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Operator: Good morning. My name is Hillary, and I will be your conference operator today. At this time, I would like to welcome everyone to the Am�rica M�vil Fourth Quarter 2025 Conference Call. [Operator Instructions] Thank you. I will now turn the call over to Ms. Daniela Lecuona, Head of Investor Relations. Please go ahead. Daniela Lecuona: Thank you so much. Good morning, everyone. Thank you for joining us today to discuss our fourth quarter results. We have today on the line Mr. Daniel Hajj, CEO; Mr. Oscar Von Hauske, COO; and Mr. Carlos Garcia Moreno, CFO. Thank you for joining. Daniel Hajj Aboumrad: Thank you, Daniela. Welcome, everybody, to Am�rica M�vil Fourth Quarter 2025 report. Carlos is going to make us a summary of the results. Carlos? Carlos Jose Garcia Moreno Elizondo: Thank you, Daniel. Good morning, everyone. Well, the U.S. government shutdown in effect through the middle of the fourth quarter ended up rising uncertainty about the state of economic activity in the U.S. Not only did it have a direct impact on employment, but on account of the shutdown, several economic indicators generated by government agencies failed to be released at all. On December 10, less than a month after the shutdown ended and with still incomplete economic data, the Fed reduced the policy rate by 25 basis points in the absence of strong inflation pressures and the appearance of a softening economy. The dollar depreciated versus practically all the currencies in our region of operations in the quarter, except for the Brazilian real, the Argentinian peso, but it declined 2.3% versus the Mexican peso, 3.7% versus the Colombian peso and 5.7% versus the Chilean peso, remaining practically flat versus the euro in the quarter. Well, we added 2.5 million wireless subscribers in the quarter, 2.8 million postpaid net gains and 298,000 prepaid losses and ended up December with 331 million wireless subscribers. Our postpaid base was up 8.4% year-on-year. Brazil led the way in terms of postpaid net adds with 644,000 subscribers, followed by Colombia with 276,000, Peru with 148,000 and Mexico with 135,000 postpaid subscribers. Now in the prepaid segment, Mexico contributed 197,000 new subscribers; Argentina, 226,000; and Colombia 224,000, whereas in Brazil and Chile, we had prepaid losses of 381,000 and 315,000 subscribers, respectively. In the fixed line segment, we connected 524,000 broadband accesses, 84,000 in Mexico, 113,000 in Brazil, 57,000 in Argentina and 49,000 in Colombia. PayTV posted a good performance, adding 77,000 units. We disconnected 79,000 voice lines -- land lines. Our access lines exceeded 410 million at the end of December: 331 million were wireless subscribers, 79 million were fixed line RGUs. The growth of our mobile postpaid base and our broadband accesses, which you can see in the chart, our most dynamic business lines have been accelerated over the last quarters with that of postpaid reaching an 8.4% year-on-year increase and broadband access is expanding 5.6%. So these are some of our highest access growth rates in years. Fourth quarter revenue rose 3.4% in Mexican peso terms from a year ago to MXN 245 billion. They were up 6.2% at constant exchange rates with service revenue expanding 5.3%. The difference between the rate of growth in nominal terms versus that at constant exchange rates mainly reflects the 9.6% appreciation relative to the year earlier quarter of the Mexican peso versus the U.S. dollar. The apparent deceleration of service revenue growth, which extends to most revenue categories, stems from the incorporation of our Chilean operation from November 2024. EBITDA was up 4.2% in Mexican peso terms to MXN 95 billion, and it was up 6.9% at constant exchange rates in the year earlier quarter. As was the case over several quarters in 2022, 2024, EBITDA expanded more rapidly than revenue on greater operating leverage. Mobile service revenue growth remained strong at 6.2%, supported by postpaid revenue that was up 7.6%. Prepaid revenue growth maintained the pace in the prior quarter, which was the fastest in at least 5 quarters and with the exceptional developments here in Mexico. As you can see in the next chart, with Mexico accelerating from 2.8% to 3.8% on the back of a strong recovery of private consumption in the country. Fixed line service revenue was up 3.6% year-over-year with fixed broadband revenue increasing 6.4%. The non-Chilean operations were growing faster over the last couple of quarters, which you can see in the dotted green line. Mexico performed well with broadband revenue growth rising from 2% to really 4%. Our operating profit totaled MXN 49 billion. It was up 5.9% in nominal terms and 8.3% at constant exchange rates. While our comprehensive financing costs were roughly half those of the year earlier quarter, this resulted in a net profit of MXN 19 billion in the quarter, which was 4x larger than that of a year before. It was equivalent to MXN 0.32 per share or $0.35 per ADR. Our operating cash flow for the year 2025 came in at MXN 213 billion after deducting from our EBITDA after leases, MXN 16 billion increase in working capital and MXN 82 billion in interest payments and taxes. After CapEx in the amount of MXN 131 billion, we were left with a free cash flow of MXN 82 billion. The latter figure represents a nearly 40% year-on-year increase in our free cash flow. Shareholder distributions reached MXN 45 billion, including MXN 12 billion in share buybacks, even as we reduced our net debt in cash flow terms by MXN 20 billion. At the end of the year, our net debt to EBITDA after leases ratio stood at 1.52x and was on a downward trend. So with this, I will pass the floor back to Daniel Hajj, and we will begin the Q&A session. Thank you. Daniel Hajj Aboumrad: Thank you, Carlos. We can start with the Q&A session. Operator: [Operator Instructions] Your first question comes from Marcelo Santos at JPMorgan. Marcelo Santos: I wanted to inquire about the CapEx outlook for 2026 and coming years. Could you please provide us with an updated view? Daniel Hajj Aboumrad: Marcelo, what we have been doing is that what we think we are not -- still we're not finalizing the CapEx for this year. But our target is to be around 14% to 15% revenues. That is what we have been saying and it's what we're going to do. That's maybe around $6.8 billion to $7 billion. That's what I mean, and that's what we're targeting to do. So we are going to be in those range. We still does not finalize all the countries, but we're looking to have around that number. Marcelo Santos: Okay. As a follow-up, going forward, is it reasonable to assume a similar percentage of revenues for the coming years? I know you have not finalized, but just conceptually, does it make sense? Daniel Hajj Aboumrad: Yes, this is what we think. The next 3 years, let's say, 2, 3 years, yes, we can assume that we can have between 14% to 15%, MXN 7 billion, MXN 6.8 billion, MXN 7.1 billion, depending on spectrum, depending on a lot of things that are coming, but that's more or less what we're thinking. Operator: Your next question comes from Rog�rio Ara�jo. Andre Salles: I have one on, there is a line called pretax nonoperating expenses. It came at MXN 7.9 billion this quarter. This is well above the quarterly average of MXN 700 million in the past couple of years. So could you please remind what anchors exactly in this line? What did impact it this quarter? And also what to expect going forward? Daniel Hajj Aboumrad: In which line you said? Carlos Jose Garcia Moreno Elizondo: In nonoperating expenses... Rogério Araújo: It's within financial results, it's called other pretax nonoperating expenses. Daniel Hajj Aboumrad: The other financial expenses. We don't have it right now, but if you can talk to Daniela, we can give you the detail on what was the difference between the 4.9% to 7.8% this year -- this quarter. Rogério Araújo: Okay. No worries. I will. Can I follow up with another question as there was no answer on this one? Daniel Hajj Aboumrad: Yes, please. Rogério Araújo: Okay. Could you comment on Telefonica's announced sale of its operations in Chile, why Am�rica M�vil and Entel ended up stepping out of the deal and any early expectation of the expected competitive environment in the country with Millicom and French buying these assets? If you could also comment on potential consolidation movements across Latin America as well, if there is anything active, and expectations for consolidation in the near future? Anything you can share would be great. Daniel Hajj Aboumrad: Well, you know that we were going together with Entel to do a bid for Telefonica. We review and we decide not -- in Am�rica M�vil, we decide no go -- finalize and don't go together with Entel. So that's -- I think then I don't know if Entel decides to go alone or not. Then it was one. The other one that I heard that it was interested and then Millicom. Finally, Millicom is the one who win. I think we still have a lot of things to do in our company inside Chile. We are doing okay. We're gaining revenues. We're gaining market share. We are doing all the investments that we need, all the synergies that we need. So we still think that we're going to be a very strong and good competitor in Chile. For us, it doesn't change a lot because we're changing as a competitor landscape, it will be very good to consolidate the market. But at the end of the day, Millicom is a new entrant. So it doesn't change anything having Telefonica and to change to Millicom. Let's see. I hope that in the future, we can consolidate the market in Chile, not only in the wireless, also in the fixed. And let's see, Chile will be important to be consolidated. For us, why we were out, it was going to be a little bit complex because regulation, the split of the company, high leverage of the company, a lot of things that was going to be difficult to decide between ENTEL and us and then the value of Telefonica. So it was not an easy deal, and that's why we decided to quit and to stay where we are. But I think it's that Chile is a difficult market. Of course, it's a difficult market, but we are preparing and we're making all the investments and that we need to do to be competitive there. And as I said, hope that in the future, the market in Chile can consolidate. Operator: Your next question comes from Gustavo Farias from UBS. Gustavo Farias: I'd like to hear some thoughts on capital allocation. So given the strong growth in free cash flow, and we also saw a slowdown in share buybacks lately. So how are you thinking about capital allocation going forward? Daniel Hajj Aboumrad: Well, I think as -- Carlos said 2 things, we do very good growth in the free cash flow. We grow around 40% in the free cash flow. But he also said that we -- the target that we have, and always, we're saying that the target on debt-to-EBITDA will be around 1.3 to 1.5x debt to EBITDA. So we are a little bit above. So well, when you said we are reducing, I don't know if you are saying we are reducing in 2026 or will reduce from 2025. But it's important. We have a target on leverage, and we want to be on our target. So that's one thing. So the excess and the cash flow that we have, we're going to put it on reducing debt. Second, we have some M&A, as we said, we used to have Telefonica in Chile. We are not there, but we still have Desktop in Brazil. And we want to be financially healthy because we are not looking on M&A in other regions or material ones. No, we're not doing and looking on anything on that. But in our region where we operate, I think there's going to be consolidation in the market, and we want to be prepared to consolidate, let's say, small companies or fiber, small fiber companies. So there will be a lot of things. The competitive landscape in Latin America is changing. We're having new competitors. Small ones are getting out. I hope -- new ones coming. So there's going to be a lot of things through the next year or 2 years. And we want to be prepared. We want to be healthy, and we want to be on target, okay? Because as we said, the target is 1.3x to 1.5x. We are a little bit slightly above on that. So what we want is to be on target and use the cash flow for that and also to return for the shareholders and will be on buybacks and dividends. So that's mainly what we are going to do on the free cash flow that we have, nothing else. And as I said, we don't have or we are not looking on going to other countries -- outside of our region to do material things, no, because I read something this morning. So we are not thinking on doing nothing on that, only to be prepared to have opportunities. I think we're going to have some opportunities in the region that we have. That's what we have. So reducing debt and more opportunities. Carlos Jose Garcia Moreno Elizondo: Sorry, just to follow up on what Daniel has said, it's important to note that we, at the end of the quarter, we're still at a little bit marginally higher than the 1.5x net debt-to-EBITDA ratio that we have as our upper limit, even though we paid down debt by MXN 20 billion, okay, a bit more than $1 billion throughout the year. So we did devote some small amount of cash to a reduction of debt to remain within the limits that we have told the market, guided the market for the last 5 years. I mean these are not new limits. Gustavo Farias: Yes. Very clear. Just a quick follow-up, if I may. So considering what you just said and considering that the consolidation in Chile is now out of the table. Is it fair to assume that any, let's say, cash flow that would be directed to M&A in Chile is now redirected towards deleveraging? Daniel Hajj Aboumrad: Towards what? Daniela Lecuona: [indiscernible] Daniel Hajj Aboumrad: Well, as we said -- yes, for -- if we don't have anything else in M&A, of course, we're going to do through leverage. And if we have an opportunity, then we're going to do something there. So that's -- we don't have something. We are looking for a lot of things, small things in Latin America where we are. And if not, then we're going to do leverage and be in the lower range of our target to be prepared for opportunities. That's what we have. Operator: [Operator Instructions] Our next question comes from Cesar Medina at Morgan Stanley. Cesar Medina: How should we think of the impact of FX on your overall results? And I'm asking because the Mexican peso strength is very visible and you're exposed to different currencies and your CapEx and debt also has sort of hard currency exposure. In net, how should we think of the impact on the cash flow? Carlos Jose Garcia Moreno Elizondo: I think, as you say, this is a company that has many operating exchange rates in our revenue. And then we also have very different exchange rates on our debt. So what we were talking about a little while ago in terms of the leverage ratio, that's something that tends to move both because the EBITDA flows move in terms of, say, if you measure them in dollars or pesos, whatever. But also the net debt itself also moves a lot in terms of dollars or peso precisely because we have all of these currencies. So yes, it becomes a bit complex to manage these issues. And that's why we always highlight here in the report how we are doing at constant exchange rates because we need to take out all of the noise that is created by the exchange rates. But yes, I think net-net, I think that we have a clear idea of how we manage the company. I think in terms of financial exposure, we manage our exposure to currencies. So we really have exposure only to 3 currencies for the most part, 3, 4 currencies. And in terms of the operating cash flows, well, that obviously has to do with -- there's nothing we do in that respect. There's nothing that we do in terms of hedging cash flows. That's something that just comes up as cities. And this is why for us, it's always -- going back to what we were saying in the prior question, we need to balance the -- on the one hand, the desire to do distributions, share buybacks and also the need to adjust our leverage ratio by paying down some debt. And again, this is something that we cannot predict exactly from the beginning because it has to do a lot with where the exchange rates are. And you can see them as noise at some point, but also they are a reality. They are there. I mean we are going to be measuring our net debt to EBITDA, which we measure with the rating agencies, that we measure with you every time that we publicly report, well, we need to be consistent with what we are doing. So balancing share buybacks, balancing CapEx, balancing the net leverage that we have. That's... Daniel Hajj Aboumrad: Exactly what Carlos is saying is a balance, a balance between the capital allocation. It will be reducing our leverage, returning to the shareholders via buybacks or dividends and be healthy to be prepared if there's something in our regions that will come as an opportunity. So these 3 things we're going to balance through all this year to be okay. So that's mainly what we're talking on the capital allocation. Operator: Your next question comes from Alejandro Azar from GBM Alejandro Azar Wabi: This is just on the consolidation that we are seeing all over Latin America, Colombia, Chile, Brazil, there's even rumors on fixed players in Mexico being interested in AT&T. So my question is, how do you see the regulatory environment for AMX as it seems that we are moving to a tighter market with 2, 3 players. Do you think we should see in 5 years, 10 years, less regulatory or less asymmetric regulation where AMX currently has one? Daniel Hajj Aboumrad: Well, the only place where we have asymmetric regulation is in Mexico, all the other places, we don't have any, let's say, asymmetric regulation in all the other 20 countries that we operate, we don't have any asymmetric regulation. It's only in Mexico. What -- your question is how I see in 3, 4 years is exactly what we're saying. I see more consolidation in all these markets. And I think it's going to be good for the business to consolidate more or less. I think like not only in mobile, but in fixed, maybe 5 years or 6 years ago, there's a lot of companies putting fiber, giving the in a lot of countries, fiber plus very aggressive promotions. I'm not seeing any more these companies putting fiber. There are still companies that they are doing, more competitors, but no new ones doing that. So they are seeing that the business, it's not as easy as it looks. And so we don't -- we are not seeing new competitors, let's say, in terms of fiber. Then the other ones, maybe they are going to consolidate between them or they are going to consolidate with other ones. So there's going to be a new landscape in Latin America, and I think that's going to be good for us and for all the people who are staying here that's staying in Latin America. In Mexico, what you say rumors about AT&T? Well, they are rumors. The only thing that I can say is that AT&T is a very strong competitor. And if they sell to other ones, there are going to be also strong competitors. So nothing to say. So what we need is to do our job to to have the best 5G network, the best quality, customer care, everything systems, IT, AI and to do everything that we are doing, all the investments that we need to do to compete against or still AT&T here or if they sell to the other one. So we -- that's what -- exactly what I said in Chile. In Chile, we used to have a Telefonica competitor. Today, it's not going to be Telefonica. It's a pity that we cannot consolidate this market because this market will be good to consolidate, but it's going to stay more or less the same with 4 competitors in mobile and the same in fixed. So let's see and see if in the future, we can consolidate that market. So that's what -- yes. Carlos Jose Garcia Moreno Elizondo: Alejandro, as Daniel is saying, I mean, I do believe that you can see that there's very much of a wave of consolidation happening in the world. You look at Europe, there used to be many more players in each one of the countries, there's been a reduction. And this basically has to do with the dynamics of the industry. This industry requires scale to get the returns for the investment. And when you have a very fragmented market, there's no returns and no investment. And typically, players end up probably not in the best of shapes. So I think that this is an issue that is more and more taken into account by regulators and generally governments worldwide. Operator: Your next question comes from Marcelo Santos at JPMorgan. Marcelo Santos: I just wanted to use this opportunity to ask about the Brazilian number portability. You mentioned in your release like that Brazil is seeing sustained customer preference as evidenced by positive number portability trends, which indeed has been very strong and stronger than usual. My question is, is this portability that has been stronger mostly explained by NuCel, which you have the MVNO? Or is it mostly explained by your like Paro operation in Brazil? Just wanted to see what's driving this strong portability, which we also see using the data. Daniel Hajj Aboumrad: I think they are both, okay? There's no doubt that NuCel is helping us in number portability, and we're doing very good with them. But in the other side, we are doing strong, and we have been growing more on revenues than our competitors in Brazil. And I think that's good number portability plus new subscribers, we are doing okay. And the other thing that I'm seeing is that we are getting also very good ARPU subscribers. So we are not only in the prepaid or in the low end, we are getting also good high-end subscribers. So it's been good. That's what I can say. There is no doubt that NuCel is helping us, but it's not only NuCel. There's all the things that we have on the back of that, that is doing -- that we have been doing that. We have been always gaining number portability through the year. And in the fourth quarter, we get a strong because NuCel. So it's been good, and we are a little bit more good, a little bit more better than what we used to be. This is what I can tell you. Alejandro Azar Wabi: So just to clarify, the jump we saw in the fourth quarter, that would be attributed to sales. You were having very good portability across the year. That's Claro, but the change we saw in more recent months, that would be NuCel. Daniel Hajj Aboumrad: Part not all, but part could be -- yes, part could be NuCel, but not all is NuCel. Also it's fourth quarter. Fourth quarter, a lot of people is changing. There's new handsets that people want to change for handsets or they want to do promotions. So there's a lot of things. Operator: Your next question comes from Emilio Fuentes at GBM. Emilio Fuentes De Leon: I'm wondering, given the stellar net adds you have had in broadband in Mexico, the recent quarters, how sustainable do you see this performance going forward, specifically as we reach a higher penetration for this service in the market? Carlos Jose Garcia Moreno Elizondo: Yes. We see a good trend on net adds within the last 4 quarters in fixed broadband in Mexico. We have very good promotions in the market that the customers have received very well. The bundles with streaming increasing the speed. So we see the same trend through the year through this year, right? So we see the bundles are working pretty good with the streaming video platforms and the speeds that we've been delivering to the market are really good. We have 92% of the customers already with fiber. So we believe that we will retain the customers. We believe the trend will be more or less the same. Operator: There are no further questions at this time. I will now turn the call back to Mr. Daniel Hajj for closing remarks. Daniel Hajj Aboumrad: Well, to thank everyone for being in the call. And thank you, Carlos, Daniela, Oscar. Thank you very much. Carlos Jose Garcia Moreno Elizondo: Thank you all. Daniel Hajj Aboumrad: Bye-bye.
Operator: Good morning, ladies and gentlemen, and welcome to the Andrew Peller Limited Q3 Fiscal 2026 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Wednesday, February 11, 2026. I would now like to turn the call over to Mr. Craig Armitage. Please go ahead. Craig Armitage: Thank you, and good morning, everyone, and thanks for joining us. Before we begin, just a quick reminder that during the call, management may make statements containing forward-looking information. This forward-looking information is based on a number of assumptions and is subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from those disclosed or implied. I'd encourage you to refer to the company's Q3 earnings release, the MD&A and other filings for additional information about these assumptions, risks and uncertainties. With that, I'll turn the call over to Paul Dubkowski. Paul? Paul Dubkowski: Thanks, Craig, and good morning, everyone. I'd like to thank everybody for joining us today. I'm pleased to be joined today by Renee Cauchi, our Chief Financial Officer; and Patrick O'Brien, our President and Chief Commercial Officer. As usual, I'll begin with a review of our operational and strategic highlights from the third quarter, and then Renee will walk us through the financial results. To kick off, Q3 was another strong quarter for the company, highlighted by top line growth of 3.3% and continued expansion in our margins and earnings, which are all at or near all-time highs for the company. These results reflect strong execution across all areas of the business and an ongoing focus on our strategic growth areas. From a sales perspective, our results reflect positive trends across multiple trade channels and regions, including a strong quarter in Western Canada and sustained momentum in Ontario as it continued to evolve with retail modernization. Our Western performance has been driven by market share improvements across almost all markets and channels. Our team has successfully navigated the impact of winter events from a few years ago, the introduction of replacement products and the changing market dynamics to deliver a strong quarter and year-to-date thus far. Our strong performance and results reflect our team's agility and strong commercial execution. In the East, we continue to perform well as Ontario retail modernization progresses, showing sustained momentum in the new and evolving channels. This quarter, we had continued strong performance in big box, grocery and the liquor board channel, supported by the depth and breadth of our portfolio. As expected, this was partially offset by some softness in our owned retail stores and wine kit business as consumers adjust to the new distribution landscape. We were also pleased with the performance of our estate properties in Ontario and in BC. While Q3 is not our busiest quarter seasonally, consistent with Q1 and Q2, we saw an increase in traffic, conversion and overall performance at our estates. This reflects continued consumer interest in local destinations and in the world-class experiences offered at our estates. During the quarter, we also delivered strong results in our Wine Club business as we're able to attract new members, improve retention and increase average spend. This is a result of new and innovative club offers and our ability to take advantage of the increased traffic at our estates. In addition, we continue to focus on key growth segments that will support our long-term strategy. This includes the Sparkling and Better for You space, two growth segments within the broader wine category. In Sparkling, we continue to make investments in our operational and brand marketing capabilities with a focus on being a market leader across the consumer sparkling landscape. Our Trius traditional method, Trius Cuve Close, Peller Secco and Peller Radiance 9% are just a few of our current offerings. In this growing space, we are excited to [Audio Gap] for further products and innovation in the year ahead. Better-for-You space also remains a strategic area for our business, one of our fastest-growing brands on a slot, continues to resonate strongly with consumers seeking a high-quality, 0 sugar option across multiple varietals, styles and formats. And this quarter marked one of the most exciting milestones of our innovation road map, the national launch of LayLow. After months of collaboration across the business, we are excited to bring LayLow to market in two styles initially with Pinot Grigio and Rose with more varietals and formats to come. These new products offer full flavor with fewer calories, less alcohol and less sugar. The brand was created both for a new generation and changing consumer who is seeking balance without compromise and it represents exactly the kind of thoughtful consumer-led innovation that defines our strategy. LayLow launched two weeks ago and will be available in all major markets and retailers over the coming months. Today, you can already find it in our wine shops, in the LCBO and rolling out across the West. We are truly excited to bring this innovation to consumers all across Canada. As we look forward, we have more innovation to come this year, including a brand refresh for Peller Estates, which will strengthen one of the most important pillars of our portfolio and support continued consumer engagement. In addition to our top line performance and progress on our strategic initiatives, we reported continued expansion in our margins and earnings, healthy cash flow and reduced leverage. Our quarter and year-to-date results put us on track to deliver a strong fiscal 2026 and ongoing growth in fiscal 2027. With that, I'm going to pass it over to Renee, who will go a little bit deeper on the results. Renee Cauchi: Thanks, Paul, and good morning, everyone. As Paul mentioned, we delivered another solid quarter, highlighted by growth in sales, margins and earnings. Third quarter sales were up 3.3% year-over-year, led by strong performance in Western Canada, driven by the success of our BC replacement program. The growth also reflects the strong Wine Club sales, as Paul outlined earlier. In the East, we continue to perform well overall as the Ontario market continues to evolve and these factors are offsetting some expected softness in our owned retail store network and Wine Club business. On a year-to-date basis, revenue was consistent with prior year. And when we normalize for the onetime impact of the LCBO strike in the second quarter of fiscal '25, revenue growth was between 1.5% and 2%. Our gross margin in the third quarter was $45.5 million or 41.8% as a percentage of revenue, up from 40.2% in the same period last year. And on a year-to-date basis, our margin improved to 43.3% from 40.4%. Margin improvements were driven by the success of our cost savings program, which materially lowered input costs for glass bottles and inbound freight. Margin also improved due to the Ontario Grape Support Program, which was not in effect during the comparable periods in fiscal '25. Selling and admin expenses were $25.8 million for the quarter, up 8% from prior year. This reflects an increase in investments for advertising and promotion, both for innovation and to support expanded distribution in Ontario as the market continues to evolve. EBITDA increased by 6% to $19.7 million in the quarter, up from $18.5 million in the prior year, reflecting our top line growth and improved margins. For the year-to-date period, we delivered EBITDA of $57.1 million, an increase of close to 16%. As Paul mentioned, we continue to reduce debt levels, which has materially driven down interest expense. Q3 interest expense decreased by 26% compared to prior year. Our net debt position was roughly $164 million at the end of the quarter, down from $182 million at fiscal year-end and our debt-to-EBITDA ratio was about 2.3x on a rolling 12-month basis. In terms of other assets, inventory was $156 million at quarter end, a decrease from $170 million at the end of fiscal '25 due to our disciplined approach to inventory management. As expected, inventory was up from our Q2 levels consistent with historical patterns as we close out the harvest season. In short, our strong operating results and balance sheet position us well to execute on our growth plans. Thanks, everyone, and I'll pass it back to Paul for his closing remarks. Paul Dubkowski: Thank you, Renee. Yes, it's definitely been a strong fiscal 2026 for the company. Excited to see the improvement in revenue margins and EBITDA, which as I mentioned before, are at or near all-time highs for the company. And I would like to extend my thanks to all of our Andrew Peller teammates for their tremendous contributions to our joint success. As we finish off the year and turn our attention to fiscal 2027, we do so with confidence and momentum. The market continues to evolve and so do consumer expectations, but our ability to adapt quickly and stay ahead of these shifts remains one of our greatest strengths. We're backed by a strong financial position and energized team, and we're ready to pursue the right opportunities, whether through innovation, strategic investment or acquisition, to accelerate our growth and advance our ambition of becoming the fastest-growing wine company in English Canada, while creating long-term value for our shareholders and all stakeholders. With that, I'll now turn it back to the operator and open the line for any questions. Operator: [Operator Instructions] Your first question comes from Nick Corcoran. Nick Corcoran: You had strong revenue growth in the quarter. Can you maybe talk about how much of that came from potentially new products and gaining market share? Paul Dubkowski: Yes, I can lead off, and then certainly, I can have Patrick jump in and provide any additional color. I mean I think we're really pleased with the over 3% growth in the quarter, as you mentioned. Our revenue is built on kind of our core portfolio performance and the innovation we're bringing to market. It really is a combination of both. We certainly saw strength across our commercial business in the East and the West, both at liquor board, in grocery, in big box. And as we mentioned, we saw some really good momentum at the estates and in our Wine Club business as well. So just good execution by the team, strategic investment in the growth areas and looking to continue that momentum into Q4. I'm not sure, Patrick, if you have any other color? Patrick O'Brien: No. That's good, Paul. Nick Corcoran: And then you mentioned that margins are at or near all-time highs. How do you think about the sustainability of that and being able to maintain the margins where they are now? Paul Dubkowski: Yes. No, definitely. A lot of good work. Really excited about margins being up over -- in the quarter, up over 41%, but on average, trending to over 43% based on the year-to-date and the outlook in Q4. A lot of that margin improvement was built on the hard work around our cost savings program. and being really strategic in terms of our investment and focus on new products we're bringing to market. We will be continually focusing on opportunities to drive margin improvement. And while we've largely delivered on our $25 million cost improvement plan, we have additional initiatives moving forward. So we do expect margins to increase as we head into F '27, but they will be increasing at a slower rate as we've landed the bulk of that program already. Nick Corcoran: Fair. And then there's rumblings in the news that USMCA may not be renewed. How do you think about that as a potential risk for the business? And anything that you've done to mitigate that potential risk? Paul Dubkowski: Yes. So we've been pretty forward thinking on all of this throughout. I would say that a lot of the political noise and tension that's existed, we've navigated with minimal impact to our business. We source products from and components from around the world, and we have the ability to pivot that and be a bit forward thinking and bringing more of that sourcing into Canada. We do not sell a substantial amount of product into the U.S. or internationally. So we're not exposed significantly in that area. So it's been something we've navigated and I don't think we're concerned moving forward at this time, but we'll continue to monitor closely. Nick Corcoran: And then in terms of M&A, how is the pipeline looking? Paul Dubkowski: I mean we've always said that M&A is a meaningful part of our historical growth plan. Pre, kind of 2020, 50% organic, 50% through acquisition. It is part of our strategic plan. We have an active process ongoing, but I'm not going to put time lines on it right now. We really are focused on looking at assets and brands that would be a meaningful acquisition for the company and fit well within our existing portfolio. Nick Corcoran: Fair. And maybe one last question for me. How are you thinking about asset sales going forward? Paul Dubkowski: Yes, it's -- we talked a lot about the value unlock there. Over the 60-plus years of the company's history, we've built up a meaningful and valuable asset base. And what I'd say is we've had meaningful discussions over the last several months on how we unlock that value. And that relates to, obviously, Port Moody, which we've talked about in the past and to our substantial vineyard assets, remains a strategic priority for myself and Renee and for our Board of Directors. And nothing to report at this time, but when we have something meaningful, we'll definitely report publicly. Operator: And your next question comes from [Eric Hugh] from Canaccord Genuity. Unknown Analyst: This is Eric in for Luke Hannan. My first question, maybe just starting off with the Better-for-You and Sparkling new products. You probably have made a bunch of investments. And then I was wondering, could you talk about the timing impact of those R&Ds and then marketing and promotional as they get rolled out throughout the country? Paul Dubkowski: Sure. So I'll talk a bit about the investment, and then I'll pass it to Patrick to talk on the commercial side of it. From an investment standpoint, I would say that the R&D and the development and the planning for those products falls within our normal cycle. We have investment dollars set aside historically every year to invest in growth areas for our business. So that has been phased in a way that it naturally flows within our results that we're reporting. So you shouldn't see any lumpiness from that in any way. And then Patrick, I'll pass it to you to talk about kind of the path forward on some of that innovation. Patrick O'Brien: Yes, awesome. Thanks, Paul. Good morning, everyone. Yes, I'll just add a little bit of color on, I think the part of your question, you referred to around kind of Better for You and our go-forward plan. So again, I think really importantly, we're seeing the Better-for-You Wine segment growing at about 60% versus last year from a category perspective across English Canada. And really, that's doubled in size in 2024. Paul touched on our new innovation LayLow. So again, really substantial bet for the organization. We're currently rolling that out, as Paul touched on, in Ontario, our TWS stores and the LCBO with some of our grocery partners to follow next month. And then across BC and Alberta in the coming months and in the Atlantic region to follow in, in quarter 1. So again, I think a really exciting time for the organization. Again, we see it as an area of the wine category that is certainly growing at double digits. So it's a big focus for us. And as I touched on, as we move forward, we'll be rolling it out across the country. Unknown Analyst: Great. And then my next question is just the overall retail environment in Ontario. Has there been any, I guess, shifts in customer consumption preferences that you have seen or channel shifts, especially going into this quarter, we have been through a [indiscernible] winter storm? So I was wondering, have you seen any changes in consumer behavior? Paul Dubkowski: Patrick, I'll pass that over to you to start. Patrick O'Brien: Yes, perfect. So I guess the domestic wine industry in Canada, it continues to perform strongly, supported by growing consumer affinity for locally produced wines and the momentum behind the Made in Canada movement. With U.S. wines off shelf in some provinces, many consumers are trading into Canadian VQA and other domestic offerings. At the same time, leading global wine regions such as Italy, France, Australia, New Zealand are seeing renewed momentum. As we move forward, we expect Canadian products produce wines to continue building steady momentum into F '27. Paul Dubkowski: And just to jump in on the back end of that. I think the other thing is, as that consumer shifts, whether it's preference or weather-related, seasonality, the advantage we have is that we can meet the consumer wherever they want to shop with our size and scale, whether that's in a restaurant, out in the state, at a grocery store, in the liquor board, whether that's a value product or a super premium product, we can meet the consumer kind of where they're at. So in addition to what Patrick said, that is one of our strategic advantages. Unknown Analyst: Great. Sounds good. And then my final question, this is kind of out of pocket, so I apologize if like you haven't prepared for this, but I was wondering, have you had any expectations for this summer with the World Cup coming into North America? And then I would assume that people will be celebrating quite a lot, just wanted to get your color on that. Paul Dubkowski: Yes. I mean that's a great question, and I can start and then Patrick can layer on. I mean I think we as a region, North America, are incredibly excited about the World Cup. In Canada, we're excited, certainly in the host cities we're excited, and we are looking at meaningful opportunities to be in and around the World Cup with our products. But I think you captured it more broadly. Any events that bring people together to celebrate, to be together, to make memories and moments is an opportunity for us to put our products on the table and to be alongside them. So I think we're going to see momentum broadly economically, and I think we're going to see the impact of that in our industry and with our products as well. So we're excited for it, 100%. Operator: And there are no further questions at this time, I will now turn the call back over to Mr. Paul Dubkowski. Please go ahead. Paul Dubkowski: Great. Thank you. Well, thanks again, everybody, for joining us today. Really looking forward to connecting again when we release our Q4 and full year results in June of this year. Have a great day, everyone. Thank you. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you very much for your participation, and you may now disconnect.
David Thomas: So I'm going to make a start. Good morning, everyone. Thanks for coming along to see us this morning, and welcome to Barratt Redrow's Interim Results Presentation for FY '26. This morning, I'm joined by Mike Roberts, our Chief Operating Officer, who will provide an update on our operational performance; John Messenger, our Investor Relations Director, who will update on our financial performance. And after John, I will then update on the market, current trading, synergies and also set out how well positioned we are for the future. First of all, I would like to take you through some of our key messages. Barratt Redrow's performance over the half was resilient, both operationally and financially. And that is despite what has been a generally subdued market. While the consumer did benefit from 2 interest rate cuts and mortgage availability improved, consumer confidence clearly remained low. Speculation ahead of the November budget caused many to postpone decision-making. But we have maintained our financially robust position and solid balance sheet. Importantly, the successful integration of Redrow is near completion, and our synergy target remains unchanged. And we are now operating from 3 distinct high-quality brands. Building on all of this, our focus centers on business as usual for Barratt Redrow around both optimizing our capital employed and fine-tuning our costs to ensure that we drive operational excellence and efficiencies across the enlarged group. So that we are going to be -- we feel well placed for the full year and well positioned for future growth. If we look in more detail at the operational highlights from the half year, clearly, embedding Redrow into the business was, of course, a highlight. And we have started to see the benefits of this reflected in our performance with good progress on synergies that I'll cover in more detail later. Our land position is strong at 5.6 years, allowing us to be even more selective around land intake. We delivered 7,444 homes, in line with our plans for the year, which was a good achievement given the market environment. I would also like to highlight some of our externally accredited credentials in the period. Our repeated success in the HBF ratings and in the NHBC Pride in the Job awards are testament to the dedication of our teams across the business as well as to the quality of training that we provide and the customer-first culture we maintain across the group. This quality is also reflected in our Trustpilot scores given by our customers, which award all 3 of our brands with the highest rating of excellent. John will cover our financials in more detail, but just to pull out a few highlights. Adjusted PBT before Purchase Price Allocation impacts was lower than last year at GBP 200 million due to higher net interest costs and lower joint venture profits. So return on capital employed, again, pre-PPA adjustments was in line with last year at 9.1%. We were particularly pleased that nearly all of our GBP 100 million target synergies were confirmed at the end of December. And finally, we finished the year with a solid net cash position after organic investment, which supports our growth plans, also our dividend payments of GBP 172 million and the share buyback of GBP 50 million in the half. With that, I will hand over to Mike, who will now go through our operational performance in more detail. Mike Roberts: Thank you, David, and good morning, everyone. I'd like to take a moment just to introduce myself. I've been in the housebuilding industry for 32 years, and I joined Barratt back in 2004. I've worked closely with Steven Boyes as Managing Director of our Northeast division. And in 2017, I was appointed Regional Managing Director for the Northern region. In July last year, I was appointed Chief Operating Officer on Steven's retirement. And today, I'll be taking you through our operational performance for the first half. Starting with the private reservation mix on Slide 7. There are a couple of points to highlight. Firstly, PRS. Given the budget uncertainty, the market became harder in the period and potential discounts increased. But we maintained our discipline and were less active. As a result, PRS reservations were a lower proportion of overall reservation volumes at 4% down from 9% in the equivalent period last year. Secondly, for existing homeowners, we saw a significant increase in the use of Part Exchange at 23% of our private reservations, up from 14% last year. We've introduced our industry-leading Part Exchange skills into the Redrow brand. It offers a stress-free moving option for our customers. And at a time when conveyancing chains were a concern for many potential homebuyers, it has proved a popular incentive. To be clear, it's offered as an alternative and not additional incentive. And it's worth noting that the combination of Part Exchange and second home movers remain fairly consistent year-on-year. Part Exchange has been an integral part of our business for many years and stock levels are carefully managed. At the end of the half, we had just 180 units unsold. Turning to completions on Slide 8. We delivered 7,444 homes, an increase of 4.7% on the aggregated performance last year. Both private and affordable completions were ahead, although this is more about timing. So our guidance for FY '26 is unchanged. Underlying private completions were 1.8% ahead and PRS completions were up over 50% to 423 homes. This increase was largely a function of our order book coming into the year. And as I said earlier, the market has subsequently hardened. Affordable home completions were up 26%, helped by the rebuilding of our order book in the prior year and are now 19.5% of wholly owned completions, which is in line with our expected affordable mix. Joint venture completions were lower than the prior year due to timing, but we are on track to deliver approximately 600 units in the full year. In terms of pricing, the wholly owned average selling price was up 4.9%. More detail is provided in the appendix, but this was driven by a combination of mix, producing a slightly larger average unit size and geographical volume variances given the spread of average selling prices between the regions. There were some notable variations by region with our Central and East regions seeing the strongest average selling price growth. Now turning to sales performance here on Slide 9. The underlying private rate remains solid at 0.55 reservations per week ahead of last year, with customers benefiting from an improvement in mortgage availability and affordability. This good performance came despite the uncertainties which overshadowed much of the period. PRS and other multiunit sales effectively paused in the run-up to the budget. And although we saw a pick up afterwards, this added just 0.02 reservations per week over the period, down on last year. We operated from an average of 405 sales outlets, below last year, but very much in line with our plans. David will cover our view on sales outlet evolution later in the presentation. Turning to the private forward order book. This was 10% lower at the half year stage. This partly reflected a high starting point coming into the year, but also the reduced reservation rate, lower numbers of sales outlets and increased completions in the first half, all of which contributed to the overall lower number. Given the solid start to the calendar year, we are confident that we can deliver full year completions in line with the guidance. I'd like to wrap up with our industry-leading credentials around design, build quality and customer service. It's what underpins our brands and is key to our sales success. We achieved a 5-star rating for customer service in the HBF survey for the 16th consecutive year. And our site managers have secured an industry-leading total of 115 Pride in the Job awards and 45 Seals of Excellence. Reportable items per NHBC inspection have increased slightly following the Redrow acquisition, but with opportunities to share best practice across the divisions, we expect to see this improve. And finally, I'd like to take this opportunity to congratulate Dane Mumford from our East Midlands division, who is runner up in the large builder category at last month's Pride in the Job Supreme Awards, an excellent achievement. On that note, I'll hand over to John for an update on our financial performance. John Messenger: Thanks, Mike, and good morning, everyone. Today, I'll take you through our half year '26 performance, an update on our land bank and also on building safety. Here is an overview of the -- our half year numbers. To be as clear as possible, we have set out here the adjusted pretax profits before PPA adjustments, then the adjusted profit before tax after PPA and finally, the statutory pretax after adjusted items. The first point to note is that both adjusted measures are now stated prior to the impact of imputed interest charges on legacy property provisions. We believe this measure provides you with the best view of the underlying performance of the business, moves us in line with peer reporting and includes the reclassification of GBP 19.6 million of noncash imputed interest in half year '26 and GBP 18.4 million in half year '25, which has been added back in arriving at the reclassified results you see here. We also show the comparables and just to flag the aggregated and reported periods have seen minor restatements for the finalization of the purchase price allocation process, which was completed at the end of last year. I will focus on our performance relative to Barratt and Redrow aggregated for the whole of half year '25. And you will remember, we consolidated Redrow actually from the 22nd of August. So adjusted profit before tax before PPA impacts was down 13.6% in the half year to GBP 200 million, and I'll take you through the key drivers of that in a moment. The good news is that the purchase price allocation impacts largely fall away from next year, which will make all of our lives a lot easier. Slide 13. This slide looks at the margin performance in more detail, and there are several points to highlight. The increase in home completions, coupled with an increase in ASP, generated revenue growth of 10.5% to GBP 2.6 billion. However, the adjusted gross margin was 200 basis points lower at 15%, giving an adjusted profit of GBP 394.8 million. There were 3 drivers behind the margin movement. Firstly, while we benefited from growth in completion volumes, underlying pricing was flat. We then saw 2 headwinds on 2 fronts. Our targeted but increased use of noncash sales incentives, particularly extras and upgrades to convert reservations against the challenging backdrop through 2025 was a negative to gross margin. These incentives added directly to cost of goods sold and had a direct impact on the gross margin. And we also experienced underlying build cost inflation of approximately 1%, including procurement cost synergies. At operating profit through both cost discipline and the benefit of cost synergies, adjusted operating profit before the impact of PPA adjustments was flat at GBP 210.2 million, with the margin down 90 basis points to 8%. I'll cover margin movements in a moment, but just the final parts in the mix here. Adjusted finance charges at GBP 12.4 million compared to finance income last half at GBP 12.2 million. This reflected reduced average cash balances, utilization of our RCF in the period and the imputed interest rate on new land creditors relative to those being settled. And JV income with lower completions in the period has reduced to GBP 2.1 million. As a result, adjusted PBT before PPA impact was GBP 200 million, giving an adjusted earnings per share of 10p. And we have proposed an interim dividend of 5p per share with our 2x dividend cover ratio in place for the full year. In summary, we saw good momentum on home completions and are pleased to see the benefits of Redrow integration coming through. Looking forward, there are clear opportunities to improve our gross margin, which David will cover. Turning now to our land bank on Slide 14. A steadier pace of land acquisition, growth in completions and the reclassification of some Redrow plots into our strategic land bank has seen the duration of our owned and controlled land bank move to 5.6 years in December. Our land bank is in a strong position and very consistent with our plans to optimize our capital employed, as David will set out. A key metric here on the slide, which we are increasingly focused on is the average number of detailed consented plots on each of our sales outlets. This is clearly a function of the size of the outlets and the time frame over which it has been actively selling, but we are looking to ensure our land bank is efficient with sales outlets sized to deliver typically sales over a 3- to 4-year period. And with more than 27,500 strategic land bank plots submitted to local planning authorities across 103 applications, we expect to make further progress on strategic land conversions over the coming years, too. Now looking at our embedded margin in the land bank. Here, you'll see the updated plot distribution of embedded gross margins across our owned land bank plots. There are 3 moving parts to highlight. First, a positive 40 basis point impact, reflecting the plot mix traded out through completions this half at a margin of 14.5% after including the PPA impact. Second, a negative 90 basis point impact from the flow-through of flat pricing, build cost inflation and incremental sales incentives. And thirdly, a 20 basis point improvement from land acquired in the period at a 23% gross margin. As a result, the embedded gross margin ended the half 30 basis points lower at 18.9%. Improving the embedded gross margin is a clear priority. With little movement on pricing, we will do this best by managing cost base inflation, driving development pace and buying land appropriately. To Slide 16. Here, we look at our adjusted operating margin and the bridge. On a pre-PPA basis, including Redrow for the full 26 weeks, this was 8.9% for the combined operations in half year '25, first column shaded here on the left. We saw a benefit of 40 basis points due to the gearing effect of higher volumes. The combination of flat pricing, but underlying build cost inflation of 1% and the targeted use of noncash incentives created a negative inflation impact of 90 basis points. Completed development provisions reflect the local authority delays in adoption of roads and public spaces accounted for a negative 40 basis points. The impact of cost synergies, which I'll set out in a moment, added 90 basis points, and these savings covered off both the underlying inflation in our admin expenses as well as mix and other items. This has resulted in the operating margin before PPA impacts of 8% for the half. And finally, you can see the PPA dropping off to deliver the 7.5% margin on an adjusted basis. Turning to administrative expenses and adjusted items. We reduced our adjusted admin expenses by 5.4% in the half year to GBP 184.8 million when compared to the aggregated business last year at GBP 195.4 million. We also then show the adjusted items here in arriving at our reported admin expenses at GBP 208.7 million. This included adjusted items charges of GBP 23.9 million with GBP 18 million charged on further restructuring and integration and legal costs on legacy property recoveries at GBP 5.8 million. Whilst not shown here, the net impact of adjusted items in the period was GBP 10.5 million, with significant legacy property-related recoveries from third parties of GBP 13.4 million recognized in gross profit. It's positive to see both cash-based adjusted items falling away as well as receipts coming in with respect to building remediation. Here is just a quick bridge in terms of the admin expenses. The movement in admin expenses from the aggregated base of GBP 195.4 million to the GBP 184.8 million is set out on this slide and shaded light green. We saw an increase of GBP 4.3 million related to changes in national insurance contributions and a further GBP 8.1 million from cost base inflation. Cost synergies then delivered a GBP 23.2 million positive impact, which were then coupled with a reduction of GBP 0.2 million in sundry income, which covers JV management fees and ground rents delivered the outturn of GBP 184.8 million. It is positive to see the synergies we identified at acquisition having a meaningful impact on our profit and loss account. Turning to Building Safety, where I'm pleased to report that there is very little to cover. There were no changes required to our provision position and having spent GBP 77.8 million on works across our Building Safety and reinforced concrete frame portfolios in the half and seeing the unwinding of imputed interest of GBP 19.6 million, our total legacy property provisions just sat at just over GBP 1 billion. To cash flow. Slide 20 sets out the cash flow bridge for Barratt Redrow from reported operating profit on the left to the net cash outflow on the right. We have just a couple of cash flow numbers to point out. The biggest driver of cash outflow in the period was the seasonal increase in construction work in progress alongside Part Exchange investment, together equating to just over GBP 313 million. 3/4 of this is construction work in progress, very much following our sales cycle and construction seasonality. Our net investment in land was relatively modest at GBP 68.7 million. And adjusting for the dividend payments of GBP 172 million and GBP 50 million in share buybacks, the net cash outflow was just under GBP 600 million. We would expect an inflow of circa GBP 300 million in the second half and for the year-end cash position to be in line with guidance at between GBP 400 million and GBP 500 million. Fees, we have included on the slide here, a reminder of some of the other relevant guidance points around cash flow. Turning to Slide 21. Here is our usual balance sheet breakout. Liberty really to highlight. Over the 26 weeks, we saw a GBP 21 million net investment in our gross land bank and land creditors reduced by just over GBP 42 million, giving a net land position at GBP 4,358 million, with land creditors funding 15% of our land investment. Land creditors clearly remained below our target range of 20% to 25%, but we are looking to add a larger portion of land purchases on deferred terms to take us towards our target range and also to manage our land bank more efficiently, as I alluded to earlier. The other balance sheet item to mention here, as already discussed by Mike, is our part exchange investment -- sorry, Part Exchange investment, which you can see closed out at GBP 219 million with GBP 74.7 million added in the half year period. Before I wrap up, I thought it would be helpful to remind you of our capital allocation priorities set out here. Our enhanced scale and balance sheet strength clearly put us in a strong financial position. But we are very mindful of the obligations we have, particularly with respect to building safety, how we are managing this appropriately. The Redrow acquisition has multiplied the opportunities we have to drive growth and value from the business. So we will invest in these, but at the same time, we will look to drive efficiencies in the way we manage both our capital employed and our cost base. And finally, we recognize the importance to our shareholders -- our shareholders place on capital returns. We have a clear dividend policy, and this is alongside an active GBP 100 million buyback program with GBP 50 million completed in the first half and a further GBP 50 million underway and set to complete in the second half of the year. So to summarize, our operational performance in the half year has been resilient, and that's despite the macro uncertainties faced. Our balance sheet remains solid, and we are capturing the cost synergies from the Redrow integration with our cost synergies confirmed. Turning to guidance. You will find a detailed slide in the appendices, but I thought it helpful to cover the main points here. As previously set out, we expect full year '26 total completions to be within the range of 17,200 to 17,800 homes. Underlying pricing is expected to be broadly flat, and we expect build cost inflation to be around 2%, including the benefit of procurement synergies. Reflecting the reclassification of imputed interest on the legacy property provisions, we anticipate an adjusted finance charge of approximately GBP 30 million with provision-related adjusted item imputed finance at GBP 32 million for FY '26. And our building safety program remains in line with guidance at approximately GBP 250 million of spend in the year. And we expect to finish the year with between GBP 400 million and GBP 500 million of net cash. Happy to take questions later, but I will now hand back to David. Thank you. David Thomas: Thanks very much, John. I'd like to start this section with an overview of the housing market. So we've talked before about the fundamentals of the market, which underpin our sector, and these continue to be strong. There is a long-standing imbalance between demand and supply. The challenges for our industry are affordability constraints on the demand side and planning constraints on the supply side. Housing and planning reforms are clear priorities for the government, and we welcome the steps that they are taking to improve the planning environment. However, it will take some time for these reforms to feed through at a local level and with many local authorities having elections in May, the planning backdrop in those areas could remain challenging until the second half of the year. Meanwhile, some of the near-term indicators on the demand side are more encouraging. Uncertainty has definitely moderated post budget. Markets are pricing in further interest rate cuts and mortgage availability continues to improve. But consumer confidence remains weak. And despite some slight improvements, affordability remains challenging, particularly for first-time buyers needing to bridge the deposit gap. In this environment, we recognize that self-help measures are very important. As Mike outlined, we continue to develop our Part Exchange offer, particularly for Redrow. And in the half, we also launched our own shared equity offer alongside our popular first-time buyer and key worker schemes. We continue to believe that the key to a sustained recovery in the housing market and volume increases across the sector is government support for prospective homebuyers of the type which has been in place for many decades until 2 years ago. Overall, given the market context, recent trading has been resilient. We have seen encouraging consumer activity since the budget, but consumers are still taking their time. So our net private reservation rate over the 5-week period was down slightly on last year. The FY '26 opening order book and slightly improved affordable housing sector backdrop means that year-to-date completions and forward sales are both ahead of the position last year. But there continues to be a lot of political and economic volatility at the macro level, which is clearly unhelpful for consumer confidence. So given the broader market context, for us to maintain a sharp focus on efficiency and leveraging the benefits of the integration is going to be key for Barratt Redrow. So I'd like to give you an update on our synergy program. If we start with cost synergies, we have confirmed our target of GBP 100 million of annual cost synergies. In FY '25, we delivered GBP 20 million of cost synergies through the P&L, as you can see on the chart. We expect to deliver a further GBP 50 million through the P&L in the current financial year, having already delivered over GBP 30 million in the half year. So we are very definitely on track for that cost synergy delivery. Looking at revenue synergies. Our target is to open 45 incremental sales outlets. To date, we have submitted 31 planning applications, of which 16 have already received approval. We are on track to submit the remaining applications in the second half of the financial year, and we expect the first sites to be ready for sales opening at the start of FY '27. Moving on to outlets. As we've said, the planning reform is positive, but we do have to experience that improvement on the ground. So as we've previously guided, we expect average outlets to be flat in the current year, but we would expect to see a good uptick in FY '27, both through organic growth and with around 15 synergy outlets coming on stream. This should bring average outlets for FY '27 to between 425 and 435. Importantly, given the strength of our land bank, we do not have to make significant future land purchases to drive our outlet opening plan. It is primarily about using the land that we already have. So as you can see, our integration activity is largely complete. Looking forward, our focus is on 2 key areas: optimizing our capital employed and fine-tuning our cost structure. This half, given the strength of our land bank following the combination and our land approvals in FY '24 and FY '25, we have substantially reduced approvals. But alongside some land swaps and land sales, we will continue to make targeted acquisitions, and we anticipate approval of between 10,000 and 12,000 plots in FY '26. Dual and triple branding our sites means we can reach more customers, which should improve our sales volumes and help our asset turn. Turning to costs. Given our scale and reach, we see opportunities to drive efficiencies across our supply chains and to make marginal reductions in our overheads. This discipline is business as usual for us. Pulling this together, we remain very confident that Barratt Redrow is best placed to navigate the market for all points of the cycle. Fundamental to this are our 3 high-quality and differentiated brands, and we have the skills and experience to deploy them effectively. These brands allow us to operate in a variety of locations and local markets with the optimal divisional infrastructure to match. Our customer focus has been established by our numerous third-party credentials over the long term. We are the reliable partner of choice across the private and public sector, allowing us to be flexible and innovative. Our reorganized divisional structure and brand portfolio positions us well for growth over the medium term. And finally, we remain financially strong with a robust balance sheet and a solid net cash position. So to wrap up, we do have 3 high-quality differentiated brands. We have a strong land bank. We have clear visibility over our outlet opening program, and we are a leading platform for growth. Virtually all of the GBP 100 million of synergies are confirmed, and we expect the integration to complete by April this year. Looking forward, our focus will be on continuing to drive our operational efficiency and using the opportunities we have identified to drive growth and value for all of our stakeholders. Thank you. Thank you very much for that. And we're now going to open up for Q&A. John is going to facilitate the Q&A, and he is looking forward to the large number of questions that I know you're going to put his way. John Messenger: If we just -- we'll start in the front row, Chris, and I think you need to pull and press basically. Great. Chris Millington. Christopher Millington: So I just want to ask about the pricing experience so far in calendar year '26 and whether or not you've seen any sort of improvement there, obviously, with incentives. And perhaps you can just put a regional overlay on that. Second one is just around the outlet opening profile. It's a big ramp-up you've got there. Now if I understand what you said correctly, is you're going to be flattish in the second half, but then potentially up at GBP 430 million next year, so roughly about 8% growth. Now if that's linear, it means the opening close is going to have to be 16-ish percent higher. I mean it feels a big number with some of the uncertainties out there, but perhaps you can give me some confidence there. And the final one is just really about the gross margin in the land bank. It looks like you're taking the lower-margin plots at the front end that makes a little bit of sense because of the new land coming in at higher margins. But how long do you think you get to the average land bank margin. Because you're kind of under-indexing what, 400, 500 bps at the moment versus our average. David Thomas: Chris, thanks very much. I mean if I take in terms of pricing and incentives to start with. And then I'll say a few words about outlet opening and then John will follow up in terms of outlet opening. And then John will pick up in terms of gross margin. So I think in terms of pricing and incentives, I mean, the first thing that I would just put in context is that if you went back to August '25, we started to see a lot of news flow about what may or may not be in the budget. And at the beginning of October, we made a very conscious decision that we needed to push harder in terms of incentives, not in terms of gross price, so generally keeping gross price as is, but pushing more in terms of incentives. And I think that's seen a step-up in relation to Part Exchange, a step-up in relation to related incentives. Coming into the new calendar year post the budget, I just think we've seen a higher level of customer interest, and we probably have a bit more confidence in terms of our ability to maybe gear back a little bit on incentives, not in that we're going to move it 1% or something in a short period of time. But there is just more interest out there. And I think all of our divisions feel that, that is a slightly better backdrop with a possible caveat around London, which I would say is pretty much unchanged. And then just before I pass over to John, in terms of the outlet opening program, I think the really key point is that we have the land under control. In terms of our FY '27 position, we're in the high 90s in terms of having a planning position in relation to that. And we would see some uptick in outlets late in this year, which will not impact reservations. And we overall will see quite a substantial uplift in FY '27. But I think the key point is we don't need lots of planning to deliver that. And bear in mind, a big chunk of it is coming from synergy outlets, which are already under our control. John, do you want to... John Messenger: Yes, David had stolen some of my thunder with the synergy points, but there you go. Yes, if you look at where we are broadly at the end of this year to where we'll be at the end of next, a big part of that is effectively 30 synergy outlets in there, which will leave you with a balance of 20 to 25 that need to come through the organic route, Chris. And I guess we are certainly comfortable in terms of that profile coming through. And when we look at the timing of it, there is quite a significant outlet opening program clearly across '27, but there will be certainly a decent boost in the second quarter, which will obviously lead us into the spring selling season for Q3. So part of it is very much kind of profile across the year, but we actually have a pretty useful program planned for the second quarter, which will obviously give us a January start into that new calendar year. The other one was around gross margin. Just to be clear, the embedded gross margin at 18.9% is post PPA. So it's all in. So the Redrow plots are in there, including the PPA component. So we expensed at 14.5%, as you saw in the slides. The embedded is 18.9%. So you've got a kind of 440 basis point differential there. I think when you look at the length of the land bank at 5 years, clearly, the average to get there, we're probably talking about 2.5 to 3 years realistically before you're going to hit that point because obviously, it's partly about the timing of when we purchased and when those new sites that are coming in at a higher gross margin start to really feed through in terms of volumes, not just in reservations, but in the completion mix. So I hope that's helpful. Will Jones at Rothschild Redburn. William Jones: Will Jones at Rothschild & Co Redburn. Maybe just 3, please. Perhaps just touching base on build costs. I think your guidance for the second half implies about 3% perhaps including some synergy benefit as well. So just the moving parts within the latest on build costs. Secondly, perhaps just more of an overview inflection 6 months plus on from the formal integration, just your view of how the Redrow brand and business is performing post acquisition. And then lastly, if we just cover off on building safety. Obviously good to see no movement in the provision, but just your level of confidence as you assess the portfolio and what you may still not know about potentially as we look forward. David Thomas: Yes. Okay. Will, thank you. So Mike will pick up in terms of build costs, and I'll pick up in terms of Redrow and building safety. So I think in terms of Redrow, we said at the time, we are admirers of the Redrow brand. We think it's an absolutely fantastic brand. And getting Redrow really focused on the heritage brand because inevitably to grow the business, Redrow were doing more than just heritage. And we think Redrow really focused on the heritage brand. It's where they want to be and it's where we want them to be, and it is the premium brand in our portfolio. In combining with the business, they have a fantastic land bank. And so I think the opportunity for us to be able to take Barratt through the Redrow sites to work together and maybe Barratt deliver more of the affordable housing, for example, alongside the Barratt housing is a really big opportunity. And then where we have sites where perhaps we were already Barratt and David Wilson, and we might have sold land to a third party, we can bring Redrow on to those sites, and we clearly have a number of those sites. And both in terms of the synergy sites, but I mean, the synergy sites are just the start of the story. I mean, I think all of our land acquisition going forward, where all 3 brands operate in that geography, then we are looking for opportunities for those brands to operate well. So I really feel that in terms of the brand, the consumer proposition and in terms of the build sales teams, it's really done well and really integrated well. So that's all positive. And I know we've touched on the synergies, but I think it's just pleasing to be in a situation that we've effectively banked the GBP 100 million of cost synergies. We're obviously looking for more, but the reality is that our main focus now is on the delivery of those cost synergies and then ensuring that we get the revenue synergies executed, which I think we're well on with. In terms of building safety, John said that we are pleased to really be saying nothing. I think that's a nice position for us to be in. I think it's too bold for anyone to say we're absolutely comfortable with all our provisions and so on. I mean, I think everyone has seen that the evolution of this has been challenging. But we feel that we really have our arms around both building safety in terms of the remediation of buildings and also concrete frame. So both parts of it, I think, are moving well, and we'll just continue to update on a 6 monthly basis. Mike, do you want to pick up build costs? Mike Roberts: Yes. So we've guided inflation at around 2% for the full year. We estimate that, that will be split between labor and materials, 1.5% labor, 0.5% materials. Labor generally, we're seeing 2% to 3% price pressures, really around National Insurance and salary reviews as per would be the norm. What we're not seeing is any inflationary pressure around scarcity of labor or labor availability. So there is no excessive pressure on the inflation for the labor content. The materials, pretty variable. Actually, we've obviously bringing the Redrow business into the Barratt, David Wilson team. We've improved our procurement capabilities. But we've seen bricks and blocks around 3% unengineered timber up at maybe 10%, but lots of materials at flat line or very low digits really. So overall, we're pretty confident that we'll be able to land that at around 2% for the full year. John Messenger: Emily Biddulph, Emily at Barclays. Emily Biddulph: Emily Biddulph from Barclays. I've got 2, please. The first one just on how we should think about the margin bridge, I suppose, for the second half of the year. Conscious you've guided build cost inflation higher, but presumably the way that you account for that, you sort of already reflected that in the first half margin. And then the sort of positive things around the potential for incentives to be a touch lower. Is that sort of the way we should think about it? And then on top of that, can you just remind us the sort of the extent to which you benefit from sort of fixed cost of goods and some leverage over that in the second half of the year and potentially that sort of a little bit of land bank evolution. Can you give us a sense of sort of what the magnitude of that might be? And then secondly, I think David mentioned the sort of evolution of the part exchange offering in Redrow. When we look at that on the balance sheet, is there a number that you sort of -- you're comfortable with it sort of ticking up to be? Or is that the way -- is that what you're sort of trying to tell us that it might actually be a little bit more on the balance sheet towards the end of the year? Or how should we think about it? David Thomas: Emily, thank you very much. I think that first question you sort of asked and answered it at the same time. So you've given John too much of clue. Emily Biddulph: Can you give the whole margin bridge? David Thomas: Yes, yes . Yes. So John will cover the margin bridge. Look in terms of Part Exchange, I mean, I think most of the housebuilders have a Part Exchange offer. It is a fantastic way for us to compete in the marketplace. I mean, bear in mind that the vast majority of customers sell a secondhand home and buy a secondhand home. So where we are able to break into that, we are best to break into it with a part exchange offer. And I think you'll see that part exchange is 2 things for us. One is we have something that we would call movemaker, where we would effectively give a commitment to buy the property, but we would primarily focus on the property being sold before we get to the point of completion on the new build house. And then we would then have a part exchange offer where either that movemaker doesn't work or we agree to take the property from the beginning. The number of properties and the value of properties is not a huge concern to us. I mean the operational and the financial risks are similar. And Mike touched on that. We have about 180 properties that are not reserved, which I think when you look at the size of the group across 30 divisions or 32 divisions is a small number of properties. So the more part exchange we can do in the current market, the better. In terms of Redrow, Redrow did have a movemaker equivalent, and they did have a part exchange offer. But I would say that they were reluctant to use it. And we just see in the market that we need to do more of it. And so the Redrow position in the underlying numbers has grown from what in the FY '25 was around about 2% of their business was using the PX offer to it now being kind of above 10% of their business is using the PX offer. So yes, we're very, very positive about that offer in the market. John Messenger: And then just to pick up on the margin bridge, Emily. So I think there are probably 4 aspects to this to keep in mind in terms of the bridge from last year to this year. First, plot mix-wise, which was mentioned there, if we look at the delta, I guess that implies with 440 basis points from where we reported in the first half to the average in the land bank, that broadly equates to 80 or 90 bps per annum, thinking of that movement. So that's probably, call it, 50 bps in the half year period, if I was looking to try and work a number through there, Emily. Second one is then on build cost inflation. And you're correct in terms of given the accounting approach and margins on site-based approach, a lot of that cost inflation is already built into the margin that we're recognizing. But there clearly, we've got to work hard in the second half to control and limit that impact from build cost inflation. But the positive on the other side of that is clearly from an incentive level where we added circa 1% to our incentives in the first half, that was very much driven by the budget and the need to convert people and to give people a call to action effectively to reserve and move through to completion. Obviously, as we work through the spring and given we've had a pretty encouraging start certainly in the 4 weeks of January post the first week we had, then we'll be working site by site, literally trying to move and make sure that we're optimizing both the balance of volume and value and that around the incentive that's applied. So there will clearly be a push to try and work as we can to get that incentive lower. And then finally, on the volume gearing aspect, when you look at our volumes, we're broadly 40% more volume in the second half than the first. That mathematically obviously will come through in terms of operational gearing, and that should again help on the second half margin. But those are the 4 ingredients in terms of that movement there. Thanks. I think over to the other side, Aynsley and then Clyde. Aynsley Lammin: Aynsley Lammin from Investec. Just 2, please. Just picking up on your comment actually around the sales rates. John, just I think you said the last 4 weeks particularly have been good. Just wondering if you had any more color. Has it been progressively improving. And when -- you've maintained your full year kind of completion guidance, but I think you mentioned that also depends on sales activity. How much risk is there? What do you need to see in the spring selling season to kind of meet that full year completion guidance, I guess? And then second question on the provision, as you say, good to see it kind of stay around the GBP 1 billion level. But could you just remind us how long you expect to work through that and what the kind of annual cash outflow profile looks like during that period? David Thomas: Okay. Aynsley, so I'll just make sort of comment on the sales rate and the sales risk and pick up on the provisions. I'm just going to answer them both. That's it. Yes. Look, in terms of sales rate, I think that we had quite a bit of debate about this, okay. So the reality is we've always said we're not going to split current trading, whether that's positive or negative because it's such a short period. And then we get into saying, well, the first week was this and the third week was that and so on. So we're not going to kind of break with that. But I think what we would say is that our business is positive about what we've seen during the month of January. And December is always a tricky month. But when we come into January, we've just seen good consumer interest, good level of appointments and reasonable levels of reservation. Now bear in mind that we're not comparing really to last year. We're presenting the numbers compared to last year because that's the convention. But we're really talking about what was it like in October compared to what is it like in January, and it is substantially better in January than it was in October. That's the reality, that October, November period. In terms of looking at the risk, I mean, we are sort of really working on the basis that we need to sell at about 0.6, and we feel comfortable in terms of that sale. And we give ranges, you're sort of -- it's a problem if you do and it's a problem if you don't. So I would say that we've got a high level of confidence of hitting the midpoint of the range. And we don't see lots of downside to that and potentially, there's a little bit of upside, but I think we've got to focus on that midpoint of the range. And then -- sorry, provisions. Yes. So the cash run rate on provisions, well, my sense is that there's another 4 years at least in terms of runoff of the provisions. We would expect expenditure will start to accelerate in '27. So there's a huge amount of setup to be done to get the developments through the building safety regulator because all of these developments have to go through the building safety regulator. We see that, that backdrop with the building safety regulator has improved from where it was 12 months ago, there's much more transparency about what is happening, but they have a huge amount to address in terms of the backlog. So getting stuff through the building safety regulator and therefore, substantial expenditure in '27 and '28. But realistically, on a GBP 250 million run rate cash spend this year, I think we're very unlikely to be above that cash spend, and we'll just run it off over the next 3 or 4 years. John Messenger: Clyde. Clyde Lewis: Clyde Lewis at Peel Hunt. Three, if I may as well. Probably following up on Aynsley's question there about sort of recent activity. I mean I'm still a little confused as to where we are because normally, spring is the best selling season for all housebuilders. And obviously, we've had a pretty shocking October, November, December period. So there's a catch-up. And I'm just, again, really trying to get a feel for whether it really does feel better than last spring or spring in '24 or spring in '23 compared to where you would have been in Q4? I understand clearly, it's better than Q4, which it traditionally is. So just pushing a little bit more on that. On land creditors, I suppose, interested to hear how quickly you think you can get into that range of 20% to 25% that you're talking about. And inevitably, there's a trade-off with chasing a higher gross margin on new land sales. So just interested in, I suppose, probing that a little bit more. And the last one was obviously, I can't not ask it, was really the government support. And David, you've mentioned it. Others are increasingly mentioning it in their updates. Do you think the government is starting to move to think about this a little bit more? From what I understand, treasury is the bigger blocker rather than maybe the political side, but I'd be interested on your views there. David Thomas: Yes. Okay. I feel I've sort of had to go at the sales rates and stuff. So I think I'm going to ask maybe Mike to comment on it, looking particularly at where we were October, November compared to where we are now. I think that's really the key thing. But I would say on the sales rates, our forward forecasts are very much thinking, okay, we need to be at this level of 0.6, which we're not far away from. In terms of land creditors, look, I think probably just 2 comments. I mean, one, us increasing the land creditor position is obviously dependent on land intake. And our land intake in the first half is -- our land approvals is obviously very low, the first point. Second point, I think when you look at the next couple of years, it would seem that there is going to be a huge amount of land coming through planning. So John referenced in his presentation that we have more than 100 strategic sites in for planning. So what I would see is that the ability to defer land payments will be greater if there is much more land coming into the marketplace, and we're already focused on the deferral of payments. So I think it's very achievable to get into that higher banding of kind of 20% to 25% in terms of land creditors, but it will depend on land intake. In terms of government support, well, I think really 2 things. I think everyone would agree, I believe that everyone would agree that you have to address the supply side. If you don't address the supply side, then you are just going to create issues by putting in demand side support. So I think that's kind of been well documented. So the government have really got after the supply side. Now I understand it hasn't changed yet. But from what we can see, the supply side changes are far more powerful than the original conservative government, national planning policy framework, et cetera. And therefore, numbers can go much higher. We're back to top down and there's an obligation on the local authorities of some scale. That is not going to improve the position on affordability in the short term. Even if you believe that there'll be a lot more supply in the future, there won't be a lot more supply to change the affordability equation over the next 12, 18 months. So we do think the affordability equation is key if we want higher volume levels. So we are doing the self-help. We've got a shared equity offer. We're doing part exchange. We're providing good incentives to our customers. but government stimulus would be a game changer in terms of the demand side. And the industry, it's not only bad at Redrow, but I think the industry have been kind of uniform in saying that they're quite happy to pay. We launched the scheme with government back in 2012, and we paid for that scheme. So the reality is that we are very happy to pay for the scheme, but we think it would be a game changer, and that would be particularly true in terms of London and the Southeast. John, do you want to -- sorry, Mike, do you want to answer? Mike Roberts: Okay. I feel like I might just be repeating on what David said when he answered the question, but just trying to add a bit more color. We certainly saw after the budget a level of interest and leads and web visits and the like from the market. I guess that's because there was no negative news in the budget around housing. I think that carried on through Christmas, and we have seen an uptick since the October, November performance in the trading since Christmas. I think in the slide, we say that it's very slightly down year-on-year. I think there's a slight anomaly maybe in the first week. But if you look at more recent trading in the last 4 weeks or so, 5 weeks, then that is in line year-on-year and gives us every confidence that we'll hit our full year completions. So really the message is year-on-year, it's the same, and we're confident we'll hit our completions. David Thomas: Allison, I think in the middle there. Allison Sun: Two questions from my side. So one is on following up on the demand stimulus. Because if you said builders are happy to contribute to the scheme, do you think that it will probably increase the chance for the government want to actually launch something given right now, there's a lot of political noise going on right now as well. And the second is on the outlets. If I can follow up a little bit as well because you said for 2027, you're expecting average outlets around 425 to 435, right? So that's probably an incremental of around 20 to 30 year-over-year. But I mean I might remember it completely wrong, but I think previously, you are probably more guiding around 30 incremental outlets opening. So I don't know if there's any color you can give on maybe the planning environment or maybe why it's not hitting the 30 level instead of 20, you said 30. David Thomas: Okay. So John will pick up in terms of the outlets. So yes, I mean, look, I think in terms of government, I mean, I do understand that the government position in terms of funding generally has got challenges. So I think the reality is that the housebuilding industry, I mean, mainly through the HBF, our trade body, have been very clear that if there was a new scheme, then the housebuilders would expect to pay for it. And as I say, we launched the scheme in conjunction with government in 2012, pre-Help to Buy, and we paid for that scheme. So I don't think the idea that the housebuilder is paying for a scheme is unusual. So yes, of course, that will help, but there are clearly other considerations that the government have to take account of. John Messenger: And then on the outlets, your math is correct, Allison. So probably 20 to 30. I think we were more at the 30 end of the scale. I think we still are, but we just have to be pragmatic in terms of -- I think everyone in the room is aware that planning is taking time, and Mike mentioned it earlier to see the actual on-the-ground benefits of that coming through. So we're shooting to deliver 30. But clearly, setting a banded range there of 20 to 30 outlets just looks a prudent position to be holding. But clearly, all of our divisions and all of our teams are working damn hard to try and pull through outlets and get them opened because ultimately, that's going to drive our top line and drive the volume growth as we look forward. Zaim next door, and then I'll come forward to... Zaim Beekawa: The first would just be on the PRS market, the view for the remainder of the year and what's in your expectations. And then secondly, I think you mentioned 31 planning applications submitted and 16 approvals -- 16 received back. Sort of any anecdotes on how easy or quicker has those been since all the government changes would be helpful. David Thomas: Yes, of course. So if I pick up those. So I think in terms of PRS, and again, just in context, that the PRS market was building a lot of momentum pre the budget in 2022. And the reality is that the funding costs for the PRS operators as they did for everyone changed fundamentally. So I think there was less activity in the marketplace, first of all, simply less people looking to buy PRS. I think we're seeing the return of more interest in terms of PRS. We announced in, I think in '21 and it became effective in '22, our cooperation with Lloyds Bank and Lloyds Living. And we have undertaken 3 groups of transactions with Lloyds Living. We've undertaken transactions without other PRS providers as well. So we felt that setting a range of 5% to 10% of our completions being through PRS was the kind of range that we felt comfortable with, which we set out last year. So we are definitely still looking to do PRS, but we're only looking to do it at the right price. It's something that can work very, very well for us in terms of return on capital employed, very well in terms of the efficiency of our build teams, but we've got to make sure that we are pricing it properly. I think in terms of planning in relation to the synergy sites, I don't think there's been any particular issues. I mean, bear in mind that these sites have already got a detailed consent. We would probably have expected to have been able to agree more plot substitutions rather than having to go to a full committee. But I mean that kind of is what it is at a local level. So again, we're very confident we will get the planning and we will get those outlets through as we outlined in FY '27. John Messenger: Alastair down in the front and then back to Rebecca. Alastair Stewart: It's Alastair Stewart from Progressive. Three questions based actually on one slide -- on one chart on Slide 7. In terms of the moving parts in the private reservation buyer type, the biggest change was in part exchange going from 14% to 23%. Obviously, Redrow's greater uptake is a big part of that. But was it all? And within part exchange, do you get a sense of how many people using it in the secondhand going into new? Is it they have to use it because they just get stuck in chains elsewhere. And how much is it a nice to have? Then the next one was first-time buyers going from 31% to 33%. Do you get any sense in there how much is Bank of mom and dad and how much is using your own Part Exchange. And then finally, following on from the previous question, PRS and other going from 9% to 4%. You said you were originally aiming at 5% to 10%. Can you -- is it going to take some time to get to the top of that range? Or are the financial costs for PRS investors just too high at the current moment? David Thomas: Thanks, Alastair. I've never answered 3 questions on 1 slide. I think we're going to have a bit of a joint go at this one. So if I pick up in terms of PRS and first-time buyers and if Mike picks up in terms of the part exchange element of it. So I mean, I think on first-time buyers, look, unquestionably, the bank of family, as [ Ians ] get referred to, is very, very important. Now I can't say this is the percentage because, as you know, we are separate from the independent financial advisers. So we don't really get into the nuts and bolts of that. But I think it's well documented that, that has become more and more important post '22 as interest costs have risen substantially. So it's good to see a little bit of a tick up generally in first-time buyers. But as we touched on in some parts of the country, particularly London and the Southeast, I think first-time buyers are largely priced out of the market, even in some cases with Bank of Family, looking at deposit levels that are well in excess of GBP 100,000 for a lot of purchasers because they don't want to be in there on a 95% loan to value. They want to be in on 85%, et cetera. So that's the first thing. In terms of PRS, we can unquestionably operate in a 5% to 10% range. The deals tend to be quite large. I mean they might not all be delivered in the same year, but I think you would tend to be looking at deals that would be for us historically between 250 and maybe 750 homes. So that might be delivered over 2 financial years, but it can have a significant impact one deal in terms of the percentages. So at the 4% percentage, we're obviously just outside that range. But we are hopeful of closing some PRS deals certainly in calendar '26, which will materially alter those percentages. Mike, do you want to just talk a bit about PX? Mike Roberts: Yes. So we have introduced our PX proposition more heavily into Redrow, and that's seen an increase. So part of that increase is certainly just the extra volume that's coming through Redrow. It's not all of it by any stretch of the imagination. It's a more popular incentive that our customers are utilizing. I think the reason for their utilization is -- I think there's many factors. A lot of it is around just simplicity in that clearly, we sell their houses eventually. So we don't carry PX for the next 12 months that they can't sell. So we can sell their houses, so they could sell their houses. It's just about simplicity. And there's an element of when somebody visits the site and set the heart on a plot, if they're not in a position ready to go, say if the PX, we can take that reservation and reserve the plot that they want. So a lot of it is around consumer choice rather than necessity. Does that answer the question? I think that's helpful. John Messenger: Great. Glynis? Glynis Johnson: John, I'm going to throw some at you actually. So I'm going to -- just a few that hopefully are very short answers. I will reel through them. Given the order book on the affordable, what should we anticipate in terms of the affordable private mix this year and maybe into next year? Second of all, the gross margin on your acquired land, can you confirm what you're actually buying in at? And thirdly, just in terms of the completed development provision, what was it last year? Is it always around that level? If this year was unusual, why? Next, the third-party payments for the build safety provisions. So that's in the gross profit, but you're taking the legal fees for getting them in the adjusted. Is that correct? And then 2 that require perhaps a little bit more color. One, the size of the outlets, is that to do with just the fact you're putting 3 ranges on it? Therefore, it's each size of site is 3 outlets? How should we be expecting that average size of outlets to progress? And then lastly, just in terms of the land approvals, there obviously the guidance has changed quite substantially. Can you give us a bit of color about why that's happened and what that might mean 1, 2 years out? David Thomas: So if we start off, we can't do just one word on each, but we'll try. So order book affordable through the mix. So I think if you look at 10 years for us, you would conclude that somewhere around 20%, 21%, that sort of level is what we would deliver in terms of affordable housing. What we saw last year was really quite an unusually low level of affordable housing, a lot of which was driven from Redrow because Redrow had been very high in the year to June '24. So in terms of the sort of pre-acquisition position, Redrow was very high in that year. So when you look forward, I would think that kind of 20%, 21% is what we should look at. In terms of gross margin on acquired land, we've said that we're acquiring on a gross margin at 23%. We're very comfortable with that in terms of the forward acquisition position. And once all of our cost and procurement synergies are embedded, we should be acquiring on a gross margin at 24%, which is just in line with what we said last year. The CDP, I'm going to pass to John because I'm not sure I understood it, so I'm just going to pass it to John. And then Building Safety, I mean, anything relating to building safety should be in adjusted. So the legal fees in respect of recovery are in adjusted and any recovery of costs would be part of our adjusted provisioning and therefore, is in adjusted. So we're not putting the recovery in gross margin and the costs in adjusted. And everything else is over to you. John Messenger: Right. Yes, yes. So just on that one, gross profit, the ones I quoted here were excluding that GBP 13.4 million gain. So -- and we're obliged to recognize that through income rather than take it as a deduction against our provision as well, just the IFRS rules we operate within. On the completed development accruals of provision, that does tend to move around a little bit. If you look back at the full year, it was a credit. So it helped us at the last full year sort of results. It does kind of ebb and flow depending on sites and the number of outlets coming to kind of closure basically as well, Glynis. So when a site closes out, you obviously then have that period, it's waiting for local authorities to adopt is the big issue there. So it does tend to be down, but it's the incremental, that's the change year-over-year. So you can see that impact there, but happy to talk about afterwards. On the third party -- sorry, I'm just looking at third party for building -- sorry, outlet size, coming on to that one. If you look at the outlet size, we're talking -- if we look at -- we think of developments and then we think of outlets. And clearly, as we look at particularly land deals that involve larger sized developments, that's where the opportunity is for us to bring on 2 or 3 brands to optimize those at that kind of 140, 150 per sales outlet, which then gives you the lifetime of 3 to 4 years. So as we look at land opportunities and how that will be driven by development activity, it's looking at those and thinking, okay, what can we do here that will optimize the brand choices, and that is kind of the differential there. So it's all about trying to optimize the speed at which we're going to be there with the show home with the sales team, building out and completing the sales. On the other one on approvals, really more a function of just the opportunities in the market, but also a deliberate point for ourselves is that, that pipeline that David mentioned on strategic land conversions, we've got a hopper there of about 27,500 plots. Now those have all gone into planning across 103 applications. The time frame over which they may come through on planning is something we want to be prepared for. And therefore, the focus has been on really optimizing the existing land bank because obviously, we were sitting there in excess of 5.5 years when you look back 6 months ago for the last 6 months, it's been about what can we do across the portfolio, either splicing and dicing the current land, but also looking at that strategic and what's going to come through. So this will give us flexibility to infill and to look at the strategic stuff as that comes through and then look at elsewhere in the market. So I think that hopefully covers that one there. And I think that covers a lot. David Thomas: So Glynis, so just on the consented plots number, I mean, you can see that over the last 3 reporting periods, it's recent reporting periods, it's reasonably consistent. But just to illustrate it, when we add in the revenue synergy outlets, what we should do is see an increase in outlets and no increase in plots. And therefore, the revenue synergy outlets will drive that number down. So I do think that when you look at the land bank, that number is very important because I mean that is a kind of measure of the sort of raw efficiency of the land bank, i.e., if you've got one site for 1,000 plots, the answer is 1,000. And if you've got 3 sites on that 1,000 plots, the answer is going to be 330. So I think it's an absolutely key measure in terms of looking at that efficiency ratio. John Messenger: Rebecca, then we'll have a couple more after that, conscious of time. Rebecca Parker: Just a couple from me. The first one, just wondering if you can talk to kind of how that net cash balance moves into the year-end, I think you're sitting about 170 at the half, but expecting 400 to 500, just some of the moving parts there, knowing that there's going to be some more volumes coming through, but then I guess, an increase in WIP as you increase your outlet profile. And then just following on, on the approvals on the land bank question before. So would we expect to see the land bank, I guess, roughly stable here as, I guess, you're doing less approvals, but getting more from your strategic land bank. And then on the outlet opening profile as well, just wondering how many of those 20 to 30, I guess, increase in outlets do you think that you'll be doing dual or triple branded outlets? How many of those outlets? David Thomas: Okay. So if John picks up in terms of the net cash balance and how that will progress towards the year-end. And then I think I'd ask John to pick up on the outlet opening profile. But what I would say in the outlet opening profile is that which I'm sure John will just restate that position, but we are talking average outlets. So therefore, if we were saying our average outlets are going to move from just above 400 to 425 to 435, we've also got to open a lot more outlets during the course of that year. But John can just outline that in terms of figures. I think in terms of the land bank and the approvals, we feel that we have a lot of flexibility. We've set out what I think is quite a strong growth agenda in terms of our outlets profile. So to move from where we are now to a sort of net outlet position of around 500. So broadly, we're moving from 400 to 500 over a period of time. I think with our land bank at 5.6 years and the strategic sites that we have in for planning, we see that we have a lot of flexibility. So we've set a target, which we'll obviously keep under review, but we've set a target of between 10,000 and 12,000 for this year. We'd be happy to be at replacement level. So if in FY '27, we were at replacement level, say. But the reality is we are very happy to shrink the land bank as long as we're delivering the required number of outlets. So I think we see that drive to 500 outlets as being the absolute key thing that we're trying to achieve. John Messenger: And maybe just before going to cash flow, just finishing off on the outlets point, I guess, certainly, when we think about the 30 synergy outlets that are opening, by default, those are generally going -- they're dual because they're an existing site that's adding Redrow to it or Barratt or David Wilson on to a Redrow. I'll get hold of some numbers, so we can always share with them with you, Rebecca. But primarily, it's dualing, but there will -- there are, I think, a handful of triple sites as well. So within that mix of synergy sites, some of them were already David Wilson and Barratt and are having Redrow added to them. So I think there's half a dozen that will be ultimately broadly triple site opportunities once we get through there. But then on cash flow, I guess, 3, I think, big ingredients really in terms of cash flow performance in the second half. First is clearly operating profit in terms of driving the initial -- our profit from operations in the second half should start as a significantly higher number. If we look at our working capital and particularly the construction WIP where we had that GBP 313 million outflow, including Part Ex, broadly 3/4, if not more of that should come back in the second half given the seasonality of our working capital cycle in terms of completions in the second half. The other one in there is then land where we would expect, as David mentioned, we're probably going to actually end up unlocking a bit of value in land in the second half. If you put those together, plus the dividend, obviously, in terms of the interim going out, which is probably GBP 60 million and the buyback of GBP 50 million, those together should get you back to that kind of somewhere between the GBP 400 million and GBP 500 million net cash at the year-end. Conscious, 2 more, Charlie, and then we'll go to the back. And I think that will probably be our time limit. Charlie Campbell: Charlie Campbell at Stifel. Just one really. Just on mortgage availability, not something you've talked about today. There are clearly quite a few changes going on there. So just wondering what the banks are telling you in terms of mortgage availability for calendar '26. Any changes there? And I suppose just to help us think about that a bit more, any changes in the customer mix in January versus, I don't know, say, July for the sake of an argument before people started to worry about property taxes in other direction? David Thomas: Okay, Charlie, if I pick them up. I think the mortgage backdrop is of gradually improving backdrop. I would say from probably 3 particular points. One, from a regulatory point that there has been a free up of the regulatory environment in terms of, as an example, the earnings multiples that is allowed to be lent. So there's no question there's a free up of the regulatory environment, which is a positive, but it's obviously been a relatively slow burn. So that is good. Secondly, I think generally, there are more and more mortgage offers that are at 95%. Now the reality is that, that isn't necessarily fully addressing affordability because the 95% mortgages can be expensive. And therefore, if somebody is comparing that to renting or staying at home, it isn't necessarily giving them what they need. And then I think the third area, which isn't particularly big for us, but it's certainly big in London is that there has obviously been more of a movement to higher loan to values on apartments. And we came from a situation, albeit a long time ago where most banks were lending perhaps 10% different as a maximum LTV. So if they were at 90 in houses, they would be at 80 on apartments. So again, we've seen some freeing up in terms of that environment. I would say overall that there's not any big change in customer mix. I mean we -- to some extent, I know it's both product and customer, but we're giving some indication of customer mix on the slide that we went through in the Q&A. But I think there's 2 customers that can really just sit out the market. So in periods of uncertainty, One is a first-time buyer who I would say generally can sit out. They would normally be living at home or renting and they can sit it out for some period of time. And the other category of customer who can sit it out is the downsizer and the downsizer was a significant part of the Redrow business. So I don't think that those are customers that have gone forever almost by definition, the first-time buyer and the downsizer can come back into the market, but they can certainly sit it out. And Redrow has seen that in terms of maybe where they were on cash sales so circa 40% of their business was cash sales, and they're now around about 30% of the business being cash sales. And that will be primarily first-time buyers sitting out -- sorry, downsizers sitting out. John Messenger: Peter, did you have a question? Peter Ajose-Adeogun: Peter Ajose-Adeogun, Morgan Stanley. It was a similar question really just in terms of the growth going forward, which customer segment do you expect to grow the fastest just because when I look at some of the metrics on first-time buyers, I think 1 in 3 now in terms of purchases in the U.K. will be first-time buyers. There's perhaps a notion that maybe not to disagree with you, but they can't sit it out because maybe they've got family formation or they'll do more to kind of get it done. And so just in terms of where you think the growth will come from if first-time buyers are starting to run too hot in terms of the level of completions they make up in the U.K.? And also maybe if you can give some color on where -- how down it is from the peak for you first-time buyers in your business? David Thomas: Okay. Thanks. I mean, that's quite a big question. So I think if you step back for new build and for Barratt Redrow in particular, I think a really big opportunity for us over the next 3 to 5 years is about the efficiency of our homes and the substantially lower running costs of our homes. And therefore, I think from a Barratt Redrow point of view, I would say that we mainly want to take market share from the secondhand market. So we don't mind if they're first-time buyers, secondtime movers or downsizers, we should be actively seeking share. And we can do that as we talked about through a part exchange offer for existing homeowners, but we can also do that through demonstrating substantially lower running costs. And the running costs are not just about the heating or so on. The running costs are also about you don't have to put in a new bathroom or a new kitchen within the first 2 or 3 years. So in cash terms, there are big, big benefits of newbuild. And so that's the first area that we should look at. And then really in terms of the mix point, I would say that we should expect to see more growth on first-time buyers and more growth on downsizers across the piece. And I do think for downsizers that there is more we could be doing in terms of part exchange offers with downsizers. And that's something that we've been looking at quite actively because we would tend to say that your house can't be worth more than the house you're buying. And therefore, that precludes a lot of downsizers. And I think that's something where we need to challenge ourselves in terms of how attractive we can be to downsizers. But I think you see on downsizers that a lot of what they want is low maintenance, low running costs and not having to think about replacing kitchens and bathrooms and so on. John Messenger: Great. I think consciously, we are 10:00. Any last ones? Otherwise, thank you, everybody. and over to David. David Thomas: Yes. Thank you very much. I appreciate all the questions. Thank you, and we will be back in April with a trading update. Thanks very much.
Operator: Thank you for standing by, and welcome to the Healthcare Services Group, Inc.'s Fourth Quarter 2025 Earnings Conference Call. The matters discussed on today's conference call include forward-looking statements about the business prospects of Healthcare Services Group Inc. For Healthcare Services Group, Inc.'s most recent forward-looking statement notice, please refer to the press release issued this morning, which can be found on our website, www.hcsg.com. Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties and important factors, including those discussed in the risk factors, MD&A and other sections of the annual report on Form 10-K and Healthcare Services Group, Inc.'s other SEC filings and as indicated in our most recent forward-looking statements notice. Additionally, management will be discussing certain non-GAAP financial measures. A reconciliation of these items to U.S. GAAP can be found in this morning's press release. [Operator Instructions] I'd now like to turn the call over to Ted Wahl, President and CEO. You may begin. Theodore Wahl: Good morning, everyone, and welcome to HCSG's Fourth Quarter 2025 Earnings Call. With me today are Matt McKee, our Chief Communications Officer; and Vikas Singh, our Chief Financial Officer. Earlier this morning, we released our fourth quarter results and plan on filing our 10-K by the end of the week. Today, in my opening remarks, I'll discuss our 2025 highlights, share our perspective on the general business environment, discuss our strategic priorities for the year ahead and provide details on our new $75 million share repurchase plan. Matt will then provide a more detailed discussion on our Q4 results, and then Vikas will provide an update on our more recent contract enhancements, liquidity position and capital allocation progression. We will then open up the call for Q&A. So with that overview, I'd like to now discuss our 2025 highlights. I am extremely pleased with our fourth quarter performance, which capped a strong year for Healthcare Services Group. Against the backdrop of solid industry fundamentals, we exceeded our initial 2025 expectations for revenue, earnings and cash flow, driven by disciplined execution of our strategic priorities. Year-over-year revenue was up over 7% with our campus division reaching a significant milestone in its growth journey, achieving over $100 million in revenue. We successfully managed cost of services and SG&A within our targeted ranges, and we generated significant free cash flow. We also returned over $60 million of capital through our share repurchase program and ended the year with a strong balance sheet and ROIC profile, underscoring our focus on value-creating capital deployment. I'd like to now share our perspective on the general business environment. Industry fundamentals continue to gain strength, highlighted by the multi-decade demographic tailwind that is now beginning to work its way into the long-term and post-acute care system. In 2026, the first baby boomers will turn 80 years old. And by the year 2030, all 70 million-plus boomers will be over the age of 65, with the oldest being in their mid-80s, the primary age cohort for long-term and post-acute care utilization. We expect that the demand and opportunities for service providers in this space, especially for those with compelling value propositions, durable business models and market-leading positions to only increase in the months and years ahead. The most recent industry operating trends remain positive as well, highlighted by steady occupancy, increasing workforce availability and a stable reimbursement environment. We remain optimistic that the administration will continue to prioritize the rationalization of regulations and policy to better align with the changing and expanding needs of our nation's most vulnerable and the provider communities we service. Looking ahead to 2026, our top 3 strategic priorities remain: driving growth by developing management candidates, converting sales pipeline opportunities and retaining our existing facility business, managing cost through field-based operational execution and prudent spend management at the enterprise level and optimizing cash flow with increased customer payment frequency, enhanced contract terms and disciplined working capital management. We are optimistic about our trajectory and expect mid-single-digit revenue growth in the year ahead. We remain confident that continuing to execute on our strategic priorities, supported by our robust business fundamentals will enable us to drive growth, while delivering sustainable, profitable results. Finally, in conjunction with our earnings release, we announced the completion of our $50 million 12-month share repurchase plan, 5 months ahead of schedule. We also announced plans to further accelerate the pace of our share buybacks in 2026 and intend to repurchase $75 million of our common stock over the next 12 months. Over the past few years, we have continued to strengthen our balance sheet and expect strong cash flow generation over the next 12 months and beyond. We have demonstrated a prudent and balanced approach to capital allocation, including, first and foremost, investing in our growth initiatives. The current valuation of our shares relative to our long-term growth potential presents a compelling opportunity to return meaningful capital to shareholders through the buyback. So with those introductory comments, I'll turn the call over to Matt. Matthew McKee: Thanks, Ted, and good morning, everyone. Revenue was reported at $466.7 million, a 6.6% increase over the prior year. Segment revenues and margins for Environmental Services were reported at $210.8 million and 12.6%. Segment revenues and margins for Dietary Services were reported at $255.9 million and 7.2%. As far as the cadence of our 2026 growth, while we don't provide full year revenue guidance broken out by quarter, our 2026 growth plans are oriented as follows: Q1 revenue in the $460 million to $465 million range with a step-up in Q2 revenue and then sequential revenue growth in the second half of the year compared to the first half of the year, culminating in mid-single-digit revenue growth for the full year 2026. Cost of services was recorded at $394.6 million or 84.6%. Cost of services benefited from strong service execution, workers' comp and general liability efficiencies and lower bad debt expense. Our 2026 goal is to manage the cost of services in the 86% range. SG&A was reported at $46.2 million, but after adjusting for the $0.4 million increase in deferred compensation, SG&A was $45.8 million or 9.8%. Our 2026 goal is to manage SG&A in the 9.5% to 10.5% range based on investments that we've made and spoken about in previous quarters with the longer-term goal of managing those costs into the 8.5% to 9.5% range. The effective tax rate for the fourth quarter was reported as a 9.4% benefit and the effective tax rate for the year was reported as a 13% expense. The effective tax rates include an $8.3 million or $0.12 per share benefit related to the treatment of certain ERC receipts recognized in the third quarter. The company, in consultation with third-party experts has determined its tax position with respect to these receipts. We expect our 2026 effective tax rate to be approximately 25%. Net income and diluted earnings per share were reported at $31.2 million and $0.44 per share. Net income and diluted earnings per share included an $8.3 million or $0.12 per share benefit related to the tax treatment of certain ERC receipts as previously mentioned. Cash flow from operations was reported at $17.4 million. After adjusting for the $19 million decrease in the payroll accrual, cash flow from operations was $36.4 million. I'd now like to turn the call over to Vikas. Vikas Singh: Thank you, Matt, and good morning, everyone. Before reviewing our liquidity position and capital allocation priorities, I'll first highlight the favorable evolution of our contracts and the resulting impact on the business. Over the past few years, we have deliberately and systematically upgraded our contracts to improve both pricing mechanics and cash flow. These changes were designed to pass through cost increases with greater certainty and speed, increase payment frequency relative to monthly collections and shift from fixed monthly billings to billings based on the number of service days, the last being a particular area of focus over the past 12 months. As a result, we've seen several meaningful benefits, including improved margin visibility and stronger collection trends, which have contributed to lower days sales outstanding. One implication of the move to service day-based billing is that revenue is now more directly influenced by the number of days in a given quarter. While this has been largely beneficial, it has introduced a Q4 to Q1 dynamic that was not as pronounced historically. For example, Q4 2025 had 92 service days, while Q1 2026 has 90 days. Applied to our Q4 2025 revenue base, that difference would equate to more than $10 million. Our Q1 revenue range reflects performance above what the day count dynamic alone would imply. That's fueled by sustained momentum across the business. This outlook extends our pattern of consistent year-over-year quarterly growth and reinforces our conviction in delivering full year growth in the mid-single digits for 2026. The service day impact is not expected to be a factor in the remaining quarters of the year. Given the number of days per quarter are more evenly distributed, they're also balanced by offsetting events. So overall, while the Q4 to Q1 dynamic is a relatively recent result of contract changes that have been a strategic priority for us, we are very pleased with the overall impact these actions have had on the business and believe they position us well with a more durable and sustainable model going forward. Our primary sources of liquidity are cash flow from operating activities, cash and cash equivalents and our revolving credit facility. We wrapped up 2025 with cash and marketable securities of $203.9 million, and our credit facility of $300 million was undrawn with utilization limited to LCs only. This strong position was driven by top line growth combined with robust collections throughout the year that enabled us to reduce our receivable balance and bring down our DSOs. The increase in our cash position also reflects ERC receipts received during the year. However, we did not receive or recognize any ERC proceeds in the fourth quarter. Moreover, there can be no certainty regarding future receipts. On the capital allocation front, our 2026 priorities remain unchanged. We will continue to prioritize direct investments towards organic growth, strategic acquisitions and opportunistic share repurchases. As Ted referenced earlier, we completed our $50 million share repurchase program in January 2026, well ahead of the original 12-month time line. Those share repurchases included $19.6 million of buybacks during the fourth quarter, which contributed to our $61.6 million of share repurchases in 2025. Additionally, in February 2026, our Board of Directors authorized the repurchase of up to 10 million outstanding shares of common stock. Alongside that authorization, we announced plans to accelerate our share repurchase activity and expect to repurchase $75 million of our common stock over the next 12 months. With that, we will conclude our opening remarks and open up the call for Q&A. Operator: [Operator Instructions] Your first question today comes from the line of A.J. Rice from UBS. Unknown Analyst: This is James on for A.J. Maybe if I could just start with how you guys are potentially thinking about the revenue upside opportunity. I know mid-single digits you've been talking about for a while for this year. But just given the strong underlying fundamentals of the nursing home sector plus the cross-sell opportunities and also the growth opportunity in campus, just wanted to get your thoughts there. Theodore Wahl: Sure, James. Overall, we continued to successfully execute on our organic growth strategy, largely by developing management candidates, converting sales pipeline opportunities and retaining our existing facility business. That's really our growth algorithm. Since we operate in a largely untapped market, where the demand for the services is greater than what we're capable of managing, our growth out is largely execution based. So we do, in many respects, retain control of that growth. Our pipeline is robust and growing. We have a highly structured sales process from prospecting all the way through closing and the demand for the services is as strong as ever. So for us, as we look out over the next 12 to 18 months, James, the growth rate limiting factor is really our ability to successfully hire, develop and retain the next generation of management candidates. More than any other factor, that's going to be the catalyst for us in sustaining the new business momentum we've seen over the past year or 2 as well as related to any potential upside opportunity. Unknown Analyst: Got it. That's helpful. Maybe just one more, if I could. It looked like margins in both segments had some nice expansion. Maybe just what are your thoughts on where those could end up in 2026? Matthew McKee: Yes. James, you're right. Certainly, we saw a nice output in margins, and obviously, that was reflected in cost of services as well. And really, that comes down to what we've talked about consistently and previously, which is the primary driver being overall service execution and the recent positive service execution trends in customer experience, systems adherence, regulatory compliance, budget discipline, all of those are near-term margin drivers, and they carried into Q4, and the expectation is that they'll carry forward into 2026 as well. So that's why we're confident in our ability to continue managing cost of services in that 86% range. That said, there's always going to be month-to-month and quarter-to-quarter movement and the timing of certain items certainly had a positive impact on Q4 results in cost of services. And of course, that feeds through into the segment margins as well. You think about workers' comp and general liability efficiencies that continue to be driven by our focus and commitment to training and safety protocol that have been implemented out in the facilities, lower bad debt expense, which we've noted will likely be a bit inconsistent in the near term, but is favorably impacted by the strong cash collection efforts and the scarcity of customer bankruptcies and reorgs during the quarter. But ultimately, you bring it back and it's ultimately far outweighed by that operational execution and some of those other factors. So we've got a firm commitment to 86% as the right cost of service target. And as we mentioned, that will ultimately feed into the segment margins as well. Operator: Your next question comes from the line of Sean Dodge from BMO Capital Markets. Sean Dodge: Congratulations on the quarter and on the year. Ted, you mentioned campus Services reaching $100 million of revenue. How is that split between Environmental Services and the Meriwether Godsey side? And just how should we be thinking about -- you've been incubating this, you've gotten comfortable with it. Is there anything left to do there before you can really begin to accelerate and scale it? And I guess what's the time line around when we start to see campus services really become kind of a more meaningful factor in your growth? Theodore Wahl: It's split pretty evenly, Sean, between our CSG brand and the Meriwether Godsey brand you referenced. So we're pleased with that. It provides a strong platform for future growth. And the organic growth element is going to be critical for us. We continue to see accelerated organic growth in both of those brands. And with the concentration primarily in the Northeast, Southeast through the Mid-Atlantic and the beginning stages of a Midwest expansion, that will be, we anticipate, fueled over the next 12 to 18 months by very strategic, very intentional M&A to be able to land and expand. So to find those brands that we've talked about before that meet our criteria in a specific market, complement the growth strategy that we've laid out and then organically grow those brands with the support and the supplementation from the home office here. So we're very well positioned. That milestone is a critical milestone as we think about it, reinforces our conviction in the model and the niche we've carved out. So we're expecting continued accelerated growth in the year ahead. And then beyond, really the possibilities are very compelling and powerful. Sean Dodge: Okay. And then on cash from operations, you had a great performance in 2025, even after you strip out the ERC payments. How should we be thinking about cash from ops trajectory for 2026? You said mid-single revenue growth, you gave some margin targets. You've talked before about cash from ops approximating net income. Is that still kind of the message, the expectation for 2026? Vikas Singh: Yes, Sean, that's spot on. I think our expectation continues to be that net income is the best proxy for cash flow from operations, excluding the change in payroll accrual. And again, I think it goes back to the indication we are suggesting for the year to follow, which is mid-single-digit revenue growth, margins consistent with what we've said in the past, which is 86% cost of sales. 10% SG&A at the midpoint of our short-term target range and an effective tax rate of, give or take, 25%, which is what we've done historically and overall collections matching revenue. And that leads to an outcome, where net income will be the best proxy for what our cash flows will be going forward. Sean Dodge: Okay. And then just last on the buyback, the plan to purchase or repurchase $75 million of stock over the next 12 months. Maybe just balancing that against the M&A opportunity, buying back that amount of stock, how much does that or how much room does that give you to still do M&A? Vikas Singh: Yes. So Sean, what we've done over the last few quarters is prime our balance sheet for all our capital allocation priorities. So you would see in 2025, we've gone through the year without drawing on our line of credit. We've built up our cash balance, and now we are sitting at a balance of $200 million plus in terms of securities and cash, which is substantial. We have an undrawn line of credit. And as we think about all the priorities, focusing on organic growth, M&A, share buyback, we feel very comfortable with our liquidity position and feel confident and comfortable that we can go after all the 3 priorities without having to worry about liquidity. I think we've put our balance sheet in a spot where all those priorities can be moved forward without one compromising the other. Now that said, if we ever find ourselves in the happy spot of finding a substantial M&A, the line of credit gives us a lot of cushion. So long way of saying that we don't really see a conflict between the priorities and our liquidity. Operator: Your next question comes from the line of Ryan Daniels from William Blair. Matthew Mardula: This is Matthew Mardula on for Ryan Daniels. And I know new business adds were a large part of the growth in 2025. But when thinking about the setup for this year, do you believe or maybe even anticipate an even larger amount of new businesses added throughout the year? And I know the timing of new businesses can vary between even months or quarters. But given the improvement in the industry and the potential of continuing, any color into how you are thinking about new business adds and the drivers of that throughout this year? Theodore Wahl: Sure, Matthew. We highlighted that in 2026, we're expecting mid-single-digit revenue growth along the lines of the cadence that Matt described in his opening remarks, and you referenced timing, but as always is the case, the timing of new business adds is a factor, and that can be fluid quarter-to-quarter, knowing there's always a subset of opportunities intra-quarter that could be pushed out or pulled forward. You think about the difference between starting a new opportunity on March 1 as opposed to April 1, maybe insignificant on a year-over-year basis, but that could be meaningful to a given quarter. Again, that's why our mid-single-digit guidance is really based off annual growth expectations, whereas our quarter-to-quarter estimates are ranges that are intended to provide that additional near-term visibility. So again, in terms of driving that organic growth, I referenced it earlier, but our growth algorithm is very straightforward. It's execution-based. And with the pipeline that we've built, which is robust and the retention trends that we're seeing in that 90% plus range, the key for us in driving organic growth is going to be executing on that management development strategy, hiring, developing, retaining and then making sure that there's balance throughout the organization. Each of those components I referenced is supported by best-in-class leadership, systems, procedures in each of the divisions as well as the service center providing administrative support here, but the execution is region by region, area by area. And we're more convinced than ever that the decentralized approach puts us in the best position to -- in a very bottoms-up type of way, deliver on that mid-single-digit growth expectation certainly over the next 12 months, but perhaps most importantly, over the next 3 to 5 years as we think about the longer-term outlook. Matthew Mardula: Got it. And then how have the services you have performed in the skilled nursing facilities compared to the other facilities you have performed at this year? Were just all types of facilities performing better than expectations? Or are there any certain ones performing better than others that need to call out from last year? And then also just kind of looking ahead to 2026, do you expect similar trends to persist or any changes in growth regarding facility types, especially with any color with the skilled nursing facilities? Matthew McKee: Yes. I would say, Matthew, from the previous comments that I made with respect to the strong performance in cost of services and the impact that, that's had on gross margin, our service execution across really all service segments and customer types, inclusive of facility types remained remarkably consistent throughout the course of 2025. That's absolutely our expectation going forward in 2026 as well. We certainly don't take that for granted. There's a heck of a lot of effort that goes into implementing our systems and most importantly, adhering to our systems at the facility level to not only deliver relative to budget and to deliver the margin and cost of services that we're anticipating. But more importantly, to do so within a framework that allows for a high degree of operational execution, client satisfaction and all of those other really important elements that are critical to our success at the facility level. So really strong performance across all verticals and segments, and the expectation is absolutely that, that continues throughout the course of 2026 and beyond as well. Operator: And we have reached the end of our question-and-answer session. I will now turn the call back over to Ted Wahl for closing remarks. Theodore Wahl: Okay. Great. Thank you, Rob. As we enter 2026, our 50th anniversary, the company's underlying fundamentals are more robust than ever. Our leadership and management team, our enhanced value proposition, our business model and the visibility we have into that model, our training and learning platforms, our KPIs and key business trends and our strong balance sheet. And with the industry at the beginning of a multi-decade demographic tailwind, we are incredibly well positioned to capitalize on the abundance of opportunities that lie ahead and deliver meaningful long-term shareholder value. So on behalf of Matt, Vikas and all of us at Healthcare Services Group, Rob, thank you for hosting the call today, and thank you again, everyone, for participating. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Nadia: Good morning. My name is Nadia, and I will be your conference operator today. At this time, I would like to welcome everyone to Vertiv Holdings Co's Fourth Quarter and Full Year 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Please note that this call is being recorded. I would now like to turn the program over to your host for today's call, Lynne M. Maxeiner, Vice President of Investor Relations. Lynne M. Maxeiner: Great. Thank you, Nadia. Good morning, and welcome to Vertiv Holdings Co's Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me today are Vertiv's Executive Chairman, David M. Cote, Chief Executive Officer, Giordano Albertazzi, and Chief Financial Officer, Craig Chamberlain. We have one hour for the call today. During the Q&A portion of the call, please be mindful of others in the queue and limit yourself to one question. If you have a follow-up question, please rejoin the queue. Before we begin, I would like to point out that during the course of this call, we will make forward-looking statements regarding future events, including the future financial and operating performance of Vertiv Holdings Co. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. I refer you to the cautionary language included in today's earnings release, and you can learn more about these risks in our annual and quarterly reports and other filings made with the SEC. Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events. During this call, we will also present both GAAP and non-GAAP financial measures. Our GAAP results and GAAP to non-GAAP reconciliations can be found in our earnings press release and in the investor slide deck found on our website at investors.vertiv.com. With that, I will turn the call over to Executive Chairman, David M. Cote. David M. Cote: Well, I am extremely pleased with how we executed in the fourth quarter and for the full year of 2025. We delivered strong results across key metrics, and we have tremendous momentum heading into 2026 and beyond. What you are seeing is the payoff from years of strategic investments and disciplined execution. Our focus on engineering innovation, capacity expansion, and deep customer partnerships is translating directly into results. Giordano and his team are doing an outstanding job executing our strategy, and I am impressed with how they are navigating both opportunities and challenges. AI-driven infrastructure build-out is accelerating, and data centers are at the center of it all. We are still in the early innings of this secular growth trend. Vertiv Holdings Co's position in this market keeps getting stronger. Our technology leadership and global scale, along with our service and operational capabilities, are not easily replicated. And we keep widening that gap. We have established a strong record. We commit to ambitious goals, and we deliver. Now, here is what excites me the most. Vertiv Holdings Co is not choosing between today and tomorrow. We are winning now and winning later, positioning us to create value both now and well into the future. Said more simply, we are not done yet. With that, I will turn it over to Giordano Albertazzi, our leader and architect of this most excellent day. Giordano Albertazzi: Well, thank you. Thank you very much, David. And welcome, everyone. We go to slide three. And certainly quite pleased with how we closed 2025. Another very strong quarter and a very strong year. Organically, fourth quarter orders were up 152% year over year and up 117% sequentially. Very strong, all regions, all markets. Trailing twelve-month organic orders growth was 81% and would be even higher if we included our recent acquisitions. Our book-to-bill ratio was 2.9 times. Our backlog stands at $15 billion, more than double last year's. Q4 organic net sales were up 19%, primarily driven by remarkable strength in The Americas, which grew 46% organically. APAC was down 9% and EMEA down 14%. Q4 adjusted operating margin was 23.2%, up 170 basis points from Q4 2024. Adjusted operating profit was $668 million and was up 33% from the prior year. Our fourth quarter adjusted diluted EPS was $1.36, up 37% from Q4 2024. Adjusted free cash flow for the full year was circa $1.9 billion, with an adjusted free cash flow conversion of 115%. For 2026, we are projecting adjusted diluted EPS of $6.02 on organic sales growth of 28% with an adjusted operating margin of 22.5%. But let me give you some color on what we see regionally, and for that, we go to slide four. Let's start with The Americas. The Americas continues to be the primary engine of our growth. Sales in 2025 were strong and broad-based, across products and customer segments. The market is accelerating. Even after the large Q4 order intake, our pipeline continues to grow. Our guidance assumes a sales growth in the high thirties. The Americas led acceleration, and that momentum continues. If we go to EMEA, well, we can say that the coiled spring is uncoiling. The market sentiment has significantly improved. Pipeline growth has accelerated. We saw strong orders in Q4, and we expect that to continue in 2026. We expect to return to sales growth in the second half of the year. When it comes to APAC, well, that is accelerating. Despite China remaining muted, we saw strong Q4 order growth, and we expect China's soft growth rate to persist in 2026, but India and the rest of Asia are robustly accelerating. And we are well-positioned to capture that growth. Now let's go to slide five. Where I want to start with customer demand on the left of the slide and just say, Vertiv Holdings Co's momentum is quite remarkable. Trailing twelve-month organic orders grew 81%, fourth quarter orders were up more than 250%. Book-to-bill almost three times a strong performance, and we did see some large orders coming in during the quarter. These large orders reflect our customers' increasing trust in Vertiv Holdings Co's ability to deliver at scale and their confidence in their market. Our $15 billion backlog is more than double last year's and up 57% sequentially. Strong. Worth noting, the shape of our backlog is not very different from what we saw a year ago, yet it is more elongated into the twelve to eighteen-month window. This is very consistent with a very strong Q4 order intake. We are seeing robust pipeline growth across all regions and all product technologies. This is a testament to the health of demand and of our visibility of the market. We have confidence in capturing a significant portion of this pipeline. Orders are getting bigger. Over time, we have been vocal about the lumpy nature of orders. This lumpiness can generate unnecessary volatility. The dynamics of the market also make orders very difficult to predict. Consistent with what we said during 2025, we have been reflecting on our orders of disclosure. We believe that currently, the best approach is to no longer report actual orders, orders forecast, or backlog with quarterly earnings. It just seems to lead to excessive volatility that is not representative of the sustained performance of the company and is not beneficial to our investors. We will continue to provide our full-year historical disclosure regarding sales and backlog in our form 10-K. We will provide a view of the market in our quarterly earnings call. We feel very good about the strength of our pipelines, our ability to win, and our prospects for growth and to lead the industry. We had an extremely strong year in orders, and we do believe we will grow further in 2026. Pricing continues to be favorable. 2025 pricing exceeded inflation, and we expect the same in 2026. The right side of the slide now to talk about how we are managing the current environment and positioning for growth. We are mitigating material inflation pressure through our pricing mechanism and focus cooperation with our suppliers. On capital, we are stepping up to 3-4% of sales in 2026, from our historical 2-3%. We continue to adopt a very disciplined and forward-looking approach enabling our growth trajectory. Our suppliers are extensions of our operations, and we are working hand in hand to ensure they are scaling with us. This combination positions us very well to capture the growth ahead. While protecting our margins, which you see embedded in our guidance. And let's now go to slide six. You know how passionate we are about driving rapid evolution. This is where Vertiv Holdings Co's strengths really come into play. Our traditional expertise in gray space is seamlessly being augmented by and interwoven with white space infrastructure expertise. With hundreds of kilowatts per rack, mechanical, the electrical infrastructure, and the IT stack are so intimately connected that they need to be thought of as one system. Here are two of our converged prefabricated solutions that perfectly align to this vision. Let's start with OneCore, an end-to-end full data center solution that dramatically simplifies and accelerates the customer journey, significantly reducing time to token. Vertiv OneCore can scale to gigawatts in 12.5 megawatts building blocks. OneCore is a complete converged entire data center infrastructure. It's engineered and scaled to deliver for the industry with speed, simplicity, and repeatability. It's engineered and scaled by an industry leader with a complete portfolio. Our collaboration with Hut 8 demonstrates this path. Let's now continue with the Vertiv SmartRun. A converged and prefabricated white space infrastructure solution that massively accelerates data whole fit out and readiness. Also here, it delivers simplicity and time to token for our customers. SmartRun is flexible and scalable across multiple generations of silicon. It is being deployed across several large customers at scale, and now work with Compass data centers perfectly shows those capabilities. Vertiv SmartRun can be standalone or part of OneCore. We continue to actively define the market with solutions like OneCore and SmartRun. Let's go now to slide seven. Our service portfolio is a critical competitive advantage and a robust source of recurring revenue. Our life cycle services orders growth was north of 25% year on year. I am very pleased to see that. I am not satisfied as you may imagine. The increasing complexity and technical challenges that characterize the market are an opportunity to demonstrate our unique service capabilities and to deepen our customer relationships. Our service business is designed to deliver customer value across every phase of the infrastructure journey. The PerchRight acquisition fits exactly within Vertiv Holdings Co's service paradigm. It significantly strengthens our fluid management capabilities end to end both the primary and the secondary fluid networks. These are very critical systems in chilled water and liquid-cooled AI data centers. Fluid management is one of the most technically demanding and financially consequential aspects of running a modern data center and AI factory. With PerchRight, Vertiv Holdings Co now offers one of the most comprehensive fluid management capabilities in the industry. From initial design to commissioning and then throughout decades of operational life. Of the data center. We optimize flow at stop top and maintain balance, ultra cleanliness, fluid performance, across the life cycle of the site. Every rack gets exactly the cooling it needs, with the highest levels of reliability and resilience as the environment evolves. For customers, this means fewer thermal throttles, higher compute throughput, efficiency improvement, and a dramatically reduced downtime risk on hardware worth millions of dollars per rack. We expect PerchRight's specialized expertise to scale globally through our existing services network. Creating the differentiated capability that addresses a growing critical customer need. With that, over to you, Craig. But first, I am very glad to introduce our new CFO, Craig Chamberlain, to the earnings audience. Craig, calling you new sounds quite strange, actually. And I am extremely pleased with the speed at which you are getting a strong handle on the business. We work really well together. And it feels like we have been working together way more than hardly three months or so. I am very thrilled. So now truly over to you. Craig Chamberlain: Thanks, Giordano. And just to start, I would like to say I am very excited to be here as Vertiv Holdings Co's new CFO. In my two-plus decades in the industrial industry, I worked with many great companies. However, what is happening here at Vertiv Holdings Co really stands out to me. The strength of our market position, the quality of our technology, and the caliber of this team makes me very excited about where we are headed. What Vertiv Holdings Co has built, the competitive advantage, customer relationships, and operational capabilities is a result of disciplined execution and strategic vision. I am honored to join at this inflection point. And I look forward to working with all of you as we continue to drive shareholder value. Now let's walk through our financial results. Turning to slide eight. We can walk through our strong first-quarter performance. Starting with adjusted diluted EPS of $1.36, up 37% year over year, $0.10 above our prior guidance. The primary driver is strong operational performance, particularly in The Americas where we saw exceptional volume growth. Organic net sales were up 19% with strong momentum continuing in The Americas, up 46%, offset by APAC down 9% and EMEA down 14%. Our adjusted operating profit of $668 million was up 33% versus the prior quarter and $29 million higher than prior guidance. Adjusted operating margin of 23.2% grew by 170 basis points versus last year. This margin expansion was driven by strong operational leverage on higher volumes, productivity gains, and favorable price-cost execution. As well, we saw our incremental margins year over year continue on a positive trend, as they came in at 31% for the quarter. To wrap up the fourth quarter discussion, let's hit on cash. We delivered $910 million of adjusted free cash flow, up 151% from the prior year fourth quarter driven by higher operating profit and working capital efficiency. Which was partially offset by an increase in higher cash tax. The larger orders in the quarter came with corresponding larger advance payments which benefited our Q4 cash flow. We exited the quarter with net leverage of 0.5 times, giving us significant strategic flexibility. Moving on to slide nine. Let's take a look at segment performance, which further highlights some of the dynamics Giordano mentioned earlier in the pitch. In The Americas, the team delivered another strong performance. Sales were up 50% with 46% organic growth. This growth was driven by broad-based strength across products and customer segments, strong end-market demand combined with our ability to deliver. Adjusted operating profit was $568 million, up 77%, and margin rate expanded by 450 basis points. The results were the outcome of strong operational leverage, positive price-cost, and continued productivity. Moving to the right, APAC sales were down 10%, 9% organically, primarily due to macroeconomic conditions in China. However, the rest of Asia remains strong. Adjusted operating profit of $49 million resulted in an adjusted operating margin of 9.9%. Which was down 270 basis points versus the prior year. Pressured primarily by volume deleverage. In EMEA, sales were down 8%, 14% organically due to continued softness in the market. However, as Giordano highlighted, we are seeing signs of recovery from strong fourth-quarter orders performance. We continue to expect EMEA to return to sales growth in 2026. Fourth-quarter adjusted operating profit of $111 million with an adjusted operating margin of 22.1%. This is a decline from the prior year's 26.6% which was expected given the 14% organic sales decline. The margin pressure reflects lower operating leverage, and we expect this margin trend to continue into 1Q. Flipping to slide 10. Here, we are highlighting our full-year 2025 results in which the team delivered another outstanding performance. We saw improvements across all key financial metrics. Adjusted diluted EPS of $4.20 was up 47% and exceeded guidance by $0.10. Net sales of $10.2 billion delivered 26% organic growth and exceeded guidance by $30 million. We saw strong growth in The Americas, up 41% and APAC, up 18%. With the partial offset of EMEA being down 2%. Adjusted operating profit of $2.1 billion was up 35%, and $30 million above guidance. Operating margin expanded 100 basis points to 20.4%. The full-year margin expansion was driven primarily by productivity and positive price-cost. To close out the margin discussion, I would like to highlight that we are delivering margin expansion while investing in growth and managing inflationary headwinds. Adjusted free cash flow was another strong performance. We generated approximately $1.9 billion in adjusted free cash flow, up 66% mainly driven by higher operating profit and positive working capital. Including increased advanced payments from the significant order delivery in the quarter. Our cash performance gives us flexibility to invest in growth, pursue strategic M&A, and return capital to shareholders. These results demonstrate both our excellent execution and industry leadership. Now let's turn to page 11 and go through our full-year 2026 guidance. We believe this outlook underscores our confidence in the market growth, and our ability to continue to drive excellent performance. We are projecting adjusted diluted EPS of $6.20 representing 43% growth at the midpoint. This improvement continues to show strong profit growth from the prior year. As we move to net sales guidance, we are projecting $13.5 billion at the midpoint which represents 28% organic growth with projected sales growth to be driven by continued strength in The Americas, at high 30% growth. With APAC at mid 20% growth and EMEA flat to down mid-single digits. On EMEA, as we mentioned earlier in the presentation, we expect a reacceleration in the market in 2026. Moving on, we expect adjusted operating profit of $3.04 billion and a 22.5% margin at the midpoint. Which translates to 210 basis points of expansion. This margin expansion is expected to be largely driven by continued operating leverage and positive price-cost, while we also expect to continue to invest in capacity and technology advancement. Finally, for the year, adjusted free cash flow is expected to be $2.2 billion representing 17% growth reflecting anticipated strong profit growth and working capital improvements offset by higher tax, and increased CapEx to support growth. As you can see from the metrics on the page, we are confident in our ability to deliver another strong year in 2026. Flipping to slide 12, we can round out with a look at 1Q 2026. For 1Q 2026, we are projecting adjusted diluted EPS of $0.98 which represents 53% growth at the midpoint. For net sales, we expect to deliver $2.6 billion or 22% organic growth at the midpoint. This guide anticipates growth in The Americas of high 30s percent and growth in APAC of low 20% with anticipated offset of EMEA being down in the mid-20% range. We expected adjusted operating profit of $495 million up 47% at the midpoint, and margin rate of 19% translates to 250 basis points of expansion at the midpoint. Just as a note on tariffs, we expect on an exit rate basis to have materially offset unfavorable margin impact from tariffs as of the first quarter of this year. As you can see from the metrics, we are expecting to deliver a strong start in 2026. With that, I will send it back to you, Giordano. Giordano Albertazzi: Well, thanks, Craig, and let's wrap up. And for then, we go to slide 13. Again, Q4 and full-year 2025 exceeded guidance across all metrics. Orders backlog, very robust, evidenced by impressive book-to-bill circa three times. The momentum is certainly very strong. We continue to strengthen our position as an industry thought leader and this is highlighted by our product technology offering full system approach, and our services strength. At this and all this is strengthened by our acquisitions, of which PerchRight is a great example. Our 2026 guidance shows a step up in all key metrics. I have never been more excited about Vertiv Holdings Co's future. We are leading the industry in orders. We are scaling. We are very well positioned to expand our market leadership and drive the industry forward. Very much looking forward to seeing as many of you as possible at our investor conference in May. And with that, back to you, Nadia, and let's start the Q&A. Nadia: Thank you. We will now begin the question and answer session. And if you have a follow-up question, please rejoin the queue. We will pause just a moment to compile the Q&A. The first question goes to Charles Stephen Tusa of JPMorgan. Please go ahead. Charles Stephen Tusa: Morning, Steve. Morning. Your ERP must have been busy this quarter. Probably requires a few more data centers just to handle that. So just on the dollar value of the orders, is there, you know, you guys have talked about the $3 to $3.5 per megawatt. There is obviously a lot of, like, megawatts coming on and being ordered. But is there any, you know, creep in that content to the upside that's bolstering these orders, or should we still think about that as the right framework for the dollar per megawatt TAM? Giordano Albertazzi: I would say that, currently, you can just use that as a framework. Clearly, we have been vocal on other occasions, certainly, as all the more recent true as the technology evolves that the complexity of the technology and the technology trajectory if anything, is good from a TAM per megawatt standpoint. So it would be a little premature at this stage. We like what we see. I think the best is, you know, three months from now, we will be together, and, certainly, this will be an important theme. Charles Stephen Tusa: And then just quickly following up on the CapEx number. How should we think about for every like $100 million of incremental CapEx, you know, from what we have seen, whether it is, you know, Eaton or some of your other peers, it is a pretty high multiple of sales growth on, you know, on that CapEx. Like, what a $100 million can what the output of that could mean? Is there some sort of multiple, like, I do not know, 15, 20 times on that extra $100 million that we can think about as being able to support a, you know, a revenue run rate for the future? Was trying to understand how you can deliver on this, you know, and what it will take to execute on this backlog. Giordano Albertazzi: I will give it a go and Craig if you want to chip in. But I would say that think the best way of looking at it is to look at 2-3% CapEx percent of sales moving to 3-4, call it 3.5. That is you can certainly correlate that to our growth and our trajectory. And, yeah, going back to how we make it happen, as I mentioned a few minutes ago, it is about being gradual. It is about being ahead. But, again, CapEx expansion, capacity expansion does not happen in big steps, at least not the way we do it. We like many steps that are meaningful but, again, I think the correlation between growth and our percent CapEx is an interesting and important element. Yeah. Excellent. Thanks, guys. Nadia: Thanks. The next question goes to Scott Reed Davis of Melius Research. Scott, please go ahead. Scott Reed Davis: Hey. Good morning, guys. And Good morning, Scott. Orlando and welcome, Craig. Congrats on an unbelievable year. Guys, I am just kind of curious as back you know, the I am just trying to picture these orders coming in April or just massive, and I know that was the crux of Steve's question as well. But is there any you know, you talked about lumpiness, were there any particularly large projects or anything unusual in the quarter? Was there any is there any incentive perhaps for folks to make an order before the end of the year in 2025 or price or otherwise or getting ahead in the queue I am just trying to get my arms around these. These numbers are just absolutely massive. Giordano Albertazzi: Well, the answer in terms of something that is unusual, let's say, from the normal course of business in terms of, price and whatever else, the answer is no. Very, very, very simply. I would say that certainly is a reflection of the demand that we see in the market. Certainly, as I said, it is a reflection of the belief and demonstrated ability to scale combined with our awesome technology. Yeah. But the fact is yes, there were quite a few large orders. But again, quite a few. The big should not look at this as something dramatically strange. This is something that has been happening in the market, all are becoming larger and larger and larger. So this is really orders with customers know that they need our kit, our systems, our solutions, and they know where and when. So it is not kind of a no big anomalies here. But orders can be lumpy. And sometimes they happen all in one quarter. More in one quarter and the other, etcetera. So the sequencing is something that is you know, lumpy, and that is what we have been saying for quite some time, and that is why, you know, the decisions that we have made on, on orders, guidance, and actuals But, no. Nothing unnatural. Craig Chamberlain: And I would think it continues to underscore what we Scott Reed Davis: sorry. Go ahead, Craig. Craig Chamberlain: No. So it continues to underscore what we have talked about before, which is the system level thinking. And I think the system level thinking is starting to play out on a larger scale. Scott, which is making these orders bigger than what they have been in the past. Giordano Albertazzi: Fair enough. Scott Reed Davis: Best of luck, guys. I appreciate the color. Thank you. Craig Chamberlain: Pass it on. Thanks, Scott. Nadia: The next question goes to Amit Jawaharlal Daryanani of Evercore. Amit, please go ahead. Amit Jawaharlal Daryanani: Thanks a lot and congrats on my side as well from some very impressive orders over here. You know, if I look at the order and the back number that you folks have, you clearly set up for some very strong performance I imagine not just in 2026, but even in 2027 and beyond. So I am wondering, Giordano, if you can just kind of walk through know, what are the key operational steps, the key bottlenecks you think you have to solve for to convert this backlog into, you know, revenues and EPS over time You know, just maybe help us understand, like, what are you focused on? What needs to go right convert these orders into sales and EPS in 2026 and 2027? Thank you. Giordano Albertazzi: Yeah. We are well, thank you. Thank you, Amit. We are really working, and we have been working. So it is not like something new. We have been working, and we continue to work. We are accelerating our capacity expansion. Capacity expansion always happens in two ways. One is, CapEx, so call it footprint. Generally speaking, not only. There is also an increase of productivity, but the other is really obtaining more output from the existing footprint. So the two-pronged approach that we talked about several times is what continues to happen. But as we speak, you know, we are factories being expanded. We have a couple of new locations coming live. And, you know, we are working very, very actively with our supply chain. So, it is really diligently and, in a very focused manner, execute on, on this, on this backlog. Think we are in a good shape. We have been diligent about making capacity available, gradually but rapidly. For, for the last couple of years, and, you know, we are accelerating. As our numbers are saying, both on CapEx and the top line. Craig Chamberlain: And Amit, I think you could look at just the fourth quarter, the acceleration in CapEx is in the financial numbers, and you will also see that in the guide that the acceleration in CapEx is there as well, which underscores what we are doing. Most of that is in flight. Meaning that we are already doing the build-outs, and we understand what we need to go do to deliver the capacity for the guide that we put out there for sales. Amit Jawaharlal Daryanani: Got it. Thank you. Nadia: The next question goes to Jeffrey Todd Sprague of Vertical Research. Jeff, please go ahead. Jeffrey Todd Sprague: Hey, thank you. Good morning. Congrats on the shock and awe numbers here. Maybe we could just sit on Europe and Asia briefly from my standpoint. First on Europe, you know, have things really changed on the ground in terms of the permitting bottlenecks and the like? Obviously, you said the orders are a bit better, but it is close to 30 to the year. And I am also just curious on China specifically, if you could address that. Clearly, you know, weak economically and industrially, but I would not think China would want to fall behind in the AI race. I just wonder if the weakness there is maybe some indication that Western players are not being invited to play to the same degree as they were historically. It is just a competitive state of things on the ground in China. I will leave it there. Thanks. Giordano Albertazzi: Yep. Well, thanks, Jeff. But it sounds with EMEA. Let's start with EMEA in general. Think it is certainly a combination of an acceleration of investment, basically. So it is not that somebody will do magic wand and everything kind of a permit wise became easy. In EMEA. That would be too simplistic. But I think the focus and the realization that a lot more infrastructure is needed is now palpable. And, pipelines that have been there for quite a while, you remember I have been vocal about that, have been and are expanding and the sales cycle of the various elements in the pipelines are accelerating. And then we have areas that are specifically moving well. So you take the Nordics as an example, not solely, but that is an example where that is happening. You have heard me probably talk about a couple of times about the fact that with all that is happening in North America, some of the decision-makers were still concentrated in North America while still are concentrated in North America. Now I think the realization that things need to happen beyond North America is and that is I think, or at least what we see happening as a matter of fact. So, quite, quite optimistic there. So you are kind of a ferbacement in the market that I have not seen for quite some time. When it comes to Asia, I would not attribute that to kind of a Western players type of dynamics. The market demand is not very strong. In, in this, in this moment. So, clearly, there is, you know, it is an important AI market with, with its own characteristics. But, again, what we see is more attributable to a general market situation than, at a particular kind of a player. I mean, we are a Chinese player in China. We are silicon agnostic. So yeah, again, very happy. With everything outside of China, but also very, very proud of what we are doing in China as a team. Jeffrey Todd Sprague: Great. Thank you. Nadia: The next question goes to Christopher M. Snyder of Morgan Stanley. Chris, please go ahead. Christopher M. Snyder: Thank you. Giordano, you talked about the company's deep relationship with the data center industry leaders. So I guess, you know, my question is how much visibility do these relationships afford Vertiv Holdings Co into the future workflow or architecture of these data centers? Because, you know, I have to imagine that you guys need to have the solutions developed, you know, before the customers are ready for it. So also interested in, you know, how far in advance does the company start the R&D or engineering process to be, to bring some of these future solutions to market? Thank you. Giordano Albertazzi: Sure. Well, thank you, Chris. I think a couple of dimensions to that. We have been always vocal about the strength of our relationship with customers, but also the other players in the ecosystem. Ecosystem. Super important. Super important because exactly as you were saying, our technology needs to land ahead of well ahead of, of the most advanced, silicon. But to that to be the case, of course, with the with the NVIDIA or other silicon let's say, technology providers, then it is about looking out two, three years sometimes in terms of or beyond. At a higher level of, let let's say, more R&D. But being two, three years out, in the way we work together. So our roadmaps certainly extend, but the role that an aspect that I am very proud of, and it is very important for, for our and especially for our customer success. So from for the our end of customers success is the work that we do with many of them really kind of a technology partnership, looking out, one, two, sometimes three years and say, hey. With all that is happening from a technology standpoint, given your business model, customer, what is really the technology the best suits your strategy. And you know, it is not it is not being told. But it is architecting together and giving them an understanding of the possibilities that they have from a technology standpoint. I think we have a uniquely stronger role in the industry. In this respect. So it is working out quite well. Christopher M. Snyder: It seems like it. Thank you. Giordano Albertazzi: Thank you. Nadia: The next question goes to Nigel Edward Coe of Wolfe Research. Nigel, please go ahead. Nigel Edward Coe: Thanks. Good morning, everyone. I guess we are not seeing too much impact yet from, Disney space. So that is good news. So want to go back to the backlog. And Okay. You know, Oh, got it. Sorry. I could not hear you. There was a little bit of a blip. In the line. Nigel Edward Coe: Okay. Go ahead, Nigel. Yeah. Sorry. Let me go let let yeah. Can you can you can you hear me now? Giordano Albertazzi: Yep. Nigel Edward Coe: Yep. Great. So I want to go back to the backlog. And I think, Craig, you mentioned more system level orders. So obviously, you have highlighting the SmartRun product. Maybe just talk about where you are seeing that success and the sort of the word share you are gaining with the data centers. And maybe, Giordano, could you just maybe touch on the backlog agent? It seems to the guidance implies roughly fifteen months of conversion to backlog. Typically, you do nine months. So maybe just talk about, are we seeing longer duration orders in that backlog? Thanks. Giordano Albertazzi: Well, so let's start with the agent so that we can address that. We are we have been already vocal quite a lot already that our customers requested lead time pretty much ranges from twelve to eighteen months, especially when we talk about, the bigger orders. It is never an exact science. It always ranges but I would say that twelve to eighteen is a good, is a good approximation of where the large orders demand the deliveries to be in. Typically, not even just one bulk if it is really a large order. But having said that, if you think about the structure of our order, you take this year, sorry, last year, 2025, with a very, very strong, second half, relative anyway to a very strong year altogether, but particularly strong in the second half and particularly, particularly strong that in the last, in the last, quarter, then they see that the twelve to eighteen months, there is a push of things, into 2027 while we have we are very happy with, how 2026 is covered. So, again, as I said in the as I said in my, comments earlier, the shape of the backlog is not something different. It is just a consequence of the phasing of the orders when we when we receive that. So no big differences in the way the market asks and demands or expects our deliveries. When it comes to the system question, we clearly see an acceleration. When we talk about OneCore or we talk about SmartRun, you know, we talk about systems and solutions that start to be quite, broadly adopted. And, certainly, that helps, the dynamic of our order intake of and our backlog. But when we talk system, we do not just talk about integration. System for us is having the entire powertrain, the entire thermal chain, certainly when we deliver a prefabricated solution, or a converged solution, considering all the pieces that really designed to work to work together. But, again, if we go back to the previous question, my answer was, it is about sitting together with a customer and having the entire portfolio and having a good and just a very profound understanding of, a system level and all data center level, technology and being able to talk systems our customers. Nigel Edward Coe: Okay. Thank you, Giordano. Thank you. The next question goes to Andrew Burris Obin of Bank of America. Andrew Burris Obin: Yes, good morning. Morning. Good morning. Giordano, Craig, Lynne. Thank you. So the question I have is on services. You know, it seems that the feedback we are getting is that the big differentiator for Vertiv Holdings Co is your ability not only to deliver the product, but to actually service it in the field and wrap all the sort of additional value-added stuff around that. Last quarter, you shared with us, you know, the increase in service headcount. Would you update us on what the headcount looks like as you increase in backlog? Rapidly and maybe preview where the service organization is going I am sure you are going to talk about your analyst day, but just give us a preview of what is happening there. Thank you. Giordano Albertazzi: Well, thank you, Andrew. One of my favorite subjects. So, and, I have many, but this is certainly one of my favorite subjects. So, and I agree. It is a big differentiation. And as you see, a big differentiator that we continue to fuel. So absolutely not static in our view. Well, we talked about, headcount. I think we are approaching it very, very rapidly, the 5,000, field people right now and really think in terms of our field capacity following very similar to, the delivery capacity. Now of course, is a function of the install base, but the installed base is growing. Our services are growing. Certainly, the commissioning, the start-up are very important events in the life cycle of a data center, and we will make sure we are there with the capacity locally to serve our customers. Also evolving our technology, not only in the of PerchRight, to me, a great example of also the all the digitization that we are injecting into our services. Business. Craig Chamberlain: I mean, I would add on that I am just as excited as Giordano is on our services portfolio coming from, you know, heavy industrial companies that lived and died on services. I think this is a superpower that we are going to continue to build out, and especially when we are when you are starting to look at what we can do with the installed bases out there. Andrew Burris Obin: Thank you very much. Giordano Albertazzi: Thank you. Nadia: The next question goes to Nicole Sheree DeBlase of Deutsche Bank. Nicole, please go ahead. Nicole Sheree DeBlase: Yes, thanks for the question. Good morning, everyone, and congrats on a great quarter. To start with the backlog, I guess, obviously, a really nice step up in backlog sequentially and year on year in the fourth quarter. Giordano, when you kind of look out over the next twelve months and with what you see in the pipeline, do you expect that we will see another year on year increase in backlog in 2026? And then just a small follow-up on CapEx. Are we going to kind of be in this 3% to 4% CapEx to sales zone for the foreseeable future given how fast the industry is growing? Thank you. Giordano Albertazzi: Well, you know, I would not go all the way to guiding orders, which I would do if I were to answer in with many details. But, obviously, if you go back we if we go back to what we shared already, if you think about our directional indication that, we believe our orders will be will be up. You probably have done the math, but our orders in 2025 right now, we have sales. So probably the answer is straightforward. We believe we will continue to build a backlog directionally. So that is, that is certainly the case. Craig Chamberlain: And I think on your question, Nicole, on the CapEx, I think, again, we always want to look at a normalization around the 2-3% as we add as you had mentioned before, prudently. So we think this year might be a little bit higher than normal, but we would always want to continue to be right around that 2-3% on a normalized basis. So I think that would be our answer right now. We would not really put a number out there for 2027 yet until we see what the market is going to look like from an orders perspective. But the guide this year is to continue to look at that as we go forward. Giordano Albertazzi: And, again, we really hope to see you at our Investor Day, and, certainly, that will be an opportunity to further elaborate on that. And the long-term trajectory of the business. Nicole Sheree DeBlase: I would not miss it. Thanks, guys. Pass it on. Giordano Albertazzi: Thank you. Nadia: The next question goes to Julian Mitchell of Barclays. Julian, please go ahead. Julian Mitchell: Hi, good morning. I just wanted to look at the orders and the sort of composition of the backlog maybe from the standpoint of cash. Because I suppose it was interesting that you had a large working capital cash inflow in 2025, whereas I think we have heard from some other companies that the high growth is one reason for bad cash flow conversion, but for you, it is the opposite. A lot of that is because of your deferred revenue inflows in the fourth quarter. So related to that, I wanted to understand is it the type of orders you got in Q4 that generated some disproportionate amount of deferred revenue inflow? And also, when we look at Slide 11, you are guiding for working capital and other to be a small use of cash. In 2026. But if orders are growing and all the rest of it, is it not more like we would see another deferred revenue inflow helping working capital be a source of cash in 2026? Craig Chamberlain: And yes, Julian, let me clarify the slide first off, and then we will get into a little bit more. But the slide says $80 million down year over year. And I believe it is down year over year, still be a working capital. It should be a working capital outcome that will be positive. So it would be just less positive than it would be year over year. Julian Mitchell: Got it. Thank you. And is that and these deferred revenue balances, are they swelling because of specific very large orders? Or we should think about them being proportionate to just the aggregate kind of volume of orders that you are getting? Just trying to understand it because traditionally in low and medium voltage electrical equipment, you do not have these large prepayments. Craig Chamberlain: Yeah. And I would say it depends on the type of order and the mix of order. Again, I think that we do always try to push to get some down payments and progress payments in there. But the mix would impact that a little bit, and it could be an influence in what drove up fourth quarter third quarter. I would not say it is marginally different than what we have seen historically. Julian Mitchell: Great. Thank you. David M. Cote: Thank you. Nadia: The next question goes to Mark Trevor Delaney of Goldman Sachs. Mark, please go ahead. Mark Trevor Delaney: Yes, good morning. Thank you very much for taking my question. Congratulations on the strong results and strong orders. I was hoping to get Vertiv Holdings Co's view on how its cooling product mix and business opportunity may evolve. And I ask because post-CES, there was some discussion that Reuben raised racks may not need chillers and conversely, post-supercompute last fall, there was a proposal from a competitor about stainless steel chillers maybe displacing CDUs. So some moving parts there, and we would love to get your opinion on how Vertiv Holdings Co sees its business opportunity evolving and what this might all mean for your content per megawatt and market share. Thanks. Giordano Albertazzi: Let's start from the thank you, Mark. Let's start from the bottom. So I go back to what we are saying. We believe the technology evolution is certainly central to that statement, is, is, favorable. From a content standpoint. It is no exception. So clearly, there is an opportunity to run some GPUs at a higher temperature than historically done. But this is pretty much what has been true for many of the more recent chips of NVIDIA. Advantages, helpful. Let's all remember that that does not rule out heat rejection. Heat rejection will continue to exist. Continue to be there. Let's not forget that there are loads that can be cooled at higher temperatures. There are loads with the same data centers that require lower temperatures. So if anything, whereas the overall efficiency of the system indeed improves, we are thinking more and more about a hybrid, cooling and thermal chain infrastructure. Now, clearly, the ability to reduce the number of chillers, but not the number net number of, heat rejection technologies, depends on the climate-specific climate situation, depends on the type of loads. Depends on the resiliency to various types of, non-GPU or different GPU loads that the data center is designed for. You know, when we look at this space, we are very, very encouraged by what we see in terms of a product that is now cataloged, and that is very, very important for us. That what we call trim cooler. So a chiller that is really optimized to operate at high temperatures, but also with the flexibility for lower temperatures that, again, coexist in systems. It is a solution that maximizes free cooling, and it is certainly very, very central to the future of the industry. So, all in all, we see that design continues to be mixed. If anything, this complicates the thermal chain and this complexity is something that we like. As someone who has got the entire portfolio, we certainly are perfectly positioned to support our customers. And, again, going back to what we are saying, enable the right choice for our customers. Cooling, chips directly in other ways than through a CDU in this moment is not something that we see, simply because you know, it would in most of the cases, it will be niche applications probably, but in most of the cases, that would be too dangerous. Blast radius is, a little bit too big at. So we are pretty sure that CDUs in various shapes and forms are a long-term element of the thermal chain. Mark Trevor Delaney: Thanks, Giordano. Appreciate it. Giordano Albertazzi: Sure. Nadia: The next question goes to Andrew Alec Kaplowitz of Citigroup. Andy, please go ahead. Andrew Alec Kaplowitz: Morning. Good morning. Giordano, Craig, good morning. If I look at core incrementals that you are I think you have got pretty close to 30% dialed in. It is kind of the low end of your long-term range for Q1 and 2026, but I would guess the scale of some of these contracts could be your friend because they should maximize the ability to leverage your sales. So is it possible to generate higher incrementals given potential operating leverage? Or do we need to be a bit more conservative regarding supply chain? And or do you just need a higher level of growth investment to fund all of your revenue growth? Craig Chamberlain: Andy, I will start off by saying you are exactly right there. There is a higher level of investment. We are still guiding at that lower end of the 30% to 35% that we have said in the past. I think as we get through the year and the investment that we are putting into place, we can continue to see those go up in our longer-term guidance and we will reiterate that in the Investor Day of what we see as that goes forward. But I think you are exactly spot on. Some of the investments that we are doing and the, I would say, the ramp-up of those has a little bit of pressure on us as we drive those incremental margins. Giordano Albertazzi: Yeah. I would say that, like, the long-term trajectory is absolutely unchanged. Yep. So I feel good about it. Andrew Alec Kaplowitz: Alright. Thanks, guys. Giordano Albertazzi: Thank you. Nadia: The next question goes to Michael Elias of TD Cowen. Michael, please go ahead. Michael Elias: Great. Thanks for squeezing me in here, and congrats on the order quarter. Great to see you guys capturing the, the market share out there. You know, Giordano, question for you. I am sure you came out of PTC with a similar sense that demand is rocking and rolling. You know, as we think about going forward, yeah, could you just give us an update on the utilization of your existing production capacity? And maybe as part of that, the evolution that you are seeing on the product lead time front for things like switchgear and how they may have evolved over the last three months given the demand strength? Giordano Albertazzi: Eric, thanks. Yeah. Certainly. Certainly, demand is there and, in, in very rude health. As one would say, and we are very happy, we capture that. Again, utilization of capacity clearly, we are pretty satisfied. In general, I always talked about having a wiggle room in the way we load our capacity in our factories. This is still true. So we are using this wiggle room to if needed sometimes to accelerate growth. But again, we like to continue to design our capacity with that wiggle room that is 20-25%. So the same way of looking at the long-term capacity. Applies, here. And that is how we decide on capacity increments. As reflected in our CapEx numbers. When it comes to lead times, yes, there has been some expansion a little bit in some product lines. But, again, pretty much, on customer and market, end market lead time in general across the majority of products. So again, quite happy quite happy with our evolution in this respect. We like the growth. We like the capacity utilization. Michael Elias: Great. Thanks. I am looking forward to seeing what is to come. Giordano Albertazzi: Alright. I think we have time for one more. Nadia: The last question goes to Amit Singh Mehrotra of UBS. Amit, please go ahead. Amit Singh Mehrotra: Thanks. Maybe just batting cleanup here a little bit. So wanted to ask about the pipeline because, obviously, pipeline leads orders. Would imagine if you are more than doubling your orders sequentially from 3Q to 4Q, pipeline is depleted. It does not seem that is the case based on how you talk about the pipeline. So just talk about that. And then the last, just a clarification. Just remind us what has to happen, what hurdles you have to pass, for an order to make it into your backlog? From a deposits or delivery certainty visibility perspective? If you can just remind us on that, that would be great. Giordano Albertazzi: Okay. So the pipeline the pipeline has not depleted. If anything, you know, despite certainly the very strong order intake in the last quarter, we are seeing the pipeline to grow quarter to quarter. So again, very satisfied about that. It is not just the market. It is the visibility of the market. So just want to reiterate it. It has not depleted. When it comes to what makes an opportunity backlog, it is a binding purchase order. Everything backlog at is a binding purchase order. Majority of but very often, with advanced payment, but, it is the nature of the PO. Binding legally binding. Purchase order. Amit Singh Mehrotra: Got it. Okay. Thank you. Appreciate it. Giordano Albertazzi: Thank you. Nadia: Thank you. This concludes our question and answer session. I would now like to turn the conference back over to Giordano Albertazzi for any closing remarks. Giordano Albertazzi: Well, thank you very much. Thank you all for the questions, and thank you for your time today. Of course, I am very pleased with what we delivered in 2025. And very pleased with how we positioned entering 2026. Certainly very proud of our job that the entire Vertiv Holdings Co team has done and I am super grateful for the collaboration with our customers and partners. We are pleased with our progress, you know me by now. We are certainly never satisfied. I am certainly never satisfied. We continue and we will continue to invest ahead of the curve, maintain our technology leadership, execute with speed and precision. I am more confident today than I absolutely ever been about Vertiv Holdings Co's trajectory. Very encouraged. And, I want to thank you all and wish you all a great rest of your day. Nadia: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Acadia Realty Trust 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 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, Will Delts. Please go ahead. Will Delts: Good afternoon. Thank you for joining us for the fourth quarter 2025 Acadia Realty Trust earnings conference call. My name is Will Delts, and I'm an analyst in our asset management. Before we begin, please be aware that statements made during the call are not historical and may be deemed forward-looking statements within the meaning of the Securities and Exchange Act of 1934. Actual results may differ materially from those indicated by such forward-looking statements due to a variety of risks and uncertainties, including those disclosed in the company's most recent Form 10-Ks and other periodic filings with the SEC. Forward-looking statements speak only as of the date of this call, February 11, 2026. The company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures, including funds from operations and net operating income. Please see Acadia's earnings press release posted on its website for reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures. Once the call becomes open for questions, we ask that you limit your first round to two questions per caller and give everyone the opportunity to participate. You may ask further questions by reinserting yourself into the queue. We'll answer as time permits. Now it's my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer, who will begin today's management remarks. Ken Bernstein: Thank you, Will. Great job. Welcome, everyone. Our strong fourth quarter results added to an overall strong year with both solid internal and external growth. And this momentum is continuing as we head into 2026. AJ, Reggie, and John will discuss our performance last quarter and our outlook going forward. But before diving into the details, I'd like to take a step back and discuss the key initiatives we put in place over the past few years, and how they have positioned us for not only strong current performance but also for strong long-term growth. A few years ago, after the very painful multiyear headwinds, first from the retail Armageddon, then from COVID and related issues, it became clear that the strong rebound in our portfolio performance was likely more than just a COVID rebound and was setting up for a longer-term positive fundamental shift for retail real estate. As we've discussed on prior calls, these tailwinds benefited most open-air retail, but they have been especially beneficial for the street retail component of our portfolio. And for several reasons. First, the lack of new development of retail real estate for almost a decade has caused the rebalancing of supply and demand and has been a powerful tailwind for all open-air retail. But more importantly, the additional shift by retailers away from a heavy reliance on selling through wholesale and department stores and their recognizing the need for their own physical stores has been an additional important driver of demand. And this increased demand has applied much more to discretionary retail, especially in key must-have corridors. Then second, while the consumer has generally been more resilient than anticipated, the so-called K-shaped economy has meant that tenant demand and tenant performance by discretionary retailers who serve the upper segment of the economy has continued unabated. Thus, the general bias in the equity markets last year to pivot to necessity-based retail following liberation day appears overdone as the street retail portion of our portfolio continued to outperform our other segments. Then third, the structure of street retail leases enables us to capture higher rental growth sooner than in our suburban assets. While increasing market rents are good for all real estate, it is most beneficial that those properties like street retail, that have a combination of stronger contractual growth, fair market value rent resets, and lighter relative CapEx on retenanting. Sooner or later, all retail real estate will benefit from increases in market rents. We just prefer sooner. So as we saw these trends unfolding, we positioned ourselves to capture this growth. As we stated, our goal has been to deliver multiyear NOI growth of 5% and for this growth to hit the bottom line, both in terms of earnings growth and net asset value growth. Consistent with this goal, we have now delivered four consecutive years of same property NOI in excess of 5%. And we want to make sure that we are not only producing strong current results but are positioned to do so for the foreseeable future. We are delivering on this growth goal through several different initiatives or levers. First and foremost, is leasing up a vacancy. Over the past four years, we have increased our economic shop occupancy from approximately 81% at the end of 2021 to over 90% today. And at 90%, still have room to run. Then beyond this lease-up, a second lever is our ability to capture rental growth on our streets from both our pry loose strategy and our fair market value resets. And AJ Levine will discuss the opportunities we're seeing here. Then a third lever will come from the meaningful growth coming out of our redevelopment pipeline, most immediately from our two assets in San Francisco as well as our development on Henderson Avenue in Dallas. John and AJ will also give further color on these needle movers as well. And then finally, to supplement this internal growth and to better ensure that we can continue to deliver our long-term growth goals has been our external growth initiatives. For our on-balance sheet REIT acquisitions, our focus here has been primarily on street retail investments where we can benefit from building operating scale on must-have streets. While we have found the benefits of scale on the suburban side of our business to be somewhat elusive, we are seeing the benefits more clearly through owning multiple stores on given key streets where we are able to better both curate a street and then drive incremental growth. We saw this playing out on several of our existing corridors such as Armitage Avenue in Chicago and M Street in Georgetown. And this gave us the conviction to focus our future street retail investments on those corridors where we can own enough concentration to create benefits of scale. So we doubled our ownership stake in Georgetown and DC, and now control nearly 50% of the street retail in this key corridor. And last year, delivered in excess of 10% NOI growth. We also doubled down in Williamsburg, Brooklyn investing approximately $160 million by adding 10 storefronts on North 6th Street. We also doubled down on Green Street and Soho investing over $80 million. And we more than doubled down on Henderson Avenue in Dallas, where we will be increasing our investment there by almost $200 million by adding additional assets and commencing our 170,000 square foot development there. We also expanded into new corridors such as Bleecker Street in the West Village, and just this quarter, Upper Madison Avenue in New York City. All told, over the past twenty-four months between our street acquisitions and planned investments into Henderson Avenue, we have invested about $700 million. And all of these investments are with a view towards further recognizing the benefits of scale and extending our long-term growth goals well into the future. And while the benefits of scale are important on a corridor-by-corridor basis, they also benefit our overall as we are well on our way to being the premier owner-operator of street retail in the United States. Then complementing the street retail side of our business is our investment management platform. For as long as Acadia has been in business, we have leveraged our institutional capital relationships to pursue alternative and complementary investment opportunities. More recently, our investment management model has shifted from running single traditional closed-end funds into multiple JV channels, and as Reggie Livingston will walk through, including our most recent activity, we have successfully executed over $800 million in JV acquisitions over the past twenty-four months. Big picture, we have been deploying our capital using a barbell approach. On one side, our on-balance sheet activity has been focused on high-growth street retail, well-suited to long-term ownership. And then for our investment management platform, we are focusing for this buy, fix, sell side of our business on opportunistic and higher-yielding investments. So to conclude, the internal and external opportunities we see provide a clear line of sight into providing multi-year top-line growth of 5% and having that growth drop to the bottom line. Then with ample balance sheet capacity, we're in a position to capitalize on the exciting opportunities that we have in front of us. With that, I'd like to thank the team for their hard work last quarter and last year, and I'll hand the call over to AJ Levine. AJ Levine: Great. Thanks, Ken. Good morning, everyone. Before I dive into the quarter, I'd like to take a minute to highlight another record year of leasing for us in 2025. Driven largely by the trends that Ken mentioned, most notably retailers' increased focus on DTC and the remarkable strength of the high-end consumer, our tenants invested in both new and existing stores with confidence and at an accelerated pace. That momentum remained consistent throughout the year and shows no signs of slowing as we look ahead to the balance of 2026 and beyond. Over the course of 2025, with a focus on Pralose opportunities and thoughtful curation, we leaned into our growing scale to add several new and exciting brands while also expanding relationships with some of our most dynamic highest-performing tenants. Notable additions would include TNT Grocery and LA Fitness Club Studio in San Francisco, Google and Swarovski on M Street in DC, Richemont's Watchfinder and Veronica Beard in Soho, Rag and Bone on Henderson Avenue in Dallas, UGG on North 6th Street in Williamsburg, and most recently, an expansion and extension of The Row on Melrose Place in Los Angeles. In addition to curation, 2025 was also a year of unlocking the outsized rent growth we've seen across our streets over the last several years. Through a combination of lease-up, Pralose, and fair market resets, the team consistently delivered spreads in excess of 50% on our streets. 2025 is also a banner year for tenant performance and sales growth across our dance contemporary, aspirational, and specialty street tenants. Year-over-year sales on our streets ranged from 10% to as high as 30% to 40% in some markets. As we've said, tenant performance remains the most important indicator of future rent growth. And where sales go, rents inevitably follow. And we expect that the last several years of outsized sales growth on our streets will continue to translate through to outsized mark-to-markets in the coming years. But given where occupancy cost ratios are on our streets today, even if that growth were to moderate, our tenants and our markets would remain healthy. Now turning to the quarter. In Q4, we signed another $3.5 million of ABR with nearly 75% coming from high-growth markets, including Melrose Place, Williamsburg, Newberry Street, and Henderson Avenue in Dallas. Highlights included the addition of UGG and one of our more recent acquisitions on North 6th Street in Williamsburg, replacing Lululemon, which we successfully relocated and expanded elsewhere on the street. Because of our scale on North 6th, we were able to add UGG at an unreported 72% spread, while also retaining an important tenant in Lululemon. While that spread was not included in our release, it's another strong data point indicative of what we're seeing across the Street portfolio. Similarly, during the quarter, we signed a new lease on Newbury Street at a 58% spread and on Melrose Place at a 60% spread. And as is typical for street leases, all of these deals included the added benefits of 3% annual contractual growth and fair market resets. Beyond signing new leases, we continue to create value through our PryLoose and mark-to-market strategy. As a byproduct of the sales growth we've highlighted, tenants are increasingly reinvesting in existing stores, especially in must-have markets like Soho, Gold Coast Chicago, and Melrose Place. In many cases, tenants are approaching us several years ahead of lease expiration for additional term, which allows us to secure these tenants long-term and recast those leases to market. For example, in January, a tenant of ours in Soho was planning a substantial reinvestment in their store but had just two years of term remaining. In exchange for extending the lease today, we were able to immediately reset the rent to market, effectively pulling forward mark-to-market by two years and achieving a 51% spread. This transaction alone contributed close to half a penny of FFO. But the PryLoose and Blend and Extend strategy is not just about accelerating mark-to-market. It is also a critical component of portfolio maintenance and risk management. In many cases, it allows us to upgrade credit merchandising. While in other cases, including this one in SoHo, it allows us to lock in credit long-term, helping mitigate any potential short-term market volatility. In that sense, the strategy is both proactive and defensive. Looking ahead, we've identified additional Pralus and early extension opportunities across Soho, M Street, Armitage Avenue, Henderson Avenue, Bleecker Street, and Williamsburg. While we still have a healthy amount of lease-up ahead of us on our streets, we also expect to continue mining the portfolio and capturing outsized rent growth while setting the portfolio up for long-term success. Now looking ahead to 2026 and beyond, tenant demand appears to be accelerating. And our pipeline of leases in advanced negotiation currently exceeds $9 million, up roughly $1 million from last quarter, with the majority of that future growth coming from our streets. And finally, in terms of markets in the earlier stages of recovery, we continue to be encouraged by the interest and the activity we're seeing in San Francisco. John will walk through the economic impact of our progress in the city, but over the past year, we've signed 90,000 square feet of leases at 555 9th Street and City Center that currently sit in our S and O pipeline. At both assets, we saw the elimination of formula retail restrictions, which will help these retailers and future tenants get open faster and with fewer obstacles. So with the wind in our backs picking up, and a pro-business administration in office, we expect continued progress in San Francisco, and we are in active negotiations on several more high-impact deals that we look forward to discussing in the coming months. So overall, we remain very encouraged by the trends and the performance we've seen over the past year. And as we look forward, we see clear indications that this momentum will continue. I want to thank the entire team for their hard work and focus throughout the year. And with that, turn things over to Reggie. Reggie Livingston: Thanks, AJ. Good morning, everyone. As noted in our earnings release, our Q4 and to-date acquisition volumes stand at nearly $500 million. And to give our recent growth further context, over the last twenty-four months, we've closed in excess of $1.3 billion of acquisitions, including over $500 million in street retail for our REIT portfolio, and over $800 million in value-add deals for our investment management platform. That volume is certainly a needle mover for a company of our size, but it isn't volume for volume's sake. As Ken mentioned, in our street retail acquisitions, we doubled down in dynamic growth markets and expanded into new markets with those same growth characteristics. And for our investment management platform, we did more volume than any comparable period during our commingle fund business. As we continue to find great assets with strong upside and capitalize them with top-tier institutional partners. By design, our dual platform approach has continued to find ways to profitably grow as our REIT portfolio and our IMP deliver the accretion consistent with our goals of a penny per $200 million. We're excited by how much we've grown, and we see nothing on the horizon that should slow us down. Now diving into specifics of our most recent activity and some 2026 visibility. Last month, we purchased five retail storefronts at 1045 and 1165 Madison Avenue in Manhattan, with tenants such as La Lavo and Todd Snyder. These assets sit within the Upper Madison retail district, which is attracting a new generation of contemporary brands. This influx is driving a rent growth surge, that places the current rents in these assets below market. And further, if we can find accretive opportunities, we plan to add more assets in this corridor to generate the benefits of scale that we've enjoyed in other submarkets. Looking ahead in our street retail business, we continue to see prime opportunities and currently have north of $150 million of deals under agreement that could close in Q1. This pipeline is being driven by sellers who continue to come off the sidelines and our priority position as the first call for many of those sellers. Our reputation as a group that knows how to underwrite and close these transactions is well known throughout our target markets and continues to serve as a competitive advantage. And while that positive reputation has underpinned our street retail growth, it also contributes to us executing the other side of our barbell investment approach. That is finding value-add and opportunistic deals for our IMP. In that platform, alongside our partners at TPG Real Estate, we closed on shops at Skyview, approximately $425 million. The asset is a 550,000 square foot center in Queens, New York with national tenants including Marshalls, Burlington, Uniqlo, and BJ's among others. The investment delivers similar yields to other recent IMP deals, but the population density and trade area spending power is substantially higher here. The asset attracts nearly 12 million annual visitors, which is only poised to increase with the recently improved Hard Rock Hotel and Casino. An $8 billion mixed-use development located a short walk from the asset. Our business plan will continue to drive value through accretive remerchandising and harvesting mark-to-market rents. We're also in advanced stages of recapitalizing Pinewood Square and Avenue at West Cobb with first-class institutional investors. Again, demonstrating another arrow in our quiver. Using our balance sheet to close quickly on IMP assets, while being thoughtful about matching the investment with the right partner. These transactions, along with others we have currently teed up, should make for an active Q1 for the investment management side, so stay tuned. Looking ahead, we anticipate this side of our business will continue to find attractive value-add deals this year, even as the surge of investment interest in retail has made finding such deals frankly harder. But in those competitive environments, our platform has a history of being able to profitably source, analyze, and harvest outsized returns. So in summary, we closed nearly $1 billion of 2025 and to-date acquisitions. That amount includes nearly $400 million in REIT portfolio transactions that resulted in an attractive gap yield in the mid-sixties and five-year CAGR in excess of 5%. And most importantly, these deals across platforms delivered accretion in excess of our 1p per 200 target. And further, we're excited about our 2026 pipeline. While my goal isn't in John's numbers, I'm confident we should be able to deliver volume consistent with our run rate the past two years. And it will deliver the earnings and NAV accretion consistent with our mandate not to mention strong CAGR to complement our internal growth. I want to thank the team for their hard work this quarter. And with that, turn it over to John. John Gottfried: Thanks, Reggie, and good morning. My remarks today will focus on our quarterly results, our 2026 outlook, and then closing with an update on our balance sheet. Our message is clear. We are continuing to see strength across our dual platforms. And with multiple avenues of growth, our team is laser-focused on driving earnings and NAV growth. Starting with our fourth quarter results. We reported same property NOI growth of 6.3% for the quarter and 5.7% for the year. Coming in at the upper end of our guidance, with our street and urban portfolio once again driving our growth. And this top-line growth is hitting our bottom-line earnings. We reported $0.34 a share for the fourth quarter, which included $0.03 of gains from our final sale of Albertsons shares. Just to lay out a clean run rate, once we back out the 3¢ of Albertsons gains and the one-time penny of net real estate tax savings highlighted in our release, we're at 30¢ for the quarter, which is sequentially up an incremental penny from the 29¢ also net of the gains and promotes that we reported in Q3. Additionally, and in line with our goals, we increased the REIT's economic occupancy another 30 basis points to 93.9%. It's also worth highlighting that our street and urban economic occupancies sequentially increased an additional 80 basis points during the fourth quarter and 370 basis points over the course of 2025. But as we've said before, not all occupancy is created equal. With street and urban occupancy at approximately 90%, versus prior peak levels that were in excess of 95%, we continue to see meaningful embedded NOI and earnings growth. I'd now like to highlight a few items from our signed, not open pipeline. First, our pipeline of $8.9 million at December 31 remains elevated with ABR at our share of approximately 4% of in-place rents. And with the incremental leasing opportunities that AJ discussed, we should be able to maintain an opportunity to exceed our current pipeline setting us up for continued growth heading into 2027 and beyond. Substantially, of our $8.9 million pipeline is expected to commence in 2026 with roughly 25% commencing in each of Q1 and Q2. And the remaining portion commencing in the second half of the year heavily weighted towards the fourth quarter. And based on this timing, we expect approximately $4 million of ABR to be reflected in NOI in 2026, with the incremental $4.9 million in 2027. Secondly, in terms of the portion of our pipeline related to our same store pool, we executed $1.5 million of new same store leases fully replacing the $1.5 million of leases that commenced during the quarter. Meaning our ongoing same property growth trajectory remains intact. Third, and as a reminder, our pipeline reflects only incremental ABR, and excludes leases on occupied space. And we have over $1 million of executed leases on spaces currently occupied, which is incremental to the $8.9 million in our pipeline. Now moving on to our guidance. As a reminder and outlined in our release, we have simplified our reporting beginning with our 2026 guidance. And we want to thank both the buy side and sell side for their input and their strong support in making this important change. Our new metric, FFO as adjusted, excludes gains from our investment management business along with any material, noncomparable items that we believe are not reflective of our core operating results. As outlined in our release, we are anticipating 2026 FFO as adjusted between $1.21 and $1.25 and projecting same property NOI growth of 5% to 9%, excluding redevelopments. With our Street anticipated to deliver about 400 basis points of outperformance as compared to our suburban portfolio. I want to start with a few thoughts on our guidance ranges and what factors will determine where we ultimately land. Keeping in mind that $1.4 million currently represents about a penny of FFO, and a 100 basis points of annual safe property NOI growth. And three key factors will determine where we land within these ranges. First, our assumptions regarding rent commencement dates on executed leases. With 4% of our ABR anticipated to commence in 2026, each month of an acceleration or delay as compared to our initial projection equates to approximately $750,000. Second is credit loss. At the midpoint of our guidance, we've assumed approximately 115 basis points against minimum rents, which is in addition to known or specific reserves we have factored in for known tenant issues. And for context, 150 basis points feels fairly conservative relative to the roughly 50 basis points have averaged over the prior two years. And lastly and potentially most impactful, is the pride lose strategy that AJ discussed. While it's not factored into our base case, our active management and leasing teams are actively pruning our portfolio to accelerate these opportunities. And while greater success in these efforts may impact our short-term results, it accelerates our long-term growth and value creation. Also want to hit on a few other items as it relates to our 2026 assumptions. First, alongside our projected 5% to 9% same property NOI growth, we expect total pro rata NOI including redevelopments and investment management, to increase approximately 15% to roughly $230 million at the midpoint compared with the approximately $200 million that we reported in 2025. Secondly, and as outlined in our release, our earnings guidance, including the numbers I the NOI numbers I just mentioned, not factor in any acquisitions or dispositions other than those that we've reported in our release. And as you've heard from Ken and Reggie, we have consistently delivered in excess of $500 million of annual transaction volume we continue to target a penny of FFO accretion incremental gross asset value acquired. Whether it's for the REIT or our I'm business. And finally, I'll close with an update on our balance sheet. With our pro rata debt to EBITDA at about five times, meaningful liquidity on our credit facilities, along with anticipated capital coming back from our investment management and structured finance businesses not only have we fully funded our Henderson development project, our balance sheet has several $100 million of dry powder on call to play offense. Additionally, we do not have any material debt maturities in 2026, and are well hedged against interest rate volatility. And with our weighted average borrowing cost of 4.5%, and five-year unsecured funding, available to us today at similar pricing we do not expect any material interest expense pressure as our debt maturities roll. The course of 2026, we intend to continue working with our capital partners to strategically and accretively refinance and extend duration across our portfolio. As debt markets remain wide open to us, with both the availability of credit and spreads at record lows. So in summary, not only were you projecting strong earnings and NOI growth in 2026, our multiyear goal is to position our portfolio to deliver sustained, 5% growth. And as we look beyond 2026, we have multiple clearly identifiable drivers that position us to achieve just that. And as Ken laid out in his remarks, those drivers include street lease-up and mark-to-market opportunities. We have roughly 500 basis points of embedded street occupancy upside, along with meaningful mark-to-market on expiring leases. And when combined with a 3% contractual rent growth, in our existing street leases, this adds an opportunity for several 100 basis points of incremental growth. Second is our redevelopments. We already have $3.5 million of executed leases in our redevelopment pipeline that we anticipate will come online in late 2026. With the vast majority of it coming from our two redevelopment projects in San Francisco. And as AJ mentioned, leasing momentum in San Francisco continues to build as tenant demand returns. And upon stabilization, inclusive of our S and O pipeline, we estimate these two projects alone will contribute an additional $7 to $9 million of NOI beyond those amounts included in 2026. Translating to approximately 3 to 5¢ of incremental FFO net of the capitalized interest in and retenanting cost. Third is Henderson Avenue. We've discussed on past calls, Henderson is tracking to stabilize in 2027 and 2028, and we continue to anticipate a high single-digit yield on our cost. Which means that upon stabilization, the project is poised to deliver 3 to 5¢ of incremental FFO. And keep in mind, that's just phase one of the project. We already have and will continue to add sites on Henderson Avenue. Which we anticipate quickly become one of our top-performing street retail quarters. And lastly is external growth. With the balance sheet positioned for offense, several $100 million of available capacity, we will remain disciplined but anticipate being highly active on the investment. These are just a few of the key drivers that give us confidence of achieving sustained 5% growth. With opportunity for additional upside on items I haven't even touched on. Whether it's City Point in Brooklyn, lease-up of 840 North Michigan Avenue in Chicago, the pride lose opportunities on our street, or the numerous and accretive redevelopment opportunities embedded throughout our portfolio. At the sake of getting to your questions, I will stop here and turn the call over to the operator for questions. Operator: Thank you. Ladies and gentlemen, to ask to be announced. To withdraw your question, simply press 11 again. As a reminder, please limit yourself to two questions per person. If you have any additional questions, you may reenter the queue if time permits. Please stand by while we compile the candidate roster. Our first question coming from the line of Samir Khanal with Bank of America Securities. Your line is now open. Samir Khanal: Good afternoon, everybody. I guess, Ken or John, I mean, you gave a lot of good details on kind of the acquisition environment, you know, the advanced stages of negotiations you're in. Maybe expand a little bit on kind of the markets and kind of what you're seeing from a pricing perspective. Ken Bernstein: Sure. I'll start it off, and then, Reggie, perhaps you'll add some more color to it. In general, the markets that we are currently active in and that you've seen the acquisitions over the last couple of years, ranging from New York, SoHo, Williamsburg down to DC, continue to be very exciting for us. There are probably a half a dozen other markets that we either have been active in and will continue at and some new markets. In terms of pricing, it's very tricky to talk about going in cap rates because rents have moved. AJ mentioned the mark to market in SoHo of 50%. So if a cap rate would be substantially lower on a lease that you know you have near-term 50% increase than one that is at market. So I'm hesitant to give going in yields other than to say we are still shooting for our overall goal of acquiring assets, that through contractual growth, and periodic fair market value resets mark to market can throw off a 5% CAGR over the next five years. And we're seeing that in the markets we're currently active in. And our retailers are showing us other markets, that makes sense in that same profile as well. Reggie, I don't know if there's anything additional you wanna add. Reggie Livingston: Yeah. I would just say that, you know, we go through a rigorous process, Samir, of looking at potential new markets. Just making sure they have those same growth characteristics of our existing markets, the tight supply, the tenant performance, and work extensively with AJ and his team, as Ken said, to understand what do tenants wanna be? And how can we find the right entry point in those markets? And then is there an opportunity to scale in those markets as we've often talked about the benefits of that scale? So go through a rigorous process with that, and we think there are new markets on the horizon. Samir Khanal: Thank you for that. And then, John, on the assumption for same store NOI growth, I know that 5% to 9%, you talked about sort of the swing factors there. I just want to make sure, is rent commencement and sort of credit loss assumptions sort of the main factors to kind of get you the high end and the low end there, or are you kind of missing on something else? John Gottfried: Yeah. I mean, I think it's a combination of three, Samir, but I would say it's really the piece that I wanted to highlight that I think, you know, as we've been posting and talking about there's a lot of below-market leases on our portfolio. And to the extent we could get those leases out, that's gonna create short-term downtime. Which we haven't filled in, into that, but one, we are actively hoping to do it. So I'd say the other ones could move, you know, 100 basis points here or there. But I think if we do our job and we could accelerate mark-to-markets on this, short-term quarterly downtime that we could get from that, we're gonna take that to get the long-term growth. So I would say that's probably the most impactful of where we land within that range. And we'll update throughout the quarters as to our progress on that. Ken Bernstein: And then under any circumstance, we're still looking at a robust 5% to 9%. Barring significant credit loss or other things, which feels pretty darn good. Operator: Our next question's coming from the line of Craig Mailman with Citi. Your line is now open. Craig Mailman: Hey. Good morning, guys. You know, I don't wanna put words in your mouth, but John, maybe it feels like reading between the lines there's plenty of variables that could, you know, make guidance here a little bit conservative. I'm just trying to figure out, you know, some of the things that AJ talked about on the kind of blend and extends and the pry loose, like, how do you guys go about figuring out what to include in guidance versus what's lower probability? Or maybe another way of asking that is, like, how much of low probability kind of upside could there be that you didn't include in guidance, but maybe relative to the past couple of years, you guys have been able to capture above and beyond that initial projection. John Gottfried: Yeah. Craig, so I think, you know, I think if you've known the way that we put out our guidance, we tend to set realistic goals and we achieve those versus putting in super soft assumptions that we would miraculously be the next quarter. So I'll just start with that, that philosophy is unchanged. What I'll say has changed is the environment that we're in. So in terms of, you know, we are not going to, as much as I trust AJ, if he tells me he's gonna get a 50% spread and open that lease in two weeks, I am absolutely not going to put that in our guidance. So I think if there's things that are not within our control, we're not gonna layer that assumption in there. I do think our credit is conservative as I put in my remarks. It's double what we needed in the prior two years. And we've also pulled out known specific or so I think to the extent we had a tenant struggling, so think, you know, we have one a single container store. You should assume that is not included in our guidance. So think there is a bit of conservatism there. But I think where we, I will say we have a lot of conservatism is on the active on the investment side. Several $100 million of forward equity. Reggie talked about the pipeline. And we're gonna be busy there. So I think that's where the upside is. The other thing is can add a penny or 2 here or there. But I think it's really our upside is gonna be from the external growth in '26. Some of the drivers for '27 and beyond, there's a lot of upside in those, which I tried to articulate, you know, with that setup going beyond this the current year. Ken Bernstein: And that just to reinforce that, whether it's pry loose, fair market value resets, or other drivers, it will probably have less of a needle-moving impact this year in '26 and more set us up stronger '27 and '28, which is how we're really thinking about this. We like how our numbers are stacking up for the foreseeable future, we wanna make sure we're continuing to extend that. Craig Mailman: That makes sense. That's helpful. And I apologize. My line was breaking in and out. Reggie, did I hear you say $500 million of kind of a near-term deal pipeline and is that correct? Reggie Livingston: I'm saying that the $150 million under agreement. But we feel confident we can always do the run rate that we've done the past two years with half of it IMP and half of it street. Ken Bernstein: And that's where the 500? Would come in? Yep. Craig Mailman: So is it another I sorry to belabor. But you guys already did the $4.25 through Skyview. Like, do you view that as your 20% So the $1.50 that Reggie's referring to is on balance sheet, 100% owned street retail assets. Reggie Livingston: New and not discussed. Craig Mailman: Yes. Until right now. Ken Bernstein: Okay. And what do you think timing on that could be? Reggie Livingston: Q1. Let's stay tuned. Craig Mailman: Okay. Great. Thank you. Operator: Our next question coming from the line of Linda Tsai with Jefferies. Your line is now open. Linda Tsai: Hi. Good morning. Any thoughts on where the 90% street occupancy could end by year-end? John Gottfried: Yeah. So I think, Linda, again, what I would say is that I look more in terms of NOI than on occupancy. So, you know, we have a single location in Soho. That's gonna have a far greater impact than, you know, a location that we have elsewhere in our portfolio. So the percentage I will say, is less relevant. But, you know, what I would say, you know, our goal continues to be is that we wanna get to that 95%. Know, call that within eighteen months. Linda Tsai: Thanks. And just one question for Ken. Any high-level color on how tariffs might have shown up in retailer results in 2025? Either from a sales or margin perspective, and how this might change in '26? Ken Bernstein: So I've had a variety of those conversations with as many of the retailers that we have in our portfolio that we meet with regularly. And the first answer is it's somewhat varied retailer by retailer. The general takeaway would be most of our retailers believe that they have navigated through the toughest parts of that storm. Now, obviously, things seem to change every day. And we would all welcome more predictability. But it feels first and foremost that the most difficult parts of that are in the rearview mirror. Secondly, and probably the most important to us, on the street retail side, this is a little different on our mass merchant side, but for our street retailers, they've been able to adequately navigate around tariffs and hold on to margins defined from our perspective. Such that the traditional rent-to-sales ratios that we have always talked about, whether it's 8% for a restaurant or 12% for certain advanced contemporary and 18% for others. Those ratios are holding. And thus, and this is important, as sales increase, whether it's due to slightly stronger inflation or strong consumer, consistent consumer demand, as you see top-line sales grow, you should expect retailers' ability to pay that increased rent has remained very similar today to where it was five, ten years ago. There's not been that shift of margin pressure resulting in any kind of pushback in terms of our rent requests. Our retailers are opening these stores. They're profitable. And while they always want to pay less rent, they are not looking to or blaming the noise around tariffs as the gating issue. Operator: Thank you. Our next question coming from the line of Todd Thomas with KeyBanc Capital Markets. Your line is now open. Todd Thomas: Hi. Thanks. Good morning. I wanted to just go back to the acquisitions. And the pipeline, you know, the, I guess, really the $150 million that the company's been awarded and maybe perhaps a little bit more broadly, you think about investments during the year. You've been active in New York more recently. And Ken, you mentioned there could be some new markets. But is the opportunity set that you're seeing in New York on a risk-adjusted basis just most favorable today? How should we think about future investment activity in the markets that you're sort of focusing on or, you know, readying to deploy capital on more near term here? Ken Bernstein: Yeah. So let me start and Reg then chime in. New York is probably a more competitive market. So where we can find deals, often they are more often than not off-market and New York will continue to do those, but you should expect to see us go into other established markets, established meaning obvious that our retailers are there and want to be there as long as we can have a view that there can be follow-on deals such that we can build scale. And we have built a nice portfolio in New York, continue to plan on adding to it. But my expectation is other markets will kick in as well. Reg, anything you wanna add to that? Reggie Livingston: Yeah. I would just say with the competition you alluded to, there's certainly more competition. But I would say not too long ago, the issue was bringing sellers for street retail, bringing them off the sidelines to decide whether they wanted to sell or not. A lot of them, because of the retail fundamentals, they've decided to sell, and so now we're just in competition with others, and I'd like that back pattern for us because it usually goes to those who have the reputation, have the capitalization, have the experience. And we feel we do well in that environment. Todd Thomas: Okay. And then, you know, Ken, you didn't mention Chicago. When you were discussing markets that remain exciting. And you just listed a couple. But how are you thinking about Chicago today in terms of both capital deployment for newer deals and also as a potential opportunity to maybe recycle capital out of? Ken Bernstein: Yeah. So let's first start with fundamentals because I think Chicago has until recently been getting a bum rap. And if you look at our metrics, if you look at our rental growth, especially on our major markets, whether it's the Gold Coast or Armitage Avenue, one of our tenants is paying percentage rent on State Street. That's fantastic. And it puts that store in one of the top of their chain. So in general, the fundamentals have recovered pretty darn strong. And that's good and encouraging to us. That being said, we still have too much ownership in Chicago relative to the rest of our portfolio. And it would make sense over the next year or two as we lease up assets. If they are not part of our scale strategy on a given corridor, it would make sense for us to prune. A goal of ours, we'll see if we can get there, is over the next two to three years, to get Chicago to that right balance which would mean even though we do periodically see some good acquisition opportunities, and even though we have seen some really strong rental growth, we don't intend to add, and we probably will, subtract in Chicago in due course. But thank goodness we did not fire sales stuff because the rent spreads and new tenant demand, the deals we've done, whether it would be Mango or KIF, thank goodness we didn't exit before those. But we recognize the rebalancing. Operator: Thank you. Our next question coming from the line of Michael Mueller with JPMorgan. Your line is now open. Michael Mueller: Yeah. Hi. I guess, first of all, I think you made a comment you'd like to be at 95% street occupancy in the next eighteen months. Is a lease number or an occupied number? And how should we think about, you know, ballpark blended rent per square foot for that 500 basis points? At least a range. John Gottfried: Yeah. So, Mike, I would say that it would be when we say least, to give us some room. Upside to have it occupied and paying. Then in terms and Mike, you know, we've had this conversation a bunch of times. It's going to absolutely matter what within that 95% we get leased up. So, for example, we could look through our portfolio. We have a single location in Soho. That is going to be in the, you know, that's going to be a very large lease, which will have a big economic impact and a relatively small impact on the occupancy. So it's really, and I know it makes it challenging in your seat, but to put a blanket number on every 100 basis points equals x, it is really it really is case by case. But what I would say is that stepping back, is several 100 basis points of NOI growth. And several cents of bottom-line FFO growth. Michael Mueller: Got it. Okay. And then for the second question, I guess, just looking across the portfolio, and I was thinking about the Madison Avenue investments, but just generally speaking, is there, like, a cap to a level of single store investment that you would make? You know, like, is it $5 million, $50 million, $100 million? Like, what should we be thinking up there? What sort of guidelines for that? Ken Bernstein: Yeah. Generally, for the streets that we're active in or most active in, it's more how small an add-on deal are we willing to do. And you see periodically, we'll do some small bolt-ons on Armitage Avenue. On the too large, you're really talking about 5th Avenue boxes, and we have been hesitant to jump into that because the outcome or the volatility of a very large single tenant acquisition and we lived out on North Michigan Avenue, the volatility is at least for a company of our size at this time, something we've always been cautious about. Worry more about us doing too many small deals than us biting one big chunky single asset deal if you're talking about a single building. If you're talking about buying a corridor and putting several 100 millions of dollars to work quickly that we would do all day long. Operator: Thank you. Our next question coming from the line of Floris van Dijkum with Ladenburg Thalmann. Line is now open. Floris van Dijkum: Hey. Thanks, guys, for taking my question. Wanted to touch on the acquisition pipeline a little bit more. I think, Reggie, you indicated it was $150 million of transactions under agreement right now. Can you give us a percentage of what is New York versus other markets? Reggie Livingston: Well, without getting too far ahead, I would say that those are the other markets. That fall into the other markets category. Floris van Dijkum: Got it. Okay. So the $150 under agreement would typically be outside of New York then? Is that the right way to interpret that? Reggie Livingston: Correct. Floris van Dijkum: And then, you know, one of the other things that we've seen happen in SOHO in particular, I think with Ralph Lauren and with IKEA. Buying, you know, retailers buying their own store. Are you seeing competition for transactions from retailers themselves and or have retailers indicated, you know, a desire maybe to purchase a store from your portfolio? Ken Bernstein: Hold on. I'll take that one. So, so far, and, AJ, correct me if I'm wrong. It's very rare that retailers, well, one or two have come to us. But usually, if retailers as competition, they're fairly too very selective. We tend not to, when we're working on deals, have a retailer be our competition. But I think, again, it speaks to the commitment that retailers are willing to make to these corridors. And in general, I find it encouraging. That being said, if I find we're bidding against one and we lose, then I'll be pissed. So, stay tuned. Operator: Thank you. And I'm showing no further questions in the queue at this time. I will now turn the call back over to Mr. Bernstein for any closing remarks. Ken Bernstein: Great. Well, thank you all for the time, and we look forward to speaking to you next quarter. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Good day, ladies and gentlemen, and welcome to the SoundPoint Meridian Capital Inc. Third Fiscal Quarter ended on December 31, 2025. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded on Wednesday, February 11, 2026. I would now like to turn the conference over to Julie Smith, Head of Investor Relations. Please go ahead. Julie Smith: Ladies and gentlemen, thank you for standing by. SoundPoint Meridian Capital refers participants on this call to the investor webpage at www.soundpointmeridiancap.com for the press release, investor information, and filings with the Securities and Exchange Commission, and for a discussion of the risks that can affect the business. SoundPoint Meridian Capital specifically refers participants to the presentation furnished today on the Form 8-Ks with the SEC and to remind listeners that some of the comments today may contain forward-looking statements. And as such, will be subject to risks and uncertainties, which if they materialize, could materially affect results. Reference is made to the section titled Forward-Looking Statements in the company's earnings press release for the period ended December 31, 2025, which is incorporated herein by reference. We note forward-looking statements, whether written or oral, include, but are not limited to, SoundPoint Meridian Capital's expectation or prediction of financial and business performance and conditions, as well as its competitive and industry outlook. Forward-looking statements are subject to risks, uncertainties, and assumptions, if they materialize, could materially affect results. And such forward-looking statements do not guarantee performance. And SoundPoint Meridian Capital gives no such assurances. SoundPoint Meridian Capital is under no obligation and disclaims any obligation to update, alter, or otherwise revise any forward-looking statements. Whether as a result of new information, future events, or otherwise, except as required by law. In addition, historical data pertaining to the operating results and other performance indicators applicable to SoundPoint Meridian Capital are not necessarily indicative of results to be achieved in succeeding periods. I will now turn the call over to Ujjaval Desai, Chief Executive Officer of SoundPoint Meridian Capital. Ujjaval Desai: Thank you to everyone joining us today, and welcome to the SoundPoint Meridian Capital earnings call for the third fiscal quarter ended December 31, 2025. We'd like to invite you to download our investor presentation from our website, which provides additional information about the company and our portfolio. With me today is our Chief Financial Officer, Dan Fabian, and after our prepared remarks, we will open up the call to your questions. For the third fiscal quarter ended December 31, 2025, we generated net investment income (NII) of $9 million or 44¢ per share and recorded a net realized loss of 5¢ per share on exited investments. We paid distributions of 75¢ per share during the quarter. The shortfall in NII relative to common distributions reflects the impact of persistent loan spread compression, elevated CLO liability costs, and reduced excess credit available to equity investors during the quarter. Net asset value (NAV) per share ended the quarter at $14.02, down from $16.91 as of September 30, 2025. NAV declined primarily due to mark-to-market pressure in CLO equity valuations, as buyers stepped back late in the year despite generally stable underlying credit performance. During the quarter, we deployed approximately $6.8 million in two warehouse investments, purchased three new issue equity positions with an amortized cost of $11.29 million and a weighted average cap yield of 9.31%, and purchased one new equity investment in the secondary market with an amortized cost of $5.23 million and a yield of 15.6%. We also sold two equity investments with an amortized cost of $8.1 million and an average yield of 15.6% and refinanced the liabilities of 10 equity investments. We deployed an additional $4.48 million related to these refinancing activities. As of quarter-end, our CLO equity portfolio's weighted average gap yield was 11% versus 12% in the prior quarter, driven in large part by seven basis points of weighted average spread loss in our underlying portfolios. The decline in portfolio yield underscores the unprecedented scale of repricing activity across the leveraged loan market over the past two years, which has meaningfully reduced asset spreads available to CLO equity. Subsequent to quarter-end, we announced monthly distributions for calendar Q2 2026 of 20¢ per share, down from our previously announced Q1 2026 monthly distribution of 25¢ per share. In setting the revised distribution level, the board considered a range of factors, including current and expected portfolio yield, the importance of maintaining balance sheet flexibility, and our objective of supporting net asset value over time. While we believe our CLO equity investments have significant refinancing optionality in 2026, which may offset the effect of loan yield compression, the sheer pace of loan repricing activity throughout the quarter and, frankly, over the past two years ultimately led to the decrease in our monthly distributions. We remain committed to our obligations as a regulated investment company and will continue to distribute at least the required portion of taxable income while evaluating distribution levels as earnings, market conditions, and portfolio positioning evolve. Our portfolio continues to be highly diversified with 97 CLOs across 30 managers, providing exposure to over 1,500 loan issuers spanning over 30 industries on a look-through basis. In an environment characterized by increasing dispersion across sectors, credits, and managers, this diversification remains an important risk management tool. I'll now turn the call over to Dan for a more detailed review of our financial highlights for the quarter. Dan Fabian: Thanks, Ujjaval, and hello, everyone. As Ujjaval mentioned, for the quarter ended December 31, 2025, we delivered net investment income of $9 million or 44¢ per share. For the quarter ended December 31, 2025, we recorded a net realized loss of $1.1 million and an unrealized loss on investments of $51.8 million. Total expenses during the quarter were $9 million. The GAAP net loss for the quarter was $43.9 million or a loss of $2.14 per share. Moving to our balance sheet, as of December 31, 2025, total assets were $474.7 million. Net assets were $287.9 million and our net asset value stood at $14.02 per share. The fair value of our investment portfolio stood at $473.5 million while available liquidity consisting of cash was approximately $525,000 at the end of the quarter. As of December 31, 2025, the company had outstanding debt that totaled 39% of total assets. During the quarter, we declared monthly cash distributions of $0.25 per share payable in January and March. Based on our share price as of December 31, 2025, this represents an annualized dividend yield of 21.8%. Subsequent to quarter-end, and as Ujjaval previously mentioned, we announced our calendar Q2 2026 distributions this morning. As of January 31, 2026, our estimated net asset value per common share was $13.40. I will now turn it back to Ujjaval, our CEO, to provide an update on the CLO market. Ujjaval Desai: Thanks, Dan. Before we move on to the Q&A, I would like to provide a brief update on the market environment for corporate loans and CLO equity. The US leveraged loan market remained highly active in 2025, with primary broadly syndicated loan activity exceeding $1 trillion, resulting in one of the strongest years of growth by volume in the last decade. Notably, roughly half of that volume came from repricing amendments, which do not represent new supply for investors. Supply levels were further constrained by below-average LBO and M&A activity, which failed to rebound over the year amid policy volatility and heightened macro uncertainty. The result of limited loan supply coupled with robust investor demand resulted in relentless loan spread compression in 2025. The de-weighted average spread of the Morningstar leveraged loan index dropped 21 basis points over the year to SOFR plus 3.2%, the lowest level since 2012. For the single B subset, the compression was even more pronounced, falling 29 basis points in 2025 and 52 basis points over the past two years. Simultaneously, volatility failed to provide relief as loans rebounded quickly from the post-liberation day tariff shock. CLO liabilities remained range-bound. This resulted in the CLO weighted average cost of capital remaining nearly unchanged from the start of 2025 despite loan spread compression weakening the overall CLO equity arbitrage. Despite tight spreads and limited supply, US managers priced $55 billion in new issue CLOs in the fourth quarter, setting a new annual issuance record for the second consecutive year. This new issuance was predominantly driven by manager-controlled captive funds. While broader credit fundamentals remain generally stable, 2025 was marked by increasing dispersion across the loan market. Sector-specific headwinds, issuer-level challenges, and elevated liability management activity contributed to a more bifurcated environment with stronger credits continuing to refinance while weaker credits faced mounting pressure. A small number of highly visible idiosyncratic credit events added to investor caution and reinforced sensitivity to downside risk even as headline default rates remained near historical averages. Taken together, these dynamics increase differentiation across CLO portfolios and underscore the importance of manager selection, structural protections, and active portfolio oversight as we enter 2026. Looking ahead, in 2026, the loan market is expected to transition away from the repricing-dominated environment of 2024 and 2025 towards modest growth in true new money issuance. Importantly, the composition of supply is expected to improve with LBO and M&A volume projected to increase, supported by lower borrowing costs, improved policy visibility, deregulation tailwinds, and an improving sponsor exit backdrop. On the other side of the coin, CLO liabilities do not need to materially tighten from here for equity use to improve. Rather, a period of relative stability in liability spreads would allow refinancing and reset activity to proceed on an accretive basis, lowering overall funding costs and partially offsetting the impact of loan spread compression. In this environment, execution, market access, and timing will be critical. And we believe a reduction in debt cost may significantly offset loan spread tightening seen throughout 2025 and increase the equity arbitrage throughout 2026, which we view as a welcome development after a technically challenged year. With that, we thank you for your time, and would like to open up the call for any questions. Operator? Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Mickey Schiff Schleien from Clear Street. Please go ahead. Mickey Schiff Schleien: Yes. Good morning, everyone. Ujjaval, I think you mentioned CLO captive funds. And there's been increasing discussion about them accepting, you know, lower equity returns because they can obviously capture management fees and incentive fees. Could you help us understand how meaningful that group has been in 2025 and, you know, how do you think that group is going to behave going forward? Ujjaval Desai: Sure. Hi, Mickey. How are you doing? So that's a very interesting question. I think captive funds as a whole, right, have certainly been driving the new loan market, new issue CLO market, rather, for 2025. I think, currently, you know, I would say 95% of CLO equity CLOs being issued are driven by captive funds. For the reasons you mentioned, I think they, you know, there is a need to have the money that has been raised by these funds, and there's a need to invest that capital. And so they can be more long-term focused rather than just looking at the returns that exist today. And, unfortunately, given that the loan market, you know, didn't grow as much last year, but new issue CLO supply continued to grow, that resulted in this supply-demand imbalance. Which meant loan spreads continued to tighten because there was, you know, demand for loans from CLOs. While CLO liability papers stayed wide because a lot of CLOs were being issued. And so, you know, that sort of imbalance was not healthy. Now, looking ahead, you know, we're seeing, as I said in my remarks, we're seeing a lot more new issue loan activity. So hopefully, that will offset the somewhat offset the demand from captive funds, and hopefully bring the arbitrage sort of back towards where, you know, it would make sense for other investors to also start investing in new issue equity. Mickey Schiff Schleien: If I could just follow-up then, sort of back of the envelope, I understand what you're saying in terms of their ability to capture fees, which third-party investors like yourselves may not be able to do, but there's got to be a point where even taking those fees into account, you know, we sort of reach a trough. Do you think we're anywhere near that trough from their perspective? Ujjaval Desai: Well, again, I don't want to sort of talk or dispatch any particular group of participants in the market. But the reality is that, you know, if you have a fund raised already, you know, you have to put that money to work. And so there isn't any, I mean, the manager decides, you know, which investment they want to do and when they want to do a CLO. So the return that they get on that deal, you know, depends on how you model it. And so, you know, you can use a lot of different assumptions to make the numbers look good, unfortunately. So I don't know if there is a particular threshold beyond which they will stop investing in their own CLOs. Because, you know, you can assume that, you know, defaults will be lower in the future, you know, spreads will be wider, and you can kind of justify whatever returns you like. So I don't know. It depends on how each person behaves. I think, ultimately, you know, these captive funds, the returns that the investors get is sort of, you know, long-term returns. They're not mark-to-market. So, ultimately, when those funds, you know, reach the end of their life, that's when investors will see what the returns really have been. So until then, you know, it's all up to the managers themselves to be disciplined. And I think we have seen some managers are very disciplined and some are not. So that's, unfortunately, it's very hard to predict exactly how they're going to react given the challenging spread environment they have now. Mickey Schiff Schleien: I understand. I think in your prepared remarks, you discussed loan spreads, which are, you know, the tightest they've been since the financial crisis. And that's obviously weighed on, you know, spread availability or the arbitrage for CLO equity. With that in mind, you know, how much more refinancing risk or repricing risk do you see embedded in your portfolio? Ujjaval Desai: Yeah. So that's a great question. I think it sort of depends on sort of day by day where loans are trading. You know, I think right now, you know, the percentage of loans trading above par, which is basically a metric that we can use to estimate or project, you know, what percent of loans would get repriced. That percentage is, you know, fairly low. It's around, you know, 15-20% of the market. It used to be about 60% a couple of weeks ago, so there has been some volatility in the market as we've all seen through, you know, due to AI and software names. And so that has reduced the percentage of loans trading above par. So as of now, I think the repricing activity is going to be fairly subdued. And if the new issue pipeline of loans materializes, which we are hearing, there's a big pipeline and certain deals are coming to the market now, some large ones. So that, I think, will certainly put, you know, should put more pressure on secondary prices in the loan market to stay, you know, at or below par, and that certainly would restrict repricing activity further. So we're, I mean, based on, again, all indications as of now, it feels that the repricing activity has probably reached, you know, a low point, and hopefully spreads in these loan portfolios, you know, will increase going forward if the new issue pipeline materializes. Mickey Schiff Schleien: And lastly, at least from my perspective, you just mentioned AI. When you talk to your managers, you know, how are they approaching management of that risk? And, you know, what's their thesis of their potential impact on AI on their portfolios? Ujjaval Desai: Yeah. So I think it's that's obviously a very topical issue right now. It's, I feel it's name by name. You have to look at each credit and analyze the risk of, you know, being impacted negatively by AI. I think where we are today is that the market, the loan market, as well as, you know, equity and other markets, kind of had a knee-jerk reaction and, you know, every name in that subsector got, you know, got sold off. Despite so regardless of the credit quality of that particular company. So I think what we are seeing now is, you know, you know, the better managers are doing a lot of detailed analysis of the portfolio. They've been doing it for a while, obviously, but I think we are hopeful that, you know, this sort of sell-off of the entire sector creates some interesting investment opportunities where certain loans may have sold off too much, and managers can finally trade their portfolio and build par by buying cheaper sort of low-priced assets that have sold off in sympathy with sort of the sector news. So I think it's going to come down to name by name analysis. And I don't think we can just say the entire sector is bad. There will be some names for sure that will get materially impacted. And the work we're doing, the work our managers are doing is sort of looking at those names and identifying which ones are going to be the winners here. And I think that is a welcome despite for CLO equity. Because last year, what we saw was, you know, the names that were struggling, those loans, the prices went down. Everything else kind of stayed at par or above par. That environment, it was extremely difficult for people to build par or trade their portfolio. Because you couldn't if you sold something, you couldn't buy something else to replace that lost par. Now with more kind of broad-based selling in certain sectors, I think that gives you this opportunity to risk manage the book better. And I think that's certainly, I feel it's much better for CLO equity than the other way around. So that's all I would say. I think, again, the whole AI story is still in sort of early stages today. And the impact is going to be more long-term than short-term. So we'll have to see how that plays out. Mickey Schiff Schleien: I understand. That's really interesting. I appreciate you taking my questions, and I look forward to talking to you soon. Thank you. Ujjaval Desai: Of course. Thanks, Mickey. Operator: Your next question comes from Eric Zwick from Lucid Capital Markets. Please go ahead. Eric Zwick: Wanted to start with a question looking at slide 10 of your deck. You quantify the potential estimated savings from your investments that are either already out of their non-call period or coming to their out of their non-call period in the next five quarters is 28 basis points. And if I compare that to last quarter's slide, the amount was 41 basis points. Curious, one, is that change from 41 to 28 purely a reflection of the, you know, resets or refinances that you completed during the last period, or is there something else that has impacted that number as well? Ujjaval Desai: Yes. Good question. Yes. That is exactly correct that we completed 10 refinancings last year. Sorry, last quarter, rather. And so those were the highest, you know, cost of liability deals. So if you think about the portfolio, the deals that are callable, you know, that were callable last quarter, were the ones that were done two years prior. And at that time, liability levels were even higher than the subsequent quarter. So there has been a roll down in liabilities costs over time. So we tackled, obviously, the ones that were last quarter ones, the ones that had the highest cost of capital. And so those savings have been achieved. And then now we're going down to the next lot, which as you can see from here, you know, it reaches about 200 basis points and then drops down from there. So it's just a sort of roll down of that kind of the breakdown of the liability cost. So it's solely because of that. There's nothing else really that's contributing to that change in number. Eric Zwick: I appreciate the confirmation there. And then just thinking about, you know, kind of the action you took with the dividend and, you know, it's clear to see that, you know, the yield effective yield has come down in the portfolio, that the gap NII has come down. However, when I look at the cash flows on a quarterly basis, they've continued to trend higher over the last few quarters. So is there something that has not been reflected in the actual cash flows yet that they're lagging kind of some of the larger portfolio dynamics as well, or how should I interpret that? Ujjaval Desai: Yeah. So I think the first part of the question, let's take a look at both of them separately. The first one is, yes, so the portfolio yields have come down, and we have talked about why. That's just because of the spread compression in the loan market. And so our portfolio yield, which stands at 11% now, down from 12%. So certainly, there is less income because of that GAAP income, and so we have adjusted our dividend to reflect that. In terms of your question on higher cash flow, that's just because when we refinance those deals, there is extra, you know, additional sort of cash generated through the refinancing activity. And so that's really the reason why the cash flow is higher. We can certainly provide additional details to you separately, but that's not because of the yield. The yield has compressed, there's cash flow because we've been refinancing these transactions. Eric Zwick: Gotcha. Okay. So I'm trying to, you know, reach the end of your repricings and or, you know, spreads widen that opportunity, lessened potentially, you know, that portion of the cash flows would go down and then, you know, so I guess maybe what wasn't clear there to me was the amount of those cash flows coming from the refinancing has made that figure look even more robust than maybe the, kind of longer-term or maybe the regular run rate of the cash flows? Ujjaval Desai: Yeah. I think that's the right interpretation. But it depends on the deal. I mean, if we do a refinancing of a deal, sometimes there is, you know, excess cash flow that gets flushed out to the equity. So that's but that's all part of, you know, it's included in the price of the equity, but there is additional cash flow that gets released when a deal gets refinanced. And sometimes, obviously, when you refinance a deal, the go-forward cash flows increase from the refinancing. So that's kind of what we've been saying, that the go-forward yields will increase slowly. But on those deals that get refinanced, that cash flow goes up because you're paying less of a liability. So there's a combination of those factors. Eric Zwick: Okay. Thank you. And then just thinking a little bit about the NAV from here, maybe trying to look at it from a couple of different perspectives. One, you seem, you know, hopeful, if not optimistic, that the pace of, you know, asset repricing has been reduced at this point, which should alleviate some pressure there. You know, still have the opportunity that we've discussed to, you know, restore some of the arbitrage opportunity by refinancing some of the liabilities and then also, I think, you know, last quarter, you discussed, you know, if in periods of market volatility, you're able to become more active in the secondary market and make some attractive purchases. You know, kind of putting that together, do you feel like, you know, the near-term pressure on the NAV has been lessened at this point, and there's potentially opportunities to see that stabilize, if not even, you know, improve at some point, or is that still, you know, hard to tell at this juncture? Ujjaval Desai: Yeah. I think the so the two components here. Right? There is the cash flow component, which is dependent on the spread compression and what happens there, and we talked about that. The second component is the NAV itself. The NAV is the, you know, is, you know, is the price of the underlying equity positions we have in our portfolio. And that is dependent on, you know, not just fundamentals, but there are also technical factors there. In particular, kind of how much demand there is for CLO equity in the market. What we saw kind of towards the end of last quarter was that liquidity dried up. So if you as you headed towards year-end, there were fewer buyers of CLO equity. You know, if you look at sort of dealer desks, they were also not buying, so there's just less, you know, less of a buyer base for CLO equity towards the end of last year, and that's continued in January as well. And so that sort of, you know, technical vacuum, if you will, resulted in NAVs continuing to decrease. I think for that to change, obviously, the cash flow increased through, you know, spread increase in loans certainly will help, but you also need just more buyers and people to be just more comfortable stepping back into the CLO equity space. And that is, you know, we'll have to wait and see how that sort of changes. We're hopeful that that would be the case at some point. I think people will think that CLO equity is quite cheap. We believe it's cheap, but if everyone agrees with that, then more buyers step in, and that certainly would help improve the NAV. So but that's much more of a technical analysis, and hard to obviously control that. But I think what we're focused here is just making sure that the portfolio continues to do well. We continue to sort of refinance the deals that we can, you know, risk manage the portfolio, and over time, try to improve the cash flows inside these deals. And then the NAV and then the technical for that will be dependent on the market. But we think CLO equity is fairly attractively priced in the secondary market today. Eric Zwick: Thank you for taking my questions today. That was very helpful. Ujjaval Desai: Of course. Thanks. Operator: Thank you. Your next question comes from Tim D'Agostino from B. Riley Securities. Please go ahead. Tim D'Agostino: Yeah. Hi. Thank you, good morning. Some great commentary before. I guess the one question on my end and don't know if you've provided in the past or if you can provide it. But you just tell us a little bit, and provide some color on how the portfolio yield and spread has trended quarter to date or year to date? Obviously, compressing in '25, but it would be great to maybe just get a directional idea of what you're seeing so far in 2026. Thank you. Ujjaval Desai: So, I mean, we can talk about the, I mean, we talked about the loan spreads, how they've compressed. In terms of the portfolio yield, the gap yield of our portfolio, that reached, of course, almost 12% the previous quarter, up to 11%. And if you look at our January numbers, it's 11.4% right now. So it ticked up a little bit in January. 11.4 A lot of that is to do with sort of the refinancing activity that we are undertaking in the portfolio. So I don't know if that was your question, but that's in the slide deck we released this morning. Tim D'Agostino: Okay. Great. Yeah. No. Thank you so much. I must have missed that. I appreciate taking the question today. Ujjaval Desai: Of course. Thanks. Operator: Okay. There are no further questions at this time. As a reminder, if you wish to ask a question, please press star followed by number one. The next question comes from Gaurav Mehta from Alliance Global Partners. Please go ahead. Gaurav Mehta: Yeah. Thank you. Good morning. I wanted to ask you on the three CLO investments that you made in the primary new issue market. Specifically on the 9.3% yield, which seems like it's lower than the last few quarters. Can you provide some details on that yield and what kind of yields you're seeing in the primary market? Ujjaval Desai: Yes, Gaurav. Great question there. So the three investments we made last quarter, you know, there were two components to the yield. There is the warehouse income, and then there is the actual yield on the equity portion itself. So, you know, for us, at the end of the day, we look at the overall combined yield that we can earn on those investments. And so it's a combination of the warehouse income as well as the running yield. So when you combine those two things together, the yields that we're buying those equity positions at were pretty strong, sort of mid-teens type of yield. So that's why there's a, you know, there's a bifurcation. There's warehouse income under the 9.8% yield on the investments themselves. So we look at it as a package. And so those look pretty attractive. In terms of the overall new issue kind of activity, you know, it's an interesting dynamic there. I think we've been saying it that new issue equity hasn't looked that interesting all of last year and continues to look, you know, less attractive compared to secondary today. And you can see that in our stats. You can look at our stats in terms of how many new issued deals we're buying. In 2024, you know, our investments were split more 80% new issue, 20% secondary. Last year, that split went to around fifty-fifty, and a lot of that was driven in the first half of last year. And then sort of as we reached the second half of last year and now this year, the new issue activity has been very, very subdued. So to the extent we find the new issue deal that looks attractive on an overall package basis, we will certainly evaluate it, and we are doing a lot of that right now. But I think right now, we still find secondary equity to be, you know, very, very attractive relative to new issue. Gaurav Mehta: Alright. Thanks for that color. Also wanted to follow-up on the 11.4% yield that you reported in January. I think you mentioned part of that is driven by the refinancing in your portfolio. And does that reflect the 52 basis points that you reported in the slide deck, like complete 52 basis points or is there more refinancing to come that could help the yields? Ujjaval Desai: Sorry. Let me just see. 52 basis points. Which 52 basis points are you referring to? Gaurav Mehta: I think on the slide deck, number 10, it says 52 basis point savings expected in Q1 2026. I think in your remarks, you said that 11.4% was partly due to refinancing. So I guess my question is that 11.4%, does that reflect the complete 52 basis points or that partial and there could be more improvement in the yield because of refinancing in this quarter? Ujjaval Desai: Yeah. So that's right. So I think the way the yield works is that, you know, you will get some credit for deals that are, you know, callable immediately. And to the extent, you know, as you roll forward, you start to get credit for the next few months of deals. And then you, you know, but you don't get credit for the deals in the subsequent quarters. So some of that is reflected in the 11.4%. There will be some more increase from that. But then the second quarter deals are going to get closer to the non-call period, and then you start to get benefit from those deals as well as long as we can complete those refinancings. As long as the liability market stays where it is right now, then those will also get, you know, pulled up into our yield, and that should help the yield as well. So since we can't refinance all these at the time, we are doing obviously quarter by quarter. So the most immediate quarter some of that gets reflected in the yield. As we start doing them. But then the rest of them, you know, will get reflected over time. Gaurav Mehta: Okay. Thanks. My next question is on the dividend, $0.20 monthly rate. I was wondering if you could maybe provide some more color on how you got to that number and do you expect that dividend to be covered by NII at some point? Ujjaval Desai: Yes. So the as we said earlier, the Board decided to set the dividend level at 20¢ per month based on kind of our current yield of the portfolio, but the expectation for where the yields are going to go. Right? That depends on sort of how much refinancing activity we can do, what's happening in the loan market, the loan spreads going forward. It also depends on sort of what sort of, you know, repositioning we can do in the portfolio to improve our yield. So we feel that based on that, 20¢ is a prudent number to have. And yes, you know, the goal here is to be able to cover that over time. And, obviously, right now, you know, with the yield at 11.4%, you know, we're not covered today, but that's the goal based on the expectation based on portfolio rotation, the market changes, you know, the expectation is for us to be able to cover that. Gaurav Mehta: Alright. My last question on the leverage, your debt to assets, at 39%. Is that close to where you want the leverage to be or how should we expect about your leverage in '26? Ujjaval Desai: Yeah. So I think the leverage ratio of 39% is, you know, it's fine right now. We're going to evaluate that and see, again, depending on our view on where, you know, where our NAV is going to go, our view on what's happening into the cash flows. We're constantly monitoring that leverage ratio. We feel comfortable with it right now. Gaurav Mehta: Alright. Thank you. That's all I have. Ujjaval Desai: Excellent. Thanks. Operator: There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect. Thank you, everyone.
Operator: Good morning, everyone, and welcome to the Evolution Petroleum Second Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode. Also note, today's event is being recorded. At this time, I'd like to turn the call over to Brandi Hudson, the company's Investor Relations Manager. Ma'am? Please go ahead. Thank you. Welcome to Evolution Petroleum's fiscal Q2 2026 earnings call. Brandi Hudson: I'm joined by Kelly Loyd, President and Chief Executive Officer, Mark Bunch, Chief Operating Officer, and Ryan Stash, Senior Vice President, Chief Financial Officer, and Treasurer. We released our fiscal second quarter 2026 financial results after the market closed yesterday. Please refer to our earnings press release for additional information containing these results. You can access our earnings release in the Investors section of our website. Please note that any statements and information provided today speak only as of today's date, 02/11/2026. Our discussion contains forward-looking statements of management's beliefs and assumptions based on currently available information and is subject to the risks, assumptions, and uncertainties described in our SEC filings. Actual results may differ materially from those expected, and we undertake no obligation to update any forward-looking statements. During today's call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA and adjusted net income. Reconciliations to the most directly comparable GAAP measures are included in our earnings release. Kelly will begin with opening remarks, followed by Mark with an operational update, and then Ryan will review the financial results. After our prepared comments, the management team will open the call for questions. As a reminder, this conference call is being recorded. If you wish to listen to a webcast replay of today's call, it will be available on the Investors section of our website. With that, I will turn the call over to Kelly. Kelly Loyd: Thank you, Brandi, and good morning, everyone. This quarter demonstrated the resiliency of our portfolio and the benefits of the strategic steps we have taken over the past several years. Despite a mixed commodity price environment, we delivered improved profitability and stronger cash flow, reflecting the diversification of our asset base, increased exposure to natural gas, and continued cost discipline. Importantly, these results were achieved without meaningfully increasing capital intensity, underscoring the durability of our underlying assets and the consistency of our strategy. Stepping back, what stands out this quarter is the operating leverage embedded in Evolution's portfolio. Improved natural gas pricing, incremental contributions from our mineral and royalty investments, and lower operating costs across several assets combined to meaningfully drive higher earnings and cash flow compared to the prior year. While commodity prices will always fluctuate, our goal has been to build a portfolio that can perform across cycles, and we believe this quarter is another example of that approach in action. From a financial standpoint, that operating leverage clearly showed in our results. In fiscal second quarter 2026, adjusted EBITDA increased by 41% year over year, despite revenue increasing only 2%. From a portfolio perspective, we continue to benefit from a balanced mix of oil and natural gas assets with a low base decline and modest capital requirements. Our assets are diversified not only by commodity but also by basin and operating partner, which helps reduce concentration risk and smooth performance over time. This approach has been intentional and remains a core pillar of how we think about capital allocation and risk management. A newer component of that diversification is our growing minerals and royalty platform. Over the past several months, we've been building a new network funnel and increasing our exposure to capital-light assets that generate high-margin production and long-lived inventory without imposing an incremental operating burden or requiring development capital from Evolution. Recent activity across our SCOOPSTACK minerals demonstrates this strategy in action, with several wells turning to sales or entering drilling and completion operations even ahead of schedule. This activity is already driving incremental cash flow and accelerating returns while reinforcing our emphasis on assets that combine current production, near-term zero-cost drilling exposure, and long-term upside. As we move forward into quarter three and beyond, we anticipate meaningful contributions from our newly acquired Haynesville-Bossier shale mineral and royalty assets. While we will always remain opportunistic with our A&D activities, we are confident that this new network will provide us with repeatable, highly accretive, tailored opportunities to enhance our portfolio. We believe this strategy enhances the durability of our cash flow profile and provides meaningful flexibility in how we deploy capital over time. Operationally, we made progress during the quarter on cost control and efficiency initiatives across the portfolio. Several assets delivered meaningful improvements in operating margins driven by lower costs and better uptime. While certain fields experienced temporary downtime during the quarter, these issues were largely mechanical or timing-related rather than structural in nature. Importantly, field-level profitability remains solid. Our operating philosophy continues to emphasize flexibility. We work closely with our operating partners to adjust activity levels based on commodity prices, market conditions, and expected returns. This approach allows us to protect capital during periods of volatility while remaining positioned to benefit when conditions improve. We believe this flexibility is especially important in today's environment, where price signals can change quickly and disciplined capital management is critical. As always, we will continue to evaluate the most effective ways to deploy capital for long-term shareholder value. Looking ahead, our strategy is consistent. We will continue to prioritize assets with durable cash flow characteristics, modest capital requirements, and attractive risk-adjusted returns. We will also continue to evaluate opportunities to expand our portfolio through acquisitions, particularly in areas where we can leverage our experience, relationships, and disciplined underwriting approach. Our goal is not growth for growth's sake, but rather growth that enhances per-share value and supports sustainable shareholder returns. Our recent mineral and royalty acquisitions fit those parameters very well. The combination of low decline assets, capital-light exposure, and disciplined reinvestment gives confidence in our ability to navigate commodity cycles while continuing to reward shareholders. With that, I'll turn the call over to Mark for more details on our operations. Mark Bunch: Thanks, Kelly, and good morning, everyone. I will focus my remarks on key operational highlights from the quarter and encourage listeners to review our earnings and press release filings for additional details across our asset base. Overall, our operations performed largely as expected during the quarter, with steady base performance across most assets and continued progress on optimization issues. Starting with SCOOPSTACK, activity on our legacy working interest remained steady with three additional wells in progress during the quarter. On the mineral and royalty side, activity continues to ramp. Three wells are converted to producing status during the quarter with 16 additional wells in progress, supporting incremental high-margin production. We expect to continue to benefit from these improved margins since royalty have inherently higher margins. At Chavaroo, production increased year over year, reflecting wells brought online over the past twelve months. While no new drilling occurred during the quarter given low oil prices, we continue to advance permitting and planning activities to ensure we are well-positioned when market conditions improve. We transitioned all but two of the wells from electric submersible pumps to rod pumps across the Chabro field. This significantly improved lifting efficiency, reduced downtime, and stabilized production, resulting in field performance trending about 5% above initial expectations, thereby boosting capital efficiency and long-term asset value. At TexMix, we focus on optimization initiatives across the assets. Progress was made through targeted workover activities and facility upgrades aimed at improving reliability and performance. While these efforts took time to implement during the transition, we believe the bulk of that work is now behind us. As additional workovers are completed and recently resolved downtime normalizes, we expect production and lifting costs to continue to improve and better reflect the underlying potential of the asset moving forward. At Delhi, production was impacted during the quarter by equipment-related downtime, primarily related to CO2 compressor issues that limited injection volumes for much of the period. Importantly, field-level profitability remained strong, aided by materially lower operating costs following cessation of CO2 purchases. On a per BOE basis, operating costs at Delhi declined meaningfully year over year, and we expect sales volumes to improve moving forward as operational issues are resolved. At Jonah and Barnett, production volumes were relatively stable on a sequential basis, consistent with the low decline nature of both assets. Realized natural gas pricing improved compared to the prior year. The results during the quarter were partially impacted by wider regional differentials driven by mild winter conditions in the Western U.S. in calendar Q4. Across the portfolio, we remain focused on maintaining operational flexibility, managing costs, and deploying capital where returns are most compelling. Over to you, Ryan. Ryan Stash: Thanks, Mark, and good morning, everyone. As Brandi mentioned earlier, we released our earnings yesterday, which contains more information on our results. For today, I'd like to go through our fiscal second quarter financial highlights. In fiscal Q2, we had total revenues of $20.7 million, up 2% year over year. The increase in revenues was primarily due to a 6% increase in production and higher realized natural gas prices, which were offset by lower oil and NGL pricing. The increase in production volumes was largely attributable to contributions from our mineral and royalty acquisitions in the SCOOPSTACK, as well as steady base production across the majority of our portfolio. Net income for the quarter was $1.1 million or $0.03 per diluted share compared to a net loss of $1.8 million or $0.06 per share in the year-ago period. Adjusted EBITDA increased 41% year over year to $8 million, reflecting stronger natural gas revenues, realized gains on derivative contracts, and lower lease operating costs. Lease operating expenses improved to $11.5 million or $16.96 per BOE compared to $20.05 per BOE in the prior year quarter, reflecting both underlying cost improvements due to our mineral and royalty acquisitions and the cessation of CO2 purchases at Delhi, and the benefit of certain one-time items recognized during the quarter. On the hedging front, our ongoing goal is to reduce downside commodity price risk while preserving the maximum potential upside. We have continued to add hedges and will continue to use a mix of swaps and collars for both oil and gas, and we'll monitor the market for any additional hedge opportunities if market conditions present themselves. Turning to the balance sheet. As of 12/31/2025, cash on hand totaled $3.8 million and borrowings under our credit facility stood at $54.5 million. Total liquidity, cash, and available borrowing capacity increased to approximately $13.5 million versus $11.9 million last quarter. During the quarter, we paid dividends totaling $4.2 million. As previously announced, the Board declared a quarterly cash dividend of $0.12 per share. Overall, our strong asset base and financial position continue to support returning capital to shareholders and pursuing accretive opportunities that enhance long-term shareholder value. I'll now hand it back over to Kelly for closing comments. Kelly Loyd: Thanks, Ryan. To sum it up, we're very pleased with our performance this quarter and encouraged by the tangible results we're seeing from our strategy, particularly the growing contribution from our minerals and royalty platform that we've built out and the momentum we continue to see in our acquisition pipeline. Our diversified asset base, growing minerals and royalty platform, and disciplined approach to capital allocation continue to support strong cash flow generation and consistent shareholder returns. With that, I'll turn it over to the operator to begin the Q&A session. Thank you very much. Operator: Ladies and gentlemen, we'll now begin the question and answer session. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality. At any time your question has been addressed, you would like to withdraw your question. At this time, we will pause momentarily to assemble the roster. Our first question today comes from Jeffrey Robertson from Water Tower Research. Please go ahead with your question. Jeffrey Robertson: Thank you. Good morning. Kelly, you talked about the diversity in Evolution's asset base. Can you talk about or can you provide an update or some color on how the minerals acquisitions that you have completed have affected the company's natural decline rate? Kelly Loyd: Yes, Jeff. Thanks for the question. The beauty of this is over time, there are a lot of locations associated with these minerals, which we don't have to pay for. So as these locations get built out, it will add incremental production that doesn't have any cost. Now on an individual basis, every well is different, right? Some of them are newer, some of them are older, and they're going to decline at different rates. But the fact that there's a bunch of inventory that's going to get added without any incremental cost to Evolution is one of the reasons we think it's so attractive. Jeffrey Robertson: Can you share any color on what kind of production levels that the Haynesville-Bossier acquisitions will add? And given the late December and January closings, that impact, I assume, will be felt in the first or the, I'm sorry, your third fiscal quarter and the fourth? Kelly Loyd: Yes, that's correct. They essentially had zero impact on the previous quarter that just ended. As we go forward, we expect to see the production there both come on as well as a lot of these wells that are being completed right now. Eyes on the ground seeing completion rigs on there. So we expect to see it ramp up relatively quickly over the next few quarters. So, anyway, excited about the prospects there and, again, the PDP will start to hit, but we also have DUCs that are being converted as we speak. Ryan Stash: Yeah. Hey, Jeff. This is Ryan. The other thing too, obviously, as you know, on the royalty side, the production impact is going to be less impressive than the cash flow, right, because of the margins. So obviously, we think we're excited about the absolute free cash flow impact. But the production impact will be there, but it won't be as impactful as the cash flow impact. Jeffrey Robertson: One more if I may. Kelly, can you share your thoughts on valuation comparisons that you see in today's market versus non-operating working interest opportunities and royalty opportunities? Kelly Loyd: So, yes, as Ryan just mentioned on a production sort of level metric, obviously the royalties are going to look like they're more expensive. But from a cash flow level perspective, we are finding the opportunities to be very competitive relative to non-op working interest. Matter of fact, most of these ones we're looking at now, the reason we went with them is because they were more attractive than what we've been seeing out there. The other thing I'd like to point out, most of our acquisitions over time have either been led by us doing a bunch of research and finding an opportunity out there or having an opportunity come to us. We think with this sort of network that we've built out and the partners we have that we can go be more proactive and go make offers and lots and lots of offers that are tailored to the kind of reserve categories that we want to see in our purchases. Like I said, we've seen some early success and we're excited about where it's going forward from there. Jeffrey Robertson: Thank you. I'll give somebody else a chance. Operator: To withdraw your questions, you may press 2. Our next question comes from Nicholas Pope from Roth Capital. Please go ahead with your question. Nicholas Pope: Hey, good morning, Kelly, Ryan, Mark. How are you doing? Kelly Loyd: Great, Nick. Thanks for joining. Nicholas Pope: Question I had, I'm kind of curious with the Delhi field. You mentioned the expectation of things kind of ramping back up after some downtime. But I'm more curious after the kind of cessation of the third-party CO2 volumes going on just recycle only. How, I guess, the field has performed and how do you kind of view the performance of that asset without that additional CO2 volume getting put into the reservoir? Mark Bunch: Well, I mean, this is Mark and I'll answer the question. With all of the facilities issues that we've had with compressors and stuff going down, and also coming out of the summertime where we have limited injectivity because of the heat, it's been kind of difficult really to quantify everything, what's going on. So, we still think that, you know, from a standpoint of how the field's operated, it's very profitable because we don't inject CO2 even if we have a reduction in rate. We are much more profitable because we're spending a lot less money on operating costs every month. So we're actually happy with the way it's performing right now. And we expect that it'll level out here after we, you know, in the next few quarters after we get past this downtime at the plant and also get past the summer season. Then we'll have a much better idea about what it's doing. Nicholas Pope: So I guess with the expectation that you could see kind of return to production, I mean, you all expecting production volumes to kind of return to that 600 barrels a day kind of rate in the field on the net to you guys? Mark Bunch: Well, that's I think right now the difficulty with what we've had with the amount of downtime we've had at the plant, it's honestly, it's really hard to quantify. Nicholas Pope: Okay. Ryan Stash: Yeah. I mean and so, Nick, I mean, their stated plan on the field, right, is that they're still injecting what is it? Like, 84% of the injection were recycled anyway. Right? And so that difference with increased water injection to make a voidage, we have yet to see really the full results of how that that'll play out. So as Mark said, it's kind of early because you have a compressor go down for basically the whole quarter. You know, it makes things rough. Nicholas Pope: Yeah. I'll drop the topic and move on. One other item just kind of to clarify with this Haynesville minerals. Looked like there was some movement in and out just with the cash flow statement. From the previous transactions. I was curious how much of that of 4.5 million spent is Fiscal 2Q versus what's gonna show up in fiscal 3Q. Ryan Stash: Yes. It's a very hey, this is Ryan. I'll take real quick. So the majority of kind of the $4 million is going to be in our fiscal Q3. We ended up spending call it, less than $1 million in actually at the very end of our fiscal quarter. So the majority of that CapEx is going to be kind of in the beginning of this fiscal Q3. Nicholas Pope: Alright. I appreciate the time for the question. Thank you. Operator: Yes. Thanks, Nick. And our next question comes from Poe Fratt from Alliance Global Partners. Please go ahead with your question. Ampo, is it possible that your line is on mute? Poe Fratt: It is on mute. Pardon me. Good morning. Just a quick question on OpEx or LOE. Had good gains on an absolute basis in Barnett, Delhi, and Tex Mex. Can you just talk about forward-looking into the third, the March quarter? I think you said that Mark may have said that he expected an additional improvement in LOE. Can you just sort of quantify that? And then also where might we see additional improvement? Mark Bunch: Yes. This is Mark. And I'd say like on I think you're talking about Tex Mex. And at Tex Mex, we had a transition that was slower than we expected from the old operator to the new operator. That's kind of passed. And we had a bunch of catch-up work, workovers to do, so that came in. You know, I think we told you last time, you know, we look at this as, at least getting down to a dollar per BOE level of what the Williston runs. And I think that's actually kind of what we're aiming for because we feel like that the cost will stay either flat or maybe go down slightly, but the BOE per day should probably be ramping up. So, anyway, that kind of probably should help you answer your question about how to look at it. Ryan Stash: Yeah. I would just oh, I'll just add. This is Ryan. Just add, you know, I think some of it is going to remain to be seen as far as kind of how much the royalties will lower overall LOE per barrel, right? You've seen a big improvement in SCOOPSTACK. Obviously, you're not really seeing that yet in the Haynesville-Bossier. And some of that is just based on data. Right? On the royalty side, we get data much more slowly than we do on some of the other assets. So a little bit of that remains to be seen. So we do think that's going to help over time overall our look overall lower our LOE per barrel. Yeah. And one other quick deal, like, we did 14 workovers at Tex Mex and spent a couple $100,000 net to us. And it netted back about 80 barrels of net barrels of oil per day. Now that wasn't all at once, obviously, was spread out over the quarter. So, you know, that kind of step is, you know, when you make the denominator a little bit bigger, it'll it's gonna drop the dollar per BOE. Kelly Loyd: A lot of those were sort of this is Kelly. A lot of those were catch-up workovers that we've overcome. We're obviously still going to have it in an old field. You're always going to have some workover activity, but that was a pretty high number, not 14. Poe Fratt: Oh, excuse me. Yeah. No. No. I mean, there should be 14 every quarter. Forward. Correct. Mark Bunch: And we do have a few additional workovers that we know we're gonna be doing. And they're high impact, but they're it's, you know, it's from a standpoint of production, but it's not a hope it's only four it's only four additional workovers that we have identified right now. Poe Fratt: Yeah. I guess I was looking at thanks for the color and the text OpEx or I was looking more at the big number, big downdraft in Barnett Shale production costs sequentially and then year over year. Can you just highlight what's going on there? And is that durable into the second half of the fiscal year? Ryan Stash: So I think as we disclosed, there was some benefit from Advo in that in the So in the Advo, especially for all of them, we get a bill once a year, and so we make an accrual. And so it's an estimate for most of the year, and we get the bill at the end of the year, we make an adjustment. Now obviously, the bill came in less than we had accrued, we do think some of that's going to be sustainable going forward at the Barnett. So we do think Advel will go down, going forward. Is it going to be as low as this quarter? Probably not as low as it was this quarter, but we will see an improvement we think, going forward from what we've seen historically. But as we kind of mentioned to you, any increase we might see from this core in the Barnett, we will have offsets and obviously SCOOPSTACK and, you know, as Mark mentioned, TexMech. So there are gonna be offsets for the kind of that. If the Barnett goes back up a little bit, we'll have some other offsets there. Poe Fratt: Great. Apologize for missing that comment about Edville. Thank you. Operator: Yes. Thanks, Poe. And our next question comes from John Baer from Ascend Wealth Advisors, LLC. Please go ahead with your question. John Baer: Thanks. The last name is Baer, Noel in there. Good morning. In looking at your asset base, one very large basin is not represented, and that's the Northeast in the Utica and Marcellus. And I'm just wondering if that's an area that you're looking at, been approached with any ideas there, what your outlook is on that, any interest in that area? Kelly Loyd: Yes. Thanks, John. I think we've as we've spoken in the past, think those are some tremendous wells. On just a pure amount you get out, amount you put in, it's a tremendous basin. The problem is it has takeaway capacity. I think it's as opposed to the Haynesville where we focused on here recently, which is sort of first to go to LNG. You could argue any incremental production up in the Northeast would be last to go to LNG. So we, again, like I said, tremendous asset. It's got takeaway constraints that what I understand, as soon as they put more on, frankly, the back of the existing wells fill it up, even have to drill anymore. So again, you'd we'd have to find the right deal, with the right sort of firm takeaway, and I'm sure we'd looked, and we just hadn't had anything that meets our return expectations there. John Baer: Okay. Well, given that it's a very old area of production, there's probably a lot of properties that could conceivably fit into your business plan there. Another question I have is there's seeing more interest in the data center build-out around production areas. I'm wondering if any of your assets might lend themselves to that idea of putting a data center in where they can directly tap a resource rather than having to go through distribution lines. Kelly Loyd: So again, this is Kelly. We have talked to a couple of our operators where we thought this might make sense. And so far, we've kind of gotten they've explored it and, you know, they're aware and like to do something if the opportunity arose, but nothing has sort of presented itself. But, yeah, for sure, that's something, again, we're thinking along the same lines. If we can do direct to consumer and lock in long-term prices, that would be something they are fully aware that we'd be interested if the right opportunity came along. John Baer: Very good. And last question is, what is your outlook or focus on trying to reduce overall debt levels? Ryan Stash: Yeah. Hi. This is Ryan, John. As far as overall debt levels, I would say, we've sort of said that our long-term target is one times net debt. Now we're a little bit higher than that. So yes, there is a plan to sort of reduce over time around to that level. But on an absolute debt basis, we certainly don't feel uncomfortable with the absolute debt level without given the leverage and given kind of the outlook of the asset base. And frankly, given actually have quite a bit of production and cash flow hedged at attractive prices. So we feel very comfortable on the debt level. But to answer your question, yes. Over time, our goal is to get the leverage down close to that one time. Kelly Loyd: And the other thing I'll just throw in there, this is Kelly, that look. If we have opportunities that we can invest the money in that earn significantly higher than what we're paying on our debt. It just makes a lot more sense to buy something at a 20% discount rate to use the capital to do that versus using capital to pay down whatever 6.8% interest on our debt. So yes. John Baer: Okay. Very good. Thanks for taking my questions. Operator: Absolutely. Thank you, John. Our next question is a follow-up from Jeffrey Robertson from Water Tower Research. Jeffrey Robertson: Thank you. Ryan, one question to follow on the LOE discussion. Gathering and transportation costs were much lower in the quarter versus where they had been in the second quarter and a year ago. Is that part of the LOE reduction sustainable? Ryan Stash: Overall, which area are you looking at, Jeff? Sorry. I'm just looking at the table in the press release on in the detail where you have cost per unit broken out. Jeffrey Robertson: It's right the regional production table. Yep. Ryan Stash: So on the gathering side, so that's lumping in obviously a bunch of different areas. I would say area by area, there hasn't been a huge amount of movement. Now some of it is tied a little bit to commodity prices. There are some contracts that go into commodity prices. So, you know, that does move around a bit, especially in the Barnett. Right? So the largest gathering kind of costs we have are in Barnett. There's some in, obviously, some in Jonah. You know, where the gas processing is. So, I would say some of that, it you know, at a lower price, is. A little bit more sustainable. But you know, there's nothing fundamentally different. Other than you know, the one point I will add, sorry, is is the gathering I think we mentioned this, right? So the gathering contract of Barnett did get restructured. So there, you know, there is gonna be some benefit there going forward, but it's prices go up, I will expect to see the cost gathering costs go up slightly, if that makes sense. Jeffrey Robertson: Thanks. And then lastly, Ryan, given you've got two more quarters in this fiscal year, can you share any color on what you think CapEx might be between now and June 30? Ryan Stash: I mean, I think the full range we put out, we still feel good about, which is that $4 million to $6 million range. So at this point, it would just be any sort of capital projects we get from operators or could be some still and we are still seeing some activity in AFEs and SCOOPSTACK. You know, so that we did actually put that in our budget. So I still think that's a good range. I mean, some of it's subject to if we get an AFE, right, but we're not talking huge AFEs, as you know, in the skip stack. And excuse me, the ones we've seen have been very attractive. So we're generally consenting to the ones we see in the SCOOPSTACK. Jeffrey Robertson: Okay. Thank you. Operator: And ladies and gentlemen, with that, we'll be concluding today's question and answer session. I'd like to turn the floor back over to Kelly Loyd for any closing remarks. Kelly Loyd: Thank you very much. We just want to say thank you to everyone for participating and look forward to moving forward with you guys. Thank you. Operator: And with that everyone, we'll be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.
Operator: Greetings and welcome to PolyPid's Fourth Quarter and Full Year 2025 Conference Call. [Operator Instructions] As a reminder, this call is recorded. And I would now like to introduce your host for today's conference, Yehuda Leibler from ARX Investor Relations. Mr. Leibler, you may begin. Yehuda Leibler: Thank you, operator, and thank you all for joining PolyPid's Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me on the call today will be Dikla Czaczkes Akselbrad, Chief Executive Officer of PolyPid; Jonny Missulawin, PolyPid's Chief Financial Officer; and Ori Warshavsky, Chief Operating Officer, U.S. of PolyPid. Earlier today, PolyPid released its financial results for the 3 and 12 months ending December 31, 2025. A copy of the press release is available in the Investors section on the company's website at www.polypid.com. I'd like to remind you that on this call, management will make forward-looking statements within the meaning of the federal securities laws. For example, management is making forward-looking statements when it discusses the company's regulatory strategy and the anticipated timing and structure of the planned new drug application or NDA submission for D-PLEX100, including the rolling submission, the potential regulatory and commercial pathways for D-PLEX100, the company's ongoing partnership discussions, commercialization readiness, transition from a primarily R&D and clinically focused organization into one that is preparing for commercialization, the potential for 2026 to be a transformative year for the company, benefits and advantages of D-PLEX100 that Kynatrix represents a broader long-term opportunity for PolyPid and the expectation that current cash resources will be sufficient to fund operations into the second half of 2026. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond the company's control, including the risks described from time to time in the company's SEC filings. The company's results may differ materially from those projections. These statements involve material risks and uncertainties that could cause actual results or events to materially differ. Accordingly, you should not place undue reliance on these statements. I encourage you to review the company's filings with the SEC, including, without limitation, the company's annual report on Form 20-F filed on February 26, 2025, which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. PolyPid disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and speaks only as of the live broadcast today, February 11, 2026. With the completion of those prepared remarks, it is my pleasure to turn the call over to Dikla Czaczkes Akselbrad, the CEO of PolyPid. Dikla? Dikla Akselbrad: Thank you, Yehuda, and thank you all for joining us today. 2025 was a pivotal year for PolyPid. Over the course of the year, we successfully completed the SHIELD II Phase III trial and announced positive results with D-PLEX100 meeting its primary endpoint and all key secondary endpoints and demonstrating a meaningful reduction in surgical site infection. Building on that momentum, we advanced D-PLEX100 into the final stages of regulatory preparation, marking an important transition point for the company. In parallel, we continue to advance our broader platform efforts, including our long-acting GLP-1 Receptor Agonist program. As we continue executing against our strategy, our progress is focused on 2 priorities: advancing the regulatory pathway for D-PLEX100 and advancing our commercial U.S. partnership discussions. Starting with regulatory progress. We recently received positive written feedback from the FDA following the pre-NDA meeting communication. Importantly, the agency supported our plan to pursue a rolling NDA review for D-PLEX100. We expect to begin the rolling NDA submission by the end of the first quarter of 2026. The FDA also agreed that the company's existing clinical data package, including results from the Phase III SHIELD II trial appears adequate to support NDA submission and review. This feedback provides meaningful clarity on the structure and expectations for our submission and further validates the regulatory pathway we have been preparing for. In parallel with our regulatory efforts, we made significant progress on the commercial front. Following our positive Phase III results and the advancement of our regulatory strategy, we have moved into advanced stages of partnership discussions in the United States. These discussions reflect growing recognition of D-PLEX100's strong clinical profile, its differentiated value proposition and the significant unmet need it addresses. I'm glad to share that we are very pleased with the progress we made throughout the quarter in our U.S. partnership discussions. These conversations have continued to move forward to advanced stages, which Ori will expand on later in the call. During the quarter, we also participated in a virtual key opinion leader webinar featuring Dr. Steven D. Wexner, a globally recognized leader in colorectal surgery. The discussion focused on the real-life clinical and economic burden of surgical site infections and why prevention remains a major unmet need in abdominal colorectal procedures. Importantly, the conversation reinforced what we believe is the core opportunity of D-PLEX100, a differentiated, long-acting localized approach that can significantly reduce infection while fitting naturally into the surgical workflow. As Dr. Wexner noted, this is truly new. This is a paradigm shift for us. We view this type of external clinical engagement as an important part of building awareness and readiness as we prepare the market for approval and launch. A link to the recording of the webinar is on our website under the Investors section. I invite all of you to listen to Dr. Wexner insights. Looking ahead, we believe 2026 has the potential to be a transformative year for PolyPid. With the rolling NDA submission expected to begin by the end of this quarter, partnership discussions continue to advance and an organization increasingly oriented towards commercial execution, we are entering a new chapter for the company. I also want to highlight an important corporate update. In December 2025, we appointed Ms. Brooke Story as Chairman of our Board of Directors. Brooke brings extensive leadership experience in medical technology and surgical solutions, including senior executive role at Becton, Dickinson and Medtronic. As we transition toward commercialization and engage with large strategic partners, we believe her background and perspective will be highly valuable in helping guide PolyPid throughout this next chapter. We look forward to providing updates as these developments continue to unfold. With that, I will now turn the call over to Ori Warshavsky, our Chief Operating Officer, U.S., who will discuss how we are approaching commercialization readiness and partner engagement, our refreshed corporate brand and the introduction of our Kynatrix technology. Ori? Ori Warshavsky: Thank you, Dikla. As Dikla mentioned, we continue to advance discussions during the quarter with potential U.S. commercial partners that have demonstrated experience in hospital-based commercialization and a strong presence within the surgical ecosystem. As these discussions have progressed, they have become increasingly detailed and operational in nature, reflecting both the maturity of the opportunity following our Phase III results and the progress we have made on our regulatory front. Turning now to our refreshed corporate brand. As you might have noticed in this morning's press release, PolyPid has a new brand look, which aims to reflect that PolyPid as a company looks different today than it did even a year ago. The 3 brands come at a very intentional moment in the company's life cycle as we transition from a primarily R&D and clinically focused organization into one that is preparing for commercialization and engaging more broadly with external stakeholders. Our audience is expanding. In addition to clinician and investigators, we are increasingly engaging with surgeons, pharmacists, hospital administrators, value committee members and potential commercial partners. The refresh brand is designed to support the more external safety conversations and to clearly communicate who we are as a company at this stage. Importantly, the new visual language is meant to convey precision, intention, reliability and control, core attributes of how our technology is engineered to perform. It reflects a more confident, mature and credible organization as we move closer to potential commercialization. I encourage investors and partners to visit our new website and review our updated corporate material, which reflects this evolution and our long-term vision. Closely related to this evolution is an important update on our technology. Over the past several years, we have significantly expanded our technological capabilities beyond what the original PLEX platform was designed to do. As a result, we are formally introducing Kynatrix as the name of our next-generation technology. Kynatrix brings together the broader set of controlled release and delivery capabilities along with the growing intellectual property portfolio we have developed over time. While PLEX remains foundational, our technology is no longer limited to local to local delivery of small molecules such as antibiotics. One clear example of these expanded capabilities is our move into metabolic disease, starting with our ultra-long-acting GLP-1 Receptor Agonist program. This program serves as the first step case for extending our technology beyond localized delivery towards addressing systemic therapeutic needs, and we continue to evaluate additional modalities where these capabilities may be applied. While Kynatrix represents a broad long-term opportunity for PolyPid, it is important to emphasize that D-PLEX100 remains firmly at the center of our near-term execution and commercial focus. Taken together, our continued progress in partnership discussions, our brand evaluation, the formal introduction of the Kynatrix technology and growing engagement with clinical leaders all reflect the company that is actively preparing for its next phase of growth. With that, I'll now turn the call over to Jonny to review our financial performance for the quarter and the full year. Jonny? Jonny Missulawin: Thank you, Ori. I'll now walk through our financial results for the fourth quarter and full year ended December 31, 2025. Starting with the fourth quarter, research and development expenses were $6.2 million compared to $7 million in the same period last year. This decrease primarily reflects the completion of the SHIELD II Phase III trial and our transition towards regulatory submission and preparation activities. General and administrative expenses for the quarter were $1.8 million compared to $1 million in the fourth quarter of 2024. Marketing and business development expenses were $0.6 million for the quarter compared to $0.2 million in the prior year period. Net loss for the fourth quarter was $8.5 million or $0.41 per share compared to a net loss of $8.5 million or $1.13 per share in the fourth quarter of 2024. Turning to the full year results. Research and development expenses for 2025 totaled $23.8 million compared to $22.8 million in 2024. The increase was primarily driven by continued activities related to the completion of the SHIELD II Phase III trial as well as regulatory preparation efforts and advancement of our development programs. General and administrative expenses for the full year were $7.2 million compared to $4.3 million in 2024. This increase was primarily due to noncash expenses relating to the vesting of performance-based options following the successful completion of the SHIELD II Phase III trial. Marketing and business development expenses for the year were $2 million compared to $0.9 million in 2024, reflecting increased business development and commercial preparation efforts as we move closer to potential commercialization. Net loss for the full year ended December 31, 2025, was $34.2 million or $2.09 per share. compared to a net loss of $29 million or $4.91 per share in 2024. From a balance sheet perspective, as of December 31, 2025, PolyPid had $12.9 million in cash, cash equivalents and short-term deposits. Subsequent to the end of the quarter, several long-time shareholders exercised warrants ahead of their expiration at prices ranging between $3.61 and $4.5 per share, generating $3.7 million in additional gross proceeds, further strengthening our balance sheet. Based on our current plans and assumptions, we believe that our existing cash resources will be sufficient to fund operations into the second half of 2026 and through several significant upcoming milestones. With that, we will now open the call for questions. Operator? Operator: [Operator Instructions] We will take our first question -- and the question comes from the line of Chase Knickerbocker from Craig-Hallum. Chase Knickerbocker: Maybe just a couple around the pre-NDA minutes that you received in December. Depo, would you be willing to share kind of how those discussions around the scope of the label sort of progressed? And just kind of generally, what your current expectations are as you kind of look to your proposed label as far as what we're thinking around kind of colorectal kind of specific versus a broader kind of abdominal label? And then kind of the same question around what kind of investor expectation should be potentially for some sort of risk factor or size of incision that could be on a proposed label. Dikla Akselbrad: Thank you. With regards to label, based on our discussion with the FDA we are targeting an initial label for the prevention of surgical site infections in prevention in patients undergoing abdominal colorectal surgery. This indication is directly supported by the SHIELD II Phase III data and is also our breakthrough therapy designation. We also expect that there may be an opportunity to evaluate potential label expansion into broader abdominal surgical application as we pursue -- as we go through the review process in a parallel. And the main rationale around it is as colorectal is the worst SSI prevalence in abdominal surgery. And obviously, there are other, but that's just as a high level. So that's our baseline assumption. This is how we built all of our planning and models. We do not expect on that regard anything that will narrow this. We think that this is a very conservative assumption, and this is why this is our baseline assumption. And as you referred to, we also met the FDA towards the end of last year as part of an NDA process, actually had a pre-IND communication with the FDA, where the purpose of this communication was really to align the requirement around the NDA submission, both in terms of time lines as well as in terms of having the FDA agreed that the Phase III data is adequate for NDA submission, both in terms of efficacy and safety. Chase Knickerbocker: Got it. Maybe just along those lines, it may be somewhat dependent on kind of partnership discussions as well, but any kind of formal thoughts on kind of plans as far as what may be required for a broader label and/or kind of further expansion opportunities for D-PLEX100 specifically. Maybe a little bit too early for that question, but any additional thoughts? Dikla Akselbrad: Yes. Maybe I think what I can say is that we have as part of our planning time frame that we plan to meet with the FDA to discuss this. Chase Knickerbocker: Got it. And just maybe last one for me on kind of future applications for the platform. Can you kind of help shape our thinking a little bit for kind of where you may go next? Obviously, you've announced that metabolic program, but -- and how these kind of future formulations may differ from what we've seen you do thus far? Dikla Akselbrad: So first, as you rightly referred to, we have the opportunity to expand D-PLEX into other indications, and that's the first and probably the most advanced pipeline expansion that we look, which is specifically on D-PLEX. But with regards to other pipeline, so I'm saying that because it's important for investors to understand that our near-term focus remains firmly on execution, the regulatory and commercialization pathway of D-PLEX. So that is where the vast majority of our intention, our resources are directed. But as we move forward with the NDA submission and approval, we are expanding into specifically, as you all know, around the GLP-1 and metabolic health. I expect that we will see during this year, we'll get additional data. I would even say around midyear. This program is still at preclinical development but with the underlying technology platform that provides long-term opportunity -- sorry, long-term exposure of 60-plus or around 60 days and the ability to support it in a linear way, this is very lucrative in this area. Operator: The next question comes from Jason Butler at Citizens. Jason Butler: Congrats on the progress. Dikla, can you just talk about the work that you're doing or will be doing this year to get ready for a potential approval of D-PLEX100, both in terms of building awareness as well as getting ready with payers. Just the work that needs to be done before approval. Dikla Akselbrad: Sure, sure. So some of it, we've shared with -- in previous calls and some of it is also Ori referred to in our new branding and website. This is all part of getting ready for the commercial stage. Some of it is already out there like the website and the new branding. But also there is work that is done around packaging for D-PLEX, its commercial name that we will obviously expose later on once we are in the approval process. And in addition to that, we have been doing a lot of work, not just now, but in the last 2 years. And Ori, please feel free to add to that. whether it is in terms of market research of pricing, creating awareness, you'll start to see many more abstracts and article coming from our front during this year, building a KOL network. Just the beginning of it was with our KOL event with doctor -- or well, it was actually our KOL event, but the ROTH Group KOL event with Professor Steven D. Wexner. Ori, do you want to add anything to that? Ori Warshavsky: I would just add that the main work right now is really, like you said, Jason, kind of putting the data out there and making sure that people are aware of the data of the product. So conferences will be a big part of it. publication will be a big part of it. A lot of the health economics piece is something that is kicking off now because, as you said, for market access, this is a driver. But also some of the on the ground kind of boots on the ground market preparation will be dependent on the partner, and we are expecting that the partner will have sufficient time, and we are -- and that's why our conversations are with kind of experienced global partners that will kind of get running immediately after signing can go on and start doing all the prior approval meetings in the hospitals and really get the access piece going almost immediately. Jason Butler: Great. And then just one more for me. On the GLP-1 program, how do you think about strategically when and what data you can generate yourself versus when a partner might make sense to bring on board? And just longer term, how you think about positioning and differentiation in this market? Dikla Akselbrad: Sure, sure. So our GLP-1 program leverages our new Kynatrix technology for approximately 60 days of sustained release and we are targeting improved patient compliance. Our vision for this program is to partner at a relatively early stage. What we are building now is more robust preclinical efficacy and [ PK ] sets of data that support this attribute, this sustained release, no spike as you see the burst release that you see -- that is seen with current weekly delivered molecules. So we are targeting to have this more robust efficacy and PK studies. We are already along the development of this program, have been speaking with different groups, but we believe that once we have this set of data, this could be very interested for partner, especially since we have -- this is coming after a validated program. D-PLEX100 has validated our approach in a very robust way, both in terms of manufacturing, CMC as well as PK and our ability to deliver and develop our technology forward into drugs. Operator: We will take our next question -- your next question comes from the line of Boobalan Pachaiyappan from ROTH Capital Partners. Boobalan Pachaiyappan: So first, I wanted to talk about the progress you highlighted in the press release about the potential U.S. partnership. So without getting into the confidential information, is it reasonable to assume the potential partner should also have a presence in ex-U.S. regions? And also assuming the significant interest post-NDA filing, what factors could play a pivotal role in closing in the partnership? And I have some follow-ups. Dikla Akselbrad: Great. thank you for that. So I'll start with the first portion. In terms of other geographies. So we are very focused now on U.S. We think that's our highest priority. That said, there might be interest to other geographies as well as part of those discussions and other discussions that we have. But our first priority is U.S. Also, since in terms of the time line, when you look at our NDA submission that is expected by the end of this quarter and European submission is expected later on about a quarter -- around the quarter after we finalize the FDA submission. So it makes more sense. And your second portion was? Boobalan Pachaiyappan: So I was asking about what factors might play a role in identifying the final partner. Dikla Akselbrad: So Ori, feel free to add to that. But we have been saying for quite some time that the ideal partner and also the partner that we are discussing with are with broad hospital-based capabilities and present in the surgical suite, in the hospital. And this is what's really needed to market a product like D-PLEX100. So I don't see the -- what could go wrong in that respect because I think that the interest and there is an alignment between the interest and the need. Ori, do you want to add to that? Ori Warshavsky: I would just add that we are -- we keep saying we're advancing, but we are advancing from a high-level discussion. The due diligence is going on and becomes more and more in the details. And I think that's a sign that we're heading in the right direction here. Boobalan Pachaiyappan: All right. That's helpful. And then you mentioned about the KOL call. Obviously, during my call with Dr. Wexner, she mentioned that the Phase III study was well designed, adequately controlled with balanced characteristics and the patients, they reflect the real-world scenario. So I was wondering if you could comment on whether the FDA took a similar view based on your pre-NDA meeting communications. Dikla Akselbrad: I think the fact that the positive -- the feedback was positive and there is an alignment on that and the FDA confirm both the NDA pathway as well as indicated that the existing clinical data package is sufficient to support an NDA submission. I think that's -- it says it all.. Boobalan Pachaiyappan: All right. Maybe one final question from us. So we have done some research. It looks like there's approximately 900 integrated delivery networks in the U.S., and they manage roughly 6,000 to 7,000 hospitals. So I was wondering, assuming this is indeed the case, what percentage of potential target IDNs would reasonably likely to include D-PLEX on formulary within the first 12 months after approval? Dikla Akselbrad: Ori, do you want to take this. Ori Warshavsky: Yes, I can take this. I think the process -- first, I would say that, of course, this would be a mission for the U.S. commercial partner. And this is the reason why we are discussing the commercialization activities with partners that understand the ins and outs of the IDNs that have relationship from the surgeon to the pharmacist to the IDN level to the GPOs to really ensure kind of uptake as fast as we can. Specifically about 1 month, I think it really -- it depends -- it's a hospital-by-hospital or network-by-network decision. There are a number of steps, and I think we discussed this in the past, there are a number of steps to get the product used in the hospital starts with finding the right champions, which this is a process that will be done even before launch to start educating from a medical perspective, educating the surgeons on the need. Then the product needs to come to a P&T review. And in this P&T review, there will be discussions both on the clinical benefit, the end economic benefits. All of that are topics that we have strong information on and the partners will have all the tools they will need to make the case. And then likely, the hospital or the IDN will ask for some sort of maybe a small pilot study, a handful of patients just really to see how this product works in the operating room and then an update to the electronic systems within the hospital. So all to say a little bit of a long answer to say that it's -- the uptake will take a little while. It's not a day 1 peak of sales, probably a few months before we'll start seeing a meaningful uptake. But I think the flip side of that is once there is -- once the product is on a formulary and there is usage, it's a relatively sticky process, meaning the products are rarely getting taken off formulary, assuming the product works and there are no issues. So we can see once the product is on formulary, volume growing steadily and usage growing steadily month after month. Operator: We will take our next question -- and the question comes from the line of Brandon Folkes from H.C. Wainwright. Brandon Folkes: Congrats on all the progress. Maybe just 2 from me. Maybe firstly, any color on when you expect to complete the rolling submission? And then maybe secondly, can you just elaborate on the differences between the Kynatrix platform and D-PLEX technology platform? And just how much early-stage work do you need to do on the Kynatrix platform? Or how much can you leverage from your experience with D-PLEX?'m just thinking about sort of how we should think about timing of moving products forward on the new platform? Dikla Akselbrad: Thank you. Thank you, Brandon. So with regards to the time line, as we said, we expect to submit the NDA by the end of the first quarter. We will first submit the CMC and nonclinical module followed by the clinical module. And the gap between those 2 submission is not more than a couple of months. It is very close to one another. From that point, since we have a Fast Track and breakthrough therapy designation that support the use of a rolling submission priority review, we expect that the NDA review will be shortened to 6 months from the regular 10 months. Ori, do you want to give a bit of difference? Ori Warshavsky: Yes, I can take that question. So Brandon, first, I think it's important to understand that it's not that one day we were on PLEX and the next day, it was Kynatrix. Kynatrix really is collecting under one umbrella, a lot of the work that has been done over the past several years that is not -- that was not under PLEX and under the PLEX IP umbrella, meaning to say there's no gap here. The work has been going on for -- as a continuous work. What you see under Kynatrix is now a way for us to collect some of the IP on peptide release on intratumoral injection on the STING agonist partnership that we had. All these activities coming under this umbrella and helping us build new IP and in a way, allowing us to discuss this more freely without the limitations of PLEX. So it's a new name, but the work in the R&D team and the development has been going on continuously forever. Does that make sense, Brandon? Brandon Folkes: Yes. Very helpful, I appreciate it and congrats again. Operator: This concludes today's question-and-answer session. I'll now hand the call back for closing remarks. Dikla Akselbrad: Thank you all for joining us today. 2025 marked an important turning point for PolyPid, and we enter 2026 with momentum across regulatory, commercial and organizational fronts. With the rolling NDA review expected to begin shortly, continued progress in partnership discussion and a clear strategic vision for the company's future, we believe PolyPid is well positioned for the next phase of growth. We appreciate the continued support of our shareholders, partners and employees, and we look forward to providing further updates as the year progresses. Thank you. And operator, you may now close the call. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, everyone, and welcome to Crombie REIT's Fourth Quarter Conference Call. [Operator Instructions] This call is being recorded on February 11, 2026. I would now like to turn the conference over to Meghna Nair, Manager of Investor Relations at Crombie. Please go ahead. Meghna Nair: Good day, everyone, and welcome to Crombie REIT's Fourth Quarter and Year-end 2025 Conference Call and Webcast. Thank you for joining us. This call is being recorded in live audio and is available on our website at www.crombie.ca. Slides to accompany today's call are available on the Investors section of our website under Presentations & Events. Joining me on the call today are Mark Holly, President and Chief Executive Officer; Kara Cameron, Chief Financial Officer; and Arie Bitton, Executive Vice President, Leasing and Operations. Today's discussion includes forward-looking statements. As always, we want to caution you that such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please see our public filings, including our management's discussion and analysis and annual information form for a discussion of these factors. Our discussion will also include expected yield on cost for capital expenditures. Please refer to the Development section of our management's discussion and analysis for additional information on assumptions and risks. I will now turn the call over to Mark, who will begin the discussion with comments on Crombie's strategy and outlook. Kara will review Crombie's operating and financial results, and Mark will conclude with a few final remarks. Over to you, Mark. Mark Holly: Thank you, Meghna, and good morning, everyone. 2025 was a standout year for Crombie for disciplined execution across the 2 pillars of our Building Together strategy combined to deliver solid results. These pillars, value creation and solid foundation, guide our day-to-day execution and have been designed for resiliency, stability and long-term unitholder growth. 2025 was a year that highlighted the power of this strategy and the operational excellence of the team. A few metrics worth highlighting. Four consecutive quarters of record committee occupancy, ending the year at 97.7%; average annual minimum rent growth of 4.8%; commercial same-asset property cash NOI growth of 3.7%, above our long-term target of 2% to 3%; 6.5% growth in AFFO per unit; a distribution increase; and finally, a credit rating upgrade from Morningstar DBRS, an impressive year. Today, I will focus my comments on 3 drivers within value creation, own and operate, optimize and partner. Let me start with own and operate, the foundation of value creation and the core of our business. Our coast-to-coast grocery-anchored centers sits at the heart of vibrant growing communities, generating consistent traffic and strong tenant demand. Through disciplined portfolio management and deliberate curation of our tenant merchandise mix, we continue to position Crombie as an attractive partner for retailers seeking access to multiple markets on a coast-to-coast basis. In 2025, demand for our space was very strong. Established national retailers and emerging concepts, both sought space across our portfolio, and that demand combined with proactive leasing management drove solid results. Year 1 renewal spreads averaged 10.4% and our weighted average lease term remained healthy at 7.9 years, reflecting the stability of our tenant relationships and the steady growth embedded in the portfolio. Portfolio management is central to our own and operate driver as we always look to high-grade our portfolio of assets. On the acquisition front, we continue to lean into grocery-anchored retail opportunities. In 2025, we added 5 Empire-bannered grocery properties totaling 197,000 square feet for $49.7 million. The acquisition of the Queensway property in Q4 was the fifth. The Queensway property is a 3.6 acre newly constructed 51,000 square foot Longo's anchored site with 2 freestanding bank pads. It was built by Crombie as development manager on behalf of Empire and subsequently acquired for $28.5 million, excluding closing and transaction costs. The property is 100% leased with all tenants now operating. It is exactly the type of necessity-based high-quality asset that strengthens our portfolio and reflects the value of our strategic partnership with Empire. We were equally disciplined on the disposition side in 2025, where we sold 2 noncore properties in New Brunswick, the 140,000 square foot Main Street office in Moncton, which had persistent vacancy, and Loch Lomond Place, a non-grocery retail property in St. John. These acquisitions reduced exposure to lower growth assets and freed up capital to be redeployed towards higher-quality properties that will provide stronger long-term FFO growth. We also completed a strategic land swap at Barrington Street in Halifax that strengthened our position on a key urban site and enhanced its long-term development potential. Ongoing portfolio review and thoughtful capital recycling remains an important driver to how we provide long-term returns for our unitholders. As part of our financial results press release last night, we highlighted that we have entered into a binding agreement to acquire a grocery-related industrial asset in Whitby, Ontario for approximately $115 million. The asset is a 42-acre property with 484,000 square foot high bay industrial distribution facility, fully leased to Sobeys under a long-term lease agreement. The facility features 37-foot clear heights with approximately 90 loading dock doors and roughly 240,000 square feet of temperature-controlled cooler space. Located directly off Highway 401 and within a 5-minute walk to the Whitby GO station, the property offers exceptional connectivity and operationally supports Sobey's distribution to its Ontario grocery stores. This acquisition brings long-duration income, serves as a central logistics infrastructure and sits in a tightly supplied transit-connected industrial corridor. It strengthens the defensive profile of our property and portfolio and expands our presence in grocery-linked industrial real estate. The acquisition enhances our long-term cash flow growth and is accretive from day 1. Turning briefly to our Calgary customer fulfillment center industrial asset. In late January, Empire announced changes to its e-commerce operations in Alberta, which included our 100% Crombie-owned industrial warehouse. The long-term lease remains in place. The asset represents approximately 300,000 square feet within our fully occupied retail-related industrial portfolio, and we expect no material financial impact from the announcement. Our second pillar, optimize, is about unlocking embedded value in the existing portfolio through targeted investments and development. In 2025, we continue to advance nonmajor development program. These are shorter duration projects, modernization, intensifications, small-scale redevelopments and greenfield projects. They're typically $50 million or less and often completed within 12 months. We expect targeted yield on cost in the range of 6% to 8%. One of our nonmajor investments is our modernization program with Empire, where we completed more than 60 projects with them in 2025. These projects upgrade the look, feel and functionality of the grocery stores and create a halo effect that benefits other tenants on the site. It also supports our leasing performance across both renewals and new deals. Our nonmajor program is a repeatable lever that enhances asset quality and drive steady growth. Within our major development pipeline, entitlements remain the strategic focus. By securing zoning and planning approvals ahead of major capital commitments, we preserve flexibility on timing and phasing, ensuring we can adapt to an evolving market conditions and build a pipeline of fully entitled properties that can support our long-term value creation. We continue to advance key sites in a deliberate manner during 2025. Of the 26 identified sites in our major development category, 6 are now zoned and 3 have applications in process. The Marlstone in Halifax is our only major project currently under construction. Pre-leasing is underway and the early response has been positive. Our last driver within value creation pillar is partner. As I noted, our strategic partnership with Empire continues to be an important competitive advantage. Our real estate priorities are closely aligned with their operational needs, and that alignment shows up across acquisitions, modernization and new store opportunities. the Queensway and our modernization program are great examples of our partnership in action. Beyond Empire, we stood up 2 new programmatic partnerships in Halifax in Vancouver this year. These programmatic partnerships serve 3 important purposes for Crombie. First, they enable us to share capital and risk on larger, longer duration opportunities, while preserving balance sheet capacity for our core grocery-anchored platform. Second, they provide a stream of management and development fees as we progress entitlements and planning work. And third, they unlock embedded NAV through highest and best use zoning and gives us flexibility on when and how we bring these high potential sites forward for redevelopment. Across the 3 value creation drivers, own and operate, optimize and partner, our capital allocation decisions are guided by our strategy of delivering resiliency, stability and growth. With that, I'll turn the call over to Kara to walk us through our financial results and the strength of our balance sheet. Kara Cameron: Thank you, Mark, and good morning, everyone. Our 2025 results reinforce the strength of our platform, the consistency of our execution and the discipline of our approach to capital allocation. And as Mark said, our focus on unitholder return. That strength translated directly to our bottom line with FFO per unit growing 4.8% and AFFO per unit growing 6.5% year-over-year. The numbers continue to tell a clear story, our strategy is working. In the fourth quarter, we completed 239,000 square feet of renewals at a year 1 increase of 10% over expiring rental rates. As we've emphasized consistently, we focus on achieving growth over the full duration of the lease. And for the quarter, we secured a 12.1% increase when comparing expiring rates to the weighted average rental rate over the renewal term. This leasing activity, combined with contractual rent step-ups and contributions from our modernization investments drove commercial same-asset property cash NOI growth of 4.1% in the fourth quarter, above the upper end of our 2% to 3% long-term target range. For the full year, we renewed 768,000 square feet of space at an average increase of 10.4% over expiring rents. This strength was broad-based with spreads of 11% in VECTOM, 14.5% in major markets and 7.9% across regional markets with a 12.2% increase in weighted average rental rate for the renewal term. We also have added 259,000 square feet of new leases during the year at an average first year rate of $16.67 per square foot. Average annual minimum rent per square foot grew 4.8% year-over-year. The same fundamental drivers of Q4 performance carried through the year, contributing to commercial same-asset property cash NOI growth of 3.7%, again, above the upper end of our 2% to 3% long-term target range. Property revenue in the fourth quarter was $122.1 million, up 0.4% from the prior year. This increase was driven by several key factors. Same asset NOI growth from renewals and new leasing, contractual rent step-ups, contributions from nonmajor development projects completed over the past 12 to 18 months, and a full quarter of income from properties acquired earlier in the year. These factors were partially offset by dispositions completed in late 2024 and 2025. For the full year, property revenue grew 3.8% to $488.7 million, reflecting higher base rents and recoveries from record occupancy, incremental contributions from nonmajor development completions and modernization investments, and revenue from assets acquired through the year, partially offset by dispositions and higher tenant incentive amortization. Management and development fee revenue in the quarter was $2.5 million, up from $1.4 million in quarter 4 of 2024. For the full year, fee revenue was $11.4 million, up 113% from $5.3 million in 2024. This growth reflects contributions from our programmatic partnerships in Halifax and Vancouver as well as fees from various Empire projects. These contributions have become a stable recurring component of our cash flow profile. For the full year, general and administrative expenses, excluding unit-based compensation, represented 4.1% of total revenue, including revenue from management and development services, consistent with where we've been tracking throughout the year. Finance costs were $97.4 million in 2025, up $4.9 million year-over-year, primarily reflecting higher interest expense related to the 2024 net issuance of senior unsecured notes. Turning to earnings. FFO for the fourth quarter totaled $0.33 per unit, up 3.1% year-over-year. FFO was $0.29 per unit, up 3.6%. For the full year, FFO per unit was $1.30, an increase of 4.8% from 2024, and AFFO per unit was $1.15, up 6.5%. This growth was driven by higher net property income, a more than doubling of management and development fees, and contributions from acquisitions and nonmajor investment activity, partially offset by higher interest expense. We ended the quarter with FFO and AFFO payout ratios of 69.2% and 78.2%, respectively. For the full year, payout ratios were 69.1% for FFO and 78.1% for AFFO, comfortably within our targeted ranges even after the distribution increase implemented in 2025. The Marlstone project continues to progress on time and on budget. At year-end, estimated cost to complete was approximately $22 million at Crombie share with expected yields on cost in the 4.5% to 5.5% range. Upon completion, construction financing will convert to CMHC mortgage financing with anticipated financing rates lower than conventional mortgages. Now turning to our balance sheet. Our balance sheet remains a core strategic asset and the source of resiliency, especially in a more volatile capital markets environment. We continue to prioritize liquidity, ending the year with $669.2 million in available liquidity between undrawn credit facilities and cash with an unencumbered asset pool exceeding $3.9 billion in fair value, earning us with ample liquidity and multiple funding levers to address our 2026 and 2027 maturities. We continue to maintain a disciplined leverage profile with a focus on preserving financial flexibility while protecting our long-term unitholder value. Debt to gross fair value was 42.1% at year-end and debt to trailing 12-month adjusted EBITDA was 7.69x. Interest coverage ratio improved to 3.39x, reflecting higher adjusted EBITDA. We actively manage interest rate exposure through a balanced mix of fixed and floating rate debt, while maintaining meaningful undrawn credit capacity to fund near-term commitments. Unsecured debt represents about 61% of our total debt and approximately 97% of our debt is fixed rate with a weighted average term to maturity of roughly 4 years. This approach enables us to absorb market variability, support development and leasing initiatives and remain positioned to act opportunistically without compromising credit quality. Over the past 2 years, we have taken deliberate steps to strengthen our debt structure, refinancing ahead of maturities, extending duration, increasing the proportion of fixed rate and unsecured debt and diversifying our funding sources. The credit rating upgrade we received earlier this year is a direct result of that work. This was a strategic objective we set for ourselves, and I'm very pleased that the team's focused execution delivered it. The upgrade has enhanced our long-term funding flexibility and supports our ability to access capital at attractive rates. Turning to capital allocation. Our capital allocation framework remains anchored in driving sustainable per unit growth, while strengthening the balance sheet. Free cash flow and disposition proceeds are directed first towards funding high-return investments, which during the year included redevelopment, intensification and leasing capital that enhanced asset quality and income durability. We continue to recycle capital out of lower growth and noncore assets such as Loch Lomond and Main Street, as Mark mentioned, into properties and projects with stronger long-term fundamentals, while also allocating capital to debt reduction where it improves leverage metrics and interest coverage. As mentioned, subsequent to the quarter end, we entered into a bonding agreement to acquire the Whitby RFC for $115.4 million. The asset is secured by a long-term triple net lease to Sobeys with contractual annual escalations, providing a high-quality, stable income stream. The acquisition is immediately accretive to both FFO and AFFO. We expect to initially fund the transaction through our unsecured revolving credit facility. Overall, 2025 was a strong year. We're hitting our strategic targets, producing consistently solid financial results and managing our balance sheet to support both stability and measured growth. We enter 2026 well positioned to continue generating dependable growth for our unitholders. And with that, I'll turn it back to Mark for some closing remarks. Mark Holly: Thank you, Kara. To wrap up, 2025 was a year defined by consistent execution and strong performance across our business. Our Building Together strategy is working, and the results this year make that clear. Underpinning our performance is the strength of our people. The people pillar of our strategy is core to our success. And as we look ahead, our focus remains the same, owning and operating essential real estate at the heart of Canadian communities, deploying capital thoughtfully and growing cash flow growth, while compounding long-term value for our unitholders. We have a proven strategy, a resilient and high-quality portfolio, and the team is committed to disciplined execution. This March will mark 20 years as a publicly listed company. And over that time, we have built a portfolio, a balance sheet and a team that is focused on stability and growth. And entering 2026, we are well positioned to continue delivering, creating long-term value that our unitholders expect from Crombie. With that, we'll open the call for questions. Operator: [Operator Instructions] The first question comes from Mike Markidis with BMO. Michael Markidis: Good morning, Crombie, and congrats on a strong finish to 2025. I was wondering up on the milestone. I know pre-leasing is progressing. If you could give us a little bit more color on how that looks as a percentage of the total units. Arie Bitton: Sure, Mike. It's Arie. What I'd tell you is that pre-leasing has been since end of last year. We have been getting a lot of activity on site. The -- I would say, marketing awareness of the property is high in the market. We are getting a lot of inbound. We're conducting touring right now still predominantly within the model suite at Scotia Square. And we're going to actively ramp that up as the building nears completion towards the end of March and take prospects through the building, it's amenities and we'll be able to then start converting applications on site with the leasing office on the premises. So I would say to date, we're pleased with the response we're seeing on the model suite. But we're going to turn that once the building gets turned over to the leasing team towards the end of March. Michael Markidis: Okay. Sounds encouraging. Just on the Calgary CFC, I know, Mark, you had a press release and you gave some color there about no material impact. I was just wondering if you could remind us what Crombie's basis or total investment is on that property and give us a little bit more, I guess, a better lens into what the remaining term on the leases. Mark Holly: Sure. Total investment is and around $100 million. It is a 300,000 square foot warehouse in Rocky View, which is in an industrial park. And it has got 36-foot clear ceiling height. It's got 90 dock -- sorry, 40 dock doors and was built purposely for Empire for its Voila platform. It's under a very long-term lease, longer than what would be a commercial standard, but all other terms and conditions within that lease are commercial. And in terms of their path forward, we started dialoguing with them about what would that look like on a go-forward basis between subletting or signing, and they do have those rights, but those rights are subject to landlords approval. So we started dialoguing with them. More to come on sort of how we're going to proceed with the asset, but we're under a long-term lease, no material impact to financials at this point, and we'll just continue to work with them as they look for subtenants. Michael Markidis: Okay. And then just on the subsequent acquisition of the industrial asset at Whitby. Congrats on that. Kara, I know you said that you initially will finance that through your facility. And I know you got tons of capacity from a balance sheet perspective. But it's a pretty significant sizable transaction. Should we be thinking about an increase in disposition volume this year in terms of total gross proceeds? Just wondering how you guys are thinking about that as we move through '26. Kara Cameron: Thanks for the question. Like you said, we've got a lot of liquidity. We've got nothing drawn on the revolver at year-end. So nothing that we need to dispose of at this point in order to fund that purchase. So I wouldn't link those two. Operator: The next question comes from Lorne Kalmar with Desjardin. Lorne Kalmar: Maybe just going back to the milestone because I feel like it was a little bit vague in terms of the lease-up color. To be clear, has leasing actually progressed or has it started yet? Or it's just really still preliminary at this point? Arie Bitton: Leasing has started. We have signed applications. We have tenants moving in as of May 1. And we have a fully functioning website where tenants are self-starting applications as we speak on that website and coming in to do touring, again, in the model suite. But we have leases in place with occupancy starting in Q2. Lorne Kalmar: Okay. And then I guess, are there any like direct competitors in that node to the type of product that you have at the Marlstone? Or are you guys kind of on your own with that? Just wondering about increased competition in the face of increased supply in the Halifax market. Arie Bitton: There is a number of buildings being constructed right now in Darkmouth. I would say that on the Peninsula, there's nothing that matches the quality of what we're building. There's nothing that matches the connectivity with Scotia Square, the parking and all the other features, including the amenities that this building has at this point. So I would say that from a downtown perspective, we're feeling pretty good about the positioning of the Marlstone. Lorne Kalmar: Okay. So no real concerns in terms of the timing of the lease-up versus what you guys have initially pro forma? Arie Bitton: That's right. Lorne Kalmar: Okay. Fair enough. And then just on the acquisition side, you guys are obviously pretty active now when you lump in the distribution center. What does the rest of 2026 look like for the team? Mark Holly: The acquisition of Whitby is $115 million. And if you kind of step back and look at how much do we allocate in capital on an annual basis, we talk about it upwards of $250 million. So this was a meaningful acquisition. We are still underwriting opportunities. We still want to grow in the core. We want to be a necessity-based, and we consider the industrial portfolio to be necessity-based as it is distributing food to stores. So we're active on it. We're doing a bunch of underwriting. The market is very hot for grocery-anchored, as you probably know. And so we're being very strategic and selective on which ones we're able to buy. We were very fortunate to be able to bring in 5 into 2025, and we're looking to do more in '26. Lorne Kalmar: Is there a preference in terms of grocery-anchored versus retail-related industrial? Or is it more opportunistic? Mark Holly: Opportunistic. We're looking at both. Operator: The next question comes from Golden Nguyen-Halfyard with TD Securities. Golden Nguyen-Halfyard: Just going back to the Whitby distribution center acquisition, would you be able to provide a cap rate on the deal as well as lease terms? Mark Holly: On cap rate, no. We don't give individual cap rates. But if you look at our portfolio weighted average, we're in and around that range. In terms of the lease, it's a long-term lease with renewals, and it is a commercially standard lease that you would find at any industrial facility. Golden Nguyen-Halfyard: Okay. And turning to the residential portfolio. Any plans to sell down a 50% interest in Zephyr? Mark Holly: Not at this point in time. Golden Nguyen-Halfyard: All right. And then maybe just one last question for me. If you had to say one area or category of leasing that will be different in 2026 versus 2025, what would it be? Mark Holly: Could you repeat the question? What category would be... Golden Nguyen-Halfyard: Yes. If you had to say one area or category of leasing that will be different in '26 versus '25, what would it be? Mark Holly: Different? Okay. Arie Bitton: I would say that right now, where we're targeting is additional uses for our retail portfolio that are maybe, what you would call, nontraditional, so additional services, additional medical to our shopping centers that really complement the grocery and traditional convenience offering. That is an area that we're focusing in on, and there's a lot of inbound demand. We demonstrated that last year with the opening of a first-class medical facility in Nova Scotia, and we're continuing to execute on deals like that. It's what tenants are asking for. It's what customers are asking for. And it really ties in nicely. And we're talking about those types of uses, medical, library uses, and more of those sort that are really adding to the complexion of our portfolio. Operator: Our next question comes from Brad Sturges with Raymond James. Bradley Sturges: Mark, you've always talked about the kind of the long-term target for NOI growth of kind of 2% to 3%. Last year was better than that. Do you see 2026 kind of being above that long-term target, kind of in that 3% to 4% range again this year? Mark Holly: Yes, 2025 was a really strong year. And as Kara called out on her prepared remarks, renewals, contractual rent step-ups, modernization program that we have with Empire, intensifications that we have been doing on sites over the last couple of years have all been contributing to that in the retail side. We continue to push on all of those drivers of same-asset NOI. We are still holding though to our long-term target ranges of the 2% to 3%. But what we do indicate is that we'll likely be on the higher end of that 2% to 3% range as we look into 2026. Bradley Sturges: Okay. My other question would just be on property -- the fee income stream. Obviously, you had an acceleration last year and there might have been a little bit of catch-up on deferred fees. Just how should we think about that line item for 2026? Mark Holly: In terms of the 2 programmatic partnerships that we have, we talked about that stability around $2.4 million on a quarterly basis and then the flow upwards as we do one-off opportunities with Empire and some of our other partners. So as you're thinking about modeling, definitely the $2.4 billion is consistent, and then there'll be opportunities to grow off of that as we do more work with our partner at Empire or some of our JOs that we have in the portfolio. Operator: The next question comes from Mario Saric with Scotiabank. Mario Saric: Just coming back to the Whitby acquisition. In terms of the annual contractual escalators, is it fair to say that, that figure is fairly consistent with the portfolio average? Or is there a nuance involved? Mark Holly: It's fairly consistent. I would say it's a little bit better, slightly better than our portfolio average, Mario, but it's not material. Mario Saric: Got it. And then coming back to the funding, I know dispositions have been opportunistic, but you're consistently kind of reviewing the portfolio for opportunities. Like in an ideal world, if things play out the way you'd like them to play out, is there a quantum of dispositions that you're thinking about in '26? Or are you conversely okay with the existing portfolio and okay with inching up leverage on a more structural basis on the back of this acquisition? Mark Holly: That's a good question. Definitely, always looking at the portfolio, always looking to high-grade it. We've been very active in that since 2023, pruning the ones that have low growth or have structural vacancies or have a declining NOI perspective as we look into the future. We are looking to continue to always high-grade. So actioning against some in 2026 is going to be our path and our plan. And in terms of using it as a mechanism to ensure we free up cash flow to high-grade the portfolio, some of it, yes, but we're comfortable with our debt metrics running at 7, 6, 9x ample room in there. We have, as Kara called out, we have no material leverage issues to address. So we're on our front foot, Mario. So we are looking at high-grading the portfolio through dispositions and acquisitions and not using it to shore up the balance sheet. Mario Saric: Got it. And what -- turning to Broadview -- Broadway & Commercial, what are the odds of some kind of resolution at that site in 2026? Mark Holly: All of '26. If you had asked Q1, I would have said extremely low. First half, probably slightly better, but still low. The development team is working with municipality and there's a number of contracts that we have to work through, and that's just going to take some time. So I can't give you is it going to happen in '26, but the team is working through it. Mario Saric: Okay. And then just maybe last question on fundamentals. You're continually hitting record high occupancy levels at some point. Presumably occupancy can't go any higher. But relative to the Q3 call, given that we're kind of 1.5 months into what could be characterized as maybe a seasonally slower retail leasing period relative to Q3, what's your level of confidence with respect to achieving continued double-digit blended lease rents in '26? And has anything changed in terms of watch lists and so on as we're heading into the spring? Arie Bitton: Mario, the outlook is still similar to what it was as we closed out 2025. So tenant demand remains high and supply remains constrained. The -- some of the, I'd call it, anomalies, Q4, we historically have some strong temporary leasing in some of our malls. So we typically see that fall off a little bit in Q1. And we also had Toys "R" Us announced the CCAA proceeding. But what we've done with that one is we terminated Toys "R" Us in January, and we are now working with a receiver to get them reopened with the receiver on a temporary basis. as of tomorrow potentially. So our watch list, really, that was probably the biggest occupier space that we were keeping an eye on. And I would say that we've mitigated that in the short term, but we've been working on backfill options throughout. And I'd say that from an additional tenant perspective, we don't have any Eddie Bauer or any of the other potential tenants that of concern right now. So I would say that our occupancy is going to remain roughly where it is. It might go a little bit up, a little bit down, but we're talking a few basis points here and there. Operator: The next question comes from Giuliano Thornhill with National Bank. Giuliano Thornhill: Just turning -- or sticking with the occupancy kind of question. I'm just wondering on your regional markets, what is the remainder kind of occupancy uptick left in your portfolio? Is it market specific or just kind of broadly and really like your ability to get to the higher levels is kind of what I'm asking? Arie Bitton: We have a number of properties that are older and closed assets that still have some remnants of vacancy. We're working our way through those. In the quarter, we leased up, as an example, 19,000 square feet in Newfoundland that was historically vacant. So I would say that those are the properties that are most affected. Again, the demand is there and there's not supply. So we are having tenants come in now that we haven't seen previously. But I would say, they're not in our grocery-anchored portfolio. They're more so in the former enclosed properties. Mark Holly: One item that I would add on that is just when you look at the 3 market classes, regional markets versus our total of 97.7%, regional markets are running at 97.1%. And if you kind of go back 36 months, that was probably 5 percentage points lower. So Arie and the team have done just an exceptional job of catching the wind that is in retail demand and doing the things that he talked about of the medical uses and some of the local government opportunities to kind of create that hub around that grocery anchored to inflate it even more. So there is still a little bit of opportunity in it, but I'd say we've moved that needle significantly over the last couple of years. Giuliano Thornhill: And the renewal -- the leasing renewal maturity for next year, would you see that broadly consistent with what you saw in 2025 in terms of location and tenant type? Arie Bitton: It is. Giuliano Thornhill: And then just lastly, on the Toys "R" Us, how large was the exposure there? Arie Bitton: About 35,000 square feet. Giuliano Thornhill: Okay. So pretty small. Operator: The next question comes from Tal Woolley with CIBC. Tal Woolley: Good morning, everybody. Just with the Empire restructuring of Voila in Western Canada, does that you think portend anything in terms of changes, modifications that Empire wants to make to its retail footprint in Western Canada? Like should we expect maybe more banner conversions, more interest in modest redevelopments? Or is there a desire on Empire's part to sort of -- I think when they acquired Safeway, they really started to get moving on remodeling a lot of the older stores in the urban markets too as well. I'm just wondering if you can sort of talk a little bit about how all this maybe changes the approach. Mark Holly: I can't comment on Empire's business or their strategy or the things that they're looking to execute against, Tal. But as a very long-term strategic partner of theirs, we intersect with them on modernizations and land use intensifications. We're buying the Whitby warehouse from them. And so we're going to -- that is our strategic competitive advantage, and we're going to lean into it. But I can't speak to sort of their strategic intent as you're asking about their wind down of Voila and does that change any of their dynamics around store deals or units. They have talked about growing more stores. That's not new. And we're actively working with them to build more stores. We did the Queensway last quarter. We have a few others that we're working on with them. So -- but I can't comment on their operating business. Operator: We have a follow-up question from Mario Saric with Scotiabank. Mario Saric: Just one more for me, maybe for Arie. The lack of new supplies, as you referenced it a couple of times in the call, it comes up consistently in the industry in terms of what's driving kind of the strong rent growth. Like if you were to add a small pad on good quality site, like what would you guess or what would you estimate is the gap between kind of market rent today and then like the rent required to achieve a good development yield on that pad? Arie Bitton: So yes, I think on that point, Mario, the new pad opportunities, the reason a lot of them aren't getting built is not because of the lack of demand, it's because of the construction cost. So where we've been able to get around that is by working on some land leases or prep pads to overcome some of those. I would say it's hard to pin down an exact number on what that delta is on a traditional basis, just given many of these, we're not building on spec, we're building for specific uses. But these days, you're probably looking at $50 to $60 or more to construct a pad. So that gives you a rough idea of where that would place us versus our in-place $19 portfolio rent. I think that's guidepost for you. Operator: We have a follow-up question from Mike Markidis with BMO. Michael Markidis: Just following up on Mario's question there. Arie, the $50 to $60 a foot for a pad, is that a net or a gross figure? Arie Bitton: Those are net rents. Michael Markidis: Okay. And then I think last quarter, you guys talked about 2 dozen properties where you actually had expansion capabilities. So I'm just wondering and trying to reconcile that comment with the comment on rents don't work. Arie Bitton: So I think you can see in our disclosure, we opened up a number of pad opportunities over the years. So again, the QSRs that are looking to grow are willing to pay the rents necessary in order to support their growth. So we saw that in our -- in both Nova Scotia as well as BC. So I would say that the demand is there. We're working our way through them. And those 2 dozen aren't just solely rents. There's entitlement, there's some zoning, but we're working our way through all those 2 dozen opportunities as we speak. Michael Markidis: Okay. And then if the construction costs don't work, can you -- I mean this might be a rudimentary question, I'm missing something, but how does the land lease work? I mean, I get how land lease works for you, but how does the land lease make it more amenable for the person paying the rent? Mark Holly: Michael, so in a land lease scenario, they're taking on the risk of the capital deployment and they're not getting a rental structure increase over it. So from their lens, in some cases, they like to take on that and not have to pay the longer-term rent obligations. We're doing it in some cases and not all cases. We did the 2 bank deals at the Longo's plaza that we just acquired. We're slightly structured differently. We've done QSRs, McDonald's and Wendy's and Dairy Queen's that are slightly different. So where Arie is getting to is it's not one-size-fits-all. So when we look at our entire portfolio of 308 properties, we're always looking at what the optimization of those properties are through intensification or modernization. On intensification, where we can pump out on the existing CRU, that's 3 walls. So that works a little bit better. And if we're doing pads, there are usually 5,000 square foot buildings, some have drive-through, some don't. So the costs there do creep up. I would say what we are seeing in construction cost, though, is stabilization. We're seeing lower cost on the front-end divisions, which is the underground and earthworks. And what we haven't seen is some of the finishes. We've seen them stabilize. We haven't seen the finishes come off. But that said, it's not escalating the way it was. So there's more certainty around what the going-in costs are going to be, which is giving the retailers less of a pause to greenlight projects. So those 2 dozen that we've talked about are the ones that we see potential near-term opportunities to build out, and that's where you're going to start to see them show up over the next number of years in that nonmajor category. So $50 or $60 square foot rent is depending on what you're going-in costs were for land, how much underground earthworks you're doing, how much you're prepping the pad versus building the asset, shelling it. So it's really difficult just to give you a blanket number of $50 because every deal is unique. But the opportunities are real. The retailers are looking to drive more incremental units, and they're finding stability and cost and ability to run a pro forma that meets their P&L. Operator: There are no further questions. This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Ladies and gentlemen, good day, and welcome to Grasim Industries Limited Q3 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ankit Panchmatia, Head, Investor Relations of Grasim Industries. Thank you, and over to you, Mr. Ankit. Ankit Panchmatia: Good morning, and thank you for joining Grasim's Third Quarter Financial Year 2026 Earnings Call. The financial statements, press release and presentation are already uploaded on the website of stock exchanges and our website for your reference. For safe harbor, kindly refer to cautionary statement highlighted in the last slide of our presentation. Our management team is present on this call to discuss our results and business performance. We have with us Mr. Himanshu Kapania, Managing Director, Grasim Industries and Business Head, Birla Opus Paints; Mr. Hemant Kadel, Chief Financial Officer of Grasim Industries. Also joining them, we have with us Mr. Jayant Dhobley, Business Heads of Chemicals, Cellulosic Fashion Yarn and Insulators; Mr. Vadiraj Kulkarni, Business Head of Cellulosic Fibers Business; and Mr. Sandeep Komaravelly, CEO, Birla Pivot, our B2B e-commerce business. Let me now hand over the call to Himanshu, sir, for his opening remarks. Over to you, sir. Himanshu Kapania: Good morning, and a very warm welcome to everyone joining us today. At the outset, we wish all of you a happy new year 2026. We hope that the year has begun on a positive note for you and your families, and it brings good health, continued progress and renewed optimism. As we step into 2026, we do so with a sense of confidence and purpose. While the global environment continues to evolve, the underlying strength of our markets, the resilience of demand and our disciplined execution gives us optimism about the road ahead. The new year represents not just a change in calendar, but an opportunity to build on momentum, sharpen our focus and deepen the value we create for our stakeholders. On that value creation, let me start sharing key updates on two of our latest growth engines. As announced earlier, our Paints business, Birla Opus CEO, Mr. Sachin Sahay, shall join us from 16th February 2026. Despite the absence of CEO, the existing Paints team delivered an extraordinary performance, reaffirming the company is being built on rock-solid foundation and has a long pipeline of leadership who can take on the baton when the need arises. During the quarter 3 of FY '26, Birla Opus, the third largest decorative paints player, expanded its revenue market share by more than 300 basis points year-on-year based on internal estimates and announced results of listed paint meters. On a quarter-on-quarter basis, Birla Opus accelerated its market share gains with revenue growth of nearly 3x the Indian decorative paint industry growth rate, inclusive of Birla Opus. Further, the combined revenue of Birla Opus and Birla White Putty business in quarter 3 FY '26, the revenue market share gap with existing #2 paint players is now reduced to around 300 basis points, based on the guided decorative segment revenues, which includes their putty business as well. In quarter 3 FY '26, Birla Opus sales volume has risen by 70% on year-on-year basis. Early this January, Birla Opus has crossed the milestone of 500 million liters of paint sales cumulatively. We believe that more than 6 million households are now experiencing superior quality of Birla Opus in a short period of 18 months. Birla Opus exponential growth is underpinned by rising brand acceptance, rapid expansion of distribution network, strong sales throughput from dealer counters to contractors and consumers, consistent differentiation through superior quality -- product quality and focused brand-building efforts. Let me give you final details of execution on the above. First, on brand reach. The presence of Birla Opus has crossed 10,400 towns across 35 states and union territories. We have covered all 50,000 population centers across India and more than 75% of the 10,000 to 50,000 population centers. The company will continue its expansion effort deeper into Bharat. The active quarterly billing dealers has grown in double digits, along with a single -- high single-digit growth per dealer revenue throughput on month-on month when compared with last year same quarter. Additionally, Birla Opus is transforming the paint consumer retail experience with company exclusive franchise outlets nearing 1,000 Birla Opus paint galleries. These galleries uplift consumer experience by selecting a paint brand, helping premiumization of the category. Institution sales continued to gain traction during the quarter, supported by increasing project wins and specification approvals among clients, including governments, builders, factories, hospitals and cooperative housing. The institution sales grew by 40% quarter-on-quarter. As institution orders have a long gestation period, happy to report more than 40,000 mid- and large-sized projects are in various stages of negotiation with nearly 25% build, thereby a strong project pipeline for future. Secondly, Birla Opus remains focused on driving secondary sales from dealer counters to contractors and consumers. The 10% free paint promotion continues on 10- and 20- data pack across all-emulsion top coats waterproofing range, however, excludes subeconomy and other categories. The company equally focused on building relationships with paint contractors, the key influencers. For them, Birla Opus has built an end-to-end first-of its kind digital platform to engage with contractors online on pan-India basis for product information, incentives and schemes, sharing consumer reach, offers assurance registration, complaint handling and much more. This platform is integrated with our unique track and trace system to monitor consumption by customers at pin code and dealer levels. We are also implementing AI-based projects to improve contractor connect and analytics. I'm happy to share that over 7.5 lakh contractors and painters have applied and experienced Birla Opus superior range of products on pan-India basis. This online platform allows us to remain always in touch digitally with the unorganized painter community and instantly transfer accrued benefits to their banks on a click of a button from their app anywhere, anytime and experience like UPI. Additionally, the centrally controlled tinting machine analytics shows strong color and consumption across geographies. With over 35,000 active tinting machines in operation during quarter 3, the tinting data shows interesting consumer insights. The top 2 [ Opus ] colors unifying the country include [ Fort Kochi ], a dark bluish gray color; and a [ Morning Birdsong ], a light, bluish gray shade, which are tinted by more than 30,000 dealers in the last 1 year. Thirdly, the foundation of our product strategy is built on R&D excellence with a portfolio designed for performance, durability and unmatched finish. Birla Opus has achieved what we believe is the fastest portfolio expansion by any brand in the industry. Today, Birla Opus proudly offers one of the widest product ranges of more than 216 products, 1,848 SKUs across emulsions, enamels, waterproofing, wood finish, wallpaper and others. This year itself, till now, we've introduced 40 new products, including the completion of retail waterproofing line, launch of painting tools and indigenously developed Italian few [ Alka ] range and many more. These innovations are not just additions, there are accelerators of growth, which is creating clear product differentiation, winning the trust of dealers and delighting consumers. The fourth powerful driver of Birla Opus is creating consumer pool by our sustained brand salience and differentiated marketing. According to Opus commission, Brand track study, the top-of-mind brand recall for bills has surged into double digits, positioning us as the second most recalled paints brand in urban markets. With over 6 million satisfied home users acquired in a very short period, Birla Opus brand acceptance will continue to accelerate, providing solid impetus to growth. From builders and government bodies to industry, total education institutions and MSMEs in the project segment to individual homeowners and housing cooperatives Birla Opus brand test is on the right. With a strong media presence in quarter 4 and high engagement campaign, our brand salience is set to sort even higher. Watchout for our latest Opus by campaign Colours of Togetherness in the ongoing T20 World Cup and upcoming IPL 2026 and many other regional and national impact properties on television, digital and outdoor media. Our premiumization efforts continue with PaintCraft recently launched Birla Opus professional painting services, fully GST compliant, transparent pricing, attractive EMI options end-to-end platforms from lead management to quotation to monitoring of services and quality approval, managed jointly by central and field team. This service has expanded to over 5,000 pin codes, and we tapped to open PaintCraft on pan-India basis through the 1,000 Paint [ gates ] at the earliest. Separately, on OPUS Assurance Services, where the company has given additional guarantee besides the standard warranty clause to redo the painting, including labor, if need arise; more than 60,000 consumers sites have been registered through nearly 30,000 contractors under this first of its kind program. The combination of PaintCraft and Opus Assurance will improve consumer experience, allowing us to sell higher-end products and premium services. The fifth powerhouse behind Birla Opus momentum is the second largest manufacturing capacity holder in the industry, a formidable 24% capacity share. With the launch of Kharagpur and a steady ramp-up of capacity utilization across each of our 6 plants, the company has executed their natural production strategy by producing fast-moving category products closer to their market, cutting down the drag of logistics cost and inventory and sharpening its service edge. With the completion of projects on time and within budgeted CapEx, the focus of the company now has shifted to improve productivity, efficiency operations and bring down significant variable costs through optimization. At the heart of our manufacturing journey lies a bold embrace of Industry 4.0 with IoT-driven automation helping standardization and consistency of quality. This excellence is now obviously validated. We are proud and excited to share that Birla Opus has received Integrated Management System certificate and compressing ISO 9001, 14001 and 45001 for all the 6 plants in one go. Achieving these certifications strengthens our organization framework and reinforces confidence of our customers, partners, stakeholders in our capabilities. Securing certification in less than 18 months of full-scale operation is an unprecedented milestone. It underscores our deep commitment to the highest standards of quality, safety environmental stewardship, compliance and operational excellence and marks a powerful step forward in our ongoing sustainability evolution. Before I move on to the next business, I wish to address the narrative about sluggish industry growth. Based on announced results of 4 listed paint [ measures ] and guidance on their decorative business. It appears the decorative paints, excluding Birla Opus, has grown by 1% to 2% by revenue but 7% to 8% by volume in quarter 3 FY '26 versus quarter 3 FY '25. Now when we add Birla Opus quarter 3 performance to these 4 players decorative paints business, industry revenue growth, including Opus, rises to 5% to 6% and volume growth jumps to 11% to 12%. In my economic understanding, a double-digit volume growth reflects a good to strong consumer demand. However, the pain of the industry is rate realization, which we believe is lower due to a combination of higher discounting and [ income ] players tendency to focus on low-value economy, subeconomy category and deep discounted [Putty] business. Birla Opus offers revenue is without [ Putty ], and our growth remains balanced across all categories of paints with premium and luxury segment continues to contribute steady 65% in our overall revenue. We have taken 2% to 6% price rise in January and February against standard dealer price list across the range of products to test the channel and consumer reaction. Coming to Birla Pivot, the B2B e-commerce business crossed the INR 8,500 crores annualized revenue run rate, ARR mark and remains on track to surpass the annual revenue of INR 8,500 crores, way ahead of FY '27 guidance. In a country as dynamic and fast growing as India, the next great feet in e-commerce would come from building another marketplace, it will come from digitizing and organizing B2B procurement at a scale and complexity few have ever dared to tackle. That is exactly what Birla Pivot is doing, and we are taking one of the largest, most fragmented operationally intense spaces in the economy and turning it into a trusted tech-enabled, outcome-driven platforms. Our vision is bold and unambiguous to become the most trusted B2B e-commerce platform in India. And we're building it the right way by scaling a powerful buyer-seller network and compounding our advantage across the three pillars that truly matter in e-commerce: Price, assortment and experience. Let's start with price, because in B2B, pricing is only about competitive parity, it's about removing friction from the system. India's raw material ecosystem is full of inefficiencies discovery gaps, opaque comparisons, fragmented sourcing and complex multi-vendor procurement. Birla Pivot doesn't mainly negotiate price, we reengineer the economics of procurement, we align suppliers' inefficiencies with buyers' needs, enabling transparent discovery and comparisons, helping suppliers reach demand more efficiently and absorbing the operational complexity of procurement at scale. In other words, we convert fragmentation into efficiency and we pass that value back to consumers. On assortment, this is where Birla Pivot is fundamentally changing how business and individuals buy project materials. We are building a true one-stop procurement engine, 35-plus categories, 40,000-plus SKUs and solution aggregated from 300-plus top brands. The product category is covering everything from steel to tiles, cement to chemicals. This breadth isn't just impressive, it's transformational. It consolidates vendors, compresses procurement cycles, standardize buying decisions and [ stabilizes ] approvals and purchase planning. We are going to step further because in B2B, the ability to buy is often tied to working capital. And that's why Birla Pivot is enabling fast, easy, customized financing designed around real procurement needs so businesses can purchase with confidence, flexibility and speed. And then comes our biggest differentiator, experience because B2B is not just digital, it's physical, operational and relentlessly service-driven. Birla Pivot delivers B2C-like simplicity in a B2B world, powered by digital tools for order enablement and fulfillment, nationwide support backbone and consistent trusted buyer experience. We are not simply building a website, we are building a reliability at scale. We are making complex procurement feel effortless, dependable and repeatable. That's the moment when a platform stops being a channel and becomes a habit. This momentum is not episodal, it's network-led, value-led and scalable. As categories expand, network effects deepen and digital adoption accelerate, Birla Pivot is uniquely positioned to play a defining role in shaping and leading India's B2B procurement digitization growth story. This isn't just about growth, it's creation of a new infrastructure layer for Indian commerce. Moving on from new businesses and focusing on macros, India continues to stand out on a global growth map. India's domestic demand is resilient, investment cycle strength and policy support have kept growth momentum intact. The most recent Union Budget reinforced this momentum with several strategic themes. First theme is government's continued focus on infrastructure, housing and urban development would drive growth for Grasim's Cement business. India's push towards self-reliance, manufacturing scale and supply chain integration would drive growth for our chemicals business. The recent GST rationalization focus on improving India's per capita driven by higher disposable incomes, better quality housing and aspirational consumption would drive growth for decorative paints and premium textiles. Support for MSMEs by increasing finance democratization and integrating into organized supply chain would drive growth for Birla -- Aditya Birla Capital and Birla Pivot. Lastly, a balanced focus on renewable energy and energy security will drive growth for our Renewable and Insulator business. For investors seeking a single scalable entry into India's structural growth, Grasim represents a credible and well-diversified proxy. As India's growth story unfolds through these diverse themes, Grasim businesses remain deeply intervened with each of these structural pillars, presenting long runway of growth and value creation. Reflecting on this growth, I'm happy to share that Grasim consolidated revenue for the current quarter stood highest at INR 44,312 crores, an impressive improvement by 25% year-on-year with building materials, Financial Services, cellulose fibers, Chemicals and even premium textiles and Insulators firing on all cylinders. The 9-month revenue stood at INR 124,330; crores, up 19% year-on-year, demonstrating consistency of performance. Stand-alone revenue grew at even faster rate, reaching highest ever at INR 10,432 crores, up by 28% year-on-year, with strong contribution from both core and new businesses. I would now like to hand over the call to Hemant, CFO, to further discuss financials and key business highlights of other businesses. Hemant Kadel: Thank you, sir. Good morning, everyone. It's my pleasure to interact with you all again. Happy 2026 to all present on this call. I am very proud to say that we have closed the calendar year 2025 on a high note with two of our new businesses on track to achieve their stated goals. As on 31st December 2025, the TTM consolidated revenue is nearly INR 170,000 crores, growth of 14% compared to FY '25 revenue. Currently, stand-alone revenue on TTM basis stands at INR 38,191 crores, up 21% compared to FY '25. Based on the current quarter revenue, stand-alone businesses are now at annualized revenue run rate of higher than INR 40,000 crores. There has been a strong underlying growth across all the businesses. Consolidated EBITDA grew by 33% year-on-year to INR 6,215 crores. Stand-alone EBITDA grew at a faster pace with growth of 57% year-on-year to INR 585 crores. Starting with key business, Building Materials, revenue for the segment grew by 30% year-on-year, driven by all-round performance across Cement, Paints and B2B. Led by the sector's strong outlook, UltraTech is steadily expanding both size and scale. UltraTech's clear vision and disciplined execution have led current capacity to reach 194.06 million metric tons with clear sight of reaching a capacity of 240.8 million metric tons by March 2028, which is a CAGR of more than 10%. The capacity expansion is clear from -- critical from three or four perspectives. Firstly, it reinforces our role as a key enabler of India's infrastructure and development journey. Secondly, it enables us to grow ahead of industry curve. Third, it narrows demand and supply gap across critical markets nationwide. And lastly, it further strengthens UltraTech's leadership position. While capacity expansion remains core to our growth, we have embedded a culture of efficiency to ensure that our growth is resilient, sustainable and cost effective. Underpinning this strength is our EBITDA growth, which grew by 29% year-on-year with an EBITDA per tonne of INR 1,051. Our MD has already covered Paints and B2B e-commerce business. Hence, let me now directly come to our core businesses of Cellulose Fibers and Chemicals. Highlight for these core businesses is that while we can keep on discussing them individually, irrespective of commodity cycles, both the businesses combined have delivered consistent EBITDA. Leadership, innovation, sustainability, capital allocation and cost effectiveness are key tenet to such consistency, which are an integral part of Grasim's growth strategy. Starting with Cellulose Fiber, the business has delivered EBITDA of INR 491 crores, growth of 48% year-on-year. This is driven by three factors: first, improved realization due to favorable product mix led by exports; second, operational efficiency due to volume growth; third, declining input prices, mainly pulp and caustic. The demand for cellulose fiber in China continues to exhibit stability due to global tightness in supply. In India, we have seen similar strength despite removal of Quality Control Order. Due to this inherent strength, we have seen prices for cellulose fiber decoupling with other competing fibers, which are on a declining trend over the past few quarters. Unlike cellulosic fiber, which are largely stable, have started to recover. Cellulosic Fiber segment also includes cellulosic fashion yarn business. The business performance for the quarter was subdued due to cheaper imports from China, which has created oversupply and lower downstream demand. Secondly, Chemical business, the revenue growth of 5% year-on-year was largely driven by volume. Caustic soda sales volume for the quarter 3 FY '26 stood at highest ever 313,000 tonnes, up by 4% year-on-year. While CFR SEA prices are down on Y-o-Y basis, domestic caustic prices are showing some resilience led by stable demand and rupee [ depreciation ]. EBITDA in Chemical business was lower by 4% year-on-year due to higher equity realization and lower profitability in Specialty Chemical business. Higher ECH price resulted in lower profitability in Specialty Chemical business, which was partially offset by lower BPA prices. Coming back to the consolidated business, in the Financial Services, it is one of the fastest-growing businesses in our portfolio. This is driven by their multichannel approach aimed at providing customers with seamless experience across channels of interaction. The revenue was up by 29% year-on-year, led by all-round performance across lending, asset management, insurance and advisory services business. Total lending portfolio, which includes NBFC and Housing Finance, grew by 30% year-on-year to over INR 190,000 crores. On a strategic front, we would like to highlight the recent announced partnership with Advent International, which also marks an important milestone for Aditya Birla Capital. During the quarter, Aditya Birla Capital Board approved a primary capital infusion of INR 2,750 crores into Aditya Birla Housing, valuing the business at approximately INR 19,250 crores on a post-money basis. Advent will hold roughly 14.3% of Housing Finance, with Aditya Birla Capital retaining about 85.7%, subject to customary shareholder and regulatory approvals. In other businesses, starting with Renewable business, Aditya Birla Renewable grew by 82% year-on-year, largely led by higher capacities, which now stands at nearly 2% peak capacity compared to 1.2 gigawatt quarter 3 FY '25. Aditya Birla Renewables has announced a strategic investment by Global Infrastructure Partners, which is a part of BlackRock. This deal marks one of the largest primary private equity commitment into an Indian renewable company. GIP will invest up to INR 3,000 crores, comprising of an initial INR 2,000 crore commitment with a green [ shoot ] option of INR 1,000 crores, subject to customary regulatory and closing conditions. Post this deal, the renewable business is valued at an [ EV ] of INR 14,600 crores. I'm happy to say that this partnership is expected to accelerate Aditya Birla Renewables growth trajectory as it builds on its operational and contracted capacity of nearly 4.3 gigawatt of peak capacity portfolio across solar, hybrid, floating solar and RTC assets and targeting scaling capacity beyond 10 gigawatt of peak capacity in coming years. This transaction brings not only capital, but also the GIP's global infrastructure operating experience to support disciplined expansion and contribute meaningfully to India's energy transition goal. As regards CapEx, post commissioning of Kharagpur plant, we have completed majority of the planned capital expenditure in decorative paint business. The capital expenditure spent on YTD basis is INR 1,310 crores. Focus now remains on Phase 1 of Harihar Lyocell project for additional 55,000 metric tons per annum capacity of specialty fibers. As on 31st December 2025, net debt of the company stood lower at INR 6,882 crores compared to INR [ 8,277 ] crores in the same period last year, with net debt to TTM EBITDA healthy at 2.1 level. Let me now open the floor for Q&A. Operator: [Operator Instructions] The first question comes from the line of Navin Sahadeo with ICICI Securities. Navin Sahadeo: Yes. I hope I'm audible. Himanshu Kapania: Yes. Navin Sahadeo: Yes. And also thank you for the detailed initial comments. Two questions. First, of course, on the paints business. So needless to say, the company has done a commendable job. I believe for the quarter, the revenues given like INR 8,500 crore run rate for the Birla Pivot and numbers that are published for UltraTech. Our sense is paints would have done roughly INR 1,200 crores kind of revenue in this particular quarter, which, of course, is great from the start that we have had. My question is the growth is seen maturing. In the sense, in Q1, a similar sort of a very rough cut working suggested INR 1,100 crores kind of a growth in the June quarter, similar flattish in September, and now we are at INR 1,200 crores give or take some margins there. I mean, some buffer there. Now to reach the scale of INR 10,000 crores exit by Q4 '28, which is a run rate -- I mean, which is around INR 2,500 crores revenue over the next 9 quarters, we need to grow at 40% CAGR year-on-year for us. So I'm just trying to understand, first of all, what different than now the company will do or what convinces us now given that the growth is maturing in the last 1, 2 quarters, how should one look at this target realistically being achieved and in that what is also the industry value growth into consideration? That's my first question. Himanshu Kapania: Thank you, Navin. So while you have done your internal calculations, I'm not going to either accept or deny it. But all I can say, both on quarter-on-quarter basis, we had a robust more than double-digit levels of growth. It's closer to between 18% to 20% on a quarter-on-quarter basis. On an annualized basis, these numbers are tending towards the 3-digit growth. So I don't know what numbers you have in your calculations and using words called mature, when we have grown on a year-on-year basis by 300 basis points in the paint industry and we see a similar kind of consumer uptake in the current quarter. On an overall basis, we are seeing across geographies, very strong demand for Birla Opus paints and a large number of existing dealers who have joined us have increased their throughout and they continue to grow at levels of strong single-digit on a quarter-on-quarter basis. And we continue to add new dealers at a double-digit level on a quarter-on-quarter basis and on H1 and H1 -- half year -- on half yearly basis. So that is the part one. Second part, which is besides consumer and dealers, we're also getting very good attraction from the contractors and as I mentioned in my opening speech, more than 7.5 lakh contractors have joined hands. And these volume -- these number of contractors give us confidence that the growth will continue. We are still a single-digit market share player. We have a large capacity. Our presence is now on a pan-India basis. We've reached every 50,000 population town. We have reached more than 75% of 10,000 to 50,000 population town. So the growth are happening. We have a large portfolio of businesses. Consumer demand is building up, and we remain confident and remain -- we continue to guide that we will deliver the INR 10,000 crores in the third year -- in third full year of operation. Navin Sahadeo: Understood. So despite the price increase that we have taken, as you said, across 2% to 6%. Despite that, you are saying we are confident to achieve the revenue target. Himanshu Kapania: So there's a price -- so you understand the philosophy of price increase. We always want to maintain a particular distance from the market leader. And we felt this distance was slightly more than that was necessary, and we're bridging that gap. That is the objective of price increase, and there is no other objective. And if you also want to test at what is the -- what demand of consumer contractor remains at the revised price. This is our first... Navin Sahadeo: Yes, go ahead, please. Himanshu Kapania: No, that's fine. Navin Sahadeo: Okay. My second question then was on your Birla Pivot business. And of course, extremely fast execution, much, much ahead of expectation. But we had also, I think, hinted, the first time we gave this target the road to profitability or breakeven for this business was also like a $1 billion kind of revenue run rate. So is it now fair that since we have achieved almost we are there, this business is breaking even or will start making positive contribution? How should one look at profitability for Birla Pivot from now going ahead? Sandeep Komaravelly: Thanks, Navin. This is Sandeep here. On the profitability front, we are making progress similar to how we have done -- how we have executed on the revenue side and the growth has been excellent over the last few quarters. We've been making good progress on bridging the gap so that we can get to breakeven as well. I think from our current estimates, we will exit FY '27 at a breakeven level, that is our current estimate. Operator: Next question comes from the line of Rahul Gupta with Morgan Stanley. Rahul Gupta: Two questions. One, continuing on the Pivot point. I remember earlier you had made a point to -- earlier you had guided to break -- cash breakeven by 2030. So you are now front loading it, accelerating it to fiscal '27 end, right? Sandeep Komaravelly: Rahul, I don't think we give the guidance of 2030 earlier, but as I mentioned, in response to the earlier question, FY '27 exit, we should be exiting the year at breakeven, yes. Rahul Gupta: Okay. That's great. And my second question is on the continuation of the points you -- point you made on the paint. You are testing waters with 2% to 6% hikes in January. Now it's early days. Can you please help us understand how the acceptance has been? And if we look at the industry which has been struggling with the discounting, how should we look at the overall industry from here on? Or let me put it this way, how volume versus value gap should move over the next year for industry and you? Himanshu Kapania: So first and foremost, as I mentioned in the previous answer, there was -- the gap between the leader and us was high, and we've used this price increase primarily to be able to bridge the gap. We obviously still are a single-digit player. And our aim is to bridge the gap between our capacity, which is at 24% to our current revenue market share. So that is part one. It's early time to be able to say what is the response to the price increase because we've had certain of a range of products where we took price increased on 28th of January and the remaining range of products is happening on 25th of February. So it will be better I respond to the consumer and contractor response after the quarter 4 results are there, because we are still in the process of executing the price increase. But on a mid- to long-term basis, what is our view about the industry. We remain very bullish if there has been -- as I mentioned in my opening speech, the industry in quarter 3 has grown by 10% to 11% or probably even 12% by volume. The challenges have been over focused on economy, subeconomy and putty-based business. So if we stop the down trading and if you notice, Birla Opus wants to operate a bit more balanced approach, it is making every effort to premiumize the service with the launch of its paint galleries and where, obviously, the ratio of premium and luxury is significantly higher. And the same is true for our painting services. We've been making every effort to premiumize and ensure that in the mix our rate realization remains at similar levels to the volume. And our attempt is volume and value to both move in tandem. As far as the industry is concerned, we believe that this year, the industry may -- including Birla Opus, may grow by 5% to 6%. FY '25, it has grown by -- almost it was nil. And FY '27, we are hopeful that it will come back to an 8% to 10% growth levels. Operator: Next question comes from the line of Nirav Jimudia with Anvil Wealth. Nirav Jimudia: Sir, just one question on the chemical side. For the Epoxy business. I just wanted to have your thoughts, a, with the trade deal donw then with the U.S.A. now and Chinese currency also appreciating by close to around 8% to 9%, how do we see our exports to the U.S.A. market in the medium term? And on a longer-term basis, with now EU FTA also in place, how do we see our volumes in terms of exports to that region as well? Himanshu Kapania: Thanks, Nirav. Thanks for your question. Can you hear me? Nirav Jimudia: Yes, loud and clear. Himanshu Kapania: Both are positive for us in a way. So as you know that in epoxy, particularly in liquid epoxy resins, the Koreans have been available in India due to their FTA, they get a certain advantage where they can bring in product without the duty. And also, they had preferential access to U.S. as well as Europe. Now clearly, that advantage is going to go away. If you look in terms of timing, then the U.S. deal probably will get actioned before the American deal. So I am seeing a positive upside on export of epoxy from India to the U.S. Now how much quantity that will be, how that will ramp up, et cetera, is a matter of individual customer qualifications and those kind of things. That's a little bit too much detail to get into right now, but we do see a positive impact on that side. Similarly, if you look at Europe, as you know very well, Nirav, the European chemical industry is struggling with high costs, both from a perspective of energy, but also from a perspective of extremely high labor costs. As you know, a lot of restructuring has been announced in Europe, you know equally that Westlake has stock operations on their Rotterdam site. I think the India-Europe FTA, in the longer term will have a much more significant impact on the Indian chemical industry, probably in my personal opinion, more than the U.S. Of course, the speed at which Europe will ratify, all this will get down into law, et cetera, will be a little bit slower, but I believe that will be more sticky. So both these agreements, Nirav, are, I think, positive for the industry. Nirav Jimudia: Got it. Yes. Sir, just 2 clarifications here. Sir, a, do we import any raw material from EU, which were earlier subject to taxes and now with this deal, could help us from the chemical business point of view also and from an overall business point of view also? And b, any volume guidance which you would like to share from the epoxy business point of view for FY '27? Himanshu Kapania: Yes. So if I look at imports from Europe, yes, we have. I would not like to get into the details of what that is, but those are like -- they're not a large part of our basket. So I don't see really a large benefit from that. What I may think of is if glycerine prices continue to remain high, then the propylene route to ECH has its own competitive advantage, right? And several of the propylene-based producers are Western based. But there is a logistic cost hurdle. So let's see how this plays out in the long term. If you look at volume growth, then if I look year-on-year, our overall epoxy business, liquid proxy plus formulations this year has grown or at least for the year-over-year, we have grown by about 6%. I expect this rate to ramp up next year. Now how much it will ramp up by as a matter of speculation, but I expect that rate to ramp up further. Nirav Jimudia: Got it. Safe to... Himanshu Kapania: None of the fundamentals changed. Nirav Jimudia: And safe to assume that this ECH price corrections, which have happened on the upside would translate into a similar increase in the prices of epoxy, which generally gets passed on a lag basis? Himanshu Kapania: Yes, there is usually a time lag associated with that. As I mentioned, in the epoxy value chain, there are competing routes, right, glycerin-based ECH and propylene-based ECH. So what may be a pass-through for me may not necessarily be a pass-through for somebody else, maybe globally who may be propylene integrated. So depending on where crude prices, propylene prices, glycerin prices, the pass-through mechanism has a different cyclicality. But in the longer term, it all always passes on, right? It's always a matter of time. But the exact speed by which it passes on depends upon these 3, 4 factors. Nirav Jimudia: Sir, last clarification, if you allow. This quarter, we have seen a dip in our epoxy revenues. So was it more because of the volumes were lesser this quarter and that should start correcting next quarter onwards? Is this the right assumption to make? Himanshu Kapania: Just let me quickly check the data. Yes. So volumes were slightly under pressure on the liquid epoxy resin side. Actually, maybe the better way to see it is we decided not to take certain volumes where we thought the margin was getting too squeezed. That's probably the better way to see it. If I look at the non-LER business, all the formulation specialties, so the specialties within the specialties, there actually, we have not had any volume issue. It's on the margin where perhaps the lowest profitable part of our LER business, we have been a little bit unwilling to allow our margins to get compressed too much. Operator: Next question comes from the line of Amit Purohit with Elara. Amit Purohit: Thanks for the detailed data points on the paint. Just to recheck, sir, on the overall sales that we sold, you talked about 500 million kiloliters. That was since the time we have been into the market, right? Is it kiloliters or did I hear it correctly? Himanshu Kapania: 500 million liters, not 500 million kiloliters. Amit Purohit: Okay. That is -- since the time we have started operations. Yes. Okay. And secondly, sir, I also wanted to understand when you talked about 300 bps lower than the second player, that includes putty and everything, right, at this point of time? Market share -- exit market share you were talking about or... Himanshu Kapania: I am saying what we said in the statement, opening remark, Birla White, the Birla Opus revenue for quarter 3 and guidance given by #2 players. In our assessment, internal estimates, now the gap is 300 basis points. I hope it's clear. And it is only Birla White's putty business. It does not include any other business. Amit Purohit: Sure. And sir, we've talked about increase in new dealer addition. I just wanted to understand the typical profile of these dealers. If you could just qualitatively highlight these are large dealers or these are dealers largely from the market leaders? Or if you could just throw some highlight because typically, I mean, there is different types of dealers. And initially, when we started off, obviously, there were challenges to reach out to the very, very large dealers. What is the state now, I mean, in terms of acceptance? Himanshu Kapania: We are getting blend from all category of dealers. In our internal assessment, we've broken the dealers into A category, which are more than INR 3 crores; B category, which is INR 1 crores to INR 3 crores; C category, which is INR 30 lakhs to INR 1 crores and D category into less than INR 30 lakhs. Most of the dealers are coming in, in the A, B, C. The small numbers will also come in the B category, but our focus in the A, B, C category. Amit Purohit: And lastly, the price increase that we highlighted, that is more from a testing perspective? Or is there any raw material pressure, which kind of -- or do you think that from now on, the brand is strong enough to kind of take pricing and still it adds value to the entire channel as well. Just wanted to know your outlook as you highlighted that next year FY '27, the growth in the industry could be closer to about 8%. So the pricing volume graph should it reduce in the FY '27? That's the last question. Himanshu Kapania: First and foremost, there are no current raw material pressures. Second, we've been consistently maintaining that we are at a lower price than the market leader and we felt the gap was higher, and we reduced the gap. That has been the strategy around there. It is not a price increase strategy per se as you're reading it. Please read it that we would like to maintain a certain gap with market leaders, and that's -- and we want to test at that gap, what is the consumer response. There was an X gap that existed and we reduced that gap. Operator: Next question comes from the line of Pathanjali Srinivasan with Sundaram Mutual Fund. Pathanjali Srinivasan: A couple of questions. So firstly, could you explain a bit on our share of retail business and institutional business because I believe we've grown pretty fast in our institutional business, but I was just trying to figure out if the base there is lower? Or are we created more towards institutional business? Himanshu Kapania: So to our understanding, the industry, retail and institutional business mix is 85-15. We are not yet there on that mix. We are still single digit on the institutional business. Retail is much faster to take off and institutional has a much longer gestation period. The message that I was communicating is that we have a strong pipeline. And over -- hopefully by FY '27, we should be able to come closer to the industry average between 12% to 15% on overall contribution from institutional business. Pathanjali Srinivasan: So could you give me some numbers for where we are in terms of range here? Himanshu Kapania: As I explained, we were a single-digit number, and we have a strong pipeline of institution, but retail continues to be the stronger forte for us at this point of time. But institutional is growing faster... Pathanjali Srinivasan: Sure. And just one more question around. So this number of saying 18% we've grown last quarter and all of that. There's just one part though where I've not been able to figure out. Like I met a couple of dealers from the time we started and more recently. And I have seen some of them saying that they've either stopped doing business or they're finding it difficult or something like that, while my sample size is very small. I want to know like what is an acceptable level of pushback or a reduction in dealers when we expand dealership and what are our targets here and where are we... Himanshu Kapania: So the -- it's a large dealer universe. They are overall 100,000 dealers. On an average in a quarter, about 50% to 60% of the dealers are active. We are also experiencing a similar levels. In fact, our sense is about 70% to 75% in the quarter are active around that. And we are satisfied with the number of people who onboarded with us with the number of people who are active in a given quarter. So from that perspective, we are very satisfied both in the expansion of -- expansion pace of dealers, both in the existing towns and new terms as well as the throughput pace of improvement of dealers. We are -- most of the leaders who have joined us and have been consistently -- have continued to stay with us. There's obviously -- we are very focused on our collection and there are dealers who are pay masters are the ones probably you may be referring to. Pathanjali Srinivasan: Got it, sir. Just to continue on that. I just wanted to know what is our policy with printing machines that we've given to dealers and where dealers have not been doing as much business as we like to them? How are we dealing with them? And are we -- have we started collecting money for tinting issues that we've given to dealers? Himanshu Kapania: No, we don't collect money for -- as we already explained, we give the dealers free-of-charge printing machines, and that remains a consistent policy even in FY '26 and going forward. Only if a dealer does default on his payment for a long period of time, are there any actions that are necessary, but it's a few and far and are probably not relevant for this national platform. Operator: Next question comes from the line of Prateek Kumar with Jefferies. Prateek Kumar: My first question is on paints. Can you just confirm again the -- while you talked about your revenue expectation maintaining for FY '28, what do you think on profitability? Other related question, you have like seen some increase in interest expense during the quarter sequentially and depreciation. Is this completely related to capitalization of 6 plants? Or also, is there any working capital changes which you expect because you're also increasing mix in your business? Himanshu Kapania: I just want to be clear, what your question is? You are referring to overall Grasim results, and you're saying that the interest and depreciation component gone up. Is that what you're referring to? Prateek Kumar: Yes, that is right. Unknown Executive: Yes. So in Grasim, if you are referring with the last year, the borrowing for the purpose... Prateek Kumar: Q-on-Q, I mentioned. Unknown Executive: Setting up the new plant was being capitalized. On the 15th of October, we have commissioned our last sixth plant. And now from quarter -- next quarter onwards, there will be no capitalization and all the interest costs will be coming to P&L account. Did this answer your query? Prateek Kumar: Yes, sure. So there's no material working capital changes because we're shifting business -- paint segment business to more institution. That doesn't have... Operator: Sorry for interrupting. Mr. Kumar, your voice is breaking. Can we just come a little closer to the mic and speak? Unknown Executive: In paints business, we have capitalized over all the 6 plants and no major CapEx is spending at all. Himanshu Kapania: If your question is on data, we are well in control as our debtors and working capital is not a challenge. We repeat again that the interest component in the past, a portion of that was getting capitalized. And now it will not -- the portion has significantly fallen because from 6 plants now down to around 15th October, it's only 1 plant. And that also, a part of it was no more capitalized. And the same applies to depreciation. As now all the 6 plants are fully commissioned, the full depreciation is reflecting in the books. Prateek Kumar: And the other question was on Paint segment profitability, which you're expecting for Fy '28. You maintain it as like turning positive by FY '28. Himanshu Kapania: Yes. We maintain our guidance. I'll repeat within 3 years of full-scale operation, we will -- we are targeting to be able to reach a profitable #2 position. Operator: Next question comes from the line of Shreya Banthia with Oakland Capital Management. Shreya Banthia: Am I audible? Operator: Yes, you are. Shreya Banthia: So my question is regarding the Chemical segment. So if you could share what is the current share of renewable energy in the Chemical segment? Himanshu Kapania: Just second. It is around -- exit rate is around 20%, 23%, right? And we expect -- we actually are targeting to reach an exit rate of over 40% by end of FY '27, if you want to make a projection. Operator: Next question comes from the line of [ Vipulkumar Anopchand Shah with Sumangal Investments ]. Vipulkumar Anopchand Shah: So when we will start sharing the revenue and EBITDA numbers of our paint business? Himanshu Kapania: Shortly. Vipulkumar Anopchand Shah: Shortly means, sir? Himanshu Kapania: Yes. We are -- even today because that's why the -- there is a portion of the material that has been produced and was not sold, and they are still reflecting revenues which they're getting capitalized. We're expecting to complete that, and we will move on to -- we will share with you the exact dates when we do that. But there is still -- so that's why this gap between capitalization, that's why the numbers, what market calculates is there is a gap, and we want to finish all the materials that we have produced before commissioning and consume it, which remains in the capitalization. Vipulkumar Anopchand Shah: So should we assume that from next financial year, you will start sharing those numbers? Himanshu Kapania: We'll definitely come back. Operator: Ladies and gentlemen, due to time constraint, that was the last question for today. We have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments. Himanshu Kapania: Thank you so much for participating on the Grasim call. We're now going to close the call. Unknown Executive: Thank you. Operator: On behalf of Grasim Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.
Bodil Torp: Good morning, and welcome, everyone. I'm Bodil Eriksson Torp, the CEO of Storytel Group. And together with me here today is, of course, our Group CFO, Stefan Ward. We are happy to deliver record strong Q4 and full year for Storytel with good financial and operational performances across both our streaming and publishing segments. We conclude 2025 with record high profitability and a strong cash flow generation. And we can say that we are in a good shape to continue our progress in 2026. So here comes some of our strong highlights for 2025 and Q4. Our Q4 highlights includes continued strong top line growth with improved profitability and a strong cash flow generation. Our streaming business delivered subscriber growth of 9%, reaching 2.7 million paying subscribers at the end of 2025. Our subscriber growth was strong across all our core markets in Q4 and also for the full year 2025. And the churn continued lower throughout the whole year, while ARPU levels in local markets remained stable. And this is, of course, a good indicator of the value that we bring to our book lovers. Our publishing business continued to deliver very good performance as well with external revenue growth of 18% in constant currency, also with high expanding profitability. In Publishing, we had a strong list of new releases also in Q4, such as, for example, the August price winner and the best-selling title Viton with Bea Uusma. And we have also today announced that we, during Q4, started the process to transfer our listing to NASDAQ Stockholm market -- main market, and it's expected to be complete in 2026. So now over to our financial performance in the quarter. We delivered sales growth of 12% in constant currencies and EBITDA growth of 15% in the quarter. Our gross margin was at a new all-time high level, while our EBITDA margin was at the 20% level for a second quarter in a row. So our net profit of SEK 300 million was boosted also by a one-off positive tax impact of SEK 195 million, and Stefan will come back and talk a little bit more about that as well. Cash flow was solid, and we ended the year with a net cash position. So we are very satisfied with the performance in Q4. We continue to see improved internal efficiencies while at the same time, our product development has been intensified during the year. So this is also more that will come, I would say. We crossed SEK 4 billion in sales for the full year 2025. Our full year EBITDA grew by an impressive 26% in 2025 over 2024. Our EBITDA margin for the year reached 18.8% -- this is keeping us well on track to meet our midterm 2028 targets as we announced last year at CMB in May. So over to you, Stefan, and the numbers of our 2 business segments. Stefan Wård: Thank you, Bodil. We had another solid quarter in our streaming business, adding close to 50,000 new paying subscribers during the quarter and over -- well over 200,000 for the full year. In the Nordics, we added 16,000 in Q4 and 57,000 in 2025. So a relatively strong intake in the Nordics where we have a good or high market share position. In Sweden, we had positive intake both in Q4 and for the full year. Outside the Nordics, we added 32,000 subs during the quarter and 152,000 during 2025. Our strongest market in terms of net intake was Poland with a total increase of over 50,000 for the full year. Other markets with strong subscriber growth included Bulgaria, the Netherlands, Turkey and Germany. At the end of Q4, our Nordic and non-Nordic subscriber bases were roughly evenly split at 1.34 million each. As a consequence, we continue to see a decline in the average ARPU as our Nordic ARPU is typically higher than ARPU levels outside the Nordics. This trend will continue. However, it is important to note that the ARPU levels in local markets remain stable to positive in constant currencies. Over the past few years, we have seen a significant decrease in churn levels and churn continues to move lower also in 2025, ending the year at a new all-time low level. Looking at streaming financial, we delivered sales growth of 10% in constant currencies and 5% in reported. Streaming gross margin was 43.6%, while the EBITDA margin was 15.3% for a total EBITDA growth of 8% year-on-year. Our EBIT in streaming improved by 21%. We're on track to cross SEK 1 billion in quarterly revenues from streaming during the second half of 2026. In our Publishing segment, we delivered another strong quarter with 11% year-on-year revenue growth and external publishing revenue growth of 21%. Publishing EBITDA margin expanded to 32.2%, enabling EBITDA growth of 19% year-on-year, while our EBIT grew by 20%. Storyside is our in-house publisher that has been fundamental for us to build and develop the audiobook market, both in the Nordics and throughout most of our non-Nordic footprint. It remains the biggest profit engine of our publishers and had a very good year. Other publishers that delivered strong results during the year are Lind & Co, Norstedts and Bokfabriken. Bokfabriken was acquired early in 2025, and has rapidly improved to become one of the key profit contributors in our publishing business. It has exceeded our expectations for 2025 and prospects are promising also for next year. In terms of cash flow, it remained strong, both in Q4 and for the full year. Cash flow from operations before changes in working capital was -- in Q4 was SEK 217 million, up 10% on a comparable basis. That means adjusting for the Copyswede amount of SEK 34 million that was included in Q4 last year. Cash flow from operations for the full year amounted to SEK 647 million, up 26% year-on-year. We had some tailwind from working capital in the quarter, but it was less than anticipated. The reason for this is that we have tied up a little bit of unnecessary working capital during the year and had a negative impact from working capital of SEK 75 million. These are due to some unfortunate internal issues that has been resolved. So our best estimate for working capital development in 2026 is to have a neutral impact for the full year. Cash flow from investing activities was SEK 55 million in the quarter and SEK 252 million for the full year, of which SEK 160 million relates to CapEx. Cash flow from financing was minus SEK 12 million in the quarter and minus SEK 235 million for the full year, including debt repayments of SEK 100 million and last year's dividend of SEK 1 per share of close to SEK 100 million. On the next slide, we can see the balance sheet. And in here, you can have a look -- both have a look at the cash and equivalents position of SEK 686 million that we had at the end of the year. You can also see that we have recognized a deferred tax asset of SEK 195 million relating to previously unrecognized tax losses carried forward. This is now deemed as highly probable to be able to utilize and therefore, moved on the balance sheet included in the noncurrent financial assets. We concluded our refinance agreement in January, where for our interest-bearing debt of SEK 550 million was -- by year-end, it was moved from noncurrent liabilities to current. But as we have concluded the refinancing early this year, it will be moved back to noncurrent in the Q1 results. Our equity to assets ratio continues to improve and is currently at 53%. On the next slide, we can see our net debt position was SEK 136 million at the end of the year. The strengthening of our balance sheet reflected the new terms of our financing -- it provides us with plenty of flexibility to pursue both organic and M&A growth strategies going forward. In addition to strong operating profitability, we also expect to see lower cost of financing and for the tax rate to remain low for the next several years. With that, I hand back to Bodil. Bodil Torp: Thank you, Stefan. And to deliver strong financial performance, we need to also deliver strong customer value. And I just would like to take some minutes to highlight what's going on during 2025, where we have increased our efforts for increased customer experience. We have a market-leading position across most of the markets in our footprint, and we are proud of that. And our strategy to defend that is the position that we have built for our 2 pillars, a world-class user experience and the strongest content catalog. We cater our book level segment where reading books is a natural part of daily lives. So since I joined in October 2024, reigniting our industry-leading product expertise has been moved up to the top of our strategic agenda during last year, and it will stay there. We will be in the front of the evolution of book consumption across all formats. And over the past year -- last year, we launched several strong new features, and I will also highlight that there is more to come here. We will continue to intensify our investments in the local relevant content, but also, of course, in the user experience that is extremely important for us. So that will continue to improve both engagement and satisfaction for our book lovers of today and tomorrow that is building our resilience. So one of the most common specific feature that has been requested from our customer is actually listening and reading. This is enabling our users to read along as they are listening or just jump between read and listening. And that's a fantastic feature that many of our customer loves. Sync listening is currently enabled on almost 50,000 books in our catalog, and this is expanding as we speak. Another feature is Story Art recently launched that shows art features connected to a specific time line in the book. Story Art with all the visuals now becomes a natural part of the listening experience optimized in the player. This adds a new immersive layer to the story, driving engagement again and connection with the story. So pilots are launched with Pottermore, Harry Potter in Netherlands, and we have also launched it together with the Bea Uusma's title Viton that also was the Swedish August prize winner last year. So this is very exciting. And here, we will soon see many more titles coming up also in the children's segment, I would say, where we see -- where we have some demand. The Sleep Timer is also very -- yes, it's a function that really many of our users use every night. It's used by 300,000 users every night. And we recently launched Sleep Timer recaps where we use generative AI to enrich the rewind options and to enable a better recap and understanding of the story. Also when you fell asleep -- fall asleep and you don't really know where did you lost the story. So it's easier for you to actually find where you were sleeping in the story. So it's easier to recap and follow up where you start to listen again. This is some of our new features. And with this, I would -- it's important for us to highlight that we have more exciting features to come in pipeline, and this is a strategic important objective for us to increase our customer experience in the payer. And over to the last slide here to recap our messages for Q4. We have delivered on our 2025 targets with record profitability and strong cash flow generation, making this a successful year. Our streaming subscribers hit 2.67 million with churn rates consistently moving lower, while ARPU levels remain stable in local currencies. Our Publishing segment delivered record external revenue growth. Cash flow generation continues to increase, and we closed the year with a net cash position. We remain on track to reach our 2028 midterm targets. Our firm targets for this year, 2026 is to deliver at least SEK 870 million in EBITDA. We also proposed a dividend of SEK 1.50, up from SEK 1 last year. We see room for -- we see room to increase our dividend by a similar amount also in 2027 and 2028. We are ready to take our business to the next level and one step is also to change listening to the main market in 2026. So with this, I would say stay tuned. And now we are ready to take your answers -- no to take your questions, so we can answer your questions. So please go ahead. Operator: [Operator Instructions] The next question comes from Joachim Gunell from DNB Carnegie. Joachim Gunell: So the new market listing here should provide some more capital allocation flexibility. And I noted here that you already had some one-off charges related to this list change in Q4. So can you comment a bit on when you expect this to be completed? And if you think that buybacks is one tool for shareholder remuneration already in 2026? Stefan Wård: Well, we aim to move the -- or what we have communicated is that it will take place during 2026. We will try to keep it a speedy process. And hopefully, we will be done by mid-2026, but that is not a firm promise at this stage. It allows us to have a broader set of tools for shareholder strategies, absolutely, but I can't comment any further than that. Joachim Gunell: Great. And in light of yet again strong cash flows and the strong balance sheet that you now have, can you provide just some reflections on your appetite for non-Nordic content acquisitions for 2026 and the pipeline you envision there? Bodil Torp: Yes, we have communicated that before that we have an active M&A agenda and the appetite is high, I would say, and we have a high activity ongoing on different markets. So that is what we can say for the moment. And we have also communicated that we are into both streaming and publishing, preferably publishing to roll out our model -- business model that has been proven in the Nordics to more markets. So we are on track on having a lot of meetings for the moment. That's what we can say. Stefan Wård: High activity on the M&A agenda, and we look to broaden our publishing base in our core markets outside the Nordics. Joachim Gunell: That sounds encouraging. And you comment here with regards to -- we see strong ARPU development on an organic basis. Gross margin is strong here and the churn trends continue to be supportive, I think, contrary to some competitive woes out in the market. So can you comment just a bit on whether you've seen any sort of impact from heightened competitive activity in Sweden? Stefan Wård: Well, in Sweden, we added -- we grew our subscriber base in Q4, and we grew it for the full year. So we have net additions in 2025 and the competitive environment is challenging, but it's not more challenging in Q4 than it was in Q3 really. So -- but there's a new entrant. And I mean, it's some uncertainty on what to expect going forward. But so far, it has been business as usual from our side. Joachim Gunell: Perfect. Maybe just squeeze in one question -- perfect, just one question since Bodil, you commented a bit about the user experience enhancements that we have seen in this year, but also that you now provide some a la carte titles in English through the Penguin Random House partnership here. So just help us here since strong local content slate is a key competitive advantage, whereas -- I mean, should we interpret this partnership with Penguin Random House -- you're seeing some shift in how your customers consume content? I mean, is the younger consumer cohorts increasingly preferring English language titles? And is this some sort of trend that you see? Bodil Torp: No, I wouldn't say that we change the focus. I mean the local knowledge and the local content is still extremely important for us. We know that over 85% of the consumption in the audio books and e-books are in local language. So that is -- we won't leave that focus. That is super important. But I mean, paper book and also the English catalog, it's, of course, one way of adding value to our customers that also want to have those titles and also the English content. So it's more like expanding our value to the customer. It's not about changing focus. The local perspective is super important still. And regarding the features and then customer experience in the app, it's also a high priority for us now to actually increase the customer experience and the customer value to actually also be the front runner when it comes to listening and reading books regardless format, I would say. But it's -- I think the company has been in a very intense years for a turnaround, and we didn't see that many feature launched a couple or 3 years ago. So I think this is super important to build our resilience to increase the engagement and loyalty as it comes to our customers. So we need to be the best payer when it comes to audiobooks and e-books. So this is -- I'm really proud of our product and tech team that also launched. We had like 7 features during end autumn last year, and we are on a good pace now. So you will see more to come when it comes to that. That's also important for the resilience and to be the front runner, so to say. Operator: The next question comes from Georg Attling from Pareto Securities. Georg Attling: I have a couple of questions, starting with the impact from Spotify. So I mean, it's quite clear in your Nordic numbers here in Q4 that they aren't much affected. But I saw comments from your competitor, BookBeat, who said that the churn to Spotify has eased in early 2026. So I'm just wondering if that's something you see as well that the churn to Spotify is easing off a bit here in early '26. Stefan Wård: Yes. We haven't seen any increase in our churn in neither of the markets where Spotify has launched in the Nordics. We assume that consumption is growing for them, but it looks to be rather from new sort of nonexisting audiobook consumers. So new people in the market would be our best guess. Georg Attling: Yes. That's clear. Then second question on the guidance here for '26. So I'm just wondering, one, how much margin expansion you baked into this? And second, how much of that SEK 870 million that is licensing revenue from Spotify? Stefan Wård: We can definitely not comment on what is licensing revenue from Spotify in that guidance. But the guidance is based on our existing model. It's pure organic. It's based on our subscriber growth estimates and our best view of what we can get from the publishing business. Yes. Georg Attling: Yes. But it sounds like if you're going to reach SEK 1 billion in quarterly streaming sales in second half of '26, it's quite a lot of growth in that top line as well. It's not solely margin expansion, so to say. Stefan Wård: No, certainly not. The guidance gives us a firm commitment for you, the external viewers of the company, a firm commitment to what to expect from us. But it also leaves us some flexibility to prioritize if we see that we can drive growth, then we can do that without being limited by a margin range, so to speak, and vice versa. If we don't see those opportunities or get good returns on our marketing spend, then we will reach that number through other strategies. But I would say that expect us to try to grow top line as much as possible while protecting our satisfactory profitability at current level, but we're not seeking sort of to maximize the margins in 2026. It's a combination. Georg Attling: Yes. Just a final question here on the ARPU in non-Nordic core, quite strong here in Q4 if you compare it to quarters -- 5 quarters in the year. So I'm just wondering what's driving this? Is it a mix shift in countries? Or is it any price changes in those markets? Stefan Wård: Well, it's a little bit of both, but we're growing in markets where we have relatively good ARPU levels, and we try to increase prices where we feel that, that is motivated. Operator: The next question comes from Martin Wahlstrom from SB1 Markets. Martin Wahlstrom: Starting off, I noted a while back that Spotify introduced a new feature where you could kind of shift between physical and e-books, the Page Match feature and also that they introduced kind of reselling of physical books on their page. Kind of are you surprised by their ambition in this space and kind of the turn that they are going into? Bodil Torp: Yes. I would say we have high ambitions regarding not only what Spotify is doing, but it's more about our own agenda to actually increase and enhance the value to the customer. And I think we have delivered on that in a good way during the 6 months when it comes to the features. So we are on a really good track here, and there will be more to come. That is what I can say for the moment. But it's on a high -- it's on the top of our strategic agenda, of course. Martin Wahlstrom: Sorry, my question might have been a bit vague, but I'm looking for -- looking at Spotify's ambition, kind of the features they seem to be introducing and rolling out and evolving their offering, kind of -- is this level of ambition in line with what you could expect from them? Or are you surprised in any way? Bodil Torp: I think, I mean, they are good and we know that they are good in driving innovation and features when it comes to the music industry. So that's maybe... Stefan Wård: We're not really surprised. I mean it was fairly anticipated that they were entering the market and that they will have a competitive offering is also expected. So I wouldn't say that we're surprised by any of the features that they've launched or any parts of their offering really. When it comes to physical book sales, it's in market that are not outside of the Nordics and for English-speaking titles. So that is not hugely important for us at this stage when it relates to physical book sales. Martin Wahlstrom: Okay. Great. And then I was just wondering if we could get any comments on the impact from the Klarna partnership that was announced during the fall. Bodil Torp: Yes, we are -- I mean, it's a big partnership and still a bit early to comment on that. We are in collaboration in 14 markets with Klarna and increasing also our efforts in that partnership. So I have nothing really now to comment on that partnership. It's in line with our expectations for the moment. Martin Wahlstrom: Yes. Great. And then kind of looking at your churn trends, they're, of course, very encouraging as they're trending lower. But kind of how do you balance with kind of new customer intake and driving down churn? I mean, are you a bit too cautious on new customer intake? Or kind of how should we view that? Stefan Wård: I wouldn't say that we are too cautious, but we're mindful of getting good returns on our marketing investments. Churn trends is more explained by that we -- our subscriber base as it grows, it also becomes -- a larger part of our base has been customers for a very long time, and they basically don't churn, and that helps us move the churn trend lower. Then when we go into new markets, we still have high churn rates in the beginning and a lot of churn for new customers in the early months, that is nothing that has changed. But the portion of loyal long-time customers is steadily increasing in the base, and that helps bringing churn down over time. Martin Wahlstrom: Great. And then just one final question here on the gross margin, which was up now again year-over-year. Kind of how should we view this going forward? Should flatten out here? Or it seems it's continuously drifting a bit upwards? Stefan Wård: Yes. In the streaming, we are growing our business outside -- we're growing in the core markets outside the Nordics. And in those markets, we typically have a higher gross margin than streaming in general, especially compared with the Nordics. And that trend is expected to continue. So we will have some support for improving gross margins in the streaming mix. On Publishing, it's more an effect -- we had a very strong year in Publishing 2025 and especially a very strong finish also with the Nobel Prize winner and this August Prize winning titles, and that helps to boost the gross margins in Publishing. That is a little bit less certain how gross margin in Publishing will evolve going forward. But I think what you should expect from us is to have a gross margin above 45%. I don't think it's reasonable to expect it to expand from 47%. That is a range, 45% to 47% is -- it's a range where we are quite satisfied. I understand that there's some surprises between quarters, but it's the nature of our business, especially when looking at the publishing side of it. Operator: [Operator Instructions] The next question comes from Derek Laliberte from ABG Sundal Collier. Derek Laliberte: I wanted to ask about -- and apologies if this has been covered somewhere, but I just noted that operating expenses were up by quite a bit in Q4, both sequentially and year-on-year. And you mentioned the marketing spend here to drive growth. But what else is it that sort of results in the higher OpEx? Stefan Wård: No, it's mainly an increase in marketing, and we also flagged that in the Q3 call that we -- in Q3, it was a little bit too low. So we saw that increase in Q4. Other than that, there's no real significant explanations. It's relating to us growing top line basically. So I don't have any better answer than that Derek. Derek Laliberte: I'm happy with that. And on the marketing spend there, I mean, can you give any comment about where you've increased spend the most and also when you expect to see sort of an effect on the subscriber base from that? Stefan Wård: Well, the biggest part of our marketing budget is still the Nordics, but we don't increase that. The increase in marketing spend is more related to growth outside the Nordics, which is also visible in how the subscriber intake is divided. That's the best answer I can give you. Derek Laliberte: Perfect. That's great. And then -- sorry if you covered this as well. But you talked -- you got a question there about the ARPU in the non-Nordic segment, which looks really good there up sequentially. Did you say where have you made price adjustments, if any? Stefan Wård: We don't comment on the local markets. You can look at the different websites for granularity, but we are trying to work with price where we find it motivated. And then we're growing more in markets where we have a good or higher ARPU levels that helps also. So it's both a mix change and a price effect. 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. Stefan Wård: Okay. So we have a few written questions. First one is churn level in the non-Nordics core is not as good as the other markets. What is the reason for that divergence? So churn in non-Nordics core is lower than in the Nordics, and that has to do with a little bit of a maturity profile that will drive a stronger subscriber intake in these non-Nordic core markets. And that is also -- when we grow fast, that also increases the churn somewhat. So it was the same when we were more aggressive in the Nordics back in the days when we sort of built the Nordic market. We had a strong subscriber intake and the churn levels were at a higher level. So that's the most or the best answer I can give to that question. Then Bodil, we have a question about the Storytel Reader. Any news about Reader? Bodil Torp: Yes. Any news about that? Yes. I know that I have said that we are into also relaunch the Reader, and there's a lot of customers waiting for that. So I will say that we are quite nearby to launching and test it in some of the markets, not all of the markets, but some markets that we think that we have the most -- the best fit into where we see the demand from the customers. So I will come back to that quite soon again. We will also do it in a cost-efficient way. That's super important. That's why it takes some time. Stefan Wård: Yes. Then we have a question relating to any thoughts on the impact for Storytel on Spotify entering the Nordic markets. And what we have said there is that so far, we are satisfied with the churn rates in those markets where Spotify has launched. So in this very short period where they have been in the market, we haven't really seen any negative impact on our side. We don't expect that to be forever. I mean we view them as a serious competitor, but we hope that they help develop the markets in those markets where we coexist and that they will -- yes, they will help us build the audiobook market, and that could be something that both consumers and providers benefit from. Then I have a question regarding the unfortunate internal working capital impacts referred to in Q4. Please expand what these were and what should normal working capital performance looks like? Okay. So the headwind or the unfortunate impact of working capital relates to the full year. We actually had a tailwind of SEK 14 million from working capital in Q4. What we can say there is that we have shortened the period, the number of days that we pay our payables a little bit too much, unnecessary too much, and we have altered that back. So that should reverse. I would estimate that impact to be around SEK 35 million. And then normal working capital is the guidance that we mentioned earlier in the call that we expect a neutral impact on working capital for 2026. And then we have a final question relating to our dividend policy for the upcoming years. And what we have communicated there is that we increased the dividend this year. I know that it wasn't formulated as an ordinary dividend last year. But from -- going forward, it should be viewed as we started with SEK 1. We raised it to SEK 1.50. What we have said is that we expect to be able to increase it by a similar amount also for '27 and '28. And that fits into our midterm targets and provide some visibility on what to expect. So far, we see that we generate so much cash flow that we are able to pursue our growth strategies while also rewarding shareholders through other strategies. and we expect this to continue over the midterm. If there will be any changes to that, it should be in our sort of when we update the midterm targets. But it looks promising. So hopefully, that clears the picture. Okay. Do we have any final questions? Nothing more. Okay. Then we conclude the call, and thank you for your interest in our company. Looking forward to see you at our next quarterly update. Bodil Torp: Thank you very much for all the good questions and participation today, and we are really looking forward to next quarter. Thank you.
Operator: Welcome to the Liberty Broadband Corporation's 2025 Year End Earnings Call. During the presentation, all participants will be in listen-only mode. Afterwards, we will conduct a question and answer session. As a reminder, this conference will be recorded February 11. I would now like to turn the call over to Hooper Stevens, Senior Vice President of Investor Relations. Please go ahead. Hooper Stevens: Good morning. Thank you for joining us. This call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Forms 10-Ks filed by Liberty Broadband Corporation with the SEC. These forward-looking statements speak only as of the date of this call, and Liberty Broadband Corporation expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Liberty Broadband Corporation's expectations with regard thereto or any change in events, conditions, or circumstances on which such statements are based. On today's call, we will discuss certain non-GAAP financial measures for Liberty Broadband Corporation, including adjusted OIBDA, adjusted OIBDA margin, and free cash flow. Information regarding the required definitions along with the comparable GAAP metrics and reconciliations, including Schedule 1 and Schedule 2 for Liberty Broadband Corporation, can be found in the earnings press release issued today, which is available on Liberty Broadband Corporation's IR website. Speaking on today's call will be Ron Duncan, the CEO of Liberty Broadband Corporation, and Brian Wendling, Liberty Broadband Corporation's Chief Accounting and Principal Financial Officer. Also during the Q&A, we will take questions related to Liberty Broadband Corporation should they arise. Additional members of Liberty Broadband Corporation management will be available to assist Ron and Brian with questions. With that, I'll hand the call over to Ron Duncan. Ron Duncan: Thank you, Hooper, and good morning. Liberty Broadband Corporation had an exceptional year. We reported solid fourth-quarter results with achieved record revenue of over $1 billion and record adjusted EBITDA of more than $400 million, a significant milestone for the company. We continue to execute on our mission to deliver best-in-class connectivity across Alaska. Our consumer wireless base is expanding. We are realizing the benefits of last year's strong sales cycle in our business segment. We continue to sharpen our strategic focus as Alaska's only converged broadband and wireless provider following the exit of our video business last year. During the fourth quarter, we announced, executed, and completed our rights offering. The rights offering was fully subscribed, resulting in approximately $300 million in net proceeds. We are pleased with the outcome, which allows us ample flexibility to continuously canvas the market and fine-tune our strategy at the parent company level. We plan to use the proceeds for general corporate purposes as well as for potential strategic acquisitions, investments, or partnerships. Turning to the business, I'm proud of how nimble and effective our Liberty Broadband Corporation team is in ensuring the continuity of our network. First, in December, we experienced two fiber breaks, one in Dutch Harbor, which was repaired in early January in under two weeks, and the other in Dearing. We expect to incur repair costs this year in the low single-digit million range, with service expected to be restored at Dearing in the summer months after the ice goes out. Second, as we mentioned last quarter, Typhoon Helong hit Southwest Alaska in early October of last year. We fully restored service to the two villages that were hit in under four months. Beyond the small revenue overhang in January, we do not expect any ongoing impact on our business. We commend the entire Liberty Broadband Corporation team for their outstanding service to the communities that we serve. Turning now to our operating highlights. We grew consumer wireless subscribers 2% year over year and ended the year with 199,000 consumer wireless lines. We had a total of 207,500 wireless lines at year-end, including 8,500 business lines. We added 3,500 consumer wireless lines during the year, including 6,700 postpaid lines, largely as a result of our unlimited test drive promotion. We continue to see slow erosion in our prepaid and government-subsidized lifeline segments, partially offsetting the growth in our postpaid lines. On the data side, we saw a 3% decline year over year, exiting the year with 151,200 data subscribers. We lost 4,500 data subscribers during the year and 1,200 data subscribers during the fourth quarter. The decline of data subscribers over the past year is due to wireless substitution and limited competition from Starlink and others, exacerbated by a fiber break on a third-party network in which Liberty Broadband Corporation uses capacity. As of the third quarter, service has been restored, although we note that winning back customers in the service-impacted areas has been slow. We are proud of the operational and financial progress we made in 2025. We reported over $400 million of adjusted OIBDA, an exceptional milestone for Liberty Broadband Corporation. But looking ahead to this year, we expect the business to be stable. As we look forward to 2026, our operating priorities are first, to invest in our network infrastructure, deliver high-quality service to our customers. Second, to complete our build-out commitments under the Alaska plan. Third, to drive value and the benefits of convergence for our customers, and fourth, to continue bridging the digital divide through our rural expansion. Starting with our network infrastructure. We're offering 2.5 gigabit broadband connectivity everywhere that has fiber middle mile, which means we can offer it to an overwhelming majority of our customers. We're making progress improving the broadband network in Anchorage. We're in the process of upgrading the core, reducing node sizes, and upgrading to a 1.8 gigahertz plant. Our initial deployment is yielding positive results. We plan to significantly scale deployment of our HFC network this year. All the work that we are doing is DOCSIS 4.0 or 4.0 capable, enabling speeds that are multiple times what we have today. We will be rolling this out to markets outside of Anchorage this year, allowing us to get to five gigabits and ultimately beyond. We believe these changes will not only lead to higher speeds but also a network with better reliability and fewer maintenance requirements. The strength of this offering positions us well against competitors today and into the future. Next, on driving convergence and maximizing value and quality for our customers. We concluded our unlimited test drive promotion at year-end, which drove meaningful postpaid consumer wireless growth in 2025 to a peak of 165,400 lines. The first cohorts of our promotional subscribers are now rolling off, and while it's still early, we are seeing exceptionally strong retention rates. In January, we launched a twelve-month free promotion that we expect will further support postpaid wireless growth this year. As of year-end, approximately 40% of our broadband customers have one or more wireless lines, and approximately 62% of our postpaid wireless lines are sold as part of a bundle, up from 57% at the end of 2024. Our focus remains on delivering quality and value for all of our customers. Lastly, on bridging the digital divide in Alaska, through expansion and completing our build commitments on the Alaska plan. Just a few weeks ago, we announced that we had completed the build-out of the iHUC one net network, which brings fiber infrastructure to the Yukon Quest equipped Delta, ensuring residents there enjoy 2.5 gigabit service. We also remain on track to complete our build-out requirements for the Alaska plan this year and increase wireless speeds in the communities we serve. The new Alaska Connect fund will extend the Alaska plan to 2034. Our focus remains on providing 5G wireless service to all covered Alaskans over the coming years. Turning briefly to Bead, the State of Alaska has announced that Liberty Broadband Corporation has been provisionally awarded approximately $120 million in Bead fund. The award remains subject to approval by the NTIA. There remains substantial uncertainty about the timing of the final awards as the state is still in active negotiations with the NTIA regarding the ultimate distribution of Alaska to be funded. Any funding that Liberty Broadband Corporation ultimately receives will offset our capital costs as we expand in unserved locations. Regulatory and macro environment. From a macro perspective, Alaska's economy could be poised for some long-overdue economic growth. In mid-October, the Trump administration announced plans to open the Arctic National Wildlife Range to drilling, a development that could accelerate oil and gas activity across the state. Combined with the potential development of the gas line, these initiatives could drive substantial economic expansion in Alaska, lifting the Alaska economy and creating new opportunities with the potential of increased demand for our services. In summary, we are encouraged by an exceptional year of financial and operational performance. The peak of CapEx in 2026 and projected step down over the coming years back to our historical range of 15% to 20% of revenue should be highly supportive of substantial cash generation as we look ahead. We believe the strength of our network and our robust operating results will continue to create value for our customers, partners, and shareholders. With that, I'll turn it to Brian to discuss the financials in more detail. Brian Wendling: Thank you, Ron, and good morning, everyone. At year-end, Liberty Broadband Corporation had consolidated cash, cash equivalents, and restricted cash of $429 million, which is inclusive of our approximately $300 million offering, which was completed at the end of 2025. And we had a total principal amount of debt of approximately $1 billion. At year-end, Liberty Broadband Corporation's net leverage, as defined in its credit agreement, was 2.3 times, and Liberty Broadband Corporation's consolidated net leverage was 1.6 times, which incorporates cash at the parent level, including the proceeds from the rights offering, as well as Liberty Broadband Corporation's non-voting preferred stock. Additionally, Liberty Broadband Corporation's credit facility has $377 million of undrawn capacity net of letters of credit. Just an admin matter during the fourth quarter, we refined the definition of our subscriber metrics. The definitions of consumer cable and wireless subscribers now exclude prepaid customers who are no longer paying for the service and postpaid and cable modem customers who have been inactive for over sixty days. All prior periods have been reflected for this refined definition, and this aligns with how Liberty Broadband Corporation manages and evaluates the business. Turning to Liberty Broadband Corporation's operating results for the full year and the fourth quarter. For the year, Liberty Broadband Corporation generated total revenue of $1 billion, representing a 3% increase for the full year. Revenue increased primarily due to growth at Liberty Broadband Corporation business. Adjusted OIBDA of $403 million was a record high and increased 12% for the full year. The increase was driven by both higher revenue and lower operating expenses, which includes lower programming video programming expenses, and reduced distribution costs related to temporary cost savings from a fiber break on a third-party network. The fiber break was fully restored during 2025. In the fourth quarter, Liberty Broadband Corporation generated total revenue of $262 million. This is flat with the prior year quarter. And adjusted OIBDA increased 7% to $90 million, primarily due to lower selling, general, and administrative expenses related to personnel and compensation expenses. Consumer revenue declined 2% for the full year in the fourth quarter, with the majority of the decline driven by the shutdown of the video business as well as data subscriber losses slightly offset by growth in wireless. As a reminder, Liberty Broadband Corporation exited the video business during the third quarter of the year. Consumer wireless revenue increased both for the full year and the fourth quarter, driven by an increase in federal wireless subsidies. Consumer gross margin increased to 70.7% for the full year and increased to 69.7% for the fourth quarter, driven by a decline in consumer direct costs resulting from decreases in video programming costs. For the year, direct costs also benefited from temporary cost savings from the fiber break on the third-party network that was previously discussed. Business revenue grew 7% for the year and 1% during the fourth quarter. For the year, the increase was driven by the strong upgrade cycle, which started in 2024. For both the full year and fourth quarter, revenue growth was partially offset by lower wireless roaming revenue. Business gross margin increased to 80.1% for the year and increased to 78.3% for the fourth quarter, primarily driven by revenue growth. For the year, business gross margin benefited from lower direct costs due to temporary cost savings from the aforementioned third-party fiber break. Capital expenditures net of grant proceeds totaled $224 million for the year. As Ron said, we expect 2026 CapEx of approximately $290 million, which includes $20 million carried over from 2025 due to normal course timing shifts. As was mentioned, we expect '26 to represent our peak year of CapEx spend, driven by completing the build-out requirements of the Alaska plan, and the timing shifts for 2025. Our historical CapEx has been 15% to 20% of revenue, and we expect our long-term CapEx following the completion of the Alaska plan build-out to trend back to these levels. Liberty Broadband Corporation generated $146 million in free cash flow for the full year, up over 70% from 2024, driven by our record financial growth. And 2025 free cash flow also benefited from positive working capital swings. The CapEx increase in 2026, when coupled with ordinary course working capital swings, will drive proportionately lower free cash flow on a year-over-year basis. And with that, I'll turn the call back over to Ron. Ron Duncan: Thank you, Brian. We appreciate everyone's interest in Liberty Broadband Corporation, and we look forward to continuing to update you on our progress. With that, we'll open the call up for Q&A. Operator: Thank you. We'll now be conducting a question and answer session. Thank you. And the first question comes from the line of David Joyce with Seaport Research. Please proceed with your questions. David Joyce: Thank you. A couple of questions, please. First, I was wondering how we should think about margins this year since you'll be comping against the operational savings while the undersea fiber was offline in the first part of last year and then you don't have the TV programming expenses? And then secondly, what sort of cadence of CapEx spending should we expect this year? And if you could kind of drill down on where, you know, where you would be spending which products? Thanks. Ron Duncan: Okay. Pete, do you want to tackle the margin question? Pete, you're out there? No, Pete. Okay. Well, I will do my best on the margins. The margins should be was Pete there? Pete just joined. No, Tyler. Go ahead. I'm happy to take the margin question, and you can add some color if you want. I think on the margin, we obviously can't guide, David. On where we think we'll ultimately end up for 2026. Jake, as you heard Ron say in his remarks, we expect a stable year for 2026. There are certainly some things on the cost side that are benefits, meaning no video expense at all during 2026. We also had revenue that was offsetting that in the early part of the year. And then there was the benefit from the fiber break. But overall, we expect a pretty stable year for next year. And I have Ron's comment yes, I'll take the CapEx. I would just comment on margins as well that the video business was kind of a net zero for us anyway by the time we got out. They were substantial revenues, but also very substantial programming costs. The reasons we exited was we could see ourselves heading into a negative free cash flow situation to stay in the video business. So it was a net positive going forward and probably not tremendous change in the base of the business as you look at it. On the CapEx cadence, typically, we peak in the second and third quarters. When the construction season is in full swing up here, and I expect that pattern to continue this year. The largest single element of this year's CapEx is in wireless, particularly rural wireless, as we sprint to the finish of our first phase commitments under the Alaska plan. We'll also be expanding substantial CapEx to expand the urban wired network as we move to our 5G and full DOCSIS 4.0 implementation. David Joyce: Great. Thank you. Thank you. Brian Wendling: David, if you don't have any other questions, that will conclude today's call. Appreciate everybody's participation. And we look forward to speaking to you offline in next quarter as well. Thank you. Ron Duncan: Thank you all very much. Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time. We thank you for your participation. Have a wonderful day.
Operator: Good day, and thank you for standing by. Welcome to the Tower Semiconductor Fourth Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the conference over to your first speaker Noit Levy, Investor Relations and Corporate Communications. Please go ahead. Noit Levi-Karoubi: Thank you. Good day, and thank you, everyone, for joining us today. Welcome to Tower Semiconductor's Fourth Quarter and Full Year 2025 Financial Results Conference Call. With us today are Mr. Russell Ellwanger, our Chief Executive Officer; and Mr. Oren Shirazi, our Chief Financial Officer. Before we begin, please note that certain statements made during today's call may be forward-looking and subject to risks and uncertainties that could cause actual results to differ materially. These risks are detailed in our SEC filings, Form 20-F and 6-K as well as filings with the Israeli Securities Authority, all available on our website. Tower assumes no obligation to update any such forward-looking statements. Our fourth quarter and full year 2025 results are prepared in accordance with U.S. GAAP. Some that are presented may include non-GAAP financial measures as defined under SEC Regulation G. Reconciliations to GAAP figures and full explanations are provided in today's press release and financial tables. For your reference, a supporting slide deck is available on our website and integrated into this webcast. With that, I'd like to turn the call over to our CEO, Mr. Russell Ellwanger. Russell? Russell Ellwanger: Thank you, Noit. Hello, everybody. Thank you for joining our call today. Very pleased to share our results for the fourth quarter and full year of 2025. Additionally, we are extremely excited to present how these results have redefined our financial milestones and accelerated the time line for achievement of the same. The updated financial model, which we will present is the result of already strong partnerships with our lead customers having grown into deeply trust-rooted supplier customer partnership technical alliances. We ended our fourth quarter of 2025 with a company revenue of $440 million, an 11% quarter-over-quarter growth, 14% year-over-year growth, fulfilling our beginning of the year target of quarterly sequential growth. In addition to the top line, we achieved bottom line growth throughout the year. Fourth quarter net profit was $80 million or 18% net margin, up from 11% in Q1 '25, 13% in Q2 '25, 14% in Q3, indicative of a value-based growth being driven by technology mix enrichment. The revenue growth from Q1 to Q4 of 2025 was $82 million, of which there was a $40 million net profit drop down and almost 50%, to be exact 48.78% and this due to the high value of the incremental Photonics revenue. Revenue for the full year was $1.566 billion, $130 million or 9% increase as compared to 2024 revenue. Now to review our 2025 revenue breakdown and discuss the key trends, please see Slides 5 and 6 as referenced. We achieved year-over-year growth across our key technology platforms, namely power management, image sensors and 300mm RFSOI on top of which record achievements and unprecedented growth of our market-leading optical transceiver offerings, silicon germanium and SiPho advanced platforms has propelled us into a favored and unique position, both driving our growth for 2026 and additionally, giving us the ability to redefine our financial model, which I will present at the end of my comments. RF infrastructure showed a 75% revenue increase, 2025 over 2024 being our fastest-growing application in '25 driven by hyperscaler rapid adoption of silicon photonics in 800G and 1.6T pluggable transceivers. Silicon germanium and silicon photonics revenues represented 27% of our corporate revenues were $421 million, up from $241 million or 17% in 2024. SiPho revenues alone were $228 million in 2025, up from $106 million in 2024. Specific to the fourth quarter, RF infrastructure revenues were 32% of corporate revenue, with SiPho having achieved $95 million or a $380 million annual run rate. Included in this number is some non-wafer NRE to enhance future developments for Gen+1 and Gen+2. As highlighted in our recent announcement with NVIDIA, the insatiable demand for compute bandwidth in both scale-up and scale-out architectures and Tower's exceptional ability to scale the capacity flawlessly in partnership with our customer has made 1.6 terabyte per second, the fastest-growing silicon photonics node in the industry to date, with Tower being by far the majority supplier of 1.6T silicon PICs. The partnership announced with NVIDIA as with all our direct module customers, underscores our commitment to deliver best-in-class technology and the manufacturing agility required to meet such an exceptional demand trajectory. In addition to Fab 3 Newport Beach, this past year, we successfully ramped silicon photonics production in Fab 9 San Antonio, Fab 7, Uozu, Japan, and are on track to ship the first production, a very large SiPho ramp in 2026 and from Fab 2 Migdal Haemek. Given an even stronger customer demand than was known at our last quarterly release, we have increased our CapEx plan for 2026 and with multiple customer requests to enter into capacity reservation agreements through 2028, enabling our customers to, in turn, give firm commitments to their customers having ensured their supply. For next-generation 400-gigabit per lane, we continue to make strong progress with heterogeneously integrated indium phosphide on silicon and other material systems. We are playing a key role, partnering with our lead customers to define the material systems that will be chosen, refining the flow and hence ensuring manufacturability readiness and immediate ramp capability upon 3.2T market introduction. We also see co-packaged optics as a substantially incremental opportunity for us in the coming years, as optics gets adopted and scale-up interconnects as well as XPU to high-bandwidth memory interconnects that are today largely copper. In Q4 '25, we announced the expansion of our mature 300 millimeter wafer bonding technology to enable wafer to wafer integration of silicon photonics ICs and silicon germanium electrical ICs. In addition, we continue to work with several customers on dense wavelength division multiplexing laser sources, which are a critical component of many CPO implementations and can significantly expand our served optical market by now including the laser source. Beyond optical transceivers, our silicon photonics platform continues to be the technology of choice for physical AI applications, particularly frequency modulated continuous wave LIDAR. Ahead of CES, 2 of our FMCW LIDAR partners, AVA and LightIC publicly announced their collaboration with us in bringing to market disruptive products. The proven robustness of our silicon photonics platform supported by many tens of thousands of high-yielding, high-quality wafers ship to date is enabling silicon photonics to capture growing share in the LIDAR market, unlocking new automotive and robotics opportunities. Our silicon germanium platform delivered strong growth year-over-year in 2025 of 43%, remaining the optimal platform solution for low-power, low-latency, high-performance components such as drivers, trans-impedance amplifiers for pluggables, LPOs and active copper and active optical cables. Alongside our silicon photonics production, our silicon germanium platform is now running in high volumes across Fab 3 Newport Beach, Fab 9 San Antonio, Fab 2 Migdal Haemek, and we have shipped 300 millimeter prototypes from Fab 7 in Uozu. RF mobile represented 23% of our 2025 corporate revenue and 24% of our Q4 25 revenues. 300mm RFSOI was up 5.5%, while the RF mobile as a whole was down 15% year-over-year. Those are primarily due to our proactively working with our customer partners to responsibly reduce exposure to lower margin controller offerings in favor of higher-value optical and RF mix in the fabs and also influenced with the front-end module market shift from 200 millimeter to the higher digital content better served with more advanced nodes in 300 millimeter. Our latest technology, which we presented last quarter, with substantial improvement of our [indiscernible] relative to the competition and reduced layer count, therefore, higher overall value per customer dollar continues to see robust customer adoption. Lead customers have recognized it as best-in-class and are preparing to ramp to high volumes. Across the board, we continue to see strong design win momentum that positions our 300mm RFSOI platform for sustained secular growth. In 2025, we achieved major wins, namely 3 of the top 4 Tier 1 RF front-end module providers. One has begun production with all planning for strong ramp in 2027 towards achieving appreciable revenue volumes in 2028. Power Management grew 20% year-over-year, demonstrating strong year-over-year revenue growth in both 200 millimeter and 300 millimeter offering, representing 16% of our 2025 corporate revenues and 15% of our Q4 '25 revenues. In 300 millimeter, this includes the ramp of the Tier 1 handset envelope tracker previously announced, which is expected to continue to gain share in the years to come. Overall, our revenue growth in 300 millimeter power has significantly outpaced the rate of growth for both the power market as well as the mobile handset market, demonstrating the strength of our offering and share gains in this significant space. Sensors and Displays grew 10% year-over-year, representing 16% of our 2025 corporate revenue, 15% of the fourth quarter revenue. We have seen strength and continue to see strength in the machine vision market with new advanced products ramping to production alongside existing products that continue to gain share. We also expect our first ramp in the AI -- I'm sorry, in the AR display segment with our silicon back plane for OLED on silicon, which has started production this past quarter. We are tracking this first adoption and its overall market carefully and with optimism as it may have significant value for Tower in the following years. Mixed signal CMOS represented 7% and Discrete represented 11% of our 2025 corporate revenues. Year-on-year, we've seen decreases of 18% and 14%, respectively, supporting our value-driven growth strategy, allowing additional capacity for the higher margin and the highest margin platform to replace these 2 application sets. Regarding capacity expansion. During our previous earnings release in November '25, we announced an increase of investment for silicon photonics and silicon germanium growth targeting a tripling of SiPho capacity against our targeted Q4 '25 silicon photonics actual shipments having stated a target that this would be online to begin silicon starts in the second half of 2026. Due to continued growth in demand, we are announcing today additional CapEx investment of $270 million on top of the previously announced $650 million capacity expansion plan. This total capacity is targeted to yield capacity growth greater than 5x of the actual fourth quarter monthly wafer shipments -- silicon photonics wafer shipments to be compared to the 3x target that we gave during the Q3 public release. And over 70% of the total SiPho capacity is either presently reserved or in the process of being reserved through 2028, firmly backed with customer prepayment. For the fourth quarter, utilization rates were Fab 2 operated at about 60% utilization as we are now in the final stages of silicon germanium and silicon photonics capacity qualification for a variety of flows. Fab 3 maintained our model full utilization of 85% and still adding capacity for increasing silicon photonics capability. Fab 5 was a 75% utilization. Fab 7 was fully utilized, well above our 85% utilization model. Fab 9 was at 65% utilization, presently in the silicon photonics and silicon germanium ramp. As stated in our press release, Intel has expressed its intention not to perform under the September '23 Fab 11X agreement. We are presently in a mediation process. All flows, which have been transferred or are in the process of being transferred to Fab 11X were originally qualified in our Japanese 300 millimeter factory Fab 7. Customers are being redirected to be supported by this fab in Japan. For guidance, we guide our first quarter of 2026 midrange revenue to be $412 million plus/minus 5%, representing a 15% increase as compared to the start of 2025. We target quarter-over-quarter revenue and profitability growth throughout 2026. Based upon the thriving corporate ecosystem we've developed intertwined with deeply trusted customer partner alliances, we are pleased to provide a revised financial model. This new model demonstrates our value-driven growth strategy. Please refer to Slide 7. First, the assumptions. Beyond the $920 million CapEx plans that have been released, no additional CapEx, clean room space or otherwise additional monies are required to achieve this model. This model is based on utilizing Tower-owned capacity at an 85% utilization level. Intel Fab 11X is not included in this model. Revenue, $2.84 billion, which will create 39.4% gross margin, 31.7% operating margin, a 7.7 point drop from gross to operating margin, demonstrating a highly efficient business and if not the very best, certainly among the best in our industry. Such efficiency is seen in more than just margin dollars. It is reflective to the speed of decision-making and execution. Speed is a sustainable differentiator. Net profit is $750 million or 26.4% net profit margins. All tools and customer qualifications are planned to be fully completed within 2026. Hence, and most importantly, we target to achieve this model in the calendar year 2028. Now I'd like to turn the call to our CFO, Oren Shirazi. Oren, please. Oren Shirazi: Hello, everyone. Earlier today, we released our financial results for the fourth quarter of 2025 and for the full year and also released our balance sheet and cash flow reports. Now I will review the results highlights as well as the highlights of our CapEx investment and afterwards, I will present our updated target financial model, resulting in higher revenue and profit margins than the prior model. Let's first look into the P&L. In 2025, we achieved quarter-over-quarter revenue increase during the year, which has accelerated in the second half of 2025, resulting in record revenue of $440 million in the fourth quarter of 2025, reflecting a year-over-year revenue increase of 14% and a quarter-over-quarter revenue increase of 11%. Gross profit for the fourth quarter of 2025 was $118 million, an increase of $25 million or 26% compared to the prior quarter. And operating profit was $71 million, 40% higher as compared to the prior quarter. Net profit the fourth quarter of 2025 was $80 million, an increase of $26 million or 49% compared to net profit of $54 million in the prior quarter. And earnings per share were $0.71 basic and $0.70 diluted per share compared to $0.48 basic and $0.47 diluted earnings per share reported for the prior quarter. Please note that income tax expenses line in the P&L includes a nonrecurring tax benefit recorded in the fourth quarter of 2025, resulting in an all-in 2% effective tax rate. For 2026 and beyond, as required by Pillar 2 regulation, we estimate all-in tax effective rate to be at least 15% in all our manufacturing sites. For the full year 2025, we reported revenue of $1.57 billion, 9% higher as compared to $144 billion in 2024. Gross profit and operating profit for '25 were $364 million and $194 million, respectively, compared to $339 million and $191 million in 2024 respectively. Net profit for 2025 was $220 million or $1.97 basic and $1.94 diluted earnings per share, compared to $208 million net profit in 2024. Moving to our balance sheet. Our balance sheet is very strong, evidenced by the following indicators and financial ratios. As of end of December 2025, our assets totaled over $3 billion, primarily comprised of $1.5 billion in fixed assets, predominantly comprised of fab machinery and $1.7 billion of current assets. The recent increase in other long-term assets as compared to past periods is mostly attributed to the Newport Beach Fab lease extension prepayment as was announced in November 2025 and paid, which is presented as an asset as required by GAAP. Current assets ratio is very strong at about 6.5x, while shareholders' equity reached a record number of $2.9 billion at the end of December 2025. Hedging, I would like now to describe our currency hedging activities. In relation to the Japanese yen, since the majority of TPSCo's revenue is denominated in yen and the vast majority of TPSCo's costs are in yen, we have a natural hedge over most of our Japanese business and operations. To mitigate part of the remaining yen exposure, we are executing 0 cost cylinder transactions to hedge currency fluctuations. Hence, while the yen rate against the dollar may fluctuate, there is limited impact on our margin. Similar concept goes to the Israeli shekel. In relation to the Israeli shekel currency, while we have no revenue in this currency since a portion of our cost in Israel is denominated in shekel, we also hedge a large portion of such currency risk by engaging zero-cost cylinder transaction to mitigate this exposure. Hence, while the shekel rate against the dollar may fluctuate, the impact on our margins is limited. Now moving into our CapEx investment plan and its impact on our financial model. As we announced today, in order to support the increasing SiPho and SiGe demand, we are allocating an additional $270 million of cash to invest in capacity and capability side for equipment, which would result in a total of $920 million cash investments in CapEx, including the $650 million we already announced during 2025. These $920 million CapEx investment will expand our Fab's capacity in our 8-inch fabs in Israel, Newport Beach, Texas and also in our 12-inch Uozu Fab in Japan. This CapEx plan includes a large portion of capability CapEx for advanced development and high-end RF technology-related projects. Approximately 28% of the above-stated $920 million CapEx investments were already paid to date while the remaining 72% of the $920 million are expected to be paid in 2026 and 2027. Moving to the financial model. Following these investments, which are expected to drive greater revenue and incremental margins as compared to our prior model, which we released more than 2 years ago, we are providing an updated target financial model resulting in significantly higher revenue, profitability and margin targets. Please note, the model is based on many forward-looking operational business and financial assumptions including the assumption that all our fabs will operate at 85% utilization post installation and qualification of the $920 million equipment tools we are investing in. Assumptions considering a modest average wafer selling price reduction of existing products and/or flows that we target will be offset by new products and/or flows introductions. Assumptions that our cost estimates will not differ significantly from our current assumptions. And lastly, please note that the model does not include Fab 11X capacity, revenue and margin. Now any possible additional fabs and/or new capacity that has not yet been obtained, established or announced to date. Under this model, which you may see in the slide for your reference, we are targeting $2.84 billion in annual revenue, which is $1.27 billion higher or 81% higher in revenue than our actual full year 2025 revenue. $1.12 billion in gross profit, which is more than tripling our 2025 gross profit. This level of gross profit reflects approximately 40% gross margin, which reflects a 59% incremental gross profit that are derived from the incremental revenue when comparing the model to FY 2025 actual results. It also states $900 million in annual operating profit, which is 4.6x our actual FY '25 operating profit, reflecting 32% operating margin. This reflects 55% incremental operating profit margins that are derived from the incremental revenue when comparing the model to FY 2025 actual results. And lastly, on net profit, $750 million, more than tripling the full year 2025 net profit, reflecting 26% net margin, like Russell stated, which reflects 42% incremental net profit margins that are derived from the incremental revenue when comparing the model to FY 2025 actual results. To summarize, comparing this updated financial model to the prior financial model that we presented more than 2 years ago, gross profit, operating profit and net profit are much higher, 50%, 60% each higher as compared to the prior model, mostly driven by the higher SiPho and SiGe mix and the additional value we bring to our customers. That concludes my prepared remarks. Now I'd like to turn the call back to the operator so we can take your questions. Operator: [Operator Instructions] We are now going to proceed with our first question. And the questions come from the line of Mehdi Hosseini from Susquehanna Financial Group. Mehdi Hosseini: A couple of questions from me. Russell, I want to dive into the announcement that you had last Thursday, increased collaboration with NVIDIA. The press release was making a reference to module. And I want to better understand what that implies. Does this mean that you will be manufacturing a transceiver for NVIDIA or the module is more of a broader -- a reflection of a broader services that you would provide for this customer? And I have a follow-up. Russell Ellwanger: No, the part of our role in the module is the output parameters of our photonics or of the TIA or of the drivers or of the -- for the pluggable or as well for the copper or optical cable. But the partnership is referring to the fact of alignments and needs directly and through our module customers and understandings of supply needs and commitments on supply shipments. Mehdi Hosseini: Okay. And your 5x capacity increase for silicon photonics, silicon germanium, is that -- does that include incremental demand from NVIDIA and partners? Russell Ellwanger: Yes, that's referring to total demand. Well, I wouldn't say it's necessarily referring to total demand. It's an answer to demand, but it's the actual capacity that we're building. So if you look at what we had referred to as the $380 million run rate that we had in Q4, take off of that some small amount of NRE, which we don't specify, the silicon wafers that we shipped for the fourth quarter, that exact amount of silicon wafers by capacity, we plan to have 5x more of that in the fourth quarter of 2026. Mehdi Hosseini: Got it. Okay. And then on your power business line, does -- would you be able to also help prospective customers on the high voltage, especially as the next generation of AI server rack will require 800-volt DC? Russell Ellwanger: We have a variety of road map activities. We don't, at this moment, have an 800-volt platform on an IC. We do have 800-volt capabilities in Fabs, but not in an IC. But we do have higher voltage IC capabilities with and without SOI. Operator: We are now going to take our next question. And the next questions come from Tavy Rosner from Barclays. Tavy Rosner: Just following up on the NVIDIA question. So just to clarify, you're not actually shipping directly to NVIDIA, you're shipping through resellers that will just send your technology on to them. Russell Ellwanger: That is correct. We -- as far as the photonics itself, we do not ship that directly to NVIDIA. And as far as specifics of projects or activities that we're doing with NVIDIA, that anything that was not specifically stated in the PR, I would not be at liberty to talk about. But as far as the present photonics -- silicon-based photonics ICs, they are all being designed by and shipped through other module makers or integrators. Tavy Rosner: Okay. Understood. And then around CPU, I mean, you spoke about the opportunity. I think I recall last quarter, maybe it was a different conversation. You guys spoke about the ability to add value to the ecosystem through lasers, power connectors and you guys also doing any R&D on the actual CPU as well, maybe through like third-party packaging in order to have your kind of own end-to-end offering at some point? Russell Ellwanger: Direct packaging of the CPU, no, we're certainly working on multiple architectures of CPO and certainly, the XPU would be or could be incorporated into the CPO. But the specific activity right now of our engagement, well, that's not even 100% true. Yes. I mean we're certainly working with XPU makers on CPO strategies. Tavy Rosner: Okay. Understood. And then very last one for me. The rollout of additional CapEx, I think I recall you saying it's going to be all live by end of 2026. Is there any chance that it can come in sooner depending on several factors, maybe some of them beyond your control, but like is there any chance or you have the certainty that that's not going to be online before the end of the year? Russell Ellwanger: The capacity qualification ramp will be happening throughout the year. So it will -- the biggest portion of this $920 million should easily be online, I mean, fully qualified within the third quarter -- on or before the third quarter with growth happening in the first and the second quarter as well. The most recent orders that we've done also have tools that are coming in, in the second quarter. So -- but what we've stated is that what I just stated is that expect and target that by December, everything will be fully qualified in order to be able to do customer starts. In order to have everything fully qualified by December, the tools really have to arrive before the end of the third quarter and nominally by mid-third quarter. So that's where you could be thinking of is that linear or not, there will be a distribution of tools. Some have already arrived and the bulk of this $920 million will be arriving between now and mid-third quarter. Operator: We are now going to proceed with our next question. And the question comes from the line of Cody Acree from Benchmark StoneX. Cody Grant Acree: Congrats on the steady and impressive progress. Russell, maybe could you just give us a little more color on your expectations for your silicon photonics contribution in '26 and '27, specifically with the 70% commitment already talking about prepaid. It looks like your visibility should be pretty solid for the next couple of years. Russell Ellwanger: Yes, definitely. The demand is there. Certainly, we're very aware of the demand. Right now -- if your question is really on the ramp profile, the ramp profile is pure operational execution at this moment. I mean there's some technical execution still. There's some flows that still would need to be qualified, be it San Antonio or be it Migdal Haemek that are not yet qualified that are in the first order -- not the first order, but solely qualified in Newport Beach as that was the fab that most all of this development was done at. So you have some more technical work has to be done, but that's, for the most part, behind us on the technical work. From the time that everything is ready to be qualified, you still have several months for live testing in order to have customers qualify the flow themselves, if you know what I mean. So in some cases, it goes through HTOL and whatever other live tests the customer requires in its own commitments to their end customers, but the bulk of this is just operational execution. I think that's one reason that we're so bullish and confident on where we're at and where we're going on this model that we just gave of the [ 2.8 ] -- what was it [ 2.84 ] and the $750 million net profit. When your target and your plans are to have everything online, for wafer starts in December. Okay, let's say, worst case, you miss it by 1 month, 2 months, 3 months, okay, maybe, but it's there. So if it's -- will you have the full start capability in December, we target to have that, and I believe that we will. Can it push out that 1 or 2 tools isn't fully qualified for whatever reason. Obviously, this is a lot of equipment coming from suppliers. And although we're very good and the suppliers are very good at doing a final test at the supplier site, the tools are all disassembled and shipped. During the disassembly and shipment, there can be something that's broken or goes wrong, that isn't identified immediately during the, what's called Tier 1, Tier 2 start-up at our site. So it's possible that, that could take a little bit longer and 1 or 2, 3 tools can be delayed beyond the plan. It's also possible that for whatever reason, the supplier themselves misses their initial target, and that can happen. The same as not that tower would ever do it, but sometimes wafer manufacturers miss their commitments -- to just a joke there. But the point being, whether it's December or January, maybe February, I don't know. It could also be -- I mean we've released that we tend to have everything up and running in December. People that want to make sure that future commitments will always give targets where they believe they have some leeway. So the internal target should probably be more aggressive than the express target to the street, right? But the big point I'm trying to make in maybe too many words is that whether we hit the full qualification of start capability in December or whether it's November or whether it's January or February, it will be hit. And the demand is there, it's committed, and it will be used. So the model will be hit. Now from the time that you start all the starts, it's some period of time to get everything ramped and qualified. And then it's some amount of months before you can ship and get the revenue. So we feel very comfortable in talking about the 2028 to hit our model because the demand is there. Customers have committed to that demand to the extent we did not ask customers for reservation fees, they wanted it. They know how precious, especially from tower, SiPho demand is as we are truly by far, the leader in silicon PICs. So they want the wafers and it's just really in our hands as far as operational execution. Now I'd like to say it's 100% in our hands. It also is in the hands of our suppliers. But they're good suppliers. And we have a good relationship with our suppliers. We really focus on having strong relationships with our customers. To have a good relationship with the customer, you must also have that same model with your suppliers, right? I mean what goes around comes around. So you can't easily be someone that has a mentality to not treat a supplier well and expect a customer to treat you well and vice versa. So I think, Cody, maybe any -- too many words. But our plans are very firm, very strong. Can something be impacted by a month or two, one way or the other, of course. But the plans are there. And if it is impacted by a month or two, it's not impacted by the bulk of the capacity growth there will be 1 or 2 tools or I don't know, a handful of tools that sometimes are called a lemon tool. It's not necessarily a lemon tool. It means that there's a problem that wasn't found immediately. That can delay something. But there will always throughout this year, we will definitely have incremental capacity growth. Cody Grant Acree: Maybe can I just continue on with your mobile business. Any concerns about the ongoing memory shortages or the increased prices that have been called out by some of your peers in the industry and the impact to potential unit volumes in the handset market? Russell Ellwanger: Cody, I mean there's always a concern when you have something in the market that you yourself have no say in or control of. So yes, there's definitely a concern there. We work with our customers closely to understand what their inventory levels are. They try to understand what their customer inventory levels are. And to be as convinced as possible that the plan that we have for -- our start plan for the year can be hit. But are we -- I'd love to be able to say that there's no concern we're impervious to it. We're not -- there's -- there are factors in the market that always play that you never want to be a victim, so you try to do as good a planning as you can. And in the best case to have alternatives should a certain capacity not be used in the fab that it can be replaced with something else where we talked about the fact of intentionally working out some lower-margin products to allow room for higher-margin products. The lower-margin products are still in demand and there's always the possibility if there is a gap in the fab because a demand of what you thought would be there is not there, we have the opportunity to backfill it with something else. And that something else is maybe not preferred because it's not the same margin profile, but it can be done. So at least you're absorbing your fixed cost. Operator: We are now going to proceed with our next question. the questions come from the line of Richard Shannon from Craig-Hallum Capital Group. Unknown Analyst: This is Tyler on for Richard. Sorry to disappoint. I have a question. I had a question on this model that you gave and the 2028 time line. Is this a run rate in 2028? Or is this the full year? Russell Ellwanger: Yes. No, certainly, we will achieve it by run rate and we target to get a full year. But what we stated is that it would be achieved within the year. So we're -- our target and what I've stated is that is our target. One could definitely believe that we will hit it by run rate. And nominally, we'd love to hit it for full year. And it's possible. Unknown Analyst: Okay. Great. And then the silicon photonics, I know you just mentioned you could backfill other things. But at this point, with all of the CapEx investments that you make is this going to put the fabs at fully utilization for that model? Russell Ellwanger: No. Silicon photonics would not bring any of the factories to the full photo utilization. But it's not the silicon photonics that I was talking about as far as backfilling. That question was the specific question with regard to the RF mobile because of fear of the high-bandwidth memory manufacturers focusing on that for data center rather than supplying it elsewhere. And without the memory that it might not that there could be a decline in the overall mobile integrator by not having the memory they need for their phones. That was what the question was. So I was saying if that was the case, that capacity is fungible. Unknown Analyst: Got it. But with this, I think what I'm really getting at is with this CapEx spend that you're adding today does that bring us to the 85% utilization? Russell Ellwanger: It does providing that the other flows are used to the prescribed capacity that we allotted to them. So no, it's not -- if it was only silicon photonics, it would not be 85% utilization. But must understand as well, and this is an important point. We're focusing on the silicon photonics, our commitments around the silicon photonics where I say that the RFSOI, if you will, for the most part, that's pretty fungible to power. I mean there are some layers that are different, but relatively fungible for power, relatively fungible for imaging. The silicon photonics is under different ratios, but it's very fungible to silicon germanium. Operator: We are now going to proceed with our next question the questions come from Lisa Thomson from Zacks Investment Research. Lisa Thompson: I have a few accounting questions for Oren. First off, could you tell us exactly what the dollar amount was for the onetime tax benefit in Q4? Oren Shirazi: It's approximately the difference between if we had 15% tax or 16% or 17% by the model, which is about from the $81 million pretax income we should have like have a tax expense of about 15% to 17% of that. So about like $12 million, $13 million. Instead of that, we have $1.5 million. So the gap is about $10 million. Lisa Thompson: Okay. And can you explain exactly what did you get for the $105 million for the lease extension? Oren Shirazi: We got additional 3.5 years of lease of Newport Beach facility. We announced on 13 November 2025 press release. Instead of that it was supposed to be ending in the beginning of '27, it is now until the end of 2030. Lisa Thompson: Okay. And you paid the $105 million upfront cash? Oren Shirazi: Yes, yes. Yes. And it's included in the cash flow operations of Q4, which is the reason why it is a onetime lower by $105 million than any model. But we announced it in November. So it's not new, no. Lisa Thompson: Right, right, right. And then I'm just curious as the change in the U.S. depreciation rules of what you can write off -- has that changed your model at all or changed your depreciation expectations going forward? Oren Shirazi: No. No impact on us. Lisa Thompson: No, not at all. Okay. Great. Operator: This concludes the question-and-answer session. So I will now turn back to Russell for closing remarks. Thank you. Russell Ellwanger: Thank you very much. 2025 marked the completion of my 20th year at Tower. So I thought I would give a little bigger picture view of what Tower is about where we're going, what we're doing. For the year 2025, we had a corporate theme and the theme was bold growth, limitless impact, infinite reach. I love that theme and put a lot of thought into it and truly would be my great honor if my life's journey would be worthy to have those words in my epitaph included, obviously, to loving, honorable, loyal, husband, father, grandfather and friend. But if that was written on my epitaph, wow, what a value-add life I would have led. If you look at bold growth, at least to me, it means being undaunted and creating a legacy much accretive to one's birth situation. In the case directly of corporate leadership, it would mean expanding the enterprise much, much beyond the situation from when one arrived. If you talk about limitless impact, that would mean that the individual or the corporate leader has been successful in importing knowledge and creating opportunities for employees, colleagues, community for one family to have an advancing growth trajectory much beyond what they otherwise would have had, what otherwise would have been. Infinite Reach is a very interesting concept. I first encountered the term in David Deutsche's book, the beginning of infinity and the meeting that he put it forward meant that truth discovered in any severe if indeed a truth holds in all spheres. And it is very interesting. If you look at learning, there are many things which truly cannot be taught, but rather must be learned and where the learning comes only through doing. And I thought about that quite a bit. It really -- many, many things can be taught, but those things that can be told are tools. Things that can be learned are principles and values and it really only is learned through the doing. I have a very, very fervent belief that work is the laboratory where one can and should learn and develop themselves in all capabilities, principles and values needed to become the person that they aspire to be. Anybody worth their salt spends the bulk of their wakened dollars at work. What a meaningless activity if that isn't the place where one develops as a person. And I thought very much that a good company must allow for financial and professional growth, but a great company allows for the same with the addition of personal growth. Years back, earlier in my career, I had the great pleasure to reflect and thank Dr. Dan Medan at the time the President of Applied Materials, and this is directly what I wrote in. When I came to Applied I believe I was a good person. Thank you for creating an environment that has allowed me to become a better person. Tower aspires to be such a high -- such a company. We focus on hiring most capable and passionate people and of equal importance to develop and nurture an environment where passionate and capable people can further grow in capability, in passion and as well in virtue. We acknowledge and drive an understanding that the strongest catalyst for increased capability and enhanced passion or close collaborations with our customers and the excitement enjoy that is earned and truly earned from sharing in each other's successes. There's a quote of uncertain origin. If 2 people agree on everything, one of them is unnecessary. We treasure diversity. We treasure diversity of opinions, but only if it's directed to single miss and purpose and actions. Organizational anarchists do not do very well at Tower. But no matter what and how diverse the opinion is, if it's directed towards making things better, it's highly appreciated. I don't think a much different than anyone else. I don't like it when people disagree with me but I truly value it. And it's a very strong thing, and that's the culture that we have. So we have worked hard to be a company that really does allow people to grow. And if you allow people to grow, you have an environment and a spirit in the company where the company has become truly a masterpiece. Now I don't know the attraction of any single piece of art or music to those on the call, but I can say that I cannot walk by a da Vinci without being drawn to it. That's the impact of a masterpiece. It's the same thing with the company. If a company has extremely passionate people and they're of the highest character and they are capable, knowledgeable people, they are a magnet for the customer and the customer wants to be with them. And that's what allows for corporate growth. That is one of the things that allows for bold growth that allows a company to have limitless impact, and it's based on the infinite reach of people as soon as you take on big responsibilities, and you take full ownership on those responsibilities you learn so many truths. And what is true in one sphere is true in everything. The principles that allow you to be a successful business leader, allows you to be a successful father, a successful husband, a successful mother, successful wife, successful daughter, successful and value-added friend. So those are the things that Tower has truly worked on that we continue to work on. Ex U.S. President, Bill Clinton, had a quote that on first hearing sounds very nice, and it says old age is when your memories outweigh your dreams. I'm not a spring chicken, so those are the type of things that I think about. And at first, again, it sounds very good, but certainly, having dreams in no way define vibrant youth. So the statement maybe is correct as far as if your memories outweigh your dreams, it shows that you're old. But having dreams does not show that you're youthful. Many, many people, even at a young age, only have dreams, they do nothing to try to make the dreams real. So I added to this quote and took the liberty. Old age is when your memories outweigh your dreams and consequent actions to achieve them. Tower is in no way an aged company. We work off of the experience and knowledge that comes only through age, but with the full vibrance and excitement of use, and that's a combination that's unbeatable and is truly a catalyst for customers to want to engage with your company. We showed this new financial model, which as having stated multiple times and being questioned about as well, it's our target to achieve it, be it by run rate or be it in the full year, but to achieve this model in 2028, relatively short term. The model or went through all of the incremental margins, but what it is, it's a revenue CAGR of 22%. It's a very nice CAGR in our industry, a very nice foundry CAGR. So a 3-year CAGR of 22%. But it's a net profit CAGR of 50.5%, and that's really incredible to have a 2.5% off of the 22% CAGR -- to have a 2.5% increase on the CAGR of the net profit, which isn't something that's talked about often because most people don't have CAGRs on net profit. But from the present state to achieving this model, it's 50.5%. That is not an aged company. That is a company that is full, full of youthful exuberance based upon the capability of age, based upon experience, based upon having developed multiple years of strong, extremely strong relationships with customers. So to close, we entered 2026 with very strong momentum towards bold growth, limitless impact and infinite reach. Thank you for being with us. Thank you for continuing to be with us as we track towards the achievement of the $750 million net profit model. Thank you very much. Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.
Operator: Good day, and thank you for standing by. Welcome to the Tower Semiconductor Fourth Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the conference over to your first speaker Noit Levy, Investor Relations and Corporate Communications. Please go ahead. Noit Levi-Karoubi: Thank you. Good day, and thank you, everyone, for joining us today. Welcome to Tower Semiconductor's Fourth Quarter and Full Year 2025 Financial Results Conference Call. With us today are Mr. Russell Ellwanger, our Chief Executive Officer; and Mr. Oren Shirazi, our Chief Financial Officer. Before we begin, please note that certain statements made during today's call may be forward-looking and subject to risks and uncertainties that could cause actual results to differ materially. These risks are detailed in our SEC filings, Form 20-F and 6-K as well as filings with the Israeli Securities Authority, all available on our website. Tower assumes no obligation to update any such forward-looking statements. Our fourth quarter and full year 2025 results are prepared in accordance with U.S. GAAP. Some that are presented may include non-GAAP financial measures as defined under SEC Regulation G. Reconciliations to GAAP figures and full explanations are provided in today's press release and financial tables. For your reference, a supporting slide deck is available on our website and integrated into this webcast. With that, I'd like to turn the call over to our CEO, Mr. Russell Ellwanger. Russell? Russell Ellwanger: Thank you, Noit. Hello, everybody. Thank you for joining our call today. Very pleased to share our results for the fourth quarter and full year of 2025. Additionally, we are extremely excited to present how these results have redefined our financial milestones and accelerated the time line for achievement of the same. The updated financial model, which we will present is the result of already strong partnerships with our lead customers having grown into deeply trust-rooted supplier customer partnership technical alliances. We ended our fourth quarter of 2025 with a company revenue of $440 million, an 11% quarter-over-quarter growth, 14% year-over-year growth, fulfilling our beginning of the year target of quarterly sequential growth. In addition to the top line, we achieved bottom line growth throughout the year. Fourth quarter net profit was $80 million or 18% net margin, up from 11% in Q1 '25, 13% in Q2 '25, 14% in Q3, indicative of a value-based growth being driven by technology mix enrichment. The revenue growth from Q1 to Q4 of 2025 was $82 million, of which there was a $40 million net profit drop down and almost 50%, to be exact 48.78% and this due to the high value of the incremental Photonics revenue. Revenue for the full year was $1.566 billion, $130 million or 9% increase as compared to 2024 revenue. Now to review our 2025 revenue breakdown and discuss the key trends, please see Slides 5 and 6 as referenced. We achieved year-over-year growth across our key technology platforms, namely power management, image sensors and 300mm RFSOI on top of which record achievements and unprecedented growth of our market-leading optical transceiver offerings, silicon germanium and SiPho advanced platforms has propelled us into a favored and unique position, both driving our growth for 2026 and additionally, giving us the ability to redefine our financial model, which I will present at the end of my comments. RF infrastructure showed a 75% revenue increase, 2025 over 2024 being our fastest-growing application in '25 driven by hyperscaler rapid adoption of silicon photonics in 800G and 1.6T pluggable transceivers. Silicon germanium and silicon photonics revenues represented 27% of our corporate revenues were $421 million, up from $241 million or 17% in 2024. SiPho revenues alone were $228 million in 2025, up from $106 million in 2024. Specific to the fourth quarter, RF infrastructure revenues were 32% of corporate revenue, with SiPho having achieved $95 million or a $380 million annual run rate. Included in this number is some non-wafer NRE to enhance future developments for Gen+1 and Gen+2. As highlighted in our recent announcement with NVIDIA, the insatiable demand for compute bandwidth in both scale-up and scale-out architectures and Tower's exceptional ability to scale the capacity flawlessly in partnership with our customer has made 1.6 terabyte per second, the fastest-growing silicon photonics node in the industry to date, with Tower being by far the majority supplier of 1.6T silicon PICs. The partnership announced with NVIDIA as with all our direct module customers, underscores our commitment to deliver best-in-class technology and the manufacturing agility required to meet such an exceptional demand trajectory. In addition to Fab 3 Newport Beach, this past year, we successfully ramped silicon photonics production in Fab 9 San Antonio, Fab 7, Uozu, Japan, and are on track to ship the first production, a very large SiPho ramp in 2026 and from Fab 2 Migdal Haemek. Given an even stronger customer demand than was known at our last quarterly release, we have increased our CapEx plan for 2026 and with multiple customer requests to enter into capacity reservation agreements through 2028, enabling our customers to, in turn, give firm commitments to their customers having ensured their supply. For next-generation 400-gigabit per lane, we continue to make strong progress with heterogeneously integrated indium phosphide on silicon and other material systems. We are playing a key role, partnering with our lead customers to define the material systems that will be chosen, refining the flow and hence ensuring manufacturability readiness and immediate ramp capability upon 3.2T market introduction. We also see co-packaged optics as a substantially incremental opportunity for us in the coming years, as optics gets adopted and scale-up interconnects as well as XPU to high-bandwidth memory interconnects that are today largely copper. In Q4 '25, we announced the expansion of our mature 300 millimeter wafer bonding technology to enable wafer to wafer integration of silicon photonics ICs and silicon germanium electrical ICs. In addition, we continue to work with several customers on dense wavelength division multiplexing laser sources, which are a critical component of many CPO implementations and can significantly expand our served optical market by now including the laser source. Beyond optical transceivers, our silicon photonics platform continues to be the technology of choice for physical AI applications, particularly frequency modulated continuous wave LIDAR. Ahead of CES, 2 of our FMCW LIDAR partners, AVA and LightIC publicly announced their collaboration with us in bringing to market disruptive products. The proven robustness of our silicon photonics platform supported by many tens of thousands of high-yielding, high-quality wafers ship to date is enabling silicon photonics to capture growing share in the LIDAR market, unlocking new automotive and robotics opportunities. Our silicon germanium platform delivered strong growth year-over-year in 2025 of 43%, remaining the optimal platform solution for low-power, low-latency, high-performance components such as drivers, trans-impedance amplifiers for pluggables, LPOs and active copper and active optical cables. Alongside our silicon photonics production, our silicon germanium platform is now running in high volumes across Fab 3 Newport Beach, Fab 9 San Antonio, Fab 2 Migdal Haemek, and we have shipped 300 millimeter prototypes from Fab 7 in Uozu. RF mobile represented 23% of our 2025 corporate revenue and 24% of our Q4 25 revenues. 300mm RFSOI was up 5.5%, while the RF mobile as a whole was down 15% year-over-year. Those are primarily due to our proactively working with our customer partners to responsibly reduce exposure to lower margin controller offerings in favor of higher-value optical and RF mix in the fabs and also influenced with the front-end module market shift from 200 millimeter to the higher digital content better served with more advanced nodes in 300 millimeter. Our latest technology, which we presented last quarter, with substantial improvement of our [indiscernible] relative to the competition and reduced layer count, therefore, higher overall value per customer dollar continues to see robust customer adoption. Lead customers have recognized it as best-in-class and are preparing to ramp to high volumes. Across the board, we continue to see strong design win momentum that positions our 300mm RFSOI platform for sustained secular growth. In 2025, we achieved major wins, namely 3 of the top 4 Tier 1 RF front-end module providers. One has begun production with all planning for strong ramp in 2027 towards achieving appreciable revenue volumes in 2028. Power Management grew 20% year-over-year, demonstrating strong year-over-year revenue growth in both 200 millimeter and 300 millimeter offering, representing 16% of our 2025 corporate revenues and 15% of our Q4 '25 revenues. In 300 millimeter, this includes the ramp of the Tier 1 handset envelope tracker previously announced, which is expected to continue to gain share in the years to come. Overall, our revenue growth in 300 millimeter power has significantly outpaced the rate of growth for both the power market as well as the mobile handset market, demonstrating the strength of our offering and share gains in this significant space. Sensors and Displays grew 10% year-over-year, representing 16% of our 2025 corporate revenue, 15% of the fourth quarter revenue. We have seen strength and continue to see strength in the machine vision market with new advanced products ramping to production alongside existing products that continue to gain share. We also expect our first ramp in the AI -- I'm sorry, in the AR display segment with our silicon back plane for OLED on silicon, which has started production this past quarter. We are tracking this first adoption and its overall market carefully and with optimism as it may have significant value for Tower in the following years. Mixed signal CMOS represented 7% and Discrete represented 11% of our 2025 corporate revenues. Year-on-year, we've seen decreases of 18% and 14%, respectively, supporting our value-driven growth strategy, allowing additional capacity for the higher margin and the highest margin platform to replace these 2 application sets. Regarding capacity expansion. During our previous earnings release in November '25, we announced an increase of investment for silicon photonics and silicon germanium growth targeting a tripling of SiPho capacity against our targeted Q4 '25 silicon photonics actual shipments having stated a target that this would be online to begin silicon starts in the second half of 2026. Due to continued growth in demand, we are announcing today additional CapEx investment of $270 million on top of the previously announced $650 million capacity expansion plan. This total capacity is targeted to yield capacity growth greater than 5x of the actual fourth quarter monthly wafer shipments -- silicon photonics wafer shipments to be compared to the 3x target that we gave during the Q3 public release. And over 70% of the total SiPho capacity is either presently reserved or in the process of being reserved through 2028, firmly backed with customer prepayment. For the fourth quarter, utilization rates were Fab 2 operated at about 60% utilization as we are now in the final stages of silicon germanium and silicon photonics capacity qualification for a variety of flows. Fab 3 maintained our model full utilization of 85% and still adding capacity for increasing silicon photonics capability. Fab 5 was a 75% utilization. Fab 7 was fully utilized, well above our 85% utilization model. Fab 9 was at 65% utilization, presently in the silicon photonics and silicon germanium ramp. As stated in our press release, Intel has expressed its intention not to perform under the September '23 Fab 11X agreement. We are presently in a mediation process. All flows, which have been transferred or are in the process of being transferred to Fab 11X were originally qualified in our Japanese 300 millimeter factory Fab 7. Customers are being redirected to be supported by this fab in Japan. For guidance, we guide our first quarter of 2026 midrange revenue to be $412 million plus/minus 5%, representing a 15% increase as compared to the start of 2025. We target quarter-over-quarter revenue and profitability growth throughout 2026. Based upon the thriving corporate ecosystem we've developed intertwined with deeply trusted customer partner alliances, we are pleased to provide a revised financial model. This new model demonstrates our value-driven growth strategy. Please refer to Slide 7. First, the assumptions. Beyond the $920 million CapEx plans that have been released, no additional CapEx, clean room space or otherwise additional monies are required to achieve this model. This model is based on utilizing Tower-owned capacity at an 85% utilization level. Intel Fab 11X is not included in this model. Revenue, $2.84 billion, which will create 39.4% gross margin, 31.7% operating margin, a 7.7 point drop from gross to operating margin, demonstrating a highly efficient business and if not the very best, certainly among the best in our industry. Such efficiency is seen in more than just margin dollars. It is reflective to the speed of decision-making and execution. Speed is a sustainable differentiator. Net profit is $750 million or 26.4% net profit margins. All tools and customer qualifications are planned to be fully completed within 2026. Hence, and most importantly, we target to achieve this model in the calendar year 2028. Now I'd like to turn the call to our CFO, Oren Shirazi. Oren, please. Oren Shirazi: Hello, everyone. Earlier today, we released our financial results for the fourth quarter of 2025 and for the full year and also released our balance sheet and cash flow reports. Now I will review the results highlights as well as the highlights of our CapEx investment and afterwards, I will present our updated target financial model, resulting in higher revenue and profit margins than the prior model. Let's first look into the P&L. In 2025, we achieved quarter-over-quarter revenue increase during the year, which has accelerated in the second half of 2025, resulting in record revenue of $440 million in the fourth quarter of 2025, reflecting a year-over-year revenue increase of 14% and a quarter-over-quarter revenue increase of 11%. Gross profit for the fourth quarter of 2025 was $118 million, an increase of $25 million or 26% compared to the prior quarter. And operating profit was $71 million, 40% higher as compared to the prior quarter. Net profit the fourth quarter of 2025 was $80 million, an increase of $26 million or 49% compared to net profit of $54 million in the prior quarter. And earnings per share were $0.71 basic and $0.70 diluted per share compared to $0.48 basic and $0.47 diluted earnings per share reported for the prior quarter. Please note that income tax expenses line in the P&L includes a nonrecurring tax benefit recorded in the fourth quarter of 2025, resulting in an all-in 2% effective tax rate. For 2026 and beyond, as required by Pillar 2 regulation, we estimate all-in tax effective rate to be at least 15% in all our manufacturing sites. For the full year 2025, we reported revenue of $1.57 billion, 9% higher as compared to $144 billion in 2024. Gross profit and operating profit for '25 were $364 million and $194 million, respectively, compared to $339 million and $191 million in 2024 respectively. Net profit for 2025 was $220 million or $1.97 basic and $1.94 diluted earnings per share, compared to $208 million net profit in 2024. Moving to our balance sheet. Our balance sheet is very strong, evidenced by the following indicators and financial ratios. As of end of December 2025, our assets totaled over $3 billion, primarily comprised of $1.5 billion in fixed assets, predominantly comprised of fab machinery and $1.7 billion of current assets. The recent increase in other long-term assets as compared to past periods is mostly attributed to the Newport Beach Fab lease extension prepayment as was announced in November 2025 and paid, which is presented as an asset as required by GAAP. Current assets ratio is very strong at about 6.5x, while shareholders' equity reached a record number of $2.9 billion at the end of December 2025. Hedging, I would like now to describe our currency hedging activities. In relation to the Japanese yen, since the majority of TPSCo's revenue is denominated in yen and the vast majority of TPSCo's costs are in yen, we have a natural hedge over most of our Japanese business and operations. To mitigate part of the remaining yen exposure, we are executing 0 cost cylinder transactions to hedge currency fluctuations. Hence, while the yen rate against the dollar may fluctuate, there is limited impact on our margin. Similar concept goes to the Israeli shekel. In relation to the Israeli shekel currency, while we have no revenue in this currency since a portion of our cost in Israel is denominated in shekel, we also hedge a large portion of such currency risk by engaging zero-cost cylinder transaction to mitigate this exposure. Hence, while the shekel rate against the dollar may fluctuate, the impact on our margins is limited. Now moving into our CapEx investment plan and its impact on our financial model. As we announced today, in order to support the increasing SiPho and SiGe demand, we are allocating an additional $270 million of cash to invest in capacity and capability side for equipment, which would result in a total of $920 million cash investments in CapEx, including the $650 million we already announced during 2025. These $920 million CapEx investment will expand our Fab's capacity in our 8-inch fabs in Israel, Newport Beach, Texas and also in our 12-inch Uozu Fab in Japan. This CapEx plan includes a large portion of capability CapEx for advanced development and high-end RF technology-related projects. Approximately 28% of the above-stated $920 million CapEx investments were already paid to date while the remaining 72% of the $920 million are expected to be paid in 2026 and 2027. Moving to the financial model. Following these investments, which are expected to drive greater revenue and incremental margins as compared to our prior model, which we released more than 2 years ago, we are providing an updated target financial model resulting in significantly higher revenue, profitability and margin targets. Please note, the model is based on many forward-looking operational business and financial assumptions including the assumption that all our fabs will operate at 85% utilization post installation and qualification of the $920 million equipment tools we are investing in. Assumptions considering a modest average wafer selling price reduction of existing products and/or flows that we target will be offset by new products and/or flows introductions. Assumptions that our cost estimates will not differ significantly from our current assumptions. And lastly, please note that the model does not include Fab 11X capacity, revenue and margin. Now any possible additional fabs and/or new capacity that has not yet been obtained, established or announced to date. Under this model, which you may see in the slide for your reference, we are targeting $2.84 billion in annual revenue, which is $1.27 billion higher or 81% higher in revenue than our actual full year 2025 revenue. $1.12 billion in gross profit, which is more than tripling our 2025 gross profit. This level of gross profit reflects approximately 40% gross margin, which reflects a 59% incremental gross profit that are derived from the incremental revenue when comparing the model to FY 2025 actual results. It also states $900 million in annual operating profit, which is 4.6x our actual FY '25 operating profit, reflecting 32% operating margin. This reflects 55% incremental operating profit margins that are derived from the incremental revenue when comparing the model to FY 2025 actual results. And lastly, on net profit, $750 million, more than tripling the full year 2025 net profit, reflecting 26% net margin, like Russell stated, which reflects 42% incremental net profit margins that are derived from the incremental revenue when comparing the model to FY 2025 actual results. To summarize, comparing this updated financial model to the prior financial model that we presented more than 2 years ago, gross profit, operating profit and net profit are much higher, 50%, 60% each higher as compared to the prior model, mostly driven by the higher SiPho and SiGe mix and the additional value we bring to our customers. That concludes my prepared remarks. Now I'd like to turn the call back to the operator so we can take your questions. Operator: [Operator Instructions] We are now going to proceed with our first question. And the questions come from the line of Mehdi Hosseini from Susquehanna Financial Group. Mehdi Hosseini: A couple of questions from me. Russell, I want to dive into the announcement that you had last Thursday, increased collaboration with NVIDIA. The press release was making a reference to module. And I want to better understand what that implies. Does this mean that you will be manufacturing a transceiver for NVIDIA or the module is more of a broader -- a reflection of a broader services that you would provide for this customer? And I have a follow-up. Russell Ellwanger: No, the part of our role in the module is the output parameters of our photonics or of the TIA or of the drivers or of the -- for the pluggable or as well for the copper or optical cable. But the partnership is referring to the fact of alignments and needs directly and through our module customers and understandings of supply needs and commitments on supply shipments. Mehdi Hosseini: Okay. And your 5x capacity increase for silicon photonics, silicon germanium, is that -- does that include incremental demand from NVIDIA and partners? Russell Ellwanger: Yes, that's referring to total demand. Well, I wouldn't say it's necessarily referring to total demand. It's an answer to demand, but it's the actual capacity that we're building. So if you look at what we had referred to as the $380 million run rate that we had in Q4, take off of that some small amount of NRE, which we don't specify, the silicon wafers that we shipped for the fourth quarter, that exact amount of silicon wafers by capacity, we plan to have 5x more of that in the fourth quarter of 2026. Mehdi Hosseini: Got it. Okay. And then on your power business line, does -- would you be able to also help prospective customers on the high voltage, especially as the next generation of AI server rack will require 800-volt DC? Russell Ellwanger: We have a variety of road map activities. We don't, at this moment, have an 800-volt platform on an IC. We do have 800-volt capabilities in Fabs, but not in an IC. But we do have higher voltage IC capabilities with and without SOI. Operator: We are now going to take our next question. And the next questions come from Tavy Rosner from Barclays. Tavy Rosner: Just following up on the NVIDIA question. So just to clarify, you're not actually shipping directly to NVIDIA, you're shipping through resellers that will just send your technology on to them. Russell Ellwanger: That is correct. We -- as far as the photonics itself, we do not ship that directly to NVIDIA. And as far as specifics of projects or activities that we're doing with NVIDIA, that anything that was not specifically stated in the PR, I would not be at liberty to talk about. But as far as the present photonics -- silicon-based photonics ICs, they are all being designed by and shipped through other module makers or integrators. Tavy Rosner: Okay. Understood. And then around CPU, I mean, you spoke about the opportunity. I think I recall last quarter, maybe it was a different conversation. You guys spoke about the ability to add value to the ecosystem through lasers, power connectors and you guys also doing any R&D on the actual CPU as well, maybe through like third-party packaging in order to have your kind of own end-to-end offering at some point? Russell Ellwanger: Direct packaging of the CPU, no, we're certainly working on multiple architectures of CPO and certainly, the XPU would be or could be incorporated into the CPO. But the specific activity right now of our engagement, well, that's not even 100% true. Yes. I mean we're certainly working with XPU makers on CPO strategies. Tavy Rosner: Okay. Understood. And then very last one for me. The rollout of additional CapEx, I think I recall you saying it's going to be all live by end of 2026. Is there any chance that it can come in sooner depending on several factors, maybe some of them beyond your control, but like is there any chance or you have the certainty that that's not going to be online before the end of the year? Russell Ellwanger: The capacity qualification ramp will be happening throughout the year. So it will -- the biggest portion of this $920 million should easily be online, I mean, fully qualified within the third quarter -- on or before the third quarter with growth happening in the first and the second quarter as well. The most recent orders that we've done also have tools that are coming in, in the second quarter. So -- but what we've stated is that what I just stated is that expect and target that by December, everything will be fully qualified in order to be able to do customer starts. In order to have everything fully qualified by December, the tools really have to arrive before the end of the third quarter and nominally by mid-third quarter. So that's where you could be thinking of is that linear or not, there will be a distribution of tools. Some have already arrived and the bulk of this $920 million will be arriving between now and mid-third quarter. Operator: We are now going to proceed with our next question. And the question comes from the line of Cody Acree from Benchmark StoneX. Cody Grant Acree: Congrats on the steady and impressive progress. Russell, maybe could you just give us a little more color on your expectations for your silicon photonics contribution in '26 and '27, specifically with the 70% commitment already talking about prepaid. It looks like your visibility should be pretty solid for the next couple of years. Russell Ellwanger: Yes, definitely. The demand is there. Certainly, we're very aware of the demand. Right now -- if your question is really on the ramp profile, the ramp profile is pure operational execution at this moment. I mean there's some technical execution still. There's some flows that still would need to be qualified, be it San Antonio or be it Migdal Haemek that are not yet qualified that are in the first order -- not the first order, but solely qualified in Newport Beach as that was the fab that most all of this development was done at. So you have some more technical work has to be done, but that's, for the most part, behind us on the technical work. From the time that everything is ready to be qualified, you still have several months for live testing in order to have customers qualify the flow themselves, if you know what I mean. So in some cases, it goes through HTOL and whatever other live tests the customer requires in its own commitments to their end customers, but the bulk of this is just operational execution. I think that's one reason that we're so bullish and confident on where we're at and where we're going on this model that we just gave of the [ 2.8 ] -- what was it [ 2.84 ] and the $750 million net profit. When your target and your plans are to have everything online, for wafer starts in December. Okay, let's say, worst case, you miss it by 1 month, 2 months, 3 months, okay, maybe, but it's there. So if it's -- will you have the full start capability in December, we target to have that, and I believe that we will. Can it push out that 1 or 2 tools isn't fully qualified for whatever reason. Obviously, this is a lot of equipment coming from suppliers. And although we're very good and the suppliers are very good at doing a final test at the supplier site, the tools are all disassembled and shipped. During the disassembly and shipment, there can be something that's broken or goes wrong, that isn't identified immediately during the, what's called Tier 1, Tier 2 start-up at our site. So it's possible that, that could take a little bit longer and 1 or 2, 3 tools can be delayed beyond the plan. It's also possible that for whatever reason, the supplier themselves misses their initial target, and that can happen. The same as not that tower would ever do it, but sometimes wafer manufacturers miss their commitments -- to just a joke there. But the point being, whether it's December or January, maybe February, I don't know. It could also be -- I mean we've released that we tend to have everything up and running in December. People that want to make sure that future commitments will always give targets where they believe they have some leeway. So the internal target should probably be more aggressive than the express target to the street, right? But the big point I'm trying to make in maybe too many words is that whether we hit the full qualification of start capability in December or whether it's November or whether it's January or February, it will be hit. And the demand is there, it's committed, and it will be used. So the model will be hit. Now from the time that you start all the starts, it's some period of time to get everything ramped and qualified. And then it's some amount of months before you can ship and get the revenue. So we feel very comfortable in talking about the 2028 to hit our model because the demand is there. Customers have committed to that demand to the extent we did not ask customers for reservation fees, they wanted it. They know how precious, especially from tower, SiPho demand is as we are truly by far, the leader in silicon PICs. So they want the wafers and it's just really in our hands as far as operational execution. Now I'd like to say it's 100% in our hands. It also is in the hands of our suppliers. But they're good suppliers. And we have a good relationship with our suppliers. We really focus on having strong relationships with our customers. To have a good relationship with the customer, you must also have that same model with your suppliers, right? I mean what goes around comes around. So you can't easily be someone that has a mentality to not treat a supplier well and expect a customer to treat you well and vice versa. So I think, Cody, maybe any -- too many words. But our plans are very firm, very strong. Can something be impacted by a month or two, one way or the other, of course. But the plans are there. And if it is impacted by a month or two, it's not impacted by the bulk of the capacity growth there will be 1 or 2 tools or I don't know, a handful of tools that sometimes are called a lemon tool. It's not necessarily a lemon tool. It means that there's a problem that wasn't found immediately. That can delay something. But there will always throughout this year, we will definitely have incremental capacity growth. Cody Grant Acree: Maybe can I just continue on with your mobile business. Any concerns about the ongoing memory shortages or the increased prices that have been called out by some of your peers in the industry and the impact to potential unit volumes in the handset market? Russell Ellwanger: Cody, I mean there's always a concern when you have something in the market that you yourself have no say in or control of. So yes, there's definitely a concern there. We work with our customers closely to understand what their inventory levels are. They try to understand what their customer inventory levels are. And to be as convinced as possible that the plan that we have for -- our start plan for the year can be hit. But are we -- I'd love to be able to say that there's no concern we're impervious to it. We're not -- there's -- there are factors in the market that always play that you never want to be a victim, so you try to do as good a planning as you can. And in the best case to have alternatives should a certain capacity not be used in the fab that it can be replaced with something else where we talked about the fact of intentionally working out some lower-margin products to allow room for higher-margin products. The lower-margin products are still in demand and there's always the possibility if there is a gap in the fab because a demand of what you thought would be there is not there, we have the opportunity to backfill it with something else. And that something else is maybe not preferred because it's not the same margin profile, but it can be done. So at least you're absorbing your fixed cost. Operator: We are now going to proceed with our next question. the questions come from the line of Richard Shannon from Craig-Hallum Capital Group. Unknown Analyst: This is Tyler on for Richard. Sorry to disappoint. I have a question. I had a question on this model that you gave and the 2028 time line. Is this a run rate in 2028? Or is this the full year? Russell Ellwanger: Yes. No, certainly, we will achieve it by run rate and we target to get a full year. But what we stated is that it would be achieved within the year. So we're -- our target and what I've stated is that is our target. One could definitely believe that we will hit it by run rate. And nominally, we'd love to hit it for full year. And it's possible. Unknown Analyst: Okay. Great. And then the silicon photonics, I know you just mentioned you could backfill other things. But at this point, with all of the CapEx investments that you make is this going to put the fabs at fully utilization for that model? Russell Ellwanger: No. Silicon photonics would not bring any of the factories to the full photo utilization. But it's not the silicon photonics that I was talking about as far as backfilling. That question was the specific question with regard to the RF mobile because of fear of the high-bandwidth memory manufacturers focusing on that for data center rather than supplying it elsewhere. And without the memory that it might not that there could be a decline in the overall mobile integrator by not having the memory they need for their phones. That was what the question was. So I was saying if that was the case, that capacity is fungible. Unknown Analyst: Got it. But with this, I think what I'm really getting at is with this CapEx spend that you're adding today does that bring us to the 85% utilization? Russell Ellwanger: It does providing that the other flows are used to the prescribed capacity that we allotted to them. So no, it's not -- if it was only silicon photonics, it would not be 85% utilization. But must understand as well, and this is an important point. We're focusing on the silicon photonics, our commitments around the silicon photonics where I say that the RFSOI, if you will, for the most part, that's pretty fungible to power. I mean there are some layers that are different, but relatively fungible for power, relatively fungible for imaging. The silicon photonics is under different ratios, but it's very fungible to silicon germanium. Operator: We are now going to proceed with our next question the questions come from Lisa Thomson from Zacks Investment Research. Lisa Thompson: I have a few accounting questions for Oren. First off, could you tell us exactly what the dollar amount was for the onetime tax benefit in Q4? Oren Shirazi: It's approximately the difference between if we had 15% tax or 16% or 17% by the model, which is about from the $81 million pretax income we should have like have a tax expense of about 15% to 17% of that. So about like $12 million, $13 million. Instead of that, we have $1.5 million. So the gap is about $10 million. Lisa Thompson: Okay. And can you explain exactly what did you get for the $105 million for the lease extension? Oren Shirazi: We got additional 3.5 years of lease of Newport Beach facility. We announced on 13 November 2025 press release. Instead of that it was supposed to be ending in the beginning of '27, it is now until the end of 2030. Lisa Thompson: Okay. And you paid the $105 million upfront cash? Oren Shirazi: Yes, yes. Yes. And it's included in the cash flow operations of Q4, which is the reason why it is a onetime lower by $105 million than any model. But we announced it in November. So it's not new, no. Lisa Thompson: Right, right, right. And then I'm just curious as the change in the U.S. depreciation rules of what you can write off -- has that changed your model at all or changed your depreciation expectations going forward? Oren Shirazi: No. No impact on us. Lisa Thompson: No, not at all. Okay. Great. Operator: This concludes the question-and-answer session. So I will now turn back to Russell for closing remarks. Thank you. Russell Ellwanger: Thank you very much. 2025 marked the completion of my 20th year at Tower. So I thought I would give a little bigger picture view of what Tower is about where we're going, what we're doing. For the year 2025, we had a corporate theme and the theme was bold growth, limitless impact, infinite reach. I love that theme and put a lot of thought into it and truly would be my great honor if my life's journey would be worthy to have those words in my epitaph included, obviously, to loving, honorable, loyal, husband, father, grandfather and friend. But if that was written on my epitaph, wow, what a value-add life I would have led. If you look at bold growth, at least to me, it means being undaunted and creating a legacy much accretive to one's birth situation. In the case directly of corporate leadership, it would mean expanding the enterprise much, much beyond the situation from when one arrived. If you talk about limitless impact, that would mean that the individual or the corporate leader has been successful in importing knowledge and creating opportunities for employees, colleagues, community for one family to have an advancing growth trajectory much beyond what they otherwise would have had, what otherwise would have been. Infinite Reach is a very interesting concept. I first encountered the term in David Deutsche's book, the beginning of infinity and the meeting that he put it forward meant that truth discovered in any severe if indeed a truth holds in all spheres. And it is very interesting. If you look at learning, there are many things which truly cannot be taught, but rather must be learned and where the learning comes only through doing. And I thought about that quite a bit. It really -- many, many things can be taught, but those things that can be told are tools. Things that can be learned are principles and values and it really only is learned through the doing. I have a very, very fervent belief that work is the laboratory where one can and should learn and develop themselves in all capabilities, principles and values needed to become the person that they aspire to be. Anybody worth their salt spends the bulk of their wakened dollars at work. What a meaningless activity if that isn't the place where one develops as a person. And I thought very much that a good company must allow for financial and professional growth, but a great company allows for the same with the addition of personal growth. Years back, earlier in my career, I had the great pleasure to reflect and thank Dr. Dan Medan at the time the President of Applied Materials, and this is directly what I wrote in. When I came to Applied I believe I was a good person. Thank you for creating an environment that has allowed me to become a better person. Tower aspires to be such a high -- such a company. We focus on hiring most capable and passionate people and of equal importance to develop and nurture an environment where passionate and capable people can further grow in capability, in passion and as well in virtue. We acknowledge and drive an understanding that the strongest catalyst for increased capability and enhanced passion or close collaborations with our customers and the excitement enjoy that is earned and truly earned from sharing in each other's successes. There's a quote of uncertain origin. If 2 people agree on everything, one of them is unnecessary. We treasure diversity. We treasure diversity of opinions, but only if it's directed to single miss and purpose and actions. Organizational anarchists do not do very well at Tower. But no matter what and how diverse the opinion is, if it's directed towards making things better, it's highly appreciated. I don't think a much different than anyone else. I don't like it when people disagree with me but I truly value it. And it's a very strong thing, and that's the culture that we have. So we have worked hard to be a company that really does allow people to grow. And if you allow people to grow, you have an environment and a spirit in the company where the company has become truly a masterpiece. Now I don't know the attraction of any single piece of art or music to those on the call, but I can say that I cannot walk by a da Vinci without being drawn to it. That's the impact of a masterpiece. It's the same thing with the company. If a company has extremely passionate people and they're of the highest character and they are capable, knowledgeable people, they are a magnet for the customer and the customer wants to be with them. And that's what allows for corporate growth. That is one of the things that allows for bold growth that allows a company to have limitless impact, and it's based on the infinite reach of people as soon as you take on big responsibilities, and you take full ownership on those responsibilities you learn so many truths. And what is true in one sphere is true in everything. The principles that allow you to be a successful business leader, allows you to be a successful father, a successful husband, a successful mother, successful wife, successful daughter, successful and value-added friend. So those are the things that Tower has truly worked on that we continue to work on. Ex U.S. President, Bill Clinton, had a quote that on first hearing sounds very nice, and it says old age is when your memories outweigh your dreams. I'm not a spring chicken, so those are the type of things that I think about. And at first, again, it sounds very good, but certainly, having dreams in no way define vibrant youth. So the statement maybe is correct as far as if your memories outweigh your dreams, it shows that you're old. But having dreams does not show that you're youthful. Many, many people, even at a young age, only have dreams, they do nothing to try to make the dreams real. So I added to this quote and took the liberty. Old age is when your memories outweigh your dreams and consequent actions to achieve them. Tower is in no way an aged company. We work off of the experience and knowledge that comes only through age, but with the full vibrance and excitement of use, and that's a combination that's unbeatable and is truly a catalyst for customers to want to engage with your company. We showed this new financial model, which as having stated multiple times and being questioned about as well, it's our target to achieve it, be it by run rate or be it in the full year, but to achieve this model in 2028, relatively short term. The model or went through all of the incremental margins, but what it is, it's a revenue CAGR of 22%. It's a very nice CAGR in our industry, a very nice foundry CAGR. So a 3-year CAGR of 22%. But it's a net profit CAGR of 50.5%, and that's really incredible to have a 2.5% off of the 22% CAGR -- to have a 2.5% increase on the CAGR of the net profit, which isn't something that's talked about often because most people don't have CAGRs on net profit. But from the present state to achieving this model, it's 50.5%. That is not an aged company. That is a company that is full, full of youthful exuberance based upon the capability of age, based upon experience, based upon having developed multiple years of strong, extremely strong relationships with customers. So to close, we entered 2026 with very strong momentum towards bold growth, limitless impact and infinite reach. Thank you for being with us. Thank you for continuing to be with us as we track towards the achievement of the $750 million net profit model. Thank you very much. Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.
Operator: Welcome to the Quarter 3 Analyst Meet of Mahindra & Mahindra Limited. For the main presentation today, we have with us our Group CEO and MD, Dr. Anish Shah; ED and CEO of our Auto and Farm business, Mr. Rajesh Jejurikar; and our Group CFO, Mr. Amarjyoti Barua. Once the presentation concludes, we will begin with the Q&A session. For the purpose of completeness, I wish to read this out. Certain statements in this meeting with regard to our future growth projects are forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. With that, now I hand over to Dr. Shah for opening remarks. Anish Shah: Hi. Good afternoon. It's a pleasure being with you again, more so when our results are in very good shape. And let me start with talking about our key messages as we do every quarter. And what you see again is a continued strong performance across businesses, and you're seeing contribution from all our businesses to delivering very strong results. Operating PAT is up 66%. Reported PAT is up 47%. There are 2 factors that make the difference between these 2 numbers: One is labor code impact, which I'm sure you've seen across all companies; and second is a onetime around Mahindra Finance, where they had a reserve release last year in the same quarter, as we take that out, that increases the operating profit. Volume and margin growth, very strong for both Auto and Farm. Volume up 23% for both businesses. Margins up 90 basis points for Auto, 240 basis points for Farm. Farm did have some impairments internationally, and that dragged down the overall number, but domestic operating performance was up 64%. I want to highlight 3, what we call, breakthrough performances. And while you will see some numbers on this page and the next page, the breakthrough performances are not because of the numbers. Mahindra Finance is up 97% from an operating standpoint, down 9% from a reported standpoint. But beyond the numbers, there were 3 things that we were focused on for the past 3 years: asset quality, controls and technology, along with putting in place a very strong management team. And that today is in very, very good shape. And you've seen the results for that. As a result, Mahindra Finance has announced in its analyst call 2 weeks ago that it will now pivot to growth, and we will start seeing a much faster growth rate, more diversification and areas that we need to focus on now. For the last 3 years, we were not talking about growth and focusing on asset quality controls and technology. And that pivot is what creates a breakthrough for Mahindra Finance right now. Lifespaces, profits up 5x, but I will again caveat it by saying that in real estate, as you well know, you will continue to see ups and downs based on occupation certificates coming in because that's when you recognize the profit. But it's breakthrough not just for the profit number, it's breakthrough because we can now see projects complete with the profitability we had planned for at the start of the project. We now see a much greater level of urgency in the business. The land acquisition is going very strong. We've had an external investor, Mitsui Fudosan come in. That was announced a couple of days ago. And the business, both from an IC and a residential standpoint, continues to be on a very strong track, and you will continue to see that as we go forward. Logistics, first profitable quarter after 11 quarters. But again, more than the fact that it is the first profitable quarter is the execution that is being done is very strong with Hemant Sikka coming in and a few key leaders coming into the business as well. That's really driving logistics in a very, very different way. And it's a business we expect a lot more from. So this is a good stepping stone, but the breakthrough is really driven by execution that the business has shown now. We thought it will be useful to show where does that operating profit growth come from. And therefore, on the left-hand side, what you see is operating profit. But let me first start with the bottom of the page, which has 3 numbers, 66% operating profit growth, 54% without the Mahindra Finance onetime of reserve release last year and 47% after you take out the labor code impact as well. So those are the 3 numbers that we're looking at. And it doesn't matter which number you look at it, it just is a very strong performance overall across businesses. Lifespaces up 5x from an operating standpoint; Logistics up 2x; Mahindra Finance, 97%; Auto, 42%; Tech M, 35%; Farm, 7%, as I mentioned, driven more by the international impairments; and investments up significantly because we had a CIE sale, which is in the operating numbers, which we pointed out on the right-hand side here. So that's really a map of where all the businesses are. Yes, there are some other businesses that have done very well, but these were the main ones that were driving growth, and therefore, we put them on this page. Consolidated results, up 26% for revenue, up 54%. Excluding labor code, 47% reported. Drivers from an Auto standpoint, while Rajesh will cover this in more detail, the key headlines are SUV volume up 26%, continue to be #1 there. Margin up 90 basis points. New product launches, you've heard about, have done very well. Besides revenue market share for SUVs, our LCV share has gone up 10 basis points also at 51.9% now. Farm volume up from an export standpoint, 36%. Market share down slightly, but in January, we made that up for year-to-date as well. And Farm Machinery revenue is up 45%. So we're starting to see much faster growth from a Farm Machinery standpoint. Mahindra Finance, assets under management up 12% despite not focusing on growth a whole lot. GS3 continues to be below 4%. We continue to maintain 4.5% as the benchmark we've set. But for the last many quarters, we've been below 4%. And we've got a new ECL policy, which is more in line with industry, which will help the business as well. And technology and controls, you don't see on this page, but that's been a huge focus over the last 3 years, and we've completed projects or are close to completion of certain projects there, and that gives us a lot more comfort around the business overall. Tech Mahindra, on track with what it's outlined in terms of its path for F '27 and deal wins, margin expansion, all of that playing into that track that Tech Mahindra has outlined. Logistics, we spoke about. Only thing I'll add there is strong momentum in both auto and e-commerce for logistics. Hospitality has given up whatever it has earned in India with an FX exposure with its Finland business. And real estate is on a very strong path, which I mentioned. And this is a page that you've seen many, many times now. Consistent delivery. ROE is up 20.1%. But before any question comes, I will say what I always say, we are at 18%. It may be slightly higher, slightly lower in any given quarter. So the new bar is not 20%. We will continue with 18% plus/minus a little bit. And we'll continue to drive growth, and you see a very strong growth that's been driven in this quarter and year-to-date as well so far. We are at, I think, 38%, if I got the exact number year-to-date growth from a profit standpoint. So I can tell you that's higher than what we had expected at the start of the year as well. With that, let me invite Rajesh to take you through more details. Rajesh Kajuria: Hi, everyone. I'm going to run through this quickly. I'm sure you've seen a lot of these slides already. So I'll be quick and give more time for Q&A. The SUV volume was up 26%. We've got to average Q2 and Q3 because Q2 had a lower GST. So even if we average, it will be 17%, 18%. The very good news is seeing the revival of LCV segment, which we were all wondering why it's not coming into growth. It finally has. The GST has helped. The replacement cycle has kicked in, and we do see this sustaining for some period of time. You see this Q3 -- Q2, Q3, which I just said, I think the right way to do is to average it out. A lot of the -- some of the Q3 growth is the GST transition in Q2, which spilled over to Q3, but still we've seen very robust demand in Q3. We did get affected somewhat by the fact that we scaled down XUV700 in Q3 as we were preparing for 7XO. So that has had some effect on the mix and the revenue because literally 1 month, 1.5 months, we had stopped billing new 700s out in the last quarter. You see revenue market share at 24-odd percent. We think that's about the level we'll be at. There was abnormal peak in Q1 and Q2. These numbers now -- well, earlier also, they included the EV numbers. We're just calling that out separately so that we're not going to have a separate slide on EV. On the same slide, you'll see where we are doing -- how we're doing on market share in that quarter and YTD, which you see at the bottom. 7XO has got very good response, a very strong order pipeline. And as some of you did mention, customers, we are back into this waiting period thing, which is not always desirable, but kind of also a recognition of the fact that the product has got accepted very well. Big skew again to the top end in spite of very attractive lower-end versions, almost 70% plus is the top 2 versions, which is in a way higher than what we thought, which is also good news, but that's what is adding to the complexity on waiting period, given that the skew is higher than what we expected to the -- especially AX7L version. 41,000-plus eSUVs sold, which is really about 4,000 a month as an average. The interesting thing is the 32.5 crore kilometers that the vehicle has run, which really implies 8,000 labs around the earth equivalent, goes to show that the vehicles are not just nice parking products in the garages, but are being used a lot and are very mainstream in the way that customers have adopted usage of this, which is building that positive word of mouth and confidence. We are seeing that translating into 9S, which I'll come to in a minute. A lot of awards. We believe the most prestigious out of these is the EV, the Green Car of the Year at the ICOTY, which is a very, very robust jury of multiple auto handles coming together, and they have only 3 awards, one of which is the EV Green Car of the Year, which 9e got. The 9S has got very good feedback as well and response. We had mentioned in one of the earlier quarters that we expected North to do better with the EV portfolio. With the 9S that's happening, that segment was looking for a more conventional shaped SUV, which the 9S is balancing well. So it's bringing all the goodness and tech associations of the earlier 2 products, but in a more conservative or conventional format and in 7-seater. So we are seeing, of course, good response everywhere, but North is adding a new set of customers into the 9S kitty. We had put out what products will come in the calendar, and there have been questions around how much have we already launched and what is not. So we just put this slide to clarify that. We had said 3 new ICE -- 3 ICE SUVs in this year. The new nameplate out of that was 7XO. Two more refreshes will come over and above the Bolero and Bolero Neo. When we had said 3, we had not counted Bolero and Bolero Neo in the 3. So we've done 7XO now, Bolero, Bolero Neo and there will be 2 more refreshes in this calendar year. On EVs, both what we had spoken about are done for this calendar year. So there's no new EV launch happening in this calendar year. LCVs, we had said 2. We've just done Bolero Camper and Bolero PikUp and 2 more will happen in this calendar year. A quick slide on capacity. So we're breaking this up into 3 phases, so to say. In the calendar 2026, we will work around debottlenecking some of the current capacity products where product capacity is running out, more specifically 3XO and Bolero in Nashik plant, some of Scorpio-N in Chakan plant. So all of these in Thar a little bit. So all of these are kind of out of capacity. We'll aim by July, August to add about 3,000 to 5,000 between these products per month. Over and above that 3,000 of EVs gets added with the 9S launch. So in a way, 6,000 to 7,000 additional capacities on these products get added in F '27 on top of what we have in F '26. Calendar year 2027 will see the addition of new capacity in Chakan for the new IQ platform. So one of the Vision S or Vision T, which we will launch in 2027 will kick in. The Nagpur facility, which will come up by -- in calendar 2028, will have primarily the new IQ platform on the SUV side, definitely Vision X, which is not going to come in Chakan. We will probably need more capacity than we are planning in Chakan for Vision S, Vision T. So we'll provide for that too and any other new products. We will also figure out which of the existing products need more capacity. We will have to work the cannibalization equation of new products over current products. We may add something at the Igatpuri new land that we are taking or we may add it in Nagpur. So that's something that we will work out by way of how to split and prepare for additional capacities on existing products. So Nagpur greenfield and if there are more questions, we can talk a little bit more about what will happen in Nagpur greenfield. LCVs, I'm not repeating, I've already spoken. Auto margins have been very robust, and you see the 10.4% here without contract manufacturing, but this chart gives you a better feel of the same thing, which is the auto stand-alone without contract manufacturing is 10.4%, which is what you saw on the previous slide. INR 10 crores is what we made on the contract manufacturing in M&M. And the stand-alone as reported is INR 9.5%, which, of course, comes down because there's a big element of contract manufacturing. On the EVs, as we've started doing, we made INR 175 crores end-to-end. In MEAL, as a company, the EBITDA was INR 149 crores, INR 27 crores of that was in M&M. And the total, as you see on this chart, is INR 175 crores. The PLI status is up here. So 9e, we have all variants approved. 9S, the top 2 packs are approved already. The balance are under approval and should come in by quarter 1. And BE 6 should come in by quarter 1 again, all variants. So basically, by quarter 1, we should have all variants, all products with PLI approval. Trucks and buses, a quick look. We had a strong growth. We also look at the YTD market share, we increased somewhat and we are both together at 6%. Last mile mobility, we continue our leadership, an exciting new launch happening tomorrow in Hyderabad. And do watch for that. We believe it will be a game changer. Some really very exciting breakthrough new design, and I think it will transform the penetration even more. We already are at 30% penetration. So just a quick look at the auto consolidated numbers. You've already seen that, so I'm skipping this. Farm, the volumes grew 23% in the quarter. We lost some market share. A lot of it was due to Swaraj Tractors completely running out of stock, and that's got recovered in January as well. So we are now at 44.1%. So that's what you see here. The farm machinery, Anish spoke about, we're seeing very good turnaround. Last few months, we've crossed INR 100 crores literally every month as an average. So it is a very strong momentum now that we are beginning to see. The core tractor margin here, which is really the important parameter, is at 21.2%, very good improvement over the like-to-like quarter, but also very close to our best performance. This gives you the volatility of industry growth versus how the margins move in a band, depending on the operating leverage. Anish has covered this. So again, very strong stand-alone performance. We had to take impairments on a couple of subsidiaries, which we can talk about, which is what is showing a PBIT negative 7% and a PAT plus 7%. With that, I'll hand over to Amar. Thank you. Amarjyoti Barua: Thank you, Rajesh. Just a recap of everything you heard. I won't repeat what has already been said, but I do want to take a second to highlight that this is the first time the group has crossed INR 50,000 crores in top line, and that's a big milestone for us as a group. What I just wanted to point out within the consolidated result, there is a INR 220 crore impact of labor code. This is our share. The gross amount across group companies was INR 565 crores, okay? This is the waterfall that I usually show to show the contribution of each of the pieces. You can see here the impairments were exactly offset or very close to being offset by the CIE gain. So just calling that out very clearly so that you can see that the operating performance was not helped necessarily by the CIE gain. It was offset by the onetime impairments we take -- we took. We took impairments in 2 entities. One is our Japan entity, and we took also an impairment in our Turkey foundry business, both of which the MAM Japan one we have talked about in the past. This is just continuing the restructuring in that business. Foundry is new and was impacted by the hyperinflation in Turkey. I do want to highlight growth gems grew 3x year-over-year, okay? And that's a very big deal for us. And then from the stand-alone side, the impact you all follow this, the impact of labor code is around INR 73 crores in that -- in the INR 3,931 crores that you see. And then we've talked about the revenue growth. Outside of this, the only thing I'd like to highlight, we don't show the page, but I do want to highlight the cash performance has been, again, very strong across the group. So we continue to keep growing our cash, which will be deployed towards future growth as we find new avenues. And from an outlook standpoint, I mean, we continue to see the strength in the portfolio, so hopefully should allow us to close the year very strong. Okay. With that, we can transition to questions. Operator: We'll just wait for the setup to complete, we'll start then. Yes, Kapil, please start. Kapil Singh: First of all, sir, I would like to congratulate you because this was a fairly strong all-round performance across the group companies. So really heartening to see that, that even the group companies are now contributing solidly. I'll start off with the auto sector, just Rajesh sir, your outlook for next year for each of the segments, LCVs, tractors and autos. And one of the concerns in mind is that because just GST cut has just happened. So is there an element of pent-up that you are sensing here and how to think about next year's growth for each of these segments? And within autos, various subsegments, including EVs and compact SUVs, how are you seeing the demand momentum over there? And also, if you can give some clarity on the capacity for FY '27 and FY '28 in terms of numbers, is it possible to share what will be the available capacity? So yes, that's the first question. Rajesh Kajuria: Yes. So Kapil, outlook, we'll share like we normally do in May, and we'll not give a specific number on outlook, but we'll try and maybe answer your question 2 and question 3 together, which is the impact of GST overall, how we are seeing, in which segments has it really made a difference and that, I think, connects with your question on the demand outlook at a qualitative level on EVs and subcompacts and LCVs and so on. So firstly, the biggest impact of GST will always be in commercial segments because it fundamentally -- or a price reduction because it fundamentally improves cost of ownership and improves viability. Also, the GST cut will drive GDP growth, we believe, to be much higher and the economic prosperity of the country will go up, which also helps commercial applications and commercial usages both. So it's 2 factors kicking in when we look at commercial segments. When I'm saying commercial, I'm counting LCV, bigger CVs and tractors. They all are following a similar paradigm, which is significantly better viability for the user out of a lower -- a significantly lower price. I mean, 10% is a big change in price for that segment. In LCVs, roughly, it leads to a 4% to 5% higher profit improvement for an operator. So it's not insignificant at all. So we believe this is a fundamental shift, and this will lead to a cycle of increased demand, and it's not a 1- or 2-month thing, which is just a pent-up because there was no -- it's not a pent-up. It was pent-up in LCVs to the extent that the replacement cycle had not kicked in, and we believe that was because of COVID, where usage had got delayed or reduced over a 1- or 2-year period. And as soon as -- so there was a replacement cycle delay of a year or 2 and GST, I think, provided that impetus and we saw growth kicking in together. So I think the commercial segments will gain the most. What's happening in the other segments in which we play is actually, we think, enabling higher version variant usage. We don't think fundamentally demand for an XUV 7XO or Scorpio-N is going up because of GST drop. And that may have been momentary if it did in the festival period at all. But the demand momentum continues even as we got into December and January. So it wasn't just festive and it wasn't just 1 month. There, what we are seeing is a much better move up the ladder because customers have a price point on which they're operating and then suddenly, they can get more in that price point. So it can either lead to a lower-model customer moving up to a higher model or a lower-variant customer moving up to a higher variant. So both of these will play out. I'm not sure it will increase the total size of the industry, but it will probably change the nature of the mix for an individual player or certain models, which fall in the consideration set, right? So with the 7XO of pricing that we have where we are operating, have reasonably good options between 13.5 and 15.5 or 16. 4.6 meter product actually competes like-to-like with the 4.2, 4.3 meter product, which was not the case earlier, right? So there would be 4.3 meter customers who may look for a 4.6, 4.7 product. So I think some of that will be helped by GST. The entry car has, of course, picked up with GST in a very significant way, which I'm sure is a function of the fact that that's become more affordable and hence, more accessible to many people. Whether that is pent-up or that is going to sustain, I don't have a point of view on right now. And hence, what we would have to watch out for as we get into F '27 is what will be the mix of small car to big cars and how will each subsegment grow? I think it's a little premature to reach a conclusion on how this mix will play out. I think each segment will grow by itself, but which will grow faster and which will grow a little slower and hence, the mix and the relative impact of that on market share is something that we'll have to watch for. We've seen very robust growth in all our sub INR 10 lakh product. So Bolero, Bolero Neo, everything is below INR 10 lakhs now on showroom. The GST cut helped that. So 3XO, Bolero, Bolero Neo all have got very, very strong demand. Capacity for '20... Kapil Singh: Sir, EVs as well. Rajesh Kajuria: EV, I spoke about in a fair amount of this thing. So the price point at which -- the price point/the fact that we are more than 4 meters, which means the gap between 5% GST and 40% GST is still quite significant and which is why we are able to price 9S almost like-to-like on road as a 7XO. So a customer actually can choose without worrying about price between whether they want a 7XO ICE or a 9S EV. So in the segments in which we play, I don't think the GST arbitrage change is making any difference. But in less than 4 meter, it would because there it was 28 to 5 versus 18 to 5. So it's a much, much closer comparison now. So the price advantage relatively in less than 4 meter kind of goes away. It's still quite significant in the segments in which we play. Capacity, just to again clarify what I had on the slide, we'll probably add this year, 5,000 to 6,000 by July, August in ICE over what we have right now, another 3-odd in EVs, so 7,000 to 8,000. F '27, we would add in ICE another 7,000 to 8,000 at least, that will come from Chakan in calendar 2027. That's for the new IQ platform. And then in 2028, depending on how quickly we are able to get actual possession of the land and productionize it, we would probably add in year 1, at least 8,000, 10,000 more. It will ramp up to 500,000 over a period of time. But in year 1, it will probably be 10,000, 12,000 a year. Sorry, Long answer, sorry. Kapil Singh: No, thanks. I think it's really helpful. Amar, just one to you. We are seeing a pretty steep commodity inflation, particularly precious metals. How do you see the impact of that as we look into next year? Do we have pricing power and hedging on the commodity side? And what was the impact in 3Q as well? Amarjyoti Barua: Sure. So let me address what is happening first and because it's difficult to predict what it will be. Today, what we are seeing is across almost every commodity, there is inflation. Precious metals lead the pack. Part of it is the same dynamics that is driving gold and silver. And part of it is supply issues, especially anything dependent on iron. So copper, aluminum, et cetera, you're seeing. The iron-related products are likely to not see sustained increase because these seem to be more supply-related issues, which will get solved. It's very difficult to say that for precious metals because there seems to be something more deep that is driving that, right? So we'll see how it all plays out through next year. Right now, we did see the inflation in our numbers. The hedges have worked, but I want to emphasize that the hedges can only cover a certain portion because there isn't necessarily a market for steel, for example, for hedging, right? So we do get exposed to anything that might be happening there. The other thing also is our hedges take care of purchases beyond current quarter. So some of the gains we get when we get mark-to-market is covering for purchases in the future. So you will see some volatility in commodity costs in the future and not a hedge offset. So I think so far, very benign because we are getting the advantage of having a very robust hedging program. But in the future, we'll have to see how it all plays out. Overall, I think Rajesh has already mentioned there was -- there is a 1% price increase to take care of what is going to be the future impact of some of this commodity inflation. And then we'll see how it goes. Kapil Singh: Sure. On the EVs, are you seeing more cost inflation? Anish Shah: Just to answer your question on pricing power. Do you want to cover that? Rajesh Kajuria: Yes, I think there's headroom on price. It's just that we don't want to -- we wouldn't want to push it unless we feel it's necessary. That's been our philosophy always to make sure we don't lose a sweet spot on the pricing. So we have taken 1%, as Amar just said in January. And we'll watch closely and see how the commodity is going. There's ability to take -- the key thing is anticipating whether you need it based on a stable view on what will happen to commodity. We don't want to be knee-jerk. So sometimes you kind of say, okay, this is a short-term thing. Let's not push price up for something which is going to go up today and come down tomorrow. So then you're not reacting and that has sometimes a short-term effect. But fundamentally, if you know that the commodity trend is upward, then we will take prices to correct for that. It's the judgment of whether it is just a short-term spike, which should be ignored or is it something that we fundamentally need to take a price to cover for. That's the -- it's that judgment which sometimes affects timing of a pricing decision. Anish Shah: Yes. So we have the pricing power, whether we use it or not is... Rajesh Kajuria: We don't want to -- I mean, the simplest thing is to say, okay, let's keep taking, which is something we want to avoid. Kapil Singh: Just wanted to hear your comments on EVs also in terms of cost pressures, is it more over there? Or should we expect that EV costs will still keep coming down? Amarjyoti Barua: Imports are going to be impacted because of the rupee, right? But I think there was an overhang on the rupee as well, which hopefully, with the announcement around the U.S. FTA should -- so our now view on the rupee is don't see a significant slide beyond where it is right now. Let's see how it all progresses. And that should help us ease some of the import pressure. But we mentioned this before, Kapil, there's an aggressive localization program that the team is running, right? So that will eventually offset this pressure point. Operator: Chandu, please go ahead. Unknown Analyst: First one is on CAFE. So there's now an expectation that after the industry has represented back to the government, the 113 grams coming down to 91 might potentially be 113 grams coming down to close to 100 grams in April 2027. So just wanted to understand your thoughts around that. And if that's the case, our 25% sort of EV mix target for F '28, how much could that potentially come down by? Second question is just around the tractor business. There is some expectation that over the next 12 to 18 months, there could be a recurrence of an El Nino scenario. So what your early thoughts are around that? Any offsets we have to potentially manage around that situation? And the last question is just around sort of capital allocation growth gems. Growth gems, I think we've put a lot of effort into those businesses over the last 4 to 5 years. Maybe the market at this stage doesn't fully appreciate the value in those businesses. But just related to that, we do have a couple of entities, Pininfarina and Erkunt, which might be rags on profitability of the overall group. So just your thoughts on, is there any potential restructuring possible in those entities? Rajesh Kajuria: You want to take that first? Anish Shah: Yes. So you're absolutely right, the growth gems are still underappreciated, but that's fine. We continue to have them deliver more and more. And as we shared at the Investor Day, the valuation of our growth gems as of 3 months ago was INR 56,000 crores. You're starting to see some of that in the numbers as well because they're starting to deliver more profits. Yes, there are a few businesses more so outside our growth gems, but some of the smaller businesses that haven't fully delivered to the potential. And we continue looking at that on a regular basis and culling them out as we need to. You saw that with Sampo a few quarters ago, where we exited Sampo. And we do have all our businesses in that watch in terms of what we need to do with them. We also announced Automobili Pininfarina that we were not continuing that forward. We merged that with Pininfarina. So that was, in a sense, another exit that we took. And Erkunt foundry is not strategic for us and which is where we've taken an impairment this quarter as well. So we continue to look for what are the strategic options for us in that business. So that's one discipline that will continue, and we will cull things out. But keeping that -- I look at that as a separate question from the growth gems itself. The growth gems continue to deliver value. And the way we think about it is there are a set of businesses that have scale and have a right to win. So you've got that in SUVs, in LCVs, in tractors, in farm machinery, there are a number of businesses that -- actually farm machinery doesn't have scale as yet. It will get to scale. But you've got a few businesses with that scale and a right to win. Then there are a number of businesses that have a very strong right to win, but don't have scale. And our focus is how do you start driving scale in those businesses. And many of them are growth gems. And then we have some businesses where we feel we should have the right to win, but we don't have a right to win as yet. And there, we're looking at can we develop that right to win. If we can, we will scale it. If we cannot, we will exit it. Rajesh Kajuria: Okay. Let me take the question on which there's no answer, which is CAFE. Yes, Chandu, of course, we are all as an industry body working regularly with the government on what we think should be the right and fair way to construct a policy around emission norms. So there is a fair amount of industry engagement with the government on this, and the government is not rushing into announcing something and are capturing all the views. The overall view of SIAM is to stay with the recommendation, which was made in, I think, December 2024. There's discussion around that. So you gave a number of 25%. I don't know that 25% that we had put out as our -- was our own target was not linked to what is needed by CAFE norm. We believe that most likely what will be needed by CAFE norm will be much lower than our own internal target. The difficult thing, of course, is if ICE continues to grow at a very robust pace, then what will be the ratios between ICE and EV. And that's really what part of the discussion is that you don't want to really stop growth of the economy or of the ICE portfolio and the government needs to construct it in a way which is reasonable for both industry and climate. And I think there's good listening around that. So let's wait. I think it's -- we're not too far away from getting a very clear view on what they will do, but it's maybe like -- I think we should have something out in a couple of months. So there's a lot of industry engagement with multiple government stakeholders. On the tractor industry, often you'll ask about projections. And often, I have said we have no ability to project it. As recently as 2 months back, we said it will be low double digits, and this year is going to end at twice that literally. So low double digits, if you say is 11% or 12%, we are going to end this year at 24%. So really, even the ability to forecast next 3 months is not there. I wouldn't worry about what's going to happen in October or November. It's too early to worry about that. We will go into next year feeling optimistic and positive. But keeping in mind that we are on a very high base because this year is going to end at 24% growth, which no one expected, right? So if we say example, next year is X percent growth. Earlier, we were saying it is X percent growth for F '27 on a 10% or 11% growth this year, which itself we thought is good. Now the point is if this year is not 10% or 11%, but it's 24%, which is what it's likely to be, then we have to have a reasonable assumption of on that base, what kind of growth is going to kick in next year. Multiple things in the country, we believe, are very enabling and reservoir levels is one key enabler even if when monsoons are not good. So whatever we read about El Nino effect is likely to happen after the first round of rains. So most people say that, that effect may kick in, in August or September. So if you had a good flush of rains, then your first round of kharif sowing has happened. Reservoir levels are good, which anyway, we are going to open F '27 with good reservoir levels. Government spending in rural and agricultural sectors, both has been robust, which is also a key driver of tractor growth, so -- and favorable terms of farmer trade. So there are multiple enabling factors. So let's wait and watch. I know many of you are picking up signals that tractor demand may be under stress. I think we have to see that relative to the fact that this year will be a 24% industry growth. And overall, we think right now, there are -- the enablers are much more than the dis-enablers. At least that's the way we are going in and which is why we are triggering capacity expansion and all of that for tractor, Mahindra tractors in Nagpur, which is where we already have a base on the greenfield, plus we'll also look at something more on Swaraj. So we are preparing for the longer-term growth trend, which we spoke about on the Investor Day of about 9% CAGR. Anish Shah: The economy is accelerating. And it's driven by some of the actions taken last year, but even more so from the foundation elements that have been laid. And we continue to believe that the industry will accelerate. I've gone on record saying we would look at an 8% to 10% growth over the next 20 years, just given all the key factors that drive the economy, demographics, the infrastructure that's being built, the government reforms, and then you see last year's actions around tax, around GST, around the rate cut. So you see various different actions that have come in. So we feel that there's a very strong tailwind that will position India very well, and that will benefit multiple industries in India. Unknown Analyst: Anish, the 8% to 10%, you're talking more real growth or nominal growth? Anish Shah: Real growth. Amarjyoti Barua: Can I just add one perspective because this is why we always encourage all of you to look at consolidated. All of these impairments are not just accounting, right? There are some tough decisions that have been taken by the Farm leadership. And so we do foresee international not to be such a big drag next year, right? And I think that is something -- when you think about Farm at a consolidated level, there is also that constructive view that you should take because there is some really tough decisions that the team has taken. Anish Shah: Yes. And I'll emphasize 2 points. One on what Amar said and coming back to your question around the growth numbers. There was a point in time which you've seen we would put impairments as onetime items. You saw from the pages today, impairment was not a onetime item. It is operating profit, right? Or it brings the operating profit down. And that's a mindset we are using right now to say that wherever we invest, we need to get the results from there. And as a management team, we take accountability for that to say that is the result we will drive. And therefore, it is in our operating profit number, not as a onetime item that look at as an impairment. But to Amar's point, that improves performance going forward. And yes, there are some actions that will not work. That will always happen. But we find ways to offset that. But as we've done this, it improves performance going forward. Second, I'll come back to the growth point and expand a little on what I said. India has grown 6.5% a year in real terms for the last 30 years. And with what we see today, with the kind of infrastructure that's put in both physical and digital, the kind of government spending on CapEx, the reforms that have been put in place and more that are coming, the focus of the government on making it easier to do business, we're not completely there as yet, but there's a lot of conversation that takes place. Often, we are part of those conversations to say, here's what needs to be done. And there's a lot of room for the government to listen to it and start taking action for it. The demographic factor that we have, we are at 28.8 years median age. The China and the U.S. are at 38, Japan is at 48. So we have a lot of these benefits, and we are starting to see that come together as one to start the economy growing faster, so which is where we say that it should be 8% to 10% from a real basis. With all these actions that have been taken, this is not a -- we hope for actions in future and it will happen. This is the result of actions that have been taken already. Operator: We'll go with Raghu, then Gunjan will come to you and Rakesh. Unknown Analyst: Congratulations on strong numbers. Firstly, to Anish sir. Sir, in your Davos interview, you had talked about last mile mobility listing. If you can talk about the time line and strategy, that would be helpful. Also, if you can share your thoughts on the benefits for Mahindra Group from the recent trade deals with Europe and U.S. And also like last 2 years were remarkable for Tech Mahindra in terms of deal wins and margin expansion. How do you see the medium-term outlook? And finally, on Mahindra Finance, now that the asset quality is better, how do you see the growth ahead? Anish Shah: All right. That's a great set of questions overall. So let me start with the last 2 and Mahindra Finance, in particular, and Tech M and then I'll go to the EU FTA and continue on the first question. So Mahindra Finance, for the last 3 years, we specifically had a view that the business has to get to a much stronger and consistent asset quality. If you look back over time and you look back even what I've said on Mahindra Finance in the past, we would go to 16.5% or 16% GNPAs in every crisis, stay at 8% in normal terms. We would always say that we will get all of this back and we did. So it was always profitable, but it was highly volatile. And that is something that we had to change because we didn't like the volatility. It caused a lot of questions. You didn't like the volatility either. And therefore, we said that we have to bring it down to less than 4.5%. What that also does is it brings ROA down because higher risk, higher return. But the ROA hasn't come down as much as we had expected it to come down. So it's come down to 1.9% or so right now. The last few quarters have been less than 4% from a GNPA standpoint. And we've cut out a number of customers that caused earn and pay. And if you go back to even many years, every time during a crisis, our CEO at that time, Ramesh Iyer would talk about the earn and pay segment. And so the earn and pay segment has been impacted, and they will come back and pay later because they're not earning right now, they're not paying. But that segment, we're not lending to anymore. And therefore, you've got that coming down. ROA at 1.9% doesn't worry us as much because our cross-sell ratio is the worse in industry, which I look as an opportunity. So as we cross-sell more, as we sell more insurance and other fee-based products, that is starting to come up, and we'll get that back to 2.2% to 2.5% after that as well, but have a very strong, stable business. The other aspect we needed in that stability was controls because we did at times go 2 steps forward and come 1 step back, right? That something happens in ice ball, something happens somewhere else. It's out of our control. But can we have a business with very strong controls where we can start picking this up and centralize a lot of the processing, put in a lot of technology that's good for customers as well. In some cases, our customers have to sign 76 times to get a loan. I'm not exaggerating on this one. And with technology now that has been put in Project Udaan that got put in, it's one digital signature, and that's it. So it's taken away a lot of the processing away from it, which then improves cost. So OpEx ratios, we haven't talked about a whole lot as yet, but a lot of cost will come out of the system as technology has been put in. So as we look at our OpEx ratio, as we look at our loss ratios coming down, our credit losses have always been stable. Our GS3 will be even better. The business is on a very strong track. And now we have pivoted to growth. We will grow responsibly. We're not going to grow even at the levels we could right now because we're going to continue to maintain this discipline that we have. So therefore, we see Mahindra Finance on a very strong track at this point in time. Tech M hasn't finished its first phase as yet. Mahindra Finance has finished its first phase. The other aspect in Mahindra Finance is a very strong management team. And you can see that in terms of what we've announced. We've got some really good leaders from top banks and in a couple of cases, top NBFCs as well. So that gives us a lot of comfort. Tech M, we've got a very strong team. We've made the internal transition of the delivery organization, centralized it, and that's working very well right now. It's on track to deliver what it has to in its first phase, which ends by F '27, and it has to get to a 15% EBIT margin. As it does that, then we will look at pivot to growth from that standpoint as well. So that's on the Tech M story. On FTA, I like the way you phrased your question, which is what are the benefits from the FTA. And actually, we see that as benefits because I will give a lot of credit to the government on this. They had a very, very fine balancing act because this was a big ask from the EU because of the unused capacity that they have. And the government had the balancing act not to protect us in any form because I'll come back to that protection part, but to ensure that manufacturing in India did not get a hit, that OEMs outside India continue to invest in India and continue to manufacture in India. And that's what we told them. That's what we want. We want more carmakers to come here. We want more competition. We want a bigger market here because the more scale that we have to manufacture in India, the better it is for us. We will get a better ecosystem. We'll be more competitive and we can Make in India for the world in a much better way. That's why China is very competitive. China capacity today is 50 million units a year. Roughly half is unused. India capacity is 5 million units a year. That's where China was 20 years ago. Europe is at 23 million units a year. But Europe also has 10 million, 11 million unused capacity. Volkswagen alone has unused capacity that's half of the India market. 2.2 million is Volkswagen's unused capacity. So as you look at all of these things, the fine balancing act was to make sure that we open up the industry, we'll reduce tariffs. At the same time, we encourage all of the European makers to continue making in India. And I think they've done that really well. We can go through some of the details. You've seen most of it already. Coming to the part around protection and competition for us, take any of the European models, right? Any model that's going to be successful in India is in India. Now if you look at the math behind it, whether it's a Renault Duster or whether it's a Stellantis Jeep or whether it's any other vehicle, can they make it in EU, ship it, take the cost for shipping, take the cost of inventory for 4 months and do it cheaper than they can manufacture in India? Unlikely. If that is the case, then how does it change competition for us? They will make as many cars as they can make for India, that's what the price will be. What they would have done if the outcome had been different is if they were allowed to send everything from Europe, they could have said, "I'll shut down my India plant, and I will manufacture in Europe and send it here because I don't have to shut down my European plant in that case," right? Some have announced shutdowns of European plants as well, which they have not been able to do right now. But that's where the FTA has been done very well, which will not allow them to do that because they will need a presence in India to be able to succeed here. So that is our view on why the FTA has been done very well. The benefits or opportunities come from the fact that we can send our cars to Europe at 2.5x the quota that they have there, which is a great quota from our standpoint at 0% tax, right? Yes, their reduction was lower. Their starting point was lower and which is why it goes down to 0%. But that opens up a significant opportunity for us. And we can test the European market by manufacturing in India well and sending it there. We will also get a lower price for some of our components coming in because this FTA also allows for that. So today, we pay 16.5% for electronic screens. We have a few other imports that we have that we have a higher price. That comes down as well. So we see a lot of benefits from the EU FTA in particular. The U.S. FTA actually was a surprise in many ways. It doesn't really give much to the U.S. from an auto standpoint, the way it's drafted right now, at least what we've seen. We'll wait for the details to come in, but we don't expect any -- we never expected any challenge from the U.S. in any case. Europe was a bigger one in that sense. Unknown Analyst: Last mile, sir? Anish Shah: Yes. On last mile, we did talk in towers that we'd look at an IPO next year. And that's more around where the business is, where its trajectory is. It is competing fiercely in the market and doing very well. And we just feel that an IPO will just help unlock that value for that business. It's the right time for it, and that's what we'll do. It's not for monetization in any form because we're not worried about the cash aspect of it, but it's just something that helps proclaim victory in that space, which is why we do it. So that's -- it really shouldn't change anything from the economic view of the group. Unknown Analyst: To Rajesh sir and also to Veejay sir, on the tractor side, how do you see the contribution of the subsidy-led sales in the current year? And how do you see that subsidy-led momentum continuing for next year? Rajesh Kajuria: Yes. I'll take that, Raghu. And of course, Divya had prepared us for this question coming from many of you. So mainly the subsidy was Maharashtra and Maharashtra saw a huge growth in industry, thanks to the subsidy. Roughly 35,000 extra numbers of tractors have got sold on account of the one subsidy, which was very successful. There were 3 subsidy schemes in Maharashtra. So without getting into the granular details of each subsidy scheme. So roughly 35,000 extra tractors in F '26 over F '25 on account of the one major thing, which we don't expect will continue. But then that's the number in perspective. From looking at just that state of Maharashtra, obviously, the state will not get growth. But normally, some other state will do something or there will be key drivers. If you see the previous year, Chhattisgarh had a huge growth just like Maharashtra is having this year. So there will always be 1 or 2 other states which compensate for something else. So we live in that hope. And certainly, Maharashtra will be flattish after such a heavy growth. I think it was 90% growth or something in Maharashtra, 68%, whatever. Unknown Executive: Two years of already a pretty strong... Rajesh Kajuria: Yes, yes. So that is what it is. So that's the 35,000 is the extra absolute number in an industry of 10,000 numbers or 10 lakh numbers, all India industrial... Anish Shah: I'll just add to that and also what Kapil asked earlier, we generally like steady growth numbers year-over-year because we look at outperforming in the market. And even the auto industry, if you look back over the last few years, hasn't really grown at rapid pace, and we've done very well in an industry that hasn't grown at a very rapid pace. So for us, the huge fluctuation where growth goes up so much and then in Maharashtra it will come down again is not ideal. Yes, we will like some short-term numbers that come from it. But our general preference is slow, steady growth that comes in, and we'll overperform on that basis. Unknown Analyst: Just a last question... Operator: I'll come back to you. We'll go with Gunjan. Gunjan Prithyani: Okay. I'm going to keep it at 2. So Rajesh, with you. I think I just want to hear your thoughts on the EV business scale up now that it's been a year, we've had the portfolio in place and the fact that we have these 3 models, which will be there for the -- in CY '26, there's nothing incrementally new coming, right? So a couple of things that I'm trying to get your thoughts on. One, how do we think about the ramp-up of the volumes with these 3 models? And are these 3 models enough in context of the CAFE emission norms if they were to kick in from April '27 onwards? And just going back to the supply chain bit that this is a lot different from the ICE supply chain. Having sort of produce these models for almost a year, what are the challenges that we are -- and we see, particularly memory chips is something that I keep hearing from my colleagues is a big issue. So some thoughts on the supply chain, how sorted are we now for the next stage of ramp-up on this business? Rajesh Kajuria: Okay. Let's just get the memory chip thing out of the way. It's not an EV thing, the memory chip, right? It's going into everything. It's in infotainment systems and multiple other parts of every ICE and EV car. So a memory chip shortage has no isolated effect on EV. It has an effect on the whole portfolio because literally every part of our -- every product or variant of ours has something like an infotainment system, which needs a memory chip. So memory chip is something that is a supply chain risk/price-sensitive thing because shortage obviously is driving premiums in memory chips. So memory chip is something which is a watch out across the portfolio right now. That's the new rare earth, let's call it that, right? So every quarter, we have one such thing which will take disproportionate energy at the moment, that is memory chips. So that's not an EV thing. I'm just wanting to get that out of the way because, yes, it's a watch out and it's something that we are taking all the mitigating actions to build inventory, so on and so forth, which we have done in all other previous such kind of at risk to supply parts and memory chip is certainly one. But I just want to call out that, that is -- I'm isolating that from EV that is -- a memory chip shortage will affect the whole portfolio significantly. Gunjan Prithyani: Are you covered for it in the... Rajesh Kajuria: We are covered for it in the short run. We are buying in market. We are paying premium, and we have a set of mitigating actions. We are covered in the short run. But it's almost like going back to semiconductors of COVID. I mean that's -- the risk could be quite severe. We have the learnings now out of having handled some of those discontinuities or disruptions. So we are probably better equipped to deal with it, and that's what we are doing proactively. So memory chip is one. We are covered for now. The EV business scale up for the year F '27 is based on the 3 models, which we said. The model some of you got to see we had kind of put visuals of that out in the Banbury 2022 event is what we had code named BO7. It probably won't be launched with that name, will come in, in some part of calendar 2027. That we believe will be a very big volume driver on top of what we are doing with our current 3 products. So that is we are expecting as a 2027 launch. The 3 products we are expecting will be in the volume range right now in this calendar year between 7,000 to 8,000 a month, which is the kind of number that we have put out when we launched the 9S. So I'm just reinforcing the number that we put out as our projection for 2027, roughly [ 80-plus thousand ] a year. We feel comfortable based on the response that we've got to 9s. That's a number which is achievable. The CAFE question I've already answered, Raghu, by way of saying that there's no real answer. So I just stay with that same position. I think right now, all we can do is try to do the best in each segment without worrying about ratios. That to us is the best approach. While we, as an industry, are in touch with government, we've got to see how we grow the business and each subsegment individually, which is ICE to not curtail growth of ICE worrying about ratio and EV to maximize it to leverage the opportunity that there is. So that's really the way we are thinking about it. There's no separate supply chain-related disruption that we are seeing on EVs compared to ICE. So I just want to clarify that actually the rest of the supply chain sales and all of that on EV has actually been very seamless. So we actually don't have EV-specific supply chain disruption at all. Any supply chain disruption that is happening is based -- is actually impacting ICE and EV both because we do now have very good and high technology even in the ICE. So if there's anything happening there, it's happening here as well. Gunjan Prithyani: And just to get the regulation out, is BS VII something that is from a cost implication perspective, going to be meaningful, particularly on the diesel heavy portfolio, if you can share your thoughts. Rajesh Kajuria: Yes. No, I don't think it was -- I don't think Velu is here to help me with this, but it's not going to be -- I don't think we're going to have a penalty on diesel compared to gasoline on BS VII. A lot of work has already been done on BS VI.2. So the incremental cost of doing diesel or gasoline may not be disproportionately high. We are right now working on being ready with BS VII. We're not sure of the timing, but we are ready -- we will be ready with BS VII and... Gunjan Prithyani: The cost... Rajesh Kajuria: The cost is something we'll have to see. I mean we -- the whole industry did take BS VI. Unknown Executive: [indiscernible]. Rajesh Kajuria: Yes. Gunjan Prithyani: Okay. Got it. Just last question, Amar, to you. I think on the MEAL, if you can share what was the PLI that was as a percentage that we are accruing on the subsidiary? And with the all capacity that we've announced, is there any change to the CapEx outlook versus what we had shared earlier or anything that we should think through? Amarjyoti Barua: CapEx, we'll talk about in May because then we'll give you -- I mean there is -- it's all within what we had communicated earlier. We had always anticipated there will be greenfield and all of that is in there, but we'll give you more. On PLI, we've been accruing 13% on wherever there is approval. And as each of -- as Rajesh clearly laid out, I think this quarter, there will be -- to the extent there is 9S, we will have similar and then next quarter with the BE 6. Rajesh Kajuria: We may not accrue or assume to accrue 13 as we go into Q1. Basically, the way this works, Gunjan, is it depends on which suppliers in the value chain also qualify for PLI. So basically, if nobody qualifies in that period, then you can accrue the whole spread of 13. But if someone else, then there's a sharing. So it could range anywhere between 8 and 13 depending on which suppliers also qualify for PLI in your value chain. So we've been accruing 13 because nobody else has qualified. Amarjyoti Barua: For 9, there was nobody else. Rajesh Kajuria: Nobody else. So we have accrued the full 13. But as we get into Q1, we'll have to see whether it's 8 or 13 or whatever is the number. Amarjyoti Barua: For example, LMM to Rajesh's point is at a lower level because there are suppliers who qualify. Operator: Rakesh, you want to go? Unknown Analyst: Rajesh, my question was on 7XO. So pretty solid initial demand in terms of booking. And for the top 2 variants, specifically, you called out 70% of the demand is for that. If we go back 4, 5 years when 700 was launched, we had a similar situation, pretty solid demand, more skewed towards higher variant, maybe less than what we are seeing with 7XO. And then as the demand stabilizes, we start seeing that the product started being seen as a premium product priced above INR 20 lakh, INR 25 lakh, and that makes it difficult to sustain strong volume and you had to take price action at that time as well. How are you going to mitigate a similar repeat of a risk that once the demand stabilizes for the premium product, it doesn't get restricted to a smaller price point, but the entire price from INR 13 lakh to INR 25 lakh is addressed. Rajesh Kajuria: Okay. Rakesh, great question. So learning out of that, what we've done in 7XO, we've actually discontinued what we were calling the MX series. So just to go back to the 700, we used to have the MX series and the AX Series. AX was AdrenoX-based, which was a connected car. And MX did not have the connectivity and the AdrenoX interfaces, which were well priced. But for a customer who was coming into 700 kind of tech mindset, didn't want to look at MX as an option at all, while that was well priced. So the few corrections we made in the way we've constructed the variant lineup on 7XO is completely discontinued MX. So we now start with AX. So the lowest entry version of 7XO comes with AdrenoX and is a connected car. We have 3 screens right from AX. So the entry variant has 3 screens. So there are some of these things which were very key part of the value proposition of the product, we didn't have in 700 and the lower versions. And which is why when later on, as demand for the higher end started going down, customers are not willing to -- they didn't find the lower-end versions attractive enough because the brand stood for a certain tech value proposition and the lower end were not offering that. This we have taken care of this time. So we -- basically the key part, so DAVINCI suspension or the AdrenoX connectivity or the 3 screens are there right from the entry variant of AX. So it will be far easier for us to leverage AX, AX3 to drive volumes than what we were able to do with 700, where basically MX was not getting any traction at all. Unknown Analyst: So this initial skew of demand towards higher variant, you don't see that as a risk that in the mind of customers, it's fixed that 7XO probably is a premium car. Eventually, you would start seeing a more diversified demand across portfolio. Rajesh Kajuria: Yes. Unknown Analyst: The question I'm trying to come to essentially is that... Rajesh Kajuria: Will we have to drop price again? Unknown Analyst: Or maybe introduce some other brand at a lower price? Rajesh Kajuria: Yes. This risk is there because if you keep selling the top-end version only then the brand starts getting associated at, whatever, INR 20 lakh, INR 22 lakh price point. We've just introduced the Roxx, a special version on Roxx, called Roxx Star, Star Edition, which is actually the X7, which is at, I think, INR 16.5 lakhs or INR 16.9 lakhs or INR 16.8 lakhs or some 16.8 lakhs, which actually achieves this objective. So we had kept that option open in the -- when we launched Roxx that there is a slot in between, which was the AX7 equivalent slot, which we didn't use. And we have the ability to bring that in at a time when then that allows -- when needed to pick up volume at a price point of INR 17-odd lakhs. So there are things like that we could do with 7XO as well. To your point on should we have another product, that is something that we -- I'm sure we'll talk about as we talk about our product portfolio and share more with you as we go along. Unknown Analyst: Great. Just one clarification on your tractor capacity. How is it positioned and for the next year... Rajesh Kajuria: Yes, it's tight, honestly, because we are not -- we were not prepared for 25% growth this year. So we are scrambling to put capacity in more by way of Swaraj than Farm division. Swaraj, we have a plant 3 and that we are ramping up. We had some capacity constraints at our engine facility, which is Swaraj Engines. That capacity expansion was already approved. And that, I think, comes on way now between March and June. So it was basically June, which we are trying to prepone and get done by March. So because there was a little bit of a timing gap in that capacity coming in place, so Swaraj was constrained by engine availability from Swaraj Engines, which is the primary or the only supplier to Swaraj tractors. But that, I think we'll overcome. But like I said, we are adding 100,000 in Nagpur greenfield for Mahindra branded tractors plus looking at what we need to do for Swaraj, which should cover us for F '27. Operator: Raghu, your last question? Unknown Analyst: To Amar sir, if you can talk about the Farm subsidiaries, there was this noncash write-offs this quarter. So next quarter onwards, we should expect a normalized performance? Amarjyoti Barua: So for some of the subsidiaries where we have decided to restructure, there are rules around what you can recognize and can't recognize. So we have done whatever is the maximum possible under the rules, and there will be some trailing costs after, right? So there will be costs, but not of the magnitude that you saw today. So there will be trailing costs, and then there will be losses till the time the complete restructuring has been completed. So you will -- at least for this year, don't expect any dramatic changes. Next year, towards the second half, you should see the change in trajectory. Operator: Great. We are running a bit over time, so we'll just close this -- you have a question, okay, please proceed. Unknown Analyst: I had a question. What is your global ambition in EVs? And second is, what is the key to increasing margins in the automotive business because your scale is going up, your volumes, your market share, your acceptance is very strong. And how do you increase the margins there? Rajesh Kajuria: Yes. On the EV global, we had already spoken about the way we are approaching this. So we will look at, like we had said, for the EVs, the right-hand drive markets first, so which is Australia, New Zealand and maybe potentially U.K. Anish just spoke about the EU opportunity. So at an appropriate time, we'll go into left-hand drive markets in Europe potentially, but only after testing and being confident that it's an acceptable and a successful value proposition in the right-hand drive market. So we don't want to globalize recklessly. We have said that we will do it in a very calibrated way, see the response that we get in right-hand drive markets, maybe Australia, New Zealand first and then U.K. So that's where we are on EV. It will be very watchful and calibrated. On margins on auto, our approach has always been -- and we just had some questions around how we are pricing and so on, but is to make sure that we drive margin improvement not because the customer is willing to pay for more, so we should just keep increasing prices. It should come out of staying focused on volume, ensuring the brands continue to have a strong value proposition while working on our cost structure. So we are very, very careful and calibrated in price increases that we take. We want to keep the positioning visa customers -- price positioning vis-a-vis customers intact, so the brands continue to have momentum and then work on costs. And that, as you've seen with time, we have the best in industry peer margins right now. That comes out of -- or in spite, if I may use that word, of being very competitively priced with every launch that we do and even with our existing products. So it's really the balancing between how to get margins by being very well priced and managing costs well. Unknown Analyst: And sir, out of, let's say, 50-odd thousand SUVs, which you sell every month, how many of the customers are coming who are Mahindra customers in some way? And how many are coming from other brands, if you can help us? Rajesh Kajuria: Yes. So we've shared this earlier for EVs where 80% of the customers that we got in last year were actually non-Mahindra customers. In the rest of the portfolio, it depends based on products. So for example, 3XO, which we do almost 9,000, 10,000 a month, is not -- are all new or first-time buyers. They're not really Mahindra customers. Bolero, Bolero Neo will get a lot of Mahindra customers. XUV 7XO is getting a lot of customers which are non-Mahindra. So it really varies across product portfolio. I don't want to give you a very broad one number because that would be not the right way to interpret it. Operator: Great. With that, we'll close this meeting. Thank you so much, everyone, for joining us. Please join us for refreshments. Thank you.
Operator: Good day, and thank you for standing by. Welcome to the NanoXplore Second Quarter 2026 Earnings 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, Pierre Terrisse, Vice President of Corporate Development. Please go ahead. Pierre-Yves Terrisse: [Foreign Language] Good morning, everyone, and thank you for joining this discussion of NanoXplore financial and operating results for the second quarter of fiscal 2026. The press release reporting these results was published yesterday after market close and can also be found on our website along with our financial statements and MD&A. These documents are also available on SEDAR+. Before we begin, I'd like to remind you that today's remarks, including management outlook and answer to questions, contain forward-looking statements. These forward-looking statements represent our expectation as of today, February 11, 2026, and accordingly are subject to change. Such statements are based on assumptions that may not materialize and are subject to risks and uncertainties. Actual results may differ materially, and listeners are cautioned not to place undue reliance on these forward-looking statements. A description of the risk factors that may affect future results is contained in NanoXplore annual information form available on our corporate website and in our filings with the Canadian Securities Administrator on SEDAR+. On the call with me this morning, we have Rocco Marinaccio, our CEO; and Pedro Azevedo, our CFO. After remarks from Rocco and Pedro, we'll open the call to questions from financial analysts. Let me now turn the call over to Rocco. Rocco Marinaccio: [Foreign Language] Thank you for joining us today to discuss NanoXplore's Fiscal Second Quarter 2026 results. As we build on the momentum established in Q1, I'm pleased to report a rebound in our operating performance this quarter. We delivered sequential improvements in revenue, gross margin and adjusted EBITDA. While we remain focused on execution and continued margin expansion, these results reflect improving fundamentals across the business. Since assuming the CEO role, our priorities have been clear, disciplined execution, diversification of revenue streams and maximizing the value of our differentiated graphene manufacturing platform. Our commercial pipeline remains robust, our technology leadership is intact, and our teams are executing with focus as we scale operations and drive long-term shareholder value. Today, I will cover 3 key areas: our final decision regarding the coated spherical purified graphite, or CSPG project, an update on the implementation of our dry process graphene platform, and progress across our Tribograf and graphene solutions business. Starting with CSPG after extensive analysis we have made the decision not to proceed with the previously contemplated $100 million investment. This reflects disciplined capital allocation and a clear focus on risk-adjusted returns. The decision was driven by 3 factors: ongoing geopolitical uncertainty that can materially impact pricing and market access, prolonged qualification and testing time lines from potential offtakers and a highly unstable business environment including an instance where a CSPG manufacturer had a binding agreement subsequently nullified. We are confident this was the right decision for the company and our shareholders and allows us to focus our capital toward higher return, lower-risk growth opportunities. Turning to our dry process graphene initiative. I'm pleased to confirm that installation is on schedule with our first fully commercial module expected to be operational by early April. This represents a critical milestone for NanoXplore. Dry process graphene is significantly less costly for us to produce compared to our wet process graphene and opens new end markets that are not accessible to us today. The new mill will add incremental capacity between 500 to 1,000 tons annually. This is not simply incremental capacity. It is a transformative step that strengthens our cost leadership and significantly expands our addressable market. Moving to our graphene solutions business. We are encouraged by improving market conditions following the softness experienced over the past 3 quarters, particularly from our 2 largest customers. Demand has stabilized and OEM forecasts continue to point to a recovery in the second half of the calendar year. While timing and magnitude remain difficult to predict, we expect a gradual volume improvement beginning mid- to late this year. A major highlight this quarter was the successful launch of our program with Club Car. The launch was executed flawlessly with on-time delivery and seamless integration into their manufacturing operations. As we enter the peak recreational season, shipments are accelerating and tracking as expected. This partnership is a strong validation of our ability to scale advanced materials solutions within global OEM platforms and position us well for future expansion across Club Car's broader product portfolio. In addition, we are pleased to report a new takeover contract award from Volvo Trucks expected to begin in summer 2027 with annual revenue contributions of approximately CAD 9 million to CAD 10 million. This award adds to the $40 million of contracted business we previously reported within our graphene solutions business and further strengthens our long-term revenue visibility. Turning to drilling fluids. Our strategic collaboration with Chevron Phillips Chemical continues to advance. As a reminder, the contract became effective on October 1, 2025, with the commercial launch announced by CPChem in mid-November, just ahead of a seasonally slower drilling period. During fiscal Q2, we shipped Tribograf to CPChem's early adopters. More importantly, CPChem is actively field testing NanoSlide with 2 major Asian oil and gas producers, shipped product to one of the world's leading oilfield service companies and initiated additional testing programs in Latin America. This is a new product launch and a new commercial relationship, which makes near-term revenue visibility inherently difficult to quantify. However, the pace of customer engagement and the expanding pipeline are in line with our expectations and underscore the strategic value of this partnership. This high-margin application not only diversifies our revenue base but also aligns well with industry demand for performance-driven cost-efficient solutions. In summary, Q2 represents an important inflection point for NanoXplore. Sequential operating improvements, disciplined capital allocation, successful contract launches and the upcoming commercialization of breakthrough technology position us well for a stronger second half. With that, I'll turn the call over to Pedro to walk you through our financial results. Pedro Azevedo: Good morning, everyone. Today, I will begin with a review of our Q2 financial results, followed by an update on financial aspects of our 5-year plan and conclude with some commentary on near-term CapEx spending and revenue guidance for fiscal year 2026. Total revenues in Q2 were 17% lower than Q2 last year at $27.6 million. This decrease was mainly due to a reduction in volume demand from our 2 largest customers as well as lower tooling revenue, which was higher than usual last year. This was partially offset by new revenues with the start of the Club Car program and higher powdered sales resulting from the CPChem contract. Despite the lower volumes from our 2 largest customers in Q2, their volumes have stabilized during the quarter and forecast continued to show progressive volume increases during calendar 2026. Adjusted gross margins, which exclude depreciation as a percentage of sales was 21.5%, a slight increase versus 21.3% last year despite $5.6 million less revenues. Our ability to achieve this level of gross margin results mainly from the higher margin contributions of powder sales and the addition of the Club Car program, partly leveraging existing overheads. Adjusted EBITDA was $224,000, a decrease of $880,000 versus last year and was comprised of $181,000 in the Advanced Materials, Plastics and Composites Products segment, a decrease of $1.1 million versus last year and $43,000 in the Battery Cells and Materials segment, an improvement of $260,000 versus last year. Regarding our balance sheet and cash flows, we ended the quarter with $30.1 million in cash and cash equivalents and $14.6 million in short-term and long-term debt. Our cash, along with the unused space in our revolving credit lines, resulted in a total liquidity of $40.1 million at December 31. Operating cash flows were negative $6.4 million, mainly resulting from an increase in working capital, largely due to higher sales, payments to suppliers on tooling projects and income tax payments. Cash flows from financing activities were positive $30.1 million, resulting from the equity financing in October 2025 and equipment financing offset by debt and lease repayments. Finally, cash flows from investing activities were negative $3.6 million, mainly due to capital expenditure payments. At the end of December, the company had used a cumulative cash amount of $4 million on capital expenditures for projects in progress that will be financed during Q3 with the RBC credit facility. Moving now to an update on financial aspects of our 5-year plan. As explained by Rocco, the decision not to proceed with the CSPG production initiative of the 5-year plan is one that removes the need for over $100 million in required investment. However, the dry process graphene element of this initiative will remain a central part of our growth plan and will be undertaken in a modular way as demand for this new grade of graphene increases. Each module is expected to cost between $1.5 million and $2 million, reducing the need for large upfront investments. Regarding the graphene-enhanced SMC initiative, we completed the U.S. part of this initiative during Q1 and expect to complete the Canadian part of this initiative during Q4. While the generation of new revenues have already started in the U.S., we expect new revenues on the Canadian part to begin during fiscal year 2027. Turning now to our near-term CapEx spending and fiscal year 2026 guidance. CapEx spending during the quarter was $3.6 million and in line with expectations. We expect to spend another $4 million to $5 million during Q3 to complete the graphene-enhanced SMC initiative as well as the first module of the dry process graphene line. Once these 2 projects are completed, we expect CapEx to greatly reduce and represent less than $1 million per quarter, excluding any new initiatives. Regarding our fiscal year 2026 guidance, the economic environment remains volatile, but forecast accuracy seems to be improving. As mentioned during our Q1 earnings call, Q1 revenues were at the trough of the fiscal year with sequential quarterly revenue growth thereafter. Q2 has demonstrated this. And with the visibility we have for Q3 and Q4, it remains the case. As such, we believe revenues for the full year to be between $115 million and $120 million. Rocco Marinaccio: Thank you, Pedro. Operator, we can now open the line for questions. Operator: And our first question comes from Baltej Sidhu of National Bank of Canada. Baltej Sidhu: So a few questions from me. So margin improvement was much better than we had anticipated, and you had highlighted the drive for this was better product mix, improved productivity and cost control. So given that volume was still relatively low on this quarter, can you provide a targeted gross margin you'd expect with more run rate volumes with a similar product mix? And with that being said, and I think this has been alluded to in the prior comments, it's fair to assume that the continued quarter-on-quarter margin expansion should hold throughout the year. Pedro Azevedo: Yes. So that's correct, Baltej. We will continue sequentially quarter-to-quarter to increase the margins as sales kind of recover. The addition of the powder sales for Tribograf as they grow, and this is part of what Rocco was saying is that it's hard to tell how fast it will grow, but that inclusion of Tribograf sales will contribute to the margins that the company produces overall in a very direct way because a lot of the structural costs are already built in. So every sale of Tribograf is actually producing very strong flow-throughs to the bottom line. So in terms of specific numbers, I don't want to commit too much to numbers, but the 21.5%, we do see it growing maybe to 22%, 23% and so on over the course of the next few quarters, sequential quarters. And it really is going to be an element of how much Club Car volumes will be in the next few quarters, how much Tribograf will be sold and how much of the recovery in Club Car and Volvo volumes that are going to contribute to already existing structural costs. So all of these things should ramp up the gross margins over the coming quarters just gradually, but you should see that continuation for several quarters. Baltej Sidhu: Fantastic. That's great color. And just another one for me with the first commercial dry process mill expected to be installed shortly. Could you just walk us through the sequence from commissioning to commercial revenue? And specifically, what milestones are you looking for or that need to occur before we continue to see meaningful revenue contribution? Rocco Marinaccio: Yes, so the mill is on track in terms of being installed by April. We've -- in the past year, we've been able to produce very small lab-scale quantities to validate performance, okay? And we're in different markets. We've identified markets that are not addressable to us today are now addressable to us. So as we ramp up the mill in April this coming year, we'll be able to produce larger volumes. There's different customers in different markets in different stages of testing. Some require much more volume than we could produce to advance their testing. So again, this is difficult to predict exactly. But I will tell you, the early results that we've seen up that led us to this point, are extremely promising. And like I said, there's customers in different stages of testing. Some are towards the advanced staging, some are initial with promising results across the board. Baltej Sidhu: Perfect. And just a quick one here just on CPC Chem, exceeding expectations just with the testing that we have and in different basins and geographies. Are you comfortable with the capacity that you have there for them? Rocco Marinaccio: We're comfortable now. It is difficult. So I guess the biggest change this quarter from last quarter, we just -- we launched when we had the discussion and CPChem was trialing in one specific area. That's where all the testing was done initially, and that was validation of the product because it was one of the most stringent areas in the world. It was in the U.S. What they've started to do now is additional testing in other parts of the world to validate product, and that's where they are now. So in terms of capacity, we're fine now, and we're fine for the foreseeable future. Time will tell when we install additional capacity on the website. Operator: And our next question comes from Amr Ezzat of Ventum Financial. Amr Ezzat: Just to continue on CPChem. I believe in your prepared remarks, you noted, and I'm not sure if I'm quoting you right, a large services player is now trialing the product. I just want to confirm, is that a new potential clients beyond the first sort of batch that CPChem had? And if so, when you guys say a large services player, how should we think about the potential scale of that customer relative to the original set of customers CPChem had? Rocco Marinaccio: So yes -- so the initial customer that trialed and converted, I mentioned they're early adopters in this process. That's how I referred to them. They were the first customer that have multiple sites across the U.S., and they have converted not 100% of their volume to NanoSlide, a portion of it and they're in process of converting over time. What we referred to in the remarks were all additional customers that have been trialing or started trialing within the quarter. And that large service provider, I mean, there's 2 or 3 main ones. They're 1 of the 3 main ones, the biggest players in the world, all based in the Southern Texas, right? They're 1 of the 3. And it's not uncommon in this industry for a customer to private label a product of a competitor that is adding value and they label it as their own call white labeling. And in this case, this is what would happen once adopted. Amr Ezzat: Fantastic. It does seem that, that one player would -- is much larger, I guess, than all the other clients CPChem has. Can you help us understand where are they in the testing process? Is it still like early days? Or have they already tested the product? Rocco Marinaccio: Yes. So they've done a lab test. So everyone is going to take the CPChem data and they're going to go validate in the lab, right? That's step number one. They've done that. They're moving on to field testing. So they've ordered NanoSlide for field testing. Amr Ezzat: Understood. Okay. That's very helpful. Congrats on that. It's hard for me to ask you like at what point, what process capacity becomes a constraint. But can you maybe help us understand how quickly could you guys add incremental capacity if and when needed? Rocco Marinaccio: Sure. We believe 9 to 12 months for additional capacity, whether it's wet or dry, the answer is going to be the same. We feel 12 months would be, I would say, conservative on both sides. The difference between wet and dry, wet, we need a much larger footprint, obviously, we can't go smaller. We don't want to go smaller than what we have. So we would need additional square footage. On the dry side, we have ample square footage to expand into in our current facility. Amr Ezzat: Yes. Fantastic. Congrats on the Volvo contract. Will that be fulfilled out of North Carolina? And did I understand correctly that this is additive to the $40 million composites target that you guys have? Rocco Marinaccio: Correct. So the launch of Statesville, which is where we do the Cliff Card business, that facility is basically set up for all future SMC growth. It's an SMC contract win, where graphene enhanced SMC. And yes, it is incremental to the $40 million previously announced. Amr Ezzat: Okay. And it's not just a transfer from your existing Volvo business. This is like incrementally new? Rocco Marinaccio: It's a takeover from a competitor, if you will. So it's not internally... Amr Ezzat: No, that's helpful. Then maybe one last one on the dry process. Like you guys have highlighted some very positive sort of customer testing feedback and so on. I just wonder like what are the gating factors between installation and meaningful revenue in fiscal '27. Do we expect like a long sort of qualification cycle? Or is it really about customer integration time lines? Rocco Marinaccio: Yes. Different customers in different markets have different time lines, if you will. we're in advanced testing with certain markets and initial to mid-level testing with others. And the data has all proven to add tremendous value in each of these markets where there's final testing, I mean, plant trials that have to occur, some buyouts that have to be done. Pricing usually gets discussed pretty early on to make sure we don't go down the road that we can't supply or we can't satisfy. So again, very difficult to say the mill is going to be sold out in 3 months or 6 months or 9 months. Obviously, our goal is to fill up the capacity ASAP and order incremental mills. Operator: And our next question comes from James McGarragle of RBC Capital Markets. James McGarragle: I just had a question on the decision to forgo the CPG -- CSPG investment. I know a lot has changed since you provided those 5-year targets. I think it was in 2022. But at the time, there was $100 million of top line associated with that investment. And then maybe this isn't the time for you to address this, maybe that this is for an Investor Day. But when I look at consensus revenue, it has top line doubling by fiscal '28 versus fiscal '26. So can you just kind of provide some color on how should we be thinking about the growth rate without the decision to invest in that? I know you mentioned the CPChem opportunity is kind of hard to define in the near term. But just any color on how we should be thinking about top line growth into fiscal 2027 and fiscal 2028 would be helpful. Rocco Marinaccio: Yes. Thanks for the question, James. So go back to CSPG. So the top line growth you referenced was a combination between CSPG and dry process, okay? And just to clarify, dry process is still a goal and still a main pillar of our company going forward. So the CSPG aspect, although a number was provided, again, we strongly feel the decision at the time was the right one for the company. But as we peel back that onion further and geopolitical conditions have changed, that decision became much more inherently risky for us as a company, I mean, for North America as a whole, if you will. So the top line revenue for CSPBG, like I said, even if we had a customer in an agreement, the risk factor would always be there in terms of any margin associated could eventually go negative, right? And that was one of the main risks. On the dry process side, the answer is going to be the same, right? So as we ramp up customers, the differences between dry and wet is we don't have to add 4,000 ton capacity. We can add mills as needed depending on the grade the customer requires in incremental capacities, right? In each mill, if you use the same selling price, just to give you a thumb, I mean, each mill has between 500 to 1,000 tons of capacity. James McGarragle: I appreciate the color there. That makes a lot of sense. And then you noted volumes from your 2 largest customers started to stabilize during the quarter and that you're kind of expecting some gradual improvement as we move through the year. Can you just give us a quick update on what your customers are saying about the health of the transportation market? And any visibility you have into that ramping in Q3 and into Q4? Rocco Marinaccio: Absolutely. Yes. So the last 3 quarters have been tough for the whole industry, not just our customers specifically. The whole industry, I mean, as a whole has taken a major hit. You can point to many different factors, right? I'll tell you, for our customers specifically, where we were supplying, tariffs were an impact and the customer had to take the last few quarters to localize production where it made sense for them. We're very well positioned. We can supply out of our current facility where we supply of Quebec, we can supply to Statesville. So for us, it's very, very good that we're well positioned to support our customer growth. So what we see in the industry as a whole is that a gradual ramp-up starting, I would say, early next quarter going into the end of the year to get back to very close to, I would say, capacity, not 100% volumes to where we were 12 months ago, 12 to 15 months ago, but very close. James McGarragle: And then I was just going to squeeze one last quick housekeeping one in. I just want to confirm the commentary on the CapEx. So it was stated $4 million to $5 million in Q3. That's going to go to $1 million per quarter into Q4. And is that a reasonable run rate, the $1 million to put into our models for 2027? Yes, that's right. Operator: And our next question comes from Fred Gatali of Raymond James. Fred Gatali: Just want to go back to the CPChem, specifically on the marketing of the product. It's now been a few months that the deliveries have started. What are you seeing in terms of success and incremental demand that has come from the marketing of this product? Rocco Marinaccio: Yes, good question. So contract was official October 1, 2025. CPChem started marketing mid-November, okay? And there was a 6-week gap there really because they didn't want to market without having product blended and ready for customer trials, okay? They didn't want customers sitting there waiting. So there was a big gap in terms of when they started their marketing. And then in the industry -- and when I talk about seasonality and slowdown, I'm more talking about geographical locations where weather plays a factor. So obviously, in Middle East, where weather is not a factor, those comments don't apply. But where the initial trials were done in the U.S., weather plays a factor in December or January is a seasonality is slow period, very difficult to drill if the ground is frozen, right? So the customers that have begun trialing in the quarter or previously, results have all validated what the product has said it was going to do. And there has been no negative technical feedback, at least to our knowledge. Fred Gatali: Okay. And on the details on this Volvo award, you just parse through maybe this a multiyear contract, sort of the implications on the North Carolina facility capacity with this in place and then whether this is in line with current margins? Rocco Marinaccio: Can you -- you cut out a bit. Can you just repeat the question, please? Fred Gatali: On this Volvo award, SMC award, could you just maybe go into further details on sort of the length of this contract, perhaps then go through sort of the margin implications as well? Rocco Marinaccio: Sure. So length of contract, this is a takeover business, right? So I want to say there's at least 4 to 5 years left on this program. The good thing about this component is a lot of times when we have one business in the transportation sector, it has been for a specific program. So whether it's a hood or it doesn't matter what the component is, if you're tied into a specific program, your volume is dictated by how well that one program sells. In the case of this business, this is an oil pen, which is a common component that goes across the whole trucking platform in North America. So the volume is much higher for us. And the margin question, it's in line with our expectations on the graphene enhanced solutions business. Operator: And our next question comes from MacMurray Whale of ATB CCM. MacMurray Whale: Can you discuss what sort of efforts you might need to make on material sourcing now that you're not doing the CSPG initiative? Is there much of a disruption there? Rocco Marinaccio: Good question. No. So our process is one that's set up where it's very flexible for any type of raw material coming in. So whether it's -- we use local supply today, whether we go to Brazil, South Africa, I mean, wherever we source raw materials from, our process is very flexible to adapt. And we have agreements with more than one -- multiple sources. MacMurray Whale: Okay. I guess on the other side, you mentioned is one of the risks is the geopolitical uncertainty. What specifically are you referring to? Is it more related to, say, government support around energy transition? Or are you just really speaking about trade issues between clients that might be now outside our sort of favored nation? Is that the kind of issue? Rocco Marinaccio: Yes. I mean, trade and tariff. I mean, even with tariffs on foreign materials coming in to get to a price point, even if you include the tariff, it's not very easy to get to those numbers. And who knows what the future holds. If that tariff ever went back to where it was, we don't feel we could compete. So there's been instances where binding agreements have been nullified for the same thing. So on a binding agreement, we said we would move forward. I mean if we did move forward and it got canceled, we'd be left holding a big bag right now. MacMurray Whale: Okay. And then when you're looking -- you talked about how the rest of the year should be -- we should be seeing these improvements as you've established now in Q2. Do you find -- do you expect an acceleration of the improvements? I mean, is it more of a linear? Or is it more -- can you kind of see bigger and bigger steps in the improvement as you ramp up? Pedro Azevedo: I think the steps will be a little bit bigger as PACCAR and Volvo volumes start coming back. The Club Car business is already a bit established. So the step-up that we had from Club Car and from CPChem will continue to step up quarter-over-quarter. So you should expect a step that's a little bit better each quarter from sequential quarter-to-quarter. Operator: I'm showing no further questions at this time. I'd like to turn it back to Pierre Terrisse for closing remarks. Pierre-Yves Terrisse: Well, thank you, everyone, for participating in the call this morning, and have a great day. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Ladies and gentlemen, good day, and welcome to Grasim Industries Limited Q3 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ankit Panchmatia, Head, Investor Relations of Grasim Industries. Thank you, and over to you, Mr. Ankit. Ankit Panchmatia: Good morning, and thank you for joining Grasim's Third Quarter Financial Year 2026 Earnings Call. The financial statements, press release and presentation are already uploaded on the website of stock exchanges and our website for your reference. For safe harbor, kindly refer to cautionary statement highlighted in the last slide of our presentation. Our management team is present on this call to discuss our results and business performance. We have with us Mr. Himanshu Kapania, Managing Director, Grasim Industries and Business Head, Birla Opus Paints; Mr. Hemant Kadel, Chief Financial Officer of Grasim Industries. Also joining them, we have with us Mr. Jayant Dhobley, Business Heads of Chemicals, Cellulosic Fashion Yarn and Insulators; Mr. Vadiraj Kulkarni, Business Head of Cellulosic Fibers Business; and Mr. Sandeep Komaravelly, CEO, Birla Pivot, our B2B e-commerce business. Let me now hand over the call to Himanshu, sir, for his opening remarks. Over to you, sir. Himanshu Kapania: Good morning, and a very warm welcome to everyone joining us today. At the outset, we wish all of you a happy new year 2026. We hope that the year has begun on a positive note for you and your families, and it brings good health, continued progress and renewed optimism. As we step into 2026, we do so with a sense of confidence and purpose. While the global environment continues to evolve, the underlying strength of our markets, the resilience of demand and our disciplined execution gives us optimism about the road ahead. The new year represents not just a change in calendar, but an opportunity to build on momentum, sharpen our focus and deepen the value we create for our stakeholders. On that value creation, let me start sharing key updates on two of our latest growth engines. As announced earlier, our Paints business, Birla Opus CEO, Mr. Sachin Sahay, shall join us from 16th February 2026. Despite the absence of CEO, the existing Paints team delivered an extraordinary performance, reaffirming the company is being built on rock-solid foundation and has a long pipeline of leadership who can take on the baton when the need arises. During the quarter 3 of FY '26, Birla Opus, the third largest decorative paints player, expanded its revenue market share by more than 300 basis points year-on-year based on internal estimates and announced results of listed paint meters. On a quarter-on-quarter basis, Birla Opus accelerated its market share gains with revenue growth of nearly 3x the Indian decorative paint industry growth rate, inclusive of Birla Opus. Further, the combined revenue of Birla Opus and Birla White Putty business in quarter 3 FY '26, the revenue market share gap with existing #2 paint players is now reduced to around 300 basis points, based on the guided decorative segment revenues, which includes their putty business as well. In quarter 3 FY '26, Birla Opus sales volume has risen by 70% on year-on-year basis. Early this January, Birla Opus has crossed the milestone of 500 million liters of paint sales cumulatively. We believe that more than 6 million households are now experiencing superior quality of Birla Opus in a short period of 18 months. Birla Opus exponential growth is underpinned by rising brand acceptance, rapid expansion of distribution network, strong sales throughput from dealer counters to contractors and consumers, consistent differentiation through superior quality -- product quality and focused brand-building efforts. Let me give you final details of execution on the above. First, on brand reach. The presence of Birla Opus has crossed 10,400 towns across 35 states and union territories. We have covered all 50,000 population centers across India and more than 75% of the 10,000 to 50,000 population centers. The company will continue its expansion effort deeper into Bharat. The active quarterly billing dealers has grown in double digits, along with a single -- high single-digit growth per dealer revenue throughput on month-on month when compared with last year same quarter. Additionally, Birla Opus is transforming the paint consumer retail experience with company exclusive franchise outlets nearing 1,000 Birla Opus paint galleries. These galleries uplift consumer experience by selecting a paint brand, helping premiumization of the category. Institution sales continued to gain traction during the quarter, supported by increasing project wins and specification approvals among clients, including governments, builders, factories, hospitals and cooperative housing. The institution sales grew by 40% quarter-on-quarter. As institution orders have a long gestation period, happy to report more than 40,000 mid- and large-sized projects are in various stages of negotiation with nearly 25% build, thereby a strong project pipeline for future. Secondly, Birla Opus remains focused on driving secondary sales from dealer counters to contractors and consumers. The 10% free paint promotion continues on 10- and 20- data pack across all-emulsion top coats waterproofing range, however, excludes subeconomy and other categories. The company equally focused on building relationships with paint contractors, the key influencers. For them, Birla Opus has built an end-to-end first-of its kind digital platform to engage with contractors online on pan-India basis for product information, incentives and schemes, sharing consumer reach, offers assurance registration, complaint handling and much more. This platform is integrated with our unique track and trace system to monitor consumption by customers at pin code and dealer levels. We are also implementing AI-based projects to improve contractor connect and analytics. I'm happy to share that over 7.5 lakh contractors and painters have applied and experienced Birla Opus superior range of products on pan-India basis. This online platform allows us to remain always in touch digitally with the unorganized painter community and instantly transfer accrued benefits to their banks on a click of a button from their app anywhere, anytime and experience like UPI. Additionally, the centrally controlled tinting machine analytics shows strong color and consumption across geographies. With over 35,000 active tinting machines in operation during quarter 3, the tinting data shows interesting consumer insights. The top 2 [ Opus ] colors unifying the country include [ Fort Kochi ], a dark bluish gray color; and a [ Morning Birdsong ], a light, bluish gray shade, which are tinted by more than 30,000 dealers in the last 1 year. Thirdly, the foundation of our product strategy is built on R&D excellence with a portfolio designed for performance, durability and unmatched finish. Birla Opus has achieved what we believe is the fastest portfolio expansion by any brand in the industry. Today, Birla Opus proudly offers one of the widest product ranges of more than 216 products, 1,848 SKUs across emulsions, enamels, waterproofing, wood finish, wallpaper and others. This year itself, till now, we've introduced 40 new products, including the completion of retail waterproofing line, launch of painting tools and indigenously developed Italian few [ Alka ] range and many more. These innovations are not just additions, there are accelerators of growth, which is creating clear product differentiation, winning the trust of dealers and delighting consumers. The fourth powerful driver of Birla Opus is creating consumer pool by our sustained brand salience and differentiated marketing. According to Opus commission, Brand track study, the top-of-mind brand recall for bills has surged into double digits, positioning us as the second most recalled paints brand in urban markets. With over 6 million satisfied home users acquired in a very short period, Birla Opus brand acceptance will continue to accelerate, providing solid impetus to growth. From builders and government bodies to industry, total education institutions and MSMEs in the project segment to individual homeowners and housing cooperatives Birla Opus brand test is on the right. With a strong media presence in quarter 4 and high engagement campaign, our brand salience is set to sort even higher. Watchout for our latest Opus by campaign Colours of Togetherness in the ongoing T20 World Cup and upcoming IPL 2026 and many other regional and national impact properties on television, digital and outdoor media. Our premiumization efforts continue with PaintCraft recently launched Birla Opus professional painting services, fully GST compliant, transparent pricing, attractive EMI options end-to-end platforms from lead management to quotation to monitoring of services and quality approval, managed jointly by central and field team. This service has expanded to over 5,000 pin codes, and we tapped to open PaintCraft on pan-India basis through the 1,000 Paint [ gates ] at the earliest. Separately, on OPUS Assurance Services, where the company has given additional guarantee besides the standard warranty clause to redo the painting, including labor, if need arise; more than 60,000 consumers sites have been registered through nearly 30,000 contractors under this first of its kind program. The combination of PaintCraft and Opus Assurance will improve consumer experience, allowing us to sell higher-end products and premium services. The fifth powerhouse behind Birla Opus momentum is the second largest manufacturing capacity holder in the industry, a formidable 24% capacity share. With the launch of Kharagpur and a steady ramp-up of capacity utilization across each of our 6 plants, the company has executed their natural production strategy by producing fast-moving category products closer to their market, cutting down the drag of logistics cost and inventory and sharpening its service edge. With the completion of projects on time and within budgeted CapEx, the focus of the company now has shifted to improve productivity, efficiency operations and bring down significant variable costs through optimization. At the heart of our manufacturing journey lies a bold embrace of Industry 4.0 with IoT-driven automation helping standardization and consistency of quality. This excellence is now obviously validated. We are proud and excited to share that Birla Opus has received Integrated Management System certificate and compressing ISO 9001, 14001 and 45001 for all the 6 plants in one go. Achieving these certifications strengthens our organization framework and reinforces confidence of our customers, partners, stakeholders in our capabilities. Securing certification in less than 18 months of full-scale operation is an unprecedented milestone. It underscores our deep commitment to the highest standards of quality, safety environmental stewardship, compliance and operational excellence and marks a powerful step forward in our ongoing sustainability evolution. Before I move on to the next business, I wish to address the narrative about sluggish industry growth. Based on announced results of 4 listed paint [ measures ] and guidance on their decorative business. It appears the decorative paints, excluding Birla Opus, has grown by 1% to 2% by revenue but 7% to 8% by volume in quarter 3 FY '26 versus quarter 3 FY '25. Now when we add Birla Opus quarter 3 performance to these 4 players decorative paints business, industry revenue growth, including Opus, rises to 5% to 6% and volume growth jumps to 11% to 12%. In my economic understanding, a double-digit volume growth reflects a good to strong consumer demand. However, the pain of the industry is rate realization, which we believe is lower due to a combination of higher discounting and [ income ] players tendency to focus on low-value economy, subeconomy category and deep discounted [Putty] business. Birla Opus offers revenue is without [ Putty ], and our growth remains balanced across all categories of paints with premium and luxury segment continues to contribute steady 65% in our overall revenue. We have taken 2% to 6% price rise in January and February against standard dealer price list across the range of products to test the channel and consumer reaction. Coming to Birla Pivot, the B2B e-commerce business crossed the INR 8,500 crores annualized revenue run rate, ARR mark and remains on track to surpass the annual revenue of INR 8,500 crores, way ahead of FY '27 guidance. In a country as dynamic and fast growing as India, the next great feet in e-commerce would come from building another marketplace, it will come from digitizing and organizing B2B procurement at a scale and complexity few have ever dared to tackle. That is exactly what Birla Pivot is doing, and we are taking one of the largest, most fragmented operationally intense spaces in the economy and turning it into a trusted tech-enabled, outcome-driven platforms. Our vision is bold and unambiguous to become the most trusted B2B e-commerce platform in India. And we're building it the right way by scaling a powerful buyer-seller network and compounding our advantage across the three pillars that truly matter in e-commerce: Price, assortment and experience. Let's start with price, because in B2B, pricing is only about competitive parity, it's about removing friction from the system. India's raw material ecosystem is full of inefficiencies discovery gaps, opaque comparisons, fragmented sourcing and complex multi-vendor procurement. Birla Pivot doesn't mainly negotiate price, we reengineer the economics of procurement, we align suppliers' inefficiencies with buyers' needs, enabling transparent discovery and comparisons, helping suppliers reach demand more efficiently and absorbing the operational complexity of procurement at scale. In other words, we convert fragmentation into efficiency and we pass that value back to consumers. On assortment, this is where Birla Pivot is fundamentally changing how business and individuals buy project materials. We are building a true one-stop procurement engine, 35-plus categories, 40,000-plus SKUs and solution aggregated from 300-plus top brands. The product category is covering everything from steel to tiles, cement to chemicals. This breadth isn't just impressive, it's transformational. It consolidates vendors, compresses procurement cycles, standardize buying decisions and [ stabilizes ] approvals and purchase planning. We are going to step further because in B2B, the ability to buy is often tied to working capital. And that's why Birla Pivot is enabling fast, easy, customized financing designed around real procurement needs so businesses can purchase with confidence, flexibility and speed. And then comes our biggest differentiator, experience because B2B is not just digital, it's physical, operational and relentlessly service-driven. Birla Pivot delivers B2C-like simplicity in a B2B world, powered by digital tools for order enablement and fulfillment, nationwide support backbone and consistent trusted buyer experience. We are not simply building a website, we are building a reliability at scale. We are making complex procurement feel effortless, dependable and repeatable. That's the moment when a platform stops being a channel and becomes a habit. This momentum is not episodal, it's network-led, value-led and scalable. As categories expand, network effects deepen and digital adoption accelerate, Birla Pivot is uniquely positioned to play a defining role in shaping and leading India's B2B procurement digitization growth story. This isn't just about growth, it's creation of a new infrastructure layer for Indian commerce. Moving on from new businesses and focusing on macros, India continues to stand out on a global growth map. India's domestic demand is resilient, investment cycle strength and policy support have kept growth momentum intact. The most recent Union Budget reinforced this momentum with several strategic themes. First theme is government's continued focus on infrastructure, housing and urban development would drive growth for Grasim's Cement business. India's push towards self-reliance, manufacturing scale and supply chain integration would drive growth for our chemicals business. The recent GST rationalization focus on improving India's per capita driven by higher disposable incomes, better quality housing and aspirational consumption would drive growth for decorative paints and premium textiles. Support for MSMEs by increasing finance democratization and integrating into organized supply chain would drive growth for Birla -- Aditya Birla Capital and Birla Pivot. Lastly, a balanced focus on renewable energy and energy security will drive growth for our Renewable and Insulator business. For investors seeking a single scalable entry into India's structural growth, Grasim represents a credible and well-diversified proxy. As India's growth story unfolds through these diverse themes, Grasim businesses remain deeply intervened with each of these structural pillars, presenting long runway of growth and value creation. Reflecting on this growth, I'm happy to share that Grasim consolidated revenue for the current quarter stood highest at INR 44,312 crores, an impressive improvement by 25% year-on-year with building materials, Financial Services, cellulose fibers, Chemicals and even premium textiles and Insulators firing on all cylinders. The 9-month revenue stood at INR 124,330; crores, up 19% year-on-year, demonstrating consistency of performance. Stand-alone revenue grew at even faster rate, reaching highest ever at INR 10,432 crores, up by 28% year-on-year, with strong contribution from both core and new businesses. I would now like to hand over the call to Hemant, CFO, to further discuss financials and key business highlights of other businesses. Hemant Kadel: Thank you, sir. Good morning, everyone. It's my pleasure to interact with you all again. Happy 2026 to all present on this call. I am very proud to say that we have closed the calendar year 2025 on a high note with two of our new businesses on track to achieve their stated goals. As on 31st December 2025, the TTM consolidated revenue is nearly INR 170,000 crores, growth of 14% compared to FY '25 revenue. Currently, stand-alone revenue on TTM basis stands at INR 38,191 crores, up 21% compared to FY '25. Based on the current quarter revenue, stand-alone businesses are now at annualized revenue run rate of higher than INR 40,000 crores. There has been a strong underlying growth across all the businesses. Consolidated EBITDA grew by 33% year-on-year to INR 6,215 crores. Stand-alone EBITDA grew at a faster pace with growth of 57% year-on-year to INR 585 crores. Starting with key business, Building Materials, revenue for the segment grew by 30% year-on-year, driven by all-round performance across Cement, Paints and B2B. Led by the sector's strong outlook, UltraTech is steadily expanding both size and scale. UltraTech's clear vision and disciplined execution have led current capacity to reach 194.06 million metric tons with clear sight of reaching a capacity of 240.8 million metric tons by March 2028, which is a CAGR of more than 10%. The capacity expansion is clear from -- critical from three or four perspectives. Firstly, it reinforces our role as a key enabler of India's infrastructure and development journey. Secondly, it enables us to grow ahead of industry curve. Third, it narrows demand and supply gap across critical markets nationwide. And lastly, it further strengthens UltraTech's leadership position. While capacity expansion remains core to our growth, we have embedded a culture of efficiency to ensure that our growth is resilient, sustainable and cost effective. Underpinning this strength is our EBITDA growth, which grew by 29% year-on-year with an EBITDA per tonne of INR 1,051. Our MD has already covered Paints and B2B e-commerce business. Hence, let me now directly come to our core businesses of Cellulose Fibers and Chemicals. Highlight for these core businesses is that while we can keep on discussing them individually, irrespective of commodity cycles, both the businesses combined have delivered consistent EBITDA. Leadership, innovation, sustainability, capital allocation and cost effectiveness are key tenet to such consistency, which are an integral part of Grasim's growth strategy. Starting with Cellulose Fiber, the business has delivered EBITDA of INR 491 crores, growth of 48% year-on-year. This is driven by three factors: first, improved realization due to favorable product mix led by exports; second, operational efficiency due to volume growth; third, declining input prices, mainly pulp and caustic. The demand for cellulose fiber in China continues to exhibit stability due to global tightness in supply. In India, we have seen similar strength despite removal of Quality Control Order. Due to this inherent strength, we have seen prices for cellulose fiber decoupling with other competing fibers, which are on a declining trend over the past few quarters. Unlike cellulosic fiber, which are largely stable, have started to recover. Cellulosic Fiber segment also includes cellulosic fashion yarn business. The business performance for the quarter was subdued due to cheaper imports from China, which has created oversupply and lower downstream demand. Secondly, Chemical business, the revenue growth of 5% year-on-year was largely driven by volume. Caustic soda sales volume for the quarter 3 FY '26 stood at highest ever 313,000 tonnes, up by 4% year-on-year. While CFR SEA prices are down on Y-o-Y basis, domestic caustic prices are showing some resilience led by stable demand and rupee [ depreciation ]. EBITDA in Chemical business was lower by 4% year-on-year due to higher equity realization and lower profitability in Specialty Chemical business. Higher ECH price resulted in lower profitability in Specialty Chemical business, which was partially offset by lower BPA prices. Coming back to the consolidated business, in the Financial Services, it is one of the fastest-growing businesses in our portfolio. This is driven by their multichannel approach aimed at providing customers with seamless experience across channels of interaction. The revenue was up by 29% year-on-year, led by all-round performance across lending, asset management, insurance and advisory services business. Total lending portfolio, which includes NBFC and Housing Finance, grew by 30% year-on-year to over INR 190,000 crores. On a strategic front, we would like to highlight the recent announced partnership with Advent International, which also marks an important milestone for Aditya Birla Capital. During the quarter, Aditya Birla Capital Board approved a primary capital infusion of INR 2,750 crores into Aditya Birla Housing, valuing the business at approximately INR 19,250 crores on a post-money basis. Advent will hold roughly 14.3% of Housing Finance, with Aditya Birla Capital retaining about 85.7%, subject to customary shareholder and regulatory approvals. In other businesses, starting with Renewable business, Aditya Birla Renewable grew by 82% year-on-year, largely led by higher capacities, which now stands at nearly 2% peak capacity compared to 1.2 gigawatt quarter 3 FY '25. Aditya Birla Renewables has announced a strategic investment by Global Infrastructure Partners, which is a part of BlackRock. This deal marks one of the largest primary private equity commitment into an Indian renewable company. GIP will invest up to INR 3,000 crores, comprising of an initial INR 2,000 crore commitment with a green [ shoot ] option of INR 1,000 crores, subject to customary regulatory and closing conditions. Post this deal, the renewable business is valued at an [ EV ] of INR 14,600 crores. I'm happy to say that this partnership is expected to accelerate Aditya Birla Renewables growth trajectory as it builds on its operational and contracted capacity of nearly 4.3 gigawatt of peak capacity portfolio across solar, hybrid, floating solar and RTC assets and targeting scaling capacity beyond 10 gigawatt of peak capacity in coming years. This transaction brings not only capital, but also the GIP's global infrastructure operating experience to support disciplined expansion and contribute meaningfully to India's energy transition goal. As regards CapEx, post commissioning of Kharagpur plant, we have completed majority of the planned capital expenditure in decorative paint business. The capital expenditure spent on YTD basis is INR 1,310 crores. Focus now remains on Phase 1 of Harihar Lyocell project for additional 55,000 metric tons per annum capacity of specialty fibers. As on 31st December 2025, net debt of the company stood lower at INR 6,882 crores compared to INR [ 8,277 ] crores in the same period last year, with net debt to TTM EBITDA healthy at 2.1 level. Let me now open the floor for Q&A. Operator: [Operator Instructions] The first question comes from the line of Navin Sahadeo with ICICI Securities. Navin Sahadeo: Yes. I hope I'm audible. Himanshu Kapania: Yes. Navin Sahadeo: Yes. And also thank you for the detailed initial comments. Two questions. First, of course, on the paints business. So needless to say, the company has done a commendable job. I believe for the quarter, the revenues given like INR 8,500 crore run rate for the Birla Pivot and numbers that are published for UltraTech. Our sense is paints would have done roughly INR 1,200 crores kind of revenue in this particular quarter, which, of course, is great from the start that we have had. My question is the growth is seen maturing. In the sense, in Q1, a similar sort of a very rough cut working suggested INR 1,100 crores kind of a growth in the June quarter, similar flattish in September, and now we are at INR 1,200 crores give or take some margins there. I mean, some buffer there. Now to reach the scale of INR 10,000 crores exit by Q4 '28, which is a run rate -- I mean, which is around INR 2,500 crores revenue over the next 9 quarters, we need to grow at 40% CAGR year-on-year for us. So I'm just trying to understand, first of all, what different than now the company will do or what convinces us now given that the growth is maturing in the last 1, 2 quarters, how should one look at this target realistically being achieved and in that what is also the industry value growth into consideration? That's my first question. Himanshu Kapania: Thank you, Navin. So while you have done your internal calculations, I'm not going to either accept or deny it. But all I can say, both on quarter-on-quarter basis, we had a robust more than double-digit levels of growth. It's closer to between 18% to 20% on a quarter-on-quarter basis. On an annualized basis, these numbers are tending towards the 3-digit growth. So I don't know what numbers you have in your calculations and using words called mature, when we have grown on a year-on-year basis by 300 basis points in the paint industry and we see a similar kind of consumer uptake in the current quarter. On an overall basis, we are seeing across geographies, very strong demand for Birla Opus paints and a large number of existing dealers who have joined us have increased their throughout and they continue to grow at levels of strong single-digit on a quarter-on-quarter basis. And we continue to add new dealers at a double-digit level on a quarter-on-quarter basis and on H1 and H1 -- half year -- on half yearly basis. So that is the part one. Second part, which is besides consumer and dealers, we're also getting very good attraction from the contractors and as I mentioned in my opening speech, more than 7.5 lakh contractors have joined hands. And these volume -- these number of contractors give us confidence that the growth will continue. We are still a single-digit market share player. We have a large capacity. Our presence is now on a pan-India basis. We've reached every 50,000 population town. We have reached more than 75% of 10,000 to 50,000 population town. So the growth are happening. We have a large portfolio of businesses. Consumer demand is building up, and we remain confident and remain -- we continue to guide that we will deliver the INR 10,000 crores in the third year -- in third full year of operation. Navin Sahadeo: Understood. So despite the price increase that we have taken, as you said, across 2% to 6%. Despite that, you are saying we are confident to achieve the revenue target. Himanshu Kapania: So there's a price -- so you understand the philosophy of price increase. We always want to maintain a particular distance from the market leader. And we felt this distance was slightly more than that was necessary, and we're bridging that gap. That is the objective of price increase, and there is no other objective. And if you also want to test at what is the -- what demand of consumer contractor remains at the revised price. This is our first... Navin Sahadeo: Yes, go ahead, please. Himanshu Kapania: No, that's fine. Navin Sahadeo: Okay. My second question then was on your Birla Pivot business. And of course, extremely fast execution, much, much ahead of expectation. But we had also, I think, hinted, the first time we gave this target the road to profitability or breakeven for this business was also like a $1 billion kind of revenue run rate. So is it now fair that since we have achieved almost we are there, this business is breaking even or will start making positive contribution? How should one look at profitability for Birla Pivot from now going ahead? Sandeep Komaravelly: Thanks, Navin. This is Sandeep here. On the profitability front, we are making progress similar to how we have done -- how we have executed on the revenue side and the growth has been excellent over the last few quarters. We've been making good progress on bridging the gap so that we can get to breakeven as well. I think from our current estimates, we will exit FY '27 at a breakeven level, that is our current estimate. Operator: Next question comes from the line of Rahul Gupta with Morgan Stanley. Rahul Gupta: Two questions. One, continuing on the Pivot point. I remember earlier you had made a point to -- earlier you had guided to break -- cash breakeven by 2030. So you are now front loading it, accelerating it to fiscal '27 end, right? Sandeep Komaravelly: Rahul, I don't think we give the guidance of 2030 earlier, but as I mentioned, in response to the earlier question, FY '27 exit, we should be exiting the year at breakeven, yes. Rahul Gupta: Okay. That's great. And my second question is on the continuation of the points you -- point you made on the paint. You are testing waters with 2% to 6% hikes in January. Now it's early days. Can you please help us understand how the acceptance has been? And if we look at the industry which has been struggling with the discounting, how should we look at the overall industry from here on? Or let me put it this way, how volume versus value gap should move over the next year for industry and you? Himanshu Kapania: So first and foremost, as I mentioned in the previous answer, there was -- the gap between the leader and us was high, and we've used this price increase primarily to be able to bridge the gap. We obviously still are a single-digit player. And our aim is to bridge the gap between our capacity, which is at 24% to our current revenue market share. So that is part one. It's early time to be able to say what is the response to the price increase because we've had certain of a range of products where we took price increased on 28th of January and the remaining range of products is happening on 25th of February. So it will be better I respond to the consumer and contractor response after the quarter 4 results are there, because we are still in the process of executing the price increase. But on a mid- to long-term basis, what is our view about the industry. We remain very bullish if there has been -- as I mentioned in my opening speech, the industry in quarter 3 has grown by 10% to 11% or probably even 12% by volume. The challenges have been over focused on economy, subeconomy and putty-based business. So if we stop the down trading and if you notice, Birla Opus wants to operate a bit more balanced approach, it is making every effort to premiumize the service with the launch of its paint galleries and where, obviously, the ratio of premium and luxury is significantly higher. And the same is true for our painting services. We've been making every effort to premiumize and ensure that in the mix our rate realization remains at similar levels to the volume. And our attempt is volume and value to both move in tandem. As far as the industry is concerned, we believe that this year, the industry may -- including Birla Opus, may grow by 5% to 6%. FY '25, it has grown by -- almost it was nil. And FY '27, we are hopeful that it will come back to an 8% to 10% growth levels. Operator: Next question comes from the line of Nirav Jimudia with Anvil Wealth. Nirav Jimudia: Sir, just one question on the chemical side. For the Epoxy business. I just wanted to have your thoughts, a, with the trade deal donw then with the U.S.A. now and Chinese currency also appreciating by close to around 8% to 9%, how do we see our exports to the U.S.A. market in the medium term? And on a longer-term basis, with now EU FTA also in place, how do we see our volumes in terms of exports to that region as well? Himanshu Kapania: Thanks, Nirav. Thanks for your question. Can you hear me? Nirav Jimudia: Yes, loud and clear. Himanshu Kapania: Both are positive for us in a way. So as you know that in epoxy, particularly in liquid epoxy resins, the Koreans have been available in India due to their FTA, they get a certain advantage where they can bring in product without the duty. And also, they had preferential access to U.S. as well as Europe. Now clearly, that advantage is going to go away. If you look in terms of timing, then the U.S. deal probably will get actioned before the American deal. So I am seeing a positive upside on export of epoxy from India to the U.S. Now how much quantity that will be, how that will ramp up, et cetera, is a matter of individual customer qualifications and those kind of things. That's a little bit too much detail to get into right now, but we do see a positive impact on that side. Similarly, if you look at Europe, as you know very well, Nirav, the European chemical industry is struggling with high costs, both from a perspective of energy, but also from a perspective of extremely high labor costs. As you know, a lot of restructuring has been announced in Europe, you know equally that Westlake has stock operations on their Rotterdam site. I think the India-Europe FTA, in the longer term will have a much more significant impact on the Indian chemical industry, probably in my personal opinion, more than the U.S. Of course, the speed at which Europe will ratify, all this will get down into law, et cetera, will be a little bit slower, but I believe that will be more sticky. So both these agreements, Nirav, are, I think, positive for the industry. Nirav Jimudia: Got it. Yes. Sir, just 2 clarifications here. Sir, a, do we import any raw material from EU, which were earlier subject to taxes and now with this deal, could help us from the chemical business point of view also and from an overall business point of view also? And b, any volume guidance which you would like to share from the epoxy business point of view for FY '27? Himanshu Kapania: Yes. So if I look at imports from Europe, yes, we have. I would not like to get into the details of what that is, but those are like -- they're not a large part of our basket. So I don't see really a large benefit from that. What I may think of is if glycerine prices continue to remain high, then the propylene route to ECH has its own competitive advantage, right? And several of the propylene-based producers are Western based. But there is a logistic cost hurdle. So let's see how this plays out in the long term. If you look at volume growth, then if I look year-on-year, our overall epoxy business, liquid proxy plus formulations this year has grown or at least for the year-over-year, we have grown by about 6%. I expect this rate to ramp up next year. Now how much it will ramp up by as a matter of speculation, but I expect that rate to ramp up further. Nirav Jimudia: Got it. Safe to... Himanshu Kapania: None of the fundamentals changed. Nirav Jimudia: And safe to assume that this ECH price corrections, which have happened on the upside would translate into a similar increase in the prices of epoxy, which generally gets passed on a lag basis? Himanshu Kapania: Yes, there is usually a time lag associated with that. As I mentioned, in the epoxy value chain, there are competing routes, right, glycerin-based ECH and propylene-based ECH. So what may be a pass-through for me may not necessarily be a pass-through for somebody else, maybe globally who may be propylene integrated. So depending on where crude prices, propylene prices, glycerin prices, the pass-through mechanism has a different cyclicality. But in the longer term, it all always passes on, right? It's always a matter of time. But the exact speed by which it passes on depends upon these 3, 4 factors. Nirav Jimudia: Sir, last clarification, if you allow. This quarter, we have seen a dip in our epoxy revenues. So was it more because of the volumes were lesser this quarter and that should start correcting next quarter onwards? Is this the right assumption to make? Himanshu Kapania: Just let me quickly check the data. Yes. So volumes were slightly under pressure on the liquid epoxy resin side. Actually, maybe the better way to see it is we decided not to take certain volumes where we thought the margin was getting too squeezed. That's probably the better way to see it. If I look at the non-LER business, all the formulation specialties, so the specialties within the specialties, there actually, we have not had any volume issue. It's on the margin where perhaps the lowest profitable part of our LER business, we have been a little bit unwilling to allow our margins to get compressed too much. Operator: Next question comes from the line of Amit Purohit with Elara. Amit Purohit: Thanks for the detailed data points on the paint. Just to recheck, sir, on the overall sales that we sold, you talked about 500 million kiloliters. That was since the time we have been into the market, right? Is it kiloliters or did I hear it correctly? Himanshu Kapania: 500 million liters, not 500 million kiloliters. Amit Purohit: Okay. That is -- since the time we have started operations. Yes. Okay. And secondly, sir, I also wanted to understand when you talked about 300 bps lower than the second player, that includes putty and everything, right, at this point of time? Market share -- exit market share you were talking about or... Himanshu Kapania: I am saying what we said in the statement, opening remark, Birla White, the Birla Opus revenue for quarter 3 and guidance given by #2 players. In our assessment, internal estimates, now the gap is 300 basis points. I hope it's clear. And it is only Birla White's putty business. It does not include any other business. Amit Purohit: Sure. And sir, we've talked about increase in new dealer addition. I just wanted to understand the typical profile of these dealers. If you could just qualitatively highlight these are large dealers or these are dealers largely from the market leaders? Or if you could just throw some highlight because typically, I mean, there is different types of dealers. And initially, when we started off, obviously, there were challenges to reach out to the very, very large dealers. What is the state now, I mean, in terms of acceptance? Himanshu Kapania: We are getting blend from all category of dealers. In our internal assessment, we've broken the dealers into A category, which are more than INR 3 crores; B category, which is INR 1 crores to INR 3 crores; C category, which is INR 30 lakhs to INR 1 crores and D category into less than INR 30 lakhs. Most of the dealers are coming in, in the A, B, C. The small numbers will also come in the B category, but our focus in the A, B, C category. Amit Purohit: And lastly, the price increase that we highlighted, that is more from a testing perspective? Or is there any raw material pressure, which kind of -- or do you think that from now on, the brand is strong enough to kind of take pricing and still it adds value to the entire channel as well. Just wanted to know your outlook as you highlighted that next year FY '27, the growth in the industry could be closer to about 8%. So the pricing volume graph should it reduce in the FY '27? That's the last question. Himanshu Kapania: First and foremost, there are no current raw material pressures. Second, we've been consistently maintaining that we are at a lower price than the market leader and we felt the gap was higher, and we reduced the gap. That has been the strategy around there. It is not a price increase strategy per se as you're reading it. Please read it that we would like to maintain a certain gap with market leaders, and that's -- and we want to test at that gap, what is the consumer response. There was an X gap that existed and we reduced that gap. Operator: Next question comes from the line of Pathanjali Srinivasan with Sundaram Mutual Fund. Pathanjali Srinivasan: A couple of questions. So firstly, could you explain a bit on our share of retail business and institutional business because I believe we've grown pretty fast in our institutional business, but I was just trying to figure out if the base there is lower? Or are we created more towards institutional business? Himanshu Kapania: So to our understanding, the industry, retail and institutional business mix is 85-15. We are not yet there on that mix. We are still single digit on the institutional business. Retail is much faster to take off and institutional has a much longer gestation period. The message that I was communicating is that we have a strong pipeline. And over -- hopefully by FY '27, we should be able to come closer to the industry average between 12% to 15% on overall contribution from institutional business. Pathanjali Srinivasan: So could you give me some numbers for where we are in terms of range here? Himanshu Kapania: As I explained, we were a single-digit number, and we have a strong pipeline of institution, but retail continues to be the stronger forte for us at this point of time. But institutional is growing faster... Pathanjali Srinivasan: Sure. And just one more question around. So this number of saying 18% we've grown last quarter and all of that. There's just one part though where I've not been able to figure out. Like I met a couple of dealers from the time we started and more recently. And I have seen some of them saying that they've either stopped doing business or they're finding it difficult or something like that, while my sample size is very small. I want to know like what is an acceptable level of pushback or a reduction in dealers when we expand dealership and what are our targets here and where are we... Himanshu Kapania: So the -- it's a large dealer universe. They are overall 100,000 dealers. On an average in a quarter, about 50% to 60% of the dealers are active. We are also experiencing a similar levels. In fact, our sense is about 70% to 75% in the quarter are active around that. And we are satisfied with the number of people who onboarded with us with the number of people who are active in a given quarter. So from that perspective, we are very satisfied both in the expansion of -- expansion pace of dealers, both in the existing towns and new terms as well as the throughput pace of improvement of dealers. We are -- most of the leaders who have joined us and have been consistently -- have continued to stay with us. There's obviously -- we are very focused on our collection and there are dealers who are pay masters are the ones probably you may be referring to. Pathanjali Srinivasan: Got it, sir. Just to continue on that. I just wanted to know what is our policy with printing machines that we've given to dealers and where dealers have not been doing as much business as we like to them? How are we dealing with them? And are we -- have we started collecting money for tinting issues that we've given to dealers? Himanshu Kapania: No, we don't collect money for -- as we already explained, we give the dealers free-of-charge printing machines, and that remains a consistent policy even in FY '26 and going forward. Only if a dealer does default on his payment for a long period of time, are there any actions that are necessary, but it's a few and far and are probably not relevant for this national platform. Operator: Next question comes from the line of Prateek Kumar with Jefferies. Prateek Kumar: My first question is on paints. Can you just confirm again the -- while you talked about your revenue expectation maintaining for FY '28, what do you think on profitability? Other related question, you have like seen some increase in interest expense during the quarter sequentially and depreciation. Is this completely related to capitalization of 6 plants? Or also, is there any working capital changes which you expect because you're also increasing mix in your business? Himanshu Kapania: I just want to be clear, what your question is? You are referring to overall Grasim results, and you're saying that the interest and depreciation component gone up. Is that what you're referring to? Prateek Kumar: Yes, that is right. Unknown Executive: Yes. So in Grasim, if you are referring with the last year, the borrowing for the purpose... Prateek Kumar: Q-on-Q, I mentioned. Unknown Executive: Setting up the new plant was being capitalized. On the 15th of October, we have commissioned our last sixth plant. And now from quarter -- next quarter onwards, there will be no capitalization and all the interest costs will be coming to P&L account. Did this answer your query? Prateek Kumar: Yes, sure. So there's no material working capital changes because we're shifting business -- paint segment business to more institution. That doesn't have... Operator: Sorry for interrupting. Mr. Kumar, your voice is breaking. Can we just come a little closer to the mic and speak? Unknown Executive: In paints business, we have capitalized over all the 6 plants and no major CapEx is spending at all. Himanshu Kapania: If your question is on data, we are well in control as our debtors and working capital is not a challenge. We repeat again that the interest component in the past, a portion of that was getting capitalized. And now it will not -- the portion has significantly fallen because from 6 plants now down to around 15th October, it's only 1 plant. And that also, a part of it was no more capitalized. And the same applies to depreciation. As now all the 6 plants are fully commissioned, the full depreciation is reflecting in the books. Prateek Kumar: And the other question was on Paint segment profitability, which you're expecting for Fy '28. You maintain it as like turning positive by FY '28. Himanshu Kapania: Yes. We maintain our guidance. I'll repeat within 3 years of full-scale operation, we will -- we are targeting to be able to reach a profitable #2 position. Operator: Next question comes from the line of Shreya Banthia with Oakland Capital Management. Shreya Banthia: Am I audible? Operator: Yes, you are. Shreya Banthia: So my question is regarding the Chemical segment. So if you could share what is the current share of renewable energy in the Chemical segment? Himanshu Kapania: Just second. It is around -- exit rate is around 20%, 23%, right? And we expect -- we actually are targeting to reach an exit rate of over 40% by end of FY '27, if you want to make a projection. Operator: Next question comes from the line of [ Vipulkumar Anopchand Shah with Sumangal Investments ]. Vipulkumar Anopchand Shah: So when we will start sharing the revenue and EBITDA numbers of our paint business? Himanshu Kapania: Shortly. Vipulkumar Anopchand Shah: Shortly means, sir? Himanshu Kapania: Yes. We are -- even today because that's why the -- there is a portion of the material that has been produced and was not sold, and they are still reflecting revenues which they're getting capitalized. We're expecting to complete that, and we will move on to -- we will share with you the exact dates when we do that. But there is still -- so that's why this gap between capitalization, that's why the numbers, what market calculates is there is a gap, and we want to finish all the materials that we have produced before commissioning and consume it, which remains in the capitalization. Vipulkumar Anopchand Shah: So should we assume that from next financial year, you will start sharing those numbers? Himanshu Kapania: We'll definitely come back. Operator: Ladies and gentlemen, due to time constraint, that was the last question for today. We have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments. Himanshu Kapania: Thank you so much for participating on the Grasim call. We're now going to close the call. Unknown Executive: Thank you. Operator: On behalf of Grasim Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.
Operator: Welcome to the Quarter 3 Analyst Meet of Mahindra & Mahindra Limited. For the main presentation today, we have with us our Group CEO and MD, Dr. Anish Shah; ED and CEO of our Auto and Farm business, Mr. Rajesh Jejurikar; and our Group CFO, Mr. Amarjyoti Barua. Once the presentation concludes, we will begin with the Q&A session. For the purpose of completeness, I wish to read this out. Certain statements in this meeting with regard to our future growth projects are forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. With that, now I hand over to Dr. Shah for opening remarks. Anish Shah: Hi. Good afternoon. It's a pleasure being with you again, more so when our results are in very good shape. And let me start with talking about our key messages as we do every quarter. And what you see again is a continued strong performance across businesses, and you're seeing contribution from all our businesses to delivering very strong results. Operating PAT is up 66%. Reported PAT is up 47%. There are 2 factors that make the difference between these 2 numbers: One is labor code impact, which I'm sure you've seen across all companies; and second is a onetime around Mahindra Finance, where they had a reserve release last year in the same quarter, as we take that out, that increases the operating profit. Volume and margin growth, very strong for both Auto and Farm. Volume up 23% for both businesses. Margins up 90 basis points for Auto, 240 basis points for Farm. Farm did have some impairments internationally, and that dragged down the overall number, but domestic operating performance was up 64%. I want to highlight 3, what we call, breakthrough performances. And while you will see some numbers on this page and the next page, the breakthrough performances are not because of the numbers. Mahindra Finance is up 97% from an operating standpoint, down 9% from a reported standpoint. But beyond the numbers, there were 3 things that we were focused on for the past 3 years: asset quality, controls and technology, along with putting in place a very strong management team. And that today is in very, very good shape. And you've seen the results for that. As a result, Mahindra Finance has announced in its analyst call 2 weeks ago that it will now pivot to growth, and we will start seeing a much faster growth rate, more diversification and areas that we need to focus on now. For the last 3 years, we were not talking about growth and focusing on asset quality controls and technology. And that pivot is what creates a breakthrough for Mahindra Finance right now. Lifespaces, profits up 5x, but I will again caveat it by saying that in real estate, as you well know, you will continue to see ups and downs based on occupation certificates coming in because that's when you recognize the profit. But it's breakthrough not just for the profit number, it's breakthrough because we can now see projects complete with the profitability we had planned for at the start of the project. We now see a much greater level of urgency in the business. The land acquisition is going very strong. We've had an external investor, Mitsui Fudosan come in. That was announced a couple of days ago. And the business, both from an IC and a residential standpoint, continues to be on a very strong track, and you will continue to see that as we go forward. Logistics, first profitable quarter after 11 quarters. But again, more than the fact that it is the first profitable quarter is the execution that is being done is very strong with Hemant Sikka coming in and a few key leaders coming into the business as well. That's really driving logistics in a very, very different way. And it's a business we expect a lot more from. So this is a good stepping stone, but the breakthrough is really driven by execution that the business has shown now. We thought it will be useful to show where does that operating profit growth come from. And therefore, on the left-hand side, what you see is operating profit. But let me first start with the bottom of the page, which has 3 numbers, 66% operating profit growth, 54% without the Mahindra Finance onetime of reserve release last year and 47% after you take out the labor code impact as well. So those are the 3 numbers that we're looking at. And it doesn't matter which number you look at it, it just is a very strong performance overall across businesses. Lifespaces up 5x from an operating standpoint; Logistics up 2x; Mahindra Finance, 97%; Auto, 42%; Tech M, 35%; Farm, 7%, as I mentioned, driven more by the international impairments; and investments up significantly because we had a CIE sale, which is in the operating numbers, which we pointed out on the right-hand side here. So that's really a map of where all the businesses are. Yes, there are some other businesses that have done very well, but these were the main ones that were driving growth, and therefore, we put them on this page. Consolidated results, up 26% for revenue, up 54%. Excluding labor code, 47% reported. Drivers from an Auto standpoint, while Rajesh will cover this in more detail, the key headlines are SUV volume up 26%, continue to be #1 there. Margin up 90 basis points. New product launches, you've heard about, have done very well. Besides revenue market share for SUVs, our LCV share has gone up 10 basis points also at 51.9% now. Farm volume up from an export standpoint, 36%. Market share down slightly, but in January, we made that up for year-to-date as well. And Farm Machinery revenue is up 45%. So we're starting to see much faster growth from a Farm Machinery standpoint. Mahindra Finance, assets under management up 12% despite not focusing on growth a whole lot. GS3 continues to be below 4%. We continue to maintain 4.5% as the benchmark we've set. But for the last many quarters, we've been below 4%. And we've got a new ECL policy, which is more in line with industry, which will help the business as well. And technology and controls, you don't see on this page, but that's been a huge focus over the last 3 years, and we've completed projects or are close to completion of certain projects there, and that gives us a lot more comfort around the business overall. Tech Mahindra, on track with what it's outlined in terms of its path for F '27 and deal wins, margin expansion, all of that playing into that track that Tech Mahindra has outlined. Logistics, we spoke about. Only thing I'll add there is strong momentum in both auto and e-commerce for logistics. Hospitality has given up whatever it has earned in India with an FX exposure with its Finland business. And real estate is on a very strong path, which I mentioned. And this is a page that you've seen many, many times now. Consistent delivery. ROE is up 20.1%. But before any question comes, I will say what I always say, we are at 18%. It may be slightly higher, slightly lower in any given quarter. So the new bar is not 20%. We will continue with 18% plus/minus a little bit. And we'll continue to drive growth, and you see a very strong growth that's been driven in this quarter and year-to-date as well so far. We are at, I think, 38%, if I got the exact number year-to-date growth from a profit standpoint. So I can tell you that's higher than what we had expected at the start of the year as well. With that, let me invite Rajesh to take you through more details. Rajesh Kajuria: Hi, everyone. I'm going to run through this quickly. I'm sure you've seen a lot of these slides already. So I'll be quick and give more time for Q&A. The SUV volume was up 26%. We've got to average Q2 and Q3 because Q2 had a lower GST. So even if we average, it will be 17%, 18%. The very good news is seeing the revival of LCV segment, which we were all wondering why it's not coming into growth. It finally has. The GST has helped. The replacement cycle has kicked in, and we do see this sustaining for some period of time. You see this Q3 -- Q2, Q3, which I just said, I think the right way to do is to average it out. A lot of the -- some of the Q3 growth is the GST transition in Q2, which spilled over to Q3, but still we've seen very robust demand in Q3. We did get affected somewhat by the fact that we scaled down XUV700 in Q3 as we were preparing for 7XO. So that has had some effect on the mix and the revenue because literally 1 month, 1.5 months, we had stopped billing new 700s out in the last quarter. You see revenue market share at 24-odd percent. We think that's about the level we'll be at. There was abnormal peak in Q1 and Q2. These numbers now -- well, earlier also, they included the EV numbers. We're just calling that out separately so that we're not going to have a separate slide on EV. On the same slide, you'll see where we are doing -- how we're doing on market share in that quarter and YTD, which you see at the bottom. 7XO has got very good response, a very strong order pipeline. And as some of you did mention, customers, we are back into this waiting period thing, which is not always desirable, but kind of also a recognition of the fact that the product has got accepted very well. Big skew again to the top end in spite of very attractive lower-end versions, almost 70% plus is the top 2 versions, which is in a way higher than what we thought, which is also good news, but that's what is adding to the complexity on waiting period, given that the skew is higher than what we expected to the -- especially AX7L version. 41,000-plus eSUVs sold, which is really about 4,000 a month as an average. The interesting thing is the 32.5 crore kilometers that the vehicle has run, which really implies 8,000 labs around the earth equivalent, goes to show that the vehicles are not just nice parking products in the garages, but are being used a lot and are very mainstream in the way that customers have adopted usage of this, which is building that positive word of mouth and confidence. We are seeing that translating into 9S, which I'll come to in a minute. A lot of awards. We believe the most prestigious out of these is the EV, the Green Car of the Year at the ICOTY, which is a very, very robust jury of multiple auto handles coming together, and they have only 3 awards, one of which is the EV Green Car of the Year, which 9e got. The 9S has got very good feedback as well and response. We had mentioned in one of the earlier quarters that we expected North to do better with the EV portfolio. With the 9S that's happening, that segment was looking for a more conventional shaped SUV, which the 9S is balancing well. So it's bringing all the goodness and tech associations of the earlier 2 products, but in a more conservative or conventional format and in 7-seater. So we are seeing, of course, good response everywhere, but North is adding a new set of customers into the 9S kitty. We had put out what products will come in the calendar, and there have been questions around how much have we already launched and what is not. So we just put this slide to clarify that. We had said 3 new ICE -- 3 ICE SUVs in this year. The new nameplate out of that was 7XO. Two more refreshes will come over and above the Bolero and Bolero Neo. When we had said 3, we had not counted Bolero and Bolero Neo in the 3. So we've done 7XO now, Bolero, Bolero Neo and there will be 2 more refreshes in this calendar year. On EVs, both what we had spoken about are done for this calendar year. So there's no new EV launch happening in this calendar year. LCVs, we had said 2. We've just done Bolero Camper and Bolero PikUp and 2 more will happen in this calendar year. A quick slide on capacity. So we're breaking this up into 3 phases, so to say. In the calendar 2026, we will work around debottlenecking some of the current capacity products where product capacity is running out, more specifically 3XO and Bolero in Nashik plant, some of Scorpio-N in Chakan plant. So all of these in Thar a little bit. So all of these are kind of out of capacity. We'll aim by July, August to add about 3,000 to 5,000 between these products per month. Over and above that 3,000 of EVs gets added with the 9S launch. So in a way, 6,000 to 7,000 additional capacities on these products get added in F '27 on top of what we have in F '26. Calendar year 2027 will see the addition of new capacity in Chakan for the new IQ platform. So one of the Vision S or Vision T, which we will launch in 2027 will kick in. The Nagpur facility, which will come up by -- in calendar 2028, will have primarily the new IQ platform on the SUV side, definitely Vision X, which is not going to come in Chakan. We will probably need more capacity than we are planning in Chakan for Vision S, Vision T. So we'll provide for that too and any other new products. We will also figure out which of the existing products need more capacity. We will have to work the cannibalization equation of new products over current products. We may add something at the Igatpuri new land that we are taking or we may add it in Nagpur. So that's something that we will work out by way of how to split and prepare for additional capacities on existing products. So Nagpur greenfield and if there are more questions, we can talk a little bit more about what will happen in Nagpur greenfield. LCVs, I'm not repeating, I've already spoken. Auto margins have been very robust, and you see the 10.4% here without contract manufacturing, but this chart gives you a better feel of the same thing, which is the auto stand-alone without contract manufacturing is 10.4%, which is what you saw on the previous slide. INR 10 crores is what we made on the contract manufacturing in M&M. And the stand-alone as reported is INR 9.5%, which, of course, comes down because there's a big element of contract manufacturing. On the EVs, as we've started doing, we made INR 175 crores end-to-end. In MEAL, as a company, the EBITDA was INR 149 crores, INR 27 crores of that was in M&M. And the total, as you see on this chart, is INR 175 crores. The PLI status is up here. So 9e, we have all variants approved. 9S, the top 2 packs are approved already. The balance are under approval and should come in by quarter 1. And BE 6 should come in by quarter 1 again, all variants. So basically, by quarter 1, we should have all variants, all products with PLI approval. Trucks and buses, a quick look. We had a strong growth. We also look at the YTD market share, we increased somewhat and we are both together at 6%. Last mile mobility, we continue our leadership, an exciting new launch happening tomorrow in Hyderabad. And do watch for that. We believe it will be a game changer. Some really very exciting breakthrough new design, and I think it will transform the penetration even more. We already are at 30% penetration. So just a quick look at the auto consolidated numbers. You've already seen that, so I'm skipping this. Farm, the volumes grew 23% in the quarter. We lost some market share. A lot of it was due to Swaraj Tractors completely running out of stock, and that's got recovered in January as well. So we are now at 44.1%. So that's what you see here. The farm machinery, Anish spoke about, we're seeing very good turnaround. Last few months, we've crossed INR 100 crores literally every month as an average. So it is a very strong momentum now that we are beginning to see. The core tractor margin here, which is really the important parameter, is at 21.2%, very good improvement over the like-to-like quarter, but also very close to our best performance. This gives you the volatility of industry growth versus how the margins move in a band, depending on the operating leverage. Anish has covered this. So again, very strong stand-alone performance. We had to take impairments on a couple of subsidiaries, which we can talk about, which is what is showing a PBIT negative 7% and a PAT plus 7%. With that, I'll hand over to Amar. Thank you. Amarjyoti Barua: Thank you, Rajesh. Just a recap of everything you heard. I won't repeat what has already been said, but I do want to take a second to highlight that this is the first time the group has crossed INR 50,000 crores in top line, and that's a big milestone for us as a group. What I just wanted to point out within the consolidated result, there is a INR 220 crore impact of labor code. This is our share. The gross amount across group companies was INR 565 crores, okay? This is the waterfall that I usually show to show the contribution of each of the pieces. You can see here the impairments were exactly offset or very close to being offset by the CIE gain. So just calling that out very clearly so that you can see that the operating performance was not helped necessarily by the CIE gain. It was offset by the onetime impairments we take -- we took. We took impairments in 2 entities. One is our Japan entity, and we took also an impairment in our Turkey foundry business, both of which the MAM Japan one we have talked about in the past. This is just continuing the restructuring in that business. Foundry is new and was impacted by the hyperinflation in Turkey. I do want to highlight growth gems grew 3x year-over-year, okay? And that's a very big deal for us. And then from the stand-alone side, the impact you all follow this, the impact of labor code is around INR 73 crores in that -- in the INR 3,931 crores that you see. And then we've talked about the revenue growth. Outside of this, the only thing I'd like to highlight, we don't show the page, but I do want to highlight the cash performance has been, again, very strong across the group. So we continue to keep growing our cash, which will be deployed towards future growth as we find new avenues. And from an outlook standpoint, I mean, we continue to see the strength in the portfolio, so hopefully should allow us to close the year very strong. Okay. With that, we can transition to questions. Operator: We'll just wait for the setup to complete, we'll start then. Yes, Kapil, please start. Kapil Singh: First of all, sir, I would like to congratulate you because this was a fairly strong all-round performance across the group companies. So really heartening to see that, that even the group companies are now contributing solidly. I'll start off with the auto sector, just Rajesh sir, your outlook for next year for each of the segments, LCVs, tractors and autos. And one of the concerns in mind is that because just GST cut has just happened. So is there an element of pent-up that you are sensing here and how to think about next year's growth for each of these segments? And within autos, various subsegments, including EVs and compact SUVs, how are you seeing the demand momentum over there? And also, if you can give some clarity on the capacity for FY '27 and FY '28 in terms of numbers, is it possible to share what will be the available capacity? So yes, that's the first question. Rajesh Kajuria: Yes. So Kapil, outlook, we'll share like we normally do in May, and we'll not give a specific number on outlook, but we'll try and maybe answer your question 2 and question 3 together, which is the impact of GST overall, how we are seeing, in which segments has it really made a difference and that, I think, connects with your question on the demand outlook at a qualitative level on EVs and subcompacts and LCVs and so on. So firstly, the biggest impact of GST will always be in commercial segments because it fundamentally -- or a price reduction because it fundamentally improves cost of ownership and improves viability. Also, the GST cut will drive GDP growth, we believe, to be much higher and the economic prosperity of the country will go up, which also helps commercial applications and commercial usages both. So it's 2 factors kicking in when we look at commercial segments. When I'm saying commercial, I'm counting LCV, bigger CVs and tractors. They all are following a similar paradigm, which is significantly better viability for the user out of a lower -- a significantly lower price. I mean, 10% is a big change in price for that segment. In LCVs, roughly, it leads to a 4% to 5% higher profit improvement for an operator. So it's not insignificant at all. So we believe this is a fundamental shift, and this will lead to a cycle of increased demand, and it's not a 1- or 2-month thing, which is just a pent-up because there was no -- it's not a pent-up. It was pent-up in LCVs to the extent that the replacement cycle had not kicked in, and we believe that was because of COVID, where usage had got delayed or reduced over a 1- or 2-year period. And as soon as -- so there was a replacement cycle delay of a year or 2 and GST, I think, provided that impetus and we saw growth kicking in together. So I think the commercial segments will gain the most. What's happening in the other segments in which we play is actually, we think, enabling higher version variant usage. We don't think fundamentally demand for an XUV 7XO or Scorpio-N is going up because of GST drop. And that may have been momentary if it did in the festival period at all. But the demand momentum continues even as we got into December and January. So it wasn't just festive and it wasn't just 1 month. There, what we are seeing is a much better move up the ladder because customers have a price point on which they're operating and then suddenly, they can get more in that price point. So it can either lead to a lower-model customer moving up to a higher model or a lower-variant customer moving up to a higher variant. So both of these will play out. I'm not sure it will increase the total size of the industry, but it will probably change the nature of the mix for an individual player or certain models, which fall in the consideration set, right? So with the 7XO of pricing that we have where we are operating, have reasonably good options between 13.5 and 15.5 or 16. 4.6 meter product actually competes like-to-like with the 4.2, 4.3 meter product, which was not the case earlier, right? So there would be 4.3 meter customers who may look for a 4.6, 4.7 product. So I think some of that will be helped by GST. The entry car has, of course, picked up with GST in a very significant way, which I'm sure is a function of the fact that that's become more affordable and hence, more accessible to many people. Whether that is pent-up or that is going to sustain, I don't have a point of view on right now. And hence, what we would have to watch out for as we get into F '27 is what will be the mix of small car to big cars and how will each subsegment grow? I think it's a little premature to reach a conclusion on how this mix will play out. I think each segment will grow by itself, but which will grow faster and which will grow a little slower and hence, the mix and the relative impact of that on market share is something that we'll have to watch for. We've seen very robust growth in all our sub INR 10 lakh product. So Bolero, Bolero Neo, everything is below INR 10 lakhs now on showroom. The GST cut helped that. So 3XO, Bolero, Bolero Neo all have got very, very strong demand. Capacity for '20... Kapil Singh: Sir, EVs as well. Rajesh Kajuria: EV, I spoke about in a fair amount of this thing. So the price point at which -- the price point/the fact that we are more than 4 meters, which means the gap between 5% GST and 40% GST is still quite significant and which is why we are able to price 9S almost like-to-like on road as a 7XO. So a customer actually can choose without worrying about price between whether they want a 7XO ICE or a 9S EV. So in the segments in which we play, I don't think the GST arbitrage change is making any difference. But in less than 4 meter, it would because there it was 28 to 5 versus 18 to 5. So it's a much, much closer comparison now. So the price advantage relatively in less than 4 meter kind of goes away. It's still quite significant in the segments in which we play. Capacity, just to again clarify what I had on the slide, we'll probably add this year, 5,000 to 6,000 by July, August in ICE over what we have right now, another 3-odd in EVs, so 7,000 to 8,000. F '27, we would add in ICE another 7,000 to 8,000 at least, that will come from Chakan in calendar 2027. That's for the new IQ platform. And then in 2028, depending on how quickly we are able to get actual possession of the land and productionize it, we would probably add in year 1, at least 8,000, 10,000 more. It will ramp up to 500,000 over a period of time. But in year 1, it will probably be 10,000, 12,000 a year. Sorry, Long answer, sorry. Kapil Singh: No, thanks. I think it's really helpful. Amar, just one to you. We are seeing a pretty steep commodity inflation, particularly precious metals. How do you see the impact of that as we look into next year? Do we have pricing power and hedging on the commodity side? And what was the impact in 3Q as well? Amarjyoti Barua: Sure. So let me address what is happening first and because it's difficult to predict what it will be. Today, what we are seeing is across almost every commodity, there is inflation. Precious metals lead the pack. Part of it is the same dynamics that is driving gold and silver. And part of it is supply issues, especially anything dependent on iron. So copper, aluminum, et cetera, you're seeing. The iron-related products are likely to not see sustained increase because these seem to be more supply-related issues, which will get solved. It's very difficult to say that for precious metals because there seems to be something more deep that is driving that, right? So we'll see how it all plays out through next year. Right now, we did see the inflation in our numbers. The hedges have worked, but I want to emphasize that the hedges can only cover a certain portion because there isn't necessarily a market for steel, for example, for hedging, right? So we do get exposed to anything that might be happening there. The other thing also is our hedges take care of purchases beyond current quarter. So some of the gains we get when we get mark-to-market is covering for purchases in the future. So you will see some volatility in commodity costs in the future and not a hedge offset. So I think so far, very benign because we are getting the advantage of having a very robust hedging program. But in the future, we'll have to see how it all plays out. Overall, I think Rajesh has already mentioned there was -- there is a 1% price increase to take care of what is going to be the future impact of some of this commodity inflation. And then we'll see how it goes. Kapil Singh: Sure. On the EVs, are you seeing more cost inflation? Anish Shah: Just to answer your question on pricing power. Do you want to cover that? Rajesh Kajuria: Yes, I think there's headroom on price. It's just that we don't want to -- we wouldn't want to push it unless we feel it's necessary. That's been our philosophy always to make sure we don't lose a sweet spot on the pricing. So we have taken 1%, as Amar just said in January. And we'll watch closely and see how the commodity is going. There's ability to take -- the key thing is anticipating whether you need it based on a stable view on what will happen to commodity. We don't want to be knee-jerk. So sometimes you kind of say, okay, this is a short-term thing. Let's not push price up for something which is going to go up today and come down tomorrow. So then you're not reacting and that has sometimes a short-term effect. But fundamentally, if you know that the commodity trend is upward, then we will take prices to correct for that. It's the judgment of whether it is just a short-term spike, which should be ignored or is it something that we fundamentally need to take a price to cover for. That's the -- it's that judgment which sometimes affects timing of a pricing decision. Anish Shah: Yes. So we have the pricing power, whether we use it or not is... Rajesh Kajuria: We don't want to -- I mean, the simplest thing is to say, okay, let's keep taking, which is something we want to avoid. Kapil Singh: Just wanted to hear your comments on EVs also in terms of cost pressures, is it more over there? Or should we expect that EV costs will still keep coming down? Amarjyoti Barua: Imports are going to be impacted because of the rupee, right? But I think there was an overhang on the rupee as well, which hopefully, with the announcement around the U.S. FTA should -- so our now view on the rupee is don't see a significant slide beyond where it is right now. Let's see how it all progresses. And that should help us ease some of the import pressure. But we mentioned this before, Kapil, there's an aggressive localization program that the team is running, right? So that will eventually offset this pressure point. Operator: Chandu, please go ahead. Unknown Analyst: First one is on CAFE. So there's now an expectation that after the industry has represented back to the government, the 113 grams coming down to 91 might potentially be 113 grams coming down to close to 100 grams in April 2027. So just wanted to understand your thoughts around that. And if that's the case, our 25% sort of EV mix target for F '28, how much could that potentially come down by? Second question is just around the tractor business. There is some expectation that over the next 12 to 18 months, there could be a recurrence of an El Nino scenario. So what your early thoughts are around that? Any offsets we have to potentially manage around that situation? And the last question is just around sort of capital allocation growth gems. Growth gems, I think we've put a lot of effort into those businesses over the last 4 to 5 years. Maybe the market at this stage doesn't fully appreciate the value in those businesses. But just related to that, we do have a couple of entities, Pininfarina and Erkunt, which might be rags on profitability of the overall group. So just your thoughts on, is there any potential restructuring possible in those entities? Rajesh Kajuria: You want to take that first? Anish Shah: Yes. So you're absolutely right, the growth gems are still underappreciated, but that's fine. We continue to have them deliver more and more. And as we shared at the Investor Day, the valuation of our growth gems as of 3 months ago was INR 56,000 crores. You're starting to see some of that in the numbers as well because they're starting to deliver more profits. Yes, there are a few businesses more so outside our growth gems, but some of the smaller businesses that haven't fully delivered to the potential. And we continue looking at that on a regular basis and culling them out as we need to. You saw that with Sampo a few quarters ago, where we exited Sampo. And we do have all our businesses in that watch in terms of what we need to do with them. We also announced Automobili Pininfarina that we were not continuing that forward. We merged that with Pininfarina. So that was, in a sense, another exit that we took. And Erkunt foundry is not strategic for us and which is where we've taken an impairment this quarter as well. So we continue to look for what are the strategic options for us in that business. So that's one discipline that will continue, and we will cull things out. But keeping that -- I look at that as a separate question from the growth gems itself. The growth gems continue to deliver value. And the way we think about it is there are a set of businesses that have scale and have a right to win. So you've got that in SUVs, in LCVs, in tractors, in farm machinery, there are a number of businesses that -- actually farm machinery doesn't have scale as yet. It will get to scale. But you've got a few businesses with that scale and a right to win. Then there are a number of businesses that have a very strong right to win, but don't have scale. And our focus is how do you start driving scale in those businesses. And many of them are growth gems. And then we have some businesses where we feel we should have the right to win, but we don't have a right to win as yet. And there, we're looking at can we develop that right to win. If we can, we will scale it. If we cannot, we will exit it. Rajesh Kajuria: Okay. Let me take the question on which there's no answer, which is CAFE. Yes, Chandu, of course, we are all as an industry body working regularly with the government on what we think should be the right and fair way to construct a policy around emission norms. So there is a fair amount of industry engagement with the government on this, and the government is not rushing into announcing something and are capturing all the views. The overall view of SIAM is to stay with the recommendation, which was made in, I think, December 2024. There's discussion around that. So you gave a number of 25%. I don't know that 25% that we had put out as our -- was our own target was not linked to what is needed by CAFE norm. We believe that most likely what will be needed by CAFE norm will be much lower than our own internal target. The difficult thing, of course, is if ICE continues to grow at a very robust pace, then what will be the ratios between ICE and EV. And that's really what part of the discussion is that you don't want to really stop growth of the economy or of the ICE portfolio and the government needs to construct it in a way which is reasonable for both industry and climate. And I think there's good listening around that. So let's wait. I think it's -- we're not too far away from getting a very clear view on what they will do, but it's maybe like -- I think we should have something out in a couple of months. So there's a lot of industry engagement with multiple government stakeholders. On the tractor industry, often you'll ask about projections. And often, I have said we have no ability to project it. As recently as 2 months back, we said it will be low double digits, and this year is going to end at twice that literally. So low double digits, if you say is 11% or 12%, we are going to end this year at 24%. So really, even the ability to forecast next 3 months is not there. I wouldn't worry about what's going to happen in October or November. It's too early to worry about that. We will go into next year feeling optimistic and positive. But keeping in mind that we are on a very high base because this year is going to end at 24% growth, which no one expected, right? So if we say example, next year is X percent growth. Earlier, we were saying it is X percent growth for F '27 on a 10% or 11% growth this year, which itself we thought is good. Now the point is if this year is not 10% or 11%, but it's 24%, which is what it's likely to be, then we have to have a reasonable assumption of on that base, what kind of growth is going to kick in next year. Multiple things in the country, we believe, are very enabling and reservoir levels is one key enabler even if when monsoons are not good. So whatever we read about El Nino effect is likely to happen after the first round of rains. So most people say that, that effect may kick in, in August or September. So if you had a good flush of rains, then your first round of kharif sowing has happened. Reservoir levels are good, which anyway, we are going to open F '27 with good reservoir levels. Government spending in rural and agricultural sectors, both has been robust, which is also a key driver of tractor growth, so -- and favorable terms of farmer trade. So there are multiple enabling factors. So let's wait and watch. I know many of you are picking up signals that tractor demand may be under stress. I think we have to see that relative to the fact that this year will be a 24% industry growth. And overall, we think right now, there are -- the enablers are much more than the dis-enablers. At least that's the way we are going in and which is why we are triggering capacity expansion and all of that for tractor, Mahindra tractors in Nagpur, which is where we already have a base on the greenfield, plus we'll also look at something more on Swaraj. So we are preparing for the longer-term growth trend, which we spoke about on the Investor Day of about 9% CAGR. Anish Shah: The economy is accelerating. And it's driven by some of the actions taken last year, but even more so from the foundation elements that have been laid. And we continue to believe that the industry will accelerate. I've gone on record saying we would look at an 8% to 10% growth over the next 20 years, just given all the key factors that drive the economy, demographics, the infrastructure that's being built, the government reforms, and then you see last year's actions around tax, around GST, around the rate cut. So you see various different actions that have come in. So we feel that there's a very strong tailwind that will position India very well, and that will benefit multiple industries in India. Unknown Analyst: Anish, the 8% to 10%, you're talking more real growth or nominal growth? Anish Shah: Real growth. Amarjyoti Barua: Can I just add one perspective because this is why we always encourage all of you to look at consolidated. All of these impairments are not just accounting, right? There are some tough decisions that have been taken by the Farm leadership. And so we do foresee international not to be such a big drag next year, right? And I think that is something -- when you think about Farm at a consolidated level, there is also that constructive view that you should take because there is some really tough decisions that the team has taken. Anish Shah: Yes. And I'll emphasize 2 points. One on what Amar said and coming back to your question around the growth numbers. There was a point in time which you've seen we would put impairments as onetime items. You saw from the pages today, impairment was not a onetime item. It is operating profit, right? Or it brings the operating profit down. And that's a mindset we are using right now to say that wherever we invest, we need to get the results from there. And as a management team, we take accountability for that to say that is the result we will drive. And therefore, it is in our operating profit number, not as a onetime item that look at as an impairment. But to Amar's point, that improves performance going forward. And yes, there are some actions that will not work. That will always happen. But we find ways to offset that. But as we've done this, it improves performance going forward. Second, I'll come back to the growth point and expand a little on what I said. India has grown 6.5% a year in real terms for the last 30 years. And with what we see today, with the kind of infrastructure that's put in both physical and digital, the kind of government spending on CapEx, the reforms that have been put in place and more that are coming, the focus of the government on making it easier to do business, we're not completely there as yet, but there's a lot of conversation that takes place. Often, we are part of those conversations to say, here's what needs to be done. And there's a lot of room for the government to listen to it and start taking action for it. The demographic factor that we have, we are at 28.8 years median age. The China and the U.S. are at 38, Japan is at 48. So we have a lot of these benefits, and we are starting to see that come together as one to start the economy growing faster, so which is where we say that it should be 8% to 10% from a real basis. With all these actions that have been taken, this is not a -- we hope for actions in future and it will happen. This is the result of actions that have been taken already. Operator: We'll go with Raghu, then Gunjan will come to you and Rakesh. Unknown Analyst: Congratulations on strong numbers. Firstly, to Anish sir. Sir, in your Davos interview, you had talked about last mile mobility listing. If you can talk about the time line and strategy, that would be helpful. Also, if you can share your thoughts on the benefits for Mahindra Group from the recent trade deals with Europe and U.S. And also like last 2 years were remarkable for Tech Mahindra in terms of deal wins and margin expansion. How do you see the medium-term outlook? And finally, on Mahindra Finance, now that the asset quality is better, how do you see the growth ahead? Anish Shah: All right. That's a great set of questions overall. So let me start with the last 2 and Mahindra Finance, in particular, and Tech M and then I'll go to the EU FTA and continue on the first question. So Mahindra Finance, for the last 3 years, we specifically had a view that the business has to get to a much stronger and consistent asset quality. If you look back over time and you look back even what I've said on Mahindra Finance in the past, we would go to 16.5% or 16% GNPAs in every crisis, stay at 8% in normal terms. We would always say that we will get all of this back and we did. So it was always profitable, but it was highly volatile. And that is something that we had to change because we didn't like the volatility. It caused a lot of questions. You didn't like the volatility either. And therefore, we said that we have to bring it down to less than 4.5%. What that also does is it brings ROA down because higher risk, higher return. But the ROA hasn't come down as much as we had expected it to come down. So it's come down to 1.9% or so right now. The last few quarters have been less than 4% from a GNPA standpoint. And we've cut out a number of customers that caused earn and pay. And if you go back to even many years, every time during a crisis, our CEO at that time, Ramesh Iyer would talk about the earn and pay segment. And so the earn and pay segment has been impacted, and they will come back and pay later because they're not earning right now, they're not paying. But that segment, we're not lending to anymore. And therefore, you've got that coming down. ROA at 1.9% doesn't worry us as much because our cross-sell ratio is the worse in industry, which I look as an opportunity. So as we cross-sell more, as we sell more insurance and other fee-based products, that is starting to come up, and we'll get that back to 2.2% to 2.5% after that as well, but have a very strong, stable business. The other aspect we needed in that stability was controls because we did at times go 2 steps forward and come 1 step back, right? That something happens in ice ball, something happens somewhere else. It's out of our control. But can we have a business with very strong controls where we can start picking this up and centralize a lot of the processing, put in a lot of technology that's good for customers as well. In some cases, our customers have to sign 76 times to get a loan. I'm not exaggerating on this one. And with technology now that has been put in Project Udaan that got put in, it's one digital signature, and that's it. So it's taken away a lot of the processing away from it, which then improves cost. So OpEx ratios, we haven't talked about a whole lot as yet, but a lot of cost will come out of the system as technology has been put in. So as we look at our OpEx ratio, as we look at our loss ratios coming down, our credit losses have always been stable. Our GS3 will be even better. The business is on a very strong track. And now we have pivoted to growth. We will grow responsibly. We're not going to grow even at the levels we could right now because we're going to continue to maintain this discipline that we have. So therefore, we see Mahindra Finance on a very strong track at this point in time. Tech M hasn't finished its first phase as yet. Mahindra Finance has finished its first phase. The other aspect in Mahindra Finance is a very strong management team. And you can see that in terms of what we've announced. We've got some really good leaders from top banks and in a couple of cases, top NBFCs as well. So that gives us a lot of comfort. Tech M, we've got a very strong team. We've made the internal transition of the delivery organization, centralized it, and that's working very well right now. It's on track to deliver what it has to in its first phase, which ends by F '27, and it has to get to a 15% EBIT margin. As it does that, then we will look at pivot to growth from that standpoint as well. So that's on the Tech M story. On FTA, I like the way you phrased your question, which is what are the benefits from the FTA. And actually, we see that as benefits because I will give a lot of credit to the government on this. They had a very, very fine balancing act because this was a big ask from the EU because of the unused capacity that they have. And the government had the balancing act not to protect us in any form because I'll come back to that protection part, but to ensure that manufacturing in India did not get a hit, that OEMs outside India continue to invest in India and continue to manufacture in India. And that's what we told them. That's what we want. We want more carmakers to come here. We want more competition. We want a bigger market here because the more scale that we have to manufacture in India, the better it is for us. We will get a better ecosystem. We'll be more competitive and we can Make in India for the world in a much better way. That's why China is very competitive. China capacity today is 50 million units a year. Roughly half is unused. India capacity is 5 million units a year. That's where China was 20 years ago. Europe is at 23 million units a year. But Europe also has 10 million, 11 million unused capacity. Volkswagen alone has unused capacity that's half of the India market. 2.2 million is Volkswagen's unused capacity. So as you look at all of these things, the fine balancing act was to make sure that we open up the industry, we'll reduce tariffs. At the same time, we encourage all of the European makers to continue making in India. And I think they've done that really well. We can go through some of the details. You've seen most of it already. Coming to the part around protection and competition for us, take any of the European models, right? Any model that's going to be successful in India is in India. Now if you look at the math behind it, whether it's a Renault Duster or whether it's a Stellantis Jeep or whether it's any other vehicle, can they make it in EU, ship it, take the cost for shipping, take the cost of inventory for 4 months and do it cheaper than they can manufacture in India? Unlikely. If that is the case, then how does it change competition for us? They will make as many cars as they can make for India, that's what the price will be. What they would have done if the outcome had been different is if they were allowed to send everything from Europe, they could have said, "I'll shut down my India plant, and I will manufacture in Europe and send it here because I don't have to shut down my European plant in that case," right? Some have announced shutdowns of European plants as well, which they have not been able to do right now. But that's where the FTA has been done very well, which will not allow them to do that because they will need a presence in India to be able to succeed here. So that is our view on why the FTA has been done very well. The benefits or opportunities come from the fact that we can send our cars to Europe at 2.5x the quota that they have there, which is a great quota from our standpoint at 0% tax, right? Yes, their reduction was lower. Their starting point was lower and which is why it goes down to 0%. But that opens up a significant opportunity for us. And we can test the European market by manufacturing in India well and sending it there. We will also get a lower price for some of our components coming in because this FTA also allows for that. So today, we pay 16.5% for electronic screens. We have a few other imports that we have that we have a higher price. That comes down as well. So we see a lot of benefits from the EU FTA in particular. The U.S. FTA actually was a surprise in many ways. It doesn't really give much to the U.S. from an auto standpoint, the way it's drafted right now, at least what we've seen. We'll wait for the details to come in, but we don't expect any -- we never expected any challenge from the U.S. in any case. Europe was a bigger one in that sense. Unknown Analyst: Last mile, sir? Anish Shah: Yes. On last mile, we did talk in towers that we'd look at an IPO next year. And that's more around where the business is, where its trajectory is. It is competing fiercely in the market and doing very well. And we just feel that an IPO will just help unlock that value for that business. It's the right time for it, and that's what we'll do. It's not for monetization in any form because we're not worried about the cash aspect of it, but it's just something that helps proclaim victory in that space, which is why we do it. So that's -- it really shouldn't change anything from the economic view of the group. Unknown Analyst: To Rajesh sir and also to Veejay sir, on the tractor side, how do you see the contribution of the subsidy-led sales in the current year? And how do you see that subsidy-led momentum continuing for next year? Rajesh Kajuria: Yes. I'll take that, Raghu. And of course, Divya had prepared us for this question coming from many of you. So mainly the subsidy was Maharashtra and Maharashtra saw a huge growth in industry, thanks to the subsidy. Roughly 35,000 extra numbers of tractors have got sold on account of the one subsidy, which was very successful. There were 3 subsidy schemes in Maharashtra. So without getting into the granular details of each subsidy scheme. So roughly 35,000 extra tractors in F '26 over F '25 on account of the one major thing, which we don't expect will continue. But then that's the number in perspective. From looking at just that state of Maharashtra, obviously, the state will not get growth. But normally, some other state will do something or there will be key drivers. If you see the previous year, Chhattisgarh had a huge growth just like Maharashtra is having this year. So there will always be 1 or 2 other states which compensate for something else. So we live in that hope. And certainly, Maharashtra will be flattish after such a heavy growth. I think it was 90% growth or something in Maharashtra, 68%, whatever. Unknown Executive: Two years of already a pretty strong... Rajesh Kajuria: Yes, yes. So that is what it is. So that's the 35,000 is the extra absolute number in an industry of 10,000 numbers or 10 lakh numbers, all India industrial... Anish Shah: I'll just add to that and also what Kapil asked earlier, we generally like steady growth numbers year-over-year because we look at outperforming in the market. And even the auto industry, if you look back over the last few years, hasn't really grown at rapid pace, and we've done very well in an industry that hasn't grown at a very rapid pace. So for us, the huge fluctuation where growth goes up so much and then in Maharashtra it will come down again is not ideal. Yes, we will like some short-term numbers that come from it. But our general preference is slow, steady growth that comes in, and we'll overperform on that basis. Unknown Analyst: Just a last question... Operator: I'll come back to you. We'll go with Gunjan. Gunjan Prithyani: Okay. I'm going to keep it at 2. So Rajesh, with you. I think I just want to hear your thoughts on the EV business scale up now that it's been a year, we've had the portfolio in place and the fact that we have these 3 models, which will be there for the -- in CY '26, there's nothing incrementally new coming, right? So a couple of things that I'm trying to get your thoughts on. One, how do we think about the ramp-up of the volumes with these 3 models? And are these 3 models enough in context of the CAFE emission norms if they were to kick in from April '27 onwards? And just going back to the supply chain bit that this is a lot different from the ICE supply chain. Having sort of produce these models for almost a year, what are the challenges that we are -- and we see, particularly memory chips is something that I keep hearing from my colleagues is a big issue. So some thoughts on the supply chain, how sorted are we now for the next stage of ramp-up on this business? Rajesh Kajuria: Okay. Let's just get the memory chip thing out of the way. It's not an EV thing, the memory chip, right? It's going into everything. It's in infotainment systems and multiple other parts of every ICE and EV car. So a memory chip shortage has no isolated effect on EV. It has an effect on the whole portfolio because literally every part of our -- every product or variant of ours has something like an infotainment system, which needs a memory chip. So memory chip is something that is a supply chain risk/price-sensitive thing because shortage obviously is driving premiums in memory chips. So memory chip is something which is a watch out across the portfolio right now. That's the new rare earth, let's call it that, right? So every quarter, we have one such thing which will take disproportionate energy at the moment, that is memory chips. So that's not an EV thing. I'm just wanting to get that out of the way because, yes, it's a watch out and it's something that we are taking all the mitigating actions to build inventory, so on and so forth, which we have done in all other previous such kind of at risk to supply parts and memory chip is certainly one. But I just want to call out that, that is -- I'm isolating that from EV that is -- a memory chip shortage will affect the whole portfolio significantly. Gunjan Prithyani: Are you covered for it in the... Rajesh Kajuria: We are covered for it in the short run. We are buying in market. We are paying premium, and we have a set of mitigating actions. We are covered in the short run. But it's almost like going back to semiconductors of COVID. I mean that's -- the risk could be quite severe. We have the learnings now out of having handled some of those discontinuities or disruptions. So we are probably better equipped to deal with it, and that's what we are doing proactively. So memory chip is one. We are covered for now. The EV business scale up for the year F '27 is based on the 3 models, which we said. The model some of you got to see we had kind of put visuals of that out in the Banbury 2022 event is what we had code named BO7. It probably won't be launched with that name, will come in, in some part of calendar 2027. That we believe will be a very big volume driver on top of what we are doing with our current 3 products. So that is we are expecting as a 2027 launch. The 3 products we are expecting will be in the volume range right now in this calendar year between 7,000 to 8,000 a month, which is the kind of number that we have put out when we launched the 9S. So I'm just reinforcing the number that we put out as our projection for 2027, roughly [ 80-plus thousand ] a year. We feel comfortable based on the response that we've got to 9s. That's a number which is achievable. The CAFE question I've already answered, Raghu, by way of saying that there's no real answer. So I just stay with that same position. I think right now, all we can do is try to do the best in each segment without worrying about ratios. That to us is the best approach. While we, as an industry, are in touch with government, we've got to see how we grow the business and each subsegment individually, which is ICE to not curtail growth of ICE worrying about ratio and EV to maximize it to leverage the opportunity that there is. So that's really the way we are thinking about it. There's no separate supply chain-related disruption that we are seeing on EVs compared to ICE. So I just want to clarify that actually the rest of the supply chain sales and all of that on EV has actually been very seamless. So we actually don't have EV-specific supply chain disruption at all. Any supply chain disruption that is happening is based -- is actually impacting ICE and EV both because we do now have very good and high technology even in the ICE. So if there's anything happening there, it's happening here as well. Gunjan Prithyani: And just to get the regulation out, is BS VII something that is from a cost implication perspective, going to be meaningful, particularly on the diesel heavy portfolio, if you can share your thoughts. Rajesh Kajuria: Yes. No, I don't think it was -- I don't think Velu is here to help me with this, but it's not going to be -- I don't think we're going to have a penalty on diesel compared to gasoline on BS VII. A lot of work has already been done on BS VI.2. So the incremental cost of doing diesel or gasoline may not be disproportionately high. We are right now working on being ready with BS VII. We're not sure of the timing, but we are ready -- we will be ready with BS VII and... Gunjan Prithyani: The cost... Rajesh Kajuria: The cost is something we'll have to see. I mean we -- the whole industry did take BS VI. Unknown Executive: [indiscernible]. Rajesh Kajuria: Yes. Gunjan Prithyani: Okay. Got it. Just last question, Amar, to you. I think on the MEAL, if you can share what was the PLI that was as a percentage that we are accruing on the subsidiary? And with the all capacity that we've announced, is there any change to the CapEx outlook versus what we had shared earlier or anything that we should think through? Amarjyoti Barua: CapEx, we'll talk about in May because then we'll give you -- I mean there is -- it's all within what we had communicated earlier. We had always anticipated there will be greenfield and all of that is in there, but we'll give you more. On PLI, we've been accruing 13% on wherever there is approval. And as each of -- as Rajesh clearly laid out, I think this quarter, there will be -- to the extent there is 9S, we will have similar and then next quarter with the BE 6. Rajesh Kajuria: We may not accrue or assume to accrue 13 as we go into Q1. Basically, the way this works, Gunjan, is it depends on which suppliers in the value chain also qualify for PLI. So basically, if nobody qualifies in that period, then you can accrue the whole spread of 13. But if someone else, then there's a sharing. So it could range anywhere between 8 and 13 depending on which suppliers also qualify for PLI in your value chain. So we've been accruing 13 because nobody else has qualified. Amarjyoti Barua: For 9, there was nobody else. Rajesh Kajuria: Nobody else. So we have accrued the full 13. But as we get into Q1, we'll have to see whether it's 8 or 13 or whatever is the number. Amarjyoti Barua: For example, LMM to Rajesh's point is at a lower level because there are suppliers who qualify. Operator: Rakesh, you want to go? Unknown Analyst: Rajesh, my question was on 7XO. So pretty solid initial demand in terms of booking. And for the top 2 variants, specifically, you called out 70% of the demand is for that. If we go back 4, 5 years when 700 was launched, we had a similar situation, pretty solid demand, more skewed towards higher variant, maybe less than what we are seeing with 7XO. And then as the demand stabilizes, we start seeing that the product started being seen as a premium product priced above INR 20 lakh, INR 25 lakh, and that makes it difficult to sustain strong volume and you had to take price action at that time as well. How are you going to mitigate a similar repeat of a risk that once the demand stabilizes for the premium product, it doesn't get restricted to a smaller price point, but the entire price from INR 13 lakh to INR 25 lakh is addressed. Rajesh Kajuria: Okay. Rakesh, great question. So learning out of that, what we've done in 7XO, we've actually discontinued what we were calling the MX series. So just to go back to the 700, we used to have the MX series and the AX Series. AX was AdrenoX-based, which was a connected car. And MX did not have the connectivity and the AdrenoX interfaces, which were well priced. But for a customer who was coming into 700 kind of tech mindset, didn't want to look at MX as an option at all, while that was well priced. So the few corrections we made in the way we've constructed the variant lineup on 7XO is completely discontinued MX. So we now start with AX. So the lowest entry version of 7XO comes with AdrenoX and is a connected car. We have 3 screens right from AX. So the entry variant has 3 screens. So there are some of these things which were very key part of the value proposition of the product, we didn't have in 700 and the lower versions. And which is why when later on, as demand for the higher end started going down, customers are not willing to -- they didn't find the lower-end versions attractive enough because the brand stood for a certain tech value proposition and the lower end were not offering that. This we have taken care of this time. So we -- basically the key part, so DAVINCI suspension or the AdrenoX connectivity or the 3 screens are there right from the entry variant of AX. So it will be far easier for us to leverage AX, AX3 to drive volumes than what we were able to do with 700, where basically MX was not getting any traction at all. Unknown Analyst: So this initial skew of demand towards higher variant, you don't see that as a risk that in the mind of customers, it's fixed that 7XO probably is a premium car. Eventually, you would start seeing a more diversified demand across portfolio. Rajesh Kajuria: Yes. Unknown Analyst: The question I'm trying to come to essentially is that... Rajesh Kajuria: Will we have to drop price again? Unknown Analyst: Or maybe introduce some other brand at a lower price? Rajesh Kajuria: Yes. This risk is there because if you keep selling the top-end version only then the brand starts getting associated at, whatever, INR 20 lakh, INR 22 lakh price point. We've just introduced the Roxx, a special version on Roxx, called Roxx Star, Star Edition, which is actually the X7, which is at, I think, INR 16.5 lakhs or INR 16.9 lakhs or INR 16.8 lakhs or some 16.8 lakhs, which actually achieves this objective. So we had kept that option open in the -- when we launched Roxx that there is a slot in between, which was the AX7 equivalent slot, which we didn't use. And we have the ability to bring that in at a time when then that allows -- when needed to pick up volume at a price point of INR 17-odd lakhs. So there are things like that we could do with 7XO as well. To your point on should we have another product, that is something that we -- I'm sure we'll talk about as we talk about our product portfolio and share more with you as we go along. Unknown Analyst: Great. Just one clarification on your tractor capacity. How is it positioned and for the next year... Rajesh Kajuria: Yes, it's tight, honestly, because we are not -- we were not prepared for 25% growth this year. So we are scrambling to put capacity in more by way of Swaraj than Farm division. Swaraj, we have a plant 3 and that we are ramping up. We had some capacity constraints at our engine facility, which is Swaraj Engines. That capacity expansion was already approved. And that, I think, comes on way now between March and June. So it was basically June, which we are trying to prepone and get done by March. So because there was a little bit of a timing gap in that capacity coming in place, so Swaraj was constrained by engine availability from Swaraj Engines, which is the primary or the only supplier to Swaraj tractors. But that, I think we'll overcome. But like I said, we are adding 100,000 in Nagpur greenfield for Mahindra branded tractors plus looking at what we need to do for Swaraj, which should cover us for F '27. Operator: Raghu, your last question? Unknown Analyst: To Amar sir, if you can talk about the Farm subsidiaries, there was this noncash write-offs this quarter. So next quarter onwards, we should expect a normalized performance? Amarjyoti Barua: So for some of the subsidiaries where we have decided to restructure, there are rules around what you can recognize and can't recognize. So we have done whatever is the maximum possible under the rules, and there will be some trailing costs after, right? So there will be costs, but not of the magnitude that you saw today. So there will be trailing costs, and then there will be losses till the time the complete restructuring has been completed. So you will -- at least for this year, don't expect any dramatic changes. Next year, towards the second half, you should see the change in trajectory. Operator: Great. We are running a bit over time, so we'll just close this -- you have a question, okay, please proceed. Unknown Analyst: I had a question. What is your global ambition in EVs? And second is, what is the key to increasing margins in the automotive business because your scale is going up, your volumes, your market share, your acceptance is very strong. And how do you increase the margins there? Rajesh Kajuria: Yes. On the EV global, we had already spoken about the way we are approaching this. So we will look at, like we had said, for the EVs, the right-hand drive markets first, so which is Australia, New Zealand and maybe potentially U.K. Anish just spoke about the EU opportunity. So at an appropriate time, we'll go into left-hand drive markets in Europe potentially, but only after testing and being confident that it's an acceptable and a successful value proposition in the right-hand drive market. So we don't want to globalize recklessly. We have said that we will do it in a very calibrated way, see the response that we get in right-hand drive markets, maybe Australia, New Zealand first and then U.K. So that's where we are on EV. It will be very watchful and calibrated. On margins on auto, our approach has always been -- and we just had some questions around how we are pricing and so on, but is to make sure that we drive margin improvement not because the customer is willing to pay for more, so we should just keep increasing prices. It should come out of staying focused on volume, ensuring the brands continue to have a strong value proposition while working on our cost structure. So we are very, very careful and calibrated in price increases that we take. We want to keep the positioning visa customers -- price positioning vis-a-vis customers intact, so the brands continue to have momentum and then work on costs. And that, as you've seen with time, we have the best in industry peer margins right now. That comes out of -- or in spite, if I may use that word, of being very competitively priced with every launch that we do and even with our existing products. So it's really the balancing between how to get margins by being very well priced and managing costs well. Unknown Analyst: And sir, out of, let's say, 50-odd thousand SUVs, which you sell every month, how many of the customers are coming who are Mahindra customers in some way? And how many are coming from other brands, if you can help us? Rajesh Kajuria: Yes. So we've shared this earlier for EVs where 80% of the customers that we got in last year were actually non-Mahindra customers. In the rest of the portfolio, it depends based on products. So for example, 3XO, which we do almost 9,000, 10,000 a month, is not -- are all new or first-time buyers. They're not really Mahindra customers. Bolero, Bolero Neo will get a lot of Mahindra customers. XUV 7XO is getting a lot of customers which are non-Mahindra. So it really varies across product portfolio. I don't want to give you a very broad one number because that would be not the right way to interpret it. Operator: Great. With that, we'll close this meeting. Thank you so much, everyone, for joining us. Please join us for refreshments. Thank you.
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Cineplex Fourth Quarter Year-End 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Rayhan Azmat. Sir, please begin. Rayhan Azmat: Good morning, everyone. I would like to welcome you to Cineplex's Fourth Quarter 2025 Earnings Release Conference Call. I'm Rayhan Azmat, Vice President, Investor Relations, Corporate Development and Financial Planning and Analysis at Cineplex. Joining me today are Ellis Jacob, our President and Chief Executive Officer; and Gord Nelson, our Chief Financial Officer. I'll remind you that certain statements made today are forward-looking and subject to various risks and uncertainties. Such forward-looking statements are based on management's beliefs and assumptions regarding the information currently available. Actual results may differ materially from those expressed in forward-looking statements. Information regarding factors that could cause results to vary can be found in the company's most recently filed annual information form and management discussion and analysis. Following today's remarks, we will close the call with our customary question-and-answer period. I will now turn the call over to Ellis Jacob. Ellis Jacob: Thank you, Rayhan, and good morning, everyone. I'm pleased to present our fourth quarter and full year 2025 results with you today. We will start with a look at the fourth quarter, which featured a broad and compelling film slate that appeal to audiences across a wide range of genres. The quarter's performance was led by James Cameron's third installment in the Avatar franchise, Avatar: Fire and Ash, which delivered a strong performance and over-indexed at Cineplex powered by audience demand for our premium experiences. Following close behind was family titled Zootopia 2, which provided incredible results and has become the highest grossing Disney animation release of all time globally. The musical Wicked: For Good enchanted audiences and contributed meaningfully to the quarter's performance. In addition, Five Nights at Freddy's 2 delivered the largest December opening ever for a horror film. Together, these results reinforce the familiar truth, when compelling content is available, guests choose to experience it at our theaters. While the quarter included several standout films and strong performances in our premium formats, Q4 results were down compared to last year, driven primarily by the weakest October since 2020. After the slow start to the quarter, the slate strengthened significantly through November, December, supported by the wide range of high-performing titles and leading to our strongest December since 2019. In fact, our fourth quarter box office performance exceeded the domestic market by 218 basis points, marking the third consecutive quarter where we outpaced the North American industry performance. Our premium formats remain one of Cineplex's competitive advantages with guests overwhelmingly choosing to view films in one of the many enhanced formats we offer. In Q4, 43% of our box office came from premium experiences versus 41% in 2024. Our premium formats continue to play a major role in the performance of 2025's biggest titles with our top 5 films averaging 62% of our box office from premium formats. The strong demand for premium experiences, combined with strategic pricing and a continued focus on the guest experience contributed to new all-time records. In Q4, we delivered the highest quarterly box office per patron in our history at $13.87 and a Q4 record for concession per patron at $9.92. Our distribution business, Cineplex Pictures, also had a strong fourth quarter. The Housemaid opened in Q4 and has delivered impressive holding power into January. And Now You See Me: Now You Don't, performed exceptionally well in Canada. Our distribution team continues to demonstrate that we can drive better results as a distributor because of our deep understanding of the Canadian moviegoer allowing us to effectively position and market titles to maximize their potential in this market. The success of our distribution business in the fourth quarter was also highlighted by Jujutsu Kaisen, the anime title performed well and as part of our broader resurgence in the genre. Earlier in 2025, Demon Slayer: Infinity Castle, became the highest-grossing foreign-language film of all time at the domestic box office. Its performance reinforce how anime tentpoles can drive exceptional results when they tap into large, passionate fan bases built over years of televised storytelling. This dynamic extends beyond anime with the Stranger Things series finale, which sold out at 97% of our locations during the year-end. These events reinforce that audiences are choosing to come to our theaters for moments they could easily watch at home, drawn to share and immersive cultural experiences that resonate more deeply in our cinemas. The fourth quarter once again showcased the value of our data-driven audience targeting and localized market expertise. International content represented more than 11% of our Q4 box office nearly double the North American average further demonstrating our ability to identify titles that resonate with specific demographic groups. One of the standout performance this quarter was Dhurandhar, which became the highest grossing Hindi language film in North America where Cineplex delivered an impressive 31% market share and ranked among our top 5 films for the quarter. This underscores how alternative an international content remain key differentiators for Cineplex and positions us well for 2026, which includes a number of highly anticipated international releases including Blades of the Guardians, and Scare Out, both of which they do at the start of Lunar New Year, as well as the sequel to Dhurandhar in March and Ramayana Part 1 later this year during the Indian Festival, Diwali. Our programming strength form an important competitive advantage, reflecting the power of our analytical capabilities and reinforcing the essential role this content plays in the future of theatrical. Turning to our media business, Cinema Media continued to perform well despite a softer advertising market. Q4 revenues increased 12.5% over the prior year despite a decrease in attendance. As a result, our Cinema Media per patron reached a Q4 record of $3.33. Advertisers remain attractive to the high attention environment that only theatrical can offer. Our team continues to leverage data and analytics to optimize campaign performance and demonstrate clear value to our agency partners and clients. We successfully closed the sale of Cineplex Digital Media to Creative Realities, Inc. on November 7, 2025. The transaction unlocks meaningful value for shareholders while strengthening our balance sheet. The initial cash proceeds of approximately $60 million provides flexibility for share buybacks, debt reduction and general corporate purposes. Importantly, Cineplex Media will continue as CDN's exclusive advertising sales agent for its digital out-of-home networks across Canada ensuring continuity for clients and maintaining a strong presence in this market. Turning to our location-based entertainment business, revenue increased 6.8% to $35.9 million in the fourth quarter, driven by the contribution of new locations opened in the prior year. This performance comes against the backdrop of broader industry trends where many operators seeing same-store revenue decline in the same range we are. Despite the softer top line results, we continue to demonstrate strong operational discipline, which helped us maintain flat same-store margins. This reflects the expertise of our teams and our ongoing efforts to optimize the operations of our locations. During the quarter, we announced that construction of a new Playdium is underway at Vaughan Mills, one of Canada's most visited shopping and entertainment destination. This location will further strengthen our position in the GTA and expand our ability to offer guests a dynamic social entertainment experience, anchored in gaming, attractions and food and beverage. Our Cineplex Club program remains a powerful driver of engagement and frequency. Membership has now surpassed 225,000 members and we continue to see strong adoption of the annual plan, which helps reduce churn and support small consistent visitation throughout the year. CineClub members visit more often chose premium formats at a higher rate and spend more on concessions. All signs the program is delivering meaningful value both for our guests and our business. Our new Monday surprise premieres have also been extremely well received, offering moviegoers early access to select titles and creating a sense of exclusivity that strengthens loyalty and deepens engagement. Our broader loyalty ecosystem has also taken an important step forward with the expansion of Scene+ to include Shell as a national partner. This addition enhances the everyday utility of Scene+ by connecting entertainment, groceries, travel, dining and now gas into a holistic value proposition. The ability for guests to own and redeem points across such a wide range of touch points in their daily lives, strengthened Scene+ as one of Canada's leading loyalty programs. I'd like to provide a brief update on our appeal of the Competition Tribunal's decision regarding our online booking fee. The Federal Court of Appeal has upheld the Competition Tribune on September 2024 decision related to Cineplex' presentation of its online booking fee including the $39 million administrative monetary penalty. We respectfully disagree with the Federal Court of Appeals' decision, and we continue to believe that our online booking fee has always been presented in a clear and permanent manner that fully complies with the spirit and letter of the law. We have reviewed the Federal Court of Appeals' decision and will seek leave to appeal to the Supreme Court of Canada and seek the state of this penalty. As we look back on the full year, we started with the soft first quarter, but Q2 to Q4 benefited from a relatively consistent release schedule and a diverse slate of quality films contributing to a solid and steady performance through the balance of the year. From April through December, we delivered box office revenues of 105% of the prior year and outperformed the domestic market over the same period, reflecting the unique strength of our programming strategy and the engagement we continue to see from Canadian moviegoers. Our investment in premium experiences continue to resonate with 44.8% of our box office from Q2 through Q4 generated from premium experiences the highest proportion since the same time frame in 2018. Audiences embraced a wide range of genres and formats. Superman and The Fantastic Four: First Steps, both became the highest grossing films in their franchise. Live action firms, remakes of Lilo & Stitch and How to Train Your Dragon, both outperformed their original films. A Minecraft movie delivered the biggest opening ever for video game adaptation. Best Picture nominee, F1, the movie became Apple's highest grossing film of all time, driven by exceptional performance in our premium formats. Horror film, The Conjuring: Last Rites became the highest grossing in its time chart and the original title Sinners and Weapons will both standout performances and exceeded expectations. Despite this breadth of success, no film surpassed $500 million at the domestic box office. The first time this has occurred since 2016. We do not expect this anomaly to occur again. What gives us more confidence is that the 2026 film slate is shaping up to be significantly stronger than 2025 with both mega blockbusters and depth. Audience engagement to trailers and teasers is suggesting that consumers are meaningfully more interested in 2026 titles than they were in 2025. The 2026 lineup features a remarkable collection of strong intellectual property with incredible brand recognition, including: The Super Mario Galaxy Movie, Toy Story 5, a live-action remake of Moana, Spider-Man: Brand New Day, Dune: Part 3, and Avengers: Doomsday. The slate also includes compelling original titles such as Pixar's Hoppers, Steven Spielberg's Disclosure Day and Chris Nolan's epic The Odyssey. Cineplex Pictures will be distributing the highly anticipated film, Michael, which is the most watched biopic trailer ever. It is also acting as a distributor for the new installment from the Hunger Games franchise, Sunrise on the Reaping. These releases position 2026 as a year with significant strength and greater depth than 2025. With our focus on premium experiences, innovative programming, loyalty engagement and increasing diverse slate, Cineplex is well positioned to capture demand as it develops over the course of the year. Before I close, I'm pleased to announce the appointment of Sean McGuckin to our Board of Directors. As the former Group Head and CFO at Scotiabank, Sean brings intensive leadership experience in finance, governance and executive management and his strategic insight will be a huge asset. We look forward to the valuable perspective he will bring to the board. I would also like to extend our sincere thanks to Rob Bruce for his many years of dedicated service and meaningful contributions to Cineplex. His leadership, counsel and support have played an important role in guiding the company, and we are deeply appreciative of his commitment throughout his tenure. I will now turn the call over to Gord Nelson, our Chief Financial Officer, to walk you through the financials in more detail. Thank you. Gord Nelson: Thanks, Ellis. I am pleased to present a condensed summary of the fourth quarter and full year 2025 results for Cineplex Inc. For further reference, our financial statements and MD&A have been filed on SEDAR+ and are also available on our Investor Relations website at cineplex.com. Our MD&A and earnings press release include a complete narrative on the operational results. So I will focus on highlighting select items in addition to providing commentary on liquidity, capital allocation priorities and our outlook. For my comments on operations, all amounts following will be from continuing operations unless otherwise stated. As Ellis mentioned, the fourth quarter was supported by several highly anticipated releases. Our EBITDA remained relatively flat to the prior year despite lower attendance. Total revenue for the quarter was $334.8 million, a decrease of 1.8% from Q4 2024, driven primarily by lower attendance. Adjusted EBITDAaL was $35.1 million, just below the $35.8 million reported in the prior year, reflecting the impact of the lower theater volumes related to a weak start to the quarter, partially offset by strong per patron performance and continued cost discipline. Our consolidated EBITDAaL margin remained steady at 10.5%, consistent with the prior year. So, now let's take a closer look at the segments. In the Film Entertainment and Content segment, box office revenue for the quarter was $140.7 million, down 4.7% and reflecting the 8.9% decrease in attendance to 10.1 million guests. October results were impacted by a softer film slate and competing live events, such as the MLB Playoffs and World Series, which featured our Toronto Blue Jays and generated record-breaking viewership across Canada. As a result, the Canadian market underperformed the North American market by 480 basis points in October. These softer results were partially offset by a strong rebound in the latter half of November and through December led by Wicked: For Good, Zootopia 2 and Avatar: Fire and Ash. The strength in the latter half of the period contributed to Cineplex outperforming the North American box office by 218 basis points for the fourth quarter. Our Q4 BPP of $13.87 was the highest delivered in any quarter on record and represents an increase of 4.6% from last year. This was supported by strategic pricing initiatives and a strong mix of premium products. Similarly, concession per patron reached a Q4 record of $9.92 and our second highest quarterly result ever, up 5.4% driven by continued enhancements in menu offerings, purchase incidents and service execution. While our cash rent paid and payable is lower due to closed locations and the renegotiation of leases upon renewal, theater occupancy increased approximately $3 million over the prior year primarily due to tax and insurance recoveries reflected in the prior year. Segment adjusted EBITDAaL for Film Entertainment and Content was $14.9 million compared to $26.6 million last year reflecting the attendance decline and higher film settlement rates on this quarter's top-performing titles. In our Media segment, Cinema Media revenue increased 12.5% to $33.8 million, driven primarily by higher demand for showtime advertising with strong contributions from pharmaceutical, retail and fragrance and cosmetic clients. The launch of programmatic cinema in the fourth quarter also unlocked incremental demand from connected TV budgets, bringing new advertisers into the cinema environment, particularly within the consumer packaged goods category. Cinema Media per patron increased 23.3% to a Q4 record of $3.33, reflecting strong advertising engagement, especially during an uneven attendance quarter. As a result of the revenue increase, segment adjusted EBITDAaL was $28.3 million, up from $24.9 million in the prior year. On a full year basis, EBITDAaL margin in this segment increased to 80.5% from 79.2% in the prior year. Location-based entertainment revenue for the quarter was $35.9 million, an increase of 6.8% from the prior year, driven primarily by the three new locations that opened in late 2024 and contributed a full quarter results this year versus only partial contribution last year. Same-store revenue declined 4.1% consistent with trends observed across the broader LBE industry. Despite these revenue declines, same-store adjusted EBITDAaL margin of 23.1% remained stable year-over-year, demonstrating the operational improvements and cost discipline we've executed on. These efficiencies helped to mitigate the impact of minimum wage increases. Overall, adjusted store level EBITDAaL for the quarter was $7.6 million compared to $7.9 million last year with an overall margin of 21.1%. At the segment level, adjusted EBITDAaL margin improved to 16.4%, up from 10.2% due to fewer preopening costs in 2025. G&A expenses for the quarter were $14 million, down $5.2 million from the prior year. This decrease was primarily driven by lower LTIP expenses due to increased forfeitures associated with the cost restructuring program and a lower share price. In November, we completed the sale of Cineplex Digital Media and received $60 million in initial cash proceeds. We recognized a gain of $3.3 million and have presented the gain in net income from discontinued operations. Importantly, Cineplex will continue as the exclusive advertising sales agent for CDMs, digital out-of-home networks nationwide under a long-term agreement, preserving continuity and value in our media business. We ended the quarter with $134 million in cash on the balance sheet and no drawings under our $100 million covenant-light credit facility. The December cash balance is higher than prior period due to the $60 million in initial cash proceeds received on the sale of CDM in addition to working capital, NCIB and operating results impacting this balance sheet. With respect to CapEx, net cash capital expenditures for the fourth quarter were $8.1 million, reflecting lower gross spending following the completion of our major LBE openings in late 2024. For the full year, net CapEx was $32.7 million, lower than the $65.9 million in the prior year, which included the three new LBE locations, in Vaughan, [ single. ] Our guidance for 2026 is $50 million. Our capital allocation priorities remain unchanged and include maintenance capital expenditures, strengthening the balance sheet to achieve our target leverage ratios, providing shareholder returns in the form of share buybacks and/or dividends and selective investment and growth opportunities. During the fourth quarter, we purchased -- we repurchased approximately $7 million in common shares for cancellation under the NCIB, and we repurchased an additional $5 million in shares in January 2026. We expect the remaining funds from the sale of CDM to be allocated towards a contribution -- combination of debt reduction, opportunistic buybacks or other corporate purposes consistent with our capital priorities. As Ellis mentioned, with respect to the Federal Court of Appeal, upholding the Competition Bureau of September 2024 decision related to the presentation of our online booking fee, we had previously accrued for the $39 million administrative monetary penalty during the third quarter of 2024. There's no impact to our financial statements as a result of this decision, and we will seek leave to appeal to the Supreme Court of Canada and seek a stay of this penalty. Full year results reflect consistent performance across our business. For 2025, total revenues increased 0.8% to $1.2 billion, supported by record per patron metric, strong media performance and stabilized margins in the LBE segment despite macroeconomic impacts. Adjusted EBITDAaL increased to $91.6 million, up from $90 million in the prior year reflecting continued operational discipline and the strength of our teams despite slightly lower attendance. While our consolidated results in 2025 showed modest growth relative to 2024, a notably weak film slate in the first quarter and the start to Q4 hindered our results. We have said that quality content and the consistency brings guests to our theaters and looking ahead to 2026, we expect to benefit from year-over-year improvements in the strength and depth of the film slate. So in summary, we have a strong pipeline of product coming in 2026, particularly in Q2 through Q4. We remain focused on creating long-term value for shareholders and our long history of disciplined operations and capital management will lead us there. With that, I would like to turn things over to the conference operator for questions. Operator: [Operator Instructions] Our first question or comment comes from the line of Derek Lessard from TD Cowen. Derek Lessard: Ellis and Gord, hope you're doing well. I just wanted to maybe hit down on the media business. Obviously, it was a pretty good quarter. But you did talk about the launch of programmatic cinema. Could you maybe just add some color around this business and then further around the comments of how it's unlocking new advertisers for you? Gord Nelson: Sure. So we had adopted programmatic slowly ramping it up over the past year or so. It's been very effective, particularly in the out-of-home networks. And we've launched it in Q4 as it relates to kind of opportunities in the cinema market. And so, although we've had programmatic and our learnings in the out-of-home market, we're really seeing value we can move budgets away from connected TVs into our programmatic markets, and we saw some great insights in that first quarter of deployment in 2025 -- in the fourth quarter of 2025. Derek Lessard: Okay. That's helpful. And then on the BPP, CPP, both records. So how should we be thinking about, I guess, your ability to further pricing and/or mix optimization going forward? Gord Nelson: Yes. So our comments on, sort of, Q3 as we -- in Q3 results, we launched some additional $5 discount days, which went through the Labor Day weekend in 2025, which did not happen in 2024. So, in Q3, when you look at our full year results, really look at Q3 is a bit of an anomaly, and we mentioned that during the call. So you see the rebound of the growth in both BPP and CPP in the fourth quarter of 2024. And so as we look forward, we have always said we look to pass on kind of CPI increases in terms of BPP and CPP growth. And then as premium mix shifts, we also benefit from that perspective. Now in any given quarter, the film slate and the type of audience that it tracks whether it's kids or whether it's seniors or whether it's people looking to see in the big screens like UltraAVX and IMAX, that impacts the overall BPP. But on a long-term basis is we would look to continue to take price through CPI increases as we have done historically and balancing out the value offerings that we have, which is our Tuesday offerings and our CineClub program and the other offerings that are at. Operator: Our next question or comment comes from the line of Charles Zhang from Canaccord Genuity. Zhongye Zhang: Just regarding the court decision. So as you mentioned, Gord, the provision was already made in last Q3, right? Just to confirm. Ellis Jacob: Correct. Yes. Zhongye Zhang: Yes. And maybe on OpEx and some costs tied to the online tickets maybe taper off in the future. I mean, do you see any room for like further cost reductions going forward on that aspect? Gord Nelson: Sorry, I missed the first part of the question related to which aspect? Zhongye Zhang: Related to the online booking fees. Gord Nelson: So look, I'm not sure that there are costs related to the online operating OpEx kind of matters related into the online booking fee matter. We always strive for -- from an OpEx perspective is looking for automation and AI to help us drive efficiencies and opportunities for savings. And so, we would continue to do that. Our online ticketing offering is one of our kind of guest service initiatives that we have out there. And as we look to create digital connections with customers, it's just another element of those connections. Zhongye Zhang: Maybe on media, I mean, Cinema Media definitely delivered strong Q4 results. And also, we're looking at a pretty strong film slate coming this year in '26, including like Super Mario, Spider-Man, Avengers. And I'm wondering how are you thinking about the outlook there for the Cinema Media? Ellis Jacob: Yes. We are pretty confident on the media side of the business as a result of, like you mentioned, there is some extremely good content that we have in 2026. So we should be able to continue to move forward strongly. And also on the Digital Media side, we are still providing that selling for those particular locations across the country. Operator: Our next question or comment comes from the line of Maher Yaghi from Scotiabank. Maher Yaghi: I noticed that your theater occupancy expenses were up 20% year-on-year in Q4, but also 6% on the year, mostly from a line, other occupancy cost line. Can you provide some insight on what is driving this even though you are down four theaters year-on-year? And how do you expect that cost line to behave next year? Gord Nelson: Yes, sure, Maher, it's Gord here. I called out a couple of items. So in that cost category, so this is typically non-contractual rent. So it would include -- related -- sorry, occupancy, which does not include contractual rent obligations. So it would include common area maintenance costs, it would include property taxes, it would include insurance on the facilities. And those will be the kind of the core main categories in that line item. I called out a few things in that last year, during the quarter, we had some insurance recoveries as well as some property tax recoveries that caused Q4 to be -- last year to be lower than typical run rate. If you look at the quarters -- each of the quarters, that line item for -- or that category for each of the quarters of the year, you'll see that it's a relatively consistent number. So it will go up and down with where property tax assessments go typically. Maher Yaghi: Okay. And it could increase a bit, I guess, for next year if it's linked a lot to property taxes? Gord Nelson: Yes. I mean, you would expect -- I mean, we're seeing a couple of things out there. One is we -- you're seeing ongoing increases in property taxes. We are seeing some level of reduction in insurance costs as we look forward. So -- but the big increase will be related to property taxes. But again, when you look at roughly $240 million in total overall occupancy costs, which includes the rent, the rent component is continued to go down. Maher Yaghi: Yes. Okay. And just a follow-up on that. In terms of theater count for 2026, how should we think about your year-end getting to from a starting base here in Q1? Is it going to continue to decline like we saw in '24 and '25? Ellis Jacob: No, we don't expect in 2026 that it continues to decline. We will have a number of closures. I'm sure you heard about The Beaches, which was announced. And -- but we feel that the overall box office will be much stronger in 2026 compared to 2025 because of the content that we have and the great product for the balance of the year. Maher Yaghi: Okay. But the theater count will be roughly the same as you ended in 2025? Ellis Jacob: No, we'll be down two to three theaters. Maher Yaghi: Okay. Okay. That was what I was trying to get down to. So in terms of -- just final question here for me. Looking at the last 2 years, you've been holding steady at around $92 million, $94 million of EBITDAaL. And is this -- I assume this is a good starting base for us to use it for '26, but I'm sure you're expecting growth, as you mentioned from your expectations of better movie theater deployments and shows. So -- but roughly speaking, how should we think about 2026 in terms of EBITDAaL cash generation? Ellis Jacob: Well, the industry is predicting box office increases from 8% to 15% over 2025. And with our international content and our distribution business, we should be well engaged in getting reasonably strong numbers for 2026. And that will result in stronger EBITDAaL as we look forward. Operator: Our next question or comment comes from the line of Drew McReynolds from RBCCM. Sarah McKeown: This is Sarah on for Drew. I just had a quick question on expectations for same-store revenue growth for 2026 for LBE? And additionally, when LBE begins to lap the changes in discretionary spending and consumer behavior? Ellis Jacob: We are confident that our continued focus on marketing expansion, special offers and growth in groups and event sales will positively impact our performance across both same-store and newer locations for LBE. And as we mentioned earlier that we are going to be opening a location in Vaughan, and that will also assist us in continuing to build the business going forward. Operator: Our next question or comment comes from the line of Drew Reichert from BMO Capital Markets. Drew Reichert: This is Drew Reichert on for Tim Casey. The film cost as a percentage of box office has trended up slightly year-over-year and has risen steadily over the past few years. How do you see film cost percent playing out in 2026 given film supply and premium mix? Ellis Jacob: Film cost is really driven by the performance of the films. And one of the challenges we run into is when you have a lot of bigger producing films, the film cost does go up. But I always say I'd rather have higher box office and pay film costs, because you've got more attendance and more guests coming through the theaters. And that's something that we'll continue to focus and pursue. And what helps too for us in certain cases is the increased film cost from Hollywood is basically helped by our international content where we have better film settlements in certain cases. Drew Reichert: Okay. And just as a follow-up regarding CapEx trends. CapEx was down pretty significantly in 2025, given the three location expansions in Q4, '24. Could we expect further LBE expansions to return post summer 2026? Gord Nelson: So we have one location which we announced, the Playdium in Vaughan, which is going to open in the first half of this year. And we -- at this point in time, we have described that we have what we -- we described as a prudent pause, we see the disruption in the retail landscape. We think there are going to be -- what we see retailers leaving that there's going to be some great opportunities in great locations that potentially great economics. So we have no further commitments at this time, but we continue to be monitoring opportunities that may exist out there. Operator: We have a follow-up question from Mr. Derek Lessard from TD Cowen. Derek Lessard: Just a follow-up for me. Now with the three LBEs done and cash in the bank from the Digital Media sales, just curious how you are prioritizing capital between the buyback leverage and sort of other growth initiatives? Gord Nelson: Yes. So -- and those are really our priorities. So in terms of, obviously, the maintenance CapEx is first, our leverage is -- we're not where we are, where we want to be in our comfort zone. So that is, I would say, that priority too. And then, as I believe, I described on the call last time, where we exist today is there's a maximum of about $17.5 million that can be allocated to share buybacks. And so we're at $12 million. So when you think of the overall scheme of things, those are some of the factors that are behind our minds as we evaluate how we allocate capital going forward. Operator: I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks. Ellis Jacob: Thank you again for joining the call this morning. We are excited about the outlook for 2026. And even the coming weekend, we're looking forward to three movies that are opening: Wuthering Heights, GOAT, and Crime 101. So make sure you are at the movie theater, and we look forward to sharing our first quarter results in May 2026. Have a wonderful day. Thank you. Operator: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.