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Steinar Sonsteby: Welcome to the Q4 and 2025 numbers from the Atea Group. Welcome to icy cold Oslo, a beautiful winter day. It has been a challenging year, but a very rewarding year for everybody in the ecosystem of Atea. It's been a year of good results and we'll soon take you through all of them. But it's also been a year where we've been doing massive investments in the future of Atea and we'll touch on some of those too. Diving into Q4 first, we had a gross sales of NOK 17.8 billion, up almost 8%. EBIT came in at NOK 488 million, up almost 24%. And net profit impressively up almost 36%. All in all, it gave us an operating cash flow of NOK 2 billion. But as always, I'll leave it to Robert to give you all the good news. Robert Giori: Thank you, Steinar. [Audio Gap] growth in the fourth quarter of 2025, driven by higher sales, increased gross margins and relatively low growth in operating expenses. Gross sales in Q4 were NOK 17.8 billion, up 7.8% from last year. After adjusting for changes in currency rates, organic growth in constant currency was 4.7%. Hardware sales increased by 5.4%, driven by higher sales in mobile devices. Software and Cloud sales grew by 11% with strong growth in sales of cloud solutions. Services in last year based on higher demand for consulting and product support agreements. Net revenue according to IFRS was NOK 11.3 billion, up 6.1% from last year. Gross profit increased by 9.0% to NOK 3.1 billion. Gross margin was higher than last year due to an improved hardware margin and a higher proportion of software in the revenue mix. Operating expenses, excluding restructuring costs, grew by 6.6% to NOK 2.6 billion. Adjusted for currency movements, these costs grew by approximately 3.5% from last year. EBIT before restructuring costs increased by 23.7% to NOK 488 million. Restructuring costs were NOK 8 million in Q4 2025 as Atea Denmark reduced staff in its Managed Services business. In Q4 last year, Atea incurred restructuring costs of NOK 39 million from a cost reduction initiative in Sweden. After restructuring costs, EBIT grew by 35.1% to NOK 480 million. And net profit after tax increased by 35.7% to NOK 333 million increased by 35.7% to [Audio Gap] revenue and profit growth across the countries in which we operate. Atea's strong sales and profit performance was spread across nearly all countries in the fourth quarter of 2025. In Norway, gross sales increased by 8.5% to NOK 4.6 billion, with very strong growth in sales of software and services. EBIT grew by 12.4% to NOK 156 million. In Sweden, gross sales grew by 5.2% to SEK 6.9 billion, driven by strong demand for hardware. With higher revenue and flat operating expenses, EBIT before restructuring costs grew by 31.4% to SEK 207 million. In Denmark, gross sales fell by 4.0% to DKK 2.4 billion due to lower sales of hardware compared with last year. Last year, Atea had a very high volume of initial hardware orders on new public sector frame agreements. Despite lower hardware sales, EBIT before restructuring costs grew by 52.6% to DKK 41 million with a higher margin revenue mix and flat operating expenses. In Finland, gross sales grew by 11.0% to EUR 112.7 million as demand for products showed a strong recovery from last year. EBIT was EUR 2.5 million, a decline from last year due to an increase in staff and temporary factors, including start-up costs related to new contracts. In the Baltics, gross sales increased by 55.8% to EUR 76.8 million, driven by exceptionally strong growth in product deliveries to the public sector. EBIT increased by 16.7% to EUR 4.0 million. Atea Group Functions, which includes shared services and group costs, was a net operating expense of NOK 32 million compared with an expense of NOK 22 million last year. The difference was due to higher spending on corporate development activities. Now a word on our cash flow and balance sheet. In Q4 2025, Atea had very strong cash flow from operations of NOK 2.0 billion. As you can see from this chart, Atea's cash flow from operations is highly seasonal with strong cash inflows in the fourth quarter as Atea's sales and collections from the public sector increase and its working capital balances fall. Cash flow from operations was positively impacted by seasonal fluctuations in working capital in Q4 2025, although this impact was less pronounced than in Q4 last year. Based on the strong cash flow from operations, Atea had a positive net cash balance of NOK 1.0 billion at year-end as defined by Atea's loan covenants. This corresponds to a net debt-EBITDA ratio of negative 0.5. Atea's net debt balance at the end of Q4 2025 was NOK 6.4 billion, less than the maximum allowed by its loan covenants. Atea has a strong balance sheet and significant additional debt capacity before its loan covenants would be reached. That concludes the presentation of the fourth quarter results. I'll now hand the podium back over to Steinar to review full year results and discuss the outlook for Atea's business. Steinar Sonsteby: Thank you, Robert. As always, you have all the fun. If we try to summarize 2025, revenue came in at over NOK 60 billion. It's an impressive number, but it's even more impressive that growth in Norwegian kroners in 2025 came in at a little bit more than NOK 6.5 billion with the same number of people. EBIT at NOK 1.385 billion, up 15.4%. All in all, a very good year. But this is not new. Atea has been stable both on revenue growth and EBIT growth for many years. And on this chart, you see the last 6 years. It is almost as linear as analysts' spreadsheets with gross sales growth of 9% on average and EBIT on 10% on average. In the next couple of years, we have to scale even better on this revenue. But let me bring you in to some of the things that have happened in Atea in 2025 and that will have effect on our results in the coming years. First, of course, we are extremely happy with how we have developed in the defense sector. It's not only the national defense organizations, it's also companies delivering to defense. But during the last couple of years, we've also strengthening our activity towards NATO all over the world. And so when we signed a new agreement in the fall of 2025 with NATO and you see Robert having the honor here on the picture in Brussels, we were extremely happy but also proud. It's a contract that will change many of the operations that we do internationally and it will strengthen us and prepare us to do similar contracts with other companies that have similar needs. But as you can see on the right side, it's not the only large contract we signed in 2025 that will have impact in the next couple or even more years. We have strengthened our relationship with SKI in Denmark, but we also signed another equipment deal with NATO which is as a service which you see on the left side and so it's not one contract. It's many. And we have contracts in Norway and in the Baltics. But we are particularly proud that we will do outsourcing together with the Health regions in Finland. This is by the way one of the contracts which have led us to take on more people in Finland even though short term that might not have looked well when revenue hasn't been growing. That will change in 2026. All in all, whole bunch of new contracts that will help us going into the new year. In 2025 we also worked on the future of a daughter company called AppXite. And just before Christmas we signed a deal with Aries, a U.K.-based software company, that they will take over 51% of the company. In Q1 2026, we will recognize an EBIT of approximately NOK 150 million as a result of this transaction. So I want to say thank you to everybody in AppXite. I know that you're probably looking at this for working together for the last many years and also for working with you into the future though in a different capacity. The deal we have done with Aries and how we developed AppXite would also be something we'll talk to you about in the coming years as this will change some of the relationship we -- or possibilities that we have with Microsoft with their new incentive programs where AppXite has become a distributor that Atea and other customers of AppXite can use going forward and to maximize Microsoft's programs. Many other things have happened more internally in Atea. I've already mentioned the growth. It's actually pretty impressive when you see that this growth is probably higher than the revenue of the biggest competitors that we have in the region. But we also worked to strengthen Denmark and I'm very happy to welcome Nicolai Moresco as new Country Manager in Denmark starting later in this quarter. We also hired Hans Vigstad to take over and run our Managed Services division across all 7 countries. We have strengthened and kind of moved the focal point for Atea Global Services, which we have had in Riga for a long time and from a nearshoring to more a center of excellence. And we have moved into new and fresh offices, so our 600 people have a better environment to do that center of excellence job. Finland has been lagging a little bit on results, but we have kept on building the capacity and we have high hope for the line of opportunities in 2026. We've built, as I've alluded to, a special sales team across the countries to work with defense and NATO specifically as it has some special demands on security clearance and also the products that we deliver. It was a big day late in 2025 when Atea Logistics, our central supply chain organization, passed SEK 10 billion in revenue. We opened the new center late 2019. So that is some of accomplishment. At the same time, they changed their ERP system and we're now fully operating on an SAP solution that we later will also roll out in the different countries. And we are very happy that in 2025 in total, 16% of our customers have chosen Atea to be their main cybersecurity partner, up from 10% only 12 months ago. So a productive and very constructive and good 2025 is behind us. So what does the future look like? Well, there are challenges also that we have to face and solve in 2026. But we expect to keep on growing. We expect to keep on consolidating the market and the vendors are helping us. They want to have fewer partners in Europe and they want the partners have to be stronger and they're pushing us to develop services and be a complete shop for the customers. This gives us a possibility to keep on growing the EBIT. But there are also some challenges when it comes to the supply chain situation. And many of you are worried when you read that there is a shortage of memory, CPUs or other components. And we do recognize that this is a problem. Right now, the problem for us is not as much supply as it is unprecedented price increases. We have seen price increases on certain offers of more than 100%. Now this is not new. It's happened before. We're only 2 or 3 years away from last time. This is a little bigger though. And you know it comes from all the investments in AI forms, AI PCs, but also the fact that what we do is now a part of everything, cars, refrigerators, TVs and other equipment. It will be challenging. We feel right now we're kind of in the middle of a storm that we are dealing with hour by hour and day by day. But this will calm down. The situation will work itself out. And we think that the price increases will keep on -- or the prices will keep on being high for the rest of this year and maybe even long into the future. In many ways, you can say that we get help from price increases in getting revenue increase. We are doing a lot of activities internally and we have the flexibility with the breadth that we have in Atea to face these kind of problems. And if you look into our history, you can see we have dealt pretty well with them before. As you know, you don't have to be perfect as long as you're better than competition and we are certainly equipped to be better than competition in situations like this. We are using our balance sheet to have more inventory over a period. But we also see that this will calm down. The unpredictable will become predictable and the whole industry will deal with it. As said, we have done it before, so we're confident we can do it again. On basis of everything Robert and I have told you today, the Board will propose for the general assembly that we will increase the dividend to NOK 7.5. And it will be as normal, a repayment of paid-in capital and in 2 installments, one in May and one in November. Solid results from the company gives shareholders a solid return in the way of dividend. So that concludes the presentation for the Q4 and 2025 results and we'll now go to Q&A. Unknown Executive: Thank you, Steinar and Robert. We have several questions here. First question, I've understood there's been many changes to the vendor partner programs. How do you see this? Steinar Sonsteby: Absolutely it has been. And I'll [Technical Difficulty] a feel of what we see. But I want to start by saying that this is not new. This is actually very predictable. Partner programs are programs because the partners want to challenge us and to give us some kind of direction in where they want us to go. We actually has [Audio Gap] to manage the beast. These are huge companies that has an opinion on how they pay us and what they want us to do to get paid. During 2025, we've particularly faced 3 major changes that also have been talked about in press and in the market. First of all, of course, Microsoft changed their incentive program 1st of January in 2025, so a little bit more than a year ago. It was something that was talked about in advance. And we as everybody else was challenged. When we now look back, we feel right now that we're back on even and that means that our job in 2026 is to take advantage of the upside in the changes of the program. Another well talked about change was Broadcom buying VMware a couple of years ago and changing their partner programs. It's absolutely been challenging, more maybe for our customers than for us, with the impressive, impressive price increases that VMware and Broadcom has brought to the market. On the [Technical Difficulty] so they let all their services people in Europe go. This creates an opportunity for us. And it's a typical way of seeing this when the partner program changes. It will create some noise and maybe a little bit of chaos in the ecosystem at once. But over time, it actually is there for a reason and it gives the full service houses a bigger opportunity and it creates a consolidation of the channel. The last one I want to just mention is Cisco. I personally and we as a company have worked with Cisco for many decades. This is not the first time Cisco changes their program. This time it's called the 360 Program. And it started 1st of February this year. And so we are very fresh to it. But of course, Atea is highly certified in the new program when we start in all 7 countries. So we feel pretty confident that over time, again, we'll be able to take advantage of all the changes. So I think I'll leave it with that. Unknown Executive: Several questions here on Finland is lagging. Can you explain, please? Steinar Sonsteby: Yes. And I have to say and you are who runs Finland for us knows this, we are a little disappointed at the numbers in 2025. But it's also a part of life. We can't fight gravity. The economy in Finland has not been the strongest. On the contrary it's probably been one of the weakest in Europe. We think long term. We also won, as I said earlier in the presentation some large outsourcing contracts where we had to take on people in 2025 before revenue starts in 2026. So in short, economy in Finland has been suffering. It looks better in 2026. We have kept on building our capacity and winning contracts that will give us an upside going into 2026. We are confident that Finland will start delivering again. Unknown Executive: You note that memory-driven supply crunch. Can you help us understand how many months out in 2026 you have visibility or guaranteed deliveries? And furthermore, at which point does it start to get more murky? Steinar Sonsteby: Yes. Looking into the future have never been an exact science. But right now, it's not as if production or supply has gone down. Supply is actually increasing as we're speaking. It's just that it isn't increasing as much as demand. So in another way, you could say that if there were no limit to how much memory and CPUs that could be produced, there is really no limit to how much the IT market could grow right now. And so we don't see lack of demand as being the most difficult thing right now. We're getting most of what we're ordering on more or less normal supply time. It is the price increases that hurts us because it creates unpredictability. And in a machine like Atea and for that sake, the whole IT industry, unpredictability creates opportunities, but also problems. So demand is less of a problem today than price increases. Price increases on the other side is also helping us and also giving us opportunities in the partner programs as they are massively focused on growth. Unknown Executive: Continuation or similar question. As we enter into this uncertain territory, how bad can it get for the lower-end devices? Are they more at risk? And for higher-end devices, would you -- we have a priority and do you see better supply for the higher-end devices? Steinar Sonsteby: Again, so far, we don't see actually big supply constraints. It's not the supply side. What we see though is with price increases on a normal PC of more than 20%, that there will be a shift towards using those components in higher-end products. So we do -- we predict that we will see the shortage on low-end products when and if the shortage comes. Unknown Executive: What kind of EBIT growth would you have expected in 2026 if we assume memory and supply wasn't an issue? Steinar Sonsteby: So we have said several times during 2025 that we predict a growth in the high end of single digits in 2025. Well, we came in a little bit higher than that at 11%, 12%. We have also said that we, in 2026, see a demand which will give us a mid-single digit growth, maybe 5% to 7% and that is what we have predicted. That is also still what we think, but we think we'll do it with a little lower unit delivery, but with a higher average price. So we're still in mid-single digit growth on revenue for 2026. Unknown Executive: I have a question on hardware pricing. Any risk that you can't push forward the hardware price hikes? Also, is there any chance you might hike prices on the inventory we have to increase margin? Steinar Sonsteby: Yes. So that's a pretty detailed question. We don't have -- so starting with inventory. We don't normally have inventory the way that question dilutes to. Our inventory is actually products in work. So they've been ordered and we are doing something to it or it's product that customers have ordered and store in our warehouse. It's very little what we call open stock. So the fact that we could have had inventory where we paid less and now the price increases are giving that a higher value is unfortunately not -- or maybe fortunately, not a part of our game. Now I said in the presentation that we will use our balance sheet to do some of that going forward. But we are not gambling with currency. We're not gambling with inventory. That's not what we do. What we do is concentrating on the needs of the customers. And so our inventory going forward will be built together with the largest customers and mostly paid for by those customers. Unknown Executive: Atea is aiming for revenue growth and EBIT expansion in both Q1 and 2026. Can you elaborate on how we should think about the ingredients of EBIT margin? And would it be fair to assume that Atea is aiming for higher margins year-over-year for the group? Steinar Sonsteby: We are and have been aiming at increasing the margins and scaling on cost for years. That is what we challenge the organization for every day. We also work hard with the vendors so that they pay us fairly for that higher value that we invest to our customers. And we're very happy to see the changes that we discussed in partner program are actually rewarding that higher value that we have for customers. [Technical Difficulty] we're looking at higher margin. But when it comes to the product and services offerings and how that will change or develop over 2026, I think we'll get back to more details when we can actually talk about it as numbers. But we expect more high-end products, more AI PCs as more customers are still demanding or working on their Windows 11 strategy. We see defense buying higher-end products and they will become a larger part of our revenue. And so we absolutely see that there will be a movement. This also leads to a little bit of a pressure on the services business, which is very connected to the number of units that we sell. But that's why Managed Services is so important going into the future and especially in Europe with the sovereign discussion that are just increasing in scale. Unknown Executive: Can you give some more color on cost development in Denmark in 2026? Do you expect to front-load any costs due to any structural changes in Denmark? Steinar Sonsteby: Yes. Again, a pretty detailed question. We have done some investments in the services business in Denmark that will lead to a little bit of a higher cost into Q1 and the coming quarters. Outside that, we don't see any real cost increase as we're trying to balance where we have people and where we increase cost. But I also want to say when you do a transformation or a turnaround as we are working on in Denmark, nothing is linear. And the quarters with the lowest revenue will be where we have the lowest improvement in the short term because the cost is a little bit higher than what it was a year ago. Specifically, this is on consultancy in Denmark, where we have recruited approximately 40 to 45 consultants so far. Unknown Executive: Several questions here. How has Q1 been so far in 2026? Steinar Sonsteby: I think I'll pass on that and leave you to listen to us in April. Unknown Executive: Another question here on pricing. How should we think about price increases from the hardware providers and impact on gross margins? Steinar Sonsteby: All changes give us opportunity to work on every value that we create, also gross margin on hardware. Some of it short term will be difficult to react to and some of it actually give us larger opportunity. The way we have seen this historically, it's always difficult to see into the future, but the way we have seen this historically is that there isn't major changes. So we're not predicting a positive margin development or gross profit development and we're not predicting any major impact on the negative side. But internally, in the machine of Atea, there will be a lot of things and that's why we're talking about the price increases as demanding to the organization as we have thousands and thousands of orders every week that we handle. Unknown Attendee: And our final question. How is the competitive situation? Any changes that you see? Steinar Sonsteby: With everything that's going on in the world, competition is not my worry. I focus on what we can do and we can do a hell of a lot and I hope we've proven that today. With that, we'll conclude this presentation. Thank you for joining.
Operator: Ladies and gentlemen, welcome to the conference call on fourth quarter and full year 2025 results. I'm Moritz, the Chorus Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Juergen Rebel, Head of Investor Relations. Please go ahead, sir. Juergen Rebel: Good morning, everyone. This is Juergen speaking. Welcome to today's call on fourth quarter and full fiscal year '25 results. Aldo, our CEO, will comment on business and strategy. Rainer, our CFO, will focus on the financials. During the call, we are referring to the Q4 earnings call presentation that you can find on our website. Aldo, please share your thoughts on fiscal '25 and Q4 with us. Aldo Kamper: Thank you, Juergen, and good morning, everybody, also from my side. Let's start with Slide 3. 2025 was another year of disciplined execution. We built a stable foundation for further expansion as a leader in digital photonics. Our core semiconductor portfolio grew 7% year-on-year, underlining the strength of our focused positioning. And importantly, for the first time ever, ams-OSRAM holds the #1 position in the global LED market, a significant strategic milestone. Design win traction remained excellent with more than EUR 5 billion in new lifetime value added to the pipeline. Profitability also improved again, adjusted EBITDA margin up 1.5 percentage points year-on-year, driven by the accelerated execution of the Re-establish-the-Base program despite significant cost headwinds 1 year ahead of plan. We also delivered EUR 144 million free cash flow, including interest paid. And on top of that, our deleveraging plan progressed strongly. 2 portfolio transactions announced as of last week with proceeds of EUR 670 million and pro forma leverage at 2.5x. On to Slide 4. Q4 was a strong quarter. Revenues and adjusted EBITDA came in, in the upper band of our guidance, a clear beat, thanks to a super strong aftermarket lamps business. Revenue stayed almost flat compared to last year at first glance, but bear in mind, the weaker dollar cost us around EUR 55 million top line versus last year. Adjusted EBITDA increased 7% year-on-year despite FX headwinds, driven by the continued cost savings of the Re-establish-the-Base program. Let's move to Slide 5, looking at the segments. OS held up okay in a seasonally weaker quarter. Revenue dipped a bit more than what you would normally expect. I will comment on auto on the next slide. Margin dropped broadly in line with fall-through, but is still 5 percentage points higher than a year ago. CSA showed resilience after the typical peak in the third quarter, driven by good demand from custom sensor products for consumer handhelds and better industrial medical revenues compared to a year ago. Revenues were broadly stable quarter-on-quarter and slightly up compared to a year ago. However, adjusted EBITDA margins were down both sequentially and compared to a year ago, an unfortunate product mix, coupled with a strong impact from the weaker U.S. dollar and some inventory cleanup effects were the reasons for this. Lamps & Systems saw an exceptionally strong seasonal upswing. Aftermarket demand went through the roof as customers flooded us with short-notice orders after our closest competitor fell into financial troubles. We are trying to turn some of this into long-term business for sure. Specialty Lamps contributed for the last time for a full quarter before closing the transaction with Ushio later this quarter. In line with fall-through, profitability was up more than 80% compared to Q3. Overall, a good quarter across the portfolio. Now let's take a closer look at the semiconductor business on Slide 6. If you look through the weaker dollar in the noncore portfolio contribution, the clean core portfolio grew exactly in line with our semi target operating model, 8% year-on-year. The noncore portfolio was expected to be fully phased out latest by Q1 last year. However, customers kept ordering and ordering. For this, it still contributed a high double-digit million-euro revenue last year. This page highlights the underlying resilience of our semiconductor business. Automotive sequential decline, mostly seasonal. But the automotive supply chain continues to operate with extremely lean inventories and the competitive environment driven by the kind of war amongst the OEMs is unchanged. Although difficult to quantify the so-called Nexperia chip crisis at the beginning of last quarter, but we also had a bit of a negative impact on order intake. Year-on-year, softness is basically due to FX, the order pattern I just mentioned and that no real restocking in the supply chain happened. Industrial and Medical, this vertical is gradually improving. Finally, we are not out of the woods yet, but indicators are trending in the right direction. Orders in Industrial Automation and Medical came in a bit stronger, balancing the seasonal decline in horticulture, for example. Consumer, typical Q4 seasonal decline with U.S. dollar effects and the exit of the noncore portfolio. Let me hand over to Rainer for some comments about cash flow on Slide 7. Rainer Irle: Thank you, Aldo. Hello to everyone from my side. We delivered EUR 144 million free cash flow adjusted for the onetime positive cash in from changing the employee pension funds setup. Free cash flow above EUR 100 million, as we had promised. That includes a high double-digit million-euro inflow from the Austrian Chips Act. The same is true for the full year number, EUR 144 million, again, free cash flow when adjusting for the pension financing, as just described. CapEx remained disciplined, well below the 8% target. With that, let us take a look at liquidity and the maturity profile on the next slide. This is strong free cash flow in Q4. And the inflow from the change in the pension fund setup, our cash on hand was close to EUR 1.5 billion, and the available liquidity position rose to EUR 2.2 billion, backed by a diversified mix of instruments, cash revolver bilateral lines. In December, we also rolled EUR 100 million bank loan to '27. In January, we completed a EUR 200 million buyback of the outstanding '27 convertible. Including the expected proceeds from the 2 announced transactions, we have already today sufficient funds to repay the convertible bond due in '27 and the OSRAM minorities. This sets the stage for refinancing our high-yield maturities at improved terms. Back to Aldo now for a more detailed look at the full fiscal year '25. Aldo Kamper: Thanks, Rainer. Slide 9 shows how the company has been progressing despite major headwinds from currency, automotive supply chain pattern changes, precious metal and raw material prices increases, et cetera. Our IFRS top line declined by 3% on a year-on-year basis, but it's worth looking deeper. EUR 100 million FX impact and a more than EUR 100 million noncore portfolio needs to be considered. With that in mind, the underlying core portfolio would have been up 4%. That is especially true when we look at our semiconductor segment. The core portfolio grew about 7% year-on-year at constant currencies, in line with our midterm growth ambition. The year-on-year decline in Lamps & Systems stems mostly from 2 topics: the decline in the OEM business, in line with the lower number of factory new cars with traditional lamps; and the Q2 supply chain adjustment after liberation day. On top, the weaker U.S. dollar also weighed in a bit on the top line. Adjusted EBITDA margin improved meaningfully, thanks to the implementation of Re-establish-the-Base run rate savings 1 year ahead of plan. Cost headwinds have been heavy, gold, silver, rare earths and the top line impact from the weaker dollar. Let's move to Slide 10. A key highlight, one that has always been a personal ambition for me for more than a decade, ams-OSRAM is now ranked #1 packaged LED supplier globally by value. We now clearly surpassed our long-term rival to the crown, NICHIA, helped by a weaker yen, but primarily by better relative performance from us in the marketplace last year. This further strengthened our position with automotive OEMs, professional lighting customers in emerging markets such as micro emitters. On to Slide 11, design win performance. Last year was, again, a green year, great year for winning new business, underpinning our semiconductor growth model. The tally reached more than EUR 5 billion, again, the third year in a row. After a strong Q3, we also booked more than EUR 1 billion of design wins in the last quarter. On this slide, we show outstanding design wins in the triple-digit million euro lifetime value. In consumer, for example, projects in display management and camera enhancement accumulated hundreds of millions. In automotive, the EVIYOS and intelligent RGB ambient lighting projects stood out. And professional lighting and medical imaging designers also contributed exceptionally. These examples show the strong structural momentum in our business. Design wins today are the revenues of tomorrow, and our pipeline is very healthy, underpinning our growth ambitions in the semiconductor core business and along the avenues of our key engineer-emerging digital photonics applications. Slide 12 shows the next wave of structural improvements. Thanks to the great execution of our teams, Re-establish-the-Base delivered its savings 1 year early, EUR 220 million. That's a huge success, but we have to get even more ambitious in view of the persisting headwinds. We're sharpening our profile towards the clear leader in digital photonics, we also want to transform the way we work and thereby save an additional EUR 200 million of annual cost. Cost, speed, agility are our guiding principles as we reshape our operating model. We want to further reduce overheads, which includes addressing stranded costs of the divestments. We want to improve our manufacturing costs by transferring production of established products fully to Asia and the productivity push through automation across the globe. We are developing cost-optimized product platforms and also product development shall become cheaper and more efficient by developing maturing product families in Asia and by using more AI. Expensive European resources are focused on advanced digital photonics topics. In total, around 2,000 colleagues will be affected, half of them in Europe, half of them in Asia. Certainly, we also want to get our share of productivity improvements by rolling out AI, as just mentioned. Let me ask Rainer to comment a bit on the progress when it comes to deleveraging our balance sheet. Rainer Irle: Now turning to Slide 13. Last April, we communicated our accelerated deleveraging plan. Since then, we have made a strong progress. First, improving the structural profitability. As Aldo just explained, we implemented Re-estab-the-Base savings 1 year ahead of plan and are launching the new program, Simplify. Second, generating proceeds well above EUR 500 million from divestments. We delivered. We will get EUR 670 million in cash from the 2 transactions that we have announced: the sale of the specialty lamps business to Ushio and the sale of the non-optical sensor business to Infineon. The transactions will also result in a onetime profit of about EUR 450 million to EUR 500 million. And third, the solution for Kulim 2, the sale and leaseback. We continue working hard on it. There's always been interest, discussions intensified recently, but it is really too early to call when exactly we will see a deal. But we are fully convinced that there will be a solution. We have always delivered so far, and we have no intention to change that. On a pro forma basis, the leverage has significantly improved, as we will show you in a minute. But the solution for the sale and leaseback and fixing some of the stranded cost of that factory might be needed to really get to below 2x. Nevertheless, I'm convinced that we will be able to refinance the senior notes much cheaper to bring interest cost down, the key impediment for strong free cash flow performance. After refinancing the high-yield bond, it is now likely that we land at below EUR 150 million annual interest cost. On Slide 14, we already showed that last week, you see the impact of the transactions on our leverage. We discussed the update of our balance sheet as of December '25 earlier in the presentation. With that, on a pro forma basis, including the divestment proceeds, leverage drops from 3.3x to 2.5x. Excluding the OSRAM put options, net debt would stand at around EUR 850 million, implying 1.6x. This is a major step forward and a prerequisite of refinancing our '29 maturities at lower costs. And on the next slide, Slide 15 summarizes our transformation journey, as Aldo outlined last week in detail, when we announced the sale of our non-optical sensor business to Infineon. The path consists of 3 phases. From '23 to '25, as you know, we stabilized and refocused the company, divestments, portfolio shaping, Re-estab-the Base and refinancing. '26 will be a transition year, reflecting the deconsolidation of sold business and temporary stranded costs. We will have to bear a temporary drop in adjusted EBITDA due to several one-off effects. For this and for making the company over more efficient and more agile, we launched a new program, Simplify. Also financing costs remain high in '26, approximately EUR 250 million to EUR 300 million until the refinancing of the senior notes, which we have on the radar for '27. And then from '27 onwards, we enter the growth and value creation phase. We want to see growth in the core business and growth along the lines of the existing and new digital photonics applications, highly pixelated forward lighting, micro-emitter projection arrays and spectral bio and distance sensing. Based on the Simplify program and growth, we will see margin expansion. With growing profitability and the solution for the Kulim 2, we will have a fully healthy balance sheet with leverage below 2x. And we want to see our financing costs below EUR 150 million. And the low run rate of restructuring costs is the basis to deliver strong free cash flow well above EUR 200 million. Before we move on to the exciting growth avenues of some of our digital photonics projects, we have to look a bit deeper in one of the aspects of the transition phase. Precious metal prices in here, namely gold, Slide 16. Gold is an important material in the production of LEDs. You need it for corrosion-free mirrors to get the light out of the EP layers, to put it simply. In normal years, that added to the COGS bill, a high double-digit million-euro figure. The unprecedented gold rate that accelerated in '25 cost us an additional EUR 35 million, that's 2% margin of the OS division. That was in '25. The price curve is taking an exceptional shape, as you can see on the left. The peak has come down the last 10 days. But when assuming an average price of about USD 5,000 per ounce, we have another EUR 60 million cost add-on compared to '25. That would be a 4% margin impact for OS and around 2% for the group. We are mitigating as best as we can. We are hedging and that limits further risk very much but doesn't solve the problem. But then we are also reducing precious metal usage by redesigning our product. So that takes a bit. And we are launching the Simplify program. I hate to say it, but on top of the divestments and the stranded costs, the gold price and precious metal prices overall will weigh further on margins and adjusted EBITDA in '26. And with that, back to Aldo for some words on digital photonics growth vectors that we'll kick in step by step and that, we presented in detail last week. Aldo Kamper: Thank you, Rainer, and we are on Slide 17 now. Digital photonics is really opening up multiple highly attractive growth avenues across both emitters and sensors for us. On the emitter side, micro-emitter arrays are transforming 3 key markets: advanced automotive lighting with EVIYOS, where we already ship in volume and hold the clear design win lead; ultra-compact RGB micro-emitter arrays enabling bright, power-efficient and small AR displays for next-generation smart glasses; and multichannel micro-emitter-based optical links for AI data centers, wide and slow as it is called, interconnects that offer superior energy efficiency and unlock future chip-to-chip optical architectures. For each of these, we see additional revenue potential in the triple-digit million euro territory over a staggered period of time. On the sensor side, we are equally well positioned. Spectral sensing is already today a triple-digit million business, and we see it grow further, anchored in the premium smartphones and expanding further with new product generations and the right of foldables. Biosensing continues to scale as wearables at more optical measurable biomarkers creating incremental double-digit million opportunities. And finally, multi-zone direct time-of-flight sensors bring high-precision 3D awareness to smart devices, robotics and emerging humanoid platforms, with adoption curves that could drive significant revenues by 2030 and beyond. Also on the sensor side, we see additional revenue potential of double-digit million euros, in some cases, even triple-digit long term. Together, these 6 factors demonstrate our unique portfolio of emitter and sensor technologies positioned at the center of major global trends, automotive safety, AR, AI compute, personal health, intelligent robotics, each offering meaningful, scalable and compounding growth potential. Now let's quickly revisit our financial targets for 2030 that we published last week on Slide 18 now. This slide sets out our over-the-cycle target operating model for 2030 once divestitures, including Kulim 2, deleveraging, corporate simplification and debt refinancing are complete and with new applications contributing to growth. For semiconductors, we target mid- to high single-digit revenue growth starting in '27 based on a variety of growth factors that I just spoke about and the adjusted EBITDA margin of over 25%. Traditional auto lamps contributing to the group, as illustrated on the right-hand side, are expected to be flat and I guess a reliable cash source that helps fund the semiconductor transition and growth, consistently an adjusted EBITDA margin between 13% and 15%. With that, we target for the group a CapEx ratio of up to 8% of sales, which should end up typically lower than that. The group free cash flow, as Rainer explained before, well above EUR 200 million post refinancing and a net debt to adjusted EBITDA ratio below 2x. These are over-cycle targets. They reflect our operating model once the portfolio transition is complete. So let me summarize the key takeaways for Q4 and thereafter on Slide 19. Q4, we beat revenue and profitability guidance. The core semiconductor business grew 8% year-on-year on a like-for-like basis. Free cash flow was strong at EUR 144 million. RtB run rate savings were achieved 1 year ahead of plan. We also progressed well in deleveraging our balance sheet. Last week, we announced the sale of our non-optical sensor business to Infineon. Together with the sale of Specialty Lamps, we will get EUR 670 million in cash, exactly the more than EUR 500 million that we announced last year. We have ample liquidity of EUR 2.2 billion available. We bought back EUR 200 million of convertible notes in January. And most importantly, we have clearly defined the future direction of the company. We have laid out a strategic direction by creating the leader in digital photonics where we want to benefit from upcoming inflection points in this field. And we launched today the new transformation and savings program, Simplify, for saving further costs and transforming the way we work. Now on to the outlook for the first quarter. We expect revenues to come in between EUR 710 million and EUR 810 million with adjusted EBITDA around 15%, plus/minus 1.5 percentage points, based on a euro to dollar ratio of $1.19. Lamps & Systems will show the usual seasonal reduction, minus 1 month of deconsolidation of Specialty Lamps as that business will go to Ushio. Semiconductors will experience a typical seasonal decline. Given the coming change in the portfolio and the associated challenges for you in building a financial model, we also want to give some hint for the full year of '26. Group revenue might end up slightly softer than '25 given the divestments and a weaker U.S. dollar. Please remember that USD 0.1 equals roughly EUR 20 million more or less revenue per year. The move from $1.13 to $1.19, for example, would cost us another EUR 20 million in revenue. Adjusted EBITDA will be negatively impacted by several one-offs, the divestments where we effectively sell EBITDA to the buyer, stranded cost overheads that we are not transferring to the buyer, but of course, are working on as part of Simplify and higher precious metal prices and other factors beyond that. With that, we are now open for your questions. Operator: [Operator Instructions] And the first question comes from Sebastien Sztabowicz from Kepler Cheuvreux. Sébastien Sztabowicz: First of all, on the automotive market, inventories remain at a very low level across, I would say, the board. Do you see any room for kind of inventory replenishment in the coming months? And attached to that on automotive, do you see any specific risk of DRAM shortages impacting your customers and indirectly impacting your business? Second question is regarding the guide for 2026 in terms of revenue. What are the assumption in terms of asset disposals you have taken into your comment, both in terms of revenue contribution and in terms of timing, just to understand where we should land in terms of revenue in your euro term? Aldo Kamper: Yes. On auto, as you mentioned, we see overall a very short-term order behavior. Inventories at our customers are low. We've got a lot of orders, still within our lead times. So far, we are able to deal with those. Is there room for replenishment? Yes, we have been hoping for that, honestly speaking. We feel that overall, the inventories are on the low side. We have started to kind of compensate a bit for that by putting a bit more inventory into our distribution channel. But at the moment, still overall inventories stay low. And I think that's because also a lot of our customers continue to manage their cash flow extremely carefully. Whether that is smart or not, time will tell. As you mentioned, memory is getting tight. And I think people are also a bit uneasy there on what it means for overall volumes. So far, no direct implications. But yes, there's, of course, a potential in that as well. Do you want to take the guidance question? Rainer Irle: Yes. So the asset disposals kind of -- I mean, it's the business we are selling. The first one, the lamps, the industrial lamps business, that was roughly EUR 150 million of revenue and let's say, EUR 15 million of EBITDA, that will go out probably end of Q1. So in the guidance, we assume that it would still be in for 2 months, and the third month will be out. And for the non-optical sensor business, that was a revenue of EUR 200 million and EUR 60 million EBITDA, assuming that would go out mid of the year, then obviously, half of that will go out. And then there's also, yes, for both transactions, roughly EUR 30 million stranded costs that we will immediately tackle one after closing, but then we'll take up to a year to take it out. That is part of the Simplify program, the elimination of that stranded cost. Sébastien Sztabowicz: And when you come for modest, I would say, revenue decline, modest is like a moderate to mid-single digit, is making sense? Rainer Irle: Yes, that makes sense. Operator: And the next question comes from Janardan Menon from Jefferies. Janardan Menon: My question is just following on the '26 guidance but on the adjusted EBITDA margin. I'm just wondering how we should think about that. You've guided to 15% in Q1. Is that -- would that be a bottom? And should we think that things will gradually improve from there? Or when the non-optical business gets sold in the second half, will that have a sort of further negative effect on the margin as we go into the second half of the year? And then second one is just on the revenue beyond 2026, especially on the AR projection display and the AI data centers where you are targeting triple-digit million. What is roughly the time scale when you think you'll get material revenues, let's just say, materialize in low tens of millions of euros or something like that? Will that be from '27? Or is that beyond '27? Rainer Irle: Yes. Maybe starting with the EBITDA. I mean the negative impact from gold and so on, we already see today. So that is included in the Q1 guidance and that will not get worse. Obviously, then when the revenue and the EBITDA goes out, I mean that goes together and has no major impact on the margin. Obviously, the stranded cost will then come once the business is out. If we are tackling those stranded costs immediately, we will try then to see the improvement already within this year. The typical seasonality certainly is kind of in Q2 then. I mean, in Q1, we still have 2 months in of the traditional lamps business that will be done in Q2. And anyway, Q2 is typically a seasonal very weak quarter. And then you always see the improvements in the second half of the year, and we should see the same this year. Aldo Kamper: On the new growth topics, I think AR is much further along in its development than the AI topic. AR is already quite well advanced, and we will see revenues in the somewhat foreseeable future. But still, there is a bit of time before market introduction there. AI is at the moment in, I would call it, very advanced research stage, quick getting into product development stage. So you can imagine that is something for a bit later in the decade now. But once it comes, for both topics, we feel that these topics will scale quite rapidly because the markets are significant and the interest that we're getting shows that the programs that we're working on would be sizable. Operator: Then the next question comes from Robert Sanders from Deutsche Bank. Robert Sanders: I assume you've got works council approval for this restructuring and what you did with the pension trustees, et cetera. Is there anything you've done to guarantee the remaining employees as part of this deal? Just if you can give us some color. And where are these 2,000 headcount going to come out from the company? And then I have a follow-up. Rainer Irle: Yes. I mean the pension and the Simplify program are completely independent, right? So the -- I mean, the pension, what we did is we really took some time to go through all of that and kind of see where we had covered it. We basically had a double insurance and so on. So we resolved that and now the pensions are just secured exactly onetime and everything, the pensions plus the pension increases. So we clean it up, and now there's a really good system, and that helped a bit the liquidity in Q4. Now the headcount reduction from the Simplify program, and we are talking about roughly 2,000 people. A good half of that will be out of Europe with a strong emphasis of Germany, and we had already announced a few months ago the closure of one of the traditional factories in Germany. And with the traditional halogen business declining, we certainly have to do more adjustments, but it will also affect our Regensburg site, where we move some of the manufacturing of some R&D to Asia. But also, as Aldo pointed out, we will invest massively in automation and particularly on the back end, and that is then in Asia. And then we will also see a significant reduction in our Asian workforce. Because of that, automation/productivity improvement/AI. Robert Sanders: Got it. Just to follow up on a question on the previous call. I just want to double check that the Premstaetten fab, Infineon has been very clear they're going to move their volumes very quickly over to Kulim. So what percent of that fab wafer capacity is relating to the businesses that you've sold to Infineon? But that's what I just want to double check. Aldo Kamper: Well, I think actually, yes, they will move product over, but it will not be immediate. They will have to also prepare their factories for it. They have to get customer approval for it. And also, we have agreed on a smooth transition so that we have the time to develop new businesses to compensate for that. The factory has 3 areas in -- the filter making that we mainly use for the display sensors is completely untouched by this transaction. So it stays fully loaded and stays fully there. TSV, that's a specific technology on how you connect different layers in your semiconductor, is also only to a very small extent used by the type of products that Infineon is taking over. And then the more generic CMOS is where the product lines that Infineon is using is probably in the 30%, 40% range of that capacity. So that's where we see, over time, a step-wise reduction and where we feel we can compensate that by expanding, on the one hand, our internal business. We spoke about the emitter arrays, both on headlamps, but also, for example, on AR, those need to be controlled by CMOS building blocks, if you will, or steering blocks on the backside of this product, and they will increasingly come out of Premstaetten. So that's, for example, one of the internal growth factors externally beyond the business that we keep, we also see that actually the foundry business is a part of the growth story here as well as selected PMIC on customers and applications, where we have a good access and a right to play. So we feel quite comfortable with these growth factors and with the time that the transition will take because it's quite a number of smaller products. It's not one product with a huge volume that is in this product line. Industrial Automation and Medical are usually smaller programs running for a long time but are very specific in their technological needs and also in the customer approvals. And therefore, it was a logical combination that we agreed on a time schedule in the step down that allows them to do a good preparation and gives us the time that we need to then refill the fab with good new business. Robert Sanders: Got it. If I could just squeeze in one more. Just about auto LED, I mean, that business, in the past, you said, could grow at sort of 10% per year. Obviously, this year looks like a difficult year for the car industry. But is there anything that would prevent auto LED growing at 10% per year, maybe changes in mix or something that you see from today's perspective? Aldo Kamper: Well, there are 2 factors, I would say. The one hand, we see a clear push to more of these highly integrated, high-performance headlamps like EVIYOS. And we have now a variety of flavors in that, and we see really good traction now across the globe. It used to be a very European program. Then a number of the Chinese jumped on. And now with the new regulation in the U.S. also enabling adaptive driving beam, we also see much more interest from the U.S. So that category will significantly outgrow that percentage that you just mentioned. At the same time, of course, the saturation in the car with standard LEDs is already quite a bit higher. And there, of course, we are also confronted with price pressure, especially in China. You can imagine that the war amongst the OEMs has also an impact there. And that's why the efforts that we put in, in Simplify and also in a lot of the product cost optimization that we are doing, are very important to defend our shares there, but that weighs a bit on the growth rate. So overall, I would say mid- to high single digit would still be my view given the mix of topics that I just outlined. Operator: The next question comes from Craig McDowell from JPMorgan. Craig Mcdowell: The first one, just on the pension trustee piece. Can you explain what that means in practical terms for cash? What's actually happened in practice? And just to confirm, there's no restriction on the cash released from this arrangement? And then secondly, thanks for the color on the adjusted EBITDA of the divested assets. Just wondering whether you give any indication on gross margin of those sold assets as well, just to help modeling. Rainer Irle: Yes. Craig, yes, sure. Yes, I can confirm, I mean, the cash on hand that we had end of last year that included the pension transaction which was close to EUR 1.5 billion, is no restricted cash, right? It's on our bank accounts, and we can use it. We can use it for operational matters. We can use it to repay the debt. And as I said, together with the divestment proceeds, we have all the money on hand that we need to repay both the convertible and the minorities. Now with the adjusted EBITDA that goes out for the transactions, I would say that just the margins are comparable to the business we keep, though. The manufacturing services that we will then provide to the buyers, that holds true for both transactions, those typically have a lower margin. Operator: [Operator Instructions] The next question comes from Harry Blaiklock from UBS. Harry Blaiklock: Aldo, you kind of mentioned in a previous question around the Chinese market and potential pricing pressure from -- given the pressure that OEMs are seeing there. And I know you have decent exposure and the market is obviously, as you mentioned, softening after a few strong years. Can you maybe comment a bit more around the dynamics that you're seeing in that market? And then also your view on Chinese competition currently, kind of whether that's intensified over the last year or so? Aldo Kamper: Yes. I think China is a bit of a question mark for '26 now in terms of volumes. At least at the moment, it seems to start a little slower and also the projections are a bit lower. At the same time, I think if we think back a number of years, every time when things truly started to slow down, there were incentives put into the system to make sure that everybody in brackets can survive. So let's see how '26 truly plays out. China will still remain an important market, both in terms of volume but also in terms of innovation. As I said before, one of the markets where a lot of our new products get accepted very quickly and where we see high adoption rates, for example, of EVIYOS. So it is always important for us to be the clear innovation partner for our customers and at the same time, have a cost position that allows us to also continue to capture a very significant share in the more established products. But that second part requires a lot of work. I mean prices are coming down, and we need to do a lot of work to take cost out of our products to be able to continue to enjoy that business. And that's not easy. But so far, we are able to pretty well defend our shares, but there's definitely pressure, and we acknowledge that, and therefore, we take action to counter that. Harry Blaiklock: Got it. Makes sense. And then on the EBITDA margin target for the semiconductor business of over 25%. Obviously, you gave that last week, which was before the announcement of the plan, but I'm sure the Simplify plan was obviously baked into that. But I'm wondering would you be able to hit that over 25% margin target without the Simplify plan? Like does the Simplify plan provide some kind of upside to where you could have got? And -- yes. Aldo Kamper: I should say it was priced in. We didn't want to speak about it last week because it would very much confuse the messages. I think both topics, the deleveraging and the divestment, were an important topic to give the bandwidth to last week so that people, also our employees, could really understand what was going on. And now this, with Simplify this week, we give a lot more insight in how we want to defend and expand our margins. That was baked into this target. Obviously, what we, of course, will push for is to get these things implemented as quick as possible. And with that, get to the target margins as quick as possible. That's the key focus now. And then let's see how it goes. I mean with the last 2 programs, I think we have shown a pretty good track record of being aggressive, being quick, and that's what we would like to repeat. But obviously, it doesn't get easier. You need different levers, and we are now using very different levers than last time, for example, really reallocating the full standard product portfolio on the chip side from Regensburg to Malaysia, including the R&D that is associated with it to really compensate also these pressures that I spoke about before and to free up then room for highly automated innovative products, for example, on the AR side here in Germany. So it is quite a structural change that is important for competitiveness and important for innovation at the same time. Harry Blaiklock: Got it. Super helpful. And one last question, if I may, just on the consumer business and any impact that you've seen there, like obviously not -- I'm sure you haven't seen kind of tangible impact yet from the memory disruption, but any conversations that you've been having with customers about their thoughts going into the second half of the year? Aldo Kamper: Well, our customers are worried about it, but so far, say they have secured their volumes. Whether that is fully true or not, the year will tell. But it is acknowledged. Our customers are working on it. So far, no reductions in forecast or outlook yet. But can it happen? Well, AI pays top dollar to compete with a simple smartphone against that will not be trivial. At the same time, the industry have always found ways around it and to deal with it. So yes, it's too early to tell what the true impact will be at the moment. Operator: There are no further questions at this time. So I would now like to turn the conference back over to Juergen Rebel for any closing remarks. Juergen Rebel: Thank you, operator. Thanks, everyone, for joining today's call. If there are any follow-up questions, there's a lot of material on our website, and you can always reach out to the Investor Relations team. Thanks very much, and speaking to you soon. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.
Ulrika Hallengren: Welcome to the presentation of Wihlborgs' Full Year Report 2025. Another year comes to an end, and we can conclude that despite limited support from the economic climate and with the rental market that has remained a bit slow and cautious, we have once again delivered growth across almost all key metrics. Vacancy has also increased slightly, but we have higher rental values, higher rental income, higher operating surplus, higher income from property management and property values have all strengthened once again. This marks 20 consecutive years of growth, a track record we are fully committed to continuing. And I claim that our region has never been more positively perceived than it is today, which makes me generally excited about the years to come. Let's go to our report. We start with a summary of the last quarter, October to December. Rental income up 5%, a new record at SEK 1.111 billion, income from property management, plus 23% and excluding revaluation from joint venture, plus 8%. Net letting positive at SEK 12 million, net debt to EBITDA at 10.4x. We have good access to financing. And as I said many times before, but this still stands. Demand remains for good quality and good locations, and our tenants are willing to pay for that. And we are proud to be able to continue with a project investment that gives continued good potential for growth. The Board proposes a dividend of SEK 3.30 per share. Looking at the full year '25, rental income up to SEK 4.354 billion, plus 4%. The operating surplus increased also with 4% to SEK 3.107 billion and income from property management increased by 14% to SEK 2.038 billion or 11%, excluding joint venture revaluations. The result for the period amounts to SEK 2.220 billion, corresponding to SEK 7.22 per share, and EPRA NRV has increased by 10% to SEK 99.36 per share adjusted for paid dividend. A comparison of rental income full year '25 and '24. Indexation gives plus SEK 41 million; acquisition, plus SEK 132 million; currency effect, minus SEK 33 million; additional charges, plus SEK 37 million; and completed projects, new leases and renegotiation, plus SEK 3 million. And here is included higher vacancy as well as higher property tax of approximately SEK 20 million, plus SEK 53 million from new projects and plus SEK 20 million from new leases in the existing portfolio. And the net letting is positive again, plus SEK 12 million in the quarter, plus SEK 77 million for the full year and, in total, new leases at a yearly value of SEK 399 million signed for the year. For the last -- for being a last quarter, the volume of new leases of SEK 92 million is good and a large amount to have lease commencement during first half of '26 or in the fall for Skrovet 6 in Malmo. 43 quarters in a row with positive net letting, but let's not take anything for granted. The quarter is a short period, but looking over time, I'm very proud of how we have found good opportunities over the past years. Here are some of the tenants that we have signed during Q4, a combination of headquarters, defense development, industrial and governmental tenants as examples, new tenants, expanding tenants, but also Ericsson with no change in areas and thereby not included in the net letting, but still very important for us. Six additional years, a bit higher rent and a small investment for improvements in the property, approximately SEK 1,650 per square meter. Here, we have the net letting in a historical perspective, lettings in green terminations in light blue and dark blue stacks are the net letting. We don't win every lease opportunity, which is annoying, but we think the hit rate is quite okay. And the list of our 10 largest tenants in alphabetic order, strong customers, and they contribute with 20% of our rental income. 7 out of 10 are governmental tenants and the public sector contributes with 22% of total rental income. Rental value as of 1st of January '26 is SEK 4.990 billion per year, plus 7.4%; and rental income, SEK 4.405 billion, plus 6%. Strong figures, and this is an effect from acquisitions, indexations, investments and tenants willing to pay for the right quality. Looking at like-for-like figures, all the properties we owned a year ago, excluding projects compared with updated figures, we can see that rental value is up 2% and rental income is up 0.8%. It's good with the growth also in the like-for-like stock, but to get the growth, we aim for acquisitions and investments will continue to be important, especially in times of higher vacancy. The growth in rental value is supported by indexation of 0.9% in Sweden and approximately 2% in Denmark taking effect this year. Changes in market value of our properties, we started the year with SEK 59.168 billion accordance with the external valuation of 100% of our portfolio. We have made acquisitions, which add on SEK 2.604 billion; investment, SEK 2.738 billion; divestment, minus SEK 156 million; changes in valuation, plus SEK 859 million; and together with currency translations of minus SEK 799 million, that summarized to a value of SEK 64.414 billion. Our external appraisers, one in Sweden and one in Denmark, they value 100% of the portfolio as of year-end, no cherry picking. A bit higher valuation yields for Swedish offices market and a touch lower for industrial. The growth come mainly from investments and new leases. Here's the long-term trend for our portfolio growth from SEK 7 billion to SEK 64 billion in 20 years and growth every year without taking in any new equity from our shareholders. And these figures shows the running yield that shows how we actually perform in relation to the valuation. So not valuation yield. For the whole portfolio, the occupancy rate is 90%, excluding projects and land and with an operating surplus of SEK 3.304 billion, that gives a running yield of 5.5%. In the project volume, now Blackhornet is included with a quite high volume of new areas, but not completed yet. Fully let, the portfolio would give a running yield of 6.3%. Good earnings capacity in relation to the value of the portfolio and good cash flow generation is the foundation also ahead. Compared to a year ago, the occupancy rate is down 0.3 percentage points, but we see areas which have improved, offices in Helsingborg, for example. And everything points in the direction that rental income will improve further during the year. In the office portfolio, the market value is SEK 50.401 billion with an occupancy rate of 91%. 91% in Malmo, improved to 90% in Helsingborg, 90% in Lund and 91% in Copenhagen. The operating surplus from offices summarized to SEK 2.731 billion and running yield of 5.4%, 6.2% fully let. And the demand for logistics and production continues to be good in Malmo, especially with an occupancy of 94% for us, lower occupancy in Helsingborg at 83%, 91% in Lund with a small portfolio and 96% in Copenhagen. 86% (sic) [ 88% ] occupancy rate as a whole with a running yield of 6.2%, a total value of SEK 9.181 billion. And as mentioned before, we continue to see harder competition in the third-party Logistics segment with quick changes in need, and that also means that occupancy can improve quickly when market has new needs. As mentioned before, I assume that vacancy in the southern parts of Helsingborg will be a bit sticky since the area will go through a makeover and that will take a number of years. But once again, let's remember that even if the vacancy is high, the running yield of 6.3% is decent, especially in location where the market as such continues to be interesting. The development of our total portfolio's running yield, 5.5% brings stability, not least since the portfolio overall has a high quality and good location. And as noted before, a good increase of the running yield since 2021. And some follow-up on the sustainability metrics. This is some of our overall goals for 2025. We managed to reach over 90% certification in the office portfolio in Sweden, a bit ahead, and we have continued with the rest of the portfolio. Evaluation of suppliers have not reached the 100% goal since there are always a few on the way in, but we will continue to improve. Carbon dioxide emissions from Scope 1 and 2 now at 0.93 kilograms per square meters and energy use 76 kilowatt hours per square meters below the target of 85. New goals have been set for 2026 and forward, more on that topic in the next report. But also some sustainability highlights from Q4 '25. Our project at Vatet 1 in Lund for our tenant, Arm, is the first project to be certified according to an updated manual Miljobyggnad 4.0 Renovation and reached the highest level goals. And let's remember that every upgrade of the manual makes it more difficult to be certified. The demands increase for every update. In Malmo, we have installed charging infrastructure for heavy-duty traffic for one of our tenants, and we continue with our energy efficiency improvements. And yes, you can find The Janne Solution among them. So minus 50% at energy use at Syret3, minus 27% at Cylindern in Helsingborg; and minus 10% at Kranen 8 in Malmo, as examples. A catalog of our value and properties in our 4 cities in '25. 39% of the value in Malmo, 23% in Helsingborg, 17% in Lund and 21% in Copenhagen. The region and especially these 4 cities continue to be of high interest for future growth, both regarding population growth, which will be a challenge in many places and regarding the number of workplaces, which is important for us, supported by Danish infrastructure and a young and well-educated population in Sweden. And time for financials. Over to you, Arvid. Arvid Liepe: Thank you very much, Ulrika, and good morning, everyone. Looking at the Q4 income statement. As Ulrika mentioned, rental income during the quarter amounted to SEK 1.111 billion, up 5% and actually a record figure for a single quarter when it comes to rental income. Operating surplus was up 3% to SEK 773 million. And income from property management was actually also a record for a single quarter at SEK 556 million. However, as Ulrika mentioned, that number was affected by a positive revaluation within one of our JVs of SEK 68 million. So the growth of 23% in income from property management, excluding the JV revaluation was plus 8%, which, in my opinion, is also actually quite a good figure. We had positive value changes in the quarter of SEK 444 million and in total, a profit for the period of SEK 850 million. On the next slide, you have the balance sheet as of year-end 2025. Property value of SEK 64.4 billion, up SEK 5.2 billion versus 12 months previously. Equity stood at SEK 24.3 billion, up SEK 1.2 billion versus the year previously, despite paying almost SEK 1 billion in dividend during 2025. And borrowings increased by SEK 3.2 billion to SEK 33.2 billion in total. Looking at some key figures relating to the balance sheet and the P&L. The equity assets ratio stands at 36.9%, slightly down versus the previous year, and the LTV stands at 51.6%. I think you should bear in mind, though, looking at those 2 numbers that during 2025, we invested more than we have ever done in projects, SEK 2.7 billion. And we also actually concluded the largest single acquisition that we've ever done with a property value of SEK 2.4 billion. That is, of course, a way for us to continue to build for growth. And bearing that in mind, we are quite comfortable with those financial metrics. We're also happy to see that the interest cover ratio is now gradually strengthening and stands at a good 2.9x. The EPRA NRV as of year-end is at SEK 99.36 per share, up 10% adjusted for the paid dividend during the year. The historic development of the EPRA NRV, you can see on this slide. And in the long-term perspective, since 2009, the annual average growth in EPRA NRV actually is at 15% adjusted for paid dividends. On the next slide, you can see the long-term development of the financial metrics, equity ratio, LTV as well as interest cover ratio. And as I stated before, in relation to the targets we've set for ourselves, we are at comfortable levels. And particularly, I would like to stress that the interest cover ratio is improving and at 2.9x. That is a good reflection of our ability to generate a good cash flow. On the next slide, the earnings relative to borrowings or net debt to EBITDA now stands at 10.4x. We are comfortable with the ratio. It has gone up slightly during the year, basically due to, as I've stated before, high investments and debt financing of the acquisition made during 2025. On the next slide, you can see the sources of financing, total borrowings of SEK 33.2 billion. Half of it comes from bilateral bank agreements with Nordic banks, 33% from the Danish real mortgage system and 17% from the bond market. Nordic banks are still very much willing to lend and the terms are probably unchanged over the past few months, but access to financing from the banking system, I would say, is good. The bond market is also both active and attractive. We have, over the past few weeks, issued a 3-year bond under our own MTN program at a margin of 98 basis points and a 4-year bond at a margin of 117 basis points. And for us, those are competitive levels. Looking at the structure of our loan portfolio, you can see the details on this slide. The average interest rate stands at 3.25%. That becomes 3.29% if you include costs for unutilized credit facilities. With STIBOR at basically 2.0 and a margin of -- an average margin in our loan portfolio of a touch above 100 basis points, you could see that the loan portfolio is pretty much -- we're paying what the current market rate actually is or pretty close to it. We have an average fixed interest period of 2.7 years and an average loan maturity of 4.7 years in the loan portfolio as of year-end 2025. And on the next slide, you can see the historic development over the past 5 years of the fixed interest period and the loan maturity and there are no dramatic changes in the development of those numbers over the past few quarters. Lastly, on the number crunching slides, we can look at available funds, that is unutilized credit facilities plus liquid funds as of year-end, which stands at SEK 3.2 billion. And that gives us a good flexibility to seize potential opportunities in the market. And you can also put into perspective, the SEK 3.2 billion is that we have bond maturities in Q1 of approximately SEK 1.2 billion, but we've also issued bonds amounting to approximately SEK 1 billion since year-end. So with that, I'll hand the word back to you, Ulrika. Ulrika Hallengren: Thank you. And I'll give you an update on our investments in progress and a quick overview of our largest project. During '25, we have invested SEK 2.738 billion. It's still a record, and it remains SEK 2.144 billion to invest in approved projects, highest investment level ever in our history, and this makes us prepared for coming years. A reasonable yield on cost with 6% or a bit over 6% for new build offices and 7% or a bit above that for industrial and a good mix of refurbishment and new build in the portfolio. In Copenhagen, we are about to complete our project at Ejby Industrivej 41 for Per Aarsleff. In the beginning, we planned this project for a multi-tenant transformation, but with a 15-year lease with Per Aarsleff, it has been turned into a single-tenant building. 24,000 square meters, investment SEK 231 million and a yield on cost a bit above 6%. Completion now in Q1 '26. The large project of Amphitrite 1 in Malmo, for Malmo University is running well in accordance with plan. A bit above 20,000 square meters for Malmo University in a 10-year lease, investment SEK 1.130 billion and completion is planned to late Q4 '27. In Malmo, in Hyllie, we continue with Blackhornet 1 VISTA. SEK 884 million investment, the mobility hub has already been completed since a year ago, and the offices will be completed from now and during 2026. Yield on cost, 6.2% and approximately 40% pre-let. The attractiveness of the product shows clearly now when tenants are starting to move in, and we work hard at the coming leases. From 1st of January, the total areas in the building are included in Malmo offices as classified as projects since the areas are not ready for moving in yet. Still too much raw concrete, but completion is ongoing. Last Friday, we opened Borshuset 1 in Malmo after a large refurbishment. It's an almost iconic building right beside the train station, 6,000 square meters offices, restaurant and co-working and top rents in the Malmo perspective. Completion now in Q1 '26 and moving in will continue during '26. Pre-let, 95%. At Kranen 7 in Malmo, we will invest approximately SEK 136 million in a preschool for the municipality, 2,900 square meters zoning plan approved and completion is expected to Q3 '27. Public procurement acts for the contractor is ongoing. And at Skrovet 6 in Malmo, we refurbished 11,000 square meters, 50% pre-let to Cloetta and Media Evolution with completion start in Q3 '26. So a quick refurbishment. Investment, SEK 149 million for a total technical shift in the building and a quick change from the quite closed building, which was the result from the SAAB, the former tenant, and now open up to be a new entrant to the whole Dockan area. In Lund, we are building a new modern office right beside the Central Station, Posthornet 1, phase 2. 10,100 square meters, yield on cost, 6.5% and completion starts in Q2 '26. Pre-let, 70%, a very successful project. In the southern part of Lund, we continue the development of Tomaten. This project is for BPC, completion in Q2 '26 and investment SEK 79 million, 3,600 square meters and the yield on cost 7%. And next to that, at former Stora Raby 32:22, now named as Surkalen 1. We have been able to improve since the project started. Tenants will be both Note and Lund University. So well-used land area and long leases in total. 14,500 square meters completion in Q2 and Q4 '26. investment SEK 260 million and yield on cost 9.2%. In Horsholm, Copenhagen, we have invested for a new school for NGG. 25 years lease, 11,600 square meters and investment SEK 390 million. Completion now in January. And at Girostroget in Hoje Taastrup, refurbishment for Novo continues. 62,000 square meters, our investment is limited to SEK 423 million and completion is expected now in Q1 '26, but Novo pays rent also during refurbishment period. That was some of the ongoing projects and just a touch of possible future projects. There are 4 possible projects in the Nyhamnen area in Malmo. We own the land for Kranen 15, Slagthuset and Polstjarnan 1 and 2. Zoning plan are ongoing, and we actually see some progress. And some more possibilities in Malmo, both the industrial at Spannbucklan, for example, housing at Kranen 5 and offices at Naboland, zoning plan approved for Spannbucklan and Naboland. In Lund, we continue the work in southern part at Hasslanda, where we bought Brysselkalen '25 -- we bought it 2025 from Granitor, approximately 50,000 square meters gross floor area. And at the Ideon area, we can continue with projects both at Ideontorget and Delta 2, and we also have more building rights at the eastern side of the highway. At Vasterbro in the western part of Lund, it will be mostly housing and one way for us is to use these building rights as a trade for other possibilities. And in Helsingborg, we can add on areas for offices at Polisen and several industrial and logistic possibilities, both as fill-in and stand-alone projects for us to be ready for different kind of times and tenants, and I think we have very good opportunities. So let's summarize Q4 once again, rental income up 5% income from property management, plus 23% and excluding revaluation from joint venture, plus 8%. Net letting positive at SEK 12 million, net debt to EBITDA at 10.4x. So we see continuously good access to financing, and the Board proposes a dividend of SEK 3.30 per share. And it goes without saying, we will continue with our focus on cash earnings and our future growth. With that, we are open for questions. Operator: [Operator Instructions] The next question comes from Erik Granstrom from DNB Carnegie. Erik Granström: I had a few questions following the report. I'm wondering if you could perhaps talk a little bit about your outlook for the rental market in 2026, how it's started so far? And where do you see vacancy rates moving, given what you know in terms of project completions and so on? Ulrika Hallengren: Erik, I think the year started quite slow. January was not too exciting. But after that, things have started moving on and good discussions are ongoing. And we have quite strong rental income growth from already signed leases coming in during 2026. So I think there's many -- quite many positive signals ahead, but it took some weeks in the early year before things started to move along. As said many times before, high quality is in very -- in everybody's focus, and we have that in our portfolio. So confident about the future. But a little help from economic growth, of course, looking forward to see that. Would you continue? Arvid Liepe: No, I just want to comment also on that tenants are willing to pay for quality and location. And it is not a new trend in this quarter. We've seen it over the past few years. But we continue to see that there is a willingness to pay for good location and good quality in the premises. And you can see that also in that the top market rents in our markets are increasing, not dramatically, but a little bit. Erik Granström: Okay. And given the project completions that you have now in the first half of '26, do you think that those will improve the overall vacancy or vice versa? I'm thinking about the fact that Blackhornet will be completed in Q2 and carries a little bit higher vacancy than the rest of the project portfolio to be completed. Ulrika Hallengren: Yes. So from now, from this report, Blackhornet is -- the areas are included in the project volume. So they are completed into a very raw standard. So that can, of course, affect the figures, but the rental income will continue to increase. And you never know what happens ahead. I mean it's -- our main focus is to have a good growth in the cash flow. And of course, I'm very happy of how we have been able to be quick on the changes for Skrovet 6, for example. We will have 10 months of vacant 100%. But after that, we have signed leases and they move in from 50%. So 10 months for total refurbishment, and we have done this kind of quite quick shift in quite high volumes in the last years. So that is a good thing. And I also think that Blackhornet now when they're moving in have started, and you can see the quality in the areas. That will continue to help the new leases come in place in that area as well. Arvid Liepe: But I think -- if I may add something. Looking at occupancy, Q4 versus Q3, it was down by, I think it was 0.2%. So if we go into decimals, so a slight decrease, but nothing dramatic. Given our projects being completed and given the rental agreements that we've signed, it's fair to assume that, that would have a positive effect on occupancy during the coming few quarters. On the negative side, you have when Blackhornet is completed, that is -- there's still too high vacancy for our liking in that property, of course. But -- and exactly the timing of those effects over the coming couple of few quarters is a bit tricky to say. But I think the net effect should not be significant, but we see a potential for a slight improvement in the occupancy rate. Erik Granström: Okay. And then perhaps switching over to investment opportunities for 2026. You mentioned, and we can see that in the numbers, SEK 2.7 billion invested in projects and the portfolio. What's your outlook for 2026? Because if I look at what's left to be invested in your project portfolio, it stands at around SEK 2 billion now, and it was about SEK 3 billion a year ago. So I was just wondering how you view the pace in terms of investments and the amount for 2026, if you can give us some color on what you're planning? Ulrika Hallengren: 2026 will not be a new record year, is my estimate, but we will continue with a good pace also during '26. I can't give an exact figure, but around -- not as high as 2025. But of course, we are always looking for new investment possibilities. And exactly when the timing is right for that. We have the portfolio, so that's good. I think we have good preparation, both for offices and industrial, not at least. Lund is very interesting. Maybe we will see something more in Landskrona adding on to this, and also industrial in Malmo is interesting. So we have things going on for the 2027 as well. But for -- at the moment, the building for Amphitrite for Malmo University will be our largest project, of course. And that will go on until end '27. Erik Granström: Okay. And then my final question regards the property valuations in Q4 and for the full year, you mentioned that 100% is externally evaluated. Could you say something about what -- in terms of CPI and indexation, what is assumed for 2027? The effect on '26 is already known, but what's now assumed for '27 and on? And also in terms of valuation yields, I do know that you do not report that, but you mentioned some changes. But overall, what -- do you see any major shift in yield requirements in '25 versus '24? Arvid Liepe: We commented on the slight changes in the valuation yields. And as usual, we will not give exact figures for the full portfolio with the same logic that we've had before that it's one aspect out of many to be judged in combination of many different assumptions. Regarding the CPI assumptions in the valuations for 2027 and onwards, the assumption is 2%. But again, I would like to stress that you cannot look at 1 or even 2 parameters alone in the assumptions in the property valuations. You have to look at all the variables in order to be able to make up your mind if something is reasonable or not. And we are comfortable that our external appraisers are doing a reasonable judgment when it comes to the balance between different parameters in the model. Operator: The next question comes from Oscar Lindquist from ABG Sundal Collier. Oscar Lindquist: Yes. So a couple of questions from me. You mentioned on new lettings that you expect some contribution from Q2, Q3 this year. I was wondering on terminations, is there anything you can highlight here? Did you have any larger terminations? And what could we expect in terms of impact in the coming quarters? Ulrika Hallengren: We have -- I mean the largest termination we had, SAAB, as we have reported on before, that was from now on from 1st of January this year. We have a few terminations that starts, I think, 1st of January '27, but they are quite -- I mean for the total volume, it's SEK 12 million and SEK 12 million, something like that. So not as large as SAAB were. And I mean we also have a year to work with that, especially in the industrial portfolio, we have good potentials to find new solutions for that. So not at any larger expense, I would say. Oscar Lindquist: Okay. And I also believe that WSP has signed a lease with Vasakronan in Malmo. Has that termination come through in your numbers this quarter? Or is it expected in Q1? Or can you say anything about that? Ulrika Hallengren: No. We have that message in December. So that is part of report for 2025. And they are one of the tenants that will move. Arvid Liepe: I believe that contract will be terminated in Q2 or something. So it's not the full -- they will not pay rent for the full year 2026. Ulrika Hallengren: Okay. So a bit earlier then. I think that is one of the lease. Oscar Lindquist: Yes. And then you have -- on financials, you have SEK 2 billion in swaps maturing in '26 average rate of 1.53%. You say that -- or you mentioned that you're currently paying around market terms. What sort of effect could we expect from swaps maturing and net of new financing? Arvid Liepe: Those swaps expiring in 2026, I would expect that we have -- I mean it will have a slight negative effect on the average interest rate for the group. But we actually, of those swaps have examples of swaps being both in the money and out of the money. So the effect, it's not that all those swaps are on extremely attractive levels. But it will have a slight negative effect on the average interest rate. And at the same time, we still have both bonds and we have bank agreements where the margin we're paying is slightly above where the market is currently. So I don't expect the net effect on the group's average interest cost -- the effect will not be very large. Operator: The next question comes from Lars Norrby from SEB. Lars Norrby: Talking about expansion and record CapEx in '25. And as far as I understand it, you're not expecting the same kind of level in '26, not fully SEK 2.7 billion. Now how about acquisitions? I think you did some net SEK 2.5 billion in '25. In '26, can you handle the same kind of volume with your existing balance sheet if something comes up? And are you looking at something of any size at the moment? Arvid Liepe: If I start with the financial capacity, I think that, as I mentioned, our access to liquidity, we feel is good, and we're comfortable with the financial metrics of the LTV, the equity ratio, the net debt to EBITDA that we have. As stated before, if an attractive acquisition opportunity of -- well, significantly large would come up, we have the tool or the mandate from the AGM to issue equity. We have never used that tool, and we've had it over all the years. But it is a tool in the toolbox for -- if the right opportunity would come up. Ulrika Hallengren: And without giving any prognosis about what will happen, as said many times before, we look into all kind of possibilities, both small, which add on things piece by piece, but of course, also possibilities with larger portfolios. But it's really important that we think that we can add on some value to that. It has to be -- I mean I think it's good for us that we are a bit picky when we choose things. It should both be the right quality or possibilities and the right price, of course. But of course, we see possibilities. I mean Copenhagen continues to be interesting. And also on the Swedish side, there is possibilities. But you can never say ahead. Lars Norrby: If you're looking at Copenhagen, what type of properties and what kind of yield level are you looking at? Is it similar to what you have in the portfolio right now, meaning higher yields than in Central Copenhagen? Ulrika Hallengren: Yes. We don't want to go too low on the earnings. Of course, they are important for us. But we think there is some possibilities in a bit of a better location than we are today so that we can transform a bit, but still get a decent yield for us. So that is mostly the kind of things that might be of interest for us. Lars Norrby: Just to wrap it up from my side, for example, if Castellum would be willing to sell some of their properties in more central locations, you wouldn't be looking at them. Is that correct? Ulrika Hallengren: I don't think we will be the one that are prepared to pay the price that they are expecting. Operator: The next question comes from John Vuong from Van Lanschot Kempen. John Vuong: You mentioned something about rental income growth for signed leases. Are you referring to capital reversion? And if so, what reversion potential are you seeing in your portfolio? Arvid Liepe: I think if you talk about -- I mean reversion potential, generally speaking, as has basically been the case over many years, the rents that we have in our rental contracts today are fairly close to where the market rents are. And our markets have rarely, if ever, seen any huge reversion potential that is being able to sign or to renegotiate rents at completely different levels. Ulrika Hallengren: But when I mentioned higher rental income, I was pointing at leases that we have signed, but where tenants haven't moved in yet, but they will move in during the year. So that will give some extra income, of course. John Vuong: Okay. That's clear. And then just looking at your Malmo office portfolio, screens that the vacancy has increased by 80 bps over the quarter. Is this an issue of timing given that letting? Or have new leases been skewed to other regions? Arvid Liepe: I would say that looking at Malmo offices in the quarter, I mean that has, of course, been affected by SAAB moving out as of this past year-end. So there you would have -- and that was actually 4 leases out of 3 were terminated, if I remember correctly. And that was actually a significant chunk. So the Malmo office occupancy effect would mainly be driven by SAAB in this quarterly report. Ulrika Hallengren: And we have also added on areas from Borshuset. So Borshuset is completed, but the tenants haven't moved in yet. They will continue to move in until August. So that is vacant in the economic terms at the moment, that the tenants are eager to move in. John Vuong: Okay. And then on the leases, what's the percentage point impact on your occupancy? And maybe just looking at the number overall, is it skewed to any specific submarket within Malmo or say, building age? Arvid Liepe: No. I mean nothing different from what we tried to communicate earlier that there's still a good demand for good quality, good location. Predominantly, our office portfolio is good quality, good location with only a few exceptions. So there's no real change in that picture, I would say. Ulrika Hallengren: And the decision from SAAB to move to Lund, to a new premises there, was they wanted to combine both all the offices area and their development area, which also is a part of industrial classification in that. And Lund municipality could arrange that kind of area where they were allowed to have both engineers and also this experimental industrial things going on at the same place. And so that was the reason why they moved to Lund, and we have seen very good effects from that in the Lund areas affecting all the things we own at the Lund area, not at least. So for the region, that decision from SAAB has been a boost, I think, actually. And I'm also very satisfied with the solution that we have found with Skrovet 6, where SAAB had their largest leases before. So we have new tenants there from starting with 1st of September and adding on also from 1st of October with a totally refurbished property. So I think that solution will also be good for the Dockan area in Malmo. But of course, the timing for that, it gives us some vacancy at the moment. Operator: The next question comes from Eleanor Frew from Barclays. Eleanor Frew: A couple of questions. One is probably a slight follow-up. Can you calculate the net letting excluding leases on new developments or just including the completed stock? And can you give some color on how you see that trending if so? Arvid Liepe: I'll have to check that number because I don't have that number off the top of my head, the net letting excluding projects. Ulrika Hallengren: We have mentioned it before, but not the full year figure. But we have been positive in the net letting for the existing portfolio before. But let's check upon that because -- and I don't see if we had some new leases in new areas in Q4, but I -- let's come back to that. Eleanor Frew: Great. And then is there a reason sort of high vacancy on Blackhornet? It stands out a bit given the pre-letting and your other projects? Or more broadly, how is the momentum going in the pre-letting discussions? Ulrika Hallengren: Good discussions, high interest, but not in the pace that we are aiming for. So good -- I mean it's the best product you can find, but the decisiveness must be there from our tenants. I think what we see in a bit of a cautious market is when you have a high volume with very good quality, you don't need to take the decision now, you can wait because there's more to choose. It's not this level, so you can choose another level. So we don't really see the tempo in that yet. But patience is something you need. Arvid Liepe: Getting back to net lettings, excluding new developments. In Q4, it was still positive, also excluding leases and new developments. It will take a bit more time to look at the full year, but Q4 was still positive. Operator: The next question comes from James Cattell from Green Street. James Cattell: Just had a question on the new EPRA CapEx table on Page 25. Thank you for including that. I noticed TIs increased from SEK 499 million to SEK 802 million. Was this just a temporary increase due to a difficult letting market? Or do you expect this to be the run rate going forward? Arvid Liepe: Could you please repeat which figure you're relating to? It was Page 25, right? James Cattell: Can you hear me? Arvid Liepe: Yes, yes. James Cattell: I have some difficulties in my line. Can you hear my question? Arvid Liepe: Well, you referred to a number on Page 25 in the report, and I was just uncertain which number. So if you could repeat that and we'll see if we can answer. James Cattell: On the EPRA CapEx table, the number for tenant incentives, it increased from SEK 499 million to SEK 802 million. Yes. I was just wondering is this increase due to the difficult letting market? Or is this what the rate you expect to be going forward? Arvid Liepe: To be frank, it's actually the first time that we have calculated this number according to the EPRA definition of capital expenditure. And we've spent some time together with the EPRA team defining these different -- well, the sums, meaning that I'm actually a bit uncertain when it comes to how to project how the different parts of the sum will develop over time. So I'm not quite sure that I, off the top of my head can answer your question about how that will develop going forward. James Cattell: Okay. And do you have any idea of the split between rent-free and capital contributions on that? Arvid Liepe: I mean generally, you could say that our market is characterized by few tenant incentives and few and short rent-free periods. So I mean we basically come from a market where tenant incentives have been very, very marginal. And so we don't expect that to develop in any dramatic way. James Cattell: Okay. And do you have any guidance on what caused the increase in the joint venture property values in the fourth quarter? Arvid Liepe: Well, I mean property valuations are what they are and always very tricky to predict. We would not expect that, that type of property valuation -- property revaluations in our joint ventures will come on a regular basis, but property valuations are hard to predict. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Ulrika Hallengren: Thank you. So let's see. Do we have any written questions? Arvid Liepe: We have received no e-mail -- questions via e-mail as I can find. Ulrika Hallengren: Okay. But you're always welcome with further questions any time. So by that, thank you for today, and have a nice day. Arvid Liepe: Thank you very much.
Operator: Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the MPS Group Fourth Quarter and Full Year 2025 Preliminary Results Presentation. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Luigi Lovaglio, Chief Executive Officer and General Manager. Please go ahead, sir. Luigi Lovaglio: Thank you. Good morning. Thank you for joining us for the presentation of our fourth quarter and full year 2025 financial results. Today is more than a quarterly presentation, it marks a milestone in our history. We are at the gateway to what Monte Paschi Group will become, decisive turning point that sets the direction of the group for the years to come. It is the first time we stand here as Monte Paschi plus Mediobanca, with consolidated results that speaks clearly and proudly about what we are accomplishing together. What truly matters today is that we now have a tangible evidence, not forecasts, not expectation, that Monte Paschi plus Mediobanca combination is grounded in a strong industrial rationale, strategic coherence and the strength to create lasting value for our clients, our people, our shareholder and for the entire economy as a whole. As Monte Paschi, we're presenting another quarter and full year of strong stand-alone results. Our business continues to perform solidly across all dimensions, particularly in fees and commission income, supported by robust commercial dynamics. We are offering one of the highest dividend yields in European banking currently standing at 10%. All these provides a solid foundation on which to build the future of the Monte Paschi Group, a leading competitive force in the banking landscape, thanks to the complementarity of the two platforms, Monte Paschi and Mediobanca, with a diversified, resilient and customer-driven business mix. We are accelerating the integration process with the bank moving towards a specialized [Technical Difficulty] business model that enhances the brand value, capabilities and talents of both organizations with Mediobanca's legal entity focused on corporate investment banking, high-end private banking activities, embracing a very ambitious and deserved path for growth and development. We confirm that our target group structure will be fully aligned with our industrial projects to maximize the value creation at the integration level. We will present our business plan for the combination with Mediobanca on February 27 as we are finalizing the guideline for the group's reorganization. This will allow us to build a powerful, profitable and sustainable business model. Our clients will experience a group that blends proximity with capability, heritage with innovation. As the integration progresses, these benefits will become increasingly visible. Together with Mediobanca, we have the earning power, capital strength and the balance sheet quality to invest in talent retention and development with dedicated program being designed and funded; client service excellence, leveraging combined capabilities as a broader product and service platform; growth initiatives, systematically pursuing customer coverage opportunities; technology investing to support all our businesses; sustained high shareholders' returns supported by strong earnings and capital generation. Turning now to the full year results, which underscore our ability to create sustainable value and deliver strong shareholders' return. Full year 2025 net profit of the new combined group amounted to EUR 3 billion before PPA's net income impact equal to around EUR 300 million. Full year 2025 Monte Paschi stand-alone profit at EUR 2.750 billion, up by 17.7%, higher than last year, excluding the positive net tax in both periods [Technical Difficulty]. Operator: Ladies and gentlemen, please hold the line. The conference will resume shortly. Thank you. Mr. Lovaglio, you can go ahead. Luigi Lovaglio: Okay. Thank you. I'm just recalling the full year 2025 net profit of the new combined group at EUR 3 billion before PPA's net economic impact equal to EUR 300 million. Full year 2025 Monte Paschi stand-alone net profit at EUR 2.750 billion, up by 17.7% year-on-year, excluding the positive net tax in both periods. Results were driven by solid operating performance with resilient revenues sustained by growing fees and the effective management of both operating costs and cost of risk. Net profit in the last quarter reached EUR 1.384 billion, higher by 18.5% compared with the fourth quarter of 2024, excluding positive net tax. Focusing on our stand-alone results, our strong performance is reflected in the net operating profit, which amounted to EUR 1.860 billion in the 12 months, growing by 6.4% year-on-year with resilient revenue sustained by strong plus 8.2% increase in fee income, costs well under control, improved cost of risk. Significant contribution to the results came from the fourth quarter net operating profit that reached EUR 472 million. It was higher by 15.3% [Technical Difficulty] and plus 4.2% quarter on the quarter. Commercial performance remained very strong. Savings, inflows, mortgages and consumer finance all confirm the resilience and the power of our franchise. Regarding asset quality, cost of risk has been reduced to 40 bps from 53 bps in 2024. Gross NPE ratio at 3.5%, lower by 1 percentage point compared to last year. Net NPE ratio at 1.8%. NPE coverage reached 49.3% with an increase of 80 basis points year-on-year. Solid capital position at group level with core Tier 1 ratio at 16.2%, including the impact of Mediobanca transaction, net of dividend to be proposed to the coming Annual General Meeting. The dividend is equal to EUR 0.86 per share for a total amount above EUR 2.6 billion for a dividend yield of 10% at the top of the banking system. And now I would like to give a short update on the combination process with Mediobanca. The combination creates a new strong, powerful player in the banking sector, thanks to the complementarity of the two platforms, leveraging the strength of both Monte Paschi and Mediobanca. The target group structure is confirmed, fully aligned with the industrial rationale of the offer, aiming at maximize the value creation and achieve maximum integration in line with the regulatory requirements related to ECB authorization, with legal entity Mediobanca focused on corporate investment banking and private banking high level. The combination program is progressing at full speed with full involvement and alignment of both teams. Bottom-up analysis confirmed that outside-in estimate of EUR 700 million synergies are there, and I allow myself to say also with a potential upside. As anticipated, we will detail the corporate reorganization business plan and the updated targets at our Capital Market Day on February 27. We now move to the stand-alone results section. For comparability, this P&L and balance sheet figures do not include Mediobanca. Now just an explanation from the stand-alone to the combined group full year '25 net profit. We are describing the main components. The waterfall explain the, as I said, components for the full year '25 group profit reported at the level of EUR 2.7 billion. Monte Paschi's stand-alone pre-tax profit is EUR 1.7 billion, well above guidance. Fourth quarter Mediobanca pre-tax profit at EUR 376 million. With Mediobanca P&L consolidation, we completed the full write-up of off-balance sheet DTAs with the net positive contribution of taxes amounted to EUR 461 million (sic) [ EUR 961 million ] in the full year. With these three elements, we have reached EUR 3 billion net profit of the group. The slide also highlights PPA's economic impacts, including an ECL booking of Mediobanca's performing loans as customary under IFRS. Including these net effects, we have reported group net profit of EUR 2.716 billion. Now let's move on the usually discussed details of Monte Paschi's stand-alone results. As I have already mentioned, full year 2025 net profit of Monte Paschi stand-alone reached EUR 2.750 billion, up by 17.7% year-on-year, net of positive tax effects in both periods. These results were driven by a solid operating performance, thanks to resilient revenue, sustained by strong growth in fees, coupled with effective management of both operating cost and cost of risk. Fourth quarter contribution of EUR 1.384 billion, including positive net tax from DTA write-up following tax consolidation with Mediobanca. Net of that tax effect, Q4 '25 profit is up by 18.5% versus fourth quarter '24, with quarterly dynamics affected by nonoperating costs related to the transaction. Now moving on the next slide. The net operating profit confirms the strength of our underlining engine. Full year 2025 amounted to EUR 1.860 billion, up by 6.4% year-on-year. The net operating profit in the fourth quarter amounted to EUR 472 million, showing an increase of 15.3% compared to last year and 4.2% dynamics quarter-on-quarter, driven by strong fee income, solid base this quarter for a new strategic plan. Now let's move on to gross operating profit. We reached EUR 546 million in this quarter, up by 5.2% year-on-year and 2.8% quarter-on-quarter. Revenues increased by 2.4%, despite the impact of the decreasing interest rate environment, thanks again to strong fees, while costs remain well under control. Full year gross operating profit was EUR 2.189 billion, up by 1%, with the revenues supported by fees and net interest income stabilization. Operating costs are up only by 0.8% despite labor contract renewal. Full year cost/income remained stable at 46%. Commercial momentum remains a clear highlight and lays the foundation for the new business plan. Total commercial savings are EUR 178 billion, up by 6.5% year-on-year. Wealth Management gross inflow are EUR 17 billion, up by 17%. New retail mortgages are EUR 6 billion, up by 81% (sic) [ 83% ] and the new consumer finance are at the level of EUR 1.3 billion, up by 14%. Let's see now net interest income evolution. In the fourth quarter '25, net interest income is EUR 544 million, flat quarter-on-quarter, seeing a stabilization according to the guideline we gave in the last quarter. Full year '25 net interest income was at the level of EUR 2.182 billion, down by 7.4% year-on-year, in line with expectations. Now looking at the volumes, let's start with loans. Net customer loans to retail and small business reached practically EUR 66 billion, increasing by EUR 4 billion or plus 6.2% year-on-year. Growth is driven by strong commercial activity in key strategic segments, with important contribution also in Q4. Total commercial savings reached EUR 178 billion, up by more than EUR 10 billion since December 2024. The Q4 '25 contribution was around EUR 4 billion, again driven by all components. Quickly now about govies. The banking book stands at EUR 9.1 billion. Credit spread sensitivity of the Fair Value to OCI portfolio remains very low. The fair value through P&L decreased slightly quarter-on-quarter, reflecting market-making dynamics. Now let's move on to fees and commission income. Fees continue to be a key driver of our performance. Fourth quarter '25 fees are EUR 401 million, up by 7.4% year-on-year, driven by Wealth Management fees, up by 14.8%. Fee also increased by 4.9% quarter-on-quarter, with both Wealth Management and Commercial Banking contributing by 7% and 2%, respectively. Full year fees are at the level of EUR 1.586 billion, up by 8.2% year-on-year. Wealth Management and Advisory fees are up by 13.3% and Commercial Banking fees are up by 3.5%. Again, this is a confirmation how our network is powerful. Now let's move on to the operating costs, starting with the quarterly evolution. Q4 '25 operating costs are at the level of EUR 474 million, down by 0.6% year-on-year. Non-HR costs fell by 7.8% year-on-year, more than offsetting HR cost pressure from contract renewal and variable remuneration. Quarterly dynamics reflect typical fourth quarter seasonality. Full year operating costs are at the level of EUR 1.885 billion, up only by 0.8% year-on-year. Again, non-HR costs are down by 5.7%, offsetting HR costs up by 4.3%. Now let's move on asset quality. Asset quality continues to improve. Gross NPE stock down to EUR 2.9 billion, gross NPE ratio improved to 3.5% from 4.5% in December '24. Net NPE ratio is at 1.8% from 2.4%. Cost of risk is 57 bps (sic) [ 37 bps ] in Q4 and 40 bps for the full year '25, down from 53 bps in full year '24. NPE coverage is 49.3%, improving by 80 bps year-on-year. Now funding liquidity again is showing the strength of our balance sheet. We have a very solid liquidity position, confirmed also in this quarter with unencumbered counterbalancing capacity above EUR 30 billion, LCR at 168% and NSFR at the level of 133%. Now a quick and simple representation of the Purchase Price Allocation. So we are presenting here the main components. Provisional effects of PPA amount to approximately EUR 3.6 billion, of which EUR 2.5 billion have already been included in the third quarter 2025 results. Goodwill is estimated at the level of EUR 3 billion. The Purchase Price Allocation process will be continued, and it is expected to be finalized by the end of September 2026. Now capital. We have a very strong capital position, and this is confirmed also in this quarter with a common equity Tier 1 ratio fully loaded at the level of 16.2%, including net profit net of dividend proposed already reflecting the preliminary impact of the Mediobanca transaction. The capital ratios are therefore strong, with a large capital buffer compared to regulatory requirements that give us strategic flexibility going forward. The slide shows the main drivers of the quarterly dynamic and the conservative treatment of partial preliminary PPA effects. Now let me spend a few words on Mediobanca fourth quarter results. The fourth quarter, again, is a confirmation of the potential deriving from the combination. Net profit Mediobanca was at the level of EUR 301 million before one-offs and EUR 221 million reported for fair value adjustments and costs related to the OPS. Sound asset-driven business with total financial assets at the level of EUR 115 billion, stable quarter-on-quarter. Revenues are up by 6% quarter-on-quarter with fees rebounding plus 6%, driven by Wealth Management. Cost/income at the level of 47%, including retention action costs, and cost of risk is 55 bps. Core Tier 1 at the level of 16.4%. A dividend per share of EUR 0.63 is proposed to be paid in April. Now let's turn to the combined platform and the industrial rationale. This transaction has a very strong industrial rationale, a combined platform that are not overlapping but genuinely complementary. Monte Paschi brings unique retail and commercial banking franchise. Mediobanca contributes best-in-class capabilities in consumer finance, wealth, investment banking and asset management. Together, we create a structurally profitable and sustainable business model. The operating model is simple and industrially driven. We leverage scale where it matters while preserving specialization and excellence in each business line. In Retail & Consumer Finance, the logic is very clear. By combining Monte Paschi's nationwide reach with Compass' leadership in consumer finance, we built a market-leading platform with superior growth and returns. Wealth Management and Private Banking are a core value driver. Greater scale and stronger digital capabilities allow us to move up the value chain, attract high net worth clients and increased share of wallet. Asset gathering platforms and private banking franchises work together in a fully integrated model. Corporate and Investment Banking is significantly strengthened. We offer clients a solid balance sheet and unique advisory expertise in Italy. And also international through Messier Maris and Arma Partners. Insurance and asset management add stability and diversification. They reduce reliance on traditional banking revenues and improve the overall risk return profile. The result is a well-balanced, resilient growth, diversified across retail, corporate, wealth and insurance and well positioned to deliver sustainable value through the cycle. On pro forma basis, the group has a well-balanced revenue mix. Retail and Commercial Banking around 30%; Consumer finance 19%; asset gathering and management, 21%; 9%, SIB; and 14%, insurance. This is supported by a revenues base around EUR 8 billion. Now about the Combination Program. We are moving at full speed with the combination. Our objective is clear. We want to reach the target operating model by the end of this year, 2026. We have almost completed the design of a comprehensive and disciplined integration plan. It covers all key business functions with dedicated teams, strong leadership and clear accountability. The focus is on efficient execution while ensuring business continuity and minimal disruption. Phase 1 is now completed. We have finalized the diagnostic and the design of the target business model and operating model. We are now entering Phase 2. This phase is fully dedicated to complete the definition of the business target model and the corporate structure. The work done over the last few months give us strong confidence in the delivery of EUR 700 million of envisaged synergies. These synergies are concrete and actionable. We have identified more than 50 granular initiatives across business, cost and funding. The integration plan is almost finalized, fully aligned with the ECB requirement, with clear milestones already set for the coming weeks. Execution so far has been solid. Teams are working constructively. And this is the key message I want to underline. Synergies are not a promise. They are a program with initiative, milestone and accountabilities already in motion. Let me conclude with what really matters. The fundamentals of this group are already very strong. In full year '25, Monte Paschi on a stand-alone basis, delivered a pretax profit of EUR 1.7 billion, well above guidance. This is a result of outstanding commercial performance with strong volume growth, a high single-digit fee growth. And this momentum does not stop here. We expect these trends to continue into 2026, with an acceleration of commercial dynamics and solid growth in fees and commissions. On a pro forma basis, this trend will support a year-on-year increase in group profit before tax. At the same time, we have confirmed the target group structure, a structure fully aligned with industrial rationale of the offer designed to maximize integration and to maximize synergies. Mediobanca's legal entity will be focused on corporate and investment banking and high-end product banking, reinforcing clarity, specialization and value creation. But this is not just about numbers. This is about a new way of doing banking, a group where Mediobanca's client relationship is strengthening Monte Paschi lending engine, where excellent is not the sum of the part, but the multiplier, where client experience the full breadth of our capabilities with simplicity, confidence and trust, where two strong historic brands and franchises stand together as one group, broader, more powerful and more ambitious than ever. This is only the beginning of what Monte Paschi Group will become, a group we are shaping for the benefit of all our stakeholders, a group powered by almost EUR 3 billion in earnings, a robust balance sheet with 16.2% capital strength and by an integration, advancing with discipline, speed and purpose, guided by a clear organization blueprint. This will be fully unveiled on February 27, when we will present the business plan for Monte Paschi and Mediobanca combination. To our employees, our clients and our shareholders, [Foreign Language]. Your commitment, your confidence and your belief in this journey are the forces that make this transformation real. Our fundamentals are strong, our strategy is client-focused, our commitment and our ambitions are very high. Together, we are not simply combining two banks. We are shaping the leading competitive force for Italy, one that creates value, strengthen its talent and stands on solid foundation for our employees, for our clients and for the future. Thank you, and we are ready to take your questions. Operator: [Operator Instructions] The first question is from the conference call in English from Antonio Reale, Bank of America. Antonio Reale: [Technical Difficulty] Operator: Mr. Reale, we cannot hear you. Can you get closer to the receiver, please? Mr. Reale, we cannot hear you. Maybe your line is on mute. Please check your microphone, please. Antonio Reale: [Technical Difficulty] Operator: The next question is from Giovanni Razzoli, Deutsche Bank. Giovanni Razzoli: The first one is on the CET1 ratio. If I'm not mistaken, the 16.2% includes only EUR 40 million of restructuring cost out of a total of EUR 600 million. And so my question is, can you still confirm above 16% CET1 ratio in the coming years when all the restructuring costs will be booked? And another question on the restructuring cost is relating to the phasing of those costs in the coming years. How does this phasing of restructuring cost aligns with the proposal of dividend per share of EUR 0.86, which I presume represent a starting point for the plan? So in other words, how can you expect to confirm, if any, this EUR 0.86 of dividend in the coming years when you are likely recorded restructuring cost? I understand that this is a kind of anticipation to the business plan, but if you can help us understanding how this square with the overall picture of this CET1 and dividend. Andrea Maffezzoni: On your questions, actually, the integration cost, based on the latest estimates, are expected to be for the next year is around still EUR 500 million gross. So the net amount is around EUR 350 million. So if you even factored them in the capital ratio, would still be around 16%. Then you have to take into consideration that the booking of the integration cost is strictly related to the announcement of the plan projections, so on the plan targets and initiatives. So this is why will happen for the bulk in 2026. For your last question on capital projections, state what I said on the impact of integration costs per se, I would, let's say, postpone the answer to when we present the business plan, which is, I would say, let me anticipate that this is -- this statement is valid for most of the forward-looking questions that we will tackle when we present the business plan on the 27th of February. Operator: The next question is from Luis Manuel Grillo Pratas, Autonomous. Luis Pratas: You comment on the presentation that you want the full integration of the two banks. I wanted to ask you, what is the ideal corporate structure for you? Is it a scenario where you delist Mediobanca, owning 100%, but then you spinoff a specialized entity for CIB and private banking? I'm asking this because for weeks, there has been a lot of speculation on the press about alternative routes such as refloating Mediobanca, keeping it listed. So any color here would be very much appreciated. And then I wanted to ask you about the NII in Q4 stand-alone. It came flat, whereas peers showed already some growth in Q4 '25. If I look at individual drivers, loan volumes came 1% higher Q-on-Q. The customer spread also expanded a few basis points to 2.8%. So I wanted to understand the flattish Q4 figure, if there were like any one-offs there and whether you could provide any guidance for NII in 2026 stand-alone, please? Luigi Lovaglio: Okay. Thank you. Thank you for the question. I think Andrea make preliminary statement that clearly, most of the information regarding key elements, P&L and projection will be provided in 15 days with the presentation of the business plan. Having said that, I can just really confirm that we are focused regarding the structure and reorganization, we are focused on value creation. And in order to do it, we need to maximize the level of industrial synergies to be achieved. That's why we are confirming that the organization of the group should respond to this objective. The guideline will be finalized together with Mediobanca in the coming weeks, with the aim of reaching the final approval of the integration industrial plan by February 26. So I believe as -- no decisions will be taken at the Board yet. I really ask to be patient and to wait for the presentation of the business plan in the next 15 days. About net interest income, I will ask Andrea. Andrea Maffezzoni: Yes, about net interest income. As mentioned also in our previous calls, starting from Q4, has actually happened, we expect a stabilization and then a pickup -- a slight pickup in the next few quarters in 2026. In the fourth quarter '25, yes, we have some benefits on wholesale cost of funding. And also on commercial NII, there are actually, yes, some accounting one-off impacts that led to the stable NII. But let's say, the trend is expected to be a stable/positive one in '26. Luis Pratas: Can I just do a very quick follow-up? So in the scenario where you delist Mediobanca via major bank corporation, I would like to ask how the buyout price, the exchange ratio is defined? Do you need to pay the same exchange ratio that you paid during the offer, so 2.533? Or can it be a different price, for instance, considering where Mediobanca trades compared to the offer? Luigi Lovaglio: Whatever I'm saying will be price sensitive. So I think it's better if we postpone the right timing. Sorry for that. Operator: The next question is from Noemi Peruch, Morgan Stanley. Noemi Peruch: The first one is on tax rate. Which tax rate would you expect for 2026 for the group? And then if you could please update us on the trends of private bankers year-to-date, whether the exits have stopped or not? My third question is on the payment of an interim dividend in 2026. If you can share your thoughts on this? Luigi Lovaglio: Okay. Take the answer, right. Okay. Tax rate will be around 30% -- 29%, 30%, I believe, clearly in line with what we planned originally in our projection for the OPS. Then I think regarding Mediobanca private bankers, right? I believe that some necessary actions have already been taken to retain talented bankers, that I believe are crucial for the business origination and growth. I know the new effort will be put in place in order to be even more effective. Honestly, we believe that the situation is something that we can consider absolutely under control. And I'm sure that the top management of Mediobanca will ensure prompt action in order even to invert this kind of trend. So as far as dividend, I believe, as Andrea was mentioning, it's better if we disclose all the necessary information in the next presentation of the business plan 2 weeks from now. Operator: The next question is from Hugo Cruz, KBW. Hugo Moniz Marques Da Cruz: I have a few questions. So the PPA, the full process will be completed by September. Should we expect any further impact on capital from finalizing this process? Perhaps it's something you can answer without kind of going into the business plan. And then ideally, if you could give guidance on PPA charge for future years, the annual recurring charge? But so that's one question. Second question, MREL. Can you confirm if the plan is still to keep the combined entity as a single point of entry? And the third question on ECB funding, you're still 7% of liabilities. Can you remind us of the cost of this funding and if you can replace it with cheaper funding? Andrea Maffezzoni: So thank you for your questions. So on the first question, what actually remains to be done with regard to the PPA is mainly related to the valuation of intangibles like brands, customer relationships, et cetera. So we would not expect any material impact on capital. The relevant things to be assessed were done end of this year. As regards the PPA charge going forward, then it depends on the amortization schedule of the different asset liabilities. But let's say, on average, you can assume around EUR 100 million per year for an average 10 years, then it will depend on the actual amortization of the different items. As regards the question on MREL, yes, we definitely still plan, stated that formally the decision is not on us, is on the SRB, but anyway that the group will be managed via a single point of entry approach, and this is also relevant for funding synergies. So definitely, this is still an objective. Finally, the ECB funding, yes, I mean, as we further accelerate on our commercial deposits, yes, we will be able to replace the remaining ECB funding potential with cheaper cost of fund. Operator: Next question is from Andrea Lisi, Equita. Andrea Lisi: The first one is on fees, particularly on wealth management fees that made really well in the last quarter. Just to understand and for comparison of the contribution of performance fees in the fourth quarter '25 and in the fourth quarter '24. Then I want to ask you if clearly, I mean, that this will be said clearly that in the plan but if the target of EUR 700 million synergies would be realized also without a delisting of Mediobanca? And in case of full integration of Mediobanca with Monte, that's just from a regulatory standpoint and time frame, can you identify or clarify which are clearly the steps and the time frame to arrive at the full integration? Andrea Maffezzoni: Maybe let me before letting the CEO comment on the commercial performance in wealth management fees, maybe just make a quick preamble that I think is relevant for the interpretation of our performance that was particularly good on fees. I would refer you to Slide 39. So it is in annex of our presentation where you see the recast of Mediobanca P&L on the basis of Monte Paschi reclassified P&L. This is relevant because if you compare the fee number, you can see that the number under our classification is lower than the one that you will find in the Mediobanca presentation because there are some reclassification to other items like cost, for example. So this is relevant for your future projections and also to compare with your previous target. So this is the first point. Second point, you have to take into consideration is instead when you consolidate, then part of the banking fees of Monte Paschi, so which are the upfront fees that we get on Compass -- on the distribution of Compass products, which is, say, around EUR 10 million this quarter, slightly less, these are elated because these are accrued in the future years. So you have to take into consideration these two items to better interpret the fee performance that is much better compared to whether you simply add the two -- the fees of the presentation of Monte Paschi stand-alone and Mediobanca stand-alone as it was shown yesterday. So you have to refer to our Slide 39 to interpret the future. So sorry for the long preamble, but I think it's relevant for your future projections, but also to interpret our quarterly results. And then I'll let the CEO comment on the commercial performance. Luigi Lovaglio: Okay. Let's start from the key information that we are providing with these results. So as we said, 1/3 of total revenues are coming from asset gathering. That's why it's quite important for us to exploit the potential of full synergies that we can come from the combination of Mediobanca plus Monte Paschi. Now having said that, clearly, on the side of private banking, high level, this kind of activity will be clearly concentrated the focused in Mediobanca legal entity with the strong brands that they have, with the strong professional people there and the long-lasting experience and the position that they have on in the market. If I remember well, recently, they got also a special reward and the money as the best private banker activity in Italy, right? So this is, again, a plus that we believe can further be developed by sharing their know-how also to the bulk of customer -- of private banking customer we have in Monte Paschi. Having said that, it's clearly that as we were seeing in the documents of our public offer, it's clear that you will extract maximum level of synergies by optimizing the full integration. But anyway, also without a full integration, we can get synergies. It's clear that the goal is to generate the maximum level of synergies and value for our stakeholder. That's why we are in the process to finalize the best structure that can fit with this goal, and we provide to the market a complete set of information during the business plan presentation. Operator: The next question is from Antonio Reale, Bank of America. Antonio Reale: I'm going to try again. Sorry about earlier. It's Antonio from Bank of America. Two questions from my side. Some of them have been addressed already, but I'm going to ask you a market question. Ex dividend, Monte Paschi is trading now on EUR 8 on my screen. And I think you said not long ago on previous occasions that you think the shares are undervalued. Now I think you still believe that, and that probably makes two of us. My question is how can you convince the market that it's wrong on Monte dei Paschi? What do you think the market is getting wrong? That's my first question. My second one is, can you help us frame the moving parts from here on sort of what's affecting your capital going forward, both positively and negatively? I know you've talked about PPAs, but sort of DTAs restructuring charge. Trying to get a sense of the magnitude of your excess capital here. You might have already answered this, but sort of is staying above 16% a target also in the outer years? Luigi Lovaglio: I think what is important and normally is what we're trying to do is to convince the market with the results. We are keeping deliver sustainable, continuously growing results in what is the part that is showing the sustainability of these results is the fees and commission. We are one of the most powerful network in Italy. And this is proven by this capability to keeping growing high-quality streams of revenues that are presented by wealth management product and fees related to this kind of business. We are a bank that is providing -- the group will be capable to provide one of the highest dividend yield. We have a strong position of capital, thanks also, as we were mentioning, the write-up of DTAs, we can count on additional support to the core Tier 1 of around EUR 500 million per year for the next 6 years. So we have capital. We can give evidence of capability to provide high remuneration while keeping a strong position, and keeping a strong position of capital will give us the opportunity to exploit and capture all the opportunity that will come to the market to further enlarge our business scope and to further have possibility to reward our shareholders. So I'm sure that the market will recognize the work that we are doing, the quality of our results, and we will see the appreciation of our evaluation, that I agree with you, is absolutely underestimated today. Andrea Maffezzoni: On -- Antonio, on the capital moving parts, let's say, in qualitative terms, you have the business evolution. So the net income relevant RWAs growth or anyway, movements that are relevant to produce that P&L. We mentioned that the one-off integration costs that are around -- expected to be around EUR 500 million gross of tax. We mentioned the PPA charge for the next 10 years. The CEO has just mentioned the EUR 500 million for the next 6 years on average, positive contribution from the DTA utilization and then you will have the dividend roughly. So these are the moving parts. Then, of course, it depends on the relevant projections on which we will comment on the 27th of February. Operator: The next question is from Hugo Cruz, KBW. Hugo Moniz Marques Da Cruz: Sorry, I just wanted to follow up because you mentioned the integration charges, but how -- what split should we assume between Mediobanca stand-alone and Monte Paschi stand-alone for those charges? Andrea Maffezzoni: Actually, this is a second level details question. So let us answer on the 27 of February. So I should go too much into detail now to answer this question, so that would be ahead of our business plan presentation, sorry. Operator: The next question is the follow-up from Luis Manuel Grillo Pratas, Autonomous. Luis Pratas: Just a quick follow-up. You mentioned the retention policy at Mediobanca. Can you give us any color on the expected cost of this policy? And like any early evidence that is working, essentially stopping the exit of private bankers? Luigi Lovaglio: As I mentioned, Mediobanca was already put in place some actions of retention. I believe that at the current stage, there are not a significant level of expenses. That's why we count on a broader action in order to retain the talented people that currently is in Mediobanca. That's why I think a component of this cost will be considering among the split that we are going to provide in the business plan. So it's better not to anticipate out of the context that we are going to explain in connection also with the expectation of growing and further potential private banker to join Mediobanca as well. Operator: Mr. Lovaglio, there are no more questions registered at this time. I turn the conference back to you for any closing remarks. Luigi Lovaglio: So thank you very much. I think we fixed this important date that is this investor day that we are going to have on 26 (sic) [ 27 ]. So it will be a pleasure to answer all your question, I apologize, if today, we postponed some answer. But I'm sure you will also appreciate what we are going to disclose because this project that we are going to represent a full business plan to the plan of integration is one of the most attractive projects for the banking sector and opportunity to reward our stakeholders, and you will see that what we are going to present will be fully answering -- responding to this high level of targets we fixed to ourselves. Thank you very much, and see you in 2 weeks from now. Operator: Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.
Operator: Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the MPS Group Fourth Quarter and Full Year 2025 Preliminary Results Presentation. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Luigi Lovaglio, Chief Executive Officer and General Manager. Please go ahead, sir. Luigi Lovaglio: Thank you. Good morning. Thank you for joining us for the presentation of our fourth quarter and full year 2025 financial results. Today is more than a quarterly presentation, it marks a milestone in our history. We are at the gateway to what Monte Paschi Group will become, decisive turning point that sets the direction of the group for the years to come. It is the first time we stand here as Monte Paschi plus Mediobanca, with consolidated results that speaks clearly and proudly about what we are accomplishing together. What truly matters today is that we now have a tangible evidence, not forecasts, not expectation, that Monte Paschi plus Mediobanca combination is grounded in a strong industrial rationale, strategic coherence and the strength to create lasting value for our clients, our people, our shareholder and for the entire economy as a whole. As Monte Paschi, we're presenting another quarter and full year of strong stand-alone results. Our business continues to perform solidly across all dimensions, particularly in fees and commission income, supported by robust commercial dynamics. We are offering one of the highest dividend yields in European banking currently standing at 10%. All these provides a solid foundation on which to build the future of the Monte Paschi Group, a leading competitive force in the banking landscape, thanks to the complementarity of the two platforms, Monte Paschi and Mediobanca, with a diversified, resilient and customer-driven business mix. We are accelerating the integration process with the bank moving towards a specialized [Technical Difficulty] business model that enhances the brand value, capabilities and talents of both organizations with Mediobanca's legal entity focused on corporate investment banking, high-end private banking activities, embracing a very ambitious and deserved path for growth and development. We confirm that our target group structure will be fully aligned with our industrial projects to maximize the value creation at the integration level. We will present our business plan for the combination with Mediobanca on February 27 as we are finalizing the guideline for the group's reorganization. This will allow us to build a powerful, profitable and sustainable business model. Our clients will experience a group that blends proximity with capability, heritage with innovation. As the integration progresses, these benefits will become increasingly visible. Together with Mediobanca, we have the earning power, capital strength and the balance sheet quality to invest in talent retention and development with dedicated program being designed and funded; client service excellence, leveraging combined capabilities as a broader product and service platform; growth initiatives, systematically pursuing customer coverage opportunities; technology investing to support all our businesses; sustained high shareholders' returns supported by strong earnings and capital generation. Turning now to the full year results, which underscore our ability to create sustainable value and deliver strong shareholders' return. Full year 2025 net profit of the new combined group amounted to EUR 3 billion before PPA's net income impact equal to around EUR 300 million. Full year 2025 Monte Paschi stand-alone profit at EUR 2.750 billion, up by 17.7%, higher than last year, excluding the positive net tax in both periods [Technical Difficulty]. Operator: Ladies and gentlemen, please hold the line. The conference will resume shortly. Thank you. Mr. Lovaglio, you can go ahead. Luigi Lovaglio: Okay. Thank you. I'm just recalling the full year 2025 net profit of the new combined group at EUR 3 billion before PPA's net economic impact equal to EUR 300 million. Full year 2025 Monte Paschi stand-alone net profit at EUR 2.750 billion, up by 17.7% year-on-year, excluding the positive net tax in both periods. Results were driven by solid operating performance with resilient revenues sustained by growing fees and the effective management of both operating costs and cost of risk. Net profit in the last quarter reached EUR 1.384 billion, higher by 18.5% compared with the fourth quarter of 2024, excluding positive net tax. Focusing on our stand-alone results, our strong performance is reflected in the net operating profit, which amounted to EUR 1.860 billion in the 12 months, growing by 6.4% year-on-year with resilient revenue sustained by strong plus 8.2% increase in fee income, costs well under control, improved cost of risk. Significant contribution to the results came from the fourth quarter net operating profit that reached EUR 472 million. It was higher by 15.3% [Technical Difficulty] and plus 4.2% quarter on the quarter. Commercial performance remained very strong. Savings, inflows, mortgages and consumer finance all confirm the resilience and the power of our franchise. Regarding asset quality, cost of risk has been reduced to 40 bps from 53 bps in 2024. Gross NPE ratio at 3.5%, lower by 1 percentage point compared to last year. Net NPE ratio at 1.8%. NPE coverage reached 49.3% with an increase of 80 basis points year-on-year. Solid capital position at group level with core Tier 1 ratio at 16.2%, including the impact of Mediobanca transaction, net of dividend to be proposed to the coming Annual General Meeting. The dividend is equal to EUR 0.86 per share for a total amount above EUR 2.6 billion for a dividend yield of 10% at the top of the banking system. And now I would like to give a short update on the combination process with Mediobanca. The combination creates a new strong, powerful player in the banking sector, thanks to the complementarity of the two platforms, leveraging the strength of both Monte Paschi and Mediobanca. The target group structure is confirmed, fully aligned with the industrial rationale of the offer, aiming at maximize the value creation and achieve maximum integration in line with the regulatory requirements related to ECB authorization, with legal entity Mediobanca focused on corporate investment banking and private banking high level. The combination program is progressing at full speed with full involvement and alignment of both teams. Bottom-up analysis confirmed that outside-in estimate of EUR 700 million synergies are there, and I allow myself to say also with a potential upside. As anticipated, we will detail the corporate reorganization business plan and the updated targets at our Capital Market Day on February 27. We now move to the stand-alone results section. For comparability, this P&L and balance sheet figures do not include Mediobanca. Now just an explanation from the stand-alone to the combined group full year '25 net profit. We are describing the main components. The waterfall explain the, as I said, components for the full year '25 group profit reported at the level of EUR 2.7 billion. Monte Paschi's stand-alone pre-tax profit is EUR 1.7 billion, well above guidance. Fourth quarter Mediobanca pre-tax profit at EUR 376 million. With Mediobanca P&L consolidation, we completed the full write-up of off-balance sheet DTAs with the net positive contribution of taxes amounted to EUR 461 million (sic) [ EUR 961 million ] in the full year. With these three elements, we have reached EUR 3 billion net profit of the group. The slide also highlights PPA's economic impacts, including an ECL booking of Mediobanca's performing loans as customary under IFRS. Including these net effects, we have reported group net profit of EUR 2.716 billion. Now let's move on the usually discussed details of Monte Paschi's stand-alone results. As I have already mentioned, full year 2025 net profit of Monte Paschi stand-alone reached EUR 2.750 billion, up by 17.7% year-on-year, net of positive tax effects in both periods. These results were driven by a solid operating performance, thanks to resilient revenue, sustained by strong growth in fees, coupled with effective management of both operating cost and cost of risk. Fourth quarter contribution of EUR 1.384 billion, including positive net tax from DTA write-up following tax consolidation with Mediobanca. Net of that tax effect, Q4 '25 profit is up by 18.5% versus fourth quarter '24, with quarterly dynamics affected by nonoperating costs related to the transaction. Now moving on the next slide. The net operating profit confirms the strength of our underlining engine. Full year 2025 amounted to EUR 1.860 billion, up by 6.4% year-on-year. The net operating profit in the fourth quarter amounted to EUR 472 million, showing an increase of 15.3% compared to last year and 4.2% dynamics quarter-on-quarter, driven by strong fee income, solid base this quarter for a new strategic plan. Now let's move on to gross operating profit. We reached EUR 546 million in this quarter, up by 5.2% year-on-year and 2.8% quarter-on-quarter. Revenues increased by 2.4%, despite the impact of the decreasing interest rate environment, thanks again to strong fees, while costs remain well under control. Full year gross operating profit was EUR 2.189 billion, up by 1%, with the revenues supported by fees and net interest income stabilization. Operating costs are up only by 0.8% despite labor contract renewal. Full year cost/income remained stable at 46%. Commercial momentum remains a clear highlight and lays the foundation for the new business plan. Total commercial savings are EUR 178 billion, up by 6.5% year-on-year. Wealth Management gross inflow are EUR 17 billion, up by 17%. New retail mortgages are EUR 6 billion, up by 81% (sic) [ 83% ] and the new consumer finance are at the level of EUR 1.3 billion, up by 14%. Let's see now net interest income evolution. In the fourth quarter '25, net interest income is EUR 544 million, flat quarter-on-quarter, seeing a stabilization according to the guideline we gave in the last quarter. Full year '25 net interest income was at the level of EUR 2.182 billion, down by 7.4% year-on-year, in line with expectations. Now looking at the volumes, let's start with loans. Net customer loans to retail and small business reached practically EUR 66 billion, increasing by EUR 4 billion or plus 6.2% year-on-year. Growth is driven by strong commercial activity in key strategic segments, with important contribution also in Q4. Total commercial savings reached EUR 178 billion, up by more than EUR 10 billion since December 2024. The Q4 '25 contribution was around EUR 4 billion, again driven by all components. Quickly now about govies. The banking book stands at EUR 9.1 billion. Credit spread sensitivity of the Fair Value to OCI portfolio remains very low. The fair value through P&L decreased slightly quarter-on-quarter, reflecting market-making dynamics. Now let's move on to fees and commission income. Fees continue to be a key driver of our performance. Fourth quarter '25 fees are EUR 401 million, up by 7.4% year-on-year, driven by Wealth Management fees, up by 14.8%. Fee also increased by 4.9% quarter-on-quarter, with both Wealth Management and Commercial Banking contributing by 7% and 2%, respectively. Full year fees are at the level of EUR 1.586 billion, up by 8.2% year-on-year. Wealth Management and Advisory fees are up by 13.3% and Commercial Banking fees are up by 3.5%. Again, this is a confirmation how our network is powerful. Now let's move on to the operating costs, starting with the quarterly evolution. Q4 '25 operating costs are at the level of EUR 474 million, down by 0.6% year-on-year. Non-HR costs fell by 7.8% year-on-year, more than offsetting HR cost pressure from contract renewal and variable remuneration. Quarterly dynamics reflect typical fourth quarter seasonality. Full year operating costs are at the level of EUR 1.885 billion, up only by 0.8% year-on-year. Again, non-HR costs are down by 5.7%, offsetting HR costs up by 4.3%. Now let's move on asset quality. Asset quality continues to improve. Gross NPE stock down to EUR 2.9 billion, gross NPE ratio improved to 3.5% from 4.5% in December '24. Net NPE ratio is at 1.8% from 2.4%. Cost of risk is 57 bps (sic) [ 37 bps ] in Q4 and 40 bps for the full year '25, down from 53 bps in full year '24. NPE coverage is 49.3%, improving by 80 bps year-on-year. Now funding liquidity again is showing the strength of our balance sheet. We have a very solid liquidity position, confirmed also in this quarter with unencumbered counterbalancing capacity above EUR 30 billion, LCR at 168% and NSFR at the level of 133%. Now a quick and simple representation of the Purchase Price Allocation. So we are presenting here the main components. Provisional effects of PPA amount to approximately EUR 3.6 billion, of which EUR 2.5 billion have already been included in the third quarter 2025 results. Goodwill is estimated at the level of EUR 3 billion. The Purchase Price Allocation process will be continued, and it is expected to be finalized by the end of September 2026. Now capital. We have a very strong capital position, and this is confirmed also in this quarter with a common equity Tier 1 ratio fully loaded at the level of 16.2%, including net profit net of dividend proposed already reflecting the preliminary impact of the Mediobanca transaction. The capital ratios are therefore strong, with a large capital buffer compared to regulatory requirements that give us strategic flexibility going forward. The slide shows the main drivers of the quarterly dynamic and the conservative treatment of partial preliminary PPA effects. Now let me spend a few words on Mediobanca fourth quarter results. The fourth quarter, again, is a confirmation of the potential deriving from the combination. Net profit Mediobanca was at the level of EUR 301 million before one-offs and EUR 221 million reported for fair value adjustments and costs related to the OPS. Sound asset-driven business with total financial assets at the level of EUR 115 billion, stable quarter-on-quarter. Revenues are up by 6% quarter-on-quarter with fees rebounding plus 6%, driven by Wealth Management. Cost/income at the level of 47%, including retention action costs, and cost of risk is 55 bps. Core Tier 1 at the level of 16.4%. A dividend per share of EUR 0.63 is proposed to be paid in April. Now let's turn to the combined platform and the industrial rationale. This transaction has a very strong industrial rationale, a combined platform that are not overlapping but genuinely complementary. Monte Paschi brings unique retail and commercial banking franchise. Mediobanca contributes best-in-class capabilities in consumer finance, wealth, investment banking and asset management. Together, we create a structurally profitable and sustainable business model. The operating model is simple and industrially driven. We leverage scale where it matters while preserving specialization and excellence in each business line. In Retail & Consumer Finance, the logic is very clear. By combining Monte Paschi's nationwide reach with Compass' leadership in consumer finance, we built a market-leading platform with superior growth and returns. Wealth Management and Private Banking are a core value driver. Greater scale and stronger digital capabilities allow us to move up the value chain, attract high net worth clients and increased share of wallet. Asset gathering platforms and private banking franchises work together in a fully integrated model. Corporate and Investment Banking is significantly strengthened. We offer clients a solid balance sheet and unique advisory expertise in Italy. And also international through Messier Maris and Arma Partners. Insurance and asset management add stability and diversification. They reduce reliance on traditional banking revenues and improve the overall risk return profile. The result is a well-balanced, resilient growth, diversified across retail, corporate, wealth and insurance and well positioned to deliver sustainable value through the cycle. On pro forma basis, the group has a well-balanced revenue mix. Retail and Commercial Banking around 30%; Consumer finance 19%; asset gathering and management, 21%; 9%, SIB; and 14%, insurance. This is supported by a revenues base around EUR 8 billion. Now about the Combination Program. We are moving at full speed with the combination. Our objective is clear. We want to reach the target operating model by the end of this year, 2026. We have almost completed the design of a comprehensive and disciplined integration plan. It covers all key business functions with dedicated teams, strong leadership and clear accountability. The focus is on efficient execution while ensuring business continuity and minimal disruption. Phase 1 is now completed. We have finalized the diagnostic and the design of the target business model and operating model. We are now entering Phase 2. This phase is fully dedicated to complete the definition of the business target model and the corporate structure. The work done over the last few months give us strong confidence in the delivery of EUR 700 million of envisaged synergies. These synergies are concrete and actionable. We have identified more than 50 granular initiatives across business, cost and funding. The integration plan is almost finalized, fully aligned with the ECB requirement, with clear milestones already set for the coming weeks. Execution so far has been solid. Teams are working constructively. And this is the key message I want to underline. Synergies are not a promise. They are a program with initiative, milestone and accountabilities already in motion. Let me conclude with what really matters. The fundamentals of this group are already very strong. In full year '25, Monte Paschi on a stand-alone basis, delivered a pretax profit of EUR 1.7 billion, well above guidance. This is a result of outstanding commercial performance with strong volume growth, a high single-digit fee growth. And this momentum does not stop here. We expect these trends to continue into 2026, with an acceleration of commercial dynamics and solid growth in fees and commissions. On a pro forma basis, this trend will support a year-on-year increase in group profit before tax. At the same time, we have confirmed the target group structure, a structure fully aligned with industrial rationale of the offer designed to maximize integration and to maximize synergies. Mediobanca's legal entity will be focused on corporate and investment banking and high-end product banking, reinforcing clarity, specialization and value creation. But this is not just about numbers. This is about a new way of doing banking, a group where Mediobanca's client relationship is strengthening Monte Paschi lending engine, where excellent is not the sum of the part, but the multiplier, where client experience the full breadth of our capabilities with simplicity, confidence and trust, where two strong historic brands and franchises stand together as one group, broader, more powerful and more ambitious than ever. This is only the beginning of what Monte Paschi Group will become, a group we are shaping for the benefit of all our stakeholders, a group powered by almost EUR 3 billion in earnings, a robust balance sheet with 16.2% capital strength and by an integration, advancing with discipline, speed and purpose, guided by a clear organization blueprint. This will be fully unveiled on February 27, when we will present the business plan for Monte Paschi and Mediobanca combination. To our employees, our clients and our shareholders, [Foreign Language]. Your commitment, your confidence and your belief in this journey are the forces that make this transformation real. Our fundamentals are strong, our strategy is client-focused, our commitment and our ambitions are very high. Together, we are not simply combining two banks. We are shaping the leading competitive force for Italy, one that creates value, strengthen its talent and stands on solid foundation for our employees, for our clients and for the future. Thank you, and we are ready to take your questions. Operator: [Operator Instructions] The first question is from the conference call in English from Antonio Reale, Bank of America. Antonio Reale: [Technical Difficulty] Operator: Mr. Reale, we cannot hear you. Can you get closer to the receiver, please? Mr. Reale, we cannot hear you. Maybe your line is on mute. Please check your microphone, please. Antonio Reale: [Technical Difficulty] Operator: The next question is from Giovanni Razzoli, Deutsche Bank. Giovanni Razzoli: The first one is on the CET1 ratio. If I'm not mistaken, the 16.2% includes only EUR 40 million of restructuring cost out of a total of EUR 600 million. And so my question is, can you still confirm above 16% CET1 ratio in the coming years when all the restructuring costs will be booked? And another question on the restructuring cost is relating to the phasing of those costs in the coming years. How does this phasing of restructuring cost aligns with the proposal of dividend per share of EUR 0.86, which I presume represent a starting point for the plan? So in other words, how can you expect to confirm, if any, this EUR 0.86 of dividend in the coming years when you are likely recorded restructuring cost? I understand that this is a kind of anticipation to the business plan, but if you can help us understanding how this square with the overall picture of this CET1 and dividend. Andrea Maffezzoni: On your questions, actually, the integration cost, based on the latest estimates, are expected to be for the next year is around still EUR 500 million gross. So the net amount is around EUR 350 million. So if you even factored them in the capital ratio, would still be around 16%. Then you have to take into consideration that the booking of the integration cost is strictly related to the announcement of the plan projections, so on the plan targets and initiatives. So this is why will happen for the bulk in 2026. For your last question on capital projections, state what I said on the impact of integration costs per se, I would, let's say, postpone the answer to when we present the business plan, which is, I would say, let me anticipate that this is -- this statement is valid for most of the forward-looking questions that we will tackle when we present the business plan on the 27th of February. Operator: The next question is from Luis Manuel Grillo Pratas, Autonomous. Luis Pratas: You comment on the presentation that you want the full integration of the two banks. I wanted to ask you, what is the ideal corporate structure for you? Is it a scenario where you delist Mediobanca, owning 100%, but then you spinoff a specialized entity for CIB and private banking? I'm asking this because for weeks, there has been a lot of speculation on the press about alternative routes such as refloating Mediobanca, keeping it listed. So any color here would be very much appreciated. And then I wanted to ask you about the NII in Q4 stand-alone. It came flat, whereas peers showed already some growth in Q4 '25. If I look at individual drivers, loan volumes came 1% higher Q-on-Q. The customer spread also expanded a few basis points to 2.8%. So I wanted to understand the flattish Q4 figure, if there were like any one-offs there and whether you could provide any guidance for NII in 2026 stand-alone, please? Luigi Lovaglio: Okay. Thank you. Thank you for the question. I think Andrea make preliminary statement that clearly, most of the information regarding key elements, P&L and projection will be provided in 15 days with the presentation of the business plan. Having said that, I can just really confirm that we are focused regarding the structure and reorganization, we are focused on value creation. And in order to do it, we need to maximize the level of industrial synergies to be achieved. That's why we are confirming that the organization of the group should respond to this objective. The guideline will be finalized together with Mediobanca in the coming weeks, with the aim of reaching the final approval of the integration industrial plan by February 26. So I believe as -- no decisions will be taken at the Board yet. I really ask to be patient and to wait for the presentation of the business plan in the next 15 days. About net interest income, I will ask Andrea. Andrea Maffezzoni: Yes, about net interest income. As mentioned also in our previous calls, starting from Q4, has actually happened, we expect a stabilization and then a pickup -- a slight pickup in the next few quarters in 2026. In the fourth quarter '25, yes, we have some benefits on wholesale cost of funding. And also on commercial NII, there are actually, yes, some accounting one-off impacts that led to the stable NII. But let's say, the trend is expected to be a stable/positive one in '26. Luis Pratas: Can I just do a very quick follow-up? So in the scenario where you delist Mediobanca via major bank corporation, I would like to ask how the buyout price, the exchange ratio is defined? Do you need to pay the same exchange ratio that you paid during the offer, so 2.533? Or can it be a different price, for instance, considering where Mediobanca trades compared to the offer? Luigi Lovaglio: Whatever I'm saying will be price sensitive. So I think it's better if we postpone the right timing. Sorry for that. Operator: The next question is from Noemi Peruch, Morgan Stanley. Noemi Peruch: The first one is on tax rate. Which tax rate would you expect for 2026 for the group? And then if you could please update us on the trends of private bankers year-to-date, whether the exits have stopped or not? My third question is on the payment of an interim dividend in 2026. If you can share your thoughts on this? Luigi Lovaglio: Okay. Take the answer, right. Okay. Tax rate will be around 30% -- 29%, 30%, I believe, clearly in line with what we planned originally in our projection for the OPS. Then I think regarding Mediobanca private bankers, right? I believe that some necessary actions have already been taken to retain talented bankers, that I believe are crucial for the business origination and growth. I know the new effort will be put in place in order to be even more effective. Honestly, we believe that the situation is something that we can consider absolutely under control. And I'm sure that the top management of Mediobanca will ensure prompt action in order even to invert this kind of trend. So as far as dividend, I believe, as Andrea was mentioning, it's better if we disclose all the necessary information in the next presentation of the business plan 2 weeks from now. Operator: The next question is from Hugo Cruz, KBW. Hugo Moniz Marques Da Cruz: I have a few questions. So the PPA, the full process will be completed by September. Should we expect any further impact on capital from finalizing this process? Perhaps it's something you can answer without kind of going into the business plan. And then ideally, if you could give guidance on PPA charge for future years, the annual recurring charge? But so that's one question. Second question, MREL. Can you confirm if the plan is still to keep the combined entity as a single point of entry? And the third question on ECB funding, you're still 7% of liabilities. Can you remind us of the cost of this funding and if you can replace it with cheaper funding? Andrea Maffezzoni: So thank you for your questions. So on the first question, what actually remains to be done with regard to the PPA is mainly related to the valuation of intangibles like brands, customer relationships, et cetera. So we would not expect any material impact on capital. The relevant things to be assessed were done end of this year. As regards the PPA charge going forward, then it depends on the amortization schedule of the different asset liabilities. But let's say, on average, you can assume around EUR 100 million per year for an average 10 years, then it will depend on the actual amortization of the different items. As regards the question on MREL, yes, we definitely still plan, stated that formally the decision is not on us, is on the SRB, but anyway that the group will be managed via a single point of entry approach, and this is also relevant for funding synergies. So definitely, this is still an objective. Finally, the ECB funding, yes, I mean, as we further accelerate on our commercial deposits, yes, we will be able to replace the remaining ECB funding potential with cheaper cost of fund. Operator: Next question is from Andrea Lisi, Equita. Andrea Lisi: The first one is on fees, particularly on wealth management fees that made really well in the last quarter. Just to understand and for comparison of the contribution of performance fees in the fourth quarter '25 and in the fourth quarter '24. Then I want to ask you if clearly, I mean, that this will be said clearly that in the plan but if the target of EUR 700 million synergies would be realized also without a delisting of Mediobanca? And in case of full integration of Mediobanca with Monte, that's just from a regulatory standpoint and time frame, can you identify or clarify which are clearly the steps and the time frame to arrive at the full integration? Andrea Maffezzoni: Maybe let me before letting the CEO comment on the commercial performance in wealth management fees, maybe just make a quick preamble that I think is relevant for the interpretation of our performance that was particularly good on fees. I would refer you to Slide 39. So it is in annex of our presentation where you see the recast of Mediobanca P&L on the basis of Monte Paschi reclassified P&L. This is relevant because if you compare the fee number, you can see that the number under our classification is lower than the one that you will find in the Mediobanca presentation because there are some reclassification to other items like cost, for example. So this is relevant for your future projections and also to compare with your previous target. So this is the first point. Second point, you have to take into consideration is instead when you consolidate, then part of the banking fees of Monte Paschi, so which are the upfront fees that we get on Compass -- on the distribution of Compass products, which is, say, around EUR 10 million this quarter, slightly less, these are elated because these are accrued in the future years. So you have to take into consideration these two items to better interpret the fee performance that is much better compared to whether you simply add the two -- the fees of the presentation of Monte Paschi stand-alone and Mediobanca stand-alone as it was shown yesterday. So you have to refer to our Slide 39 to interpret the future. So sorry for the long preamble, but I think it's relevant for your future projections, but also to interpret our quarterly results. And then I'll let the CEO comment on the commercial performance. Luigi Lovaglio: Okay. Let's start from the key information that we are providing with these results. So as we said, 1/3 of total revenues are coming from asset gathering. That's why it's quite important for us to exploit the potential of full synergies that we can come from the combination of Mediobanca plus Monte Paschi. Now having said that, clearly, on the side of private banking, high level, this kind of activity will be clearly concentrated the focused in Mediobanca legal entity with the strong brands that they have, with the strong professional people there and the long-lasting experience and the position that they have on in the market. If I remember well, recently, they got also a special reward and the money as the best private banker activity in Italy, right? So this is, again, a plus that we believe can further be developed by sharing their know-how also to the bulk of customer -- of private banking customer we have in Monte Paschi. Having said that, it's clearly that as we were seeing in the documents of our public offer, it's clear that you will extract maximum level of synergies by optimizing the full integration. But anyway, also without a full integration, we can get synergies. It's clear that the goal is to generate the maximum level of synergies and value for our stakeholder. That's why we are in the process to finalize the best structure that can fit with this goal, and we provide to the market a complete set of information during the business plan presentation. Operator: The next question is from Antonio Reale, Bank of America. Antonio Reale: I'm going to try again. Sorry about earlier. It's Antonio from Bank of America. Two questions from my side. Some of them have been addressed already, but I'm going to ask you a market question. Ex dividend, Monte Paschi is trading now on EUR 8 on my screen. And I think you said not long ago on previous occasions that you think the shares are undervalued. Now I think you still believe that, and that probably makes two of us. My question is how can you convince the market that it's wrong on Monte dei Paschi? What do you think the market is getting wrong? That's my first question. My second one is, can you help us frame the moving parts from here on sort of what's affecting your capital going forward, both positively and negatively? I know you've talked about PPAs, but sort of DTAs restructuring charge. Trying to get a sense of the magnitude of your excess capital here. You might have already answered this, but sort of is staying above 16% a target also in the outer years? Luigi Lovaglio: I think what is important and normally is what we're trying to do is to convince the market with the results. We are keeping deliver sustainable, continuously growing results in what is the part that is showing the sustainability of these results is the fees and commission. We are one of the most powerful network in Italy. And this is proven by this capability to keeping growing high-quality streams of revenues that are presented by wealth management product and fees related to this kind of business. We are a bank that is providing -- the group will be capable to provide one of the highest dividend yield. We have a strong position of capital, thanks also, as we were mentioning, the write-up of DTAs, we can count on additional support to the core Tier 1 of around EUR 500 million per year for the next 6 years. So we have capital. We can give evidence of capability to provide high remuneration while keeping a strong position, and keeping a strong position of capital will give us the opportunity to exploit and capture all the opportunity that will come to the market to further enlarge our business scope and to further have possibility to reward our shareholders. So I'm sure that the market will recognize the work that we are doing, the quality of our results, and we will see the appreciation of our evaluation, that I agree with you, is absolutely underestimated today. Andrea Maffezzoni: On -- Antonio, on the capital moving parts, let's say, in qualitative terms, you have the business evolution. So the net income relevant RWAs growth or anyway, movements that are relevant to produce that P&L. We mentioned that the one-off integration costs that are around -- expected to be around EUR 500 million gross of tax. We mentioned the PPA charge for the next 10 years. The CEO has just mentioned the EUR 500 million for the next 6 years on average, positive contribution from the DTA utilization and then you will have the dividend roughly. So these are the moving parts. Then, of course, it depends on the relevant projections on which we will comment on the 27th of February. Operator: The next question is from Hugo Cruz, KBW. Hugo Moniz Marques Da Cruz: Sorry, I just wanted to follow up because you mentioned the integration charges, but how -- what split should we assume between Mediobanca stand-alone and Monte Paschi stand-alone for those charges? Andrea Maffezzoni: Actually, this is a second level details question. So let us answer on the 27 of February. So I should go too much into detail now to answer this question, so that would be ahead of our business plan presentation, sorry. Operator: The next question is the follow-up from Luis Manuel Grillo Pratas, Autonomous. Luis Pratas: Just a quick follow-up. You mentioned the retention policy at Mediobanca. Can you give us any color on the expected cost of this policy? And like any early evidence that is working, essentially stopping the exit of private bankers? Luigi Lovaglio: As I mentioned, Mediobanca was already put in place some actions of retention. I believe that at the current stage, there are not a significant level of expenses. That's why we count on a broader action in order to retain the talented people that currently is in Mediobanca. That's why I think a component of this cost will be considering among the split that we are going to provide in the business plan. So it's better not to anticipate out of the context that we are going to explain in connection also with the expectation of growing and further potential private banker to join Mediobanca as well. Operator: Mr. Lovaglio, there are no more questions registered at this time. I turn the conference back to you for any closing remarks. Luigi Lovaglio: So thank you very much. I think we fixed this important date that is this investor day that we are going to have on 26 (sic) [ 27 ]. So it will be a pleasure to answer all your question, I apologize, if today, we postponed some answer. But I'm sure you will also appreciate what we are going to disclose because this project that we are going to represent a full business plan to the plan of integration is one of the most attractive projects for the banking sector and opportunity to reward our stakeholders, and you will see that what we are going to present will be fully answering -- responding to this high level of targets we fixed to ourselves. Thank you very much, and see you in 2 weeks from now. Operator: Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.
Ulrika Hallengren: Welcome to the presentation of Wihlborgs' Full Year Report 2025. Another year comes to an end, and we can conclude that despite limited support from the economic climate and with the rental market that has remained a bit slow and cautious, we have once again delivered growth across almost all key metrics. Vacancy has also increased slightly, but we have higher rental values, higher rental income, higher operating surplus, higher income from property management and property values have all strengthened once again. This marks 20 consecutive years of growth, a track record we are fully committed to continuing. And I claim that our region has never been more positively perceived than it is today, which makes me generally excited about the years to come. Let's go to our report. We start with a summary of the last quarter, October to December. Rental income up 5%, a new record at SEK 1.111 billion, income from property management, plus 23% and excluding revaluation from joint venture, plus 8%. Net letting positive at SEK 12 million, net debt to EBITDA at 10.4x. We have good access to financing. And as I said many times before, but this still stands. Demand remains for good quality and good locations, and our tenants are willing to pay for that. And we are proud to be able to continue with a project investment that gives continued good potential for growth. The Board proposes a dividend of SEK 3.30 per share. Looking at the full year '25, rental income up to SEK 4.354 billion, plus 4%. The operating surplus increased also with 4% to SEK 3.107 billion and income from property management increased by 14% to SEK 2.038 billion or 11%, excluding joint venture revaluations. The result for the period amounts to SEK 2.220 billion, corresponding to SEK 7.22 per share, and EPRA NRV has increased by 10% to SEK 99.36 per share adjusted for paid dividend. A comparison of rental income full year '25 and '24. Indexation gives plus SEK 41 million; acquisition, plus SEK 132 million; currency effect, minus SEK 33 million; additional charges, plus SEK 37 million; and completed projects, new leases and renegotiation, plus SEK 3 million. And here is included higher vacancy as well as higher property tax of approximately SEK 20 million, plus SEK 53 million from new projects and plus SEK 20 million from new leases in the existing portfolio. And the net letting is positive again, plus SEK 12 million in the quarter, plus SEK 77 million for the full year and, in total, new leases at a yearly value of SEK 399 million signed for the year. For the last -- for being a last quarter, the volume of new leases of SEK 92 million is good and a large amount to have lease commencement during first half of '26 or in the fall for Skrovet 6 in Malmo. 43 quarters in a row with positive net letting, but let's not take anything for granted. The quarter is a short period, but looking over time, I'm very proud of how we have found good opportunities over the past years. Here are some of the tenants that we have signed during Q4, a combination of headquarters, defense development, industrial and governmental tenants as examples, new tenants, expanding tenants, but also Ericsson with no change in areas and thereby not included in the net letting, but still very important for us. Six additional years, a bit higher rent and a small investment for improvements in the property, approximately SEK 1,650 per square meter. Here, we have the net letting in a historical perspective, lettings in green terminations in light blue and dark blue stacks are the net letting. We don't win every lease opportunity, which is annoying, but we think the hit rate is quite okay. And the list of our 10 largest tenants in alphabetic order, strong customers, and they contribute with 20% of our rental income. 7 out of 10 are governmental tenants and the public sector contributes with 22% of total rental income. Rental value as of 1st of January '26 is SEK 4.990 billion per year, plus 7.4%; and rental income, SEK 4.405 billion, plus 6%. Strong figures, and this is an effect from acquisitions, indexations, investments and tenants willing to pay for the right quality. Looking at like-for-like figures, all the properties we owned a year ago, excluding projects compared with updated figures, we can see that rental value is up 2% and rental income is up 0.8%. It's good with the growth also in the like-for-like stock, but to get the growth, we aim for acquisitions and investments will continue to be important, especially in times of higher vacancy. The growth in rental value is supported by indexation of 0.9% in Sweden and approximately 2% in Denmark taking effect this year. Changes in market value of our properties, we started the year with SEK 59.168 billion accordance with the external valuation of 100% of our portfolio. We have made acquisitions, which add on SEK 2.604 billion; investment, SEK 2.738 billion; divestment, minus SEK 156 million; changes in valuation, plus SEK 859 million; and together with currency translations of minus SEK 799 million, that summarized to a value of SEK 64.414 billion. Our external appraisers, one in Sweden and one in Denmark, they value 100% of the portfolio as of year-end, no cherry picking. A bit higher valuation yields for Swedish offices market and a touch lower for industrial. The growth come mainly from investments and new leases. Here's the long-term trend for our portfolio growth from SEK 7 billion to SEK 64 billion in 20 years and growth every year without taking in any new equity from our shareholders. And these figures shows the running yield that shows how we actually perform in relation to the valuation. So not valuation yield. For the whole portfolio, the occupancy rate is 90%, excluding projects and land and with an operating surplus of SEK 3.304 billion, that gives a running yield of 5.5%. In the project volume, now Blackhornet is included with a quite high volume of new areas, but not completed yet. Fully let, the portfolio would give a running yield of 6.3%. Good earnings capacity in relation to the value of the portfolio and good cash flow generation is the foundation also ahead. Compared to a year ago, the occupancy rate is down 0.3 percentage points, but we see areas which have improved, offices in Helsingborg, for example. And everything points in the direction that rental income will improve further during the year. In the office portfolio, the market value is SEK 50.401 billion with an occupancy rate of 91%. 91% in Malmo, improved to 90% in Helsingborg, 90% in Lund and 91% in Copenhagen. The operating surplus from offices summarized to SEK 2.731 billion and running yield of 5.4%, 6.2% fully let. And the demand for logistics and production continues to be good in Malmo, especially with an occupancy of 94% for us, lower occupancy in Helsingborg at 83%, 91% in Lund with a small portfolio and 96% in Copenhagen. 86% (sic) [ 88% ] occupancy rate as a whole with a running yield of 6.2%, a total value of SEK 9.181 billion. And as mentioned before, we continue to see harder competition in the third-party Logistics segment with quick changes in need, and that also means that occupancy can improve quickly when market has new needs. As mentioned before, I assume that vacancy in the southern parts of Helsingborg will be a bit sticky since the area will go through a makeover and that will take a number of years. But once again, let's remember that even if the vacancy is high, the running yield of 6.3% is decent, especially in location where the market as such continues to be interesting. The development of our total portfolio's running yield, 5.5% brings stability, not least since the portfolio overall has a high quality and good location. And as noted before, a good increase of the running yield since 2021. And some follow-up on the sustainability metrics. This is some of our overall goals for 2025. We managed to reach over 90% certification in the office portfolio in Sweden, a bit ahead, and we have continued with the rest of the portfolio. Evaluation of suppliers have not reached the 100% goal since there are always a few on the way in, but we will continue to improve. Carbon dioxide emissions from Scope 1 and 2 now at 0.93 kilograms per square meters and energy use 76 kilowatt hours per square meters below the target of 85. New goals have been set for 2026 and forward, more on that topic in the next report. But also some sustainability highlights from Q4 '25. Our project at Vatet 1 in Lund for our tenant, Arm, is the first project to be certified according to an updated manual Miljobyggnad 4.0 Renovation and reached the highest level goals. And let's remember that every upgrade of the manual makes it more difficult to be certified. The demands increase for every update. In Malmo, we have installed charging infrastructure for heavy-duty traffic for one of our tenants, and we continue with our energy efficiency improvements. And yes, you can find The Janne Solution among them. So minus 50% at energy use at Syret3, minus 27% at Cylindern in Helsingborg; and minus 10% at Kranen 8 in Malmo, as examples. A catalog of our value and properties in our 4 cities in '25. 39% of the value in Malmo, 23% in Helsingborg, 17% in Lund and 21% in Copenhagen. The region and especially these 4 cities continue to be of high interest for future growth, both regarding population growth, which will be a challenge in many places and regarding the number of workplaces, which is important for us, supported by Danish infrastructure and a young and well-educated population in Sweden. And time for financials. Over to you, Arvid. Arvid Liepe: Thank you very much, Ulrika, and good morning, everyone. Looking at the Q4 income statement. As Ulrika mentioned, rental income during the quarter amounted to SEK 1.111 billion, up 5% and actually a record figure for a single quarter when it comes to rental income. Operating surplus was up 3% to SEK 773 million. And income from property management was actually also a record for a single quarter at SEK 556 million. However, as Ulrika mentioned, that number was affected by a positive revaluation within one of our JVs of SEK 68 million. So the growth of 23% in income from property management, excluding the JV revaluation was plus 8%, which, in my opinion, is also actually quite a good figure. We had positive value changes in the quarter of SEK 444 million and in total, a profit for the period of SEK 850 million. On the next slide, you have the balance sheet as of year-end 2025. Property value of SEK 64.4 billion, up SEK 5.2 billion versus 12 months previously. Equity stood at SEK 24.3 billion, up SEK 1.2 billion versus the year previously, despite paying almost SEK 1 billion in dividend during 2025. And borrowings increased by SEK 3.2 billion to SEK 33.2 billion in total. Looking at some key figures relating to the balance sheet and the P&L. The equity assets ratio stands at 36.9%, slightly down versus the previous year, and the LTV stands at 51.6%. I think you should bear in mind, though, looking at those 2 numbers that during 2025, we invested more than we have ever done in projects, SEK 2.7 billion. And we also actually concluded the largest single acquisition that we've ever done with a property value of SEK 2.4 billion. That is, of course, a way for us to continue to build for growth. And bearing that in mind, we are quite comfortable with those financial metrics. We're also happy to see that the interest cover ratio is now gradually strengthening and stands at a good 2.9x. The EPRA NRV as of year-end is at SEK 99.36 per share, up 10% adjusted for the paid dividend during the year. The historic development of the EPRA NRV, you can see on this slide. And in the long-term perspective, since 2009, the annual average growth in EPRA NRV actually is at 15% adjusted for paid dividends. On the next slide, you can see the long-term development of the financial metrics, equity ratio, LTV as well as interest cover ratio. And as I stated before, in relation to the targets we've set for ourselves, we are at comfortable levels. And particularly, I would like to stress that the interest cover ratio is improving and at 2.9x. That is a good reflection of our ability to generate a good cash flow. On the next slide, the earnings relative to borrowings or net debt to EBITDA now stands at 10.4x. We are comfortable with the ratio. It has gone up slightly during the year, basically due to, as I've stated before, high investments and debt financing of the acquisition made during 2025. On the next slide, you can see the sources of financing, total borrowings of SEK 33.2 billion. Half of it comes from bilateral bank agreements with Nordic banks, 33% from the Danish real mortgage system and 17% from the bond market. Nordic banks are still very much willing to lend and the terms are probably unchanged over the past few months, but access to financing from the banking system, I would say, is good. The bond market is also both active and attractive. We have, over the past few weeks, issued a 3-year bond under our own MTN program at a margin of 98 basis points and a 4-year bond at a margin of 117 basis points. And for us, those are competitive levels. Looking at the structure of our loan portfolio, you can see the details on this slide. The average interest rate stands at 3.25%. That becomes 3.29% if you include costs for unutilized credit facilities. With STIBOR at basically 2.0 and a margin of -- an average margin in our loan portfolio of a touch above 100 basis points, you could see that the loan portfolio is pretty much -- we're paying what the current market rate actually is or pretty close to it. We have an average fixed interest period of 2.7 years and an average loan maturity of 4.7 years in the loan portfolio as of year-end 2025. And on the next slide, you can see the historic development over the past 5 years of the fixed interest period and the loan maturity and there are no dramatic changes in the development of those numbers over the past few quarters. Lastly, on the number crunching slides, we can look at available funds, that is unutilized credit facilities plus liquid funds as of year-end, which stands at SEK 3.2 billion. And that gives us a good flexibility to seize potential opportunities in the market. And you can also put into perspective, the SEK 3.2 billion is that we have bond maturities in Q1 of approximately SEK 1.2 billion, but we've also issued bonds amounting to approximately SEK 1 billion since year-end. So with that, I'll hand the word back to you, Ulrika. Ulrika Hallengren: Thank you. And I'll give you an update on our investments in progress and a quick overview of our largest project. During '25, we have invested SEK 2.738 billion. It's still a record, and it remains SEK 2.144 billion to invest in approved projects, highest investment level ever in our history, and this makes us prepared for coming years. A reasonable yield on cost with 6% or a bit over 6% for new build offices and 7% or a bit above that for industrial and a good mix of refurbishment and new build in the portfolio. In Copenhagen, we are about to complete our project at Ejby Industrivej 41 for Per Aarsleff. In the beginning, we planned this project for a multi-tenant transformation, but with a 15-year lease with Per Aarsleff, it has been turned into a single-tenant building. 24,000 square meters, investment SEK 231 million and a yield on cost a bit above 6%. Completion now in Q1 '26. The large project of Amphitrite 1 in Malmo, for Malmo University is running well in accordance with plan. A bit above 20,000 square meters for Malmo University in a 10-year lease, investment SEK 1.130 billion and completion is planned to late Q4 '27. In Malmo, in Hyllie, we continue with Blackhornet 1 VISTA. SEK 884 million investment, the mobility hub has already been completed since a year ago, and the offices will be completed from now and during 2026. Yield on cost, 6.2% and approximately 40% pre-let. The attractiveness of the product shows clearly now when tenants are starting to move in, and we work hard at the coming leases. From 1st of January, the total areas in the building are included in Malmo offices as classified as projects since the areas are not ready for moving in yet. Still too much raw concrete, but completion is ongoing. Last Friday, we opened Borshuset 1 in Malmo after a large refurbishment. It's an almost iconic building right beside the train station, 6,000 square meters offices, restaurant and co-working and top rents in the Malmo perspective. Completion now in Q1 '26 and moving in will continue during '26. Pre-let, 95%. At Kranen 7 in Malmo, we will invest approximately SEK 136 million in a preschool for the municipality, 2,900 square meters zoning plan approved and completion is expected to Q3 '27. Public procurement acts for the contractor is ongoing. And at Skrovet 6 in Malmo, we refurbished 11,000 square meters, 50% pre-let to Cloetta and Media Evolution with completion start in Q3 '26. So a quick refurbishment. Investment, SEK 149 million for a total technical shift in the building and a quick change from the quite closed building, which was the result from the SAAB, the former tenant, and now open up to be a new entrant to the whole Dockan area. In Lund, we are building a new modern office right beside the Central Station, Posthornet 1, phase 2. 10,100 square meters, yield on cost, 6.5% and completion starts in Q2 '26. Pre-let, 70%, a very successful project. In the southern part of Lund, we continue the development of Tomaten. This project is for BPC, completion in Q2 '26 and investment SEK 79 million, 3,600 square meters and the yield on cost 7%. And next to that, at former Stora Raby 32:22, now named as Surkalen 1. We have been able to improve since the project started. Tenants will be both Note and Lund University. So well-used land area and long leases in total. 14,500 square meters completion in Q2 and Q4 '26. investment SEK 260 million and yield on cost 9.2%. In Horsholm, Copenhagen, we have invested for a new school for NGG. 25 years lease, 11,600 square meters and investment SEK 390 million. Completion now in January. And at Girostroget in Hoje Taastrup, refurbishment for Novo continues. 62,000 square meters, our investment is limited to SEK 423 million and completion is expected now in Q1 '26, but Novo pays rent also during refurbishment period. That was some of the ongoing projects and just a touch of possible future projects. There are 4 possible projects in the Nyhamnen area in Malmo. We own the land for Kranen 15, Slagthuset and Polstjarnan 1 and 2. Zoning plan are ongoing, and we actually see some progress. And some more possibilities in Malmo, both the industrial at Spannbucklan, for example, housing at Kranen 5 and offices at Naboland, zoning plan approved for Spannbucklan and Naboland. In Lund, we continue the work in southern part at Hasslanda, where we bought Brysselkalen '25 -- we bought it 2025 from Granitor, approximately 50,000 square meters gross floor area. And at the Ideon area, we can continue with projects both at Ideontorget and Delta 2, and we also have more building rights at the eastern side of the highway. At Vasterbro in the western part of Lund, it will be mostly housing and one way for us is to use these building rights as a trade for other possibilities. And in Helsingborg, we can add on areas for offices at Polisen and several industrial and logistic possibilities, both as fill-in and stand-alone projects for us to be ready for different kind of times and tenants, and I think we have very good opportunities. So let's summarize Q4 once again, rental income up 5% income from property management, plus 23% and excluding revaluation from joint venture, plus 8%. Net letting positive at SEK 12 million, net debt to EBITDA at 10.4x. So we see continuously good access to financing, and the Board proposes a dividend of SEK 3.30 per share. And it goes without saying, we will continue with our focus on cash earnings and our future growth. With that, we are open for questions. Operator: [Operator Instructions] The next question comes from Erik Granstrom from DNB Carnegie. Erik Granström: I had a few questions following the report. I'm wondering if you could perhaps talk a little bit about your outlook for the rental market in 2026, how it's started so far? And where do you see vacancy rates moving, given what you know in terms of project completions and so on? Ulrika Hallengren: Erik, I think the year started quite slow. January was not too exciting. But after that, things have started moving on and good discussions are ongoing. And we have quite strong rental income growth from already signed leases coming in during 2026. So I think there's many -- quite many positive signals ahead, but it took some weeks in the early year before things started to move along. As said many times before, high quality is in very -- in everybody's focus, and we have that in our portfolio. So confident about the future. But a little help from economic growth, of course, looking forward to see that. Would you continue? Arvid Liepe: No, I just want to comment also on that tenants are willing to pay for quality and location. And it is not a new trend in this quarter. We've seen it over the past few years. But we continue to see that there is a willingness to pay for good location and good quality in the premises. And you can see that also in that the top market rents in our markets are increasing, not dramatically, but a little bit. Erik Granström: Okay. And given the project completions that you have now in the first half of '26, do you think that those will improve the overall vacancy or vice versa? I'm thinking about the fact that Blackhornet will be completed in Q2 and carries a little bit higher vacancy than the rest of the project portfolio to be completed. Ulrika Hallengren: Yes. So from now, from this report, Blackhornet is -- the areas are included in the project volume. So they are completed into a very raw standard. So that can, of course, affect the figures, but the rental income will continue to increase. And you never know what happens ahead. I mean it's -- our main focus is to have a good growth in the cash flow. And of course, I'm very happy of how we have been able to be quick on the changes for Skrovet 6, for example. We will have 10 months of vacant 100%. But after that, we have signed leases and they move in from 50%. So 10 months for total refurbishment, and we have done this kind of quite quick shift in quite high volumes in the last years. So that is a good thing. And I also think that Blackhornet now when they're moving in have started, and you can see the quality in the areas. That will continue to help the new leases come in place in that area as well. Arvid Liepe: But I think -- if I may add something. Looking at occupancy, Q4 versus Q3, it was down by, I think it was 0.2%. So if we go into decimals, so a slight decrease, but nothing dramatic. Given our projects being completed and given the rental agreements that we've signed, it's fair to assume that, that would have a positive effect on occupancy during the coming few quarters. On the negative side, you have when Blackhornet is completed, that is -- there's still too high vacancy for our liking in that property, of course. But -- and exactly the timing of those effects over the coming couple of few quarters is a bit tricky to say. But I think the net effect should not be significant, but we see a potential for a slight improvement in the occupancy rate. Erik Granström: Okay. And then perhaps switching over to investment opportunities for 2026. You mentioned, and we can see that in the numbers, SEK 2.7 billion invested in projects and the portfolio. What's your outlook for 2026? Because if I look at what's left to be invested in your project portfolio, it stands at around SEK 2 billion now, and it was about SEK 3 billion a year ago. So I was just wondering how you view the pace in terms of investments and the amount for 2026, if you can give us some color on what you're planning? Ulrika Hallengren: 2026 will not be a new record year, is my estimate, but we will continue with a good pace also during '26. I can't give an exact figure, but around -- not as high as 2025. But of course, we are always looking for new investment possibilities. And exactly when the timing is right for that. We have the portfolio, so that's good. I think we have good preparation, both for offices and industrial, not at least. Lund is very interesting. Maybe we will see something more in Landskrona adding on to this, and also industrial in Malmo is interesting. So we have things going on for the 2027 as well. But for -- at the moment, the building for Amphitrite for Malmo University will be our largest project, of course. And that will go on until end '27. Erik Granström: Okay. And then my final question regards the property valuations in Q4 and for the full year, you mentioned that 100% is externally evaluated. Could you say something about what -- in terms of CPI and indexation, what is assumed for 2027? The effect on '26 is already known, but what's now assumed for '27 and on? And also in terms of valuation yields, I do know that you do not report that, but you mentioned some changes. But overall, what -- do you see any major shift in yield requirements in '25 versus '24? Arvid Liepe: We commented on the slight changes in the valuation yields. And as usual, we will not give exact figures for the full portfolio with the same logic that we've had before that it's one aspect out of many to be judged in combination of many different assumptions. Regarding the CPI assumptions in the valuations for 2027 and onwards, the assumption is 2%. But again, I would like to stress that you cannot look at 1 or even 2 parameters alone in the assumptions in the property valuations. You have to look at all the variables in order to be able to make up your mind if something is reasonable or not. And we are comfortable that our external appraisers are doing a reasonable judgment when it comes to the balance between different parameters in the model. Operator: The next question comes from Oscar Lindquist from ABG Sundal Collier. Oscar Lindquist: Yes. So a couple of questions from me. You mentioned on new lettings that you expect some contribution from Q2, Q3 this year. I was wondering on terminations, is there anything you can highlight here? Did you have any larger terminations? And what could we expect in terms of impact in the coming quarters? Ulrika Hallengren: We have -- I mean the largest termination we had, SAAB, as we have reported on before, that was from now on from 1st of January this year. We have a few terminations that starts, I think, 1st of January '27, but they are quite -- I mean for the total volume, it's SEK 12 million and SEK 12 million, something like that. So not as large as SAAB were. And I mean we also have a year to work with that, especially in the industrial portfolio, we have good potentials to find new solutions for that. So not at any larger expense, I would say. Oscar Lindquist: Okay. And I also believe that WSP has signed a lease with Vasakronan in Malmo. Has that termination come through in your numbers this quarter? Or is it expected in Q1? Or can you say anything about that? Ulrika Hallengren: No. We have that message in December. So that is part of report for 2025. And they are one of the tenants that will move. Arvid Liepe: I believe that contract will be terminated in Q2 or something. So it's not the full -- they will not pay rent for the full year 2026. Ulrika Hallengren: Okay. So a bit earlier then. I think that is one of the lease. Oscar Lindquist: Yes. And then you have -- on financials, you have SEK 2 billion in swaps maturing in '26 average rate of 1.53%. You say that -- or you mentioned that you're currently paying around market terms. What sort of effect could we expect from swaps maturing and net of new financing? Arvid Liepe: Those swaps expiring in 2026, I would expect that we have -- I mean it will have a slight negative effect on the average interest rate for the group. But we actually, of those swaps have examples of swaps being both in the money and out of the money. So the effect, it's not that all those swaps are on extremely attractive levels. But it will have a slight negative effect on the average interest rate. And at the same time, we still have both bonds and we have bank agreements where the margin we're paying is slightly above where the market is currently. So I don't expect the net effect on the group's average interest cost -- the effect will not be very large. Operator: The next question comes from Lars Norrby from SEB. Lars Norrby: Talking about expansion and record CapEx in '25. And as far as I understand it, you're not expecting the same kind of level in '26, not fully SEK 2.7 billion. Now how about acquisitions? I think you did some net SEK 2.5 billion in '25. In '26, can you handle the same kind of volume with your existing balance sheet if something comes up? And are you looking at something of any size at the moment? Arvid Liepe: If I start with the financial capacity, I think that, as I mentioned, our access to liquidity, we feel is good, and we're comfortable with the financial metrics of the LTV, the equity ratio, the net debt to EBITDA that we have. As stated before, if an attractive acquisition opportunity of -- well, significantly large would come up, we have the tool or the mandate from the AGM to issue equity. We have never used that tool, and we've had it over all the years. But it is a tool in the toolbox for -- if the right opportunity would come up. Ulrika Hallengren: And without giving any prognosis about what will happen, as said many times before, we look into all kind of possibilities, both small, which add on things piece by piece, but of course, also possibilities with larger portfolios. But it's really important that we think that we can add on some value to that. It has to be -- I mean I think it's good for us that we are a bit picky when we choose things. It should both be the right quality or possibilities and the right price, of course. But of course, we see possibilities. I mean Copenhagen continues to be interesting. And also on the Swedish side, there is possibilities. But you can never say ahead. Lars Norrby: If you're looking at Copenhagen, what type of properties and what kind of yield level are you looking at? Is it similar to what you have in the portfolio right now, meaning higher yields than in Central Copenhagen? Ulrika Hallengren: Yes. We don't want to go too low on the earnings. Of course, they are important for us. But we think there is some possibilities in a bit of a better location than we are today so that we can transform a bit, but still get a decent yield for us. So that is mostly the kind of things that might be of interest for us. Lars Norrby: Just to wrap it up from my side, for example, if Castellum would be willing to sell some of their properties in more central locations, you wouldn't be looking at them. Is that correct? Ulrika Hallengren: I don't think we will be the one that are prepared to pay the price that they are expecting. Operator: The next question comes from John Vuong from Van Lanschot Kempen. John Vuong: You mentioned something about rental income growth for signed leases. Are you referring to capital reversion? And if so, what reversion potential are you seeing in your portfolio? Arvid Liepe: I think if you talk about -- I mean reversion potential, generally speaking, as has basically been the case over many years, the rents that we have in our rental contracts today are fairly close to where the market rents are. And our markets have rarely, if ever, seen any huge reversion potential that is being able to sign or to renegotiate rents at completely different levels. Ulrika Hallengren: But when I mentioned higher rental income, I was pointing at leases that we have signed, but where tenants haven't moved in yet, but they will move in during the year. So that will give some extra income, of course. John Vuong: Okay. That's clear. And then just looking at your Malmo office portfolio, screens that the vacancy has increased by 80 bps over the quarter. Is this an issue of timing given that letting? Or have new leases been skewed to other regions? Arvid Liepe: I would say that looking at Malmo offices in the quarter, I mean that has, of course, been affected by SAAB moving out as of this past year-end. So there you would have -- and that was actually 4 leases out of 3 were terminated, if I remember correctly. And that was actually a significant chunk. So the Malmo office occupancy effect would mainly be driven by SAAB in this quarterly report. Ulrika Hallengren: And we have also added on areas from Borshuset. So Borshuset is completed, but the tenants haven't moved in yet. They will continue to move in until August. So that is vacant in the economic terms at the moment, that the tenants are eager to move in. John Vuong: Okay. And then on the leases, what's the percentage point impact on your occupancy? And maybe just looking at the number overall, is it skewed to any specific submarket within Malmo or say, building age? Arvid Liepe: No. I mean nothing different from what we tried to communicate earlier that there's still a good demand for good quality, good location. Predominantly, our office portfolio is good quality, good location with only a few exceptions. So there's no real change in that picture, I would say. Ulrika Hallengren: And the decision from SAAB to move to Lund, to a new premises there, was they wanted to combine both all the offices area and their development area, which also is a part of industrial classification in that. And Lund municipality could arrange that kind of area where they were allowed to have both engineers and also this experimental industrial things going on at the same place. And so that was the reason why they moved to Lund, and we have seen very good effects from that in the Lund areas affecting all the things we own at the Lund area, not at least. So for the region, that decision from SAAB has been a boost, I think, actually. And I'm also very satisfied with the solution that we have found with Skrovet 6, where SAAB had their largest leases before. So we have new tenants there from starting with 1st of September and adding on also from 1st of October with a totally refurbished property. So I think that solution will also be good for the Dockan area in Malmo. But of course, the timing for that, it gives us some vacancy at the moment. Operator: The next question comes from Eleanor Frew from Barclays. Eleanor Frew: A couple of questions. One is probably a slight follow-up. Can you calculate the net letting excluding leases on new developments or just including the completed stock? And can you give some color on how you see that trending if so? Arvid Liepe: I'll have to check that number because I don't have that number off the top of my head, the net letting excluding projects. Ulrika Hallengren: We have mentioned it before, but not the full year figure. But we have been positive in the net letting for the existing portfolio before. But let's check upon that because -- and I don't see if we had some new leases in new areas in Q4, but I -- let's come back to that. Eleanor Frew: Great. And then is there a reason sort of high vacancy on Blackhornet? It stands out a bit given the pre-letting and your other projects? Or more broadly, how is the momentum going in the pre-letting discussions? Ulrika Hallengren: Good discussions, high interest, but not in the pace that we are aiming for. So good -- I mean it's the best product you can find, but the decisiveness must be there from our tenants. I think what we see in a bit of a cautious market is when you have a high volume with very good quality, you don't need to take the decision now, you can wait because there's more to choose. It's not this level, so you can choose another level. So we don't really see the tempo in that yet. But patience is something you need. Arvid Liepe: Getting back to net lettings, excluding new developments. In Q4, it was still positive, also excluding leases and new developments. It will take a bit more time to look at the full year, but Q4 was still positive. Operator: The next question comes from James Cattell from Green Street. James Cattell: Just had a question on the new EPRA CapEx table on Page 25. Thank you for including that. I noticed TIs increased from SEK 499 million to SEK 802 million. Was this just a temporary increase due to a difficult letting market? Or do you expect this to be the run rate going forward? Arvid Liepe: Could you please repeat which figure you're relating to? It was Page 25, right? James Cattell: Can you hear me? Arvid Liepe: Yes, yes. James Cattell: I have some difficulties in my line. Can you hear my question? Arvid Liepe: Well, you referred to a number on Page 25 in the report, and I was just uncertain which number. So if you could repeat that and we'll see if we can answer. James Cattell: On the EPRA CapEx table, the number for tenant incentives, it increased from SEK 499 million to SEK 802 million. Yes. I was just wondering is this increase due to the difficult letting market? Or is this what the rate you expect to be going forward? Arvid Liepe: To be frank, it's actually the first time that we have calculated this number according to the EPRA definition of capital expenditure. And we've spent some time together with the EPRA team defining these different -- well, the sums, meaning that I'm actually a bit uncertain when it comes to how to project how the different parts of the sum will develop over time. So I'm not quite sure that I, off the top of my head can answer your question about how that will develop going forward. James Cattell: Okay. And do you have any idea of the split between rent-free and capital contributions on that? Arvid Liepe: I mean generally, you could say that our market is characterized by few tenant incentives and few and short rent-free periods. So I mean we basically come from a market where tenant incentives have been very, very marginal. And so we don't expect that to develop in any dramatic way. James Cattell: Okay. And do you have any guidance on what caused the increase in the joint venture property values in the fourth quarter? Arvid Liepe: Well, I mean property valuations are what they are and always very tricky to predict. We would not expect that, that type of property valuation -- property revaluations in our joint ventures will come on a regular basis, but property valuations are hard to predict. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Ulrika Hallengren: Thank you. So let's see. Do we have any written questions? Arvid Liepe: We have received no e-mail -- questions via e-mail as I can find. Ulrika Hallengren: Okay. But you're always welcome with further questions any time. So by that, thank you for today, and have a nice day. Arvid Liepe: Thank you very much.
Operator: Thank you for standing by, and welcome to the Region Group First Half FY '26 Financial Results. [Operator Instructions]. I would now like to hand the conference over to Mr. Anthony Mellowes, Chief Executive Officer. Please go ahead. Anthony Mellowes: Thank you very much, and welcome to our First Half FY '26 results for Region Group. My name is Anthony Mellowes. I'm the Chief Executive Officer. Presenting these results with me today is David Salmon, our Chief Financial Officer. Also in the room with me is Erica Rees, our Chief Operating Officer. I'm really pleased with this set of results as we have increased our earnings growth, which is underpinned by some really strong operational results and our fully hedged interest position. Let me take you to Slide 4, which sets out our first half FY '26 highlights. Our funds from operations or FFO, was $0.079 per security, which increased by 3.9% from December 2024. The distribution per security was $0.069 per security, which was the same as our adjusted funds from operation or AFFO, which increased by 3% from December 2024. Our statutory net profit after tax of $180 million, including an increase in the fair value of our investment properties. Our assets under management has increased by 3.9% from June '25 to $5.4 billion. Our operational metrics remained resilient. Our comparable MAT growth was 3.1% per annum. Our average annual fixed rent reviews were 4.3% per annum. Our average specialty leasing spreads were 3.4% and our comparable NOI growth was 3.7%. With respect to capital management, our weighted average cap rate firmed by 10 basis points to 5.87% since June '25. We've continued the on-market security buyback program. 6.7 million securities have been purchased during the half year at an average price of $2.39 for a consideration of around $16 million. And our NTA per security has increased 3.6% to $2.56 off the back of that valuation growth. Our weighted average cost of debt of 4.6% per annum with 100% of debt hedged or fixed for FY '26 at an average rate of 2.89%. Slide 5 remains unchanged. Our strategy is to provide defensive, resilient cash flows to support secure, growing and long-term distributions to our security holders. Moving to our operational performance, which starts with our portfolio overview on Slide 7. Our occupancy has improved to 97.7%, up 20 basis points with a continued strong weighting towards those nondiscretionary tenants. 45% of our gross rent is attributable to our anchor tenants and 55% of our gross rent is to specialties and mini majors with a focus on food, liquor, retail services, pharmacy and health care. We have 87 centers that are owned 100% by Region, which are geographically diversified across Australia. Moving to Slide 8. Our positive sales momentum continues across our nondiscretionary categories. Our 3.1% comparable MAT growth is driven by supermarkets at 3.1%, our discount department stores at 3.7%, our mini majors at 1.7%, nondiscretionary specialties at 3.3% and our discretionary specialty tenants improved to 3.6%. Our specialty sales productivity is now at $10,265 a square meter. As for the majority of the market, we have excluded tobacco sales consistent with our June '25 results. Our supermarkets continue to demonstrate resilient growth as shown on Slide 9. We continue to capital partner with our anchor tenants to drive sales growth with over 53% of supermarkets generating turnover rent. We have 123 anchor tenants contributing 45% of our gross rent. 76 direct-to-boot and e-commerce facilities. 97% of stores have online sales included in the turnover rent calculation. And as I said earlier, there was 3.1% supermarket comparable MAT growth. And the turnover rent generated from 52 anchor tenants with a further 20 anchor tenants within 10% of that turnover rent threshold. Moving to Slide 10. Over 88% of gross rent is generated from nondiscretionary tenants. Our portfolio occupancy of 97.7% is up from 97.5% as at June '25. Our specialty vacancy has improved to 4.5% as at December '25 compared to 5.4% at June '25. Our portfolio WALE decreased slightly by 0.1 years to 4.8 years. Our average specialty rent increases to $930 per square meter, representing annualized growth of 5% since December 2022. Our average specialty annual fixed rents remained strong at 4.3%, and these were applied across 96% of our specialty and kiosk tenants. 79% of expiring tenants were retained, which helps to minimize leasing capital expenditure and downtime. Moving on to Slide 11. Proactive leasing continues to drive increased leasing spreads across the portfolio. Our specialty leasing benefited from slightly increasing annual fixed rent reviews and positive leasing spreads. We completed 177 specialty leasing deals with 3.4% average leasing spreads, a positive uplift on prior December periods. A strong performance from new leases with an average leasing spread of 7%, while renewals were relatively flat. The average annual fixed rent reviews increased from 3.9% in December '23, up to 4.3% in December '25. Our leasing incentives on new deals averaged 12.3%, and this is aligned with our 12-month leasing incentive for new tenants. Moving on to our sustainability update on Slide 12. We're on track to reach our net zero for Scope 1 and 2 greenhouse gas emissions by FY '30 and continue to make a positive impact in the local communities which we serve. We continue to progress towards our sustainability targets, which is spelled out in our annual sustainability report. The key focus has been on environmental, progressing with our net zero investment during the period, contributing to our solar rollout target of having 25 megawatts installed in construction or design on Region assets by the end of FY '26. In social, we continue to make a real positive impact in the communities that we operate in and have undertaken a number of community initiatives, including the uniform exchange program at Raymond Terrace in Newcastle. We also continue to sponsor 128 students through the Smiths Family's Learning for Life program. And with respect to governments, our alignment to the ASRS is on track for our FY '27 reporting. I'll now hand over to David, who will talk through our financial performance. David Salmon: Thanks, Anthony, and good morning, everyone. I'll start on Slide 14. We'll highlight the key drivers of the movement in our funds from operations, which has had strong earnings growth in the first half of FY '26, partially offset by an increase in the weighted average cost of debt. Our FFO for the first half of 2026 is $0.079 per security, representing growth of 3.9% from December 2024. There were positive contributions from the comparable portfolio NOI growing by 3.7% and the impact of our transactional activities and growth in funds under management. The FFO growth was offset by the previously flagged weighted average cost of debt increase from 4.3% to 4.6% during the period. Moving to Slide 15, where we provide further information on our financial results for the half. As mentioned, our funds from operations was $0.079 per security. Our adjusted funds from operations came in at $0.069 per security, an increase of 3% from December 2024 after additional capital this period from the leasing up of vacancies. Our distribution for the period represented a 100% AFFO payout ratio in line with guidance. Comparable NOI growth was 3.7% with moderating property expenses as well as specialty annual fixed rent reviews and positive leasing spreads. Full year comparable NOI growth guidance remains at around 3.3%. Total net operating income has grown by 5.3%, driven by the aforementioned comparable NOI growth, cost reduction phasing from the prior period, lower ECL compared to the Mosaic impacted prior period and completed developments NOI, partially offset by net asset disposals. There was strong growth in funds under management income supported by funds management platform expansion during the period. Corporate expenses were impacted by cost phasing in the prior period with costs in line with the FY '25 average over the year. Statutory profit for the period is $180 million, following an increase in the fair value of investment properties. Moving to Slide 16. As at December 2025, our total assets under management was $5.4 billion. This is a 3.9% increase from 30 June 2025 with investment property valuation growth and an increase in funds under management. NTA per security of $2.56 has increased by 3.6% from June 2025, driven by fair value uplift on investment properties. Our balance sheet remains healthy with gearing of 32.7% at the lower end of our target range. This provides us with the capacity to deploy capital when opportunities arise. 6.7 million securities were purchased during the half year at an average price of $2.39 for a consideration of $16 million as part of an on-market security buyback program. Since the announcement of the buyback program in April 2025, 8.9 million securities have been bought back at an average price of $2.37 for a total consideration of $21 million. Slide 17. Our property valuation movement shows cap rate compression and continued income growth driving the valuation increases. During the period, our portfolio increased by $129 million. The movement was driven by a $92 million fair value increase and $37 million in capital expenditure. Capitalization rates have firmed by 10 basis points since June 2025 to 5.87% on top of the 10 basis points firming in the second half of FY '25. We have 3% fair value increases since June 2025, with approximately 1.7% driven by cap rate compression and the remainder being valuation NOI growth over the 6-month period. On to Slide 18, where we talk to our funding. In November 2025, we issued a successful 6-year AUD 300 million medium term note. We saw significant interest from both offshore and Australian debt investors with the final order book being 3.6x oversubscribed. This strong demand allowed for the transaction to be priced with favorable borrowing margin of 1.22%. Proceeds from the MTN issuance were used to repay bank debt. We have total debt facilities of $1.9 billion with around $355 million of funding capacity available for us to draw on. We have no debt expiries until FY '28, and we have strong interest from both new and existing banks to enter into new facilities. Our weighted average cost of debt increased from 4.3% to 4.6% over the first half, and we expect this to decrease just slightly to 4.5% for the full year. Moving on to Slide 19. Our strong hedging across FY '26 to FY '28 provides stability and reduces exposure to near-term interest rate changes. We have high hedging levels with 100% of debt hedged or fixed in FY '26 at an average rate of 2.89%. We remain highly hedged in FY '27 and FY '28 with 87% and 70% of debt hedged or fixed in those respective years. This mitigates the impacts of any near-term rate increases, which the RBA has now commenced and is expected to continue. Our average hedged fixed rate over the next 3 years of around 3%, which is well below forecast market rates. I will now hand back to Anthony to talk through our value creation opportunities. Anthony Mellowes: Thanks very much, David. Turning on to Slide 21. We maintain our disciplined approach to continue to pursue high-quality opportunities that align with our long-term strategy. In January '26, we settled on the acquisition of Treendale Home and Lifestyle Center for $53 million at a 6.4% initial yield. It's a large-format retail center strategically located directly opposite our existing center at Treendale Shopping Center, and this also allows some improved management efficiencies. The center also has a district center and urban zoning, providing the ability to house additional retail such as additional supermarkets into the future. We remain the largest owner of convenience-based centers with a proven transactional track record that allows us the opportunity to continue to consolidate this very fragmented market. Slide 22 highlights the targeted reinvestment and increased development spend to drive earnings and portfolio performance. The table shows the first half FY '26 actual and FY '26 forecast indicative spend on our capital deployment program. In the first half of FY '26, we spent $32 million and in -- for the full year FY '26, we expect to spend around $65 million. This forecast has increased by roughly $15 million, which is mainly driven by development projects relating to center expansions across North Orange in New South Wales, Newcastle Market Town in Newcastle and Greenbank in Southwest Brisbane. Moving on to Slide 23 for funds management. Our Metro Fund continues to be a platform for growth with 2 new acquisitions. We set Metro Fund settled on the acquisition of Dalyellup Shopping Center in Western Australia for $36 million in November '25, growing our funds under management by 5.7% from June '25 to $752 million. Metro Fund also exchanged on the acquisition of 3 additional strata properties valued at $89 million at West Village in Brisbane in Queensland, which is driving further growth through these strategic acquisitions. Two of these strata properties have already settled in January '26 and the remaining Strata is due to settle by June '26. David will now talk through our AFFO growth target. David Salmon: Moving to Slide 25. To sustainably drive our medium- to longer-term earnings growth, we are focused on generating comparable NOI growth of at least 3%. Through our value creation initiatives, we aim to add another 1% to our growth rate. Our work in the capital management space to increase our hedging has mitigated some of the short- to medium-term earnings volatility generated from interest rates with a longer-term impact dependent on market movements. Based on all this, we are targeting medium to term longer growth in our FFO and AFFO of 3% to 4% per annum. Our results for the half year have aligned with this growth target, notwithstanding the flagged impact of interest costs. I'll now pass it over to Anthony, who will talk to our key priorities and outlook. Anthony Mellowes: Thanks again, David. So Slide 26 steps through our key priorities and outlook. We believe the nondiscretionary retail will continue to be resilient, and we will generate comp NOI growth through our strong leasing, increased fixed rent reviews and continued proactive expense management. Our balance sheet is supported with growing valuations, which provides us with the opportunity to develop some of our centers, also to be disciplined with our acquisitions and disposals and explore additional funds management opportunities. We're maintaining a proactive approach to capital management, including where prudent, asset recycling, on-market security buyback and interest rate hedging. Assuming no significant change in market conditions, our FY '26 earnings guidance has been upgraded to be FFO of $0.16 per security, up from $0.159 per security, a growth of 3.2% on FY '25 and AFFO of $0.411 per security, up from prior guidance of $0.14 per security, a growth of 2.9% from FY '25. This marks my final results presentation over the past 14 years. It's been a real privilege to lead the group through a period of significant progress and growth. I'm really delighted to welcome Greg Chubb as our next CEO and Managing Director, effective the 9th of March. And I'm really confident the company will continue to build on this really strong foundation. Thanks very much, and over to questions. Operator: [Operator Instructions]. Your first question today comes from Howard Penny from Citi. Howard Penny: Just the first question on -- just to talk through how you're firstly seeing the sort of upgraded guidance drivers. What really drove the increased guidance in this period? David Salmon: Howard, it's David here. Yes. Look, largely, the upgrade in the guidance from the $0.14 to the $0.141 was largely off the back of some of the transactional activity. As we flagged, we bought Treendale Lifestyle Center, the circa $50 million. Obviously, that's at a yield of over 6% compared to our funding cost. That's an upgrade in net earnings. And we also expanded the funds management platform through the acquisition of those 3 properties we flagged at West Village, which has the -- we have a 20% interest in that fund. So we have earnings accretion there, plus also we get acquisition and funds management fees as well, which go into the mix. What we are doing for the full year guidance is we are holding our comp NOI growth of 3.3% guidance that we'd flagged at the start of the year. We haven't changed that at this stage. Howard Penny: And just my second question on the Treendale acquisition. Could you just take us through why this was a great acquisition for Region? And then just a second question on that, can we expect potentially more acquisitions in the next sort of 12 to 18 months similar to this? Anthony Mellowes: Thanks, Howard. It's Anthony here. Look, this center, if you look on Google Maps at Treendale, it is directly across the road. It is -- there's a lot of retail in that space. And it just makes a lot of sense for us to own it. It's really very integrated with the whole precinct. And so we are the natural owner of that. Just like it's no real difference to we bought a large-format center in Ballarat. Again, it's basically physically linked to our existing shopping center, and there's no real difference. So it's about -- it's strategically owning that, and it's at the price that we could buy it for. We continue to remain really disciplined looking at opportunities. There's a lot of groups out there that are still offering very tight yields on assets, which is great because we own and manage over 100 of them. But we continue to be really disciplined about ensuring that they meet our long-term hurdle rates. I still believe we will continue to buy assets and find them and work them through. And I think there's some great opportunities out there, but we're going to remain really disciplined. And that's not just on acquisitions. It's also on disposals as well. We still have some, not that many assets that are really tight yields with not huge growth, but very -- there's a strong appetite from privates out there for those smaller dollar value assets, of which we still got a few there to go. But it's really just remaining disciplined to meet our long-term hurdles. Howard Penny: And maybe just one final question from me. It's good to see the joint venture starting to get more active. What's changed in that in terms of where the partner and Region are getting more active? What's changed in the expectations at the moment? Anthony Mellowes: Look, I think it's fair to say when interest rates really jumped up very quickly. The hurdle rates were increased as interest rates have stabilized and they certainly have stabilized, notwithstanding they've just gone up a bit recently. They're still relatively stable compared to the increases that we were looking at. And I think that's the major driver. And we find really good opportunities that, again, the assets at West Village, there's strategic reasons for owning the additional strata to control everything in that particular asset, but also the likes of Dalyellup was met the hurdle rates that we needed. So yes, but I'd say it's the volatility in interest rates or less volatility in interest rates has been the key driver. Operator: Your next question comes from Andrew Dodds from Jefferies. Solomon Zhang: Just firstly, I'd just be interested to hear how retail trading conditions have trended throughout January and February. It's positive to see that they held out throughout the period, but certainly, just keen to hear about how they've trended since the sort of the outlook for rates has sort of evolved over the past couple of weeks. Anthony Mellowes: Yes. Look, it's Anthony here. We haven't got the actual figures. It's a little bit too early. So it's only the Anthony Mellowes is anecdotal. It's not based on any real data because we just don't have it yet. It's continued to be -- I don't expect it to be all that different from December, November, I think January because it goes on like-for-like against January last year, I think it will be fairly much the same because we do have that high focus on nondiscretionary, which really doesn't move around a lot. I mean, I've said for the last 13 years, we get excited when it moves from 3% to 4%, and we get a bit worried when it goes from 3% to 2% because it's always around the 3%. So I expect much the same. Solomon Zhang: Okay. Great. And then on the buyback, $100 million, it looks like it's just over 20% complete now. You've been buying back stock sort of between $240 million and $225 million. So I mean, with the stock sort of trading within this range now, do you expect that the buyback will recommence once the blackout period ends? And just a follow-on, it would be good to understand just what guidance assumes in terms of completion of the buyback in the second half, too. David Salmon: Yes. It's David. Well, maybe just answer the last bit. Yes, we haven't assumed any further buyback in our guidance for FY '26. In terms of whether we intend to continue the buyback. Look, I mean, obviously, when we announced the buyback, we were trading much lower. We also had raised a fair bit of capital through some asset sales, and we're looking to redeploy that capital. We've obviously deployed that capital a bit into the buyback, about 20%, but we've also acquired Treendale for circa $50 million recently as we just talked about. So the buyback, the merits of the buyback are still there in terms of where we're trading relative to NTA and where our distribution -- implied distribution yield sits at. So the merits of the buyback is still there. But I guess it's probably been the appetite to do as much buyback is probably lessened because we've been deploying capital into some other opportunities. So I won't say a hard no or a hard, yes, but it will depend on where trading goes. But to the extent that we have other opportunities arise, we might decide to deploy that capital into those opportunities. Also, if we were to sell some assets that might come about -- that obviously gives us some surplus capital to consider in that context as well. Solomon Zhang: All right. And then just finally, just on the MTN issue. The borrowing margin you got of 122 basis points is clearly very favorable. Can I ask just what the sort of weighted average margin is across the group and how much of an earnings benefit this has provided? David Salmon: Yes. Our weighted average margin across the group is around 1.5%, that's our forecast for the year, I should say. So obviously, this is circa 1.2% is obviously bringing that debt has brought that down a little bit. It was 1.6%, I think, pre that. Look, we see there's definitely opportunities in the compressing borrowing margin market that we find ourselves in. I mean, you can do the math, $300 million at 30 bps and the annualized benefit there. That's obviously -- that's coming through a bit in FY '25, but also it will annualize in -- sorry, a bit in FY '26, that will annualize in FY '27 as well. Solomon Zhang: Okay. Thank you very much and congratulations Anthony. Anthony Mellowes: Thank you. Operator: Your next question comes from Solomon Zhang from UBS. Anthony Mellowes: No, I can't hear you, Solomon. Operator: Your next question comes from Daniel Lees from Jarden. Daniel Lees: Just a question on costs. It looks like your property expenses are down, corporate expenses up a little bit. Maybe just if you could talk through the key drivers here and how do you want us to think about costs going forward? David Salmon: Yes. It's David here. Yes, obviously, in the second half of last year, we have done a number of cost initiatives to manage our gross costs. You're seeing some of that come through this half. There was a bit of phasing of the cost benefits last year between first and second half. So what we've done is for our comp NOI growth of 3.7%, we're saying that comparable cost growth was around 1.4%. What I'd also say that the property expense reduction cost has also been impacted by asset disposals that we had in the prior period as well. But like it's fair to say that the cost growth looking forward, our target is to manage cost growth in that 3% to 3.5% growth range as well as our revenue line for that matter, which we think sets us up well for that 3% to 3.5% comp NOI growth that we talked about. Daniel Lees: And corporate costs? David Salmon: Yes, sorry, corporate costs. Look, again, there's a little bit of phasing and lumpiness in last year's split between first and second half. But our corporate costs for this half, noting that the corporate costs in terms of the dollars are a lot smaller compared to comp NOI. But our corporate costs of $7.4 million in the half is more in line with the half average from the full year last year, which was about $15.2 million for the year, about $7.6 million for the half. So I think you'll see it more in line with that in the second half going forward. Daniel Lees: Great. And then on deployment opportunities, obviously, 10-year bond rates and rates generally have shifted higher. Are you seeing that flush out any acquisition opportunities from maybe the high net worth and syndicators? Anthony Mellowes: I think it's still just a little bit early to be saying that at the moment. There was still some -- there was an asset in Tamworth that sold at a very tight 5.1%, I think, recently to a private. There's still DD happening of deals that were agreed in sort of December that they're going through their DD. So I think it's just a little bit early to be making that judgment at the moment. What I would say is at our results at June, I've said I think overall cap rates will compress to December of about 10 to 15 basis points, which is what happened. And if conditions continue, I'd expect sort of maybe another 10 basis points to June '26. Conditions have changed. I don't expect cap rates to continue to compress from December '25 to June '26. I think they'll stay fairly flat. Daniel Lees: Okay. That makes sense. And just a final one from me, if I could. On the capital deployment program on Slide 22, the $65 million, what's your estimate yield on cost for that program? David Salmon: Look, generally speaking, we're targeting a 6% plus yield on our capital deployment. Obviously, you've got a bit of variation depending on the nature of the projects. But that's -- as a rule of thumb, we target that. Anthony Mellowes: And there's timing issues. David Salmon: Well, there's obviously timing issues in terms of the phasing of the projects coming online and also you have sometimes you have a bit of downtime in -- while you're developing sites as well. Operator: Your next question comes from Solomon Zhang from Morgan Stanley. Solomon Zhang: Hello David. I'm sure there's a reason for this, but your 5.3% NOI growth. I know, David, you talked about cost savings at the property expenses line. But can you explain to me why gross rental income didn't move at all? David Salmon: Look, the primary reason that didn't move is the impact of the disposals. They have come out. So that's the primary reason. The comp growth after adjusting for the disposals was about 3% growth. Solomon Zhang: Comp growth at the gross property income line was about 3%. David Salmon: Yes, comp growth, correct. Solomon Zhang: Okay. Fair enough. The 7% leasing spreads for new leases, that's pretty impressive. Can you kind of give me some color as to the composition? Like were there still some old Mosaic boxes that you leased up at massive leasing spreads? Like I'm just trying to work out what the underlying leasing spread would have been without some of those extraordinary good boxes? David Salmon: Look, we -- maybe just to preface it with the Mosaic site, there are vacant sites that we're trying to lease, but it's -- at the same time, we see them just another vacancy we're trying to fill. So we're trying not to differentiate between all the different sites. Obviously, there were some good deals this half, and it's been quite low. Sometimes you're talking half numbers, the stats can be very sensitive to a few big deals. Maybe if I could put it this way, if you excluded the top few deals, yes, you'd be closer to that sort of 4% to 5% leasing spread range. And conversely, if you excluded the bottom few deals on the renewals, they'd be up around 2% or 3% higher as well. So yes, I mean, you do get some outliers that can skew things either way. But at the end of the day, yes, look, there is an element of Mosaic that's not into those numbers, yes. Solomon Zhang: Great. What were those bottom few deals and renewals that dragged it down to pretty much flat? Like were they a special type of retailer? Or was it a specific retailer? Anthony Mellowes: Yes. We had -- there were 3 deals that hurt us in that renewals, 2 were banks, and we wanted to keep those banks because they wanted to leave. And one was a pharmacy who, as you know, pharmacies retain the basically pharmacy license. And if they move, you can't just easily replace a pharmacy. So they were the 3 deals, 2 banks and a pharmacy. Solomon Zhang: Great. Great. And just one last one. I noticed you guys kicked off a Metro Fund III. Can I assume it's with the same capital partner as Metro 1 and Metro 2? Anthony Mellowes: Yes. Operator: Your next question comes from Murray Connellan from Moelis Australia. Murray Connellan: I just wanted to quickly drill into the Mosaic brand space, if you wouldn't mind. Would you be able to contextualize for us the amount of vacancies that still remain there, the amount of income that you've assumed going into the second half? And I guess, the drag of those vacant sites relatively speaking, in FY '26 guidance overall? David Salmon: It's David. Anthony Mellowes: What David is looking at -- look, I'll just say, Murray, Mosaic is gone, and they're just now a vacancy for us. And -- but David will run through some numbers, and we are getting better rents on the Mosaic groups. It is heading pretty close to what we suggested when Mosaic went broke. I remember what was 18 months ago, whatever. So -- but Dave run through. David Salmon: Yes. Look, just to give you a bit of context, obviously, and we have flagged this in the past that there would be a bit more leasing capital this year to help lease up those Mosaic sites. We had about $1.2 million in leasing capital on those sites for the first half, and we're forecasting roughly about double that for the full year of FY '26 to about $2.5 million. Look, in terms of how much of the Mosaic portfolio have we dealt with, we've got about 85% either leased or casually let where it's earning some sort of income. Obviously, we're looking to fully lease everything, but there is a little bit of a drag. In terms of dollars on the NOI line, there still will be a bit of drag for the full year because obviously, we've got the new rents kicking in, offset by the lost rent coming out. There'll still be a little bit of a drag, maybe $0.5 million or so for the full year, depending on how we go in the second half on things. But yes, like I said, the primary impact on AFFO for the year will be that leasing capital and that leasing capital is part of the first half higher leasing capital that we talked about earlier. Murray Connellan: Will it be fair to say that, that space is assumed to be, I guess, mostly 90% productive going into 2H? '26 on average? David Salmon: Look, we're certainly banking on having most of it in there. There might be a few delays in terms of start dates and things like that. But obviously, when we come out with our guidance at year-end for FY '27, we'll be able to give a bit more color on that. But like Anthony said, we're trying not to think about Mosaic as one big thing. At the end of the day, we're trying to fill up all our vacant sites, and this is just one part of it. Murray Connellan: And Anthony, congrats on your last set of results. All the best for the next phase. Operator: Your next question comes from Richard Jones from JPMorgan. Richard Jones: Anthony, just interested in your broader views on retail markets. Obviously, you've been around a while, and we've seen a heap of demand come through in the past 6 to 12 months. Obviously, Charter Hall have raised a lot of money and deployed in a relatively short time frame. So just interested in where you see transaction markets in light of a bit of a shift in where rates are going as well. Anthony Mellowes: Yes. Look, people get quite excited by institutions buying. The privates for 20, 30, 40 years have been the most active buyer and seller in this particular sector. And they will continue to be the most active buyer and seller for, I think, for some time. The issue is you just get institutions coming in and everyone thinks that's really interesting. But the bottom line is there's always buyers and sellers. You can go back as many years as you like, and there's roughly 40 to 50 sort of transactions a year, which is roughly 1 a week. And that's just what happens in this particular space. The difference is you've got institutions looking at the moment. So -- but I think the buyers will still be there. The sellers will still be there, and it's a really good sector. Roughly 50% of your income comes from really high-quality tenants like Woolies and Coles. The other 50% of the income comes from pretty well nondiscretionary retail, coffee shops, pharmacies, whatever you want, it's a pretty good, solid returning asset that's very consistent. And I think that's what people like. Now with rates going up, yes, it will have a bit more pressure on people's buying ability, but I don't think it's going to move it all that much. People don't necessarily buy assets. They buy them for a lot of cash often. So lending isn't always a consideration because they're private buying. Richard Jones: And just on your funds management business, can you just clarify what the rough return hurdle is for that deployment and how much you've got in committed capacity? Anthony Mellowes: Well, I was -- I'm not going to tell you a return because that's up to our partner. But I think it's fair to say it's market returns for these types of assets. Now they have a slightly lower cost of capital. And so maybe it's slightly better to buy in different times, but that can move. But look, we originally started our joint venture with them, our partnership with them for a $750 million sort of stake. We're sort of at that now. We're at over $800 million. And I think we all want to continue. We've got -- started with Metro 1. We've got Metro 2. We've got Metro 3. We're over the $750 million. And I think they have -- they like that particular partner likes this type of sector, and they have capacity to purchase in this sector. So I think where it ends, I think it comes down to the opportunities that are presented to them. Operator: Your next question comes from Callum Bramah from Macquarie. Callum Bramah: I just wondered, can you just clarify a little bit of the drivers of the expectation of comp growth to slow over the full year? Because you've still got, as you said a couple of times, 3.3% as your guide relative to, I think, 3.7% delivered in the first half. David Salmon: It's David. Yes, look, I think the simple answer there is the first half has benefited more from some of those moderating costs that we implemented in the second half of last year. And so that's also the reason why the second half is a little bit lower to get to that 3.3% for the full year. Callum Bramah: Okay. And so that's in the property expenses is what you're talking about? David Salmon: Yes, property expenses, that's right, yes. Callum Bramah: Okay. And just going or maybe a follow-up also on the lease incentives comments that you've made. So clearly, there was the step-up in the first half. And I think based on the comments around Mosaic, that continues into the second half. But should we anticipate that you step back down in fiscal '27? So I think at the moment, you'd be running at something in the order of $15 million per annum in lease incentives. So would it come back down closer to the 12% as we go forward as those have disappeared out of the portfolio? David Salmon: Yes. Look, I mean, obviously, our higher leasing incentives this half is some of the Mosaic, but obviously, it was due to a number of new tenants in general as well as Mosaic. Look, in terms of where -- I think we're guiding towards around $13.8 million for the full year on the leasing side. Yes, Prima facie, you won't have as many Mosaic tenancies to fill. But it's part of a broader environment where it depends on how many other new tenants we might get in. Obviously, our retention rates help mitigate some of that exposure. And look, you got to remember that the cost of fit-outs and things like that is not going backwards. So as well as trying to keep those new leasing incentives on new tenants around that 12-month mark, you do have cost pressures. So I won't say you can just draw a line in the sand and say whatever it was this year will go backwards by x million dollars. It will be part of a broader environment where you have to consider cost of doing fit-outs and also how many new tenancies you expect to put into the portfolio. Callum Bramah: Okay. And maybe just 2 other ones. So just on Treendale, I think the guide is for an initial yield of 6.7% -- just in relation to the commentary that sort of implies there's some sort of synergies between properties across the street. Does the 6.37% include that benefit? And therefore, maybe -- I assume maybe the cap you bought it on is lower and you've got a benefit through property management? Anthony Mellowes: Look, that's exactly right. How much -- it's not massive dollars, but there's a little bit there for us. And that's what we're going to be focusing on to maximize that. But we're not talking, it's going to move from a 6.3% to an 8% yield. But there is efficiencies there for us. Callum Bramah: Fantastic. And then just maybe if you can also just talk -- so cost of debt into the second half will be, I guess, around 4.4%. Is that fair? And then it just trends up with your hedge book a little bit into fiscal '27? David Salmon: Yes, we're guiding towards 4.5% for the full year. So I don't have a split of the second half, but yes, it would be -- implies it's slightly lower than given the first half was 4.6%. So -- and in terms of your question about the hedge book, yes, look, we've always had high hedging. Obviously, what's embedded into our hedge position is we have some callables and we have a collar as well. Inherently, if you're working out your percentage hedged and your rate, you have to make an assumption around what is going to be come into effect based on the interest rate environment. So we're assuming that both those callables are called and also that the collar will be enacted from when it kicks in, in the future. So that's the main thing that's driven our sort of movement in the hedge book since 6 months ago. Callum Bramah: And one last one, sorry to finish it maybe on a negative. But just looking at those -- the comparable MAT growth for sort of discount variety or apparel, just are there any tenants that you're particularly concerned about? Anthony Mellowes: No. In the past, we have been concerned about sort of Mosaic and that type of thing. Look, you've got the reject shop that have been taken over by an enormous discount retailer from Canada doing a tremendous job. They want to expand. So they're looking really positive. So a lot of chemists in there. Chemists are doing well. So we don't have any portfolio of tenants that we're sitting there going, we've got a big watch on them, like we have had in the past. There will be some that will come up. That's just natural, but there's nothing there at the present in those many majors. Callum Bramah: Congratulations, Anthony, on your successful tenure as CEO of the group. Operator: Your next question comes from Ben Brayshaw from Barrenjoey. Benjamin Brayshaw: I just had a quick question on the guidance for NOI growth for the Callum's chat earlier. Could you just clarify the driver around the lower NOI growth implied for the full year in the second half? You mentioned property expenses. So will property expense growth be up in the second half? David Salmon: Yes. I mean that's essentially -- yes, it's the first half benefited more from those cost savings initiatives, which kicked in, in the second half of last year. And yes, for the full year guidance, it is slightly lower because we will effectively have higher expense -- property expense growth in the second half compared to the first half, noting that what I said before, the first half only having comparable growth of 1.4%, which is obviously lower than the run rate we would be envisaging going forward. Operator: [Operator Instructions]. Your next question comes from Solomon Zhang from UBS. Solomon Zhang: Apologies for the tech issue earlier. Two questions from me. So maybe for David first. You mentioned earlier that there was some balance sheet capacity to deploy potentially on acquisitions. But I guess your look-through gearing is sitting around 35%, and I can't really recall you sitting above that mark for very long. Should we read this as increased appetite to lift gearing? Or is this more a reflection of reval unlocking deployment capacity? David Salmon: Yes. Look, in terms of that look through gearing, I think we calculate it to be a little bit lower than that, but I think sort of in the 34s. But we still have what we say is capacity to debt fund some acquisitions if we wanted to go down that path, noting that, yes, there's also the opportunity to maybe recycle some capital from other asset disposals if we wanted to do so as well. Look, I guess, at the end of the day, we look at through the lens of do we have confidence in our gearing position through the valuation cycle? Yes, we do at the moment. do we want to protect our credit rating. We're not going to do anything that's going to threaten that. We're comfortably in our credit rating at the moment, and we would like to continue to do so, and we expect to do so. And obviously, like I said earlier, the security buyback is an option, but I'd say that's been mitigated to some extent where we've deployed capital into other opportunities like Treendale. Solomon Zhang: Makes sense. So you'd be comfortable sitting in the upper half of your target range of 30% to 40%? David Salmon: I'd say going to the upper end of that is probably a bit stronger language. Maybe around the mid-30s is probably more about how we view it as a potential scenario, noting that there might be reasons why that comes down, like I said, through asset sales. So it might be more of a capital recycling situation like you've seen over the last few years. Solomon Zhang: Okay. Maybe a question for Anthony. Just looking at Slide 11, just on your renewal spreads, they were basically flat. And I know you called out the bank and the pharmacy spreads that are a bit lower. But can you just discuss the dispersion of your spreads? Anthony Mellowes: Well, I think we did -- basically, if you take out the top number of new leases, it comes from 7% down to sort of 4-ish. And if you take out the bottom 3 of the 80-odd renewals, it comes up to sort of 3%. So they're all sort of sitting in around -- the vast majority by number is sitting in and around there. And I think you're going to see a skew where in the second half, there's going to be more renewals than new leases. And I think you'll see the average spread lift from flat to positive 2 to 3s, 4s where it has been sort of sitting in the past. We have been very focused on increasing our annual -- average annual fixed rent reviews, and that has moved from sort of 3.7% to 4.3% over the last number of years. That is a lot more important because it gets -- it applies to 80% of the tenants every year versus leasing spreads only apply to 20% of the tenants each year. So maybe we have been a bit focused on increasing getting those 5% average annual fixed rent reviews through, and we've been successful at that. So I'm really comfortable where things are at. And like I said, smaller numbers do get skewed by a couple of deals, as David said earlier. Solomon Zhang: What were the re-leasing spreads in the Bank of [indiscernible]. Anthony Mellowes: What was that? Solomon Zhang: Could you quantify the actual re-leasing spreads, the percentage on those bank deals? Anthony Mellowes: No. Operator: Your next question comes from [Claire McHugh] from Green Street. Unknown Analyst: Just a quick one regarding capital allocation. I appreciate you're evaluating buybacks and acquisitions. But on the acquisition front, what unlevered IRR hurdle are you targeting? And how has this changed in light of recent increases in long-term rates? David Salmon: Look, I mean if you look at our weighted average cost of capital, it's sort of around that 8-ish sort of percent sort of range depending on what you want to assume for long-term funding rates, which has obviously been moving a lot recently. Yes. So it's for us, it's a combination of initial yield and growth opportunities. Obviously, we're trying -- in the past, we talked about wanting to get -- wanted to buy assets with a 6% yield and growth and obviously sell at tighter yields with less growth. So I think a lot of that thinking is carrying forward. What I will say is sometimes we will acquire sites more for strategic reasons. It's not always just a purely a yield discussion. But obviously, we like to do both. So -- and look, in that context, when we're deploying capital, obviously, you've got a buyback -- security buyback where we're sort of trading at north of a 6% yield and an implied growth as well. So you've got to consider all deployment of capital opportunities. But as Anthony said earlier, we're trying to be very disciplined around our capital decision-making. Unknown Analyst: Okay. That's helpful. I mean just looking at the recent deals, it would seem that Treendale looks like on an unlevered basis, you're probably going to hit sort of 8.5% to 10%. Is it fair to say that sort of that sort of return excess of 8.5% to 10% or 8% on an unlevered basis is reasonable or --. Anthony Mellowes: Yes, we wouldn't have done it otherwise. David Salmon: Yes. Obviously, the yield was good. That was a tick. And there was also obviously a strategic purchase, like Anthony said, being across the road from our center that we see there's further opportunities in the asset in terms of overall management efficiency, also the leasing opportunities that will come with the site as well. Anthony Mellowes: And there is growth out of those centers. David Salmon: Yes. That's right. Operator: Your next question comes from Connor Eldridge from Bell Potter Securities. Connor Eldridge: Just looking at the full year FFO guidance bridge from the FY '25 preso, you flagged about $0.02 per share of incremental income from transactions. It looks like that full contribution has effectively been already realized in the first half. So I guess, just to be clear, should we assume that current guidance is effectively assuming no incremental contribution from transactions in the second half and i.e., there's potential upside there? David Salmon: Our updated guidance has factored in all the transactions and funds management initiatives that we've announced. So that's all been factored into the new guidance. Anthony Mellowes: We haven't factored in any others. David Salmon: Correct. So we haven't factored any further capital initiatives like either through funds management or on balance sheet acquisitions or disposals or -- and we haven't factored in any security buyback as well. Connor Eldridge: Right. Okay. And just one more for me. Just on the tenant retention number has now dropped below 80%. Can you just help me understand how much of that, I guess, is intentional churn, upgrading the tenancy mix and whatnot versus how much of that is actually tenant driven? Anthony Mellowes: I think it's dropped from -- was it 81% or something to 79%. It's still roughly 80%. So it's just the mix that's sort of come in. David Salmon: But, I would -- just to your last point, I would say that look, there is some intentional churn on our behalf in that number that we're trying to get the most out of the assets. So the reality is if we excluded those, it would be into the 80%. So yes, that is a factor, but we just reported as it is a fact. Operator: There are no further questions at this time. I'll now hand back to Mr. Mellowes for any closing remarks. Anthony Mellowes: All right. Well, look, thank you all. And I think that was one of our -- my longest one at 58 minutes. So thanks very much and look forward to speaking to you all, all the investors as we speak to you and the analysts all this afternoon. But thanks very much. It's been a great fun since December 2012. So thank you very much, and I'll speak to you all shortly.
Mathias Meidell: Hi, and welcome to Hexagon Purus' Q4 2025 Presentation. My name is Mathias Meidell, and I am the IR Director of Hexagon Purus. I will be moderating from the studio in Oslo. And from the studio, I'm also joined by Group CEO, Morten Holum; and Group CFO, Salman Alam. The agenda for today includes, as usual, the highlights from the quarter, a company update, the financials and the outlook. We will end the presentation with a Q&A session as usual. So please feel free to enter your question via the function on your screen. And with that, I would like to pass the word over to you, Morten, who will take us through the highlights of the quarter. Morten Holum: Thank you, Mathias, and good morning, everyone. Thanks for joining our webcast this morning. 2025 was a challenging year. Looking back, we had 4 key points: One, after a long period of significant growth, the activity in '25 dropped dramatically, driven by significant market uncertainty that was amplified by regulatory changes, tariffs and geopolitics. That resulted in lower demand and weaker revenue compared to 2024. Number 2, we took decisive actions to adapt the operating model to a new market reality to reduce the cost base and protect liquidity. Our primary focus in '25 was to align the cost base with the near-term expected market conditions. Number 3, we also undertook an extensive review of our entire business portfolio to assess our options to improve capital efficiency to extend the liquidity runway and to preserve flexibility to support long-term value creation. And finally, number 4, we made focused efforts to diversify the customer base across our core applications, and we're able to broaden the customer portfolio. We saw the positive impact of that now in Q4, where the uptick in volume was driven by several new hydrogen distribution customers. More on that in the outlook section. After a challenging start to the year, we saw a significant uptick in Q4. On the left, you see that revenue for the quarter was NOK 468 million, representing an 18% increase year-over-year and an 85% increase from Q3 '25. The main driver for the revenue increase was significantly higher volume in transit bus, hydrogen distribution and aerospace. The higher volume also translated into improved margins. EBITDA for the quarter was minus NOK 99 million, including NOK 76 million of items affecting comparability. These are primarily related to inventory revaluations and impairments. That means that the underlying EBITDA margin was minus 5% in the quarter, significantly closer to breakeven. So, we see the positive impact of higher volume and a leaner cost base. And to the far right, we exited the quarter with an order backlog consisting of firm purchase orders of approximately NOK 728 million, more than 90% of which is for delivery in '26. I'll come back to that in a minute. Overall, we're happy to see the uptick in volume in Q4 and happy to see that the cost measures we've executed are having a positive impact on profitability. Looking at revenue composition, Hydrogen infrastructure made up the largest part of revenue in Q4 with a share of 42%. This is a decrease in relative terms from Q4 last year despite the strong sequential growth from Q3 '25. Transit bus continued to increase its relative share in Q4 compared to last year with a 10 percentage points increase, and the 6-percentage point increase in other applications is driven by higher aerospace activity in the quarter. So, for the full year, we ended at a revenue composition consisting of 29% distribution, 36% transit bus and 27% other applications, which is a mix of industrial gas bundles and aerospace, that's a significant mix shift from last year where more than half the business was in hydrogen infrastructure. Looking at the full year revenue bridge, we had significantly lower revenue for hydrogen infrastructure. Very low volume in the first half of the year. In fact, we had more volume in Q4 alone than in the first 3 quarters of the year, around 60% of the full year volume came now in Q4. So, hydrogen infrastructure is the key reason for the year-over-year revenue decline, driven by delay in new green hydrogen projects and delayed commissioning of the significant customer fleet additions that we sold in 2024. Hydrogen mobility declined by 13% from last year, where strong growth in transit bus almost offset the loss of the heavy-duty truck volume that we had in '24. On the battery electric mobility side, the volumes and movements are small, but the 9% increase is related to deliveries of battery electric trucks to Hino throughout the year. These are trucks that will be used for test and validation purposes and for customer demos. In other applications, the main growth driver was aerospace, which compensated for lower demand for industrial gas bundles. And then to the order book, we went into '26 with NOK 728 million in orders, of which 92% is for execution this year. In terms of product areas, the 3 largest areas are hydrogen infrastructure, hydrogen mobility and other applications, where the largest part of the latter is aerospace. These figures are from the beginning of the year, so they don't include the 14-truck order from Hino that we got in January, amongst others. Looking at the overall situation, we have satisfactory demand and revenue visibility through Q1 and parts of Q2. We're encouraged by the customer dialogues we're currently having and see that there is potential for growth in '26, but the market is still uncertain. And at the current run rate, the order intake is below what we need to break even. We made good progress on the portfolio review that we initiated last year. It's taken time, but we're getting traction on the different initiatives. We've been looking for ways to strengthen our financial position and extend the liquidity runway while preserving future optionality to support long-term value creation. We've had a strategic review ongoing for the BVI business, we have looked at the different parts of the HMI portfolio, and we're working on the China JV. Since last quarter, we've made progress that will materially impact the company going into 2026, both in terms of capital efficiency of the business and the liquidity runway. So, let's start with the BVI business. Now I want to give some background for the actions that we took now in January. Over the past years, we have built an industry-leading technology for battery electric heavy-duty mobility. This has been tested and validated on several customer platforms. And those that have followed us for a while will remember that we signed some very significant agreements with OEMs a few years back when the expectations were that vehicle electrification would scale quickly. So based on those signals back in the day, we scaled up, built a great organization and invested in sizable manufacturing capacity. And then the market turned. Over the past 12 to 18 months, the uncertainty around regulation and tariffs, in particular, has materially changed the near-term outlook. And we're sitting with significant capacity that can't be utilized. Looking a bit forward, we believe in the future of truck electrification and the strong positive feedback that we're getting now from the customer demo programs, we're confident that the technology that we have is competitive and attractive. But it's challenging, if not impossible, to get the business in its current form to profitability short-term. So, in response to a weaker and more uncertain market in North America, we initiated a strategic review of the BVI segment back in June, evaluating the full range of operational, structural partnership and transaction alternatives. The dialogues we have had as part of that review leads us to conclude that it's unrealistic to execute a value-accretive transaction in the current market environment. But at the same time, we believe that fleet electrification will materialize, albeit on a longer time horizon. And we're confident that the technology we have developed has substantial medium to long-term value potential. So, in response to a weaker and more uncertain North American market, we initiated that strategic review back in June. Again, as I talked about, the full range of operational, structural partnership and transaction alternatives we had under discussion. So, we decided now to operate the BVI segment scale back to a minimum level to align with the current market condition while preserving long-term strategic optionality. That means that we had to scale back the operations around 2/3 of the workforce have been let go, and we are going to consolidate our footprint to the Dallas facility, leaving the Ontario and also eventually going out of the Kelowna facility over time. We will take a restructuring cost of approximately NOK 0.7 million now in Q1 2026. As part of that, we have also renegotiated the battery cell supply agreement, eliminating the overhang of the NOK 12.9 million in prepayment that was there. And since all the CapEx now has already been taken, we will retain the ability to quickly scale back up again when demand is growing. So, in January, we received an order from Hino for an additional 14 Class 6, 7 and 8 trucks with expected delivery towards the end of the second quarter and the beginning of the third quarter of '26. Given now the significant cost reductions taken, this is expected to allow the BVI segment to operate at close to cash neutral levels in aggregate through mid-2026. A key enabler of that is the fact that a substantial portion of the components is already sitting in our inventory, which limits the need for additional working capital to complete these vehicles. And then again, with the renegotiated Panasonic contract, which eliminated the outstanding prepayment, the overhang related to that has been removed. Last week, we signed an agreement to sell 100% of the shares in Masterworks, our Westminster business unit to SpaceX. The Westminster business has performed well during the past years, partly due to significant growth in demand for cylinders for aerospace applications. Aerospace used to be a small part of the business but has recently become the dominant driver of revenue in our Westminster unit. The space exploration sector is growing rapidly due to falling launch costs and higher demand for satellites, both for commercial and national security purposes. Along with that growth comes a preference from the aerospace customers to secure full control of critical components like high-pressure cylinders by bringing the competence and the manufacturing capacity in-house. Because of that, we believe the future of our aerospace business is best developed under an industrial owner with a dedicated aerospace focus. The transaction with SpaceX secures a good industrial home for the Westminster business, while it significantly strengthens our financial position and allows us to focus more narrowly on our core strategic priorities and to reduce risk. I also want to mention a few words on China. The Chinese market remains strategically important for us, representing the largest global market for hydrogen-related mobility and infrastructure solutions and the most competitive supply chain for materials and components. Market has developed slower than expected. It took longer than we thought to establish operations there. And there have been frequent changes in regulatory requirements to qualify for local certification. But it remains the most active hydrogen market in the world today. So, we have a manufacturing plant that's operational. We have validated the process, the product and the quality by manufacturing cylinders for our European infrastructure market there last year. And we're now in the final stage of the process to receive certification for the local market. But at this point, the JV is not yet generating profits. So, to manage our liquidity situation, we've engaged in discussions with CIMC Enric regarding potential financing alternatives for 2026. We're seeking ways to minimize our cash contribution while maintaining the JV's operational continuity and market presence. And in parallel, we are jointly exploring opportunities to simplify the joint venture structure to improve cost efficiency and execution speed with the main purpose to secure our competitiveness in the Chinese market. We're well aligned with our JV partner, CIMC Enric. So, I'm hopeful that we will be able to conclude on a solution within a reasonably short time frame. So that was the company update, and I'll now hand it over to our CFO, who will take you through the financials. Alam? Salman Alam: Thank you. All right. Thank you, Morten, and good morning, everyone. Let's have a closer look at the fourth quarter 2025 results. In the fourth quarter of 2025, we posted revenue of NOK 468 million, which is 18% higher compared to the same period last year and 85% higher than the third quarter of 2025. The increase in revenue is primarily due to strong contributions from transit bus and aerospace applications. And compared to earlier this year, hydrogen infrastructure also recovered and contributed strongly to revenue in the fourth quarter. Full year 2025 revenue amounted to NOK 1.144 billion, representing a 39% decline compared to the prior year. The main driver of the year-over-year revenue decline for the full year was softness in hydrogen infrastructure, which had a very solid 2024. Operating expenses ended at NOK 568 million in the fourth quarter. The cost of materials ratio was 72% in the quarter and was inflated due to inventory write-downs, which amounted to approximately NOK 67 million in the quarter. When excluding these effects, the underlying cost material ratio was close to 59%. When looking at the full year cost material ratio the underlying cost material ratio was close to 56% which is lower than the average that we've seen in '23 and '24, predominantly, due to the fact that hydrogen distribution infrastructure made up a significantly strong revenue in 2025. Payroll related expenses were NOK 135million which is about 21% lower compared to same period last year. Other operating expenses were NOK 95 million in the fourth quarter, which is up sequentially from the third quarter driven by higher activity-related costs across warranty, freight, plant operations and engineering and testing, as well as about NOK 10 million of one-off items related to development write-offs and customer insolvency. Subtracting total expenses from total revenue, EBITDA ended at minus NOK 99 million in the fourth quarter, but this includes NOK 76 million of items affecting comparability, which then includes inventory write-downs, warranty provisions, bad debt expense and restructuring costs. For the full year 2025, EBITDA ended at minus NOK 618 million and includes NOK 186 million of items affecting comparability. Moving below the EBITDA line. Depreciation and amortization amounted to NOK 343 million in the quarter and was negatively impacted by NOK 282 million in fixed asset impairments. Of this, NOK 223 million relates to the company's BVI segment, recognized as part of the annual impairment testing based on updated assumptions and the revised business outlook for the segment following the restructuring we announced a few weeks ago. Another NOK 59 million relates to the HMI segment, which mainly reflects write-down of production equipment that is no longer in use. Losses from investments in associates ended at minus NOK 9 million in the quarter and reflects the operating activity in the part of the China joint venture, which is not consolidated. Finance income in the quarter was NOK 24 million, where NOK 3 million was related to interest income on bank deposits and NOK 21 million was related to foreign exchange fluctuations. Finance expense was NOK 83 million, where NOK 67 million is related to noncash interest on the convertible bonds and another NOK 9 million was related to interest on lease liabilities and the remainder was foreign exchange fluctuations of NOK 6 million. At the group level, we are not in a taxable position and tax expense in the quarter was negative NOK 2 million. Loss after tax then ended at minus NOK 508 million versus NOK 667 million in the same quarter last year. Moving on to the segments and starting off with hydrogen mobility & infrastructure. As a reminder, this segment is the business unit that manufactures hydrogen cylinders and hydrogen systems for storage of hydrogen on board either off-road or on-road vehicles, or for infrastructure purposes such as the distribution of hydrogen from the point of production to the point of consumption. It also includes our industrial gas business in Europe and the aerospace business in the U.S. Generally, the HMI business unit delivered a strong finish to 2025, converting a sizable order backlog into deliveries through disciplined execution. Revenue in the quarter was robust and resulted in close to breakeven EBITDA, reflecting higher activity levels and the impact of cost reduction measures implemented earlier in the year. Workforce reductions during 2025 have lowered headcount in the segment by about 30%, leaving a cost base which is better aligned with current activity. However, we continue to monitor capacity costs closely given the ongoing market uncertainty. Looking at the segment financials. Revenue in the fourth quarter was NOK 427 million for the segment, which is up 20% year-over-year and up 83% sequentially from the third quarter. The year-over-year growth was primarily driven by higher activity in hydro mobility particularly transit bus applications as well as strong growth in aerospace. Sequentially, revenue also benefited from a clear rebound in hydrogen infrastructure activity with the delivery of 27 hydrogen distribution units in the quarter. For the full year, segment revenue ended at just north of NOK 1 billion which is down 42% compared to 2024. As mentioned, 2024 had a very solid market for hydrogen infrastructure, which was much softer in 2025 and the macro environment has led customers to extend asset utilization and delay new investments combined with a pushout of new green hydrogen projects coming online. Turning to profitability. EBITDA in the quarter was negative NOK 2 million, which includes NOK 31 million of items affecting comparability, primarily related to inventory effects. Looking past these items, EBITDA was positive NOK 29 million, corresponding to a margin of 7%. The underlying profitability reflects higher activity levels combined with the cost reduction measures implemented during 2025. For the full year 2025, EBITDA was negative NOK 268 million, which is also impacted by restructuring items and other items affecting comparability of a total of NOK 118 million. Moving on to the battery systems and vehicle integration segment. This is the business unit that engages in battery systems production and complete vehicle integration of battery electric and fuel cell electric vehicles for the U.S. market. As mentioned earlier today and also as announced in January, we've implemented significant cost and operational measures in the BVI segment to align the business with the current market conditions while trying to preserve long-term optionality. These measures together with the recently received orders from Hino for 14 trucks are expected to support operations of the BVI segment at close to cash neutral levels in the first half of 2026. Operationally, the Class 8 battery electric-truck demonstration programs have been successful with vehicles tested at several leading U.S. logistics customers and very positive feedback on performance, range and reliability. That said, the U.S. market environment, the regulatory uncertainty continues to be very challenging and continues to weigh on heavy-duty electrification resulting in generally longer sales cycles and limited near-term order visibility for the segment. Revenue for BVI in the fourth quarter was NOK 39 million and primarily comprised of vehicle deliveries to Hino and lease revenue from Dallas as we sublease part of the Dallas facility to Hino. EBITDA for the segment was negative NOK 62 million in the fourth quarter, but this includes NOK 45 million of inventory write-downs. These inventory adjustments were largely a consequence of the announced scale down of the segment, which led to a reassessment of inventory composition, bill of materials and future use, resulting in certain inventory being deemed obsolete. Zooming out to the group level and turning to the balance sheet. The balance sheet amounted to approximately NOK 3.5 billion at year-end, down from around NOK 4 billion at the end of the third quarter. On the asset side, we saw sequential decreases in inventory due to the strong revenue development in the quarter, combined with the inventory write-downs we've already described. We saw an increase in trade receivables sequentially, which was in line with higher activity levels, while there was a larger-than-usual decline in property, plant and equipment due to fixed asset impairments in BVI and HMI, as mentioned earlier today. Cash at the end of the fourth quarter stood at NOK 322 million, which is down from NOK 360 million in Q3. On the liability side, the noncurrent liabilities, the increase in noncurrent liabilities reflects the payment in kind infrastructure we have on the convertible bonds. Total equity ended at NOK 579 million, which corresponds to an equity ratio of 17%. The decline versus last year and the decline versus Q3 of this year is mainly driven by losses in the period, including significant impairment changes taken across the year. These impairments are noncash and reflect balance sheet adjustments where necessary. When assessing the equity ratio, it is therefore important to consider the capital-intensive nature of the balance sheet and the long-lived asset base. At the same time, we've taken decisive actions to strengthen liquidity, reduce capital intensity and lower the cost base. And the current equity level is, therefore, not expected to constrain near-term operations. Moving to the cash flow statement, which captures the changes in the balance sheet and income statement. Operating cash flow for the quarter was positive at NOK 14 million. There were significant noncash effects in the quarter, which combined with working capital release of NOK 69 million, brought operating cash flow into positive territory for the first quarter in about 3 years. Cash flow from investments ended at minus NOK 46 million, where CapEx towards PPE was NOK 15 million and capitalized product development was NOK 26 million. The latter number is a bit higher than what we've seen in prior periods in 2025, which mainly reflects the completion and final validation of select product and technology initiatives during the quarter, especially in the BVI segment. Cash flow from financing and currency movements was negative NOK 7 million in the quarter, resulting in net cash flow of minus NOK 39 million and a cash balance at the end of the fourth quarter of NOK 322 million. This slide shows the clear step change that we've had in our cash profile throughout 2025. As we've communicated previously, cash outflow was elevated in the first half of the year, driven by lower revenue, restructuring costs, spillover CapEx from 2024 and limited working capital release. As expected, this improved materially in the second half, reflecting a leaner cost base, lower CapEx and improved conversion of inventory into revenue. Looking ahead, we expect to continue to work down inventory as deliveries are executed, which should support further working capital release. This is expected to offset a significant portion of operating losses, while CapEx will remain at low levels. In parallel, we have announced several structural measures that further supports the cash profile going forward. This includes the agreed sale of the aerospace business, which strengthens liquidity through cash proceeds at closing, discussions with our Chinese joint venture partner aimed at minimizing cash outflow to the Chinese joint venture in 2026 and the recent scale down of the BVI segment with a focus on operating close to cash neutral levels until mid-2026. Taken together, while the underlying business is still expected to consume cash in 2026, the combination of a leaner cost base, low CapEx, working capital release and structural measures is expected to meaningfully reduce net cash outflow and be supportive for our overall liquidity position. With that, I'd like to pass it over to Morten to talk us through the outlook. Morten Holum: All right. Thank you, Salman. Let's take a look at what we expect ahead. We're still facing uncertain market as we enter 2026 with limited demand visibility. We have more comfort in the short-term with a good order book for Q1 and decent visibility for Q2, but we still need to fill the second half of the year. This, by the way, is not an unusual situation to be in at this time of year in our business. We were more or less in the same spot last year, and we do have quite a bit in the pipeline that isn't landed yet. And with what we have done in terms of taking out costs, we do have a leaner cost base in both HMI and BVI with a significantly lower breakeven level. And we'll get a liquidity boost once the sale of the U.S. Aerospace business has closed. But let's walk through the 3 main product areas and look at the demand dynamics for each of them. The hydrogen distribution part of our business serves 2 main customer types, the major industrial gas players and the emerging new green hydrogen players. During 2025, we have made focused efforts towards diversifying the customer base for our hydrogen distribution modules to reduce exposure to a handful of larger customers. And we saw the impact of those efforts in Q4, where demand is increasingly coming from smaller industrial gas and logistics companies, where the use cases remain a mix of traditional gray hydrogen distribution and emerging green hydrogen applications. We remain positive on the long-term potential for our hydrogen distribution business despite near-term demand visibility being limited. It's better today than it was this time last year, but we're not back yet to 2024 levels. And while the order book visibility remains limited beyond the first half of '26, the current customer dialogues are encouraging. So, looking at the overall situation and the existing order backlog, we're planning for modest volume in '26 and currently expect the full year potential could be somewhat stronger than for 2025. Transit bus has developed quite well over the last couple of years, driven by growing demand from municipal and local public transportation authorities across Europe and even some states in the U.S. In Europe, the hydrogen buses are gaining broad momentum across the continent, backed by strong regulatory support. The EU is targeting 100% of city bus sales to be zero emission by 2030. And hydrogen is a good complementary technology to battery electric. Particularly for routes with extended range requirements, hilly terrain or in hot or cold climates. So we see an increasing number of bus OEMs introducing hydrogen platforms as part of their zero-emission offering, and that helps diversify our customer base and is also an important factor to drive adoption. Customers get more options to choose from and can select between different platforms to serve their needs. We continue to expect the overall market for transit bus to remain strong in the near to medium-term, but we expect to have lower volume on our side in '26 than in '25 due to capacity constraints at some of our customers and ramp-up limitations at others. Our overall order visibility then is good through mid-2026. On the BVI side, given the current state of the U.S. truck market, we have, as I mentioned, limited visibility and limited expectations short-term. The overall truck market is weak for all technologies with fleet operators opting to prolong asset utilization and postpone fleet replacements in light of the economic uncertainty. But it's not all dark. Many fleet operators continue to pursue long-term decarbonization strategies, and there are still many state-level incentives for clean mobility available to support those who do. But we also realize that it's going to take time to get up to the required volume run rate to breakeven. So that's why we acted now in January to dramatically reduce the cost base and the liquidity needs for that business. Operationally, the demo programs for the Class 8 battery electric truck have been very successful so far. We've had vehicles in testing at several leading U.S. logistics and distribution customers, and the feedback from these programs have been great. The truck has performed really well, both in terms of drivability, range efficiency and reliability. So with the trucks now delivered in Q4 and the ones on order, we'll be able to increase the number of demo programs and hopefully be able to convert several of those into orders. So we're focusing more short-term in this business now. With the orders received in January, we currently have visibility through the middle of the year. And we can float through that period with minimal use of liquidity. We enter 2026 with a significantly lower cost base and an extended liquidity runway, which will better enable us to navigate through the year and manage the inherent market uncertainty. Our annualized operating costs going forward will be significantly lower. Working capital requirements are also significantly lower given that we can convert things we have in inventory now to cash through sales. CapEx will also be limited given that we have completed the expansion program and have enough capacity for the foreseeable future. On top, the divestment of the U.S. Aerospace business will increase liquidity once the transaction closes. And finally, we expect to conclude on the financing arrangement for the China JV in the near future, which we expect will minimize the cash outflow to China in 2026. So, in sum, all of these measures strengthen our financial position and lengthens the liquidity runway. In terms of priorities for '26, they remain the same as they have been for quite some time. We need to fill the order book. So we've done a lot on the cost side, but we need higher revenue to reach breakeven. We will also continue working on balancing costs with the revenue outlook and continue to review and assess the business portfolio, looking for more capital-efficient ways to operate the company. And finally, all this is with the overall aim on maintaining sufficient liquidity until we have stabilized the business above the breakeven level. It's not that long ago that my main worry was centered around how to find enough people to scale up the business fast enough. For the past year, we've had the opposite challenge. And when managing that challenge, we have become significantly more short-term focused. The portfolio review is aiming to focus our operation around the most attractive parts of the business with good near-term profitability and cash prospects and avoid deploying liquidity to opportunities that are far out in time. At the same time, we also try to retain as much as we can of the future upside potential. We are the leading company in our space with a leading technology platform and leading customer positions. Markets look challenging short-term, but we're confident that our technology will be relevant in the future. So, we're restructuring our operation with that in mind. Simplifying, taking out costs to match the market conditions short-term and bridge the time until markets recover. We're not fully there yet, but we're well on our way, working on the right things, taking necessary measures, and we will continue to operate in that same way going forward. So that concludes our presentation for today, and we will now open it up for Q&A. Mathias? Mathias Meidell: Thank you, Morten. So, we can start off with a question from Frank. Does the order book of NOK 728 million still include aerospace? Salman Alam: Yes, it does. So that still includes aerospace and the aerospace-related backlog from -- if you take from Q2 to Q4 of this year is about NOK 135 million. Mathias Meidell: And then a question from Johannes here for you, Morten. Why was the aerospace business sold to SpaceX instead of using the opportunity to generate orders here? How has the company supposed to make new orders now? Morten Holum: Yes. So, the aerospace market is attractive in itself. And you have to balance out what the future is going to look like with the opportunities that you see that you have internally. And as I mentioned, the very rapid growth in the aerospace business in general and then with the pressure vessels being a very critical component of any rocket or spacecraft. In our dialogue with our aerospace customers, it's clear that they want to in-source this. So when we balance then what does the long-term look like, how much should we put into scaling this business up, we decided that at this time, it's probably best that, that business is developed under one of the space exploration companies, which gives, again, a good home for the business, but also for us, something that alleviates the liquidity concerns short-term. Mathias Meidell: Thank you, Morten. And then a question here from Enric. What is your annualized operational cost base going forward in 2026 approximately, Salman? Salman Alam: So we retain the ambition around cost cuts, as we've stated previously. So, we're still looking for NOK 350 million of savings compared to where we were at run rate at the end of 2024. So that's still the ambition for 2026. Mathias Meidell: Thank you. So that was actually the last question we've gotten today. So I'd like to thank you both for presenting. And then thank you all for following us today. And on behalf of Hexagon Purus, I would like to thank you all for spending time with us this morning, and we look forward to seeing you in the next quarter.
Nicola Gehrt: Thank you so much, and good morning, ladies and gentlemen. It's my pleasure to welcome you to our first quarter 2026 results presentation here at the Congress Center in Hannover, where we will be holding our AGM later this morning. My name is Nicola, and I'm Group Director, Investor Relations at TUI, and I'm delighted to be joined for the presentation by our CEO, Sebastian Ebel; and our CFO, Mathias Kiep. We look forward to sharing with you the details of a very positive start to the new financial year, along with an update on current trading and the reconfirmation of our outlook. In the interest of time, we will keep the presentation brief before we open the floor for your questions. We kindly ask you for your understanding that due to the AGM, we will need to limit the session for 1 hour. And with that, I have the pleasure to handing over to Sebastian. Sebastian Ebel: Thank you, Nicola. A very warm welcome from all of us here in Hannover. The sun is shining the first time since a couple of weeks, but the snow is still outside, but we hope now for warmer weather. You know the agenda, it's very similar as you are -- as you know it. I will do a short introduction about the last quarter. We are very happy about the results. Last year, first quarter was good. This year, it's even better. We have seen an increase in EBIT of EUR 26 million despite the cost of the Melissa hurricane of Jamaica. I will talk about this later on. And this improvement is based on a positive HEX trading momentum, but also an improvement in Market and Airlines. And we have seen strong demand in Holiday Experiences business and we have seen the right demand for our risk capacity, which we use -- which we wanted to fill as much as possible with the right margin. And you remember that the main target for the retail is also for the sales activities to fill our assets. And by having this positive momentum, we can reaffirm the guidance -- the EBIT guidance for '26 of 7% to 10% growth. And we also see this growth for the coming years. If we go into the details, first quarter in Holiday Experiences, we were able to improve the result by EUR 18 million despite the one-off impacts in hotels. The Jamaica, you remember, Melissa, who was affecting the business in Jamaica, we had to close hotels the Riu hotels, the Royalton hotels for the whole time the first quarter, and you will see it later, we also had to cancel a significant amount of flights from the U.K. to Jamaica. Nevertheless, we have -- if we take the one-offs out in Hotels & Resorts, we would have seen a EUR 6 million improvement and without that, we are EUR 19 million below. And exclusive of Jamaica, you see that the occupancy even in winter grew by 1% and the average daily rate grew by 5%. Cruise is very strong. We have seen a significant improvement in result despite a significant higher capacity of 16%. Occupancy were up by 3%, almost reaching 100% and having the same daily rate, an outstanding result. And also Musement and winter is not so important, has seen a slight improvement. When we look at Market and Airlines, we also have seen a EUR 10 million improvement versus prior year. This includes a negative impact of Jamaica, EUR 6 million. As I said, we had to cancel flights to the island, and this had a EUR 6 million impact. For us, it has been important and it is important and will be important that we have the right risk capacity because with the right risk capacity, we can protect our margin. And the growth today in the future should come from dynamic packaging. And that we did that quite well in this quarter is shown by the load factor, which went up by 1%. And what we see is also the first benefit of our cost reduction program. Some special items we have seen and initiatives we have seen in the first quarter. We are really proud that we announce our market entry and open our network in Romania on Thursday, I will be there. And it will be after [indiscernible] which we opened 2 years ago. It's doing very well. It will be the second in the market which we opened. We had a prelaunch a couple of days ago. We see quite promising demand and good margin. And again, it will help us to fill our assets in Europe, but also outside Europe. We also are increasing our River Cruise fleet. The second Nile ship had been launched, and we have now -- we operate now successfully 6 vessels. We have put a lot of effort in improving further development in our app. We, as you may recall, we are bringing forward activities on the same global IT platform. The app was the first platform, which we not only harmonized, it's the same one. And now we do see day by day the benefit of doing so. If you look at the app today, the AI application is really a success story. And we have seen a significant conversion growth and uplift in bookings through the app. And the app is the most efficient way to book and to keep customers and to increase retention, and we are very happy. And the potential for us is huge if we compare us with best of breed. We also signed a partnership agreement with Jet2 on the Musement activity platform. We are very thankful for the trust Jet2 gave to us to integrate the Musement platform after Booking.com, easyJet and lastminute.com, it's the fourth big wholesale partner. We don't take it for granted. It's a big obligation for us like for Booking, like for easyJet, like for lastminute to deliver outstanding products to the Jet2 customers. We are growing on the hotel side. We have a strong pipeline. As you know, we opened 5 hotels in Africa. We opened 1 hotel in Vietnam. So these are -- especially these are the 2 regions where we are growing, and we want to grow further. Sustainability is key of our DNA. It's not a trend which may have faded away a little bit. For us, it's very important for our customers for the climate, and it's commercially a sound business case, and that was recognized by achieving the A rating of the CDP. And Mathias, if you like to go into the numbers. Mathias Kiep: Thank you very much, Sebastian, and a very good morning also from my side. Thank you for joining the call. As always, I want to give an overview about the performance, then the EBIT bridge and then details to P&L, cash flow and the balance sheet. And Sebastian, as you said, we are very pleased with the first quarter results and this first step into the new fiscal year. And -- if you look at this, it's really great that we not only have an operational improvement of the numbers, EUR 77 million, the highest underlying EBIT that we've ever seen in this quarter, but also another progress and step improvement in our balance sheet and the underlying financial profile. Net debt improved another EUR 0.5 billion year-on-year. This includes EUR 0.2 billion FX impact, but the underlying decrease, EUR 0.3 billion is coming from all the measures that we undertook over the last 12 months. And as elements of this progress, I would like to highlight: one, we've now also taken the final cruise ship from Marella into ownership. And as you may have seen and recall, we have also repaid early the outstanding remaining amount of the old convertible 2028. And as you said, Sebastian today is the AGM where we will return to dividend payments. That is, for all of us, a very important and great moment. So for the details, as I said, EBIT bridge, P&L, cash flow and balance sheet. Now as you saw in the front section, there's really a strong underlying development in all segments. In the hotels, please remember the impact that Jamaica has. Second, that we had a positive one-off last year of around EUR 15 million. We also called that out. And against that, we have the results in this quarter. So overall, an operationally positive development and a negative impact through these one-offs or the not repeat of one-offs. Then you see the very strong development in Cruise. And I think it's really great to say not only the capacity addition and the earnings that come from that in TUI Cruises, but also the constant improvement in Marella and in the operational development of TUI Cruises. So alone, the rate increases in Marella for the winter, we talk about 5% again. I think with the ships that we have and with the concept, that's really a fantastic achievement. Musement, really good development, strong cost control. And then as Sebastian mentioned, even despite the impact that we also see there in Jamaica with the long-haul business, a very strong operational development, and it's so important to manage the capacity, one; and second, to make sure that we continue to deliver in our own assets and business in holiday experiences. And with the EUR 77 million, a really strong start into the year, EUR 26 million more than we had the year before. Now to the P&L, two things to highlight. One, it's the first underlying result, which is positive pre-minorities in this quarter. In tourism, you normally have a negative result, also operationally in the winter. So this is even more so very pleasing to see. Also as a result, our loss per share halved effectively for that quarter year-on-year. And one contributor to that is another improvement in the interest expense that comes from all the measures that we did, in particular, the lease portfolio restructuring and taking the ships and ownership. So that's another EUR 10 million improvement that helps us to reaffirm our guidance of EUR 325 million to EUR 350 million. On this number, please remember that most of our payments dates for financial instruments are more in the second quarter, so it's quarter 2, quarter 4. So we can't take this times 4. There's a higher interest payout in Q4 and Q4 compared to Q1. And -- with that to cash flow and cash flow is in line with expectations. The very important element is that the structural savings that we worked on and that we achieved interest payments, the fall away of the regular contributions to the U.K. pension scheme and a reduction in the lease and asset financing repayments, that helps to offset the higher investments that we wanted to see in the hotel segment and that we need to do in context of the Boeing delivery portfolio. And all in all, a EUR 50 million improvement in the first quarter on the cash flow side. Coming to the balance sheet. And as I said, the EUR 0.5 billion improvement is driven by the improvement that you see in the lease portfolio, aircraft and ships in particular, and includes also EUR 0.2 billion FX movement. Now this strong performance and the strong advantage, we will not see this coming and going through the rest of the year because we will see more aircraft being delivered. I think this year, Sebastian, we talk about up to 15, maybe a bit more of planes coming from Boeing. So that will -- because they directly move on balance sheet, impact that. But overall, we continue to see a further improvement of net debt in the full fiscal year. And concluding from my side, because we got the question a lot about the mechanics for the dividend payments. So today is the AGM. We put that to road show. Shareholders are expected to approve the dividend payment. And then tomorrow, we will pay into the system. So our shares go ex dividend. And then on the 13th, there will be the payment date from the system to shareholders. And with that, back to Sebastian on the way forward, how our bookings and the guidance look like. Sebastian Ebel: Thank you, Mathias. So a good start into the new year. How does the future look like? What do we expect? If you look into Hotels & Resorts, we do see that the available bed nights will significantly grow in the second quarter, but also for the full half year. The occupancy for the second quarter is on the same level like we have seen last year. This includes -- that excludes the Jamaica effect. We are with 4% below last year when it comes for the second half year. That is not a concern to us because we are still in the ramp-up phase when it comes to Jamaica. But also, what we do see, by the way, this is also very valid for Markets + Airline. We see a late booking trend. The available -- the average daily rate increase is about 3%, which is a healthy number also to cope with the cost inflation. On Cruise, the outstanding picture remains. What we do see is that the capacity growth is getting smaller, but it's still significant. Occupancy is 4%, respective 3% in the second half up. And you should recall that the ships are 100% full. So this will further reduce to 0. But what we now can do is to optimize the price because we are so well ahead in being booked the ships. Musement, we expect a mid-single-digit growth for experiences. And this in a market which we do see is a very good result and shows that Musement is doing an excellent job. When it comes to Markets + Airline, and I would like to start to reiterate again, we slightly reduced our risk capacity, it's all about to sell the risk capacity, flight, hotel owned assets with -- in a way that we protect margin. The growth should come through the dynamic products. And by having said so, we will see a winter on the same number as last year, especially when we take into account the last-minute business. What we do see is -- I just look, for example, for the number of yesterday, we see that after the strong winter we had where the footfall was significantly down for retail, we see that the weather has normalized in the last 4, 5, 6 days, and therefore, the business has immediately picked up significantly. And for summer, we are slightly below last year. Also there, we are very confident that it will move into the same level as last year. And the focus is on protecting margin and the focus is on filling our risk capacity to fill our aircraft and our hotels. We are well hedged, as you can see, and the hedge position gives us an opportunity with today rates. And by having said so, we can reconfirm the guidance, the increase in EBIT by 7% to 10%. And as I said, a good start in the first quarter. We are confident for the second quarter, and we also expect a good summer. There's one chart left, the summary. And just to repeat, both sectors support each other. The vertical integration is -- makes our business model strong and resilient. The marketplace benefits from the exclusive products and the Holiday Experiences benefit from the strong sales. And together, we protect revenue and margin. And as I said, this should bring us to the ambitious growth guidance we have given. And therefore, we also could reiterate not only the dividend proposal for today, but also for the coming years, 10% to 20% of the underlying EPS. Nicola Gehrt: Thank you, Sebastian. Thank you, Mathias. We are now available for Q&A. Operator: [Operator Instructions] Our first question comes from Karan Puri from JPMorgan. Karan Puri: I've got two quick ones. One on the summer trading that you just mentioned. So tracking at minus 2%, how confident are you to hit your 2% to 4% top line growth guidance in that context? If you could take that one first, and then I'll move to the second one. Sebastian Ebel: As I explained, we are confident that we will achieve last year's level. Mathias Kiep: And on the revenue -- and I think you also asked about the revenue guidance, 2% to 4%. I mean if you look at Q1, there is -- on constant currency, there's a 1% improvement. Now we will also see increase of sales from our Holiday Experiences segment that also needs to be factored into this revenue guidance. And that's why we're overall reiterating our guidance also on the sales side this morning. Sebastian Ebel: And what I would like to remind you, the strong growth in TUI Cruises, you don't see in the TUI AG numbers, not in our numbers because the revenue is not consolidated. So this significant impact is not impacting TUI. So this is outside the consolidated TUI revenue number. Karan Puri: Yes. Understood. And second question was actually on your partnership with Mindtrip and other LMMs. Is it possible to maybe share some early indications of progress made with these partnerships? Anything on the distribution unit economics will really be helpful here. Sebastian Ebel: Yes. So distribution is changing. We very much believe in retail. That's key, and it's commercially a sound case because the margins and because of the early sales are strong. We're seeing and expect a very significant change from web to app and to LMMs and social media. And we put a lot of effort and investments into creating an outstanding app. We have releases every 2 weeks. It's really improving a lot, and we do see that in the numbers -- growth numbers in the significant improved conversion. So every 2 weeks, you will see new applications, including AI applications and new ways of search. We have started collaborations with LMMs and Mindtrip. We have started to sell to ChatGPT. So I'm really proud that we're there on the [indiscernible], on the lane to overtake. And at the moment, we do see that we get the first numbers of traffic. It's still low. It's still more that people get information, but they can book with us as well. And we really want to use this channel as good as possible. Operator: The next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: Can you just help us understand these hotel KPIs with and without the Jamaica impact? I mean, are you able to tell us what the occupancy is in Q1 and Q2, perhaps with Jamaica included, so we can see the sequential trend through to the second half? Because I'm seeing some investors concerned about what that means for the hotel trend, but that's not quite understanding how you're presenting those KPIs. And then just the second question would come down to the reduced interest costs and the impact of bringing assets back on to the balance sheet. Can you just explain whether these gains are one-off or whether they are sustainable? Are they onetime things as you bring the assets on balance sheet? Or are they all enduring improvements to the interest cost? Sebastian Ebel: I think we have stated that the Jamaica effect was EUR 15 million on the Hotel's side, and that should be reduced to 5% to 10% in the second quarter, which means that a significant part of the 4% is based on the Jamaica effect. And there, we would expect till the end of the second quarter, this should be very much normalized to it. And that's why we feel confident about the occupancy for the hotel business in general. Mathias Kiep: Yes, and on the interest results, so what you see for Q1 versus last year is really a structural improvement. And we had last year and -- a better interest environment with regard to interest income. And also, we had a smaller one-off during the year that we also published that was in H2. And that's why the guidance, the lower end is in line with what you saw as a full result in last year. But the improvement, that's what we worked on is really structural. So it's replacing leases from the past that are not with regard to market terms that we can get today with more attractive instruments or with cash proceeds. Operator: The next question comes from Leo Carrington from Citi. Leo Carrington: If I could ask two questions, please, both really about your demand. Firstly, in terms of the demand against your risk capacity adjustments, can you give a bit more color of what these -- what the shape of these adjustments was? Is it certain destinations, certain dates or across the board? I'd be interested to know how you're planning for this year? And then secondly, in terms of how we should understand consumer preferences, what's your view on the differing trends between the hotels which is perhaps more competitive, later booking trends versus cruise, which seems to remain very strong. Is it the product? Is it demographics? I'd be interested. Sebastian Ebel: As you have seen, the occupancy in Markets + Airlines in the first quarter was up 1%. This, you can put into -- relation to the slightly lower number of customers. What we have taken out and capacity is not our own flying, not our own hotels. It's third-party commitments. We had full chargers, allotments, guarantees and that we have reduced significantly because we also believe that this capacity is available dynamically. And we wanted -- just wanted to make sure that our risk capacity, the ones which we produce ourselves, we can fill for a decent margin. So it's all about third-party capacity. We haven't seen a negative impact on the hotel business, except the Jamaica business. And this is not a surprise. All the hotels, the Riu hotels, and the Royalton were closed. The Riu hotel started to get opened in January. The Royalton hotels will be opened just before Eastern because they use the time for renovations. So this is an impact which we couldn't avoid, we do see that the business is healthy. Of course, there are markets which are stronger than others. What helps is the international sales organization we have, if one market is less good, the other one is better. When it comes to consumer preference, one thing is clear for us. That's why we invest so much in international sales activities. We want to make sure that if one market is weaker, we can get the customer from somewhere else. Therefore, the share of international customers in our own assets is growing, and that gives us the confidence to really see, again, outstanding numbers there. If you look at the overall demand, the one group which is buying later are the families and also this is understandable to see. Leo Carrington: Can I just ask a follow-up on that first point on the risk capacity? Do you get the sense that this -- the allotment say in the hotel capacity that you've not taken on this year has gone to other tour operators? Or is it possible that you could actually fill it dynamically later in the season? Sebastian Ebel: Yes. That is very clearly the concept. It doesn't mean that we don't have a great relationship to the hotel. It's sometimes also the wish of the hotel. It's the wish of ourselves because then it's up to the hotel -- hotelier to know what is the best price he want to offer to get the volumes. And this uncertainty, what is the right price we take away if we still work with the hotelier on a very exclusive basis, but having a risk capacity, which is mainly -- is not there anymore, but the capacity we use is by getting dynamic rates. So the model is in the longer tail changing to dynamic. And this is something which we will see huge benefits in the future. Operator: The next question comes from Andre Juillard from Deutsche Bank. Andre Juillard: Two questions, if I may. First one on the source market. Could you give us some more color about the trend you are seeing in the U.K. and in Germany, which are your 2 first markets? And in terms of destination on the other side, you are mentioning that Greece, Balearics, Turkey and Egypt are very strong. Could you also give us some more color about the trend you are seeing if you have some new destination emerging? And also what is the most profitable one or the one on which you see the strongest operating leverage? Sebastian Ebel: I will not give you the details which one is the most profitable one. I do apologize for that. Egypt is very, very strong. Bulgaria and Tunisia, so the lower cost countries are strong. Greece and Spain are stable. Turkiye is suffering at the moment because of high inflation and low currency devaluation. So -- and it's more a family destination. If you look at our clusters, we do see strong demand for Sansiba. We also see good demand for the Middle East. For Asia, we see less good demand for the U.S. And if you look into the main markets in Europe, the Eastern European market, and that's why we are so happy to move into Romania. Germany and the U.K. are stable, but with significant competition. Germany, as I said, will see a catch-up because we had since the week before Christmas, minus 5, minus 10, minus 50, 0.5 meter snow and the footfall was really 1/3 of what we had seen before. So that's why we expect that Germany will be stable or will see a slight growth. And I would say that the U.K. market is -- the sun and beach market is -- especially mid-haul is strong. On the long haul, there might be some more weakness, but that's what we have to wait for. Andre Juillard: Do you see anything specific on the source market and destinations that was not anticipated or something which is really scary or anything special? Sebastian Ebel: I mean we are happy about the strength to Egypt because we benefit from us. Turkiye is a concern, but I mean, that's the good thing if you are more and more going to dynamic, if you can bring clients from A to B that a lower demand in one destination is -- needs some replanning but didn't kill profitability. So that's good. I mean maybe it will be interesting to see how the demand to North America will develop, but we don't fly to it. It's very small. It's not relevant for us. It's nice to have, and it clearly has an impact on the revenue numbers, but it's from a profit point of view very, very small. I think we have flight per week to Melbourne in California. That's all. So there is no -- and one hotel in Miami, the Riu Hotel. So the exposure is very, very minimal. But of course, it has an impact on the revenue side. Operator: The next question comes from Kate Xiao from Bank of America. Kate Xiao: First, I want to ask about your river cruises product, which you kind of highlighted as part of your Markets + Airlines on one of the slides. Can you talk to us about the market opportunity there? It looks like you guys are adding capacity. And what's your sense of the latest demand and pricing trends? Is it healthy? Is it stronger or weaker than ocean cruise market? That was the first question. And the second question on your Musement partnerships. You're highlighting kind of new partnerships with Jet2 on top of existing partnerships. Can you help us understand the long-term market opportunity with these partnerships? And how is the economics looking compared to kind of your own traffic? And also over the long term, what's your margin goal for this business? Obviously, you guys are ramping up profitability. What do you think is the long-term realistic margin goal theoretically? Sebastian Ebel: So on cruise and river cruise, the demand is big. I mean there's one major difference for a new ship, the profit is EUR 60 million, EUR 70 million for a river ship with maximum 200 passengers compared to 3,000, 4,000 is limited. But nevertheless, it's a great product. You get access to customers to bring into the TUI ecosystem, and therefore, we like it. So strong demand. The good thing is, and you may have heard a lot of orders, but the restricting factors are the slots in the harbors, in the city harbors. And that protects very much the margin, and we are very happy to own slots, and therefore, it's a very stable business. Can it scale to 10 ships, 12 ships? Yes, but it's still 10 ships with 200 passengers and which is just half the size of an ocean cruise ship. So it's nice -- it brings -- it's profitable, but it's good, especially good for the TUI customer ecosystem. On the partnerships, yes, you're right. It's 1 out of 4, and there are smaller ones as well. And I think it's great if our partners can sell more to their customers, profitable, and it's good for us as a producer. We have 2 focuses -- or we have a lot of focus, but 2 main focus on growth. One is through the wholesale partnerships. Second, on the own products because our business model or it could be, but we have decided not to do is not to sell the long -- I mean, we also sell the long tail, but that's not where we've spent the marketing money for. We spent the marketing money to sell the own products where the margin is not 10%, not 12%, but it's 30%, 40%. The catamarans, electric bicycles, or whatsoever, the special entries into coliseum and other things to really where we have created with our own buses, for example, own products because there, we have the big customer base. We can fill them from the first day onwards and they bring us good margin. So if we say 7 -- or 5% or 7% growth, it's mainly on own products and less focus on the long tail that comes along with the customers we have gained. And we hope, of course, if the customer who lives in Berlin wants to buy a theater ticket in Berlin, they also use our app. But there, the margin is EUR 2 or EUR 3, very limited. When this customer, for example, buys a transfer at Mallorca Airport, the benefit is EUR 20 or EUR 30 or EUR 40. So that is -- it's not scale. It's really -- of course, it's also scale, but its scale more from B2B, and it's more really incremental significant margin through own products. Operator: [Operator Instructions] The next question comes from Richard Clarke from Bernstein. Richard Clarke: Three, if I may. Just want to kind of loop back on the philosophy around the shift to dynamic packaging, and I think you say it's around sort of preserving margin. If we were to look next year into sort of 2027, I guess with -- you'd expect lower lease costs on planes, lower fuel costs with the weak dollar. And so the profitability of flying is probably going to increase for you. Could that possibly lead to a lean back into risk capacity? Or is the direction of travel always going to be towards more dynamic packaging irrespective of what the cost environment is? And then second question, just on cruise. I guess, pricing up 1%. You said in your prepared remarks, you see some opportunities to push a bit harder on price maybe beyond the current capacity growth. I guess you must be selling cruises more than a year out. So what is the pricing looking on that? Is there some expectations maybe into 2027 that we can start seeing cruise prices up sort of mid-single digits. And then lastly, a very quick one, but do you get any sense that you're losing any demand because of the World Cup in the summer of this year? So any sort of U.K. or German customers traveling over to the U.S. for the World Cup rather than maybe taking a TUI holiday? Sebastian Ebel: Thank you for the question. It's maybe an aspect I didn't get. We are in the middle of the transformation in Markets + Airlines. And the transformation is on the Market side and on the Airline side. On the Market side, it's especially to connect NDC airlines. To give you an example, last week, we -- or on the weekend, we integrated Finnair NDC into the Nordic system. And by getting this contract, we have seen a significant uplift for lower distribution cost. Of course, Finland is a small market. But with this thing to get more and more carriers on the lowest price tariffs, which we haven't had yet. This will help us to get the content and to get the content for the best price. The second part of the transformation is Airline. And in the Airline, we had 5 airlines or 6 airlines which were run separately. We brought the airlines together as one airline, two AOC and U.K. because not being part of the Europe and the European airlines. We have seen by bringing it together on the operational side, a huge cost improvement. If you look at our denied boarding compensation, it's 1/3 of what it had been because now the Belgian -- if there is an AOG in Germany, the Belgian airline that can fly and so on. What is still missing is the one commercial piece. So if you are a Spanish customer, you don't find a Spanish website where you find the flights to Frankfurt and to London. That's -- we are just doing it at the moment, as I speak, to bring this into the market. And we lose 20% or 30% of the demand because we haven't run the airline like an airline. And by commercializing the airline, and -- we will see despite the operational benefits, which we really realized this year, we will see the commercial benefits from next year onwards with a significant impact for the summer. On price in cruise, if we would -- I mean, when we increased the demand in the last 24 months and not the demand, the demand as well, but the capacity by 45%, 45% increase TUI Cruises demand. And I must say I was skeptical about not selling the volume, but price. But it was selling by far better than we had anticipated. And if we would have known that strong demand, we could probably have risen the price by 3%, 4% more. Fortunately, we are very well sold. So what we do now on the pricing side has an impact, but because the volume is small, the impact is limited. So the big impact will be in the coming years where we are good sold above the years before, but still a quite significant volume to be sold. And the last question -- the World Cup, I don't know. The effect had been strong 15 years ago, or I would say, 16 years ago. It has become slower -- smaller and smaller year-by-year. It -- one reason is 16 years ago, there were hardly big TV screens in a hotel or in your hotel room and you haven't had the live transmission. Today, it's very different. People can watch the game they want to watch on an iPad or on the computer. And therefore, I would say, yes, there is an impact, but this impact is small. Operator: The next question comes from Cristian Nedelcu from UBS. Cristian Nedelcu: The first one maybe on the Markets + Airlines, the splitting capacity dynamic versus risk capacity. I think it used to be 15% dynamic and 85% risk, I don't think it changed that much. But could you tell us how do we think about this year? We think about low single-digit declines in risk capacity and 8% growth in dynamic capacity? Or what's the range of outcomes for this year? And the second one, could we go a bit in more detail through the EBIT bridge in Markets + Airlines year-over-year? You have the forecast or the outlook for strong growth versus the EUR 200 million EBIT last year. Can we talk about the moving parts? Because we have the cost cutting 30% of the EUR 250 million that helps. But in the same time, we do have some wage inflation. We do have some inflation, I would guess, in your overhead and distribution costs. Your book revenues for the summer are down 2%. Now I'm making an assumption here. If the overall revenues are down 2% year-over-year, there's EUR 400 million lower revenues in the tour operator. How much are you cutting from your capacity cost year-over-year on accommodation airline and so on? Could you tell us a bit more the moving parts there? And what gives you confidence that you can indeed grow the EBIT in a strong way year-over-year? Sebastian Ebel: First, our main profit, and therefore, I'm always a little bit puzzled by so many questions comes to Markets + Airlines. The main driver for us is the Holiday Experiences business and the distribution makes sure that our assets are filled well. When you look at the dynamic share or the decrease in the risk capacity, it's not on our own assets, it's on third-party assets. So it has no impact on our own assets. And therefore, in the first quarter, for example, the load factor on our airline has even increased by 1%. If you ask about the split, we are not talking about a 2-digit percentage. It's a small or medium big 1-digit percentage. Mathias Kiep: Towards 20%, maybe. Sebastian Ebel: Yes, towards 20%. The future growth will come, of course, from dynamic packaging. And we -- due to the cost measures, we want to and will reduce the overhead distribution, IT cost in relation to the revenues. Operator: We have no further questions. So I'll hand the call back to the management team for any closing comments. Sebastian Ebel: Good. So we have had a good start. We are confident about the future for this year. Therefore, we could reconfirm the guidance. And we will benefit from all the measures we have taken, right capacity, a better cost structure, higher efficiency. And we are middle in the process of transformation to prepare the company for growth. And therefore, we are very confident with the guidance we have given. Operator: This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.
Operator: Thank you for standing by, ladies and gentlemen, and welcome to Coca-Cola HBC's conference call for the 2025 full year results. We have with us Zoran Bogdanovic, Chief Executive Officer; Anastasis Stamoulis, Chief Financial Officer; and Jemima Benstead, Head of Investor Relations. [Operator Instructions] I must also advise that this conference is being recorded today, 10th of February 2026. I now pass the floor to one of your speakers, Jemima. Please go ahead. Thank you. Jemima Benstead: Good morning, and thank you all for joining the call. I'm here with our CEO, Zoran Bogdanovic; and our CFO, Anastasis Stamoulis. In a moment, Zoran will share the key highlights of 2025. Anastasis will then take you through our financial performance in more detail and discuss the outlook for 2026 before handing back to Zoran, who will discuss the strategic growth areas for the business. We will then open up the floor to questions. We have about an hour for the call today, which should give plenty of time for a good discussion. So please keep to 1 question and 1 follow-up, waiting for us to answer the first question before moving to your follow-up. Finally, I must remind you that this conference call contains various forward-looking statements. These should be considered in conjunction with the cautionary statements in our results press release this morning and at the end of our slide deck. And with that, I will turn the call over to Zoran. Zoran Bogdanovic: Thank you, Jemima. Good morning, everyone, and thank you for joining the call. 2025 was another strong year for Coca-Cola HBC. We've executed against our strategy and delivered a strong financial performance, all while operating through a mixed market environment and continuing to invest across the business for the long term. Let me call out key highlights from the year. 2025 marks the fifth year of consistent strong growth and share gains. Both our revenue and EBIT growth was strong and high quality, underpinned by continued volume momentum despite a range of macroeconomic conditions. Importantly, volume growth continues to be led by 2 of our strategic priority categories, Sparkling and Energy. And we continue to win in the market and deliver value to our customers gaining a further 80 basis points of value share in non-alcohol ready-to-drink in 2025. We also remain committed to investing in the business to unlock long-term growth. Throughout the year, we continued to invest in our 24/7 portfolio, in our bespoke capabilities, in our people and in sustainability, which we truly view as a growth enabler. In the year, we made further good progress in our most material areas: packaging, climate and water. And last, but certainly not least, in October, we took a significant step forward in our growth journey with the agreement to acquire Coca-Cola Beverages Africa, or CCBA. Disciplined execution of our strategy enabled another year of strong financial performance. Let me share the key highlights before Anastasis goes into more detail shortly. Revenue grew by 8.1% on an organic basis with volume growth of 2.8%. Comparable EBIT was nearly EUR 1.4 billion, up 11.5% organically. We also delivered 60 basis points of EBIT margin improvement leading to strong comparable EPS growth of nearly 20%. Finally, we achieved free cash flow of EUR 700 million, drove a further increase in return on invested capital and increased our dividend. As you know, in October, we announced the acquisition of Coca-Cola Beverages Africa, the largest Coca-Cola bottler in Africa. This acquisition presents a highly compelling strategic rationale, which at its core is about growth. The acquisition materially enhances our presence in Africa by bringing together 2 leading bottlers in the continent with strong track records of growth and deep commitments to investing in talent and local communities. Together, we will represent 2/3 of Africa's total Coca-Cola system volume. This combination further diversifies our geographic footprint, increasing our exposure to high-growth markets with compelling demographics, including sizable and growing populations and economies with significant potential to increase per capita consumption. The acquisition is consistent with the pillars of our growth strategy and vision of being the leading 24/7 beverage partner. CCBA is the leading player in NARTD across its markets with a winning portfolio of over 40 global and local brands, further strengthening our exceptional portfolio. We also see a clear opportunity to leverage our strength of operating in dynamic emerging markets, we can share best practices, apply our best-in-class bespoke capabilities and invest further in CCBA to drive growth. Finally, we expect the acquisition to enhance value for all stakeholders. For shareholders, it is expected to be low single-digit EPS accretive in the first full year following completion, with a clear prospect of creating more shareholder value over the long term. In terms of progress towards completion, let me outline where we are. On the 19th of January this year, we received approval from Coca-Cola HBC shareholders of the resolutions put forward at the extraordinary general meeting. Our teams continue to work through the customary regulatory filings and anti-trust approvals and preparations for the secondary listing of our shares on the Johannesburg Stock Exchange. Overall, we remain on track to complete the acquisition by the end of 2026 and are working on integration plans so we can hit the ground running. We look forward to sharing more details on the opportunities ahead for the combined group post completion. Sustainability remains at the core of our strategy, enabling us to deliver growth while creating value for the communities we serve, our partners and the environment. In 2025, we saw further recognition of our progress, placing us among the leaders of the global beverage industry with top scores across major benchmarks. Let me share a couple of highlights from 2025. We advanced our circular packaging agenda with the launch of a new collection hub in Nigeria and the expansion of deposit return systems to Austria and Poland. Recently launched systems in Romania, Hungary and Austria achieved average return rate of over 80% in 2025. Partnerships continue to be a key driver of progress. As I mentioned last summer, together with Carrefour and the Coca-Cola Company, we initiated a sustainable linked business plan with Romania piloting a program that unites suppliers to cut emissions and improve packaging sustainability. Supporting communities remains a central priority. In 2025, Europe faced severe wildfires and floods. And I'm proud that the Coca-Cola HBC Foundation was able to commit EUR 2.3 million in disaster relief. The group also announced an additional $5 million for the foundation to support communities starting from 2026. Overall, we've made strong progress towards our Mission 2025 goals with many targets reached ahead of schedule. Full results will be published in our 2025 integrated annual report in March along with details on the next phase of our sustainability journey. With that, let me hand over to Anastasis to take you through the financial results of the year in more detail. Anastasis Stamoulis: Thank you, Zoran, and good morning, everyone. So let me start with the strong top line performance. 2025 organic revenue growth was 8.1%. We delivered another year of good volume growth, up 2.8%, driven primarily by sparkling and Energy as Zoran has mentioned. I am pleased that all 3 segments achieved volume growth or maintained volumes despite an ongoing challenging backdrop. Organic revenue per case increased by 5.1% and normalization versus previous years as we expected. We continue to implement targeted revenue growth management initiatives while navigating lower levels of inflation across most markets. Overall, pricing remained the largest driver of revenue per case. However, category mix and package mix were also positive, with continued improvement in single-serve mix, which expanded by 130 basis points in the year and is now 310 basis points higher on a 3-year basis. We achieved another year of double-digit organic EBIT growth with comparable EBIT growing 11.5% to nearly EUR 1.4 billion. Our comparable EBIT margin increased 60 basis points on a reported basis to 11.7% and 40 basis points organically. This marks a record high EBIT margin for our company, which is great to see, having navigated several years of inflation and currency pressures. Let me break down the drivers of this. We improved gross profit margins by 70 basis points with good topline leverage. Operating costs overall stepped up by 10 basis points in the year. However, breaking this down a bit further, operating expenses, excluding direct marketing, improved by 30 basis points as a percent of revenue. You may recall that in 2024, we faced headwinds in our operating expense line due to currency devaluation in Egypt, which we cycled this year. However, offsetting this, direct marketing expenses stepped up by 40 basis points as a percent of revenue as we invested in activations across categories, but notably the Share a Coke campaign, the Winter Olympics and the new Finlandia marketing campaign. Let me now look to the drivers of performance by segment. I'm going to discuss these figures on an organic basis. In the Established segment, revenues grew by 2.3%. Volume was in line with last year, reflecting mixed trends across markets. Sparkling volumes were slightly ahead of last year with high single-digit growth in Coke Zero and mid-single-digit growth in Sprite. Energy continued to grow strongly, up high teens, still declined low single digits, although we delivered mid-single-digit growth in Sports Drinks. On a country basis, volumes in Italy were slightly positive despite our decision to prioritize profitable revenue growth in water in the second half of the year. Excluding water, volumes in Italy grew low single digits. In Ireland, volumes grew low single digits with consistent growth throughout the year, whereas in Austria, volumes declined in a more challenging environment. Established revenue per case was up 2.3%, driven by pricing as well as positive package and category mix. Established segment comparable EBIT declined 2.8%, primarily due to a step-up in investments, as previously noted. Turning to the Developing segment. Revenues were up 6.1%. Volumes grew 0.8% with Sparkling volumes slightly higher than last year, driven by Coke Zero and Sprite. Energy saw accelerating momentum with strong double-digit growth. Stills declined high single digits, driven by water and juices despite strong double-digit growth in Sports Drinks. In terms of country performance, the Czech Republic was a standout performer, growing volumes mid-single digits despite a tough comparative. In Poland, volumes declined for the year, though we saw an improvement in the second half of the year. Developing revenue per case increased by 5.3%, driven by pricing actions taken to manage inflation supported by a favorable category and package mix. Comparable EBIT increased by 5.6% year-on-year with EBIT margin in line with the previous year. In the Emerging segment, revenue grew by 13.2%, driven by both volume and good price mix. Emerging markets, volume grew 4.4%. Sparkling volumes increased by mid-single digits with mid-single-digit growth in Trademark Coke, Sprite and Adult Sparkling. Energy grew strongly despite cycling tough comparatives driven by affordable brands. Stills volumes grew low single digits, led by water and further supported by very strong growth in Sports Drinks on a small base. At a country level, the performances of both Nigeria and Egypt have been very strong despite external challenges with volumes growing mid-single digit and low teens, respectively. Emerging segment revenue per case increased 8.5% and moderation compared to previous years, reflecting lower levels of inflation and currency headwinds for Nigeria and Egypt. We benefited from pricing actions as well as from positive category mix. Comparable EBIT grew 23.2%, a strong rebound due to organic growth as well as cycling the impact of the foreign currency remeasurement in Egypt last year. Moving back to the group P&L. We saw comparable earnings per share grew 19.7% to EUR 2.72. This was supported by the strong EBIT delivery, lower net finance cost than previous year. As mentioned at the first half results, we have seen lower than usual finance cost this year due to several factors. We benefited from lower foreign exchange losses compared to 2024 due to greater currency stability as well as higher finance income in the year. As you will have seen from the guidance, we do expect a more normalized finance cost environment in 2026. As expected, our comparable tax rate of 27.1% was in line with our guidance range. Our return on invested capital expanded by 100 basis points to 19.4%, driven by higher profit. We have seen very good improvement in ROIC over the last 5 years, and it remains a very important metric for us. CapEx increased EUR 148 million in the year to EUR 828 million, in line with our plans, as we continue to invest in future growth initiatives, such as production capacity, ongoing automation and supply chain, digital and data solutions and energy-efficient coolers. CapEx as a percent of revenue was 7.1%, up 80 basis points year-on-year, but well within our target range of 6.5% to 7.5%. We delivered free cash flow of EUR 700 million. I'm really pleased that even in a year where CapEx stepped up materially, we have still delivered robust free cash flow. Our balance sheet remains very strong, and we closed the year with net debt to comparable EBITDA at 0.7x. Clearly, this will increase, as we complete the acquisition of CCBA. However, we expect leverage post completion to remain within our medium-term target range of 1.5 to 2x. Importantly, we do not expect any impact to our credit rating, and we have a strong commitment to sustainably maintaining an investment-grade profile. Leveraging this strong balance sheet, we have a robust and disciplined capital allocation framework, which remains unchanged. Our top priority is investing in the business organically to drive long-term growth for the company. We pursue a progressive dividend policy and target a 40% to 50% payout ratio. With another year of strong growth in comparable earnings per share, we are recommending a dividend per share of EUR 1.20, an increase of 17% from 2024. When it comes to strategic M&A, as you know, in 2025, we announced the milestone acquisition of CCBA. The strategic expansion into African markets underpins our focus on driving long-term growth and will enhance value for shareholders. We expect low single-digit EPS accretion in the first full year following completion and more shareholder value in the long term. Overall, when it comes to our capital allocation in 2025, I'm really pleased that we have delivered a combination of investment in the business, a value-enhancing acquisition, increased shareholder returns as well as a strong improvement in ROIC. As we look to the rest of 2026, we expect the macroeconomic and geopolitical backdrop to remain challenging with a mixed consumer environment across our markets. However, we have high confidence in our 24/7 portfolio, our bespoke capabilities, the growth opportunities across our diverse markets and most of all in our people. In 2026, we expect to make further progress against our medium-term growth targets with organic revenue growth in our medium-term range of 6% to 7% and organic EBIT growth in the range of 7% to 10%. Thank you for the attention. Let me pass the call back to Zoran. Zoran Bogdanovic: Thanks, Anastasis. Well, we are proud of our achievements in 2025. We are really proud of the consistency of that performance over many years now. We have now had 20 consecutive quarters of organic revenue growth despite many challenges along the way. If we look back over the last 5 years, we can see that our growth algorithm is working. We have delivered average organic volume growth of nearly 4%, a revenue growth of 15% and EBIT growth of 14%. Our diversified country footprint, unique 24/7 brand portfolio, bespoke 4 capabilities and strength of our people have driven that consistent growth. What we've learned across many years operating in a range of markets and conditions is that there is no one size fits all approach. We strike a careful balance to focus on what makes the local market unique, staying relevant and tailoring our approach while aligning with the group strategy, leveraging our global scale, tools and capabilities, particularly with digital and data insights to drive personalized execution. It truly demonstrates the resilience of our business through a range of different macro and consumer backdrops and our ability to deliver results at the group level. This gives me the confidence that we can continue to navigate unpredictable environment going forward and underpins our guidance for 2026 as Anastasis set out. Let me now take you through some of our biggest potential opportunities across our business for 2026 and beyond. Sparkling continues to be the core driver of our growth, contributing 2/3 of our group revenue. In 2025, we delivered organic volume growth of 2.5%. Coke Zero continued to perform strongly, growing low double digits and Coca-Cola 0.0 grew high teens. Together with the Coca-Cola Company, we executed locally tailored activations at key moments across the year, leveraging relevant passion points and consumption occasions. In 2025, we also rolled out the Share a Coke campaign with local programs and initiatives tailored to our markets. We successfully executed customer and consumer activations across channels to drive transaction and further strengthen brand equity. We are pleased with the campaign's performance and the positive engagement it generated. We also accelerated growth in Sprite with volumes up mid-single digits, as we continued focusing on the Spicy Meals occasion, and we activated the Turn Up Refreshment campaign over the summer. Adult Sparkling grew mid-single digits in 2025 with a strong performance from Schweppes in our African markets. We introduced new flavors, and the Flavour of the Quarter activation with promising initial results and plan to roll this out further in 2026. We also continued to roll out Three Cents, our premium mixer brand into more countries. In 2026, we will continue capitalizing on key occasions to create memorable consumption moments, including the Winter Olympics, which just kicked off last week and the upcoming FIFA World Cup. Energy continued its strong growth trajectory. Volume grew by 28% against tough comparatives, making 2025 the tenth consecutive year of double-digit growth. We also hit a milestone surpassing EUR 1 billion of revenue for the first time with a category now accounting for 9% of our group revenue. All segments contributed to growth, reflecting the strength of our diversified portfolio, which enables us to address varied market demographics and affordability needs. In Established and Developing, growth was driven by Monster supported by successful innovations such as Rio Punch and the launch of a new Monster drink with Lando Norris. Predator and Fury, our affordable offers in Africa, grew over 40%, supported by football partnerships and marketing activations that truly resonate with local consumers. We are confident we can continue to drive a strong performance in Energy and expect the category to reach a double-digit percentage of our revenues very soon. The category continues to see broad-based consumer demand, and we are excited for another year of innovation and planned partnerships, which we will complement by adding more dedicated coolers across our markets. Moving on to Coffee. At the start to 2025, we announced we had made a strategic decision with our partners at Costa Coffee to prioritize the out-of-home channel because that is where we see the greatest potential for sustainable, profitable growth. I'm pleased to see that this decision is delivering results. We are seeing strong growth in the out-of-home channel, driven by both Costa and Caffe Vergnano with volumes up 26.5%. This has been driven by growth in our existing outlets as well as recruiting new high-quality outlets. We remain very positive about the growth potential for our Coffee business. It plays a critical role within our 24/7 portfolio and helps us build stronger customer relationships in the hotels, restaurants and cafes channels. We are building a strong, credible business with unique capabilities and meaningful competitive advantages. In Stills, volumes declined by 1% as growth in Water and Sports Drinks was offset by juices and Ready-To-Drink tea, where we faced a more challenging market environment. Water volumes grew low single digits, and we remain focused on profitable revenue growth, prioritizing premium waters. Sports Drinks continued its strong momentum with volumes growing low double digits. We launched new flavors of Powerade and leveraged local sports partnerships as well as football activations featuring global ambassadors to drive transactions. In 2025, we also launched Powerade in Romania. Premium Spirits volumes grew by 12.2% with double-digit growth across all 3 segments and strong growth of Finlandia Vodka, our own brand. The new Finlandia campaign we launched in April 2025 has been positively received, contributing to increased brand awareness and share gains in key markets. Our distribution partnerships with Brown-Forman, Bacardi and Edrington also contributed to growth. In our Snacks business, 2025 marked the return to full operations of our Bambi plant following the fire in 2024. In October, we also launched Bambi snacks in Nigeria, our first entry into the African continent in this category. We implemented a bespoke plan tailored to the local market and are pleased with the early feedback. Investing in our bespoke capabilities is critical to drive best-in-class growth and allows us to continue to gain share. I want to call out the specific examples of progress in 2025. Revenue growth management is one of our core capabilities to drive profitable revenue growth. Affordability remained important in 2025, and we increased our focus on entry and smaller packs. Premiumization remains relevant for a large segment of the population, and we focused on expanding multipacks of single serves as well as driving mini-cans in relevant markets. We also continue to leverage our advanced promotion analytics tools, which led us assess the effectiveness of each promotion and make a quicker in-market decisions to drive more value for us and our customers. Within data, insights and AI, we continued to leverage AI capabilities. Two great examples include our Ignite Naija initiative, where jointly with Coca-Cola Company, we are linking consumer and customer data in Nigeria, which Naya and the Nigerian team shared with you at our Bitesize event last year. Early results indicate that this more sophisticated segmentation approach is translating into higher volume and revenue per case. We also expanded our segmented execution approach to wholesalers, leveraging shared data and outlet intelligence to provide our wholesale partners in Italy with tailored recommendations relevant to the outlets they serve. In 2026, we will continue to implement more advanced segmented execution across our markets, enhanced by AI and more -- most importantly, tailored to the local market dynamics. We are increasingly digitizing our route to market. Our dynamic routing tool, which reduced its travel time by 15% is live in 22 markets, freeing up more time for face-to-face customer engagement. We also increased placement of our Always-On connected coolers by 20%. These integrated coolers continuously send data and analytics to our systems, giving our teams immediate insights to improve in-store execution and cooler profitability. Another example is our AI-enabled logistics project, which helps reduce out of stocks by generating automated data-driven fulfillment recommendations. We launched it in Poland in 2025 and have already seen efficiency gains, and plan to scale these to more markets in '26. At the half year results, I shared with you about our digital transformation and how we've been investing in our digital commerce platforms to serve our customers and consumers who shop online. We are live with Customer Portal, our largest B2B platform, in 22 markets now. Partnering with our customers to drive value underpins everything we do at Coca-Cola HBC. In 2025, our Net Promoter Score increased to 78%, partially reflecting an increase in the number of resolved customer issues within 48 hours to 99%. This disciplined focus helped underpin a sixth year of market share gains in NARTD. Finally, we couldn't do any of this without talented people. Our latest employee survey results showed overall engagement remained strong at 88%, which reaffirms the strength of our culture and the ongoing focus on high performance, learning and development. In 2025, we scaled the Metaverse learning environment to accelerate capability building for sales teams and improve in-store execution. This is now live in 7 markets with further markets planned for 2026. To conclude, I'd like to reiterate the key messages I started with. We've had a strong 2025, the fifth year of consistent delivery with further strategic and operational progress and financial results. We've seen another year of growth in volumes, sales, EBIT, EPS and market share. Investing for the future remains critical. And in 2025, we invested across our portfolio, capabilities, people and sustainability initiatives. Finally, we are very excited about the acquisition of CCBA, a great business with strong brands and the leading market presence across Africa. We have great confidence in the opportunity ahead of us to drive sustainable, profitable growth. And before I close, I would like to sincerely thank all our colleagues, customers, suppliers and partners for their ongoing efforts and support. Thank you for your attention. And with that, let us now open the call up to questions. Operator: [Operator Instructions] We will now take the first question from the line of Sanjeet Aujla from UBS. Sanjeet Aujla: A couple for me, please. I'd like to dig a little bit deeper into Egypt. By my math, your volumes in Q4 are up around in the low mid-20% range. Can you just talk us through what's really driving that? I appreciate you're lapping some of the impact, but really keen to understand a little bit the impact of your commercial execution there and where your market share is now versus prior to the transaction. That's my first question. My follow-up is around Established. You've had 2 years of flattish volume growth in Established. How you -- what's embedded in your outlook for 2026? Do you think volumes can get back to growth? And ultimately what's driving that? Zoran Bogdanovic: Sanjeet, so on Egypt, really, really pleased with that -- with performance that came last year. First of all, just to say that we've seen in Africa, both in Egypt and Nigeria, more stable backdrop and environment. And that really then sets the good platform, where everything that we do there can be more visible. Coming back to Egypt, what we've seen last year and then Q4 is just part of that is a result of us investing in a committed and disciplined way even while we were facing very strong headwinds over the last several years. Because we were focused from the moment we started 4 years ago to work on the enhancement of our portfolio and then investing in capabilities in a very fast way, leveraging data insights to better inform revenue growth management, route to market changes and enhancements, we've done a very wide investment into upskilling of people in sales and commercial capabilities. We have changed and improved commercial policies with the way how we work with wholesalers. We have introduced new capacity, which enabled us to fulfill anticipated growing demand that we believe will come and brought new can line. We are just opening another line in like Alexandria. And then, not to forget something that's super important, Coca-Cola Company has really created some and done very strong locally relevant marketing programs in the areas that truly matter to Egyptian consumers. Those relate to music with the outstanding activation and partnership that works extremely well, driving transactions. Also football, which is a big passion point in Egypt with a partnership with a club that has the, by far, largest fan base and also more focus on behind meals. You know that Egypt is the largest country globally in terms of the Schweppes business, by far, largest in Hellenic. And that's a phenomenal business, which worked so well last year with very intentional programs being -- with which the portfolio was supported. We introduced energy with 2 brands, Monster and Fury, and that also proved to be working really well, tapping into passion points. And all that, again, gets delivered through our evolved and more developed route to market, where we are fully scaling the market, segmenting it and really adjusting how we serve the market from at-home customers as well as to out-of-home customers. So all these blended together is coming very nicely and resulting in a very strong performance. Yes, in fairness, we also know that we had lower comps, easier comps to cycle. But I think that this performance demonstrates as a good testament to the quality of work that we are doing, not for 1 year, but for many years to come, and I'm confident that Egypt is going to have another strong year in 2026. Moving on to Established. With a stable volume performance that we saw last year, we are pleased with that performance as this happened in spite of a few challenges. We've seen a couple of countries really making good performance across the year. But I will start with Italy, which finished on moderately positive volume performance, which for us was really important. And we did say that Italy will be positive in 2025. If you deduct Water, which we intentionally play in -- with selective part of customers and markets, our performance there was on a low single digit. Very encouraging to see sparkling performance of 2.2%, a strong performance of Zeros, excellent performance of new Zero Sugar Zero Caffeine, about which we have very high hopes how it will perform, not only in Italy, but much broader, and then continued strong performance also of Energy. All that resulting in a strong continued market share gains. So then, we had a consistent performance in Ireland. We've seen a good performance in Greece in the second part of the year, as well as in Switzerland, where we didn't have the best entry into the summer in terms of the weather. And also, we had, like many other CPG players, specific situation related to retail negotiations. And once this was successfully resolved in a win-win way, we have resumed full performance with full listings. And that's why we are very pleased with the second half performance in Switzerland. One country that consistently has been on a softer side is Austria, where industry also is in decline. We do see lower consumer sentiment, which is below the EU average, but in that circumstances, we see that our team has been gaining share there and has been doing some quality work, which is also reflected in single-serve growth. So to wrap up, Established, we believe that this performance in '25 present a good base, and we do expect that we will see improvement in that segment in 2026. Operator: We will now take the next question from the line of Andrea Pistacchi from Bank of America. Andrea Pistacchi: I want to follow up on established and -- on Established markets, mainly both with the first question and the follow-up. So affordability and consumer sensitivity has been a bit of a headwind in a few of your Established and Developed markets. You just mentioned Austria, I think even Romania and Switzerland. Are you seeing any signs of these pressures easing as we go into 2026? And how are you thinking about pricing and revenue management this year, specifically in these markets? And the follow-up question is on EBIT in Established. So at group level, you've delivered very strong EBIT, again, mainly driven by Emerging, but EBIT declined a little, I think, in Established markets as you reinvested in the business. Last year, EBIT was flat. So the question is how -- going forward, how are you thinking about balancing reinvestment versus EBIT growth in Established markets? Would you expect profit in Established? Can it return to growth? Are there opportunities for incremental maybe cost savings in Established? Zoran Bogdanovic: Good morning, Andrea. So I'll start, and then, I'll hand over to Anastasis for your second part of the question. So in Established, firstly, it's not one size fits all. It really varies. And we monitor and measure price sentiment and sensitivity in every single country, also dynamics with a certain level of private labels that can exist across the market. Even though I have to say that in Sparkling and in Energy, this is where private labels have the smallest share. And even in Sparkling, the private label share is in decline. However, there are a few markets, and you mentioned Romania, even though it's not in the Established, either country where we have seen somewhat better performance of the -- of private label. All of this gets this input into the overall revenue growth management framework, which then on a country level is being designed and which then produces tailored specific things for affordability initiatives as well as premiumization initiatives in every of these markets. So somehow with our reading, we do see an opportunity for positive improvements in 2026. And second part of the year in those markets have given us that time, and I have to also acknowledge that for Established as well as for all other countries, we have prepared very strong plans with additional investments behind many of the strong programs that are coming up in this year. Summer for us always is the biggest program we have. But also, there is a FIFA World Cup. There are many innovations that are coming up, and we see that being very relevant in the Established segment. And I reiterate that we are positive that we will make an improvement in the Established segment in '26. Anastasis? Anastasis Stamoulis: Yes. Thank you, Zoran. Yes, actually, to build on Zoran's point, for 2025, we saw a resilient top line performance with a revenue growth of 2.3%. Let me share a little bit more detail because you touched the profitability of the Established. Actually, the gross profit margin grew in the Established market, but as you rightfully pointed out, you saw pressure on the EBIT margin, which was mainly impacted by a targeted decision to step up our investments in the market, a joint decision with the Coca-Cola Company to accelerate further growth in the segment, and I can go over the big activations of the year, but predominantly it was a Share a Coke campaign with the investment ahead of the Winter Olympics in Italy, which is undergoing now as well. And also cycling extra investments in our people when it comes to field force execution in the market. So with that in mind, we are very pleased to see that actually, our investment strategy has been paying off. In Italy, as Zoran pointed out, we had a low single-digit volume growth in Sparkling and strong double-digit growth in Energy and share gains in both Sparkling NRTD and Energy. And similar market was Ireland with continued volume growth and share gains across. So if we look into 2026, what I can say is that we will continue to step up our investments in the market. Zoran already mentioned the FIFA World Cup, we have the Winter Olympics ongoing. We have also step up in the overall Finlandia Investment. But we do expect that all this will translate to positive volume growth that will also flow down the P&L with profitable growth and also margin expansion. Operator: We will now take the next question from the line of Aron Adamski from Goldman Sachs. Aron Adamski: Congrats on the results. I have 2 questions. First one is on your innovation pipeline. Can you give us a sense of the scale of the innovation and activation plans that you have for 2026 compared to the previous year? In particular, could you give us some color on the launch pipeline in Energy drinks? Is it comparable to the 3 big launches that you had last year? And perhaps in Sparkling, it would also be great to hear if you're seeing any uplift in Italy's volume during the January month from the Olympics activations? That will be my first question. Zoran Bogdanovic: Aron, on innovation, innovation pipeline is one of the drivers of our growth, and we are very happy that with both Coca-Cola Company and Monster Energy Company, there is a rich pipeline. So we have a number of innovations lined up for this year. Those will be very exciting flavor innovations, which, in some cases, are also coming with some partnerships. You've seen Lando Norris launch last year, which worked extremely well, and that will continue into this year with also some -- a couple of other innovations that I think will be better that we discuss when they are done. On Sparkling side, we are very excited with -- we think of it as innovation, which is Coca-Cola Zero Sugar Zero Caffeine with new graphics look and feel with excellent feedback from the market, and we see that performance of this variant within Coca-Cola trademark is igniting very strong growth. We've seen a strong growth last year, and it has been ramping up from quarter-to-quarter. Then, we will have further flavor innovations within our Adults, whether that's Schweppes or Kinley. Also, within Fanta, there are some very interesting things. And you will see some very exciting things in the way the activations will be for the Halloween, which becomes a very important part of Fanta activation. So I can -- then Powerade will be also coming up with some innovations, especially as you see that now Powerade goes so well together with the Coca-Cola brand in the sports activations, and the exciting and largest ever FIFA World Cup is ahead of us. So I can say, Aron, that we are pleased and confident that we have the right set of innovations. For us, it's very important that those innovations are driving incremental transactions, which are all delivered through very, very strong execution across all the markets. You asked also about Italy Olympics. Yes. Look, we started activating Olympics already last year in Italy. That gave us a great platform to activate and partner together with customers, driving joint programs. We've been just there last week and seeing excellent activation displays, consumer promotion, visibility, transaction driving mechanism. So I cannot single out how much is specifically because of Olympics, but I can really say that it's a very clear tailwind in what we have seen in Q4 and definitely what we will experience in Q1. Aron Adamski: Great. That's very clear. And then my second question is on FX. Given where the current spot rates are, would you expect 2026 to see some transactional FX benefits in Africa? And in the context of easier COGS backdrop that we've seen more recently, how are you thinking about the balance of price with mix and volume following several years of very high pricing that you had in Africa? Anastasis Stamoulis: Aron, let me take that one. As you have seen, we are providing our guidance. We expect a range of EUR 0 million to EUR 30 million of a headwind from translational effects. Obviously, we don't provide a transactional element, but that's well captured within our overall EBIT guidance. Yes, you mentioned the spot rates. Obviously, that's one part of the element, but we actually provide a range in the back of trying to assess our experience of a quite unpredictable environment when it comes to FX volatility, especially in the African markets. We are seeing positive signs in both economies, and there is significant inflows of foreign currency in those markets, will make FX availability easier and good signs. But as I said, that's why we provide the range across. Now, when it comes to balancing the pricing element in Africa, we always follow an adaptive and data-driven pricing strategy in those markets. We've also seen that this year, as we managed to adapt our pricing in relation to a lower inflationary pressure, a lower also FX volatility. We'll continue doing the same next year. And these are, of course, markets that we expect significant volume growth with a balanced pricing to adapt to the local market needs. So as always, nothing new. Operator: We will now take the next question from the line of Matt Ford from BNP Paribas. Matthew Ford: So my first question is just on the guidance, I suppose, the 7% to 10% like-for-like EBIT range that you've given for the year. I'd just be interested to just get your kind of take of the moving parts. How -- what do you see going right to get you to that 10% and potentially higher? And potentially, what could go wrong to get you to the lower end of that range? And then, I'll follow up with my next question. Zoran Bogdanovic: Yes. Matt, yes, you're right. I mean, we're providing a range of 7% to 10% on organic EBIT. I think we need to remind ourselves this comes on the back of a strong EBIT delivery for 2025, which is the third consecutive year of double-digit organic EBIT growth and actually proves our capability to navigate in the environment and still consistently deliver despite what happens. Now, given the timing of the year, we're a little bit early, and considering that we do believe that the markets will remain in a certain uncertainty on the macroeconomic and geopolitical landscape, we believe that the current range reflects any type of movements on other direction. So, for example, on the lower end, you would expect a worsening of the geopolitical environment, which we have a spillover effect on consumer sentiment and further FX pressures with commodity inflation. While on the upper end, it's built on the back of a stronger momentum across the markets that materialized through the year should deliver also a stronger bottom line. Matthew Ford: Okay. Great. And then my follow-up is just on Poland, naturally. I mean, Poland saw sequential improvement in Q4 following a fairly solid Q3. And obviously, in the first half of the year, you were still being impacted by the reintroduction of a competitor in a retailer in Poland. So I just want to get your sense of how much of this Q4 improvement should we see continuing into '26? And how do you think about the outlook for growth in that market in '26 and beyond? Zoran Bogdanovic: Yes. Thanks, Matt. So let me first say that we are very pleased with the performance of Poland. When you see on a broader horizon of last 4, 5 years, we've done excellent, excellent progress in terms of volume, revenue, profitability as well as significant market share gains. And understandably, with the return of the key competitor into the largest customer, of course, this would have a temporary impact. That's why, when we also see our market share performance, excluding particular customer, we do see that our performance and share gains are there. And we've seen that also in the country. We see a good -- very good performance of Coke Zero, which is up low teens. And also, just to say that in Q4, overall, we gained share in Sparkling. We also see a very strong performance of Energy, which is driven by Monster. So all in all, we have strong plans, very strong team in Poland and at the back of this very good performance over the last couple of years. And in last year, what we've seen is a return to positive performance in Q3, and then, especially in Q4, we do expect and we will see positive performance and volume growth and revenue growth in Poland also in 2026. Operator: We will now take the next question from the line of Simon Hales from Citi. Simon Hales: So my first question, Zoran, really is around the performance of the Premium Spirits business. It was very strong in the year, Finlandia, performing particularly well in a tough environment for the wider spirits industry. I wonder if you could just talk a little bit more about what's drove -- or driven that relative outperformance versus many of your spirits peers? And how do you think about that Premium Spirits opportunity as we look into 2026? That's my first question. Zoran Bogdanovic: Thank you, Simon. Look, overall, on like a helicopter review, Premium Spirits plays a strategic role in the overall portfolio, as it also strengthens our customer leverage. It provides a great blend in mixability. And that's one of the reasons why really Premium Spirits portfolio is performing well because it's not stand-alone consumption and activation, but it is also how we blend that in combination with our nonalcohol beverage portfolio, which clearly drives incremental transactions, which benefit both our non-alcohol part of portfolio, but also, of course, it benefits the Premium Spirits part of the portfolio. Secondly, we also are -- with all the partners, and I'll come back to Finlandia, with all the partners, we are increasing our penetration presence across the outlets, which means that we are increasing distribution and gaining share versus other brand companies in the market. We are also expanding a number of countries, where with Bacardi, we have increased when we started from 2, where we are now to 11 countries. So that scaling is also helping us to drive the business. And then Finlandia, we always believed that this brand has a great overlap with our territories, having 60% of its global volume across our territories. So when we took it over, we really wanted to give it a fresh kick to refresh the brand, give it more support. And that's why carefully crafted marketing campaign has been launched in April last year. And it was very well received, and it really accompanied great strong execution focus across the countries. So all that blended comes together that we are having another year of very good growth of Premium Spirits, which I want to remind also has a collateral benefit in driving the rest of the portfolio. Simon Hales: Great. That's very clear. And then, my follow-up is really on the finance cost guidance for 2026 of EUR 25 million to EUR 45 million and if you could talk about the build of that. I mean, you obviously started 2025 with pretty high finance cost charge expectations of EUR 40 million to EUR 60 million, and you basically ended the year with almost a 0 finance cost line. Why is it going to be so different in 2026? I mean, how much of the guide that you put out this morning is related to the bridging cost finance for CCBA? How are you thinking about foreign currency losses for this year within that guidance? Anastasis Stamoulis: Yes. Simon, so yes, I mean, we closed the year with EUR 1.1 million of finance cost, which was lower to our updated guidance and even lower to -- honestly, to our expectations. It was mainly driven by 2 key reasons. First of all, the greater currency stability that we had in the Nigerian naira as well as higher finance income. So if you look into next year and our guidance for next year, which is in the range of EUR 25 million to EUR 45 million, we expect a more normalization when it comes to the relevance of finance cost. Now -- so first of all, we assume ongoing income from our cash balances in Russia, which is positively contributing to the finance cost, of course. And on the other hand, we factored some higher finance costs in relation to renewing our finance structure, not related to CCBA at this stage. And of course, you rightfully mentioned the bridge financing cost, which is captured within our finance cost for the year, as this is already there. I want to remind us that this guidance does not include anything in relation to new debt for CCBA acquisition. This, of course, will be reflected, and we'll provide further guidance subject to the timing of the completion of the transaction. But I feel overall comfortable with the range that we are providing at this stage of the year and the visibility that we have. Operator: We will now take the next question from the line of Nadine Sarwat from Bernstein. Nadine Sarwat: My question is on CCBA. You announced the deal. It's been a couple of months now. And so I'm curious to hear over that time period, have you learned anything incrementally that you're able to share that makes you incrementally excited or perhaps additional areas where you see opportunities for improvement in the business? Zoran Bogdanovic: So after the announcement in October, we have immediately proceeded with application across countries where this is necessary to be done to seek the regulatory approvals for the transaction. So we are now in the period where, a, we are not the owner, and we need to wait for those approvals, which we estimate to be obtained by the end of the year latest. So during this period, what we can do, and we started doing, is integration planning. So our functional teams, together with functional teams of CCBA, started working together on the preparations and planning, which then will be executed only once we get all the necessary approvals. But, to conclude, you said the word excitement. So that's exactly the right word with how we feel about CCBA. And if we felt excited at the day of the announcement, I would say that we just feel more excited now, and we can't wait to get started with these wonderful territories, which offer abundance of opportunities that -- behind which we want to invest to drive growth. Operator: We will now take the next question from the line of David Roux from Morgan Stanley. David Roux: Just on -- I've got a question on CCBA, and then, a quick technical follow-up. So you've spoken about the deal accretion in year 1. And then, in your prepared remarks there, you went on to further note you expect it to create shareholder value in the long term. Can you remind us of how this deal will affect your medium-term targets of 6% to 7% organic growth, and then, the 20 to 40 basis points of margin expansion? And then, just my technical question, on the phasing of organic growth for 2026, there was an extra trading day this past quarter. Can you remind us of the impact across the 2026 quarters from more fewer trading days? Zoran Bogdanovic: Thank you, David. So on CCBA, very short, as we said last time, we will come back once the transaction is completed and approved. We will come back with our view on the guidance, and we will definitely take you through that. So for that, we simply need to wait that all the necessary things are done until then. And on the phasing, look, we have in Q1 4 more days, and that was in January. And we have, I think, 4 days -- or 3 days less in Q4. So that's why you will see that in Q1, we will see -- this will be reflected in the performance of Q1 and also somewhat balanced in the Q4. And for that reason, I think that informs how also phasing will be. I don't know if you want to add anything, Anastasis. Anastasis Stamoulis: No, I think Zoran captured it well. You should expect to see a bit more -- that extra volume from the first half to flow down from the revenue to the P&L, not of course, to the full extent, as there is a level of investments that we mentioned before, like the Olympics. So a little bit more on the first half of the year. And just to add on the CCBA that we -- our assessment is that, of course, once the company -- the process is completed on a new rebase of margin, we do expect that we will be delivering within a line of our guidance of 20 to 40 basis points. Operator: We will now take the next question from the line of Charlie Higgs from Rothschild & Co. Charlie Higgs: My first one is on COGS per case inflation, which I think was 3.8% in 2025. I was wondering, Anastasis, if you could give any thoughts for 2026 because European sugar is looking pretty good; PET, likewise; electricity costs are a little bit all over the place. But can you just talk about what you're seeing there? And how hedged you are on key commodities? And then I have a follow-up, please. Anastasis Stamoulis: Charlie, yes, actually, looking ahead for 2026, we are currently expecting COGS per case to increase in the low single-digit level. There is still some inflationary pressure in commodities like aluminum and PET, while as you rightfully said, there is some moderating trend in sugar. But as you know, we always follow a very robust hedging policy. And our current hedging coverage on key commodities, as we speak, is above 55% with higher coverage in sugar and aluminum, which basically means that any positive -- further positive trends in sugar will not be floating fully in the P&L, as the hedging position covers that. But we remain always focused on this with the hedging strategy and long-term contracts, and we continue to do productivity, and we'll reflect that as the year evolves. Charlie Higgs: Great. That's very useful. And then, my follow-up is just on some of the leadership changes that are happening at KO. We've got James Quincey's last outing in a couple of hours after an amazing run. We've had in the last few months, a new Head of Europe and a new Head of Africa, and also recently, the company announcing a new Chief Digital Officer. So can you just kind of put all of these leadership changes together and summarize what you think it will mean for Coca-Cola Hellenic? Zoran Bogdanovic: Charlie, so look, on the -- on that topic, I can say, first of all, we know very well all the leaders who are taking all the new roles. But let me first start to say that we believe that James has done phenomenal steering of the Coca-Cola Company and especially the way James and John and Henrique in their roles have done also gluing and bringing system so much closer together like never before. I really believe it is one of the reasons why the overall Coca-Cola system is working so well together and demonstrating such high performance. So -- and then preparation of this succession with Henrique, I think it's an exemplary case. We know Henrique really well as another phenomenal leader that we had privilege to have him on our Board, and we still do. But obviously, he will be stepping down given his new role. But we know that gave also the chance to Henrique to see Hellenic from up close. And we know that we share a strong belief in the system, in the business that we are in. And we also shared very bold ambition of how we all should think about future and how much more opportunities there are. And we will do everything from our side to support and work together in a flawless partnership that we have. And then, also 2 new leaders, both in Europe with Luisa and in Africa with Luis, excellent relationship, super strong leaders, growth mindset, drive to win, and above all, a great sense of partnership, attitude, approach that really inspires to do more better together. So -- I mean, you got me on a question that I could talk so much because we have really huge respect and trust and admiration for these leaders, and we are very privileged that we can work with them. And not to forget also Sedef, great choice of such experienced business leader to take such an important topic as digital transformation. And we already started, where with Henrique and John, we are having a Global System Digital Council, where now Sedef plays a very important role. So very exciting. And I'm very sorry, I don't have more time because I could really go on. But thanks a lot. I hope I answered your question. Operator: We will now take the next question from the line of Mitch Collett from Deutsche Bank. Mitchell Collett: You mentioned in the release some new AI capabilities that you've rolled out in 2025. And I think you say that it gives you better volume and also better revenue per case. So can you perhaps give a sense of the quantum of that uplift? And how quickly do you expect to be able to roll that out into other markets? And then, I have a follow-up. Zoran Bogdanovic: Mitch, sorry, of all the AI because that's another one where I can go for hours, but -- did you ask specifically on the one that we do in Nigeria? Mitchell Collett: Yes. I think that's the one where you say it gave you volume and revenue uplift. Zoran Bogdanovic: Yes. Yes, absolutely. No, that's -- you picked a good one because the beauty of that is that, as we and also Coca-Cola Company, we are all stepping up our data analytics and AI. But the beauty of that is when we come together, and this is an example of a case where we combine consumer data and our customer data. Bottom line of that is who shops where. And based on that, we are segmenting so that we can have segmented communication execution based on profiles of consumer segments in which type of outlets. That's the essence of that. And we've seen based on the pilot, which was just under 4,000 outlets, gave us a very good performance, definitely a better performance in volume and revenue per case than the controlled set of outlets. And for that reason, we are expanding that throughout 2026 by more than tripling number of outlets where we will be spreading this. And more importantly, all the learnings that we get from this are the backbone of how we will be then taking this further to other markets together as a joint system team. Mitchell Collett: That's great. And then my unrelated follow-up is just going back to the finance charges for this year. I think you say it includes the cost of the bridging financing. Can you just quantify how much that is? Apologies if you gave that earlier and I missed it. Anastasis Stamoulis: Yes. Mitch, you mean this year, you mean for '26, right? Yes. So in Q2, we expect it to be low single digit. Mitchell Collett: Millions, low single digits, euro millions. Anastasis Stamoulis: Yes. Yes, yes. Very low single digit million. Operator: We will now take the next question from the line of Richard Withagen from Kepler Cheuvreux. Richard Withagen: First one is on RGM. As inflation normalizes, how should we think about your current RGM strategy? So what's the medium-term algorithm between price, pack architecture, promo intensity and mix to stay in a good balance between the revenue per case growth and volumes? Zoran Bogdanovic: Richard, thank you for great question. So RGM, when I think of last 5, 6 years with everything we've been going through, I don't know how we would go if we didn't have RGM at the level that we have. This helps us in the situations of extreme conditions like we went with a very high inflation and how RGM carried us through all of that. And mind you, where on top of very strong price/mix, we have been able to deliver constantly positive volume, and that's attributed to the RGM, which takes into account so many things together. So going forward, in situation of a more stable inflationary environment, both in Europe and in Africa, this is where exactly all 3 drivers that you mentioned play a role. RGM is accounting and using end volume and price and mix. And for us, package mix, category mix are important drivers of how we are driving overall price/mix. We said for the last year that you will see more balanced play between volume and price/mix. And this is what happened. And we also estimate for -- and that's also what we estimate for 2026, where you will see even more balanced ratio between -- a combination between volume and price/mix. Now, just as the bottom line is that RGM, the core purpose, so it is to drive sustainable revenue and margin through well thought through initiatives that either tackle affordability or premiumization in every single market in their own unique way. And that's why this we call one of our prioritized bespoke capabilities behind which we are constantly investing just to get constantly better, better and raise the bar. I hope I answered your question. Richard Withagen: Yes, that's very clear, Zoran. And then my follow-up, maybe more for Anastasis, but -- you made some investments in inventories in the past few years, which I guess makes sense given the volume growth of the business. Now, in 2025, inventories actually declined year-on-year. Did you have any specific initiatives around inventories or around the broader working capital? And what can we expect going forward? Anastasis Stamoulis: Richard, thank you for the question. First of all, you mentioned the overall working capital cycle, and we are pleased how we are managing this in order to contribute to the overall free cash flow generation. Inventories have always been a focus area together with receivables, where we are making very good progress on actually keeping lowest possible overdues as a percent of receivables. But inventories as well has been a focus and part of the areas that we are working with supply chain to ensure the necessary requirement. Of course, the priority is about delivering in the market and ensuring availability, and we'll continue to do that. But I want to underline that I'm very pleased with the free cash flow generation as a combination of what has been driven from the profitable growth, the working capital cycle, while we created the space to continue to invest in our CapEx that fuels the future growth. So, yes, good progress there, and we'll continue to focus on this and keeping these levels of free cash flow generation. Operator: We will now take the last question from the line of Laurence Whyatt from Barclays. Laurence Whyatt: Just one for me, please. Just following up on one of the previous questions. I think you mentioned that you're going to have a bit of a more balanced split between volume and price/mix as you look at your guidance this year. Just wondering if you could confirm that that's what I heard, if you're expecting it to be around sort of 50-50 between the 2? Zoran Bogdanovic: Laurence, yes, you heard well where we say that it's going to be more balanced play between the 2. This really depends on every country. It may be that somewhere it's 50-50, it can be 60-40, it can be 40-60. So this is really hard to predict now. But in our algorithm, and as we think about '26, we do see that end volume and price and mix will play a role. And yes, it's going to -- we see it to be in a more balanced way. Laurence Whyatt: Just to split it up between your 3 divisions, I'm assuming that the majority of the improved volume is coming from the emerging region. Or is there any other areas you would expect a material step up? Zoran Bogdanovic: Yes, it's logical that more volume to come from the Emerging segment. Absolutely. You're right. Operator: There are no further questions at this time. I would like to hand back over to the speakers for closing remarks. Zoran Bogdanovic: Well, thank you, operator. And I just want to thank everyone for taking the part in today's call and all the questions and good conversation, and we look forward to speaking with you soon. Thank you very much, and goodbye. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Welcome to the Medicover Q4 2025 Report Presentation. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, John Stubbington; and CFO, Anand Patel. Please go ahead. John Stubbington: Good morning, everybody. It's John here, and welcome to our Q4 results. It's another good quarter for us. We've made some good progress. We've got continuing strong performance, double-digit growth again, and we're seeing margin expansion, which is really, really pleasing. The performance remains strong. We're seeing that with good demand across all of our markets and particularly from our fee-for-service segment. Margins are improving and good cost control in place. So we're well positioned. We predicted a bit of softness in some of our lines in the previous quarter, and we have seen that, and we said that it would continue for a little bit longer. But we do see the beginnings of signs of recovery certainly in Q4. So we're watching this space as we go through to Q1. We've got continued organic growth and profitability improvements in Healthcare Services, particularly driven by our Sports and Wellness business and our ambulatory business. Our Diagnostic Services team, they've continued their momentum. They've got double-digit growth in all of the fee-for-service markets. and really strong volume tests that have increased. So well done to the team there. It's really great to see. We predicted that our leverage would come down, and we see that happening, so down at 3.1. And the Board has recommended a dividend increase, which I think really reflects our progress. On the right-hand side, you can see organic growth, 10.6%, which is really solid. We see continuing operating leverage coming through on our adjusted EBITDA plus 20.9%. So again, an encouraging sort of trend for us in the in the fourth quarter, different season, different quarter. And in terms of margin improvement, you can see that that's followed through as well with a really decent margin increase. Operating cash flow, very pleasing indeed, up 56%. So that's very good for us and a good quarter from that respect. If we move on and look at it from a different perspective in terms of our growth. We've got, as I said before, continued double-digit growth coming through the business. Again, just to remind everybody, this is despite the fact that we've exited Hungary. So when we take the Hungary figures into consideration, it increases even further. Revenue by country, there's a bit of a change in some of the numbers here, but Poland is strong, Germany reflects the reform change that we're going through that we're still navigating well, Romania, a decent return for us. And India, from a euro perspective, they're seen as 0. But from a local currency perspective, is up 15%, which is kind of in line with some of the comments that we made in the previous quarter, and we're seeing some good momentum, which we'll talk about later. From a payer perspective, it's relatively stable. If you look at Healthcare Services, Healthcare Services have got good revenue growth. 8.5% from an organic perspective going up to 11%, a good percentage of that coming from price, which reflects our position of when we've been dealing with inflation that we've not been scared to be able to show the power of our proposition and make sure that we get the right price to deliver the right services. So the team have done well there. India revenue, 14.7% in local currency. And remember, this is despite the fact that we had the strike in one of our main states in October. And momentum, which I think is the most important word for us when it comes to India. Our momentum is increasing. And I've always said that this is the business end of our journey in India when it comes to IPO and that we need to get our our figures into the right kind of order. And it's pleasing to see that the kind of doctor recruitment that we've done is now starting to see the first signs of maturity. Sports & Wellness, key contributor to the fee-for-service growth as well as the -- a bit margin improvement. So our move into that space has been very, very successful. If you look at our membership, our membership growth is relatively small. But of course, we've taken out one of our key countries in terms of Hungary in that journey. And we have to balance this up with how our business has moved over time, we're a much bigger fee-for-service business nowadays. And that's one of the reasons that we took the decision to share with you the customer relationship number within Healthcare Services. And as you can see, Q3 when we gave it to you the first time, it was 3.6 million. We're now up to 3.8 million. Growth on the right-hand side is good. You can see the revenue mix by country is, again, pretty stable. And from a margin perspective, we've got a very strong margin improvement in Healthcare Services, going from 15% to 17%. So really pleasing progress from the team. If you look at Diagnostic Services, the momentum continues. So congratulations to everybody in Diagnostics. Revenue increased by 13.5%. Organic was 9.3%. Price was a smaller part of the increase here. Remember, that's a big part of our business in Diagnostics is in Germany and the regulations on price in Germany were affected by the reform. We've got double-digit growth in all of our fee-for-service markets and that's been further supported by some [ public pay, ] particularly in Ukraine, who have had an incredible year and an incredible work considering the conditions that they operate in. So a big thank you to our team in Ukraine based upon the fact that doing a fantastic job despite the circumstances. Germany, private pay growth, again, we're seeing signs of that starting to move up as a consequence of the public funding changes. But overall, if we look at all of 2025 and consider the reform that happened in Germany, we've really navigated that position well. And we mentioned earlier that we've got strong test increases -- increased by 17.6%, which is a really good result for the team. So if we go across, we've got good growth in revenue. We've got a relatively stable revenue by country, but some really good increases in different lines. We still have a margin increase in Diagnostic Services as well, 17.3% from 16.1%, which again is really pleasing and here, you can see the lab tests starting to move up, and that would be strong. Some of this momentum, of course, is caused by [indiscernible] which has started to the SYNLAB -- the SYNLAB acquisition, which is starting to show through in our numbers. And as expressed before, we're fully on track now with our activities in that area. If we go and have a quick look at 2025. I think 2025 was a very strong year for us. We've made significant progress as a team. We've got organic growth of 12.7%. Our revenues of -- our revenues overall has growing 13.7% and really, really good. We've made excellent progress from an EBITDA perspective, good progress from a margin perspective, cash flow really good and a positive impact from a dividend perspective. So we've got a really strong track record in terms of stating the direction that we'll take over a 3-year period and looking to make sure that we outperform what we say. And if you remember back 3 years ago when we first went through these numbers, it was seen as quite a challenging position for us. We've navigated the German reform really well in 2025. I think we've got another quarter to go before we see the the full effect. The acquisitions we've done have been embedded very, very well. And as a consequence of that progress, you can see that our return on invested capital has increased quite nicely and getting into a more appropriate zone. So we're really pleased with that. And then if you look at the '23 to '25 targets, we're in a position, a very lucky position, a very privileged position. A lot of hard work has gone in to be able to deliver this, but we're basically saying from a revenue perspective tick, from an EBITDA perspective tick, from a leverage perspective tick and from a dividend policy perspective, tick. And then even if we look at our alternative measures, we've got a couple of ticks in the boxes there. So, it's nice to see so many things being ticked off and being achieved. But this is all history now. It's all part of our past. It's not part of our future, and we'll move on as we go through today and tomorrow to tell you much more about how we intend to improve on this over future years. So now I'll hand over to Anand, who will talk you through more of the financial details of the quarter. And I'll come on at the end, and then we'll answer the questions. Anand Patel: Thank you, John, and good morning, everyone. So as John said, another solid quarter for Medicover ending FY '25. So from a revenue perspective, EUR 611 million which is double-digit growth on the total revenue -- on the total basis and also strong organic growth year-on-year, which has already been mentioned. In terms of profit measures, good year-on-year growth in terms of margin growth. hence, our EBITDAaL and the EBIT lines were growing faster than our revenues. So if you look at EBIT, for example, in the quarter, EBIT of EUR 35.2 million, strong growth of margin of 5.7%, which is 150 basis points year-on-year. And also another thing to note is, I would say, a net profit of EUR 17.3 million at margin percent of 2.8%. So strong flow-through of our revenues into the quarter. And the final profit metric I'll talk about is the EBITDAaL number because the leases are part of our cost base and how we grow our business. So EBITDAaL of EUR 57 million, up 30% with margin rate up 140 basis points year-on-year at 9.3%. So I would say, a solid quarter and in line with the messaging that John and I gave at the end of Q3. And if you look across the business units, it's again similar messages of growth that we saw in prior quarters, but not as pronounced year-on-year, I would say. So looking at Healthcare first, organic revenue up 11%, price driving 6%, volume driving 5%, EBITDAaL of EUR 72.5 million, growth of 23%, and John has already mentioned that we had margin expansion of 200 basis points in the quarter. So really pleasing. I guess I'll touch on the EBITDAaL loss on the immature hospitals. So year-on-year, the loss is slightly less, moving from EUR 3.3 million to EUR 3.1 million quarter-on-quarter, though as we basically opened a new hospital operationally, then the loss increased from EUR 2.7 million to EUR 3.1 million in the quarter. So I would summarize that as a good quarter for Healthcare and doing what we said we would do. In terms of Diagnostics, John has already said, it's a really strong performance by the team. So well done to them. So organic growth of about 10% with price driving 3% and volume driving 7%. We talk about Germany a lot. And I think even in Germany, still we still -- although we have the reduction in prices, we're still getting good strong volume growth in those -- in that market. From an EBITDA perspective, EUR 33.3 million, growing 120 basis points year-on-year to 17.3%. And as John mentioned, there's a good kind of move in terms of the FFS markets and the positive performance in Germany as well. I think from a payer mix potential. So in summary, a strong quarter to end the year in Diagnostics too. So if I wrap up the full year I guess, I would say, a stellar year in terms of consistent growth across both business units with double-digit revenue growth and profit measures growing faster than revenue, resulting in an improvement in margins. The other thing I'd add is actually a really strong performance in cash and a step-up on return on investment metrics too. Highlighting a couple of measures. So revenue just under RUR 2.4 billion, growing 13.7%, EBIT more than doubling to EUR 155.7 million at a margin rate of 6.5%, which is up 310 basis points year-on-year. And EBITDAaL of EUR 243.1 million, growing 40%, up 190 basis points year-on-year. All of the above are leading to a really strong EPS. So our EPS was EUR 0.514, up from EUR 0.112 last year. And as John has already mentioned, we beat the externally guided targets that we gave you for FY '25 across all measures. On this slide, you can kind of see what some of the other metrics are. So from a leverage perspective, John talked about it already in terms of 3.1%, down from 3.4% last year. and a reduction quarter-on-quarter as well as a good result. Effective tax rate of 26.1%, in line with what we had shared previously. And I would put out a really strong performance in cash on the quarter and the full year. So our net operating cash of EUR 100 million is up 56% year-on-year. And on a full year basis, it was EUR 343.7 million, which is up 31% year-on-year. And I think if you look at free cash flow, you can see that in the quarter, it was 8.4% of our revenue. So a really big step-up compared to prior year. The other thing I'd say -- sorry, I would say and that slide is actually a really strong improvement in ROIC. So you'll have seen that we started the year at 6.7% at the end of FY '24, and we've nearly doubled it to 13%. So kind of real gives comfort that actually as we expand our margin and invest in white space opportunity that actually the profit flow-throughs are flowing through and impacting our investment metrics. On the next slide, you can see where we are on CapEx. So CapEx in the quarter was just under EUR 57 million. So there's a bit of catch-up in CapEx from prior quarters. in terms of percentage of revenues. But from a full year perspective, we're about 6.7% of revenues, which is in line with what we've shared previously. And as you can see from the chart on the left, there continues to be clear white space between our free cash flow and our investment growth CapEx. So a good sign, and we expect that to continue in the future. In terms of the spend in the quarter, as expected, predominantly in Healthcare Services, which is a common theme from this year. And in terms of growth and maintenance split, roughly 72% was growth, 28% was maintenance, and that's broadly the same split for the full year as well. And finally, in terms of new medical space, so in the year, we added on 77,000 square meters. We ended at 986,000 square meters at the end of the financial year, and actually, we'll break past 1 million square meters in Q1. So in summary, a good quarter to end the year. In totality, a strong year in FY '25. And as John mentioned a year ago -- as John mentioned previously, a year in which we beat the targets that we set externally. So now looking forward, I'm pleased -- bear in mind most of the talking, we expect about the future in terms of our numbers and how we get there is expected to be tomorrow. Today is meant to be predominantly about the final quarter and only answering any questions. What the future targets are as follows and is in a similar vein, their 3-year targets, which takes us to the period of 2028. So to summarize, we expect revenues -- organic revenues to be in excess of EUR 3.25 billion. We expect adjusted organic EBITDA to be in excess of EUR 600 million, leverage to be under 3x -- at or under 3x, which is lower than the previous measures we've given a 3.5x. Dividends to be 50% or lower of net profit. And on an illustrative basis to help you with your models, you can see we expect to be EBIT to be in excess of EUR 290 million. So you can calculate the EBIT CAGRs from that based on where we are at the moment. So strong EBIT growth and adjusted EBITDAaL to be in excess of EUR 430 million. So you can see the targets that we've got. I think they're ambitious but challenging, but it reflects the strength of our business and the opportunity that we see ahead of us. And with that, I'll hand back to John. John Stubbington: Thank you, Anand. And so in terms of key takeaways, 2025 is a strong year. We've successfully achieved our 3-year financial targets, which I think is very positive for us. We've got good organic growth and good -- well, very significant improved margins from both divisions and a really strong fee-for-service line, which is a good revenue stream for us. There is room for us to improve. We can -- we know that, we see that, and that's really reflected in our future targets. And we believe we can improve from a growth perspective, and we believe we can certainly improve from a margin perspective. We're in very strong markets where we've got the opportunity to grow the network that we currently have we can certainly develop some new products and some new areas of interest for our customers. And let's not forget that over a long period of time, we put a lot of investment into our business and increased our square meters for quite a period, and we still got capacity utilization to come. So looking ahead, we're entering a new phase, a phase where we enter it with from a position of strength. We're very excited, and we're looking forward to it. And so we're in a good place and just really to end with a big thank you to all of the people in Medicover, who have committed a lot to be able to achieve the numbers that we committed to 3 years ago and who will continue to commit a lot to be able to make sure that we do it again in 3 years' time. Thank you very much. Operator: [Operator Instructions] The next question comes from Philip Ekengren from ABGSC. Philip Ekengren: So I'll stay away from asking about the new targets and keep that for tomorrow. But just just on margins. So adjusted EBITDA margins up 200 basis points year-over-year. Could you give us sort of the key drivers behind that increase? And perhaps also if you can split up how much is operational leverage and how much is price so that increase, please? John Stubbington: Well, from a price perspective, you can see it in the numbers that we've just kind of published. If you go through not only the quarter but for the year, you'll see that from a Healthcare Services perspective, the price component is much stronger and obviously from a Diagnostic Services perspective, it's a lot weaker. The increase from a Diagnostic perspective, the increase in the volume of tests, as we all know, with the Diagnostic business that -- once you put more tests through the lines that you've already got, it's quite a sweet position for you. So if the team continues to drive that extra volume, that extra volume will result in operational leverage and it's pretty similar in Healthcare Services, but not to the same extent of the margin increase. You've got to do a bit more volume from a Healthcare Services perspective to get the same kind of outcome in the financial numbers. But capacity in Healthcare Services, that's where most of our square meters has gone on. You've got a bit of mix in there as well. Q4 was a slightly strange quarter with all the holiday pattern as well that happened over Christmas, which is quite unusual. Lots of different factors in there, but certainly, price, certainly capacity, certainly a bit of volume. The usual usual levers that then have an impact on the model. Philip Ekengren: Makes sense. And on India, it's continuing to show some double-digit growth in local currency. What are you seeing on the market starting so during January '26? Can you say something about that? John Stubbington: Well, we usually talk about Q1 -- in the end of Q1. But I stand I can understand you're asking the question because it's such an important component of the the story that we've been talking about in recent times. If you look -- I'll make 2 comments on Q1 as I start to the year, is that if you look at Europe, there's been very strange where the partners hit us, which is very unusual in our key markets at the time, you've got minus 20-degree positions. And then, of course, in India, you don't get that. So India, I think that Europe will be affected a bit by that weather position. And I think that from a India perspective, I said earlier on, the key word was momentum, and that momentum that we said that would build in Q4 has started to build in Q4. And we expect it to build as we go through the year because that's what we need to be able to continue with Plan A. And we're certainly on Plan A from an IPO perspective and the team have done a good job so far. And then we'll see how Q1 turns out. It's always has a little bit of ups and downs in Q1 because of holiday patterns, et cetera. So we'll see. Philip Ekengren: Appreciate it. And then perhaps a final one for me. So you mentioned some softness ahead of Q4 in the Q3 report on the call. And now you talked about some early signs of improvement. Could you elaborate a bit on that? Is it a change of the underlying sort of macro? Or is it your kind of mitigating factors that's working? John Stubbington: Well, that's always a very difficult one to be able to quantify because as it moves it could be economic factors. It could be the fact that what we've actually done is resonating with the consumer. What we know from history is that when we've hit this kind of patch, it's taken us 1, 2, sometimes maybe 3 quarters to kind of like reprofile. And then we've reprofiled and pushed through. So I think we will get some positive impacts from an economic perspective where we're seeing this softness. And I think we will get our teams doing what they've managed to do over a period of time. It's just a question of how long that takes. Q4 versus our expectations was a little bit better than we thought. In Q1, let's see. Operator: The next question comes from Julia Angeli Strand from Handelsbanken. Julia Strand: I have a couple, and I'll start off with a question on India. So how much did the strike affect you? Was there a pent-up demand effect or more of a negative effect in this quarter? John Stubbington: Well, it was negative on us, let's quantify against everybody remembers, this is in one state where for the Governmental Pay business, which is a smaller percentage of our overall, the -- every provider in that state basically didn't provide care unless it was an emergency for members of the public that we're entitled to it. This was because the local government had taken quite a long time to be able to settle all of their bills. It lasted for all of October, maybe a little bit longer, but certainly most of October. It did affect us. It did have a negative impact on us. I'm not going to quantify what that impact is. But we -- from our perspective, we've moved through that in the quarter very successfully. I think that's the important [indiscernible], it won't be there in Q1 because things have returned to normal for the time being. And we fully expect, as we -- as I said earlier, the momentum is a really key word when it comes to India, and we expect that word to be something that we talk about after Q1. Julia Strand: Okay. Understood. And is it -- are you able -- could you disclose how much of the revenue in India that comes from mature hospitals? John Stubbington: I don't think we've put that on public record. So I don't think I can unfortunately. Julia Strand: Okay. Understood. But could you -- does that say something about when you expect the rich mature occupancy in India given the hospital facilities you have open today? John Stubbington: So I'll frame it slightly differently. If you're looking at our occupancy journey and what will need to happen, I think we've been quite open and clear about that in many discussions that we've had in many different places. We have improved our occupancy, but it's never really been seen because as we've done that, we've opened more and more facilities and that suppressed things. The opening of the new hospital, which has happened in -- soft launch, which has happened sort of the beginning of the year, is the last major investment that we have planned and now we look to mature our occupancy rates. So it's a really key driver. It's one of the 3 key drivers that we talk about. The other 2 being doctor recruitment and the other one being the average revenue per occupied bed. So currently, we're below the 50s, before we talked about being on the 50s. So it all depends about the bed mix and what's happening. Now we fully expect if our momentum picks up in the way that we needed to pick up, we will see that occupancy start to move. If that occupancy moves even a 10% movement up for us will be a very significant impact on our operating model. If we go further than that, then it will be an even bigger impact. So we're at the business end. We realize that and the next couple of quarters are going to be key. So we're really looking forward to talking to you over the next couple of quarters about India. Julia Strand: Okay. That's clear. And then just one last from me. How should we think about the fee-for-services in Diagnostics? Is this any indirect effect of German reimbursement or just a strong momentum? John Stubbington: No. I think that the German market will need a period of time to mature when it comes to fee-for-service, we'll see signs of fee-for-service growth both coming from the fact that it's been reformed but also from a lifestyle perspective, consumers are wanting different things when it comes to things like antiaging, longevity, all that type of thing. So there'll be a mix change as well, and some of those things are not covered under the national scheme. But Germany will take quite a while, I think, before we sit here and say we've got a fee-for-service market in Germany. It will be more complementary when it comes to fee-for-service. And of course, if that line grows in Germany from a margin perspective, it should be good for the model. But the other markets that we have, they are mainly led by fee-for-service, and we're a strong player in those markets. We have a good proposition. We have excellent service. We have a broad base of tests that we can give to give to people, and we have great technology that provides a platform in that network for us to take advantage of things. So I think what you're seeing is some of that benefiting us and of course, the SYNLAB. The SYNLAB acquisition also benefiting us, which is driving some of the overall positivity. But it's positive. I think that's the key word there that those markets are very positive for us and doing really well. And as I said before, congratulations to the team. Operator: The next question comes from Mattias Vadsten from SEB. Mattias Vadsten: I have a few here as well. First one, India again, so rephrasing it a bit, perhaps. So it must have improved quite a lot through the quarter. So what is basically the key contributor here? Am I correct to say the key is that you have removed the bottleneck from lack of talent to care for patients through good recruitment? Or is it sort of something else that you want to add to that? Or how should we think about it? That's the first one. John Stubbington: Yes. I mean, we said in the previous quarter that we focused a lot on retention and recruitment. And in that previous quarter, we also said that when you bring some of these doctors in, they're very good doctors, but it takes a period of time for customers to realize where they are, where they move to, and it takes a period of time for our excellent marketing team to get out there and spread the word, et cetera, et cetera. So recruitment is definitely a key part to it for us. And then there's other things from an operational leverage from our model in India, once you increase the revenues, it starts to get really, really positive for us. And we've put a lot of technology changes into India as well, which stops some of the revenue leakage in the patient flows, there's a lot of developments that's going on in India. But the key one, you're right is doctor recruitment, doctor retention. Mattias Vadsten: Perfect. And then Germany, just if you could provide some commentary on the EBITDAaL margin movement in 2025 as a whole. So we understand just... John Stubbington: I'll hold that until tomorrow, Matthew. I think there's -- there'll be something tomorrow that shows you that over a couple of year period. The only comment I'll make about it, I won't go to specifics. I'll just say, if you look at Germany over a 2-year period rather than just a year of reform, it's a very positive position for us. And I think we'll share that tomorrow. Mattias Vadsten: Okay. Good. And could you -- I guess we'll come back with this as well tomorrow. But could you give sort of high-level commentary on the anticipated CapEx to revenue ratio through 2028 and sort of a rough split between the segments? Anand Patel: Yes. Yes, Mattias, it's Anand. So I guess we continue to see opportunities to invest. So I would assume, if I were you guys, I would keep roughly the same percentage of revenues as organic CapEx spend over the next 2, 3 years. And I would envisage that broadly speaking, the split would be geared towards Healthcare more than Diagnostics as well. So that's our view and what we can say for now really. Mattias Vadsten: And one last one for me. A short one. How did seasonality with Christmas and so forth impact margins in Q4 versus last year? John Stubbington: Yes. The holiday pattern was very frustrating for us because for those that didn't work it out, you only had to take a few days holiday and then you were off for about 3 weeks, I think. So there was definitely a slowdown that occurred. And that slowdown in terms of people returning post-Christmas also was a longer period for us. But I think when you look at our Q4, if that hadn't happened, in our Q4, I think would have been even stronger. It's hard to say exactly the position that we would have been in, but roughly, our Q4 -- from our point of view, our Q4 is kind of in line with where we expected it to be, if not a little bit better in terms of some of the things we were navigating with standards in good stead. So it was there. It's just one of those things. It's not one of those things that happens every single year. We just have to navigate it, move on. And in our long-term journey and our long-term objectives of what we want to do, I don't think we'll be talking about Christmas 2025 too much in our future. Operator: The next question comes from Kristofer Lijeberg from Carnegie. Kristofer Liljeberg-Svensson: Two questions. is it possible to maybe comment about the cost synergies from the SYNLAB acquisitions and how far you have come with that? John Stubbington: Yes. I mean, we have obviously gone through a full cycle of a complete year of seeing the benefits of this. But in terms of the acquisition and post-acquisition implementation plan, we are almost complete from a SYNLAB perspective. The things that we've got left to do are things that are left to do based on the fact that the time line would take us a little bit longer. So things such as our purchasing coming together and getting the benefits of that, things in terms of any duplication that we had that needs to be resolved and things such as systems and things such as sending some of our more advanced tests to centralize in Romania or Germany, those kind of things are super well progressed. So from a maturity curve against ambition versus activation, the team are almost complete. Now we've got to just make sure that comes through positively in our numbers as we go through the course of the next 12 months. Kristofer Liljeberg-Svensson: But is it possible to quantify the cost savings and how much more of that we should expect in 2026? Anand Patel: No, I'll take that one. So not now. I think what we will do is in the annual report for the first time when we report that, you'll see the split of the revenues and net income between CityFit and SYNLAB. So you'll see the numbers in there in terms of how they're flowing through into profitability. We're not sharing that in this Q4 interim statement. But as John said previously as well, we've said that the Sports business we bought had a strong start and carried on, and that's fair to say that's happened. And from a SYNLAB perspective, still lots of opportunity there, but we had a slower start. So -- but we're catching up now, as John said, and we're getting to the run rate where we need to be in terms of delivering on synergies and the profits that we expect, although they're both still accretive versus the underlying Medical business is what I'd say. So in the annual report, you'll get a bit more information about it, and that's all kind of we can set on that. Kristofer Liljeberg-Svensson: Okay. And then my second question, the margin outlook here for 2026. And the reason I'm asking is, of course, to see the Q4 margin, it was lower than the full year level for 2025. So how -- or could you say anything about how we should think about 2026 margin and particularly maybe in the first half of the year? John Stubbington: Yes. I think the first half of the year for us, the first half of the year for us with the softness and whatever, that we'll need to navigate that. We don't disclose margins by quarter or give forward projections on these things other than our midterm targets that we've said. But I think if you look at from a midterm target perspective, we're confident over the next 3 years that we'll build an even stronger business model. And we've mentioned weakness -- started to mention that in Q3, saying we're going to have to navigate it over a few quarters. So I mean, that sends a slight message, and we'll see how it goes. But we're positive that we can move our margins up over a period of time because we've got some levers that we feel we can pull. So it's -- we're in a good position, although we don't disclose it. Kristofer Liljeberg-Svensson: Okay. But if we just take the seasonal effects that was discussed here previously. So just from a seasonal perspective, Q1 versus Q4, is that a stronger margin in Q1 than Q4? Anand Patel: Yes, it will be. So Q4, I think, particularly given the mix in the sports business is a bit a little bit low in terms of how the margins flow through from a profitability perspective. So yes, that would be better. But remember, as I've said, in prior quarters, we had stellar margin rate growth in Q1, Q2 and Q3. So we've got strong comps to anniversary as well. So yes, the seasonality levels out in terms of the movement, but strong comps to offset that. Operator: The next question comes from Kane Slutzkin from Deutsche Bank. Kane Slutzkin: Just a quick one on Germany. On Germany, you mentioned you're seeing volume growth there despite the reform. Are you seeing sort of competitors being sort of squeezed out there? Is this sort of volume share gains? And then how much of the margin expansion in the Diagnostics business is coming from sort of a shift towards more advanced testing and things like genetics versus the sort of more standardized testing? John Stubbington: Yes. I mean from a German market perspective, we fully -- what we talked about reform all the way back in the early quarters of 2025. We talked a lot about the tail and that reform always always ends up cutting the tail of some of the smaller competition, and we fully expect that to come through. So again, from a -- when things -- when change comes like this, people want to try and trade out of it and then eventually the -- some of them realize that they can't. So I think there's more to come yet. And then from an Advanced Diagnostic perspective in our German model, our German Advanced Diagnostics, which includes -- included generically, with our Genetics business is a strong part of our proposition, and we'll show that a bit more tomorrow in terms of how that works and why that's important for us. And we do see growth in that particular area. And we have in 2025, invested further in that area because we firmly believe it's a strong place for us to be that we can do -- we can grow quite strongly. So I think you'll see more -- let's talk about that more tomorrow that will give a bit more of a flavor to it. Operator: There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Hanna Bjellquist: So we've got a couple of other questions. In the report, you notice you see the recovery members addition, could you elaborate more what is driving this recovery? John Stubbington: Yes. I mean from a member perspective, we have to put everything into context. Our biggest membership business is Poland, is much smaller in Romania. But our Polish position as we -- over -- if you look back in history, over the last couple of years with the extreme inflation that we were having, our focus was very much on making sure our business model was robust and that our pricing was appropriate and that we could deliver high-quality services to our customers as a consequence of the pricing position. We didn't take a stance to say let's use this to drive a high volume of membership growth, and that's what you've seen. The inflationary position will still be relatively high, but not super high as it was. And our focus will move more towards building membership. And again, a bit tomorrow, you'll see some of that, but also I'll mention today that some part of that will be about product developments and how that product development can increase our membership. And we've done some of that already, and we see some early signs of success on some of that product development, and we see some good pipelines being developed. So we're back into a different kind of mode as we go through '26, '27 from a membership perspective. But also, I'll counter that with -- if you look at our business mix now, we've got funded members and we've got fee-for-service members, and you can see extreme increases in our relationships that we have from a consumer perspective, which will -- also standards in good stead. So I think we're reasonably well placed on both lines. Hanna Bjellquist: And what scope do you see for pricing of Healthcare services for 2026 in view of the more challenging Q4 '25? John Stubbington: Yes. I mean we'll take our normal pricing position, which is the appropriate pricing will be put in place based upon the -- what we see in terms of utilization and what we see in terms of medical inflation. And if we go back the last couple of years, our pricing has been a little bit higher. You would expect it to kind of normalize positions we had before. But we are not an organization that will discount price to get volumes. We're an organization that wants to price appropriately, so that we can add value to the customer and have a nice balance between them paying as an appropriate fee and us delivering a fantastic service to them. Hanna Bjellquist: And the last question, would it be possible to mirror the sport wellness success in Poland in other markets? Or is it very particular to just Poland? John Stubbington: Currently today, our focus is very much on Poland. It's been a fantastic addition to our portfolio. Our customers appreciate the diversity of the proposition that we can now give them in Poland. There's a slightly different pricing dynamic that comes into play because Poland has the funds from the businesses, the independent funds that can be used for social funds, which aren't necessarily available in other countries. And we've got quite a big expansion to do in Poland. So we've got laser focus on Poland at the present. Hanna Bjellquist: And the final one. If you look at your last page and where you talk about where growth will come from, how do you look at the split between network expansion product... Anand Patel: I think John kind of broadly answered that on Page 6 of the pack. So if you look at Poland, that was 16% growth year-on-year in the quarter. The majority of that growth was driven by Sports and Wellness, which we mentioned already. And the other material areas of growth in the quarter in Healthcare were in Romania. So obviously, we've got remaining hospitals in Healthcare. So that's probably it. Hanna Bjellquist: That was the final question. John Stubbington: Okay. Thank you, everybody. Thank you for the questions. Really good session. We're really pleased with the quarter that we've had. We're really excited about the targets ahead they're challenging, they're ambitious, everything that Medicover was about. So we're very happy to take those on board and looking forward to developing the business forward to be able to to achieve them. For those of you that are joining us tomorrow, we look forward to seeing you whether you're face-to-face or online, and we wish you a good day. Thank you very much.
Operator: Thank you for standing by, and welcome to the Amotiv Limited FY '26 H1 Results Call. [Operator Instructions]. I would now like to hand the conference over to Mr. Graeme Whickman, CEO. Please go ahead. Graeme Whickman: Thank you, and welcome to the earnings call of Amotiv results for the half year ended 31st December. I'm Graeme Whickman, CEO and the Managing Director. And I'm here with Aaron Canning, the company's Chief Financial Officer. As per normal, the recording of this call, along with the material will be available later today on the website. So I'll start the call by touching on the key messages and the group performance, a review of the operating divisions, then I'll turn it over to Aaron to cover off the financial section in more detail, and then we'll conclude with a short trading update and outlook before conducting the Q&A. So let's turn to Slide 3. I believe we've delivered a solid result in what is a challenging operating environment. I think it reflected disciplined execution and the benefits of a multiyear diversification strategy in terms of where we got around revenue. Amotiv Unified continues to deliver incremental benefits with ongoing costs, margin and operational initiatives, mitigating segment-level macro pressures through a more streamlined and efficient operating model. We had strong cash conversion and coupled with disciplined capital management that supported reinvestment in the business while returning capital to shareholders. Against all that backdrop, the FY '26 guidance remains unchanged. Group revenue growth is expected with underlying EBITA growth of circa $195 million. Now turning to Slide 4, where we detail some group performance. Well, the revenue diversification has been a core pillar of our strategy. So it's pleasing to see the revenue growth of just over 3%, underpinned by new business wins, ongoing product investments and a high contribution from offshore markets. This provided an offset to some of the headwinds in 4-wheel drive and LPE, while our Powertrain division continues to outstrip what is a resilient system growth. Underlying EBITA of $98.3 million, up marginally on the PCP. It was impacted a little bit by lower 4-wheel drive margins due to domestic inflationary pressures and the ramp-up of South African plant, by the way, a market that we remain excited about in terms of future prospects. And then we got some select pricing implemented in Q2, and that's expected to support the 4-wheel drive margins in the second half. The Amotiv Unified initiatives across the group delivered meaningful cost benefits, and these partially mitigated the margin pressure from domestic cost inflation. This program has got really good momentum and further incremental benefits have been identified and expected to support H2 a little bit there and then certainly into future earnings. A great cash flow, very strong. Capital management drove EPSA up 5% and dividend growth was just over 8%. At the same time, leverage was maintained comfortably within the target range. And circa sort of $48 million was returned to shareholders in the period, inclusive of both dividends and buyback. Safety, always a pride point for the group. And therefore, it's pleasing to see continued improvement in the TRIFR, which has trended down to just down to 9.7-ish. And as an aside, our work on reducing emissions also delivered tangible benefits in the period. Now turning to Slide 5, we outline the progress made on our strategic imperatives, which represent the key areas of shareholder value creation. If you look from left to right, as mentioned earlier, we're pleased to see the momentum in cost realizations from Amotiv Unified programs, which we first announced to the market back in May at our Thailand site visit. Now we'll cover this in a bit more detail later on, Aaron will. But these activities garnered benefits across 3 of our divisions, all 3, as well as also our corporate head office costs. I'm actually really excited that the commissioning of the third Thailand plant is underway, adding capacity to the already well-utilized existing adjacent facilities up in Thailand. And this low-cost jurisdiction positions us well to win business in Europe and the U.K. And we touched a little bit on that at the full year, and I'm going to talk a bit more about that later on. As discussed earlier, revenue diversification has been an important driver of this result. With ongoing penetration of offshore markets resulting in a 14% growth in revenue outside of Amotiv's ANZ domestic market. Our operational excellence efforts were well rewarded in the half. Safety improved. Headway was made on reducing emissions with circa 850 kilowatts of solar energy commissioned at our 4-wheel drive Keysborough plant. As a result of some of the unified warehouse consolidation initiatives, Powertrain & Undercar saw an increase in DIFOT, post the latest phase of the Truganina DC consolidation. So very happy with the way that's coming together. And then finally, in terms of capital management, the buyback we announced in October '24 was completed in the half. At the same time, we increased the dividend at a higher rate than EPSA. Now moving to Slide 6. We touch on Amotiv2030 Strategic Plan to the group unveiled at the last AGM. Now as you can see from the slide, we've reduced and simplified our strategic priorities from the prior GUD2025 Strategy aligning with our divisions. And this calls for us to optimize our Powertrain & Undercar portfolio while adding 1 or 2 adjacent non-ICE categories. Solidify and defend our Australian and New Zealand Lighting, Power and Electrical business, while still growing a global niche Lighting and Power business from our established basis, both in the U.S. and Europe. Building a leading integrated 4-wheel drive Accessories & Trailering business in Australia, while leveraging key expertise to build a focused global business. And I would term that as sweating the assets, both from an engineering and also manufacturing point of view. And then finally, simplify and improve via Amotiv Unified to make us more efficient and effective. Now my point of view, Amotiv remains an attractive pure play, all centered around automotive, as you know, servicing large and resilient addressable markets, supported by market-leading brands of largely ICE-agnostic products, which in turn is supported by some really strong new product development credentials, both in terms of investment and also strong market positions, something we don't take for granted. The group is led by experienced management team focused on improving shareholder returns, through disciplined investment as backed by a strong and, I think, resilient balance sheet. Having said all that, there's lots of work to do, but we're all excited with the prospect. 2030 from a strategy point of view is designed to create a clear path to leveraging our automotive pure play to grow and create value for shareholders, underpinned, I think, by clear set of attractive investment thematics. Now let me turn my attention to some divisional updates. Right, starting with 4-wheel drive. Well, revenue was up 5.5%, driven by new business, including a full period of South African revenues that weren't present in the PCP. And this was also complemented by some continued Aussie towbar wins. I think this is a credible performance against a highly challenging backdrop. Pickups were flat in the half, net of Shark in Australia, New Zealand, and down 7% net of Shark, in January alone in ANZ. So January was an interesting month. The mix also of OEMs was challenging in Australia, as an example, in the half, with 5 of the top 10 pickups down in the half between 3% and 37% and then you sort of cast your eye to January because remember, you are generating revenue in the half, even though those vehicles have been sold in January. And if we looked at the performance in January, 6 of the top 10 pickups were down actually even more pronounced between 14% and 38%, so a little bit softer than what we're expecting. Cruisemaster. So if I turn my attention to caravans, continue to gain share, which positions us nicely for what is a weak caravan, RV market when that eventually turns. I think overall, the result reflects a cyclical and the inflation headwinds that the team are facing. It also reflects the ability of this division to win global business, and this has been leading us to invest in the growing and prospective offshore revenue pipeline. Underlying EBITA was down just over 15%. Down 12%, if you were to back out the impact of a double debt provision for an RV customer, that was around $1 million. And with that similar approach, the actual EBITA margins were down 290 basis points. Now the key driver which was delayed price realization relative to domestic cost inflation, and we signaled this to market previously. At that same time, when we're talking to you, we spoke about out-of-cycle OEM pricing, and that was secured in the end of Q2 to address a period of heightened inflationary pressure within the domestic manufacturing operations. As a result, margin is expected to improve from H2. There's also been a country mix impact as we consolidate South Africa after the full first period. Now this new facility has excess capacity, again, not new news to our investors as it's in the early stage of ramp-up. You'll be reminded, it's stood up on the basis of SKUs, but we remain confident in the ability to win business in that jurisdiction and improve utilization of margins. And of course, while it's profitable, as detailed in our FY '25 full year results, South Africa is below the margin of a mature 4-wheel operation. Within the 4-wheel drive, Amotiv Unified also positively contributed to earnings through the right sizing of the New Zealand operations, which are now profitable. So if I start to look forward, we expect the combined impact of pricing actions and higher volumes, such as Hilux in H2 and Navara in FY '27. And particularly from offshore, the likes of U-Haul and some European business coupled with the Unified efforts to improve margins from H2 and specifically beyond. Interestingly, we had some comments from our shareholders in the past and wanted to understand a little bit more about the Chinese situation. Well, the depth and breadth of our relationships with Chinese OEMs continue to improve through the half. You can see on the chart on the slide that the Chinese OEMs are becoming a larger part of the addressable market in Australia and New Zealand. Much has been made of the successful launch of the BYD Shark. Unlike some of the other Chinese OEMs, BYD has taken the approach of self-supplying towbars. But the balance of the Chinese OEM, which represents 72% as you can see on the chart of units in CY '25 have outsourced this function, and we are already pending already our customers of the 4-wheel drive business, which means we're well positioned for any OEM mix change within the Australian car parc. As mentioned earlier, capacity also has been added to our Thai facility. The 4-wheel drive team have a really strong track record of winning and retaining business and is focused on scaling these offshore operations to drive revenue growth and recover fixed cost investments supporting that margin improvement I mentioned over time. As evidence of this, I'm really pleased to announce that we secured our first European towbar contract. That's being supplied out of Thailand, so it's utilizing and sweating that asset based on the engineering capability we already have and that's our first material -- when I say material, I mean, in terms of an OEM, contract that we've been able to secure. And that volume will be expected to come in FY '27. And we expect to perhaps get some more European contracts, and that's market share gains that's taking business off the likes of First Brands and Westfalia. In the U.S., the export volumes in Thailand continue to build with growing U-Haul demand expected to support volumes into FY '27. So I'll stop there and perhaps now move to Slide 9 and the LP&E division. Now the ANZ market conditions remain challenging for LP&E, particularly across the reseller channels. Against this backdrop, the group benefited from continued execution of Amotiv Unified and increasing offshore revenue diversification, which provided a meaningful offset. Revenue reflects volume growth in the U.S. and Europe, which mitigated some of the soft reseller demand in ANZ. By category, lighting delivered growth of 1%, well done to the Vision X team in the U.S. and Europe. And that offset muted Australian reseller demand. Power Management revenue increased 3%, reflecting ongoing investment in product innovation and continued growth in the U.S. market -- and then electrical accessory revenue decreased 4%, impacted by softer Australian reseller demand, some ranging changes, but really some emerging signs of flights to value. The unified benefits were delivered through a leaner Australian operating model with total operating costs down circa 12% compared to PCP. And as a result, underlying EBITA increased nearly 9.5% with margin expansion of 210 bps, largely driven by those Unified benefits. I turn my attention to looking ahead, while the ANZ reseller dynamics are expected to persist in the second half, while Europe and the U.S. are expected to continue to grow. The full benefit of the Q2 U.S. tariff-related price increases expected to flow through into H2 with modest price increases anticipated from Q4. The net result is that we expect underlying EBITA in H2 to be marginally softer in H1, but slightly above certainly the PCP. Now let's turn to the final division, Powertrain & Undercar. This is a really pleasing result, well done to the Powertrain & Undercar division that reflects the continued resilience of the where repair market, supported by some really strong brand strength and ongoing efforts to diversify revenue. That revenue grew by almost 5%. It was driven by volume and the annualization of pricing actions across select product categories, a broadening product portfolio increased PD investment drove our performance. And when I say our performance, I'm thinking about that relative to system growth. Interestingly, the New Zealand revenue grew by 12%, and that was driven by enhanced distribution and ranging outcomes. Efficiency and margins were supported by ongoing Unified consolidation benefits and reduced EV investment. And this resulted in an underlying EBIT growth of 6.7%, nearly 7%. EV investment was further moderated through the first half, in line with the changing market dynamics and we've spoken about what we were going to do at an early stage. With that business on track to reach breakeven by the end of FY '27 on a run rate basis. Looking ahead, further Unified initiatives will be implemented through the second half as the business continues to consolidate site operation and improved returns. This also includes the consolidation of Infiniti operations into the IMG group. Operating cost benefits flowing from the first half headcount reductions, the rationalization of the ACS warehouse into Truganina and the commencement of the group procurement benefits, including freight. So that sort of wraps up the divisions. Perhaps I'll now ask Aaron and hand over to Aaron to give a bit more detail to some of the finances in the back. Aaron. Aaron Canning: Thank you, Graeme and good morning, everyone. My name is Aaron Canning, I'm the Amotiv CFO, and I'll take you through the first half financial results in more detail. On Slide 12, we highlight our group financials. As Graeme has touched on, revenue grew 3.3%. Importantly, that was all organic growth. The full-wheel drive business benefited from new business wins as well as the inclusion of South Africa for the first full half growing 5.5%. The powertrain and undercar business grew 4.9%, really driven by a broad range of categories from filtration, brakes and gaskets, which was pleasing to see. The LP&E division, Graeme has touched on was marginally down driven to a softer ANZ reseller demand offset by continued growth in both Europe and the U.S. Gross profit declined by 0.5% with margins lower due to the inflationary increases in full drive, which have been yet to be offset by the OE price increases that were announced in Q2. These will show up in the second half. U.S. tariffs also impacted the LP&E margins as our double-digit price increases announced in May 2025 post-tariff updates did not come into effect until midway through Q2 as we honored customer backorders at pricing pre-tariff pricing, We expect all of that margin to flow through to the second half, and we continue to monitor the U.S. tariff environment and are prepared to make any further pricing changes, if required to protect our margins. Operating costs pleasingly were lower by over 2%, more than offsetting inflationary increases, largely due to disciplined cost management and the benefits from our Amotiv Unified program flowing through. Depreciation and amortization were broadly consistent period-on-period. And our underlying EBITA at $98.3 million is marginally ahead of the PCP by 1.3%. And importantly, it keeps us on track for an unchanged full year 2026 earnings guidance, which Graeme will speak to in more detail later. Significant items totaled $8.3 million and largely related to restructuring activities linked to executing Amotiv Unified initiatives. In the half, a further 50 employees part of the business, predominantly across our Powertrain & Undercar for Lighting, Power, and Electrical divisions as we continue to simplify and optimize the operating model in these divisions. A more detailed breakdown of significant items are provided in the appendix on Slide 26. We remain disciplined when it comes to managing significant items, and it's worth noting we are 1 year into our 3-year Amotiv Unified journey. Although we do expect further one-off costs in the future, we see this as moderating over the medium term. There were no noncash impairments in the half, and we remain comfortable with the carrying value of our core brands and intangibles. In terms of tax, we had an effective tax rate of 29.1% in the half, marginally up on the PCP with some minor movements in the period. A further breakdown of these movements is provided in the appendix on Slide 27. We expect the full year effective tax rate to be broadly in line with the current levels around 29%. Our statutory net PAT at $46 million represents 39.4% growth on the PCP, with the prior year impacted by higher significant items, including a $10.4 million noncash impairment. Underlying EPSA grew 5.3%, largely due to earnings growth and lower shares on issue on completion of our buyback in the half. The Board has approved an interim dividend of $0.20 per share, representing over 8% growth or a 52% payout ratio. As Graeme has touched on, pleasingly, we've been able to return over $48 million to our shareholders in the period with a combination of over $18 million invested to complete the 5% buyback program and nearly $30 million in dividends paid in September 2025. Directing your attention to Slide 13, net working capital. Net working capital as a percentage of revenue improved 1 percentage point to 28.7%. Improved collections partially offset inventory -- growth and inventory balances for the period with total working capital growing at 3.1%. I'll unpack this in a little bit more detail by division. And inventory increased just under $19 million since June or 8%, it's predominantly driven by the LP&E division, which has carried higher inventory levels for our Vision X business in the U.S. and Europe post-U.S. tariff changes. In Australia, we have sought to rebalance our inventory holdings commensurate with reseller demand. This is still work in progress. And Australia represents an opportunity for us to improve our inventory position through the second half as we build our sales and operational planning capability. 4-wheel drive saw marginal increases. It's important to note in that division, the majority of finished goods inventory is made to order in that business. And it also includes the inclusion of South Africa for the period and some timing of inventory purchases. The Powertrain & Undercar division also saw some increases as we continued our work on consolidating our logistics and warehousing footprint as part of Amotiv Unified. As such, we have built inventory through the first half to manage this transition as we expect to make some further changes in Q3 as we rationalize our warehousing operations for our Clutch and EV businesses. We expect the current inventory levels to unwind in this division through the balance of the year. Our payables were broadly aligned with PCP. And pleasingly, our receivables have decreased by 4% or over $8 million against the reported revenue growth of over 3%, largely due to better compliance and a concerted effort around collections. Compared to the PCP, we do not have the one-off collection issue repeat in this period. And importantly, we see further opportunities to improve our collections through the balance of this financial year. For transparency, we executed similar levels of debt factoring around $16 million in this period versus the PCP in December 2024 and again in June 2025. Pleasingly, our cash conversion remains strong at just under 92% and ahead of our guidance. Directing your attention to the chart on the bottom right-hand side of the slide, you can see the strength and the resilience of the business across a number of periods and regardless of the cycle and broader macro environment. As we look to the full year, we do not see this changing. And we expect our cash conversion to be at line and/or ahead of our cash allocation target of 75% or more. As we turn to Slide 14, capital investment. Our investment in product development has ticked up in the period to 3.8%. It's been a key driver in underpinning our performance in our Powertrain & Undercar results. and also supporting future wins in 4-wheel drive. We expect similar levels of investment through the second half of this year. Our CapEx has moderated and down 22% versus PCP, largely in 4-wheel drive which in the prior period included investments in South Africa and Thailand. As previously advised, we expect the full year CapEx investment to be up to 10% lower than last year. In terms of our CapEx split between growth and maintenance, it is broadly balanced. It's in line with our capital allocation framework metrics and ensure as we balance investment in maintaining what we have today, with investment initiatives to generate future growth. On Slide 15, our foreign exchange exposure was well managed. The first half was impacted by a stronger USD versus the PCP. However, this was well managed within a volatile spot market. For the remainder of this financial year, we are now effectively fully hedged with further hedging being executed in January. We also have taken the opportunity in the last few weeks in particular, to take advantage of the AUD strength, and we've locked in meaningful coverage for the first half of FY 2027. If there continues to be any further AUD strength above current levels, this will mostly be an H2 '27 impact for Amotiv. In terms of our offshore earnings, it continues to provide a natural hedge to FX exposure, particularly as we increase our U.S. dollar and Asia currency earnings. U.S. dollar earnings grew 41% versus PCP, building our natural hedge in the period. Combined U.S. dollar and non-AM earnings now represent 32% of our total post-tax earnings in the half. And we see growth in offshore earnings continuing to be meaningful through the second half and beyond. On to Slide 16. Our balance sheet remains in great shape. The group's balance sheet remains in a strong position with gearing at 1.95x, increasing by 0.2 turns since December 2024. It remains well within our capital allocation framework target range of 1.5x to 2.25x. Our leverage increased marginally since June, largely due to the completion of the buyback program. I said earlier, we invested a little over $18 million in completing that in the period and some further investments in new jurisdictions in the form of working capital and operating expenses. The business continues to deliver stable and predictable cash flow earnings, as I noted earlier. Our leverage guidance remains unchanged with the expectation the business will delever through H2. Our debt profile remains long dated with nearly 2/3 of it fixed at market-leading rates. As such, recent and any future changes in the Australian domestic interest rate environment will have a relatively low impact on our cost of funds. As a guide, 25 basis point increase or decrease will have a 0.3% impact on a full year result for us. We remain strong support from aligning the group and strong appetite for further support should we need it. In terms of our cost of funds on the right-hand side, it's reduced marginally in the period by 11 basis points, largely reflecting the domestic interest rate environment. On to Slide 17. In terms of our capital allocation framework, we performed strongly against the majority of these metrics. In February of last year, we announced this framework. The framework provides visibility on how we will deploy capital against, as you can see, a set of return metrics, both for organic and inorganic investments. Importantly, these metrics, in particular, return on capital employed now form part of management's long-term incentive program. For the first half, we performed in line or ahead of all metrics with the exception of returning capital employed. This remains a key area of focus for us, and we are unhappy with our current performance in that area. And we continue and will continue to measure ourselves on a pre-APG impairment metric. On a reported basis, you can see the results provided in the footnotes to the slide. Furthermore, today, we are announcing we expect to generate an incremental $10 million annualized gross benefits from the Amotiv Unified program on exit of this financial year. And on that particular topic, I will now cover off the amount of Unified update as part of a broader update on our outlook. I'll now direct you to Slide 19. In February 2025, we announced our transformation program called Amotiv Unified. This is a 3-year program made up of a number of projects with execution staggered into 3 ways. Exiting FY '25, we delivered $15 million in gross annualized benefits with $5 million reinvested into marketing, product development and new roles. This net $10 million of benefits is included in our FY '26 guidance. We are announcing today an incremental -- in addition to that, an incremental $10 million annualized gross benefits to be realized on exit of FY '26. These further benefits will support $5 million investment into simplifying our IT platforms, further warehouse consolidations and program management resourcing through the second half of this year. The timing of these benefits at an additional net $1 million EBITA benefit in FY '26, highlighted in the table on the bottom right of the page. These benefits are helping offset revised modest pricing increases expected in the second half. These combined net benefits of the $1 million using today and the $10 million that we previously announced are included in our FY '26 guidance. I'll now hand you back to Graeme to discuss this guidance and trading update in more detail. Graeme Whickman: Thanks, Aaron. I appreciate the detail, as I'm sure listeners did as well. As you say, let's get into the trading update and outlook. So after the 4 weeks of January, if you just take January in isolation, ANZ pickups were down 7% net of BYD. And as mentioned, in Australia, 6 of the 10 pickups were down. This outcome is slightly below our expectations. And I guess that's important to note, only because obviously, we're collecting revenue from the January performance ahead of that, given we supply ahead of a sale, so to speak. Light, Power & Electrical, the AU resellers and the channels remain subdued. So whether it's a reseller or indeed the truck or the bus or the RV market, not a lot has changed there. But pleasingly, we are seeing continued momentum in the U.S. and EU. And then from a powertrain point of view, the wear and repair remains resilient with the forward workshop bookings, they're stable at sort of 1 to 2 weeks, nothing changing there, which is great. From an outlook point of view, our guidance is unchanged regardless of some headwinds and some tailwinds, we're holding point of view around the revenue growth. It's expected to grow in FY '26 and the underlying EBITA of circa $195 million. As I said, it still remains a challenging environment. Four-wheel drive new vehicle sales are trending slightly softer, but to H2 margins within this division are expected to improve due to the H1 pricing actions. LPE, the headwinds in ANZ are expected to persist. The H2 underlying EBITA is expected to be marginally softer than H1. Powertrain, the wear and repair categories are expected to remain resilient. As outlined in the Amotiv Unified slide, the incremental FY '26 net benefit of $1 million is included in our $195 million guidance. That's provided a bit of an offset to revised pricing approach to account for more modest price increases in H2. The H1 and H2 EBITA SKU expected to be broadly balanced. Cash conversion expected to be in line with capital allocation. The balance sheet strength to be maintained, and we expect to delever in H2. And as Aaron just mentioned, we got incremental $10 million of annualized gross benefits as we exit FY '26. So that's really the outlook and also the trading update completed. Of course, it would be rude of me not to finish the presentation though, by not thanking the Amotiv team who worked so hard through that first half. And so from a Board point of view, from Aaron and I, I just wanted to thank those people. I know some of them actually listen to this call because they have great interest in our results, as you would expect. So with that now, I'll hand over to the moderator, who will coordinate the questions that we have online. Operator: [Operator Instructions] Your first question on the phone today is from Mitch Sonogan with Macquarie. Mitchell Sonogan: Just the first one, just on the FY '26 guidance, I'm just trying to understand a little bit the moving parts, pretty specific on the LPE guidance. But on 4-wheel drive, you've talked to new vehicle sales being slightly softer. We expect better margins in the second half. Do you mind just giving some color on your expectations and what you've got in terms of forward visibility at this point in time? Graeme Whickman: I'll answer the forward visibility, and I'll just hand over to Aaron, in terms of the composition of the second part of the question. And I guess it links to perhaps other questions and no doubt will be asked around, say, the January performance in terms of new vehicle sales. So when you look at new vehicle sales in January, as I mentioned briefly, they were down net of BYD, 7% in ANZ. But then you sort of peel that back a little bit, Ranger was down 20%, Hilux 15%, I think D-Max was sort of 14%, Triton was up, Navara down about 35%. That revenue obviously has already been recognized in most of that context. We did expect January to be slightly softer anyway. December was relatively strong, and January can always be a bit of a funny month in terms of vehicle sales. The full visibility that sort of sits behind our point of view around the guidance across the group is generally between 2 and 3 months in terms of -- I'm talking about new vehicle sales, and I think your question specifically around probably 4 will drive more than anything method in that regard. So we have forward visibility of those sorts of sales. It's interesting that and perhaps others will ask around interest rates. It's interesting that the likes of Triton has actually been on a bit of a tear and they've actually been perhaps a bit more aggressive in terms of the discounting over the last 2 or 3 months, whereas Toyota and Ford and others have set a little bit on the sidelines but starting to come back. And so I expect that to happen a little bit more. Aaron, from a guidance point of view, did you just want to cover off the composition? Aaron Canning: Yes, I agree. Hi, Mitch. Look, just in terms of second half of 4-wheel drive, we've obviously got a couple of tailwinds into the second half. We announced the pricing around out-of-cycle OE pricing. So that will all bite in the second half. We do expect to take some more pricing in the second half around aftermarket. We obviously got the highlights -- new highlights coming into the second half as well. And we've obviously got some Amotiv Unified benefits into the second half, some quite meaningful benefits, particularly in things like freight that are going to come into the second half. So sort of bundling all those up together, we are expecting a better margin performance in H2. I would say that's not going to fully offset the margin erosion we saw in the first half versus PCP, but it's going to be materially strong. Mitchell Sonogan: Yes. Very clear. Just a second one on that. Just in terms of the Powertrain & Undercar, you've talked about first half, second half EBITA expected to be broadly balanced. Yes, again, Graeme, just maybe a little bit of color there. Any reasons why we shouldn't expect a little bit of improvement half-on-half given it has been pretty steady in resilient and a good outcome in the first half? Graeme Whickman: Yes. So the broadly balanced comments more of the group is what I was referring to in terms of the outlook. I didn't speak to the Powertrain half-on-half, you can probably get there by deduction of sorts anyway. We expect Powertrain to continue to be resilient. We're not calling out specifically anything around Powertrain in terms of the half. We mentioned LP&E and obviously, we mentioned 4-wheel drives therefore, the deduction you can do it for yourself. For the reasons that we've been speaking about, and I touched on earlier on when I was chatting and reviewing this slide, we've got further benefits that have come through in terms of Truganina consolidation. We've also got benefits of putting the IMG and the Infinitev businesses together. So we do expect a decent performance out of Powertrain in the second half. Mitchell Sonogan: Yes. And just probably more thinking about just run rate into FY '27. But just -- yes, I guess, in terms of any quick commentary on corporate costs, should we expect a similar run rate into the second half in FY '27 and Aaron talked to the $10 million gross benefits for the Amotiv Unified. Just wondering what costs will be required in '27 to achieve those ones as well. Aaron Canning: Why don't I help you out, Mitch. You're obviously looking to have a bit more color around divisional second half performance. So let me just -- I'll expand and answer to your question. So 4-wheel drive, we've touched on better margins in second half. LP&E, a little softer in the second half. Powertrain, as Graeme said, we've got a few things in the second half. They're going to support that business. In corporate, we are going to put some more costs in the second half. You heard me touch on things like resourcing around program management, really to support our Unified program. So I expect our corporate costs will go up in the second half versus the first half. And then into '27, yes, well, obviously, with the further benefits we've announced on Unified today, that's largely going to be a '27 story as only $1 million net of those are turning up this year. So we haven't finalized our reinvestment levels for 2027. But I would say that, that $10 million is providing -- will provide some buffer to further headwinds around cost and inflation to '27 to support continued growth into '27. Mitchell Sonogan: Okay. And just one super quick one. You talked to the EV investment still having a loss in '26. Can you maybe just tell us what that loss is, given you're guiding to a breakeven in FY '27, and I'll jump off. Aaron Canning: Yes. Look, we guide to it being breakeven on a run rate basis exiting '27. So the '27 year won't be breakeven, but we'll exit the year being breakeven. Look, it's less than $2 million, and it's more than $1 million. So it's pretty close in terms of where it's currently tracking. We're very happy with the EV business. Revenue growth is strong. We're making further changes around our operating footprint in terms of warehouse consolidation that's going to happen in the second half. Graeme touched on moderated investment in that space, and we're just being very cautious in relation to the changing dynamics of the car parc. But over the long term, it's a business that we see huge potential in and we're going to balance that investment with the revenue growth we're getting out from that business. So on exit, on a run rate basis, Mitch, profitable in FY '27, not profitable, though, but I've given you sort of some trend lines there for the quantum. Operator: Your next question comes from Andrew Hodge with Canaccord Genuity. Andrew Hodge: Look, a couple of my questions have been answered here. So I'll just ask around the currency. Just in terms of Aaron, you mentioned second half '26 improvement from the sequentially but down on the PCP. So can you just remind us where you were hedged in second half '25? Aaron Canning: Yes. Why don't I just give you a more definitive answer. It's less than $1 million, the impact, Andrew. So it's pretty marginal. I'm talking second half on second half, right? I think is your question. Andrew Hodge: Yes. And then into '27, have you started hedging first half '27 yet? And should we be thinking about -- I mean subject to how far hedged are you? And is what a reasonable expectation to the level that you're hedging at the moment? Aaron Canning: Second part of your question, yes. And we are so covered out to the beginning of November. Andrew Hodge: Great. And I just want to ask one question on the 4-wheel drive margins. I know you've talked about the process, the OEM price rise in order to bridge some of that gap. How much of risk is the lower-than-expected volume. So January was lower than your expectations. If that trend continued and you lost some of the volume that you were otherwise expecting, how much of a risk is the operating leverage to that margin even in the face of some price increases and not a repeat of the bad debt? Graeme Whickman: Well, obviously, the bad debt goes away. We're not trying to hurdle that. But look, we've also got aftermarket pricing that sits to the general car parc. We've also got some Unified benefits coming through, a little bit of an exchange in the last part of the second half. And the likes of Hilux, we'll get the full half of that. So those are some of the tailwinds that will sit there. In terms of the volumes, I mean, yes, there is a downside risk clearly. Although we have 2 to 3 months' worth of visibility already, Andrew, as you would expect in terms of Ford. So some of that is already, I would call that pseudo-hedged in our minds. We're watching it closely. And January, I don't think necessarily is a good barometer of either good or bad. December was a pretty strong month. Sometimes you have a bit of supply. And the other thing is that, as I said earlier on, that some of those OEMs are still not that active in the market in terms of discounting. So we're watching it closely. And naturally, there's a little bit of downside risk, but we do have some other leaders to pull and we are expecting some of that margin improvement. And then if you -- not that you've asked this, but when you then start to reflect on how does that exit FY '26 and go into '27, we still haven't even spoken about the actual delay of Navara. That's actually a full year impact of Navara, which is fantastic. U-Haul starts to increase. Kia comes in. So we're not reliant so much on -- as reliant on the ANZ market, and we think it will also pick up some other European towbar business. So we're trying to offset the ANZ cyclicality as we speak, and some of that shows up and will be showing up in the first half of FY '27. So sorry, it's a bit more of an answer than what you asked for, but I just wanted to give you more color. Operator: Your next question is from Sam Teeger with Citi. Sam Teeger: I was just keen to understand the dynamics driving a different performance between PTU and LPE in Australia, given they share a number of customers. Are you seeing retailers focus more on private label in electrical and accessories? Graeme Whickman: Well, look, I think when you separate out across the 3 areas that we speak about on the LP&E slide. And if you went to that slide, you'd see that we sort of break out lighting, power management and electrical, we speak about lighting being up, power management being up but electrical accessories being down. And that's a reflection of the reseller demand that we see at the moment. There's a mix of home brand performance that sits behind that, Sam. But at the same time, without disclosing a particular customer, we just won the globe business in one of those big 3 resellers with a Navara brand. So house brands come and go and the performance can ebb and flow. But in times of tight economic circumstance, people -- there is a bit of flight to value. We do call it out, Sam. So I think there's a bit of a mixture there. Having said that, though we are now arranging in other areas, we're doing better and some of the independents were into Bunnings and a couple of other areas like Autopro and Auto One. So we always look to offset and reduce the customer concentration. But that's how I sort of characterize it. Sam Teeger: Yes, that's good. And then on that slide, which of the LPE brands are showing most of the weakness, is it KT Cable, BOAB Offroad, National Luna or another one. And are you thinking about any potential divestments to help improve your return on capital employed? Graeme Whickman: We're doing that day by day by day in terms of ROCE. We have a point of view around what we want to achieve. And that includes brand rationalization, that includes marketing dollars being spent on particular brands where we want to put our energy. And so the likes of National Luna, BOAB and the brands we've just spoken of, they are very, very low investment and if not little at all, whereas we're concentrating, frankly, on the NARVA, Projecta and also KT. Obviously, that provides a midrange electrical accessory range compared to the NARVA. We're also in the process of taking some of those brands online. We just launched projecta.com So you can now buy directly from us on certain products through that, and we're doing that internationally. So really, we're concentrating hard on NARVA, Projecta and KT. The other ones are less of a distraction as we're going through a brand rationalization effort as part of Unified, not just in LP&E but across the other brands as well to ensure that we're spending the right dollars on the right brands. Sam Teeger: Okay. Great. And what should we expect for significant items in the second half to unlock that $10 million in incremental Amotiv Unified benefits? Aaron Canning: Sam, broadly similar to H1 levels, perhaps marginally lower. Most of it's going to be around work we're doing around our technology platforms in terms of simplifying ERP platforms and a little bit around warehouse consolidations. So it won't be any higher, but it will be in and around the same number, possibly slightly lower. Sam Teeger: Okay. Great. And I think you've touched on it a little bit, but just wanted to clarify the second half guidance, what's the assumption around the macro and interest rates? Graeme Whickman: If I just go back to the first question or that last question before we go to the assumptions. I think the other thing when you talk about significant items, Aaron, I mean, the payback in terms of the dollars being spent, I think compelling. What would you say about that? Aaron Canning: Yes, look, very compelling. And I sort of noted it in my speaker notes that we're very aware of one-off costs. We're not -- we're trying to run the business and improve the business at the same time, and we've got a very strong lens on improving shareholder returns. You can see that in our capital allocation framework. We're unhappy with where our return on capital sits. In order to make some meaningful changes, there are some costs we have to put into the business on a one-off basis. So the clear examples of it are in the first half. Unfortunately, we say goodbye to 50 people in the first half. We didn't replace those people, the payback on that is less than a year. So it has a very strong correlation with our payback metrics. Graeme Whickman: A lot of those significant items paybacks are less than a year. I mean the likes of some of the warehousing and tech stack just what Aaron's referring to, have paybacks within the sort of 1- to 3-year period, but we're determined to make sure when we're rolling out Unified that our investors can see a real playing correlation, a clear correlation of a return quickly. I just wanted to make that point before we get into. In terms of the assumptions around the full year guidance, linked to the second half, I mean look, we had expected a muted maybe slightly better year-over-year in terms of NVS and pickups in the total year. Obviously, the second half started out a bit weaker. But with the forward visibility we have, we're sort of expecting it to be sort of there or thereabouts year-over-year in terms of NVS. We're not expecting -- if you think about other OEM and OES business, which might translate between both 4-wheel drive and LP&E. We're not expecting the RV or caravan market for something spurt back. We do expect a little bit of market share gain or whether it be Cruisemaster or indeed LP&E. LP&E have just launched 48-volt systems in the projector range. The biggest caravan manufacturer is very excited about that and already taken that. We've pushed that into Crusader. We've got MDC taking that. So Caravan Show has gone very well. We're just launching our body control modules in the caravan market. So whilst the caravan markets, we're not expecting to come back, we're still expecting a little bit of market share there. Truck and bus, we're certainly not expecting to see that. That's quite low. The cyclicality is, I would say, at a really low trough, so we're not expecting that to come back. In terms of the resellers, Sam, we're not expecting that to spurt. I think the economic situation, the macro in ANZ is still very muted, as you would know. So we're not expecting that to bounce back and watching with some interest around where the interest rates are ahead and then we're expecting people to continue to service vehicles in terms of the wear and repair, and that's not abating. If anything, as you know, the car parc and some information in the latter part of the deck, the latest promotion shows that the car parc is approaching 12 years. And if there was a bit of deferral because of cost of living pressures over the last 12 to 18 months, that will have to show up at some point. So we're not expecting that to drop away and our assumptions, therefore, are relatively buoyant. And then you've heard from Aaron, there are assumptions around some of the things that are less in our control, whether it be exchange or interest rates and other bits and bobs. We've kind of got some of that covered and the rest of it, we'll see how we go. So hopefully, that gives you a flavor of the assumptions that sit behind second half and importantly, the full year. Operator: [Operator Instructions]Your next question is a webcast question from Tim Plum with UBS. This reads, January ANZ pickup sales, excluding BYD, down 7%. Some OEM models are fair bit worse than that, Ford Ranger, Toyota Hilux, Prado, RAV4. What are your thoughts on this? Is this Australian consumer demand coming off? Or is this OEM supply driven? How are you thinking about the remainder of the year from a volume perspective, and does this change, i.e. worsen if RBA announces further interest rate hikes or have you incorporated this into your thinking for second half '26? Graeme Whickman: Thanks for the question, Tim. So you're quite right. And I think I have already articulated the nuance of some of the OEM brands within the January performance. I mean, obviously, the first half was flat, net of BYD. I looked at the first half Ranger down 3%, D-Max down 11%, BT sort of 4-ish sort of was in that space, and that was more pronounced clearly in January. The same models, Ranger down 20%, Hilux 15% and D-Max 14%. I think it's actually a mix of both. I think people had a bit of pause through January. We saw January really quite a -- I won't say peculiar, but quite a variable month across all of our businesses, some strong, some a bit weaker. It seemed like workshops are coming back a bit later. People weren't necessarily spending in some of the retail-centric areas of some of our resellers and indeed, were necessarily buying vehicles on mass. I think it's a bit of -- so it's a bit of both. I think December was a strong month and therefore, a little bit of supply, perhaps constraint, not massive and then a little bit of demand off. I think the interest rates, I mean, we've been much higher than where we have, obviously, with the deceleration of the rates. And if we return another 25 basis points or 50 basis points, I don't think we'll be facing anything different than what we were 6 and 12 months ago. I do expect -- and if you were to look on the pages of Ford, indeed, Triton and others, they're just starting to spurt the market. Interestingly, Triton, if you look at where they came in for the half, they were actually up 11%. If you look in January, they bucked the trend again, they're up 36%. Now in part, that's because again, my personal point of view, in part because they have more supply in part, they're actually quite aggressive in the market. They are drawing customers out of the market with some reasonably aggressive driveway prices. Ford have just put some driveway prices. And recently, Toyota, no, I can't remember now exactly piece by piece. So I think we'll start to see more progressive incentivization of the market. And of course, the other thing with Hilux is there's not been a huge supply of them as they start to launch. So our assumptions are built on a soft -- slightly softer second half. We're watching carefully. We know we'll get a bit more business with Hilux because that's started to launch. And we obviously have the sports bar in addition to the towbar and we'll watch closely. But we also are sucking more revenue out of a few more Australian towbar contracts. And in the background, we expect right at the back end of the half, Tim, that we might see just a little bit of that offshore revenue coming, just a little bit of it, and we'll see also what happens with the U-Haul business. So kind of balancing a little bit of that. Operator: Your next question is a webcast question from Adam Dellaverde with Taylor Collison. This reads, can you discuss relative utilization levels for Thai and Australian plants at TriMotive? Is it still patchy? How does throughput today compare to when you acquired APG and what things can be done to improve margins, independent of securing higher order volumes? Graeme Whickman: Yes, sure. And thanks for the question. Look, the Thai plant's utilization is very high. Hence, why we just commissioned the third plant or in the process of commissioning that. That's useful given that we've just won some European contract and we're pitching for more European contracts. So that plant actually will be less utilized. But we're bursting at the seams and that's before, Adam, you think about a full year of Hilux sports bar you had before, and then you start to take the Navara, and we haven't spoken much about the Navara. But Navara will go from currently or in the past cycle, we used to literally deliver parts of a towbar to a domestic operation. We're now delivering the towbar, the sports bar, the nudge bar and that comes in, in FY '27. So naturally, the utilization will creep. In terms of Australia, that's still patchy. But we run a one-ship operation there anyway. It's not in the 40s, 50s, 60s, but it might be in the sort of 70s and 80s, depending on which month we're looking at because it does ebb and flow. The average batch sizes there are a lot lower. We're at 7 or 8 batch sizes, and that supports also -- also supports the aftermarket. So it's a little bit more patchy there, Adam. In terms of the margin, look, if you were to take it to a dollar value as opposed to book value, we were down $4.5 million, half over half or $1 million of that was Zone caravans and then probably about $3 million worth of pricing annualized with the pricing we've got to put in place. So you'd get back that pretty quickly. That's not discounting the fact that we're paying workforce another 4%. Our electricity bill quite higher. So you think about utilities and also the rent of that. So that pricing sort of that's the last seven tenths. So that pricing fixes the majority of that. Then you go and start thinking about AM pricing that we've spoken briefly about outside of the OEM pricing. The new business wins that are concrete in nature, Hilux and Navara, just to name 2, increasing U-Haul and the EV business -- sorry, the Kia business in Europe. And I reckon we'll win some more. Then you got Unified benefits. Freight is decent and contract labor, that's to come and then a bit of margin improvement because the Thai plant has been a bit brutal for a while. We picked up a little bit there. So there's plenty of reasons to see this business return to not just FY '25 but FY '24 type margins at a minimum as we expand. Operator: Your next question comes from Ralph Katz, private investor. This reads, how will the switch to electric vehicles impact Amotiv performance? Graeme Whickman: Thanks, Ralph. I don't know what you've been reading or what you've been following, but the EV investment around the world is crashing at the moment. You can look at Ford, they wrote-off 20-something million, Stellantis $32 billion -- sorry, I'm talking billions, not millions. Everybody is pulling out of EV investment quicker than they can, and that's just because the payback is just brutal. They were all primarily compliance plays linked to particularly the U.S. government's point of view around CAFE and a few other bits and pieces. I'm not making a judgment on whether an EV is right, wrong or different. We, as a business, are committed to reducing our emissions and have done so and actually at Scope 1 and 2 we're actually carbon neutral, so just as an aside. But the onslaught of EVs has slowed quite dramatically, Ralph. What you are still seeing is a strong Chinese level of investment, although there's 100 brands or so in China, that will go through massive consolidation. BYD recently just had a very tough period. So ultimately, at the end of the day, we're going to see not as strong as predicted ICE adoption in this particular market. We've already moved though. Our revenue, as it stands now, is roughly 75% non-ICE, it's ICE-agnostic. So we're well positioned in that regard. The adoption isn't quite as high. And where those vehicles are coming through are in small vehicles, passenger vehicles and small SUVs, which is less important to us. And where we've got pickups and the likes of electrified pickups whether it be Ford's electrified, Toyota and the like, we've been able to engineer towbars that are lightweight and actually support them. So I think we're well positioned. I don't see that as any threat. But we've already moved to a strong non-ICE position anyway. Hopefully, that answers your question in a broader context. Operator: There are no further questions at this time. I'll now hand back to Mr. Whickman for closing remarks. Graeme Whickman: Well, thank you. Firstly, thank you for your attention. I appreciate the questions. As I said earlier on, we feel we've delivered a really solid result in a challenging environment. The balance sheet is in a great place. And as you tick through many of the financial metrics, whether an allocation framework or due to the broad financial metrics, we're seeing a lot of green ticks. It doesn't mean that we don't have more work to do. We're always anxious and ambitious. With the 2030 strategy, we're keen to see the business grow, but grow in a way that's done in a quality fashion. And I'm not just talking about revenue. I'm talking about the EBIT with clear ROCE. As I said earlier on, the prospects for each of the divisions still remains strong. Reiterating guidance, I think, is very positive and some exit rates around the work on Unified, I think, also demonstrates that we're not sitting still in what is an insipid market. We remain committed and active in managing the business in a way that I think we can be pleased with. So with that, I'm sure we'll be meeting with many of you through the course of the week and whether it's at a broker lunch, dinner or breakfast and then individual shareholders. So we look forward to those conversations, both Aaron and I, and we'll see you through the course of the week. Thank you. Thank you, everybody. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Region Group First Half FY '26 Financial Results. [Operator Instructions]. I would now like to hand the conference over to Mr. Anthony Mellowes, Chief Executive Officer. Please go ahead. Anthony Mellowes: Thank you very much, and welcome to our First Half FY '26 results for Region Group. My name is Anthony Mellowes. I'm the Chief Executive Officer. Presenting these results with me today is David Salmon, our Chief Financial Officer. Also in the room with me is Erica Rees, our Chief Operating Officer. I'm really pleased with this set of results as we have increased our earnings growth, which is underpinned by some really strong operational results and our fully hedged interest position. Let me take you to Slide 4, which sets out our first half FY '26 highlights. Our funds from operations or FFO, was $0.079 per security, which increased by 3.9% from December 2024. The distribution per security was $0.069 per security, which was the same as our adjusted funds from operation or AFFO, which increased by 3% from December 2024. Our statutory net profit after tax of $180 million, including an increase in the fair value of our investment properties. Our assets under management has increased by 3.9% from June '25 to $5.4 billion. Our operational metrics remained resilient. Our comparable MAT growth was 3.1% per annum. Our average annual fixed rent reviews were 4.3% per annum. Our average specialty leasing spreads were 3.4% and our comparable NOI growth was 3.7%. With respect to capital management, our weighted average cap rate firmed by 10 basis points to 5.87% since June '25. We've continued the on-market security buyback program. 6.7 million securities have been purchased during the half year at an average price of $2.39 for a consideration of around $16 million. And our NTA per security has increased 3.6% to $2.56 off the back of that valuation growth. Our weighted average cost of debt of 4.6% per annum with 100% of debt hedged or fixed for FY '26 at an average rate of 2.89%. Slide 5 remains unchanged. Our strategy is to provide defensive, resilient cash flows to support secure, growing and long-term distributions to our security holders. Moving to our operational performance, which starts with our portfolio overview on Slide 7. Our occupancy has improved to 97.7%, up 20 basis points with a continued strong weighting towards those nondiscretionary tenants. 45% of our gross rent is attributable to our anchor tenants and 55% of our gross rent is to specialties and mini majors with a focus on food, liquor, retail services, pharmacy and health care. We have 87 centers that are owned 100% by Region, which are geographically diversified across Australia. Moving to Slide 8. Our positive sales momentum continues across our nondiscretionary categories. Our 3.1% comparable MAT growth is driven by supermarkets at 3.1%, our discount department stores at 3.7%, our mini majors at 1.7%, nondiscretionary specialties at 3.3% and our discretionary specialty tenants improved to 3.6%. Our specialty sales productivity is now at $10,265 a square meter. As for the majority of the market, we have excluded tobacco sales consistent with our June '25 results. Our supermarkets continue to demonstrate resilient growth as shown on Slide 9. We continue to capital partner with our anchor tenants to drive sales growth with over 53% of supermarkets generating turnover rent. We have 123 anchor tenants contributing 45% of our gross rent. 76 direct-to-boot and e-commerce facilities. 97% of stores have online sales included in the turnover rent calculation. And as I said earlier, there was 3.1% supermarket comparable MAT growth. And the turnover rent generated from 52 anchor tenants with a further 20 anchor tenants within 10% of that turnover rent threshold. Moving to Slide 10. Over 88% of gross rent is generated from nondiscretionary tenants. Our portfolio occupancy of 97.7% is up from 97.5% as at June '25. Our specialty vacancy has improved to 4.5% as at December '25 compared to 5.4% at June '25. Our portfolio WALE decreased slightly by 0.1 years to 4.8 years. Our average specialty rent increases to $930 per square meter, representing annualized growth of 5% since December 2022. Our average specialty annual fixed rents remained strong at 4.3%, and these were applied across 96% of our specialty and kiosk tenants. 79% of expiring tenants were retained, which helps to minimize leasing capital expenditure and downtime. Moving on to Slide 11. Proactive leasing continues to drive increased leasing spreads across the portfolio. Our specialty leasing benefited from slightly increasing annual fixed rent reviews and positive leasing spreads. We completed 177 specialty leasing deals with 3.4% average leasing spreads, a positive uplift on prior December periods. A strong performance from new leases with an average leasing spread of 7%, while renewals were relatively flat. The average annual fixed rent reviews increased from 3.9% in December '23, up to 4.3% in December '25. Our leasing incentives on new deals averaged 12.3%, and this is aligned with our 12-month leasing incentive for new tenants. Moving on to our sustainability update on Slide 12. We're on track to reach our net zero for Scope 1 and 2 greenhouse gas emissions by FY '30 and continue to make a positive impact in the local communities which we serve. We continue to progress towards our sustainability targets, which is spelled out in our annual sustainability report. The key focus has been on environmental, progressing with our net zero investment during the period, contributing to our solar rollout target of having 25 megawatts installed in construction or design on Region assets by the end of FY '26. In social, we continue to make a real positive impact in the communities that we operate in and have undertaken a number of community initiatives, including the uniform exchange program at Raymond Terrace in Newcastle. We also continue to sponsor 128 students through the Smiths Family's Learning for Life program. And with respect to governments, our alignment to the ASRS is on track for our FY '27 reporting. I'll now hand over to David, who will talk through our financial performance. David Salmon: Thanks, Anthony, and good morning, everyone. I'll start on Slide 14. We'll highlight the key drivers of the movement in our funds from operations, which has had strong earnings growth in the first half of FY '26, partially offset by an increase in the weighted average cost of debt. Our FFO for the first half of 2026 is $0.079 per security, representing growth of 3.9% from December 2024. There were positive contributions from the comparable portfolio NOI growing by 3.7% and the impact of our transactional activities and growth in funds under management. The FFO growth was offset by the previously flagged weighted average cost of debt increase from 4.3% to 4.6% during the period. Moving to Slide 15, where we provide further information on our financial results for the half. As mentioned, our funds from operations was $0.079 per security. Our adjusted funds from operations came in at $0.069 per security, an increase of 3% from December 2024 after additional capital this period from the leasing up of vacancies. Our distribution for the period represented a 100% AFFO payout ratio in line with guidance. Comparable NOI growth was 3.7% with moderating property expenses as well as specialty annual fixed rent reviews and positive leasing spreads. Full year comparable NOI growth guidance remains at around 3.3%. Total net operating income has grown by 5.3%, driven by the aforementioned comparable NOI growth, cost reduction phasing from the prior period, lower ECL compared to the Mosaic impacted prior period and completed developments NOI, partially offset by net asset disposals. There was strong growth in funds under management income supported by funds management platform expansion during the period. Corporate expenses were impacted by cost phasing in the prior period with costs in line with the FY '25 average over the year. Statutory profit for the period is $180 million, following an increase in the fair value of investment properties. Moving to Slide 16. As at December 2025, our total assets under management was $5.4 billion. This is a 3.9% increase from 30 June 2025 with investment property valuation growth and an increase in funds under management. NTA per security of $2.56 has increased by 3.6% from June 2025, driven by fair value uplift on investment properties. Our balance sheet remains healthy with gearing of 32.7% at the lower end of our target range. This provides us with the capacity to deploy capital when opportunities arise. 6.7 million securities were purchased during the half year at an average price of $2.39 for a consideration of $16 million as part of an on-market security buyback program. Since the announcement of the buyback program in April 2025, 8.9 million securities have been bought back at an average price of $2.37 for a total consideration of $21 million. Slide 17. Our property valuation movement shows cap rate compression and continued income growth driving the valuation increases. During the period, our portfolio increased by $129 million. The movement was driven by a $92 million fair value increase and $37 million in capital expenditure. Capitalization rates have firmed by 10 basis points since June 2025 to 5.87% on top of the 10 basis points firming in the second half of FY '25. We have 3% fair value increases since June 2025, with approximately 1.7% driven by cap rate compression and the remainder being valuation NOI growth over the 6-month period. On to Slide 18, where we talk to our funding. In November 2025, we issued a successful 6-year AUD 300 million medium term note. We saw significant interest from both offshore and Australian debt investors with the final order book being 3.6x oversubscribed. This strong demand allowed for the transaction to be priced with favorable borrowing margin of 1.22%. Proceeds from the MTN issuance were used to repay bank debt. We have total debt facilities of $1.9 billion with around $355 million of funding capacity available for us to draw on. We have no debt expiries until FY '28, and we have strong interest from both new and existing banks to enter into new facilities. Our weighted average cost of debt increased from 4.3% to 4.6% over the first half, and we expect this to decrease just slightly to 4.5% for the full year. Moving on to Slide 19. Our strong hedging across FY '26 to FY '28 provides stability and reduces exposure to near-term interest rate changes. We have high hedging levels with 100% of debt hedged or fixed in FY '26 at an average rate of 2.89%. We remain highly hedged in FY '27 and FY '28 with 87% and 70% of debt hedged or fixed in those respective years. This mitigates the impacts of any near-term rate increases, which the RBA has now commenced and is expected to continue. Our average hedged fixed rate over the next 3 years of around 3%, which is well below forecast market rates. I will now hand back to Anthony to talk through our value creation opportunities. Anthony Mellowes: Thanks very much, David. Turning on to Slide 21. We maintain our disciplined approach to continue to pursue high-quality opportunities that align with our long-term strategy. In January '26, we settled on the acquisition of Treendale Home and Lifestyle Center for $53 million at a 6.4% initial yield. It's a large-format retail center strategically located directly opposite our existing center at Treendale Shopping Center, and this also allows some improved management efficiencies. The center also has a district center and urban zoning, providing the ability to house additional retail such as additional supermarkets into the future. We remain the largest owner of convenience-based centers with a proven transactional track record that allows us the opportunity to continue to consolidate this very fragmented market. Slide 22 highlights the targeted reinvestment and increased development spend to drive earnings and portfolio performance. The table shows the first half FY '26 actual and FY '26 forecast indicative spend on our capital deployment program. In the first half of FY '26, we spent $32 million and in -- for the full year FY '26, we expect to spend around $65 million. This forecast has increased by roughly $15 million, which is mainly driven by development projects relating to center expansions across North Orange in New South Wales, Newcastle Market Town in Newcastle and Greenbank in Southwest Brisbane. Moving on to Slide 23 for funds management. Our Metro Fund continues to be a platform for growth with 2 new acquisitions. We set Metro Fund settled on the acquisition of Dalyellup Shopping Center in Western Australia for $36 million in November '25, growing our funds under management by 5.7% from June '25 to $752 million. Metro Fund also exchanged on the acquisition of 3 additional strata properties valued at $89 million at West Village in Brisbane in Queensland, which is driving further growth through these strategic acquisitions. Two of these strata properties have already settled in January '26 and the remaining Strata is due to settle by June '26. David will now talk through our AFFO growth target. David Salmon: Moving to Slide 25. To sustainably drive our medium- to longer-term earnings growth, we are focused on generating comparable NOI growth of at least 3%. Through our value creation initiatives, we aim to add another 1% to our growth rate. Our work in the capital management space to increase our hedging has mitigated some of the short- to medium-term earnings volatility generated from interest rates with a longer-term impact dependent on market movements. Based on all this, we are targeting medium to term longer growth in our FFO and AFFO of 3% to 4% per annum. Our results for the half year have aligned with this growth target, notwithstanding the flagged impact of interest costs. I'll now pass it over to Anthony, who will talk to our key priorities and outlook. Anthony Mellowes: Thanks again, David. So Slide 26 steps through our key priorities and outlook. We believe the nondiscretionary retail will continue to be resilient, and we will generate comp NOI growth through our strong leasing, increased fixed rent reviews and continued proactive expense management. Our balance sheet is supported with growing valuations, which provides us with the opportunity to develop some of our centers, also to be disciplined with our acquisitions and disposals and explore additional funds management opportunities. We're maintaining a proactive approach to capital management, including where prudent, asset recycling, on-market security buyback and interest rate hedging. Assuming no significant change in market conditions, our FY '26 earnings guidance has been upgraded to be FFO of $0.16 per security, up from $0.159 per security, a growth of 3.2% on FY '25 and AFFO of $0.411 per security, up from prior guidance of $0.14 per security, a growth of 2.9% from FY '25. This marks my final results presentation over the past 14 years. It's been a real privilege to lead the group through a period of significant progress and growth. I'm really delighted to welcome Greg Chubb as our next CEO and Managing Director, effective the 9th of March. And I'm really confident the company will continue to build on this really strong foundation. Thanks very much, and over to questions. Operator: [Operator Instructions]. Your first question today comes from Howard Penny from Citi. Howard Penny: Just the first question on -- just to talk through how you're firstly seeing the sort of upgraded guidance drivers. What really drove the increased guidance in this period? David Salmon: Howard, it's David here. Yes. Look, largely, the upgrade in the guidance from the $0.14 to the $0.141 was largely off the back of some of the transactional activity. As we flagged, we bought Treendale Lifestyle Center, the circa $50 million. Obviously, that's at a yield of over 6% compared to our funding cost. That's an upgrade in net earnings. And we also expanded the funds management platform through the acquisition of those 3 properties we flagged at West Village, which has the -- we have a 20% interest in that fund. So we have earnings accretion there, plus also we get acquisition and funds management fees as well, which go into the mix. What we are doing for the full year guidance is we are holding our comp NOI growth of 3.3% guidance that we'd flagged at the start of the year. We haven't changed that at this stage. Howard Penny: And just my second question on the Treendale acquisition. Could you just take us through why this was a great acquisition for Region? And then just a second question on that, can we expect potentially more acquisitions in the next sort of 12 to 18 months similar to this? Anthony Mellowes: Thanks, Howard. It's Anthony here. Look, this center, if you look on Google Maps at Treendale, it is directly across the road. It is -- there's a lot of retail in that space. And it just makes a lot of sense for us to own it. It's really very integrated with the whole precinct. And so we are the natural owner of that. Just like it's no real difference to we bought a large-format center in Ballarat. Again, it's basically physically linked to our existing shopping center, and there's no real difference. So it's about -- it's strategically owning that, and it's at the price that we could buy it for. We continue to remain really disciplined looking at opportunities. There's a lot of groups out there that are still offering very tight yields on assets, which is great because we own and manage over 100 of them. But we continue to be really disciplined about ensuring that they meet our long-term hurdle rates. I still believe we will continue to buy assets and find them and work them through. And I think there's some great opportunities out there, but we're going to remain really disciplined. And that's not just on acquisitions. It's also on disposals as well. We still have some, not that many assets that are really tight yields with not huge growth, but very -- there's a strong appetite from privates out there for those smaller dollar value assets, of which we still got a few there to go. But it's really just remaining disciplined to meet our long-term hurdles. Howard Penny: And maybe just one final question from me. It's good to see the joint venture starting to get more active. What's changed in that in terms of where the partner and Region are getting more active? What's changed in the expectations at the moment? Anthony Mellowes: Look, I think it's fair to say when interest rates really jumped up very quickly. The hurdle rates were increased as interest rates have stabilized and they certainly have stabilized, notwithstanding they've just gone up a bit recently. They're still relatively stable compared to the increases that we were looking at. And I think that's the major driver. And we find really good opportunities that, again, the assets at West Village, there's strategic reasons for owning the additional strata to control everything in that particular asset, but also the likes of Dalyellup was met the hurdle rates that we needed. So yes, but I'd say it's the volatility in interest rates or less volatility in interest rates has been the key driver. Operator: Your next question comes from Andrew Dodds from Jefferies. Solomon Zhang: Just firstly, I'd just be interested to hear how retail trading conditions have trended throughout January and February. It's positive to see that they held out throughout the period, but certainly, just keen to hear about how they've trended since the sort of the outlook for rates has sort of evolved over the past couple of weeks. Anthony Mellowes: Yes. Look, it's Anthony here. We haven't got the actual figures. It's a little bit too early. So it's only the Anthony Mellowes is anecdotal. It's not based on any real data because we just don't have it yet. It's continued to be -- I don't expect it to be all that different from December, November, I think January because it goes on like-for-like against January last year, I think it will be fairly much the same because we do have that high focus on nondiscretionary, which really doesn't move around a lot. I mean, I've said for the last 13 years, we get excited when it moves from 3% to 4%, and we get a bit worried when it goes from 3% to 2% because it's always around the 3%. So I expect much the same. Solomon Zhang: Okay. Great. And then on the buyback, $100 million, it looks like it's just over 20% complete now. You've been buying back stock sort of between $240 million and $225 million. So I mean, with the stock sort of trading within this range now, do you expect that the buyback will recommence once the blackout period ends? And just a follow-on, it would be good to understand just what guidance assumes in terms of completion of the buyback in the second half, too. David Salmon: Yes. It's David. Well, maybe just answer the last bit. Yes, we haven't assumed any further buyback in our guidance for FY '26. In terms of whether we intend to continue the buyback. Look, I mean, obviously, when we announced the buyback, we were trading much lower. We also had raised a fair bit of capital through some asset sales, and we're looking to redeploy that capital. We've obviously deployed that capital a bit into the buyback, about 20%, but we've also acquired Treendale for circa $50 million recently as we just talked about. So the buyback, the merits of the buyback are still there in terms of where we're trading relative to NTA and where our distribution -- implied distribution yield sits at. So the merits of the buyback is still there. But I guess it's probably been the appetite to do as much buyback is probably lessened because we've been deploying capital into some other opportunities. So I won't say a hard no or a hard, yes, but it will depend on where trading goes. But to the extent that we have other opportunities arise, we might decide to deploy that capital into those opportunities. Also, if we were to sell some assets that might come about -- that obviously gives us some surplus capital to consider in that context as well. Solomon Zhang: All right. And then just finally, just on the MTN issue. The borrowing margin you got of 122 basis points is clearly very favorable. Can I ask just what the sort of weighted average margin is across the group and how much of an earnings benefit this has provided? David Salmon: Yes. Our weighted average margin across the group is around 1.5%, that's our forecast for the year, I should say. So obviously, this is circa 1.2% is obviously bringing that debt has brought that down a little bit. It was 1.6%, I think, pre that. Look, we see there's definitely opportunities in the compressing borrowing margin market that we find ourselves in. I mean, you can do the math, $300 million at 30 bps and the annualized benefit there. That's obviously -- that's coming through a bit in FY '25, but also it will annualize in -- sorry, a bit in FY '26, that will annualize in FY '27 as well. Solomon Zhang: Okay. Thank you very much and congratulations Anthony. Anthony Mellowes: Thank you. Operator: Your next question comes from Solomon Zhang from UBS. Anthony Mellowes: No, I can't hear you, Solomon. Operator: Your next question comes from Daniel Lees from Jarden. Daniel Lees: Just a question on costs. It looks like your property expenses are down, corporate expenses up a little bit. Maybe just if you could talk through the key drivers here and how do you want us to think about costs going forward? David Salmon: Yes. It's David here. Yes, obviously, in the second half of last year, we have done a number of cost initiatives to manage our gross costs. You're seeing some of that come through this half. There was a bit of phasing of the cost benefits last year between first and second half. So what we've done is for our comp NOI growth of 3.7%, we're saying that comparable cost growth was around 1.4%. What I'd also say that the property expense reduction cost has also been impacted by asset disposals that we had in the prior period as well. But like it's fair to say that the cost growth looking forward, our target is to manage cost growth in that 3% to 3.5% growth range as well as our revenue line for that matter, which we think sets us up well for that 3% to 3.5% comp NOI growth that we talked about. Daniel Lees: And corporate costs? David Salmon: Yes, sorry, corporate costs. Look, again, there's a little bit of phasing and lumpiness in last year's split between first and second half. But our corporate costs for this half, noting that the corporate costs in terms of the dollars are a lot smaller compared to comp NOI. But our corporate costs of $7.4 million in the half is more in line with the half average from the full year last year, which was about $15.2 million for the year, about $7.6 million for the half. So I think you'll see it more in line with that in the second half going forward. Daniel Lees: Great. And then on deployment opportunities, obviously, 10-year bond rates and rates generally have shifted higher. Are you seeing that flush out any acquisition opportunities from maybe the high net worth and syndicators? Anthony Mellowes: I think it's still just a little bit early to be saying that at the moment. There was still some -- there was an asset in Tamworth that sold at a very tight 5.1%, I think, recently to a private. There's still DD happening of deals that were agreed in sort of December that they're going through their DD. So I think it's just a little bit early to be making that judgment at the moment. What I would say is at our results at June, I've said I think overall cap rates will compress to December of about 10 to 15 basis points, which is what happened. And if conditions continue, I'd expect sort of maybe another 10 basis points to June '26. Conditions have changed. I don't expect cap rates to continue to compress from December '25 to June '26. I think they'll stay fairly flat. Daniel Lees: Okay. That makes sense. And just a final one from me, if I could. On the capital deployment program on Slide 22, the $65 million, what's your estimate yield on cost for that program? David Salmon: Look, generally speaking, we're targeting a 6% plus yield on our capital deployment. Obviously, you've got a bit of variation depending on the nature of the projects. But that's -- as a rule of thumb, we target that. Anthony Mellowes: And there's timing issues. David Salmon: Well, there's obviously timing issues in terms of the phasing of the projects coming online and also you have sometimes you have a bit of downtime in -- while you're developing sites as well. Operator: Your next question comes from Solomon Zhang from Morgan Stanley. Solomon Zhang: Hello David. I'm sure there's a reason for this, but your 5.3% NOI growth. I know, David, you talked about cost savings at the property expenses line. But can you explain to me why gross rental income didn't move at all? David Salmon: Look, the primary reason that didn't move is the impact of the disposals. They have come out. So that's the primary reason. The comp growth after adjusting for the disposals was about 3% growth. Solomon Zhang: Comp growth at the gross property income line was about 3%. David Salmon: Yes, comp growth, correct. Solomon Zhang: Okay. Fair enough. The 7% leasing spreads for new leases, that's pretty impressive. Can you kind of give me some color as to the composition? Like were there still some old Mosaic boxes that you leased up at massive leasing spreads? Like I'm just trying to work out what the underlying leasing spread would have been without some of those extraordinary good boxes? David Salmon: Look, we -- maybe just to preface it with the Mosaic site, there are vacant sites that we're trying to lease, but it's -- at the same time, we see them just another vacancy we're trying to fill. So we're trying not to differentiate between all the different sites. Obviously, there were some good deals this half, and it's been quite low. Sometimes you're talking half numbers, the stats can be very sensitive to a few big deals. Maybe if I could put it this way, if you excluded the top few deals, yes, you'd be closer to that sort of 4% to 5% leasing spread range. And conversely, if you excluded the bottom few deals on the renewals, they'd be up around 2% or 3% higher as well. So yes, I mean, you do get some outliers that can skew things either way. But at the end of the day, yes, look, there is an element of Mosaic that's not into those numbers, yes. Solomon Zhang: Great. What were those bottom few deals and renewals that dragged it down to pretty much flat? Like were they a special type of retailer? Or was it a specific retailer? Anthony Mellowes: Yes. We had -- there were 3 deals that hurt us in that renewals, 2 were banks, and we wanted to keep those banks because they wanted to leave. And one was a pharmacy who, as you know, pharmacies retain the basically pharmacy license. And if they move, you can't just easily replace a pharmacy. So they were the 3 deals, 2 banks and a pharmacy. Solomon Zhang: Great. Great. And just one last one. I noticed you guys kicked off a Metro Fund III. Can I assume it's with the same capital partner as Metro 1 and Metro 2? Anthony Mellowes: Yes. Operator: Your next question comes from Murray Connellan from Moelis Australia. Murray Connellan: I just wanted to quickly drill into the Mosaic brand space, if you wouldn't mind. Would you be able to contextualize for us the amount of vacancies that still remain there, the amount of income that you've assumed going into the second half? And I guess, the drag of those vacant sites relatively speaking, in FY '26 guidance overall? David Salmon: It's David. Anthony Mellowes: What David is looking at -- look, I'll just say, Murray, Mosaic is gone, and they're just now a vacancy for us. And -- but David will run through some numbers, and we are getting better rents on the Mosaic groups. It is heading pretty close to what we suggested when Mosaic went broke. I remember what was 18 months ago, whatever. So -- but Dave run through. David Salmon: Yes. Look, just to give you a bit of context, obviously, and we have flagged this in the past that there would be a bit more leasing capital this year to help lease up those Mosaic sites. We had about $1.2 million in leasing capital on those sites for the first half, and we're forecasting roughly about double that for the full year of FY '26 to about $2.5 million. Look, in terms of how much of the Mosaic portfolio have we dealt with, we've got about 85% either leased or casually let where it's earning some sort of income. Obviously, we're looking to fully lease everything, but there is a little bit of a drag. In terms of dollars on the NOI line, there still will be a bit of drag for the full year because obviously, we've got the new rents kicking in, offset by the lost rent coming out. There'll still be a little bit of a drag, maybe $0.5 million or so for the full year, depending on how we go in the second half on things. But yes, like I said, the primary impact on AFFO for the year will be that leasing capital and that leasing capital is part of the first half higher leasing capital that we talked about earlier. Murray Connellan: Will it be fair to say that, that space is assumed to be, I guess, mostly 90% productive going into 2H? '26 on average? David Salmon: Look, we're certainly banking on having most of it in there. There might be a few delays in terms of start dates and things like that. But obviously, when we come out with our guidance at year-end for FY '27, we'll be able to give a bit more color on that. But like Anthony said, we're trying not to think about Mosaic as one big thing. At the end of the day, we're trying to fill up all our vacant sites, and this is just one part of it. Murray Connellan: And Anthony, congrats on your last set of results. All the best for the next phase. Operator: Your next question comes from Richard Jones from JPMorgan. Richard Jones: Anthony, just interested in your broader views on retail markets. Obviously, you've been around a while, and we've seen a heap of demand come through in the past 6 to 12 months. Obviously, Charter Hall have raised a lot of money and deployed in a relatively short time frame. So just interested in where you see transaction markets in light of a bit of a shift in where rates are going as well. Anthony Mellowes: Yes. Look, people get quite excited by institutions buying. The privates for 20, 30, 40 years have been the most active buyer and seller in this particular sector. And they will continue to be the most active buyer and seller for, I think, for some time. The issue is you just get institutions coming in and everyone thinks that's really interesting. But the bottom line is there's always buyers and sellers. You can go back as many years as you like, and there's roughly 40 to 50 sort of transactions a year, which is roughly 1 a week. And that's just what happens in this particular space. The difference is you've got institutions looking at the moment. So -- but I think the buyers will still be there. The sellers will still be there, and it's a really good sector. Roughly 50% of your income comes from really high-quality tenants like Woolies and Coles. The other 50% of the income comes from pretty well nondiscretionary retail, coffee shops, pharmacies, whatever you want, it's a pretty good, solid returning asset that's very consistent. And I think that's what people like. Now with rates going up, yes, it will have a bit more pressure on people's buying ability, but I don't think it's going to move it all that much. People don't necessarily buy assets. They buy them for a lot of cash often. So lending isn't always a consideration because they're private buying. Richard Jones: And just on your funds management business, can you just clarify what the rough return hurdle is for that deployment and how much you've got in committed capacity? Anthony Mellowes: Well, I was -- I'm not going to tell you a return because that's up to our partner. But I think it's fair to say it's market returns for these types of assets. Now they have a slightly lower cost of capital. And so maybe it's slightly better to buy in different times, but that can move. But look, we originally started our joint venture with them, our partnership with them for a $750 million sort of stake. We're sort of at that now. We're at over $800 million. And I think we all want to continue. We've got -- started with Metro 1. We've got Metro 2. We've got Metro 3. We're over the $750 million. And I think they have -- they like that particular partner likes this type of sector, and they have capacity to purchase in this sector. So I think where it ends, I think it comes down to the opportunities that are presented to them. Operator: Your next question comes from Callum Bramah from Macquarie. Callum Bramah: I just wondered, can you just clarify a little bit of the drivers of the expectation of comp growth to slow over the full year? Because you've still got, as you said a couple of times, 3.3% as your guide relative to, I think, 3.7% delivered in the first half. David Salmon: It's David. Yes, look, I think the simple answer there is the first half has benefited more from some of those moderating costs that we implemented in the second half of last year. And so that's also the reason why the second half is a little bit lower to get to that 3.3% for the full year. Callum Bramah: Okay. And so that's in the property expenses is what you're talking about? David Salmon: Yes, property expenses, that's right, yes. Callum Bramah: Okay. And just going or maybe a follow-up also on the lease incentives comments that you've made. So clearly, there was the step-up in the first half. And I think based on the comments around Mosaic, that continues into the second half. But should we anticipate that you step back down in fiscal '27? So I think at the moment, you'd be running at something in the order of $15 million per annum in lease incentives. So would it come back down closer to the 12% as we go forward as those have disappeared out of the portfolio? David Salmon: Yes. Look, I mean, obviously, our higher leasing incentives this half is some of the Mosaic, but obviously, it was due to a number of new tenants in general as well as Mosaic. Look, in terms of where -- I think we're guiding towards around $13.8 million for the full year on the leasing side. Yes, Prima facie, you won't have as many Mosaic tenancies to fill. But it's part of a broader environment where it depends on how many other new tenants we might get in. Obviously, our retention rates help mitigate some of that exposure. And look, you got to remember that the cost of fit-outs and things like that is not going backwards. So as well as trying to keep those new leasing incentives on new tenants around that 12-month mark, you do have cost pressures. So I won't say you can just draw a line in the sand and say whatever it was this year will go backwards by x million dollars. It will be part of a broader environment where you have to consider cost of doing fit-outs and also how many new tenancies you expect to put into the portfolio. Callum Bramah: Okay. And maybe just 2 other ones. So just on Treendale, I think the guide is for an initial yield of 6.7% -- just in relation to the commentary that sort of implies there's some sort of synergies between properties across the street. Does the 6.37% include that benefit? And therefore, maybe -- I assume maybe the cap you bought it on is lower and you've got a benefit through property management? Anthony Mellowes: Look, that's exactly right. How much -- it's not massive dollars, but there's a little bit there for us. And that's what we're going to be focusing on to maximize that. But we're not talking, it's going to move from a 6.3% to an 8% yield. But there is efficiencies there for us. Callum Bramah: Fantastic. And then just maybe if you can also just talk -- so cost of debt into the second half will be, I guess, around 4.4%. Is that fair? And then it just trends up with your hedge book a little bit into fiscal '27? David Salmon: Yes, we're guiding towards 4.5% for the full year. So I don't have a split of the second half, but yes, it would be -- implies it's slightly lower than given the first half was 4.6%. So -- and in terms of your question about the hedge book, yes, look, we've always had high hedging. Obviously, what's embedded into our hedge position is we have some callables and we have a collar as well. Inherently, if you're working out your percentage hedged and your rate, you have to make an assumption around what is going to be come into effect based on the interest rate environment. So we're assuming that both those callables are called and also that the collar will be enacted from when it kicks in, in the future. So that's the main thing that's driven our sort of movement in the hedge book since 6 months ago. Callum Bramah: And one last one, sorry to finish it maybe on a negative. But just looking at those -- the comparable MAT growth for sort of discount variety or apparel, just are there any tenants that you're particularly concerned about? Anthony Mellowes: No. In the past, we have been concerned about sort of Mosaic and that type of thing. Look, you've got the reject shop that have been taken over by an enormous discount retailer from Canada doing a tremendous job. They want to expand. So they're looking really positive. So a lot of chemists in there. Chemists are doing well. So we don't have any portfolio of tenants that we're sitting there going, we've got a big watch on them, like we have had in the past. There will be some that will come up. That's just natural, but there's nothing there at the present in those many majors. Callum Bramah: Congratulations, Anthony, on your successful tenure as CEO of the group. Operator: Your next question comes from Ben Brayshaw from Barrenjoey. Benjamin Brayshaw: I just had a quick question on the guidance for NOI growth for the Callum's chat earlier. Could you just clarify the driver around the lower NOI growth implied for the full year in the second half? You mentioned property expenses. So will property expense growth be up in the second half? David Salmon: Yes. I mean that's essentially -- yes, it's the first half benefited more from those cost savings initiatives, which kicked in, in the second half of last year. And yes, for the full year guidance, it is slightly lower because we will effectively have higher expense -- property expense growth in the second half compared to the first half, noting that what I said before, the first half only having comparable growth of 1.4%, which is obviously lower than the run rate we would be envisaging going forward. Operator: [Operator Instructions]. Your next question comes from Solomon Zhang from UBS. Solomon Zhang: Apologies for the tech issue earlier. Two questions from me. So maybe for David first. You mentioned earlier that there was some balance sheet capacity to deploy potentially on acquisitions. But I guess your look-through gearing is sitting around 35%, and I can't really recall you sitting above that mark for very long. Should we read this as increased appetite to lift gearing? Or is this more a reflection of reval unlocking deployment capacity? David Salmon: Yes. Look, in terms of that look through gearing, I think we calculate it to be a little bit lower than that, but I think sort of in the 34s. But we still have what we say is capacity to debt fund some acquisitions if we wanted to go down that path, noting that, yes, there's also the opportunity to maybe recycle some capital from other asset disposals if we wanted to do so as well. Look, I guess, at the end of the day, we look at through the lens of do we have confidence in our gearing position through the valuation cycle? Yes, we do at the moment. do we want to protect our credit rating. We're not going to do anything that's going to threaten that. We're comfortably in our credit rating at the moment, and we would like to continue to do so, and we expect to do so. And obviously, like I said earlier, the security buyback is an option, but I'd say that's been mitigated to some extent where we've deployed capital into other opportunities like Treendale. Solomon Zhang: Makes sense. So you'd be comfortable sitting in the upper half of your target range of 30% to 40%? David Salmon: I'd say going to the upper end of that is probably a bit stronger language. Maybe around the mid-30s is probably more about how we view it as a potential scenario, noting that there might be reasons why that comes down, like I said, through asset sales. So it might be more of a capital recycling situation like you've seen over the last few years. Solomon Zhang: Okay. Maybe a question for Anthony. Just looking at Slide 11, just on your renewal spreads, they were basically flat. And I know you called out the bank and the pharmacy spreads that are a bit lower. But can you just discuss the dispersion of your spreads? Anthony Mellowes: Well, I think we did -- basically, if you take out the top number of new leases, it comes from 7% down to sort of 4-ish. And if you take out the bottom 3 of the 80-odd renewals, it comes up to sort of 3%. So they're all sort of sitting in around -- the vast majority by number is sitting in and around there. And I think you're going to see a skew where in the second half, there's going to be more renewals than new leases. And I think you'll see the average spread lift from flat to positive 2 to 3s, 4s where it has been sort of sitting in the past. We have been very focused on increasing our annual -- average annual fixed rent reviews, and that has moved from sort of 3.7% to 4.3% over the last number of years. That is a lot more important because it gets -- it applies to 80% of the tenants every year versus leasing spreads only apply to 20% of the tenants each year. So maybe we have been a bit focused on increasing getting those 5% average annual fixed rent reviews through, and we've been successful at that. So I'm really comfortable where things are at. And like I said, smaller numbers do get skewed by a couple of deals, as David said earlier. Solomon Zhang: What were the re-leasing spreads in the Bank of [indiscernible]. Anthony Mellowes: What was that? Solomon Zhang: Could you quantify the actual re-leasing spreads, the percentage on those bank deals? Anthony Mellowes: No. Operator: Your next question comes from [Claire McHugh] from Green Street. Unknown Analyst: Just a quick one regarding capital allocation. I appreciate you're evaluating buybacks and acquisitions. But on the acquisition front, what unlevered IRR hurdle are you targeting? And how has this changed in light of recent increases in long-term rates? David Salmon: Look, I mean if you look at our weighted average cost of capital, it's sort of around that 8-ish sort of percent sort of range depending on what you want to assume for long-term funding rates, which has obviously been moving a lot recently. Yes. So it's for us, it's a combination of initial yield and growth opportunities. Obviously, we're trying -- in the past, we talked about wanting to get -- wanted to buy assets with a 6% yield and growth and obviously sell at tighter yields with less growth. So I think a lot of that thinking is carrying forward. What I will say is sometimes we will acquire sites more for strategic reasons. It's not always just a purely a yield discussion. But obviously, we like to do both. So -- and look, in that context, when we're deploying capital, obviously, you've got a buyback -- security buyback where we're sort of trading at north of a 6% yield and an implied growth as well. So you've got to consider all deployment of capital opportunities. But as Anthony said earlier, we're trying to be very disciplined around our capital decision-making. Unknown Analyst: Okay. That's helpful. I mean just looking at the recent deals, it would seem that Treendale looks like on an unlevered basis, you're probably going to hit sort of 8.5% to 10%. Is it fair to say that sort of that sort of return excess of 8.5% to 10% or 8% on an unlevered basis is reasonable or --. Anthony Mellowes: Yes, we wouldn't have done it otherwise. David Salmon: Yes. Obviously, the yield was good. That was a tick. And there was also obviously a strategic purchase, like Anthony said, being across the road from our center that we see there's further opportunities in the asset in terms of overall management efficiency, also the leasing opportunities that will come with the site as well. Anthony Mellowes: And there is growth out of those centers. David Salmon: Yes. That's right. Operator: Your next question comes from Connor Eldridge from Bell Potter Securities. Connor Eldridge: Just looking at the full year FFO guidance bridge from the FY '25 preso, you flagged about $0.02 per share of incremental income from transactions. It looks like that full contribution has effectively been already realized in the first half. So I guess, just to be clear, should we assume that current guidance is effectively assuming no incremental contribution from transactions in the second half and i.e., there's potential upside there? David Salmon: Our updated guidance has factored in all the transactions and funds management initiatives that we've announced. So that's all been factored into the new guidance. Anthony Mellowes: We haven't factored in any others. David Salmon: Correct. So we haven't factored any further capital initiatives like either through funds management or on balance sheet acquisitions or disposals or -- and we haven't factored in any security buyback as well. Connor Eldridge: Right. Okay. And just one more for me. Just on the tenant retention number has now dropped below 80%. Can you just help me understand how much of that, I guess, is intentional churn, upgrading the tenancy mix and whatnot versus how much of that is actually tenant driven? Anthony Mellowes: I think it's dropped from -- was it 81% or something to 79%. It's still roughly 80%. So it's just the mix that's sort of come in. David Salmon: But, I would -- just to your last point, I would say that look, there is some intentional churn on our behalf in that number that we're trying to get the most out of the assets. So the reality is if we excluded those, it would be into the 80%. So yes, that is a factor, but we just reported as it is a fact. Operator: There are no further questions at this time. I'll now hand back to Mr. Mellowes for any closing remarks. Anthony Mellowes: All right. Well, look, thank you all. And I think that was one of our -- my longest one at 58 minutes. So thanks very much and look forward to speaking to you all, all the investors as we speak to you and the analysts all this afternoon. But thanks very much. It's been a great fun since December 2012. So thank you very much, and I'll speak to you all shortly.
Nicola Gehrt: Thank you so much, and good morning, ladies and gentlemen. It's my pleasure to welcome you to our first quarter 2026 results presentation here at the Congress Center in Hannover, where we will be holding our AGM later this morning. My name is Nicola, and I'm Group Director, Investor Relations at TUI, and I'm delighted to be joined for the presentation by our CEO, Sebastian Ebel; and our CFO, Mathias Kiep. We look forward to sharing with you the details of a very positive start to the new financial year, along with an update on current trading and the reconfirmation of our outlook. In the interest of time, we will keep the presentation brief before we open the floor for your questions. We kindly ask you for your understanding that due to the AGM, we will need to limit the session for 1 hour. And with that, I have the pleasure to handing over to Sebastian. Sebastian Ebel: Thank you, Nicola. A very warm welcome from all of us here in Hannover. The sun is shining the first time since a couple of weeks, but the snow is still outside, but we hope now for warmer weather. You know the agenda, it's very similar as you are -- as you know it. I will do a short introduction about the last quarter. We are very happy about the results. Last year, first quarter was good. This year, it's even better. We have seen an increase in EBIT of EUR 26 million despite the cost of the Melissa hurricane of Jamaica. I will talk about this later on. And this improvement is based on a positive HEX trading momentum, but also an improvement in Market and Airlines. And we have seen strong demand in Holiday Experiences business and we have seen the right demand for our risk capacity, which we use -- which we wanted to fill as much as possible with the right margin. And you remember that the main target for the retail is also for the sales activities to fill our assets. And by having this positive momentum, we can reaffirm the guidance -- the EBIT guidance for '26 of 7% to 10% growth. And we also see this growth for the coming years. If we go into the details, first quarter in Holiday Experiences, we were able to improve the result by EUR 18 million despite the one-off impacts in hotels. The Jamaica, you remember, Melissa, who was affecting the business in Jamaica, we had to close hotels the Riu hotels, the Royalton hotels for the whole time the first quarter, and you will see it later, we also had to cancel a significant amount of flights from the U.K. to Jamaica. Nevertheless, we have -- if we take the one-offs out in Hotels & Resorts, we would have seen a EUR 6 million improvement and without that, we are EUR 19 million below. And exclusive of Jamaica, you see that the occupancy even in winter grew by 1% and the average daily rate grew by 5%. Cruise is very strong. We have seen a significant improvement in result despite a significant higher capacity of 16%. Occupancy were up by 3%, almost reaching 100% and having the same daily rate, an outstanding result. And also Musement and winter is not so important, has seen a slight improvement. When we look at Market and Airlines, we also have seen a EUR 10 million improvement versus prior year. This includes a negative impact of Jamaica, EUR 6 million. As I said, we had to cancel flights to the island, and this had a EUR 6 million impact. For us, it has been important and it is important and will be important that we have the right risk capacity because with the right risk capacity, we can protect our margin. And the growth today in the future should come from dynamic packaging. And that we did that quite well in this quarter is shown by the load factor, which went up by 1%. And what we see is also the first benefit of our cost reduction program. Some special items we have seen and initiatives we have seen in the first quarter. We are really proud that we announce our market entry and open our network in Romania on Thursday, I will be there. And it will be after [indiscernible] which we opened 2 years ago. It's doing very well. It will be the second in the market which we opened. We had a prelaunch a couple of days ago. We see quite promising demand and good margin. And again, it will help us to fill our assets in Europe, but also outside Europe. We also are increasing our River Cruise fleet. The second Nile ship had been launched, and we have now -- we operate now successfully 6 vessels. We have put a lot of effort in improving further development in our app. We, as you may recall, we are bringing forward activities on the same global IT platform. The app was the first platform, which we not only harmonized, it's the same one. And now we do see day by day the benefit of doing so. If you look at the app today, the AI application is really a success story. And we have seen a significant conversion growth and uplift in bookings through the app. And the app is the most efficient way to book and to keep customers and to increase retention, and we are very happy. And the potential for us is huge if we compare us with best of breed. We also signed a partnership agreement with Jet2 on the Musement activity platform. We are very thankful for the trust Jet2 gave to us to integrate the Musement platform after Booking.com, easyJet and lastminute.com, it's the fourth big wholesale partner. We don't take it for granted. It's a big obligation for us like for Booking, like for easyJet, like for lastminute to deliver outstanding products to the Jet2 customers. We are growing on the hotel side. We have a strong pipeline. As you know, we opened 5 hotels in Africa. We opened 1 hotel in Vietnam. So these are -- especially these are the 2 regions where we are growing, and we want to grow further. Sustainability is key of our DNA. It's not a trend which may have faded away a little bit. For us, it's very important for our customers for the climate, and it's commercially a sound business case, and that was recognized by achieving the A rating of the CDP. And Mathias, if you like to go into the numbers. Mathias Kiep: Thank you very much, Sebastian, and a very good morning also from my side. Thank you for joining the call. As always, I want to give an overview about the performance, then the EBIT bridge and then details to P&L, cash flow and the balance sheet. And Sebastian, as you said, we are very pleased with the first quarter results and this first step into the new fiscal year. And -- if you look at this, it's really great that we not only have an operational improvement of the numbers, EUR 77 million, the highest underlying EBIT that we've ever seen in this quarter, but also another progress and step improvement in our balance sheet and the underlying financial profile. Net debt improved another EUR 0.5 billion year-on-year. This includes EUR 0.2 billion FX impact, but the underlying decrease, EUR 0.3 billion is coming from all the measures that we undertook over the last 12 months. And as elements of this progress, I would like to highlight: one, we've now also taken the final cruise ship from Marella into ownership. And as you may have seen and recall, we have also repaid early the outstanding remaining amount of the old convertible 2028. And as you said, Sebastian today is the AGM where we will return to dividend payments. That is, for all of us, a very important and great moment. So for the details, as I said, EBIT bridge, P&L, cash flow and balance sheet. Now as you saw in the front section, there's really a strong underlying development in all segments. In the hotels, please remember the impact that Jamaica has. Second, that we had a positive one-off last year of around EUR 15 million. We also called that out. And against that, we have the results in this quarter. So overall, an operationally positive development and a negative impact through these one-offs or the not repeat of one-offs. Then you see the very strong development in Cruise. And I think it's really great to say not only the capacity addition and the earnings that come from that in TUI Cruises, but also the constant improvement in Marella and in the operational development of TUI Cruises. So alone, the rate increases in Marella for the winter, we talk about 5% again. I think with the ships that we have and with the concept, that's really a fantastic achievement. Musement, really good development, strong cost control. And then as Sebastian mentioned, even despite the impact that we also see there in Jamaica with the long-haul business, a very strong operational development, and it's so important to manage the capacity, one; and second, to make sure that we continue to deliver in our own assets and business in holiday experiences. And with the EUR 77 million, a really strong start into the year, EUR 26 million more than we had the year before. Now to the P&L, two things to highlight. One, it's the first underlying result, which is positive pre-minorities in this quarter. In tourism, you normally have a negative result, also operationally in the winter. So this is even more so very pleasing to see. Also as a result, our loss per share halved effectively for that quarter year-on-year. And one contributor to that is another improvement in the interest expense that comes from all the measures that we did, in particular, the lease portfolio restructuring and taking the ships and ownership. So that's another EUR 10 million improvement that helps us to reaffirm our guidance of EUR 325 million to EUR 350 million. On this number, please remember that most of our payments dates for financial instruments are more in the second quarter, so it's quarter 2, quarter 4. So we can't take this times 4. There's a higher interest payout in Q4 and Q4 compared to Q1. And -- with that to cash flow and cash flow is in line with expectations. The very important element is that the structural savings that we worked on and that we achieved interest payments, the fall away of the regular contributions to the U.K. pension scheme and a reduction in the lease and asset financing repayments, that helps to offset the higher investments that we wanted to see in the hotel segment and that we need to do in context of the Boeing delivery portfolio. And all in all, a EUR 50 million improvement in the first quarter on the cash flow side. Coming to the balance sheet. And as I said, the EUR 0.5 billion improvement is driven by the improvement that you see in the lease portfolio, aircraft and ships in particular, and includes also EUR 0.2 billion FX movement. Now this strong performance and the strong advantage, we will not see this coming and going through the rest of the year because we will see more aircraft being delivered. I think this year, Sebastian, we talk about up to 15, maybe a bit more of planes coming from Boeing. So that will -- because they directly move on balance sheet, impact that. But overall, we continue to see a further improvement of net debt in the full fiscal year. And concluding from my side, because we got the question a lot about the mechanics for the dividend payments. So today is the AGM. We put that to road show. Shareholders are expected to approve the dividend payment. And then tomorrow, we will pay into the system. So our shares go ex dividend. And then on the 13th, there will be the payment date from the system to shareholders. And with that, back to Sebastian on the way forward, how our bookings and the guidance look like. Sebastian Ebel: Thank you, Mathias. So a good start into the new year. How does the future look like? What do we expect? If you look into Hotels & Resorts, we do see that the available bed nights will significantly grow in the second quarter, but also for the full half year. The occupancy for the second quarter is on the same level like we have seen last year. This includes -- that excludes the Jamaica effect. We are with 4% below last year when it comes for the second half year. That is not a concern to us because we are still in the ramp-up phase when it comes to Jamaica. But also, what we do see, by the way, this is also very valid for Markets + Airline. We see a late booking trend. The available -- the average daily rate increase is about 3%, which is a healthy number also to cope with the cost inflation. On Cruise, the outstanding picture remains. What we do see is that the capacity growth is getting smaller, but it's still significant. Occupancy is 4%, respective 3% in the second half up. And you should recall that the ships are 100% full. So this will further reduce to 0. But what we now can do is to optimize the price because we are so well ahead in being booked the ships. Musement, we expect a mid-single-digit growth for experiences. And this in a market which we do see is a very good result and shows that Musement is doing an excellent job. When it comes to Markets + Airline, and I would like to start to reiterate again, we slightly reduced our risk capacity, it's all about to sell the risk capacity, flight, hotel owned assets with -- in a way that we protect margin. The growth should come through the dynamic products. And by having said so, we will see a winter on the same number as last year, especially when we take into account the last-minute business. What we do see is -- I just look, for example, for the number of yesterday, we see that after the strong winter we had where the footfall was significantly down for retail, we see that the weather has normalized in the last 4, 5, 6 days, and therefore, the business has immediately picked up significantly. And for summer, we are slightly below last year. Also there, we are very confident that it will move into the same level as last year. And the focus is on protecting margin and the focus is on filling our risk capacity to fill our aircraft and our hotels. We are well hedged, as you can see, and the hedge position gives us an opportunity with today rates. And by having said so, we can reconfirm the guidance, the increase in EBIT by 7% to 10%. And as I said, a good start in the first quarter. We are confident for the second quarter, and we also expect a good summer. There's one chart left, the summary. And just to repeat, both sectors support each other. The vertical integration is -- makes our business model strong and resilient. The marketplace benefits from the exclusive products and the Holiday Experiences benefit from the strong sales. And together, we protect revenue and margin. And as I said, this should bring us to the ambitious growth guidance we have given. And therefore, we also could reiterate not only the dividend proposal for today, but also for the coming years, 10% to 20% of the underlying EPS. Nicola Gehrt: Thank you, Sebastian. Thank you, Mathias. We are now available for Q&A. Operator: [Operator Instructions] Our first question comes from Karan Puri from JPMorgan. Karan Puri: I've got two quick ones. One on the summer trading that you just mentioned. So tracking at minus 2%, how confident are you to hit your 2% to 4% top line growth guidance in that context? If you could take that one first, and then I'll move to the second one. Sebastian Ebel: As I explained, we are confident that we will achieve last year's level. Mathias Kiep: And on the revenue -- and I think you also asked about the revenue guidance, 2% to 4%. I mean if you look at Q1, there is -- on constant currency, there's a 1% improvement. Now we will also see increase of sales from our Holiday Experiences segment that also needs to be factored into this revenue guidance. And that's why we're overall reiterating our guidance also on the sales side this morning. Sebastian Ebel: And what I would like to remind you, the strong growth in TUI Cruises, you don't see in the TUI AG numbers, not in our numbers because the revenue is not consolidated. So this significant impact is not impacting TUI. So this is outside the consolidated TUI revenue number. Karan Puri: Yes. Understood. And second question was actually on your partnership with Mindtrip and other LMMs. Is it possible to maybe share some early indications of progress made with these partnerships? Anything on the distribution unit economics will really be helpful here. Sebastian Ebel: Yes. So distribution is changing. We very much believe in retail. That's key, and it's commercially a sound case because the margins and because of the early sales are strong. We're seeing and expect a very significant change from web to app and to LMMs and social media. And we put a lot of effort and investments into creating an outstanding app. We have releases every 2 weeks. It's really improving a lot, and we do see that in the numbers -- growth numbers in the significant improved conversion. So every 2 weeks, you will see new applications, including AI applications and new ways of search. We have started collaborations with LMMs and Mindtrip. We have started to sell to ChatGPT. So I'm really proud that we're there on the [indiscernible], on the lane to overtake. And at the moment, we do see that we get the first numbers of traffic. It's still low. It's still more that people get information, but they can book with us as well. And we really want to use this channel as good as possible. Operator: The next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: Can you just help us understand these hotel KPIs with and without the Jamaica impact? I mean, are you able to tell us what the occupancy is in Q1 and Q2, perhaps with Jamaica included, so we can see the sequential trend through to the second half? Because I'm seeing some investors concerned about what that means for the hotel trend, but that's not quite understanding how you're presenting those KPIs. And then just the second question would come down to the reduced interest costs and the impact of bringing assets back on to the balance sheet. Can you just explain whether these gains are one-off or whether they are sustainable? Are they onetime things as you bring the assets on balance sheet? Or are they all enduring improvements to the interest cost? Sebastian Ebel: I think we have stated that the Jamaica effect was EUR 15 million on the Hotel's side, and that should be reduced to 5% to 10% in the second quarter, which means that a significant part of the 4% is based on the Jamaica effect. And there, we would expect till the end of the second quarter, this should be very much normalized to it. And that's why we feel confident about the occupancy for the hotel business in general. Mathias Kiep: Yes, and on the interest results, so what you see for Q1 versus last year is really a structural improvement. And we had last year and -- a better interest environment with regard to interest income. And also, we had a smaller one-off during the year that we also published that was in H2. And that's why the guidance, the lower end is in line with what you saw as a full result in last year. But the improvement, that's what we worked on is really structural. So it's replacing leases from the past that are not with regard to market terms that we can get today with more attractive instruments or with cash proceeds. Operator: The next question comes from Leo Carrington from Citi. Leo Carrington: If I could ask two questions, please, both really about your demand. Firstly, in terms of the demand against your risk capacity adjustments, can you give a bit more color of what these -- what the shape of these adjustments was? Is it certain destinations, certain dates or across the board? I'd be interested to know how you're planning for this year? And then secondly, in terms of how we should understand consumer preferences, what's your view on the differing trends between the hotels which is perhaps more competitive, later booking trends versus cruise, which seems to remain very strong. Is it the product? Is it demographics? I'd be interested. Sebastian Ebel: As you have seen, the occupancy in Markets + Airlines in the first quarter was up 1%. This, you can put into -- relation to the slightly lower number of customers. What we have taken out and capacity is not our own flying, not our own hotels. It's third-party commitments. We had full chargers, allotments, guarantees and that we have reduced significantly because we also believe that this capacity is available dynamically. And we wanted -- just wanted to make sure that our risk capacity, the ones which we produce ourselves, we can fill for a decent margin. So it's all about third-party capacity. We haven't seen a negative impact on the hotel business, except the Jamaica business. And this is not a surprise. All the hotels, the Riu hotels, and the Royalton were closed. The Riu hotel started to get opened in January. The Royalton hotels will be opened just before Eastern because they use the time for renovations. So this is an impact which we couldn't avoid, we do see that the business is healthy. Of course, there are markets which are stronger than others. What helps is the international sales organization we have, if one market is less good, the other one is better. When it comes to consumer preference, one thing is clear for us. That's why we invest so much in international sales activities. We want to make sure that if one market is weaker, we can get the customer from somewhere else. Therefore, the share of international customers in our own assets is growing, and that gives us the confidence to really see, again, outstanding numbers there. If you look at the overall demand, the one group which is buying later are the families and also this is understandable to see. Leo Carrington: Can I just ask a follow-up on that first point on the risk capacity? Do you get the sense that this -- the allotment say in the hotel capacity that you've not taken on this year has gone to other tour operators? Or is it possible that you could actually fill it dynamically later in the season? Sebastian Ebel: Yes. That is very clearly the concept. It doesn't mean that we don't have a great relationship to the hotel. It's sometimes also the wish of the hotel. It's the wish of ourselves because then it's up to the hotel -- hotelier to know what is the best price he want to offer to get the volumes. And this uncertainty, what is the right price we take away if we still work with the hotelier on a very exclusive basis, but having a risk capacity, which is mainly -- is not there anymore, but the capacity we use is by getting dynamic rates. So the model is in the longer tail changing to dynamic. And this is something which we will see huge benefits in the future. Operator: The next question comes from Andre Juillard from Deutsche Bank. Andre Juillard: Two questions, if I may. First one on the source market. Could you give us some more color about the trend you are seeing in the U.K. and in Germany, which are your 2 first markets? And in terms of destination on the other side, you are mentioning that Greece, Balearics, Turkey and Egypt are very strong. Could you also give us some more color about the trend you are seeing if you have some new destination emerging? And also what is the most profitable one or the one on which you see the strongest operating leverage? Sebastian Ebel: I will not give you the details which one is the most profitable one. I do apologize for that. Egypt is very, very strong. Bulgaria and Tunisia, so the lower cost countries are strong. Greece and Spain are stable. Turkiye is suffering at the moment because of high inflation and low currency devaluation. So -- and it's more a family destination. If you look at our clusters, we do see strong demand for Sansiba. We also see good demand for the Middle East. For Asia, we see less good demand for the U.S. And if you look into the main markets in Europe, the Eastern European market, and that's why we are so happy to move into Romania. Germany and the U.K. are stable, but with significant competition. Germany, as I said, will see a catch-up because we had since the week before Christmas, minus 5, minus 10, minus 50, 0.5 meter snow and the footfall was really 1/3 of what we had seen before. So that's why we expect that Germany will be stable or will see a slight growth. And I would say that the U.K. market is -- the sun and beach market is -- especially mid-haul is strong. On the long haul, there might be some more weakness, but that's what we have to wait for. Andre Juillard: Do you see anything specific on the source market and destinations that was not anticipated or something which is really scary or anything special? Sebastian Ebel: I mean we are happy about the strength to Egypt because we benefit from us. Turkiye is a concern, but I mean, that's the good thing if you are more and more going to dynamic, if you can bring clients from A to B that a lower demand in one destination is -- needs some replanning but didn't kill profitability. So that's good. I mean maybe it will be interesting to see how the demand to North America will develop, but we don't fly to it. It's very small. It's not relevant for us. It's nice to have, and it clearly has an impact on the revenue numbers, but it's from a profit point of view very, very small. I think we have flight per week to Melbourne in California. That's all. So there is no -- and one hotel in Miami, the Riu Hotel. So the exposure is very, very minimal. But of course, it has an impact on the revenue side. Operator: The next question comes from Kate Xiao from Bank of America. Kate Xiao: First, I want to ask about your river cruises product, which you kind of highlighted as part of your Markets + Airlines on one of the slides. Can you talk to us about the market opportunity there? It looks like you guys are adding capacity. And what's your sense of the latest demand and pricing trends? Is it healthy? Is it stronger or weaker than ocean cruise market? That was the first question. And the second question on your Musement partnerships. You're highlighting kind of new partnerships with Jet2 on top of existing partnerships. Can you help us understand the long-term market opportunity with these partnerships? And how is the economics looking compared to kind of your own traffic? And also over the long term, what's your margin goal for this business? Obviously, you guys are ramping up profitability. What do you think is the long-term realistic margin goal theoretically? Sebastian Ebel: So on cruise and river cruise, the demand is big. I mean there's one major difference for a new ship, the profit is EUR 60 million, EUR 70 million for a river ship with maximum 200 passengers compared to 3,000, 4,000 is limited. But nevertheless, it's a great product. You get access to customers to bring into the TUI ecosystem, and therefore, we like it. So strong demand. The good thing is, and you may have heard a lot of orders, but the restricting factors are the slots in the harbors, in the city harbors. And that protects very much the margin, and we are very happy to own slots, and therefore, it's a very stable business. Can it scale to 10 ships, 12 ships? Yes, but it's still 10 ships with 200 passengers and which is just half the size of an ocean cruise ship. So it's nice -- it brings -- it's profitable, but it's good, especially good for the TUI customer ecosystem. On the partnerships, yes, you're right. It's 1 out of 4, and there are smaller ones as well. And I think it's great if our partners can sell more to their customers, profitable, and it's good for us as a producer. We have 2 focuses -- or we have a lot of focus, but 2 main focus on growth. One is through the wholesale partnerships. Second, on the own products because our business model or it could be, but we have decided not to do is not to sell the long -- I mean, we also sell the long tail, but that's not where we've spent the marketing money for. We spent the marketing money to sell the own products where the margin is not 10%, not 12%, but it's 30%, 40%. The catamarans, electric bicycles, or whatsoever, the special entries into coliseum and other things to really where we have created with our own buses, for example, own products because there, we have the big customer base. We can fill them from the first day onwards and they bring us good margin. So if we say 7 -- or 5% or 7% growth, it's mainly on own products and less focus on the long tail that comes along with the customers we have gained. And we hope, of course, if the customer who lives in Berlin wants to buy a theater ticket in Berlin, they also use our app. But there, the margin is EUR 2 or EUR 3, very limited. When this customer, for example, buys a transfer at Mallorca Airport, the benefit is EUR 20 or EUR 30 or EUR 40. So that is -- it's not scale. It's really -- of course, it's also scale, but its scale more from B2B, and it's more really incremental significant margin through own products. Operator: [Operator Instructions] The next question comes from Richard Clarke from Bernstein. Richard Clarke: Three, if I may. Just want to kind of loop back on the philosophy around the shift to dynamic packaging, and I think you say it's around sort of preserving margin. If we were to look next year into sort of 2027, I guess with -- you'd expect lower lease costs on planes, lower fuel costs with the weak dollar. And so the profitability of flying is probably going to increase for you. Could that possibly lead to a lean back into risk capacity? Or is the direction of travel always going to be towards more dynamic packaging irrespective of what the cost environment is? And then second question, just on cruise. I guess, pricing up 1%. You said in your prepared remarks, you see some opportunities to push a bit harder on price maybe beyond the current capacity growth. I guess you must be selling cruises more than a year out. So what is the pricing looking on that? Is there some expectations maybe into 2027 that we can start seeing cruise prices up sort of mid-single digits. And then lastly, a very quick one, but do you get any sense that you're losing any demand because of the World Cup in the summer of this year? So any sort of U.K. or German customers traveling over to the U.S. for the World Cup rather than maybe taking a TUI holiday? Sebastian Ebel: Thank you for the question. It's maybe an aspect I didn't get. We are in the middle of the transformation in Markets + Airlines. And the transformation is on the Market side and on the Airline side. On the Market side, it's especially to connect NDC airlines. To give you an example, last week, we -- or on the weekend, we integrated Finnair NDC into the Nordic system. And by getting this contract, we have seen a significant uplift for lower distribution cost. Of course, Finland is a small market. But with this thing to get more and more carriers on the lowest price tariffs, which we haven't had yet. This will help us to get the content and to get the content for the best price. The second part of the transformation is Airline. And in the Airline, we had 5 airlines or 6 airlines which were run separately. We brought the airlines together as one airline, two AOC and U.K. because not being part of the Europe and the European airlines. We have seen by bringing it together on the operational side, a huge cost improvement. If you look at our denied boarding compensation, it's 1/3 of what it had been because now the Belgian -- if there is an AOG in Germany, the Belgian airline that can fly and so on. What is still missing is the one commercial piece. So if you are a Spanish customer, you don't find a Spanish website where you find the flights to Frankfurt and to London. That's -- we are just doing it at the moment, as I speak, to bring this into the market. And we lose 20% or 30% of the demand because we haven't run the airline like an airline. And by commercializing the airline, and -- we will see despite the operational benefits, which we really realized this year, we will see the commercial benefits from next year onwards with a significant impact for the summer. On price in cruise, if we would -- I mean, when we increased the demand in the last 24 months and not the demand, the demand as well, but the capacity by 45%, 45% increase TUI Cruises demand. And I must say I was skeptical about not selling the volume, but price. But it was selling by far better than we had anticipated. And if we would have known that strong demand, we could probably have risen the price by 3%, 4% more. Fortunately, we are very well sold. So what we do now on the pricing side has an impact, but because the volume is small, the impact is limited. So the big impact will be in the coming years where we are good sold above the years before, but still a quite significant volume to be sold. And the last question -- the World Cup, I don't know. The effect had been strong 15 years ago, or I would say, 16 years ago. It has become slower -- smaller and smaller year-by-year. It -- one reason is 16 years ago, there were hardly big TV screens in a hotel or in your hotel room and you haven't had the live transmission. Today, it's very different. People can watch the game they want to watch on an iPad or on the computer. And therefore, I would say, yes, there is an impact, but this impact is small. Operator: The next question comes from Cristian Nedelcu from UBS. Cristian Nedelcu: The first one maybe on the Markets + Airlines, the splitting capacity dynamic versus risk capacity. I think it used to be 15% dynamic and 85% risk, I don't think it changed that much. But could you tell us how do we think about this year? We think about low single-digit declines in risk capacity and 8% growth in dynamic capacity? Or what's the range of outcomes for this year? And the second one, could we go a bit in more detail through the EBIT bridge in Markets + Airlines year-over-year? You have the forecast or the outlook for strong growth versus the EUR 200 million EBIT last year. Can we talk about the moving parts? Because we have the cost cutting 30% of the EUR 250 million that helps. But in the same time, we do have some wage inflation. We do have some inflation, I would guess, in your overhead and distribution costs. Your book revenues for the summer are down 2%. Now I'm making an assumption here. If the overall revenues are down 2% year-over-year, there's EUR 400 million lower revenues in the tour operator. How much are you cutting from your capacity cost year-over-year on accommodation airline and so on? Could you tell us a bit more the moving parts there? And what gives you confidence that you can indeed grow the EBIT in a strong way year-over-year? Sebastian Ebel: First, our main profit, and therefore, I'm always a little bit puzzled by so many questions comes to Markets + Airlines. The main driver for us is the Holiday Experiences business and the distribution makes sure that our assets are filled well. When you look at the dynamic share or the decrease in the risk capacity, it's not on our own assets, it's on third-party assets. So it has no impact on our own assets. And therefore, in the first quarter, for example, the load factor on our airline has even increased by 1%. If you ask about the split, we are not talking about a 2-digit percentage. It's a small or medium big 1-digit percentage. Mathias Kiep: Towards 20%, maybe. Sebastian Ebel: Yes, towards 20%. The future growth will come, of course, from dynamic packaging. And we -- due to the cost measures, we want to and will reduce the overhead distribution, IT cost in relation to the revenues. Operator: We have no further questions. So I'll hand the call back to the management team for any closing comments. Sebastian Ebel: Good. So we have had a good start. We are confident about the future for this year. Therefore, we could reconfirm the guidance. And we will benefit from all the measures we have taken, right capacity, a better cost structure, higher efficiency. And we are middle in the process of transformation to prepare the company for growth. And therefore, we are very confident with the guidance we have given. Operator: This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.
Christian Gjerde: Good morning, and welcome, everybody, to this fourth quarter and full year results presentation for 2025 for Elopak. My name is Christian Gjerde and I'm the Head of Treasury and Investor Relations. Today's presentation will be held by our CEO, Thomas Kormendi; and CFO, Bent Axelsen. The presentation will last for around 30 minutes, followed by a Q&A session where the people here in the audience and the people following us online will be able to ask questions. So with that short introduction, Thomas? Thomas Kormendi: Good morning. Thank you very much, Christian, and a warm welcome to all of you here in wintry, beautiful Oslo morning and pretty cold one as well. Today, we're going through Q4. And on a personal note, let me just say it is a great pleasure to present Q4, closing off what has been a really, really strong year for Elopak. And I think on behalf of all of the Elopak team members here, my colleagues, we are incredibly happy about the result we are about to present. First things first. And just to remind everyone, what is it actually we are doing? We are on a mission where we are offering sustainable packaging. And that we do in commodities, we do it across the world. We, through this, enable nutrition and also all the time are thinking and considering how we impact and how we enable the reduction of plastics. Let's then go to the performance. And as I start off by saying, it's been a very strong quarter, and it actually rounds off what has been a momentous year for us, both in terms of results, but also in terms of the strategy execution that we have executed during this year. Now firstly, we have -- we're seeing a quarter of very solid growth around 15%. That leads to an increase in EBITDA by more than EUR 5 million and a margin level of around 14.6%, which is a strong result, and it's also driven essentially by a number of elements, including evidently the growth we're seeing, but also the pricing initiatives we have, also the operational excellence, the cost controls we've had, all of that has led to this result. I'm coming back to that. Americas, clearly with Little Rock now in place, Line 1 producing, delivers 28% growth. And also, very importantly, the Little Rock plant is now, for the first quarter, accretive to the group. Remember, we said in Q3 that we were now cash positive in Little Rock, and now we are with -- in this quarter, also accretive to the group. We also record the highest ever cash from operations, more than EUR 63 million, and that leads us to propose a dividend in the range of EUR 0.102, a total of 59% in terms of net profit. I think it's fair to say that it's been a year where we have strengthened our strategy, particularly, of course, in U.S., but also in other areas that you will see throughout this presentation. Let's firstly think about the revenue side. And this is the first year actually where we are breaking the EUR 1.2 billion mark. And we're doing that, thanks to clearly the growth in U.S., but also very solid growth in commissioning of filling machines, which will give you, as you know, is a good indicator of coming sales. It's a very strong indicator of how our customers look at the offerings we have, the equipment we have, the services we have. Looking at the EBITDA level, we are delivering roughly EUR 9 million more on a full year basis. And as you can see, increasing margin levels to about 15.3%, well in line with our midterm targets and also throughout a level in Q4, which is driven by essentially growth in America, but also growth outside of America like India. Let's go to the strategy and a couple of words around this. And some of you will have seen it before, but it is important to highlight that what we have seen throughout the last few years, '25 not being any exception, is that we are following these strategy points pretty disciplined, in fact. Clearly, it's about the realizing global growth where Americas is the #1 priority for us, frankly, in terms of capital allocation and also in how they now deliver the growth. But it also includes MENA and India. We have the strengthening leadership, which is all about our core business in Europe, our developments around delivering sustainable packaging, delivering on regulations, up-and-coming regulations. And then lastly, the plastic to carton shift. which we have talked about a number of times, and I'm going to highlight examples of that now. What we haven't talked about very often throughout these quarters are the efforts that we are doing around the operational excellence. And we do that across the group. We do it in our manufacturing facilities, reducing waste, improving our waste figures, and increasing our OEE figures, getting more out of our assets, but we also have a number of other examples on that. And let me just go through 3. Firstly, and this we always take because this is also part of our midterm targets, and that relates to safety. And while all incidents, obviously, are too many, any incident is one too many, we are seeing a development in the right track. We are down now to 4, which is for us, historically, a low level, in fact. This is a TRI level of 4. And if you go a couple of years back, we would have been at a lot, lot higher level. It's thanks to a discipline in the organization and a very high level of commitment in the team driving the safety awareness and the safety culture in Elopak. The other one, which we are very happy about because this is a strong indicator of why -- how we're going to grow in the future as well is, we maintain our fixed cost base while increasing our revenue with about 6%. Clearly, this is a testament to the fact that this is a very scalable industry. We do see the possibilities of driving more business through our organization and then hence, increase our effectiveness and productivity. And finally, on a very important point relating to our working capital, we are now seeing efforts that are finally paying off, I can say, on inventories, reductions by 17%, and also an overdue collection, which is down quite significantly. So all of that is, I think, is a sign of health how we are driving and building the operational efficiency while driving growth and securing the profitability. Now on a completely different topic, but related to plastic to carton. Very often, we talk about non-food. We talk about areas outside of our core categories. But we also focus on the business that is very close to us, the dairy business, and not only in milk, in this case, also in cream. And interestingly, and this is not something you would necessarily see everywhere. But in Germany, as an example, you will have a significant amount of cream packed in plastic cups, essentially. You can look at the slide and you see the classical plastic cups, which are used for cream. Now together with one of our close customers in Germany, NordseeMilch, we've been working on a project on replacing some of these plastic cups by cartons. This actually results in somewhere around 65% to 80% -- 85% less plastic for the retailers. So clearly, very interesting from their point of view. But also and very importantly, it also results in higher efficiency in transportation, logistics costs go down and overall TCO, total cost of ownership, which is in favor moving it from plastics into carton. It's something that is only just beginning with the end of last year when we started it. It's something we believe strongly in. We will have -- will be -- can be rolled out to more customers. A lot of that is, of course, private label in Germany. But as you will see also on the quote, we think this is a really, really good example of even in smaller parts of the -- in core categories close to our heart, how we can work on the plastic to carton replacement. Right. And I think with this, Bent, I will hand over to you and join you in a second again. Bent K. Axelsen: Thank you, Thomas. Let's jump straight to it, starting with the EMEA segment. For EMEA, we reported revenues of around EUR 222 million. That is a growth of 8%. That growth is mainly driven by the increased sales of filling machines, which was at a really high level in the quarter. That being said, this is compared to a rather softer quarter last or the year before for filling machine. And there -- back then, we also had a higher share of rental. So that is also exaggerating the growth level to some extent. The carton business and the closure business is rather stable year-over-year. What we are seeing is that there is a decline in the juice segment. This is very much driven by the high citrus prices that is depressing demand. That is then compensated by growth in the UHT segment, where we have customer wins, and we also grow with selective customers. The closure business is basically following the carton demand. In MENA, the business case is stable. We have a resilient demand in an environment that is quite competitive these days. When it comes to home and personal care, this segment is developing slower than expected. It takes more time to develop a new category, but we still believe in the long-term potential of this segment and the global mega trend. If we look at Roll Fed, as we have reported before, we see a decline in Europe, but the rate of the decline is lower. So we are hoping for that the tide will turn to some extent, and we will look forward to how that will develop in the following quarters. In India, on the other hand, the Roll Fed growth continues to be strong. We report a revenue growth of around 6% in India. And that is despite a weak season for juice where adverse weather has dampened the juice demand, and we also continue to see overcapacity and very strong competition and price pressure in the overall India market. When it comes to profitability, we are reporting EUR 31 million, slightly below last year. The margin is 14% versus 15% and that margin reduction is due to the fact that we are growing at a high rate in India. And we are selling a lot of filling machines in the quarter, and both those 2 factors dilute the average margin for the segment. On the operating cost side, what we are happy to see is that improved efficiency rate reductions are offsetting inflation and the continued increased R&D activity level. If we move to Americas, we are reporting around EUR 100 million. That is 18% growth. And on a constant currency basis, that is 28%. This is, obviously, the impact of the successful ramp-up of the Little Rock plant, where we are steadily onboarding customers throughout the quarter. In addition to Little Rock, we have very strong performance in the Canadian assets and that enable growth in the fresh dairy segments. All in all, this is also supported by a continued trend where dairies are prioritizing supply security, and they want to have a dual sourcing strategy and here, Elopak comes in. In addition to the volume growth, we also have carton price adjustments in America following the higher raw material costs. The EBITDA is EUR 23 million. That's up from EUR 19 million the year before, and the margin is improving to 23%. This is driven by the volume growth, obviously. But in addition to that, we have attractive mix effect in the business. And we're also very happy to report that Little Rock as a plant is delivering margin -- accretive margins to the group, in line with what we have talked about when we talked about this investment for the first time. So very happy to see this development. Also in America, we are seeing a benefit from improved operational efficiency, and that also includes improvements in waste. So that is good to see that we can grow and have operational efficiency at the same time. On the other hand, when it comes to our joint ventures, the results or the share of the net profit from these joint ventures are -- have declined to EUR 1.9 million from EUR 2.7 million, and that is reflecting a softer demand and change in consumer pattern in Mexico and Central America. If you go to the bridge from EUR 41 million to EUR 46 million, we start off with the revenue mix. As I mentioned, this is obviously driven by the American expansion with a strong growth. And it's also a result of price increases initiated throughout the year in Europe. And these 2 in combination are the main factors for the effect of EUR 9 million. The raw material cost base is stable. And below that, we see higher board prices that are almost offset completely by reduced LDPE prices. As you see on the chart here, we are very pleased to see that the operating costs, if you adjust for inflation, they are actually down compared to last year. And that is a result of a systematic initiative in the company where we are reducing the use of external services, stricter travel policies and generally improved efficiency in the way we are spending our money. The last bridge element, we have already talked about the joint ventures, but we see we have a currency impact of EUR 1.9 million, and that is a result of the weakening of the U.S. dollar. If we then move to the quarterly cash flow, we are very happy to report that not only this is a quarter with strong profitability, but it's also a quarter with good working capital turnover. So we start with the left, we start with the EBITDA, and we see we have a reduction of working capital of around EUR 28 million. Thomas talked about improved inventory of packaging material, reduced overdues. The high rate of commissioning of filling machine have also reduced the inventory of the filling machines. This -- we do have inventory increases in U.S. naturally because that comes with the growth. So the structural part of it is around EUR 7 million, EUR 8 million. And in the quarter, we have an unusually high account payable of around EUR 20 million, and we believe that EUR 20 million increase will reverse in the first half. So of this reduction, there will be a reversal, which will be close to EUR 20 million sometimes in first half because these accounts payables they are going up and down with the business cycle and the settlement of our raw material contracts. In addition to that, we are paying the EUR 9 million of taxes. The other is basically a reversal of the share of net profit because that is not a cash flow item, giving the EUR 63 million cash flow from operation, which is the highest figure we have seen in the quarter so far. Cash flow from investing activities is EUR 23 million. We see the investment of EUR 28 million, and that is EUR 8.5 million related to the U.S. plant. We do have our normal maintenance programs in our plants. Filling machine CapEx is lower than normal because we are selling more of the machines versus renting them out, and that reduces the CapEx. The cash flow from financing activities is minus EUR 32 million. That reflects the dividend of EUR 22 million and lease payments and interest. And as you can see from the chart, we have a reduction of around EUR 8 million in net bank debt if you compare Q3 and Q4. We want to talk about the year as well. And also for the whole year, we are happy to report that we are generating enough cash flow, both to pay dividends. We are -- for the year of '25, we are paying 1.5 year of dividends because we changed from one dividend payments per year to semiannual payments per year. So we do that. We have the investment program in Little Rock. And despite that, the bank debt year-over-year is stable. So we are very pleased to see that. And with that combination, that also brings the leverage ratio to 2x, exactly on 2, which is our midterm target. And that is a result of the profitability, the improved working capital that we have generated throughout the quarter. And I think what is good to see is that the leverage ratio as such is coming down from Q3, but so is the absolute level of debt, which is going from EUR 272 million to EUR 264 million. If we move to the return on capital employed, it's still picking up, getting closer to 16%, now 15.7%. And then we see the effect of the growth and operational leverage from our American assets. We still have some investments to do. We have invested $96 million so far in Little Rock, and we have $32 million to go for the investment in the third line that we announced in the previous quarter. So a good year with good profitability and very strong cash flow. So with that, I will give it back to you, Thomas. Thomas Kormendi: Thank you. So where does this then lead us? And I think summing up of what we have just seen here, it's clear that we talk about solid growth. We talk about EBITDA growth of more than EUR 9 million, revenue growth of about EUR 50 million, leverage ratio already now down to 2x, which is in line with our midterm target. And then the dividend for the second half of last year, leading to a full year of around 59% of our normalized net profit. And all of that actually is in line with what we said back at the Capital Markets Day for our midterm targets. And what we are seeing now when we look forward and look to the full year, we expect to deliver -- continue to deliver in line with the targets that we have communicated back then in '24. So with this, I thank you very much for your attention, and we'll hand over to you, Christian. Christian Gjerde: Thank you, Thomas. So with that, we will start with Q&A. So taking questions from the audience first. So I'll come around with a mic. Please state your name and the company that you represent. Ole-Petter Sjovold: Ole-Petter Sjovold, SB1 Markets. So 3 questions, if I may. First, on the utilization on Line 1. What sort of utilization are you currently running? And is your customer ready to receive all the products? Question 2 is, did you add on any further offtake from Line 2 and 3 during the quarter? And question 3 is on the Roll Fed market in Europe. Could you touch on the price levels you're currently seeing being offered from your competitors? Is this at sustainable levels? Or is this another antidumping potential case? Thomas Kormendi: Three questions. Let me try on the utilization. So what we said during all of last year, actually -- well, not all, after the ramp-up started is that. We saw a ramp-up somewhat slower than what we had planned. But as you can see, we mitigated that by producing more in Canada. So overall, the figures for Americas turned out very, very good. What we have seen in Little Rock is that the issues we commented on before, which had to do with some of our customers, their designs, onboarding some of their plants took longer. And we saw at the end of last year, we were getting very close to the right ramp-up speed. We also saw, which was extremely positive, that the efficiency in manufacturing, when we measured in terms of waste, et cetera, we were really, really at a level that was actually slightly ahead of what we had thought. So it was a mix. So when it comes to the full year, we did not fully ramp it up to the level that we thought, but the speed at the end was -- is right, if you put it like that, very close to being right at least. The question on Line 2 and 3, right? So what is happening now is we are installing Line 2. What is also happening is that Line 3, as you know, will be installed by the end of this year and during '27. So in the meantime, we are currently working on some movements of products just to make sure that we get the best efficiency in Little Rock from that point of view. But it's frankly more technical how we move from one or the others and you have to do with sizing and things like that. Roll Fed, so the Roll Fed market is, as we've communicated and Bent said, it's very competitive. It's very competitive. Pretty much everywhere we look in Europe, you have excess capacity and you have more capacity coming in, maybe not directly in Europe, but in the Middle East, which can also support into Europe. What we have seen in Europe is a stabilization of our Roll Fed volume to a certain extent. It's -- we have seen and we have actually walked away from quite a lot of business because it was at an unattractive margin before. And now we see that we are at a more stable level. If you ask, is it sustainable with the pricing levels we're seeing, I think the answer is no. It's not. It's not sustainable to make the kind of investments that are being made and then produce at -- with margins that are being produced. It's not sustainable. It's also a business when you look back a couple of years, you have seen companies close, you've seen bankruptcies, et cetera. It is a business with overcapacity in Europe, and it's not sustainable to supply at the margins that are, in some cases, being supplied. We are not doing it. Marcus Gavelli: Marcus Gavelli, Pareto. So just first on the filling sales machines today. Could you try to elaborate somewhat on the geographical split on that, just first within EMEA and if you can -- as most granularity is preferred, but if you could provide any color on where do we see filling machine sales firming up? And also on the order book as well, how you see that now looking into 2026 versus when you look into 2025? Thomas Kormendi: So if we look at the filling machine, we look -- we think about filling machines in 2 perspectives. Bent talks about commissioning, right, which is, obviously, very important for us. This is when they start producing and we get them out of our working cap and inventories. When we look at the order intake, we are seeing good order intake in U.S. rather -- yes, in actual U.S. in this case, U.S. but also in Europe. And we're seeing it in South Europe and also we see in Northern Europe. There is no -- I cannot give you an answer saying one or the other area right now is a lot more -- a lot stronger. Last year, South Europe for us was, from an order intake point of view, very strong actually. Bent K. Axelsen: I think it's also if you want to see the split between America and EMEA, you can look into what I believe is Note 2 where you see this split between the segments. Marcus Gavelli: And just on the -- let's call it the aseptic rollout, you're trying to -- it's at least in your IPO and CMD, you used a lot of time on the aseptic rollout and how you want to develop that into Europe. How are you seeing that? You didn't use too much time on it in the report today. You say Roll Fed volumes are stabilizing. Are we seeing that same trend in the aseptic segment? Thomas Kormendi: Yes, I think if we look at the overall market on aseptic and for us, aseptic Pure-Pak currently is Europe only. And Bent pointed out as well, the juice sales, not specifically linked to our business, but in general, is under a lot of pressure due to high raw material costs, citrus prices, et cetera. You will go into any shop here and see it's become pretty costly with juice. We see that as well on our aseptic Pure-Pak business. On the other hand, we see higher than market growth in our UHT sales. So machines that are producing clearly UHT milk, but also other non-juice related products will tend to see good sales right now. Then you have, as always, exceptions also in juice. There are some customers who do better than others. But overall, juice consumption is strained. Bent K. Axelsen: And also to add to that, I mean, there's a completely different dynamic between the Roll Fed business where we have lost market share, not only because of the pricing pressures, but because of tethered cap regulation where customers move to other formats. So there is a shift in format change -- in format preferences. So it's not all price competition. But there, we lost some market share. In Pure-Pak aseptic, we don't lose market share. It's a system where we sell the whole package. So these 2 businesses are perceived very different by our customers, and it's also run by us in 2 very distinctly different ways. Christian Gjerde: Okay. No further questions from the audience. Okay. Then we will move to the questions that we have received online. So I will start with questions from Jeppe Baardseth, Arctic Securities first. What was the gross margin, excluding India and equipment sales? And how does this compare with historical levels? Additionally, could you clarify the gross margins for equipment sales and for India, respectively? Bent K. Axelsen: So this is -- I don't know what you say, Christian, but that is probably beyond the disclosure level, but maybe I could add some color. When you sell a filling machine in Europe and many of the machines and you will find that and you'll in the notes, they are commissioned in Europe. When you have a sales, you have very limited margin. That is a fact. So you really cannot compare filling machines with blanks. When it comes to the blanks and closure business, in Europe they are rather stable and the margin level of the blanks business also are rather stable, if not slightly improving. When it comes to India, India margins do indeed impact the margin in Europe. We have not disclosed those effects accurately. All I want to say around that is that we are taking measures to not only improve pricing in Roll Fed, but also work on the raw material side, both the way we work with our suppliers from a price point perspective, but also from a value engineering perspective. I think that's probably as far as we can go to stay consistent with our disclosure level, Christian. Christian Gjerde: Yes. Thank you, Bent. Continuing then with additional questions from Jeppe. What factors are driving the slower-than-expected growth in home and personal care volumes? Approximately what share of total sales does home and personal care segment represent today? Thomas Kormendi: So let me start by the factors, what is driving -- maybe the question is why are we seeing the speed of ramp-up that we are seeing? And there are a couple of reasons for it. Firstly, I think it's important to remember, we are trying to do something new, right? We are trying to change something that has been around for many, many, many years. That takes a while. And many of these companies that will be working in these categories are large FMCG, large multinationals who frankly take their time. They have the equipment installed, they have the production base installed. There has -- it doesn't mean necessarily that everything will deliver in line with our plans or even their own plans. But there are other things in it as well, right? There are things that when you look at the non-food area, we are seeing quite a diverse picture. We look at it from a Nordics perspective, it's moving very, very fast. We see more and more equipment. We see more capacity needed. We go further down in Europe. We have retailers who, in some case, actually, in the case of Lidl will have set up a system around plastic recycling. And then that is a strong motivation for them to maintain -- to drive that business in its own right. And then we have, of course, companies and areas where we say, is it the right size? Is it the right format? Is it -- is there something around the way it looks? We are actually, as we speak, launching generation 2 of our system, which offers a different way of displaying our cartons, displaying non-food products in a more, I think, you can say, creative -- and using some of the advantages that are given through the designs, et cetera, which we think will overcome some of the obstacles in this. But I think the reality is, big FMCG areas tend to be slow moving. And there's a lot of testing going on. There is more equipment going in now. We are very committed to making this a success. We strongly believe it will be, but we have to accept that it's taken a little bit longer time. Bent K. Axelsen: I think you've [ answered ] that. So the consumer priorities in 2026 compared to 5 years ago, they have changed. So there are other concerns and carbon footprint is probably not as high on the list from a consumer perspective. The companies and the brand owners, they still have their commitments, but that not necessarily the value proposition they are bringing to the consumers where the convenience will be the key criteria. Back -- on the question of how big it is today? I think you can say that today, the non-food volume is insignificant. But when we laid out the strategy, there was an expectation and an ambition to grow more than what we have done in 2025. So it's more to report that the trajectory so far since we laid out the strategy is not at the speed that we expected it to be, albeit from a minute starting point. Christian Gjerde: Thank you, Thomas. Thank you, Bent. So continuing with one last question from Jeppe, relates to the competitive landscape in the U.S. So are we seeing any indications of additional demand following customers' supply chain derisking to call it that? Thomas Kormendi: I think you can say yes, shortly without being too specific around it. I think there is an understanding and a recognition that we are putting capacity in. We are investing in Americas. That is not done by any of our competitors. And hence, there is a sense that from a contingency point of view, it's customers who we have typically not been -- have not been ours are now coming to us as well. It is frankly also part of the plan and why we established both Line 1, 2 and 3. So I think this is in line with what we had hoped and expected. Christian Gjerde: Thank you, Thomas. That's a good segue to the next question from Charlie Muir Sands from BNP. How much of Little Rock's capacity has now been sold or committed to customers across the 3 lines? Thomas Kormendi: I'm a little bit uncertain to us how explicit we are this in terms of disclosure. What we have said, you remember, is by the time we invest in Line 1, it was sold out. That was number one. Then we said we invest in Line 2 and we didn't sell out Line 2 because we wanted this to start up and get some experience. And then when we invested in Line 3, I think we said 80%, 90% was sold out. So that is the level we have had. Now what I then said is there will be some mixes here, right? Some volume will move, and we may see some movement into Line 2 earlier, et cetera. But overall, that is where we are right now. We are evidently continuing to sell volume and ensuring that the lines will be filled when we move on. But what we're also doing, and this is very important is, we are looking at Americas from a full supply chain perspective. And in Americas, we utilize all 4 factories. So Canada, Little Rock, Mexico and the Dominican. And what we are working on now, and going to work on is to make sure that we get the full optimization between the 4 factories rather than just talking about lines in Little Rock. Christian Gjerde: Thank you, Thomas. A couple of more questions from Charlie. What is the 2026 CapEx expectation? If leverage continues to decline, what is your priority for surplus capital, higher dividends, M&A, buybacks? Bent K. Axelsen: Right. So we announced Line 3 in the third quarter. We are building the second line Little Rock in the first half of this year. And we're also doing upgrades of some of the lines in Europe. So if you go back to the Capital Markets Day, we said that overall, the CapEx level will be around 5% to 7% of the top line. With that progression of the investment program, we will be on the higher end of that range, if not more, in 2026. So given the acceleration of the growth program, especially in America, we don't expect that there will be a lot of surplus -- extraordinary surplus cash. But you have seen from the dividend, we have given out now 59% that we are always looking to -- into the balance sheet. And as long as we are investment-grade [ land ] and delivering a leverage ratio of around 2x, and then we are willing to pay the dividends. But 2026 is going to be a relatively high investment level compared to 2025 for the reason I mentioned. Christian Gjerde: Thank you, Bent. Then we have a question -- last question from Charlie, and it relates to the raw material costs for '26. So could we comment anything on how we see liquid packaging board pricing developing for '26 and also our other important raw material inputs? Bent K. Axelsen: Should I take that? Thomas Kormendi: Yes, please. Bent K. Axelsen: Thank you, Thomas. So what we are seeing is that, generally speaking, for the year of 2026, the liquid packaging board raw materials are increasing average. There are pluses and minuses based on the different product categories. But overall, the liquid packaging boards are increasing. And remember that in Europe, we are negotiating multiyear contracts with the opportunity to adjust prices annually. So you will not see any volatility or any changes in the liquid packaging board prices throughout 2026 because those are contracted with very close to fixed price. When it comes to LDPE, we have reported over a few quarters, a softening of the LDPE. And I would like to remind that we are also hedging the position on LDPE and that hedging rate is typically 70%, 80% either through the commercial contracts or through the financial instruments. Christian Gjerde: Thank you, Bent. Then I have one question from Hakon Fuglu or actually 3 questions from Hakon Fuglu. It goes back to the raw material prices again. So how are we able to mitigate the increases that we are seeing on liquid packaging board as an example? And how are you seeing this impacting volumes in EMEA? Thomas Kormendi: Maybe I can start on this... Bent K. Axelsen: Absolutely. Thomas Kormendi: On this part because what we have done this year is we have increased our pricing, adjusted our pricing in line with what Bent just said, based on the fact that raw materials are going up. Now these price increases we've implemented early on from this year. They are implemented from January. And that's the one way, of course, we are offsetting it. The other one is evidently, given that we are also living in a competitive environment, we continue to improve on the efficiencies we talked about during this presentation, operational efficiencies, all the things we can do to offset these kind of increases. Volume-wise, what we see and believe is evident when you have these price movements, there will be ups and downs in the market. But as I said in the outlook, we believe that we are going to deliver in line with our midterm targets as communicated back in '24. Bent K. Axelsen: Absolutely. And maybe to add one more thing as a mitigating factor for Elopak, which is quite Elopak specific, is the very strong growth we have in America, and that is giving us operational leverage and diluting the fixed costs. So that is also a way to mitigate and manage EBITDA margins. Christian Gjerde: Thank you, Thomas. Thank you, Bent. A couple of more questions here before we round off. So continuing with a couple of more questions from Hakon. Can you comment on end consumer demand in the U.S.? Are you seeing volume growth on milk and other dairy products? Thomas Kormendi: That's actually a very good question because what you see in U.S. is somewhat of, call it, softening or drop on plant-based. And as you -- some of you, I'm sure you will have known that recent years, plant-based gained share on the back of milk, which in turn somewhat declined. Now for reasons related to health, related to nutritional value, et cetera, there is a little bit of headwind on the plant-based side. And some of the plant-based products are seeing that more than others. What we hear, but I have to say here, because there are no really solid facts around it, but we hear that, that is then giving the milk consumption a resurgence in U.S., more protein -- focus on protein, et cetera, et cetera. As you know, the milk production and the milk consumption, but not liquid milk, but milk in general, is increasing a lot in U.S. and that has to do with cheese, spreadables, exports into China, et cetera, has been the driver there. But the liquid milk part over some years has been declining. And there are indications that, that is now turning around. But it's -- I think it's early days to say that. Christian Gjerde: Thank you, Thomas. Then we will take one last question before we close off. That's from Alessandro Foletti from Octavian. Q4 growth was much stronger than full year growth. It seems that Q4 was -- saw an acceleration. Was this all due to stronger sale of filling machines? Or did you see somewhat of a market recovery? Bent K. Axelsen: This is very much filling machines. If you are focusing on EMEA, we do have a commissioning plan. And when you make a commissioning plan that has a tendency to be quite linear in reality. Most of these contracts, these machines get commissioned in the fourth quarter. And I think if you look at December, I don't think we have ever seen so many machines being commissioning in 1 month. This is not because suddenly the interest was much higher, but it was basically a needed catch-up to get back what we lost in commissioning speed in the beginning of the year. So that would be the EMEA part. And in America, of course, then is real underlying growth, and that is not related to the market, but that is basically the market share we are getting being that second supplier to secure security of supply for the customers. Christian Gjerde: Perfect. Thank you, Bent. So that concludes our Q&A session and results presentation for today. So I would like to thank everyone for joining both here in Oslo and you joining online. Thomas Kormendi: Thank you very much. Bent K. Axelsen: Thank you.
Operator: Good day, and welcome to the Q4 2025 Datadog Earnings 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. If your question has been answered and you would like to remove yourself from the queue, please press 11 again. As a reminder, this call may be recorded. I would now like to turn the call over to Yuka Broderick, Senior Vice President of Investor Relations. Please go ahead. Yuka Broderick: Thank you, Michelle. Good morning, and thank you for joining us to review Datadog's fourth quarter 2025 financial results, which we announced in our press release issued this morning. Joining me on the call today are Olivier Pomel, Datadog's Co-Founder and CEO, and David Obstler, Datadog's CFO. During this call, we will make forward-looking statements, including statements related to our future financial performance, our outlook for the first quarter and fiscal year 2026, and related notes and assumptions, our product capabilities, and our ability to capitalize on market opportunities. The words anticipate, believe, continue, estimate, expect, intend, will, and similar expressions are intended to identify forward-looking statements or similar indications of future expectations. These statements reflect our views today and are subject to a variety of risks and uncertainties that could cause actual results to differ materially. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our Form 10-Q for the quarter ended 09/30/2025. Additional information will be made available in our upcoming Form 10-K for the fiscal year ended 12/31/2025 and other filings with the SEC. This information is also available on the investor relations section of our website along with a replay of this call. We will discuss non-GAAP financial measures, which are reconciled to their most directly comparable GAAP financial measures in the tables in our earnings release, which is available at investors.datadoghq.com. With that, I would like to turn the call over to Olivier. Olivier Pomel: Thank you, Yuka, and thank you all for joining us this morning to go over what was a very strong Q4 and overall a really productive 2025. Let me begin with this quarter's business drivers. We continue to see broad-based positive trends in the demand environment. With the ongoing momentum of cloud migration, we experienced strength across our business, across our product lines, and across our diverse customer base. We saw a continued acceleration of our revenue growth. This acceleration was driven in large part by the inflection of our broad-based business outside of the AI-native group of customers we discussed in the past. And we also continue to see very high growth within these AI-native customer groups as they go into production and grow in users, tokens, and new products. Our go-to-market teams executed to a record $1.63 billion in bookings, up 37% year over year. This included some of the largest deals we have ever made. We signed 18 deals over $10 million in TCV this quarter, of which two were over $100 million, and one was an 8-figure land with a leading AI model company. Finally, churn has remained low, with gross revenue retention stable in the mid to high nineties, highlighting the mission-critical nature of our platform for our customers. Regarding our Q4 financial performance and key metrics, revenue was $953 million, an increase of 29% year over year, and above the high end of our guidance range. We ended Q4 with about 32,700 customers, up from about 30,000 a year ago. We also ended Q4 with about 4,310 customers with an ARR of $100,000 or more, up from about 3,610 a year ago. These customers generated about 90% of our ARR. And we generated free cash flow of $291 million with a free cash flow margin of 31%. Turning to product adoption, our platform strategy continues to resonate in the market. At the end of Q4, 84% of customers used two or more products, up from 83% a year ago. 55% of customers used four or more products, up from 50% a year ago. 33% of our customers use six or more products, up from 26% a year ago. 18% of our customers use eight or more products, up from 12% a year ago. As a sign of continued penetration of our platform, 9% of our customers use 10 or more products, up from 6% a year ago. During 2025, we continued to land and expand with larger customers. As of December 2025, 48% of the Fortune 500 are Datadog customers. We think many of the largest enterprises are still very early in their journey to the cloud. The median Datadog ARR for our Fortune 500 customers is still less than half a million dollars, which leaves a very large opportunity for us to grow with these customers. So we are landing more customers and giving more value, and we also see that with the ARR milestones we are reaching with our products. We continue to see strong growth dynamics with our core three pillars of observability: infrastructure monitoring, APM, and log management. As customers are adopting the cloud, AI, and modern technologies, today, infrastructure monitoring contributes over $1.6 billion in ARR. This includes innovations that deliver visibility and insights across our customers' environments, whether they are on-prem, virtualized servers, containerized hosts, serverless deployments, or parallelized GPU fleets. Meanwhile, log management is now over $1 billion in ARR. This includes continued rapid growth with FlexLogs, which is nearing $100 million in ARR. And our third pillar, the end-to-end suite of APM and DEM products, also crossed $1 billion in ARR. This includes an acceleration of our core APM product, into the mid-thirties percent year over year, currently our fastest-growing core pillar. We have now enabled our customers with the easiest onboarding and implementation in the market while delivering unified deep end-to-end visibility into the application. Now remember that even with these three pillars, we are still just getting started, as about half of our customers do not buy all three pillars from us, or at least not yet. Moving on to R&D and what we built in 2025, we released over 400 new features and capabilities this year. That's too much for us to cover today, but let's go over just some of our innovations. We are executing relentlessly on a very ambitious AI roadmap, and I will split our AI efforts into two buckets: AI for Datadog and Datadog for AI. So first, let's look at AI for Datadog. These are AI products and capabilities that make the Datadog platform better and more useful for customers. We launched the AI SRE agent for general availability in December to accelerate root cause analysis and incident response. Over 2,000 trial and paying customers have run investigations in the past month, which indicates significant interest and showed great outcomes with BCAI. Sorry. And we are well on our way with DeepAI DevAgent, which detects code-level issues, generates fixes with production context, and can even help release the monitor fix. And BigAI Security, which autonomously charges SIEM signals, conducts investigations, and delivers recommendations. The Datadog MCP server is being used by thousands of customers in preview. Our MCP server responds to AI agent and user prompts and uses real-time production data and rich data context to drive troubleshooting, root cause analysis, and automation. And we are seeing explosive growth in MCP usage. With the number of tool calls growing 11-fold in Q4 compared to Q3. Second, let's talk about Datadog for AI. This includes capabilities that deliver end-to-end observability and security across the AI stack. We are seeing an acceleration in growth. Over 1,000 customers are using the product, and the number of spans sent has increased 10 times over the last six months. In 2025, we broadened this product to better support application development and integration, adding capabilities such as experiments, LLM playground, LLM analysis, and custom as a judge. And we will soon release our AI Agents console to monitor usage and adoption of AI agents and coding assistance. We are working with design partners on GPU monitoring, and we are seeing GPU usage increase in our customer base overall. And we are building into our products the ability to secure the AI stack against prompt injection attacks, model hijacking, and data poisoning, among many other risks. Overall, we continue to see increased interest among our customers in Next Gen AI. Today, about 5,500 customers use one or more Datadog AI integrations to send us data about their machine learning, AI, and LLM usage. In 2025, our observability platform delivered deeper and broader capabilities for our customers. We reached a major milestone of more than 1,000 integrations, making it easy for our customers to bring in every type of data they need and engage with the latest technologies, from cloud to AI. In node management, we are seeing success with our consolidation motion. During 2025, we saw an increasing demand to replace a large legacy vendor with stakeout in nearly 100 deals for tens of millions of dollars of new revenue. And we improved log management with notebooks, reference tables, log patterns, calculated fields, and an improved lifestyle among many other innovations. We launched data observability for general availability. Data is becoming even more critical in the AI era. With data availability, we are enabling end-to-end visibility across the entire data life cycle. We launched storage management last month, providing granular insights into cloud storage and recommendations to reduce spend. We delivered Kubernetes auto-scaling so users can quickly identify which over-provisioned clusters and deployments and right-size their infrastructure. In the digital experience monitoring area, we launched product analytics to help product designers make better design decisions with clear data about user experience and behavior. And we delivered run without limits, giving front-end teams full visibility into user traffic and performance, and dynamically choosing the most useful sessions to retain. In security, we are seeing increasing traction in our activity displacing existing market-leading solutions with cloud SIEM in long to private. This year, our engineers shipped many new capabilities, including a tripling of the amount of content packs into the product. And most importantly, the tight integration with Bit.ai security agent, which has already shown promise as a strong differentiator in the market. We launched code security, enabling customers to detect and remediate vulnerabilities in their code and open-source libraries, from development to production. And then we continue to advance our cloud security offering, adding infrastructure as code or IAC security, which detects and resolves security issues with Terraform. And we launched our security graph to identify and evaluate attack paths. In software delivery, in January, we launched feature flags. They combine with our real-time observability to enable Canary rollouts so teams can deploy new code with confidence. And we expect them to gain importance in the future, as they serve as a foundation for automating the validation and release of applications in an AI agentic development world. We are also building out our internal developer portal, which includes software catalog and scorecards, to help developers navigate infrastructure and application complexity, provide rich context to AI development agents, and ultimately enable a faster release cadence. Cloud service management, we launched on-call, and now support over 3,000 customers with their incident response processes. And I already mentioned this AI's already agent, which pairs with on-call to accelerate our customer incident resolution. As you can tell, we have been very busy, and I want to thank our engineers for a very productive 2025. And most importantly, I am even more excited about our plan for 2026. So let's move on to sales and marketing. I want to highlight some of the great deals we closed this quarter. First, we landed an 8-figure annual deal, and our biggest new logo deal to date with one of the largest AI financial model companies. The customer had a fragmented observability stack and cumbersome monitoring workflows leading to poor productivity. This is a consolidation of more than five open-source, commercial, hyperscaler, and in-house observability tools into the unified Datadog platform. That has returned meaningful time to developers and has enabled a more cohesive approach to observability. This customer is experiencing very rapid growth, and Datadog allows them to focus on product development, supporting their users, which is critical to their business success. Next, we welcome back a customer with a European data company in a nearly 7-figure annualized deal. This customer's log-focused observability solution had poor user experience and integrations, which led to limited user adoption and gaps in coverage. By returning to Datadog and consolidating seven observability tools, they expect to reduce tooling overhead, improve engineering productivity with faster incident resolution. They would adopt nine Datadog products as a stock, including some of our newer products, such as FlexLog, observability pipeline, self-cost management, data observability, and on-call. Next, we signed an 8-figure annualized expansion with a leading e-commerce and digital payments platform. These customers' products have an enormous reach in commercial APM solutions, had scaling issues, lacked correlation across silos, and had a pricing model that was difficult to understand or predict. With this extension, they are standardizing on Datadog APM using OpenTelemetry, so their teams can correlate metrics, tracing, and logs to detect and resolve issues faster. And they have already seen meaningful impact, with a 40% reduction in resolution times by their own estimates. This customer has adopted 17 products across the Datadog platform. Next, we signed a seven-figure annualized expansion for an eight-figure annualized deal with a Fortune 500 food and beverage retailer. This long-time customer uses the Datadog platform across many products but still has over 30 other observability tools and embarked on consolidating for cost savings and better outcomes. With this expansion, Datadog log management and flex logs would replace the legacy logging product for all ops use cases, with expected annual savings in the millions of dollars. This customer is expanding to 17 Datadog products. Next, we signed a 7-figure annualized expansion with a leading healthcare technology company. This company was facing reliability issues impacting clinicians during critical workflows and putting customer trust at risk. The customer will consolidate six tools and adopt seven Datadog products, including LLM observability, to support their AI initiative, as well as Big AI SRE agents to further accelerate incident response. Next, we signed an 8-figure annualized expansion, more than quadrupling the annualized commitment, with a major Latin American financial services company. Given its successful tool consolidation projects and rapid adoption of Datadog products across all of its teams, the customer renewed only with us when expanding to additional products, including data observability, CI visibility, database monitoring, and observability pipelines. With Datadog, this customer showed measurable improvements in cost efficiency, customer experience, and conversion rates across multiple lines of business. That proof of value led them to broaden their commitment with us and have firmly established Datadog as their mission-critical observability partner. Last and not least, we signed a 7-figure annualized expansion for an 8-figure annualized deal with a leading fintech company. With this expansion, the customer is moving their log data onto our unified platform, so teams can correlate telemetry in one place and save between hours and weeks in time to resolution for incidents. This customer has obtained 19 Datadog products across the platform, including all three pillars, as well as visual experience, security, software delivery, and service management. And that's it for our wins. Congratulations to our entire go-to-market team for a great 2025 and a record Q4. It was inspiring to see the whole team at our last month, and really exciting to embark on a very ambitious 2026. Before I turn it over to David for the financial review, I want to say a few words on our longer-term outlook. There is no change to our overall view that digital transformation and cloud migration are long-term secular growth drivers for our business. So we continue to extend our platform to solve our customers' problems from end to end across our software development, production, data stack, user experience, and security needs. Meanwhile, we are moving fast in AI by integrating AI into the Datadog platform to improve customer value and outcome, and by building products to observe, secure, and act across our customers' AI stacks. In 2025, we executed very well and delivered for our customers against their most complex mission-critical problems. Our strong financial performance is an output of that effort. And we are even more excited about 2026 as we are starting to see an inflection in AI usage by our customers into the application, and as our customers begin to adopt AI innovation, such as Big AI SRE agent. To hear about all that in detail and much more, I welcome you all to join us at our next Investor Day this Thursday in New York between 1 and 5 PM. I'll be joined by our product and go-to-market leaders, sharing how we are serving our customers, how we innovate to broaden our platform, and how we are delivering better value with AI. For more details, refer to the press release announcing the event or head to investors.datadoghq.com. And with that, I will turn it over to our CFO, David. David Obstler: Thanks, Olivier. Our Q4 revenue was $953 million, up 29% year over year, and up 8% quarter over quarter. Now to dive into some of the drivers of our Q4 revenue growth. First, overall, we saw robust sequential usage growth from existing customers in Q4. Revenue growth accelerated with our broad base of customers, excluding the AI natives, to 23% year over year, up from 20% in Q3. We saw strong growth across our customer base with broad-based strength across customer size, spending bands, and industries. And we have seen this trend of accelerated revenue growth continue in January. Meanwhile, we are seeing continued strong adoption amongst AI-native customers with growth that significantly outpaces the rest. We see more AI-native customers using Datadog, with about 650 customers in this group. And we are seeing these customers grow with us, including 19 customers spending $1 million or more annually with Datadog. Among our AI customers are the largest companies in this space. As of today, 14 of the top 20 AI-native companies are Datadog customers. Next, we also saw continued strength from new customer contributions. Our new logo bookings were very strong again this quarter, and our go-to-market teams converted a record number of new logos. And average new logo land sizes continue to grow strongly. Regarding retention metrics, our trailing twelve-month net retention revenue retention percentage was about 120%, similar to last quarter. And our trailing twelve-month gross revenue retention percentage remains in the mid to high nineties. And now moving on to our financial results. First, billings were $1.21 billion, up 34% year over year. Remaining performance obligations or RPO was $3.46 billion, up 52% year over year. And current RPO growth was about 40% year over year. RPO duration increased year over year as the mix of multiyear deals increased in Q4. We continue to believe revenue is a better indication of our business trends than billing and RPO. Now let's review some of the key income statement results. Unless otherwise noted, all metrics are non-GAAP. We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release. First, our Q4 gross profit was $776 million with a gross margin percentage of 81.4%. This compares to a gross margin of 81.2% last quarter and 81.7% in the year-ago quarter. Q4 OpEx grew 29% year over year, versus 32% last quarter and 30% in the year-ago quarter. And we continue to grow our investments to pursue our long-term growth opportunities, and this OpEx growth is an indication of our successful execution on our hiring plans. Our Q4 operating income was $230 million or a 24% operating margin compared to 23% last quarter and 24% in the year-ago quarter. Now turning to the balance sheet and cash flow statements. We ended the quarter with $4.47 billion in cash, cash equivalents, and marketable securities. Cash flow from operations was $327 million in the quarter. After taking into consideration capital expenditures and capitalized software, free cash flow was $291 million for a free cash flow margin of 31%. And now for our outlook for the first quarter and the full fiscal year 2026. Our guidance philosophy overall remains unchanged. As a reminder, we base our guidance on trends observed in recent months and apply conservatism on these growth trends. For the first quarter, we expect revenues to be in the range of $951 to $961 million, which represents a 25% to 26% year-over-year growth. Non-GAAP operating income is expected to be in the range of $195 to $205 million, which implies an operating margin of 21%. Non-GAAP net income per share is expected to be in the $0.49 to $0.51 per share range, based on approximately 367 million weighted average diluted shares outstanding. And for the full fiscal year 2026, we expect revenues to be in the range of $4.06 to $4.1 billion, which represents 18% to 20% year-over-year growth. This includes modeling within our guidance that our business, excluding our largest customer, grows at least 20% during the year. Non-GAAP operating income is expected to be in the range of $840 million to $880 million, which implies an operating margin of 21%. And non-GAAP net income per share is expected to be in the range of $2.08 to $2.16 per share, based on approximately 372 million weighted average diluted shares. Finally, some additional notes on our guidance. First, we expect net interest and other income for the fiscal year 2026 to be approximately $140 million. Next, we expect cash taxes in 2026 to be about $30 million to $40 million, and we continue to apply a 21% non-GAAP tax rate for 2026 and beyond. Finally, we expect capital expenditures and capitalized software together to be in the 4% to 5% of revenue range in fiscal year 2026. To summarize, we are pleased with our strong execution in 2025. Thank you to the Datadog teams worldwide for a great 2025. And I am very excited about our plans for 2026. And finally, we look forward to seeing many of you on Thursday for our Investor Day. And now with that, we will open up our call for questions. Operator, let's begin the Q&A. Operator: Thank you. Our first question comes from Sanjit Singh with Morgan Stanley. Your line is open. Sanjit Singh: Thank you for taking the questions and congrats on a strong close to the year and a successful 2025. Olivier, I wanted to get your updated views in terms of where observability is headed in the context of a lot of advancements when it comes to agentic frameworks, agentic deployments, the stuff that we have seen from Anthropic and new frontier models from OpenAI. Just in terms of, like, what this means for observability as a category, the visibility of it, in terms of, can customers use these tools to build, you know, homegrown solutions for observability. Just get your latest comments on the defensibility of the category and how Datadog may potentially have to evolve in this new sort of agentic era. Olivier Pomel: Yeah. I mean, look. There are a few different ways to look at it. You know? One is there's going to be many more applications than there were before. Like, people are building much more, and they're building much faster. You know, we have covered that in previous calls, but, you know, we think that this is nothing but an acceleration of the increase of productivity for developers in general, so you can build a lot faster. As a result, you create a lot more complexity because you build more than you can understand at any point in time. And you move a lot of the value from the act of writing the code, which now you actually do not own anymore, to validating, testing, making sure it works in production, making sure it's safe, making sure it interacts well with the rest of the world, with the end users, making sure it does what it's supposed to do for the business, you know, which is what we do with observability. So we see a lot more volume there, and we see that as, you know, what we do basically where observability can help. The other part that's interesting is that a lot more happens within these agents and these applications. And a lot of what we do as humans now starts to look like observability. You know? Basically, we're here to understand, we try to understand what the machine does. We try to make sure it's aligned with us. We try to make sure, you know, the output is what we expected when we started. And that, you know, we did not break anything. And so we think it's going to bring observability more widely in domains that it did not necessarily cover before. So we think that these are accelerants, and we, I mean, obviously, we have a horse in this race, but, you know, we think that observability and the contact between the code, the applications, and the real world, and the environment, and the real user, and the real business, is the most interesting, the most important part of the whole AI development life cycle today. Sanjit Singh: And maybe just one follow-up on that line of thinking. In a world where there's a greater mix between human SREs and agentic SREs, is there any sort of evolution that we need to think about in terms of whether it's UI or how workflows work in observability and how, maybe Datadog sort of tries to align with that evolution that's likely to come in the next couple of years? Olivier Pomel: Yeah. Because there's going to be an evolution, that's certain. There's going to be a lot more automation, we see today. Like, we see all the signs we see point to everything moving faster. I mean, more data, but more interactions, more systems, more releases, more breakages, more resolutions of those breakages, more bugs, more vulnerabilities. Everything. Yeah. So we see an acceleration there. At the end of the day, the humans will still have some form of UI to interact with all that. And a lot of the interaction will be automated by agents. So we're building the product to satisfy both conditions. So we have a lot of UIs, and we are able to present the human with UIs that represent how the world works, what the options are, give them some of your ways to go through problems and to model the world. And we also are exposing a lot of our functionality to agents directly. You know, we mentioned on the call we have an MCP server that is currently in preview and that is really seeing explosive growth of usage from our customers. And so it's a very likely future that part of our functionality is delivered to agents through MCP servers or the like. Part of our functionality is directly implemented by our own agents. And part of our functionality is delivered to humans with UIs. Sanjit Singh: Understood. Thank you, Olivier. Operator: Our next question comes from Raimo Lenschow with Barclays. Your line is open. Raimo Lenschow: Congrats from me as well. Staying on a little bit on that AI theme. Olivier, the 8-figure deal for a model company is really exciting. I assume they tried to do it with some open-source tooling, etcetera. But and actually went from, like, you know, almost paying not a lot of money to paying you more money. What drove that thinking? What do you think they saw that kind of convinced them to do that? And it's now the second one, you know, after the other very big model provider. So clearly, that whole debate in the market between oh, you can do that on the cheap somewhere, is not kind of valid. Could you speak to that, please? Thank you. Olivier Pomel: I mean, the situation is just very similar to where every single customer will land. Every customer we land has had some homegrown. They have some open source. They might still run some open source. Like, that's typically what we see everywhere. The idea that it's cheaper to do it yourself is usually not the case. You know? So your engineers are typically very well compensated in the big part of the spend in these companies. Their velocity is what gates just about anything else in the business. And so, you know, usually, when we come in, when customers start engaging with us, we can very quickly show value that way. So it's not any different from what we see with any other customer. And, also, within the AI cohort, it's not, you know, original at all. Like, you know, the AI cohorts in general are a who's who of the companies that are throwing guys and that are shaping the world in AI. And they're all adopting our product for the same reasons. Sometimes with different volumes because those companies have different scales, but the logic is the same. Raimo Lenschow: Perfect. Thank you. Operator: Thank you. Our next question comes from Gabriela Borges with Goldman Sachs. Gabriela Borges: Hi, good morning. Congratulations on the quarter and thank you for taking my question. Olivier, I wanted to follow up on Sanjit's question on how to think about where the line is between what an LLM can do longer term and the domain experience that you have in observability. If I think about some of Anthropic's recent announcements, they're talking about LLMs as a broader anomaly detection type tool, for example, on the security vulnerability management side, how do you think about the limiting factor to using LLM as an anomaly detection tool that could potentially take share over from the severity of the time and the category? And how do you think about the moat that Datadog has that offers customers a better solution relative to where the roadmap and LLMs can go long term? Thank you. Olivier Pomel: Yeah. So that's a very good question. You know, we definitely see that LLMs are getting better and better, and we will bet on them getting significantly better, you know, every few months as we've seen over the past couple of years. And as a result, they are very, very good at looking at broad sets of data, you know, for analysis. So if you see a lot of data, ask for an analysis, you're very likely to get something that is very good, and that is going to get, you know, even better. So when you think of, you know, what we have that is here, there's two parts. One is how we are able to assemble that context so we can feed it into those intelligence engines. You know? And that's how we aggregate all the data we get, you know, we parse out the dependencies, we understand where we can fit together, and we can fit that into the LLM. That's in part what we do. For example, today, we expose the kinds of functionality behind our MCP server. And so customers can recombine that in different ways using different intelligence tools. But the other part that's we think where the world is going is going for observability is that, you know, right now, we are, you know, GSDLP is accelerating a lot but it's still somewhat slow. And so it's okay to have incidents and run post hoc analysis on those incidents and maybe use some outside tooling for that. Where the world is going is you're going to have many more changes, many more things. You cannot actually afford to have incidents to look at for, you know, everything that's happening in your system. So you'll need to be proactive. You'll need to run analysis in stream as all the data flows through. You'll need to run detection and resolution before you have outages materialize. And for that, you'll need to be embedded into the data plane, which is what we run. And we also need to be able to run specialized models that can act on that data, you know, as opposed to just taking everything and summarizing everything after the fact in fifteen minutes later. And that's, you know, what we're uniquely positioned to do. We're building that. We know we're not quite there yet, but we think that, you know, a few years from now, that's where the world's going to run, and that's what makes us significantly different in terms of how we can apply under detection intelligence and preemptive resolution into our systems. Gabriela Borges: That makes a lot of sense. Thank you. My follow-up, by the way, the data planes we're talking about are very real-time. And there are many orders of magnitude larger in terms of data flows, data volumes than what you typically feed into an LLM. So it's a bit of a different problem to solve. Gabriela Borges: Yeah. Super interesting. Thank you. My follow-up for you, Olivier and David, you've mentioned a couple of times now some of the conversations you have with customers about value creation within the Datadog platform. Tell us a little bit about how some of those conversations evolve when the customer sees that in order to do observability for more AI usage, perhaps that Datadog bill is going up. What are some of the steps that you can take to make sure that the customer still feels like they're getting a ton of value out of the Datadog platform? Thank you. Olivier Pomel: Well, there's a few things. I mean, first, you know, again, the rule of software always applies. You know, there's only two reasons that people buy your product. It's to make more money or to save money. So whatever you do, when customers use a new product, they need to see a cost saving somewhere, or they need to see that they are going to get customers they wouldn't get to otherwise. So we have to prove that. We always prove that anytime a customer buys a product, you know, that's what is happening behind the scenes. In general, when customers add to our platform as opposed to bringing another vendor in or another product team, they also spend less by doing it in our platform. Gabriela Borges: I appreciate the color. Thank you very much. Operator: Our next question comes from Ittai Kidron with Oppenheimer and Company. Your line is open. Ittai Kidron: Thanks and congrats on quite an impressive finish for the year. David, I wanted to dig in a little bit into your '26 guide. Just want to make sure I understand some of your assumptions. So maybe you could talk about the level of conservatism that you've built into the guide for the year and also you've talked about at least 20% growth for the core, excluding the largest customer. But what is it that we should assume for the large customer? And now when you look at the AI cohort excluding this large customer, are there any concentrations evolving over there given your strong success there? David Obstler: Yeah. There are questions in there. The first is overall on guidance, except what we're going to speak about next. We took the same approach as we looked at the organic growth rates and the attach rates and the new logo accumulation rates and discounted that. So for the overall business, which is quite diversified, we talked about diversification by industry, by geography, by SMB, mid-market, and enterprise. We took the same approach. We noted that with the guidance being 18% to 20%, and the non-AI or heavily diversified business being 20% plus, that would imply that the growth rate of that core business assumed in the guidance is higher than the growth rate of the large customer. That doesn't mean the large customer is growing any which way. It's just that in our consumption model, we essentially don't control that. And so we took a very conservative assumption there. And the last point I think you mentioned is the highly diversified. We said 650 names in the AI. It's quite diversified. You know? Essentially, it would be very similar to our overall business, which we have a range of customers, but not the concentration level. And what we're seeing there is significant growth. But like our overall distributed customer base, you know, a growth and then, you know, potentially some working on how the product's being used. But nothing, you know, out of the ordinary relative to the overall customer base. In the very diversified AI set of customers outside the largest customer. Ittai Kidron: Okay. That's great. Yeah. And can you give us the percent of revenue of the AI cohort this quarter? David Obstler: We definitely haven't put it in there. Ittai Kidron: Thank you. Operator: Our next question comes from Todd Coupland with CIBC. Todd Coupland: Thank you and good morning. I wanted to ask you about competition. And how the LLM rise is impacting share shifts. Just talk about that and how Datadog will be impacted. Thanks a lot. Olivier Pomel: Yeah. I mean, there hasn't been, you know, in the market with customers, there hasn't been any particular change in competition, you know, in that we see the same kind of folks, and the positions are relatively similar. And we are pulling away. We're taking share from anybody who has scale. And I know there's been noise. There were a couple of M&A deals that came up, and we got some questions about that. The companies in there were not particularly winning companies, not companies that we saw in deals. That can be they had a large market impact. And so we don't see that as changing the competitive dynamics for us in the near future. We also know that competing in observability is a very, very full-time job. It's a very innovative market. And we know exactly what it is we have to do and have to do to keep pulling away the way we are. And so we're very confident in our approach and what we're going to do in the future there. With the rise of LLM, there's clearly more functionality to build, and there's new ways to serve customers. You know, we have mentioned our product. There are a few other products on the market for that. I think it's still very early for that part of the market, and that market is still relatively undifferentiated in terms of the kinds of products they are. But we expect that to shake out more into the future. We think in the end, there's no reason to have observability for your LLM that is different from the rest of your system. In great part because your LLMs don't work in isolation. The way they implement their sparks is by using tools, the tools on your applications and your existing applications. Or new applications you build for that purpose. And so you need everything to be integrated in production, and we think we stand on a very strong footing there. Todd Coupland: Thank you. Operator: Thank you. Our next question comes from Mark Murphy with JPMorgan. Your line is open. Mark Murphy: Thank you. Olivier, Amazon is targeting $200 billion in CapEx this year. If you include Microsoft and Google, that CapEx is going to exceed $500 billion this year for the big three hyperscalers. It's growing 40% to 60%. I'm wondering if you've collected enough signal from the last couple of years of CapEx that trend to estimate how much of that is training-related and when it might convert to inference where Datadog might be required. In other words, you know, are you looking at this wave of CapEx and able to say it's going to create a predictable ramp in your LLM observability revenue, maybe what inning of that are we in? And then I have a follow-up. Olivier Pomel: I think it's more I think it's probably too reductive to peg that on LLM's availability. I think it points to way more applications, way more intelligence, way more of everything into the future. Now it's kind of hard to directly map the CapEx on those companies into what part of the infrastructure is actually going to be used to deliver value, you know, two or three or four years from now. So I think we'll have to see on what the conversion rate is on that. But, look, it definitely points to very, very, very large increases in the complexity of the systems, the number of systems, and the reach of the systems in the economy. And so we think it's going to be like, it's going to be of great help to our business. Let's put it this way. Mark Murphy: Yeah. Great help. Okay. And then as a quick follow-up, there is an expectation developing that OpenAI is going to have a very strong competitor, which is Anthropic. Kind of closing the gap, producing nearly as much revenue as OpenAI in the next one to two years. You mentioned that 8-figure land with an AI model company. I'm wondering if we step back, do you see an opportunity to diversify that AI customer concentration, whether, you know, sometimes it might be a direct customer relationship there. Or, you know, it could be some of the products like Claude Code, being adopted globally, just kind of creating more surface area to drive business to Datadog. Can you comment on maybe what is happening there among the larger AI providers or whether you can diversify that out? Olivier Pomel: Yeah. I mean, look. We've never been a like, we're not built as a business to be concentrating on a couple of customers. That's not how we become successful. That's probably not how we'll be successful in the long term. So, yes, I mean, we at the end of the day, it should be irrational for customers for all customers in the AI cohort not to use our product. So we see have some great successes with the customers currently in that cohort. We see more. By the way, we have more that are, more inbound there and more customers that are talking to us. From the largest, you know, even hyperscaler level AI lab. And we expect to drive more business there in the future. I think there's no question about that. And you're seeing that in some of the metrics we've been giving in terms of the number of AI-native customers. The size of some of these customers. So, you know, to echo what Olivier said, we are essentially selling to many of the largest players, which results in greater size of the cohort and more diversification. Mark Murphy: Thank you. Operator: Thank you. Our next question comes from Matt Hedberg with RBC. Your line is open. Matt Hedberg: Congrats from me as well. David, question for you. Your prior investments clearly paying off with another quarter of acceleration. And it seems like you're going to continue to invest in front of the future opportunity. I think margins are down maybe 100 basis points on your initial guide. I'm curious if you can comment on gross margin expectations this year and how you also might realize incremental OpEx synergies by using even more AI internally. David Obstler: Yeah. On the gross margin, I think what we said is, you know, plus or minus the 80% mark. We, you know, we try to engineer when we see opportunities for efficiency, we've been quite good at being able to harvest them. At the same time, we want to make sure we're investing in the platform. So I think, you know, what we're essentially where we are today is very much sort of in line with what we said we're targeting. There may be opportunity longer term, but we also are trying to balance those opportunities with investment in the platform. And in terms of AI, to date, we are using it in our internal operations. So far, it's well, the first signs of what we're seeing is productivity and adoption. We will continue to update everybody as we see opportunities in terms of the cost structure. Olivier, anything else you want to go over? Olivier Pomel: Yeah. I mean, look. The expectation in the short to midterm anyway should be that we keep investing heavily in R&D. You know, we're getting a lot we see great productivity gains, you know, with AI there. But at this point of detail, it helps us build more faster, get to solve more problems for our customers. And but we're very busy adopting AI for the organization. Matt Hedberg: Got it. Thanks, guys. Operator: Our next question comes from Koji Ikeda with Bank of America. Koji Ikeda: Yeah. Hey, guys. Thanks so much for taking the question. Olivier, maybe a question for you. A year ago, you talked about how some while some customers do want to take observability in-house, it's really a cultural choice. It may not be rational unless you have tremendous scale, access to talent, growth is not limited by innovation bandwidth. Which most companies do not. And so it is a year later, and it does seem like the industry and the ecosystem and everything has changed quite a bit. So I was hoping to get your updated views on these thoughts if it has changed at all over the past year and why. Thank you. Olivier Pomel: No. I mean, look. It's something that happens sometimes, but it's a small part of the cases. Like, the general motion is customers start with some homegrown or attempts to do things themselves. Then they move to a product, then they'll care with our product. Sometimes they optimize a little bit along the way. But the general motion is they do more and more with us. They rely on us for more of their problems. And they outsource the problem. And increasingly the outcomes to us. So I don't think that's changing. Look. We'll still see customers here and there that choose to resource it and do it themselves. Again, usually for cultural reasons. I would say economically, or from a focus perspective, it doesn't make sense for the very vast majority of companies. And, you know, we even see teams at, you know, hyperscalers that have all the tooling in the world, all the money in the world, and that still choose to use our products. Because it gives them a more direct path to solving their problems. Koji Ikeda: Thank you. Operator: Thank you. And our next question comes from Peter Weed with Bernstein Research. Your line is open. Peter, if your telephone is muted, please unmute. Our next question comes from Brad Reback with Stifel. Your line is open. Brad Reback: Great. Thanks very much. Olivier, the sustained acceleration in the core business is pretty impressive. Obviously, you all have invested very aggressively in go-to-market over the last kind of eighteen to twenty-four months. Can you give us a sense of where you are in that productivity curve? And if there's additional meaningful gains you think? Or is it incremental? And maybe where you see additional investments in the next twelve to eighteen months? Thanks. Olivier Pomel: Yeah. I mean, we feel good about the productivity. I think the main drivers for us in the future are we still need to scale, and we're still scaling the go-to-market team. We're not at the scale we need to be in every single marketing segment we need to be in in the world right now. And so we keep scaling there. Their focus now is not necessarily to improve productivity. It's to scale while maintaining productivity. And, of course, there's too many, many things we can do. Actually, we love our performance, there's always a bunch of things that could be better, your territory that could be better, productivity that could be better, things like that. So we have tons of work, tons of things we want to do, tons of things on the fix, some things we want to improve. Overall, we feel good about what happened. We feel good about scaling, and you should expect more scaling from us on the go-to-market side in the year to come. Brad Reback: Great. Thank you. Operator: Thank you. Our next question comes from Howard Ma with Guggenheim. Howard Ma: Great. Thanks for taking the question. I have one for Olivier. The core APM product growing in the 30% growth, that is pretty impressive and I think better than maybe a lot of us expected. Is the question is, is that a reacceleration, and is the growth driven by AI-native companies that are using Datadog's real user monitoring and other DEM features as compared to or as opposed to rather core enterprise customers that are building more applications? Olivier Pomel: Yeah. I think, I mean, look. APM in general, I think, has always been a bit of a steady Eddie in terms of the growth. Like, it's a product that takes a little bit longer to deploy another, which is further into the applications. And so it's, you know, it takes a bit longer to penetrate within the customer environment. That being said, we did a lot of different things we did that help with the growth there. One is we invested a lot in actually making that onboarding deployment a lot simpler and faster. You know? So we think we have the best in the market for that. And it shows. Second, we invested a lot in the digital experience side of it. And it's very differentiated. It's something our customers love, and it's driving a lot of adoption of the broader APM suite. And we'll expect to see more of that in the future. And third, you know, we make investments and go to market to cover the market better. And so we're getting into more looks at more deals in more parts of the world. And so all of that combined, you know, helps that product reaccelerate growth, you know, quite a bit. And so we feel actually very, very good about it, which is why we, you know, we keep investing. Overall, we still only have a small part of the pure APM market. Like, that product is scaled at about $10 billion, including DEM. The market is larger. And so we think there's a lot more we can do. David Obstler: Yeah. I want to add, you know, we talked about because I just mentioned that we're not penetrated across our customer base. And, therefore, we're continuing to consolidate onto our platform. So we have quite a number of wins where we already have other products. We already have Infrared logs, and we're consolidating APM. Howard Ma: Thank you, guys. David, as a follow-up for you, on margin, are the large AI-native customers significantly diluted to gross margin? And when you think about the initial 2026 margin guide, how much of that reflects potentially lower gross margin type of those customers versus incremental investments? David Obstler: On a weighted average, they're not. We, as we always said, for larger customers, it isn't about the AI natives or non-AI natives. It has to do with the size of the customer. We have a highly differentiated diversified customer base. So I would say, you know, we're essentially expecting a similar type of discount structure in terms of size of customer as we have going forward. And, you know, there are consistent ongoing investments in our gross margin, including data centers, and development of platforms. So I think it's more or less what we've seen over the past couple of years not really affected by AI or not AI in AI native. Howard Ma: Okay. Thank you. Great quarter. Operator: Thank you. Our next question comes from Peter Weed with Bernstein Research. Your line is open. Peter Weed: Hello. Can you hear me this time? Operator: Yes, John. Peter Weed: Okay. Thank you. You're on. Yep. Apologies for the last time. Great quarter. You know, looking forward, I think one of your most interesting opportunities really is around Bits AI and I'd love to hear kind of, like, how you think that opportunity shapes up. Like, how do you get paid the fair value for the productivity you're bringing to the SRE and broader operations team? And really how you see competition playing out in that space because, obviously, we've seen startups coming in. You know, there's questions about Anthropic and, you know, where they want to go. You know, how does Datadog really capture this value, and protect it for the business? Olivier Pomel: Yeah. I mean, look, the way we currently sell a lot of these products is you show, like, the difference in time spent. And when the alternative is you try and solve the problem yourself and, you know, you have an outage and you start a bridge and you have 20 people on the bridge, and they look for three hours for the root cause, you know, and ask the people for that. Now it's very expensive. It takes a long time. There's a lot of customer impact because the outages are long. And if the alternative is, you know, in five minutes, you have the answer and you only get three people looking that are the right folks. And, you know, you have a fix within ten minutes. You know, you have shorter impact on the customer, many, many, many fewer folks internally involved, lower cost. So it's fairly easy to make that case. And so that's how we saw the value there. The longer term, as I was saying earlier, I think you have an incident and you look into it. And you diagnose it, and then you resolve it. You know? So maybe you cut the customer impact from one hour to, you know, fifteen minutes. You know? But you still have an issue. You still have impact. You still distract the team. You still, you know, have humans working on that. I think longer term, what's going to happen is the systems will get in front of issues. They will auto-diagnose issues. They will help preemptively get or pre-remediate, you know, potential issues. And for that, the analysis will have to be run in-stream, which is a very different thing. You know? You can message data and give it to an LLM for post hoc analysis, and a lot of the value is going to be in the gathering the data, but you also have quite a bit of value in the smarts that are done in the back end, you know, by the LLM for that. And that's something that is done by the end for the OpenAIs of the world today. I think as you look at the in-stream, looking at, you know, three, four, five orders of magnitude more data, looking at this data in real-time, and passing judgment in real-time on what's normal, what is abnormal, and what might be going wrong, during that. You know? Hundreds, thousands, millions of times per second. I think that's what it's going to be our advantage, and where it's going to be much harder for others to compete, especially general-purpose AI platforms. Operator: Thank you. Our next question comes from Brent Thill with Jefferies. Your line is open. Brent Thill: Thanks. David, I think many gravitate back to that mid-20% margin you put up a couple of years ago and I know the last couple of years, including the guidance, are looking at low 20%. Can you talk to maybe your true north, how you're thinking about that, obviously, growth being number one, but how you're thinking about the framework on the bottom line? Thanks. David Obstler: Yep. The framework is we try to plan with more conservative revenues. Understanding that if revenues exceed above the targets that we give, it's, you know, difficult in the short term to invest incrementally. So what we're trying to do is invest first in the revenue growth and then layer in additional investment as we see if we see excess of target. So generally, it reflects, one, the continued investment, which we think is paying off, both in terms of the platform R&D as well as in, and including AI as in go-to-market. And then, you know, as we've seen, you know, over the years, in our beat and raise, we've tended to have some of that flow through into the margin line and then re-up again for the next phase of growth. Brent Thill: And any big changes in the go-to-market or big you need to make, David, this year to address what's happened in the AI cohort or not? David Obstler: We're continuing. It's very similar to what we're doing, which is to try to work with clients to prove value over time that reflects, you know, that manifests itself in our account management and our CS, as well as our enterprise. So no, I think for this year, we are looking at capacity growth, including geographic, you know, deepening the ways we interact with customers, expanding channels, very much similar to what we've done in the previous years. Brent Thill: Thanks. Olivier Pomel: Alright. And then that's going to be it for today. So on that, I'd like to thank all of you for listening to this call, and I think meet many of you on Thursday or on Investor Day. So thank you all. Bye. David Obstler: Thank you. Operator: Thank you for your participation. You may now disconnect. Everyone, have a great day.
Operator: Welcome to the Fourth Quarter and Full Year Sequans Earnings Conference Call 2025. My name is Shannon. I'll be your operator for today's call. After the speaker's presentation, there will be a question and answer session. To ask a question on 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 star 11 again. Please note that this conference is being recorded. I will now turn the call over to David Hanover, Investor Relations. David, you may begin. David Hanover: Thank you, operator, and thank you to everyone participating in today's call. Joining me on the call from Sequans Communications are Georges Karam, CEO and Chairman, and Deborah Choate, CFO. Before turning the call over to Georges, I would like to remind our participants of the following important information on behalf of Sequans. First, Sequans issued an earnings press release this morning, and you'll find a copy of the release on the company's website at www.sequans.com under the newsroom section. Second, this conference call contains projections and other forward-looking statements regarding future events or our future financial performance and other potential financing sources. All statements other than present and historical facts and conditions contained in this release, including any statements regarding our business strategy, cost optimization plans, strategic options, the ability to enter into new strategic agreements, expectations for sales, our ability to convert our pipeline of revenue, and our objectives for future operations are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, section 27 a, of the Securities Act of 1933 as amended, and section 21 e of the Securities Exchange Act of 1934 as amended. These statements are only predictions and reflect our current beliefs and expectations with respect to future events and are based on assumptions and subject to risks and uncertainties and subject to change at any time. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. Given these risks and uncertainties, you should not rely on or place undue reliance on these forward-looking statements. Actual events or results may differ materially from those contained in the projections or forward-looking statements. More information on factors that could affect our business and financial results are included in our public filings made with the Securities and Exchange Commission. And now I'd like to hand the call over to Georges Karam. Please go ahead, Georges. Georges Karam: Thank you, David, and good morning, everyone. I'd like to start with a brief update on our capital allocation framework and how we are balancing execution of our IoT semiconductor business with the management of our digital asset treasury. All in support of long-term shareholder value creation. First and foremost, we remain focused on executing our IoT strategy and advancing our 5G product roadmap in a disciplined manner. Our objective is to unlock the full strategic value of the IoT business for our shareholders, and that remains our top operational priority. At the same time, we continue to manage our Bitcoin digital asset treasury thoughtfully with the goal of extracting the full value underlying our Bitcoin holdings and our treasury structure. Since launching our Bitcoin strategy, we have been deliberate in how we assess market conditions, and the tools available to us always with a focus on actions we believe can create pressure value in an accretive way. In the current environment, where many digital asset treasury peers are trading below an MNav of one, we believe the most value accretive lever available to us has been repurchasing ADS when our share price implies a significant discount to our net cash and net digital asset value. During the fourth quarter, we repurchased approximately 9.7% of the company's outstanding ADSs. In addition, our board has approved a new ADS repurchase program authorizing the buyback of up to an additional 10% of the outstanding ADSs. Overall, we are taking a balanced and disciplined approach to capital management. This includes rightsizing our operating expenses, continuing to invest in our most important R&D program, which is our 5G eRedcap chip, and allocating capital to the treasury only when it's clearly accretive, while maintaining flexibility to evaluate our options as market conditions evolve. To provide some context around our balance sheet, with Bitcoin Holdings end of Q4, and Bitcoin currently at approximately $70,000, our Bitcoin NAV is about $150,000,000. After adding our end of Q4 cash balance, and netting out convertible debt, our net cash equivalent position exceeds $68,000,000. Importantly, beyond our Bitcoin and cash assets, the company's valuation should also reflect the significant value represented by our IoT revenue pipeline and our 5G and RF transceiver IP portfolio. We intend to remain patient and optimistic, staying disciplined, and focused on actions that we believe can drive long-term per share value. Turning now to the operational side of the business. Our IoT semiconductor business continues to build momentum. In the fourth quarter, it generated $7,000,000 in revenue, which was in line with our prior expectations. Revenue in the quarter was predominantly product-based, with more than 94% coming from product sales, and roughly 6% from services, reflecting strong incremental growth in the product shipments. For the full year 2025, total revenue was approximately $27,200,000. This figure includes a meaningful amount of nonrecurring Qualcomm-related revenue resulting from the deal we closed with them in 2024. On an adjusted basis, the underlying business was closer to $20,000,000, and our fourth quarter run rate clearly demonstrates the ramp we have been driving throughout the year. Looking ahead to 2026, our internal plan currently targets approximately $40,000,000 to $45,000,000 of total global revenue supported by improving visibility and a significant order backlog. Our outlook is further supported by the strength of our design win pipeline and the increasing percentage of projects now in production. We are exiting 2025 with the revenue funnel exceeding $550,000,000 in potential three-year product revenue, including over $300,000,000 from design win projects. Of those design wins, 44% have already reached production and are generating revenue, up from 38% end of Q3. Assuming no changes to customer forecast, this represents approximately $132,000,000 of potential three-year revenue from production stage projects alone. During the fourth quarter, we added nine new customer projects to our design win pipeline, and three existing projects transitioned into production. We expect this momentum to continue through 2026, with the target of having over 50% of our current design win projects in production by June. Our product pipeline continues to be driven primarily by our 4G Cat M and Cat 1 BIS technologies, as well as our RF transceiver product, which supports a wide range of software-defined radio applications. We are also seeing early engagements around 5G eRAD cap, which we view as the successor to 4G in IoT deployments. Smart metering, telematics, and asset tracking remain our strongest verticals, followed by security, e-health and medical, and other industrial applications. From a product family perspective, Cat M remains a meaningful growth driver in 2026, led by asset tracking and smart metering deployments, including expanded programs now entering production with customers such as Honeywell and iDrop. Cat 1 Bis is positioned for a breakout year in 2026, supported by multiple customer ramps in telematics and security. In RF transceivers, we have committed backlog in place, with additional demand expected in the second half of the year. We also expect to begin seeing meaningful revenue from our 5G licensee partner in China. Demand for 5G eRAD cap continues to strengthen. Mobile network operators in the US are accelerating the transition from 4G to 5G to reform spectrum, and IoT applications remain the final bottleneck completing that transition. This is why having a 5G eRED cap solution as early as possible is critical. We continue to make strong progress on this program and expect to receive our first test chips this quarter, with customer sampling beginning in mid-2027. Our IP licensing and services business is now fully integrated into our go-to-market strategy and represents attractive high-margin upside in 2026. We are currently engaged in discussions with multiple potential partners, with individual opportunities ranging from approximately $2,000,000 to $10,000,000 or more, depending on scope. Beyond revenue, these opportunities expand our reach into new markets and regions. On the supply chain side, we continue to operate in a dynamic environment. While not indicative of demand, these factors can influence shipment timing and costs quarter to quarter. We're addressing substrate constraints by adding suppliers to reduce single-source exposure and improve resilience. We are also seeing memory pricing and capacity pressures, which affect both our product and our customer's device. We are working to pass through these cost increases where appropriate while maintaining strong customer relationships. Also, we are coordinating closely with customers on ordering and delivery schedules. At this stage, we expect little to no impact on our business in 2026 and limited impact in the second half. Looking ahead, we are focused on reducing cash burn over the course of the year, with the objective of reaching a breakeven run rate by Q4. We are taking a disciplined approach to operating expenses, rightsizing where appropriate, while protecting the innovation that underpins our differentiated position. Working capital dynamics may create short-term cash flow variability, but these effects are tied directly to long-term growth. Overall, the fourth quarter underscores our progress in strengthening the core IoT business, improving financial discipline, and maintaining flexibility in our capital strategy as we position the company for sustained growth in 2026 and beyond. For Q1 2026, we currently expect revenue to be around $6,500,000, reflecting normal seasonality, with the risk that approximately $1,000,000 of revenue could shift into Q2 due to manufacturing and shipment timing planned for the end of Q1. Based on our backlog and design win pipeline, we expect revenue to ramp through the remainder of the year and continue to believe we can approach cash flow breakeven in Q4. We continue to evaluate strategic alternatives that could enhance profitability and unlock additional value across both the IoT business and our treasury strategy. The board is actively reviewing options, and we remain committed to unlocking shareholder value without rushing decisions, particularly at a time when the company is in its strongest position today. I will now turn the call over to Deborah to review our fourth quarter and full year 2025 financial results in greater detail. Deborah? Deborah Choate: Thank you, Georges, and hello, everyone. I'll begin by reviewing our fourth quarter financial results and then discuss our Bitcoin holdings. During the fourth quarter, we experienced several significant events that impacted our financials. These included a substantial increase in product revenues, a reduction in operating expenses, the early redemption of half of the convertible debt issued in July 2025, the launch of our ADS buyback program, and the sale of Bitcoin to finance these two non-operating initiatives. In Q4 2025, revenues increased 72.6% sequentially, driven primarily by growth in product revenue. Gross margin for the quarter was 37.7% and was impacted by provisions for slow-moving inventory. Excluding these provisions, gross margin would have been approximately 43% compared to 42.4% in the prior quarter. R&D and SG&A expenses declined to a combined total of $11,500,000 in Q4, down from $13,600,000 in the third quarter. We maintain our goal of continuing to reduce operating expenses over the course of 2026 in order to support our breakeven goals for operating results and cash burn. We recorded a noncash impairment charge of $56,900,000 related to the mark-to-market value of our Bitcoin holdings in the fourth quarter, compared to an $8,200,000 charge in Q3. We also recorded an $8,400,000 net realized loss on the sale of Bitcoin. This sale funded the redemption of half of the convertible debt and the repurchase of 9.7% of our ADS. The July issuance of convertible debt and warrants resulted in the recognition of an embedded derivative, which is remeasured at each reporting period. Changes in its value affect our P&L that are entirely noncash. Similarly, while the convertible debt carries a 0% coupon in the first year, IFRS accounting requires us to recognize significant noncash interest expense. At the October, we redeemed half of the outstanding convertible debt ahead of its normal July 2028 maturity. This resulted in a $29,100,000 loss on early redemption of debt that was primarily noncash. Reflecting these factors, we reported an IFRS net loss of $87,100,000 in Q4 compared with an IFRS net profit of $900,000 in the prior quarter. On a non-IFRS basis, excluding significant noncash items, we reported a non-IFRS net loss of $18,500,000 or $1.19 per ADS, compared with a non-IFRS net loss of $11,300,000 or $0.81 per ADS in Q3. The realized loss on the sale of Bitcoin of $8,400,000 is included in the non-IFRS net loss, so we would have been just over $10,000,000 non-IFRS net loss without this element. Normalized operating cash burn in Q4, including primary working capital movements in inventory and trade payables and receivables, was approximately $7,700,000. After completing Bitcoin purchases totaling $3,400,000 early in the quarter, we later sold Bitcoin to fund $101,000,000 of debt redemption and a $9,400,000 ADS buyback. At year-end 2025, we held 2,139 Bitcoin with a market value of $187,100,000. Of this, 1,617 Bitcoin, valued then at $141,500,000, were pledged as collateral for the remaining $94,500,000 of convertible debt due in July 2028. The remaining 522 Bitcoin, valued at year-end at $45,600,000, are unencumbered. And with that, I'll turn it back over to Georges. Georges Karam: As we close, I want to reiterate that our primary focus remains on executing the IoT business. The fourth quarter reflected continued momentum with revenue predominantly driven by product shipments. We are encouraged by the depth and quality of our design win pipeline, with more than 44% of projects now in mass production and additional ramps expected throughout the year. With solid demand across Cat M, Cat 1 Bis, RF transceivers, and early engagement around 5G eRedcap, we believe the IoT business is positioned to continue scaling while our cost discipline supports a clear path toward cash flow breakeven by 2026. At the same time, we have taken a disciplined and value-driven approach to capital allocation. During the fourth quarter, we took actions to repurchase shares where we believe our valuation does not reflect underlying asset value, and we continue to have board authorization in place to pursue additional repurchases as appropriate. These actions reflect our focus on unlocking value on a per-share basis while maintaining flexibility to evaluate additional capital allocation options as market conditions evolve. With that, let's now begin with the Q&A session. Operator? If you don't mind. Operator: Thank you. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Scott Searle with Roth. Your line is now open. Scott Searle: Hey, good morning, good afternoon. Thanks for taking the questions. And thanks for all the detail on the call related to some of the product development activity ongoing. Hey, Georges. Just to quickly dive in on the guidance, I'm wondering how you're thinking about licensing in terms of that $40,000,000 to $45,000,000 figure. And I'm wondering if you could reiterate again what you expect the percentage of design wins to be in production at that point in time? I missed that number. And it looks like just at a quick first cut, $15,000,000 to $16,000,000 exiting the year is kind of what gets you to cash flow breakeven, and then I had a couple of follow-ups. Georges Karam: Yeah. Hi, Scott. Thanks. Thanks for being on the call. So just to start with one, the guidance, I believe you're reflecting about the guidance for the year. You know, we continue as you see, like Q4 was, as I said, mainly product. I believe Q1 is going to be very close as well, you know, in our guidance. We are not expecting except surprises, I will say, because we have many deals and it depends on which one will close. You know? We have really currently in the backlog, I should say maybe a couple of million dollars over the year if you want. Of secured licensing. However, we have, as I said, you know, four, five, and more, each one ranging between $2,000,000 and $10,000,000. So it's very, very hard to make a projection if you want on the numbers. So we're taking a very conservative approach. Assuming like, maybe get another $5,000,000 of all this in the year, five to six. They could be secured and bring like technically, $2,000,000 to $3,000,000 per quarter in the remainder of the year if you want. After Q1, Q2, Q3, and so. So this is a little bit our guidance. So the number I gave in terms of production for the year, this in percentage just means we will have, like, 80-85% or so, 80-85% product and only 15% services on this basis. 20% services, something like this. And then the other question was regarding the convergence of the percentage of product. So what you know, when I exit the year, you need to keep in mind, you know, we're giving those percentages. But as you know, each year, each quarter, the design win is increasing. So we're not updating the metric on a quarterly basis. Just for convenience, we will be updating this like every six months, you know, to avoid every quarter. Having, you know, sometimes to explain some variation, maybe not linear and so on. But we are very comfortable that the design win pipeline, the $300,000,000 is today above 300 and we continue growing towards the year. And on those 300, our estimation, at least 50% of them will be in production in June. In June this year. So, obviously, we project year-end, you need to add, you know, I could say maybe 75% towards the year-end. There's no guidance on this, but for mid-year, it's like more than 50 for sure. Scott Searle: Gotcha. Very helpful. And Georges, just in terms of the breakeven then in terms where you guys are reducing the OpEx, it sounds like it's in the mid to high teens. And would be the exit rate and trajectory? Okay. Georges Karam: I remain on the number, which is essentially, honestly, the mix of services and product can give you a different number. Obviously, you understand the margin. In our model, assuming, like, you know, the $15,000,000-$16,000,000 number where $3,000,000 of this is services. And the remaining your product. Scott Searle: Gotcha. And if I could follow-up on the transceiver front, this seems like it's one of the hidden gems in the business. I think in the past, you've talked about that maybe being north of $5,000,000 on an annual basis. I'm wondering what the current thoughts are, design activity, and how that momentum is looking into the back half of '26 and into '27? How big could that opportunity be? Georges Karam: You know what? We have, you know, as you know, the acquisition of ACP gives us exact directly a couple of customers to whom today, you know, they move into production. And we have genetic revenue from them every quarter. So have even a backlog in 2026 from them for the first half. So we'll see, you know, sometimes the forecast for the full year, you know, with Chinese customers could be a little bit, you know, I don't want to give guidance on this. We believe, like, we could be doing this year maybe in the other business, $7,000,000 or so. I mean, in case more in the north of five. For sure. And can be, you know, getting out if some upside, then we'll go beyond the $7,000,000. This is how we see it. And also, as you know, the RF technology, we launched this with many customers, new customers. To those new customers, we're something now are the board and something, you know, chips, and they're designing products. And we have really a few tier-one already worked on this. It's more, to be honest, us being able to support them and help them is what we're working on this. But I don't expect big revenue in '26 from them because they are all in the application like drone, defense, and it takes time to build those products and come to market. This could be meaningful, you know. This could be a business, you know, for sure, you know, maybe in the $15,000,000-$20,000,000 run rate. This is doable. If we are successful, we're keeping the Chinese customer and add those customers that you can get for defense and public safety application and other software-defined radio applications. Scott Searle: Gotcha. And lastly, if I could, Georges, you had some comments on the memory side of the business. It sounds like indirectly, you guys are managing that well and you're not seeing too much in terms of headwinds from your end customers. I'm wondering if you could provide some expanded thoughts on that. And then just the competitive landscape. You guys certainly have a strong position with Cat 1 BIS. It seems like running the table is the right expression, but you guys are certainly winning a lot of business on that front and gaining some momentum. And so I was just wondering if you could comment on the competitive landscape for Cat 1 Bis. And then as it relates to eRedcap, which will be the next big cycle in '27 and beyond, kinda what you're seeing from a competitive aspect? Thanks. Georges Karam: Okay. Well, the supply chain, just to be clear, you know, the industry is completely, you know, today, I mean, it's not like the direct memory of Sequans. It's not our technology because as you know, our technology is not an AI. But AI and geopolitics as well. Combined with geopolitics is obviously the demand on AI is eating most of the capacity and obviously the OSAT and all the, you know, the packaging material and all this increasing price or making constraints on supply, increasing lead time, and so on. Struggle on the substrate. We continue to watch this very closely. We managed to secure at least our Q3 production. We're in good shape on this. But despite this, we're working on multiple sources. But we are seeing price increase. Unfortunately. And just only that's how it is. On the memory, again, we're not using the memory that you need in AI. That's how it is. All this business is connected. Right? I mean, so if the AI, you know, big memory, their prices are getting up because there is demand. This is impacting as well smaller memory and flash. RAM and flash that we use next to our chip if you want, our module and so. So we have direct impact on this as well. In supply and pricing, unfortunately. We are working all out the price, you know, and secure the capacity with multiple partners, have double source on the memory as well. To be sure that you have the supply. But unfortunately, believe we're going to have the cost increase is happening, and we are reflecting this to our customer. We're already discussing with our customer and trying to pass those costs to them. I believe we'll see more of this impact in our number in the second half of the year. The first half, we have some backlog. And so at least Q1, we have backlog for this on all the pricing and we're not it's very hard to change the price when you are shipping at the same time. With customers. So it's something to watch. As well, you know, customers and, you know, the customer, they could be building devices where they are using the big CPU and memory. That's an old application. In some applications, they need this. And obviously, could face shortage or challenge on the memory they need to get for their own device. So there is tension in the market. I don't qualify it like in the COVID days. But it's there. You know, we're spending time on it. My team is working day and night on securing supply, talking with the customers and so on to be sure that we can pass 26-27 in good shape because it seems like this will continue until 2028. What I'm hearing. Talking about the competitive landscape and the product, indeed, you know, on Cat 1 Bis, two guys that they have Cat 1 Bis is not Chinese. It's Qualcomm and Sequans. So it's really a duopoly market. And most of our design wins are around Cat 1 Bis outside. It's not like CAT M, we're not doing anything anymore. We still have Cat M business. But I believe we have a big piece of the pipeline driven by the Cat 1 Bis because of the new product ramping and because also on the competitive landscape limitation. Obviously, you know, the customer has the choice between using Sequans technology or Sequans technology. Just only whether they buy it from us or from Qualcomm. That's how it is because it's the same technology behind it. Which is good position us, I would say, to push this technology further. And on eRAD cap, I was at CES and there is really big movement. And I will have MWC in a couple of weeks. Meeting with the carriers AT&T, Verizon, and T-Mobile, all of them, they are really eager to get the 4G frequency band and move them to the 5G. In other words, they need and they have the obligation to get those frequencies. And as you know, the existing 5G network for any category for the IoT. The IoT remains on the 4G. And the broadband and the phones are moving to 5G. So it's easy on this side. IoT is more complicated mainly because there is also commitment for ten years, business and metering and so on. So it's really becoming a very, very hot topic. A lot of discussion at CES were around this. The carrier would like to see the ecosystem moving faster because the soonest they have eRAD cap, the soonest they can transition the new devices to eRAD cap technology even if it's falling back to 4G. So you'll have 5G falling back to 4G, but at least the technology will be the product will be future-proof. And this gives the freedom to the carrier to switch off the 4G sooner or at least on time as they plan it and not to drag this longer and they can recover the frequency to put them on the 5G. And here again, you know, we are I believe we are in a leading position. From, you know, it's very early not to it's very hard to talk about it when the customer didn't announce product yet. But we started the 5G as you know, many years before. Working on the broadband. We licensed the 5G to a partner. So we have a lot of those pieces of the puzzle already in hand. When we kick off our eRAD cap chip last year, we use a lot of this. And here we go after one year of the work we have is this chip coming to the company this quarter, end of this quarter. And from there, we start the testing and continue development. And we believe we'll be ready for what we call it the IUDT testing with the infrastructure vendor at all 2027. And we'll be sampling to customers midyear or, let's say, the 2027. This is our timeline, and we're executing on this. And we're getting a lot of push to accelerate this. Carriers would like us even to do it faster if you want. I believe we are in a leading position with this family. Scott Searle: Great. Thanks so much. I'll get back in the queue. Operator: Thank you. Our next question comes from the line of Mike Grondahl with Northland. Your line is now open. Mike Grondahl: Yeah. Thank you. Georges, with 44% of those design wins in mass production, could you talk a little bit about the breadth of customers and just sort of like average order size? Georges Karam: Yeah. Hi, Mike. You know, it's essentially gross 44. You know, in other words, as I said, this is like more than $130,000,000 all three years revenue. So obviously, you divide by three, you know, it gives you a little bit where we stand above $40,000,000 in linear. It's something year one, year two, year three for the new projects. For all the projects, they are there in their second year. Like, for example, the tracking business is moving very well. We have customers there, and it's like buying again, you know, if I take in the million units, 400k unit, 300k unit, you know. The skip or the space, we are really in a good shape, you know, where we have matured the product shipping. Few metering finally entering into production. With Honeywell and Itron. And a lot in the tracking device. Tracking, we have many customers. We have some of them, you know, as I said, they do million units a year and more than million units a year. And others, they do 200k. Know? So it's really a variety of orders. But when you sum them all up, Mike, to get the order of magnitude, it's not like, first of it's many, many projects. I mean, I don't have the number in mind, but if I don't want to give you a wrong number, but it's more than 30 for sure. Project. It's diversified. On many applications, as I said, already that all the segments we are talking about. Some of them are in CAT M, some of them are in CAT 1. And we have tier-one customers and we have some small customers, but not too small. I mean, it's too small in a sense. They ship, they work well. They do 50,000 units per quarter and they are there buying every quarter. And moving. Mike Grondahl: Got it. In terms of your breakeven cash goal by April, do you expect a lot of progress on the $11,500,000 you got to for R&D and SG&A combined? Georges Karam: Yeah. I mean, we continue driving this down. You know, we put the guide, you know, see on the OpEx point of view. We'll be a little bit, you know, we believe in the second half of the year around $10,500,000. Is our target. Obviously, this includes depreciation, you know, so you need to take off the depreciation. When we're talking about, you know, cash flow, you know, breakeven, we're counting on a cash basis if you want. So we'll be somehow you have, like, in this 10.5, maybe around $1,500,000 depreciation. So the company will be, like, using, $9,000,000 if we speak in cash, I would say. Per quarter, and obviously, you add, like, $3,000,000 in service, this gives you like, you know, $6,000,000 left because service will be 100% margin. Or less, I mean, very close to a hundred. So then you will the product revenue needs to cover, like, the $6,000,000. And if you have a gross margin around on the product, 45%, you can do it with $13,000,000, it gives you a little bit the number where we are there. Obviously, this can vary because the mix can change. We can have a gross margin. Higher or a little bit lower, and obviously, the service could be higher and then we can accelerate the breakeven or the product could be higher than this number as well. Mike Grondahl: Got it. And then just lastly, it sounds like the progress on 5G the eRedcap chip is going well. Revenue, do you still sort of have that penciled in mid-2028? What any updated thoughts on there? Georges Karam: Yeah. I believe, honestly, the yeah. I mean, the revenue is mid-2028. Why? Because you need to think about how it's going to work, Mike. Ericsson and all the infrastructure vendors are building their software release to support eRAD cap and bring it to the network. Without giving too much detail. But this is targeted, I will say, to be in the network towards the end of this year, beginning of next year in testing. Then the carrier will deploy it. And then from there, you do when they are ready, we can test end to end. Right? I mean, in other words, if I have it ready today, it doesn't matter. No. I need to have the infrastructure working. So I'm synchronizing with Ericsson. To come on time doing the testing if you want soon. Once we have the testing, we have the proof that the chip is working. From there, you can have your first alpha customer engaging with us. And if you get depending on what they are doing, if it's definitely a replacement on existing product, this could be fast. Because it's not a new design. We'll give them a much which is pin to pin compatible with the previous one. And it will be running in Cat M or Cat 1 Bis plus 5G. So they can go fast and in 2028 can introduce product. If you have other customers or they are building completely new products, that takes two years or two years and a half to develop, and they start with 5G, obviously, you don't see that revenue in '28. You see it in '29. But more or less, the way we are seeing the push to have the customer adopting 5G faster, we feel good about seeing revenue in 2028. Mike Grondahl: Got it. Okay. Thank you. Operator: Thank you. Our next question comes from the line of Fedor Shabalin with B. Riley. Fedor Shabalin: Good morning, good afternoon, everyone. Georges and Deborah, thanks for the detailed review of your quarter. You already talked about near-term guidance, but I wanted to touch a little bit for maybe midterm on 2027. How should we think about the revenue cadence heading into 2027? Specifically the base at which the remaining year remaining 60% of the pipeline converts to production revenue and whether the combination of material LTE and CAT 1 Bis programs, alongside early 5G engagements position the company to meaningfully inflect beyond the cash flow breakeven milestone that is targeted for 2026? Georges Karam: Yeah. Maybe they're yeah. You're absolutely right. I mean, the pipeline is there. And when you talk about those design wins converting, they are there. Right? When they convert, they bring revenue and they stay there. They don't disappear over one year or two years. This is really long-term business when we talk about metering, tracking, I mean, there is no project in the company that doesn't live five years. If you want, then some of them, they live ten years, seven years, eight years. All those metering segments. So what we are winning will continue to be there. The pipeline continues converting and bringing revenue. So just only if we take what we have in hand, and if you talk about, you know, we have 44% that's founded, I would say, this means we still have the other half. So by definition, we can double. You know? That's how it is. The growth is big. Right? I mean, if you assume all this only converts and they will be we don't choose anything lose not the customer will go to someone else. But like you could have, I'll say some accidents, some customers planning for some big forecast and they do less and so on. But it's a diversified pipeline that gives me confidence. Our business will continue growing. Not to give guidance of saying it's going to be I mean, the doubling is not it's built in the model. Obviously, you could argue how this is can be developing every quarter and we'll continue growing. And maybe we'll be in a 60, 60% plus growth. That's at least what I in terms of seven, that will continue to 28. And in '28, where we have really I believe, really, the eRAD cap, if we execute well, you need to imagine that the eRAD cap 5G, it's over. There is no Chinese at all competing. You have only a couple of players that they can bring this to the market. And this gives us an opportunity to increase our market share as well. Because, you know, we have now an established customer base. We're not going to win a new customer with the 5G. We're going to go to the same customer and support them with a new product line and expect expand our market share with the new customer. So I'm very I believe as well that the 5G will be a great catalyst in 2028 to add another growth driver to our revenue. Year over year. Fedor Shabalin: Thank you. This is very helpful. And my follow-up is about buybacks. So we just stopped trading at where it is trading now and given the authorization to repurchase an additional 10% of outstanding ADSs. Can you provide color on the expected pace and cadence of buybacks in Q1, specifically Q1 2026? I mean, specifically, whether the current share price level has accelerated repurchase activity quarter to date and how you balance your urgency of buying back stock at these levels against preserving liquidity? Thank you. Georges Karam: You know, obviously, very I mean, we have the authorization. We are, you know, free on doing this. Obviously, we were when we are in the window, which is locked, we cannot do it. We can do it when the window's open. And, essentially, we're assessing really this versus because you need to assess two things. You need to assess what's happening as well on the Bitcoin to become price. And the value of the share versus the net cash. So the two together are going to drive our I'll say the pace. But if you want the intention there is clear. You know, we believe if our share price is not appreciated, it's good things to do but to buy back shares and I would say reduce the number of shares outstanding. So it's like giving cash, giving money to all our shareholders sticking with us. So then the decision is there. We'll be executing on it. I'm not going to tell you if in Q1 we'll buy all the 10% or only 3% or 5% because it depends really how many dynamics I'm observing now with the Bitcoin price and so on. So we need to watch this carefully and make decisions based on this as well. Fedor Shabalin: Thank you very much, Georges. Appreciate the color, and continue. Best of luck. Georges Karam: Thank you, Fedor. Thank you. Thank you. As a reminder, to ask a question at this time, please press 11 on your touch-tone telephone. Our next question comes from the line of Jacob Stephan with Lake Street Capital Markets. Your line is now open. Jacob Stephan: Hi, guys. I appreciate you taking the questions. Maybe since a lot of questions have been asked, maybe help me unpack Q1 guidance a little bit. I know you said $6,500,000. Sounds like some of that could shift, but without affecting the balance of the year. What I guess, what, you know, portion of that is subject to shifting later into the year? And maybe just help us walk through that. Georges Karam: Yeah. I mean, Jacob, hi. And essentially, you know, it happens like, you know, again, going to the condition of the market, you know, even on TSMC, even on the wafer side, there is we have the capacity. It's all fine, but it's really stretched in timing. You know? It's like you pulling in stuff, getting this, you know, accelerating even a week. It's a little bit complicated. You know, the fiber loaded. And technically, what I'm saying is that we have orders. Right? I mean, we have orders covering Q1 and Q2, and have backlog even covering Q3 and Q4, some of our backlog. And in our guidance, you know, some of those orders, we should be able to ship them Q1. But they are really on the edge of Q1. And as I'm speaking, some of those dates are not 100% confirmed. You see the work in progress. So in theory, they are there. But you're not at risk you are at risk of having slippage of a few days. You know, we're not talking about, you know, it could be really weak. And, unfortunately, I have a few orders decent order happening there. But they're not lost. It's just only And if they don't come in the quarter, they shift to Q2. You know, this will beef up if you want my guidance. I mean, you should sum Q1 and Q2 to look to the performance on the company. This is where we are. So just to be cautious on this. If I do the math today, I believe should manage it. The guidance I gave, the 6.5, but there's a little bit of risk, so I will try to respond here with the market. Jacob Stephan: Okay. Very helpful. And then maybe touch on the price increases a little bit. You know, for your customers. You know, how susceptible have or, I guess, how receptive have they been to, you know, overall price increases? Georges Karam: Well, you know, to be honest, surprisingly, I should say the customer I don't know how much no one is for the pricing fees in general. But what I like is the standard then that's relearning what happened in the COVID. And the customer are reacting positively, if you will, around what's going on. In other words, they appreciate that you go and tell them that we have we have we could have supply problem. We could have price problem. And sit down with the customers and talk about the issues and so. Everyone is taking for granted the memory. The memory is really everyone knows and clear, you know, because the memory, by the way, people always prepared of the memory. It gets up and down all the time. So when it's up, read it in the news, they read it everywhere. When you go to the material, the, you know, the cost of the gold, even if it's everything is clear. Right? I mean, when you give the number, so it's a little bit more challenging. But that's okay. You know? I mean, I don't call it like you know, we're managing this customer by customer. You know, we have sometimes obligation. We have and but it's the reception is positive. It's not like no way. Because at the end of the day, that is it's not the choice of Sequans. Right? I mean, we're not trying to abuse the system. We're trying just only to be transferred to our customer and secure supply and this force us somehow to pay a little bit more. Because that's how it is the industry in Asia today. If you take, for example, all the geopolitical push many guys outside of China. So you have less competition in the packaging from China. So everything is happening outside of China between Taiwan mainly, but you have others obviously country around Taiwan. And now, obviously, those guys, they have demand for to get more, you know, to secure all the a thing. We can take all the other fab big customer willing to give them check-in advance and so on. And then the same time, you have good reason that the material, you know, as well as the packaging material is getting up. So all this combined, is pushing the price of the packaging up, you know, the substrate and the packaging as well. TSMC is still okay. You know, TSMC they remain on they didn't change anything. They are not giving signs that will do any change for now. At least for those geometry, which is the regular one, we use the flat, I would say. $40.22 and even the high FinFET 16, 12, and so on. Jacob Stephan: Okay. And just last question for me. On the Bitcoin treasury strategy, you know, obviously, 2026, you know, the actual interest rate, goes up materially on the convertible debt. I'm just wondering how you're kind of thinking about, you know, overall the debt repurchase or redemption. Georges Karam: I'll figure what I mean. You know, obviously, we're evaluating this. Specifically as well with the price of the Bitcoin. What I could say we have, you know, good relationship with the main debt holder. And as you saw in the past, redeemed 50% of this. So we're considering all our options. Nothing yet decided. Today. We'll look into the option, but you know, if you ask me my view on this, like, in general, the way we are seeing things if Bitcoin is not rallying and going to the moon, there is no interest, I will say, keep the debt forever. And better to redeem it sooner than later if you want. Like, if I have to look to the picture today, there's not too much value creation to be done there. But we are factoring all this, obviously, and discussing with the board, you know, based on all our options and what we should do and what. Jacob Stephan: Okay. Very helpful. I appreciate it. Operator: Thank you. And I'm currently showing no further questions at this time. I would now like to hand the conference back over to Georges Karam for closing remarks. Georges Karam: Thank you very much all. Thanks for the questions and being on the call. And happy to see you next opportunity or discuss with you on next opportunity. Thank you very much. Operator: Thank you, operator. You're welcome. This concludes today's conference call. You may now disconnect, and everyone have a great day.
Operator: Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to DuPont de Nemours, Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call. 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 at that time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw that question, again, star one. Thank you. I would now like to turn the conference over to Ann Giancristoforo, Vice President, Investor Relations. Please go ahead. Ann Giancristoforo: Good morning, and thank you for joining us for DuPont de Nemours, Inc.'s fourth quarter and full year 2025 financial results conference call. Joining me today are Lori Koch, Chief Executive Officer, and Antonella Franzen, Chief Financial Officer. We have prepared slides to supplement our remarks which are posted on DuPont de Nemours, Inc.'s website under the Investor Relations tab and through the webcast link. Please read the forward-looking disclaimer contained in the slides. During this call, we will make forward-looking statements regarding our expectations or predictions about the future. Because these statements are based on current assumptions and factors that involve risks and uncertainties, our actual performance and results may differ materially from our forward-looking statements. Our Form 10-Ks, as updated by our current and periodic reports, includes detailed discussion of principal risks and uncertainties which may cause such differences. Unless otherwise specified, all historical financial measures presented today are on a continuing operations basis and exclude significant items. We will also refer to other non-GAAP measures. A reconciliation to the most directly comparable GAAP financial measure is included in our press release and presentation materials and has been posted to DuPont de Nemours, Inc.'s Investor Relations website. As a quick reminder, on the basis of presentation, for our fourth quarter and full year financial results, our total company net sales, operating EBITDA, and adjusted EPS reflect the separation of Cunity and the previously announced divestiture of the Aramis business reported as discontinued operations. I'll now turn the call over to Lori, who will begin on Slide three. Lori Koch: Good morning, and thanks, everyone, for joining our fourth quarter call. Earlier today, we reported our fourth quarter and full year financial results which were ahead of our previously communicated guidance. We finished the year strong, delivering full year organic sales growth of 2%, operating EBITDA growth of 6%, and 100 basis points of margin expansion. Operational discipline and a focus on productivity were key to our earnings growth and margin improvement. These results led to an adjusted EPS of $1.68 per share, up 16% year over year. Free cash flow generation was strong in the year. While delivering on our financial metrics, we also executed significant operational and portfolio transformation during the year. We successfully completed the separation of Community Electronics, standing up a premier pure play technology solutions partner. The semiconductor value chain. We also completed the build-out of my executive leadership team, adding external talent from well-run companies as well as promoting within the organization. We set the strategic direction of New DuPont starting with enhancing our core values to drive a culture focused on growth and continuous improvement. This includes building a robust business system and continuing the progress on both our commercial and operational excellence frameworks. Finally, we set clear and robust medium-term financial targets aligned with our performance-based culture. I want to thank our employees for remaining focused on delivering these results and driving the transformation during the year. The momentum and progress we made in 2025 is carrying forward to our 2026 strategic priorities, which I will cover on Slide four. Consistent with what we outlined at Investor Day, our strategic priorities for 2026 are clear: drive above-market organic growth, continue to build out a robust business system, deploy a balanced capital allocation model, all while consistently delivering financial results. We have successfully repositioned ourselves and have a streamlined portfolio of leading businesses. The majority of which are aligned to secular end markets which will enable strong organic growth. We saw a 2% organic growth for full year 2025 and expect that to accelerate to about 3% in 2026. We are well positioned in secular end markets, and our top-line growth will continue to be bolstered by our innovation engine, which launched more than 125 new products in 2025. Our new products generated greater than $2 billion in sales this past year, and our vitality index remained strong at about 30%. We are advancing the build-out of our business system and made significant progress last year. We introduced a core set of enhanced KPIs, focused on driving improvement for our shareholders, customers, and employees. These KPIs are embedded in our refreshed set of management standards which has added more visibility, rigor, and structure to our business processes. In addition, we will continue to expand the use of Kaizen events across the businesses and functions to identify areas to drive productivity, improve end-to-end processes, and accelerate commercial development. On commercial excellence, we continue to advance the framework across commercial enablement, sales effectiveness, and strategic marketing. We have completed a maturity assessment resulting in the identification of key initiatives in 2026 centered primarily on demand generation and pipeline discipline. Operational excellence enhancements will continue in 2026. Last year, we rolled out an updated set of KPIs aligned with our focus on safety, quality, delivery, and cost and refreshed our excellence toolkit with a stronger focus on lean methodology. In addition, we invested in people and process capabilities across our supply chain and quality function in order to enhance the customer experience. These improvements and investments will drive overall productivity in 2026. Across these disciplines, we are also actively deploying digital capabilities and AI to accelerate our progress. Within innovation, we are making investments in our labs to enable streamlined workflows and accelerate our product development cycle times. Within operations, we are utilizing tools in the reliability and maintenance space to improve uptime and reduce cost. And on the commercial side, we are focusing on investments in workflow and process automation to improve the customer experience. On capital allocation, we have a proven model that enables both consistent investments in high-return organic opportunities as well as bolting on to existing businesses with M&A to enable even greater returns. A strong balance sheet is a priority for us. We will continue to return cash to shareholders through a quarterly dividend in line with our targeted payout ratio as well as utilizing share repurchases. We previously announced a $2 billion share repurchase authorization and we executed a $500 million ASR in 2025. With these priorities, let's move to our 2026 outlook on Slide five. Our financial guidance for 2026 is in line with the medium-term targets that we outlined at our September Investor Day. On a reported basis, we expect organic sales to grow about 3% year over year, operating margins to expand 60 to 80 basis points, and adjusted EPS of $2.25 to $2.30 per share. On a pro forma basis, our EPS will grow 10% to 12% year over year. Free cash flow generation will be solid with an expected conversion of greater than 90%. Underpinning our organic growth is a mixed macro environment. Market indicators for healthcare and water technology continue to expect mid-single-digit growth in both spaces on increasing medical procedures to support an aging and growing population and strong global wire demand. Overall automotive demand is about flat in 2026 with weakness in the US and Europe. However, we continue to expect EV builds to significantly outpace overall builds. In construction, after years of decline, market stabilization is expected with flattish demand year over year. We are off to a good start to the year. Our January sales were in line with expectations, and overall, we are seeing improving order trends in our industrial technologies business, which we view as an indication that these markets, which were down last year, are beginning to stabilize and recover. Overall, our teams are executing with a focus on driving growth and operational discipline, and our strategic priorities position us well for long-term value creation. With that, I'll now turn the call over to Antonella to cover the financials and outlook in more detail. Antonella Franzen: Thanks, Lori, and good morning, everyone. The fourth quarter marked a strong operational finish to the year. We exceeded our financial guidance on better-than-expected top-line mix and productivity, resulting in strong EBITDA and margin improvement in the quarter. Beginning with fourth quarter financial highlights on Slide six. Net sales of $1.7 billion were about flat versus the year-ago period, as a 1% organic sales decline was offset by a 1% benefit from currency. Organic sales consisted of a 1% decrease in volume which included a $30 million or 2% headwind from order timing shifts into the third quarter from the fourth quarter due to system cutover activities in advance of the electronic separation. Adjusting for the timing shift, organic sales would have grown 1% in the quarter. Looking at the second half, organic sales increased 2% versus the year-ago period. From a segment view, during the quarter, organic sales grew 3% in Healthcare and Water Technologies, offset by a 4% decline in diversified industrials. From a second-half perspective, healthcare and water technologies grew 5% on an organic basis partially offset by a 1% decline in diversified industrials. From a regional perspective, in the quarter, we saw organic growth in Europe, up 2% year over year, with Asia Pacific down 2%. North America was about flat year over year. Fourth quarter operating EBITDA of $409 million increased 4% versus the year-ago period on favorable mix and cost productivity. Operating EBITDA margin during the quarter of 24.2% increased 80 basis points year over year. Turning to Slide seven. Adjusted EPS for the quarter of $0.46 was up 18% versus the year-ago period. The increase was driven by higher segment earnings of $0.02, lower interest expense of $0.04, and a $0.02 benefit from exchange gains and losses. This was partially offset by a $0.01 headwind from a higher tax rate. Turning to Slide eight. Healthcare and Water Technologies fourth quarter net sales of $821 million were up 4% versus the year-ago period. On a 3% organic growth, and a 1% benefit from currency. Organic growth included a headwind of approximately $15 million or 2% in order timing shifts into the third quarter. Adjusting for this headwind, organic sales growth was 5% in the quarter. For the fourth quarter, Healthcare sales were up mid-single digits on an organic basis versus the year-ago period. Organic growth was broad-based led by continued strength in medical packaging and medical devices. Water sales were up low single digits on an organic basis primarily due to strength in industrial water markets. A majority of the headwinds from the order timing shift was within water. Operating EBITDA for the segment during the quarter of $255 million was up 4% versus the year-ago period on organic growth and productivity gains, partially offset by growth investments. Operating EBITDA margin during the quarter was 31.1%, flat with the prior year. Turning to Diversified Industrials on Slide nine. Fourth quarter net sales of $872 million decreased 3% versus the year-ago period on a 4% organic decline partially offset by a 1% benefit from currency. The organic decline included a headwind of approximately $15 million in order timing shifts into the third quarter. Adjusting for this headwind, organic sales declined 2% in the quarter. At the line of business level, organic sales for Building Technologies were down high single digits on continued weakness in construction markets. Industrial Technologies organic sales were down low single digits as strength in aerospace was more than offset by weakness in printing and packaging markets. A majority of the headwind from the order timing shift was within Industrial Technologies. Operating EBITDA for Diversified Industrials of $197 million was up 2% versus the year-ago period, on favorable mix and cost productivity. Operating EBITDA margin during the quarter was 22.6%, up 110 basis points versus the year-ago period. Turning to Slide 10, which outlines our first quarter and full year 2026 financial guidance. For the first quarter, we estimate net sales of about $1.67 billion, operating EBITDA of about $395 million, and adjusted EPS of $0.48 per share. Our first quarter net sales guidance assumes about 2% organic growth and about a 2% benefit from currency. Our operating EBITDA assumes a 10% increase year over year and margin expansion driven by business improvement and lower corporate costs. For the full year 2026, as Lori noted, our guidance is in line with our medium-term targets. We expect net sales of about $7.1 billion, operating EBITDA of about $1.74 billion, and adjusted EPS of $2.25 to $2.30 per share. Our full year net sales guidance assumes about 3% organic growth and a currency benefit of about 1%. Our operating EBITDA assumes a 6% to 8% increase year over year with 60 to 80 basis points of margin expansion. Our adjusted EPS guidance at the midpoint assumes about a 35% increase on a reported basis and an 11% increase on a pro forma basis. For the healthcare and water segment, we expect full year 2026 organic sales growth in the mid-single digits percent range. This assumed growth is expected to be driven by broad-based strength within healthcare, primarily due to demand in medical packaging applications and medical devices. In water, we expect continued growth primarily driven by demand for reverse osmosis and ion exchange within industrial and municipal water markets. For the diversified industrial segment, we expect full year 2026 organic sales growth in the low single digits percent range. Within building technologies, after a year of market declines, we are expecting 2026 to be about flat, primarily driven by stabilization within US construction markets. Industrial Technologies, we expect low single-digit growth year over year driven by strength in aerospace and demand recovery within markets served by our industrial-based product lines. With that, we are pleased to take your questions, and let me turn it back to the operator to open the Q&A. Operator: Thank you. We will now begin the question and answer session. We also ask that you limit yourself to one question and one follow-up. Any additional questions, please re-queue. And your first question comes from the line of Jeffrey Sprague with Vertical Research Partners. Please go ahead. Jeffrey Sprague: Hey. Thank you. Good morning, everyone. Nice to see a solid, clean quarter. And, also, Lori, your opening remarks there all focus on internal KPIs and growth, and you were working on that along the way, but a shift from portfolio moves is welcome on my behalf anyhow. Lori Koch: Thank you. Thank you. Jeffrey Sprague: Yeah. Good luck with all that. I wanted to shift, though, a little bit to the external, if I could. Can you just put a little bit finer point on the industrial side of the equation, sort of the soft U.S. industrial production in your guide that you mentioned but then seems a little bit countered by your comments about industrial orders picking up? So maybe just a little bit more color on what you're seeing really in the core industrial parts of the portfolio. How orders are trending? And what do you think is going on with channel inventories? Lori Koch: Yeah. Thanks, Jeff. So on the industrial side, so, like, talking ex the shelter business, which we had mentioned, we think will be about flat this year, so moderating from down mid-single digits in 2025 and the flat on the shelter side is general kind of low single-digit growth expectations for the full year. On non-res and repair and remodel and then down low to mid-single digit from the on the resi side. But on the industrial side, it's primarily coming from the advanced mobility businesses which comprise automotive and aerospace, and on the consumer packaged goods side of some of our packaging goods in Spiral. So we've seen nice order pickup as we exited the year and went into Q1. A lot of it is being driven by aerospace. We're seeing nice low double-digit improvement in order in aerospace. It's about 3% or 4% of our revenue. So it's in that range. But all the businesses kind of in that industrial technology space are doing nicely and seeing kind of the short cycle recovery that other means have been bringing to. Jeffrey Sprague: Great. And then just on price cost, obviously, a lot of attention on metals cost, is maybe less of an issue for you than some of the metal vendors I cover. But what's going on on the inflation side of the equation? What sort of kind of price is embedded in the outlook? 2026? Lori Koch: So, Jeff, when it comes to our organic growth of 3%, it is predominantly related to volume for 2026. I would tell you, we're not really expecting any significant headwinds from, you know, any of the roles, logistics, and kind of utilities going into next year. We expect that to be relatively flat. And given our productivity initiatives, expect to see a nice improvement in our gross margins on a year-over-year basis. Jeffrey Sprague: Got it. Great. Thank you. Lori Koch: Yep. Yep. Operator: Your next question comes from the line of Scott Davis with Melius Research. Please go ahead. Scott Davis: Hey, good morning. Lori and Antonella. Good morning, Scott. I echo what Jeff said. Nice to see a more normalized quarter here. Wanted to follow-up a little bit on Jeff's question, but on the shelter side, we are going from kind of a negative high single digits to something that's more flattish. How do we cadence that into 2026? Is it more back-end loaded, or do you see real green shoots here early in the year that you've already seen to be able to call a recovery? Lori Koch: Yes. So let me start on that one. So when you look at our overall shelter business, we mentioned that it was down around mid-single digits in 2025. So when we start off 2026, I would tell you that we expect it to be slightly down as we start the year. So part of it's going to be the comps. On a year-over-year basis. So just keep in mind that in 2025, we were down around 6% in that business. So on a year-over-year basis, when you look at the two-year stack, it's not really changing significantly. From kind of the second half of the year of where we're exiting, kind of going into the beginning of the year. So we do expect slight improvement as we go through the course of the year. If we start out slightly negative, getting a little bit better, that gets you to the overall flat for the year. Scott Davis: Okay. That's helpful. And I don't recall hearing vitality index on these calls in the past. Maybe you and I just haven't heard it. But 30% seems like a pretty robust number, but I don't really have any context to what that's been historically. And, perhaps just some color on how helpful is this as it relates to mix or price or volume? Are these iterative slight improvements, or are there real meaningful product changes? Just some color would be helpful, I think. Thanks. Lori Koch: Sure. Yeah. We had first talked about it at Investor Day where we mentioned that the 2024 number was about 30%. We expect that same performance in 2025. So it is helpful on both the top-line side as well as the margin side. So there's work that goes into not only releasing new products where we can get enhanced pricing and get some incremental share. There's also work that goes on on the kind of the value engineering side to take cost out and deliver margin improvement. So if we look at the margin profile of those products that comprise any product sales, it is higher than the overall margin of the company. And so we're seeing nice lift from both sides. Our efforts internally, you know, we did 125 new products last year. We'll expect to continue to do nicely this year. And we'll focus on making sure that shift is happening from renew versus grow. So you had mentioned the impact to the top line. There is a portion of that 30% vitality index that is replacement. And making sure that we stay competitive and differentiated. And we want to continue to do that, but also shift the mix towards growth. So that we can get incremental top-line growth out of the innovation engine. Scott Davis: Okay. Lori. Best of luck. Appreciate it. Pass it on. Thank you. Operator: Your next question comes from the line of Steve Tusa with JPMorgan. Please go ahead. Shagusa Cotopo: Hi, this is Shagusa Cotopo on for Steve. Thanks for taking my question. So my first question is on, so you're making great progress on the margin front, and I just wanted to go back to the margin bridge that you provided at Analyst Day. And you provided, like, zero to 50 bps of productivity here. Was wondering given the execution, is there potential upside here or you are tracking ahead of plan? Lori Koch: Yes. Well, I'll say let's take it one year at a time as we progress through the year three-year plan. But I would say, you know, we're clearly starting out of the gates in a nice good spot. And when you look at our guidance for 2026, we have at least 20 basis points of margin expansion coming from productivity. Clearly, the teams are doing a great job. Lori outlined a lot of activities. That we have ongoing in the organization. I think you saw some of the benefit of that in our Q4 results. You'll see that continue as we go into 2026 and we'll continue to drive that as we move through the three-year period. Shagusa Cotopo: Okay. That's great. Thanks. And then on the Aramis divestiture, I think, is expected to close at the end of the first quarter, which is gonna bring in about $1.2 billion of pretax proceeds, if I remember correctly. But any initial thoughts on what you're thinking about capital deployment? Thanks. Lori Koch: Yeah. So we're still in that range of closing around the end of the first quarter, and it will be about $1 billion on a net tax basis. Keep in mind, we've already deployed about half of that with the $500 million ASR that we announced last quarter and have completed already which is enabling about 2.5% EPS growth for us this year. So we'll continue to be shareholder-friendly with the deployment of the proceeds. We have mentioned that we would like to continue to add to the top line through M&A. So we've got some opportunities that we're looking at primarily in the healthcare side right now within similar aspects to what we did with Spectrum and Donatelle. We'll continue to be mindful, obviously, about ensuring a really strong return. So we'll look to get up to, you know, higher than our cost of capital by year five with respect to the IRR on the deal. So we'll continue to be shareholder-friendly. We've proven that we've done it in the past significantly, and we'll look to deploy them efficiently. Shagusa Cotopo: Okay. Great. Thank you. Operator: Your next question comes from the line of John McNulty with BMO. Please go ahead. John McNulty: Good morning. Thanks for taking my question. Maybe wanted to dig into the diversified margin lift. It was a pretty chunky lift. I guess, how much of that is around the mix with the benefit of aerospace kind of hanging in as a really strong driver versus much of it is tied to some of that 80/20 kind of work that I know Beth is working on really kind of accelerating as we push over the next twelve to eighteen months. Can you help us to think about that? Lori Koch: Yes. So a couple of things that I would mention there. I would say, you know, you're not really yet seeing the benefits of 80/20. It's a little too early. You know? As you know, Beth recently arrived. So, yes, she's working on that, but the benefits of that, I would say, are to come. As we move forward. When you kind of look at the activity in the fourth quarter, I would point more towards what drove the margin expansion to be a bit of mix related to, you know, the businesses that we're growing when you look at the line of business level as well as a strong push relative to productivity. Is what really drove the nice margin expansion in the fourth quarter on a year-over-year basis. John McNulty: Got it. Okay. No, thanks for the color. And then in terms of innovation, you mentioned the vitality index. You kind of spoke to, I think it was $2 billion of growth that you saw from some of the new products. I guess, can you help us to think about some of the more exciting innovations, the ones that are starting to move the needle maybe more than others that we should be looking for as we kind of look through '26 and '27? Lori Koch: Yeah. So the $2 billion is the total new product sales that are within the, you know, roundly $7 billion of sales that we reported. So it's a portion of replacement and a portion of growth. So we'll continue to try to shift that mix towards more growth replacement in the future. But as far as exciting innovations that are on to come, I think one for this year, we highlighted on the last call, and I'll highlight again just because it was such a sizable improvement, were the enhanced Tyvek garments. So we announced at a trade show late last year that we came out with a new model that has the best breathability and the best protection in the industry, and we've seen really, really nice customer reaction to that. We announced it first in Europe, and we'll continue to roll it out across the globe. On the water side, we continue to advance the latest technology within the reverse osmosis side. So this year, we're expanding capacity at our Edina site to be able to produce the gen four, which would be the highest-end technology that would enable a significant total cost of ownership to our customers. So we're continuing to advance that, and we'll look to commercialize that in 2027. So those are just two of the highlights. But, obviously, with 125 new products last year, it's happening kind of all across the portfolio. John McNulty: Got it. Thanks very much for the color. Operator: Your next question comes from the line of John Roberts with Mizuho. Please go ahead. John Roberts: Good. Thank you, and congrats on a good start here. Could you provide some margin on the four subsegments, water, health, building, and industrial? I'm not sure. How much detail you want to provide there. Lori Koch: Yes. We typically give color on the revenue side of our segments. But when you do look from a margin perspective, I mean, what I would add is you will see margin improvement, I would say, in both of our reportable segments. As we move forward, and we'll also obviously get some margin expansion from lower corporate costs as well. And that's certainly what's gonna drive the 60 to 80 basis points of margin expansion in 2026. John Roberts: And then your Asia Pacific sales were down 2% organic. Was that water supply chain contraction again, or is something else going on there? Lori Koch: No. It wasn't water. It was primarily within the diversified side. We had a supply chain change in our shelter business that was the single largest item. So it was really just a change in the distributor joint venture relationship. So nothing permanently. We'll push it into 2026. So nothing material. We expect to return to growth across all the regions, both in the quarter and the full year for 2026. John Roberts: Great. Thank you. Operator: Your next question comes from the line of Joshua Spector with UBS. Please go ahead. Joshua Spector: Hi. Good morning. I had two questions on water. Maybe one slightly related to the comment earlier on Asia is that when your forecast or talking about mid-single-digit growth in water for '26 China is lower than that. You go into some of the details on why and what you're seeing there? I mean, you and some other peers are seeing slower growth in China in general. And then secondly, does that help or hurt your mix in the overall segment? Lori Koch: Yeah. So we are seeing a slower start in China with respect to overall growth within the water, and it's primarily stemming from just the reduced industrial production in the region. So, we'll start in the low single digits in China, water, and then we'll ramp into the back half to get overall to that mid-single-digit. I think we're, as you had mentioned, our peers are seeing a similar dynamic. So it's really just a reflection of the industrial production malaise in China. About half of our water is used in the industrial wastewater treatment or industrial utility water space. And so when industrial production is down, obviously, it would have an impact on that. As far as the mix, no material change in mix depending on where the regional growth is. Or margin. Joshua Spector: Okay. Thank you. I'll leave it there. Operator: Your next question comes from the line of Aleksey Yefremov with KeyBanc. Please go ahead. Paul: Hi. This is Paul on for Aleksey. Can you discuss what you're currently seeing in auto trends right now and maybe the cadence for your outlook for 2026? Thanks so much. Lori Koch: Yeah. Overall, the expectation for auto builds from IHS is to be about flat. We would expect to slightly outperform that just based on our EV growth. And so we did see nice EV growth in 2025, and we'll continue to see nice EV growth in 2026. It'll vary by quarter. But overall, the full year is about flat and will be slightly up. Operator: Your next question comes from the line of Matthew DeYoe with Bank of America. Please go ahead. Matthew DeYoe: Yeah. Morning, everyone. So clearly, the portfolio is shaking out a lot. But, you know, as we settle here, is there any hope to establish annual pricing initiatives in any of the businesses that could be enough to actually drive, you know, structural pricing gains across consolidated DuPont, whether that's 50 bps or 100 bps? Do we have a framework there? Lori Koch: We do. I mean, we've had, obviously, the past two years have been the unwind of the sizable price that we took through the inflationary environment coming out of COVID. But going forward, would expect to see structural price lift. As Antonella mentioned at the beginning, in 2026, our 3% organic is primarily volume, but underneath that, there is some price in some of the businesses. We continue to expect to have to give back a little bit on the shelter side primarily. Is that sizable price raise that we drove in the 2022, 2023 time frame starts to unwind. But, yes, there is an opportunity to drive structural price in most of the businesses in our portfolio. Matthew DeYoe: Thanks, Ed. And have you commented on something like Tyvek with the new advanced garments? Right? How much margin uplift would something like that give versus a legacy product? And I guess maybe I don't know if you want to comment specifically on that, but it's a different one maybe. Like, what is the average margin uplift? If you were to look at the vitality index, and you're thinking about replacement, is this, you know, through the index of 30 basis points or 100 basis points or is it flat? You know, what's the uplift look like? Lori Koch: As we think about last year? Rather not comment on the margin lift at kind of the product line level. But overall, in the vitality index, in the 30%, we have about 145 basis points of margin lift from those products that are introduced in the past five years. Matthew DeYoe: That's great. Thank you. Operator: Your next question comes from the line of Christopher Parkinson with Wolfe Research. Please go ahead. Christopher Parkinson: Great. Thanks so much for taking my question. We just take a step back and look at your healthcare portfolio? I know this is a focus of your CMD. But, Lori, what are you the most enthusiastic about as you go through '26 and perhaps even the longer-term growth algo? Is it on the biopharma side? Is it pharma solutions, med device? Like, if you could just comment on your enthusiasm in terms of your product portfolio, that would be particularly helpful, and then I'll have a follow-up. Lori Koch: Yeah. It's really across all three. So, you know, both med packaging, med device, and bio all are nicely contributing to the kind of mid to high single-digit range in 2026. They all participate nicely in the higher-end aspects of the med device universe. So if you think about the majority of our applications, they're more in the cardiovascular space, which has an overall higher growth rate with respect to overall surgical procedures. So all three of them are gonna contribute nicely. We'll continue to differentially invest in those businesses to ensure that we can continue to grow. Christopher Parkinson: Got it. And just a similar question for the Water business, now that all the dust has settled post the split. When you take a look at your water portfolio filtration, particularly across, like, NFRO, US, you know, is there it's clearly a great business, but do you feel as though you're missing any scale? Do you feel as though there's an easier portfolio? Obviously, you've added other things. Like, ion exchange over the years. Like, what else do you think you need to do, if anything, quite frankly, to further garner investor appreciation for that specific business? Lori Koch: Yeah. But I think from a technology perspective, we've the leading technology across all the main components within water filtration. So leading in RO, leading in ion exchange, leading in US and nanofiltration. So we're nicely positioned there. We've mentioned the desire to start to build around water. So potentially going into spaces beyond filtration just given filtration would be difficult from a regulatory perspective for us given that we've got the leading position. So we continue to scout and look for opportunities to expand in the water space. Obviously, we'll be highly in tune to the valuations there. They can be quite pricey. We've seen a few assets with some of our competitors trade in the last few quarters that had a high valuation that would make it difficult for us. But we'll continue to see. We recently added just to continue to shore up our supply chain in the water space and asset in China. RO has huge growth in China. We didn't have an established footprint. We bought an asset outside of Shanghai. They gave us established membrane capacity in the region for us to continue to be competitive and local to our customers there. Christopher Parkinson: Helpful, Lori. Thank you so much. Lori Koch: You're welcome. Operator: Your next question comes from the line of Vincent Andrews with Morgan Stanley. Please go ahead. Vincent Andrews: Thank you very much. I wanted to ask on healthcare. You called out in the deck that surgical procedures you're expecting to be up mid-single digits this year. Just give us a sense, is that sort of the normal growth rate? And is that favorable or about the same versus 2025? And then is your portfolio sort of well represented across that entire cohort? Or how should we think about it? Lori Koch: Yeah. I would say it's a similar growth rate to what we saw in '25 minus the destock that happened in the first quarter that kind of drove up the overall healthcare growth for the year. So we're nicely positioned. As I mentioned, the areas that are driving kind of above the average surgical procedure rate, so if you say general surgeries, it's about 4%. Where we play, we expect that overall average to be more market-weighted to about 5%. So we're nicely positioned on both the healthcare side with the Tyvek packaging as well as on the Spectrum and Donatelle side on the device. Our single largest end market there is also within the cardiovascular and vascular space. Vincent Andrews: Okay. And then just to follow-up on the balance sheet and capital allocation. You ended the year with, I think, $715 million in cash. You've got the $1 billion coming in. Earlier, you spoke to, well, we've kind of spent some of that $1 billion already with the $500 million ASR. So can you just refresh us on sort of what the minimum level of cash is that you want to carry? And then as you move forward through the year, and generate more cash, obviously, you're expecting another very strong year of cash conversion. Understanding sort of the dual track of pursuing M&A as well as share repurchases. We think about that sort of remaining proceeds from the divestiture to be sort of earmarked for M&A, but the sort of free cash flow generation from this year to sort of be ratably allocated to CapEx, to dividends, and to repurchases? Or is that not the right way to think about it? Lori Koch: Yes. So let me start with your first question. So typically, on the balance sheet, we would carry around $1 billion in cash. We were a little bit below that at the end of the year given the cash that we spent on the ASR of $500 million. So as you mentioned, we will have, you know, a nice cash flow generation year in 2026. We do expect our free cash flow conversion in '26 to be greater than 90%. In addition to that, we do have the proceeds that are coming in the door related to the Aramis transaction. As Lori kind of mentioned earlier, I would say, you know, in terms of capital allocation, we view that in the eyes of a shareholder in terms of what creates the most amount of value. So I wouldn't say there's a specific amount earmarked towards an M&A deal or a specific amount earmarked towards share repurchases. We'll continue to look at both. We do have a pipeline of some M&A that we are looking at. You know, ultimately, you'll see if they come to fruition or not, but clearly, we will continue to deploy capital in the best interest of our shareholders as we move forward. Vincent Andrews: Thank you very much. Operator: Your next question comes from the line of Patrick Cunningham with Citi. Please go ahead. Rachel Li: Hi. This is Rachel Li on for Patrick. So I think in an earlier response, you mentioned all regions should be up organic sales-wise. It's year and in one Q. So with recent PMIs trending more favorably, can you just provide more color on that response and maybe what you're seeing in terms of organic sales growth versus GDP? Lori Koch: You kind of dropped off at the end, I couldn't hear which quarter you were referencing. But to the earlier comment, we do expect to see organic growth across all regions, both in the first quarter and in the full year. The improvement, kind of the first quarter being at 2% organic and the full year being at 3%, most of that improvement is going to be in North America just based on the improvement that we expect to see on the shelter side. So with shelter starting, you know, kind of slightly negative and then trending to even on the full year, you'll see that lift given the majority of the end markets in shelter are North America. Rachel Li: Got it. Thank you. And can I just ask what sort of level of visibility you have for order books across the healthcare portfolio in general? Lori Koch: Yeah. I'll answer the question broadly for the company, because it's a bit about we don't have a long lead time. It that way. So we start each month with about 80% of the orders on the books, and we start each quarter with about 50% of the orders on the books, and then we build from there. Shelter is definitely the shortest cycle. On the longest cycle, I would say, would be our aerospace businesses and our water business. Would be on the longer end, and everyone else would kind of fall in between. Rachel Li: Great. Thank you so much for the color. Operator: Your next question comes from the line of Michael Sison with Wells Fargo. Please go ahead. Michael Sison: Hey, good morning. Nice quarter in Outlook. Just a quick one on US construction. Your outlook is flat. Any differences between nonres, res, and repair and model? In that Outlook? Lori Koch: Yes. So as we look into 2026, our expectations would be that nonres would be up in the low single-digit range as well as repair remodel, and that would be off by a low to mid-single-digit decline on the resi side of the business. Michael Sison: Got it. And then quick follow-up. You know, your outlook and your results, particularly the organic growth continues to, you know, look a lot better than the chemical folks. Are you still looking to, you know, is it still possible to change your industry designation? And how does that work given, you know, I think your results have been much more steady than my group. Lori Koch: Yeah. So when you take a look clearly at the portfolio, our portfolio is not a chemical company portfolio. And to your point, when you look at our performance, our performance is not mirroring that of a specialty chemical company either. So I would tell you we continue to make some progress. In terms of the GICS classification. But what I would tell you is our first priority is just to continue to execute, but we will continue to move forward in terms of trying to get the GICS code changed to more appropriately reflect the portfolio that we have today. Michael Sison: Thank you. Operator: Our last question comes from the line of Arun Viswanathan with RBC Capital Markets. Please go ahead. Arun Viswanathan: Great. Thanks for taking my question. I just wanted to, I guess, clarify on both healthcare and water. So did you see any destocking there? We did see, you know, maybe one of your competitors within healthcare packaging, reference some of that. And then similarly on water, you know, maybe some of the downstream players are also, you know, speaking about that in different regions. So I guess you're not seeing that given your robust outlook for healthcare. Is that correct? Lori Koch: Correct. Yeah. The destock was behind us in 2025, so we've continued to see normalized inventory levels across both those businesses. Arun Viswanathan: Just given that being the case, sorry if I missed this, did you also mention maybe M&A across both of those businesses, if there are opportunities and where you are kind of in that trajectory? Lori Koch: Yeah. Sure. No. We continue to scout opportunities in both spaces. I would say that pipeline is more robust on the healthcare side just given the fragmentation that exists as well as evaluations are a little lower in that area. So we continue to look hard at both. We've been busy looking on the med device side similar to the acquisitions that we made with Spectrum and Donatelle as we continue to build out a total suite of offerings to our customers. Really building our relationships with them and then viewing us as a solutions partner and an application development partner. But we continue to look. Arun Viswanathan: Thanks a lot. Operator: Ladies and gentlemen, I will now turn the conference back over to Ann Giancristoforo for closing comments. Ann Giancristoforo: Great. Thank you, everyone, for joining our call. For your reference, a copy of our transcript will be posted on DuPont de Nemours, Inc.'s investor website. This concludes today's call. Ladies and gentlemen, thank you for your participation, and you may now disconnect.
Operator: Ladies and gentlemen, welcome to Canaan Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, we will have a question and answer session. Please note that this event is being recorded. Now I'd like to hand the conference over to your speaker today, Gwyn Lauber, Investor Relations for the company. Please go ahead, Gwyn. Gwyn Lauber: Thank you, operator. Hello, everyone, and welcome to our earnings conference call. Joining us today are Chairman and CEO, Nangeng Zhang, and our CFO, James Jin Cheng. Leo Wang, Vice President of Capital Markets and Corporate Development, and Shi Zhang, Senior IR Manager, will also be available during the question and answer session. Our CEO will start the call by providing an overview of the company and performance highlights for the quarter. Our CFO will then provide details on the company's operating and financial results for the period before we open up the call for your questions. Before we begin, I would like to refer you to our Safe Harbor statement in our earnings press release. Today's call will include forward-looking statements. These statements include, but are not limited to, our outlook for the company, and statements that estimate or project future operating results and the performance of the company. These statements speak only as of today, and the company assumes no obligation to revise any forward-looking statements that may be made in today's press release call or webcast except as required by law. These statements do not guarantee future performance and are subject to risks and assumptions. Please refer to the press release and the risk factors and documents we file with the Securities and Exchange Commission, including our most recent annual report on Form 20-F for information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call, we will discuss both GAAP financial measures and certain non-GAAP financial measures which we believe are useful as supplemental measures of the company's performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings press release which is posted on the company's website. With that, I will now turn the call over to our Chairman and CEO, Nangeng Zhang. Please go ahead. Nangeng Zhang: Hello, everyone. This is Nangeng Zhang, CEO of Canaan Inc. Welcome to our earnings call. Together with our CFO, James Jin Cheng, we are calling from our Singapore headquarters to discuss our Q4 2025 business results and latest updates with you. During the first quarter, it comprises experienced significant volatility. In early October, Bitcoin briefly broke above its previous all-time high, reaching approximately $126,000. It then fell below $100,000 in mid-November and dropped to below $90,000 by December. At the same time, the wave of new hash rate that entered the pipeline during the price surge in the first quarter came online, pushing total network hash rate to a record high. This puts strong pressure on miners' profit margins. Facing this highly volatile market, we managed our sales pace well at the '4. We secured a large order from a major customer in North America, and efficiently mobilized resources to support production and smooth delivery. At the same time, we steadily expanded our self-mining operations and explored diversified mining partnerships, starting several pilot projects. As a result, our total revenue for the quarter reached $196 million, up 30.4% quarter over quarter and 121.1% year over year. This was our highest quarterly revenue in the past three years and exceeded the midpoint of our guidance range of $175 million to $205 million. We achieved a major breakthrough in mining machine sales in this quarter, benefiting from our continued focus on the North American market. We secured a large-scale order of more than 50,000 A15 Pro models from a leading mining company. This milestone collaboration drove our strong sales performance and underscores the market's growing recognition of our product performance and delivery capability. To ensure high-quality delivery, our supply chain, production, and operation teams worked closely together to ensure smooth and high-quality execution. This resulted in an all-time high of 14.6 exahash per second in computing power sold during the quarter, up 45.7% quarter over quarter and 60.9% year over year. While average selling price declined slightly due to volume discounts for large-scale orders, the surge in sales volume drove product revenue to $165 million, up 39.1% quarter over quarter and 124.5% year over year. This marks our highest single-quarter revenue in the past thirteen quarters. We will continue creating value for customers through product upgrades and customized services to deepen our partnerships with global customers. Although the company focused most of its resources on rig sales in Q4, our self-mining operations continued to progress steadily under the principle of resource alignment and efficiency first. In Q4, we steadily expanded and optimized global development. At the end of the fourth quarter, total installed hash rate increased 8.6% quarter over quarter to 9.91 exahash per second, of which 7.7 exahash per second was energized. We mined approximately 300 bitcoins during the quarter, further contributing to our cryptocurrency reserves. At the end of 2025, our crypto assets holdings were 1,750 bitcoins and 3,951 Ethereum. This holding reflects the combined contribution from our mining and ongoing debt management strategies. In the current market environment, this capital portfolio not only provides liquidity but also offers potential upsides if crypto prices recover. We continue to explore innovative mining applications and promote deeper integration between computing and energy. In October, we partnered with a local energy infrastructure provider in Canada to convert flare natural gas at wellheads into computing power. This project marks our initial step from utilizing stranded energy towards broader participation in energy infrastructure. It demonstrates the value of high-performance computing within emerging energy systems and opens up more space and long-term sustainability for the expansion of our mining business. In R&D and supply chain management, we maintained our focus on product performance, driving technological upgrades in tandem with capacity optimization. Last October, we officially launched the A16 XP, our flagship next-generation air-cooled model. It achieved breakthroughs across multiple performance metrics by delivering over 300 terahash per second per unit with an industry-leading power efficiency of 12.8 joules per terahash. This showcases our deep technical and R&D expertise in the design of high-performance ASIC chips. As we continue to advance our product generation upgrades, we work closely with our wafer foundry partners to optimize manufacturing processes. These efforts have led to higher yields and lower costs for our A15 series, allowing us to deliver more computing power from the same amount of wafers. On the supply chain front, our production footprint across Malaysia, the US, and Mainland China allows us to remain compliant with flexibility, adapting to an increasingly complex global trade environment. During the mass delivery of the large-scale order this quarter, our teams across manufacturing, quality control, and logistics worked in close coordination, successfully withstanding the dual pressure of shipment volume and tight timelines. By early January 2026, the entire order had been fully delivered, demonstrating the resilience and execution strength of our supply chain. In summary, 2025 was a challenging year. We navigated a complex international trade environment while continuing to expand our business across multiple dimensions. For the full year, total revenue was $530 million, up 139.6% year over year. We strengthened our presence in North America, partnered with leading customers, and increased total computing power sold by 40.7% year over year to a record 36.5 exahash per second. In terms of products, we achieved mass production of the upgraded A15 series, launched the next-generation A16 series, and expanded our Avalon series into a multifunctional product lineup, significantly improving revenue growth and brand influence. Our mining business reached a key milestone in 2025, with its full-year revenue exceeding $100 million for the first time. Global installed hash rate rose 82% and energized hash rate grew 61% year over year. We now operate nine mining projects globally, with total power capacity exceeding 250 megawatts. We also expanded into innovative energy scenarios by exploring wind power, stranded gas, and computing-generated heat reuse, driving deeper integration of computing and energy. We completed the deployment of assembly and production capabilities across Malaysia, the US, and Mainland China, building a flexible and resilient global delivery system. We also established our digital assets treasury management framework, keeping our crypto reserve competitive and providing capital allocation flexibility to support our long-term development. As we enter 2026, the external environment remains highly volatile. Shifts in macro liquidity and risk appetite are making digital asset prices and industry demand more cyclical and phase-driven. We do not base our operations on short-term views of price movements. Instead, we focus on navigating cycles through controllable factors, including product competitiveness, delivery and operational capabilities, inventory and cash flow discipline, compliance, as well as lower-cost and more scalable energy and infrastructure capabilities. This approach has enabled us to remain resilient and achieve growth in the complex environment of 2025. More importantly, we do not see Canaan's next stage as being defined merely as an equipment provider or a single-node computing player. We have a clear long-term vision. Computing and energy infrastructure are becoming increasingly integrated. Bitcoin mining and AI HPC colocation may appear to be two different businesses on the surface, but they are highly complementary at the infrastructure level. They share electricity, facilities, power distribution, cooling systems, and human and technical resources for operations and maintenance. By leveraging different workload characteristics, we can improve power utilization efficiency and overall project economics. At the same time, these applications can interact with the power grid more constructively. They can absorb energy when the power supply is abundant and reduce the load when the grid is constrained, ultimately contributing to a more resilient and dispatchable computing infrastructure. So in 2026, our strategy centers on two core pillars, with execution as our top priority: scaling proven models, streamlining non-repeatable pilots, and laying the groundwork early for long-term capabilities. Our first track focuses on power and computing infrastructure. We are shifting our strategy from securing power resources from an opportunistic asset-light approach to a more systematic upstream development path. To secure reliable and economic power resources and leverage our North American resource base built since 2022, we will prioritize applying for power directly rather than bidding for capacity with existing third-party projects. We have made significant progress on a robust pipeline to secure direct power capacity in the US. We are confident of securing substantial load by the year-end of 2026, potentially reaching the gigawatt scale. At the same time, we are exploring ways to integrate Bitcoin mining with AI HPC colocation. This approach can improve returns on invested capital while supporting dynamic load management for the power grid and strengthening our existing positive relationships with grid operators. Development of power and infrastructure is not a sprint but a long journey with steady gains. The process spans multiple stages, including site selection, grid interconnection assessments, negotiation with power partners, contract structuring, engineering, construction, and commissioning. Each step requires careful and disciplined execution. Accordingly, our primary objective for 2026 is to establish a pipeline of executable projects and clear development pathways. We do not intend to pursue one-off large-scale capital outlays. Instead, we will move forward within a framework of capital discipline. We will leverage partnerships and project financing as tools, relying on asset-level cash flows and project-level financing to support expansion. This approach limits unnecessary volatility in our overall financial position. This also means we will prioritize securing high-quality power resources that are well-suited for AI HPC colocation. Second, in the consumer and small to medium-sized business segments, we will take a more systematic approach to building our 2C SMB business in 2026. Last year, we saw strong potential on both the demand side and the gross margin structure for these products. But we also understand that success in the consumer market is hard. Users expect excellent product experience, stability, and attention to detail and service, and we must treat this market with complete respect. That's why in 2026, we will continue to improve our product line and launch new models. At the same time, we will raise our standards and take a more cautious approach. Long-term product reputation matters. We will focus on stability, ease of use, noise control, and user experience as our top priorities. Also, we will continue to strengthen our product capabilities while we will also focus heavily on building out our channels. A key priority of growing our 2C and SMB business, our product experience has shown that in the consumer market, the core competitiveness comes not only from the product itself but also from the strength of our channels and service system. In 2026, we will make systematic investments in this area. This includes partnerships with online platforms, expanding our offline distributor network, improving after-sales services and content operations, and building more efficient user engagement and conversion methods. Our message is clear. Even in areas where we are still catching up, we are committed to putting in real efforts and resources. And for areas that are key to long-term success, we will go in to make sure the business line becomes a more stable and cycle-resistant revenue contributor. Lastly, I will share our view on the operating pace for 2026 and our preparations. From an operational standpoint, we expect 2026 to show clear stage-by-stage characteristics. Industry demand and pricing may remain under pressure during the first half of this year. Our focus will be on maintaining strong discipline in cash flow and inventory, strengthening product and delivery capabilities, and advancing key practices in power and infrastructure early on. At the same time, we are preparing our supply chain and execution teams for potential demand recovery later in the year. If the industry presents a clear structural opportunity, we will be ready to act quickly with strong execution and a healthy cost structure to capture market share and grow efficiently. We believe that this strategy centered on execution and long-term capability building will allow Canaan to remain competitive within the Bitcoin mining value chain and gradually become a trusted infrastructure participant within the computing power and energy ecosystem. Our goal is to create more sustainable long-term value for our customers, partners, and shareholders. Before concluding, I would like to note that the outlook above contains forward-looking statements. Actual results may vary due to challenges in macroeconomic conditions, industry cycles, regulations, and market demand dynamics. We will continue to communicate with transparency and respond to market expansions through clear, verifiable execution progress. Given recent global macroeconomic uncertainties, including ongoing monetary tightening, evolving geopolitical developments, and heightened volatility in the digital asset market, we maintain a relatively cautious view about the market environment in 2026. After global miners have adopted a wait-and-see approach in response to the recent decline in Bitcoin prices, the sale of mining rigs is facing considerable challenges. We expect total revenue for 2026 to be in the range of $60 million to $70 million. This outlook is based on current market conditions and operating assumptions. However, actual results may differ due to policy uncertainty and market volatility. This concludes my prepared remarks. Thank you, everyone. Now I will hand it over to our CFO, James Jin Cheng. James Jin Cheng: Thank you, Nangeng, and good day, everyone. This is James Jin Cheng, CFO of Canaan Inc. I'm pleased to share our Q4 financial performance with you. To begin my part, I would like to echo Nangeng's perspective on the fourth quarter industry environment. It was a very volatile quarter for the Bitcoin price. Bitcoin reached a new high in October, hitting $126,000 before dropping below $100,000 in November and below $90,000 in December. During the quarter, network hash rate also reached historical highs, significantly impacting the profitability of miners. Fortunately, our operation was robust in Q4. We successfully secured large-scale orders from key clients in the North American market and globally, and our strong supply chain relationships ensured timely production and delivery. In our mining operation, we continued our deployment and seized opportunities for new pilot agreements. Overall, we delivered solid quarterly results in Q4 despite the market dynamics. Let's take a closer look at the details. First, I will highlight our strong top-line results in the fourth quarter and for the full year of 2025. In Q4, we delivered $196 million in total revenue, up 13.4% sequentially and 121.1% year over year. Our total computing power sold also reached a record 14.6 exahash per second. This growth was primarily driven by the massive delivery of our A15 series. Our revenue increased consistently throughout every quarter in 2025. This trajectory peaked at a new quarterly high for Q4. Consequently, our full-year revenue reached $530 million, nearly doubling 2024 results. Within product revenue, our Avalon home series also delivered exceptional growth in 2025, contributing approximately $25 million in revenue. Notably, our Q4 revenue mainly came from the North American market. Revenue from North American customers reached $125 million, accounting for over 75% of our total product sales. This demonstrates that top-tier institutional miners in North America continue to recognize Canaan as a primary long-term partner. Regarding our mining operations and trade risk strategy, we continued to scale our infrastructure while maintaining a robust asset base. By the end of Q4, our installed computing power reached nearly 10 exahash per second, up 7% from Q3. Our digital asset treasury also remains a core pillar of our financial strategy. As of December 31, 2025, we held 1,750 Bitcoins and 3,951 Ethereum. At year-end prices, these holdings were valued at approximately $166 million. While we manage through market fluctuations, this robust reserve provides a solid foundation for our balance sheet and long-term liquidity. Mining revenue in the full year of 2025 was $113.2 million compared to $44 million in the full year of 2024. The increase was mainly due to the increased computing power energized for mining, especially the expansion in the United States. On the operational front, we achieved notable gains in efficiency and supported our liquidity through disciplined capital management. Despite our business scaling up, our operating expenses in Q4 were $38 million, decreasing 6% quarter over quarter. This improvement reflects our efforts to streamline our organization and focus on core strategic projects. Our strong sales and financing activities have also strengthened our cash position. In Q4, we generated approximately $75 million in cash inflow from sales and received approximately $80 million from strategic equity financing and the brief utilization of our renewed ATM. This healthy liquidity funded our Q4 payments of $100 million to secure our wafer supply and $89 million for production and operation. These investments ensure our goal of a flexible manufacturing footprint across Malaysia, the United States, and Mainland China. Consequently, we ended the quarter with a cash balance of $81 million. This aligns with our commitment to strict cash flow discipline, allowing us to navigate market cycles without compromising our strategic roadmap. Reflecting our strong confidence in the company's financial position and long-term shareholder value, we have already repurchased approximately 2.8 million ADSs for $2 million under our $30 million stock repurchase program announced in December. We intend to continue executing this plan optimistically as market conditions allow, underscoring our firm belief in the company's prospects. Turning to our margins, we have taken a proactive approach to address market pressures and de-risk our balance sheet. In Q4, our gross margin was $14.6 million compared to $16.6 million in Q3. This compression was primarily due to three factors. First, we delivered several large-scale institutional orders. These orders are strategically essential for securing our long-term market share in North America. Second, Bitcoin price softened in the latter half of the quarter. This trend weakened the market demand. These headwinds lowered our average selling price. Last but not least, we prioritized the delivery of industrial machines to strategic customers instead of the Avalon Home series in Q4. Additionally, considering the severe Bitcoin price volatility early in 2026, we recorded inventory write-downs of $13.9 million in Q4. These impairments are based on management's latest estimates and reflect our cautious expectations under current conditions. Below gross profit, the year-end dip in Bitcoin prices resulted in a $44 million non-cash fair value loss. Another $15 million non-cash fair value loss was recorded for the conversion of the final batches of preferred shares. There will not be any fair value loss regarding preferred shares conversions for the next quarter. These non-cash items led to an adjusted EBITDA loss of $40.5 million. It is important to note that our cash position remains stable, providing us with sufficient liquidity to fund our operations and R&D plans. Furthermore, our ongoing expansion into the consumer and small and medium-sized business segments is expected to contribute to a more balanced and resilient margin profile over the long term. Finally, I want to outline our cautious yet resilient outlook. We are monitoring the very volatile Bitcoin price in the first two months of 2026. On February 5, the Bitcoin price dropped to $60,000. Low Bitcoin prices triggered machine shutdowns and operations closures for higher-cost miners. Profitability of existing miners is also under pressure recently, including our own mining operations. Given the headwinds and uncertainties, we are taking a very prudent approach to provide our Q1 guidance. We estimate our revenue will be in the range of $60 million to $70 million. In Q1, our priority is to maintain a healthy cash position and de-risk our balance sheet. We will allocate our capital carefully between power source investments and wafer supply for computing hash rate, and we will prepare to capture the next market recovery. This concludes our prepared remarks. Now we are open for questions. Operator: Thank you. We will now begin the question and answer session. As a courtesy to other investors and analysts, please limit yourself to one question and one follow-up. If you have any additional questions after the Q&A session, the Investor Relations team will be available after the call. For the benefit of all participants on today's call, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 1. 1 again. We will take our first question. The first question comes from Ben Summers from BTIG. Please go ahead. Ben Summers: So it's good to hear about strong progress in the supply chain efficiency. Kind of curious how the A16 mass production is progressing and kind of any updates around the timeline there? Nangeng Zhang: I think you're asking about our generation rigs. Right? Ben Summers: Yeah. Nangeng Zhang: Right now, we are sending the A16 SIP machines to our customers. And I think they're doing the testing phase. We are moving ahead with mass production preparations right now. And I think the mass production will start after the Lunar New Year holiday. And we expect it to begin volume ramp-up by the end of the first quarter. Currently, we don't have any issues or anything to broadcast. On the chip side, the chips are already in mass production. And on the production side, our main focus now is refining the product at a system level. And, also, you know, besides the air-cooled version, we will have the liquid-cooled and immersion-cooled models. So now we are working on these different models so we can better match different customer deployment needs and site conditions. I hope this answers your question. Thank you. Ben Summers: No. Awesome. That was super helpful. And then just kind of I know you touched on it briefly, but just curious for a little bit more color on the difference in the margin profile between the home series, the A15, and kind of how you think this can potentially, you know, help keep margins strong moving forward? James Jin Cheng: I will take this question, Ben. I think currently we observed market price has some influence from the Bitcoin price. So it seems like the industrial machines' profitability seems to be under pressure. But it looks like the home series continued without serious competition in the market. So we can still maintain good profitability. But in Q4, on the delivery side, we prioritized the industrial orders because it's from the strategically important customers from North America. Looking forward, I think we will continue to see the home series play a more important role in our category to generate profit. I don't know if I answered your questions, Ben. Ben Summers: No. That was super helpful, and thank you guys for the update. James Jin Cheng: Thank you, Ben. Thank you. Operator: Thank you. We will take our next question. The question comes from Nick Giles from B. Riley Securities. Please go ahead. William Chan: Good morning. This is William Chan speaking on behalf of Nick Giles. Thank you for taking my question, and congratulations on the quarter. It was good to see your heat recovery proof of concept announcement in Canada in early January. So I wonder, can you speak to the size of the TAM for this opportunity, ideally in megawatt terms? And as a follow-up, how scalable is this specific solution? And what are some other ways that you can expand your energy efficiency initiatives going forward? Nangeng Zhang: Thank you. Hello. Morning. I fully understand the market's interest in the new energy and ESG-related computing products. I think the core value for these objectives is transforming wasted and concentrated energy into measurable, tradable computing power, and even for cash flow. However, I'd like to be more candid. These opportunities are highly dependent on specific scenarios, such as resource availability, grid connection conditions, and even compliance pathways. And also the operational capacity. I think, you know, we have been working on this for more than one year. So the scale of each individual project typically ranges from a few megawatts to several tens of megawatts. The true total addressable market largely comes from the number of these points. But we want to caution against overly optimistic calculations like, okay, we have a few megawatts for each site, and there's thousands of points there, and so there's a multi-gigawatt business. We believe that is too optimistic because the business model is still relatively fragmented, and the pace of progress must be steady. So over the past year, we have started systematically screening potential sites for several POC projects, and we have already implemented some of them, collecting initial operational data. Not only the Canada one, there are many others. But moving forward, our focus will be on three key areas. First is the data and methodology standardization. The second is productization and the model. We aim to change the POCs into replaceable modular solutions. And third is replication and expansion. This is a service. I think once we have reached the surface, then we'll continue to expand similar projects faster. I hope I answered your question. Thank you. William Chan: Yep. That's very helpful. Thank you, and continue best of luck. James Jin Cheng: Thank you. Operator: We will take our next question. Your next question comes from the line of Mark Palmer from Benchmark. Please go ahead. Mark Palmer: Yes. Good morning. As you think about Canaan's manufacturing footprint, from a long-term standpoint, what would that look like, and where would the company's US manufacturing place, you know, to adjust for the tariff environment, fit into that? Nangeng Zhang: Yeah. I think over the last year, the external environment has been very dynamic. Tariffs move back and forth. Compliance requirements become tighter in many markets, and it's very volatile. In this context, computation is not only about the price and the efficiency. It's also about the compliance, capability, display, and how fast you can adjust. So now the supply chain issue is combined with compliance. But we treat compliance as a baseline. So we keep high standards across sales, delivery, and regional operations. Despite multiple policy changes last year, we did not take any meaningful surprise loss from policy swings. This is not always the case in this industry. More particularly, some peers have a heavier fixed asset exposure in certain regions. And so when the policy or the market trends quickly, their adjustment cost is higher. We do not have, you know, firstly, our self-mining is 100% outside China. And also, we build multiple region production and assembly setups across Mainland China, South Asia, Malaysia, and even in California, North America. So this really gives us resilience and continuity as regions become less predictable. So, you know, I think for your question, North America is our most important market. And last year, we built thousands of machines from our US manufacturing facilities. So this year, we will carefully review the whole supply chain and make it safer for US customers and expand our US manufacturing. Yeah. Thank you. Mark Palmer: That's helpful color. Thank you. Thank you. Operator: We will take our next question. Your question comes from Kevin Cassidy from Rosenblatt Securities. Kevin Cassidy: Hi. Yeah. Thanks for taking my questions. I wonder at what point price do your customers break even for Bitcoin mining? I think it had been $90,000. Has that changed? James Jin Cheng: Thank you, Kevin. I think we have two lines for this breakeven point. One, including the price of the machines, we say it's the all-in payback level. I think it's almost like a $100,000 to $110,000 range for Bitcoin price to stay there. And, you know, the hash price should be like $55 per PH per day. Something between that, that's the all-in payback level. Another interesting metric to measure this is the marginal shutdown level because we only consider the energy cost, the variable cost when we start the operation because the CapEx is already a sunk cost. So in this kind of scenario, it's quite lower compared to the previous all-in payback level. For various miners, of course, it's different. If we use our competitor's machine as a comparison, if the electricity cost is like 6¢ and we use our competitor's S21+, we see the shutdown price is like $50,000. And if it's S19 XP, it's $66,000. And then look back to ourselves or our mining operation. Our average cost is like 4.3¢ globally. So our shutdown price for the A15 Pro version is like $37,000. When Bitcoin price hits like $37,000, we have to shut down the machine. But, of course, in our mining sites, we do have some older generation machines. So it varies from, you know, like $40,000 to $50,000 to $60,000 in certain cases. So I think that's the part. If we change that to the A16 series, it's 12.8 joules power efficiency, and the shutdown price is about $30,000, you know, for Bitcoin price. I think this calculation is based on the latest hash price. It always changes because of the network, the total network hash rate changes, and also the Bitcoin price changes. So I think in the current stage, we have already observed in December, early January, and early February, some of the operations in the network have been shut down, and the total hash rate moves back to like 900 exahash from previously 1,100 exahash. So we do see a lot of needs in the short term have not been released to the manufacturers. But in the longer term, when the electricity has already been prepared for mining, they will come back asking for better machines, for the latest generation machines. That's something that happened in the past cycles, no matter bear market or bull market. Kevin, I think this answers your question. Kevin Cassidy: That was a great answer. Thank you. Yeah. Very good. Thank you. As you get more orders for the leading edge, then what is your foundry availability on the A16, and what's the cost difference for a wafer versus A15? Nangeng Zhang: Yeah. I'll do this one. Since last year, with our assessment of market cycles, we have maintained a fixed price interest strategy with low stock levels. And we secured, but we still secured critical foundry capacity and supply chain resources in anticipation of market recovery this year. Currently, global foundry capacity is indeed very tight, particularly for advanced nodes, which are seeing surging demand for AI-related sectors. But we secured our position earlier and maintained it because we have long-term partnerships. We're utilizing rolling forecast prepayments and collaborative ramp-up mechanisms. So our access to wafers and key components remains stronger than the industry average. What I can say is, yeah, industry average. So regarding the cost, we cannot disclose specific product unit costs for A16 faces upwards pressure in wafers, packaging, and certain system components compared to A15. I think it's for sure. You know, even the metal is rising in price. So our plan is to offset these costs through yield improvements, testing optimizations, and designing more efficient systems. So, overall, what I can say is we expect the unit cost increase for A16 to remain within a manageable range. Ultimately, we measure competitiveness by our customers' life cycle economics, including power efficiency, returns stability, and delivery certainty. So I think if the market recovers, our cost and our performance can give you an opportunity to have good ASP at that time. Yeah. Thank you. Kevin Cassidy: Great. Okay. Thank you. Operator: Thank you. We will take our next question. Your next question comes from the line of Kevin Dede from H. C. Wainwright. Please go ahead. Kevin Dede: Hi, Nangeng and James. Thanks for having me on the call. A couple of things for you. One is just I know you spoke to strategic priorities, but I just like to understand the one-gigawatt facility objective and what that pipeline looks like. Maybe you could add some color there, please. Nangeng Zhang: Yeah. Okay. Hello. Good morning. Yeah. We will share more details when the time comes. But currently, we are quite confident in the gigawatt-level power opportunities, which is based on our results from work at this stage. We have already worked on this for maybe close to one year, I think. Yeah. Second, yes, we believe our goal is to co-locate AI HPC and Bitcoin mining much better. So we are talking about high-quality power resources. Kevin Dede: Okay. Thanks, Nangeng. James, you mentioned, I think, a cash outlay of $100 million for wafers and $80 million in operating costs, I think, in the fourth quarter. Can you offer more detail on the wafers you secured? And of the 14 exahash sold, you usually give us sort of an average price per terahash, and I was wondering if you could offer some color on that and whether or not that figure would include the home series. James Jin Cheng: Yeah. Thank you, Kevin. I think we start from the average selling price. I think the Q4 average selling price is $11.3, slightly lower than Q3, but I have explained a little bit on the margin side just because our average selling price for the institutional miners in a big order is usually lower than the small orders for the retail miners. I think that's the case. And, also, we prioritized the industrial miners in Q4 instead of the home series. Even the margin side, the home series is better. But we have to make sure our strategic partner, the client, feels satisfied to get our delivery on time. So we tried our best in Q4. And, you know, still a few batches were delayed to early January. But we completed most of the deliveries in Q4. I think that's very helpful to the client. But not helping our financials. It looks like the profitability part is not as good as we expected for Q4. Just like I mentioned, the $38 million is the total expense for Q4. We did some work, which is slightly lower than Q3, in streamlining the organization. And I think the wafer supply side, the $100 million secured is most likely the wafer delivered to the customers and also some of the inventories carried to Q1. It's ongoing. We still, but with a smaller volume of payment, continue that trajectory in Q1 to our wafer partner. I think that's some color I added to this question, Kevin. Kevin Dede: Thank you very much, James and Nangeng. Appreciate being on the call. James Jin Cheng: Thank you, Kevin. Thank you. Operator: Thank you. Once again, if you wish to ask a question, we will take the next question. The question comes from Kevin Dede from H. C. Wainwright. Please go ahead. Kevin Dede: Hi again, gentlemen. I figured I'd hop on again given the opportunity to do that. Nangeng, can you talk a little bit about your product development? I understand the 12 joules per terahash target for the A16, but you also mentioned chip development that could push you down to maybe five or six joules per terahash. Can you talk about that and whether or not you see a product cycle shortening and when you might think that latest generation chip might be in the market? Nangeng Zhang: Yeah. I think it's a very open question. I think for the A16 series, currently, we achieved 12.8 joules for the ASIC XP with manageable cost rise. So our target is to, when the market recovers, you know, currently because of the deep dive for the Bitcoin price, so the whole market is some kind of freezing for a few weeks maybe. And after the market recovers, the competition comes back, we can have very competitive cost and performance to our competitors and give benefits to our customers. And for the next generation, yes, we have already moved to the next generation development for the chips. But, you know, because we are already at sub-nano process nodes, I think the benefits from the process itself are very tightened now. And, also, the cost for the manufacture of the chips is rising a lot. We are trying different methods to further improve the energy efficiency. But it looks like after, I mean, after the 12 joules stage, when we come to the sub-10 joules product, it's very, very hard to say that the manufacturing cost is still manageable if we are using today's standards. We already observed that our competitors' products have to be priced very high because we know the rough cost for the system. You cannot sell at a loss forever. Right? So, currently, in many different internal meetings, we are continuing to discuss if our target is the best power efficiency, then we may have to pay for, like, twice or triple the cost. How can we avoid this kind of situation? Because the most important part is to let the TCO for our customers. Yeah. So also, we, you know, we also started the big-scale infrastructure in the US. So I think on the operational side, we are not only the equipment provider, we also got involved in operations. Any pains our customers have previously, we will react to ourselves. So we are thinking about this more and more carefully. Yeah. So, currently, I think in conclusion, I think the development for the new system, we will not accelerate, but also it will not delay. It will just go at a very natural progress. We are sure we will have new products this year. And, yeah, and also, you know, we hope at that time, you know, the AI HPC will not relocate 100% of the semiconductor capacity. Yeah. And also, we don't have, like, the DRAM and HBM kind of memories. So sometimes we are in a very good position. Still, we can use the rapid or, you know, sometimes the peak capacity is released from the foundries. We can use this kind of capacity to get one-time deals to fill our inventory. So this is good. We are waiting for this kind of opportunities. Yeah. So, basically, I think the industry is not coming to the end. It's still going at a normal speed. Yeah. This is my personal view. Yeah. Thank you. Kevin Dede: Okay. Okay, Nangeng. Yeah. Thank you for the detail there. Does Canaan have a self-mining target for 2026? Congratulations for reaching 10 exahash. I know that was a target in '25. I was wondering if you thought about and are willing to communicate where you hope to be at the end of this year. Nangeng Zhang: Yeah. I think our priority is R&D and delivery to our customers first. And because of the current market situation, so we moved the priority to allocate energy resources instead of just putting more rigs on the shelf. So, yeah, the infrastructure will give us the ability to scale it up when the right window opens. Yeah. So, currently, I don't have a fixed number for this year. We have internal goals for electricity infrastructure. Yeah. So, yeah. And after that, if the window opens, we will rapidly ramp up the hash rate. I think controllable energy resources and facilities will give us more opportunities to try different business models and to provide different kinds of products to our customers. Yeah. I hope, you know, the hash rate sales can come through to our mainstream maybe next year. Yeah. Operator: Thank you. As there are no further questions now, I'd like to turn the call back over to the company for any closing remarks. Gwyn Lauber: Thank you for joining the call today, and we look forward to speaking with everyone throughout the quarter. Thanks. Operator: Thank you. That concludes the call today. Thank you, everyone, for attending. You may now disconnect.
Operator: Greetings and welcome to the Incyte Fourth Quarter and Year End 2025 Financial Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. You may be placed in the question queue at any time by pressing star one on your telephone keypad. We ask you to please limit yourselves to one question, then return to the queue. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star 0. It's now my pleasure to turn the call over to your host, Alexis Smith, Vice President of Investor Relations. Please go ahead. Thank you. Alexis Smith: Good morning, and welcome to Incyte's Fourth Quarter and Full Year 2025 Earnings Conference Call. Before we begin, I encourage everyone to go to the Investors section of our website to find the press release, related financial tables, and slides that follow today's discussion. On today's call, I'm joined by William Meury, Pablo Cagnoni, and Thomas Tray, who will deliver our prepared remarks. Stephen Willey, David Neil Lebowitz, Matteo Trotta, and Mohamed Issa will also be available for the Q&A portion of today's call. I would like to point out that we will be making forward statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors discussed in our SEC filings for additional detail. I will now hand the call over to William Meury. William Meury: Alexis, thank you, and good morning, everyone. I'll cover two topics today. First, I'll give an overview of our performance in 2025. Then I'll turn to our outlook for 2026 and beyond, and the steps we're taking with our core business and pipeline to transition Incyte. As I touched on at JPM, there were several achievements in 2025 that stand out. First, our business exceeded expectations on three levels: total sales, Jakafi sales, and our core business sales ex-Jakafi. Second, we fundamentally changed the shape and maturity of our pipeline. We moved multiple assets from early to late-stage development. We now have several outlier opportunities for the treatment of MPNs, pancreatic cancer, colorectal cancer, and HS, that have the potential to drive revenue, earnings, and cash flow into the next decade. Finally, regulatory applications for Jakafi XR, Opsilor for moderate AD, and povastatinib for HS in Europe were submitted on a timely basis. The point here is we have much greater visibility into the potential growth profile of the company now than we did at the start of 2025. Everything we accomplished this past year commercially, scientifically, and operationally has created the foundation for an inflection point in '26 and beyond. Now I'll speak to our performance in '25 and the outlook for '26. Turning to revenue, the business performed exceptionally well this past year. Revenues in the fourth quarter totaled $1.51 billion, up 28% versus the prior year. For the full year '25, revenue totaled $5.14 billion, up 21% year over year. This was driven by strong commercial performance and an increase in milestone and contract revenue. Net sales in the fourth quarter totaled $1.22 billion, representing a 20% increase versus the prior year. For the full year '25, net sales were $4.35 billion, also up 20% year over year, exceeding both expectations and our guidance. Growth was broad-based with nearly every product contributing meaningfully. Focusing on our core business, Jakafi sales totaled $1.26 billion, representing over $400 million in growth and a 53% increase versus 2024. Opsalora, Niktimbo, and Manjoovi were the largest absolute growth contributors. This core business is expected to grow over 30% in '26 and has the potential to grow at a 15% to 20% five-year CAGR and approach $3 to $4 billion by 2030. Now a few comments about the key products, Jakafi, Opsilora, and our hematology and oncology products. Starting with Jakafi on slide nine, fourth quarter and full year sales exceeded expectations. In the fourth quarter, sales were $828 million, an increase of 7% versus the prior year. Full year sales totaled $3.093 billion, representing an 11% increase year over year. Jakafi remains an integral part of our business, and keeping it healthy is a priority. It continues to serve as a funding source for our pipeline and for future product launches. A few comments on the fundamentals of this business. First, prescriptions increased 11% in the fourth quarter and 9% for the full year 2025 despite a growing base and competition. Second, demand was up across all three indications. PV will be the largest and fastest-growing indication in '26. And with a penetration rate of only 30%, versus 60 to 70%, in frontline MF, it should be a reliable and significant source of growth going forward. And finally, formulary coverage for Jakafi remains excellent with near-complete coverage across plans. In '26, we expect net sales to be $3.22 billion to $3.27 billion. Prescriptions are expected to grow at a high single-digit rate, representing mid-single-digit sales growth compared to 2025. In terms of '26, given this timing, the second half of the year will be mostly about formulary access. '27 will be focused on conversion. We'll share more about our launch plans in future calls. Now, we'll turn to slide 10 for Opsalor. Net sales in the fourth quarter totaled $207 million, an increase of 28%, and full-year net sales were $678 million, up 33% versus 2024. Growth was driven by increased penetration in the US AD and vitiligo markets, where Opsilora prescriptions climbed 24% and 15%, respectively. The pediatric launch for Opsilor AD is off to a strong start in the United States, with sales already annualizing around $30 million. Both dermatologists and parents are increasingly seeking nonsteroidal options for atopic dermatitis, driven by concerns about long-term steroid use. International sales for Opsilora and vitiligo doubled to $130 million in 2025. In '26, we expect sales of $750 million to $790 million, representing roughly a 15% increase at the midpoint. This estimate is based primarily on continued double-digit volume growth in the United States for AD and vitiligo, partially offset by price actions to expand formulary coverage, as well as sustained double-digit growth internationally off of a larger base as we lap the strong full-year launch for Vitiligo in Europe. Most of the benefits of the moderate AD launch in Europe will be seen in '27 and beyond. As I said, our aim long-term is to nearly double the size of this business. The nonsteroidal segment of the AD market is growing 20% year over year, creating a significant tailwind as prescribing migrates from topical steroids to nonsteroidal options. We still have a modest share of each of those segments, so there is substantial headroom for growth. In addition to this, our international business and new indications will serve as meaningful catalysts for the next phase of expansion. And now on slide 11, we'll turn to our hematology and oncology products. Net product sales in the fourth quarter were $187 million, up 121% compared to the prior year. Full-year '25 sales were $583 million, representing an 83% increase compared to 2024, driven by Niktymbo, Manjuli, and Zionis. Nictimbo finished its first year at $152 million. We achieved broad penetration and deep utilization of BMT centers, reaching more than 1,400 patients with 13,000 infusions. In line with expectations, Dictimbo is being used widely in the fourth-line setting with increasing preference in the third line. As it relates to Manjubi, sales were up 20% versus the prior year based on a strong launch in follicular lymphoma in 2025. As you know, we released data in January in frontline DLBC where Monjube plus lenalidomide showed a 25% improvement in PFS, improving on R-CHOP chemotherapy, which is a regimen that still accounts for 50% of the first-line DLBCL market. This year, we plan to present the data at an upcoming medical meeting, work to incorporate MONJUVY into appropriate guidelines, and submit an SBLA in the first half with a potential FDA approval by early '27. Looking ahead, we've set our full-year guidance for the hematology and business at $800 million to $880 million for the year, representing approximately a 40% to 50% increase compared to our performance in '25. Now three takeaways about '26 that I'd like to reinforce before turning over the call to Pablo. First, our core business excluding Jakafi has the potential to be as large as Jakafi is today by 2030. A key part of that growth will come from product launches we expect late this year and early '27. I mentioned XR, Opsalor, and Manjoovi earlier, so I want to make a few comments about where we are with povastatin. The NDA for povastatin in HS has been submitted, and we anticipate filing acceptance this quarter. As you know, HS is the first of potentially three indications, the others being PN and vitiligo. POVO has the potential to be the first FDA-approved oral treatment for HS. Here, we have an opportunity to capture patients at two critical inflection points. First, in the pre-biologic setting, a population with no FDA-approved treatments today. These patients are cycling through antibiotics and steroids that don't address the underlying disease biology. Second, the post-biologic setting where IL-17s and TNFs are used, but where partial responses are common. An effective oral option could be transformative in both treatment settings. We'll talk more about launch plans in future calls. Second, our pipeline has the breadth and depth to support top-tier growth in the potential of two to three times our top line over time. In '26 alone, we will have 14 pivotal trials underway across seven assets by the end of the year and multiple data catalysts. Pablo will walk through the status of our key programs and the potential to double our business over time. And finally, we view BD as a multiplier, a way to extend and strengthen the core. We have the capacity to pursue a broad range of opportunities. Ultimately, the size and nature of any deal will be dictated by strategic fit and the potential for durable revenue, earnings, and cash flow. Now I'll hand it over to Pablo. Pablo Cagnoni: Thank you, William, and good morning, everyone. As William mentioned earlier, in 2025, the pipeline reached a new level of breadth and maturity, setting up a materially different outlook for the company going forward. First, our approved portfolio and regulatory footprint broadened with approvals for Mounjube in follicular lymphoma, Zynes in squamous cell anal carcinoma, and Obsilura in pediatric atopic dermatitis, alongside regulatory submissions for Jakafi XR, Opsilura, and povastatinib. Second, positive clinical data meaningfully advanced multiple programs, including phase three registrational data for povircitinib in hidradenitis suppurativa or HS, and early-stage results supporting pivotal development for the mutant color program in MFNET, KRAS G12D in pancreatic cancer, and TGF beta receptor two by PD one bispecific in MSS colorectal cancer. In 2026, we will continue to build on this momentum through additional approvals, regulatory filings, pivotal data readouts, and trial initiations. For a late-stage pipeline, we anticipate FDA filing acceptance for policitabine in HS this quarter, and we plan to submit an SBLA for tafasitamab in first-line DLBCL in 2026. With these submissions underway, we expect the potential approval and launch of four products in late 2026 and early 2027. The emphasis in '26 shifts to advancement across the portfolio, as we expect seven data readouts this year, including the positive tafasitamab data already shared in January, and 14 pivotal trials underway across hematology, oncology, and immunology by year-end. Together, this reflects a pipeline that is increasingly focused, more mature, and positioned to translate scientific progress into meaningful impact and long-term value creation. The hematology portfolio balances two priorities: expanding the addressable market of established products such as tafasitamab across the full spectrum of B cell lymphomas and axatilamab in graft versus host disease, and advancing novel therapies for myeloproliferative neoplasms via our MPM portfolio of targeted therapies. In GVHD, advancing Nictimbo in two first-line studies evaluating it in combination with ruxolitinib as well as in combination with steroids. Data from these trials are expected in early 2027 and early 2028, respectively. Our MPM pipeline remains a key area of focus where we're advancing three targeted therapies: nine eighty nine, our mutant cholera monoclonal antibody, seven eight four, our mutant COLR by CD three bispecific antibody, and o five eight, our JAK two v six one seven f small molecule inhibitor. Each of these programs is designed to address a well-defined disease driver with the potential for disease-modifying activity and the opportunity to fundamentally change how MPNs are treated. Looking ahead to upcoming milestones, we expect to report phase one data for o five eight in the second half of this year, and phase one data for seven eighty four in 2027. With that context, I would like to turn to slide 17 to review our progress with September and the breadth of development efforts for this program. As a reminder, last year we presented phase one data evaluating September in cholera-positive patients with essential thrombocythemia and myelofibrosis. The data presented at EHA and ASH in 2025 reinforced the potential of our approach to directly target the driver mutation, addressing both the underlying disease and key clinical manifestations. Importantly, this proof of concept results provide a strong foundation to advance nine eighty nine into pivotal phase three development. We expect to initiate our phase three trial evaluating nine eighty nine in second-line collard positive ET patients in mid-2026, following regulatory alignment in the first quarter. Turning to myelofibrosis, we expect to initiate a Phase III trial in second-line MF in 2026, following regulatory alignment midyear. In parallel, we continue to advance our ongoing phase one study, which is enrolling second-line ET, second-line MF, and first-line MF cohorts. We plan to share updated data in second-line ET and second-line MF midyear and new data from our cohort evaluating nine eighty nine as a monotherapy and in combination with ruxolitinib as a first-line therapy in the second half of 2026. Finally, we're advancing a subcutaneous formulation of nine eighty nine. We aligned with the FDA on this development strategy last month, and we plan to initiate a phase one study during 2026. In December, tafasitamab was approved in both Europe and Japan in combination with lenalidomide and rituximab for the treatment of adult patients with relapsed or refractory follicular lymphoma following at least one prior line of systemic therapy, further expanding its global footprint. In January, we reported positive top-line results from the pivotal Phase III FRONT MIND trial, which evaluated tafasitamab and lenalidomide in combination with R-CHOP as a first-line treatment for newly diagnosed high-grade DLBCL with IPI of three to five. The study met its primary endpoint of progression-free survival and achieved its key secondary endpoint of event-free survival by investigator assessment with no new safety signals observed. We plan to present additional data from the frontline study, including overall survival and subgroup analysis, at an upcoming medical congress this year. Based on these results, the SBLA for ProSigned DLBC BCL remains on track for submission in 2026. If approved, Mondruby has the potential to address the full spectrum of B cell lymphomas. Turning now to oncology, the oncology portfolio focuses on advancing novel therapies that target well-validated but historically difficult pathways in high-incidence cancers, including colorectal, pancreatic, and ovarian cancer. Starting with a nine o, our first-in-class TGF beta two by PD one bispecific antibody. Based on data we presented at ESMO, and following alignment with the FDA, we initiated a phase three study in December evaluating a nine o in combination with Falfox and bevacizumab compared to placebo in combination with Falfox and bevacizumab in first-line MSS colorectal cancer patients. Next, six six seven, our CDK two inhibitor, is being evaluated in patients with platinum-resistant ovarian cancer with cyclin E1 overexpression, a biomarker-defined population with significant medical need. The Myastra clinical program consists of two ongoing trials, a phase two single-arm study and a phase three study versus investigator's choice chemotherapy, as well as a planned phase three study evaluating six sixty seven in the first-line maintenance setting in combination with pevacizumab. Seven three four is a highly selective KRAS G12D inhibitor that has demonstrated promising antitumor activity in G12D mutated solid tumors, including pancreatic ductal adenocarcinoma or PDAC. Last month, at ASCO GI, we presented new efficacy and safety data evaluating seven thirty four both as a monotherapy and in combination regimens in patients with PDAC. At the planned phase three dose of twelve hundred milligrams a day, seven three four as a monotherapy demonstrated a thirty seven percent overall response rate in a predominantly third-line and later population, with a disease control rate of seventy eight percent. In combination with standard of care therapies, seven three four demonstrated a manageable tolerability profile when combined with botchemicitabine plus nab-paclitaxel and modify FOLFIRINOX, without compromising chemotherapy dose intensity. Taken together, this data supports the potential for seven thirty four to be meaningfully integrated into frontline treatment for patients with PDAC. Earlier this year, we gained alignment with the FDA on the registration program and are on track to initiate our phase three trial in first-time PDAC in the first quarter of 2026. If approved, seven three four would represent the first G12D targeted therapy for the treatment of patients with pancreatic cancer. With pivotal trials now underway for CDK two, TGF beta receptor by PD one, and KRAS G12D, our strategic focus is turning to how we can expand these programs across additional tumor types and clinical settings. Our objective is to broaden the potential impact of these programs and reach more patients over time. We expect to provide updates during 2026. Finally, in IAI, we have a JAK anchor franchise with topical to oral solutions that span across mild to severe immune-mediated dermatological conditions. First, an update with Opsalura. In early 2025, we shared results from the phase three program in prurigo nodularis, where Opsilura met its primary endpoint and demonstrated statistically significant improvement in itch compared to placebo in one of two registrational studies. In January, we received FDA feedback indicating that an additional clinical efficacy study will be required to support registration for this indication. As a result, we have decided to pause further development of Seleura MPN at this time. Opsalura has also been evaluated in a large phase three registrational program as a topical treatment for mild to moderate hidradenitis suppurativa, with results expected from the true HS1 and true HS2 trials later this year. Hironolitis suppurativa is also the most advanced indication for a novel JAK1 small molecule inhibitor. Earlier this year, we presented twenty-four-week phase three data that further reinforced the differentiated clinical profile of demonstrating deep and sustained improvement across multiple key endpoints. Importantly, povircitinib also showed a rapid and robust reduction in skin pain and draining tunnels, a defining symptom for patients and a critical treatment goal for clinicians. From a regulatory standpoint, we submitted the MA to the EMA during 2025 and anticipate acceptance of the NDA filing by the FDA in 2026. Beyond HS, our phase three registrational trials in vitiligo and PN continue to progress well. In vitiligo, we anticipate data from our two registrational Phase III trials STOP V1 and STOP V2 in mid-2026. In PN, we anticipate data from our stop PN one and stop PN two studies expected by year-end. Finally, we continue to explore its broader potential with phase two proof of concept data in asthma anticipated in 2026. Overall, 2026 is a pivotal year for Opsilure and povastatin, with important key regulatory and clinical milestones across all evaluated indications. To close, we have a catalyst-rich year ahead, with multiple late-stage data readouts, regulatory milestones, and pivotal trial initiations across our three core franchises, underscoring the breadth, depth, and maturity of our pipeline. We look forward to an exciting year of execution and to providing continued visibility as these milestones unfold. With that, I'll turn the call over to Thomas Tray for a financial update on the quarter. Thomas Tray: Thanks, Pablo. As William mentioned earlier, our total revenues and product revenues for the quarter were $1.51 billion and $1.22 billion, respectively, increasing 28% and 20% from the prior year. For the full year, our total revenues and product revenues were $5.14 billion and $4.35 billion, respectively, increasing 21% and 20% from the prior year. Our GAAP R&D expenses were $611 million for the quarter, increasing 31% from the prior year. Our GAAP R&D expenses were $2.05 billion for the year. Ongoing R&D expenses increased 8% year over year, driven by continued investment in our late-stage development assets. Moving to SG&A, GAAP SG&A expenses were $390 million for the quarter, increasing 19% year over year. Our GAAP SG&A expenses were $1.38 billion for the year, increasing 11% year over year, primarily driven by costs associated with the U.S. Oncology product launches in 2025 and the timing of certain other expenses. Ongoing operating expenses for the full year 2025 increased 11% year over year compared to a 19% increase in ongoing revenues during the same period, leading to a continued increase in operating leverage and margins. I'll now turn the call back over to William Meury. William Meury: Thanks, Thomas. Before we close, I want to reiterate our revenue guidance and address our expense outlook for 2026. As mentioned earlier, we have set full-year '26 revenue guidance of $4.77 billion to $4.94 billion, representing a 10% to 13% increase from the prior year. This includes net revenue expectations for Jakafi of $3.22 to $3.27 billion, Opsilora of $750 to $790 million, and hematology oncology of $800 to $880 million. Sales for our core business ex-Jakafi will range between $1.57 billion and $1.69 billion, representing roughly a 30% growth rate at the midpoint in 2026. As it relates to expenses, I think we've achieved the right balance between maintaining financial discipline and ensuring we are not underfunding strategic initiatives or compromising our growth prospects. We will continue to get leverage out of this business where we can, so that we can create financial breathing room to invest where it matters most. Ultimately, what we're solving for is the steepest possible growth curve post-'29 and durable earnings and cash flow. We expect total GAAP R&D and SG&A operating expenses to be $3.495 billion to $3.675 billion in '26. At the midpoint, this represents a 4% increase versus the prior year, driven primarily by targeted investments in our late-stage pipeline and launch readiness while maintaining tight control elsewhere. We expect R&D to be up roughly 10% from last year, consistent with advancing programs that we believe can meaningfully shape the company's future. 80% of our investment in R&D is concentrated in the seven programs Pablo reviewed earlier. As it relates to SG&A, G&A will be down 10% compared to last year, while sales and marketing is modestly higher to support the key launches in the second half of the year. Together, SG&A will remain relatively flat year over year, reflecting deliberate reallocation rather than broad-based spending. Finally, we anticipate the cost of goods to remain relatively stable in the 8% to 9% range of net sales. We have an excellent set of opportunities in front of us and a path to replace Jakafi. What matters most right now, like at any company, is execution, getting things done, which means orchestrating product launches, running multiple phase three trials to tight timelines, and managing the business at a detailed level. With that, I'll turn the call over to the operator for Q&A. Operator: Thank you. We'll now be conducting a question and answer session. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And as a reminder, we ask that you please ask one question, then return to the queue. Press star 1 to be placed in the question queue. Our first question is coming from Marc Frahm from TD Cowen. Your line is now live. Marc Frahm: Hi. Thanks for taking my questions and congrats on the progress. Maybe to start with Pablo, for the CALAR pivotal programs, just your latest thoughts as you've gotten into designing the phase three, just kind of how to address the potential differences for nine eighty nine and dosing some of the different calR mutations to ensure full potency. Is the best approach to start low, titrate up for those that need it, maybe prospectively wrap people to different starting doses, or is it just to simplify things and max out the dose for everyone? And then maybe just a quick clarifying thing on the commentary around Opsolar pricing. How much of that was driven by your entry into new markets and needing to access those versus maybe some of the competitive launches putting pressure on the existing indications? Pablo Cagnoni: Yeah, go ahead. Pablo will take the first one. Thanks for the question, Marc. Good morning, Marc. So we're going to discuss this with the FDA this quarter. So I'm going to try not to get too far ahead of ourselves. What we're proposing in principle and for the ET second-line study, which we intend to initiate this half in 2026, is first of all, the enrollment would be in all patients, patients with all types of mutations, both type one and non-type one mutations. And we're going to discuss with the FDA a dosing strategy which we think will address the differential potency of nine eighty nine across the mutations that you brought up in your question. We're confident that we have a good strategy. We're also going to discuss the primary endpoint of the study, which obviously will be some version of hematologic response, but the question there is the timing for the evaluation of the primary endpoint, which we would like to discuss with the agency. So all in all, I think we're in a good position. I think we submitted a good package. We look forward to interacting with the agency, and we'll provide an update later this year. William Meury: Thanks, Pablo. And, Marc, as it relates to Opsalor, it's not a competitive issue. We take a very long-term view of Opsalora, have exclusivity to the end of the next decade. We just launched a pediatric indication. We potentially could have an HS indication. The market is really moving, as you know, as I mentioned, prescribing migrates from steroidal topicals to nonsteroidal topicals. This was about improving formulary coverage for the long term at the major PBMs so that it's a frictionless experience for dermatologists and patients. And I would expect the impact on ASP in '26 to roll off in 2027 and beyond. We'll be providing fewer discounts in the future than we did in the past. That's it. Thanks for the question. Operator: Thank you. Next question is coming from Tazeen Ahmad from Bank of America. Your line is now live. Tazeen Ahmad: Hi, guys. Good morning. Thanks for taking my question. Also, one on Opsalora. So can you just give us your sense of what the uptake is in the current approved indications? And the average number of tubes that are being used? We understand the importance of being on formulary, but we'd also like to get a better sense of how to better model sales on a go-forward basis. Thanks. William Meury: Yeah. I can break this down a little, Tazeen. First, the AD business is growing at almost 20% year over year. You saw that in our 25 results. And then you have a vitiligo business that's growing in the mid-teens. And roughly, 60% of our business is AD, and roughly 40% of it is vitiligo. I would also comment that we launched for pediatrics in 2025. And that business, when you look at prescription data on a weekly basis, is already annualizing at $30 million. So when you're thinking about modeling Opsalora, that business is going to grow over the next five years at about a 10% CAGR. That's how we think about net sales. The other piece of Opsalor that you have to think about is the international business. Now internationally, we finished '25 with $130 million in sales in Vitiligo. We're launching for moderate AD in that same market in the second half of the year, most of the benefit will be in '27. The AD market is five times the size of the vitiligo market. So I estimate there's probably $300 million in incremental revenue for Opsilora internationally over the next five years. So we're going to finish the year at roughly $700 million, give or take, just below. $300 million of that comes from the United States driven by AD and Vitiligo. And then $300 million internationally just with the launch in Modern AD. What I haven't factored into this is if we get an indication for HS for Opsilor at the 2027. Most of our growth will be volume. We expect some modest price actions over the next several years. I think most of the heavy lifting as it relates to securing formulary coverage and the investment in that is behind us. That's how you think about this business. Essentially, you're going to grow at a CAGR of, call it, 10 to 15%. Thanks for the question. Operator: Thank you. Next question today is coming from Michael Schmidt from Guggenheim Securities. Your line is now live. Michael Schmidt: Hey. Good morning, guys. This is Rosie on for Michael. Thanks for taking our questions. Just some questions on Frontline. I guess, longevity succeeding in a frontline PLBCL, you had mentioned that, you know, fifty percent of patients are receiving R-CHOP. But just help us understand how you're thinking about the overall opportunity for Monjuvi in this setting and just positioning versus Polyvi. And then a quick follow-up. I was on the trial, with the IPI eligibility criteria, it seems like the trial would maybe have a higher enrichment of patients with a poor prognosis. So I guess in this context, how should we think about the PFS benefit that you reported and are there any implications here for Monjuvi's potential use across a broader frontline population? Thank you. William Meury: Great questions. I'll have Pablo answer the second question and then we'll double back and answer the first question. Thanks, Pablo. Pablo Cagnoni: So you're correct. The study was focused on patients with IPI three to five, and that is a group with the worst prognosis compared to what has been reported by some of our competitors in the frontline DLBCL setting. I also would encourage you. What we know today, obviously, as mentioned in the script, is that about half the patients are still getting R-CHOP. And the recently introduced competitors in this space do not address the need of all patients with DLBCL. As you know, there's an entire subset of patients here with GCB DLBCL that are not currently addressed by one of the more recent entries in the space. We look forward to showing the full benefit of MONJUVY in this patient population. We think that the benefit in PFS that we reported is very competitive. As you know, the safety profile of Mounjube is very well established in this context. So we'll discuss the results in more detail over the course of the year. But we're very encouraged by what we're seeing across the entire spectrum of patients on DLBCL with IPI three to five. I'll just make a couple of comments, and then I'll ask Mohamed Issa, who runs Manjoovi, to finish up. Right now, we're going to have, by the '26, early '27, a three-indication product. And we'll finish this year somewhere in the range of the mid-$200 million. With an indication of frontline DLBCL, and I don't see it as a fight to the death between Polyvia and Manjoovi. We have a very positive study in frontline DLBCL with clear separation in terms of PFS. It's simply an intensification strategy with Manjoovi being added to LEN and R-CHOP versus a substitution or replacement strategy with Polyvi. And so there's incremental revenue associated with Manjoovi that will support building this core business in 2030 to $3 to $4 billion. Mohamed, do you have anything to add? Mohamed Issa: Yeah. Thanks. Thanks, Rosie, for the question. First-line DLBCL represents the largest potential opportunity for Manjoovi with approximately 30,000 patients treated annually. And fifty percent of those patients, as was mentioned, are still being treated with R-CHOP today. And as William just described, Mounjeevi is an addition to R-CHOP versus replacing R-CHOP. And as Pablo mentioned, the full spectrum of efficacy across all different types of patients with the PFS benefit that has been communicated, I think positions Manjoovi not just for short-term growth, but continues to make Manjoovi a meaningful contributor as you heard from William and others around our growth story in 2029 and beyond. Thanks for the question, Rosie. Operator: Thank you. Next question today is coming from Eric Schmidt from Cantor Fitzgerald. Your line is now live. Eric Schmidt: Thanks for my question. Maybe I'll ask about 890, your bispecific for colorectal cancer. Are we going to see any additional phase one two data in 2026? And does the pivotal study have an interim analysis? Thanks. William Meury: Thanks, Eric. Pablo, do you want Steven to take that? Pablo Cagnoni: Yes. Eric, good morning. So, yes, you will see additional data over the course of the year. That program, as I mentioned in my prepared remarks, was initiated. The phase three study was initiated already. We're in the process of expanding the footprint. We have identified more than 200 sites globally to execute this study, and we look forward to sharing updated data both in combination with falxpivacizumab as well as other combinations that we are implementing for that program. So you'll see more data over the course of the year. We'll give more clarity on the specific timing of those as the year progresses, depending on submissions to different conferences. Operator: Thank you. Next question today is from Salim Syed from Mizuho. Your line is now live. Eric Lavington: Hi. This is Eric Lavington on for Salim Syed. Thanks for taking our question. I was just wondering if we could get a little bit more color on the Opsilura in PN and why the FDA was asking for another phase three or recommending it. If that has any read-through to the Opsilor in HS or if it per chance might have to do with trial designs for, you know, HSPN. Thanks. William Meury: Great. Thanks for the question. Steven Stein will answer that for you. Steven Stein: Eric, thank you. You asked a few questions related to both PN and HS. So just in Pablo's prepared remarks, if you remember, we conducted two large Phase 3s in prurigo nodularis. The one study was positive and statistically significant. The second study just missed. Based on comments during the year that the FDA made, we approached them if their combined analysis could suffice to get across the finish line. Because we have conducted two studies and one was negative, they strongly recommended that an additional trial, a third study, would be needed in the setting and would obviously have to be positive to get it across the finish line. So it's a unique situation where we had two studies, one positive, one negative. And as Pablo said, that's why, you know, the program's currently paused while we debate whether or not to conduct an additional study. There is no read-through to HS. In our HS studies, we're doing standard regulatory development. Again, two large phase threes accruing very well. As you know, our proof of concept data is very strong there. And, obviously, we want those studies to be positive and get across the finish line. I don't know if Pablo wants to add anything else. Pablo Cagnoni: No. I just I will just add just a small comment on PN. While the second study did barely miss the primary endpoint of itch, it was very positive for the investigator global assessment of treatment success. So we're convinced that Opsalura has strong efficacy in patients with prurigo nodularis. As I mentioned in my prepared remarks, we paused further development there. We're discussing whether we will or will not do an additional trial to try to support that indication. I obviously agree with Steven. I don't think there's any read-through to the HS indication. William Meury: Thank you for the question. Operator: Thank you. Next question is coming from Salveen Richter from Goldman Sachs. Your line is now live. Salveen Richter: Good morning. Thanks for taking my question. Could you speak to the M. KLR bispecific here? You've guided to Phase I data next year. Maybe tell us more about this asset and how it could be differentiated from your current MKLR program. And then on June, where we'll see initial phase one data in the second half, is your current level of conviction for this asset? Walk us through the profile you want to see here to make that go, no-go decision. Thank you. William Meury: Thanks, Salveen. Pablo will take that. Pablo Cagnoni: Thank you, Salveen. Good morning. So let me take first the CALAR by CD three bispecific program. So that study is really now accelerating. So we're very encouraged that enrollment is going well. As you might remember, we designed our CALAR by CD T cell engager bispecific purposefully with the KALR arm binding to a different epitope from our KALAR antibody. The reason for that is, obviously, if patients for some reason do not respond to the KOLAR antibody, there would be ideal targets for the bispecific. Now in terms of understanding where exactly we'll place the bispecific in the treatment paradigm for patients with MPNs, I think it's too soon for me to elaborate too much there. We believe that there might be some patients that require a more potent approach or that require a molecule that produces faster responses or perhaps that after initial responses to the cholera antibody for some reason progress. As we generate the efficacy data that we will have next year for the bispecific, we will get more clarity on the working position in the treatment paradigm in patients with MPNs. As you know, and I reiterated at ASH last year, our goal by the end of the decade is to have a treatment solution for every single patient with MPNs. That's why we think that bispecific could play a role. Now in terms of the V six seventeen F program, we remain fully convinced that if you hit this driver mutation, the V six one seven M mutation patient MPN, if we hit it hard enough, we will get the same type of outcomes that we saw with the color antibody in MFNET and ET. This is a driver mutation. We have a small molecule inhibitor. We have a very strong preclinical package that we present repeatedly. And we believe that if we hit it hard enough, we will get the same kind of transformative clinical effects and molecular effects that we saw with nine eighty nine. We just need to generate that data. We are now entering the clinic with a new formulation that we've discussed recently, a solid dispersion formulation. We will have data later this year. Once we have that data, we'll tell you what the next steps for the program are. William Meury: And, Pablo, also the key is that with six one seven F, we'll cover three MPNs: MF, ET, and PV. Not just MF and ET. And the mutation frequency, as you know, Salveen, is two times, three times what it is for CalR. And so you'd essentially, with six seven, cover 80% of MF, ET, and PV. Operator: Thank you. Our next question today is coming from Jay Olson from Oppenheimer. Your line is now live. Jay Olson: Oh, hey. Thanks for taking the question. As you plan your 12 D PDAC study, can you share your thoughts on the trial design and how are you viewing the competitive landscape that's evolving in PDAC and potential advantages for your program? And do you plan to run any additional phase three studies beyond PDAC? William Meury: I'm going to have Steven comment on the trial design, then I can come back with the competitive landscape and the expansion of this program. Go ahead. Steven Stein: Yes, Jay. Thank you for the question. So as Pablo said in the updated ASCO GI, we had that thirty-seven percent response rate. We're very encouraging data on duration of response, potentially a read-through. Duration of treatment to PFS. So we're really encouraged. I think the second really important point there was the ability to combine our twelve D inhibitor with both standard of care chemotherapy regimens in the frontline. So gemobraxane plus modified fulforinox and the ability to deliver those regimens with the dose. So you can read through to that. Obviously, the study will go up on quintiles.gov as soon as it's open. And we intend to do a first-line study in combination with both chemotherapy regimens. We'll stratify accordingly, probably be 50-50% approximately each use, and then it'll be a comparison to the chemotherapy with standard time to event endpoints. We may look at things along the way in terms of response rate, etcetera, but it's a time to event study in that setting. In terms of other studies beyond PDAC, obviously, this is a compound that we really like. I just alluded to the activity in PDAC. We have interesting activity in other tumor types where 12 D is important, like colorectal cancer, and lung, etcetera. So stay tuned to developments there. And including in PDAC as well, there's potential to potentially do things like adjuvant or neoadjuvant studies as well, which, you know, we'll outline as soon as we're ready to do so. So it's an important compound to us. We, you know, may well be the first 12 D to get across the finish line in terms of mutation-specific therapy in a large tumor with massive unmet need and the ability to combine with both first-line standards of care chemotherapy. William Meury: Thanks, Steven. And, Jay, just regarding the competitive landscape, and I think this is true not just for seven thirty four or G12D, but also TGF beta by PD one. Both these cancers' response rates are low, survival times are short. And there haven't been novel treatments in the frontline setting in decades. G12D as a target was the Everest of oncology. TGF beta by PD one, no one's cracked the code. Now we have to convert phase one to phase three. But I don't think this is about competition. These are the largest wide-open white spaces in cancer. We could be first or early in pancreatic, and we could be first and only in colorectal. So right now, we have to execute this program. And as Pablo talked about and Steven, expand these programs. And we have the capabilities and the resources to maximize both assets. If we ever needed a partner, we would think about that carefully, expand our geographic reach, and we would do it on our terms. But we are sort of locked in on both of these, and I think competition is less important in phase three, execution is most important. Operator: Thank you. Our next question is coming from Matt Phipps from William Blair. Your line is now live. Madeline: Great. This is Madeline on for Matt Phipps. Thanks for taking our question. On POVO in HS, did the pre-NDA discussions with the FDA discuss the potential to include biologic-naive patients in the labeled indication? Thanks. William Meury: Yeah. Thank you for the question. I'll let Steven Stein answer it. Steven Stein: Yes, obviously, our study included both populations, pre-biologic and post-biologic. In fact, about thirty-three to thirty-six percent of patients had biologic exposure. You saw the activity, which we updated during the year, you know, showing extremely encouraging Hiscar response rate that increases over time. Excellent pain control upwards of seventy percent of patients over time, having little to no pain, and excellent data on draining tunnel. And that includes both populations. The post-biologic activity is a little higher. We submitted the NDA as we alluded to in our remarks, and that'll be by the end of this first quarter, should be signed off by the FDA. And we are seeking a label in both populations. Operator: Thank you. Our next question today is coming from Judah Farmer from Morgan Stanley. Your line is now live. Parth: It's Parth on for Judah. Thanks for taking our question. We just wanted to get incremental color on expectations for the nine eighty nine readout in frontline MF later this year. What are you guys looking for in order to kind of move forward in that setting? Thank you. Pablo Cagnoni: Great. So by the second half of this year, we'll have a pretty substantial dataset in patients with previously untreated myelofibrosis. And we're randomizing patients to nine eighty nine versus a combination of nine eighty nine ruxolitinib. So we'll have a very good understanding of what the efficacy is in that population. Now let me make something very clear. I believe the data we have today with nine eighty nine that we presented at ASH, that we have with nine eighty nine mostly previously treated patients with MF, a little bit of naive patients that were not eligible for Jakafi. I am convinced that the efficacy and safety of nine eighty nine will support development in the first-line setting. We do need the dataset that we'll present later this year in order to discuss with the FDA how to design and implement the phase three trials. But I am fully convinced that this medicine will be developable in first-line MF. And we'll give you more clarity later this year. Operator: Thank you. Next question today is coming from Andy Chen from Wolfe Research. Your line is now live. Brandon: This is Brandon on for Andy. Thanks for taking the question. Regarding the XR, any preliminary conversations with payers on formulary access? Or early signs that give you confidence on the eventual launch here? Thank you. William Meury: Yeah. It's a good question. We absolutely have had conversations with every major PBM. Here's how I would think about it. I think that Jakafi is the perfect product for an XR formulation. Because if you think about it, it treats a chronic symptomatic disease. The twice-a-day drug with a three-hour half-life. And we know that once-a-day formulations produce an adherence gain of 15 to 25%. So there is a medical reason why this product should be put on formulary. That's point number one. Point number two is we have to set a price that makes sense for the PBMs and the health plans for the patients, and for Incyte. And there is a price point that's going to make sense. We think about it in three contexts. One, is what is the net cost of the plan? Two, what is the coinsurance and patient out of pockets? And then three, what will be rebates? Now a new product, your goal is to get 80 to 100% coverage. With an extended-release formulation like Jakafi, you're probably not going to reach into that top tier of formulary coverage. But we should get enough formulary coverage to enable a conversion rate of 10 to 30%, pick the midpoint. Most of '26 will be about that. You'll start to see meaningful conversion in 2027. Thanks for the question. Operator: Thank you. Next question today is coming from Evan Seigerman from BMO Capital Markets. Your line is now live. Evan Seigerman: Hi, Thank you so much for taking my questions. When you're thinking about the Phase III HS data for OPSILURA in 4Q, talk to me about how you plan to manage the placebo response to this trial, especially with it being tested in kind of the mild to moderate patient population, which you could have a more exaggerated dynamic with the placebo. Thank you, guys. William Meury: Thanks, Evan. Go ahead, Steven. Steven Stein: Yeah, Evan. Thanks for the question. You're right. So when you have a lower burden of abscess and nodules, you can get an inflated placebo response rate. The two ways we're managing that in the phase three are a larger study, a greater n, and then setting the minimum number of requirements on abscess and nodules, which should manage an artificial placebo response rate. And then also looking at higher rates of Hiscar control, like Hiscar 75. So all of the above, larger study, minimum number of abscess and nodules, and a higher Hiscar control rate, and then, obviously, two studies as well. And that's the main ways we're trying to control the placebo response rate. Thanks. Operator: Thank you. Next question is coming from Derek Archila from Wells Fargo. Derek Archila: Hey, good morning. Thanks for taking the questions. Just quickly, so how much revenue contribution from RUX XR are you really baking into the Jakafi guide? And I just wanted to clarify. So you highlighted 30% penetration for Jakafi in PV right now. I guess, what level do you think you can get to before LOE? Thanks. William Meury: As it relates to the guidance for 2026, there's no incremental revenue associated with XR in that number. And so we expect that Jakafi in '26 between MF, PV, and GVHD will grow in the high single digits, and there is going to be some modest price actions, and that gets us to the current guidance. When you think about this business over the next three years, the two indications that are growing at a double-digit rate are PV and GVHD. And I would look at this as a, you know, mid maybe mid to high single-digit grower between now and 2028, the '28 when we actually transition and generics are introduced. I think it's the best way to model and think about the business. I think I've been pretty consistent about how to think about Jakafi. And as it relates to conversion, if we can pick up, take the midpoint 20%, you're going to have almost a quarter of $1 billion sitting at XR when we get to the twenty-ninth year. Thank you. Operator: Thank you. Next question is coming from Brian Abrams from RBC Capital Markets. Your line is now live. Brian Abrams: Hey, guys. Good morning. Thanks for taking my question. So on September, now that you have some alignment with the FDA, I was wondering if you could give us a sense of just the potential volumes and injection times that you're going to be testing for the subcu bioequivalence study. And maybe talk about the most probable path for integrating the subcu into the broader program and potential timelines there. Thanks. Pablo Cagnoni: So let me make a couple of comments on the subcu development. And it's a little bit early for me to answer your question with a lot of precision, so let me try this. The study will test the first thing we need to is what's the bioavailability of the formulation that we're going to test sub q. We obviously have preclinical data, but now we need human data to really understand exactly what that is. So that's point number one. The second, and as I mentioned, related to the first phase three trial in second-line ET is we need to align with the FDA, which we'll do this quarter, on the dosing strategy for patients with ET. Once we have those two pieces of data, bioavailability of the subcu formulation, and dosing strategy, I will be able to answer your question about volume and infusion time. As you remember, we signed a collaboration with Enable late last year, I believe in October, to use their infused device, which will allow very high volumes of infusion by the patients at home without the need to go to the doctor's office. It's a self-applied device. It takes about ten, fifteen minutes, and the patient does it without, you know, without any major discomfort. It's not a device the patients have to work continuously. They just do it during the time of infusion, and then they can remove it and throw it away. So we believe that that device will give us the alternative to really have a very simple subcutaneous infusion experience for patients, pretty much regardless of the dose. But in terms of specifics, we need a little bit more data to fully answer the question. We'll have that data over the course of the year. Operator: Thank you. Our next question is coming from Steven Willey from Stifel. Your line is now live. Steven Willey: Yes, good morning. Thanks for taking the question. On the mutant selective JAK inhibitor, I know you've made some comments recently about 35 being the exposure target that's needed to seek clinical benefit. Can you just elaborate on why you think that's the right target exposure if that's somehow limited by cross-reactivity on wild type and just whether you think the new formulation can get you meaningfully higher than IC 35? Thanks. Pablo Cagnoni: Yeah. It's an excellent question. So the reason for the IC 35 focus with the o five a program is because that's specific to o five a. It's not about the target. It's about the selectivity of the molecule that we have in the clinic. And that's what the animal model data suggests. That there is a window, the ideal window of selectivity between the effect on the mutant in the v six one seven mutant and the wild type is around the IC 35. So we believe that with the current formulation, based on preclinical data, we should be able to achieve that level of exposure. That question will be answered relatively quickly over the course of this year. And we believe we'll then have clinical data in the second half of 2026. But the IC 35 is related to the selectivity of the molecule. Now as I mentioned, I think towards the end of last year, we reiterated at JPMorgan earlier this year, we do have backup programs in this space. We are fully committed to this target. We believe hitting this target hard will translate into clinical benefit in this patient. So whether it's 58 in the second half of this year, we'll provide clarity on addressing this target or one of the backup programs remains to be seen, but we're fully committed to answering this question. Operator: Thank you. Our final question today is coming from Srikripa Devarakonda from Truist Securities. Your line is now live. Srikripa Devarakonda: Hey, guys. Thank you so much for taking my question. I wanted to just get your expectations for provercitinib in asthma with the phase two readout coming up. And also, you can help us understand where you see a place for this drug in the therapeutic landscape. Is it pre-biologic oral or for patients who are refractory? I know it's a little early ahead of the data, but any color you can give would be helpful. Thank you. William Meury: Yeah. I'll take the second part of your question, which I think relates to povastatin and HS. And then I'll turn it over to Pablo. I think the key here with povastatin is to think about what's happening in the obesity market right now. An oral pill. There is a lot of energy around Wegovy. Now I'm not suggesting that HS is like obesity. But there's a couple hundred thousand people in the United States being diagnosed and treated with HS. Only about twenty-five percent of those patients are taking an advanced systemic, and the only advanced systemics available are the IL-17s and TNFs. That's fifty thousand people. A hundred and fifty thousand people using products that are not approved for HF, antibiotics, and steroids. Our ability to drive sales of povastatin is to get to that group, that 75% of the market, where they haven't advanced to a biologic, they're not getting complete control with an antibiotic or a steroid. And so I think the path here is to get to this pre-biologic population, and 70% of our data are in that population. POVO is tailor-made for this group of patients, and I do expect that there'll be a great deal of trial and adoption. Once that happens, there's, of course, the post-biologic, and half the people that are on IL-17 don't get a full response, and so there are going to be patients there. The next thing we have to do as a company is create an experience for patients or physicians and make it easy to get the product. And that means making sure we verify benefits, we get the time to first fills really short, we clear PAs, and we reduce the abandonment rate. And if we do those two things, povastatin is going to be a major driver of revenue for this company in HS. And then, of course, you layer in PN and vitiligo, and we have a very sizable product. That's how I would think about it. If you want to turn to the asthma piece, Pablo Cagnoni: So, look, we know from all the data that we've been generating over the past several years across a range of indications that povastatin is a very strong, very potent anti-inflammatory medicine. In that context and knowing that asthma is an inflammatory disease, I think there's a strong rationale. There was a strong rationale when the study was started to develop over significant asthma, particularly in patients, obviously, that don't respond to inhaled corticosteroids or long-acting beta agonists, and particularly in patients with low eosinophilic asthma. Now we are conducting a well-designed randomized phase two study. We will have the data later this year. And based on that, we'll decide next steps. But, obviously, there was a strong scientific rationale to do that, and we look forward to sharing the data later this year. Operator: Thank you. We've reached the end of our question and answer session. And ladies and gentlemen, 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.