driven by [ cap software ]. So same as kind of what you're seeing right now is about what we expect. It could go up slightly over the next year as we continue to code out new products for our new partnerships. But for now, in the short term, I think you can roll that forward. Sean McGowan: And stock-based comp is something that on the podcast side, I know they've been using more of stock for the talent, and we saw an increase there. It should -- but it also depends on grants and things like that. So what should we be expecting on stock-based comp over the next several quarters? Ryan Carhart: Yes. You should expect similar levels to this quarter going into next and then it potentially could increase depending on how it goes with getting our talent online with our equity plans. So kind of you can roll it forward and potentially expect some increase there. Sean McGowan: Okay. And then I'm going to circle back a couple of questions that have been touched on, but I want to see if we can get a little bit more precise. So let's say, this 30 million subscriber deal, when -- what's the timing on when that -- when revenue from that deal would be expected to start to show up? Robert Ellin: Do you want to take that, Ryan? Ryan Carhart: Yes, sure. Sean, I think right now, with one of them, we're on the cusp of launching something. It will be a test phase. So I think we're going to be pushing that through this quarter. We don't expect it to really ramp until the following year. We're not putting any numbers against that or anything right now, Sean. But I think you could start to see a little bit come in this quarter and then the following quarter, the ramp coming in -- maybe... Sean McGowan: The $85 million to $95 million audio guidance, that does contemplate revenue from that deal, right? Ryan Carhart: Yes, the $85 million -- Rob mentioned this earlier, Sean, I mean, the $85 million to $95 million is a very, very conservative look forward. So we would consider that to be a baseline case, a very baseline case, and it would only go up from there. Sean McGowan: Okay. Yes, I'm trying to get my arms around because it's easy to pencil out some numbers if you look at multiple deals that get to much higher numbers than that. So I'm just trying to figure out if there's any revenue from that particular B2B deal that is embedded in the $85 million to $95 million. If you're saying there's some, but it could be better, that's one answer. But if you say there's none in there for that, then that's a different answer. So I'm just trying to figure out, have you contemplated any revenue from that particular deal in that guidance? Robert Ellin: Nickels and dimes, Sean. Sean McGowan: Okay. Robert Ellin: Okay? We're being -- as you can see, we're being very careful because this is happening as we speak, right? This is real time now, right? The first phase is done. The second phase is going, and the other ones are being launched shortly. But as we said, we expect all 3 of them to be out there publicly by year-end. So we're going to be very conservative, but we look forward to the fourth quarter and really talking about the highlights of where we think next year can be. Sean McGowan: Okay. And then my last question is on -- is back on these Tesla users that have converted from the old model to the new. Right now, it's ad-supported. What kind of conversion are you seeing to paid so far? And are you expecting that to contribute more revenue? Are you expecting that number to grow the revenue from Tesla subscribers? Are you expecting that number to grow next fiscal year? Robert Ellin: Absolutely. And what I would say now is to kind of highlight is we just paid off $2.5 million of debt. One of the beauties, right, of what happens with this is you get year-long subscriptions. So you get a chunk of money upfront. And so that should be very, very helpful, right, in building balance sheet, using to buy back stock, pay down debt. And we couldn't be more excited that we've paid off all of our junior debt and now part of our senior debt is starting to be paid. We couldn't be more excited to do that and to continue to strengthen the balance sheet. And I think you'll see a lot more excitement coming this quarter, right, around the additional cleanup of that balance sheet and strengthening of the balance sheet over the next literally 30 to 60 days. Operator: I'm not showing any further questions in the queue. I would now like to turn it over to Mr. Ellin for closing remarks. Robert Ellin: I think we've covered everything. I just want to thank everyone for your patience. Thank you for being supportive. We couldn't be more excited about the business. And I say this very humbly, I really think that right now, the current B2B deals and the ones imminently coming out put us in a position that this could be the biggest opportunity that I've been involved in my career. I am looking forward to stepping down as President right in the very near future and bringing in an operating President, which we've had previously and had great success with, right, pre-COVID, bringing in someone, again, adding to it and putting them next to me in a position that they have both public experience in building as well as selling public companies for $1 billion or better, just like I've done before. And done before in my other companies and really focusing my energy on M&A side. We have not done an acquisition in a substantial period of time, which is unique. We usually have one acquisition a year, and we haven't done one in a few years. This is now becoming an exciting time for that as well as on the other side of it is we have to really explore those strategic partners or potential buyers of a subsidiary or the whole company at some point and that the inbound calls are coming in. So I want to focus my energy on that. And then my key energy right now is I am so really fascinated and excited about what AI is doing for our company and doing for the industry. I want to focus the energy on that and on our B2B deals. And that crossover between them, I really believe that the data of music is so critical to building these data -- all of these AI models right, that music is going to be a very important component of that. And I think we're right in the center of the ring of that. And having the talent we have behind it is going to give us the ability to really expand those. So I'm going to spend a lot of energy on that. Now that the restructuring is completed, we're really going to focus on that $125 million NOL. As everyone knows, in Digital Turbine, when we started eating away at that NOL and started showing profits, which I expect at the end of this year, right, you're going to get GAAP earnings and you can have just a massive, massive run in the stock under GAAP earnings. So I'm laser-focused on that. And I think fully expect that you'll see an operating president here in the very near future with a big background at building and selling a multibillion-dollar public company. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.
Vincent Rouget: Good morning, and a warm welcome to URW's Full Year 2025 results, my first as CEO. I'm going to take you through some key highlights and share some insights on our key priorities. Fabrice will cover our financials, and then we will both be available for questions. 2025 was another big year for URW with many achievements and a good start to our Platform for Growth business plan, including a 2025 AREPS guidance at EUR 9.58 per share. We are reporting a strong performance across our business plan priorities, attractive growth -- organic growth, disciplined capital allocation and substantial deleveraging. First, the key foundation is our strong retail operational performance. Footfall and tenant sales are up, leasing activity is strong and vacancy is down to a record low. We also made very important strategic inroads in preparing for a bright future through 2 capital-light initiatives, a new franchising business, an industry first in flagship retail globally and the acquisition of a 25% stake in St. James Quarter in Edinburgh. This demonstrates the significant growth potential of the Westfield ecosystem of performance with top mall owners. We also had successful deliveries with Westfield Hamburg-Uberseequartier and Westfield Cerny Most in Czech Republic. Second, on the capital allocation side, valuations are up and our LTV has significantly improved, helped by EUR 2.2 billion of disposals completed or secured since the start of 2025. We have delivered on our earnings and distribution commitments for 2025, thanks to all these great achievements and to the successful financing and hedging activity delivered by Fabrice and his teams. One more point. We will present in a few slides how we are preparing the future as a top innovator, thanks to the exciting possibilities data and AI offer us and our retail partners. I'm sincerely grateful to all our teams for their outstanding performance across our 4 regions in 2025, and I'm very excited to lead this great company. Our Platform for Growth business plan focuses on delivering growth from a dominant network of retail-anchored urban infrastructure assets. And you can see that clearly in our 2025 results. For me, they clearly reinforce our strong underlying fundamentals and showcase the strength and attractiveness of our unique business. Our EBITDA margin stands at 63%, a level very few businesses enjoy. And post disposals, we now have an attractive cash flow conversion rate in excess of 70%. With the completion of our noncore disposals program, our business now comprises a portfolio of irreplaceable destinations. The strengthening of our balance sheet with an LTV at its lowest level since 2017 means we are well on track to achieve our 40% 2028 LTV target. All this is great news as it gives us the strategic flexibility to unlock URW's embedded growth potential in line with our business plan. As I shared at the start, our business has once again demonstrated its attractivity and consistent compounding growth. We saw continued improvement in key operating metrics across all regions within our retail portfolio. Tenant sales continue to outperform sales indices and core inflation and vacancy is down a further 20 basis points to record low, driven by dynamic leasing activity. Zooming in on our key leasing metrics, we signed over EUR 400 million of MGR with an 11% uplift on long-term deals, consistent with 2024 activity. We made good progress in 2025, and we want to go even further with leasing being our #1 priority for me and our teams. In the Platform for Growth, we have a simple plan, which will drive growth through our established ecosystem of performance that combines unique assets, best-in-class retail operations expertise and the powerful Westfield brand. As a result, we see a clear opportunity to increase traffic, to keep driving tenant sales up with our partners, further enhance rental tension and retail tension and reduce vacancy and solidify our competitive advantage and capture market share. This is the key work that will drive like-for-like growth and unlock capital-light opportunities for our group. Now I want to spend a couple of minutes on why we outperformed our sector. It's pretty simple, and this is at the core of our competitive advantage. Flagship stores are an essential part of a retailer's brand expression and customer acquisition strategy. Traditionally, these stores were located in premium city center or high streets with high footfall. And today, they are increasingly a key component of the Westfield value proposition. We offer brands premium locations, incredible footfall and most importantly, a profitable growth platform. Our value proposition combines brand awareness with earned media value equal to 20% to 25% of annual occupancy costs at our centers and a cost-efficient customer acquisition channel, 80% lower than digital. For these reasons, our stores are big business for many tenants. Our top 20 fastest-growing brands achieved a plus 40% sales increase across our portfolio over only the 2 past years and generate an average of EUR 16 million of annual sales from each store. Here is another data point. Our 10 largest brands are grossing between EUR 100 million and EUR 900 million in annual sales volume across our portfolio. This is huge, and we're super excited to see which one will first reach the EUR 1 billion sales with us. Finally, I would add that this success also reflects the benefits of our highly curated destinations for customers. These are safe, secure, comfortable locations that offer a superior experience in real-life human connection. This being said, here is a thought-provoking comparison. We have taken key leasing data from Forum des Halles in Paris and compared it to our city's leading high streets, Avenue des Champs-Elysees. We are talking about roughly the same annual footfall levels around EUR 65 million, yet Forum des Halles has materially lower rents. Given our similar to higher sales densities, this means higher profits for retailers at our Westfield destination. You'll also notice that average store sizes are 4x larger on Champs-Elysees. Usually, in retail, the larger the store, the lower the rent per square meter. Interestingly here, the opposite is true with Champs-Elysees. And this is clearly the beauty and power of operating in the flagship locations business, where retailers are ready to pay a premium for brand awareness and visibility. OCR is much less part of the conversation. Obviously, you could argue that Champs-Elysees represents a different proposition for major brands. And I'm not saying that we will soon match these rental levels. However, we clearly offer a compelling value proposition that provides comparable traffic levels and attractive demographics while also delivering profitability for retailers. And it certainly gives us confidence about the true value of our offer and the upside potential we see on the very best flagship assets. And beyond this sales performance, as a single landlord compared to Forum des Halles multiple ownership, this means that we are in full control of tenant mix, customer journeys and visit store data. And this is where we can be a top innovator in the flagship retail segment. In 2025, we continue to see a strong lineup of new flagship openings. Bringing in new flagship concepts that are in demand by our customers is key to increasing the level of commercial tension at our locations. The U.S. offers, in particular, a deep reservoir of great brands like Skims, Vuori and others that are very open to the flagship opportunity we offer and look to Westfield as a natural partner to expand into Europe. A great example is premium activewear brand, Alo, which has 7 stores in our U.S. portfolio and just opened its first shopping center location at Westfield London. Early data is extremely positive, outperforming the brand's gross revenue targets by 80%. We also hear it is frequently outperforming their other flagship stores. In Europe, our newest flagship asset, Westfield Hamburg-Uberseequartier is also proving to be a major draw for big brand flagships such as Aesop, LEGO, [ Polo Ralph Lauren ] or Dyson. We have a huge opportunity in front of us, and I'm confident we can do more to attract exciting new concepts by better demonstrating our value proposition and its potential to brands, hence, our leasing, leasing, leasing priority for 2026. In the end, it's fairly simple. The higher the attractivity, the higher the demand, which results in more leasing tension and occupancy, which delivers a higher rental growth profile. We are also leading the way in data intelligence, thanks to years of investment in technology as well as our scale and the quality and size of our assets. We see it as another way to unlock the full potential of Westfield through AI. We partnered with digeiz to develop mapping algorithms to convert video footage into GDPR-compliant segmented data, harnessing the power of AI to analyze real customer visits and traffic patterns. We have now rolled out this technology across 21 Westfield shopping centers in Europe. And what is truly exciting is its massive potential as a performance tool in areas like asset management and leasing. We are unlocking new KPIs and data sets like capture rates, conversion rates or bounce rates today received or estimated in almost real time, i.e., not a month later, like tenant sales. These KPIs are making a real difference in decision-making and providing insights that were not possible with traditional metrics like rent per square meter and sales intensity. And this powerful data can allow a deeper evidence-based conversation with tenants to drive their performance at a shopping center and a portfolio level with URW. This understanding provides valuable insights and data intelligence that can unlock higher long-term growth, but also allows us to provide additional value-add services like Westfield Rise packages. On this slide, we have shared some anonymized data showing these new KPIs for a medium-sized fashion tenant with stores at multiple locations. By comparing store performance at such a granular level, you start seeing how much richer conversations with retail partners can be. How can we help you improve capture rates at a given store? Do you know why this store has significant higher bounce rate than your others? Why is the conversion rate so low at store X versus usual standards? This is obviously a ton of new data to digest for our teams. And this is where AI technology will be of great support to start unlocking this full potential. To further illustrate this, we selected 3 other concrete examples of how data is already enabling active asset management and driving operating performance at URW. First, leasing. Thanks to new passing by and demographic data, we were able to demonstrate the true potential of an area that had been perceived as soft and a specific unit that had been vacant or only short-term let for several years at Westfield Forum des Halles. Traffic data helped us convince an existing tenant to upsize and relocate into the space and unlock the second opportunity within the same asset, i.e., allowing another tenant to expand as well into the free space to create a flagship store, which it had been looking for, for quite some time. Second, the retailer performance. We can now measure the real impact of introducing new concepts, not just on traffic in the immediate area, but also on visits to adjacent stores or brands in the same category. This gives us tangible evidence for rental discussions and powerful insights, leasing strategy in opportunity zones across the mall. And third, retail media. Data enables more precise audience targeting and far more effective brand campaigns. Across 11 recent Westfield Rise campaigns in our portfolio, we were able to measure a 16% increase in store visits for advertising retailers with an estimated 17% sales growth over the campaign months. Looking ahead, AI will allow us to go even further, generating smarter, automated campaign recommendations based on our custom data sets. Using this data, we will also be able to create digital simulations of our assets to further optimize our tenant mix and customer journey. And I can tell you, you simply don't get this on the best high streets. We are excited by the potential and one of our key priorities for 2026 is to scale use cases and turn them into a driver of shared performance with retailers. With this, data and AI-led physical retail truly becomes the future of commerce. Moving now to disposals, which have been key to streamlining and simplifying our business and the continued strengthening of our balance sheet. Despite tough market conditions, we were very active in 2025 and have now completed or secured EUR 2.2 billion of disposals. I remember vividly the many questions received at our Investor Day last year about the feasibility of a disposal plan, well within and at pricing levels in line with book values. This now means a strategic shift to a capital recycling mode to fund any additional investment and development activities going forward that can contribute to our organic growth profile in a disciplined way. Speaking of capital-light growth, it will be an important tool for creating long-term value for our group. We established very important foundations in 2025. First, our acquisition of a 25% stake in St. James Quarter, an 81,000 square meter flagship shopping center in Edinburgh and 1 of only 4 A++ assets in the U.K. As you could guess, Westfield London and Westfield Stratford City are 2 of the other 3. This transaction demonstrates our ability to strengthen our presence in an existing market and expand the Westfield platform in a way that is consistent with our capital-light strategy. Our ecosystem of performance, including the Westfield brand was key to majority owner APG, actively seeking us out, creating an opportunity to improve the future performance of the asset and generate management fees for the group. Second, a new franchising business is generating fees as well, while allowing us to reach new markets and customers with no capital deployment. This is a first in the world in flagship retail, and we are very proud of this achievement. In December, a 58,000 square meter mall in Saudi Arabia's third largest city became Westfield Dammam and the first asset to be rebranded. Based on early feedback, the rebranding has already driven stronger-than-expected footfall and increased commercial tension. In the coming year, 2 new flagship centers in Riyadh and Jeddah will open under the Westfield brand. A key focus for URW this year will be to demonstrate the substantial added value we can bring to owners of flagship assets in new markets. Let's now spend a few minutes on our developments. We delivered projects that totaled EUR 1.8 billion of total investment cost, including 3 key retail projects, all at high leasing levels. In November, Westfield Cerny Most became the 41st Westfield branded asset in our portfolio, and we opened its extension, bringing in 32 new shops and dining concepts. Westfield Hamburg-Uberseequartier has now crossed 10 million visits and as mentioned earlier, has proven to be the new destination for flagship retail for major brands and retailers in Hamburg. With completion of the IBIS hotel and remaining office works, our committed development pipeline drops to EUR 0.7 billion over H1 2026, down from EUR 3 billion a year ago. This significant progress means our development focus can now shift to disciplined capital allocation and capital-light growth outlined in our Platform for Growth business plan. Moving to sustainability next and a Better Places road map, which is a core strategic driver for the group and a key to our long-term competitive advantage. In 2025, URW achieved significant progress and was recognized again among the top 100 most sustainable companies worldwide by Corporate Knights and Time Magazine. Other highlights include our Le Louvre au Centre partnership, bringing iconic Louvre artwork reproductions into 6 mold -- 6 French molds to expand cultural access and reconnect communities with a shared heritage. URW is fully on track to achieve its Better Places targets, and we will publish more information on our 2025 performance in our URD in March. At the end of the day, with a portfolio of EUR 49 billion and an annual footfall in excess of EUR 900 million, we have a substantial impact in our communities and an increasingly meaningful role to play in today's society. We are in a position to deliver at scale and on our purpose to reinvent being together. In addition to leasing and innovation, our third core priority for 2026 is the continued simplification of our business. We've already made significant progress in 2025, including our organizational shift to 4 regions, the disposals of noncore businesses and 21 noncore assets and administrative changes like delisting Australian CDIs. In addition, we are preparing to destaple URW shares. This would be tax neutral and have no change to economic exposure, and we plan to propose this to shareholders at this year's AGM. We will continue to reduce the number of group subsidiaries, and Fabrice will cover the further decrease in our net admin expenses in 2025. In 2026, we will remain very focused on driving down costs while developing a culture of simplicity and agility for all teams at all levels in all regions and for everything we do. This is key to freeing up internal resources so that we can allocate a valuable time to generate growth, push our advantage in data and AI and drive impact. Before I hand over to Fabrice, I am happy to welcome Kathleen Verelst, who joined our Management Board as Chief Investment Officer at the start of the year. She brings a deep real estate experience and relationships and will lead a disciplined capital allocation approach. Kathleen joins Anne-Sophie, Fabrice, Sylvain and I, and we are altogether tremendously excited to lead the group in this next chapter. In May, we presented our Platform for Growth business plan, which was well received by the market. The whole Management Board is focused on delivering the plan and achieving those targets. We've already made significant progress with LTV down 355 basis points on a pro forma basis and generated underlying average growth of more than 5%. And we have very clear priorities for 2026, leasing, leasing and once again leasing. Innovation, including leveraging the Westfield brand and our data and AI capabilities and continued simplification and development of an agile and entrepreneurial culture. I want to thank once again our teams across our business and regions for their significant commitment and focus. We have achieved attractive growth with lower cost, less CapEx and more innovation, and we are well positioned to continue this strong momentum in 2026. I will now hand over to Fabrice to share more detail on our results, and I will then return to cover 2026 guidance and answer questions. Fabrice Mouchel: Thank you, Vincent, and good morning, everyone. In 2025, we once again saw a strong operating dynamic. Tenant sales increased plus 3.9% compared to 2024, supported by a footfall increase of plus 1.9%. Leasing activity was robust and vacancy fell further to 4.6%, the lowest level since 2017. We completed or secured EUR 2.2 billion of disposals in 2025 and in the year-to-date. And as a result, IFRS net debt, including hybrid is down to EUR 19.7 billion pro forma for secured disposals. This net debt reduction, together with the increase in valuations and in like-for-like EBITDA led to a further improvement of the group rate metrics. Let's look at our 2025 figures. AREPS stands at EUR 9.58 per share, down minus 2.7% on 2024, mainly as a result of the disposals completed in 2024 and 2025. Our AREPS figure also reflects the 3.25 million URW shares issued to CPPIB in December 2024 in exchange for an additional 39% stake in URW Germany. 2025 AREPS is consistent with guidance, taking into account the timing of disposals, strong underlying growth and lower financial costs. EBITDA growth was plus 3.6% on a like-for-like basis, mainly from higher shopping center NRI. Office NRI was down minus 34.7% due to disposals, partly offset by the full letting of Lightwell and the full delivery of the Coppermaker Square residential project. 2025 earnings growth also benefited from the reduction in both financial expenses and the hybrid coupon, which I will comment on later. Here, we provide a detailed bridge showing the AREPS evolution year-on-year. Disposals net of acquisitions had a minus EUR 0.57 impact on 2025 AREPS. 2025 AREPS was also down minus EUR 0.19 year-on-year due to the contribution of the Paris Olympics to C&E activity in 2024. Rebates for disposals, net of savings in financial expenses, the Olympics and the impact of the CPPIB deal. We have delivered underlying AREPS growth of 5.4%. And this is in line with the underlying growth rate of at least 5% in our guidance for 2025. Retail NRI growth contributed plus EUR 0.51, thanks to our positive operating performance and recent deliveries. This performance was partly offset by minus EUR 0.07 from offices as well as the usual C&E seasonality effect between even and odd years. Financial expenses had a positive contribution of EUR 0.04, thanks to proactive refinancing and FX hedging. And we also saw a positive impact of plus EUR 0.13 from the hybrid liability management exercises completed in April and September. The other category reflects the negative FX impact on EBITDA before hedging as well as minority interest. So let's look more closely at URW's retail performance on a like-for-like basis. NRI was up 3.8% like-for-like, made up of plus 3.5% for Europe and plus 5% for U.S. flagship assets. Indexation made a plus 1.4% contribution at group level, reflecting a plus 1.7% increase in Europe. Leasing activity and sales base rents in Europe made a total contribution of plus 1.2% on top of indexation. Our U.S. flagship NRI growth was supported by leasing activity and higher sales days rents, representing growth of plus 5.4%. And the other category contributed plus 0.4%, thanks to variable income, including Westfield Rise and parking as well as lower service charges in Central Europe. It was slightly down in the U.S. due to a few bankruptcies. Moving to vacancy now, which stands at 4.6% at group level. This corresponds to a minus 20 basis points decrease from last year, thanks to strong leasing activity. In particular, vacancy decreased in Q4 with EUR 125 million in MGR signed, corresponding to around 30% of total leasing activity for the year. Vacancy in Europe was 3.3% compared to 3.6% in December 2024, thanks to a noticeable reduction in Northern Europe, which dropped from 5.5% to 4.8% with a further decrease in U.K. vacancy. Vacancy remained low in Southern Europe and Central Europe at 3.1% and 2.2%, respectively. U.S. Flagships vacancy was 6.3%, in line with December 2024, up slightly, reflecting the impact of bankruptcies in Q3. And despite this, U.S. flagship delivered like-for-like growth of 5% in 2025. Leasing activity remains strong in 2025 with EUR 423 million of MGR signed. Total MGR is slightly down on last year due to lower vacancy and lower bankruptcies to address as well as the FX impact. Rental uplift continued to be healthy, standing at plus 6.7% on top of indexation, combining a 5.4% uplift in Europe and a plus 9.4% uplift in the U.S., and this is in line with the 6.5% uplift that we achieved in 2024. 2025 performance was supported by an 11.3% uplift on long-term deals, including plus 6.6% in Europe and plus 23.8% in the U.S. It also benefited from a higher proportion of long-term deals at 82%. And the uplift in the U.S. was driven by the introduction of new food, luxury, automotive and fashion brands replacing nonperforming tenants. Rents per square meter signed in 2025 stood at EUR 659 per square meter in Europe and $80 per square foot in the U.S. This was an increase of 17.8% and 17.4%, respectively, compared to rents signed in 2024. Moving now to occupancy cost ratio, which stands at 15.7% in Europe, slightly above its 2024 level of 15.6%. In the U.S., OCR for flagship assets decreased from 12.6% in 2024 to 12.2% as at December 2025. And as we have demonstrated previously, the volume of activity generated by omnichannel retailers through in-store initiatives as well as brand and marketing value as highlighted by Vincent, goes well beyond the sales figure used to compute the OCR. NOI for our C&A activities stood at EUR 160 million, a 27% decrease compared to last year, reflecting the positive effect of the Paris Olympics on 2024 and the usual seasonality between even and odd years. On a like-for-like basis, i.e., excluding triennial shows, the Olympics and scope changes, NOI was minus 0.9% compared to 2024 and plus 31% above 2023, the last comparable year. This was thanks to lower energy costs and the full recovery of this activity. Bookings and prebookings stand at 93% of the expected rental revenues planned for 2026, demonstrating the appeal of URW's convention and exhibition venues. Our 2025 performance was also supported by a minus 4.6% decrease in our general expenses as part of wider cost-saving initiatives. And this is on top of the minus 10% decrease achieved in full year 2024. General expenses as a percentage of NRI have now decreased from 10.1% in 2022 to 8% in 2025, reflecting both the improvement in our operating performance and the efficiency gains that we've achieved on top of the effect of disposals. These gains include the positive effect of the simplification of the organization into 4 regions as well as stringent procurement and ongoing process automation. Moving now to the evolution of our gross market value. The group GMV at December 2025 amounted to EUR 48.9 billion, a minus 1.6% decrease compared to last year. This is mainly due to the EUR 1.5 billion in disposals achieved in 2025, partly compensated by CapEx of EUR 1.1 billion spent over the period. GMV was also impacted by a minus EUR 1.2 billion FX impact from the weakening of the U.S. dollar and sterling versus euro. Net of investment, disposals and FX, portfolio valuations were up EUR 836 million, corresponding to a plus 1.7% increase. This is the first positive revaluation of the portfolio, excluding FX, investment and disposals since 2018, and it is above the 1% annual growth we referred to at our Investor Day. Net reinstatement value stood at EUR 143.8 per share at the end of 2025, in line with year-end 2024. This includes an AREPS contribution of EUR 9.58 per share and the EUR 3.50 distribution paid in May. NAV saw a positive asset revaluation contribution of plus EUR 3.85 per share at group share. This was partly offset by a negative FX impact of minus EUR 5.18 from U.S. and U.K. assets, net of liabilities and minus EUR 1.49 on the mark-to-market of debt, hybrid and financial instruments. It also takes into account an increase in the fully diluted number of shares. Moving to shopping center portfolio valuations next. Like-for-like retail valuation was up 1.9% in 2025, driven by a positive rent impact of plus 1.6% and plus 0.4% from yield impact. This positive rent impact reflects the strong operating performance achieved in both Europe and in the U.S. in 2025. Overall, a yield impact, which had been negative in previous years was slightly positive in 2025, thanks to Europe. And this comes from an overall minus 10 basis points reduction on the discount rate, while exit cap rates remain unchanged. Like-for-like valuations were up plus 2.3% in Europe, slightly above the 2024 revaluation at plus 1.6%. Valuations were up in the U.S. for the first time since the Westfield acquisition at plus 0.7% and the GMV increase for U.S. Flagship assets was plus 1.6%, fully coming from a rent impact. The net initial yield for European assets as at December 2025 stands at 5.3%, i.e., 10 basis points below 2024 level, while potential yield was stable at 5.7%. The NRI growth assumed by appraisers for the European portfolio stands at 3.5%, including a plus 1.8% assumption on indexation. The net initial yield for U.S. flagship assets stands at 5.2%, plus 10 basis points above its 2024 level and 40 basis points above its 2023 level. The stabilized yield for U.S. Flagship assets based on assumed rental increase in year 3 stands unchanged at 5.7%. And these yields are consistent with recent transaction on A++ assets in the U.S. like NorthPark Center in Dallas sold at 5.3%. These yields also reflect the potential growth embedded in our U.S. assets. And the NRI growth assumed by appraisers for the U.S. Flagship assets stands at 3.8%, and this is based on cash flow growth, including the contractual rents and CAM escalation of 3% on average. This means that more than 3/4 of the growth assumed by appraisers comes from current leases in place, assuming the extension with no capture of rental uplift nor vacancy reduction. Moving now to development. The key event in 2025 was the successful delivery of the retail component of Westfield Hamburg as well as the handover of the first office to Shell. Following these deliveries, the total investment cost of our committed pipeline decreased from EUR 3 billion to EUR 1.2 billion between 2024 and 2025. Works on the IBIS Hotel and the remaining offices in Hamburg are due to be completed in H1 2026. And when handed over to tenants, this will reduce the total investment cost of our pipeline by a further EUR 0.5 billion, leaving just EUR 0.7 billion in committed projects. The controlled pipeline amounts to EUR 1 billion at 100%, in line with last year. And any decision to launch controlled pipeline projects will be fully consistent with the capital allocation policy presented at our Investor Day. Net debt has further reduced in 2025 from EUR 21.9 billion to EUR 20.3 billion on an IFRS basis, including hybrid. This results from the EUR 1.6 billion disposals completed in 2025, which has a positive impact of over 200 basis points on the LTV. The retained profit, net of distribution and others also contributed to the LTV reduction for a net impact of circa 120 basis points, and this was partly offset by the EUR 1 billion of investment spend in 2025. Net debt decreased by EUR 0.4 billion as a result of the weakening of the sterling and the U.S. dollar, which also impacted the GMV as we saw earlier, leading to an overall negative impact of circa minus 20 basis points from FX on the LTV. And last, portfolio valuation had a positive impact of circa 90 basis points on our LTV. In total, IFRS LTV, including hybrid, stood at 42.8%, down from 44 -- from 45.5% at year-end 2024, a 270 basis points decrease. The group has also secured an additional EUR 0.5 billion of disposals. And taking into account these disposals, the IFRS net debt, including hybrid would stand at EUR 19.7 billion on a pro forma basis. And as a consequence, the LTV would decrease further to 42%. The IFRS net debt over EBITDA ratio, including hybrid, further improved to 9.1x in 2025, down from 9.5x in 2024. This is consistent with the trajectory presented at our Investor Day and the 9x level anticipated in 2026. This results from the net debt reduction of EUR 1.6 billion achieved in 2025. It also reflects an EBITDA decrease of minus 2.9% due to disposals and the 2024 Olympics impact and a plus 3.6% EBITDA increase on a like-for-like basis. This ratio does not take into account the further EUR 0.5 billion of disposals secured or the full year NRI impact from projects delivered in 2025 and to be delivered in 2026. The cost of debt for 2025 amounted to 2.1%, slightly above the 2% in full year 2024. This includes the benefit of refinancings completed in particular in the U.S. and the hedges put in place in 2025 to cover rates and FX. This was partly mitigated by the maturity of low coupon debt in 2025, a lower cash amount and decreasing cash remuneration. Going forward, the cost of debt is expected to be aligned with the trajectory presented during the Investor Day of a 20 to 30 basis points increase per year. So let's look at those refinancings in more detail. The group has successfully executed major financing transactions in 2025, illustrating its access to funding at attractive conditions and its ability to seize market opportunities. We fully refinanced our hybrid stack in April and September 2025. The new hybrids issued have an average coupon of 4.8%, while the group reimbursed its 2028 hybrid with a coupon of 7.25%. Through these transactions, the group has generated savings of around 55 basis points on its hybrid coupon, representing a positive contribution of plus EUR 18.6 million to its 2025 AREPS. The group's hybrid portfolio stands at EUR 1.8 billion at the end of 2025 and will decrease to EUR 1.5 billion by April 2026 with the repayment of the remaining EUR 226 million hybrid. We also refinanced $1.2 billion of commercial mortgage-backed securities, managing to both extend the maturity and secure improved conditions with an average coupon of 5.3%. This corresponds to a saving of around 190 basis points compared to conditions previously in place. And this included the refinancing of $925 million for Century City, which was the tightest spread for a AAA tranche over the 2020, 2025 period and the tightest CMBS coupon for a single asset in the past 5 years. And last, the group renewed and extended its credit facilities. And thanks to this activity, our average debt maturity was unchanged at 7 years. Finally, the group's IFRS cash position decreased from EUR 5.3 billion to EUR 2.7 billion during 2025. This results from the use of available cash to repay EUR 3 billion of maturing debt. This also included proactive repayment of EUR 600 million of bonds at a 2.5% coupon maturing in June 2026 and EUR 150 million loans at 4.2% maturing in 2027. We also proceeded with the discounted repayment of Wheaton and the debt on Wheaton, generating a $30 million net debt reduction. And this is consistent with the group's approach to reducing its cash position as remuneration conditions deteriorated with a decrease in central bank's rates and as we made a significant progress in our deleveraging program. And as the group's cash position decreased, we reaccessed the commercial paper markets in Europe and in the U.S. to benefit from decreasing short rates. And these programs are backed by undrawn credit facilities standing at EUR 8.7 billion at the end of the year. And the group's strong liquidity position gives us the full flexibility to access debt markets as and when we see fit. In total, we have secured the EUR 2.2 billion of disposals announced during the Investor Day. We have shown a strong operating performance in 2025. Our credit metrics improved on the back of the group's net debt reduction, like-for-like EBITDA growth and a 1.7% increase in asset values. We have also demonstrated our strong access to funding through the CMBS and hybrid issuances completed in 2025. In view of these achievements and as already disclosed, we intend to propose a distribution of EUR 4.50 per share for fiscal year 2025. This corresponds to an increase of circa 30% compared to 2024 and a payout ratio of 47%, which we intend to increase to 60% for fiscal year 2026. And as in 2024, this distribution will be paid out of premium. With that, let me hand back to Vincent for some closing remarks. Vincent Rouget: Thank you, Fabrice. Solid performance. Let's now look at our guidance for 2026. At our Investor Day, we provided AREPS guidance of at least EUR 9.15, reflecting the mechanical effect of disposals. We are now increasing the range of full year 2026 AREPS guidance to between EUR 9.15 and EUR 9.30. This represents another year of underlying growth of at least 5%, supported by our solid retail operating performance. No major deterioration of the macroeconomic and geopolitical environment is built into this guidance. Finally, in line with our commitment to increase shareholder distributions, we intend to propose a payout of EUR 5.50 per share for fiscal year 2026 to be paid '27, consistent with our confidence in the group's outlook. This represents a payout ratio of circa 60% and a 22% increase versus 2025. Before we move to Q&A, I would like to share why I'm excited to lead this amazing business and confident we will deliver sustainable long-term growth. We have an unmatched and irreplaceable flagship portfolio located in the best cities and catchment areas in the U.S. and Europe, powered by our retail operations expertise and the iconic Westfield brand. Our assets, our expertise and our brand are an ecosystem of performance and a powerful competitive advantage. Looking more broadly beyond the real estate industry, we also have a sound, highly profitable and cash-generative business and are fully focused on unlocking our full potential through a platform for growth business plan and being the leading innovator in our industry. This will generate compelling shareholder returns and create value for all our stakeholders. With the depth of talent in this group and the plan we have in place, I have absolute confidence in our ability to deliver something truly incredible. And with that, let's start the Q&A. Operator: [Operator Instructions] The first question is from Valerie Jacob of Bernstein. Valerie Jacob Guezi: Congratulations on your results. So my first question is on capital allocation. You've now completed your disposal program. You've also sold some lands, which perhaps reflect less upside on development. So I just wanted to ask you what are now your key priorities in terms of capital allocation? And how shall we think about it? Vincent Rouget: Thank you, Valerie. We're very happy to be at a point where we can now move towards capital recycling. That's another avenue of organic growth to some extent at a similar debt level that keeps on going down, that will fuel potential additional growth. This is a tool through the further disposal on the land bank part as we had shared during the Investor Day that we'll keep on working over the next few years. And that will be the main driver of our capital allocation strategy in a disciplined way. And as we expressed it and shared it during the Investor Day, we have a net CapEx investments, annual investments on average over '26, '27 and '28 that is set at EUR 600 million, and that will be the key yardstick for us for any future capital allocation decisions and new investments, which will be funded by disposals on the resource side. So -- and maybe the last point I will add is that we share the criteria upon which we will appreciate and analyze any new investments in the future as part of our Investor Day as well, and they remain fully in place in any new situations we may be looking at. Valerie Jacob Guezi: And just in terms of geographies, are you completely agnostic or do you have some priorities? Vincent Rouget: I think our teams are monitoring every opportunity that fits our overall highly qualitative positioning across the portfolio in our existing markets. So I think we remain alert to every opportunity in the market across different locations and geographies. And I would say -- beyond countries, I would say, urban areas to some extent because, as you know, we are more a city player than a country player, generally speaking, across our 24 markets. So this is where we like to build scale and to generate further competitive advantage in our positioning as well. Valerie Jacob Guezi: And my second question is on your vacancy rate. I mean you've made some good progress over the past few years. Do you think you can improve the occupancy further? Or have we reached a floor and you're happy with what the portfolio is? Vincent Rouget: I think before I hand over to Fabrice, maybe to comment on the vacancy, it's really at the core of our leasing, leasing, leasing #1 priority. So we intend to keep driving up occupancy across the portfolio and continue to increase the retail tension across the board. So that's definitely part of the plan. And it's really through this virtuous cycle of efforts of bringing in and attracting the very best concepts, which are sometimes not in shopping centers yet that will increase gradually the expansion that will reinforce our desirability vis-a-vis tenant partners and will drive upward as well the tenant sales, which is the long-term yardstick we are pursuing to ensure that we have durable and consistent long-term organic growth. Fabrice Mouchel: Thank you, Valerie. So to come back to your question. First, we've been able to reduce significantly the vacancy in Q4. And as you would recall, the vacancy stood at 5.3% at the end of Q3. And we've been able to decrease it to 4.6%. And this was in particular on the back of strong leasing activity with EUR 125 million of MGR signed. So 30% of the total full-year leasing activity and with a higher focus on the letting of vacant units. Hence, as Vincent said the importance on the leasing, leasing side. Now to your question, there are still some areas where we see some improvement potential. One is the U.K. And even though there was an improvement in the vacancy rate in the U.K. from 5.8% to 5% at the end of 2025, we still see some possibility to reduce further the vacancy rate in the U.K. And the other one is obviously the U.S. at 6.3%. So historically, the structural vacancy in the U.S. was somewhat higher than in Europe but we feel that there's some room for improvement to reduce further the vacancy on our U.S. Flagship assets. Operator: Next question is from Jonathan Kownator, Goldman Sachs. Jonathan Kownator: The first question is going to be on brand media. I think you described a slightly shrinking market. You described weakness in luxury demand. Obviously, you have a lot more statistics also to offer to retailers at this stage. How are they seeing the market? Are you able to convince them that it's not just out-of-home market and that there is more potential, i.e., do you see any, I would say, a question on the growth path for that business, please? Vincent Rouget: Yes, correct. We see a lot of potential in this activity. As you know, Jonathan, we expressed it during the Investor Day, and we see this business line as higher growing trend inside the overall portfolio. We see some -- there are several levers across this activity. Beyond the market situation and the market environment generally, we believe that we can increase the occupancy rates across our screens, generally speaking. And we believe that we have some substantial leeway as well on the rate card and the way we -- what we pay and charge -- what we charge for those screens. So we are still at the beginning of this activity, we believe and where we see some interesting potential as well is making the link with our core business further in the next few years. And that's really our second priority around data and AI because of the investments we've made to expand and to develop retail media franchise with Westfield Rise. Now we can use those substantial investments to improve on our core business. And it's really the link and the full connection of those various approaches and value-add services towards retailers to some extent that will crystallize the upside. The advertising market is softer right now that -- what we foresaw maybe a year ago. We still see some growth in our business and we fully believe in the upside we shared with investors during last year's Investor Day and the substantial growth trajectory we see on this line of business. Jonathan Kownator: Just to continue on the -- so these luxury tenants, are they unhappy with the results of their campaigns? Or is it just broadly they reduce advertising? Or are they shifting it online? I mean, online is obviously 60% of the market, right? And so what are you seeing there? Vincent Rouget: Look, I think luxury tenants are very happy with us because they've been generating a positive performance in sales, in footfall, generally speaking, across year 2025. It's one of the best-performing branches when we look at our overall portfolio with tenant sales, which are above what we reported at the group level of 3.9%. So from that standpoint, I think the business for luxury retailers with us is doing well. On the advertising market, again, we are seeing an increase in occupancy across our screens between '25 and '24 when we correct for the positive effect of the Olympic games in Paris. And so we don't have anything to report specifically around the luxury market and the lack of appetite for this new media. Jonathan Kownator: Okay. Just one quick question, sorry, on your FX assumption for 2026. You said that you have a negative FX impact. Are you able to elaborate what assumptions you've taken for FX and at the same time, have you put hedges in place similar to what you had in 2025? Fabrice Mouchel: So that's a very important topic and which effectively has a strong impact on the 2026 results compared to 2025. And just to give you some perspective, so basically, a, of course, we are hedged in 2026 to the same extent as we are hedged in 2025, but we are hedged at levels that are much higher in 2026 than they were in 2025 as a result of the evolution of the currency, in particular, the ongoing weakening of the dollar that we saw over the period. So all in all, we are fully hedged but the level at which we are hedged is closer to the current market levels that you see with an FX of around 1.8 between euro and dollar, whereas in 2025, we've been able to hedge ourselves at a level closer to 1.03. That was the level of FX that was prevailing at the beginning of 2025. So basically, in 2025, we had a positive impact from FX compared to 2024 when the FX rate was on average at 1.06. But in 2026, we'll see a negative impact on the FX coming from this evolution and the weakening of the U.S. dollar that we've seen over the period. Vincent Rouget: Let me commend very strong performance of Fabrice and his treasury teams this year. Again, I think it's a well-known fact in the market, generally speaking, but obviously, the track record is very impressive and better than the trajectory we shared last year in terms of anticipation. So hats off. Operator: Next question is from Pierre-Emmanuel Clouard, Jefferies. Pierre-Emmanuel Clouard: Yes. Coming back on your capital allocation, what do you mean when you say that the objective in 2026 to capture market share in 2026. Is it -- are you willing to be a net buyer or net seller in 2026? And would you say that the convention and exhibition activities core business for you from a medium-term perspective? Vincent Rouget: Yes. Pierre-Emmanuel, very simply by mentioning capturing market share. This is what we've been doing over the last few years and somewhat when you look at the evolution of a tenant sales versus national indices, we've been operating at a healthy spread over the years. And it's true that, I would say, leasing, leasing, leasing priority that will predominantly capture this. Obviously, when we co-invest in a capital-light way on the 25% stake in St. James Quarter in Edinburgh. It allows us to expand our portfolio as well in a very disciplined way on the balance sheet side and the net debt levels that we want to keep on reducing over time. So this is what we mean about capturing market share, generally speaking. It's not about acquisitions, substantial M&A or things like that. And I think we're very happy to have achieved a EUR 2.2 billion disposal program in advance to what we foresaw and announced to the market during our Investor Days or slightly in advance, I would say, because we had targeted early 2026. And it allows us to look with full flexibility at capital recycling opportunities if the attractive ones materialize for us, and it will need to be to the service of the growth profile of AREPS and obviously, it doesn't -- without affecting LTV reducing trend. So I think these are the core parameters for us in terms of capital allocation. I don't have an answer for you on the net buyer or net seller from that standpoint because we have completed a disposal program. So it will be managing the timings in case we were pursuing capital recycling because the opportunities are there. Lastly, on the convention and exhibition. This is a core activity. This is historic activity for the URW Group, we see some growth potential with the delivery of major infrastructure in the northern side of Paris for [indiscernible] site. And so -- and the activity is performing very well. You could see obviously, the great performance with the Olympic games last year. And we are on the right trend on this business. So there's no disposal plan whatsoever on this activity. Pierre-Emmanuel Clouard: Okay. Understood. And a quick follow-up on your capital allocation strategy. The [ Balkany family ] Is selling a big Spanish portfolio, including La Vaguada, in Spain, and it has been reported by the press, you could have a look at this portfolio? So are you evaluating this process? And if so, would you angle be selective [indiscernible] stakes or full ownership? Vincent Rouget: We as -- I mean, first, we never comment on specific situation, as you well know. So thank you for your question. And more generally, we are monitoring all situations across the market and across our different markets, as I mentioned previously. So we track them. We want to know where assets trade, whether the portfolio quality fits our ambition and our overall quality in the portfolio, and we do that with this opportunity as with others. I think in the end, the bottom line is we have a very clear trajectory. We intend to deliver on that. And it sets some parameters, which are pretty stringent in terms of capital allocation. So even though we look at everything to know the market and know our markets, I think the odds of something happening are pretty disciplined, I would say. Pierre-Emmanuel Clouard: Okay. Understood. And a final question on your pipeline. So it would be interesting to have an update on your pipeline, specifically about the residential scheme next to Westfield White City in London and also Westfield Milan, is there any news here? And maybe a quick follow-up about the pre-letting ratio on offices in Hamburg that will be delivered this year. Vincent Rouget: Yes. On the pre-leasing ratio, we stand at 82% on the overall office product across the Hamburg state in the Westfield, Hamburg-Uberseequartier, a state which is a very high rate and reflects the high quality and great location, this office product offers prospective tenants, and we keep on having positive discussions with prospects. With regards to your questions on the various developments, I think on all the examples you shared or you cited. We are investing in pre-devCapEx and expenses across our portfolio to bring our land investments to maturity. And this is what we apply across the board on our controlled pipeline and noncontrolled pipeline. And again, it will -- any decision to commit further capital to new developments and new densifications will have to fit within a baseline, the baseline we shared during the Investor Day of EUR 600 million net CapEx, so net of capital recycling. So that's the approach we're pursuing. We are working on a slightly marginal rezoning of the Westfield London residential quarter to improve the product and improve overall the project. Operator: Next question is from Paul May, Barclays. Paul May: Just a couple of quick questions for me. I wonder if you could give some color on the average yield on the EUR 2.2 billion of disposals, not obviously specific assets, but just so we can get a sense for modeling, particularly the remaining outstanding yield would be great. And then given all the activity, if you could provide a proportionately consolidated closing annualized rental income as at the year-end, that would be really helpful moving forward and say proportionately consolidated would be great. I think you gave the nonconsolidated version. And then do you want the second question now or should I ask that afterwards? Fabrice Mouchel: So to your first question, Paul, on average, the yield at which we sold or secured the EUR 2.2 billion was between 6% and 7%. and I will be even more helpful than your question. So basically, just to give you an insight of the impact of disposals -- of the 2025 disposals on the 2026 AREPS. So basically, it's higher than the EUR 82 million of negative impact that we saw in 2025 for the 2024 and 2025 disposals. And out of the EUR 82 million, you had less than EUR 40 million that was coming from the 2025 disposals. So basically, based on that, you see what could be the total impact on the NRI side of the disposals secured or completed, the EUR 2.2 billion. What was the impact on 2025 and therefore, what would be the impact on the 2026 AREPs. Hope it helps. And if not, you can still call me. Paul May: Perfect. Just following up with the second question is following on a previous question around the ramp-up of development, which I think you talked about in the medium-term outlook. I think various development schemes, especially your experience at Hamburg and recent retail experience would imply that retail development isn't really going to work in the current rate environment or the current return environment. And then if you look at offices, you've got obviously the structural issues and possible AI impact seemingly impacting offices at the moment. So that doesn't seem like a viable sort of decision to ramp up development there. So I was just wondering what is the thought process with that? Does it not make more sense to reduce your land exposure, try to sell what you can and rotate that into income-producing assets? Just thinking on that sort of capital allocation, what the thought process is? Vincent Rouget: Yes, sure. I would say both on the offices side as well as on retail, but I'm sure it applies to other asset classes. It all starts with the product. And I think on offices, there's a lot of talk about the impact of AI. And at the same time, I read headlines everywhere that New York office market -- prime office market has been booming for 3 years now and has never been as good as it is right now. So it's really the quality of products. What we've shown very substantially and meaningfully on La Defense market, which has not been an easy market for a number of years and where we managed to deliver Trinity and fully leased Trinity after delivery, starting from 0% pre-letting at record rents and a massive premium versus every other restructured product delivered over the same period in La Defense. So it really starts with the product. It's the same for us in our view and strong conviction with [indiscernible] project, which is -- where construction is ongoing. And so it's really a question of location, market, but as well ability to create the right product. It also applies to retail. I leave aside the capital allocation side of Hamburg, but we see that Hamburg product is a tremendous success from a retail perspective. The retail partners are very happy about the performance. We already passed in less than a year, 10 million footfall. And so you see that when you create a great product, it creates its own attractivity. That being said, I think a lot of -- obviously, we're working on the land portfolio, as you suggest. And as we expressed it during the Investor Day, we shared, I believe, a figure of roughly EUR 1 billion on our balance sheet of land values back then. And we shared that we intended to sell or dispose around EUR 400 million over the duration of the plan. So between last year and the end of 2028 this objective remains true. And so that's what will enable us to keep investing in development or selling assets and more through a mixed-use angle and adding and densifying around our existing footprints, I would say, as a general trend. And then for the rest, it will be a matter of bringing in partners alongside us as well on the right product and projects in which we have strong conviction to enable the launch and the development of those. So I would say, in a disciplined capital allocation way in the end as we committed to early 2025. Paul May: Yes, I do. I get that. It's just, as you said, putting aside the capital return point, which, obviously, for shareholders, we can't put aside the capital return point. So Hamburg is a great success in terms of it looks pretty and it's got lots of footfall, but I think yield on cost was in the 3s, and also you've lost a lot of money on that. So that would be, I suppose, a concern of shareholders is that real estate companies focus on the shiny final asset and not on the capital return point. I think we just want to get comfort that you're not going to just go off and develop a lot of trophy assets and not generate returns for shareholders. I think that's the concern people have. . Vincent Rouget: Paul, you can have every comfort you wish to have on this, and that's the exact reason why we ascribe ourselves to a very stringent net CapEx spend of EUR 600 million per annum. I use this opportunity -- as we shared during the Investor Day, roughly EUR 300 million, give or take, is going to leasing -- ongoing leasing, maintenance and better places CapEx overall, which leaves EUR 300 million net of extra spending to go for developments or densification around our existing assets. So this is a very stringent trajectory from that standpoint. And I didn't mean the capital allocation side in that form for Hamburg. It's a real trauma, and this is an experience we learned from. And it was also at the source of the decision we made with GMV to drive a platform for growth business plan last year with such a disciplined capital allocation approach. We shared during this some pretty specific criteria in terms of the targets we will aim at in terms of underwriting of new projects as part of the Investor Day, and we absolutely stick to them. And that's exactly the approach we are pursuing. And lastly, when I look at our business overall across real estate asset classes, the EUR 600 million net CapEx accounts for roughly 25% to 30% of the EBITDA we generate on an annual basis of our NRI. This is one of the most compelling metric across asset class in the industry -- in the real estate industry. And that shows that it doesn't leave a ton of space to launch, as you call, new crown jewel developments in terms of development forward. Operator: The next question is from Florent Laroche-Joubert, ODDO BHF. Florent Laroche-Joubert: So 2 questions for me, if I may. So my first questions would be on the guidance for 2026. So we have been able to see in your presentations that you are working on improving your G&A expenses. In which way have you been able to -- have you taken into account some improvement today in your guidance for 2026? Fabrice Mouchel: So thank you, Florent. So basically, this is incorporated, but this is not the main driver for the evolution and the AREPS in 2026. So basically, our guidance. First, we've discussed the 2 mechanical effects with Jonathan and Paul, which are, a, the disposal, which, as you see, as I've mentioned, will be significant and even above in terms of NRI loss compared to 2025. The second is the FX impact. But all in all, this is also driven by a positive evolution and particularly on the rents on a like-for-like basis even though the indexation would be lower in 2026 than it was in 2025. So -- but despite that, we expect to deliver strong like-for-like growth in line with what we've done last year, in line with the guidance that we gave during the Investor Day. And on top of that, we'll benefit from the ramp-up of the projects. And ultimately, there will be also the positive impact of the seasonality of the C&E activity with the even year that would also benefit from the 2026 year. So this is part of the growth that we expect or the evolution of the NRI of the AREPS that we expect in 2026 but that's not the main driver. The main driver continues to be the strong like-for-like growth, which is the priority that we have laid out during the Investor Day and the platform for growth. Florent Laroche-Joubert: Yes. That's very interesting. And maybe my second question would be on your cash on hand that you have now at EUR 2.7 billion, so it's much more or less than 1 year ago. And also we have been able to see that you have been able to re-access to short-term debt. So what would be -- what can we expect now for you for 2026? And after maybe -- do you think that you would be able to have maybe a lower cost of debt than the ones you presented at the Capital Market Day? What -- how do you want to manage that now? Fabrice Mouchel: So. So basically, first, in 2025, we've been able to achieve a cost debt of 2.1% which was only a 10 basis points increase compared to 2024. So below the 20 to 30 basis points increase in the cost of debt that we have mentioned during the Investor Day. And the main reason for that, again, is the FX hedging that we have put in place and that have been -- that we have -- that has allowed us to reduce our cost of debt for 2025. So basically, going forward, as we said, we stick to the guidance that we gave of an increase between 20 and 30 basis points in the cost of debt. And this already incorporates, by the way, the use of the commercial paper market. And it also incorporates some lower remuneration on the cash and the cash has reduced, and this was done on purpose. We've reduced it from 5.3% to 2.7%. So part of the cash was used to repay debt, maturing debt, but also proactively repaying debt maturing in '26 and '27, which had coupons above the cost -- the remuneration conditions of the cash. But all in all, the marginal conditions are higher than the average cost of debt. And therefore, there should be a 20% to 30% basis points increase year-on-year, even though as usual, we try to optimize it and the use of the CP market is one of the ways to achieve that. But it only makes sense to the extent that your cash position reduces enough. Otherwise, you would raise cash on the CP market, but you would have to replace it at conditions that would be slightly worse than the ones at which you would have raised this cash. Operator: The next question is from Veronique Meertens, Kempen. Veronique Meertens: For me, 2 questions around Asian disposals. So I was wondering, so you've now completed your disposal program, pro forma LTV of 42% and you reiterated your guidance of 40%. I was just wondering versus the plan that you presented in May last year, are you ahead or on track after the completion of the disposal program to reset 42% -- 40%? And then in line with that, how actively are you still pursuing disposals at the moment? Are there ongoing discussions at the moment? And how do you see that investment market at the moment? Vincent Rouget: I would say on the fact that we reached EUR 2.2 billion disposals, we had planned to reach it slightly later. So from that standpoint, we are slightly ahead of the objective and what we foresaw last year, and we received a lot of questions during the Investor Day last year on -- to what extent we were confident we would be able to execute such a volume and quantum in a difficult market. So we're slightly ahead there. On the rest of the criteria, and I will leave -- I will let Fabrice elaborate on those. We are well into the plan. We are on track with the plan we disclosed and we shared with the market in May 2025, and we see a solid momentum in our business. And so I would say that's the general assessment and perception we have around our strong operations. Fabrice Mouchel: So to come back to your question, I think the one point on which we are ahead compared to the assumption that we have given during the Investor Day is the evolution in valuation. So as you would recall, we said that the trajectory towards 40%, a, assumed that we would complete the EUR 2.2 billion of disposals, and this has been done. But it also assumed a 1% increase in values per year between '25 and '28, and we have achieved 1.7% in 2025, which is above the 1% level that we had referred to during the Investor Day. So this is where we are ahead of the plan compared to the LTV evolution, and this is already incorporated into the 42% of LTV level, which, as you would recall, compares to 41.7%, which was the level without any increase in values at the end of -- at the end of 2028. Vincent Rouget: It' a good sign, and I will finish on also insisting on the fact that, that's the key reason why organic growth is our primary focus and the leasing, leasing, leasing priority there because with the ability to drive our business plan and to generate the kind of organic growth we shared during the Investor Day market, we see that rates have kind of landed now or reached a high on the cap rates. And to some extent, we start seeing the benefit with such an attractive organic growth on the valuation levels. So that gives us a lot of confidence. And this is really at the center of everything we do, driving this like-for-like performance for our own assets, but it's also the key that unlocks and makes extremely attractive to partner with us either through rebranding and management or co-investment in our existing markets, but also on the franchising business to expand into new markets where we are not present today. So this is really the core of the ecosystem of performance we set up in order to deliver a very attractive platform for growth. Veronique Meertens: Okay. That's clear. And one follow-up on that because during the Investor Day, you had several ideas on future capital allocation and obviously, on a disciplined manner. But one of the things that you did mention was also share buybacks as one of the potential ways. When you're looking at -- if you say that now you're ahead on that sort of like 40% target, what is necessary to potentially trigger a share buyback? Or is it really just focusing now on interesting opportunities in the market? Fabrice Mouchel: So share buyback is definitely part of our toolbox. Now there are a number of conditions that needs to be met before we use this tool. The first one is, as we said, that we need to sell more than the EUR 2.2 billion of assets. So basically, any use of capital would be only done to the extent that we sell more than the EUR 2.2 billion. So now we've reached EUR 2.2 billion. So we'll have to see what are the additional proceeds that we can generate from disposals. And the second topic is that out of the use of these proceeds coming from additional disposals on top of the EUR 2.2 billion, we have a variety of options to reallocate this capital, one being acquisitions. And as we have done, for instance, in Edinburgh with the acquisition of this 25% stake, which is on a prime asset, as Vincent has mentioned, with very attractive conditions with capacity also to develop the brand, capacity to generate some fees. And so basically, out of the various options that will be available to us, we will look into what can be done in terms of acquisition, what can be done in terms of share buyback. And again, looking at both the returns of each option and as well its impact on the financial ratios and the LTV and the net debt over EBITDA, the share buyback being, of course, more negative than acquisitions when it comes to the financial ratios. Operator: The next question is from Neil Green, JPMorgan. Neil Green: Just one, please. It's a bit of a follow-up from Jonathan's earlier on FX. If you go back to the Capital Markets Day, I think you used a euro-dollar FX assumption of 1.14 in the medium-term guidance. So just wondering if there's any change to that assumption, please, and whether the reiteration of the medium-term targets today could potentially be seen as an upgrade given what we've seen in the movement in the FX rate over the last 12 months or so, please? Fabrice Mouchel: Coming back to effectively the FX, the FX evolution as of now had a negative impact on 2028 AREPS in as far as -- as mentioned, today, the spot rate is more in the [ 118, 119 ] whereas what we had assumed during the Investor Day was more closer to [ 114 ]. So basically, what we've been doing is securing a level of FX above which we won't go, and therefore, we have limited our risk on the downside. We can still benefit from the upside. But all in all, the level at which we have hedged ourselves is above the 1.14 in terms of FX, meaning that there will be a negative impact on the FX compared to the 2028 guidance that was given. By the way, there would be another mechanical effect, a negative effect, which is the one that I've already mentioned for 2026, which is the lower level of indexation. And just to give you an insight, so we were at 1.4% indexation contribution for 2025, and we expect to be closer to 1% in 2026. So these are the 2 elements that might impact 2028. But all in all, we expect the trajectory that we have presented in terms of recurring results to be still aligned with the Platform for Growth targets. And in particular, this is consistent with the priorities that Vincent has reminded in terms of leasing, leasing, leasing because in the end, this growth will be coming from the leasing activity, the like-for-like growth that we will be able to generate out of our assets. Operator: And the last question is from Rahul Kaushal, Green Street. Rahul Kaushal: My first question is on the investment market. How much appetite do you see across various investment markets? And more specifically, what -- I guess, were the differences you see across various markets? And maybe if you can specifically touch on Germany there. And what is the spread in terms of cap rates between your ask and what you're seeing from interest from investors? Vincent Rouget: Thanks, Rahul. To answer your question on the spread, I mean, we are transacting. So we are transacting at values we are comfortable transacting to in line with our valuation. So in the end, we don't see so much of a spread. As we often mentioned in the past, some noncore assets we are disposing are core assets for other acquirers given the very high quality of our portfolio. And this is one of the reasons why despite, I would say, an overall difficult investment market, we managed to progress on disposals at pace and at scale because we've been one of the most active player in the market on the disposal market over the last year-end change. So I would say in terms of investor velocity, obviously, the Spanish market is showing quite substantial liquidity and the diversity of investors and buyers. So this is one of the strong markets, investment markets in Europe. We see some transactions in the U.K. market as well where you see some liquidity. We've transacted in Germany. So it's quite widespread overall. And interestingly, Fabrice mentioned it as well as part of his presentation, we are seeing some real mark of interest on the premium end of the mall sector in the U.S. The financing markets are wide open over there for senior credit, which is pricing at tight spreads. There's a lot of appetite and demand from debt investors from that perspective. It feeds into the retail market and the quality mall market as well or for some large-scale mixed-use type of properties with a very substantial quality retail component, which have been trading, let's say, in the 5% to 6% cap rate area over 2025. So we see encouraging signs of a strong return of investment market in the U.S. as well. Okay. I believe we do not have any more questions. Thank you. Thank you, everyone, for joining us for this presentation and the Q&A session, and we're looking forward to speaking with you very soon. Fabrice Mouchel: Thank you. Bye-bye. Vincent Rouget: Bye-bye.
Operator: Good morning, everyone, and welcome to BCV's 2025 Full Year Results Call. My name is Lydia, and I will be your operator today. [Operator Instructions] I'll now hand you over to Pascal Kiener, CEO, to begin. Please go ahead. Pascal Kiener: Thank you very much. Good afternoon, everybody. Let me jump directly on Page 4, where I would like to highlight the key messages or the key points of our 2025 result. As you might see, we have an ongoing growth in -- across all business lines. Our revenue are stable. Actually, this is, I think, minus 0.4%. I think the main point is to highlight the well-diversified business model of BCV. You will see when Thomas presents the financial result that we have a reduction in the interest rate revenues, more or less compensated by an increase in the commission business. I think this is the main point of our -- the strong point of our business model. A solid net profit of CHF 430 million, which is 2% less than last year. I remember that 2024, '23, were a very good year. 2024 was the second best result in BCV story. So basically minus 2% given the environment of interest rate, and I think this is a strong result. And finally, we're going to propose a dividend of CHF 4.40, unchanged from last year. Maybe I would direct lead to Page 6. So you see in the different business lines or volume categories being mortgage, other loans, deposit or AUM, you see an increase between 2% to 5%, 6% depending on the client segment. Basically here, everything is going quite well. In terms of ratings, the financial ratings being S&P or Moody's are totally unchanged and have been confirmed. In terms of ESG rating, we have some good news. CDP is not on the chart, because Carbon Disclosure Project, they have increased their the notation. And you see that we have quite high rating in terms of non-financial ratings. Very often, this is the second-highest rating in their categories or in their ranking. And if you compare with other cantonal banks, I think we are among the top. Now coming back to business. Retail banking, steady increase being deposit or mortgage loans, so quite a good performance. Here, it is clear there is one competition -- fewer competition since Credit Suisse is no longer in business. UBS remains a very tough competitor. But nevertheless, we could take advantage of this measure by getting some increase in this business, mortgage loan 5%, customer deposit 4%. And you see that in the revenues and operating profit. Here, there are a couple of points -- I mean the volume growth plays a role. Then quite a lot of transaction of those retail customer being ForEx transaction or in fact, transaction in Switzerland. And finally, as you know, I mean, in a universal bank like BCV, you have transfer pricing between the corporate center and the division, and it is clear that the transfer price have increased for the Retail Banking division. Therefore, they have better revenues and a better operating profit. If you have specific question on that, Thomas will answer those questions later. In the corporate banking business, basically here, I mean, it's almost nonsense to discuss the overall figure without going into the specific business lines. So SME basically up in terms of loan, and in terms of deposits slightly down, but this is the year-end figure. If we take the average over the year, this is more or less stable. One point I would like to make in those COVID-19 bridge loans, 90% have been paid off. Basically, 81% have been reimbursed by the customer and 9% have been reimbursed by the confederation. As you know, maybe for those of you who are not aware -- or are not aware of those bridge loans, there is no risk for the Swiss banks. I mean the risk is there by the confederation that was clear from the beginning. And when we set-up the program with the Swiss federal authorities and a couple of banks, we sold, we would have something like 20% default, 20% loss actually. And now, we are at 90% reimbursed, 81% by the customer, 9% by the confederation. So rest is 10%. Let's assume we have half-half, we have another 5% reimbursed and 5% by the confederation that would mean overall loss in this scheme of 15%, which is below what I would expect and showed also that the COVID-19 program was really a very good program for the Swiss economy. Anyway, for us, there is no risk. I just wanted to mention that if you're interested, which shows nevertheless that the Swiss economy is doing quite well. I was expecting more write-off out of those COVID-19 bridge loans. Real estate firms, mortgage are up. So nothing to mention here. Large corporate is always kind of volatility. It depends on the price that we are making. So here, we don't look at volumes, we indicate volume, but this is more a kind of profit business, so we try to optimize profit and profitability, and not the volumes here. This is very clear. Trade finance still operating at a very low level, I would say, given the geopolitical situation. And nevertheless, slightly up 8%, but this is really small. So we will carry on this way until, I mean, some geopolitical problems are solved, I don't know when. I hope soon, but it might take time. So trade finance will carry on more or less at this level, plus/minus 10% around the current situation. And the economy in Switzerland and Vaud is doing still well. Although we have a slight increase in provision for SMEs, Overall, this is still low and the cases of default we have nothing to do with U.S. tariffs or economy doing not well or the strength of the Swiss francs, those are isolated cases for different reasons. But nevertheless, the level remained very low if you compare with the expected loss, which is a bit higher. Okay. Wealth Management, again, here, you have different business here. You have the asset management part of the mother company of BCV. You have private banking part of BCV and you have also our small subsidiaries, Piguet Galland. So a typical small private banks in Lausanne and in Geneva, actually in the French part of Switzerland. Here, everything is up, which is quite normal given the current situation of the financial markets. And trading, very good year, up. This is the trading room basically. Two main drivers. First of all, the ForEx business, where we have limited risk as it's a transaction induced trading. And the second pillar is structured products, which are back-to-back. And here, given the very good rating of BCV, we had a strong expansion in the French part, but also in the German part of Switzerland. I think there are not a lot of companies that can have a AA of offering the kind of structured product we are offering to the markets. Okay, now for the, let's say, financial result, I hand over to my CFO, Thomas. Thomas Paulsen: Thank you, Pascal. Hello, everybody. I believe very brief, just to point out points, which you might be your questions. I'm on Page 13. Well, while the key numbers are here, as you know them by them on the extraordinary income, nothing special to signal. On Page 14. Well, let's -- you see again here the point of the composition of our bank revenue and the lower part of the chart, you see that our NII was basically before loan, impairments was basically down CHF 26 million. Here, you only have the volume and interest rate effects. And then we have slight variations in loan impairment charges, which remain very low, which means that NII is down by minus CHF 28 million. At the higher part of the chart, you can see that commissions almost have compensated this by CHF 25 million as mentioned already by Pascal Kiener. Let we come to this chart, which is especially prepared for you guys. On Page 15, we always give you more in-depth understanding with regard to interest income. What is really interest income from the activity, and what is rather balance sheet management. Here, you see that the pure NII before balance sheet management is going down from CHF 627 million to CHF 596 million, is down minus CHF 31 million, which is probably already answering one of your questions. So here you see the full impact from the business side perspective. Then you know that what we do is we do balance sheet management by taking typically in U.S. dollars, which create a charge on interest and doing FX swaps, which result into trading income. So the charges for this on the NII were by minus CHF 70 million, and the income generated by this was CHF 89 million on the trading side. So net CHF 19 million. So we can see 2 elements here, which are important to see that, first of all, in year-to-year comparison, the balance sheet management charge was lower, right? And explain the evolution to CHF 526 million. And on the other hand side, you see also that the income from this was lower, which actually points out another point. From an accounting perspective, trading income was CHF 195 million, stable. But from a business perspective, you can see that trading income is higher , CHF 106 million against CHF 99 million, okay? Of course, I will be there for your questions, if this was too complicated. On Page 16, total operational charges with the 3 components are almost stable. Basically, you see a shift from other operating costs into personnel costs, because this is basically the last movement, which appears here with regard to integrating the resources for IT hosting, because first quarter 2024, they were still paid outside. And over 2025, they were fully part of BCV employees. So that is why personnel cost -- main reason why personnel costs are slightly up. And other operating costs are slightly lower. I just focus on this key element, obviously, there are a lot of movements going on. Depreciation and amortization is stable. With regard to the headcount, nothing special to signal. It's more or less stable at the parent company, and its subsidiaries. With regard to total assets, obviously, the business developments of mortgage loans and advanced customers have already been explained by Pascal Kiener. I would like to focus on the elements that financial investments, which are purely there for liquidity reserve in the sense of HQLA, high quality liquid assets are up by CHF 1.3 billion, which is part of our financial strategy. On Page 19, you see that the customer deposits are up by 0.6% and bonds and mortgage bonds are up by 1.7 million, which is basically coming from our Pfandbriefe Centrale mortgage capital loans, which are first mutualized company of the cantonal banks and our own bond issues. With regard to current discussions in newspapers, I really want to point out one thing, which has also been made by Martin Schlegel of the Swiss National Bank. I mean we had no issue in funding at all over this period. And maybe it's also a little more further away from Switzerland, you must know that, for example, Pfandbriefe Centrale is this institute of Swiss Pfandbriefe, which issues mortgage covered bonds did record levels of issuing of CHF 14 billion gross issuing over 2025. So I just want to make clear there is no funding issue, and I recommend you the lecture of the short paper, which Martin Schlegel of the SNB published yesterday or days ago, which makes us even more -- provides even more in-depth understanding of that point. Well, our shareholders' equity continues to rise, and is now almost at CHF 4 billion and -- logically it cross CHF 4 billion the next time we closed. Now on Page 20, where it has all been mentioned, right, that the new -- net new money was CHF 3.8 billion, and this nice market performance, CHF 6 billion, we are up by 8%. So the net new money came has reflected our business mix of individuals, SMEs, institutions and large corporates. With regard to CET1 on Page 21. Obviously, here, we -- as mentioned already quite -- for quite a while, it happened, right? Basel final had its positive impact even larger than we shared with you before of 1.4% or 100 basis points. And then obviously, there are business volumes development. So we are at this nice CET1 of 18%, which gives a lot of place for further development because we consider this as an excessive CET1 rate. The LCR, as you see, is cruising at comfortable levels, with the mix, I already mentioned before between HQLA and liquidity and SNB. On Page 23, the net stable funding ratio is also pretty much on the same level, as you can see on Page 23. So given this nice business development, but also given that we are in a situation where still a lot of macroeconomic geopolitical uncertainty, but we are also at a solid earning capacity, we will propose a stable dividend of CHF 4.40 to the AGM soon. So basically, with this, we are at the historical average of payout. But I really want you to understand that, I only want to maybe make a point here also with regards to your first comments as a result. First of all, when we announced for 5 years dividend interval, this has nothing of a plan or an objective, nothing at all. This is an interval where we are convinced that, first of all, we will stay above the lower border. Secondly, it gives some perspective of what potential we see without being completely in the sky. And certainly, we do a step-by-step, and once we've done dividend level, except a major structure of regulatory crisis, we will not go to a lower level. But there's nothing of an objective if we say CHF 430 million to CHF 470 million to be at CHF 470 million by the end of the horizon. We have never communicated like this. It's not the logic. Our history has shown that we were able to do this for more than 15 years. We went through a lot of unexpected crisis, be it the financial crisis, be it euro crisis, be it negative interest rates, be it COVID, be it the Ukranian war. So we have shown that we are highly resilient. And obviously, if things become very positive, we will be rather at the higher end of the interval, but that's all. Okay. Maybe we will have more questions for this, but I think it's important to remind you of that. Thank you very much. Pascal Kiener: Good. Let me maybe just conclude very rapidly with 2 charts how we see the future going forward. I think that the fundamental of the Swiss economy are still strong. I know the Swiss franc is very strong. But on the other side, as can import goods cheaply or cheaper. And we have a production growth. So the internal demand is quite good, low employment rate. So I expect that to carry on the economy in Canton Vaud and Switzerland is quite resilient, quite strong. They have proven that during all past crisis that Thomas just mentioned, it's clear that the U.S. tariff and the strength of the Swiss franc is not something that we like. But nevertheless, I expect the Swiss and the Vaud economies doing correctly in the next 2 years, something like 1% growth. I don't expect more than 1.5%. I don't believe that, but I don't expect much below 1%. So probably maybe 0.8 that could not be excluded, but not below that. Those that means growth and not recession and not stagnation. One of the main business of BCV is the mortgage business and the real estate, you see the prices are going up every day, more or less, which is quite normal. I mean, low interest rates, but more than that is basically the ongoing growth of population being immigration of all basically more new kids than deaths of people. Anyway, so basically, with a 1.1% to 1.3% population growth every year, which is something like 9,000 people, which means a need for homes, 3,700, 4,000, let's say, flats or homes, and we don't build that much. So basically, I expect those prices to go up again. And I'm not saying this is very good because it's very, very high. But on the other hand, the economics, I mean, the fundamentals are just good. Those people need to sit somewhere. I don't expect immigration going backwards given the need for workforce in Switzerland and also some problems in terms of economics of our neighbors. So basically, we will carry on being very, very cautious in this business, where we target growth between 4% to 5%, but really focusing on quality. We could grow probably faster, but we don't want. We want to make sure that we have quality growth, and we will target those areas where there's a low vacancy rate, because this average of 0.9 basically, if you take the Canton Vaud, this is between 0.3 around Lausanne, maybe to 1.82% in some areas. Okay. I think that's it, and we are ready to take your questions. Thank you very much. Operator: [Operator Instructions] We have our first question from Cajrati. Ausano Cajrati Crivelli Mesmer Nobili: I have a question regarding the outlook. Why didn't you give any commentary on outlook or guidance or anything thereof? Pascal Kiener: Because, I mean, look, if you know BCV, you see this is a very stable business model, and basically, I don't see the point -- I mean how can I give a very bad outlook? Does that make sense? How can I give a very rosy outlook that doesn't make sense as well? So we are in a situation -- in an ongoing situation in the last 5, 6 years. So I don't expect something special, neither very negative, neither very positive. I mean, we don't want to do it because then if there is a slight, let's say, deviation from the normal course, then we have to make maybe a profit warning being positive or being negative. And this is always huge discussion. And since the stability of the business -- BCV business model, if we were a high-tech company or a company with suddenly a launch of new product or whatever, I can understand that analysts require more or less a guidance. But for a stability business like BCV, very diversified, I don't think this is necessary for analysts in order to make a, let's say, a good provision. I hope that answers your question. Ausano Cajrati Crivelli Mesmer Nobili: Yes. But in the past, you used to give some outlook? Pascal Kiener: Yes. that's a good point. And we had problems. Once we were much better than we thought because we had some extraordinary items. And we had tremendous discussion with our legal team, whether we have to make a profit warning, a positive one. And you see no discussions for me, useless. And at the end of the day, we say we don't do it. We will not make a positive profit warning, but that's the main reason, because I don't expect -- I mean, if we had a very special event, then we would do something, but I don't expect any special event, and I expect BCV to carry on showing similar results. Now it depends then on the interest rate you see. Of course, if interest rate go up, then we will have better result. If they go down, probably that will reduce slightly, but up to a certain point, because now I mean we are at zero. This is, in a way, the worst situation for BCV I would prefer probably the SNB. Just from a BCV point of view, I'm not sure this is good for the environment. But from a business point -- from a BCV point of view, if the SNB would reduce or go into negative territories, that will be better for us. So basically, I mean, either way, it's in a way better. Operator: We have our next question from Stefan Stalmann. Stefan-Michael Stalmann: I hope, you can hear me well. Pascal Kiener: Sure, very well. Stefan-Michael Stalmann: Yes, I wanted to come back to the dividend decision. I hear you, Thomas. It's not a commitment to follow this 4.3 to 4.7 trajectory, but you did seem to behave differently last year. So last year, profits were down by more versus '23, and you still increased the dividend by at least 10, which seem to follow this trajectory to 4.7. And this year, profits are almost stable, minus 2% or so. And the dividend is flat and so on. I guess, it's fair to wonder whether you're sending some signal here in any way or whether this is -- how should we think about next year really -- and is 4.7 still a plausible outcome for '27? Thomas Paulsen: Stefan, I like your question, because it gives me the opportunity to explain something further. 2023 was an extraordinary record result. And basically, when we -- we applied the same logic as we would do for an extraordinary bad result, right? We basically wanted to stay somewhere in the middle. That's why we did the CHF 430 million, whereas we were -- which was the CHF 370 million distribution, whereas the result was CHF 470 million being that we had CHF 100 million we kept, which is excessive from this regard what we did previously before that. So that's really the point. We had extraordinary net results. And basically, now we get back to something, which for the given environment is more typical. And we evolve it is CHF 4.40, right? That is a dynamic, which is really behind this move from -- going from CHF 380 million to CHF 430 million and not to -- we could have gotten to much higher to CHF 480 million, right, to CHF 470 million almost with that result. We didn't do it. And now we evolved with something which is this environment, which we look at it with some prudence, okay? I think that's really the point. Then there's a question forward looking for Pascal? Pascal Kiener: Maybe, if I may add. I mean, look, we've been doing that for 17 years. I introduced that 2008, this distribution policy. At that time, that's quite new. Now you see some banks or some other companies doing something similar. I think this is totally normal for the business model we are in and the kind of economy we are in, which is not really growing by 10%, but rather by 1% to 3%. So the point. So I think we -- I hope that you give us the credibility after 17 years. Now we will never go back. I will never blow up the dividend, that must be clear. Unless, I don't know if somebody, I don't know in 6 months, FINMA, Swiss regulator, asked for twice as much equity that is another story, but I don't expect that. So I will never lower the dividend. That's first point. And we will always be between the 2, the floor and the ceiling we have set. Now going forward, it depends a bit on the interest rate. I mean, who knows what's going to happen to the interest rate? So we had some -- we were cautious in putting the CHF 430 million. We said we don't know. We think probably that there is slight increase in the long-term rates, and maybe depending on the results next year, we will increase. I mean, going forward, if you take a kind of a midterm, long term, I think our result will increase because probably the interest rate will come back to normal level, I mean, to a certain level. We will never decrease, and we will over time, increase. But we have those 2 numbers, the floor and the ceiling to say what is reasonable for the next 5 years. Now it's for the next 2 to 3 years or the next 2 years. Given the current situation, probably we will not be at CHF 470 million in 2 years. Now depending, why not, but probably not, but there is a good chance that -- I mean, the strategy of increasing steadily regularly the dividend is still the strategy, and we will carry on doing that for the next couple of years. I hope that answered the question, because, let's say, in a nutshell, we are cautious. There is no signal. We are not signaling that we changed the BCV, the dividend policy or that we just know that we reduce, no, or that was stable. It was really to being cautious. Stefan-Michael Stalmann: And by the way, I wanted to apologize for only turning on my camera. Now I didn't have the full functionality of mic and camera during the first half of the call, but now I do. Could I maybe ask a related question? And I think it was you, Thomas, who said that 18% CET1 was excessive. Do you have any particular thoughts about how to bring it down to something less excessive? And where will that be? Thomas Paulsen: Well, Stefan, you know us for quite a while, and we -- I mean, from a business point of view, we always said that this bank would be really from as an efficient machine, perfectly capitalized with something like 14%, 15%. And anything above that is excess capital. Or from a valuation perspective, you will basically say 14% to 15% is what I need from my operating value, and what above can add to it as an excessive value, right? That's the story. And over time, the whole story of our dividend policy had also the idea, but it didn't happen. So that's why we don't insist on it, that we, okay, we keep some capital to take into account, part of the risk-weighted assets growth, but not fully enough so that the CET1 has it should go down over time. Now as I have been taking this for 17 years, it never went down. I don't talk about it so much anymore. But we must also objectively consider that Basal 1, 2 -- rather 2 and 3 has been very positive for us. And the different moments along this time scale, we had uplifts by this, because as we came in as the kind of unwanted participants, they had put on us a very tough regime. And the first we went, they realized that we were really doing it very honestly, and so we have seen these opportunities to even lower our risk rates for that reason. Pascal Kiener: So if you don't take into account those discontinuities. So those years where we had suddenly an increase in the ratio based on those, let's say, regulation changes. I mean you will see that the Tier 1 ratio goes down slightly because we -- as Thomas said, if we would keep it stable, then probably we would have a lower dividend. We would need to retain more equity, but that's not the point. I mean the point is to use this in a way excess capital to increase over time, the dividend and to decrease the Tier 1 ratio. And we don't expect yet new. I mean, new regulation from FINMA. I think Basel III final is implemented in Switzerland. And here, we had a tick-up, I'm fine, but we didn't expect exactly that. We expected some positive news, but not as positive -- or so positive as they are today, but I don't expect those kind of changes in the next 5 years. So roughly, probably given the growth in the credit business, so the risk-weighted assets, given the dividend policy of distribution, I expect this Tier 1 ratio to slightly reduced over time. I would like here to mention that I've been the CEO for now 17 years, CFO the previous 5 years. Since 2004-'05, we have, in a way, kind of excess capital. We will not use this capital to do bad things. So I don't expect any merger or acquisition just to use this capital. Capital will remain in the bank and will decrease slightly over time based on risk-weighted asset and distribution policy. Stefan-Michael Stalmann: I don't know, can I maybe ask another one? Or should I step out and step in, again? Pascal Kiener: Yes. Stefan-Michael Stalmann: AI. Obviously, a topic everyone is very high on the agenda. And I was wondering if you could just talk a little bit about how you're looking at it, whether you already have initiatives ongoing, how big they are, what the results could be, whether that changes the competitive dynamics, anything that you find important. Pascal Kiener: This is a huge question. We have time till 6:00. No, I mean, in a nutshell, Yes. No, I think this is something very important for the economy overall. I see AI as a game-changer, like in a way, Internet, but it's going to take time. I mean, this is one thing to play with ChatGPT at home and to ask for summary to have a couple of things. This is another thing to implement that in a bank with all risk assessment done with a 100% of reliability, et cetera, et cetera. And we have initiatives ongoing. Let me give you one example. I mean, I'll have a couple. For example, we have introduced an AI tool to generate leads for our customer relationship manager. So based on basically the situation of the customer, analyzing flows, analyzing the kind of product they have, the trajectory, et cetera. The system is able to suggest to the relationship manager, a couple of products that we could sell to that customer. I mean, a human can do exactly the same. The AI tool is not better, but it's much quicker, much quicker. So we get some productivity improved. But here, we're talking some percent of people. So you cannot really get rid of some people based on that. Another implementation, we have 5, 6 implementation tools. Another one is to prevent fraud. You know that in the -- in Switzerland, this is the same probably in other countries. You know that online payment. I mean this is incredible. Our people are naive, stupid and are being fraud. So here, we have implemented AI tool in order to, let's say, to better monitor the transaction of customers to try to get those wrong transactions or those fraud transactions, and to do that, let's say, at an acceptable cost because you could check every single transaction. But in payment, we have, I don't know, 30,000 to 40,000 payment by hour for each hour. So if you control all of them, that's impossible. So here, AI can help clearly. And I mean, that will carry on. Now what I see in the market, not only banks, I think, AI is a powerful tool. Now taking the benefit in terms of more revenues and, let's say, less cost is not easy, especially for established companies and established business model. Probably, it's easier to start a new company based on AI and then maybe you can get the benefit. That will come, but that will take some time, but we will be part of this game. In terms of competition, I don't think that we -- for the time being, play a significant role that will sometimes change a bit the relationship and on the customer and ourselves, think about investment. I think you are in the business of investment. So asking ChatGPT or I mean, asking a very good AI tool or asking a relationship manager for advice, who is best today, probably the man or the person, but in 5 years from now, I don't know. So probably expect, nevertheless, some productivity improvement due to AI in the mid- to long term, but not in the next 2 years. Stefan-Michael Stalmann: It sounds like you don't expect this to drive any particular investment needs that you wouldn't have out of your ordinary IT budget. Pascal Kiener: No. Stefan-Michael Stalmann: Could I ask one final from my side? I have been, I mean, I have been looking at the loan-to-deposit ratio, if you like to turn it the other way around in your reporting. And you have already commented a little bit on some of the funding topics that have been around more recently, let's say. But even if I look at longer periods of time, 5, 6 years, your loan-to-deposit ratio has quite consistently trended up. And I was just wondering whether that's any concern to you at all, whether you mind, whether this is maybe just a bit of a random result of what happens in your corporate -- large corporate business in particular, between loan and deposit decisions? Or are there constraints where you say, I don't want to go above whatever 110 or 115 for particular reasons. And why do you think, by the way, that we have seen this move from 93 to 100, whatever, 10 or 7 over those 5, 6 years? Pascal Kiener: Exactly I mean, it depends how you look at the ratio. We tend to look at the other way around, but I mean, it doesn't matter. No, no, no problem. But this is not a BCV trend. If you look at more or less all cantonal banks. So all, let's say, retail banks or universal banks, I mean, cantonal banks because UBS is something different anyway and private banks are also different. So if you look at cantonal banks or value or horizon, you see the same. And to be honest, I'm not sure I understand completely why. I mean, first of all, there is a strong demand for credit, being mortgage or be it commercial loan, this is clear. And the demand is even stronger after the UBS and Credit Suisse merger. So that's one point. But -- okay, that's one point. Second point, I think the retail customer, although let's say, mostly, let's say, the individual. I'm not talking about SME. I mean they are more, probably, this is an assumption, I'm not sure. There are more possibilities, opportunities to invest or to deposit their money. Okay, as I go, they would deposit in savings, and maybe they have some investment products. Today and in the crypto, there are so many opportunities in Switzerland, a broad -- so my guess is that part of the money is going to other, and investment channels, I'm not sure what I'm saying because we are trying to analyze that. But this is not a BCV trend. Now it's clear that following your question or the last part of your question, I mean, we have a kind of a limit. I don't want -- I mean, if I take my ratio, my way of looking at ratio, probably at 80%, I start being EBITDA and ticking and probably for you, it would be under 20 or under 15, I don't know if we should bid the math. It doesn't mean that we're not going to be above that or below that, depending on the way you look at the ratio, but we have to think about it, what it means. And that then we have to diversify, I don't want to be dependent on the financial market. This is a risk slightly, of course, but I would like to ask -- I don't know for example, 50% of my loans only covered by my deposit, that would be very dangerous. So we have to look at that. This is an ongoing trend for the last 5 years, you're right. But you see that is -- this is all retail bank, all cantonal banks have the same trend, more or less. And if you look at some of them, one or two are already at level, which I consider they should start thinking about what they do, whether they carry on like that, whether they try to get other opportunities for financing, whether they limit the growth in the credit business. We are not that. We have time, but this is something that we have to look at and to understand exactly what's going on. It's a very good question. Thomas Paulsen: I still want to remind, I just was looking for the chart, adjusted the chart recently. I mean, before 2015, we saw quite low loan-to-deposit levels, right? So we are still marked by this period of excessive liquidity, also linked to the negative interest rates, but the point which was Pascal was just making is completely the same. I just want to remind us of historic data. Operator: [Operator Instructions] We have no further questions at this time. So this concludes our call today. Thank you very much for joining us. You may now disconnect. Pascal Kiener: Thank you very much. Thomas Paulsen: Thank you. Bye-bye.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to Precision Drilling's Fourth Quarter and Year-End Conference Call. I will now pass the call over to Lavonne Zdunich, Vice President, Investor Relations. Please go ahead. Lavonne Zdunich: Good day, and thank you all for joining Precision Drilling's Fourth Quarter and Year-end Conference Call and Webcast. Today, I'm joined by Carey Ford, our President and CEO; and Dustin Honing, the CFO. Please note that some comments today will refer to non-IFRS financial measures and include forward-looking statements, which are subject to a number of risks and uncertainties. For more information on financial measures, forward-looking statements and risk factors, please refer to our news release and other regulatory filings available on SEDAR and EDGAR. Before I pass the call over to Carey and Dustin, I would like to recap how we delivered on our 2025 strategic priorities. First, we enhanced our shareholder returns by reducing debt $101 million, ending the year with a net debt to adjusted EBITDA ratio of 1.2x. And we also repurchased $76 million of our shares, meeting the midpoint of our guidance of allocating between 35% and 45% of our free cash flow to share buybacks. During the year, we maximized our free cash flow by delivering resilient drilling margins in both Canada and the U.S., even though average industry activity declined. And finally, we grew revenue organically by increasing our Canadian market share and increasing our U.S. rig utilization from a low of 27 in February to a high of 40 in the fall and exited the year with 38 active rigs. Today, Precision is the second most active driller in North America. With that, I will turn it over to Dustin Honing. Dustin Honing: Great. Thank you, Lavonne. Good morning, good afternoon. Precision's 2025 financial results demonstrate our long-standing commitment towards delivering on our strategic priorities and further strengthening the competitive positioning of the business. Last year, we continued to generate strong free cash flow, allowing Precision to meet our shareholder return commitments while significantly reinvesting into our rig assets and Alpha digital technologies. As we enter the final stages of our long-term deleveraging journey, the business is positioned with immense financial flexibility and a platform to maximize value for our shareholders. Moving on to fourth quarter results. We recorded adjusted EBITDA of $126 million, which equates to $132 million before share-based compensation expense. This compares to prior year EBITDA of $121 million, $136 million before share-based compensation expense. During the quarter, we reported a net loss of $42 million, which includes a noncash charge of $67 million related to decommissioning of drilling rigs and another noncash charge of $17 million related to drill pipe. Without these onetime expenses, net income would have been positive $42 million compared to $15 million in the fourth quarter of 2024. In Canada, drilling activity averaged 66 active rigs, an increase of one rig from Q4 '24. Our reported Q4 daily operating margins were $14,132 a day compared to $14,559 a day in the fourth quarter of '24, falling within our prior guidance range. During the fourth quarter, Precision incurred reactivation costs associated with the 2 Super Triples that were mobilized to Canada from the U.S. back in September. Both rigs began operations in Q4 and will be fully operational throughout 2026 and beyond, backed by long-term contracts. In the U.S., we averaged 37 active rigs, a slight increase sequentially from Q3 and an increase of 3 rigs from prior year Q4. Our daily operating margins for the quarter were USD 8,754 compared to USD 8,700 per day sequentially in the third quarter, also falling within our prior guidance range. During 2025, despite declining industry activity levels, we increased our U.S. rig count throughout the year. This momentum is a result of leveraging our upgrades and digital offering to deliver strong field performance for our customers, coupled with our favorable positioning in U.S. natural gas markets. Internationally, Precision averaged 7 active rigs, down from 8 rigs prior year Q4. International day rates averaged USD 53,505 a day, an increase of 8% from prior year Q4. This was due to prior year nonbillable days from rig recertifications. In our C&P segment, adjusted EBITDA was $17 million, which compares to $16 million for prior year Q4. Increased well servicing demand in Canada more than offset the impacts of winding down our U.S. operations back in the second quarter of 2025. During the year, our strong presence in Canada's unconventional natural gas and heavy oil markets, combined with our unique natural gas exposure in the U.S. provided us the ability to capitalize on rig upgrade opportunities, underpinned by firm customer contract commitments. For the full year 2025, capital expenditures were $263 million, comprised of $156 million for sustaining and infrastructure and $107 million for upgrades. These investments were made alongside our shareholder return commitments, reducing debt by $101 million, allocating $76 million towards share buybacks and increasing our year-end cash balance to $86 million, which is up $12 million from prior year. Moving on to forward guidance, which I will begin with our expectations for the first quarter of 2026. In Canada, all of our 32 Super Triples and 47 Super Singles have been active in the winter drilling season. We also have several Tele Doubles operating, allowing us to reach a peak rig count of 87 rigs operating in Q1. For the full quarter, we expect average active rig counts to exceed the 74 average rigs from prior year Q1. Our operating margins in Canada are expected to range between $14,000 and $15,000 a day. In the U.S., we've sustained the momentum we've built over the last 3 quarters. For Q1, we expect our average active rig count to be in line with the 37 active rigs from prior quarter with encouraging customer conversations for additional deployments. For the first quarter, we expect our operating margins to remain firm, ranging between USD 8,000 and USD 9,000 a day. Internationally, we expect to run 7 rigs. However, operating margins will be lower than prior year due to one Kuwait rig coming down, offset by one reactivated rig in Saudi Arabia. In Q1, we expect to incur USD 2 million of onetime charges with this reactivation. Our C&P business continues to generate strong free cash flow, driven by our Well Servicing and Surface Rental business lines. For Q1, we expect EBITDA to slightly exceed prior year levels. Moving to forward guidance for the full year of 2026. Capital expenditures are budgeted to be $245 million, comprised of $182 million for sustaining and infrastructure and $63 million for upgrades. Note that our sustaining and infrastructure budget includes long lead components, a portion of which, which will be allocated to upgrade projects as they materialize, plus a bulk purchase for drill pipe, which will be utilized in late 2026 and into 2027. Depreciation is expected to be $305 million and cash interest expense from debt is expected to be approximately $45 million. Our effective tax rate is expected to be approximately 25% to 30% with cash taxes remaining low in 2026. For 2026, we expect SG&A to stay flat at approximately $95 million before share-based compensation expense. Share-based compensation guidance for the year is expected to range between $25 million and $45 million, assuming a share price range of $100 to $140. Please note that this is a preliminary estimate, and we will provide updated guidance on our Q1 call following the settlement of past grants and issuance of new grants later this quarter. Our long-term target to achieve net debt to adjusted EBITDA of less than 1x remains firmly in place as is our plan to increase our free cash flow allocated directly to shareholders, up to 50%. We entered 2026 with a net debt-to-EBITDA ratio of 1.2x with an average cost of debt of 6.6%, and we have over $445 million in total liquidity. With that, I'll pass it over to Carey. Carey Ford: Thank you, Dustin, and good morning and good afternoon. As Dustin and Lavonne mentioned, Precision Drilling had a successful 2025, reflecting industry trends with differentiated activity levels and financial outperformance in a flat to declining North American market. Certainly, there is plenty for the Precision team to be proud of about 2025. As our recent performance has been well covered in previous disclosures and on this conference call, I would like to spend time talking about our 2026 priorities and why Precision Drilling is positioned for continued differentiated performance in the year ahead. Our 2026 priorities may sound familiar to listeners because they are consistent with those of prior years with a focus on generating free cash flow, delivering financial returns to our investors and providing high-performance services to our customers. Financial discipline has been important for strengthening Precision's balance sheet, reducing share count and building trust with our investors through our decade-long track record of delivering on commitments. This part is ingrained into Precision's strategy and will continue this year. Our first strategic priority is to drive revenue growth and deepen our customer relationships, and it is listed first because this focus area will be how Precision differentiates itself this year. Our platform provides multiple avenues to achieve this priority. First, I'll discuss our options to grow revenue in the current market. Precision is uniquely positioned to capture demand across North America's diverse basins, each with distinct demand drivers and equipment requirements. What remains constant across every basin is the increasing complexity of well designs and our customers' relentless demand for footage per day performance. Starting in Canada, our heavy oil regions require long horizontals and complex wellbore geometries, including wine rack, feather and fish bone designs. And we're meeting that demand with 17, soon to be 19, pad capable Super Singles. In the Montney, we continue to invest in the hardware and digital capabilities of our 32 Super Triple rigs to drive consistent industry-leading performance. Turning to the U.S. In the Permian, we're executing extended reach U-turn wells in the Haynesville drilling deep high-pressure wells requiring a 1 million pound hook load and in the Marcellus, delivering smaller footprint rigs with extended reach horizontal drilling capabilities. The takeaway is clear, no matter the basin or the challenge, Precision has the fleet, the technology and the expertise to deliver well after well. Second, I'll follow the discussion on revenue growth with the objective of deepening customer relationships through performance conversations and presenting new ways to create longer-term value. We do this through field service delivery and our standardized and fully scaled Alpha and Clarity digital platforms to optimize drilling planning and execution, provide real-time insights, enhance customer communication and implement performance improvement plans. We also delivered upgraded rig solutions executed internally and delivered quickly to meet our customers' specific needs. Additionally, we have been introducing creative commercial arrangements to incorporate equipment upgrades, digital technology additions and performance contracts. Many of these initiatives are underway, and we plan for more in the future. Absolute market share gains are one positive outcome of our strategy. But perhaps more importantly, among Precision's 130 drilling rigs active globally, 25 customers are running multiple Precision rigs, and we want this number to grow. My final point on our first strategic priority is that many of these revenue growth and customer relationship initiatives are capital-light, enabled by Precision's vertically integrated operations, cross-border capabilities and a consistent modular Super Series rig design, dynamics that allow for a faster, more economic upgrade plan. We view our upgrade capabilities as a competitive advantage and expect contracted upgrades to continue in 2026 for customers across several North American regions. All 3 of our priorities in 2026 are important for the Precision team. with financial discipline and returns focus underpinning operational and growth decisions. I would now like to make a few comments about Precision's core geographies, starting with Canada, where our Q1 peak activity of 87 rigs surpassed last year's peak by 4 rigs. The medium- to long-term outlook for the Canadian market is solid with supportive commodity prices, increased LNG and crude takeaway capacity and resilient demand for Super Series rigs. As a reminder, short-term activity throughout the year can be affected by weather and commodity price volatility. The U.S. industry outlook for rig activity is generally flat, but we are finding pockets of opportunity for performance differentiation and expect to continue to capture modest growth in a flat market. Our customers are focused on executing the development plans in the most efficient way possible and are not reacting to weekly changes in oil and gas prices. The gas basins have been the main drivers of growth over the past year, but we are having several encouraging performance conversations with Permian customers as we look to expand our presence in that key oil region. In the Middle East, our 7 active drilling rigs are delivering excellent results for our customers, and we are actively pursuing opportunities to reactivate idle rigs with financial returns driving all potential capital deployment decisions. Also, we are exploring options for more capital-efficient means to develop scale, including technology differentiation. To that point, we are installing our first Alpha system on an active Precision rig in the region. And we are laying the foundation for longer-term capital-light international growth in the Western Hemisphere. During the fourth quarter, we entered an MOU with an established drilling contractor in Argentina, under which Precision has the option to provide idle Super Series rigs, digital technology and operational support, while our partner will operate the rig, and the customer will have a direct leasing arrangement with Precision. We are excited about the potential to expand our presence in a growing region, focusing on Precision's performance offering. We are in the process of deploying our first Alpha automation system on one of our partners' drilling rigs in the country to demonstrate Alpha's performance advantages to potential customers. We currently have no near-term rig deployment plans, and we'll update the market as opportunities develop. I'll wrap up the business discussion with an update on Precision's Completion and Production Services division, where we delivered a 6% increase in service hours in 2025. Rising operating costs in the division continued to be a concern, but the team has addressed these costs with operating efficiencies and focused execution. Precision Well Services remains the premier service provider in Western Canada with industry-leading crews and safety performance and has proven its ability to meet evolving customer needs, resulting in resilient customer relationships. Once again, I would like to thank the Precision crews, field leadership and all Precision employees for their commitment to safety, customer service and dedication to Precision. With that, I will hand the call back to the operator for questions. Operator: [Operator Instructions] Our first question comes from Derek Podhaizer with Piper Sandler. Derek Podhaizer: Maybe just starting off with Kuwait and the rig that was demobilized over there. I was hoping to get a little more color and context around what happened there. It's great that you're able to backfill as far as reactivating the Saudi rig. And then separately, you also talked about potential reactivations of idle rigs in the region. Can you maybe help refresh us on how many rigs you have idle there and would be candidates to return to work? And where could your active rig count, which is at 7 now go to? So just a little more color on Kuwait and then just potentially the upside to your 7 active rig count today? Carey Ford: Sure, Derek. So we have 6 rigs in the Kuwait market, 4 are active and are on long-term contracts for the next couple of years. We do have 2 idle rigs. One of them just finished its last 6-year contract. And we didn't demobilize it. We just racked it in-country, and we'll be looking for opportunities to deploy that in the region, either in Kuwait or another country. And there will be opportunities to tender that rig, we think, later this year. So we are looking to reactivate that rig. We do have another idle rig in Kuwait that we're -- it's in the same situation. It's a modern rig. We deployed it in, I think, 2017, and we would expect to have opportunities to deploy that rig as well. In Saudi Arabia, we have 2 active rigs. One of them just went back to work. It was a suspended rig that have been well publicized in the market. And that one just went back to work last week, and will be running on a multiple year contract. So we have 2 rigs there and then one rig idle in the region. So first priority for Precision is to reactivate idle rigs in the region, and we think that's a near term -- near- to medium-term opportunity. And I think more medium and long term, we'll be looking for new avenues for growth in the region. Dustin Honing: Yes. And Derek, just to clarify, like the 2 will be up to 3 in Saudi after this reactivation is complete. Derek Podhaizer: Right, right. Super helpful. Switching over to the U.S. Obviously, an encouraging guide as far as steady rig count with some potential for the upside. Could you maybe help us understand that potential upside comment that you guys made? Is this, again, more gas-associated rigs like in the Haynesville or Permian, you talked about getting in with maybe some of these performance-based contracts. Just maybe a little more help as far as what the upside there and also publics versus privates? Carey Ford: Yes. I think the answer is all of the above. We're having active rig addition conversations with customers in the Marcellus, in the Haynesville and the Permian. And I think that we're looking at modest growth opportunities, but all of the discussions are driven by performance and efficiency where we think we can outperform several of the rigs that are operating today. I probably should add, we are having conversations with customers in the Rockies as well. Operator: Our next question comes from Keith MacKey with RBC Capital Markets. Keith MacKey: Can we just maybe start on the U.S. margin guide for Q1, USD 8,000 to USD 9,000 per day, pretty consistent guide with what you did in Q4, although there was a significant amount of reactivation costs that came through in Q4. So can you just break down some of the pieces for us in terms of the Q1 guide and what we should be expecting for reactivation or changes in day rates or changes in your core OpEx? Dustin Honing: Keith, it's Dustin here. I'll start. I'll let Carey jump in. But I would say it's kind of a mixed bag because we're seeing different pricing trends in each one of our operating segments in the Lower 48. We've seen some encouraging pricing play with a lot of the upgraders we've staged into the natural gas markets, that would be the Marcellus and Haynesville, a little bit more competitive in the oil-based markets. But we've been able to leverage our Alpha technologies as an a la carte charge to help support our margins. And then the benefit of fixed cost absorption certainly helps as we've been increasing our activity in the U.S. market. So from what we see, it's very short-term visibility. Contracts are quite short term in nature in the U.S. market, a little bit longer in gas, but overall, shorter than Canada. But from what we see, we feel comfortable with that guidance range for -- to hold firm. Carey Ford: I don't have anything to add there, Dustin. It's a good answer. Keith MacKey: Got it. Just anything on reactivation costs we should be expecting for Q1 in the U.S.? Dustin Honing: I would expect to see a fairly similar trend, Keith. It's not perfectly linear, but this is just the reality of the constant churn that we see in the U.S. market. But we've been able to absorb those quite well. And I would say you probably want to expect something similar going forward. Keith MacKey: Got it. Okay. And just turning to the MOU in Argentina. Just maybe give us a little bit more comments on that. How did this opportunity come about? And what ultimately do you hope to achieve from executing this MOU in terms of financial performance or further international expansion, et cetera? Carey Ford: Sure. So I would say that this was announced in the industry press in the fourth quarter. So it's been out there. I would say that we've looked at Argentina as a really interesting market from both the resource that's there and the growth opportunities. And we've been trying to figure out the way that we can get to the market, have a differentiated offering and reduce some of the challenges and risks associated with that market. We understand that a lot of parts of the market are improving for the better for Western countries or North American countries to go into that region. But we still want to find a solution where we can offer performance and technology, but derisk some of the complexities of doing business in the market. So we think that this is a really good opportunity for us to explore, and that's all that we have right now is an MOU to go to the market in a way that we have an established partner. It's San Antonio Drilling. They have a long-standing relationship and very good customer relationships in the -- long-established reputation and very good customer relationships in the region. And we want to partner with them with our rig technology and digital technology to go and work. And it's hard to say at this point how big of an opportunity this is going to be. But I'll stress that we don't have anything to announce right now. I think that the first rig deployment, if it moved at light speed would be late this year, maybe early next year. And I think we're probably talking about 1 to 3 rigs over the next couple of years. It's not going to be a fast-moving program for us. Operator: Our next question comes from Aaron MacNeil with TD Securities. Aaron MacNeil: Carey, you mentioned the strength of the longer-term Canadian outlook. And I'm sure you don't want to get into anything too specific on a customer-by-customer basis. But with their Q4 results, ARC recently removed Attachie Phase 2 from its 5-year plan and withdrew its broader Attachie guidance. So just curious to see if you've had -- if you've seen any direct impact of this yet, if you're expecting it in the future, how you're thinking about this in the context of overall basin demand for Super Triples or any other color that you could provide? Carey Ford: Yes. So I certainly won't speak to any particular customers' plans and Precision, I think we work for 8 of the top 10 most active customers in the Canadian market. So we do see quite a bit. You did hear my comments that we had 87 rigs running in the winter drilling season. We peaked in January at 87 rigs, which is up from last year. We've had all of our Super Triples and all of our Super Singles active during this winter drilling season. So certainly, we haven't seen any change in demand in the short term. We've been as active as we've ever been, at least in the last decade. And then longer term, I think our point is that takeaway capacity for both oil and gas is strong. We also have deep resources -- deep inventory resources for almost all of our customer base. So I think despite an individual customer with a specific change in plans, we have not seen a broad change in demand from our customers. Aaron MacNeil: Okay. Fair enough. And then maybe to build on Keith's question on the direct leasing opportunity in Argentina. What would a contract look like in terms of daily margin? Who is responsible for the mob and demob? Like how does that -- like all sort of the nuts and bolts of all of that work? Carey Ford: Yes. So I won't get into all the specific details. But yes, the mob and demob would be contemplated in the contract and an economic consideration will be given for that. But think about it as 2 revenue streams for Precision, one from our partner for what we provide on operational support and one from the customer on a direct leasing payment for the rig itself. And I think that's the crux of the contract and why the opportunity is attractive for us if we're able to secure a rig contract or 2 with a customer down there over the next few years. Operator: Our next question comes from Tim Monachello with ATB Cormark Capital Markets. Tim Monachello: It was good to see the capital allocation guidance pushing higher on the share repurchases. So I wanted to start there. You're getting to the tail end of your deleveraging target. And I'm curious what you think your allocations are going to look like once you hit that target? Carey Ford: I think we're stretching to give annual allocations for share repurchases. And we like the model. We get feedback from investors all the time that they like the way that we're allocating capital to both debt and equity, and we've been consistent that as we reduce our absolute debt levels, we will increase our direct allocations to shareholders. And that's a broad bucket. It could be share buybacks, it could be dividends at some point, but we'd like to continue that. And based on the current market, based on where valuations have been, we're comfortable continuing that. Now a year from now, we might be in a different market. And so I can't really comment on what form that would take. And I think the key thing for investors to remember about Precision is we are generating significant cash flow in just about any market, and we will continue to use that cash flow to deliver returns for investors. Tim Monachello: Okay. And then on the rig upgrade capital, $63 million earmarked for 2026, how much of that is a home currently? And can you speak to which markets you're seeing opportunities for rig upgrades? And I guess a follow-on to that would be, how do you think that will impact your contracted status, particularly in the U.S.? Carey Ford: Yes. So I'll comment about the capital plan. So remember, our capital plan is always activity driven, and that is definitely the case for maintenance, and it is the case for upgrades as well. Upgrades are demand driven. It's where we have customer request and customers willing to enter into contracts. I would say that only a portion of that has been fully committed, and I don't know if it's 15% or 20% or 30% has been fully committed. The rest is what we expect based on conversations with customers. So that could go up and down. The other part of the capital plan that Dustin covered a bit in his opening comments is that the maintenance and infrastructure portion of our capital spend contains long lead items that may either be used in maintenance, may be pushed into 2027 or if we get upgrade contracts, you can think about the absolute total dollar amount of capital expenditures not necessarily going up, but the shift from maintenance to upgrade may change with more capital going to upgrades as we go throughout the year. So that's one comment. Did you have anything? Dustin Honing: I would just add, Tim, if you're asking just regionally where we're seeing the upgrade opportunities? It's really a similar allocation that we commented in Q3. So in Canada, it's the deeper extended reach drilling programs in natural gas, specifically the Montney. And then we're seeing continued demand for pad Super Single upgrades with our heavy oil customers, significantly improving the agility of those rigs and converting those rigs from 250 days a year to an asset that might work 325 days. So we really like those upgrades. In the U.S., continued momentum with upgrade opportunities in the Marcellus and Haynesville. And to Carey's comments earlier, we're seeing increased opportunities playing out in the Permian. Tim Monachello: Okay. That's helpful. I guess in Q1, which is anticipated to be, I guess, the peak of the oil glut, and you guys are talking about sort of stable rig activity and opportunities in the Permian and gas basins in the U.S. Do you think that when you look through the back half of '26, you continue to think that the rig count in the U.S. is stable? Or do you think you're going to start to see that move higher? Carey Ford: Yes. I think when we comment about flat activity, it's kind of a combination of what we hear and what we read from the experts. And then in the shorter term, what we're hearing from customers. And I think our view from customers is shorter than back half of this year. I think it's -- we've got some customers that are looking a year or 2 out, but the broad market is still largely 6 months out. Tim Monachello: Okay. And then last one for me. Just on the Argentina opportunity, would that be served with rigs in your fleet that would assume be upgraded from the U.S.? Or would that be -- assume it probably not a new build. Is that the right way to think of it? Carey Ford: No. And that's one of the reasons why it's attractive to us. It wouldn't be new builds. We still have some idle Super Triple rigs in the U.S. market. And some of them would have minor upgrades before they were deployed and some would require a bit more capital. But all of those capital investments and mobilization would be contemplated in the economics of any contract that we pursue. Operator: Our next question comes from John Daniel with Daniel Energy Partners. John Daniel: A quick question. You mentioned potentially modest growth expectation in the U.S. market and you cited 4 basins. I'm curious, is that growth -- is that Precision adding rigs that are being displaced -- you're displacing others? Or do you actually see your customers in those 4 basins looking to add incremental activity? Carey Ford: I would say at least half are displacements, and I'd probably add on more of those being displacements than customer rig adds. John Daniel: Got it. And then as we continue to see more and more consolidation within your customer base, how is that influencing your appetite to potentially participate or prosecute more consolidation within your businesses? Carey Ford: Yes. I would say we've been pretty consistent. We don't look at any of the targets as strategic. So there's not one that we think we have to have to make Precision Drilling a better and more competitive company. There are some decent targets out there, and it's just a matter of whether it works on a strictly financial basis where we pay something below our multiple and get synergies and we can integrate well within our fleet. So possible, but not strategic priority #1. John Daniel: Fair enough. And the final one is just housekeeping. How many -- in the budget for '26 -- if you said this, I apologize, I missed it, but how many rig upgrades does that contemplate? Carey Ford: I would say it's -- right now, I mean, it can move around a lot. It's -- think about it as a big bucket of capital and sometimes it might be a high-torque top drive on a rig and that's an upgrade and that's not a huge dollar amount or it might be creating a 2,000-horsepower Super Triple rig, which could be $6 million, $7 million, $8 million. So I would say, as we sit here today, think about it as 10 upgrades, plus or minus a few. Operator: [Operator Instructions] Our next question comes from Josef Schachter with SER. Josef Schachter: Two questions. Going through the decommissioning of the drilling rigs and the $67 million charge, can you talk -- is there a certain class of rigs that you were -- and age of rigs that you decommissioned? And then in the balance sheet under assets held for sale, you don't even have anything there either for scrap value. Can you give me some background on all of that? Dustin Honing: Yes. So we did a deep dive on really analyzing the forward trends in the industry and what's really evolved in these more complex drilling programs. It's really starting to surface and take hold, I'd say, over the last 1 or 2 years where rigs -- drilling programs are becoming more complex, higher strain on equipment. There's just a specific capacity that you need. So when we look deep into our fleet and scrutinize the capabilities, it just was clear that we had a few that were falling not competitive, and we had that review late in the year and booked the appropriate charge. Carey Ford: Yes, in terms of the assets held for sale, there's going to be 2 things that we do with those rigs. One will be strip the rigs with any parts that we might be able to use in our fleet. So there will be some of that. And the rest, we would scrap, but we wouldn't necessarily have a held-for-sale item on our financials because we don't have a time line on that. Josef Schachter: Okay. Next one, going to the drill pipe, $17 million. What's going on in pricing? Because you mentioned you're going to be buying quite a bit in Q4. How big of a swing are you seeing in these numbers in terms of the timing of when it's appropriate and attractive for you to add more drill pipe? Carey Ford: Yes. I would say that when we pursue bulk drill pipe purchases, and we've done this throughout the history of our company, usually, there are times in the market where a supplier will have extra drill pipe. They'll need to have a home for production schedule, and we're able to capitalize with some liquidity and planning to where we can take advantage of a discount. And don't think about this as being a 40% or 50% discount. But on large dollar amounts, it can be meaningful, and it makes us act a little bit quicker than we would have otherwise. Josef Schachter: And the $17 million happened for any specific reason? Dustin Honing: Similar to our rigs, we made an adjustment on useful life for drill pipe and similar comment. As wells have become more complex, harder on equipment, we've noticed that our drill pipe life spans have been shortened up. And then we did have some that were disposed as well at a loss. Carey Ford: Yes. And I would just say that this is not a Precision dynamic. This is an industry dynamic in both the Canadian market and the U.S. market. Drill pipe is just wearing out a whole lot faster than it used to, and we need to adjust our accounting treatment to account for that. Operator: I'm not showing any further questions at this time. I'd like to turn the call back over to Lavonne. Lavonne Zdunich: Thank you, everyone, for joining today. If you have any further questions, you can call me or contact me through e-mail. Thank you. Operator: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.
Operator: Good morning, and welcome to Klabin's conference call. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions] Any statements made during this conference call about Klabin's business outlook, projections, operating and financial targets and potential growth should be understood as merely forecasts based on the company's management in relation to the -- and their expectations in relation to the future of Klabin. These expectations are highly dependent on market conditions, on Brazil's overall economic performance and on industry and international market behaviors and therefore, are subject to change. We have with us today Mr. Cristiano Teixeira, CEO; Gabriela Woge, CFO and IRO; and the other officers from the company. Mr. Cristiano and Ms. Gabriela will comment on the company's performance during the fourth quarter of 2025. And after that, other executives will be available to answer any questions that you may wish to ask. Now I will pass the call over to Mr. Cristiano. Please go ahead, sir. Cristiano Teixeira: Thank you, and welcome, everyone, to our earnings call for the fourth quarter of 2025. I would like to officially make it known, not that it is not known, but I'd like to mention Gabriela's presence here as a Financial Director, as a CFO. She has been a partner for some years. And now that she has taken on this position, she will definitely have a wonderful journey for the -- along with the entire company. We'd also like to wish Marcos all the best. He's somewhere in Central America with [ Sares ] visiting our clients, and that is why he is not here today. But here we are for the main -- to discuss the main points about the paper market. So starting on the fourth quarter of 2025. I'd just like to mention briefly the most important points from the end of last year so that we can talk about the performance for the full year. And I will come back when we talk about the trends and our alert signs, our dashboard. So starting on Slide 3, it's important to mention the consolidation of that recovery we started in our production. The second half of 2025 was a benchmark for the recovery of our teams. As you know, the fact that we are working on basically full capacity, as I'll mention on the next slide, except for recycled products. In virgin fibers, we are producing at full capacity and all of it is sold. So obviously, our margins are lower. We don't have any production announcements to make. We are at our full capacity after all. So we don't have any, let's say, fat from not producing. So I always have to prove that we are at full efficiency. If we did have any reduced production, these operational errors would not appear because it would be hidden by the production that was announced to the market. So since we are at our full capacity, we did have an issue early in the first half of the year, which was recovered in the second half. We're full steam now with all machines, and we're having a very positive moment right now. Let's continue with Slide 4. So I'd like to draw your attention to something on this slide. As a reminder of the split that we had for some time, this number related to pulp sales in 2025 is the basis for our expectations in 2026. So fluff is always a priority, as you know, and we are at full production in January. This recovery that we saw in the second half of 2025 has been sustained. We had a downtime in Ortigueira and Monte Alegre, and now all plants are in full production. Looking at papers now, what is the piece of good news we see here? We've been saying for some time that Klabin has been increasing its production. That's what happened in '25 versus 2024, and we have the same expectation for 2026. So this expected production increase will take papers to similar numbers as we have in pulp. So we're going to have a similar split there, about 1.5 million tonnes. And this increase in production in 2026 is still to come, but it will be in the same order of magnitude as we had in 2025 versus 2024, and this will continue to dilute our fixed costs. And especially, we have some expectations about this. We expect the market to be better. We'll go further into details about this later on. But all the signs that we had in January have led to very positive expectation so far. Of course, we have to be cautious. It's the first month of the year. But when we compare to the first month of 2025 or even the pace we had at the end of 2025, we are having a very good January. When it comes to packages -- we will return to this afterwards. But when it comes to packages, once again, it has been a brilliant year. The corrugated boxes area has been performing very well as it had been in previous years. We've been performing well in volume, but especially in recovering price stability. Initially, 7 or 8 years ago, we repositioned ourselves, and we've been able to maintain that position since then. But we are now seeing signs that we are at a new level in corrugated box prices in Brazil. Volumes and market share have improved due to improvement in services, better client relationships. 70% of what we have is under long-term contracts, 3- to 5-year contracts. We have many exporters, and we have many clients in the domestic market, and this will continue. Similarly, although January is only the first month of the year, it's been very positive. I will now hand it over to Gabi, and we'll return and discuss some trends later on. Maria Woge Liguori: Thank you, Cristiano. Good morning, everyone, and thank you for following our conference call. On Page 5, given the production stabilization and the ramp-up of paper machines, our quarterly sales volume reached 1.25 million -- excuse me, 1,025,000 tonnes in the period, in line with the same period last year. Net revenue in the quarter reached BRL 5.2 billion, down 2% year-on-year due to the appreciation of the real versus the dollar and the pressure on hardwood pulp prices. Adjusted EBITDA was BRL 1.8 billion with a margin of 35% in the fourth quarter of 2025, the same level as the fourth quarter of 2024. This reflects an increase in volumes, especially in pulp and paper, and an increase in packaging prices, as well as the effect of land sales, which are in line with our strategy of monetizing forestry assets. These effects were enough to offset the appreciation of the real against the dollar, pressure on pulp prices and the impact of maintenance downtimes during the period. Moving on to the next page. Net revenue for 2025 was BRL 20.7 billion, an increase of 5% compared to the previous year. This increase is mainly explained by the higher volume in sales across all business segments, the depreciation of the real versus the dollar and price increases in packaging. Adjusted EBITDA in 2025 was BRL 7.8 billion, 7% higher than EBITDA in 2024. Margins were 38%, an increase of 1 percentage point on the same comparison basis. Throughout the year, the solid performance of these segments, the ramp-up of Puma II and the effects from the exchange rate all contributed to a growth in our adjusted EBITDA. During this time, the company used its ability to adapt resilience and execution discipline to deliver consistent results and make important progresses tangible. Moving on to Page 7. The total cash cost per tonne in 2025, including the effects of the general downtime, was BRL 3,225, stable for the fourth consecutive year and confirming the cost projection we gave to the market. The accumulated cash cost for the year materializes this various actions implemented by Klabin, especially the reduction of fixed costs, mainly personnel and services such as travel and consultancies in addition to the dilution provided by a higher sales volume. This performance reinforces our predictability, the financial performance and discipline of our business model. Continuing with Slide 8, we ended the fourth quarter of 2025 with a net debt of BRL 25.9 billion, in line with the third quarter of 2025. Leverage measured by the net debt to adjusted EBITDA ratio in U.S. dollars ended the quarter at 3.3x, down 0.3x comparing -- excuse me, down 0.6x comparing to the fourth quarter of 2024. The company continues its downward trend in leverage in a disciplined manner, confirming its consistent execution of our strategy and the strengthening of its capital structure. Moving on to the next page. Our liquidity remains robust, ending September at BRL 13.6 billion. This liquidity comprises BRL 10.9 billion in cash and the rest in undrawn revolving credit lines. The average debt maturity at the end of the quarter was 85 months, and the average cost in U.S. dollars was 5.2% a year, a reduction of 0.5 percentage points compared to December 2024, which reflects the liability management initiatives carried out throughout the year. Turning to Page 10, we present the company's free cash flow. In 2025, Klabin had a positive free cash flow generation of BRL 715 million. In the last 12 months, our adjusted free cash flow was BRL 2.1 billion, representing a free cash flow yield of 9.2%. Continuing with Slide 11, the dividends distributed to shareholders over the last 12 months totaled BRL 1.215 billion. This amount represents a dividend yield of 5.3%. I would also like to highlight the early declaration of dividends approved at the end of last year in view of the transitional rules laid out by the current legislation, a total of BRL 1.112 billion, the first instalment of which was paid -- will be paid on February 2027 amounting to BRL 278 million. I'll now hand it back to Cristiano. Cristiano Teixeira: Thank you, Gabi. Starting on Slide 12, talking about pulp. Our sales volume versus the previous quarter is listed here along with our market demand and expected prices. So starting with short fiber, we are recovering. We had been in this moment already at the end of last year, but I want to draw your attention to the next 20 to 30 days. Recently, in Indonesia, there was an operation that was blocked, over 1 million hectares, and this affected the planted area or the planted volume there. That had a deep effect on pulp producers with production costs for February and March. And on the long term, it will also postpone several projects. I have to mention that because this is making us reflect on something. And this is something I've mentioned to you previously. Our current projection -- well, China is importing 40 million tonnes. And by projecting what has been announced in capacity, we have over 5 million tonnes. So when we draw this parallel with the supply of wood in Indonesia -- and why am I talking about Indonesia and China at the same time? Well, as I've mentioned in other opportunities, we have some integrated industrial units. And in this concept, you have to ensure that there are forests near to where you need to guarantee your supply, that is your production units. This is not what we see in China. We are currently seeing that they are importing pulp, wood scrap. So when we look at current and future production, there would need to be an accelerated planting process in China to face their current and projected volumes. So we are very confident in these numbers here in Latin America. We don't see any threats to this. There would need to be a major planting effect not only in China, but we would also need to see a reconciliation between China and Australia and other wood producers from the region. So I'm mixing the short and long term here, but I just want to say that our recovery since last year shows us an impact on trying to recover stocks in Indonesia and postponing investments in Indonesia itself. On the medium to long term, I am confident in our belief that there will be positive mutual dependence from Brazil exporting to China. With fluff, we also see price recoveries. This recovery is short of what we would like, but it is happening. And as a sign of the last few days, something that we should see over the next days is that we expect price readjustments to be announced, which will affect us still on the first quarter. So we have positive expectations when it comes to price. Among our fibers business, as we recently saw in our volumes, we have a significant part of the domestic market in fluff and short fibers, but we also have a significant share of China. And obviously, we are going to reposition our sales mix according to how the other markets behave starting in the first quarter, but also continuing during the second one. But in January, we have already seen a significant recovery for pulp prices. Continuing with paper, I'm mentioning 2 products here, as I usually do, milk and beer. We are well positioned in milk. We have some of the best machines to produce milk cartons in the world from LTV. We have already had technical approval from all of the manufacturers. We're having very positive volumes, and not only with our main clients, but all the other system suppliers. So we will see a significant increase in servicing these clients around the world that produce liquids. So we are already seeing good volumes in January. When it comes to kraftliner, you've been seeing how much we've expanded our exports recently. And I skipped from milk to kraftliner, but -- and I forgot to talk about beer, but that's another important point. So I'm just going to go back here to coated board. We are seeing a recovery in the beer market in January. We're being very cautious about this information. I understand that beer brewers are cautious as well. We had a call from Heineken yesterday. But for us, since we are selling coated board for beers here in Latin America, specifically in Brazil, we did see a significant recovery in January. Our information is always specific about what we're operating, and everything is short term for us because our clients have small inventories. But when we look at January 2026 versus January 2024, we can already see a recovery. And at the end of the year, even with the seasonal pattern, we are starting to see a recovery in the beer market in January, specifically in Brazil, which is positive. But we do understand that beer producers are being cautious here in Brazil. That's what we've been seeing. And similarly, we're seeing a significant improvement in Manaus. Now continuing with corrugated boxes. We're seeing significant numbers from Manaus. Their market expenses are representing some of the items being sold for the World Cup, just as we have good expectations with beer. So we're seeing a very important year ahead of us, which is normally the case when we have a World Cup. That goes -- those years are usually very good for television sets and beer. For the other items under corrugated boxes, as I mentioned initially, the last few years have been brilliant in price and volumes, but also market share gains. And what we're seeing in January for corrugated boxes is that we will continue to outpace the market. Obviously, it's still January. We can't set our expectations for the year yet. But when we look at all of that and when we analyze our budgets, our expected prices and sales volumes, our expectations for 2026 are very positive. We expect paper production to be higher. We expect our market share to be sustained. And in the worst-case scenario, we will follow inflation. It's going to be a good year for industrial bags. Coated board, we expect to have good volumes. Kraftliner is well established. And you saw the reduction of U.S. exports to China. And so Klabin has gone strongly into the Chinese market. And finally, in pulp, in general, we expected a price recovery, which is continuing at a very positive pace. That is in addition to everything else I mentioned when it comes to wood supply in China. So that concludes our analysis of the trends. We have very positive expectations for 2026, and January is starting very well. We expect prices to recover and stabilize in practically all markets. Thank you. We can now continue with the Q&A. Operator: [Operator Instructions] The first question will be asked by Caio Greiner from UBS. Caio Greiner: First of all, I'd like to ask about a hot topic, which is M&As in the paper and packaging industry. It's interesting. We talk about this very frequently. We've talked about regional integration. But now we're seeing the opposite movement. We're seeing a major American producer splitting its operations between South and North America. We were expecting last year an M&A with Klabin and a major American player. So I just like to get your take on the strategic changes to the industry. And how much has that impacted your volume and the industry? Do you think Klabin is fitting into these global -- how do you think Klabin is fitting into these global dynamics? And should we continue keeping track of this with an outlook to Klabin? So continuing, you mentioned this frequently, Cristiano, but I'd like to hear more about the replacement of single-use plastics and how it impacts the demand for paper. That might have been one of the biggest points that made the demand disappoint us a bit considering your expectations in the beginning of last year. You mentioned a beer brand in the U.S. that switched back from paper to plastic. And now we are seeing the targets of these major companies in U.S. and many of them are removing the ESG targets, their reduction in single-use plastic targets. So what have you been hearing from your clients? And how do you think that will impact the demand for the industry on the short and medium terms. Cristiano Teixeira: Starting with your second question on strategy. You are correct in what happened, but I would just add this. Over time, we had a COVID pandemic -- I know that it has been over for a while, but during that time, we expected alcohol products -- well, there were several residential consumption items that grew. Obviously, this was the case for beer. There is an example that you mentioned yourself. So our expectations had to be realigned. Maybe volumes for beer will not be what they were like during the COVID pandemic, but I think now the numbers are normalized. 2025 still hasn't been a positive year. We still haven't seen the recovery we expected. But I do think it's been happening. In January 2026 -- this is very short term, but we'll get to the strategic part of your question. In January 2026, we are seeing very positive historical numbers, as if we were reaching historical levels for beer production again. I see that all my clients are cautious. Some of them had been changing their guidance. But considering that we sell paperboard to other areas that also produce beer, we're seeing that January at least in Brazil is posting a historical level recovery in the volume of beer produced. Obviously, this includes beers packaged as a 6-pack. But then we would need to see how much of that is replacing plastic. So companies may be losing their focus and so on, on sustainability I think is a circumstantial thing. I think reality will make everything bounce back. The recycling level for single-use plastics and the CO2 emissions, I mean this is not discussed enough. And I won't go too deep into it, but we did see an increase in CO2 emissions. The recycling for single-use plastics in the world is very low, it's very poor, and that continues to be true. But I do think that this is just a current circumstance. Again, reality will prevail. And on the medium term, this will come back to the commitments that many governments have made on the reduction of single-use plastics. I just want to add one point here when it comes to beer, but this goes to any supermarket item. You know this better than I do since you are keeping track of macroeconomic factors. We see that the world has been trying to find a rebalance in tax conditions after the COVID pandemic. I'm referring to the COVID pandemic again, even though it's been some time, but we still haven't rebalanced after that. So we saw that taxes have increased around the world. There are interest rate policies to try to control inflation. And I'm not even talking about the tariff wars, but we are seeing that countries are trying to find stability or at least an optimal point for their tax policies. Exchange rates have changed significantly recently. So we have a complex situation. So putting it in simple terms, looking at consumers, whether they are in the U.S. or in Brazil or anywhere in the world -- and I can refer to a book by one of our shareholders. He said, look, I can make a list of how much I pay item by item, toothpaste and so on, without looking at inflation data, just looking at how much a supermarket basket costs. This means that -- this shows that people lost their purchasing power. We don't need to discuss what this means for society and for politics, but what I'm saying is that consumers can feel it. And you can see how much average tickets have been lower in supermarkets. Sales volumes have gone down in retail in some countries, but especially, we see that average tickets are lower in supermarkets. So major brands took a hard hit in 2025 from that, from the lower average ticket. And now we're starting to see a recovery. I mentioned beer brands, but each brand has its own strategy to restructure itself. And they understood, and some of the main brands, they've said that they need to reposition their prices to regain market share. And when I see major brands repositioning themselves, I see that, that is good for Klabin, bringing it back home. Whenever we see major brands repositioning itself -- their selves, this is good for Klabin because we supply to all major brands in the world. So I'm making a long answer out of it, but I want to say that this is circumstantial. I think recycling levels need to go up. We talked about CO2 emissions. And I think, again, truth will prevail at the end. For Klabin, what we've been seeing is that major brands are trying to structure themselves to regain share. When it comes to M&A, I'll try to keep it brief. Obviously, I'm not going to talk about the recent M&As positions that changed and so on. But what I can tell you about Klabin is that we've never been this focused on something I've been saying for a while. We are seeing great years ahead of us in free cash generation, all of the investments that we're making. And of course, you are the ones who are going to judge. But all of our investments have been precise when it comes to capital allocation. Figueira, the paperboard machine, the kraftliner machine, this is all happening at the right time. So all of our precise investments, our capital allocation strategy, the Monte Alegre boiler, all of the interconnections that we made in January, everything is going well. The company has allocated its capital well. As I mentioned earlier, we're going to see good paper production volumes this year. This will also be sold across all the markets we work in. And in 2026 and the next 4 or 5 years, we will see a lot of free cash generation, which will make the company's leverage lower. So we don't expect to talk about M&As in Klabin. There haven't been any studies. This is not in our strategic vision for the next years. Of course, if it does happen -- if it is proposed, it will be assessed. But right now, this is not in our long-term vision. Quite contrary, we're focusing on cash costs here in Brazil. We're focusing on the markets that we work in. We're focusing on long fibers. And there's a difference of about USD 400 between short and long fibers. I've been saying this for many years. Klabin has been focused on this, and that's why we purchased some areas from [ Arau ]. But M&As are not on our radar. We're focusing on free cash generation and using our capacity, which is increasing for 2026. Operator: The next question was asked by -- will be asked by Marcio Farid from Goldman Sachs. Marcio Farid Filho: The first question is about pulp. Obviously, fluff performed well this year, above the main benchmarks in the industry. And this is probably due to your strategy of focusing in Brazil and regions outside China. But what we see is that China is gaining relevance in producing and exporting fluff. So I'd just like to ask about your perspective for the next years. So what do you think will happen in China? I think that's the next step in growth. And what can you tell us about that? Also if you can tell us -- I think Cristiano mentioned this, the headlines that we've been hearing from Indonesia. But in any case, if you could see -- if you could tell us what you believe will happen to the supply and demand in the main hardwood and softwood markets around the world? Cristiano Teixeira: I'll talk about this strategic part that you mentioned about fluff. Let me put it this way. We see the -- we can see the acreage in China, how many millions of acres have been planted in China, where is that wood being taken. So if you have 3 million hectares of Pinus planted in China, where is that being taken? Wood has multiple uses, and markets compete among themselves. So that's the first angle: where is wood being used? The second angle is: what's the productivity of that wood? So how much do they expect to increase their volumes every year. That will give us an understanding of this future projection. And how much is being replanted and how much of it is new areas. So if we look at this, I don't see -- this is not material. We're not seeing any new areas in new planting in China. Specifically, about softwood, there's no long -- excuse me, there's no planting there. Actually, they're reducing their Pinus areas due to the regional issues with pests. They've been reducing their acreage. They're using this wood circumstantially for fluff. But our industry can't only be short term. I know that things get mixed up. We're talking about the financial and economic vision and the company's strategy. So they are not planting new areas in China for Pinus. We don't see this area being prepared to be planted. The most important thing is I don't -- we have to look at the use of soil in China, the use of land. They know that they cannot expand into flat areas. And for agriculture -- they're not going to expand these areas for forests. Forest will always be in more difficult areas in other regions. But again, they're not expanding into new planting areas, especially for softwood, but this also goes for hardwood. What's happening now is just the circumstance of planting these Pinus areas due to their issues with pests. When it comes to the short term, speaking about the American market that is not exporting to China, this is the circumstance that led to the current situation. Linking this to Santa Catarina, which is our expected future project, nothing will change, quite contrary. What I'm saying is that we have a short -- excuse me, a softwood plant in the most competitive area in the world, with the lowest cash cost in the world, with the best logistics to deliver to any part of the world. And they are planting and renewing areas in Santa Catarina and Parana. This is a growing market, such as adult diapers are growing by double-digit figures around the world, versus China that is not planting a new area, that has very low productivity, and that basically is not developing its genetics, that it's no R&D. So I don't see any long-term threats to Klabin's softwood fluff. Unknown Executive: And just adding to what Cristiano has said, these tariff issues in China have affected the supply of American fluff to China. So that gave us some strength for the local production in China. But it doesn't compete with our fluff simply because these products in China will not be used for premium products, and Klabin gained market share in China. It's important to underscore that. It's also important to mention that when it comes to price, this is something that you need to calculate. We talked about the price gap of $400 per tonne. But if you look at the benchmark prices for softwood and the prices that we delivered last year, we were $200 above the market between softwood and fluff. So this shows our -- the strength of our contracts. This is a business of contracts. It's not a spot market. And we have a good balance between Brazil and the international market, which gives us a leverage on the general prices. Looking at the short term, as Cristiano mentioned just now, we started the year with some maintenance downtimes in our pipeline. We had some weather effects from the U.S., which led to some complications, especially for North American producers. We started seeing a slight reaction in prices in February in spot markets, where prices went up USD 10 to USD 20 per tonne. And this year had a significant announcement of price increases of about $155 in mature markets, Europe and the U.S. And this influences -- this will influence Brazil in March. And we saw a $70 change in net prices for Asian, Middle East and African markets. So we expect this to recover. Obviously, this is a first announcement. And Klabin reinforces that the demand for fluff remains robust. Volumes have been consistent. So this recovery should take place during the end of this quarter, with a more positive impact during the second quarter. Marcio Farid Filho: Great. And if you can tell us a bit more about hardwood and softwood and fibers in China, that would be great. Cristiano Teixeira: So hardwood, as you mentioned -- as we mentioned in other calls, we were surprised by high demand from China that started in the fourth quarter of 2025. This movement continues, and we are seeing robust volumes from these markets, not only China, but Asian countries in general. Europe and the U.S. market are not having the same demand levels as Asian countries. But all of the volumes contracted for mature markets are being placed with no issue. We expect prices to be implemented in China. Those $10 from February have already passed. In Europe, the listed prices have been implemented completely. And we also expect another price increase in March. So in general, markets are behaving with resilience during the first quarter. And in the case of mature countries, there's always a delay in implementing these prices, especially Europe and the U.S. And this will probably lead to better prices starting in the second quarter. Operator: The next question will be asked by Tathiane Candini from JPMorgan. Tathiane Candini: Actually, my first question is about costs. We expected a cost increase in pulp quarter-on-quarter due to the downtimes that you mentioned. But something that drew my attention was that increase in -- of BRL 90 per tonne due to weather issues that were a bit out of control. So what do you expect this to be when it normalizes? What level do you expect for the first quarter? Do you see a reduction in costs? And the total cash cost is not too far from your guidance for the year. So should we expect reductions or just a normalization? My next question is about paper. In 2025, as you mentioned, we had a very significant mix of kraft versus paperboard. January seems to be stronger, as you mentioned. But I'd just like to understand what your expectations are of the mix between kraftliner and paperboard. Should we expect it to be stronger in the direction of paperboard? What do you expect? Cristiano Teixeira: So let's start on costs, and Gabi will answer that, and then I'll answer your question about paperboard. Maria Woge Liguori: As you mentioned, throughout 2025, we faced some weather issues, which impacted the cost of fibers in our forests. After several initiatives made by the company, we expect these costs to normalize. So after these past issues, we expect fiber prices to normalize. But something to point out is that in our cash cost that we listed in our guidance for 2026, the cost of fiber there already reflects some of our expectations for the year. You can see that our cash cost is close to what it was in 2025. We will have the fourth year in a row in which we are seeking stability without passing on inflation through our costs. So this is reflected there. There was also an offset in 2025 from these costs of fibers through other initiatives to preserve our total cash. This was our guidance, and this was reached in 2025. For 2026, we will continue doing the same. The company obviously will need to do everything it needs to do throughout the year. But besides this expected normalization, we also have a number of other initiatives to try to offset these things so that we can deliver on our guidance for the fourth year in a row. Cristiano Teixeira: Continuing talking about the paper market and the mix that you are asking about. Paperboard machine ramp-ups usually happens with kraftliner, as you know. I mentioned at some point that machine 28 has been fully approved for high-end products in our industry. There's no concerns about this right now. The milk market is doing very well around the world, not only here. When we look at 3 to 5 manufacturers, and this is very regional, we are supplying to the entire world. And we are aligned with the sales behaviour that is happening throughout the world, not only milk, but new proteins, the fitness market and so on. And we're going to keep track of their expected volumes for the next year. So there's no issue there. There are very few paper manufacturers in the world, as you know. And we always have the option of making paperboard for milk, for beer or kraftliner, which at a good moment that we've been reporting. And I've mentioned here before, this reduction in U.S. exports to the Chinese market has created an important volume for Klabin. These are products that we are experienced in, kraftliner for the tobacco industry, which we already service in Brazil. And we've been taking this to China efficiently. We've been replacing some U.S. suppliers. So we should continue doing that. Production volumes will increase, and we are expecting that, but the mix will probably remain similar, which will make our paperboard volumes higher than 2025. But craft volumes will be more significant. I think I mentioned in the last call that virgin fiber kraftliners in the category that we call containerboard will be a premium product, just as we saw with softwood recently. I mentioned this before, and I can assure you that this premium will come. And why do I believe that? There are softwood production players leaving the market, and that is faster than the entrance of hardwood producers. So we're basically not seeing an increase in softwood. This balance in the medium term will make this premium appear. But fiber to fiber can be an issue, and this will happen for some of that replacement. But it will never replace it completely, just as it never had -- has. Klabin has done this in the last 40 years. In fluff, we've done 30% hardwood in the blend, and that facilitates operations for our clients. We still believe that. And this will be the blend used in our machines in the future. So the premium will continue to exist. Each market has its own specificities. I've mentioned tobacco, which is a product that requires more weight. So this production mix -- I don't mean to bore you, but these are -- there are several opportunities and several alternatives there. And we're making a very strong effort to study this opportunity cost, and we will continue to maximize our mix in the best way possible. At the end of 2026 and early 2025 (sic) [ 2027 ], we expect Klabin to be full in its production volume. Looking back and comparing to the next 12 months, we believe Klabin will be at a different production level, which will also help with the point that Gabriela has just raised on stability and confidence in our cash mix for the next years. Operator: The next question will be asked by Stefan Weskott from Citibank. Stefan Weskott: My first question is, in 2025, we saw a conclusion of the STE processes, which helped with your leverage. You mentioned that there will be some changes for 2026, but do you think there will be other STE operations in forestry that can help you deleverage for the year? My next question is, looking at paperboard again, we saw how it is offsetting a more challenging year of 2025. So should we expect a better domestic mix? You mentioned that you had positive figures for January. So what do you believe will be the share between domestic and exports in paperboard? Cristiano Teixeira: I'm going to let Gabi answer first, and then I'll answer your other question. Maria Woge Liguori: Our strategy on STEs is not new for Klabin. We've been using this as a way of optimizing our capital structure in our forestry expansion for many years. Last year, this operation was a highlight for the company as we used it for the purchase of forestry assets. So this was a special operation in volume as it was connected to this major forest acquisition that we made. But what I can tell you about the future is that if the forestry operation strategy happens through partnerships with teams and other entities -- well, that's a core part of our strategy of optimizing our capital structure. We need to have partnerships. As you mentioned, they help us with deleveraging. And we expect this to happen -- for this to continue happening, not at the same volume. This was a huge operation for the market. But our forestry expansion in the future will definitely count on this structure as well. Cristiano Teixeira: And continuing on paperboard and the mix, speaking a bit about the domestic market. Well, the domestic market, obviously, is relatively smaller. But what we saw in the last, at least 2 years -- and you mentioned this before. We've answered this question, and I'll underscore it. Yes, there has been a pressure on Chinese paperboard, this deflation when they stepped out of the U.S. They sent a lot of this to Latin America, Europe and a bit to Africa. During that time, Klabin gained market share in Brazil. So not only did we not suffer from this, but we gained market share from this during this time in which China was exporting. And where did that come from? Well, we're focused on major brands. We have several smaller brands in our portfolio, of course, but we're focusing on consolidated clients. There are many Brazilian manufacturers of several products like frozen foods, hygiene products, personal hygiene and cleaning products and other products that use paperboard in Brazil. We can also manufacture white paperboard, and so we've been able to access clients from the pharma industry as well. So we believe the Brazilian market has been oscillating in the last few years. Some major brands have been losing space in some products, but secondary brands, let's call them that, have gained space. And Klabin is selling paperboards to both for frozen foods and liquids -- I've mentioned them before -- but also personal hygiene and cleaning, all of the paper markets that we're working with. And now the pharma industry, high-technology products, or higher than at least traditional folding paper. So we gained market share despite this Chinese threat. We have good long-term contracts with major brands. And what we're seeing right now, and I mentioned this as well, is that major brands are repositioning themselves to regain market share in the secondary brands that I mentioned. So I'm very confident about the Brazilian market. We expect this to continue, and we're going to keep track of the volume. Whatever we are gaining in market share will depend on the market dynamics. And we will continue to export to these clients I mentioned, our suppliers in the milk industry, whatever opportunities we find in beer. And of course, we have a great opportunity -- excuse me, cost of opportunity, which is to implement kraft and -- kraftliner in the markets where we're replacing American suppliers. Operator: Ladies and gentlemen, this concludes the question-and-answer session. We will now hand it over to Mr. Cristiano Teixeira for his closing remarks. Cristiano Teixeira: Thank you, everyone. See you on the next call. Operator: This concludes Klabin S.A.'s conference call. Thank you for your participation, and have a great day.
Dominik Ruggli: Good morning everyone, and welcome to the press conference call of Leonteq's Full Year 2025 Results. Today at 6:30 a.m. we published the results press release, the results presentation, the annual report and the sustainability report for 2025. All these documents can be found in the Investor Relations section of our website. In today's discussion of our financials, we will use information that references alternative performance measures. For that, I refer you to the APM section at the end of the press release where you will also find the usual cautionary statement. That cautionary statement also applies to the information provided verbally in this presentation and the Q&A session. Here with me today are Chief Executive Officer, Christian Spieler; and our Chief Financial Officer, Hans Widler. We will start the presentation with our key messages. Afterwards, Hans will provide you a detailed discussion of our financial performance in 2025. And Christian will then take you through our strategic progress update. The presentation will last about 45 minutes, after which we are happy to take questions. We intend to close the conference call latest by 11:00 a.m. With that, I hand over to you, Christian. Christian Spieler: Thank you, Dominik. Also from my side, a warm welcome to all investors, analysts, and media representatives on this call. 2025 presented a mixed set of developments. We closed the year with an unsatisfactory result, as challenging market conditions and lower activity from our historic partners weighed on our earnings. We also continued to feel the effects of legacy matters in our business. At the same time, we began to see improved client momentum in the second half of the year. The transition to the new regulatory regime in a very short time frame was a major achievement, reflecting significant commitment across the entire organization. At the end of December 2025, we reported a strong CET1 ratio of 16.9%. We have also executed against our strategic priorities in a disciplined manner along our ROE plan: Resize, Optimize and Expand, with the focus on resizing and optimizing in 2025. We can now fully focus our resources on expansion while continuing to transform the company. For 2026, our full focus is on growing and expanding promising businesses, and we expect to return to a positive pretax result for H1 and full year 2026. I also want to draw your attention to our further announcement today: the nomination of Felix Oegerli as new Independent Chairman proposed for election at the AGM 2026. Felix is an accomplished leader in the financial services industry and brings experience across the major business areas in which we operate. He retired last year after more than 11 years at ZKB as Head of Trading, Sales and Capital Markets. Before that, he ran the Kantonalbank's liquidity management, short-term interest rates and prime finance activities for more than 5 years. Earlier in his career, he spent 21 years at UBS, where he held positions including Global Head of Prime Brokerage and Deputy Global Head of Securities Lending and Repo. I am convinced that this background and skills will be of great value in the continued transformation of our company, and I very much look forward to working with him. Now I'll hand over to Hans for the financial update. Hans Widler: Thank you, Christian. Also a very warm welcome from my side and thank you for joining us here today. I would like to start by putting our performance into the context of the market environment we faced as shown on Page 6. 2025 was indeed a challenging market environment for Leonteq with 2 distinctly different half years. Looking at the left-hand side chart, we provide you with the development of 1-month implied versus realized volatility of the Standard & Poor's 500. In the first half year of 2025, we saw a significant increase in market volatility following the so-called Liberation Day. In the second half, the realized volatility decreased significantly and was constantly below the implied volatility. Why is this relevant? We keep a structurally long volatility position on the trading book as a macro hedge against market dislocations. In periods of heightened market volatility, we benefit from significant positive contributions on the trading side. Due to the fact that the realized volatility was constantly below the implied volatility, we recognized negative contributions from our hedging activities in the second half of 2025. Such a pattern is very rare and unusual over an extended period of time. Looking at the right-hand chart, the Swiss franc, which was the best performing currency in the G10 last year, continued to strengthen against major currencies. This impacted parts of our revenues given a large component of our client flow is denominated in U.S. dollars and in euro. Let's move now to Page 7 to look at how these parameters concretely influenced our numbers. Our net income declined by 17% to CHF 178.5 million in 2025. This was on the back of 4 key factors. First, we had a temporary halt in new business activities with Leonteq's largest insurance partner due to a merger-related shift in priorities. Second, on the structured product side, we saw a decrease in margins from 70 basis points to 59 basis points on the back of a change in our partner and product mix. Third, contributions from large tickets decreased from approximately CHF 14 million to CHF 7 million year-on-year. And fourth, the before-mentioned strengthening of the Swiss franc impacted fee income by another CHF 5 million. Let's look now at the net trading result, which is influenced by our hedging and our treasury activities. In 2025, the net trading result decreased to minus CHF 3.1 million compared to CHF 21.5 million in 2024. On the hedging side, we recorded positive hedging contributions in the first half of 2025. These were reversed in the second half on the back of the realized volatility which was consistently below the implied volatility as mentioned before. Contributions from Leonteq's treasury activities were also negative, primarily due to a change in our investment portfolio in preparation of the newly defined business-specific liquidity regime. This resulted in reduced credit risk exposure, but also yielded in lower returns. For the same reason, we extended and used available credit facilities leading to a net interest result of minus CHF 6.4 million. On the cost side, underlying operating expenses decreased by CHF 36 million or 16% in 2025. I will give you a detailed breakdown of the drivers and also the view between reported and underlying costs on the next page. Overall, on the back of lower net fee income and a reduced trading result, we reported an underlying pretax loss of CHF 21.5 million for 2025 despite significant cost reductions and renewed momentum in client business activities in the second half of the year. On an IFRS reported basis, which includes one-off charges that are non-recurring in the amount of approximately CHF 11 million, the Group net loss amounted to CHF 33 million. Moving now to Page 8. I would like to give you more color on the drivers behind our cost base. On a reported IFRS basis, costs are down CHF 25 million or 11%. We reduced personnel expenses by CHF 20 million. This was driven by a more than 50% reduction in lower variable compensation committed for 2025 compared with the previous year. We also reduced our head count by 7% and reduced our contractors by 24%. Leonteq also recognized lower net provisions of approximately CHF 5 million due to the conclusion of legacy matters. On an underlying basis, our costs went down by 16% to CHF 194 million. This excludes CHF 2.2 million one-off costs in relation to the transition to our new regulatory framework. It also excludes CHF 9 million for one-off restructuring costs which we incurred in 2025. For 2026, Leonteq expects total operating expenses of approximately CHF 200 million. This slight increase compared to the underlying cost base 2025 reflects 3 factors. First, the planned launch of the retail flow business in Germany, which will require marketing-related expenditures. Second, we expect to see a certain normalization of the variable compensation following 2 years of significant reductions in bonuses for our staff. Third, we further expect certain index-related price increases, in particular on market data services and software licenses. These increases are partly offset by the full-year effects of cost reductions achieved in 2025 and result in net increased costs of approximately CHF 6 million. Let us now move to Page 9 of the slide deck. Since 1st January 2025, Leonteq is subject to enhanced capital and large exposure requirements as defined by the Swiss Capital Adequacy Ordinance. This governs capital requirements for banks and account-holding securities firms in Switzerland. Simultaneously and effective January 2025, the revised capital adequacy requirements known as Basel III final entered into force. Under this framework, most relevant are capital calculations under the standardized approach for market risks for Leonteq. These were introduced under the so-called Fundamental Review of the Trading Book. I will refer to FRTB from here onwards during the presentation. Leonteq's business model is largely driven by the issuance of structured investment products with embedded derivatives. Therefore, Leonteq is required to perform capital calculations according to FRTB. Taking into account, the complexity of risk-weighted asset calculations under FRTB, Leonteq was allowed to temporarily apply the so-called simplified standard approach over a phasing period until end 2026. Leonteq invested significant resources in implementing FRTB, which required substantial changes in systems, data infrastructure and calculation engines. We completed the transition to FRTB in November 2025 and thus significantly ahead of schedule. The implementation of the risk-weighted asset calculations according to FRTB had a material positive impact on Leonteq's capital position. The market risk risk-weighted assets decreased by 16% resulting in an increase in the CET1 ratio of approximately 270 basis points to 16.9% at the end of December 2025. This is a strong capital ratio and well above the guidance provided with first half year 2025 results. Looking now ahead, we will continue to optimize our capital framework to reduce the sensitivity to risk-weighted asset fluctuations. We also want to maintain an appropriate buffer under different stress test scenarios, and for that, an appropriate observation time period is required. In light of the reported financial loss and in line with its capital return policy, the Board decided that Leonteq will not pay a dividend for 2025. The Board considers it prudent not to return capital at this point in time. This will allow the effectiveness of measures taken to further optimize the company's capital framework to be monitored. The Board is determined to return excess capital through a share buyback in early 2027, provided that the CET1 ratio is maintained at a level meaningfully in excess of 15% on a sustainable basis. This is also very much in line with the capital return policy defined last summer, and we are confident that we will be able to deliver also on this ambition. Continuing on Page 10, let's look at our balance sheet. In terms of numbers, we reported an increase in total assets of CHF 0.5 billion to CHF 11.2 billion at the end of 2025. This is predominantly driven by an increase in trading financial assets on the back of higher equity hedging positions which in turn increased our securities lending activities. Cash and receivables decreased mainly due to a decrease in transaction volumes towards the end of the year. Our investment portfolio remained broadly stable at CHF 2.7 billion, but the composition is today even more conservative. In preparation for the business-specific liquidity regime, Leonteq shifted its investment approach to higher quality liquid assets resulting in reduced credit stress exposure. On the liability side, Leonteq issued products increased by 2% to CHF 5.3 billion, underscoring the continued confidence by our clients in Leonteq. We shifted further certain of our funding activities in relation to the before mentioned increase in equity hedging positions and saw an increase in short-term credit and liabilities by 20% to CHF 2.3 billion. Lastly, our shareholders' equity reduced by 14% to CHF 0.7 billion. This was predominantly driven by 2 factors. First, Leonteq made a CHF 52.9 million distribution to shareholders in April 2025. Second, the depreciation of the U.S. dollar against the Swiss franc had an OCI impact on our structural U.S. dollar position of CHF 46.6 million. This capital impact, however, strongly correlated with the currency impacts of risk-weighted assets. Overall, Leonteq has a highly liquid hedge book and runs a very conservative investment portfolio. This puts us in a sound position to manage our assets and liabilities in different operating environments. I will now turn over to Christian for his remarks on our strategic progress update. Christian Spieler: Thank you, Hans. I have now been CEO of Leonteq for roughly a year. I would like to briefly outline what I found when I took on the role, how we addressed key challenges, and where I believe we stand today, where we're going next. My first and foremost observation is that with both the existing talent and some new leaders I added when I joined, Leonteq has indeed a very strong team. This team is highly business and customer driven and extremely committed and gives me confidence we'll succeed. Let us now look at our business model and put this into context of our strategy. Our business model is in fact very simple. Leonteq generates fees by selling structured products through distributors. These financial intermediaries generally distribute these products to end investors. The fees usually are generated by charging margin on transacted volumes. So this is a straightforward business model. However, as you can see on the left side in the grey box area, we operate a highly specialized product factory for structured investment solutions. This requires highly skilled teams, advanced trading systems and sophisticated risk control. The business model depends on high volume transaction processing, which means operational complexity and execution intensity. We work closely with financial intermediaries and partner institutions to distribute our products. But in some of these relationships our pricing power is limited, which contributes to margin pressure. To attract more volume to the platform, Leonteq has built over the years a number of additional core services to support the needed growth in fees. In particular, these are: First, different white labeling setups to onboard new issuance partners. Second, the company started to offer auxiliary services such as accounting, risk metrics, lifecycle management support and regulatory reporting services for its partners. Third, a SHIP infrastructure was built to allow partners to back-to-back hedge the exposure on a trade-by-trade basis to external hedging counterparties. And fourth, a powerful digital investing platform called LYNQS was developed. However, all these services are provided free of charge. So to a certain extent, you can think of all these services in the grey box on the left as Leonteq's fixed cost base. Over the years, also the operating environment has fundamentally changed. The economic dynamics of the structured products market have steadily deteriorated over the last 15 years, with fee and margin compression, excess capacity, and aggressive pricing becoming the norm. Competitors are increasingly pursuing scale, commoditized offerings, and volume-driven models, all of which have put pressure on industry margins. In response to these market dynamics, a number of countermeasures were taken in the past. These you can see on the right side in the green box. First, the number of partners were increased to leverage the existing fixed cost base and to reduce the historic dependence on 2 large partners. Whilst this dependency was in part reduced, it also affected one stable revenue sources as well as margins. Second, the client base was widened through regional expansion and a significant increase in target markets from 30 to 70, together with a widened client risk spectrum within a few years. Third, the product offering was diversified which triggered significant investments. Altogether, these countermeasures led to an increasingly diversified revenue mix with a nevertheless high and increased cost base, but also with a continued dependency on volatile trading results. As a further challenge, which you can see on the top in the red box areas, increased regulatory scrutiny since 2022 and a lingering reputational overhang have impacted Leonteq's client business and reduced strategic flexibility. Combined with a generally reduced risk appetite, certain counterparties and partners have been limiting their exposure to us. Or the company has itself limited certain activities since the beginning of 2025. On top, our new much stricter regulatory framework has required major investments in systems, processes, risk infrastructure, and liquidity management, weighing on our profitability and absorbing significant management time last year. This is why we introduced our ROE strategy, our execution framework to build sustainable performance. Resize parts of the business that are not profitable. Optimize established areas. And expand initiatives with strong future potential. So the goal is clear: a structurally stronger Leonteq with less dependence on volatile trading income, improved profitability, and more resilient returns. Let me walk you through how we are executing on this strategy and the progress made so far since last summer. Let's start with the Resize pillar where we're reshaping the footprint and cost base with discipline. We have materially reduced our cost base. Underlying operating expenses are down 16% to CHF 194 million in 2025. We're actively improving the structural efficiency of our organization with 26% of non-sales trading staff now based in Lisbon, and targeting about 30% by end 2026. We're decreasing our footprint where it is strategically and economically sensible. For example, we signed an agreement to sell our Japan entity which is expected to close in Q1 2026. And we're making very good progress in exiting our pension savings initiative, bench. In the past months, we managed to transfer saving balances of all bench customers to other providers and target the controlled wind-down by end 2026. In our Optimize pillar, we are strengthening efficiency and capital discipline in the core. We're improving profitability by focusing on the levers that matter most: stronger operational execution, lower capital consumption and tighter control of complexity and risks. We're taking a pragmatic approach here: improve what works, fix what doesn't and remove avoidable friction in our model. Now most importantly, our Expand pillar. We are building up initiatives with more recurring revenues and a more efficient capital profile and are increasing our total addressable market. This includes businesses like: quantitative investment strategies, QIS; actively managed certificates, AMC; the retail flow business; and LYNQS. To be clear, this is not growth at any price. It's targeted expansion into areas where Leonteq has a clear right to win and to achieve superior margins. Let's now move to the next page to back up my statements with concrete data points that demonstrate why we're confident about our strategic trajectory. As you can see on Page 14, we saw an improved client momentum in the second half of 2025 despite all the headwinds we faced. Our client transactions increased by 14% to more than 140,000 and we issued a record of 33,000 products on our platform in the second half of 2025. Also in our home market Switzerland, we increased our market share in structured investment products to 29% in H2 2025. On Page 15, I want to take a closer look at the regional performance. Net fee income in Switzerland declined by 16% to CHF 39 million in H2, mainly driven by a decline in fee income from the pension savings business. This decrease is related to a temporary halt in new business activities with our largest insurance partner on the back of a merger-related shift in priorities there. Operations in Europe generated net fee income of CHF 38 million in H2, mainly due to a change in partner mix. As you can see, we had a significant drop already in H1 2025 and are now starting to see a slow improvement from here. In the Asia and Middle East region, net fee income grew by 38% to CHF 13 million in H2, reflecting the first positive results of the leadership change in Asia. Whilst obviously our starting point is low, we are seeing positive trends in the second half which continued now in the start of the new year, and we clearly expect revenue growth across all our regions for 2026. On Page 16, you can see continued progress in key growth areas. In 2025, we consistently rolled out our new generation of AMCs to a broader client base. This offering has attracted considerable interest, especially in Asia, and the outstanding volume had already risen to approximately CHF 0.3 billion at the end of December 2025. That's an increase of 46% year-on-year. Overall, across all AMC products, the total outstanding volume in AMCs amounted to CHF 2.3 billion. That's minus 5% year-on-year. This provided the Group with recurring revenues totaling CHF 28.3 million in the second half of 2025, which is broadly flat versus H2 2024. This clearly demonstrates the recurring revenue nature of this business, even in a half year when total revenues are down notably. We also advanced our retail flow business initiative, which represents our single biggest investment in recent years. Leonteq entered the market of listed leverage products in Switzerland in April 2025. As of end 2025, we offered more than 10,000 listed leverage products on SIX and BX Swiss, positioning Leonteq among the leading issuers in this market. With eight months of entering the Swiss market, we had achieved 7% market share in the offered product categories at SIX Swiss Exchange. At the beginning of 2026, we also received BaFin approval for a license extension in Germany. This marks an important step in the expansion of the Retail Flow business in the German market. We plan to go live in the second quarter of 2026 and are looking forward to a well-executed start that will be just as successful as the one in Switzerland. And finally, we continue to make progress with our digital investment platform, LYNQS. Major developments included the addition of further third-party issuers on the platform as well as the enablement of QIS for pricing. In the second half of 2025, the number of products initiated via LYNQS increased by 90% to 11,087 products. As a result, our click 'n' trade ratio improved to 33% in H2 2025 compared to 26% in the prior year period. This demonstrates the company's success in shifting trade execution to the platform, particularly for smaller ticket sizes. Let's now look at our performance from an issuer perspective on Page 17. We saw a strong pick up in demand for our own issued products, which demonstrate continued confidence in our Leonteq product. Turnover in Leonteq products increased by 23% to CHF 7.5 billion in the second half of 2025. Turnover from Tier 1 issuers increased by 7% to CHF 4.5 billion in H2. In this segment, we saw a change in partner mix. This also had an impact on our margins. Turnover from Tier 2 and Tier 3 issuers saw a strong growth by 42% in H2 to CHF 1.7 billion. As reported before, we have revised our acquisition framework and have launched a process to identify an additional high-rated issuer. So let me wrap up today's presentation on Page 18. We are at an inflection point. Legacy matters are largely behind us, and with the transition to the new regulatory regime now completed, we have full clarity on our capital ratios, and our capital position is strong. This significantly reduces uncertainty and frees up management capacity and resources to focus on our core priorities: strengthening client relationships; onboarding new clients; and growing revenues. We have already seen a recovery in client activity in the second half of 2025, reflected in higher issuance volumes and increased transaction activity. Client sentiment has improved and flows into Leonteq-issued products have picked up, underscoring the continued confidence in Leonteq by our clients. Following a year focused on resizing and optimizing the company, we are now in a position to focus our resources toward growth and the expansion of the initiatives defined under our new strategy. In terms of financial outlook, we expect to return to a positive pretax result for both the first half and the full year 2026 and now expect to achieve our mid-term financial targets in 2028. The key now is disciplined execution of our strategic priorities. While the transformation will take time, my first year at Leonteq has reinforced my conviction that we have distinctive capabilities and a highly committed team that can deliver progress and shareholder value. In closing, what I ask of our shareholders and stakeholders is this: judge us by execution and trajectory. Look beyond the unsatisfactory result for 2025. Look at what we have achieved already in a short time. Going forward, look for disciplined delivery of our ROE initiatives and steady progress in our performance step-by-step. The direction is right. The measures are in motion and our foundations are solid. We need the time and support to complete this turnaround and fully deliver on Leonteq's value creation potential. We have a capital and infrastructure-intensive business. It requires a sophisticated and costly machine. But when run well, it will deliver attractive returns and meet shareholders' expectations over time. I'm confident we're on the right track. With this, I would like to thank you for your attention and hand back over to Dominik. Dominik Ruggli: Thank you, Christian and Hans for the presentation. We are now happy to start with the Q&A session. We will take the first question. Operator: [Operator Instructions] The first question comes from the line of Daniel Regli from Zurcher Kantonalbank. Daniel Regli: I have a couple of questions. First about capital policy. Obviously, you have achieved quite a nice capital ratio of 16.9% by year-end. And you announced a share buyback in early 2027. Should the CET1 ratio remain meaningfully above 15%? So here, I first wanted to ask, can you specify a little bit more what you exactly mean by meaningfully above 15%? And then secondly, obviously regarding 2026, since you expect a profit, can we also assume that investors will again get a dividend in 2026? And what do you have in mind in terms of payout ratio for 2026? Is it still the kind of 50% you once mentioned, or has anything changed in this regard? Then my second question on the turnover developments. And I mean, I appreciate you trying to provide more clarity on the turnover, however, can you maybe talk a little bit more specifically about, the old world traditional or historic partners versus new partners? Obviously, I lack a bit the comparability of the new tiring of the partners since partners can move between the different tiers. So yes, can you maybe talk a little bit more about this? And then also regarding turnover, historically you have always talked about a balance sheet-light turnover. Can you maybe specify how this has developed and in how far this SHIP project from years ago has kind of recovered in importance due to the regulatory transition? And then maybe lastly, can you maybe talk a little bit about the regulatory legacy points which I think with BaFin you are now kind of settled, FINMA is also settled. So there remains something in France. Can you maybe talk a little bit about the timeline until when you expect clarity on this one? Hans Widler: Thanks a lot, Daniel, for your questions. Allow me to start first with the capital policy and your question with regards to the dividend. As you know, we switched to FRTB for market risks in November. That is just about 2 months ago. Leonteq feels it's prudent and adequate first to focus on the sensitivity of the respective capital ratios over a certain period of time before committing to the capital return policy that we have announced accordingly. With regards to dividend, we adhere to our guidance provided earlier, that is no dividend with a loss-making result. And we reiterate the current payout ratio of 30% that was guided earlier. With regards to the share buyback early 2027, as mentioned, it's important that we observe the sensitivity of the respective ratios over a certain period of time, and we feel it's adequate and prudent then to launch it on the basis accordingly beginning of 2027. With regards to historic versus new partners, the split that you asked on the turnover side, the major drivers that you see on Tier 1 issuance partner are obviously the historic partners. That didn't change within the last 6 to 12 months. So majority of the respective Tier 1 partner impacts can be really compared with the historic partners. And as you can see, it is clearly our ambition to further diversify as reflected in the increase of Tier 2 and Tier 3 partner activities. With regards to your question on balance sheet-light. Balance sheet-light turnover amounted to approximately 13%. This is comparable with last year. We will have a continued focus on expanding balance sheet-light activities as part of our efforts to optimize our regulatory capital requirements. With regards to the regulatory update, I will pass on to Christian. Christian Spieler: Yes. On the regulatory side, I mean, first, you've seen, and we've talked about this already before in December, the announcement by BaFin, we closed matters with them related to legacy stuff that was at a low fine. But we then immediately after got an expansion of our license. So on the side of BaFin, everything is resolved and fine. On the side with FINMA, we have taken everything they had and wanted us to fix on board. We -- everything has been remediated. And it's all done. And so now on this front, we are -- there's a last audit going through, but nothing is expected here. So that is considered that one done. There is one large -- one other EU regulator where there was a finding in 2023 that was largely -- that was largely with respect to lack of certain processes and certain governance structures. All of those findings that we were told about in 2023 were remediated fully very quickly and are fully remediated. We were also told in that interaction that things -- that nothing new had occurred and been found since, and we are expecting that to close in the future. Operator: Next question comes from the line of Anne Risold from Octavian. Anne-Chantal Risold: Maybe on the German retail flow business, I mean, over the years -- I mean, it's good you have finally received the license. Over the years, we had -- that was your main investment, and we had previously some figures how much you could contribute. But if you could maybe give us again how much do you expect now that you have the license and kicking in, how much it will contribute to your profitability in the midterm? And what kind of margin do you expect from this business? One on the -- you mentioned a lower fee from the insurance contribution because of your partner is having some restructuration or merging. Do you expect -- what do you expect on this front? Is it going to restart? Or do you think the merged entity of your counter partner may change their view? On the -- and then on the governance side, did I understand right that also you mentioned that you described previously the regulatory update. So clearly, on the French regulatory update, do you still -- did you close this? Or do you -- when do you expect to close this with the French regulator? And maybe one thing on the -- at the beginning of January, the shareholder agreement with Raiffeisen and 2 stakeholder has terminated, was not renewed. Do you expect that it could have any effect on your operation? Christian Spieler: Yes. Thank you for the questions. So first on the RFB business. The RFB business so far, and that's just based on what we've done in Switzerland has generated this year around about CHF 3 million of revenues. That's a significant increase versus the prior year and like in the order of magnitude increase of CHF 2 million. And as we said, like we went into the market with only 8 months, we went to a significant number of listed products, achieved sort of like #3 player in the market. That is a very significant achievement here. And looking at Germany, which is a much larger market, we think this is going to be a very, very good success for us. We're looking forward to it. But what are the drivers? Why do we believe this? We have probably the best team, most experienced team in this space on our platform. They joined us a few years ago. They built a tech platform, which is absolutely market-leading. And this business is largely -- there is a lot of technology drive in this business. So having a leading top-notch tech platform that has all the experience of 30 years of these people built into this platform and the experienced people on board with our execution strategy there, we expect this to be a very successful start. And altogether, the RFB business this year is budgeted to deliver around CHF 8 million of revenues. That's a significant increase. You asked about margin. It's a high-volume business with low margin. But again, tech platform comes into play and becomes the real strength here because the ability to handle large volumes, low-margin product still, in the end, generates significant revenues, and we have a very positive outlook for the medium to longer-term for this business, which obviously goes into the double-digit revenue region. Hans Widler: Then with regards to our major insurance partner, [ indiscernible ], we are in very close collaboration for a potential new product launch in this regard. On operating level, we are in contact, obviously, on a daily basis in this regard. But we also have full sympathy for the respective partner given the legal merge that the priorities are short-term different. With regards to expectations for 2026, we expect a comparable revenue contribution in 2026 as for 2025, excluding effects of a potential relaunch accordingly. Why do we expect the comparable revenue contribution? Whilst certain policy cancellations every year are standard and hence, the number of policies are expected to slightly decline without a relaunch of new products, the AUCs given the premium inflows will increase and herewith lead to a stable revenue contribution. We are highly committed to that large insurance partner and looking forward to relaunch additional products, but have full sympathy and full support for the interim period for the merger requirement adjustments. With regards to French regulator, I will pass on to Christian. Christian Spieler: Yes. I mean, this was effectively part of my answer to Daniel Regli's question earlier. When I referred to a large EU regulator, again, as I said, as answer to that question, we have remediated everything that has been asked for. We've been told there have been no new findings since the original raising of the issue in 2023. And as I also mentioned, we expect this to close in the future. I cannot comment on timing because the regulators work this their way, but we look forward to this being closed. Lastly, your question on the shareholder agreement, we do not expect that to have any impact to say. Raiffeisen is our main shareholder and remains our main shareholder. We welcome them as our main shareholder. And to the extent they want to stay committed in their investment, we love that, and we'll work with them. Operator: We now have a question comes from the line of Sylvain Perret from AlphaValue. Sylvain Perret: So I wanted to know whether you could share more details on how you perceive the market environment in the beginning of 2026? Has it become less difficult than in 2025? And if so, what positive market catalysts do you see as having the potential to accelerate the turnover growth and the fee margin recovery this year? And my second question is on the retail flow business. So considering the good success you already observed in Switzerland and the expertise you are building there, do you expect to launch the business into additional countries besides just Germany? That's all for me. Christian Spieler: Yes, thank you for the question. Market environment 2026, I would characterize in short as very different from the second half of 2025. What 2025 second half made it a really rare stretch of a market environment was the consistently higher volatility, implied price volatility versus the actual realized volatility. Specifically in the maturity segment of the products that we offer. That obviously for us being largely buyers of optionality led to us buying at the high price implied volatility and hedging at the lower realized volatility, which caused some of the issues in our trading result in the second half. That again is a very rare environment and over the years to observe. And if we now look at 2026, we are in a completely different environment. It's been very different. Like, high level, realized vol has been above implied vol. And we're seeing a very active market. So it's a market environment that suits us. That being said, our outlook is it's too early to comment on an outlook for the performance for H1 in trading per se because obviously we only had about 5 or 6 weeks into the new year under our belt. But -- and it also depends, like results depend very much on how flows materialize from the client side et cetera. But we're seeing an overall what I would call healthy market environment 2026. A question of the RFB business. So I give two answers. So one is, we're expecting to go live in Germany in Q2 2026. And yes, we do have a list of further countries where we intend to roll this out. One major country that's on our list is Italy. Operator: [Operator Instructions] The next question comes from the line of [ Thomas Paul ] from [ AVP ]. Unknown Analyst: I just have one question on your pension savings business. Did I understand this right? This was slowed down by the merger -- this is probably Helvetia Baloise? And will this pick up now in 2026 or 2027 meaningfully? Hans Widler: Thanks a lot, Mr. Paul, for your question. I mean we are not commenting on single insurance partners or on single partner names itself from that perspective. But with regards to the contributions, the reduction compared with 2024 is two-fold. On one side, we had some extraordinary effects in revenues in 2024. On the other side, we benefited still from the launch of new so-called contingencies, from new insurance policy sets. We do expect that to continue. With regards to the timing, we are to some extent also dependent on the respective partner activities. But it's clearly a business activity that is close to Leonteq's DNA and that we will continue to invest, also with potential new insurance partners that we target. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Dominik Ruggli for any closing remarks. Dominik Ruggli: So thank you everyone for attending the conference and the interesting debate. We look forward to speaking and meeting with many of you in the coming days and weeks. And we wish you all a very good day. Thank you.
Felipe Navarro López de Chicheri: Good morning, and welcome to MAPFRE's Full Year 2025 Activity Update. This is Felipe Navarro, Deputy General Manager of the Finance area. We are pleased to have here with us, Antonio Huertas, the Group Executive Chairman. He will make a few opening remarks and will give an overview of business trends and developments. Following to that, José Luis Jiménez, the Group CFO, will give us a brief overview of the IFRS figures and will discuss the main financials under local accounting. I will walk us through the balance sheet and capital-related topics. Before we begin, just a few reminders. Interpretation services are available, both here and online. So feel free to choose the language you prefer, either English or Spanish. At the end of the presentation, we will open up the Q&A. Questions can be made in either language. I will now hand the floor over to Antonio Huertas. Antonio Huertas Mejías: Thank you, Felipe. Hello, everyone, and thank you for your time today, both of you here in person or those connected online. Firstly, I must express the Board of Directors' satisfaction with the results we have just presented. You have seen, 2025 was an excellent year for MAPFRE. It was a year in which we exceeded our main business targets with significant improvements in our main technical ratios as well as achieving significant strategic advances. In terms of net attributable profit, we had another record year with EUR 1.08 billion, representing an increase of almost 20%. But we must remember that gross profit exceeded EUR 2.4 billion, also representing a spectacular improvement of 20%. Premiums also reached an all-time high, exceeding EUR 29 billion, also up 20%. And we cannot forget to mention that total income, including financial income, exceeded EUR 34 billion for the first time. We have once again outperformed all the financial targets that we updated and presented in the last AGM despite the fact that the international economic environment has affected our growth in euros. In this context, exchange rate depreciations have negatively impacted our business volumes, especially those currencies that have the greatest weight in our accounts such as the Brazilian real, the U.S. dollar, the Turkish lira and other Latin American currencies. Premium grew by 3.6% in euros, but at constant exchange rates, this figure would more than double, reaching almost 8%. Non-Life, which is 3/4 of our business continues to benefit from technical improvements, growing 6% at constant exchange rates or 1.5% in euros to over EUR 22 billion. Life business is also up nearly 15% at constant exchange rates, almost 12% in euros to over EUR 6.6 billion. The Non-Life combined ratio now stands at an excellent 92.2%, representing a decrease of more than 2 points. This is the best combined ratio our group has achieved in the last 15 years. The technical improvement has been impressive with all geographical areas and all businesses showing a significant reduction in their combined ratio. Particularly notable is the sharp reduction in the claim ratio to 65%. ROE stands at a healthy 12.4%. Excluding noncash one-offs in the third quarter, profit would have exceeded EUR 1.1 billion and ROE would have been over 30%. Our capital base remains strong despite market volatility with shareholders' equity to up over 5% during the year, just shy of EUR 9 billion, and the solvency ratio was 210% at the end of September. These excellent results have enabled us to propose a final dividend of EUR 0.11 per share, fulfilling our commitment for another year to pay out at least 50% of our profits. Next, the following slide, allow me to comment on the key data from our most relevant activities, which shows excellent underlying trends. Starting with insurance operations in the different regions, Iberia has delivered an excellent technical and commercial performance and has once again achieved outstanding results, thanks to a solid and well-diversified business. Net profit was EUR 450 million, up 23% with significant contributions from both Life and Non-life businesses. Technical management continues to improve in all areas. The Motor business has experienced a clear change in trend, once again becoming a significant contributor to the result with a result up over EUR 100 million and the combined ratio that has fallen by almost 7 points to 98.5%. General Non-life and Accident & Health businesses are also solid with both combined ratios around 94%. LATAM also showed solid underlying results with a net profit of EUR 365 million. The combined ratio stands at 84.6% with most countries well below 100%. Brazil remains a key driver of profitability, supported by high financial income and solid technical margins. Net profit reached a record level of around EUR 270 million, an increase of 5%. North America also posted record results of nearly EUR 140 million, up 42%. The operational improvements implemented in recent years have paid off and combined ratios in the U.S. are now the best ever. Finally, MAPFRE RE recorded a profit of EUR 381 million, up 17% with a combined ratio of 91.2% indicating that both Reinsurance and Global Risk has performed excellently with historic results. It's true that it has not been a particularly intense year in terms of major catastrophes, but the frequency of weather events is not decreasing globally and the increase of secondary perils in the industry is significant. In our case, our technical rigor in underwriting and risk selection, our diversified business model and appropriate retrocession program have helped us to achieve these magnificent results. In addition, reserves remain close to the upper end of our confidence interval. We are extremely satisfied with this year's historic results and the Board of Directors has proposed a final dividend of EUR 0.11, representing a 15.8% increase to be approved at the AGM on March 13. This is the highest dividend paid ever and the fifth consecutive increase in 3 years, bringing the total dividend against 2025 to EUR 0.18, up 12.5%. Total dividends reached EUR 454 million with a payout of 51.4%. The average dividend yield for 2025 was 4.6%. The average dividend yield for -- okay, I already said. Over the last 5 years, MAPFRE has paid out EUR 2.3 billion to its shareholders, fully in cash. Now -- I will now hand the floor over to José Luis. José Jiménez Guajardo-Fajardo: Thank you, Antonio. Before moving into the details of the local figures, I would like to briefly comment on the main KPIs under IFRS compared to local GAAP, which are very aligned. Insurance revenue, which reached a little over EUR 26 billion is up over 3%. At constant exchange rates, growth is 7.6%. The net result stands at EUR 1,133 million under IFRS, EUR 54 million higher than local GAAP. IFRS 17 had a EUR 43 million positive impact. The impact of discounting and the risk margin offset a negative impact from the loss company, which mainly affected the Life business in Colombia during the year. IFRS 9 had a positive EUR 11 million impact, the positive impact of mutual fund valuation booked in P&L offset the realized gains on equity recorded under ICI. Shareholders' equity amounts to EUR 9.4 billion, and return on equity was 12.4% with similar trends under local GAAP. The growth CCM was EUR 2.6 billion, up almost 4% and was EUR 1.6 billion after taxes and minorities, mainly from the contribution of new business. The 90% combined ratio under IFRS is below the local figure. Mainly due to the discount factor, we had a 1.4 point impact. I will now discuss the key trends by region. In Iberia, total premiums are growing over 10% with solid momentum across most business lines. Non-Life is up 5%, while Life has increased over 23%, supported by remarkable performance in savings. The combined ratio has improved more than 3 points, reaching 95.8%. The return on equity is now over 2 points to 13.6%. Profitability in LATAM has been excellent with a return on equity of nearly 16% despite some one-off and currency depreciations. Brazil reached a record high result, posting a return on equity of close to 28%, with improved technical ratios and strong investment returns. The Non-Life combined ratio remains outstanding at 72%. In euros, premiums are down 10% with almost 7-point drag from foreign exchange rates. The decline reflects a slowdown in lending-linked products due to higher interest rates. In the rest of LATAM, premiums are over 5% in euros with a strong local currency growth in key markets like Mexico, Colombia and Peru. The combined ratio has improved in most countries standing at 98.8% for the region. The net result was EUR 97 million with 2 relevant negative impact. EUR 37 million in Mexico from the change to VAT treatment for insurance companies and EUR 57 million in Colombia due to the 23% minimum wage increase, mainly affecting annuities reference to inflation. Overall, trend across the region are still strong, and we are confident that the region will continue to prove resilient as we have been successfully operating in these markets for years. In North America, premiums are down over 4% in euros due to the U.S. dollar depreciation. In a record profit year, the combined ratio is down to 95.4%, improving 3 points. In EMEA, losses in Germany and Italy are down. The region is reporting its third consecutive quarter of positive numbers with a EUR 60 million profit compared to EUR 30 million in losses last year with an 8-point reduction in the combined ratio. Regarding MAPFRE RE, in terms of growth, premiums are in line with last year. The non-group Reinsurance business around 40% at constant exchange rates. In terms of profitability, it has been a good year after a very quiet hurricane season. There was a partial release of reserve in the fourth quarter. Some of this prudence was applied to claims on a case-by-case basis. The combined ratio includes around 2.5 points of total addition reserve prudence at year-end. There has also been a one-off tax impact for around EUR 45 million in the fourth quarter due to a prudent approach related to doubling position in some Latin American countries. MAWDY continues to contribute positively with a net result of EUR 6 million. Finally, I would like to comment that the net hyperinflation adjustment are down from EUR 60 million last year to EUR 31 million, mainly from the case of Argentina. General P&C lines continue to benefit from disciplined technical management, solid market presence and diversification. Premiums are down, affected by the Brazilian real and the U.S. dollar. The combined ratio remained excellent at 80%. In Iberia, premiums are up 7%, with a strong performance in key segments with commercial lines growing 10%. The combined ratio stands at 94%, thanks to diversification, a prudent underwriting approach and comprehensive reinsurance protection. In Brazil, premiums declined 8.5% in euros, mainly due to the currency depreciation. Furthermore, agricultural insurance remained affected by high interest rates, while other retail and industrial lines experienced notable growth. The combined ratio was stable and 63% supported by Agro. In North America, premiums are impacted by dollar depreciation while the combined rate has improved more than 5 points to 79%, supported by prior year tariff increases as well as lower weather-related claims. Regarding Motor, the fourth quarter result confirms the positive trends with significant advance in profitability in most markets. The combined ratio is below 100% with a 5-point improvement year-on-year. In Iberia, the combined ratio was 98.5%, improving 7 points. Premiums are growing 3%, with average premium up 7.5% compared to the market at 6%. In Brazil, premiums are down mainly due to the currency depreciation. The combined ratio remained stable, in line with higher interest rates. In North America, premiums also declined due to weaker currency. Profit amounts to EUR 72 million, up more than 80% with the combined ratio down more than 3 points. Regarding other regions, in other LATAM, almost all units reported combined ratios below 100%. In EMEA, the combined ratio is also down 11 points from 122 to 111, driven by an over 20-point reduction in Germany. In conclusion, technical management remains strong with measures continue to deliver. On the Life business, sorry -- that's it. On the life business, premiums are up 12% with the strong trends in Iberia and other LATAM. The Life business continues to be very profitable, adding almost EUR 200 million to the group results. In Iberia, premiums are growing 24% due to a strong performance in savings. The Protection business is up over 4%, in line with previous trends. The net result was EUR 132 million, down year-on-year, largely driven by lower financial gains. In Brazil, premiums are down 30%, impacted by the currency as well as the high interest rate environment, which affect lending and related Life Protection product demand. Earnings remained strong, up 5% with a combined ratio of 82%, down 2 points year-on-year. Regarding other markets, volumes were up 80% laid by other LATAM, with not wealthy performance in Mexico growing 40%. The loss in other largely reflects the increase in the minimum wage in Colombia. And now I will hand the floor over to Felipe to discuss the main balance sheet items. Felipe Navarro López de Chicheri: Thank you very much, José Luis. Shareholders' equity stands at strong at over EUR 8.9 billion, up more than 5% at year-end on the back of the excellent results that we're presenting. The improved valuation of the investment portfolio offsets negative conversion differences, mainly from the U.S. dollar, which is now down nearly 12%. Leverage is below 21% at the beginning of the year. We completed a dual tranche of 6- and 10-year senior transaction for a total of EUR 1 billion with 3.125 and 3.625 coupons. Leverage would increase temporarily, but still acceptable levels until we repay the upcoming senior bond maturity in May. We don't expect any other major changes in our capital structure in the near future. Our strong balance sheet supported by strong cash flow generation within MAPFRE Group. In 2025, EUR 900 million was upstreamed from subsidiaries, EUR 200 million higher than the previous year. Iberia remains the most important contributor with EUR 348 million. LATAM contributed EUR 300 million, including an extraordinary dividend of EUR 80 million in Brazil, corresponding to 2026, which was upstream to avoid fiscal changes that have taken effect this year. North America contributed over EUR 70 million. MAPFRE RE upstreamed almost EUR 150 million this year. In conclusion, our sources of cash generation are solid and well diversified. Total assets under management stand at almost EUR 65 billion, growing 9% year-on-year. Third-party assets now reach over EUR 16 billion, up 20%. In Spain, we remain among the top nonbank asset managers. We maintain our commitment to being a benchmark in financing planning. In 2025, MAPFRE was among the top 5 largest players in pension plans, leading growth with a rate of 8%. As for mutual funds, growth has been outstanding, reaching 32% year-on-year. Brazil was the main contributor to this expansion, nearly doubling assets under management throughout our local asset manager. In Spain, our own channel delivered double-digit growth with an increase of 16%, while the bancassurance channel posted a 39% increase. Our own investment portfolio amounts to EUR 48.4 billion with asset allocation stable throughout the year. It remains defensive with a focus on quality, diversification and high liquidity and with a low exposure in alternative assets. Regarding the euro area, investment portfolio yields are up over 50 basis points at MAPFRE RE, while Iberia yields and duration are slightly down. In other markets, Brazilian portfolio yields increased over 230 basis points during the year, reaching 12.7%. In North America, yields are up -- are also up around 25 basis points to over 3.2%. Realized gains and losses are very stable, around EUR 43 million as in Non-Life financial income. I would like to comment on a few exceptional items. In Iberia, there was a prudent accelerated amortization of intangibles, which had a EUR 24 million impact. And in North America, there was a reclassification of premium finance fees in line with market practice with around EUR 20 million impact. Financial income continues to be a tailwind, and our portfolios are well positioned to face market volatility. I will now hand the floor over to Antonio to make a few closing remarks. Antonio Huertas Mejías: Thank you, Felipe. The close of 2025 marks the end of the second year of our 2024-2026 strategic plan. We have continued to implement a strategy focusing on growth and results. MAPFRE has continued to enhance in technical excellence, improving productivity and leveraging its potential across all markets, while transforming our business. Referring to our financial commitments, we are very pleased with our achievements in the current plan. Over the last 2 years, average growth has been 3.1%, but at constant exchange rates, it would have been 7%, meaning we would have met our targets. Our average ROE target for the period is 11% to 12%, excluding extraordinary items, and we reached over 13% at the year-end. Combined ratio performance was also excellent in 2025 at 92.2%, well below the target range. These financial figures are on the local accounting, but we are very much in line with IFRS metrics. We remain highly committed to sustainability, having achieved notable improvements. We are now carbon neutral in 13 countries and improving from 10 in 2024. Over 93% of our portfolio is now ESG rated. Additionally, women now occupy 35.4% of top management positions globally. We have strengthened our underlying profits in all geographies and products. Those excellent results are mainly due to our geographical diversification. Results in Brazil, North America and MAPFRE RE have been outstanding, reaching historic highs. And Iberia has returned to normalized results, maintaining its position as the group's leading contributor. In addition, in terms of business development, MAPFRE continues to occupy leading positions in our main markets. The technical work carried out after the pandemic has borne fruit. We have reduced the combined ratio by more than 5 points since 2023 with improvement in technical management and disciplined underwriting, and we have increased prudence in our reserves. In addition to all this, improving efficiency remains a strategic pillar. We maintain a strict cost control despite inflation with a stable paying ratio. Finally, it's worth highlighting the strength of our balance sheet, which has allowed us over the years to absorb extraordinary events without a significant impact on the final results. To conclude, I would like to comment on our general expectations for 2026. First, despite a complex macroeconomic context, MAPFRE will continue to demonstrate its ability to navigate these circumstances successfully. This year, we will focus more on growth, especially in those segments where profitability has already reached acceptable levels, including Motor. In addition, the impact of currencies is expected to be more benign than in 2025. We believe that our new brand identity launched this year will also help the business to develop. Our ambition is now also being rolled out with a new global modern and digitally connected brand. This new corporate identity strengthens our positioning in the markets, bringing us closer to our customers and other stakeholders. Despite our excellent ratios and profitability levels, we believe that we can still grow profitably, thanks to our diversified business model and the effect of the entire transformation process we are undergoing. Financial income should also continue to be a favorable factor and the portfolios are well positioned to cope with possible interest rate declines. In conclusion, we are optimistic about MAPFRE's performance in 2026, as well we are prepared to face the challenges post by global uncertainty and the competitive insurance of reinsurance market. The dividends announced today reinforces our confidence in the future of our firm commitment to continue creating value for our shareholders. I will now give the floor to Felipe to start the Q&A session. Felipe Navarro López de Chicheri: Thank you very much, Antonio. Although most of you are already familiar with the process, let me quickly remind you of the details of the Q&A session. [Operator Instructions] And we will try to answer them as time allows. The IR team, I remind you that the IR team will be available for any pending questions after the call. And before that, I would like to apologize because of the information that we provided and the CNMV that was a little bit late this morning due to a technical issue with the connection with -- to the CNMV. I mean this is something that was out of our possibilities. So it is something that we could not do anything else. I would like to start with the floor in the room. Felipe Navarro López de Chicheri: [Interpreted] I'm switching over to Spanish now. [Operator Instructions] Maria Paz Ojeda Fernandez: [Interpreted] Can you hear me? Great. Maria Paz Ojeda from Banco Sabadell. Well, first of all, congratulations on your performance. It's really been outstanding for the past 18 months. I have three questions. First, about the Colombia regulation changes and those in Mexico, too. What do you foresee for 2026 and the future years because these changes, I'm sure, would affect your rating, right? So any possibilities to raise premiums or prices to offset that VAT-related cost increase and the new salaries? As for the business in North America, well, that 68% combined ratio sounds spectacular. I understand it takes support on milder weather with fewer claims. So what do you think the additional impact would be if a standard amount of weather events were to take place? And also, do you have any information on the firm storm that blew over the whole East Coast in January? And also, could you give us some flavor on the lawsuit or the differences in opinion with the AAA club vis-a-vis the contract renewal? And another question, we see that most of the targets, both the combined ratio and return on equity are being met easily in your strategic plan into next year. So what's your perspective on whether you can go more ambitious in your targets? Antonio Huertas Mejías: [Interpreted] Okay, I will start dealing with the one-offs in Mexico and Colombia, and then José Luis will deal with the rest of your question. Yes, certainly, these one-offs are not your usual run-of-the-mill one-offs. You come up with, as part of our business, like extreme weather events or similar circumstances leading to potential impairments or not. These circumstances are entirely out of our management's sphere. Well, in Colombia, we had the December 29 change in the salary in Mexico. We have a long-standing dispute with the Mexican tax administration, which demanded a legal review of VAT and insurance. And finally, the photo finish was that the industry negotiated with the Mexican government to get retroactive action to only 2025 and of course, from 2026 on. MAPFRE has already provisioned the total impact expected for 2025 and the expected impact for 2026. I'm sorry, but I cannot claim for fee or premium adjustments. But as soon as possible, when we start dealing with renewals after the second quarter, we will have full view of the total impact. And we will have fully transferred this to our clients. The total impact is calculated in over $1 billion for the Mexican insurance industry. And for us, it's a limited impact, but it's still part of that price transfer that we couldn't do in 2025. And as for the case in Colombia, the increase in minimum wage, 23% unexpected increase that affects only some specific product of life rent. And they're already in runoff in Colombia for MAPFRE. So we don't need to do much. We already have provisions to deal with this one-off, the new rates, which are after all indexed to the minimum wage. But I insist it's a runoff portfolio. So it won't have a huge impact. Well, the impact was relevant for the industry, particularly for very specific product, as I said. And then quickly, AAA agency. We know that in late 2026, our 20-year agreement with AAA would come to an end. We knew that 20 years ago, and we've done our best to continue to be exclusive distributors for AAA. From now on, we will not be exclusive since AAA is opening an insurance company panel. The distribution capacity for AAA is very relevant, but we have a lot of capacity beyond AAA to deal with this new circumstances that affect Nordisk, mostly in Massachusetts. The fact that they've been less than compliant during the past year is truly nonrelevant. And I'm sure we will come to an agreement so that this last year of the contract will be as smooth as possible. And then we have another agreement with another AAA, a joint venture we have in Washington and Oregon is totally unrelated because we're talking about federated separate institutions. Our joint venture for auto is growing as expected, and there's nothing to report there. José Jiménez Guajardo-Fajardo: [Interpreted] As for the storms, and the U.S. Maria path, we're not aware that there are any material things to report. This is just business as usual in the United States. Right now, their temperatures are minus 10, minus 20 Celsius. So nothing new to report. We're provisioning for it. Maybe at this time of the year, some weather events might affect California, too. But we -- only time will tell. We just know that the January storms have not had any material effects, nothing that is not usual in that considering the geography. About the performance of our strategy plan, we're more than pleased. We're over complying. It's been years of work to come to this point, and we're in a very healthy situation. However, it's too soon to tell. We would have to wait until the AGM to see if the new targets are, as you say, more demanding. Felipe Navarro López de Chicheri: [Interpreted] I will go over one of the questions that came in online about AI. Apparently, news is broken about an intermediary who was coming to an agreement with ChatGPT and changes in the distribution considering AI. Do we consider that this agreement between Tuio and ChatGPT might become credible disruption in the insurance distribution market? That's part of the question. And what we see as the general impact of AI on our business? So in sum, how could AI affect the business? And what consequences could it have on the general insurance business? Antonio Huertas Mejías: [Interpreted] Yes, maybe a few thoughts on the matter. Certainly, we've been following the news with great interest. It does not come as a surprise because the benefits of AI for the present and the near future of all businesses are very clear. We just need to continue to integrate AI into our distribution initiatives. But that's valid not only for the insurance business. I guess many of us have been using AI to prepare a holiday or to compare pricing in other products. So AI is likely to change our lives, most likely for the better, just for simplification purposes. I mean price comparative tables were already out there before AI. The new technology has enabled to compare prices for a long time. Obviously, AI can make things better and quicker. But dealing with distribution, well, MAPFRE is a multichannel group that works and will continue to work with all sorts of distributors. We were connected to many insurtechs that have tested different models. Well, they don't go directly into insurance because our installed capacities are beyond their means. But anything enabling financial and insurance inclusion, particularly in markets not served by traditional mediation are welcome. A large part of the world population, even European and Spanish population don't have access to simple products just because they don't understand products that seems so simple, but it might look like they don't deserve too much explanation. Products like Life, Risk, ensuring fundamental tools, for instance, MAPFRE has been using AI for some time now. Two years ago, we were the first company to generate our own manifesto to communicate our intention to work on AI and make that connection transparent. We contemplate a people-focused AI with the same values and principles, we have stood for in our face-to-face relationship with clients to make sure that our clients will always have a consultant mediator, a professional expert to walk them side by side and generate trust in the product. So long-live technology, and we welcome any company that can give greater access to citizens to generate better financial and insurance inclusion. José Jiménez Guajardo-Fajardo: [Interpreted] If I may, Antonio, we've been reading about stock performance of companies and some reports seem exaggerated. A company in Spain with a turnover of EUR 15 million shaking long-established companies in their boots doesn't seem to make a lot of sense. Maybe if we think back, remember the Lemonade case in the U.S., it felt very disruptive only 5 years ago, and look where we are now in terms of balance sheet and return on equity. I do understand that it's loud news and the industry has grown impressively in the past year, but that's all there is. Felipe Navarro López de Chicheri: [Interpreted] And an extension of this question. Do we expect to start selling small ticket products customized to the new possibilities, AI yields, simpler products, for instance? Antonio Huertas Mejías: [Interpreted] Well, we cannot answer that at this point. We -- like I said, we are working with several AI suppliers. We're just getting to know artificial intelligence, and we're using it for both back office and front office to offer our clients solutions that will truly have an impact on their real lives. Only in Spain, over 6 million users in Spain benefited from AI solutions to facilitate connectivity. And well, in Brazil and the United States, we have very interesting projects to keep growing that accessibility. But AI product distribution seems a little bit more distant in the future. When there's real capacity to do so in the future, we will consider it. But so far, our model remains based on being close to the ground and relying on experts because insurance products are very complicated, even the most traditional products like auto, we don't want to cheapen those products as they're enormously complicated in technical terms and in terms of third-party accountability and liability. Felipe Navarro López de Chicheri: [Interpreted] Well, I think this answers Ivan Bokhmat's, Maks Mishyn and David Barma's questions online. Back to the room. Do we have any hands raised? Juan Lopez Cobo: [Interpreted] Juan Pablo Lopez, from Santander. Two questions. The first one about your solvency ratio, which continues to do better and better, 8 percentage points throughout the year within your target range. So two questions. One, about the dividend. The dividend seems to keep growing, a payout of 51%. Have you, at any point, considered paying out more considering your extraordinary capital position? And second, about potential M&As. We've seen some news in Portugal, a company that might potentially go public or bank that went dual track, they tried to go public and then finally got sold. If there were that possibility for that dual track, would you be at all interested? And could you update or are you willing to update your position on M&A? And then about Reinsurance, you come from a particularly good quarter, particularly in Non-Life. So have you released any provisions? PBT was particularly solid. And then on tax. Tax line was a little bit high this quarter. I understand there are one-offs and catch-ups. Can you shed some light on that? José Jiménez Guajardo-Fajardo: [Interpreted] Well, you asked about our solvency ratio. We're pretty pleased that we're within the range of 1.75% to 2.25% established by the Board. We're approaching the top of the bracket, and we're feeling comfortable. About the dividend, well, today, we announced a dividend of EUR 0.18, the highest paid by this company so far and that stands for 12.5% above last year's number, and it's the fifth dividend raise in the past 5 years. The message the Board has always conveyed is that if the business does better, so will the dividend. And I believe we have maintained our promise. So the outlook is positive, and I believe that for this year -- well, this year is looking good. Certainly, last year, we had some headwinds on the side of currencies and these one-offs we've been mentioning in Colombia and Mexico, which should not be recurrent. No reason to do so. And in the case of Colombia, this was certainly a one-off. There's always been a slight scale when it comes to raising salaries. But this time, since there were Congress and presidential elections, there was a public policy decision made to raise the minimum salary above reasonable levels. Felipe Navarro López de Chicheri: [Interpreted] And I can say something maybe about the company, which is now going to trade in the Brazilian stock market. MAPFRE is not going to invest a minority stake in a company that's going through an IPO. Just -- it's not part of our core strategy. And then as for any M&A activity, our objectives are still the same as we've said over and over, we want more potential for distribution in Spain. We want to deploy a bit more capital in Europe. And one of our goals is definitely Germany, but we won't be opening up any more markets or companies. And in LATAM, we're always looking up for opportunities in Brazil and Mexico. And in Brazil, anything that doesn't, of course, impinge upon our agreement with Banco do Brasil. And in the U.S., if we find something that could complement a single-state company, for instance, that could be complementary to our current business in the U.S. And as for the Reinsurance topic, it's true that there is that tax impact of EUR 45 million, but that is because of an interpretation on the risk of double taxation, how that could affect Reinsurance. So we've provisioned those EUR 45 million from a purely prudential perspective. As for the reserves, you're right that there has been some release of provisions in the fourth quarter because of two basic effects. First, as we said throughout the year, we have been preparing for a hurricane season, which looked like it was going to be much longer or later. But in the end, it was almost nonexistent. And so it didn't affect our insured footprint and so we've released those provisions in a standard way. And then we strengthened provisions relative to some case-by-case claims. What we do at the end of the year is check and see how our case-by-case claims have evolved and we provision accordingly. So the releases are not that significant in terms of MAPFRE RE's figures. We still have very solid reserves with an impact of about 2.5 points in the combined ratio because of the reinforcement of these reserves and with amazing results in 2025. And now if you want, we can read out a question that has come in. The people who are following this online, they're asking, from Barclays, how do we expect to benefit from the reform of Solvency II? José Jiménez Guajardo-Fajardo: [Interpreted] Well, I think like most of the European insurance sector, the reforms, which will come into force if everything goes according to plan in June of 2027, will have a positive impact for most insurers. In our case, we're estimating initially that it could be between 3 and 5 additional points of solvency. Felipe Navarro López de Chicheri: [Interpreted] Thank you very much, José Luis. Another small question, which I might perhaps answer myself, if I may, because it's about Malta. They're asking about the estimated impact of storm Harry on Malta and Italy, and there probably will be some claims. Well, Malta is a country that has constantly been affected by these types of storms with winds, which are practically hurricane-forced winds and the company has sufficient financial resilience to cover such claims, and it's basically claims to do with property and house insurance near the other coast. As for the impact of Malta for the whole group, it's really not going to have any effect because Malta's figures are solid enough to cover of all this on its own. As for Italy, mostly there's an Auto portfolio, auto affected by the storm, where cars affected by -- vehicles affected by the storm were very few. So we don't expect it to have a significant impact. Questions from the room? Paco? Francisco Riquel: [Interpreted] Yes, I'm Francisco Riquel from Alantra. Antonio, you said that the priority for 2026 is to grow premiums, again, particularly in the Auto business. The number of policies has continued to drop in the main markets, Spain, Brazil, the U.S. How compatible is that with growing premiums profitably? Because in the case of Spain, your combined ratio for Auto is still 98.5%, which is the high end of your range. Do you think you can grow and still continue to improve profitability? And how? And the second question about Brazil. The yield curve anticipates a fall of 500 basis points in 2 years. You've reduced the tenor of your portfolio to 1.5 years. So -- but how sustainable is Brazil's profitability in general? Antonio Huertas Mejías: [Interpreted] Okay. Paco, let me start with the part about growth. I don't know if going back to growth is the right way to put it. It's about bolstering the growth because we've always had growth in policies, in customers, not in every market, but definitely in premiums. It's true that we have seen less growth in Europe in the consolidated accounts. But in local currency, except for Brazil, all the other markets grew even above inflation, which is no longer a major concern right now. And with our forecast, we can expect it to be for the next 2 or 3 years. Growing the number of customers is the biggest challenge, but that is our focus always, customer selection and risk selection processes as well as the market pricing we do to adjust the price to the risk we're taking on is our standard business. Auto, of course, is the business that was under more pressure in the last 4 years because of impairment in that line. Also, Health because of sector inflation, not the general inflation, but sector inflation were significant, and it probably is still somewhat high. We know of the pressures that are present in markets because manufacturers, OEMs are exposed to that with the inflow of Chinese cars at much lower prices. And electric, EV, which are very welcome and very necessary, also have much higher prices than their equivalent combustion engine cars. So that means that there's price on -- there's rising prices for insurance as well. But we don't contemplate seeing combined ratios in Spain or in other mature markets, like the ones we had back in the day. We trust that the combination of good customer selection, combining all their policies and other insurance needs and their MAPFRE brands make us feel that with reasonable technical profit, we can offer solutions that will make it worth their while to be in MAPFRE, where they have 2 cars, for instance, plus health insurance, plus property insurance and some life insurance products means we can be very good at pricing. The techniques we have to predict future claim rates for those customers also means that we can be very competitive and therefore, see higher growth rates for Auto in a very competitive market like Spain or Brazil or the U.S. But in general, we're satisfied. We made some tough decisions with some fleet business and some group business to improve that combined ratio, which will nevertheless continue to improve based on our forecast, based on our pricing calculations will continue to improve slightly. In the rest of the world with a high interest rate environment, you can have combined ratios around 100% or even a bit higher without any problem. But we are quite optimistic with regards to the growth of that segment, and we maintain our guidance in the strategic plan, although we are, of course, saying that that's for constant euros. But we do expect some tailwinds this next year with currency exchange and that both the dollar and the real and the Mexican peso might begin to recover, and that could also help drive our growth in current euros. José Jiménez Guajardo-Fajardo: [Interpreted] And as for Brazil, you were asking what's going to happen with the yield curve. It's already discounting lower rates, probably around 2, 3 points for the next months. And I would start by focusing on Brazil's excellent performance last year, even though it wasn't easy because of the currency depreciation effect. But remember that at some point, even the U.S. administration levied 50% tariff on Brazil imports when it's a net exporting -- commodity exporting economy to the U.S. and other markets. But I think that very negative context last year has, I think, turned around quite quickly. I would say that probably Latin America in general and Brazil especially could be some of the economies that will benefit the most during this year. And so I think it's what we're seeing in the forecast and reports of most of the major investment banks. Lower interest rates in Brazil would be a very positive outcome for us. Of course, maybe our investment portfolio, instead of having a gross yield of 15% might see that come down a couple of points. But the important thing is the growth of our business, particularly protection insurance, which is linked to credit. It's very difficult to sell credit when rates -- imagine if your reborrow was 15% here, very few people would ask for loans. But as rates come down, gradually, I think that will definitely drive sales. It's what we're seeing already. Our relationship with our partner, the Banco do Brasil is excellent. Our business with them is also growing very well, and we're seeing a recovery in commodity prices as well. So I think overall, this year for Brazil should be an excellent year. Felipe Navarro López de Chicheri: [Interpreted] And I think we've answered all the questions, right, except Francisco, maybe if you want to add anything? No. Thank you very much. I'm going to group some questions that have come in about the business in Spain. JB Capital, Maks is asking about the impact of the storms we've had this first quarter in Spain. Also asking about the target for the combined ratio in Iberia now that it's already improved and whether we will achieve a combined ratio group target with the Auto business in Iberia? And what kind of average premium hike are we implementing? And what do we expect from our policy portfolio? Do we expect it to grow or not? Antonio Huertas Mejías: [Interpreted] Okay. The storms are, of course, extremely unfortunate because they're happening one after another in some parts of the country. But luckily, in Spain, we do have one of the best systems for managing storm damage anywhere in the world since we have full coverage for everyone through the insurance compensation consortium when damage is caused by wind or flooding. And we've received about 40,000 claims in the last weeks to do with these storms and the number will continue to grow since there have been new storms coming in nonstop, although perhaps not as extreme, and they are unfortunately causing a lot of disruption in people's lives, and particularly in rural areas. MAPFRE is already responding personally to everything that is to do water damage covered by our policies and our internal numbers are not that significant and will not really have a material impact on our P&L with the information we have so far. But again, a lot of it is going to be covered by the consortium, which as we saw in the Valencia floods worked exemplary with over EUR 5 billion damages insured covered in just a year and a bit very successfully by the consortium and with no impact on the P&L of the sector. These were contributions that we have made to the consortium over the years and which were then paid out to cover those claims. And with the flood, we've not had to raise premiums to our clients because there was enough fund in that consortium pool to cover everything, and the same will happen now. José Jiménez Guajardo-Fajardo: [Interpreted] As for the other questions that Felipe summarized, I would say that, in general, for the group or for Spain, the ambition is to grow and to grow in euros. And last year, at the group level, we had this ForEx effect, but often in the currency markets, there's always a sort of regression to the mean as we're seeing in this year so far. And in Spain, the Life and the Non-Life segments are going to grow, but not at any price, of course, as we said in the strategic plan, we seek profitable growth. And so in the last few years, what we did was to adjust our portfolio sharply to go back to profitability. So reducing the combined ratio 7 points in Spain was the great achievement of this last year. And so our ambition to grow will focus on both the digital channels, but also the offices. And we have different levers we can use to have a positive result this year. As we said at the beginning, there's the whole rebranding and how that could boost the business, but also the over 3,000 offices. It's the second largest distribution network of the financial sector in Spain, and also with a new commercial structure, which was launched on January 1 as well, which was a major challenge, in order to help simplify and improve the efficiency for clients. And you were asking also about the Life Savings business. Yes, the strong growth, the over EUR 3 billion in premiums we've seen in Spain, will it continue? Well, we're doing everything we can to become a major actor in financial planning. And our ambition is still to grow. And to do that, apart from this network, we have over 10,000 professionals ready to advice and sell financial products, both insurers and the asset management side. And in 2026, we feel fairly optimistic. It's true that most of our competitors, which are banks, are not really competing very aggressively in this segment, and we are very close to the customers. And we think that just like in Non-Life, a personal touch and knowing your customer is particularly important, which doesn't mean we can't use digital channels and applications, but things are perfectly compatible with hybrid models, but ultimately, like everything in life, what really matters is the human touch and having someone who knows you, who knows what you need and who can help you do the best financial planning for your own personal needs. So we are ambitious with growth in that area. And in 2026, we expect to exceed the targets of 2025. Felipe Navarro López de Chicheri: [Interpreted] Thank you. I think that was a pretty good answer for the questions from UBS, from JB Capital, from Autonomous Research. And now we're going to move to the Reinsurance sector. There's lots of questions with respect to 2026. What do we think will be the trend for premiums? I think we've already explained about the releasing of provisions in the year and especially about renewals in this first part of the year and what we expect for next year. And an obvious question, which is how much have we saved or how the savings we've achieved in our reinsurance program affected our results? Antonio Huertas Mejías: [Interpreted] Yes, the early year campaign just ended. We have two, January and June. As for MAPFRE's hedging, well, most of it is about midyear and become effective in July. And then MAPFRE RE and group provisions are mostly placed in January. And yes, as expected, the market has grown rates substantially for the past 3 years, a circumstance that MAPFRE ceased to make a capital extension. And considering a benign performance of the weather, if we can call it that, we still have weather event, but perhaps in areas that have lower insuring and reinsuring effect. So this year, reduction -- an incipient reduction is observed, not a very relevant one because it allows us to accommodate for new coverage and grow MAPFRE's appetite with the possibility to integrate purchases for second or third-party event at practically no cost. Of course, this situation generates more tension in reinsurers because they need to seek new clients and fight over the existing ones with more competitive pricing, and that will entail small reductions in performance and, of course, make our -- or generate more competitiveness amongst our reinsurance businesses. But we have a solid footprint in different markets, and we have enough commercial products that have greater possibilities for reinsurance. As a matter of fact, we have nearly automatic coverage programs facilitated by MAPFRE RE to enhance business insurance, and it actually boosts our growth. As we have seen in the past, we haven't reached -- we haven't hit rock bottom in price terms. If large events take place next year, we will go back to previous numbers. And if we have to carry that out to clients or final consumers, we will do so with more thorough complicated products. And of course, we will work harder on our relationship with clients, but we do not see any threats on the horizon for the immediate performance of MAPFRE RE and Global RE, which may be more exposed to price reductions in certain businesses. We still have plenty of room to grow in terms of market share in several areas. Felipe Navarro López de Chicheri: [Interpreted] Thank you. I believe that with this, we've answered Carlos Peixoto, [ Max Migliorini ], and August Marcan on MAPFRE RE. We also have questions about Colombia. Is MAPFRE affected by the project to increase tax withholdings to nonresidents in Colombia? We have a question about Mexico. Is there any impact that carries over to next year? I think we already talked about the nondeductibility of VAT in Auto and Health. But anything to say, José Luis? José Jiménez Guajardo-Fajardo: [Interpreted] Just a reminder, in Mexico, the impact was EUR 37 million. What we did was take the impact recorded in 2025 in the last quarter last year to a possible impact on 2026 to move ahead of the impact, if you will. We are aware that the legislation in Colombia is subject to an appeal in the constitutional court, and we still don't know whether this will have an impact in the case of Colombia or in our business in Colombia. Felipe Navarro López de Chicheri: [Interpreted] Any further questions. I can't see any raised hands in the room. There seems to be none. We do have a question online, and it's a frequent question coming from Maks, JB Capital, about the expected combined ratio in Brazil for -- in 2026 and midterm. Well, the foundation is excellent, isn't it? Right, José Luis? José Jiménez Guajardo-Fajardo: [Interpreted] Well, we always say that things need to get worse for a little bit, but they haven't. We could expect combined ratios to go up a little bit, but at a very positive level for us. Just a few points up will not affect us significantly. Certainly, during the past couple of years, we've had an absence of great disasters in Brazil. Our portfolio is highly diversified per region per crop, and we're not expecting any major events. And if that trend continues, the ratio will be positive and very profitable. And about premiums, because we do see that premiums are more deeply affected by interest rates. Well, as we said during the presentation, we're talking about insurance policies indexed to loans. So a reduction in the interest rate for this kind of activity would be very positive. We cannot quantify the elasticity of this ratio. But in Brazil, we've seen years when levels remained around 2.5%, with strong growth and years where we've reached 15%, which is the real or the actual interest rate, the highest interest rate in the world as the Chair said during the presentation, 15%. As rates go down, well, we know that this would foster investment. And the agricultural sector in Brazil, which is such a relevant one, and with that reduction of tariffs and the foreign policy applied by United State, I think this places the industry in a very positive position. We don't know how long it will take, but it is looking good. Also, this year, presidential elections are scheduled in Brazil, and that will probably bring a new boost to the agricultural business in Brazil. Felipe Navarro López de Chicheri: [Interpreted] A question from [ Vicky Beata ] from Bank of America. Average premium and performance throughout the year and a possible reacceleration on Q4. And does that show a change in market conditions? Or is it rather a matter of product mix and seasonality affecting the fourth quarter? And in more general terms, they ask about pricing expectations for 2026. I understand the question is about Spain, right, particularly the Auto business. José Jiménez Guajardo-Fajardo: [Interpreted] Well, policy price is generated on a client-by-client basis based on risk profile. We're not a single channel company. Many of our clients are very satisfied with the service quality they are getting and price is not a deal breaker. Probably pricing will go above inflation to cover costs, but we do not expect any significant peaks in pricing this year now that the industry has gone back to balance, but we will continue to enhance the combined ratio as we've said a number of times. Felipe Navarro López de Chicheri: [Interpreted] Thank you, José Luis. And about local currency premiums in the U.S. This growth we're beginning to experience, will it be supported by the number of policies or average premiums? Question by Carlos Peixoto. José Jiménez Guajardo-Fajardo: [Interpreted] Well, the United States has a clear target of profitable growth, obviously, give or take currency fluctuations, but the trend we've been observing in the past few months is expected to be maintained in the near future. Felipe Navarro López de Chicheri: [Interpreted] Thank you, José Luis. And one last question from Alessia Magni from Barclays via the app. Alessia asks whether we expect any pressure on combined ratios in any of our markets in 2026? And maybe looking forward into the future, what can we expect for 2027? José Jiménez Guajardo-Fajardo: [Interpreted] Well, that's one very good question with a very difficult answer. Pressure, there will always be pressure on the combined ratio, right? Plenty of factors out there. It depends on competitors and the type of business. In reinsurance, as we said, well, there have been several years with fewer disasters, weather events, and that has led to a small adjustment in prices. But that could change in a matter of hours if anything serious happens. In other markets, at least in general, we've seen some serious ups and downs in Brazil, U.S., Spain, Germany, even Italy. But those fees have been gradually adapted to the actual cost of claims and combined ratios are stable. I cannot foresee any extra pressure anywhere, all things being equal. I mean we will probably run on inertia. Antonio Huertas Mejías: [Interpreted] At any rate, the diversification of the MAPFRE model causes general insurance and damages, insurance will affect our competitors more than it will affect us. And maybe our combined ratio could go up, but we still have margin in the Auto business, for instance where we're slightly below 100%. And I'm sure that as interest ratios go down, there will be pressure to reduce the technical ratio to maintain margins. So that diversification, that offset effect keeps us afloat. We're not optimistic -- that opportunistic to consider that 92% combined ratio will persist, but slightly above that, it's still perfectly acceptable. There are exceptional circumstances like the agriculture insurance in Brazil that has a nonsustainable combined ratio. I'm sure drought will take place in the future. But also we expect to grow in volume because this is a year where fewest policies have been acquired in Brazil because of the incentives that the Brazilian government used to grant agricultures were removed. These subsidies, actually, kept agricultures from getting insurance. I'm sure the premiums will go back up and the combined ratio will go slightly up. But all in all, the general bottom line will remain above expected. Felipe Navarro López de Chicheri: [Interpreted] We don't have any further questions online. Would you like to make any wrap-up comments? Antonio Huertas Mejías: [Interpreted] Well, I'd just like to thank you for following this presentation. It's been an excellent year having seen the best combined ratio ever, we say, over the last 15 years, but actually, it's the best ever since we have records as an international group. And that, I think, shows the consistency of our model. And of course, growth is always going to be the hardest thing to maintain, as you pointed out in your questions, but that's what we're focused on. And our outlook is to continue to grow organically. But of course, we could also take advantage of some M&A opportunities if they develop. Continuing with our traditional model of adding new distribution networks, banking networks to our distribution model through alliances and agreements also add additional capabilities that could help, but always, again, open to any M&A opportunity that might develop to integrate businesses that might be complementary to ours, but always in a consistent way and making sure that it's going to add value for our shareholders medium term. We're not planning to broaden our footprint. That's clear. And the M&A priorities Felipe described are the same. But with -- but knowing we have enough financial capabilities and support from the shareholders to continue to grow in the future. But mostly, the priority is to open up new distribution networks through new agreements and alliances in bancassurance or even through retail distribution like here in Spain with Carrefour, which will now distribute MAPFRE products in our main market, our home markets. So anyway, that's it for 2025. The AGM on March 23 in 2026, the prospects look really good, and we're working already to give you an update on our guidance during that General Shareholders' Meeting and also some indications of our new strategic plan, which will start in 2027. So anyway, I just encourage you that starting February 19, there's going to be a new beautiful exhibition in the MAPFRE Foundation next door here. Anders Zorn, who is an amazing Swedish painter, unknown in Spain, but who was known as the Swedish Sorolla and was extraordinarily important in Madrid's painting of the 19th century in Sweden. And so those of you who're following online might not have a chance to stay now for a drink and some appetizers, but the rest of you definitely invited to join us. And thank you for being here and for helping us be better every year. Thank you. Felipe Navarro López de Chicheri: [Interpreted] Thank you very much, Antonio. I'll remind you that all the documents are posted on our website and with -- and in the CNMV's website. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]