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Operator: Good morning, and welcome to the TransUnion 2025 Fourth Quarter Earnings Conference Call. [Operator Instructions] Please also note that this event is being recorded today. I would now like to turn the conference over to Greg Bardi, Vice President of Investor Relations. Please go ahead. Gregory Bardi: Good morning, and thank you for attending today. Joining me on the call are Chris Cartwright, President and Chief Executive Officer; and Todd Cello, Executive Vice President and Chief Financial Officer. We posted our earnings release and slides to accompany this call on the TransUnion Investor Relations website this morning, and they can also be found in the current report on Form 8-K that we filed this morning. Our earnings release and the accompanying slides include various schedules, which contain more detailed information about revenue, operating expenses and other items as well as certain non-GAAP disclosures and financial measures along with their corresponding reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures. Today's call will be recorded and a replay will be available on our website. We also will be making statements during this call that are forward-looking. These statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially from those described in the forward-looking statements because of factors discussed in today's earnings release and the comments made during this conference call and in our most recent Form 10-K, Forms 10-Q and other reports and filings with the SEC. We do not undertake any duty to update any forward-looking statements. With that, let me turn it over to Chris. Christopher Cartwright: Thank you, Greg, and good morning, and welcome, everybody, to the call. Kind of excited to share our fourth quarter results with you today. We had a really good quarter, as you can see, and it was a great capstone to another strong year of growth and profitability at TransUnion. So I'm going to start focusing on the fourth quarter results themselves and also provide an overview of our 2025 accomplishments. And then we'll get into the 2026 guide and our strategic priorities. And then I'll pass it over to Todd, who's going to give you the full financial details on Q4, as well as providing the first quarter guide and the full year 2026 guide. So 2025, we finished very strongly again, exceeding revenue, adjusted EBITDA and adjusted diluted EPS in the fourth quarter. In total, revenues increased 12% organically and the U.S. market grew 16%, and both of these are some of our strongest underlying performance since 2021. We grew adjusted diluted EPS by 10% in the quarter, actually in the mid-teens, 14% if you exclude the impact from the tax rate reset this year. And with robust business fundamentals and strengthening cash flow, free cash flow, we continue to emphasize shareholder-centric capital deployment, particularly at the current valuation level. So we repurchased roughly $150 million of shares in the quarter for a total of $300 million over 2025. And of course, we retain ample capacity under our recently increased $1 billion repurchase authorization. And we also raised our quarterly dividend by 9% to $0.125 a share. Now the fourth quarter results demonstrate continued execution against our growth strategy across our solutions, our market verticals and our geographies. Within the U.S., Financial Services grew 19%, 11% excluding mortgage. Mortgage, consumer lending and auto were all double-digit growers. Across all lending types, we outpaced volume growth through new business wins across our solutions suite. Emerging Verticals accelerated from 7% in the third quarter to 16% growth in the fourth, with insurance, media, tenant and employment screening, tech, retail and e-commerce all growing double digits. And across U.S. markets, our core B2B solutions families grew double digits. Marketing and fraud grew 15% and 14%, respectively. Now this is our best quarter of growth for both of these since the Neustar acquisition. Our results reflect the power of our streamlined product suites, the accelerated pace of innovation, and our improved go-to-market activities. Our innovative solutions are really resonating with our customers, and they're driving new levels of growth for TransUnion. So internationally, we grew 2% on an organic constant currency basis. Canada and the U.K., our 2 most established markets, they both grew double digits, and they continue to outperform their overall market significantly. Our emerging markets continue to navigate some moderating economic conditions and some credit volume -- moderating credit volume conditions. India declined 4%, below expectations in what we're viewing as a reset year for unsecured lending and for credit card originations in the Indian market. Now we believe that we are experiencing a bottoming of unsecured lending and card volumes in 2025 and probably early into '26 as well, but we expect a slow and steady improvement in volumes over the course of 2026, supported by using capital restrictions and now with the U.S.-India trade agreement, a lot less uncertainty. We anticipate mid-single-digit growth in India in '26, and a return to double-digit growth thereafter. And again, India is an immense growth opportunity for us, driven by their favorable economic and demographic trends and our unique market position and the coming deployment of all of our global products and IP into this marketplace. Todd is going to provide a more comprehensive review of India in our fourth quarter results shortly. So 2025 marked a milestone year for TransUnion. We delivered strong financial results. We accelerated the pace of our innovation, and we executed very well on our business transformation. So in 2025, we delivered our second straight year of high single-digit revenue growth and double-digit adjusted diluted EPS growth or mid-teens excluding the impact of the tax rate reset. We also expanded adjusted EBITDA margin by 50 basis points in the year, excluding the impact of FICO mortgage royalties. And this underscores the underlying operating leverage in our business. We significantly outperformed the high end of our initial guidance in February by $183 million on revenue and $56 million on adjusted EBITDA and $0.22 per share adjusted diluted EPS. Our strong earnings and free cash flow enabled a thoughtful and accretive capital deployment throughout the year. We returned in total $390 million to shareholders through buybacks and dividends. We completed the acquisition of Monevo, our new credit offers engine, and we announced our agreement to acquire majority ownership of Trans Union de Mexico. Now moving to our solutions. Our complementary and scalable solutions have really powered diversified revenue growth that is very durable. We now generate roughly half of our U.S. markets revenue outside of core credit. And in international, we generated over 1/4 of our revenue from noncredit solutions, but with expansive opportunity as we deploy fraud marketing and consumer solutions in our countries around the world. Slide 7 provides the 25-year breakdown by solution family. This is our second year of providing this breakdown, and we simplified the reporting around 4 strategic solutions areas of credit, fraud, marketing and consumer. Our communications products, which include Trusted Call Solutions, are now largely reported within our fraud mitigation solutions. We also allocated our market-specific solutions, including our investigator tools to these main solution families. On '25, we drove accelerated innovation and growth across solutions. We launched over 30 major enhancements and new products, by far the largest cohort ever, and we have a significant pipeline and long-term revenue growth potential. In addition to driving strong new business, these solutions and enhanced go-to-market supported record retention rates and record new sales in U.S. markets. So to highlight our growth drivers in each solution family. So Credit Solutions grew 13%, driven by U.S. nonmortgage volumes, consistent pricing, sales acceleration in FactorTrust and TruIQ analytics. Marketing solutions accelerated from flat growth in '24 to 7% organic growth in '25, enabled by our tech replatforming, an integrated and simplified solution suite as we've gone from over 90 products down to 30 and, of course, a strengthened leadership team. So we drove robust bookings in identity, increased sales and usage of our audiences and strong retention in our measurement solutions, setting up marketing solutions for another strong year in '26. Fraud solutions grew 8%. Trusted Call Solutions or TCS, led the way, growing by $40 million or over 30% year-over-year to $160 million. We expect TCS revenue to exceed $200 million in 2026, and our recently announced tuck-in acquisition of the mobile division of RealNetworks is expected to close in the first half of the year and only adds to this potential growth. The acquisition augments our TCS voice channel capabilities with highly complementary messaging solutions to fight fraud and improve customer engagements. So our fraud and other products are poised for accelerating growth with strong demand from our new AI-powered fraud models for synthetic fraud detection and credit washing. Finally, consumer solutions grew 6%, excluding the large breach win in 2024. Our indirect channel grew well and direct-to-consumer freemium offerings continues to add users at a healthy pace. We also continue to see strong growth and demand for our consumer solutions across international markets. Our ambitious business transformation enabled us to accelerate our pace of innovation and growth. Through several years of investment in execution, we have built a truly scalable global technology and operating platform. In '25, we strengthened our global operating model with key talent additions and process improvements. So first, we added several new solutions and operations leaders throughout the year. Most recently, Francesca Noli, who previously led Capital One's CreditWise product has joined us as the Head of Consumer Solutions. We also standardized our global product management best practices to better align our resources, streamline decisions and enable a faster pace of product development and introductions. We significantly advanced our tech modernization in '25. We migrated over 100 U.S. credit customers to OneTru by year-end, proving the platform's ability to deliver the most complex and sophisticated use cases. We augmented our underlying OneTru capabilities, including integrating additional identity data such as our public records to strengthen our industry-leading coverage and density. We also implemented agentic AI across core processes such as data onboarding, identity resolution, analytics and delivery. And globally, we deployed key TruIQ analytic capabilities into the Indian, Canadian and U.K. markets. So these achievements reflect the results of our disciplined multiyear investment. The fourth quarter marked the completion of our transformation investment program on schedule, on budget, and we're going to realize the full target savings in 2026. So in '26, we expect to deliver another year of strong financials. We anticipate growing 8% to 9% organically in constant currency for revenues, 7% to 8% adjusted EBITDA growth, and 8% to 10% adjusted diluted EPS growth. The high end of our guidance implies a third consecutive year of at least high single-digit revenue growth and double-digit adjusted EPS growth. And our guidance assumes continued healthy operating leverage with 70 basis points of adjusted EBITDA margin expansion when excluding the FICO mortgage royalty payments. So our initial guidance maintains our prudently conservative approach. We expect modest U.S. lending growth similar to recent quarters and a gradual recovery in our international markets. Now assuming a continuation of these current trends, we would again expect to deliver toward the high end of our range. Our strategic focus on '26 is to build on our momentum and to drive innovation-led and scalable growth. The priority is really turbocharging our innovation. We expect that the pace of major product enhancements and introductions will accelerate further in '26. Across our portfolio, we are launching new AI-powered solutions to boost product predictiveness and capture more value within a customer's workflow. In credit, we're embedding role-based AI agents in TruIQ analytics for faster data exploration and easier accessibility. In fraud, advanced machine learning and AI already power our newest models and will support rapid development of customized models for clients at scale. In marketing, we're enhancing our robust identity data with AI models to create advanced consumer behavioral models. And in our international markets, we continue to deploy our fastest-growing U.S. solutions, including TruIQ analytics and Trusted Call Solutions into target local markets. We believe our broader solution suite will enable continued outperformance in mature markets like Canada and the U.K., and adds to our growth potential across our attractive emerging markets. Our solutions portfolio is the strongest it's ever been, and it's only gaining momentum. And to ensure commercial momentum, we continue to sharpen our go-to-market approach and have added specialized sellers capable of selling our newest solutions. So we're unlocking the full potential of our global technology and operating platform to fuel these innovations and growth. We're on track to complete U.S. credit migrations onto OneTru by midyear. And further, we plan to migrate credit and analytic capabilities for Canada, the U.K. and the Philippines onto OneTru over the course of '26. From an operating standpoint, we remain focused on continuous improvement, standardization and automation. Scaling our technology and operating platform, we also anticipate ongoing cost savings that will boost margins and support future growth investments. And finally, I wanted to finish with a few thoughts on AI, given the recent noise in the information services and software space. So AI raises concerns about commoditization, especially for information services companies that manage more readily accessible and unregulated data. However, I believe that TransUnion's data assets are protected from this risk because they're broadly sourced, they're proprietary, they're highly regulated, and they're continuously enhanced by [indiscernible] from providing services across our networks. And this creates a significant entry barrier. Now with our market-leading identity resolution, we integrate all of this data to enable advanced analytics and deliver great predictions of credit and fraud risk to clients as well as marketing effectiveness. This helps our clients make smart decisions about their resource allocation. Also, AI can accelerate our growth by increasing the data consumption by our clients to improve their AI-enabled models, but also by substantially automating our internal analytic processes. And I'll remind you that today, our most AI-enabled clients also consume the most data. So we think we're in an advantageous position. We have a ton of domain-specific data and a position in our customer workflows that's going to allow us to drive substantial value and be enabled by AI rather than [ erode it. ] So if I can double-click a bit. I'd start with our credit solutions and remind you that these are broadly sourced proprietary data. In the U.S. alone, at any point in time, we have 12,000 to 14,000 active lenders furnishing data. This represents individual contracts and individual ongoing supervision for each one of these data contributors. Additionally, they can only contribute the data to authorized reporting agencies, and we can only use it for very specific and highly regulated purposes. Before we provide this information to a customer, we have to research them. They go through an elaborate credentialing process. They can only use the data for specific uses. We have to monitor their usage of the information on an ongoing basis. Credit information is deeply important to consumers, each year the bureaus handle millions of consumer inquiries and thousands of regulatory inquiries. And unfortunately, credit reporting is also one -- receives like the highest volume of litigation from consumers of any industry in the U.S. So obviously, the combination of the broad sourcing networks, the proprietary and highly regulated nature and all of the challenges around selling this information and supporting its usage in the market create quite a barrier to entry. Our fraud and marketing solutions also leverage fast contributory networks of data and an industry-leading data craft. Most of this information is proprietary and sourced from industry consortiums. For instance, our fraud models use data from our device consortium alongside with anomalies that we did [indiscernible] and in credit files or from our public records business. This device consortium represents hundreds of corporations around the world and has engaged with over 14 billion devices over the last 15 years. In marketing, our measurement solutions capture information on consumer interactions with ads across hundreds of leading e-commerce entities. And this includes the walled garden, streaming platforms, most of the prominent publishers out there. And these entities provide us with this data because we represent multibillions of dollars of brand spending from their consumers, rather from their customers. And they're looking to us for independent and entrusted measures of advertising effectiveness. And so our marketing identity solutions, they take in all of this data input, plus they gather additional information from our clients' range of internal systems and they bring it all together to assess, to provide insights into the effectiveness of a client's marketing initiatives and just assess the probability that a prospect is going to convert within the marketing funnel. So we're also actively leveraging AI internally, and we're seeing some enormous benefits, driving software development productivity, speed of product development, improving our customer experience and the consumer experience and operations, and just allowing us to do a lot more with less. AI is enhancing each phase of our analytic data insight process within OneTru, empowering our newest products. So net-net, I think AI is going to be a revenue and profit growth enabler for TransUnion. And I'll remind you that our most AI-enabled customers consume more data than our traditional customers and adopt our newer solutions more quickly. So increasingly, TransUnion can capture value with AI agents by performing the work that's done upstream, either by internal client teams or encroaching on automation in workflow solutions that rest upon our data and analytics. So I'm sure we'll get some questions on this in the Q&A. I look forward to that. But now I'm going to hand it over to Todd for more depth on the financials. Todd Cello: Thanks, Chris, and let me add my welcome to everyone. As Chris mentioned, we exceeded guidance in the fourth quarter, led by U.S. financial services and emerging verticals. Consolidated revenue increased 13% on a reported and 12% on an organic constant currency basis. The Monevo acquisition added 0.5% to growth. The foreign currency impact was immaterial. Mortgage contributed 3 points to growth. Adjusted EBITDA increased 10%. Adjusted EBITDA margin was 35.6%, in line with our expectations as we made targeted investments in the quarter behind strong revenue growth. Adjusted diluted earnings per share was $1.07, $0.05 ahead of the high end of our guidance and an increase of 10%. In the fourth quarter, we incurred $25 million of onetime charges related to our transformation program, $6 million for operating model optimization and $19 million for technology transformation. The fourth quarter marked our last quarter of onetime charges related to our transformation program. Looking at segment financial performance for the fourth quarter, U.S. markets revenue grew 16% on an organic constant currency basis versus the prior year. Adjusted EBITDA margin was 37.9%. Financial Services revenue grew 19% or 11% excluding mortgage. The environment remains positive. Lenders have sufficient capital, credit performance is strong and consumers continue to show resilience due to low unemployment and rising wages. We continue to outperform underlying volumes on the strength of our broad-based solution suite. Credit card and banking rose 3%, with healthy lending volumes and good demand for our alternative data, fraud and marketing solutions. Consumer lending rose 21% as fintechs and personal lenders continue to expand activity. Delinquency trends remain stable even with the pickup in activity and fintech funding remains strong. FactorTrust finished the year well and grew nearly 20% for the year. Auto grew 12%, driven by volume growth, pricing and new wins. Mortgage revenue grew 37% against inquiries up 4% due to third-party scores pricing and non tri-bureau revenue. Mortgage represented 13% of TransUnion's 2025 revenue. Emerging Verticals accelerated to 16% growth, up from 7% in the third quarter with strength across our verticals. Even excluding some onetime project revenue, underlying growth was still over 10%. Insurance again grew double digits. Tech, retail and e-commerce, media, and tenant and employment also accelerated to double-digit growth. Communications grew mid-single digits and public sector grew modestly. Insurance delivered its first $100 million revenue quarter, a testament to strong execution and our unique position as the clear leading bureau serving the insurance space. Double-digit growth in insurance was supported by consumer shopping and healthy credit-based marketing activity as insurers benefit from improved rate adequacy. We continue to execute a broad-based growth playbook with strong sales across core credit, driving history, marketing and Trusted Call Solutions. Turning to Consumer Interactive. Revenue grew 8% on an organic constant currency basis driven by strength in the indirect channel and breach remediation wins. For my comments about International, all revenue growth comparisons will be in organic constant currency terms. For the total segment, revenue grew 2%. Adjusted EBITDA margin was 43.1% as we controlled expenses for moderating revenue growth. Looking at the specifics for each region. Our U.K. business grew 10%, a second straight quarter of double-digit growth. We benefited from healthy volumes from our largest banking and fintech customers as well as new wins across verticals. Canada grew 13%. Broad-based growth was driven by fintech wins and customer expansion, innovation-led gains in financial services and growth across Consumer Indirect, insurance and auto. 2025 was our third straight year of double-digit growth in Canada, reflecting our proven global growth playbook. Latin America declined 3% due to softer economic and lending conditions. Colombia grew low single digits despite political uncertainty that weighed on activity. Our other Latin America countries declined modestly impacted by uncertainty linked to recent trade and immigration policies. Our smaller Brazilian business also declined. Asia Pacific declined 11%. The Philippines grew low single digits, but Hong Kong faced soft volumes and continued to lap onetime consulting revenue from the prior year. In both Latin America and Asia Pacific, we expect similar growth rates and dynamics in the first quarter of 2026, with improving performance as the year progresses. Finally, Africa increased 3% with good growth across banking, insurance and fintech. Turning to India. Revenue declined 4% in the quarter and grew 2% for the year. Here are our expectations. As a reminder, in 2024, we experienced strong but decelerating growth throughout the year, and the Reserve Bank of India took proactive actions to support financial stability and slow lending by tightening regulations and targeting lower loan-to-deposit ratios industry-wide. In 2025, India experienced stable GDP growth and inflation, and the RBI steadily eased some of the lending restrictions. With that said, unsecured personal loans and credit cards, which drive our volume and revenue remained sluggish due to capital constraints and lender conservatism. Overall, consumer loan growth in the year predominantly came from secured products like gold loans, where credit pull penetration is not significant. Unsecured personal loan and card lenders prioritize existing customers and higher notional loans as opposed to new to credit opportunities, which also impacted credit polls. This dynamic weighed on growth, particularly after U.S. tariff announcements dampened commercial lending to export-oriented sectors. Despite volume challenges throughout 2025, we continue to drive solid sales throughout the year of our innovative credit and direct-to-consumer solutions. For 2026, we expect mid-single-digit growth with high single-digit declines in the first quarter, followed by improvement over the course of the year. Our guidance assumes a tempered recovery in the unsecured personal loan and credit card markets. Economic conditions are favorable and the recently announced trade deal between the U.S. and India reduces some uncertainty. That said, lenders remain cautious, and we will monitor conditions closely. We believe our accelerating pace of product innovation also supports improved growth in 2026 with several new consumer and small business credit scores, additional TruIQ analytics tools, and an expanded direct-to-consumer offering. Longer term, India remains a unique opportunity for TransUnion, and we believe a healthy double-digit growth compounder. We are the market leader in the world's fastest-growing market. In addition to highly favorable demographic trends with 850 million consumers under 35 years old, rapid digitization plays into our strength in fraud and marketing. We plan to expand our offerings in India with our leading global IP, including marketing solutions, True IQ and trusted call solutions. Secular trends combined with significant vertical and solution, whitespace present multiple avenues for growth across our Indian business. Turning to the balance sheet. We ended the quarter with $5.1 billion of debt and $854 million of cash. Our leverage ratio at quarter end declined to 2.6x as we continue to push toward our long-term target of under 2.5x. Our strengthening free cash flow and ongoing delevering positioned us to return capital returns to shareholders. We repurchased $150 million in shares in the fourth quarter, bringing the total for 2025 to roughly $300 million. We view valuation as attractive at current levels and plan to continue being active in the repurchase market over the course of 2026. We also raised our quarterly dividend from $0.115 to $0.125 per share, underscoring our commitment to growing our dividend alongside earnings growth. We expect to complete our acquisition of a majority ownership of Trans Union de Mexico in the first half of 2026. We are excited to expand our global reach and bring our expertise and solution to Mexican consumers and businesses. Based on current exchange rates, we expect the purchase price to be approximately USD 660 million. We plan to fund the acquisition with cash on hand and debt. Ahead of the acquisition in February, we upsized the capacity on our revolving credit facility to $1 billion. Before turning to guidance, I want to provide final comments on our completed transformation investment program. In late 2023, we announced this program to optimize our operating model and modernize our technology capabilities. In addition to driving structural cost savings, the program was a clear enabler of our current innovation and growth momentum. We met all financial commitments for the program, completing it on time, and within our $355 million to $375 million budget. Additionally, CapEx was roughly 8% of revenue in 2024 and 7% of revenues in 2025, better than expected as we manage capital investment throughout the period. The program delivered $200 million in free cash flow savings, inclusive of roughly $130 million of operating expense savings and a reduction in capital intensity to approximately 6% of revenue starting in 2026. In 2026, there will be no onetime spend related to this investment program. We expect free cash flow generation as a percentage of adjusted net income to be 90% or greater in 2026 and going forward. Turning to guidance. We have maintained a prudently conservative approach. We assume modest U.S. lending volume growth and a tempered recovery in our international emerging markets. If conditions and business momentum continue, we expect to deliver results towards the high end of our guidance range. Additionally, our acquisition of Trans Union de New Mexico, which we anticipate being modestly accretive in its first year upon closing is not included in guidance. Throughout the year, we plan to provide transparency on the impact of FICO mortgage royalty increases, which increased our reported revenue this year but have no profit impact. That brings us to our outlook for the first quarter. FX impact is expected to be a 1 point benefit to both revenue and adjusted EBITDA. At this point, we assume minimal impact from acquisitions. Revenue is guided to be between $1.195 billion and $1.205 billion, 8% to 9% on an organic constant currency basis or 5% to 6% excluding the impact from FICO mortgage royalties. We anticipate total mortgage revenue growing roughly 35% in the quarter compared to a modest increase in inquiries. We anticipate adjusted EBITDA to be between $414 million and $420 million, up 4% to 6%. This implies an adjusted EBITDA margin of 34.6% to 34.9%, down 140 to 160 basis points. However, excluding the 110 basis point margin drag from FICO mortgage royalties, we expect our margins to be down modestly in the first quarter. We expect our adjusted diluted earnings per share to be between $1.08 and $1.10, up 2% to 5%. Turning to the full year. We anticipate FX and acquisitions to be immaterial to revenue and adjusted EBITDA. Revenue is guided to be between $4.946 billion and $4.981 billion, 8% to 9% on an organic constant currency basis or 5% to 6% excluding the impact from FICO mortgage royalties. Specific to our segment organic constant currency assumptions, we anticipate U.S. markets to be up high single digit or mid-single digit excluding mortgage. Within U.S. markets, we expect another strong year from our B2B solutions and verticals and a transition year from Consumer Interactive as we lap breach wins and ramp the monetization of our freemium channel. We are guiding Financial Services to be up mid-teens or high single digit excluding mortgage, Emerging Verticals to be up mid-single digit and Consumer Interactive to decline low single digit. We anticipate international growing mid-single digit. Turning back to the total company outlook. We expect adjusted EBITDA to be between $1.756 billion and $1.777 billion, up 7% to 8%. That would result in an adjusted EBITDA margin of 35.5% to 35.7%, down 30 to 50 basis points. However, excluding the impact of FICO mortgage royalties, we expect to expand adjusted EBITDA margins by 70 basis points at the high end of guidance, driven by flow-through on revenue growth as well as the remaining savings from our transformation program. We anticipate adjusted diluted earnings per share to be $4.63 to $4.71, up 8% to 10%. Our adjusted diluted earnings per share guidance assumes no benefit from our acquisition in Mexico nor other capital allocation actions. For other guidance items, we expect depreciation and amortization to be approximately $600 million or $310 million excluding step-up amortization from our 2012 change in control and subsequent acquisitions. Additionally, we expect net interest expense to be about $220 million. The adjusted tax rate to be approximately 26%, and capital expenditures to be about 6% of revenue. Before handing it back to Chris, I want to provide our perspective on the mortgage market and how our assumptions inform 2026 guidance. Given the growing -- given the number of moving pieces, I want to provide our high-level view on industry structure and dynamics. First, credit data is a foundation to safe underwriting mortgage in all lending categories. Any score or analytic depends on credit bureau's data stewardship. We differentiate our data from peers as the only bureau with 30 months of trended data plus alternative data sets like rental and utility trade lines. Second, our pricing actions preserve the profitability of our mortgage vertical while prioritizing lower costs for consumers and promoting lender choice. In 2026, we are offering VantageScore at $4, a 60% discount to a FICO score. We are also keeping the price of our credit data plus VantageScore flat in 2026 at $15. Our pricing approach [ influence ] TransUnion's profitability from potential changes in third-party score delivery models. Finally, VantageScore adoption represents incremental profit and margin opportunity for TransUnion. We have had very constructive discussions about VantageScore 4.0 and expect customers to test and validate throughout 2026. That brings me to our underlying U.S. mortgage guidance for 2026. We anticipate generating $425 million of mortgage revenue excluding FICO royalties, up roughly 6%. This expectation is driven by core data pricing as well as new wins in TruIQ and Trusted Call Solutions. Inclusive of FICO royalties, we expect $750 million of reported mortgage revenue, up 28%. A few underlying assumptions to this guidance. We expect mid-single-digit inquiry declines based on the extrapolation of current origination trends. Given the presently low level of mortgage activity, any additional reduction in interest rates represents upside to our guidance. We assume no shift to the FICO direct licensing program in the year, informed by current observations and customer feedback. No customer has shifted to this program to date. Again, absolute profitability is similar regardless of whether TransUnion or the reseller calculates the score. Finally, any VantageScore adoption represents profit and margin upside to our guidance. Timing and pace of adoption will be dependent on key milestones, such as the FHFA publishing its loan level price adjustment matrix for the GSEs. Given that FICO mortgage royalties impact revenue but not profit, we believe the best way to judge underlying performance is to exclude these revenues from our metrics. In 2024 and 2025, we grew high single digits even when excluding FICO mortgage royalties and expect to deliver 6% growth based on the high end of 2026 guidance. Excluding no-margin FICO royalties also uncovers the underlying operating leverage of the business over the last several years. Based on the high end of guidance, we expect to deliver 38.2% margins with 70 basis points of expansion in 2026 or 240 basis points of expansion since 2023. This underlying operating leverage across the 3 years is again driven by strong revenue growth and the benefits of our transformation cost savings. Finally, the secular trends in mortgage remain the same, and any recovery in mortgage activity represents upside to our financial results. There are now almost 10 million mortgages with rates above 6%, creating a significant refilable population if average rates fall below 6%. Every 10% increase in volumes would add over $40 million of adjusted EBITDA and $0.16 to earnings. A full recovery to 2019 levels equates to close to $1 in earnings or over 20% upside to our earnings base. This upside is in addition to the significant opportunity from VantageScore adoption. I'll now turn the call back to Chris for closing remarks. Christopher Cartwright: Well, thank you, Todd. So to summarize, we finished 2025 with a great fourth quarter, growing our revenues by 12% organically and surpassing guidance. Assuming business conditions remain stable, we expect another strong year in '26. We're guiding for 8% to 9% organic constant currency revenue growth and 8% to 10% adjusted diluted EPS growth. Our '25 results and our '26 guide reflect the benefits of our multiyear strategic transformation. We remain focused on leveraging this transformation to drive innovation-led and durable growth. So we plan to share more details around our strategic momentum and our future growth prospects at our Investor Day coming up on March 10 in New York City. We've got a robust schedule planned with opportunities to hear from our senior leaders and to see demos of our newest products. And we plan to spotlight our AI-enabled OneTru platform, our reinvigorated innovation engine and how our robust product portfolio is driving growth across our verticals and geographies. We'll also provide an updated financial growth framework. Our strategy emphasizes driving industry-leading organic growth, enhancing our earnings and our cash flows and strengthening return of capital and shareholder-friendly capital deployment. So I hope you can all join us. Please reach out to Greg and the IR team for more details. And with that, back to you, Greg. Gregory Bardi: That concludes our prepared remarks. For the Q&A, we ask that you each ask only one question so that we can include more participants. Operator, we can begin the Q&A. Operator: [Operator Instructions] At this time we will take our first question, which will come from Jeff Meuler with Baird. Jeffrey Meuler: My question is on the U.S. emerging vertical guidance. It's good, but you just put up really strong growth, even excluding, I think, one timers, you said it was double digit. It's broad-based. And I would think that there would be building benefits from the product replatforming and capabilities, consolidation along with the tech transformation. So just any specific call-outs on the U.S. emerging verticals outlook beyond just the general prudent conservatism? Christopher Cartwright: Yes, Jeff, and thank you. Yes, it was a great quarter, wrapping up another really strong year of top line organic growth. And emerging was certainly a big part of the story. We're happy to get into the guidance and the approach. Probably a good way to start the call, given some of the chatter early on here. But as you know, we're starting the year, and typically, we guide a bit on the prudently conservative side to set us up for beats and raises over the course of the year. That's been the approach over the past 2 years, and we've been outperforming consistently over the last 8 quarters. I think it's very much the same posture in '26. So I do understand your question on emerging. Let's just have Todd take us through a quick comparison of the '25 guide versus the actual achievement and then how we're setting up in '26. Todd Cello: Okay. Thank you, Chris, and Jeff, thank you for the question. It's a good place for us to start this morning. I think it's important just to ground us and everybody in what we feel is a very strong guide starting off 2026. And I would start with, at this point in the year, this is a guide that we have a high degree of confidence in being able to achieve. And if you were to look back to last year at this time, we were guiding our organic constant currency revenue growth at 4.5% to 6%, and we ended up growing 9%. And if you look at the guide that we put out for 2026, we're contemplating 8% to 9% growth. So a continuation of 2025, again, a high degree of confidence. And as we typically do, we would orient you more towards the high end of that guidance just based on the assumption that conditions that we're seeing, if they stay the same, we should be about at that level. And if you look at our results, ex FICO compared to the guidance and specifically FICO mortgage, last year, we were guiding 2.5% to 4%, and we ended up at 8% growth. And this year, we're guiding 5% to 6% growth. So you saw a significant outperformance in products and services that TransUnion is delivering into the market and adding a significant amount of value. Specific to your question on Emerging Verticals, last year, we were guiding mid-single digits, and we ended up posting an 8% growth for 2025. And right now, we're starting at mid-single digits. And again, it's just back to that, what we have high confidence in and conviction in being able to achieve at this point in the year. So we feel that it's a healthy guide at this point. But again, we oriented towards more of the high and we see upside as the year goes on. And just from a profitability perspective, I know you're asking about revenue, but I want to round this out. Last year, we were guiding adjusted EBITDA growth at 3% to 6%. We ended up growing 10%. And right now, we're guiding 7% to 8%. And similarly, adjusted diluted EPS last year, 1% to 4%. That 4% was burdened by a change in our tax rate due to some Pillar 2 impact as well as FX at the time. We ended up delivering double digits for 2025, which was an outstanding result for TransUnion, and it's the second year in a row of double-digit EPS growth. And what you could see for 2026 is we're guiding 8% to 10%. So we're already at the high end where we're orienting investors towards that high at 10% double digit. So if we achieve that, that would be 3 straight years, which we feel is indicative of the earnings power that we have created at TransUnion. Christopher Cartwright: Yes. And so good detail. I mean we've leaned in more for the total guide this year as you can see. And we would expect to hit the high end and hopefully outperform that as well. On the emerging side, it's great that we have got that part of the business growing high single digits. I would expect that we can continue to do that despite a lower initial guide over the course of the year. It's really important to point out the strength that marketing solutions and fraud are showing both for full year '25, where both were, again, at the high single-digit level. And then we exited low double digits in the fourth quarter. Now we're not going to extrapolate from the fourth quarter in our '26 guide. That's a bit too aggressive. But again, you should think of the Emerging Verticals as a high single-digit compounder now, and that's half of the revenues in the U.S., which is 80% of our total business. And you can also expect that, that is being driven by marketing and fraud now, which are now positioned post Neustar asset integration on the OneTru platform to compound mid-single digits to low double digits, which is what we told investors we would achieve when we acquired Neustar back in early 2022. Operator: And the next question will come from Toni Kaplan with Morgan Stanley. Toni Kaplan: Chris, you talked a lot about AI, which was very helpful. And I was hoping you could talk even more about within marketing and fraud, you talked about this already, but just maybe nail down your differentiation versus competitors and maybe more about the data assets in those areas, specifically where the data is coming from and why competitors can't get the data. All of that would be super helpful. Christopher Cartwright: Okay. Thanks, Toni. Well, with the first component of value in our digital marketing suite is our identity data asset and our identity resolution capabilities. And all of our data has been consolidated on the OneTru platform on a common identity spine or graph. We have several different views of that. One is the individual, of course, one is the devices and one is the geo location. And now that we've achieved that, and that was a delivery over the course of '25, we consistently hear from customers that we have the best identity information in the market, period. And every effective marketing campaign starts with clean data in a clean sense of where you can access these customers digitally. So one, I would emphasize that unless you are operating a credit bureau, fraud contributory networks, a marketing measurement platform, and you own all the public records in the U.S. plus, you're going to struggle to have the identity data that we have, plus again, we're hovering in from thousands of sources, individually contracted, a whole degree of other information that augments the identity graph. In fact at Investor Day, we're going to drill into this even more deeply. That's the first point, I would say. And that's proprietary and that's differentiated. On the audience side, it's a variety of behavioral, demographic, [ psychographic ] and some real-time consumer intent data that's flowing in. That data, less differentiated, but also not a large percentage of our growth or profit, but very complementary to identity. And what we find is if you win identity, they then leverage from that to audience purchasing. And then from that, it moves into activation where we have invested a lot to extend the number of connections we have with publishers and platforms throughout the digital ecosystem so we can more directly activate. And then when you get to measurement, in order to measure the effectiveness of advertisements and influencing prospects within the marketing funnel, you have to negotiate and program integrations into hundreds and hundreds of different points within the digital ecosystem. Some will be massive walled gardens that we all know about. Others will be streamers and prominent publishing sites, et cetera, et cetera. All of those contributions, which can come at an individual consumer level or a cohort level to protect privacy have to get integrated and interpreted and normalized and then aggregated for subsequent analysis. So there's a lot of proprietary information. There's a lot of proprietary integrations, a lot of data science and a lot of analytics to get coherent answers as to whether advertising is working and who you should prioritize for the next round of ads. Similar dynamics in fraud. I mean we have hundreds and hundreds of customers around the world who run our fraud mitigation software on their computers. We see every device that connects to it. We can relate many of those devices back to individuals. We understand if there's any questionable behavior that these devices engage in. That helps us form a reputation. We're analyzing the geo locations from which they connect and the IP addresses to see if there are anomalies there. And then we're aggregating the behavior of these devices and comparing it to patterns of good and bad device behavior from a fraud perspective. All of this are proprietary integrations, individual sales, ongoing relationship maintenance that leads again to proprietary network effect enabled data flowing into these assets. So again, there's a lot of proprietary information in the fraud and marketing world, it's difficult to access, too. You just don't get it by crawling the web or licensing a book library from a publisher. Operator: And the next question will come from Andrew Steinerman with JPMorgan. Andrew Steinerman: I'm looking at Slide 23, the $750 million of U.S. mortgage revenues for '26 being up 28%, which, of course, includes the FICO reps. Does that 28% figure make any assumption about market shift from FICO to Vantage? And also, are there any assumptions in your '26 guide in terms of VantageScore adoption benefiting TransUnion today, meaning in '26? Todd Cello: Andrew, I'll take that question. So right now, in our guidance, what we are assuming is status quo. We are assuming that there is no shift to the FICO direct program based on customer feedback that we've had at this point in time. And we also are assuming that there is no VantageScore adoption as well. So needless to say, in both of those situations, if that were to happen, if we were to see a migration to the FICO direct program that would enable our profit margin to increase, similar with VantageScore as well, too. So there's just nothing but upside. So we've taken a conservative posture with both of these assumptions to start the year. Just that there's just so many unknowns at this point in time. But the net of it is, if we do get either to move, you'll see higher profit margin. Christopher Cartwright: Yes. We just thought it was a cleaner and clearer way to present our numbers for '26 because different of our competitors could have different assumptions around share movement and conversion and the like. So this is clear, and it's clean. But just to reinforce what Todd said, if the direct license program does get traction over the course of the year, that may erode some of our revenue, but it won't erode any of our profits. In fact, our profitability will increase because we don't have a margin on FICO royalties within mortgage. And then once these LLPA matrices are published by the FHFA, we would expect that we're going to start selling Vantage scores that will be additive to revenue and highly accretive to profitability. And look, the whole industry is waiting impatiently for those things to come out because there's a heck of a lot of interest amongst lenders. And we're working with lenders currently, providing them with free scores and supporting analytics so they can do their backfile estimates and performance conversions and get ready for share movement. Operator: The next question will come from Faiza Alwy with Deutsche Bank. Faiza Alwy: I wanted to ask about consumer lending. It was interesting to see that growth rate accelerate, and I know you talked about a prudent die, but I'm curious if you can talk about the trends that you're seeing there? Is it just better market performance? You touched on some of the fintech activity. But just curious to hear a little bit more about that and what you're embedding for the guide and your confidence there. Christopher Cartwright: Sure. So happy to talk about consumer, probably should zoom out a bit and just talk about the health of the marketplace. Again, I would reinforce what you heard the banks say that the macro conditions are still solid and stable. We've got good GDP growth. We have low levels of unemployment. Obviously, job creation is not as robust as we would like, but perhaps a little bit better than was assumed. Real wage gains, we're still eating out gains there, which is good for the consumer. And the consumer leverage ratios are still acceptable. They're still within range. Although if you're on the lower end of the economic spectrum, you're under stress. That's unfortunately been the story, at least over the past decade that I've been here. The banks are all reporting good earnings. They're optimistic about loan growth. Their delinquencies are low or within a manageable range certainly, which is a positive. And a lot of the banks and a lot of economists are forecasting a stronger second half to the year, which is great, right? Because over the course of '24 and '25, you've seen how fast we can grow revenue in this business and the flow-through to profits and what are just kind of stable but still somewhat muted economic conditions. We are forecasting those conditions over the course of '26. We think that's sensible and conservative to start the year at. But if we do have any improvement, we're going to have material, we're going to have nice upside to the guidance that we're giving. And again, I would point out, our organic revenue growth rate is strong. It's been at the top of the industry in '24 and '25. We're guiding at the top of the industry in '26. We would point you to the high end of our guidance, and we're going to work really hard to outperform that. Todd Cello: Yes. And Chris, I would just add, when we talk about consumer lending, I think it's important to call out that we've had some really good success, both with FactorTrust in that space, and that grew 20% for us. And that is a really good indicator of what we've done with the OneTru platform, and that was the first product that we went and replatformed. That's embedded in the numbers. So it's a good proof point on where we're headed with OneTru. And hand in hand with that, also TruIQ was a winner in the consumer lending space for us as well, too. So I think our data analytics and the capabilities that we'll bring to our customers, a lot of good momentum in the consumer lending space in those 2 areas. Christopher Cartwright: Yes. And I guess just to finish up on consumer lending. We expect continued strength in that area. All the players have been able to resupply their balance sheets. We think there's still a good environment for loan consolidation and conversion of revolving card balances and the like. I think over the past, say, 4 or 5 years, because of the experience in '22 and '23, where consumer lending was hard hit, there's been an assumption that it's a more volatile space than it actually is. Consumer lending has always been an important part of the U.S. lending landscape. It's far more robust and [ growthful ] and I think you've seen that over the past couple of years, and we expect more strength this year. Operator: The next question will come from Andrew Nicholas with William Blair. Andrew Nicholas: I was hoping to ask on the margin trajectory this year. I know that there's some difficulty. You provided a lot of information on what margins look like ex FICO. But it does look like it's modestly down year-over-year in the first quarter before improving as the year progresses. Can you just kind of flesh that out a little bit further, what impacts or informs expansion as the year progresses or accelerating expansion as the year progresses ex FICO? Todd Cello: Andrew, and thanks for the question. So let's dig into this. So in the first quarter, our high guidance, we are calling for a margin of 34.9%, which would be down 140 basis points. We think it's probably best to look at our margin, though, excluding the FICO mortgage royalty. At that level, we're at 37.5%, which would be down 30 basis points. When you compare that to the full year guide. Full year, we're guiding 35.7%, which at the top, all in with the FICO mortgage royalties. So we'd be down 30 basis points. Really, where your question is at is an ex FICO, we're going to grow our margins 70 basis points to 38.2%. So several factors here. The first one, the first quarter of any year for TransUnion is our seasonally lowest revenue amount in dollar terms. So needless to say that if you don't have higher revenue, you don't have that flow through in dollars down to profit. So that's the first thing of why Q1 is the way it is. Second, if you look at the growth rates that we've provided in the guide relative Q1 and then relative to what we would -- you'd imply for Q2 through Q4, and then we're at the high, that growth rate ex the FICO mortgage is relatively stable each quarter throughout the year. So meaning we're not necessarily assuming that there's a significant increase in the revenue growth rate. So there's a stability in that growth rate. So then where this then leads to then is in the margin expansion that we're expecting, a lot of that's going to happen in the second half of 2026. And as a reminder, in 2025 in the second half, we were opportunistic with our performance and making onetime investments back into the business to continue to solidify the really strong advances that we made with our technology and our product teams of augmenting sellers to continue the really good momentum that we have on the top line. So we're going to lap some of those onetimes. We won't have them in '26, so that will provide a benefit. And from a compensation perspective, in the second half of 2025, we did have higher incentive compensation accruals. We're at this point in time right now we've reset those accruals back at target, right? So that provides a natural upside for us with the margin in the second half. Christopher Cartwright: Yes. And so look, in the [ big, ] over the past couple of years, some investors have asked whether our business still has the same degree of operating leverage that we enjoyed previously. And it's because we've been growing high single digit, and you haven't seen the top line margin flow through. As we explained, it was being masked by the FICO price increases that have been quite considerable over the period. Now that we're breaking this out, you can see that margins have expanded by 240 bps over the past several years, which is terrific. And so you can see the operating leverage is still here. And again, we are now also supporting marketing and fraud and analytics product line that has lower margins at this point than does core credit, and we're also investing heavily in the business. So I hope from this, investors are reassured that we still have tremendous operating leverage, and you're going to see that in our profits and our EPS as we continue to compound the top line high single digits. Operator: The next question will come from Manav Patnaik with Barclays. Manav Patnaik: Just one question from this AI debate that's out there, and that's more tied to your selling model. Like how seat count tied or enterprise tied is your business? Just touching on the angle that everyone's worried or believes that because of AI, every industry will have materially less headcount, more efficient, et cetera. So just trying to appreciate how you think that could impact your business. Christopher Cartwright: Yes. Well, Manav, as you know, we are a highly recurring transactional business at the core with a material chunk of subscription that's not tied to seat count necessarily more to utilization or ranges that factor under the annual subscription that we would charge a client. So I don't think there's going to be a model disruption because of anything on the AI side. I do think, to the latter part of your point, we're going to apply AI and are applying AI to drive productivity internally. You're going to see a dramatic productivity increase in our software developers. That's not really going to translate into fewer developers because we have so many innovation opportunities that a 30% or 50% increase, I'm going to put the work on product and revenue growth. But in our analytics organization, there's going to be a massive productivity improvement. We're launching a new product, a new analytics platform that's all AI-enabled. We call it the [ Analytics Orchestrator. ] You'll see that at the upcoming Investor Day, and that's going to enable orders of magnitude improvement in the speed with which we can create models and insights across the credit risk marketing and fraud value chains within our clients. The point of this is that more and more of our analysts will be forward deployed in the clients. There will be more of a consulting and consultative selling and an enablement aspect to how we engage in the market because now we have 3 strong product lines with highly interrelated workflows that we've pulled together on this common platform, and we want to show clients how they can become a lot more productive by consolidating their work on this platform. And the best people to show them that are in the analytics organization. So I mean I think that's how the go-to-market model is going to evolve in the coming years. Operator: And our next question will come from Ashish Sabadra with RBC Capital Markets. Ashish Sabadra: I just wanted to drill down on the international side. You provided a lot of good color on India, but I was just wondering if you can also talk about Canada and U.K. or other countries as well. Christopher Cartwright: Yes, for sure. Well, look, obviously, the international division in total didn't grow as fast as we have become accustomed to. The business is in the mature markets. Canada and the U.K. are doing exceptionally well. They're growing well above the market, and we're confident that we're taking share in both markets. And look, it's because we have strong management teams. We've incorporated a lot of our new products into those markets in both Canada and the U.K., the TruIQ analytics platform has been localized for their use. And I just feel like we get great value propositions and an opportunity to grow above market for quite a bit of time. We've had macroeconomic -- kind of macro-driven softness in India, and in Latin America to a degree as well. Focusing on India. I mean, look, India has been [ buffeted ] by some macro forces over the past couple of years. We've talked about the RBI intervention in the unsecured lending market to calm that down. We've also seen lenders reviewing the profitability of their card portfolios and also pulling back a little bit there. The tariffs of 50% that were imposed in the fourth quarter really jolted the market. A big part of the Indian economy are small- to medium-sized businesses that are export oriented. The U.S. market was important. Those tariffs kind of froze exports. And the banks looked at that and said, "Hey, this sector of the market is less lendable, we have to be cautious here, too, right?" Now we think the fourth quarter in India and the first quarter of '26 are going to represent a bottoming out from a volume perspective, kind of a financial lending retrenchment, if you will. And then we're going to start resuming our growth. We're forecasting mid-single digits for the year. Clearly, over time, India has far better growth potential than that. Demographics are great. The economy is still growing almost 7%, inflation is manageable. There's a lot of goodness. And I do think that the broad outline of the deal that the U.S. and India have announced is going to be helpful to bringing some stability back to that market. So we're bullish on India longer term. We are bringing our fraud marketing and analytics products into India. This year, those are going to be entirely new vectors of growth. And so we're looking forward to just getting in there and continuing to drive growth in a very fundamental way, and we're confident that over time, the macro is going to heal itself and be supportive of growth. Operator: And our next question will come from Jason Haas with Wells Fargo. Jason Haas: When we think about the annual guidance, excluding FICO, the 5% to 6% organic growth and the 50 to 70 bps of EBITDA margin expansion, is that a fair framework for thinking about how the business should grow longer term? Are there still costs or anything weighing on the business in 2026? Christopher Cartwright: Yes. So look, as Todd was detailing earlier, net of FICO in '26, it's 5% to 6% organic guide. And look, as we have reminded the market, we start off with a prudently conservative guide at the beginning of the year, and we steer you guys more towards the high end, which would be 6%. And for the past 2 years, we've been able to beat and raise. And so I would just say, think about those factors in your own deliberations. But as I've said in prior calls, I think this is a business that can now organically compound in the high single digits, perhaps more annualized. And in fact, we did in '24 and '25 ex FICO, right? So organic revenue growth was 8% in '25 ex FICO, similar in '24. So we're proving that we can grow at that level. We have exited our period of incremental investment and add-backs. We're not adding anything back. We don't need to. That is going to -- it has helped our cash flow tremendously. We're very confident in a low 90% cash flow conversion in '26. I want to reiterate that for all of you on the call this morning. And then look, in terms of just operational efficiencies and flow through EPS. As we continue to grow at this level, particularly ex FICO, you're going to see really good flow-through to profits and you should expect double-digit growth, perhaps even mid-teens compounding in EPS. That's not the official guide, but that speaks more toward what we've delivered in '24 and '25 into the potential of this business. And remember, our tech transformation is different, right? We have built a global platform to run credit marketing and fraud businesses with this integrated analytic layer on one single platform. We're converting the U.S. to it. We're also going to convert Canada, the U.K. and the Philippines over the course of the year. That gives us a way to continually take cost out of the business, right? And so that's another initiative that's going to improve the profitability of the business. Now with those profits, we can invest more in product innovation, in larger and more consultative selling and also in improving margins for the business overall. So I think that's an often overlooked or certainly underappreciated dynamic that we've created in our business. But you can look for us to leverage that in the coming years. Operator: And our last question will come from Kelsey Zhu with Autonomous. Kelsey Zhu: Could you talk a little bit more about your assumptions behind the mid-single-digit declines and mortgage increase guidance for 2026? And how the trigger leads or legislation affect total volume growth there? As well as if you're seeing any competitive pressure from Equifax credit file that also includes the work number indicator? Christopher Cartwright: Sure. Right. So a good topic to talk about. First, I would say that triggers will not have any negative impact at TransUnion. We've been out of the mortgage triggers business for quite a while now. Other players in the space, we'll have to address that. With regard to any share movement because of bundling credit and some incoming information off the work number. Look, you can look at our mortgage results. We're still doing very well overall, relatively speaking. We've seen no share movement because of -- we had no share movement in the prequalification space. We are aware of 1 large customer that moved between our 2 competitors. We look at that as really a case of price discounting. That trade happened at a 25% discount to the prevailing prices. So I'm not sure I would attribute it to any market innovation. Now in terms, Todd, of the setup for mortgage and the assumptions for the year, maybe some color on that? Todd Cello: Yes, sure. So the volume assumptions in the first quarter, we're expecting to be up modestly. But for the full year, it's going to be down mid-single digits. So obviously, what that says is that Q1 is our easiest comparable because we saw volumes modestly improve throughout 2025. And then again, looking at mortgage outside of the FICO mortgage score, our mortgage business is still expected to grow 6% on a year-over-year basis, and that has to do with some of our own pricing but also driving innovation through. Christopher Cartwright: Yes. And so perhaps, when we wrap, I'll just emphasize to everybody, Fourth quarter was a great exit to a great year. 12% cumulative growth is awesome, 6% and [ 16% ] in the U.S., we're super encouraged by. Macro factors buffeted us a bit in our emerging markets, which pulled down international. But as we've shown, that's a consistent high single-digit, low double-digit grower over time. I would expect that we can resume that pace in the coming year or so. But there's still a lot of incremental revenue and profit fall through to come because of the transformation that we've achieved. In every country that we convert to the OneTru platform, that country will be able to bring to market the best of our credit, best credit analytics, in addition to marketing and fraud and our new analytics platform. We now have 4 market-leading horses pulling our wagon, so to speak. I think that's going to be additive to our growth rate and profit fall through. So we're excited. We're excited with where this business is at and what we can deliver for investors and we're ready to get at it. Gregory Bardi: All right, Chris. I think that's a good place to end. Thanks for all your questions today, and have a great rest of your day. Thanks. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Operator: Good morning. My name is Bailey, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Granite Construction Incorporated 2025 Fourth Quarter Conference Call. This call is being recorded. Operator: All lines have been placed on mute to prevent any background noise. Operator: After the speakers' remarks, there will be a question and answer period. Participants today, it is now my pleasure to turn the floor over to Vice President of Investor Relations, Michael W. Barker. Michael W. Barker: Good morning, and thank you for joining us. I am pleased to be here today with President and Chief Executive Officer, Kyle T. Larkin, and Executive Vice President and Chief Financial Officer, Staci M. Woolsey. Please note that today's earnings presentation will be available on the Events and Presentations page of our Investor Relations website. We begin today with a brief discussion regarding forward-looking statements and non-GAAP measures. Some of the discussion today may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are estimates reflecting the current expectations and best judgment of senior management regarding future events, occurrences, opportunities, targets, growth, demand, strategic plans, circumstances, activities, performance, shareholder value, outcomes, outlook, guidance, objectives, committed and awarded projects or CAP, and results. Actual results may differ materially from statements made today. Please refer to Granite Construction Incorporated’s most recent 10-Ks and 10-Q filings for a more complete description of risk factors that could affect these forward-looking statements. The company assumes no obligation to update forward-looking statements, except as required by law. Certain non-GAAP measures may be discussed during today's call, from time to time by the company's executives. These include, but are not limited to, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, and cash gross profit. The required disclosures regarding our non-GAAP measures are included as part of our earnings press releases and in company presentations, which are available on our website graniteconstruction.com, under Investor Relations. Now I would like to turn the call over to Kyle T. Larkin. Good morning. Before we turn to the segment discussions, I would like to discuss the progress we have been making to deliver on our strategic priorities. In 2025, we continue to focus on bidding and building the right work, investing in our materials business, and expanding our geographic footprint through targeted M&A. Our strategy to drive consistent, predictable financial performance across the company is working. We remain highly selective in the work we pursue, emphasizing best value and high-quality bid-build opportunities in our home markets where we believe we can earn an appropriate return for the risk we assume in constructing these projects. This disciplined approach, combined with a strong funding environment, underpinned our efforts to build a strong project portfolio even as we grew our CAP to a record $7,000,000,000 at year end 2025, the highest in our history. Since 2020, our teams across the company have focused on pursuing the projects where we can leverage our home market advantages and consistently deliver higher margin work. This strategy enabled us to drive significant improvement in profitability from 8.8% Construction segment gross profit margin in 2020 to 15.7% in 2025, all while demonstrating the ability to organically grow the top line across our footprint. As I look at the landscape of the construction business entering 2026, I believe there are still significant public and private opportunities Kyle T. Larkin: to capture work in our home markets, even as we maintain discipline and work to continually drive excellence in execution in the bid room and every day on our job sites. During 2025, we also continue to invest in our Materials business, both through acquisitions and CapEx. We have now completed the second year following our internal reorganization where we restructured our businesses to place Materials leaders over our Materials business. This change has allowed these teams to direct our strategy across the segment as we work to unlock value through market-based pricing and through application of efficiencies across the segment. Over the last several years, we have focused our CapEx spend on the Materials segment to improve plant performance, acquire additional aggregate reserves, and expand our footprint. We have improved Materials segment cash gross profit from 19% in 2023 to 26% in 2025. The return on our investments has been exceptional. The team has many more initiatives in process, including partnering with our Construction teams to drive more tons to our plants by leveraging our vertical integration, and we expect to spend another $50,000,000 in strategic CapEx in the Materials business in 2026 to continue the strong momentum we built. In 2025, we completed three acquisitions, both expanding and strengthening our Southeast platform with the Warren Paving acquisition and strengthening the home markets in California and Nevada with the acquisitions of Pappage Construction and CinderLite. These margin-accretive acquisitions in strong, growing markets are representative of the acquisitions I expect to continue to complete in 2026. We expect acquisitions will continue to be a major component of our growth that should enhance the performance of the business in existing home markets and expand our footprint to new geographies. We expect to drive further gains and deliver significant shareholder value as we continue to execute on our strategic plan. We will continue to build a larger, higher-quality project portfolio even as we invest in and grow our vertically integrated model. These efforts position Granite Construction Incorporated for continued organic growth, margin expansion, and strong cash generation. We believe we are on track to achieve our 2027 financial targets supported by favorable market conditions, robust infrastructure funding, and consistent execution across the business. Turning now to the Construction segment. First, I want to say how excited I am about the performance of our Construction teams across the company. Their execution throughout the year was outstanding and a key driver of our strong finish to 2025. We entered the fourth quarter with record CAP, and despite some delays on certain projects and wet weather at the end of the quarter, year-over-year revenue growth accelerated as expected. We continue to see sustained market strength and a healthy bidding environment across our footprint, with California and Nevada leading the way. With several significant awards in the quarter, CAP increased sequentially by $632,000,000, ending the year with $7,000,000,000, a new record. In California, the newly proposed California budget for the 2026 to 2027 fiscal year represents a significant increase in the key capital outlay projects and local assistance components for the transportation funding for the original 2025 to 2026 budget, which itself was increased significantly in the latest January forecast update. Stable and protected funding for transportation infrastructure in California continues to grow despite concerns about overall deficits. The strength of state transportation budgets is broad, and we see many meaningful opportunities across our regions to continue to grow CAP in 2026 and throughout the year. Best value work continues to grow as a percentage of our portfolio, ending the quarter at 48% of CAP. Michael W. Barker: As we discussed in past quarters, Kyle T. Larkin: best value procurement plays to Granite Construction Incorporated’s home market strengths. These projects tend to be awarded to teams with strong qualifications. The process is designed to promote risk mitigation during design and reward collaboration, thereby enabling us to better manage construction risk, reduce disputes, and deliver high-quality, complex projects more efficiently. Best value construction remains a key driver of our sustainable margin expansion strategy. This growth in best value work has been a core contributor to our de-risked project portfolio and has allowed us to achieve consistent, predictable increases in our Construction margins over the past several years, and we expect that trend to continue as more states adopt these procurement methods. The high-quality CAP portfolio we have built helped deliver the gross profit margin increase that we expected in 2025. We expect continued gross profit improvement in 2026 consistent with our 2027 financial targets. Overall performance in this segment has improved meaningfully, and with record-level, higher-quality CAP and favorable market conditions, we expect continued revenue growth and Construction margin expansion in 2026 in line with our long-term financial targets. Moving to the Materials segment, 2025 was a transformational year for our Materials business. We delivered both organic top-line and bottom-line growth, and we significantly expanded our addressable market through acquisitions, most notably through the acquisition of Warren Paving, which significantly expands our reserves and resources in the Southeast. This was our first full quarter including Warren Paving, and we see numerous opportunities as we continue to integrate it into our Southeast platform. We expect to continue growing this platform organically as we work to expand its distribution network, improve logistics efficiency, and leverage Warren’s marine and river-based transportation capabilities. Expansion opportunities include potentially adding additional aggregate yards and acquiring strategic assets to enhance both scale and margin profile of the platform. With the addition of Warren, along with the acquisitions of CinderLite and Pappage Construction, our aggregate reserves and resources increased 34% year over year to 2,100,000,000 tons, more than doubling Granite Construction Incorporated’s reserves in the last five years. This growth in long-life reserves provides a strong foundation for sustained margin expansion in the Materials segment. We expect the growth of our Materials business to continue throughout 2026 and in the years to follow, supported by strong market conditions, our proven vertically integrated operational model, and our ongoing commitment to disciplined investment. Now I will turn it over to Staci M. Woolsey to review our financial performance for the quarter. Staci M. Woolsey: Thanks, Kyle. Operator: 2025 was a tremendous year of growth with year-over-year increases in a number of areas. Revenue increased 10% to $4,400,000,000. Gross profit increased 24% to $711,000,000. Adjusted net income increased 29% to $276,000,000. Adjusted EBITDA increased 31% to $527,000,000, and operating cash flow increased 3% to $469,000,000. Our teams have done a great job executing and positioning Granite Construction Incorporated for continued organic growth, margin expansion, and cash generation in 2026 and beyond. Now let us discuss our results for the quarter. In the Construction segment, revenue increased $119,000,000, or 14% year over year, to $940,000,000. Throughout the year, CAP gradually increased and we expected revenue conversion to accelerate in the second half of the year. In the fourth quarter, we saw this dynamic with organic revenue growth of 7% year over year as projects ramped up. In addition, our newly acquired companies, Warren Paving and Pappage Construction, contributed $59,000,000 in Construction segment revenue. The significant increase in revenue drove a $15,000,000 improvement in Construction segment gross profit to $143,000,000, with segment gross profit margin of 15%. The improvement in our portfolio mix continues to translate into higher margins, and we expect further expansion in 2026 consistent with our 2027 financial targets. In the Materials segment, revenue increased $69,000,000 year over year to $225,000,000, with gross profit up to $25,000,000. The increase in Materials revenue was primarily due to the acquired businesses. Cash gross profit for the quarter increased $10,000,000 year over year to $47,000,000, or 21% of revenue, despite wet weather conditions in certain geographies. For the full year, cash gross profit margin improved 490 basis points year over year to 26%. For the year, volumes for both aggregate and asphalt and aggregate cash gross profit per ton increased significantly, primarily due to the addition of Warren Paving in August 2025. Adjusted EBITDA for the full year grew $125,000,000 to $527,000,000, or an adjusted EBITDA margin of 11.9% compared to 10% in 2024. Turning to cash flow. We had another outstanding quarter of cash generation and ended the year with operating cash flow of $469,000,000, or 10.6% of annual revenue. Our disciplined focus on profitability and working capital efficiency is producing consistent, high-quality cash flow that we are reinvesting to drive long-term value. Our 2025 operating cash flow benefited from the collection of a long outstanding contract retention balance and receipt of payment for several disputed claims in 2025. Excluding these non-recurring cash collections, in 2025, our operating cash flow as a percent of revenue was in line with our original target of 9%. With our expected profitability improvement in 2026 and sustained working capital management, our 2026 target for operating cash flow margin is 10% of revenue. In 2025, we executed on our capital allocation priorities with CapEx of $138,000,000, acquisitions of $778,000,000, and dividends of $23,000,000. We also repurchased 300,000 shares under our Board-approved share repurchase program to offset dilution from our stock-based compensation. We ended the year with $650,000,000 in cash and marketable securities, debt of $1,300,000,000, and $583,000,000 in availability under our revolving credit facility. Going into 2026, our cash generation and strong balance sheet position us well to continue investing organically and through acquisitions while maintaining financial flexibility. We have a robust pipeline of acquisition opportunities that may either bolt on to an existing home market or further expand our geographic footprint. While we are selective in our pursuits, we expect to achieve our goal of completing several strategic acquisitions in 2026. Now let us turn to our 2026 guidance. We expect revenue to grow to a range of $4,900,000,000 to $5,100,000,000. This reflects our record CAP balance and the strong macro environment and places organic growth at the high end of our 2027 target CAGR of 6% to 8%. This range includes a full year of the acquisitions completed in 2025. As we grow, driving efficiency to manage SG&A continues to be a top priority. We expect our SG&A to be in a range of 8.5% to 9% of revenue, inclusive of an estimated $48,000,000 in stock-based compensation expense. We expect our adjusted EBITDA margin to be in the range of 12% to 13% of revenue. With our high-quality CAP portfolio, strong market, and high-performing Materials business, we expect continued adjusted EBITDA margin expansion in line with our 2027 financial target of 12.5% to 14.5% of revenue. Finally, we expect to invest in our business through CapEx in the range of $140,000,000 to $160,000,000. Similar to 2025, this range contemplates approximately $50,000,000 in strategic Materials investments to expand reserves as well as investments in additional automation projects as we work to grow the Materials business. Now I will turn it back over to Kyle. Kyle T. Larkin: Thanks, Staci. I will close with the following points. I have strong confidence in the future of Granite Construction Incorporated. I believe Granite Construction Incorporated is in position to capitalize on the numerous opportunities in both of our segments as we work towards sustainable, long-term value creation, and as we focus on growing revenue and driving margin and cash flow expansion. The strong public construction market is fueling our CAP growth. We have the bidding opportunities ahead of us to enhance portfolio quality and support disciplined CAP expansion in 2026. In addition, while CAP growth has been concentrated in the public market, I believe our private markets, such as rail and commercial site development, remain robust and represent attractive incremental growth avenues for our Construction segment. In the Materials business, we have made outstanding strides over the last two years, and I believe that will continue in 2026. With the addition of Warren Paving, Pappage Construction, and CinderLite for the full year, I expect meaningful increases in revenue and profit in this segment in 2026. I believe we are on track for our 2027 financial targets for adjusted EBITDA margin and operating cash flow margin, with 2026 being another important step in demonstrating consistent performance against our long-term targets. Finally, as we are integrating the acquisitions of 2025, I expect to add several more acquisitions in 2026 that will further strengthen our competitive position and support our ability to achieve our 2027 financial targets. We are evaluating bolt-ons in our existing markets and expansion opportunities in new markets as we continue to strengthen our position as America's infrastructure company. Operator, I will now turn it back to you for questions. Operator: We will now begin the question and answer session. Please pick up your handset before pressing the keys. Our first question comes from Brent Edward Thielman with D.A. Davidson. Please go ahead. Brent Edward Thielman: Great. Hey, thanks. Good morning. Michael W. Barker: Hey, Kyle. Some of your peers have offered some comments just in terms of thoughts on federal Kyle T. Larkin: legislation. Obviously, IIJA expiring here in September, maybe your latest thoughts on, Brent Edward Thielman: what you are hearing, when we can get maybe more detail on what is coming? Maybe you would start there. Michael W. Barker: Yeah. Good morning, Brent. Kyle T. Larkin: So I think as we spoke before on previous calls, the IIJA expires, I think everybody knows now, in September. And all the funds we expect to be allocated out. Now the spend to date is right around 50%. That is as of November, so there is still a really nice runway of spending to go. So that will last, luckily, for a few more years. I think what we hear really from industry today is that there is still bipartisan support. There is still a huge focus on coming up with another investment mechanism. And I think the really good news is the investment amount is significantly higher, at least that is what is in discussions today, than what is in the IIJA. So it is all positive. In terms of timing of when we might hear, I think we are going to start getting maybe some updates, I would say, around March, April if they can get a draft bill put in place for the Transportation and Infrastructure Committee to review. So I think that is kind of the next step in terms of when we get the next update. Brent Edward Thielman: Got it. Appreciate that, Kyle. And I guess my follow-up, Kyle, just in terms of you have got a great sort of book of business here that seems to continue to build or looks like it will continue to build. Can you talk about some of the direct federal opportunities that are out there that you have spoken about before? What does that pipeline look like? Are you optimistic that there could be some meaningful things that could get picked up there this year? Michael W. Barker: What do you mean federal Kyle T. Larkin: Are you talking a few more around the border infrastructure, Brent, or just kind of the federal program in general? Brent Edward Thielman: Yes. I mean, I guess, infrastructure or anything beyond that, directly related to federal government contracting. I think we have spoken about some large things before there. Michael W. Barker: Right. So we do have quite a bit of work with the federal Kyle T. Larkin: government in Guam, and that work continues to be going very well. We believe we will continue to pick up work in Guam as part of that program. With regards to the border, there is a huge border infrastructure program that is probably just in about $40,000,000,000, and there are around 11 contractors or so pursuing that work, and we are one of them. And we actually have one contract today in southeastern Texas that is just under $200,000,000. We started that work last November. So there is a huge program and opportunity in front of us. One of the things that changed is the government's looking to get that work out and awarded, we believe, midyear. So sometime around June, July, and to help with that, these contracts are getting larger than what we originally contemplated. So the risk profile is changing a little bit on those to one that is just giving us reason to be more disciplined in our pursuits and ensuring that we can not only just win the work, but be successful in delivering it for ourselves and for our clients. So we will see. What I can tell you is we do not have any additional border infrastructure work in the guidance that we provided you today. Brent Edward Thielman: Okay. Thank you. I will pass it on. Michael W. Barker: Thank you. Operator: Our next question comes from Steven Ramsey with Thompson Research Group. Please go ahead. Steven Ramsey: Hi. Good morning, everyone. Operator: I wanted to think high level that you are tracking to your 2027 targets. Did you expect CAP to be at this level when you laid those targets out, or would you say those targets were predicated on a CAP level that was lower or higher than this, Steven Ramsey: I guess I am trying to get a sense of how CAP-dependent those targets are. Kyle T. Larkin: Yeah. I do not know if we necessarily came out and said, here is what our CAP needs to be in order to hit those 2027 targets simply because it is a balance of bid-build and best value. And obviously, the burn rates on those two are very different, one being a lot shorter burn of a couple years, and the best value could be up to about a five-year burn. In the CAP today, it is back to about 50/50 between those two, which we think is very healthy. So that gives us a lot of confidence not just in our ability to hit our numbers from an organic growth rate of around 8% in 2026, but it should allow us to continue to have that growth rate into 2027. So I think the best way to answer is we feel really good about the CAP. The $7,000,000,000 is a really high-quality CAP. The margin profile within our CAP continues to improve, and that is going to also get to those 2027 targets. So I think our CAP is right on track to where we want to be. Steven Ramsey: Okay. That is helpful. Operator: And then wanted to think about the CapEx, the strategic CapEx of $50,000,000 geared towards the Materials segment? Steven Ramsey: Can you Operator: talk a bit about how much of that is in the legacy Western markets? How much of that is the Steven Ramsey: recently acquired Warren assets? And Operator: maybe to tag along with that, Steven Ramsey: how the Warren integration is going and how that is shaping up for growth in both sales and profits within the Southeast business? Michael W. Barker: Hey, Steven. I will start if Operator: talk a little bit about the strategic Materials CapEx of $50,000,000. That is more heavily weighted towards the legacy business and expanding reserves and doing automation projects. Michael W. Barker: There. Operator: And also in our acquisitions from a couple of years ago with Raymond Roberts and the stone and gravel, and doing some investment there. So but really more heavily weighted towards the legacy Granite business. And then as we think about the Warren integration, they have performed really well so far this year in the five months that we have had them on board, and we are really excited about that and feel good about that going forward. And then the opportunity that is going to present to continue to expand in the overall health Kyle T. Larkin: Yeah. Maybe I will add a little bit to the integration. We made an investment, so we have dedicated resources, our integration team today, to help with these acquisitions and Warren Paving is off to a strong start similar to Pappage Construction and CinderLite. So all three of our acquisitions last year are performing very well, if anything, outperforming where we thought they were going to be. Again, we are excited about the teams that came with those companies, the leadership that came with those companies, and the markets that they are in continue to be healthy and growing. So we really look forward to having them in our full year of business this year in 2026. Operator: Great. That is great color. Thank you. Kyle T. Larkin: Thank you. Operator: Our next question comes from Kevin Gainey with Thompson Davis. Please go ahead. Operator: Good morning, Kyle and Staci. Great quarter, guys. Maybe if you wanted Kevin Gainey: to dive into the project Adam Bubes: bidding opportunities and more so maybe by vertical, I am just kind of interested in what you guys are seeing out there for mining, rail, maybe renewables, water? Adam Bubes: Sure, you know Kyle T. Larkin: in general, the market is strong. It has been strong. It remains strong. You think over the last six months, we did more work, we captured more work with slightly higher margin. So that is kind of the high-level really good news and obviously driving a very strong CAP for us. The public market with the IIJA is still a big, big part of our business, around 85% or more today. And so I think that is more a reflection of a really strong IIJA and public funding. We see mining continue to be strong, whether it is our involvement on the process water side or actually just doing work for the miners on site development side of things. Rail is an opportunity. We continue to see intermodal opportunities in our future, and hopefully, we will continue to capture some of those that could maybe shift things back a little bit more weighted towards private than public as an overall company. Renewables stay strong. We are seeing solar projects continue to come out, and we continue to pursue them. And I think we are going to continue to grow that part of our segment in Construction in the next year or two. So I think all in all, we feel really good about the market. You know, we do not participate a whole lot in the residential market. But the markets that we are in on the private side outside of that continue to be really strong. I would say we are starting to look a little bit harder at some of the data center work. We do do data center projects up in the Pacific Northwest and Nevada today. We are pursuing some projects outside of those markets down into Texas and even in Ohio. So there are some new opportunities for us that we can capture in the future here. Operator: And then as we sit here and we Adam Bubes: think about the $7,000,000,000 CAP, do you guys have any concerns operationally or from maybe whether it is labor, equipment, or anything like that that could cause you an issue in executing on a project pipeline? Michael W. Barker: Not at all. Yeah. That $7,000,000,000 of CAP, again, half Kyle T. Larkin: of that is best value, half of it is bid-build. So the progression and burns can vary a little bit. Historically, we have been as high as, if you look at bringing up our contract backlog in any given year, close to 50% of our CAP. This year is going to be closer to just over 40% Michael W. Barker: of our CAP. So we do not have any ESG concerns at all in that regard. Adam Bubes: That sounds good. And then maybe just one more just on the EBITDA guidance for margins. What would it take to be able to get to the high end of that range? And maybe if you could talk about the low end as well. Kyle T. Larkin: Well, in any given year there are a few factors. Obviously, we talked before about weather. Q1, Q4 weather can always be an opportunity or it can be a hindrance for us. So far in Q1, it has been okay. There were some big weather issues Michael W. Barker: in the Southeast, as we all know, earlier this year, Kyle T. Larkin: we do not think that is going to impact our ability to hit our guidance. We will have to see how the rest of this quarter shakes out as well as Q4. We still have to win and actually bid and build some of the work that we are going to need this year to hit our revenue numbers. So it is always a risk in the first half of the year of actually capturing that work and getting started on that work. And then execution, that is an opportunity for us and a risk as well. We have to perform. But I think today, our operational excellence is at a really high level and a very different business than what we were several years ago. And I see execution as more of an opportunity today than a risk. We tend to outperform our projects more than we underperform today. And then there are some unknown unknowns, and we will have to see if any of those show up. But I feel as though the things that we control, we are in really good shape, and it should be a really nice year for us. Adam Bubes: That sounds good. I appreciate all the color. I will turn it over. Kyle T. Larkin: Thank you. Michael W. Barker: Thank you. Operator: Our next question comes from Michael Stephan Dudas with Vertical Research Partners. Please go ahead. Michael Stephan Dudas: Yes. Good morning, Staci, Mike, Kyle, Michael W. Barker: Good morning. Kyle, best value Michael Stephan Dudas: practice backlog getting close to 50%, very helpful. And you mentioned in your prepared remarks, other states are engaging in those types of contracts. Maybe you could share a little bit more how much of a percentage of your backlog could that type of contract be, Kyle T. Larkin: And given how it is Michael Stephan Dudas: allocated and let throughout the process, Michael W. Barker: because of the building, is that going to Michael Stephan Dudas: provide some more project or award opportunities or revenue opportunities Adam Bubes: a little longer in the cycle Kyle T. Larkin: given that Michael Stephan Dudas: it has been built up so high and that could give some more visibility to later this year into next year and beyond because of Michael W. Barker: how Michael Stephan Dudas: big and how large that part of the backlog will grow. Kyle T. Larkin: Yeah. So maybe you are breaking up a little bit. Let me see if I think I can answer the question based on what I Michael W. Barker: think I Kyle T. Larkin: you said there, Mike. But if I get it wrong, let me know. You know, the question has come up before around what is the right balance between best value and bid-build. Michael W. Barker: And Kyle T. Larkin: you know, I do not think we necessarily know the answer to it. I think we like what we have today, is that 50/50 feels pretty good. And to your point, as more states pass legislation to allow CM/GC or CMAR or progressive design-build, we could see that increase. I think that is okay. It allows us to do some more complex Adam Bubes: larger contracts in a de-risked manner, and we tend to perform very well on those. So Kyle T. Larkin: I think that if that progression happens, that would be a good thing for us. I think that is the future of contracting, to be more collaborative, to be partners with our clients, and it really fits us well as we have a home market strategy. So we like to know the customers that we are working for and having the resources to ensure that we could deliver these projects for them the way that we both would expect us to. So if it does increase, I think that is a good thing. I think another good thing about our CAP being about 50% best value is it gives us some insight into the future. And so we know that we are going to progress through a portion of that work this year. But it gives us confidence as we start working towards those 2027 numbers and beyond. So I think we feel really good about our CAP today, and we will have to see what happens in terms of this best value over time. Michael Stephan Dudas: Yes. That is perfect. Thank you for that answer, Kyle. And my follow-up is on the Materials side. Since your reorganization of the business, certainly the pricing and volumes have been quite good, organic and your acquisitions. How do you feel you are relative to pricing two years later with this change relative to the market? Is there still upside relative to market in certain regions? And what are you anticipating or budgeting for aggregate and asphalt pricing generally Kyle T. Larkin: 2026? Yeah. I would say in 2026, we will start with the pricing first, mid-single-digit price improvements on the aggregate side and low single digit on the asphalt. You know, every market is different. We look at every project, every market uniquely and discreetly. And so I think that there are still opportunities. I think our team consistently looks at that. And one of the things we did with the reorg a couple years ago is we bring some of that sales strategy and feedback loop up to a higher level. And so we can look at things a little bit more broadly and ensure that we are looking at things with maybe a little bit less emotion. And so I think there is still work to be done. I think that our team has done a fantastic job. I am impressed with what they have done. They have obviously unlocked a tremendous amount of value in our Materials business, but I think there is still some more to do. In the 2027 targets, we have talked about another 3% or better cash gross profit over the next two years. So we expect to continue to see that this year. That is contributing to our EBITDA margin expansion this year. And so I think we are right on track with all that. Michael Stephan Dudas: And just quick follow-up on your costs. What about your cost, what you are budgeting in the Materials business on a percentage basis relative to the Kyle T. Larkin: pricing you are sharing? We have done a really, really nice job in legacy business keeping costs under control. I think that is one of the real highlights that our team has. Costs year over year have actually been flat in the last two years. So I think the automation efforts we put in place, standardization of our Materials playbook, I think all that is paying off for us as well. Obviously, there are some cost inputs, some of the variable costs that would go up with inflation. But all in all, last year, mix-adjusted, I think we ended up close to about 8%. Michael W. Barker: Excellent. That is 8% net pricing Kyle T. Larkin: increase. Michael W. Barker: And net Michael Stephan Dudas: 8% price increase overall. I appreciate it. Thanks, Kyle. Kyle T. Larkin: Yeah. Thank you. Operator: Our final question comes from Adam Bubes with Goldman Sachs. Please go ahead. Adam Bubes: Hi, good morning. Can you help us think through the 2026 versus 2025 margin outlook? I think the guide is just over 50 basis points of margin expansion at the midpoint. How much of that margin expansion is coming from price versus better execution versus I know you have some favorable M&A rollover, and then what are some of the offsets? I think you had a favorable claim last year. Looks like maybe slightly outsized equipment sales this year that you could be lapping. Just trying to think through the puts and takes. Michael W. Barker: Yeah. Yeah. I think, Adam, Kyle T. Larkin: I think the easiest way to look at it is we have been talking about a 1% Construction margin improvement over the next two years and split really between 2026 and 2027. So it was around 50 basis points improvement in our Construction margins. Materials, we have been talking about at 3% over the next two years, so about a percent and a half each year. So on a weighted average basis, that is around 20 basis points. You put the two together, that is around 70 basis points improvement between Construction and Materials. As Staci mentioned in her remarks, there is about a 50 basis points improvement on SG&A. So it is about a 120 basis points improvement in margin. But then you have to net out the things you talked about. So we had some claim recoveries. We had a little bit larger gain on sale. And so that nets out to about a 50 basis points improvement, if that answers that question. I think the other thing to think about is to get to the midpoint of our 2027 EBITDA margin guidance. It is about a 100 basis points improvement from here. So we are right on track with where we thought we would be this year and right on track getting to that midpoint of our EBITDA margin in 2027. Adam Bubes: Terrific. And then can you just talk about, it sounds like the M&A pipeline is still pretty robust. What is the range of outcomes that you are contemplating for M&A in 2026? And can you just talk about how you view M&A in context of leverage as well, if there are larger opportunities out there. Would you feel comfortable moving above the leverage target of 2.5, or nothing of size that would really move the needle in the medium term on that front? Kyle T. Larkin: Well, I mentioned previously, all three of the recent transactions have gone very well. It gives us a lot of confidence as we move forward and look to do more deals. We have invested in our corporate development team, which has been great. So we can really vet through a whole lot of opportunities that come our way. We can also self-source a lot of our deals. So I do expect, and we expect, to get several things done this year. I think from a leverage perspective, we are still targeting that 2.5 times net debt. If there was something larger that came out, we would probably go up from there with a plan to obviously come back down. But I think that that leverage target kind of still holds. And, yeah, we are busy. I think our team is busy. I hope that we come back sometime in Q2 and provide you with some sort of update there. Adam Bubes: Great. Thanks so much. Michael W. Barker: Yep. Operator: This concludes our question and answer session. I would like to turn the conference back over to Kyle T. Larkin for any closing remarks. Kyle T. Larkin: Okay. Well, thank you for joining the call today. As always, we want to thank our teams for everything they did to make 2025 such a success. Most importantly, we would like to thank our teams for making 2025 our safest year yet. We are an industry leader in safety, and we expect to get even better in 2026. Thank you for joining the call and your interest in Granite Construction Incorporated. We look forward to speaking with you all soon. Operator: The conference has now concluded. Operator: Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning. My name is Paul, and I will be your conference facilitator. At this time, I would like to welcome everyone to Granite Point Mortgage Trust Inc. Fourth Quarter and Full Year 2025 Financial Results Conference Call. At this time, all participants will be in a listen-only mode. After the speakers' remarks, there will be a question and answer session. Please note today’s call is being recorded. I would now like to turn the call over to Chris Petta, with Investor Relations for Granite Point Mortgage Trust Inc. Please go ahead. Thank you and good morning everyone. Chris Petta: Thank you for joining our call to discuss Granite Point Mortgage Trust Inc.’s fourth quarter and full year 2025 Financial Results. With me on the call this morning are Jack Taylor, our President and Chief Executive Officer; Steve Alpart, our Chief Investment Officer and Co-Head of Originations; Blake Johnson, our Chief Financial Officer; Peter Morale, our Chief Development Officer and Co-Head of Originations; and Ethan Leibowitz, our Chief Operating Officer. After my introductory comments, Jack will provide a brief recap of conditions and review our current business activities. Steve will discuss our portfolio and Blake will highlight key items from our financial results. Press release, financial tables, and earnings supplemental associated with today’s call were filed yesterday with the SEC and are available in the Investor Relations section of our website. We expect to file our Form 10-Ks in the coming weeks. I would like to remind you that remarks made by management during this call and the supporting slides may include forward-looking statements, which are uncertain and outside of the company’s control. Forward-looking statements reflect our views regarding future events and are subject to uncertainties that could cause actual results to differ materially from expectations. Please see our filings with the SEC for a discussion of some of the risks that could affect results. We do not undertake any obligation to update any forward-looking statements. We also refer to certain non-GAAP measures on this call. This information is not intended to be considered in isolation or a substitute for the financial information presented in accordance with GAAP. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in our earnings release and slides, which are available on our website. I will now turn the call over to Jack. Jack Taylor: Thank you, Chris, and good morning, everyone. Jack Taylor: We would like to welcome you and thank you for joining us for Granite Point Mortgage Trust Inc.’s fourth quarter and full year 2025 earnings call. 2025 was a constructive year for the commercial real estate industry. Chris Petta: The year began with strong momentum Jack Taylor: after pausing briefly in the spring due to macro uncertainty, quickly resumed with heightened deal activity and spread compression throughout the balance of the year. During the fourth quarter, we saw greater capital availability for a broader array of properties, including certain office properties, as well as improving fundamentals across many markets and most property types. Lending volume has expanded and also extended to a wider range of property types and markets. This greater liquidity in the market has benefited the CMBS market and strengthened CLO issuance. Larger commercial banks have become more active, notably for warehouse financing, and regional banks are beginning to return to the market as well. Against this backdrop of available capital in the market, there continues to be a shortfall of actionable deals, which is one of the key factors contributing to the spread tightening we have been seeing over the last several quarters. For Granite Point, with the long-awaited market improvement, 2025 was an impactful year, as we achieved some of our key objectives. These included five loan resolutions, seven full loan repayments, and one REO property sale, as well as a reduction in our cost of debt. The market momentum experienced in 2025 has continued into early 2026, and sets the stage for this year to be potentially a stronger year for the industry, with forecasted growth in transaction activity across property types, increased liquidity from traditional lenders, a robust securitization market, and an increasingly constructive backdrop for asset resolution activity. In 2026, continue to make progress reducing our higher-cost debt and moving along our asset resolutions, which will continue to help reduce the risk within our portfolio and improve our net interest spread. This month, we repaid a substantial amount of additional higher-cost debt, resulting in a reduction in the cost of our repurchase facilities by roughly 60 basis points and an estimated annual savings of $0.10 per share. With respect to our two REO assets, we are investing capital where we believe it will maximize our outcome and then we will seek to exit and extract capital. Post quarter end, we also have received two full loan repayments of $174,000,000 combined. Turning to originations, as we said last quarter, we expect to begin to regrow our portfolio this year, and to start that process in 2026. The exact timing and volume of originations will be driven by the pace of loan repayments and asset resolutions, as well as market conditions and idiosyncratic factors. While the timing and volume is uncertain, reallocating capital in our portfolio and recycling into new originations remains one of our highest priorities. I would now like to turn the call over to Steve to discuss our portfolio activities in more detail. Thank you, Jack. Steve Alpart: And thank you all for joining our fourth quarter and full year earnings call. We ended the year with $1,800,000,000 in total loan portfolio commitments, inclusive of $1,700,000,000 in outstanding principal balance and about $77,000,000 of future fundings, which accounts for only about 4% of total commitments. Operator: Our loan portfolio remains diversified across regions, Steve Alpart: and property types, and includes 43 investments with an average UPB of about $39,000,000 and a weighted average stabilized LTV of 65% at origination. As of December 31, our portfolio weighted average risk rating increased slightly to 2.9 from 2.8 at September 30. The realized loan portfolio yield for the fourth quarter was 6.7%, which, excluding nonaccrual loans, would have been 8% or 1.3% higher. We had an active year of loan repayments totaling about $469,000,000 during 2025. During the year, funded about $51,000,000 on existing loan commitments and other investments. During the fourth quarter, we had $45,000,000 of loan repayments and partial paydowns, including a full repayment of a $33,000,000 loan secured by a multifamily asset located in North Carolina. We had about $15,000,000 of future fundings and other investments, resulting in a net loan portfolio reduction of about $30,000,000 for the fourth quarter. Post quarter end, we have received two full loan repayments of $174,000,000. We will now provide some color on the risk-rated five loans. At December 31, we had four such loans with a total UPB of about $249,000,000. At quarter end, we downgraded a $53,000,000 loan collateralized by a 284-unit multifamily property in the Atlanta MSA from a risk rating of four to a rating of five. While we have seen a pickup in occupancy at the property, the local market remains soft and we are not seeing the return of the pricing power we had expected. We are reviewing resolution alternatives, which may include a property sale. We are monitoring the situation closely and expect to have more to share over the coming quarters. We discussed last quarter that we had a partial resolution on the Chicago loan with the sale of the upper floor office space to a developer for a residential conversion. After the sale, the remaining collateral securing the $76,000,000 loan is the retail space. The story is now cleaner and simpler, and we are continuing to work cooperatively with the borrower towards the ultimate resolution, which we expect will occur via a property sale in the nearer term. For the $27,000,000 Tempe hotel and retail loan, we are reviewing resolution alternatives there as well, which could involve a sale of the property. Regarding the $93,000,000 Minneapolis office loan, as previously disclosed, we anticipate a longer resolution timeline given the persistent local market challenges. Resolving these remaining five-rated loans remains a top priority. Turning to the REO assets, we continue to have positive leasing successes at the suburban Boston property, and remain actively engaged with our partner and the local jurisdiction and other third parties on several value-enhancing repositioning opportunities. We continue to invest capital into this property to maximize the outcome. The Miami Beach office property is a Class A asset located in a strong market. We are having positive leasing discussions with a variety of existing and new tenants, will prudently invest in the property, and continue to review resolution alternatives, which include the potential sale. As we shared in prior quarters, our plan for 2026 is to remain focused on loan and REO resolutions. We expect our portfolio balance will trend lower in the near term until we start our origination efforts in 2026 to take advantage of attractive investment opportunities and begin to regrow our portfolio. I will now turn the call over to Blake to discuss our financial results. Blake Johnson: Thank you, Steve. Good morning, everyone, and thank you for joining us today. Turning to our financial results. For the fourth quarter, we reported a GAAP net loss attributable to common stockholders of $27,400,000, or negative $0.58 per basic common share, which includes a provision for credit losses Jack Taylor: of $14,400,000, or negative $0.30 per basic common share Steve Alpart: and an impairment loss Blake Johnson: in the Miami Beach OREO asset of $6,800,000, or negative $0.14 per basic common share. Distributable loss for the quarter was $2,700,000, or negative $0.06 per basic common share. Our book value at December 31 was $7.29 per common share, a decline of $0.65 per share from Q3, largely from the provision for credit losses Jack Taylor: and impairment loss on REO. Blake Johnson: Our aggregate CECL reserve at December 31 was about $148,000,000, as compared to $134,000,000 last quarter. The roughly $15,000,000 increase in our CECL reserve was mainly due to an increase in our specific reserve on our collateral-dependent loans Jack Taylor: and worsening macroeconomic forecast in our CECL model relative to the prior quarter. Blake Johnson: Approximately 70% of our total allowance was allocated to individually assessed loans. As of quarter end, we had about $249,000,000 of principal balance on four loans with specific CECL reserves of around $105,000,000, representing 42% of the unpaid principal balance. Steve Alpart: We believe we are appropriately reserved Blake Johnson: and further resolutions should meaningfully reduce our total CECL reserve balance. Turning to liquidity and capitalization, we ended the quarter with about $66,000,000 of unrestricted cash. Our total leverage increased slightly relative to the prior quarter from 1.9 times to 2.0 times. As of a few days ago, carried about $55,000,000 in cash. Steve Alpart: Our funding mix remains well diversified and stable, and we continue to have very constructive relationships with our financing counterparties. We expect to expand our financing capacity once we return to originating new loans. Blake Johnson: I will now ask the operator to open the line for questions. Operator: Thank you. We will now be conducting a question and answer session. Thank you. Our first question is from Douglas Harter with UBS. Marissa Lobo: Good morning. It is actually Marissa Lobo on for Doug today. Thanks for taking my questions. On origination, how are you thinking about the economics of new origination versus returning capital to shareholders, given the large discount to book value that you trade at? Blake Johnson: Good morning, Marissa. This is Blake. Thank you for the question today. When we look at our portfolio and the discount to book, one of our main objectives over the years to continue resolving our loans and actually working on decreasing our leverage until we start originating again. We do plan on returning to originations later in the year, and that is our focus for 2026. Marissa Lobo: Okay. And on the CECL reserve build, how are you viewing the current reserve position and the likelihood for further reserve build? How are current macroeconomic assumptions factoring into that? Blake Johnson: A very good question. Thank you. Yes. So as of year end, we go through our CECL process as in every quarter end. And when we went through the process, we update the generator for the latest and greatest economic forecast in our truck model. So that includes change in assumptions, and the biggest driver for this quarter was a decrease in the CRE price index. Jack Taylor: These forecasts can change going forward, so the general reserve could change. But as of right now, that is the most recent assumption as far as what our general should be. Blake Johnson: Moving to the actual specific reserve, that is based on our collateral-dependent loans. So as of quarter end, we had four collateral-dependent loans. In each quarter end, we assess the fair value of the underlying collateral is. Jack Taylor: So absent any changes in collateral itself, Steve Alpart: we do believe we are appropriately reserved for on those loans. Marissa Lobo: Okay. Thank you. Appreciate the answers. Operator: Our next question is from Jade Rahmani with KBW. Thank you very much. Blake Johnson: Do you have any views as to where book value per share may trough Steve Alpart: in this cycle? Operator: It is down quite sharply year over year and quarter over quarter. Jade Joseph Rahmani: Which clearly based on today’s stock performance, is a surprise. So can you just comment as to, you know, what your expectations are for the risk of future losses going forward? Jack Taylor: Well, I will address that first and then turn it over to Steve to talk about credit migration. Blake Johnson: We Jack Taylor: We believe that there is a risk that there will be upgrades and downgrades and future losses may be part of that. Right? We do not—we have best that risk in our book today and that is embedded in the reserves. That we reserves. With respect to credit migration, maybe, Steve, you would speak to that. But I have been very clear over the quarters. I do not believe it is over in terms of workouts, delinquencies for the whole industry, and not for us. And there have been some prizes to us. We expect to have some upgrades and some downgrades. Steve? Steve Alpart: Is that everything you were gonna—You know, it is—Hey, Jay. Good morning. It is Steve. I think Jack and Blake covered it pretty well. I mean, I would just say that we feel that the majority of the portfolio is performing well. We are working through these remaining loan resolutions, which are not entirely, but heavily in the office sector, and the impact of the rate hike that we went through. We are pleased with the progress we have had to date. We had a lot of resolutions in 2024. We had five more in 2025. We are in process on a couple more right now. We just talked about the Chicago deal where we had the partial resolution of the office, and we are working on a full resolution, which involves the retail, which we think can get done in the near term. We did have two new fives during the quarter. So there is always a possibility that there could be more of that. But we also hope to have more resolutions, some upgrades, and we are happy to see that we are in a constructive environment, as far as capital, certainly debt, also, increasingly equity. And we think that will be helpful on further repayments and resolutions. Jade Joseph Rahmani: And just overall, when you look at the portfolio, clearly, portfolio has a legacy vintage prior to the Fed rate hikes. So nearly every single loan in the portfolio is gonna have probably some cost of capital issue when it is up for maturity. But then looking beyond that, multifamily was an area of downgrade this quarter, which was so much surprising. So can you comment on the vintage and the multifamily property type and what your expectations are there? Steve Alpart: Sure. I think there are two related questions in there. So we are working through these loans, including these kind of older vintage loans. We have pretty good visibility, I would say, on about a quarter of these loans, in terms of a near-term payoff where there is a process underway and we are expecting a loan repayment. I would say there is another, I call it 40% or so if I had to kind of take an estimate, where there is an upcoming maturity. We have communicated to the borrower that we expect an exit this year by the maturity date. And there may be a refi or a recraft or a refi or a recap or sale process that is underway or expected. And we certainly cannot say that all those will get done, but we have, you know, some visibility on those that we think that there is a process that there is an exit out of. And then there is another, you know, call it about a third or so, where there are a couple of 2027 and 2028 maturities. And then I would throw in the Minneapolis office deal that are a little bit further out. So we are—I would say we are kind of chipping away at it. And some have near-term visibility, some we are expecting and pushing on, and then a few will be, you know, kind of 2027 and 2028. Then as far as your question on multifamily, multifamily in our portfolio, we feel pretty good about. We did have the credit migration on the Atlanta deal, and we have talked about certain markets that we are looking at. We have kind of flagged in the past Atlanta. So, would say that one for us has been a bit of an exception. So—and that one has some unique factors that we can we can talk about. But I think the overall trend line that we are seeing, including in the Sun Belt, is that I think the recovery that we were all expecting has been a little bit more sluggish, and you see that in the read-through on some of the public multifamily REITs. The spring leasing season last year was a little slower than expected. But the supply picture overall is improving. There has not been a lot of pricing power for landlords. But, you know, when we sit back and look at macro supply and demand, it feels like, you know, over the second half of this year and kind of going forward, we feel like the trend line in multifamily is fairly positive. And there is obviously a lot of liquidity in the asset class. The sentiment coming out of the NMHC this year was very positive. So overall, on multifamily overall and in our book, we feel pretty good about it medium to longer term. Jack Taylor: Thank you. Thank you, Jay. Operator: Our next question is from Christopher Muller with Citizens Capital. Blake Johnson: Hey guys, thanks for taking the questions. So I guess starting on the portfolio, it has been shrinking as you guys have been focused on asset management. But sounds like new originations starting up is still the expectation for later this year. Operator: So I guess the question is, you guys have a ballpark of where the portfolio size could trough and maybe kind of playing into that a little bit is, what does scheduled maturities look like in the first half of this year in addition to what you guys already disclosed? Steve Alpart: Hey, Chris, it is Steve. Just high level, on the first part of your question, look, just given Blake Johnson: the Steve Alpart: near-term focus on repayments and resolutions, we do expect the portfolio to tick down through mid-2026 and then begin to restabilize and regrow in the latter part of the year. Ultimately, that will depend on the timing of repayments and resolutions relative to new originations, but it will get a little lower over the next few quarters and then begin to regroup. Regrow. Operator: Got it. And any visibility you guys have on Christopher Muller: scheduled maturities that may play into that? Steve Alpart: Yeah. I mean, a part of that is what I just mentioned to Jay that we have—we do have visibility on certain loans that are coming up on maturity. As we kind of look out—I am kind of looking out into 2026 overall. Some of these will just pay off in the normal course. A couple will extend out of bright. Has happened on some loans recently. Then to the extent—then we have other loans that I mentioned are not up for maturity yet, but they are up—know, kind of clawed—you know, third, fourth quarter. And, you know, we are in a—of that, we are having conversations with a number of borrowers that we have done previous extensions on, where they have done everything right, where they put new money in. And we are looking to get the portfolio turned. So we are having clear communications with borrowers about our expectations and if they cannot do it via a refi, do it via an equity recap, it via a sale. So that has been kind of the playbook. Look, case by case, we have extended out loans in win-win mod situations, but we feel like that was the playbook that allowed couple of years, and we are trying to move past that and get to just turning the portfolio. Christopher Muller: Got it. And then just a quick clarifying one. Did I hear you guys correctly that there were two new five-rated loans in the quarter? I see the Georgia multifamily in the deck but, what was the other one if I heard that right? Steve Alpart: There is one—there is one new five-rated loan. Christopher Muller: Got it. So I just misunderstood. Thanks for taking the questions today. Steve Alpart: It is the Georgia multifamily, correct. Thank you, Chris. Operator: Our next question is from Gabe Hoggi with Raymond James. Hey, good morning, guys. Thanks for taking the question. Christopher Muller: I may have missed this before, but can you tell us what the two sectors were and any details around the repayments you received year to date in one thus far this year in 2026? Jack Taylor: Well, hey, Steve. Maybe I can just lead in on that for a moment and I would say it is a retail, a multifamily and importantly want out relating to an earlier Blake Johnson: question, Jack Taylor: These were vintage loans. COVID period and the higher interest rate period and paid off at par. Christopher Muller: Thank you. Operator: Thank you. There are no further questions at this time. I would like to hand the floor back over to Jack Taylor for any closing comments. Jack Taylor: Yes. I just wanted to elaborate on something that was said earlier, which is the portfolio will shrink as we said, but I think we have many tools to regrow the portfolio. Through our loan repayments and resolutions, releasing capital—our REO, which will extract capital. We will be repaying our higher-cost debt and then rebuilding with an originations team that has been intact from when we were originating at $1,500,000,000 to $2,000,000,000. We have a lot of tools to re-leverage our balance sheet internally through the assets as they move from lower-level assets, the vintage loans that are being carried at lower leverage, to the new loans that we add Jade Joseph Rahmani: And Jack Taylor: that we also—excuse me—move into CLOs and the like and source capital as we have done in the past successfully to bring our lower leverage of 1.7 closer back to our target leverage. And to start repairing our earnings. Thank you for your time. And I just want to welcome—I would say thank you, everybody, for joining us for the call. And hope to speaking to you next Steve Alpart: further Jack Taylor: positive resolution. Operator: This concludes today’s conference call. We thank you again for your participation. You may now disconnect your lines.
Operator: Greetings, and welcome to the Lincoln Electric 2025 Fourth Quarter Financial Results Conference Call. All lines have been placed on mute and this call is being recorded. It is my pleasure to introduce your host, Amanda Butler, Vice President of Investor Relations and Communications. Thank you. You may begin. Thank you, Colby, and good morning, everyone. Welcome to Lincoln Electric's Amanda H. Butler: fourth quarter 2025 conference call where we will be covering our fourth quarter and full year 2025 financial results, as well as our new 2030 targets. We released our financial results earlier today, and you can find our release and this call slide presentation at lincolnelectric.com in the Investor Relations section. And joining me on the call today is Steven B. Hedlund, Chairman and Chief Executive, as well as Gabriel Bruno, our Chief Financial Officer. And following our prepared remarks, we are happy to take your questions. But before we start our discussion, please note certain statements made during this call may be forward-looking and actual results may differ materially from our expectations due to a number of risk factors and uncertainties, which are provided in our press release and in our SEC filings on Forms 10-Ks and 10-Q. In addition, we discussed financial measures that do not conform to U.S. GAAP. A reconciliation of non-GAAP measures to the most comparable GAAP measure is found in the financial tables in our earnings release, which again is available in the Investor Relations section of our website at lincolnelectric.com. I will now turn the call over to Steven B. Hedlund. Steve? Steven B. Hedlund: Thank you, Amanda. Good morning, everyone. Turning to slide three, I am proud to report record 2025 performance. Despite challenged end markets, our sales increased 6% to a record $4,200,000,000 from acquisitions and price. We maintained last year's record adjusted operating income margin, increased adjusted EPS to a record $9.87, and generated strong cash flows from operations. This resulted in record cash returns to shareholders. Disciplined cost management and the agility of our supply chain team mitigated unprecedented levels of inflation, finishing the year at our neutral price-cost target. In addition, our savings programs generated an incremental $31,000,000 of permanent savings. These achievements, combined with solid commercial and operational execution, culminated in top quartile ROIC and total shareholder return performance versus our peers. On behalf of the board and leadership team, I would like to thank our global team for delivering these superb results. Their commitment, focus, and agility continue to position the company to outperform in the years to come. Turning to slide four to cover demand trends in the fourth quarter. Organic sales grew 2.5% from price which was largely offset by weaker volume performance. As discussed on earlier calls, we faced a challenging prior year comparison in our automation portfolio which magnified volume declines. Excluding automation, organic sales would have increased approximately 8%. The growth reflects price contributions in consumable and equipment, as well as relatively steady volume performance in our welding consumables in Americas and international welding. 2025 was a challenging year for automation due to lower capital spending and project Amanda H. Butler: deferrals. Steven B. Hedlund: Automation sales were $240,000,000 in the quarter, 11% decline versus a record prior year. And on a full year basis, we achieved $870,000,000 which is a mid single digit percent decline. We are encouraged by strong order rates and a solid back in our automation business in the fourth quarter. This is expected to drive growth in 2026. Due to seasonality and the timing of revenue recognition, we expect first quarter sales to be steady with prior year levels and then pivot to growth starting in the second quarter. This follows the typical seasonality cadence of a 40-60% split between the first and second half of the year. Looking at end markets in the quarter, three of our five sectors grew with an acceleration in December. Notably in Americas Welding. And excluding automation due to its challenging prior year comparison, all five end markets were flat to up. This momentum combined with a return to more normalized customer productive production activity, OEM announcements of higher capital spending plans for 2026, and the manufacturing PMI pivoting to growth in January are all encouraging signs that we may be in the stages of an industrial recovery. A few highlights to note are the continued outperformance in energy, which is due to strong project activity in both Americas and Asia Pacific. General industries achieved double digit growth in Americas, but was impacted by lower HVAC activity in the quarter. We are seeing HVAC demand start to normalize in January. And our nonresi structural steel sector was flat globally, but up mid teens percent in Americas on strength in both North and South America from a range of projects. The two challenged sectors were automotive and heavy industries, and both were impacted by automation's prior year comparison. Transportation, excluding automation, grew at a mid to high single digit percent rate largely from consumable demand for vehicle production. Heavy Industries organic sales excluding automation was higher year over year as construction and ag sector production activity continued to improve resulting in solid consumable volume growth. So we are well positioned with strong backlog levels and broadening pockets growth in Americas and Asia Pacific to drive growth in the year ahead. Now I'll pass the call to Gabriel Bruno to cover fourth quarter financials in more detail. Thank you, Steve. Moving to slide five, our fourth quarter sales increased 5.5% to $1,079,000,000 from 8.9 higher price, 1.9% favorable foreign exchange translation, a 1.1% benefit from acquisitions. These increases were partially offset by 6.4% lower volumes. Gross profit dollars increased approximately 1% to $374,000,000, and gross profit margin compressed 140 basis points to 34.7%. A $3,000,000 benefit from our savings actions as well as diligent cost management and operational initiatives was offset by lower volumes and a $3,000,000 LIFO charge in the quarter. SG&A expense decreased approximately $3,000,000 versus the prior year from the benefit of $5,000,000 of permanent savings and lower employee costs, which were partially offset by unfavorable foreign exchange translation and higher discretionary spending. SG&A expense as a percent of sales declined 130 basis points to 17%. Reported operating income increased 4% to $184,000,000. Excluding special items primarily related to acquisitions as well as rationalization and asset impairment charges, adjusted operating income increased 4% to $194,000,000. Our adjusted operating income margin declined 20 basis points to 18%, reflecting a 15% incremental margin. We reported an effective tax rate of 21.2% which is five ten basis points higher versus prior year. Gabriel Bruno: Our effective tax rate reflected an approximate $3,000,000 special item tax expense from the election of provisions for the One Big Beautiful Bill Act. This election also reduced tax payments by approximately $25,000,000 in the quarter which we expect to realize again in 2026. Excluding special items, our effective tax rate was 19.8%, which was 300 basis points higher versus the prior year's adjusted effective tax rate which benefited from a favorable mix of earnings and the timing of discrete items. We reported fourth quarter diluted earnings per share of $2.45. On an adjusted basis, earnings per share increased 3% to $2.65. Our earnings per share results include a $0.07 benefit from share repurchases and a $0.01 favorable impact from foreign exchange translation. Moving to our reportable segments on slide six. Americas Welding sales increased approximately 4% driven by 10.4% higher price and 60 basis points of favorable foreign exchange translation. Volumes declined approximately 7% primarily from the automation portfolio which had a challenging prior year comparison. While automation order rates accelerated in the fourth quarter, and the segment has a strong backlog entering into 2026, revenue recognition is not expected to begin to ramp until the second quarter. The price increase reflects prior actions taken to address rising input costs. We anticipate price levels to hold sequentially in the first quarter prior to substantially anniversarying in the second quarter. We will continue to monitor trade policy decisions and take appropriate actions as needed. Americas Welding segment's fourth quarter adjusted EBIT increased 7% to $141,000,000. The adjusted EBIT margin increased 90 basis points to 20% primarily due to effective cost management, favorable mix, and $5,000,000 in permanent savings. We expect Americas Welding to continue to operate in the mid 18 to mid 19% EBIT margin range in 2026. Moving to slide seven, the 7% as a 5% benefit from our alloy steel acquisition, a 5% favorable foreign exchange translation and 50 basis points of price were partially offset by 4% lower volumes. Volume compression reflected the continued challenges in European industrial demand trends, which were partially offset by pockets of growth in Asia Pacific and in the Middle East. Adjusted EBIT decreased approximately 4% to $31,000,000. Margin compressed 100 basis points to 11.8% as the benefits of our alloy steel acquisition, effective cost management and a $3,000,000 of permanent savings were offset by the impact of lower volumes. We expect International Welding's margin performance to be in the mid 11 to mid 12% margin range in 2026. Moving to the Harris Products Group on slide eight. Fourth quarter sales increased 11% driven by 18% higher price and 170 basis points of favorable foreign exchange translation. As expected, volumes compressed 9% due to the decline in HVAC sector production activity in the quarter. Price continued to increase on metal costs and price actions taken to mitigate rising input costs. Adjusted EBIT increased 8% to $23,000,000 as margin declined 30 basis points on lower volumes and mix. The Harris segment is expected to operate in the 18 to 19% margin range in 2026. Moving to slide nine. We generated solid cash flows from operations in the quarter, aided by lower tax payments. Average operating working capital rose 100 basis points versus the comparable prior year period to 17.9%, primarily due to higher inventory levels and reflects top quartile performance compared to peers. Moving to slide 10. We continue to execute on our balanced capital allocation strategy, with high quartile returns. In quarter, we invested $44,000,000 in growth reflecting an acceleration in CapEx investments and $94,000,000 to shareholders. We generated an adjusted return on invested capital of 21.3%. Moving to slide 11 to discuss our operating assumptions for 2026. While conditions remain dynamic in many of our regions from ongoing trade negotiations and geopolitics, we are encouraged by recent OEM commentary on capital spending plans and growing infrastructure project commitments. This gives us cautious optimism that we may be in the early stages of an industrial sector recovery that would translate to broader demand momentum in our business in the second half of the year. While domestic distribution channel demand and consumer volumes have remained resilient, demand for our equipment and automation portfolios has been choppy. We will be looking for consumable volumes to inflect to consistent growth which is typically followed by an acceleration in capital spending after one to two quarters. Once we see those drivers, we are confident that our channel mix, diversified end markets, and portfolio solutions positions us well to capitalize on accelerating growth. Our full year 2026 operating framework assumes the sales growth rate in the mid single digit percent range with organic sales split fifty-fifty between volume and the 2025 price actions that carry over to 2026. We expect volume growth rates to improve starting in the second quarter and through year end. Price is expected to be strongest in the first quarter especially in the Americas Welding segment before largely anniversarying last year's price actions in the second quarter. Our price assumption does not include dynamic metal price adjustments in our Harris Products Group segment due to the volatility of metal markets. Our 2025 alloy steel acquisition is expected to provide an approximate seven basis point contribution to sales. These assumptions support our first quarter sales estimate that is similar to fourth quarter sales results. We will continue to pursue a neutral price-cost posture and expect a mid 20% incremental operating income margin from volume growth and enterprise initiatives, which will result in a modest improvement in our operating margin for the full year. In the first quarter, we expect a seasonal sequential increase of approximately $10,000,000 in incentive costs as we reset incentive targets and issue long-term incentives. This will impact margins and cash flow performance as we start the year. For the full year, we are confident in strong cash flow generation supports our capital allocation strategy and helps compound earnings performance through the cycle. We will continue to maintain an elevated level of capital spending with a target range of $110 to $130,000,000 as we invest across a range of safety, growth, and productivity-oriented projects to drive long-term value. Our expected tax rate and interest expense are generally in line with last year, at a low to mid 20% rate and in the range of $50 to $55,000,000 respectively. And now I'll pass the call back to Steve to cover our RISE strategy new 2030 targets. Thank you, Gabe. Turning to slide 13. Our next strategy builds upon the success of our Higher Standard strategy, which concluded in 2025. Steven B. Hedlund: And despite a volatile five year period that no one could have predicted, Gabriel Bruno: we are proud to have advanced the business and achieved most of our strategic targets. Reaffirming our strong say-do reputation and our commitment to deliver on our goals. This is a testament to our incredible global team, the agility of our operations, and the tremendous support of our and shareholders. So on behalf of the leadership team and the board of directors, thank you for your support. Steven B. Hedlund: Turning to slide 14, each reportable segment may Gabriel Bruno: progress during the Higher Standard strategy. Steven B. Hedlund: Most notably in profit contribution without the benefit of significant operating leverage. Gabriel Bruno: Diligent cost management, savings programs, and operational improvements were all drivers to segment improvement. Steven B. Hedlund: Key highlights are the doubling of our automation sales and EBIT margin over the five years Gabriel Bruno: the outperformance of Harris Products Group's margins, Steven B. Hedlund: and the groundwork we laid in leveraging the scale and scope of our enterprise to drive higher returns. Gabriel Bruno: The persistent drive for continuous improvement has delivered superior returns for our shareholders as highlighted on slide 15. With a 122% total shareholder return rate, which is over double proxy peers in the last strategy cycle. Turning to slide 16. For 130 years, we have consistently operated with a value framework Steven B. Hedlund: that balances being people focused with growth, continuous improvement, and financial discipline. Gabriel Bruno: Our unwillingness to trade off one element for another is what sets us apart and is foundational to our culture and success. It has also delivered superior returns for our shareholders. What has evolved over time is how the work gets done in each of these areas. This is driven by changes in technologies, processes, and organizational structures. Steven B. Hedlund: In the next five years, we will further evolve how we operate Gabriel Bruno: under a new strategy named RISE. This next phase of our development is focused on Steven B. Hedlund: structurally aligning the global organization to drive even greater efficiency and agility in our operations. Gabriel Bruno: Further differentiating our technologies and solutions Steven B. Hedlund: exposing the business to broader growth opportunities, Gabriel Bruno: and generating value for our employees, customers, and shareholders. Let's walk through the key themes of RISE on slide 17. The R stands for reimagining how work gets done over the next five years. Steven B. Hedlund: We will be completing the transition from regionally led businesses to center-led functions that will drive higher levels of efficiency Gabriel Bruno: across one standard enterprise. I stands for innovating to differentiate. We are challenging our R&D, product management, and M&A teams to further differentiate our portfolio to accelerate wins. Steven B. Hedlund: Whether that is through internal development Gabriel Bruno: external partnerships, or techquisitions, we see great opportunities to expand our market impact Steven B. Hedlund: by amplifying the value we bring to customers' operations. Enrotech is an excellent example of a recent techquisition. Gabriel Bruno: Technology is being integrated into our first autonomous automation solution that uses vision and AI to weld with precision while adjusting the variables just like a human welder would. We believe this, among other innovations, will redefine productivity expectations for Steven B. Hedlund: customers in the years ahead. S stands for serve. Today, customers tell us that our service outperforms industry peers but we know that we can do better. We have identified opportunities to improve supply and service levels across the business which can be a growth driver for us in the next five years. And finally, we will be investing to elevate our team. We are renowned for our industry-leading technical sales reps, engineers, application experts, automation specialists, and a strong operating and supply chain organization. But we want to achieve best-in-class engagement with our employees. New development programs combined with more proactive career planning will help ensure our team is engaged, upskilled, and that we are attracting and retaining industry-leading talent to help us grow. Looking at the 2030 financial targets starting on slide 18, we are maintaining a high single digit to low double digit percent sales growth rate framework. Our growth stack consists of organic sales increasing in a mid single digit percent rate. We are well positioned to benefit from cyclical growth in key growth drivers. Our customers need partners that can offer the expertise and the solutions to address the shortage of skilled welders that support greater safety and productivity in their operations, enable reshoring and capacity expansions, and deliver the right engineered solutions for electrification and infrastructure investments whether for energy, AI data centers, or for civil infrastructure projects. We also have a long-standing position servicing defense contractors predominantly in the maritime industrial base, and have added some exposure to aerospace through recent acquisitions. So favorable macro trends coupled with innovation, a targeted expansion of our TAM where we can add value, share gains, and 300 to 400 basis points of sales growth from acquisitions, are all catalysts that give us attractive growth opportunities to leverage. During the next five years, we expect higher contribution from growth at an average high 20% incremental operating income margin. This compares with a mid 20% rate in our prior cycle. Turning to slide 19. We expect varying rates of organic sales growth across our reportable segments, reflecting regional dynamics and segment strategies. Americas Welding will lead with a mid to high single digit percent organic growth rate. Strong regional positioning will allow the team to capitalize on cyclical and secular trends. In addition, the majority of our automation portfolio is in region, and we continue to expect automation's organic sales growth at twice the rate of the core business. In international, we are pursuing a two-pronged approach to growth. We will be pursuing accelerated growth in portions of the Middle East and Asia Pacific which have high levels of project activity and where we can invest to expand our reach. In core industrial Europe, we are assuming a low growth given macro trends, but we will monitor European industrial trends to ensure we are aligned with customer needs and can capitalize on any growth opportunities which could offer upside to our model. We are expecting a mid single digit percent growth rate in Harris Products Group from ongoing HVAC sector growth, a strategic expansion of fabricated solutions for targeted industrial applications, and expectations for an improvement in residential and retail channel trends. While operating leverage from volume growth is important to our strategy, enterprise initiatives are also a driver of higher incremental margin performance. On slide 20, we highlight four keys enterprise initiatives that are being implemented in conjunction with local continuous improvement projects and our safety and environmental initiatives, which are highlighted in the appendix. Together, we expect all of these initiatives to drive approximately one third of the improvement in our higher incremental operating income margin performance through the strategy cycle. Our first key initiative is our shift from a more regional structure to a global enterprise of center-led functions. This allows us to align our work on standardized tools, datasets, and establish highly efficient core processes. It will also enable us to leverage our scale and reduce complexity in our structure. In addition, standardization supports increased digitization, automation, and the use of AI bots to drive supply chain and administrative efficiency. Second, we will continue to invest in factory automation and modernize our production platform to improve safety, productivity, sustainability, and lower conversion costs in our operations. Third, we have piloted what we call our spotlight process over the last couple of years in our Harris business. And we will be deploying this process more broadly across the enterprise. We have demonstrated that modest adjustments to our operating posture can result in improved service for customers helping us gain market share while also generating internal efficiencies and productivity. And finally, we regularly shape our footprint to ensure utilization, quality, and service are aligned with any shifts in demand. During the Higher Standard strategy, we generated approximately $60,000,000 in permanent savings from optimization projects. While the opportunity list is shorter, we will continue our disciplined approach which will contribute to margin performance. And now I'll pass the call to Gabe to cover margin targets, cash flow, and capital allocation. Gabriel Bruno: Turning to slide 21. As Steve mentioned, we expect a step up in our incremental margins on average operating income to high 20% range. This is about two thirds from volume leverage and one third from enterprise initiatives. This will increase our average operating income margin to 19% across the cycle which is a 300 basis point improvement compared to the percent average in our last strategy. This is a step up from our typical 200 basis point improvement that we have historically achieved cycle to cycle. Amanda H. Butler: Our new framework targets a peak consolidated operating income margin Gabriel Bruno: of 20 plus percent. By segment, all segment target EBIT margin ranges have increased from their 2025 levels based on their growth plans, enterprise initiatives, and segment specific action plans. In addition, we are targeting a mid teens percent EBIT margin contribution from our acquisitions, and our automation portfolio, which is largely in the Americas Welding segment. Moving to slide 22, we have improved our working capital performance over time to top decile levels. While our ratio increased in the last few years as we have strategically increased inventory during supply chain challenges, we continue to operate at top decile levels versus peers. As we execute our RISE strategy, we will continue to optimize working capital and target a 16% to 17% ratio to sales over the next five years. Cash flows from operations have also improved over each cycle with improved margin and working capital performance. We expect to generate over $3,700,000,000 in cash flows from operations at a 100% cash conversion ratio through 2030. This will allow us to continue to fund growth and return excess cash to shareholders through the cycle. Turning to slide 23 in our capital allocation strategy. We have followed a balanced capital allocation strategy which you can see on the right side of the slide with approximately 48% invested in growth, and 52% returned to shareholders over the last cycle. We will be maintaining this balanced approach moving forward. Our growth investments include internal CapEx and R&D initiatives as well as acquisitions. Internal investments yield our highest returns and we target M&A returns in the mid teens percent by year three. We will also continue to return capital to shareholders. We expect to return approximately 30% of net income to shareholders through the dividend. And as a dividend aristocrat with 30 years of consecutive annual dividend increase, we remain committed to our dividend program. In addition, we will continue to repurchase shares to prevent dilution at approximately $75,000,000 a year and will then opportunistically buy back shares using excess strategic cash. Our capital allocation strategy allows us to effectively fund growth and generate superior returns for our shareholders through the cycle. To summarize our 2030 financial targets on slide 24, we are targeting growth that will position sales above $6,000,000,000 in 2030. Profit margins will expand at high 20% incremental operating income margin, which would generate an average operating income margin that is 300 basis points higher than the last cycle's average. We are expecting a peak 20 plus percent operating income margin in this cycle. Earnings per share is expected to grow at a mid teens percent CAGR reflecting improved performance and capital deployment. Cash flow from operations is expected to expand to over $3,700,000,000 which will fund growth and shareholder returns while allowing us to maintain a solid balance sheet profile. This strategy is expected to maintain top quartile ROIC performance and elevate Lincoln Electric to consistently higher levels of performance as we continue to shape the company for another 130 years of success. And now we will pass the call to the operator to take questions. Operator: Ladies and gentlemen, at this time, we will be conducting a question and answer. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad to raise your hand and enter the queue. If you would like to withdraw your question, simply press star one again. To ensure that everyone has an opportunity to participate, we ask that you ask one question and one follow-up question, and then return to the queue. We will pause just for a moment to compile the roster. Your first question comes from the line of Angel Castillo with Morgan Stanley. Your line is open. Hi, good morning. Thanks for taking my question. I wanted to start a little bit more on the longer term dynamic, particularly on the high 20s incremental margins. You laid out some very compelling factors as we think about, I think, 20 with how you can continue to kind of drive toward those higher incrementals. Could you talk a little bit more about the timeline of how we should think about these levers being achieved? Is this all starting out to drive the business in 2026? Or should we think about some of those investments in areas like automation or levers really starting to show through more, you know, over a longer period of time. Then related to that, just how should we think about the push and pull of the role of M&A and innovation in driving faster kind of differentiated growth? But the potential kind of dilutive nature of that versus your portfolio and whether that is kind of essentially factored in and how we should think about that within the incremental margins? Steven B. Hedlund: Yeah. Great question, Angel. So as you noted, when we talk about the improvement in our incremental margins, we pointed to a part of that being driven by volume growth and leverage on the volume growth, part of that being driven by the enterprise initiative. So let me talk to the enterprise initiatives. We have a variety of initiatives in flight in various stages of maturation. I think the transformation of our finance function is probably the furthest along and Gabe, the team have done a great job there leveraging shared service and process bots and the like to make that function much more efficient. I would say next behind that is probably and then HR. And then if you look at things like purchasing and R&D, you know, much earlier in their maturation cycle. So I think I would expect to start to see benefits from the enterprise initiatives flowing in fairly steadily over the course of the five year period as each of those functional initiatives, you know, reaches their full potential. So it is not a big bang that all happens at the end of the strategy period. It is also not going to be very quick to get all the benefit at the front end. So I would model it as being fairly smooth over the course of the five years. Gabriel Bruno: Angel, just to add your comment in terms of M&A and the impact on incrementals, you know, we have incorporated all that into our model. And when you look at our targets, as you point to an ROIC, I mean, we are at 18 to 20%. So we do not want to limit our ability to grow by driving target ROI above where we are currently at. I want to introduce acquisitions there in that mid teens type of returns by year three, and that kind of fits nicely for us. You have seen that historically, that is how we have performed. And we expect to continue to execute on that kind of dynamic. Operator: That is very helpful. Thank you. And then maybe just on the more near term side, wanted to talk about your guide for net sales of mid single digits. Apologies if I missed this, but did you break down exactly, I guess, what your expectation is for organic growth within that? And related to that, could you just maybe provide a little bit more color on the specific kind of order trends? You mentioned accelerating orders in automation, but just curious what you are seeing in quarter to date in January, February for the rest of the business in terms of orders and kind of the cadence for organic growth there? Gabriel Bruno: Yes. So Angel, so when you think about the organic assumptions that we provide, you know, mid single digit type of growth split, fifty fifty between price volume. What we have assumed for pricing, it reflects all of the 2025 pricing actions that we have placed into our business responsive to the acceleration of input costs. And we will see that largely in the first quarter and then begin to anniversary largely in the second quarter. So we have confidence that based on the strength of orders and backlog, particularly in our automation business, that we will see a pivot to growth beginning in the second quarter. So as the year progresses, we expect to see less pricing, see that more in the first half of the year, and more volume in the back half of the year. And the confidence level we see because of order levels and back and automation really drives that volume assumption. As we have mentioned, the consumables business has held steady from a volumes perspective. So that is good posture to be in when you think about the production levels across the end markets we serve. But we do want to see more consistency in order patterns from a capital investment perspective. So the volume assumptions are anchored on what we have seen to date, particularly in our automation business. Steven B. Hedlund: And Angel, just to add some further color to that. What we saw in the fourth quarter in automation was that we won some very large project orders, which we were very pleased to capture that business and to see some of the large end users start to release capital. What we have not seen yet is the more small to mid sized fabricator in the general industry segment really start to deploy capital, whether that is automation or for our standard welding equipment. We are encouraged that the consumable, which is the shortest cycle portion of our business and typically is a good bellwether for where the industry is headed, has held stable. And we are hopeful that as the PMI continues to inflect and as business confidence improves, we will see the consumable volume start to grow and that will then translate typically with a one to two quarter lag to more capital spending on standard automation, standard equipment. Operator: Very helpful. Thank you. Amanda H. Butler: Mhmm. Operator: Your next question comes from the line of Nathan Hardie Jones with Stifel. Your line is open. Good morning, everyone. Steven B. Hedlund: Good morning, Nate. Operator: I guess I will do first question on the automation business. You talked last quarter about being more confident in that in the order progression on that. You sound more confident again today talking about, you know, having a better backlog. I think you said the automation business was $840,000,000 in 2025. Can you talk about the expectations for that in 2026? Maybe size the increase in orders in '25. I understand the lag. Gabriel Bruno: And so we will see that start to ramp up in the second quarter. Just any more color you can give us around that would be great. Thanks. Yeah, Nathan. So as we said, our sales levels for our automation business were $870,000,000 in 2025, and that reflected mid single digit decline. The order of magnitude in how we are seeing volumes, is large driven by the automation business, is to essentially recover a lot of that organic softness we saw in 2025. So think about a mid single digit type of growth trajectory potentially in automation based on what we have seen in order levels in our backlog. And our confidence will continue to increase as we see less choppiness in the order patterns. And as Steve mentioned, Amanda H. Butler: some really strong good orders. We would to see more activity on the short Gabriel Bruno: cycle type of business. Operator: Excellent. Thanks for that. I guess my second question is around some of the center-led functions that you talked about. Just changing the org structure, I guess, and operational structure of the business a little bit. Can you talk about some of those functions? You know, what the benefits are that you are going to get from centralizing those things. Are you targeting Asia and Middle East? Does that require a more centrally led business? I think, generally, you need to have kind of local content there, especially in the Middle East to their investments you need to make there. I will leave it there. Thanks. Steven B. Hedlund: Yeah. Sure, Nate. I think it is important to note that we use the term center-led, not centralized. And the objective of this approach is to try to get the benefits of our scale and scope by having highly standardized, simplified, and automated processes for running the business. And unfortunately, given how we have evolved the business over the number of last decades, we tend to run our core business processes just slightly different everywhere. So the way we do demand forecasting, order entry, supply chain planning, just slightly unique in every different part of the company, and that frustrates our ability to try to use process automation, you know, chat bots, shared services, things like that to get much more efficient at running those processes. So it is a lot of work around, you know, standard old-fashioned business process redesign to enable us to take advantage of those opportunities while still trying to retain the local agility. So we have teams that are based in Europe, for example, that are doing, you know, demand forecasting and supply planning. We want them to be able to the best automated tools, but still be very responsive to the local market. So we are trying to get the best of both worlds between a pure regionally autonomous and a pure centralized approach. Operator: Your next question comes from the line of Mircea Dobre with Baird. Your line is open. Thank you. Good morning. And I will start with a near term question, and then a longer term follow-up. So from a near term perspective, if I understand your comment correctly, in terms of pricing for 2026, you are not baking in any of the metal inflation that is coming through in Harris, and the pricing that is reflected in the guidance is just carryover from 2025. So I guess the question is this, clearly, there is metal cost inflation in Harris. Is that flowing through the P&L? How should we think about the impact that that pricing element has on EBIT dollars, margin, however you want to frame it, Gabe? And bigger picture as we think about 2026 pricing, is there an argument to make that, you know, you will need to put through a 2026 price increase generally speaking, not just carryover from 2025. Gabriel Bruno: So, Mig, I will answer the last part of your question first, is we will take pricing actions as conditions require. Our price-cost strategy is to be neutral. Currently, we go and come into this new year, we have held steady on pricing actions largely, but we will be responsive to how we see any dynamics in the markets. In terms of Harris, you know, we have a mechanical adder that is built into our pricing methodology. You have seen what is happened with silver and copper, for example. And it obviously has an impact on the brazing side of our business. And so we do not feel that is going to have a significant impact on margins because that is all incorporated into our adder and our movement and adjustments on pricing. But it has been pretty volatile. So we cannot and want to try to outline what silver or copper markets will do, but we do have a pricing mechanism, as you know, that is more mechanical in nature. Operator: But the impact on EBIT or on operating income from the price, does that carry any contribution to your EBIT or not? Gabriel Bruno: Yes. It is not dilutive to the overall Harris margin. Operator: Okay. Thank you for that. And then the longer term question is on, obviously, the RISE strategy. You sound very bullish, constructive on the growth opportunity in automation, and I guess maybe all of us would agree on that. But at least for now, the reality is that this portion of the business is dilutive from a margin standpoint. So in your targets, you are obviously aware of that, and you are capturing it. But I guess my question is, how do you think about the opportunity for truly driving higher margin in this business? Because if you are offering something that is differentiated to your customers, and value added, presumably, there is opportunity to price accordingly. And as you think about M&A, you know, you talk about techquisitions. I guess that is a new term that I learned today. Presumably, that is geared towards the automation component of the business. Is there a way for you to do the kind of M&A that would actually be accretive to margin rather than dilutive to margin as I guess, a previous question assumed they would? Thank you. Steven B. Hedlund: Yeah. Mig, great question. I will give you, you know, a basic framework as to how to think about it, and then let Gabe fill in some details for you. You are right. The automation business is dilutive to the overall portfolio at the moment. And it has been particularly challenged over the last eighteen months by the environment we have been in that has caused customers to be very cautious on capital spending. We still really like the automation portfolio. We think it is a great fit for us strategically. We see that the world is only going to demand more and more automation going forward. So where the endpoint target for the margin structure of the business will remain to be seen, but the first step is to get it to be non-dilutive. Once we get it to be non-dilutive, then we can talk about how high is high from an accretive standpoint. But the journey right now is get the business back to where it was supposed to be prior to all this disruption. Regarding technology, you are absolutely right. I mean, to the degree that we can provide capability that do not exist in the world that are differentiated from what other vendors can supply and that solve a real customer pain point, you know, we expect to get paid for that. And so we look at the techquisitions of things like Enrotech that bring in an ability, help us create something that is new to the world, you know, we are going to expect to get paid for that and portion of the business for sure should be accretive. Gabriel Bruno: Yeah. So, Mig, just to add a couple of points, just keep in mind, historically what we have done in the last two years, as you know, have been pressured by the capital investment cycle, but we started off 2025 at about a $400,000,000 level of business, and we increased our business to $940 or so million in 2023 or so. When we achieved low teens type of profile and our target is, as you heard in my comments, is to be mid teens. So that is our objective. We were not that far away when we were talking about the $900 or so million of business at a target of $1,000,000,000. So we did have pressure in the last couple of years on capital investment, but we are confident that we can achieve that mid teens type of profile. And that is what is incorporated into our 2030 model. Operator: I appreciate it. Thank you. Gabriel Bruno: Mhmm. Operator: Your next question comes from the line of Robert Stephen Barger with KeyBanc Capital Markets. Your line is open. Thanks. Good morning. Gabriel Bruno: Good morning, Amanda H. Butler: Morning. Operator: You referenced some large product project orders you won in April. Is that primarily automotive, or are you seeing some opening up in other industries? And just more broadly, does it feel like inbound calls are starting to accelerate or is this sales work that you did last year, which is now starting to monetize? Steven B. Hedlund: Yeah. So the large projects we won in the fourth quarter were primarily automotive. And I think part of that is driven by just the nature of their business and the need to have product refresh on a defined cycle. What we are really looking for is, you know, greater willingness across the portfolio of customers to invest capital on the business. So whether that is heavy fab, structural steel, general fab, there is still a fair amount of caution out there. The funnel of opportunities has probably never been better. The challenge just becomes converting those high probability opportunities that we feel fairly confident we are going to eventually win. Can we get them over the finish line sooner rather than later? And again, that really is a customer confidence driven discussion less so than, you know, are they satisfied with our solution or us as a supplier? I do not think that is the issue. It is just are they ready, willing, and able to finally pull the trigger on releasing the capital. Got it. Operator: And the automation strategy has, you know, obviously increased your OEM exposure and cyclicality. And you have done a great job managing margin through what has been a tough environment for the last four or six quarters. But is there a thought to balancing exposure to more products and services that show less volatility through cycles, or is that increased volatility just the price you pay for the direction you want to take the company? Steven B. Hedlund: Yeah. I think about it, Steve, more as where are there problems that are pain points for that we can solve and get paid for solving? The recent acquisition we did in alloy steel is really all around providing solutions for abrasion and wear in a mining application. So if you are mining stuff with an excavator, the excavator's parts are going to wear and you need some way of either replacing or refurbishing those. That is a great business for us that we picked up. Very excited about that. Look to continue to grow and expand that business. We look at automation opportunities the same way. How that then affects our overall cyclicality is something we will deal with as long as we believe over the course of a cycle, we can get fairly compensated for the value we are creating. Operator: Understood. Thanks. Your next question comes from the line of Chris Dankert with Loop Capital Markets. Your line is open. Steven B. Hedlund: Hey, morning. Thanks for taking the questions. Operator: I guess just to circle back, fully appreciate, you know, we do not want to get into, you know, handicapping silver and steel and copper prices in the guide here. But I guess, given the level of volatility, we are halfway through the first quarter. Can you give us just a sense for what that metals impact would be on 1Q as of today, not obviously for the full year, but just for the first quarter? Gabriel Bruno: So because I do not want to get that specific, you know, as you are tracking silver, I mean, we saw a point for silver topped at $110 a troy ounce and dropped back to the eighties and that. So as you are looking at the mix of our business, we have got about 40% of our business tied into HVAC, which is tied into brazing consumables. So we do expect an escalation in average pricing but it has been choppy. But overall, it has been on an increasing level of trend when you look at it year over year. You could just use that as a framework from year over year perspective. But it can move as you know. Steven B. Hedlund: Yeah. Yeah. Thank you for the color there. Operator: I guess to circle back on a bigger picture thinking about international, any sense for kind of the planning around margin expansion there? I guess, how much of that kind of 2025 to 2030 improvement is based on just volume recovery versus, say, you know, cost actions or efficiency gains or mix? Just any way to kind of size those two components of the margin expansion in international? Steven B. Hedlund: Yeah, Chris. I will give you some color and then let Gabe fill in details. When we think about the international business, we really want to focus our efforts and our future investments in places that have good macroeconomic conditions where we have a good value proposition and where we feel like we can win and profitably grow the business. So we are looking at, you know, portions of the international portfolio, particularly in Middle East, Africa, parts of Asia. Core Europe really is the open question mark. You know, it has been a long tough slog in Europe, due to the macroeconomic conditions there. You know, there is some talk about increased defense spending. We will see whether that actually comes through to fruition. But our targets over the five year period for international really are not predicated on there being a significant recovery in Europe. Operator: Hey, Chris. Just to add that is very helpful. Gabriel Bruno: Yeah. Broader comment in terms of when you say volume, demand levels in general. When you look at the organic sales growth rates that we have shared by segment, we do not incorporate a significant level pricing. Historical pricing will be between 100, 200 basis points. And that is kind of what we assume broadly. So our assumptions are largely driven by expansion in our foot acceleration in demand, for example, as we talked about automation. Steve mentioned the strength we would expect into Asia, Middle East, and international. So they outlined and we have shared in terms of growth strategies is anchored on real increase in presence throughout the markets, not on pricing. Pricing will be modest. Operator: That is really helpful context, fellows. Thank you. Gabriel Bruno: Mhmm. Operator: Our last question comes from Walter Scott Liptak with Seaport Research Partners. Your line is open. Steven B. Hedlund: Hi. Thanks. Operator: Yeah. I wanted to just circle back on that January question. Steven B. Hedlund: And, you know, you guys mentioned the reference to PMI a couple times in January. I did not it was not clear to me. Did you guys see a pop in January with some of your general industrial either consumables, or equipment? Operator: Yeah. And and Steven B. Hedlund: what we would lag the any improvement in the PMI. So we are encouraged by the published number, and as we said before, our volume has been steady, but we have not seen an inflection in consumable volume. Gabriel Bruno: So that is pretty key, Walt. Right? As we are seeing studying this, in the consumable volume level business. That ties into production levels and really want to see an escalation in capital investment. Operator: Okay. Great. And then maybe, you know, sort of a high level one. Steven B. Hedlund: I wonder if there is a difference with the way that you guys went after the 2030 RISE targets versus the way that the 2025 Higher Standards were put in place. Like, the business has been evolving. You know, you have some factory consolidation in those impressive profit margin targets. You have got some impressive organic growth targets. Is there something that is kind of structurally changed Operator: I wonder if you just talk to, you know, the, you know, how Lincoln's evolved. Steven B. Hedlund: Yeah. Well, great question. We really think about the RISE strategy is a continuation and evolution of the Higher Standard and really trying to build upon the momentum and the progress that we have created over the last five years. And again, what has been a fairly interesting, shall we say, you know, market environment with a lot of headwinds and a lot of disruption from COVID, a few hot wars around the world, a global trade war, fairly unpredictable, you know, trade policy emanating at the U.S. So we are hoping that, you know, we may see a somewhat of a return to normalcy in the outside world, but that and it is when we say we are cautiously optimistic about the future, the caution is really around the external environment. Our optimism is driven by what the team has been able to accomplish over the last five years, and the opportunities that we know are in front of us that we see every day and that we are committed to addressing and making the business even stronger going forward. So, I do not see it as a radical departure from the Higher Standard strategy. Okay. Great. Thank you. Operator: This concludes our question and answer session. I would like to turn the call back to Gabriel Bruno for closing remarks. Gabriel Bruno: I would like to thank everyone for joining us on the call today and for your continued interest in Lincoln Electric Holdings, Inc. We look forward to discussing our RISE strategy and the progression of our initiatives as we advance to our 2030 targets in the future. Thank you very much. Operator: This concludes today's conference call. You may now disconnect.
Operator: Welcome to the Curtiss-Wright Corporation Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for your questions following the presentation. In the interest of time, we ask that you limit yourself to one primary question and one follow-up. Lastly, if you should require operator assistance, please press 0. I would now like to turn the call over to James Ryan, Vice President of Investor Relations. Please go ahead. James Ryan: Thank you, Jamie, and good morning, everyone. Welcome to Curtiss-Wright Corporation’s fourth quarter and full year 2025 earnings conference call. Joining me on the call today are Chair and Chief Executive Officer, Lynn M. Bamford, and Executive Vice President and Chief Financial Officer, K. Christopher Farkas. A copy of today's financial presentation and the press release are available for download through the Investor Relations section of our website at curtisswright.com. A replay of this webcast will also be available on the website. Our discussion today includes certain forward-looking statements that are based on management's current expectations and are not guarantees of future performance. We detail those risks and uncertainties associated with our forward-looking statements in our public filings with the SEC. As a reminder, the company's results and guidance, including adjusted non-GAAP view, that excludes certain costs in order to provide greater transparency into Curtiss-Wright Corporation’s ongoing operating and financial performance. GAAP to non-GAAP reconciliations are available in the earnings release and on our website. Now I would like to turn the call over to Lynn to get things started. Operator: Thank you, Jim, and good morning, everyone. Lynn M. Bamford: As you saw in last night's results, the momentum continues to build at Curtiss-Wright Corporation. I would like to begin by acknowledging our 9,100 hardworking employees for driving another record year of financial performance. We continue to deliver on our pivot to growth strategy, which resulted in strong growth in sales, profitability, free cash flow, and new orders in 2025. Our performance reflects the critical positioning of our technologies across our A&D and commercial markets, our ongoing pursuit of operational and commercial excellence, and our commitment to delivering exceptional results for our shareholders I will start with highlights of our fourth quarter 2025 results Overall, of $947,000,000 increased 15% year over year, highlighted by strong organic growth of 11% and the solid contribution from our I&C Solutions acquisition. We delivered 16% growth in our aerospace and defense markets, which exceeded our expectations driven by an acceleration of Ground and Naval Defense revenues into 2025. Of note, growth in our A&D markets reflected our continued strong alignment to U.S. Military priorities and accelerated pace of growth in NATO and allied funding. While commercial aerospace sales increased more than 20% Growth in our commercial markets was also impressive, up 13% year over year, primarily driven by higher revenues in the Power and Process market. Operating income increased 14% and included higher R&D investments to drive future organic growth, while operating margin was strong at 19.7%. We delivered diluted earnings per share growth of 16% year over year, slightly ahead of our expectations, was primarily driven by higher A&D sales. Free cash flow was strong at $315,000,000 up 13%, which reflected a 224% conversion. Regarding our order book, new orders increased 18% in the fourth quarter, reflecting nearly 1.2 times book to bill were driven by continued solid demands within our naval defense and commercial nuclear markets. Next, I will highlight our full year 2025 results. We delivered another record financial performance with higher growth in revenue and operating income across all three segments reflecting the underlying demand and the momentum that continues to build across our portfolio. We delivered exceptional margin expansion up 110 basis points year over year to reach a new record of 18.6%. This performance reflected the strong growth in sales the benefits of our operational excellence initiatives, and the savings generated by our restructuring actions. Furthermore, we continue to accelerate investments in research and development across the portfolio to support future organic growth and reinforce our commitment to grow R&D faster than sales over time. Diluted earnings per share increased 21% year over year, driven by improved operational performance as well as a lower share count. Adjusted free cash flow also reached a record $554,000,000 which reflected strong conversion of 111% based on the growth in earnings and near record level of working capital efficiency. We achieved these strong results despite a nearly 50% increase in capital expenditures in 2025 to support growth investments across all three segments. Turning to our full year 2025 order book. Strong overall demand in our A&D and commercial markets yielded a new record of $4,100,000,000 up 10% year over year and a book to bill of nearly 1.2 times. Starting with our A&D markets, continued strong demand for nuclear propulsion equipment supporting submarine programs in naval defense was partly offset by lighter than anticipated demand within our aerospace and ground defense markets due to delays resulting from the continuing resolution government shutdown. This principally impacted timing of orders with some of our short cycle Defense Electronics businesses including Tactical Communications. As a result, we delivered a book to bill of 0.96 times in Defense Electronics initially leading us to take a more conservative 2026 guide in our overall ground defense market. However, looking across the pipeline of opportunities for these businesses, our customers have expressed their confidence that this is timing Our programs remain in good standing and our technologies closely aligned with the modernization priorities of The U.S. And our allies. Wrapping up our A&D markets, in Commercial Aerospace, we remain aligned with the anticipated production ramps across the major OEM platforms which continues to drive demand for our products. Within our commercial markets, we concluded the year with tremendous growth in commercial nuclear. Driven by strong demand for aftermarket equipment supporting scheduled plant outages and restarts as well as continued advancement across leading SMR designs. Additionally, we continue to see stabilization across two of our consistent watch areas, process and industrial, each of which recognized solid order demand to close to conclude the year. Overall, the healthy growth in orders builds on Curtiss-Wright Corporation already strong backlog, which increased 18% in 2025 to reach a new record of in excess of $4,000,000,000 and provides greater confidence in our future top line growth. Another important takeaway from this past year was our disciplined approach to capital allocation to ensure deployment towards the highest return opportunity in order to enhance shareholder value. We executed a record $465,000,000 in total share repurchases in 2025 and we increased our annual dividend for the ninth straight year. Now, I would like to briefly introduce our full year 2026 guide. Overall, we are projecting organic sales of 6% to 8%. Supported by growing momentum in our overall order book and our commitment to continued investment in the business. Operating income growth is once again anticipated to outpace sales growth and reflects 30 to 60 basis points in operating margin expansion this year to range from 18.9% to 19.2%. As a result, diluted EPS is expected to grow 11% to 15% Furthermore, we anticipate another year of record free cash flow generation and continue to expect strong conversion in line with our long term targets. In summary, Curtiss-Wright Corporation is poised to deliver an outstanding performance in 2026 And as we will discuss later in our remarks, we have line of sight to exceed the three year financial targets that we issued at our 2024 Investor Day. Now, I would like to turn the call over to Chris to provide a more in-depth review of our financials. James Ryan: Thank you, Lynn. Turning to Slide four, I will begin by reviewing the key drivers of our fourth quarter 2025 performance. I will start with the Aerospace and Industrial segment where overall sales increased 5% and was in line with our expectations. In the segment's commercial aerospace market, our results reflected solid OEM sales growth supporting increased production on both narrow body and wide body platforms. Within the segment's defense markets, we experienced increased demand for EM actuation equipment supporting ground based mobile launcher systems. And in the general industrial market, sales were essentially flat overall, but outpaced the global macro conditions affecting industrial vehicle markets. Turning to the segment's fourth quarter operating performance, we delivered a strong operating margin of 20.1% and benefited from favorable absorption on higher A&D sales the overall profitability was tempered by a less favorable mix of business mainly due to higher customer funded R&D. Next, in the Defense Electronics segment, sales growth of 17% exceeded our expectations. Mainly due to timing within Ground Defense as embedded computing revenues accelerated into the fourth quarter. We also experienced solid year over year growth in sales of tactical communications equipment as well as increased turret drive stabilization systems supporting international customers. Within the segment's aerospace defense market, higher direct foreign military sales of embedded computing and flight test instrumentation was offset by the timing of domestic fighter jet and UAV programs In this segment's commercial aerospace market, our results reflected solid growth in flight data recorder sales as well as higher avionics equipment supporting various helicopter programs. Regarding the segment's operating performance, we delivered a strong 25.9% operating margin up 160 basis points and in line with our expectations. Reflecting favorable absorption on higher revenues and the benefits of our ongoing operational excellence initiatives. Those increases were partially offset by higher investments in research and development, Turning to the Enablement Power segment, Overall sales increased 21% and were well ahead of our expectations. This performance was once again driven by strong revenue growth in Naval Defense following continued improvements in the supply chain and an acceleration of production on submarine programs. We also experienced an increase in aftermarket revenues supporting naval shipyards through fleet services work, Within this segment's aerospace defense market and as expected, we experienced a strong sequential and year over year increase in revenues for a arresting systems products principally supporting international programs. In the power and process market, our results reflected a strong contribution from our INC Solutions acquisition, which contributed to higher sales in both our commercial nuclear and process markets. On an organic basis, growth in commercial nuclear sales reflected the continued ramp up in development across several SMR designs as well as higher government nuclear revenues. Additionally, strong growth in the process market was driven by higher MRO valve sales where demand continued to improve throughout 2025 providing us with increased optimism for growth in 2026. Regarding the segment's operating performance, operating income grew 13% while operating margin was solid at 17.9%. Our results reflected favorable absorption on higher sales, which was more than offset by unfavorable mix including higher research and development supporting next generation SMR designs. To sum up Curtiss-Wright Corporation’s fourth quarter results, we delivered teens growth in sales and operating income which resulted in an overall strong operating margin of 19.7%. Building on our strong performance in 2025, I would like to take the next few minutes to review our full year 2026 guidance. I will begin on Slide five with our end market sales outlook where we total sales to grow 6% to 8% driven by continued strong organic growth in our A&D and commercial markets. In Aerospace Defense, our outlook for 9% to 11% growth mainly reflects the alignment of our technologies to the FY 2026 U.S. Defense budget including key military priorities such as aircraft modernization and Golden Dome. This in turn is driving increased demand for embedded computing solutions across numerous applications from communications and radar to various mission packages supporting both existing and next generation platforms. Within Ground Defense, we anticipate anticipate sales to decline 4% to 6% As a reminder, this follows a strong pace of mid teen sales growth in both 2024 and 2025. Based on the acceleration of computing revenues into 2025 and the delays in the orders for tactical communications equipment that Lynn referenced in her opening remarks, we are beginning the year with a more conservative outlook in this market. Aside from those timing delays, we expect continued growth in embedded computing towards radar and strategic missile defense applications across a wide number of programs, In addition, we expect increased EM actuation sales supporting the U.S. Army's IFPC program and higher sales of turret drive stabilization systems supporting international ground vehicles through our relationship with Rheinmetall, In Naval Defense and building upon our strong performance this past year, growth of 5% to 7% mainly reflects higher revenues on the CVN-eighty one aircraft carrier and Virginia class submarine programs. Looking more broadly across all three defense markets, based on our strong backlog across key platforms globally and the alignment of our technologies to support NATO and allied countries, we expect direct foreign military sales to remain a key contributor to our overall defense growth in 2026. Turning to Commercial Aerospace, our outlook for 10% to 12% sales growth reflects the high teens growth in our order book this past year and the anticipated ramp up in OEM production on narrow body and wide body aircraft. Lynn M. Bamford: To wrap up our aerospace and defense James Ryan: outlook, we project total sales in these markets to increase 5% to 7%. Moving on to our commercial markets. In Power and Process, our outlook for 12% to 14% sales growth reflects mid teens growth in our commercial nuclear market along with low double digit growth in process. Our outlook in commercial nuclear reflects continued strong U.S. Demand driven by a step up in year over year outages well as higher revenue supporting both plant life extensions and restarts of existing plants. In addition, we anticipate higher international aftermarket sales mainly from Canada and South Korea. Our guidance also reflects strong growth in SMR revenues as we begin to transition from development to the initial prototype stage for critical systems on the Xenergy Advanced Reactor including both the helium circulator and reactivity control and shutdown systems. Please note that our initial guidance does not include an AP1000 order that we continue to anticipate that we will receive an order for reactor coolant pumps in 2026. And in the process market, our outlook is mainly driven by improving demand for our severe service valves as well as higher sales of instrumentation solutions from our I&C business. Lynn M. Bamford: Lastly, in the general industrial market, while we anticipate sales to be James Ryan: flat once again in 2026, we saw signs of improvement in our Q4 2025 order book and entered 2026 with a solid backlog. Looking deeper, we expect modest growth in medium duty industrial vehicle sales this year as well as a small benefit from international growth. We remain cautiously optimistic that conditions within our overall industrial vehicle business will improve through the year and into 2027. Wrapping up our total commercial markets, we are targeting strong full year sales growth of 7% to 9%. Moving on to our full year 2026 financial outlook by segment on Slide six. I will begin in Aerospace and Industrial, where we expect sales to grow 5% to 7% overall reflecting strong growth in commercial aerospace and ground defense as well as flat sales in general industrial. Regarding the segment's profitability, we project operating income growth of 11% to 14% and operating margin expansion of 90 basis to 110 basis points ranging from 18.3% to 18.5%. This outlook reflects our expectations for higher sales the benefits of our operational excellence initiatives and the savings generated by our restructuring while we continue to accelerate investments in R&D. Next in Defense Electronics, we expect sales to grow 4% to 6% mainly driven by strong growth in Aerospace and Defense partially offset by the timing of orders in Ground Defense. Regarding the segment's profitability, we expect operating income growth of 4% to 6% and operating margin to be flat to up 20 basis points to a new all time high range of 27.3% to 27.5%. Of note, this outlook reflects our expectations for higher sales and the savings generated by our restructuring actions as well as $4,000,000 in incremental investments in internally funded R&D. In Enable and Power, we expect sales to grow 8% to 9% reflecting the strength of our orders and backlog in both our naval defense and commercial nuclear Regarding the segment's profitability, we expect operating income growth of 10% to 13% and operating margin expansion of 30 to 50 basis points. Estalgic reflects our expectations for strong revenue growth and the savings generated by our restructuring actions while we continue support investments in both internal and customer funded development programs. To summarize our 2026 outlook, overall, we anticipate total Curtiss-Wright Corporation operating income to grow 8% to 11% and expect operating margin to range from 18.9% to 19.2%, up 30 to 60 basis points. Next, to aid in your quarterly modeling, we expect first quarter 2026 sales to grow by high single digits relative to the 2025 and we are targeting low double digit growth in operating income with solid year over year operating margin improvement across all three segments. Continuing with our financial outlook on Slide seven, I wanted to provide some color on a few non operational items. I will start with other income, which we expect to increase by approximately $3,000,000 to $4,000,000 this year based upon our strong free cash flow generation and the resulting impact on interest income. Looking ahead to December, we will pay down $200,000,000 in senior notes coming due, which will have a minor benefit and lower interest expense. Regarding our 2020 tax rate, we are targeting a slight reduction to 21.5% which reflects our ongoing success in reducing our effective tax rate. Lynn M. Bamford: Turning to our EPS guidance, James Ryan: we expect full year 2026 diluted EPS to range from $14.70 to $15.15 up 11% to 15% reflecting strong profitable growth within our operations and a reduction in our share count following record share repurchases in 2025. For 2026, to start the year, we anticipate $60,000,000 in standard share repurchases as we continue to offset dilution. To aid in your quarterly modeling, we expect first quarter EPS to reflect high teens growth relative to the 2025 mainly driven by a strong operational performance with a supplemental benefit of $0.10 from a lower year over year first quarter tax rate. And similar to last year, we expect sequential quarterly EPS improvement with the fourth quarter being our strongest, And lastly, we are projecting a record full year free cash flow of $575,000,000 to $595,000,000 reflecting our expectations for strong growth in earnings in our continued focus on working capital management, more than offsetting increased growth investments in capital expenditures. As Lynn mentioned earlier, we delivered near record levels of working capital in 2025 reaching 19.2% of sales. And for 2026, we expect to further improve upon that and to reach a new record level of performance. Beyond that, our outlook for $110,000,000 to $120,000,000 in capital expenditures represents an increase of more than 25% year over year which follows last year's nearly 50% increase and reflects our ongoing investments to support future growth. Lynn M. Bamford: Overall, as we accelerate investments across our operations this year, James Ryan: we continue to expect free cash flow in excess of earnings and a healthy free cash flow conversion rate of approximately 105%. Now I would like to turn the call back over to Lynn. Lynn M. Bamford: Thank you, Chris. And turning to Slide eight, where I will wrap up today's prepared remarks. Curtiss-Wright Corporation has demonstrated strong growth in financial financial performance over the past two years since our May 2024 Investor Day event and we are well positioned to continue that momentum by delivering strong profitable growth again in 2026. I will spend the next few minutes providing a few insights insights into the increasingly favorable industry tailwinds for two of our largest end markets, defense and commercial nuclear. Which are benefiting from positive market forces and provide us with increased confidence as we look into the future. I will also provide some additional color on a few of our targeted growth initiatives across the portfolio. Then I will conclude today's presentation by reviewing our progress against the major 2024 Investor Day financial targets shown at the bottom of the slide. I will start with Defense. Curtiss-Wright Corporation is primed to benefit from the tremendous acceleration in global defense spending driven by a record U.S. Budget of approximately $1,000,000,000,000 including reconciliation funding and the increased commitments from NATO and Allies. Starting in Naval Defense where we continue to benefit from strong demand and the call for accelerated production across the U.S. Navy's most critical platforms. As a key supplier of nuclear propulsion equipment, our decades long relationships along with capacity to take on additional business uniquely positions Curtiss-Wright Corporation to secure new content across existing and future platforms. In Defense Electronics, we stand to benefit from the administration's focus on commercial solutions and agile contracting and also through our strong alignment to the DOW top strategic priorities. These include areas such as next generation fighters, Golden Dome and aircraft modernization just to name a few. Our broad offering of embedded computing products are used in a wide number of ARC and ground based systems and are an integral part of mission critical applications such as comms, networking, threat detection, jamming, targeting and fire control. Curtiss-Wright Corporation continues to make purposeful and focused investments in research and development to advance our technology portfolio. To name a few significant examples, we are designing and building ruggedized computing solutions with NVIDIA's GPUs ranging from the high end Blackwell to the swap optimized store, tailoring them to match the compute needs of those different applications. Additionally, our Fabric 100 family of products provides industry leading 100 gigabit connectivity enabling the highest performance in deployable computing systems today. Also, we recently announced our ruggedized servers are now validated as part of Microsoft Azure ecosystem, bringing the enterprise class computing to the tactical edge. These solutions and others uniquely position Curtiss-Wright Corporation as a leader in defense technology. Supporting next generation applications while ensuring our alignment to the US government's most standard and highest priorities. Operator: Overall, this is but a sample Lynn M. Bamford: of our ongoing investments in and development of new technologies help ensure Curtiss-Wright Corporation maintains a strong position on leading defense programs today and well into the future. On the international front, there is a clear recognition of the need and movement by our NATO allies to strengthen their defense capabilities. This year NATO committed to boost defense spending from 2% of GDP per year to upwards of 5% by 2035. Similar to our market position in The U.S, we have a very broad reach across a large number of platforms. As a result, over the past few years, we have recognized mid teens plus growth in our direct FMS revenues and we continue to solidify our positions with technologies that support operational readiness such as embedded tactical computing ground based arresting systems, and Navy aircraft handling systems. In addition, we remain well aligned with Brian Mittal, where we expected growth in ground vehicle platforms affords us the opportunity to supply our turret drive stabilization systems technology to thousands of new vehicles over the coming decade. These represent just a few of the many ways the Curtiss-Wright Corporation stands to benefit from the continued acceleration of global defense spending. Turning to Commercial Nuclear. During the last two years, the momentum and pace of activity has accelerated globally. Broadening the near and long term scope of opportunities for Curtiss-Wright Corporation in the Operator: industry. Lynn M. Bamford: Here in The U.S, the President's executive orders issued last May are providing tremendous uplift by advancing support for the industry at large and in keeping with the focus on U.S. Nuclear energy dominance. These directives are already advancing the speed at which approvals for reactor licensing are being completed particularly for plant life extensions of U.S. Reactors. This in turn is creating a pathway for a broad acceleration across our customers' business models while further supporting the administration's goal to quadruple U.S. Nuclear generation capacity to 400 gigawatts by 2050. Additionally, and perhaps the largest potential boost for Curtiss-Wright Corporation is the administration's $80,000,000,000 commitment to support the construction of 10 new Westinghouse AP1000 reactors This expanded scope across The U.S. Builds upon the existing AP1000 opportunities in Europe, particularly in Poland and Bulgaria, which continued to demonstrate steady progress. Overall, we remain aligned in those these pursuits and continue to expect our next order this year. Meanwhile, the SMR development continues to evolve in The U.S. And globally, including Canada, The UK and Europe. And we expect to benefit as these efforts transition from ongoing design activities to building prototypes before shifting to production later in the decade. Of note, we have maintained a steady pace of investment to support Curtiss-Wright Corporation’s growth as we work to enhance our relationships and expand our content across the leading 300 megawatt plus SMR developers. Overall, Curtiss-Wright Corporation is extremely well positioned to capitalize on the expected surge in demand and future growth in this industry providing us with increased confidence in our ability to deliver on our growth targets in commercial nuclear. Next, I will review our progress against our three year Investor Day targets. Starting with sales, we are currently on track to deliver an organic revenue CAGR of approximately 8.5% well ahead of our target of 5% and a clear acceleration relative to our historical top line growth rates. In addition, we are consistently delivering operating income growth in excess of revenue growth, which is a foundational premise under the pivot to growth strategy that opens funding for reinvestment back into the company Since 2023, we have grown R&D at a faster pace than sales and at the same time are driving towards operating margin expansion of 170 basis points over the three year span. This year, we expect to reach a new milestone with the potential to deliver an operating margin of 19% which firmly entrenches our position as a top quartile margin performer relative to our peers. We are also well positioned to expand our EPS growth target by more than 700 basis points and are on track to deliver a 17% EPS CAGR over the three year period. Through a combination of strong operational performance and our dedication to a balanced capital allocation strategy, we are compounding earnings at a mid teens pace over time. And finally, we are driving record levels of free cash flow across our business. We are tracking well ahead of our expectations while more than offsetting increased growth investments in CapEx and expect to generate 110% average free cash flow conversion over the three year period. Our strong free cash flow generation helps to fuel organic and inorganic investments across the business that drive efficiency, expand capacity and help enhance our overall customer offering. Along with our commitments to returning capital to shareholders. In closing, we look forward to the year ahead and achieving another record financial performance in 2026. Looking on this year, I am very excited about the medium and long term prospects for Curtiss-Wright Corporation that will continue to provide momentum under our pivot to growth strategy drive long term value for our shareholders. Thank you. And at this time, I would like to open up today's conference call for questions. Operator: Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press 1 on your telephone Thank you. Our first question will come from Kristine Liwag with Morgan Stanley. Please go ahead. Hey, good morning, everyone. And Lynn, thank you for the details you provided on the different growth vectors in defense. I wanted to dive a little bit deeper on missiles. We have seen multiyear agreements that increased volume by 300% to 600% on certain programs at Lockheed and at Raytheon. I was wondering, can you provide more color regarding your exposure to this? Is it in your radar or sensors business or defense electronics? How do you think about the potential opportunity of this specific growth sector? And what is your exposure? Lynn M. Bamford: Thank you for that question, Christine. So we have some content directly on the missiles, but it is relatively minor. It is telemetry and flight test instrumentation type of content. Which can be meaningful revenue, but maybe not deployed across every single missile that is produced. So just to level set that you know, focus in our portfolio. However, as the demand and the belief that we need to restock pile is all connected to the Golden Dome and very many things that are related to the defense of our country where we have fantastic exposure. So we have talked about in Golden Dome, there is kind of you think of it in three technology buckets, the sensors, the networking of those sensors, and then the effectors to combat any incoming threats. And across all three of those areas, we are very well positioned and have very many active developments mean, system will be built up of existing capabilities. That our long history has us well positioned on. We are very well positioned in the networking with the various standards that are going to be used for the command and control across it. And on top of the existing platforms, are engaged in quite a few exciting new developments across industry to provide some upgrades into those systems and deliver new capability. So just broadly speaking, the overall growth of defense I would say we are very well positioned not just here in The U.S. But across Europe. Operator: Great. Super helpful, Lynn. If I could do a follow-up question on, no surprise, the AP1000. So you guys mentioned that you are expecting an order in 2026. But it is not in the financial outlook. I wanted to clarify, one, which customer do you expect this to come from? Is this Poland, Bulgaria, a U.S. Customer? And the second question to that is, how many are you expecting in this order for 2026? And the third one would be, if you do get this order, and noted that it is not in your 2026 guidance, how do we think about potential moving pieces Alexandra Eleni Mandery: to your outlook for the full year? Sorry, I know that is three questions into one, but basically an AP1000 question, Dylan. Lynn M. Bamford: So it is a topic we definitely anticipated being asked about. And so really, mean, the first orders could come from either a European customer Poland or Bulgaria or from The U.S. How this $80,000,000,000 that, the government has committed to jumpstart the build out of AP1000 reactors in The US is gonna flow is still something I think everybody's coming to understand. And for us, our customer is Westinghouse. We work very hard to stay aligned with Westinghouse. We are definitely communicating with them on different scenarios. Of production ramp and are just committed to being a great supplier to Westinghouse. And working with them. So I do not think at this time we can give any color on the size of the first order. It could be different quantities and really until Westinghouse decides how they want to do that, I do not think we would get ahead of what that would mean for Curtiss-Wright Corporation. Operator: Great. Thank you very much. Alexandra Eleni Mandery: I am sorry. Go ahead. James Ryan: I was just going to add, you had asked about the financial impact. And I think, Tito, as you think about timing of the order and when that hits us during the year, There is going to obviously be some labor that we are going to incur upfront in the contract, but we mentioned the bell curve and that taking place over a five year period. So there will be a little bit of Lynn M. Bamford: a startup. James Ryan: And then as we are able to place orders for material, and start to see that material come in the door, which I would expect a greater portion of that material to start coming in this next year. We will see some uplift in the revenues. That is when we will really start to accelerate within the bell curve. And then just from the cash perspective, I mean, we are in negotiations with Westinghouse. We are here ensure that they are successful in their deployment of BAP1000. But think you can see from our focus on working capital and what we have demonstrated in free cash flow that the team is dedicated to ensuring that we continue to improve upon that. So I think that there will hopefully be some good news of that in that area as we progress through the year. Alexandra Eleni Mandery: Wonderful. Thank you very much, Chris. Operator: We will move now to Myles Alexander Walton with Wolfe Research. Please go ahead. James Ryan: Hi, good morning everyone. This is Greg Galberg on for Myles. I wanted to start on the free cash flow guidance just because you have seen you know, big step up in CapEx in 2025 and you are calling for it again in 2026. With minimal impact to free cash flow conversion. And Chris, I know you mentioned the working capital performance in your prepared remarks. So I was curious if you could just kind of put a finer point on what is actually happening with the working capital to enable this? Like are you getting better advances from your customer? Or kinda can you just talk through the dynamics there? Sure. So I mentioned on the call that we were 19.2% working capital as a a percentage of sales in 2025. And if you take a look at our financial statements, you are going to see that our deferred income has been increased K. Christopher Farkas: gradually over the past several years. A lot of that has to do with the team's focus on commercial excellence and success that they have had in negotiating contracts. And kind of supports the the way that our sales are growing, a lot of naval defense work, a lot of strong commercial nuclear growth ahead of us. So the team has been doing a good job in that regard. This last year, we had higher DPO. We did some good things with supply chain, ensure that they were protected at the same time, participate participating in our cash flow goals. But as we head into this next year, we are going to continue to improve upon collections. We have got opportunity across the board whether it is DSO, inventory turns, DPO. We will be targeting a working capital percentage of sales of the approximately 18% That will be a record. I think if you step back to the years when we had the last AP1000 contract, we were somewhere in that high 18s rate and we are expecting to beat that this year. The team outside of commercial excellence and negotiating with contracts has done a lot of good systems work. We talked about that at Investor Day. We have new levels of information at our disposal regarding daily billings, and progress on cash flow across the corporation. That scales all the way from Lynn and myself down to the business unit level. We have done some good things there to improve the systems that help to enable improved cash flow management. James Ryan: Got it. And then just quickly on the C-17 order you guys announced earlier this week. Was that order booked for you in 4Q just because I think that is when Boeing got the order? Or is that a 1Q order? And if not, we expect the relatively quick snapback in Defense Electronics bookings, just giving what seems to be a timing issue Lynn M. Bamford: Yes. So it is we definitely saw delayed bookings and we mentioned in the script the 0.96 book to bill. In Defense Electronics, and that was very much affected by the delay. So to be clear, was a Q1 order for us and it is a very exciting new platform for us, but it is also very indicative of the the bookings we clearly saw that we believe would come in 2025 that were delayed, partly due to the CR, some structure changes within the government. And so it is a very meaningful example of one of those and a platform we are pretty excited about. Alexandra Eleni Mandery: Great. Thank you. Operator: We will turn now to Peter John Skibitski with Citi. Please go ahead. K. Christopher Farkas: Great. Thank you. This is Bradley Oyster on for John Gaudin. James Ryan: Thank you for taking my question. Just want to dial a little bit in on the aerospace and industrial and sorry, naval and power headwinds that you called out for fourth quarter. Particularly around mix. Is this something that is more of a K. Christopher Farkas: seasonality item here? Or is it more structural? And how should we think about that James Ryan: going to '26 with the guide that you have? K. Christopher Farkas: Yes. So as we enter into 2026, we are going to continue to see a heavy ramp up in not only naval defense and as I mentioned on the script that will be work in performance to accelerate where we are on the CDN 81, but also the Virginia Class submarine program. But we are also accelerating in commercial nuclear and our process markets. The process markets, I will start there first. We saw a healthy order book and continued growth in the order book here later in the year in 2025 and that is positioning us really well in 2026 for MRO growth. And there is some accompanying margin benefits to higher concentration of MRO valves. But we also had mentioned in the script that commercial nuclear is going to accelerate quite a bit here in 2026 The fourth quarter order growth in commercial nuclear alone was up 50% year over year A lot of orders coming in relative to SMRs and work that is beginning to transition from development to prototype, which is happening this year in 2026. So that work does represent a little bit more of a challenge for us from a margin As you would imagine, it is not production work. Eventually, it will transition there and that convert into stronger margins. But we are also underpinned by a strong increasing footprint in global aftermarket content and that will help as we move through the year as well. So thematically, think process and maybe the the transition into prototyping are probably the two things that you can think about as we go into 2026. Got it. I appreciate all the color. Thank you. Pass it along. Operator: We will turn now to Nathan Hardie Jones with Stifel. Please go ahead. K. Christopher Farkas: Hello, everyone. This is Andres on for Nathan Jones. I wanted to talk a little bit about operational and commercial excellence. Obviously, that was a big part of driving margin expansion over the last three years. How should we think about these initiatives moving forward? And what was the contribution the last three years? Lynn M. Bamford: Maybe I will start off and talk about some of the efforts and such and K. Christopher Farkas: I will let Lynn M. Bamford: Chris speak to what he can about the contribution. But when you run a complex business, there is a lot of things that go into how you expand margins and it is you cannot always completely bucketize them from one thing to the next. But our operational growth platform has really become a fundamental part of the company and how the teams evaluate themselves. And it has a robust set of focus areas with everything from the commercial excellence and which includes pricing and making sure we can analyze that. Aspect with as there has been inflation in the world. And such that making sure we are really understanding how we are pricing our products is very critical. And we have become much more sophisticated in how we can do that. So not people do not always think about that as part of operational excellence, but it is very much how we manage the company. But we continue to do things in our supply chain We have added commodity managers at a corporate wide level is just one example. That are helping making sure we maximize the buying power across the organization. And achieving the best results there to ever ongoing activity on integrating robotics into our operations. So I will just pull those out as some examples. It is very widespread and the team has made great successes over the past three years. But we have a clear list of things that are still in our windshield that we are going to go after. And in no way shape or form does this end. So it is definitely still an ongoing focus and something that is part of our DNA at this point. K. Christopher Farkas: Yeah and maybe I will not go all the way back to 2024 at this point in time. But if I just kinda start with what happened here in 2025 as a base, We had close to $12,000,000 of commercial and operational excellence roll through our P&L this last year. The operational growth platform is affecting all James Ryan: the K. Christopher Farkas: all entities and the greater portion of that was really operational excellence, but still some pricing successes this last year. Additionally, we have been conducting restructuring programs, restart restructuring for growth in many areas of the business, but also efficiency and you saw some of that benefit come through in 2025. Now as we enter into 2026, we are going to continue to see some of that restructuring benefit from the programs that we started in prior year continue to roll through our P&L. You will see some uplift from that and operational excellence and pricing initiatives again not quite at the same pace. But as Lynn had mentioned, there is plenty of opportunity in front of us and we will continue to kind of drive towards that opportunity. But overall, looking at Curtissite margins for this next year, we are going to have a good strong incremental contribution margin on sales of roughly 25%. We will benefit from all those initiatives that are helping us in the P&L and that is going to more than offset what is happening in our increase in IR&D and CRAD this next year. So pleased to be able to come on out of the gate with a guide of 30 to 60 basis points of expansion. Awesome. Thank you so much for that context. Also, a quick one here. With 4Q power and process benefiting from strong growth in industrial valve sales. Called that out earlier. Are you seeing any improvements in the underlying process mark Maybe an update there. Yes. I think we are seeing some improvement in the underlying process market. I mean, as you look forward in twenty twenty North America MRO is really projected to grow in that low single digit to mid single digit range. We are seeing some good benefits across North America related to CapEx. I think the and that is particularly in the oil and gas side of things. When you look at the chempetrochem, the global growth is going to be a little bit below GDP. North America will probably be in line with GDP. But I think one of the things that is important to point out and really just kind of credit back to the team is that they have done an exceptional job really focusing on customer satisfaction, being able to tighten lead times, get product in the hands of the customer sooner, heavy focus on quality and at the same time kind of expanding some of those sales channels globally so that they could take advantage and gain some market share in the process. So really doing some good things and I think that is going to help us kind of beat the overall industry market growth rates as we head into 2026. I appreciate it. Thank you. I will jump back in the queue. Operator: We will move now to Michael Frank Ciarmoli with Truist Securities. Please go ahead. James Ryan: Hey, morning guys. Nice results. Thanks for taking the questions. Lynn or Chris, I think I know the answer to this, but figured I would ask it anyway. Mentioned some of the timing in defense, but you have got pretty big deceleration in just your pure defense revenue growth. I think you have averaged 13% over the past three years. The guide points to six I think naval growth is down too. And again, tough comps, I understand what you are lapping. You did talk about the strong direct foreign military sale. But anything else George Anthony Bancroft: going on beside timing and just kind of what has been a strong kind of prior trajectory? I know you talked about the bookings in Defense Electronics being below one, but any other color there? James Ryan: So Lynn M. Bamford: we feel very strongly optimistic about our ability to continue to grow our defense business at a pace that matches or beats what The U.S. Is doing. And that does military sales are part of that, but we are very well aligned here in The U.S. And there can be just some timing issues and having a multi multi month CR and then the shutdown definitely had an impact And so we have taken a bit of a conservative stance, as Chris mentioned, in our ground guide that we think now that we have a budget, we expect the normal order flow would begin in 60 to 90 days. But we are watching that. We thought it was a great sign to see that the C-17 order come in so quickly after the appropriations. Broadly speaking across Defense Electronics specifically, we can clearly have line of sight of over $100,000,000 of orders we fully expected to get in twenty five. That have been pushed into 2026 and that C-17 is one of the first ones that has landed. And again, we are very close contact with our customers. There is nothing going on that is disruptive to the long term. We are very well positioned with our technologies. And I think of things that the team is doing and whether it is the Fabric 100 we have got over 20 or what 20 MOSSA, CMOS compliant products to to market in 2025. We will exceed that number in 2026. Our relationship with NVIDIA is just at its beginning for being a growth factor vector. The Microsoft Azure is also just at the beginning. And those are the things we made public in 2025 and the team continues to do things that will provide other differentiated capabilities that are unique to Curtiss-Wright Corporation and bring those to And so whether it is that portion, our alignment with the systems around Golden Dome, and we are aligned in our shipbuilding. I think regardless of the shipbuilding, to your comment there, fact that at our Investor Day, had $15,000,000 of maritime industrial based funding and that is up to $55,000,000 now. That is a clear indication that of how the Navy sees Curtiss-Wright Corporation is a critical supplier and they want to assure we are ready for the growth that is coming our way. And so that is a tangible thing we can point to tied to the Navy. So there is no concerns looking out to '27 and potentially having a $1,000,000,000,000 budget is very exciting and we are doing the things make sure we are ready for the growth that our customers are signaling to us. George Anthony Bancroft: Okay, perfect. That is really helpful. And then maybe just totally shifting gears back to nuclear. You have given us sort of the end market waterfall detail for 2025 and '26. So we can probably back into what looks to be maybe $60,000,000 of OE revenue on new nuclear builds this year growing close to 40% over last year. Is anything else you mentioned ex energy transitioning into prototype build. Are there any other SMR reactors that are expected to transition to drive that growth? Or can you point to other specific platforms or partnerships that are kind of driving that sort of SMR growth this year? Alexandra Eleni Mandery: So we have Lynn M. Bamford: made some announcements on our partnership with Rolls Royce. We continue to build out the capabilities of what we are going to do with Rolls Royce and some of those will turn into early prototyping types of revenue in 2026. You are well positioned with TerraPower, we really work across the gamut, and everyone is maturing in their designs and working hard to be bringing plants online in the 2030s. So without getting ahead of our customers, I do not think I would say anything else. But the revenues from these three restarts to the trying to build out and complete some of the reactors that were stalled All in all, these things are all very active, very real and our teams doing real work and gaining real business opportunities across the industry. And so thing I like is it is very widespread. It is not one thing. And, as we said, the AP1000 work is still in our futures. The order we believe strongly is coming in 2026. And that will be pretty dramatic when it comes in a very, very good way. K. Christopher Farkas: And Mike, would just add one other one other kind of interesting data point as you think about this because we get a lot of questions about newbuilds and AP1000 and SMRs. But we also have content on other reactors. As you look at the ATR 1,400 out of South Korea, and we talked about $10,000,000 to $20,000,000 of content per new build there. Now those are multiyear projects. We did have some order activity here in the fourth quarter for new build in South Korea. So some content there that is affecting the new build splits as well. George Anthony Bancroft: Perfect. That is helpful. Thanks, guys. I will jump back in the queue. K. Christopher Farkas: Thanks, Mike. Operator: We will turn now to Louie DiPalma with William Blair. Please go ahead. James Ryan: Lynn, Chris and Jim, good afternoon. Lynn M. Bamford: Hey, Louie. K. Christopher Farkas: In December, the Secretary of the Navy, John Phelan, announced the implementation of the shipbuilding operating system powered by Palantir to use AI to achieve supply chain efficiencies for for submarine construction. And and Phelan indicated that 30 key suppliers were on the platform. Has this software platform had any impact on Curtiss-Wright Corporation in terms of volumes and the impressive margin expansion that you are seeing. Lynn M. Bamford: So very much in tuned with what is going on and have had discussions with Palantir around that topic. I would say today it is definitely still in the forming stage. So no, I would not say there is any impact to date, but it is something that is an initiative by the Navy and Curtiss-Wright Corporation will participate as is appropriate for us as a business. And those discussions have begun. Makes sense. Thanks, Lynn. And K. Christopher Farkas: is there the potential another topic that has been in the news, is there the potential for Curtiss-Wright Corporation to be involved in the development for a lunar nuclear reactor. The secretary of NASA discussed the need for like, nuclear propulsion in space and a nuclear reactor to provide consistent power generation. Do you view these opportunities as viable over the long term? Or is it just something that is just too early to provide a specific opinion on. Alexandra Eleni Mandery: So there is different ways that we potentially will have an impact. And, you know, we Lynn M. Bamford: when we talk about our nuclear footprint, we tend to talk and focus and we have as a company on the 300 megawatt and larger reactors. But we do work with a variety of the more microreactors And there are a few names that are more in the press. And we have content with a lot of those. It is not something that is ever gonna it it appears today anyways, you know, be as significant to Curtiss-Wright Corporation revenue wise as say, what is going on with AP1000. But we do work with them. Our our capability and quality as you put something into space and wanting to assure you are gonna have that generations of reliability that fits into Curtiss-Wright Corporation's sweet spot. So we will see on top of electronics capabilities in that space. So nothing specific to mention yet, but there could be relevance. Alexandra Eleni Mandery: Great. And Lynn M. Bamford: as it relates to your K. Christopher Farkas: to the last question and answer, do you expect to announce Bryce Sandberg: more SMR content agreements similar to what you announced with Rolls Royce and X Energy and and TerraPower? Lynn M. Bamford: Yes. I do. I mean, we it is we are continuing to develop and expand our content across some of the providers and or most of the providers. And believe we will have more announcements in 2026 of new systems that we have reached a level of confidence with our customer that they are okay with us talking about it publicly. And again, we really work very hard to be a great supplier into our customers and not get ahead of them with things that were announced seeing. But there is a lot more activity going on and there will definitely be more announcements. Bryce Sandberg: Fantastic. Thanks, Lynn. Thank you. Operator: We will move now to George Bancroft with Gabelli Funds. Please go ahead. James Ryan: Hey, Ken. Congratulations, Lynn and Chris and team on all your accomplishments. Very well done. George Anthony Bancroft: There has been a lot of discussion, you heard major OEM, commercial OEM talking about supply chain improvements. And on the other side, you have seen maybe some countervailing commentary that there is still a lot of need in especially further down the supply chain just you know just difficulties in in getting getting those up to up to speed. What are you seeing maybe in your supply chains? And is there any opportunities, to, for for M&A where it would make sense to be accretive for you to have that and be internalized and obviously, you know, opportunities there with that. Any thoughts on that, Lynn? Lynn M. Bamford: Yes. So I think broadly speaking, supply chain remained fairly stable in 2025 and there was not a lot of disruption. But that is not to say we do not have watch items. One thing that is very much in the news is memory, high bandwidth memories and storage parts. As tie as their common things used in this AI infrastructure build out. And then there is some raw materials in rare earths that are watch items for us. But really what I for Curtiss-Wright Corporation, we have learned a lot as a and it started in during COVID, we have implemented many, many new tools that we use across the organization in all three segments. And have added these centralized resources that I mentioned a moment ago to really assure we are driving the best performance we can broadly across where we are leveraging the supply chain. We do things like we look for getting dual sources, We very much leverage our government high priority ratings, which is very often we are able to do with a lot of our naval work and even some of our defense electronics work. And so that keeps us at the front. And we spend a lot of time in with our supply chain working with them. So the team does a great job and is really staying on top of it, but, you know, it is something you have to continuously be in tune to and work. An acquisition standpoint, it is not something that is currently a high priority for us that does not our strategic priorities But it is not to say, I would never say never to a lot of things that there was an opportunity, it could be something we would consider if we were looking for global diversification to be able to be better aligned to end markets where they want low localization would be an example where it really opened up the ability for you to have a good active business in an end market. And so I would not say never, but team does a great job managing it. George Anthony Bancroft: Great job. Thank you, Lynn. Operator: And ladies and gentlemen, in the interest interest of time, that will conclude today's Q&A session. I would like turn the floor back over to Lynn M. Bamford, Chair and Chief Executive Officer, for any additional or closing remarks. Lynn M. Bamford: Thank you, everybody, for joining us today, and we look forward to speaking to you either on the road or we release our first quarter results. Have a good day. Operator: Thank you. This concludes today's Curtiss-Wright Corporation earnings conference call. Please disconnect your line at this time and have a great weekend.
Operator: Good morning and welcome to the Hyatt Fourth Quarter and Full Year 2025 Earnings Call. All participants are in a listen-only mode. After the speakers’ remarks, we will conduct a question and answer session. As a reminder, this conference call is being recorded. I would now like to turn the call over to Adam Rohman, Senior Vice President, Investor Relations and Global FP&A. Thank you. Please go ahead. Adam Rohman: Thank you, and welcome to Hyatt Hotels Corporation’s fourth quarter 2025 earnings conference call. Joining me on today’s call are Mark Hoplamazian, Hyatt Hotels Corporation’s President and Chief Executive Officer, and Joan Bottarini, Hyatt Hotels Corporation’s Chief Financial Officer. Before we start, I would like to remind everyone that our comments today will include forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our Annual Report on Form 10-Ks, Quarterly Reports on Form 10-Q, and other SEC filings. These risks could cause our actual results to be materially different from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued today, along with the comments on this call, are made only as of today and will not be updated as actual events unfold. In addition, you can find a reconciliation of non-GAAP financial measures referred to in today’s remarks under the Financials section of our Investor Relations website and in this morning’s earnings release. An archive of this call will be available on our website for 90 days. Additionally, we posted an investor presentation on our Investor Relations website this morning containing supplemental information. Please note that unless otherwise stated, references to occupancy, average daily rate, and RevPAR reflect comparable system-wide hotels on a constant currency basis, and closed hotels in Jamaica are excluded from comparable metrics in 2026. Percentage changes disclosed during the call are on a year-over-year basis unless otherwise noted. With that, I will now turn the call over to Mark. Thank you, Adam. Good morning, everyone, and thank you for joining us today. I want to begin by expressing my sincere gratitude for, and pride in, the entire Hyatt Hotels Corporation family. Our teams around the world navigated a dynamic macro environment in 2025. Guided by our purpose, we advanced our evolution to a more brand-focused organization, one that uses sharper brand positioning and deeper insights to go to market in a more meaningful and differentiated way. This approach allows us to serve our guests and customers on more stay occasions and become an even more attractive brand choice for owners. We closed 2025 with momentum, and we believe we are better positioned than ever to create lasting value for our shareholders. Now turning to operating results. This morning, we reported fourth quarter system-wide RevPAR growth of 4%, driven by the continued strength of our luxury brands. Leisure transient RevPAR increased approximately 6% to last year, as our guests continue to prioritize leisure travel. This was especially true across our luxury brands where we saw leisure transient RevPAR grow by 9% with strong growth across the world. Business transient RevPAR declined 1% in the fourth quarter, driven by select service hotels in the United States, while full service hotels delivered low single-digit growth led by hotels in international markets. Group RevPAR increased 3% compared to last year, in line with our expectations and supported by a more favorable calendar in the United States. We continue to see exceptional engagement from our World of Hyatt loyalty members, a key driver of our commercial performance. The World of Hyatt program is consistently recognized in the industry as best in class. We are proud to have been recently recognized as NerdWallet’s best hotel rewards program and The Points Guy’s best hotel elite status in the industry. World of Hyatt continues to grow in both scale and significance. We ended 2025 with over 63,000,000 members, an increase of 19% compared to the end of 2024, and World of Hyatt members accounted for nearly half of total occupied hotel rooms across the world in 2025. As we have sharpened our brand focus, we are seeing loyalty drive not just scale, but higher-value demand, particularly among our most frequent and loyal guests. In 2025, we saw a 13% increase in room nights from members who stayed with us for 50 or more nights over the course of the year. It is clear that the value proposition of our loyalty program resonates with current and prospective members, which we believe makes Hyatt Hotels Corporation very attractive to hotel owners and developers as they look to brands that are growing in value to them. Turning to development. We achieved industry-leading growth for the ninth consecutive year with net rooms growth of 7.3% in 2025. Excluding acquisitions, net rooms growth was 6.7%, a meaningful acceleration from 2024. During the fourth quarter, we surpassed 1,500 open hotels and resorts globally and welcomed several notable openings including the Parquet Cabo del Sol and Andaz One Bangkok. Our newest upper midscale brands are starting to make an impact, marked by the second Hyatt Studios hotel opening along with the debut of our first Hyatt Select hotels. Both brands provide the foundation for our upper midscale expansion in the United States. We also welcomed several Unscripted by Hyatt hotels during the quarter, and we are excited about the opportunity to grow this brand across the world. We ended 2025 with a record development pipeline of approximately 148,000 rooms, up more than 7% compared to the end of 2024. In the United States, we achieved the strongest year of signings in the past five years, with 50% of those signings in markets where Hyatt Hotels Corporation does not currently have a brand presence. Our three new brands, Unscripted by Hyatt, Hyatt Studios, and Hyatt Select, accounted for nearly two-thirds of the signings in the United States, demonstrating the compelling value proposition for owners and developers and the clear opportunity for Hyatt Hotels Corporation to expand into new markets. Outside the United States, we continue to see strong interest in our brands, and we expect Greater China and India to be significant drivers of future growth. In Greater China, we are seeing strong interest across our select service brands, with signings growing by more than 50% compared to 2024. In India, we are seeing great interest in our full service offerings. Our strong pipeline and momentum in upscale and upper midscale brands reinforce our confidence in achieving durable and capital-efficient fee growth well into the future. Now shifting to an update on transactions. On December 30, we sold the remaining 14 hotels in the Playa portfolio to Tortuga Resorts for approximately $2,000,000,000 and entered into long-term management agreements for 13 of those properties. This transaction strengthens our position as a global leader in luxury all-inclusive offerings and is another example of delivering on our commitments and emerging with a value-accretive, asset-light platform. During the quarter, we also completed the sale of three Alua properties in Spain, which we acquired in late 2024. As part of this transaction, we entered into long-term management agreements, and the new owner plans to invest additional capital into those properties. We continue to make progress on the sale of additional owned properties. We currently have three hotels under purchase and sale agreements. We expect to close these transactions in 2026, subject to certain closing conditions, and we will provide further updates as these transactions progress. We are also evaluating opportunities to sell additional assets beyond those assets already under contract. Since announcing our first asset sell-down commitment in 2017, we have realized over $5,700,000,000 of real estate disposition proceeds at an average multiple of 15 times, and we have invested approximately $4,400,000,000 into asset-light platforms at a blended multiple of less than 10 times. We have returned $4,800,000,000 to shareholders over this period of time, proving that we can return significant capital to shareholders while also investing in growth that creates long-term value. We are now fully transformed into an asset-light business and we expect asset-light earnings of 90% in 2026. As I reflect on the year, I am incredibly proud of what we have accomplished. We achieved strong operating results and organic growth, advanced our brand-focused organization, and completed the Playa transaction in a fully asset-light manner. But what stands out most to me is how our purpose has remained our North Star. While Hyatt Hotels Corporation has evolved significantly over the past decade—expanding our portfolio, entering new markets, and transforming our business model—what has never changed is the foundation that drives our decisions and defines our culture. Our purpose is embedded in the way our colleagues care for each other, our guests, and our owners every day around the world. It is what enables us to meet people where they are, to lead with empathy, and to deliver differentiated experiences. Our purpose shapes how we invest in our brands and loyalty program, where we choose to grow, and how we allocate capital. We have been deliberate about investing in the parts of our portfolio where we see the strongest demand, the best owner economics, and the greatest returns. That discipline has strengthened the durability of our fee-based earnings and increased our scale over time. As we look ahead, we believe this positions Hyatt Hotels Corporation as the most responsive, innovative, and ultimately the best-performing hospitality company—one that can continue delivering consistent performance, capital-efficient growth, and long-term value for our shareholders. I would like to close by thanking each of our colleagues around the world who bring our purpose to life and deliver value to our stakeholders every day. I will now turn the call over to Joan Bottarini for the financial results. Joan, over to you. Joan Bottarini: Thanks, Mark, and good morning, everyone. In the fourth quarter, RevPAR exceeded our expectations, increasing 4% compared to last year. As Mark noted, and consistent with the trends we have seen throughout the year, high-end chain scales produced the highest growth. In the United States, RevPAR increased 0.5% compared to last year. Full service RevPAR increased 2%, benefiting from a more favorable calendar, while RevPAR declined for select service hotels, reflecting softer business transient demand. Outside the United States, RevPAR performance remained strong, led by leisure transient travel. Asia Pacific, excluding Greater China, led all regions with RevPAR growth of more than 13%, fueled by international inbound travel. Greater China had the strongest quarter of RevPAR growth for the year, with domestic travel up in the mid-single digits—a positive shift compared to trends we saw earlier in 2025. Europe continued to deliver great results, supported by high-end leisure demand. Our all-inclusive resorts finished an exceptional year, growing net package RevPAR 8.3% compared to 2024, with excellent performance in both the Americas and Europe. Our results reflect sustained trends seen throughout 2025: outperformance in luxury and full service brands, strength in international markets, and growing demand for premium all-inclusive experiences. Turning to our financial results, gross fees in the fourth quarter increased approximately 5% compared to the same period last year to $307,000,000. Gross fees for the full year increased 9%, finishing at $1,198,000,000. Our fee business has become the engine behind Hyatt Hotels Corporation’s earnings model, and this is especially true when it comes to organic fee growth. From 2017 through 2025, organic gross fees have grown by almost 8% on a compounded annual basis, demonstrating the strength of our underlying core fee business. In the fourth quarter, Owned and Leased segment adjusted EBITDA declined by approximately 2% adjusted for both asset sales and the Playa transaction, while Distribution segment adjusted EBITDA declined versus the prior year due to Hurricane Melissa and lower booking volumes from four-star and below hotels. Fourth quarter adjusted EBITDA growth was solid despite headwinds from Hurricane Melissa, and on a full-year basis, we achieved another strong year of adjusted EBITDA growth, increasing over 7% after adjusting for assets sold in 2024 and Playa-owned hotel earnings. As of December 31, we had total liquidity of approximately $2,300,000,000 including $1,500,000,000 of capacity on our revolving credit facility. Adam Rohman: During the quarter, Joan Bottarini: we repaid the notes due in 2026 and issued $400,000,000 of notes due in 2035. We used proceeds from the Playa real estate sale transaction to fully repay the outstanding balance under our $1,700,000,000 delayed draw term loan in accordance with the terms of the agreement. In the fourth quarter, we repurchased $114,000,000 of Class A common stock, and for the full year of 2025, returned approximately $350,000,000 to shareholders through share repurchases and dividends. We ended the year with $678,000,000 remaining under our share repurchase authorization. We remain committed to our investment-grade profile, and our balance sheet is strong. Before I cover our full-year outlook for 2026, I would like to highlight that beginning in 2026, we are updating our definition of adjusted EBITDA and will no longer include Hyatt Hotels Corporation’s pro rata share of owned and leased adjusted EBITDA from unconsolidated joint ventures. We believe this change not only aligns our definition with our peers, it reflects our strategy and evolution of our business. To help you with modeling our outlook for 2026, we have provided bridges from 2025 reported results to our 2026 outlook on pages 18 and 19 in the investor presentation published this morning. As we have turned the calendar to 2026, we are encouraged by full-year forward booking trends. Group pace for full service hotels in the United States is up in the mid-single digits for this year and is expected to benefit from large-scale events such as the World Cup. We continue to hear positive feedback from our group and corporate customers about their intent to travel this year, particularly for customer-facing travel. Pace for our all-inclusive resorts in the Americas is up over 9% in the first quarter, reflecting the continued strength of leisure travel. We expect full-year system-wide RevPAR growth between 1% to 3%, and we anticipate trends in 2026 will be similar to 2025. This includes higher growth in international markets compared to the United States, and luxury to be the strongest chain scale. In the United States, we expect full-year RevPAR growth between 1% to 2%, led by our full service hotels. We expect net rooms growth of 6% to 7% with continued momentum behind our new brands, driving another year of strong organic growth. Gross fees are expected to grow between 8% to 11% in the range of $1,295,000,000 to $1,335,000,000. Our outlook reflects strong contribution from our core business and incremental fees from the Playa Hotels, along with the impact of temporarily closed hotels in Jamaica and moderate headwinds from properties in Mexico. Adjusted EBITDA is expected to grow at a very strong 13% to 17% when adjusting for the removal of pro rata JV EBITDA and asset sales, in the range of $1,155,000,000 to $1,205,000,000. This reflects strong fee growth and a net positive benefit from the extended co-branded credit card terms. Our outlook assumes continued pressure in the Distribution segment, which we expect will decline by approximately $10,000,000 compared to 2025. Adjusted free cash flow is expected to increase 20% to 30% in the range of $580,000,000 to $630,000,000 and reflects a conversion of adjusted EBITDA to adjusted free cash flow of at least 50%. Finally, we expect to return between $325,000,000 and $375,000,000 of capital to shareholders through share repurchases and dividends. For the first quarter of 2026, we expect global RevPAR growth around the midpoint of our full-year range, with international markets growing at a higher rate than hotels in the United States. Gross fees could grow in the mid-single digit range, and adjusted EBITDA could grow in the low-single digit range compared to what we reported in 2025 after removing pro rata JV EBITDA. As a reminder, we are lapping a very strong 2025, and expect approximately half of the impact from Hurricane Melissa to our fee business and Distribution segment in the first quarter. To close, our 2025 results reflect the strength of our asset-light business model, the power of our brands, and the disciplined execution of our strategy. As we look ahead, we expect our competitive advantage will continue to expand, fueled by the attractiveness of our network and the opportunities to grow across geographies and chain scales. We enter 2026 with confidence, supported by the best team in the business and a clear focus on driving meaningful value for our owners, guests, and shareholders. This concludes our prepared remarks, and we are now happy to take your questions. In the interest of time, we ask that you please limit yourself to one question. Our first question comes from Dan Pitzer from JPMorgan. Dan Pitzer: Hey, good morning, everyone, and thank you for taking my questions. Mark, I wanted to touch on the net unit growth at the 6% to 7% that you gave. I think it was last quarter you talked about maybe being more glass half full here. I wanted to check if that is still the case. And then maybe you can talk about the drivers for this outlook—its conversion, midscale—and then along with that, your appetite for larger partnership deals within this guidance? Thanks. Mark Hoplamazian: Yes, glass is still half full. I feel really good about the momentum that we have seen. We had a really significant signing quarter in the fourth quarter and have tremendous momentum in the newly launched brands. So in Hyatt Select’s case, for example, we went from having nine hotels to 32 in the pipeline. And of those, we have some new construction, by the way, in the Hyatt Select brands. Some are prototypical new construction, but most of them are conversions. So we have three under construction, but we have 27 under design. Many of those will be conversions. Studios went from five under construction to 10, but we also have 31 under design, and so they will advance and get shovels in the ground soon. And Unscripted went from nothing to having 0 open and eight in the pipeline right now—three under design, three under construction—so of the eight, six are advancing quickly. And then YourCove, we have 72 hotels open by the end of the year and 93 in the pipeline. So the entirety of the upper midscale side of the equation has tremendous positive momentum, and I am particularly encouraged to see the advancement of so many projects through design into construction for Studios. So that is one piece of the equation. The other piece of the equation is that our mix, as you know, is about 70% luxury and upper upscale in existing open hotels. It is also true that that is the mix of our pipeline. Seventy percent is luxury and upper upscale, and 70% of the total pipeline is outside the U.S. where we are seeing less sensitivity to new builds. So we are opening new projects in China, throughout Southeast Asia, in Europe, and even in the Americas. We opened the Parquet at Los Cabos just this past quarter, and we have other openings in Mexico that are not the all-inclusive resort side of the business, but EP hotels coming this year. So I feel like there is great momentum and that the positioning that we have got—yes, financing is still difficult in the U.S. Yes, construction costs have gone up, but frankly, that has already been taken into account in large measure. You might have seen some recent articles about housing starts actually lagging and housing construction actually lagging. I think that might change, but right now it takes a little bit of pressure off of construction materials costs and factor costs themselves. And we are working really hard to uncover other sources of financing to help our developers who are under design get under construction. So we have got so many levers that are all working right now in a positive manner that I feel really good about the overall growth profile organically looking forward. In terms of portfolio deals, which was your last question—yes, we continue to look at portfolio deals. We are very focused on making sure that they are real, meaning we are not happy to just affiliate. We want to have a deeper relationship and make sure that we are under contract in a way that is providing the owners the best value proposition, which is really to be plugged into our systems and under a franchise arrangement or under a management arrangement. So we have got several discussions underway right now on portfolio transactions. Some are quite large, and they would be full-blown management or franchise agreements. Others are smaller. We are still working hard to fill in Europe on the full service side. It feels like a refrain every quarter, but it remains a focus of ours. I feel really good about where we stand. Dan Pitzer: I appreciate all the detail. Thanks so much. Operator: Our next question comes from Benjamin Nicolas Chaiken from Mizuho. Please go ahead. Your line is open. Benjamin Nicolas Chaiken: Hey, good morning, and thanks for taking my question. Mark, at risk of getting too technical, for AI travel, how do you envision the ranking system working as consumers search for hotels? To the extent you have a view, do you think this will be a traditional kind of CPC auction model where traffic goes to the highest bidder, or do you have a sense that order will be determined purely on the relevancy of the search? Obviously, it is early, but what would be your opinion on how this plays out? Thanks. Mark Hoplamazian: It is interesting. I think the answer is we will see. I actually do not know yet. What I would say is we began last year building an intent-based search natively into our own digital channels because we recognized early that guests actually wanted to search in prose as opposed to city, state, and availability-date framework. It is very much language-based, and that has been live on hyatt.com for some time. Secondly, we are one of the very few hotel companies that has already launched an app live on ChatGPT, and we are learning a lot just watching and learning from how people are actually using that app in relation to search. We are studying it. What I would say is that our architecture—so a little bit of history—we have been at this, AI enablement, for two full years. Starting in January 2024, I actually chaired the effort. We put together a steering committee, we set up our infrastructure and built it, we set up governance, we set up our control environment, and we identified use cases, four of which have already been executed as large-scale agentic platforms. We are moving forward on a number of different initiatives at the same time. With respect to search specifically, we have been working with OpenAI for months, which is why we have advanced to getting an app up and running with them so quickly. Of course, everybody in the world is at the table with Google and others. You can assume that all suppliers are engaged with all providers of LLM-based platforms. I personally think that the natural language search capability is going to grow in popularity, and we have longitudinal data over a couple of quarters which clearly demonstrate that the booking conversion rate and the total revenue being generated through the native intent-based search capabilities that we built into hyatt.com are having a positive impact. We are seeing higher conversions, higher revenues per booking, and longer length of stay. We are seeing the evolution of search translate into value. It is hard to extrapolate that to an app within ChatGPT, although if you access that app, you will see that there is a live link to hyatt.com so you can complete your booking on hyatt.com because ChatGPT has never indicated that they are prepared to be a merchant of record, and you cannot complete the reservation in that environment. That is fine with us because it brings us into hyatt.com. If I had to guess, I would say there is a more than 50% chance it will be attribute-based and intent-based as opposed to strict value. I would also say that we are cognizant that both will have some place in the ecosystem, and we are prepared for both. This is something that we have been working very intensively on for a long time, and I thought you would benefit from a little bit more context. Benjamin Nicolas Chaiken: Very helpful. Thank you. Operator: Our next question comes from Shaun Clisby Kelley from Bank of America. Please go ahead. Your line is open. Good morning, everyone. Mark, at risk of going even further down the rabbit hole, I think that AI and generative AI is clearly the topic across a lot of different sectors right now. Can you talk a little bit more about your actual relationship with OpenAI or ChatGPT? What do you get from that in terms of your ability to see behavior? What do you own versus what do they own in that relationship? How do you monetize it, or how is that different than traditional SEO-based, open browser search? How is this fundamentally different when you see what people are doing on the app? Mark Hoplamazian: I am trying to think about how to best order my answer. First of all, you are asking specifically about OpenAI, so let me address that. Then let me expand, because OpenAI is just one of the LLMs that we are using for our agentic platforms. We have in-licensed others—Microsoft, Google, Anthropic, and OpenAI—for use in different agentic platforms that we have already built and that are live in production at the moment. The way it basically works is the infrastructure that we have built is all private cloud-based. You in-license an LLM, and that LLM is in your environment, and you are paying a license fee to whomever provided it. But that is the LLM that is used that we then apply our own training to. We train that model to be ours, and it remains ours within our environment in a protected way. The reason why you use different LLMs is because different LLMs have different attributes, both in terms of how they have been trained, but also their trainability. We have, for example, an agentic platform for our group sales force, and it has allowed them to value every piece of business. A few years ago, I think I may have mentioned this on a prior call, we responded to over one and a half million RFPs, and we wanted to automate a lot of what we are doing. Now we have the ability to value every single piece of business that comes in, rank-order them in terms of desirability from a total revenue perspective and profitability flow-through perspective, but also take into account our overall relationship with the party that is requesting space for a meeting. If it is a top-five customer but a relatively small meeting, it gets prioritized because we want to maintain greater share with the biggest and most important customers to us. What that has allowed is for us to grow group market share every month since we launched this. We are realizing higher revenue per group booking and we picked up almost 20% productivity for the group sales force folks at the hotel level. That is a day a week, if you can imagine how significant that is. That is just one of several examples. I am not going to go through all of them. Among other things, there are some competitively sensitive ones that I am not interested in sharing. With respect to the app, what is going to end up happening is you will have several agentic interfaces. We have fully thought through agent-to-agent booking, where you end up with individual travelers or even corporate travel managers or meeting planners that have their own agents, and being able to have agents on our side that interface and can complete reservations without any intervention whatsoever. We are prepared for that. We already built the capability to do it, and that is what we are advancing at this point. We are deliberate about which LLMs we use. We are going to work with everybody, and I think the advancements have yet to come. We are just seeing the beginnings of this on the agentic side, and Google is probably the one that is continuing to really focus their time and attention on this, and yet they have yet to really disclose the full suite of options that they will have. We are paying close attention to that and are in discussions with them every day. All of what I just described is revenue-focused. We have also implemented some agent platforms that are very much efficiency-focused, and both are in play right now for us. Shaun Clisby Kelley: And maybe just as a very short follow-up, you had a very strong G&A program this year to keep costs under control. Are some of the efficiency gains that you are seeing here directly related to some of these AI initiatives? The group sales force comment you made does seem really tangible. Are we seeing that directly, or is that a little aggressive to connect those two dots? Mark Hoplamazian: No. It is not aggressive. Some of the things that you are seeing in G&A are enabled by automation. We have already deployed a number of things that allow us to do better. It is not just about saving cost, by the way. It is about elevating the quality, robustness, and fidelity of the data and the analytics and the insights that can be derived from the data. It is about being better, not just being more efficient. Secondly, there are a whole bunch of things that we have already realized through automation—mostly machine-learning applications as opposed to true agentic AI, although some through agentic AI too—in our call center operations, for example, which have already had a significant impact in our cost structures with respect to our hotel services, which do not show up in our G&A. We spend hundreds of millions of dollars every year supporting our hotels, and we have freed up capacity within those funds to be able to invest further in AI enablement, automation, and machine learning. That is exactly what we are doing. You are not going to see that in G&A, but it is a significant unlock for additional value creation within our chain services environment. Operator: Our next question comes from Richard J. Clarke from Bernstein. Please go ahead. Your line is open. Richard J. Clarke: Thanks for taking my question and for bringing it a bit more back to the Brazil. In 2024, you were able to guide to a 54% conversion of EBITDA into free cash flow and then an 89% conversion of free cash flow into capital return. Those are worse for 2026 than they were for 2024, despite you being more asset light. Help us bridge why that has dropped down and also the disconnect on RevPAR between your commentary of mid-single digit growth, positive on all segments, and a low to midpoint of 1% to 2%. Is there anything in there like refurbishments that are going to weigh RevPAR to get you down to that level? Joan Bottarini: Richard, let me take these one at a time. The cash flow commentary that you provided—we expect in 2026 to be back to those levels of conversions, which is low to mid-fifties. If you look at the percentages that I described in my prepared remarks, we are absolutely back there. We also have opportunity above and beyond that. We are looking to have some delevering over the next couple of years to get us back into our investment-grade ratios. That will take some interest expense out of the equation, and there is obviously opportunity because of our asset-light position now and where we expect to grow, including the contribution from the credit card into 2026 and into 2027 as we previously described. On RevPAR, we provided a bridge so that you could see very clearly how we anticipate RevPAR to grow. The top-line expectations that we provided in the outlook is 8% to 11%. If you look at the contribution of Playa and the impact of the restructuring of the credit card earnings into our co-brand earnings into our results, we end up with a midpoint of core fee growth that is exceptionally strong. It is 7.5% at the midpoint. We also provided in the materials that we distributed this morning that we have had a core growth in our fees since 2017 on a compounded basis of almost 8%. We are exceptionally proud of how our core growth in fees has been growing and we expect will continue to grow. We wanted to make sure that highlight was well understood, which is why we provided the breakdowns that we have. I hope that answers your question. Richard J. Clarke: One final part. On the capital returns at the $350 million midpoint, am I able to understand that it is because you will be deleveraging this year, and so hence some of the free cash flow goes to deleveraging rather than capital return? Joan Bottarini: As we sit here at this point in the year, our capital allocation strategy has not changed. We expect to invest in growth for the platform and return excess cash to shareholders as appropriate, and of course retain our investment-grade profile. As we sit here now, we think that the healthy start to the year—and as you have seen us do time and again for the past decade—we have returned capital to shareholders when there is excess cash. I would point to when we had the signing bonus in 2025, we did what we said we were going to do, which was return that directly to shareholders as excess cash. That will be how we proceed with this year as well. Richard J. Clarke: Understood. Thank you. Operator: Our next question comes from Brandt Montour from Barclays. Please go ahead. Your line is open. Brandt Montour: Good morning, everybody. Thanks for taking my question. The industry has largely cited a better December than expected, and that was the best month of the quarter for most folks. You did a really impressive 4% globally for the fourth quarter overall. If I look at the first quarter guidance, you are pointing to the midpoint of your full-year guidance, so you are looking for, let us say, 2% in the first quarter after doing 4% in the fourth quarter. With the context that one of your larger peers yesterday called out a real-time firming within business transient—they are seeing some first-quarter pickup, essentially December and the first quarter—are you seeing that? Is there anything else in the first quarter that we should think about quarter-over-quarter in terms of comparisons? Joan Bottarini: Brandt, why we ended up at that midpoint of the range is that we are seeing a continuation of trends. We are absolutely seeing that package RevPAR is very strong in the first quarter, so leisure transient is as we described. January has come in a little bit better than our range, at the top end of our range. With respect to the breakdown of that, BT has improved slightly, still a little bit flat in January. It has been an interesting comparison because, of course, last year we had the inauguration. As we look at the quarter and we consider the conversations that we are having with our big customers, we are absolutely hearing that they are still intending to travel. It is just that as you look at the booking windows, BT remains the shortest. We are about flattish in January. The overall for January is at the high end of our range, and that package RevPAR is really strong, which is a great sign for leisure. Mark Hoplamazian: There are two things that I would say are true. First, do not forget we are lapping inauguration last year, so that has some impact. Excluding Washington, our U.S. BT would have been better, because U.S. BT overall was down. It would have been better by a significant measure because of the comparison in D.C. The second thing I would say is that our pace, such as it is—it is short term—is positive in both February and March. Even though the total revenues that are booked right now are not huge proportions of total BT expected revenues, they are up in both cases above the top end of our RevPAR range for the year. So BT looks like it is going to be firming for the remainder of the first quarter. Leisure, as Joan pointed out, is very strong, especially at our all-inclusive resorts with pace up around 10%. We are looking at a situation where, as much as we can tell at this point, it looks like we have more positive momentum on the BT front in the near term at least. Anything beyond two months out is not really relevant because the booking window is so short. We are also going to be lapping Liberation Day. We will see what impact that has in terms of the comparisons when we hit April. Brandt Montour: Thanks, everyone. I will leave it at one. Operator: Next question comes from Smedes Rose from Citi. Smedes Rose: Hi. Thank you. I wanted to ask a little more on your decision to no longer include EBITDA from nonconsolidated joint ventures in your definition. I know you said part of it aligns with peers, but it also, I think you said, reflects strategy and evolution. I assume these are minority interests that you hold. Would it make strategic sense to go to your partners and try to get bought out over time as a way to get more simplicity in your overall model? I guess the benefit of these nonconsolidated JVs will just come to you through the EPS line, which I think most people focus less on relative to peers because for lots of reasons it is very difficult to model just getting to an EBITDA number. Could you talk about that decision a little more? Mark Hoplamazian: A good question is one for which I have an answer. A great question is one in which I get an idea thrown at me that we are actually already implementing. Thank you. In 2017, when we started going down the path of the program to sell down more methodically the asset base, we concurrently really shifted our strategy. Up until then, we were actively using real capital. We had allocated $200,000,000 back in 2015, 2016, and 2017 to fund JV interests to help propel getting Hyatt Centric open in great locations with great partners. Those investments turned out to be good investments. Many of them, other than a couple, have already been monetized. The same was true for a few Hyatt Place properties in key locations like Austin and Nashville. We have used capital through JVs to help propel and accelerate growth for individual brands. We will find other opportunities to do that, but it is not a proactive strategy that we are pursuing. We are actually pursuing what you described, which is looking at monetization of all of our JVs over time. As you say, in some cases, we have the ability to actually control an exit. In other cases, we have bought out partners so that we can control the hotel and then be able to pursue a sale. There are several examples of that where those owned hotels are currently in our portfolio—JV partners have been bought out. Finally, we have one public situation, which is Juniper. I think the market cap of our holdings is somewhere in the $240,000,000 to $250,000,000 range, which is a staggering return because we only put in maybe $40,000,000 into that investment to begin with. That is after a significant decline in the Indian market. We believe that value will recover because performance in India continues to go from strength to strength, and we will look to monetize that over time. Your suggestion is accepted. The mandate is set, and we are going to work. Joan Bottarini: I would just add that similar to the program for asset sales, we have retained management and franchise contracts on every single transaction, and this portfolio is also of a very high quality. We have high-quality partners. As we consider all of the future actions we might take that Mark laid out, we would retain management and franchise contracts on all of these. Smedes Rose: That is helpful. Thank you. Can I just ask a quick follow-up separately? You mentioned the impact of Hurricane Melissa. It is in your numbers. Do you have any business interruption insurance claims, or is there anything that might offset that? Joan Bottarini: Yes, we sure do, Smedes. As you can imagine, in these parts of the world, this is a risk that we are faced with. As owners, while we were owning the Playa Hotels, and our owners also have good insurance in this location. We have not included that in the outlook, if that was your next question. We are not sure when those proceeds will come in. We will keep you posted. Smedes Rose: But that impact could be modified somewhat by insurance? I know the timing is always difficult, and the amount is always difficult. Mark Hoplamazian: It will be, but the amount and timing is what is still under discussion. Smedes Rose: Thank you. I appreciate it. Operator: Our next question comes from Steven Pizzella from Deutsche Bank. Please go ahead. Your line is open. Good morning, everyone, and thank you for taking my question. Mark, I wanted to ask about how you think about the ALG Vacations benefit to the business today—whether that is something you would consider selling outright to a partner similar to UVC; you can manage the business. I am more curious broadly about how you think about the benefits to the broader business. Is it an acquisition tool for new all-inclusive resorts because you can tell owners you will drive people to your destination? Is it just that integral to the existing portfolio that you like maintaining the control? Mark Hoplamazian: The answer is yes and yes. Let me give you some data first. The HIC portfolio has outperformed the overall market every year since we have owned ALG, and part of the reason that is true is because of ALGV’s capabilities. I think that plus UVC members, who are the most dedicated and loyal, are driving outperformance for our HIC hotels. Finally, World of Hyatt is growing significantly across our all-inclusive resorts in terms of penetration. It is up 290 basis points year over year in terms of penetration, and I think we have a lot more room to go. Over time, you will see World of Hyatt also be a major contributor. Between those three avenues, which are wholly owned, we have real ability to drive business where and when we need it. The underlying business itself is a profitable and really good distribution platform. For context, HIC represented about 30% of ALGV’s total hotel revenue in 2025, and ALGV represented about 16% of HIC’s total rooms revenue in 2025. It is a channel that represents fully 16% of our total net package RevPAR. Our own portfolio represents about 30% of ALGV total volume. So the answer is yes, it is extremely helpful in new property acquisition. Yes, it is extremely helpful and vertically integrated into how we sell currently. The other major benefit is that we get tremendous visibility into lift. We represent something like 13% of all the plane lifts in Cancun Airport, the largest market share of anybody, and we are similarly number one in Punta Cana. We have an incredible relationship. We buy hundreds of millions of dollars of airline tickets every year from all the major airlines, and we are plugged in in a way that gives us great visibility to route planning and to flow. To your question—yes, my answer is we are always open and always evaluating potential strategic alternatives for ALGV, but there are certain conditions. One, we have to maintain the strategic attributes that I just described. Two, it really needs to be something that would be an enhancement of their business model, not just a financial transaction, because there are many players, you can imagine, that would bring different dimensions to ALGV’s business, whether that be geographic expansion or product type expansion. Finally, ALGV has for the last two straight years been working on AI enablement, and we believe that they have made some great advances. We have a lot more to do this year, but I think we are going to end up seeing some real opportunities there to improve the internal economics of the business itself, but also improve the market positioning of ALGV. There is opportunity to do better with what we have, and yes, we are open to strategic alternatives meeting those conditions that I just mentioned. Joan Bottarini: Maybe, Steve, I will just add with respect to the guidance that I provided in my prepared remarks. I mentioned that there would be about a $10,000,000 headwind for 2026 related to the business, and that is in part because of the impact of Jamaica and in part because of what we are experiencing with the four-star and below demand. In addition to that $10,000,000 for the year, we expect on a net basis that full amount to be recognized in the first quarter because we are lapping such a strong quarter relative to 2025. As you look at the rest of the year, we moderated post-Liberation Day, so Q2 and Q3 may be a little bit down, with an upside in Q4. That is how you can think about it across the year, which we think would be helpful because I think there have been some questions about how to model the business. Mark Hoplamazian: We are not running the company for the first quarter of this year. This Jamaica impact is a 2026 issue. We have plans with the owner, Tortuga, and the other owners in Jamaica—it is primarily Tortuga. They have a fantastic insurance program, as we had. They will have the money. I met with the Minister of Tourism two weeks ago in Spain, and they have assured—and we know—that airports are open, roads are open, the potable water supply is restored, the grid is restored. They did this in record time—just remarkable. In addition to that, the government is taking action to facilitate getting building products brought in without undue tariffs and taxes, and labor. They are really supporting. The government is backing up the truck to make sure that all of the reconstruction can be done in the most cost-efficient and fastest way possible. So yes, we are going to take a hit in 2026. We have been very explicit about what that is. The real point is what does that position us for in 2027? We are going to have fully refreshed, newly rebuilt and renovated and upgraded hotels, and Jamaica is going to have a very strong year because the government is going to make sure it does. There are too many jobs dependent on this industry for the government not to throw everything they have at this for 2027. 2026 is what it is. It is not a persistent issue. It is not a fundamental structural issue. It is a point in time. 2027 has the opportunity for us to far exceed what our own underwriting was out of those resorts when we did the deal and sold the properties. I am excited about the prospects for Jamaica. I am excited about the financial prospects for those properties as we head into 2027. If you are here to buy the stock for what we are going to do in the first quarter, you probably should not. That is a trading question, and I am not going to engage in trading questions. This is about an investment. The profile sets up beautifully for a great 2027. Steven Pizzella: That is very helpful. Thank you. Operator: Our next question comes from Lizzie Dove from Goldman Sachs. Please go ahead. Your line is open. Lizzie Dove: I want to go back to rooms growth. You mentioned earlier, to Dan’s question, about being open to portfolio deals. Just to confirm, is your assumption then that the 6% to 7% would not necessarily be all organic? You also mentioned some of the newer brands where you have traction—Hyatt Select, etc. How big do you think those can be over time as a contributor? Mark Hoplamazian: Thanks. We believe that the 6% to 7% is the organic growth number, just to be clear. The fact that we have brands that are designed for conversion is taken into account. Portfolio deals are different, though. When we are building Hyatt Select’s pipeline, which has expanded dramatically, and when we are building the Unscripted pipeline, that is one-by-one hotel. Sometimes we do mini portfolios. We brought Wink Hotels in Vietnam—six hotels that joined Unscripted in December. That is a mini portfolio deal, but it is really treated like a regular-way development deal. Our organic growth includes the brand portfolio that we currently have, which includes conversion brands. You can expect that is how we think about that. The portfolio deals that I am talking about are larger and have more infrastructure associated with them. These are management platforms, either because of geography or type of hotel, where we would do a deal, bring on a larger number of hotels either under its own brand or to be included under one of our collection brands or to be rebranded. We would also bring on capabilities and people who are engaged if it is in a geography in which we have relatively modest representation, which is exactly the kinds of deals we should be doing. In order to grow our reach and our points of service to all of our guests and how we care for our guests, we end up focusing on the places where we do not have representation. One of us mentioned that 50% of the signings were in new markets. That shows the strategy in the data as well. Thank you for that, Lizzie. I want to thank all of you for your time this morning. As you have heard throughout today’s call, we are really proud of what we have accomplished. We are really proud of the Hyatt Hotels Corporation family, and we are really excited about the momentum that we have in the business. The fee-based aspect of our business is going from strength to strength. I think there has only been one year in the past ten years where we have not led the industry in RevPAR growth. I would focus everyone’s attention on the fact that yes, we have done a lot of M&A over this period of time. Yes, as the headlines have continued to point out, there are some moving pieces. We have been very explicit about what they are. We provided bridges. We provided all the information to simplify so that people can understand what we have done and where we are headed. But do not mistake that significant value growth through inorganic activity. Do not let that distract you from the fact that the core business is extremely strong. Our cash flow conversions are going up. Our returns to shareholders will continue to go up, and our ability to delever and open up more capacity in the future—or relever and return more to shareholders—is before us. Stay tuned. We appreciate your continued interest in Hyatt Hotels Corporation, and we certainly look forward to welcoming you into our hotels. For any of you who are not members of World of Hyatt, please join. It is a phenomenal program, and you can read about it on any blog. People love this program. Do not take my word for it—just go read about it. Thank you, and have a great day ahead. Operator: This concludes today’s conference call. Thank you for participating, and have a wonderful day. You may all disconnect.
Operator: Good day, and welcome to the Trinity Industries, Inc. Fourth Quarter and Full Year Ended December 31, 2025 Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then 0 on your telephone keypad. After today's presentation, to withdraw your question, please press star then 2. Please note this event is being recorded. Before we get started, let me remind you that today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995 and includes statements as to estimates, expectations, intentions, and predictions of future financial performance. Statements that are not historical facts are forward-looking. Participants are directed to Trinity Industries, Inc.’s Form 10-K and other SEC filings for a description of certain of the business issues and risks, a change in any of which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. I would now like to turn the conference over to Leigh Anne Mann, Vice President of Investor Relations. Please go ahead. Leigh Anne Mann: Thank you, Operator. Good morning, everyone. We appreciate you joining us for the company's fourth quarter and full year 2025 financial results conference call. Our prepared remarks will include comments from E. Jean Savage, Trinity Industries, Inc.’s Chief Executive Officer and President, and Eric R. Marchetto, the company's Chief Financial Officer. We will hold a Q&A session following the prepared remarks from our leaders. During the call today, we will reference certain non-GAAP financial metrics. The reconciliations of the non-GAAP metrics to comparable GAAP measures are provided at the appendix of the quarterly investor slides and are accessible on our Investor Relations website at www.trin.net. These slides are under the Events and Presentations portion along with the fourth quarter earnings conference call event link. A replay of today's call will be available after 10:30 a.m. Eastern Time through midnight on 02/19/2026. Replay information is available under the Events and Presentations page on our Investor Relations website. It is now my pleasure to turn the call over to E. Jean Savage. E. Jean Savage: Thank you, Leigh Anne, and good morning, everyone. Our 2025 results demonstrate the durability of Trinity Industries, Inc.’s business model and the effectiveness of our strategy across the cycle. We are intentionally structured to generate resilient earnings, strong cash flow, and attractive returns in a wide range of market conditions, and this year's performance reinforces that positioning. For the full year, we delivered earnings per share of $3.14, representing a 73% year-over-year increase, and achieved an adjusted return on equity of 24.4%, up 67% from the prior year. These results reflect the strength of our leasing platform, disciplined execution in the secondary market, and resilient manufacturing performance in a low-volume environment, and a significant year-end transaction that not only enhanced earnings, but also highlighted the substantial embedded value of the railcar assets on our balance sheet. Looking ahead to 2026, we are introducing an EPS guidance range of $1.85 to $2.10. Our guidance reflects confidence in the durability of our earnings and the visibility of our leasing cash flow. Lease rates continued to trend higher, supported by healthy demand, even as the pace of growth moderates in certain railcar categories. The buying and selling of railcars is a key value driver of Trinity Industries, Inc.’s business model. We expect industry deliveries of approximately 25,000 railcars in 2026, well below replacement levels but reflective of current industry backlogs. Importantly, despite lower delivery volumes, we expect solid operating margins driven by disciplined execution and the realization of the cost actions we have implemented. Eric will walk through our expectations for 2026 in more detail shortly. I will begin with a brief market overview followed by a closer look at our fourth quarter and full year performance. The North American railcar fleet continued to rationalize in 2025 with retirements exceeding new deliveries, resulting in a net fleet contraction. In 2025, approximately 31,000 railcars were delivered, while more than 38,000 older cars were retired. At the same time, rail network fluidity has shown meaningful and sustained improvements. As efficiency has improved, railcars in storage rose above 21% for the first time since 2021, reflecting faster cycle times and the normalization of carload demand. While our 2026 delivery expectations are muted, we are optimistic about the pickup we have seen in inquiry levels and orders in the fourth quarter. We remain disciplined in our order intake while maintaining readiness to respond as demand strengthens. In 2026, agriculture, energy, and nonresidential construction end markets are showing strength. Headwinds remain in key consumer and chemical markets, like automobiles and chlor-alkali. I will now highlight segment performance for the quarter, beginning with the Railcar Leasing and Services segment, which includes leasing, maintenance, and digital and logistics services. The Leasing and Services business remains the foundation of Trinity Industries, Inc.’s earnings stability. Full year revenues increased 5.5% year over year driven by higher lease rates and net fleet growth. Net lease fleet investment totaled $350,000,000 at the high end of our guidance range, and we used the secondary market effectively as both a buyer and a seller to strategically grow and strengthen the composition of our lease fleet. Segment operating profit increased 53% year over year supported by the railcar partnership restructuring we completed with Napier Park in December, recording a $194,000,000 noncash gain in the segment. Additionally, we recorded $56,000,000 in gains on railcar sales in the fourth quarter, resulting in a full year gain of $91,000,000. Fleet utilization remained strong at 97.1% with renewal success of 73% in the fourth quarter. While the future lease rate differential, or FLRD, moderated to 6% as renewal growth normalized, renewing rates were 27% higher than expiring rates. We believe there is still significant room for lease rate increases and remain very positive about this business. Eric will walk through the financial impact of our recently completed railcar partnership restructuring, but I did want to highlight the change in fleet composition. The transaction simplified our ownership structure, resulting in approximately 17,100 railcars removed from the partially owned railcar category. We assumed full ownership of 235 railcars. The remaining railcars moved from partially owned to investor owned, which will reduce reported revenue and operating profit, but this impact is largely offset by a corresponding reduction in minority interest. The restructuring simplified our ownership structure, increased transparency, and improved earnings while maintaining economic value. Rail Products delivered a full year operating margin of 5.2%, within guidance despite deliveries declining 46%. Cost discipline, automation, and workforce actions enabled profitability in a low-volume environment. Additionally, the headcount rationalization decisions we made in 2025 have right-sized the organization for the current reality and allow us to maintain profitability. With an aging fleet and continued net retirements, we expect demand to return over time allowing meaningful margin expansion as volumes recover. In the fourth quarter, we recorded a onetime credit loss related to a customer receivable within Rail Products. This charge was included in SG&A and reduced the Rail Products Group operating margin by 190 basis points for the quarter. This was an isolated incident and not reflective of ongoing performance. Before I hand it over to Eric and 2026 guidance to provide more details on our 2025 financial performance, I want to reiterate that Trinity Industries, Inc. is designed to perform in a wide range of demand environments. Our results and guidance clearly demonstrate the actions we have taken over the last several years have strengthened our business and lowered the breakeven point. For example, we have been investing in AI as a core operating capability, not as a standalone technology initiative. Working with partners like Palantir and Databricks, we have embedded AI directly into our manufacturing, logistics, and financial workflows. Practically, that means we are using AI to recover and redeploy material that historically would have been scrapped, improving margin. We have extended those same models into accounts receivable, reducing disputes and accelerating collections. The cumulative impact has been improved working capital, higher productivity, and more predictable execution across the enterprise. Importantly, these are not pilot programs. They are embedded in how we run the business today, and they continue to scale. We are excited at the impact these initiatives are having on our business now and in the future. I will now turn the call over to Eric R. Marchetto, who will talk through financial results and our guidance for 2026. Eric R. Marchetto: Thank you, Jean, and good morning, everyone. Before I talk through our financial statements, I want to take a moment to walk through our recent strategic railcar partnership restructuring and what it means for Trinity Industries, Inc. Prior to this transaction, approximately 23,000 railcars held in our TRIP and RIV partnership vehicles were partially owned but fully consolidated on our balance sheet and carried at cost. As part of a new fund raised by Napier Park, we began simplifying the fleet structure. We took full ownership of the TRP 2021 fleet, approximately 6,235 railcars, and Napier Park assumed full ownership of the TRIUMPH fleet, approximately 10,850 railcars. The transacted value of the TRIUMPH fleet was significantly higher than our book value, which resulted in a $194,000,000 noncash gain on the disposition. Our railcar leasing fleet now consists of 101,000 railcars on our balance sheet, and 45,000 railcars under management as part of our railcar investment vehicles, or RIVs. Our RIV program provides servicing revenue of approximately $20,000,000 per year, which is part of our leasing operations. The RIV program also provides scale for our platform, which enhances the unique view we have of the North American railcar market. Furthermore, this railcar partnership transaction underscores the embedded value in our assets. We have over 101,000 railcars on our balance sheet carried at a cost of $6,300,000,000. We estimate that the market value of these railcars will be approximately 35% to 45% higher than the carrying value, which demonstrates the estimated 3% to 4% annual appreciation we have seen in railcar values over the last 20 years. While lease rates have increased, they have not increased at the same pace as railcar asset appreciation. We can choose to generate value from our railcars over the long term by holding them in our fleet as lease rates continue to rise or by selling them. This gives us conviction in the long-term returns of the business. Moving to the income statement. We ended the year with fourth quarter revenue of $611,000,000 and full year revenue of $2,200,000,000. This was down year over year due to lower external Rail Products deliveries. Our fourth quarter earnings per share of $2.31 reflects a strong end of the year and an impact of approximately $1.50 from the fourth quarter RIV partnership restructuring. Full year EPS of $3.14 was up 73% year over year, in line with our guidance of $3.05 to $3.20. Before the impact of the RIV partnership restructuring, our 2025 performance was above the midpoint of our previous guidance. Moving to the cash flow statement. Our full year cash flow from continuing operations was $367,000,000. Our full year net lease fleet investment was $350,000,000 at the top of our guidance range, reflecting our conviction in deploying capital in our own fleet. Additionally, we returned $170,000,000 in 2025 to our shareholders through dividends paid and share repurchases. In December, we raised our quarterly dividend to $0.31 per share, marking seven consecutive years of dividend growth with an annualized growth rate of 9%. This reflects Trinity Industries, Inc.’s commitment to returning capital to shareholders. We are ending the year with a strong balance sheet. We have liquidity of $1,100,000,000 through cash, revolver availability, and our warehouse. Our loan to value for the wholly owned lease fleet is 70.2%. The increase in our LTV was a result of the debt restructuring we completed in October as well as the addition of the TRP 2021 fleet to our wholly owned fleet. We are very comfortable with the leverage on our fleet and are regularly refinancing our railcars as our debt amortizes to keep our debt in an appropriate range. Our balance sheet gives us the flexibility we need to effectively deploy capital and run our business. I will now talk about our expectations for 2026. As Jean noted, we are expecting industry deliveries of about 25,000 railcars, and we expect to maintain our historical market share of those deliveries. Despite the lower level of new railcars, we expect to maintain a Rail Products segment operating margin of 5% to 6% for the full year. We expect the secondary market to remain active and anticipate gains of $120,000,000 to $140,000,000 in 2026. We see an opportunity to further simplify our fleet structure and contribute the remaining partially owned railcars to our managed Napier Park fleet in the second quarter. While this transaction is not complete, we have included the anticipated gains in our full year guidance. We expect Leasing and Services full year segment margins of 40% to 45%, including the impact of gains and any further railcar partnership restructuring activities. In addition to the gains, we expect higher lease rates to contribute to a higher operating margin, offset by higher fleet maintenance activity in 2026. We expect a full year net lease fleet investment of $450,000,000 to $550,000,000, reflecting new lease originations, secondary market sales and purchases, and fleet modifications and sustainable conversions. We expect operating and administrative CapEx of $55,000,000 to $65,000,000, which includes further investment in automation, technology, and modernization of facilities and processes. We expect slightly lower SG&A costs in 2026. We expect a full year tax rate of approximately 25% to 27% for the full year. And finally, we expect a full year EPS of $1.85 to $2.10. We have made structural changes to our business over the last few years that have improved our profitability and returns throughout the economic cycle. With our 2026 guidance, I would also like to close with an update on our three-year targets we set at our 2024 Investor Day. As you recall, we introduced three enterprise KPIs with targets over the 2024 to 2026 time frame: net lease fleet investment, cash flow from operations with net gains on lease portfolio sales, and adjusted return on equity. First, our three-year net lease fleet investment target was $750,000,000 to $1,000,000,000 over the three years. To date, we have invested $531,000,000 and with our 2026 guidance, we will be at the top end of this range. Second, our cash flow from operations with net gains on lease portfolio sales target was $1,200,000,000 to $1,400,000,000 over the period. To date, we have achieved $1,100,000,000 and with our current guidance, we expect to exceed this range. It is important to note this excludes noncash gains. Finally, we set an adjusted ROE target of 12% to 15%. We ended 2024 with an adjusted ROE of 14.6% and ended 2025 with an adjusted ROE of 24.4%, averaging 19.5% over the first two years of the planning period. These targets were introduced with the overall guidance of approximately 120,000 industry railcar deliveries over the period. Our current outlook reflects deliveries of approximately 100,000 units. Importantly, this demonstrates the strength and flexibility of our operating model. We have proactively aligned our business to match evolving market conditions while continuing to deliver on our financial commitments. As Jean noted, our 2025 results underscore the strength and resilience of our platform and our ability to deliver attractive returns in a more challenging operating environment. As we look ahead to 2026, we remain highly confident in our trajectory. With disciplined execution, continued cost rationalization, and a flexible platform, we believe we are well positioned in the market. These strengths give us the foundation to navigate uncertainty and, more importantly, the capacity to generate meaningful, sustainable value for our shareholders over the long term. Operator, we are now ready to take our first question. Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Harrison Bowers with Susquehanna. Please go ahead. Harrison Bowers: Hi, Jean, Eric. Thanks for taking my question. E. Jean Savage: Maybe just to start off high level on what you are seeing in demand. Can you sort of talk about if you are seeing improving inquiry levels? And if conversion times to actual firm orders are improving at all, beginning to compress, just what the latest you are hearing from customers broadly about tariffs, broader trade clarity, and some expectations for demand as the year progresses? Thank you. Good question, Harrison. So customers are engaged but the decision cycles are still longer than they have been in the past. It appears to be delaying orders. It is not destruction of the demand. When you look at the replacement demand fundamentals, they are still there. We have over 200,000 railcars that are over 40 years old. And when you look at current inquiry levels, they are increased, which is encouraging. But as you heard, our expectations for 2025, excuse me, 2026 are only 25,000. So we are seeing inquiry pick up. We think that may lead to return to replacement level demand in 2027, but still expect 2026 to be a little bit lower. Thanks. And could you maybe touch on what your expectations are for improving inquiry levels in, you know, and how many incremental orders you might need to see to maybe backfill some space, you know, embed and what your guidance is for the year? Sure. So when you look at what is going on in the marketplace right now, with the lower demand, you are seeing some builders not being quite as disciplined. And so we are seeing some pressure on those margins and having to fight pretty hard. On our typically the specialty cars, we do really well, and some of the other ones. So all the work we have been doing to lower our breakeven is really playing through and what you are seeing in our Rail Products Group margin, and then for 2026, we are still calling for the 5% to 6%. But it is aggressive out there. We are still being disciplined on what we are taking in and making sure that they are good orders that make sense for us to do. When you look at what we have to fill, we still have room in the back half of the year. So we will continue to see that progress as we go through the different quarters, the first half of this year. Thanks. And could you maybe level set what you had expect margin cadence and maybe deliveries throughout the year, even if directional, just to get a sense if there is anything, if any quarters are, you know, well above or below that 5% to 6% range that you called out. Yes. So we do not give quarterly guidance, but I would expect it to be fairly even throughout the year. Great. Thank you. Can you maybe speak a little bit more to the sort of easing FLRD but also seeing the really positive renewals versus expiring, and just what maybe sequential lease rates are and how you expect for those to perform throughout the year? Sure. So the FLRD remains positive for the eighteenth consecutive quarter. And when you are looking at the renewal rates like you talked about, they are materially above expiring rates at 28.6% for the fourth quarter. And utilization improved quarter over quarter. What you are seeing from the moderation on the FLRD is really lapping prior strong repricing that we have had. But when you look at the value of these assets, we think it supports continued lease rate upside. Eric R. Marchetto: I think you asked about quarterly and annually. Our average lease rate continues to go up quarter over quarter and year over year. So we are still seeing positive results there and expect to still have some headroom. Harrison Bowers: Thanks. And maybe taking a step back on leasing. Can you maybe speak to your expectations on the potential for additional leasing consolidation, whether, you know, in the form of some of the partnership or reorganization that you have talked about, or if you would expect, you know, some further consolidation in the space, and maybe what the level of private capital of this space, just to maybe general overview on the competitive dynamics with regards to the leasing space? Eric R. Marchetto: Sure. Hey, Harrison, it is Eric. I will take that one. We have seen some consolidation in the leasing space over the last few years, and that just speaks to the attractiveness of the asset class. We have seen capital looking to come in to the space. As you get out and speculate on what could happen in the future, I know there is capital there that would like to do things. But it takes two. And so I am not anticipating anything in the near term. But there is still very active trading at more at the portfolio level and the asset level, and we would expect that to continue. When you talk about the partnerships, some of the private capital, you know, that there is always possibility with that, but it seems like there is still an appetite to grow from that private capital standpoint. Harrison Bowers: Great. Thanks. I will hop back. I will pass it over and hop back in the queue if I have other questions. Thank you. Operator: The next question comes from Andrzej Tomczyk with Goldman Sachs. Please go ahead. Andrzej Tomczyk: Hey, good morning, Jean, Eric, and Leigh Anne. Appreciate you taking my questions. Just wanted to start bigger picture as well. If we could just talk a little bit more about the guidance range that you laid out. Could you help translate sort of the low end versus the high end of the range relative to your expectations for customer demand through 2026? It might have been asked a little bit earlier, but I guess specific to the manufacturing deliveries, maybe what it means in terms of absolute levels of deliveries throughout the year, and then what you are expecting for ordering activity in the first half of this year in order to get to your full year targets? Thanks. E. Jean Savage: Yes. So Andrzej, thanks for the call. Let me see if I can help you through that. When you look at, you know, we talked about 25,000 deliveries for the industry. We have not given any more detail on our deliveries other than it would be in our normal range of 30% to 40%. So that would imply, you know, that you can imply what you get from that from the math. When you look at just the guidance range, so that is what you are going to get from Rail Products. And also, we gave you the margin of 5% to 6% there. And so that is kind of the big piece of it. You know, when you look at the range that we provided, you know, pretty big range on the gains of $120,000,000 to $140,000,000. So that is also going to provide some of the spacing between the low end and the high end. Andrzej Tomczyk: Got it. That is helpful. And I think you called out a 190 basis point margin headwind in manufacturing in the fourth quarter, if I had that right. So I just wanted to clarify that point first. And then just what we should expect sort of off of that run rate, if that is sort of an adjusted number. I think it would be closer to, like, 6.5% if I have that right for the fourth quarter for manufacturing. How do we think about, is it still just the 5% to 6% through the year, but maybe the first quarter starting off closer to the low end of that range? Or do we think relative to that adjusted number? Eric R. Marchetto: So we did not adjust. We just called out the difference in the reserve that we took. But when you think about it, as Jean mentioned, it should be relatively smooth. We did have, as we talked about in the third quarter, on some of the specialty mix that we had, on the tank car side in the third quarter. Some of that carried through in the fourth quarter, so you got a little bit of benefit there. As we get to more of a traditional mix going forward, that is where we are, the 5% to 6%. You know, the 5% to 6% also with the volume that we are talking about that we have, we are happy with that, especially with, you know, as you mentioned, the amount of unsold space. And you talked about order cadence. I guess I did not answer that previously. But, you know, last quarter, there were industry orders were about 5,800 units. And so that is kind of what we would expect going forward in the near term to get to that 25,000 units for the year. Andrzej Tomczyk: Understood. And it seems like we have a firm grasp on sort of the volume picture for manufacturing this next year. Curious if you could help out on the sort of revenue per unit in manufacturing. Are there any sort of notes to consider around mix in 2026 from a revenue per delivery perspective? Eric R. Marchetto: You will get a, I mean, at the lower levels, there is a little more tank car mix than freight car mix. Generally, those are a little higher unit pricing. As Jean mentioned, it is a competitive environment out there. So you have a little bit of pricing pressure on the top end. And then we are trying to take, we have our initiatives to take the cost out to preserve as much of the margin as we can at these lower volume levels. These are low volume levels that we are operating in. So every bit helps. Andrzej Tomczyk: Yep. That makes sense. Maybe just shifting to leasing. Just curious if you could dig in a little more on the initial feedback of the partnership restructuring deal that you completed in the fourth quarter, and then just the moving parts of that into 2026 regarding the level of your owned lease fleet through the year and then revenue per unit and leasing would be helpful as well. And then just on that, the moving parts, sort of the minority interest that you mentioned in 2026, maybe what level we should be thinking there or what you are baking in? Appreciate it. Eric R. Marchetto: Yeah. Okay. I will start there. Let me just reset. Napier Park, they have been a partner of ours since 2013. They are our longest RIV partner, railcar investment vehicle partner. And as part of a new fundraise that they did, we divided these assets up in December. What we really like about it is we think it really demonstrates the value of the fleet. And recall, when you look at our fleet, our fleet for the most part, most of our assets are at manufacturing cost. And so when you apply a market value against the manufacturing cost basis, you get the types of gains that we saw in the fourth quarter. This increases our RIV program to about 45,000 railcars, so a significant piece of our fleet. As I mentioned in my script, that provides about $20,000,000 a year in fee income, which we really like. It also provides a lot of scale for our business. 45,000 railcars that we are the lessor on, that we run through our shops. It just provides a lot of scale for our business. Also, you mentioned the minority interest. This will help simplify our balance sheet. We will have less partially owned and less minority interest that comes out. So it will be simpler from an outside perspective. As we look ahead in 2026, we see an opportunity to do something similar with the remaining partially owned assets. We are including that in our gains guidance of $120,000,000 to $140,000,000. We would expect that to close in the second quarter. We do not have a price yet agreed to. We do not have a transaction structure agreed. But we do have line of sight to that happening. And Napier Park, while they have not been a buyer of assets for the last several years, with this new fund, we would see them as a potential buyer in the future of assets and kind of revive them as a buyer of assets. More to come on that. But I said a lot there. So just to kind of sum it up, it demonstrates the value of our fleet, especially when you compare market value to cost, and it is going to create opportunities for us going forward both in terms of fee income and then potential transactions down the road. Andrzej Tomczyk: That is very helpful color. Just maybe to clarify on the one point then, is it fair to say in the second quarter, we should expect more of the gains to occur relative to the full year target? Or is that still sort of— Eric R. Marchetto: That is what I am saying. Yes. That is what I am saying. Andrzej Tomczyk: And then just one more broad question from my end to close out. Not sure how far you guys want to venture out, but however you can talk about this would be helpful. Just curious sort of your level of confidence on 2026 marking a bottom for customer ordering activity or maybe industry delivery activity. If your customers are giving any indication that that could be true. And I guess the question is what could, you know, what could cause the prolonged downturn to linger into 2027 from a risk perspective? Or is it just tough to envision that at this point, just given how long in the tooth it feels we are in this industrial slowdown or freight recession. Thanks again for the time. E. Jean Savage: Yes. Thank you, Andrzej. So when you look at what we are seeing in 2026, the rail traffic had improved besides the weather that we saw. So with carloads, we are improving. That is a good thing. We just heard the manufacturing hiring. The jobs report was up. So even though we are not calling victory, we are saying we are starting to see signs that it is stabilized or bottomed out and starting to improve from there. The timing of that, your guess is as good as mine, but we really think that 2026 may be that bottom and start to come out from there for 2027. Andrzej Tomczyk: For all the time this morning. Appreciate it. E. Jean Savage: Yep. Thank you. You. Operator: This concludes our question and answer session. I would like to turn the conference back over to E. Jean Savage for any closing remarks. E. Jean Savage: Thank you. So Trinity Industries, Inc. is structurally stronger, more resilient, and better positioned today than in prior cycles. We will remain disciplined and focused on continuing to drive improvements in our business. We are intentionally structured to generate resilient earnings and strong cash flow through disciplined lease pricing, active portfolio management, and balanced capital deployment. Thank you for joining us today on today's earnings call. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and welcome to the Brookfield Corporation Fourth Quarter 2025 Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Ms. Katie Battaglia, Vice President, Investor Relations. Please go ahead. Welcome to Brookfield Corporation’s Fourth Quarter and Full Year 2025 Conference Call. On the call today are Bruce Flatt, our Chief Executive Officer, Nick Goodman, President of Brookfield Corporation, and Sachin Shah, Chief Executive Officer of our wealth solutions business. Bruce will start off by giving a business update, followed by Nick, who will discuss our financial and operating results for the year, and finally, Sachin will provide an update on our wealth solutions business. After our formal comments, we will turn the call over to the operator and take analyst questions. In order to accommodate all those who want to ask questions, we request that you refrain from asking more than two questions. I would like to remind you that in today’s comments, including in responding to questions and in discussing new initiatives in our financial and operating performance, we may make forward-looking statements, including forward-looking statements within the meaning of applicable Canadian and U.S. securities laws. These statements reflect predictions of future events and trends and do not relate to historic events. They are subject to known and unknown risks, and future events and results may differ materially from such statements. For further information on these risks, and how they and their potential impacts on our company, please see our filings with the securities regulators in Canada and the U.S., and the information available on our website. In addition, when we speak about our wealth solutions business or Brookfield Wealth Solutions, we are referring to Brookfield’s investments in this business that supported the acquisitions of its underlying operating subsidiaries. With that, I will turn the call over to Bruce. Bruce Flatt: Thank you, Katie, and welcome to everyone on the call. 2025 was a very active year for the business. We advanced a number of strategic initiatives and delivered strong financial results. Our cash flows are now supported by our large-scale capital base, which totals $180,000,000,000 and the diversification of our platform across asset classes, geographies, and capital sources, all of which provide multiple avenues for growth and position our business to remain resilient and grow across economic cycles. In the last twelve months, we raised $112,000,000,000 of capital, financed nearly $175,000,000,000 of assets, completed $91,000,000,000 of asset sales, and deployed $126,000,000,000 of capital while growing our insurance asset base to $145,000,000,000. That all allowed us to deliver record financial results with distributable earnings before realizations of $5,400,000,000 and total distributable earnings of $6,000,000,000. Nick will cover financial results in more detail, and Sachin will spend some time discussing our wealth solutions business shortly. Before they speak, I will add a few things. Looking back to 2025 in the stock market, our stock generated a 21% return for shareholders. That increased our thirty-year track record to an annual compound return of 19%. That is a $1,000,000 with us over that period would be worth $285,000,000 today. Of course, that is the miracle of compounding good results. Turning briefly to the market environment, business fundamentals are strong. Capital markets have been. Liquidity has returned, both in debt and equity markets. Interest rates have started to come down globally and transaction activity has picked up. In this environment, real assets should continue to outperform, offering investors the opportunity to earn excellent returns while taking moderate risk. As our platform has grown, so has the scale of the work we do with our partners. Increasingly, we are partnering with the highest quality organizations on large-scale sophisticated projects that are critical to both national and corporate priorities. Recently, that has included partnerships with NVIDIA, Microsoft, JPMorgan, the United States, French, Swedish, and Qatar governments, among others. Our ability to work with counterparties of this caliber underscores the strength, resilience, and global reach of our platform. It also reflects a deliberate long-term approach to building our business with great partners. We believe long-term business success requires many things but three in particular stand out. Together, they make the difference between good and great long-term returns. First, it starts with identifying business that can endure and evolve. For decades, we focused on building the backbone of a global economy, and while that focus has remained consistent, long-term success requires evolving as the economy itself evolves. Second, when a business is well positioned and well run, compounding becomes the dominant driver of value creation. Over long periods of time, small differences in annual returns can lead to very large differences in outcomes. And third, and maybe most important, avoiding disruption to the compounding process and business success is critical. Compounding works best when capital is allowed to be remained invested for long periods of time. For us, that means that we must always keep excess capital to ensure that we can ride through any market cycle. And our balance sheet strength, as Nick will indicate later, gives us flexibility to do just that. It allows us to stay focused on long-term value creation, allocate capital selectively, and take advantage of dislocations when others are more constrained. Real estate illustrates this well. Over the past forty years, we have invested in, operated, and monetized real estate across many market cycles. Our approach has always been grounded in fundamentals. We acquire assets for value, finance them conservatively, and manage them actively. In the most recent cycle, dislocation was driven largely by capital markets and shifting sentiment, rather than a deterioration in underlying fundamentals. While many stepped back, we remained active, continuing to invest, develop, and reposition assets. And today, this sentiment is beginning to realign with fundamentals. New supply across core markets is very muted. Demand is growing, and asset values are set to rise substantially. We enter this next phase from a position of strength, owning the highest quality real estate in supply-constrained markets, operating it through our leading platforms. And as we have seen across cycles, great real estate owned and managed well always wins over time. That same long-term mindset applies to our other businesses, including how we think about our structure in the public markets. Over the last fifteen years, as many of you know, we have offered listed versions of our investment strategies through what we refer to as our listed partnerships. To broaden accessibility for global investors, neither are later paired with sister corporate entities. And when we created our insurance business five years ago, we followed the same approach, establishing it as a listed sister company to Brookfield Corporation trading under the symbol BNT. These structures have served our business extremely well. But as markets evolve and with the continued expansion of index investing, splitting market capitalization has become suboptimal. As a result, we are now focused on streamlining and consolidating our market capitalization. As an initial step last year, we announced the combination of Brookfield Business Partners with its sister company, Brookfield Business Corporation. This transaction creates a single listed entity that is index eligible for the entire market capitalization, and it now reflects the full scale of the business in one company. Building on that momentum, this year, we intend to work on merging Brookfield Corporation with its paired sister insurance entity, BNT. This will streamline our structure and enable the next evolution of Brookfield, bringing together our insurance and our balance sheet investment activities into one single entity. This will also add substantial capital to our insurance operations, supporting growth in that business that is under by our real asset focused investment strategy, while our excess capital will enable us to operate at industry-low operating leverage. In closing, we have strong momentum across all of our businesses, significant access to capital, and a long runway of growth. We are well positioned and confident in our ability to continue to deliver financial results and compound value for shareholders. 2026 should be another strong year. Thank you all for your continued support and interest in Brookfield. I will now turn it over to Nick. Thank you, Bruce, and good morning, everyone. We delivered record financial results in 2025 supported by strong momentum across each of our core businesses. Nick Goodman: Distributable earnings, or DE, before realizations for the year were $5,400,000,000, or $2.27 per share, representing an 11% increase over the prior year. Total DE, including realizations, was $6,000,000,000, or $2.54 per share, and total net income was $3,200,000,000 for the year. Our asset management business delivered record results in 2025, generating $2,800,000,000 of distributable earnings, or $1.17 per share. We raised $112,000,000,000 of capital during the year across a diversified set of strategies, reflecting continued investor demand for our fund offerings. Fee-bearing capital increased by 12% to over $600,000,000,000 and drove a 22% increase in fee-related earnings to $3,000,000,000. Looking ahead, with strong fundraising visibility, including the launch of our latest flagship private equity fund and our inaugural AI infrastructure fund, and with the announced acquisition of Oaktree, our asset management business is well positioned to deliver another year of meaningful earnings growth. Our Wealth Solutions business delivered strong results in 2025, generating $1,700,000,000 of distributable earnings, or $0.71 per share, representing a 24% increase over the prior year. Our results were driven by continued growth in our insurance platform with $20,000,000,000 of annuity sales during the year, alongside improved profitability in our P&C business. On the investment side, we deployed $13,000,000,000 into Brookfield-managed strategies, supporting a sustained 15% return on our equity while generating a 2.25% gross spread. And Sachin will expand on this in more detail in his remarks. Our operating businesses continued to deliver stable and growing cash flows, generating distributable earnings of $1,600,000,000, or $0.68 per share for the year. This performance was supported by strong underlying fundamentals across the platform. Operating funds from operations in our renewable power and transition and infrastructure businesses increased by 14% over the prior year, and our private equity business continues to contribute recurring high-quality cash flows. Within our real estate business, we have seen sentiment realign with the strong underlying fundamentals that have been in place for some time now. The environment today reflects several years of limited new supply across major global markets, while tenant demand has continued to grow, translating into strong leasing activity and meaningful rent growth for high-quality assets. During the year, we signed nearly 17,000,000 square feet of office leases globally, with net rents averaging 18% higher than expiring leases across our super core and core plus portfolios. A few portfolio highlights include: in New York, we signed 2,400,000 square feet of leases at rents 20% higher than those expiring; in Canada, leasing activity picked up meaningfully over the year, we signed 2,400,000 square feet of leases at rents 10% higher than expiring levels; and in London, we signed nearly 800,000 square feet of leases at rents close to 10% higher than those expiring. This leasing activity reflects strong demand from large, creditworthy tenants such as Moody’s and Visa, who are relocating their regional headquarters to our properties, alongside many of our other high-quality tenants that executed long-term renewals and expansions. At the same time, properties that we delivered or substantially repositioned over the past few years, including office assets in major global markets, are now nearly fully leased and achieving some of the highest rents on record. As a result, our portfolio finished the year in a very strong position, with our super core and core plus portfolios more than 95% occupied and poised to continue delivering robust NOI growth in 2026. Turning to monetizations, 2025 was a record year, advancing $91,000,000,000 of sales across the business at attractive returns, including $24,000,000,000 in real estate, $22,000,000,000 in infrastructure, $12,000,000,000 in renewable power, and $33,000,000,000 from private equity and other investments. Substantially all sales were at or above carrying values, realizing meaningful value for our clients. During the year, we realized $560,000,000 of carried interest into income and ended the year with $11,600,000,000 of accumulated unrealized carried interest. And with a strong pipeline of planned asset sales across the business, we expect carried interest realized into income to accelerate over time. Moving on to capital allocation, in addition to investing excess cash flow back into the business, we also returned $1,600,000,000 to shareholders in 2025 through regular dividends and share buybacks. We repurchased more than $1,000,000,000 of Class A shares in the open market at an average price of $36, which represents nearly a 50% discount to our view of intrinsic value, including approximately $150,000,000 repurchased since last quarter. We also maintained strong access to capital markets during the year and executed approximately $175,000,000,000 of financings across the franchise, including $53,000,000,000 in infrastructure, $43,000,000,000 in real estate, $37,000,000,000 in renewable power, and more than $40,000,000,000 in private equity and other businesses. At the corporation, we issued C$1,000,000,000 of seven- and thirty-year notes at favorable spreads in December, and subsequent to year end, our real estate business completed an $800,000,000 fixed-rate financing at a super core office property in Manhattan at very attractive spreads, further underscoring lender appetite for high-quality assets. Lastly, we ended the year with a conservatively capitalized balance sheet, strong liquidity, and record deployable capital of $188,000,000,000. Taken altogether, the strategic initiatives we advanced in 2025 have fueled meaningful momentum. With a $180,000,000,000 permanent capital base, strong liquidity, and multiple avenues for growth, we are well positioned to continue compounding shareholder value in 2026 and over the long term. With that, I am pleased to confirm that our Board of Directors has declared a 17% increase in the quarterly dividend to $0.07 per share, payable in March to shareholders of record at the close of business on March 17, 2026. I thank you for your time. And with that, I will now pass the call over to Sachin. Sachin Shah: Thank you, Nick. Bruce Flatt: And good morning, everyone. I am pleased to join the call this quarter. Nick Goodman: To provide an update on Brookfield Wealth Solutions. 2025 was a strong year. We finished with over $140,000,000,000 insurance assets, generated $1,700,000,000 of distributable earnings, and delivered a return on equity above our mid-teens target. Bruce Flatt: As we look ahead to 2026, Nick Goodman: We are very well positioned to deliver continued growth across both our retirement and protection businesses. Bruce Flatt: As always, our ability to invest into the broader Sachin Shah: Investment platforms continues to be a key advantage for us. Access to long-duration, real asset, equity, and credit strategies that provide stable, recurring cash flow growth and attractive returns provides a differentiated foundation for driving the business forward. On our current trajectory, expect to end 2026 with circa $200,000,000,000 of insurance assets, over $2,000,000,000 of distributable earnings to Brookfield, and a capital base exceeding $20,000,000,000, well above our regular regulatory targets. Nick Goodman: Importantly, Sachin Shah: This growth is supported by a highly diversified business across multiple scale geographies, high-demand retirement products, and a growing protection franchise, which together provide multiple avenues to source long-duration low-cost liabilities. We have a number of important priorities in 2026, and I will highlight a few of them now, which we believe will drive stable, reliable earnings growth over the next decade and should lead to continued growth in the value of our business. First, we are focused on closing, integrating, and scaling our U.K. acquisition. Over £50,000,000,000 of pensions are expected to come to the U.K. risk transfer market in 2026, and over £500,000,000,000 of pensions will come to the market over the next decade. This represents a large and growing opportunity set. We have made substantial investments in the pension markets, acquiring platforms for value, building out operational capabilities required to scale. Our recently announced acquisition of the Just Group in the U.K. is expected to close in 2026, and we are already advancing plans to grow that business and execute on over £5,000,000,000 of pension opportunities annually. At the same time, we are working to grow our footprint in Asia, where savings products continue to be in high demand as populations age, and retirement income is highly desirable. Japan’s life and savings insurance market is one of the globally, with approximately $3,000,000,000,000 of assets on insurer balance sheets today, reflecting the depth of long-term savings and retirement liabilities that create significant opportunities for retirement income and growth-oriented solutions in the region. More broadly, across Asia Pacific, demographic shifts are driving a rapid increase in financial assets, with life and pension savings representing an increasing share of household wealth. We are in the early stages of building our business in Japan and broader Asia, having completed our first transaction in Japan at the 2025. We have a strong pipeline of opportunities ahead of us, which should translate into $3,000,000,000 to $5,000,000,000 of annual flows over time. In the U.S., we are expanding our retirement distribution capabilities to drive in excess of $30,000,000,000 of inflows into the business annually over time. U.S. fixed annuity demand exceeded $300,000,000,000 in 2025 as aging populations continue to look for stable retirement income. A significant portion of that demand flows through large bank and broker-dealer channels, which have been a key area of focus for us. On average, these channels account for two-thirds of U.S. retail annuity sales, whereas they have only represented about one-third of our sales historically. Given the sustained demand through these channels, we have been investing into these relationships. We have expanded our offerings on one such platform already this year, are on track to launch a second before the end of this month, and expect to launch two additional platforms within the calendar year. Given our expansion, our annualized organic inflows should comfortably grow to over $25,000,000,000 in the near term. As it relates to our protection franchise, we are prioritizing and identifying opportunities for scale as markets soften through selective M&A, organic growth, and expansion of our reinsurance capabilities. Our protection business delivered $8,000,000,000 of float to manage in 2025, at virtually no cost to funding. We have made tremendous progress to date, focusing the business on reducing risk, exiting low-profitability lines of business, and positioning for softer markets ahead, which we believe will lead to more compelling growth opportunities over time. Lastly, are continuing our pivot towards equity-oriented strategies to enhance investment returns, using our strong capital base to deliver higher-quality earnings with lower operating leverage. In 2025, we deployed $13,000,000,000 into Brookfield-originated strategies at an average net yield of 8% to 8.5%. We also made additional commitments to Brookfield-sponsored private funds, which will be further accretive to our earnings as those funds call and deploy capital over the medium term. To bring this together, the strategic initiatives we have executed to date together with our priorities outlined for 2026 position the business for continued earnings growth. We have a platform that benefits from diversification across distribution channels, geographies, and product types, allowing us to access the most competitive risk-adjusted cost of capital. With a strong pipeline of real asset investments across Brookfield’s various strategies, we feel confident in our ability to continue compounding our capital at well above our mid-teens targets. Thank you for your time, and with that, I will turn the call over to the operator for questions. Sachin Shah: Thank you. Operator: As a reminder, to ask a question, please press *11. And our first question will come from the line of Kenneth Worthington with JPMorgan. Your line is open. Sachin Shah: Hi, good morning, and thanks for taking the question. You have spoken in the past about scaling the P&C business. And today, you called out the protection business and the improved profitability a number of times in the prepared remarks. So I was hoping you could flesh out your comments and talk about where the business stands today, maybe a bit more on how you plan on scaling it from here, and then lastly, what is the right relative size of the P&C business to the life and annuity business for you. Nick Goodman: Sure. It is Sachin here. So you are right. We have talked a lot about our P&C protection business, as we call it. I would say the last few years, and you would know this just from the general market backdrop, has been a very hard market. You have seen record profits in established P&C platforms. And during that period, to acquire businesses for value was very difficult. Owners would expect significant multiples on book capital, and not everyone had a great platform or has a great platform, yet valuation expectations were tremendously high. Our approach during that period was to acquire platforms where we felt we could acquire them at a significant discount to book, work on repositioning them, and really orient them to the next cycle that will come, softer markets, and ensure that we have a good risk culture, a good cycle management culture, and that we could grow them organically even if markets start to soften, which we are seeing pretty significantly right now, in particular on the property side. Where that leaves us is we now have a business that is generating strong profits. We have been able to reposition our investment portfolios much more to equity-oriented strategies. We are breakeven on underwriting profit, and will be generating underwriting profits going forward. We now have a platform that as markets soften, we think that we can pursue M&A; there will be some platforms who struggle in this environment. We think we can build out reinsurance capabilities, and we can continue to diversify our lines. So I think from the outlook perspective, the business has a very strong outlook ahead. In terms of size, we have about $3,000,000,000 of capital that supports our protection business, $8,000,000,000 of float, and I think we could comfortably see a path to $20,000,000,000 to $25,000,000,000 of float by the end of the decade. I will pause there. Great. Thank you. Operator: One moment for our next question. And that will come from the line of Bart Dziarski with RBC Capital Markets. Your line is open. Sachin Shah: Wanted to ask around the decision to simplify the structure and collapse BNT. So I know you called out a few reasons in the letter, but can you maybe unpack the decisioning there, why now, and the expected time frame? Sachin Shah: Thanks. Nick Goodman: Hey, Bart. Morning. It is Nick. I think in the letter and then in Bruce’s comments, we provided a lot of the background. What I would add to that is we have seen an evolution in public markets, and as our business has evolved, we do believe at this point in time it makes sense to streamline and simplify. And we have seen the benefits of that play out for BBU. And as we think about BN, when we set up BN originally as—sorry—BWS, when we started investing in insurance, we did so thinking it was a very attractive stand-alone investment opportunity. And to stand it up on its own two feet, we set up a paired security, BNT, that added value and provided optionality as we continued to scale the business. I think as, you know, as we have discussed, we see things quite differently now. The insurance business has scaled meaningfully. There is great growth potential ahead for that business. And as it has grown, we have realized the tremendous synergies that it has with overall Brookfield. And therefore, it has increasingly become more integrated with the corporation. And today, the business fully benefits from the investment ecosystem of BAM, offering ideal investment solutions to back the liabilities that we have. We think the next step is to also allow the business to fully benefit from the capital base of the broader Brookfield, the full $180,000,000,000 of capital that we have, to back its growth while allowing it to maintain low operating leverage. So what that means for the business is that we are working on a plan to combine BN and BNT into a single listed company, one security. We would see no change to the governance, the management team, the investment processes, the risk framework within the business, but the end result would be a streamlined structure that provides investors with simpler access to our business and will sustain and ultimately enhance the long-term growth profile of the. So we will continue to work on that, and as we said in the letter, we would like to think we can execute it within the next twelve months. Sachin Shah: Great. Very helpful. Thanks for that color, Nick. And then just sticking with, I guess, Brookfield Wealth Solutions, very strong ROE. It looks like it is north of 15%. I think we get it on the asset side as to how the strategy is differentiated. Is anything on the liability side that is also contributing to that? And what is the outlook there in terms of preserving that ROE this year? Thanks. Hi, Bart. It is Sachin. Yeah. On the liability side, we have really been focused on diversification of product type. You know, that started with simple annuities and a small P&C business. It has really morphed into geographic expansion, a multitude of retirement products that we sell through all of our businesses, getting into the pension markets and scaling there, and broadening out our P&C business. What that really means in practice is at the top of the house, we can look at where our capital is allocated, and we can allocate it to where the cost of funding is the lowest. And therefore, we can move our capital around by geography, by product type, and ensure that as competition increases in one area, we move away to an area where we see better value. We couple that with our investment franchise at Brookfield, and that leads to really robust spread and really robust total returns for the business. Great. Thanks, Sachin. Operator: One moment for our next question. And that will come from the line of Alexander Blostein with Goldman Sachs. Your line is open. Sachin Shah: Thank you. Thank you. Good morning, everyone. Bruce Flatt: Just maybe another one around P&C. Definitely seems like—and you guys have been hinting to that for a couple of quarters now—but it definitely feels like you are leaning into that more aggressively, both organically and perhaps inorganically. How are you thinking about the risk that that brings to the BAM platform as a whole? Quite different than the annuities business. When we think about the opportunity that that creates for BAM, as far as incremental assets that could be managed or fall under the IMA, what would be the implications for the management fee business? Sachin Shah: I will start with just the balance sheet of the P&C business. As you know, it is a lower leverage business. So I think, you know, it requires capital to grow, but you do not get the same operating leverage as you do in annuity business. And for that reason, you do not get the same projected asset going over to BAM. That being said, our annuity business is very large. It is global. And we really have focused the last five years on scaling that. So we have a regular flow of capital coming into the group. On the P&C side, the real benefit for us is there will be times where that business we see opportunities to drive our funding costs down that do not have as much competition. And remember, the annuity market today is very competitive, all of our peers are in that space. Many small asset managers have gone into it, and all the incumbent insurers are very aggressively growing their retirement business as well. So it was prudent for us to build other levers to drive funding costs down, and to be able to allocate capital in parts of the business that have less competition. Bruce Flatt: Got it. Alright. That is helpful. Okay. Second question for you guys, maybe pivot to real estate. The fundamentals in the business look like continue to improve. If we look at NOI, FFO, any of the metrics you guys put out, it looks like it is been a nice improvement over the last couple of quarters now. But help us maybe unpack what has been driving that, and within that, I believe there is quite a bit of floating rate debt that still benefits the cash flows of your real estate franchise. Maybe help with some sensitivity around, kind of, I do not know, 25 basis point cut in rates, how much does that impact the cash flows across the entire BPG real estate franchise? Yeah. Hi, Alex. Nick Goodman: Listen. I think we have talked at length about the fundamentals and the market dynamics going on in global real estate right now, and they are continuing to build momentum. And I would say that is across the highest quality office and retail. If you look at the office markets in global gateway cities, there is very low to no new supply coming on market. New supply is not expected for, you know, in large scale anytime soon, and yet tenant demand continues to grow. And we have seen that inflection point in that business in the last couple of years, this year accelerating, still going on, with the number of tenants we are actively engaged with through very large requirements for high-quality space. We, you know, we signed two of the largest leases in downtown last year. I think it is the largest ever move of tenant in the downtown core, definitely for some time, into a trophy building, and we can see that momentum continue. You look in London, one of the tightest markets globally now, setting record rents with each lease we sign in the city. Tenant demand in Canary Wharf, the strongest we have seen. So those are the underlying drivers for the growth in the NOI in office. Now as we move those tenants in and we vacate space, it takes time to come through the numbers, but the underlying momentum and the valuation appreciation is coming through the numbers. And in retail, the sales continue to be very strong. We had a very strong seasonal performance in our assets this year, strong total year, and again expect sales growth this year with strong tenant growth. And all of these assets continue to sign leases at very strong positive spreads to the leases that are expiring. So that is driving the NOI growth, and we see that trend continuing. The capital markets are incredibly supportive of these assets. We just completed the financing in downtown New York last week, and the debt stack was 10 times oversubscribed up and down the stack. The capital markets are incredibly constructive. We continue to drive in spreads. So that is driving the NOI performance. On the FFO, you are right. We have some floating rate debt. We are probably right now about 75% to 80% fixed rate, but that floating rate movement, 25 basis points, probably roughly about $35,000,000 to FFO on an annualized basis. I would say there is more going on than just rates coming down. We have the benefit of tightening spreads, and we have the benefit of some delevering come through the P&L. So I think the FFO trajectory continues to look positive from this point forward. Bruce Flatt: Alright. Thanks, Ed. Operator: And that will come from the line of Michael Cyprys with Morgan Stanley. Your line is open. Sachin Shah: Good morning. Thanks for taking the question. Wanted to ask about BWS. I heard the helpful commentary around some of the globally. I was hoping maybe we could double-click on Asia, and if you could maybe elaborate a bit on some of the steps you are taking to grow your footprint in Asia, what we can expect from Brookfield here, ’26 and over the next couple of years. I think you mentioned a pipeline. Can you just elaborate on that pipeline, what that looks like? And then in Europe, as we move past the Just deal and we look out to later this year into ’27, can you speak to some of the steps that you are going to be taking to capture the opportunity set in Europe? Thank you. Sure. It is Sachin here. So first on Japan, I would say our pipeline, we have been pretty active for the last three years in the Japanese market with teams on the ground, focused on relationship building, leveraging the broader Brookfield brand. And as you know, there has been a pretty steady history of Japanese insurers undertaking reinsurance with foreign counterparties. And we have been able to build trust. We have been able to get onto the list of acceptable counterparties. We completed our first deal, as we have announced last year, with Dai-ichi Frontier Life. I would say we now have strong relationships with half a dozen of the top insurers in Japan, all of whom are advancing discussions with us about entering into partnership deals on both flow and in-force reinsurance. Not all of them will hit, but we expect a number of them will, and we feel pretty good that we will have a recurring steady flow of reinsurance relationships in the country. Beyond Japan, we are actively looking at markets like Korea and Hong Kong, Taiwan, where you have a similar savings dynamic that is occurring and, you know, aging populations that really are not earning a proper yield in their savings products and look to insurance products to supplement returns for themselves. And I would say we are actively conducting outreach in those markets as well, looking to build on our pipeline. Europe, I would say, is a bit more of a challenge. We have spent a lot of time in Europe on the annuity side and on the protection side. But I would say on the annuity side, the market there is much more regulated around what is called the with-profits business. And what it effectively means is your ability to generate spread is very limited by regulatory constructs. So I think if we are going to advance our business in Europe, we are going to do it very slowly, very carefully, and make sure that we do not end up in a situation where the things that we are good at at Brookfield, investing in real assets, are not able to be done. That would be problematic for us. Great. Thank you. And then just a follow-up question, if I could, on carry. I was hoping you might be able to help carry, how are you characterizing the outlook here for carry into ’26 relative to ’25? Nick Goodman: Yeah. Thanks, Mike. So I think we had a good performance in 2025, probably slightly ahead of plan for the year, and I know we have talked in the past about seeing an inflection point coming this year. The pipeline for monetizations continues to be very strong as we look out this year. And I would say it is active in the right areas as it relates to carry. It is active specifically in the funds that are relevant for realizations across infra, real estate, and within Oaktree. So I think we feel good about where we are today. Obviously, we feel very good about the valuation of the assets we are bringing to market. Timing is slightly outside of our control. But if we had to estimate, we think we would see it start to step up in the second half of the year and then continue to scale into ’27 and ’28, as we have talked about before. So the valuations are good. The processes are going. The pipeline is strong. And it just depends on timing now. Sachin Shah: Great. Thank you. Operator: One moment for our next question. And that will come from the line of Mario Saric with Scotiabank. Your line is open. Sachin Shah: Hi, good morning. Just wanted to talk about the dividend increase. The $0.07, 17% was the largest in some time. It is kind of double five-, ten-year CAGRs. Sachin Shah: The largest among the Brookfield publicly traded companies this year. Bruce Flatt: I am pretty sure it is not a result of lack of investment opportunities as we are hearing on the call. So I am curious whether Sachin Shah: The increase is kind of a shift in dividend growth Angela Yulo: Policy that better mirrors expected underlying cash flow per share growth going forward. Nick Goodman: Yeah. Hey, Mario. It is Nick. No. I think it is more simple than that. Obviously split the shares, and at BN, we have not done fractions of a penny increases. We stuck with a penny. The payout ratio is still very low, as you know. So whilst it looks like a high increase on paper, and it is a nice increase, the payout ratio is still very low, and it is not a change in strategy. We still are focused on reinvesting capital back into the business. And when we return capital to shareholders, we look to do it opportunistically through buying back shares. So I do not think it is a significant change in strategy. It is more a product of the fact that we split the shares this year. Last year. Angela Yulo: Got it. Okay. Makes sense. And my second question, in the letter to shareholders, you talk about identifying themes that enable investment growth. You have talked a lot about digitalization, decarbonization, and deglobalization that maintains over the past decade. Associated with your commentary about the need of an organization to evolve over time, if you have to guess, you know, what are some themes that you may be discussing at your investor day five years from now that may or may not be different than what you are talking about today? Nick Goodman: Listen. I think the themes that we have today have a long runway ahead of them. We are in the very early stages of the buildout of supporting the growth of AI and this revolution. And I think the themes will still be anchored by the same fundamental principles. You know, they are anchored today by the same principles we were talking about ten and fifteen years ago. It is very hard to predict exactly what we will be talking about five years from now. But I think it will be anchored on the same core fundamentals. But we do expect a very long runway from the current themes that are driving the growth of the business. Angela Yulo: Okay. Those are my two. Thank you. Sachin Shah: Question? Operator: And that will come from the line of Jaeme Gloyn with National Bank. Your line is open. Sachin Shah: Yes. Thanks. Just a Sachin Shah: Question on the North American residential portfolio. Bruce Flatt: Just looking at the operating FFO this Dean Wilkinson: Quarter stepping up from Q3, was there any increase in activity on sales this quarter versus the prior quarter? Or is that just more reflecting some of the seasonality in the business? And then you could maybe talk through some of the outlook around that portfolio into 2026. Nick Goodman: Yeah. Hi. It is very much due to seasonality. The best way to analyze the performance of that business would be comparing the quarter performance with the prior-year quarter, as opposed to the prior quarter. There tends to be seasonality and strong performance in Q4, and when you look at it compared to Q4 of last year, we did have a one-time gain on a sale of a large lot. So there is an outsized gain in last year’s numbers. I think that, listen, the trend in that business continues to be what we have talked about for a while. It is a very well-performing business for us, very well run. It generates good cash flow. But for sure, we are seeing muted activity in the housing markets in Canada and the U.S. for now. We expect that over time, the performance will improve, as we see a shortage in housing. We are very well placed with a very nimble platform. And if you think back to Q1, we did derisk that investment by pulling out $1,000,000,000 of capital by exiting a few of our master-planned communities, and we have positioned that more as an asset-light business now, and we continue to scale the land servicing and land management businesses for our clients, generating fees for Brookfield Asset Management. But I think as we look forward, we do see muted performance at the start of this year, but very well positioned to benefit when the market improves. Dean Wilkinson: K. And then, following in the same theme around the real estate assets, if I kind of go back to a couple of investor days, the view would be that real estate assets would sort of decline through the 2029, 2030 period. But we have kind of seen that tick up over the last several quarters. So I guess, is that a reflection of just hanging onto the assets for now until better monetization opportunities present themselves? And do you see that sort of accelerating in the early part of the year, second part of the year? Or is it maybe more of a ’27 story when you see that start to unfold and see the, you know, the capital levels start to drift lower. Nick Goodman: Yeah. Listen. I would not say that we have necessarily been aggressively acquiring, as in stepping up from acquisition, but we have obviously been holding onto the assets. We have been focused on operational improvement and performance. And we have seen that. And as I said, the operating fundamentals have been strong for a while now, and that growth is only accelerating. Capital markets get stronger by the day, and I think we are seeing market sentiment and broad market sentiment, out of those really involved in the business day to day, really start to appreciate what is going on in the office market and the durability of high-quality office in this cycle and in long-term growth. And I think as that sentiment and acceptance broadens, you are going to see transaction activity really pick up. We have seen it more broadly for real estate businesses that we sold last year around the world, and we expect it to pick up for high-quality assets. Exact timing is always hard to give you, but I do think it is close to coming back in a meaningful way. And when it does come back, we will be poised to monetize a number of assets in the portfolio. Sachin Shah: Great. Thank you. Operator: And our next question will come from the line of Cherilyn Radbourne with TD Cowen. Your line is open. Thanks very much, and good morning. With respect to the plan to merge BN and BNT, if I recall correctly, there were some tax advantages associated with holding BNT. So I am curious if losing those is effectively the cost of simplification, and to the extent that these were just paired securities, maybe you can elaborate a little bit more on how the insurance business was not previously benefiting from the full capital base of Brookfield. Nick Goodman: Yeah. Hi, Cherilyn. It is Nick. Listen. I think we will be very focused as we work through this process over the next twelve months on preserving and maintaining all the operational benefits we have in the business. So you can be assured that we are focused on preserving that. I think today, it is a paired security, but it is technically, under insurance, a separate ownership structure. So while paired, the ownership chain is slightly different. So as we have looked to capitalize BWS since inception, it has involved us actually moving capital over the business off the BN balance sheet. And I know that is a subtle difference, but having them under the single ownership will allow us to put the business under the total capital base of the organization. So it is a slight structural nuance. It served a lot of benefits as we have grown the business from inception. But there is a clear benefit now to putting them together and realizing that full potential. Sachin Shah: Okay. That makes sense. Operator: And then question on BWS and the reallocation of the flow to BAM-managed strategies. I think you reallocated $13,000,000,000 in 2025 versus annuity inflows of $20,000,000,000. So I assume that still results in some timing-related pressure on the spread. Does that $13,000,000,000 need to step up in 2026? And can it step up as BAM holds first closes on three large flagships? Sachin Shah: Cherilyn, it is Sachin. So first, the $13,000,000,000 that we invested into BAM strategies, that represents the illiquid private portion of our total asset base, which today is about 50% liquid, 50% private, and will stay in that range. So I would say, in fact, as we have been rotating the asset portfolios from companies that we have acquired, we are exceeding our 50% target because we started with a very large liquid base of assets. So as money comes in, you should think of it that in general, half the money will stay in liquid cash and liquid securities, and half the money will go into Brookfield private fund strategies, or other opportunities that come into the Brookfield investment universe. So I am not worried that we will not be able to keep pace. In fact, we have been exceeding the run-rate pace that we need to achieve. Cherilyn Radbourne: Okay. So if I understand that correctly, basically, $10,000,000,000 of the $20,000,000,000 should have gone into private strategies. And so the $3,000,000,000 is kind of a catch-up on the liquidity that you had entering the year. Is that a good way to think about it? Sachin Shah: Yeah. That is correct. If you were to keep it very simple, that is a correct way to think about it. Cherilyn Radbourne: That is all for me. Thank you. Operator: And one moment for our next question. And that will come from the line of Sohrab Movahedi with BMO Capital Markets. Your line is open. Sohrab Movahedi: Sachin, I wonder if you could just unpack something you said a little bit earlier. I think in response to kind of managing the cost of funds, you were talking about having the flexibility or the ability to kind of allocate capital to the lowest kind of cost-of-fund, I guess, jurisdictions to generate the returns. When I look at your cost of funds throughout the year, presumably, you have been doing that. So is this as good as it gets, or can cost of funds come lower from here? And how quickly can you pivot from one jurisdiction to another in the capital allocation? Sachin Shah: Hi, Sohrab. So first of all, it is not as good as it gets. I think there is always room to do things better in a business. I think Japan, in general, is a low funding cost market. So as we build out there, that should help us drive our funding cost down. The P&C business is one, when run well, and you saw it in this year’s results, we had zero cost of funds. So they meaningfully drive down your funding cost. And as we grow both of those areas of the business, you should see that help drive the weighted average cost of funding down. In terms of the speed at which you can move, you know, we are in the market every day. We have products that get repriced on the annuity side monthly, and so we can pull back pretty quickly. Pension markets are bid on as individual transactions, and when they get too expensive for us, we pull back on bidding on them. And P&C float has a shorter duration, so you can quickly shrink your book if you feel like the markets there are either softening too much or there is too much capital chasing deals. So for us, it was important to have that level of diversity, and we think we can be pretty nimble. Sohrab Movahedi: Okay. Sachin, that is excellent. And given that flexibility and nimbleness, is it aspirational of me to think you could move that 15% ROE hard higher, or is that 15% target given everything you just said? Sachin Shah: I think the way I would look at it is we are trying to maintain a pretty conservative balance sheet. We are trying to keep leverage levels low, and we are trying to keep capital base high. All of those things go against higher returns, as you can imagine, but they lead to a safer balance sheet and a higher quality of earnings. If you couple that with our investment strategy and our ability to drive funding costs down, that is why we say mid-teens is our target. If we ran at the same operating leverage as maybe some of our peers in the space, the returns would be higher, but we would be taking more risk to do so. So I would look at it as if we are trying to build a business for a very long-term horizon, we are trying to do so where we have got a lot of excess capital, and we are pretty comfortable that mid-teens is just a good target for us to maintain. Sohrab Movahedi: Thank you for taking the questions. Operator: Thank you. I am showing no further questions in the queue at this time. I would now like to turn the call back over to Ms. Katie Battaglia for any closing remarks. Cherilyn Radbourne: Thank you everybody for joining us today. And with that, we will end the call. Operator: Ladies and gentlemen, thank you for participating. This concludes today’s program. You may now disconnect.
Fernando Fernandez: Hello, and welcome to Unilever's full year results announcement. Thank you for joining us. In a moment, Srini Phatak, our Chief Financial Officer, will take you through a detailed breakdown of Unilever results for 2025. But before that, I would like to share with you a few reflections on our performance last year. Let me start by saying that we have delivered a solid year, fully in line with our commitments despite challenging conditions. When I took over as CEO, I made clear that one of my biggest priorities was to ensure that in Unilever, we could both perform and transform. 2025 has demonstrated our ability to [ evolve ]. We delivered a good performance, delivering competitive volume growth, positive mix and gross margin expansion, with sequential improvement throughout the year. We sharpened the portfolio. The successful demerger of Ice Cream combined with 10 deals, including acquisitions like Minimalist, Wild, and Dr. Squatch and the disposal of several nonstrategic brands means that we have rotated 15% of the total portfolio in 2025. We have significantly elevated the offering of our brands, stepping up their functionality, their aesthetics, their sensorials. Strong innovation plans and a decisive shift to social first demand generation models also contributed to a strong improvement in the [indiscernible] brand superiority scores of our brands, a key reason for our ability to outperform markets. This is empowered by another increase in our brand and marketing investment. We improved our execution, reflected by our continuing strength in developed markets and our improved performance in emerging markets, including the successful operational results in key markets like Indonesia and China. We have also acted decisively to correct performance gaps in areas like Home Care and Deodorants in Brazil or U.S. [ Hair ] businesses, in which we expect significant improvements during 2026. We drove cost discipline and improved overheads by 50 basis points through the continuing delivery of our productivity program that is significantly ahead of schedule. We are moving at a speed to build a business that drives desire and scale in our brands and execution excellence. There is much still to do, but we have entered 2026 as a simpler, sharper, more focused business, better able to capture the many growth opportunities that exist across our categories and our channels. Our performance in 2025 give us added confidence that we are on the right track, as Srini will now highlight in taking you through the numbers. Srini? Srinivas Phatak: Thank you, Fernando. Before I turn to the results, just a brief point on the basis of reporting. All the figures that I refer today are on a continuing basis, which excludes Ice Cream. Comparative figures have been restated to reflect the demerger of the Ice Cream business. So all growth, margin and cash metrics are presented on a like-for-like basis. For the full year, underlying sales growth was 3.5%, with volumes at 1.5% and price at 2%. Looking beyond the single year, performance over a 2-year period highlights the underlying momentum of the business, particularly in Beauty & Wellbeing, Home Care and Personal Care, we delivered compounded annual volume growth of 3.6%, 3.1% and 2.1%, respectively. In 2025, we saw a clear sequential improvement through the year, with quarter 4 growth at 4.2%, with a step-up in volumes to 2.1% and pricing at 2%. This reflects our disciplined execution and a sharper focus on volume-led growth. Our 30 Power Brands, which represent more than 78% of the group turnover, continued to grow ahead of the average, delivering 4.3% underlying sales growth for the full year, with volumes up 2.2%, in line with our medium-term growth algorithm. This performance has been sustained over time, with Power Brands delivering a 2-year compounded annual growth rate of 5%, including 3.4% volume growth. Power Brands have the first [ call our ] incremental resources, with 100% of our incremental BMI in 2025 being invested behind them. The performance we see reflects the impact of those prioritization choices. Momentum strengthened further in the fourth quarter with Power Brands delivering growth of 5.8%, driven by volume growth of 3.5%. Beauty & Wellbeing delivered balanced growth across the year, with underlying sales growth of 4.3% evenly split between volume of 2.2% and price at 2.1%. Dove, Vaseline and our premium brands continued to outperform, delivering double-digit growth, reflecting the strength of our innovation and focused execution. Category performance varied across the year, reflecting different stages of portfolio reshaping, innovation delivery and execution. Hair Care was flat overall, with pricing offset by lower volumes. Within this context, Dove Hair continued to deliver double-digit growth, driven by the rollout of its fiber repair range across multiple markets. Total hair care performance in North America was flat, reflecting portfolio simplification actions, while softer market conditions in some emerging markets weighed on volumes. Core skincare delivered mid-single-digit growth. Vaseline again stood out, delivering double-digit growth for the third consecutive year and becoming our eighth largest brand. Wellbeing remained a key growth engine, delivering double-digit growth for the year, led by volume. Liquid I.V. and Nutrafol both delivered double-digit growth, with Liquid I.V. reaching 2 important milestones: becoming a billion-dollar brand and achieving a record U.S. household penetration of over 18%. OLLY delivered high single-digit growth, and it is now an over $500 million brand. Prestige Beauty delivered low single-digit growth. Hourglass and K18 continued to grow double digit, and Dermalogica and Paula's Choice returned to growth in the second half. In the fourth quarter, Beauty and Wellbeing growth stepped up to 4.7%, with volumes up 2.8%. This performance underpins a 2-year compounded annual volume growth rate of 3.3%, reflecting improved execution and a stronger performance across several key Asia Pacific Africa markets as the year progressed. While market growth moderated in Wellbeing, we delivered volume growth above 5% for the quarter, continuing to materially outperform the market. Meanwhile, our core portfolio delivered improved growth with Hair Care at mid-single-digit growth. From a profitability perspective, underlying operating profit in Beauty & Wellbeing was EUR 2.5 billion in 2025, with an underlying operating margin at 19.2%, down 20 basis points year-on-year. This reflects a significant improvement in overhead efficiency, with increased brand and marketing investments behind Power Brands and premium innovations supporting long-term sustainable growth. Personal Care delivered underlying sales growth of 4.7% for the full year, with a much stronger competitive performance driven by the momentum in the United States. The U.S. remains a big growth engine and a benchmark for the execution across the business group. Price contributed 3.6%, largely reflecting commodity-driven increases, with volumes growing 1.1%, supported by premium innovations, particularly in Dove, which delivered high single-digit growth. Strong volume growth in developed markets led by North America more than offset softer conditions in Latin America where volumes declined, but the performance remained ahead of the category. Deodorants delivered low single-digit growth, supported by both price and volume. Dove again led performance, delivering double-digit growth, with scaling of whole body deos across 15 markets, reinforcing our leadership in the category. In the fourth quarter, growth improved sequentially to mid-single digit as actions to address product format mix in Brazil began to gain traction. Skin Cleansing delivered mid-single-digit growth led by price and continued premiumization. Oral Care also delivered mid-single-digit growth, driven by strong performances in CloseUp and Pepsodent with premium whitening and naturals innovations in Asia Pacific, Africa. During the year, we further strengthened Personal Care's portfolio through the acquisitions of Wild and Dr. Squatch. These acquisitions enhance our exposure to premium segments, and are expected to contribute meaningfully to growth over time. In the fourth quarter, underlying sales growth remained strong at 5.1%, led by North America and Asia Pacific, Africa. Growth was driven by price and supported by positive volume, reflecting the positive trajectory of the business and the sustainability of U.S.-led momentum. From a profitability perspective, underlying operating profit in Personal Care was EUR 3 billion. Underlying operating margin increased by 50 basis points to 22.6%, driven by improvements in gross margin and overhead efficiency. We continue to invest behind our brands, most notably in the U.S. and in the premium segments, in line with our strategic priorities. Home Care delivered underlying sales growth of 2.6% for the year, with growth primarily being volume-led at 2.2% and a modest contribution from price of 0.4%. Performance improved sequentially through the year, supported by strong growth momentum in Europe, driven by premium innovations and improved execution and performance in India. Fabric Cleaning was flat as strong performance in Europe was offset by a softer performance in Brazil. The corrective pricing actions were taken earlier in the year to restore competitiveness. Wonder Wash continues to go from strength to strength, following its launch in 2024, and it's now established in more than 30 markets. This demonstrates the speed at which we can roll out high-impact innovations at scale. Home and hygiene delivered mid-single-digit growth led by Cif and Domestos. Growth was supported by premium innovations, including Cif Infinite Clean and the continued rollout of Domestos Power Foam beyond Europe, extending our leadership in hygiene formats. Fabric enhancers delivered high single-digit growth led by volume. Comfort, one of our billion euro brands performed particularly well, supported by premium formats and fragrance led innovation with strong momentum across several emerging markets. In the fourth quarter, growth accelerated to 4.7% driven by 4% volume growth, underlining the recovery of the business. India was a key contributor to this momentum, with Home Care delivering mid-single-digit volume growth, led by strong performance in liquids across Fabric Wash and Household Care, and reaching its highest ever market share. Brazil, Home Care's second largest market, also returned to growth in the quarter, further supporting the overall improvement. From a profitability perspective, underlying operating profit in Home Care was EUR 1.7 billion, with an underlying operating margin of 14.9%, up 40 basis points year-on-year. This reflects improved overhead efficiencies and disciplined brand investments focused on fewer high-impact innovations, partly offset by a decline in gross margin. Foods delivered underlying sales growth of 2.5% for the year, with 0.8% from volume and 1.7% from price. Growth was ahead of the market, driven by strong performance in emerging markets, while developed markets were broadly flat amid weaker consumer demand. Against that backdrop, this represents a solid performance, with clear evidence of competitiveness across our core brands. Hellmann's continued to perform well, delivering mid-single-digit volume rate growth for the year. This was supported by the continued strength of its flavored mayonnaise range, now scaled across more than 30 markets and established as a EUR 100 million platform, demonstrating our ability to premiumize at scale. Cooking Aids delivered low single-digit growth, driven primarily by price. Knorr grew low single digit, with softer retail conditions in developed markets offset by volume and price growth in emerging markets. Unilever Food Solutions was flat, volumes were positive in North America, offset by declines in China, reflecting a weaker out-of-home consumption. We expect the UFS performance in China to improve during 2026. In the fourth quarter, underlying sales growth was 2.3%, with volumes up 1.3%, reflecting a market environment that remained subdued into year-end. From a profitability perspective, Foods delivered a record year, with underlying operating margin increased by 130 basis points to 22.6%, the highest level achieved by the business group. Underlying operating profit was EUR 2.9 billion. This reflected portfolio pruning, disciplined pricing, productivity gains in gross margin, tight overhead control, alongside continued focused brand investments in line with our food strategy. We delivered balanced growth across developed and emerging markets despite a more uneven macro and consumer backdrop through the year. This highlights the advantage of our geographic footprint. In developed markets, we grew ahead of our categories despite consumer conditions softening, particularly in the second half. In emerging markets, performance improved throughout the year, reflecting decisive actions we took to address challenges, alongside improved execution, a step-up in innovation and a more focused channel execution as well as an improving trading environment in several key markets. Developed markets, which represent 41% of the group turnover, delivered underlying sales growth of 3.6% for the year, a sustained outperformance versus the market. Growth moderated in the second half as the macro and the consumer backdrop softened, with fourth quarter underlying sales growth of 1.7%, with slower market growth in both U.S. and Europe. North America was a standout performer. Underlying sales grew 5.3% for the year, with volumes contributing 3.8%, reflecting continued share gains and the benefits of multiyear reshaping of our portfolio towards Beauty & Wellbeing and Personal Care. Premium innovations supported by strong retail execution continue to underpin growth, allowing us to outperform the markets despite more subdued consumer conditions. In the fourth quarter, growth moderated as category conditions softened across the segments. Despite this, our portfolio performance remained resilient, reflecting the strength of our portfolio and execution. Europe delivered low single-digit underlying sales growth for the year. Home Care and Personal Care performed well, supported by the volume growth and the continued rollout of Wonder Wash and whole body deodorants. This was partly offset by softer conditions in Foods, where we continue to outperform the market. Growth across Europe was uneven, with good momentum in France and Italy offset by softness in Germany. In the fourth quarter, underlying sales were flat, in line with the slowing market environment, but our performance remained robust relative to the categories. Emerging markets, which account for 59% of the group turnover, delivered underlying sales growth of 3.5% for the year. Performance improved sequentially through the year, with growth accelerating to 5.8% in the fourth quarter including 3.2% volume growth, reflecting the impact of decisive actions taken earlier in the year, alongside a return to growth in Latin America. Asia Pacific Africa delivered underlying sales growth of 4.6% for the year, with volumes contributing 3%, and price 1.6%, reflecting strengthening of execution across several key markets. Momentum strengthened in the fourth quarter, with APA delivering underlying sales growth of 6.9%, driven by volume growth of 5.7%. In India, underlying sales grew 4% for the year, with volumes up 3%. Growth accelerated in the fourth quarter to 5% with volumes up 4%, reflecting market share gains, a gradual recovery in market growth and the normalization of the trade environment following GST adjustments in the third quarter. Performance was led by our premium Personal Care portfolio and strong execution in laundry liquids. In Indonesia, underlying sales grew at 4% for the year, with a sharp recovery in the second half following a comprehensive reset of the business. Alongside price stabilization and trade stock normalization, we stepped up innovation and significantly increased social-first brand activation, strengthening relevance and demand across our core categories. As execution improved, availability and affordability were sharpened. The performance stepped up materially, with growth accelerating to 17% in the fourth quarter against soft prior competitors. In China, underlying sales growth were flat for the year with clear improvement in the second half, including mid-single-digit growth in the fourth quarter. Actions to reset the business, including strengthening of go-to-market execution and accelerating premiumization supported this improvement. This was led by Beauty & Wellbeing and Personal Care despite overall market growth remaining weak. In Latin America, underlying sales grew 0.5% for the year, reflecting a broad-based market slowdown amid ongoing macro and political uncertainty. Price growth of 5.9% largely offset a volume decline of 5.1%, with elevated price elasticity continuing to wane on volumes as consumer demand remained under pressure. The region, however, returned to growth in the fourth quarter. For the year, Beauty & Wellbeing and Foods both delivered low single-digit growth. In Foods, performance was supported by Hellmann's, led by the continued strength of the flavored mayonnaise range in Brazil. In Beauty & Wellbeing, growth reflected improved execution and the strength of the core brands. During the year, we took targeted actions in Brazil to restore competitiveness, including corrective pricing in fabric cleaning, and adjustments to the format mix in Deodorants. Home Care returned to growth in the fourth quarter, providing a clear indication that these actions are beginning to gain traction. One Unilever markets delivered mid-single-digit growth with positive volume and price, and were accretive to both group sales and profit growth in 2025. This performance reflects the benefits of radical prioritization and sharper focus in our smaller markets. Turnover for the full year was EUR 50.5 billion, down 3.8% versus the prior year. This was driven by significant currency headwinds, with FX reducing turnover by 5.9%. The currency impact was broad-based, reflecting a weaker U.S. dollar, alongside depreciation across a number of emerging market currencies, including several of our large markets. This was only marginally offset by strength in a small number of currencies. Excluding currency, turnover increased by 2.3%, driven by underlying sales growth of 3.5%, partly offset by portfolio actions as we continued to sharpen the business. The net impact from acquisitions and disposals was negative 1.2%. Within this, acquisitions contributed 0.6%, driven by Minimalist, Wild, and Dr. Squatch, all performing in line with their acquisition business cases. This was more than offset by a disposal impact of 1.8%, reflecting the exits of Unilever Russia and the China water purification business in 2024. Disposals of Conimex, The Vegetarian Butcher, and Kate Somerville were completed during 2025. Underlying operating margin expanded by 60 basis points to 20% in 2025, reflecting a structurally strong margin profile. Gross margin contributed positively, expanding by 20 basis points and marking the third consecutive year of gross margin expansion. Importantly, following the Ice Cream's demerger, gross margin now is at structurally higher level of 46.9%. This reflects a fundamental shift in the shape of the group, alongside improvements in mix, price and sustained delivery of savings. Our productivity program and the ongoing cultural shift enabled a further 50 basis points reduction in the overheads. Since the program began, we have delivered more than EUR 670 million of savings and are well ahead of the plan. We remain on track to complete the EUR 800 million program in 2026. Brand and marketing investment increased by 10 basis points to 16.1% of turnover, the highest percentage in over a decade, and 300 basis points higher than 4 years ago. This reflects a clear choice to prioritize investment behind our strongest brands and innovations, consistent with our focus on sustainable growth and long-term value creation. 100% of the incremental BMI was allocated behind Beauty & Wellbeing and Personal Care. Underlying operating profit was EUR 10.1 billion, a decline of 1.1% versus prior year. In line with our multiyear priority, in 2025, we delivered hard currency underlying earnings growth. Underlying EPS rose to EUR 3.08, up 0.7% versus the prior year, with sales growth and margin expansion together contributing 6.5% to EPS growth. Net finance costs were broadly flat year-on-year, reflecting active balance sheet management and disciplined funding decisions. Net finance costs represented 2.1% of average net debt, underscoring the resilience of our financing structure following the Ice Cream separation. Tax contributed positively, adding 1.3% to underlying earnings per share as the underlying effective tax rate decreased slightly to 25.7%. This reduction reflects the mix of earnings and the benefits of local tax optimization measures. Our share buyback programs contributed 1.5% to underlying EPS. These positives were morely offset by currency, which had a negative impact of 8.8% on the underlying earnings per share. On a constant currency basis, underlying earnings per share grew by 9.5%. Following the separation of Ice Cream, an 8 for 9 share consolidation was implemented in December 2025 to ensure comparability of earnings per share, share price and dividends, with prior periods being restated accordingly. Sustainability remains a fundamental part of Unilever's strategy and is managed with the same discipline as our financial performance, with clear accountability and a direct link to remuneration. In 2025, we reached an important milestone on plastics delivering both on our multiyear targets due this year. This reflects sustained focus and investments and demonstrates our ability to deliver against complex commitments. Free cash flow for the year was EUR 5.9 billion, representing 100% cash conversion. Compared with the previous [ year's ], free cash flow was around EUR 400 million lower, reflecting costs associated with the Ice Cream demerger, including separation-related tax on disposals. Excluding these demerger-related items, free cash flow was EUR 6.3 billion, underlining the cash generating strength of the business. Net debt at the year-end was EUR 23.1 billion, an absolute reduction of EUR 1.4 billion following the Ice Cream separation. This reflects the combined impact of cash generation and the demerger offset by dividends, acquisitions and share buybacks. Net debt to underlying EBITDA closed at 2x, remaining within our target range and consistent with our capital structure objectives. Turning to returns. Our underlying return on invested capital was 19%, placing us in the top 1/3 of the sector. Our ROIC benefited by around 100 basis points from Ice Cream demerger, reflecting the higher quality and the lower capital intensity of the group following the separation. Overall, ROIC remains firmly in the high teens, which we continue to view as a key guardrail for capital allocation and a core pillar of a multiyear value creation model. Our capital allocation is clear and disciplined and remains focused on 3 priorities: growth and productivity, actively shaping the portfolio and delivering attractive capital returns. Starting with growth and productivity. We continue to invest at scale where it matters most. Brand and marketing investment was 16.1% of turnover, while capital expenditure was 3.1% of turnover. Importantly, more than half the CapEx is directed towards productivity and margin initiatives, reflecting our focus on strengthening the underlying economics of the business while continuing to support our brands and innovation agenda. Turning to the portfolio, we remain value-focused. We are continuing to simplify the portfolio through targeted disposals while pursuing bolt-on acquisitions aligned to our strategy. Our focus remains on Beauty & Wellbeing and Personal Care, with emphasis on premium segments, digitally-native brands and e-commerce exposure, particularly in the U.S. and India. Finally, on capital returns, we returned EUR 6 billion to shareholders in 2025, comprising EUR 4.5 billion in dividends and EUR 1.5 billion in share buybacks. This reflects our capital allocation priorities, with a clear preference to maintain in principle a 70-30 balance between dividends and share buybacks. Taken together, this provides consistency and visibility, supported by strong cash generation and disciplined execution. We continue to transform the portfolio in 2025, allocating capital towards higher growth premium segments, while exiting businesses that no longer fit our strategic direction. Taken together, 2025 represents a step change in portfolio transformation. With the Ice Cream demerger and 10 transactions completed or announced during the year, we materially increased the focus and the growth profile of the group. On the acquisition side, the additions of Magnum, Dr. Squatch, and Wild strengthen our exposure to Beauty, Wellbeing and Personal Care, premium segments and digitally native e-commerce led brands, with particular emphasis on the U.S. and India. At the same time, we were decisive in simplifying the portfolio. We completed exits from lower growth on noncore businesses, including Conimex, The Vegetarian Butcher, and Kate Somerville and announced further disposals such as Graze, Indonesia [ tea ] and the Home Care business in Colombia and Ecuador. These actions further sharpen the focus of the group and reduce complexity. The Ice Cream demerger is the most significant step in this portfolio transformation. It reflects a deliberate decision to simplify the group, increase the strategic focus, enabling both Unilever and the Ice Cream business to pursue testing strategies, capital structures and growth priorities more effectively. Overall, the scale and pace of change in 2025 underlines that this is a different Unilever, one that is actively transforming its portfolio to drive higher-quality growth and stronger returns over time. Turning to 2026. Our outlook reflects the progress we have made and a disciplined focus on what we can control in a slower market environment. On growth, we expect underlying sales growth for the full year to be at the bottom end of our multiyear range of 4% to 6%. We expect underlying volume growth of at least 2%, maintaining focus on our volume-led growth and outperforming slower markets. On margins, we are confident of a further modest improvement to the underlying operating margin. Our structurally strong gross margin will continue to benefit from value chain interventions, fueling ongoing reinvestment into our brands. In 2026, we expect inflationary pressures in select commodities with the overall inflation being lower than 2025. As before, margin progression is an outcome of our choices, not the short-term objective in its own right. On capital returns, we have announced a new share buyback of EUR 1.5 billion, reflecting confidence in the strength of our balance sheet and the consistency of our capital allocation framework. We also continue to expect sustained attractive and growing dividends, supported by strong cash generation. With that, over to you, Fernando. Fernando Fernandez: Thank you, Srini. As we look ahead, we expect conditions to remain challenging, with soft markets in many parts of the world. Our confidence in the future stems from the significant progress we made in 2025, and we entered '26 as a very different looking business, one that is not only simpler and more focused, but also now bid to deliver consistently. We are building a sales and marketing machine founded on 3 fundamental shifts that transcend our whole business with 7 clear growth priorities. Let me take them in turn. The 3 fundamental shifts encompass our brands, our organization and our people. Our brands are benefiting from a desired scale model that is elevating every stage of the journey, from product development right through to the way we reach and engage with consumers, to the way we execute in both off-line and online retail. Where fully deployed, we have seen incredibly strong performances in brands Dove, Vaseline, Persil and Hellmann's. We are making our organization fit for the AI age, transforming every link in the value chain, particularly around the consumer. That means deploying AI to supercharge demand generation, scaling and hyper targeting marketing content, partnering with consumer faces, LLMs, and working with retailers on agentic shopping models, creating a future-fit model for how our brands are discovered and shopped. And our people are embracing a new play-to-win philosophy approach where the demands may be greater, but our targets are sharper, accountability is clearer, potential rewards are higher and with the highest ever differentiation between best and worst performers. When it comes to our growth priorities, this will be increasingly familiar to you by now. They involve honing in and double down on our biggest growth opportunities across categories with more Beauty, more Wellbeing, more Personal Care, across geographies with U.S. and India as clear and core markets for Unilever, and our growth segments and channels focusing on premiumizing the portfolio and further increasing our exposure to e-commerce. These 7 areas are already driving a large proportion of our growth. And with the additional focus on investment we are bringing to them, we see opportunities to go considerably further. I look forward to going deeper on these fundamental shifts and growth priorities at next week's Cagny conference in Orlando. Nowhere does the robustness and validity of these transformation and fundamental shifts and strategic growth priorities show up more clearly than in the strength and quality of our innovation program. You have seen in our results today, how effective our premium innovation is when we create or grow categories, like powder hydration, short-cycle laundry, probiotics in surface cleaning, flavored mayo, all powered by our superior science in residual aesthetics and elevated sensorials. We are doubling down on this approach in 2026 with an excellent pilot of innovation, leveraging our multiyear scientific streams and introducing new ones. And many of our Personal Care innovations will be activated alongside our sponsorship of the FIFA World Cup 2026, an exciting moment for us and our brands. A simpler, more focused company is not an end in itself, it is all about delivery, consistent delivery. That's what we are concentrated on. And while there is a lot more to do and more to prove, we are confident that '26 will be another big step forward in moving to a model and an approach that is built for delivery. The key elements are all there. First, our mantra is and will remain volume growth, positive wins and gross margin expansion. We are laser-focused on these very clear metrics. This is a route to sustain success for Unilever and to top for shareholder returns, and we will continue to invest accordingly to achieve these objectives. Second, with the well-executed separation of Ice Cream now behind us, and with other recent bolt-on deals successfully completed, we have a sharper portfolio radically focused around our strongest categories and our biggest brand. Third, with our emerging markets strengthening and developed market continuing to outperform, we have a real opportunity now to leverage one of Unilever's most distinctive assets, our global strength. Fourth, our capital allocation priorities, as you heard from Srini, are crystal clear, focused on driving growth and productivity by supporting our brands, sharpening our portfolio and maximizing margin initiatives, while at the same time, delivering strong capital returns to shareholders. And finally, the strength of the organizational change at Unilever over recent years can hardly be overstated. The heavy lifting has been done. This is now a new business, simpler, leaner more accountable, with P&L ownership now squarely in the hands of our category-led business groups, all back up by differentiated reward to the right of performance. All these elements give us the confidence that we are moving towards a model and an organization built for consistent delivery even in markets that will remain tough. Thank you for your attention. We look forward now to taking your questions. Operator: [Operator Instructions] Jemma Spalton: Our first question comes from Celine at JPMorgan. Celine? Moving to the second question, Warren. The second question comes from Warren Ackerman at Barclays. Warren Ackerman: Yes. Fernando, Srini, Jemma, Warren here at Barclays. Can you hear me okay? [indiscernible] an echo. Jemma Spalton: Yes, we can, Warren. Warren Ackerman: So -- okay, super. So first one, Fernando, can you talk a bit about the emerging market outlook for 2026? I think about the big 4: Brazil, India, China, Indonesia. Can you maybe hit on some of the key topics that people are interested in? The fix on Brazil deals, for example. Is China and Indonesia proper reset? Is it done? How should we think about volumes in '26? That's the first one. Second one, another geo one. It's on the U.S., obviously slowed versus Q3. Can you talk a little bit, Fernando, about where you see U.S. category growth? Any signs of price pressure in the U.S. and your confidence about the '26 delivery, what kind of innovation pipeline, what kind of delivery should we expect out of the U.S. in '26? And just quickly, if I can squeeze in a housekeeping for Srini. Can you just tell us where the productivity savings landed, Srini? Is the EUR 800 million done? And what should we think about productivity-wise in '26? Fernando Fernandez: Thank you, Warren, and good morning, everyone. Well, let me start saying that we consider our strength in emerging markets a significant long-term competitive advantage given the exposure to give us to better population growth rate, [ worse ] margin expansion, et cetera. And we have a portfolio in emerging markets that is really diversified in terms of geographies, category segment, price points, and this gives us resilience against volatility. We are very, very confident in our step up in emerging markets. We are seeing now -- with the exception of LatAm, in which the market volume growth is flattish. We are seeing now growth in Asia Pacific Africa, in the [indiscernible] of 3% volume growth for the market. And our performance is improving across the board -- in India is improving, both in terms of economic backgrounds and the fundamentals of business, particularly the strengthening of our brand equities, our mission brands, operating scores in India are improving across the board, our execution, particularly in rural areas and traditional trade, independent trade is also improving. We are growing shares, particularly in Home Care, we have achieved that, as you know, is 40% of our business there. We have achieved the highest ever share there in the last reading. China is slowly getting better. Growth has accelerated in second half 2025. We have made some significant interventions in the route to market of e-commerce. More work to do there, but we expect a better year in China in 2026. In Indonesia, we are very pleased with the renewed leadership team that we have put in place. They have done the right thing to reset the fundamentals of the business. We are now operating with very, very historic low levels of stock in our distributors, that has removed any fundamental issue of [ churn ] and price conflict we have had in the past. We have relaunched our 8 top brands in the market. And of course, in quarter 4, we were benefiting for a very weak comparable. But I feel the metric that we look obsessively in Indonesia is an improvement in our sales run rates. And every single quarter, we have been selling more in Indonesia in the last 4 quarters. Other markets, like Vietnam, Pakistan, Bangladesh, Arabia are all also improving. We have significant operations in other countries. So all this is growing nicely. Regarding LatAm, markets remained flattish. We have seen in the second half of last year around 0% growth. Volume growth in Latin America, macroeconomic remained challenging in Mexico and Brazil. But we are pleased with the return to growth in quarter 4 led by the great momentum in Foods. We have a flying Hellmann's there. Solid growth in Beauty & Wellbeing. I'm very, very pleased with the fast reaction in Home Care to the corrective actions that we have put in pricing to restore competitiveness. This is starting to bear fruits there. We expect improvements in Deos in the next few months. Actions have been put in place to rebalance our investment, increasing the one in aerosol relative to the one in contract applicator formats. Reigniting growth in aerosol is absolutely critical, given the higher revenue per use and the higher profit per use. We are getting a lot of support from retailers in this aspect. We are resetting planograms in thousands of stores and growth region, and we expect Deos in Latin America to be a key contributor to growth from quarter 2 onwards. So in summary, optimistic about emerging markets in 2026. In U.S., let me start saying that our volume growth in North America in the last 3 years has been 3.9% in 2023, 4.2% in 2024, 3.8% in 2025. So this is a very consistent performance despite tough markets, probably one of the best performances in the sector. And this is a reflection of a profound transformation we have done in our portfolio, the setup of a U.S. for U.S. innovation model and a huge focus in a strengthening relationship with retailers there. Quarter 4 had a soft start, but we are encouraged by the fact that the market has rebounded in December and January. We have -- we are off to a good start in North America in 2026. Of course, we have seen some slowdown in Wellbeing. Wellbeing in North America in the quarter 4 delivered around 5% volume growth when it was in double digit in first 3 quarters, we have a couple of issues there. Fundamentally, the share of assortment of Liquid I.V. in a key retailer of the club channel, also some increase in the customer acquisition cost of our DTC business of Nutrafol, but we continue very, very confident in the structural growth in the verticals of [indiscernible] in which we compete and in our ability to continue expanding our leadership there. So optimistic about the emerging markets, really optimistic about emerging markets. I believe that the solid delivery in U.S. in the last 3 years give us confidence that we will continue with outperforming the market there. Srinivas Phatak: Thanks, Warren. On the productivity savings, I think we've said it in the press release. Cumulatively, we have now delivered about EUR 670 million of savings. The program is ahead of our own plans and internal plans and schedule. Most of this benefit, you will actually see in our SG&A line [ under ] the lower heads line, while some part of it was in supply chain overheads. From a 2026 perspective, we expect to at least deliver the balance, EUR 130 million, that was a commitment we set about EUR 800 million, and we'll continue to go further on that. And more as a cultural shift that we have really made in the company is, we'll continue to keep our SG&A costs and other overhead costs at run rates which are lower than the turnover and therefore, in a sense that productivity, therefore, becomes an ongoing habit. Jemma Spalton: Our next question comes from Guillaume at UBS. Guillaume Gerard Delmas: A couple of questions for me, please. The first one is on the pricing outlook for 2026. Fernando, can you maybe shed some light on how you expect price growth to play out this year, particularly given the sequentially, I think, lower inflationary pressures you're expecting for '26. And also, it seems a pickup in promo activities in many of your categories and regions. So it would be interesting, did you hear if you anticipate some or maybe contrasted pricing developments by region or product category this year? And then the second question, probably for Srini. Could you maybe walk us through the key building blocks that support your confidence in achieving this modest margin improvement in '26? And in terms of phasing, anything you would flag at this stage, be it for margin or for underlying sales growth? Fernando Fernandez: Thank you, Guillaume. Well, I think that the category and geographical footprint of Unilever offer in the long run around 3% pricing. That's the kind of normal pricing we have seen in the last 10 years. This year, we probably see that probably a bit lower than that, around 2%. We have seen some increased promotional spending, particularly in promotional intensity, particularly in Foods, but it's not dramatic. We have not seen really an increase in promotional intensity in emerging markets. So overall, I would expect pricing to be around the 2% level. Commodity inflation, Srini can give a bit of background on that. Srinivas Phatak: So you're absolutely right. I think Fernando summarized the pricing outlook quite well. In 2026, the commodity inflation is not going to be broad-based. It's actually concentrated in a few set of the materials, most notably really being palm, canola oil and surfactants, where we continue to see year-on-year pressure coming through. The second angle, which is important -- and the first element of that really comes from a Home Care and Personal Care perspective, that's where we'll start to see elevated inflation in comparison to the other categories. The second aspect, which is important and sometimes overlooked, is that half our inflation classically comes from imported inflation or currency devaluation in the emerging markets. And therefore, that becomes an important element. It's also equally important to highlight that in some other commodities, notably in some of the food side of it or it's a crude related, including packaging, we are actually seeing deflation. So it's important in the first element to understand the difference between the different sets of the commodities that we have. Notwithstanding, we'll all recognize that there is also wage inflation, which is happening in the market. And that's also an important element, which we'll have to cover through a combination of productivity and through pricing. Coming back to, I think, the point really on the building blocks on gross margin. It's actually been quite an incredible story. If you really see, we have now consecutively increased our gross margins for the last 3 years, and the increases have actually been sizable, over 330 basis points. What we now start at 46.9% is structurally in a sustainably high gross margin business. And the levers in a manner are consistent with what we have been talking about. Mix plays a very important role for us through a combination of portfolio and geography will continue to drive that harder. Our savings program, notably in procurement, has actually demonstrated very differentiated capabilities now. On a consistent basis, we are actually beating across more commodities and markets we are beating the market, and that's actually flowing into the bottom line. We have also significantly enhanced some of our commodity risk management practices, which is enabling us to use more of the tools and the instruments to really hedge and actually mitigate the risk for us. We've also talked about capital investment. More than 50% of our capital has been now consistently, for the past 18, 24 months, being put towards savings, and that's something that we will continue. A combination of these elements, we are quite confident that our gross margin expansion in 2026 is likely to be higher than 2025, and that becomes actually a super important lever for us to actually continue to invest behind our brands. '25, we actually reached 16%. We'll continue to increase the spend, both on our Power Brands and also on our Beauty and Personal Care businesses. And completing the picture, I did talk about overheads. Culturally and philosophically, we will keep overheads increases lower than sales. That means there is inherent productivity built into our plans. A combination of all of this actually then starts to give us a confidence to have a higher gross margin, which we'll reinvest, and therefore deliver what we call is really a modest margin expansion. The last point in terms of your question on the phasing, while from a margin perspective we don't expect material differences between half 1 and half 2, it's important to highlight that we'll have slightly additional or higher headwinds of currency in half 1. That's really reflecting what has happened in base [ period ] of 2025. But from a full year perspective, we should be in the right ballpark. Jemma Spalton: Our next question comes from Jeremy at HSBC. Jeremy Fialko: First one is on Europe, perhaps you could just go into a little bit more detail on that, sort of flattish at the end of the year. Was that reflecting kind of entirely slower markets? Or did your relative performance slip a bit? And then what would the outlook for the region be in 2026? And then the second part was, I guess, the Power Brands versus everything else. I guess that was an unusually big difference from what I could remember in Q4. Perhaps you could talk about sort of the non-Power Brand stuff because logically, that was quite a lot weaker. Just kind of how you -- how you kind of intend to manage that sort of 25% of the business to make sure that it doesn't become too big a drag on your turnover or whether you're happy with this sort of more dramatic Power Brand versus everything else growth that you saw in the quarter? Fernando Fernandez: Thank you, Jeremy. Well, in Europe, our performance, yes, there was some slowdown in Europe in the last quarter. We have seen markets getting a bit more flattish in Europe. We continue outperforming the market, particularly in Home Care and Personal Care. They continue performing really well. Our Home Care business is gaining share broad-based across Laundry and Household Care. And our Deodorants business really performing also very, very strong. We have a strong innovation pipeline coming into 2026 in these categories. We continue thinking that we will remain strong when it comes to our competitiveness. We are in a round of negotiation with retailers at this stage. Everything is progressing well. So we don't expect any kind of big impact coming from that. Probably the biggest issue in Europe has been in Foods, that has been gradually soft, particularly in Netherlands, Germany. We have very, very good performance in Italy and France, overall. And U.K. has been solid for us. Poland has been a weak spot also. 40% of our European business is Foods, so that has an impact. But overall, we are confident that the kind of improved performance that we have had in Europe in the last couple of years, we can sustain that in average. When it comes to Power Brands and non-Power Brands, Power Brands are now 78% of our revenue. You already remember that we used to call out around 75% 18 months ago. They are growing strongly. In the quarter 4, we grew close to 6% [ UAG ] in Power Brands with 3.5% UAG. This is where we are concentrating all our incremental investment, particularly in the Power Brands of Beauty & Wellbeing and Personal Care. When you look at the non-Power Brands, 22% of our revenue, for the year, we delivered a volume growth negative of 1%. It has accelerated to minus 3% in the quarter 4. There are some discontinuation that we have done in that quarter. And also, there is some geographical elements that have play a role there. But we are not -- we continue thinking that the strategy of focusing behind our most strongest assets is the right one. If you look at our Beauty & Wellbeing and Personal Care combined, our performance has been, I believe, 4.5% growth for the year and 4.9% in quarter 4. And if you look at Power Brands in that territory, it's close to 6%. So that's what we will continue to put in the focus, and we will manage the rest of the portfolio accordingly. I would like to highlight also that the One Unilever markets, that our smaller markets have an excellent performance in 2025. This is an organization that we have put in place in 2025, with 35% reduction in headcount. It delivered 5.2% growth, and we have delivered an expansion of margin of more than 250 basis points. So smaller markets for us are a key engine for growth, but we are managing them in a simpler way, in a sharper way, with clear focus in the portfolio. They are focusing the portfolio there, and we are very confident about those geographies also. Jemma Spalton: Our next question is coming from Celine at JPM. Celine, we're trying your line again. Celine, can you hear us? Celine Pannuti: Yes. Can you hear me? Jemma Spalton: We can. Celine Pannuti: Excellent. So I hope I'm not asking something that's already been asked, but my first question would be on the sequencing of growth for the year. So you're looking to grow around 4%. I understand maybe pricing, 2%; and volume, above 2%. But then you've been flagging probably some weakness in the U.S. in the first quarter, and I presume a normalization in Asia or at least in Indonesia. So can you talk about how we should expect these to evolve throughout the year? And my second question is coming back on the Wellbeing and Beauty category. If you can talk about, on the Wellbeing side, what you're doing in the U.S. to reconnect with growth? And as well, what is your expectation about internationalization on that business? And what can we expect as that business, I would say, more normalized growth rate to be, if I could use that word. And I think on that division too, if you can talk about Hair Care and what we should expect for '26. Fernando Fernandez: Cool. Thank you, Celine. We are guiding our top line growth at the lower end of our midterm guidance from 4% to 6%. If we are doing that, of course, there can be some quarters that can be below and some quarters that can be above that 4%, okay? So we will not guide on a quarterly basis. We have a good start in January, but there is a lot to do in the next few weeks to close quarter 1. But overall, we are confident that we will be delivering that 2-plus percent volume growth for the year and around 4% -- at least 4% for the top line growth. Going into Beauty & Wellbeing, what is the performance? As I mentioned before, if you look at Beauty & Wellbeing and Personal Care, that combined business, because there are some brands that travel across the categories. We delivered an aggregated growth of 4.9% in the quarter 4 and 4.5% in the full year. And within Beauty and Personal Care, we had another great year of our largest brand, Dove, it grew 9%, with 7% volume growth on top of our 7% volume growth in the previous year, I would like to highlight that. In the case of Beauty & Wellbeing, we saw a solid performance in Skincare, great performance in Dove and Vaseline. Vaseline has delivered, for the second year in a row, double-digit volume growth. In Hair Care, we have been accelerating performance throughout the year. Dove Hair relaunch is a great success. We are seeing growth in markets like U.S, above 20%. This mix is traveling globally, and the rollout is expected to be completed in all key markets by mid-'26. And we expect better performance from Sunsilk and Clear that in 2025 were affected by the issues in Brazil and China. In Prestige Beauty, we accelerated also. The second half in 2025 was much better than the first half. We have great performances in brands like Hourglass and K18, our last acquisition. And in the retail channel for Dermalogica, we need to improve performance in Paula's Choice. There is a full relaunch of the brand ready for March this year, and we have to improve performance in the professional channel of Dermalogica that takes 30% of the brand. In Wellbeing, another great year. If you look at each of our 3 biggest brands: Liquid I.V., 16% growth; Nutrafol, 23% growth; OLLY, 9% growth. All these brands are U.S.-centric. We saw some softening in quarter 4, some of that fundamentally linked to market growth. The volume growth we delivered in the quarter was about 5%. We expect a relatively soft quarter 1 due to strong comparators, but we -- as I mentioned before, we are very confident on the structural growth potential of the Wellbeing verticals in which we compete and in our ability to continue expanding the leadership positions our brands enjoy there. I highlighted before, there are a couple of issues that we have to sort out. There was a decrease of share of assortment for Liquid I.V. in an important customer of the group channel. And there is some increase in the customer acquisition cost in Nutrafol, but we have great teams working on that, and we will find the solution quickly. Jemma Spalton: Our next question comes from Jeff at BNP. Jeff Stent: Two questions, if I may. The first one is with respect to innovation, you've made quite a few comments about it. But could you just tell us what are the sort of big new renovations that you've got coming to market this year that we should be expecting to hear quite a lot about as the year progresses? And the second one, really just a housekeeping issue, but are you able to quantify the magnitude of the [ TSA ] receipts that you'll be getting from Magnum? Fernando Fernandez: Thank you, Jeff. Well, first of all, I would like to highlight that our first -- our first [ pennies ] go to continue investing behind the innovations that have been very successful in the last few quarters. The Dove Hair relaunch, Persil Wonder Wash, Vaseline Gluta-Hya and Vaseline Pro Derma, the flavored range of Hellmann's that is really driving significant growth, all these platforms are above the EUR 100 million, EUR 200 million. So this is really going very, very fast, and we continue investing behind them. There is new innovation hitting the market in multiple categories. I would like probably to mention the UV repair range of Dove hitting the market in January in countries like China, Indonesia, Thailand, Vietnam, South Asia, Philippines. The derma scalp range of Dove Hair with focus in developed markets. I would call out particularly Vaseline lips. That's a 100 million franchise already. We are gaining share in every single market around the globe. We see lips as an entry for younger users into Vaseline, and we are very excited with the kind of Gluta-Hya range in lip care that we are bringing into the market. The rollout of the seal press range of TRESemmé that has been a big success in India. We are rolling out that across Asia. Nexxus, a big relaunch in U.S. and significant innovation in China and Indonesia. In China, Nexxus is really one highlight of our performance. In Personal Care, many things coming into the market, but I would like to highlight also the importance of the activation around the FIFA World Cup. This should be a real support for our performance, particularly in quarter 2, quarter 3. In Foods, continuity to the development of Hellmann's flavored mayo, but we are entering with protein caps in North with the launch in U.S. and scaling into European markets during the year. These are just some of the things that we are doing. So our innovation machine, I believe, has improved a lot in the last 2 to 3 years. Now our focus is ensuring that our execution capabilities are in line with the improvements that we have done in product development and innovation. But a good plan for the year. And as I mentioned before, our absolute priority is investing heavily behind the big winners that we have in the portfolio now. Srinivas Phatak: On the TSA, Jeff, we are not actually quantifying externally the cost -- the total cost of the TSA. Having said that, there are 3 important elements. It's a cost plus and therefore, there's a very small markup that we charge on these services that's got to do with IT and it's got to do with the other commercial services, mostly in the functions. Point number two is that most of these TSAs will actually -- there are separate contracts, individual components. Between '26 and 2027, we expect most of them to really be taper off as the Magnum Ice Cream Company starts to take on these activities. Third element is that we have clear plans, which are ensuring that we manage these contracts well. And more importantly, there are no [ stranded ] costs left at a Unilever level. So all in all, very clear plans to handle this for the benefit of both companies. Jemma Spalton: Our next question comes from Olivier at Goldman Sachs. Jean-Olivier Nicolai: Fernando, Srini, and Jemma, could you please provide an update on the strategy for Prestige Beauty first? Some brands are doing great like K18 and Hourglass; other, less so. Do you need more brands to -- for the portfolio to reach a bigger scale? And what does the M&A landscape look like at the moment? And then secondly, going back to Food. You had an amazing margin improvement. I think you reached 22.6% margins there. That's well above historical trends. What's the driver behind this improvement, how sustainable it is? And perhaps is Food Solutions better margins than the rest? Fernando Fernandez: Good. I will cover Prestige, and Srini will cover the Food margin question. In Prestige, you are right. We have had a great performance in brands like our Hourglass, [ touch ], K18, not so well in Dermalogica, Paula's Choice. Even in Dermalogica in the retail is showing a lot of strength, but the brand is exposed to a professional channel that is declining, and we need to address some issues there. The Prestige market is changing dramatically. I feel you see less importance of travel retail. You see department store practically disappearing. You see a huge growth of the e-commerce channel. And I believe this gives us a lot of opportunities. And we consider our presence in Prestige a natural continuity of our presence in Skin Care and Hair Care. So that's how we see that. We are working in a much more integrated way, particularly in areas like Asia, in which channels of specialist beauty are not so developed and e-commerce is really taking the lead in developing the prestige market. We are always scanning the market for opportunities. Our acquisition criteria are very, very, very clear. We look at brands that are digitally-native with the big exposure to e-commerce, in [ categories ] in which we can add value and there are a set of criteria that we follow with a lot of rigor. But we will not rush into acquisitions if the right asset doesn't emerge. And at this stage, we have not acquired in Prestige recently because we have not seen any asset that really fill any gap in the portfolio that we can have. But super, super committed to Skin Care, Hair Care. To a brand like Hourglass, that is a real jewel in the [indiscernible] cosmetic super premium space. We see Prestige as natural continuity of our presence in our Skin Care and Hair Care business. Srinivas Phatak: On the Foods margins, we are actually quite pleased with the way the whole business has been managed and being operated. There is a very sharp strategic choices that we've made in terms of where to play, how to win. And what's also notable is actually the execution discipline which has come into this business, which is actually leading to our market outperformance across various markets and various segments. A lot of this really is read through gross margin. Some of the levers, which I explained earlier are also applicable to the Foods business, and therefore, I will not repeat them. Having said that, Foods business has also benefited significantly from some of the portfolio rationalization. We have, over the past 18, 24, 36 months, taken out or delisted the parts of the portfolio which were not value accretive. So I think that has really helped us. Second is we also have some very good whole pack price architecture, especially when it comes to Hellmann's and some of the innovations. Secondly, when it comes to the UFS business where we manage it extremely well with profitable accounts has also been a big driver for us. It's also important that the whole overhead element of savings, which we have executed in the company, are also benefiting from a food perspective. Having said that, we continue to invest well. I think that's the most important element because we see Foods as a growth business for us. So we are absolutely determined to invest to really grow the business. At an aggregate level, I think we are quite happy with the margins. The focus from here on for us is going to be more drive growth, volume-led growth, and not necessarily a big margin expansion. Jemma Spalton: Our next question comes from Sarah at Morgan Stanley. Sarah Simon: I have 2 questions, please. One was the impact of discontinuations generally across the group. Can you quantify that in terms of volume? And then the second one was on Dr. Squatch, have you -- obviously, that was growing super fast before you acquired it. Can you give us any idea how much that's grown during fiscal '26 -- sorry, fiscal '25? Fernando Fernandez: Yes. I don't know if we will provide any discontinuation figure, Srini. But in Dr. Squatch, the -- of course, this is an important acquisition for us. It will only count in our underlying sales growth from September next year, but the performance has been good since acquisition, continued growing double digit, a strong brand, very distinct proposition in the male grooming space. Really making significant inroads particularly in the Deo category after establishing a very, very strong position in skin cleansing. So we are very pleased with having Dr. Squatch in our portfolio. We expect that to be a significant contributor to growth during 2026. But as I mentioned before, it will only count in our underlying sales growth from September onwards. But of course, pleased with the performance until now, absolutely in line with the business case that we put at acquisition time. Srinivas Phatak: Just a short one. See, anything that we actually do from an M&A or a disposal perspective, you get a full list of those disposals and the impact. Discontinuations and new launches of SKUs happen in the normal course of our business. Having said that, some of these discontinuations actually sit in the non-Power Brands section. And Fernando actually gave you a bit of a flavor in terms of whether it is the tail list of SKUs in Beauty & Wellbeing or some of the elements in Foods. I think that's the right place to keep looking for it, and it gives you a bit of a sense in terms of what's happening there. Jemma Spalton: Our next question comes from David at Jefferies. David Hayes: Just one for me, I think, in terms of the topic. Just Latin America, I know you talked about a little bit, but it feels like that's recovered volume wise a little bit quicker than maybe you were kind of indicating at the third quarter. So just whether that is the case, what was done better that meant that, that's happened? I guess, to some extent, was the innovations, a relaunch that took place? And did that -- effectively, did that flatter the quarterly volumes in the fourth, maybe leading on to then saying, well, volume growth you think be flat to positive in the first quarter or the first half? Fernando Fernandez: Yes. Yes, we don't see in Latin America, any performance that is fundamentally different to what we what we said to you one quarter ago. The macro environment remains tough, both in Brazil and Mexico. Markets, as I mentioned, has been flattish. But we have intervened in some areas in which, as I mentioned before, we have scored some own goals, particularly in Home Care pricing and in Deos format focus. Our Food business continue performing very, very well, particularly Hellmann's having a blast in Brazil, gaining share penetration, brand equity. And Beauty & Wellbeing has had a solid performance. In the case of Home Care, as I mentioned, we are pleased with the reaction to our pricing correction, is showing really impacting our volumes, particularly in Brazil. And in Deos, I believe there is much more to come. Some of the actions that we have taken are being implemented now, particularly the reset of planogram in thousands of stores across the region. We are really investing heavily behind aerosol format that as I mentioned before, has a much higher revenue per user and profit per use than some of the contract applicators, and we have a strong support from the retailers in that space. So we are confident for 2026 that Latin America will have a much better contribution to our performance. I have been associated with Latin America for many years. I have never seen 2 bad years in a row in Latin America. So we are very confident that we will deliver in that region and the team is super, super committed in the region to improve performance there. Jemma Spalton: Our next question comes from Tom at Deutsche Bank. Tom Sykes: Yes. I wondered if you could just say a few words on the channel shift that is occurring in North America and how that's impacting you? We're obviously seeing very high growth on Amazon, and it appears that your shares are a bit lower on Amazon than they would be off. So what is the outlook for your share on that channel? And what's the effect of that channel growth? And particularly, I guess, as well is just the growth of smaller peers and what that then does to the cadence of your innovation because you're stating a lot of innovation globally, but it's not clear whether that is speeding up in any one particular market, if you say, particularly in North America. So are you combating the growth of smaller peers by fewer, bigger innovations or more iterative, please? Fernando Fernandez: Thank you, Tom. Well, we continue having a strong performance in digital commerce. And I would say there are 3 types of digital commerce in which we have delivered strong performances. One is classic marketplace in North America, big retailers, they are like Amazon and walmart.com. I have mentioned the performance last quarter, I will not repeat numbers today, but we are growing double digit with these people strongly in North America. Social commerce in places like Southeast Asia and China and quick commerce in India. So in all of them, we are growing double digit. We are growing our [indiscernible] through a special assortment of our core brands. And of course, through the portfolio of new brands that we have been acquiring, particularly in the case of North America, our focus in acquisitions has been in digitally-native brands with a strong exposure to e-commerce, and that has been working for us properly. We have not seen a significant slowdown in the North American market in the e-commerce side. Probably what you have seen, particularly in the month of October, that was very weak in the North American market, it was more related with physical stores with the off-line channel. And there is always, of course, e-commerce opens an entry point to many small brands, but very few brands has been able to scale big. I continue thinking that brands like that or like Vaseline have significant competitive advantage also in online. And when I said before that, that is growing 7% volume globally. When you look at that growth in e-commerce, it's practically 2x that. So good performance in digital commerce. Of course, this is accelerating, particularly in some markets in Asia, that is, I would say, a leapfrog of modern physical retail into e-commerce, but we are very well prepared to take advantage of that. Jemma Spalton: Our final question comes from Ed Lewis, Rothschild. Edward Lewis: Yes. A couple of ones for me. I guess a lot of change, a lot of heavy lifting, as you said, Fernando, the last [ 2 ] years. So we think about 2026, is this really the first year that we should start to see the benefits of the revamped approach to innovation that you introduced a couple of years ago? And then for Srini, just on the CapEx plans, over 3% of turnover, how much of CapEx will be spent on what you call margin-enhancing activities? I think you were close to around 60% last year. Fernando Fernandez: Thank you, Ed. Yes, a lot of heavy lifting has been done, I would say, particularly in terms of organization. And if you think that last year, we divisionalize our sales force, we separate Ice Cream, we made significant steps in our productivity program. All these are potential, very disruptive initiatives. And the fact that we delivered a solid year in the context of all these initiatives, we consider that something important for us. Our product development, our innovation capabilities definitely are in a very different place to where they were 3 years ago. I have not said 3 years ago that I would have been proud when I stand up in front of the up Dove shelf or the Vaseline shelf. I am now. And that's basically a sentiment that I may start an experience with many, many of our brands. Of course, there are some elements in execution that have to improve. We have had issues of channel price conflict in some markets, some issues in country like Brazil that should have not happened. We have launched a program of what we call perfect store in order to ensure that pricing assortment visibility are really properly managed and in a homogeneous way across Unilever. I'm really focusing to that now. But as you said, a lot of the heavy lifting has been done, and we see 2026 as a very important year to really bear some of the fruits of this effort that -- this investment that we have put in the business, both in terms of money and time and focus during all these years. Srini? Srinivas Phatak: So on the CapEx for the past 2 years, we have actually been spending around the 3% level. And you're right that we are -- or even from a 2026 point of view, we will look to spend anywhere about 55% to 60% going towards what we call as productivity or savings. From a capacity perspective, I think we are well covered, and therefore, that gives us the ammunition to continue to drive the savings harder. Having said that, we are actually open to increasing the levels of CapEx to support the further growth in the productivity agenda, but with 2 caveats. One is obviously each of the case -- business cases have to justify themselves. And we have actually taken up the thresholds in terms of both the IRRs as well as the payback periods, and these are nonnegotiable. So each of the projects have to justify and they justify. We will invest. That will not be a constraint. The second element is we are committed to maintaining 100% cash conversion. So therefore, we will generate this cash for us to be able to fund it. But our focus on leveraging productivity CapEx remains on track from 2026 perspective. Fernando Fernandez: Cool. I believe there are no more questions. So thank you, everyone, for joining the call. And let me close saying that I hope it's clear that first, we have delivered a very solid 2025 despite subdued markets and a very negative currency environment for Unilever. Second, that we enter 2026 as a simpler, more focused business with stronger brands and competitive level of investment. We're investing now 16% of our revenue in our brands, 3 years ago, we were at 13%. Third, that our geographical footprint is an asset, and we are very confident in a step-up in emerging markets in 2026. And fourth, that our key metrics don't change: volume growth, positive mix and gross margin expansion to deliver earnings growth in hard currency. That's where the whole company is focused on. Thank you very much.
Operator: Hello, and thank you for standing by. Welcome to Tripadvisor, Inc. fourth quarter 2025 conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. I would now like to hand the conference over to Angela White, Vice President of Investor Relations. You may begin. Angela White: Thank you, Towanda. Good morning, everyone, and welcome to Tripadvisor, Inc.'s fourth quarter and full year 2025 Financial Results Call. Joining me today are Matt Goldberg, President and CEO, and Mike Noonan, CFO. Earlier this morning, we filed and made available our earnings release. In that release, you will find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measure discussed on this call. Before we begin, I would like to remind you that this call may contain estimates and other forward-looking statements that represent management's views as of today, 02/12/2026. Tripadvisor, Inc. disclaims any obligation to update these statements to reflect future events or circumstances. Please refer to our earnings release as well as our filings with the SEC for information concerning factors that could cause actual results to differ materially from these forward-looking statements. With that, I will turn the call over to Matt. Matt Goldberg: Thanks, Angela, and good morning, everyone. We are pleased with our 2025 results, which reflected continued momentum in our experiences and European dining marketplace offerings are increasingly replacing the declines in our legacy metasearch and media offerings. We achieved record high revenue of $1,900,000,000, a result of 10% revenue growth in Experiences, and 22% growth at The Fork, offsetting legacy revenue declines of 8% in our Hotels and Other segments. Group adjusted EBITDA was $319,000,000 or 17% of revenue. Tripadvisor Group is fundamentally different today than it was three years ago. Our focus and investment are now deliberately centered on a large and growing marketplace opportunity, particularly in Experiences, rather than on constrained SEO-dependent legacy offerings. This shift is changing the composition of our revenue and profit profile. In 2025, our marketplace businesses represented 61% of group revenue and 35% of adjusted EBITDA. By contrast, in 2022, our legacy offerings generated 59% of revenue, and all of the group's profit. In 2026, we expect this transition to advance further. Marketplace revenue is expected to deliver two thirds of total group revenue and half of adjusted EBITDA. And Experiences on its own is expected to contribute more than 50% of our revenue and roughly 40% of our adjusted EBITDA, firmly establishing it as the group's primary value drive. Over the past year, we streamlined our corporate structure and made deliberate operational choices to concentrate on the areas of travel with the greatest long-term opportunity grounded in our competitive advantages. As we enter 2026, our priorities are clear. We will extend our leadership position in Experiences globally, leverage our differentiated assets to position ourselves for an AI-enabled future, and simplify our legacy offerings while we continue to evaluate strategic options across the portfolio to unlock shareholder value. As we concentrate the group more fully on becoming an Experiences-first company, we are mindful that The Fork has more limited strategic synergies with where we are headed. At the same time, it is growing fast, diversifying its revenue, expanding profitability, and innovating as the only dining marketplace in Europe operating at scale across both B2B and B2C. We believe this is a uniquely valuable business with an attractive long-term growth profile, which may be underappreciated in our portfolio given the market activity we have seen around the dining category. As a result, we have decided to explore strategic alternatives for The Fork as part of our broader portfolio review. We view this as one potential path to creating additional capacity for meaningful capital return to shareholders balanced with opportunities to invest further in our Experiences strategy. I would like to spend most of my time today on Experiences, our highest strategic priority and the area where we believe we have the assets, track record, and teams to be the global leader. We have a proven business model with growing customer loyalty driving improving unit economics in a highly attractive market. We see a durable long-term position ahead, thanks to tailwinds in consumer preferences and low online penetration, the fragmented long-tail nature of the supply base, and the critical role our unique brands play in smoothing the friction between customers and small operators. Over the next few years, the online portion of the Experiences market is to grow by double digits. And our profitability and scale provides us the flexibility to invest in capturing even more share and accelerate our growth at attractive ROIs. We have achieved meaningful scale. Our gross booking value, or GBV, is rapidly approaching $5,000,000,000 with a majority of bookings coming from loyal repeat customers that spend more and increasingly return to us through direct channels. We are driving this growth profitably as we expanded adjusted EBITDA margins in Experiences to 10% in 2025 and see a clear path for healthy margin growth in the future. Last year, our bookings volume and GBV growth progressed quarter by quarter, and we exited 2025 strong with 18% bookings growth and 16% GBV growth in Q4, a profile that suggests we are accelerating taking share in our core markets, and entering 2026 with momentum. As we look forward, our priorities are to drive demand from a diverse set of channels, improve our product experience to lift conversion, and grow our supply base to attract new customers. Let me walk through each of these elements of our flywheel briefly: demand, product, and supply. We have made progress in our marketing efficiency by coordinating our two brands to capture more demand at improving ROIs. Our operating model changes have increased the combined click share in our core U.S. performance marketing channels outpacing other players. This year, we will build on this playbook as we broaden our demand sources, expand investment in social media, and evolve our engagement with scaled strategic partners in AI while continuing to lower our marketing spend as a percent of revenue. Our product teams are aggressively accelerating experimentation, ending 2025 with more than double our testing volume versus the prior year. This lift has resulted in a meaningful lift to conversion, a critical driver of improving unit economics. We drove higher conversion rates on the Tripadvisor, Inc. point of sale quarter by quarter through last year and are now approaching the conversion rates of the Viator point of sale. As we move into 2026, we are sustaining that pace, leveraging AI, machine learning, and predictive modeling to optimize the user experience in areas like personalization, merchandising, and booking flexibility. Working with suppliers, we are also launching new tools to deliver the right price at the right time to travelers, benefiting both sides of the marketplace. We are extending our supply coverage and quality across markets, leveraging the group's reach and customer signals. In 2025, we have grown supply in our core markets to more than 425,000 products from 70,000 suppliers, and our quality scores above 4.5 out of five stars are rising, up approximately 20% from last year. We will continue to build on our supply scale advantage, focusing on relevance and conversion to attract new customers. We have a clear signal that our efforts are stimulating new demand. As we have added new supply, we continue to improve the all-important rate to achieve the first booking, and a strong mix of the new Experiences are proving to be incremental. For 2026, this all adds up to higher quality of supply driving more travelers to more relevant Experiences and increased revenue opportunities for our operators. Looking forward, repeat bookers will continue to be our largest and fastest growing cohort, which is especially important given the impact these loyal customers have on our marketing leverage and profitability. We also see opportunities to target new customers by capturing more of the global TAM. This year, we will build on our strengths by extending our marketing investment outside of our core U.S. point of sale, leveraging the power of both brands, localizing our storefronts for non-English native language customers, and adding locally relevant new supply across geographies and categories. Before turning to some commentary on our other segments, a quick word on how we will continue to position ourselves for an AI-enabled future. Last quarter, we mentioned that we would rapidly launch an AI-native MVP, and we did just that in Q4. Our goal is simple: utilize the substantial data and content we have to make more relevant, personalized recommendations better matched to travel intent and easier to book, whether in the planning phase or in destination. While it is too early to say how or when this AI innovation will change our financial profile, we were pleased that we could deploy smaller teams working at higher velocity to go live quickly with a fully AI-first approach so we can test and learn from the large audience at Tripadvisor, Inc. And the early data indicates that our MVP is outperforming our prior on-site AI efforts across key customer engagement and conversion metrics. And, of course, as we innovate on our own platforms, we are also taking advantage of direct relationship with key AI partners to experiment and learn across AI-first search and agentic AI through licensing and product integration. The Viator app in ChatGPT is now live as a proof of concept, joining our apps from Tripadvisor, Inc. and The Fork. This cooperation has reinforced the value of our brand, content, and data, and suggests the power of the trust and travel category insight we provide. It is also resulting in significant increases in traffic coming from LLMs with higher revenue per visitor, although it is still small relative to other traffic sources. We believe there is a big opportunity ahead to scale our partnerships further by helping travelers close the trust gap between using AI for discovery and planning and using AI to book with confidence. Next, turning to The Fork. As I mentioned earlier, over the last few years, we have strengthened our market position and financial profile. We diversified our revenue, improving our marketing efficiency, and leveraging our R&D investments to increase profitability. In our more mature B2C offering, more than 80% of our bookings are coming from repeat diners. And with nearly 80% of bookings coming through the mobile app, we are also bringing more diners direct, improving the unit economics and validating the long-term margin opportunity for this business at scale. In our higher-growth B2B subscription offering, our improved product is delivering strong growth in premium plan adoption, which in turn is driving higher-than-average revenue per restaurant within our base of more than 50,000 reference, a clear sign of the value in the B2B product. The Fork's innovation agenda is expanding reach and conversion gains through an engaging social feed, while leveraging AI to improve search, matching, and conversion for diners, and increasing productivity in customer service. Finally, we will continue to simplify our Hotel and Other offerings as we streamline the cost base while leveraging Tripadvisor, Inc.'s heritage of trusted travel guidance to support our strategic objectives. We continue to hold a unique position in this space despite ongoing declines in fly-by visitors to our site due to the changing search landscape and the rise of AI overviews. Last year, a stable base of travelers shared nearly 80,000,000 contributions on Tripadvisor, Inc., impressive and consistent volumes despite the traffic headwinds we have endured. This reflects a commitment of our most loyal travelers and the valuable proprietary data assets we will deploy to advance our Experiences and AI priorities. At the same time, we will run our Hotel and Other legacy offerings for profit. We will continue to align costs with revenue, evaluate strategic partnerships to stabilize and add scale, or potentially exit certain business lines. Where we are not driving value to our broad base of customers or partners, we will continue to anchor on simplification. We just kicked off 2026, but we have hit the ground running with energy, focus, and confidence in our plans. We could not be more excited about our Experiences future, the innovation and execution across our teams, and the opportunity we see to catalyze shareholder value and drive sustainable long-term revenue growth and margin expansion ahead. With that, I will turn the call over to Mike. Mike Noonan: Thanks, Matt, and good morning. I will start with a review of our financial performance and then provide more information on our outlook for 2026, each under our new segment reporting. As a reminder, all growth rates are relative to the comparable period in 2025 unless noted otherwise. Q4 consolidated revenue was $411,000,000, flat with a year ago, and in line with our expectations. Revenue growth in Experiences and The Fork came in at the high end of our guidance range, but was offset by slightly lower revenue performance in Hotels and Other. Full year consolidated revenue was $1,900,000,000 or 3% growth. Q4 consolidated adjusted EBITDA was $45,000,000 or 11% of revenue, which was at the low end of our expectations. In the quarter, we saw an opportunity to capture incremental demand through increased marketing investment, which we believe will benefit Experiences growth in 2026. Full year consolidated adjusted EBITDA was $319,000,000 or 17% of revenue. Experiences and The Fork both delivered adjusted EBITDA margin expansion that was more than offset by deleverage from Hotels and Other. Before discussing segment performance, I would like to briefly review the key changes to our new segment reporting. This morning, we posted materials with a detailed explanation of the changes and recast of historical periods. I would like to make a few key points on the changes. In the Viator sec in Experiences segment, revenue and all related metrics are the same as our prior Viator segment reporting. Adjusted EBITDA reflects all costs associated with entirety of our Experiences business, including the fixed and variable costs for both the Viator and Tripadvisor, Inc. points of sale. Therefore, there is no longer intersegment Experiences revenue because the new Experience segment reflects the full P&L for both brands. In Hotels and Other segment, revenue and adjusted EBITDA includes all revenue and fixed and variable costs included in the prior brand Tripadvisor, Inc. segment, less any revenue and costs associated with the Tripadvisor, Inc. Experiences point of sale. The FORQ segment remains unchanged. Certain shared group costs are allocated across the segments consistent with our prior segment reporting approach. Now turning to the results in each segment for Q4. In our Experiences segment, the number of Experiences booked grew 18%, which was at the high end of our expectations. Bookings growth in our owned and operated platforms, Viator and Tripadvisor, Inc., accelerated faster than the overall segment as we continue to lead into coordinated marketing investments across the brands, driving increased conversion. In North America, our largest source market, we saw another quarter of sequential acceleration, a positive sign that our combined brand approach is delivering results. Bookings volume growth from third-party points of sale remained higher than overall segment, though it stepped down sequentially as we began lapping a period of high growth from third-party merchant partners that began scaling in Q4 2024. Experiences gross booking value, or GBV, grew 16% in Q4, a modest sequential acceleration to approximately $980,000,000. We also saw faster GBV acceleration in our owned and operated points of sale. Q4 Experiences revenue grew 10% to $204,000,000, a slight acceleration from 9% growth in Q3. The difference in growth between GBV, bookings volume, and revenue continues to be driven by higher bookings volume growth from third-party merchant partners. However, this gap narrowed in Q4. Changes in FX positively impacted both GBV and revenue growth by approximately three percentage points. Revenue for the full year grew 10% to $924,000,000. We were pleased the sequential acceleration in both GBV and bookings volume growth through the year, with GBV reaching more than $4,700,000,000 for the full year. While the progression of total GBV demonstrates our meaningful scale in the category, we are also operating with consistently improving unit economics. Repeat bookings continue to be our fastest growing cohort, comprising the majority of our GBV, and represent our most profitable customer base. We are managing our business prudently to balance growth and profitability progression while investing for long-term competitive positioning. The financial performance we delivered in 2025, the momentum we are carrying into 2026, reflect the resiliency of our financial model and the strength of loyal loyal booker cohorts maturing at scale. We believe the diversity of our brands and business model is an advantage and uniquely positions us for sustainable leadership in the category. Viator and supervisor represent a significant majority of total segment GBV, with Viator contributing the bulk of GBV. Viator and Tripadvisor, Inc. leverage a shared industry-leading supply asset that we merchandise to each audience and increasingly in a more personalized way through data and AI. We also leverage our supply to reach incremental audiences through third-party demand partners. This set of distribution channels is diverse and growing fast, serving thousands of partners globally, extending our reach beyond our core markets. Importantly, bookings from third-party partners are immediately profitable on every transaction. In terms of channel mix on our owned and operated platforms, our direct channels are growing the fastest as a result of our investments in supply and product that convert first-time bookers to loyal repeat cohorts. Importantly, unlike our legacy Hotels offering where we faced SEO headwinds, SEO is not a large channel for us in Experiences, and we expect this channel to contribute less than 10% of GBV as we exit 2026. We will continue to leverage both of our brands in the paid channels to attract high-intent new bookers while testing new paid channels that diversify our investment mix from SEM. Experiences adjusted EBITDA in Q4 was $15,000,000, 7% of revenue, down from $29,000,000 last year. We anticipated deleverage in the quarter due to a known indirect tax benefit of approximately $4,000,000 realized last year. Additionally, in service of our strategic focus increasing our execution velocity as we enter 2026, we made incremental investments in the quarter to accelerate bookings while continuing to invest in engineering, data, and AI to drive product and supply enhancements that we believe will benefit growth and competitive differentiation in the medium term. For the full year, Experiences adjusted EBITDA was $91,000,000 or a 10% margin, which we believe makes us the most profitable scaled Experiences platform in the world. This adjusted EBITDA profile demonstrates our financial discipline, exhibiting strong and improving unit economics while continuing to invest for future growth. Turning now to The Fork. Revenue in Q4 was $57,000,000 or 18% growth and 9% growth in constant currency. Total bookings in our B2C channel grew 9%. While a smaller contributor, our B2B subscription revenue grew at a much higher rate driven by ongoing restaurant adoption of higher-priced premium plans, highlighting the strong value proposition The Fork delivers to restaurants. On a full-year basis, revenue was $221,000,000, representing 22% growth and 17% constant currency. Adjusted EBITDA at The Fork in Q4 was $1,000,000 or 2% of revenue, approximately 150 basis points higher than last year, driven primarily by leverage in marketing and overall fixed costs. For the full year, adjusted EBITDA was $21,000,000 or a margin of 9%, a meaningful improvement of over 600 basis points driven by prudent fixed cost management while delivering strong revenue growth. In Hotels and Other, Q4 revenue was $151,000,000, a decline of 15% which we anticipated given the impact of structural demand headwinds in this category. As we mentioned last quarter, we are managing our Hotels offering offerings to optimize for profitability rather than chase low-margin revenue. As a result of product improvements we have made, Hotel Meta pricing continued to be strong due to high-quality travel intent our platform is delivering to our Hotels and OTA partners. Structural traffic headwinds also continue to impact our media and advertising offerings, with revenue declining 17% in Q4 to $30,000,000. For the full year, Hotels and Other revenue declined 8% to $750,000,000. Adjusted EBITDA in the Hotel and Other category was nearly $30,000,000 or 20% of revenue. Lower personnel costs related to our cost savings program we announced last quarter partially offset the lower revenue stemming from SEO headwinds, which is driving a higher mix of revenue from paid channels. Full year adjusted EBITDA was $270,000,000 or 28% revenue. Turning to consolidated expenses starting with the quarter and for the full year. Cost of revenue in Q4 was 9% of revenue, up almost 200 basis points year over year due to the benefit of last year of indirect tax credit. For the full year, cost of revenue was 8% of revenue, with last year. Marketing costs in Q4 were 43% of revenue, higher by approximately 550 basis points year over year due to marketing investment in Experiences. For the full year, marketing was 42% of revenue, deleverage of approximately 200 basis points which is largely driven by revenue headwinds at Hotel and Other. Importantly, Experiences improved its marketing leverage for the full year by approximately 130 basis points. Personnel costs in Q4 were 32% of revenue, lower by approximately 300 basis points year over year. Lower personnel costs were largely driven by the previously announced gross cost savings program, primarily impacting Hotels and Other. Absent share-based compensation, personnel costs as a percent of revenue was lower by approximately 200 basis points. For the full year, personnel costs were 30% of revenue, lower by approximately 200 basis points or 100 basis points absent share-based compensation. Technology costs in Q4 at 6% of revenue were approximately flat with last year. The full-year technology costs were flat with last year as well. G&A as a percent of revenue in Q4 was approximately flat with last year. On a full-year basis, G&A as a percent of revenue was lower by a little over 100 basis points. Now turning to cash and liquidity. For the full year, operating cash flow was $245,000,000 and free cash flow was $163,000,000. The increase in operating cash flow and free cash flow were driven primarily by changes in working capital as a result of lapping the impact of last year's nonrecurring tax settlement. Total cash and cash equivalents at December 31 were approximately $1,000,000,000. Our cash balance includes approximately $350,000,000 in Term Loan B proceeds raised in 2025, which we plan to use to pay our outstanding convertible notes due in April. After taking into account deferred merchant payables of approximately $308,000,000 and a $350,000,000 term loan, our remaining excess cash balance is approximately $377,000,000. During the fourth quarter, we repurchased 3,300,000 shares at an average cost per share of $15.14, a total of $50,000,000. Over the course of the year, we have repurchased 6,100,000 shares pursuant to our program totaling approximately $90,000,000 at an average price per share of $14.72. Today, we have approximately $110,000,000 remaining in our share repurchase authorization. Combined with the LTRIP transaction earlier in the year, we have reduced share count by approximately 21% since 2024. We believe that our current cash profile and net leverage levels reflect strong capital structure with appropriate cash for operating needs. Turning now to our outlook for 2026 and Q1. For the full year, we expect modest consolidated revenue growth, which reflects the ongoing mix shift we are driving towards our growth marketplace businesses. Our marketplace growth, which we believe is outpacing the overall travel market and the category growth rates where we operate, continues to be offset by structural traffic headwinds impacting our legacy Hotels and media advertising business. We expect the mix of our marketplace businesses to continue to grow meaningfully and represent approximately two thirds of our consolidated revenue as we exit 2026. Experiences revenue alone is expected to comprise over half of our consolidated revenue. In addition, we expect quarterly performance throughout 2026 to reflect higher seasonality trends that are inherent in scaled travel marketplace businesses as Experiences and The Fork become a larger portion of our consolidated revenue. Now some brief commentary on each of the segments for the full year 2026. Starting with Experiences. We expect accelerating growth in bookings, GBV, and revenue in our Viator and TurboVisor points of sale and slowing growth in our 3P points of sale as we continue to lap the steep ramp in this channel. As a result of this mix shift, we expect approximately flat bookings volume growth in the year over year for the segment. We expect GMV and revenue growth to accelerate with revenue growth in the low teens. Importantly, we expect to exit the year at a higher revenue growth rate relative to the start of the year as combined marketing, product, and supply effort gained momentum. At The Fork, we expect revenue growth in the low to mid-teens. This growth rate reflects solid volume-driven bookings growth in the B2C business and healthy expansion in our premium software, driving B2B growth above 20%. Segment growth expectations include an estimated currency benefit of 400 basis points on current rates. In Hotels and Other, we have taken a prudent approach based on the more pronounced trends we observed the second half of last year. As a result, our current expectations are for mid to high teens revenue declines largely driven by SEO traffic headwinds and our focus on maintaining consistent ROIs in the paid channels within Hotel Meta. Our Hotel Meta performance is lapping a difficult comp in the first half of this year, as we observed strong pricing last year. By the second half of the year, we expect to see some stabilization in segment revenue declines as we lap easier comps. Turning to consolidated EBITDA, we expect to deliver flat to modest margin expansion alongside mid-single-digit EBITDA growth, driven by our marketplace businesses and a year-in-year impact from our cost savings program we announced on our last call, offsetting anticipated declines in our Hotels and Other segment. We expect our marketplace businesses to contribute approximately 50% of our overall EBITDA, up from 35% in 2025, with Experiences adjusted EBITDA alone expected to contribute approximately 40% of the total. On a segment basis, for the full year adjusted EBITDA, in Experiences, we expect margins to expand between 300 and 400 basis, which implies healthy adjusted EBITDA growth, primarily due to greater market efficiencies driven by strong repeat cohorts and by operating our two brands in a more coordinated manner. Adjusted EBITDA will be back-half weighted due to the typical seasonality in marketing investment in Q1 relative to large seasonal travel period in Q3. At The Fork, we expect to deliver margin expansion between 200 and 300 points, primarily due to more efficient marketing mix and continued fixed cost leverage. Finally, in Hotels and Other, we expect adjusted EBITDA margin to decline by between 150 and 250 basis points as we continue to manage this business on both variable and fixed cost despite anticipated revenue declines. Turning now to our outlook for Q1. We expect consolidated revenue to be down by 3% to 5% year over year. Despite continued growth in our marketplace businesses, the anticipated declines in our legacy offering pressure overall growth, in particular, given that Q1 is seasonally low revenue in our marketplace and therefore, its weighting on consolidated revenue is lower. However, we expect to see consolidated revenue acceleration throughout the year as our marketplace businesses continue to increase their share of group revenue mix. On a segment basis, we expect Experiences items growth in the low teens, which is due to the lapping of strong 3P growth last year. Despite solid growth in our Viator and Tripadvisor, Inc. points of sale, revenue is expected to accelerate by approximately 1% to 2% sequentially in part due to the aforementioned investment we made in Q4. We expect revenue growth at The Fork of between 20–22%, which includes a currency benefit of approximately 12 percentage points. We expect Hotels and Other declines of approximately 21% to 23% due to a continuation of recent trends and a more difficult year-over-year compare in pricing that we expect to erase in the second half. We expect consolidated Q1 adjusted EBITDA margin of approximately 3% to 5%. Step down is due to the aforementioned revenue headwinds in Hotels and Other segment, as well as growth investments in Experiences this quarter. In Experiences, we expect our adjusted EBITDA margins to step back by approximately 200 basis points year over year primarily due to an increased marketing investment. At The Fork, we expect margins to swing positive year over year, increasing approximately 800 basis points to about 1% of revenue, benefiting from marketing efficiencies expected in the quarter. In Hotels and Other, we expect adjusted EBITDA margin between 21–23%, which reflects revenue headwinds previously discussed. We are excited about 2026 and the priorities we have established to continue to extend our leadership in global Experiences. We expect to see the increased impact of its contribution to our group finish profile this year, establishing a foundation for multiyear group revenue acceleration while delivering healthy levels of profitability. We look forward to updating you on our progress on our next call. With that, I turn the call back over to the operator for Q&A. Operator: Thank you. Please press 11 on your telephone, then wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open. Eric Sheridan: Thanks so much for taking the question. Sticking with the Experiences side of the business, can you characterize how you are thinking about the incremental growth investments in the business, especially in the marketing side in response to two things, both the demand signal you think you are getting from the market in terms of Experiences growing as a percentage of consumer spend and also in light of what might be different or stable elements of the competitive intensity in Experiences. We would love to get some characterization on both against your growth investments. Thanks so much. Matt Goldberg: Yeah. Thanks, Eric. I appreciate the question. It is Matt. And I will take the question, and Mike can fill in as he likes. We see the Experiences market as very attractive. Obviously, it is growing faster than other travel categories. We saw, know, from '19 to '25, the online portion growing at 13%. In that period, we grew 22%. From '22 to '25, the market grew 16%. Online 22%. We grew 22% over that period. So we feel really good about our ability to grow not only in line with the online portion, but to exceed it over time. Looking forward, you know, we think there are a number of reasons that we can really deliver here. The first is the scale we have already achieved, the position we have in our core market, in the U.S., and the ability to extend that globally. You can see that in our GBV. That is accelerating and approaching $5,000,000,000 last year. You can see that in how our supply is growing and the relationship we have with operators. And you can see demand signals very, very clearly both in our Tripadvisor, Inc. point of sale, where we are able to take that data and match supply and demand as we target the supply we want to go after that is going to allow us to extend, internationally. We brought our team together to drive marketing efficiency, and we have a stronger competitive position there. We are leveraging our product and, as as I mentioned, supply across those brands. And really smoothing the friction to get more, conversion and ultimately driving our unit economics across the business. So that is driving profitability. And as we see scale, and accelerating growth with profitability, we really think that that gives us the flexibility to invest further, to drive global leadership. So the operating model is helping. We see it, in our data. And you can obviously see it externally. Anybody you talk to in travel is talking about the power of Experiences and how that is driving all of the other categories. So we feel we sit bull's eye there. As we relate to others in this space, I think it is really interesting because when when you look at where we stand, it is really you know, we are the most profitable Experiences player in there. I think you come from the strongest market, which gives us an opportunity to extend that into other markets. Our unit economics are progressing, and we just feel that between our ability to go after demand and meet that with supply, extend the TAM growth, right, by looking into new geographies and categories, we are really well positioned to double down in Experiences, add resources and investment that are going to draw accelerate both growth and profitability over time. Mike Noonan: Yeah. And one thing I would add on to that, Eric, would be a little bit about specifically on the marketing approach. To add on. No. I think a few fundamental things about the category. One, we believe it is very large, as Matt said, but the awareness is still relatively low. And so I think it it is how you find intent, how you convert that tent. And, you know, we see that intent primarily through the paid channels. And I think we have exceedingly good teams that are good at those conversions. And importantly, importing that those wins over to both our points of sale at Viator and Tripadvisor, Inc. And so, really, we have to follow that intent and convert that where we can. And that is really the basis of how we think about our ROIs in the paid channels. You know, we we understand that as an investment in a new user, particularly a new user in the category. And it is all then how you drive that repeat behavior. And and and how we target those ROIs is just based on where we see our long-term margin progression until target margin can be over the long period of time. And that is the formation of how we think about our ROIs. Operator: Please stand by for our next question. Our next question comes from the line of Naveed Khan with B. Riley Securities. Your line is open. Naveed Khan: Question on the on the Experiences margin expansion. I think you are guiding to a few 100 basis points of EBITDA margin expansion in Experiences. And my question is about the the fact that you mentioned repeat bookings are up from the previously acquired cohorts. Why not why not double down on customer acquisition versus giving back some on the on the EBITDA margin. Why not just optimize for long-term customer growth and maximize the potential there? And then second question is, I think you mentioned that you expect that SEO will be less than 10% of the traffic for 2026. How should we think about that and your long-term sort of margin view of maybe this business operating at around mid-twenties EBITDA margin. Just give us your thoughts there. Thank you. Mike Noonan: I will I will I will hit both, and Matt can chime in. So I I think, you know, the question on growth and profitability, what you are getting at. So I think the profitability this year in Experiences is driven by two. Two factors. One, which we believe we can continue to drive, efficiencies in our, in marketing, driven by really product-driven conversion growth, operating two teams, operating, you know, two two platforms as one. We can drive a lot of efficiencies there. We are excited about that. And then two, as you said, Naved, the natural, repeat cohorts that are building in the business, I I would just say when we think about, our growth profit trade-off, we are not targeting profitability over growth. I think what we have to look at and continue to look at is what is that incremental ROI and marginal ROI for new users which I said as I just said, is an investment. And we are continuing to look at where we can be smarter and make trade-offs. We made some trade-offs in Q4 that we liked. And so you have seen us demonstrate that in in the Q4, and we will continue to be flexible and do that as we move through the year. But listen. When when we are we are sitting primarily in a North American market where new users are are, we are always looking at that marginal, incremental ROI to see where we can drive more growth at profit levels that makes sense based on re rates we see. Part of the algorithm, we talked about this last call. We mentioned again this call about how we are expanding our TAM, our addressable TAM by looking at new regions outside of North America. We are very excited about the work that is underway there. And there is a great example where you could see us leaning into marketing spend as we are growing more aggressively in an in a new geo. And we will, you know, and we will absolutely update, update you with that with our progress as we move forward with that. But, I think we are remaining very nimble and open-minded as we think about the growth growth, algorithm. Secondly, on SEO, yeah, I I think it is it is just very important that, we we do see the Experiences business not having a major reliance on SEO. And and and the most of the SEO is coming through the the CA channel today. We are expecting on a combined basis to be that below 10% as I mentioned on the call. So when we think about long-term margin progression, not relying on SEO to to hit our long-term margin target. What we are relying on is continued progress in all things we just talked about, which is marketing leverage, the two t you know, two platforms being able to leverage, the brands more effectively in the paid channels, wherever they may be. You know, finding new paid channels outside of them, SEM, which we are excited about the progress there. And if the continued mature, maturation of our repeat cohorts that are building very nicely. So you know, all those ladder up to, we believe, very strongly still about our, long-term margin progression. We are excited about the growth trade-offs we have to make, to to get there. Operator: Please stand by for our next question. Our next question comes from the line of Nafeesa Gupta with Bank of America. Your line is open. Nafeesa Gupta: Hi. Thank you. Hi, Matt. Could you tell us more about this AI-native MVP that you launched in the fourth quarter and how that is different from your earlier trip plan? And then I have one more after this. Yeah. So I just want to understand about the economics that you are seeing from the larger platforms in terms of user acquisition? And also, how are you thinking about monetizing your user review data that you have from Tripadvisor, Inc. core? Matt Goldberg: Okay. Thanks. Yeah. So on the end and the AI-native MVP, what we wanted to do was to shift the way that we deliver AI products to our customers. And so we want it to be AI-first, AI-native, use the tools, and really reimagine what Tripadvisor, Inc. could be in a fully AI-native world. So we are we are going back to our roots. We want to help people validate their travel choices with better recommendations that understand who they are, drive personalization, that these recommendations can be better explained through social proof and that they can immediately be more actionable. And so we have been learning off the last quarters and years of our investment in our AI infrastructure and our products, which we are really adding on to our existing product. Now we are going fully AI-native to to reinvent. And so we like the data that we are learning. We we believe that we can build trust in the why behind travel choices. We believe that our UGC, which as I said, is stable, and we intend to really drive growth there, gives the social proof that users want before they are willing to book. And we think that we can ultimately become that trust layer whether it be on our own products or serve and services or in partnership with a a scaled AI partner. So we are taking a very different approach. The teams have been, you know, running really fast. They are they are extraordinarily lean, and we are iterating on live customer behavior to understand how how we can improve and and and drive that conversion and and that revenue. I will say, you know, we are live to a slice of of our of our audience. So it is still early. But in Q4, we saw that the approach drove multiples higher engagement with users than our prior AI travel assistant on the site and had good early monetization signals. Now that can be applied to whether you are planning or whether you are in destination. So, you know, when when travels are in destination, they have a lot of last-minute decisions around what they want to do, what they want to see, what they want to eat. But availability, pricing, and logistics are tricky in Experiences. So we are we are leveraging our assets there to help travelers experience the destination better and really testing, you know, what is around me now, GeoAware recommendations, proactive offers to drive incremental demand, you know, making it much easier to book and access real-time customer support, and we think that is going to drive some good good activity. And your your second question was how are we going to leverage our, I think, UGC to drive can you just repeat the second question? Yes. As I mentioned, the UGC data continues to be solid. And we continue to have both the contributors who are slightly up year on year, the contributions, which have been relatively stable year on year, as a as a really differentiated quality content and data asset to leverage. We are using that both on our own platforms as well as in our partnerships. And what we are seeing is that as AI traffic comes in, it tends to be higher intent. It tends to be, you know, these long queries tend to help us get the answers more quickly. And so we are seeing the the conversions to be a bit stronger because it is it is relatively higher intent, we think, lower down the funnel. Now that traffic that we are driving through that AI-first approach is is a lower relative percentage of our overall traffic. But it is growing much, much faster, and we are pretty excited about what we can do there both on our products and through our partnerships ahead. So more to come there. Thank you. Operator: Please stand by for our next question. Our next question comes from the line of Stephen Ju with UBS. Your line is open. Stephen Ju: So I think know, for Viator, I think there was a push for a number of years. If not from yourself, but generally, know, across the segment to make it progressively less episodic by maybe asking your users to use it, you know, in their home market. So you know, is that proving to be more challenging, or is just an awareness factor? Are you getting that activity picking up currently? And you know, because, you know, with folks thinking that maybe they should only open up Viator only when they travel. Thanks. Matt Goldberg: Yeah. Thanks. We are definitely continuing our work to attract customers who are interested in Experiences wherever they may be, whether that is on a a long haul trip, a domestic short haul trip closer to home, or even, you know, an experience that they want to have over a long weekend. And, of course, you know, our supply is the largest supply available anywhere. So we think that matching that kind of demand is something that we can do now. We are growing our supply, and it will depend on you know, really going after more local Experiences, and that is something that as we continue to invest in supply, we can continue to add. I would say that our primary focus right now has been to enter new geos. But as we enter new categories and think about extending that supply, going deeper perhaps into attractions, you know, maybe that local supplier who you rent a canoe from to go down the river with your kids, you know, that will be something we will continue to do. So it is an area of future growth. I would not say that it is the priority we are driving hardest at. Otherwise, we would have called it out. But it is definitely something that we believe our platform can deliver on. So there will be more there to discuss going forward. Operator: Please stand by for our next question. Our next question comes from the line of Lloyd Wamsley with Mizuho. Your line is open. Lloyd Wamsley: Thanks. I have got two questions. First, just drilling into the geographic expansion for Experiences. Like, how much of that is building supply, you know, in new markets and demand in new markets, versus maybe selling North American Experiences into new points sale where you do not need new supply. It is more marketing. Just anything you can help us understand on on the plan for geographic expansion. And then the second one was just, you know, you sort of hinted at, the potential for evolution in the partnerships with the larger AI search platforms? Like, anything you can tell us either specifically, or should we expect evolution there? This year in in any meaningful way? Anything you could share there would be great. Thanks. Matt Goldberg: Thanks, Lloyd. On the geo expansion, it is a combination of both, but, of course, you know, we are already serving U.S. North American customers going to international destinations. We think we do that relatively well. Of course, we can continue to improve as we think about specific supply in particular locations. But I think going after the geo expansion is very much about the supply that will appeal to international source markets that we have not served in the past. We have done some in English language, but I would say we are under-optimized as we think about that native traveler from international source markets. So think about a different kind of experience that they may want to have relative to an American. That is supply. We will go out. We have the Tripadvisor, Inc. brand, which is highly trusted and huge awareness in Europe and Asia. And, obviously, we can leverage that. We can use those signals of intent to go target the right supply. We can use AI to localize through translation and do that relatively quickly. And then, of course, we can leverage all of our data to go and target through our marketing channels in those geographic locations. So think local sourcing of new markets as a meaningful opportunity for us ahead, which we are just getting going on, and we are we are excited about that with more to come. In the second question, about our partnership opportunities, we are very excited about what is ahead in our partnership. I would say that 2025 was very much about establishing a foundation. We wanted to learn from partners what worked, what did not, what we had that was valuable, and really get a set of partners going. So you saw us working with OpenAI, with Tripadvisor, Inc. and The Fork app, and we just announced today that this week, the Viator app is there. We are learning a lot through that integration about agentic AI. We have got a licensing arrangement there. With companies like Amazon and Snap, we are exploring a multimodal AI. We have explored marketplace data with Microsoft, and and we are playing with others around new AI form factors and device like glasses, where you will hear more about that in the future. We generated a meaningful revenue through these in a in a diverse way. I do not think we have broken that out publicly, but, you know, we expect it has been growing, and we expect that to continue growing across licensing revenue, link-back traffic, and and integrating our products. We also learned a lot. I think what we learned is that our data is valuable. It is incremental, and it is structured. And so it can really help address customer problems. We are just getting started there. We bring a deep knowledge of the category that I think is very helpful to these horizontal players because spec and vertical focus is helpful. And as we put our foundation together, we were limited in how we wanted our brand, our content, and data to be used. We were more looking to understand the value ahead. And so we are having meaningful conversations about doing something bigger that would be less constrained. We think we have the assets to be a deeper partner with a select partner because what they need is a trust layer. They need cross-category content. They need the data. And, of course, leading supply and Experiences is very helpful too. And so what we think we can do there is to really close what I call the confidence gap between planning and booking, and let me explain why that is such a big opportunity. Almost half of travelers use AI to plan trips. But less than 10% of them are actually booking with AI. And the gap represents a huge amount of unrealized value, and we think it exists because we need you know, there needs to be an improvement in trust. There needs to be an execution capability in the current tools. And so we think that nobody has figured that out or cracked it yet, and we think that we bring brand, content, data, and scale to help make that happen. It is an execution challenge. And that is where we think our role is really compelling because we bring trusted human judgment, scaled Experiences supply, and a transaction layer that, you know, with our 8,000,000 plus POIs, and our and our sort of you know, social proof through our UGC that may be missing. And so we are going to go after it. We also think that, you know, trust and being neutral and being able to work with a with a broad player is is an opportunity ahead. Operator: Our next question comes from the line of Jed Kelly with Oppenheimer and Company. Your line is open. Jed Kelly: Hey, great. Thanks for taking my question. Just just drilling down to Experiences, you know, obviously, the marketing was up quite a bit in fourth quarter. Can you just talk about the competitive intensity around that? Or is that more from you testing new channels? Now the other thing with with Experience is have you looked into getting into more partnerships that could actually drive more repeat traffic such as, like, event ticketing? Thank you. Mike Noonan: Yeah. I will I will take the first one. You know, Matt, take the second one. Yo, listen. I think in terms of the the the marketing, in Q4, one, no change in approach. As I as I was talking earlier with with Naveed. You know, we are looking and driving a very disciplined set of ROIs in a marketing spend, and, you know, where we think we can drive growth, we will look to do so based on the same set of of of of criteria. I I would say when you are accelerating that deleverage as a percent of revenue is going to show through for sure. When you look at our marketing as a percent of GBV, it is pretty flat year over year. So, in our minds, you know, the the marketing spend was was it was kinda in line to our historical, disciplined approach, the way we approach it. And and as I said earlier, we are going to be flexible as we approach as we move through the year. We always are going to be seeking ways to, you know, grow, accelerate, take share, but we are going to do it in a way that is disciplined, that ladders up to a long-term target market. And, again, I think as we open up our geo expansion, that opens up a different set of, of really exciting choices for us. Matt Goldberg: Yeah. And on your second question, Jed, around partnerships to drive repeat booking, absolutely, we are always talking with a variety of partners. We have a strong B2B team and a partnerships team. Live events and ticketing, as you just described, is one area. Earlier, we were talking about local activities that we could go after. So it is a combination of partnerships and supply, and, absolutely, that is something we are focused on. We think there is any number of additional opportunities to go after. I do not want to get ahead of ourselves and start talking about those now. But we talked about two of them, and I think you can expect to hear more from us on on some of those opportunities ahead. Operator: Our next question comes from the line of Tom White with D. A. Davidson and Company. Your line is open. Tom White: Hey, this is Wyatt on for Tom. Thanks for taking our Just given the heavy fragmentation and Experiences, is that technically better insulated from potential AI disintermediation? And I would like to hear your thoughts on maybe how Experiences are maybe uniquely positioned in the travel space. Thanks. Matt Goldberg: Yeah. I think that, Tom, thanks for the question. I think your commentary about the long-tail fragmented supply with, you know, all of those hundreds of thousands of small businesses that are out there to go after, and we feel really good about our penetration there. I think you are right. I think that does insulate AI disintermediation. There are a couple other reasons why I think it is insulated and durable ahead. First, you know, as Mike was saying earlier, it is much less dependent on the structurally challenged SEO traffic. Second, I think it is really hard to bring that structure to the supply base and connect them directly to consumers, taking friction out of the journey, putting in place all of the infrastructure as a marketplace, applying, you know, customer service, dealing with the logistical challenges. And then I think, you know, the way that, you know, we have been competing effectively in these high-intent demand channels in getting these heat economics going is is also, you know, an installation there. So we think that positions us really well. And, of course, you know, we will continue to to drive that flywheel and only strengthen the durability and potential to defend. So it is a good question, and that is exactly how we are approaching it. Operator: Thank you. Ladies and gentlemen, due to the interest of time, I would now like turn the call back over to Matt Goldberg for closing remarks. Matt Goldberg: Yeah. Thanks for that, and and thanks, everyone, for joining us today. We covered a lot on this morning's call. I think the most important thing is we are excited about 2026 and executing on our priorities. We think it will drive durable, sustained long-term shareholder return. Also just want to take a moment to thank all of our employees for their good work to deliver on our clear priorities ahead. We are looking forward to 2026 and updating you on our progress and plans on the next call. Thank you, everyone. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Fernando Fernandez: Hello, and welcome to Unilever's full year results announcement. Thank you for joining us. In a moment, Srini Phatak, our Chief Financial Officer, will take you through a detailed breakdown of Unilever results for 2025. But before that, I would like to share with you a few reflections on our performance last year. Let me start by saying that we have delivered a solid year, fully in line with our commitments despite challenging conditions. When I took over as CEO, I made clear that one of my biggest priorities was to ensure that in Unilever, we could both perform and transform. 2025 has demonstrated our ability to [ evolve ]. We delivered a good performance, delivering competitive volume growth, positive mix and gross margin expansion, with sequential improvement throughout the year. We sharpened the portfolio. The successful demerger of Ice Cream combined with 10 deals, including acquisitions like Minimalist, Wild, and Dr. Squatch and the disposal of several nonstrategic brands means that we have rotated 15% of the total portfolio in 2025. We have significantly elevated the offering of our brands, stepping up their functionality, their aesthetics, their sensorials. Strong innovation plans and a decisive shift to social first demand generation models also contributed to a strong improvement in the [indiscernible] brand superiority scores of our brands, a key reason for our ability to outperform markets. This is empowered by another increase in our brand and marketing investment. We improved our execution, reflected by our continuing strength in developed markets and our improved performance in emerging markets, including the successful operational results in key markets like Indonesia and China. We have also acted decisively to correct performance gaps in areas like Home Care and Deodorants in Brazil or U.S. [ Hair ] businesses, in which we expect significant improvements during 2026. We drove cost discipline and improved overheads by 50 basis points through the continuing delivery of our productivity program that is significantly ahead of schedule. We are moving at a speed to build a business that drives desire and scale in our brands and execution excellence. There is much still to do, but we have entered 2026 as a simpler, sharper, more focused business, better able to capture the many growth opportunities that exist across our categories and our channels. Our performance in 2025 give us added confidence that we are on the right track, as Srini will now highlight in taking you through the numbers. Srini? Srinivas Phatak: Thank you, Fernando. Before I turn to the results, just a brief point on the basis of reporting. All the figures that I refer today are on a continuing basis, which excludes Ice Cream. Comparative figures have been restated to reflect the demerger of the Ice Cream business. So all growth, margin and cash metrics are presented on a like-for-like basis. For the full year, underlying sales growth was 3.5%, with volumes at 1.5% and price at 2%. Looking beyond the single year, performance over a 2-year period highlights the underlying momentum of the business, particularly in Beauty & Wellbeing, Home Care and Personal Care, we delivered compounded annual volume growth of 3.6%, 3.1% and 2.1%, respectively. In 2025, we saw a clear sequential improvement through the year, with quarter 4 growth at 4.2%, with a step-up in volumes to 2.1% and pricing at 2%. This reflects our disciplined execution and a sharper focus on volume-led growth. Our 30 Power Brands, which represent more than 78% of the group turnover, continued to grow ahead of the average, delivering 4.3% underlying sales growth for the full year, with volumes up 2.2%, in line with our medium-term growth algorithm. This performance has been sustained over time, with Power Brands delivering a 2-year compounded annual growth rate of 5%, including 3.4% volume growth. Power Brands have the first [ call our ] incremental resources, with 100% of our incremental BMI in 2025 being invested behind them. The performance we see reflects the impact of those prioritization choices. Momentum strengthened further in the fourth quarter with Power Brands delivering growth of 5.8%, driven by volume growth of 3.5%. Beauty & Wellbeing delivered balanced growth across the year, with underlying sales growth of 4.3% evenly split between volume of 2.2% and price at 2.1%. Dove, Vaseline and our premium brands continued to outperform, delivering double-digit growth, reflecting the strength of our innovation and focused execution. Category performance varied across the year, reflecting different stages of portfolio reshaping, innovation delivery and execution. Hair Care was flat overall, with pricing offset by lower volumes. Within this context, Dove Hair continued to deliver double-digit growth, driven by the rollout of its fiber repair range across multiple markets. Total hair care performance in North America was flat, reflecting portfolio simplification actions, while softer market conditions in some emerging markets weighed on volumes. Core skincare delivered mid-single-digit growth. Vaseline again stood out, delivering double-digit growth for the third consecutive year and becoming our eighth largest brand. Wellbeing remained a key growth engine, delivering double-digit growth for the year, led by volume. Liquid I.V. and Nutrafol both delivered double-digit growth, with Liquid I.V. reaching 2 important milestones: becoming a billion-dollar brand and achieving a record U.S. household penetration of over 18%. OLLY delivered high single-digit growth, and it is now an over $500 million brand. Prestige Beauty delivered low single-digit growth. Hourglass and K18 continued to grow double digit, and Dermalogica and Paula's Choice returned to growth in the second half. In the fourth quarter, Beauty and Wellbeing growth stepped up to 4.7%, with volumes up 2.8%. This performance underpins a 2-year compounded annual volume growth rate of 3.3%, reflecting improved execution and a stronger performance across several key Asia Pacific Africa markets as the year progressed. While market growth moderated in Wellbeing, we delivered volume growth above 5% for the quarter, continuing to materially outperform the market. Meanwhile, our core portfolio delivered improved growth with Hair Care at mid-single-digit growth. From a profitability perspective, underlying operating profit in Beauty & Wellbeing was EUR 2.5 billion in 2025, with an underlying operating margin at 19.2%, down 20 basis points year-on-year. This reflects a significant improvement in overhead efficiency, with increased brand and marketing investments behind Power Brands and premium innovations supporting long-term sustainable growth. Personal Care delivered underlying sales growth of 4.7% for the full year, with a much stronger competitive performance driven by the momentum in the United States. The U.S. remains a big growth engine and a benchmark for the execution across the business group. Price contributed 3.6%, largely reflecting commodity-driven increases, with volumes growing 1.1%, supported by premium innovations, particularly in Dove, which delivered high single-digit growth. Strong volume growth in developed markets led by North America more than offset softer conditions in Latin America where volumes declined, but the performance remained ahead of the category. Deodorants delivered low single-digit growth, supported by both price and volume. Dove again led performance, delivering double-digit growth, with scaling of whole body deos across 15 markets, reinforcing our leadership in the category. In the fourth quarter, growth improved sequentially to mid-single digit as actions to address product format mix in Brazil began to gain traction. Skin Cleansing delivered mid-single-digit growth led by price and continued premiumization. Oral Care also delivered mid-single-digit growth, driven by strong performances in CloseUp and Pepsodent with premium whitening and naturals innovations in Asia Pacific, Africa. During the year, we further strengthened Personal Care's portfolio through the acquisitions of Wild and Dr. Squatch. These acquisitions enhance our exposure to premium segments, and are expected to contribute meaningfully to growth over time. In the fourth quarter, underlying sales growth remained strong at 5.1%, led by North America and Asia Pacific, Africa. Growth was driven by price and supported by positive volume, reflecting the positive trajectory of the business and the sustainability of U.S.-led momentum. From a profitability perspective, underlying operating profit in Personal Care was EUR 3 billion. Underlying operating margin increased by 50 basis points to 22.6%, driven by improvements in gross margin and overhead efficiency. We continue to invest behind our brands, most notably in the U.S. and in the premium segments, in line with our strategic priorities. Home Care delivered underlying sales growth of 2.6% for the year, with growth primarily being volume-led at 2.2% and a modest contribution from price of 0.4%. Performance improved sequentially through the year, supported by strong growth momentum in Europe, driven by premium innovations and improved execution and performance in India. Fabric Cleaning was flat as strong performance in Europe was offset by a softer performance in Brazil. The corrective pricing actions were taken earlier in the year to restore competitiveness. Wonder Wash continues to go from strength to strength, following its launch in 2024, and it's now established in more than 30 markets. This demonstrates the speed at which we can roll out high-impact innovations at scale. Home and hygiene delivered mid-single-digit growth led by Cif and Domestos. Growth was supported by premium innovations, including Cif Infinite Clean and the continued rollout of Domestos Power Foam beyond Europe, extending our leadership in hygiene formats. Fabric enhancers delivered high single-digit growth led by volume. Comfort, one of our billion euro brands performed particularly well, supported by premium formats and fragrance led innovation with strong momentum across several emerging markets. In the fourth quarter, growth accelerated to 4.7% driven by 4% volume growth, underlining the recovery of the business. India was a key contributor to this momentum, with Home Care delivering mid-single-digit volume growth, led by strong performance in liquids across Fabric Wash and Household Care, and reaching its highest ever market share. Brazil, Home Care's second largest market, also returned to growth in the quarter, further supporting the overall improvement. From a profitability perspective, underlying operating profit in Home Care was EUR 1.7 billion, with an underlying operating margin of 14.9%, up 40 basis points year-on-year. This reflects improved overhead efficiencies and disciplined brand investments focused on fewer high-impact innovations, partly offset by a decline in gross margin. Foods delivered underlying sales growth of 2.5% for the year, with 0.8% from volume and 1.7% from price. Growth was ahead of the market, driven by strong performance in emerging markets, while developed markets were broadly flat amid weaker consumer demand. Against that backdrop, this represents a solid performance, with clear evidence of competitiveness across our core brands. Hellmann's continued to perform well, delivering mid-single-digit volume rate growth for the year. This was supported by the continued strength of its flavored mayonnaise range, now scaled across more than 30 markets and established as a EUR 100 million platform, demonstrating our ability to premiumize at scale. Cooking Aids delivered low single-digit growth, driven primarily by price. Knorr grew low single digit, with softer retail conditions in developed markets offset by volume and price growth in emerging markets. Unilever Food Solutions was flat, volumes were positive in North America, offset by declines in China, reflecting a weaker out-of-home consumption. We expect the UFS performance in China to improve during 2026. In the fourth quarter, underlying sales growth was 2.3%, with volumes up 1.3%, reflecting a market environment that remained subdued into year-end. From a profitability perspective, Foods delivered a record year, with underlying operating margin increased by 130 basis points to 22.6%, the highest level achieved by the business group. Underlying operating profit was EUR 2.9 billion. This reflected portfolio pruning, disciplined pricing, productivity gains in gross margin, tight overhead control, alongside continued focused brand investments in line with our food strategy. We delivered balanced growth across developed and emerging markets despite a more uneven macro and consumer backdrop through the year. This highlights the advantage of our geographic footprint. In developed markets, we grew ahead of our categories despite consumer conditions softening, particularly in the second half. In emerging markets, performance improved throughout the year, reflecting decisive actions we took to address challenges, alongside improved execution, a step-up in innovation and a more focused channel execution as well as an improving trading environment in several key markets. Developed markets, which represent 41% of the group turnover, delivered underlying sales growth of 3.6% for the year, a sustained outperformance versus the market. Growth moderated in the second half as the macro and the consumer backdrop softened, with fourth quarter underlying sales growth of 1.7%, with slower market growth in both U.S. and Europe. North America was a standout performer. Underlying sales grew 5.3% for the year, with volumes contributing 3.8%, reflecting continued share gains and the benefits of multiyear reshaping of our portfolio towards Beauty & Wellbeing and Personal Care. Premium innovations supported by strong retail execution continue to underpin growth, allowing us to outperform the markets despite more subdued consumer conditions. In the fourth quarter, growth moderated as category conditions softened across the segments. Despite this, our portfolio performance remained resilient, reflecting the strength of our portfolio and execution. Europe delivered low single-digit underlying sales growth for the year. Home Care and Personal Care performed well, supported by the volume growth and the continued rollout of Wonder Wash and whole body deodorants. This was partly offset by softer conditions in Foods, where we continue to outperform the market. Growth across Europe was uneven, with good momentum in France and Italy offset by softness in Germany. In the fourth quarter, underlying sales were flat, in line with the slowing market environment, but our performance remained robust relative to the categories. Emerging markets, which account for 59% of the group turnover, delivered underlying sales growth of 3.5% for the year. Performance improved sequentially through the year, with growth accelerating to 5.8% in the fourth quarter including 3.2% volume growth, reflecting the impact of decisive actions taken earlier in the year, alongside a return to growth in Latin America. Asia Pacific Africa delivered underlying sales growth of 4.6% for the year, with volumes contributing 3%, and price 1.6%, reflecting strengthening of execution across several key markets. Momentum strengthened in the fourth quarter, with APA delivering underlying sales growth of 6.9%, driven by volume growth of 5.7%. In India, underlying sales grew 4% for the year, with volumes up 3%. Growth accelerated in the fourth quarter to 5% with volumes up 4%, reflecting market share gains, a gradual recovery in market growth and the normalization of the trade environment following GST adjustments in the third quarter. Performance was led by our premium Personal Care portfolio and strong execution in laundry liquids. In Indonesia, underlying sales grew at 4% for the year, with a sharp recovery in the second half following a comprehensive reset of the business. Alongside price stabilization and trade stock normalization, we stepped up innovation and significantly increased social-first brand activation, strengthening relevance and demand across our core categories. As execution improved, availability and affordability were sharpened. The performance stepped up materially, with growth accelerating to 17% in the fourth quarter against soft prior competitors. In China, underlying sales growth were flat for the year with clear improvement in the second half, including mid-single-digit growth in the fourth quarter. Actions to reset the business, including strengthening of go-to-market execution and accelerating premiumization supported this improvement. This was led by Beauty & Wellbeing and Personal Care despite overall market growth remaining weak. In Latin America, underlying sales grew 0.5% for the year, reflecting a broad-based market slowdown amid ongoing macro and political uncertainty. Price growth of 5.9% largely offset a volume decline of 5.1%, with elevated price elasticity continuing to wane on volumes as consumer demand remained under pressure. The region, however, returned to growth in the fourth quarter. For the year, Beauty & Wellbeing and Foods both delivered low single-digit growth. In Foods, performance was supported by Hellmann's, led by the continued strength of the flavored mayonnaise range in Brazil. In Beauty & Wellbeing, growth reflected improved execution and the strength of the core brands. During the year, we took targeted actions in Brazil to restore competitiveness, including corrective pricing in fabric cleaning, and adjustments to the format mix in Deodorants. Home Care returned to growth in the fourth quarter, providing a clear indication that these actions are beginning to gain traction. One Unilever markets delivered mid-single-digit growth with positive volume and price, and were accretive to both group sales and profit growth in 2025. This performance reflects the benefits of radical prioritization and sharper focus in our smaller markets. Turnover for the full year was EUR 50.5 billion, down 3.8% versus the prior year. This was driven by significant currency headwinds, with FX reducing turnover by 5.9%. The currency impact was broad-based, reflecting a weaker U.S. dollar, alongside depreciation across a number of emerging market currencies, including several of our large markets. This was only marginally offset by strength in a small number of currencies. Excluding currency, turnover increased by 2.3%, driven by underlying sales growth of 3.5%, partly offset by portfolio actions as we continued to sharpen the business. The net impact from acquisitions and disposals was negative 1.2%. Within this, acquisitions contributed 0.6%, driven by Minimalist, Wild, and Dr. Squatch, all performing in line with their acquisition business cases. This was more than offset by a disposal impact of 1.8%, reflecting the exits of Unilever Russia and the China water purification business in 2024. Disposals of Conimex, The Vegetarian Butcher, and Kate Somerville were completed during 2025. Underlying operating margin expanded by 60 basis points to 20% in 2025, reflecting a structurally strong margin profile. Gross margin contributed positively, expanding by 20 basis points and marking the third consecutive year of gross margin expansion. Importantly, following the Ice Cream's demerger, gross margin now is at structurally higher level of 46.9%. This reflects a fundamental shift in the shape of the group, alongside improvements in mix, price and sustained delivery of savings. Our productivity program and the ongoing cultural shift enabled a further 50 basis points reduction in the overheads. Since the program began, we have delivered more than EUR 670 million of savings and are well ahead of the plan. We remain on track to complete the EUR 800 million program in 2026. Brand and marketing investment increased by 10 basis points to 16.1% of turnover, the highest percentage in over a decade, and 300 basis points higher than 4 years ago. This reflects a clear choice to prioritize investment behind our strongest brands and innovations, consistent with our focus on sustainable growth and long-term value creation. 100% of the incremental BMI was allocated behind Beauty & Wellbeing and Personal Care. Underlying operating profit was EUR 10.1 billion, a decline of 1.1% versus prior year. In line with our multiyear priority, in 2025, we delivered hard currency underlying earnings growth. Underlying EPS rose to EUR 3.08, up 0.7% versus the prior year, with sales growth and margin expansion together contributing 6.5% to EPS growth. Net finance costs were broadly flat year-on-year, reflecting active balance sheet management and disciplined funding decisions. Net finance costs represented 2.1% of average net debt, underscoring the resilience of our financing structure following the Ice Cream separation. Tax contributed positively, adding 1.3% to underlying earnings per share as the underlying effective tax rate decreased slightly to 25.7%. This reduction reflects the mix of earnings and the benefits of local tax optimization measures. Our share buyback programs contributed 1.5% to underlying EPS. These positives were morely offset by currency, which had a negative impact of 8.8% on the underlying earnings per share. On a constant currency basis, underlying earnings per share grew by 9.5%. Following the separation of Ice Cream, an 8 for 9 share consolidation was implemented in December 2025 to ensure comparability of earnings per share, share price and dividends, with prior periods being restated accordingly. Sustainability remains a fundamental part of Unilever's strategy and is managed with the same discipline as our financial performance, with clear accountability and a direct link to remuneration. In 2025, we reached an important milestone on plastics delivering both on our multiyear targets due this year. This reflects sustained focus and investments and demonstrates our ability to deliver against complex commitments. Free cash flow for the year was EUR 5.9 billion, representing 100% cash conversion. Compared with the previous [ year's ], free cash flow was around EUR 400 million lower, reflecting costs associated with the Ice Cream demerger, including separation-related tax on disposals. Excluding these demerger-related items, free cash flow was EUR 6.3 billion, underlining the cash generating strength of the business. Net debt at the year-end was EUR 23.1 billion, an absolute reduction of EUR 1.4 billion following the Ice Cream separation. This reflects the combined impact of cash generation and the demerger offset by dividends, acquisitions and share buybacks. Net debt to underlying EBITDA closed at 2x, remaining within our target range and consistent with our capital structure objectives. Turning to returns. Our underlying return on invested capital was 19%, placing us in the top 1/3 of the sector. Our ROIC benefited by around 100 basis points from Ice Cream demerger, reflecting the higher quality and the lower capital intensity of the group following the separation. Overall, ROIC remains firmly in the high teens, which we continue to view as a key guardrail for capital allocation and a core pillar of a multiyear value creation model. Our capital allocation is clear and disciplined and remains focused on 3 priorities: growth and productivity, actively shaping the portfolio and delivering attractive capital returns. Starting with growth and productivity. We continue to invest at scale where it matters most. Brand and marketing investment was 16.1% of turnover, while capital expenditure was 3.1% of turnover. Importantly, more than half the CapEx is directed towards productivity and margin initiatives, reflecting our focus on strengthening the underlying economics of the business while continuing to support our brands and innovation agenda. Turning to the portfolio, we remain value-focused. We are continuing to simplify the portfolio through targeted disposals while pursuing bolt-on acquisitions aligned to our strategy. Our focus remains on Beauty & Wellbeing and Personal Care, with emphasis on premium segments, digitally-native brands and e-commerce exposure, particularly in the U.S. and India. Finally, on capital returns, we returned EUR 6 billion to shareholders in 2025, comprising EUR 4.5 billion in dividends and EUR 1.5 billion in share buybacks. This reflects our capital allocation priorities, with a clear preference to maintain in principle a 70-30 balance between dividends and share buybacks. Taken together, this provides consistency and visibility, supported by strong cash generation and disciplined execution. We continue to transform the portfolio in 2025, allocating capital towards higher growth premium segments, while exiting businesses that no longer fit our strategic direction. Taken together, 2025 represents a step change in portfolio transformation. With the Ice Cream demerger and 10 transactions completed or announced during the year, we materially increased the focus and the growth profile of the group. On the acquisition side, the additions of Magnum, Dr. Squatch, and Wild strengthen our exposure to Beauty, Wellbeing and Personal Care, premium segments and digitally native e-commerce led brands, with particular emphasis on the U.S. and India. At the same time, we were decisive in simplifying the portfolio. We completed exits from lower growth on noncore businesses, including Conimex, The Vegetarian Butcher, and Kate Somerville and announced further disposals such as Graze, Indonesia [ tea ] and the Home Care business in Colombia and Ecuador. These actions further sharpen the focus of the group and reduce complexity. The Ice Cream demerger is the most significant step in this portfolio transformation. It reflects a deliberate decision to simplify the group, increase the strategic focus, enabling both Unilever and the Ice Cream business to pursue testing strategies, capital structures and growth priorities more effectively. Overall, the scale and pace of change in 2025 underlines that this is a different Unilever, one that is actively transforming its portfolio to drive higher-quality growth and stronger returns over time. Turning to 2026. Our outlook reflects the progress we have made and a disciplined focus on what we can control in a slower market environment. On growth, we expect underlying sales growth for the full year to be at the bottom end of our multiyear range of 4% to 6%. We expect underlying volume growth of at least 2%, maintaining focus on our volume-led growth and outperforming slower markets. On margins, we are confident of a further modest improvement to the underlying operating margin. Our structurally strong gross margin will continue to benefit from value chain interventions, fueling ongoing reinvestment into our brands. In 2026, we expect inflationary pressures in select commodities with the overall inflation being lower than 2025. As before, margin progression is an outcome of our choices, not the short-term objective in its own right. On capital returns, we have announced a new share buyback of EUR 1.5 billion, reflecting confidence in the strength of our balance sheet and the consistency of our capital allocation framework. We also continue to expect sustained attractive and growing dividends, supported by strong cash generation. With that, over to you, Fernando. Fernando Fernandez: Thank you, Srini. As we look ahead, we expect conditions to remain challenging, with soft markets in many parts of the world. Our confidence in the future stems from the significant progress we made in 2025, and we entered '26 as a very different looking business, one that is not only simpler and more focused, but also now bid to deliver consistently. We are building a sales and marketing machine founded on 3 fundamental shifts that transcend our whole business with 7 clear growth priorities. Let me take them in turn. The 3 fundamental shifts encompass our brands, our organization and our people. Our brands are benefiting from a desired scale model that is elevating every stage of the journey, from product development right through to the way we reach and engage with consumers, to the way we execute in both off-line and online retail. Where fully deployed, we have seen incredibly strong performances in brands Dove, Vaseline, Persil and Hellmann's. We are making our organization fit for the AI age, transforming every link in the value chain, particularly around the consumer. That means deploying AI to supercharge demand generation, scaling and hyper targeting marketing content, partnering with consumer faces, LLMs, and working with retailers on agentic shopping models, creating a future-fit model for how our brands are discovered and shopped. And our people are embracing a new play-to-win philosophy approach where the demands may be greater, but our targets are sharper, accountability is clearer, potential rewards are higher and with the highest ever differentiation between best and worst performers. When it comes to our growth priorities, this will be increasingly familiar to you by now. They involve honing in and double down on our biggest growth opportunities across categories with more Beauty, more Wellbeing, more Personal Care, across geographies with U.S. and India as clear and core markets for Unilever, and our growth segments and channels focusing on premiumizing the portfolio and further increasing our exposure to e-commerce. These 7 areas are already driving a large proportion of our growth. And with the additional focus on investment we are bringing to them, we see opportunities to go considerably further. I look forward to going deeper on these fundamental shifts and growth priorities at next week's Cagny conference in Orlando. Nowhere does the robustness and validity of these transformation and fundamental shifts and strategic growth priorities show up more clearly than in the strength and quality of our innovation program. You have seen in our results today, how effective our premium innovation is when we create or grow categories, like powder hydration, short-cycle laundry, probiotics in surface cleaning, flavored mayo, all powered by our superior science in residual aesthetics and elevated sensorials. We are doubling down on this approach in 2026 with an excellent pilot of innovation, leveraging our multiyear scientific streams and introducing new ones. And many of our Personal Care innovations will be activated alongside our sponsorship of the FIFA World Cup 2026, an exciting moment for us and our brands. A simpler, more focused company is not an end in itself, it is all about delivery, consistent delivery. That's what we are concentrated on. And while there is a lot more to do and more to prove, we are confident that '26 will be another big step forward in moving to a model and an approach that is built for delivery. The key elements are all there. First, our mantra is and will remain volume growth, positive wins and gross margin expansion. We are laser-focused on these very clear metrics. This is a route to sustain success for Unilever and to top for shareholder returns, and we will continue to invest accordingly to achieve these objectives. Second, with the well-executed separation of Ice Cream now behind us, and with other recent bolt-on deals successfully completed, we have a sharper portfolio radically focused around our strongest categories and our biggest brand. Third, with our emerging markets strengthening and developed market continuing to outperform, we have a real opportunity now to leverage one of Unilever's most distinctive assets, our global strength. Fourth, our capital allocation priorities, as you heard from Srini, are crystal clear, focused on driving growth and productivity by supporting our brands, sharpening our portfolio and maximizing margin initiatives, while at the same time, delivering strong capital returns to shareholders. And finally, the strength of the organizational change at Unilever over recent years can hardly be overstated. The heavy lifting has been done. This is now a new business, simpler, leaner more accountable, with P&L ownership now squarely in the hands of our category-led business groups, all back up by differentiated reward to the right of performance. All these elements give us the confidence that we are moving towards a model and an organization built for consistent delivery even in markets that will remain tough. Thank you for your attention. We look forward now to taking your questions. Operator: [Operator Instructions] Jemma Spalton: Our first question comes from Celine at JPMorgan. Celine? Moving to the second question, Warren. The second question comes from Warren Ackerman at Barclays. Warren Ackerman: Yes. Fernando, Srini, Jemma, Warren here at Barclays. Can you hear me okay? [indiscernible] an echo. Jemma Spalton: Yes, we can, Warren. Warren Ackerman: So -- okay, super. So first one, Fernando, can you talk a bit about the emerging market outlook for 2026? I think about the big 4: Brazil, India, China, Indonesia. Can you maybe hit on some of the key topics that people are interested in? The fix on Brazil deals, for example. Is China and Indonesia proper reset? Is it done? How should we think about volumes in '26? That's the first one. Second one, another geo one. It's on the U.S., obviously slowed versus Q3. Can you talk a little bit, Fernando, about where you see U.S. category growth? Any signs of price pressure in the U.S. and your confidence about the '26 delivery, what kind of innovation pipeline, what kind of delivery should we expect out of the U.S. in '26? And just quickly, if I can squeeze in a housekeeping for Srini. Can you just tell us where the productivity savings landed, Srini? Is the EUR 800 million done? And what should we think about productivity-wise in '26? Fernando Fernandez: Thank you, Warren, and good morning, everyone. Well, let me start saying that we consider our strength in emerging markets a significant long-term competitive advantage given the exposure to give us to better population growth rate, [ worse ] margin expansion, et cetera. And we have a portfolio in emerging markets that is really diversified in terms of geographies, category segment, price points, and this gives us resilience against volatility. We are very, very confident in our step up in emerging markets. We are seeing now -- with the exception of LatAm, in which the market volume growth is flattish. We are seeing now growth in Asia Pacific Africa, in the [indiscernible] of 3% volume growth for the market. And our performance is improving across the board -- in India is improving, both in terms of economic backgrounds and the fundamentals of business, particularly the strengthening of our brand equities, our mission brands, operating scores in India are improving across the board, our execution, particularly in rural areas and traditional trade, independent trade is also improving. We are growing shares, particularly in Home Care, we have achieved that, as you know, is 40% of our business there. We have achieved the highest ever share there in the last reading. China is slowly getting better. Growth has accelerated in second half 2025. We have made some significant interventions in the route to market of e-commerce. More work to do there, but we expect a better year in China in 2026. In Indonesia, we are very pleased with the renewed leadership team that we have put in place. They have done the right thing to reset the fundamentals of the business. We are now operating with very, very historic low levels of stock in our distributors, that has removed any fundamental issue of [ churn ] and price conflict we have had in the past. We have relaunched our 8 top brands in the market. And of course, in quarter 4, we were benefiting for a very weak comparable. But I feel the metric that we look obsessively in Indonesia is an improvement in our sales run rates. And every single quarter, we have been selling more in Indonesia in the last 4 quarters. Other markets, like Vietnam, Pakistan, Bangladesh, Arabia are all also improving. We have significant operations in other countries. So all this is growing nicely. Regarding LatAm, markets remained flattish. We have seen in the second half of last year around 0% growth. Volume growth in Latin America, macroeconomic remained challenging in Mexico and Brazil. But we are pleased with the return to growth in quarter 4 led by the great momentum in Foods. We have a flying Hellmann's there. Solid growth in Beauty & Wellbeing. I'm very, very pleased with the fast reaction in Home Care to the corrective actions that we have put in pricing to restore competitiveness. This is starting to bear fruits there. We expect improvements in Deos in the next few months. Actions have been put in place to rebalance our investment, increasing the one in aerosol relative to the one in contract applicator formats. Reigniting growth in aerosol is absolutely critical, given the higher revenue per use and the higher profit per use. We are getting a lot of support from retailers in this aspect. We are resetting planograms in thousands of stores and growth region, and we expect Deos in Latin America to be a key contributor to growth from quarter 2 onwards. So in summary, optimistic about emerging markets in 2026. In U.S., let me start saying that our volume growth in North America in the last 3 years has been 3.9% in 2023, 4.2% in 2024, 3.8% in 2025. So this is a very consistent performance despite tough markets, probably one of the best performances in the sector. And this is a reflection of a profound transformation we have done in our portfolio, the setup of a U.S. for U.S. innovation model and a huge focus in a strengthening relationship with retailers there. Quarter 4 had a soft start, but we are encouraged by the fact that the market has rebounded in December and January. We have -- we are off to a good start in North America in 2026. Of course, we have seen some slowdown in Wellbeing. Wellbeing in North America in the quarter 4 delivered around 5% volume growth when it was in double digit in first 3 quarters, we have a couple of issues there. Fundamentally, the share of assortment of Liquid I.V. in a key retailer of the club channel, also some increase in the customer acquisition cost of our DTC business of Nutrafol, but we continue very, very confident in the structural growth in the verticals of [indiscernible] in which we compete and in our ability to continue expanding our leadership there. So optimistic about the emerging markets, really optimistic about emerging markets. I believe that the solid delivery in U.S. in the last 3 years give us confidence that we will continue with outperforming the market there. Srinivas Phatak: Thanks, Warren. On the productivity savings, I think we've said it in the press release. Cumulatively, we have now delivered about EUR 670 million of savings. The program is ahead of our own plans and internal plans and schedule. Most of this benefit, you will actually see in our SG&A line [ under ] the lower heads line, while some part of it was in supply chain overheads. From a 2026 perspective, we expect to at least deliver the balance, EUR 130 million, that was a commitment we set about EUR 800 million, and we'll continue to go further on that. And more as a cultural shift that we have really made in the company is, we'll continue to keep our SG&A costs and other overhead costs at run rates which are lower than the turnover and therefore, in a sense that productivity, therefore, becomes an ongoing habit. Jemma Spalton: Our next question comes from Guillaume at UBS. Guillaume Gerard Delmas: A couple of questions for me, please. The first one is on the pricing outlook for 2026. Fernando, can you maybe shed some light on how you expect price growth to play out this year, particularly given the sequentially, I think, lower inflationary pressures you're expecting for '26. And also, it seems a pickup in promo activities in many of your categories and regions. So it would be interesting, did you hear if you anticipate some or maybe contrasted pricing developments by region or product category this year? And then the second question, probably for Srini. Could you maybe walk us through the key building blocks that support your confidence in achieving this modest margin improvement in '26? And in terms of phasing, anything you would flag at this stage, be it for margin or for underlying sales growth? Fernando Fernandez: Thank you, Guillaume. Well, I think that the category and geographical footprint of Unilever offer in the long run around 3% pricing. That's the kind of normal pricing we have seen in the last 10 years. This year, we probably see that probably a bit lower than that, around 2%. We have seen some increased promotional spending, particularly in promotional intensity, particularly in Foods, but it's not dramatic. We have not seen really an increase in promotional intensity in emerging markets. So overall, I would expect pricing to be around the 2% level. Commodity inflation, Srini can give a bit of background on that. Srinivas Phatak: So you're absolutely right. I think Fernando summarized the pricing outlook quite well. In 2026, the commodity inflation is not going to be broad-based. It's actually concentrated in a few set of the materials, most notably really being palm, canola oil and surfactants, where we continue to see year-on-year pressure coming through. The second angle, which is important -- and the first element of that really comes from a Home Care and Personal Care perspective, that's where we'll start to see elevated inflation in comparison to the other categories. The second aspect, which is important and sometimes overlooked, is that half our inflation classically comes from imported inflation or currency devaluation in the emerging markets. And therefore, that becomes an important element. It's also equally important to highlight that in some other commodities, notably in some of the food side of it or it's a crude related, including packaging, we are actually seeing deflation. So it's important in the first element to understand the difference between the different sets of the commodities that we have. Notwithstanding, we'll all recognize that there is also wage inflation, which is happening in the market. And that's also an important element, which we'll have to cover through a combination of productivity and through pricing. Coming back to, I think, the point really on the building blocks on gross margin. It's actually been quite an incredible story. If you really see, we have now consecutively increased our gross margins for the last 3 years, and the increases have actually been sizable, over 330 basis points. What we now start at 46.9% is structurally in a sustainably high gross margin business. And the levers in a manner are consistent with what we have been talking about. Mix plays a very important role for us through a combination of portfolio and geography will continue to drive that harder. Our savings program, notably in procurement, has actually demonstrated very differentiated capabilities now. On a consistent basis, we are actually beating across more commodities and markets we are beating the market, and that's actually flowing into the bottom line. We have also significantly enhanced some of our commodity risk management practices, which is enabling us to use more of the tools and the instruments to really hedge and actually mitigate the risk for us. We've also talked about capital investment. More than 50% of our capital has been now consistently, for the past 18, 24 months, being put towards savings, and that's something that we will continue. A combination of these elements, we are quite confident that our gross margin expansion in 2026 is likely to be higher than 2025, and that becomes actually a super important lever for us to actually continue to invest behind our brands. '25, we actually reached 16%. We'll continue to increase the spend, both on our Power Brands and also on our Beauty and Personal Care businesses. And completing the picture, I did talk about overheads. Culturally and philosophically, we will keep overheads increases lower than sales. That means there is inherent productivity built into our plans. A combination of all of this actually then starts to give us a confidence to have a higher gross margin, which we'll reinvest, and therefore deliver what we call is really a modest margin expansion. The last point in terms of your question on the phasing, while from a margin perspective we don't expect material differences between half 1 and half 2, it's important to highlight that we'll have slightly additional or higher headwinds of currency in half 1. That's really reflecting what has happened in base [ period ] of 2025. But from a full year perspective, we should be in the right ballpark. Jemma Spalton: Our next question comes from Jeremy at HSBC. Jeremy Fialko: First one is on Europe, perhaps you could just go into a little bit more detail on that, sort of flattish at the end of the year. Was that reflecting kind of entirely slower markets? Or did your relative performance slip a bit? And then what would the outlook for the region be in 2026? And then the second part was, I guess, the Power Brands versus everything else. I guess that was an unusually big difference from what I could remember in Q4. Perhaps you could talk about sort of the non-Power Brand stuff because logically, that was quite a lot weaker. Just kind of how you -- how you kind of intend to manage that sort of 25% of the business to make sure that it doesn't become too big a drag on your turnover or whether you're happy with this sort of more dramatic Power Brand versus everything else growth that you saw in the quarter? Fernando Fernandez: Thank you, Jeremy. Well, in Europe, our performance, yes, there was some slowdown in Europe in the last quarter. We have seen markets getting a bit more flattish in Europe. We continue outperforming the market, particularly in Home Care and Personal Care. They continue performing really well. Our Home Care business is gaining share broad-based across Laundry and Household Care. And our Deodorants business really performing also very, very strong. We have a strong innovation pipeline coming into 2026 in these categories. We continue thinking that we will remain strong when it comes to our competitiveness. We are in a round of negotiation with retailers at this stage. Everything is progressing well. So we don't expect any kind of big impact coming from that. Probably the biggest issue in Europe has been in Foods, that has been gradually soft, particularly in Netherlands, Germany. We have very, very good performance in Italy and France, overall. And U.K. has been solid for us. Poland has been a weak spot also. 40% of our European business is Foods, so that has an impact. But overall, we are confident that the kind of improved performance that we have had in Europe in the last couple of years, we can sustain that in average. When it comes to Power Brands and non-Power Brands, Power Brands are now 78% of our revenue. You already remember that we used to call out around 75% 18 months ago. They are growing strongly. In the quarter 4, we grew close to 6% [ UAG ] in Power Brands with 3.5% UAG. This is where we are concentrating all our incremental investment, particularly in the Power Brands of Beauty & Wellbeing and Personal Care. When you look at the non-Power Brands, 22% of our revenue, for the year, we delivered a volume growth negative of 1%. It has accelerated to minus 3% in the quarter 4. There are some discontinuation that we have done in that quarter. And also, there is some geographical elements that have play a role there. But we are not -- we continue thinking that the strategy of focusing behind our most strongest assets is the right one. If you look at our Beauty & Wellbeing and Personal Care combined, our performance has been, I believe, 4.5% growth for the year and 4.9% in quarter 4. And if you look at Power Brands in that territory, it's close to 6%. So that's what we will continue to put in the focus, and we will manage the rest of the portfolio accordingly. I would like to highlight also that the One Unilever markets, that our smaller markets have an excellent performance in 2025. This is an organization that we have put in place in 2025, with 35% reduction in headcount. It delivered 5.2% growth, and we have delivered an expansion of margin of more than 250 basis points. So smaller markets for us are a key engine for growth, but we are managing them in a simpler way, in a sharper way, with clear focus in the portfolio. They are focusing the portfolio there, and we are very confident about those geographies also. Jemma Spalton: Our next question is coming from Celine at JPM. Celine, we're trying your line again. Celine, can you hear us? Celine Pannuti: Yes. Can you hear me? Jemma Spalton: We can. Celine Pannuti: Excellent. So I hope I'm not asking something that's already been asked, but my first question would be on the sequencing of growth for the year. So you're looking to grow around 4%. I understand maybe pricing, 2%; and volume, above 2%. But then you've been flagging probably some weakness in the U.S. in the first quarter, and I presume a normalization in Asia or at least in Indonesia. So can you talk about how we should expect these to evolve throughout the year? And my second question is coming back on the Wellbeing and Beauty category. If you can talk about, on the Wellbeing side, what you're doing in the U.S. to reconnect with growth? And as well, what is your expectation about internationalization on that business? And what can we expect as that business, I would say, more normalized growth rate to be, if I could use that word. And I think on that division too, if you can talk about Hair Care and what we should expect for '26. Fernando Fernandez: Cool. Thank you, Celine. We are guiding our top line growth at the lower end of our midterm guidance from 4% to 6%. If we are doing that, of course, there can be some quarters that can be below and some quarters that can be above that 4%, okay? So we will not guide on a quarterly basis. We have a good start in January, but there is a lot to do in the next few weeks to close quarter 1. But overall, we are confident that we will be delivering that 2-plus percent volume growth for the year and around 4% -- at least 4% for the top line growth. Going into Beauty & Wellbeing, what is the performance? As I mentioned before, if you look at Beauty & Wellbeing and Personal Care, that combined business, because there are some brands that travel across the categories. We delivered an aggregated growth of 4.9% in the quarter 4 and 4.5% in the full year. And within Beauty and Personal Care, we had another great year of our largest brand, Dove, it grew 9%, with 7% volume growth on top of our 7% volume growth in the previous year, I would like to highlight that. In the case of Beauty & Wellbeing, we saw a solid performance in Skincare, great performance in Dove and Vaseline. Vaseline has delivered, for the second year in a row, double-digit volume growth. In Hair Care, we have been accelerating performance throughout the year. Dove Hair relaunch is a great success. We are seeing growth in markets like U.S, above 20%. This mix is traveling globally, and the rollout is expected to be completed in all key markets by mid-'26. And we expect better performance from Sunsilk and Clear that in 2025 were affected by the issues in Brazil and China. In Prestige Beauty, we accelerated also. The second half in 2025 was much better than the first half. We have great performances in brands like Hourglass and K18, our last acquisition. And in the retail channel for Dermalogica, we need to improve performance in Paula's Choice. There is a full relaunch of the brand ready for March this year, and we have to improve performance in the professional channel of Dermalogica that takes 30% of the brand. In Wellbeing, another great year. If you look at each of our 3 biggest brands: Liquid I.V., 16% growth; Nutrafol, 23% growth; OLLY, 9% growth. All these brands are U.S.-centric. We saw some softening in quarter 4, some of that fundamentally linked to market growth. The volume growth we delivered in the quarter was about 5%. We expect a relatively soft quarter 1 due to strong comparators, but we -- as I mentioned before, we are very confident on the structural growth potential of the Wellbeing verticals in which we compete and in our ability to continue expanding the leadership positions our brands enjoy there. I highlighted before, there are a couple of issues that we have to sort out. There was a decrease of share of assortment for Liquid I.V. in an important customer of the group channel. And there is some increase in the customer acquisition cost in Nutrafol, but we have great teams working on that, and we will find the solution quickly. Jemma Spalton: Our next question comes from Jeff at BNP. Jeff Stent: Two questions, if I may. The first one is with respect to innovation, you've made quite a few comments about it. But could you just tell us what are the sort of big new renovations that you've got coming to market this year that we should be expecting to hear quite a lot about as the year progresses? And the second one, really just a housekeeping issue, but are you able to quantify the magnitude of the [ TSA ] receipts that you'll be getting from Magnum? Fernando Fernandez: Thank you, Jeff. Well, first of all, I would like to highlight that our first -- our first [ pennies ] go to continue investing behind the innovations that have been very successful in the last few quarters. The Dove Hair relaunch, Persil Wonder Wash, Vaseline Gluta-Hya and Vaseline Pro Derma, the flavored range of Hellmann's that is really driving significant growth, all these platforms are above the EUR 100 million, EUR 200 million. So this is really going very, very fast, and we continue investing behind them. There is new innovation hitting the market in multiple categories. I would like probably to mention the UV repair range of Dove hitting the market in January in countries like China, Indonesia, Thailand, Vietnam, South Asia, Philippines. The derma scalp range of Dove Hair with focus in developed markets. I would call out particularly Vaseline lips. That's a 100 million franchise already. We are gaining share in every single market around the globe. We see lips as an entry for younger users into Vaseline, and we are very excited with the kind of Gluta-Hya range in lip care that we are bringing into the market. The rollout of the seal press range of TRESemmé that has been a big success in India. We are rolling out that across Asia. Nexxus, a big relaunch in U.S. and significant innovation in China and Indonesia. In China, Nexxus is really one highlight of our performance. In Personal Care, many things coming into the market, but I would like to highlight also the importance of the activation around the FIFA World Cup. This should be a real support for our performance, particularly in quarter 2, quarter 3. In Foods, continuity to the development of Hellmann's flavored mayo, but we are entering with protein caps in North with the launch in U.S. and scaling into European markets during the year. These are just some of the things that we are doing. So our innovation machine, I believe, has improved a lot in the last 2 to 3 years. Now our focus is ensuring that our execution capabilities are in line with the improvements that we have done in product development and innovation. But a good plan for the year. And as I mentioned before, our absolute priority is investing heavily behind the big winners that we have in the portfolio now. Srinivas Phatak: On the TSA, Jeff, we are not actually quantifying externally the cost -- the total cost of the TSA. Having said that, there are 3 important elements. It's a cost plus and therefore, there's a very small markup that we charge on these services that's got to do with IT and it's got to do with the other commercial services, mostly in the functions. Point number two is that most of these TSAs will actually -- there are separate contracts, individual components. Between '26 and 2027, we expect most of them to really be taper off as the Magnum Ice Cream Company starts to take on these activities. Third element is that we have clear plans, which are ensuring that we manage these contracts well. And more importantly, there are no [ stranded ] costs left at a Unilever level. So all in all, very clear plans to handle this for the benefit of both companies. Jemma Spalton: Our next question comes from Olivier at Goldman Sachs. Jean-Olivier Nicolai: Fernando, Srini, and Jemma, could you please provide an update on the strategy for Prestige Beauty first? Some brands are doing great like K18 and Hourglass; other, less so. Do you need more brands to -- for the portfolio to reach a bigger scale? And what does the M&A landscape look like at the moment? And then secondly, going back to Food. You had an amazing margin improvement. I think you reached 22.6% margins there. That's well above historical trends. What's the driver behind this improvement, how sustainable it is? And perhaps is Food Solutions better margins than the rest? Fernando Fernandez: Good. I will cover Prestige, and Srini will cover the Food margin question. In Prestige, you are right. We have had a great performance in brands like our Hourglass, [ touch ], K18, not so well in Dermalogica, Paula's Choice. Even in Dermalogica in the retail is showing a lot of strength, but the brand is exposed to a professional channel that is declining, and we need to address some issues there. The Prestige market is changing dramatically. I feel you see less importance of travel retail. You see department store practically disappearing. You see a huge growth of the e-commerce channel. And I believe this gives us a lot of opportunities. And we consider our presence in Prestige a natural continuity of our presence in Skin Care and Hair Care. So that's how we see that. We are working in a much more integrated way, particularly in areas like Asia, in which channels of specialist beauty are not so developed and e-commerce is really taking the lead in developing the prestige market. We are always scanning the market for opportunities. Our acquisition criteria are very, very, very clear. We look at brands that are digitally-native with the big exposure to e-commerce, in [ categories ] in which we can add value and there are a set of criteria that we follow with a lot of rigor. But we will not rush into acquisitions if the right asset doesn't emerge. And at this stage, we have not acquired in Prestige recently because we have not seen any asset that really fill any gap in the portfolio that we can have. But super, super committed to Skin Care, Hair Care. To a brand like Hourglass, that is a real jewel in the [indiscernible] cosmetic super premium space. We see Prestige as natural continuity of our presence in our Skin Care and Hair Care business. Srinivas Phatak: On the Foods margins, we are actually quite pleased with the way the whole business has been managed and being operated. There is a very sharp strategic choices that we've made in terms of where to play, how to win. And what's also notable is actually the execution discipline which has come into this business, which is actually leading to our market outperformance across various markets and various segments. A lot of this really is read through gross margin. Some of the levers, which I explained earlier are also applicable to the Foods business, and therefore, I will not repeat them. Having said that, Foods business has also benefited significantly from some of the portfolio rationalization. We have, over the past 18, 24, 36 months, taken out or delisted the parts of the portfolio which were not value accretive. So I think that has really helped us. Second is we also have some very good whole pack price architecture, especially when it comes to Hellmann's and some of the innovations. Secondly, when it comes to the UFS business where we manage it extremely well with profitable accounts has also been a big driver for us. It's also important that the whole overhead element of savings, which we have executed in the company, are also benefiting from a food perspective. Having said that, we continue to invest well. I think that's the most important element because we see Foods as a growth business for us. So we are absolutely determined to invest to really grow the business. At an aggregate level, I think we are quite happy with the margins. The focus from here on for us is going to be more drive growth, volume-led growth, and not necessarily a big margin expansion. Jemma Spalton: Our next question comes from Sarah at Morgan Stanley. Sarah Simon: I have 2 questions, please. One was the impact of discontinuations generally across the group. Can you quantify that in terms of volume? And then the second one was on Dr. Squatch, have you -- obviously, that was growing super fast before you acquired it. Can you give us any idea how much that's grown during fiscal '26 -- sorry, fiscal '25? Fernando Fernandez: Yes. I don't know if we will provide any discontinuation figure, Srini. But in Dr. Squatch, the -- of course, this is an important acquisition for us. It will only count in our underlying sales growth from September next year, but the performance has been good since acquisition, continued growing double digit, a strong brand, very distinct proposition in the male grooming space. Really making significant inroads particularly in the Deo category after establishing a very, very strong position in skin cleansing. So we are very pleased with having Dr. Squatch in our portfolio. We expect that to be a significant contributor to growth during 2026. But as I mentioned before, it will only count in our underlying sales growth from September onwards. But of course, pleased with the performance until now, absolutely in line with the business case that we put at acquisition time. Srinivas Phatak: Just a short one. See, anything that we actually do from an M&A or a disposal perspective, you get a full list of those disposals and the impact. Discontinuations and new launches of SKUs happen in the normal course of our business. Having said that, some of these discontinuations actually sit in the non-Power Brands section. And Fernando actually gave you a bit of a flavor in terms of whether it is the tail list of SKUs in Beauty & Wellbeing or some of the elements in Foods. I think that's the right place to keep looking for it, and it gives you a bit of a sense in terms of what's happening there. Jemma Spalton: Our next question comes from David at Jefferies. David Hayes: Just one for me, I think, in terms of the topic. Just Latin America, I know you talked about a little bit, but it feels like that's recovered volume wise a little bit quicker than maybe you were kind of indicating at the third quarter. So just whether that is the case, what was done better that meant that, that's happened? I guess, to some extent, was the innovations, a relaunch that took place? And did that -- effectively, did that flatter the quarterly volumes in the fourth, maybe leading on to then saying, well, volume growth you think be flat to positive in the first quarter or the first half? Fernando Fernandez: Yes. Yes, we don't see in Latin America, any performance that is fundamentally different to what we what we said to you one quarter ago. The macro environment remains tough, both in Brazil and Mexico. Markets, as I mentioned, has been flattish. But we have intervened in some areas in which, as I mentioned before, we have scored some own goals, particularly in Home Care pricing and in Deos format focus. Our Food business continue performing very, very well, particularly Hellmann's having a blast in Brazil, gaining share penetration, brand equity. And Beauty & Wellbeing has had a solid performance. In the case of Home Care, as I mentioned, we are pleased with the reaction to our pricing correction, is showing really impacting our volumes, particularly in Brazil. And in Deos, I believe there is much more to come. Some of the actions that we have taken are being implemented now, particularly the reset of planogram in thousands of stores across the region. We are really investing heavily behind aerosol format that as I mentioned before, has a much higher revenue per user and profit per use than some of the contract applicators, and we have a strong support from the retailers in that space. So we are confident for 2026 that Latin America will have a much better contribution to our performance. I have been associated with Latin America for many years. I have never seen 2 bad years in a row in Latin America. So we are very confident that we will deliver in that region and the team is super, super committed in the region to improve performance there. Jemma Spalton: Our next question comes from Tom at Deutsche Bank. Tom Sykes: Yes. I wondered if you could just say a few words on the channel shift that is occurring in North America and how that's impacting you? We're obviously seeing very high growth on Amazon, and it appears that your shares are a bit lower on Amazon than they would be off. So what is the outlook for your share on that channel? And what's the effect of that channel growth? And particularly, I guess, as well is just the growth of smaller peers and what that then does to the cadence of your innovation because you're stating a lot of innovation globally, but it's not clear whether that is speeding up in any one particular market, if you say, particularly in North America. So are you combating the growth of smaller peers by fewer, bigger innovations or more iterative, please? Fernando Fernandez: Thank you, Tom. Well, we continue having a strong performance in digital commerce. And I would say there are 3 types of digital commerce in which we have delivered strong performances. One is classic marketplace in North America, big retailers, they are like Amazon and walmart.com. I have mentioned the performance last quarter, I will not repeat numbers today, but we are growing double digit with these people strongly in North America. Social commerce in places like Southeast Asia and China and quick commerce in India. So in all of them, we are growing double digit. We are growing our [indiscernible] through a special assortment of our core brands. And of course, through the portfolio of new brands that we have been acquiring, particularly in the case of North America, our focus in acquisitions has been in digitally-native brands with a strong exposure to e-commerce, and that has been working for us properly. We have not seen a significant slowdown in the North American market in the e-commerce side. Probably what you have seen, particularly in the month of October, that was very weak in the North American market, it was more related with physical stores with the off-line channel. And there is always, of course, e-commerce opens an entry point to many small brands, but very few brands has been able to scale big. I continue thinking that brands like that or like Vaseline have significant competitive advantage also in online. And when I said before that, that is growing 7% volume globally. When you look at that growth in e-commerce, it's practically 2x that. So good performance in digital commerce. Of course, this is accelerating, particularly in some markets in Asia, that is, I would say, a leapfrog of modern physical retail into e-commerce, but we are very well prepared to take advantage of that. Jemma Spalton: Our final question comes from Ed Lewis, Rothschild. Edward Lewis: Yes. A couple of ones for me. I guess a lot of change, a lot of heavy lifting, as you said, Fernando, the last [ 2 ] years. So we think about 2026, is this really the first year that we should start to see the benefits of the revamped approach to innovation that you introduced a couple of years ago? And then for Srini, just on the CapEx plans, over 3% of turnover, how much of CapEx will be spent on what you call margin-enhancing activities? I think you were close to around 60% last year. Fernando Fernandez: Thank you, Ed. Yes, a lot of heavy lifting has been done, I would say, particularly in terms of organization. And if you think that last year, we divisionalize our sales force, we separate Ice Cream, we made significant steps in our productivity program. All these are potential, very disruptive initiatives. And the fact that we delivered a solid year in the context of all these initiatives, we consider that something important for us. Our product development, our innovation capabilities definitely are in a very different place to where they were 3 years ago. I have not said 3 years ago that I would have been proud when I stand up in front of the up Dove shelf or the Vaseline shelf. I am now. And that's basically a sentiment that I may start an experience with many, many of our brands. Of course, there are some elements in execution that have to improve. We have had issues of channel price conflict in some markets, some issues in country like Brazil that should have not happened. We have launched a program of what we call perfect store in order to ensure that pricing assortment visibility are really properly managed and in a homogeneous way across Unilever. I'm really focusing to that now. But as you said, a lot of the heavy lifting has been done, and we see 2026 as a very important year to really bear some of the fruits of this effort that -- this investment that we have put in the business, both in terms of money and time and focus during all these years. Srini? Srinivas Phatak: So on the CapEx for the past 2 years, we have actually been spending around the 3% level. And you're right that we are -- or even from a 2026 point of view, we will look to spend anywhere about 55% to 60% going towards what we call as productivity or savings. From a capacity perspective, I think we are well covered, and therefore, that gives us the ammunition to continue to drive the savings harder. Having said that, we are actually open to increasing the levels of CapEx to support the further growth in the productivity agenda, but with 2 caveats. One is obviously each of the case -- business cases have to justify themselves. And we have actually taken up the thresholds in terms of both the IRRs as well as the payback periods, and these are nonnegotiable. So each of the projects have to justify and they justify. We will invest. That will not be a constraint. The second element is we are committed to maintaining 100% cash conversion. So therefore, we will generate this cash for us to be able to fund it. But our focus on leveraging productivity CapEx remains on track from 2026 perspective. Fernando Fernandez: Cool. I believe there are no more questions. So thank you, everyone, for joining the call. And let me close saying that I hope it's clear that first, we have delivered a very solid 2025 despite subdued markets and a very negative currency environment for Unilever. Second, that we enter 2026 as a simpler, more focused business with stronger brands and competitive level of investment. We're investing now 16% of our revenue in our brands, 3 years ago, we were at 13%. Third, that our geographical footprint is an asset, and we are very confident in a step-up in emerging markets in 2026. And fourth, that our key metrics don't change: volume growth, positive mix and gross margin expansion to deliver earnings growth in hard currency. That's where the whole company is focused on. Thank you very much.
Operator: Greetings, and welcome to the CBRE Fourth Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions] It's now my pleasure to turn the call over to Chandni Luthra, Global Head of FP&A and Investor Relations. Please go ahead. Chandni Luthra: Good morning, everyone, and welcome to CBRE's Fourth Quarter 2025 Earnings Conference Call. Earlier today, we posted a presentation deck on our website that you can use to follow along with our prepared remarks and an Excel file that contains additional supplemental materials. Today's presentation contains forward-looking statements, including, without limitation, statements concerning our business outlook, business plans, seasonality and capital allocation strategy as well as our earnings and cash flow outlook. These statements involve risks and uncertainties that may cause actual results and trends to differ materially. For a full discussion of the risks and other factors that may impact these statements, please refer to this morning's earnings release and our SEC filings. We've provided reconciliations of the non-GAAP financial measures discussed on our call to the most directly comparable GAAP measures, together with explanations of these measures in our presentation deck appendix. Throughout our remarks, when we cite financial performance relative to expectations, we are referring to actual results against the outlook we provided on our third quarter 2025 earnings call in October, unless otherwise noted. Also as a reminder, our resilient businesses include facilities management, project management, property management, loan servicing, valuation, other portfolio services and recurring investment management fees. Our transactional businesses comprised property sales, leasing, mortgage origination, carried interest and incentive fee in the investment management business and development fee. I'm joined on today's call by Bob Sulentic, our Chair and CEO; and Emma Giamartino, our Chief Financial Officer. Now please turn to Slide 3 as I turn the call over to Bob. Robert Sulentic: Thank you, Chandni, and good morning, everyone. We had a strong end to 2025. Fourth quarter revenue and core EPS rose by double digits with both reaching their highest levels ever for CBRE. Our strength was broad-based. We saw significant gains in sales and leasing in the U.S. and much of the rest of the world, and our resilient businesses continued to post double-digit revenue growth a trend we see continuing. From a strategic perspective, we continue to build businesses that are benefiting from secular tailwinds. An example is the Pearce Services acquisition in November, which expanded our technical services capabilities in the digital infrastructure market. Our Data Center Solutions business is another example. We've created an integrated offering for the most important hyperscalers. This business consists of services related to a data center's technical infrastructure called the white space and the building operating system called the gray space, along with traditional facilities management services. Revenue from this business is expected to reach $2 billion in 2026 and is growing at 20% per year. More broadly, data center and digital infrastructure work across our 4 business segments accounted for approximately 14% of our core EBITDA in 2025. CBRE is positioned for strong, sustained growth. We are taking advantage of this circumstance to streamline our operations while investing to ensure this growth continues further into the future. We expect another good year in 2026 with core EPS in the range of $7.30 to $7.60, reflecting 17% growth at the midpoint of the range. This will be driven by healthy growth in both our resilient and transactional businesses. Before I turn the call over to Emma, I want to address AI. We spend a lot of time thinking about this topic, and we know it's top of mind for investors. I'll begin with how we are using AI in our business today and we'll then walk through market-facing risks and opportunities that we see related to AI. We are using AI today in 2 areas. The first is efficiency. We're deploying AI where its economic value clearly exceeds the economic value of traditional efficiency levers like offshoring. We're very disciplined about understanding the trade-offs before pursuing efficiency-related AI investments. The second area is developing a knowledge advantage to differentiate our product offerings. CBRE has more real estate data than any company in the world. Historically, we have not been able to turn this enormous base of knowledge into a comparably large competitive advantage. With the use of AI, we are moving toward gaining advantages that are more in proportion to the data advantage that comes with our market position. We are encouraged in a balanced way by both of these AI-related opportunities. With regard to the market-facing risks and opportunities, AI introduces to our business, we think about the risks in 3 broad areas: first, our transactional businesses. Second, the businesses in which we create and improve physical assets; and third, the businesses in which we operate assets. The transactional and investment work we do is most protected from AI disruption. For instance, we've known for some time that our opportunity in the brokerage business is enabled by but not anchored to market data. This same dynamic is in play in our REI businesses. Clients engaged CBRE to plan and execute complex transactions because of our creativity, strategic thinking, negotiating skills, deep base of market knowledge and broad relationships. None of this seems likely to be replaced by AI in the foreseeable future. The physical creation and improvement of assets, which relates to our development and project management businesses, entails a level of complexity across such things as site assemblage and entitlement, strategic planning, cost analysis, knowledge of vendor capabilities and pricing, construction supervision, negotiating skills and more. Because of that complexity and the physical nature of this business, we believe what we do is materially protected from disintermediation. Finally, we have the operation of buildings, facilities and property management, which inherently involves both large amounts of data and information and has a labor-intensive element to it. AI can both enable and disintermediate the data and knowledge side of this. We believe the scale and complexity of our client relationships is helpful in mitigating this risk. The labor-intensive side will not be easy for AI to disintermediate. On the market-facing side, we believe there is and will be massive opportunity with owners and operators of data centers and digital infrastructure. We serve those owners and operators in a myriad of ways. We have a strong start in building these capabilities as evidenced by the results we delivered in 2025. On balance, when you add all of this up, there will be risks, risk mitigants and opportunities in our business associated with AI. We are optimistic that the net impact will benefit CBRE in the long run. Early empirical evidence is supportive of this view. With that, Emma will discuss our outlook and results for the quarter and the year in detail. Emma? Emma Giamartino: Thank you, Bob, and good morning, everyone. CBRE's strong fourth quarter saw revenue increase 12% with both resilient and transactional businesses delivering double-digit growth. Core EBITDA rose 19% for the quarter, while core EPS increased 18%. In Advisory Services, we saw continued double-digit growth in both leasing and sales. Leasing revenue grew 14% globally, EMEA led the way with Continental Europe up 29% and the U.K. up 16%. The U.S. showed continued strength, growing leasing revenue 12% overall, supported by data centers, which more than doubled and industrial, which was up 20%. Demand for big box logistics facilities, a market segment where CBRE has a deep presence accelerated meaningfully, while 3PLs continue to exhibit a strong appetite for space. In Q4, we saw large industrial occupiers act in advance of upcoming lease expirations, often upgrading their space. U.S. office leasing revenue remained strong, in line with our expectations, reaching record levels for both the quarter and full year. Year-over-year office leasing growth decelerated to low single digits versus a then record Q4 in 2024. We saw some large deals slip into 2026, which we expect to benefit our first quarter results. In Capital Markets, both sales and commercial mortgage originations grew at high teens rates. U.S. sales revenue increased 27%, driven by office and multifamily. However, revenue from both asset classes still remain well below prior peak levels. Outside the U.S., sales were strong in India and the U.K. Mortgage origination fees grew over 20%, supported by a 23% rise in loan volume, led by increased activity with debt funds and CMBS. Advisory SOP grew 14%, outpacing revenue growth. Excluding the impact of lower escrow income, operating leverage was even more significant. Turning to the Building Operations and Experience segment. Revenue growth was driven by local facilities management, data center solutions and contributions from the Pearce Services acquisition. As Bob highlighted, we are seeing the benefits of our investment in data center solutions, where revenue grew by more than 20%. Local Facilities Management continued to deliver strong mid-teens growth driven primarily by the ongoing expansion in the Americas as well as notable strength in Western Europe. Enterprise facilities management growth was led by the life sciences, health care and financial services sectors. BOE segment operating profit grew 20%, outpacing revenue. Turning to Project Management. We delivered solid revenue growth underpinned by new real estate projects for hyperscalers in the U.S. and new infrastructure mandates in the U.K. public sector. The integration of Turner & Townsend and CBRE's Legacy business continues to proceed well and our project management segment is now largely operating as a combined business around the world. As we anticipated, margins declined compared with the prior year due to a few unusual onetime expenses. The segment delivered healthy operating leverage for the full year. Turning to our Real Estate Investments segment. SOP showed strong growth, driven by the sale of data center sites in our development business. We still have embedded gains of about $900 million in our development portfolio. Investment Management operating profit was largely in line with expectations. Growth in recurring asset management fees was offset by lower incentive fees and co-investment returns than in the prior year. We raised over $11 billion in capital in 2025 and AUM ended the year at $155 billion, up more than $9 billion for the year. Before moving to cash flow and capital allocation, I want to point out a couple of items that reduced GAAP earnings for the quarter. The first is the noncash impact of the buyout of our U.K. pension plan, which will result in future net cash savings. The second is an increased reserve for fire safety remediation in the U.K. development business. Together, these totaled $279 million. Without them, Q4 GAAP net income would have increased 43%. Looking at our cash flow, we generated nearly $1.7 billion of free cash flow in 2025, reflecting 86% conversion on core net income, slightly above our 75% to 85% target range. Since the end of the third quarter, we have allocated more than $1.5 billion of capital. This includes about $1.2 billion for the Pearce Services acquisition and nearly $400 million for share repurchases. Share buybacks have totaled more than $1 billion since the beginning of 2025. Net leverage ended the year at 1.2 turns. As Bob indicated, we expect to generate core EPS in the range of $7.30 to $7.60 for 2026. This represents 17% growth at the midpoint, supported by continued double-digit revenue growth in our resilient businesses and greater than through-cycle growth in our transactional businesses. In our Advisory segment, we expect low teens SOP growth should be supported by solid increases in leasing and sales activity. As we move further into the recovery cycle, transaction revenue growth will begin to slow from the prior year's elevated levels. In our BOE segment, we anticipate mid-teens SOP growth driven by strength in our data center solutions business, our local facilities management business and full year contributions from Pearce Services. We are focused on sustaining the significant margin gains made in 2025, while we are investing in future growth. In Project Management, we expect low teens SOP growth. the complex integration of Turner & Townsend, and Legacy CBRE project management should be largely complete this year. In real estate investments, we expect both investment management and development operating profit to roughly match our strong 2025 results. We continue to see demand from hyperscalers for sites that can be developed for data centers. However, as we've discussed in the past, it can be difficult to predict when we will complete these land sales due to the long lead times required to secure power. As Bob mentioned, we're positioned for sustained growth and are taking advantage of this position to invest in our functional platform and products. This includes launching a finance transformation, which will include an ERP implementation, process standardization and organizational restructuring. We are also making further organic investments across many parts of our business to support the strong mid-teens EPS growth we expect to deliver this year and beyond. In addition to data center solutions, we're expanding our local business in the Americas which has grown revenue from $330 million in 2021 to $800 million in 2025. Our industrious business is growing profitably and will expand to more than 300 locations by year-end up from about 200 when we acquired the business at the beginning of 2025. We're also building out our Americas infrastructure capabilities in the Project Management business. Traditional infrastructure is growing rapidly, but comprises far less of the segment's total revenue in the Americas than the 25%, it contributes across the rest of the world. Finally, our strong growth in Q4 has continued through the first 6 weeks of the year across our Services segment. Advisory, BOE and Project Management are expected to deliver double-digit SOP growth in the first quarter. Advisory is showing particularly notable strength for Q1, historically its slowest period. As a result, we expect Q1 to comprise approximately 15% of our full year core EPS, a larger percentage contribution than in last year's Q1. With that, operator, we'll open the call for questions. Operator: [Operator Instructions] Our first question today is coming from Stephen Sheldon from William Blair. Stephen Sheldon: I really appreciate the commentary around AI opportunities and risk, Bob, I would -- I highly agree with your take. Maybe just starting on capital markets. I mean, can you just give some more detail on what you're seeing in the pipeline and what you've baked into the guidance for 2027. It sounds like you're off to a strong start for the year. And I guess how dependent do you think a continued recovery in activity will be on the interest rate trajectory? And specifically, do we need any additional rate cuts for activity to continue picking up in your view? Or are there plenty of other factors that support activity? Just generally, how are you thinking about it? Robert Sulentic: Yes, Stephen, we're not counting on that business being driven by interest rate cuts in 2026 at this point. What we do see is that the demand between -- or the balance between asking prices and offering prices has closed. There is capital available, even though not more inexpensively materially than it was recently. And there's a lot of buyers out there that want to buy assets and sellers want to sell assets. And as a result, we expect another good year for sales and financing activity in our business this year. But it won't return. This isn't a business that's rapidly returning to peak levels like some of our other businesses. We've said in prior quarters that we expect this to be a slow, steady recovery. We still feel that way. Am in her prepared remarks noted that the first quarter has started out strong, and we're encouraged by that. But we don't expect to see a big rapid rise in that part of our business this year, just some nice double-digit growth. Stephen Sheldon: Got it. That's helpful. And then maybe for Emma, and apologies if I missed this, but can you just give us some more detail on the onetime expenses, the weight on Project Management margins in the quarter? And will there be any flow-through impact from those, I guess, are they truly onetime for the fourth quarter? Is there going to be any flow-through impact into early 2026? Emma Giamartino: Sure. I'll start with saying we now -- we believe that those will be entirely reversed in the first quarter. So we'll see a nice margin expansion in project management. In Q4, as we were going through the balance sheet, we did take a pretty conservative view on some of the receivables on some of our larger projects. And we now think that will be reversed. Operator: Next question today is coming from Julien Blouin from Goldman Sachs. Julien Blouin: Bob, I wanted to dig into your comments around the brokerage businesses sort of being hardest to disintermediate by AI. I think broadly the thought out in the market was that this was maybe where the risk was greatest given the ability of AI to sort of empower sales lead generations, perhaps automate other parts of the sales process. Do you think there's a risk that AI maybe eats into some of these more market-making aspects of your brokerage business? Robert Sulentic: Well, Julien, we watched this business for years with people saying things like, gosh, with the scale you have, with the client relationships you have, with the data you have shouldn't you be able to shift the economics between the brokers and the company. That's been part of the dialogue over the years. And if you go back and listen to my comments over the last several years, I've always said that's not what we're trying to do. What we're trying to do is enable our brokers because what we know our clients want is certain things the brokers bring to the table that we enable, but the brokers bring to the table. The ability to provide strategic input to big complex transactions. We're not we're not selling $2 million condos. These are big complex transactions that we're doing. The ability to negotiate experience in doing these big complex transactions relationships in the market. We don't get our brokerage leads online somewhere. We get our brokerage leads because of deep knowledge about the occupiers and investors in the marketplace that we serve. So we've become quite confident that, that business really is driven by the strategic creative thinking that our brokers do. And we think that's going to continue to be the case. And we haven't seen any evidence to the contrary. What we're really working hard to do in thinking we're finally making some gains on using AI is to provide data to our brokers in a more efficient way and a more cost-effective way for us. It is expensive to collect and provide this data to our brokers from the different sources. We think we've turn the corner on that with the use of AI, we're pretty encouraged in some tools we've built. But the thing that the clients buy from us is creative strategic thinking, negotiating skills, et cetera. It's the same set of skills that go into our investment businesses, which are going to -- and that's development and investment management, which are going to make those difficult to disintermediate. Julien Blouin: No, that's really helpful. Emma, I wanted to maybe check on the advisory services sort of incremental margins. They appeared lower this quarter. I know you mentioned the lower escrow income. I guess how much of that -- or what would the incremental margins have looked like absent the lower escrow income versus is there any sort of impact here from compensation or sort of fee pressures? And then what kind of incremental margins are you assuming in 2026 in advisory? Emma Giamartino: Julien, to answer your -- the second half of your question around escrow interest, without the escrow interest, which declined this quarter as interest rates declined. Our incremental margins were above 30%, which we view as very strong. And I think what we have to keep in mind is we have industry-leading margins in this business as we do across all of our segments and we consistently grow above the market. So we're consistently gaining market share. And to do that, we have to continue to invest in the business. Just like Bob just talked about investing in our data for our brokers and our platforms, we're consistently doing that. We're also investing in talent to be able to outperform the market. You have to have the best talent in the industry. So we're making all of those investments and looking to 2026, we expect to continue to do the same. Operator: Your next question today is coming from Anthony Paolone from JPMorgan Chase. Anthony Paolone: Bob, thanks for the comments on AI related to CBRE. Can you talk maybe a bit more about what you think the impact might be on your end markets, particularly around office and whether you see any long-term diminution in that just in terms of overall space needs and perhaps also in areas like appraisal, which can maybe get streamlined and perhaps reduce fees or something there? Robert Sulentic: Well, Tony, 2 very different questions. Let me start with office. If there are less office workers in the long run as a result of AI, there will be less demand for office space. That would be a long-term trend to unfold. What we're seeing right now is tech companies, financial companies, advisory companies, every kind of company you can imagine is using their office space to attract talent and make talent more efficient and effective and excited to come in and go to work. And that's created a lot of opportunity for us. Over the last 5 quarters, we've gone from, well, on main and main, there's more demand for office space -- excuse me, main and main in the gateway markets. Well, then it's Main and Main plus and the gateway markets plus. Now what we're seeing is across primary and secondary and tertiary markets, a lot of demand for office space because workers have come back and companies are using office space to support those workers in all the ways I said at the outset of this answer. In the long run, will there be less office users because AI disintermediates some of the work people do, that's possible. But what we're likely to see is a lot more AI-related workers backfill other types of workers that may go away because of AI. So it would be very difficult to sit here today and say there's going to be less office space as a result of AI in the foreseeable future over the next few years. And certainly, right now, we're in one of the sweet spots we've been in, in my Enpower career for office-based leasing which is a wonderful thing for us because it's at a point in time when we're taking share in leasing. We've had some really good momentum there, particularly in the Americas. The second part of your question, restate the second part of your question, if you would. Anthony Paolone: It was more on appraisals where... Robert Sulentic: Appraisals, yes. Well, we -- for years, we've been automating. If you go to Asia and Pacific, Australia, New Zealand, for years, we've had an appraisal business there that was heavily, heavily automated, radically more efficient in terms of the hours of the man hours that go in appraisal in here. And what we did is we built technology systems over there that caused the revenue per appraisal to go down for us, but the number of appraisals we do to go up radically, and that's been one of the more profitable parts of our valuations business around the world. So that cuts in both directions. That probably is a part of the business that's subjected to disintermediation. And the question for us will be, given our scale and our ability to address will we be able to be a net winner in that subject to that set of dynamics, and we're feeling good about that. I think MR assessment is that our valves business is going to grow 10% next year. So we're feeling good about that right now, Tony. Anthony Paolone: Okay. And then just a detailed question, Emma, for you. I think there's a comment in the deck about OMSR net MSR gains and a change there. Can you -- is that in the guidance and you just haven't shown us like how you're going to disclose it yet? Or just kind of what's happening there? Emma Giamartino: It's not in the guidance yet. What we will do is we will provide historical restatement of our financials, including the OMSR change and the data center Project Management change going back a number of years. We'll do that well before the Q1 results. But it doesn't change the growth rates on the guidance. Operator: Our next question today is coming from Steve Sakwa from Evercore ISI. Steve Sakwa: I think you had a comment about the data centers, I think, being up more than 20%. And obviously, there's a lot of discussion just around AI, data center growth in general and kind of whether we're in a bubble or not. But like what visibility I guess, broadly, do you have on the data center business inside of CBRE broadly? How far out kind of can you see that business? And are there any sort of longer-term concerns or issues that you see with that business? Robert Sulentic: Yes. Steve, I'm going to answer that question, if you don't mind. So you can imagine, given our business and given how much data centers have grown for us, how much time we've spent discussing that question. How enduring is the growth that we're seeing, what do we need to do to position ourselves to take advantage of all the demand. And one of the very first things that we observed when we ask that question is we couldn't have imagined 5 years ago, if we were talking about the data center business being where we are today. I think we need to keep that in mind. We don't know where we're going to be 5 years from now. It may be -- we may be in something of a bubble or we may find that the explosion gets even bigger. What we know for sure is that given what's already in the pipeline today, we are having trouble keeping up. And others that do what we do are having trouble keeping up and based just on the duration of the work that's out there today, that's going to go on for a few years. I had Vince Clancy, who is the CEO of our Turner & Townsend businesses in from London and he and I had dinner last night. And the #1 subject that he and I discussed was how are we going to get the talent we need to keep up with the demand we have in our data center and critical infrastructure businesses. That's a little bit at odds with the notion that, that talent is being disintermediated. What's happening is that talent being used to support the growth of AI. So we think there's going to be enduring growth there. We have very quickly built this integrated data center solutions business that includes white space projects, gray-based projects, which is kind of the building infrastructure, MEP work, the white space is the technical work and then the legacy facilities management. As I said in my comments, that's a $2 billion business likely in -- $2 billion likely revenue business in 2026. And we have big, big efforts underway to grow that business both organically and in and finding resources, not the financial resources we need to grow that business, but the people resources we need is hard. So we're not sitting here today worried about a bubble or running out of opportunity. By the way, we are not material players in the ownership of data centers. So if there's some bubble around that, that's not a big area of exposure to us. We do have this land data center land business within Trammell Crow Company, but we have very, very little balance sheet investment supporting that. and it's a nice add to our profitability, and we think it's going to continue to be. We have, I think, 30 or so sites that we have under control in various ways that we're working on. But we just -- we don't see a scenario sitting here today just based just on what's in the pipeline and the duration associated with that. our direct interface with the hyperscalers and what we know about the capital they have available to keep growing and what they're asking us to do. We see this running for a few years. And then, of course, once those few years ago in terms of creating data centers, there's going to be a huge amount of work to do to maintain those data centers, refit those data centers, manage those data centers. So we see this as a substantial part of our future and one that we are fortunate enough to have put ourselves in a pretty good position to take advantage of. Steve Sakwa: Great. Maybe just on capital allocation. You've been both acquisitive buying businesses, but also buying back stock. I know you don't put any of that into guidance as you set the range for '26, but just I guess, where is your head today either Bob or Emma, on kind of the free cash flow you have moving into '26. Are you tilting more in the buybacks given the recent selloff? Or is there a pipeline of deals that seems to be more attractive than buybacks? Emma Giamartino: So it's very consistent with what we've talked about historically and done historically. We have a strong pipeline. We're actively looking at target companies within data centers within facilities management within investment management within infrastructure, Project Management. And we have a strong pipeline. But as we've always said, it takes a lot for those to convert, and it's very difficult to anticipate which of those deals will convert into a transaction. And so we're going to balance that with share repurchases. And our goal for -- on a consistent basis, is to at least to deploy the level of free cash flow that we expect to generate in a year. So given the levels of free cash flow we're generating, it's unlikely that we'll do M&A, do all of that through M&A. So we'll continue to buy back shares. Operator: Next question today is coming from Ronald Kamdem from Morgan Stanley. Ronald Kamdem: Two quick ones. First, it's a little bit difficult. When you -- I think you said that the company has sort of the most CRE data of sort of any other company out there and built through the cycles. I guess the question that we're getting is how -- if you have an AI tool out there can you just remind us what are some of the moats to being able to replicate that sort of data advantage? And how long you think it could take? Robert Sulentic: We think by the end of 2026, we'll -- there'll be concrete evidence that we've made some real gains in terms of extracting the data we have assimilating it and delivering it to our professionals in a way that we haven't done before. And that is being enabled by AI, and that's one of the areas we're most encouraged to buy. It's going to save us money in terms of accumulating the data, buying the data, and it's going to make our brokers more efficient in terms of using the data. We're also, as already mentioned, we're using that same set of tools to meaningfully cut the cost of our research effort. So we expect concrete evidence this year. We're very excited about it. Ronald Kamdem: Great. And then my follow-up is just on free cash flow. Maybe one, can you talk about the expectations for '26. And I think the '27 numbers came in at $1.7 billion versus $1.8 billion before. Is that sort of correct? And what sort of happened there? Emma Giamartino: Yes. And 2025, I think is $1.7 billion. So cash flow for 2025 was really strong. It was above the high end of our -- slightly above the high end of our range of 75% to 85% conversion on core net income. And the reason it was higher than our range is because of those -- we had a really strong year within development. And those gains convert to cash flow above 100%. So that's what drives us above the range. In terms of what the delta between the $1.8 billion that we talked about and the $1.7 billion, that's simply some timing related to onboarding our large enterprise clients, so that's hitting working capital, and that will be reversed in 2026. Going into 2026, we believe we're going to be solidly within that 75% to 85% range. that working capital headwind that we had at the end of Q4, again, should reverse in 2026. But we also do have another headwind in 2026 related to the cash compensation that we're paying in 2026 related to the really strong performance we had in 2025, especially within our development business. Operator: Next question today is coming from Jade Ramani from KBW. Jade Rahmani: Could you comment as to whether you see margins in the BOE and Project Management business. Do you expect there to be room for further improvement? Do you see margin expansion in 2026? Emma Giamartino: Thanks, Jade. I'll start with BOE. First, I'll say, we're very pleased with where we -- where our margins ended up in 2025. The expansion that we delivered resulting from the big cost efficiency exercises we went through at the end of 2024, led to margin expansion beyond what we had expected at the beginning of 2025. And again, like I said about our advisory margins, our BOE margins are industry-leading. So we put a lot of work into getting to those margins and focusing on operational efficiency to get there. We're also really pleased with the growth we delivered. It's exceptional growth in that business. It's above what we've delivered historically on an organic basis and definitely on an inorganic basis. So going into 2026, we are very focused on proactively investing within our BOE business to make sure that we can sustain those levels of outsized growth. So there is some operating leverage in the plan in 2026, but that is being offset by the investments that we're making. So we're expecting BOE margins to be flat in 2026. Going forward, because of these investments and because of the growth that we're putting into these -- some of these newer businesses like our data center solutions like Industrious, like local in the Americas, we should expect to see continued margin expansion, and we'll always be incremental but going forward beyond 2026. And then turning to project management, we are expecting some margin expansion in the year. Jade Rahmani: On the agency servicing business, there's been a lot of players that have received loan putbacks from Fannie Mae and Freddie Mac. That's when those companies for the originator servicer due to issues of fraud and the like to buy back those loans. Had CBRE experienced any of that? It doesn't seem that way from the disclosure, but I wanted to ask. Emma Giamartino: We have not seen any fraud in our portfolio, and we are evaluating it consistently on a quarterly basis like all of our competitors do and are very attentive to that. We have really a very rigorous underwriting process. And our loan loss reserves do increase. steadily as our loan book increases. And I think now it's just at about $70 million, but we haven't seen the spikes that you've seen elsewhere in the market. And we don't expect to. Operator: Next question is coming from Alex Kramm from UBS. Alex Kramm: Just coming back to BOE for a second. You mentioned local -- the local business continues to be. It sounds like one of the locomotives in that business. So maybe you can just expand on what you're seeing right now in the pipeline. Any changes in the competitive dynamics in that market? And since somebody just asked about margins, can you just talk about how the margins in the local business are trending relative to BOE overall? Robert Sulentic: I'll talk about the expansion and the strategy for expansion and then Emma can hit the margin question. So I want to start by saying this has been one of the gems for CBRE for years. And I'm not sure that people always recognize when we say enterprise facilities management and local facilities management, what the difference is. Enterprise facilities management is when we handle facilities typically for large corporates across large swaths of geography sometimes the entire world sometimes the U.S. or Europe and multiple asset classes that they have in their portfolio. So big, big portfolios of property sometimes hundreds even over 1,000 people assigned to those enterprise clients. Local FM is when we do typically single complex assets, for instance, maybe a big museum or a particular hospital or we do a group of assets of a similar type within a confined geography, 1 metropolitan area, 2 very different profiles in terms of the portfolios you serve for those clients. Local includes within it also a lot of small project work. So roof replacements, parking lot replacements, et cetera. that's done on a principal basis. And that's typically add-on work. That's typically not in the base contract. It's incremental work you do and nice margins in that business. That business was very centered in the U.K. and Ireland, and then we grew it into Continental Europe. And now we've started to build that business in the U.S. And I think Emma gave the numbers, it's grown from like $300 million to $800 million in the last 3.5 years. And that's the basic FM footprint that we've laid down doing those projects. Now we're starting to build into that business the incremental project work that's higher margin. That model is working exactly as it's supposed to work. We're thrilled with what's going on there. It's 1 of the things that differentiates our business from others. And but it does take organic investment. We're growing that business mainly here in the U.S. organically. That's why Emma commented on some of the -- yes, we -- there's some inherent margin advantage as you take on those projects, for instance, but you also have to do an organic build out of that business. And that's where that's working. And it's driving a considerable amount of growth for the company. And Emma, you might want to comment on the margins. Emma Giamartino: Yes. So overall, the local margins globally are slightly above what you see for the BOE segment. And then like Bob said, in the Americas, that margin is lower as they're building out those teams, expanding across the U.S. And so that's upside to both local and BOEs as that market matures. Alex Kramm: Very helpful. And then just a quick follow-up on the data opportunity. It sounds like you just want to do -- you were going to do a lot more work there to enable your brokers, et cetera. But just -- maybe just 2 more questions here. On the savings side, Bob, you gave some opportunities to have savings. Can you expand on that a little bit? Maybe how much are you spending on external vendors? Do you think you can actually cut those out mostly over time as AI gets better? And then also you mentioned research. So is it just a reshaping of the research organization that you have internally. And then just very quickly, on the external side, are you also seeing data monetization opportunities externally to some of your real estate end clients? Or is this really just to enable your business better? Robert Sulentic: Yes. So there are a number of things there. I'm going to start with an area where we can be empirical about the savings. We think we're going to be able to save over this year maybe extending into next year, about 25% of the cost of our research work using AI and the data that we assemble and manipulate through AI to support the research work. We get data from a lot of different sources in our brokerage business, and we spend money in a variety of ways there. We're not specifically talking about where we're going to save, but through a combination of what it costs us to collect data ourselves and what it costs us to buy data, we will save money. And then we will be able to deliver that data. This is what we're most excited about in a more useful efficient way to our brokers in a more self-serve way to our brokers. So it's a combination of all those things. And that's, I think, as far as we want to go with that right now. Operator: Our next question today is coming from Seth Bergey from Citi. Seth Bergey: I guess just to start off, you've touched a lot on AI. And just going back to some of your comments on data and efficient ways for your brokers to kind of serve your clients. How do you think about kind of head count needs just as you balance kind of the accelerating advisory services business and then maybe some efficiency gains that you're kind of seeing with AI over the longer term? Robert Sulentic: Yes. So I'll talk about 2 kinds of headcount. We are not reducing broker headcount. We're adding brokers. By the way, another thing we have going on here in Dallas this week, we have our Americas brokerage leadership team assembled here in Dallas. I spent time with them today -- or excuse me, yesterday, we've rebuilt -- it's a spectacular team, and they are doing a really good job of adding talented brokers and taking market share in leasing in particular. And they're doing a good job with the team that we've built with -- that's been enabled by our digital and technology team of delivering data to our brokers in a more effective and efficient way, and that's what we were commenting on, that helps us recruit that helps us retain. But the big product there is the talent of that group of brokers. And so that's all going exactly as we would like it to go. But the savings is in things like research, the cost of data and then the efficiency of delivering data to the brokers. Seth Bergey: That's helpful. And then maybe just getting that kind of some of the things that you're kind of underwriting with guidance what kind of gets you to kind of the top end and the low end of the guidance range that you put out for the year? Emma Giamartino: Yes. Seth. So similar to last year, the range is almost entirely driven by the timing of our data center land site monetization. Like I said in my prepared remarks and we've talked about before, there is uncertainty around how long it takes to get power to these sites, and that really is the driver of the timing. And so to get to the high end of the range, it's really the -- almost all of what we have in our data center pipeline converts this year and then the low end is very little concern. Operator: We've reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments. Robert Sulentic: Thanks, everyone, for joining us, and we will talk to you again when we report our first quarter results. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Operator: Hello, and welcome to the KBC Group Earnings Release Q4 2025 Conference Call hosted by Johan Thijs, CEO; Bartel Puelinckx, CFO; and Kurt De Baenst, Head of Investor Relations. Please note, this conference is being recorded. [Operator Instructions] I will now hand over to Kurt De Baenst to begin today's conference. Thank you. Kurt De Baenst: Thank you, operator. A very good morning to all of you from the headquarters of KBC in Brussels, and welcome to the KBC conference call. Today is Thursday, February 12, 2026, and we are hosting the conference call on the fourth quarter and full year results of KBC as well as the '26 and '28 financial guidance. As usual, we have Johan Thijs, our Group CEO, with us; as well as the Group CFO, Bartel Puelinckx, and they will both elaborate on the results and add some additional insight on the new short-term and long-term financial guidance. As such, it's my pleasure to give the floor to our CEO, Johan Thijs, who will quickly run you through the presentation. Johan Thijs: Thank you very much, Kurt. And also from my side, a warm welcome to the announcement of the fourth quarter results of 2025, which was also, obviously, is then the announcement of the full year results of the very same year. Let me start with the highlights. And as a matter of fact, and I always use in this perspective, the same thing, [ Glenn ], you know what I'm going to say, the machine has been firing on all its cylinders. Yes, indeed, all the different aspects of our bancassurance franchise have been performing excellently. First of all, we have continued to operate at a diversified split of 50% net interest income and 50% noninterest income despite the fact that our net interest income grew significantly, which clearly means that we are able to perform also on the asset management side and the insurance side, life, non-life at the same growth pace as the increasing net interest income. Coming back to that net interest income, it was significantly up compared to previous quarter and obviously significantly up compared to previous years, which was triggered by, in essence, 2 things: first of all, a further continuation of the strong performance of what we call the transformation results or our replicating portfolio, which was further boosted by the further continuation shift of term deposits into current accounts and saving accounts. Next to that, we also saw a strong performance of our loan and our customer deposits, both are growing significantly in all the countries and therefore, contributed to the net interest income. We saw as well a record net sales over the full year, which was supported with again a positive net sale on the fee and commission business, so asset management business in the fourth quarter. The insurance business performed excellently also with growth numbers double digit, both on non-life and on the life side, which was, by the way, improving even the record results of 2024. In that perspective, we also see that the underlying -- sorry, first of all, the total income in total grew 9% on the year, while our costs maintained at the guided level of 2.5% in that perspective, excluding obviously the bank taxes and the FX effect, which is giving us a jaw of more than 6%, as a matter of fact, 6.4%. Quality-wise, impairments under control, 13 basis points, significantly better than the guidance. And the combined ratio also 87%, also significantly better than the guidance. As a matter of fact, all the elements which we provided for as a guidance in last year were achieved or let me say differently, overachieved. This has 2 consequences. First of all, if you wrap it up then your capital ratio -- then our common equity Tier 1 ratio now stands at 14.9% and our liquidity ratios stand at very solid positions, both in the short term and in the midterm, which allows us to say that the dividend, which we are going to propose to the Annual General Meeting will be EUR 5.1 per share, and if you include there the AT1 coupon, that means a payout ratio of 60%. Given the exceptional character of 2025, not only in terms of the results, but also in terms of customer satisfaction, in terms of employee satisfaction and also on the digital front, where we have once again been nominated having the best banking app in the world, we also decided to contribute a profit allocation to the tune of EUR 25 million into what we call Team Blue bonus for our staff. We also provide guidance for the period to come, but I will go into that in more detail later on, and we will then immediately switch into the detail of quarter 4 first. On the next page, you can clearly see the performance of our digital initiatives. This is underpinned by what you already know, Kate. It's performing better and better. It has been retrained, as I said on previous occasions, and it now is a fully fledged large language model included, which means also that the autonomy of Kate under that new formula, so Kate 2.0 is now having an increase of its autonomy, which means the ability to solve questions of our customers without any human being interfering and solving the question means providing the requested product or providing the requested answer to the customer indeed, well, that has increased with roughly 20% compared to the previous version and now brings the autonomy to 82%. As a matter of fact, we will be launching this in the Central European countries in the quarters to come, and that will mean that efficiency gains in that perspective will be to the same tune because the autonomy in Central Europe is now hovering around 70%, which indeed is the previous number of Belgium. In terms of the job done by Kate of the equivalent FTEs, we talk now more than 400 FTEs. But what is also very much more important that is Kate is able to deliver 400,000 sales independently from the traditional network. Also in that perspective, we will continue to invest in the nearby future on the same developments on the innovation front. And just to highlight, we launched in quarter 4, an ecosphere around mobility. That ecosphere was triggered -- was launched in Belgium, was triggered in the first month by 73,000 users, which were generating indeed already a lot of data, which is enabling us to sell more products to these customers. In terms of one-offs, it was a very normal quarter. You can see that on Page 5, roughly [ EUR 8 million, EUR 7 million ] after tax, [ EUR 9 million ] before tax of exceptional income. It's not worth to talk about it. There is, of course, a bigger impact in 2024 end of year. So be careful, the DTA of Ireland was at that stage included. Now more importantly is what about the evolution of the net interest income? Well, we do report today EUR 1.608 billion of net interest income, which is a significant rise of the net interest income compared to previous quarter, 5% and even 12% compared to previous year. What is the driver? As we said on previous occasions, it is the result of the commercial transformation result, which continues to increase significantly. What is underpinned by 2 things. First of all, the reinvestment yields, which continue to rise, and we confirm here today that through the cycling -- sorry, the cycle of the guidance, '26, '27, '28, this will be again the case. Second element, which is crucial from this perspective is the continued increase of our deposits, first of all, and secondly, also the shift from term deposits back into current account, saving accounts, which allows stability on our transformation result. So in this perspective, indeed, commercial transformation result has boosted the net interest income and will continue to do so going forward. Second main contributor is the net interest income generated on lending side. Well, here again, we had a good quarter in 2025 quarter 4, with a growth of 1.1%, which brings the total growth of 2024 on the lending -- sorry, '25, obviously, on the lending side to 7.4%, which is much better than we originally anticipated and which we guided for. And therefore, it contributes to the lending growth. What remains under pressure, obviously, are the commercial margins. It is not true that in every type of product in every country, the margin will go down. This is not the case. For instance, the margin of mortgages in Belgium went up with 8 or 9 basis points. But in general, I would say there is commercial pressure, but this is offset by the volume increase and therefore, also the increase of market share, which we see in most of our countries. In summary, the net interest margin went up to 211 basis points, which is significantly higher than previous quarter. And this is indeed triggered by 3 things: the replication portfolio, which continues to perform excellently, as explained, the shifts between term deposits and current account, saving accounts and then obviously, also the fact that in Belgium, we brought down the loyalty premium on the savings account at 10 basis points. Now in terms of all the other elements of net interest income, well, they're more or less in line. So I would not dwell upon this too much. But let's say, in essence, they are in line with what we have seen in previous quarters, if you talk about inflation-linked bonds, if you talk about the short-term cash management, so on and so forth. So not worth to spend too much time, but we will be happy to answer all of your questions in that perspective. Far more important is the next slide, where you see the evolution of our customer money and the core customer money. And the message is very straightforward. In the fourth quarter, again, a positive evolution of EUR 4.5 billion, which is triggered by 2 things. First of all, the shift of term deposits into current account and saving accounts. As a matter of fact, there is a positive delta of roughly EUR 4 billion. And then on top of that, we do see monies flowing in, further continue to flow into the mutual fund business, again, a positive growth of EUR 0.7 billion. So in total for the full year, this brings us an inflow of a striking EUR 13.5 billion, which is, in essence, split up as a shift of, let me round the number, roughly EUR 9 billion of term deposits and savings certificates into current accounts and saving accounts, totaling that amount as an inflow of roughly EUR 16 billion, further underpinning the replicating portfolio. And then last but not least, a record year in inflow into our investment products, mutual fund business of EUR 6 billion, but that is worth in itself a further explanation in a second. So to wrap it up, we do see a continuous shift from lower-yielding term deposits into higher-yielding term -- sorry, current account, saving accounts, but also mutual funds. And this is a trends which we continue to see in '26 and also expect to happen going forward, given the evolution of the policy rates of the central banks. Let me then go immediately into fee and commission. Well, fee and commission, EUR 725 million, which is up roughly 2% on the year -- on the quarter and 4% on the year. And this is again driven by the performance mainly on the asset management services side. So first of all, we did see a good performance on the management fees for obvious reasons. And secondly, we do see also a good performance on the sales side, which is further contributing to the growth of those asset management services fees. In terms of the banking services, well, in essence, we do see there also a good performance. There is one caveat. And the caveat is when you do excellently on the sale of certain banking products, you have to pay commissions and those commissions are deducted here from the fee and commission, and that is EUR 11 million. Otherwise, banking services will be on the rise as well. So in that perspective, fourth quarter is a continuation of what we have seen in the 3 previous quarters and is then bringing the total of assets under management to a record high EUR 300 billion. Direct client money, you can see it on the graph, is also on the rise, and this is mainly triggered by end market performance, but also on net inflows, as I just explained. Just for information purposes, if you look at the gross sales of 2025, we have a striking EUR 16.5 billion of gross sales, which is translated in net sales of 6 billion, and this is indeed a record high. Also small detail, we do see strong performance on our trading platforms. And in those trading platforms, we have 2 major contributors, the Belgium Bolero platform, which saw an increase of 25% of customers over the year and a 45% increase of transactions. And more or less, the same can be said about the Czech platform, which is used in Central Europe, so not only in Czech Republic, where we did see the same kind of performance or a likewise performance. Anyway, what about the other part of the diversification insurance? Well, if you look on the year-on-year results, 11% up. If you look year-to-date, it's 9% up, which is indeed a striking number. And this is translated not only in a strong growth, but also in good quality because the combined ratio now stands at 86.7%, and that is better than guided, but also better than last year. So continuation of good growth, 9%; and good quality with the delta compared to the 100% combined ratio of 13%. Life insurance sales, well, we had until third quarter already a record performance and fourth quarter has topped that up with a whopping 26% increase, which is triggered by both unit-linked as interest guaranteed products, mainly interest guaranteed products due to commercial campaigns run both in Belgium and Central Europe. So this performance of growth in the life insurance side is also true for Central Europe. And let me emphasize something I forgot on the fee and commission. The growth of the fee and commission business on the asset management side was also driven by Central Europe in essence. So in this perspective, we do see, again, a very strong growth, which means that the guaranteed interest products and the unit linked both roughly are 45% of the total production, which means that it is very well balanced. In terms of the more volatile results, financial instruments fair value, we do see a fundamental increase of the contribution, which is mainly linked to the fact that the ALM derivatives have been performing better due to, in essence, the difference between previous quarter and this quarter is mainly driven by positive contribution of the ineffectiveness of hedge accounting and on the performance -- better performance due to better interest rate swaps. Coming to the net other income, while the run rate is roughly EUR 45 million. So with EUR 39 million, we're slightly below, but this is a detail. And in essence, I would say it's perfectly in line with what this should be. Let me then go to an important line that is the operating expenses line. Well, we guided in the beginning of the year a growth of 2.5% year-to-date, and we delivered on that precisely 2.5% cost increase full year '25 compared to full year '24, excluding, obviously, bank taxes and the FX impact. So in this perspective, it's perfectly in line with the guidance and if that entails also the efficiency because intrinsically, if you look at the contributors, we have the seasonal effects in the fourth quarter of IT contributors, marketing expenses and so on and so forth. But if you look at the underlying result, well, in essence, it's very simple, we built down the total number of FTEs KBC group-wide. So we have less people, but we have 9% more revenues generated in 2025. And it is that efficiency, which we are going to continue in the years to come, '26, '27 and '28. How is this translated? Well, this is translated in a further improvement of the cost/income ratio. If you do more with less people, then your cost/income ratio goes to 41% when you exclude the bank taxes. And bank taxes speaking, we now have EUR 666 million. It's a very interesting number and is therefore also called bank taxes. No further comments on the next page, you see the detail. And let me go then immediately into impairments. Well, impairments are well under control. We had actually a good quarter in quarter 4, EUR 76 million were related to the loan book, which was triggered by 1 or 2 bigger files, but this is perfectly in line with the guidance which we gave. And on the buffer, which we hold for geographical and emerging risks, we only had a release of EUR 3 million, which brings the buffer to EUR 100 million, which can be used for circumstances if they would derail in the future. We also had a EUR 48 million impairment on goodwill which is mainly triggered by an impairment on software. This is software mainly in the Central Europe entities where we have, as you know, installed new platforms, and we impaired other parts of solutions, which were built in that perspective. In terms of the remaining amounts, EUR 9 million is linked to a government initiative in Slovakia, EUR 9 million of modification losses and EUR 7 million on goodwill impairment, which sums it up to EUR 48 million. What about credit cost ratio and impaired loans ratio? Well, we continue to see a very good credit cost ratio, 13 basis points regardless of the buffer and the 13 basis points compared to the guidance, which we gave below 25 to 30 basis points, which is that box is ticked. And also when you compare it in the longer term credit cost ratio of 25, 30 basis points, well, then this is significantly better. The ratio is good. Why? Because also the underlying portfolio on impaired loans is further improving. It now stands at 1.8%. If you would use the EBA definition because of the KBC definition a bit harsher, then the number stands at 137 basis points, which is significantly better than the European average. Also, if you would look into the evolution of the PD classes, which you can find in the quarterly report as well, then you see there that in quarter 4, we had a further improvement of the PD evolution in our loan book, triggering indeed this credit cost ratio and saying that the quality of the book is good. Going to the capital ratios, which you know are built up by 2 sides. In the numerator part, we add the contribution of the quarter 4, and we obviously also add the dividend payments of KBC Insurance, which is, as you know, lagging 1 quarter behind in the insurance side. So the result you see here is the dividend of the previous quarter, which is booked and totaling EUR 19.2 billion capital, CET1 capital. What about the denominator? Well, that denominator is influenced by 2 things. First of all -- actually 3 things. First of all, growth, given the fact that we're strongly growing our asset side, so our loan book, that has an impact on the risk-weighted assets to the tune of EUR 1.7 billion. Next to that, we have the traditional booking of the operational risk-weighted assets totaling EUR 1.2 billion and some changes on the market risk-weighted assets, EUR 0.8 billion. So in total, let's say, round the number, roughly EUR 4 billion, but this was offset by the inclusion of the impact of the SRT, which we run in the fourth quarter, and that SRT brings down the risk-weighted asset increase to roughly EUR 1.7 billion. In that perspective, the capital ratio now stands at a solid 14.9%. What is not included in this capital ratio are, in essence, 2 things. First of all, we have closed the acquisitions of 365 bank and 2 days ago or -- yes, 2 days ago, the acquisition of Business Lease, Czech Republic and Slovakia. And the sum of the 2 will have an impact of 50 basis points. And then what is also to be known is that we will continue to further optimize our capital position, risk-weighted asset position in the course of 2026 with SRTs and therefore, try to mitigate the impact of the volume increase, which we foresee as we speak in '26, '27 and '28. Going to the ratios then. Well, we end up with an OCR ratio of 10.87%, which is 2 basis points higher than before. This has to do by legal changes on the systemic buffer and so on and so forth. It's only 2 basis points, so let's not dwell on this. And then the MDA stands at 10.91%. This is triggered by a 4 points percent -- no, not 4 points percent, 4 basis points difference on the Tier 2, and that is almost fully but not entirely compensated by the AT1 surpluses. Leverage ratio stands at 5.6%, which is a further increase, which is also true for the liquidity ratios already mentioned them. And also the insurance stands at a very solid 227% Solvency II ratio, which was positively triggered by the evolution of the spreads on the bonds and also obviously, by the contribution of the results of the insurance company, which brings us to the future. What about the future? Well, the guidance this time is a bit more difficult because we are comparing 2025 as a base year with '26, '27, '28, where KBC Group changes from a composition. '25 does not contain 365 nor Business Lease acquisitions. So therefore, let's be careful. And therefore, we prefer to give also guidance on the underlying performance of KBC Group in '26, '27 and '28. On the first slide, this is on Page 19, you can see what actually we guided last year for '26 and '27. If you look at the performance, the underlying total income growth which we forecasted a year ago is 5.3%. And if you look at the guidance -- longer-term guidance on last year for '26 and '27 on the cost side, then we guided an increase of 3.3%. Well, if I just take now a look at '26, '27 and '28 purely organically, so forget about the acquisitions, then we guide that our income growth for '26 will be stronger than the 5.3%, so 6.8% and the efficiency, the cost evolution will be roughly the same as what we guided a year ago, so 3.4%. Let me translate that differently. We use the same efficiency, but we add hundreds of millions to our bottom line P&L. So in the operating profit, there will be a strong positive contribution remaining the efficiency of what we had or let me use it differently with the same people doing even more revenues. Intrinsically, what we do then add for the long-term guidance is the acquisition of 365 and Business Lease. 365 added in 2026 means that we are adding a company which still is not working according to the KBC standards. We do foresee max 24 months to make 365, Business Lease working according to the efficiency and productivity standards of KBC. That means that we will have the full benefit on the revenue side and on the cost side fully into '28, not '26, '27 because you just absorb them as of the 1st of January of this year. As a matter of fact, it also then gives for 2028, the same underlying results. We will continue to see the underlying growth of our cost, 3.4% with that difference that our top line will grow even faster than what was done in '26 and '27, so 7.7%. So adding then at the end of 2028, the efficiency, the benefits of 365 and Business Lease will add another EUR 100 million on your bottom line. So in summary, in essence, underlying, you will have a jaw of 3.4%. And this is true for the entire cycle. The difference is that we will continue to grow our total income further and stronger than what we did last year. And therefore, it adds to your operational profit hundreds of millions of euro. How you translate that then in efficiency? Well, we do see the cost-income ratio of '26 guided at roughly 40%. And given what I just said, we do more income with less people, we will guide the cost-income for the longer term below 38%. All the rest on the guidance is more or less in line. We increased the guidance on our insurance business from 7% to 7.5%. Combined ratio goes to 91% below and then credit cost ratio is well below the 25, 30 basis points. And let me emphasize again, this is what we call the floor ceiling approach. So everything which is related to income is a floor, so it's at least and everything which is related to costs or claims or impairments is considered to be a ceiling, so max. In that perspective, one more detail, we do expect our net interest income for this year to be at least EUR 6.725 billion, which is compared to previous year, roughly 11% [Technical Difficulty] as a floor, so it is at least. Let me go then in the wrap-up. The wrap-up is in that perspective a repeat. So let me actually emphasize only one slide that is a slide of full year 2025. If you look at '25 as a summary of fourth quarters, then this is indeed [ EUR 3,568 million ] of profit, which is significantly better as last year. If you exclude the one-offs -- the one-off effect of the DTA in Ireland out of the year 2024, then the profit rose with 18%. And given the fact that the guidance, which we just gave of '26, '27 and '28 is just a prolongation and a continuation of the effect of '25. The outlook on the operating profit is more or less in line with what I just said on '25, '24. Given the exceptional character of this year, where we not only had record results, but also record performance on the customer satisfaction, employee satisfaction and the best banking app in the world, we also decided or not decided, we proposed to our Board yesterday evening to grant an exceptional bonus of EUR 25 million for the entire group to our staff. This bonus is yesterday positively advised and now will be proposed to the AGM in May. The reason why it goes to the AGM, it is an allocation of profit. And therefore, under Belgian GAAP, it will be -- indeed when it is approved by the AGM, it will be booked under the profit allocation. In the IFRS, the rules are a little bit different. That profit allocation is considered to be a cost, and that will be then, if positively decided by the AGM, will be contributed to the cost. That cost, given the fact that decision needs to be taken is not in the guidance. So this sums it up. I am not going to dwell upon all the other slides. I give you time for your questions. So I give back the floor to Kurt. Kurt De Baenst: Thank you, Johan. The floor is now open for questions. [Operator Instructions] Thank you. Operator: [Operator Instructions] The first question today comes from the line of Tarik El Mejjad from Bank of America. Tarik El Mejjad: Two questions. I mean, first, I would just come back on your point about your always arguments about NII is a floor and -- or revenue is a floor and cost guidance is a cap. And I understand where is the upside could come from both. First, on NII, I would like to understand what volume assumptions you use for loans and deposits? I mean for loans, you gave the 5% year-on-year in '26, but one which sounds to me quite low bold given your delivery and the pickup in growth in CEE and in Eurozone. But I want to hear on this and what's the outlook for beyond '26? Is it fair still to apply the usual 1%, 2% NII conservatism buffer you guys always had worked quite well in the past. So just wondering if you still have this cautiousness there. And then on costs, I understand the scope effect change, but on the AI and tech and basically growing Kate further, how much actually allocated on investments on this? I mean for AI and tech for banking, it turned from banks being winners to losers in the last few weeks. What do you think of that? And do you see it really as a pain first than a benefit? Or you think you can reap the benefit first? Bartel Puelinckx: I will respond to the first question of Tarik related to the development of the loan volumes and the deposit volumes going forward. So indeed, I mean, we recorded an exceptional 7.4% organic growth in the loan portfolio in '25. But this is indeed exceptional. We now guide in '26 for approximately 5% growth. The reason why we had a very strong growth in the '25, which is rather exceptional was, of course, triggered by the first half of the year, particularly in advance also of the uncertainty related to the tariffs, where we saw quite some increase also in anticipation of those tariffs of production in Europe. That's one element of that. And secondly, we also indicated that basically the strong growth in the first half was driven by a number of large transactions, mainly M&A transactions of some of our core customers, which drove the increase to indeed for the full year, 7.4%. We do not expect that to be repeated in the '26. That is the reason why we guide 5%. But obviously, 5% is based and driven by the fact that we typically look at the composition of the GDP growth on the one hand and the inflation. So if you -- that's a rule of thumb that we always use, particularly in Central Europe, GDP growth plus inflation, which indeed is bringing you to roughly 5%. And by the way, when you look back over the past 5 years, we always have been able to grow our loan portfolio by 5% organic growth. So that is where the 5% comes from. Then as far as the deposit side is concerned, so we never guide on the growth of deposits. But as you have seen, we have 2.8% organic growth for the full year and 4% growth for the full year nonorganic. This gives you an indication of potential future growth. Obviously, also here, the wealth conversion and the GDP growth in Central Europe is going to contribute to that. And so we have a positive view on the further growth from that perspective. So that explains where we come from. We do not guide on the loan and deposit growth for the '27 and '28 for obvious reasons. Johan Thijs: And Tarik, I will answer your second question. Indeed, there is -- at this, let's say, last quarter, there is a big shift in terms of also media attention and statements made on artificial intelligence and impact on business development, but also on efficiency and not only in the financial industry, but in general. But specifically for the financial industry, I think our sector is in that perspective, really, really prone to using and embracing artificial intelligence if productivity gains need to be achieved. So giving this general statement, you can imagine that we are continuously emphasizing this, we have been doing this for the last 11 years already. KBC started with its artificial intelligence applications in our organizational structures and in our operations in 2014, '15. So we will continue to do so. We have an intention to further optimize the way we are working, and that is done in 2 ways. First of all, we continue to develop our backbone because in KBC, the philosophy of using artificial intelligence, and that is, I think, a little bit different than what you sometimes read in the press. I have the impression that in the press, sometimes people are believing that when they mentioned the word artificial intelligence, that only the fact that it is mentioned already increased productivity gains. I do not think that is a given. I think you have artificial intelligence productivity gains only when you tailor your AI solutions to the specific needs of your company. That's the first thing. And second thing, we will continue to do so. You can read it in our presentation as part of our Q4 announcement, but it's already in that pack for, let's say, 10 years. We continue to develop our front-end and our back-end connected via AI solutions. This is translated via Kate amongst others, but we will continue to develop those going forward. Straight-through processing, which means using AI tools to tailor solutions to the customer needs without any human being interfering in KBC, and the commercial processes stands now at roughly 65%, and the ambition is to bring it higher. But -- and that's something which we launched in 2025 beginning of the year, and this is now coming to maturity. We also are doing this exactly same thing that is connecting your front end and your back end, the front end in this case, the internal people for the noncommercial processes, and that needs to -- that is also using AI for good understanding, and that needs to deliver its results in the course of '26, '27 and '28. So on that perspective, yes, we will continue to invest in artificial intelligence, so using innovation, but we will continue, and that is, I think, far more important to use artificial intelligence to automate the processes in what we call a dark factory mode, so without any human beings interfering. The total summary of all investments is also part of the pack, including the transformation of the back offices, which is the trigger, including the front office applications, including artificial intelligence is cash-wise EUR 2 billion for the next 3 years and is roughly EUR 1.5 billion in terms of OpEx, also over 3 years. Operator: The next question comes from the line of Namita Samtani from Barclays. Namita Samtani: My first question, I see the footnote on the net interest income guidance says you include conservative pass-through assumptions. Can I clarify, do you mean pass-through of policy rates or pass-through of your replicating portfolio yield? Just wondering because both your Benelux peers are guiding to around 100% pass-through of the uptick in the replicating portfolio to savers. So are you similarly conservative there? And my second question, could you please give us an outlook for banks and insurance taxes, please? Because when I look at a country level, Belgium is going to be up around EUR 35 billion year-on-year. Hungary is going to be up EUR 60 million, and you're guiding to 5% deposit growth or something similar. So I find consensus being up only EUR 25 million year-on-year, quite confusing. So is my math wrong? Or can you give some color here, please? Bartel Puelinckx: Namita, so actually, what the conservatism that we guide for is basically the external rate on the saving accounts, which is, of course, going to be depending on the evolution of the policy rates going forward. Johan Thijs: Okay. And then I will take your second question. So on the bank taxes, indeed, it is not a guidance provided yet for the simple reason that there is uncertainty on one big element that is what Belgian government is going to do. So it is unclear definitely in the detail how and what the Belgian decision in this matter is going to be. And therefore, we cannot give you now a right insight in what the evolution of the bank taxes is going to be. I am not -- so I know you made a reference to certain articles in the newspapers. I'm not convinced this is the real situation yet in Belgium. So therefore, I recommend to wait until the end of quarter 1 when we are going to announce anyway the guidance or the expectations on bank taxes for the full year because then we have better insight how it's going to work. The 2 -- the other element on bank taxes is, of course, Hungary, where the Hungarian government has already positioned itself. As you know, part of that positioning is actually passed through to customers. The other part is impacting our P&L, and that has already been disclosed earlier. So all the other countries, no bank tax changes are foreseen. And therefore, we will give you full guidance on the bank taxes when we have more insight, more clarity on the Belgium position end of quarter 1. Namita Samtani: Sorry, can I just follow up on the savings account? Can you quantify the pass-through? Or are you assuming any increase in deposit costs if base rates are stable? Bartel Puelinckx: Well, no, we can -- basically, what we're doing, I mean, there is -- you always need to take into account, of course, what the commercial impact this is going to be. And also, of course, when the policy rates would be increasing, then obviously, it's likely that we would be required to increase our external rates on the saving accounts as well. And that's the reason why we put some conservatism on the external rates of the saving accounts. Operator: The next question comes from the line of Benoit Petrarque from Kepler Cheuvreux. Benoit Petrarque: So my first question will be on the assumptions on NII for '26 and '28. So on the volume growth, I think you've clarified that. Could you maybe clarify what your assumptions are on asset margins going forward also in terms of shift from term deposits to other type of deposits? And also clarify on the pass-through rate assumption, sorry to come back on that. What type of marginal pass-through rate assumption do you expect in your guidance? So that's the first question. Number two is on OpEx. Thanks for the Slide 19 and the kind of organic OpEx growth of 3.4%. It sounds still a bit high. I'm looking at the Belgium inflation, and we know we have indexation there. This is coming down quite sharply. So I'm trying to understand why you expect 3.4%. And did you include any maybe one-off investments? We talked about AI. And are there any specific investments in that number? Bartel Puelinckx: Benoit, so as far as your first question is concerned, first of all, the margins on the asset side. Basically, I mean, already indicated and I should have also highlighted that on the mortgage side, let me start by that one. We still expect some -- quite some nice growth. Also in Belgium, actually, also this year started well off quite nicely with continuous growth also on the mortgage side, but particularly in Central Europe and this in all countries. In terms of margins on the mortgages, in Belgium, as Johan has been highlighting, we saw a -- we further reduced the gap between the front -- the margin on the front book and the margin on the back book in the fourth quarter by roughly 8 basis points. However, what we see is in the beginning of this year that competition has somewhat increased. And as a result of that, margins are somewhat more under pressure in Belgium. This is less the case in certain countries in Central Europe, where, particularly in Hungary, due to the fact that we have the home start program and the fact that now 80% of the business is being subsidized, this also leads to significantly higher margins and supporting, of course, further growth also of the mortgage business. In Bulgaria, also there, we see a very strong and continuous growth. You know that in anticipation of the euro adoption, the mortgage business increased quite significantly, but we see that pattern continuing also after the positively euro adoption at margins that are now at least compared to the Euribor in a positive range. However, also you know that there is a very particular funding approach and replication approach in Bulgaria, where the margins or the external rates are directly linked also to the external rates on the deposit side. As far as the Czech Republic is concerned, also there, we continue to see quite nice growth of the mortgage portfolio but also there, margins somewhat more under pressure, being still aligned with the margins on the back book. Slovakia, also there, continuous growth, margins similar to the Czech Republic, approaching more also the margin on the back book. Then on the mortgage side, on the corporate and SME side, we also expect continuous growth in both segments, where in most of the countries, the margins are quite strong and continue to be -- we expect them to continue to be quite strong going forward also in Belgium, although there, of course, competition might increase in the course of the year. So that's on the asset margins. As far as the shift is concerned towards term deposits, as you have seen and indeed, as Johan has been highlighting, there has been a huge shift of term deposits to CASA, particularly in Belgium, following, of course, the maturity of the term deposits that were issued 1 year ago following the repayment of the state note or state bond, I should say. Basically, 50% went actually back to CASA. So this is obviously a one other experience, but we do expect going forward that, that shift will continue as well, depending, of course, on the development of the policy rates, and that's because, of course, if the policy rates would increase, it might be that some would return from CASA to term deposits as well as, of course, the continuous growth of our asset management business, where we will continue also to focus on increasing particularly the net sales. So that as far as the shift is concerned of term deposits towards CASA. And as far as the pass-through are concerned, basically the pass-through as such, we do not guide specifically. Johan Thijs: Benoit, I will take your second question. Yes, indeed, as you pointed already out, the cost is -- the cost increase organically for '26 is mainly driven by inflation, but I would nuance the word inflation because I would more specifically refer to wage inflation. In general, we do expect a wage inflation of roughly 3.7% for the group, which means not only Belgium, where it is indeed indexed, as you rightfully pointed out, but obviously, you also have promotions and so on and so forth. And the sum of all parts means that the wage inflation is 3.7%, which immediately indicates that if the guidance which we gave 3.4% cost rise for 2026 organically, it means that efficiency gains are bringing down the number of wage inflation to the total lower cost increase. Let me translate it more boldly. We do more work, more output with less people because the inflation of the salaries is otherwise eating up your cost performance. So in essence, this is not only true for 2026, but this is indeed the same for 2007 (sic) [ 2027 ], for 2028, where the CAGR of the cost side -- of the wage inflation side, sorry, is also roughly the same amount, 3.7%, 3.8%. So in that perspective, yes, indeed, we do the investment, and that was the answer to Namita's question -- or sorry, on Tarik's question, sorry, that is indeed, the efficiency gains are triggered by the automation via artificial intelligence solutions. And therefore, we are able to bring down wage inflation to a lower cost level. Your question about investments and more specifically one-off investments. Well, I would not call it a one-off investments. But in the numbers of '26, '27 and '28, we do have actually, for the first time, bigger parts coming in on the cost side, which are related to investments. Let me highlight one thing, the investments which we are doing in Czech Republic on both the banking and the insurance side, where we're building new platforms are here again, front-loaded. So you see that more into the cost and the benefits will come later on, so in the course of the next coming years. While that is increasing, for instance, on the Czech Slovakia and banking side, the cost '26 versus 2025 with another EUR 12 million. But as I said, you don't see it in the CAGRs. Why? Because we are making more gains on the efficiency side, on the, let's call it, automation and AI side. And therefore, all those investments are returning into the P&L, which allows us, as I said, to make more revenues, substantially more revenues, I'm talking about hundreds of millions of euro with less people and therefore, with a strong positive contribution. Operator: And the next question comes from the line of Shrey Srivastava from Citi. Shrey Srivastava: Two for me, please. The first is you guide all the way until 2028 to be notably below your through-the-cycle cost of risk of 25 to 30 bps. At what point do you start to question the through-the-cycle range rather than just commit to being below it year after year? And my second one is another one on artificial intelligence and Kate. You mentioned when you introduced your large language model, you drove an increase in autonomy of 15%. What are the latest figures on this because you've obviously had 3 months more now to test it. It was very new at the time. Could you give an idea of sort of latest developments here if there's been a higher increase in autonomy or if you have a greater level of confidence? Johan Thijs: Thank you for your questions, Shrey. Let me answer -- well, I'll probably take both anyway. So your question about the longer term or the cycle on the credit cost ratio. Well, as a matter of fact, we already reviewed it a year ago when we took out a couple of one-off effects, amongst others, the longer-term cycle, which is somewhere in the pack. I don't know the number -- the page number by heart, but it is indeed roughly 30 basis points. We reviewed it. Why? Because in those numbers, the longer-term 25 years number was including, obviously, the financial crisis and was including Ireland, which is no longer part of the group. So we reviewed the numbers. What you see here, the 25, 30 bps is the group as it is over the last 20 years. Do we need to review it? Well, I mean, we could give you more details by saying the last 10 years or the last 5 years or whatever. But this is what the group is in the longer term. So the through-the-cycle number is 25, 30 bps reviewed in the composition as it is -- composition of the group as it is today. Then going to the artificial intelligence and the increase of autonomy. As I said during the announcement of the results, there is indeed an increase of the efficiency of the tool, which we use and which is used in the front end and in the back end. To -- you referred to earlier said 15% increase of autonomy. Well, it is actually today in reality, so in production since, what is it, 4 months, it's actually 20%. So Originally, Kate, when we changed it, had an autonomy of 70% in Belgium. Now we do have an autonomy of 82%, which is roughly 20% plus. The Central European entities are today, as you can see it on the slide, 69% in Czech Republic, but in Hungary and Bulgaria and so on and so forth is 71%, 72%. So in summary, it's there roughly 70%. We will use the new tool, the Kate 2.0 also in the next coming quarters in the Central European countries. And therefore, you can expect the rise of that autonomy indeed in line with what we have seen in Belgium. Two other small remarks. First one, it's not only the autonomy, which is up significantly, but we do see that customers are using more and more Kate because of the new tool. Why? It's far more intuitive. It can answer contextual questions and so on and so forth. And therefore, customer satisfaction was significantly up as well, translated in more usage, more usage means more efficiency, means more work done by Kate. As you have already seen in this quarter, that is a number of FTEs is on the rise. That's the first thing. Second thing is we also use this Kate in the back offices. Let me give you a silly example, at the first glance at silly. Every bank has a database which contains all the information which our employees need to use, regulation, product features, da, da, da. What they do in the past, they are going into that database, but they have a question, they look for the information. They spend X minutes, for instance, 10, 15 minutes before they find the answer to that question. Well, this has been translated into Kate 1.0 already, but it's now translated into Kate 2.0, which has a huge boost on the efficiency, whereas previously, an employee was not always able to find the answer. It took 10, 15 minutes to find the answer. Today, with Kate 2.0, all answers are found and the throughput time is 1 second. And therefore, we just celebrated the 100,000th question in Belgium under the tool Kate for staff. And that means that efficiency gain is translated into the numbers as well. So it sounds silly, but the impact is quite significant. For good understanding, this tool is rolled out group wide. Shrey Srivastava: That makes sense. Just if I may quickly follow up on the first one. You mentioned 25% to 30% is the through the cycle for the entire group. But obviously, 2028 is a way away, and you must have some degree of confidence to guide for something which is 2 or 3 years away. So just what gives you confidence in 2028 being well below the 25% to 30% through-the-cycle figure... Johan Thijs: So indeed, yes, we -- I mean, the floor ceiling approach you know, given the fact this is a ceiling, we are very confident that it will be low. As a matter of fact, when I look into the portfolio, the guidance which we give is based on underpinning elements, obviously. One of the most important underpinning elements I highlighted briefly during the call that is what about PD migrations. And the PD migrations in quarter 2, 3 and 4 of 2025, and it sounds perhaps counterintuitive given the -- I mean, the world and the shape of the world we are in, the PD migrations have been improving. So we do see in our entire loan book, the PD migrations shifting to the better side. So a number of defaults that is improving. What, of course, can happen is that there is a bigger file here and there. But if you take that into account and you take into account the observations which we have for '26, '27, '28, given and that is an assumption, the same economic environment, which we have, well, there is no reason to assume that the 13 basis points, which we have seen for 2025 is going to be fundamentally different than in '26, '27, '28, which means significantly below the 25, 30 bps. One caveat, you probably know what I'm now going to say, no escalations of wars, no other things which are popping up, which are disrupting the environment, the economic or political environment significantly globally. Operator: And the next question comes from the line of Giulia Aurora Miotto from Morgan Stanley. Giulia Miotto: I have 2. Sorry, just to go back on the NII. Did I understand it correctly that you are assuming continued faster growth of current account versus savings and term, i.e., a mix shift towards current account, which is more profitable? Or are you assuming a stable mix shift from here? And I know we had a great mix shift in the quarter. I'm just looking forward. And then secondly, SRTs, you started doing some. How much shall we assume every year in addition to what you have already done? And I don't know if you can share any economics on this in terms of the costs to do so. Johan Thijs: Giulia, I apology, can you repeat your second question, because we -- I mean, it's very difficult to understand. No, no, please, sorry. Giulia Miotto: Okay. I was just asking about SRTs. How much are you planning to do every year... Johan Thijs: SRT, okay, sorry. Giulia Miotto: Yes, SRT. Yes, significant risk transfer. Johan Thijs: Because we missed the word SRT. And therefore, we... Giulia Miotto: All right. Then it doesn't make sense. Okay. Bartel Puelinckx: Okay. Giulia, I will respond to both of your questions. So as far as the shift is concerned, we never indicated that it would be a shift only to current accounts. When I was referring to a shift, it's a shift that goes from term deposits to both current and saving accounts. So we do not specifically mention that it was only to current accounts. Secondly, as far as your SRTs is concerned, indeed, I mean, as we have always been saying, we see the SRTs as a means to an end. We are, of course, actively engaging into portfolio management, which is a number of tools that we used and one of them is indeed SRTs. The reason why we're doing that is that we do not want to become fully dependent on the SRT market going forward. Having said that, you know that we did our first inaugural SRT back in the fourth quarter, which was a very successful one, EUR 4.3 billion, out of which we generated a EUR 2.3 billion of risk-weighted asset saving, which is an efficiency of more than 50%. And also, as we indicated, this is at a cost which is well below the cost of capital of KBC. So therefore, also contributing quite nicely. Going forward, we do intend to further invest or launch SRTs. We do not -- we are currently making an analysis of the portfolio. We have a relatively good view on which portfolios we will include. And indeed, you can expect further SRTs depending, of course, also on the approvals that we get from the ECB because you also know that they have launched the so-called fast lane track, but there are quite a number of conditions that are need to be fulfilled in order to be able to benefit from that fast lane approach. And so therefore, it's very uncertain whether we would be able to benefit. So therefore, taking into account that we will probably launch a second SRT in the second quarter and a third SRT in the fourth quarter of '26. The amounts that remains to be seen and depends on the portfolio and the efficiency that we can generate on those portfolio, but we will keep you posted on that going forward. Giulia Miotto: And if I can just follow up on the first question, so the mix shift. So basically, you assume less term, more current and savings. And you base these go-to levels on history. So what -- can you share basically the split that you are using? Johan Thijs: Well, it's very difficult to anticipate how much exactly is going to shift from the term deposits to CASA. And as I stated before, to a large extent, this will also depend on the development, of course, of the policy rates because if policy rates would go up again, you can expect, of course, that less will be shifting and we might even have to see a return from saving accounts to term deposits. So that's the reason why it's very difficult to give you a clear indication of what the shift is going to be, but we do expect that for the time being, if, of course, policy rates remain as they are, that we will continue to see a shift from term deposits to CASA and particularly also to mutual funds. Operator: The next question comes from the line of Chris Hallam from Goldman Sachs International. Chris Hallam: Just 2 left. So I think both pretty simple ones. So why did 50% of the state notes go back to CASA? I know the rates are from term deposits aren't as generous as they were, but I guess they're still better than CASA rates. So why do you think clients are proactively rebalancing their liquidity from locked up saving strategies into more operational accounts? I know there's a difference between the flow, but just specifically when the state note matured and that flowback happened, maybe Kate is telling them to do that. And then perhaps I missed this earlier, but could you give us your best sense on the time line on Ethias where that currently stands? I know we've had a mark-to-market on that in prior calls. I know it's not directly relevant for you as well, but any color you have on the time lines of Belfius and whether or not there could be any connection between those 2 processes? Johan Thijs: First of all, as far as your first question is concerned, I mean, why indeed 50% of the maturing term deposits went back to CASA. Obviously, are you -- when you look at the current external rates that we are able to generate because, of course, the main difference with last year is that the market has returned to more rationality. And as a result of that, basically, we are able to offer term deposits now not at negative rates, but of course, negative margins, but at positive margins. So the rates on the term deposits have come down significantly. And therefore, people are very unlikely or willing to continue to lock in their money for a longer term at such rates. And that's the reason they probably shifted more to CASA, awaiting also for opportunities, and that's also what we are doing to further invest in mutual funds. So that is exactly what we are expecting that we are moving, that we will -- we see also more moving into the mutual funds going forward. Bartel Puelinckx: Thanks, Chris, for your questions. I will take the second one. If I add one more flavor to what Bartel just said, be aware that a lot of people which invest in term deposits were very wealthy people. And therefore, they are inclined to go more into investment products. Anyway, going back to your second question, well, the government has taken position also on the record on what they're going to do with their assets, and that is entailing in essence, 2 things. The one is Belfius. They have the possibility to investigate a private placement of roughly 20% of the capital, which then also means that they could maintain their dividend, which goes into the budget, as you know, of the government. The 20% sale goes into the that GDP position of the government. And then they have the same announcement, they also indicated that the position on Ethias is investigated, which means that in the course of 2026, they will position themselves and that position can be twofold and is either launched in terms of a sale, partial sale, whatever sale of Ethias. And then secondly, the other option would be no, we keep it for whatever reason. The position in this perspective of KBC is quite clear. We will struggle. Belfius is not possible for us giving the concentration risk in terms of market share. And the second one, Ethias, we are clearly interested. I said this on multiple occasions, and this is not changing. So we are definitely looking into that possibility. For that reason, we also prepared ourselves. And if the outcome of the government will be launched, we will be ready. If the outcome of the government, no launch, then and a clear statement that it will not be sold, then it is considered for us to be gone. And in that perspective, we will reconsider our position on the capital, which we hold specifically for that acquisition. Operator: The next question comes from the line of Anke Reingen from RBC. Anke Reingen: Just one follow-up question on the capital distribution. I'm sorry if I missed this. I'm just wondering what was the thinking you moved to about 60% payout ratio and you didn't go out all the way to the 65%. And sorry, just one follow-up on the EPS. You said there's also partial sale discussed. Would you be interested? I mean, I guess it depends on all the moving parts, but would a partial sale be of interest as well as a full acquisition? Johan Thijs: Thank you, Anke, for your questions. So on the dividend, well, what is our policy is straightforward. We want to grow further our book. And in that growth of book is in 2 ways, organic growth, which we established this year, 9%, or 8.7% to be precise. And also acquisitions, which we did this year as well with the acquisition of 365 and the leasing companies in Czech Republic and in Slovakia. The outlook for 2026 is indeed, given the government statement, a potential acquisition. So 365 and Business Lease is going to be deducted from our capital this quarter -- sorry, this quarter, which is quarter 1. So that is roughly -- that is 50 basis points, 46 points plus 4. And then our capital ratio stands at 14.4%. The acquisition of Ethias, if it comes to the table, will have an impact. I mean, according to the analyst reports, we don't comment on this precise impact. But according to analyst reports, most of them under Danish Compromise consider this to be max 100 basis points. You can make the calculation yourself. So in this perspective, the 60% payout is a further execution continuation of our dividend policy, which brings it now to EUR 5.10 per share and is aligned with what I just explained on the potential acquisitions and the potential M&A, which we can do in '26, '27. In that perspective, it is also clear that it was also the answer which I just gave on Chris' question. If it is not coming to the table, then this capital is no longer allocated to this part and becomes part of the distribution, clear. So in this perspective, we just keep, let's call it, the powder dry and we bring a very decent payout and the consideration on the future in that perspective is quite clear or we do an acquisition or we release that part of our capital in terms of capital distribution. What about a partial sale? Well, I mean, at this stage, if there is a partial sale with a straightforward message that no longer it is possible to do a full sale, well, that would completely change our position because we are not interested to participate in an acquisition where we withhold, for instance, not the 100% or withhold a position where there is a firm stake of the government involved. So in that perspective, we still assume the position to be fully released by the authorities. Operator: The next question comes from the line of Farquhar Murray, Autonomous. Farquhar Murray: Just one detailed question from me actually in this case on the non-life side. I just wondered whether you factor in any cyclical softening to pricing in the non-life outlook when you look out towards full year '28? And maybe more in the here and now, are there any actual signs of such softening emerging in the markets you operate? Johan Thijs: Thanks, Farquhar, for your question. So be aware in the position which we have and softening of pricing is obviously related to 2 things, and that is what is the current growth of your economy, which is triggering 2 things on the non-life side, for sure, the growth of your -- potential growth of your book, and the second part is how profitable is your book. In terms of our profitability, we are a positive outlier compared to peers also in the Belgian market. Portfolios have improved in the market in general, but not to the same extent as where we are with KBC. So therefore, we have a competitive edge. And to go immediately into the extreme version of soft pricing, that is a price war, I don't expect this to happen. Why? Because the margins are good, but the margins are not super in the sector. And KBC, the 87% in that perspective is not representative of what we see in the market. And this is true in the majority of the countries where we are present. So do we expect a softening of the pricing? The outlook is at least not that we go into a strong version of softening and definitely not into a price war. So in that perspective, the reason why we continue to see the growth of insurance companies and even upgraded the guidance to 7.5% is tailored to 2 things. First of all, what I just said, GDP growth is quite significant. Don't forget that GDP growth in Central Europe is roughly 100 to 150 basis points, at least higher than what we see in Europe and Europe -- Western Europe, sorry. Western Europe is considered to grow roughly 1%, 1.1%. And then secondly, be aware that the underwriting of our non-life insurance business is fully automated. Same standards apply in the same group. That's one of the reasons why the combined ratio is what it is, but also allows us to, in that perspective, target very specifically the bank customers and other customers via the models which we use. And they are pushed, amongst others by Kate. Operator: The next question comes from the line of Sharath Kumar from Deutsche Bank. Sharath Ramanathan: I have 2. Firstly, on fee growth, what's the embedded assumptions for your midterm guidance? I calculate around a 6% CAGR between now and 2028. Would you agree with it? And what sort of an assumptions predicate this? Specifically on asset management, do you think the 5% organic flow rate that we saw in 2025 is sustainable? Are there any positive extraordinary performance fees that we need to be aware of in 2025? Secondly, on capital distribution, a follow-up on the Ethias comment that you made. Assuming it does not happen, what is your excess capital stand? Would 14% be a realistic floor rather than the 13% minimum that you have in your policy? Bartel Puelinckx: Okay. Thank you. I will take the first question on net fee and commission income. Basically, you know that we are not guiding net fee and commission income for the very simple reason that basically, to a large extent, the development of net fee and commission income is defined by the asset management business and therefore, also, of course, by the development of the assets under management and the market performance. So because basically, 55% of our net fee and commission income, roughly 55% comes from asset management. And of the 55%, roughly 50% of our portfolio is in equity. So there we are subject, of course, to quite some market evolutions. But the numbers that you have calculated in terms of the non-NII growth are more or less -- I mean, are some numbers that I would be able to subscribe. Do we see some extraordinary fees or whatever? You know that in the fourth quarter, there was a EUR 50 million fee that was paid -- performance fee that was paid by the pension company in the Czech Republic. This you cannot extrapolate, obviously, because it's performance related. But it is indeed that the only annual performance fee that we have. And so from that perspective, the answer to your question is negative. Johan Thijs: And I will take your second question, Sharath. So on the capital side, what would happen in terms of excess capital if Ethias does not come to the table? Well, first of all, in terms of the final destination that is if we don't have any M&A possibilities, concretely at the end of '26, beginning of '27 when we decide on the dividend. Well, then this is considered to be surplus capital or capital which we cannot make work in terms of organic growth and M&A. So -- and as I said, that will be then pronged for distribution. How much capital is excess? Well, that's -- we don't speak in terms of excess capital. So as we did, what is it 2 years ago, this is no longer valid. We have a clear position there. We have an absolute minimum of 13% on the CET1 ratio. We do have our current capital position, 14.4% if you take into account 365 and Business Lease. And then obviously, you add to that the performance in terms of capital in the course of 2026 to end up with the number, and that will be compared to our peers in a nonmechanical way. So we want to be amongst the better capitalized financial institutions. That is something which we don't forgo on, and that will be then decided by our Board in all discretion. Let me emphasize one more thing, which Bartel said earlier. We will continue to optimize our capital structure. It means, amongst others, that SRTs are tools which we have on the table, which we are preparing and which are going to be indeed influencing positively the capital position. Operator: There are no further questions. So I hand back over to your host for closing remarks. Kurt De Baenst: Thank you. This sums it up for this call. I would like to thank you for your attendance and enjoy the rest of the day. Bye-bye. Operator: Thank you for joining today's call. You may now disconnect your lines.
Operator: Good morning, and welcome to the NetSol Technologies Second Quarter and 6 Months Ended December 31, 2025, Earnings Conference Call. On the call today are Founder and Chief Executive Officer of NetSol Technologies, Inc., Najeeb Ghauri; Co-Founder and President, Naeem Ghauri; Chief Financial Officer, Sardar Abubakr; and Senior Vice President, Legal and Corporate Affairs, General Counsel and Corporate Secretary, Patti McGlasson. I will now hand the call over to Patti, who will provide the necessary disclaimers regarding forward-looking statements made during today's call. Patti, please go ahead. Patti McGlasson: Good morning, everyone, and thank you for joining us today. After we review the company's business highlights and financial results for the second quarter and 6 months ending December 31, 2025, we will open the call for questions. Before we begin, I'd like to remind you that our remarks today may include forward-looking statements within the meaning of the federal securities laws, including the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect management's current expectations and are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied. We encourage you to review the cautionary statements and risk factors contained in NetSol's press release issued earlier today as well as in our filings with the Securities and Exchange Commission, including our most recent Form 10-K and quarterly reports on Form 10-Q. I'd also like to note that today's discussion will include certain non-GAAP financial measures. A reconciliation of these measures to their most direct comparable GAAP figures can be found in the press release issued earlier today. Lastly, please remember that this call is being recorded and will be available for replay on our website at netsoltech.com, and through a link included in today's press release. [Operator Instructions] I will now hand the call over to our Founder and CEO, Najeeb Ghauri. Najeeb? Najeeb Ghauri: Thank you, Patti. Good morning, everyone, and thank you for joining NetSol Technologies call to review our results for the second quarter and 6 months ended December 31, 2025. We delivered a strong second quarter of fiscal 2026. Total net revenues increased 21% year-over-year to $18.5 million, driven by higher services revenues and growth in our recurring subscription and support revenues. Services revenue grew 41%, primarily from new implementations from major customers. As these implementations move through go-live and expansion phases, we believe they can support recurring subscription and support revenues over time. I'm pleased with strong balance sheet. Our current ratio of 2.3 reflects strong liquidity, giving us substantial flexibility for growth initiatives. I'd like to highlight the strategic progress we made during the quarter across product innovation, customer momentum and leadership. Firstly, on product and innovation, we launched our loan origination platform or Check, our AI-enabled credit decisioning engine. Check is designed to modernize credit underwriting by combining deep reasoning, intelligent automation and agentic workflows to support faster, smarter and more consistent credit decisions. It is an important extension of our Transcend platform and reflects our focus on building high-margin products that expand long-term revenue opportunities. Second, on customer momentum, we strengthened a key relationship with a $50 million 4-year contract extension with a Tier 1 global auto captive and long-standing partner. This extension reinforces customer trust, provides meaningful revenue visibility and validates the scalability of our platform. In addition, Transcend Retail continued to gain traction in the U.S. in the U.S. market with new dealer groups and franchised dealerships signing on during the quarter. Demand for digital automotive retail solutions remains strong, and these wins support our strategy to expand recurring revenue, while increasing our footprint in a high potential growth market. Finally, we continue to strengthen our leadership team to support our next phase of growth. During the quarter, we appointed Sardar Abubakr as Chief Financial Officer with Roger Almond transitioning to serve as a Chief Accounting Officer. Together, they bring deep financial expertise and will help maintain strong governance, discipline and transparency as we continue to scale globally. Overall, these milestones reflect solid execution across innovation, customer expansion and leadership. We remain focused on sustainable growth, deepening customer partnerships and advancing our position as a trusted technology partner, helping OEMs, dealerships and financial institutions sell, finance, lease and manage assets end-to-end. Looking ahead, our pipeline, multiyear contracts and recurring revenue base provide visibility into near- and long-term performance. We remain focused on disciplined execution and continued progress on growth and profitability. And now I'd like to turn the call over to our President, Naeem Ghauri, who will share an update on NetSol's journey and latest development with AI and how we are leveraging this transformative technology, both for our products and across our operations. Naeem? Naeem Ghauri: Thank you, Najeeb, and good morning, everyone. I'd like to share a brief update on our AI strategy and progress. Over the past year, our focus has been to embed AI across the Transcend platform and our internal operations horizontally, not as a stand-alone feature, but as workflow capabilities that drive measurable outcomes for our customers. We have built a shared AI layer with reusable components and governance built in, so we can deploy AI consistently across products while maintaining reliability, auditability and human oversight. Our teams work closely with customers to integrate AI into real-world workflows, so we can adapt general models into domain-specific capabilities tied to ROI and operational impact. AI at NetSol is now integrated into our product development life cycle, supported by dedicated teams, shared tooling and an integrated road map that helps us scale AI in a repeatable way, with evaluation and monitoring designed in from the start. A good example, as Najeeb mentioned, is Check, our AI-enabled credit decisioning capability within our loan origination product. It combines reasoning, automation and agentic workflows to help underwriting teams move faster with greater precision, while keeping humans in the loop. In parallel, we are applying AI internally horizontally to streamline delivery and improve productivity, and we are also exploring value-based pricing approaches for select AI-enabled capabilities. Overall, we believe this strengthens differentiation, supports operating leverage and positions us to scale AI value responsibility across our business. With that, I'll turn the call over to our CFO, Sardar Abubakr, to review the financial results. Abu? Sardar Abubakr: Thank you, Naeem, and good morning, everyone. I will begin with our financial results for the second quarter of fiscal year 2026, followed by results for the 6 months ended December 31, 2025. For the second quarter of fiscal 2026, total net revenues increased 21.1% to $18.8 million compared with $15.5 million in the prior year period, driven primarily by higher services revenues and higher subscription and support revenues. On a constant currency basis, total net revenues were also $18.8 million. Subscription and support revenues increased approximately 5.1% to $9.1 million compared with $8.6 million in the prior year period. On a constant currency basis, subscription and support revenues were $9.2 million. Service revenues increased 40.9% to $9.6 million compared with $6.8 million in the prior year period. Total service revenues on a constant currency basis were $9.6 million. Gross profit was $9 million or 48% of net revenues. On a constant currency basis, gross profit was $9 million or 47.8% of net revenues. Cost of sales was $9.8 million or 52% of net revenues compared with $8.6 million or 55.5% of net revenues in the second quarter of fiscal 2025. On a constant currency basis, cost of sales was $9.8 million or 52.2% of net revenues. The increase primarily reflected increased salaries and travel costs, even though the margin has improved. Income from operations was $1.3 million compared with a loss from operations of $0.5 million in the second quarter of fiscal 2025. On a constant currency basis, income from operations was $1.3 million. Foreign currency movements contributed a gain of $0.05 million in the quarter compared with $0.7 million loss for the prior year period. Moving to non-GAAP. EBITDA for the quarter was $1.7 million compared with a loss of $0.8 million in the second quarter of fiscal 2025. Overall, the quarter reflected strong top line growth driven by implementation activity, along with continued subscription and support performance. We also delivered meaningful profitability improvement versus the prior year, supported by gross margin expansion and improved operating leverage. Turning now to the 6 months ended December 31, 2025. Total net revenues were $33.8 million compared with $30.1 million in the prior year period. On a constant currency basis, total net revenues were $33.5 million. Recurring subscription and support revenues increased 7.2% to $18 million compared with $16.8 million in the prior year period. On a constant currency basis, recurring subscription and support revenues were $17.9 million. Service revenues increased 17.9% to $15.6 million compared with $13.2 million in the prior year period. On a constant currency basis, services revenues were $15.5 million. Gross profit was $14.9 million or 44.2% of net revenues compared with $13.5 million or 44.8% of net revenues in the prior year period. On a constant currency basis, gross profit was $14.6 million or 43.5% of net revenues. Cost of sales was $18.9 million or 55.8% of net revenues compared with $16.7 million or 55.3% of net revenues in the prior year period. On a constant currency basis, cost of sales was $18.9 million or 56.5% of net revenues. GAAP net loss attributable to NetSol for the 6 months totaled $2.1 million or $0.18 per diluted share compared with a GAAP net loss of $1.1 million or $0.09 per diluted share in the prior year period. On a constant currency basis, GAAP net loss attributable to NetSol was $2.5 million or $0.21 per diluted share. Non-GAAP EBITDA for the 6 months ended December 31, 2025, was a loss of $0.1 million compared with a non-GAAP EBITDA loss of $0.5 million for the prior year period. Turning to the balance sheet. Cash and cash equivalents were $18.1 million at December 31, 2025, compared with $17.4 million at June 30, 2025. Working capital was $26.4 million compared with $26.6 million and NetSol stockholders' equity was $35.9 million or $3.04 per share. For the first half of fiscal 2026, we delivered continued revenue growth across both recurring and services businesses, while maintaining a solid balance sheet and liquidity position. I'll now hand over the call back to Najeeb. Najeeb Ghauri: Thank you, Abubakr. Looking ahead, we remain confident in our ability to capitalize on opportunities across our markets. We will continue investing in our product portfolio, including AI-enabled capabilities across the Transcend platform, while expanding our global footprint and enhancing our solutions to meet evolving client needs. Our focus on long-term customer relationships, supported by a strong pipeline of recurring and services engagements, positions us well for continued progress. With that context, we have increased our full year fiscal 2026 revenue growth guidance to nearly $73 million or better, supported by our current pipeline and continued investment in go-to-market initiative and our unified AI-enabled Transcend platform. While macroeconomic and currency dynamics remain a consideration, our diversified business model, execution discipline and resilient customer base provide a solid foundation for the remainder of the fiscal year. Overall, our first half performance reinforces our view that NetSol is well positioned to achieve our full year objectives and continue creating value for our customers and shareholders. With that, operator, please open the line for question and answers. Operator: [Operator Instructions] Our first question comes from the line of Todd Felte with StoneX Group. Todd Felte: Congratulations on a great quarter. I think the $18.8 million may be an all-time record for quarterly revenue. So that's great to see. I wanted to ask about your margins. I know you had some recent hires and some travel expenses. But as those new hires get up to speed, do you expect continued margin improvement? And where do you think your margins will kind of stabilize out at? Najeeb Ghauri: Thank you, Todd. Absolutely, we are anticipating improving margins in the coming quarters and the next fiscal year. As you said rightly, we are continuously investing in our growth strategy. It means travel, new employees, building new platform, so forth. So I think the gross margin will improve, absolutely. And I think I can have you Naeem and Abu jump in to add further. Naeem Ghauri: Yes, I'll just add a little bit more color. So essentially, the new hirings are primarily in the AI teams, Todd, and we see that continuing for a period. We are also incurring some expense on cross-training. So we have a very aggressive plan to cross-train our existing workforce across horizontally in every department from HR to software engineering and testing, accounting, admin. So literally, we are touching every single business segment. So internally, we are very, very confident that within the next 6 months, we will have a major transformation Phase 1 completed, and we'll go on to more advanced training as we go forward in the rest of the calendar year. Patti McGlasson: Does that help? Sardar Abubakr: I'd like to just share that. Todd Felte: Yes. While I got you, I was wanting also to ask about the noncontrolling interest and how that is computed. I know that took a big chunk out of our earnings per share this quarter. Najeeb Ghauri: You want to answer Abu just talking about the Pakistan subsidiary, right? Naeem Ghauri: Minority interest, yes. Sardar Abubakr: Sure. So if I could, Todd, just go back to your previous question first, and then we'll come back to this one just to add some color. So to take on what Naj and Naeem said, we will continue to invest in the right areas that will propel our future growth. But margin improvement, both at a gross and at a net level is going to be important for our profitability story and our journey going forward. You probably will see just very quickly that our GP percentage of revenues this quarter versus the preceding quarter was up 48% as compared to 44.5%. Cost of sales was down. Similarly, this quarter was 55.5% compared to the equivalent quarter of 52%. And then EBITDA, which is an important metric, of course, clocked at about a 9% margin compared to a loss in the equivalent quarter last period. I think what gives me confidence, Todd, in addition to that is that our liquidity position is solid. The current ratio, but also our debt to equity, it gives us an opportunity to continue to invest in exciting growth markets. And I think we're at the intersection of both software, financial services and mobility. Now coming to your second question on minority interest controlling. If I understood that question, you were saying that how is that computed? Todd Felte: That's correct. Sardar Abubakr: If you could just mention that again. Najeeb Ghauri: Yes. Yes. Todd Felte: Yes. Just how is it computed? I know that there was a nice profit for the Pakistani subsidiary, and I showed you took a $715,000 loss on that noncontrolling interest. Sardar Abubakr: Yes. We follow the standard definitions applied in GAAP for noncontrolling interest. So the Pakistani subsidiary is owned majority, but there is a 30% minority interest, and we follow the standard definitions as per calculation for GAAP. Roger, if you want to add to that, you can feel free to add if I missed anything. Roger Almond: No, I think you have that correct. So Todd, if you look at our Pakistani entity, there, we own almost 70%, 30% is held by noncontrolling interest. So as they have recorded a very nice profit for the quarter or for the 6 months, then the 30% of their profit would then get allocated to the noncontrolling interest piece. Based on the consolidation, all of their revenues would be included up in our revenues and costs and our costs, et cetera, and then noncontrolling interest is then calculated down at one number in the bottom. So that's -- we follow the GAAP process as Abu had mentioned. Todd Felte: Okay. That's helpful. So basically, the better that the subsidiary does, it will add to your revenues. But if it's really profitable, 1/3 of that will have to be written off in the noncontrolling interest? Roger Almond: Correct. Sardar Abubakr: So Todd, yes. So as a subsidiary and not an affiliate, we will consolidate all revenues and costs. But from the profit share, you're right. Any earnings are split on a 70-30 basis between the parent and minority interests. Todd Felte: Okay. That's helpful. And then finally, to allude to your comments about the strong financial position the company is in. As a shareholder, we see the stock still trading just barely above book value. Have you thought about allocating some of that $18 million in cash, a small amount to either a stock buyback or maybe a small dividend? Roger Almond: I think... Sardar Abubakr: We -- go ahead. Go ahead. Roger Almond: Todd, thank you for asking the question. We did that a couple of years ago, and we're always open to the same approach. But as soon we can decide between the Board, then we'll get back to you accordingly. I mean we would definitely like to see go up. But Todd, I want to -- thank you especially for taking the time to visit us a few months ago. It shows your commitment and believe in our company. So thank you so much for your long-term view. Todd Felte: It was great to visit you. Operator: [Operator Instructions] We have no further questions at this time. Mr. Ghauri, I'd like to turn the floor back over to you for closing comments. Najeeb Ghauri: Thank you for joining today's call. Sorry, Todd, do you want to come back? Naeem Ghauri: Yes, I thought Todd wanted to come back. He's going back in the queue. Najeeb Ghauri: Is he in the queue, operator? Operator: Todd, [Operator Instructions] Najeeb Ghauri: I think it's okay. We're fine. Operator: Okay. Yes. Najeeb Ghauri: Well, thanks for joining the call today... Operator: No, I'm sorry, he did jump back in. Najeeb Ghauri: Okay. Operator: Todd, your line is live. Todd Felte: Okay. I'm good with that. Again, congratulations on a great quarter, and I look forward to future success. Najeeb Ghauri: And do come back again to Encino, California, Todd. Thank you for joining us today for your ongoing interest in NetSol. We look forward to updating you on our continued progress in the coming quarters. Have a nice day. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day. Najeeb Ghauri: Thank you, operator.
Geoffroy Raskin: Good noon, everyone, and thank you for joining us today. I'm Geoff Raskin from IR. I'm pleased to have with us Laurent Nielly, our new CEO; and Geert Peeters, our CFO, to present the 2025 results. Before that, let me remind you of the safe harbor regarding forward-looking statements. I will not read it out loud, but I will assume you will have duly noted it. With that cleared up, Laurent, over to you. Laurent Nielly: Thanks, Geoff. And before I dive into the results, allow me to say some words about me. First of all, let me share my appreciation for the Board and for our former CEO, Gustavo Calvo Paz, for the trust and the support in this transition. I'm honored to take over and realize the challenges ahead to both rebuild trust fast and to continue to work to unlock the interesting value of Ontex. I joined Ontex 8 years ago to help turn around the just acquired business in Brazil, then moved to Europe with a mission to bring strategic discipline, drive the business back to growth and to rebuild profitability after the inflationary shock in '22. I have a deep understanding of our company, and I share the passion for our purpose, mission and people. We have strong assets, potential, and I take on the assignment with high energy, but obviously also at a time of big disappointment after a challenging '25. As you know, the year did not evolve as we had anticipated at the start of '25, and we had to revise our outlook twice. The final results should be of no surprise to any of you being in line with the outlook we communicated early December. Revenue was 5% lower like-for-like in a challenging market and the adjusted EBITDA came down by 2 percentage points, mainly due to the impact of lower volume. The 10% margin level is still demonstrating resilience of the business in a difficult year. We did better than we anticipated for free cash flow, ending with a negative EUR 25 million. Net debt benefited from the divestment proceeds with lower adjusted EBITDA, our leverage rose to 3.3x. Let me expand a bit on the main elements that drove our results in the year on the next slide. Clearly, our volumes, which are the backbone of our business, did not meet our ambition with 3 key factors. We faced a softer demand in '25, especially in Baby Care. We could not pivot on some of the growing segment as fast as we wanted in the midst of our transformation in Europe that limited temporarily our flexibility, and this was amplified by some disruption in supply that we had discussed in previous quarters. And in North America, we experienced much more repeat decline in our contract manufacturing sales. Against this backdrop, we continue to preserve our competitive position, signing and starting delivery of new contracts, thereby maintaining our positive contract gain and loss balance for the year. We also continue to innovate in all 3 categories and are recognized on our sustainability performance, as illustrated recently with an A score from CDP. Most importantly, we reached some key milestones in our transformation journey. We completed the divestment of our emerging business. Our Belgium footprint work is progressing well. And in North America, we added production line in our North Carolina factory. Before I pass over to Geert on the financial analysis of the year, I'll quickly touch base on the fourth quarter performance. Our revenue came down by 7.6% like-for-like in Q4 versus a strong quarter last year. This is 2% lower than our third quarter of '25 with demand softening further, especially in Baby Care, both in Europe and North America. You can see in the chart that the decrease and the volatility of revenue in the last 8 quarters is mostly linked to our Baby Care business. whereas Adult has consistently grown and in the last quarter, represents 47% of our revenues. The lower volume in Q4 impacted the profitability, especially as we had anticipated growth and the adjusted EBITDA margin, therefore, dropped 3 percentage points versus last year to 9%, which is 2.4 points decline quarter-on-quarter. While Q4 was again below our expectation, it is important for me to stress the many progresses made on our transformation journey, which are strengthening the company and which will bear fruits in the months and years to come. Yet it is equally clear that more is needed to improve back our trajectory. With this, I pass over to Geert for a more detailed analysis on our full year results. Geert Peeters: Thanks a lot, Laurent, and hello, everyone. In the financial review, I will focus on the full year results and start, of course, with the revenue. On this slide, you will find the full year revenue bridge showing the 5% revenue decrease, which was almost entirely due to the volume decline by EUR 93 million. As Laurent already explained, this was caused mainly by the lower demand for retailer brands in Baby Care and specifically in North America, the decline of contract manufacturing causing Baby Care volumes to drop by 12%. Feminine Care sales volumes were 2% lower, which largely reflects the market trends. We benefited from the continuing growth of the adult care market, albeit with a modest 1% volume growth Reason is that we have a large exposure to the more stable healthcare channel. To capture further growth in the retail channel, we're currently ramping up the capacity. Our sales prices were slightly lower, reflecting the carryover from the lower sales price in '24 as well as some targeted price investments and our product mix improved at the same time and more than compensated for this. ForEx fluctuations had a small negative impact, mostly linked to the depreciation of the British pound, the Australian dollar and especially the U.S. dollar. Let's move now to the adjusted EBITDA bridge on the next slide. On the EBITDA bridge, you can see that EUR 40 million impact of the lower revenue on adjusted EBITDA. It includes also lower absorption of fixed costs. Positive is that our cost transformation journey continues. And this year, we generated EUR 69 million net savings, creating a 5% efficiency gain on our operating base. This encompasses efforts across the organization and includes the first benefits from the Belgium footprint transformation. We could have done more had volumes been higher. These continued efforts compensated most of the cost increases but leaving an EUR 8 million negative net cost impact. Raw materials prices rose by about 4%, mainly driven by higher indices. The impact was across inputs, but especially in packaging, superabsorbent polymers and fluff. Raw material price indices spiked in H1, but came down since, but on average, they're still higher than in '24. Other operating costs rose by about 8%. A large part is linked to inflation of salaries, logistics and other services. some were also caused by the supply chain inefficiencies we faced mainly in the first half of the year, think for example, outage of our Segovia plants. Despite all these challenges in '25, we managed to keep an adjusted EBITDA margin of 10%, which is 2 percentage points lower than last year. How this revenue and margin translates in net profit and also including the divested emerging markets can be seen on the next slide. Adjusted EBITDA -- sorry, adjusted profit from continuing operations was EUR 34 million as compared to EUR 76 million in '24. The decline can be fully explained by the lower adjusted EBITDA. In '25, we had much lower restructuring costs as compared to '24. This represented some EUR 19 million and were mostly noncash caused by impairments of obsolete assets and intangibles. Profits from continuing operations, which includes also the nonrecurring costs, thereby amounted to plus EUR 60 million and is, therefore, more or less in line with '24, which ended at EUR 21 million. As to the emerging markets, we posted EUR 190 million loss for Brazil and Turkey, and this loss is entirely caused by the noncash accounting impact from currency translation reserves. These were accumulated over the many years in the past, and these are recycled through the P&L once the divestment is completed, and this caused EUR 210 million combined loss in '25. But as I repeated already, it's noncash. With the last divestments executed only the core business is left. The result is much stronger -- is a much stronger balance sheet with lower debt, which we will discuss later. Let's now move to the cash flow on the next slide. Here, you'll find the bridge explaining how the adjusted EBITDA of EUR 184 million translates in a free cash flow of minus EUR 25 million. Net working capital changes were largely neutral, with an increase in discontinued operations, offset by an improvement in our core business. That latter core business improved from 5.4% to 5.1% over sales, mainly thanks to lower inventories, lower receivables and higher factoring. We have a EUR 12 million negative impact from employee liability changes as we accrued lower variable remuneration in the EBITDA of '25, which will lead, of course, to lower cash payout in '26. CapEx was EUR 81 million, representing 4.5% of the revenue of our core business and a nonrecurring cash out amounted to EUR 30 million mainly due to the already provisioned Belgium footprint restructuring. This brings the free cash flow before financing to plus EUR 18 million. Cash out related to financing was EUR 43 million, higher than in '24 due to the high-yield bond refinancing and a favorable interest rate swap, which came at maturity end of '24. This brings the free cash flow to equity holders to the minus EUR 25 million, as I told you before. Let me go to the net debt. Our net debt reduced by 6% from EUR 612 million end '24 to EUR 577 million end '25. Apart from the free cash flow, which I explained on the previous slide, we finalized the divestments of the Brazilian and Turkish business, which brought EUR 131 million net proceeds. We, however, had to reclassify EUR 34 million of cash residing in Algeria, dating from the divestment in '24, and it was reclassified as a financial asset. But currently, we're making good progress in repatriating this money. We also had an increase in lease liabilities and some other noncash elements, which amounted to EUR 27 million and relates to future commitments related to the renewal of some real estate leases. Next, we have the share buyback program, which was launched in '24 whereby we acquired 1.5 million shares to cover the future potential option plans with an impact of EUR 11 million in '25. This brings us thus year-on-year to the reduction of net debt by 6% and gross debt by 12%. And just to summarize, if we look at our gross debt, which is EUR 647 million, it's at the right side of the slide, you can see it consists of EUR 145 million of leases, of course, a EUR 400 million of high-yield bonds. And then we have the revolving credit facility, of which we had drawn EUR 100 million, which is a bit more than 1/3 of the total facility. And then before I pass the word back to Laurent, we can have a look at the leverage ratio. And in this graph, you can see the evolution since the end of '22. The net debt you can find in the middle in green and has reduced year-over-year by constantly deleveraging the net debt. The last 12 months adjusted EBITDA, which is at the top in blue, improved consistently year-over-year until the end of '24. In '25, we have the decline because of the challenging year, but also, of course, the scope reduction following the different divestments. In yellow then at the bottom, you find the ratio of both representing the leverage ratio. It improved from 6.4x at the end of 2022 to 3.3x at the end of '23, 2.5x the end of '24, and now we returned back just above 3x at 3.3x at the end of '25. Nevertheless, the balance sheet remains healthy. The leverage ratio remains below the 3.5x covenant, which is a threshold in the RCF, and important to stress is that we have ample liquidity, namely EUR 240 million, which is the cash of EUR 70 million and about 2/3 of the RCF, which is undrawn. The maturity of our debt is extended to at least '29. Now I'm very pleased to pass the word back to Laurent. Laurent Nielly: Thanks, Geert. After 2 solid years in '23 and '24, '25 was more difficult. So how do we see '26. And I will start with the overall market conditions, that we anticipate to remain pretty similar to '25 overall with low consumer confidence and continued promotional activity by A brands. Yet we equally expect the Adult Care momentum to continue and overall retail brand to remain a compelling consumer proposition with opportunity to grow share. On top of this general setting, the following elements are reflected in our assumptions. We expect birth rates in Europe to drive overall Baby Care demand slightly lower as they did in '25. In North America, worth mentioning that our contract manufacturing current sales level will create a negative comparison in the first half of '26 and especially in the first quarter, whereas you might remember, we had anticipated shipments at the end of Q1 '25 ahead of the trade buyer threats between the U.S. and Mexico. And in the other smaller overseas business that we have, we continue to review our portfolio with targeted exits of unprofitable contracts. So let me now share how this will translate to our ambition for '26 year. We target adjusted EBITDA to improve by 10% as we accelerate our extended cost transformation program throughout the year, and progressively return to more stable operations. This EBITDA improvement will be gradual, starting from a soft first quarter which is expected in line with the fourth quarter of '25, but therefore, lower than the strong first quarter that we had in '25. This improvement is underpinned by overall largely stable revenue for the full year. And here again, you should expect a lower Q1 versus prior years for the reason that I just explained. And then volume growth to pick up in subsequent quarters. We expect free cash flow after financing to be back in positive waters, driven by this higher adjusted EBITDA, lower restructuring charges and a continued effort to drive our working capital down. This, in turn, will lead leverage down to 3x or better by the end of the year. To deliver this plan, our priorities are clear as presented in the next slide. First, resume volume growth. This includes ramping up the existing and newly secured contract as well as the benefit of the additional capacity we have added in Adult. Second, continue our productivity program with an extended cost transformation initiative which includes an adjustment of our organization to our new scope of business. And third, a laser focus on improving cash conversion. In parallel, we started a strategic review with a clear focus on value creation. We want to go fast, whether by improving delivery and speed of our current plan or by adding new elements to create incremental opportunities and we will update you on a regular basis as progress is being made. This closes our prepared remarks. Geert and I are now ready to take your questions. Geoffroy Raskin: [Operator Instructions] And the first question is coming from Wim Hoste. Your line is open. Please go ahead. Wim Hoste: I have a couple of ones. First one on the U.S. market. How should we think about revenue evolution in '26? You explained the situation with the contract manufacturing drop in preceding quarters. But will this contract manufacturing further drop in '26? How much support can you get from recently signed or started up contracts? Can you offer a little bit of clarity on that as well, please? So that's the first question. The second one is a more general one, pricing versus raw material evolution, if you can elaborate on that as well. And then a third and smaller one is how much CapEx budget have you included in the free cash flow guidance? That would also be helpful. Laurent Nielly: All right. Thank you, Wim, for your questions. I'll take on the first 2 questions and then Geert will address the third one. So on the U.S. market growth, as you know, we don't provide guidance of expected growth by region, but the dynamic that was described is what you should continue to expect, which is we're continuing to grow on our retail brand business. And yearon-over-year, our contract manufacturing sales in '26 will be lower than the full year '25. Overall, with the 2 blocks, we expect the U.S. to contribute more growth in Europe in '26. That's for your first question. On the second question on pricing versus raw material, we expect stable to slightly positive contribution of raw material in '26 versus '25. And at the same time, we expect that as we have some contract renewal or tenders that we participate to, we might strategically invest on targeted customers to secure our gains. So this is the dynamic that we always have, where we try to remain competitive as we see raw material cost evolution. And on CapEx, I will pass it on to Geert. Geert Peeters: On CapEx, yes, we keep, in fact, to the guidance we gave several times that at the end of '25, we wanted to go back to a level of 3.5% to 4.5% of CapEx to revenue. So that's what we're heading for and which is sufficient to execute our plans. Geoffroy Raskin: The next question comes from Karine Elias from Barclays. Karine Elias: Just going back to your -- the guidance on the full year EBITDA. Obviously, Q1 has been a tough comp. So I understand the decline that you mentioned, which would be similar to Q4. But just as we think through the year, what's your visibility like into Q2? Should we expect the EBITDA improvement to start showing from Q2 onwards? Because on my numbers, if we've got a EUR 50 million decline in Q1, that means a EUR 37 million improvement in Q2 through to Q4 to get to your guidance. Just wondering a little bit how we should think about the of the EBITDA. Geert Peeters: Thanks Karine, for your question. So the way we look at it and you phrased it well. So we expect Q1 in line with the last quarter of last year of '25 and then indeed, as we said in our guidance, we expect gradual improvements throughout the year. What are the drivers? Of course, there are different elements. First of all, it's the continuous productivity improvement, which we're constantly working on with the cost transformation program which we also had last year, but this year, we project a much more stable year because there was quite some instability coming from external factors that happened, but also the changes we did in our organization. So we have the Belgium footprint reorganization that we were executing that's ending at the end of Q1, so that's finalized, so that will bring a lot more stability. And also in North America, we had an important ramp-up as well in production as in sales and also there, we see much more stability, which will help us to drive that EBITDA growth. Karine Elias: Great. But just to clarify, so we would expect to start seeing that from Q2 onwards? Or is it going to be more back-ended? Geert Peeters: From Q2. So it's really throughout, it's step-by-step, quarter-by-quarter. Geoffroy Raskin: The next question comes from Usama Tariqfrom ABN AMRO ODDO BHF. Usama Tariq: I just have one set of questions. Could you provide some view on the nonrecurring cash outflow for next year. So this year was around EUR 30 million. So any guidance there or pointer there would be very helpful. And just my second question would be it's a bit more general, but please correct me if I'm wrong, Ontex still has some exposure to Russian assets. Would that also be considered into the strategic review going forward? Or if you could provide any pointers there, that would be really grateful. Geert Peeters: I take your first question on the nonrecurring. There, as a management, we have always had the intention to decrease our nonrecurring. So we also keep to that intention. That means that based on the plans we have at this moment, we still have about EUR 10 million of the last phase of the footprint in Belgium. So that's the big provision we made in '24 and what we gradually executed over the 1.5 years more or less. So there is EUR 10 million, but it's already in the P&L. So it's a cash out. And based on the current plans we have and the further transformation, we foresee more or less another EUR 10 million. Laurent Nielly: All right. And Usama, Laurent, I will tackle your second question. Yes, we still have our assets in Russia. You know our Russian business is about 5% of our total revenues. The strategic review is actually a pretty broad exercise where we're going to review where we compete in different categories, different markets and where we should allocate our resources to maximize value creation. And as part of this, if it's relevant to review our position with this market, we will, but it's way too early to preclude any conclusion. Geoffroy Raskin: [Operator Instructions] The next question comes from Fernand de Boer from Degroof Petercam. Fernand de Boer: Actually, I have one question. So you're guiding for a lower EBITDA in Q1 versus last year. So that means that on a 12-month basis, your EBITDA also comes down. What is your cash flow outflow expected for Q1 or first half because I think then you still are within the covenants, but if you look at that, then you could be very close. And what happens if you would drop below the -- above the 3.5x? Geert Peeters: Okay, Fernand. I will answer on that question. Yes, we're not giving guidance by quarter that you know on cash flow. But of course, we are very aware on the quarter-to-quarter. We have a slow onset, a very clear cash focus, so that will be -- it's something not we look at on a quarterly basis. It's on a weekly basis that we're on top of that. As to covenants, you know that we guide to the -- towards the end of the year to go below 3x. That will not be in the first half of the year. But the purpose is to go down. It's also for us, the covenant testing. I want to stress that one. It's always coming at the end of half year. So we feel confident that we are -- yes, we're doing well and we are within the target set. Fernand de Boer: Okay. Maybe I missed it, but did you give an amount of factoring? Geert Peeters: Yes, it's in the press release, but I can tell you, of course, it's EUR 185 million. Fernand de Boer: Yes. Sorry. Geert Peeters: No sorry. It's normal. You couldn't read everything. That's perfectly normal. Geoffroy Raskin: The next question comes from Rebecca Clements from JPMorgan. Rebecca Clements: Can you hear me? . Geoffroy Raskin: Yes, we hear you well. Rebecca Clements: Okay. Okay. Great. Just following up on the accounts receivable factoring. You said it was EUR 185 million used at year-end. Is that correct? Geert Peeters: Yes, that's right. Rebecca Clements: Okay. I think you had said last year that you expected some working capital pressure because of reduced receivables. It -- and I think that was related to the securitization facility. Could you just talk us through -- is that still the case? Or do you expect there to be some negative impact on the receivables side through at least part of 2026 due to the lower sales? That's my first question. Geert Peeters: Yes. Good question, Rebecca. But of course, working capital, we look to the total. So it's for us inventory accounts, payable accounts receivable. Factoring at year-end, it was a bit higher than normal because there was quite some invoicing just at the end of the year. So it's a bit accidental. That's also one of the reasons where our free cash flow was somewhat better than the guidance. But for the rest of our accounts payable, yes, you have seen we don't give guidance on revenue, but we expect it to stabilize, and that means that our accounts receivable will be following the same pattern and with a close follow-up, of course, on our DSO. Does it answer your question? Rebecca Clements: Okay. Sort of. I was just wondering, because of, I guess, reduced -- given who you're selling to and which receivables go into that facility. I just wasn't sure if there would be some sort of temporary potentially negative impact of not being able to submit receivables to that facility that could impact you midyear? . Geert Peeters: Not really. No, it's -- no, it's normal operation. Rebecca Clements: Okay. Okay. And then my second question is related to your visibility. So you said things are more stable now. I know last year, one of the challenges in the second half was that circumstances changed more quickly than you could react to and you ended up having some cost absorption issues from a manufacturing perspective. What gives you comfort that you feel the situation is more stable, whether it's North America Baby Care or European Baby Care? What gives you that sort of confidence in it being more stable because it seemed last year that it was quite difficult for you guys to predict kind of where volumes were going and plan accordingly. Laurent Nielly: Yes, Rebecca, thanks for the question. This is Laurent. I think when we talked about stability here, we were referring to our operations, not necessarily the sales pattern. We fundamentally -- what we're doing to be better prepared because we expect that there will still be some volatility from time to time in our sales, is to improve forecast accuracy and our ability to anticipate with leading indicators that would allow us to adjust our operation and our production ahead of time. And as at the same time, we're going to have less movements of start-up of new lines, relocation of lines from one factory to the other, et cetera, it will be in the context of a more stable operational framework, which will help us to be much more fluid and to create less inefficiency when you have some volatility in the demand pattern. Rebecca Clements: Okay. That's helpful. Can I get one more question in or no? Is that okay? Geoffroy Raskin: Yes, sorry. Rebecca Clements: Do you -- was most of the issues around not being able to react as quickly enough, was that North American Baby Care? Or was that across Baby Care globally for you? Laurent Nielly: It was across the care on both sides. Proportionately, obviously, it was a bigger impact on the U.S., but Europe also, we observed a change in behavior in the market. And our role is to partner with our customers to help them adapt to that situation. So we saw a much greater promotional activity from a brand in Europe. And we're talking to our key partners to share analysis with them and come up with ideas and proposition for them how best to be competitive in this new market reality to protect their position and for them to win on the marketplace. So on both sides. Geoffroy Raskin: The next question comes from Charles Eden from UBS. Charles, we are listening. Charles Eden: Two for me, please. Just firstly, on the EBITDA bridge, that 10% growth, which is what, EUR 17 million, EUR 18 million year-on-year. I hear you flat revenue. So I guess no real drop-through from the top line fluff and other inputs broadly stable, maybe EUR 1 million or EUR 2 million contribution. Is there anything else in the bridge? Or are you basically saying EUR 15 million of cost savings year-on-year gives you the growth? And maybe if that is true, where exactly are the cost savings coming from? Is it headcount reduction? Is it efficiencies? Is it a combination? Any color you could give us there would be appreciated. And then my second question is just on the strategic review and Laurent, firstly, welcome. But secondly, just in terms of expectations on the strategic review, obviously, the business has changed a lot over the last few years. What can we expect you to be focusing on doing a strategic review? I assume there's not change your portfolio top of the list. But what are the areas that are top of that list for that strategic review? Laurent Nielly: Sure. I'll address quickly your first question on the EBITDA. I think that you're right that our continued productivity will be the key driver of our margin expansion and therefore, EBITDA growth and the second element that you need to keep in mind is mix, we benefit from a favorable mix. So even within stable sales environment, the mix will be a positive contributor. On the building block of this cost productivity, they are the usual suspects in terms of we work with procurement on improving the mix of our suppliers. We work on manufacturing, on the efficiency of our lines. We are doing some re-networking analysis on logistics. We have the design-to-value initiative where we always cost optimize our product, and we're extending that in '26 to also include some adjustments on our organization design to generate additional savings. So those would be the key building blocks. On the strategy review question. It is a pretty broad effort, as you could have read in our press release in January, where we basically are stepping back and are looking at where best to allocate resources, capital to create maximum value for our shareholders, where we have the best chances to win and where it grows. We believe that all our categories have potential. We have already done a huge focused effort to focus on Europe and North America. There is -- both have potential. Yet what we're looking at is the new conditions to compete and how do we tweak, if you want, the formula between the focus on different categories, what it takes to compete and therefore, what is the proper footprint and organization to maximize our cost in order to be able to continue to grow volume in those categories. So a bit long answer to your questions because this is exactly the goal of that effort. And our commitment is that as we progress, we will share our conclusions in our subsequent earnings calls with you. Geoffroy Raskin: And the next question comes from Maxime Stranart from ING. Maxime Stranart: Hope you can hear me well. Two questions from my side, if I may. Apologies if it has been asked already. A bit of delay here. So first of all, looking at your EBITDA guidance and the cadence throughout the year, can you elaborate on when do you see inflection point coming in? Based on your guidance, I understand that EBITDA should decline by basically almost 20% in Q1. So just a view on how we should see the work panning out. Second question would be on restructuring. I think you announced previously that you wanted to accelerate savings and productivity improvement there. I think you mentioned EUR 40 million, of which some were to be included in SG&A and some restructuring. Any view you can share on that? That would be helpful. Geert Peeters: So Maxime, your first question, our EBITDA guidance is that our Q1 is in line with last quarter of '25, and then we see a gradual improvement quarter-by-quarter. Is that answering your question? Maxime Stranart: Yes, it does. Just want to cross check there. So basically, if I look at last year, Q1 was good, Q2 was bad, Q3 was good. So I just wanted to make sure I understand the phasing of your guidance correctly. Geert Peeters: Yes. But indeed last year was at a quite volatile pattern. That's not what we expect. And yes, as you have seen, we give guidance on EBITDA. So we're, of course, also focused on revenue. But for us, the productivity improvements are important. The mix improvements, the stability that we've built in the business, and that's what will drive that continuous growth throughout the quarter. Laurent Nielly: The second question was on restructuring. Maybe Geert, you can add on that as well in terms of what to expect. Geert Peeters: Yes. So restructuring, linking to what Laurent said before, for us, we have existing plans, which is on one hand a continuation of the plants in the past, but all with new initiatives because we're talking about add-on savings. And in the strategic review, they will look at what extra things they can untap as potential. But in the restructuring plan, which is part of the guidance we give, they -- yes, there's a whole bucket of savings with the restructuring costs that I mentioned before, of still above what we still have to pay on bringing out the Belgium footprint, we still have EUR 10 million of restructuring costs and there's another EUR 10 million we expect this year to execute the existing plans. Maxime Stranart: Okay. Got it. I apologize, I missed the beginning of the call. I just wanted to clarify then you basically expect a EUR 20 million basically cash outflow from restructuring. Just want to make sure. Geert Peeters: That's right. That's right. Based on the existing plans. Geoffroy Raskin: So there are no more questions. So I hand it back over to you, Laurent, for your closing remarks. Laurent Nielly: All right. Thank you, Geoff. 2025 was a year that did not live up to our expectations. Yet we continued to deliver on our transformation program, and we showed some solid resilience, including in our profitability and in our ability to compete in the marketplace. We remain upbeat on the potential we have in the different markets in which we participate. The strategic review is a needed step to sharpen our trajectory and focus even more on where we can create compelling value and we will share our conclusions and the year progresses. We have very clear priorities set to deliver our '26 plan with a laser focus on financial discipline and cash. We are confident we can start to rebound even in the first part of the year will continue to be subdued. The priorities we shared today are the ones of our close to 5,000 employees who give their best every day, so we deliver great proposition to our customers. They understand the need for us to rebuild trust and to adjust our journey to best reflect the market realities. With that, thank you for joining, and have a great day. Geoffroy Raskin: This concludes the call. Bye-bye. Geert Peeters: Bye-bye.
Operator: Hello, and welcome to the Organon Fourth Quarter and Full Year 2025 Earnings Call and webcast. [Operator Instructions]. I would now like to turn the conference over to Jennifer Halchak, Vice President, Investor Relations. You may begin. Jennifer Halchak: Thank you, operator. Good morning, everyone. With me today are Joe Morrissey, Organon's Interim Chief Executive Officer; and Matt Walsh, our Chief Financial Officer; Carrie Cox, Organon's Board Chair; and Juan Camilo Arjona Ferreira, Organon's Head of R&D, will also be joining for the Q&A portion of this call. Today, we are referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call on the Events and Presentations section of our Organon Investor Relations website. Please reference Slides 2 and 3 for a couple of brief reminders. I would like to caution listeners that certain information discussed by management during this call will include forward-looking statements. Forward-looking statements can be identified because they do not relate strictly to historical or current facts and use words such as potential, should, will, continue, expects, believe, future, estimates, believes, outlook and other words of similar meaning. Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission. This includes our most recent Form 10-K and Forms 10-Q and those amended forms. These statements are based on information as of today, February 12, 2026 and except as required by law, Organon undertakes no obligation to update or revise any of these forward-looking statements. In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. Descriptions of these measures and reconciliations to the comparable GAAP measures are included in today's earnings press release and conference call presentation, both of which are available on our Investor Relations website and have been furnished to the SEC on the current report on Form 8-K. I note that while our full year 2026 guidance measures other than revenue are provided on a non-GAAP basis, Organon does not provide GAAP financial measures on a forward-looking basis because we cannot predict with reasonable certainty and without unreasonable effort, the ultimate outcome of legal proceedings, unusual gains and losses, the occurrence of matters creating GAAP tax impacts and acquisition-related expenses. These items are uncertain, depend on various factors and could be material to our results computed in accordance with GAAP. I'd now like to turn the call over to Joe Morrissey. Joseph Morrissey: Thank you, Jen. Beginning on Slide 4. In 2025, Organon delivered $6.2 billion in revenue and $1.9 billion of adjusted EBITDA. Revenue was down 3% on both a reported and ex exchange basis. Relative to where we began the year, our biosimilar franchise performed better than expected, driven by solid performance in Hadlima as well as contributions from new launches. Vtama delivered $128 million of global revenue in 2025 and Emgality and our fertility business also grew strongly in 2025. That performance helped to offset the continued impact of the LOE of Atozet and headwinds in other parts of the business that emerged during the year. Those include policy-related changes in the U.S. for Nexplanon and a revision to medical guidelines in certain international markets that deprioritize the use of montelukast, which impacted Singulair. Though Nexplanon had its challenges this year, the FDA approved our sNDA to extend the duration of Nexplanon from 3 to 5 years. The study supporting the approval enrolled a population of women with varying body mass indices, including women with overweight or obesity, a testament to Organon's commitment to inclusive and comprehensive women's health care. This is a meaningful milestone for Organon and the Nexplanon brand as it potentially broadens the addressable market for this key product. The approval also includes a new risk evaluation and mitigation strategy program that will enhance Organon's existing clinical training program and controlled distribution program, which has been in place since 2006. One of the most important decisions the company made in 2025 was to lower our dividend payout ratio and apply those excess funds to debt reduction. We also divested the Jada system, resulting in approximately $390 million in net proceeds that will help us to reduce net debt in 2026. Together, these decisions mark our commitment to improving capacity in Organon's balance sheet to put us in a position to pursue growth opportunities in the future. At the same time, we have scrutinized our spending and had to consider tough but necessary changes to our business. In 2025, we were able to keep adjusted EBITDA margins essentially flat with 2024, despite 150 basis points of gross margin degradation. We achieved over $200 million in cost savings in 2025 through significant efforts, which offset investments in growth drivers like Vtama. We also discontinued early-stage clinical programs and are limiting spend to activities such as medical and regulatory affairs that support products already in the market. As we look across the portfolio, we expect revenue and adjusted EBITDA this year to be very much in line with 2025, which means at a high level, we expect to deliver about $6.2 billion of revenue and about $1.9 billion of adjusted EBITDA in 2026. We expect that the annual revenue foregone with the sale of the Jada system will be offset by an FX tailwind of about the same amount, which means we expect revenue to be about flat with prior year on a constant currency basis, pro forma for the Jada system divestiture. On the profitability front, we continue to thoughtfully curtail OpEx to offset what we believe is about 75 to 100 basis points of deterioration in gross margin in 2026 and that we can manage to an adjusted EBITDA figure of about $1.9 billion. I remain confident in our ability to deliver these results in 2026, and I'm deeply proud of the talented teams across Organon who are driving this work every day. With that, I hand it over to Matt. Matthew Walsh: Thank you, Joe. Beginning on Slide 5, let's talk about the main drivers of performance in women's health. Women's health was down 16% ex FX for the fourth quarter and down 2% for the year. Sales of Nexplanon decreased 20% ex FX in the fourth quarter and 4% for the full year, in line with what we discussed in November when we re-guided on the product. As we've talked about in previous quarters, in 2025, Nexplanon was impacted by several headwinds. Let's break it down between those we expect to continue versus those that we believe are onetime in nature. And starting with the onetime item. As we talked about last quarter, we expected an approximate $17 million negative impact in the fourth quarter related to the cessation of certain identified U.S. wholesaler sales practices identified in the Audit Committee's internal investigation disclosed in late October. The impact from that practice is contained to 2025. Now what do we think is likely to persist in 2026. We see 4 drivers. The first driver is in the U.S. and is macro in nature. Government policy-related access restrictions have impacted planned parenthood and federally qualified health centers where Nexplanon has a leading market share among LARCs, incorporated in our guidance is that this policy environment persists in 2026. The second driver. In 2025, we saw a developing weakness with smaller independent commercial clinics who are tightly managing their buy-and-bill purchasing with some choosing to switch to specialty pharmacy claims for each patient via assignment of benefits. While we expect this change to remain, we are actively engaging customers in this segment to support sustained and improved access to Nexplanon. Third driver. As we've discussed previously, in 2026, we will have a volume headwind from loss of reinsertions as we transition to the 5-year label. Fourth and final driver is an offsetting positive. We expect strong ex U.S. growth to compensate for the U.S., particularly in Latin America, where we are seeing improved access. Turning to fertility. Our fertility business declined 6% ex FX in the fourth quarter of 2025, primarily related to sales performance in China, where we are holding share, but socioeconomic trends are weighing on the broader fertility market. For the full year, the fertility business grew 8% ex FX, driven by performance in the U.S., particularly in the first half of 2025 as well as geographic footprint expansion which together offset declines in China. Fertility will likely be a headwind for us in 2026 as we expect an increasingly competitive environment in the U.S. brought on by a competitor's agreement with the administration's new Direct Access Program. And finally, the Jada system delivered $74 million of revenue in 2025. We completed the divestiture of Jada in January of this year. So that will represent a headwind of about 120 basis points to Organon's consolidated revenue in 2026. Turning now to biosimilars on Slide 6. For the fourth quarter and full year, the drivers in biosimilars are largely the same. Performance was driven by Hadlima, which grew 61% ex FX globally for the full year, reflecting the strong clinical profile of Hadlima and the effectiveness of our pricing strategy as well as expansion into Canada and Puerto Rico. To a lesser extent, biosimilars also benefited from our new denosumab biosimilars, which were approved by the FDA in August and launched in the U.S. in late September, and Tofidence, which the company acquired in the second quarter of 2025. In 2026, we expect biosimilars to deliver flat to modest growth with Hadlima and the contribution of new assets expected to at least offset the expected decline in Ontruzan and Renflexis, consistent with the maturity of those assets. As regards to future launches, we've entered into a settlement with Genentech that grants us a license to start launching our pertuzumab biosimilar asset in UCAN in 2027 and in the U.S. in 2028. Wrapping up the franchise discussion with established brands on Slide 7. Established brands revenue declined 5% ex FX in the fourth quarter of 2025 as well as for the full year. We've always said that the CAGR in established brands should be about flat ex FX and with some years above and some years below. In 2025, we navigated through the LOE of Atozet, which itself was an approximate 400 basis point headwind to established brands revenue. In 2026, we expect to return to flat performance. Contributions from Vtama and Emgality together with lapping the LOE of Atozet, should offset expected continued pressure in our respiratory franchise. Turning now to the fourth quarter revenue bridge on Slide 8. Revenue in the fourth quarter was $1.57 billion, down 8% at constant currency. Loss of exclusivity was about $20 million in the quarter, the lowest of the year and was related to lapping the Atozet LOE in the EU, which occurred in September of 2024. VBP was negligible for the quarter. Organon products were not included in any new rounds of China's national VBP program during 2025. We lost approximately $80 million on price in the fourth quarter. About $30 million of this was related to 4 separate gross to net adjustments that were onetime in nature. The remainder was primarily driven by pricing revisions in respiratory, expected competitive pricing pressures in fertility and biosimilars and the LOE of Atozet. Additionally, there was an increase in the U.S. rebate rate for Nexplanon in the quarter related to a change in patient mix tied to Medicaid usage claims. Volume declined about $10 million in the quarter, and that was mainly driven by lower volume for Nexplanon and in the respiratory portfolio, which was largely offset by volume growth in Vtama, Hadlima, Emgality and Arcoxia. In Supply other, here, we capture the lower-margin contract manufacturing arrangements that we have with Merck, which have been declining since the spin-off as expected. And lastly, foreign exchange translation had an approximate $35 million favorable impact for the quarter, which reflects the weaker U.S. dollar against the majority of foreign currencies in which we transact. Let's look at these same drivers now on a full year basis on Slide 9. Loss of volume from LOE was about $200 million, consistent with the range we've outlined all year and that was primarily related to the LOE of Atozet in the EU. As I mentioned, there was essentially no VBP impact in 2025. There was about $180 million of negative impact from price in 2025 or about 2.8%. Pricing headwinds for the full year were primarily in the respiratory portfolio with rate pressure in the U.S. for Dulera and mandatory price reductions in China for Nasonex and Singulair. To a lesser extent, we also felt price impacts stemming from the competitive environment in biosimilars and fertility in the U.S. Volume grew $200 million in 2025 or 3% for the year with contributions from Vtama and Emgality and growth in fertility and biosimilars, offsetting declines in the global respiratory portfolio and Nexplanon in the U.S. Now let's turn to Slide 10, where we show key non-GAAP P&L line items and metrics for the quarter. For reference, GAAP financials and reconciliations to the non-GAAP financial measures are included in our press release and the slides in the appendix of this presentation. For gross profit, we are excluding purchase accounting and amortization and onetime items from cost of goods sold, which can be seen in our appendix slides. Non-GAAP adjusted gross margin was 56.7% for the fourth quarter of 2025 compared to 60.6% in the fourth quarter of 2024. Pricing pressure and unfavorable product mix were notable drivers in the decline of non-GAAP adjusted gross margin. Adjusted gross margin for the full year 2025 was 60.1% compared with 61.6% for the full year 2024, with pricing pressure being the primary unfavorable driver in the year. Non-GAAP adjusted EBITDA margin was 25.4% in the fourth quarter of 2025 compared with 28.1% in the fourth quarter of 2024. The year-over-year decline in the fourth quarter 2025 adjusted EBITDA margin was primarily driven by the lower adjusted gross margin that was partially offset by a 5% reduction in non-GAAP operating expenses. Adjusted EBITDA margin was 30.7% for full year 2025, consistent with prior year as the decline in adjusted gross margin was substantially offset by lower R&D expense. Net loss for the fourth quarter of 2020 was $205 million or $0.79 per diluted share compared with net income of $109 million or $0.42 per diluted share in the fourth quarter of 2024. Net loss for the fourth quarter of 2025 includes a noncash goodwill impairment of $301 million or $1.16 per share related to the decline in the company's stock price and underperformance in the U.S. For the fourth quarter of 2025, non-GAAP adjusted net income was $165 million or $0.63 per diluted share compared with $235 million or $0.90 per diluted share in 2024. Non-GAAP adjusted net income was $954 million for full year 2025 or $3.66 per share compared with $1.065 billion or $4.11 per share in full year 2024. Turning to free cash flow now on Slide 11. For full year 2025, we delivered $960 million of free cash flow before onetime costs, consistent with prior year. Onetime costs related to the spin-off were completed in 2024, following the rollout of our global ERP system. What remains are margin-enhancing restructuring and manufacturing separation activities which were together about $270 million for 2025. For 2026, we expect costs associated with manufacturing separation activities to be about $100 million. We do expect an increase in CapEx associated with these activities as well as an increase in net working capital consumption driven largely by inventory in established brands and biosimilars, which means our free cash flow in 2026 will likely resemble what we delivered in both 2024 and 2025. Below the free cash flow line in 2025, we paid about $170 million related to contractual milestones for Vtama, Emgality and the biosimilar programs with Shanghai Henlius and made another $66 million in upfront payments, primarily related to acquiring the licensing rights for Tofidence and to a lesser extent, the purchase of the Oss bio manufacturing site. In 2026, we expect that commercial milestone payments will be similar to 2025 at approximately $170 million. Turning now to leverage on Slide 12. Net leverage at year-end was approximately 4.3x. Consistent with our priority to reduce leverage, during the year, we retired approximately $530 million of debt which included the open market repurchase and cancellation of $419 million of Organon's 5.125% notes due in 2031 including $177 million retired in the fourth quarter, the prepayment of a portion of the long-term debt assumed as part of the Dermavant acquisition and normal quarterly term loan payments. Given our outlook for approximately $1.9 billion in adjusted EBITDA in 2026, together with approximately $390 million of net proceeds from the Jada divestiture, we expect to be able to achieve net leverage below 4x by the end of the year. Now turning to the 2026 full year revenue bridge on Slide 13. For full year 2026, we expect revenue of about $6.2 billion. We expect LOE to be about $40 million related to a collection of smaller LOEs, for example, CLARINEX in Japan, as well as the potential for a generic of Dulera in the U.S. We expect VBP impact to be about $30 million and related to the inclusion of Fosamax in round 11. We expect headwinds from price to be about $75 million or about 1.2%, which is lower than what the portfolio has experienced in prior years and it's driven by several factors. First, lapping of the approximate $30 million in onetime gross to net adjustments in the fourth quarter of 2025. Second, we expect stability in U.S. gross to net in the U.S. in 2026. And three, less pricing erosion internationally, particularly in the EU as we lap the LOE of Atozet. And in Japan, as the majority of our portfolio there has already reached pricing parity with generics. We expect volume growth of about $150 million or about 2.4% will be driven by continued contribution from Vtama and Emgality and growth in biosimilars and Nexplanon ex U.S. And finally, we're estimating that a modest FX tailwind offsets the loss of Jada revenue. Turning to Slide 14. We expect adjusted gross margin in 2026 to be about 75 to 100 basis points lower than prior year. And while price will be a headwind as it has been in prior years, the main driver of the adjusted gross margin decline in 2026 is higher cost of goods sold related to the release of accumulated foreign exchange translation on inventory that has subsequently matched to revenue when the inventory is sold. For OpEx, our range for SG&A as a percentage of sales remains in the mid-20% area, and we expect the range for R&D spend to be in the mid-single-digit area. For below-the-line items, our estimate for full year 2026 interest expense is about $500 million, in line with 2025. In 2026, we expect to refinance certain 2028 maturities, which will offset the benefits of recent voluntary debt payments and lower variable interest rates. We expect depreciation of about $140 million for full year 2026 and expect approximately 265 million for our fully diluted share count. For 2026, we estimate our non-GAAP tax rate to be in the range of 27.5% to 29.5%. The uptick from 2025 is largely due to the full year impact of the implementation of OECD's Pillar 2, 15% global minimum tax, the absence of a tax amortization benefit and an increase in our nondeductible interest expense, offset by use of additional foreign tax credits. Pro forma for any divestitures, we expect cash taxes to be similar to 2025. As we think about the phasing of the quarters in 2026, we expect revenue growth to build throughout the year, but OpEx is more evenly spread through the quarters. So that means Q1 margin is likely to have the lowest margin of the year, and Q1 could wind up looking a lot like the quarter that we just reported in Q4 of 2025. In 2026, our primary objective is to maintain performance that aligns with last year. At the same time, we are committed to continuing to manage operating expenses and capital deployment in a disciplined fashion to achieve progress on our deleveraging efforts. Carrie Cox: This is Carrie. Before we go to Q&A, I'd just like to say that we won't be able to answer any questions today regarding the topic referred to in our press release under other matters that was brought to the attention of the Audit Committee yesterday. With that, operator, we are ready to begin Q&A. Operator: [Operator Instructions]. Your first question comes from Umer Raffat with Evercore ISI. Umer Raffat: And Carrie I want to be respectful for what you just said, but not relating to that specific issue on what exactly the specifics are of the purchasing. My question is more higher level. Remember last quarter, I asked you how can one -- anyone know that the channel behavior issues were limited to Nexplanon? And why was the Audit Committee investigation so limited in its scope only to Nexplanon? And I remember at the time, you said it did span beyond look through other product areas and found nothing else. Today, we're learning there was another issue. And this time, it's biosimilars purchasing and that too because it was brought up, meaning 5 other things could be brought up. How can we know that a comprehensive review has been taken? It almost looks like there's an unwillingness by the Board and the leadership to actually solve this for once and do it the right way so we can move on and look at fundamentals and pay down all the $9 billion in debt. Carrie Cox: Thanks, Umer. I'm sorry. We can't provide any additional color at this point. Operator: The next question comes from Mike Nedelcovych with TD Cowen. Michael Nedelcovych: I have 2. My first is on the biosimilar portfolio. Back in October, as you know, FDA released draft guidance limiting the requirement for comparative efficacy studies for biosimilars. So I'm curious what you consider to be the status of this policy in the U.S. What's your interpretation of that guidance? And what impact should we expect it to have on Organon's business, for example, does it open the biosimilar floodgates and hugely boost margins? Or is it more of an incremental change? And then my second question is on your 2026 guidance. Can you provide any more detail on the Nexplanon contribution that's contemplated in your 2026 sales guidance and will launch of the longer-acting Nexplanon implant be accretive to total Nexplanon sales this year? Joseph Morrissey: Mike, I think the first -- the first question on the biosimilars. We feel it would be more incremental. So we think our strategy with biosimilars is the right one of picking the right partners that are positioning their biosimilars in the right order of the ability to launch and building out those partnerships. We're excited about our opportunities in the U.S., continuing to grow Hadlima as well as with our launch of the denosumab biosimilars and expanding that in other markets around the world and continue to grow in that way. So we see that more incremental. Matthew Walsh: And on the second part of the question for 2026 guidance at Nexplanon, we believe Nexplanon will be roughly flat year-on-year. We've got pushes and pulls on the Nexplanon business. Ex U.S., the business will continue to grow nicely. We talked about improved access to Nexplanon in Latin American markets. In the United States, we'll have consistent with the launch of the 5-year label, we will have a bit of a dip due to no reinsertion. Roughly -- and we've said 10% to 15%, let's call it, 13% of insertions annually are actually reinsertions. So now with the move to 3 to 5 years, that will create a bit of an inflection point in volume there. And some of the channel issues that we experienced in the second half of the year will annualize. So net-net, the contribution of Nexplanon to our 2026 guidance is to summarize roughly the level with 2025. But we remain optimistic that the attractiveness of the 5-year label, especially for high BMI patients, and now with the duration making the product more attractive versus other long-acting reversible contraceptives, bode very well for the long-term growth of the product, both inside and outside the United States. Operator: The next question comes from Jason Gerberry with Bank of America. Bhavin Patel: This is Bhavin Patel on for Jason. Two questions from us. So the first is you're guiding to a flat 2026 adjusted EBITDA of $1.9 billion, and we have $275 million in annualized cost savings from the reset flowing into the P&L. So I guess if we strip out those savings, the underlying EBITDA performance appears to be declining. Maybe if you can help us bridge where that $275 million benefit is being absorbed. Is it purely the 75 to 100 bps of gross margin deterioration? Or are there a massive onetime reinvestments into Vtama and Nexplanon REMS program? And then my second question is to double-click on this REMS program that launches in a couple of weeks with a 6-month grace period ending in August. So does your 2026 Nexplanon outlook assume any volume bottlenecks or certification friction in the second half of the year once that mandate is fully enforced? And maybe does the REMS mandate distributor registration potentially provide you with like a cleaner data to monitor the wholesaler days of coverage? Matthew Walsh: So I'll take the first part of the question, Juan Camilo can take the REMS question. So on the operating expense savings, the $275 million we referred to when we spoke earlier in the year was all related to gross takeouts that we were going after in sort of the base administrative and structural elements of our cost structure. That was the gross number we were going after. That enabled us to take a portion of that and reinvest it, for example, in increased enhanced promotional activity for Vtama. So when you asked the question, you essentially answered it by saying that some of that $275 million would be redirected to revenue growth opportunities. I'll take a step back and say that the management team here continues to go after OpEx very aggressively. We've built another round of OpEx savings into our 2026 guidance, not quite as large as the 2025 effort, but certainly in the same ballpark. And it's just essential that we continue to rightsize the operating expense footprint of the company in light of what's happening in terms of our gross margins being compressed. Now I'll turn the question over to Juan Camilo for REMS. Juan Camilo Ferreira: Yes. Thank you, Matt, and thanks, Jason. Yes. We are pretty confident that with this window that we have and the efforts that we have already planned, we will be able to recertify the prescribers that constantly use or loyalty use of Nexplanon. This physicians that have been already certified before will have a very small requirement that will take them around 15 to 20 minutes to be certified. So we are pretty confident that we'll be able to maintain the volume based on the retraining that I believe was your question. The other factors are the ones that Matt and Joe already covered. Operator: The next question comes from Chris Schott with JPMorgan. Ethan Brown: This is Ethan on for Chris. Maybe just building on the margin commentary, just maybe taking a step back, what are your latest thoughts on what operating costs and margins can look like over time from here? And then on Nexplanon, very helpful commentary on the headwinds going to the 5-year indication. Just maybe how long should we think about that headwind -- about the duration of that headwind? And are there any potential offsets via price there? Matthew Walsh: So the first part of the question relates to OpEx. And I think the challenge for the company as we've seen gross margins compress since the spin is to continue to streamline, make the business more efficient, get economies of scale where we can. And I just make the broad comment that it's incumbent upon us to continue to do that. And -- but at the same time, make sure that we are not sacrificing OpEx where it can draw a clear line to revenue growth and value creation in the top line. So I don't have a numerical answer to the question. What I have is the philosophy here that we are deploying -- have been deploying as we try and manage a bottom line that optimizes what our opportunity is. On the 5-year and the reinsertion, I think this year will be the most pronounced for it, 2026. We might be talking about reinsertion risk in 2027. It should be at a fairly significantly lower level than what we're talking about this year. Operator: The next question comes from David Amsellem with Piper Sandler. Alexandra von Riesemann: This is Alex on for David. The first one is, can you talk to the pressure on established brands and how we should think about key established brand segments, not only in 2026 but also beyond? And how you're thinking about potential trouble spots such as respiratory? And then on Vtama, how are you thinking about competitive dynamics for the product given that growth has been slower than topical roflumilast? So with that in mind, how are you thinking about your support of the product? Matthew Walsh: So the first part of that question -- go ahead, Joe. Joseph Morrissey: Yes. Thanks, Matt. So I think, Alex, the first thing with the established brands, I think Matt said it in his commentary, right? We do think established brands are going to have some years where you have somewhat of a reset like we did with the respiratory in 2025 and then remaining backward flat. I think when we look at it, a lot of the respiratory risk, it may -- it will pull into this year but it's largely we're getting past that as well as some of the declines we had over the year and the prior year in Japan. And so when we look at them, the growth with products like Emgality plus Vtama and so forth, that's where we see stabilization in established brands, but it's still going to be somewhat chunky, I would say, in the future, where we'll have some challenges and then opportunities to offset that with growth. Matt, do you want to take Vtama? Matthew Walsh: Yes. So from a Vtama perspective, as it competes against steroidal nonsteroidal options, we see that 2026, the product is likely to grow in line with the other nonsteroidal topical. So in the 20%, 25% range year-on-year for Vtama. The only other thing I would add to Joe's comment on established brands is that we continue to add products there that capitalize on the global infrastructure that we have. So we -- the company made an announcement tail-end of last year that we will be marketing [ Nilemdo ] in the EU. Not a big product, but it can slide right in similar to Emgality, very little in the way of incremental operating expense necessary and once again, capitalizes on what's a unique asset and feature for Organon's business, which is this global infrastructure that enables us to sell either directly or directly into 140 countries around the globe. Operator: The next question comes from Terence Flynn with Morgan Stanley. Terence Flynn: Two for me. I was just wondering if you can give us any update on the search for a permanent CEO? And then the second one relates to the denosumab biosimilar that I know you guys launched end of December. I think Amgen has talked about being able to, on the Prolia side, at least, hold on some more share given they have Evenity as another option. So I guess as you think about your go-to-market strategy, on the denosumab biosimilar specifically for the osteoporosis setting. Anything you're doing differently to try to capture more share there? Carrie Cox: So I can take the one on the CEO search. You might recall there was a special committee of the Board formed last year. We've had a very robust process underway, but there's no public update to share right now. Matthew Walsh: And as far as the denosumab question, I think let's just talk about what we should be modeling and how investors should be thinking about Organon's opportunity for that product. And like a lot of the biosimilar partnered opportunities that we have will be competing against highly competitive markets, both from a volume and price perspective when we think about what the peak revenues might be for that denosumab product over both reference products, it's on the order of $100 million in total, let's say, over about a 5-year time frame. Operator: This concludes the question-and-answer session and we'll conclude today's conference call and webcast. Thank you for joining. You may now disconnect.
Operator: Good day, and welcome to the Nova Ltd. Fourth Quarter and Full Year 2025 Financial Results Conference Call [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Miri Segal, CEO of MS-IR. Please go ahead. Miri Segal-Scharia: Thanks, operator, and good day, everyone. I would like to welcome all of you to Nova's conference call. With us on the line today are Gaby Waisman, President and CEO; and Guy Kizner, CFO. Before we begin, I would like to remind our listeners that certain information provided on this call may contain forward-looking statements, and the safe harbor statement outlined in today's earnings release also pertains to this call. If you have not received a copy of the release, please view it in the Investor Relations section of the company's website. Gaby will begin the call with a business update, followed by Guy with an overview of the financials. We will then open the call for the question-and-answer session. I will now turn the call over to Gaby Waisman, Nova's President and CEO. Gaby, please go ahead. Gabriel Waisman: Thank you, Miri, and thank you all for joining us today. I will start the call by summarizing our fourth quarter and full year performance highlights. Following my commentary, Guy will review the quarterly and annual financial results in detail. 2025 was an exceptional year for Nova, delivering record performance across our business and strong execution in a rapidly expanding semiconductor landscape. We delivered record annual revenue of $880.6 million, up 31% year-over-year, along with record GAAP and non-GAAP profitability with earnings per share growing 29% year-over-year. Fourth quarter revenue exceeded the midpoint of our guidance, reaching $222.6 million, up 14% year-over-year. This performance highlights the depth of our portfolio, solid customer demand, our leading market position and our disciplined operational focus. It underscores Nova's strategic alignment with key vectors in the industry and strengthens our foundation as we move into another year of growth. We entered 2026 with a robust investment cycle, translating into accelerating demand for leading-edge nodes and steady investments in mature ones. It has manifested in capacity additions, higher-yield pressures and a need to maximize device performance. Rising design complexity is increasing the number of process steps and accelerating adoption of new integration methods such as backside power delivery and hybrid bonding. Coupled with faster time to market and yield requirements, it is broadening the need for precise metrology. Some manufacturers have already announced an increase in CapEx plans, contributing to the positive outlook. We are confident that our operational agility, flexibility and grit enable us to address our customer needs. An emerging segment fueled by the AI era is silicon photonics, a technology that uses light photons instead of electrons to transfer data, enabling ultrafast data transmission at lower power consumption. It requires very high accuracy measurements of optical structures such as waveguides and modulators, necessitating precise alignment and 3D characterization, which opens new opportunities for Nova. These market and technology dynamics are reinforcing our strategic alignment with the fastest-growing and most technically demanding segments of our industry. We are engaged with our customers to address their high-value challenges and are well positioned to capitalize on the opportunities they pose. We expect positive momentum to propel our performance in the coming quarters. One of the highlights of the fourth quarter was when a global leading logic customer selected Nova's integrated metrology portfolio for CMP applications across gate-all-around processes. Following a comprehensive evaluation, the customer adopted our full CMP product suite, extending their earlier back-end deployment into front-end high-volume manufacturing. Multiple orders have already been placed for 2026 with additional orders expected as capacity ramps. This win reflects our close collaboration with customers to accelerate time to market, support their technology roadmaps and enhance yields. Another highlight is our services organization, delivering record quarterly and annual revenues. This performance was driven by capacity installation, adoption of our value-added services to support yield improvement and a focus on shifting from Time and Materials towards annual service contracts. We are especially proud that our teams earned multiple service excellence awards from leading customers in Asia, underscoring our deep commitment to customer success. Nova's growth this year was broad-based. In gate-all-around processes, we are now firmly established as a foundational partner in the industry's transition to next-generation architectures and expect to see demand increase further in 2026. In advanced packaging, revenue rose more than 60% year-over-year, representing approximately 20% of product revenue. We saw strong traction across both dimensional and chemical metrology platforms and broad adoption of our dedicated products. And in memory, we saw record results driven primarily by DRAM applications where manufacturers expanded adoption of the materials and chemical metrology offering. Nova's advanced metrology solutions secured multiple strategic qualifications across leading global manufacturers, reinforcing our position as a trusted partner for next-generation technology inflections. A few examples include the ELIPSON materials metrology solution, which was selected as tool of record by a leading foundry for advanced gate-all-around production and recent adoption of the Metrion platform for gate-all-around as well as advanced 3D NAND and DRAM device manufacturing. At the same time, our Nova WMC optical metrology system gained traction in advanced packaging and high-bandwidth memory. On the technology front, we continue to invest in R&D, including a noble metrology solution that leverages our optical and materials metrology core competencies amplified by Nova's unique strengths in modeling and signal analysis. This new solution is designed to address emerging challenges associated with technology inflections such as gate-all-around, CFET and advanced memory. Nova's unique strengths in physical and AI-driven modeling will come together in this new solution, enabling precise measurement of individual nanoscale structures, improved parameter decorrelation for complex architectures and coverage of critical gaps left by existing metrology technologies. Looking ahead to 2026, we are entering the year with increasing confidence in the market environment. We see favorable trends across logic, advanced packaging and memory applications. Current order patterns point to another growth year for Nova with momentum expected to build through the first half and accelerate in the second half of the year. Our priorities for 2026 remain clear: continue to expand our leadership in advanced nodes, proliferate our materials metrology platforms, deepen our share in advanced packaging ecosystems and scale our operations to support increasing customer requirements. To that end, we are strengthening our operational foundation for the next phase of expansion, including the launch of a new state-of-the-art ERP system to manage growing volume of business with greater efficiency and scalability. We are also expanding our global manufacturing footprint by building new production capacity in Asia, enhancing cost efficiency while positioning us closer to key customers and supply chain partners. We remain focused on executing with discipline, capturing opportunities and outperforming WFE. I'm thankful to our employees for their dedication and commitment and to our customers and partners for their trust in Nova. For more details on the financials, let me hand over the call to Guy. Guy Kizner: Thanks, Gaby. Good day, everyone. I will begin by reviewing our financial achievements for the fourth quarter of 2025, then summarizing our performance for the full year and finally, provide guidance for the first quarter of 2026. In the fourth quarter of 2025, total revenues reached $222.6 million, above the guidance midpoint of $220 million. This performance reflects a growth of 14% year-over-year. Product revenue distribution was approximately 75% from logic and foundry and 25% from memory. Product revenue included 3 customers and 4 territories, which contributed each 10% or more to product revenues. In the fourth quarter, blended gross margins were 57.6% on a GAAP basis and 59.6% on a non-GAAP basis, in the upper end of our target model range of 57% to 60%. The high gross margin in the quarter was attributed to a favorable product mix. Operating expenses increased in the fourth quarter and came in at $67.5 million on a GAAP basis and $62 million on a non-GAAP basis. We continue to ramp up R&D and sales and marketing spending in targeted manner to advance our product roadmap and unlock future growth opportunities. Operating margins in the fourth quarter reached 27% on a GAAP basis and 32% on a non-GAAP basis. The effective tax rate in the fourth quarter was approximately 11% on a GAAP basis, primarily reflecting the release of uncertain tax positions following the completion of a tax assessment audit. The effective tax rate on a non-GAAP basis was approximately 16%. Earnings per share in the fourth quarter on a GAAP basis were $1.94 per diluted share, and earnings per share on a non-GAAP basis were $2.14 per diluted share, exceeding the midpoint of our fourth quarter guidance of $2.11. Moving on to the annual results of 2025. Revenues increased 31% year-over-year, reflecting our continued outperformance of the industry through disciplined execution of our strategy. We are also building the foundations to sustain this outperformance by gaining market share, qualifying our differentiated portfolio with strategic customers and advancing innovation through continued investment in R&D of more than 15% of revenues. The geographic revenue split in 2025 was as follows: China was 33%, Taiwan was 29%, Korea was 16%, U.S. was 9% and other territories contributed the remaining 13%. Gross margins for the year were 57.4% on a GAAP basis and 59% on a non-GAAP basis. Operating margin for the year came in at 29% on a GAAP basis and 33% on a non-GAAP basis, in the upper end of our target model range of 28% to 33%. These operating margins demonstrate the strong value proposition of our process control solutions and our consistent operational execution. Earnings per diluted share on an annual basis came in at $7.96 on a GAAP basis and $8.62 on a non-GAAP basis. Turning to the balance sheet. We ended 2025 with more than $1.6 billion in cash, cash equivalents, bank deposit and marketable securities. During 2025, the company generated $218 million in free cash flow and presented healthy parameters related to working capital management. Next, I would like to share the details of our guidance for the first quarter of 2026. We currently expect revenues for the quarter to be between $222 million and $232 million. GAAP earnings per diluted share to range from $1.90 to $2.02. Non-GAAP earnings per diluted share to range from $2.13 to $2.25. At the midpoint of our first quarter 2026 estimate, we anticipate the following: gross margins of approximately 56% on a GAAP basis and approximately 58% on a non-GAAP basis. Operating expenses on a GAAP basis to decrease to approximately $65 million; operating expenses on a non-GAAP basis to decrease to approximately $60 million. Financial income on a non-GAAP basis is expected to be approximately $16 million. Effective tax rate is expected to be approximately 16%. To conclude, our 2025 results reflect strong execution and continued progress against our strategy. As we look to 2026, we see positive momentum in the business and remain focused on investing in innovation, strategic customer relationship and capacity to support long-term performance. With that, we will be pleased to take your questions. Operator? Operator: [Operator Instructions] The first question comes from Blayne Curtis with Jefferies Ezra Weener: Ezra Weener on for Blayne. Just wanted to start by looking at your guidance. You've talked about the first quarter, but can you talk a little bit about the year, what you're seeing? We've heard a lot of different WFE outlooks and what you're seeing for your WFE outlook that you plan to outperform. Gabriel Waisman: So I believe that the most important, and thank you for the question, Ezra, factors in outperforming the WFE is having the right growth engine, and we are well positioned in that respect. With regards to WFE, we anticipate it to be in the low double digits based on, I assume the same data that you are seeing. So we definitely see a momentum gathering where we expect the second half of the year to accelerate. And we do see the first half of '26 higher than '25. So it's definitely progressing in the right direction. Ezra Weener: Got it. And then just a follow-up would be, if WFE does accelerate, do you have any bottlenecks in terms of your own production and being able to meet demand Gabriel Waisman: So it's a great question. First of all, we have made significant investments over the last year to expand our manufacturing capacity, and we have the sufficient one to support our growth outlook, including, of course, clean room capacity for advanced packaging in particular. And this year, we continue to invest in infrastructure, including new production capacity in Asia and also the investment in IT infrastructure, such as the ERP to improve the efficiency and scalability. And we believe that these actions give us the ability to manage higher volumes with better cost and time efficiency, being closer to the customers and providing greater transparency. Operator: The next question is from Matthew Prisco with Cantor. Matthew Prisco: Maybe just to start, can you offer any additional color on maybe how customer conversations have evolved over the past 3 months across each end market? And then those customer conversations, are those translating into actual orders at this point to support that second half inflection? Gabriel Waisman: So thank you, Matthew. So let me start with perhaps taking it into the growth engines, the primary growth engines and drivers for us this year and take it to the customers specifically. So we see '26 as another growth year with several key drivers. First is the advanced logic and gate-all-around. We see proliferation of gate-all-around across all leading manufacturers with increasing process control intensity. On DRAM and high-bandwidth memory, we see a healthy recovery in DRAM and continued build-out of HBM capacity. In advanced packaging, we see growing contribution from hybrid bonding. And of course, we support it with our both dimensional and chemical portfolio that we see significant growth over there. Overall, we see the increased capital investments as has been published by several of our customers. Of course, it takes time until this has turned out into WE orders and, of course, revenue for company. But we've seen those latest announcements as very encouraging and building the momentum getting to 2026. Matthew Prisco: Okay. That's helpful. And then maybe as a follow-up, can you walk us through share dynamics in your dimensional metrology business, both from the overall portfolio and that integrated CD opportunity you talked about? And maybe a specific focus on PRISM as well and Nova's positioning there and kind of adoption trends of those systems? Gabriel Waisman: So I hope I understand the question correctly. But if you're talking about the overall market share, so as per the Gartner latest report for 2024, we grew to become second in market share with an overall market share in CD and film film at about 25%. That represented an overall increase of about 25%, and we are seeing continued market share gains across our portfolio. In terms of the integrated metrology, we've I've mentioned the fact that we have a leading global logic customer adopting our integrated metrology portfolio and product suite for its gate-all-around CMP processes. We've also mentioned the fact that both ELIPSON and METRION has had an excellent year in '25 and are becoming important growth engines for the company. ELIPSON is a tool of record at a top foundry for advanced gate-all-around production with additional tools at another leading logic and memory customers. We also see repeat orders and proliferation from R&D into high-volume manufacturing. And on the METRION side, we have recently qualified at both gate-all-around logic customer and a leading memory manufacturing manufacturer as we have planned to and discussed, and this is a very significant milestone for the company. In both cases, of course, we are at the early phase of proliferation, and our goal is to evolve to become a multiple tool per fab similar to how we scaled XPS historically. And just as a side note, we've just shipped the 300th XPS tool, and it's definitely a reason to become -- to be optimistic. We also see share gain traction with our stand-alone OCD solutions for packaging and advanced packaging and also on the front-end copper dual damascene for our chemical portfolio. So definitely quite optimistic in terms of the share gain momentum as we enter 2026 Operator: The next question is from Michael Mani with Bank of America Securities. Michael Mani: Could you just clarify your view for the business this year between DRAM and foundry and logic, which one do you expect to grow faster? And thanks for your WFE view for 2026 of low double digits. I guess as you look out to this year, you said you'd be able to outperform, and that makes sense because you have the right product suite, gaining share. It's going to be a very leading edge heavy year. But does the degree of outperformance you expect this year look very different from the past couple of years? It feels like it should be stronger given all those dynamics, but would love to hear your view on that. Gabriel Waisman: Thank you for the question. We do see several vectors in growth this year, stemming especially from advanced logic and DRAM. We see significant growth coming from advanced packaging as well. I think that I mentioned the fact that we had about 60% growth in '25 in advanced packaging, bringing the total share out of the company's revenue to about 20%. And we believe that advanced packaging will still have a double-digit growth this year. So the major vectors for growth are both leading-edge advanced logic and DRAM as well as advanced packaging. In terms of NAND, we do see some signs of improvement, but we are waiting an inflection point similar to what we've seen on DRAM and HBM. And in terms of outperformance, of course, we are aiming to outperform WFE, but it's still early on this year to indicate any specific number. Michael Mani: Got it. And then on China, so I think you mentioned it came in at 33% of sales for 2025. I think that was a little higher than expected. So heading into this year, I mean, what's your view for the market? Is it flat? Is it slightly down? And any sort of color on what exactly you're seeing that might be driving that lack of growth? Gabriel Waisman: So we've had 39% of our business from China in 2024. And as you indicated, it normalized to about 33% last year. China is a large and very, very important territory for us, and we expect it to continue and represent around 30% of our sales. We do see shorter lead times in China, which reduced visibility, but we are seeing trends that make us believe that China will continue to have steady investments this year to maintain this proportion that I've just indicated as part of our overall sales. Naturally, as advanced nodes and DRAM invest more and China is focused on mature nodes, we'll see the relative portion of China go down even if the nominal sales remain flat, but we are seeing signs of improvement in the business in China as well. Operator: The next question is from Shane Brett with Morgan Stanley. Shane Brett: So my first question is on leading-edge logic. So how should I think about your share position in the context of your largest customer adding more 3-nanometer wafers this year? I'm asking this because your Taiwan revenue is up nearly 90% year-over-year in 2025, which is very reflective of your strong position. I'm just curious just how much better this can be for you in 2026. Gabriel Waisman: So I'm not sure I can discuss specific shares with a specific customer. But I can say that in terms of gate-all-around specifically, and we'll talk a bit more about the advanced nodes in gate-all-around, we're well positioned across all 4 players. And we see the growth this year and the momentum increasing compared to last one. In terms of 3-nanometer, of course, the intensity is not as high as it is in gate-all-around in the 2-nanometer, but it's still very significant. So any investment in advanced nodes is very beneficial for us. Shane Brett: Got it. And then for my follow-up, so for advanced packaging revenue, you kind of talked about low double digits. But I guess relative to some of the etch and dep players, that feels a little bit light, but it's kind of in line with your kind of metrology inspection peers. Just what's the dynamic that's going on in advanced packaging this year that's, I guess, leading to a bit of a moderation from 60% growth to kind of low double digits this year? Gabriel Waisman: So advanced packaging for us is relatively new, and we see the penetration of more and more products and gaining share in advanced packaging. So out of the 20% of product revenue that I indicated, about 1/4 to 1/3, depending on the quarter is high-bandwidth memory and the rest is logic. We do see strong double-digit growth this year as well. And since we are engaged with all players and introducing more and more solutions and capabilities, we believe that this is a great opportunity for us, and we'll see the growth continuing into this year as well. Operator: The next question is from Elizabeth Sun with Citi. Yiling Sun: This is Elizabeth for Atif. First question is for is for gross margin guidance for Q1 is 58% slightly is down sequentially. So I'm just wondering what's the puts and takes in the gross margin guide for Q1. Guy Kizner: Sure. So this quarter, we reported gross margin of 59.6%. Looking ahead for the next quarter, we are guiding gross margin of 58%, plus/minus 1% point. And this reflects the current specific product mix as we see it right now for the quarter. But as we always said, margins can fluctuate on a quarterly basis. And the right way to look on our margin profile is on the annual basis. So nothing really changed structurally. It's based on specific product mix in a specific quarter. Yiling Sun: Got it. And then on gate-all-around accumulative revenue of $500 million until '26. So we are already in '26. I'm just wondering like you have a lot of announcement recently. So I'm wondering for gate-all-around in total, are you seeing the accumulated revenue to be maybe above the $500 million level? Gabriel Waisman: So we do see the momentum. And as I mentioned, we are well positioned across all players, and we are on track with getting to the $500 million mark as an accumulated revenue for '24 to '26. Obviously, '26 is expected to be higher than '25. So we'll see how it goes. Right now, I can say that we're on track to getting to this target. Operator: The next question is from Charles Shi with Needham & Company. Yu Shi: Maybe 2. First one is regarding China, how -- it looks like you talked about a little bit reduced visibility, but overall looking strong. It sounds like probably second half should see some pickup in China revenue relative to second half as well, in line with the overall trend for what -- I mean what you guided for your overall revenue. Is that still the case? And how do you feel about sustaining maybe last year's China growth somewhere around 11% based on your -- the geographical breakdown you just provided? Any color would be great. Gabriel Waisman: Thank you, Charles. So overall, if we look at process control in China, at least according to the data that we have from external sources, process control in China actually went down. But as I mentioned before, for us, it nominally went up, and we're very encouraged about the position that we have there. Obviously, as I mentioned before, proportionally, it went down from 39% to 33%. And the more investment there is in advanced nodes, it's expected to continue to go down, whereas I believe that it will normalize around the 30%. So it will continue to be a dominant and key territory for us moving forward. In terms of the trends, we currently see the some increased visibility, even though in general, visibility went down in China as well. But what we see now gives us more confidence about at least the nominal level of business in China in '26. Yu Shi: Got it. The other question, I know this is actually a question I got asked a lot. One of your peers talked about rising memory prices having some impact on gross margin. Wondering if you are seeing any of that. I know it's kind of hard to compare what you see versus what your peer sees. And I just want to get some clarification. Is memory price creating any pressure on your gross margin? Gabriel Waisman: Not sure I fully understood the question. But overall, we don't see a correlation between memory pricing to our gross margin. No. Operator: The next question is from Vedvati Shrotre with Evercore ISI. Vedvati Shrotre: I think most of my questions have been answered. So the one I had was, can you talk about how your lead times have changed maybe 3 months versus now? And within that, your peers talked about the optical components being constrained. Does that impact you as well as you go through the year? Gabriel Waisman: Yes. So thank you for the question,. I agree with the fact that there is more pressure on the lead times. which, of course, impacts visibility as well. But that pressure on lead times calls for our operational agility to improve, which we're doing, as I previously mentioned. We're working with our suppliers and with our supply chain to make sure that we have both the material and to have the capacity to support the business and the anticipated growth this year. So there is additional pressure on the lead times, but we are making ourselves more agile in order to accommodate for that. Vedvati Shrotre: And is the optical component a driver of that lead time pressure? Gabriel Waisman: No. I think that the lead time pressure is coming from the customers that they have to turn CapEx into WFE and to actual deliveries into the fab. It's across the board, meaning that it impacts both the material, chemical and dimensional metrology portfolio that we have. There's no difference in the requests that we have from different components of our portfolio. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Gaby Waisman, Nova's President and CFO -- CEO, excuse me, for closing remarks. Gabriel Waisman: Thank you, operator, and thank you all for joining our call today. Operator: The conference has concluded. Thank you for attending today's presentation. You may now disconnect.
Kiira Froberg: Good morning, and welcome to Kemira's Q4 and Full Year '25 Earnings Conference. My name is Kiira Froberg, and I'm the Head of Investor Relations at Kemira. Here with me today, I have our President and CEO, Antti Salminen; and our CFO, Petri Castren. This will be actually Petri's last and 50th earnings webcast as Kemira's CFO. Before we start the actual presentation, I would like to remind you that our presentation today includes forward-looking statements. Next, Antti will cover our full year '25 and Q4 highlights, after which he will discuss Kemira's group level performance. After that, Petri will talk about business unit performance and cover financials in a bit more detail. And then in the end, before the Q&A, Antti will discuss Kemira's strategic focus areas in 2026 and also talk about our financial outlook for the year. But now Antti, the stage is yours. Please go ahead. Thank you. Antti Salminen: Thank you, Kiira. Good morning on my behalf as well. It's great pleasure to present Kemira's '25 results as well as, of course, in a bit more detail the Q4 results. And the year was challenging for us. Markets were soft and uncertain, which is visible in the numbers. So really challenging market environment, which then resulted in a clear revenue decline for the full year as well as for the Q4. But I'm very proud of the organization. We managed to maintain our profitability in a very healthy level. Operative EBITDA being over 19% for the full year, which I think is a really good achievement under these market conditions. And it enabled us to continue to invest into our strategy execution. So building the future growth for the company. And basically, in water business, we announced earlier in the year the acquisition of Water Engineering in North America, which is a really good platform investment into a fast-growing water services market in North America. We also invested or started an investment project in Helsingborg, Sweden for building an activated carbon reactivation capacity, which is part of our strategy to step into the fast-growing micropollutants removal market. And we have now been working for more than 6 months with the Cambridge U.K.-based AI material science company, CuspAI to significantly accelerate and basically change the way innovation is done on this area. And also that work is focusing on this fast-growing micropollutants area. So soft markets, but good profitability performance, which enables us to continue to invest into our growth initiatives. Also, our customers have been very committed, and I have to thank all the customers for the long-term partnership and commitment. We had all-time high Net Promoter Score, which I think tells about our capability to be dependable and trustworthy also in the volatile uncertain market environment. And our employees continue to stay very engaged, which, again, is the platform on which we can build the strategy execution going forward. So despite of the challenging environment, putting a lot of stress and pressure on the organization, the organizational changes that we've been going through, the organization is committed and engaged. We also made good progress on our sustainability targets. This is in the heart and core of what we do and our strategy. So we increased our score in the CDP, both in Water Security and Climate Change. reaching the A- level, which is -- which has been our target. We increased our score in EcoVadis rating, and we continue to reduce the CO2 emissions exactly according to our SBTi commitments. Again, really solid improvement there. And on February 20, when we will publish our Sustainability Statement, we will publish the new positive water impact target, which will be then guiding our way forward in terms of water stewardship. Then if we look at the Q4 in a bit more detail. So as mentioned already, the markets were soft and this market softening and uncertainty actually accelerated towards the end of the year. As a result, the Q4 revenues were 8% below the previous year, and the revenues declined in all the 3 business units. Operative EBITDA margin, however, solid at over 18% and actually increasing in Packaging & Hygiene Solutions, where basically we have continued the self-help program to improve the underlying profitability of the business and results are visible there. The strategy execution continued, as I already mentioned, and actually accelerated during the Q4. So the Water Engineering acquisition happened in Q4. And then we were working during Q4 on the first bolt-on acquisition on this platform, AquaBlue, company, which we then finalized the acquisition in early January. So this is first in the row of several such bolt-ons that we are planning to build on the platform of Water Engineering. And we have a really healthy pipeline, which we are working on. So basically kind of executing a programmatic acquisition-driven growth in the water business there. And then the latest announcement just a couple of days ago, announcing the acquisition of SIDRA Wasserchemie in Germany. And this is then strengthening our position in the most profitable and resilient part of the business, i.e., the coagulant business in the Europe. So basically building on the core, strengthening the Water Solutions business core part, strengthening our position in Western and Central Europe. So market softness accelerated in Q4, but we accelerated also our actions to continue to invest in the future growth of the company. Revenue, as you see, basically, again, just the numbers kind of proving the acceleration of the softening of the market towards the end of the year here. And it's good to remember here that there's also quite significant FX impact in these numbers, and Petri will soon elaborate a bit more on that. And then looking at the profitability, healthy, over 18% profitability, as I mentioned in the Q4. Q4 typically is the weakest quarter for us. There's the underlying seasonality of the businesses you'll see it in the previous years as well. So under these conditions, I'm happy with -- happy about the ability of company to maintain this level of profitability. And especially happy to see that our self-help actions in the Packaging & Hygiene Solutions are bearing fruit, and we have been improving the profitability of that business. There's quite some items affecting the comparability in the Q4, totaling more than EUR 30 million, mostly coming from the restructuring and streamlining costs. So working actively to basically balance the softer top line and keep the profitability on a healthy level. And those costs are there. And again, Petri will soon elaborate a bit more on those. And it also included then the transaction cost of the Water Engineering transaction. And then as a result of this -- all this, the full year '25 earnings per share totaled EUR 1.18. And if we then look at, finally, the financial long-term targets that we have set. So clearly, we are below the organic growth target, driven by the soft demand from the markets, but we are within our target range, both in terms of operative EBITDA and return on capital employed. Of course, the capital employed going closer to the target threshold. There you see clearly the impact of the acquisition of the Water Engineering, which is then basically increasing the capital employed there. But with this, I will pass it on to Petri, who will elaborate a bit more on the financials for the very last time for Kemira. Petri Castrén: Let's assume that my voice is audible. So as Antti said, we made good progress in our strategy execution during the year and also during the first quarter. The other headline, I think, from this report, of course, is that the market has been weak, but we have been able to defend and protect our profitability quite well. I'll go directly to the variance analysis next. Headline revenue declined 8%, really 3 components that Antti already mentioned. It's the -- all negative now. Volumes were declining. Negative FX impact, mostly it's the weakening of the U.S. dollar, which is -- everybody knows about it and everybody has paid attention to it. But yes, it has been impacting us quite severely. And also a little bit on the product pricing as well about 1% on average for the quarter. Of course, these are the same components that impact profitability. In addition, there was a little bit of a higher variable costs impacting primarily our Fiber Essentials, and I will come back to that when I talk about the business unit comments. Fixed cost savings that Antti already alluded to regarding Packaging & Hygiene Solutions, where we really have had headcount reductions. But obviously, there have been fixed cost saving actions throughout the company that we have been doing to really protect the profitability during the quarter and for the year. Full year story, same component again. Of course, there, you have the addition that there is still the tail in the comparison period of the oil and gas business. So if you eliminate that part, the comparable decline 5%. And again, biggest contributors being the volume development and the U.S. dollar weakening. Then if we look at the year in totality, and we look at sort of the various components. Obviously, it's clear that the volume decline is more impactful during the second half of the year. So there was an acceleration in the business decline. And again, I will come back to those during the business comments. Sales prices actually have been relatively stable for the year. But in the first part of the year, the year-on-year comparison was quite negative. But if you look at the 1-year comparison, meaning Q4 '25 to Q4 2024, it's 1% decline. So overall, we are in a pretty stable pricing environment. It's really a volume issue that we are dealing with. And of course, this slide actually tells the same story. Prices and variable costs have significantly stabilized during the last 4 or 5 quarters. So you'll see that there's a fairly flat line when we had this huge peak during the COVID and supply chain problem years. Energy costs were sky high in '21, '22, but we are sort of putting that period of time into history, and we are now in a much more stable environment. And our crystal ball as far as we can say or see doesn't really indicate much of changes to this. I mentioned this comment after Q3, but I do it again. So it's really a volume game now for us. Volume increase the key to driving our profitability now and for us that is largely market dependent and it applies to all of our business units. We have capacity available in most of our plants and so any additional volume we can process without really adding any fixed costs for infrastructure. This means that if and hopefully when the markets improve, the operating leverage will help us with the bottom line. Having said that, you'll see that in the assumptions we are not yet foreseeing really a market recovery at this time. Antti mentioned the items affecting comparability. It's really -- we are also -- we are taking action because of the lower volumes. So we're taking action on our manufacturing assets. We're ramping down our production entirely in our Teesport U.K. site, resulting in an asset write-down, restructuring and closing provisions. We're also making an efficiency and automation investment in our Botlek site, resulting in a reduction of manual work and the related -- restructuring costs related to that as well. Fortunately, we had EUR 12 million environmental provision for a site that has been closed long time ago -- many years ago. More than decade ago in Finland where we actually disagree with the authorities of how the land remediation should be done. The land has been remediated and the polluted land impacted soil has been taken away, but there is a difference of opinion how that soil should be treated. We'll probably continue that dispute for a while. But we have now taken a provision for that -- for the worst-case scenario, least put it this way. All-in-all, this restructuring, streamlining and transaction costs add up to EUR 32 million within EBITDA and EUR 43.8 million within EBIT. And of course, the impact of that is driving EPS down for the quarter to just EUR 0.07 per share. And for the year, EUR 1.18, below previous years of EUR 1.61. Next, I'll go to the business unit commentary, as I promised, and I'll start with the Water Solutions. So first of all, let's start with a reminder of the basics. So in Water Solutions, we do have seasonality. So our particular municipal customers do treat less wastewater during the winter months and they require less of our chemicals. So that creates the seasonality that is within our Water Solutions business. Having said that, revenue was weak, particularly it was weaker in the industrial side. The revenue was down 9%. That's quite a significant decline. But more than half of that is attributable to our contracting volumes that we received from our oil and gas business acquirer. And their customer has had an operational issue. So it's not a loss of customer, it's a loss of -- its not a loss of business, but an operational issue that has dragged on longer than anybody expected. There was also some general weakness on the industrial side. Industrial production, in general, has been weak, in particular in Europe, and there are many processes where there are some wastewaters created that impact us in the industrial side. Urban water service in Europe was very stable. It is a very resilient business. There was a 4% organic decline in North America. And of course, in euro terms, clearly bigger in our numbers. So lower volumes impact the overall profitability, so that the operative EBITDA declined by 7%. Still operative margin at 18.5% for the business unit, slightly below the level of that last year. Next comments on PHS, Packaging & Hygiene Solutions. So challenging market continued. And year-on-year, the market was clearly softer and volumes impacted. Organic revenue declined 6%. Profitability has been protected by the measures that we have taken. We also have received and gained some new customer wins. So that has been helpful, but the market -- underlying market has been really soft. But the important point is that the market has now seems to it has bottomed up. It has not gotten any worse since Q3. It is not any better either. We saw, in fact, very little volume or very little price changes from Q3 to Q4. Profitability in Q4, slightly lower than in Q3, mainly due to product mix type of issues. I think, I commented that the product mix in Q3 was favorable. Now it was less favorable than in Q4. Q4 was less favorable than in Q3. And we're not done with the profitability improvement actions. So we are just implementing the new operating model as of beginning of this year, and we will be seeing benefits of that in the coming quarters as that is being implemented. Regarding regions, fair to say that APAC continues to be the biggest challenge. We see a particularly weak market in China with weak demand and with the local oversupply situation leading to much depressed prices and volumes. Regarding Fiber Essentials, environment has been weak for pulp chemicals, particularly here in the Nordics, which is a key market to us. Also market prices for base chemicals have remained low. For example, caustic soda is relatively important for us. For Fiber Essentials, there we have seen some price -- I'm sorry, variable cost increases -- raw material cost increases in the second half of the year. So it's really isolated to our sulfur products, but the increase has been quite significant. And that's the sort of one area where there is significant inflationary pressures. And it's enough that it's visible in the Fiber Essentials margins to some extent in the second half of the year. So again, looking at the full year, the volume decline, it's really in the second half of the year. And you see that the quarterly revenues have been -- have fallen to EUR 132 million, EUR 134 million range, whereas before that, we were clearly in the EUR 145 million, EUR 150-ish million per quarter run rate. And as the drop-through impact is quite significant, these are good gross margin products, but high fixed cost operating plans. So the volume -- any volume increase would have, obviously, positive impact to our profitability should -- and if and when that hopefully happens. All right. Moving to balance sheet. Now during '25, our net debt level has increased due to the acquisition of the Water Engineering and of course, the share buyback program that we had on the second half of the year. Then the smaller addition is that we actually inaugurated our new R&D facility in Espoo, here in Finland, with a 15-year lease. So that's added to our lease liabilities and reported as a part of debt obligations. ROCE that Antti was already talking about, return on capital employed, has come down to 16.5% due to this Water Engineering acquisitions. But of course, it's also heavily impacted by the reported EBIT or operative EBIT that we have, and those 2 components clearly impacting there. Cash flow from operations, EUR 127 million during the quarter and EUR 373 million for the year. Maybe a comment on the cash flow component. So our net working capital increased from previous year. We perhaps were not quite successful in reducing our inventory levels with the reduced volumes as the business was -- that business was experiencing. So obviously, trade payables are coming down, but if inventory levels remain roughly at the same level, it reflect as an increase in net working capital. And therefore, inventory levels will now need to be and are in the focus for us going into '26. There is some opportunity to tighten inventory rotation. CapEx fell just about where we expected and how we guided, slightly below EUR 200 million in '25. And now estimated '24, '26, it will increase slightly. We have some growth investments ongoing. And then, we are doing these modernization investments. I mentioned, the Botlek, but we have a few others as ongoing as well. Dividend, we have a strong track record of increasing our dividend. And now we are proposing increasing our dividend to EUR 0.76 to our Annual General Meeting. This increase is consistent with our dividend policy of paying a competitive dividend as well as increasing the dividend over time. And in recent years, the dividend has been paid in 2 installments, and we'll continue that practice. In addition to increasing our dividend, we're continuing to return capital to our shareholders through share buyback program. The purpose is to continue to optimize our capital structure. We have received almost universally positive feedback for the program that we initiated last year, and we feel that it's important that we continue to serve the interest of our diverse shareholder base. However, this is not limiting our desire or our ability to continue to execute our growth strategy. And again, it's evidenced by the 2 acquisitions that we have already done or announced -- and well, the first one is already completed. But the second one that we announced yesterday, we will continue to invest into organic growth opportunities when they are -- as well as inorganic growth opportunities. And again, this acquisition of SIDRA Wasserchemie for EUR 75 million approximately is a proof point of that. I will turn next to Antti, but before I do, I reflect a little. So this -- as Kiira said, it is my 50th and it's my last quarterly announcement. As announced, I will leave my position as Kemira's CFO at the end of March. So March 31, will be my last day of work. Looking back, I'm very proud of what Kemira has been and what Kemira has become during those 12.5 years. Kemira is much stronger, much better company, and I believe that Kemira has a really bright future. In this forum with you, our analysts and investors, there's one group of Kemira employees that I want to thank, and it's the IR officers. I had the privilege of working with during the years. So when I joined, started working with Tero Huovinen, then continued to work with Olli Turunen. Then up to quite recently with Mikko Pohjala, and now most recently with Kiira. Kemira's IR team has always been top-notch, and it's been my intention only to recruit the best that I can find in the market and been successful with that. And we've been able to maintain a top-notch IR practice for Kemira. And I'm really proud of that. And besides, the team has always been fun to work with. So thank you all. With that, now I'll turn to Antti. Antti Salminen: Thank you, Petri. Yes. So then I'll finally say a couple of words about the strategy execution a bit more. Petri already quite nicely talked about the kind of the latest announced investment and how we are really committed to grow the company via both organic and inorganic investments. I'll elaborate a bit more on that. But just to remind everybody that these 3 cornerstones are the focus areas of the strategy. So expanding the water business, there's plenty of evidence of that, and we continue to work on that. Then building our presence as the leading provider of renewable chemistry in our target markets and even more widely. So clearly, we have been recognized as one of the big leaders in the world on this area, and we continue to work on that. We have a lot of good progress on innovation projects, both in-house and with external partners on that domain and solutions that have been proven not only in lab, but in extensive customer trials. So I'm expecting quite a lot of positive things to come back for the future growth in coming years. And then thirdly, investing kind of into these new adjacent high-growth market areas, tapping or unlocking the growth potential from those areas where we have clear right to win, which are part of kind of our domain, but where we have been historically out of. And the NVS, New Ventures & Services, unit has been actively working on this, and there's a lot of good stuff in the pipeline there as well for the future growth. Then looking at a bit on a time line, basically the time since '22 when we have been executing the growth strategy, which we then sharpened 2 years ago a bit more. But basically, we've been constantly investing into the focus growth areas stated in the strategy. It started from the acquisition of the SimAnalytics, which basically has strengthened our position in the digital services area for the water business, so being present and growing our position in there. Then continued with organic investments into coagulant capacity, so that's the core -- the resilient core of our water business, so we continuously invest in there. And as Petri said then, we have capacity, we are able to benefit from the market recovery when it happens without adding fixed costs as we are -- have been building the capacity for that. Then entering into the micropollutants removal area, so small first acquisition in the U.K. and then continuing with organic investments for that area. So clear commitment to grow in that area as well. And then lately, the entry into the fast-growing industrial water services market in North America via Water Engineering. And as I already mentioned, that's a platform acquisition. So we have a really healthy pipeline of small and also some bit bigger bolt-on acquisitions and first example already happened in the first week of January. So progressing very well on that area. And then the last announcement 2 days ago regarding SIDRA. So again, strengthening the core, increasing our position -- improving our position in the water business and basically on the path to grow the significance of water business in our portfolio. So lot of things have happened, and our aim is to further accelerate the execution of strategy, so working on these growth initiatives, which is enabled by our strong financials and strong profitability despite the weak market. So I think this is exactly the time when the markets are soft, when basically we need to continue to believe in our strategy and invest in these growth activities to make us able to capitalize on the growth when the markets get healthier. So this is clearly essential for us, and we continue to be committed to that. So the 3 business units have clearly separate, different roles in the strategy execution, as mentioned already, Water Solutions being the growth engine. We will continue to invest both organically and inorganically to growth in Water Solutions. Short-term Packaging & Hygiene Solutions, the profitability improvement is the key target. But then also the packaging board markets which we serve are now in the basically historical low point and the world will need packaging materials. So that business unit has growth potential when the market ultimately recovers. And then Fiber Essentials, clearly a profitable cash flow generation unit, enabling us to invest into growth in other areas. So to close this with our outlook for '26, amid the uncertainty and fussiness of all the possible crystal balls, our -- we expect the revenue to be between EUR 2.6 billion and EUR 3 billion and the EBITDA -- operative EBITDA between EUR 470 million and EUR 570 million. So clearly, kind of you will see from here as well that it's very difficult to predict the market, but this is our outlook to the year. It assumes this continuation of global economic uncertainty and the softer volumes and basically, especially the impact being heavy on pulp and paper, but also on the industrial water markets. We assume stable raw material environment, as Petri already alluded to, so basically no big swings from there. And thus, this is the outlook that we give for this ongoing year. So with this, thank you very much. And finally, once more big thanks to Petri. He's been elementary in this growth journey and making the company the good company it is today, completely different compared to 12 years ago, as he mentioned already. But I have to personally thank Petri for the past 2 years because he's been the kind of a brick wall that I could always lean on as a new CEO and giving me the confidence that no matter if I miss some details here or there, he will always be there to support me and correct me. So very big thanks, Petri, for these past 2 years. And then with this, we move on to Q&A. Kiira Froberg: Okay. Thank you, Antti, and thank you also, Petri. And now we are then ready for the questions. So I think we could start from the line. So operator, please go ahead. And we will, of course, also take questions through the chat. So those will be coming also. Operator: [Operator Instructions] The next question comes from Andres Castanos from Berenberg. Andres Castanos-Mollor: Petri, first of all, best of wishes for the future. And also congratulations to the company and to you on all the bold actions on the finance side, M&A, buybacks, dividend increase, the full lot. So well done there. My question will be first one on M&A, please. Can you please put some numbers to the U.S. pipeline, the water pipeline there? How much money can you possibly deploy there in the next year ahead? Also, I would love a comment on the Germany deal that you announced yesterday. It seems like a rare opportunity. Do you think this could be replicated similar deals like this one? Antti Salminen: Well, I'll start, and then I'll let Petri comment on the kind of -- especially how much we can allocate to this. But as I mentioned, the pipeline is very healthy. And we've already mentioned that these kind of small bolt-ons like -- the AquaBlue is a very good example of roughly size of a single deal. So they are in the range of EUR 10 million annual revenue type of -- hovering a bit lower, a bit higher typically. And I've also mentioned earlier that we have a solid pipeline, and the aim is to execute several of those every year going forward, so that's basically giving you the basic -- the idea. And then there are couple of bigger ones also in the pipeline, which then would change the pattern. But basically, it's a solid programmatic growth ambition that we have there. And then regarding the SIDRA type, so we've -- all the time, we have said that we actively look at the base business, coagulant market and look for opportunities. There are not too many, but each and every one, we will act on. You already saw that Thatcher in North America earlier. And then we have now the SIDRA, which is, I think, really good strengthening of our Central European business. So we will -- we are actively monitoring the market. We know all the players there. And when something is suitable becomes available, we will promptly act on that. Petri Castrén: Yes. I don't know if I have much to add. But the AquaBlue type companies, there are probably a couple of hundred or a few hundreds in North America. And theoretically, almost everyone -- not everyone, but -- so it's the beginning of the pipeline. Then as the pipeline is progressed. But I have seen long lists that have 20, 30 names in it. Currently, short list is obviously shorter. It needs to be shorter. But like Antti said, these type of deals is really where we have the strong natural platform executing the EUR 10 million, EUR 20 million type revenue companies, and there are multiple those cases. And of course, from the finances point of view, balance sheet point of view, we have no restrictions on executing on that one. And so that certainly continues. Obviously, if we are looking at the Water Engineering pipe, which was well over EUR 100 million type of investment, then those would be looked at little bit differently. There's -- that's progressed in a different way in our M&A process. Andres Castanos-Mollor: A second question, if I may, please, on margin trajectory in the water business. You mentioned some seasonality, and I wonder is that it? Should we see a rebound in Q1 versus Q4 on margins? And also, can you comment on the margins of the acquired companies that you have acquired so far? Are they accretive to the current water business margins? Petri Castrén: Well, I can start with... Antti Salminen: With the seasonality... Petri Castrén: Yes, in water business. Antti Salminen: And then again pass on to you. So basically, the water business has this natural seasonality because big part of the water business is especially on the urban municipal side is weather dependent. And -- but there are also other things, and I will talk a little bit more about them. But basically, typically, the summer months are the strongest or the summer quarters are the strongest quarters. And then the winter quarters are always a bit weaker, and especially Q4 being typically historically and especially in North America, the weakest one. So it's partly weather dependent. There's less water in the systems, but especially kind of entering into this water -- industrial water services business, there's also the industrial patterns because a lot of that business is in cooling towers, for instance. And when you have cold months, you have less need for cooling in industrial applications. Also, there's a lot of business in the services part business, which has to do with the -- there's a lot of pools in U.S. So basically, again, pools are not used in winter time and so forth. So it will only strengthen the seasonality, I think, in the water business, this entry into the services area. Petri Castrén: And so Andres, if your question was really regarding the pipeline of these services companies, they actually vary quite a bit. They vary from the low teens to 40% EBITDA margin in the business. And it often depends on how much product and possibly equipment sales they have in it or whether it's pure services where the margins tend to be higher. So I don't think I can give you an universal answer on the types of margins that you see. But philosophically, we don't want to dilute our profitability with these acquisitions. So even if the coming in margin is lower than ours, there needs to be synergies that get to our sort of at least average group margins. Operator: The next question comes from Tomi Railo from DNB Carnegie. Tomi Railo: It's Tomi from DNB Carnegie. And thank you also Petri from my side it's been absolutely a pleasure to present a short while... Kiira Froberg: Now we can't really hear you, Tomi. Could you please repeat your question? Tomi Railo: Can you hear me now better? Kiira Froberg: Yes, we can hear you now. We heard the thank you part. But then when you started to ask your question, we lost you. Tomi Railo: Okay. Maybe that's a signal. But the question is simply, was there something still extraordinary in the water clean that you booked kind of in the clean EBITDA? You mentioned some of the items, but or was it just a very clean, clean number what you reported? Petri Castrén: I would say that it's clean. And of course, during the Q4, you always tend to look at your inventories and you tend to get some invoices from your customer -- suppliers that hadn't been accrued for small amounts. So we have a fondness of talking about 13th month, it's not 13th month. But there is typically some new expenses that come in December time frame we usually plan for -- or we plan for that, but there's a little bit of unknown. But I would call that in -- put that in the level of noise, particularly for Water Solutions. Tomi Railo: Okay. And the second question on the outlook. I'm just trying to make a sense. You mentioned that kind of the softness accelerated in the fourth quarter from the third quarter. But then when I'm reading your kind of outlook commentary, it doesn't really sound that the market has changed for worse. Actually, you also mentioned yourself that it's stable. So kind of is the market now stable, what you believe? Or is there still some further weakening? Petri Castrén: Let me correct first -- correct me first and then I think it's more appropriate that Antti talks about the outlook. I probably may have miscommunicated a bit poorly. What I meant to say that the volume decline was higher in the second half versus the first half. And this was clearly driven in Nordics by the pulp mill, not closures, but... Kiira Froberg: Downtime. Petri Castrén: Downtime -- thank you for the word -- as well as the contracting volume decline in industrial. And then perhaps there was some more industrial decline in water service in second half. But if you sort of -- I recognize accelerate is probably the wrong word. So it was not accelerating. So third quarter to fourth quarter, there was no acceleration. So let me correct that if I communicated that poorly. But then I'll let Antti talk about the outlook. Antti Salminen: Yes, yes. And as I said when I introduced the outlook, so basically, if anything, the visibility is really poor. So commenting to this or that direction, whether we see kind of an improvement or declining, it is -- the visibility is really poor. But as Petri mentioned, I think many indicators from the market show that this -- we believe that this is kind of the bottom level. We haven't seen any significant further weakening, but we haven't seen really any kind of bright signs for -- at least for the first half of the year either. And there, I would, again, as we discussed earlier, so Tomi, I would recommend to look at what our big key customers have stated about market because, of course, they see it first and we get hit in kind of upper in the value chain of those phenomenon. So basically, you can read that, and that's the kind of crystal ball we have. Tomi Railo: Of course. Just a follow-up. If you could give kind of price and volume assumptions into '26, what you are saying? I hear you that kind of it's a volume game, but would you assume that pricing is down or stable in this environment? Or what's kind of price and volume assumption, maybe if there's something. Petri Castrén: I already offered my view of the crystal ball, and it's pretty stable, and it has been stable for the last 4 or 5 quarters, and we don't see changes to that. And that applies both to pricing environment and the variable cost environment. Kiira Froberg: Thank you. Let's now take the next question from the line, please. Operator: The next question comes from Joni Sandvall from Nordea. Joni Sandvall: A couple of questions from my side. In BHS, you mentioned the continued improvement, what you have started now with the new operating model kicking in from '26. So if I remember correctly, you maybe have mentioned around 15% EBITDA margin target by end of '26 is still valid with the current market environment? Antti Salminen: Market environment, of course, plays a role there, but that's the ambition level that we have been talking about. So I mean, if you look at from the group perspective, that's the expectation. Now whether the market support reaching that exactly during the last quarter of '26 or later in '27, that depends, but that's the ambition level that we have set for. Joni Sandvall: Okay. That's clear. Then maybe a question on the energy prices have been spiking both in the Nordics and in Europe. Are you seeing any support for yourself through the pricing now in H1? Petri Castrén: Well, the weather forecast, I was looking for it to be snowy for the weekend, but then I heard that the weather forecast changed. It's not getting more snow. I'm looking for the cross-country skiing next weekend. Honestly, let's not get excited about -- too excited about a 1 month of cold weather in Finland and Europe. So I think we have to look at the bigger picture and longer period of time. It is true that in the Fiber Essentials, typically, our customers do benefit -- also customers benefit of high energy because they do produce energy, electricity while their pulp mills are operating. So that's sort of an ongoing market commentary that I can say. But really regarding a crystal ball for the weather, for the remaining of the year, don't know -- we don't have that. Joni Sandvall: Okay. That's clear. Then maybe on the Fiber Essentials, also a question on -- because your sales were declining now in Q4, so could you give any indication how large part of this was driven by lower utilization ratios of the Nordic pulp mills in Q4, which is -- it's not typical that those are curtailed during Q4? Petri Castrén: It's not typical, but they were. So Latin America, there's no change. There's, obviously, some currency impacts year-on-year from North America. But honestly, I would -- I don't have the data now, the breakdown in my head. But it's mostly Europe. It's mostly Nordic. Antti Salminen: It is really mostly Europe. So basically, the -- as Petri said, the Latin America, there was no change quarter-on-quarter in terms of our delivery volumes. In North America, we actually improved a bit in quarter 4, if anything. So it's really coming predominantly from the Nordics. Joni Sandvall: Okay. And then maybe lastly, quickly and for Petri about your supplementary pension fund returns expectations for '26? Petri Castrén: Well, we are expecting to receive another EUR 10 million of return from capital because the fund is roughly EUR 100 million overfunded. So we are unwinding the overfunding slowly and gradually. Obviously, continue to invest smartly. And I trust my successors will continue to do that. So the pension fund is in good shape. So no issue there. Kiira Froberg: Thank you, Joni. We now have a few minutes time to take some questions from the chat. And I think that we could start with the Fiber Essentials team. So the question is, do you expect volume recovery in Fiber Essentials in early '26, given that pulp wood prices in the Nordic area are clearly down, supporting profitability of pulp mills in the region? Antti Salminen: Well, I mean, again, I would refer back to what our customers in that business have announced and said. But clearly, I mean, as Petri already mentioned, it's favorable for the Nordic pulp mills to run as full as possible in the cold winter months as they produce electricity as well. So basically, typically, the first quarter is volume-wise a strong one. And then, of course, the kind of decreased wood prices should be supporting the business of our customers also going further into the year. So of course, we dearly and truly hope that the volumes are improving as a result of this phenomena. But it's really up to our customers. Kiira Froberg: Yes. There's another question, which is related to the Water Solutions business, and I think that we've covered the seasonality part yet. But this is related now to the measures or the kind of like items affecting comparability. That's how I read this. So could you come back on the measures to increase production capacity in the Water division and why these measures make sense despite the lower volumes and lackluster demand in water. So maybe kind of like why these sites and... Petri Castrén: So let me -- I'll cover the 2 items affecting comparability. So Teesport U.K. has been a site with low-capacity utilization for quite some time. Let's be honest about that one. And we have reviewed -- and now what we have made a decision that it's sort of now falling below the threshold, and we are moving the production from particularly some deformers from that site to another site in Europe. So we are closing that site entirely. So we are obviously reducing fixed cost significantly with the closure of that site. So I think that's fairly obvious. Then in Botlek, Netherlands, we are not closing a site. We're actually investing into a site. But it's a site with a relatively high fixed cost because -- I mean, it's Netherlands. The salaries are relatively high there. And we are doing an automation investment. So what has been a fairly manual process, we are automating and, in the process, we are eliminating manual work and its fairly significant or big enough number of employees that it actually makes a difference. And so it's -- there, we -- I'm not sure if we are investing into capacity addition. I think it's, we call it improvement and automation investment. So it's not capacity constrained that particular site. It's really an efficiency improvement with a quite decent payback period. Antti Salminen: Exactly. And then if I continue on the -- if you look at the kind of couple of years' timeline and the coagulant investments that we have been doing into Water Solutions. So we have been there. I mean, the growth -- the population in Europe is not growing. The per capita water consumption is not growing, but the regulation is getting tighter. So basically, we have been doing this investment or initiating them when we see the regulation on certain part of Europe changing. It's not same even if the EU regulation is the same, but the application in jurisdictions is different. So that's why we have twice expanded the coagulant capacity in U.K. The first one, we sold immediately to practically full utilization, that's why we did the second capacity expansion. Same goes for the Iberia, the Tarragona site. So there are certain factors in the regulation and the market that drive the demand. And we do kind of very targeted, relatively small add-on capacity investments on existing site to capitalize on those pockets of market that we see the growth potentially. Kiira Froberg: Thank you. Let's now take one last question from the chat, and it's about the Packaging & Hygiene Solutions profitability program or profitability improvement program. So can you comment on the progress? How much more work is there to be done? And when are you expecting the full impact to kick in? Antti Salminen: Well, I'll start and then if there's something that Petri wants to add. But basically, I mean, it has progressed in phase. So what we did last year is that we basically found the kind of so-called low-hanging fruit in terms of cost both in the business unit itself and then on the operations side that are supporting it, and those we kind of had implemented. So the run rate should be kind of built into this year's numbers. We similarly found some kind of new add on top line, which basically was realized. Those contracts were negotiated and closed last year. So basically, again, us, the customers change suppliers, we should see the revenues in this year's numbers. But then the next phase of that is the new operating model, which we have implemented where we basically changed also the structure and basically how we serve the customers, giving better service for our key customers, the key accounts and then streamlining the service levels for the kind of tail end. That work, the implementation is going -- ongoing as we speak. So that happens during the Q1 and then the results would be visible later in the year. And then the business unit management has in pipeline the next round as well because this is a kind of continuous process of when we kind of put something in the shape, then we realize that there are other things that can be further improved. So we will continuously work on that. But gradually during the year those benefits will be visible. And some of them in '27 only also. So this is a long process. Kiira Froberg: Yes. Thank you. Unfortunately, we are running out of time. So we will start to conclude the conference. And if there are any other questions you know where to find the Investor Relations. So please be in touch. And we have a pretty full roadshow agenda coming in now after the earnings. So we will start with Petri next week in Geneva. So there are still plenty of opportunities to meet also Petri. And Antti and myself, we will be back here in our results studio in connection with our Q1 report, which will be published on April 24. And we, of course, hope that Petri will be cheering for us maybe from the golf course or I don't know. Thank you all. Have a great day. Antti Salminen: Thank you. Petri Castrén: Thank you.
Operator: Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pacific Gas & Electric Co. Fourth Quarter 2025 Earnings Release. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the call over to Jonathan Arnold, vice president of investor relations. Please go ahead. Good morning, everyone. Jonathan Arnold: And thank you for joining us for Pacific Gas & Electric Co.’s fourth quarter and year-end 2025 earnings call. With us today are Patricia Kessler Poppe, Chief Executive Officer, and Carolyn J. Burke, executive vice president and chief financial officer. We also have other members of the leadership team here with us in our Oakland headquarters. First, I should remind you that today’s discussion will include forward-looking statements about our outlook for future financial results. These statements are based on information currently available to management. Some of the important factors which could affect our actual financial results are described on the second page of today’s earnings presentation. The presentation also includes a reconciliation between non-GAAP and GAAP financial measures. The slides, along with other relevant information, can be found online at investors.pgecorp.com. We would also encourage you to review our annual report on Form 10-K for the year ended 12/31/2025. With that, it is my pleasure to hand the call over to our CEO, Patricia Kessler Poppe. Patricia Kessler Poppe: Thank you, Jonathan. Morning, everyone, and thanks for joining us. This morning, we are reporting full-year 2025 core earnings of $1.50 per share at the midpoint of our EPS guidance range and up 10% over 2024. This marks our fourth consecutive year of double-digit core EPS growth. I am proud of how our team stayed focused on our highest priorities: safe, reliable, and affordable service for our customers while at the same time delivering strong results for investors. Looking ahead, we are raising and tightening our 2026 core EPS guidance range. We are increasing the low end by $0.02 which brings the range to $1.64 to $1.66. At the midpoint, our 2026 guidance implies 10% EPS growth. Looking further out, I am pleased to reaffirm our growth outlook of 9% plus annually from 2027 to 2030. As you have come to expect, we will also continue our practice of basing future growth on our actual earnings. As previously announced, last month, I began the five-year extension of my contract as CEO, which runs through 2030. I am energized by the work ahead. Our priorities are clear: safely keep the lights on and the gas flowing, and keep making bills more affordable. It is a safety, reliability, and affordability trifecta that we are delivering here at Pacific Gas & Electric Co. On the safety front, in 2025, we had a 43% reduction in serious injuries and fatalities compared to 2024, and our serious preventable motor vehicle incident rate improved by 30%, achieving some of our best-ever safety metrics. On reliability, our systemwide performance improved by 19% from 2024. And on affordability, it is our consistent execution on our plan—our simple, affordable model—which is allowing us to chart a differentiated path for our customers. On January 1, we delivered our fourth reduction in electric rates in two years, with our gas rates also going down. Combined with prior decreases, our bundled residential electric rates are now 11% lower than January 2024, with the typical customer paying about $20 less per month. That is progress customers can feel. If our pending 2027 GRC were to be approved as filed, combined gas and electric bills would be flat to down compared to 2025. And we are going to keep pushing because fighting for customer affordability is core to our strategy. Looking ahead, we see opportunities to further improve this trajectory through the addition of rate-reducing load, from data centers and other electric growth. This new load can deliver a win-win for California—economic development and affordability. Slide four should be familiar by now and summarizes our consistent execution track record. Each year brings different headwinds and tailwinds, but our approach is unchanged: plan conservatively and execute relentlessly to deliver consistent, predictable results over the long term. In 2025, we confronted early headwinds with strong execution during the year, particularly on the cost side, ultimately putting us ahead of plan. This allowed us to redeploy and pull ahead costs in the back half of the year. That is our model doing exactly what it is designed to do—deliver consistent results for owners while redeploying outperformance to benefit our customers. As shown on the slide, over the past four years, savings generated under our simple, affordable model have allowed us to redeploy over $700 million for the benefit of customers while still delivering for our investors. These are dollars which could have shown up as higher profits but which we chose instead to deploy toward better customer outcomes and derisking future years. Said another way, profits and customer savings go hand in hand. Turning to slide five. We remain intensely focused on helping California find a path to address the state’s wildfire challenge. We will stay constructive and tenacious until we reach a more sustainable, safer, and affordable future for our customers, for our communities, for our state, and for those who commit their capital to us. Since our last call, the California Earthquake Authority stakeholder process for SB 254 phase two has been progressing, and they are tracking towards submission of their report and recommendations to the governor and legislature April 1. I should note that the April 1 CEA report will not be the end of the road for phase two. In fact, it will mark the beginning of the legislative process. We are not getting specific today on which policy choices might be most effective, but be reassured our team is actively engaged. In terms of core principles, our goal is to address the open-ended and unknown risks which the current construct puts on the IOUs and our customers. For California to attract much-needed capital, you must be able to quantify and price the risk. Our customers and hometowns need us to access affordable capital as a prerequisite for the safe, resilient, and clean energy system they expect. Turning to slide six. Ignitions were down 43%, which resulted in a third year without a major fire caused by our equipment. This was achieved despite elevated fire activity statewide. As we do every year, we are looking to drive further safety in 2026. We expect to further expand our continuous monitoring capabilities, including our smart meters, which are helping us get ahead of potential issues—anticipating failures before they happen. In late January, we announced the launch of EmberPoint, a new venture between Lockheed Martin and Pacific Gas & Electric Co. Marking a critical milestone in our mission to end catastrophic wildfires, EmberPoint is intended to integrate next-generation wildfire solutions and set a new standard of wildfire safety. With our regulator’s approval, we can bring our wildfire mitigation experience and proven layers of protection while Lockheed Martin brings its cutting-edge prediction and detection along with military-grade equipment and tools to help our firefighters stay safe while putting out fires faster. We can accelerate at scale the deployment of technology at the lowest societal cost, the goal being speed to safety—making our system and others safer faster. In addition, EmberPoint gives us a pathway to flow some savings back to our customers over time. Also in January, five finalists were announced in the autonomous response track of XPRIZE Wildfire where Pacific Gas & Electric Co. is the main sponsor. This summer, the five finalists will be tasked with demonstrating autonomous systems which can detect and fully suppress a high-risk fire in a 1,000 square kilometer test zone within minutes while leaving decoy fires untouched. We could not be more excited to be helping advance real-world adoption of game-changing solutions. On the regulatory front, in December, the CPUC voted out revised guidelines for utility undergrounding plans. This is a key step that moves us toward initiating our ten-year plan filing with OEIS, likely in the third quarter of this year. Earlier this week, we and the other IOUs made a required filing with the CPUC to establish the benefit-cost ratio methodology. Aligned with that, the CPUC guidelines provide us a path for us to file for approximately 5,000 miles of additional undergrounding over ten years starting in 2028. These miles will represent the next phase of our undergrounding journey and will add to the 1,900 miles we expect to have completed by 2027. Combined with overhead hardening, this would bring our total system hardening plans through 2037 to almost 11,000 miles and more than three-quarters of the high fire threat miles we plan to harden based on our current modeling. The remainder of our overhead system in the HFTDs will be protected with operational controls like PSPS, EPSS, maintenance including vegetation management, and continuous monitoring, as it is today. As illustrated on slide seven, we see Pacific Gas & Electric Co.’s affordability story as our story of the year. As I mentioned earlier, on January 1, we lowered our bundled residential rates for the fourth time in two years, and our average bills for those customers are now 11% lower than in January 2024. That is a headline worth repeating. We hear a lot of discussion of affordability in absolute terms, but what gets less attention is that our bills, as measured by share of wallet, are below the U.S. average. Our value proposition relative to income levels is therefore better than average. Our prices are moving in the right direction, and we believe this will become easier for policymakers to recognize going forward. As our 2027 GRC proposal laid out, our simple, affordable model allows us to make needed investments while holding our bill increases at or below typical inflation. Back in 2024, we started talking about our simple, affordable model, amplified. This showed an opportunity for further improvement in each of the key elements, our goal being to bend our future customer bill trajectory down even further. Today, as shown here on slide eight, I am excited to share with you that we are officially updating our simple, affordable model to show a new target future bill trajectory of 0% to 3%. You heard me—0% increase in our bills is in sight. We have amplified two key enablers: our non-fuel O&M savings and electric load growth. Our confidence in the Pacific Gas & Electric Co. performance playbook and in our ability to drive savings has continued to grow. We still see plenty of headroom for savings, as indicated by our capital-to-expense ratio, which has improved from 0.8 to 1.0 over the past two years. While improving, our ratio remains well below our peer group average of 2.0, while top-decile performers are close to 3.0. Turning to our rate-reducing load story here on slide nine. Since our third quarter update, we have seen significant growth in projects moving into the final engineering stage, which now stands at almost 3.6 gigawatts. That is up two gigawatts, more than doubling from last quarter. We are excited by the opportunity to bring on large load and deliver savings to our bundled customer base while enabling growth and economic prosperity for our state. In January, Carla Peterman represented us at a ribbon-cutting ceremony at the Equinix Great Oaks South Data Center, the first data center to come online under our joint implementation agreement with the City of San Jose. This was an opportunity to demonstrate that Pacific Gas & Electric Co. is delivering on our promise to provide fast, reliable power to large energy users. For each gigawatt of large loads, we see the potential to drive savings of 1% or more on average monthly electric bills. In order to do this, it is actually quite simple. We just need to get the pricing right. And while the relationship between data centers and customer affordability is now receiving a lot of attention at the national level, demonstrating savings for our core customers has been nonnegotiable for us from the beginning and continues to be so. With that, I will hand it over to Carolyn. Carolyn J. Burke: Thank you, Patty, and good morning, everyone. Here on slide 10, we are showing you our 2025 earnings walk for the full year. Core earnings per share are $1.50, at the midpoint of our guidance and up 10% from 2024. We have added $0.07 from our customer capital investment, deploying critical capital on behalf of our customers for safety, resiliency, reliability, capacity, and new customer connections. In fact, with respect to new connections, by late 2025, we had cut application intake time by 40%, from a 2023 average of 76 days to just 45 calendar days. And our engineering design times are down by one-third, thanks to our performance playbook. Our operating and maintenance savings came in at $0.20 for the year, and we were able to redeploy $0.09 back into our system for the benefit of our customers. We had over 160 waste-elimination initiatives in 2025, which came from across Pacific Gas & Electric Co., from our front line to the back office. And we are not done yet, as this is a muscle we are continuing to strengthen. Timing items reversed for the full year, with “other” here mainly reflecting benefits from smart tax planning, as we shared on the third quarter call. Turning to slide 11. There is no change to our $73 billion five-year capital plan. We still see at least $5 billion outside the plan, much of which is FERC-jurisdictional capital, which can enable rate-reducing growth. Here on slide 12, I am pleased to share our five-year financing plan. On the third quarter call, I shared our financing guideposts. Those principles have not changed and are reflected here. Importantly, our plan is built to require no new common equity through 2030. We continue to prioritize investment-grade ratings, including sustaining FFO to debt in the mid-teens. And we still target reaching a dividend payout of 20% by 2028 and holding that level through 2030. As you likely saw, we doubled our annual share dividend to $0.20 for 2026, and based on our payout guidance, you can expect consistent increases in the next two years. This plan offers flexibility over the five-year period and is based on conservative assumptions. On this slide, we are also showing our expected 2026 utility debt issuance of up to $4.6 billion. Our plan includes a modest additional parent-level debt financing, which may include efficient tools such as junior subordinated notes. Overall, we expect our percentage of parent debt to remain below 10% through 2030, which is on the lower end of sector norms. While this need is more towards the back end of the plan, we will always be opportunistic in terms of timing our market access. Given uncertainty on timing and indeed whether the contingent contributions to the continuation account will be called, we have not explicitly included these in our waterfall. If these were called, Pacific Gas & Electric Co.’s share would be $373 million annually over five years, which we would plan to debt finance and still maintain our mid-teens credit metric. Turning to slide 13. Achieving investment-grade ratings and efficient financing are key principles of our financing plan. With investment-grade credit, we would be able to access lower-cost debt, unlocking a key incremental affordability driver for our customers. Regarding capital allocation, consistent with what we have said before, we are in the midst of a state-led process on wildfire policy reform, and we continue to see our current investment plan as the one that best delivers for our customers and investors. Now is not the time to make a change. That said, as you would expect, we will have a disciplined approach, and if we reach a point where we are not seeing clear signs of progress on the legislative front, then you can be certain we will take a hard look at all aspects of our plan. Here on slide 14, now this is where I get really excited. We reduced non-fuel O&M by 2.5% in 2025, meaning we have now exceeded our target for four years in a row. And we are definitely not done yet. As Patty mentioned, we have updated our simple, affordable model on this call to reflect O&M savings in the 2% to 4% range, up from the previous target of 2%. And as a reminder, this savings target is after we have absorbed inflation and other cost pressures. Slide 15 highlights our upcoming legislative and regulatory calendar. The California legislative session is already underway, and as you know, the wildfire fund administrator’s report is due April 1. On the regulatory front, our general rate case process continues with intervenor testimony tomorrow and hearings in April. We expect to file our ten-year undergrounding plan with OEIS in the third quarter, and we are tracking towards a November proposed decision in the Kincaid and Dixie cost recovery proceeding. I will end here on slide 16 with our value proposition. It is a reminder that the simple, affordable model works. The concept is simple, but it is our differentiated performance that is unlocking benefits for both customers and investors. And now I will hand it back to Patty. Patricia Kessler Poppe: Thank you, Carolyn. We understand that the state’s work on wildfire risk in SB 254 phase two remains the critical variable for many investors, and we are fully committed to finding an outcome which delivers on key priorities. These include continuing to accelerate our reduction of wildfire risk while also delivering on affordability for our customers and attracting investment for California energy infrastructure. Before we take your questions, let me recap some highlights from this past year. We achieved a significant reduction in serious injury and motor vehicle incidents, resulting in some of our best-ever safety performance. We reduced ignitions by over 40%, resulting in our third consecutive year with no major fires caused by our equipment. We improved electric reliability by 19% year over year. We now have 3.6 gigawatts of data center demand in the final engineering stage, positioning us to capture rate-reducing load growth. Our customer transaction score, which we measure every day, is up, and our field crews are being scored 9.5 out of 10 by our customers when they interact with our frontline team. Our brand trust is up. We reduced O&M by 2.5%. We delivered another year of double-digit earnings growth, further extending our execution track record. And with all of that, we have lowered bills again, with our now amplified, simple, affordable model offering a pathway to zero bill inflation. Now that is a year to be proud of. With that, operator, please open the lines for questions. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. As we enter Q&A, we ask that you please limit your input to one question and one follow-up. As a reminder, to ask a question, please press the star button followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Your first question comes from the line of Nicholas Joseph Campanella of Barclays. Please go ahead. Nicholas Joseph Campanella: Good morning, everyone. Thank you. Morning. Operator: Great to see progress overall, and you know, definitely hear you on the 0% to 3% bill growth on the refresh plan, so thanks for that. Maybe just kind of if you were to kind of reflect on the CEA process, what is most encouraging to you? And then what is your view on just having something done legislatively in June versus September just given the summer recesses? You know, historically, I think things have gone the full distance into September. I am wondering if there is broad enough alignment in your view to maybe get something done sooner than that. And any comments on timing? Thank you. Patricia Kessler Poppe: Yeah. Thanks, Nick. I will start with timing questions. Look, this is a complex legislative effort, and we definitely want to support taking the time to get it right and getting the right outcomes. And, obviously, the sooner, the better, but we want to make sure the most important thing is getting something right done this year. So we are very much intent of, you know, really helping make sure that we are on the right footing, that we have got the right information, and that the decision makers have the information they need to make decisions well. And so that leads to the CEA process, and I would say that they are right where they are supposed to be in terms of timing in the process. They are doing what they said they were going to do. We are encouraged by that. And you know, as they closed their latest webinar, the CEA said they are focused on actionable, viable, and durable solution. Boy, we really support that. Because we know our customers and our investors bear an outweighed cost of the current construct, and it is regressive. Our most vulnerable citizens are paying too much for this current construct, and so we definitely support the actions that are being considered. You know, we do think that the most important criteria for us as we look at it is making sure that we continue to focus on risk reduction on recovery outcomes for costs that are borne, affordability obviously needs to be a key component of whatever solution there is. And today, the current model is not affordable for our customers, and so we need to fix that and make sure then that, most importantly for the audience on this call, is that we continue and are able to be investable and that you can price the downside risk associated with the legal construct here in California. So we are very much focused on getting the right outcomes and taking the time required to do that here in this legislative session. Nicholas Joseph Campanella: Thanks for the thoughts there. And then, you know, I know in the prepared there was also kind of discussion about, you know, you would relook at the overall plan, depending on the signs of progress and legislation overall. Can you just, if it does not go the way it is planned, can you just give us a sense of some of the items or just how you would kind of rank what takes priority in capital allocation, whether it is the capital investment, dividend, or otherwise that you would be looking at first. Patricia Kessler Poppe: Well, let us just back up for a little bit about capital allocation just in general. As Carolyn reiterated, and I will just reiterate for everyone on the call that, look. We see what you see. We too can do the math. The current valuation is absolutely not sustainable. And we are ringing that bell in every corner of California that we can find and in every conversation to make sure that people understand the value of the investor-owned utility model and how important attracting low-cost, high-quality investment is to spread out the cost of infrastructure for customers over the long haul. And that means we need to have an attractive legislative construct. Therefore, that is what makes SB 254 phase two so important. Now we say that, and as I said earlier, we do think that they are right where they are supposed to be, and people are following through on what they said they were going to, so we feel good about that. But as we think about capital allocation today, because we are encouraged by that progress, because we are having the right conversations, and because we are delivering everything that I talked about on the call—performance is power here—this is no time for us to pull back on serving our customers. Look. As I mentioned, our safety has continued to improve. Our reliability has improved 19% year over year. Our customer satisfaction is up. Our trust is up. Our rates are down. All of that to say, there is no time to change the model. However, to your ultimate question, Nick, if progress stops or derails or we feel that the state has lost interest in getting to the right outcome on SB 254, then obviously all aspects of our plan must be and will be on the table. We will not continue to sustain this valuation. And so, you know, today, that could take a lot of different forms, and I am not going to rack and stack them here on the call. But there is a lot of different ways to approach that problem, and the entire plan will be on the table if we do not see progress or if it stops and derails. Nicholas Joseph Campanella: Appreciate the thought. Thank you. Jonathan Arnold: Thanks, Nick. Operator: Your next question comes from the line of Steven Isaac Fleishman of Wolfe Research. Please go ahead. Jonathan Arnold: Hey. Morning, Steve. Patricia Kessler Poppe: Hi, Steve. Hi, Patty. Excuse me. Good morning. Good morning, Carolyn. Operator: So yeah. So just maybe following on the CEA process, we did get this view from the CPUC last week, and I am kind of curious your take on that and how influential they might be with the legislature in this process? Patricia Kessler Poppe: Yeah. You know, the CPUC sees what we see—that this current model is regressive, and it is putting excessive burden on our electric IOUs and our customers. And so I appreciated them sharing their points of view. They, I think, support what we support, which is a whole-society approach. People will definitely listen to what the CPUC thinks. They are the state agency whose job is to confirm that we have financially healthy utilities and rates and affordability for customers. And given our performance and our ability to lower rates while we are continuing to improve the service customers, we hope that it makes it easier for the CPUC to fully advocate for the reforms that we think are necessary in SB 254 phase two. Operator: Okay. Great. And then just going back to the simple, affordable model changes. So on the growth level, is this basically, with this better visibility from the data centers, you now have kind of line of sight to higher growth? Patricia Kessler Poppe: Yeah. I would say prediction that it is going to be higher. Yes. Yes. We definitely see. And as we shared, 3.6 gigawatts in final engineering. We had previously said about 1.5 of that would be online by 2030. Now we are saying it is closer to 1.8 gigawatts that will be online by 2030. Obviously, that continues to change and evolve. And as we get more applications and we can combine projects and bring things online faster, obviously, we would accelerate that. But the good news is that we do see that real load growth in project stages that makes it very real, and we have lots of confidence about that. We said 2% to 4% load growth in the simple, affordable model. That 4% is more at the back end of the five-year plan, but we definitely see it in there. And we also see, as Carolyn shared, an opportunity to continue to increase our O&M reductions as we continue to better serve customers. So it is really a combination. I will also say that we are still seeing EV load penetration. We had 18% EV penetration in the final quarter of the year, even after the incentives went away. So we definitely are still seeing increased EV demand as well, and that is an additional load driver. Jonathan Arnold: Okay. Operator: Great. Thank you. Your next question comes from the line of Shar Pourreza of Wells Fargo. Please go ahead. Patricia Kessler Poppe: Good morning. This is Marcella Petiprant on for Shar. Thanks for taking our question. Operator: Hi, Marcella. Patricia Kessler Poppe: Hi, Marcella. Patricia Kessler Poppe: Hey. Good morning. Maybe following up on that data center piece, how should we be thinking about the timeline for ramp beyond 2026? And then is that, just to clarify, final engineering stage fully incorporated into the 0% to 3% bill growth and CapEx opportunities on transmission or would be incremental when it reaches construction stage? Patricia Kessler Poppe: Yeah. So our load growth is part of the 0% to 3%. So to get to zero, we would need to see more of that load growth online. And so as I was sharing, as we look at the ramp to 2030, we can see about 50% of that 3.6 gigawatts online by the end of that range, so 2030. And so that is in that zone of 2% to 4% within that five-year time period. So consider that a ramp in that period. There are other things, though, that we have got in the hopper to help drive affordability. In addition to, you know, we talk about O&M and load growth on that, but the other line, you know, we held at 2%, but there are other parts of the bill, like supply costs. We had a good reduction in our supply costs here this year over year, thanks to our incredible supply team and work they have been doing to make the energy that we purchase and procure and produce more affordable. So there is a lot that goes into a customer’s bill that can help get us to that 0% to 3% range and trying real hard to bias as close to zero as we can get. And so we are going to keep working that every day. Jonathan Arnold: Great. Carolyn J. Burke: And then pivoting a little bit to credit metrics, investment grade one agency, how much incentive is there for continued balance sheet improvement? And then any line of sight to multi-agency investment grade? Yeah. So I will take that. This is Carolyn. So a couple of things just to remember. Fitch just upgraded us this past fall to investment grade. Patricia Kessler Poppe: Both Moody’s and S&P have said that our financial metrics are meeting the investment-grade criteria. What they are really looking at is, again, progress on SB 254, less of continued improvement in our balance sheet. With that said, we remain very committed to mid-teens FFO-to-debt metrics, and we continue to look at building a very sustainable financing plan to continue to meet those metrics. Carolyn J. Burke: Perfect. Got it. Thanks so much. Operator: Your next question comes from the line of Anthony Crowdell of Mizuho. Please go ahead. Anthony Crowdell: Hey. Good morning. Thanks for taking my—excuse me. How is it going? Just I wanted to follow up on Steve’s question. I only had one. On the legislature, there are some new faces or maybe old faces in new places in the state senate. Senator Limón is a pro tem of the senate, also new head of the energy committee. Just curious if you had any discussion with them. Just wondering if you think that may be a required big portion of support of getting something across the finish line. Patricia Kessler Poppe: Well, of course, we have been in conversation with the leadership, and we continue to be. And, you know, I think one of the hard things is our business model is hard to understand. And it is hard for people to believe and see that you can raise profits and lower rates all at the same time. That is why our performance is so important and why our mantra that performance is power really holds true at this time as we work to educate all of the legislators, including the leaders as well as others, that we can, in fact, invest in long-term infrastructure, make the system safe, make the system resilient, and lower costs. I think affordability is top of mind for all the legislature, and I think they are going to want to understand that as they make decisions on SB 254 and can see that SB 254 is actually contributing to the affordability issues for their constituents puts us on very much common ground. We want the same thing. We want a safe state. We want the ability for resources to respond when there is an incident and spread is taking place, but that our customers should not be subject to this regressive policy that has them bearing both the cost of the hardening of the infrastructure and claims then that follow when we were, in fact, prudent and capable operators. And so I think that that problem takes a long form to explain to people. And so the more we work with the legislators to help them understand the full picture, the better. So we look forward to engaging with those leaders to help make sure that they are making the best decisions for the people they represent, which happen to be the people that we serve. Anthony Crowdell: Great. That is all I had. Thanks again. Carolyn J. Burke: Thanks, Anthony. Operator: Your next question comes from the line of Julien Patrick Dumoulin-Smith of Jefferies. Please go ahead. Carolyn J. Burke: Morning, Julien. Julien Patrick Dumoulin-Smith: Hey. Good morning, team. Hey. Thank you guys very much. Appreciate it, Patty, team. Look. Hey. Hey. Just wanted to come back on the upside capital you guys have here, and look, away from SB 254, how do you think about that $5 billion and when you would be in a position to around that? Right? And as much as, obviously, you guys are talking about sales, and that trending in the right direction, I would love to hear how you think about upside of the $73 billion CapEx plan. Then in tandem, how do you think about financing that to the extent to which you were ever to go down that rabbit hole? I imagine that there is debt capacity that is latent to be able to accommodate that upside capital that you guys are identifying? And or how do you think about JSON? Carolyn J. Burke: Yeah. Hey, Julien. This is Carolyn. I will answer that. As we think about the additional $5 billion, as we have said in the past, we see three options. The first option is you can make the plan bigger. Right? You could increase your $73 billion. But that is probably the least likely given our current valuation discount. Then there is the potential to make the plan better. And when we say better, we mean in terms of affordability in particular. And an example of that is prioritizing certain capital that is associated with new load that could improve upon our bill trajectory. And then the third option is we could simply make it longer in terms of extending our above-average growth runway. So where we sit today and seeing the pipeline for load growth, the way we think about that $5 billion is if there is any additional capital coming in, it is probably option two, where we are looking to make the plan better, keeping to the $73 billion envelope of our capital plan, but ensuring that we can drive affordability for our customers with that additional capital. In terms of financing, I will just say that we continue to prioritize avoiding the need for equity at today’s low values and maintaining the FFO-to-debt to mid-teens. So as we look at financing that, those are two of our key principles. Julien Patrick Dumoulin-Smith: Awesome. Excellent. And then just if I could follow up a little bit on the process front. Any specific milestones after April 1 that you would be looking towards? I mean, I know at times it gets pretty dark and opaque through the summer months. But anything in particular you would flag here at least at the outset beyond the April 1 recommendation? Patricia Kessler Poppe: Yeah. I think that there are no specific milestones I would point to. I think there will be ongoing conversations, and it remains to be seen how much of those political conversations will be public, or will they be handled by a subcommittee or however the legislature intends to take on process once they have been given recommendations. Operator: Okay. I get it. Well, best of luck, Patty. Carolyn J. Burke: Thanks, Julien. Operator: Your next question comes from the line of Carly S. Davenport of Goldman Sachs. Please go ahead. Carolyn J. Burke: Hey. Good morning. Thank you for taking my questions. Carly S. Davenport: Hey. Just a couple of quick follow-ups to some other questions. Firstly, just on the data center pipeline, great to see that growth in the final engineering and the under construction. Just any color on the movement in the overall pipeline? Is that a high grading? Or are you seeing any shifts in sort of overall tone on demand? Patricia Kessler Poppe: Yeah. I would say that that will continue to move. As we mentioned, we just, or at least we said on the slide, we have just hired a Chief Commercial Officer. We are seeing lots of opportunity. You do not think about California when you think about manufacturing, but let me remind everyone on this call that California manufactures more products than any other state in the nation. California has more manufacturing jobs than any other state in the nation. I expect that those companies intend to grow, and so we are working to make sure that we can supply their growth as well, whether it is robotics or silicon manufacturing equipment and chip manufacturing equipment. That all lives here. And there is an electric bus company in—these companies intend to grow, and so we want to make sure that we grow for them as well. So I would say that number is a moment in time, and I expect over time when people realize that we have the capacity, that we can, in fact, deliver the timelines that they want and make sure that what we deliver is then affordable for all of our customers, that we are going to continue to be a key enabler to California’s prosperity, and that requires growth. And we are excited to power it. Carly S. Davenport: Really clear. Thank you for that. And then just back on the wildfire policy reform, just as you talked about given the urgency, but also the complexity here, I guess, is it your expectation that this will be sort of in this legislative session? Or do you see any potential for other processes to sort of be borne out of this one? Patricia Kessler Poppe: We are very hopeful that this is resolved. The substantive risk and cost allocation—we are very hopeful that this is resolved during this legislative session. That would be—this is the second phase of a two-phase process, a two-year session. And we have gotten—you know, I think we have seen what everyone has seen—that they are right where they said they were going to be. The process is working as planned, and the CEA is a very professional organization. I am impressed by the actions that they have taken and them following through on what they said they were going to do. Carly S. Davenport: Great. Thank you for all the color. Jonathan Arnold: Thanks, Carly. Operator: Your next question comes from the line of Gregg Gillander Orrill of UBS. Please go ahead. Yeah. Good morning. Thank you. Congratulations on the results. Patricia Kessler Poppe: Thank you. Just—I was wondering if you could talk about what you are expecting from the Kincaid and Dixie cost recovery proceedings, who handles that, and, you know, what you are expecting to see out of that. Carolyn J. Burke: Yeah. So we filed in November 2025 the first catastrophic wildfire proceeding that involves the presumption of prudency. What we submitted is a review of the costs that were paid by the Wildfire Fund associated with Dixie and Kincaid. That is the over $1 billion in claims. That is about $674 million. We are also looking for recovery of WEMA costs, which is about $1.6 billion, and that is primarily—if you think about this, remember, we did not have the self-insurance at that time. Patricia Kessler Poppe: And so it is the donut hole between what we recovered from insurance versus up to the $1 billion threshold before we can have access to the Wildfire Fund. So we are looking for—that is the second thing we are looking for recovery from, and then we are looking for recovery from CEMA costs, which are about $314 million. Carolyn J. Burke: So that is what we are looking for. I will just remind you that with Kincaid and with Dixie, we had a valid safety certificate, which is— Patricia Kessler Poppe: So we are deemed reasonable in terms of our prudency. We think we have made a strong case, and we believe the facts support our case. Gregg Gillander Orrill: Sounds good. Thank you. Operator: Your next question comes from the line of Ryan Michael Levine of Citi. Please go ahead. Had one clarifying question around some of your comments. Are you looking to accelerate the prudency determination through the CEA process for future liabilities or future claims? Is the CEA process— Patricia Kessler Poppe: Yeah. Ryan, there are a lot of things that we are looking at through the CEA process. So, really, not specifics. It is going to be a bundle of options and improvements and construct. And so I hesitate to have a specific outcome that we want. We want to make sure that the downside risk is knowable and affordable for both customers and investors. And there is probably a lot of ways to make that happen. Operator: Okay. Thanks for taking my question. Patricia Kessler Poppe: Yep. Thanks, Ryan. There are no further questions at this time. And with that, I will now turn the call over to Patricia Kessler Poppe, CEO, for closing remarks. Please go ahead. Patricia Kessler Poppe: Thank you, Kelvin. Thanks, everyone, for joining us today. I will just hit the high points. Look, our safety has improved. Our reliability has improved. Our customer satisfaction has improved. Our earnings have improved, and our rates are down. And at the fundamental aspect of running a great utility, I could not be more proud of this team and the work that they have done. And for a company that leads with love, happy Valentine’s Day. I hope you have big plans for tomorrow. Enjoy your time. Thanks so much. We will see you soon. Operator: Ladies and gentlemen, this concludes today’s call. We thank you for participating. You may now disconnect your lines.
Operator: Greetings, and welcome to the First American Financial Corporation Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. A copy of today’s press release is available on First American Financial Corporation’s website, investors.firstam.com. Please note that the call is being recorded and will be available for replay from the company’s investor website and for a short time by dialing (877) 660-6853 or (201) 612-7415 and entering the conference ID 13758180. I will now turn the call over to Craig J. Barberio, Vice President, Investor Relations, to make an introductory statement. Thank you, Operator. Good morning, everyone, and welcome to First American Financial Corporation’s earnings conference call for the fourth quarter and full year of 2025. Craig J. Barberio: Joining us today on the call will be our Chief Executive Officer, Mark Edward Seaton, and Matthew Feivish Wajner, Executive Vice President and Chief Financial Officer. Some of the statements made today may contain forward-looking statements that do not relate strictly to historical or current fact. These forward-looking statements are only as of the date they are made, and the company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. Risks and uncertainties exist that may cause results to differ materially from those set forth in these forward-looking statements. For more information on these risks and uncertainties, please refer to yesterday’s earnings release and the risk factors discussed in our Form 10-K and subsequent SEC filings. Our presentation today contains certain non-GAAP financial measures that we believe provide additional insight into the operational efficiency and performance of the company relative to earlier periods and relative to the company’s competitors. For more details on these non-GAAP financial measures, including presentation with and reconciliation to the most directly comparable GAAP financials, please refer to yesterday’s earnings release, which is available on our website at investors.firstam.com. I will now turn the call over to Mark Edward Seaton. Thank you, Craig. The fourth quarter was a strong one for First American Financial Corporation. We generated adjusted EPS of $1.99, a 47% improvement from the prior year. Mark Edward Seaton: In the fourth quarter, we experienced trends similar to those we saw throughout 2025: a strong commercial market contrasted with a sluggish residential market. On the commercial side, revenue grew 35% as we saw improvement in nine of the 11 asset classes we track. Several positive dynamics are driving this growth. We achieved price stability in 2025, which provides a solid foundation for future transaction activity. We have seen a persistent increase in sales volumes, rising commercial lending, and higher levels of refinance activity. Historically, refinance activity accounted for about 30% of our commercial premiums. In 2025, that figure increased to roughly 40%. Some lenders are choosing to write shorter maturities, which naturally leads to more refinance activity. Our commercial revenue growth was driven by both higher average revenue per order and transaction volumes. Commercial ARPU increased by 22% while closed orders increased by 10%. On the residential side, conditions remain challenging. Existing home sales are running approximately 4,000,000 units, well below the 5,500,000 units we consider to be a normalized level, as the rate lock-in effect discouraged homeowners from selling and therefore also not buying, and affordability remains constrained. One benefit of operating in a trough market is it creates an opportunity to implement meaningful change. In December, we reached an important milestone with the launch of Endpoint; in one office, we closed the industry’s first AI-powered escrow. As of last week, we have opened 153 orders and closed 47 on the Endpoint platform. While the volumes are immaterial today, the learnings are highly consequential. Endpoint improves every day, and we plan to roll it out nationally over the next two years. We believe the capabilities we are building over time will be a durable competitive advantage. On the refinance side, revenue grew 47%. While refinance volumes remain at relatively low levels, the recent drop in mortgage rates has given us some optimism. Continuing on the technology theme, in the fourth quarter, we launched our enhanced AI-powered—excuse me—Sequoia title production engine for refinance transactions. Sequoia AI is now live in Phoenix, Arizona, and three markets in Southern California. In these markets, we have achieved 40% automation rates of the search and examination functions for the products that are supported. By Q2, we expect to roll out Sequoia AI purchase capabilities in these markets, with plans to expand Sequoia across California and Florida by year-end, followed by a broader national rollout in 2027. As with Endpoint, we are learning and improving every day. Over time, we expect geographic expansion, higher capture rates, and improved operating leverage as marketing initiatives improve while reducing risk, cost, and cycle time. Craig J. Barberio: I also want to highlight another strategic initiative we are excited about. Mark Edward Seaton: The Owner’s Portal. In the 25 states where we have direct operations, customers who close with First American Financial Corporation receive free property title monitoring and fraud alert service, providing an important layer of protection for homeowners amid rising real estate fraud risk. Today, we have approximately 53,000 users on the platform, which has grown 580% just over last quarter. At our bank, First American Trust, we recently launched our 1031 exchange product. Historically, we have managed savings and checking deposits at First American Trust. Now we are also supporting 1031 exchange deposits. We ended the year with $94,000,000 in 1031 deposits, and have quickly grown to over $300,000,000 today. We expect to be closer to $1,000,000,000 by year-end. The growth in deposits will help offset the impact to investment income related to lower short-term interest rates. Looking ahead to 2026, we expect growth across each of our major revenue drivers: commercial, purchase, and refinance. On the commercial side, we expect a record revenue year, exceeding our prior peak in 2022. While uncertainty remains, our pipeline is strong. On the purchase side, we are less optimistic than some industry forecasts. We are calling for 7% to 8% growth. We do expect improvement in 2026 as the rate lock-in effect discouraging homeowners from selling and buying fades, and slow house price appreciation allows affordability to modestly improve in many markets. Open purchase orders were down 7% in the fourth quarter, implying continued weakness in purchase revenue in the first quarter. January open orders were essentially flat, with growth expected to emerge later in the year. Refinance activity is hard to predict, but refinance open orders were up 72% in January, a good sign for a seasonally weak first quarter. In closing, we remain focused on being the best title and escrow company in the industry. Based on the most recent ALTA data, we have gained 90 basis points of organic market share over the last 12 months, with additional initiatives underway to expand that further. We are reimagining our core title and escrow business by building modern AI-powered products that improve the experience for our customers, amplify the work of our employees, and ultimately create long-term value for our shareholders. Our adjacent businesses also enhance our competitive advantage and contribute to our earnings growth. Our data assets become more valuable over time. In 2025, we delivered record earnings at our bank, in home warranty, at ServiceMac, and at First Funding. With that, I will turn the call over to Matt for a more detailed review of our financial results. Matthew Feivish Wajner: Thank you, Mark. This quarter, we generated GAAP earnings of $2.05 per diluted share. Our adjusted earnings, which exclude the impact of net investment gains and purchase-related intangible amortization, were $1.99 per diluted share. Both our GAAP and adjusted earnings include one-time benefits of $28,000,000, or $0.20 per diluted share. The one-time benefits are comprised of a $13,000,000, or $0.09 per diluted share, reserve release in Canada recorded in the Title segment and a $15,000,000, or $0.11 per diluted share, insurance recovery recorded in the Corporate segment. Adjusted revenue in our Title segment was $1,900,000,000, up 14% compared with the same quarter of 2024. Looking at the components of title revenue, commercial revenue was $339,000,000, a 35% increase over last year. Our closed orders increased 10% from the prior year and our average revenue per order was up 22%, setting a record at $18,600 per closing. Purchase revenue was down 4% during the quarter, driven by a 7% decline in closed orders, partially offset by a 4% improvement in the average revenue per order, reflecting the ongoing softness in the residential market. Refinance revenue was up 47% compared with last year, driven by a 44% increase in closed orders and a 2% increase in the average revenue per order. Mark Edward Seaton: Refinance accounted for just 7% of our direct revenue this Matthew Feivish Wajner: quarter and highlights how challenged this market continues to be compared to historic levels. In the agency business, revenue was $790,000,000, up 13% from last year. Given the reporting lag in agent revenues of approximately one quarter, these results primarily reflect remittances related to third quarter economic activity. Mark Edward Seaton: Information and other revenues were $274,000,000 during the quarter, Matthew Feivish Wajner: up 15% compared with last year. The increase was driven by refinance activity in the company’s Canadian operations, revenue growth at ServiceMac, the company’s subservicing business, and higher demand for non-insured information products and services. Mark Edward Seaton: Investment income was $157,000,000 in the Matthew Feivish Wajner: fourth quarter, up 1% compared with the same quarter last year despite the Fed cutting rates five times since the beginning of 2024. Mark Edward Seaton: The impact of declining interest rates was offset by higher average balances driven by commercial activity Matthew Feivish Wajner: and by our bank subsidiary shifting its asset mix to fixed-income securities, which are less sensitive to changes in short-term interest rates. Net investment gains were $28,000,000 in the current quarter, compared with net investment losses of $62,000,000 in 2024. Mark Edward Seaton: The net investment gains in the current quarter were primarily due to recognized gains in the venture portfolio. Matthew Feivish Wajner: While net investment losses last year were primarily due to asset impairments. Personnel costs were $581,000,000 in the fourth quarter, up 11% compared with the same quarter of 2024. The increase was mainly due to incentive compensation expense as a result of improved financial performance. Other operating expenses were $282,000,000 in the quarter, up 7% compared with last year, primarily attributable to higher production expense driven by higher volumes and increased software expense. These higher costs were partly offset by the previously mentioned $13,000,000 reserve release in Canada. Our success ratio for the quarter was 47%. The provision for policy losses and other claims was $44,000,000 in the fourth quarter, or 3% of title premiums and escrow fees, Mark Edward Seaton: unchanged from the prior year. Matthew Feivish Wajner: The fourth quarter rate reflects an ultimate loss rate of 3.75% for the current policy year and a net decrease of $11,000,000 in the loss reserve estimate for prior policy years. Mark Edward Seaton: Pretax margin in the Title segment was 14.9%, or 14% on an adjusted basis. Matthew Feivish Wajner: Turning to 2026, in January, closed orders per day were down 7% for purchase, up 13% for commercial, and up 48% for refinance. Open orders per day were essentially flat for purchase and commercial and up 72% for refinance. Moving to the Home Warranty segment, total revenue was $110,000,000 this quarter, up 7% compared with last year. Mark Edward Seaton: The loss ratio was 40%, down from 44% in 2024. The improvement in the loss ratio was mainly due to fewer claims, partly offset by higher claim severity. Matthew Feivish Wajner: Pretax margin in the Home Warranty segment was 21.1%, or 21% on an adjusted basis. Mark Edward Seaton: The effective tax rate in the quarter Matthew Feivish Wajner: of 25.7% was higher than the company’s normalized tax rate of 24%, primarily attributable to higher income from the company’s non-insurance businesses, which are taxed at a higher rate relative to its insurance businesses, which pay state premium tax in lieu of income tax. Our debt-to-capital ratio was 30.7%. Excluding secured financings payable, our debt-to-capital ratio was 21.9%. Now I would like to turn the call back over to the Operator to take your questions. Thank you. Operator: We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question comes from the line of Bose Thomas George with KBW. Please proceed with your question. Matthew Feivish Wajner: Hey, guys. Good morning. I just wanted to go back to your—Mark—the comment just about commercial hitting a record year in 2026. Can you help us think about the potential improvement over 2025? I mean, if you look at the 2022 number, you have already, I guess, just about 4% away from that in, you know, in 2025. Your year-over-year growth is 35% the year in 2025. So, yeah, just based on your pipeline, you know, where do you think it is trending now versus over 2025? Mark Edward Seaton: It is—you know, thanks for the question, Bose—it is hard to say. One thing I would say about commercial is, you know, it is always something we have a hard time forecasting. But I will tell you, we are very optimistic about what 2026 is shaping out. I talked about some of the trends we are seeing in my prepared remarks, but there is just a lot of momentum in commercial, broad-based strength. We are getting a lot of refinance transactions. There are a lot of data center deals we are doing. There are a lot of big energy deals we are doing. And I would just say the team is probably as confident as I have ever seen in terms of how the year is going to shape out. Now is that 5%? Is it 10%? Is it higher than that? We just do not know. We do not know. But I think we have a lot of conviction that it is going to be, I would say, definitely growth over 2025, an all-time record relative to 2022. We are just going to have to see how it plays out. But I will tell you, the first, you know, six weeks of the year are looking really, really good for commercial. We will just see if it is sustained. So I do not have a number to give out, though. Operator: That is helpful. Thanks. And then Matthew Feivish Wajner: actually, in terms of the contribution from data centers to commercial premiums, is there a way to kind of quantify what that is? Mark Edward Seaton: There has been a lot of growth in data centers, as I am sure you could imagine, and we are involved in all, or many, of those, just because, you know, if customers need to underwrite big transactions, I mean, they have to go to us or Fidelity, really. And so we are really involved in all these data center transactions. Last year, it was roughly 10% of our premiums. And so we have seen a big growth in it. And, again, we have a big pipeline heading into this year. So I would say data center is kind of this new asset class that we have just started to track because it has really emerged. But it is a lot more broad-based than just data centers, though. I mean, when you look at—again, I talked about earlier—nine of the 11 asset classes were up last quarter. And data centers is one of them, but it is really broad-based beyond that. But really, right now it is about 10% of premiums. Matthew Feivish Wajner: And, Bose, this is Matt. Just to—Matt. Sorry, Bose. Just to clarify, it is 10% of our commercial premiums. Bose Thomas George: Yep. Matthew Feivish Wajner: Oh, okay. Perfect. So okay. Great. Thanks. Mark Edward Seaton: Thanks, Bose. Operator: Our next question comes from the line of Terry Ma with Barclays. Please proceed with your question. Mark Edward Seaton: Hey, thank you. Good morning. Maybe just to touch on Sequoia and then Endpoint. I appreciate the color on the rollout and expansion timeline. Any way to think about the impact to the margin Matthew Feivish Wajner: just from the drag that you guys had previously kind of talked about subsiding over the next two years? How should we think about that? Mark Edward Seaton: The drag on the margin is going to gradually alleviate itself, and we are already starting to see it as we invest more in our modern platforms—which Endpoint and Sequoia, like you point out—and we just invest less in the legacy platforms, and we are going to start to see that play out. You can see we had a really strong success ratio this quarter, and at least some of that is because we are reducing our investment in these legacy platforms. And so the margin drag will just dissipate over time. And I would just say we are really excited about both platforms. We reached a big milestone with Endpoint this quarter. It is live now. It is really hard to get that first order onto the system. But it is working now. It is in one market. We learn every day. And we have significant plans for Endpoint. Ultimately, what we are trying to do is we are really trying to improve the experience for employees. We are trying to reduce a lot of the tasks that you just have to do to close a transaction. I think the work-life balance of our team will be better. I think they will be able to close more transactions, and they will be paid more. I think it is going to be a better experience for our customers, that we are going to have modern technology that we can update very, very frequently, and it is just going to be a system that the industry has not seen before. I think it will be a real competitive advantage for us for a long time. Same thing for Sequoia on the title side, too. I mean, Sequoia—we really marched with Sequoia to try to do instant title for purchase transactions. And we think that we are going to achieve that vision next month of having instant title for purchase Matthew Feivish Wajner: transactions. Mark Edward Seaton: And it is just going to get better and better over time. When we roll something out, it is not going to be a 10 out of 10 day one. But over time, we just continue to get better and better. I think over the next two years, we are going to show some real progress. We have talked about the success ratio of 60% being a target for us, but I think we can beat that over the next couple of years with these new tools we are rolling out. Got it. That is helpful. And then, maybe just following up on commercial. You guys mentioned kind of broad-based trends Terry Ma: but also kind of called out larger deals on the energy side, and obviously data center is big. As I look at ARPU, at $18,600 this past quarter, and, you know, we roll forward to 2026, do you think more of the revenue growth comes from order count increase, or is it more ARPU? Any color on that? Mark Edward Seaton: I think it will be a mix. I think, as a general statement, when you look into 2026, we are expecting the mix to be higher transaction growth as opposed to ARPU growth. We will see if that plays out. But I think when we look at the growth in commercial, more of a higher percentage will come from more orders as opposed to ARPU. Matthew Feivish Wajner: Got it. Thank you. Operator: Our next question comes from the line of Mark Hughes with Truist Securities. Please proceed with your question. Mark Hughes: Yes. Thank you. Good morning and good afternoon. The 90 basis points you talked about, the organic market share—is that a mix issue, geography issue? What would you say is driving that? Mark Edward Seaton: There are two big drivers to that. They are both roughly equally weighted. One is we are gaining market share in our Agency division. And the second is we are gaining market share in Commercial. Those are the two things I would point to and say that is where the market share is coming from. We are really proud of that. And then your refi ARPU is up a little. It had been down pretty meaningfully in the last few quarters. I guess you have probably lapped some of that downdraft. Mark Christian DeVries: You think that stays in positive territory? Any visibility there? Matthew Feivish Wajner: Hey, Mark. This is Matt. So, yes, ARPU for refi was up a little bit this quarter year-over-year. I will point you to—in Q4, we revised some of our refi order counts, which also impacted historic ARPU. So if you look at the revised numbers, you will see that the trend is very similar. Mark Christian DeVries: Okay. Alright. Very good. And then in the purchase, purchase ARPU has been up three to three and a half percent the last couple of quarters. You talked about maybe pressure on housing prices benefiting affordability that could impact volume. Do you think that ARPU maybe comes under a little pressure through the year? Matthew Feivish Wajner: Yes. So in the way we are thinking about Mark Edward Seaton: 2026, we do think ARPU is going to moderate. We still think it will be positive in 2026, but it will be less than what we saw in 2025. Operator: The growth. Mark Edward Seaton: Sorry. Operator: Yeah. Mark Christian DeVries: Okay. Alright. Thank you very much. Terry Ma: Thanks, Mark. Operator: As a reminder, if you would like to ask a question, press star-1 on your telephone keypad. Our next question comes from the line of Oscar Nieves with Stephens. Please proceed with your question. Matthew Feivish Wajner: Hey, good morning. I have a question on the Title segment’s adjusted pretax margin. This quarter, it reached its highest level since, I think, Q2 2022. Can you break down the primary drivers of that expansion, Mark Edward Seaton: whether that was volume mix, pricing, expense control, or other? Oscar Nieves: Thanks, Oscar. There are a few—one of the things is we absolutely have commercial tailwinds at our backs. The margin is higher than it has been because we are getting some revenue Terry Ma: tailwinds. Mark Edward Seaton: And we are managing our expenses well. And also, the fact that the commercial market is doing very, very well right now, and commercial just has a higher margin relative to some other lines of business. There is a little bit of a mix issue there, too. There are a lot of factors, but I think that is the key driver. That is helpful. And as a follow-up to that, you have talked about Sequoia and Endpoint already. But since you referenced in the past Matthew Feivish Wajner: a 100 basis point drag from Mark Edward Seaton: the technology costs from those initiatives. Has that headwind now largely rolled off, or is some of that assumed better in the margin profile? The reason I am asking is we are looking at 14% plus margins, so I wonder if there is still some upside from Matthew Feivish Wajner: those investments rolling off. Mark Edward Seaton: I think there is significant upside with those investments for a couple of reasons. Number one is we have achieved big milestones with both Endpoint and Sequoia in the sense that they are both live in markets, working. But they are really beta versions, I will call it. They do not have many orders running through them now. We are testing it. We are learning. We are improving every day. But we are still running our business on other platforms. We have two benefits that are going to be realized over the next couple of years. One is the fact that once we transition all of our work to the new platforms, we can decommission the old technology, and there will be a benefit to that. That is already starting because we are not investing as much in the old technology, but there will be more benefit over time. The second thing is once we do get national scale on those two platforms, we do think that we will have productivity improvements, and that definitely has not shown up in the numbers yet. Over time, it is not going to just happen in one quarter all of a sudden, but we will have incremental gains over time as we roll these platforms out nationally. And once we roll it out nationally, the builds continue to improve from then, too. We feel like this is going to be a long-term benefit for margin improvement. Great. And if I can ask Terry Ma: just one last one on Matthew Feivish Wajner: capital allocation. What are the priorities Mark Edward Seaton: heading into 2026? Our first priorities are dividends, buybacks, bank investments, and potentially M&A. It is something we think a lot about. Our first priority is we want to make sure that we are investing in our core business. We want to make sure that we equip our employees, our team members, with the best tools and the best products in the industry. That is the first priority: building our technology, building out our databases, investing in the future. But I will say we do not need to ramp that up. Everything we are building is already at a run rate. If you look at our capital expenditures the last three years, they have been falling every single year. When you look at our CapEx this year in 2025, they were $188,000,000. Last year, in 2024, was $218,000,000. The year before that was $263,000,000. So we have been lowering our CapEx every year despite the fact that our operating cash has been increasing every single year. The second priority is acquisitions. The acquisition pipeline, at least the last couple of years, has been pretty dry. I think we did $2,500,000 of M&A in 2025. We talked about gaining 90 basis points of market share. We did that with only investing $2.5 million in M&A. We look at buying title companies and we look at buying businesses that are outside of title but adjacent to our core title business. I would say that is the second priority. We do not have anything material in the pipeline. Things can always change, but that is the second priority. The third priority is returning capital back to the shareholders. At the end of the day, we are trying to generate good returns to our shareholders organically or through M&A. If we cannot do that, we will give it back to shareholders. We do that through dividends or buybacks. In 2025, our payout ratio—our dividend payout ratio—was 36%. That is a priority for us. We have typically raised it a penny the last couple of years because we have been in the trough market. Our target is 40%, and we are running a little bit below that. Dividend is a priority. With buybacks, we are opportunistic. In 2025, we bought back the equivalent of about 20% of our net income in buybacks. When you look at the 20% for buybacks and 36% for dividends, we returned 56% of our net income to shareholders last year. We are focused on doing that. The last thing I would say on capital management is we think that AI is going to have a big impact. It is hard to see exactly what the impact is going to be, but our cash flow has been really improving. We want to build a little bit of dry powder. I am not saying we need to do that to strengthen our balance sheet—our balance sheet is already strong enough. But there are a lot of things moving around with AI. Everything we do, whether it is the buyback or M&A, we look through an AI lens now that we did not have before. We are going to try to keep a little bit more dry powder here just to pounce on opportunities that may arise in the future. That is how we are thinking about heading into 2026. Super helpful. Thank you. Mark Hughes: Thanks, Oscar. Operator: Our next question comes from the line of Geoffrey Dunn with Dowling & Partners. Please proceed with your question. Geoffrey Dunn: Thanks. Good morning, Mark. Is the size of some of the commercial deals tempering the appetite to upstream capital from the operating company? And how do you think about striking a balance between the necessary balance sheet strength and returning excess capital? Mark Edward Seaton: The big deals that we are doing—there is no thought of making sure that we, for example, do not pay dividends at our First American Financial Corporation title insurance company, that we need more capital in the underwriter to support these big deals. There is no thought of that. We have adequate ratings. Underwriting these big deals is not going to prevent us from maximizing our dividends. I will just say we have a very robust reinsurance program, and we feel very comfortable with the risk that we are running. Operator: Okay. And then Geoffrey Dunn: as we think about potential margin improvement as the tech investment comes down and Endpoint rolls out, is it truly gradual or more of a cliff improvement given the rollout costs that you might incur? Mark Edward Seaton: It is going to be gradual. And remember, we have other— as you know, Jeff, we are really talking about our direct division. I think these will benefit our Agency division, particularly Sequoia. It is not every single piece of the company that Endpoint and Sequoia are going to benefit. But it is going to be gradual, and we are already starting to see it. I have talked about this where we are not investing as much in our legacy platforms. Otherwise, if we did not have Endpoint and Sequoia, we would have to do that. Eventually, we will decommission legacy platforms. Eventually, our productivity will continue to improve. It really will be gradual every single quarter for a while. It will not be a cliff benefit. The important thing to note is we just continue to hit our milestones. We laid out a plan a year ago for our new AI-powered version. I am really pleased with how we are sticking to that plan. We talked about a national Mark Christian DeVries: rollout Mark Edward Seaton: by 2027, and we are still on track for that. Sorry. Go ahead. Go ahead, John. Geoffrey Dunn: Last question just on the loss provision. Expectation for it to remain steady at 3.75%? Matthew Feivish Wajner: Hey, Jeff. This is Matt. Mark Edward Seaton: So Matthew Feivish Wajner: you know, it is too early to say because it is obviously based on the way claims come in, and we reevaluate every quarter. But, as you know, the policy rate for this year was 3.75%. We had 75 basis points of reserve release for prior periods, which put the calendar rate at 3.0%, and that is consistent with the prior year. I would say that, as you know, the normalized loss rate is closer to 5%. So I do think it is likely that sometime here in the future, we will stop releasing prior year or slow down the release of prior year. But a 3.75% policy year loss rate feels kind of right and near the normalized rate. We are not seeing any claims pressures or any adverse claims activity that makes me think we will see significant changes here soon. Operator: Alright. Appreciate it. Thank you. Mark Edward Seaton: Thanks, Jeff. Operator: Our next question is from Mark Christian DeVries with Deutsche Bank. Please proceed with your question. Geoffrey Dunn: Another question for you on the tech investments. So far in the markets where you started to roll out Sequoia and Endpoint, are the productivity benefits that you are seeing kind of comparable to what you saw in the pilot stage? Mark Christian DeVries: And then Geoffrey Dunn: also, Mark, are you able to go on record as to the margin lifts you think we could get over the next couple of years as you fully roll these out? Mark Edward Seaton: Yes. So, Mark, I would say with Endpoint—let me just start there—it is in one office in Washington. The AI-powered version is in one office in Washington. When we roll it out, it is a beta version; it is not going to work perfectly. I would say it is probably better than our expectations, though, than what we thought when we rolled it out. I would not say it is ready to be rolled out nationally right now. We still have a lot of work to do. That is what we are doing right now. The plan with Endpoint is to continue to work on the product and make it better. The plan is in the second quarter, we are going to launch it to 15 escrow teams in the state of Washington. Before we do that, we have to make the product a little bit better, and we also need to fine-tune our change management. By the end of this year, we will have it in a few other states launched. We want to have most of the company on it at the end of next year. I would say the technology is a little bit better than what we thought it was going to be, but we still have work to do. On the Sequoia side, when we are getting 40% automation rates for refinance transactions for the products that we support in those four markets, we are seeing savings. We have completely automated the search. We have completely automated the examination. We are still doing some QC, just because we are checking to make sure the product is working. We are seeing benefits. But it is very small numbers at this point. I would say with both Sequoia and Endpoint, both are in line, maybe a little bit better than our expectations. In terms of guiding to what this means, we need to show the benefit at more of a scale. We just have not had that yet. Once we roll these out to, I would say, a statistically significant sample size, we can share those numbers. But right now, in one office in the case of Endpoint and four markets in the case of Sequoia, it is just too small to share those right now. Mark Christian DeVries: Okay. Got it. And I think, Mark, earlier, you alluded to Mark Edward Seaton: having some of the investments roll off and some of the efficiency gains Maxwell Fritscher: could keep the efficiency ratio at a pretty attractive level. I guess it was 47 this quarter. You said at least for the next couple of years. Is there any reason to think it is not just going to be kind of structurally better than it has been, and the 60% target is out the window? Mark Edward Seaton: I think that it can be better than 60%, as I mentioned. I have not really thought hard about what is the new guidance. But I do think that the 60% was in, I would say, a very labor-intensive model. Now we are transitioning parts of our business. We are always going to be a people business. We are always going to be labor-intensive, but it is going to be more data-driven, and you will have better operating leverage in that model. We just need to prove it out. We have to prove it out. We are hitting milestones. We have products in the market. We have to prove it out over the next couple of years. But I do think that, based on what we believe and what we know, we can do better than that 60% for a period of time. Maxwell Fritscher: Okay. Great. And then just one last one. On the commercial volumes, I think you indicated that the refi activity has been kind of higher than normal recently. I think you alluded to lenders doing shorter-duration loans. Is that just a product of where rates are—borrowers less excited about locking in at high rates? And if so, are we looking at a multiyear tailwind here on the refi side? Mark Edward Seaton: I believe so. I have talked to life insurance companies and lenders that typically went five- to seven-year maturities, and they have moved to two to three years. When you think about that, there is just more frequency of refinance activity—they are putting two- to three-year loans on right now. It is sort of the opposite of what is happening on the residential side. I do think there will be a refi tailwind here on the commercial business for a few years. As you know, for our commercial business, our premiums are basically the same for purchase and refinance, so that is a big benefit to us. Operator: Got it. Thank you. Mark Christian DeVries: Thanks, Mark. Operator: Our next question is a follow-up from Oscar Nieves with Stephens. Please proceed with your question. Geoffrey Dunn: Thanks for taking my questions. Texas recently implemented a title insurance rate reduction. Can you quantify the expected revenue impact under current volume and other operating assumptions? Matthew Feivish Wajner: Hey, Oscar. This is Matt. If we assume similar volumes to 2025—if we just basically assume that the rate change went in at 2025—it would lower the total revenue and net operating revenue in the Title segment by about 50 basis points. Operator: Okay. Matthew Feivish Wajner: That is helpful. And as a follow-up to that, Geoffrey Dunn: as we think about your Texas exposure, how much is Matthew Feivish Wajner: residential versus commercial? And are there any offsets, Mark Edward Seaton: because, obviously, the rate reductions bring down your premiums, but they should also bring down how much you pay to your agents, right? Geoffrey Dunn: In terms of Mark Edward Seaton: the offsets, I would not count on too many offsets. The premium is where most of the economics are, as opposed to the escrow fees or other fees. I would not assume that we are going to get anything material on the offsets. We do not have this broad-based plan to just raise rates on other products. I would not really assume anything on that. With Texas, some states we do better, some states we do worse. Texas—we are underweight market share, particularly on the residential side, but we do very well in commercial. I do not have the numbers in front of me, but I would just say we do really well in commercial in Texas. In residential, it is something that we are really focused on, but we are underweight market share on the residential side. That is useful. Thank you so much. Okay. Thanks a lot, Oscar. Operator: Our next question is also a follow-up from Mark Hughes with Truist. Please proceed with your question. Mark Christian DeVries: Thank you. I am sorry if I missed this, but did you give guidance for investment income for Q1 or for the full year? Geoffrey Dunn: Hi, Mark. Matthew Feivish Wajner: We did not give guidance, but where we sit today, the way we are thinking about investment income for full year 2026 is that it is going to come in roughly flat with what we saw in 2025 for the Title segment. Mark Edward Seaton: I will just add to that, Mark. I think this is a big win for us because we have talked about how every time the Fed lowers rates, we are going to lose investment income. We have talked about that for a long time, and we really have not. We have not because of a couple reasons. One is commercial balances have been higher. Second is we have gone longer in the bank’s portfolio, which kind of insulates us from that risk. A third thing, which I talked about in my comments, is that now we are capturing 1031 exchange deposits at the bank. All those factors mean we have really been able to defend our investment income. We think we can continue to defend it if the Fed lowers rates a couple times this year. I think that is a big win relative to where we were a couple of years ago. Matthew Feivish Wajner: Appreciate it. Mark Christian DeVries: Thank you. Operator: Our next question is a follow-up from Bose Thomas George with KBW. Please proceed with your question. Matthew Feivish Wajner: Hey, guys. Actually, a follow-up on the regulatory side. Craig J. Barberio: There has always been a lot of noise about affordability from the White House and the FHFA. Have you heard anything specific from D.C. about potential changes to title insurance? Mark Edward Seaton: We have not heard anything directly or new about any changes to title insurance, no. We have talked about AOEs in the past. We have talked about the title waiver pilot with Fannie Mae that is still continuing and it is going to be up in May. But there is nothing new. We look at a couple of these bills going through Congress. The House passed the Housing for the 21st Century bill. The Senate passed the Road to Housing Act. Our industry trade association, the ALTA, supports both bills. There is a lot going on with housing, but to answer your question, there is nothing new or noteworthy that we are aware of around title insurance directly. Craig J. Barberio: Okay. Great. And then actually one more on the commercial. Geoffrey Dunn: You noted the shorter expected duration because of these loan sizes. Craig J. Barberio: But I assume that does not impact the premium, so the premiums are similar even if Mark Edward Seaton: these are going to roll off more quickly? Operator: That is right. Geoffrey Dunn: Correct. Okay. Great. Thanks. Mark Edward Seaton: Thanks a lot, Bose. Operator: There are no additional questions at this time. That concludes this morning’s call. We would like to remind listeners that today’s call will be available for replay on the company’s website or by dialing (877) 660-6853 or (201) 612-7415 and entering the conference ID 13758180. The company would like to thank you for your participation. This concludes today’s teleconference. You may now disconnect.