加载中...
共找到 24,969 条相关资讯
Operator: Good day, and thank you for standing by. Welcome to the Mips Year-end Report 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Max Strandwitz, CEO of Mips. Please go ahead. Max Strandwitz: Thank you, operator. Good morning, everyone. My name is Max Strandwitz, and I am the CEO of Mips. With me today, I also have our CFO, Karin Rosenthal, and we will take you through the Mips presentation of the Q4 year-end report of 2025. So if we start with the key highlights, it was a good end of the year. Strong development with 18% organic growth in the fourth quarter. We did grow in all categories despite the challenging conditions. And our year-to-date organic growth ended at 21%. Of course, with year-to-date, we mean full year. The good momentum in Europe continued. We saw an organic growth of Europe of a little bit more than 30%, which is, of course, a fantastic number given that we grew 137% the year before. So despite a very strong comparator, we continue to see good performance in Europe. And if we look at the full year split of sales, Europe actually contributed to 43% of the total net sales of Mips, which is something that we have been very happy about and of course, part of our ambition to be less dependent on the U.S. market and having a better sales split between Europe and U.S. market. But also the U.S. sales developed well. We did grow close to 30% organically also on the U.S. market, which is a little bit surprising given the challenging consumer market that we see. We saw a little bit of a change in momentum when it comes to the U.S. market, and I will come back to that a little bit later in the presentation, but good performance also in the U.S. market. When it comes to the Asian market, not our biggest part of our sales, we saw a softer market with soft development, especially relating to the Chinese market, where we saw a very hesitant consumer. Of course, we did a very exciting acquisition in December through the ingredient brand Koroyd, great complementary portfolio to Mips and the brand with global potential, which is also something that we appreciate a lot. I will talk a bit more about that also later in the presentation. We had a good development of the underlying profitability. A lots of ins and out in the quarter. The decrease in EBIT that we saw is fully explained by the impact of legal cost, the ForEx headwind and transaction cost. And if we would adjust for the negative impact of the legal cost and the transaction cost related to the acquisition of Koroyd, we would actually be very close to a 40% EBIT margin, actually 39.8%. We have had a legal dispute that will continue. And we will continue to support our customers in the defense of the legal dispute, similar level to 2025 expected also in 2026. And just as a reminder, in 2025, we spent SEK 43 million in this legal dispute. The Board of Directors is proposing a dividend of SEK 2.50 per share, which is corresponding to 55% of net earnings, a little bit ahead of our financial ambition of having a dividend distribution of at least 50% of net earnings. And of course, also adding Koroyd to our business, we remain confident in our long-term strategy and the journey towards our financial targets. So if we start with the Mips Group's acquisition of Koroyd and a summary of what we actually did acquire. We see it much more as a merger rather than acquisition because, of course, it's 2 great companies coming together. But first of all, strategically, really important to look at the strategic fit. And actually, when it comes to the acquisition, we actually see that it strengthened 2 out of 3 already existing strategic pillars. The first one, of course, of our pillars is to grow our existing business of rotational protection solutions in helmets for Sports, Moto and the Safety category. That, of course, will remain unchanged because that's Mips key focus areas. But if we look at other areas like capture new opportunities within helmet safety, of course, Koroyd and impact technology is a great addition to that. And also the third one when it comes to opening up new channels and markets, of course, having the opportunity to expand into body protection, also having customers in tactical and so on, of course, opens great opportunities for further growth. If we look at the culture fit, which is, of course, extremely important when you look at acquisitions, Koroyd has many similarities to Mips. First of all, it is a very vision and purpose-driven company to make active life safer. It's market leader within its niche. Ingredient brand, which is, of course, trusted by consumers and leading product brands. It's very much a science-led and technology-driven company. They have world-class testing and simulation capability, just like Mips. Scalable asset-light supply chain, high EBIT margin despite significant R&D spend. Important to note that Koroyd will continue to operate as an own brand. The current strong leadership and operational team will continue to lead the Koroyd business. But of course, both brand teams see many synergies when it comes to product development and of course, product portfolio expansion. If we look a little bit more on the details of the transaction, the purchase price amounts to EUR 40 million on a cash and debt-free basis, corresponding to a multiple of 8x adjusted 2025 EBITDA. In addition, the sellers have the possibility for an additional earn-out up to EUR 25 million, corresponding to a multiple in total of 13x if we compare against the same adjusted EBITDA of 2025. The transaction was financed through a combination of existing cash, and we also have arranged with a credit facility. And of course, the acquisition is expected to contribute positively to Mips earnings per share, EBIT sales growth, both on a short and a long-term basis. And I think it's also important to note that Mips and Koroyd will be consolidated under the same group first time in the Q1 reporting. If we look at another very important area for us, it's, of course, what we do in sustainability, and we are really proud about the work that we have done there. We have had great development also in 2025. First of all, Mips was ranked #1 in Carnegie's sustainability rankings within consumer goods, which is something that we are extremely happy about. AAA rated at MSCI and also top rated at small and mid-cap enterprises at CDP. So really starting to get also great recognition externally for our sustainability work. Of course, when it comes to sustainability, it's not the awards that really makes a difference. It's what you actually do. And of course, we have 3 key targets, which we delivered against. And the first one is, of course, to continue to reduce our emissions, and we did that during the year. And including 2025, we have now delivered 49% of our 2030 ambition. And that, of course, is in line with our long-term ambition. We have also been quite successful when it comes to increase the usage of recycled materials in our products. And today, and that is, of course, in 2025, the usage amounted to 34% of our total usage. And Mips has also, of course, a well-developed factory audit program. And we have increased our average score from social audits to above 90%, which is actually ahead of our 2030 ambition. So really happy with the progress that we did in sustainability. In Sports, we see that the progress continues. We are happy with the development that we see there. Good quarter with 17% organic net sales growth in Sports. We did see strong growth in the European market. And like I said, that's on the back of a very strong comparator last year where we actually grew 137% in total. So we now had 6 really, really strong quarters in Europe and of course, start to see that the impact, of course, also showing up in the total sales of Mips as a company. We did see also good growth when it comes to the challenging U.S. market. We saw in terms of market data, a little bit of a trend shift when it comes to Mips addressable markets. And if you look at bike, for instance, we saw actually for the first time in a long time that the addressable market grew 1% when it comes to volume in bike, and it actually grew 5% when it comes to price. So of course, a lot of the customers have initiated and taking price increases to compensate for tariffs, but good to see that also in terms of volume growth in bike helmets, we saw that there was a positive progress. Then when it comes to snow, same ratio, 2% volume growth. If we look at the total market when it comes to U.S. dollar and price, it actually grew with 6%. So of course, still soft market, but at least it has started to go into positive territory. We also see that our customers coming from quite a low inventory level, now have started to refill their inventory. Every one of them, as you have seen in previous quarter, has been a little bit careful in terms of filling up their inventory because of the uncertain tariff situation. And of course, it's also good to see that bike continues to develop well overall. We had the ninth quarter in a row with growth in bike, which is something that we're also happy about. And of course, we continue to see good volume growth also in snow, both in the quarter and year-to-date. We did launch our collaboration with Mikaela Shiffrin, of course, the greatest Alpine skier of all time. So something that we think is a great ambassador for the Mips brand that also can help us to increase the awareness of Mips globally and of course, committing to the overall vision of Mips of driving the world to safer helmets. And I think it's also important to note that the shift that we have really been doing in snow, where you only take a difference of the last Olympic versus the current Olympics. When we look at our athletes this time, we actually see that more -- a majority of the people that are wearing a ski helmets is actually a helmet equipped with Mips. So something that, of course, we are very happy to see. And the long-term positive outlook in the Sports category remains. If we look at the development in Moto, we saw good development also there. 32% organic net sales in Moto in the quarter, year-to-date net sales now amounting to 22% organic growth. And we saw good development also in both off-road and on-road category. And good to see that the volumes are coming back in Moto after a challenging period and the impact of the U.S. tariffs. We continue to roll out a lot of new innovations in the Moto category and, of course, are quite excited about 2026. And no change to the long-term outlook, good opportunity to continue to grow in the category. In Safety, we saw organic net sales growth of 41% in the quarter. If we look at the year-to-date performance, it's 42%. We, of course, have seen during the year and also the quarter that performance is impacted by the implementation of tariff and related cost increases where we have seen some delay in ordering. If we look at the underlying in-market performance, we actually see that we have great sellout with new brand wins and also new products. And of course, during the quarter, it was also the world's largest fair when it comes to occupational health and safety. In Germany, it's only every second year. And there, of course, again, the interest for Mips in the industry was confirmed. The long-term ambition remains unchanged. It's also good to see that the acquisition of Koroyd can also accelerate our growth in this category and make our offering even more relevant in the category as such. So if we look at the category performance, like I said, in Sports, Q4, 17% organic growth, 20% full year. In Moto, 32% in the quarter and 22% full year; and Safety, 41% and 42% full year. With that, I hand over the presentation to Karin. Karin Rosenthal: Good morning. I'm Karin Rosenthal, CFO of Mips, and I will take you through the financial part of the presentation. We saw a good development in the fourth quarter with an increase in net sales of 2% and adjusting for FX due to a stronger SEK versus U.S. dollar, net sales increased 18% organically. Gross profit increased with 2% and a good gross margin of 72.9%, same as last year. We saw an underlying improvement in profitability. EBIT was down 24% to SEK 47 million versus SEK 62 million last year, which is fully explained by legal cost of SEK 7 million, transaction costs due to the acquisition of Koroyd of SEK 5 million and ForEx. EBIT margin decreased by 11 percentage points to 31.8% versus 42.9%. Excluding legal costs and transaction costs, EBIT margin was 39.8% in the quarter. The higher spend in OpEx is fully explained by the legal costs, the acquisition costs and the ForEx. So we have also continued to invest in our strategic priorities. We had a good operating cash flow in the quarter with SEK 52 million. And if we look at the financial KPIs, organic growth of 18%, 32% EBIT margin and operating cash flow of SEK 52 million. If we turn to next page and look at the development for the full year. Net sales increased with 10% and adjusting for the FX due to a stronger SEK versus U.S. dollar, net sales increased 21% organically. Gross profit increased with 12%, and we saw a gross margin of 73.4% versus 72.5% last year. And the increase was mainly explained by the increase in sales and the sales mix. We have an underlying improvement in profitability. EBIT was down 11% to SEK 156 million versus SEK 174 million, which is mainly explained by the legal costs of SEK 43 million and the FX. EBIT margin decreased 6.9 percentage points to 29.2% versus 36.1%. And excluding legal costs and transaction costs, EBIT margin was 38.2% for the full year. So the higher spend in OpEx is fully explained by legal costs and the ForEx, and we have continued to invest in R&D and marketing during the year. We had a strong operating cash flow of SEK 148 million versus SEK 142 million last year. So the financial KPIs, 21% organic growth, 29% EBIT margin and operating cash flow of SEK 148 million. If we look at the balance sheet and cash flow, we have cash and cash equivalents of SEK 214 million versus SEK 382 million last year. During December 2025, Mips obtained a revolving credit facility of SEK 300 million to finance the acquisition of Koroyd. The net debt versus adjusted EBITDA amounted to 0.5x. The operating cash flow in the quarter was SEK 52 million, and the Board proposes a dividend of SEK 2.5 per share, corresponding to 55% of net earnings. And then over to you, Max. Max Strandwitz: Yes. So if we then summarize the quarter and the full year, good year -- good development in the quarter with 18% net sales growth. We did grow in all our 3 categories despite challenging conditions. Good performance also year-to-date, of course, with 21% organic growth. And of course, as we are growing significantly faster than the market, we are gaining market share, of course, both in U.S. and the important European market. We do expect the positive development to continue with, of course, less hampering effects from the tariffs, which we saw in 2025. Good to see also, I wouldn't say it's a turnaround, but a little bit positive signs of the U.S. consumer in Q4 when it comes to helmet. And of course, good to see also that the U.S. brands are also refilling their inventory again. Of course, the exciting complementary acquisition of the ingredient brand, Koroyd, will, of course, strengthen our position in helmet safety further and offer possibilities for product extensions in adjacent categories, which is, of course, something that we are quite excited about. Good underlying improvement in profitability. The decrease that we saw is fully explained by legal cost, ForEx headwind and transaction costs. And we remain positive on our long-term outlook and of course, the delivery of our financial targets. And with that, we open up for questions. Operator: [Operator Instructions] The first question comes from the line of Emanuel Jansson of Danske Bank. Emanuel Jansson: Hope you can hear me. And a couple of questions from my side. And on the organic growth seen here in the quarter, can you provide some color on the sequential development during the quarter, maybe especially regarding the U.S. market. And so did you see any acceleration or de-acceleration over month-over-month? Max Strandwitz: Yes. I think, I mean, overall, it was relatively equally spread. I would say that in the end of the quarter, we saw a little bit of an uptick of the U.S. market, of course, potentially also from a little bit stronger sales, at least than we anticipated from the U.S. market and, of course, refilling the stock. So it ended a little bit better than it started. Emanuel Jansson: And given that the Chinese New Year falls later this year versus what it did in 2025, can we assume that some of the normal Q4 sales has shifted into the first quarter of 2026 regarding especially bike sales or bike helmet sales? Max Strandwitz: Yes. Given that, of course, during my 10 years at Mips, I don't think that the Chinese New Year has been so late, which means that they have at least 1.5 months more to produce and, of course, ship. So yes, we see a good momentum also into Q1 when it comes to order momentum and so on. And part of that is, of course, attributed to a later Chinese New Year. When you normally see an earlier Chinese New Year, of course, then to be able to make the season, of course, you produce maybe a little bit more in Q4 because, of course, then the Chinese New Year comes and you don't have time to hit the market before the season starts. Emanuel Jansson: That's very clear. And jumping back to the U.S. market, where I think the growth was quite impressive. And can you maybe share us some insights on which categories or customers that drove this growth most strongly in this quarter? Max Strandwitz: Yes. I think, I mean, first of all, if we look at the total market, which means, of course, not only the addressable market for Mips, it was actually shrinking with 1%. So it was slightly down and the addressable market was up. And when we look at the addressable market for Mips, we look at helmets above USD 30. There is a couple of brands that is doing really well on the market at the moment. Giro, which is one of our bigger customers is doing exceptionally well, and they're gaining a lot of shares. Also, we see Smith Optics also doing well, especially in the mountain bike segment, and we also see that the Fox brand is doing well. So a couple of brands that is really outperforming at the moment. And of course, all of those are heavy Mips customer, and that helps a lot. Emanuel Jansson: And should that also be attributable to more premium type of helmets that are doing better versus the -- towards the end consumer? Max Strandwitz: Yes. I think when we segment the market, and of course, there is different ways of slicing the market. I would say top premium market, we have never seen actually especially weak market. It seems like that consumer is immune to whatever setbacks happen. So they seem to buy products anyway. And then we talk really premium product. What was a little bit of a shift in this quarter is that we also see in mid-price levels that the consumer is coming back, which is a bit of a change. And of course, with that consumer also comes quite a lot of volume. And of course, that has a direct contribution to the volume development. Emanuel Jansson: Perfect. That's really interesting. And heading then back to -- heading to Europe, I mean, 50% organic sales growth during 2025 and you increased your market share and increased market penetration, what should we think is a sustainable growth rate in 2026, you think, given that you have grown into size, but you still have plenty more to do in that region? Max Strandwitz: Yes. I think, I mean, we do have fantastic momentum in Europe, would be fantastic even if Europe can pass ahead of the U.S. market would be really a good sign of the really establishment that we have done in the European market. So I do expect continued good growth in Europe. There is a couple of regions where we have started, of course, in a fantastic way. Germany has been very favorable for us. We see good development there. Then, of course, we also see in France that the market development is really, really good for us. Switzerland, of course, not a lot of market data, but really high penetration. Nordic is a good region. What has been the key change also is that we see that the south of Europe is starting to also appreciating, first of all, helmet use and of course, also helmets with rotational technologies like Mips. I think what also was a bit fantastic for 2025 is, of course, that in Italy, they also started to mandate helmets when you're skiing and so on. And of course, that, in general, of course, start to increase the awareness on helmet safety in general, but also, of course, these type of mandates from governments also help to make people more safety conscious. So there were a couple of different things helping, and we see that trend continuing. And also what has been a big change for us in Europe is that we don't only sell well in premium helmets, but we see also that we can reach down and, of course, target consumers also in lower price points. And again, with lower price points comes also higher volumes. Emanuel Jansson: Perfect. And last 2 questions here. On the Koroyd acquisition, can you share anything about how the business developed during Q4? Max Strandwitz: Yes. I mean we do not comment too much about it because, of course, it was not owned by Mips as such. And of course, those numbers has not been audited by us as was not part of the due diligence and so on. They continue to see good momentum. They have developed well when it comes to safety and of course, also sports, and that was the key growth driver. So no change to the momentum than they have seen prior quarters. And of course, we expect that to continue also into 2026. And then, of course, we do see some customer synergies across the board, both ways, where, of course, we have been talking to a lot of customers, a lot of brands are excited of combining both Mips and Koroyd into helmets, which is something that, of course, is part of the strategic rationale of the acquisition. For us, Koroyd will always be a premium offering. And of course, we will work with a select amount of brands, but at least the start of the discussion has been very positive. So I think we can also get some sales synergies and of course, really excited to show what we can do both in 2026. But of course, as helmet project sometimes takes a little bit time, of course, also in 2027. Emanuel Jansson: Perfect. And final question here. And correct me if I'm wrong, but I just think that the previous communication regarding legal costs indicated that it would gradually decrease during 2026. But I mean, given now the rhetoric now in Q4, it seems to be more or less in line with 2025. Has anything changed? Or what should we expect here going forward in the nearest quarter when it comes to legal costs? Max Strandwitz: No, you're correct when it comes to the previous communication, we did expect slowdown of cost, which you partly saw already in Q4. We are, of course, still preparing for the case. We are doing a lot of investigations and of course, preparing us to make sure that we are as prepared as possible. It's always difficult when it comes to legal cases. Sometimes they can end very quickly. And of course, that's normally the best resolution. But since we do not know exactly how long it will go, we decided to take a little bit more cautious communication on this. So I wouldn't say that nothing have materially changed. It's more us being a little bit more cautious on the communication. The only thing we know is what we spend in 2025. And then, of course, it's probably the best to assume a similar kind of momentum in '26. I hope I'm wrong, but I think the cautious view is probably better at this moment. Operator: The next question comes from the line of Carl Deijenberg of DNB Carnegie. Carl Deijenberg: So a couple of questions from my side. First of all, if I could ask on the quarterly seasonality in the acquired entity, how does that compare relative, let's say, legacy Mips when we look at the quarterly distribution going into '26? Is that a material difference on net sales and earnings contribution on a quarterly level? Or how should we think about that? Max Strandwitz: Yes. Just to make sure I understand. So it was in terms of the quarterly phasing when it comes to Koroyd. Carl Deijenberg: Right. Exactly. Max Strandwitz: Sorry. So yes, you do see a similar pattern to Mips, where you have the smallest quarter when it comes to Q1. Of course, that's normally the case all the time because, of course, you have Chinese New Year, factories close and so on. So it has a similar phasing pattern than Mips when it comes to Q1. When it comes to the rest of the quarter, which means Q2 to Q4, given that they are a little bit more exposed to safety, they have a more, I would say, flat phased, maybe that's not the right word, but they have a more equally spread sales across the rest of the 3 quarters. Carl Deijenberg: Okay. Perfect. And then I also wanted to ask on a similar topic. I mean when you look at their '25 development, did they have any quarters that were exceptional in any way when we look at the sort of quarterly comparisons also going into '26. Did they, for example, see a similar development as you did in Q2 on Liberation Day and so forth or anything to keep in mind there when we model the quarters? Max Strandwitz: Yes. I mean everyone in the industry, of course, had quite a hiccup when it comes to liberation. They -- at least the ones that have U.S. exposure. And of course, they have a big U.S. exposure and so on, even bigger than we had. So of course, they saw an impact of that. So I wouldn't say it's materially different. It's difficult for us, of course, to comment too much of the quarters because, of course, -- this is a relatively small company and, of course, focused mainly on full year delivery and so on. We have a quarterly split, but without having audited quarter-by-quarter, it's, of course, difficult to give too many comments. But it seems like quite a normal seasonality from a business exposed to industrial safety and snow as such. Carl Deijenberg: Okay. Good. Then I also wanted to just follow up on the sort of guidance on the legal costs going into '26. And then, yes, for the full year, you were right about SEK 40 million and roughly SEK 7 million here in Q4. And I'm also just wondering a little bit on the phasing here because annualizing that guidance, that's obviously quite a step-up relative to the exit rate of SEK 7 million here in Q4. So is the run rate now going forward, is that going to be around SEK 10 million per quarter? Is it going to be come up already here in Q1? Or could you say? Max Strandwitz: No, I think SEK 10 million is probably a fair assumption. And of course, given that these costs tend to fluctuate, I think it's much better to have like an even phasing of SEK 10 million per quarter. Carl Deijenberg: Okay. Great. Then finally, also, I just wanted to ask geographical development for you or at least what you disclosed. Just if you could share a little bit more details on the development in China, particularly given it's obviously a quite big contraction here year-on-year and also sequentially relative to Q3 despite the seasonality. So any further granularity to add there? Max Strandwitz: Yes. I think, I mean, as any company exposed to the Chinese market, of course, especially when it comes to consumer demand, you see a very hesitant Chinese consumer. It's not a huge part of our business. It's actually quite a small part of our business. We see that the Chinese consumer is much more hesitant. You have also seen at some of the big retailers shutting down a lot of shops because, of course, the Chinese consumer, a lot of them has a lot of money invested into property. And that, of course, has been everyone's pension retirement plan and so on. Now there is a big uncertainty what happens on the property market. The Chinese consumer appreciate cash and, of course, have started to save a lot of cash, and that means that they are not spending. You see that across the board when it comes to all consumer brands. Some of the partners we talk to, they say that the market is down 70% to 80%. I think that's a little bit rough, but at least we see a very soft Chinese market at the moment. There has been some initiatives by the Chinese government, but they don't seem to have that effect yet. But of course, we know that China normally can change a lot of things. And of course, we see quite a lot of excitement when it comes to winter sports. We also start to see that Viking is a big category. So I think the Chinese consumer will come back. But for me, it's very difficult to speculate exactly when. So I will continue to have quite a negative view at least on the Chinese consumer for 2026. Operator: There are no further questions via the phone. I will now hand over for questions via the webcast. Max Strandwitz: Yes. So the first question was about legal costs, which we have explained. Then the second question is, what is the medium term to expand in Moto industrial segment? And what is the impact of tariffs that you see in U.S. in 2026? And then the third, based on the same question, do you see demand supply pricing has normalized. So when it comes to Moto, like I said, we started to see an uptick in volume already after the implementation of tariffs. I think it's great to see that the off-road category is really coming back also in terms of volume. And we start to see more customers also on the on-road segment, which is something that has been lagging behind. We do see a lot of attention to the new standards that is coming into play and making it a lot tougher for helmet brands to pass the new standards without the rotational technology. And of course, that's what we do. And that, of course, is supporting the plan. And of course, this is not something that has happened overnight. But when it comes to development in motorcycle helmets, development time can easily be 3 years. So a lot of these projects has already been done. And of course, that's what we are rolling out, and that will generate the growth that we have been seeing. When it comes to industrial safety, I think most companies will probably 41% in the quarter organic growth, 42% full year is a great number. I think we should be able to do more. Of course, we were a bit surprised by the tariff implementation and of course, the pricing effect. And it's not so much about the helmet, but it's normally quite big companies. And of course, helmets is a small portion of what they actually sell. And sometimes, of course, they need to price up their whole segment when it comes to tariffs and so on. And then, of course, the attention to helmet is pushed back. We have a couple of really big volume projects with so-called round or brim helmets, full brim helmets for the U.S. market, which is very much what is in style. They will be launched during -- or have already been launched, but will start to be produced in Q1 and onwards. And that, of course, will generate a lot more volume. Then, of course, adding Koroyd business, also industrial safety, we were a lot more relevant. And of course, we can do even more when it comes to helmet. So I think in industrial safety, when it comes to our customer acquisition plan, I think we have all the customers that we need in order to reach the plans that we have set. For us, it's really making sure that we support the sell-through of the Mips equipped product and making sure that we get bigger penetration in their total portfolio. So quite excited about what happens in safety. Like I said, 42% is a good organic growth. But of course, I'm not always known as a patient man and of course, want to have more, and that's what we are gearing up for in 2026. And then when it comes to our recruitment plan for 2026, of course, Mips is a company that is growing. We also plan to grow the Koroyd business. And of course, the key focus that we have at the moment is to add more people in R&D. We have always had a ratio of Mips and a ratio I like because it's very simple, one engineer, one person in the rest of the company, and that's really a ratio that I think is effective. when you are a company which is very innovation focused and so on. Koroyd is 1 to 3 at the moment. So I really hope that we can get that up to the same ratio as Mips and continue to do a lot of innovations. And like I also explained in the report, we are doing a lot when it comes to creating a lot more innovation. We're also stepping up in terms of the amount of innovation. So we see a lot of new great Mips products coming out. Koroyd has a fantastic portfolio, especially when it comes to adjacent areas like body protection, gloves and so on. So really happy to share what we are going to do there. So key recruitments will be engineers. And then, of course, as any company that scales up, even though we both have a fantastic scalable business model, we need to add also resources everywhere else, but it, of course, will be in a much more scalable way. We are an asset-light model and so on. And of course, the amount of headcount will not increase in line with the growth that we expect to see in 2025. And then it's -- can you provide any update on project volumes versus the prior period, given that the revenues came down a little bit during the year. So we actually saw in Q2 and it started to stabilize in Q3 that a lot of our brands, they focus very much their engineering resources around relocations. So relocations outside China. And then, of course, we start to see that the volume is coming back again. And already in Q3, we saw on par with previous year and so on. And at the moment, we have great project momentum, and we can actually not do all the projects that we have in the pipeline. And of course, that's why we're also recruiting more engineers. And then, of course, it's a question on you can talk about the developments of new safety models or customers over the period, given the significant trade shows like World of Concrete that took place over the quarter. And of course, World of Concrete was in January. There, of course, we supported a lot of our brands. And the key focus there was, of course, to really drive the rollout of the full brim helmet. Full brim helmets is a big thing in the U.S. That's where you have the main part of the volume. Mips was first implemented in more like climbing style helmets. And now we see that we also go into full brim helmets. That's where you also see a much bigger part of the volume. And that's also where you see a big part of Koroyd's business is in full brim helmets. That's where they see most part of the volume. So I think that's basically all the questions that we have. Of course, if there is any follow-ups or you need to find out more, you know where to find us. If not, then speak again next quarter. Thank you for listening in. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Johannes Narum: Good morning, ladies and gentlemen, and welcome to Storebrand's Fourth Quarter and Full Year 2025 Results Presentation. As usual, our CEO, Odd Arild Grefstad will present the key highlights, followed by CFO, Kjetil Krokje, who will dive deeper into the numbers. At the end of the presentation, participants in the team's webinar will have a chance to ask questions. Details on how to join the webinar are found on the Investor Relations website. But without further ado, I give the word to our CEO, Odd Arild. Odd Arild Grefstad: Thank you, Johannes, and good morning, everyone. I am excited to share a strong set of results for the fourth quarter today. Before we jump into further details, I will start with a few reflections on the progress we have made in 2025. 2025 was another year of clear progress and strong performance. We achieved a record high NOK 5.7 billion result. This means we surpassed our target outlined in the Capital Markets Day in 2023 by 14%. We also saw 26% growth in the operational result for the full year. A large share of the operational result came from short-tailed insurance and capital-light savings products. This leads to increased quality of earnings. Return on equity was 16% for the full year, surpassing the target of 14% significantly. 2025 was also a solid year for our Savings customers as they received NOK 147 billion in returns. To enhance customer experience and strengthen scalability, we invest selectively in AI and digital platforms. I'm therefore pleased to see clear progress in this area. One example is our AI-based customer service chat for insurance that recently ranked first in the market. AI-driven customer interaction is key to scalability going forward. In December, we updated the market on our strategic direction and set financial targets for 2028. The organization is now in execution mode with full focus on operational improvements and scalability across business areas. As shown in this graph, Storebrand has delivered solid result growth over the last 3 years. Two factors are important to understand this progress. First, it is a result of a group strategy built for capital-efficient value creation within Savings and Insurance. Our diversified business with strong synergies makes us resilient in various scenarios. Second, the progress is driven by great execution. My 2,600 colleagues bring our priorities to life through an action-oriented culture built on teamwork and shared goals. I want to thank all Storebrand colleagues for your dedication and contribution throughout 2025. Let me now turn to the highlights for the quarter. Storebrand delivered a group profit of NOK 1,515 million in the quarter. The operational result was NOK 1,131 million, up by 61% year-on-year. The underlying operational result is the best ever for the quarter and for the full year. The record high result is driven by significant growth in insurance with premiums up by 20% from the last year, together with increasing profitability. Within Savings, the result development in asset management stands out positively. Cost control remains a key priority, and I'm pleased to see cost development in line with what we outlined for the year. Turning to capital distribution. I'm pleased to confirm a 15% increase in dividends to NOK 5.4 per share. On share buybacks, Storebrand has a long-term ambition to distribute more than NOK 12 billion by the end of 2030. By the end of 2025, NOK 5 billion of this has been completed. Reflecting solid capital and liquidity positions, we aim to conduct NOK 2 billion in share buybacks during 2026. This will be done in 2 tranches of NOK 1 billion with the first one starting today. We keep executing our strategy to grow our capital-light business areas. This strategy is built for Storebrand to take 3 commercial positions. A, to be the leading provider of occupational pension in both Norway and Sweden. B, to be a Nordic powerhouse in asset management. And c, to be a fast-growing challenger in the Norwegian retail market for financial services. We take these positions and unlock growth by using our strategic enablers and group synergies. So let me dive into our progress. Across the group, we can once again report double-digit growth. This is due to both structural growth in the savings business, increased market shares in insurance and banking and supportive markets. Let me start with the first strategic position, being a leading provider of occupational pension in Norway and Sweden. In 2025, we saw double-digit growth in both Unit Linked reserves and corporate insurance premiums. Contributing to this, we captured the largest share of the net customer flow in the individual pension market in 2025. In Sweden, SPP keeps expanding. A highlight in the quarter was the broadening of the distribution agreement with Danske Bank. SPP will be the sole provider of pension services to Danske Bank, an important valuation of SPP's solutions. Our second strategic position is to be a Nordic powerhouse in asset management. Several of our flagship funds performed very well in the quarter, taking performance-related income to NOK 475 million for 2025. Within alternatives, our second Nordic real estate fund has experienced strong investor demand and completed its second close. We are very happy to see that investors value our long-term Nordic strategy. In addition to this, AIP management, where Storebrand has a 60% stake has developed well. With support from existing investors, AIP reached the first close of EUR 2 billion for its newest clean energy fund. The AMU growth is supported by positive net flow over the last years. An important competitive advantage is our group synergies, where the growing pension business provides a steady flow to asset management. Over the past years, external assets have grown faster than captive assets, showing that our offering is competitive in the market. Finally, the third strategic position. Storebrand aims to be a growing challenger in the Norwegian retail market. We are very pleased to have partnered with Santander in the fourth quarter, a leading player in the market for car financing. This further strengthens our capabilities in the car distribution channel and will be an important driver for our growth strategy. Growth in retail insurance was a key highlight. 26% growth in portfolio premiums in 2025 has increased our market share in P&C to almost 8%, and this is up from almost 7% a year before. To sum up, 2025 was a year of clear progress with strong result growth, improved return on equity and increased capital distribution. Johannes, back to you. Johannes Narum: Thank you, Odd Arild. Now let's take a closer look at the numbers. Kjetil, please go ahead. Kjetil Krøkje: Thank you, Johannes. Let's start with the key figures for the quarter. The quarterly result of NOK 1.515 billion is 42% better than last year, driven by strong results from insurance and asset management. The operating momentum into 2026 is strong with solid growth, pricing measures flowing through in insurance and record high AUM levels across the business. Storebrand delivered 16% return on equity for the full year and increased underlying earnings per share. If we move to the balance sheet, the solvency margin is reduced by 1 percentage point in the quarter with both higher own funds and capital requirement. This is still a very robust balance sheet that provides resilience if financial markets were to become more volatile. The expected return on our investments in the guaranteed business is well hedged and still 180 basis points above the guaranteed rate. In order to pay dividends and fund share buybacks, we need both solvency and liquidity. As you can see on this slide, we have around NOK 3.7 billion in liquidity as of the start of 2026. With strong remittance from subsidiaries, we will be able to increase ordinary dividends by 15% and execute our share buyback program of NOK 2 billion in 2026. The projected upstreaming of capital secures long-term predictability in our capital distribution in addition to strategic flexibility to support organic growth and accretive bolt-on opportunities that can occur. It's fair to mention that remittance is particularly strong this year, driven by strong results, tax loss carryforward and because of strong upstreaming from the bank due to the implementation of CRR3 for Norwegian banks. This should be considered when forecasting future remittance from subsidiaries and the consequent liquidity position of the holdco. Storebrand provided a remittance outlook at the Capital Markets Day in 2025 that includes further details on expected remittance levels from 2026 onwards. The solvency margin ended at 194%, down from 195% last quarter. Post-tax results contributed positively. This was offset by regulatory factors and accrued dividends in the quarter. The announced buyback program of NOK 2 billion is expected to reduce the solvency ratio with approximately 3% at the Q1 reporting and another 3% in connection with the next tranche. With the current level of solvency, buffers and interest rates, the balance sheet is very robust to fluctuations in the financial markets. Let's go a little deeper into the results line by line at the group level and then turn to the reporting segments. The top line growth for the full year was 13%. The insurance result is up 49%. The increase in insurance is mainly attributed to significantly improved results in the Retail segment, supported by repricing measures and continued volume growth. Operational cost is within our guidance of NOK 6.9 billion, excluding performance-related costs and extraordinary strong sales in P&C. For 2026, we expect to have around NOK 7.3 billion, NOK 7.4 billion in operational cost before currency and performance-related costs. All taken together, this leads to an improvement in the operating results of 2026 for 26%. The financial result is strong, and this leads to a group result of NOK 5.7 billion, NOK 700 million higher than the ambitious targets we announced at the 2023 Capital Markets Day. The tax charge for the quarter was 20%. This is within the normal range. The tax rate was lowered by currency movements and the asymmetry in how tax is calculated on assets and currency derivatives, while higher earnings from the Asset Management segment increased the tax rate. For the full year, the tax charge was 15%. The low tax rate was caused by lower taxes in our Swedish operation and currency movements. Our tax guiding is still 19% to 22%. This table shows the same numbers as on the previous page, but split into the business lines, savings, insurance and guaranteed. Storebrand's front book continues to grow strongly, while the guaranteed back book shows relatively stable results. The segment Other is mainly return on company capital and cost of debt. Let me start with the Savings segment. In Unit Linked, assets under management are growing double digit, fueled by structural market growth. Top line margins are reduced by 4 basis points year-on-year. The bank delivers a weak fourth quarter caused by periodization of loan losses and reduced net interest rate income driven by lower margins on deposits. The bank will implement measures to actively improve the deposit base and continue to cross-sell to improve the income base. The bank delivers an ROE of 10.5% for the full year. Asset Management contributes very well in the quarter with strong performance in active funds and event-driven income from the alternatives business. The business delivers positive net flow and keeps the share of external capital at 54%, while internal capital is also growing strongly. Within insurance, the combined ratio for the last 12 months has fallen to 92%. This is down from 97% last year and 102% the year before. The full year improvement is in line with previous communication. And with implemented measures, we maintain our CMD guiding for a combined ratio at or below 90% for the full year 2028. Despite strong profitability measures to get back to the targeted levels, it's pleasing to see that churn is within normal variation and that the growth in premiums and market shares continues. Zooming in on the quarter, we still see strong growth and result development within retail, whilst we see more moderate results in corporate due to weak disability results in Group Life. However, I'm pleased to see that in the corporate P&C offering, it's continuing to scale at satisfactory profitability levels. In Guaranteed, results are satisfactory. The guaranteed reserves as a percentage of total reserves continue to fall. We deliver improvements to profit sharing in Norway and Sweden, in line with the levels communicated on the CMD in 2023. Over to the Other segment. The company portfolios in the Norwegian and Swedish life insurance companies and the holding company amounted to NOK 28 billion at the end of the quarter. The returns range from 3.1% in the Swedish portfolio to 4.8% in the Norwegian portfolio for the full year. Storebrand is funded by a combination of equity and debt. Interest expenses for the group amounted to NOK 175 million in the quarter, excluding hedging effects. Let me close off the results with a slide that zooms out a little, but represents a story many of you are familiar with. Both savings and insurance, which is the future Storebrand business model and the runoff business in Guaranteed are improving profitability. And the runoff business require less capital as it runs off. This means that we have produced improved cash results while we have spent excess capital to buy back shares. This has led to higher earnings per share and a significantly higher return on equity, a development we aim to continue in the years ahead. In addition, Storebrand has ambitious sustainability targets across the group. I will not go through this in detail now, but you can look forward to a comprehensive reporting in our annual report, which will be published in the middle of March. With the results we present today, we deliver on our 2025 ambitions, and we have excellent momentum in the group to deliver on our newly announced 2028 ambitions. And with that, I will hand it back to you, Johannes. Johannes Narum: Thank you, Kjetil. We're now happy to take questions from our audience. Johannes Narum: [Operator Instructions] The first question comes from Hans Rettedal Christiansen in Danske Bank. Hans Rettedal Christiansen: Congrats on a good end to 2025. And I was just wondering if we could dig a little bit into the results in the Savings segment and in particular, the asset management. And just wondering how much of that result we should kind of extrapolate going forward. Performance fees can obviously vary from quarter-to-quarter, but looking a bit away from that and thinking about the event-driven fees that you're reporting in Q4, I guess, net the Q4 result is up some NOK 100 million, which I guess is also attributable to that. Can you talk a bit about sort of what we should expect from ongoing fundraisings or planned fundraisings for 2026 and the impact of those -- that's the first question. And the second question is on the Unit Linked business, specifically the transfer balance, which looks again like it's sort of trending downwards. Just trying to triangulate your updated fee margin guidance given in the CMD. I'm wondering what sort of front book margins you're seeing now versus back book and when in 2026, you would expect the turn in the transfer balance for that business? Kjetil Krøkje: Thank you, Hans. Let's start with the Asset Management segment. Around NOK 150 million came from performance-related fees in the fourth quarter. In addition, we had around NOK 70 million in event-driven fees. Of course, looking forward and into 2026, we do expect some both event-driven fees and performance-related fees throughout the year. We have said that for AIP, we have now just closed a EUR 2 billion -- done a the first close of a EUR 2 billion fund, and we expect through the end of 2026 or early '27 to do the final close and do another EUR 1 billion in that fund. So that should affect the event-driven fees also in 2026. On the Unit Linked transfer balance, well, let's first start by saying that this is -- we're still in a structurally growing market. We grow this AUM base by 13% last year. And that being said, this has been a market where the pricing on risk has not been profitable for the last years. We have been very disciplined and priced it to profitability in our books. We have also seen a small part of the portfolio migrates to own pension account. And of course, we are very happy with our market share of 22% throughout 2025 in own pension account, but this is still lower than the around 30% we have in the occupational schemes. So these factors altogether explains the NOK 2 billion roughly transferred out in the fourth quarter. And again, we're not happy with it. It's not something we're pleased with. So we are, of course, working with measures here to make that transfer balance neutral and positive again throughout 2026. And I guess on the margin side as well, we can comment on that, 4 basis points down this year compared to last year. We gave a guidance on the CMD that the margins are expected to be in the 45 to 50 basis points range out in 2028. And I think the development we have seen this quarter points in that direction that we will be in that range when we come 2028. Johannes Narum: Thank you, Hans. We have a next question from David Barma in Bank of America. Please go ahead, David. David Barma: Two on the Insurance segment, please. First on Disability, where we've seen a deterioration of the trend in Q4. Can you run us through the measures and price increases you're putting through in that space. And in group life, in particular, are you able to pass everything through in your '26 renewals? And then on the retail part of the business, so Q4 appeared to be a really good quarter for the industry, but you're flagging that you took some reserve release in the period, implying the underlying profitability would have deteriorated a bit more compared to the last quarters. So can you talk about that, please, and how you're pricing compared to the market so far into the year? Kjetil Krøkje: Yes. No, I can start on that. And when we look at the Insurance segment as a whole, on the retail side, we've been hit by the Storm Amy on one hand, but we've also seen some runoff gains and a little bit lower large losses in the quarter than we normally would expect. On the other hand, we have had a reserve strengthening in the corporate segment that kind of takes it the other -- goes in the other direction. So all in all, the 93% we report in this quarter is a pretty good -- it shows pretty good the temperature on the -- of the underlying business. Odd Arild Grefstad: And we're very pleased, of course, to meet the target of 90% to 92% with a 92% combined ratio for the full year. Kjetil Krøkje: And when it comes to disability and pricing, we have sent through high double-digit pricing and based on the customer, quite high price increases now for this year's renewal. It's fair to say that disability is a long-tail business. It's been something we have had not the best results in over some time. So it's a really important focus area for us to be able to price this up at the right level or consider other measures to make sure that this does not -- will be a drag on the results also going forward. So it's an extremely important focus area for us internally at present. Odd Arild Grefstad: Yes, it's an important focus area for us and for the whole society in Norway with the disability. We see still high disability levels in the society. We have now priced our main portfolio in a way where we have profitability, especially the ones that is linked to our Unit Linked business, we see a healthy development. There is still some smaller portfolio, which we see long tail and need for, as we saw in this quarter, reserve strengthening, but that is minor portfolios altogether. And we work with different measures. We talked about price increases here, but we also have our well concept that we now have given -- delivered to all our 400,000 customers, where we have expertise in-house, medical expertise where we can also be very fast on delivering solutions for people that are in the phase of getting into sick leave or disability. And we see very promising results out of this system and this program. Johannes Narum: Thank you, David. We have a next question here from Roy Tilley in Arctic Securities. Please go ahead, Roy. Roy Tilley: So 2 questions from me. Just the first one on insurance. You announced a letter of intent with Knif a couple of weeks ago. Just wondering if you could say anything more about that company and what the plans are and whether or not you see a merger is likely at some point, it's a small one, but still interesting. And then just secondly, I saw some news that you are moving Kron, the customers to the Storebrand platform. And to my understanding, at least initially, it means that the available mutual funds on the platform will drop from around 500 to around 80. So just wondering if you've seen any pushback from customers on that switch or what you're hearing from customers from the group. Odd Arild Grefstad: Yes. I should start on Knif. First of all, it's very early days, of course, in the development of this relationship. We are looking into that as we speak. But it's very interesting to see. Knif is a company or a system that has a very strong position within the nonprofit sector in Norway and have different financial solutions for the nonprofit sector. As a part of that, also an insurance company that has around 1% point market share within corporate insurance. And around 0.3% market share within retail and premiums around NOK 800 million. And of course, with Storebrand's very strong synergies, especially on capital when it comes to insurance, this is an interesting company for us to also have a cooperation with. And we think also that they have a position within the nonprofit sector that can be broadened and can be a very important element for growth within that sector for Storebrand with a broad overview of our products. Kjetil Krøkje: And on the move from Kron to the life insurance company, this is only the pension customers that we -- that are moved to the regulatory platform of Storebrand Life Insurance. All interaction will still happen on the Kron platform, so that's important. And all the savings customers in Kron using Kron for mutual funds, et cetera, they will still have the wide fund offering that they have today. And then we are building up a wide fund offering also through the platform in Storebrand Life Insurance. There has been some moves out in connection with the move, but not anything significantly. And we still think that they will have a market-leading both solution with Kron as the platform and with the Storebrand as the actual provider in the back. So, so far, so good. Odd Arild Grefstad: I think more than 90% of the customers that moves over to Kron, we had 2 solutions now for pension, and we merged that into one solution that is the leading solution we have from the life insurance company and 90% coming for the more fund-based solution will have the same fund selection when they move into Kron. And for the ones that has some special funds that we see that there is not a part of this platform today. We add some funds to cover up for that. And altogether, I think we meet the expectations in this portfolio in a very good way. Johannes Narum: Thank you, Roy. We have a next question from Farooq Hanif in JPMorgan. Please go ahead, Farooq. Farooq Hanif: My first question on insurance. Would you be willing to give some sort of guidance on the pathway to less than 90% for 2026. There's always a tension between pricing, profitability measures and your desire to grow share. So can you explain or help us with where you are in that journey in 2026? And then turning to remittances. I mean, you did flag extraordinary remittances in 2025 at your CMD, and you're guiding towards remittances being closer to the net cash result in future years. But when you say closer to, are there any other pockets of surplus capital that might still come through that you could talk about in the remittance ratio in '26. Kjetil Krøkje: Well, let's start with insurance. We've said that we should be at 90% or below in 2028. And the way we see it is that, that will be a gradual improvement from now and until 2028. And it's also fair to say that insurance business fluctuates a little bit, so there might be some fluctuations around that straight line. So that is kind of the best expectation we have for 2026. Odd Arild Grefstad: But then again, delivering 92% now for the full year 2025 means that we are very well in line meeting that target. Kjetil Krøkje: Absolutely. And when it comes to remittance, as you said, it is stronger this year. And one of the reasons for that is both the fact that we are in the last year on nonpayable tax that would, all else equal, reduce remittance with some NOK 0.8 billion next year. And also the fact that this year was changes in the standard model in the bank that released capital as we went over to CRR3. So the main pockets of remittance capacity in this system comes from either earnings or from the capital that are in the life insurance companies. And I think we've given a pretty clear guidance that, that will be NOK 1 billion above the results also for next year. So I think that's the best expectation we can give for now, Farooq. Farooq Hanif: And if I may just quickly return on insurance. No change, I guess, in your ambition to grow share here at the current pace? Odd Arild Grefstad: No, I think we feel that we really are a challenger in this market. And with 4 large competitors in the Norwegian market, we really feel that we have a good momentum, a very strong brand name and the opportunity to grow our market share with profitability in this market. Kjetil Krøkje: And as we have said many times, it has to happen with profitability and with the profitability targets we have set, but it's still a good market to grow in. Johannes Narum: Thank you, Farooq. We have a next question from Thomas Svendsen in SEB. Thomas Svendsen: Two questions from me. First, on this agreement with Santander. I guess they have a large market share of car financing in Norway. So what was your value proposition. Why did you win over competition to get this deal? And also, do you see more opportunities, distribution opportunities in the car channel? Kjetil Krøkje: So I guess on Santander, we have been in dialogue with them for a while. It's obviously both the fact that we are now a larger and more robust P&C setup. So we could be a full partner with Santander in -- together with them, offering good services to the customers. And obviously, it's always a discussion about price. It's a discussion about service levels where we were deemed to be the best partners. Odd Arild Grefstad: I also want to mention, I had my own meetings with them actually. And what they also tell us is that the Storebrand brand name is an extremely strong brand name, as you know, for insurance, makes it easy for the dealers out there to also use that brand name in connection with car financing. Kjetil Krøkje: Yes. And when it comes to other opportunities, I think this is a significant one. We're always having our eyes and ears open, and we are exploring some other dialogues, but we will revert to that if something materializes. Thomas Svendsen: And then the second question on the bank there. So should we expect you to sort of have this loan loss charges or impairment charges every Q4? Or should we expect more equal charging throughout '26. Kjetil Krøkje: Yes. No, I think when you look at '24, we had more equal charging throughout the year. This year, we were at the same nominal level of loan losses for the full year, but it was back-end loaded. I think going into 2026, I would expect it to be more equal throughout the year. Johannes Narum: We have a next question from Michele Ballatore in KBW. Please go ahead. Michele Ballatore: So 2 questions. So the first is going back to Non-Life. If you can maybe explore a little bit more in terms of the pricing trends, both in retail and in corporate, if there is any -- I mean, I guess the claims environment is pretty good. I mean, is there any sign of softening that you see or anticipate for maybe the second half of 2026. So this is the -- as I said, both in retail and corporate. And the second question is about -- I mean, we have seen in the past couple of days, the impact of news about AI in asset management hitting pretty strong on asset managers. So it's debatable if it's a threat or if it's an opportunity. I just wanted to have your view on this. Kjetil Krøkje: Yes. I can start on the pricing. What we see in insurance, and this is both in retail and corporate is that we've been through a pricing cycle now in the Norwegian market with extremely high inflation, both driven from the currency movements with a weakened NOK and the general value chain disruptions that happened after COVID, leading to high inflation on car parts, building parts and more. In addition, we were hit by higher frequency in the Norwegian market, arguably driven by the large proportion of EVs in the Norwegian car market. So what we have seen that we've gone from years with almost 20% increase in prices at the highest point to a downward trend where over time, we expect the pricing within insurance to go back to a more inflation plus like pricing. We're not there yet, but that is what we expect to happen over time. Odd Arild Grefstad: And your question on AI, was it the use of AI within asset management or. Michele Ballatore: No, it was more -- I mean, there is a debate on the market, especially when it comes to asset managers, especially in the past couple of days about is this a competitive force? Or is it an opportunity? Because it looks like from the market reaction, people are worried -- more worried about the, let's say, incumbents. Kjetil Krøkje: Yes. No, I think you see a couple of examples. You see it in insurance. You saw some trends in Australian insurers with new services going up where you get custom quotes on insurance through AI-based platforms. You've also seen similar things in asset management. That obviously, like I remember earlier, the risk of kind of big tech moving into finance, that is still an ongoing threat that can take many forms. We don't see a lot of it concretely right now, but it's obviously on our strategic radar. And then on the other hand, I think when we work with AI internally, just as Odd Arild mentioned with the Chatbot and more, we see quite interesting opportunities for scaling both customer dialogue kind of directly, but also down in settlement processes and these kind of processes, which are quite labor-intensive today, but where you can scale the business without really adding much new people, but adding new AI-based tool. So it's a little bit on both sides that it's both potentially a threat to some part of the business model, but also a lever where you can drive operational efficiency. Johannes Narum: Thank you, Michele. We have a follow-up question from Hans in Danske Bank. Please go ahead, Hans. Hans Rettedal Christiansen: So I just wanted to go back to the Slide #13 on the liquidity bridge that you have and you provided -- you say that you're going to have NOK 5 billion in liquidity by year-end. I think you previously said you want to have somewhere between NOK 3 billion and NOK 4 billion in the holding company at any given time. So you have sort of NOK 1 billion to NOK 2 billion more at year-end. So going back maybe to the previous question on Knif, it's not completely obvious to me exactly what kind of discussions that you're having there is? Is that part of the capital allocation sort of split given the liquidity bridge and sort of what price expectations are there, there? And maybe just linking that to what your liquidity expectation or capital allocation plans are for going into 2027. Odd Arild Grefstad: Well, let's start on that. First of all, you see we gave the guidance now in our Capital Markets Day, both around, of course, as we have done for a long time, solvency and over capitalization and also targeted levels with a soft closing around that for liquidity. Very pleased now to announce another year with a 15% increase in dividends and also an increase now in share buybacks this year. Then we expect, but it's still to see coming through high remittance and a very strong liquidity positions year-end 2026. That is, of course, both possible to use for -- if we need to support any subsidiaries, if we do a bolt-on M&A as Knif might be one-off, but also another set of flexibility for the Board to make the decisions around capital allocation by year-end 2026. So that is how we view it. We have clear guidance now for what we have said. And then if we have this NOK 5 billion, that gives a good starting point for the discussion with the Board, I think, a year from now. Hans Rettedal Christiansen: Just to follow up on that, the sort of -- your hope is to acquire Knif at some point throughout the year. Odd Arild Grefstad: It's very early days. We have started to look at Knif now and have a good relationship with them. We think a combination of insurance company with Storebrand can be a good thing to do. As I said, altogether around NOK 800 million in premiums. That can give you an indication, of course, of the size. And if you know the metrics, also the price for a company like that, but that is where we stand today. Johannes Narum: Thank you, Hans. We have a follow-up question from Farooq in JPMorgan as well. Please go ahead, Farooq. Farooq Hanif: I'm aware this is a bit of a silly question I'm going to ask now for an earnings call. But can you talk briefly about what you're doing about this autonomous cars debate and remind us again of your share of car in your retail business versus other lines? Kjetil Krøkje: Yes. I can start. Well, the facts, I think, is around 8% now in market share on cars in the P&C lines. I think the development we have seen now in Norway is that autonomous cars hasn't really come here yet as this is not regulatory approved. It's probably one of the hardest places to do fully autonomous cars due to the geography and the winters we have here in the North. But obviously, at some point, you will have more driver assistant and maybe also fully autonomous cars going into Norwegian roads. And then there's always the debate on what will that do to claims ratios? Will OEMs take a larger share of the market. I think all we can do is to position ourselves well, both towards the OEMs and towards the end customers and continue to work with both to make sure that we are an important part of the value chain going forward. I don't know, Odd Arild, if you have. Odd Arild Grefstad: No, that's fine. Johannes Narum: Thank you, Farooq. It looks like we've covered all the questions. So that wraps up today's presentation. We look forward to seeing you again on the first quarter result presentation on April 29. Thank you for attending, and goodbye.
Operator: Welcome to Assurant's fourth quarter 2025 conference call and webcast. At this time, all participants have been placed in a listen-only mode. The floor will be open for your questions following management's prepared remarks. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session. It is now my pleasure to turn the floor over to Sean Moshier, Vice President of Investor Relations. You may begin. Sean Moshier: Thank you, operator, and good morning, everyone. We look forward to discussing our fourth quarter and full year 2025 results with you today. Joining me for Assurant's conference call are Keith Demmings, our President and Chief Executive Officer, and Keith Meier, our Chief Financial Officer. Yesterday, after the market closed, we issued a news release announcing our results for the fourth quarter and full year 2025. The release and corresponding financial supplement are available on assurant.com. Also on our website is a slide presentation for our webcast participants. Some of the statements made today are forward-looking. Forward-looking statements are based upon our historical performance and current expectations and are subject to risks, uncertainties, and other factors that may cause actual results to differ materially from those contemplated by these statements. Additional information regarding these factors can be found in the earnings release, presentation, and financial supplement on our website, as well as in our SEC reports. During today's call, we will refer to non-GAAP financial measures, which we believe are important in evaluating the company's performance. For more details on these measures, the most comparable GAAP measures, and a reconciliation of the two, please refer to the news release and supporting materials. We'll start today's call with remarks before moving into Q&A. I will now turn the call over to Keith Demmings. Good morning, and thank you for joining us. 2025 was an exceptional year for Assurant. Keith Demmings: Marking our ninth consecutive year of profitable growth. Our business model continues to outperform, supported by disciplined investment in innovation across lifestyle and housing businesses. These investments are delivering simpler, faster, and more consistent outcomes for clients and are reinforcing a strong foundation for long-term value creation. In 2025, we delivered another year of double-digit growth, including 11% for adjusted EBITDA and 12% for adjusted earnings per share, both excluding catastrophes. Including catastrophes, adjusted EBITDA and adjusted EPS grew 16-19%, underscoring the strength and resiliency of Assurant. At the core of that performance, and what truly differentiates us, is our people. Around the world, our teams show up every day with a relentless commitment to clients and customers. Their dedication continues to elevate our market leadership. I'm proud we were recognized on Forbes World's Best Employers list, and we continue to be named amongst Fortune's America's Most Innovative Companies. These recognitions reflect a culture grounded in collaboration, accountability, and a drive to make a meaningful impact. Our results this year build on a multiyear track record of strong, resilient performance, highlighting earnings durability. Since 2020, adjusted EBITDA excluding CATS has increased by well over $700 million, representing an 11% compound annual growth rate. At the same time, adjusted EPS excluding CATS grew to $22.81 per share, delivering a high-teens compound annual growth rate. Over the last five years, we generated an average ROE of approximately 14% and a return on tangible equity over 30%. Together, our strong growth and financial return profile delivered a total shareholder return of 93% over this period. Turning to our operating segment highlights. In 2025, Global Life delivered mid-single-digit adjusted EBITDA growth, reflecting increased momentum in Connected Living and Global Automotive. We are positioning the business for additional growth by investing in innovation to expand programs and product capabilities for clients and end consumers. Across Connected Living and Global Automotive, we are transforming operations through our intense focus on technology, including artificial intelligence, to support clients, deliver efficiencies, and improve the customer experience. In Connected Living, adjusted EBITDA grew mid-single digits. Over the last two years, we prioritized investments that are delivering earnings growth and supporting expansion across client programs. In mobile, we added nearly 2 million protected devices over the past year through new programs and strategic wins. Today, we protect over 66 million devices globally. Subscriber growth remains strong, supported by the expansion of device protection programs globally, including with US device protection clients, who continue to win in the market. We also deepened key carrier partnerships this year. Early in 2025, we launched a new device protection plan with Verizon's fast-growing no-contract wireless provider, Total Wireless. As previewed on our third-quarter call, we expanded our T-Mobile relationship through a multiyear reverse logistics agreement and opened a dedicated state-of-the-art logistics facility. Looking to 2026, we see additional opportunities to grow with T-Mobile. We continue to be excited about the additional near-term opportunities within the reverse logistics space with other large US mobile carriers. Together, these examples reinforce our role as a long-term strategic partner within the carrier ecosystem. In retail extended service contracts, we continue to build momentum across appliances and consumer electronics, including the expansion of our partnership with Best Buy to support their Geek Squad protection program. Following our third-quarter announcement of this new program, we're now servicing the back book of existing protection policies, meaningfully increasing our scale as we focus on optimizing the program in the coming quarters. We also saw strong progress in financial services as we scaled our card benefits business with the completion of the first full year of our partnership with Chase Card Services, supporting benefits for millions of cardholders nationwide and also recently expanding our relationship in the UK. This past year, Global Automotive also delivered mid-single-digit earnings growth in what was a significant year for the business. We expanded our presence with national dealer groups, third-party administrators, and OEMs, now protecting 57 million vehicles, nearly 2 million more than last year. After several key wins throughout 2025, we launched a new partnership with a top 25 dealer group in the US and renewed a key national dealer partnership. We also accelerated progress in heavy equipment and lease and finance businesses, adding four new partnerships with heavy equipment manufacturers and renewing 10 agreements with key lending partners. Entering 2026, Global Auto is well-positioned with momentum across major channels. Turning to global housing. Adjusted EBITDA grew double digits, excluding catastrophes, with earnings surpassing $1 billion, more than doubling since 2022. This year demonstrated the differentiated profile of our specialized housing business, achieving a very strong underlying combined ratio of 80% excluding favorable prior year reserve development. In homeowners, our lender-placed business continues to serve a critical role in the US mortgage market. As the voluntary homeowners market has hardened, more homeowners rely on lender-placed insurance to protect their homes. This drove a 5% increase in in-force policies year over year. During the year, we renewed four major lender-placed partnerships representing more than 4 million loans tracked. We see clear opportunities to expand our market position in 2026. In renters, our technology-enabled services, including our Cover360 platform, continue to differentiate Assurant in the marketplace. We delivered meaningful top-line growth and increased renters policies by 15%, supported by onboarding a new portfolio that expanded our footprint and unlocks future growth potential. We reinforced our market position by signing several new PMCs and renewing key partnerships, including three of our top five partners. Overall, our market-leading positions in scale and housing allow continued technology investments leading to attractive expense and combined ratios while providing an exceptional experience for both our clients and customers. Across Assurant, we executed against our priorities that remain central to our strategy. This year, we expanded offerings and attachment rates with existing partners, won new clients globally, and continued to invest in core markets where we see long-term value creation. These examples show how leading with insight, challenging convention, and delivering with discipline help us and our clients win and redefine the boundaries of protection in the market. We were excited to announce our new relationship with Compass International Holdings. We recently signed a long-term agreement across six of their US real estate brands. This launch expands our total addressable market in home protection and extends our reach directly into the real estate channel, making Assurant home warranty available to hundreds of thousands of affiliated agents across participating Compass International Holdings brands. We see a clear path to long-term leadership in home warranty, driven by three core advantages. First, we have a proven track record of executing successful channel expansion by partnering with market-leading clients and building solutions aligned to their strategic objectives. Within Assurant home warranty, we're applying the same highly collaborative operating model and senior-level engagement that enabled us to scale and differentiate our mobile business. As a result, we're already seeing growing interest across the broader real estate ecosystem and from existing Assurant partners who view home warranty as a natural extension of their customer relationships. Second, we're leveraging our global capabilities at scale. We bring decades of experience managing service networks, underwriting risk, administering claims, and supporting customers across mobile, auto, and home protection. Our ability to integrate seamlessly into partner workflows reduces friction for agents and delivers more consistent, reliable outcomes for homeowners. Third, and most importantly, we deliver exceptional customer experiences. Historically, home warranty has been defined by complexity and inconsistency, creating friction for both homeowners and agents. We believe the market opportunity will grow by earning trust. Our solution is built around customer-first claims resolution and a nationwide network of service professionals focused on quality and reliability. Ultimately, bringing greater clarity, simplicity, and confidence, giving agents a solution they can stand behind, homeowners a reason to renew year after year. Taken together, these strengths reinforce our confidence in our path toward leadership in home warranty and our ability to scale over the long term. As we begin 2026, we expect increasing momentum in Global Lifestyle, with high single-digit earnings growth anticipated for the year, and continued underlying strength in global housing. While we continue investing in home warranty and other strategic priorities, we expect to deliver strong underlying results as we execute our long-term strategy. Before turning the call over to Keith, I want to thank our clients for their trust and partnership, and the entire Assurant team for their tremendous work throughout the year. Your dedication and commitment to excellence define who we are and position us for another strong year ahead. Keith, over to you. Keith Meier: Thanks, Keith, and good morning, everyone. 2025 was definitely another outstanding year for Assurant. Through the commitment of our teams, we executed on key priorities and reinforced our market-leading positions with strong financial performance across housing and lifestyle. Our performance was underscored by yet another exceptional year in global housing, where we delivered 15% adjusted EBITDA growth excluding reportable CATS, representing our third consecutive year of double-digit earnings growth. Within Global Lifestyle, earnings grew across both businesses, supported by new partnerships and programs in Connected Living, and continued loss improvement in global automotive. At the same time, we invested in partnerships to drive value for all stakeholders, advancing our innovation roadmap and strengthening product differentiation. As we leverage global technology to create customized new products and unlock new growth paths. This was capped off by our entrance into the attractive home warranty market, where we see a path to market leadership. We're excited about our trajectory heading into 2026. Before getting into this year's outlook, let me start by highlighting our fourth-quarter results beginning with Global Lifestyle. Fourth-quarter adjusted EBITDA increased 2% compared to last year, with year-over-year growth impacted by an unfavorable $7 million non-run rate mobile inventory adjustment in Connected Living. Excluding this item, Global Lifestyle's underlying adjusted EBITDA grew 6%, or $11 million. Within Connected Living, underlying EBITDA growth was 7% or $9 million, led by global mobile device protection programs and modest growth in mobile trade-in programs. The strength of our mobile device protection programs was supported by subscriber growth across the US and with our international clients. In global trade-in, we continue to see higher contributions across US mobile. Our trade-in and reverse logistics business has benefited from the use of robotics and AI to assess mobile device quality and process trade-ins with greater speed and consistency. This has presented a powerful opportunity at facilities like our innovation and device care center near Nashville to support higher average selling prices and create more value for our clients and end consumers. In global automotive, adjusted EBITDA increased 3%. Prior rate increases and enhancements to claims processes continue to improve loss experience. Our guaranteed asset protection or GAP product also improved in recent quarters as we proactively reduced claims risk. For Global Lifestyle, our net earned premiums, fees, and other income grew 7%, primarily driven by connected living growth from mobile protection and trade-in programs and the recent launch of our partnership with Best Buy to support their Geek Squad protection program. Moving to global housing. Fourth-quarter adjusted EBITDA was $276 million, including $9 million of reportable catastrophes. Excluding CATS, adjusted EBITDA increased 3% to $285 million. After considering impacts of lower prior period reserve development, underlying growth was 8%. Results benefited from continued top-line growth in Lender Place due to higher in-force policies and average premiums, specialty products, including our manufactured housing business, also contributed to growth. Finally, our liquidity position at year-end was $887 million, providing flexibility to continue to invest in growth, return capital to shareholders, and support future opportunities. This quarter, we returned $138 million to our shareholders, including $94 million of share repurchases and $44 million in dividends. This brings our 2025 share repurchases to $300 million, ending at the top end of our expected range. As we enter 2026, with an attractive valuation, we've repurchased an additional $30 million through February 6. We'll continue to evaluate the best uses of capital using a disciplined and balanced approach. During 2025, we completed four small acquisitions to enhance our products and capabilities. This included the fourth-quarter acquisition of RL Circular Operations, a reverse logistics division of TIC Group based in Australia and New Zealand. This acquisition will help us bolster our reverse logistics capabilities through AI-based technologies, which we'll look to deploy across other regions. Additionally, in November, we increased our dividend by 10%, marking our twenty-first consecutive year of increases. Let's move on to our outlook for 2026. We expect full-year adjusted EBITDA and earnings per share to be consistent with 2025 levels, both excluding CATS given the $113 million of favorable prior year reserve development within our 2025 results. Excluding this impact, we expect mid to high single-digit growth in both adjusted EBITDA and earnings per share excluding CATS. To deliver these objectives, we expect to generate EBITDA growth of over $130 million, overcoming the $113 million of 2025 prior year development and incremental investments for Assurant home warranty in 2026. We expect Global Lifestyle to lead the underlying growth of the enterprise with high single-digit earnings expansion. Connected Living growth is expected to be driven by continued optimization of new programs, expansion with existing clients, and contributions from recently announced new programs and capabilities. Global auto is expected to grow from higher investment income, continued loss improvement, and growth of global partnerships. Turning to global housing. We expect solid underlying growth, excluding the favorable 2025 prior year reserve development of $113 million. Consistent with our past approach, our 2026 outlook does not contemplate additional prior year reserve development. In lender-placed, we expect growth to be driven by higher tracked loans from expected new client wins and the continued hardening of the voluntary homeowners market. From a placement rate perspective, anticipate some quarterly fluctuations from client loan movements during the year. For our 2026 catastrophe reinsurance program, we are currently working through the placement, which will be effective on April 1. Overall, we expect a similar structure to our 2025 program, maintaining robust coverage at both the top and bottom end of our program. Our annual CAT load assumption for this year is estimated to be between $180 million and $185 million. We'll provide additional information on the program on our May earnings call. For Corporate, we expect an EBITDA loss of approximately $140 million, which includes incremental investments related to Assurant home warranty. We currently expect this to be our most substantial organic investment across Assurant 2026. From a capital perspective, strong cash generation creates flexibility, enabling us to reinvest for growth, including M&A, and return excess capital to shareholders. After a strong year of repurchases, expect our 2026 repurchases to be in the range of $250 million to $350 million, subject to M&A as well as market and other conditions. This represents an increase from last year's range of $200 million to $300 million, demonstrating the confidence we have in business growth and our ability to generate meaningful cash flows. Our full-year results and financial performance, commercial momentum, and our outlook for 2026 reinforce the strength of our businesses and the value we bring to all of our stakeholders. With that, operator, please open the call for questions. Operator: Thank you. The floor is now open for questions. If you'd like to ask a question, please click on the raise hand button which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk and then you'll hear your name called. Please accept, unmute your audio, and ask your question. We'll wait one moment to allow the queue to form. Our first question comes from Charles Lederer at BMO. Please unmute your line and ask your question. Charles Lederer: Morning, Charles. Good morning. Hey. Good morning. I guess I wanted to start with I know you don't like to anchor to the written premium KPIs, but I wanted to kind of understand the Connected Living growth in the context of the guidance. So we can see the written premium growth accelerated in Connected Living to 48% from 21% last quarter and 9% the quarter before that. But guidance for the Lifestyle segment is mid- to high single-digit EBITDA growth. Can you help us unpack that? What's offsetting the premium growth? Is it slower earn-in of the premium? Is it growth in lower-margin business? Or are there underlying investments offsetting that premium growth? Thanks. Keith Demmings: Great. Thanks, Charles. Maybe I'll start with a couple of high-level comments, and then Keith Meier can jump in. I mean, I think we are pleased as we look at 2026, certainly, relative to the overall outlook, but particularly with the lifestyle growth leading the organization next year. And we do expect growth in both connected living and auto. So that's really, really good to see and obviously coming off of mid-single-digit in both this year. And you're right. I mean, we've had a lot of investment in the business. We've launched a lot of new client programs. We're scaling results, and you've seen a lot of growth in subscribers, 2 million subscribers up year over year. So that trend line continues as we head into '26 and certainly a big driver of the company's success and growth. But maybe Keith, more specifically on the revenue side. Keith Meier: Yeah. And I think we certainly have the momentum on the revenue side. You mentioned, is there an earnings aspect to that? And a lot of that especially in the fourth quarter, as we've expanded our extended warranty business, does have multiyear contracts in it. And we've brought on a book as well during the fourth quarter. So I think you'll see that earning through over the next couple of years. And I think it also just is another example of why we have the confidence to say that our lifestyle business will lead to growth into 2026. Charles Lederer: Thanks. And then maybe just on the outlook for PYD. I know you guys don't put it in your guide, but how are you feeling about I guess, you know, reserve confidence in housing and you know, have some of the tailwinds that have boosted that you know, KPI the last couple of years? Is that still there? Or any color there? Keith Meier: Yeah. I think we feel very good about the reserve position we're in. In our housing business. And so, you know, I think that's where it's hard to predict where that will come in into next year, but we certainly feel good about the reserve position as of the end of the year. And certainly, we'll share more of that as it evolves throughout the next few quarters. Keith Demmings: Yeah. And maybe I'll add a couple of comments, I think, into your point. We've had favorable development the last couple of years, you know, really pretty consistent in 2024-2025. When you look at the underlying growth in housing, year over year, it's certainly double-digit, you know, with and without considering PYD. So we're incredibly proud of how this business has performed. Talk about a business growing from just over $400 million in 2022 to over $1 billion in 2025 is truly remarkable. And as we think about next year, and this is probably the important message setting aside the PYD, you know, strong underlying growth continues. You know, we see loan growth, policy growth, AIB increases over the year. Probably a relatively neutral rate environment, low to mid-80 combined ratios for the year in 2026. So we're really proud of the business and how it's proven to be so resilient the last few years. Charles Lederer: Thanks. And I guess just one other follow-up. I think Keith Meier mentioned continued hardening of the traditional home insurance market. I guess, have you seen any signs of that trend abating? I guess, is that concentrated in specific geographies? Or you know, I think that's somewhat counter to some of the messaging in the market. So would love to hear more of your thoughts there. Thanks. Keith Meier: Yeah. Sure. What we've seen most recently is a similar trend to what we saw throughout last year where we're growing certainly in California. We're also growing in the Midwest as well. And then that's actually offset a little bit by where in Florida, it was flat to maybe a little bit down in Florida. So overall, we are seeing the overall mix being positive. And not only that, but the places where we're getting the growth are very good for our overall long-term stabilization and how we think about not having as much risk in Florida. So we're really happy with the way the business is growing. Keith Demmings: Thanks. Thank you. Operator: Our next question will come from Jeff Schmitt with William Blair. Please unmute yourself to ask your question. Jeff Schmitt: Morning, Jeff. Hi, Jeff. Keith Meier: Hi. Good morning, Keith and Keith. Jeff Schmitt: Question on the home warranty business. Could you discuss the size and cadence of investments that you're planning for that business in '26? And was there much invested in '25? Keith Demmings: Sure. And we had signaled at the third quarter that the delta in terms of the increased expectation in '25 in the corporate line was driven by some of the investments in home warranty, which started to scale as we went through the year. I would signal probably $15 to $20 million of incremental investment in '26. You see that showing up in the corporate line as $140 million in '26, it was $124 million this year. So that gives you a sort of an order of magnitude of the investment we expect. And yeah, we're super excited about this opportunity. It's a great long-term growth vector for the company. I think we're incredibly well-positioned and to be launching our solution with a market leader as we're doing, I think, is incredibly exciting for us. Jeff Schmitt: Okay. Great. And then one more on home warranty. What geographies are you starting in there, and then how have you gone about, you know, sort of building out the contractor network in Salesforce there? Is it all new third-party contractors? Like, how many sales agents did you hire? Thanks. Keith Demmings: Yeah. So we're in the early rollout phase, I would say. We're rolling out across six brands. These are the legacy anywhere brands. Coldwell Bankers, Century 21, Sotheby's, Corporate Homes, ERA, and Better Homes and Gardens. And we're in the process of rolling out as we speak to all of the affiliated agents across the country. We're rolling out nationally. We're seeing sales come through every day. It's obviously going to grow as we continue to get the word out. We're deeply integrated into the buy flow, the transaction flow with our partners, and we feel really excited about the opportunity. And we've been investing in this business for a long, long time. We build service networks for a living. We serve connected homes. We serve appliances. Historically done some work in the home warranty arena. I think there's a great opportunity. We're incredibly good at leveraging technology, building out service networks, aspiring to raise the bar around customer experience, and that's exactly what our client is looking for, and that's exactly what this market is looking for. Jeff Schmitt: Okay. Great. Thank you. Operator: Our next question comes from John Barnidge with Piper Sandler. You may now go ahead with your question. John Barnidge: Hey, John. Thank you for the Good morning, John. Hey. John Barnidge: Good morning. Thank you for the opportunity. My first question, if we can maybe stick on home warranty, is that $140 million a new level we should be thinking about? Keith Meier: With the business located in corporate or do you think there's a reversion lower in the corporate loss beyond '26 in the investment period? Thank you. Keith Meier: Yeah. So I think you can think about it for this 2026 year, John. And then as the business scales, that's going to evolve. Hopefully, we can even invest more by adding more clients on as well. But as it stands now, we would be investing in '26, and then obviously growing that business over the coming years. And, you know, we have a long-term agreement. Typically, our agreements are three to five years. This is beyond that. So this is a long-term view of how we're looking at this market, and we're super excited about the entry we have with a leader in real estate. John Barnidge: Thank you very much. And my next question is on the Outlook. Understand it excludes cat losses, You give us an estimate for that. It also excludes favorable reserve development. And maybe going back to an earlier question, can you remind us on a per-share basis how much favorable reserve development helped earnings in '25? And what that would be what that $22.81 would be excluding that '25 favorable reserve development. Thank you. Keith Demmings: Yeah. So Keith Meier: I think the way to think about it is we had the $113 million of prior year development. And I think that's the part where we see strong underlying growth but it we do expect it to decline a little bit in relation to the $113 million, but the underlying growth being very, very strong. And then I think when you think about the overall company, in terms of our outlook, we're overcoming the $113 million of prior year development and the investments that Keith mentioned in home warranty, you know, those total $130 million. So that's the way that we combine those in terms of how we view being consistent with last year overcoming $130 million, John. John Barnidge: It's very helpful. Thank you very much, Keith. My last question a lot of your distributions b to b to c ultimately, Can you talk about AI, how you're incorporating that in your business, not just to drive greater margin? But ultimately actual top-line growth. Thank you. Keith Demmings: Yeah. I mean, I think, you know, as you mentioned, our business model is unique. We're obviously a highly specialized provider, and we're embedding into the transaction flows of our clients really across almost every product line, which is a fantastic position to be. We're really operating as an extension of clients. And I think for us, AI is a huge opportunity. Right? Whether it's driving customer experience, improving efficiency, you know, across the board operationally, but also in every department in the company. And then adding more personalized service. You know, how we think about personalizing products to target the interest of individual consumers, and then how we customize service delivery on a more personalized level. So there's a tremendous amount of opportunity, and a lot of it is all about how the customer is getting served. But Keith, anything you would add? Yeah. I think we're using it across multiple areas. Keith Meier: You know, when you think about driving revenue, we're using it to improve our products. Think about things like premium technical support where we're able to infuse AI to make that experience for the customer even better. In auto, we're actually helping our dealers to be able to sell better. So that's helping us in that revenue. Keith mentioned operationally, it's been very meaningful to us. And then even in our device care centers where we utilize robotics and AI to process our mobile phone devices, you know, you can see how we infuse AI across all of our businesses. Thank you. Keith Demmings: Welcome. Operator: Our next question comes from Mark Hughes with Truist. Please unmute yourself to ask your question. Good morning, Mark. Morning. Mark Hughes: On the home warranty business, when do you think it'll be material enough, I guess, to move out of the corporate and into connected living? Keith Demmings: Yeah. It's a great question. Hopefully, sooner than later, obviously. But you know, I think we're early, early days. Right? We just put out the announcement this week. We're super excited. It's a great opportunity to drive growth. You know, we'll shed more light on the progress as we get a couple of quarters under our belt, see what the sales volumes look like. And then at some point, you know, it probably does move out of corporate. Right now, I think it makes a lot of sense. It's being led by our chief innovation officer. Used to lead the Connected Living business, really drove our entry into the mobile space. We're trying to rerun that playbook. I think it's a pretty exciting moment, and it will move back into lifestyle at some point in the future. Mark Hughes: And you said there's some interest from your other partners perhaps in the warranty business. Could you expand on that? You know, which categories are we talking about? And what Yeah. I probably I probably won't Keith Demmings: I probably won't tip our hand too much in terms of the competitive market but what I would say is what we're trying to do in this space, how we're thinking about coming to market with our products and services, how we're trying to address pain points, and then aligning with clients. We're incredibly good at b to b partnerships and having that partner mindset in everything we do. We operate with incredible transparency. And I think our clients are really interested in doing more around home warranty. So we've had quite a number of conversations across real estate and also with many of our affinity partners, and I definitely think there's a long-term place for Assurant in this marketplace. In multiple different ways. Keith Meier: Yeah. I think we're pretty optimistic about the opportunities we have ahead in home warranty. You know, Keith mentioned the progress we had made on mobile from the early days to today. You know, reminds me also of how we entered into Japan where we were able to align with one of the market leaders in Japan. That became a very successful business for us. Similar to home warranty leveraging our global capabilities and technology, and, you know, now Japan has a lot of growth opportunity for us over the long term, and we think home warranty will be another growth vector for us as well. Mark Hughes: And then in connected living, is revenue gonna grow faster than EBITDA or slower than EBITDA? Keith Demmings: That's a great question. I think what I would say is, you know, we do see high single-digit EBITDA growth in lifestyle. Strong contributions across connected living and auto. Obviously, we've had really nice revenue growth broadly. But I'm excited to be in the high single-digit growth range for that business. And we've got a ton of momentum and a lot of opportunity. Mark Hughes: And then just a final one, if I can squeeze it in. You'd mentioned reverse logistics with other large carriers. Would that be a new relationship, or is that the one you've already talked about previously? Keith Demmings: It would be something that we'd talk about more broadly in the future. You know, we're super excited with what we've built with T-Mobile. We highlighted it in the third quarter. We put a little more finer point on it this quarter. This would be with an additional client. We're doing more work around this category. We'll likely share more hopefully in May, I would think, on the next earnings call. But this is another place where I think we're creating market advantage. Leveraging technology, and there's a lot of opportunity to embed more deeply in the mobile ecosystem. Mark Hughes: Thank you very much. Keith Demmings: Yeah. Thank you. Operator: Our next question comes from Tommy McJoynt with KBW. Please go ahead with your question. Hey Tommy. Keith Meier: Hey, Tommy. Tommy McJoynt: Hey. Good morning, guys. Thanks for taking our questions. Maybe the first one on the global housing side. A number of state regulators, you know, have announced sort of the exploration of profit caps. Do you have a preliminary sense for whether or not any of those proposals could impact your business, for instance, in a state like New York that's been pretty vocal about it? Keith Demmings: Yeah. I think the one thing that we feel good about Tommy, is, you know, we do regular rate filings with all of the states and that's a very, very formalized process. There's a minimum requirement to file every certain number of years if losses and the profitability metrics are too favorable, then we file sooner. So I do feel like we're really well-positioned. There's a lot of regulatory scrutiny over the top of the lender-placed product. It's obviously very different from voluntary homeowners. It's serving a very different purpose in terms of what it's protecting and when it's valuable. So I do feel like we're in a good place with the product overall. Keith, anything you'd add? Keith Meier: No. I think that's the key is the fact that we are regularly in dialogue with each state and doing the regular filing. So you know, there really aren't any surprises going on when you're doing that. Tommy McJoynt: Okay. Got it. And then maybe a big picture one here. I want to just check in kind of what you guys are doing to make sure that you're staying on the forefront of what's happening sort of with the evolution of connected devices. You know, you've done a great job, obviously, on the smartphone, the mobile device. But to the extent that we see AI become more infused in other devices, you know, whether it be smart glass or earbuds or, you know, anything in the home. What are you guys doing to make sure you're staying on the forefront of being involved and integrated in the evolution of that technology? Keith Demmings: Yeah. I think, first of all, I think we provide protection around all consumer electronics and technology products. And as those products evolve, we're evolving our protection accordingly. You know, I think about the example we gave on what we're doing with T-Mobile in Texas is a great example where we're taking back all device types. In our facility. So that's wearables, hearables, cases, cables, screen protectors, etcetera. So, we're evolving as the clients' categories are shifting and making sure that we're able to process devices that we're able to dispose of them, appropriately, resell them, and obviously repair them. So I think we're really well-positioned, and this is what our team. We've got a lot of engineers that are constantly working with our clients to make sure we're fit for purpose. Keith Meier: Yeah. And I think when you consider we partner with the largest mobile player, largest consumer electronics player, the largest appliance seller, you know, we have deep R&D that is seeing all these products real-time and ahead of time as we're preparing to be able to outline the coverages that we would want to have for those products. So the nature of being able to be working with market leaders at the forefront of each of these industries, Tommy, I think is a powerful advantage for us. Tommy McJoynt: So you guys know what OpenAI's new rumored hardware devices? You guys have an inside scoop on that? Keith Demmings: Yeah. You'll have to ask your AI assistant. Great. Tommy McJoynt: Guys. Keith Meier: Thank you. Appreciate it. Operator: Our next question comes from Bob Huang with Morgan Stanley. You may go ahead with your question. Keith Demmings: Morning. Hey, Bob. Hey. This is Dan on for Bob. Can you guys hear me? Hey, Dan. Hi, Dan. Keith Meier: Yes. Yep. Dan Lakpano: Hi. Awesome. Great. Yeah. Hi. Good morning. Yeah. I guess my first question would be on I kinda wanted to ask about global lifestyle. You guys mentioned high single digits for 2026 for Global Lifestyle. How much of that earnings profile for this segment could we I just wanted to see ask maybe for that high single digits for point '26, how much of that would come from, like, new partnerships or issuance of new policies versus margin improvements? So how are you guys thinking about that? Would be my first question. Keith Meier: Yeah. Keith Demmings: That's great. I think, you know, when we look at lifestyle overall, at high single, I would say a couple of major drivers. Number one, like we saw in '25, we're going to see mobile device protection subscriber growth. We had 2 million subscriber increases this year. That trend line will continue into 2026. We also see great opportunity to optimize the new programs that we've launched and scaling the results from some of the investments we've made. So we've made a lot of investments in the business. In '24 and '25. Launching new programs. That will mature, and that will definitely be a big contributor to the profitability improvement. We've got continued momentum in auto as we get earned through from the rate increases and all the work that we've been doing on the claims side. And then we've got broad expense discipline that's contributing as well. So I think those are probably the big drivers in '26. Dan Lakpano: Great. Yeah. Thank you. And I guess my final follow-up would be on lastly, home warranty has, like, as the business gets built out, I guess I wanted to ask just overall your long-term aspirations for this product line and how that in terms of growth and earnings profile and how that might impact your overall earnings profile or margin profile for Connected Living. Keith Demmings: Yeah. I think our aspirations as you'd expect, are to be the market leader. Yeah. Where we typically get into categories, and we always say we want to be aspiring to be number one, you know, in some cases, we're settling to be number two. We don't want to be a distant player. A fragmented market. We want to be a leader and we want to define the market. And I think that's what we're going to try to do in the real estate sector and more broadly in home warranty. It's a phenomenal market. Had some incredible conversations with a variety of different clients and prospects, and it does feel like Assurant can make a difference in space. So I'm super excited. Keith Meier: And I think it's got a good margin profile, you know, long term if we look at that industry. So, you know, we see it being a meaningful contributor over time, you know, similar to the other businesses we have in Global Lifestyle. Awesome, guys. Thank you so much. Operator: Thank you. Our next question comes from Dan Lakpano with Dow Partners. Please unmute and ask your question. Keith Meier: Morning, Dan. Morning, Dev. Hey, guys. Can you hear me? Dan Lakpano: Yep. Dan Lakpano: Okay. Hey, guys. I don't mean to beat a dead horse, but on the home warranty business, I guess one more question. Following up on Dan's question. Who are the main competitors in that channel? How fragmented is the market? Keith Demmings: Is there a big player that you're looking to replace? I mean, the largest player would be Frontdoor with American Home Shield, but there are, you know, there's probably 10 or 20 different players across the market. And it's pretty fragmented. So there's a lot of and I think there's a lot of long-term white space to actually grow the overall category. To not just take share, but to grow the category as well. Keith Meier: Yep. And by the way, Dan, it's okay to ask more questions. We're pretty excited about our entry into home warranty, as well the way we've been able to launch with the market leader. Dan Lakpano: Great. Thanks. And any opportunities outside the real estate channel, maybe in retail going forward? You think that's an attractive market as well? Keith Demmings: Yeah. I think we'll, you know, we'll look work with potentially affinity partners. We do business with a lot of companies, as Keith mentioned, a variety of industries that relate to the home. So they'll certainly be opportunities to explore that, and, you know, we've got the kind of deep partnerships with clients where you know, they're always interested in new ideas. So there'll definitely be more of those conversations to come. Dan Lakpano: Great. And one more question, if I may. Just wanted to get some color from you on the items that you put below the line. In the quarter. The $29 million restructuring costs and the loss on subsidiary held for sale, of $11 million. Just curious if you have any if you can add any color on that. Keith Meier: Yeah. So on the restructuring, that was basically about a quarter of that was related to optimizing our real estate, Dan. Then we're also there's some more reductions in there that optimize our resource model to really drive operational efficiencies and automation, as well. But overall, I think it's important to do these things to then drive and fund important investments like home warranty, like our AI investments. And so, you know, I think it really sets us up to be putting our dollars to where it's going to make a big impact for us long term. And then I think you mentioned there's a subsidiary sale as well. That's basically an entity that has some old long-term care legacy business that is reinsured to well-rated counterparties, but yeah, I would say that is really another example of us fine-tuning our business portfolio to really focus on being the number one or two player in each market we serve and, you know, being able to have that part of the that particular entity being sold, I think, just allows us to continue to focus more on so many great opportunities we have. Dan Lakpano: Thanks for the color. Keith Meier: You're welcome. Thank you. Operator: Our final question today is coming from Charles Lederer with BMO. You may now ask your question. Charles? Charles Lederer: Welcome back. Thanks. Thanks. Can you hear me? I've got the okay. You can hear me. Right? Yeah. Okay. Sorry. Yep. Just going back to my question on the hard market in housing. Appreciate growth coming from California and the Midwest. I guess in the Midwest, is that growth more coming from hard market dynamics? Or is it new partnerships? Or something else? And I have one more follow-up. Thanks. Yeah. Keith Meier: Yeah. I think it's a little bit of the hard markets. I think it's also a reflection of the mix of the portfolios that we have. As well, Charles. So I would say it's a combination of both of those things. Charles Lederer: Okay. Thanks. And then on the share repurchase guide, I appreciate the growth year over year. I guess when I look at the excess liquidity you're holding, it's at the highest level it's been in a while. Guess, what's keeping you guys from having upside to that from having a wider range or a higher end? Thanks. Keith Meier: Yeah. No. And I appreciate you asking about our strong capital position. You know, we're really pleased with where we are, you know, holding $887 million at the end of the year. You know? And I think it really puts us in a position, Charles, to be on offense, which is exactly where we want to be. You know, we've mentioned that we and we also increased the share repurchases over last year's guidance. So we feel good about that. We also increased our dividend last quarter by 10%. So we're certainly making sure that we're returning excess capital to shareholders. But certainly our biggest priority is being in a position to drive growth organically. We talked about investments we're making organically. As well as doing M&A where we can really accelerate some of our strategy. So we feel great in terms of the position we're in, and, you know, we're in a position to take advantage of opportunities that present themselves. Thanks, guys. Keith Demmings: Very good. Alright. Thanks, Charles. And I think that wraps us up. So thank you, everybody, for joining the call, and we'll look forward to the next call in May. Everybody. Have a great day. Thank you.
Operator: Welcome to the Randstad Q4 and Full Year 2025 Results Conference Call and Audio Webcast. [Operator Instructions] I will now hand the word over to Sander van't Noordende, CEO. Mr. Sander van't Noordende, please go ahead. Alexander van't Noordende: Thank you very much, Alba, for that introduction, and good morning, everyone. I'm here with Jorge and our Investor Relations team to share our Q4 and full year 2025 results. First of all, 2025 has been a year characterized by great strides in our transformation, while I would say, navigating the cycle and demonstrating a resilient performance. It's also been a special year as we celebrated Randstad's 65th anniversary, a milestone reflecting our enduring commitment to being a true partner for talent. The market environment in Q4 was in many ways similar to what we saw throughout the year. We remain in a stagnant job market, but we see more resilience in Temp with good growth in Southern Europe, and we see further signs of an early cyclical pickup in U.S. Operational. As mentioned in the previous call, the Professional and Perm markets remain challenging, particularly in Northern Europe, while APAC remains resilient. Against this backdrop, we delivered solid results. We achieved revenues of EUR 5.8 billion and an EBITDA of EUR 191 million with a margin of 3.3%. For full year 2025, we delivered revenues of EUR 23.1 billion, 2% lower year-on-year, and an EBITDA of EUR 720 million with a margin of 3.1%. So I'm very proud of how our teams navigated their markets during the year with a consistent focus on delivery of results while transforming the business. So whilst 2025 was a challenging year, we came out of the year in a much better place than we went into it. First of all, from a growth perspective, we now have over 50% of the business in growth compared to around 25% at the end of 2024. From a profitability point of view, we reap the benefits of our cost discipline with EUR 181 million lower cost in 2025 than in 2024, and our recovery ratio was very strong at 71% for the year. From a productivity point of view, our focus on delivery excellence through our talent and delivery centers is making us a more [Technical Difficulty] organization. And as a [Technical Difficulty] we achieved 3% productivity gains in Q4 and 1% for the full year. This discipline led to a solid free cash flow of approximately EUR 600 million, further strengthening our balance sheet. In light of this, we will propose a dividend of EUR 1.62 or EUR 284 million, in line with our capital allocation policy. We started 2026 with stability in our volumes. Our exit rate in December was solid and the January revenue trend is flattish. Of course, we remain laser-focused on serving our clients and talents while steadily executing our partner for talent strategy. In Q3 and Q4, I visited all major countries, and on the ground, you can really feel the energy and excitement for our transformation. Our people get it and want to lead the market as we continue to move our business model toward a digital-first talent company where we deliver [Technical Difficulty] scale through our platforms. While there is still work to do, we are seeing the clear benefits of this transformation in how we run the business day-to-day. First of all, we continue to [Technical Difficulty] life sciences, e-commerce and logistics, health care and, of course, all the digital hot skills around AI, cloud, data and analytics. Together, these segments delivered EUR 9 billion in revenue this year, growing 2% year-on-year. Looking at our specializations. In Operational, we've seen good commercial progress and sustained momentum with an increase in clients' visits paying off. In Digital and Enterprise, we signed several new blue-chip clients in semiconductors and financial services. However, professional job flow was impacted by a combination of year-end slowdown and low hiring confidence. With our digital marketplaces generating approximately EUR 4 billion in annualized revenue, we are running the business at a higher clock speed. In Q4, we saw around 1.4 million shifts self-scheduled by our talent, an increase of 30% quarter-on-quarter. Clients and talent clearly like the new models. We will further accelerate our digital-first strategy, and that's why I'm very pleased to welcome David Koker, who will be Randstad's first Chief Digital Growth Officer. David knows how to build digital experiences at scale and brings over 25 years of experience in driving commercial and platform growth across Europe and Asia, most recently at Booking.com. Finally, none of this is possible without the best team in the industry. Despite the pace of change, our employee engagement remained above benchmark at 7.7. And we also continue to invest in our people's future by providing AI readiness training to all of our colleagues. And you will understand that with everything we've done in 2025, both operationally and strategically, we couldn't be better positioned for a more complete recovery with profitable growth as we are more specialized, more digital and more efficient. Jorge, over to you. Jorge Vazquez: Thank you, Sander, and let me shed some extra color on our results. So good morning, everyone. All in all, we saw a continuation of the trends observed throughout the year. And always first from a momentum perspective, once again, the seasonal pattern continued as we added 15,000 talent working sequentially since Q3, again, versus 10,000 last year. Earnings-wise, Q4 and Q3 were very similar. It was somewhat of an erratic quarter, I would say, in what was overall a step towards a stronger exit rate in December and the start of January. That is encouraging, and we'll talk more about that later. We also continued to gain field productivity and materialized structural cost savings in indirect costs achieved even while increasing digital investments. Lastly, disciplined cash conversion, allowing us to balance deleveraging with shareholder returns in line with our capital allocation policy, and also more about that later. But let's start and break this down, starting with the regional performance now on Page 8. In North America, we continued to see good progress this quarter with a pickup in the industrial pockets of our business. In U.S., our Operational business grew 6%, significantly ahead of the market. And we see this as a very testament to our new way of working, centering on the digital marketplace and central delivery. Elsewhere, Professional is down 10% and Digital this quarter was flat, but with solid operational leverage. Enterprise was minus 3%, with demand in RPO becoming more muted as we reached year-end. Meanwhile, in Canada, we continued to grow. Permanent hiring showed also some signs of stabilization, albeit at a low level, declining still 14% as hiring confidence remains low. The EBITDA margin for North America came in at 3.6%, up 20 basis points year-over-year. This represents a recovery ratio of above 100%, meaning we've been able to expand EBITDA year-over-year more than the gross profit we lost with productivity continuing to increase in Operational. And now moving to Northern Europe on Slide 9. In Northern Europe, we continued to navigate challenging markets, though as we exit the year and enter 2026, exit rates in December and January suggest bottoming out or sequential improvement. In the Netherlands, organic revenue remained subdued at minus 7% with hiring freezes in government and large professional clients. Q4 [Audio Gap] this quarter an increase of the sickness provision, reflecting a rise in long-term sickness rates and going forward as well probably to stay relatively high, and a EUR 5 million one-off dotation into the new pension scheme. Looking ahead, the new Temp CLA and the Future Pensions Act, WTP, effective of January 1, will increase some of the wage components. It is still too early to tell what the legislation impact will be, but at first glance, we see higher bill rates offsetting some of the pressure on volumes. We also celebrate 1 year of the acquisition of Zorgwerk, which continues its impressive growth and synergies path, reinforcing our position in health care as a structural growth segment. In Germany, things remain challenging with revenue at minus 10%, driven still by subdued automotive, though manufacturing is stabilizing. More importantly here, our structural improvements on the cost side, as you can see, are paying off, ensuring a profitability base and positioning us for a stronger company into 2026. Belgium declined 5% with operation at minus 4% against tougher comparables. And finally, Poland, 7% growth, Switzerland, 6% growth, continued to lead growth, offsetting the subdued Nordics, still at minus 14%. And now moving on to the segment Southern Europe, U.K. and LatAm on Slide 10. France remains a story of a 2-speed market. On one hand, we see resilience in our industrial pockets, and this is most visible in in-house, which grew this quarter at 13%. On the other hand, the SME segment is still down double digits, leading to an overall operational decline of 4%. Professionals were down 14% year-over-year. And this quarter, health care saw sequentially less revenue, impacted primarily by legislative changes that came into effect in December. Our leaner structure enabled us to deliver an EBITDA margin of 5.4%, up 130 basis points year-over-year. Italy posted its seventh consecutive quarter of growth. Operational grew 6%. Profitability landed at 5.7%, reflecting strategic investments ahead of the Randstad talent platform rollout. Iberia remains a stronghold, plus 5%, led by Spain, up 6%, where growth investments are paying off. Elsewhere, the picture is mixed. The U.K. remains tough. And across these regions, conversion does continue to increase, resulting in a 3% EBITDA margin. And now let's move on to Asia Pacific on Slide 11. Japan continued its solid growth at plus 6%, and we continue to invest to capture structural opportunities, particularly in digital engineering, where we're growing 7%. India delivered double-digit growth as we continued to invest in growth segments, while Australia and New Zealand declined 7% against steep comparables in a subdued market. Overall, the EBITDA margin for the region came in at 3.3%. And that concludes the performance of our key geographies. But now let me walk you through our combined financial performance on Slide 13. Let's start with the revenue. So looking at the revenue mix, we see the trends of the last few quarters continuing. Operational specialization continued to improve throughout the year and is now flat. Professional and Digital remained broadly stable throughout the year, albeit still at a low level. In Enterprise, we saw after several quarters of solid growth in RPO, demand softening in this quarter, resulting in a 4% decline. If we move down, gross profit and OpEx remained very similar to Q3 levels, and this resulted in an EBITDA margin of 3.3%, stable sequentially and year-over-year. Underlying EBITDA came in at EUR 191 million, and it's worth noting that we again faced an adverse FX impact of around EUR 8 million. Adjusting for that, our operational profitability was very close to last year's level. Integration costs and one-offs this quarter amounted to EUR 34 million. And for the full year, one-offs totaled EUR 125 million with the largest focus on structural cost reductions in Northern and Western Europe. Regarding amortization and impairment, we recorded an impairment of EUR 9 million related to our digital business in Belgium, reflecting the ongoing weak market conditions there. Net finance income of EUR 5 million for the quarter, where fair value adjustments, reversal of impairments on our loans and financial commitments resulted this quarter in a gain of EUR 18 million, effectively offsetting our regular interest expenses for the quarter. The effective tax rate was 31% for the year, within our guided range. In 2026, we expect a similar tax rate guidance of 29% to 31%. And this all leads to an adjusted net income of EUR 135 million for the quarter. And with that, let's now dive deeper into the gross margin slide on Page 14. A few things about margin. So Temp margin was down 20 basis points year-over-year. Operational business remains more resilient versus Professional and Digital specializations. There we continue to see a geographical divergence with Northern Europe below group average and Southern Europe continuing to do better. And as we mentioned before, an adverse FX impact in 2025. Incidental items also took an impact in the Netherlands, as mentioned earlier, and that overall brought the gross margin in Temp down 20 basis points. Perm contribution was down 20 basis points as well with a little sign still of stabilization in key perm markets remaining challenging. In HRS and other, this quarter was flat. RPO decline, 3%, 4%, is pretty much in line with group level, therefore, not impacting the overall gross margin mix. This is the market at the moment. Overall, looking back at 2025, the impact of geo mix, enterprise clients and specialization mix with Operational being more resilient carries a Temp margin decline that will progressively unwind with different market dynamics. Which brings me to the OpEx bridge on Slide 15. And remember always, this one is sequential. Underlying operating expenses were EUR 880 million, once again, like throughout the year, moving in lockstep with gross profit. This means OpEx has stayed broadly in line sequentially, with seasonality and strategic investments offsetting cost -- offset by cost savings. The payback of the one-offs executed throughout the year remained well below the 12 months reference we normally provide. And the real story here is our 71% recovery ratio. Over the last 3 years, we have become structurally more agile. Our structural changes to how we conduct and support our business have improved our ability to recover the decline in gross profit by reducing operating expenses or to convert more of gross profit into EBITDA in the countries where we see growth. Today, we have more revenue also going through delivery centers. We have more parts of our process done digitally, and we have more and more revenue in our digital solutions. At the same time, in parallel, we continue to drive structural indirect costs down. Linking this back to our Capital Markets discussions in May, I am pleased to share that we've achieved north of EUR 100 million in net structural savings for 2025. And with that in mind, let's now move on to Slide 16, which we discuss cash flow and balance sheet. Turning to cash flow. Our underlying free cash flow for the quarter was a positive EUR 213 million, reflecting mostly seasonality. For the full year, free cash flow totaled close to EUR 600 million, up EUR 260 million year-over-year, reflecting good cash conversion, while year-end timing was supportive in 2025. DSO came in at 56.7 days, up slightly by 0.5 days sequentially. Net debt, therefore, decreased EUR 274 million year-over-year, and our leverage ratio now stands at 1.3. Consistent with our capital allocation, we proposed a regular dividend of EUR 1.62 per share. This reflects 64% of adjusted net earnings, which equals the floor when we temporarily exceed the 40% to 50% range. And that brings me on Slide 17. All in all, we see further volume stability, especially in our Operational business with 50% of the business in growth to continue, and for the remaining 50%, we see support by improving end markets or annualization of some of the sharper declines of last year. In concrete, we are encouraged by the revenue trends, with a better exit of the quarter than we started and January coming in at 0.4% decline per working day. Q1 2026 gross margin is expected to be broadly stable sequentially as we see more adverse effects and the lower Perm and RPO business offsetting some of the improved mix. Operating expenses are expected to be lower modestly quarter-over-quarter, and I believe it should be at least in the range of $10 million to $15 million, a reflection of our efforts taken this year. Lastly, the number of working days will be the same. For Q1, we stayed the course, balancing growth, strategic initiatives and then to protect relative profitability, although we never optimize for a quarter and we set ourselves for the year and the years to come. And to summarize, 2025 was an important year for Randstad, finishing better than we started and setting us up for a better 2026. In terms of growth, decline rates eased over the year, and we entered 2025 at minus 5% and we finished with 50% in growth, and in the rest, bottoming out. Started 2026 crossing the line in terms of growth. And more structurally, we continued to position ourselves where growth is, our growth segments, and successfully integrated Zorgwerk. In terms of field productivity, we continue to change how we work, digitizing more and with real revenue now flowing through our marketplaces in various countries and markets, with especially our Operational and Digital business marketplaces showing good progress. SG&A and indirect costs, we also took more than EUR 100 million structural costs that are now not coming back. In terms of profitability, the short-term plan was adaptability, but the long-term plan is about structurally building operational leverage and resilience, breaking the linear model, as we normally discuss, and the expectations that come with it. If anything, in 2025, we've become more structurally more agile and scalable, proven by the 71% recovery ratio and despite continued investments. This has allowed us to deliver strong adaptability and now set the performance frame for 2026. That concludes our prepared remarks, and we now look forward to taking your questions. Operator: The first question comes from Remi Grenu from Morgan Stanley. Remi Grenu: A few questions on my side, if I may. So the first one would be on organic growth. So good to see that it's trending in the right direction, I guess, going into 2026, but there is still a little bit of a gap with some of your competitors. So I'd like to understand how you would explain that gap and how you intend to bridge it. So is it about the necessity to reposition the business on more supportive segments? Is it about hiring more FTEs to generate volume? Or maybe a little bit of issue with the pricing positioning versus competitors? So just want to have your take on that competitive landscape and how you intend to bridge the performance gap. The second question is on what you alluded to in the Netherlands. So there is this Dutch law coming into effect in July, if I'm not mistaken. So I just wanted to understand if you feel like the employers -- I mean, the clients you're discussing with have already adjusted ahead of the change? Or if you feel that there could be additional pressure in the second half of this year? And if so, if it's possible to quantify it a little bit given the revenue exposure of the company to that country? And then the third one would be on your Enterprise business. So I think you said it was a little bit softer this quarter. What has driven that softness? Is it company-specific large contracts you would have lost or which would be ramping down? Or are you seeing largest employers being a little bit more cautious on hiring trend going into 2026? Alexander van't Noordende: Well, let me take a step back because, of course, it's all about growth here. So let me just sort of reflect on what's going on here. So let's maybe first make a few comments on Q4. As Jorge mentioned it, the way we see Q4 is that we had a little bit of a blip in a few parts of our business, and the blip was primarily in October and November because December and January have shown encouraging results. And I speak specifically about France, Belgium and Germany. And the story is with different reasons, more or less the same for those big 3 countries. In Enterprise, your question is a good one. The main issue in enterprise is that we have seen somewhat lower hiring in Q4, basically some of our larger clients putting on the brake, stepping on the brake, not stopping, but reducing hiring in Q4. We have, at the same time, signed up a bunch of new clients which we are bringing up to speed in Q1, and hopefully, the revenues for those clients will start to come through in Q2 and definitely in Q3. So that's sort of the Q4 reflections. Then if we look forward, we see that 50% of our business is in growth, and we are optimistic about the other 50% also improving from here on. What's driving that? Well, first of all, just sort of the macro headwinds are easing. Interest rates have been coming down. Inflation is easing. This whole thing about trade is more like the new normal. Clients are dealing with it, are knowing what to do, have taken their measures. So that's -- the uncertainty is somewhat dissipating. The labor markets are getting unstuck. We see more mobility. We see some people -- more people leaving, some layoffs even here and there. So there's more dynamics and more mobility in the labor market. All of that could indicate a cyclical pattern, if you will. Temp is definitely more resilient and North America operational is leading the way here. That's great. In Europe, as I said, in those big 3, 4 countries, we see an encouraging start of the year as well. So that's all positive, I would say. Then last but not least, and this is really important -- I mean, obviously, we have been building a more resilient and agile Randstad. And what does that mean? That means, first of all, a better experience for our clients and talents because that's why we are here on earth, that's how we make a living. But also all of that is fully focused on creating more leverage. So you have to realize that over the last years, we have been investing more than EUR 500 million in new processes, systems, talent centers, delivery centers, technology, and all of that is creating not only a better experience, but it's also creating more leverage in our business. That's talent centers. We have to meet the talents where they are, and the talents are online. So we have talent centers complemented with technology, increasingly AI, by the way, to get more efficient -- to be more efficient in getting talent in the door. That's delivery centers, the central delivery for clients that have multiple locations with dedicated teams focusing on improving the fulfillment at those clients. And the results that you see left and right are actually quite staggering. Then the DMP, and North America is a case in point. If there's one example of operational leverage, it's the DMP. If the client is asking for 100 people more, we can deliver those people -- we can deliver those 100 people more tomorrow with 0 marginal cost. That is how a DMP works, and that's extremely, extremely powerful. So all of that to say that we're steering the business in a very disciplined way, as you know. So we're aiming to do the same in 2026 as we have done in 2025, is steering with an ICR and IRR above historical levels, like we did in 2025, and you know we had 71%, which is, of course, something that we are extremely, extremely proud of. So in short, I would say I'm actually pleased to get another 4 years in Randstad because I haven't been more optimistic at the beginning of the year in my tenure in Randstad. And you may know the saying every dog has its day. I think my day as a dog has maybe come starting in 2026. So I'm optimistic. Jorge Vazquez: Just one -- Remi, your second question, if I'm not mistaken, was about the Netherlands. So just to be clear, the new temp CLA and the changes you were alluding to, they actually start on the 1st of January. We are working with our clients. It's a bit too early. I think, by and large, the increase we see in wage components, let's put it like this, will offset, if any, the volume pressure that we might see. But for now, that's what we are working on, yes. Operator: The next question comes from Andy Grobler from BNP Paribas. Andrew Grobler: Just the one from me and a follow-up. Just in terms of gross margin, could you talk a little around the underlying pricing you're seeing in the constituent parts? And essentially, to what extent is the downward trend in gross margin about -- just about mix versus like-for-like changes? And particularly on that, your guide into Q1, sorry, and the moving parts inherent within that? Jorge Vazquez: And let me basically just take a step and look at the full year and then how we enter 2026, because some of these things start potentially changing as we enter the year. So in terms of gross margin -- I mean, let's separate things. There's a service mix as always and then there's a temp margin. And I think we talk a lot about pricing, but I should also think I'll talk more about the market and the market we have today and how the industry is supporting different clients, different geographies and what we see. Today, we have a Randstad that from a geographical perspective has growth and is supporting more clients in countries where there's a slightly lower temp margin, think Spain, think Italy versus, let's say, the Central European countries. But that's basically a geographical mix. We also have a client base at the moment in an industry that is leaning towards a bigger share of large clients, think in-house, think very large enterprises. And that, of course, brings as well a client mix impact. And thirdly, and not the least, if you look at our specializations, and it's in line somehow with previous cycles that we've seen before. What is holding up better is clearly the Operational business. It's flat even at the end of the year, crossing into growth already. And we see the higher skilled specializations, think of professional, digital, still with, let's say, year-over-year declines. Meaning, again, the higher margin specializations declining and the lower margin specialization continuing to increase. Now this is the market we have today. And if I look at 2025, we have basically around, I would say, 60 basis points delta on our gross margin, if you kind of normalize it throughout the quarters. And I would say 40 basis points -- Andy, that's the mix. It's the market we have today. I don't like to talk about mix because this has consequences for OpEx, has consequence for everything. It's where we have market and it's where we are gaining, it's where we're going to operate. We also had an impact of 20 basis points from perm and a positive impact somehow from RPO as RPO was basically throughout the year growing faster than the group. That means approximately 60 basis points in 2025. If we now look at 2026, what is likely to happen, right? This 40 basis points from the temp side of things, so the geo, the client and specialization -- we don't really know, we want to grow everywhere. But clearly, they are starting to annualize or will start to ease. If there's growth, more growth in the U.S., if it continues to be supported in Southern Europe, one way or the other, some of the things will annualize in the higher-margin accounts, and we should start seeing things bottoming out on at least easing the comparisons that we had. The same with client mix. I can't tell you we want to grow in every single client segment, but somehow, if we look at previous years, once things indeed increase towards large clients, the years after start analyzing. And the specialization is the same. We're crossing over into growth and operational, but we still need to see how professional, how digital will evolve into 2026. Remember, we have pockets in digital. Look at United States, we're either in growth or flat. So it's already a very different start of the year than we had in 2025. And then perm, we continue still to count on 20 basis points, potentially 10 for now. We'll see how things ease throughout the year. RPO, Sander alluded to it. The positive impact has now in Q4 kind of faded away. On the other hand, it will be about balancing business as usual with new implementations. And the pipeline and FX adds particularly in Q1. And remember, a lot of the bigger fluctuations happened in Q2, Q3 and Q4. So as we now ease into the year, FX will have an impact in Q1 and not in Q2. So at least if things don't change, less in Q2, Q3 and Q4. So again, into 2026, we see pretty similar margin trends as 2025, and potentially as we go into the year, easing off in some of the components. Andrew Grobler: Okay. And just one follow-up in terms of the in-house sort of large clients versus SMEs. In fairly broad terms, can you talk about the difference in gross margin between your average in-house solution and your more sort of branch-led SME business? Jorge Vazquez: Yes. I would say, I mean, probably 10 to 15 -- it depends on the markets, right, Andy. Andrew Grobler: Yes, inside France, for example. Jorge Vazquez: 10 to 15 basis points roughly, I would say, on average at group level. I don't specify for country. Operator: [Operator Instructions] The next question comes from Rory McKenzie from UBS. Rory Mckenzie: It's Rory here. I wanted to ask about the impact of the digital marketplaces. How much do you think is visible in these numbers? If it's now annualizing at nearly 20% of revenues, you called out 1.4 million self-scheduled shifts. Can we see that at all in the North American growth rate? Do you think that's been a part of why you've seen that improve? Has it allowed you to protect margins more? Or really do you think we're still waiting to see more of those benefits over time as market volumes recover? I know there was another restructuring charge in the quarter as well. So maybe could you say how much of that is relating to kind of the structural reshaping compared to maybe adjusting to the market conditions? Alexander van't Noordende: Well, where can we see the impact of digital marketplaces in our numbers? Well, first of all, in North America, in Operational. I think that part of the growth is because of our digital marketplaces, because once clients ask more, we are much faster and at much lower cost, of course, to deliver those additional FTEs. The digital marketplace is also differentiating us in the marketplace because some clients are saying, with Randstad, we have access to talent that we otherwise would not have. So it gives us a leg up in competing against our competitors for new clients. We have seen the productivity in terms of EWs per FTE now surpassing the level of 2019. So that's a good sign. So you can see it in the U.S. at scale. The other places that we can see the impact of the digital marketplace are in health care. So in health care in the Netherlands, there has been a big shift from freelance to temp. Without the digital marketplace, we would not have been able to make that shift at the pace that we have been doing over the course of 2025. And it's actually quite phenomenal what that team has pulled off there over the last year. Similar dynamics both in France, where we have, of course, some challenges with regulation. But because we have the digital marketplace, we're better to navigate that. And last but not least, I would say, in Australia. Finally, in Randstad Digital -- and I spent time with the team last week. About 80% of our fulfillment is now coming directly from our community in our digital marketplace in Randstad Digital in the United States. Obviously, you can imagine that means faster, that means more productivity and the likes. Now obviously, this is all EUR 4 billion on an annual basis. So we're now going to work hard to expand that to other markets most likely, so markets that we are focused on in 2026, Belgium, Italy, Switzerland, Japan, Poland, just to name -- Canada, just to name a few. So this model works. Clients and talent like it. We can now look at the business and run the business in a much more granular way. And frankly, we are start to -- we're only touching the surface -- scratching the surface of the opportunity that the digital marketplace is offering us in terms of talent availability, efficiency, precision, relationship with talent, redeployment. We're just scratching the surface. So I'm extremely optimistic. This model is working, and more to come. Jorge Vazquez: Rory, any follow-up question? Rory Mckenzie: Just about the -- maybe the disruption charge in Q4, and how much of that is related to kind of reshaping the business to get the most out of this platform compared to adjusting to the cyclical conditions? Jorge Vazquez: The one-offs. Yes, sorry. Yes. Sander, can I just complement something from a finance perspective? Everything you heard from Sander, what excites me, Rory, is it's structurally changing the ability that the company has, becoming more agile, but also gearing up and converting. So a lot of what we sought was the art of the possible. We now see the benefits of digital and the benefits of everything we're doing, starting to basically be possible also in our industry and in Randstad. And that's quite exciting. In terms of one-offs, let's be clear, they continued elevated in 2025, though lower than in 2024 and 2023. More important I would argue, when we make these decisions in terms of allocating capital to it, is the return on them. And from that perspective, if I look at the return we had from the one-offs, you can actually already see this very clearly in Q4 and as we enter into Q1. So a large part of, almost EUR 30 million, EUR 35 million actually, reduction in OpEx we had in Q4, I would say almost 2/3 of that were directly driven from the one-offs done this year. And we are well below the 12-month target that we set ourselves internally. And that will support us again into Q1. Operator: The next question comes from Marc Zwartsenburg from ING. Marc Zwartsenburg: Two questions from me as well, first on the EBITA margin in North America. The progress, 20 basis points year-on-year, it was a bit higher than previous quarters, but still conversion ratio of 100%. But how should we think about that margin in 2026? Should we see that the productivity gain from the digital marketplace and the self-placement or self-scheduling to feed through and the step-up -- really a step-up in the margin in '26, because now it's a bit volatile in the progress on the year-on-year? Can you maybe give a bit more color on what we should expect there in terms of margin progression? And then following up on that, on the cost base. You already mentioned we should see the cost base will be relatively flat or slightly lower in Q1. How should we think about that throughout '26? Will you be able to offset all the inflationary because inflation is coming down, that you will be able to offset that? And that you can keep that OpEx level rather flat throughout the year? How should we think about that? And also in relation to the one-offs, how many one-offs will we see in '26 to keep that going? That's it. Jorge Vazquez: Okay. I mean, first on the U.S. So yes, in terms of we want to see a step-up in profitability. There's a few things at play, Marc, as well. The exciting thing is we're seeing 10% productivity gains. You can see it in our numbers already in the U.S. overall, even more parts in our Operational business, where a lot of this model is already helping us supporting growth. We still see perm somewhat subdued. Props still to recover as you've probably been reading on other players in the market. RPO also not necessarily yet in sustainable growth, though Sander alluded to it we are winning new business or we're implementing new clients. So there's a few variables there. But in short, yes, we want to see and we will see a step-up in profitability in North America. In terms of the cost base, let's -- and the one-offs, let's look at it. We're actually starting the year at a lower level. I mean, I want to make a side note. We're now probably have the OpEx way below 2018, 2017 even levels of OpEx. So clearly, let's say, a lot of the OpEx we have incurred and we have perhaps inadvertently structurally had through COVID, a lot of it has been corrected back. And to the question of one-offs, the point here is making sure that it will not come back, because this is also eliminating and improving how we work and basically making sure they work differently. The point of having incurred these one-offs is to make sure this does not come back, these costs. So we are a leaner and meaner Randstad as we now prepare to cover -- or to go over into growth in 2026. If we then look at the exact OpEx level, look, we'll start low in general with the seasonality of the year. We see growth in many markets and it's stepping up. So I don't want to make obviously a comment about our OpEx will stay flat throughout the year, but it's optional for us. So we can choose depending on how much growth we see and how we want to support potential opportunities in growth, how to develop our OpEx going from Q1 onwards. And we will never sacrifice growth for a quarter result or performance. But yes, we have the option within us. Marc Zwartsenburg: That's very clear. And then from a cash flow perspective on the one-offs, is there any cash outflow to be expected from the one-offs still in '26? Jorge Vazquez: Yes. I mean, look, as we continue to roll out -- again, they were lower this year. I don't expect them to -- I mean, I expect them again, if anything, to exist to be lower than 2025. But remember, I also told you very clearly, from a cash allocation, this is probably one of the best -- well, we shouldn't talk about it like that. But from a return perspective, it is way below the 12 months. There is likely to be some one-offs, but things are bottoming out. It's more about continuing to roll out better ways of working and our functional target operating models. That's basically where we -- what we are focused now. Operator: The next question comes from Simon Van Oppen from Kepler Cheuvreux. Simon Van Oppen: I would like to extend on Remi's question about the Netherlands. So we saw that revenues in the Netherlands was down 7% on an organic basis against an easier comparison base, while your corporate staff was actually up by 60 people in the Netherlands. And Jorge, you mentioned increase in wage components potentially offsetting volume pressure around regulations. But how should we look at profitability in the Netherlands for 2026? And can we expect further pressure on profitability with potentially higher number of FTEs due to more administrative work around the new regulations? Jorge Vazquez: So let's -- first of all, on the Netherlands. So if you look ahead, yes, there's a big legislation change. I just told you that the first view we have is -- and remember, we're #1 here clearly. So it's where we also can add responsibility to lead the market in terms of implementation of legislation. And in that respect what we see for now is bill rates offsetting some of the volumes. We also see Zorgwerk stepping up and in growth territory. So you see a lot of things into Q1 that support growth. And from a headcount perspective, this is probably a big change, one of the biggest change we had over the years in the Netherlands. So there is a temporary ramp-up, let's say, of people to help us, basically making sure that everything is in order for our clients and for our talents. Remember, we're #1. So for many companies, we are their partner, the one partner in the Netherlands in terms of managing flexibility and contingency on talent. And in that respect, we are basically making sure that everything is ready for this particular quarter. Also take into account -- if you look at some of the one-off -- or the restructure costs that we've taken, they are primarily concentrated in Northern Europe, and, of course, that also includes the Netherlands, as we adjust to the running rate of the 7%. So we're not standing still. We're making sure that the legislation is well implemented. There's always opportunities and risks, but more important, we're also focusing on making sure that the business is balanced for 2026. Operator: The next question comes from Vasia Kotlida from Barclays. Vasiliki Kotlida: I have 2 questions. First one, you mentioned new client wins. Can you please give some color on what industries and geographies? And the second is about the January trends. These are almost flat. Is that comp related or a genuine pickup in activity from Q4 that was up minus 2%? Alexander van't Noordende: Yes. On the new client wins, a couple of exciting deals in RPO and MSP in Life Sciences and in Financial Services, primarily, I would say, in North America and a couple also here in the core of Europe. So good news there. Jorge Vazquez: Yes. On the second question on the growth rate, Vasia. If you look at Q1, I mean, Sander alluded to it, we have 50% of the markets already in Q4 in growth. So again, those markets continue to be in growth, and in many of them, even encouraging signs. Also in volume -- I mean, we are literally crossing into volume growth already. And Q4 was probably the first quarter, I would say, since Q2 2022 that we were flat in employees working. So things clearly seeming to bottom out. And we see strong momentum in the U.S. and Southern Europe. We also see a stronger or a better, I would say, exit rate in France. It's in line with market data. We just talked about the Netherlands, where we have slightly higher bill rates, and we also have Zorgwerk in growth. And in general, also, if you look at some of the more challenging markets like particularly in Q4, Belgium and Germany, let's say, the blip we saw in comparables in Q4, we now go back to the trend of Q3, so again, improving into Q1. So overall, we see supported revenue trends into Q1. Operator: The following question comes from Simon LeChipre from Jefferies. Simon LeChipre: A follow-up on gross margin. So you are pointing to top line momentum improving into Q1 and particularly in North America, which should help gross margin. But your guidance suggests gross margin being down 90 bps year-on-year in Q1, which is a sequential deterioration. It was minus 40 bps in Q4. So how do you explain this? And my follow-up question is on -- so your 3% EBIT margin floor. I mean do you expect to break it in Q1? And are you confident to maintain this level at least for the full year? Jorge Vazquez: So I mean, we don't -- Simon, we don't necessarily give guidance for a quarter. I think what the tone -- and Sander was quite clear on it, and I'm happy to confirm it from a financial perspective. We've built operational -- I mean, we can talk about adaptability in 2025. I think the year is more important than that, mainly because we've built operational gearing throughout -- let's say, for Randstad. So in terms of looking to 2026, I mean, given the current economic scenarios we see and even a range of them, I'm pretty sure we've built the ability to improve the results and profitability going forward. If I look at the gross margin in particular, I think -- again, I tried to when talking to Andy to try to break out a little bit from the fog and the mist of one quarter and the other. We had incidentals in Q4 and Q1 last year. So that kind of mixes up things a little bit. But what you see into Q1, you see still a perm environment that is more negative than we had expected. You see probably -- but okay, we cannot obviously predict that -- a very subdued FX impact. Remember, Liberation Day and a lot of the swings or the corrections we got in exchange rates happened in Q2 last year. And we see RPO a little bit negative vis-a-vis what had been throughout 2025. And this offset some of the better mix that we have. If anything, it better notch up as we go into 2026 for some of the annualization of our geo clients and specialization mix, as I explained before. Operator: Our next question comes from Konrad Zomer from ABN AMRO - ODDO BHF. Konrad Zomer: On the bill rates in the Netherlands, I understand that some of the bill rates have gone up as much as 15%, mainly due to the pension regulatory changes. What could be the time delay in terms of volumes to come down? Because if temps get more expensive, I can see why employers would be more hesitant to recruit. And also, I think the minus 0.4% in January is certainly good. But what would be the impact specifically from these regulatory changes in the Netherlands? Jorge Vazquez: Yes. So first, Konrad -- I mean, I don't want to go into, let's say, the very, very -- very detailed. But the 15% is -- it's -- I mean, I'm not -- we don't see that, so I'm not -- I think it's way -- just to be absolutely clear for everyone, that's way, way too high. I think there's 2 things happening, just to be absolutely clear. There's a pension scheme, as you very well know, the pension -- the Future Pension Act, and there's the collective labor agreement changes. And these 2 things, we don't expect them to be not even almost half of what you just -- let's say, half of what you just mentioned. And it's too early to tell what the impact will be, if any, on volumes. What I would say is the first impression is -- or the first signs that the uplift you might get from, let's say, the bill rate effect, the wage components, seems to offset some of the pressure we might have on volume. But more about that later. We don't see more than that. And it's the same with any legislation. There's always a big uproar, and in the end, things normalize into the normal level of flexibility in an economy. Operator: We have time for one last question. The question comes from Maarten Verbeek from the IDEA! Maarten Verbeek: In the third quarter, you mentioned that your digital marketplace generated EUR 4 billion in annualized revenue, and exactly the same you mentioned today. So why haven't we seen any progress quarter-on-quarter? And in addition to that, have you set yourself a target for annualized revenue, what you would like to achieve in the fourth quarter of '26? Alexander van't Noordende: Yes, good question. Well, first of all, how we -- so of course, we need to add more countries and more scope to the digital marketplaces to grow. Yes, North America grew from Q3 to Q4. But let's say, in the bigger scheme of things, that's not a massive number, as you can understand. So it's just a matter of technicalities. As I said, in 2026, we will add more markets, somewhere around 5 to 7 markets with the digital marketplace. So we will add more scope, and therefore, we'll grow. I think it's too early to put a number on that because -- I mean, you can imagine that requires work, that requires go-live. So let's not put a number on that just yet. We'll keep you updated throughout the year. Jorge Vazquez: Martin, any follow-up question? Unknown Analyst: No, thank you. That's it. Thank you. Alexander van't Noordende: Okay. With that, thank you all for joining the call. And before we wrap it up, as always, I would like to thank all our Randstad employees and our employees working for their hard work in Q4 and the hard work they're going to do in Q1, of course. And we wrap up the call here. Thank you very much.
Operator: Good day, and thank you for standing by. Welcome to the Parsons Corporation Fourth Quarter 2025 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host for today, David Spille, Vice President of Investor Relations. Please go ahead. David Spille: Thank you. Good morning, and thank you for joining us today to discuss our fourth quarter fiscal year 2025 financial results. Please note that we provided presentation slides on the Investor Relations section of our website. On the call with me today are Carey Smith, Chair, President, and CEO, and Matt Ofilos, CFO. Today, Carey will discuss our corporate strategy and operational highlights. And then Matt will provide an overview of our fourth quarter and fiscal year 2025 financial results as well as a review of our 2026 guidance and long-term growth rates. We then will close with a question and answer session. Management may also make forward-looking statements during the call regarding future events, anticipated future trends, and the anticipated future performance of the company. We caution you that such statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual results may differ materially from those projected in the forward-looking statements due to a variety of factors. These risk factors are described in our Form 10-Ks for fiscal year ended 12/31/2025 and other SEC filings. Please refer to our earnings press release for Parsons Corporation's Complete Forward-Looking Statement Disclosure. We do not undertake any obligation to update forward-looking statements. Management will also make reference to non-GAAP financial measures during this call. We remind you that these non-GAAP financial measures are not a substitute for their comparable GAAP measures. Now we'll turn the call over to Carey. Thank you, Dave. Carey Smith: Good morning. Welcome to Parsons Corporation's fiscal year 2025 and fourth quarter earnings call. 2025 was a successful year despite a dynamic federal government macro environment. We delivered 12% total revenue growth and 8% organic revenue growth, excluding our confidential contract. We continue to be one of the organic revenue growth leaders in both of our segments, with 10% organic growth in critical infrastructure and 7% organic growth in federal solutions, excluding the confidential contract. We expanded our adjusted EBITDA by 60 basis points to a company record of 9.6%. This record margin builds on the 50 basis points of expansion we achieved in 2024. Additionally, we delivered free cash flow conversion of 100% and exceeded the high end of our fiscal year 2025 cash flow guidance range. We efficiently deployed capital by completing three acquisitions during the year and increased our share repurchases while maintaining a strong balance sheet with ample capacity for further investments in our growth strategy. From an operations perspective, we won strategic contracts, achieved high win rates of 61%, maintained strong hiring, and had record retention rates. We delivered double-digit total revenue growth at both critical infrastructure North America and Middle East business units. Also, we were named the number one program management firm in the world by Engineering News Record, one of the world's most trusted companies by Forbes, one of the best-led companies by Glassdoor, and one of the world's most ethical companies by Atmosphere. We are proud of our 2025 accomplishments, and I want to thank more than 21,000 employees for their contributions to delivering our customers' most critical missions. The end of 2025 marked the completion of our performance against the three-year Investor Day targets established in March 2023, with a focus on creating long-term shareholder value. I'm pleased to report that we delivered on this strategy that we outlined at this event of investing in integrated solutions to move up the value chain and win larger and more strategic programs. During this three-year period, we exceeded the high end of all of our Investor Day targets: total revenue, adjusted EBITDA, and operating cash flow. From 2023 through 2025, we increased total revenue by 52% or more than $2 billion. This equates to a three-year compound annual organic revenue growth rate of 10%. And excluding the confidential contract, our three-year compound annual growth rate was 9%, nearly double our four to 6% target. We expanded margins by 120 basis points, resulting in an adjusted EBITDA compound annual growth rate of 20% over the three-year period. Additionally, we grew cash flow from operations by over 100% since 2022, equating to a 26% compound annual growth rate. Given our strong operating performance over the last three years, we were able to reduce our net debt leverage ratio from 1.4 times to 1.3 times while deploying over $1.1 billion on eight strategic acquisitions, capital expenditures, and share repurchases. As we look forward over the next three years, we expect to again drive long-term shareholder value by achieving mid-single-digit or better annual organic revenue growth, supplemented with accretive acquisitions. Additionally, we believe we can continue to expand adjusted EBITDA margins over the next three years with the goal of double-digit margins by 2028. This expansion is on top of the 120 basis points of margin improvement achieved over the last three years and on a revenue base that is more than 50% larger than when we initiated our plan in 2023. Finally, we expect a free cash flow conversion rate of 100% or better over the next three years. Moving to our fourth quarter results, we delivered strong revenue growth, adjusted EBITDA margins, and cash flow. Although our fourth quarter revenue was below our expectations, we achieved total revenue growth of 11% year over year and 8% on an organic basis excluding our confidential contract while contending with the impacts from the longest government shutdown in history. These growth rates include 9% organic growth in our critical infrastructure and federal solutions segments, respectively. In Q4, our adjusted EBITDA margin expanded 110 basis points and operating cash flow of $168 million grew 32% year over year. We also closed the acquisition of Applied Sciences during the fourth quarter. In addition to delivering solid financial results for the fourth quarter, Critical Infrastructure now has 21 consecutive quarters with a book-to-bill of 1.0 or greater, and we won four contracts over $100 million in Q4, with three of the four contracts representing new work for Parsons Corporation. All four contracts were within our federal solutions segment, and we had 15 wins over $100 million for the year, matching last year's record. Significant fourth quarter contract wins include a new ten-year $392 million single work contract by a federal customer. On this contract, we will deliver advanced biometric and identity management solutions combining hardware, software, and integration expertise to support federal, defense, and law enforcement missions. Parsons Corporation has deployed over 3,500 mobile biometric solutions that collect and analyze data in real-time, enabling faster identity verification and improved threat detection. We booked $36 million on this contract during the fourth quarter. We were awarded a new five-year single award classified contract with a value of $200 million. We booked $23 million on this contract during the fourth quarter. We were awarded a five-year $125 million single award repeat contract to support the United States Army Combat Capabilities Development Command Army Research Laboratory, High Performance Computing Modernization Program, and Defense Research and Engineering Network. Parsons Corporation will deliver an array of services including research, development, test and evaluation, infrastructure operations, and comprehensive project management. We booked $44 million on this contract during the fourth quarter. Finally, we were awarded a contract valued at over $100 million by NAMMA, to provide design and program and construction management for a new rocket motor manufacturing facility in Perry, Florida. The two-year industrial base modernization contract represents new work for the company. This project directly supports the Department of War's acquisition transformation strategy by expanding the United States' munitions production capacity, strengthening supply chain resilience, and accelerating delivery of critical capabilities to the warfighter. We booked the full value of the contract during the fourth quarter. After the fourth quarter ended, Parsons Corporation was awarded an early $593 million contract extension under the Federal Aviation Administration's technical support service contract to provide program and construction management, engineering, technical services, health and environmental safety, fire protection, equipment installation and testing, and logistics. FAA elected to exercise our three-year option period nearly a year early, underscoring Parsons Corporation's critical role in FAA's nationwide airspace modernization. And finally, after the fourth quarter ended, we received an intent to award notification for a sole source contract from a national security customer. The contract's new work for the company with a ceiling value of up to $500 million. We booked $13 million on this contract for the low rate initial production which was awarded during the fourth quarter. In addition to winning these large contracts, we effectively used our balance sheet to acquire strategic companies with critical intellectual property that strengthen our existing portfolio by generating revenue growth and adjusted EBITDA margins of 10% or more. Parsons Corporation is viewed as an acquirer of choice in the industry, which frequently provides us the opportunity to pursue preemptive M&A. During the fourth quarter, we acquired Applied Sciences Consulting, a Florida-based engineering firm that specializes in water and stormwater solutions for cities, counties, and water management districts across the state. Water is our most profitable and fastest-growing market within the North America infrastructure business unit. This acquisition expands our expertise, strengthens our presence in Florida, and exceeds our financial M&A thresholds. After the fourth quarter ended, we closed on our acquisition of Altamira Technologies Corporation, in an all-cash transaction, valued at up to $375 million, including the $45 million earn-out. Altamira advances high-priority national security missions supporting intelligence community and Department of War customers by providing multi-intelligence technology solutions and performing critical operations. Altamira expands Parsons Corporation's market presence in signals intelligence, missile warning, space, and foreign military exploitation and adds critical customer depth with the National Air and Space Intelligence Center, National Security Agency, and other classified intelligence customers. There are more than 600 employees, 90% of whom hold security clearances, share the same mission focus as Parsons Corporation, and we are already working on revenue including cross-selling to our customers, expanding our Golden Dome offerings, and providing full kill chain solutions from space to operations. Altamira's technologies, including AI/ML, signals and data analysis, cyber operations, and their deep software engineering capabilities will accelerate Parsons Corporation's expansion into the rapidly growing intelligence and multi-domain areas. The transaction is consistent with Parsons Corporation's strategy of completing accretive acquisitions with revenue growth and adjusted EBITDA margins of at least 10%. As we enter 2026, I could not be more excited about our robust and diverse opportunities to continue to grow our company and outpace industry growth rates. Our unique and synergistic critical infrastructure and federal solutions portfolio, which consists of six growing, profitable, and enduring end markets, provide substantial tailwinds for us to meet or exceed our financial objectives. In critical infrastructure, we see strong demand in both North America and Middle East markets. In North America, our focus on hard infrastructure, such as roads and highways, bridges, airports, and rail and transit, is aligned to the administration's spending priorities. The Infrastructure Investment and Jobs Act provided states the confidence they needed to move forward with major infrastructure projects, and discussions on the next surface transportation bill are well underway. This new five-year bill will add more funding for US infrastructure spending. In the Middle East, our business remains well-positioned for decades to come. In the fourth quarter, we had key wins, including Newmaraba, Riyadh traffic management, and Aldar properties. In addition to our legacy transportation and urban development areas, we successfully leveraged our federal solutions capabilities to move into the defense and security markets and drove synergies across it. Infrastructure with the first deployment of our intelligent network PeriNet, advanced traffic management system into the Middle East. This market expansion illustrates the value of our synergistic and diversified portfolio which creates global opportunities. With long-term infrastructure tailwinds and 21 consecutive quarters of book-to-bill of 1.0 or greater, we've delivered double-digit total revenue growth in both North America and the Middle East for four consecutive years. And we expect further growth in both geographies for the foreseeable future. We are winning the largest projects in our company's history, and we've established a distinguished global reputation. In federal solutions, we remain excited about the upward momentum in defense budgets. This includes the reconciliation funding of over $150 billion for the Department of War and over $190 billion for the Department of Homeland Security, the vast majority of which has not been spent, and the potential of a much larger defense budget in 2027. Our purpose-built portfolio has strong alignment to the administration priorities, especially in full-spectrum cyber operations, electronic warfare, air and missile defense, space superiority, counter-unmanned air systems, industrial base modernization, and border security. Through our acquisitions and internal research and development investment, we've developed differentiated capabilities to protect our nation and deter adversaries. In summary, we've been one of the industry growth leaders in both of our segments for the last three years. And we expect this success to continue as we leverage our unique, complementary, and diverse portfolio. Our balanced portfolio and alignment to priority areas enabled us to withstand short-term headwinds that occurred last year. We've demonstrated our ability to cross-sell capabilities, including cybersecurity, critical infrastructure protection, advanced manufacturing, program extraction management, aviation, environmental remediation, and intelligent transportation systems. Our business remains steadfast as we are consistently delivering mid-single-digit or better organic revenue growth while expanding margins and delivering strong free cash flow. Also, we're supplementing our organic growth with accretive acquisitions to further differentiate our portfolio. In addition, our balanced portfolio diversifies our revenue stream as our largest contract is expected to only generate 4% of our total revenue in 2026. Our leading indicators, which include a $55 billion pipeline, strong win rates of 61% in 2025, total backlog of $8.7 billion, of which 73% is funded, and our $11 billion of contract wins that we have not yet booked, gives us confidence that we will continue to outpace market growth rates. As a result, I look forward to what we'll accomplish in 2026 and over the next three years. We have an experienced management team, operate in six end markets that are all growing, a purpose-built national security portfolio that outpaces near-peer threats, unprecedented global infrastructure spending, and a favorable financial outlook with an effective capital deployment strategy. With that, I'll turn the call over to Matt to provide more details on our fourth quarter and fiscal year 2025 financial results. Matt? Matt Ofilos: Thank you, Carey. 2025 financials were highlighted by strong revenue growth, significant adjusted EBITDA margin expansion, delivering free cash flow ahead of expectations. In addition, we continue to effectively deploy capital for strategic acquisitions, internal research and development, and share repurchases to support long-term growth and drive shareholder value. Turning to the details of our fourth quarter results, total revenue grew 11% on an organic basis, excluding our confidential contract. These increases were driven by double-digit growth in our transportation, critical infrastructure protection, urban development, and space and missile defense markets. Total revenue, including the confidential contract, decreased 8% from the prior year period and was down 10% on an organic basis. SG&A expenses for the fourth quarter decreased 2% from the prior year period. The decrease was primarily driven by effective cost management and lower transaction-related expenses, partially offset by the inclusion of recent acquisitions. Fourth quarter adjusted EBITDA of $153 million increased 5% from the prior year period, and adjusted EBITDA margin expanded 110 basis points to 9.6%. These increases were driven by improved execution and growth on accretive contracts, offsetting lower revenue volume on the confidential contract. Total revenue for fiscal year 2025 increased 12% from the prior year period and was up 8% on an organic basis, excluding the confidential contract. The strong organic growth throughout the year was driven by the ramp-up of recent contract wins and growth on existing contracts. Total revenue, including the confidential contract, decreased 6% from the prior year period and was down 9% on an organic basis. SG&A expenses for total year 2025 increased 6% from the prior year period. The increase was primarily driven by the inclusion of three acquisitions completed in 2025, strategic investments to support future growth. Record fiscal year 2025 adjusted EBITDA of $609 million increased 1% from 2024. Adjusted EBITDA margin increased 60 basis points to a record 9.6%. Adjusted EBITDA increases were primarily driven by improved program performance, effective cost control, and accretive acquisitions. It's important to note that despite $1 billion of revenue headwinds in 2025 from the accretive confidential contract, we were able to report record adjusted EBITDA and adjusted EBITDA margins reflecting the strength and breadth of the portfolio. I'll turn now to our operating segments. Starting first with critical infrastructure, where fourth quarter revenue increased by $89 million, 12% from 2024. This increase was driven by organic growth of 9% and inorganic revenue contributions from our BCC TRS, and applied sciences acquisitions. Organic growth was driven primarily by the transportation and urban development markets. Critical infrastructure adjusted EBITDA of $87 million increased 87% from 2024, and adjusted EBITDA margin increased 420 basis points to 10.6%. Both adjusted EBITDA dollars and margins were fourth quarter records for CI. These increases were driven by improved program performance, the ramp-up of recent awards, and accretive acquisitions. For the full year, critical infrastructure revenue increased 15% on an organic basis. The strong year-over-year organic growth was driven by the ramp-up of recent contract awards and existing contracts, primarily within the transportation and urban development markets. This is the fourth consecutive year in which both our North America and EMEA business units delivered double-digit total revenue growth. Critical infrastructure adjusted EBITDA of $328 million for the full year increased 73% from 2024, and adjusted EBITDA margin increased 350 basis points to 10.4%. Both adjusted EBITDA dollars and margins were fiscal year records. Increases were driven by strategic portfolio decisions over the past several years leading to higher margin work and improved program performance. Additionally, we have efficiently managed indirect expenses during a period of strong top-line growth. Moving to our federal solutions segment, where fourth quarter revenue increased 9% on an organic basis, excluding the confidential contract. Increases were driven by growth in our critical infrastructure protection, space and missile defense, and transportation markets. Total federal solutions revenue, including the confidential contract, decreased 22% from the prior year period and 24% on an organic basis. Federal Solutions adjusted EBITDA decreased 34% from 2024, and adjusted EBITDA margin was 8.4%. Adjusted EBITDA was primarily impacted by lower volume on the fixed-price confidential contract and recent execution challenges on a program in a remote region. For the full year, federal solutions revenue increased 9% on an organic basis, excluding the confidential contract. A strong year-over-year organic growth was driven by critical infrastructure protection, cyber and electronic warfare, space and missile defense, and transportation markets. Total federal solutions revenue, including the confidential contract, decreased 20% from the prior year period, and it was down 21% on an organic basis. Federal Solutions adjusted EBITDA for the full year decreased 32% from 2024, and adjusted EBITDA margin decreased 170 basis points to 8.7%. These decreases were driven primarily by lower volume on a fixed-price confidential contract and investments in growth. Next, I'll discuss cash flow and balance sheet metrics. Our net DSO at the end of Q4 2025 was sixty-seven days, a twelve-day increase from the prior year period. This increase was primarily driven by lower volume on the confidential contract and strong growth in the associated timing of collections in the Middle East. During 2025, we generated $168 million of operating cash flow, which was ahead of expectations on strong collections and drove free cash flow conversion to 100% for fiscal year 2025. Capital expenditures totaled $32 million in 2025, and $68 million for the full year. Our full-year CapEx spend was in line with our plan of approximately 1% of annual revenue. Our balance sheet remains strong as we ended the fourth quarter with a net debt leverage ratio of 1.3 times. During the year, we closed three strategic acquisitions totaling $145 million, net of cash acquired. Including the cash acquisition of Altamira in Q1 2026, pro forma leverage would be approximately 1.8 times based on Q4 results. During Q4, we repurchased approximately 856,000 shares, which for $60 million. For the full year, we repurchased approximately 1.8 million shares at an average purchase price of $68.59, for an aggregate price of $125 million. Turning next to bookings, the fourth quarter reported contract awards of $1.5 billion, representing a book-to-bill ratio of 0.9 times on an enterprise basis. On a trailing twelve-month basis, our book-to-bill ratio is 1.0 times, which continues our streak with a trailing twelve-month book-to-bill ratio of 1.0 or greater in every quarter since our IPO. Critical infrastructure, we achieved a book-to-bill ratio of 1.1 times, which is a twenty-first consecutive quarter with a book-to-bill ratio of 1.0 or greater. For the full year, our 1.2 times book-to-bill ratio. Federal solutions, we reported a book-to-bill ratio of 0.8 times for both the fourth quarter and full year. Our backlog at the end of the fourth quarter totaled $8.7 billion, a 2% decline over Q4 2024, mainly driven by the impact from the confidential contract coming to completion. Our funded backlog of $6.4 billion remains the highest since our IPO and increased 8% year over year. At the end of Q4, our funded backlog represented 73% of total backlog, which is also a company record. Now let's turn to our guidance. For 2026, we expect revenue to be between $6.5 and $6.8 billion. This represents 4.5% growth at the midpoint of the range and 0.5% growth on an organic basis. As previously discussed, we have a headwind of approximately $345 million from our confidential contract as we enter 2026 with the program scheduled to complete in Q1. The $345 million year-over-year headwind, $275 million will be realized in 2026. Excluding this contract, the rest of the portfolio is projected to grow total revenue 10.5% and 6% on an organic basis, which is in line with the mid-single-digit or better organic revenue growth we've been communicating. Adjusted EBITDA is expected to be between $615 and $675 million, with a margin of 9.7% at the midpoint of our revenue and adjusted EBITDA guidance ranges. This represents adjusted EBITDA growth of 6% and margin expansion of approximately 10 basis points from 2025 at the midpoint. Cash flow from operating activities is expected to be between $470 and $530 million. This represents 4.5% growth at the midpoint of the range and 100% free cash flow conversion of adjusted net income. This includes an increase in CapEx spending to approximately 1.5% of total revenue, which is mainly driven by growing demand for additional classified facilities. Our 2026 guidance ranges contemplate domestic budget uncertainty, a competitive labor market, and best estimates related to the government procurement environment. These macro risks are offset by tailwinds to include unprecedented global infrastructure spend, a federal portfolio that is closely aligned to the administration's priorities, recompete risk of approximately 5% of 2026 total revenue, $8.7 billion of total backlog, including record funded backlog, $11 billion of contracts awarded to Parsons Corporation but not yet booked into backlog. Other key assumptions in connection with our 2026 guidance and our quarterly cadence are outlined on slide 16 in today's PowerPoint presentation located on our Investor Relations website. In terms of our long-term financial targets, our outlook continues to support mid-single-digit or better organic revenue growth with a goal of double-digit margin by 2028 and a free cash conversion rate of at least 100% of adjusted net income. We expect to supplement our organic growth with acquisitions accretive to both top and bottom line. In summary, our core business executed very well in 2025. Delivered strong revenue growth excluding the confidential contract, significantly expanded margins, and delivered strong free cash flow. That cash flow was redeployed to fund strategic acquisitions, internal research and development, and share repurchases to position us for future growth and drive long-term shareholder value. With that, I'll turn the call back over to Carey. Thank you, Matt. Carey Smith: Although 2025 was a dynamic year in many ways, it validated the strength and resiliency of our portfolio. We're fortunate to operate in two large and well-funded segments across six growth end markets, and we're capitalizing on these tailwinds to remain an industry growth leader, expand margins, and generate strong free cash flow. We're optimistic about our future given our team's proven execution, the tailwinds we have in both segments, our strong total and funded backlog, and our robust pipeline of large opportunities. With that, we'll now open the line for questions. Operator: Thank you. And wait for your name to be announced. To withdraw your question, simply press 11 again. Please stand by while we compile the Q&A roster. Our first question coming from the line of Sangita Jain with KeyBanc Capital Markets. Your line is now open. Good morning, Carey, Matt. Thanks for taking my question. Carey Smith: Obviously, CI margins continue to exceed expectations. Sangita Jain: Just wanted to see if it's safe to presume that the legacy adjustments are behind you. And should we expect this performance as a reasonable run rate going forward? Kinda trying to see if this will be the segment that drives the push to double-digit margins by the end of the planning period. Carey Smith: Yeah. Good morning, Sangita. Thanks for your question. Yes, the legacy programs are behind us. We're in final closeout stages with the customers, but the execution has completed. We still expect continued expansion in margin for critical infrastructure as we look to 2026, and we also expect expansion in the federal market as we look to 2026. 10 basis points for Parsons Corporation, and that's 10 basis points for federal, 20 for critical, and infrastructure. Critical infrastructure will expand more quickly because about 75% of that business is fixed price, time, and material, and 25% is cost reimbursable. And most of the expansion will come from North America. Sangita Jain: Got it. Thanks. And one on Federal Solutions, if I can. Obviously, April had the impact of the shutdown. But just curious on how you're seeing the cadence of order activity since the end of the shutdown and if it still continues to be more of a book and burn environment. Just trying to see because book-to-bill in that segment has been sub one for some time now. Thank you. Carey Smith: Yeah. Thanks, Sangita. Q4 did have the impact of a forty-three-day government shutdown, but I'm really pleased, the six awards that we announced on our call, all of which were greater than $100 million, were all in the federal segment, and a lot of that representing brand new work for Parsons Corporation. As we go into 2026, we're very confident that we will achieve over a 1.0 book-to-bill for Federal Solutions. Starting off in 2026 based on the award activity we're seeing. Sangita Jain: Appreciate it. Thank you. Operator: Thanks, Lisa. Thank you. And our next question coming from the line of Louie DiPalma with William Blair. Your line is now open. Louie DiPalma: Carey, Matt, and Dave, good morning. Matt Ofilos: Morning, Louie. David Spille: Carey, you recently announced a win for your Drone Armor system. How do you view the addressable market in both the US and internationally as there's been a major focus on air defense with drones? Carey Smith: Yeah. Thanks, Louie. So first, I'll say we're really excited about our drone armor solution. We recently achieved technology readiness level nine. And this solution has been proven to protect personnel, bases, and assets from drone threats. It's built on a modular open system architecture. Where we're unique, it really allows for a lot of customization and adaptation to various mission requirements. We also use artificial intelligence and machine learning for enhanced decision-making and to reduce the cognitive workload. And we have a core command and control component. We had the opportunity to demonstrate our drone armor recently when the Department of Homeland Security and all of their components visited our Summit Point facility. We see opportunities not just with the Department of State, which we're currently providing those solutions to, but also with the Department of Homeland Security. And then for protection of FAA sites as well. So broad market area. Matt Ofilos: Great. David Spille: Thanks. And, Carey, you recently visited the Middle East. What are you hearing in terms of the demand for mega projects? There's been speculation that some of the mega projects on the transportation side could convert towards data center build. But what are you hearing on the ground in the Middle East? Carey Smith: Yeah. We had a great visit to the Middle East. We went to Saudi Arabia as well as the UAE in January. And I think, Louie, what you're referring to, Saudi's taking a move, what I would call, towards fiscal discipline, and they're prioritizing projects that are tied to the immediate upcoming global events like the 2030 World Expo and the 2034 FIFA World Cup. And they're scaling back or delaying some of what I would call the more speculative longer-term real estate ventures. Again, in the Middle East, we've had four years of consecutive double-digit growth, so we continue to rapidly expand. And we are on all the giga projects within Saudi Arabia. We're the number one program manager in Saudi Arabia, UAE, as well as Qatar. And there's gonna be a lot of spend there coming up in all of those. We've moved our business not just from doing urban development and transportation as we've historically done, but we've gotten into the defense, the border security, and the tourism and hospitality sectors as well as industrial manufacturing. One thing I will note for us a couple of years ago, we made a very smart decision, which was to focus on programs around Riyadh. So we've been awarded a lot of those such as King Salman Park, King Abdullah Financial District, Riyadh Ring Roads, Riyadh Traffic Management, Qiddiya, King Salman International Airport, and most recently, New Murabba. And that's where, again, they will spend the money. But I will say following Saudi Vision 2030, there will be a Saudi Vision 2040 where they'll go back to looking at some of the longer-term real estate projects, things like Neom or some of their growth like Al Soudan and other tourism locations. We see growth in the Middle East for decades to come. Louie DiPalma: Okay. And merging my first question and second question, with the World Expo and the World Cup, are you able to provide some of your own intellectual property technology solutions to the Middle East as well? Are you able to export drone armor to the Middle East, and are you able to utilize some of your transport modernization solutions such as iNet in the Middle East in addition to being a program manager? Carey Smith: Yeah. We're able to offer quite a few capabilities for the events that are coming up in the Middle East. On the federal side, we obviously have to go through the ITAR and the technical assistance agreement process to get releasability for that. But we are already able to offer the iNet solution, which does not fall under the ITAR, and I mentioned we're using that for traffic management around, and we see that system being further deployed. Given that we did the traffic management for the Qatar World Cup, and it was very successful, we were also involved in Dubai both on the metro as well as overall construction management services, we see potential plays in those areas as well. Then on the federal side, we would look at things like electronic security systems, potentially biometrics capability. And if we have releasability for something like counter-unmanned air systems. Those are all offerings that we could provide. Parsons Corporation has been involved in every world event since the 1996 Atlanta Olympics. We look forward to helping the Middle East as well as the United States and Canada with the upcoming events. Operator: Great. Thanks. Thanks, Carey. Louie DiPalma: Thank you, Matt and Dave. Louie. Thanks. Operator: Thank you. Our next question coming from the line of Gavin with UBS. Your line is now open. Gavin: Thank you. Matt Ofilos: Morning. Gavin: Good morning, Gavin. David Spille: As if I exclude the confidential contract last year, Gavin: you still had to revise Federal Solutions revenue guide down a couple of times? So any common theme you can identify that was driving that, and have you taken any different approach to framing the 2026 Federal Solutions guide? Carey Smith: Yes. I would say on Federal Solutions, we definitely were impacted by the shutdown. There was slower procurement activity leading up to the shutdown as well. Specifically, had two contracts, our air base air defense as well as our joint cyber hunt kit that were delayed, and that had a lot of material volume. As you know, materials can be lumpy. I think what we're seeing right now is a positive procurement environment. The fact that we were able to get six awards greater than $100 million booked for federal between Q4 and early Q1. And as I mentioned earlier, David Spille: strong book-to-bill of Carey Smith: greater than 1.0 for federal as anticipated for 2026. And, Gavin, I'll just add, you know, everything Carey said, but on Matt Ofilos: top of that, I think, you know, when it comes to kinda new new or kinda getting used to the cadence and the amount of time it gets to award. So maybe a little bit more conservatism on timing of new new and a little bit more bullishness on contract growth and things like that. So it kinda nets out a little bit, but the new new is a more difficult environment today than it was prior administration. Gavin: Okay. That's helpful. And appreciate the guidance on color or color on quarterly cadence for the year. It looks like there's a pretty big step up in 2Q from 1Q. What's driving that? Matt Ofilos: Yeah. Biggest driver there, Gavin, is mainly the Middle East. In the Middle East, in 2025, the holidays spanned over Q1 and Q2. In 2026, it's all within Q1. So you'll see, you know, kinda Middle East kinda flattish in Q1 and then almost 20% growth in Q2. But first half is kinda bracketed comp in a balanced way. Thank you. Operator: Thanks, Kevin. Gavin: Thank you. Operator: Our next question coming from the line of John Gordon with Citi. Your line is now open. John Gordon: Hey, thank you for taking my question. I wanted to follow-up a little bit on the margin outlook. There were a few drivers on Slide 15, things like operating leverage, growth in margin accretive contracts, growth in high margin markets. I was hoping you could dig into those a bit more and elaborate. I'm just curious if you think there's potential for upside to margin guidance for the year? Matt Ofilos: Yes. I would say, obviously, we're really happy with over the last two years, 110 basis points of margin expansion, kind of well ahead of our Investor Day targets. So I'd say, again, kinda 2024 and 2025 outperformed. 2026 have about $350 million worth of headwind from that confidential program, which was accretive, of course, to the company margins. And so we're competing against that a little bit. But overall, I think, you know, great news is in 2025, net EAC adjustments was down about 50%, so an improvement of about 50%. So really great performance across the company. So, yeah, I think there is, you know, as we expand on products, as we have additional accretive M&A, and two-point leverages are all great opportunities to continue to expand margin. John Gordon: Okay. Great. And you also mentioned that you're targeting double-digit margins for the enterprise. You're not far away from that. That's not a surprise. I'm just curious, you know, infrastructure is already there, federal isn't. Do you think both segments will be at double-digit margins Matt Ofilos: Or is this going to be more of a barbell where infrastructure continues to move higher and drag the John Gordon: company average out? Matt Ofilos: I suspect for the period, infrastructure will remain higher and kinda north of 10% and, you know, Carey's point earlier, about 10.5% in 2026 at the midpoint. Federal, of course, is always really driven by the mix of work. Cost plus versus fixed price. And so we are seeing faster growth on cost plus in the federal area. The opportunities again on as we expand on products, the product deliveries is a great opportunity to expand margins in federal. But overall, right now, we see federal in kind of high eights, low nines short term and trending toward mid-nines longer term. John Gordon: Appreciate it. Thank you. Carey Smith: Thanks, John. Thanks, John. Operator: Thank you. Our next question coming from the line of Sheila Kahyaoglu with Jefferies. Your line is now open. Good morning, guys, and thank you. I know it's been asked a few ways, but just on 2026, Carey, Matt, any sort of color on the largest program movers that are growing in '26 from whether it's a contract area Carey Smith: or a particular contractor or a specific area. Yeah. Thanks, Sheila. So again, I would kinda go back for the federal side to highlight some of the key wins that we've had. Joint Cyber Hunt kit would be one of those. I we highlighted two classified wins. The $392 million contract was a takeaway from another company, and the $200 million one represents brand new work for us. We're also expecting continued growth on our GSA schedules as well. And then within the Middle East, it would be the contracts that we've won recently, including the airport contract, the Riyadh traffic management contract, the New Murabba contract. Those are all gonna be ramping up. And then within critical infrastructure, North America, it's kind of across the board, a lot of the major contracts like Newark Airtrain, Hawaii rail and transit, and some of the larger programs. Operator: Got it. And then maybe a bigger picture question for you, Carey. Just given one of your competitors preannounced negative this morning, we're seeing sort of a dichotomy between Carey Smith: IT services, CACI at the high end, Leidos kind of there along with it. Operator: And Carey Smith: declines as well in the sector. So where are you seeing areas that are improving in the government budget? And where are you shifting your portfolio to? Clearly, critical infrastructure is good, but within the federal side, maybe any additional color on how you're trying to shift that $11 billion unbooked pipeline to convert into revenues? Yes. I would say we're very fortunate in federal, and that's why we're very bullish on strong book-to-bill as we come into 2026 within federal, and we started to see these large awards go through. We're well aligned with the key areas of focus both under the national defense strategy as well as what's in the reconciliation budget. And those dollars are gonna have to get spent. So whether you're looking at areas like Golden Dome or Border security or counter-unmanned air systems, biometrics, and then cyber operations, and then electromagnetic spectrum, space. We're very well positioned. And if you look at reconciliation alone, we believe that we have about $85 billion of addressable market for Parsons Corporation. So I feel our portfolio is well aligned for 2026 and beyond. Operator: Got it. Thank you. Sheila Kahyaoglu: Thank you. Operator: Thank you. And as a reminder, to ask a question, please press 11. Our next question coming from the line of Andrew Wittmann with Baird. Your line is now open. Andrew Wittmann: Oh, great. Good morning, everyone. So I wanted to ask about the outlook for critical infrastructure's backlog. Specifically, Carey, you just mentioned some of those large, larger projects that you've won over the last year or two, Hawaii, Newark Airtrain. Georgia state route. There's a bunch of them in there that are obviously very significant and have been very powerful drivers. Those are getting into bigger burn stages now. You made a comment on your federal first half bookings, but I was wondering if you think that, with the ramping burn rate, if you think the book-to-bill in CI can still remain over one in the first half or even for the full year, just kinda moving parts as you look at your pipeline there and your recent win rates, please. Carey Smith: Yes. So we have planned for critical infrastructure book-to-bill to remain over 1.0 for 2026. Again, resting on 21 consecutive quarters of greater than 1.0 in the demand that we see both in North America as well as in the Middle East. Andrew Wittmann: Okay. Great. And then just as a follow-up, I guess, maybe I wanted to kinda have you zoom in on a few projects which have been in the headlines or are notable today. One of them is Golden Dome, and you've referenced this. And, obviously, you're one of many, many contractors with a very large contract. I was just wondering what Carey Smith: you're seeing there in terms of your ability to win task orders that's in your backlog today, if at all, and maybe just how Parsons Corporation is or is not affected by the turmoil surrounding the Hudson River Tunnel project, which has obviously been a lot of fits and starts here even here in recent days. Carey Smith: Yeah. Let me take the Hudson River Tunnel question first. So last week, the US district judge ordered the funding restored. And so that would have forced the Trump administration to lift the four-month freeze on federal funding. But then on Monday, she issued an administrative Operator: stay Carey Smith: which basically leaves the tunnel construction on hold until February 12 at 5 PM. And preserving the status quo, while the US court of appeals for the second circuit is considering whether to intervene. So the outcome is if the appeals court grants a stay, the funding freeze would remain in place during the appeal. If it does not, the judge's injunction, barring enforcement of the funding suspension is set to take effect again at 5 PM on February 12, and that would allow federal disbursements to move forward. It's important to note that this contract represents less than 0.5% of Parsons Corporation's revenue. On to your second question, within Golden Dome, I'd say our biggest play there is our role that we have with the missile defense agency. Again, we're the system engineering and integration contractor for the missile defense agency. So we expect and we have been doing some work relative to Golden Dome on that contract. And secondly, I would say nonkinetic effects, the use of cyber and electronic warfare instead of kinetics to kinetics is a growth opportunity for us. Airbase air defense is another one. We're providing protection of airbase air defenses and for the air force base in Europe. And you could think about that as being similar to what's gonna be needed to provide the local area of the defense here within the US and the Golden Dome program. And then I'd say, we also have some cyber efforts. Golden Globe has been starting to roll out. It's been a little slow, but classified architecture has been released. General Line is confirmed and running the program. There's been a four-layer kinda strategy that's defined, which is a layer distributed and software defined. There's been command and control integration, task force worked up, and there's a few small contracts for space-based interceptors. But our key play is really system engineering and integration. Andrew Wittmann: Thank you. Matt Ofilos: Thank you. Operator: Thank you. And, again, as a reminder, to ask a question, please press 11. Our next question coming from the line of Tobey Sommer with Truist. Your line is now open. Tobey Sommer: Thank you. David Spille: I'm curious. What in 2026 do you Andrew Wittmann: expect in terms of changes in revenue and profit from the FAA customer? Carey Smith: Yes. So, we do expect growth on our FAA technical support services contract. And again, they exercise the option nearly a year early, which we were pleased with. For $593 million over the next three years. We've supported the FAA for five decades, and currently, we're on the technical support service contract, $1.8 billion contract over ten years. We have over 500 FAA cleared personnel that support engineering, construction, environmental equipment installation. We're located at over with thousands of FAA sites, it's pretty much all the national airspace sites including nav aids, radar sites, communication sites, and military installations. And then we also have a team that includes over 300 subcontractors. There's a lot of money that's been put in, $12.5 billion to modernize the air traffic control center. And so we look forward to continuing our role as the implementer for that work for the FAA. Andrew Wittmann: Thanks, Carey. And then Tobey Sommer: you did talk about areas of Carey Smith: growth this year within federal. Tobey Sommer: But Carey Smith: was wondering, would your answer be the same for areas that are likely to spearhead the greater than one book-to-bill in the first half? Would they map against CyberKit and, you know, GSA schedules that you commented on earlier? Carey Smith: Yeah. They would be in the same areas. The Joint Cyber Hunt kit program. Obviously, the FAA award will get booked in the first quarter. Those are the two that we announced after the fourth quarter ended. But once again, all of our market areas are growing, whether it's cyber and electronic warfare, space and missile defense market, or critical infrastructure protection. Tobey Sommer: And the last question for me. What's your what's the most area for the company to apply capital to in the form of acquisitions over the balance of the year? Carey Smith: Yes. We'll continue to look in similar areas. I say on the federal side, Altamira is a great example, you know, where they hit a lot of points: cyber, signals intelligence, space capabilities. And then also, they broadened our customer reach, particularly with the intelligence community customer and also, NASIC National Air and Space that's out of Dayton, Ohio. So that's a good example of a federal one, and that builds upon companies that we've bought in the past like, Black Signal, Black Horse, and CTI. And it broadens our all-domain capabilities. Within critical infrastructure, we're gonna continue to look in the water space. We're also gonna continue to double down on transportation engineering. And specifically looking across our six tier-one states: Florida, Texas, California, New York, New Jersey, and Georgia. Tobey Sommer: Let me sneak one more in if I could. Does the company have an interest in expanding and amplifying its ability in critical infrastructure to participate in what looks like a global increase in demand for nuclear energy? Carey Smith: We have a small footprint in nuclear today, and it is expected to grow, as you indicate, both in the United States as well as in the Middle East. We're currently the Department of Energy National Nuclear Security Administration engineering and construction management services contractor. We're also starting to look at some small micro-reactor type of projects. There's a few bids out on those. We also do microgrid work. For example, we have a program in Puerto Rico that's been going quite well. And then within the Middle East, we're having discussions with companies because they're gonna be making a large investment in nuclear. Tobey Sommer: Thank you. David Spille: Thanks. Operator: Thank you. Our next question coming from the line of Gavin Parsons with UBS. Your line is now open. Gavin Parsons: Hey. Gavin: For the follow-up. I just wanted to ask on the medium-term growth targets. First, what are you assuming for the DOW budget growth? Or is that based on reconciliation flow through? And then second, is that mid-single-digit plus just a blend of the end markets? And does that not contemplate any potential for market share? Thanks. Carey Smith: That's the first part, and then Matt will answer the second. But I would say from a budget request, we've got again very strong alignments, the reconciliation budget both for Department of Homeland Security as well as Department of War, and we see about $85 billion and for the FAA. We see about $85 billion of that being addressable for Parsons Corporation. As we look forward to FY 2027, President Trump has Operator: announced Carey Smith: that he would like to have a $1.5 trillion defense budget. That would represent a historic 50% increase over the $1 trillion that was authorized for FY 2026. There's some arguments that you can say it might happen because there's a lot of executive commitment to the priorities such as Golden Dome and Golden Fleet. There is congressional support, particularly coming from the GOP for a higher budget. And then the Republicans are also taking a look at a second potential reconciliation budget that might be, like, $450 billion to $600 billion. On the areas that reasons that FY '27 may not reach full amount. There's obviously fiscal concerns that the increased would add about $5.8 trillion to the national debt over a decade. And then depending on what happens with the upcoming elections. So we're watching that closely, but I would say feel very good about FY '26, the one big beautiful bill at the reconciliation funding starting to flow, and there's clearly momentum towards the larger FY '27. Matt Ofilos: Yeah. Gavin, I would just add, you know, to your point, within our markets are pretty strong, you know, kinda averaging in that 6.5% range. But higher win rates that we have flowing through the plan over the next few years would assume some takeaway as well. Gavin: Thanks again. Carey Smith: Thank you, Kevin. Kevin. Thank you. Operator: And that's all the time we have for our question and answer session today. I will now turn the call back over to Dave for any closing comments. David Spille: Thank you for joining us this morning. If you have any questions, please don't hesitate to give me a call. We look forward to catching up with many of you over the coming weeks. Carey Smith: And with that, we'll end today's call. Have a great day. Operator: Ladies and gentlemen, that does conclude the conference for today. Thank you for your participation. You may now disconnect.
Conversation: Katarina Rautenberg: Good morning, and welcome to the presentation of Investment AB Latour's year-end report for 2025. [Operator Instructions] With that, I hand over to CEO, Johan Hjertonsson; and CFO, Mikael Johnsson Albrektsson. Johan Hjertonsson: Thank you very much, Katarina. Welcome, everybody. I'm here together with Mikael. Today, the presentation will be divided into 2 sections. The first part is the usual one with we've always done. We'll walk through the Latour Group's development in Q4 and the full year. And we will be commenting on the development of the investment portfolio and the wholly owned operations. And then we will open up for questions. Then we have a new thing, a second part, where this time, we will make a deep dive into Latour Industries, which is 1 of our 7 wholly owned operations. We will then later rotate our 7 wholly owned operations on the quarterly report. So you will meet more colleagues later on. But today, we're inviting Tina Hultkvist, who is the CEO of Latour Industries for this section. And finally, we will have -- after Tina's presentation, we will have a Q&A session together on the Latour Industries. So thus, 2 Q&A sessions today. Good. Let's go into the Latour Group key highlights. We finished the year on a very positive note, delivering a record quarterly results with improved profitability. Continued strong performance across our operations despite the challenging business climate. We had an organic order intake growth in both Q4 and the full year, which indicates a positive underlying demand, although it does vary between industries and regions. On the one hand, we're facing a weak market environment driven by increasing geopolitical instability. On the other hand, we own companies operating in sectors shaped by global megatrends such as energy efficiency, accessibility and automation, which provide strong prospects for growth going forward. I will comment more on the financial outcome more in detail later in this presentation. And finally, the acquisition activity has been quite high during the quarter. We signed an agreement to acquire Alstor to Latour Industries and divested 2 companies within Latour Industries Mobility division, AAT and Batec. In addition, Latour Future Solutions made a minority investment in NOAQ. It is rewarding to see that all the efforts of our M&A teams, both centrally and within our businesses are paying off. Summarizing the year, we have completed 7 acquisitions, adding SEK 1.8 billion in annual revenue, a solid foundation as we enter into 2026. And here, I would like quickly to hand over to Mikael to present our net asset value. So over to you, Mikael. Mikael Albrektsson: Thank you very much, Johan. And if looking on the net asset value development during the year, we can conclude that it increased by 2.4% adjusted for dividends during the year and amounted to SEK 216 per share compared to SIXRX that increased by 12.7%. And the share price at the end of December was SEK 225, which means that there is a premium of 4% compared to how we present the net asset value. And as of yesterday, the net asset value was SEK 218 per share. And the share price on the same day closed at SEK 229, which gives a premium to our way of describing the net asset value of about 5%. The consolidated net debt decreased during the quarter from SEK 16.8 billion to SEK 15 billion, supported by a strong cash flow. And the net debt corresponds to about 10% of the market value of our investments, leaving headroom for further acquisitions going forward. And with that, I hand back over to you, Johan. Johan Hjertonsson: Thank you, Mikael. And then we have the dividend here. We have a good profit development in our holdings and a strong financial position. So the Board of Directors proposes an increased dividend to SEK 5.10 per share, which is an increase of 10.9%. And the proposal is in line with the dividend policy, which you can see here on the slide. And thus, we have a strong historic trend of increased dividends, as you can see on this slide that shows at least the last 10 years. So if we move on then into the investment portfolio. So there's no major changes within the listed portfolio during the quarter. Earlier in the year, however, we increased our holdings in CTEK to 35.3%. And value development during the year was 1.2%, where SIXRX was 12.7%. Some of our holdings have shown weaker stock market performance, while others have been strong. Until yesterday, February 10, the portfolio value was SEK 89.2 billion, and the total returns amount to 1.4% so far this year. And the SIXRX was 5.4%. And if we go to the next slide, looking at the underlying performance, it is clear that the greater part of our holdings have demonstrated positive growth and profitability over the years, also especially the last couple of years that has been quite tough business-wise. The majority of our companies have reported the Q4 results and performance has been strong for most of them despite challenging market conditions. Geopolitical instability continues to affect the markets though the impact varies depending on market exposure and geographic presence. The acquisition activities are high in our listed holdings. And one example among several is Sweco, who acquired assar architects during the quarter, thereby strengthening its position even more in Belgium. And if we take the next slide, just to show a little bit longer perspective on our listed holdings. As Latour is a long-term owner, it is worth evaluating the total return of the listed portfolio from a longer perspective, as I said. And during the last 15 years, the total return amounts to about 600% compared to SIXRX that amounts to 350%. We see this as a confirmation that the holdings in our portfolio are contributing to the positive shareholder value creation. And then I would like to comment on the wholly owned operations. And the wholly owned operations ended the year with a very strong quarter. Order intake increased by 7%, of which 8% was organic and net sales increased 6%, of which 5% was organic. The organic growth indicates an underlying good demand for our companies, but the picture is mixed. The construction industry remains weak, for instance, with the Hultafors facing the toughest market conditions. At the same time, long-term drivers as energy efficiency, accessibility, automation support growth opportunity, benefiting companies like Swegon, Bemsiq and Innovalift. Caljan also reported solid underlying demand driven by major logistic customers and Nord-Lock Group has performed strongly throughout the year, supported by its global industrial exposure and an increasing focus on safety. We have good cost control and profitability is increasing in the quarter. The adjusted operating result for the quarter is record high with an operating margin of 15%. And then to comment our wholly owned business on the full year. And our businesses have navigated their operations well throughout the year in markets marked by the geopolitical disturbances that you all know. Total growth order intake was 13% and net sales 9%. Various growth initiatives, combined with currency headwinds have put pressure on the operating margin. The Q4 outcome, however, indicates that we are moving in the right direction and that our investments are paying off. Adjusted operating profit amounted to SEK 3.9 billion compared to SEK 3.8 billion the previous year, and the EBIT margin was 14% compared to 14.6% in the previous year. Lastly, a strong cash flow generation accounting to more than SEK 3.7 billion in positive cash flow. So a strong result, especially in a turbulent year, and we are very happy and proud for that. And if I go over and comment on our acquisitions during 2025. And during the quarter, Latour Industries signed the agreement to acquire Swedish Alstor, which I mentioned, which was finalized in January of this year. And Alstor is a provider of compact forestry machinery for thinning and forest management. And with this acquisition, Latour Industries is entering a new segment, the market for forestry equipment. Latour Industry also divested AAT and Batec during the quarter. And with that, they left the Mobility division. In addition, after the reporting period, Bemsiq within Latour Industries increased their services offer by the acquired Scandinavian Sealing based in Sweden. In total, this year, we have finalized -- in last year, I should say, we have finalized 7 acquisitions. Should we include the 2 acquisitions finalized in January of this year, the acquisitions during the year adds to more than SEK 2 billion in net sales on an annual basis. And we're very happy with our M&A performance as well during 2025. So having said that, I hand back to Mikael to comment on our 7 business areas. Over to you, Mikael. Mikael Albrektsson: Thank you very much, Johan. And the regular fashion, we start by taking a closer look at Bemsiq Group. And Bemsiq had a continued good performance in the quarter. Order intake in line with last year, which is driven by both organic growth and acquisitions, although partly offset by negative currency effects. And the total organic growth in net sales was 12%, driven by the Building Automation division, while the Metering division is a bit slower. A strong performance overall, considering the challenging market within the real estate and construction industries. And the adjusted operating profit amounted to SEK 94 million with a good margin of 18.4%. And the margin was slightly negatively affected by growth initiatives ongoing and recent recruitments. With that said, we then turn the page and direct the focus towards Caljan. And order intake remained strong during the quarter, increasing by 20% when adjusting for currency effects, and the order backlog is at solid levels for the coming quarters. Caljan is now increasing the production capacity to meet the strong demand. Driven by the higher order intake during the year, net sales showed a very strong development in the quarter, growing organically by a very strong 38%. And the adjusted operating profit was very strong as well, amounting to SEK 109 million with an operating margin of 23.9%, which is a combination by good cost control, a strong gross margin and high volumes. With that said, we turn the page and take a look at Hultafors Group. And as Johan commented a bit earlier, the overall market conditions continues to be challenging for Hultafors Group, especially in North America. And the total net sales is organically down by 4% compared to the corresponding quarter last year. The profit margin is lower than last year, mainly due to a combination of long-term investments for future growth as well as lower volumes in the period. And the adjusted operating profit amounted to SEK 301 million with a margin of 16.8%, which is good under the circumstances. We then turn page and take a look at Innovalift. And for Innovalift, we saw order intake continue to grow, supported by acquisition and a very healthy organic growth. Total net sales grew by 37%, driven by both acquisition and organic growth and especially within the Components & Modernization segment as well as the direct service and sales segment. And the gross margin continues to improve step-by-step, and the cost controls remain strong, which allowed the operating profit -- the quarterly adjusted operating profit amounted to SEK 132 million with a margin of 13.8% and summarizes a very good year for Innovalift. With that, we turn the page and continue with Latour Industries. And Latour Industries business unit showed a mixed development with a sustained strong demand for REAC and MAXAGV while the remaining units faced somewhat softer market conditions. In total, order intake is growing organically by a strong 12% during the quarter. Net sales is down by 3% from last year, driven by REAC and LSAB. And the adjusted operating profit amounts to SEK 30 million with an operating margin of 6.4%. And the result is negatively affected by currency effects and the weak market climate as well as ongoing investment for future growth. And as we have commented, worth mentioning again, Latour Industries is currently -- has an under-absorption of the fixed cost on the central level following the distribution of Innovalift putting additional pressure on the margin for the time being. And as the heading of the picture states, the focus of Latour Industries continues to be on developing the existing holdings and to find new platform investments, which Tina will talk more about later in the presentation. And to briefly recap what Johan also had said earlier, the Mobility division was divested during the quarter and the acquisition of Alstor was signed in December and finalized in January. We then turn page again and take a look at Nord-Lock Group. That continues to develop strongly during the year and in quarter 4, despite the tough business climate, reporting growth across several metrics. Order intake grew organically by a strong 19% during the quarter. The net sales grew organically by a very healthy 10%, reaching an all-time high for a single quarter. All sales units contributed to the growth and the order backlog remains at solid levels going into the coming quarters. And the quarterly adjusted operating profit increased to SEK 139 million with a strong operating margin of 25.5% despite significant negative currency effects. But summarizing a very strong year for Nord-Lock Group overall. We then turn page again and look at our final business area, Swegon. And for Swegon, the market has stabilized somewhat during the quarter and order intake strengthened during the quarter and is up 10% organically from last year. Total net sales grew organically by 4%, driven by North America and the segment air handling, cooling and heating. Adjusted operating profit came in at SEK 307 million with a margin of 11.4%, supported by higher volumes and an improved margin. We can also once again comment that Andreas �rje Wellstam left his role as CEO of Swegon on February 1 and will assume the role of Chief Investment Officer of Latour in April. Very exciting and welcome back, Andreas, we say. And we can also comment that Eva Karlsson now is serving as Interim CEO for Swegon. So we want to take the opportunity to congratulate Eva to that appointment and wish you all the best in that position. And then to continue, we continue with the financial targets. And with that, I hand over back to you, Johan. Johan Hjertonsson: Thank you, Mikael. Excellent. So our financial targets. During the last 12 months, we have had a growth of 8.7%, EBIT margin of 14% and return on operating capital of 13.9%. This is an outcome that we're pleased with. The targets are to be seen over a business cycle, and we have been in some time in recession for some time now and growth is driven by both acquisition and organic growth, but with strong currency headwinds. We had about SEK 900 million in negative headwinds on the top line in the quarter -- no, in the full year. EBIT margin is a good level and return on operating capital is satisfying. So -- and then I go to the next slide here before the Q&A. To summarize, 2025 have been yet another year marked by the global uncertainties affecting the business climate. However, we are pleased with the outcome, and we are entering 2026 with a strong order backlog and an organization well prepared to meet both opportunities and challenges. Latour is a long-term sustainable investment company and a responsible owner creating value for our shareholders. We are financially strong and continue to invest in our holdings, both existing and new ones to enable future growth and create value for our shareholders. We have a strong corporate culture that we treasure, which is of great value while we move forward in a volatile and rapidly changing world. So with that, I'd like to thank you listening in so far, and we open up for the first Q&A session here together with myself and Mikael. Operator: [Operator Instructions] The next question comes from Linus Sigurdson from DNB Carnegie. Linus Sigurdson: So my first question is on Hultafors and the margin profile. And I agree that 16.8% margin is definitely strong in the face of these headwinds. But could you just help us pick apart how much of this headwind comes from the FX and the negative volumes? And how much is these strategic growth investments that you're undertaking? Johan Hjertonsson: I can start and then Mikael, maybe you can shed some more light on it. I think overall, on the full year on the industrial operations, it's about 3% negative headwind on the top line and about the same on the EBIT. So that translates to a little bit less than SEK 1 billion on the top line and some SEK 120 million to SEK 130 million on the EBIT in total. But then over to you, Mikael, if you want to comment a bit more specifically on Hultafors. Mikael Albrektsson: No, I can just -- I mean, for Hultafors, I think, I mean, the important -- the most important driver for Hultafors per se is the volume that is -- we are very confident looking at underlying margins that when volume comes, the EBIT margin profile is where we want it to be for Hultafors specifically. Linus Sigurdson: Okay. And then my second question is on Caljan since -- I mean, it's been a while, if ever, since we've seen sort of normal circumstances in this company. Should we think that this 20-plus EBIT margin level is reasonable to expect going forward if these market conditions persist? Johan Hjertonsson: Yes, I agree with you, Linus. It's been really roller coaster ride with Caljan. That's a little bit -- one is the nature of the business. It's a very project-oriented business with a very large projects. But it's also a business that is exposed to heavy CapEx type of investments with new clients, right? And then thirdly, I'd like to say -- they had an extreme peak during the pandemic when e-commerce was booming and then they had the equivalent reverse downward trend when the pandemic was over because there were overinvestments in the logistics sector. And now those investments are coming back. So I would say that last year, you would see that a more normalized year. Of course, the growth numbers are a bit crazy because you compare to very low numbers in the year before in 2024. Margin-wise, I think Caljan is a company that should operate somewhere on 20-plus EBIT margin on everything else the same over a longer period. Linus Sigurdson: Okay. And then my final question was on Swegon. I understand that volume growth is obviously a key driver here as well for margin improvements. But are there any other, say, notable actions that move the needle that you're taking in Swegon on the margin or cost side? Johan Hjertonsson: We always work with optimizing our cost. On a positive note, we have seen strong growth and indications that the market has turned in Q4 for Swegon. So, hopefully, we will see a stronger growth going forward. And also as a general comment, I would like to say that Swegon is very nicely positioned in the area of energy efficiency and also there is an increased interest in a healthy indoor climate,. And that's exactly what Swegon works with. So that plays very well in that sense. Something you want to add, Mikael on the margin? Mikael Albrektsson: No, not really. I think as you mentioned, Johan, the -- I mean, the increased demand for indoor air quality requires more advanced products, which plays well ahead for Swegon's offering and also that type of product is also more technology content typically offer healthy margins in that business as well. Operator: There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions. Mikael Albrektsson: And we do not have any written questions in the activity feed. So I hand back to you, Johan. Johan Hjertonsson: Thank you, Mikael. So that ends our first Q&A. Johan Hjertonsson: Now into our new thing, we will, on our quarterly report presentations, do a quick deep dive into each business areas, and we will have a rolling schema coming up. And the first one is the Tina Hultkvist for Latour Industries. So I hand over to you, Tina, and I know that you have a presentation, and then the 3 of us will together take Q&A on Latour Industries after that. So over to you, Tina, please. Tina Hultkvist: Thank you, Johan. So then moving into a deep dive of Latour Industries. Latour Industries is 1 of the 7 companies in Latour's wholly-owned portfolio. The main mission for Latour Industries is to build new company platforms. We are the home where good companies are young, grow as teenagers and ultimately move away becoming new company groups in the Latour wholly owned portfolio. Actually, 3 out of 6 sister companies have grown within Latour Industries and then moved out forming new company groups. And that's Nord-Lock, which was quite a few years ago, then Bemsiq and last Innovalift roughly 2 years ago. If combining us, around SEK 10 billion out of the current wholly owned operation of Latour comes from previous Latour Industries companies. Altogether, we've made around 60 acquisitions and stands for around 30% of the value of the wholly owned portfolio. And this is just to show how building the new platforms has played out over time, forming the SEK 10 billion. The gray part is the portfolio currently reported as Latour Industries. And within here, we continue nurturing companies that have the potential to form new platforms, and we also develop companies that may be more relevant on a stand-alone basis. So when Latour Industries as such is small, we are most successful because by then, we have most probably recently let one of our company groups move away from home, and our work starts all over again. So creating new business areas is our main mission. We do this by proactively establishing and nurturing contacts with good companies. This is an area we have strengthened the last 2 years. And of course, we also engage in structured processes as they come out. By active business development to support growth and add-on acquisitions, we take the steps towards forming a new business area. Guiding stars in the acquisition process is, of course, the Latour Investment criteria, focusing on acquiring good companies with good growth potential. As mentioned, we have intensified the actions in proactive deal sourcing lately and are spending quite some time in building and growing relations with good companies. The current portfolio we have is a quite wide range of companies. With respect of time, I will just mention the last 2 acquisitions, the most recent one then being Alstor. Alstor designs and manufactures compact forest machines for customers ranging all the way from professional players to self-employed forest owners. And then before that, it was MAXAGV and MAXAGV designs and manufactures automated guided vehicles, combined with in-house developed software solutions for various kinds of industrial use cases. So coming back to what Mikael showed, what you see on the 5-year perspective to the right is the development of the companies still within Latour Industries portfolio. The 2 new business areas built during those 5 years are excluded here and reported separately, but have, of course, been a major part of the efforts made within Latour Industries. We have a quite widespread operations in the portfolio and the performance differs between the companies that we have today. As you know, 2 companies that we had has been divested during the quarter. And in addition to that, the underlying demand is good in REAC and MAXAGV, but we are exposed to currency fluctuations, and we do have some headwind in other parts of the portfolio. When looking ahead, we are striving for a high level of acquisitions. Historically, the pace of platform builds has been around 2 platforms in roughly 5 years. And this is a quite good indicator of the pace that we are aiming for going forward. We hope this has given a clear view of who we are in Latour Industries and what our value for the Latour Group is. And with that, we open up for questions. Johan Hjertonsson: Thank you, Tina, for an excellent and to the point and clear presentation. And therefore, we open up for the Q&A session with Tina and Mikael and myself. Operator: [Operator Instructions] The next question comes from Linus Sigurdson from DNB Carnegie. Linus Sigurdson: Hello again. Thank you for being on. I had 2 quick questions. The first one being, I mean, I understand, of course, that there's lower pressure on the companies within Latour Industries to sort of show immediate, say, profitability improvements, et cetera. But where do you draw the line where you would decide that you would divest a business in Latour Industries? Johan Hjertonsson: It's a good question. I can take a first cut on that and then Mikael and Tina, please join in. I would say we have the same pressure expectation on Latour Industry companies as all our companies. But naturally, we take a slightly higher risk in parts of Latour Industries when we enter a new segment and so on. And it can also be that when we come into a new segment, we learn a lot about the segment and we learn about that industry and we see things we like, and then we continue and we build and we see that our initial hypothesis was correct. And sometimes we see that it was tougher than expected, and we see that maybe it doesn't fit us in that sense. And that you could see them in the Mobility division was an example where we said we can't add value. There's more other interesting opportunities and then we go up. So it's not that we have fixed EBIT margin that you come -- it's where we feel that this is not long-term viable in that sense, that's where we exit. You want to add to that, Tina or Mikael? Tina Hultkvist: I think it's a good description. Maybe just adding there that we are, of course, very much looking into the potential also when looking at the profit. So where can we go with this kind of business. That's an important metric for us. And then to some extent, maybe we do have a little bit more patience also in developing the companies here within Latour Industries than what we usually have. Johan Hjertonsson: And many of many -- if I can add to that, many of the Latour Industry companies are naturally slightly smaller in size. And therefore, Latour Industries has a very professional central overhead, if I may say so, to support them, to support and develop in terms of business development, M&A, strategy formulation and so on. Linus Sigurdson: Okay. That's helpful. And then my second question was on if there are any sort of sectors or megatrends that you're actively working with currently, but that you don't have in the portfolio right now? Johan Hjertonsson: Good -- very good question. Do you want to say something on that? Tina Hultkvist: Of course, we are continuously looking into interesting sectors. And there were a few that we are maybe more interested in others. And let's see what happens with that. But I think we should not disclose that particularly here. But we are open to many new sectors as long as it is within the Latour investment criteria. So we are looking broadly, of course. And Latour Industries is the area where we can enter into completely new sectors. So that's why we are open to entering into anything new that is enough interesting and fits into the criteria. Johan Hjertonsson: But I think we can mention Tina, one acquisition that we just did as an example of how we think is Alstor then in the forestry sector. And we have identified that the forestry sector is a very long-term globally interesting sector to be in. It's an under trend, so to speak, of the whole green thinking of more -- you will build more with wood and energy and all of that, that comes from our forest. And then also you know, Linus, that has followed us a long time. We are also looking for a company with good technology that has an international potential. And within the forestry sector, actually globally, Sweden and Finland are the technology leading countries in the forest industry sector. So obviously, then we start with one company, and now we will learn this sector in depth. And hopefully, we can make add-on acquisitions and build something interesting within that. So I think that's the way we think, and I think Alstor is a good example of that, right? Operator: The next question comes from Oskar Lindstrom from Danske Bank. Oskar Lindström: Yes. Just a quick question on the execution of acquisitions within Latour Industries and when you do acquisitions in your companies, are these the same M&A teams carrying out all of these acquisitions? Or does Latour Industries have its own dedicated M&A team? That's my question. Johan Hjertonsson: Good question. It is a mix. We have Investment AB Latour has its own M&A team that works with many of our wholly owned businesses to help them with as internal consultants, you could also say, to help them with M&A. One of those business areas is Latour Industries. So Latour Industries draws its resources, so to speak, from the Latour team in that sense. Other business areas might also have their own M&A team. So the precise answer to your question, there is a mix between central team and the local teams, but they all work tightly together, of course. Oskar Lindström: If I may, a follow-up question. When you look at acquisition targets for Latour Industries, are you actively thinking about businesses that could, in the future, be merged with your other wholly owned companies? Or is that not really part of the consideration when selecting acquisition targets? Johan Hjertonsson: I can start and then, Mikael, if you want to comment. I think no, primarily, it is to find new areas. Obviously, Latour Industry will have a lot of inbound interesting cases, but they will be funneled directly to the other business areas where it's more appropriate in that sense. So we would not -- I think I understand your question. I think we would not buy something that we think would fit in Swegon and keep it in Latour Industries and then transfer it. Then we will ask for instance, to do the transaction directly. So Latour Industries is a transaction vehicle for the other business areas to be clear. Oskar Lindström: Good. So it's like a stand-alone incubator, not an incubator for the other wholly owned company. Excellent. Operator: There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Mikael Albrektsson: Yes, we do not have any written questions in the feed. So I think that concludes then the final segment Q&A. And I hand over to you, Johan. Johan Hjertonsson: Thank you, Mikael, and thank you, Tina, for this premier of an in-depth in one of our business areas. That was great. Tina, thank you for visiting us here on the call. And thank you, everybody, for listening in, and that concludes the complete presentation of the Q4 report and looking forward to talk to you and speak to you again when we have our Q1 presentation later on this year. So from Tina and from Mikael, thank you very much. Bye.
Melanie Kirk: Hello, and welcome to the results briefing for the Commonwealth Bank of Australia for the half year ended 31 December 2025. I'm Melanie Kirk, and I'm Head of Investor Relations. Thank you for joining us. For this briefing, we will have presentations from our CEO, Matt Comyn, with an overview of the results and an update on the business. Our CFO, Alan Docherty, will provide details of the results, and Matt will then provide an outlook and summary. The presentations will be followed by the opportunity for analysts and investors to ask questions. I'll now hand over to Matt. Thank you, Matt. Matthew Comyn: Thanks very much, Mel, and good morning, everyone. It's great to be with you today to present the bank's half year results. We recognize the cost of living pressures, global uncertainty and rapid change are weighing on many Australians. In this environment, we've remained focused on supporting and serving our customers. That focus has delivered disciplined growth across our core customer segments. Cash net profit increased by 6% on the prior comparative period and earnings per share increased by $0.19. We maintained strong liquidity, funding and capital positions. And our operating performance and capital position has allowed the Board to declare a fully franked dividend of $2.35, up $0.10 on the prior corresponding period. This marks the 11th consecutive period of DRP neutralization. There are 2 features of this result to stand out. The first is the market context. We've seen high credit growth, low loan losses, supportive funding markets and intense competition. The second, which is a key strength, has been maintaining stable margins while growing volume at or above system across all major segments. Over the past 12 months, mortgage balances grew by $45 billion or 7% and business lending grew by 12% at 1.3x system. Deposit balances increased by $44 billion in the half. This was our strongest domestic deposit and lending balance growth in a half year reporting period since 2008. Australia is currently experiencing relatively strong nominal growth and private sector demand. In this environment, banks play a critical role in supporting credit growth for productive investment while maintaining unquestionably strong capital positions. Doing this sustainably requires profitable banks that can generate capital organically to support the economy. The last time credit growth was at this level, apart from a brief period during COVID, returns across the industry were materially higher. In normal conditions, such an environment would favor disciplined competition so that scarce capital is deployed where it earns an appropriate return. However, the competitive landscape is materially shifting due to differing business models, regulatory settings and architecture, customer offerings and return hurdles. Against this backdrop, we believe CBA is uniquely positioned to adapt and perform strongly. Our deep customer relationships and franchise strength allows us to compete effectively and profitably. That profitability allows us to support higher growth across the economy, invest to improve the customer experience and deliver consistent returns for our shareholders. Disciplined growth and margin management drove operating income growth of 6.6%. Operating expenses increased by 5.5%, excluding restructuring and notable items. This reflected inflationary pressures and higher investment in technology, resilience and our frontline teams to improve customer experience. Credit conditions remained very benign, contributing to 6.1% cash profit growth. The performance and long-term health of our franchise is underpinned by a simple relationship-led model. Deep trusted customer relationships drive more frequent and meaningful engagement. That engagement provides deeper insights into customer needs, enabling us to deliver superior customer experiences. Over time, this creates enduring value for customers and sustainable returns for our shareholders. This model has long underpinned our leadership in retail banking and over the past year -- over the past several years, has accelerated growth in our business bank. Technology continues to amplify this advantage, enabling more personalized, timely and scalable customer engagement. Our financial performance reflects customer focus, disciplined execution and investment in our franchise. We track the strength of our customer relationships through Net Promoter Score, and this remains an important indicator of trust and advocacy. We currently hold leading NPS positions among major banks in consumer and institutional banking. And following 15 months at #1, we dropped to the second position in business banking in the half. Operationally, this is translating into scale and momentum across the group. On average, each week, we settle more than 3,000 home loan purchases, lend around $900 million to businesses and process almost 150 million payments, and alert customers around 280,000 times to suspicious card activity. We continue to build scale and depth of primary customer relationships, which underpins long-term franchise health. We've consciously increased investment in data, technology and AI to improve customer experience, safety, security and operational resilience. The retail bank has performed well with pre-provision profit growth of 5%. We've maintained the leading Net Promoter Score for 38 consecutive months. Retail MFI share has increased slightly to 33.5%, but remains below its 35% peak. Customer engagement remains a core strength with 9.4 million CommBank app users and 14 million daily log-ins. We now hold 12 million retail transaction accounts, a 35% increase since the start of COVID and an increase of 585,000 in the past year. As a result, our deposit growth has been strong. Home loan balances increased by 7% in the past year to $622 billion. 97% of these customers hold a transaction account with us. Digitization and technology continue to drive performance in home lending. 70% of proprietary home loan applications are auto decisioned on the same day. We're focused on continuing to strengthen our MFI share and investing in AI-enabled digital experiences. The Business Bank has had another period of strong performance. Pre-provision profit growth was 8% and cash profit growth was 14%. MFI share increased to 26.9%, which is a 310 basis point increase since the start of COVID. We added 85,000 transaction accounts in the past year, which is a 7% increase. And the business bank is now the Commonwealth Bank's largest source of transactional deposits. We grew lending at 1.3x system, increasing balances by $18 billion in the year. Business Banking lending balances have increased by 87% or $78 billion in the past 6 years, supporting growth and jobs in our economy. Approximately 90% of business loans are linked to a CBA transaction account, reflecting the depth of our primary relationships. This supports credit quality with loan losses of 6 basis points in the half. It also allows us to use data and automation to substantially improve lending and servicing processes. For small businesses, we've doubled the volume of loans auto approved through BizExpress over the past 2 years and have reduced annual loan maintenance activity by 85%. We also launched a national AI, cybersecurity and digital capability initiative, supporting up to 1 million small businesses to lift productivity and competitiveness. The combination of deep customer relationships and prudent lending growth is delivering sustained earnings performance. Our institutional business is also performing well with pre-provision profit increasing by 13%. We've regained the #1 position in NPS, supported by improvements in client experience and execution. Our institutional bank plays an important role in providing $64 billion in net deposit balances and supporting markets activity. We've seen growth in new transaction banking mandates, enabling the institutional bank to further support the group in deposit funding. The markets business has had a particularly strong half. We led the market in debt capital market performance and last year topped the Bloomberg combined lead table. In New Zealand, ASB performed well with operating income growth of 8%. ASB is the highest reputation score of the major banks in New Zealand and has been a Digital Bank of the Year for the past 4 years. ASB saw 1.3x system growth in home lending and business and rural lending. Deposits grew at 1.2x system. Customer deposits and home lending balances have both increased by 41% in the last 6 years by $26 billion and $24 billion, respectively. The credit environment remains benign. Troublesome and nonperforming exposures decreased following upgrades or external refinancing activity. The number of home loan customers in hardship declined by 28% since June 2024, and we remain well provisioned for a range of economic scenarios. We hold total provisions of $6.3 billion, which is $2.8 billion above our central economic scenario. Our balance sheet remains strong with 79% deposit funding. Our weighted average maturity of long-term funding is 5.2 years and liquid assets are $199 billion. Our capital ratio of 12.3% is $10 billion above minimum regulatory requirements. A strong balance sheet allows us to invest for the long term and respond to any deterioration in market conditions. We've seen record inflows of deposits in the half. We've also seen $15 billion increase in redraw balances and offset accounts. Customers having surplus funds available is a significant predictor of arrears performance, and so this behavior has a positive capital impact. 87% of home loan customers are now in advance of their scheduled repayments. On average, 35 payments in advance. When adjusted for redraw and offset savings, household debt has now returned to levels not seen since 2015. The transmission of monetary policy in Australia means that our banks pay very competitive interest rates on at-call household deposits compared with other markets. On average, at-call deposits in Australia are attracting an interest rate, which is 5x higher than in the U.S. and 10x higher than in Europe. We've seen a strengthening in the economy in the past 6 months, driven by consumer demand. Spend has been increasing across all customer age cohorts. Most age groups are broadly maintaining discretionary spending and increasing savings levels. GDP growth in mid-2026 was 2%, more than double the same period a year ago. Most noticeably, economic growth has shifted from being primarily driven by public demand to being driven by household consumption. Last week, we saw the Reserve Bank raise interest rates to 3.85% in response to inflation, which is running higher than the target band. Almost 1/3 of the increase in the CPI basket is driven by housing with utilities a substantial contributor to that category. Our purpose, building a brighter future for all guides how we allocate capital, manage risk and invest for the long term. It reflects our long-term commitment to Australia, our customers and our communities. Some of the ways we're delivering on our purpose include significantly increasing funding for new residential housing development, delivering $190 million in benefits to consumers through CommBank Yellow, migrating our core banking system to the cloud to improve resilience, delivering 30% more technology changes, reducing critical incidents and improving recovery times by 65%, rolling out new AI tools and training programs to our teams to build capability and deliver better customer experiences and maintaining our strong balance sheet settings, sending around 40,000 alerts a day to customers about suspicious activities and deploying more than 2,900 AI bots to engage and disrupt scammers. Importantly, our strong performance enables us to continue supporting our 18 million customers, protect communities, support Australia's economy and invest for the long term. As cost of living pressures persist, we are providing targeted support to households under strain, including 63,000 tailored payment arrangements for customers most in need. We supported more than 79,000 households to buy a home, including through dedicated support for first home buyers. And we lent $25 billion to businesses supporting growth, jobs and economic activity. We're investing $1 billion a year to help more people protect themselves from scams and fraud. Our strong balance sheet allows us to support customers and communities while delivering sustainable long-term returns for shareholders, including $4.4 billion in dividends this half, benefiting more than 14 million Australians. We will continue to support our customers, protect communities and invest for the long term to provide strength and stability to the Australian economy. I'll now hand to Alan to take you through the result in more detail. Alan Docherty: Thank you, Matt, and good morning, everyone. Starting with the results overview. We've set out the key aspects of our current operating context, how we are responding and how those actions are contributing to the long-term strengthening of our franchise. At a macro level, we are seeing strong system growth in both credit and money supply. Competitive intensity within the banking sector remains elevated. Technological innovations continue at pace and geopolitics remains a source of potential tail risks. Against that backdrop, our response has been deliberate and disciplined. We have carefully managed volume and margin trade-offs, continue to invest and extend our leadership in both technology and proprietary distribution and maintained conservative balance sheet settings. This approach is yielding strong financial outcomes. Pre-provision profit growth is healthy. Our dividend per share continues to reflect the strong compositional quality of our earnings. And our balance sheet settings give us confidence in our ability to continue supporting customers, growing the franchise and delivering sustainable returns to shareholders over the long term. This slide sets out the usual reconciliation between statutory and cash profits for the half. There were only modest movements in the usual noncash items during the period. As such, both statutory and cash profits on a continuing operations basis totaled around $5.4 billion. Breaking down the components of that cash profit, Operating income grew 6.6% year-on-year as our investments in technology and proprietary distribution continue to yield strong operational outcomes. That top line performance allows us to continue to invest in the franchise with underlying operating expenses increasing 5.5% on the prior comparative period. Notable expense items totaled $170 million over the last 6 months, largely due to the settlement of a long-standing legal proceeding in New Zealand during the September quarter. Loan impairment expense was flat year-on-year and lower versus the second half, reflecting the benefits of our conservative settings and the resilience we continue to see in customer and portfolio credit quality. This resulted in growth in cash profits of a little over 6% on both the prior corresponding period and the second half of last year. It's worth noting that the effective tax rate for the half was 30.3%. Looking ahead, you can assume that will settle closer to 30% for the 2026 financial year. On operating income, we delivered growth of 6.6% over the prior comparative period. Net interest income increased strongly, up $761 million, supported by profitable above-system growth in lending and deposits. Other operating income also contributed, growing $163 million over that period, assisted by one-off gains. This slide sets out some of the drivers of long-term franchise strength that we have been targeting, deeper customer relationships, deposit-led growth in our core segments that underpins and proceeds lending growth and productivity improvements within our frontline teams. Our retail bank continues to build foundational banking relationships, adding 3 million net new transaction account customers over the past 5 years. In home lending, we continue to prioritize and grow proprietary distribution with $55 billion of new fundings originated over the last 6 months through our own channels. And our strategic focus on business banking continues to deliver strong outcomes with double-digit compound annual growth in both deposits and lending over recent years. Our investments in building a more digital, customer-focused and streamlined business bank for our people and our customers can be seen in the productivity improvements delivered over the last 5 years with fundings per banker up 65% over that period. Turning to the net interest margin and looking at the movement over the most recent 6-month period. The main driver of the 4 basis point reduction over the half was the increased mix of low-margin liquid assets and institutional repos. Excluding those items, margins were 1 basis point lower with competitive pressures and the impact of a lower cash rate, largely offset by the replicating portfolio and the favorable portfolio mix effect of strong deposit growth. Margins were a little stronger in the December quarter, largely due to the benefit of higher swap rates on our replicating portfolio. You can see here that we're managing margin outcomes carefully, balancing competitiveness with returns and staying focused on building lasting primary relationships with our customers rather than chasing unprofitable volume growth. On operating expenses, they increased 5.5% on the prior corresponding period. The drivers are largely unchanged over recent years. We are seeing inflationary impacts on wages and IT vendor cost inflation continues to run higher than CPI. At the same time, we continue to invest behind the franchise with higher cloud consumption and software licensing costs and our ongoing investment in technology infrastructure and AI capabilities alongside enhanced frontline capacity and operational resilience. We are self-funding much of that investment through productivity initiatives, realizing approximately $222 million in incremental cost savings over the past 6 months. Turning to credit risk. Loan impairment expense for the half was $319 million, broadly consistent with the prior comparative period and improving versus the second half. Across the portfolio, we continue to see broadly stable to improving conditions. Households have been supported by the strength of the labor market and rising disposable incomes. We have seen this reflected in higher prepayments and lower consumer arrears. In the corporate portfolio, troublesome assets and nonperforming exposures continue to trend lower as a proportion of the portfolio. Given the uncertainty in global macro and geopolitics, we've maintained strong provisioning coverage. Total recognized provisions are approximately $6.3 billion. And importantly, we continue to hold a material buffer above the central scenario. This slide provides the usual additional detail on sectoral considerations. We marginally reduced base provisioning and forward-looking adjustments in areas where conditions have improved, including consumer, construction and retail trade. This was partly offset by an increased level of provisioning relating to our downside economic scenarios where we take into account the risk of exogenous shocks to the domestic economy. Overall, our approach to provisioning remains grounded, forward-looking and appropriately conservative. Our funding and liquidity profile has continued to strengthen. We continue to be predominantly deposit funded, supported by a strong deposit gathering franchise. Total customer deposits grew at an annualized rate of 10% over the last 6 months, taking our customer deposit ratio to 79%. We also maintained a historically low proportion of short-term wholesale funding. This combination of deposit growth, consistent term issuance across diverse funding markets and strong liquidity buffers, we remain well positioned to support the current strong level of customer demand for lending growth. On capital, our common equity Tier 1 ratio remained at 12.3% with organic capital generation continuing to support franchise growth and dividends. Growth in risk-weighted assets was largely a function of lending volume growth with credit risk weightings remaining broadly stable over the past 6 months. The interim dividend increased $0.10 to $2.35, representing a headline payout ratio of 72% and a normalized payout of 74% after adjusting for the benign first half loan loss rate. The dividend will be fully franked and the dividend reinvestment plan will be offered with no discount and fully neutralized. Delivering franchise growth while maintaining returns above our shareholders' cost of capital allows sustainable and consistent accretion and dividend per share over the long term. This slide sets out our long-term approach to capital management. We prioritize profitable franchise growth as the first and best use of organic capital generation. We invest in line with our strategic priorities aimed to pay sustainable dividends, and we carefully manage our share count and surplus capital in a disciplined way. Over time, you can see we've balanced capital generation with capital distribution, supporting franchise growth when lending demand is elevated, while also returning excess capital to shareholders, primarily through dividends as well as through the selective utilization of buybacks. Ultimately, we remain focused on optimizing long-term shareholder outcomes while maintaining the balance sheet resilience that underpins our ability to support our customers and the broader economy through the cycle. In closing, this long-term approach has again assisted in delivering consistent and superior shareholder returns. Our combination of a high return on equity and strong payout ratio continues to compare favorably with domestic and global banking peers. Our strategic investments are yielding measurable improvements in franchise growth and productivity, underpinning our continued outperformance in net tangible assets and dividends per share. I'll now hand back to Matt for the economic outlook and closing remarks. Thank you. Matthew Comyn: Thanks very much, Alan. Australian economic growth has strengthened more quickly and proven more resilient than expected. This was driven by increases in consumer demand and rising investment in AI and energy infrastructure. Household consumption has risen, including across discretionary categories. Supply side constraints mean that the economy is struggling to meet this increased demand. And as a result, inflation is now expected to remain above the Reserve Bank's target band for some time, placing further upwards pressure on interest rates. Australia has remained highly resilient despite a volatile global environment. To date, there has been limited economic impact from trade and tariff disruptions. A global AI investment cycle is supporting growth. Elevated geopolitical risks are likely to generate ongoing shocks, reinforcing the importance of economic and operational resilience. We will continue supporting our customers with their financial resilience during this period. We're optimistic about the prospects of the economy and we will play our part in building a brighter future for all. So in summary, the market has seen a period of high growth, low loan losses and intense competition. The Commonwealth Bank is well placed to adapt and perform against this backdrop. We remain committed to supporting and protecting our customers, reimagining customer experiences by investing in technology and AI and providing strength and stability for the Australian economy and delivering sustainable returns. We will stay focused on consistent, disciplined execution and investment for the long term to deliver for our customers and build a brighter future for all. I'll now hand to Mel to go through your questions. Melanie Kirk: Thank you, Matt. For this briefing, we will take questions from analysts and investors. When the line opens for you, please introduce the organization that you represent and limit your questions to 1 to 2 maximum questions. The briefing will then have the -- sorry, we'll then take the first question from Andrew Triggs. Andrew Triggs: Matt, in your prepared remarks for the first quarter trading update, you talked about the competitive concerns -- sorry, the competition concerns you had and potential responses and onsettings. Could you sort of elaborate on those? You seem to have sort of reiterated some of those comments this morning. And specifically, what size of the balance sheet are you referring to there? It does seem at odds with a stable underlying margin in the half and the slight improvement in NIM that you've seen in the December quarter. Matthew Comyn: Yes. No, thanks. Look, I guess I'd contrast between -- as I said in the opening remarks, I think the strength of this result has been our ability to maintain a very good and disciplined volume growth and a part of that is underlying stability in the margin performance across all of our customer-facing segments. I think when we look at, let's say, last calendar year, I think the market is and the competitive context is shifting. I think clearly, this demonstrates our ability to be able to perform well in that. But I mean, if you look at the period of the last 5 years, we've seen the most rapid growth by one competitor in household deposit share growth. In fact, I think it will be close to double the previous growth rate. I think we've seen a pretty sharp reduction in household balances. I think the greatest over that 5-year period outside the major banks. I think even if you went back to 2008. And I think that's interesting in the context of the backdrop. We've got, as we talked about, higher system credit growth. We've seen that clearly in retail and also in non-retail. We expect that there's going to be a maintenance of higher credit growth on the back of higher nominal growth and of course, I hope a pickup in investment. If you look at the organic capital generation across peers and really the sort of volume and NII returns that are being generated, I think that sort of marks quite a shift. Against that sort of credit environment, you'd actually expect there to be much greater pricing discipline. And look, clearly, there are different choices that are being made around business model and customer proposition. Some part of that's being informed by the regulatory architecture and choices. I mean it's for us to understand and adapt to the environment to be able to execute as well as we can, both in the 6- or the 12-month period, but also most importantly, to position the organization for the future. And we think a lot about how do we build on the scale, durability, resilience, investment in the franchise while continuing to perform well in any given period and deliver sustainable, reliable returns to our shareholders. Andrew Triggs: And maybe perhaps for Alan. Just the pick apart maybe a little bit more of the slight improvement you referred to in NIM in the second quarter. You put that down to the replicating portfolio, but that tends to come through more slowly. What were the other drivers? And given we've had a rate hike in February, potentially another one in May, what does it mean for the outlook for the NIM into the second half? Alan Docherty: Yes. Thank you, Andrew. Yes, between Q1 and Q2, I guess there was a couple of things that changed. I mean, importantly, the replicating is a major factor. The 5-year swap rate, I think, increased 30 basis points between Q1 and Q2. And as the tractors gone through over that period, we've seen the pickup there. Also, there was a bit more of a cash rate headwind in Q1. So if you look at the weighted average overnight cash rate that was down, I think, 40 basis points Q1 to the second half of last year and only down a dozen basis points over the second quarter relative to the first. So you had that cash rate headwind in Q1 sort of be much more neutral, I guess, in Q2. And the other aspect was very strong growth as we've reported in particularly business transaction accounts in that December quarter. So that was pleasing. And so we picked up a bit of a mix benefit on BTA growth through Q2. Now an element of that is seasonal, we get seasonally stronger growth in the December quarter. But you can see what the changes we've seen in swap rates. So that will continue to feed through in our tractors in the period ahead. Melanie Kirk: The next question comes from Jon Mott. Jonathan Mott: Jon Mott here from Barrenjoey. I've got a question on Slide 96. I know it's a long way in, but if we can just click over there. Just looking at the deposit side and well done, just really shows the strength of the franchise with the great growth of the deposits coming through. But I wanted to drill down into it. So if you look at the growth in retail transaction accounts, pretty steady, good numbers growing 3% in the half, 5% year-on-year. It's been growing pretty steadily. But then when we look over at the retail deposit mix, a big jump, and I think this is the biggest jump you've ever had in transaction deposits in the retail bank. And if you go on the average balance sheet, you can also see they're coming in noninterest-bearing deposits, so excluding offset accounts. You're seeing huge growth. And given the comments from the first quarter, it didn't appear to be there. So it really looks like it's come through in the December quarter. To put it into perspective, I just backs that the average transaction account in Australia jumped by $700 from just over $10,000 to $10,700. So what happened in that December quarter to see such massive growth, not in the number of transaction accounts, but in the balance? And when you think about how it's going to go going forward, is this just a seasonal and then get drained into savings or higher interest rate accounts over this next half? Or are you going to see really strong growth in noninterest-bearing deposits really support the NIM through the second half of '26 and into '27? So can you just explain what happened? Alan Docherty: Yes. I mean one element of that transaction account growth is growth in the offset accounts. We've seen very strong consistent growth in offset through both Q1 and Q2. I mean that's, I think, a healthy sign of continued growth in excess savings across the economy, and we called out in the -- in one of the macro slides, the improvement that you can see in the savings rate that we continue to see through the course of that half. Yes. And in terms of the performance of the underlying ex offset growth in the retail bank, that's continued to improve. I mean we've seen relatively consistent growth in average balances per retail customer account. So that's continued to grow in the period. And of course, we've continued to attract more customers. And so very strong growth, another, I think, year-on-year, 600,000 growth in customer transaction accounts in the retail bank. Retail customer numbers are up 3 million over the 5-year period. So again, that's been relatively steady. But I think it's a function of just that continued growth in savings across the broader economy, and we've seen a large share of that come through the retail bank. Jonathan Mott: Okay. Just digging into that a bit more. I just going over to the retail bank in the actual result. And if you look at the noninterest-bearing transaction accounts in the -- you can see there, this obviously excludes offset accounts. Big jump again there by $4 billion. So is there anything in particular that happened in that fourth quarter that just drove this much higher because this isn't you're seeing steady customer account growth, it's unusual. And then obviously, this implies what happens into the next half. Alan Docherty: Yes. No, I mean it's very pleasing. I think a more like-for-like comparison is going to be December to December growth in noninterest-bearing trend in the retail bank. We do get a fair amount of seasonality into that June period. So going into June, as you come out of the March quarter into June, you tend to have a higher level of spot non-retail transaction account deposits, which then dip quite significantly into the 30 June period. We see a lot of switching, particularly small business owners injecting cash in other businesses as they get to the 30 June financial year-end. So we've been pleased with the growth, probably the better underlying measure of that growth, I think, is the year-on-year 6% growth between the $47.5 billion we had this time last year and the $50 billion that we landed at 31 December. So yes, strong growth, but I wouldn't annualize the 6-month growth. Matthew Comyn: Yes. I think there's a bit of seasonality for sure. And Jon, I think Alan touched on it all. I mean, obviously, we'd like to think with all the work that we're doing around the engagement of main bank proposition that's attracting higher balances. We did see obviously a run-up in incomes across the economy. But I think it's hard to then just extrapolate the fourth quarter was strong for us in a number of areas, including both in business and retail deposit growth at an account and average balance number. Melanie Kirk: The next question comes from Richard. Richard Wiles: I've got a couple of questions. The first relates to the mortgage market and the second relates to the benefits of scale. So on the mortgage market, your major bank competitors have been pretty clear in communicating their desire to invest in and grow their proprietary distribution. So that leads me to ask whether your expectation that you can grow at or above system in the mortgage market is premised on a belief that you won't lose any share of proprietary distribution or that third-party broker share of the industry's mortgage origination will fall from its current levels? Matthew Comyn: Yes. Look, Richard, I mean, we don't, as you know, sort of -- we, at any period, seek to grow sort of at or around system. We're going to make lots of different choices. I think there's a couple of different sides to it. Clearly, the proprietary distribution has been a strength for some time, and the team have executed really well. I think we're now, we think, 54% of proprietary mortgage origination. On one side, the other banks joining and having a greater focus on that, maybe that helps a little bit to change the perception or customer preference more broadly in the market. I mean, secondly, the broker channel is a really important distribution for us and it will be going into the future. So I mean, it's predicated really on the continuation of what we have been doing. And I think we'll be able to maintain between both our CBA Yello brand, BankWest, which is obviously heavily concentrated in broker and our digital proposition, a balanced portfolio in terms of distribution. And then, of course, while serving our customers, we've sought to optimize for cohorts and individual segments where there's structurally higher margins like there are in investor. Richard Wiles: Okay. And my second question really relates to some of the slides and your comments pointing to very strong growth in the franchise since 2019, whether it be deposit balances or number of customers or number of accounts, you called that out in your opening remarks. That should suggest that you'll get increasing benefits from scale. But if we look at the cost-to-income ratio, in rough terms, it's somewhere in the mid-40s. That's where it is today. That's where it was back in 2019. Do you think it's fair to view the cost-to-income ratio as a measure of whether you're delivering benefits from scale? And can investors expect or cost-to-income ratio at CommBank over the coming years? Matthew Comyn: Yes. Look, I mean, it's -- and look, I'm certainly a believer in increasing returns to scale and how they might compound over a long period of time. I think the drivers, particularly on the cost side for us, I guess, as we reflect over the last, whatever, 5 or 8 years have been deliberately targeted in a couple of areas. First and foremost, we've significantly increased the investment, and we think that's really important to both underpin the durable competitive advantages. But I think that's one of the major sources of scale. And we've substantially increased sort of operational and regulatory risk management. Of course, without giving any sort of clear guidance, you might recall early on in our collective tenure, we gave some cost-to-income ratio guidance and then the cash rate promptly fell several times after that. So we're not likely to repeat with that. Richard Wiles: That was early 2019. Matthew Comyn: It was. It was, Richard. We remember it well, I'm sure you do. So look, I think we definitely have aspirations to perhaps over the medium term, definitely shift the trajectory of that cost. But we also, I guess, in any period, we're prepared to sacrifice near-term returns if we believe that we can deliver the best long-term outcome. And I do think the next 5 years will be quite different in terms of where the investments will come from. I do think there's a lot of consistency around technology. Probably the other area that I think occurs to Alan and I in this result is in terms of where the increased investment over and above the areas that we're used to calling out is there's just a lot more going into resilience more broadly. And I mean cyber has been a theme. So we do think the importance of being able to continue to invest in differentiated experiences but also just core resilience and protection of our customers. You need to be able to generate a strong organic return profile to be able to fund that investment to be able to simultaneously provide lending to the economy and distribute dividends. So it's probably a long-winded way of saying no change to guidance, believe in returns to scale strongly. I think there will be opportunities for us to improve our cost trajectory and ratios over time. Melanie Kirk: The next question comes from Andrew Lyons. Andrew Lyons: Andrew Lyons from Jefferies. Alan, just a question on costs. Firstly, the first quarter, you spoke to seasonally low IT vendor costs, but the first half cost performance was a particularly good one, and it wasn't particularly apparent that, that came through in the second quarter. How should we sort of think about that seasonality comment from the first quarter? Should we be seeing a bit of a step-up in those costs being expensed through the P&L in the second half just as you continue to invest in the business? Alan Docherty: Yes. You'll notice in the detail of the investment spend disclosures we have. We have dropped the capitalization rate in the current period. We're capitalizing less, more of that's flowing through into the P&L. That goes with the change -- slight change in mix that we've seen from a strategic investment perspective. So more weighting towards productivity and growth initiatives, a little bit less proportionately on some of the infrastructure spending. The infrastructure spending by nature is more capitalization heavy than other forms of spend. There is a little bit of seasonality in Q1. We've seen some of that reverse in Q2. It's fair to say that we've called out IT vendor cost inflation pretty consistently over the past 12, 18 months. It's an area that we continue to be very cognizant of, very focused on. We see that as over the medium- to long-term potential source of above CPI, above domestic inflation source of cost growth. So it's something that we're managing carefully, but something we keep an eye on, and that's why we made the comment in the first quarter because you didn't really see it as a source of cost inflation there. But again, that was a quarterly timing issue. Andrew Lyons: Yes. Okay. And perhaps a question for Matt. It was a particularly strong result in business banking. Your loans are up 9% on PCP NIMs up 3 bps over the same period and 5 bps in the half. That does somewhat fly in the face of the view that the market is facing elevated competition driven by both the big 4 and also other players in the space. So can you perhaps just talk about the competitive environment in business banking? How do you see it playing out? And what is CBA basically doing to sort of try and insulate the margin as much as possible as you do grow? Matthew Comyn: Yes. Look, I mean, I think the competitive context is intense. And against that, I think the team have executed extremely well. I mean some of the things I think that stand out to us is a continuation of what we've now seen for many years in terms of transaction liability-led strategy, strong growth in account numbers, strong growth in balances, as Alan touched on, particularly in the fourth quarter. I think a very good track record over the last 5 or 6 years of high-quality risk identification in terms of lending, really leveraging the main bank relationship and having a much broader relationship with our customers. We've seen also capabilities that the team have developed. It is probably one of the things that stood out to us as well as like a very good performance in small business. I touched on some of the growth in products like BizExpress, which is largely unsecured, and we've gone from sort of $30 million to $130 million. Now at some level, they're still relatively small numbers, but it's been a diversification of the lending growth that's been good. Small business would probably be roughly twice the margin of some of the other segments. They've been very disciplined up and down throughout all of the segments. We monitor closely in terms of the value of deals that we won't originate due to pricing, the value of deals we won't originate due to credit conditions. And I think leveraging some of the technology both in the decisioning -- speed of decision as well through to funding but also in terms of giving us the confidence to be able to originate across broader cohorts of customers where we've got that main bank relationship. We've also been able to again, leveraging some of the technology to automate some of the account management processes, substantially free up banker time. And so we're seeing much improved productivity in terms of facilities per banker. So I think in aggregate, the team have executed extremely well. I think the result is another very strong one. Melanie Kirk: The next question comes from Carlos. Carlos Cacho: I'm Carlos Cacho from Macquarie. You spoke to in the retail section lower deposit margins due to competition and shifting into high-yielding savings deposits. Can you give us any color on the mix shift you're seeing there from lower rate products like NetBank Saver into the higher gold saver or potentially higher rates on some of the NetBank Saver accounts that's driving that. Alan Docherty: Yes. I mean, I guess that's been a consistent trend. I mean, I talked earlier about the things that had changed between the first quarter and the second quarter, but one 1 thing that didn't change was the very strong level of growth that we continue to see into the GoalSaver product. So that's running multiples of the growth rate. And we're still growing in NetBank Saver, but the key driver of savings account growth in the retail bank has continued to be GoalSaver. And so the sort of mix effect and we've called out previously the very strong level of balances that are attracting that high the bonus rate on GoalSaver. So that's now up to 87% of balance is attracting that high rate. We can see then on the quarterly trends on margin, it's a consistent headwind. So very consistent over Q1 and Q2, it was about a basis point headwind in each of those periods due to the mix effect of that the growth in that higher rate product. Matthew Comyn: Yes, I think specifically -- sorry, I was say we're using the GoalSaver product, particularly, we've got some targeted offers in market. I think we see a little bit more switching into the saving, but there's probably less churn than we would have seen in other periods from savings into TD. And I think, again, the team have done a good job of optimizing across the various customer segments and trying to make sure we're getting the right overall margin outcomes whilst growing a bit above system as well. Carlos Cacho: Great. The other question I want to ask you is more around the thinking longer-term asset investments you make. You're clearly investing a lot of money into technology and AI. And I spoke to those vendor inflation headwinds, which appear to be as the tech companies wanting to return on their investment, how do you think about return on those investments you're making? And I guess, particularly how you think about that flowing through higher revenues versus potentially more productivity or lower cost in time? Alan Docherty: Yes. I mean we've been very pleased with the yield from the investment. And I think it's particularly there's a number of proof points in this result that we've called out. I think sure that we are getting a measurable return on those investments. We called out the productivity that we've seen as we've continued to digitize, importantly, the work of a business banker. We've got much better mobile and digital platforms for our business banking customers, getting them to the sort of levels that we achieved in previous years for retail. Customers, and you see that coming through. I mean that's a big driver of the MFI growth that we've continued to see within the business bank continue to underpin the transaction account growth. And then we've got sort of 97% conversion of those transaction accounts into lending relationships, which has seen us continue to grow well above system in the business bank over the last 12 months. So yes, the yield from the technology investments we're seeing measurable returns, both on the revenue side and in the cost side. So we've been pleased with that. To your point, and again, that's why we call out the IT vendor cost inflation, there is over the next few years, we're going to continue to see where the returns emerge from newer technologies between the technology companies themselves and the corporates who have deployed those tools. Certainly, over the past period of time, we've been pleased with the return that we're generating through our franchise, but that's something that we'll continue to manage, ensure we've got compatibility with lots of different vendors. We're able to switch providers in various areas, maintain that flexibility to ensure we maintain competitive -- have a competitive tension with some of our key technology providers, which I think is going to be important for every corporate over the next 5, 10 years. Melanie Kirk: The next question comes from Matt Wilson. Matthew Wilson: Matt Wilson, Jarden.Two questions, if I may. If you look through the long term, CBA's key point of differentiation has been your largest ticker low, no cost deposit base, and you're very effective at growing it as we can see today, and your major bank peers have failed to close that gap through the decades for various reasons. But today, we have sort of 2 new challenges out there. Macquarie who's the fourth peer and perhaps should appear in every slide where there's a peer comparison now going forward to put a line in the sand and then you've got AI. If we embrace your enthusiasm for AI, then does it follow that we'll all have a personal AI bot that will automatically direct our savings and transaction accounts into the highest-yielding accounts and a machine will do that for us. And on that basis today, they move to Macquarie. I've got a second question. Matthew Comyn: Yes. Look, Matt, I think on your first question. I mean, look, I think what the result demonstrates is our ability to perform in the current context. We think we've got to see good strategic assets and sources and the team have executed really well. We're, of course, alert to lots of different shifts in the competitive context. I mean, specifically, maybe it's a little bit of a flow on to car losses. Question, in terms of AI and technology, we've got a bit of balance between sort of flexibility and scale. I think in the near term for heavily regulated institutions, I think it adds both complexity and governance. I do think one of the important things that we're certainly spending time on is where do we think AI has the potential to change the economics of the industry, what might the impact be around sort of competitive moats or enduring sources of advantage, how might that show up. I think there's lots of different ways that we envisage that we can compete extremely effectively in that environment. So I think we are both planning for the long term, lots of different sort of scenarios. We think we've got the scale to invest. We think we're uniquely placed. And I think the team are highly motivated and very focused on execution. At least in this period, I think it's a good example of it, and we certainly intend to maintain that focus, discipline and execution ability. Matthew Wilson: And then a second question, probably linked to Richard's second question as well. If we look back over the last 5 years or so, headcount at the enterprise is up nearly 20% despite investments in AI and technology that should be driving efficiencies. But at some stage in the future, there's obviously a big dividend to be reaped by taking people out of the organization. Could you comment on that opportunity? Matthew Comyn: Yes. Look, I mean, I think that's right. In banking in Australia, there's been a significant increase in headcount. At least in some of our areas, though, as well. I mean it's our approach to the management of important risk types like financial crime has strengthened considerably. There's large operational and FTE requirements with that today. When we think about that more broadly, economic crime, across scams, fraud, cyber. Clearly, the vector of threats that we need to be able to deal with is increasing on a daily basis. And absolutely, some of the technology that we're deploying at the moment in time, I think we'll be able to make a meaningful improvement to the level of automation and efficiency with which we're allowed to deliver those services. A lot of the other increases have been in and around technology. Obviously, that's supported much higher levels of investment, also into key frontline roles, notwithstanding the fact that we've been able to improve productivity on a per role basis, but I think that's enabled us to grow at a faster revenue rate than peers, which we think is important. So I guess to Alan's answer earlier, I think there's both revenue and cost benefits that are being delivered in this period. We obviously and Alan is tracking those benefits very carefully and clearly, we think it's really important to continue to sort of push for further sources of competitive advantage. I think that takes time. But clearly, we think there's some opportunities to manage the cost base over the medium term. Alan Docherty: I'd just add one point, Matt, around the 5-year growth in the FTE, of course, about half of that growth just related to the in-sourcing that we had within our technology teams. So we've moved away from third-party suppliers in many respects, brought our own engineers in-house. We're seeing a much more -- much greater velocity, much greater quality, much greater productivity over that 4, 5-year period, as we've conducted that in-sourcing. So that's been a big part of the overall FTE growth. Actually, we're seeing again -- we've called out some of the benefits we're seeing in terms of the engineering capability. Change deployments is up 30%. Over the past 12 months, we're seeing that deployment at greater pace, greater speed and greater quality. And so the work that we've done to in-source into our FTE base the engineering capability, we think is paying dividends. Melanie Kirk: Our next question comes from Brian. Unknown Analyst: Thank you. And first of all, congratulations on the stonking result. But more to the point, since you've been speaking, you put on a lazy $3 or $4 a share. So I had two questions. The first one is that if we have a look at CommBank, we can see that you've got excess liquidity, long-term funding. You look at your software. You're increasing the expensing profile. You've got incredibly strong provisioning. We're not a look at the profit after capital charge. It's up -- you're saying that you normalize the dividend payout ratio for the current low loan losses. I just would be interested to hear what is the scenario where we'd start to see your harvesting the latency. And does that basically mean that we see a continued dividend growth even when system becomes more averse? And then I have another question as well, please. Matthew Comyn: Yes. Maybe I'll start, and then Alan can add to it specifically. I mean, Vijay, as I know, we've had this conversation before. I mean a lot of that the way we think about things is sort of maximizing value over the long term. We're consistently trying to find ways to invest in the earnings potential. We're prepared to not seek to sort of maximize our performance in a particular period because we want to have the flexibility over a long period of time to both deliver very strong earnings growth and momentum but also to have substantial flexibility to be able to deal with a range of different scenarios. And so look, I think this is clearly above the central scenario. I think the largest excess we've had at $2.8 billion. This is clearly still tail risks, particularly on a global basis and some of those are hard to accurately predict and price. But I mean, I think, there's a number of different areas where we've got a lot of flexibility in the organization. But most importantly, we want to translate a lot of the investments into long-term earnings potential going well beyond 2030. Alan Docherty: Yes. I mean the balance sheet settings, we continue to take us sort of through the cycle view. As Matt says, I mean, the provisioning, we're pleased to hold the provisioning at the broadly around stable levels, albeit we're growing the lending side of the balance sheet very quickly. We've seen record levels of lending growth. So the coverage ratio, the provisions as a proportion of the risk-weighted assets has drifted a little lower. And so you've seen some unwind of the provisioning that we held maybe 12, 18 months ago. But yes, we take it through-the-cycle view. We like having that latency, and I think that gives us a more stable through-the-cycle performance, which our shareholders really value. Unknown Analyst: Just a second question, if I may. Once again, I really want to congratulate the entire management team on the results. If we have a look at some of the global in financial services, in particular, as they seem to hit a kind of more adverse environment, they basically seem to be pulling the pin quite aggressively to shared labor. I'm just wondering, when we have a look at CommBank, is there a point at which you -- how close are we at the point to which technology replaces people? And I'm not saying you necessarily have to go to retrench people, but natural nutrition probably gets you. But do we actually get to the point where we actually see basically the headcount element of the total operating cost fall. And in that context, can you see a point, Matt, and I never thought I'd ask this question where it's difficult to find more incremental to spend on technology? Matthew Comyn: I think in terms of tech spend and investment and software, I think demand across the economy still sort of outstrip supply. But I mean, clearly, the potential to be able to deliver a lot more change, I mean, significantly more than we're currently doing in year is clearly there. And I think some of the leading firms globally, outside of banking are already seeing some of that automation. Look, I think there's going to be multiple sort of speeds for how AI is adopted across the organization, how it's able to improve and automate some of the processes. I do think also it's important and certainly the approach that we're taking is thinking through that very carefully and thinking about the individual tasks and skills. I think it's really important to build the capability across the organization. I think anything that is disruptive like this technology is, it's really important to engage inside the organization, maintain the very high levels of engagement and motivation. I don't think some of the more pessimistic scenarios around labor force disruption will materialize. I think it does take quite a bit of time. I think the sort of the performance of the models is quite jagged. There's also a number of different things that you can do really well. There's others that candidly, you can't. But I think the potential over time to improve certainly the performance of every individual to provide greater output and then in time through more automation. And there's also just a number of customer processes, we think we can manage on an automated basis. I mean we believe in having to be able to service our customers in real time dealing with scams and disputes and fraud and to be able to perform and close those tasks out through an agentic framework to be able to serve many of our customers more directly and comprehensively. We've already got the capability to be able to monitor the environment and an automated basis, deploy new rules in to pick up and detect fraud. I think we're just scratching the surface of the potential here. And I don't think we're going to be talking about it in very significantly different ways at our full year results in August, but I think in a sort of 3- and a 5-year time frame, I think there certainly is some significant potential. And there's a lot of things that need to be managed as a highly regulated industry. I mean I do think sort of governance and transparency and explainability and most importantly, trust with customers and with employees. I think that will be a very important part of what we need to do well. We've obviously started communicating externally with some of the work that we're doing. And yes, I think we're trying to think about this comprehensively and over a long period of time, and we believe it's going to be a source of competitive advantage for CBA. Melanie Kirk: Our next question comes from Brendan. Brendan Sproules: Brendan Sproules from Goldman Sachs. I just have a couple of questions. Just in terms of the impact of higher interest rates as we look forward into the second half. Obviously, in this looking backwards this half had record lending growth, particularly strong deposit growth in business banking as touched on earlier on the call. But when you look back to when the cash rate was last, 4.35, you showed us a number of slides similar to Slide 18, which showed negative spending and cost of living pressures in the household sector and you also saw quite a slowdown in business credit. Just want to get your view on how sensitive you think the current system growth rate in both lending and deposits will be to these higher rates over the next 6 to 12 months? Alan Docherty: Yes. I mean, it's going to be -- to your point, I mean one of the things I called out in my opening was very strong level of credit, growth leads to very strong growth in broad money and money supply. And that's a factor that we look closely at in terms of, I mean, we see a lot of that money supply growth come through our deposit accounts. That puts more money in people's hands ultimately across the economy, and there's an inflationary element, obviously, to that mechanism. So of course, the reason that rates are being hiked as in order to maybe slow down some of that demand more broadly across the economy slowdown in that spending. And so we would expect to see some impact to that. We've had a very strong period for system growth across both home lending and non-retail lending across the system. We've got -- our economics team has got a range of between 6% and 8% across the total system credit over the next couple of years. Obviously, we're running at the top end of that as we sit here today. So I think there's maybe some -- you would expect some impact on system levels of credit growth and a higher rate environment. I guess the big question will be how many rate rises do we see from here because that will determine the sort of size of the slowdown you see from a credit perspective. Matthew Comyn: Yes. I think, I mean, if you assume there's a couple of rate hikes. I think it have a modest impact maybe even if it took a percentage point of housing credit growth. I think the non-retail credit growth has been very strong. Certainly, everything that we see is there, we think sort of higher nominal growth is going to support that. I think boosting investment is going to be an important driver of productivity. I think there's certainly investments in technology across the economy that are going to support that. And I think that's the importance of having the right sort of capital settings and deploying that lending growth into the right risk-adjusted returns, and certainly, we've kind of extended out the sort of credit growth that we've seen over the last couple of years. And I guess that's sort of our base case to make sure we're going to perform optimally in that environment. Brendan Sproules: That's great. And the second question, just on NIMs on Slide 27, obviously one of the better parts of today's result is the lack of compression on your funding cost. To what extent is this a timing issue in terms of the switch in the rate cycle that sort of happened towards the end of the fourth quarter? Obviously, with the RBA pushing rates higher earlier this month. We have seen some deposit product pricing move higher with that. To what extent is that going to play out in the second half, a bit of catch-up in terms of deposit pricing for these higher rates? Alan Docherty: Yes. I mean I think that as we've long said, I think the -- I mean, deposits are very competitive, and we're going to continue to see the mix, unfavorable mix impact of that growth in our high rate products. So I think that's likely to continue. The other element that we watch closely is wholesale funding spreads. I mean, I guess you've seen a very benign period. I mean, in the last 6 months, the 5-year funding cost and the wholesale funding markets fallen another 10 basis points. You tend to find there's a real correlation between what happens in wholesale funding markets and the level of deposit competitive intensity and deposit pricing. And so one of the forward indicators or lead indicators that we'll be looking carefully at around the likely outlook for deposit pricing and competition as that level of wholesale funding spread. We've had a benign period. We're below historic averages in a number of those long-term funding products. So we'll keep a close eye on that in terms of how that -- there's a potential for that to revert and that to lead to more deposit competition in the second half, but we don't know that today. We'll keep a close watch on that. Melanie Kirk: Our next question comes from John Storey. John Storey: Good set of results. I just wanted to touch quickly just on the business model and potential construction to business model. You've seen it in the last few days. Insurance broking firms have obviously been impacted by the threat of AI, right, in terms of distribution. Just thinking about it in terms of the mortgage market share in Australia, how prevalent brokers have become -- I mean, what are your views on the likelihood of AI disrupting mortgage brokers. So the disintermediators are becoming intermediated. And around that, how well or how prepared is CBA in terms of its own business model for something like that, that could potentially eventuate? Matthew Comyn: Yes. No. I mean, look, we've tried to think through all the various sort of potential sources of disruption not limited to mortgages and how to most effectively prepare for that. I think we feel we've got the right combination of distribution assets to perform well in that particular environment. I mean I know from speaking to a number of mortgage brokers and some of the leaders of those mortgage brokers firms, that's definitely on their mind. I think like a lot of businesses, perhaps the sort of speed and rate of disruption is also a question of debate. I think one of the things that has been important in terms of why our customers will still preference a face-to-face experience with either a mortgage broker or a proprietary lender is it's a significant decision I think people still value that. I would have incorrectly forecast the proportion of mortgages that would have gone to digital when we started sort of thinking about this 15 years ago, and it's been a lot slower. So -- but look, I think it's important to think things through and assume they're going to happen more rapidly. I think in our case, we think we're well prepared and I think there's very few sectors of the economy that aren't thinking about some of the disruptive potential and obviously, the rate and pace of change, particularly some of the genetic services that are out even in the last month. Certainly, there's been some pretty significant share price reactions to a number of global industry and software providers. John Storey: One, just quickly on a second question. Obviously, a lot of talk, I guess, is on certainly over the last few weeks, months, around increased levels of competition put in the market. And obviously, you've got a very interesting slide, Slide 73, 74, just around new business volumes that are significantly 24% half-on-half, right? I wanted to just get your views on to what extent this growth that you've often seen reflects some of the competitors actually stepping back from the market, right? So I'm thinking specifically around some of the regional banks. And then obviously, ANZ going to a period of restructuring. How sustainable is this level of new business growth that CBA is showing? Matthew Comyn: Well, I mean -- we'll see, it remains to be seen. But I mean, I think, we executed well in the period. We certainly planning to continue to do that. I mean, look, I do think it's quite interesting in terms of some of the share shift on the deposit side. And then on the asset side. I think where your returns are under pressure and you're not able to generate returns above the cost of capital, it's pretty hard to grow it system. Yes, there's disruption. I guess the other point is it occurs to us as we look at both capital ratios across the industry and where we would anticipate the DPS profile might be at some of those institutions, it would probably start -- it would tend to support pretty disciplined pricing. And so I think clearly, where there's volume share shifts between institutions, that tends to at times lead to not particularly disciplined pricing. I think it's been a really good period for the half. I think it's quite a -- I think it's an interesting equation, at least as we look forward and think about, well, if it's higher credit growth and the RWA the consumption that comes with that, shouldn't plan as a base case that record low loan losses are going to continue investment, certainly, for us, we're increasing. And we think that's important from a competitive perspective as well as to be able to support broader resilience objectives. I think -- but maybe that financial equation looks a little challenged, perhaps for some. And so I mean, look, I think we're thinking about how best to compete in that environment. And I think, hopefully, at least this 6-month period has been probably one of our better periods of execution in market. Melanie Kirk: Our next question comes from Matt Dunger. Matthew Dunger: Yes. Could I ask a deposit question in a different way? The 79% deposit funding stands out versus the peers. You flagged you're expecting higher growth in higher rate deposits and we noticed that NetBank Saver didn't reprice as much as some of your peers through 2025. So why compete on price when you're already leading deposit growth? Is there a target at CBA to continue to strengthen the deposit funding mix? Alan Docherty: Yes. I mean we're always -- we're predominantly deposit-funded and we want to keep it that way. We've been impressed with the execution on the deposit gathering and it's a foundational relationship. It drives MFI drives, as you can see in the numbers we've disclosed, relationship between retail transaction account and home lending, propensity to have your home loan with CBA higher in the business bank. So we -- it's an important part of the franchise. We want to continue to gather deposits. Now we're in a competitive market for deposits. And hence, we've got a very attractive offer on not only GoalSaver, very, very attractive rate. On GoalSaver, we've a very high proportion of balances that achieve that rate. We also got very competitive term deposit offer. So the 12-month term deposit especially that you've seen across the industry, I mean, they're up 45 basis points in the last 6 months. So it's an important part of the franchise. We'll compete effectively in there. We've got -- we've been happy with the improvement in the deposit ratio. I think as a game of inches, though on the deposit ratio. It's a large balance sheet. We're continuing to compete well for deposits. We don't have particular targets that we set around that particular ratio. We want to keep funding as much of our lending growth as possible through deposits. And pleasingly, in the 6-month period deposit growth outpaced lending growth even though we had a very high level of lender growth relative to a very high system. So we were able to retire a couple of billion dollars of long-term wholesale funding, which again helps in terms of the overall earnings profile and net interest margins. So we don't have particular targets that we set around that. We just try and keep things in balance and make sure we've got a strong deposit gathering franchise. Matthew Dunger: And if I could just follow up on the credit quality side, you're talking about bad debt charges being low. You just referenced some of the peer selling capital returns policies based on that. You've seen the external refinancing of corporate exposures, bringing down the arrears. Just wondering if this reflects your conservative lending settings. Or are you seeing competition after this corporate business as it refis out? Alan Docherty: Yes. We've continued to see -- I mean there's always going to be an element of external refinancing across each of the bank's portfolio. So we've seen some of that over the last sort of 6 and 12 months in particular, within our business bank, in particular. It's a competitive market. There's -- we've seen some continued aggressive pricing offers in market, particularly at that top end of the business bank. I think we called that out 6 and 12 months ago, that's continued in over the last couple of quarters. We are seeing some banks compete more on credit risk appetite, and we've seen some external refinancing. from our portfolio. So I think that's a function of the competitive market for business bank and that we're in at the moment. Melanie Kirk: The next question comes from Ed Henning. We might just move to the next question, and perhaps we can come back to Ed if the line comes back. The next question will take is from Tom Strong. Thomas Strong: Tom Strong from Citi. Just a couple of questions. The first on the replicating portfolio, it contributed basis points in the half, and the commentary suggested that much of that came in the December quarter. How should we think about the replicating portfolio over the next couple of halves just given the material step-up in swaps that sits sort of 50 to 100 basis points above the tractor rates now? Alan Docherty: Yes. Yes, there will be -- the tractors will perform well at current swap rates. Now the swap rates have proven to be, obviously, fairly volatile over the past 12, 18 months. But current levels of swap rate, I mean there'll be a pickup in each of the tractors. So if you think about the size of our replicate portfolio, it's something like $2 billion that we'll reinvest at current swap rates each month. And so yes, that will be a function of the where swap rates move expectations for interest rates more broadly and the level of the deposits that we choose to hedge at any point in time. So yes, that will be a supportive element. I mean the equity tractor we called out last time around, if you go back 3 years, where swap rate was then, it's pretty similar to where swap rate today in the 3-year part of the curve and so we're not going to see much tailwind on equity tractor but replicating portfolio, given it's a 5-year tractor. We've probably got another 2, 3 halves of positive earnings momentum as those if you go back sort of for years, we were still in some pretty low in a pretty low rate environment. Some of the tractors that we put on there are coming up for reinvestment at much higher current rates. So yes, 2 or 3 halves of earnings momentum from replicating remain. Thomas Strong: Great. And just a second question around business deposits. I mean we look at the strong growth in the business bank, but net of offset accounts, a lot of this growth has come from more expensive TDs and the business MFI did sort of slipped slightly half-on-half. I mean how are you seeing competition for business deposits more broadly given a number of your peers spending pretty considerably to emulate your success here? Alan Docherty: Yes, I mean, it's a competitive market for deposits both for REIT on the retail side and the business bank side. We've been pleased with the deposits that we've gathered. I mean, the new business transaction account openings have continued at pace. I think we're up 7% in net BTA accounts opened over the past 12 months. So we're pleased with that. Yes, we did -- I think there's a little bit of volatility. It's a 6-month moving average on MFI. I think we're up 40 basis points year-on-year in the longer-term trend I think we're up 300 basis points over the last 5 years. So you'll see some oscillation one half to the next. But the overall momentum within MFI, I think, goes to the good execution within that franchise over multiple years. And yes, there's been, I think, some as I mentioned earlier, we've got some attractive rates on the term deposit product as well, and that did particularly well in the 6-month period within the business bank, which we're pleased with. It's a good stable source of funding for the strong lending growth that we're doing in that division. Melanie Kirk: Thank you. That brings us to the end of the briefing. Thank you for joining us, and please reach out if you have any follow-up questions. Thank you.
Erkka Salonen: Good day, ladies and gentlemen. I'm Erkka Salonen from Finnair Investor Relations, and it's my pleasure to welcome you to this Q4 2025 Earnings Call. I'm joined by our CEO, Turkka Kuusisto; and our CFO, Pia Aaltonen-Forsell. After the presentation, we have a Q&A session, and you may present your questions either by dialing in or using the chat function of the webcast. But with these words, I hand it over to you, Turkka. Turkka Kuusisto: Thank you, Erkka, and very good afternoon to all of you joining us today. And today, we have shared, in my opinion, very good news earlier when we published our Q4 report that indicated a very strong profitability development, especially driven by the continued strong demand and solid execution. Pia will discuss, in short, the result in detail, but I would characterize it as a sum of multiple factors. Of course, we benefited from the lower than -- lower fuel price. But at the same time, when we added into the equation the increased cost from the environmental compliance, other regulatory charges, I would say that the cost management and effectiveness was extremely well executed with -- among the Finnair team. At the same time, we still saw and we will see a strong demand, especially in the Japanese and European market that performed, in my opinion, relatively well. That led into a close to a 1% revenue growth, but above all or more importantly, our comparable operating result increased almost by 29% versus the compared, that already was actually a significant improvement from 2023. As you recall some months back, mid-November, we announced our long-term financial targets and also the updated strategy. And therefore, I'm also very happy that already now, we start to see pieces of evidence that the strategy execution or implementation has started with good velocity. As a concrete example of regaining the trust after the, let's say, more difficult or disruption shadowed first half, we restored the confidence of our customers and also discuss about the employees, but also the external stakeholders that we have as a concrete example being that with Pia's lead, we did successfully issue a EUR 300 million bond just before the year closing. If and when we will take the regional perspective, as mentioned, our investment in further strengthening the Japanese foothold after the double crisis is paying off. All in all, the Asian markets continued double-digit growth, both in terms of capacity and revenue. And then if I take a deep dive into our foothold or market presence in Japan in the summer season of 2025, we flew 25 weekly frequencies between Helsinki and multiple destinations in Japan. And we are going to actually further strengthen that for the next summer season when we are adding 3 additional weekly frequencies from Helsinki to Osaka. Also, as already mentioned, Europe as a traffic region performed relatively well during Q4, whereas the domestic part was a bit more soft in terms of load factor development. And then Middle East, when we kind of characterize the profile of the business performance, we need to continue to keep in mind or bear in mind that we don't -- didn't fly anymore from Copenhagen or Stockholm to Doha under the Qatar Airways collaboration or umbrella. So therefore, the revenue development and the ASK development is extremely negative. Big question, of course, still related to how will the North Atlantic traffic develop during the forthcoming quarters. Still in Q4, we saw some softness in terms of ASK development and also load factors. But here, we need to continuously also bear in mind that our ASKs, 9% is allocated to the North Atlantic traffic, and we, of course, continue to monitor the development extra carefully. Then speaking of customers, obviously, when the first half of '25 was overshadowed by complex CLA negotiations that led into severe disruptions, we faced, of course, declining NPS. But I'm extremely happy when I started to see already in September that the NPS is recovering very rapidly after we were capable of stabilizing the operation and continue to fly with the kind of recognized Finnair quality and safety and functionality. So therefore, in Q4, which is the most demanding winter season, the NPS among the total customer population of ours graded 33, which is a good result in network carriers global benchmark. And if and when I'll take the core customer perspective, that is the core of our new strategy among the top tiers of Finnair Plus frequent flyer program, we are actually currently trending above 40. And as you can see from the chart on the right-hand side, the number of passengers continue to grow by 2% year-over-year. Then also maybe related to the disruptions that we faced during the first half of '25, it's important to address that we haven't witnessed significant changes in the capacity market share in our core markets. So these 2 charts, in my opinion, provides a lot of information that our stronghold in Helsinki and our stronghold in the Europe-Asia traffic is holding extremely well, and we will continue to develop our market presence accordingly. And then with this slide, I try to capture the highlights of 2025. So basically, the year was split into 2, difficult first half because of the industrial action and associated disruptions that caused directly more approximately EUR 70 million of negative EBIT impact. And then of course, we were not capable of flying the ASK plan that we had planned for the first half, but ever since we got the CLA disruption behind us early July, we were capable of stabilizing the operation very quickly and actually then, started to implement our profitability improvement actions. And then towards -- through Q3 towards Q4, we improved the momentum and velocity and therefore, very happy with the result. Report a full year result of EUR 60 million in form of comparable EBIT. Unflown ticket liability also grew by some 7%, which is a good forward-looking indicator that how the ticket sales did develop during the fourth quarter. Pia will discuss this in more detail. And then on the right-hand side, on the bottom right-hand side, you can see that the Board of Directors yesterday decided to propose a EUR 0.09 capital return to be decided in the AGM held later in this quarter. But maybe with these words, I would leave it for Pia to discuss the financials in more detail. Pia Aaltonen-Forsell: Thank you, Turkka, and good afternoon, ladies and gentlemen. I just want to say a big thanks to our team, to our customers and to our partners. It's a great privilege to be able to present so strong quarterly figures, as Turkka said, on the back of a start of the year that was still very challenging on many fronts. I think we have ended the year on a very strong note. And therefore, I wanted to offer you a few sort of quarterly time series here with some comparisons on some of the key figures, just to sort of have that perspective. I'll start a bit with the top line and the revenue. As Turkka explained, we are in a market momentum in our key markets that's already a bit more positive. So we have seen some growth in the demand have seen some growth in our top line of about sort of 1% on a full year basis, which is pretty much equal to also, if you count in the wet leases, is how much we added to the capacity sort of holistically during the year. Please still keep in mind that due to the earlier strike situation, we did have cancellations, we have paid compensations, et cetera. Those all, of course, impact the top line as well. If I look at the quarter itself and especially, if I think about sort of the different parts of our business, maybe there's a few words still worth sort of mentioning. We have seen growth sort of through our different categories. So the ticket revenues, we've also seen this increase on the ancillary side. Ancillary is very important from our strategic perspective. The growth was not that fast during the quarter. The comparison period a year ago had a very strong campaign towards that end of the Q4 in '24. So that sort of impacts a little bit the comparison here, but we are still continuing on a good path. That is really important for us, I mean, already reaching over EUR 50 million impact per the quarter. And finally, cargo was sort of fairly stable in the period. Maybe those words are enough on the revenue side. Then let's turn our attention to the middle of the page, which is the graph on the operating profit. So the comparable operating profit to be exact. And you see our result was a stellar EUR 62 million for the fourth quarter. This is the strongest fourth quarter on record that we could find using the current accounting methods. And when you compare it to a year ago where we made EUR 48 million, we actually had a bit of strike impact, although it was EUR 5 million a year ago in the figures and none in this period. But from a cost perspective, there were a few external factors that are worth mentioning. I'll say first that we were supported year-on-year in the development by fuel prices and also a weaker dollar, that did bring us on a quarter-on-quarter comparison, maybe EUR 15 million of benefit. On the other hand, we also had higher sustainability regulation-related costs that's added more than EUR 10 million per quarter, as well as higher navigation and landing costs that also added about EUR 10 million per quarter. So the headwinds of these external factors were actually bigger than the tailwinds. Nonetheless, we still had a EUR 50 million uptick, and this came very much from somewhat higher sales, so we were growing, and we were able to do that in a good way also then sort of being able to use the scale benefits, have a good operational performance, and that helped us then to improve the result year-on-year. Finally, Turkka talked about the unflown ticket liability. I think that's a good sign of the momentum that we have right now that keeps on a stronger side, 7% increase sort of year-on-year. Of course, our business has a lot of seasonality. So you do see the quarterly variance here, but we are on a very good path. I have one more slide really from the profitability perspective. And I wanted to talk to you about revenue RASK and CASK, and just give still some perspectives into that development. I'll start on the revenue per available seat kilometer, the RASK key figure here. And many of the things that I mentioned before on the revenues obviously play in here. I think if you look at the sort of year-on-year development, we can say it's a bit of a sort of hanging in there, sort of making the best of the situation in a challenging year with the strikes, et cetera, during the first half. So clearly, there's been an impact out of that holistically. If we look at yields, I think it's worth still picking up on what Turkka also said, showing the geographical areas before. Though we see a positive development holistically year-on-year throughout Asia, particularly Japan has been a very important market for us, as Turkka said, we also see a good development in Europe if we look at the full year. But the North Atlantic traffic, that has been also from a yield perspective under pressure, and that's due to the sort of holistic situation that we face in that market, and I think that put a little bit of a lead or a little bit of a pressure here on our yield development. So kind of keeping all of that in mind, I still think we have a decent development through the year. On the cost side, the lower fuel costs are helping us, but those other higher regulatory costs as well as landing, navigation costs, et cetera, they all come through here. So you can still see that we've done a good job in mitigating some of the impact. And I think just looking from everything, there's also some seasonal variance. I take one example, maintenance cost. I think we managed really good in the fourth quarter. And obviously, sort of between the quarters, there could be a little bit of changes. I think we have also structurally made some changes as we are through '23, through '24, and a little bit in '25 also done some lease buyouts that are, to some extent, then shifting between the lines, the cost of maintenance. That does give me a nice bridge now to my final page, which is more on cash flow and balance sheet. So let's have a look there. Our cash flow was robust. Obviously, cash flow very much built on the operative performance, the result as well in itself. I think there's only one thing that I wanted to pick up from the cash flow side page here that you can see on the slide that you see on the left-hand side, and that is to explain that if you are keen on details, look sort of from our reporting a year ago, we had a bit of a reclass there on the credit card holdback that sort of boosted from a reporting perspective the figure in the year-on-year comparison. But I think sort of operationally, a good performance in this quarter. Let's talk a little bit about CapEx. Going forward, we do expect a CapEx amount, EUR 400 million to EUR 500 million per year. We are also guiding sort of about that midpoint for 2026. You can see that in 2025, we were coming towards a little bit lower figure. Actually, the gross CapEx was less than EUR 200 million. There was quite a lot of buyout still in this. It was a bit north of EUR 100 million, so lease buyouts, and there was also a EUR 64 million of sort of more maintenance-related CapEx and then some investments, for example, into digital, et cetera. So that was really what we were working with in '25. Looking into '26, this will increase a bit, aligned with the communication that we had on our CMD in November. And finally, it's good to end the year with a robust cash position and still with a good leverage, 1.8, and a good cash to sales ratio, as you can see in the chart to the right. So I think we have a good setup for starting to work into 2026. And on that note, Turkka, please, over to you. Turkka Kuusisto: Thank you, Pia. So to some extent, recapping what we said in connection with the Capital Markets update we held in the middle of November. The strategy is pretty much now centered around the customers and more specifically, core customers because the network setup that we have, have, of course, changed because of obvious reasons. But now after 3 fiscal years since the Russian airspace was closed, Finnair has now demonstrated that we can operate a profitable network carrier even though the Russian airspace is and most likely will remain closed for the time being. So therefore, we have highlighted the focus on traveling to and from Finland while continuously keeping in mind that we are still extremely important transfer carrier for international passengers who connect from Helsinki to European destinations, for instance. This Japanese example that I provided you with earlier is a concrete piece of evidence that we are very strong in Europe, Asia traffic even though the Russian airspace is closed. So the strategic priorities that we shared also with you a few months back pretty much now focus on further optimizing this rebalanced or repivoted network of ours and continuously searching for new route openings, for instance. At the same time, of course, taking good care of the safety, reliability and convenience and functionality of the operations that we run, which enables us to monetize on our commercials, providing more choice through modern retailing. And as you can see from our numbers that the revenue received or collected from the ancillary sales was more than EUR 50 million again during the fourth quarter. There was a bit of a hold or pause in the growth rate, but there is an item affecting the comparability because last year around, we did have a very extensive Avios points sales campaign, but what we continue to forecast is a very solid growth on the ancillary side. And then, of course, when we get a more intimate relationship with our customers, we can then extract the full benefit out of the Finnair Plus frequent flyer program. Then taking from the kind of this 30,000 feet to more grassroot level, concrete examples, we are opening 12 European destinations for the summer season 2026. And very exciting news, published a few weeks ago when we communicated that we will be opening a route from Helsinki via Bangkok to Melbourne. And while at the same time, adding this third daily flight from Helsinki to Bangkok, again to kind of strengthen our presence in the Far East Asia market. Of course, we continue to invest in addition to aircraft and the new fleet scheme into other areas as well. AI and digitalization and other technologies will influence significantly that how an airline like Finnair will be run, operated and led in the future. And we do have a lot of initiatives ongoing, where we can utilize the next-generation technology, be it fuel efficiency, route optimization, back-end processes and such. And speaking of digitalization, we will also continue to invest in the, let's say, digital footprint or digital experience of Finnair in form of new mobile applications, for instance, that will be launched later this year. And then as a maybe final remark from my side related to strategy and on the journey ahead. Of course, given the double crisis, maybe even the longer legacy when it comes to an organization undergoing a significant transformation. And then, of course, the CLA spring that we faced, we want to now invest with extra care when it comes to further developing the engagement, cultural development, leadership and also employee well-being at Finnair. And I was extremely positively maybe even surprised at how much our engagement score increased when we measured it last time in the midpoint of November and December. So it, again, gives us a lot of confidence that we have selected a right path. We are on the right journey with our colleagues that represent 5,800 kind of professionals across the entire organization. To kind of finalize the presentation phase, outlook and guidance provided today. We expect that the global air traffic will continue to grow 2026. We estimate that our total capacity measured by ASKs will grow approximately by 5% during 2026. And then, of course, when giving outlook and forward-looking statements, we continuously need to keep in mind the macro volatility, geopolitical tensions and also the fuel price volatility. But given all this, we are today estimating that our revenue for full year 2026 will be within a range of EUR 3.3 billion to EUR 3.4 billion, and the comparable operating result to be within a range from EUR 120 million up to EUR 190 million. So I guess that with these words, we will close to presentation and open for Q&A. Erkka Salonen: Yes, indeed. Thank you, Turkka. So now would be a convenient time for any questions you may have. Please follow the operator's instructions or use the chat function. Operator: [Operator Instructions] The next question comes from Jaakko Tyrvainen from SEB. Jaakko Tyrväinen: Sorry, I didn't hear the early part of the presentation, so if I'm repeating here. But could you give some color where you are about to play the capacity increase in '26? The point that it will be mainly Europe and Asia routes? Pia Aaltonen-Forsell: Yes, Jaakko. And I think maybe some of that was mentioned, but I think it's very well worth repeating. So of course, looking into Asia, we are further strengthening Japan with 3 more weekly routes during -- or weekly during the summer season. And as well, we have launched the Melbourne route from winter season of '26, and that will then also mean that we fly to Bangkok 3 times per day. So that's sort of the Asia part of it. And then when it comes to Europe, I think, for the summer season, we have launched quite a few sort of interesting destinations, if you are interested in Stavanger or Umea or Luxembourg, and there's plenty more there, all in all, 12 of them. So I think we have a plan that has already raised some attention and some interest, and that's what we are up to now. Jaakko Tyrväinen: Great. And then what about the competitive environment at the Helsinki Airport now that given that all the players should have kind of published their route plans for '26, how you're looking the upcoming competition for the start of the year? Turkka Kuusisto: Of course, competition is something that we will face on daily basis. This is a globally competitive business and sector. When it comes to Helsinki Airport specifically, we kind of knew that there might be an opening from Middle East to Helsinki. And therefore, we already actually -- we are one step ahead by introducing this third daily connection from Helsinki to Bangkok to mitigate the impact. And then at the same time, it's extremely important to put this into a context -- into context. Our traffic area, Middle East represents some 3% of our ASKs and revenues, and this specific route from Helsinki to Dubai, we fly it only during the winter season. So I wouldn't like to underestimate the impact, but I would kind of position it there for the time being rather insignificant, especially given the connectivity beyond Helsinki. So should one kind of arrive at Helsinki, 70% of the passengers will continue to somewhere else with our aircraft. Jaakko Tyrväinen: Excellent. Then if we think about the guidance and the EBIT version of it, if we exclude the industrial actions impact in '25, which factors are you seeing being the kind of the most important profit growth drivers for '26? Is it volume, pricing perhaps or costs? Pia Aaltonen-Forsell: Yes. Thanks, Jaakko. I think the volume part, the growth part here is an important driver. I mean we are seeing ASKs growing approximately 5% and you also see that in the top line guidance there, the EUR 3.3 billion to EUR 3.4 billion that we are expecting on the revenue side. So clearly, that's a big driver because that then also helps us to keep kind of spread the cost in many cases over sort of a bigger spectrum. But of course, we will need to keep the cost control, and we will also need to deliver on other parts of the strategy. That includes, for example, the ancillary sales, and that as well includes certain efforts that we are making in digitalization and AI that will also help us on the cost side. But it's more the growth and the revenue sort of in that context. Jaakko Tyrväinen: Good. And then the final one from my side. Did I get it right in your presentation that there will be further material inflation when it comes to traffic charges in '26? Pia Aaltonen-Forsell: At least in my presentation, Jaakko, the point I tried to make was to really describe the impact in '25, which even in the quarter was EUR 10 million per quarter. And I think there was a big sort of pressure sort of following COVID and the losses, of course, of many of these, let's say, national very regulated agencies. So at least sort of as far as I can see right now, many of those really step changes that were needed to sort of cover for history probably occurred during '25, but that doesn't mean that this is without inflation, but probably the big step change has occurred. Operator: The next question comes from Joonas Ilvonen from Evli. Joonas Ilvonen: It's Joonas from Evli. Congrats on very strong earnings. You already talked about the cost side of Q4. But could you elaborate a little bit? I mean when I look at your cost line items, is there anything to highlight there? I mean, lines like passenger and marketing as well as aircraft materials and overhaul? I think they were all like slightly lower than estimated. So would you say that this kind of so-called, as you said, solid operational execution, is it repeatable throughout 2026 as well? Because in my opinion, if you were able to be as successful in terms of cost over 2026, then you would have basically no trouble reaching the upper end of your EBIT guidance. So is there anything to like highlight? Or do you think how repeatable this kind of cost performance is? Pia Aaltonen-Forsell: Thank you, Joonas. I think 2025 saw many sort of particular challenges also when it comes to sort of maintaining the customer satisfaction when we had cancellations earlier and also kind of handling those situations. So I think we sort of came into a more normal environment then during Q4. So maybe there is room to say, yes, there is a bit of a sort of better situation that we have reached. I would, however, point out that when it comes to maintenance, so I see there is a little bit of sort of just timing topics, whether they occur in one quarter or in another. So I don't see that we structurally would have achieved a situation where we have lower maintenance cost. We are, of course, at the moment, still having an aging fleet. So that is one that I just think there were maybe more a bit of sort of quarterly variations. There is a structural change, but it only goes kind of in between lines because when we have bought more of the leasebacks, it means that some of the costs that were previously shown separately under sort of maintenance cost could now go into the depreciation line because some of the bigger overhauls would be treated as CapEx when they are to our own equipment. So there is a slight change, but that, of course, is not impacting the EBIT line as such. Joonas Ilvonen: All right. That's clear. And then about your revenue guidance, you already talked about this a bit. And you say you expect your capacity to grow 5% this year. But overall, I think your revenue guidance is -- I mean you expect quite robust growth. So to what extent beyond higher capacity do you expect passenger load factors and ticket prices to contribute to growth? Pia Aaltonen-Forsell: There is definitely -- just looking at the market environment and then the capacity growth in combination with our guidance, I think we are seeing some improvements in the load factor throughout the yield. And I don't want to comment on the yields in particularly. I just -- I think it's just good to sort of look at the full network that we have and the ability that we still have to boost Asia to some extent. So this sort of a mix thing is a good one to consider. Joonas Ilvonen: So you're basically still following the development of North Atlantic demand closely, but you're quite confident on Asia and Europe going to develop well also in 2026? Pia Aaltonen-Forsell: I think we have seen North Atlantic sort of continue kind of on the same path that we have seen before. But long term, we are still having capacity on those lines. And let's see when's that time for the changes. Operator: The next question comes from Pasi Vaisanen from Nordea. Pasi Väisänen: This is Pasi from Nordea. If I may start with this new route openings. So these new connections you have announced, are they supporting or kind of declining your average yield? I would assume that there are no easy wins available anymore. So how you are making the calculations for these new routes in terms of your kind of economical reasoning of the opening? Turkka Kuusisto: I guess time will tell what the yields will be eventually. But there is, of course, very diligent analysis behind when we are opening a new route. But especially the new openings in the Nordic region, we feel that there is currently a bit of a vacuum when it comes to providing regional flying from many of the Nordic destination to a Helsinki hub that then provides connectivity beyond Helsinki. Then when it comes to the Toronto route, that is a kind of a reopening for the summer season '26. And then this Bangkok-Melbourne route that we communicated, too early to tell. But of course, it's a combination of optimizing your yields and then also capturing new passengers or passenger flows to your entire network. So that's maybe something that we will revert to when we meet you for the next time. Pasi Väisänen: Yes, I see. And secondly then kind of looking at your investment program. So if you're now kind of buying new or kind of used planes in this spring, are these planes already included on your 5% capacity growth guidance on this year or not? Pia Aaltonen-Forsell: So we have a plan for growing capacity, and we have a plan of the CapEx as well, which is somewhere like around EUR 450 million for the year. And this is like sort of including also then the capacity increases. Of course, these are all plans and estimates at this point in time, but this is sort of how they hook together. Turkka Kuusisto: Yes. And it's always a combination of then maybe switching your balance from wet lease operation to your, let's say, new, although secondary acquired or secondhand acquired fleet. So therefore, again, too early to tell. Pasi Väisänen: Yes. But this investment guidance is in line with the 5% estimated capacity growth guidance for this year? Turkka Kuusisto: Yes. Yes, that's correct. Pasi Väisänen: Yes. And were there any kind of one-offs in last year, let's say, coming from the strikes or the accidents, which actually would kind of somehow be on comparable for the 5% increase on capacity on this year? Or is it on comparable basis excluding those one-offs? Pia Aaltonen-Forsell: I think it is on comparable basis. I mean, of course, the strikes impacted holistically the year including the top line. But I mean, we have reported the full figures and we still continue to fly throughout the year. Pasi Väisänen: Yes. And then when looking at your guidance for the full year in terms of operating profit, so kind of the fuel price is already up by 12% year-to-date on this year. So is this peak on the fuel costs also included on your full year guidance? Or have you made the kind of calculation regarding the end of December situation regarding the expected cost for fuel? Pia Aaltonen-Forsell: Yes. Pasi, we are updating a minimum once a week sort of the full view relating to kind of what's the current price, what's the forward curve, what's our hedging ratio. This is kind of the -- one of very important drivers for our profitability. So my answer is yes. I mean we are standing here now today with sort of very recent updates of how we view the year. But obviously, we also recognize that this is a big reason for fluctuation. That is why we have a range in our EBIT guidance. And that is also why we wanted to sort of even specify that, hey, if we see a 10% change in the fuel price, that would be like approximately EUR 34 million delta in the result sort of from where we stand today. Operator: The next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: Yes, congratulations on good results in this quarter. Sorry, just to repeat, just to make sure I understand correctly from your last question. The 5% growth, that is on what was actually flown in '25? Or is it on what was originally planned? Pia Aaltonen-Forsell: It is what was actually flown, on what was actually flown. Yes. Andrew Lobbenberg: Yes. Good. And are you able to tell us what the percentage capacity changes by region, North Atlantic, Asia, domestic Europe, can you give us that for the year? Pia Aaltonen-Forsell: I don't have the percentages here for you, but based on the route openings and how we have described that, it's clear that there is more focus on Asia and then regionally within Europe. Andrew Lobbenberg: Is there any reduction on the North Atlantic? Or does it go up because you're adding Toronto? Or are you pulling down some of those frequencies that came in this year? Pia Aaltonen-Forsell: I don't think that we have any sort of significant pull-downs. Obviously, we are sort of constantly monitoring the load factors, et cetera. But Toronto is added as we have informed. But really, if I sort of look at the kind of the balanced picture of the world and where we are, there is then much more emphasis on the growth in Asia and in Europe. Andrew Lobbenberg: And that growth in Asia, that's 3 weekly frequencies to Japan, is that what you were saying? Or is it 3 routes? Pia Aaltonen-Forsell: Yes, from weekly frequencies. Turkka Kuusisto: The 3 additional weekly frequencies from Helsinki to Osaka. So after that addition, we have 28 weekly frequencies from Helsinki to Japan. Andrew Lobbenberg: Yes. Cool. And nothing changes otherwise, China, Korea, India? Turkka Kuusisto: No. No big changes. No. Andrew Lobbenberg: Yes. Okay. Then can I come back to the maintenance cost and the lease buybacks? Obviously, I should know this. But can you remind me how many aircraft in the year you bought back and how many were bought back in the fourth quarter? Pia Aaltonen-Forsell: I think there was 3 or 4, but none in the fourth quarter. So obviously, this is a cumulative approach from something that we also did already back in '24. Actually, we did most of the lease buybacks already back in '23. So that shouldn't like bring any more sort of a year-on-year change between '24 and '25, but it's all sort of building into the status that we have. Andrew Lobbenberg: And so there's no onetime effect from lease buybacks in the fourth quarter? Pia Aaltonen-Forsell: No, no, no. I wouldn't say so. But it's a structural change. If you look over time, you would see those sort of shifts from the maintenance to the depreciation, those sort of particular sort of maintenance activities. Andrew Lobbenberg: Yes, yes, yes. Makes sense. But when you did do them, did you have a onetime gain? Because other airlines recorded onetime gains releasing maintenance provisions. You have them, right? Pia Aaltonen-Forsell: So we have released maintenance provisions accordingly, but I don't think that had any significant impact during 2025. Andrew Lobbenberg: Despite doing 4 airplanes? Pia Aaltonen-Forsell: So these were -- if you look sort of across our fleet and the ones that we were doing, then my answer is no. It didn't have a significant impact. Andrew Lobbenberg: Okay. Because like Norwegian had a really big impact from it, but I guess there were newer, shinier planes. Pia Aaltonen-Forsell: Must have been shinier. Andrew Lobbenberg: And then I guess what I'd love is an update, and apologies, I also missed the start of the call and also perhaps, I'm just forgetting from the Capital Markets Day. Can you just remind us of what the status is of the fleet renewal on the mid-haul or short haul? Turkka Kuusisto: So if you are referring to the partial renewal of the narrow-body fleet. Andrew Lobbenberg: Exactly, yes. Turkka Kuusisto: Yes. Thank you. So we're still working with the project or program. And as I said, in connection with the CMU events that we want to run a very thorough and diligent process. And therefore, unfortunately, today, we are not yet in the position of disclosing news, but I would expect that during the weeks to come, we should be over the finish line. So I kindly ask for extra patience. Andrew Lobbenberg: Right. And is anything associated with that in your CapEx guide for this year in terms of deposit payments? Pia Aaltonen-Forsell: I think within that sort of EUR 400 million to EUR 500 million or EUR 450 million range that we have, I don't also have any sort of significant items relating to that. There could be something, but it's really more on this sort of shorter-term buying used or arranging so that we can use, used aircraft, et cetera, that we also spoke about in the CMU. There are sort of more -- that is kind of closer in time. Therefore, it's also including in our plans for this year as well as then the capacity increase for this year. Operator: [Operator Instructions] The next question comes from Kurt Hofmann from Air Transport World. Kurt Hofmann: Regarding Australia, it's quite an interesting move you do and as such, the route is quite an -- I can imagine, quite an investment. What are your expectations on this Australia route? And on the North Atlantic, do you see -- many of your colleagues see some uncertainty on the North Atlantic market. Do you see some overcapacity this coming summer and you have to adjust maybe the North Atlantic network? Turkka Kuusisto: So if I start with the North Atlantic traffic, of course, we follow the booking curve very diligently. And then if we need to react, I think that we are well positioned to fine-tune or optimize the weekly schedule to North America. So let's see. But too early to draw conclusions because we are still in the, let's say, the hot season of selling tickets to the summer season '26. When it comes to the Melbourne route, that is, of course, a new opening for Finnair, and it has received quite a lot of interest. Too early to tell that how the ticket sales or the booking curve will develop. I'm personally actually visiting Melbourne next week to strengthen the relationship. And it's also about the kind of tactics or activity that we wanted to do that we added this third daily connection from Helsinki to Bangkok. So it opens us an opportunity to -- with rather low risk level to test this avenue. And we are, of course, doing it with our oneworld partners to also attract kind of a shared interest. So let's see how it develops, but I find it as a fascinating opening. Kurt Hofmann: Yes, I fully agree. And you're one of only a few carriers, which is doing Australia from Europe. Regarding fleet, as the Qantas A330s, I remember from our last call, they will return in the future. What's your plans on the A330? You need all of them or you maybe phase them out, some of them because on the route network, the range is not enough to do more nonstops with them? Turkka Kuusisto: No, I guess that's, again, kind of a multifactor optimization exercise how the booking curve development will kind of develop towards the summer season. Then of course, A330s, as you know, are very good workhorses and the spare part availability is rather limited for the time being. So we might consider a hot spare. But then if the kind of the passenger volumes are developing according to our plan, then we will utilize it in our own flying. So we have multiple avenues to get benefit from the assets that will be returned from Qantas. Kurt Hofmann: Yes. Okay. And one topic as now you resized your last A350, do you think for a new order on wide-body aircraft for a future fleet, maybe, let's say, A330neos in the future or A350, you have to think about this as well? And when you need new narrow-bodies, how many new narrow-body aircraft you would need actually in the future? Turkka Kuusisto: Time will tell. We will now want to finalize this campaign that we are running when it comes to partial renewal of the narrow-body fleet. And as we've communicated, we have 15 aircraft, 5, A319s; and 10 A320s that are approaching the end of their life cycle. So that is the most urgent need. But then, of course, we need to take into consideration the projected market and passenger volume growth. So that will be kind of the equation through which -- by which we will then eventually decide that what's the size of the narrow-body fleet investment also quantity-wise. Then when it comes to wide-bodies, too early because we still have one incoming A350, which is a fantastic aircraft, especially in the current geopolitical situation. And as you mentioned by yourself, those 2, A330s that will be returned from Qantas to us, I think that we are well off now when it comes to wide-body capacity. Kurt Hofmann: Okay. Final question. If the airspace one day via Russia will open again, and we have for sure no signs at the moment, how fast you can react to restore flights again via Russia? Turkka Kuusisto: That's, of course, very complex question. So if I take the easiest part when it comes to day-to-day operations, that is, I guess, the most -- the quickest activity when you could get back to those 24-hour rotations. But then there are other big questions related to -- over flight rights, insurances and such. So quite a lot needs to happen on the, first, in the political field and then the system level before we can go into the operational level and then landing slots and what have you. But then from the operations standpoint, we are -- we can move very quickly, but quite a few steps must happen before running into the operational questions and the implementation plan. Kurt Hofmann: Thank you very much. That's from my side. And I think I will meet you soon in Helsinki in about 2 weeks. Erkka Salonen: It seems that there are no further questions, so we can conclude the call. Many thanks for joining, and have a nice day. Turkka Kuusisto: Thank you. Have a nice afternoon. Pia Aaltonen-Forsell: Thank you.
Operator: Hello. Welcome to the Alfen 2025 Full Year Results Conference Call hosted by Michael Colijn, CEO; Onno Krap, CFO. [Operator Instructions] I would like to now hand the call over to Michael Colijn. Mr. Colijn, please go ahead. Michael Colijn: Thank you, Maria. Good morning, and welcome to Alfen's Full Year 2025 Earnings Call. Thank you all for taking the time to join us today. I'm Michael Colijn, Chief Executive of Alfen, and I'm delighted to be leading this trading update with you today. Joining me is Onno Krap, our CFO, who will talk you through our financial performance later in this presentation. Today's agenda is structured to give you a comprehensive view of our 2025 performance and our path forward. I'll begin with the highlights of 2025. We'll then dive into each of our 3 business lines. Onno will follow with our full year 2025 financials. I'll then outline our strategy update. We'll conclude with our 2026 outlook before opening the floor for your questions during our Q&A session. 2025 was a challenging year for Alfen. At the same time, our focus on cost control and operational discipline allowed us to maintain a stable adjusted EBITDA margin at 5.8% of revenue. This highlights the resilience of our business in a difficult market environment. Since joining Alfen 4 months ago, I spent significant time getting to know our organization's employees and partners, engaging with key customers, major supply chain partners and our investors. The past period has reinforced my view that Alfen is a company with potential. Alfen's products and services are crucial for the European energy independence and energy transition. Looking ahead to 2026 and 2027, we are focused on translating Alfen's strong strategic position into performance. To capture our strategic position, Alfen has embarked on company-wide transformation to align organizational capabilities with the revised strategic focus of customer centricity, product excellence and digitalization. This transformation is essential as we work to navigate current market conditions and position Alfen to better capture future growth opportunities. Looking ahead to 2026, this will be a transformational year in which Alfen repositions for profitable growth. We expect revenue to be between EUR 435 million and EUR 475 million with an adjusted EBITDA margin between 4% and 7%, while maintaining CapEx below 4% of revenue. I will dive deeper into our transformation and 2026 outlook later in this webcast. Let me turn to our Smart Grid Solutions business. In 2025, SGS generated revenue of EUR 189 million compared to 2024 revenue of EUR 210 million. Market conditions remained mixed throughout 2025 with headwinds in smart grid solutions caused by labor shortages, regulatory constraints and grid congestion, while underlying demand drivers linked to electrification remained intact. Activity increasingly centered on battery energy storage integration, transport distribution stations and the rollout of SF6 free substations in preparation for European regulation. We maintained a balanced revenue mix with 70% of revenue generated by high-volume transformer substation sales to grid operators and 30% by project sales. Our adjusted gross margin remained stable at 22.4% compared to 22.8% in 2024. Looking ahead, we are starting to see regulatory tailwinds that will benefit both the product and project smart grid business over time. For example, the European grid package published in December and the Dutch Environmental and Planning Act will contribute to increasing the speed of permitting and the availability of capacity on the transmission grid. Installation capacity will also be increased by the scaling plan 2030 published in November 2025, where Dutch DSOs, contractors and government launched a plan to accelerate grid infrastructure deployment. And Alfen is prepared to capture a significant part of that growth. Our EV charging business faced significant headwinds in 2025, with revenue ending at EUR 120 million compared to EUR 153 million in 2024. This decline was driven by increased competition in the EV charging home segment and reduced installation rates in the public segment. Our adjusted gross margin for EV charging improved significantly to 43.4% compared to an adjusted margin of 36.1% in 2024, primarily due to lower component prices. A significant achievement at the end of 2025 was the introduction of 2 innovative chargers, the Eve Single Plus and Eve Double Plus. These new products feature vehicle-to-grid ready capabilities, compatibility with a wide range of vehicle brands and energy systems, smart charging capabilities with OCPP 2.x compatibility, ancillary services for charge point operators, reduced installation costs for charging plaza applications and the secure ad-hoc payment options by dynamic QR codes. Over 2025, the battery electric vehicle market in the EU regained momentum with high double-digit growth rates in car registrations year-on-year across the EU. Importantly, European Union legislation continues to confirm the electric future with both short and midterm accelerators. Even though the European Commission has lowered several 2035 CO2 tailpipe emission reduction targets for cars, this still shows the future of mobility is electric. New initiatives such as greening corporate fleets and the automotive omnibus further support market development. We also see that market uptake will be increasingly driven by economic and customer preferences, such as the superior total cost of ownership and performance compared to internal combustion engine vehicles. These economic and customer preference factors are overtaking the importance of regulation in driving EV adoption. Our Energy Storage Systems business demonstrated resilience in 2025 with increasing revenue by 1.6% to EUR 125.6 million compared to EUR 123.7 million in 2024. This growth occurred despite market headwinds as energy storage system prices kept falling sharply in 2025. The gross margin for energy storage system was 22% in 2025 compared to 29% in '24. This was due to revenue recognition timing effects and an increased share of large-scale battery projects with a lower margin. Despite these challenging market conditions, we achieved several significant commercial wins during the year, and I give you 2 examples. For NOP Agrowind, Alfen will be doing the full engineering, procurement and construction scope for a 49-megawatt, 196-megawatt hour battery electric system, including the grid integration. Additionally, Alfen will be manufacturing 56 Mobile X units for Greener Power, Europe's largest temporary battery fleet. On the innovation front, we launched a new inverter design, significantly reducing noise levels and making the system more suitable for urban and other noise-sensitive environments. This development strengthens our competitive position as energy storage systems increasingly move into densely populated areas where noise considerations are critical. The backlog for energy storage systems for 2026 revenue was EUR 122 million at the end of 2025. This positions us well for 2026, and we still expect to book some orders in the first half of the year that will contribute to revenue in 2026. I now hand over to Onno to walk us through the 2025 financial performance. Onno? Onno Krap: Thank you, Michael. Our revenue in 2025 was backloaded towards Q4 due to a number of end of the year projects that were commissioned. We delivered revenue of EUR 120.1 million, representing a 12% decline compared to EUR 135.7 million in Q4 2024. This year-on-year Q4 decline was driven by lower EV charging revenues and by lower revenues in smart grid solutions. Smart grid solutions revenues in the Q4 2024 comparison base were higher than normal due to the production catch-up to recover from lower output early in 2024. Our adjusted gross margin for Q4 2025 remains stable, 24% of revenue in Q4 2025 compared to 25% of revenue in Q4 2024. The lower adjusted gross margin was driven by lower margin in energy storage solutions due to revenue recognition timing effects and a lower margin in smart grid solutions due to a relatively high share of transport distribution stations delivered with a lower margin compared to private domain stations. This gross margin effect was partly offset by a higher gross margin in EV charging due to lower component prices. Adjusted gross margin in Q4 2025 was lower than earlier in the year due to a business line and mix effect, relatively more revenue in ESS, relatively more. We also delivered a number of mid-voltage distribution stations at slightly lower gross margins. Adjusted EBITDA for Q4 2025 was 4.6% versus 5.7% in Q4 2024. This reduction was driven by a margin as well as a deleveraging effect. Looking at our full year 2025 income statement, I'll walk you through the key financial metrics and how they compare to our 2024 performance. Starting with revenue, we generated EUR 435.6 million in 2025, which leaves us at the lower end of our updated revenue guidance of EUR 430 million to EUR 480 million, as we already indicated during our Q3 earnings release. The decline represents a 10% decrease from EUR 487.6 million in 2024. Our gross margin for 2025 was EUR 124.9 million, representing 28.7% of revenue compared to EUR 115.4 million or 23.7% of revenue in 2024. The significant improvement in gross margin percentage was mainly driven by a large amount of one-off costs in 2024, totaling to EUR 24 million, among others, a provision for the moisture issue as well as a provision of obsolete EV charging inventory. When we look at our adjusted gross margin, which provides a clear view of our underlying operational performance, we see it remained relatively stable at 28.1% in 2025 compared to 28.6% in 2024. To calculate our adjusted gross margin, we exclude a provision of EUR 1.8 million in obsolete inventory for EV charging components, offset by a EUR 4.1 million reduction of the moisture issue provision. Moving to our operational costs. Personnel costs decreased significantly by 15.2% to EUR 73.8 million in 2025 from EUR 87.1 million in 2024. Our adjusted personnel costs exclude EUR 1 million in restructuring costs and some minor other adjustments. Other operating expenses also declined meaningfully by 21.1% to EUR 25.7 million in 2025 compared to EUR 32.5 million in 2024. Our adjusted operating expenses exclude EUR 1.2 million in one-off transformation costs for R&D and EUR 0.8 million in share-based payment expenses. In the next slide, I will explain in more detail how our adjusted operational expense have changed as a result of our cost control efforts and rightsizing. EBITDA improved from a negative EUR 4.2 million to a positive EUR 24.8 million, mainly driven by the absence of previously mentioned significant one-off items in 2024. Adjusted EBITDA remained stable at 5.8% of revenue, while dropping in absolute terms from EUR 28.5 million to EUR 25.5 million. Adjusted net profit remained stable at EUR 3.2 million. Throughout 2025, we implemented significant cost reduction measures. These actions were necessary to align our cost structure with revenue developments. Total personnel expenses and operational costs were reduced by 16.8%, our most substantial cost reduction in absolute terms came through organizational rightsizing, where we reduced our workforce from 1,053 FTEs at the end of 2024 to 923 FTEs by the end of 2025. We achieved meaningful reductions in other operational expenses, which decreased by 21.1% to EUR 26 million in 2025. These savings came from multiple initiatives across the organization. Moving forward, we will continue to maintain this disciplined cost and efficiency approach. Our net debt position continued to improve throughout 2025, demonstrating our commitment to maintaining a healthy balance sheet. Looking at the most important balance sheet movements. Current assets decreased by EUR 46.2 million, driven by further inventory reductions and a reduction of trade receivables as our end of year 2024 position was higher than normal on higher volumes of substations towards year-end and a number of battery outstanding receivables. On the liability side, noncurrent liabilities decreased by EUR 6.8 million, caused by a reduction on provisions and scheduled repayments of borrowings, while current liabilities decreased by EUR 44 million due to a reduction of trade payables as we paid our year-end bills. Our net debt position improved further from EUR 32.7 million at the end of 2024 to EUR 20.7 million at the end of 2025. Operating cash flow was EUR 32.5 million positive in 2025 compared to EUR 55.8 million in 2024. Operating cash flow was highly influenced by the inventory reductions in 2024 as well as in 2025. Further, we remain well within our bank covenant requirements. Our net debt to adjusted EBITDA ratio stayed below the maximum threshold of 3:1 as stipulated in our banking agreements. This improved net debt position gives us a solid financial foundation as we navigate through 2026 transformational phase. Our working capital position showed significant improvements throughout 2025, declining from EUR 92 million in 2024 to EUR 77 million at the end of 2025, reflecting our disciplined approach to inventory management and improvements in AR position. The most notable improvement came from our inventory reduction efforts. Between 2023 and 2025, we reduced overall stock levels and strategic down payment by 45%, equivalent to EUR 79 million. In 2025 alone, we achieved a substantial 20% decrease in inventories, representing EUR 20 million in reductions. This was driven by several key factors, selling a number of long-term energy storage inventory items and continuing to sell EV and battery charging inventory. Moving forward, we will continue to focus on further bringing down EV charging inventories to optimize our working capital position. Trade receivables decreased significantly in 2025 by EUR 32.9 million, mainly reflecting the normalization of elevated receivable levels at the end of 2024. These higher levels were driven by the ramp-up in volumes with grid operators in the second half of 2024, following the resolution of the moisture issue that had affected the Smart Grid Solutions business. On the payable side, our trade payables was reduced by EUR 40.9 million as certain larger accounts payable position were due towards the end of the year. The effect of our energy storage business on our working capital position continues to be positive. This continued positive impact is dependent on a continuous flow of energy storage contracts incoming for which prepayments are due. Overall, the working capital improvements contributed meaningfully to our positive operating cash flow of EUR 32.5 million in 2025. I now hand over to Michael Colijn, who will walk you through the strategy update and outlook. Michael Colijn: Thank you, Onno. When we look at the energy transition today, one thing becomes very clear. The ideal solutions are those that are cybersecure, easy to deploy and compact. And the reason for that lies in the underlying market trends that are shaping demand across the sector. First, the trend of electrification continues and is now combined with the need for energy security. Geopolitical tensions remind us that independent and cybersecure infrastructure is not optional. It is essential. This means customers are increasingly demanding electricity systems that are strengthened, controlled locally and protected against cyber threats. Second, we continue to integrate more renewables, and that push is decentralizing the grid. As solar and wind capacity grow, we need smarter grid connections and energy storage to close the gap between moments of high generation and high demand. But these trends introduce new challenges. We see rising grid congestion driven by electrification outpacing the expansion of the grid infrastructure. This creates pressure on our customers to find solutions that reduce or avoid the need for new grid connections. As a result, demand is growing for smarter energy assets. And finally, we are seeing execution constraints in the downstream value chain. Permitting cycles are long, qualified labor is limited and space is often scarce. This puts a premium on compact systems that are easy to deploy. Our strategy and our portfolio are best designed exactly to address these needs. Everything we do starts with our purpose, securing the electricity needed to keep life happening every day, everywhere. Today, energy security is more critical than ever. Our customers rely on us because our products must always be safe, reliable and trusted, especially as electricity is increasingly the backbone of mobility, communication, heating and industry. But being reliable isn't enough. We have to deeply understand our customers, not just what they ask for, but what they actually need to operate, grow and stay resilient in a world that is rapidly changing. Anticipating those needs is what sets us apart. And the role we play goes far beyond the customer relationship. Electricity is at the heart of society because when something goes wrong, when the lights go out or systems fail, households, businesses and entire communities feel the impact immediately. We, as Alfen, exist to prevent that. We believe deeply in the energy transition, and we believe in keeping electricity safe and reliable. And we believe in growing our business so that we can deliver reliable energy wherever and whenever society needs it. That sense of responsibility has shaped us for decades, and it will continue to guide us as we transform for the future. We take sustainability as a given. When we look at the environmental pillar of ESG, we have SBTi validated CO2 reduction targets and have achieved strong CO2 reduction across Scope 1, 2 and 3 in 2025. We are even on track to meet our 2030 SBTi validated target for Scope 1 and 2 already in 2026, ahead of time. On the social dimension, we're committed to being a responsible employer. For example, Alfen trains new technical personnel through the Alfen Academy. From a governance perspective, we maintain the highest standards of business ethics, transparency and accountability, and we are proud to be able to say that in 2025, there were no violations or irregularities reported on, for instance, the code of conduct. These efforts are also externally recognized as we are ranked in the top ninth percentile by the 2025 Sustainalytics rating. Let us now dive into what Alfen offers at a glance. Across our 3 business lines, we provide end-to-end solutions that are designed, engineered and built in Europe, supported by our own R&D, production, project management and service organization. In smart grid solutions, we deliver distribution substations and grid infrastructure that help operators strengthen the grid and enable electrification. Customers choose us for reliability, compact design, ease of deployment and integrated functionality. In EV charging, we offer highly reliable AC chargers for home, business and public locations with strong interoperability, smart charging capabilities and remote service built in. Our focus is on reliability, connectivity and ease of installation. And in energy storage systems, we provide multi-megawatt stationary solutions and mobile storage systems that help customers manage limited grid capacity, integrate renewables and optimize energy use. Here, we win on end-to-end service, local grid expertise and performance guarantees. Together, these business lines give us a diversified complementary yet resilient offering, one that directly responds to the needs of the market. Alfen operates across Europe with our headquarters and primary manufacturing facilities located in the Netherlands. We have established a strong presence in key European markets with our core markets being the Netherlands, Germany, Belgium, France and the Nordic countries. We build scale by growing with our customers. As they expand, we expand with them. For example, in the United Kingdom, we followed our battery electric storage systems. Local presence is core to our model. It allows us to serve customers with speed, high quality and deep market understanding. Today, we already operate with local sales and service teams across many European countries, and that network continues to grow. Each new country we enter often starts with one business line, but that local presence becomes a stepping stone to build out the next, especially in regions such as Southern Europe. This allows us to grow in a disciplined, scalable way. And once we achieve overlap between our business lines in the market, we unlock a major advantage, the ability to offer integrated solutions, for example, across Benelux, Germany and the Nordics. This European footprint, combined with our local depth, positions us strongly to support the energy transition wherever our customers need. Looking across our 3 business lines, we see sustained strong growth. Starting with smart grid solutions, we see increased demand from grid operators who are under pressure to expand and strengthen grid infrastructure to accommodate electrification. In the private domain, we observed increasing demand in the key segments such as fast charging, commercial and industrial storage, which are illustrative for the broader market environment. Also in EV charging and energy storage, we continue to see strong sustained double-digit growth across Europe. On the EV charging side, the number of installed charge point keeps rising as electric vehicles become more affordable and increasingly attractive for consumers. In energy storage, growth is even steeper. As more renewables enter the system, the need for storage to balance the grid increases rapidly. These long-term views reaffirm that Alfen is present in the right markets. To capture these growth opportunities, we are embarking on a comprehensive transformation. The goal of this transformation is threefold: to get closer to our customers, to achieve product excellence and to further digitalize our offering. Our transformation is guided by 4 core principles that will shape every decision we make and every initiative we undertake. The first of these 4 is total customer confidence. We want to build complete trust by being reliable, responsive and locally present across Europe, so we retain customers for the long-term and grow with them. The second is perfect product foundations. This means consistently delivering high-quality products that meet customer needs today and anticipate their needs tomorrow while optimizing the total cost of ownership. The third is smart services innovation. We will add more value to our customers through bundled, relevant and dependable solutions, enabling a step change in how we support them. And finally, a fighting fit model. We will evolve our structures and ways of working to enable the aforementioned 3 principles and to ensure we operate safely and effectively as we scale. These 4 principles define how we will transform and how we will position our company for the next phase of growth. Let me provide a couple of concrete examples of how these 4 principles will translate into action across our organization. For total customer confidence, we're building out 24/7 response capability and increasing our local-for-local presence. Under perfect product foundations, we're adopting a more networked approach to engineering and moving to modular, scalable software development. For smart services innovation, we're investing in remote monitoring and predictive maintenance, and we're equipping our field teams with remote diagnostics to resolve issues quickly. And within our fighting fit model, we're implementing a new operating model with clearer P&L accountability, and we're optimizing end-to-end processes within each business unit. For every business unit, we have developed a strategy that will guide commercial activity, European expansion and product and digital solution development. In smart grid solutions, we are concentrating on the 5 strongest growth segments, including public networks, fast charging, logistics, C&I sites and rail with a more proactive market outreach. We are also expanding in Europe by leveraging our existing relationships in private segment grid solutions. Across all markets, we will continue to differentiate through reliability, compactness, ease of deployment and our turnkey integrated offering. In EV charging, we continue to focus on AC charging for the home, business and public segments. Towards the future, we are simplifying the portfolio from 5 to 3 AC charger types to reduce cost and complexity while continuing to stand out with reliability, smart charging features, interoperability and strong remote aftersales support. Geographically, we will expand our core markets into Italy, Spain, Portugal and plan for re-entry into the U.K. And in energy storage systems, we are increasing commercial efforts in both utility scale and mobile solutions and further expanding into fast-growing C&I segments. We will prioritize our existing core countries with selective expansion based on clear criteria. Our edge remains our end-to-end service capability, local grid expertise, performance guarantees and particularly in mobile, our interoperability and plug-and-play peak shaving functionality. Together, these strategies give each business unit a sharp commercial focus while ensuring we differentiate through reliability, innovation and local customer relevance across Europe. As part of our smart services innovation, we are strengthening and expanding our digital solutions across all business units to improve performance, efficiency and customer experience. In smart grid solutions, customers can already configure substations directly through our webshop, influencing production planning in real time. And we are developing the station of the future, integrating predictive maintenance and remote connectivity into transformer substations. In EV charging, we are launching 2 major digital upgrades, a new mobile installer app that reduces on-site installation time by up to 90% and our new EVE control platform, which will provide advanced asset management, full remote service and simpler configuration of chargers. And in the battery energy storage, TheBattery Connect platform gives customers full visibility and control over their systems. It processes massive volumes of data in real time, enabling continuous optimization and fast reactions to any system alerts. These digital solutions are already creating value today, and they will become an even stronger driver of reliability, uptime and customer satisfaction as we scale. To support our transformation and accelerate our execution, we will adopt a business unit structure. Each business unit will be led by a dedicated business unit director. This structure brings several advantages. First, it moves us closer to the customer. More of our organization will be directly connected to customer-facing roles, giving us faster insights and quicker responses. Second, it allows for faster strategy execution. Strategic direction can be translated more directly into team priorities without unnecessary steps or complexity. Third, it increases accountability. Each BU will own its business outcomes end-to-end below the management Board, ensuring clear responsibilities and stronger performance management. And finally, it reflects the different dynamics in each BU, whether it's product versus project environments, commercial go-to-market approaches or operational requirements. At the same time, we will continue to leverage shared support functions and other synergies. This gives us the best of both worlds, greater speed and customer focus within each BU while still capturing synergies across the company. To fully enable our strategy, we need to strengthen the capabilities of our organization. By Q2 2026, we will transform both the skeleton and the nervous system of the company, the structure that supports how we work and the culture that guides how we behave. First, on the structural side, the skeleton, while maintaining overall headcount, we will reallocate capacity towards the capabilities that are critical for our commercial growth strategy. This means strengthening areas such as digital solutions, project management and service. As part of this shift, we do anticipate reductions in some areas and increases in others. And to support this transition, we will take a restructuring provision of approximately EUR 4.5 million in 2026. Second, on the cultural side, the nervous system. We will embed a company-wide culture focused on customer centricity. We have defined and will roll out consistent leadership behaviors across the organization, and we will clarify roles and accountabilities to ensure everyone knows what they own and how to contribute. Together, these changes will help us get closer to the customer, improve reliability and further digitalize our offering. Looking ahead to 2026, this will be a transformational year for Alfen. We recognize that before we can accelerate growth, we must first transform our operations and complete the organizational changes necessary to position us for sustainable success. This year will be about building the foundation for top line growth. For 2026, we are guiding revenue between EUR 435 million and EUR 475 million. Let me provide some context on how we see each business unit contributing to this guidance. The 2026 backlog for energy storage systems is at EUR 122 million, and we still expect to book several orders that will lead to revenue in 2026. Smart grid solutions revenue is expected to increase both in the project business as well as in the product business. For 2026, we expect a decline in EV charging segment, while the product portfolio is being renewed and competitive pressure persists. Our adjusted EBITDA margin guidance for 2026 is between 4% and 7%, and our CapEx is expected to remain below 4% of revenue. Looking beyond 2026, our ambition for 2027 is to return to profitable growth. By then, we expect our transformed organization, strengthened commercial strategies and enhanced digital capabilities to position us to capture significant growth opportunities across all 3 business lines. These investments we are making in 2026 are specifically designed to establish Alfen as the partner of choice for customers across Europe's energy transition. Thank you very much. We now open the floor for questions from our analysts. Operator: [Operator Instructions] Our first question comes from Nikita Papaccio. Nikita Lal: The first one would be on EV charging inventory. Could you give us any indication where are you currently? And what is the targeted level? The second one is on the decision to re-enter the U.K. in the charging business after exiting this, I think, last year. Just wanted to understand what has changed the situation in the U.K. What do you expect there? And what might be the cost to re-enter the country again? And the third one on the timing of your restructuring provision of the EUR 4.5 million. The organizational structure should change in Q2. Should we expect the provision to be booked in Q2 as well? Onno Krap: Nikita, this is Onno. Thanks for the questions. On EV charging inventory, we are currently -- at the end of 2025, we are at EUR 28.8 million in inventory for EV charging. The expectation is that there's around EUR 10 million of excess inventory still in there, and that will be brought down over the, let's say, next 2 to 3 years. We won't bring that down full year 2026 yet. So we need a little bit longer for that. Michael Colijn: On your second question regarding the U.K. re-entry plan for EV charging. I believe it was absolutely the right decision for the company to reduce its number of geographies last year when it had to realign and strengthen its core while reducing headcount. In our revision of our strategy for this year, we looked at how we would enter the U.K. and with what purpose. And there are 2 significant differences between the way we were operating prior to last year's withdrawal. The first is that we've taken a local-for-local approach, building teams in countries that can understand regulation, be close to the customer and really support the business there, both in terms of sales, service and project management. And the second, especially relevant for the U.K., is that we grow with our customers. We have several customers that have indicated with whom we're doing business already in different geographies that they wish to expand their portfolio with us into the U.K., and we are looking to do that together with them, thereby reducing risk on market traction, reducing operational expense to trigger the market and allowing us to grow neatly next to our customers. Onno Krap: I will take the question on restructuring. The expectation is to book most of the restructuring provision in Q2. It could be that a portion will still move into Q3. And the expectation is also that the cash outflow is around -- is most likely in Q3. Operator: Our next question comes from Ruben Devos from Kepler Cheuvreux. Ruben Devos: The first one is just on the gross margins. I think if my math is a bit right that the Q4 adjusted gross margin came in around 24%. I think in the rest of the year in '25, you were around 29% to 30%. So I think you've talked about mix effects from more storage revenue and a shift towards these lower-margin transport distribution stations in smart grids. So if the '26 sales guidance assumes growth in both storage and in smart grids, should we expect that same mix of Q4 to somewhat persist throughout the year? That's the first question. Onno Krap: Your analysis is right. Those are the main drivers for the somewhat lower margin in Q4. And also, if you take a look at the guidance that we have given by product line or by business unit, then SGS somewhat higher, battery somewhat higher and EV charging somewhat lower. That does mean something -- that does mean that our average margin will come down in 2026, and that's also reflected in the guidance that we have given on the EBITDA margin. Ruben Devos: Okay. And just to further build on that, I think you also talked a bit about '27. You're guiding for a year-on-year improvement in revenue and adjusted EBITDA margin. I think not too long ago, you were sort of talking about getting towards a low double-digit EBITDA margin in the mid-term. So maybe could you help us understand what a realistic 2027 exit rate would look like? Is low double-digit still on the table at this point as a mid-term objective? Or do you have a bit of a new look on that? Onno Krap: Yes. I don't really want to go beyond the guidance that we have been given so far. So the guidance for 2027 is moving in the direction of profitable growth and to -- and we're giving that guidance for a reason, and I don't want to basically go beyond that, and I'll mention any numbers on that. Ruben Devos: Okay. Fair enough. Then just a final one on the backlog of energy storage. I think it was a EUR 127 million, of which EUR 122 million for '26 delivery. That looks already like a strong coverage, right, relative to the sales you realized last year. I think you also talked about project execution timing that would drive the conversion. So basically, my question is how much sort of contingency is built into the guidance for this year for potential project delays? And what is -- if 1 or 2 larger projects slip into '27, how impactful could that be? Onno Krap: Yes. Good question. So -- but we -- if we take -- currently taking a look at the backlog that we already have and taking a look at the planning of the backlog from an execution and revenue recognition perspective, then we do see that the revenue is somewhat front-end loaded. So that basically gives some confidence that we have -- we have some cushion if something gets delayed, it gets delayed to Q4 and not delayed into 2027. And with respect to the orders that we still expect basically on top of the EUR 122 million that will lead to revenue in 2026, they have to come in relatively soon. So let's say, within the next 2 months, and that has to do with the fact that we do see increasing lead times of some key components, sometimes even going up to 40 weeks. So you can imagine that if we get an order in, let's say, in April with lead times of more than 40 weeks, it's difficult to realize those still in 2026. So timing is of the essence here also to book the initial orders to realize revenue in 2026. Operator: The next question comes from Jeremy Kincaid from Lanschot Kempen. Jeremy Kincaid: I have 3 questions, but let's start with the first one. On your EV charging guidance, you're obviously talking to continued competitive pressure and a decline from '25 to '26. But obviously, this year, you've launched some new products with -- which have new innovations. And I think I also read that you undertook a pricing reset. And so even after these steps, you're still going to be losing market share. So I suppose my question is, what is it going to take for you to stabilize market share or even grow? Michael Colijn: Thank you for the question. I think the steps that we are taking in the EV charging space are threefold. First of all, there's ongoing simplification of the portfolio, whereby the features inside the chargers are being designed to meet the latest expectations of our customers in terms of energy management, load balancing, VTG capability. And the other part is that each charger will be made more suitable across a larger number of geographies. The third element, which is playing on the minds of our customers is in terms of uptime, ease of installation, ease of use and really ensuring that we are best-in-class once again, which we were for a long, long time, and we did not pay enough attention to that in the last few years, and we've now launched the development of these new chargers, and we expect them to have the traction that we need. The initial response from our key customers is very positive, and we look forward to regaining traction with them during this year. Jeremy Kincaid: Okay, sure. And then on smart grid solutions, you're also talking to a broader international expansion. I think in the past, you've talked to the fact that you're reluctant to do that because grid networks are different. Are you able to talk to the rationale for the geographic expansion now? Michael Colijn: Absolutely. I think there are 2 markets that we serve within the general smart grid solutions area. One is the public one where we serve the grid operators. And what we're talking about here today is not that. We are discussing the private market, such as fast charging hubs, logistics, the C&I market, solar and wind farm support. These are behind the meter, specifically designed to support larger energy consuming or energy-generating projects, whereby standardization is possible across geographies, and there is not the need to meet complex grid requirements that we see in the public market. Jeremy Kincaid: And then the final question, Michael, if you look -- to look 5 years into the future, which of your 3 business units do you think would be the largest? Michael Colijn: Well, I'm in love with all 3 of them. So we are happy to focus on them. And joking aside, I think the strength that we will build out in the future is the synergies between them start to become more visible as projects become larger. To give a few examples of what we've done in the second half of last year, we've combined SGS, smart grid solutions with charging capability for really large international distribution companies. We've built out a combination of battery with smart grid solutions where peaks and troughs in demand can help those solutions where grid connections are difficult. And we've seen an increase in the number of smart grids at local level where we combine our SGS solution with either a battery or charging or simply getting the grid locally strengthened. Those type of synergies, we expect -- we see them, and we expect a bigger uptake in the future because intrinsically, we see an increasing complexity of the grid at the decentralized level, and that's where we're playing. Jeremy Kincaid: Sure. Okay. I suppose a final comment, it would be helpful to receive some sort of measure on that interconnectedness going forward to be able to assess that. But I fully understand your point. Operator: The next question comes from David Kerstens from Jefferies. David Kerstens: I've got 2 questions, please. First of all, on your revenue guidance, I think you upgraded that slightly from low single-digit back in November to growth of up to 9%, maybe 4% on the midpoint. What's driving that upgrade? And when you compare that with the market growth data that you provided in the strategy update, should we assume a further acceleration towards double-digit growth longer-term? That's my first question. Onno Krap: Okay. So I'll start with that one. Break out the revenue guidance, I think to a certain extent, Michael already also gave an indication there is in smart grid solutions, we do foresee modest growth or relatively low growth with the grid operators for this year. But in the project business, where we are also -- we expect some decent growth and we classify the work that we do for the mid-voltage distribution station, we classify that in our project business. That's where we expect a significant part of the growth coming from in the SGS business. If I then move to battery business, I think we tried to explain kind of the foundation of our guidance very much already backed up by the EUR 122 million in backlog that we have in portfolio already, plus the number of orders that we have visibility on and we expect to book in the next 2 months. So that's basically driving the guidance on batteries. And then we also see for 2026, a decline in EV charging. And -- but of course, I mean, that's something that's a position that we are not satisfied with. And I think all our efforts during 2026 will be focused on making sure that we reverse that trend, become more competitive and reverse that to a growth in 2027. That combined basically led us to guide you on 2027 that it will be profitable growth without, at this moment in time, putting any percentages on that. We will do that as soon as we have more visibility in that direction. David Kerstens: Okay. I understand. Second question is on the geographical expansion in EV charging. You already touched upon the expansion and re-entry in the U.K. You talk about increasing competition in EV charging. I was wondering how do you now see the competitive landscape in the various markets like Italy and Spain, which you are now targeting as well as in the U.K. I think there are many -- from what I understand, many local brands. And how do you expect for Alfen to build a position in these local markets? And what would be the associated cost for marketing to get into that market again? And will you mainly focus on the home segment? Or is this mainly in the public domain where you're looking to expand in these markets? Michael Colijn: Okay. A couple of questions there. Let me strip them down. First of all, the strategy is for us to be local for local and where we expand into the geographies based on our customers' wishes to expand. We see some pull from customers that are choosing Alfen because of reliability and a long history in EV charging. And we do see an increased competitive landscape in terms of the number of competitors, both local and international. When we look at the ability to drive innovation and our ability to maintain cost, we believe we have positioned ourselves for being very competitive across the different geographies in Europe. And we're not doing a single bet on a single country, you can see from our expansion plan that it is a multipronged approach, whereby volume is one of the key deciders for us to play in the geographies that we've mentioned today. In terms of the segment, the highest volume segment is the home market, followed by business and then finally, public. We believe that the mix of being in all 3 gives us an advantage in terms of platform, in terms of scale and in terms of being able to offer our customers what they're looking for. David Kerstens: And can you talk about the associated cost of this geographical expansion? Does it require advertising campaigns to expand in the home market? Michael Colijn: Not really. This is a relationship-based business-to-business market that we're in. We're not looking to develop a brand image around the charging facility. Operator: The next question comes from Thijs Berkelder from ABN AMRO ODDO BHF. Thijs Berkelder: First question on guidance 2026 on margins. In November, you still guided for 5% to 8% adjusted EBITDA margins, as I recall. And now you pushed that down to 4% to 7%. Can you explain the reason why you're pushing the margin guidance down? And why would you in '26, not be able to beat your '25 margin? What are the key factors there? And maybe David already hinted at larger -- higher marketing costs, other extra costs whatever -- can you explain? Onno Krap: Sure. It's actually twofold. One is based on the fact what I mentioned on kind of the mix that we see for 2026 between business units. SGS and batteries are increasing, but they have a lower gross margin than our EV charging business and EV charging business is declining somewhat. So in the mix, we see a reduction in our gross margin. I already said, okay, that -- I already said that that's a trend that we have to reverse, but that reversal will -- we're working on that to reverse that towards 2027. At the same time, we're also saying this 2026 is a transformational year. And transformation means change and change doesn't always come for free. So we expect certain costs and maybe even certain inefficiencies during 2026 that lead to additional costs and therefore, pushing down our overall EBITDA margin. And that's why we came to the guidance between 4% and 7%. And if you take the midpoint of that one, in absolute terms, that will be EUR 25 million, and that's more or less the same as where we are in 2025. Thijs Berkelder: Okay. Then coming back on the EUR 25 million as a starting point and roughly translating into -- I'm looking now more -- much more at cash flows. Your cash flow from operations, excluding working capital effect last year was around EUR 20 million, I think, and that's before your, let's say, necessary investments in personnel for technology, what have you of close to EUR 10 million. So net of that, it's only EUR 10 million and after lease payments you have to pay off around EUR 8 million. You have very minimal organic cash flow left in '25 and in '26, given your guidance and the cost you will have to pay, it won't be much different. How as a CFO, are you looking or protecting your downside? Given all the staff reductions, I would have expected at least in terms of guidance that the low end of the margin guidance would not be further guided down. Onno Krap: Yes. No, I think your analysis is correct. We need around EUR 30 million to EUR 32 million in EBITDA to be autonomously cash flow positive. And so from that perspective, 2026 will be a year where that will not -- will be approximately EUR 5 million to EUR 6 million negative. At the same time, we do still expect for 2026 certain improvements in working capital, especially in inventory. We still have -- and I just elaborated on that one. We still have some excess inventory in EV charging, and we still have a couple of items in batteries that we expect to reduce during 2026. So from that perspective, and without basically really giving guidance on that, I mean, I'm not overly worried about the fact that we won't be generating cash next year. And then definitely to put towards 2027, I think we need to see an improvement to basically also create -- reach an EBITDA that will be in itself cash flow positive. And from there on, we build on further. Thijs Berkelder: Yes. Third question is on, Michael, you're optimistic on your end markets. Your end markets are growing, maybe even now starting to accelerate a bit further. But to catch that growth also abroad, are you not scared that your working capital management is now too tight and simply your balance sheet situation and cash flow requirements will prevent you from growing with the market and will only force you to not grow with the market? Michael Colijn: I think for 2026, we see that we are not growing as fast as the market, also not in our outlook because we believe this rebalancing is necessary. Indeed, when growth picks up, there is a challenge of balancing cash flow and growth capital needed. I would say I would be -- it's a happy challenge to face in the future when we are looking at cash needed for accelerated growth. What I can say on the 3 different segments that we serve, when we look at the battery storage side, payments are usually upfront that really helps us in managing cash, and we've seen some of that already in 2025. When we look at our SGS performance, we see that our grid operator companies are getting better at their forecast prediction and there is a balance in their payments versus their offtake. And so I'm not too concerned about that either. When we look at the EVC charging, increasingly, we are working and we are working in this year towards having framework contracts in place, whereby the predictability of the volume becomes better. Having said that, we see that already with those customers, their payment cycles are stable and good. And as we grow with them, I wouldn't expect sudden unexpected growth leading to a lack of payments as we ramp up. So of course, we are watching this carefully, but I'm not overly concerned about the growth because of those reasons. Operator: The last question is from Luuk Van Beek from Degroof Petercam. Luuk Van Beek: A couple of questions. First, on the cost savings. Previously, you indicated that you were already at to, say, a minimum cost level that cutting further would hurt your commercial and innovation capabilities. Now you see room to still make further cuts basically in the organization and then free up money to invest in your new strategy. Can you explain how you have found new ways to save costs basically? And if we can see the OpEx and the personnel cost level of H2 as a sort of run rate for next year? That is the first one and I'll come back later with other ones. Onno Krap: Okay. Yes, on the cost savings side, the cost saving on personnel, you mainly see during 2025. And so we brought down the number of FTEs by around EUR 120 million -- [indiscernible] the change that we are, at this moment, looking for, for 2026 in the organization is not so much focused on cost savings. It's much more shifting a certain part of the organization into an area where we see more need for it in digitalization, in projects and in services. So the focus here is not on cost savings. The focus here is redirecting capabilities from one side of the organization to the other to basically make us stronger and to accelerate growth. Apart from that, especially if you take a look at our OpEx, I would call it the discretionary spending, we will continue to focus there and making sure that when we spend money on outside vendors that we always think twice and make sure that we spend it wisely in order to make sure that it contributes to the health of the organization or to basically making sure that we generate more revenue. I think that's the approach. I think maybe coming back to the question of ties, and we are not trying to starve the organization. That's not what we're trying to do. But we're trying to be very conscious on where we're spending the money, how we're spending it and to make sure that it is optimal and not in the direction of starving the company. I think that's in no ways what we're trying to accomplish. Luuk Van Beek: And then I have a question about the gross margin in EV charging, which was supported by lower component costs in H2. At the same time, you are cutting your prices, obviously, to be more competitive. How do you look at the balance between further support from lower component costs and a negative impact from pricing cuts going forward? Onno Krap: Okay. Now there is an impact of lower components costs we saw more or less starting to happen in Q2 last year and continued in Q3 and Q4. Expectation is that we will also see that effect in 2026, not so much that components costs will become even lower. But I mean, this effect is here to stay. At the same time, we continue to see competitive pressure. That's also where some of the guidance is coming from that -- in 2026, we will see some lower revenue. To counteract that, we will definitely also work on pricing. So my expectation is that gross margins for 2026 will definitely not go up. And we will use a little bit of the room that we're currently seeing in our margins to make sure that we stay -- that our pricing stays competitive. Luuk Van Beek: Okay. That's clear. And then last quarter, you mentioned that you had a new type of transport distribution station, which was much larger the turnkey. Can you comment on the build the progress? Do you still expect that it will become a significantly larger part of your revenues in smart grid solutions this year? Onno Krap: Yes. We -- the part of the growth that we are currently forecasting or guiding in 2026 is actually coming from the increase in these transport distribution stations. So definitely, we see that increasing, and we see actually also for the longer-term quite some opportunities there. Those are stations that are significantly larger or significantly more from a pricing perspective, larger than the ones that we sell on a regular basis. And we have a pretty strong position there at this moment in time, and we intend to build that further in the years to come. Luuk Van Beek: And my final question is about the reporting. You will now move to the organization by business unit. Does it also mean that we will get the EBITDA by business unit in the future? Onno Krap: It's likely that we will move in that direction. Timing of that will still depends, but it's likely that at a certain moment in time, we will move in that direction. Operator: Thank you. And with that, I will now turn the call back to Mr. Colijn for any closing remarks. Please go ahead. Michael Colijn: Thank you all for joining us today for Alfen's Full Year 2025 Earnings Call. We look forward to updating you on our transformation and financial performance during our Q1 trading update on May 13. Have a good day. Operator: Thank you. You can now disconnect.
Operator: Hello, and welcome to the Commerzbank AG conference call regarding the fourth quarter results 2025. Please note that this call is being transmitted as well as recorded by audio webcast and will be subsequently made available for replay in the Internet. [Operator Instructions] The floor will be opened for questions following Bettina Orlopp's and Carsten Schmitt's presentation. Let me now turn the floor over to our CEO, Bettina Orlopp. Bettina Orlopp: Good morning, everyone, and welcome to our earnings call. You already saw the bottom line and capital return yesterday with our pre-release. And today, we are pleased to present the full picture of our Q4 and full year performance 2025. I will present to you our overview of the year and share our strategic and financial view going forward. Afterwards, Carsten will walk you through the detailed financial performance of the fourth quarter. We can report on a very successful year for Commerzbank. We achieved our growth targets and in many areas, exceeded them. We delivered a record operating result and will return even more capital to shareholders than originally planned. This is a clear proof to the fact that our Momentum strategy pays off and drives profitable growth. In 2025, we created significant value. On the financial side, we achieved an operating result of EUR 4.5 billion, an increase of 18% compared to previous year. Our return on tangible equity before restructuring expenses reached 10%. This is the highest return since the global financial crisis, and hitting this double-digit figure is an important milestone. It demonstrates the improved strength and profitability of Commerzbank and sets our new baseline for growth from 2026 onwards. This is complemented by a capital return of EUR 2.7 billion for 2025, higher than we thought back in November, and bringing the total since 2022 to EUR 5.8 billion. This financial success translates into value for all our stakeholders. For our shareholders, the market has recognized our growth path and our transformation. Our share price has more than doubled in 2025, reflecting the confidence in our strategy and its execution. For our employees, our success is also their success. We launched an employee share program and saw a high participation rate of 90%. This creates a culture of ownership and aligns the interest of our team with the long-term success of our bank. And for our clients, our growth is a reflection of their trust. We grew our corporate loan volume by 10% and our securities volume by 9%. This shows that our clients value our partnership and our expertise, in particular, in the current economic environment. We are a reliable partner for our clients, especially in the German Mittelstand. A more detailed look at the financial performance underpins the positive trend across our key metrics. Our total revenues climbed by 10% to EUR 12.2 billion. This was driven by good performance across the board, particularly by a 7% growth in our net commission income and the strong results from our Polish subsidiary, mBank. Even in an environment of lower benchmark interest rates, we kept our net interest income nearly stable, reflecting our successful NII management. At the same time, we have maintained our consistent cost discipline. We improved our cost-income ratio by 2 percentage points to 57%, achieving our target for the year. This was accomplished alongside strategic investments as well as absorbing one-off effects such as higher valuation of equity-based compensation due to our share price performance. This combination of revenue growth and cost control led to the 18% increase in operating results. This demonstrates the improved earnings power of our bank. Our net result stands at EUR 2.6 billion. If adjusted for the restructuring expenses, it rose strongly by almost 13% to EUR 3 billion. This underlying profitability is also reflected on our net RoTE before restructuring expenses, which, as mentioned, reached 10%, exceeding our target. I already touched on capital return, and we'll come back to it shortly. But before that, I would like to draw your attention to the execution of our Momentum strategy. We have delivered on our strategic milestones in 2025, driving both growth and transformation. On the growth side, we have leveraged our franchise for capital-accretive loan growth, demonstrating our strong client relationships. Furthermore, we have taken a smart analytical approach to deposits. By using AI, we improve savings retention, apply sophisticated pricing schemes and grow volumes through reactivation of existing customers. The strong focus on client needs has supported the growth in our fee business across all customer segments, contributing to our revenue uplift. On the transformation side, we have implemented the new enhanced service model for our private customer. As one key element, we have created more capacity for high-quality advice in private banking and wealth management. This is a key step to further grow our fee income. Our restructuring program is on track with the ongoing shift to sourcing and shoring locations progressing as planned. An important component of this transformation has been the introduction and expansion of AI-based capabilities. We are already realizing initial efficiencies and improve both customer and employee experience. This is happening as we speak, and I will come back to this in a minute. Overall, we are very pleased with the success of our Momentum strategy, which paves the way for 2026 and beyond. Our priorities are clear. First, we are fully committed to delivering on our 2026 to 2028 strategic and financial targets. We have a clear plan, and our 2025 results give us all the confidence that we will achieve it. Second, we will continue our growth path. This will be supported by an expected modest recovery in the German economy and the government's stimulus package. Further catalysts from 2027 onwards will be the pension reform in Germany, which comes with government-subsidized securities savings plans. Third, we will further increase the usage of artificial intelligence to transform the bank. We will increase the investments in AI to drive efficiency, enhance customer service and create new revenue opportunities. Fourth, we will continue the execution of our Asset Management Growth strategy. This is an important building block to achieve our targeted growth of 7% annually in fee income. And finally, we will strive to optimize the deployment of our excess capital, including the ongoing screening of inorganic growth opportunities. Let me expand on 2 of these key priorities, artificial intelligence and asset management, starting with AI. AI is a fundamental driver of our ongoing transformation. We have built a solid starting point in 2025, moving from concepts to concrete applications that deliver benefits. Let me highlight a few of them. In our advisory and customer service center, our AI-powered agent assist provides real-time call transcription, generate summaries and recommend suitable solutions. Workplace tools like cobaGPT make information retrieval and content creation for our employees significantly faster. Our in-house tool Fraud AI helps to automatically detect fraudulent activities. And in our banking app, our virtual assistant, Ava, combines generative AI with Avatar technology to assist customers with their banking needs. The benefits are already visible and will increase every year. In 2026, we will expand and enhance the use cases we started in 2025. We will also introduce additional GenAI applications such as for legal contract generation and annual report analysis for risk assessment. Furthermore, we will continue piloting agentic AI in collaboration with our strategic partners to drive further process transformation. In conclusion, AI will change banking, and we are well underway in this transformation. We have increased our change budget for 2026 from originally planned EUR 500 million, to almost EUR 600 million and an increasing share of this is allocated to AI. The key lever for growth, particularly in our fee income is our Asset Management strategy. Our strategy is based on a combination of in-house asset management offerings and partnerships, creating a platform that provides a wide choice for our clients. Our in-house capabilities cover a broad range. This includes discretionary portfolio management and liquid strategies at Commerzbank and our specialist manager, Yellowfin. And in the areas of private markets, we have the expertise of Commerz Real in real estate and infrastructure as well as Aquila Capital in clean energy and sustainable infrastructure. Combined, our in-house units managed EUR 67 billion. Currently, we see more inflows in liquid assets and the more challenging environment for less liquid assets. Regarding early-stage investments into renewable energy projects, Aquila faces market challenges, which put pressure on 2 specialized institutional funds. Hence, we have pulled forward the full depreciation of the acquired capitalized client value. Going forward, we fully focus on developing our existing business and adding new business to meet the demand of our clients. The in-house offerings are complemented by our partnerships, which provide a full set of standard fund and ETF solutions with a volume of EUR 95 billion. This setup is designed to expand our business with our clients. It will further strengthen our position as a comprehensive partner for their investment needs. Let me move on with a central element of our equity story, our commitment to delivering capital returns to our shareholders. For the 2025 financial year, we will return EUR 2.7 billion to our shareholders, EUR 200 million more than originally planned. This reflects a 100% payout ratio before restructuring expenses and represents a total yield of 7% based on the market capitalization at the start of the year. Regarding the mix and given that we trade well above book value, we have decided to put more emphasis on the dividend. Hence, we intend to propose an increase to EUR 1.10. On share buybacks, we have decided yesterday to start another buyback of up to EUR 540 million tomorrow. This comes on top of the EUR 1 billion buyback, which was completed already in December. Looking forward, we continue targeting a payout ratio of 100% of our net result after AT1 coupon payments. We intend to further grow the dividend share towards 50%, establishing Commerzbank as a reliable dividend stock. This capital return policy comes with a total yield increasing to 10% in 2028 and remains a key cornerstone of our strategy. Our performance and strategic execution give us confidence for the year ahead, and January has already been a very good start. Hence, we have increased our outlook for 2026, which confirms the traction of our Momentum strategy. We anticipate a supportive, albeit modest macroeconomic environment in Germany with government stimulus supporting the economy. This is reflected in a GDP growth of 0.9% and an inflation remaining close to the 2% target. Furthermore, we expect ECB's deposit rates to remain at 2% throughout the year. Against this backdrop, we have set clear targets for 2026. We are aiming for a net result of more than EUR 3.2 billion. We will continue our strict cost management and plan for a cost-income ratio of 54%, which is 2 percentage points better than originally planned. And we are targeting a return on tangible equity of more than 11.2%. And as I just mentioned, we are committed to a total payout of 100% of the net result after AT1 coupon payments. Finally, I would like to provide a transparent view of our path towards our 2028 RoTE target of 15%. Starting from our 2025 adjusted RoTE of 10%, we have a credible road map to reach our goal. The journey will be driven by several key factors. The diminishing burdens from the FX loans in Poland will provide an uplift, and the positive impact from the restructuring will also contribute in terms of cost measures. The main drivers, however, will be loan growth and the replication portfolio lifting net interest income and the target 7% annual growth in net commission income. We also see potential upside. The steep yield curve, a stronger-than-expected German stimulus and an accelerated impact from our AI initiatives could all provide additional tailwinds to our profitability. They are not yet reflected in our 2028 plan but form tangible drivers with a very good likelihood to materialize. Of course, we are also diligently monitoring potential headwinds such as geopolitical risk, trade tensions and intensifying deposit competition. However, we are confident that we have a very robust and credible plan to navigate these challenges and deliver on our 15% RoTE target. And to use one of my favorite words, you can consider the target as our floor. And with that, I hand over to Carsten for a detailed look at the financials of the fourth quarter. Over to you, Carsten. Carsten Schmitt: Thank you, Bettina, and good morning, everyone. The results of the quarter speak for themselves, strongly contributing to the excellent results for the year. In Q4, the net RoTE reached 10.1%, slightly above the level we reached for the whole year before restructuring expenses. This is driven by a near record operating result that is in turn based on very strong revenues. The CET1 ratio remained unchanged at 14.7%. I will now go through the details, starting with revenues. Revenues were exceptionally strong in the quarter, up 6% compared to last year. Net interest income has exited the trough that was induced by the ECB rate cuts and will continue to grow in the next quarters. Net commission income is the best ever achieved by the bank in the fourth quarter. The net fair value result reached EUR 74 million. The EUR 27 million increase compared to Q4 last year was driven by a higher fair value result, mainly at mBank, offsetting lower interest income. Other income, excluding FX loan provisions, reached EUR 79 million and mainly stems from a positive hedge result. Now to net commission income in more detail. All customer segments grew their business year-on-year, resulting in a record fourth quarter. This is a clear testament to the excellent work done by the teams. Corporate Clients continues to grow in trade finance year-on-year on the back of our strong market position and despite the ongoing weakness in German exports. The biggest increase, however, came from lending where fee income linked to loan origination has continued its upward trajectory as we have maintained good volume growth. Private and Small Business Customers in Germany continue to expand the securities business, both from securities volumes and transactions. The better payments business is driven by higher account fees, while the cards business contributed less this quarter. We have continued to increase the share of customers who have signed up to the new account model to around 65% and have only lost customers with low revenue contribution. As last year, the discretionarily managed portfolios performed very well in the quarter, contributing a significant portion of the revenue increase compared to the last quarter. Let's move on to the interest income. With ECB rates unchanged to Q3, a strong loan business in Corporate Clients and successful deposit management, interest income in Commerzbank grew slightly in Q4. Conversely, in mBank, the effect of materially lower Central Bank rates is visible in net interest income. However, the effect has been partially offset in net fair value. As rates in Poland are well below last year and might be reduced further, this will also have an effect in 2026. Looking at volumes, growth has continued across the board. Corporate Clients has again increased loan volumes in all customer groups. As customers improved their liquidity positions towards the end of the quarter, the average deposit balance was EUR 2.7 billion higher than in Q3. Therefore, both loans and deposits contributed to the increase in revenues. In PSBC Germany, loan volumes have been stable. Deposits are up based on inflows in both sight and call deposits. The deposit beta has come down in the quarter as high rates offered for new retail deposits in the summer started to expire. While we will have more expiries in Q1, comdirect has initiated a new deposit campaign with attractive rates in January. We, therefore, will have offsetting effects in the beta. On the next slide, I will give you more details on the loan growth in Corporate Clients. In 2025, Corporate Clients achieved a EUR 10.9 billion loan growth, of which EUR 2.4 billion was achieved in the fourth quarter. The mix in 2025 has been weighted towards the international business. In Germany, we had only moderate demand from corporates. However, we did see growth from the public sector. Corporate demand has been across sectors with the 2 largest being energy and consumption. New business has been good in Q4. The new loan agreements signed will be drawn over time and start contributing to the net interest income in the next quarters. Looking into 2026, January has started well. We have seen some pickup in demand in Germany and have continued demand outside of Germany. We are, therefore, confident that we will continue our profitable growth trajectory in 2026. This brings me to the next slide with the outlook for NII. We raised our outlook to around EUR 8.5 billion for 2026. The main reason for this is the more favorable forward curve in combination with the increased size of the replication portfolio. Due to these, the replication portfolio will contribute an additional EUR 600 million in 2026. ECB rates are expected to remain at the current level, slightly lower than in 2025. In combination with the effect of moving more deposits into the replication portfolio, we anticipate an impact of around minus EUR 200 million from the deposits invested at floating rates. For the beta, we expect an increase from 40% on average in 2025 to 42% in 2026, leading to EUR 100 million lower interest income. This should be more than compensated for by growth in loans and deposits. Finally, interest rates in Poland have come down significantly and are forecast to go down further. We, therefore, expect interest income in mBank to be lower in 2026. Based on the current business mix and our assumptions for the deposit beta, volume growth and the forward curve, we expect further increases in interest income in 2027 and 2028 with a clear potential to reach around EUR 9.4 billion in 2028. Of course, there could be more intense deposit competition than anticipated or lower rates, particularly in Poland, than assumed, which would lead to slower revenue growth. Conversely, the environment might become more favorable. Now to costs on Slide 21. We have reached our target cost/income ratio of 57% for 2025. This is based on strict cost management as we had to compensate 2 larger unplanned cost items in 2025. One is the doubling of the share price and its impact on share-based compensation. The other is the accelerated impairment of intangible assets. Together, they represent 3% of our cost base. Excluding these items and due to our cost management, costs increased by only 3%. The main cost drivers have been general salary increases, investments and the build-out of our shoring and sourcing centers. The cost increase in mBank is mainly due to business growth but also higher compulsory contributions are a significant factor. We will maintain our strict cost management approach in 2026 and are therefore confident that we will reach our improved target cost/income ratio of 54% for the year. While not part of the regular cost base, we had final restructuring expenses of EUR 9 million related to our Momentum strategy in the quarter. The next slide covers the risk result. The risk result came in at EUR 207 million. This is better than expected and in line with the previous year. The portfolio has proven to be very resilient. We have maintained our approach to overlays. There has been no material change in the outstanding amount, which stood at EUR 147 million at the end of the quarter. The risk result for the financial year reached EUR 722 million, well below our guidance of less than EUR 850 million. Nevertheless, for 2026, we again guide for a risk result of around EUR 850 million. In 2026, the German economy will leave a 3-year phase of stagnation and should show moderate GDP growth. But given the ongoing structural changes and higher default rates, we prudently plan with a slightly higher risk result, which is equivalent to 25 to 30 basis points cost of risk. This concludes the view of the key line items. I've already covered the main drivers of the excellent operating result and will therefore focus on the net result. Full year taxes and minorities are higher in 2025 than in 2024, reflecting material changes in the tax codes in Germany and Poland as well as a better profitability in mBank, increasing the minorities. For 2026, we expect a tax rate at around 30% due to a higher tax rate in Poland and further rising minorities as the profitability of mBank should continue to increase. The next slides cover the results of the operating segments, starting with Corporate Clients. As already mentioned, Corporate Clients had a very good fourth quarter. Revenues benefited from the ongoing healthy loan growth and the good capital markets business. Also, the increase in deposit volumes contributed. This is clearly visible in international corporates with 13% higher revenues. Institutionals again reached a very good level of last year. Mittelstand also increased revenues in the loan business. However, year-to-year, this could not fully compensate the effect of lower rates on deposits. In PSBC Germany, our new client advisory model has become fully operational in Q4. This has come with the reassignment of some customers. Due to these changes, the Q4 revenues of the 2 units can be only compared in combination to the previous quarters. Looking at Private Customers and Small Business Customers in aggregate, revenues have increased substantially in the quarter. The biggest drivers have been the securities business and the deposit business. While asset management overall showed better revenue than in the previous quarters, the asset management subsidiaries have lower Q4 revenues compared to the previous quarters as these benefited from transaction fees, which tend to be lumpy and not evenly distributed over the quarters. For the financial year, revenues of the asset management subsidiaries have been only slightly lower, reflecting a partially more difficult market environment. mBank has maintained its good profitability. The customer business has held up well despite being impacted by the lower interest rates in Poland. As expected, provisions for FX loans have again been lower than in the previous quarter. For 2026, we maintain our outlook that the burdens from FX mortgages, which have been EUR 483 million in 2025, should no longer be material. mBank should further increase its contribution to our result in 2026 and plans to resume paying a dividend. Others and consolidation reported a small operating loss in the quarter. For the full year, the operating result is plus EUR 32 million, in line with our expectation of a neutral result for the full year. For 2026, we again expect a more or less neutral result. Now to the RWA and capital development. The CET1 ratio was stable at 14.7%. Overall, minor RWA and capital changes largely canceled each other out. In total, we have dedicated EUR 2.7 billion for distribution to shareholders. This is equivalent to 154 basis points of the CET1 ratio and represents a yield of 7% based on the market capitalization at the end of the year. In 2026, we intend to again distribute 100% of the net result after AT1 payments. Therefore, as in 2025, we will not include the net result in our CET1 ratio calculation. As already communicated with the Q3 results, we have received the SREP letter from the ECB. Our 2026 capital requirements were lowered by 10 basis points as we must hold only part of the regulatory capital requirement as CET1, the MDA will be reduced by around 6 basis points effective since January. This brings me to the outlook for 2026. As already mentioned, we have improved our outlook for NII from EUR 8.4 billion to EUR 8.5 billion. As in 2025, we target 7% growth in net commission income and expect a risk result of around EUR 850 million. Based on the improved revenue outlook compared to our original momentum strategy, we target a cost/income ratio of 54%. This is well ahead of our original target of 56%. The same applies to the outlook for the net result, which should be above the original EUR 3.2 billion target. As mentioned, we confirm our target payout ratio of 100%. The CET1 ratio at the end of the year should still be above 14%. And the RoTE should increase from 10% in 2025 to more than 11.2% in 2026. For '28, we confirm all targets laid out in our Momentum strategy and, as Bettina has pointed out, with clear upside potential. Thank you very much for your attention. Bettina and I are now looking forward to taking your questions. Operator: [Operator Instructions] Several questions are incoming. The first question is from Jeremy Sigee from BNP Paribas. Jeremy Sigee: Two questions, please. Firstly, thank you for all the guidance on the outlook and that kind of thing. Could you talk about your expectations for costs in absolute terms? You've obviously given us a cost-to-income ratio, but could you talk about the absolute amount of costs that you expect in 2026? And then second question, you mentioned loan demand limited so far from German domestic corporates. But I think you said you'd seen a pickup in January, unless you're talking about something else, I think you said you've seen a pickup in loan demand in January. And I just wondered if you could give us an update on how corporates are behaving and how they see the German stimulus and reforms coming through? How much action you're starting to see on that front? Bettina Orlopp: Yes. Thank you, Jeremy. So on the second question, with respect to loan demand, I mean, we have seen a very good start actually into January. But this is again very much broad-based. So it includes international locations but also Germany. If it comes to Mittelstand, they are still hesitant. They are still waiting for more reforms to come. There are always exceptions. But overall, and I mean, you see it also in the GDP growth, which is now at 0.9%, but we also expected it last year a little bit higher that this hesitance and you see it in the sentiment index, that we still wait for the turnaround [indiscernible] because we also support our clients going abroad. And on costs, I hand over to Carsten. Carsten Schmitt: Yes. Thanks for the question, Jeremy. So on the cost side, as you know, our main sort of driving principle is the cost/income ratio, which we are aiming to improve to 54% this year. With regard to the absolute cost target for the year, which will also keep firmly inside clearly, let's start from -- coming from '25. We are looking at EUR 6.9 billion in '25. And as lined out, we had around EUR 200 million of extraordinary effects, which we compensated with our strict cost discipline last year. So deduct that. If you add 3% to 4% of the updrift in cost that we have by general salary increases and potentially another EUR 100 million for additional investments we intend to make this year into our strategy, then you arrive at something that should be nearing the EUR 7.1 billion from below. Operator: The next question comes from Benjamin Goy of Deutsche Bank. Benjamin Goy: Two questions, actually follow-ups to what you said. The first one is, Carsten, you mentioned net interest income will continue to grow in the next quarters, specifically wondering about Q1 where you obviously face some headwinds from day count. So also Q-on-Q up in Q1, then steady growth after that? And the second question is on the very strong start to January. I mean you commented on loans but also wondering about any comments you could do on deposit campaigns, how the retention went on -- at comdirect and also on the fee income side, what you're seeing so far? Bettina Orlopp: Yes. I mean, January has been strong across all dimensions, actually. I mean, risk result, you would anyhow not expect anything in January. But on the cost side, high cost discipline on the revenue side, a very, very good start on NII, and Carsten will dig deeper into that in a minute. But also on the net commission income side, it has been an excellent start. Carsten Schmitt: Yes. And Benjamin, looking into the NII, you had a few questions. So first of all, I think what we've seen in Q3 last year was what we call the trough of the NII development. So we've seen an uptick already in Q4, and we expect this to also carry into the coming quarters. As mentioned earlier, we are looking at a slightly lower beta at the end of the year given that we had campaigns running out, and we are now starting a new campaign. So let's see actually how that potentially impacts the beta movement. But generally, you should expect the net interest income to steadily increase throughout the year and towards the new guidance of EUR 8.5 billion. With regard to the campaigns, we started, as we usually do beginning of the year with a campaign in comdirect. And you also asked around the retention rates of the previous offers that we had out. I mean those fluctuate, as you know. The purpose that we have with these offers is to bring the money and the customers in in order to ideally then also transform them into other quality products like asset management, investment, securities volume. So it's always a bit tough to say how much is actually flowing out, but we see this as a very good means to actually increase volume also on that side and then also support our commission income. Operator: The next question comes from Kian Abouhossein of JPMorgan. Kian Abouhossein: The first question is just on the beta. What gives you the confidence? You mentioned 40% for '25. I think I saw 41% in the fourth quarter average and 42% for the year '26. Just if you can discuss where that confidence is coming from. Clearly, you have delivered in the past. Just trying to understand the deltas, both on the corporate side, where I think last quarter, you also discussed a little bit more pressure, but not this time around, from what I listened to. And in that context, can you just talk a little bit around your funding profile. I can see there's some funding coming up not just this year, but over the next 2 years as well. And I'm just trying to understand how you -- how should we think about duration of funding and cost of funding on replacement, if I may? Carsten Schmitt: Yes, Kian, thanks for the questions. Let's start with the beta. You're, of course, as always, absolutely right on the beta figures, also for last year. We had an average of 40% last year. What makes us confident that we are planning well with the 42% is that, A, we will see a slight updrift, as I just mentioned, given that we are running new campaigns. Also, we are aware that usually beginning of the year, we see the market being quite competitive. We had a similar discussion last year. But if we are looking a bit into sort of what we base our confidence on, number one, we have proven actually for ourselves last year that managing the deposits and also the pricing of the deposits, is including our AI-based approach, i.e., we are also making improvements in how we price, what we have in the books and how to retain these volumes. So that actually puts us into a confidence space that we can use this to also counter a bit of the challenging environment we might be seeing. And you mentioned the corporate side specifically, as you might have heard also in my speech, we had quite significant volumes coming in also on the corporate side. And this actually gives us, at this point in time, also support. So at the moment, this is what puts us very confident for the beta development. Then when it comes to sort of the funding profile over the next years, I mean, we are looking at around EUR 12 billion that we are going to fund this year. As you know, we have a funding plan that is usually rolled out over the next years, and we are trying to keep our well-established and good mix. We are currently looking into slightly longer tenors that we are issuing, also making sort of benefit of the current market environment. And clearly, credit spreads are beneficial for us. So funding profile that we have improved since last quarter with a bit of prefunding last year already and also going into the next should actually help us to further positively manage our funding costs. Operator: The next question is from Tarik El Mejjad from Bank of America. Tarik El Mejjad: Two questions from my side, please. First, on the net interest income guidance. You've done a beat and raise in every -- literally every quarter since your CMD. And I think there's more to go, but you haven't really updated on '28. So when should we expect guidance change or update in '28? And should we see the same dynamics so far being applying in the long term as well there with the volume component? And then my main question actually is on the cost-to-income and on your investments. I've noticed actually in Slide 9 on the payout ratio for '26, you say that this is before restructuring expenses -- potential expenses for '26. Is it fair to think that the whole your increased focus on AI, and you've -- Bettina, you've highlighted as really a critical driver for better efficiency in the longer run, should we expect a lower than 50% cost-to-income in '28 coming from investments from this year that will be actually removed from the payout ratio? So in other words, you basically be able to pay more than 100% payout with shareholders not paying for the cost of this restructuring and also you lower by then your CET1 ratio? Is my reading correct? Bettina Orlopp: Thank you, Tarik. So on your first question, it's pretty simple. EUR 9.4 billion is the latest expectation for 2028, assuming that the yield curve stays intact as we see them currently. When it comes to the cost-to-income ratio, and the guidance for 2028, we said that it's really -- it's -- for the cost-to-income ratio, you could say it's a cap because we definitely want to achieve the 50% and might go even below given that we will use specifically the year 2026 and the upcoming strategic dialogue and multiyear planning process to evaluate the effects we currently see. And as said, and you know that from us, whenever we are done with the planning, we also come out with updated numbers. So you can expect that this year as well. When it comes to the payout ratio, I mean, investments into AI are clear investments. They are shown in the cost line and nowhere else. So there is no real possibility to exclude that one from the payout ratio. We are increasing our investments as we speak. So already in the 54% guidance for this year, we have an increase in investments from the original EUR 500 million planned for change into -- up to EUR 600 million. So we absorb it basically in our cost targets. So the payout reference is really restricted to real one-offs and something like real restructuring charges. But at least with the latter one, we are definitely done and -- except for the Russian topic, which we always raise, we don't see also any potential one-offs luckily. Tarik El Mejjad: Okay. And the strategic update is usually -- always you do it in September, right? Bettina Orlopp: Yes. I mean, I think normally, we come out with the Q3 numbers, but something around that, yes, you can expect. Operator: The next question comes from Borja Ramirez from Citi. Borja Ramirez Segura: I have 2, please. Firstly, on the hedge. I would like to ask the increase in the hedge in the 4Q. What were the duration of that and also the average yield? And also your -- the hedge benefit that you disclosed, I would like to ask, is that based on the current forward swap rate? And then my last question would be, I think based on the ECB data, the yields on your mortgages are around 100 basis points above the 10-year swap rates. So I think there's maybe some benefit in your NII from this as well. So I would like to ask if there's also some upside compared to the target on this point as well, please? Carsten Schmitt: Yes. Borja, thank you for your questions. Let me start with the replication portfolio, so the hedge portfolio that you referred to. In Q4, we did increase the size of the portfolio. As always, we are looking at the overall amount of deposits that we're having and then the amount that we can model. The amount that is available for modeling is slightly above EUR 200 billion, and we decided in Q4 to actually enhance the size of the portfolio by EUR 9 billion. Together with that, because we've invested that indeed at current rates, you see an uptick in the average yield of the portfolio of around 9 to 10 basis points on the full portfolio, and we're now at around 1.14%. So that is up from the levels we discussed in the previous quarters last year. So with that, actually, we will have positioned ourselves nicely in the current market environment and also slightly to the longer term in the investments. Then second question you had on the mortgages. Let's just assume the rates that you mentioned. I think the ingoing factor for us is the volume of the mortgage book, and you will have seen that this is stable if you look at the volume bars in our presentation. In Q3, we saw a very healthy front book of EUR 2.7 billion. In Q4, we saw another EUR 2.1 billion. And as you know, these will roll in with time. So it will take about a few quarters until we see the full volume. That clearly stands against some of the early repayments. But overall, that book and the front book comes in at good margins and should be supportive for our NII. Borja Ramirez Segura: And just to confirm, the replication portfolio benefit in NII guidance, that's based on the current forward curve? Carsten Schmitt: Yes, that's correct, Borja. Operator: The next question comes from Riccardo Rovere from Mediobanca. Riccardo Rovere: 2 or 3, if I may. The first one is, Bettina, throughout the call, you and Carsten have repeatedly stated that there is some degree of prudence or upside potential here and there within your 2026 outlook. Could you please list all the areas where you think you might have been prudent in setting the 2026 guidance? The second question I have is 2 -- a few days ago, UniCredit in its UniCredit Unlimited update set the cost trajectory down in absolute terms. I was wondering whether this puts pressure on you to achieve more efficiency throughout over the next few years? And then I have -- sorry to get back to the steepening of the yield curve. It's not clear to me whether a steeper yield curve is included in the EUR 8.5 billion NII guidance, if that's the case or not? And the last question I have is on the capital. Again, you have a target of above 14% but technically, the target is 13.5% at some point in the future. I was wondering what prevents you to bring it down to 13.5%. And on this topic, I was wondering if you could update us where you are on the SRTs on the RWA optimization because especially on the corporate side, I remember you had a fairly large amount of risk-weighted assets reduction related to securitizations. Bettina Orlopp: Thank you very much, Riccardo. Lots of questions. I hope we get them all. So with respect to upside potential for 2026, where are we prudent? And you know us, we are normally always conservative to make sure that we deliver. I mean, to start with, clearly, we have the risk result. Again, we are guiding it for EUR 850 million. And you have seen in the past years that we always come in below. So there is upside potential, hopefully there -- if things are developing as planned. Number two, it is -- we always have the problem with the fair value, and you know that -- to predict that correctly, so we are always a little bit cautious on that one. Why we are very convinced about the EUR 8.5 billion NII? That is, for us, always a starting point to say it like that. And also on the net commission income, the 7% is an aspirational target, but we are strongly convinced that we can deliver that. And when it comes to the cost side, you have seen that we have maintained a very high cost discipline this year. So we could really also balance out some of the extraordinary burden, which we have seen, and we intend to do that. Also, I have to say that, in 2026, we still have also some doubling effect because we are building up capacities in our shoring locations on the one side. And on the other side, we still have also some people still running the business here to really, really ensure smooth transition. When it comes to competitors, I mean, we really focus on ourselves. Every competitor is different. So for us, it is important that we drive with the right path for our organization. It is very clear that we are committed to efficiency to transformation. It's part of our strategy, Momentum, growth and transformation. And as I said, I mean, we are now in the second year of the strategy implementation. We now start the normal process as we always do. We didn't do it last year because we just had the presentation of the strategy. But this year, we start with our strategic dialogue process, which then ends an updated multiyear plan figures. And clearly, we take into account all the learnings and experience we gathered specifically from our AI use cases which seems to be very promising. So there is -- as also said in the speech, there's upside on that. When it comes to capital, I mean, it's a path, as you know, we have already lowered our CET1 ratio. The target CET1 ratio stays at 13.5%, but we do it, as always, in a path, which is fully aligned also with the regulatory authorities. And the final target, however, stays the 13.5%. And when it comes to SRTs, we have done transactions in the fourth quarter, and we currently have an RWA relief because of SRTs of approximately EUR 9 billion. And on the yield curve, I hand over to Carsten. Carsten Schmitt: Yes. Riccardo, on the yield curve and the EUR 8.5 billion target for the NII, that's on the current forward curve. So if there's a movement, of course, there is potential. But you also have to bear in mind the portfolio is set up in a way that we stabilize the net interest income, which also means that we do reinvest slightly above EUR 3 billion every month in the rolling tranches. So you will have an averaging up effect in any case. And if there's a change to the forward curves with that amount, we will then also see additional pickup also pending potential decision to invest more in it. So that would be the upside potential in this. Riccardo Rovere: Sorry, Carsten, to get back to this. So the first bullet point on Slide 11, steep yield curve and corresponding benefit for replicated portfolios, this would be, like say, in a steeper yield curve than the one that it is today because it is already a bit -- there is already a bit of steepening. Carsten Schmitt: Yes, absolutely. And then you're absolutely -- yes. Sorry. But you're right. Riccardo Rovere: No, no. Okay, okay. And the other -- sorry, to get back to RWA 1 second. Am I right in saying that what is left in terms of SRTs in '26 should not be enough to compensate for the normal lending growth that you are expecting? Am I right in saying so? Carsten Schmitt: Yes. As you know, we're using SRTs to manage RWA. If you want also a bit of the risk profile, what we're looking at in 2026, is around EUR 8 billion in volume and an RWA effect of around EUR 4 billion. And that you can see actually, if you look at the volume growth we have set out for ourselves on the corporate side, is helping us to free up resources but not countering the growth. Operator: Last question for today from Stefan Stalmann, Autonomous. Stefan-Michael Stalmann: I wanted to ask you about the trends in sight deposits, please. PSBC Germany, that number has been basically flat for almost 2 years now. Is that something where your existing clients are shifting the mix away from sight deposits? Or are you losing actually market share in sight deposits in the German market? And also in Corporate Clients, the number tends to be quite flat [ this year ] by the occasional seasonal side at year-end. And I was wondering if you're actually raising any corporate sight deposits outside of Germany, given that you're doing quite a bit of lending business with [ out of Germany ]. And the second question regarding Aquila, the impairments that you have done in '25 are roughly half of the total intangible assets that came with Aquila. Do you think there could be more to come? And are you seeing any problems with the funds and [indiscernible] and whether or not this could impact the behavior of your clients and the willingness of your clients to invest in new funds? Carsten Schmitt: Yes. Thanks, Stefan, for the question. So first of all, on the deposits and the deposit side, you're right. If you look at actually the last 8 quarters, we have a stable sight deposit volume across the personal customer space, which, given the markets actually, is what we've always been talking about. We are defending our market share that we're having there and making sure that we have this also at reasonable rates, from our point of view. And overall, you see a slight growth in the portfolio. So we see no structural shifts from sight to term or call deposits. But what we are doing, as I mentioned earlier, is we are also attracting these when we go out with our offers in order to allow us to transform them into other and usually then commission income-bearing products. On the corporate side, also stable. This is always depending a bit on also the economic cycle and how corporates use their liquid assets, if we can call it that, for the time being. And you're right, we see slight fluctuations, especially in Q4, we saw a good inflow on that end. You also asked on the international portion of this, we have smaller portions coming in from corporates internationally when it comes to deposits but not to a structural degree. So it's in line with the business that we're doing with these customers abroad. Bettina Orlopp: And when it comes to Aquila, I mean, first of all, our Asset Management strategy is clearly a combination of 2 things, in-house and partners. And you see also on the Slide 8, the distribution of volumes and significance. And what we have observed in the past quarters is there is, yes, some skepticism in the moment on illiquid assets, and it's a cycle, but cycles normally also have the benefit that they change. So we stay basically on path here. And when it comes to the depreciation, we did the full depreciation of the intangibles. So nothing more to expect because the rest is embedded in our goodwill of the Private Client segment, and we do not expect any write-downs there. And I think that -- was this -- I think we have had the last question. So I wish you all a very successful day, and I'm looking forward to seeing you soon again. Thank you.
Operator: Ladies and gentlemen, welcome to the Schindler Full Year Results 2025 Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Lars Brorson, Head of Investor Relations. Please go ahead. Lars Wauvert Brorson: Thank you, Valentina. Good morning, ladies and gentlemen, and welcome to our full year 2025 results conference call. My name is Lars Brorson. I'm Head of Investor Relations at Schindler. I'm here together with Paolo Compagna, our CEO; and Carla De Geyseleer, our CFO. As usual, Paolo will discuss the highlights of our 2025 results and our 2026 market outlook, and Carla will take us through the financials. After the presentation, we are happy to take your questions. We plan to close the call at 10:30 local time. And with that, I hand over to Paolo. Paolo, please go ahead. Paolo Compagna: Good morning, everyone. I'm pleased to be back to report on our '25 results. But today, before I dive into the results, let me take this opportunity to take a step back and reflect on the journey over the last few years. You have seen we have titled our first slide, operational recovery completed as we see 2025 as marking the final year of our operational recovery. For those of you who have followed us for a while, you will recall that in '22, we faced severe supply chain challenges, steep declines in many of our major new installation markets and a significant drop in earnings and cash flow, and the company had to perform an emergency landing. Four years on, after some very difficult decisions taken by our majority shareholders and the Board at the end of '21, and thanks to the hard work and dedication of nearly 70,000 employees, I'm pleased to say that we have emerged from this period as a stronger and more resilient company. Well, one could say Schindler is back. We have made clear structural improvements to our supply chain. We have enhanced our product competitiveness and innovation and strengthened our global footprint and maintenance portfolio, including exiting smaller markets where returns were not aligned with our objectives. And from a financial perspective, the company has delivered 12 consecutive quarters of year-on-year EBIT margin improvement with high cash conversion. That is something we are really proud of. Now looking ahead to '26 and beyond, accelerating growth becomes our key priority, but without compromising on our commitment to the continuous improvement in operating margins. This I'd like to underline. An important part of the strategy is the commercialization of innovative standardized New Installation and Modernization products and our industry-leading digital offering for our Service customers. More on that shortly. Now let me touch on the highlights of 2025. Firstly, we delivered on our promises by achieving our financial targets. Growth was a little softer than we would have liked, but it was another year of a strong operating performance with a reported EBIT margin coming in at 12.6% versus our initial expectation of around 12%. I'm pleased to see that the efficiency initiatives launched over the last few years yielded good results, something we will build on in '26. Second, I'm comfortable saying that we are back in Modernization. I was very open with you 2 years ago that we were behind and having to catch up. Today, I believe we are increasingly leading in terms of competitiveness and momentum of our product portfolio, and I'm very optimistic about '26. In '25, Modernization orders were up 19%. And importantly, revenue was up 12% as backlog execution accelerated in the final quarter of the year. I'm confident that we can continue to expand our capacity and execute successfully also in '26. Third, a word on product momentum. We see signs that our efforts on product portfolio in the last years are starting to yield commercial results. And this will support us executing our strategy to accelerate profitable growth. The rollout of our standardized modular platform has been completed according to plan, positioning us well for NI recovery in our key markets. The rollout of our U.S. mid-rise product has clearly exceeded our plans in '25 and sets us up, I believe, for a continued market share gain in '26, too. And in Modernization, we continue to industrialize our operation and standardize our product portfolio. We are seeing very good traction with our standardized packages, and it is not only driving growth, but also enhancing our competitiveness and supporting our journey towards higher profitability in Modernization going forward. Fourth, despite the pressure in '25 from lower NI conversions and our decision to be more selective in recaptures, we continue to make good progress on our maintenance portfolio, which was up mid-single digit in value terms in '25. I believe we have an industry-leading retention rates on our portfolio, but I still see potential for this to improve. That will come in part as we leverage connectivity to improve the offering for our customers and to drive incremental digital revenue streams. Fifth, we delivered on operating cash flow of CHF 1.5 billion for the year, a second year of very strong cash conversion. Carla will elaborate on this. But this strong cash flow allows us to invest back into the business whilst also accommodating our shareholders with an increased payout. And I'm pleased to announce that the Board has proposed a dividend of CHF 6 for '25 as well as an extraordinary dividend of CHF 0.80. Let me touch on our China operations. I told you at the beginning of '25 that we had to take some tough decisions in order to realign our organization and set us for the future growth opportunities, especially in Modernization and Service. Now we are starting to see encouraging signs of operational improvement as we enter '26. A big thank you to our Chinese colleagues for all the effort in '25. Finally, a word on sustainability. We continue to make a good progress on our agenda. In 2025, Schindler's sustainability management system was recognized with an EcoVadis Platinum medal, ranking Schindler in the top 1% of the more than 150,000 companies worldwide. In addition, Schindler was once again included in the CDP A list of companies operating according to the highest environmental standards. So let us now look back at the global elevator and escalator market development in '25. Turning to Slide 4. Focusing on our updates on what we said in October after our Q3 results versus the year ended. First, we saw a strong Q4 in the U.S. new installation market, while demand in Brazil also developed slightly better than anticipated. Therefore, our assessment for Americas in 2025 has been revised to low single-digit growth from earlier flat. Second, we witnessed a strong finish to the year in India and Southeast Asia, lifting the Asia Pacific market growth comfortably above 5%. And finally, the Service and Modernization markets saw a good development in line with our expectations. So how did we perform in this market environment last year? Turning to Slide 5. First, in Service, our maintenance portfolio units continued to expand with the strongest growth in Asia Pacific, excluding China. In Americas, we saw a modest decrease as indicated already in October. This was a result of our increased selectivity when it comes to recaptures that we decided to pursue as well as from softer conversions. Given the normally longer lead time, especially in North America, the decline in our NI orders from 2023 was still having some impact last year. In Modernization, we have been able to maintain the strong momentum and saw double-digit order growth across all regions, except for Asia Pacific, excluding China, due to a lower level of large project bookings in both Q4 and full year. China was the standout with growth of close to 50% as we benefited from the massive equipment renewal program with well over 100,000 elevators replaced throughout the country. In New Installations, our global order volumes declined by over 10% due to China, where, as mentioned before, we have been repositioning our operations to be ready for capturing future growth opportunities. In the rest of the world, our NI orders grew mid-single digits, driven by solid growth across the Americas as well as in Asia, excluding China and notably in India. Now moving to our market outlook for '26 on Slide 6. We expect the Service markets to continue to expand across all regions with the lowest growth rate in the Americas and the highest in Asia Pacific, driven by India. The Modernization markets will continue to see robust mid- to high single-digit growth across the world. In China, the so-called bond program is expected to continue on an even larger scale, and we currently estimate another double-digit growth for the Chinese market also in 2026. In new Installations, we anticipate the global market to decline by more than 5% due to China, where the market is expected to suffer another contraction of more than 10%. While key real estate statistics saw double-digit declines with home starts by floor area falling around 20%, and this is now following at 3 years of 20% plus declines and also to be considered the higher tier cities, which earlier in the year performed relatively better than smaller cities, deteriorated sharply, especially in the final quarter of '25. Across the EMEA region, we expect good development in the Middle East to be coupled with important German market returning more firmly to growth as already evident from the double-digit pickup in multifamily building permits based on latest data available. Significant state support is aimed at easing the chronic housing shortage and stimulating investment, including increased funding for social housing, fiscal incentives such as the 5% aggressive depreciation for new rental residential buildings as well as the so-called Bau-Turbo initiative to fast-track housing projects. And we anticipate Asia Pacific, excluding China, to continue to expand by high single digit with broad-based growth across the region, led by India and Southeast Asia. With that, let me turn over to Carla to walk us through our financial results in more details. Carla Geyseleer: Thank you very much, Paolo. Good morning, everybody. So I propose we start with Slide 8. So that is our usual summary slide of the quarter compared to the last 4. So overall, Paolo mentioned it already, very pleased with the progress that we have made on the profitability over the recent years as well as our continued high cash conversion. I also acknowledge, as Paolo mentioned, that there is room for improvement in terms of growth, something I will touch on shortly when we discuss the '26 guidance. Firstly, reflecting on '25, Q4 marked the 12th consecutive quarter of year-on-year improvement for operating margins. So our reported EBIT margin was up 180 basis points versus quarter 4 in '24 and our adjusted margins up 100 basis points. For the full year, our reported EBIT margin landed at 12.6% versus our initial expectation for the year of 12%. So a very satisfactory performance, and I'm pleased to see that the efficiency initiatives launched over the last few years yielded good results in '25. Secondly, we had a strong end of the year for operating cash flow. Quarter 4 came in at CHF 523 million and the full year at CHF 1.5 billion, just shy of what we have seen the year before. Finally, our net profit continues to increase versus last year in both absolute and margin terms despite the decline in financial income as well as the FX headwinds. Now moving to our order intake development on Slide 9. You heard Paolo saying that our global New Installation order volumes declined by over 10% in '25. In quarter 4, our NI order volumes declined by over 15%. So clearly, a soft quarter for our New Installation business, driven primarily by China, down mid-30s in the quarter as we remain -- and we remain committed to our strategy of pricing discipline and as we continue to reposition our operations here towards future growth opportunities. So even though China made up less than 10% of our group order intake in '25, it continues to be a burden to our growth. We also had slightly softer development in the quarter in some of our Southern European and Middle Eastern markets, partly due to fewer larger projects here. So overall, a quarter with limited organic growth as a decline in New Installation almost fully offset the growth in Service and Modernization. Now if you look at the full year '25, order growth in local currencies came in at 3.1%. Excluding China, however, order intake grew 5.4%. So our growth in '25 was very much driven by Modernization, which grew 19% for the full year and 15% in quarter 4. Growth here was broad-based in '25 with strong double-digit growth across our 3 regions: EMEA, Americas and APAC, with China clearly a standout, up close to 50% in '25, driven by the government's bond program. Service orders grew mid-single digits organically in which combined with the strong MOD growth offset the decline in New Installations. Now finally, a word on currency. So the FX translation headwinds amounted to more than CHF 450 million on our order intake in '25 due to the strength of the Swiss franc versus major currencies, notably the dollar. And it's worth noting that these FX headwinds are not abating. Rather based on current FX spot rates, they will intensify in the short term. Now in terms of order backlog, it was up 1.2% in local currency at the end of '25, driven by Modernization, which was up double digit. Our backlog margin was stable sequentially in quarter 4, but still clearly up year-on-year. Especially the backlog margin in our U.S. business was stable sequentially in Q4, and we are starting to make progress on repricing our backlog here for the tariffs implemented in '25. We expect these repricing measures to continue over the coming quarter. Now moving on to our revenue development on Slide 10. The organic growth, both in the quarter and the full year, was driven by Modernization, up 22% in quarter 4, 12% for the full year '25. You will recall that we spoke of some operational challenges during '25 in terms of scaling up our delivery capabilities in Modernization, so we were pleased with how the year ended. And going forward, we continue to make good progress on scaling our capabilities and driving more efficient backlog execution. Now outside of Modernization, revenue in New Installation was down high single digit in '25, driven by China, which was down mid-20s, whilst other regions were down low single digit for our New Installation business. Service was up mid-single digit in '25. Now moving to Slide 11, operating profit performance. Let me say that I'm proud of what the organization achieved in '25 in terms of efficiencies. We have spoken over the last few years of shifting the corporate culture towards a mindset of continuous improvement, and we are really starting to see that more clearly, which is driving our financial performance. We delivered 12.6% reported EBIT margin in '25 and 13% in the final quarter of the year. And you can see the operational improvement of CHF 35 million in quarter 4 and CHF 163 million for the full year. That reflects primarily good progress in SG&A savings, but also supply chain and procurement savings, which continued to deliver in '25. Price and mix were contributors, but less so than efficiencies. One important operational achievement in '25, which I want to flag was the implementation of the ERP system in our U.S. operations. The U.S. is now fully integrated with the rest of our global organization. And as we complete this integration, leverage our global ERP platform, this should yield further operational efficiencies. Now restructuring costs in '25 came in at CHF 54 million, slightly lower than the up to CHF 70 million we had guided to initially, partly as some of our initiatives shifted into '24. So that meant that restructuring costs were below the level of '24 and hence, a small positive in the EBIT bridge. Now moving to the net profit. You can see that net profit grew to CHF 277 million in quarter 4, reflecting a 9.9% margin, close to CHF 1.1 billion for the year with a margin of 9.8% despite lower interest income and onetime financial gains in last year's period. So I'm very pleased with that result. Now moving to the operating cash flow on Slide 13, which reached CHF 523 million for the quarter and CHF 1.5 billion for the year, just shy of last year's exceptionally strong performance. Again, the uptake in our operating earnings drove the strong performance in '25, whilst net working capital improved, but less so than in '24 and hence, a headwind in our year-on-year bridge. This moderation in net working capital came partly as a result of less down payments for our New Installation business in '25. Now moving to Slide 14. So happy to share that the strong cash generation in '25 also allows for further distribution to our shareholders. So I can report, Paolo mentioned it already, that the Board has proposed an ordinary dividend of CHF 6 per share for '25 as well as an extraordinary dividend of CHF 0.80, reflecting a payout ratio of 72%. This higher dividend should also be seen in light of our solid balance sheet with our net liquidity position further boosted in '25 from the reduction in our Hyundai stake and the lower interest rate environment in Switzerland as well as our continued focus on delivering a more competitive yield for our shareholders. Now let me also mention a word on the share buyback program, which we launched in November '24. And this program has been running according to plan with the total number of shares, both registered and participation certificates bought back during '25 amounting to over just 700,000 shares for an amount of CHF 200 million. Now before I move on to discuss our '26 guidance, allow me a moment to zoom out a bit to give you a bit of a broader perspective on our financial performance. So if you look at the bottom 3 charts on this slide, I think you'll appreciate the quality of our business model. Cash conversion and return on capital compared to most other industrial sectors, both are high and stable. I'm very pleased to see the progress that we made since '22. That means that our balance sheet continues to strengthen, ending the year with a net liquidity of CHF 3.9 billion. Now this cash compounding wouldn't be possible without a stable and a growing top line. And as you can see from the top 3 charts, our long-term growth level is really healthy, led by a strong Service growth and with a balanced regional exposure. I think that is very important to remember at a time when we and the broader industry go through a bit of a softer patch in terms of growth. Now being a Swiss company has also meant facing significant currency headwinds over the past decade with FX shaving off over CHF 3 billion cumulatively of our top line over the last 10 years. Now moving towards the end and giving a bit of perspective on the '26 guidance. So for this year, we expect to achieve low to mid-single-digit revenue growth in local currency and an EBIT reported margin of 13%. As Paolo said, we are looking to accelerate the profitable growth and believe we have the right strategy to do so. In terms of revenue growth in '26, we expect to see continued strong growth in MOD, up double digits in local currency in '26, whilst New Installation should start to stabilize, consistent with our market outlook of recovering new installation markets ex China. But of course, with some lead time before that impacts our revenue. Going forward, in '26 and beyond, we also see an opportunity to complement our organic growth with inorganic initiatives across key strategic markets. Looking back over the last 3 years, we acknowledge the contribution from M&A has been lower than usual as our efforts have been more internally focused. But going forward, with the benefit of a sound financial position, I expect us to increase the pace of selective bolt-on acquisitions. Now as for the margin guidance of 13% in '26, it's very much driven by continued productivity improvements, increasingly from field efficiency. We expect an acceleration here to offset a moderation in procurement and SG&A savings such that we can achieve the same overall level of incremental savings in '26 as we did in '25. Now let me touch on the midterm margin guidance, which we will update later in the year. But let's be clear, we continue to expect a continued improvement of current levels over the midterm. One important difference to '25, however, will be the impact from mix. As you know, we have benefited significantly over the last few years from positive mix as our Service business grew strongly, whilst New Installations declined. But as our New Installation business expectedly starts to stabilize and Modernization grows strongly, the margin tailwind from mix will neutralize in '26 or perhaps even turn modestly negative. And finally, in terms of restructuring costs, we expect up to CHF 60 million in '26 on a par with the level in '25 and still burdening our reported EBIT margin. Now a word on tariffs, which I believe we have managed well in '25. As I mentioned, with the U.S. tariff costs now reflected in our backlog, we will continue to work hard at mitigating the impact, including making price adjustments to offset the impact. In terms of the annual gross P&L impact from tariffs, we estimate that to be around CHF 18 million based on current tariff levels, so lower than the initial estimate of CHF 33 million, which we provided to you in April last year. Again, we expect to offset most, if not all, of that with pricing and cost mitigating actions. So to conclude, let me end by thanking together with my colleagues in the Executive Committee, our close to 70,000 employees across the globe for their tremendous efforts in '25. And as we start out in '26, I believe we are in a great position to execute on our strategy, which we look forward to sharing with you at our upcoming Capital Markets Day. And with that, I hand back to Lars. Lars Wauvert Brorson: Thank you, Carla. Yes, as Carla mentioned, let me remind you of our Capital Markets Day scheduled for the 3rd of June this year at our headquarter here in Ebikon in Switzerland. We look forward to seeing as many of you as possible here on the day. Now with that, Paolo and Carla are happy to take your questions. In the interest of time, please, can I ask you to limit yourself to 2 questions only. And with that, operator, please, let's take the first question. Operator: [Operator Instructions] The first question comes from Daniela Costa from Goldman Sachs. Daniela Costa: I will take two, but I'll take them one at a time. The first one in terms of your order organic growth rate, it seems significantly lower, I think, than some of the peers that we have seen reporting recently. You mentioned China, but some of them also have pretty big China businesses. You mentioned large projects. Can you give us a little bit more of a color? Was it unintended, you didn't take some of those large projects. Did you lose some market share for some other reasons? Just breaking down the competitive landscape context to understand this lower number than peers? Paolo Compagna: Well, there's a very simple answer to a complex question. There are 2 main reasons for the development of our OIT, which you see. Number one, yes, China was down for us. And this we have communicated. One reason is also the adjustment in structure we have initiated last year. We talked about it was mid of the year, and this kept us quietly busy till end of the year. So yes, in China, for us, it was kind of expected that we would take less of the market than possibly, I don't know, our competitors. There's a second and rightly so, you said, a second momentum, which had an impact on our OIT, and it is the deliberate, more selective approach when it comes to large projects. And here, I'd like to be very clear. We have to separate, let's say, the mass business in NI, residential, commercial and selected large, large projects, which -- we shared this in Q3 and also over Q4, we were very selective in also key markets not to take things which would feed what we call the boa constrictor, you remember, 3 years ago once again. And both had the impact, which you see, especially in NI. Daniela Costa: Got it. And then the second question is just on margins. So you've hit the 13%, and you've exceeded what you've expected earlier in 2025. And I think in the press release, you call it that the operational recovery phase is completed. I believe some time back, you talked about getting your margins over the long run to best-in-class peers, which are still a bit higher. So should we interpret this that the route to get there is just more dependent on just operating leverage? Or are there still any idiosyncratic actions? Just how do we read this operational phase is completed and the ambition to get to best-in-class peer margins over the long run, how do we get there? Paolo Compagna: Yes. So my statement is clear. The operational recovery, which we started mid of '22, this we see as completed as we gave ourselves a target, which was also shared with the market, and we aim to be there in the course of this year finally. So hence, bear with us until we meet at our Investors Day in summertime, where we will then share with you also what are our next steps and plans. But as Carla mentioned before, very clearly, and I said it before, our intention, our plan, our commitment is to continue a journey of margin expansions while we accelerate growth is what we internally call now '26, the profitable growth agenda, which then we will share more details in June when we meet. But thank you for your question. It's very important to be mention here and today that the journey is not an end. We have just moved now from one phase to the next. But yes, the recovery we started. Remember, factories, key markets, we shared this all with you. This we see as completed. Operator: Next question comes from Vivek Midha from Citi. Vivek Midha: I have one question and one follow-up, please. On the order intake, still a similar development to the third quarter on the Americas Service business, the slight decline in the unit growth. Just thinking ahead to 2026, is this something we should expect to persist through the first half of 2026, given your continued selectivity, maybe some lingering effects from the weaker 2023 NI order intake. When does this start to fade out in your view, in your orders? Paolo Compagna: Vivek, we shared in Q3 the impact of our strategy, especially on portfolio selectivity in recaptures, right? These are recoveries from the market, which we don't intend to change. However, the soft contribution from NI conversions from '23, this we expect to be over in the course of this year. So hence, to your question, we would not expect the same trend continuing in '26. Vivek Midha: Understood. Just following up on that. When you say for 2026, so should we already expect that to be visible by the first quarter? Paolo Compagna: That's a valid assumption. Now Q1 is always -- I think Q2, Q3 is where we should see a change in the trend in the U.S. market in portfolio for us. Vivek Midha: That's very clear. My other follow-up, if I may, is on the 2026 margin guide. How much are you assuming as raw material or commodities headwind within your guidance? Carla Geyseleer: Thank you for that question, Vivek. Of course, we will see some headwinds when it comes to the raw materials, especially in the copper and aluminum, also to a certain degree, steel in the U.S., but that has all been included in our guidance, yes. So we consider that. Vivek Midha: Okay. Understood. Do you have a number? Could you maybe quantify that for us, please? Carla Geyseleer: Yes. I mean this could go up to CHF 15 million, even CHF 20 million depending on the scenario that will pack out, yes. Operator: The next question comes from Andre Kukhnin from UBS. Andre Kukhnin: I'll start with one on the growth guidance, the low to mid-single digit. You've got 3% orders growth in 2025. I guess that underpins the lower end of the low to mid-single digit. Could you just talk about what kind of variables are out there? And how do they need to evolve for you to land in the higher end in that kind of mid-single-digit mark for 2026, please? Paolo Compagna: Andre, if I look back to '25, the order intake growth was a mixed picture between what we could have in China, which was, as I shared before, lower than expected. And I must say, in the rest of the world, our growth was significantly higher. So now looking to '26, your question is how confident can we be to get to a higher growth rate? And why can we talk about profitable growth? The answer is very clear. Outside China, and allow me to do this separation for all transparency, we expect to further grow a bit higher than last year. And in combination with a little recovery in China, this would lead to the guidance we have shared this morning. So we are quite confident that we can get to OIT growth we have communicated. So a combination of China little recovery and further expansion outside of China. Andre Kukhnin: Great. And my second question is kind of a follow-up, but I just wanted to see if we could build a couple more pieces of the profit bridge for 2026. Carla, could you help us with how much was the mix help in 2025 that you now guide to be neutral or slightly negative? And also for Service growth for 2026, what would you anticipate compared to the mid-single digit in 2025? Carla Geyseleer: Look, I mean, first important, I would say, contribution will come also in '26 from the efficiency. So that will continue. And I clearly outlined that. So it's not because, let's say, procurement and SG&A saving and supply chain savings are maturing that we will see less incremental because, obviously, it is our intention to monetize more on the other efficiency, mainly in the New Installation, Modernization and to a certain degree also in the Service business. So that is definitely one important element. The other important element is that we see also more stable markets when it comes to pricing, especially in NI and MOD and I'm really talking about outside China. So that goes, of course, hand-in-hand with the recovery, although, I mean, a gradual recovery that we see in some of our key markets. So that definitely will also play a role. In terms of mix -- well, in the overall margin uptake, we said always, well, in some of the prior years, it could have gone -- it was around 1/3 of margin uptake. We are fully aware of that. So we consider that, that full neutralizes actually in 2026. It could be even, as I said, slightly negative depending then on how the growth of the Modernization goes and the recovery of the New Installations. Operator: The next question comes from John Kim from Deutsche Bank. John-B Kim: Two questions, if I may. Can you comment on your Modernization order book versus capacity? I know in Q3, there were some issues on kind of throughput and delivery. I'm just wondering where you are on that journey. And then the second question, just a clarification around the tariff number. So CHF 18 million, is that a number we should be using in our bridge? Or should we think about that against the backlog, i.e., more than 1 year? Paolo Compagna: John, let me elaborate on MOD, which is a very good question. As last year, and I was saying before, you remember, we had to catch up on Modernization growth, which now in '25, we could do. And as I said, we intend to continue in '26. If we look at the execution, which is nothing else than the translation into capacity to execute the backlog, we could accelerate throughout '25 as we were able to build up resources in almost all key markets. And we continue to do so. Hence, as of the top line contribution, the execution is supposed to continue to accelerate. And our resources, which you say is capacity, will be continuously adjusted. However, for the backlog execution of '26, we are quite already prepared. But we continue to invest as we expect, as I said before, Modernization also beyond '26 to be a significant business driver. But for '26, the resources are almost there. Carla Geyseleer: John, Carla, I will take the question on the tariffs. The CHF 18 million that I referred to, that's actually the gross impact. So as we are going through the usual mitigation measures, I expect very little to impact our P&L. Operator: The next question comes from James Moore from Rothschild & Co Redburn. James Moore: Carla, I think I've got one for Paolo and one for Carla. Maybe product momentum first, if I could. And just going back to your comments, Paolo, in terms of the standardized modular platform rollout and also the kind of standardized MOD packages. Is there any way you could say what percentage of the way through the rollout we are for NI and MOD? And what proportion of revenue in '25 was already attributing to the new standardized? And what you'd expect it to be when it's all rolled out and when you think you get to that point? I guess that's the first question. And maybe I'll come back with the second. Paolo Compagna: James, now connection was a bit weak. Is this about the level of standardization. Carla Geyseleer: It's very -- you are difficult to understand. Paolo Compagna: We got it. It's about the level percentage of standardized solution, right, within NI, right? James Moore: Yes, If I -- just to repeat, so you can hear it. Just if you could say what proportion of revenue was standardized in '25 for NI and MOD? And what you think it will be when you get to the end of the journey and when that is? Paolo Compagna: Okay, very good. So we've got -- actually in our own program, we have progressed, I would say, NI, more than the half. In Modernization, we have to separate between full replacements and partial replacements. In the full replacement, we have a very high level of standardized solution already. In partial replacement, we are already 50% of it, and it's continuing to increase. Second part of your question, by when do -- or what could be the ultimate target of standardization in both businesses? Well, we would love to see one day in New Installation, a standardization level of 85%, 90%, one could say, and similar one day Modernization, while admitting for everyone to remind that Modernization is also due to the complexity -- we were talking about this last year, remember, of the complexity of the existing portfolio, which makes it much more difficult to get to a high level of standardization. So here, I think the whole industry is working hard to get to this level, also to have 80% plus of standardization will take longer. But ultimately, it's what we have to get to. James Moore: Very helpful. I wondered if I could ask about margin mix in 2 dimensions, really. Just behind the 130 basis point expansion in your adjusted EBIT margin in the full year, could you provide some qualitative color on margins by type and region? I guess, would it be possible to say if NI, MOD and Service margins all expanded? And if you could rank them, that would be great. And I'm trying to avoid asking for a number. But equally, could you do the same regionally? Did all move forward? Or did we see China stepping back? And what really drove the uptake regionally as well? Carla Geyseleer: Yes. So first of all, what is important to share that is that the uptake of the margin is really based on a big number of operations. So it is globally spread. So it's not a few that are fueling the uptake. It's really globally, you can say that the -- everybody is contributing to the uptake of the margin, I would say, with the exception clearly of China, which is anyway a bit of a different market now. So that's from a market perspective. Secondly, when you look at, okay, where is the efficiency really coming from? Well, our 4 building blocks, they are not new. They have been clearly communicated on a regular basis. So still in '25, the major impact is coming from supply chain and purchasing savings. That is number one, followed by the SG&A savings because there clearly, our restructuring plans are paying off and are yielding results and then followed by the efficiency in NI, MOD and EI. And obviously, they had quite a good basis already this, what I call operational efficiencies. In '25, we can really see them accelerating. And obviously, that will continue in '26 and that increment in that area will offset the less increment that will be generated in terms of the SG&A. So that is to give you a bit of flavor where it is coming from. Obviously, I referred already to pricing. Pricing was healthy outside of China. So that clearly has also a contribution. So that's, in a nutshell, how the bridge actually looks like between '24 and '25. Operator: The next question comes from Martin Flueckiger from Kepler Cheuvreux. Martin Flueckiger: Two questions. Firstly, I would just like to get back to the slides, I think the first one, yes, operational recovery completed, it's called, where you described the growth in your maintenance portfolio being mid-single digit in local currencies. Just wondering whether you could break that down in terms of units and pricing growth as well as also that more than 40% of equipment being cloud connected. I was just wondering how much of that is just connection without customers paying for it? Or put differently, how much of that more than 40% is actually paying clients? That's my first question. I'll come back with the second one. Paolo Compagna: Yes. Without going now to which market has developed how, the mid-single-digit growth, Martin, on portfolio is actually well distributed everywhere. And I like in all [indiscernible] with may be a bit difference on China as always. As obviously, the big reduction in NI sales of the last year is hitting also the growth of the portfolio. But for the rest of the world, the development, especially in value was equally distributed. So I would not have any region or country to say, oh, there we did a big either pricing or whatever increase. So it's well distributed, and we are very happy about that. Then considering... Martin Flueckiger: Sorry, I think there's a misunderstanding here. I was referring to the split between unit growth and pricing within that mid-single-digit growth rate in local currencies. It's not the geographic contributions I'm interested in. I'm more interested in the volume pricing effects there. Paolo Compagna: No. Well, it's -- I think it's both low single digit -- it's low single-digit growth in both. So it's quite equal. So it's not that we have a significant unit growth with low value. I can say -- and this is maybe also important to understand that the portfolio growth came also with a quite equal price and value development. So it's both similar. Martin Flueckiger: That's helpful. And with regards to the more than 40% connectivity, are all of these paying for connectivity or just a part? And if yes, what's that part? Paolo Compagna: Well, difficult to say in detail which part it is. Then also the connectivity, I must say a larger part is contributing with a paid service, but by end, the level of paid services is very different country by country. So then if we have to say the number of the percentage of the connected units, how many do contribute, I would say the percentage is significant. The magnitude of the contribution of the connectivity is very different country by country. Martin Flueckiger: Okay. That's very helpful. And then my second question would be on BuildingMinds. I think a topic we haven't touched upon in any of the quarterly calls for quite a while. Just wondering how happy are you with the developments? And how much longer are you going to invest into BuildingMinds? And what are the operational, let's say, improvements or developments that you have seen in connection with the start-up? Paolo Compagna: Yes. So well, it's two questions in one. Let me summarize. BuildingMinds is now in the phase of scaling up the business model. As shared before, the platform has been completed and the team in BuildingMinds is now working on scaling up the business model, hence, in growing the business. The second part of the question, connectivity as a contributor. Connection to Schindler in the business, this is limited to some countries in which we have joined or shared customers. But on a broader base, this remains a separate entity. Operator: Next question comes from Martin Husler from Zurcher Kantonalbank. Martin Huesler: I also have two questions. First question, could you please share your ideas on M&A, maybe in terms of segments and regions? And up to what size would you consider M&A transactions? Paolo Compagna: Yes, Martin, as Carla was sharing before, we were all the time looking at very selective bolt-on M&As. And here, I have to also add in some selected markets. What we like to do now more in '26 and beyond is to expand the number of markets we will be ready to invest. And coming to the size, well, a bolt-on acquisition can have different size, right? It depends of the target. So there might be no direct limit. However, for us, it was always important to identify targets in whatever specific country, which do fit to our organization. This is what made our M&A strategy in the past successful, and it is something we aim to keep in mind. Martin Huesler: And then maybe the second one on cash returns to investors. Why do you flag an extraordinary dividend of CHF 0.80 and not just increased your dividend to CHF 6.80. Maybe can you also expect a new share buyback program after November '26? Carla Geyseleer: Well, I mean, thank you, Martin. I very much appreciate the question. But if you allow me, I would like to give more insights on shareholder return policy and share buyback programs in the Capital Markets Day later on in the year. Operator: The next question comes from Rizk Maidi from Jefferies. Rizk Maidi: I'll keep them quite short. If I start with the order intake, I mean, I take the China drop and you're being quite selective. But even outside of China, it's quite a big difference versus what we've seen from some of your peers. I'm just wondering if you could just elaborate on the competitive dynamics around large projects and how competitive pricing is? And if you don't think you can get the returns expected on these large orders, then why perhaps some of your peers could actually take them on? I'll stop there. Paolo Compagna: Well, we normally don't comment on what competitors take in. But let me explain what we have done in '25 and what we intend to do in '26. And this is a clear combination of reaction to markets, which, by the way, Carla was mentioning some of our key markets, let us also look at Europe. And you remember, I was quite concerned the last years when it came, by example, to Germany. Now we see also Germany coming to a more positive momentum. What does it mean? In terms of order intake, yes, it's clear, '25, we were selective. We were more selective in the range of the large projects, especially in countries, mainly China, where we were on top of it also reorganizing our structure. In terms of pricing development, here, I'd like to distinguish between these large projects and, let's say, the residential commercial day-to-day business, let's call it this way, in which we see in many markets, pricing opportunities coming up for '26, which will allow also to work more intensively on order intake without jeopardizing our commitment to margins. How much this will be possible to complete? The answer, when it comes to large projects, well, some large projects we do and we will continue to do. Would we accept everything which some of competitors might accept in there. This, I don't like to say we would do. However, all in all, I think the '25 order intake, yes, was very much driven by these 2 decisions and '26 without changing the strategy that much, we are quite confident that we can generate a higher OIT just also by, let's say, business outside of large projects. Rizk Maidi: Understood. And then very quickly, a follow-up. Can you, Carla, maybe comment on the incremental savings in '25? So roughly ballpark, is it CHF 150 million to CHF 170 million. And same thing, if you could just quantify the mix impacts. I'm getting roughly to 40 to 60 basis points, just if you can comment on those. Carla Geyseleer: I would say you're in the right direction, yes. Operator: Next question comes from Vlad Sergievskii from Barclays. Vladimir Sergievskiy: My first one would be on Modernization growth into '26. Obviously, you are building the delivery capabilities, and we see accelerating top line growth in MOD in Q4 already. As you continue to grow it in '26, would you expect MOD backlog to actually decline in '26 or the new demand will still be strong and MOD backlog will still grow? So that's my first question. Paolo Compagna: Vlad, that's a very good question. So first, your assumption should be right. We intend to further grow in Modernization, OIT, but also top line, it means revenue. So hence, we are working to also expand our execution capabilities. Will the backlog continue to grow? Well, I think a little backlog growth should be there, but this will depend very much of how much we can accelerate execution. So therefore, both assumptions are right. Yes, we continue to grow. Yes, we expect higher top line contribution from modernization and maybe a slightly backlog growth, too, as we expand also the execution capability. Vladimir Sergievskiy: Okay. That's very clear. The second one is a very quick one. How do you see the bridge between adjusted EBIT and reported EBIT in 2026? You mentioned CHF 60 million of restructuring costs. Is there anything else in this bridge? Carla Geyseleer: Yes. Well, I mean, it's very restricted to the restructuring costs and the BuildingMinds. And obviously, BuildingMinds has become, I mean, less of a drag also compared to 2025. So yes, there are only duty elements, and I would like to keep it like that. You remember that a couple of years ago, we said, look, I mean, if it's recurring cost, it needs to go into the pure operational, and we like to keep the adjustments to a minimum. Lars Wauvert Brorson: We will take one final question, operator, please. Operator: The last question for today comes from Aron Ceccarelli, Bank of America. Aron Ceccarelli: My first one is on cost savings. You've clearly done a remarkable job over the last 3 years on executing on these efficiencies. If I take your slide of EBIT bridge for 2025, could you perhaps strip out the numbers of cost savings out of this CHF 163 million operational improvement, please? And when you look at 2026, you talked about operational efficiency to basically be the same ballpark of what you deliver on procurement. Can you maybe talk a little bit about in the real world, what are you accelerating there? That would be my first question. Carla Geyseleer: Yes. Thank you for the question. So in '25, I mean, a major part from these operational improvements are coming from what we call the SG&A savings and the supply and procurement savings. So these are the 2, I would say, major ones because they matured already these initiatives and obviously, they yielded very, very well. It doesn't mean, of course, that there were, of course, also efficiency savings in the operation, as I just mentioned before, in the New Installation and in the Modernization, and obviously, they will accelerate in '26. So overall, when we talk about these savings, we aim to go for a similar level in '26 than what we have seen in '25. However, the composition is slightly different. Aron Ceccarelli: And if I look at the CHF 163 million, is it fair to assume that 50% of those kind were savings? Or is it less -- just to have a rough idea? Carla Geyseleer: Yes, yes, absolutely. Yes, I confirm that, yes. Aron Ceccarelli: Around 50%, okay. And my second question is on China. You changed management, I think, at the end of the first half. Clearly, we saw a deterioration on orders and sales there in a tough market. Perhaps could you talk a little bit on real world, what are you guys doing now there? And where are we in the process of the restructuring, please? Paolo Compagna: Yes. The restructuring we have announced last year has been executed, and it consisted in a reset of the leadership team, which has been done. So this was done in the second half of last year, and it has been completed as well as a reorganization of the branches, which has been executed to a large extent last year. So actually, the restructuring we have announced in Q3 last year has been executed in Q4 with some minor actions still to come now in Q1. So hence, we expect in the course of this year,to see first impacts coming out of those actions. Operator: Yes, ladies and gentlemen, that was the last question. Back over to you, Lars Brorson for any closing remarks. Lars Wauvert Brorson: Thank you very much, operator. Thank you all for attending today's call. Please feel free to reach out to me and the IR team for any follow-ups you might have. I know there are a couple of follow-up questions in the queue. So please do reach out. The next scheduled event is our presentation of the Q1 results on April 23. You'll also find our reporting calendar for 2026 at the end of today's presentation deck. So with that, thank you very much, and goodbye. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Hello, and welcome to the Commerzbank AG conference call regarding the fourth quarter results 2025. Please note that this call is being transmitted as well as recorded by audio webcast and will be subsequently made available for replay in the Internet. [Operator Instructions] The floor will be opened for questions following Bettina Orlopp's and Carsten Schmitt's presentation. Let me now turn the floor over to our CEO, Bettina Orlopp. Bettina Orlopp: Good morning, everyone, and welcome to our earnings call. You already saw the bottom line and capital return yesterday with our pre-release. And today, we are pleased to present the full picture of our Q4 and full year performance 2025. I will present to you our overview of the year and share our strategic and financial view going forward. Afterwards, Carsten will walk you through the detailed financial performance of the fourth quarter. We can report on a very successful year for Commerzbank. We achieved our growth targets and in many areas, exceeded them. We delivered a record operating result and will return even more capital to shareholders than originally planned. This is a clear proof to the fact that our Momentum strategy pays off and drives profitable growth. In 2025, we created significant value. On the financial side, we achieved an operating result of EUR 4.5 billion, an increase of 18% compared to previous year. Our return on tangible equity before restructuring expenses reached 10%. This is the highest return since the global financial crisis, and hitting this double-digit figure is an important milestone. It demonstrates the improved strength and profitability of Commerzbank and sets our new baseline for growth from 2026 onwards. This is complemented by a capital return of EUR 2.7 billion for 2025, higher than we thought back in November, and bringing the total since 2022 to EUR 5.8 billion. This financial success translates into value for all our stakeholders. For our shareholders, the market has recognized our growth path and our transformation. Our share price has more than doubled in 2025, reflecting the confidence in our strategy and its execution. For our employees, our success is also their success. We launched an employee share program and saw a high participation rate of 90%. This creates a culture of ownership and aligns the interest of our team with the long-term success of our bank. And for our clients, our growth is a reflection of their trust. We grew our corporate loan volume by 10% and our securities volume by 9%. This shows that our clients value our partnership and our expertise, in particular, in the current economic environment. We are a reliable partner for our clients, especially in the German Mittelstand. A more detailed look at the financial performance underpins the positive trend across our key metrics. Our total revenues climbed by 10% to EUR 12.2 billion. This was driven by good performance across the board, particularly by a 7% growth in our net commission income and the strong results from our Polish subsidiary, mBank. Even in an environment of lower benchmark interest rates, we kept our net interest income nearly stable, reflecting our successful NII management. At the same time, we have maintained our consistent cost discipline. We improved our cost-income ratio by 2 percentage points to 57%, achieving our target for the year. This was accomplished alongside strategic investments as well as absorbing one-off effects such as higher valuation of equity-based compensation due to our share price performance. This combination of revenue growth and cost control led to the 18% increase in operating results. This demonstrates the improved earnings power of our bank. Our net result stands at EUR 2.6 billion. If adjusted for the restructuring expenses, it rose strongly by almost 13% to EUR 3 billion. This underlying profitability is also reflected on our net RoTE before restructuring expenses, which, as mentioned, reached 10%, exceeding our target. I already touched on capital return, and we'll come back to it shortly. But before that, I would like to draw your attention to the execution of our Momentum strategy. We have delivered on our strategic milestones in 2025, driving both growth and transformation. On the growth side, we have leveraged our franchise for capital-accretive loan growth, demonstrating our strong client relationships. Furthermore, we have taken a smart analytical approach to deposits. By using AI, we improve savings retention, apply sophisticated pricing schemes and grow volumes through reactivation of existing customers. The strong focus on client needs has supported the growth in our fee business across all customer segments, contributing to our revenue uplift. On the transformation side, we have implemented the new enhanced service model for our private customer. As one key element, we have created more capacity for high-quality advice in private banking and wealth management. This is a key step to further grow our fee income. Our restructuring program is on track with the ongoing shift to sourcing and shoring locations progressing as planned. An important component of this transformation has been the introduction and expansion of AI-based capabilities. We are already realizing initial efficiencies and improve both customer and employee experience. This is happening as we speak, and I will come back to this in a minute. Overall, we are very pleased with the success of our Momentum strategy, which paves the way for 2026 and beyond. Our priorities are clear. First, we are fully committed to delivering on our 2026 to 2028 strategic and financial targets. We have a clear plan, and our 2025 results give us all the confidence that we will achieve it. Second, we will continue our growth path. This will be supported by an expected modest recovery in the German economy and the government's stimulus package. Further catalysts from 2027 onwards will be the pension reform in Germany, which comes with government-subsidized securities savings plans. Third, we will further increase the usage of artificial intelligence to transform the bank. We will increase the investments in AI to drive efficiency, enhance customer service and create new revenue opportunities. Fourth, we will continue the execution of our Asset Management Growth strategy. This is an important building block to achieve our targeted growth of 7% annually in fee income. And finally, we will strive to optimize the deployment of our excess capital, including the ongoing screening of inorganic growth opportunities. Let me expand on 2 of these key priorities, artificial intelligence and asset management, starting with AI. AI is a fundamental driver of our ongoing transformation. We have built a solid starting point in 2025, moving from concepts to concrete applications that deliver benefits. Let me highlight a few of them. In our advisory and customer service center, our AI-powered agent assist provides real-time call transcription, generate summaries and recommend suitable solutions. Workplace tools like cobaGPT make information retrieval and content creation for our employees significantly faster. Our in-house tool Fraud AI helps to automatically detect fraudulent activities. And in our banking app, our virtual assistant, Ava, combines generative AI with Avatar technology to assist customers with their banking needs. The benefits are already visible and will increase every year. In 2026, we will expand and enhance the use cases we started in 2025. We will also introduce additional GenAI applications such as for legal contract generation and annual report analysis for risk assessment. Furthermore, we will continue piloting agentic AI in collaboration with our strategic partners to drive further process transformation. In conclusion, AI will change banking, and we are well underway in this transformation. We have increased our change budget for 2026 from originally planned EUR 500 million, to almost EUR 600 million and an increasing share of this is allocated to AI. The key lever for growth, particularly in our fee income is our Asset Management strategy. Our strategy is based on a combination of in-house asset management offerings and partnerships, creating a platform that provides a wide choice for our clients. Our in-house capabilities cover a broad range. This includes discretionary portfolio management and liquid strategies at Commerzbank and our specialist manager, Yellowfin. And in the areas of private markets, we have the expertise of Commerz Real in real estate and infrastructure as well as Aquila Capital in clean energy and sustainable infrastructure. Combined, our in-house units managed EUR 67 billion. Currently, we see more inflows in liquid assets and the more challenging environment for less liquid assets. Regarding early-stage investments into renewable energy projects, Aquila faces market challenges, which put pressure on 2 specialized institutional funds. Hence, we have pulled forward the full depreciation of the acquired capitalized client value. Going forward, we fully focus on developing our existing business and adding new business to meet the demand of our clients. The in-house offerings are complemented by our partnerships, which provide a full set of standard fund and ETF solutions with a volume of EUR 95 billion. This setup is designed to expand our business with our clients. It will further strengthen our position as a comprehensive partner for their investment needs. Let me move on with a central element of our equity story, our commitment to delivering capital returns to our shareholders. For the 2025 financial year, we will return EUR 2.7 billion to our shareholders, EUR 200 million more than originally planned. This reflects a 100% payout ratio before restructuring expenses and represents a total yield of 7% based on the market capitalization at the start of the year. Regarding the mix and given that we trade well above book value, we have decided to put more emphasis on the dividend. Hence, we intend to propose an increase to EUR 1.10. On share buybacks, we have decided yesterday to start another buyback of up to EUR 540 million tomorrow. This comes on top of the EUR 1 billion buyback, which was completed already in December. Looking forward, we continue targeting a payout ratio of 100% of our net result after AT1 coupon payments. We intend to further grow the dividend share towards 50%, establishing Commerzbank as a reliable dividend stock. This capital return policy comes with a total yield increasing to 10% in 2028 and remains a key cornerstone of our strategy. Our performance and strategic execution give us confidence for the year ahead, and January has already been a very good start. Hence, we have increased our outlook for 2026, which confirms the traction of our Momentum strategy. We anticipate a supportive, albeit modest macroeconomic environment in Germany with government stimulus supporting the economy. This is reflected in a GDP growth of 0.9% and an inflation remaining close to the 2% target. Furthermore, we expect ECB's deposit rates to remain at 2% throughout the year. Against this backdrop, we have set clear targets for 2026. We are aiming for a net result of more than EUR 3.2 billion. We will continue our strict cost management and plan for a cost-income ratio of 54%, which is 2 percentage points better than originally planned. And we are targeting a return on tangible equity of more than 11.2%. And as I just mentioned, we are committed to a total payout of 100% of the net result after AT1 coupon payments. Finally, I would like to provide a transparent view of our path towards our 2028 RoTE target of 15%. Starting from our 2025 adjusted RoTE of 10%, we have a credible road map to reach our goal. The journey will be driven by several key factors. The diminishing burdens from the FX loans in Poland will provide an uplift, and the positive impact from the restructuring will also contribute in terms of cost measures. The main drivers, however, will be loan growth and the replication portfolio lifting net interest income and the target 7% annual growth in net commission income. We also see potential upside. The steep yield curve, a stronger-than-expected German stimulus and an accelerated impact from our AI initiatives could all provide additional tailwinds to our profitability. They are not yet reflected in our 2028 plan but form tangible drivers with a very good likelihood to materialize. Of course, we are also diligently monitoring potential headwinds such as geopolitical risk, trade tensions and intensifying deposit competition. However, we are confident that we have a very robust and credible plan to navigate these challenges and deliver on our 15% RoTE target. And to use one of my favorite words, you can consider the target as our floor. And with that, I hand over to Carsten for a detailed look at the financials of the fourth quarter. Over to you, Carsten. Carsten Schmitt: Thank you, Bettina, and good morning, everyone. The results of the quarter speak for themselves, strongly contributing to the excellent results for the year. In Q4, the net RoTE reached 10.1%, slightly above the level we reached for the whole year before restructuring expenses. This is driven by a near record operating result that is in turn based on very strong revenues. The CET1 ratio remained unchanged at 14.7%. I will now go through the details, starting with revenues. Revenues were exceptionally strong in the quarter, up 6% compared to last year. Net interest income has exited the trough that was induced by the ECB rate cuts and will continue to grow in the next quarters. Net commission income is the best ever achieved by the bank in the fourth quarter. The net fair value result reached EUR 74 million. The EUR 27 million increase compared to Q4 last year was driven by a higher fair value result, mainly at mBank, offsetting lower interest income. Other income, excluding FX loan provisions, reached EUR 79 million and mainly stems from a positive hedge result. Now to net commission income in more detail. All customer segments grew their business year-on-year, resulting in a record fourth quarter. This is a clear testament to the excellent work done by the teams. Corporate Clients continues to grow in trade finance year-on-year on the back of our strong market position and despite the ongoing weakness in German exports. The biggest increase, however, came from lending where fee income linked to loan origination has continued its upward trajectory as we have maintained good volume growth. Private and Small Business Customers in Germany continue to expand the securities business, both from securities volumes and transactions. The better payments business is driven by higher account fees, while the cards business contributed less this quarter. We have continued to increase the share of customers who have signed up to the new account model to around 65% and have only lost customers with low revenue contribution. As last year, the discretionarily managed portfolios performed very well in the quarter, contributing a significant portion of the revenue increase compared to the last quarter. Let's move on to the interest income. With ECB rates unchanged to Q3, a strong loan business in Corporate Clients and successful deposit management, interest income in Commerzbank grew slightly in Q4. Conversely, in mBank, the effect of materially lower Central Bank rates is visible in net interest income. However, the effect has been partially offset in net fair value. As rates in Poland are well below last year and might be reduced further, this will also have an effect in 2026. Looking at volumes, growth has continued across the board. Corporate Clients has again increased loan volumes in all customer groups. As customers improved their liquidity positions towards the end of the quarter, the average deposit balance was EUR 2.7 billion higher than in Q3. Therefore, both loans and deposits contributed to the increase in revenues. In PSBC Germany, loan volumes have been stable. Deposits are up based on inflows in both sight and call deposits. The deposit beta has come down in the quarter as high rates offered for new retail deposits in the summer started to expire. While we will have more expiries in Q1, comdirect has initiated a new deposit campaign with attractive rates in January. We, therefore, will have offsetting effects in the beta. On the next slide, I will give you more details on the loan growth in Corporate Clients. In 2025, Corporate Clients achieved a EUR 10.9 billion loan growth, of which EUR 2.4 billion was achieved in the fourth quarter. The mix in 2025 has been weighted towards the international business. In Germany, we had only moderate demand from corporates. However, we did see growth from the public sector. Corporate demand has been across sectors with the 2 largest being energy and consumption. New business has been good in Q4. The new loan agreements signed will be drawn over time and start contributing to the net interest income in the next quarters. Looking into 2026, January has started well. We have seen some pickup in demand in Germany and have continued demand outside of Germany. We are, therefore, confident that we will continue our profitable growth trajectory in 2026. This brings me to the next slide with the outlook for NII. We raised our outlook to around EUR 8.5 billion for 2026. The main reason for this is the more favorable forward curve in combination with the increased size of the replication portfolio. Due to these, the replication portfolio will contribute an additional EUR 600 million in 2026. ECB rates are expected to remain at the current level, slightly lower than in 2025. In combination with the effect of moving more deposits into the replication portfolio, we anticipate an impact of around minus EUR 200 million from the deposits invested at floating rates. For the beta, we expect an increase from 40% on average in 2025 to 42% in 2026, leading to EUR 100 million lower interest income. This should be more than compensated for by growth in loans and deposits. Finally, interest rates in Poland have come down significantly and are forecast to go down further. We, therefore, expect interest income in mBank to be lower in 2026. Based on the current business mix and our assumptions for the deposit beta, volume growth and the forward curve, we expect further increases in interest income in 2027 and 2028 with a clear potential to reach around EUR 9.4 billion in 2028. Of course, there could be more intense deposit competition than anticipated or lower rates, particularly in Poland, than assumed, which would lead to slower revenue growth. Conversely, the environment might become more favorable. Now to costs on Slide 21. We have reached our target cost/income ratio of 57% for 2025. This is based on strict cost management as we had to compensate 2 larger unplanned cost items in 2025. One is the doubling of the share price and its impact on share-based compensation. The other is the accelerated impairment of intangible assets. Together, they represent 3% of our cost base. Excluding these items and due to our cost management, costs increased by only 3%. The main cost drivers have been general salary increases, investments and the build-out of our shoring and sourcing centers. The cost increase in mBank is mainly due to business growth but also higher compulsory contributions are a significant factor. We will maintain our strict cost management approach in 2026 and are therefore confident that we will reach our improved target cost/income ratio of 54% for the year. While not part of the regular cost base, we had final restructuring expenses of EUR 9 million related to our Momentum strategy in the quarter. The next slide covers the risk result. The risk result came in at EUR 207 million. This is better than expected and in line with the previous year. The portfolio has proven to be very resilient. We have maintained our approach to overlays. There has been no material change in the outstanding amount, which stood at EUR 147 million at the end of the quarter. The risk result for the financial year reached EUR 722 million, well below our guidance of less than EUR 850 million. Nevertheless, for 2026, we again guide for a risk result of around EUR 850 million. In 2026, the German economy will leave a 3-year phase of stagnation and should show moderate GDP growth. But given the ongoing structural changes and higher default rates, we prudently plan with a slightly higher risk result, which is equivalent to 25 to 30 basis points cost of risk. This concludes the view of the key line items. I've already covered the main drivers of the excellent operating result and will therefore focus on the net result. Full year taxes and minorities are higher in 2025 than in 2024, reflecting material changes in the tax codes in Germany and Poland as well as a better profitability in mBank, increasing the minorities. For 2026, we expect a tax rate at around 30% due to a higher tax rate in Poland and further rising minorities as the profitability of mBank should continue to increase. The next slides cover the results of the operating segments, starting with Corporate Clients. As already mentioned, Corporate Clients had a very good fourth quarter. Revenues benefited from the ongoing healthy loan growth and the good capital markets business. Also, the increase in deposit volumes contributed. This is clearly visible in international corporates with 13% higher revenues. Institutionals again reached a very good level of last year. Mittelstand also increased revenues in the loan business. However, year-to-year, this could not fully compensate the effect of lower rates on deposits. In PSBC Germany, our new client advisory model has become fully operational in Q4. This has come with the reassignment of some customers. Due to these changes, the Q4 revenues of the 2 units can be only compared in combination to the previous quarters. Looking at Private Customers and Small Business Customers in aggregate, revenues have increased substantially in the quarter. The biggest drivers have been the securities business and the deposit business. While asset management overall showed better revenue than in the previous quarters, the asset management subsidiaries have lower Q4 revenues compared to the previous quarters as these benefited from transaction fees, which tend to be lumpy and not evenly distributed over the quarters. For the financial year, revenues of the asset management subsidiaries have been only slightly lower, reflecting a partially more difficult market environment. mBank has maintained its good profitability. The customer business has held up well despite being impacted by the lower interest rates in Poland. As expected, provisions for FX loans have again been lower than in the previous quarter. For 2026, we maintain our outlook that the burdens from FX mortgages, which have been EUR 483 million in 2025, should no longer be material. mBank should further increase its contribution to our result in 2026 and plans to resume paying a dividend. Others and consolidation reported a small operating loss in the quarter. For the full year, the operating result is plus EUR 32 million, in line with our expectation of a neutral result for the full year. For 2026, we again expect a more or less neutral result. Now to the RWA and capital development. The CET1 ratio was stable at 14.7%. Overall, minor RWA and capital changes largely canceled each other out. In total, we have dedicated EUR 2.7 billion for distribution to shareholders. This is equivalent to 154 basis points of the CET1 ratio and represents a yield of 7% based on the market capitalization at the end of the year. In 2026, we intend to again distribute 100% of the net result after AT1 payments. Therefore, as in 2025, we will not include the net result in our CET1 ratio calculation. As already communicated with the Q3 results, we have received the SREP letter from the ECB. Our 2026 capital requirements were lowered by 10 basis points as we must hold only part of the regulatory capital requirement as CET1, the MDA will be reduced by around 6 basis points effective since January. This brings me to the outlook for 2026. As already mentioned, we have improved our outlook for NII from EUR 8.4 billion to EUR 8.5 billion. As in 2025, we target 7% growth in net commission income and expect a risk result of around EUR 850 million. Based on the improved revenue outlook compared to our original momentum strategy, we target a cost/income ratio of 54%. This is well ahead of our original target of 56%. The same applies to the outlook for the net result, which should be above the original EUR 3.2 billion target. As mentioned, we confirm our target payout ratio of 100%. The CET1 ratio at the end of the year should still be above 14%. And the RoTE should increase from 10% in 2025 to more than 11.2% in 2026. For '28, we confirm all targets laid out in our Momentum strategy and, as Bettina has pointed out, with clear upside potential. Thank you very much for your attention. Bettina and I are now looking forward to taking your questions. Operator: [Operator Instructions] Several questions are incoming. The first question is from Jeremy Sigee from BNP Paribas. Jeremy Sigee: Two questions, please. Firstly, thank you for all the guidance on the outlook and that kind of thing. Could you talk about your expectations for costs in absolute terms? You've obviously given us a cost-to-income ratio, but could you talk about the absolute amount of costs that you expect in 2026? And then second question, you mentioned loan demand limited so far from German domestic corporates. But I think you said you'd seen a pickup in January, unless you're talking about something else, I think you said you've seen a pickup in loan demand in January. And I just wondered if you could give us an update on how corporates are behaving and how they see the German stimulus and reforms coming through? How much action you're starting to see on that front? Bettina Orlopp: Yes. Thank you, Jeremy. So on the second question, with respect to loan demand, I mean, we have seen a very good start actually into January. But this is again very much broad-based. So it includes international locations but also Germany. If it comes to Mittelstand, they are still hesitant. They are still waiting for more reforms to come. There are always exceptions. But overall, and I mean, you see it also in the GDP growth, which is now at 0.9%, but we also expected it last year a little bit higher that this hesitance and you see it in the sentiment index, that we still wait for the turnaround [indiscernible] because we also support our clients going abroad. And on costs, I hand over to Carsten. Carsten Schmitt: Yes. Thanks for the question, Jeremy. So on the cost side, as you know, our main sort of driving principle is the cost/income ratio, which we are aiming to improve to 54% this year. With regard to the absolute cost target for the year, which will also keep firmly inside clearly, let's start from -- coming from '25. We are looking at EUR 6.9 billion in '25. And as lined out, we had around EUR 200 million of extraordinary effects, which we compensated with our strict cost discipline last year. So deduct that. If you add 3% to 4% of the updrift in cost that we have by general salary increases and potentially another EUR 100 million for additional investments we intend to make this year into our strategy, then you arrive at something that should be nearing the EUR 7.1 billion from below. Operator: The next question comes from Benjamin Goy of Deutsche Bank. Benjamin Goy: Two questions, actually follow-ups to what you said. The first one is, Carsten, you mentioned net interest income will continue to grow in the next quarters, specifically wondering about Q1 where you obviously face some headwinds from day count. So also Q-on-Q up in Q1, then steady growth after that? And the second question is on the very strong start to January. I mean you commented on loans but also wondering about any comments you could do on deposit campaigns, how the retention went on -- at comdirect and also on the fee income side, what you're seeing so far? Bettina Orlopp: Yes. I mean, January has been strong across all dimensions, actually. I mean, risk result, you would anyhow not expect anything in January. But on the cost side, high cost discipline on the revenue side, a very, very good start on NII, and Carsten will dig deeper into that in a minute. But also on the net commission income side, it has been an excellent start. Carsten Schmitt: Yes. And Benjamin, looking into the NII, you had a few questions. So first of all, I think what we've seen in Q3 last year was what we call the trough of the NII development. So we've seen an uptick already in Q4, and we expect this to also carry into the coming quarters. As mentioned earlier, we are looking at a slightly lower beta at the end of the year given that we had campaigns running out, and we are now starting a new campaign. So let's see actually how that potentially impacts the beta movement. But generally, you should expect the net interest income to steadily increase throughout the year and towards the new guidance of EUR 8.5 billion. With regard to the campaigns, we started, as we usually do beginning of the year with a campaign in comdirect. And you also asked around the retention rates of the previous offers that we had out. I mean those fluctuate, as you know. The purpose that we have with these offers is to bring the money and the customers in in order to ideally then also transform them into other quality products like asset management, investment, securities volume. So it's always a bit tough to say how much is actually flowing out, but we see this as a very good means to actually increase volume also on that side and then also support our commission income. Operator: The next question comes from Kian Abouhossein of JPMorgan. Kian Abouhossein: The first question is just on the beta. What gives you the confidence? You mentioned 40% for '25. I think I saw 41% in the fourth quarter average and 42% for the year '26. Just if you can discuss where that confidence is coming from. Clearly, you have delivered in the past. Just trying to understand the deltas, both on the corporate side, where I think last quarter, you also discussed a little bit more pressure, but not this time around, from what I listened to. And in that context, can you just talk a little bit around your funding profile. I can see there's some funding coming up not just this year, but over the next 2 years as well. And I'm just trying to understand how you -- how should we think about duration of funding and cost of funding on replacement, if I may? Carsten Schmitt: Yes, Kian, thanks for the questions. Let's start with the beta. You're, of course, as always, absolutely right on the beta figures, also for last year. We had an average of 40% last year. What makes us confident that we are planning well with the 42% is that, A, we will see a slight updrift, as I just mentioned, given that we are running new campaigns. Also, we are aware that usually beginning of the year, we see the market being quite competitive. We had a similar discussion last year. But if we are looking a bit into sort of what we base our confidence on, number one, we have proven actually for ourselves last year that managing the deposits and also the pricing of the deposits, is including our AI-based approach, i.e., we are also making improvements in how we price, what we have in the books and how to retain these volumes. So that actually puts us into a confidence space that we can use this to also counter a bit of the challenging environment we might be seeing. And you mentioned the corporate side specifically, as you might have heard also in my speech, we had quite significant volumes coming in also on the corporate side. And this actually gives us, at this point in time, also support. So at the moment, this is what puts us very confident for the beta development. Then when it comes to sort of the funding profile over the next years, I mean, we are looking at around EUR 12 billion that we are going to fund this year. As you know, we have a funding plan that is usually rolled out over the next years, and we are trying to keep our well-established and good mix. We are currently looking into slightly longer tenors that we are issuing, also making sort of benefit of the current market environment. And clearly, credit spreads are beneficial for us. So funding profile that we have improved since last quarter with a bit of prefunding last year already and also going into the next should actually help us to further positively manage our funding costs. Operator: The next question is from Tarik El Mejjad from Bank of America. Tarik El Mejjad: Two questions from my side, please. First, on the net interest income guidance. You've done a beat and raise in every -- literally every quarter since your CMD. And I think there's more to go, but you haven't really updated on '28. So when should we expect guidance change or update in '28? And should we see the same dynamics so far being applying in the long term as well there with the volume component? And then my main question actually is on the cost-to-income and on your investments. I've noticed actually in Slide 9 on the payout ratio for '26, you say that this is before restructuring expenses -- potential expenses for '26. Is it fair to think that the whole your increased focus on AI, and you've -- Bettina, you've highlighted as really a critical driver for better efficiency in the longer run, should we expect a lower than 50% cost-to-income in '28 coming from investments from this year that will be actually removed from the payout ratio? So in other words, you basically be able to pay more than 100% payout with shareholders not paying for the cost of this restructuring and also you lower by then your CET1 ratio? Is my reading correct? Bettina Orlopp: Thank you, Tarik. So on your first question, it's pretty simple. EUR 9.4 billion is the latest expectation for 2028, assuming that the yield curve stays intact as we see them currently. When it comes to the cost-to-income ratio, and the guidance for 2028, we said that it's really -- it's -- for the cost-to-income ratio, you could say it's a cap because we definitely want to achieve the 50% and might go even below given that we will use specifically the year 2026 and the upcoming strategic dialogue and multiyear planning process to evaluate the effects we currently see. And as said, and you know that from us, whenever we are done with the planning, we also come out with updated numbers. So you can expect that this year as well. When it comes to the payout ratio, I mean, investments into AI are clear investments. They are shown in the cost line and nowhere else. So there is no real possibility to exclude that one from the payout ratio. We are increasing our investments as we speak. So already in the 54% guidance for this year, we have an increase in investments from the original EUR 500 million planned for change into -- up to EUR 600 million. So we absorb it basically in our cost targets. So the payout reference is really restricted to real one-offs and something like real restructuring charges. But at least with the latter one, we are definitely done and -- except for the Russian topic, which we always raise, we don't see also any potential one-offs luckily. Tarik El Mejjad: Okay. And the strategic update is usually -- always you do it in September, right? Bettina Orlopp: Yes. I mean, I think normally, we come out with the Q3 numbers, but something around that, yes, you can expect. Operator: The next question comes from Borja Ramirez from Citi. Borja Ramirez Segura: I have 2, please. Firstly, on the hedge. I would like to ask the increase in the hedge in the 4Q. What were the duration of that and also the average yield? And also your -- the hedge benefit that you disclosed, I would like to ask, is that based on the current forward swap rate? And then my last question would be, I think based on the ECB data, the yields on your mortgages are around 100 basis points above the 10-year swap rates. So I think there's maybe some benefit in your NII from this as well. So I would like to ask if there's also some upside compared to the target on this point as well, please? Carsten Schmitt: Yes. Borja, thank you for your questions. Let me start with the replication portfolio, so the hedge portfolio that you referred to. In Q4, we did increase the size of the portfolio. As always, we are looking at the overall amount of deposits that we're having and then the amount that we can model. The amount that is available for modeling is slightly above EUR 200 billion, and we decided in Q4 to actually enhance the size of the portfolio by EUR 9 billion. Together with that, because we've invested that indeed at current rates, you see an uptick in the average yield of the portfolio of around 9 to 10 basis points on the full portfolio, and we're now at around 1.14%. So that is up from the levels we discussed in the previous quarters last year. So with that, actually, we will have positioned ourselves nicely in the current market environment and also slightly to the longer term in the investments. Then second question you had on the mortgages. Let's just assume the rates that you mentioned. I think the ingoing factor for us is the volume of the mortgage book, and you will have seen that this is stable if you look at the volume bars in our presentation. In Q3, we saw a very healthy front book of EUR 2.7 billion. In Q4, we saw another EUR 2.1 billion. And as you know, these will roll in with time. So it will take about a few quarters until we see the full volume. That clearly stands against some of the early repayments. But overall, that book and the front book comes in at good margins and should be supportive for our NII. Borja Ramirez Segura: And just to confirm, the replication portfolio benefit in NII guidance, that's based on the current forward curve? Carsten Schmitt: Yes, that's correct, Borja. Operator: The next question comes from Riccardo Rovere from Mediobanca. Riccardo Rovere: 2 or 3, if I may. The first one is, Bettina, throughout the call, you and Carsten have repeatedly stated that there is some degree of prudence or upside potential here and there within your 2026 outlook. Could you please list all the areas where you think you might have been prudent in setting the 2026 guidance? The second question I have is 2 -- a few days ago, UniCredit in its UniCredit Unlimited update set the cost trajectory down in absolute terms. I was wondering whether this puts pressure on you to achieve more efficiency throughout over the next few years? And then I have -- sorry to get back to the steepening of the yield curve. It's not clear to me whether a steeper yield curve is included in the EUR 8.5 billion NII guidance, if that's the case or not? And the last question I have is on the capital. Again, you have a target of above 14% but technically, the target is 13.5% at some point in the future. I was wondering what prevents you to bring it down to 13.5%. And on this topic, I was wondering if you could update us where you are on the SRTs on the RWA optimization because especially on the corporate side, I remember you had a fairly large amount of risk-weighted assets reduction related to securitizations. Bettina Orlopp: Thank you very much, Riccardo. Lots of questions. I hope we get them all. So with respect to upside potential for 2026, where are we prudent? And you know us, we are normally always conservative to make sure that we deliver. I mean, to start with, clearly, we have the risk result. Again, we are guiding it for EUR 850 million. And you have seen in the past years that we always come in below. So there is upside potential, hopefully there -- if things are developing as planned. Number two, it is -- we always have the problem with the fair value, and you know that -- to predict that correctly, so we are always a little bit cautious on that one. Why we are very convinced about the EUR 8.5 billion NII? That is, for us, always a starting point to say it like that. And also on the net commission income, the 7% is an aspirational target, but we are strongly convinced that we can deliver that. And when it comes to the cost side, you have seen that we have maintained a very high cost discipline this year. So we could really also balance out some of the extraordinary burden, which we have seen, and we intend to do that. Also, I have to say that, in 2026, we still have also some doubling effect because we are building up capacities in our shoring locations on the one side. And on the other side, we still have also some people still running the business here to really, really ensure smooth transition. When it comes to competitors, I mean, we really focus on ourselves. Every competitor is different. So for us, it is important that we drive with the right path for our organization. It is very clear that we are committed to efficiency to transformation. It's part of our strategy, Momentum, growth and transformation. And as I said, I mean, we are now in the second year of the strategy implementation. We now start the normal process as we always do. We didn't do it last year because we just had the presentation of the strategy. But this year, we start with our strategic dialogue process, which then ends an updated multiyear plan figures. And clearly, we take into account all the learnings and experience we gathered specifically from our AI use cases which seems to be very promising. So there is -- as also said in the speech, there's upside on that. When it comes to capital, I mean, it's a path, as you know, we have already lowered our CET1 ratio. The target CET1 ratio stays at 13.5%, but we do it, as always, in a path, which is fully aligned also with the regulatory authorities. And the final target, however, stays the 13.5%. And when it comes to SRTs, we have done transactions in the fourth quarter, and we currently have an RWA relief because of SRTs of approximately EUR 9 billion. And on the yield curve, I hand over to Carsten. Carsten Schmitt: Yes. Riccardo, on the yield curve and the EUR 8.5 billion target for the NII, that's on the current forward curve. So if there's a movement, of course, there is potential. But you also have to bear in mind the portfolio is set up in a way that we stabilize the net interest income, which also means that we do reinvest slightly above EUR 3 billion every month in the rolling tranches. So you will have an averaging up effect in any case. And if there's a change to the forward curves with that amount, we will then also see additional pickup also pending potential decision to invest more in it. So that would be the upside potential in this. Riccardo Rovere: Sorry, Carsten, to get back to this. So the first bullet point on Slide 11, steep yield curve and corresponding benefit for replicated portfolios, this would be, like say, in a steeper yield curve than the one that it is today because it is already a bit -- there is already a bit of steepening. Carsten Schmitt: Yes, absolutely. And then you're absolutely -- yes. Sorry. But you're right. Riccardo Rovere: No, no. Okay, okay. And the other -- sorry, to get back to RWA 1 second. Am I right in saying that what is left in terms of SRTs in '26 should not be enough to compensate for the normal lending growth that you are expecting? Am I right in saying so? Carsten Schmitt: Yes. As you know, we're using SRTs to manage RWA. If you want also a bit of the risk profile, what we're looking at in 2026, is around EUR 8 billion in volume and an RWA effect of around EUR 4 billion. And that you can see actually, if you look at the volume growth we have set out for ourselves on the corporate side, is helping us to free up resources but not countering the growth. Operator: Last question for today from Stefan Stalmann, Autonomous. Stefan-Michael Stalmann: I wanted to ask you about the trends in sight deposits, please. PSBC Germany, that number has been basically flat for almost 2 years now. Is that something where your existing clients are shifting the mix away from sight deposits? Or are you losing actually market share in sight deposits in the German market? And also in Corporate Clients, the number tends to be quite flat [ this year ] by the occasional seasonal side at year-end. And I was wondering if you're actually raising any corporate sight deposits outside of Germany, given that you're doing quite a bit of lending business with [ out of Germany ]. And the second question regarding Aquila, the impairments that you have done in '25 are roughly half of the total intangible assets that came with Aquila. Do you think there could be more to come? And are you seeing any problems with the funds and [indiscernible] and whether or not this could impact the behavior of your clients and the willingness of your clients to invest in new funds? Carsten Schmitt: Yes. Thanks, Stefan, for the question. So first of all, on the deposits and the deposit side, you're right. If you look at actually the last 8 quarters, we have a stable sight deposit volume across the personal customer space, which, given the markets actually, is what we've always been talking about. We are defending our market share that we're having there and making sure that we have this also at reasonable rates, from our point of view. And overall, you see a slight growth in the portfolio. So we see no structural shifts from sight to term or call deposits. But what we are doing, as I mentioned earlier, is we are also attracting these when we go out with our offers in order to allow us to transform them into other and usually then commission income-bearing products. On the corporate side, also stable. This is always depending a bit on also the economic cycle and how corporates use their liquid assets, if we can call it that, for the time being. And you're right, we see slight fluctuations, especially in Q4, we saw a good inflow on that end. You also asked on the international portion of this, we have smaller portions coming in from corporates internationally when it comes to deposits but not to a structural degree. So it's in line with the business that we're doing with these customers abroad. Bettina Orlopp: And when it comes to Aquila, I mean, first of all, our Asset Management strategy is clearly a combination of 2 things, in-house and partners. And you see also on the Slide 8, the distribution of volumes and significance. And what we have observed in the past quarters is there is, yes, some skepticism in the moment on illiquid assets, and it's a cycle, but cycles normally also have the benefit that they change. So we stay basically on path here. And when it comes to the depreciation, we did the full depreciation of the intangibles. So nothing more to expect because the rest is embedded in our goodwill of the Private Client segment, and we do not expect any write-downs there. And I think that -- was this -- I think we have had the last question. So I wish you all a very successful day, and I'm looking forward to seeing you soon again. Thank you.
William Lee: All right. Good morning, everyone, and welcome to our interim results presentation. It's great to be back here in-person seeing you all. After -- I think, it's been informed -- quite a long gap. It's also very happy to be doing it on the back of a good set of H1 results, which always helps. So let's crack on and have a little look through these. In terms of structure -- actually, I'm going to go through in terms of some of the highlights. Marc is going to talk through the financials in more detail, and then I'm going to give some highlights before we do the Q&A on our progress against some of our strategic priorities. So first of all, positive news in terms of revenue with this real pickup that we saw in Q2. Still underlying quite mixed market conditions, two standby areas probably for us has been the demand from our customers who make the equipment, the semiconductor manufacturing equipment, and that's for our encoder product line and also significant interest from the defense industry, which is a more broader cross sector of products. Real significance, I think, for us, though, is not just the responding to the market conditions and the great job we do there, but it's actually on our emerging businesses and the progress that we are making. So these are the bets that we are placing, the investments that we're making for the future for the long term of Renishaw. And I'm going to go through with you later on some of the progress that we have made there. And thirdly, I just wanted to stress -- clearly, we are an organization. We pride ourselves in our investment in engineering, in R&D for our long-term growth. The output of that is what is key, and we have had some really significant new product launches recently, genuine excitement, particularly from our sales team on the opportunities that they now see for making the most of these. In terms of operating margin, improvements there despite currency headwinds, and we'll look through there. And actually, we're really looking forward to a strong revenue and profit growth for the year ahead, and we released our guidance for that. We have a little look through some of the key performance indicators and some of the themes coming through here. First of all, than the -- very much that strong growth coming through in Q2. As I said, some areas strong. Other areas such as our sales of machine tool sensors, CMM sensors, the machine tool builders, the CMM builders, they're still quite sluggish overall actually. But the -- the one we always talk about is the extreme is the German machine tool market, which is still quite challenging. In terms of operating margin and flow through on to the bottom line, then we have taken actions there to improve to support this. We had a GBP 20 million cost reduction exercise and also the closure of our drug delivery business, which has supported that margin development. Also as a business, we very much are focusing on cash and cash flow conversion of making sure we are making the most of the assets that we've invested in over the last few years. We have seen some pressure on that though. We have had the impact of restructuring costs on that number. And also, we are investing at the moment in working capital as we respond to the production demands of our customers. Okay, that's some of the highlights. I'm going to hand over to Marc now to go through the financial numbers. Marc Saunders: Great. Thank you, Will. So I'm going to start by looking at some of the highlights from our income statement. As well as I said, we've had a record first half with reported revenue growth at 7.1%, rising to 11.5% at constant currency. We've seen growth in all 3 segments, and we've also seen an improving order book in all 3 segments and also all 3 regions. When we look at regional revenue performance, however, the picture is a bit more mixed. So if we look at the Americas first, really strong growth here, 15% at reported rates -- more than 15%, more than 20% at constant currency. And that was driven by strong demand coming through for high-value capital equipment, so things like our additive manufacturing machines or 5-axis co-ordinate measuring machines. So that's been a real success there. This region has also benefited from around GBP 5 million of higher pricing and surcharging to offset tariff duties that were introduced during 2025. When we look at APAC, also a really strong performance here. So growth of more than 10% at reported rates, more than 15% at constant currency. And here, the key positives were rising demand from the semiconductor and electronics manufacturing equipment sector for our position encoders and also really good growth, really good demand for our Equator flexible gauge from the consumer electronics subcontract manufacturers. So that's the story in APAC. EMEA was a bit of a different picture. Here, turnover down around 5% at both reported and constant currency basis. We've been reporting some subdued demand here in the EMEA region for a little while and that continued throughout the first part of the half, but we did see a pickup in demand later in the period, and we ended the period with the order book stronger. We also implemented a new sales ERP system in September in some territories, and that did have an impact during the half. But hopefully, you can see from the Q2 versus Q1 performance, we've seen a real step up here in the region, it's actually the biggest step up of all of our regions from Q1 to Q2. So we're moving in the right direction there. On an operating profit level, an increase of 11.4% to GBP 57.5 million and an improved operating margin by 0.6 percentage points. The moving parts there, as Will has touched on currency in one direction, organic margin improvement and another more of that in just a moment. But when we look at the income statement, perhaps the most notable thing you'll see is an 8.5% reduction in our gross engineering costs, which reflects some of the cost reduction actions that we've taken in the last 6 months. Operating -- sorry, profit before tax grew by a similar amount, 11.5% to GBP 64.1. Effective tax rate in the period was 21.1% at reported rates rising to 21.8% on an adjusted basis, and that's perhaps more representative of what we expect to see coming through in H2. And then finally, our dividend payment remains unchanged at 16.8p. Right, let's take a look at the operating margin evolution, and I'm comparing now the first half of the prior year with the first half of this year. So we're starting with 15.1% that we reported last year. And on the left-hand side of this bridge, you can see the external headwinds that we face largely from currency, but then being offset by the organic margin improvement we've generated through cost reduction and operating leverage. Starting with currency, that's been a headwind for us for some years now. We've seen progressive weakening of the U.S. dollar and the Japanese yen against sterling over several years. And we are exposed, of course, to this currency fluctuations because many of our costs are in sterling. Most of our revenues are in other currencies. And so we seek to manage that through the use of hedging contracts, forward currency contracts over 24 months. And over the last few years, our contracts have done a good job in helping to offset some of the movements we've seen on a year-to-year basis. And indeed, last year, when we looked at the prior year, we saw a particularly strong performance from our contracts and that was as a result of us taking them out at the time when sterling was much weaker than it is today. So they paid out handsomely last year. That has not been repeated to the same extent, but when we look at this year, our contracts have still done a good job, raising about GBP 5 million of revenue to offset roughly GBP 5.2 million of operating margin change as a result of moving exchange rates. But overall, when we wrap that up, we've got GBP 8 million less in currency income, in contract income, GBP 5.2 million of movement in currency, so GBP 13.2 million, 3.6 percentage points of margin. So a significant headwind. With tariffs, that's impacted our revenues by around 1.4%, but had no impact on operating profit, and as a result, has had a small degradating -- degrading effect on operating margin. Moving to the positive side of the equation. Cost reduction. Will mentioned, we ran two cost reduction programs over the last year, a company-wide operating cost reduction initiative aiming to remove GBP 20 million of cost from our run rate on an annualized basis. And we also closed down the loss-making drug delivery aspect of our neurological business, aiming to save around GBP 3 million on an annualized basis. Pleased to say those savings have started to come through. The combined impact of those programs has been roughly a 7% headcount reduction for us at a group level to just below 5,000 employees at the end of December. And we've seen GBP 9 million of savings coming through, so 2.4 percentage points in the first half, and we expect to achieve that GBP 23 million of annualized savings on an ongoing basis here forward. So that's coming through as planned. The other side of it has been operating leverage. So we've generated an 11.5% constant currency growth in the period. That has resulted, obviously, in more gross profit, which is more than offset inflationary pressures that we've seen in our cost base around things like pay benefits, health insurance. All right. So that's the margin story. I'm going to now just walk through each of the 3 segment performances for you, starting with Industrial Metrology, our biggest segment. So here, the story is solid revenue performance growth of 4.3%, rising to 8.8% on a constant currency basis. The growth drivers here were our emerging systems and software businesses. So these are our 5-axis co-ordinate measuring machines, our flexible gauges and metrology software that supports both of those products and helped use us to make the most of them. It's really pleasing to see growth in this area. These are emerging businesses, and we're really targeting top line growth. And here is a key part of our growth strategy. So it's really pleasing to see that coming through. Another success story here is our calibration products. This is an established product line, and we've seen growing demand here, particularly coming from the semiconductor and electronics manufacturing sector. So those machine builders actually use our calibration products in their factories to help them to make and pass off their machines. So we've seen rising demand coming from there as activity levels have risen. By contrast, we've seen flat sales for the sensor part of this segment. So that's our co-ordinate measuring machines, machine tool probes and also the styli and accessories that go with them. So that's been flat overall, some high points in Asia, in consumer electronics, but weaker general demand in -- particularly in Europe and particularly in the automotive sector. So when we look at the operating performance of this business, it's roughly flat in margin terms. We saw essentially currency headwinds being pretty much offset by the combination of cost saving and operating leverage, but we ended up at pretty much the same operating margin. Let's move on to Position Measurements or our other large segment. This did strong growth in the period. So we saw 7.4% rising to more than -- yes nearly 12% sorry, at a constant currency basis. And this was something of a game of two halves. We definitely saw a really notable pickup in this business in the second quarter. And we've got great momentum going into second half. The drivers of growth here were strong performances from our established open optical and magnetic encoder businesses. We've mentioned semiconductor and electronics manufacturing equipment. That's been a key driver. But actually, we've also seen strong demand from general factory automation and robotics, particularly for the magnetic encoded line. By contrast laser encoders have seen a reduction compared to a really abnormally strong period in the prior year. These are used in front-end semi and wafer inspection. And yes, we had an abnormally strong comparator to go against. But we're actually really confident in the long-term future of this business. We think this is volatility rather than a trend. We've seen rising order book, and we've launched new products in this area. So we're really confident about the long-term prospects. When we look at operating performance, we've seen similar effects that we saw in the Metrology business. So currency headwinds offset by cost savings to an extent, but here, the product mix change has been quite significant in this period comparator. So we've reduced by about 4 percentage points up to 23.4%. So still a strong for operating performance here. And I think the more meaningful comparison to take is if you look at the comparison against the whole of last year, which was 22.5%. So the first half really was a bit of an abnormal period. So we've got good momentum here, good top line growth and improving underlying margins. Finally, Specialized Tech. So the smaller segment, but the one that's grown the fastest in this period. So growth of more than 25% at a constant currency basis. So really strong growth. And that has been almost largely coming from our Additive Manufacturing business within here. So we have a strategy here of selling to key accounts, and we've seen many of those adding to their fleet of machines as they ramp up production. But we're also targeting new customers, and we've seen quite a lot of those coming in, in this period, and we've seen particularly strong demand from both new and existing customers in the aerospace and defense sector. That's been the notable change in demand in the period. Spectroscopy down slightly, slightly stronger in America, slightly weaker elsewhere, but we've seen good order momentum on that recently, normally has a stronger H2. So looking forward to that this year. And in neurological, that's the smallest part of this product group, and the key sort of thing here is that we completed the closure of the loss-making drug delivery aspect in the period. So when we wrap all of that up and look at the moving parts on margin, we can see a real step change in performance here, 22 percentage points of margin improvement. We're now just short of breakeven on this segment. The moving parts there, yes, currency, again, slightly less proportionately than the others because of slightly different regional sales patterns. We've seen cost reduction, obviously, coming through with both the company-wide program and the focused drug delivery activity. But the large majority of the margin improvement coming through here is from operating leverage with the growing AM business. So that's been the key driver of margin improvement. Right, lastly from me, just a quick look at return on capital and cash generation. So we focus on return on invested capital to make sure that we're allocating resources to profitable investments. We saw an improvement here to 13.2%, so 0.6 percentage points. We have a target of 15%. So clearly, we have some way to go. And the way we're going to get there is by driving our operating margins, but up to our target range and also keeping a lid on investment in capital. We have had a period of higher investment in recent years in property. That's now behind us, and we're operating at a lower level of CapEx. So in the first half, CapEx was GBP 17 million, and we're expecting to run at a rate of about GBP 40 million for the year as a whole, and that's focused mainly on plant and equipment to support capacity and productivity growth. And that's part of the cash generation story. The other side is working capital. We have ramped up working capital in the period. Obviously, we've seen a bit of an inflection in demand in Q2 and that's triggered us, obviously, to increase our production rate, drawing in more piece balls, more work in progress, et cetera. So that has -- we've seen that during the period. So our cash conversion overall is just below our target at 68%, but we think we're doing all the right things here in terms of keeping a lid on CapEx and making sure we're supporting growth with our balance sheet. Finally, our cash balances, currently just over GBP 240 million at the end of the period, so down compared to the summer, and this reflects the outflows that we've seen on the cost reduction activities, on working capital and on the dividend payment in respect of H2 last year. All right. I think that's enough for me. I'll hand back to Will. William Lee: Lovely. Thank you very much, Marc. So, as I said, I'd like to now talk through some of our strategic priorities and a little bit of a look more into the future. And I'm going to focus on the first 3 of these because I think the cash generation and ROIC, we have already touched on. So the first area here is the key strategy for us, which we've always talked about of long-term growth through product innovation. It's our key overriding strategy. To set the scene for this. I just want to reflect back firstly, on our long-term value creation model, something we've shared and many of you will be familiar with. Just to go through, if we look on the left here, then we can see that the markets that we operate in, that GBP 6 billion addressable market, and really most importantly, the fact that they are favorable markets that we think on average, are growing by more than 5% a year. You can see the drivers in the 4 boxes around the addressable market. What we've seen recently probably is acceleration here, all the news on AI and the data centers there really feels like it's accelerating the growth from the electrification area there. We are certainly seeing, I think, continued acceleration of our customers also looking at the adoption of the automation and so had to automate processes right across from machining to metrology, but for a range of things there. And we're also seeing probably a broader one, which maybe cuts across slightly differently with all these of the expenditure on defense. And it's really how do we help customers there with manufacturing agility, ramp-ups, new technologies to go in there. So positives, some changes going on there from our market. The key bit for us then is how do we outperform. And on the top right, you can see those 3 key themes. So the first is growing in existing markets. This is how do we sell more sensor technology normally to the machine tool -- the machine builders around the world, whether that is semiconductor or machine tool. And we'll also talk -- we'll often talk about this in terms of the number of dollars we get per machine tool spend or sold for the machine tool industry, for example. Next, increasing technology value is about us selling the increasingly complicated systems. So capital goods together with the software to enable them. And then thirdly is looking in terms of moving into new markets. And to be clear, this is very close adjacent to new markets to where we are already operating. With all of these, the innovation side being disruptive, having the USPs is absolutely key for us to succeed and give our sales teams around the world, the strongest advantage that we can. I'm really pleased that actually, despite reducing engineering expenditure, what we are seeing is a really strong pipeline of products that we have recently launched. And also, we've got a really healthy pipeline of products to come through for the future. I just want to highlight a few that are kind of really key for our strategy and for our success. So if we first will look at Industrial Metrology, we've had a really strong reception for the Equator-X and MODUS IM Equator software that goes with it. Equator-X brings very high-speed measurement to the shop floor, and it does it without the need for a master part to compare with. So our customers immediately get the benefit that it brings. The real enabler with it is the software, which dramatically deskills the level of knowledge needed to be able to program the device. So what we have with the combination of these two is, amazing performance on the shop floor, Metrology where you need it at the point of manufacture and also far simpler for our customers to deploy and far more flexible in terms of the range of different parts that they can measure. This is really key for us. You can see there's excitement from our existing sales team all around the world and what they can do with the customers that liked our existing products but need this. But there's also excitement in terms of the new routes to market that we can open up. So people who are selling already a machining and manufacturing solution where this can be a part of it, they can own it and they can sell it. So a lot going on there and a lot to do. From position measurement, Marc talked earlier about -- with our laser encoder product line being sold into the wafer inspection, the great thing here is this is always a market where the challenges of the next generation of wafer technology is getting smaller, these customers always have really tough metrology challenges. And we've really stepped forward with our next generation of laser encoder in terms of the performance that we are now giving to those customers. Again, had a chance to meet some of them recently, really positive on the relationship that we have with them. ASTRiA, we have talked about. So this is actually a new area for us using inductive. Again, it's been really well received by the market in terms of the metrology performance that it delivers. And then finally, from a specialized technology point of view, Strada is our new Raman instrument. And Raman traditionally is an instrument used for the Raman expert in the Raman map who will do things. Strada is designed to simplify. It automates the Raman process from a hardware, dramatically simplifies the software. So it's Raman for the non-Raman person. So if you want to solve a problem, you can do it with this, you don't need to know anything about the technology that is inside. So this has opened up different opportunities, different markets for us with Raman. And finally, LIBERTAS is new software that we have launched to go with our Additive Manufacturing business. So what this does is, when you are making a part additively, you have to put in supports to hold it in place? And what LIBERTAS does is by doing very clever novel scanning strategies dramatically reduces the number of supports that you need. So what this does is it speeds up the cycle time. You don't have to build these supports, you save time. You save waste because you're not processing the material. And you also save post processing time because there's a lot less than the support material to remove after the build. So it's pushing forward the productivity of our machine for our customers. What it also does actually is really improve. The tricky service on additive part is the bottom and the surface finish of that with our new software is really noticeably moved and a step change in performance there. This was really well received by a number of our customers. So a strong healthy product launches there, much more to come in the future. So while we absolutely see that our future is the growth, what we've been clear on and talked to you about is making sure that the business is as focused and as lean as it can be to support that growth. If we look at the initiatives that we have going forward, then in terms of this graph, you can see that, I guess, Marc earlier brought this up in terms of the 15.7% that we ended up with this half year now that we've just announced them. For the rest of this year, we still see continuing to have some currency headwinds, some benefit from the cost reduction program and then actually the flow-through of the margin from the revenue development taking us up to our end of year results. The interesting bit really is going forward, we set ourselves targets on this. Some of that will be achieved by the revenue flow in the future of looking at the growth strategy -- that innovation that growth strategy, but the other bit is on the development on productivity across the group. We're in early stages on this. I guess we've already done some activities, which we talked about, we are very much now in the planning stage of what are the best opportunities that we have as a business going through that and then working on the program to deploy that. So when we're back up here for Capital Markets Day in June, it's going to be a great chance to update you in more detail on those plans and what we intend to do. And thirdly, I want to spend a little bit of time on the emerging businesses. As I highlighted at the start, I think, overall, this is the bit that is the most encouraging for me with the developments that we have seen here. So right across the board on our different reporting segments, we have emerging businesses. What we have looked at here over the last several years, there's quite a bit of work and focus on these areas. And you all have seen, if you've been monitoring for a while that some of these businesses are ones that we have divested or closed. Some of them are ones that we've had for a while, but we've made quite significant strategic changes on them. And those ones, I would classify as the Metrology, CMM and gauging systems and Additive Manufacturing that both had and in some respects, quite a similar of really focusing down, understanding what our differentiators are targeting key customers and making sure we are very clear what we are about. And it's been great to see both of them really starting to do well. Additive, in particular, this time that strategy of focusing on customers with volume opportunity focusing on a highly productive single-sized machine is really starting to pay dividends. And what we're now seeing is a repeat orders coming through, both from actually the customers that we talked about in the past, whether that's of the medical that we talk about, but it's really also being accelerated now with interest and customers in defense, understanding the opportunities that Additive gives for them. Now what we also did when we exited from some of the businesses that we didn't feel were going to meet the criteria for what we wanted for the long term of the business was we did pick out some of the best areas of innovation that we felt we had across the group and tried to accelerate those. And as Marc talked about when he was talking about the position measurement both in closed optical encoders, really starting to go well. But I think that for me, the star here is definitely on the inductive encoders, FORTiS, I talked about it in the innovation. We went -- we've launched this as our MVP of saying we're just going to do one size. We're going to get it out. We're going to really hit the deadlines. The team did a fantastic job of doing it. The feedback from customers, the metrology is superb, the ease of use is superb. And now we have customers saying that they really want to switch over to our technology, design us on the existing platforms and designs us on new platforms. Now this is designed for a broad range of industries. The one at the moment where it feels like it's hitting the sweet spot is on the defense industry. We have actually recently decision that we need to invest more from an engineering and a manufacturing point of view to make the most of the immediate opportunities that we have here. These businesses all take time to come through, but this is one that feels like it is working at a different pace to what we are used to. Really important for us. I mean we're talking through with the team internally, moving these emerging businesses through into established is key. We have a lot of exciting R&D going on for the future, some of which is going to power existing businesses, but some of it is the new emerging businesses of the future. So we need to make space for it to come through so we can invest in it by migrating some at the moment. So lots of positivity going forward. But with us, there's always the uncertainty in the markets that we operate in, but we certainly feel like we have momentum going into H2. And I'm really pleased to give a positive revenue and profit trading guidance for the year ahead. Thank you very much. We now have time for Q&A, which is great to be doing in person. Lacie Midgley: Will and Marc, it's Lacie Midgley here from Bloomberg Intelligence. Just a couple for me. First, I guess, on the China strategy. At the full year, we talked a little bit about the entry-level market there, perhaps kind of looking at lower-priced alternatives to some of your core products. I know we're not quite -- we're not far on from the full year in that description, but is there any update on the strategy there and how that's evolved and any progress you can update us on? William Lee: Yes, certainly. So I think -- I'm just trying to think back to exactly what we said at full year, but certainly, what we are looking at now is, we have certain products which are established, but we can tweak and adjust so that they are limited in performance for an entry-level China market, so where we can target and go after business at a lower price to the customer. We're doing that in a quite a limited way in testing things out. So that's very specific. We're also getting the innovation engine and it's interesting here, particularly probably on some of the more sensor technology side of the business. The innovation engine has come up with some really good ideas on stripping manufacturing costs and simple designs, particularly encoders there is some really quite exciting stuff for the future coming through that allows us to target the entry-level market at a different price point. Now people always worry about this in terms of what does that mean in terms of threat of the different areas. But actually, this is stuff which is designed such that it's only suitable for entry level. What we always see in things like the encoder market is things gradually moving on. So some areas will become more commoditized and as that happens, we'll have new opportunities elsewhere, so... Lacie Midgley: That's really helpful. And on Additive Manufacturing, I mean it's clearly moving in the right direction, which is great to see. I think these are obviously much bigger ticket items for you. So not many are going to be needed to kind of move that specialized technologies aisle. I mean you talked to the defense customers. But in terms of size, are these smaller end users? I'm just trying to think about how significant the move is there? How quickly we get to that becoming an established business? And Is this about kind of expanding AM usage and really embedding the technology with your existing customers? Or is it growing the base and new customers, I think you've talked to both of those, but a bit of extra color on that would be helpful. William Lee: Yes, I think both of those are key. And often, we'll try and say, look, we're focusing on existing customers and repeat business and not doing too much and then new customers will come along. So absolutely, we're targeting existing and new. Size of the customers can range from really large to far more dedicated specialists supplying into industries. I think the most important bit across the board on this is people embracing and understanding the benefits designing for AM and showing them to their customers that this is the advantage you can get and what we can do for you now with this. So it feels like for a long time, and we've had this on machine tool pros, we had it on Equators, we had it on the ballbar product in calibration of us doing the marketing. Once the customer starts saying, this is what it can do, things start to really accelerate. There will, for sure, be ups and downs on that journey. As you say, with big ticket items, it doesn't take that much to change. It's also different for us from a manufacturing point of view, ramping up with encoders is somewhat different to ramping up with the scale and complexity of an AM machine. Mark Jones: Mark Davies Jones at Stifel. A couple of things, please. Firstly, slightly longer-term question, but obviously, it's frustrating in some ways to see all the good organic progress and profitability eaten up by FX and I'm not going to ask you about hedging strategy, but more about the cost space. I mean you are unusual in having so much of your R&D and manufacturing located in the home market rather than pushing that out into the regions. Is there any change in the thinking about that? Or do you think that's caught your ability to sort of control the technology go-to-market? William Lee: Yes. That's a very good question and one that we are considering at the moment. My honest though, is probably the reason that we would be moving any manufacturing would be for geopolitical access reasons. Because honestly, as we have things in terms of single point of manufacture, areas, we feel is extremely efficient. So we are -- this is one of our strategy decision topics of what we should be doing and are there certain products? It could be some of the stuff that was tied in with the question on low cost, which are ones that we decide we make further afield. I don't think we'd be doing this to try and -- the primary reason for doing this would not be to give ourselves more stability from a currency point of view. It would be a nice benefit from it. Mark Jones: Okay. And just a little one. I won't ask you about share buybacks because you can't say anything. And given the strength of the numbers and the strength of the balance sheet, is a flat dividend a bit mean? Is there some sort of reweighting to your thinking around that? William Lee: So we target a dividend cover of 2. And if you look at the midpoint on the profit for the end of the year, then this would give us that with a flat divi. Clearly, I guess we have an optimism around the business, but it is 1 quarter that things have happened, we don't want everyone to get carried away. So just, I guess, that the -- probably the fuller answer to that is on a capital allocation point of view, this is more of a strategic question for us to go through as a Board of thinking of how we want to run the business and use that cash or return that cash. So that's the bigger question for the future, not addressed by a divi really. Richard Paige: It's Richard Paige from Deutsche Numis. Two from me as well, please. On the defense, it sounds as though -- I may have been getting this wrong, but your growth is going to be ahead of the market. There's new applications that -- or new customers you're winning within that. Can you just elaborate on sort of end use within the defense market? William Lee: Yes, really broad. So we will have -- so ASTRiA, we talked about, which will be something that defense customers could integrate. Additive Manufacturing can be something that parts can be made with versus a lot of indirect stuff probably through machine tool, CMM builders and et cetera, which will allow the metrology and the precision of both machine parts needed for going into defense. So direct and indirect, a real mixture there. In terms of where we are on investment curves, I'm not sure that we really know, to be honest. Richard Paige: And the other word that normally goes with defense, aerospace, we haven't spoken about it much here, but obviously, with the industry ramp and so forth, expect that to be a reasonably strong area of demand for you as well? William Lee: Yes, I'm not sure exactly what our aerospace numbers are at the moment, but it's not... Marc Saunders: I would say that's probably we're seeing that coming through with our AGILITY sales, particularly in the Americas. That's -- we've got a lot of key customers that are in the aero engine sector in particular, but also airframe to a lesser extent. So that's been a driver of performance more recently in the nondefense element of A&D, although obviously, there's some overlap there in the engine business, they tend to serve both sectors. William Lee: I think one key when you're thinking about Additive Manufacturing, and I think this is a good thing for all of us. But if you're working with an aerospace, there is an awful lot of checking balances, review. So it's a very long development time that you're working with a customer before you get sales. Defense is far quicker on things that maybe don't have as long a lifetime. Marc Saunders: And perhaps if I could just add as well, I think there's quite a lot of new business formation going on at the moment in some of the later -- the more recent platforms that are being developed for modern warfare. There's new players entering the business, and we're seeing some of that within our customer base as well as repeat business coming from established customers. Bruno Gjani: It's Bruno Gjani from UBS. Just because we were on that defense topic, I just have a small follow-up. When you mentioned on the inductive encoder side that you were winning some customers and you were now being spec-ed in on some new accounts, does that specifically relate to defense? Because if that's the case, I was wondering whether if now you're being spec-ed in, you could actually see a material rise within that product line? Or how are you sort of thinking about that component? William Lee: Yes, this is still small. We have one size of ASTRiA at the moment. And it's great with the customers. They love it. But suddenly, it's okay, I need this size and I need this size and I need this size, which does create some engineering and manufacturing work. So, yes, that's going to be a positive. It's quick in our terms that we think for encoder business development, but it's still not going to have a material impact in the next year or so. Bruno Gjani: Understood. And it reads as if the emerging product line businesses were really strong within the half and the quarter. I was just wondering if there was any way you could maybe roughly quantify the contribution to growth from those emerging products or might not be? William Lee: I think probably at the moment, I think, take the positivity, but probably we're better off keeping it just the reporting segments that we have. Bruno Gjani: Understood. Were there any subtle differences in terms -- the order trends that were really encouraging or sort of read to be really encouraging ahead of revenue growing really well, the order book was growing. Were there any subtle differences within what you observed in order intake, particularly as it relates maybe to Q2? So for example, I'm thinking of you called out machine sensor as being actually quite flat in the half. Did you see any sort of pickup on the order intake side there that's worthy of calling out or not really? It's sort of similar drivers to revenue? Marc Saunders: Not worth calling out, I would say, on the machine tool sensors. Yes, the places that we saw the stronger growth were also the places that the revenue picked up. There's a strong correlation there. So additive and position measurement into semi, those were probably the highlights. But generally, automation demand for the wider position encoder business as well. Bruno Gjani: And just a final one that I was sort of wondering on is on laser encoders in terms of the mix headwind in the first half, what I wanted to get a sense of is whether the mix in the first half is abnormally low within laser encoders and therefore, there's a potential for that to grow in the coming, say, 12 to 24 months? Or was it that the mix in the first half of last year was abnormally high and actually we're at a normal level today? Marc Saunders: No, the latter is more the case. So it was an exceptional period in the prior year. I'd say the laser encoder product line has been a real success story for us over the last sort of 10 years or so. And we have a strong niche position in wafer inspection. And that is obviously tied to front-end semi and the trends in that market look decent at the moment. So -- and we've seen rising order book. So we're optimistic that if you look through the perturbation of the prior year, there's a nice growth story here. Mark Jones: Sorry, can I do a couple more? Defense, I don't remember being in your sort of breakdown of end markets being a big chunk in prior years. So could you give some sort of sense of the scale of that for you? I know it's tricky with your routes to market. William Lee: Yes. I think we normally talk about 5%. It feels like that's creeping up at the moment. And it's probably being quite impactful in certain areas that we've talked about. Marc Saunders: So it normally sits within what we call -- I mean, aerospace normally is where defense sits. We just -- we haven't called it A&D and perhaps we should. But the bulk of that historically has been civil. But yes, the defense proportion of that is rising. And as a share of the total, it feels like it's increasing overall as well as other segments so, yes less buoyant. Mark Jones: Okay. And the other one is you talked about geopolitical considerations in where you put your manufacturing. How about where your customers do? There's been all this talk about kind of reshoring and much less evidence of it actually driving investment. Are you seeing any of that coming through? William Lee: I think it's really hard to say. What we are certainly seeing is some of our customers where we would have shipped product to a certain country now saying, okay, actually, over the next 6 months, we are migrating manufacturing to a different area. Some of that's going the other way. So that's countries moving out actually. So -- and then there's a broadening in other areas. So it's actually quite complicated. We met with some of the electronics equipment manufacturers recently. And I think we probably need to understand a little bit more about why they are going to certain areas and what those trends are going to be. And for us, that doesn't matter much because we'll do the work with the design teams and then it tends to be just where we deliver the products to. Mark Jones: No, I guess I was also looking at the strength in the U.S. And is that -- do you think more product specific than market? William Lee: I think that is -- there's a good capital investment going on there at the moment. Again, probably some of the underlying manufacturing with the component side of it is maybe less. And we see some things going in, some things going out. So clearly, if you're a manufacturer that's going to be exporting, making stuff in the U.S., you may decide you're better off not making it there, which we have seen. Much of the complaints of our U.S. team. They're doing all the work and then moving the business to a... Harry Philips: It's Harry Philips from Peel Hunt. Just one question, please, on the order book. You talk a lot about the order book in the statement, but obviously didn't give us a number. So I'm assuming it's reasonably short cycle. I mean, in terms of the book-to-bill, given the revenue growth you've had in the period, can you at least give us an idea of where the book-to-bill might be against that? And then is it -- would it be right to assume that the order book is reasonably short cycle, maybe Additive Manufacturing apart or is that not? William Lee: It's not and it is. I think the one thing we would always put in as a caveat. So you're right with the Additive. On encoder, what we will see is when our customers start to get more stressed because they really think they've got orders coming through and they often don't find out until the last minute, they will start to put on call off orders and they'll give us a 12-month, 18-month order with predicted volumes, which will go on to our order book. Then they will cancel that extremely quickly if they change their mind, but they will also show it when they want to double that. So it's -- we look at the order book and it gives us a feeling, but you can't rely on it either. Marc Saunders: We know that some of it will be -- will melt away. Harry Philips: I mean just precisely on that point, I suppose twofold is does that heat, if you like, give you a window around pricing? I mean, if you get extreme demands in terms of potential demand -- I suspect you don't want to sort of mess up online, but -- and then the second is how you plan your manufacturing around that? Because clearly, if you sort of responded directly to those order flows, you could load your cost base. And then as you say, if you then get a cancellation, you're left with sort of stranded cost type stuff. So how do you sort of -- what's the very sure way of interpreting that sort of front end into manufacturing curve? William Lee: You say smooth as though it's anything but -- and normally when these things happen. So clearly, we're trying to work on very uncertain data, and we talk about many things, even if there's investment going in, the end customer may not decide on which supplier they want to use. Those suppliers may all be using our encoders somewhere, but they may be using different encoders from us. So you can't even say, okay, we know it's going to come. Let's make this because then this customer gets it and they want something different. With us, it is just trying to make sure as much as possible long-term strategy is migrate customers to our latest technology. That's far more designed for automated assembly, so we can ramp up and then it's supply chain holding up for us to be able to respond. Safety stocks and when we look at it in terms of our invested capital, we are high there because we know this happens in the markets that we operate in, we have to deal with that. So -- and then there's just a lot of panic that goes on to try and make everything happen as quickly as it can. It is on the more commoditized stuff and quite complicated of understanding because often we'll be -- we may even be dual sourced. So it's us and a competitor are both designed into a product and then it may be then who can supply better, quicker and whatever else. Marc Saunders: I'll just add, we are also increasing our use of temporary labor in some parts of the supply chain for things like cables for encoders, which are -- there's a lot of them to be made, and we use more temporary labor in our plants in India. William Lee: Do you want to go first and then you've got... Unknown Analyst: Just have a quick follow-up -- not a follow-up, but a question on ERP. Could you perhaps provide an update in regards to how that's planning out in terms of phasing, strategy, sort of key milestones to come? William Lee: Yes, we can. So it's certainly been a challenge. We have -- having done a small -- our Canadian office, which went relatively smoothly. We've now done our most complicated U.K. center. We experienced an awful lot of challenges. I think it's fair to say we are through the worst of that now, but we still have a number of challenges that we want to make sure it are resolved and working smoothly before we roll this out further with Germany being our next company that will transfer over to D365. So yes, it has not been a pleasant experience and a lot of lessons have been learned. Unknown Analyst: On the tool builder market. It sounds as if Europe has been soft for a while. I was just wondering whether you're seeing any signs of green shoots as it relates to German stimulus spending in '26 and beyond? Or are those not apparent yet? William Lee: The last conversation I had was back at the end of last year with the head of a German machine tool company, and they were talking about this being a 5-year recession like they saw back in the '90s of a really tough time. I didn't think it was going to get any worse. it's really tough over there, domestic market, export market. It's -- and I think as we talked about, we've seen some of them being taken over. So yes, it's tough. Unknown Analyst: Lastly, could we touch maybe upon humanoids? There are some companies in the market, sort of traditional industrial companies with, let's say, less expertise in automation and robotics that have been talking about this quite a lot, and the financial market has rewarded them for it. Do you have a suitable product today that could serve that market? Do you have any existing relationships with humanoid OEMs? And do you view it as a potential opportunity, say, over the next 5 to 10 years? William Lee: Okay. So I thought the first thing is are we going to do a humanoid robot, which would be easy? No, no. We are definitely not going to do that. So the bit we are talking with some people around here is on the encoder, the retro encoder technology. In our view, probably this is going to end up being a quite commoditized low-end market and the price point they'll be looking at is not going to be attractive, and we've got better opportunities to go after. So it's something we look at, we'll monitor, but I don't see it being significant for us. Unknown Analyst: Rich Hill from Jefferies. I just a couple of questions just looking at margins. Looking at Position Measurement, obviously, you had one of the largest margin movements kind of out in the division. Just wanted to ask, you kind of talked about FX and the mix. Just whether there's anything else in there, perhaps more costs falling in there comparatively. And I guess to Bruno's question earlier with it perhaps normalizing, just how you kind of see that in the second half, whether kind of that bit of growth in the order book for the laser encoders will kind of offset it a little bit for the second half? Marc Saunders: I'll take that. Yes. So I mean, I don't think we see anything sort of particularly different in terms of sort of cost base escalation going on in there. We did reduce costs slightly less in the position measurement sort of side of the organization and some of the other areas in the cost reduction process, but that was because we had some areas that we were really seeking to invest in and some of the emerging elements of the product line that we felt we wanted to allocate resource to. So it had a slightly lower proportionate, but we're talking 1% or so. It's not a huge factor in this. So no, the primary driver in the short term was mix, but we're seeing it's well into the 20s in operating margin and I think long term going in the right direction. Unknown Analyst: Okay. And then if I may, just chance to question looking at your kind of emerging products, and we've heard the kind of importance to your strategy going forward. Just in terms of margins, and I appreciate not specifics, but the assumption being that they're lower kind of margin to as they come in, as you gain that market share. But just looking at that kind of profile as they become more developed, I guess, what kind of time frame or any other details you could give us there would be great. William Lee: So do you mean in terms of gross margin, sorry, or bottom line? Unknown Analyst: Bottom line. William Lee: Okay. Yes. So if they're emerging, they are definitely ones that are not hitting our profitability targets. So at the moment, they're at different stages. So we have targets on when different ones should be getting into better stages of profitability. And ones like CMM engaging are far more established than some of the ones that we have just launched. Marc Saunders: Chris, have we got anything online? Chris Pockett: Nothing yet. Marc Saunders: Okay. All right, then closing remarks. William Lee: Yes. So if there are no more questions, I guess in terms of overall, great to be back here in person. As I said at the start, it feels like a really good H1 set of results, still lots of uncertainty as there always is with us going forward in the short term. For me, I think the leading message would be on the medium to long term. If you look at the opportunities we have from the innovation engine and also the progress we're making on those emerging businesses and the focus areas that we have there, that's the excitement that is within the business and the excitement that should be around Renishaw. So thank you all very much.
Melanie Kirk: Hello, and welcome to the results briefing for the Commonwealth Bank of Australia for the half year ended 31 December 2025. I'm Melanie Kirk, and I'm Head of Investor Relations. Thank you for joining us. For this briefing, we will have presentations from our CEO, Matt Comyn, with an overview of the results and an update on the business. Our CFO, Alan Docherty, will provide details of the results, and Matt will then provide an outlook and summary. The presentations will be followed by the opportunity for analysts and investors to ask questions. I'll now hand over to Matt. Thank you, Matt. Matthew Comyn: Thanks very much, Mel, and good morning, everyone. It's great to be with you today to present the bank's half year results. We recognize the cost of living pressures, global uncertainty and rapid change are weighing on many Australians. In this environment, we've remained focused on supporting and serving our customers. That focus has delivered disciplined growth across our core customer segments. Cash net profit increased by 6% on the prior comparative period and earnings per share increased by $0.19. We maintained strong liquidity, funding and capital positions. And our operating performance and capital position has allowed the Board to declare a fully franked dividend of $2.35, up $0.10 on the prior corresponding period. This marks the 11th consecutive period of DRP neutralization. There are 2 features of this result to stand out. The first is the market context. We've seen high credit growth, low loan losses, supportive funding markets and intense competition. The second, which is a key strength, has been maintaining stable margins while growing volume at or above system across all major segments. Over the past 12 months, mortgage balances grew by $45 billion or 7% and business lending grew by 12% at 1.3x system. Deposit balances increased by $44 billion in the half. This was our strongest domestic deposit and lending balance growth in a half year reporting period since 2008. Australia is currently experiencing relatively strong nominal growth and private sector demand. In this environment, banks play a critical role in supporting credit growth for productive investment while maintaining unquestionably strong capital positions. Doing this sustainably requires profitable banks that can generate capital organically to support the economy. The last time credit growth was at this level, apart from a brief period during COVID, returns across the industry were materially higher. In normal conditions, such an environment would favor disciplined competition so that scarce capital is deployed where it earns an appropriate return. However, the competitive landscape is materially shifting due to differing business models, regulatory settings and architecture, customer offerings and return hurdles. Against this backdrop, we believe CBA is uniquely positioned to adapt and perform strongly. Our deep customer relationships and franchise strength allows us to compete effectively and profitably. That profitability allows us to support higher growth across the economy, invest to improve the customer experience and deliver consistent returns for our shareholders. Disciplined growth and margin management drove operating income growth of 6.6%. Operating expenses increased by 5.5%, excluding restructuring and notable items. This reflected inflationary pressures and higher investment in technology, resilience and our frontline teams to improve customer experience. Credit conditions remained very benign, contributing to 6.1% cash profit growth. The performance and long-term health of our franchise is underpinned by a simple relationship-led model. Deep trusted customer relationships drive more frequent and meaningful engagement. That engagement provides deeper insights into customer needs, enabling us to deliver superior customer experiences. Over time, this creates enduring value for customers and sustainable returns for our shareholders. This model has long underpinned our leadership in retail banking and over the past year -- over the past several years, has accelerated growth in our business bank. Technology continues to amplify this advantage, enabling more personalized, timely and scalable customer engagement. Our financial performance reflects customer focus, disciplined execution and investment in our franchise. We track the strength of our customer relationships through Net Promoter Score, and this remains an important indicator of trust and advocacy. We currently hold leading NPS positions among major banks in consumer and institutional banking. And following 15 months at #1, we dropped to the second position in business banking in the half. Operationally, this is translating into scale and momentum across the group. On average, each week, we settle more than 3,000 home loan purchases, lend around $900 million to businesses and process almost 150 million payments, and alert customers around 280,000 times to suspicious card activity. We continue to build scale and depth of primary customer relationships, which underpins long-term franchise health. We've consciously increased investment in data, technology and AI to improve customer experience, safety, security and operational resilience. The retail bank has performed well with pre-provision profit growth of 5%. We've maintained the leading Net Promoter Score for 38 consecutive months. Retail MFI share has increased slightly to 33.5%, but remains below its 35% peak. Customer engagement remains a core strength with 9.4 million CommBank app users and 14 million daily log-ins. We now hold 12 million retail transaction accounts, a 35% increase since the start of COVID and an increase of 585,000 in the past year. As a result, our deposit growth has been strong. Home loan balances increased by 7% in the past year to $622 billion. 97% of these customers hold a transaction account with us. Digitization and technology continue to drive performance in home lending. 70% of proprietary home loan applications are auto decisioned on the same day. We're focused on continuing to strengthen our MFI share and investing in AI-enabled digital experiences. The Business Bank has had another period of strong performance. Pre-provision profit growth was 8% and cash profit growth was 14%. MFI share increased to 26.9%, which is a 310 basis point increase since the start of COVID. We added 85,000 transaction accounts in the past year, which is a 7% increase. And the business bank is now the Commonwealth Bank's largest source of transactional deposits. We grew lending at 1.3x system, increasing balances by $18 billion in the year. Business Banking lending balances have increased by 87% or $78 billion in the past 6 years, supporting growth and jobs in our economy. Approximately 90% of business loans are linked to a CBA transaction account, reflecting the depth of our primary relationships. This supports credit quality with loan losses of 6 basis points in the half. It also allows us to use data and automation to substantially improve lending and servicing processes. For small businesses, we've doubled the volume of loans auto approved through BizExpress over the past 2 years and have reduced annual loan maintenance activity by 85%. We also launched a national AI, cybersecurity and digital capability initiative, supporting up to 1 million small businesses to lift productivity and competitiveness. The combination of deep customer relationships and prudent lending growth is delivering sustained earnings performance. Our institutional business is also performing well with pre-provision profit increasing by 13%. We've regained the #1 position in NPS, supported by improvements in client experience and execution. Our institutional bank plays an important role in providing $64 billion in net deposit balances and supporting markets activity. We've seen growth in new transaction banking mandates, enabling the institutional bank to further support the group in deposit funding. The markets business has had a particularly strong half. We led the market in debt capital market performance and last year topped the Bloomberg combined lead table. In New Zealand, ASB performed well with operating income growth of 8%. ASB is the highest reputation score of the major banks in New Zealand and has been a Digital Bank of the Year for the past 4 years. ASB saw 1.3x system growth in home lending and business and rural lending. Deposits grew at 1.2x system. Customer deposits and home lending balances have both increased by 41% in the last 6 years by $26 billion and $24 billion, respectively. The credit environment remains benign. Troublesome and nonperforming exposures decreased following upgrades or external refinancing activity. The number of home loan customers in hardship declined by 28% since June 2024, and we remain well provisioned for a range of economic scenarios. We hold total provisions of $6.3 billion, which is $2.8 billion above our central economic scenario. Our balance sheet remains strong with 79% deposit funding. Our weighted average maturity of long-term funding is 5.2 years and liquid assets are $199 billion. Our capital ratio of 12.3% is $10 billion above minimum regulatory requirements. A strong balance sheet allows us to invest for the long term and respond to any deterioration in market conditions. We've seen record inflows of deposits in the half. We've also seen $15 billion increase in redraw balances and offset accounts. Customers having surplus funds available is a significant predictor of arrears performance, and so this behavior has a positive capital impact. 87% of home loan customers are now in advance of their scheduled repayments. On average, 35 payments in advance. When adjusted for redraw and offset savings, household debt has now returned to levels not seen since 2015. The transmission of monetary policy in Australia means that our banks pay very competitive interest rates on at-call household deposits compared with other markets. On average, at-call deposits in Australia are attracting an interest rate, which is 5x higher than in the U.S. and 10x higher than in Europe. We've seen a strengthening in the economy in the past 6 months, driven by consumer demand. Spend has been increasing across all customer age cohorts. Most age groups are broadly maintaining discretionary spending and increasing savings levels. GDP growth in mid-2026 was 2%, more than double the same period a year ago. Most noticeably, economic growth has shifted from being primarily driven by public demand to being driven by household consumption. Last week, we saw the Reserve Bank raise interest rates to 3.85% in response to inflation, which is running higher than the target band. Almost 1/3 of the increase in the CPI basket is driven by housing with utilities a substantial contributor to that category. Our purpose, building a brighter future for all guides how we allocate capital, manage risk and invest for the long term. It reflects our long-term commitment to Australia, our customers and our communities. Some of the ways we're delivering on our purpose include significantly increasing funding for new residential housing development, delivering $190 million in benefits to consumers through CommBank Yellow, migrating our core banking system to the cloud to improve resilience, delivering 30% more technology changes, reducing critical incidents and improving recovery times by 65%, rolling out new AI tools and training programs to our teams to build capability and deliver better customer experiences and maintaining our strong balance sheet settings, sending around 40,000 alerts a day to customers about suspicious activities and deploying more than 2,900 AI bots to engage and disrupt scammers. Importantly, our strong performance enables us to continue supporting our 18 million customers, protect communities, support Australia's economy and invest for the long term. As cost of living pressures persist, we are providing targeted support to households under strain, including 63,000 tailored payment arrangements for customers most in need. We supported more than 79,000 households to buy a home, including through dedicated support for first home buyers. And we lent $25 billion to businesses supporting growth, jobs and economic activity. We're investing $1 billion a year to help more people protect themselves from scams and fraud. Our strong balance sheet allows us to support customers and communities while delivering sustainable long-term returns for shareholders, including $4.4 billion in dividends this half, benefiting more than 14 million Australians. We will continue to support our customers, protect communities and invest for the long term to provide strength and stability to the Australian economy. I'll now hand to Alan to take you through the result in more detail. Alan Docherty: Thank you, Matt, and good morning, everyone. Starting with the results overview. We've set out the key aspects of our current operating context, how we are responding and how those actions are contributing to the long-term strengthening of our franchise. At a macro level, we are seeing strong system growth in both credit and money supply. Competitive intensity within the banking sector remains elevated. Technological innovations continue at pace and geopolitics remains a source of potential tail risks. Against that backdrop, our response has been deliberate and disciplined. We have carefully managed volume and margin trade-offs, continue to invest and extend our leadership in both technology and proprietary distribution and maintained conservative balance sheet settings. This approach is yielding strong financial outcomes. Pre-provision profit growth is healthy. Our dividend per share continues to reflect the strong compositional quality of our earnings. And our balance sheet settings give us confidence in our ability to continue supporting customers, growing the franchise and delivering sustainable returns to shareholders over the long term. This slide sets out the usual reconciliation between statutory and cash profits for the half. There were only modest movements in the usual noncash items during the period. As such, both statutory and cash profits on a continuing operations basis totaled around $5.4 billion. Breaking down the components of that cash profit, Operating income grew 6.6% year-on-year as our investments in technology and proprietary distribution continue to yield strong operational outcomes. That top line performance allows us to continue to invest in the franchise with underlying operating expenses increasing 5.5% on the prior comparative period. Notable expense items totaled $170 million over the last 6 months, largely due to the settlement of a long-standing legal proceeding in New Zealand during the September quarter. Loan impairment expense was flat year-on-year and lower versus the second half, reflecting the benefits of our conservative settings and the resilience we continue to see in customer and portfolio credit quality. This resulted in growth in cash profits of a little over 6% on both the prior corresponding period and the second half of last year. It's worth noting that the effective tax rate for the half was 30.3%. Looking ahead, you can assume that will settle closer to 30% for the 2026 financial year. On operating income, we delivered growth of 6.6% over the prior comparative period. Net interest income increased strongly, up $761 million, supported by profitable above-system growth in lending and deposits. Other operating income also contributed, growing $163 million over that period, assisted by one-off gains. This slide sets out some of the drivers of long-term franchise strength that we have been targeting, deeper customer relationships, deposit-led growth in our core segments that underpins and proceeds lending growth and productivity improvements within our frontline teams. Our retail bank continues to build foundational banking relationships, adding 3 million net new transaction account customers over the past 5 years. In home lending, we continue to prioritize and grow proprietary distribution with $55 billion of new fundings originated over the last 6 months through our own channels. And our strategic focus on business banking continues to deliver strong outcomes with double-digit compound annual growth in both deposits and lending over recent years. Our investments in building a more digital, customer-focused and streamlined business bank for our people and our customers can be seen in the productivity improvements delivered over the last 5 years with fundings per banker up 65% over that period. Turning to the net interest margin and looking at the movement over the most recent 6-month period. The main driver of the 4 basis point reduction over the half was the increased mix of low-margin liquid assets and institutional repos. Excluding those items, margins were 1 basis point lower with competitive pressures and the impact of a lower cash rate, largely offset by the replicating portfolio and the favorable portfolio mix effect of strong deposit growth. Margins were a little stronger in the December quarter, largely due to the benefit of higher swap rates on our replicating portfolio. You can see here that we're managing margin outcomes carefully, balancing competitiveness with returns and staying focused on building lasting primary relationships with our customers rather than chasing unprofitable volume growth. On operating expenses, they increased 5.5% on the prior corresponding period. The drivers are largely unchanged over recent years. We are seeing inflationary impacts on wages and IT vendor cost inflation continues to run higher than CPI. At the same time, we continue to invest behind the franchise with higher cloud consumption and software licensing costs and our ongoing investment in technology infrastructure and AI capabilities alongside enhanced frontline capacity and operational resilience. We are self-funding much of that investment through productivity initiatives, realizing approximately $222 million in incremental cost savings over the past 6 months. Turning to credit risk. Loan impairment expense for the half was $319 million, broadly consistent with the prior comparative period and improving versus the second half. Across the portfolio, we continue to see broadly stable to improving conditions. Households have been supported by the strength of the labor market and rising disposable incomes. We have seen this reflected in higher prepayments and lower consumer arrears. In the corporate portfolio, troublesome assets and nonperforming exposures continue to trend lower as a proportion of the portfolio. Given the uncertainty in global macro and geopolitics, we've maintained strong provisioning coverage. Total recognized provisions are approximately $6.3 billion. And importantly, we continue to hold a material buffer above the central scenario. This slide provides the usual additional detail on sectoral considerations. We marginally reduced base provisioning and forward-looking adjustments in areas where conditions have improved, including consumer, construction and retail trade. This was partly offset by an increased level of provisioning relating to our downside economic scenarios where we take into account the risk of exogenous shocks to the domestic economy. Overall, our approach to provisioning remains grounded, forward-looking and appropriately conservative. Our funding and liquidity profile has continued to strengthen. We continue to be predominantly deposit funded, supported by a strong deposit gathering franchise. Total customer deposits grew at an annualized rate of 10% over the last 6 months, taking our customer deposit ratio to 79%. We also maintained a historically low proportion of short-term wholesale funding. This combination of deposit growth, consistent term issuance across diverse funding markets and strong liquidity buffers, we remain well positioned to support the current strong level of customer demand for lending growth. On capital, our common equity Tier 1 ratio remained at 12.3% with organic capital generation continuing to support franchise growth and dividends. Growth in risk-weighted assets was largely a function of lending volume growth with credit risk weightings remaining broadly stable over the past 6 months. The interim dividend increased $0.10 to $2.35, representing a headline payout ratio of 72% and a normalized payout of 74% after adjusting for the benign first half loan loss rate. The dividend will be fully franked and the dividend reinvestment plan will be offered with no discount and fully neutralized. Delivering franchise growth while maintaining returns above our shareholders' cost of capital allows sustainable and consistent accretion and dividend per share over the long term. This slide sets out our long-term approach to capital management. We prioritize profitable franchise growth as the first and best use of organic capital generation. We invest in line with our strategic priorities aimed to pay sustainable dividends, and we carefully manage our share count and surplus capital in a disciplined way. Over time, you can see we've balanced capital generation with capital distribution, supporting franchise growth when lending demand is elevated, while also returning excess capital to shareholders, primarily through dividends as well as through the selective utilization of buybacks. Ultimately, we remain focused on optimizing long-term shareholder outcomes while maintaining the balance sheet resilience that underpins our ability to support our customers and the broader economy through the cycle. In closing, this long-term approach has again assisted in delivering consistent and superior shareholder returns. Our combination of a high return on equity and strong payout ratio continues to compare favorably with domestic and global banking peers. Our strategic investments are yielding measurable improvements in franchise growth and productivity, underpinning our continued outperformance in net tangible assets and dividends per share. I'll now hand back to Matt for the economic outlook and closing remarks. Thank you. Matthew Comyn: Thanks very much, Alan. Australian economic growth has strengthened more quickly and proven more resilient than expected. This was driven by increases in consumer demand and rising investment in AI and energy infrastructure. Household consumption has risen, including across discretionary categories. Supply side constraints mean that the economy is struggling to meet this increased demand. And as a result, inflation is now expected to remain above the Reserve Bank's target band for some time, placing further upwards pressure on interest rates. Australia has remained highly resilient despite a volatile global environment. To date, there has been limited economic impact from trade and tariff disruptions. A global AI investment cycle is supporting growth. Elevated geopolitical risks are likely to generate ongoing shocks, reinforcing the importance of economic and operational resilience. We will continue supporting our customers with their financial resilience during this period. We're optimistic about the prospects of the economy and we will play our part in building a brighter future for all. So in summary, the market has seen a period of high growth, low loan losses and intense competition. The Commonwealth Bank is well placed to adapt and perform against this backdrop. We remain committed to supporting and protecting our customers, reimagining customer experiences by investing in technology and AI and providing strength and stability for the Australian economy and delivering sustainable returns. We will stay focused on consistent, disciplined execution and investment for the long term to deliver for our customers and build a brighter future for all. I'll now hand to Mel to go through your questions. Melanie Kirk: Thank you, Matt. For this briefing, we will take questions from analysts and investors. When the line opens for you, please introduce the organization that you represent and limit your questions to 1 to 2 maximum questions. The briefing will then have the -- sorry, we'll then take the first question from Andrew Triggs. Andrew Triggs: Matt, in your prepared remarks for the first quarter trading update, you talked about the competitive concerns -- sorry, the competition concerns you had and potential responses and onsettings. Could you sort of elaborate on those? You seem to have sort of reiterated some of those comments this morning. And specifically, what size of the balance sheet are you referring to there? It does seem at odds with a stable underlying margin in the half and the slight improvement in NIM that you've seen in the December quarter. Matthew Comyn: Yes. No, thanks. Look, I guess I'd contrast between -- as I said in the opening remarks, I think the strength of this result has been our ability to maintain a very good and disciplined volume growth and a part of that is underlying stability in the margin performance across all of our customer-facing segments. I think when we look at, let's say, last calendar year, I think the market is and the competitive context is shifting. I think clearly, this demonstrates our ability to be able to perform well in that. But I mean, if you look at the period of the last 5 years, we've seen the most rapid growth by one competitor in household deposit share growth. In fact, I think it will be close to double the previous growth rate. I think we've seen a pretty sharp reduction in household balances. I think the greatest over that 5-year period outside the major banks. I think even if you went back to 2008. And I think that's interesting in the context of the backdrop. We've got, as we talked about, higher system credit growth. We've seen that clearly in retail and also in non-retail. We expect that there's going to be a maintenance of higher credit growth on the back of higher nominal growth and of course, I hope a pickup in investment. If you look at the organic capital generation across peers and really the sort of volume and NII returns that are being generated, I think that sort of marks quite a shift. Against that sort of credit environment, you'd actually expect there to be much greater pricing discipline. And look, clearly, there are different choices that are being made around business model and customer proposition. Some part of that's being informed by the regulatory architecture and choices. I mean it's for us to understand and adapt to the environment to be able to execute as well as we can, both in the 6- or the 12-month period, but also most importantly, to position the organization for the future. And we think a lot about how do we build on the scale, durability, resilience, investment in the franchise while continuing to perform well in any given period and deliver sustainable, reliable returns to our shareholders. Andrew Triggs: And maybe perhaps for Alan. Just the pick apart maybe a little bit more of the slight improvement you referred to in NIM in the second quarter. You put that down to the replicating portfolio, but that tends to come through more slowly. What were the other drivers? And given we've had a rate hike in February, potentially another one in May, what does it mean for the outlook for the NIM into the second half? Alan Docherty: Yes. Thank you, Andrew. Yes, between Q1 and Q2, I guess there was a couple of things that changed. I mean, importantly, the replicating is a major factor. The 5-year swap rate, I think, increased 30 basis points between Q1 and Q2. And as the tractors gone through over that period, we've seen the pickup there. Also, there was a bit more of a cash rate headwind in Q1. So if you look at the weighted average overnight cash rate that was down, I think, 40 basis points Q1 to the second half of last year and only down a dozen basis points over the second quarter relative to the first. So you had that cash rate headwind in Q1 sort of be much more neutral, I guess, in Q2. And the other aspect was very strong growth as we've reported in particularly business transaction accounts in that December quarter. So that was pleasing. And so we picked up a bit of a mix benefit on BTA growth through Q2. Now an element of that is seasonal, we get seasonally stronger growth in the December quarter. But you can see what the changes we've seen in swap rates. So that will continue to feed through in our tractors in the period ahead. Melanie Kirk: The next question comes from Jon Mott. Jonathan Mott: Jon Mott here from Barrenjoey. I've got a question on Slide 96. I know it's a long way in, but if we can just click over there. Just looking at the deposit side and well done, just really shows the strength of the franchise with the great growth of the deposits coming through. But I wanted to drill down into it. So if you look at the growth in retail transaction accounts, pretty steady, good numbers growing 3% in the half, 5% year-on-year. It's been growing pretty steadily. But then when we look over at the retail deposit mix, a big jump, and I think this is the biggest jump you've ever had in transaction deposits in the retail bank. And if you go on the average balance sheet, you can also see they're coming in noninterest-bearing deposits, so excluding offset accounts. You're seeing huge growth. And given the comments from the first quarter, it didn't appear to be there. So it really looks like it's come through in the December quarter. To put it into perspective, I just backs that the average transaction account in Australia jumped by $700 from just over $10,000 to $10,700. So what happened in that December quarter to see such massive growth, not in the number of transaction accounts, but in the balance? And when you think about how it's going to go going forward, is this just a seasonal and then get drained into savings or higher interest rate accounts over this next half? Or are you going to see really strong growth in noninterest-bearing deposits really support the NIM through the second half of '26 and into '27? So can you just explain what happened? Alan Docherty: Yes. I mean one element of that transaction account growth is growth in the offset accounts. We've seen very strong consistent growth in offset through both Q1 and Q2. I mean that's, I think, a healthy sign of continued growth in excess savings across the economy, and we called out in the -- in one of the macro slides, the improvement that you can see in the savings rate that we continue to see through the course of that half. Yes. And in terms of the performance of the underlying ex offset growth in the retail bank, that's continued to improve. I mean we've seen relatively consistent growth in average balances per retail customer account. So that's continued to grow in the period. And of course, we've continued to attract more customers. And so very strong growth, another, I think, year-on-year, 600,000 growth in customer transaction accounts in the retail bank. Retail customer numbers are up 3 million over the 5-year period. So again, that's been relatively steady. But I think it's a function of just that continued growth in savings across the broader economy, and we've seen a large share of that come through the retail bank. Jonathan Mott: Okay. Just digging into that a bit more. I just going over to the retail bank in the actual result. And if you look at the noninterest-bearing transaction accounts in the -- you can see there, this obviously excludes offset accounts. Big jump again there by $4 billion. So is there anything in particular that happened in that fourth quarter that just drove this much higher because this isn't you're seeing steady customer account growth, it's unusual. And then obviously, this implies what happens into the next half. Alan Docherty: Yes. No, I mean it's very pleasing. I think a more like-for-like comparison is going to be December to December growth in noninterest-bearing trend in the retail bank. We do get a fair amount of seasonality into that June period. So going into June, as you come out of the March quarter into June, you tend to have a higher level of spot non-retail transaction account deposits, which then dip quite significantly into the 30 June period. We see a lot of switching, particularly small business owners injecting cash in other businesses as they get to the 30 June financial year-end. So we've been pleased with the growth, probably the better underlying measure of that growth, I think, is the year-on-year 6% growth between the $47.5 billion we had this time last year and the $50 billion that we landed at 31 December. So yes, strong growth, but I wouldn't annualize the 6-month growth. Matthew Comyn: Yes. I think there's a bit of seasonality for sure. And Jon, I think Alan touched on it all. I mean, obviously, we'd like to think with all the work that we're doing around the engagement of main bank proposition that's attracting higher balances. We did see obviously a run-up in incomes across the economy. But I think it's hard to then just extrapolate the fourth quarter was strong for us in a number of areas, including both in business and retail deposit growth at an account and average balance number. Melanie Kirk: The next question comes from Richard. Richard Wiles: I've got a couple of questions. The first relates to the mortgage market and the second relates to the benefits of scale. So on the mortgage market, your major bank competitors have been pretty clear in communicating their desire to invest in and grow their proprietary distribution. So that leads me to ask whether your expectation that you can grow at or above system in the mortgage market is premised on a belief that you won't lose any share of proprietary distribution or that third-party broker share of the industry's mortgage origination will fall from its current levels? Matthew Comyn: Yes. Look, Richard, I mean, we don't, as you know, sort of -- we, at any period, seek to grow sort of at or around system. We're going to make lots of different choices. I think there's a couple of different sides to it. Clearly, the proprietary distribution has been a strength for some time, and the team have executed really well. I think we're now, we think, 54% of proprietary mortgage origination. On one side, the other banks joining and having a greater focus on that, maybe that helps a little bit to change the perception or customer preference more broadly in the market. I mean, secondly, the broker channel is a really important distribution for us and it will be going into the future. So I mean, it's predicated really on the continuation of what we have been doing. And I think we'll be able to maintain between both our CBA Yello brand, BankWest, which is obviously heavily concentrated in broker and our digital proposition, a balanced portfolio in terms of distribution. And then, of course, while serving our customers, we've sought to optimize for cohorts and individual segments where there's structurally higher margins like there are in investor. Richard Wiles: Okay. And my second question really relates to some of the slides and your comments pointing to very strong growth in the franchise since 2019, whether it be deposit balances or number of customers or number of accounts, you called that out in your opening remarks. That should suggest that you'll get increasing benefits from scale. But if we look at the cost-to-income ratio, in rough terms, it's somewhere in the mid-40s. That's where it is today. That's where it was back in 2019. Do you think it's fair to view the cost-to-income ratio as a measure of whether you're delivering benefits from scale? And can investors expect or cost-to-income ratio at CommBank over the coming years? Matthew Comyn: Yes. Look, I mean, it's -- and look, I'm certainly a believer in increasing returns to scale and how they might compound over a long period of time. I think the drivers, particularly on the cost side for us, I guess, as we reflect over the last, whatever, 5 or 8 years have been deliberately targeted in a couple of areas. First and foremost, we've significantly increased the investment, and we think that's really important to both underpin the durable competitive advantages. But I think that's one of the major sources of scale. And we've substantially increased sort of operational and regulatory risk management. Of course, without giving any sort of clear guidance, you might recall early on in our collective tenure, we gave some cost-to-income ratio guidance and then the cash rate promptly fell several times after that. So we're not likely to repeat with that. Richard Wiles: That was early 2019. Matthew Comyn: It was. It was, Richard. We remember it well, I'm sure you do. So look, I think we definitely have aspirations to perhaps over the medium term, definitely shift the trajectory of that cost. But we also, I guess, in any period, we're prepared to sacrifice near-term returns if we believe that we can deliver the best long-term outcome. And I do think the next 5 years will be quite different in terms of where the investments will come from. I do think there's a lot of consistency around technology. Probably the other area that I think occurs to Alan and I in this result is in terms of where the increased investment over and above the areas that we're used to calling out is there's just a lot more going into resilience more broadly. And I mean cyber has been a theme. So we do think the importance of being able to continue to invest in differentiated experiences but also just core resilience and protection of our customers. You need to be able to generate a strong organic return profile to be able to fund that investment to be able to simultaneously provide lending to the economy and distribute dividends. So it's probably a long-winded way of saying no change to guidance, believe in returns to scale strongly. I think there will be opportunities for us to improve our cost trajectory and ratios over time. Melanie Kirk: The next question comes from Andrew Lyons. Andrew Lyons: Andrew Lyons from Jefferies. Alan, just a question on costs. Firstly, the first quarter, you spoke to seasonally low IT vendor costs, but the first half cost performance was a particularly good one, and it wasn't particularly apparent that, that came through in the second quarter. How should we sort of think about that seasonality comment from the first quarter? Should we be seeing a bit of a step-up in those costs being expensed through the P&L in the second half just as you continue to invest in the business? Alan Docherty: Yes. You'll notice in the detail of the investment spend disclosures we have. We have dropped the capitalization rate in the current period. We're capitalizing less, more of that's flowing through into the P&L. That goes with the change -- slight change in mix that we've seen from a strategic investment perspective. So more weighting towards productivity and growth initiatives, a little bit less proportionately on some of the infrastructure spending. The infrastructure spending by nature is more capitalization heavy than other forms of spend. There is a little bit of seasonality in Q1. We've seen some of that reverse in Q2. It's fair to say that we've called out IT vendor cost inflation pretty consistently over the past 12, 18 months. It's an area that we continue to be very cognizant of, very focused on. We see that as over the medium- to long-term potential source of above CPI, above domestic inflation source of cost growth. So it's something that we're managing carefully, but something we keep an eye on, and that's why we made the comment in the first quarter because you didn't really see it as a source of cost inflation there. But again, that was a quarterly timing issue. Andrew Lyons: Yes. Okay. And perhaps a question for Matt. It was a particularly strong result in business banking. Your loans are up 9% on PCP NIMs up 3 bps over the same period and 5 bps in the half. That does somewhat fly in the face of the view that the market is facing elevated competition driven by both the big 4 and also other players in the space. So can you perhaps just talk about the competitive environment in business banking? How do you see it playing out? And what is CBA basically doing to sort of try and insulate the margin as much as possible as you do grow? Matthew Comyn: Yes. Look, I mean, I think the competitive context is intense. And against that, I think the team have executed extremely well. I mean some of the things I think that stand out to us is a continuation of what we've now seen for many years in terms of transaction liability-led strategy, strong growth in account numbers, strong growth in balances, as Alan touched on, particularly in the fourth quarter. I think a very good track record over the last 5 or 6 years of high-quality risk identification in terms of lending, really leveraging the main bank relationship and having a much broader relationship with our customers. We've seen also capabilities that the team have developed. It is probably one of the things that stood out to us as well as like a very good performance in small business. I touched on some of the growth in products like BizExpress, which is largely unsecured, and we've gone from sort of $30 million to $130 million. Now at some level, they're still relatively small numbers, but it's been a diversification of the lending growth that's been good. Small business would probably be roughly twice the margin of some of the other segments. They've been very disciplined up and down throughout all of the segments. We monitor closely in terms of the value of deals that we won't originate due to pricing, the value of deals we won't originate due to credit conditions. And I think leveraging some of the technology both in the decisioning -- speed of decision as well through to funding but also in terms of giving us the confidence to be able to originate across broader cohorts of customers where we've got that main bank relationship. We've also been able to again, leveraging some of the technology to automate some of the account management processes, substantially free up banker time. And so we're seeing much improved productivity in terms of facilities per banker. So I think in aggregate, the team have executed extremely well. I think the result is another very strong one. Melanie Kirk: The next question comes from Carlos. Carlos Cacho: I'm Carlos Cacho from Macquarie. You spoke to in the retail section lower deposit margins due to competition and shifting into high-yielding savings deposits. Can you give us any color on the mix shift you're seeing there from lower rate products like NetBank Saver into the higher gold saver or potentially higher rates on some of the NetBank Saver accounts that's driving that. Alan Docherty: Yes. I mean, I guess that's been a consistent trend. I mean, I talked earlier about the things that had changed between the first quarter and the second quarter, but one 1 thing that didn't change was the very strong level of growth that we continue to see into the GoalSaver product. So that's running multiples of the growth rate. And we're still growing in NetBank Saver, but the key driver of savings account growth in the retail bank has continued to be GoalSaver. And so the sort of mix effect and we've called out previously the very strong level of balances that are attracting that high the bonus rate on GoalSaver. So that's now up to 87% of balance is attracting that high rate. We can see then on the quarterly trends on margin, it's a consistent headwind. So very consistent over Q1 and Q2, it was about a basis point headwind in each of those periods due to the mix effect of that the growth in that higher rate product. Matthew Comyn: Yes, I think specifically -- sorry, I was say we're using the GoalSaver product, particularly, we've got some targeted offers in market. I think we see a little bit more switching into the saving, but there's probably less churn than we would have seen in other periods from savings into TD. And I think, again, the team have done a good job of optimizing across the various customer segments and trying to make sure we're getting the right overall margin outcomes whilst growing a bit above system as well. Carlos Cacho: Great. The other question I want to ask you is more around the thinking longer-term asset investments you make. You're clearly investing a lot of money into technology and AI. And I spoke to those vendor inflation headwinds, which appear to be as the tech companies wanting to return on their investment, how do you think about return on those investments you're making? And I guess, particularly how you think about that flowing through higher revenues versus potentially more productivity or lower cost in time? Alan Docherty: Yes. I mean we've been very pleased with the yield from the investment. And I think it's particularly there's a number of proof points in this result that we've called out. I think sure that we are getting a measurable return on those investments. We called out the productivity that we've seen as we've continued to digitize, importantly, the work of a business banker. We've got much better mobile and digital platforms for our business banking customers, getting them to the sort of levels that we achieved in previous years for retail. Customers, and you see that coming through. I mean that's a big driver of the MFI growth that we've continued to see within the business bank continue to underpin the transaction account growth. And then we've got sort of 97% conversion of those transaction accounts into lending relationships, which has seen us continue to grow well above system in the business bank over the last 12 months. So yes, the yield from the technology investments we're seeing measurable returns, both on the revenue side and in the cost side. So we've been pleased with that. To your point, and again, that's why we call out the IT vendor cost inflation, there is over the next few years, we're going to continue to see where the returns emerge from newer technologies between the technology companies themselves and the corporates who have deployed those tools. Certainly, over the past period of time, we've been pleased with the return that we're generating through our franchise, but that's something that we'll continue to manage, ensure we've got compatibility with lots of different vendors. We're able to switch providers in various areas, maintain that flexibility to ensure we maintain competitive -- have a competitive tension with some of our key technology providers, which I think is going to be important for every corporate over the next 5, 10 years. Melanie Kirk: The next question comes from Matt Wilson. Matthew Wilson: Matt Wilson, Jarden.Two questions, if I may. If you look through the long term, CBA's key point of differentiation has been your largest ticker low, no cost deposit base, and you're very effective at growing it as we can see today, and your major bank peers have failed to close that gap through the decades for various reasons. But today, we have sort of 2 new challenges out there. Macquarie who's the fourth peer and perhaps should appear in every slide where there's a peer comparison now going forward to put a line in the sand and then you've got AI. If we embrace your enthusiasm for AI, then does it follow that we'll all have a personal AI bot that will automatically direct our savings and transaction accounts into the highest-yielding accounts and a machine will do that for us. And on that basis today, they move to Macquarie. I've got a second question. Matthew Comyn: Yes. Look, Matt, I think on your first question. I mean, look, I think what the result demonstrates is our ability to perform in the current context. We think we've got to see good strategic assets and sources and the team have executed really well. We're, of course, alert to lots of different shifts in the competitive context. I mean, specifically, maybe it's a little bit of a flow on to car losses. Question, in terms of AI and technology, we've got a bit of balance between sort of flexibility and scale. I think in the near term for heavily regulated institutions, I think it adds both complexity and governance. I do think one of the important things that we're certainly spending time on is where do we think AI has the potential to change the economics of the industry, what might the impact be around sort of competitive moats or enduring sources of advantage, how might that show up. I think there's lots of different ways that we envisage that we can compete extremely effectively in that environment. So I think we are both planning for the long term, lots of different sort of scenarios. We think we've got the scale to invest. We think we're uniquely placed. And I think the team are highly motivated and very focused on execution. At least in this period, I think it's a good example of it, and we certainly intend to maintain that focus, discipline and execution ability. Matthew Wilson: And then a second question, probably linked to Richard's second question as well. If we look back over the last 5 years or so, headcount at the enterprise is up nearly 20% despite investments in AI and technology that should be driving efficiencies. But at some stage in the future, there's obviously a big dividend to be reaped by taking people out of the organization. Could you comment on that opportunity? Matthew Comyn: Yes. Look, I mean, I think that's right. In banking in Australia, there's been a significant increase in headcount. At least in some of our areas, though, as well. I mean it's our approach to the management of important risk types like financial crime has strengthened considerably. There's large operational and FTE requirements with that today. When we think about that more broadly, economic crime, across scams, fraud, cyber. Clearly, the vector of threats that we need to be able to deal with is increasing on a daily basis. And absolutely, some of the technology that we're deploying at the moment in time, I think we'll be able to make a meaningful improvement to the level of automation and efficiency with which we're allowed to deliver those services. A lot of the other increases have been in and around technology. Obviously, that's supported much higher levels of investment, also into key frontline roles, notwithstanding the fact that we've been able to improve productivity on a per role basis, but I think that's enabled us to grow at a faster revenue rate than peers, which we think is important. So I guess to Alan's answer earlier, I think there's both revenue and cost benefits that are being delivered in this period. We obviously and Alan is tracking those benefits very carefully and clearly, we think it's really important to continue to sort of push for further sources of competitive advantage. I think that takes time. But clearly, we think there's some opportunities to manage the cost base over the medium term. Alan Docherty: I'd just add one point, Matt, around the 5-year growth in the FTE, of course, about half of that growth just related to the in-sourcing that we had within our technology teams. So we've moved away from third-party suppliers in many respects, brought our own engineers in-house. We're seeing a much more -- much greater velocity, much greater quality, much greater productivity over that 4, 5-year period, as we've conducted that in-sourcing. So that's been a big part of the overall FTE growth. Actually, we're seeing again -- we've called out some of the benefits we're seeing in terms of the engineering capability. Change deployments is up 30%. Over the past 12 months, we're seeing that deployment at greater pace, greater speed and greater quality. And so the work that we've done to in-source into our FTE base the engineering capability, we think is paying dividends. Melanie Kirk: Our next question comes from Brian. Unknown Analyst: Thank you. And first of all, congratulations on the stonking result. But more to the point, since you've been speaking, you put on a lazy $3 or $4 a share. So I had two questions. The first one is that if we have a look at CommBank, we can see that you've got excess liquidity, long-term funding. You look at your software. You're increasing the expensing profile. You've got incredibly strong provisioning. We're not a look at the profit after capital charge. It's up -- you're saying that you normalize the dividend payout ratio for the current low loan losses. I just would be interested to hear what is the scenario where we'd start to see your harvesting the latency. And does that basically mean that we see a continued dividend growth even when system becomes more averse? And then I have another question as well, please. Matthew Comyn: Yes. Maybe I'll start, and then Alan can add to it specifically. I mean, Vijay, as I know, we've had this conversation before. I mean a lot of that the way we think about things is sort of maximizing value over the long term. We're consistently trying to find ways to invest in the earnings potential. We're prepared to not seek to sort of maximize our performance in a particular period because we want to have the flexibility over a long period of time to both deliver very strong earnings growth and momentum but also to have substantial flexibility to be able to deal with a range of different scenarios. And so look, I think this is clearly above the central scenario. I think the largest excess we've had at $2.8 billion. This is clearly still tail risks, particularly on a global basis and some of those are hard to accurately predict and price. But I mean, I think, there's a number of different areas where we've got a lot of flexibility in the organization. But most importantly, we want to translate a lot of the investments into long-term earnings potential going well beyond 2030. Alan Docherty: Yes. I mean the balance sheet settings, we continue to take us sort of through the cycle view. As Matt says, I mean, the provisioning, we're pleased to hold the provisioning at the broadly around stable levels, albeit we're growing the lending side of the balance sheet very quickly. We've seen record levels of lending growth. So the coverage ratio, the provisions as a proportion of the risk-weighted assets has drifted a little lower. And so you've seen some unwind of the provisioning that we held maybe 12, 18 months ago. But yes, we take it through-the-cycle view. We like having that latency, and I think that gives us a more stable through-the-cycle performance, which our shareholders really value. Unknown Analyst: Just a second question, if I may. Once again, I really want to congratulate the entire management team on the results. If we have a look at some of the global in financial services, in particular, as they seem to hit a kind of more adverse environment, they basically seem to be pulling the pin quite aggressively to shared labor. I'm just wondering, when we have a look at CommBank, is there a point at which you -- how close are we at the point to which technology replaces people? And I'm not saying you necessarily have to go to retrench people, but natural nutrition probably gets you. But do we actually get to the point where we actually see basically the headcount element of the total operating cost fall. And in that context, can you see a point, Matt, and I never thought I'd ask this question where it's difficult to find more incremental to spend on technology? Matthew Comyn: I think in terms of tech spend and investment and software, I think demand across the economy still sort of outstrip supply. But I mean, clearly, the potential to be able to deliver a lot more change, I mean, significantly more than we're currently doing in year is clearly there. And I think some of the leading firms globally, outside of banking are already seeing some of that automation. Look, I think there's going to be multiple sort of speeds for how AI is adopted across the organization, how it's able to improve and automate some of the processes. I do think also it's important and certainly the approach that we're taking is thinking through that very carefully and thinking about the individual tasks and skills. I think it's really important to build the capability across the organization. I think anything that is disruptive like this technology is, it's really important to engage inside the organization, maintain the very high levels of engagement and motivation. I don't think some of the more pessimistic scenarios around labor force disruption will materialize. I think it does take quite a bit of time. I think the sort of the performance of the models is quite jagged. There's also a number of different things that you can do really well. There's others that candidly, you can't. But I think the potential over time to improve certainly the performance of every individual to provide greater output and then in time through more automation. And there's also just a number of customer processes, we think we can manage on an automated basis. I mean we believe in having to be able to service our customers in real time dealing with scams and disputes and fraud and to be able to perform and close those tasks out through an agentic framework to be able to serve many of our customers more directly and comprehensively. We've already got the capability to be able to monitor the environment and an automated basis, deploy new rules in to pick up and detect fraud. I think we're just scratching the surface of the potential here. And I don't think we're going to be talking about it in very significantly different ways at our full year results in August, but I think in a sort of 3- and a 5-year time frame, I think there certainly is some significant potential. And there's a lot of things that need to be managed as a highly regulated industry. I mean I do think sort of governance and transparency and explainability and most importantly, trust with customers and with employees. I think that will be a very important part of what we need to do well. We've obviously started communicating externally with some of the work that we're doing. And yes, I think we're trying to think about this comprehensively and over a long period of time, and we believe it's going to be a source of competitive advantage for CBA. Melanie Kirk: Our next question comes from Brendan. Brendan Sproules: Brendan Sproules from Goldman Sachs. I just have a couple of questions. Just in terms of the impact of higher interest rates as we look forward into the second half. Obviously, in this looking backwards this half had record lending growth, particularly strong deposit growth in business banking as touched on earlier on the call. But when you look back to when the cash rate was last, 4.35, you showed us a number of slides similar to Slide 18, which showed negative spending and cost of living pressures in the household sector and you also saw quite a slowdown in business credit. Just want to get your view on how sensitive you think the current system growth rate in both lending and deposits will be to these higher rates over the next 6 to 12 months? Alan Docherty: Yes. I mean, it's going to be -- to your point, I mean one of the things I called out in my opening was very strong level of credit, growth leads to very strong growth in broad money and money supply. And that's a factor that we look closely at in terms of, I mean, we see a lot of that money supply growth come through our deposit accounts. That puts more money in people's hands ultimately across the economy, and there's an inflationary element, obviously, to that mechanism. So of course, the reason that rates are being hiked as in order to maybe slow down some of that demand more broadly across the economy slowdown in that spending. And so we would expect to see some impact to that. We've had a very strong period for system growth across both home lending and non-retail lending across the system. We've got -- our economics team has got a range of between 6% and 8% across the total system credit over the next couple of years. Obviously, we're running at the top end of that as we sit here today. So I think there's maybe some -- you would expect some impact on system levels of credit growth and a higher rate environment. I guess the big question will be how many rate rises do we see from here because that will determine the sort of size of the slowdown you see from a credit perspective. Matthew Comyn: Yes. I think, I mean, if you assume there's a couple of rate hikes. I think it have a modest impact maybe even if it took a percentage point of housing credit growth. I think the non-retail credit growth has been very strong. Certainly, everything that we see is there, we think sort of higher nominal growth is going to support that. I think boosting investment is going to be an important driver of productivity. I think there's certainly investments in technology across the economy that are going to support that. And I think that's the importance of having the right sort of capital settings and deploying that lending growth into the right risk-adjusted returns, and certainly, we've kind of extended out the sort of credit growth that we've seen over the last couple of years. And I guess that's sort of our base case to make sure we're going to perform optimally in that environment. Brendan Sproules: That's great. And the second question, just on NIMs on Slide 27, obviously one of the better parts of today's result is the lack of compression on your funding cost. To what extent is this a timing issue in terms of the switch in the rate cycle that sort of happened towards the end of the fourth quarter? Obviously, with the RBA pushing rates higher earlier this month. We have seen some deposit product pricing move higher with that. To what extent is that going to play out in the second half, a bit of catch-up in terms of deposit pricing for these higher rates? Alan Docherty: Yes. I mean I think that as we've long said, I think the -- I mean, deposits are very competitive, and we're going to continue to see the mix, unfavorable mix impact of that growth in our high rate products. So I think that's likely to continue. The other element that we watch closely is wholesale funding spreads. I mean, I guess you've seen a very benign period. I mean, in the last 6 months, the 5-year funding cost and the wholesale funding markets fallen another 10 basis points. You tend to find there's a real correlation between what happens in wholesale funding markets and the level of deposit competitive intensity and deposit pricing. And so one of the forward indicators or lead indicators that we'll be looking carefully at around the likely outlook for deposit pricing and competition as that level of wholesale funding spread. We've had a benign period. We're below historic averages in a number of those long-term funding products. So we'll keep a close eye on that in terms of how that -- there's a potential for that to revert and that to lead to more deposit competition in the second half, but we don't know that today. We'll keep a close watch on that. Melanie Kirk: Our next question comes from John Storey. John Storey: Good set of results. I just wanted to touch quickly just on the business model and potential construction to business model. You've seen it in the last few days. Insurance broking firms have obviously been impacted by the threat of AI, right, in terms of distribution. Just thinking about it in terms of the mortgage market share in Australia, how prevalent brokers have become -- I mean, what are your views on the likelihood of AI disrupting mortgage brokers. So the disintermediators are becoming intermediated. And around that, how well or how prepared is CBA in terms of its own business model for something like that, that could potentially eventuate? Matthew Comyn: Yes. No. I mean, look, we've tried to think through all the various sort of potential sources of disruption not limited to mortgages and how to most effectively prepare for that. I think we feel we've got the right combination of distribution assets to perform well in that particular environment. I mean I know from speaking to a number of mortgage brokers and some of the leaders of those mortgage brokers firms, that's definitely on their mind. I think like a lot of businesses, perhaps the sort of speed and rate of disruption is also a question of debate. I think one of the things that has been important in terms of why our customers will still preference a face-to-face experience with either a mortgage broker or a proprietary lender is it's a significant decision I think people still value that. I would have incorrectly forecast the proportion of mortgages that would have gone to digital when we started sort of thinking about this 15 years ago, and it's been a lot slower. So -- but look, I think it's important to think things through and assume they're going to happen more rapidly. I think in our case, we think we're well prepared and I think there's very few sectors of the economy that aren't thinking about some of the disruptive potential and obviously, the rate and pace of change, particularly some of the genetic services that are out even in the last month. Certainly, there's been some pretty significant share price reactions to a number of global industry and software providers. John Storey: One, just quickly on a second question. Obviously, a lot of talk, I guess, is on certainly over the last few weeks, months, around increased levels of competition put in the market. And obviously, you've got a very interesting slide, Slide 73, 74, just around new business volumes that are significantly 24% half-on-half, right? I wanted to just get your views on to what extent this growth that you've often seen reflects some of the competitors actually stepping back from the market, right? So I'm thinking specifically around some of the regional banks. And then obviously, ANZ going to a period of restructuring. How sustainable is this level of new business growth that CBA is showing? Matthew Comyn: Well, I mean -- we'll see, it remains to be seen. But I mean, I think, we executed well in the period. We certainly planning to continue to do that. I mean, look, I do think it's quite interesting in terms of some of the share shift on the deposit side. And then on the asset side. I think where your returns are under pressure and you're not able to generate returns above the cost of capital, it's pretty hard to grow it system. Yes, there's disruption. I guess the other point is it occurs to us as we look at both capital ratios across the industry and where we would anticipate the DPS profile might be at some of those institutions, it would probably start -- it would tend to support pretty disciplined pricing. And so I think clearly, where there's volume share shifts between institutions, that tends to at times lead to not particularly disciplined pricing. I think it's been a really good period for the half. I think it's quite a -- I think it's an interesting equation, at least as we look forward and think about, well, if it's higher credit growth and the RWA the consumption that comes with that, shouldn't plan as a base case that record low loan losses are going to continue investment, certainly, for us, we're increasing. And we think that's important from a competitive perspective as well as to be able to support broader resilience objectives. I think -- but maybe that financial equation looks a little challenged, perhaps for some. And so I mean, look, I think we're thinking about how best to compete in that environment. And I think, hopefully, at least this 6-month period has been probably one of our better periods of execution in market. Melanie Kirk: Our next question comes from Matt Dunger. Matthew Dunger: Yes. Could I ask a deposit question in a different way? The 79% deposit funding stands out versus the peers. You flagged you're expecting higher growth in higher rate deposits and we noticed that NetBank Saver didn't reprice as much as some of your peers through 2025. So why compete on price when you're already leading deposit growth? Is there a target at CBA to continue to strengthen the deposit funding mix? Alan Docherty: Yes. I mean we're always -- we're predominantly deposit-funded and we want to keep it that way. We've been impressed with the execution on the deposit gathering and it's a foundational relationship. It drives MFI drives, as you can see in the numbers we've disclosed, relationship between retail transaction account and home lending, propensity to have your home loan with CBA higher in the business bank. So we -- it's an important part of the franchise. We want to continue to gather deposits. Now we're in a competitive market for deposits. And hence, we've got a very attractive offer on not only GoalSaver, very, very attractive rate. On GoalSaver, we've a very high proportion of balances that achieve that rate. We also got very competitive term deposit offer. So the 12-month term deposit especially that you've seen across the industry, I mean, they're up 45 basis points in the last 6 months. So it's an important part of the franchise. We'll compete effectively in there. We've got -- we've been happy with the improvement in the deposit ratio. I think as a game of inches, though on the deposit ratio. It's a large balance sheet. We're continuing to compete well for deposits. We don't have particular targets that we set around that particular ratio. We want to keep funding as much of our lending growth as possible through deposits. And pleasingly, in the 6-month period deposit growth outpaced lending growth even though we had a very high level of lender growth relative to a very high system. So we were able to retire a couple of billion dollars of long-term wholesale funding, which again helps in terms of the overall earnings profile and net interest margins. So we don't have particular targets that we set around that. We just try and keep things in balance and make sure we've got a strong deposit gathering franchise. Matthew Dunger: And if I could just follow up on the credit quality side, you're talking about bad debt charges being low. You just referenced some of the peer selling capital returns policies based on that. You've seen the external refinancing of corporate exposures, bringing down the arrears. Just wondering if this reflects your conservative lending settings. Or are you seeing competition after this corporate business as it refis out? Alan Docherty: Yes. We've continued to see -- I mean there's always going to be an element of external refinancing across each of the bank's portfolio. So we've seen some of that over the last sort of 6 and 12 months in particular, within our business bank, in particular. It's a competitive market. There's -- we've seen some continued aggressive pricing offers in market, particularly at that top end of the business bank. I think we called that out 6 and 12 months ago, that's continued in over the last couple of quarters. We are seeing some banks compete more on credit risk appetite, and we've seen some external refinancing. from our portfolio. So I think that's a function of the competitive market for business bank and that we're in at the moment. Melanie Kirk: The next question comes from Ed Henning. We might just move to the next question, and perhaps we can come back to Ed if the line comes back. The next question will take is from Tom Strong. Thomas Strong: Tom Strong from Citi. Just a couple of questions. The first on the replicating portfolio, it contributed basis points in the half, and the commentary suggested that much of that came in the December quarter. How should we think about the replicating portfolio over the next couple of halves just given the material step-up in swaps that sits sort of 50 to 100 basis points above the tractor rates now? Alan Docherty: Yes. Yes, there will be -- the tractors will perform well at current swap rates. Now the swap rates have proven to be, obviously, fairly volatile over the past 12, 18 months. But current levels of swap rate, I mean there'll be a pickup in each of the tractors. So if you think about the size of our replicate portfolio, it's something like $2 billion that we'll reinvest at current swap rates each month. And so yes, that will be a function of the where swap rates move expectations for interest rates more broadly and the level of the deposits that we choose to hedge at any point in time. So yes, that will be a supportive element. I mean the equity tractor we called out last time around, if you go back 3 years, where swap rate was then, it's pretty similar to where swap rate today in the 3-year part of the curve and so we're not going to see much tailwind on equity tractor but replicating portfolio, given it's a 5-year tractor. We've probably got another 2, 3 halves of positive earnings momentum as those if you go back sort of for years, we were still in some pretty low in a pretty low rate environment. Some of the tractors that we put on there are coming up for reinvestment at much higher current rates. So yes, 2 or 3 halves of earnings momentum from replicating remain. Thomas Strong: Great. And just a second question around business deposits. I mean we look at the strong growth in the business bank, but net of offset accounts, a lot of this growth has come from more expensive TDs and the business MFI did sort of slipped slightly half-on-half. I mean how are you seeing competition for business deposits more broadly given a number of your peers spending pretty considerably to emulate your success here? Alan Docherty: Yes, I mean, it's a competitive market for deposits both for REIT on the retail side and the business bank side. We've been pleased with the deposits that we've gathered. I mean, the new business transaction account openings have continued at pace. I think we're up 7% in net BTA accounts opened over the past 12 months. So we're pleased with that. Yes, we did -- I think there's a little bit of volatility. It's a 6-month moving average on MFI. I think we're up 40 basis points year-on-year in the longer-term trend I think we're up 300 basis points over the last 5 years. So you'll see some oscillation one half to the next. But the overall momentum within MFI, I think, goes to the good execution within that franchise over multiple years. And yes, there's been, I think, some as I mentioned earlier, we've got some attractive rates on the term deposit product as well, and that did particularly well in the 6-month period within the business bank, which we're pleased with. It's a good stable source of funding for the strong lending growth that we're doing in that division. Melanie Kirk: Thank you. That brings us to the end of the briefing. Thank you for joining us, and please reach out if you have any follow-up questions. Thank you.
Operator: Good morning, ladies and gentlemen, and welcome to the Siemens Energy's Q1 Fiscal Year 2026 Analyst Call. As a reminder this call is being recorded. Before we begin, I would like to draw your attention to the safe harbor statement on Page 2 of the Siemens Energy presentation. The conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions and are therefore subject to certain risks and uncertainties. At this time, I would like to turn the call over to your host today, Mr. Tobias Hang. Please go ahead, sir. Tobias Hang: Thank you so much, Moritz. Good morning, and a warm welcome to the Siemens Energy Q1 Fiscal Year 2026 Results and Analyst Call. As always, all documents were released at 7:00 a.m. on our website. Our President and CEO, Christian Bruch; and our CFO, Maria Ferraro, are here with me. Christian and Maria will take you through the major developments during Q1 fiscal year 2026. This will take approximately 30 minutes. Thereafter, Christian and Maria are available to answer your questions. For the entire conference call, we have allowed 1 hour. Christian, over to you. Christian Bruch: Thank you very much, Tobias, and good morning, everyone, and welcome to our quarter 1 analyst call also from my side. Thank you for joining us today. I'm pleased to report that Siemens Energy had a very strong start into fiscal year 2026, capitalizing on the favorable market momentum and successful execution of the backlog. The global energy system continues to transform with increased pace shaped by electrification and the increasing need for security of supply and our portfolio is excellent, aligned with these long-term needs. In the first quarter, we booked orders of nearly EUR 18 billion, the strongest quarter in our company's history. And this demand was broad-based across regions and business areas. The market momentum remains positive for our core portfolio. As a result, our order backlog has grown to a record of EUR 146 billion, giving us strong visibility for this fiscal year and beyond. Our very strong free cash flow performance in this quarter was supported by significant order momentum and customer prepayments, including reservation agreements, especially in Gas Services, and Grid Technologies. These businesses continue to demonstrate strength, high market demand, disciplined execution and particularly in Gas Services, high service intensity, all of which contribute to high-quality cash generation. At Siemens Gamesa, we remain on the path towards breakeven. The underlying operational measures show impact in particular, the improved productivity in offshore increased service profitability and reduction of structural cost in onshore. Please note that profitability in quarter 1 also benefited from some timing effects and was therefore less negative than expected, meaning the trajectory might not be strictly linear across the different quarters of the year. I'm also pleased to announce that we have received the first order for our SG 7.0 wind turbine that is a successor to the 5.X platform. We will supply 6 turbines for 42-megawatt wind park in Germany. Given the strength of our underlying markets, clear visibility from our order backlog and the strong start into the year, we are fully on track to achieve our fiscal year 2026 guidance. While the first half of the year is historically stronger than the second half, this performance clearly demonstrates deeper operational momentum across the company, momentum built on backlog quality, disciplined execution and exposure to markets with long-term trends. Demand remains strong and broad-based across all business areas and across all regions in the first quarter. Gas Services delivered its strongest quarter ever in terms of order intake, booking 102 gas turbines. That means we matched more than 50% of last year's unit volume within just 1 quarter. The momentum was brought across all turbine frames. In total, we booked around 13 gigawatts of new gas turbine orders in quarter 1. 12 gigawatts were converted from existing reservation agreements and at the same time, we added 12 gigawatts of new reservations. This increased total commitments to a total of 80 gigawatts even after delivering 3 gigawatts during the quarter. In the data center segment, we have commitments of 22 gigawatts, of which 15 gigawatts are reservation agreements. But I want to emphasize, our growth trajectory does not depend on data centers. Demand is driven by broader structural trends, electrification, industrial expansion and the increasing need for resilient energy systems. And these fundamentals remain firmly intact. While demand for gas turbines is especially strong in the U.S., data centers still represent only 1/4 of our total global commitments. Roughly 60% continues to come from traditional applications while the rest is related to peaking, marine or FPSO applications. Grid Technologies delivered another strong quarter, driven by robust demand across both products and solutions. The U.S. contributed with several data center-related orders amounting to a high triple-digit million euro volume. And just to remind you, last year, we booked in that space around EUR 2 billion. We also saw continued demand for grid stabilization in the U.S. reflected in large [indiscernible] orders with a total amount of a low triple-digit million euro value. Globally, customers are accelerating investments in transmission capacity to integrate renewables, meet rising demand and strengthen stability. Recent events underline the importance of energy security and resilience. The sabotage of a cable bridge in Berlin, leaving more than 45,000 households and over 2,000 businesses without power for days and the winter storms in the U.S. where around 1 million people lost electricity both highlight how mission-critical modern grid infrastructure is. Such events raise awareness and increased demand for grid stabilization technologies like our synchronous condensers. Regionally, the Americas, but particularly the United States showed excellent performance. Orders grew nearly 60% on a comparable basis and revenue increased by around 25%. This means the Americas are now nearly at parity with EMEA in order intake, a remarkable milestone that reflects the rising importance for the global energy transition. That said, EMEA also remained very strong with almost 20% growth in both orders and revenue. Significant wins in Poland and Turkey further demonstrate customers' trust in our technology and long-term reliability. In Asia and Australia, we also recorded more than 20% order growth. Revenue moderated due to a very strong prior year comparison from large offshore wind project in Taiwan but the underlying demand picture remains solid. Regional diversification continues to be a priority. A good example is the well-balanced gas services order backlog. The U.S., Middle East and Europe account for roughly 80%, almost evenly split among the 3. Quarter 1 orders in Gas Services were 40% from the U.S., 35% from Europe and 15% from Middle East and China. Across Gas Services and Grid Technologies, the pricing environment remained favorable and supported high-quality profitable growth as it is accretive to our backlog margins. In Gas Services, favorable pricing momentum continues with current reservation agreements being signed with higher pricing versus current orders. Let me now give you a progress update on our Elevate program, which we introduced in detail at our Capital Markets Day in November. We are fully on track with our capacity additions. And last week, we communicated more details around our U.S. investment program, which we already indicated at our Capital Market Day. I will provide more details on this on the next slide. In Europe, our grid technologies expansion is also progressing strongly. We have tripled production for wind transformers in Austria and together with our partner, KONCAR, opened a new transformer tank manufacturing facility in Croatia in January. We continue to strengthen our supply chain resilience through long-term partnerships. Our investment in ASTA Energy, a company which listed publicly on January 30, ensure secure access to critical copper components for our grid infrastructure portfolio. And both S&P and Moody's upgraded our credit ratings, reflecting the improved balance sheet, improved cash performance and stronger resilience of the company. We also drive forward the implementation of our new operating model, simplifying structures, reducing overhead and increasing accountability across the organization. As part of that transformation, we also increased AI capabilities and our workforce to work more efficiently and unlock new productivity improvements across the company. Across all 3 pillars, Elevate is continuously making a meaningful contribution to our performance. Progress can be seen in our margin development, cash conversion and operational stability. Let me provide you more details on our U.S. investment program. We currently execute investment projects for around $1 billion to expand manufacturing in the United States and expand our workforce as part of this effort. This includes also strengthening of the supply chain and establishing 2 training centers for qualification of workforce. Across 6 states, we are particularly strengthening the Grid Technologies and Gas Service business. In Mississippi, we are building a new high-voltage switchgear plant and expand the transformer capacity. In North Carolina, we are resuming gas turbine manufacturing as already indicated at the CMD and increasing large transformer capabilities while expanding also research and development. In Florida, we are boosting our blade and vane production and upgrading our innovation center, including an AI grid lab together with NVIDIA. In Alabama, we are scaling production of key generator components, and in New York and Texas, we are also upgrading compression equipment facilities. This expansion will add 1,500 new jobs on top of our 12,000 excellent employees in the U.S. And last year, the U.S. accounted for 29% of our global order volume, underlining its strategic importance. We are fully committed to supporting the growth of electricity in the U.S. market by driving local capacity exactly where the market needs it. Let me briefly focus on Grid Technologies, where we are scaling at an impressive speed. I am proud of the progress we made with our new production sites in Austria and Croatia. In Austria, Siemens Energy has opened a new wind transformer plant in Wollsdorf, following an investment of more than EUR 100 million creating around 100 new jobs and at the same time, tripling our wind transformer production. The facility was completed in just 13 months and has more than 25,000 square meter of production space enabling an annual output of up to 2,000 offshore wind transformers for customers in 70 countries. Combined with our long-established right side, Siemens Energy now supplies transformers for 80% of the world's offshore wind parks, solidifying our leadership in this critical segment of the energy transition. Moving to Croatia. The opening of our new Transformer tank factory near Zagreb, our joint venture with KONCAR adds more than 400 manufacturing jobs and provides capacity for approximately 160 custom large power transformer tanks per year, strengthening our global supply chain. And this is part of a broader EUR 260 million expansion program aimed at doubling regional transformer capacity to 45,000 MVA by 2031. The new factory also bolsters Europe's manufacturing resilience by supplying heavy-duty tanks for HBDC, generator step-up transformer and auto transformers up to 550 kV supporting the accelerated grid build-out required to integrate renewables at scale. And with this, I would like to hand over to Maria. Maria Ferraro: Thank you, Christian, and good morning, everyone, from my side. Very pleased to be here with all of you, and let's start to go through the details of Q1 fiscal year '26. Moving on to Slide 10, looking at the group results. Orders reached a record high of EUR 17.6 billion, up 34% year-on-year on a comparable basis. Our book-to-bill ratio was 1.82 and as Christian mentioned, order backlog hit a new record of EUR 146 billion. This is up from EUR 138 billion in Q4 of fiscal year '25. That's more than EUR 8 million in addition. Again, giving us excellent visibility for fiscal year '26 and beyond. Revenue was EUR 9.7 billion, up 12.8% year-over-year on a comparable basis, with all segments contributing to revenue growth. Just as a note, foreign exchange headwinds, primarily driven by a weaker U.S. dollar weighed on the top line by roughly 400 basis points year-over-year. Looking at profit before special items. This was EUR 1.159 million with a margin of 12%. This is more than double last year's 5.4% or up by 660 basis points. And regarding FX impact in profit, just for clarification, looking at our currency movements, it does not have a material impact on our profitability. And again, this goes to what Christian was mentioning earlier. It's due to our global footprint with strong local for local sourcing and affecting hedging strategies. Looking at net income, this rose to EUR 746 million, up EUR 494 million year-over-year. Special items was negative EUR 152 million, mainly due to the sale of the Indian wind business. However, strong operational performance led to notable earnings improvement overall. Free cash flow reached a record EUR 2.9 billion, nearly doubling last year's result. This was driven by strong orders, reservation fee and some timing effects. Cash flow continued to show strong seasonal patterns at the start of our fiscal year. Now let's take a quick or a closer look into our order backlog. Order backlog, as mentioned, reached a new high of EUR 146 billion. 45% of our backlog relates to service business. Again, this is recurring profitable revenues for many years ahead. For the current year, revenue coverage stands at approximately 90% for the remainder of the year. Already for next year, fiscal year '27, we have approximately just over 70% coverage. The growing backlog demonstrates increasing resilience due to broad-based demand geographically as well as across all businesses. Additionally, our order backlog margin further improved as a result of the positive pricing development and environment. Therefore, overall, our growing backlog and healthy margin, again, provides a strong foundation for our financial performance. Now let's talk about the drivers of free cash flow in the next slide. As mentioned, cash flow was very strong this quarter. Free cash flow pretax was EUR 2.9 billion, driven by strong profit development and customer advanced payments, including reservation fees. This is linked to our increase in orders. Regarding CapEx, we had a slow start for cash out relating to CapEx with EUR 347 million year-to-date. However, we are expecting roughly 5% of revenues or approximately EUR 2.5 billion of CapEx for this fiscal year. Quick update on Siemens Gamesa quality anticipated cash out. This amounted to EUR 101 million for the quarter. And as a reminder, for the full year, we indicated and still expect a mid-triple million amount similar to fiscal year 2025. Therefore, we closed the quarter with EUR 11.8 billion in cash and cash equivalents and EUR 3.8 billion of debt, therein EUR 2.4 billion long-term debt. This results to an adjusted net cash position of EUR 7.6 billion at the end of Q1. This is compared to an adjusted net cash position of EUR 4.8 billion at the end of September or last fiscal year. At our Annual General Meeting, which is upcoming on February 26, we will propose a dividend of EUR 0.70 per share for fiscal year '25. This will result in cash out of approximately EUR 600 million anticipated in the second quarter. In addition, the announced share buyback, which was announced at the Capital Market Day up to EUR 6 billion until fiscal year '28, is intended to commence in March. And just again, an update regarding our investment credit grade ratings, which were upgraded in December 2025. Our rating by S&P was upgraded to BBB with a positive outlook. And Moody's rating was Baa1 with a stable outlook. So now let's look at the quarterly financial performance, starting with our Gas Services business on the next slide. Here, we see Gas Services delivered an outstanding performance and another strong quarter in Q1 of fiscal year '26. Orders amounted to EUR 8.8 billion. This is up 81% year-over-year, the highest order intake ever and again, driven by large unit -- new unit projects in the U.S., Poland, Turkey and Taiwan. Book-to-bill for Q1 was an impressive 2.83, leading to a record order backlog for GS of EUR 60 billion, again another all-time high. Q1 was characterized by a very strong gas market for gas turbines greater than 10 megawatts with the largest markets in the U.S. and Europe. Gas Services booked a total of 102 gas turbines for power generation and oil and gas in Q1 of fiscal year '26. Therein, 19 were large gas turbines and 83 were industrial gas turbines. Our Q1 market share for gas turbines greater than 10 megawatts stands at 43%, securing the #1 position. Revenue for Gas Services rose by just shy of 14% at 13.9% and compared to last year, again driven by strong performance in new units, which saw nearly 51% comparable growth. Profit before special items was EUR 515 million with a margin of 16.6% and up from 14.6% last year, again reflecting improved margin quality of the processed order backlog and better underlying productivity. A gentle reminder on seasonality, our H1 or half -- first half year profitability in GS is always stronger than the second half just because of the service mix. Free cash flow pretax was EUR 1.9 billion, more than doubled, benefiting from advanced payments as mentioned on large orders. Overall, a very strong quarter for GS. And now let's take a look at our Grid Technologies business. Grid Technologies continues its strong performance. Orders were EUR 6 billion, up 22% year-over-year with strong demand specifically in our product business and partly driven by data centers in the U.S. as well as large HVDC order in the U.K. Book-to-bill ratio stood at 1.95, resulting again in a record order backlog of EUR 45 billion. Revenue reached EUR 3.1 billion. This is up 26.9% year-over-year, a substantial increase mainly driven by the solutions business, but also supported by the transformer and switchgear business. Profit before special items was EUR 538 million with a margin of 17.6%. This is up 520 basis points year-over-year, again driven by continued strong operational performance. Free cash flow pretax was EUR 1.8 billion. This, again, significantly increased by around EUR 600 million year-over-year, reflecting strong operational performance and milestone payments. Another strong quarter for our Grid Technologies team, well done. So now let's move on to Transformation of Industry, which again delivered a solid quarter. Orders were EUR 1.6 billion, up 11% year-over-year, and this was supported by compression and electrification, automation and digitalization projects, including a major order in the Middle East. Book-to-bill for Q1 stood at 1.21, resulting in an order backlog -- a stable order backlog of EUR 8 billion. Revenue came in at EUR 1.3 billion, again, stable on a comparable basis to Q1 of last year. Profit before special items was EUR 154 million or 11.8% unchanged, and free cash flow pretax was EUR 94 million. This was just down due to some timing effects looking at the previous year. So thank you to TI. And now let's move on to Siemens Gamesa. As Christian already mentioned, we are seeing progress in the turnaround at Siemens Gamesa. Here, orders were EUR 1.6 billion for the quarter. This is down from last year due to timing and a large offshore order that was booked in the prior year quarter. Revenue came in at EUR 2.4 billion, this is 3.9% up on a comparable basis, supported by offshore and service business growth. Profit before special items narrowed to negative EUR 46 million. This is a significant improvement from negative EUR 374 million just a year ago. The positive development was mainly due to productivity increases in offshore and progress in the service business. Additionally, we benefited from preponements or timing effects in the quarter. Free cash flow pretax was minus EUR 545 million, and this, again, as a reminder, included the EUR 101 million quality-related cash out. So with that, I want to sum up our achievements in Q1. We had a very strong start to the fiscal year in all of our businesses across all main KPIs, order intake, revenue growth, profitability and cash flow. So now moving to the next slide, our outlook slide. Here is our outlook for fiscal year '26 and targets for fiscal year '28, which remain unchanged. However, we do acknowledge that the year started with a very strong performance. At the same time, we remain mindful of the seasonality with a stronger first half than second, that typically influences our results each year, particularly within our Gas Services business. Bookings and associated cash flow did exceed in some areas expectations. However, it's too early to draw firm conclusions from this first quarter momentum. We will continue to monitor developments closely and will provide an assessment at the half year mark. So with that, I'd like to thank you for your attention and would like to hand back to Christian. Thank you. Christian Bruch: Thank you very much, Maria. So Siemens Energy is positioned really excellently to deliver sustainable shareholder value in a strong market. We see really good structural demand, a record high and high quality order book and disciplined execution across all segments. Our long-term value creation rests on 5 levers, profitable growth, margin expansion, strong cash generation, resilient balance sheet and consistent operational excellence. And across each of these, we are making tangible progress. I am very grateful for the commitment of our people, making this company every day a bit better and supporting our customers. Well, we know that we need to deliver, and we are fully focused on doing just that, reliable execution and consistent performance. And with this, let me hand back to Tobias for question and answers. I look forward to your questions. Tobias Hang: Thank you so much, Christian and Maria. [Operator Instructions] And the first 3 people going for the questions will be first, Alex Jones from Bank of America, Max Yates from Morgan Stanley and Ajay Patel from Goldman Sachs. Alexander Jones: Maybe I can focus on gas orders. At the CMD in November, you talked about 36 gigawatts of orders over the next 12 months, but you've clearly started ahead of that run rate with 13 gigawatts this quarter. And I think Christian, on the press call earlier, you said you wouldn't call Q1 exceptional or one-off given how strong market demand is. So therefore, is there upside to that 36 gigawatt number, given the demand you see? And could momentum continue at a similar rate as Q1 in the coming quarters? Christian Bruch: Thanks for the question. And what I said in the press call is that I continue to see strong momentum in the market. It obviously will also play out how many slots we have available and how quickly 29 fills up. So don't -- I would always say don't multiply it by 4. But at the same time, obviously, we're trying really our best to continue on this. I would still be on a 36 gigawatt planning base for the time being. We might be higher than that. It could be, but it's really something where it depends on certain larger commitments. The specialty at the moment in the market is also what you see is obviously, multi-train bigger orders. And this is what moves the needle also in terms of the gigawatts. So as Maria said, for the other comments, it's a bit too early to tell to see how the things are moving, but I'm definitely positive on the market on GS. Tobias Hang: So the next question goes to Max Yates. Max Yates: So I guess my question was just around pricing. Could you give us a feel of how much of the order growth that you're getting year-over-year is driven by pricing? And then maybe as an extension of that, we know there's pricing in kind of new equipment. Could you talk about pricing on some of the longer-term service agreements as well that you're receiving with these new orders? Are you also seeing a sizable step-up in the service contracts and specifically the longer-term service agreements that you're signing with the new equipment at the moment? Christian Bruch: Yes. Thanks, Max. I mean, obviously, we see an improvement year-on-year on the margins. And we also -- the other statement, obviously, what we make, we see the incoming orders higher than the older orders. So we see continuous appreciation of the pricing on the gas turbine side. It is -- on the service side, I'm just thinking through it at the moment. As we always said, this is slightly going up, not as distinct as for the new units. Even so, obviously, I'm very positive whenever the proportion to the service business increases because it's a good service business and keep one thing in mind, you're only going to see that after '28. So, so much to put this into perspective. Tobias Hang: So the next question goes to Ajay Patel. Ajay Patel: I just wanted to ask around cash flow. Is there any reason that the shape isn't similar on cash flow this year to last year? And then in the event that we do run ahead on cash flow, is it fair to assume the capital allocation works as in 1/3 of cash flows would be allocated towards cash returns? Just want to make sure that link is the case if we do end up better than we expected? Maria Ferraro: Thank you. And of course, yes, as I mentioned earlier, we did have a really excellent start to the year, and we started in a very strong position. And I think what -- maybe to your point of how to look at the shape of free cash flow and how that develops, it is clear that, of course, the main drivers are a few, but certainly the strong order intake. And again, to what Christian said earlier, the market continues to be very positive. However, it was quite a strong quarter for orders and not to take that and divide or multiply rather by 4 and say, here's what we can expect. And in addition, one other thing. I think one of the dynamics that perhaps is not fully, let's say, understood is we do have reservation fee agreements. And in light of how that momentum is going, this is actually quite a sizable number. And also, in addition, I think one of, let's say, the efforts that we started from a while ago, is looking at our operating working capital and how do we unlock cash. So that's something that doesn't look like linear in fashion in some of our, let's say, difficult countries where we've seen that we've been quite successful in receiving some of the overdue payments there. But again, I would just state again, we had a strong year start. This is connected to volume in some areas, but we need a bit more better visibility as the year continues, and we'll come back to you. Tobias Hang: So the next 3 questions will be going to Sebastian Growe from BNP Paribas, Richard Dawson from Berenberg and Gael de-Bray from Deutsche Bank. Sebastian, please go ahead. Sebastian Growe: My question is regards to the GT segment. apparently very strong momentum, both in regards to orders and also execution and not least free cash flow. So how should we think about the order pipeline in that business? Are you in a similarly favorable position as for GS, i.e., to sell also slots to customers? And what I'm trying to better understand here is what explains the massive free cash flow strength in the quarter in GT in particular and how it might trend from here? And if I may just quickly follow up on one of your earlier remarks, Maria, that there's a sizable impact from those reservation fee agreements. Could you quantify those? Christian Bruch: Maybe you take the cash, I just briefly on -- I hope we have heard you correctly, Sebastian, because quality was very bad. So if it was about the order pipeline momentum in GT, if I have heard you correctly. And that is obviously something which continues also to be strong. And you can bet then always every quarter who is ahead, Gas or Grid, but I think in that regard, both look very strong on. Also their data centers have an impact, maybe not as distinct. It's more around the general grid replacement and stabilization. But I obviously see this strong outlook also for the year. And I think we also indicated on the Capital Market Day that we will be -- expect the orders to be higher than last year. Maria Ferraro: Correct. And maybe just to add to what Christian mentioned there with respect to GT. I mean profit also has a part to play with that and also driven by strong orders, which we anticipate and continue to anticipate in Grid Technologies. We also indicated in the GT slide that some of that was related to milestone payments, some of those slipped into Q1 as well. And of course, we expect a very strong operational performance and underlying performance within GT and that is all reflected actually in the very, let's say, strong free cash flow. There's also an element of reservation fees for GT. I think that's also important. That plays, let's say, a factor when, of course, delivery perhaps can be even further expedited. So with respect to reservation fees, no, we do not disclose the amount of reservation fees that does change, of course, in line with, as Christian outlined earlier, how much, let's say, in GS, how many gigawatts are reserved, et cetera. And the reason why is that it just it varies. It's quite variable depending upon the contract and the size and the customer. Tobias Hang: Next question goes to Richard Dawson from Berenberg. Richard Dawson: Just a follow-up on these reservation agreements. Have you started to see any customers maybe thinking twice about signing a reservation agreement given thinking gas turbines, the lead time of delivery is so long? And can you make any comments on how Q2 is shaping up for those reservation agreements? Christian Bruch: What is shaping up, sorry? Tobias Hang: Q2. Christian Bruch: Q2 is shaping up. Sorry. Well, obviously, the key thing is when can you deliver. That's the first question every customer ask and it's obviously all about '28, '29. And you get, obviously, the further you reach out 2030, 2031, and in the meantime, that goes all up to 2032. Obviously, there is a bigger hesitation than to immediately agree because everybody wants something in '28 or '29. In that sense, however, I think the fundamental interest in the reservation agreement has not changed. It's more like can you deliver certain things? And obviously, we're trying each and everything to build bridges for the customers. And I also see this, in quarter 2, continuing on the same level. However, we have to recognize that, obviously, our delivery times continue to increase, and this is simply the fact of the matter. But I hear -- let's say, I've been, last week, seeing a lot of customers myself. Interest is as high as before. Tobias Hang: So the next question comes from Gael de-Bray from Deutsche Bank. Gael de-Bray: I guess I'm wondering if the flattish service revenue you had in the Gas division this quarter was in line with your own expectations? And how we should think about that for the remainder of the year? And since that's probably a very short question. I have a second one on the pricing side. I mean, you've talked a bit about that. But when I look at the backlog increasing by 10 gigawatt on a sequential basis and by EUR 6 billion in value terms. So I guess the back of the envelope calculation is that the price per gigawatt is around EUR 600 million this quarter, which is a major step-up compared to what we saw last year, I think. So maybe some comment about that? Because I think you said prices were only going up slightly. Christian Bruch: Maybe I'll take the last one and you -- and my feedback would be no, I would not break it down in this because I think it starts to get confusing by looking on the backlog and trying to apply the percentages. So I would refrain from breaking it down in more detail. Maria Ferraro: Of course. And let me take the comment on our service revenue. As mentioned, overall, revenue had quite a substantial FX headwind of 400 bps. And this can be directly attributed by the way, to our service revenue, as you know, we have a large installed fleet in the U.S. in which that could -- that does play a part. If you take out the FX impact, I actually don't see it sluggish at all. It's actually -- for the quarter is, let's say, slightly flat. There was some onetime topics of prior year. And for the fiscal year, going in line with the pricing, we do see growth, and that's exactly what we've indicated at the Capital Markets Day. So it is FX-related, Gael. Tobias Hang: So the next 3 questions go to Phil Buller from JPMorgan, William Mackie from Kepler Cheuvreux and Lucas Ferhani from Jefferies. Phil, please go ahead. Philip Buller: Obviously, the demand environment is very strong. I was hoping to ask about the supply situation, please. The CapEx, as you say, started a bit slowly. I think it's 3.6% of sales versus a guide for 5% for the year. Should we be reading anything into that? Are there any supply issues in ramping up the output perhaps in GS or perhaps in GT? Anything changed relative to what you're expecting on the supply side? Christian Bruch: Thanks. First of all, on the build-out of the capacity, no, you should not read anything into that. I mean that's more, let's say, the classical phasing, when does the planning come? When do the contractors get their contracts. So that's more like, let's say, normal course of business. No concerns really at the moment in terms of the execution of our own capacity expansions. On the supply chain, yes, that is something which we need to watch very carefully. We had some negative impact in quarter 1 on the supply chain, in particular, obviously, on the gas turbine side. Not surprisingly, it is also on the supply chain market for the respective supplier, which is good. And we see them, obviously, also there increasing prices. We continuously work with our suppliers in terms of what can we do to expand supply chain, co-investing and the likes. But this will be by seeing this impressive demand on the gas services side, to be continuously with us over the next 2 years, I would say. And you will also see it on the customer side. That's not so much us. That's really the EPC contractors, the civil and whatever that this brings up the total installed cost, but we will need to watch this very carefully. But we are on it. And this was also the reason why we decided to invest further money -- why we invest further money in Florida in our blade and vane manufacturing. Tobias Hang: So the next question will be going to Will Mackie. William Mackie: My question will build on Phil's really. Could you -- can we check in could you remind us where you stand with regard to your ability to serve the demand in '26, '27 in GS and GT. What I mean is, what should we be planning or thinking with regard to gigawatt install or deliveries across large and industrial turbines and across the main elements of the product business in GT? Christian Bruch: Will, I have to admit you overstretch my memory a bit. I'm trying as good as I can in terms of -- I mean, the big thing in '26, which comes online is on the midsized gas turbine. That's the increase in Finspong, which is the SGT which will towards the end of the year come in. The large gas turbine pieces, obviously all come in '27. And keep also in mind that the numbers we have showed on the Capital Market Day included also a steam portion for the larger gas turbines. So in terms of delivery for '25, before I state no wrong number, I think we have to come back to you in terms of the exact planning, Tobias will get back to you on that one. Tobias Hang: So the next question will be going to Lucas Ferhani. Lucas Ferhani: It would be on the SGRE business, just on the timing effects you talked about on the margin. Can you give us a bit more information about what they are and maybe the number behind them, what would be the underlying margin be? And also just on the order side in onshore. Obviously, it's a good start, but I'm wondering what do you have in budget for full year '26 in onshore order intake? What would you think is kind of successful for the relaunch? Maria Ferraro: Yes. Let me try. I do apologize because it was difficult to hear you. So if I -- I hope I understood it correctly, but let me -- I think the first part of that question was relating to the onetime or timing effects in the quarter 1 profit. And the second one was relating to the order intake for onshore. So let me start with the Q1 profit. So of course, the Q1 profit was negative EUR 46 million, again, supported by timing effects. Particularly, I have to say, coming probably the majority more from Q2 and again, to put that into context, it was -- in total, the range was likely around a mid-double-digit amount. So some examples are the -- some of the hedging effects, so positive hedging effects and of course, those are reversed or also evened out, of course, as we continue to execute in the quarters to come. There was, as you would expect for a large project business like Siemens Gamesa, some project benefits and shifts. It happens, right, where customers take over projects or even earlier than expected. And that's what has happened also in Q1 and again, kind of to counter that and something that to think about when you think of quarter by quarter, there is, of course, ongoing uncertainty regarding tariffs. And we said that last year that in the wind power business, actually, the tariff impact was the most substantial of all of ours. So of course, we're watching that very carefully. Again, our assumptions relating to tariffs for the year fully embedded our guidance. There's nothing to indicate at this point. But nothing was additionally booked in Q1 with wind power, but perhaps could be coming to fruition in further quarters. With respect to orders for Q1, again, with respect to onshore orders, Q1 was in line with previous year. And don't forget, I think Christian just mentioned that there's some orders forthcoming. We're now having some let's say, success with the new frames, but it was in line with last year, I think, of EUR 0.8 billion, just shy of EUR 1 billion, and that was as expected. Christian Bruch: Yes. To put it briefly into perspective. So we have, let's say, on the trajectory on where we want to get it. I mean we want to achieve the, let's say, last year's order intake. Keep one thing in mind, we limited ourselves to say, look, that is the amount of turbines we want to sell for the first phase and ensure that, obviously, every -- let's say, we test really everything out, and we are very careful. And in that regard, that's the main thing. So -- but we are, I would say, bang on plan. Tobias Hang: Thanks a lot. So the next 3 questions will be going to Chris Leonard from UBS, Sean McLoughlin from HSBC and Alex Virgo from Evercore. Chris, please go ahead. Christopher Leonard: Yes, maybe as an extension on the wind side and focusing on the offshore -- European offshore wind development. Is there any comment from your side as to what we should expect in terms of potential U.K. offshore wind allocation of orders for you in '26 or '27? And equally, any comment would be helpful as well on recent European plans for the North Sea. Christian Bruch: Yes. Thanks very much for the question. Maybe a couple of comments to offshore wind. If you look on the quarter 1 order intake, also just to flag it up, there's also one offshore order in Poland, which contributed to the order intake in quarter 1. U.K., auction around 7, still ongoing discussions, not yet fully clarified, so it's too early to say. But yes, we are also looking obviously in certain projects there and discussions are ongoing. On the 15 gigawatt, which came out of the North Sea summit of 15 gigawatt per year -- out of the North Sea Summit, yes, I believe, obviously, this will be actually great for the offshore industry or good momentum. We have to see now on how this is converted into auction schemes. You may know that Germany pushed its scheme out and is rediscussing the framework, which is fundamentally a good thing because at the end, it's not about the auction, it's about the FID. So I would expect that out of this North Sea Summit, we see obviously momentum also creating in the offshore industry going forward, potentially not in '26. It's more than coming in '27 '28. Tobias Hang: Next question goes to Sean McLoughlin. Sean D. McLoughlin: Just a question on the gas turbine mix. What's your current lead time on a new midsized turbine? And how does that compare with lead times for heavy-duty equivalent? Christian Bruch: Yes, it depends really what type of midsize, what type of turbine and keeping, let's say, flexibility there. As I said before, they see and there are some slots also '27, '28, which we try to balance, and these are the midsized gas turbines than with multiple trains. There's also a decent amount of reservation agreements on the midsized gas turbines. But I would say today, you're talking about, let's say, minimum a year shorter than the large gas turbine simply because of the supply chain situation. Sean D. McLoughlin: And just a follow-up, if I may. Just thinking about the huge increase in CapEx commitment that we've had from the main hyperscalers. I mean, I guess that puts emphasis on urgency. I mean, are you seeing more interest in midsized turbines that they can effectively obtain more quickly? Or is the mix still across all your turbine types? Christian Bruch: No, absolutely. They are -- let's say, the timing effect is a predominant decision criteria at the moment. So if you can deliver faster, smaller turbines, they go from more smaller turbines. And you see also some solutions, which I deem not ideal from an efficiency perspective, if I look on lots of small gas engines or so, which we do not do ourselves, but I see some solutions discussed just to bring power to the sites. What we are seeing is -- and what is really, really good for us, we're seeing a very strong demand across all different frames of gas turbines even below the midsized gas turbines, so in that regard, we can play the full breadth of our portfolio, and that's superb. Tobias Hang: So the next question goes to Alex Virgo. Alexander Virgo: I wondered if you could just expand a little bit on that last one there. The 83 units that you've had on the industrial turbines and the color around the order backlog exposure to hyperscalers. I wondered if you could just talk a little bit about whether that number in the industrial turbines is really what's driving and underpinning the hyperscaler exposure? And the sort of extension of that, your U.S. peer has just signed a big framework agreement, multiunit framework agreement. And I think you alluded, Christian, to that in your -- maybe it was an earlier answer on your prepared remarks, you talked about the trend to multiunits in the context of the customer discussions you're having. I wondered if you could give us a sense of whether it's likely that you're able to sign something similar? Or you're seeing that in the discussions you're having? Christian Bruch: I hope also there. I heard you correctly because our -- the worst qualities from time to time on the call is not good. I mean, looking across the, let's say, how should I say, diversity of the order book. And this is what I believe I heard from you, Alex, in terms of the different areas. Obviously, it's relatively evenly distributed around the frames. I mean, yes, the biggest chunk in terms of numbers more than obviously 50% is the midsized gas turbines. You have it evenly distributed really across the different regions. Roughly 40% is U.S., as I said, 35% EU, 15% release in China. If you see the order book, for what we're currently having is roughly 2/3 is a new unit, 1/3 is service. So that is roughly the distribution around it. If you take the data centers on the 29 -- on the orders, and if you talk about the 29 gigawatts of reservation agreements which we have outstanding, it's only half of this is data centers and half of this is conventional business is what we are seeing which also means only half of this is U.S. So this is obviously the diversity, which we have in the order book. There was a second part of the question? The multiunit -- thank you, the multiunit contracts. Yes, absolutely, we see it. We not only see it in data centers. There are some applications. We don't so prominently communicate it because not every customer wants that. But there is also bigger multiunit contracts outside the data center framework, which we have been taking and will continue to take. But we also see in the data center field framework agreements for several years and obviously, lots of units under discussion and also under conclusion in our order book. Tobias Hang: So now the last 3 questions go to Vivek Midha from Citi, Vlad Sergievskii from Barclays and last a follow-up from Phil Buller. Vivek, please go ahead. Vivek Midha: Hope you can hear me well. My question is on Grid. The margin of 17.6% is very healthy and in the upper half of the full year guidance range. Historically, Grid is not a business with that obvious seasonality. So should we see the upper half of that range is a better guide for the full year margin? And can you maybe talk about the continued fixed cost degression effects you talked about last year versus pricing impact and so on? Maria Ferraro: Yes. Thank you, Vivek, for that, and thank you for asking a question on our very nice profit development at Grid Technologies. So just maybe to preface this a little bit. So they did have a strong margin in the first quarter. There are also some underlying topics like sometimes FX, hedging, et cetera, onetime positive effects but I don't want to focus on that too much for grid technologies. What they have done and what they continue to do is execute through their backlog very efficiently, looking at things like productivity. So underlying, we see a very steady positive development. And actually, you can see that not only quarter-over-quarter, but also year-over-year. So I wouldn't expect -- I mean it was high. I would really look at their guidance of 16% to 18%, right, and see how that, let's say, is quite stably developing in the next quarters. Tobias Hang: So next question goes to Vlad. Vladimir Sergievskiy: So gas turbine orders, obviously exceptionally strong in the first quarter. Could you give us an idea of how much did it extend your backlog duration in Gas Services? And also more conceptual question. Is there a natural limit to how long backlog duration could get to? Is there a point when it becomes hard for customers to plan that far upfront? Christian Bruch: Yes. Maria, do you want to take it or [indiscernible]? Maria Ferraro: How about I take the first one. Vlad, and again, please correct us. Again, it was a bit difficult to hear. But in terms of our backlog, which I showed earlier, the EUR 146 billion, of which 45% is service. This plays very nicely into the backlog of gas services. And I think we showed that quite nicely also at the Capital Market Day, where we saw a step-up in the margin not only on new units, but also on service. And what's nice about the backlog and Gas Services, which is at EUR 60 billion, by the way, overall, a new record for them is that if you look at the new units, you tend to have, depending on frame size, I think Christian just nicely described that earlier. It depends on the frame size on how long that remains in our backlog before ultimate execution. Large frames are 3 years, maybe 3 to 4 years, perhaps the smaller frames are between 12 and 24. But what's really nice about the backlog of Gas Services is the service backlog there in. And that has an average duration in terms of our long-term service program contracts of around 13 to 14 years. So that's what -- when I talk about visibility in the EUR 146 billion backlog, I don't just talk about the next year or the year after. I really talk about the visibility that we have beyond -- towards the end of the decade and beyond. And again, I think EUR 10 billion of the backlog that we see right now around will continue to be executed until the end of fiscal year, if you think about it from that perspective and then an additional, let's say, more than that between EUR 10 billion and EUR 20 billion executed into the next fiscal year '27. As a rule of thumb, again, it all depends on how much we refill the backlog and, of course, what we execute there in. Thanks for the question. Tobias Hang: So the last question now goes to Phil, once again. Philip Buller: I think a lot of the questions are trying to disaggregate the more traditional customer environment in GS versus the data center customers. So I was hoping just to clarify a little bit. I think you said a quarter of the backlog is data center now for new units, but is the book-to-bill in Q1 for those traditional customers comfortably above 1? Reservation agreements, I know you don't disclose what the cash component is, but are there any reservation payments at all from traditional customer sets? And is there -- are you seeing signs of price elasticity, specifically for that traditional customer set? I know in aggregate, pricing is very good, but I'm just trying to drill down on the situation for that more traditional customer set, please? Christian Bruch: Yes. I mean what you have to see in quarter 1 revenue on Gas is roughly EUR 3 billion, right? And you see the order intake on EUR 8.8 billion. So -- and the answer is yes. I mean you have a book-to-bill above 1 on the very conventional base. And this is why I was giving this 25% indication also. And we feel comfortable also with the existing other market. That's why I continuously say, we are not dependent on the data centers. But they are the cream on the cake. And obviously, if you have a, let's say, early slot, you can really make nice profit around this. But obviously, going forward, if we now -- and then also in terms of reservation agreements, right? These things are also in discussions with classical customers. But the timing pressure is a little bit more flexible, I would say, for utility-driven customers. But keep in mind, we have the upcoming 10 gigawatts discussion in Germany, right? I mean -- and absolutely, we are already long-term planning this in, and we want to serve this market, and we will be in and but this is all considered at the moment. So I think across the board, it's a good market for gas. Tobias Hang: So with that, we would conclude the Q&A. And Christian, I don't know if you want to have some closing remarks just at the end? Christian Bruch: No, just an invitation also to the AGM to join us there in terms of giving a look back and a look forward. No, thank you really for participating in the call. It has been an interesting quarter. I'm very, very proud of our organization on how they execute through a demanding time, I have to say, seeing the geopolitics and everything and the high workload. Big thanks to everybody who was on the call, big thanks to the team purple here at Siemens Energy. Tobias Hang: Thank you so much, Christian. So with that, we conclude the call. And if you have any questions, you can always reach out to us at the Investor Relations team. Thank you. Bye-bye. Operator: That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. A recording of this conference call will be available on the Investor Relations section of the Siemens Energy website. The website address is www.siemens-energy.com/investor-relations. Have a nice day. Bye-bye.
Haj Narvaez: Good afternoon, ladies and gentlemen, welcome to our earnings call to discuss BPI's results for the fourth quarter and full year of 2025. I'm Haj Narvaez, your moderator for this session. Just as a reminder, we're conducting this briefing in a hybrid manner with our BPI speakers and panelists here in our headquarters at Tower 2 of Ayala Triangle Gardens, Makati City. We also have some participants who are dialing in remotely. I am pleased to introduce you to our speakers and panelists this afternoon. First, TG Limcaoco, our President and CEO; Eric Luchangco, CFO and CSO. They will also be joined in the panel for the Q&A by Tere Marcial, Head of BPI Wealth; Ginbee Go, Head of Consumer Banking; Louie Cruz, Head of Institutional Banking; Jenny Lacerna, Head of Mass Retail Products; and Dino Gasmen, Treasurer and Head of Global Markets. We are also joined by the rest of the BPI leadership team in this call. This afternoon's agenda will begin with opening remarks from our President and CEO, TG Limcaoco, followed by our CFO and CSO, Eric Luchangco, who will walk you through the fourth quarter and full year performance highlights as well as provide updates on our digital platforms and strategic initiatives. The floor will then be open to questions from the audience. Please note, the call is being recorded and legal disclaimers apply. Now let me turn you over to TG for his opening remarks. Jose Teodoro Limcaoco: Thank you very much, Haj, and very nice. Welcome to everyone joining us on this call today, both here at Tower 2 and virtually. Very happy to report that despite the domestic issues that this country faced, though it's the second half of last year, BPI managed to a 7.4% increase in our net interest -- net income after tax to PHP 66.6 billion, the details of which our CFO, Eric Luchangco, will go into. This was really driven from my perspective by our disciplined funding and our disciplined pricing on loans, which also grew 14.7%, much faster than the industry and allowed us to maintain our NIMs. Our net interest income grew 14.7% for the year. We also managed to keep OpEx growth at 9.9%, much slower than previous years. And really for me, one of the big achievements here was our ability to manage our tech spend, which if most investors will recall in the early years was growing at 28%, 25%. Previous year, we grew at about 14%. And this year, we only grew at 12%. We see that, that tech spend should continue to moderate going forward as we make changes in our tech stack and look at other vendors to supply our technology. Part of Eric's presentation today will also be to give more details on our provisioning. I know there's been some questions about that. And so we're happy to present some of our thinking behind it and also to take questions in detail about our provisioning and the risks we are taking as we shift our book to more consumer-oriented. Eric will also delve into a review of our progress on our strategic initiatives, but I'd really like to point out our success in 3 fields: our sustainability, our transformation of our branches and our agency banking. Then finally, I think we'll have a Q&A at the end, where I will be joined by our major business leaders as well as the rest of the senior team is here physically present. So in line with our real desire to be as open to our investors, we'll answer any questions. So with that, Eric, I'll turn it over to you. Eric Roberto Luchangco: Thank you, TG, and good afternoon, and thank you to everybody joining us for our fourth quarter and full year 2025 earnings call. We're pleased to report that the bank delivered another year of strong results, leading to another year of record income, the highlights of which are as follows: on profitability, the bank delivered a solid full year net income of PHP 66.62 billion, a 7.4% increase from the previous year, driven by strong revenues and positive jaws. Fourth quarter earnings of PHP 16.13 billion, up 14.7% year-on-year, highlights strengthened profitability. without the typical seasonal boost. Overall, sustained performance led to a robust full year return on equity of 14.5% and return on assets of 2%. The balance sheet continued to expand with loans up 14.7% year-on-year to PHP 2.6 trillion, while deposits rose 8.6% to PHP 2.8 trillion. The bank maintained a solid financial position with liquidity and capital buffers comfortably above regulatory minimums. Capital strength remains robust with an indicative CET1 ratio of 13.9% and a CAR of 14.7%. Overall, asset quality remained healthy with sufficient cover. The NPL ratio stood at 2.18%, rising 6 basis points year-on-year, but improving 11 basis points quarter-on-quarter. Coverage remained adequate with NPL cover at 94.9%. The bank continued to expand its consumer -- its customer franchise, growing its client base to PHP 18.2 million. Our nationwide reach accelerated through a network of 7,000 agency banking partners, enabling faster and more accessible services. Our wealth management business strengthened its role as a key growth driver, achieving record net funds contribution and record AUM of PHP 1.9 trillion. In the fourth quarter, we delivered a net income of PHP 16.13 billion, down 8% on the sequential quarter, primarily from higher provisions and the usual spike in operating expenses that we experienced in the fourth quarter. Compared to the same quarter last year, net income rose 14.7% as strong revenue expansion more than compensated for the 8.9% increase in expenses and a 233.3% increase in provisions. Total revenues grew 19.3% with net interest income up 15.5%, supported by a 14.7% loan growth and a 22 basis point improvement in NIM. While fee income increased by 16.3% pre-provision operating profit rose a robust 32.1%. For the full year 2025, we delivered a record net income of PHP 66.62 billion, up PHP 4.57 billion or 7.4%, supported by record revenues that more than offset higher operating expenses and provisions. These results included revenue of PHP 195.28 billion, up 14.8%, driven by record net interest income of -- which was up 16.0%. Trading income of PHP 8.29 billion, which surged 21.3% as we capitalized on declining interest rates in the third quarter to lock in some gains. Record fee income of PHP 38.96 billion, up 9.1% on sustained volume growth in key fee businesses. Operating expenses were up 9.9% from volume-related expenses and continued investment in people, products and technology. Pre-provision income at PHP 103.17 billion was up PHP 16.83 billion or 19.5%. Provisions increased 168.9% to PHP 17.75 billion, resulting in a net income of PHP 66.62 billion. Looking at the shareholder returns, earnings per share grew for the fourth straight quarter -- for the fourth straight year, reaching PHP 12.62 per share, a 7.1% increase from the previous year. Sustained earnings supported profitability with ROE at 14.5% and ROA at 2%. Moving on to the balance sheet. Total assets reached PHP 3.65 trillion, reflecting a 10% year-on-year increase, driven by higher loans and securities investments. Gross loans grew by PHP 2.62 trillion, up 14.7% year-on-year and 8.5% quarter-on-quarter with broad-based expansion across all segments. Deposits increased 8.6% year-on-year to reach PHP 2.84 trillion, primarily from growth in time deposits. CASA ratio finished the year at 60.7%, while the loan-to-deposit ratio reached 92.4%. Credit demand remained strong with gross loan growth accelerating 8.5% in the fourth quarter. Year-on-year, loan growth eased from 18.2% in 2024, but remained robust, increasing by PHP 336 billion or 14.7% and outperforming the 9.7% industry average for universal and commercial banks. Non-institutional loans accounted for close to half of that growth, rising PHP 163.9 billion or 25.8% year-on-year. Non-institutional loans posted steady gains with SME loans up 79.7%, credit card loans up 31.9%. Personal loans up 28.3%. Personal loans include PHP 16 billion of teachers loans, which increased 83% year-on-year. Auto loans was up 22.9% with auto loans including PHP 5 billion in motorcycle loans, which also increased 23% year-on-year. Mortgage loans was up 15.7% and microfinance loans up 15.3%. This loan expansion highlights the bank's strong momentum even against a higher base following robust expansions for noninstitutional loans in 2024 and 2023. On NIMs, our annual NIM has expanded consistently since 2021, reaching 4.59% in 2025, up 28 basis points from last year, fueled by a 26 basis point jump in asset yields, supported by a larger share of retail and SME loans and a slight decline in funding costs. On a quarter-on-quarter basis through -- on a quarter-on-quarter basis, though, NIMs fell by 4 basis points to 4.58%. This was mainly due to a drop in loan yields from the institutional loans as this segment adjusts faster to the policy rate movements. Please note that in the left chart, we also show a risk-adjusted NIM, which is based on NIM adjusted for the net NPL formation. Despite the drop in policy rates, risk-adjusted NIMs for 2025 hit 3.97%, up 36 basis points year-on-year, which is our highest figure over the past 5 years. On funding, we're optimizing funding by shifting from time deposits to bond issuances, which are supported by incentives for sustainable financing, resulting in a lower effective yield versus top TD rates. While deposits remain the core funding source, borrowed funds grew 37% and now account for 7% of total funding. Key funding ratios remain fairly stable with a loan-to-deposit ratio of 92.4% and loan to total funding at 85.7%. We continue to prioritize strengthening our deposit base with greater focus on CASA. Our CASA mix remains predominantly retail, comprising 77% of the total, including contributions from microfinance and SMEs. Growth in CASA is being driven by the core mass and mid-market segments, driven by expansion in the client base and higher average balances. We saw sustained growth in fee income, up 9.1%, led by our biggest fee businesses, cards, wealth management and insurance, which collectively contribute about 60% of total fees. Card fees grew by 13.8%, driven by an 8% increase in customer count, 17% increase in transaction count and 4% increase in average transaction amount, contributing to a 21% increase in billings from retail, cash advances and installment loans. Wealth management fees increased 6.6% on record net contribution from clients. AUM soared 18.7% to close the year at PHP 1.91 trillion, led by a 16.2% increase in private wealth, 23.7% increase in personal wealth and a 17.7% jump from the institutional business. Wealth's client base reached 1.46 million, up 26.3% year-to-date September -- year-to-date September, our market share in the trust industry rose by 35 basis points to 21.1%. And we hold a commanding market share in investment funds at 31% and a 30.5% market share in employee benefits. Income from insurance, up 11.4% is comprised of: one, equity income from joint ventures; two, royalty fees; and three, branch commissions. In 2025, equity income was up 13.6%, royalty fees up 21.6% and branch commissions up 4.6%, following a high base in '23 and '24, driven by the launch of new products. These increases were partly offset by the decline in fees from retail loans, which was down 10.2%, largely due to the absence of last year's one-off collections from housing loan penalties and late payment charge adjustments following the curing of CTS accounts. ATM and digital channels down 3.9% as the bank discontinued its e-wallet loading service for GCash and Maya. Remittances down 2.8% due to heightened competition from a new market entrant, leveraging InstaPay and PESONet-enabled transfers. Branch service charges down 2.6%, owing partly to 4 fewer banking days versus last year and the continued migration of over-the-counter transactions to online channels. Credit quality remains healthy even as portfolios expands into higher-yielding segments. NPLs increased to PHP 56.9 billion, but the NPL ratio remained broadly stable at 2.18%. Provisions totaled PHP 17.75 billion, bringing credit cost to 75 basis points for the year. NPL coverage remains adequate at 94.9% and strengthens to 122.9% under BSP Circular 941, providing a solid buffer against potential credit losses. Across segments, except for institutional loans and in particular, SME -- SME, mortgage, microfinance and auto loan segments, all recorded year-on-year increases in their respective NPL ratios. The credit card NPL ratio increased by 38 basis points year-on-year to 4.68% and remained stable quarter-on-quarter. The rise in NPL is largely driven by test programs, which account for 59% of the volume, while regular programs account for the remaining 41%. Delinquencies are concentrated in 3 groups: younger clients, aged 40 and below, lower income borrowers earning less than PHP 40,000 per month and post-pandemic acquisitions booked between 2022 and 2024. The personal loan NPL ratio also increased, rising 172 basis points year-on-year to 7.16%. Similar to cards, deterioration is coming from younger and lower income borrowers, including 2025 vintages, accounts sourced through -- and accounts sourced through universe expansion programs. To mitigate further deterioration, we tightened credit score cutoffs with early post-implementation results showing reductions in NPL ratios. We also enhanced early-stage delinquency detection and strengthened collection efforts. These measures are expected to support improved NPL performance in 2026. The microfinance NPL ratio increased 25 basis points quarter-on-quarter and rose by 277 basis points to reach 13.3%. The rise was primarily driven by a test program that offered higher loan amounts and longer tenures to existing clients. The quarter-on-quarter uptick increase reflects the impact of recent typhoons in the Visayas, which disrupted operations of certain BanKo borrowers. Overall, however, recent loan bookings are performing better than -- better following the tightening of credit score requirements. SME NPL ratio remained stable, but increased 192 basis points year-on-year to 7.25%, largely driven by strong loan growth. SME loan balances doubled in 2024, which initially kept NPL ratio low. As loan growth more recently moderated slightly, the NPL ratio normalized into the 7% to 8% range, which reflects typical SME portfolio behavior. NPL formation is mainly coming from regular or non-program loans in the lower ticket segment, select high-ticket exposures -- sorry, and select high-ticket exposures. While high-ticket cases represent less than 1% of the total NPL accounts, their larger loan sizes impact the overall NPL levels. No significant concentration has been observed by industry or by geography. Delinquencies are broadly distributed, indicating portfolio-wide, not sector-specific drivers of NPL formation. Finally, in addition to NPL coverage, we report ECL coverage at 100.9%. As shared during our previous earnings calls, our provisioning approach is anchored on ECL, which provides a forward-looking estimate of potential losses. Operating expenses rose by 9.9% year-on-year, primarily driven by technology, manpower and other expenses, which includes marketing, rewards, business volume-related expenses and third-party fees. These investments have strengthened the bank's position. We added 2 million new customers since the start of the year, bringing our total customer count to 18.2 million. We enhanced our nationwide reach in a cost-effective way, rationalizing our branches while expanding our agency banking partners. We achieved operational efficiencies, reducing cost-to-income ratio further to 47.2% in 2025. CET1 capital stood at PHP 401 billion, up PHP 34.9 billion from last year on net income accretion. The CET1 ratio declined 115 basis points quarter-on-quarter, but was flat year-on-year as earnings generation offset the drag from a higher dividend payout and robust loan growth. Capital ratios remained well above regulatory and internal thresholds and sufficient to support continued loan expansion. Strong earnings has supported sharp increases in capital distribution with the implementation of the variable dividend payout effective 2022. In 2025, the bank declared a total cash dividend of PHP 4.36 per share, up 10.1% from 2024 and 142% from the fixed dividend payout -- dividend amount paid out in 2021 and the prior years. We show here a table that shows the revenues associated with loans, covering the full year 2025, 2024 and 2023 and the respective net NPL formation for each loan book for the periods. From 2023 to 2025, revenues across the loan book increased by PHP 40.4 billion, which is more than 3x the PHP 12 billion increase in net NPL formation. The non-institutional segment contributed PHP 33 billion in revenues, surpassing the PHP 17.3 billion increase in net NPL formation, a pattern observed consistently across all loan segments. The loan revenue uplift is driven by the sharp growth in noninstitutional volume, which in turn drove the shift in loan mix toward higher-yielding segments and the increase in fee income associated with higher loan volume. Revenues have outpaced the cost. Despite the rise in provisions, the pivot toward noninstitutional loans has delivered value and validates the bank's direction to grow the share of noninstitutional portfolio in the loan mix. While institutional loans are and will remain a core part of our portfolio, noninstitutional loans have -- are the segment with a greater growth opportunity, consistently delivering loan yields averaging above 12%, even after factoring in credit costs or net NPL formation. Non-institutional loans continue to show grower -- greater risk-adjusted returns. Non-institutional loan growth has outpaced institutional loan growth, contributing to the uplift in overall profitability as there is greater availability of untapped opportunities here. Just to highlight again the higher relative returns on the noninstitutional segment, we show you a comparison of the return on assets for both the institutional and noninstitutional lending segment as well as the resulting ROA for the bank's lending business. For this exercise, please note that we used ECL formation, which largely dictates our current provisioning rather than the net NPL formation or our actual provisions in arriving at the ROA. This way, we net out the effect of higher overlays in prior years as this can be seen -- as can be seen, the non-institutional lending business has delivered ROA of around 4% or higher over the period versus the sub-3% ROA of the institutional lending business. The increased share of noninstitutional loans results in a blended ROA for the lending business of 3.2% in 2025, above the bank's overall ROA of 2% for the same year. Segments that posted the highest adjusted ROE with each enjoying a figure north of 3.5% were personal loans, credit cards and microfinance. We believe this justifies the increased allocation of resources towards the noninstitutional loans and shows that the risk-adjusted returns of the noninstitutional business, including those of unsecured segments, remains stellar, notwithstanding concerns about periodic spikes in the rate of the NPL formation. At this point, allow us to update you on what we have accomplished in 4-plus years since we first shared with you our key strategic initiatives, which include increasing the share of consumer and SME loans or the non-institutional segment in our loan book, establishing ourselves as the undisputed leader in digital banking, using branches as sales stores more than service points, closing the gap in funding leadership and promoting sustainable banking. Our lending business continues to show strong momentum, underpinned by sustained growth across all segments. Our loan growth -- our loan portfolio expanded PHP 2.62 trillion -- to reach PHP 2.62 trillion, rising 14.7% year-on-year and posting a solid 14.3% 3-year CAGR. Both institutional and noninstitutional segments contributed significantly, but noninstitutional lending remains the primary growth engine, growing at an exceptional 29.5%, 3-year CAGR, while institutional loans accelerated at a very respectable 9.5%. This faster growth has driven a big shift in our loan mix. By 2025, noninstitutional loans accounted for 30.5% of total loans from only 21.1% in 2021. This achievement places us 1 year ahead of schedule in reaching our loan mix target of 30% noninstitutional, which underscores the strength of our execution and growing relevance of our consumer franchise. Overall, we've gained significant market share since 2021, as shown on the right-hand table. Market share in gross loans was up 170 basis points, credit cards up 245 basis points, auto up 520 basis points and mortgage loans up 465 basis points. As expected, the expansion of noninstitutional loans increased the NPL level, but the NPL ratio continued to decline due to the faster growth of the loan portfolio and write-offs in the noninstitutional loan book. Credit cost was 93 basis points in 2021 or 18 basis points higher than in 2025, reflecting the elevated provisioning during the COVID-19 period to maintain sufficient NPL and ECL coverage. In line with our commitment to digital leadership, the bank continued to scale 7 client engagement platforms, which are delivering steady growth in enrolled and active users. Transaction volumes continue to shift toward digital channels, supported by new partnerships, enhanced functionalities and continuous platform improvements. Starting from the left, the BPI app, our main operating app for retail clients, now includes a buy-and-sell U.S. dollar facility, regular subscription plans for investments, mobile check deposits and virtual privileged cards, which broadened the app's role in facilitating everyday financial transactions. We also enhanced payment efficiency by reducing the InstaPay fee to PHP 10 and adding over 600 new billers. In addition, BPI to BPI transfers remain free and continuous refinements to the consumer interface and navigation are improving overall ease of use. For VYBE, our e-wallet, sign-ups have reached 2.5 million with 78% being VYBE Pro users. The BPI BizLink facility for corporate clients introduced key upgrades, including web approvals via SMS OTP, mobile multifactor authentication, pay foreign with multicurrency and express check deposit to seamlessly migrate clients to the mobile app and provide ease of transaction approval. The BPI BizKo app for SMEs now serves nearly 30,000 users boosted by e-payroll and salary on-demand services, which aim to bring unified payments for clients and drive usage. The BPI BanKo app remains central to financial inclusion, offering simplified deposits and access to accessible revolving credit. BPI Wealth Online serving high net worth individuals grew active users to 2,800, up 82% year-on-year through sustained activation initiatives. Finally, BPI Trade continues to strengthen engagement among equity investors, with higher transaction count in 2025 and new features such as eRegistration, eDeposit and eReserve to widen accessibility. Across all platforms, we continue to expand capabilities and open banking -- in open banking and improve UI/UX for a more seamless experience. As of December 2025, we have 131 API partners, up from 74 in 2019, supporting over 17,000 brands, up from only 749 in 2019. Despite our strong push towards digitalization initiatives, we continue to invest in our physical network by opening branches in targeted growth areas, even as we consolidate and co-locate branches to optimize our footprint. In 2025, we further rationalized our branch footprint, opening 3 and relocating and consolidating 37 others. The remaining branches will be redesigned into phygital, prime phygital and flagship format, depending on the target segments, customer experience and location. This approach allows us to deliver a differentiated customer experience by leveraging on our both physical stores and digital capabilities. Our branches have undergone a significant shift in their role from primarily handling day-to-day transactions to serving as advisory centers. A few years ago, only 30% of branch personnel time was dedicated towards advisory, while 70% was spent on operations. As of December 2025, operations work has decreased to 46%, while advisory now accounts for 54%, a significant shift that reflects our transformation towards higher-value customer engagement. At the bottom of the slide, we highlight the branch performance following its transformation into a physical -- into a phygital format, 6.5% increase in monthly gross acquisition, 31.8% increase in average monthly net acquisition, 8.6% increase in deposit ADB, 11% increase in digital customers and an improvement of 15.5 percentage points in the internal NPS survey for branch stores. Closely linked to our branch rationalization initiative is our growth in our agency banking, which continues to strengthen the bank's presence beyond branches. We expanded the agency banking network to 32 partners and 7,000 partner stores, driven largely by partnerships with leading brands that strengthened our footprint, particularly in Visayas and Mindanao. What began as product onboarding partner stores has scaled rapidly. 987 of these stores are now enabled for a deposit-withdrawal transactions across 18 partner brands, thereby broadening our ability to serve customer segments nationwide. In 2025, all products -- in 2025, total products sold reached [indiscernible], a fivefold increase from the [indiscernible] recorded in 2024. This growth was supported by a significant jump in productivity to 74 from only 15 in 2024, with insurance and deposit as a primary product. Deposits and withdrawal transactions grew sharply, supported by an increase in enabled stores and stronger marketing efforts. Transaction value and volume were nearly 12x that in 2024, reinforcing agency banking as a viable initiative to increase deposits. More clients can now access a transaction facility with the rollout of RRHI touch points, covering 7 brands and 474 stores using a barcode generated in the BPI mobile app. Looking ahead to 2026, we will accelerate the expansion of transaction capable stores to 2,000 and elevate the customer experience. We will deploy dedicated brand ambassadors who will guide clients through product increase applications and cash transactions within partner stores. The bank delivered a solid deposit growth from 2021 to 2025, with deposits rising 45.2% to PHP 2.8 trillion. Both CASA and time deposits increased, although the growth was led by time deposits, resulting in a decline in the CASA ratio by 16 percentage points to 63.2%. Despite the headwinds in CASA, market share in total deposits improved 67 basis points to 12.04% in 2021 to 12.71% in 2025. Corporate CASA growth remains challenged, while enrollment and transaction activity on the BizLink -- on BPI's BizLink increased overall penetration and client engagement show room for improvement. To address this, we continue to enhance our capabilities to become the main operating bank of our clients and capture the full ecosystem of their transactions. This includes positioning BPI as the aggregator by enabling real-time payments and notifications, multichannel reporting and innovative collection solutions. These initiatives aim to strengthen client engagement and accelerate CASA growth. Retail deposit acquisition continued to be our core strength, the number of new-to-bank deposit clients grew at a 30% CAGR over the past 5 years, driven by digital onboarding which surged 240%, far outpacing the 14% CAGR for branch-acquired accounts. By December 2025, CASA booked via digital channels reached 38x its 2021 level. We also managed to increase the average balances of existing or tenured CASA year-on-year. Our client base now stands at 18.2 million as we onboarded 2.2 million customers in 2025, further advancing our financial inclusion efforts. The year was marked by major ESG milestones, including the bank's larger sustainability bond, the PHP 40 billion SINAG bond, which was 8x oversubscribed, the conversion of 70 BPI branches to 100% renewable energy and BPI's pioneering membership in the Alliance for Green Commercial Banks in Asia. This Friday, we will issue and list the 2-year peso BPI Supporting Individuals to Grow, Lead and Achieve bonds or BPI SIGLA bonds. This will carry an ASEAN Social Bond label as affirmed by SEC. Other highlights include, under responsible banking, 4 new sustainability-focused products in insurance and remittance, BPI-developed AI programs for environmental and social due diligence on global and local investments, numerous ESG-focused financing deals with key deals supporting solar, wind and water projects in the Philippines and Southeast Asia. For responsible operations, BPI is the first Philippines bank to publish its decarbonization strategy road map for Scope 1 and Scope 2 GHG ambitions. By December 2025, we had a total of 44 IFC EDGE-certified green branches, doubling from 22 last year. The bank expanded its customer touch points through the May BPI Dito initiative to 32 partner brands and over 7,000 stores nationwide. Finally, for sustainability, governance and risk management, BPI expanded its sustainability framework, adding 17 new eligible green, blue and social categories. The bank also refined its E&S exclusion list and introduced a consolidated human rights policy aligned with the united declaration of human rights. Allow me to conclude with a summary on profitability. We delivered continued improvement in profitability for the fourth consecutive year of record income led by revenue growth. On the balance sheet, we delivered strong broad-based loan growth led by noninstitutional segments, while the bank's liquidity and capital positions remain above regulatory thresholds. On asset quality, we remain -- we maintain strong asset quality with sufficient cover. Finally, we sustained strong ROE and delivered increased dividends. We closed 2025 with confidence in our strategies and momentum. We navigate a challenging environment. We remain focused on delivering consistent performance and creating value for all our stakeholders. Thank you, and we will now open the floor for questions. Haj Narvaez: Thank you, Eric. Before we open the floor to your questions, please allow us a minute or 2 to set up at the venue. [Operator Instructions] For those on site, you may use any of the mics available at the floor or you may raise your hand, and we will have someone hand the mic to you. Just as a reminder, please identify yourself by your name and company, so we can address you accordingly. For the benefit of everyone attending this call, whether in person or online, we would like to encourage you to ask your questions during the session. Please note that we will refrain from taking questions after we end this call. Joining us here in front with TG and Eric, our senior leaders. First, Tere Marcial, Head of BPI Wealth; Ginbee Go, Head of Consumer Banking; Louie Cruz, Head of Institutional Banking; Jenny Lacerna, Head of Mass Retail Products; and Dino Gasmen, Treasurer, and Head of Global Markets. Perhaps we can take -- if there's anyone in the audience to ask questions. Please go ahead, DA. Daniel Andrew Tan: DA from JPMorgan. First question on asset quality. Fourth quarter, if you look at NPL formation, we estimate it to be around PHP 7 billion. It's higher than third quarter. So I just want to understand, any reason behind it? Any one-offs in fourth quarter that, that moved up? Eric Roberto Luchangco: No specific one-offs. Really, it's just some of the movements that we saw, the movement in the -- movements in -- for one thing, like I said -- like we've said, we're focusing on the ECL as one of the -- as the key basis on which we're going to be providing because, again, it's forward-looking. There were some adjustments to the MEVs. That's when you saw the weak GDP numbers from the third quarter move into our model, and therefore, that created some of the adjustments that we're looking at. Daniel Andrew Tan: But if you look at NPL formation, any -- which segments drove the formation in the fourth quarter? Eric Roberto Luchangco: So it was credit cards was one of the significant contributors to that. Actually, that was probably among them, probably where we saw the bulk of the movement. Daniel Andrew Tan: And so your fourth quarter credit costs around close to 100 basis points? Just fourth quarter, right? Going forward, what do you expect these looking into 2026? Eric Roberto Luchangco: So moving forward, credit cost, we estimate in the kind of 80-ish -- in the 80-ish basis point range. Daniel Andrew Tan: And the drivers behind is what you mentioned earlier on the tightening of credit standards and so on. Is that fair? Eric Roberto Luchangco: The driver to keep it in check. Daniel Andrew Tan: The driver to keep it lower than fourth quarter. Eric Roberto Luchangco: Yes, yes. Daniel Andrew Tan: All right. So that's my question on asset quality. Just another one on growth. So looking into this year, given the macro situation as well, we've beaten actually loan growth in fourth quarter. But do you think this year, what's the outlook on that one? Eric Roberto Luchangco: So overall -- obviously, we kind of carry forward this, in a sense, a lack of momentum that we've had over the third and fourth quarter into the beginning of the year. And yet, we remain -- we continue to believe that there is the opportunity for this to turn around quickly. A lot of the slowdown has been sentiment-driven rather than fundamentals-driven, which means that with a turnaround in sentiment, which can happen quickly, things can turn around. That being said, we approach the year with a fairly cautious approach, but with the mindset that we will retain the ability to move quickly as we see the circumstances turning around. Daniel Andrew Tan: Any guidance on growth and across segments? Eric Roberto Luchangco: Loan growth, you mean? Daniel Andrew Tan: Yes. Eric Roberto Luchangco: So loan growth, we expect to be in the low teens. So basically, weaker than the 14.7% that we saw last year, but still in double-digit territory. So call it in that kind of maybe 12% to 13% range. Daniel Andrew Tan: And just last one for me on treasury, I think last year, pretty punchy number around PHP 8 billion. Any thoughts on how we should think about this year? And also within the PHP 8 billion, how much would you say is customer flow or more recurring type of treasury? Dino Gasmen: Yes, thank you for the question. Good afternoon, everyone. Well, last year's trading income was driven really a lot by changes in monetary policy, the BSP cut by, I think, about 125 basis points. The Fed also was cutting last year. So I think that provided the opportunity to generate trading gains. Looking at 2026, I think the expectation is much less cuts. Our own economies are saying probably 50 basis points from the BSP. In the U.S., I think the forecasts are very diverse. Some say none, some say 2 to 3. So I think this year, trading gains are probably going to be less. The opportunity, I think, is on the steepness of the curves, a lot of -- well, the carry should be good this year because of the steepness of the curves. Lastly, on close. I think -- I'm not sure right now, but I think about 20%, 30% of that workflows. Haj Narvaez: We actually have a question in the Q&A box. The first question -- the question in the Q&A box is from Yong Hong Tan of Citibank. I'll actually passes over to Louie Cruz. How is corporate client sentiment for this year? Are they turning more cautious or more positive after the government budget? And are CapEx loans coming back? Luis Geminiano Cruz: Thank you, guys. Good afternoon. Okay. For this year, comparing it to last year, when we started 2025, we had a very good visibility of the pipelines of all the projects. And you can see significant projects. For this year, it's slightly lower versus last year, but the thing is, they have standby facilities. So it's -- I guess, you can see how corporates are taking now. They're more cautious. But they're also seeing opportunities given how the market would go first half or second half, depending on how this whole issue would come out this year. So the facilities are there, but the visibility compared to last year is slightly lower. Now for institutional banking overall, the growth that we're seeing, we're seeing about 8% to 9% still on the growth based on the visibility. But all this will all depend also on the working capital and the opportunity on that because not most of them will really avail at this point. But given where the rates are going, again, companies will have that opportunity to borrow. And the facilities will -- are there ready, and it all depends on the utilization now to bring up the growth moving forward. Haj Narvaez: Thank you, Louie. Actually, Yong Hong also has a question on consumer growth. I think the answer here's we're looking at low 20% level in terms of year-on-year growth in consumer. Jose Teodoro Limcaoco: Let me just put it in perspective. The target for this year for the bank is to try to grow our loan portfolio anywhere from 11%, 12%. 12% to 13% actually is what we're aiming for. But of course, like anything else, that's what we feel we can achieve, but it all depends on how the macro situation turns out. From segment basis, we're looking at corporate loans -- sorry, institutional loans about 9% -- 8%, 9% and the consumer sector growing maybe 20% to 25%. Now as Eric said, the malaise we feel in this country today is, for me, really driven by confidence. I don't think there's anything structural in the country. It's just people feeling uncertain about what's going on, looking for direction. And I think that's something that can turn very quickly. And so the bank is prepared if things turn very quickly. Of course, there are some other things that we need to watch out for. You have to look at what the sentiment of the auto distributors are. When you talk to them, they're quite bullish, right? They're looking at some growth this year. When you look at the mortgage business, you're looking at 2026, and you have to realize that in 2026, we are now really 4 years, 5 years away from the pandemic when nothing got started, right? No new projects. So that's got to play in. So if we can see 20% growth in the consumer sector, which is about 30% of our book and you see 9% growth in the corporate sector, which is about 70%, that will give you something like 12.5% growth. And that's why we feel that's something that should be achieved. The cards business is something that we continue to be quite optimistic about, but also it's a business that we watch very carefully. In the fourth quarter last year, we had significant NPL. We had scored degradation and therefore, we took provisions for that. But that is something that we have looked at and that we are correcting. Again, it's part of our process where we experiment, we look for new cohorts, we look for new clients, run a few programs. And if it works, we expand it. If it doesn't work, then we cut it very quickly. Haj Narvaez: Thank you, TG. We also have a question that was typed in from Felix Mabanta of Metro Bank. He's asking for some color on the credit card loan growth of 31.9%. Is the growth more a function of existing loans being rolled over? Or is it coming from new credit card customers? Jenelyn Zaballero Lacerna: So to answer that question, it's really a combination of growth in different parts of the business. If you recall, pre-pandemic, we're just acquiring about 200,000 cards per annum, and we're at 400,000 cards per annum post-pandemic. And our retail sales is growing at about 21%. But one of the things that's driving our growth would be installment, which is growing at about 37%. So the installment loans are the ones that you see in the stores, where you can actually purchase appliances, bigger ticket items at terms, and also loans which are targeted offers to customers, who we feel are qualified for our loans. So it's really a combination of those 3 things. Thank you. Haj Narvaez: Thank you, Jenny. Wanted to check if anyone from the audience had questions. Go ahead. John Liam Limbo: I am Liam from F. Yap Securities. I just have a couple of questions. The first question is, with the less than ideal sentiments and possible sunsetting this year of the interest rate easing, what can we expect for provisioning in 2026? Eric Roberto Luchangco: So for provisioning, I think that's about -- in the -- about in the 80-ish basis points, 80 to 89 basis points in that range is kind of what we're expecting. John Liam Limbo: All right. For my second question is for the dividend payout ratio related to the factors that I have discussed earlier. What can we expect for -- in terms of the ratio for 2026? Eric Roberto Luchangco: It's still a bit early to be very specific about that. Obviously, our dividend payout ratio is a result of where we think loan growth is going to be versus how much income we're generating. But just as a rough guide, given the fact that we think loan growth is going to be a little more muted this year, there's probably room to increase dividend payout ratio a bit. Haj Narvaez: We have a question that's also typed in by Rafael Garchitorena of Regis. Could you please break down the 11 basis point Q-on-Q drop in loan yields. Presumably, it was led primarily by the institutional book. Rafa, confirming this, I think we mentioned this in the call -- in the message earlier, it's primarily driven by the institutional book. If you'll notice also, the weight of the institutional book also went up Q-on-Q given it was quite strong on a Q-on-Q basis. Thanks. We have actually another question. This time, it's from Abigail Chiw of BDO Securities. May we know the outlook for NIMs and NPL levels this year as BPI continues to build up the consumer loan book? Eric Roberto Luchangco: Yes. So in terms of the NIMs, we expect that NIM should be fairly stable given that we think that rates are still on a slightly easing trend, right? As mentioned by Dino, our forecast is 2 more rate cuts over the course of this year. But the rate cuts from last year will actually also be filtering into the book, so that will create downward pressure on our NIMs. However, we expect to continue to shift the loan book -- to continue to shift the loan book towards the noninstitutional segment, and that should provide a balancing effect. So NIM should be fairly stable. And then on NPLs, I think we're looking for it to remain kind of within the range, but slightly growing because of the continued shift towards the noninstitutional loan book should create some -- a little bit of a lift there, but that's consistent with the direction that we're heading in. Haj Narvaez: Thank you, Eric. Another -- well, at this time, it's a question on asset quality that was typed in. This time, it's from Melissa Kuang of Goldman Sachs. She's asking on the auto loan side. Could you please elaborate on the key factors contributing to the observed increase in auto loan, nonperforming loans during this period? Ma Cristina Go: Yes, Melissa. Thank you for the question. The pressure on the NPL for auto loans is coming from our strategy of really going more expansive in our market. So it's coming from the lower income, lower risk score segments, which we've then after that tightened as we go into more and more lending programs, we adjust, we tighten the score and the underwriting parameters. So we've seen the source of these accounts to be coming primarily from dealer-generated accounts. And therefore, we've shifted our books into more of the branch-generated accounts, focusing on our prequalified depositor programs. But not to say that we will totally stop or terminate our lending programs. We are looking at balancing risk and reward. So pricing for risk and -- because we still see a lot of opportunities as we go more down market. That's really where the growth opportunities would be. Haj Narvaez: Thank you, Ginbee. Again, we'd like to open the floor to any questions from the audience. Okay. There's a question about -- sorry, there's a question here from Yong Hong Tan again of Citibank asking for the average risk weight of the corporate versus noncorporate segment. And I guess I'll direct this towards you, Eric, but just a question about the capital position looking ahead. Eric Roberto Luchangco: Risk weighted, 100% for corporate, right? And then mostly 100% across the noninstitutional except mortgage is what, 20%, right? Haj Narvaez: Yes, [ it was less ]. Eric Roberto Luchangco: And then sorry, what was the second part of the question? Haj Narvaez: Next question is actually about how we feel about our capital position moving forward. Eric Roberto Luchangco: Actually, what we think we've got more than sufficient capital, right? This level of practically 14% is more capital than we think we need. It gives us room for continued loan growth. And in fact, we think we can bring it down from where we are, which is why -- part of the reason why I also mentioned there's potential for dividend payout to increase moving forward. Haj Narvaez: Thank you, Eric. Okay. There's a question from Priya Ayyar. She's actually asking about the consumer lending space. Are we seeing any deterioration in the client profile? How much do we see the share of consumer moving forward, I guess, over the medium term? Jose Teodoro Limcaoco: Well, I guess the strategy has always been to try to increase the share of the consumer book as part of our total loan book. Therefore, we will continue to aggressively grow the consumer loan book. Growth in the consumer loan book arises from 2 things. One, it's taking more market share from our core clients, meaning, obviously, we have bank clients, depositors who bank with several banks. We try to get those clients as borrowers at the branch. Then you also have the core -- what would be the traditional client base, I guess, the upper segment of what we would call the easy to lend to. That one, we try to get them and try to get market share from our competitors by working more closely with dealers, with brokers, giving them offers. The other way to grow your loan book is by targeting new segments. And that's where we have to use our data. That's where we have to be a little more aggressive, and that's where we're willing to take risks by opening up into new markets, studying them and working very closely to shut it down if it doesn't work as it did in, I think, the -- sorry, the third quarter in 2024, and to grow those segments where it's successful. And maybe here, this is where we go, and I'll turn it over to Ginbee to talk about some of the programs where we're targeting the lower -- with our nontraditional segments, the lower end of the market as we try to expand our customer base. We have a MyBahay program and we had some programs auto side. Ma Cristina Go: Yes, TG. So on the new markets that we're looking at, again, we mentioned this earlier, we really want to make credit accessible to more Filipinos. That's part of the bank's aspiration to be more financially inclusive. In which case, we've introduced a number of programs to this end. One was the MyBahay and MyKotse, which TG mentioned. It basically addresses affordability, and that means extending the loan tenure, lowering the down payment. And so it's not just about interest rates. Because the lower income segment, monthly amortization -- budgeting for monthly amortization is more important. So that's how we're able to also manage the risk because the yields on these assets would be higher to be able to cover for the higher provisioning or credit cost. So new markets and the use of data would be critical for us to be able to manage the risks on this front. Other opportunities for us would really be on process improvements. We do realize that the ability to turn around and process loans will be critical for us to get and book high-quality accounts. So the faster you are, the better quality accounts will go to you. And that's what we're continuously addressing. And on this end, we're really looking at AI, piloting agentic AI for -- particularly for auto loans this year, but eventually rolling off to other types of loans. Third would be the OneScore. We're looking at it as a credit scoring at customer level because we understand that our customers have different loan borrowing needs. And so the ability to look at it from a total customer standpoint and manage the risk of that customer will also be critical for us, not just capturing opportunities, but managing the risks. Jose Teodoro Limcaoco: And then the last area, obviously, the new products which we're offering, which traditionally have not been. So ever since we took Robinsons Bank, we have motorcycle loans, which was totally nonexistent for us in 2023, it started 2024. And that's a very different model because we work very closely with our shareholder who runs the dealership. So there's quite good synergy there. We're not doing it with all dealers. We're just doing it with dealers of our shareholder. We also have grown a business in teachers loans. Today, that book is PHP 16 billion when we took over Robinsons Bank. I think that was PHP 4 billion, right, so in 2 years. And the secret with teachers loans is really distribution. So today, whereas Robinsons Bank was only doing it through Legazpi Savings, which very limited reach, today, we're distributing teachers loans across the country through our 800 branches plus even some of the BanKo branches. Then finally, cannot let go -- not notice the success we've had in our business bank, the SME book, which 4 years ago, was a PHP 16 billion book, and last year ended at PHP 64 billion. And that's really working with SMEs trying to understand who are the SME, standardizing the product, standardizing the distribution and working with the channels to get it there. And that one is a great success story because they're, we've used data first to identify the businesses that couldn't qualify just looking up by their cash that goes to our accounts. And then secondly, we actually turned it around and looked at individual accounts and look at their data and identify them as actually SMEs banking with us as individuals and turn them into SME clients. That's a secret for growth. We -- these -- just these 3 products alone can contribute to a significant share to the growth of our consumer. Haj Narvaez: Thank you, TG. We have a question from Aakash Rawat from UBS. Aakash Rawat: Great. So three. the first one is, so TG talked about environment which is not looking very positive, strong demand-wise. I'm just wondering what drove very strong loan momentum in the last quarter of 2025? Is it a few chunky downs from some corporates, any particular sectors? And have you seen that momentum in 2026 year-to-date? That's the first question. Jose Teodoro Limcaoco: So let me get this. You're asking the -- if we can -- any color on the strong fourth quarter loan growth, right? Louie, any big ones on the corporate side. Luis Geminiano Cruz: For the fourth quarter, it's quite clear and it's very public that the one that drove loan growth was really power, and the projects that were supposed to be completed in 2025 were mostly completed in 2025 despite the macro issues that we were experiencing. This was -- actually, this was really the growth that drove the fourth quarter. Now will this momentum continue in 2026? Unlikely during the first half, but you still see a good flow of CapEx in projects that remain significantly present. So -- but it was real purely on a timing and opportunistic basis. Aakash Rawat: The second one is, what is the loan exposure to the BPO industry? And are you seeing any change in the demand outlook there? Or is it broadly stable over the last 12, 18 months? And when these companies set up their facilities in Philippines, do they borrow from the local banks or the majority of the funding comes from the parent? Luis Geminiano Cruz: For the BPO, our exposures mostly on working capital short-term basis, and we service the flows. So basically, on the loan side, it's very limited in terms of the portfolio. I don't think it's generating even close to 2%, but I can check on that. But generally, the borrowings is from the parent. Aakash Rawat: The working capital loans is 2% of the loan book. Is that correct? Luis Geminiano Cruz: In and out based on outstanding, that's correct. Aakash Rawat: And the last one is just on your thoughts on [ RRR ]. Do you think we see any cuts this year or not? Jose Teodoro Limcaoco: Frankly, Aakash, I don't think there will be any this year. I would like some, but I don't think he'll give it to us this year. Haj Narvaez: Okay. Eric, there's actually a question from Julian Roxas from Philippine Equity Partners. He's asking for OpEx growth outlook for 2026 and our view on CIR for 2026. Eric Roberto Luchangco: OpEx loan growth, I think we'll continue to try and keep that in check. As I think in 2025, we were able to keep that a bit tighter than it had in the previous years. And we'll look to kind of replicate that performance for 2026, which means that the CIR will depend on revenue growth. Of course, the less revenue grows, the more we're going to force the tightness on the cost-to-income ratio. So we saw actually a very strong improvement in cost-to-income ratio in 2025. I think that will not necessarily be -- we may be a chance to try and replicate that in 2026, but we'll try to keep to at least that cost-income ratio, at least maintain. But I'll always be pushing for tightening up in that area. Haj Narvaez: Thanks, Eric. Before we proceed, any questions from those in the audience? If none -- this is actually a 2-part question. I think I can pass it to Dino, then to Eric. With regard to our shift towards bond funding, could you just kind of describe the benefits of going to the bond market versus paying for top rate TDs? And maybe you can talk about some of the incentives that come along with that or are the other benefits? And then what's our view in terms of incremental issuance in 2026? Dino Gasmen: The intermediation costs on bonds is much less, particularly on the research side if the issuance is ESG themed. So there is a requirement of such issuance is 0 compared to 5% for regular time deposits. So that's a huge advantage already for bond issuances. Apart from that, it's very long term, usually long term. So more steady than regular time deposits. What are the prospects for this year? Well, we just issued our new bonds, yes, SIGLA bonds. We may go back. I think we'll probably go back to the peso bond market as well as the U.S. dollar bond market later this year. Yes, I think that's it. Haj Narvaez: Actually, Danielo Picache has -- Danielo actually was the one who asked the question, Danielo of AB Capital Securities. But he has -- the second part of this question is on NIMs. Reminding -- wanted to be reminded again of the NIM sensitivity per 25 basis point BSP cut. And what's the -- what lift do we get from a shift in mix towards noninstitutional loans? Eric Roberto Luchangco: Yes. So same as -- the NIM sensitivity is the same as we've said over the last few years. It's -- we're looking at per 25 basis point cut in policy rates, approximately 4 basis points of NIM movement after 1 year. So no change from the previous years. Haj Narvaez: Thank you, Eric. And we also have a question from Daniela Hernandez of IFC. She's asking which segments will be driving the consumer loan growth or the noninstitutional loan growth? Eric Roberto Luchangco: Yes. So I think -- more or less, we expect generally those that were strong this year, which is most of them, that they will continue to be strong. So the trends remain essentially the same. Ginbee, in case you want to add? Ma Cristina Go: Yes. So wee see -- we're still very optimistic on the growth of the consumer loans, primarily driven by unsecured lending, which would comprise of credit cards, personal loans, micro finance, SME loans. And then, of course, we still see loan growth coming out of our secured mortgage and auto loans, but probably more tepid on mortgage, as TG mentioned earlier, we are already seeing that the turnovers of housing projects 4 years ago has contracted coming from COVID. And then on the vehicle sales, we're also seeing some softness there. But we have been bucking the trend, which means that all our lending programs and our focused initiatives to drive faster and more affordable loans are coming into fruition. And so we're -- we continue to look at defying the trends in both mortgage and auto. And that's why we still are continuing on our guidance of 20% mix growth. Haj Narvaez: Okay. Go ahead, TG. Jose Teodoro Limcaoco: I just want to add to what Dino was saying on bonds. I'm like one of the biggest guys who keeps on forcing Dino to try to look at more bonds. Not only is there an advantage in the reserve requirement if they're green or blue. But the fact that there's no deposit insurance, saves some. The fact that your -- if you do a bond over a year, the effective DSD cost is significantly lower. The fact that if you do a bond, you -- it's better for your LCR ratios, which allows you to be more nimble on your lending. So much more advantages to doing a bond than the typical deposit. Deposits, we're competing with our friends across the street every day. Some days, there's illogical pricing, whereas bonds, you can manage it very well. And over time, you fix your funding. So I'm a big believer in funding with bonds. So Dino, please. Haj Narvaez: Okay. Are there any more questions over there? It's Gilbert, go ahead. Unknown Analyst: What's the -- can we say operating expenses of 10% increase is the new normal annually? Unknown Executive: It's only a target. The 10% is the budget. Haj Narvaez: Thank you, Gilbert. Anyone else from the audience? Okay. Go ahead, DA. Daniel Andrew Tan: Sorry. Can I have a follow up on that? Any scope to lower -- go lower than 10%? I know you're potentially rationalizing some branches still, tech expense as well and so on. Jose Teodoro Limcaoco: It's really -- I mean, you have to set a budget, right? You set a budget because you need to plan on what you'll spend at the start of the year. A lot of that is manpower, right? So that one is, more or less, we can fix. Then the next one is premises, that one we can fix. The premises are -- is growing because we're depreciating our build-out with the renovation of the branches. We certainly want to transform the role of the branches more from the transactional -- and you have heard me say this many times, right? We need to bring them into the phygital world so that we can sell. And that's driving the expanse in what we call, premises. Then there's technology. Technology is something we have invested because we had that tech debt. So I think in '22, it rose 23%; in '23, it rose 24%; in '24, it rose, I think, only 14% or 15%; and last year, it was only 12% or something. I think we're beginning to get our tech spend under -- get it to be normalized this year. We are transitioning out of a major vendor on managed services into a new vendor and another global vendor, where we think we'll see savings of about 30% to 40% on that, and we intend to do that more and more with some of our major tech vendors. So there's a whole process there. And finally, the last component is like marketing costs, which are really driven by -- a lot of that is variable, right? We spend because it generates revenues. And as long as there is a marginal lift in the revenue from the spend, we're willing to do that. So I don't think you should be very focused on what's the growth in the marketing -- sorry, what's the growth in the OpEx spend. But really, is it driving also -- what's it a percent to your revenues because we do have a lot of what we call variable. For example, the rewards we do, right, the points we offer, the rewards and commissions we offer, that's all variable. Daniel Andrew Tan: Okay. Very clear. Can I ask one question on wealth? Just this year, you've been mentioning PHP 1.9 trillion in AUM. Just want to understand how much is the growth? And how much is net new money versus portfolio growth? And then going forward, what are your thoughts on the outlook? Maria Marcial-Javier: So DA, for 2025, I think it's about 19% in terms of AUM growth. Net new money would account for bulk of that. On average, depending on the portfolio, it could -- the -- so one is net new money, the other one is the return on the portfolio. So depending on the portfolio, it could range between maybe 5%, 6% for conservative and maybe for some of our products, as much as 30% for growth products. So -- but in large part, 19% is net new money. Haj Narvaez: Thank you, Tere. Any more questions from the audience? Go ahead. Unknown Attendee: Just one question on the consumer loans, particularly on credit cards. Can you share with us the mix between discretionary spending and nondiscretionary spending in 2025? And how does it differ in 2024? Unknown Executive: So we look at it as essential spending and discretionary spending. So for 2024 -- beginning 2024, we really see a lot more essential spending, basic necessities, basic needs. But there's some certain -- there are specific categories within the discretionary spending that are outpacing essential, like travel for certain segments. So it's difficult to answer as a whole portfolio because we really do segments across the portfolio and not just one whole. So essential, obviously, is something that has been growing for the past couple of years, but definitely in the discretionary spending, we see pockets where travels are more higher than essential and higher-end dining can also be higher than essential in certain segments. Unknown Attendee: Can you give us an idea on like percentage points how they increased year-on-year? Unknown Executive: Retail spending is increasing about 21% per annum. So that's where the essentials and the discretionary spendings are launched. Unknown Attendee: Congratulations on a great set of results. For Tere, I guess, on BPI Wealth, the 19% growth in net new money, is that -- how is that in perspective historically? Is it above your average growth in net new money? And maybe you can give us color what's driving that 19% growth? How BPI sets itself apart from a lot of other banks that want to grow the wealth segment nowadays. I think everybody wants to grow in the wealth segment. Maria Marcial-Javier: So in terms of -- Gino, in terms the 3 subsegments within wealth, so we look at private wealth, we look at personal wealth and then we look at institutional. As mentioned by Eric earlier, the highest growing -- the highest growth in terms of those -- across those 3 segments was personal wealth. And that's really because of rising affluence. I think it grew almost 25%. And then almost equally, about 16%, 17% was the growth we saw in private wealth and institutional. How does that compare versus -- in the last 3 years, we've grown at about that clip, maybe 15% to 18%. And if you look at our chart in terms of AUM over the past 5 years, we have shown a significant increase in our market share. Just last year alone, I think it was around 30 basis points. We only have up to September. So it's been really encouraging. It's a function of the market because we're seeing really a lot of shift towards wealth products. And at the same time, this whole rising affluence will show faster growth, especially on the retail as well as the mass affluent and even the high net worth, given the growing sophistication. So we're still quite positive towards -- for 2026 and beyond. Haj Narvaez: Thank you, Tere. We have a question that was put in by [ Chang Ki Hong ] of JPMorgan. He mentioned that -- I mean, we did hear a few times that segments of younger consumers, consumers with income below about PHP 40,000 are driving higher NPLs in auto, personal and credit cards. Generally, how much do these customer segments account for a lot of the growth? And if you scale back on these consumer segments, will the growth outlook for these loans be brought down? Ma Cristina Go: Maybe I can answer that, [ Chang Ki ]. We have seen the growth of the younger consumers, the appetite for credit to really be high potential. And so that's why we continue to have lending programs to be able to test the ability of these segments to manage their credit. And a lot of our lending programs are really around the lower income, as I mentioned earlier. As well as the younger segment because naturally, if you're younger, then you naturally have lower income as well. How -- they've contributed to the NPL formation and we actually expected that primarily because they're new to credit. And usually, it takes time before they get seasoned. Now what we're trying to do is as we tighten the parameters, increase the required credit score, increase the required income level, we also see opportunities in the higher quality segment, and that's what we are trying to unlock. Peeling the onion further through data, looking at opportunities to cross-sell and be able to provide additional loan and credit to those that are existing to bank and therefore, with bank transactions that we can underwrite, but also to others who are outside of the bank, the new to bank but are existing to credit. So these are the opportunities that we're looking at unlocking the potential of credit scores, such as TransUnion and CIBI so that we can capture opportunities that may not necessarily be just within the books of BPI. Jose Teodoro Limcaoco: And let's just to be very clear, there is nothing wrong with NPL as long as you're pricing it properly. And I think that's the beauty of the diverse products we have. Now certainly, there is an interest rate cap on card. So that one, we're a little bit limited as to how far down market we can go. But that's why we have personal loans where we can do smaller ticket items, price it properly. We have -- clearly, we have, like SME, we can price based on the risk of the particular SME, we can price anywhere from 14% to 27% depending on the risk. Certainly, when you face what I would call the traditional consumer products like mortgage and auto, there you're a little limited because of the competition, right? And some of my friends have been burned by not understanding. And that's where I think BPI understands the market better than anyone else. Yes, we can go down market there, but it's got to be priced properly, and we're prepared to walk away when the pricing is wrong for the kind of risk that people are offering. Ma Cristina Go: I will also add, we talk a lot about underwriting, but we don't talk enough about recoveries and collections. And that's really another big opportunity for us because we're able to use data and able to use our branches and our expanse networks to be able to really recover and improve our collections. We monitor our curing rates and our flow rates very, very intently, and that's how we're able to do that. That's why we have also very good LGDs in our -- particularly in our collateralized or secured loans. Haj Narvaez: Thank you, Ginbee. Thank you, TG. Just wanted to check again any more questions from the audience? Okay. We've actually gone through our questions. Thank you, everyone who's put up some questions. Again, we'd like to highlight, BPI is always welcome, we always welcome your feedback and likewise, take them into careful consideration. Before we end the call, maybe call on TG for some final thoughts? Jose Teodoro Limcaoco: Thank you, Haj, and thanks again to everyone for participating in this call. And thanks to my colleagues here for joining me and being more transparent with our investors. To be frank, 2025 actually ended better than we had thought when we were looking at the way we thought the year would end. Back in September and October, we were a little more bearish on what the results came out. So we're very pleased with the final results. January has started actually not so bad, not so bad. And so it gives me hope that 2026 will be a decent year. Now my gut feel here is that, yes, I've called it the malaise of -- what sentiment of the economy. But it's -- guys, it's really about confidence. There's no structure. We don't have a war. We don't have -- it's purely sentiment driven. And I think that sentiment can turn very quickly. And therefore, as an organization, we're being prepared for that. We do have our plans for the year. We do want to be more capital efficient this year. So we have hinted at increasing dividends and a higher dividend payout because we think we have sufficient capital, and we want to maintain the return on equity that's closer to 15 than the 14.5 that we added. So with that message, I think let's look forward to 2026. Again, thanks to everyone for participating today. Thanks, Haj, for being a great host, and we'll see you in 1 quarter -- sorry, at the ASM. Haj Narvaez: Yes. Thank you, TG. Thank you, TG, Eric and the rest of the BPI senior management team. Ladies and gentlemen, this concludes today's earnings call. Thank you again for your participation. Those likewise joining online, you may now disconnect. And for those on site, please do join us for some refreshments. Thank you.
Sonja Horn: Welcome to Entra's fourth quarter presentation brought to you here from Oslo. Let me start by enlighting you on what you can see on this picture. This is Christian Krohgs gate 2 in Oslo, our planned redevelopment project, which we, in the quarter announced that we have entered into a partnership with Skanska to develop. So moving on to the highlights. Rental income of NOK 787 million in the quarter. That is NOK 20 million up compared to same quarter last year, meaning also that the effects from previous divestments have been offset by an increase through projects feeding into the management portfolio. Net income from property management of NOK 425 million in the quarter, that is up with NOK 108 million compared to same quarter last year, mainly explained by the completion and divestment of our project in Trondheim. The net value changes in the quarter were NOK 56 million. And in that, we have also included the positive value uplifts on the investment properties of NOK 111 million. Profit before tax of NOK 476 million in the quarter, and our EPRA NRV is up with NOK 2 per share to NOK 169 in the fourth quarter. We've had a good quarter in respect of operations with a positive net letting of NOK 4 million, and we have also completed 3 projects this quarter, one new build project in Trondheim, which also has been forward sale. So upon closing of that transaction, we have taken a gain of NOK 101 million in the fourth quarter. And our Board has decided to propose a dividend of NOK 1.10 per share for the second half of 2025, and this will be then decided at the Annual General Assembly on April 21. In addition to that, the Board has also decided to initiate a share buyback program of up to 0.5% of the company's shares based on the gains realized on the Trondheim transaction. Moving on to operations. We have, as I said, had a good quarter in respect of letting. Pleased to see that gross letting came in at NOK 183 million in the quarter. And if we look at the year as a whole, it's also been an active letting year where we signed a total of NOK 555 million. So right up there with historic best levels. If you look at our terminated contracts, NOK 80 million in the quarter. Out of that, approximately 57% is related to contracts which have been resigned in the Entra portfolio and the net letting then of NOK 4 million this quarter. A few comments on the largest contracts you can see at the bottom of the page. We were pleased to see that we prolonged and renegotiated with the Police, getting a good uptick on rent and signing 9.5 years new lease there. We will do some refurbishments for the Police here. And upon completion of that, we will prepare this asset for sale seeing that it's in a nonstrategic area for us. In Christian Krohgs gate 2, Skanska has signed 7,500 square meters. I'll get back to that shortly. In Kaigaten 9, Tide has signed 2,000 square meters, and that's also a project which we now will be preparing to start a refurbishment of this building, which is located right next to the train station in Bergen. Our occupancy is down with 40 basis points in the quarter to 93.8%. And as I have commented on in previous quarters, we expect to see more fluctuations in our occupancy ratio going forward, explained by a mix of factors. Firstly, the terminations and negative net letting we've had in the past quarters will potentially affect the occupancy going forward if we do have not let those vacated -- terminated space before the new leases -- sorry. This may translate into increased vacancy if we do not sign new leases on this space before the existing tenants move out. This is, however, fully reflected in our rental income bridge. If we take a look at also the timing of new projects will affect the vacancy and also the completed projects returning back into the management portfolio with some remaining vacant space will typically also affect the occupancy. So this quarter, the increase in vacancy is explained by the fact that the Brynsengfaret 6, one of our projects is feeding back into the management portfolio with an occupancy ratio of 83%. So if we move on to the projects which were completed in the quarter, Brynsengfaret 6, we had a refurbishment project here of 35,000 square meters. This has been completed in line with expectations, leaving us with a yield on cost of 5.8% and the building has now reached an energy class of C in line with the EU taxonomy. In Sandvika, we have a small project, 3,400 square meters, which is a courthouse building let to on a 20-year lease to the courthouse administration. This has been completed with some increase on costs, leaving us with a yield on cost of 4.6% versus the initiated reporting of 5.3%. And finally, in Trondheim, the new build project, which we completed is also part of a larger project totaling 48,000, which has been realized in 3 phases over the last 6 years. So when concluding this project, we have built 2 sections here, the new regional office for the Norwegian Broadcasting Corporation and one section of office. Both have been sold to the 2 buyers, the Norwegian Broadcasting Company and the existing previous buyer of the Trondheim portfolio. The total project cost here is NOK 611 million. That is NOK 73 million lower than what we initially started reporting on. And this is reflecting several factors. Firstly, we have managed to materialize some learning effects compared to the second phase, which was done with the same contractor and also the same team. We did a very favorable timing on that contracting. And also, we have transferred some of the lease-related risk and cost to the buyers as part of the forward sale. The transaction value of NOK 845 million includes also a tenant-specific outfitting of NOK 77 million for the Norwegian Broadcasting Company, which was settled as part of the transaction. And the return on investment on the project here is 25%. So this also is from a sustainability project perspective, quite an impressive project right up there amongst the top buildings in Norway, which also is part of the reason why we managed to do a decent or very good, I would say, transaction pricing on this building. If we move -- look at the completion of the entire Holtermanns project, I would say that it is a very good example on how we manage to combine high-quality development, disciplined risk management and transactions and creating good value. If you took a look at the ongoing development portfolio, we only have 2 projects on this list now. Both of them are progressing according to plan with the remaining CapEx of around NOK 270 million. And in Nonnesetergaten 4 in Bergen, we have increased the occupancy from 83% to 91% in the quarter. The cost is up slightly with NOK 5 million, but that is also financed through tenant investments. And the Drammensveien 134 project at Skoyen, also here, we've seen that up slightly in the quarter. We continue to have a disciplined approach to investment, prioritizing CapEx to solving the letting activity on vacant space. And as already mentioned, we will now prepare to start the project in Kaigaten 9 in Bergen and start reporting on that from the second quarter. That building is located right next to Nonnesetergaten on this list, meaning that we also expect to benefit a bit from the lease activity or letting activity and lease pipeline we already have on Nonnesetergaten 4. We also announced that we did a transaction in the fourth quarter with Skanska, where we sold 50% of the share in our building in Christian Krohgs gate 2 as part of a larger JV structure established for the redevelopment of this asset. This asset is located only 3 minutes walk from the central station, which you can see is around the high-rise buildings in the background there. And the transaction was based on a gross property value of NOK 550 million, which was 2.7% above our Q3 book values. And as part of the transaction, Skanska has also signed a lease contract for 7,500 square meters in 10 years in the new project. And they have also prolonged their existing lease with us in their current location at Sundtkvartalet, which is located, you can see on the map, the top right corner of this picture. That was a project which was materialized in the same JV structure with Skanska almost 10 years ago. And in addition to that, Skanska will act as a turnkey contractor for the construction of this project. And we clearly see that this partnership provides a very capital-efficient way for us to start the redevelopment of this project, which also will benefit this very strategic area for Entra, enhancing the qualities of the neighboring surroundings. The transaction closed in the first quarter and the project start is planned for the second quarter this year with the completion in the end of 2029. So that leaves us also with 4 years to solve the vacant -- remaining vacant space, seeing that we start the project with a pre-let ratio of 35%. I would also like to take the opportunity to update you a bit on the ongoing transformation on the area around the Oslo Central Station. Entra has approximately 190,000 square meters in their management portfolio in the area surrounding the Central Station. And this part of the city is going through a transformation. This is the most central communication hub in Norway. And I remember when I came into Entra more than 10 years ago, we started setting targets that we would push rent levels about NOK 3,000 per square meters in this high-rise building, where you can see that the current top rent is now around NOK 5,000 per square meter, which means that we, in the past 10 years, already have seen a 60% increase in rents in this area. Now on the photo on the right side here, you can see that the CBD East, which has been developed over the last 20 years in Oslo. In this area, top rents are now at NOK 6,500 per square meters. While on the north side of the tracks, rents are between -- top rents between NOK 4,000 and NOK 5,000 per square meter. So we clearly see that this gap is going to be narrowed over the years to come and the projects which start in the neighboring area will also reinforce and strengthen this transitioning, which has already started. So we also continue to work on optimizing our project in Stenersgata 1 Phase 2, which is located in the bottom left of this picture next to the NOK 4,000 mark. That's the Phase 1 of that building project. And once we get the anchor tenant we're looking for, we will also be able to start that project. A few words on the Norwegian economy. It has remained robust through the global market volatility in 2025, and we are well positioned with the Norwegian oil fund also to stabilize the economy through fiscal policies and public spending. Mainline GDP growth is expected to be somewhere around 1.5% and 1.7% going forward. Employment growth has remained stable around 0.7% in the last couple of years and is expected to stay around those levels also going forward. In Oslo, however, we've seen that in 2025, the employment growth was lower, around 0.3%, and that was also mainly driven by the public sector, which currently is transitioning into more space-efficient workplace strategies, meaning that we are not getting much tailwind from the employment growth in the Oslo market currently. The key policy rate has been reduced to 4% in September. Expectations from Norges Bank has been that we could potentially see further rate cuts with cut per year over the next 3 years. CPI for January, however, came in higher than expected with an adjusted CPI of 3.4% versus the Norges Bank's forecast or estimates of 2.9%. So forward interest rates now indicate lower probability of rate cuts in the near term. Entra's contracts are indexed based on the November index. And from January, that means 3% indexation for our portfolio. If we move on to the letting market, we have seen that the total volumes signed in 2025 were in line with expectations, slightly lower maybe than what would have been expected based on the future expiries in the market database. We have, however, seen that the tenant search activity picked up through the fourth quarter coming also into the first quarter and are currently also seeing quite a lot of activity in the letting market. The vacancy is currently around 7% in Oslo, expected to remain around those levels with some variations between clusters, some clusters also above 10%. Same goes for Bergen vacancy levels. Now if you look at the expected market rental growth for the next 3 years, according to our consensus report top right, the growth is expected to be around 12% over the next 3 years. If we look into Areal statistics database, we have actually seen that in the inner city center of Oslo, the area which I previously showed on the map, the market rental growth from the fourth quarter in '24 until the fourth quarter of '25 in the top segment was actually 13%, which clearly supports that there is willingness to pay for the CapEx required to deliver projects in this area. New build volumes are expected to remain low in the next years with -- seeing that we also have had a few new project starts in the recent years. A few words on the transaction market. The financing markets are available and lending sentiment is positive with credit margins tightening through the fourth quarter, both in bank and bonds. The transaction volumes for 2025 came in at around NOK 87 billion, slightly below normal historic levels. We saw that the segment split, office represented 22% of that volume, while more normal levels would be between 40% to 45%. So more activity than within segments like logistics and also residential portfolios. The prime rent in Oslo -- sorry, prime yield in Oslo is currently around 4.5% and is expected to remain around those levels going forward according to our consensus report. We can see that we have seen transactions supporting those prime yields and also that there is continued interest for prime assets and also central city offices in the market, primarily from equity buyers on these current yields. And our assessment is that at these yield levels and with the forecasted consensus on inflation, equity buyers are still able to achieve their return targets with 7% to 8% potential. And that we also see that the market players are confident or comfortable that we will see a real rent growth also in the years to come. So that also supports the current yield levels. Okay. I think that leaves it for me for now, and we'll get some more details from you, Ole. Ole Gulsvik: Thank you, Sonja. In Q4, our financial performance improved compared to previous periods. Rental income came in at NOK 787 million, up from NOK 767 million in the fourth quarter last year. We had positive -- net positive impact from realized projects of NOK 19 million and also a positive impact from CPI growth of NOK 17 million. This was partly offset by negative like-for-like of NOK 10 million due to increased vacancy as well as a negative NOK 5 million due to divestments. The rental income is NOK 15 million higher compared to the bridge that we presented in the third quarter. This is a larger than normal deviation due to a combination of positive one-offs as well as letting effects. Net income from property management came in at NOK 425 million, up from NOK 317 million in the fourth quarter last year. In Q4, we had positive gain from the forward sold development project, Holtermanns veg in Trondheim of NOK 101 million. Adjusted for this gain, we report underlying result improvement in the quarter, supported by both rental income growth and by reduced financing costs. Profit before tax came in at NOK 476 million, which includes both the mentioned gain from the Holtermanns veg project as well as positive NOK 56 million in net value changes. In the fourth quarter last year, we had net value changes positive of NOK 457 million, which explains the reduction in pretax profit from the fourth quarter last year to the fourth quarter this year. I have already gone through the rental income part, but I will give you some more flavors on the other P&L items. OpEx came in at NOK 80 million or 10.2% of rental income. This is above previous quarters. In Q4, the OpEx was particularly high due to timing of maintenance cost and to a certain degree, higher vacancy cost. The OpEx percentage level for the full year of 2025 is a realistic indication of the cost level also going into 2026. If we look at other revenue, other costs, this was net positively impacted by the gain of NOK 101 million on the forward sold Holtermanns veg project in Trondheim, as mentioned earlier. Admin cost is up to NOK 55 million due to increased personnel costs and a couple of nonrecurring items in the quarter. We have managed to scale the admin costs for several years by offsetting some of the wage increases with efficiency measures and other cost reductions, and we target to continue to improve the admin cost ratio also for 2026. Net realized financials came in at NOK 336 million, which is down NOK 10 million to previous -- or to the last quarter. This is due to lower debt following the settlement of Holtermanns veg. Value changes in our investment properties were positive with NOK 111 million, and I will come back with more on this later on in the presentation. We had negative value changes in our financial instruments of NOK 55 million, and this is mainly due to 1 quarter shorter duration in our positive market value positions from 2021 and 2022. And the value of the interest rate hedges will gradually be reduced until maturity. And this gave then a profit before tax of NOK 476 million. Moving then to our rental income development. Looking forward, the model indicates rental income in the first quarter to be NOK 794 million. This is NOK 13 million higher than the bridge we presented in the third quarter. For 2026 as a whole, the total rental income in the bridge is up nearly NOK 40 million compared to the bridge that we presented in the third quarter, of which nearly NOK 10 million is due to higher-than-expected CPI, about NOK 15 million is related to letting effects. And lastly, some of the compensation we did for one-offs in Q3 was too conservative, and we, therefore, rebalanced our model slightly. This graph is not the guidance. It just highlights the rental income based on reported events in existing contracts. There is upside to this bridge as also presented in previous quarters. Firstly, we aim to let out existing vacant space, which has a total rental income potential of NOK 211 million. In addition to this, we have available vacant space in the reported ongoing project portfolio with an annual rent potential of NOK 21 million. And lastly, there is a market rent reversal potential of NOK 161 million. Moving then to our property value, which is slightly down to NOK 63.6 billion in the quarter. Divestments of negative NOK 841 million is related to the sale of Holtermanns veg. Value changes were positive with NOK 111 million in the quarter, which is a limited value increase of only 0.15%. The positive value impact is predominantly a slight increase in the CPI for 2026 compared to the estimates in previous quarters, and this was partly offset by a rent reduction on certain specific assets in the quarter. The deviation between the appraisals has come gradually down over the last few quarters and is now only 0.5%. CapEx in the quarter was NOK 249 million, which has also come gradually down over the last few years. We will continue to have a disciplined investment strategy going forward and prioritize defensive CapEx to increase occupancy and realize market rent uplift. The portfolio net yields now stands at 5.04% and 5.70% fully let at market rent. On the right-hand side, you can see that the net asset value increased from NOK 167 per share to NOK 169 per share in the quarter. In addition to this, we also paid out NOK 1.1 in dividend in the fourth quarter, which brings the total dividend since the IPO to NOK 38 per share. Moving then to our debt metrics, which continued to improve in the quarter. The ICR looks like have bottomed out and improved to 2.14 measured over the last 12 months. Leverage ratio also improved going from 48.8% to 48.0% and the net debt-to-EBITDA is down to 11.0. The debt metrics in the fourth quarter is supported by the gains of the Holtermanns veg sale. However, we will continue to have a conservative approach when it comes to both leverage and interest risk going forward. And we, therefore, expect a gradual positive development in our debt metrics going forward. This is supported by the running cash flow from our property management, a conservative and disciplined capital use as well as potential for value increases in our property portfolio over time. We have created a solid financial platform in 2025 with an average time to maturity for total debt of 3.6 years. The debt capital market was open with tightening spreads also during the fourth quarter. We issued NOK 750 million in new green unsecured bonds, both 6-year fixed bonds, which we swapped to NIBOR plus 118 basis points, and we did floating bonds at 5.5 years at 113 basis points. In total, we have issued NOK 6.7 billion in bonds during 2025, and the debt capital market remains attractive and open in the beginning of 2026. As you can see in this graph to the right, we have undrawn bank credit lines of NOK 7.7 billion committed until 2028. We have reduced our bank lines during the quarter to optimize our funding cost, but we still have ample available liquidity in the next 24 months. We also see that the bank spreads are coming in during the quarter, and we will continue to work to optimize our total funding costs during 2026. On the left-hand side, you can see that 68% of our debt financing is now green, and we have the capacity to issue more green debt with our existing environmental-friendly property portfolio. Moving then to the cost of debt. The all-in net financial cost is down to 4.31%, while interest rate on our interest-bearing debt is slightly up to 3.97% in the quarter. The forward curve has shifted slightly upwards in the fourth quarter. However, our interest rate forecast is more or less unchanged from what we presented in the third quarter as we compensated higher interest rate outlook with lower credit margins in our bank debt during the quarter. As you can see in this graph, we estimate slightly increasing but relatively stable interest rates going forward, and this is due to improved credit margins, our existing hedges as well as future policy rating cuts according to market expectations. As Sonja mentioned earlier, the Board has proposed to pay out NOK 1.1 per share in dividend for the second half of 2025. This corresponds to 32% of the cash earnings or the underlying cash earnings in the period. This is the same amount as we paid out in the first half of the year, which gives a total dividend of NOK 2.20 per share in 2025. In addition, the Board has decided to initiate a share buyback program of up to 0.5% of the outstanding shares with the proceed from the gain from the Holtermanns veg project in the fourth quarter. This totals approximately NOK 100 million in value. The shares will be proposed to be canceled at the Annual General Meeting at the 21st of April. The Entra share is currently trading at approximately 33% discount to net asset value. And with the share buyback, we are efficiently buying our own assets at 15% discount. And we believe this is a good investment and creates shareholder value. Dividends and buybacks combined total capital distribution yield of approximately 2.4% and 36% of the cash earnings in 2025. The capital distribution level is in line with the revised dividend policy to distribute a minimum 30% of cash earnings with room to distribute more capital over time as financial conditions permits. Sonja Horn: Okay. Thank you, Ole. So before I do some closing remarks, I think it's good to also reflect a bit about on the achievements we've had through 2025. First of all, we improved our financial performance and debt metrics. We have had solid gross letting volumes in what I would describe as a more muted demand environment in the Oslo market. We have had property value changes. So we're back in the positive territory here. And the financial flexibility has been secured through the restructuring of our bank facilities and also by reestablishing Entra in the bond market. We have clearly articulated our return targets and supported that by capital discipline across the portfolio and resumed semiannual distributions to our shareholders. We are also well positioned now to capitalize on previous investments in environmental qualities with an already very energy-efficient portfolio. And from that to a few closing remarks, we've had -- pleased to see that we are now once again proposing cash dividends of NOK 1.1 per share and also that we are initiating a share buyback program based on the proceeds from the Trondheim sale. In the fourth quarter, we also see examples that we are able of unlocking value from the project development and transactions with the successful divestment in Trondheim and also the capital efficient and very value-accretive project realization we expect to see in Christian Krohgs gate 2. The letting market fundamentals continue to look promising, supported also by a stable Norwegian economy, where we expect to see also positive employment growth going forward. And I'm pleased to see that the activity in the tenant market picked up during the fourth quarter and also feeding into the first quarter this year. And we are now also seeing the first signs of market rents reaching the breakeven levels we need to see to have accretive projects, particularly in the city center of Oslo. So Entra will continue to deliver future rental income growth driven by CPI, letting of vacant space and capturing the reversion potential in the portfolio and also selective projects going forward. So when we look forward, the priority is clear. We continue to focus on improving profitability through increasing the occupancy and capturing reversion potential through selective project development and asset rotation and continue to have a disciplined approach to capital allocation, preserving our balance sheet strength and funding flexibility and also deploying capital where we find it to be most accretive or also through capital distributions. So I think that sums it up for today. And let's see if we have any questions, Isabel? Isabel Vindenes: Yes, we have got one question in. Can you please provide more details on the rental market demand and discussion with potential tenants and the risk for higher vacancy? Sonja Horn: Okay. So that's 3 questions. Let's see. A bit more flavor on the market. As I said, we are in a market where we have employment growth, which is a positive. What we saw through 2025, however, is that in Oslo, the employment growth was driven by the public sector tenants, which are currently reducing their space when renegotiated -- renegotiation. And in the private sector, we have experienced through 2025, more wait-and-see mode. I hope to see that we'll see more activity also within the private sector going forward following that we have at least had a few rate cuts. So hopefully, a stable demand side, that's our base case going forward. And if you look at where do the tenants want to go? They want to go more into the city center. So the tenant search activity, which we see now are much more heavily dominated towards the city center locations. And if you look at the city center locations, our products are in the less expensive parts of the city center compared to CBD. So we can offer relative more value in our products than other locations in the city center. So I'm very confident that we will be able to bring our occupancy up. Having said that, we also experienced that the letting processes are very timely because our tenants need time to reassess how they want to sit and work. And we can easily use on the large searches more than a year before they conclude. And on the shorter ones, the absolute shortest is 3 months. So it will take time to get the contracts signed. But based on our leads pipeline now, we have good activity, progressed also leases but then again, there's competition. So if you get -- if you win them, I'm very confident that we'll see occupancy come up in the short term, but we probably also will lose some of these competitions we are in. So I'm -- I think it's difficult to give clear guidance exactly on how our vacancy will develop in the short term. But I'm very confident that we're going to bring occupancy back about north of those 95% over time. But where we'll be through this year, somewhere between 93% and 95%, maybe, but it's difficult to be very precise on that. Maybe also a few notes on net letting because we know also that we have 3 large tenants in this -- 3 of our large tenants in Entra who are on lease searches, and they will probably also conclude through 2026. So we're well prepared, work very well to ensure that we are going to be the preferred landlord. But at the same time, if you lose one of those, it will also affect our net letting through 2025. So it's a bit binary how we end up. But these large leases, they will still be sitting with us 1 through 2027, 1 through 2028 and 1 through 2029. So that also tells you that tenants are planning 4 years ahead, giving us time to solve the letting if they should choose to go elsewhere. So a long answer. I hope that was helpful, but we are, of course, available for chat if somebody wants more flavor on that. Isabel Vindenes: Thank you, Sonja. There are no further questions today. Sonja Horn: Okay. Thank you all for following us, and feel free to get in touch if we can help with some more information. Have a nice day.
Erkka Salonen: Good day, ladies and gentlemen. I'm Erkka Salonen from Finnair Investor Relations, and it's my pleasure to welcome you to this Q4 2025 Earnings Call. I'm joined by our CEO, Turkka Kuusisto; and our CFO, Pia Aaltonen-Forsell. After the presentation, we have a Q&A session, and you may present your questions either by dialing in or using the chat function of the webcast. But with these words, I hand it over to you, Turkka. Turkka Kuusisto: Thank you, Erkka, and very good afternoon to all of you joining us today. And today, we have shared, in my opinion, very good news earlier when we published our Q4 report that indicated a very strong profitability development, especially driven by the continued strong demand and solid execution. Pia will discuss, in short, the result in detail, but I would characterize it as a sum of multiple factors. Of course, we benefited from the lower than -- lower fuel price. But at the same time, when we added into the equation the increased cost from the environmental compliance, other regulatory charges, I would say that the cost management and effectiveness was extremely well executed with -- among the Finnair team. At the same time, we still saw and we will see a strong demand, especially in the Japanese and European market that performed, in my opinion, relatively well. That led into a close to a 1% revenue growth, but above all or more importantly, our comparable operating result increased almost by 29% versus the compared, that already was actually a significant improvement from 2023. As you recall some months back, mid-November, we announced our long-term financial targets and also the updated strategy. And therefore, I'm also very happy that already now, we start to see pieces of evidence that the strategy execution or implementation has started with good velocity. As a concrete example of regaining the trust after the, let's say, more difficult or disruption shadowed first half, we restored the confidence of our customers and also discuss about the employees, but also the external stakeholders that we have as a concrete example being that with Pia's lead, we did successfully issue a EUR 300 million bond just before the year closing. If and when we will take the regional perspective, as mentioned, our investment in further strengthening the Japanese foothold after the double crisis is paying off. All in all, the Asian markets continued double-digit growth, both in terms of capacity and revenue. And then if I take a deep dive into our foothold or market presence in Japan in the summer season of 2025, we flew 25 weekly frequencies between Helsinki and multiple destinations in Japan. And we are going to actually further strengthen that for the next summer season when we are adding 3 additional weekly frequencies from Helsinki to Osaka. Also, as already mentioned, Europe as a traffic region performed relatively well during Q4, whereas the domestic part was a bit more soft in terms of load factor development. And then Middle East, when we kind of characterize the profile of the business performance, we need to continue to keep in mind or bear in mind that we don't -- didn't fly anymore from Copenhagen or Stockholm to Doha under the Qatar Airways collaboration or umbrella. So therefore, the revenue development and the ASK development is extremely negative. Big question, of course, still related to how will the North Atlantic traffic develop during the forthcoming quarters. Still in Q4, we saw some softness in terms of ASK development and also load factors. But here, we need to continuously also bear in mind that our ASKs, 9% is allocated to the North Atlantic traffic, and we, of course, continue to monitor the development extra carefully. Then speaking of customers, obviously, when the first half of '25 was overshadowed by complex CLA negotiations that led into severe disruptions, we faced, of course, declining NPS. But I'm extremely happy when I started to see already in September that the NPS is recovering very rapidly after we were capable of stabilizing the operation and continue to fly with the kind of recognized Finnair quality and safety and functionality. So therefore, in Q4, which is the most demanding winter season, the NPS among the total customer population of ours graded 33, which is a good result in network carriers global benchmark. And if and when I'll take the core customer perspective, that is the core of our new strategy among the top tiers of Finnair Plus frequent flyer program, we are actually currently trending above 40. And as you can see from the chart on the right-hand side, the number of passengers continue to grow by 2% year-over-year. Then also maybe related to the disruptions that we faced during the first half of '25, it's important to address that we haven't witnessed significant changes in the capacity market share in our core markets. So these 2 charts, in my opinion, provides a lot of information that our stronghold in Helsinki and our stronghold in the Europe-Asia traffic is holding extremely well, and we will continue to develop our market presence accordingly. And then with this slide, I try to capture the highlights of 2025. So basically, the year was split into 2, difficult first half because of the industrial action and associated disruptions that caused directly more approximately EUR 70 million of negative EBIT impact. And then of course, we were not capable of flying the ASK plan that we had planned for the first half, but ever since we got the CLA disruption behind us early July, we were capable of stabilizing the operation very quickly and actually then, started to implement our profitability improvement actions. And then towards -- through Q3 towards Q4, we improved the momentum and velocity and therefore, very happy with the result. Report a full year result of EUR 60 million in form of comparable EBIT. Unflown ticket liability also grew by some 7%, which is a good forward-looking indicator that how the ticket sales did develop during the fourth quarter. Pia will discuss this in more detail. And then on the right-hand side, on the bottom right-hand side, you can see that the Board of Directors yesterday decided to propose a EUR 0.09 capital return to be decided in the AGM held later in this quarter. But maybe with these words, I would leave it for Pia to discuss the financials in more detail. Pia Aaltonen-Forsell: Thank you, Turkka, and good afternoon, ladies and gentlemen. I just want to say a big thanks to our team, to our customers and to our partners. It's a great privilege to be able to present so strong quarterly figures, as Turkka said, on the back of a start of the year that was still very challenging on many fronts. I think we have ended the year on a very strong note. And therefore, I wanted to offer you a few sort of quarterly time series here with some comparisons on some of the key figures, just to sort of have that perspective. I'll start a bit with the top line and the revenue. As Turkka explained, we are in a market momentum in our key markets that's already a bit more positive. So we have seen some growth in the demand have seen some growth in our top line of about sort of 1% on a full year basis, which is pretty much equal to also, if you count in the wet leases, is how much we added to the capacity sort of holistically during the year. Please still keep in mind that due to the earlier strike situation, we did have cancellations, we have paid compensations, et cetera. Those all, of course, impact the top line as well. If I look at the quarter itself and especially, if I think about sort of the different parts of our business, maybe there's a few words still worth sort of mentioning. We have seen growth sort of through our different categories. So the ticket revenues, we've also seen this increase on the ancillary side. Ancillary is very important from our strategic perspective. The growth was not that fast during the quarter. The comparison period a year ago had a very strong campaign towards that end of the Q4 in '24. So that sort of impacts a little bit the comparison here, but we are still continuing on a good path. That is really important for us, I mean, already reaching over EUR 50 million impact per the quarter. And finally, cargo was sort of fairly stable in the period. Maybe those words are enough on the revenue side. Then let's turn our attention to the middle of the page, which is the graph on the operating profit. So the comparable operating profit to be exact. And you see our result was a stellar EUR 62 million for the fourth quarter. This is the strongest fourth quarter on record that we could find using the current accounting methods. And when you compare it to a year ago where we made EUR 48 million, we actually had a bit of strike impact, although it was EUR 5 million a year ago in the figures and none in this period. But from a cost perspective, there were a few external factors that are worth mentioning. I'll say first that we were supported year-on-year in the development by fuel prices and also a weaker dollar, that did bring us on a quarter-on-quarter comparison, maybe EUR 15 million of benefit. On the other hand, we also had higher sustainability regulation-related costs that's added more than EUR 10 million per quarter, as well as higher navigation and landing costs that also added about EUR 10 million per quarter. So the headwinds of these external factors were actually bigger than the tailwinds. Nonetheless, we still had a EUR 50 million uptick, and this came very much from somewhat higher sales, so we were growing, and we were able to do that in a good way also then sort of being able to use the scale benefits, have a good operational performance, and that helped us then to improve the result year-on-year. Finally, Turkka talked about the unflown ticket liability. I think that's a good sign of the momentum that we have right now that keeps on a stronger side, 7% increase sort of year-on-year. Of course, our business has a lot of seasonality. So you do see the quarterly variance here, but we are on a very good path. I have one more slide really from the profitability perspective. And I wanted to talk to you about revenue RASK and CASK, and just give still some perspectives into that development. I'll start on the revenue per available seat kilometer, the RASK key figure here. And many of the things that I mentioned before on the revenues obviously play in here. I think if you look at the sort of year-on-year development, we can say it's a bit of a sort of hanging in there, sort of making the best of the situation in a challenging year with the strikes, et cetera, during the first half. So clearly, there's been an impact out of that holistically. If we look at yields, I think it's worth still picking up on what Turkka also said, showing the geographical areas before. Though we see a positive development holistically year-on-year throughout Asia, particularly Japan has been a very important market for us, as Turkka said, we also see a good development in Europe if we look at the full year. But the North Atlantic traffic, that has been also from a yield perspective under pressure, and that's due to the sort of holistic situation that we face in that market, and I think that put a little bit of a lead or a little bit of a pressure here on our yield development. So kind of keeping all of that in mind, I still think we have a decent development through the year. On the cost side, the lower fuel costs are helping us, but those other higher regulatory costs as well as landing, navigation costs, et cetera, they all come through here. So you can still see that we've done a good job in mitigating some of the impact. And I think just looking from everything, there's also some seasonal variance. I take one example, maintenance cost. I think we managed really good in the fourth quarter. And obviously, sort of between the quarters, there could be a little bit of changes. I think we have also structurally made some changes as we are through '23, through '24, and a little bit in '25 also done some lease buyouts that are, to some extent, then shifting between the lines, the cost of maintenance. That does give me a nice bridge now to my final page, which is more on cash flow and balance sheet. So let's have a look there. Our cash flow was robust. Obviously, cash flow very much built on the operative performance, the result as well in itself. I think there's only one thing that I wanted to pick up from the cash flow side page here that you can see on the slide that you see on the left-hand side, and that is to explain that if you are keen on details, look sort of from our reporting a year ago, we had a bit of a reclass there on the credit card holdback that sort of boosted from a reporting perspective the figure in the year-on-year comparison. But I think sort of operationally, a good performance in this quarter. Let's talk a little bit about CapEx. Going forward, we do expect a CapEx amount, EUR 400 million to EUR 500 million per year. We are also guiding sort of about that midpoint for 2026. You can see that in 2025, we were coming towards a little bit lower figure. Actually, the gross CapEx was less than EUR 200 million. There was quite a lot of buyout still in this. It was a bit north of EUR 100 million, so lease buyouts, and there was also a EUR 64 million of sort of more maintenance-related CapEx and then some investments, for example, into digital, et cetera. So that was really what we were working with in '25. Looking into '26, this will increase a bit, aligned with the communication that we had on our CMD in November. And finally, it's good to end the year with a robust cash position and still with a good leverage, 1.8, and a good cash to sales ratio, as you can see in the chart to the right. So I think we have a good setup for starting to work into 2026. And on that note, Turkka, please, over to you. Turkka Kuusisto: Thank you, Pia. So to some extent, recapping what we said in connection with the Capital Markets update we held in the middle of November. The strategy is pretty much now centered around the customers and more specifically, core customers because the network setup that we have, have, of course, changed because of obvious reasons. But now after 3 fiscal years since the Russian airspace was closed, Finnair has now demonstrated that we can operate a profitable network carrier even though the Russian airspace is and most likely will remain closed for the time being. So therefore, we have highlighted the focus on traveling to and from Finland while continuously keeping in mind that we are still extremely important transfer carrier for international passengers who connect from Helsinki to European destinations, for instance. This Japanese example that I provided you with earlier is a concrete piece of evidence that we are very strong in Europe, Asia traffic even though the Russian airspace is closed. So the strategic priorities that we shared also with you a few months back pretty much now focus on further optimizing this rebalanced or repivoted network of ours and continuously searching for new route openings, for instance. At the same time, of course, taking good care of the safety, reliability and convenience and functionality of the operations that we run, which enables us to monetize on our commercials, providing more choice through modern retailing. And as you can see from our numbers that the revenue received or collected from the ancillary sales was more than EUR 50 million again during the fourth quarter. There was a bit of a hold or pause in the growth rate, but there is an item affecting the comparability because last year around, we did have a very extensive Avios points sales campaign, but what we continue to forecast is a very solid growth on the ancillary side. And then, of course, when we get a more intimate relationship with our customers, we can then extract the full benefit out of the Finnair Plus frequent flyer program. Then taking from the kind of this 30,000 feet to more grassroot level, concrete examples, we are opening 12 European destinations for the summer season 2026. And very exciting news, published a few weeks ago when we communicated that we will be opening a route from Helsinki via Bangkok to Melbourne. And while at the same time, adding this third daily flight from Helsinki to Bangkok, again to kind of strengthen our presence in the Far East Asia market. Of course, we continue to invest in addition to aircraft and the new fleet scheme into other areas as well. AI and digitalization and other technologies will influence significantly that how an airline like Finnair will be run, operated and led in the future. And we do have a lot of initiatives ongoing, where we can utilize the next-generation technology, be it fuel efficiency, route optimization, back-end processes and such. And speaking of digitalization, we will also continue to invest in the, let's say, digital footprint or digital experience of Finnair in form of new mobile applications, for instance, that will be launched later this year. And then as a maybe final remark from my side related to strategy and on the journey ahead. Of course, given the double crisis, maybe even the longer legacy when it comes to an organization undergoing a significant transformation. And then, of course, the CLA spring that we faced, we want to now invest with extra care when it comes to further developing the engagement, cultural development, leadership and also employee well-being at Finnair. And I was extremely positively maybe even surprised at how much our engagement score increased when we measured it last time in the midpoint of November and December. So it, again, gives us a lot of confidence that we have selected a right path. We are on the right journey with our colleagues that represent 5,800 kind of professionals across the entire organization. To kind of finalize the presentation phase, outlook and guidance provided today. We expect that the global air traffic will continue to grow 2026. We estimate that our total capacity measured by ASKs will grow approximately by 5% during 2026. And then, of course, when giving outlook and forward-looking statements, we continuously need to keep in mind the macro volatility, geopolitical tensions and also the fuel price volatility. But given all this, we are today estimating that our revenue for full year 2026 will be within a range of EUR 3.3 billion to EUR 3.4 billion, and the comparable operating result to be within a range from EUR 120 million up to EUR 190 million. So I guess that with these words, we will close to presentation and open for Q&A. Erkka Salonen: Yes, indeed. Thank you, Turkka. So now would be a convenient time for any questions you may have. Please follow the operator's instructions or use the chat function. Operator: [Operator Instructions] The next question comes from Jaakko Tyrvainen from SEB. Jaakko Tyrväinen: Sorry, I didn't hear the early part of the presentation, so if I'm repeating here. But could you give some color where you are about to play the capacity increase in '26? The point that it will be mainly Europe and Asia routes? Pia Aaltonen-Forsell: Yes, Jaakko. And I think maybe some of that was mentioned, but I think it's very well worth repeating. So of course, looking into Asia, we are further strengthening Japan with 3 more weekly routes during -- or weekly during the summer season. And as well, we have launched the Melbourne route from winter season of '26, and that will then also mean that we fly to Bangkok 3 times per day. So that's sort of the Asia part of it. And then when it comes to Europe, I think, for the summer season, we have launched quite a few sort of interesting destinations, if you are interested in Stavanger or Umea or Luxembourg, and there's plenty more there, all in all, 12 of them. So I think we have a plan that has already raised some attention and some interest, and that's what we are up to now. Jaakko Tyrväinen: Great. And then what about the competitive environment at the Helsinki Airport now that given that all the players should have kind of published their route plans for '26, how you're looking the upcoming competition for the start of the year? Turkka Kuusisto: Of course, competition is something that we will face on daily basis. This is a globally competitive business and sector. When it comes to Helsinki Airport specifically, we kind of knew that there might be an opening from Middle East to Helsinki. And therefore, we already actually -- we are one step ahead by introducing this third daily connection from Helsinki to Bangkok to mitigate the impact. And then at the same time, it's extremely important to put this into a context -- into context. Our traffic area, Middle East represents some 3% of our ASKs and revenues, and this specific route from Helsinki to Dubai, we fly it only during the winter season. So I wouldn't like to underestimate the impact, but I would kind of position it there for the time being rather insignificant, especially given the connectivity beyond Helsinki. So should one kind of arrive at Helsinki, 70% of the passengers will continue to somewhere else with our aircraft. Jaakko Tyrväinen: Excellent. Then if we think about the guidance and the EBIT version of it, if we exclude the industrial actions impact in '25, which factors are you seeing being the kind of the most important profit growth drivers for '26? Is it volume, pricing perhaps or costs? Pia Aaltonen-Forsell: Yes. Thanks, Jaakko. I think the volume part, the growth part here is an important driver. I mean we are seeing ASKs growing approximately 5% and you also see that in the top line guidance there, the EUR 3.3 billion to EUR 3.4 billion that we are expecting on the revenue side. So clearly, that's a big driver because that then also helps us to keep kind of spread the cost in many cases over sort of a bigger spectrum. But of course, we will need to keep the cost control, and we will also need to deliver on other parts of the strategy. That includes, for example, the ancillary sales, and that as well includes certain efforts that we are making in digitalization and AI that will also help us on the cost side. But it's more the growth and the revenue sort of in that context. Jaakko Tyrväinen: Good. And then the final one from my side. Did I get it right in your presentation that there will be further material inflation when it comes to traffic charges in '26? Pia Aaltonen-Forsell: At least in my presentation, Jaakko, the point I tried to make was to really describe the impact in '25, which even in the quarter was EUR 10 million per quarter. And I think there was a big sort of pressure sort of following COVID and the losses, of course, of many of these, let's say, national very regulated agencies. So at least sort of as far as I can see right now, many of those really step changes that were needed to sort of cover for history probably occurred during '25, but that doesn't mean that this is without inflation, but probably the big step change has occurred. Operator: The next question comes from Joonas Ilvonen from Evli. Joonas Ilvonen: It's Joonas from Evli. Congrats on very strong earnings. You already talked about the cost side of Q4. But could you elaborate a little bit? I mean when I look at your cost line items, is there anything to highlight there? I mean, lines like passenger and marketing as well as aircraft materials and overhaul? I think they were all like slightly lower than estimated. So would you say that this kind of so-called, as you said, solid operational execution, is it repeatable throughout 2026 as well? Because in my opinion, if you were able to be as successful in terms of cost over 2026, then you would have basically no trouble reaching the upper end of your EBIT guidance. So is there anything to like highlight? Or do you think how repeatable this kind of cost performance is? Pia Aaltonen-Forsell: Thank you, Joonas. I think 2025 saw many sort of particular challenges also when it comes to sort of maintaining the customer satisfaction when we had cancellations earlier and also kind of handling those situations. So I think we sort of came into a more normal environment then during Q4. So maybe there is room to say, yes, there is a bit of a sort of better situation that we have reached. I would, however, point out that when it comes to maintenance, so I see there is a little bit of sort of just timing topics, whether they occur in one quarter or in another. So I don't see that we structurally would have achieved a situation where we have lower maintenance cost. We are, of course, at the moment, still having an aging fleet. So that is one that I just think there were maybe more a bit of sort of quarterly variations. There is a structural change, but it only goes kind of in between lines because when we have bought more of the leasebacks, it means that some of the costs that were previously shown separately under sort of maintenance cost could now go into the depreciation line because some of the bigger overhauls would be treated as CapEx when they are to our own equipment. So there is a slight change, but that, of course, is not impacting the EBIT line as such. Joonas Ilvonen: All right. That's clear. And then about your revenue guidance, you already talked about this a bit. And you say you expect your capacity to grow 5% this year. But overall, I think your revenue guidance is -- I mean you expect quite robust growth. So to what extent beyond higher capacity do you expect passenger load factors and ticket prices to contribute to growth? Pia Aaltonen-Forsell: There is definitely -- just looking at the market environment and then the capacity growth in combination with our guidance, I think we are seeing some improvements in the load factor throughout the yield. And I don't want to comment on the yields in particularly. I just -- I think it's just good to sort of look at the full network that we have and the ability that we still have to boost Asia to some extent. So this sort of a mix thing is a good one to consider. Joonas Ilvonen: So you're basically still following the development of North Atlantic demand closely, but you're quite confident on Asia and Europe going to develop well also in 2026? Pia Aaltonen-Forsell: I think we have seen North Atlantic sort of continue kind of on the same path that we have seen before. But long term, we are still having capacity on those lines. And let's see when's that time for the changes. Operator: The next question comes from Pasi Vaisanen from Nordea. Pasi Väisänen: This is Pasi from Nordea. If I may start with this new route openings. So these new connections you have announced, are they supporting or kind of declining your average yield? I would assume that there are no easy wins available anymore. So how you are making the calculations for these new routes in terms of your kind of economical reasoning of the opening? Turkka Kuusisto: I guess time will tell what the yields will be eventually. But there is, of course, very diligent analysis behind when we are opening a new route. But especially the new openings in the Nordic region, we feel that there is currently a bit of a vacuum when it comes to providing regional flying from many of the Nordic destination to a Helsinki hub that then provides connectivity beyond Helsinki. Then when it comes to the Toronto route, that is a kind of a reopening for the summer season '26. And then this Bangkok-Melbourne route that we communicated, too early to tell. But of course, it's a combination of optimizing your yields and then also capturing new passengers or passenger flows to your entire network. So that's maybe something that we will revert to when we meet you for the next time. Pasi Väisänen: Yes, I see. And secondly then kind of looking at your investment program. So if you're now kind of buying new or kind of used planes in this spring, are these planes already included on your 5% capacity growth guidance on this year or not? Pia Aaltonen-Forsell: So we have a plan for growing capacity, and we have a plan of the CapEx as well, which is somewhere like around EUR 450 million for the year. And this is like sort of including also then the capacity increases. Of course, these are all plans and estimates at this point in time, but this is sort of how they hook together. Turkka Kuusisto: Yes. And it's always a combination of then maybe switching your balance from wet lease operation to your, let's say, new, although secondary acquired or secondhand acquired fleet. So therefore, again, too early to tell. Pasi Väisänen: Yes. But this investment guidance is in line with the 5% estimated capacity growth guidance for this year? Turkka Kuusisto: Yes. Yes, that's correct. Pasi Väisänen: Yes. And were there any kind of one-offs in last year, let's say, coming from the strikes or the accidents, which actually would kind of somehow be on comparable for the 5% increase on capacity on this year? Or is it on comparable basis excluding those one-offs? Pia Aaltonen-Forsell: I think it is on comparable basis. I mean, of course, the strikes impacted holistically the year including the top line. But I mean, we have reported the full figures and we still continue to fly throughout the year. Pasi Väisänen: Yes. And then when looking at your guidance for the full year in terms of operating profit, so kind of the fuel price is already up by 12% year-to-date on this year. So is this peak on the fuel costs also included on your full year guidance? Or have you made the kind of calculation regarding the end of December situation regarding the expected cost for fuel? Pia Aaltonen-Forsell: Yes. Pasi, we are updating a minimum once a week sort of the full view relating to kind of what's the current price, what's the forward curve, what's our hedging ratio. This is kind of the -- one of very important drivers for our profitability. So my answer is yes. I mean we are standing here now today with sort of very recent updates of how we view the year. But obviously, we also recognize that this is a big reason for fluctuation. That is why we have a range in our EBIT guidance. And that is also why we wanted to sort of even specify that, hey, if we see a 10% change in the fuel price, that would be like approximately EUR 34 million delta in the result sort of from where we stand today. Operator: The next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: Yes, congratulations on good results in this quarter. Sorry, just to repeat, just to make sure I understand correctly from your last question. The 5% growth, that is on what was actually flown in '25? Or is it on what was originally planned? Pia Aaltonen-Forsell: It is what was actually flown, on what was actually flown. Yes. Andrew Lobbenberg: Yes. Good. And are you able to tell us what the percentage capacity changes by region, North Atlantic, Asia, domestic Europe, can you give us that for the year? Pia Aaltonen-Forsell: I don't have the percentages here for you, but based on the route openings and how we have described that, it's clear that there is more focus on Asia and then regionally within Europe. Andrew Lobbenberg: Is there any reduction on the North Atlantic? Or does it go up because you're adding Toronto? Or are you pulling down some of those frequencies that came in this year? Pia Aaltonen-Forsell: I don't think that we have any sort of significant pull-downs. Obviously, we are sort of constantly monitoring the load factors, et cetera. But Toronto is added as we have informed. But really, if I sort of look at the kind of the balanced picture of the world and where we are, there is then much more emphasis on the growth in Asia and in Europe. Andrew Lobbenberg: And that growth in Asia, that's 3 weekly frequencies to Japan, is that what you were saying? Or is it 3 routes? Pia Aaltonen-Forsell: Yes, from weekly frequencies. Turkka Kuusisto: The 3 additional weekly frequencies from Helsinki to Osaka. So after that addition, we have 28 weekly frequencies from Helsinki to Japan. Andrew Lobbenberg: Yes. Cool. And nothing changes otherwise, China, Korea, India? Turkka Kuusisto: No. No big changes. No. Andrew Lobbenberg: Yes. Okay. Then can I come back to the maintenance cost and the lease buybacks? Obviously, I should know this. But can you remind me how many aircraft in the year you bought back and how many were bought back in the fourth quarter? Pia Aaltonen-Forsell: I think there was 3 or 4, but none in the fourth quarter. So obviously, this is a cumulative approach from something that we also did already back in '24. Actually, we did most of the lease buybacks already back in '23. So that shouldn't like bring any more sort of a year-on-year change between '24 and '25, but it's all sort of building into the status that we have. Andrew Lobbenberg: And so there's no onetime effect from lease buybacks in the fourth quarter? Pia Aaltonen-Forsell: No, no, no. I wouldn't say so. But it's a structural change. If you look over time, you would see those sort of shifts from the maintenance to the depreciation, those sort of particular sort of maintenance activities. Andrew Lobbenberg: Yes, yes, yes. Makes sense. But when you did do them, did you have a onetime gain? Because other airlines recorded onetime gains releasing maintenance provisions. You have them, right? Pia Aaltonen-Forsell: So we have released maintenance provisions accordingly, but I don't think that had any significant impact during 2025. Andrew Lobbenberg: Despite doing 4 airplanes? Pia Aaltonen-Forsell: So these were -- if you look sort of across our fleet and the ones that we were doing, then my answer is no. It didn't have a significant impact. Andrew Lobbenberg: Okay. Because like Norwegian had a really big impact from it, but I guess there were newer, shinier planes. Pia Aaltonen-Forsell: Must have been shinier. Andrew Lobbenberg: And then I guess what I'd love is an update, and apologies, I also missed the start of the call and also perhaps, I'm just forgetting from the Capital Markets Day. Can you just remind us of what the status is of the fleet renewal on the mid-haul or short haul? Turkka Kuusisto: So if you are referring to the partial renewal of the narrow-body fleet. Andrew Lobbenberg: Exactly, yes. Turkka Kuusisto: Yes. Thank you. So we're still working with the project or program. And as I said, in connection with the CMU events that we want to run a very thorough and diligent process. And therefore, unfortunately, today, we are not yet in the position of disclosing news, but I would expect that during the weeks to come, we should be over the finish line. So I kindly ask for extra patience. Andrew Lobbenberg: Right. And is anything associated with that in your CapEx guide for this year in terms of deposit payments? Pia Aaltonen-Forsell: I think within that sort of EUR 400 million to EUR 500 million or EUR 450 million range that we have, I don't also have any sort of significant items relating to that. There could be something, but it's really more on this sort of shorter-term buying used or arranging so that we can use, used aircraft, et cetera, that we also spoke about in the CMU. There are sort of more -- that is kind of closer in time. Therefore, it's also including in our plans for this year as well as then the capacity increase for this year. Operator: [Operator Instructions] The next question comes from Kurt Hofmann from Air Transport World. Kurt Hofmann: Regarding Australia, it's quite an interesting move you do and as such, the route is quite an -- I can imagine, quite an investment. What are your expectations on this Australia route? And on the North Atlantic, do you see -- many of your colleagues see some uncertainty on the North Atlantic market. Do you see some overcapacity this coming summer and you have to adjust maybe the North Atlantic network? Turkka Kuusisto: So if I start with the North Atlantic traffic, of course, we follow the booking curve very diligently. And then if we need to react, I think that we are well positioned to fine-tune or optimize the weekly schedule to North America. So let's see. But too early to draw conclusions because we are still in the, let's say, the hot season of selling tickets to the summer season '26. When it comes to the Melbourne route, that is, of course, a new opening for Finnair, and it has received quite a lot of interest. Too early to tell that how the ticket sales or the booking curve will develop. I'm personally actually visiting Melbourne next week to strengthen the relationship. And it's also about the kind of tactics or activity that we wanted to do that we added this third daily connection from Helsinki to Bangkok. So it opens us an opportunity to -- with rather low risk level to test this avenue. And we are, of course, doing it with our oneworld partners to also attract kind of a shared interest. So let's see how it develops, but I find it as a fascinating opening. Kurt Hofmann: Yes, I fully agree. And you're one of only a few carriers, which is doing Australia from Europe. Regarding fleet, as the Qantas A330s, I remember from our last call, they will return in the future. What's your plans on the A330? You need all of them or you maybe phase them out, some of them because on the route network, the range is not enough to do more nonstops with them? Turkka Kuusisto: No, I guess that's, again, kind of a multifactor optimization exercise how the booking curve development will kind of develop towards the summer season. Then of course, A330s, as you know, are very good workhorses and the spare part availability is rather limited for the time being. So we might consider a hot spare. But then if the kind of the passenger volumes are developing according to our plan, then we will utilize it in our own flying. So we have multiple avenues to get benefit from the assets that will be returned from Qantas. Kurt Hofmann: Yes. Okay. And one topic as now you resized your last A350, do you think for a new order on wide-body aircraft for a future fleet, maybe, let's say, A330neos in the future or A350, you have to think about this as well? And when you need new narrow-bodies, how many new narrow-body aircraft you would need actually in the future? Turkka Kuusisto: Time will tell. We will now want to finalize this campaign that we are running when it comes to partial renewal of the narrow-body fleet. And as we've communicated, we have 15 aircraft, 5, A319s; and 10 A320s that are approaching the end of their life cycle. So that is the most urgent need. But then, of course, we need to take into consideration the projected market and passenger volume growth. So that will be kind of the equation through which -- by which we will then eventually decide that what's the size of the narrow-body fleet investment also quantity-wise. Then when it comes to wide-bodies, too early because we still have one incoming A350, which is a fantastic aircraft, especially in the current geopolitical situation. And as you mentioned by yourself, those 2, A330s that will be returned from Qantas to us, I think that we are well off now when it comes to wide-body capacity. Kurt Hofmann: Okay. Final question. If the airspace one day via Russia will open again, and we have for sure no signs at the moment, how fast you can react to restore flights again via Russia? Turkka Kuusisto: That's, of course, very complex question. So if I take the easiest part when it comes to day-to-day operations, that is, I guess, the most -- the quickest activity when you could get back to those 24-hour rotations. But then there are other big questions related to -- over flight rights, insurances and such. So quite a lot needs to happen on the, first, in the political field and then the system level before we can go into the operational level and then landing slots and what have you. But then from the operations standpoint, we are -- we can move very quickly, but quite a few steps must happen before running into the operational questions and the implementation plan. Kurt Hofmann: Thank you very much. That's from my side. And I think I will meet you soon in Helsinki in about 2 weeks. Erkka Salonen: It seems that there are no further questions, so we can conclude the call. Many thanks for joining, and have a nice day. Turkka Kuusisto: Thank you. Have a nice afternoon. Pia Aaltonen-Forsell: Thank you.
Operator: Welcome, everyone. The Heineken Full Year 2025 Results Call will begin shortly. [Operator Instructions] Raoul-Tristan Van Strien: Good morning and good afternoon, everyone, from Amsterdam. Thank you for joining us for today's live webcast on our 2025 full year results. Your host will be our Chief Executive Officer, Dolf van den Brink; and our Chief Financial Officer, Harold van den Broek. Following the presentation, we will be happy to take all your questions. The presentation includes expectations based on management's current views and involve known and unknown risks and uncertainties, and it is possible that the actual results may differ materially. For more information, please refer to the disclaimer on this first page of the presentation. I will now turn over the call to Dolf van den Brink. Rudolf Gijsbert van den Brink: Thank you, Tristan, and good morning afternoon, everybody. Now after 6 years and with some understandable mixed emotions, today is my final full year results presentation as CEO. It is not a farewell though, I am and will be fully focused and committed to the business through the end of May. And as you all know, I love this great company, and I will miss it dearly. My priority for the coming months is to leave Heineken in the strongest possible position with momentum, clarity and ambition. It is a natural moment to reflect on how far we have traveled since launching EverGreen in 2020 in the midst of COVID and to look ahead as we move into the disciplined execution of EverGreen 2030, our new 5-year growth strategy. Over the last 6 years, we launched a fundamental transformation of the company, delivered EverGreen 25 and navigated a demanding external environment. We have made meaningful progress in future proofing Heineken, growing the Heineken brand by more than 50%, consolidating our global leadership in 0.0, strengthening our advantaged footprint with significant deals in India, Southern Africa and Central America, while saving over EUR 3.5 billion in cost and digitizing the business, I am very proud of what we, as a team, have achieved, and there's more to do. The next chapter is our sharpened EverGreen 2030 strategy, which we introduced at the Capital Markets event at Seville. We now have a sharpened focus on 3 strategic priorities, and the task ahead is accelerating disciplined execution. Growth. It is the foundation of our business and remains our #1 priority. Productivity, which fuels reinvestment and healthy profit flow-through. Future fitting Heineken, enabled by our digital backbone and evolving operating model. Harold will explain how we are accelerating the disciplined execution of these priorities over the next few years. With this clarity, we aim to deliver superior and balanced growth and attractive shareholder returns while future-proofing Heineken. We track this through the Green Diamond, which we have now strengthened with ROIC as our capital efficiency KPI. Let's take a closer look at the key highlights of 2025. First, we delivered a well-balanced performance in challenging market conditions. In our growth pillar, we grew revenue through quality volume. We gained or held market share in more than 60% of our markets and in about 80% of our priority growth markets, which is even more important. In our productivity pillar, strong over-delivery of growth savings supported our margin expansion. On capital efficiency, we generated another year of solid cash flow and improved ROIC. And looking ahead, we expect operating profit to grow between 2% and 6% in '26. This is before the additional profit and earnings accretion from the FIFCO acquisition we completed last month. So let's take a closer look at our financial highlights. Total volume declined by 1.2%, reflecting softer markets in the Americas and Europe, partly offset by consolidated volume and license volume growth in APAC and resilience in Africa and Middle East. Within that, the momentum behind the Heineken brand continued to grow 2.7%. Net revenue increased 1.6%, and net revenue per hectoliter grew 3.8%, driven by disciplined pricing and positive mix. Operating profit grew 4.4% with a 41 basis point margin expansion and net profit grew faster at 4.9%. Diluted EPS (beia) came in at EUR 4.78 million, and we are proposing a total dividend of EUR 1.90 per share, a 2% absolute increase, indicating a payout to 39% of net profit. We're also expanding our payout range for future years to be 30% to 50%. Harold will cover this in more detail later. Although our volume declined in the year, and it's not yet where we wanted to be, the quality remained high. To better reflect our evolving asset lines approach in China, Latin America and Africa, Middle East, we will going forward report total volume, combining consolidated volume, which declined 2% and license volume, which grew almost 18%. Our mainstream brands outperformed the total portfolio declining only slightly and local power brands delivered solid growth for several major markets, including Cruzcampo in the U.K., Harar in Ethiopia, Tecate Original in Mexico and Kingfisher in India. Heineken 0.0 grew slightly. Our global brands grew almost 2% led by Heineken, up nearly 3%. The broader premium portfolio also performed well, supported by strong local brands such as Kingfisher Ultra in India, Bernini in South Africa and Legend Stout in Nigeria. This high-quality volume supported 2% net revenue growth with positive price/mix across all regions. Our productivity programs ensured solid revenue to profit conversion contributing to operating profit growth of 4.4%, in line with our guidance. Let me turn to the Heineken brand, which continues to lead our portfolio. Heineken delivered another year of growth in 2025, increasing by almost 3%, with 27 markets growing at double-digit rates. Heineken continues to stand out for its creativity in both idea and execution. At a time when people seek more real-world connection, Heineken champions socializing in a way that's authentic to who we are, supported by our global partnership with Formula 1 and Men's and Women's UEFA Champions League. Heineken 0.0 grew slightly. Inventory adjustments in Brazil, its largest markets, partly offset good growth in Spain and the United States, and it maintained its position as the world's largest alcohol-free beer brand. It is Heineken Silver that truly drove the growth for the brand. Silver grew by almost 30%, led by Vietnam in China. As you can see on the chart, Silver now represents about 15% of the total Heineken volume close to 9 million hectoliters. It can now be considered one of the most successful innovations in the history of the Heineken company. As part of the growth pillar in our sharpened EverGreen 2030 strategy, we're expanding our global brands. We are applying the principles of the centrally governed Heineken brand model across the broader global brand portfolio, strengthening consistency and discipline in execution. Across the global brand portfolio, we delivered 1.9% total volume growth in 2025, which shows solid progress. We have already spoken about Heineken. Amstel, our shadow premium brand connects friends around the world with a distinct social character. Amstel delivered another strong year across all 4 regions, with continued momentum in Brazil, a doubling of volume in China, revitalizing launch in Romania and a double-digit growth in South Africa. Birra Moretti continued to unlock food pairing occasions across Europe, supported by good performances in Switzerland and in France. Tiger remains a cornerstone of our success in Myanmar, while Tiger Crystal, a more refreshing sessionable member of the family, delivered strong results and contributed to the brand's revitalization in Vietnam. Desperados reinforced its relevance in markets with its bold flavors and Latin-inspired positioning resonates strongly with GenZ consumers, especially in Nigeria and in Spain. Productivity is our second strategic priority, and it's vital to support our growth agenda. This year, we delivered over EUR 500 million in gross savings, with increased flow-through to profits seen in our 41 basis point margin expansion. Our focus to boost cash led to a cash conversion of 87% after posting 103% last year, allowing us to deliver EUR 2.6 billion of free operating cash flow. Harold will expand on this and also how we will accelerate the EverGreen 2030 productivity agenda. When we look at our third strategic priority, future proofing our business, brew a better world remains our framework for delivering our environmental, social responsibility ambitions. On responsible consumption, we continue to lead the category by ensuring 0 alcohol options are widely available and easy to choose. In '25, our operating companies invested 26% of Heineken brand media to promote this message, reaching 1.4 billion consumers. On carbon, we continued progressing towards our 2030 net zero ambition for Scope 1 and 2, reducing emissions by 38% over the last 3 years. On water, we improved efficiency across all breweries to 2.9 liters per liter of beer. On the social pillar, we continue building a culture belonging by equipping leaders and colleagues across the company. In '25, women held 31% of senior management roles. With that, let me move to the regions. Starting with Africa, Middle East, where we delivered strong revenue growth, substantial profit improvement and overall market share gains. Net revenue grew 16%, with stable volume and strong price/mix reflecting earlier pricing actions as inflation eased, operating profits increased 60% supported by the transformed cost base of the past 2 years and a strong top line growth. Notably, in euros, operating profit grew more than 30%. In Nigeria, last year's cost base and capital structure adjustments, combined with continued discipline resulted in strong financial performance. Despite the soft markets, Nigerian Breweries gained significant share across lager, stout, beyond beer and nonalcoholic malts. Premium brands, Heineken, Desperados and Legend Stout all delivered double-digit growth. At Heineken Beverages in Southern Africa, commercial execution strengthened through the year. Our beer portfolio grew with Amstel delivering particularly strong results in South Africa. Bernini, our wine-based spritzer continued to grow and expand its consumer base. I would also like to highlight Ethiopia. The business improved steadily as the economy stabilized following the currency devaluation. We reinforced our market leadership and now secured the #1 position in the North too supported by continued momentum from Bedele and Harar. Turning to the Americas. Our business showed resilience. Markets softened as the year progressed, requiring agility while keeping strategic investments on track. Even in this environment, we gained overall share in the region. Net revenue declined 1% and beer volume was down 3%, while price/mix recovered strongly in the second half, up 2%. Operating profit declined 2%, decycling last year's significant step-up. In Mexico, despite macroeconomic and geopolitical uncertainties, the beer category remains resilient. Our system strength, supported by the Six store network and effective revenue management delivered solid financial results. Growth was broad-based. Tecate Original, Indio, Carta Blanca performed steadily, and Miller High Life surpassed the 1 million hectoliter mark in premium. In Brazil, after rebalancing and reducing excess inventory in the first half, the market softened in the second half. Based on sell-out data, we captured significant market share. Investment increased again in '25, including the opening of the new 5 million hectoliter Passos brewery. Amstel maintained strong momentum, supported by our CONMEBOL Libertadores partnership and the success of Amstel Ultra. In premium, Heineken gained share and Eisenbahn delivered double-digit growth. The United States remains challenging, further impacted by tariffs introduced in the first half. We continue to work on strengthening our portfolio, including the return of The Most Interesting Man for Dos Equis last month. Heineken 0.0 remains a highlight, delivering its seventh consecutive year of depletion growth. Moving on to APAC, where we delivered growth across all metrics and gained overall market share. Total volume increased 4% with consolidated beer volume slightly up and license volume up 27%. Net revenue grew 4%, supported by strong price/mix of almost 5%. Operating profit grew 5%, driven by strong performances in Vietnam, India and Myanmar. In Vietnam, volume grew high single digits as the market returned to positive momentum, a strengthened route to consumer and effective portfolio expansion enabled outperformance in both on and off-premise channels, accelerating our leadership position. Heineken grew in the high 30s, led behind Heineken Silver, while Larue Smooth continued expanding its footprint. In India, volume grew mid-single digits ahead of the overall market. As the country's largest brewer, we continued shaping the category, expanding our reach and transforming our sales model. Kingfisher maintained its growth trajectory, supported by cricket sponsorships, while the premium portfolio grew strongly led by Kingfisher Ultra, Ultra Max, Heineken Silver and our latest innovation, Amstel Grande. In China, Heineken Original and Silver delivered another year of double-digit growth supported by strong execution and high-impact sponsorship such as Masters Tennis and the Shanghai Formula 1. Amstel also doubled volume through distribution gains and excellent in-market execution. With the increasing contribution of royalties and share of associate profits, China became a top 3 market for the group in delivering net profit in 2025. Turning to Europe. Our performance was mixed in a challenging environment. Overall market share contracted slightly due to retailer disruptions, although we gained share in the on-premise channel. Net revenue in total volume each declined 3% with price/mix just above 1%, supported by pricing and a stronger premium portfolio. Operating profit declined almost 5% as volume deleverage and inflation more than offset the strong growth savings, including continued progress on supply chain rationalization, brewery closures and the refinement of our intermarket sourcing model. In the United Kingdom, our broad portfolio, innovation pipeline and continued investment in the Star Pubs estate supported solid financial performance. Cruzcampo continued its exceptional trajectory, now in its third year. Murphy's Stout outperformed the growing stout categories through distribution gains and expanded draught presence. In cider, premiumization continued with strong growth from Inch's and Old Mout. We also received top honors in the Advantage Survey, where customers rated us the #1 supplier across all FMCG companies in both on-trade and the grocers in the off-trade. In Western Europe, extended negotiations with off-premise buying groups weighed on performance. These discussions focused on protecting long-term sustainable category development were fully resolved in the second half, with distribution and shelf space recovering as the year progressed. Despite the disruptions, we gained on-premise share and continue to see strong contributions from our premium portfolio including Gallia, Texels and STELZ. Our global brands also performed well in selected markets, including Heineken in Italy, Birra Moretti in Switzerland, Amstel in Romania and Desperados in Spain. And let me now turn to our newest operating company. On January 30, we completed the acquisition of FIFCO after receiving all regulatory approvals. This transaction significantly strengthens our presence in Central America, and advances EverGreen 2030 by bringing together a portfolio of high-quality assets that enhances our long-term growth platform. It deepens our advantaged geographical footprint in markets supported by strong macroeconomic fundamentals and favorable demographic trends. Through this acquisition, we gained full control of Costa Rica's leading beverage company, including our common brands such as Imperial, a well-established PepsiCo franchise and attractive adjacent businesses in wine, spirits and in proximity retail. We also assumed full ownership of HEINEKEN Panama, a consistent strong performer that has repeatedly outpaced market growth. In addition, the transaction provides an equal partnership in Nicaragua's leading brewer, Compa��a Cervecera de Nicaragua, expands our access to a scalable food and beverage platform in Guatemala and adds fast-growing beyond beer brands in Mexico. The acquisition is expected to be value accretive enhancing our operating profit margin and earnings per share, while strengthening our strategic position across a dynamic, high-growth region. On day 1, we welcomed our new colleagues to the Heineken family and began the integration process, which is expected to complete in 2026. We have appointed a strong integration team to ensure business continuity while driving growth. Harold will take you through the financials of FIFCO, which will be accretive to earnings in '26. And with that, over to Harold to discuss the financials. Harold Broek: Thank you, Dolf, and good morning all. I'm pleased to take you through the financial highlights of our full year 2025 results and the outlook for 2026. And starting with our top line performance on Slide 17. We posted an organic growth of EUR 0.5 billion or 1.6%, a 2.1% volume decline was more than offset by a positive price/mix of 4.1%. Pricing contributed 2.8% and mix added another 1.3%, a result of continued premiumization and strong execution behind our global and local power brands. Pricing was more pronounced in Africa, Middle East, covering for local input cost inflation and currency devaluation, while in Europe and Americas, our revenue per hectoliter growth was very moderate. Currency translation dampened revenue by almost EUR 1.5 billion, reflecting the strengthening of the euro against some of our key currencies. The minor consolidation effect of minus EUR 84 million relates to our exit of Sierra Leone and a brewery sale in Eastern Congo. Turning to operating profit. where we delivered EUR 4.4 billion of operating profit (beia) growing 4.4% organically and resulting in an operating profit margin (beia) of 15.2%, up 41 basis points organically versus last year. The EUR 467 million of organic net revenue (beia) growth on the previous page translated to EUR 198 million organic operating profit growth, a conversion rate of 42%. With negative volume leverage, moderate pricing and continued investments in brand and digitalization, gross savings from our productivity programs were a critical driver. Variable cost per hectoliter increased by low single digits, with meaningful differences across regions, ranging from mid-single-digit decrease in Europe, low single-digit increases in Americas and Asia Pacific and high single-digit inflation in Africa, Middle East. Marketing and selling investment as a percentage of net revenue reached 9.9%, up 6 basis points compared to the prior year. Investments concentrated on our priority growth markets, including Brazil, Mexico, U.S., South Africa, Vietnam, U.K. and India, with a meaningful step-up in sponsorships and in trade execution, and particularly in Africa, Middle East and Asia Pacific. Marketing and selling expenditure on our 5 global and 25 local focus brands accounted for over 80% of total spend. On a regional level, the main contribution to operating profit growth was the Africa Middle East region, where operating profit grew 62%, as Dolf said, benefiting from a transformed cost base from productivity savings delivered over the past 2 years and revenue growth outpacing inflation. Operating margin (beia) improved over 400 basis points, now reaching 12.8% for the year 2025. In APAC, operating profit grew by 5.8% with strong contributions from Vietnam, India and Myanmar, held back by Cambodia. In the Americas, operating profit declined 1.9%, incorporating the tariff impact on imports into the USA. Also worth bearing in mind that we cycled a strong prior year comparison where the region grew operating profit by almost 25%. And finally, in Europe, operating profit declined 4.9%. Decreases in Poland, Austria and France outweighed growth in the U.K. and Spain. Lower material and energy costs and strong growth savings include a further European supply network rationalization were more than offset by volume deleverage and general inflation. Consolidation changes had a negative impact of EUR 36 million. Translational currency effect was EUR 290 million negative, again, mainly caused by the strengthening of the euro. Let me turn to the other key financial (beia) metrics on Slide 19. On the second line, you see that our share of profit (beia) from associates and joint ventures grew 5.3% organically, over half driven by strong mid-teens growth of our CRB partners in China. Net interest expenses (beia) decreased by 1% to EUR 522 million, reflecting a lower average net debt position and a lower average effective interest rate of 3.4%. Other net financing expenses improved by almost 18% to EUR 199 million due to lower losses from currency revaluations on outstanding foreign currency payables, especially in Nigeria, following our successful rights issue and subsequent balance sheet restructuring at the end of last year. Net profit increased by 4.9% organically to EUR 2.66 billion, which includes an increase in income tax expenses and noncontrolling interest. The effective tax rate (beia) was 27.2% compared to 27.9% in 2024. The improvement mainly reflects changes in the profit mix. All in all, and factoring in the share count reduction from our share buyback, this resulted in a constant currency EPS (beia) increase of 3.6% to EUR 4.78. We will propose at the AGM of this year a dividend increase of 2.2 per share to EUR 1.90. This equates to an equivalent amount of EUR 1.046 billion to be returned to shareholders through dividends. Finally, our net debt-to-EBITDA ratio was 2.2x at the end of the year below the long-term target of below 2.5x. When we consolidate FIFCO in 2026, we will see a moderate uplift and as per our policy, we'll aim to bring this back to below 2.5x target at pace. Let me now turn to the free operating cash flow. We generated EUR 2.6 billion of free operating cash flow in 2025, a strong cash conversion of 87% following last year's peak 103%. We are pleased with this performance. The year-on-year decrease of EUR 456 million should be seen in conjunction with last year's strong working capital improvements, which contributed approximately EUR 1 billion to our free operating cash flow for 2024. This year, we further improved working capital by over EUR 300 million, with main working capital as a percentage of net revenue, improving by almost 1%. Because the improvement is less than last year, the effect is negative, as shown in the EUR 523 million adverse impact. CapEx amounted to EUR 2.4 billion, representing 8.3% of net revenue (beia) in line with our guidance. Many investments related to our new Passos brewery in Brazil, our Star Pubs in the U.K. and in our digital backhaul. Cash used for interest, dividends and income tax decreased in aggregate by EUR 78 million. Let us now turn to our capital allocation priorities. As a reminder, in our value creation model, we prioritize capital allocation towards organic growth. We do so with a disciplined financial framework, with a prudent approach to debt. We remain committed to our long-term below 2.5x net debt-to-EBITDA ratio. We maintain a regular dividend policy as we've had for decades as an important and consistent source of shareholder returns. Going forward, we bring the dividend payout policy range to 30% to 50% of net profit before exceptional items and amortization of brands, so net profit (beia) compared with the prior range of 30% to 40%. We pursue value-enhancing acquisitions for long-term profitable growth. And with the FIFCO acquisition completed in January, we're excited to welcome the brands, the customers and the people to Heineken. Actively shaping the portfolio also means resolving or exiting operations where we see limited possibilities for sustained value creation. And as previously indicated, we consider returning excess capital via share buyback. This time last year, we announced a EUR 1.5 billion program and completed the first EUR 750 million tranche last month. We will shortly announce the start of our second EUR 750 million tranche. We outlined our EverGreen 2030 strategy last October at the Capital Markets Day in Seville. Let me now take a minute of how we accelerate execution in 2026. As Dolf already mentioned, our priorities are clear, with growth as our #1 priority. We are directing resources to strengthen our growth profile staying close to consumers and customers. At the same time, we are increasingly leveraging our global scale to improve productivity and simplify how we operate. A key focus is on how we build and manage our brands. All our global brands, representing almost 40% of total volume and now adapting the Heineken brand model, combining a pioneering spirit with a structured repeatable way of building brands that support consistent execution and better value delivery. Amstel's progress over the last year demonstrates the impact this can have. We are also increasing the breadth and space of our innovation. In 2026, we will have around 3x as many launches and pilots in our priority segments, which allows us to respond more effectively to changing consumer needs. Freddy AI will become a core enabler of our marketing and brand building processes. And by the end of 2026, most markets will be onboarded, representing close to 80% of our global marketing and selling investment. This will deepen consumer and customer relevance and enable excellent execution at speed and scale with improved ROIs over time. To fuel the growth and the profit, we are stepping up productivity initiatives and make changes to our operating model. We are moving to a simpler, leaner Heineken centered on empowered operating companies. In selected regions, we are transitioning to multi-market operating companies or MMOs. 4 MMOs will already go live in Europe in the next 6 months. We're accelerating the leveraging of our global scale, including further expanding our global supply networks and enlarging the scope of Heineken Business Services. The transition to a single global digital backbone will further standardize data and processes, enabling automation and productivity, and we are moving to a smaller, more strategic head office. Concretely, we will streamline our supply chain through brewery digitization and selected closures, exit markets where we do not see a path to sustainable growth and transition around 3,000 roles to Heineken Business Services to double its scale and broaden the services it provides. Across these initiatives, we expect a net reduction of between 5,000 and 6,000 roles over the next 2 years. Time lines will vary by market, and we will support impacted colleagues with care, respect and appropriate assistance. These actions are designed to deliver the EUR 400 million to EUR 500 million of annual gross savings and allow us to continue investing in our brands and capabilities while supporting healthy operating profit growth. Now then the outlook for 2026. We remain prudent on the macroeconomics and the consequent household spending in several markets. At this stage of the year, we do not expect the consumer environment to materially change. We anticipate operating profit to grow between 2% and 6% on an organic basis. As just highlighted, we accelerate the disciplined execution of EverGreen 2030 at pace, invest behind our growth and step up needed cost interventions. As such, we expect gross savings to be at the upper end of our medium-term guidance range. In terms of variable costs, we expect a low single-digit rise, primarily from currency effects on local inflation in Africa. The effective interest rates and the other net finance expenses are expected to be in line with 2025 and our effective tax rate to be in the range of 27% to 28%. And lastly, the completed acquisition of the FIFCO Beverage and Retail business is expected to be accretive to EPS in 2026. Now let's double-click on the financials of FIFCO. As a reminder, we acquired the business at 11.6x EV EBITDA multiple for a EUR 3.2 billion cash consideration. This means that our net debt-to-EBITDA ratio will increase moderately and expect to be back below 2.5x by 2027. At the time of the deal announcement in September, we gave you the '24 financials. The '25 financials do not differ materially. Net revenue of $1.15 billion and an operating profit of $276 million. These figures are, of course, based on the local accounting policies. The integration team will now start to align reporting with the Heineken accounting policies. And like I said earlier, we closed the transaction on the 30th of January. For the 11-month period, we expect FIFCO to be circa 2% to 3% accretive to EPS in 2026. To summarize, for 2025. We achieved a well-balanced performance in challenging market conditions. In the growth pillar, we delivered revenue growth consisting of quality volume with solid market share gains. In the productivity pillar, our teams realized another year of strong growth savings, the key driver of the operating margin expansion. We are pleased with the progress on capital efficiency with solid cash flow and an improving ROIC. And for 2026, in a similar market context as 2025, we accelerate the execution of EverGreen 2030, putting our growth strategy in place and taking bold productivity measures to unlock investment space and enable profit expansion. We expect operating profit (beia) to grow in the 2% to 6% range. Thanks for listening. And now over to you for questions. Operator: [Operator Instructions] Our first question comes from Sanjeet Aujla from UBS. Sanjeet Aujla: Dolf, just a quick word to wish you all the best for your next steps and thanks for all the openness and transparency over the years. I've got 2 questions, please. Firstly, can you just go into a little bit more on the pricing actions in Americas in Q4 and how your market share has responded to that? And is that perhaps behind some of your cautiousness on volumes into '26? And secondly, just digging a bit deeper into Europe, where are you on distribution and shelf space now following the resolution of the retailer disputes, are you anticipating to recoup that fully in 2026? Rudolf Gijsbert van den Brink: Very good. Thanks for your kind words, Sanjeet. Let me take a first step and then Harold can complement. Just on Europe, already in the second half, distribution and shelf space has been recovering month-over-month. On shelf space, there were some gaps left, but we are very confident that in the spring resets, those will be completely closed. We're also making very good progress on the retail negotiations for this year. And again, no regrets on biting the bullet last year, as very important strategic principles. And in our view, the long-term sustainability of the category were in play in those negotiations, and yes, the outcome of those negotiations, even though taking longer than expected, were acceptable to us. On pricing in the Americas, did you picked up that we took pricing up a bit to the back end of the year, but also in response to input cost. Our market share in the aggregate in Brazil has been very strong on sell-out. And we all know that at the beginning of the year, we had to stock resets impacting our sell-in. But on sell out market share has been very strong throughout. In Mexico, we had very strong market share indeed for the first 9 months, and that came a bit under pressure in the last quarter indeed. But in the aggregate, we are confident, and we are happy with where we are at. Harold, anything to add on that one? Harold Broek: Yes. Maybe on that last point, just to piggyback on that because Sanjeet, your question is also looking forward. And I think it's fair to say that we are happy with where the pricing and the promotional level of activity is at this moment in the run going forward. As you know, these things really go in waves, and we take pricing on our own demand by taking competitive realities into account, and we felt that we really had to adjust in the second half of the year, especially as what Dolf just said. But we are happy where it is, and we don't expect an overhang from that going into 2026. Operator: Our next question comes from Chris Pitcher from Rothschild & Co Redburn. Chris Pitcher: And I echo Sanjeet, Dolf, wishing you well in the future. And leading on from that comment, in Seville, it really felt like you presented the next chapter for Heineken. So it really was a surprise to read that you've decided to leave. I appreciate you're moving into the execution phase right now. And this morning, on interview, you said the Board has completely supported that strategy. I'm just trying to understand the role of the CEO over the next 2 to 5 years because there's obviously a lot of operational execution required with FIFCO, about 10% of the global workforce impacted either through transitional reduction. But also from a branding perspective, brand set that EUR 15 billion target for your international brands. And 3 out of the 5 actually saw volumes decline this year. So what is the challenge? Is it more of an operational execution? Or is it more on the brand side? And could you perhaps just give us a bit more color on Tiger, which seems to be sort of struggling in its positioning versus Heineken? Rudolf Gijsbert van den Brink: Very good. Thanks, Chris. Yes. A couple of thoughts. First of all, indeed, it is very important. And the words of Peter Wennink, the Chairman of our Supervisory Board in that press release a couple of weeks ago, we are very intentional that there is very explicit alignment between the Supervisory Board, the Executive Board and executive team that EverGreen 2030 is our strategy. It's clear, it's compelling, and it provides a lot of, yes, clarity and direction to the company. So that stands now and in the foreseeable future. It is all about accelerating disciplined execution. The announcements that we included in our release today on productivity, on FTE reductions should be seen very much in that spirit. And we're not slowing down. We are accelerating. We are now really operationalizing and double clicking on the priorities as we presented them in the interview, and more to come in the months and years ahead. On the branding, we indeed believe that about 10, 15 years ago, we made a governance change on brand Heineken, which ultimately unlocked systemic growth on the Heineken brand. It's amazing its year-over-year through all the disruption and turbulence of the last year, every year, the Heineken brands kept on growing. Last year, it was growing. It was up double digits in 27 years. So that governance model with a much more clear global governance and direction, but is now going to be applied on the other global brands. Amstel is a fantastic example that already moved a bit earlier, and you see the results with an acceleration of the performance of the Amstel brand across all regions. The incredible success in Brazil, now the doubling in China, South Africa returning to significant growth, but also in Europe in markets like Romania, where we are launching it. Moretti and Desperados, also a little bit because of mix effect because Europe is such a big proportion of those brands. And the home markets or some of the large markets, for example, Poland, for Desperados do impact a little bit the brand. But we are very confident that when the step-up in that brand confidence, there's a lot of potential for brand Desperados and Moretti. And we keep rolling out Moretti to new markets in Europe, and we keep expanding Desperados on a global level with, for example, in the Africa region, fantastic results in Nigeria, C�te d'Ivoire and other places. Tiger is disproportionately impacted by Vietnam because underlying the brand is doing well. Vietnam,of course, being such a big part of the brand. And there, we are really in a revitalization of the brand. Actually, Tiger Crystal is now in absolute terms, larger than Tiger Original and continuously grow. And actually, we are approaching the moment where the decline on the underlying Tiger Original business is smaller than the increase on Tiger Crystal. And in a way, what happened with the Heineken brand, the Heineken brand was under pressure for about a decade until the launch of Heineken Silver. And Silver has done an amazing job revitalizing brand Heineken across the APAC region. And we think with Tiger Crystal something happening similarly with Tiger. So let me leave it at that. Operator: Our next question comes from Simon Hales from Citi. Simon Hales: And I just echo as well everyone else's comments, Dolf to you. Thanks for all your insights and wisdom over the last 6 particularly challenging years for the industry and all the best for the future. I've got a couple as well, please. Obviously, you talked in your presentation and in the press release this morning about being prudent still on the consumer backdrop coming into 2026 and you've issued that 2% to 6% organic guidance for the year. So what factors do you think will drive you to the upper end or the bottom end of the range? Is the first question. What should we be bearing in mind there? And then secondly, around AI adoption in the business in 2026 and specifically AI adoption through Freddy's in marketing. What's that really going to mean do you think, for savings in marketing in the short term? How should we think about the overall marketing spend levels in 2026? I think from memory Dolf back in Seville at the end of last year, you talked about aiming to get A&P or marketing above 10% as a percentage of sales. You're on the cusp of that. Should we see you get there in 2026? Rudolf Gijsbert van den Brink: Yes. Very good. Thanks, Simon. Thanks for your kind words. Let me take the second part and then over to Harold. On the AI adoption. So first of all, the old AI machine learning has been adopted across the business for many, many years, particularly in supply chain, but also beyond. Of course, AI is different ways, whether it's the generative AI, your customer service, whether it's more agentic AI across operations, we're really moving at pace and in a focused way, focused on clear use cases that we are done scaling across our network. Marketing is indeed, as you were saying, particularly prone to the use of the more, let's say, future AI possibilities. What we announced, what Bram announced in Seville, the launch of Freddy AI, which is kind of our global internal marketing engine, which we're building, and it's built completely with AI in mind. And indeed, with time, it should unlock significant savings. To what extent we will reinvest these savings or whether we will let them go to the bottom line is to be determined along the way. We are not expressing ourselves at this point. We are very proud that even in a challenging year for the industry last year, we're able to expand our marketing investments in absolute terms. Indeed, we went up in basis points to very close to the 10%. And we, for this year, are still planning an absolute increase in our marketing investments. But indeed, yes, a lot of organizational focus and attention is now into the building, designing and scaling of Freddy AI now and for the years to come. Harold, if you can take the one on the prudent guidance. Harold Broek: Sure, well. The guidance, and indeed, it starts with a recognition to link it to what Dolf just said that it's important for us to continue to invest in the category and continue to invest in our brand portfolio and continue to invest in the digitization of Heineken. And we are basically being realistic that as from quarter 4 exit rates to quarter 1 starting rates, we don't see a material change in the consumer environment, neither in the economic certainty or uncertainty that the world is at the moment, offering us. So in that sense, I think Dolf is right that we're cautious on the macroeconomics and the economic sentiment determined to invest in the long-term health and strategic pillars of the growth of this organization and by stepping up productivity, ensure that we have got the flex to deal with those realities. And we talked, Simon, before about the fact that we are not giving, let's call it, good summer, bad summer ranges. We are really now starting to pivot to different scenarios in different markets aggregating that up and that's where the 2% to 6% range is coming from. So we'll just have to see how things are evolving in 2026, but we got the ammunition to keep on investing in growth. Operator: Our next question comes from Richard Withagen from Kepler. Richard Withagen: And also from my side, Dolf, all the best for the future. Now the 2 questions I have is the first one, you mentioned the aim to accelerate the growth of the global brands using the Heineken brand model. So maybe you can elaborate a bit in what way has the brand building of the global brand is different from the Heineken brand. Is it perhaps in terms of innovation, commercial execution, less resources, perhaps some background on that? And then the second question is back to Europe. Yes, we saw volume pressure from the retail disruptions and negotiations. Can you tell us what specific commercial changes are being implemented to avoid a repeat of those disruptions? And do you expect volume growth in Europe in 2026? Rudolf Gijsbert van den Brink: Thank you so much. Let me take the first one and then Harold if you can take the second one on Europe. So on the difference in the model, I don't want to go into too much detail, but the governance of Brand Heineken is firmly done from the center. And it means that positioning campaigns, tech lines, commercials are all centrally developed and sometimes adopted or customized for differences across regions. With some of the other global brands, take Moretti until very recently, brand ownership and governance was done out of Italy. But the team in Italy doesn't have the kind of global perspective that is now needed going forward. And the same applies to the other global brands. So this is really about strong global brand team centered in Amsterdam with a global perspective and really taking ownership of positioning the brand strategies, the core campaigns, really leveraging also the benefit of scale and skilled insights if you'd like. And we started moving that already a bit early with Amstel and you see the incredible success and acceleration of performance that was the consequence. Harold, over to you. Harold Broek: Yes. So let me tackle the Europe question. So first, it's important to realize that if you look at the volume growth in Europe, about 2/3 of the volume drop that we saw in Europe was related to market and market specific circumstances and about 1/3 was impact from the negotiations that we were just talking about. We also previously spoke about the household sentiment, the consumer sentiment in Europe that has been relatively subdued, and as a consequence of that, we really saw a trend towards more price-sensitive or value-seeking consumer. We spoke about that previous. Important to note that both in 2025 as well as the outlook for 2026, we believe that we are seeing price mix management that is below the level of CPI inflation that we see. And therefore, bringing affordability more back into the category. The second thing is what Glenn and team is doing is really starting to focus on growth pockets, whether this is our start-ups in the U.K., the Cruzcampo brand that we really see another 50% growth coming from there in the U.K. And we still believe that there are great growth opportunities in France, which is a growing market as consumers prefer increasingly beer over wine. And the same is true in some of the other southern markets with different propositions and innovation that Dolf was also talking about. So it is really about growth pockets, innovation, premiumization in selected markets, but also making sure that affordability comes into play. And in order to finance that and increased investment in brands and categories, we really need to take the cost out as a result of which we've really driven that productivity lens globally but also specifically in Europe. So that's the equation that we follow. Operator: Our next question comes from Olivier Nicolai. Olivier Nicolai: I would echo everyone else's comments. Thank you very much, Dolf. I got 2 questions, please. First of all, could you give us a little bit more color on Asia Pacific. In Q4, beer volumes has been slowing down about minus 3.4%. How much shipment phasing there is related to the debt, which is obviously going to benefit Q1? And if you could help us to quantify this, that would be great. And then secondly, a question on the free cash flow, EUR 2.6 billion. That was ahead of expectations. Could you give us a bit more details on how much upside do you see there going forward, particularly when it comes to net working capital and inventory specifically? And is it realistic to go back towards EUR 3 billion its year. Rudolf Gijsbert van den Brink: I'm for sure going to leave the second question to Harold. Let me take the APAC question. First of all, we -- let me emphasize, we are very happy with our performance across APAC. And I think the footprint is working very, very well. Vietnam, of course, is such a critical market for us. And after the incredible market disruption in '23, the stabilization in '24, '25 was really the year where both the market returned to growth but also where Heineken Vietnam really resumed market share gains. So we significantly outpaced the growth of the market across regions, across channels, both on and off-trade, premium and mainstream. So it's a very broad-based recovery of market as well as our relative performance momentum. There's always the timings of debt and those kind of things that impact a bit quarter-by-quarter performance. But in the aggregate, we're very happy with the performance of Vietnam. India, as we -- this is such a critical strategic pillar of the company now. I think we all agree, it's probably the largest frontier market globally in terms of upside on per capita and in absolute terms. We're very happy by the job done by the team after initially also, yes, a job to kind of integrate and normalize and standardize the business to Heineken standards. We are now really starting to see the fruits of, yes, the commercial strategies coming to life. The back end of last year was really impacted by weather. It was extraordinarily cold and wet in Q3 going into Q4. But from a market share performance, we're very happy with India, both on the core Kingfisher brand, which is by far the leading brands in the country, but also in particular, our premium portfolio with Kingfisher Ultra, Heineken, Amstel Grande, what have you. Cambodia is probably the market that has been the biggest drag on our results in Q4. They were playing against a large number of local players with a lot of overcapacity, not everybody playing to the same rules. So that remains a concern that we are focusing on. But in the aggregate, very happy with the APAC performance. Again, we keep reiterating in the organic results you're probably referring to, you don't have China, which is an absolute success story. This is such an important strategic pillar of the company now. We keep growing double digits. Brand Heineken up double digit again, and now Amstel becoming a sizable second engine, which is only at the beginning of the curve. And as we revealed in the press release or actually in my comments, I believe, it's now a top 3 market in terms of absolute net profit contribution, if you take the income from associates plus royalty income. So this -- yes, we sometimes feel frustrated and it's also one of the reasons where Tristan proposed to update the volume definition to give more visibility to the license volumes because actually, strategically, this is becoming a very important part of the business and relatively asset light. Let me leave it there. Harold, on the cash flow? Harold Broek: On the cash flow, I like the challenge. But there is a reason why we said we were pleased with our performance because we are -- as we said at the Capital Markets Day, really paying more and more attention to free operating cash flow delivery, but also return on invested capital as we extensively discussed then. It also is important to realize what we're doing with that free operating cash flow. We continue to invest in the organic side of the business, but the addition of FIFCO is a really, really important jewel that gives us coverage, great coverage with great brands in Central America. You will have noted that we're expanding our dividend range from 30% to 50% and are increasing our dividend slightly but slightly nonetheless. And we are announcing the second tranche of our share buyback program. So the free operating cash flow is an important metric for us to also enable sustainable shareholder value creation in the long term. The EUR 3 billion is a good ambition to have, but I'm not going to commit to it in 2026, as you will understand. Our real focus is to sustainably bring the cash conversion rate up to 90%. And you will have seen that all the levers are in play. Our net working capital improved as a percentage of revenue by 1%. Our CapEx, we really talk about growth without CapEx. Don't take this too literally. But we are really getting the leverage out of our existing capital base, and importantly, management focus, both better forecasting, but also action. Cash actions are really stepping up in that space. So that's the message that we're trying to signal, whether it leads to EUR 3 billion, time will tell. Operator: Our next question comes from Laurence Whyatt from Barclays. Laurence Whyatt: I once again echo everyone's thoughts, Dolf, best of luck for the future. I really appreciate you've taken the time over the past few years to help us out. A couple of questions for me. Firstly, on Mexico, I appreciate you've taken quite a bit of price in recent years and again in Q4. But what strikes me about the Mexican market is just sort of the lack of the premium segment. It seems to have a very low percentage of premium beers sold in Mexico. And so whilst I appreciate you're working on the price element, is there something more that could be done on mix within Mexico just to sort of get that percentage of premium beers up? And of course, I would have thought that leads to greater profitability there as well. And then secondly, on your Heineken 0 brand, we've seen a number of line extensions over the past year and a couple of more announced just this year. Some of those extensions are on sort of fruit flavors. I'm just wondering how you see this sort of strategy evolved? How close can you get to sort of more of a soft drink type of brand with the Heineken 0 as you add more and more fruit and whether those line extensions you're expecting to bring new consumers into the beer space? Do they go into the alcoholic side of Heineken once they try these line extensions? Sort of how do you see the nonalcoholic part of Heineken impacting the rest of the Heineken brand? Rudolf Gijsbert van den Brink: Very good. Very good questions. So thanks for your words, Laurence. On Mexico, indeed, historically, the premium segment has been small. I know from my own experience leading the market a bunch of years ago, that it is not for lack of trying on our behalf nor the competition. I think it might also be a reflection that the absolute price level in the market is, for example, compared to Brazil, much higher. So I think it might also have to do a little bit with the affordability of mainstream creating maybe less space to go above. Having said that, we do see premium segments now accelerating. In our portfolio, we see it with Miller High Life, which crossed the 1 million hectoliter mark. I remember doing the first license deal with, of course, many years ago, and it was -- Miller High Life was a rounding error and it's now becoming actually a meaningful brand at scale with very fast growth. The same for Dos Equis our affordable premium brands. So we do believe that there's an opportunity, but it might go a little bit at a different pace than it has been going in other markets like Vietnam or in Brazil. On the 0.0, the line extensions had come in 2 shapes. It's the flavors under the regular 0.0. We piloted them last year, and we are now really scaling them. And of course, a couple of key markets like now the U.S. and the U.K. And we have the ultimate, which is the triple 0, including 0 calories, which we piloted in the Northeast of the U.S. and which is expanding now too. So we're indeed experimenting, learning different ways rather than go to big global launches in one go. We're really kind of feeling our way to see where the consumer is at. But we are very confident that there's very good upside there. On the question on soft drinks, we do believe it's not about us trying to be a soft drink. I think it's the other way around. We believe that by extending our 0.0, we can play into premium adult natural beverages, which is clearly complementing soft drinks, and it's an area where soft drinks cannot go as easy as we can using a beer brand as a brand carrier makes it more adult. Given it's 0.0 beer, it's more natural. Typically, it has much lower sugars, much lower calories. So we believe -- and it commands premium pricing in a very significant way. So we really like where this is going and where the first generation of 0.0 beer started very close to beer occasions at moments that somebody chose for a no alcohol option. We do believe indeed that we can start to unlock new occasions that were not accessible before, as the 0.0 segment is maturing. And as the global leader, we should take the leading role in pioneering that. So we're pretty excited about it. Laurence Whyatt: Just maybe to follow up on Ultimate. Do you see that playing a different space to where the current 0.0 beers are? Are they taking share from each other? Or do you think that's really opening up a new market. Rudolf Gijsbert van den Brink: No, we do believe that, that's a new market. Where Heineken 0.0 Original, really plays into less beer drinkers or for certain occasions where people -- unlike a lunch occasion or a business dinner occasion where people rather stay in control and not have the alcohol version. The Ultimate plays into complete new occasions around sports moments, after sports occasions. That's why the global sponsorship with Padel is interesting in this regard. So we're really trying to -- in the end of the day, marketing is about growing consumer penetration, and that's what we're trying to do very intentionally with these line extensions. Operator: Our next question comes from Sarah Simon from Morgan Stanley. Sarah Simon: Dolf, you will be missed. I had 2 questions, please. First one was on FIFCO. You've given us some numbers in terms of the performance in dollars, but can you give us a bit more color around how the business performed organically in 2025, and also what you're kind of expecting in terms of what things are looking like for '26? And the second question was around sort of following on from Laurence's question on 0.0. You obviously had basically flat Heineken 0.0 volumes during the year. And I appreciate your comments about distributor inventory resets. But what do you think your 0.0, let's say, sellout is globally? And how does that compare with what you think the market is doing? Rudolf Gijsbert van den Brink: Yes. Thank Sarah. Let me take the second, and then maybe Harold can comment on the FIFCO question. So our largest Heineken 0.0 market globally is Brazil, and that was, as said, highly disrupted by the stock reset in Brazil. In the key and core markets, like, for example, the U.S., Heineken 0 continues to do very, very well. And in the aggregate, we need to be careful that we don't make new forward leading comments, but 0.0 should drive disproportionate growth across our portfolio. We remain very bullish. We believe consumer penetration is still low and building. We are unlocking new occasions as per the prior discussion. Globally, it's still low single-digit percentage of the total beer category. In Europe, it's nearing 4%, 5% in core markets like the Netherlands. Spain, it's 10%. I don't see no reason why this can't be 10% of global beer in XYZ years. We were the first mover about a decade ago. We have been very intentional about scaling and for sure, we will continue. So we would see '25 performance as an outlier due to some very specific cyclical reasons. But underlying, we are very confident in our low and no strategy portfolio and business momentum. Harold? Harold Broek: Yes, let me be brief on FIFCO. So first, I think it's important to reemphasize that this is really about long-term strategic fit. We're very happy with the brand portfolio. We're very happy with our market share positions. We're very happy with the grip that we have also through retail outlets. So we really believe that for the long term, this is a fantastic opportunity for us. And let's remind ourselves also that compared to the other markets, the per capita consumption is still relatively low. So we do see growth opportunities in the Central America, but in particular, in the Costa Rica market as well. Then in terms of the trading question that you're asking is pretty much in line with 2024. So no big dramas there. It's also very much in line with what we had assumed for 2025. So no surprises coming there. And yes, there has been likely many of the American markets, some impact from macroeconomic uncertainty, for example, tourism have been down a little bit, and that may have had some impact on market category growth momentum, but nothing that worries us at all going forward. Operator: Our next question comes from Andrea Pistacchi from Bank of America. Andrea Pistacchi: And Dolf, also on my part, thank you for the open interactions, insights and all the very best. Two questions, please. First one, I wanted to go back to Brazil a minute, please, which showed a sequential improvement in Q4. You gained share in the market, but could you maybe talk about the health of the market? Are you seeing signs of improvement as we go into this year? How constructive do you feel about Brazil recovery in '26? And also how is the new brewery opening proceeding? And will it drive cost savings already this year? My second question is actually on the multi-market operations. Could you talk a bit about the scope of these multi-market operations? How large are the clusters? Is this mainly a European initiative? Or is it global? And the pace of moving towards these MMOs and what do you see as the main benefit besides cost savings? Rudolf Gijsbert van den Brink: Thank you, Andrea. And let me take the first one and Harold will take the second one. So on Brazil, again, overall, on sellout, we are very happy and pleased with our ongoing market share momentum, really driven by brands Heineken and the Amstel brand, but now also Eisenbahn really picking up and some of the more super premium brands. The market did slow down remarkably in the second half of the year, the market is going into decline. We are deliberately cautious on the short-term outlook on Brazil. We don't want to look too much into January numbers. Let's wait for the Nielsen numbers also to see what that is looking like. We're really focusing on what we can control, which is brand portfolio, which is our relative pricing decisions, which are our activation plans. And there, again, we feel very confident also for this year. The brewery Passos is very important because of its physical location. We were trucking a lot of beer from the Northeast to the Southeast where the bulk of our volume is. And so there is Immediate logistical savings, there is government incentive savings. So even though our volume is not expanding at a rapid pace in the short term, this will come with an optimized P&L. And that was also one of the reasons why we did pursue that opening. Harold, on to the MMO question. . Harold Broek: Yes. So first, the reason why we're doing this MMO is really that we see opportunity to be stronger together as Glenn would call it. Most of the FMCG companies that we know of have already started to do that. And we do believe that there is opportunity, but very importantly, a dedicated management team at country level will continue to exist. So this is not really about taking the eyes of consumers and customers. It really is about pulling resources where we believe they are better equipped to do that above a single market and really pull, therefore, that together in a multi-market structure. We will look at this geography by geography. We have already some of these multi-market operations in play and the biggest one that we know is, of course, Heineken beverages in South Africa, where we already see leveraging portfolio, leveraging distribution systems, leveraging support offices is really benefiting the total of the cluster. So this is not new to us, and it's something that we really want to start looking seriously into, but in a very managed deliberate, intentional way. The scope, therefore, in Europe is centered around 4 Czech Slovak, Romania, Bulgaria, Benelux and the Germany, Austria, Switzerland cluster or multi-market organization. And as we already said in the earlier question, the benefits are not only about cost savings, it's really also about taking, let's call it, distraction away so that country organizations can focus on customers and consumers. And that the rest, the parent -- the biggest one in the multi-market organization does a lot of the administrative work and that is what we are trying to do. So it has cost benefits but certainly also focused benefits. Operator: Our next question comes from Celine Pannuti from JPMorgan. Celine Pannuti: First of all, I see a lot of changes that are happening in the organization. And clearly, on the EverGreen strategy. So I wanted to congratulate you, Dolf, on this. And obviously, wishing you a lot of luck for the future. My first question probably related to the EverGreen strategy where you said that top line growth is the core focus. In '25, you grew 1.6% organically. And I'm trying to understand how to unpack that for '26? You say -- I mean, obviously, price/mix accelerated into the quarter, although you seem to be saying that price/mix, you want to be a bit more careful about that. At least that was for Europe. So if you could try help me understand how the price/mix should develop in '26 versus the '25 level? And in an environment where, obviously, you are quite cautious as well about our demand, do you think that aiming for flat volume in '26 is achievable for you? So that's my first question. My second question is regarding profit delivery, the 2% to 6%, I think you made a comment about how this was really driven by EMEA. I would like to understand for '26 the balance of that by region? And as well, is there any balance we should think about H1, H2, given, I think, still some FX transaction in the first half of the year? Rudolf Gijsbert van den Brink: Thank you, Celine. Let me have a first go at it, and then I'm sure Harold has a thing or 2 to say on this. Let me start by the profit guidance of 2% to 6%. So we trimmed it a little bit and it's a combination of a couple of things. One is just to remain a bit prudent on the short-term expectations from the category. In different places, there's different drivers, affordability concerns or we have macroeconomic disruption still playing in parts of the footprint. Mid and long term, we remain confident explicitly so and that the category should sequentially improve to growth again. But in the short term, we rather err on the side of being a bit cautious on the category assumption. Very importantly, another reason is that we really want to maintain flexibility to keep investing in growth in digitizing the business, et cetera. As I said earlier, very pleased that even in a challenging lean year like last year, we were able to increase our absolute marketing selling expenses, increasing marketing selling as a percentage of revenue by some basis points. And so that guidance is also really set with that intention in mind to remain flexibility to keep those investment level in place even if there's unforeseen turbulence. Harold, over to you on the question on pricing and revenue. Harold Broek: Yes. Of course, going forward, we're not going to comment on pricing, certainly not specifically market by market for obvious reasons, Celine, you know. But maybe it's good that we look back towards 2025, which makes me a bit more comfortable to speak about it. And I think what we're trying to signal is a bit consistency in our behavior. And therefore, you really need to look at the revenue per hectoliter growth region by region, where in Africa, we indeed continue to predict input cost inflation from foreign exchange and local inflation, and we will take pricing for that if and when and how we can, like we did in 2025. In the other side, Vietnam is a good example of that, and Dolf alluded to that in the beginning. We see a very important opportunity to continue to manage the mix, because the growth of Heineken is a premiumization strategy, but in a 0.25 liter can. And that is an important component of the price mix that you see in Vietnam. And that is really what we are trying to do. To balance affordability, price-seeking consumer, but still going after premium because the consumer is prepared to go premium as long as it fits the pocket and the cash outlay like, for example, with 25 cl can. So revenue management is a very important part of our pricing strategy, not just pure pricing. And that's how we're trying to get this right market by market, region by region, and we will do in developed markets, particularly in Europe, be very cautious about the consumer environment not to overprice and really start paying attention to volume as well. Celine Pannuti: Any commentary on the balance of operating profit delivery? Harold Broek: Yes, between half 1 and half 2, well, you know that we're always aiming to be consistent and predictable, which the world would say the same. So I think we are trying to be very agile in approach to balance that out and give you line of sight, but it depends on factors and as Dolf already alluded to, we also have our investment strategy and are not here to manage quarter-by-quarter short term. We really are wanting to get this right for the long term as well. So we'll do our best, but cannot promise. Rudolf Gijsbert van den Brink: I think we're going to the last question. Operator: Our last question is from Trevor Stirling from Bernstein. Trevor Stirling: You'll be relieved to know there's only one question. But firstly, let me reiterate what everyone else has said, Dolf, and in particular, I look forward to saying it in person over a cold one tomorrow. The question, Dolf, clearly, 1st of June 2020, a world a lot has happened in those intervening years. When you look back, what do you think is your biggest learnings here in terms of what's worked, what hasn't worked? Yes, just reflections on your time as CEO. Rudolf Gijsbert van den Brink: Thank you, Trevor. And certainly looking forward to a cold one, with all of you together tomorrow end of day, always a -- yes, a happy moment to look forward to. Yes, I actually just realized that today, it's February 11, and it was on February 11, 2020, that I was informed that I was going to be nominated as the next CEO of Heineken. And I was living in Singapore at that moment, and it all looked rosy. And I was really worried about how to step in the footsteps of Jean-Francois, given the incredible momentum, the role, the category, the business was happening. And little did we know that living in Singapore, it was just days or 1 or 2 weeks later that COVID erupted in Asia and then later in the world. And I took a plane on May 25, was a one-way plane with KLM and air stewards were wearing ski goggles because people still believe that the virus could penetrate your eyeball, it was just bizarre. And then starting in June 1 from home, sitting behind the screen, trying to figure out this team's thing and what have you, this Zoom thing. So it has been a bizarre period. What I'm super proud of Trevor is that already before COVID, I felt that we had to pick up the pace of change in the company because the pace of change in the world was accelerating. And again, that pace of change in the world has capital accelerating time and again over the last 6 years. And EverGreen as we designed it with the executive team in the second half of 2020 was explicitly designed to future-proof the company in a fast-changing world. And we did that across different dimensions. It was future-proofing our footprint by exiting some markets and doubling down on high-growth markets with good fundamentals like India, South Africa and now more recently with FIFCO, it was doubling down on growth segments like premium beer, low and no beer and beyond beer with varying levels of success, some things moved more smoothly than other. We always knew, and I remember speaking with some of you 6 years ago, that you said Heineken is fantastic and the brand and the culture, but you guys don't do cost productivity. And we very explicitly tried to change that. I am proud of the progress we have made, taking EUR 3.5 billion of cost out, and there's still more to do. And that's what EverGreen 2030 is all about. We were behind on digitizing the business, including the boring ERP part of it, and we're really advancing at pace, making considerable investments not just in money but also in organizational resources to make sure that our digital backbone is future-proofed. And we did it on sustainability and people, too. All in all, proud of the progress, incredibly proud of the 87,000 people at Heineken. We lay the foundation, we were not done. More is needed. We are humble in that sense. And I hope you got that spirit and tone when we were together in Seville. And EverGreen 2030 is our sharpened clear expression of our ambition levels building on progress and learnings and at the same time, very clear in the priorities for the company. And as such, it was the toughest decision of my career, if not my life because I love this company dearly. It is the right moment for me personally to take a professional and personal reset, but I do that with full confidence in the future of this beautiful company and that I'm leaving the company in very capable hands with Harold and the rest of the executive team and with a clear strategy. So thanks for that question, Trevor. And again, looking forward to expand if needed over a beer or otherwise when we see each other tomorrow end of day. Raoul-Tristan Van Strien: Thank you very much. We will see most of you tomorrow afternoon. Take care. Harold Broek: Thank you. Rudolf Gijsbert van den Brink: Thanks, everybody. Bye-bye. Operator: Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.
Operator: Welcome to the Randstad Q4 and Full Year 2025 Results Conference Call and Audio Webcast. [Operator Instructions] I will now hand the word over to Sander van't Noordende, CEO. Mr. Sander van't Noordende, please go ahead. Alexander van't Noordende: Thank you very much, Alba, for that introduction, and good morning, everyone. I'm here with Jorge and our Investor Relations team to share our Q4 and full year 2025 results. First of all, 2025 has been a year characterized by great strides in our transformation, while I would say, navigating the cycle and demonstrating a resilient performance. It's also been a special year as we celebrated Randstad's 65th anniversary, a milestone reflecting our enduring commitment to being a true partner for talent. The market environment in Q4 was in many ways similar to what we saw throughout the year. We remain in a stagnant job market, but we see more resilience in Temp with good growth in Southern Europe, and we see further signs of an early cyclical pickup in U.S. Operational. As mentioned in the previous call, the Professional and Perm markets remain challenging, particularly in Northern Europe, while APAC remains resilient. Against this backdrop, we delivered solid results. We achieved revenues of EUR 5.8 billion and an EBITDA of EUR 191 million with a margin of 3.3%. For full year 2025, we delivered revenues of EUR 23.1 billion, 2% lower year-on-year, and an EBITDA of EUR 720 million with a margin of 3.1%. So I'm very proud of how our teams navigated their markets during the year with a consistent focus on delivery of results while transforming the business. So whilst 2025 was a challenging year, we came out of the year in a much better place than we went into it. First of all, from a growth perspective, we now have over 50% of the business in growth compared to around 25% at the end of 2024. From a profitability point of view, we reap the benefits of our cost discipline with EUR 181 million lower cost in 2025 than in 2024, and our recovery ratio was very strong at 71% for the year. From a productivity point of view, our focus on delivery excellence through our talent and delivery centers is making us a more [Technical Difficulty] organization. And as a [Technical Difficulty] we achieved 3% productivity gains in Q4 and 1% for the full year. This discipline led to a solid free cash flow of approximately EUR 600 million, further strengthening our balance sheet. In light of this, we will propose a dividend of EUR 1.62 or EUR 284 million, in line with our capital allocation policy. We started 2026 with stability in our volumes. Our exit rate in December was solid and the January revenue trend is flattish. Of course, we remain laser-focused on serving our clients and talents while steadily executing our partner for talent strategy. In Q3 and Q4, I visited all major countries, and on the ground, you can really feel the energy and excitement for our transformation. Our people get it and want to lead the market as we continue to move our business model toward a digital-first talent company where we deliver [Technical Difficulty] scale through our platforms. While there is still work to do, we are seeing the clear benefits of this transformation in how we run the business day-to-day. First of all, we continue to [Technical Difficulty] life sciences, e-commerce and logistics, health care and, of course, all the digital hot skills around AI, cloud, data and analytics. Together, these segments delivered EUR 9 billion in revenue this year, growing 2% year-on-year. Looking at our specializations. In Operational, we've seen good commercial progress and sustained momentum with an increase in clients' visits paying off. In Digital and Enterprise, we signed several new blue-chip clients in semiconductors and financial services. However, professional job flow was impacted by a combination of year-end slowdown and low hiring confidence. With our digital marketplaces generating approximately EUR 4 billion in annualized revenue, we are running the business at a higher clock speed. In Q4, we saw around 1.4 million shifts self-scheduled by our talent, an increase of 30% quarter-on-quarter. Clients and talent clearly like the new models. We will further accelerate our digital-first strategy, and that's why I'm very pleased to welcome David Koker, who will be Randstad's first Chief Digital Growth Officer. David knows how to build digital experiences at scale and brings over 25 years of experience in driving commercial and platform growth across Europe and Asia, most recently at Booking.com. Finally, none of this is possible without the best team in the industry. Despite the pace of change, our employee engagement remained above benchmark at 7.7. And we also continue to invest in our people's future by providing AI readiness training to all of our colleagues. And you will understand that with everything we've done in 2025, both operationally and strategically, we couldn't be better positioned for a more complete recovery with profitable growth as we are more specialized, more digital and more efficient. Jorge, over to you. Jorge Vazquez: Thank you, Sander, and let me shed some extra color on our results. So good morning, everyone. All in all, we saw a continuation of the trends observed throughout the year. And always first from a momentum perspective, once again, the seasonal pattern continued as we added 15,000 talent working sequentially since Q3, again, versus 10,000 last year. Earnings-wise, Q4 and Q3 were very similar. It was somewhat of an erratic quarter, I would say, in what was overall a step towards a stronger exit rate in December and the start of January. That is encouraging, and we'll talk more about that later. We also continued to gain field productivity and materialized structural cost savings in indirect costs achieved even while increasing digital investments. Lastly, disciplined cash conversion, allowing us to balance deleveraging with shareholder returns in line with our capital allocation policy, and also more about that later. But let's start and break this down, starting with the regional performance now on Page 8. In North America, we continued to see good progress this quarter with a pickup in the industrial pockets of our business. In U.S., our Operational business grew 6%, significantly ahead of the market. And we see this as a very testament to our new way of working, centering on the digital marketplace and central delivery. Elsewhere, Professional is down 10% and Digital this quarter was flat, but with solid operational leverage. Enterprise was minus 3%, with demand in RPO becoming more muted as we reached year-end. Meanwhile, in Canada, we continued to grow. Permanent hiring showed also some signs of stabilization, albeit at a low level, declining still 14% as hiring confidence remains low. The EBITDA margin for North America came in at 3.6%, up 20 basis points year-over-year. This represents a recovery ratio of above 100%, meaning we've been able to expand EBITDA year-over-year more than the gross profit we lost with productivity continuing to increase in Operational. And now moving to Northern Europe on Slide 9. In Northern Europe, we continued to navigate challenging markets, though as we exit the year and enter 2026, exit rates in December and January suggest bottoming out or sequential improvement. In the Netherlands, organic revenue remained subdued at minus 7% with hiring freezes in government and large professional clients. Q4 [Audio Gap] this quarter an increase of the sickness provision, reflecting a rise in long-term sickness rates and going forward as well probably to stay relatively high, and a EUR 5 million one-off dotation into the new pension scheme. Looking ahead, the new Temp CLA and the Future Pensions Act, WTP, effective of January 1, will increase some of the wage components. It is still too early to tell what the legislation impact will be, but at first glance, we see higher bill rates offsetting some of the pressure on volumes. We also celebrate 1 year of the acquisition of Zorgwerk, which continues its impressive growth and synergies path, reinforcing our position in health care as a structural growth segment. In Germany, things remain challenging with revenue at minus 10%, driven still by subdued automotive, though manufacturing is stabilizing. More importantly here, our structural improvements on the cost side, as you can see, are paying off, ensuring a profitability base and positioning us for a stronger company into 2026. Belgium declined 5% with operation at minus 4% against tougher comparables. And finally, Poland, 7% growth, Switzerland, 6% growth, continued to lead growth, offsetting the subdued Nordics, still at minus 14%. And now moving on to the segment Southern Europe, U.K. and LatAm on Slide 10. France remains a story of a 2-speed market. On one hand, we see resilience in our industrial pockets, and this is most visible in in-house, which grew this quarter at 13%. On the other hand, the SME segment is still down double digits, leading to an overall operational decline of 4%. Professionals were down 14% year-over-year. And this quarter, health care saw sequentially less revenue, impacted primarily by legislative changes that came into effect in December. Our leaner structure enabled us to deliver an EBITDA margin of 5.4%, up 130 basis points year-over-year. Italy posted its seventh consecutive quarter of growth. Operational grew 6%. Profitability landed at 5.7%, reflecting strategic investments ahead of the Randstad talent platform rollout. Iberia remains a stronghold, plus 5%, led by Spain, up 6%, where growth investments are paying off. Elsewhere, the picture is mixed. The U.K. remains tough. And across these regions, conversion does continue to increase, resulting in a 3% EBITDA margin. And now let's move on to Asia Pacific on Slide 11. Japan continued its solid growth at plus 6%, and we continue to invest to capture structural opportunities, particularly in digital engineering, where we're growing 7%. India delivered double-digit growth as we continued to invest in growth segments, while Australia and New Zealand declined 7% against steep comparables in a subdued market. Overall, the EBITDA margin for the region came in at 3.3%. And that concludes the performance of our key geographies. But now let me walk you through our combined financial performance on Slide 13. Let's start with the revenue. So looking at the revenue mix, we see the trends of the last few quarters continuing. Operational specialization continued to improve throughout the year and is now flat. Professional and Digital remained broadly stable throughout the year, albeit still at a low level. In Enterprise, we saw after several quarters of solid growth in RPO, demand softening in this quarter, resulting in a 4% decline. If we move down, gross profit and OpEx remained very similar to Q3 levels, and this resulted in an EBITDA margin of 3.3%, stable sequentially and year-over-year. Underlying EBITDA came in at EUR 191 million, and it's worth noting that we again faced an adverse FX impact of around EUR 8 million. Adjusting for that, our operational profitability was very close to last year's level. Integration costs and one-offs this quarter amounted to EUR 34 million. And for the full year, one-offs totaled EUR 125 million with the largest focus on structural cost reductions in Northern and Western Europe. Regarding amortization and impairment, we recorded an impairment of EUR 9 million related to our digital business in Belgium, reflecting the ongoing weak market conditions there. Net finance income of EUR 5 million for the quarter, where fair value adjustments, reversal of impairments on our loans and financial commitments resulted this quarter in a gain of EUR 18 million, effectively offsetting our regular interest expenses for the quarter. The effective tax rate was 31% for the year, within our guided range. In 2026, we expect a similar tax rate guidance of 29% to 31%. And this all leads to an adjusted net income of EUR 135 million for the quarter. And with that, let's now dive deeper into the gross margin slide on Page 14. A few things about margin. So Temp margin was down 20 basis points year-over-year. Operational business remains more resilient versus Professional and Digital specializations. There we continue to see a geographical divergence with Northern Europe below group average and Southern Europe continuing to do better. And as we mentioned before, an adverse FX impact in 2025. Incidental items also took an impact in the Netherlands, as mentioned earlier, and that overall brought the gross margin in Temp down 20 basis points. Perm contribution was down 20 basis points as well with a little sign still of stabilization in key perm markets remaining challenging. In HRS and other, this quarter was flat. RPO decline, 3%, 4%, is pretty much in line with group level, therefore, not impacting the overall gross margin mix. This is the market at the moment. Overall, looking back at 2025, the impact of geo mix, enterprise clients and specialization mix with Operational being more resilient carries a Temp margin decline that will progressively unwind with different market dynamics. Which brings me to the OpEx bridge on Slide 15. And remember always, this one is sequential. Underlying operating expenses were EUR 880 million, once again, like throughout the year, moving in lockstep with gross profit. This means OpEx has stayed broadly in line sequentially, with seasonality and strategic investments offsetting cost -- offset by cost savings. The payback of the one-offs executed throughout the year remained well below the 12 months reference we normally provide. And the real story here is our 71% recovery ratio. Over the last 3 years, we have become structurally more agile. Our structural changes to how we conduct and support our business have improved our ability to recover the decline in gross profit by reducing operating expenses or to convert more of gross profit into EBITDA in the countries where we see growth. Today, we have more revenue also going through delivery centers. We have more parts of our process done digitally, and we have more and more revenue in our digital solutions. At the same time, in parallel, we continue to drive structural indirect costs down. Linking this back to our Capital Markets discussions in May, I am pleased to share that we've achieved north of EUR 100 million in net structural savings for 2025. And with that in mind, let's now move on to Slide 16, which we discuss cash flow and balance sheet. Turning to cash flow. Our underlying free cash flow for the quarter was a positive EUR 213 million, reflecting mostly seasonality. For the full year, free cash flow totaled close to EUR 600 million, up EUR 260 million year-over-year, reflecting good cash conversion, while year-end timing was supportive in 2025. DSO came in at 56.7 days, up slightly by 0.5 days sequentially. Net debt, therefore, decreased EUR 274 million year-over-year, and our leverage ratio now stands at 1.3. Consistent with our capital allocation, we proposed a regular dividend of EUR 1.62 per share. This reflects 64% of adjusted net earnings, which equals the floor when we temporarily exceed the 40% to 50% range. And that brings me on Slide 17. All in all, we see further volume stability, especially in our Operational business with 50% of the business in growth to continue, and for the remaining 50%, we see support by improving end markets or annualization of some of the sharper declines of last year. In concrete, we are encouraged by the revenue trends, with a better exit of the quarter than we started and January coming in at 0.4% decline per working day. Q1 2026 gross margin is expected to be broadly stable sequentially as we see more adverse effects and the lower Perm and RPO business offsetting some of the improved mix. Operating expenses are expected to be lower modestly quarter-over-quarter, and I believe it should be at least in the range of $10 million to $15 million, a reflection of our efforts taken this year. Lastly, the number of working days will be the same. For Q1, we stayed the course, balancing growth, strategic initiatives and then to protect relative profitability, although we never optimize for a quarter and we set ourselves for the year and the years to come. And to summarize, 2025 was an important year for Randstad, finishing better than we started and setting us up for a better 2026. In terms of growth, decline rates eased over the year, and we entered 2025 at minus 5% and we finished with 50% in growth, and in the rest, bottoming out. Started 2026 crossing the line in terms of growth. And more structurally, we continued to position ourselves where growth is, our growth segments, and successfully integrated Zorgwerk. In terms of field productivity, we continue to change how we work, digitizing more and with real revenue now flowing through our marketplaces in various countries and markets, with especially our Operational and Digital business marketplaces showing good progress. SG&A and indirect costs, we also took more than EUR 100 million structural costs that are now not coming back. In terms of profitability, the short-term plan was adaptability, but the long-term plan is about structurally building operational leverage and resilience, breaking the linear model, as we normally discuss, and the expectations that come with it. If anything, in 2025, we've become more structurally more agile and scalable, proven by the 71% recovery ratio and despite continued investments. This has allowed us to deliver strong adaptability and now set the performance frame for 2026. That concludes our prepared remarks, and we now look forward to taking your questions. Operator: The first question comes from Remi Grenu from Morgan Stanley. Remi Grenu: A few questions on my side, if I may. So the first one would be on organic growth. So good to see that it's trending in the right direction, I guess, going into 2026, but there is still a little bit of a gap with some of your competitors. So I'd like to understand how you would explain that gap and how you intend to bridge it. So is it about the necessity to reposition the business on more supportive segments? Is it about hiring more FTEs to generate volume? Or maybe a little bit of issue with the pricing positioning versus competitors? So just want to have your take on that competitive landscape and how you intend to bridge the performance gap. The second question is on what you alluded to in the Netherlands. So there is this Dutch law coming into effect in July, if I'm not mistaken. So I just wanted to understand if you feel like the employers -- I mean, the clients you're discussing with have already adjusted ahead of the change? Or if you feel that there could be additional pressure in the second half of this year? And if so, if it's possible to quantify it a little bit given the revenue exposure of the company to that country? And then the third one would be on your Enterprise business. So I think you said it was a little bit softer this quarter. What has driven that softness? Is it company-specific large contracts you would have lost or which would be ramping down? Or are you seeing largest employers being a little bit more cautious on hiring trend going into 2026? Alexander van't Noordende: Well, let me take a step back because, of course, it's all about growth here. So let me just sort of reflect on what's going on here. So let's maybe first make a few comments on Q4. As Jorge mentioned it, the way we see Q4 is that we had a little bit of a blip in a few parts of our business, and the blip was primarily in October and November because December and January have shown encouraging results. And I speak specifically about France, Belgium and Germany. And the story is with different reasons, more or less the same for those big 3 countries. In Enterprise, your question is a good one. The main issue in enterprise is that we have seen somewhat lower hiring in Q4, basically some of our larger clients putting on the brake, stepping on the brake, not stopping, but reducing hiring in Q4. We have, at the same time, signed up a bunch of new clients which we are bringing up to speed in Q1, and hopefully, the revenues for those clients will start to come through in Q2 and definitely in Q3. So that's sort of the Q4 reflections. Then if we look forward, we see that 50% of our business is in growth, and we are optimistic about the other 50% also improving from here on. What's driving that? Well, first of all, just sort of the macro headwinds are easing. Interest rates have been coming down. Inflation is easing. This whole thing about trade is more like the new normal. Clients are dealing with it, are knowing what to do, have taken their measures. So that's -- the uncertainty is somewhat dissipating. The labor markets are getting unstuck. We see more mobility. We see some people -- more people leaving, some layoffs even here and there. So there's more dynamics and more mobility in the labor market. All of that could indicate a cyclical pattern, if you will. Temp is definitely more resilient and North America operational is leading the way here. That's great. In Europe, as I said, in those big 3, 4 countries, we see an encouraging start of the year as well. So that's all positive, I would say. Then last but not least, and this is really important -- I mean, obviously, we have been building a more resilient and agile Randstad. And what does that mean? That means, first of all, a better experience for our clients and talents because that's why we are here on earth, that's how we make a living. But also all of that is fully focused on creating more leverage. So you have to realize that over the last years, we have been investing more than EUR 500 million in new processes, systems, talent centers, delivery centers, technology, and all of that is creating not only a better experience, but it's also creating more leverage in our business. That's talent centers. We have to meet the talents where they are, and the talents are online. So we have talent centers complemented with technology, increasingly AI, by the way, to get more efficient -- to be more efficient in getting talent in the door. That's delivery centers, the central delivery for clients that have multiple locations with dedicated teams focusing on improving the fulfillment at those clients. And the results that you see left and right are actually quite staggering. Then the DMP, and North America is a case in point. If there's one example of operational leverage, it's the DMP. If the client is asking for 100 people more, we can deliver those people -- we can deliver those 100 people more tomorrow with 0 marginal cost. That is how a DMP works, and that's extremely, extremely powerful. So all of that to say that we're steering the business in a very disciplined way, as you know. So we're aiming to do the same in 2026 as we have done in 2025, is steering with an ICR and IRR above historical levels, like we did in 2025, and you know we had 71%, which is, of course, something that we are extremely, extremely proud of. So in short, I would say I'm actually pleased to get another 4 years in Randstad because I haven't been more optimistic at the beginning of the year in my tenure in Randstad. And you may know the saying every dog has its day. I think my day as a dog has maybe come starting in 2026. So I'm optimistic. Jorge Vazquez: Just one -- Remi, your second question, if I'm not mistaken, was about the Netherlands. So just to be clear, the new temp CLA and the changes you were alluding to, they actually start on the 1st of January. We are working with our clients. It's a bit too early. I think, by and large, the increase we see in wage components, let's put it like this, will offset, if any, the volume pressure that we might see. But for now, that's what we are working on, yes. Operator: The next question comes from Andy Grobler from BNP Paribas. Andrew Grobler: Just the one from me and a follow-up. Just in terms of gross margin, could you talk a little around the underlying pricing you're seeing in the constituent parts? And essentially, to what extent is the downward trend in gross margin about -- just about mix versus like-for-like changes? And particularly on that, your guide into Q1, sorry, and the moving parts inherent within that? Jorge Vazquez: And let me basically just take a step and look at the full year and then how we enter 2026, because some of these things start potentially changing as we enter the year. So in terms of gross margin -- I mean, let's separate things. There's a service mix as always and then there's a temp margin. And I think we talk a lot about pricing, but I should also think I'll talk more about the market and the market we have today and how the industry is supporting different clients, different geographies and what we see. Today, we have a Randstad that from a geographical perspective has growth and is supporting more clients in countries where there's a slightly lower temp margin, think Spain, think Italy versus, let's say, the Central European countries. But that's basically a geographical mix. We also have a client base at the moment in an industry that is leaning towards a bigger share of large clients, think in-house, think very large enterprises. And that, of course, brings as well a client mix impact. And thirdly, and not the least, if you look at our specializations, and it's in line somehow with previous cycles that we've seen before. What is holding up better is clearly the Operational business. It's flat even at the end of the year, crossing into growth already. And we see the higher skilled specializations, think of professional, digital, still with, let's say, year-over-year declines. Meaning, again, the higher margin specializations declining and the lower margin specialization continuing to increase. Now this is the market we have today. And if I look at 2025, we have basically around, I would say, 60 basis points delta on our gross margin, if you kind of normalize it throughout the quarters. And I would say 40 basis points -- Andy, that's the mix. It's the market we have today. I don't like to talk about mix because this has consequences for OpEx, has consequence for everything. It's where we have market and it's where we are gaining, it's where we're going to operate. We also had an impact of 20 basis points from perm and a positive impact somehow from RPO as RPO was basically throughout the year growing faster than the group. That means approximately 60 basis points in 2025. If we now look at 2026, what is likely to happen, right? This 40 basis points from the temp side of things, so the geo, the client and specialization -- we don't really know, we want to grow everywhere. But clearly, they are starting to annualize or will start to ease. If there's growth, more growth in the U.S., if it continues to be supported in Southern Europe, one way or the other, some of the things will annualize in the higher-margin accounts, and we should start seeing things bottoming out on at least easing the comparisons that we had. The same with client mix. I can't tell you we want to grow in every single client segment, but somehow, if we look at previous years, once things indeed increase towards large clients, the years after start analyzing. And the specialization is the same. We're crossing over into growth and operational, but we still need to see how professional, how digital will evolve into 2026. Remember, we have pockets in digital. Look at United States, we're either in growth or flat. So it's already a very different start of the year than we had in 2025. And then perm, we continue still to count on 20 basis points, potentially 10 for now. We'll see how things ease throughout the year. RPO, Sander alluded to it. The positive impact has now in Q4 kind of faded away. On the other hand, it will be about balancing business as usual with new implementations. And the pipeline and FX adds particularly in Q1. And remember, a lot of the bigger fluctuations happened in Q2, Q3 and Q4. So as we now ease into the year, FX will have an impact in Q1 and not in Q2. So at least if things don't change, less in Q2, Q3 and Q4. So again, into 2026, we see pretty similar margin trends as 2025, and potentially as we go into the year, easing off in some of the components. Andrew Grobler: Okay. And just one follow-up in terms of the in-house sort of large clients versus SMEs. In fairly broad terms, can you talk about the difference in gross margin between your average in-house solution and your more sort of branch-led SME business? Jorge Vazquez: Yes. I would say, I mean, probably 10 to 15 -- it depends on the markets, right, Andy. Andrew Grobler: Yes, inside France, for example. Jorge Vazquez: 10 to 15 basis points roughly, I would say, on average at group level. I don't specify for country. Operator: [Operator Instructions] The next question comes from Rory McKenzie from UBS. Rory Mckenzie: It's Rory here. I wanted to ask about the impact of the digital marketplaces. How much do you think is visible in these numbers? If it's now annualizing at nearly 20% of revenues, you called out 1.4 million self-scheduled shifts. Can we see that at all in the North American growth rate? Do you think that's been a part of why you've seen that improve? Has it allowed you to protect margins more? Or really do you think we're still waiting to see more of those benefits over time as market volumes recover? I know there was another restructuring charge in the quarter as well. So maybe could you say how much of that is relating to kind of the structural reshaping compared to maybe adjusting to the market conditions? Alexander van't Noordende: Well, where can we see the impact of digital marketplaces in our numbers? Well, first of all, in North America, in Operational. I think that part of the growth is because of our digital marketplaces, because once clients ask more, we are much faster and at much lower cost, of course, to deliver those additional FTEs. The digital marketplace is also differentiating us in the marketplace because some clients are saying, with Randstad, we have access to talent that we otherwise would not have. So it gives us a leg up in competing against our competitors for new clients. We have seen the productivity in terms of EWs per FTE now surpassing the level of 2019. So that's a good sign. So you can see it in the U.S. at scale. The other places that we can see the impact of the digital marketplace are in health care. So in health care in the Netherlands, there has been a big shift from freelance to temp. Without the digital marketplace, we would not have been able to make that shift at the pace that we have been doing over the course of 2025. And it's actually quite phenomenal what that team has pulled off there over the last year. Similar dynamics both in France, where we have, of course, some challenges with regulation. But because we have the digital marketplace, we're better to navigate that. And last but not least, I would say, in Australia. Finally, in Randstad Digital -- and I spent time with the team last week. About 80% of our fulfillment is now coming directly from our community in our digital marketplace in Randstad Digital in the United States. Obviously, you can imagine that means faster, that means more productivity and the likes. Now obviously, this is all EUR 4 billion on an annual basis. So we're now going to work hard to expand that to other markets most likely, so markets that we are focused on in 2026, Belgium, Italy, Switzerland, Japan, Poland, just to name -- Canada, just to name a few. So this model works. Clients and talent like it. We can now look at the business and run the business in a much more granular way. And frankly, we are start to -- we're only touching the surface -- scratching the surface of the opportunity that the digital marketplace is offering us in terms of talent availability, efficiency, precision, relationship with talent, redeployment. We're just scratching the surface. So I'm extremely optimistic. This model is working, and more to come. Jorge Vazquez: Rory, any follow-up question? Rory Mckenzie: Just about the -- maybe the disruption charge in Q4, and how much of that is related to kind of reshaping the business to get the most out of this platform compared to adjusting to the cyclical conditions? Jorge Vazquez: The one-offs. Yes, sorry. Yes. Sander, can I just complement something from a finance perspective? Everything you heard from Sander, what excites me, Rory, is it's structurally changing the ability that the company has, becoming more agile, but also gearing up and converting. So a lot of what we sought was the art of the possible. We now see the benefits of digital and the benefits of everything we're doing, starting to basically be possible also in our industry and in Randstad. And that's quite exciting. In terms of one-offs, let's be clear, they continued elevated in 2025, though lower than in 2024 and 2023. More important I would argue, when we make these decisions in terms of allocating capital to it, is the return on them. And from that perspective, if I look at the return we had from the one-offs, you can actually already see this very clearly in Q4 and as we enter into Q1. So a large part of, almost EUR 30 million, EUR 35 million actually, reduction in OpEx we had in Q4, I would say almost 2/3 of that were directly driven from the one-offs done this year. And we are well below the 12-month target that we set ourselves internally. And that will support us again into Q1. Operator: The next question comes from Marc Zwartsenburg from ING. Marc Zwartsenburg: Two questions from me as well, first on the EBITA margin in North America. The progress, 20 basis points year-on-year, it was a bit higher than previous quarters, but still conversion ratio of 100%. But how should we think about that margin in 2026? Should we see that the productivity gain from the digital marketplace and the self-placement or self-scheduling to feed through and the step-up -- really a step-up in the margin in '26, because now it's a bit volatile in the progress on the year-on-year? Can you maybe give a bit more color on what we should expect there in terms of margin progression? And then following up on that, on the cost base. You already mentioned we should see the cost base will be relatively flat or slightly lower in Q1. How should we think about that throughout '26? Will you be able to offset all the inflationary because inflation is coming down, that you will be able to offset that? And that you can keep that OpEx level rather flat throughout the year? How should we think about that? And also in relation to the one-offs, how many one-offs will we see in '26 to keep that going? That's it. Jorge Vazquez: Okay. I mean, first on the U.S. So yes, in terms of we want to see a step-up in profitability. There's a few things at play, Marc, as well. The exciting thing is we're seeing 10% productivity gains. You can see it in our numbers already in the U.S. overall, even more parts in our Operational business, where a lot of this model is already helping us supporting growth. We still see perm somewhat subdued. Props still to recover as you've probably been reading on other players in the market. RPO also not necessarily yet in sustainable growth, though Sander alluded to it we are winning new business or we're implementing new clients. So there's a few variables there. But in short, yes, we want to see and we will see a step-up in profitability in North America. In terms of the cost base, let's -- and the one-offs, let's look at it. We're actually starting the year at a lower level. I mean, I want to make a side note. We're now probably have the OpEx way below 2018, 2017 even levels of OpEx. So clearly, let's say, a lot of the OpEx we have incurred and we have perhaps inadvertently structurally had through COVID, a lot of it has been corrected back. And to the question of one-offs, the point here is making sure that it will not come back, because this is also eliminating and improving how we work and basically making sure they work differently. The point of having incurred these one-offs is to make sure this does not come back, these costs. So we are a leaner and meaner Randstad as we now prepare to cover -- or to go over into growth in 2026. If we then look at the exact OpEx level, look, we'll start low in general with the seasonality of the year. We see growth in many markets and it's stepping up. So I don't want to make obviously a comment about our OpEx will stay flat throughout the year, but it's optional for us. So we can choose depending on how much growth we see and how we want to support potential opportunities in growth, how to develop our OpEx going from Q1 onwards. And we will never sacrifice growth for a quarter result or performance. But yes, we have the option within us. Marc Zwartsenburg: That's very clear. And then from a cash flow perspective on the one-offs, is there any cash outflow to be expected from the one-offs still in '26? Jorge Vazquez: Yes. I mean, look, as we continue to roll out -- again, they were lower this year. I don't expect them to -- I mean, I expect them again, if anything, to exist to be lower than 2025. But remember, I also told you very clearly, from a cash allocation, this is probably one of the best -- well, we shouldn't talk about it like that. But from a return perspective, it is way below the 12 months. There is likely to be some one-offs, but things are bottoming out. It's more about continuing to roll out better ways of working and our functional target operating models. That's basically where we -- what we are focused now. Operator: The next question comes from Simon Van Oppen from Kepler Cheuvreux. Simon Van Oppen: I would like to extend on Remi's question about the Netherlands. So we saw that revenues in the Netherlands was down 7% on an organic basis against an easier comparison base, while your corporate staff was actually up by 60 people in the Netherlands. And Jorge, you mentioned increase in wage components potentially offsetting volume pressure around regulations. But how should we look at profitability in the Netherlands for 2026? And can we expect further pressure on profitability with potentially higher number of FTEs due to more administrative work around the new regulations? Jorge Vazquez: So let's -- first of all, on the Netherlands. So if you look ahead, yes, there's a big legislation change. I just told you that the first view we have is -- and remember, we're #1 here clearly. So it's where we also can add responsibility to lead the market in terms of implementation of legislation. And in that respect what we see for now is bill rates offsetting some of the volumes. We also see Zorgwerk stepping up and in growth territory. So you see a lot of things into Q1 that support growth. And from a headcount perspective, this is probably a big change, one of the biggest change we had over the years in the Netherlands. So there is a temporary ramp-up, let's say, of people to help us, basically making sure that everything is in order for our clients and for our talents. Remember, we're #1. So for many companies, we are their partner, the one partner in the Netherlands in terms of managing flexibility and contingency on talent. And in that respect, we are basically making sure that everything is ready for this particular quarter. Also take into account -- if you look at some of the one-off -- or the restructure costs that we've taken, they are primarily concentrated in Northern Europe, and, of course, that also includes the Netherlands, as we adjust to the running rate of the 7%. So we're not standing still. We're making sure that the legislation is well implemented. There's always opportunities and risks, but more important, we're also focusing on making sure that the business is balanced for 2026. Operator: The next question comes from Vasia Kotlida from Barclays. Vasiliki Kotlida: I have 2 questions. First one, you mentioned new client wins. Can you please give some color on what industries and geographies? And the second is about the January trends. These are almost flat. Is that comp related or a genuine pickup in activity from Q4 that was up minus 2%? Alexander van't Noordende: Yes. On the new client wins, a couple of exciting deals in RPO and MSP in Life Sciences and in Financial Services, primarily, I would say, in North America and a couple also here in the core of Europe. So good news there. Jorge Vazquez: Yes. On the second question on the growth rate, Vasia. If you look at Q1, I mean, Sander alluded to it, we have 50% of the markets already in Q4 in growth. So again, those markets continue to be in growth, and in many of them, even encouraging signs. Also in volume -- I mean, we are literally crossing into volume growth already. And Q4 was probably the first quarter, I would say, since Q2 2022 that we were flat in employees working. So things clearly seeming to bottom out. And we see strong momentum in the U.S. and Southern Europe. We also see a stronger or a better, I would say, exit rate in France. It's in line with market data. We just talked about the Netherlands, where we have slightly higher bill rates, and we also have Zorgwerk in growth. And in general, also, if you look at some of the more challenging markets like particularly in Q4, Belgium and Germany, let's say, the blip we saw in comparables in Q4, we now go back to the trend of Q3, so again, improving into Q1. So overall, we see supported revenue trends into Q1. Operator: The following question comes from Simon LeChipre from Jefferies. Simon LeChipre: A follow-up on gross margin. So you are pointing to top line momentum improving into Q1 and particularly in North America, which should help gross margin. But your guidance suggests gross margin being down 90 bps year-on-year in Q1, which is a sequential deterioration. It was minus 40 bps in Q4. So how do you explain this? And my follow-up question is on -- so your 3% EBIT margin floor. I mean do you expect to break it in Q1? And are you confident to maintain this level at least for the full year? Jorge Vazquez: So I mean, we don't -- Simon, we don't necessarily give guidance for a quarter. I think what the tone -- and Sander was quite clear on it, and I'm happy to confirm it from a financial perspective. We've built operational -- I mean, we can talk about adaptability in 2025. I think the year is more important than that, mainly because we've built operational gearing throughout -- let's say, for Randstad. So in terms of looking to 2026, I mean, given the current economic scenarios we see and even a range of them, I'm pretty sure we've built the ability to improve the results and profitability going forward. If I look at the gross margin in particular, I think -- again, I tried to when talking to Andy to try to break out a little bit from the fog and the mist of one quarter and the other. We had incidentals in Q4 and Q1 last year. So that kind of mixes up things a little bit. But what you see into Q1, you see still a perm environment that is more negative than we had expected. You see probably -- but okay, we cannot obviously predict that -- a very subdued FX impact. Remember, Liberation Day and a lot of the swings or the corrections we got in exchange rates happened in Q2 last year. And we see RPO a little bit negative vis-a-vis what had been throughout 2025. And this offset some of the better mix that we have. If anything, it better notch up as we go into 2026 for some of the annualization of our geo clients and specialization mix, as I explained before. Operator: Our next question comes from Konrad Zomer from ABN AMRO - ODDO BHF. Konrad Zomer: On the bill rates in the Netherlands, I understand that some of the bill rates have gone up as much as 15%, mainly due to the pension regulatory changes. What could be the time delay in terms of volumes to come down? Because if temps get more expensive, I can see why employers would be more hesitant to recruit. And also, I think the minus 0.4% in January is certainly good. But what would be the impact specifically from these regulatory changes in the Netherlands? Jorge Vazquez: Yes. So first, Konrad -- I mean, I don't want to go into, let's say, the very, very -- very detailed. But the 15% is -- it's -- I mean, I'm not -- we don't see that, so I'm not -- I think it's way -- just to be absolutely clear for everyone, that's way, way too high. I think there's 2 things happening, just to be absolutely clear. There's a pension scheme, as you very well know, the pension -- the Future Pension Act, and there's the collective labor agreement changes. And these 2 things, we don't expect them to be not even almost half of what you just -- let's say, half of what you just mentioned. And it's too early to tell what the impact will be, if any, on volumes. What I would say is the first impression is -- or the first signs that the uplift you might get from, let's say, the bill rate effect, the wage components, seems to offset some of the pressure we might have on volume. But more about that later. We don't see more than that. And it's the same with any legislation. There's always a big uproar, and in the end, things normalize into the normal level of flexibility in an economy. Operator: We have time for one last question. The question comes from Maarten Verbeek from the IDEA! Maarten Verbeek: In the third quarter, you mentioned that your digital marketplace generated EUR 4 billion in annualized revenue, and exactly the same you mentioned today. So why haven't we seen any progress quarter-on-quarter? And in addition to that, have you set yourself a target for annualized revenue, what you would like to achieve in the fourth quarter of '26? Alexander van't Noordende: Yes, good question. Well, first of all, how we -- so of course, we need to add more countries and more scope to the digital marketplaces to grow. Yes, North America grew from Q3 to Q4. But let's say, in the bigger scheme of things, that's not a massive number, as you can understand. So it's just a matter of technicalities. As I said, in 2026, we will add more markets, somewhere around 5 to 7 markets with the digital marketplace. So we will add more scope, and therefore, we'll grow. I think it's too early to put a number on that because -- I mean, you can imagine that requires work, that requires go-live. So let's not put a number on that just yet. We'll keep you updated throughout the year. Jorge Vazquez: Martin, any follow-up question? Unknown Analyst: No, thank you. That's it. Thank you. Alexander van't Noordende: Okay. With that, thank you all for joining the call. And before we wrap it up, as always, I would like to thank all our Randstad employees and our employees working for their hard work in Q4 and the hard work they're going to do in Q1, of course. And we wrap up the call here. Thank you very much.