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Operator: Welcome to this Ørsted Q4 2025 Earnings Call. [Operator Instructions] The conference must not be recorded for publication or broadcast. Today's speakers are Group President and CEO, Rasmus Errboe and CFO, Trond Westlie, Speakers, please begin. Rasmus Errboe: Hello, everyone, and thank you for joining today's call. 2025 has been a defining year for Ørsted. We have taken significant steps to solidify our financial foundation and improve the robustness of our business. At the outset of the year, we stepped away from our long-term capacity ambitions and established 4 strategic priorities to secure a more focused and competitive [ Ørsted ]. We have sharpened our strategy to focus on maintaining our global leadership position within offshore wind with an emphasis on our core markets in Europe and select markets in APAC, where we have a distinct competitive advantage and can leverage our unique offshore wind capabilities. As the global leader in offshore wind, we will continue working with governments, industry and investors to strengthen the conditions required to support future offshore wind development. At the recent North Sea Summit in Hamburg Monday last week, Governments in our core markets demonstrated their willingness to strengthen these conditions when they signed the Joint Offshore Wind Investment Pact for the North Sea's alongside the wind industry and transmission system operators. The pact will turn the North Sea into the green power plant of Europe, reaffirming 300 gigawatt of offshore wind capacity by 2050 and charting a path of more evenly distributed offshore build-out between 2031 and 2040 with up to 15 gigawatt installed capacity per year in Europe, which includes a sound investment framework for offshore renewables through mechanisms such as national and cross-border 2-sided contracts for difference. This will unlock massive investments in Europe in the coming decades and is a giant leap towards powering Europe with renewables, secure and cost competitive electricity. Further, the agreement between the Danish and German government to develop the Bornholm Energy Island will strengthen energy security and deliver enough affordable electricity to power the equivalent of more than 3 million German and Danish homes. The agreement reached at the North Sea Summit are very positive framework developments for future offshore wind opportunities in Europe. And with our focused strategy on offshore wind in Europe, we are ready to invest in the build-out. Throughout 2025, we have executed on our 4 strategic priorities, and these will remain our focus over the coming years. Let me go through our progress across each priority. Our first priority is to strengthen our capital structure, and we have delivered significant progress on this during 2025. A key part was the completion of the rights issue, and we are thankful for the strong support we received from our shareholders. The completion of the rights issue supports our target of a solid investment-grade rating, and it is -- and it has reinforced our ability to realize the full value potential of our existing portfolio and capture future value-creating offshore wind opportunities. As part of the updated targets presented in connection with the rights issue, we plan to secure more than DKK 35 billion in proceeds through our partnership and divestment program across 2025 and 2026. The transactions signed during 2025 and early into this year amount to around DKK 46 billion in proceeds, and we have thus exceeded our projections and finalized the program ahead of our expected time line. Pending closing in 2026 of the transactions already signed related to Greater Changhua 2 and our European onshore business, this includes the closing of divestments related to stakes in Hornsea 3, West of Duddon Sands and 3 U.S. onshore projects. Another important element in supporting our capital structure and financial foundation is the continued performance of our operational portfolio. Despite wind speeds below the norm throughout the year, we have delivered DKK 25.1 billion of EBITDA, in line with our guidance. This is mainly driven by an increase in the availability across our offshore portfolio due to strong performance every single night and day by our generation team. Our second priority is to deliver on our 8.1 gigawatt offshore wind construction portfolio, and we have seen significant progress across the portfolio throughout 2025. Some of the major milestones achieved include the commissioning of Gode Wind 3 as well as delivering first power at Borkum Riffgrund 3 in Germany. And in Taiwan, we have completed the installation of turbines and delivered first power at Greater Changhua 2b and 4. In the U.S., we have progressed well on several installation scopes, including completing the installation of all 3 offshore substations for our 2 projects. All of these milestones are delivered under complex and dynamic conditions and are attributable to a strong risk and execution management by our EPC organization and our project teams. I will shortly go through the continued construction progress in detail. But first, I want to touch on the lease suspension orders that our 2 offshore -- U.S. offshore projects, Revolution Wind and Sunrise Wind received from the U.S. Department of the Interior, BOEM, requiring the projects to suspend all ongoing activities on the Outer Continental Shelf for the following 90 days. Both project companies pursued litigation in the U.S. District Court of the District of Columbia separately, including motions for preliminary injunctions against the orders while the lawsuits over them proceed. Revolution Wind's motion for preliminary injunction was granted on January 12, 2026, and Sunrise Wind's motion for a preliminary injunction was granted on February 2, 2026. Both projects have subsequently resumed work of the halted activities while their lawsuits over the orders proceed, and we are determining how it may be possible to work with the U.S. administration to achieve an expeditious and durable solution. Our third priority is to ensure a focused and disciplined approach to capital allocation, always prioritizing value over volume with a strategic emphasis on offshore wind opportunities in Europe and select markets in APAC. During the year, we demonstrated this disciplined approach in relation to Hornsea 4, which we are now reconfiguring for potential future development. The decision was taken prior to incurring significant breakaway costs, and we continue to hold the seabed lease, grid connection and key permits. In November, we secured the rights under the Irish tender to develop the 900-megawatt fixed bottom offshore wind farm Tonn Nua, alongside with our partner, ESB. As a potential final investment decision will not be until early 2030s, this is an early-stage opportunity and the project needs to be assessed and matured through our stage-gate process, including meeting our value creation criteria. Finally, on our fourth priority, we have also taken steps in improving our competitiveness with the announcements of significant adjustments to our organization. Due to the sharpened strategic focus of our business going forward and the fact that we'll be finalizing our large construction portfolio in the coming years, we will adjust our organization accordingly to become more efficient and flexible. Let's turn to Slide 5, where we'll talk through some of the operational highlights for the full year. First, I am pleased with the operational performance with our EBITDA, excluding new partnerships and cancellation fees amounting to DKK 25.1 billion for the full year, driven by strong availability rates within our offshore business, which stood at 93% for the full year. This ensured a material earnings contribution and is an increase of 5 percentage points compared to last year. Also, we delivered a net profit of DKK 3.2 billion, primarily driven by the solid operational performance in the year. For several years, we have had a target that renewables should consist of 99% of our generation by 2025. And I'm very pleased that we reached this ambition or this ambitious target in 2025. The increased share of renewable was driven by the closing of our last coal-fired CHP plant in the second half of 2024. Furthermore, 2025 was the year where we became the first energy company to complete a green transformation of its own energy production. We have reduced Scopes 1 and 2 emissions intensity by more than 98% since the beginning of our transformation in 2006. We will continue our decarbonization journey focusing on reducing our upstream and downstream carbon emissions to deliver on our 2040 net zero target. Lastly, with our continued focus on safety, we reduced the total recordable injury rate to 2.5 in 2025 that we reduced our total recordable injury rate, and we continue to strengthen our safety commitments through targeted initiatives and sharing of best practices with suppliers, all aimed at lowering the incident rate and bringing our people home safe every day. Let's turn to Slide 6 and an overview of our construction projects. I will cover the more advanced projects individually and in more details as usual on the next slide, while putting a few remarks on the remainder of the construction portfolio here. For Borkum Riffgrund 3, all offshore installation works have been completed. The grid connection has been commissioned by the transmission system operator and was announced ready for first feed in early Q4 2025. First power was achieved early December according to plan. Turbine commissioning is ongoing and progressing according to schedule, and the project is expected to be fully commissioned towards the end of Q1 2026. For Hornsea 3, construction is progressing according to schedule. The onshore works at the landfall cable route and converter stations remain on track. For the offshore scope, the project will be using 2 HVDC offshore converter stations. The first platform is undergoing final equipment installation in Norway, which is progressing well. And the second platform arrived in Norway from the fabrication yard in Thailand in December to complete the same final works. Our turbine and foundation installation partners have taken delivery of their new build installation vessels, and we have started offshore activities preparing the seabed for export and array cable installation. We continue to closely monitor a number of items related to the delivery of the project. This includes the schedule of the project's grid connection, where we are working closely with National Grid on our onshore grid connection works to support commissioning this year. Further, we continue to focus on manufacturing of turbine monopile foundations to ensure they are delivered according to plan, enabling us to commence installation in spring 2026. The manufacturing has started as planned and 2 suppliers have started to deliver completed monopiles, the first of which have arrived in seaport ready for mobilization. There are multiple suppliers contracted for the scope. And if relevant, we can utilize the flexibility gained from this to mitigate risks should they occur. Next steps in the project will be the commencement of the main offshore installation activities, starting with the installation of the offshore export cables, the first offshore converter station as well as foundation installation. For Baltica 2, the project is progressing on schedule as we move towards offshore construction. There has been good progress in the recent quarter, and the degree of completion has increased to 25%, up from 15% last quarter. This includes further progress on the manufacturing of the 4 offshore substations and further fabrication on the turbine foundations with 48 of the 111 turbine foundations fabricated at this stage. The fabrication of the export cable has also commenced. For the onshore substation, majority of the equipment have been delivered to the sites and onshore export cable installation is on schedule, supporting timely grid integration milestones. The project team is focused on ensuring progress of the transmission system, fabrication of the key components and the onshore and offshore substations. Next steps are the preparation of the seabed ahead of turbine foundation installation, which is planned to start during Q2 this year. The installation of the offshore substations will also start towards the end of this year. Turning to Slide 7 and an update on our Greater Changhua 2b and 4 project in Taiwan. With the progress achieved during the quarter, the degree of completion is now at 75%, up from 65% at Q3. The project achieved a major milestone during the quarter as the installation of turbines was completed for the project. At this stage, 17 of the 66 turbines has been commissioned and are producing power and the commissioning works of the remaining turbines is ongoing. The project remains focused on the installation and energization of the remaining array cables. At this point, 57 out of the 66 array cables have been installed, and it is the expectation that the remaining array cables will be installed during the first quarter. Also, the project will resume works to replace the export cable for the Greater Changhua 2b section. Onshore work related to this is ongoing and the replacement work offshore will commence during the summer. The project remains on schedule for commissioning during Q3 2026. Turning to Slide 8 and an update on our Northeast program, starting with Revolution Wind. Despite offshore construction being on pause for 3 weeks due to the suspension order, Revolution Wind continues to make progress, and the degree of completion has increased to approximately 87%, up from 85% in Q3 2024 -- 2025 sorry. During the quarter, all remaining array cables were installed. The export cables, interlink cable and both offshore substations have now been energized. At this stage, 59 of the 65 turbines have been installed. In the coming period, the project will focus on completing installation of the remaining turbines and continue ongoing commissioning activities. First power for the project is expected within weeks. Turning to Slide 9 and an update on the progress at Sunrise Wind. During the quarter, despite offshore construction being paused for 6 weeks due to the suspension order, the project has made progress illustrated by the degree of completion increasing to 45%, up from 40% in the third quarter. The first installation campaign of turbine foundations has been completed according to plan with 44 of the 84 turbine foundations installed. Onshore construction and commissioning are progressing well. The onshore portion of the export cable has been installed and jointed and the nearshore section of the export cable was successfully installed. In terms of fabrication, all turbine foundations, array cables and the remaining sections of the export cable are now complete. All turbine towers and nacelles have been fabricated and the majority of blade sets have been fabricated with the remaining sets progressing according to plan. In the coming period, the project's focus is on resuming halted activities with safety as a top priority. This includes the offshore installation of the mid and far shore section of the export cable. The project is working diligently to maintain the installation schedule, which includes first power in the second half of this year and commissioning of the project in the second half of 2027. Turning to Slide 10 and an outlook for our deliveries in 2026, to focus on delivering on our strategic priorities over the coming years as this will improve our financial foundation and ensure that we can compete from a position of strength for new offshore wind opportunities in our core markets. Specifically, in 2026, we will continue to have a very significant focus on our generation and ensure that we deliver in line with our expectations. We will be commissioning more than 2.5 gigawatts offshore wind capacity across 3 continents. And for the remainder of our construction projects, we will continue our efforts building on the solid progress achieved during 2025. We will assess new opportunities within offshore wind across 3 avenues. First is on the auction and tender front, where there are several relevant opportunities for us to assess during 2025 in our core markets. And from 2027 and onwards, we are expecting a material step change in terms of the number of auctions. Second, we will continue maturing our proprietary pipeline and bring the projects forward if the value creation is there. And thirdly, we continue to assess the potential for any project-specific collaborations. Those will remain the buckets that we are looking for when we think about offshore wind growth and filling our pipeline for the back end of this decade and onwards. And we will prioritize value over volume. To support this, we will further progress on measures to improve our competitiveness. This includes the initiatives within our trading and revenue function as well as our generation organization. In addition, we will deliver according to plan on our announced adjustments to our organization, so it will become more efficient and flexible. With this, let me hand over to you, Trond. Trond Westlie: Thank you, Rasmus, and good afternoon from me as well, everyone. As always, unless I state otherwise, the numbers I refer to will be in Danish kroner. And then let's turn to [ Slide 8 ] and the EBITDA for '25. For the full year, we had a solid operational performance and delivered EBITDA, excluding new partnerships and cancellation fees of DKK 25.1 billion, as Rasmus previously said. And this is in line with our guidance for the year. Let me walk you through the main development. For our offshore business, the overall site earnings came in DKK 500 million higher compared to last year. This was driven by higher availability rates, ramp-up generation for Gode Wind 3 and compensation at Borkum Riffgrund 3, leading to an increase of approximately DKK 1.5 billion. This was, to a large extent, offset by the lower wind speeds, lower earnings by approximately DKK 1 billion compared to 2024. Earnings within Partnership increased compared to last year as negative effects in '24 were not repeated to the same extent in '25. For other costs in Offshore, there was an increase primarily driven by changes in cost allocation methodology with no impact to the total EBITDA. In our offshore business -- onshore business, sorry, earnings increased by approximately DKK 200 million compared to last year. The increase was due to the ramp-up of generation at Sparta Solar, Eleven Mile and Mockingbird, partly offset by the farm-down of the same projects. Within Bioenergy and other, earnings in our combined heat and power business increased by approximately DKK 300 million, driven by the higher achieved prices and improved spreads, only partly offset by lower generation. Earnings in our gas business increased by approximately DKK 300 million, mainly driven from our offtake contract with the Danish Underground Consortium and its ramp-up production from the Tyra field. The negative effect from other was mainly due to a provision for severance payment relating to the rightsizing of the organization initiated in the fourth quarter. The total impact of severance payment and provision amount to approximately DKK 750 million in '25 and covers the period of the executions in '25 through '28. Let's turn to Slide 13 and our guidance for '26. For the full year of '26, we expect an EBITDA more than DKK 28 billion. Let me go through the expected drivers for the different segments. In our offshore business, overall earnings are expected to be higher in '26. Our offshore site will benefit from ramp-up generation of Greater Changhua 2b and 4 and Revolution Wind and Wind speeds in line with historical averages, whereas 2025 was below historical averages. This is expected to be offset by lower market prices, lower earnings from trading activities and subsidy step down for Borkum Riffgrund 3 as well as Gode Wind 1 and 2 stepping out of subsidy, leading to expected sites earning to be in line with the '25 level. We expect earnings from existing partnerships to increase compared to '25, mainly driven by construction agreement at Hornsea 3. Within our offshore business, we anticipate lower expense project development costs as well as lower fixed costs. For our onshore business, we expect earnings to be in line with '25. This is driven by the ramp-up of generation from new assets, offset by divestment of European onshore business, which we expect to close during second quarter this year. For our Bioenergy segment, we expect earnings to be in line with '25. The gross investments for '26 are expected to amount to DKK 50 billion to DKK 55 billion, which is in line with our previously expected investment level. Furthermore, our committed capital of approximately DKK 145 billion for the period 2025 throughout '27 remains unchanged as this already accounts for the planned divestments of the European onshore business. Let's turn to Slide 14. In the fourth quarter of '25, our EBITDA, excluding new partnership and cancellation fees amounted to DKK 8.1 billion, which represents an increase of approximately DKK 500 million. This was driven by the offshore business, where earnings increased compared to last year due to higher wind speeds as well as lower fixed cost levels. Our net profit for the quarter totaled a negative of DKK 3.4 billion. This was impacted by the negative noncash EBITDA impact from the closing of the Hornsea 3 transaction and the impairment that have been recognized following the lease suspension orders to our 2 projects in the U.S. as well as the sale of our European onshore business. As part of closing the Hornsea 3 transaction, we have recognized a noncash impact of DKK 4.8 billion to reflect the accounting net present value effect of the asymmetric distribution structure. The impact was rebased upon closing as the project was slightly less advanced compared to our expectation at the time of signing. The underlying transaction structure and valuation remains the same. The lease suspension order have resulted in increased costs due to anticipated extension of contracts for both our projects, leading to an impairment of approximately DKK 600 million in the fourth quarter of '25. As part of the decision to divest the European onshore business, we have reassessed the book value of the segment. In previous acquisitions of the business, we have recognized goodwill in our accounts. And as part of the decision to undertake the divestment, this has been written off, leading to an impairment of DKK 1.6 billion. Adjusted for impairments and cancellation fees, our return on capital employed ROCE came in at 8.4%, which is a decrease compared to last year, driven by an increase in capital employed. The reported ROCE came in at 5.4%. We had expected that '25 ROCE would be lower than the ROCE in '26 and '27. However, it has come in lower than expected, primarily driven by the impairments relating to the suspension order on Revolution Wind and Sunrise Wind and the impairment of goodwill related to the divestment of Ørsted's European onshore business. Our target for average ROCE for '26 and '27 is to be around 11% and above 13% for the period '28 to '30 with the expected improvement of ROCE in '26 and '27, primarily driven by increased operational earnings coming from the commissioning of the projects that we are currently constructing. Let's turn to Slide 15 and our net interest-bearing debt and credit metrics. At the end of Q4 '25, our net debt amounted to DKK 19 billion, representing a decrease of approximately DKK 64 billion during the quarter, which was primarily driven by the proceeds received from the closing of the rights issue. Cash flow from operating activities include contribution from our operational earnings as well as payments related to both the divestment of 50% stake in Hornsea 3 transmission assets and the construction agreement that was entered into as part of the divestment. For the divestments, this includes payment under the SPA agreement relating to Hornsea 3 divestment as well as the divestment of a stake in Badger Wind U.S. Our gross investments amounted to DKK 15.1 billion, reflecting the continued investment into our renewable construction projects. Our key metric -- our key credit metric, the FFO to adjusted net debt stood approximately at 43% at year-end, reflecting a significant increase compared to previous years. The increase is primarily driven by the proceeds of the rights issue and the closing of Hornsea 3 transaction and is currently well above our target of 30%. And finally, let's turn to Slide 16 and focus on our divestment program. With the closing of Hornsea 3 transaction as well as the signing of our Greater Changhua 2 farm-down and the divestment of our European onshore business, we have successfully delivered on the partnership and divestment program, which we announced as part of our second quarter '25 update. We had a target of delivering proceeds of more than DKK 35 billion across the announced transactions. And with securing proceeds of assets around DKK 46 billion, we have now ensured strong delivery on this. In combination with the completion of the rights issue, this is a significant contribution to the strengthening of our capital structure, and it will ensure that we have a robust financial foundation throughout the coming years. Also to pursue new value-creating opportunities while we are delivering on our construction program. Upon completion, our projects will ensure significant contribution to increasing our financial headroom. With this, we have reduced our dependency on divestments of operational assets and we will now be able to undertake a more value-accretive and flexible approach to partnerships and farm downs going forward. And with that, we will now open for questions. Operator, please? Operator: [Operator Instructions] The first question comes from the line of Harry Wyburd from BNP Paribas. Harry Wyburd: It's on the North Sea agreement or the Hamburg agreement. Could you help me draw a line between the commitments that were made there, which are obviously huge and the money that you expect to be put behind the CfD auctions. So I guess anyone who's familiar with AR7 will be -- you're familiar with the concept of the pot size. I believe that governments in Europe or around the North Sea will put a big pot size behind these CfDs given affordability constraints? And have you had any informal commitments from governments on whether they are willing to put a lot of money behind the CfDs that would be able to procure that many gigawatts? And then maybe as an add-on to it, there was a 30% cost reduction commitment in that agreement as well. Where would you see those cost reductions coming from? And I presume it's not just hoping for lower interest rates. Is this coming from the supply chain? Is this coming from OEM manufacturers? Is this coming from your processes? Could you give us some color on how you would deliver that cost decrease? Rasmus Errboe: Absolutely. Harry. There is no doubt that the agreement that was made between the 9 heads of states in Hamburg last Monday, we are very pleased with that agreement. Not sort of one thing is, of course, that the governments stand shoulder to shoulder and commit to up to 300 gigawatts by 2050. That's sort of one thing. I think the more important part actually is that as opposed to previous agreements made on this one, the 9 countries involved are a bit more specific about the how is this actually going to happen. So it is by tendering out up to 15 gigawatts of offshore wind every single year from 2031 to 2040 and 10 of the 15 gigawatts are expected to be with CfDs. That commitment provides 2 things to the industry. It provides certainty about a more linear build-out. So basically stepping away from the more lumpy build-out and less coordinated build-out that we have seen in the last years. And what it also provides is the right sort of frameworks in terms of how to tender out offshore wind, i.e., a consistent approach centered around CfDs across all the 9 involved states. So that -- those 2 things combined, Harry, in our view, provides the necessary predictability for the industry, which is exactly what we need to again break the curve and bring down cost. As you rightfully point out, the commitment from the industry has been to reduce levelized cost of electricity by roughly 30% towards 2040. And it is coming from this predictability. It drives significant investments in the supply chain. The European supply chain has already invested, I believe, more than EUR 14 billion in the last 3 years across manufacturing vessels and ports. And that brings you to roughly 10 gigawatts. And then if you go to 15 gigawatts as is now set out, it's sort of roughly EUR 10 billion more. Those divestments -- sorry, those investments will provide sort of cost down on the supply chain. And obviously, also the predictability will make it easier for the developers to also enter into framework agreements and also, you can say, deliver the projects that has been won. So that is what's going to drive down the cost again towards 2040. And then for the second part of your question on sort of the pot size, we would have to see what comes out in the individual auctions in the coming years, the same way as you have seen in the U.K. But I would, as an example, just highlight the agreements that has just been made in Denmark -- between Denmark and Germany, where the cap or the budget set aside for the 3 gigawatts of offshore wind between Denmark and Germany is around DKK 140 billion committed by the Danish and German government split roughly with 30% to Denmark and 70% to Germany. So this is just an example about the commitments that we are starting to see here. Operator: The next question comes from the line of [ Christian ] [indiscernible] from [indiscernible]. Unknown Analyst: So my question is on your farm-down program where all transactions have now been down. But sort of reflecting on them, I would claim that some of these transactions have lowered the financial transparency given the increasing level of noncash EBITDA as a consequence of these transactions. I understand why you've had to do this, but I'm just curious how problematic you consider this movement and not least, if you are to consider further divestment transactions in the future, should we expect you to go sort of back to the old model, which were more simple? Trond Westlie: Well, part of the proceeds coming from these transactions is, of course, paying for some of the equity value, but some of them are also a part of our working capital like the OFTO. So it goes into the operating cash flow. And as a result of the accounting rules, making sure that we actually apply to those, we also have to address that. So I do think that we have been very transparent in telling how the sort of the split between our expected more than DKK 35 billion were divided into the 3 major and the other smaller divestments. So as of now, Hornsea 3 has provided us with DKK 10 billion, of which DKK 4 billion is proceeds and a bit more than DKK 6 billion is on the working capital. On the onshore U.S. transaction, it is DKK 5 billion in proceeds. On the EU onshore, it's short of DKK 11 billion in proceeds. The Changhua transaction, which we're going to close in Q3 this year. It is, of course, an asset value of DKK 16 billion. And the reason for having that asset value is, of course, because we are consolidating the full project until COD and then we deliver the full package to Cathay. And then West of Duddon Sands of DKK 4 billion. And that asset value of all those transactions is DKK 46 billion. Going forward is really we expect -- well, we do not have any concrete plans as of now. And we do believe that in case we are doing transaction, we will, of course, inform them about the content of this transaction, depending on the structure of the transaction every time. Operator: We now have a question from the line of Peter Bisztyga from Bank of America. Peter Bisztyga: So a question on your growth profile towards the end of this decade. Once everything is operational, hopefully, in 2028, I presume any new projects that you might win in offshore auctions over the next couple of years won't be operational until after 2030. So there's going to be a window of like 2 or 3 years where you're just building up unproductive capital without kind of any new earnings coming in. So I'm just wondering, first of all, how do you think about that? And given your planned divestments have exceeded your target by a sort of fairly material amount. I'm just wondering if that gives you flexibility to accelerate investments, for example, in U.S. onshore solar and battery or something like that to fill that growth gap. So interested in your views on that point, please. Rasmus Errboe: Absolutely. Thank you, Peter. A few reflections. I think, first of all, important to emphasize that we as you also allude to that we are very much in a position now on the back of the successful divestment program that Trond talked about and the successful capital raise last year. And we are in a place where we have the financial robustness to pursue value-accretive offshore wind opportunities in our core markets. And we are seeing quite a few opportunities already during 2026. As we talked about before, sort of there is a tender coming in Denmark. There is a tender coming in the Netherlands. There is a tender coming in APAC. And when you get to -- in Taiwan, and you also -- when you get into 2027, you are starting to see a significant pickup. So that is sort of one avenue for future growth for us, one potential avenue. Another one is obviously also to move forward with the projects that we already have, the more proprietary projects. We talked about sort of Hornsea 4 as an obvious example that we'll be able to bid in from '27 and onwards. And then at the same time, as I also alluded to before, we are also pursuing, you can say, project-specific collaborations where relevant, all to further fill up the pipeline on the other side of the build-out that we have right now. You are right in the sense that we will see a drop in our gross CapEx from in '28 relative to the levels we are at now. That is quite clear, which is also why we have put the measures in place in terms of having a more flexible and rightsized organization to manage that dip, if you will. We are quite sort of bullish on the long-term projections for offshore wind in our core markets and the growth for the longer term. You talked about sort of unproductive CapEx and so on in the years towards the back end of the decade. And you also mentioned U.S. onshore. Just reminding us about our capital allocation principles. So it is to make sure at all times, we have a robust capital structure. We honor the dividend commitment. We intend to honor the dividend commitment by paying out first time in 2027 on the back of '26. Bucket #3 is value-accretive growth. And then bucket #4 is, of course, potential rebalancing towards our shareholders. Those are the principles that we have and we have had for a while, and we intend to follow them. We continue to invest in our U.S. onshore business. We -- as we have said before, we have separated out now to be more of a stand-alone business. We finalized that in October last year. We are right now constructing 2 projects in U.S. onshore, 500 megawatts in total. And we will continue to develop the business, but you should not expect a rebalancing of CapEx, as you alluded to before, our key strategic focus is offshore wind in our core markets, i.e., in Europe. Operator: The next question comes from the line of Jenny Ping from Citi. Jenny Ping: Actually, my question was fairly similar to Peter's with really the pivot more to your point around project collaboration. I just wondered whether this actually meant in order to fill in the back end of the decade growth profile, you would be open to buying into projects that other people have won that's already kind of getting to -- have got CfDs, et cetera, that's getting to FID stage that would deliver back in the decade just to keep the momentum of the growth. And then just along the same lines in terms of the balance sheet, I'd be very keen to understand the opportunity to releverage the U.S. projects. Obviously, you're making very good progress in the delivery of that. Is it the case that these projects we shouldn't even think about the opportunity to project finance them and take equity out before reaching COD? Or are banks actually starting to warm up as you deliver the construction? Rasmus Errboe: Thanks a lot. Jenny, I will take the first part and then leave the U.S. project financing question to Trond. So we are pursuing growth across 3 buckets. It's tenders and auctions in one bucket. It is developing our proprietary pipeline in another bucket. And then the third one is, as you alluded to, to potentially enter into agreements with other developers potentially about projects. There is a significant backlog right now of offshore wind projects in several of our core markets. And we have that as we -- which is not new, we have had that for a while, 1 of the 3 buckets that we are potentially pursuing. That being said, you mentioned sort of momentum of growth. It is important just to reemphasize that we will be patient. We will be patient and we will always prioritize value over volume. And we have -- we are setting ourselves up in a way where we have and are sort of able to cater for a slight dip in our construction activity towards the back end of the decade. But we do believe there are quite a few opportunities out there across the 3 buckets in terms of future growth. Trond Westlie: When it comes to the balance sheet effects of the U.S. projects, we have -- when we sized the rights issue and also deciding on the farm-downs and the sales proceeds, -- we did not -- we made sure that we had enough capital not to plan for project financing before COD in the U.S. That has been a major element to this to make sure that we have the financial solidity as well as the liquidity in place to make sure that we can continue constructing on our 8.1 gigawatts. Having said that, the timing of project financing when it comes to those projects is, of course, dependent on the political uncertainty and how the financial market in the U.S. and also elsewhere, but mostly in the U.S. looks at certainty of those projects coming into play. So it will be an opportunity for us at some point in time, but we have not planned or concluded on that time. Jenny Ping: Okay. Sorry, just to be clear, so M&A is on the table under this bucket of project collaboration? Rasmus Errboe: Project level, yes. Operator: We now have a question from the line of Deepa Venkateswaran from Bernstein. Deepa Venkateswaran: It is somewhat similar to the previous questions, but it's probably a more philosophical question. So in the past, Ørsted was always a lead developer, you farm down to financial players. You haven't done too many projects with other industrial players, but we know many of them are looking for partners. I think Vattenfall said that they're looking for partners for their German offshore project at BASF -- have, and we know SSE, for example, will be looking at these. So where do you see from a perspective of value creation Ørsted kind of coming in as perhaps the -- maybe not in the driver's seat, but as a secondary partner, would those sort of transactions be okay with you? And yes, or is there any commitment that you need to be the lead developer operator constructor of these projects? I think that's my question. Rasmus Errboe: Thank you, Deepa. So in terms of market by market, I would rather say our focus is on the core markets that I -- that you know that we are focusing on. So the U.K., Denmark, Poland, Germany, the Netherlands, Belgium, that continues to be the case. And then again, we have the 3 buckets that I mentioned before. It becomes too speculative for me to sort of get into what kind of potential partnerships it could be that is a bit premature. Deepa Venkateswaran: But in principle, would you be okay with building something with another industrial player? Rasmus Errboe: The answer will be the same, Deepa, that it becomes a bit too speculative for me to talk about potential future collaboration models. Operator: Next question comes from the line of Alberto Gandolfi from Goldman Sachs. Alberto Gandolfi: It's Alberto Gandolfi. I just wanted to talk about growth, but from a slightly different perspective and a bit more granularity. The first one is how much capital do you feel comfortable in committing in the next 18 -- 12, 18 months given the lingering risks around Sunrise, just in case we still have another move and appeal by the administration, the court case is pending. And while you are talking about offshore, in particular, would you mind telling us how many gigawatts you could potentially bid for in these regions? There's a very good slide where you talk about all these countries in Europe and Asia. So how many gigawatts in terms of permitting leases could you potentially bid for if you wanted to? And if you can tell us, given you talk about value over volume, how do you define value? Is there an absolute IRR we should be thinking about given where the cost of capital is today? Do you think you need to now put more contingencies? So can you tell us how we should be thinking about risk, quantity and returns? Rasmus Errboe: Thank you, Alberto. So sort of 3 buckets in your question, maybe partly overlapping in my answer. So first of all, you're saying what kind of capital are we comfortable committing considering the situation we have in the U.S. I'm not going to put out any numbers here. What I can say is, and Trond can, of course, elaborate here, that we have our CapEx -- committed CapEx program towards '25 to '27, and we have DKK 145 million in total. And we are still there across our projects. And then we have -- as we also talked about, we have completed the farm-down program. We have completed the equity raise. So we are in a position now where we have a robust balance sheet. part of sizing the equity raise was to be able to withstand the regulatory uncertainty that we are also now seeing unfolding in the U.S., but also to deliver on our business plan. But I'm not going to put out a specific CapEx number, which is the same reason for why I'm also not going to put out a specific gigawatt number because this is exactly what we -- where we have changed our approach, if you will. So we're not chasing gigawatts. It is value over volume. You will remember from the beginning of the year that we -- one of the first things we did after I took over was that we canceled our 2030 targets in terms of gigawatts -- because our focus is on value. And as I said before, we do believe that the opportunities are out there. On value, you said sort of how do we define value. We have -- our value criteria are unchanged in the sense that we guide that it is 150 to 300 basis points on top of our cost of capital. We stand by that. And then at the same time, internally, we obviously also look at the absolute IRRs of the projects that we are considering moving forward. But we only guide externally on the 150 to 300 bps on top of our cost of capital. And then, of course, when we look at value, we also look at the flip side, which is risk. And we have -- we are carefully assessing risks in our opportunities that we are looking at. We are looking at the breakaway profiles of the opportunities. We're looking at the farm-down, potential farm-down risk as we also talked to as part of putting Hornsea 4 back to development. So those are some of the things we look at when we assess new opportunities. Operator: We now have a question from the line of Ahmed Farman from Jefferies. Ahmed Farman: I have a sort of broad question on the 2 U.S. projects, but with a few sort of subsegments. So last year, you provided us an estimate of the remaining CapEx to be spent in the second quarter. So sort of the first question is, could you just remind us where that is? Could you remind us on the timing of the monetization of the ITC for Revolution Wind? And then Rasmus, you referenced expeditious and durable solution, trying to sort of find that in your sort of -- in your strategy. I would be interested if you could elaborate on that point further. Rasmus Errboe: Thank you, Ahmed. So I will take CapEx and the durable solution and then leave ITCs to you, Trond. So yes, just to reiterate, the remaining CapEx for us the share across Revolution Wind and Sunrise is around roughly DKK 35 billion. So basically, you can say broadly unchanged relative to what we have said before. In terms of the dialogue track, as you indirectly alluded to, so we have -- we are focusing on 2 things here in the U.S. One is obviously to finalize construction of Revolution Wind and Sunrise as fast as well and as safe as possible for our colleague. And the construction is actually progressing quite well across both despite sort of taking into account that we have been out for 3 weeks on one and roughly 6 weeks on the other. But I can, of course, talk much more about that construction progress. The other part of the work we do is on seeking to, via dialogue, see if there is a path for a more expeditious and sort of a durable solution across the 2 projects. I will follow the same line as I have had before here. I don't want to go into the content of dialogues we may or may not have with other developers, with the administration, with suppliers, et cetera. But we are pursuing still 2 tracks. Trond Westlie: On the ITC element, the element on the ITC and what we expect is the money to come in sort of a year subsequent to COD. And that's sort of the planning phase that we are looking at. Operator: The next question comes from the line of Mark Freshney from UBS. Mark Freshney: If I could just drill down a bit on to the ITC. My question is, is it possible to monetize the ITC and do the transactions with the bank while the lease suspensions are still in place. So do you need those lease extensions removed to get the -- I think it's like DKK 25 billion from both of the construction assets in '27 and '28. So that's my first question. And just secondly, it sounds -- standing back, it sounds like we're now focusing on growth beyond the 5 construction projects. Given the kind of opportunities you've laid out and the kind of optimism, and given the need to maintain a strong balance sheet, can we infer that the dividend payout ratio will be sort of low, potentially somewhere around where it was at the time of the IPO, which I think was about DKK 2.5 billion. Trond Westlie: When it comes to the ITC, I would probably answer you, Mark, in 2 different ways. When it comes to the tax equity part, it is still a good market there in the onshore sector. And there is no differential really relative to tax credit where they come from. So when it comes to that, having said that, there is, of course, the political surroundings in this uncertainty as well as the legal elements as you talked to about the suspense orders and so forth. So yes, there is, of course, elements here that we are discussing with investors. But the progress of this is continuing as we have planned. But as you allude to, there is uncertainty parameters that we need to contain or address during the course of the way. But as of now, the progress is there. There's no sort of nothing hindering the process, except for, of course, that we to have to cater for those elements. On the dividend side, we will not, at this point in time, give any guidance on the levels as such. We will come back to that in due time. But as of now, it's too early for us to expand on where that level is going to be starting to be paid in '27. Operator: We now have a question from the line of Casper Blom from Danske Bank. Casper Blom: A question regarding the ramp-up of Revolution and Sunrise Wind. You mentioned, Rasmus, that you expect the first power from Revolution within the first next couple of weeks and with Sunrise, you say in the second half of this year. Can you give any kind of guidance to how much you expect to squeeze out of these 2 projects this year? And maybe a percentage of how much power you expect to generate compared to how much it will be when these projects are fully up and running? Any flavor to the impact that the projects will have on this year's earnings would be very nice to have. Rasmus Errboe: Thank you, Casper. I, of course, see what you're doing, but I'm not going to guide on sort of EBITDA at the project level for '26. But I can give you sort of a little bit of color of sort of where we are and then leave it for you to make your own assessment. So on Revolution Wind, as I said, we have now installed 59 out of 65 turbines. We expect first power, as I said, within weeks. We have energized the export cable. We have energized what is called the interlink cable, energized the offshore substations and also the onshore substation. So therefore, you can say moving forward quite well. But more details about sort of remaining installation and ramp-up, I cannot give. Our guidance remains that we expect COD for the full wind farm in the second half of 2026 and the ramp-up within week -- and the first power within weeks, as I said. On Sunrise, again, we also here do expect first power this year. But again, what -- and what we have stated in recently is that we would expect for it to be in October. 2026 and then COD by second half of 2027. And also Sunrise is progressing according to plan. We have sort of the fabrication progress is going quite well. We only have 7 sets of turbines left and so on and 44 out of 84 foundations installed, offshore substation installed, onshore converter station, 90% done, energized onshore cable 100% done. So it is moving forward according to plan despite the setbacks we have received. Operator: The next question comes from the line of Olly Jeffery from Deutsche Bank. Olly Jeffery: Just asking about a different topic. Could I get an update on the Elsam related case, which has been ongoing for a while. I think the amount there potentially liable for is DKK 4.4 billion, depending on how that court case outturns. When do you expect -- can we expect a judgment this year? And if so, do you any time lines on that? Is there a kind of date for when we will get more information on how that turned out? Trond Westlie: Well, the Elsam case has been there for quite some years. So it has been a long way to go. When the case was up last time on the final ruling on the main case, that was back in, I believe, 2017 or '18. We did win that. Subsequent to that, there are, I think, around 1,100 small cases that has been added up to this case coming up. And the case has started up now. It is the amount that you have said. We have disclosed that both in the rights issue and it's also in the annual report. We do not have any provisions for this. We do have a view that it will end up as it has been ended up before. But the case is ongoing, and we expect to have an answer or a decision here midyear somewhere. And then again, just to be clear on that, the decision made this time may be appealed by both parties. Operator: We now have a question from the line of Rob Pulleyn from Morgan Stanley. Robert Pulleyn: The remaining question I would like to ask is, given obviously lots of interest in your future partnerships you mentioned and also the market is very interested in potential collaboration with your Norwegian neighbors. And to leave to park that particular topic, there is a related one is that, that particular neighbor has a U.S. project and pipeline as well. And so from a high level, could you talk to whether you would be interested in increasing your exposure in the U.S. market at all? Rasmus Errboe: Thank you, Rob. So yes, you are right that sort of with respect to Equinor that we are -- we continue to be pleased having them as a shareholder. They were very supportive at the capital raise. They are a 10% shareholder, and we have a very good dialogue with them. We have no expectations whatsoever to increase our exposure to offshore wind in the U.S. Roughly a little less than a year ago, shortly after I took over, we adjusted or we basically came adjusted our strategy for [indiscernible]. And one of the things we did when we came to the U.S. was to refocus to basically only focusing on finalizing the 2 projects we have, Revolution Wind and Sunrise Wind on the offshore side. We maintain the leases we have. And we sort of continue to comply and we have them for sort of optionality, but we have no expectations to acquire new projects in the U.S. Operator: The next question comes from the line of James Carmichael from Berenberg. James Carmichael: Just first one, just quickly on the 2,000 headcount reduction that you mentioned. I was just wondering if you could say how many, if any, of those occur naturally, I guess, as part of the European onshore disposal, how many effectively go over to CIP with that asset base? And then just while we're talking onshore, just wondering if you could maybe remind us of your commitment to the U.S. onshore business given the strategic focus on offshore and Europe that you talked about. Rasmus Errboe: Thank you very much. So if we take the people aspect first, as you -- just as a reminder, we communicated in October that we would be reducing our -- the number of people working for us towards the back end of 2027 with roughly 2,000 positions. We are moving forward according to plan in that regard. And we have said goodbye to around 500 colleagues in the back end of last year. And the 200 -- and it is -- on top of that, it is roughly 200 people who are employed in our Europe onshore business, and they will all transfer to the new buyer and is included in the reduction that I talked about towards end of 2027. It is very important to me that we continue to treat all of our employees, those staying and those leaving in the best possible way. And I believe we are -- then the other part of your question was sort of what is our commitment to our U.S. onshore business. We are moving forward according to plan with our U.S. onshore business. It is going well. We have separated it out as a separate unit, as I mentioned before, effective from October last year. And the business is going well. We are moving forward projects. We have right now roughly 500 megawatts under construction, 1 wind project, 260 megawatts battery wind in MISO and one battery, 250 megawatts in ERCOT. And then on top of that, we have 6 to 7 gigawatts of capacity that meet the IRS definition of qualification through 2029. And we have this development portfolio consisting of a mix of solar, wind and storage, slightly more weighted towards solar in the near term. So moving forward well. Operator: We now have a question from the line of Louis Boujard from ODDO BHF. Louis Boujard: Maybe remaining a little bit on the efficiency measures. I think that you mentioned that you recorded also DKK 600 million of cost of implementation. Is this the total cost of implementation for the redundancy measures that you plan? Or shall we forecast additional costs going forward? And on top of it, I think that you mentioned as well that you are taking some initiatives into the trading and revenue division or activity. I would like to see -- to know if you could provide eventually some example of where you could eventually make some improvement on this topic in order to reach and to converge towards the DKK 2 billion savings that you previously mentioned? Rasmus Errboe: Thank you, Louis. You asked 2 questions, and we were simply not able to get the first part of your question, but it sounded like it was for Trond. But I will answer the latter, the second part, and then I would ask you to ask the first one more time. Sorry about that. It's a little bit of a dotty line. So you asked about trading and revenue and examples and so on in terms of the efficiency measures that we are talking about. So just as a reminder, as part of the rights issue, we communicated that we expect DKK 0.5 billion to DKK 1 billion of incremental EBITDA from '27 and onwards full year effect. And sort of a few examples. One is increased value from selling and buying certificates. Another one is increased activity day-to-day in today, day ahead. Another one is more third-party origination of PPAs, 3 examples. Our focus is on our core, which is power in Europe. So you should not see this as us increasing our risk appetite across gas or elsewhere, but we focus on our core. But those are a few examples of where we see the uplift. And then I would have to ask you to ask the first one more time. Louis Boujard: Yes. Thank you for giving me the opportunity to reask the first question. So the question was about redundancy measures and potentially, I think that you mentioned DKK 600 million of cost that you have recognized in Q4 regarding indeed the rightsizing of the company. And I was wondering if you could confirm if it is the total cost that should be expected for the redundancy measures or if there is other additional costs that we could expect in '26 and eventually 2027? Trond Westlie: Thank you, Louis. It's good to hear the question. Yes, it's -- just to recap, what we say is that we have approximately DKK 750 million charged in '25 for rightsizing and restructuring. Of that, the provision is slightly more than DKK 500 million of that and the DKK 200 million to DKK 250 million is what is cost relative to the rightsizing effects that we did in '25. Accounting rules has its limitation relative to providing for restructuring and how concrete they have to be. So I would say that we have catered for the ones that we have decided and have clear sight on how to do. There might be some additional. We do not, as of this point, see it as significant. But of course, as we go along and look at the road map towards '28, it might come up, but we will be transparent on it. Operator: The next question comes from the line of Dominic Nash from Barclays. Dominic Nash: The question I've got is looking at your 30% cost reduction in wind costs by 2040, I believe. Do you think that, that's achievable without a Chinese supply chain? And could you let us know how advanced you are in discussions with sort of Chinese providers of turbines and offshore wind products and where you think that puts you relative to your -- the competitive disadvantages and advantages against your sort of developer peers? Rasmus Errboe: Thank you, Dominic. So in short, the first part of your question, yes, I do believe that the European supply chain is able to deliver on the commitments put out Monday last week. The European supply chain is quite robust. And only the last 3 years, it has invested more than EUR 14 billion across 20 European countries in the supply chain, 50% roughly on manufacturing, 20% in vessels, 30% in ports. And with the predictability that is now sort of there from the North Sea offshore wind investment pack, we do expect to see further ramp-up from the supply chain, roughly EUR 10 billion required to get our numbers to get to 15 gigawatts per year, and we believe that, that is possible. As for our own sort of approach. We are a global company present across 3 continents, and we do operate in a business with a global supply chain. And of course, the robustness and diversification are important priorities for us, and we do assess different technologies and suppliers. And when we do it, we do it based on quality, technological maturity, capability, ESG, regulatory, et cetera. And -- and we do also follow the development in China on the turbine side, as you are alluding to as part of our normal market sort of surveying. But we have no projects in our portfolio or in our pipeline using Chinese turbines. So we are following the development in the market like any other developer would do. And as I expect also most of our colleagues are. Dominic Nash: Sorry, can I just follow up? Apologies. I know that probably like a second question, but it's similar. I presume that if someone were to use Chinese products in the North Sea and it were seen to be cheaper, that once that's been sort of derisked, then other developers would follow them? Or do you think they'll still remain the European supply chain? Rasmus Errboe: That becomes a bit too speculative for me, Dominic. I think my -- our view is, as I stated before, I can best speak on our own behalf. Operator: We now have a question from the line of Ingo Becker from Kepler Cheuvreux. Ingo Becker: First, I have a question, please, on your DKK 35 billion divestment. I think you broke it down before in terms of the total program, but I'm interested in the balance sheet date with the view of your fiscal year-end balance sheet, how much of the DKK 35 billion has been cash effective booked in the balance sheet and how much is left in the cash flow statement? There's a DKK 12.5 billion figure which would mean DKK 22.5 billion cash effective would be left, but I'm not sure that's the right way of looking at it. And my second question would be on your '28 EBITDA. I know you have not given guidance, but you gave us a helping hand last year by helping us with the likely composition of that number and the consensus made out of this, something like DKK 37 billion. Not asking you to confirm that DKK 37 billion. But if we assume for one second that DKK 37 billion is the right figure, does this change with the proceeds moving from DKK 35 billion to DKK 46 billion, taking potential accounting effects into account. So would the EBITDA still be the same? Or would it change? Trond Westlie: When it comes to the cash effects, what I would -- it's basically it's basically Changhua and European onshore that has not been a part of the cash effects per the end of '25. So if you look at the debt effects going forward, the effects that's going to happen, it's 2 elements on Changhua. It's because we have 100% of the assets until COD. When we sell off 55%, we will, of course, deconsolidate the project and the project has then approximately DKK 20 billion in debt. So that debt will be then deconsolidated as a part of the transaction. In addition to that, there will be approximately DKK 5 billion in proceeds. And then in addition to that, it's around DKK 10 billion coming out of Europe onshore sale when it closes. That is the 3 elements of the sort of the transaction elements that is not included per year-end '25. When it comes to the '28 numbers, we have not guided on those numbers. So I will, of course, not take your hypothesis as a starting point. What we can do is that we are still saying that the numbers is between [ 11 ] and [ 12 ] for the 8.1 gigawatts for the first full year EBITDA effect of those projects. And relative to have an understanding of the elements, we also said during the capital increase, we said that the U.S. projects is around DKK 4.5 billion of that. The DKK 4.5 billion consists of approximately around DKK 1 billion for Revolution, our 50% ownership and our 100% ownership of Sunrise is about DKK 3.5 billion. So just to be clear that we can reiterate those numbers for the full year -- the first full year of the COD year for those projects. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Rasmus Errboe for any closing remarks. Rasmus Errboe: Thank you all very much for joining. We appreciate the interaction and the interest. And as always, if you have any further questions, please do not hesitate to reach out. Our IR team will be here to answer all of them. Thank you. Stay safe, and have a great day.
Marcelo de Noronha: [Interpreted] Good morning, everyone. I am Marcelo Noronha. I'm here live from Cidade de Deus, the headquarter of Bradesco for this earnings release presentation related to the fourth quarter of 2025. And why not saying of the full year of 2025 today is February 6 and my watch shows 10:31 a.m. I'll start with presentation saying that all of this material has been released last night after the market closing and I think you had access to it. And I start with our recurring net income, BRL 6.5 billion growing 20.6% year-on-year, and BRL 24.7 billion for the full year 26.1% growth and however, with an ROAE of 15.2% exceeding our cost of capital for the first time in this quarter. And that's why we say that we will continue to grow our ROAE for the coming quarters and years to come. Here, I have all of the operating highlights. I'm not going to go over each one of them because I will show -- I will certainly change a little bit today's presentation, and I would like to bring you some elements related to our transformation plan that in fact was published February 7, 2024, so less than 2 years ago, it will the 2 years as of tomorrow. So that's when we released the plan. And I would just like to remind you of what we did back then. So we started with a diagnosis at Banco Bradesco the Brazilian market, and also, we drew up a worldwide benchmark with all of the relevant aspects like technology. Out of the diagnosis, we drew up a plan knowing all of our strengths. The plan -- the bank has several strengths, and the organization as a whole for that matter. Back then, we said that we have 70 million clients. We also said that we were leaders in SMEs. SMEs understood as a segment defined by the Central Bank because every bank has its own format. These are companies that grows up to BRL 300 million a year. We also said that there was high penetration in the high income segment. And certainly, we have the largest insurance group in Latin America, in addition to having a stake in many other companies. And we also said that we will work on our strength to create a new position with the clear goal to increase competitiveness in the short and long run. But it's important to remember that we put a deadline of up to 5 years. It wouldn't happen overnight. And it hasn't even been 2 years. When we presented the plan, we came up with this [ mandala ] with all the main topics, the 10 main items that were carefully looked at with more than 200 new initiatives. I will go over some of them, I will not talk about all of them or all of that, otherwise, we will be here for 2 hours, and you will be really tired. But our IR team and the transformation office, everybody is available to give you further clarification, especially those that want to talk to investors, to discuss some particular area of this [ mandala ] -- and if you have additional questions, we are certainly at your disposal. So I'll briefly cover some of the most important highlights and then I'll go back to the core numbers, and we wrap up the presentation. So then after the presentation we have the Q&A. Well starting with digital retail. We haven't been bringing a lot of elements for you, but after this period at year-end, we came up with 19 million clients fully digital. They are fully assisted through the digital channel with our BIA GenAI with the level of resolution, which is very high. So BIA is retaining 90% of all calls that comes through digital retail, but it's also important to look at the engagement level. Our efficiency in this client life cycle that allow us to -- I mean, I'm not going to get into the details of every topic. But I would like to draw your attention to this item here down below. The direct cost to serve to all of these clients in the digital platform that was reduced by 40x. This is an important number. And what we envision for 2026 vis-a-vis our digital retail. First, we go from 19 million to approximately 40 million clients between account holders and non-account holders. And certainly our objective, not only for 2026, but going forward is to reduce the cost of -- cost to serve and to continue growing our customer base. The second topic is affluent clients, and we are talking about principal and prime segments. We promoted an upgrade to more than 3.1 million clients with a new value proposition. And at the same time, we introduced a new position in this segment of clients. Prime ended the year of 2.3 million clients. We trained 3,500 managers, we focus on that training. But notice the level of accuracy for BIA team. It's accuracy was 93% at BIA customers, and then i go to Principal. You may recall that we launched principal in November 2024, with 3 offices, one in Faria Lima, another one in Campinas and the other one in Leblon in Rio. And then we started the expansion process. In fact, I invited sell-side and buy-side clients to look at our management model rather than just the business model. So we are just going through this phase in other segments. So we launched a new segment in November of '24. By the end of last year, we had 62 offices and 36 municipalities approximately 320,000 clients in this segment with this current level of NPS, so a new value proposition. And this created this new differential. And what do we expect to see next year out of these 2 affluent segment. I mean, new upgrade with more than 1.5 million clients reaching 4,700,000 clients. And as for principle, we will open almost 50 additional offices in Sao Paulo, reaching 70 municipalities, and we will have almost 800,000 clients by the end of the year. But you might recall our target because it's not something that we change overnight because this is gradually build. So we will expand our share of wallet, and this is what you see down below when it comes to the affluent segment. And next comes SMEs. As I said at the beginning, we were market leaders. We had approximately 14.3% market share in SMEs of almost BRL 300 million a year. But notice what happen here. We've built a much more robust segment with a new digital model with a new value proposition. So mostly digital and remote service and also companies and business segment. This is a segment where we introduced 150 new branches during 2024, and we changed the segmentation of the business segment. The configuration of the management model for managers, we delivered a new Internet Banking an new app for companies and look at what happened to our NPS. These are numbers that were not disclosed before. We went from 56 to 74 points. So I'd like to say that nothing happens by divine order, it happens because we work hard in the backdrop and we execute based on the plan. But I will draw your attention to say that we have more than 5,000 managers in this segment. And we are present in 2,100 service points, and this adds value to clients. Regardless of having this level of evaluation in metrics with a robust capacity to serve clients because they can't do self-service and at the same time, have a very good experience. But we can still serve these clients in the physical channels. But I would like to draw your attention to something that I said at the beginning. We had 14.3% share. We are leaders in this market, but what happened up to September 2025. We gained market share. We reached 16.6% market share, and we continue on the right track in terms of this segment. Our purpose, not only for 2026, but for a more distant future is to increase our penetration in these segments. And we believe in this was stated in the diagnosis that in this segment of up to 300,000 a year of SMEs, it's a segment that tends to increase its share in the financial system in the next coming years up to BRL 300 million a year. And I mean, payments and cash. I'm not going to get into many details, but Bradesco Global Solutions with global cash, and obviously, our goal is to increase the share of wallet and customer centricity through time. I mean credit we introduced a credit view. Of course, I will talk about cause and effect, because as I said, things don't happen by divine chance. We introduced the credit BU at the beginning of our plan, and we thinned this business unit. We introduced a portfolio management area. They are working on different client segments. And they are also operating in the life portfolio, be it in Wholesale and Retail bank, Customer Finance, et cetera. So within this business unit, we also introduced a new pricing area to serve all segments and businesses, all the verticals I mentioned to you before, and all of them to generate more risk-adjusted return, and this is a very important part of our strategy. But when we put this together I told Andre that we wouldn't get any lack of resources. There will be enough resources. So to that end, we hired 250 professionals and we gave them full technology support to enhance the models for all customer segments, also to manage the portfolios. And looking at the time line of credits and loans that are not only decided on prediction models, but mostly decided by human judgment, and then support all of it, and the consequence is -- that this SME growth level is still the same that we have with payroll loans. And if we hadn't put this together in the way it is, certainly, we wouldn't be growing SMEs the way we've been growing today and the way we grew in 2025. And what do we expect in terms of our objectives. This unit together with the clients segment. We want more competitiveness in some lines and segments, but growth with quality and moreover, a very strict risk adjusted returns. We have also many other initiatives. Maybe there is one that will take longer to deliver. But our clear objective is not only to have back office and front office. But moreover, having an end-to-end experience that we really boost our productivity. I mean, model culture, in addition to the area led by Silvana, which is people -- they are contributing with up-skilling, re-skilling. And despite everything we are doing including new variable compensation KPIs, et cetera, we conducted a new survey new engagement survey, 84% engagement when compared to 74% postpaid in the survey of 2024. And that's why we are focused on keeping a very engaged team and fully committed to everything we want to do with the capacity to change as well and adjust. People are crucial, competent teams and teams that can certainly deliver and change as we go so that we can deliver more competitive goals in the short and long run. So organizational structure was the first thing I showed during the plan. So we reduced layers. We reduced the span of control -- I mean we increased the span of control. And -- we brought C-levels and Directors to different areas. I talked about the credit area more recently, but we also promoted inorganic growth. I'm not going to get into the details, but in the Insurance company as well with the hospitals. And what do we expect out of this organizational structure. To gain more efficiency and agility, when it comes to decision making. Technology. This is a chapter that I've been talking about all the time for investments in AI. For us our culture is AI first. AI first and AI is not just GenAI, but it's machine learning for our mathematical models, but also multi-agents who have been working with a number of initiatives on the slide, I spoke about BIA client with that level of retention using GenAI. But we have the BIA Core, BIA Tech and BIA Client so on and so forth. So what happened in these 2-year period. We gained productivity. We reduced lead time and the consequences was this that I mentioned before. With a base of 100 of delivery of apps for clients internally for review processes, and gaining productivity of a regulatory points we ended 2025 with 300. We grew our capacity by 3x over -- less than 2 years. That's when we started this whole move. We invested and we've invested in cybersecurity. We have -- we improved our second and third lines of defense for cyber, and we expect greater productivity gain. More and more intensive GenAI use, but more competitiveness, and innovation and time to market. And I'd like to mention some other things here because I'm going to get to the numbers in a minute and we'll speak about guidance eventually. But we invested last year, invested heavily in technology. Investment in technology grew in 2025 compared to 2024 by 22%. And if you look at our guidance, which I will refer to in a minute of those about 8% of growth approximately, about 3% or slightly over 3% come from the investments that we will continue to make. We will not give up on investing. I see technology is a big driver of our productivity and our ability to deliver a lot more to tech clients with hyper personalization, which we have been doing, and during the Q&A, we can speak more about that. Synergies and Innovations. We had a number of actions with Cielo. Tap-on-phone, D+0 receivables discount all invented in our corporate app. In Bradesco Financiamentos, we also gained investment with new hiring, not just efficiency in the unit cost, but commercial efficiency of Bradesco Financiamentos. And what are the next steps, we expect -- well, with the next step to increase our share of wallet, increase growth, productivity and innovation with different verticals that we have in our organization. And now speaking again about profitability to give you more numbers. I mentioned that before, and feel free because our team is ready to talk with you and explain this in much more detail. If we look at the net income. I always tell my team, this should be the last slide and not in the first because again, we speak here about the cost and effect and this is the effect. Effect of what? Effect of a plan that is been executed and that is showing how our capacity revealing and improving, the strengths that we talked about, but strengths that were driven by actions of the plan and we have a growing number. 8 quarters delivering always a little bit more and step by step, we don't change these strategic plan overnight. You correct of course. You correct the tactics, but there is a strategic continuity, with execution discipline. And this is -- it called also discipline, we are showing this with our the team in the transformation office. Moving to total revenues. We are growing in all revenues. NII, we see here, the growth in NII and fee and commission income. When we remove the Cielo tender offer, the growth is 5.5%. Insurance investment plans of 16.1%, another robust quarter and growth expectation. But why is all the revenue growing? Again comes into the effect. It's not by divining profit. It's by increased penetration, credit trading traction in NII, a reduction of liabilities cost better liability management and so on and so forth. With all the initiatives adopted. Looking at our loan portfolio almost BRL 1.1 billion in December 2025, and the previous quarter, we were at BRL 9.6 billion and now BRL 11 billion. The highlight goes to micro-small medium-sized companies growing 21.3%, and that's why we're gaining share. And by looking at all of the portfolios, we are growing in all of them. Again, why are we growing? We are growing because we have a client base. We've grown because we have high penetration in all client segments, and in the verticals that we work with, and so when this supported, because we have an engaged team. A team that was supported by client management systems, GenAI, a better offering for clients. In a nutshell, it is a set of measure that we improved over this period. And looking at the portfolio, and the loan quality indicators they are all flat over 90-day NPLs totally easy. Over 15 days, if we look on the slide, it's absolutely flat, we structured our portfolio with the BRL 10.5 billion in 2025. BRL 20.5 billion reduction of problematic assets. Look at our stages. Stage 3 dropping quarter-after-quarter. Stage 1 increasing quarter-after-quarter with the evolution of the secured portfolio. So we are totally at ease with our loan portfolio and with our ability to continue to originate even more and particularly with some levers. Net interest income 14.9% increased and the client NII up 17.4%. Again, this is we see 17.4% to growth, in here, this hits the bottom line, BRL 4.8 billion to BRL 10.3 billion, growing 22.6%. Cost of risk, absolutely under control and quite and market NII delivering our expectation -- expectation of our treasury. Fee and commission income grew at the proportion that I mentioned before, but please note I should highlight 3 card income 14.4% increase in high income 25%. Construction management. There is a lot of traction, growing 17.3%. When we look at loan operations, we have a lot of traction as well. Why is it not growing? Because part of it has been deferred because of the Resolution 4,966. But look at what happened with capital markets. 29.2% increase full year '25 compared to full year '24. This was not divine providence again, this is investment. We changed the structure with Bruno's team and the whole team, we created the agribusiness segment. We changed our investment banking structure to broaden Bradesco's team and capture a lot more in DCM, M&A and other line items such as project finance. The result is this level of growth. We have a DCM share, that we had in 2022. So we grew, we're doing well in the rankings, and we continue to grow. But there are 2 offenders here that do not help these levers, which are checking account and collection, which normally in this market pull the results down. But overall, we are delivering and we're delivering well. Operating expenses, 8.5% increase. I told you and I will repeat it. Investments in technology. We grew 22% of technology investments in 2025 compared to 2024. And we will continue to invest in technology. But if we break our expenses down into personnel and administrative, where we grew 5% in line with the average IPCA. POR is one of defect on expenses with our profit sharing patent, this would be 2.5%. We continue to reduce our footprint -- if we look at the complete period. 2,800 points, and if we exclude EloPar and Cielo as we have been doing in past quarters, growth of operating expenses would be 7.2%. But in the Q&A, if you want you can ask and we can debate administrative expenses, but overall growth was negative. We have personal expenses with this variable that I mentioned, the profit sharing program and investments in technology, in transformation. For example the whole implementation of the 59 Principal office almost 50 more will be added next year, so we continue to invest in reviewing our footprint and focusing on the necessary investments in each one of the departments to help us grow. Our Insurance growth, another strength of our organization. ROE 24.3%, but in the full [indiscernible] 22%, spoke about this already. We are growing in all lines with a lot of balance. Client base growing. I was checking this with Ivan earlier today. The result of insurance operations exceeding the guidance of 16.1% and growth in operating results, and not necessarily in financial results, with technical provisions of 446% (sic) [ BRL 446 billion ] growing more than 10% year-on-year. Moving to the end of my presentation. When we'll look at this capital discipline. We have year-on-year growth, if we look at December 2024 compared to December 2025 in Tier 1, 12.4% to 13.2% and the quarter there is a slight reduction of 20 basis points in common equity in Tier 1, but if we look at common equity we also posted growth year-on-year up 0.7 percentage points and this is something that I mentioned with all of you with the sell-side, with the buy-side. I spoke about this that we have this under control. And lastly on guidance. Well we delivered at the top of the guidance impacting all items in expanded loan portfolio we were growing 9.6% in September and we ended up with 11% good, because of our traction and the ability to execute. We start 2026 with even more traction. Insurance operations 16.1% beyond the guidance and we have the guidance for 2026 listed here. I am here and I'm ready to discuss this with you and now I will sit down with my colleagues Andre Carvalho IR Officer and Cassiano for us to start our Q&A. But I would end my speech saying that we have heard comments since last night, when we released the results, post the results, some positive comments regarding the 2025 numbers. I didn't hear anyone saying bad things, negative things, but the expectations were much higher for our 2026 guidance. Our share between December 31, 2024, and today is Feb, 6 had increased 106%. Appreciated a 106% -- so it is only natural, its part of the game of sell-side, buy-side to have price adjustments. Not 29%, it's 27.5%, of the middle of the guidance, it's up to you, but we will not loose sight of our horizon because the shares have to be adjusted by 5%, no problems. Can you imagine today with the level of conviction that we have, with the level of the delivery that we have, I am super confident in our organization. I'm happy. I had the meeting yesterday with our leadership team with the level of engagement we have in our company. So Andre over to you. Thank you very much for joining us in this call. Andre Carvalho: [Interpreted] Good morning, everyone. Thank you, Marcelo and Cassiano. I would like to let you know that Ivan Gontijo, CEO of our Insurance company is joining us remotely. To start the Q&A session, I would like to present 3 alternative for questions. [Operator Instructions] The first question comes from Pedro Leduc from Itau BBA. Pedro Leduc: [Interpreted] Good morning, everyone. Thank you for the presentation and congratulations on this wonderful year in your trajectory. My question is related to how you see the underlying business trends? So we could look at the NII guidance, less LLP. I mean I think you're going to grow low 2-digits, slightly above the portfolio. I just want to understand what's behind it when we think about NII in isolation or LLP, I think these 2 things have to talk to one another, but to understand what is part of it, so that I will have a good idea of your views about mix, spread, credit quality as you know, the year is just beginning. Marcelo de Noronha: [Interpreted] Okay. Pedro I will start, Cassiano will start as well. It's good to see you again, Pedro. Our NII remains focused on our standard. We changed our mix for 2025. Secured products remains our main lever. Obviously, the quality of our credit BU allows us to work in any credit line secured and unsecured we're very, very comfortable with the quality of our portfolio and the way we are operating it. The average rate should be maintained until the end of the year. And our LLP should grow in line with our operational. These are the main drivers of our NII, and we will maintain it with a very high degree of engagement. Cassiano Scarpelli: [Interpreted] Okay. I have a few things to add. It's important to say and highlight what you just said. Portfolio mix, spread level, always focusing on risk adjusted return. This is the goal, and I also talked about pricing. The pricing area comes to reinstate that point. I mean we have some very important levers that go through different segments like payroll loans in all of its lines I'm talking about public and INSS and private. We have approximately slightly above 14% market share. But I would like to remind you that we have the lowest market share on the private side. So we have a lot of opportunities, and we already saw this level of growth. And I would just like to add that we are I mean, we are placing our hiring offering. It's 24/7. And this is hyper customized with microseconds, that go and come and already respond, give us a response about the risk of the borrower, the company and pricing, which is adjusted to risk, it's risk-adjusted pricing. Therefore, I'm saying that we will grow in payroll loans. We see a lot of traction coming from the clients. INSS has its own challenges, market challenges. It's not all ours, but in previous quarters, year-over-year, we were growing 5%. And now in this past quarter, we grew 6.8%. But this is payroll loan, SME, we are still growing, and we will continue to grow in lines with secure lines backed by receivables, be it direct receivables or some lien, et cetera. So we will grow with auto for companies and individuals. We are very optimistic in terms of future growth with the credit quality that it's absolutely under control. I do not see any deviations. We are not concerned with that, because certainly, you know that we did our homework, when it comes to portfolio management and our modelings team. And then you also mentioned an important aspect. You talked about NII growing slightly above the portfolio. Well, this has to do with the mix. We are a wholesale bank, we can fluctuate as it happened this quarter on the positive side, but it could also fluctuate on the negative side because we do the turnover of the portfolio. Andre Carvalho: [Interpreted] And the next question is from Mario Pierry with Bank of America. Mario Pierry: [Interpreted] Congratulations on your results. We understand that a lot has been done in the first 2 years, but you still have a lot more to do going forward. But what you have already demonstrated is that you are on the right track. Right. I have 2 questions. You had an additional expense of BRL 700 million. You spent that to restructure and the structure that is suggested for 2026. And this is almost twice as much in terms of provisions you posted last year. So could you please highlight where these restructuring will focus more, whether it has to do with the number of branches? And we understand that we are getting a lot of questions from our clients. Your guidance says that you will grow expenses by 8% at the top you said it's 3% relates to investments and technology. This also means that the rest of the bank will grow or is growing 5%, in line with inflation. And just like you said, you already reduced -- 2,800 points in the past 2 years. So how come expenses are not growing below inflation? That's why the consensus, I was hoping for a number close to BRL 20 million rather than BRL 27.5 million. We thought that the bank's core expense should be growing below inflation? Marcelo de Noronha: [Interpreted] Well, thank you for your questions. If you look at our admin expenses, and if you look at some of the lines in our full publication, you will see, okay, third-party services, maintenance, conservation, lease, all of these lines were down and transportation, transportation of currency. So what are the detractors here? I'm just summarizing, there are some that are very positive. But technology, I mean, it grew 22%. And when we look at it, it will continue to grow. We will continue to invest, to increase our competitiveness. Second, I mean, profit sharing, we increased profit, and we paid out more. And the third detractor. I'm not going to refer to small lines. We had some changes on the advertising side. But we found 3 good opportunities at the end of the year, and we decided to invest like when we launched Principal. And that's when we did the coverage at the airports. It's out of what we expect us to do at that time. And thirdly, there are other expenses that also go through some lawsuits, we have a very good provision coverage. We've been working a lot based on this root causes. And when you work in that root cause, you do not expand the incoming, but that is coming down with time. So I believe that these lines will be below 27%, 28%. And this is what you look at when you look at expenses or other expenses in addition to expenses with technology. And talking about investments in restructuring, I would tell you that, first of all, we continue to review the footprint. We were doing less than -- less than what we would do in 2025. And so we will do more than what we did last year. But we will open, as I said before, about 50 offices earmarked for Principal. But we are also refurbishing some physical stores with private, meaning that we continue to invest in this transformation, making footprint adjustments also increasing our capacity to invest more and reduce cost to serve, in Retail and Digital. So our cost is 40x lower. Cassiano Scarpelli: [Interpreted] Well, thank you for your question. There is one more thing I would like to add in addition to the 3% you mentioned in terms of technology investment. 5% is only related to human resources. Well, that's important to remember, in addition to profit shares. You will see that our expenses are very much under control. There is one more thing because you said that was twice as what it was last year. If you look at 2024, it's very close to the number that we posted in 2024. Maybe the difference is about BRL 100 million. 40% higher on average or greater than average. There is another point related to efficiency. Our efficiency ratio was down by 2.2%, from 2.2% to 50%. So our ambition is to reach 40% by 2028, meaning that the trend is downwards in 2026, and this drop will be even more accentuated in '27 '28, when the top line grows a lots, it's just natural that some OpEx to see growth with OpEx. And our top line growth will be almost 10% in 2026. Also, as you increase transactional, certainly the variable cost I mean it's different even with scale. Andre Carvalho: Next question is from Gustavo Schroden with Citi. Gustavo Schroden: [Interpreted] Congratulations on resuming ROAE starting from 10% to 12% now over 15%. I would like to think a little about the investment cycle, more specifically and linking with operating efficiency and efficiency ratio. Marcelo you're very clearly showing, and I heard an interview you gave, when you said that you won't stop in investing, but the focus is to maintain competitiveness. And is that you're thinking about the future of the bank in a sustained fashion. So I'd like to understand, what part of the cycle would you say the bank is in? Particularly in terms of technology investments or investments in new product or segments? And should we start thinking -- should we start thinking about the benefits coming from operating leverage operating efficiency, and reducing efficiency ratio, thinking that in 2026 revenue should continue to support the step-by-step ROAE improvement, so that in '27, we'll start seeing the benefits of operating efficiencies? Marcelo de Noronha: [Interpreted] Gustavo, I would say that we are in the middle of the cycle. We are not at the end of the cycle. If you look at our plan, we spoke about stretching this until 2028. And along that period, some things are quick wins. You capture the benefits in the short term. Other things we invest in and you're going to reap the fruits later. We'll continue to invest in the whole renovation of the bank. Look at some U.S banks and Asian banks and what they have been seeing in September, I was in Asia I had an opportunity to talk with CEOs of other Asian organizations and to speak with peers of that region, and everyone is investing again in AI first, we see opportunities to improve efficiency and to gain competitiveness in our relationship with our clients. I will not stop investing. We want to improve our infrastructure, our architecture constantly in terms of technology. So efficiency doesn't come only because we're going to invest less -- and I'm going to give you my opinion. In the opinion of all world banks. I don't see anyone stopping investing in technology. Technology will require growing constant investing over time. That's my opinion. But we're going to gaining in other lines. For example, loss expense and areas, where we are going to have a reduction not only in 2026. So we have to have efficiency gains, and we will have these efficiency gains -- but this will be driven to the top line. Gustavo, you can ask me, if I don't deliver the top line, but I want to deliver the top line. Increased penetration continue to grow and delivering ROAEs even better than what we currently have. My colleague yesterday said an airplane will never fly backwards. We are not going to fly backwards. It was 15.2% in this quarter, and we expect it to increase, if we can deliver more and more, which was the case of the loan book in the past quarter, we will do it. Andre Carvalho: Next question from Daniel Vaz with Safra. Daniel Vaz: [Interpreted] Congratulations on the results and the delivery, since the beginning of the strategic plan. I think it's -- we can see how dedicated the management is in readapting the bank and improving the whole quality of the portfolio while still growing. My question is focused on Cielo. Cielo is a strategic asset of yours. You're talking about integrating Cielo, particularly in SMEs, integrating Cielo even more. It's already partially integrated. But in terms of TPV, Cielo had a big difference compared to the network. So perhaps we're thinking about those big accounts, not SMEs. This is an important difference in trajectory. So I'd like to hear from you what is the strategy for the large accounts? Perhaps there's a loss of profitability and you don't want to change that? And in SMEs, you advanced a lot also in terms of governmental programs, and that's an important liquidity for the system. But the Cielo part in terms of strategy, the strategy is not so clear to me in 2026, '27. I'd like to understand what is the integration stage we're at. Cassiano Scarpelli: [Interpreted] Well, thank you, Daniel, for the questions. #1, regarding Cielo. Cielo has also been undergoing a process of transformation, which is rather significant. Over there, we created separate teams for the 2 partners. Today, we have a connection at different sites with the Wholesale and the Corporate Retail segments. And we worked with them in a plan and so that we'll be a lot more connected in a verticalized way. Talking about cash and talking about affiliation, more than having a segregated company, where I would originate something and they would work with it. No, they have to improve logistics. They did. They had to deliver tap-on-phone. They did, deliver. They had to deliver a whole new pricing system for D-0, they did. They needed to deliver a connection to our app. We delivered it together. So all of that is done. But you're correct. I think that there were 2 or 3 cases, I don't remember, 2 or 3 of large accounts. And the similar team went to the limit and took it to the limit and decided to give up the TPV, which was important rather than losing profitability. So we see an ability to grow and grow a lot because we are very accelerated and tractioned in SMEs, and we reduced the attrition with our distribution channels. And this is an army of more than 5,000 managers in addition to all of the digital offering that we have. So we are going to move forward. You can rest be assured of that. But we are not going to throw away money with margins that are effectively very reduced. Regarding SMEs, our SMEs, we are growing not only in government clients, our expectation is to continue to grow. With a very similar number that we had in 2025. Indeed, we haven't got that final number, okay, Daniel, the final number regarding government or total government programs. But we have an estimate. And the estimate is that we had 26% or 25% to 26% market share. We were the bank that operated the most government clients last year. We have an initial estimate, our own estimate, not market estimate, but let's wait for official data, but that's kind of that level. We have good traction, but we can only do all that because of the kind of structuring we have in the SME segment and also because of our technology deliveries, our ability to hire through our digital channels, the whole modeling of the Credit BU portfolio management. So we are not granting credit just because we have a government guarantee. We have a lot of criteria, and it's always about RAR, risk-adjusted return. We have a program to price each one of these government programs. So, we have a lot of traction. We ended the year with high traction, and we believe that we will continue to deliver good results and Marcelo? Marcelo de Noronha: [Interpreted] This is one of the important pillars of technology this year. We created our app for business with a totally different technology embedded to it. And this is a very important reinforcement for this. Yes, we're migrating 500,000 clients to this new experience that Cassiano just mentioned. So that's another important information. We are increasing our competitiveness with Cielo being integrated. Andre Carvalho: Next question from Yuri Fernandes with JPMorgan. Yuri Fernandes: [Interpreted] I mean, your long-term view -- your long-term view, I mean, I know sometimes it's not easy to invest in the future, but you are delivering improvements gradually. So congratulations for it. I mean my question is about capital. I mean CET1 is very close to 11%. I think this quarter was 11.2%. But for 2026, there might be some challenges. There are some prudential adjustments going forward, 49.66% operating risk. So can you please elaborate a little bit about the capital outlook, whether CET1 should remain at 11%? Or maybe possibly it will be slightly lower and you would just gradually increase it. And in addition to that prudential adjustment, my other question has to do with your portfolio growth. I mean, you posted a very positive growth message. And like you said, the bank is well tractioned. But this 9.5% growth in the portfolio with retained profit, the retained profits in the middle of the guidance also might imply some capital consumption. So going back to my question, will it remain at 11% or it will go slightly above? So if you can tell me something else about CET1, I would appreciate it. Cassiano Scarpelli: [Interpreted] Thank you. You were constantly provoking us about this topic, and I really enjoy your provocation. So thank you again for joining us today. I would like Andre to start answering your question, and then I will follow through. Andre Carvalho: [Interpreted] Thank you, Yuri. In terms of CET1 of around 11%, that's what we expect to have throughout 2026. We are here talking about loan book growing at 9.5%, and we look at full CET1 of 9.2% in the first quarter, going up vis-a-vis what it was in 2025. So interest on equity that was BRL 14.5 billion last year, it will go up this year for above BRL 15 million. Our capital absorbs that portfolio growth increase in interest on equity. And here, we also have DTA, like you said. So CET1, it's around 11%. In the first quarter of the year, we know that we have the regulatory measures, operating risk, the Resolution 4,966 issue. So everything has been computed whenever when we mentioned CET of around 11% for this year. There might be some fluctuations, but it will be around the 11% number, but our baseline is 11%. But there might be some fluctuation for the reasons already explained by Andre, but it will be around 11%, and this is important. Cassiano Scarpelli: [Interpreted] Yuri, I would just -- I'm not going to repeat what they said because this is what we expect to see. But 2 years ago, we told you that we have a lot of discipline when it comes to capital. And every year, we review our DTA or tax credit horizon for 10 years, meaning that we are constantly monitoring that. And we also evaluate all of the opportunities as you put it yourself. Therefore, we are constantly looking at that. And back then, we said that we would have enough capital. But look at our allocation in our loan portfolios. Turnover of the wholesale bank therefore, everything we are doing is very well planned and coordinated. So I can even go further. I think we can surprise you more than anything else just in terms of our CET or common equity. And of course, net income will grow and our return as well. Obviously, [ 14.67 ] is a challenge more for some banks than others. But it is for the period of 10 years, but there is an intersection here, which is '26, '27 and '28 are the heaviest years. But after that, when the horizon may change. Therefore, we are very confident about everything we are doing and in terms of the capital that we are allocating. Well, thank you for your provocations. Andre Carvalho: Next question from [indiscernible] with Santander Bank. Unknown Analyst: [Interpreted] I would just like to revisit the payroll loan. I think you said something about it, but if you could elaborate a bit more about your appetite and expectations for payroll loans and more specifically private payroll loans? And I know that on the public side, you gained some important and relevant market share. Cassiano Scarpelli: [Interpreted] Well, we are very, very well positioned to grow. Gain market, of course, that depends on the competition, but I think we are well positioned to gain market share. Well, we gain market share on the public side, INSS that involves a lot of market discussions and things related to the management of INSS, when it comes to payroll loans. But we are also very well positioned with INSS. But on the private side, we tend to increase our share. And as I said, we deploy models that are highly competitive 24/7. We are growing. We've seen that in the past quarter of 2025, the last quarter of last year, and we will see the same things happening throughout the year. Therefore, I'm very optimistic in terms of everything that we are doing to grow and to gain share. Andre Carvalho: [Interpreted] Next question from Renato Meloni with Autonomous. Renato Meloni: [Interpreted] I'd like to second my colleagues and congratulate you on the deliveries, since the plan was announced. I think that the results show the whole work that was done. Over the year, you showed a lot of ROE expansion. But when we look at the guidance at the midrange, ROE similar to that of Q4. So I'd like to understand, do you expect 2026 as to be a year of accommodation of settling or the uncertainty regarding the elections made you be more conservative in the guidance? Now moving to 2027. If we have this scenario of accommodation, I think that in 2027, we bring ROEs to more reasonable levels. What would be the levers in revenue to increase profitability? Marcelo de Noronha: [Interpreted] Renato, thank you for the question. I'd say that I don't see a year of settling for us. I think it's part of our plan. Again, we will improve step by step because we'll continue to invest to increase competitiveness. I don't want to be repetitive, but this is our mantra. We focus on this all the time. Regarding the ROE, again, it's kind of an internal joke. Yesterday, we were laughing about this. An aircraft will not fly backwards. So there's no chance that we'll do less than 15%, 20%. Actually, Andre, you might witness and Cassiano as well, I said a year ago, I'm more optimistic. I'm more pointing to the upper range of the guidance than focusing on the lower band of the guidance. Of course, this year, I'm a little more optimistic. So what we actually saw, Renato, is that the market somehow started bringing the expectation of our net income to BRL 30 billion, BRL 31 billion. And the role of IR is to correct the course. You don't have a 30%, 40% leap year-on-year because we continue to invest in our transformation. Remember that. I see a higher and growing ROE. Indeed, you mentioned the macroeconomic aspect. It is true. We should have a little more volatility in the second half because of the elections that is only natural. But I am optimistic regarding what we are doing and our ability to compete in terms of the expectation of our economists we'll have the GDP growth and unemployment rate very balanced. So we have a lot of opportunity for growth. With the interest rate cuts, they happen a little faster. This will help some companies regarding their costs, if they are a little bit more leveraged. So of course, the macroeconomic environment does have an influence for all players in the market. But I see us with a lot of opportunities to grow the ROE. And if we can deliver superior absolute results, just like the loan book that grew 11% when in September, it was growing 9.6%, we will do it. We're not wasting time. We're not wasting space or losing space. And please remember what I explained here, Renato. We are well aligned, increasing penetration. I spoke about Principal segment, SMEs, Corporates doing well, the Insurance company. I mean, they are delivering a lot. And there are several verticals. Earlier today in the press conference, Ivan spoke about the continuity of growth in pension plans, active distribution there. So I see 2026 with optimism. I think that there is some a structural issue in Brazil. In terms of the fiscal aspect and the public debt. But if we're able to look at the public debt regardless of the presidential candidate, if we improve that for 2027, '28, we'll improve the market expectations. And he asked about the levers to increase profitability. Cassiano Scarpelli: [Interpreted] Renato, I can say that it's almost everything, credit. We're growing it with the right drivers. But we are not operating in the higher risk segments for credit card, mid-income and high income. In lower income, our risk appetite is lower. Credit is a big driver. Liability management, the liability management we've been doing and the growth that we've been posting and we've posted a lot of growth. Fee and commission income, the main levers and the detractor. So that's another line. The insurance group again. And in the other areas, payments, our consortium business at full speed, the ability for auto loans in our own channels and external channels and so on and so forth. So I see a lot of opportunity because our organization is diversified. We have different revenue sources at different moments. And this year, we will review the channels, and this will increase cross-selling a lot. We spoke about Bradesco Expresso, distributing a lot more consortium, operations, insurance, payroll deductible loans, but also Bradesco Financiamentos selling more insurance. So we have a number of opportunities for cross-selling. Our business app that we'll have Cielo will soon have insurance, dental insurance. So it's all part of operating leverage for us. Andre Carvalho: [Interpreted] Next question from Thiago Batista with UBS. Thiago Bovolenta Batista: [Interpreted] My question has to do with what you just mentioned, good performance of the insurance group. In recent years, the share of the insurance group was about 20%. It got to almost 50% in 2023, and it was dropping. But in recent quarters, it became relevant again. I think that in consolidated income, a much higher percentage came from the insurance group. This is due to an ROE of 18% post to that. But in the sister banks too a bit under pressure. So 2 topics, 1 is the relevance, when I think about the midterm in 5 years' time, how much of the results should come from the insurance group? And #2, is the power of the organization hurting the consumption of DTAs of the bank. In 2026, will DTAs start dropping or not? Cassiano Scarpelli: [Interpreted] Thank you, Thiago. Well, the insurance group is not getting in the way in terms of consumption of DTAs, and that is important to mention. What we have been saying in terms of DTAs is that this is a year when we will try to neutralize the nominal portion. We'll see a reduction of DTAs in 2027, '28. And this is part of our plan stretching until 2028, as Marcelo mentioned. And that is super important. And I think that we've had the best allocation possible in managing the cost of capital, and it has to do with the tax credit. What was the second part of the question? Well, a comment to make periodically, the insurance group also pays dividends to the controlling shareholder. So we declare it and repay it. So you see the insurance group is a strength to us and not the other way around. It is diversified. It is the biggest insurance group in Latin America. We have a huge traction in the bank's channels to distribute insurance, but we also have external distribution of insurance, reaching out to other clients, which were not necessarily reached out by our internal channels. But we don't hope that the insurance group will do less. We want them to do more. We have an expectation of growing even more. This is what we are seeing. The bank is investing a lot. We're investing in technology, 22% in 2025 over 2024. The bank is investing in technology. And sometimes, we capture the value considering BF consortium and so on and so forth. So what I see is, over time, we should have 2/3 from the bank, 1/3 from the Insurance group. But if this means that the Insurance group will grow a lot more and have a bigger share, I'm happy. I want to deliver more. And this is our expectation. We are very pleased with the results there and with the other related companies. So you'll see that we will be taking off in our ROE and absolute profit. Andre Carvalho: [Interpreted] Next question from Matheus Guimaraes with XP. Matheus Guimarães: [Interpreted] Congrats on the results. I would like to revisit the SME topic. I think Andre talked about market share, and that was a relevant information. And historically, this has been the bank's strength in SMEs. But we've seen some competitors, even new bank talking about SME. Of course, the concept of SME varies in terms of the size of the company. But what would we expect for 2026 in that portfolio? Because given that this is a very relevant portfolio for you in terms of growth and even in terms of growth going forward. Cassiano Scarpelli: [Interpreted] Matheus, thank you for your question. We are very pleased with our position. In reinstating our position, I must say that I've been working directly with Jose. Jose is the VP in charge of that area, but I've been working with all of my colleagues, [ Alexandre Pinheiro ], Mario [indiscernible] Marcelo, the entire corporate team or company team and also wholesale bank with Bruno, et cetera, and the middle market team. First of all, we always look at what places the Central Bank in terms of assets, companies up to BRL 300 million a year because this allow us to draw a comparison. Competition in this area is very fierce. We always knew that. But our distribution strength is very important. We delivered a lot in digital channels. We hire government progress through digital channels. The journey is very efficient. And we continue to invest. If there is a place to put money, it is precisely in SME, micro and small and midsized companies. The levers continue to be government lines, but also, we provide funding to company vehicles and other investments that have even sounder guarantees, prepayments to suppliers, all of that, it's part of our journey. But then when you look at the digital need with the new Internet app, I mean, a new app when we are migrating over 500,000 clients. The retention rate has been enormous and great growth opportunity and the commercial team in the back office is supported by GenAI and new tools. We just deployed Salesforce back in 2024 for the company segment. And now we are expanding that with the entire business segment and the previous platform we had so we can manage this whole set of things much better with more than 5,000 managers in 21 points of sales. I am very, very pleased with the results. So look at the level of market share we have and see all that we were able to deliver in terms of our loan portfolio. And that was not by chance, but rather because we implemented in new tools, new segmentation, new tools to our clients, new experiences and certainly with business unit models and products that are much more suitable. With SMEs, Matheus, not only we reduce the risk, but we increase penetration, and this is what we have to do. AI is here to help us. There are things that are a lot of -- involve a lot of machine learning and other things involve Gen AI. So there are things that we do to manage our portfolio, some predictive default models and engagement to grow, this means the client life cycle of a client totally connected to our analytics via CRM, which has also been revisited. Therefore, we are sticking to our position. I mean, going from 16.6% to 17% or 16.4% that's not what changes the game. We have to continue to grow and at the same time, reaching our fair share of everything that is important to us. And I'm very much aware of our potential and the growth that we can post for either corporate and individuals. Andre Carvalho: [Interpreted] Next question from Carlos Gomez-Lopez. Now I'll turn into English. Carlos Gomez-Lopez: Congratulations on your second year of -- under the new management. I had 2 very brief questions. The first one is about the absence of cockroaches, as you call them, bad corporate cases. We haven't had any this quarter? In your guidance for the next year, do you expect corporate defaults to stay where they are? Or do you incorporate some deterioration? And the second is, could you comment on what tax rate you expect for next year? Cassiano Scarpelli: Carlos, the answer is no for the first question. Andre Carvalho: [Interpreted] But Andre, you can just start answering on the tax rate, and then I can add if necessary. Cassiano Scarpelli: [Interpreted] Okay. The tax rate that we are working is between 16% and 21% and 18.5% or 19% to calculate fixed net income. And why is it that the tax rate was 20% in 2025, and it dropped a little bit. First of all, because we anticipate higher payment of interest on equity, like I said, BRL 14.5 billion in 2025. So I'm saying between BRL 15 billion and BRL 16 billion in 2026. Certainly, this is a number that certainly depends on interest on equity to be announced by the government. It's not a fixed number. This is just the best estimate, but we anticipate growth in IOE, so that we can take more advantage of the embedded benefit. And secondly, is what Marcelo said, part of our investments bring about competitive gains. And like consortium. We've been highlighting that almost every quarter, we could also talk about auto financing that had posted a good performance in the past 3 months. We have several examples, even with BBI. All of the companies are posting very strong performance, and this helps reduce the rate -- tax rate. That doesn't mean that this is operating weakness. But on the contrary, this is very well distributed. And this year, in particular, the tax rate will drop a bit. I mean, depending on the company, the rate is different. The insurance business has a lower tax rate. I think this is the answer. And we have no concerns when it comes to the wholesale bank. So thank you, Carlos. Andre Carvalho: Next question comes from Tito Labarta from Goldman Sachs. Daer Labarta: You may have just answered it, but just wanted to make sure, right, because on the -- if we do ROE on a pretax basis, it's actually been a little bit more stable throughout the year, right? And I think on the guidance, our tax rate will be a little bit lower. Just because of the tax benefits you have, I think as your profitability generation improves, I would expect that tax rate to go up. And I think you mentioned the insurance tax rate is a bit lower. But just to understand, in terms of the underlying sort of earnings potential of the business, do you think that keeps improving? Or do you think this tax rate sort of remains low because of the tax benefits that you do have? Just to kind of think about excluding the tax rate, the ROE of the business and how you see that continuing to evolve? Cassiano Scarpelli: [Interpreted] Tito. Regarding the operational results of the group, the operational results of the group before taxes grew 27% in 2025, very strong. Secondly, looking at 2026, the answer is no. Yes, we will post strong operational result growth. And it's not about a weaker operational and a lower tax rate. It is all well distributed with Insurance, very strong consortium, very strong Bradesco Financiamentos, very strong. It's a very big group with several companies. When we consolidate it all, we see a small reduction of the income tax rate. Let me stress this Tito. We spoke about this in the other question. The insurance group has a smaller tax rate. If you go to other affiliates as well, for example, in payments, it's the same thing. We consolidate it all. And sometimes in one channel, for example, the complete connection of Bradesco Financiamentos with this one single channel for checking account holders or non-checking account holders. So I have -- it's a different situation sometimes. It's not the case of the tax rate, but there are other companies that have different tax rates, which is the case of Cielo. You see there is a mix of tax rate. And you should not forget that sometimes in the end of a period, there are some fiscal aspects, a certain law here and there. For example, insurance group benefited from that in the past quarter. They benefited from one law that affected the tax rate. So this is kind of what explains it, nothing different, as Andre mentioned. Andre Carvalho: [Interpreted] Next question from Eduardo Nishio with Genial. Still no sound. Let's move on and the question comes from Andrew Geraghty from Morgan Stanley. Andrew Geraghty: Congratulations on the great results. I know you have discussed at some length credit growth and some expectations for payroll loans, secured loans. I was hoping you could maybe elaborate a bit more on each of the different segments and how they fit into the loan portfolio guidance of 8.5% to 10.5%, kind of where you're expecting better growth, maybe where you're expecting some weaker growth and where there could be some upside by segment, if possible? Cassiano Scarpelli: [Interpreted] Well, actually, as Marcelo mentioned, we start 2026 stronger than we started 2025. We had a positive surprise in credit in Q4 2025. So we start the year already with a lot of traction. So we see a continuity of that movement. So what do we see in terms of trends? Very strong SMEs followed by individuals and then wholesale, wholesale competing with the capital market funding. As Marcelo mentioned, sometimes very high tickets making a difference. In Q4, positive difference for us. That doesn't happen all the time. But I think that the expectation, the prospects for the segments would be this, SMEs, individuals, wholesale, we have traction across all fronts, and we are ready to capture all opportunities. Right, but Andrew, there are some different situations, when we speak about the affluent segment. In Principal, we have relationship products such as investments, the credit card with a value proposition that is unique for these clients, totally different experiences for these clients. The same goes for Prime, which is different than the relationship for INSS retirees. For that audience, we offer deductible loans. And when we get to Prime and Principal, mortgages. So we have these mixes of products that sustain in these segments. And this is just to mention a few major. And in terms of companies, legal entities, we have a huge mix of products growing in small and medium-sized enterprises in different lines, by the way, increasing our penetration there. And with the wholesale bank, we are recycling the portfolio, and what we call OBD book origination for distribution, which is the case when the capital market spread was very crushed, we can compromise risk-adjusted return. So we don't work looking at that. So it is better to distribute than effectively keeping it in our books. And we have a set of fees, which are also important for us, in different lines of business. And there's also cash management. It is a super important platform for small and medium-sized enterprises as well as for the wholesale, we have a new technology platform, which over the year will bring us important improvements. That is another key point to improve profitability. Andre Carvalho: [Interpreted] Let's see if Nishio is back. We still cannot hear you. Not yet. Maybe if you remove your headset, maybe it will be better. We cannot hear. We're receiving a question about mass income. Okay. Tell me a little bit about the mass income portfolio? Cassiano Scarpelli: [Interpreted] So if you need any more information, I can add. Okay. Mass income is probably one of the major transformations of our banking cycle, since the beginning of our track record, our history. I think we are bringing some good news. I think Marcelo mentioned it quite well. 90 million clients are already fully digital in the mass retail with a totally different value proposition. But again, it's much easier to operate, not only they use BIA GenAI, but there is a specialist that can help with a customized sale, which changes the paradigm of having an individual physically present in a branch. The second relevant aspect is the engagement, our capacity to serve that client with Gen AI tools and integration tools that are very important to boost sales. And I think this has been a major evolution. We anticipate BRL 45 million. So throughout the year, we will be fully digital. This will be our mass retail bank. This is a very important aspect. And today, February 6, we already have 25 million digital clients because every week, the numbers are growing with zero resistance, zero friction with clients. And this has been a very pleasing experience, very good experience. And behind all that, all of that is supported by a very good technological platform for individuals, and this will encompass all the individuals. And I think we've been telling you about that in the past quarters, and this will certainly grow or help us decrease cost to serve, which has been significantly reduced, and this has an important correlation to our footprint adjustment. Andre Carvalho: [Interpreted] Well, [ Nishio ], thank you very much for joining us. I know you had a that problem with the sound. But thank you. We are always available to talk to you and also to welcome you here at the bank. And the same thing goes for our IR team. I think Cassiano gave you a good backdrop. Well, you saw more than BRL 40 million at the end of '26, starting with BRL 19 million, but engagement is increasing and improving. And certainly, we are able to reduce direct cost to serve by 40 fold. We are very committed to what we are doing. And there are still people that look at the physical space in the physical world, and we are testing different models all the time with our Bradesco Expresso, so that we can address these topics. And this is a challenge. In fact, I said that I went to Asia last September. And I heard comments from some banks, they have the same challenges we have when it comes to footprint adjustments, cost to serve and consumer. Therefore, an issue, we are sticking to our plan, and we will bring this year, and in particular, in the second half, more information about this digital retail. And thank you. Thank you, Nishio. And with that, we conclude the Q&A session. Questions that couldn't be answered right now will be answered by our IR team. And before I turn the floor to Marcelo to his final comments, I must say that this presentation and the full material of this release is available in our IR website. Marcelo de Noronha: [Interpreted] Well, thank you, Andre. Thank you, Cassiano. -- and I extend this thanks to all of our team, who helped us in this video conference. And thank you, our audience, for your interest and for the time that you spent with us. Its what I said -- I mean, this is the summary of our transformation, 8 quarters in a row, delivering good numbers with the focus that I said, without losing sight of the plan that we set up for ourselves step by step, but delivering improved ROE and improved absolute net income with a very engaged team with clients and with the Bradesco team. So thank you once again. And our team is entirely available to give you more details, not only about this earnings presentation, but also about our transformation program. Thank you all very much, and thank you for joining us.
Marcelo de Noronha: [Interpreted] Good morning, everyone. I am Marcelo Noronha. I'm here live from Cidade de Deus, the headquarter of Bradesco for this earnings release presentation related to the fourth quarter of 2025. And why not saying of the full year of 2025 today is February 6 and my watch shows 10:31 a.m. I'll start with presentation saying that all of this material has been released last night after the market closing and I think you had access to it. And I start with our recurring net income, BRL 6.5 billion growing 20.6% year-on-year, and BRL 24.7 billion for the full year 26.1% growth and however, with an ROAE of 15.2% exceeding our cost of capital for the first time in this quarter. And that's why we say that we will continue to grow our ROAE for the coming quarters and years to come. Here, I have all of the operating highlights. I'm not going to go over each one of them because I will show -- I will certainly change a little bit today's presentation, and I would like to bring you some elements related to our transformation plan that in fact was published February 7, 2024, so less than 2 years ago, it will the 2 years as of tomorrow. So that's when we released the plan. And I would just like to remind you of what we did back then. So we started with a diagnosis at Banco Bradesco the Brazilian market, and also, we drew up a worldwide benchmark with all of the relevant aspects like technology. Out of the diagnosis, we drew up a plan knowing all of our strengths. The plan -- the bank has several strengths, and the organization as a whole for that matter. Back then, we said that we have 70 million clients. We also said that we were leaders in SMEs. SMEs understood as a segment defined by the Central Bank because every bank has its own format. These are companies that grows up to BRL 300 million a year. We also said that there was high penetration in the high income segment. And certainly, we have the largest insurance group in Latin America, in addition to having a stake in many other companies. And we also said that we will work on our strength to create a new position with the clear goal to increase competitiveness in the short and long run. But it's important to remember that we put a deadline of up to 5 years. It wouldn't happen overnight. And it hasn't even been 2 years. When we presented the plan, we came up with this [ mandala ] with all the main topics, the 10 main items that were carefully looked at with more than 200 new initiatives. I will go over some of them, I will not talk about all of them or all of that, otherwise, we will be here for 2 hours, and you will be really tired. But our IR team and the transformation office, everybody is available to give you further clarification, especially those that want to talk to investors, to discuss some particular area of this [ mandala ] -- and if you have additional questions, we are certainly at your disposal. So I'll briefly cover some of the most important highlights and then I'll go back to the core numbers, and we wrap up the presentation. So then after the presentation we have the Q&A. Well starting with digital retail. We haven't been bringing a lot of elements for you, but after this period at year-end, we came up with 19 million clients fully digital. They are fully assisted through the digital channel with our BIA GenAI with the level of resolution, which is very high. So BIA is retaining 90% of all calls that comes through digital retail, but it's also important to look at the engagement level. Our efficiency in this client life cycle that allow us to -- I mean, I'm not going to get into the details of every topic. But I would like to draw your attention to this item here down below. The direct cost to serve to all of these clients in the digital platform that was reduced by 40x. This is an important number. And what we envision for 2026 vis-a-vis our digital retail. First, we go from 19 million to approximately 40 million clients between account holders and non-account holders. And certainly our objective, not only for 2026, but going forward is to reduce the cost of -- cost to serve and to continue growing our customer base. The second topic is affluent clients, and we are talking about principal and prime segments. We promoted an upgrade to more than 3.1 million clients with a new value proposition. And at the same time, we introduced a new position in this segment of clients. Prime ended the year of 2.3 million clients. We trained 3,500 managers, we focus on that training. But notice the level of accuracy for BIA team. It's accuracy was 93% at BIA customers, and then i go to Principal. You may recall that we launched principal in November 2024, with 3 offices, one in Faria Lima, another one in Campinas and the other one in Leblon in Rio. And then we started the expansion process. In fact, I invited sell-side and buy-side clients to look at our management model rather than just the business model. So we are just going through this phase in other segments. So we launched a new segment in November of '24. By the end of last year, we had 62 offices and 36 municipalities approximately 320,000 clients in this segment with this current level of NPS, so a new value proposition. And this created this new differential. And what do we expect to see next year out of these 2 affluent segment. I mean, new upgrade with more than 1.5 million clients reaching 4,700,000 clients. And as for principle, we will open almost 50 additional offices in Sao Paulo, reaching 70 municipalities, and we will have almost 800,000 clients by the end of the year. But you might recall our target because it's not something that we change overnight because this is gradually build. So we will expand our share of wallet, and this is what you see down below when it comes to the affluent segment. And next comes SMEs. As I said at the beginning, we were market leaders. We had approximately 14.3% market share in SMEs of almost BRL 300 million a year. But notice what happen here. We've built a much more robust segment with a new digital model with a new value proposition. So mostly digital and remote service and also companies and business segment. This is a segment where we introduced 150 new branches during 2024, and we changed the segmentation of the business segment. The configuration of the management model for managers, we delivered a new Internet Banking an new app for companies and look at what happened to our NPS. These are numbers that were not disclosed before. We went from 56 to 74 points. So I'd like to say that nothing happens by divine order, it happens because we work hard in the backdrop and we execute based on the plan. But I will draw your attention to say that we have more than 5,000 managers in this segment. And we are present in 2,100 service points, and this adds value to clients. Regardless of having this level of evaluation in metrics with a robust capacity to serve clients because they can't do self-service and at the same time, have a very good experience. But we can still serve these clients in the physical channels. But I would like to draw your attention to something that I said at the beginning. We had 14.3% share. We are leaders in this market, but what happened up to September 2025. We gained market share. We reached 16.6% market share, and we continue on the right track in terms of this segment. Our purpose, not only for 2026, but for a more distant future is to increase our penetration in these segments. And we believe in this was stated in the diagnosis that in this segment of up to 300,000 a year of SMEs, it's a segment that tends to increase its share in the financial system in the next coming years up to BRL 300 million a year. And I mean, payments and cash. I'm not going to get into many details, but Bradesco Global Solutions with global cash, and obviously, our goal is to increase the share of wallet and customer centricity through time. I mean credit we introduced a credit view. Of course, I will talk about cause and effect, because as I said, things don't happen by divine chance. We introduced the credit BU at the beginning of our plan, and we thinned this business unit. We introduced a portfolio management area. They are working on different client segments. And they are also operating in the life portfolio, be it in Wholesale and Retail bank, Customer Finance, et cetera. So within this business unit, we also introduced a new pricing area to serve all segments and businesses, all the verticals I mentioned to you before, and all of them to generate more risk-adjusted return, and this is a very important part of our strategy. But when we put this together I told Andre that we wouldn't get any lack of resources. There will be enough resources. So to that end, we hired 250 professionals and we gave them full technology support to enhance the models for all customer segments, also to manage the portfolios. And looking at the time line of credits and loans that are not only decided on prediction models, but mostly decided by human judgment, and then support all of it, and the consequence is -- that this SME growth level is still the same that we have with payroll loans. And if we hadn't put this together in the way it is, certainly, we wouldn't be growing SMEs the way we've been growing today and the way we grew in 2025. And what do we expect in terms of our objectives. This unit together with the clients segment. We want more competitiveness in some lines and segments, but growth with quality and moreover, a very strict risk adjusted returns. We have also many other initiatives. Maybe there is one that will take longer to deliver. But our clear objective is not only to have back office and front office. But moreover, having an end-to-end experience that we really boost our productivity. I mean, model culture, in addition to the area led by Silvana, which is people -- they are contributing with up-skilling, re-skilling. And despite everything we are doing including new variable compensation KPIs, et cetera, we conducted a new survey new engagement survey, 84% engagement when compared to 74% postpaid in the survey of 2024. And that's why we are focused on keeping a very engaged team and fully committed to everything we want to do with the capacity to change as well and adjust. People are crucial, competent teams and teams that can certainly deliver and change as we go so that we can deliver more competitive goals in the short and long run. So organizational structure was the first thing I showed during the plan. So we reduced layers. We reduced the span of control -- I mean we increased the span of control. And -- we brought C-levels and Directors to different areas. I talked about the credit area more recently, but we also promoted inorganic growth. I'm not going to get into the details, but in the Insurance company as well with the hospitals. And what do we expect out of this organizational structure. To gain more efficiency and agility, when it comes to decision making. Technology. This is a chapter that I've been talking about all the time for investments in AI. For us our culture is AI first. AI first and AI is not just GenAI, but it's machine learning for our mathematical models, but also multi-agents who have been working with a number of initiatives on the slide, I spoke about BIA client with that level of retention using GenAI. But we have the BIA Core, BIA Tech and BIA Client so on and so forth. So what happened in these 2-year period. We gained productivity. We reduced lead time and the consequences was this that I mentioned before. With a base of 100 of delivery of apps for clients internally for review processes, and gaining productivity of a regulatory points we ended 2025 with 300. We grew our capacity by 3x over -- less than 2 years. That's when we started this whole move. We invested and we've invested in cybersecurity. We have -- we improved our second and third lines of defense for cyber, and we expect greater productivity gain. More and more intensive GenAI use, but more competitiveness, and innovation and time to market. And I'd like to mention some other things here because I'm going to get to the numbers in a minute and we'll speak about guidance eventually. But we invested last year, invested heavily in technology. Investment in technology grew in 2025 compared to 2024 by 22%. And if you look at our guidance, which I will refer to in a minute of those about 8% of growth approximately, about 3% or slightly over 3% come from the investments that we will continue to make. We will not give up on investing. I see technology is a big driver of our productivity and our ability to deliver a lot more to tech clients with hyper personalization, which we have been doing, and during the Q&A, we can speak more about that. Synergies and Innovations. We had a number of actions with Cielo. Tap-on-phone, D+0 receivables discount all invented in our corporate app. In Bradesco Financiamentos, we also gained investment with new hiring, not just efficiency in the unit cost, but commercial efficiency of Bradesco Financiamentos. And what are the next steps, we expect -- well, with the next step to increase our share of wallet, increase growth, productivity and innovation with different verticals that we have in our organization. And now speaking again about profitability to give you more numbers. I mentioned that before, and feel free because our team is ready to talk with you and explain this in much more detail. If we look at the net income. I always tell my team, this should be the last slide and not in the first because again, we speak here about the cost and effect and this is the effect. Effect of what? Effect of a plan that is been executed and that is showing how our capacity revealing and improving, the strengths that we talked about, but strengths that were driven by actions of the plan and we have a growing number. 8 quarters delivering always a little bit more and step by step, we don't change these strategic plan overnight. You correct of course. You correct the tactics, but there is a strategic continuity, with execution discipline. And this is -- it called also discipline, we are showing this with our the team in the transformation office. Moving to total revenues. We are growing in all revenues. NII, we see here, the growth in NII and fee and commission income. When we remove the Cielo tender offer, the growth is 5.5%. Insurance investment plans of 16.1%, another robust quarter and growth expectation. But why is all the revenue growing? Again comes into the effect. It's not by divining profit. It's by increased penetration, credit trading traction in NII, a reduction of liabilities cost better liability management and so on and so forth. With all the initiatives adopted. Looking at our loan portfolio almost BRL 1.1 billion in December 2025, and the previous quarter, we were at BRL 9.6 billion and now BRL 11 billion. The highlight goes to micro-small medium-sized companies growing 21.3%, and that's why we're gaining share. And by looking at all of the portfolios, we are growing in all of them. Again, why are we growing? We are growing because we have a client base. We've grown because we have high penetration in all client segments, and in the verticals that we work with, and so when this supported, because we have an engaged team. A team that was supported by client management systems, GenAI, a better offering for clients. In a nutshell, it is a set of measure that we improved over this period. And looking at the portfolio, and the loan quality indicators they are all flat over 90-day NPLs totally easy. Over 15 days, if we look on the slide, it's absolutely flat, we structured our portfolio with the BRL 10.5 billion in 2025. BRL 20.5 billion reduction of problematic assets. Look at our stages. Stage 3 dropping quarter-after-quarter. Stage 1 increasing quarter-after-quarter with the evolution of the secured portfolio. So we are totally at ease with our loan portfolio and with our ability to continue to originate even more and particularly with some levers. Net interest income 14.9% increased and the client NII up 17.4%. Again, this is we see 17.4% to growth, in here, this hits the bottom line, BRL 4.8 billion to BRL 10.3 billion, growing 22.6%. Cost of risk, absolutely under control and quite and market NII delivering our expectation -- expectation of our treasury. Fee and commission income grew at the proportion that I mentioned before, but please note I should highlight 3 card income 14.4% increase in high income 25%. Construction management. There is a lot of traction, growing 17.3%. When we look at loan operations, we have a lot of traction as well. Why is it not growing? Because part of it has been deferred because of the Resolution 4,966. But look at what happened with capital markets. 29.2% increase full year '25 compared to full year '24. This was not divine providence again, this is investment. We changed the structure with Bruno's team and the whole team, we created the agribusiness segment. We changed our investment banking structure to broaden Bradesco's team and capture a lot more in DCM, M&A and other line items such as project finance. The result is this level of growth. We have a DCM share, that we had in 2022. So we grew, we're doing well in the rankings, and we continue to grow. But there are 2 offenders here that do not help these levers, which are checking account and collection, which normally in this market pull the results down. But overall, we are delivering and we're delivering well. Operating expenses, 8.5% increase. I told you and I will repeat it. Investments in technology. We grew 22% of technology investments in 2025 compared to 2024. And we will continue to invest in technology. But if we break our expenses down into personnel and administrative, where we grew 5% in line with the average IPCA. POR is one of defect on expenses with our profit sharing patent, this would be 2.5%. We continue to reduce our footprint -- if we look at the complete period. 2,800 points, and if we exclude EloPar and Cielo as we have been doing in past quarters, growth of operating expenses would be 7.2%. But in the Q&A, if you want you can ask and we can debate administrative expenses, but overall growth was negative. We have personal expenses with this variable that I mentioned, the profit sharing program and investments in technology, in transformation. For example the whole implementation of the 59 Principal office almost 50 more will be added next year, so we continue to invest in reviewing our footprint and focusing on the necessary investments in each one of the departments to help us grow. Our Insurance growth, another strength of our organization. ROE 24.3%, but in the full [indiscernible] 22%, spoke about this already. We are growing in all lines with a lot of balance. Client base growing. I was checking this with Ivan earlier today. The result of insurance operations exceeding the guidance of 16.1% and growth in operating results, and not necessarily in financial results, with technical provisions of 446% (sic) [ BRL 446 billion ] growing more than 10% year-on-year. Moving to the end of my presentation. When we'll look at this capital discipline. We have year-on-year growth, if we look at December 2024 compared to December 2025 in Tier 1, 12.4% to 13.2% and the quarter there is a slight reduction of 20 basis points in common equity in Tier 1, but if we look at common equity we also posted growth year-on-year up 0.7 percentage points and this is something that I mentioned with all of you with the sell-side, with the buy-side. I spoke about this that we have this under control. And lastly on guidance. Well we delivered at the top of the guidance impacting all items in expanded loan portfolio we were growing 9.6% in September and we ended up with 11% good, because of our traction and the ability to execute. We start 2026 with even more traction. Insurance operations 16.1% beyond the guidance and we have the guidance for 2026 listed here. I am here and I'm ready to discuss this with you and now I will sit down with my colleagues Andre Carvalho IR Officer and Cassiano for us to start our Q&A. But I would end my speech saying that we have heard comments since last night, when we released the results, post the results, some positive comments regarding the 2025 numbers. I didn't hear anyone saying bad things, negative things, but the expectations were much higher for our 2026 guidance. Our share between December 31, 2024, and today is Feb, 6 had increased 106%. Appreciated a 106% -- so it is only natural, its part of the game of sell-side, buy-side to have price adjustments. Not 29%, it's 27.5%, of the middle of the guidance, it's up to you, but we will not loose sight of our horizon because the shares have to be adjusted by 5%, no problems. Can you imagine today with the level of conviction that we have, with the level of the delivery that we have, I am super confident in our organization. I'm happy. I had the meeting yesterday with our leadership team with the level of engagement we have in our company. So Andre over to you. Thank you very much for joining us in this call. Andre Carvalho: [Interpreted] Good morning, everyone. Thank you, Marcelo and Cassiano. I would like to let you know that Ivan Gontijo, CEO of our Insurance company is joining us remotely. To start the Q&A session, I would like to present 3 alternative for questions. [Operator Instructions] The first question comes from Pedro Leduc from Itau BBA. Pedro Leduc: [Interpreted] Good morning, everyone. Thank you for the presentation and congratulations on this wonderful year in your trajectory. My question is related to how you see the underlying business trends? So we could look at the NII guidance, less LLP. I mean I think you're going to grow low 2-digits, slightly above the portfolio. I just want to understand what's behind it when we think about NII in isolation or LLP, I think these 2 things have to talk to one another, but to understand what is part of it, so that I will have a good idea of your views about mix, spread, credit quality as you know, the year is just beginning. Marcelo de Noronha: [Interpreted] Okay. Pedro I will start, Cassiano will start as well. It's good to see you again, Pedro. Our NII remains focused on our standard. We changed our mix for 2025. Secured products remains our main lever. Obviously, the quality of our credit BU allows us to work in any credit line secured and unsecured we're very, very comfortable with the quality of our portfolio and the way we are operating it. The average rate should be maintained until the end of the year. And our LLP should grow in line with our operational. These are the main drivers of our NII, and we will maintain it with a very high degree of engagement. Cassiano Scarpelli: [Interpreted] Okay. I have a few things to add. It's important to say and highlight what you just said. Portfolio mix, spread level, always focusing on risk adjusted return. This is the goal, and I also talked about pricing. The pricing area comes to reinstate that point. I mean we have some very important levers that go through different segments like payroll loans in all of its lines I'm talking about public and INSS and private. We have approximately slightly above 14% market share. But I would like to remind you that we have the lowest market share on the private side. So we have a lot of opportunities, and we already saw this level of growth. And I would just like to add that we are I mean, we are placing our hiring offering. It's 24/7. And this is hyper customized with microseconds, that go and come and already respond, give us a response about the risk of the borrower, the company and pricing, which is adjusted to risk, it's risk-adjusted pricing. Therefore, I'm saying that we will grow in payroll loans. We see a lot of traction coming from the clients. INSS has its own challenges, market challenges. It's not all ours, but in previous quarters, year-over-year, we were growing 5%. And now in this past quarter, we grew 6.8%. But this is payroll loan, SME, we are still growing, and we will continue to grow in lines with secure lines backed by receivables, be it direct receivables or some lien, et cetera. So we will grow with auto for companies and individuals. We are very optimistic in terms of future growth with the credit quality that it's absolutely under control. I do not see any deviations. We are not concerned with that, because certainly, you know that we did our homework, when it comes to portfolio management and our modelings team. And then you also mentioned an important aspect. You talked about NII growing slightly above the portfolio. Well, this has to do with the mix. We are a wholesale bank, we can fluctuate as it happened this quarter on the positive side, but it could also fluctuate on the negative side because we do the turnover of the portfolio. Andre Carvalho: [Interpreted] And the next question is from Mario Pierry with Bank of America. Mario Pierry: [Interpreted] Congratulations on your results. We understand that a lot has been done in the first 2 years, but you still have a lot more to do going forward. But what you have already demonstrated is that you are on the right track. Right. I have 2 questions. You had an additional expense of BRL 700 million. You spent that to restructure and the structure that is suggested for 2026. And this is almost twice as much in terms of provisions you posted last year. So could you please highlight where these restructuring will focus more, whether it has to do with the number of branches? And we understand that we are getting a lot of questions from our clients. Your guidance says that you will grow expenses by 8% at the top you said it's 3% relates to investments and technology. This also means that the rest of the bank will grow or is growing 5%, in line with inflation. And just like you said, you already reduced -- 2,800 points in the past 2 years. So how come expenses are not growing below inflation? That's why the consensus, I was hoping for a number close to BRL 20 million rather than BRL 27.5 million. We thought that the bank's core expense should be growing below inflation? Marcelo de Noronha: [Interpreted] Well, thank you for your questions. If you look at our admin expenses, and if you look at some of the lines in our full publication, you will see, okay, third-party services, maintenance, conservation, lease, all of these lines were down and transportation, transportation of currency. So what are the detractors here? I'm just summarizing, there are some that are very positive. But technology, I mean, it grew 22%. And when we look at it, it will continue to grow. We will continue to invest, to increase our competitiveness. Second, I mean, profit sharing, we increased profit, and we paid out more. And the third detractor. I'm not going to refer to small lines. We had some changes on the advertising side. But we found 3 good opportunities at the end of the year, and we decided to invest like when we launched Principal. And that's when we did the coverage at the airports. It's out of what we expect us to do at that time. And thirdly, there are other expenses that also go through some lawsuits, we have a very good provision coverage. We've been working a lot based on this root causes. And when you work in that root cause, you do not expand the incoming, but that is coming down with time. So I believe that these lines will be below 27%, 28%. And this is what you look at when you look at expenses or other expenses in addition to expenses with technology. And talking about investments in restructuring, I would tell you that, first of all, we continue to review the footprint. We were doing less than -- less than what we would do in 2025. And so we will do more than what we did last year. But we will open, as I said before, about 50 offices earmarked for Principal. But we are also refurbishing some physical stores with private, meaning that we continue to invest in this transformation, making footprint adjustments also increasing our capacity to invest more and reduce cost to serve, in Retail and Digital. So our cost is 40x lower. Cassiano Scarpelli: [Interpreted] Well, thank you for your question. There is one more thing I would like to add in addition to the 3% you mentioned in terms of technology investment. 5% is only related to human resources. Well, that's important to remember, in addition to profit shares. You will see that our expenses are very much under control. There is one more thing because you said that was twice as what it was last year. If you look at 2024, it's very close to the number that we posted in 2024. Maybe the difference is about BRL 100 million. 40% higher on average or greater than average. There is another point related to efficiency. Our efficiency ratio was down by 2.2%, from 2.2% to 50%. So our ambition is to reach 40% by 2028, meaning that the trend is downwards in 2026, and this drop will be even more accentuated in '27 '28, when the top line grows a lots, it's just natural that some OpEx to see growth with OpEx. And our top line growth will be almost 10% in 2026. Also, as you increase transactional, certainly the variable cost I mean it's different even with scale. Andre Carvalho: Next question is from Gustavo Schroden with Citi. Gustavo Schroden: [Interpreted] Congratulations on resuming ROAE starting from 10% to 12% now over 15%. I would like to think a little about the investment cycle, more specifically and linking with operating efficiency and efficiency ratio. Marcelo you're very clearly showing, and I heard an interview you gave, when you said that you won't stop in investing, but the focus is to maintain competitiveness. And is that you're thinking about the future of the bank in a sustained fashion. So I'd like to understand, what part of the cycle would you say the bank is in? Particularly in terms of technology investments or investments in new product or segments? And should we start thinking -- should we start thinking about the benefits coming from operating leverage operating efficiency, and reducing efficiency ratio, thinking that in 2026 revenue should continue to support the step-by-step ROAE improvement, so that in '27, we'll start seeing the benefits of operating efficiencies? Marcelo de Noronha: [Interpreted] Gustavo, I would say that we are in the middle of the cycle. We are not at the end of the cycle. If you look at our plan, we spoke about stretching this until 2028. And along that period, some things are quick wins. You capture the benefits in the short term. Other things we invest in and you're going to reap the fruits later. We'll continue to invest in the whole renovation of the bank. Look at some U.S banks and Asian banks and what they have been seeing in September, I was in Asia I had an opportunity to talk with CEOs of other Asian organizations and to speak with peers of that region, and everyone is investing again in AI first, we see opportunities to improve efficiency and to gain competitiveness in our relationship with our clients. I will not stop investing. We want to improve our infrastructure, our architecture constantly in terms of technology. So efficiency doesn't come only because we're going to invest less -- and I'm going to give you my opinion. In the opinion of all world banks. I don't see anyone stopping investing in technology. Technology will require growing constant investing over time. That's my opinion. But we're going to gaining in other lines. For example, loss expense and areas, where we are going to have a reduction not only in 2026. So we have to have efficiency gains, and we will have these efficiency gains -- but this will be driven to the top line. Gustavo, you can ask me, if I don't deliver the top line, but I want to deliver the top line. Increased penetration continue to grow and delivering ROAEs even better than what we currently have. My colleague yesterday said an airplane will never fly backwards. We are not going to fly backwards. It was 15.2% in this quarter, and we expect it to increase, if we can deliver more and more, which was the case of the loan book in the past quarter, we will do it. Andre Carvalho: Next question from Daniel Vaz with Safra. Daniel Vaz: [Interpreted] Congratulations on the results and the delivery, since the beginning of the strategic plan. I think it's -- we can see how dedicated the management is in readapting the bank and improving the whole quality of the portfolio while still growing. My question is focused on Cielo. Cielo is a strategic asset of yours. You're talking about integrating Cielo, particularly in SMEs, integrating Cielo even more. It's already partially integrated. But in terms of TPV, Cielo had a big difference compared to the network. So perhaps we're thinking about those big accounts, not SMEs. This is an important difference in trajectory. So I'd like to hear from you what is the strategy for the large accounts? Perhaps there's a loss of profitability and you don't want to change that? And in SMEs, you advanced a lot also in terms of governmental programs, and that's an important liquidity for the system. But the Cielo part in terms of strategy, the strategy is not so clear to me in 2026, '27. I'd like to understand what is the integration stage we're at. Cassiano Scarpelli: [Interpreted] Well, thank you, Daniel, for the questions. #1, regarding Cielo. Cielo has also been undergoing a process of transformation, which is rather significant. Over there, we created separate teams for the 2 partners. Today, we have a connection at different sites with the Wholesale and the Corporate Retail segments. And we worked with them in a plan and so that we'll be a lot more connected in a verticalized way. Talking about cash and talking about affiliation, more than having a segregated company, where I would originate something and they would work with it. No, they have to improve logistics. They did. They had to deliver tap-on-phone. They did, deliver. They had to deliver a whole new pricing system for D-0, they did. They needed to deliver a connection to our app. We delivered it together. So all of that is done. But you're correct. I think that there were 2 or 3 cases, I don't remember, 2 or 3 of large accounts. And the similar team went to the limit and took it to the limit and decided to give up the TPV, which was important rather than losing profitability. So we see an ability to grow and grow a lot because we are very accelerated and tractioned in SMEs, and we reduced the attrition with our distribution channels. And this is an army of more than 5,000 managers in addition to all of the digital offering that we have. So we are going to move forward. You can rest be assured of that. But we are not going to throw away money with margins that are effectively very reduced. Regarding SMEs, our SMEs, we are growing not only in government clients, our expectation is to continue to grow. With a very similar number that we had in 2025. Indeed, we haven't got that final number, okay, Daniel, the final number regarding government or total government programs. But we have an estimate. And the estimate is that we had 26% or 25% to 26% market share. We were the bank that operated the most government clients last year. We have an initial estimate, our own estimate, not market estimate, but let's wait for official data, but that's kind of that level. We have good traction, but we can only do all that because of the kind of structuring we have in the SME segment and also because of our technology deliveries, our ability to hire through our digital channels, the whole modeling of the Credit BU portfolio management. So we are not granting credit just because we have a government guarantee. We have a lot of criteria, and it's always about RAR, risk-adjusted return. We have a program to price each one of these government programs. So, we have a lot of traction. We ended the year with high traction, and we believe that we will continue to deliver good results and Marcelo? Marcelo de Noronha: [Interpreted] This is one of the important pillars of technology this year. We created our app for business with a totally different technology embedded to it. And this is a very important reinforcement for this. Yes, we're migrating 500,000 clients to this new experience that Cassiano just mentioned. So that's another important information. We are increasing our competitiveness with Cielo being integrated. Andre Carvalho: Next question from Yuri Fernandes with JPMorgan. Yuri Fernandes: [Interpreted] I mean, your long-term view -- your long-term view, I mean, I know sometimes it's not easy to invest in the future, but you are delivering improvements gradually. So congratulations for it. I mean my question is about capital. I mean CET1 is very close to 11%. I think this quarter was 11.2%. But for 2026, there might be some challenges. There are some prudential adjustments going forward, 49.66% operating risk. So can you please elaborate a little bit about the capital outlook, whether CET1 should remain at 11%? Or maybe possibly it will be slightly lower and you would just gradually increase it. And in addition to that prudential adjustment, my other question has to do with your portfolio growth. I mean, you posted a very positive growth message. And like you said, the bank is well tractioned. But this 9.5% growth in the portfolio with retained profit, the retained profits in the middle of the guidance also might imply some capital consumption. So going back to my question, will it remain at 11% or it will go slightly above? So if you can tell me something else about CET1, I would appreciate it. Cassiano Scarpelli: [Interpreted] Thank you. You were constantly provoking us about this topic, and I really enjoy your provocation. So thank you again for joining us today. I would like Andre to start answering your question, and then I will follow through. Andre Carvalho: [Interpreted] Thank you, Yuri. In terms of CET1 of around 11%, that's what we expect to have throughout 2026. We are here talking about loan book growing at 9.5%, and we look at full CET1 of 9.2% in the first quarter, going up vis-a-vis what it was in 2025. So interest on equity that was BRL 14.5 billion last year, it will go up this year for above BRL 15 million. Our capital absorbs that portfolio growth increase in interest on equity. And here, we also have DTA, like you said. So CET1, it's around 11%. In the first quarter of the year, we know that we have the regulatory measures, operating risk, the Resolution 4,966 issue. So everything has been computed whenever when we mentioned CET of around 11% for this year. There might be some fluctuations, but it will be around the 11% number, but our baseline is 11%. But there might be some fluctuation for the reasons already explained by Andre, but it will be around 11%, and this is important. Cassiano Scarpelli: [Interpreted] Yuri, I would just -- I'm not going to repeat what they said because this is what we expect to see. But 2 years ago, we told you that we have a lot of discipline when it comes to capital. And every year, we review our DTA or tax credit horizon for 10 years, meaning that we are constantly monitoring that. And we also evaluate all of the opportunities as you put it yourself. Therefore, we are constantly looking at that. And back then, we said that we would have enough capital. But look at our allocation in our loan portfolios. Turnover of the wholesale bank therefore, everything we are doing is very well planned and coordinated. So I can even go further. I think we can surprise you more than anything else just in terms of our CET or common equity. And of course, net income will grow and our return as well. Obviously, [ 14.67 ] is a challenge more for some banks than others. But it is for the period of 10 years, but there is an intersection here, which is '26, '27 and '28 are the heaviest years. But after that, when the horizon may change. Therefore, we are very confident about everything we are doing and in terms of the capital that we are allocating. Well, thank you for your provocations. Andre Carvalho: Next question from [indiscernible] with Santander Bank. Unknown Analyst: [Interpreted] I would just like to revisit the payroll loan. I think you said something about it, but if you could elaborate a bit more about your appetite and expectations for payroll loans and more specifically private payroll loans? And I know that on the public side, you gained some important and relevant market share. Cassiano Scarpelli: [Interpreted] Well, we are very, very well positioned to grow. Gain market, of course, that depends on the competition, but I think we are well positioned to gain market share. Well, we gain market share on the public side, INSS that involves a lot of market discussions and things related to the management of INSS, when it comes to payroll loans. But we are also very well positioned with INSS. But on the private side, we tend to increase our share. And as I said, we deploy models that are highly competitive 24/7. We are growing. We've seen that in the past quarter of 2025, the last quarter of last year, and we will see the same things happening throughout the year. Therefore, I'm very optimistic in terms of everything that we are doing to grow and to gain share. Andre Carvalho: [Interpreted] Next question from Renato Meloni with Autonomous. Renato Meloni: [Interpreted] I'd like to second my colleagues and congratulate you on the deliveries, since the plan was announced. I think that the results show the whole work that was done. Over the year, you showed a lot of ROE expansion. But when we look at the guidance at the midrange, ROE similar to that of Q4. So I'd like to understand, do you expect 2026 as to be a year of accommodation of settling or the uncertainty regarding the elections made you be more conservative in the guidance? Now moving to 2027. If we have this scenario of accommodation, I think that in 2027, we bring ROEs to more reasonable levels. What would be the levers in revenue to increase profitability? Marcelo de Noronha: [Interpreted] Renato, thank you for the question. I'd say that I don't see a year of settling for us. I think it's part of our plan. Again, we will improve step by step because we'll continue to invest to increase competitiveness. I don't want to be repetitive, but this is our mantra. We focus on this all the time. Regarding the ROE, again, it's kind of an internal joke. Yesterday, we were laughing about this. An aircraft will not fly backwards. So there's no chance that we'll do less than 15%, 20%. Actually, Andre, you might witness and Cassiano as well, I said a year ago, I'm more optimistic. I'm more pointing to the upper range of the guidance than focusing on the lower band of the guidance. Of course, this year, I'm a little more optimistic. So what we actually saw, Renato, is that the market somehow started bringing the expectation of our net income to BRL 30 billion, BRL 31 billion. And the role of IR is to correct the course. You don't have a 30%, 40% leap year-on-year because we continue to invest in our transformation. Remember that. I see a higher and growing ROE. Indeed, you mentioned the macroeconomic aspect. It is true. We should have a little more volatility in the second half because of the elections that is only natural. But I am optimistic regarding what we are doing and our ability to compete in terms of the expectation of our economists we'll have the GDP growth and unemployment rate very balanced. So we have a lot of opportunity for growth. With the interest rate cuts, they happen a little faster. This will help some companies regarding their costs, if they are a little bit more leveraged. So of course, the macroeconomic environment does have an influence for all players in the market. But I see us with a lot of opportunities to grow the ROE. And if we can deliver superior absolute results, just like the loan book that grew 11% when in September, it was growing 9.6%, we will do it. We're not wasting time. We're not wasting space or losing space. And please remember what I explained here, Renato. We are well aligned, increasing penetration. I spoke about Principal segment, SMEs, Corporates doing well, the Insurance company. I mean, they are delivering a lot. And there are several verticals. Earlier today in the press conference, Ivan spoke about the continuity of growth in pension plans, active distribution there. So I see 2026 with optimism. I think that there is some a structural issue in Brazil. In terms of the fiscal aspect and the public debt. But if we're able to look at the public debt regardless of the presidential candidate, if we improve that for 2027, '28, we'll improve the market expectations. And he asked about the levers to increase profitability. Cassiano Scarpelli: [Interpreted] Renato, I can say that it's almost everything, credit. We're growing it with the right drivers. But we are not operating in the higher risk segments for credit card, mid-income and high income. In lower income, our risk appetite is lower. Credit is a big driver. Liability management, the liability management we've been doing and the growth that we've been posting and we've posted a lot of growth. Fee and commission income, the main levers and the detractor. So that's another line. The insurance group again. And in the other areas, payments, our consortium business at full speed, the ability for auto loans in our own channels and external channels and so on and so forth. So I see a lot of opportunity because our organization is diversified. We have different revenue sources at different moments. And this year, we will review the channels, and this will increase cross-selling a lot. We spoke about Bradesco Expresso, distributing a lot more consortium, operations, insurance, payroll deductible loans, but also Bradesco Financiamentos selling more insurance. So we have a number of opportunities for cross-selling. Our business app that we'll have Cielo will soon have insurance, dental insurance. So it's all part of operating leverage for us. Andre Carvalho: [Interpreted] Next question from Thiago Batista with UBS. Thiago Bovolenta Batista: [Interpreted] My question has to do with what you just mentioned, good performance of the insurance group. In recent years, the share of the insurance group was about 20%. It got to almost 50% in 2023, and it was dropping. But in recent quarters, it became relevant again. I think that in consolidated income, a much higher percentage came from the insurance group. This is due to an ROE of 18% post to that. But in the sister banks too a bit under pressure. So 2 topics, 1 is the relevance, when I think about the midterm in 5 years' time, how much of the results should come from the insurance group? And #2, is the power of the organization hurting the consumption of DTAs of the bank. In 2026, will DTAs start dropping or not? Cassiano Scarpelli: [Interpreted] Thank you, Thiago. Well, the insurance group is not getting in the way in terms of consumption of DTAs, and that is important to mention. What we have been saying in terms of DTAs is that this is a year when we will try to neutralize the nominal portion. We'll see a reduction of DTAs in 2027, '28. And this is part of our plan stretching until 2028, as Marcelo mentioned. And that is super important. And I think that we've had the best allocation possible in managing the cost of capital, and it has to do with the tax credit. What was the second part of the question? Well, a comment to make periodically, the insurance group also pays dividends to the controlling shareholder. So we declare it and repay it. So you see the insurance group is a strength to us and not the other way around. It is diversified. It is the biggest insurance group in Latin America. We have a huge traction in the bank's channels to distribute insurance, but we also have external distribution of insurance, reaching out to other clients, which were not necessarily reached out by our internal channels. But we don't hope that the insurance group will do less. We want them to do more. We have an expectation of growing even more. This is what we are seeing. The bank is investing a lot. We're investing in technology, 22% in 2025 over 2024. The bank is investing in technology. And sometimes, we capture the value considering BF consortium and so on and so forth. So what I see is, over time, we should have 2/3 from the bank, 1/3 from the Insurance group. But if this means that the Insurance group will grow a lot more and have a bigger share, I'm happy. I want to deliver more. And this is our expectation. We are very pleased with the results there and with the other related companies. So you'll see that we will be taking off in our ROE and absolute profit. Andre Carvalho: [Interpreted] Next question from Matheus Guimaraes with XP. Matheus Guimarães: [Interpreted] Congrats on the results. I would like to revisit the SME topic. I think Andre talked about market share, and that was a relevant information. And historically, this has been the bank's strength in SMEs. But we've seen some competitors, even new bank talking about SME. Of course, the concept of SME varies in terms of the size of the company. But what would we expect for 2026 in that portfolio? Because given that this is a very relevant portfolio for you in terms of growth and even in terms of growth going forward. Cassiano Scarpelli: [Interpreted] Matheus, thank you for your question. We are very pleased with our position. In reinstating our position, I must say that I've been working directly with Jose. Jose is the VP in charge of that area, but I've been working with all of my colleagues, [ Alexandre Pinheiro ], Mario [indiscernible] Marcelo, the entire corporate team or company team and also wholesale bank with Bruno, et cetera, and the middle market team. First of all, we always look at what places the Central Bank in terms of assets, companies up to BRL 300 million a year because this allow us to draw a comparison. Competition in this area is very fierce. We always knew that. But our distribution strength is very important. We delivered a lot in digital channels. We hire government progress through digital channels. The journey is very efficient. And we continue to invest. If there is a place to put money, it is precisely in SME, micro and small and midsized companies. The levers continue to be government lines, but also, we provide funding to company vehicles and other investments that have even sounder guarantees, prepayments to suppliers, all of that, it's part of our journey. But then when you look at the digital need with the new Internet app, I mean, a new app when we are migrating over 500,000 clients. The retention rate has been enormous and great growth opportunity and the commercial team in the back office is supported by GenAI and new tools. We just deployed Salesforce back in 2024 for the company segment. And now we are expanding that with the entire business segment and the previous platform we had so we can manage this whole set of things much better with more than 5,000 managers in 21 points of sales. I am very, very pleased with the results. So look at the level of market share we have and see all that we were able to deliver in terms of our loan portfolio. And that was not by chance, but rather because we implemented in new tools, new segmentation, new tools to our clients, new experiences and certainly with business unit models and products that are much more suitable. With SMEs, Matheus, not only we reduce the risk, but we increase penetration, and this is what we have to do. AI is here to help us. There are things that are a lot of -- involve a lot of machine learning and other things involve Gen AI. So there are things that we do to manage our portfolio, some predictive default models and engagement to grow, this means the client life cycle of a client totally connected to our analytics via CRM, which has also been revisited. Therefore, we are sticking to our position. I mean, going from 16.6% to 17% or 16.4% that's not what changes the game. We have to continue to grow and at the same time, reaching our fair share of everything that is important to us. And I'm very much aware of our potential and the growth that we can post for either corporate and individuals. Andre Carvalho: [Interpreted] Next question from Carlos Gomez-Lopez. Now I'll turn into English. Carlos Gomez-Lopez: Congratulations on your second year of -- under the new management. I had 2 very brief questions. The first one is about the absence of cockroaches, as you call them, bad corporate cases. We haven't had any this quarter? In your guidance for the next year, do you expect corporate defaults to stay where they are? Or do you incorporate some deterioration? And the second is, could you comment on what tax rate you expect for next year? Cassiano Scarpelli: Carlos, the answer is no for the first question. Andre Carvalho: [Interpreted] But Andre, you can just start answering on the tax rate, and then I can add if necessary. Cassiano Scarpelli: [Interpreted] Okay. The tax rate that we are working is between 16% and 21% and 18.5% or 19% to calculate fixed net income. And why is it that the tax rate was 20% in 2025, and it dropped a little bit. First of all, because we anticipate higher payment of interest on equity, like I said, BRL 14.5 billion in 2025. So I'm saying between BRL 15 billion and BRL 16 billion in 2026. Certainly, this is a number that certainly depends on interest on equity to be announced by the government. It's not a fixed number. This is just the best estimate, but we anticipate growth in IOE, so that we can take more advantage of the embedded benefit. And secondly, is what Marcelo said, part of our investments bring about competitive gains. And like consortium. We've been highlighting that almost every quarter, we could also talk about auto financing that had posted a good performance in the past 3 months. We have several examples, even with BBI. All of the companies are posting very strong performance, and this helps reduce the rate -- tax rate. That doesn't mean that this is operating weakness. But on the contrary, this is very well distributed. And this year, in particular, the tax rate will drop a bit. I mean, depending on the company, the rate is different. The insurance business has a lower tax rate. I think this is the answer. And we have no concerns when it comes to the wholesale bank. So thank you, Carlos. Andre Carvalho: Next question comes from Tito Labarta from Goldman Sachs. Daer Labarta: You may have just answered it, but just wanted to make sure, right, because on the -- if we do ROE on a pretax basis, it's actually been a little bit more stable throughout the year, right? And I think on the guidance, our tax rate will be a little bit lower. Just because of the tax benefits you have, I think as your profitability generation improves, I would expect that tax rate to go up. And I think you mentioned the insurance tax rate is a bit lower. But just to understand, in terms of the underlying sort of earnings potential of the business, do you think that keeps improving? Or do you think this tax rate sort of remains low because of the tax benefits that you do have? Just to kind of think about excluding the tax rate, the ROE of the business and how you see that continuing to evolve? Cassiano Scarpelli: [Interpreted] Tito. Regarding the operational results of the group, the operational results of the group before taxes grew 27% in 2025, very strong. Secondly, looking at 2026, the answer is no. Yes, we will post strong operational result growth. And it's not about a weaker operational and a lower tax rate. It is all well distributed with Insurance, very strong consortium, very strong Bradesco Financiamentos, very strong. It's a very big group with several companies. When we consolidate it all, we see a small reduction of the income tax rate. Let me stress this Tito. We spoke about this in the other question. The insurance group has a smaller tax rate. If you go to other affiliates as well, for example, in payments, it's the same thing. We consolidate it all. And sometimes in one channel, for example, the complete connection of Bradesco Financiamentos with this one single channel for checking account holders or non-checking account holders. So I have -- it's a different situation sometimes. It's not the case of the tax rate, but there are other companies that have different tax rates, which is the case of Cielo. You see there is a mix of tax rate. And you should not forget that sometimes in the end of a period, there are some fiscal aspects, a certain law here and there. For example, insurance group benefited from that in the past quarter. They benefited from one law that affected the tax rate. So this is kind of what explains it, nothing different, as Andre mentioned. Andre Carvalho: [Interpreted] Next question from Eduardo Nishio with Genial. Still no sound. Let's move on and the question comes from Andrew Geraghty from Morgan Stanley. Andrew Geraghty: Congratulations on the great results. I know you have discussed at some length credit growth and some expectations for payroll loans, secured loans. I was hoping you could maybe elaborate a bit more on each of the different segments and how they fit into the loan portfolio guidance of 8.5% to 10.5%, kind of where you're expecting better growth, maybe where you're expecting some weaker growth and where there could be some upside by segment, if possible? Cassiano Scarpelli: [Interpreted] Well, actually, as Marcelo mentioned, we start 2026 stronger than we started 2025. We had a positive surprise in credit in Q4 2025. So we start the year already with a lot of traction. So we see a continuity of that movement. So what do we see in terms of trends? Very strong SMEs followed by individuals and then wholesale, wholesale competing with the capital market funding. As Marcelo mentioned, sometimes very high tickets making a difference. In Q4, positive difference for us. That doesn't happen all the time. But I think that the expectation, the prospects for the segments would be this, SMEs, individuals, wholesale, we have traction across all fronts, and we are ready to capture all opportunities. Right, but Andrew, there are some different situations, when we speak about the affluent segment. In Principal, we have relationship products such as investments, the credit card with a value proposition that is unique for these clients, totally different experiences for these clients. The same goes for Prime, which is different than the relationship for INSS retirees. For that audience, we offer deductible loans. And when we get to Prime and Principal, mortgages. So we have these mixes of products that sustain in these segments. And this is just to mention a few major. And in terms of companies, legal entities, we have a huge mix of products growing in small and medium-sized enterprises in different lines, by the way, increasing our penetration there. And with the wholesale bank, we are recycling the portfolio, and what we call OBD book origination for distribution, which is the case when the capital market spread was very crushed, we can compromise risk-adjusted return. So we don't work looking at that. So it is better to distribute than effectively keeping it in our books. And we have a set of fees, which are also important for us, in different lines of business. And there's also cash management. It is a super important platform for small and medium-sized enterprises as well as for the wholesale, we have a new technology platform, which over the year will bring us important improvements. That is another key point to improve profitability. Andre Carvalho: [Interpreted] Let's see if Nishio is back. We still cannot hear you. Not yet. Maybe if you remove your headset, maybe it will be better. We cannot hear. We're receiving a question about mass income. Okay. Tell me a little bit about the mass income portfolio? Cassiano Scarpelli: [Interpreted] So if you need any more information, I can add. Okay. Mass income is probably one of the major transformations of our banking cycle, since the beginning of our track record, our history. I think we are bringing some good news. I think Marcelo mentioned it quite well. 90 million clients are already fully digital in the mass retail with a totally different value proposition. But again, it's much easier to operate, not only they use BIA GenAI, but there is a specialist that can help with a customized sale, which changes the paradigm of having an individual physically present in a branch. The second relevant aspect is the engagement, our capacity to serve that client with Gen AI tools and integration tools that are very important to boost sales. And I think this has been a major evolution. We anticipate BRL 45 million. So throughout the year, we will be fully digital. This will be our mass retail bank. This is a very important aspect. And today, February 6, we already have 25 million digital clients because every week, the numbers are growing with zero resistance, zero friction with clients. And this has been a very pleasing experience, very good experience. And behind all that, all of that is supported by a very good technological platform for individuals, and this will encompass all the individuals. And I think we've been telling you about that in the past quarters, and this will certainly grow or help us decrease cost to serve, which has been significantly reduced, and this has an important correlation to our footprint adjustment. Andre Carvalho: [Interpreted] Well, [ Nishio ], thank you very much for joining us. I know you had a that problem with the sound. But thank you. We are always available to talk to you and also to welcome you here at the bank. And the same thing goes for our IR team. I think Cassiano gave you a good backdrop. Well, you saw more than BRL 40 million at the end of '26, starting with BRL 19 million, but engagement is increasing and improving. And certainly, we are able to reduce direct cost to serve by 40 fold. We are very committed to what we are doing. And there are still people that look at the physical space in the physical world, and we are testing different models all the time with our Bradesco Expresso, so that we can address these topics. And this is a challenge. In fact, I said that I went to Asia last September. And I heard comments from some banks, they have the same challenges we have when it comes to footprint adjustments, cost to serve and consumer. Therefore, an issue, we are sticking to our plan, and we will bring this year, and in particular, in the second half, more information about this digital retail. And thank you. Thank you, Nishio. And with that, we conclude the Q&A session. Questions that couldn't be answered right now will be answered by our IR team. And before I turn the floor to Marcelo to his final comments, I must say that this presentation and the full material of this release is available in our IR website. Marcelo de Noronha: [Interpreted] Well, thank you, Andre. Thank you, Cassiano. -- and I extend this thanks to all of our team, who helped us in this video conference. And thank you, our audience, for your interest and for the time that you spent with us. Its what I said -- I mean, this is the summary of our transformation, 8 quarters in a row, delivering good numbers with the focus that I said, without losing sight of the plan that we set up for ourselves step by step, but delivering improved ROE and improved absolute net income with a very engaged team with clients and with the Bradesco team. So thank you once again. And our team is entirely available to give you more details, not only about this earnings presentation, but also about our transformation program. Thank you all very much, and thank you for joining us.
Sota Endo: We would now like to start the presentation of the third quarter -- FY 2025 third quarter financial results of NTT DATA. My name is Endo from the IR office. I will be serving as the moderator today. Regarding today's materials, please refer to the financial results briefing session materials posted on our company's IR website. I would like to introduce the attendees today. Nakayama, Representative Director and Senior Executive Vice President; Nishimura, Director and Senior Vice President, Head of Corporate Planning, General Headquarters; Kusakabe, Senior VP, Head of Finance Headquarters. Total of 3 will be attending. Sota Endo: Today, we will start from the Q&A session. Without further ado, we would like to take question. [Operator Instructions] First question, SMBC Nikko Securities, Kikuchi-san. Tatsuma Kikuchi: Kikuchi speaking. I have 2 questions. First is this fiscal year, in Q2, July, data center shifted to REIT, it was a bit off from the initial assumption, and so you revised. But since then, there has not been any revision. Are you trending as planned? In Q4, how much profit are you expecting and for the full year? Kazuhiko Nakayama: Thank you. I will go one by one. Nakayama speaking. Thank you very much for the question. So at this time, the performance forecast was revised. So about the gain on sale of data center was revised downward. Others are in line, no change from the initial forecast. Q3 financial results, if I could explain a little. In data center, the fee income was a bit large. There were some one-off positive factors. So including that, Q4 -- for other areas, it's not that we have much headroom, but especially on the overseas side, we had a stretched target year-on-year. So there is a downside risk. But we want to somehow achieve the target for this year. So that is the key focus. In Japan, in public sector, in Q3 and year-to-date, we are negative year-on-year. We are trying to come close to the target as possible. And in other financial and enterprise, we will try to cover the shortfall. I think this is a question by others, too. Second question, I asked this question to the holdings, too. Tatsuma Kikuchi: In the new year, I'm sure you will discuss further. But in Q4, you may not be planning a capital recycling, but other than REIT, you may have some capital recycling in Q4. So what is your forecast? If not, and even not in Q4, what is your thinking on REIT and non-REIT capital recycling in the next fiscal year? What is your policy? Capital recycling disposal. So gain on sales, so how much gain you can get and whether you will do it or not is also my question. Kazuhiko Nakayama: First, data center gain on sale, we have nothing planned for Q4. And next year, FY '26 data center gain on sale, we have nothing fixed yet. As we've mentioned from the past, FY '25 data center gain on sale was Singapore REIT IPO. So to form the REIT price, we had to have the liquidity. So we had quite a big sale for that. So the second and third offering are usually smaller than the IPO amount, a fraction of IPO amount in normal cases. When we launched this REIT, we considered the portion for IPO and for the follow-on, we've thought of the -- so the ones that are mature and can have certain level of yield, and we also think of the regional balance. Our plan for next year is not fixed. And we understood by doing this IPO in FY '25, depending on the market trend, we get impacted. So the initial plan, it may be good or bad to mention the amount that we plan upfront. But our general thinking is not do IPO and put an end to it. We want to do some more deals to realize the cash flow early on and prepare for the next investment. So if I mention the amount, the number will help the analysts, I know, but that's not the nature of what we're trying to do. So once we have a clearer number, we will share it with you. And one clarification. Next fiscal year, data center investment, I will ask you again 3 months from now, but JPY 300 billion or JPY 400 billion. And then you recycle and also finance debt. So asset and debt will increase more next year, so you cannot help but increase? Yes. Data center investment from FY '23 to '27, we say over JPY 1.5 trillion. So that's the general trend. And the data center demand, given the strong demand, we now do business with hyperscalers, but we get orders and try to address those orders. So data center sales and profit will become sizable in the medium term. Of course, the key is the balance with the leverage. But -- and cannot mention the numbers how much next year, but the general direction is no change from the past. So most likely, we will move forward like we've done in the past. Sota Endo: We'd like to take the next question from Goldman Sachs Securities, Mr. Tanaka. Chikai Tanaka: This is Tanaka from Goldman Sachs Securities. I wanted to ask the 3 questions, including confirmation of the numbers. The first is regarding the fee income of the data centers. The one-off factor, how much of a plus or negative impact did it have on the -- sorry, the first -- the third quarter on a quantitative manner? Can you quote on that on a quantitative manner? Keisuke Kusakabe: This is Kusakabe speaking. I would like to answer your question. The data centers, it's sold as an asset and from where it's into a joint venture. If it sells, we are going to receive the revenue. That's a one-off situation. But the third quarter is about JPY 5 billion. And I believe that in the first half, I believe, was about JPY 5 billion. So 9-month total is about JPY 10 billion. Chikai Tanaka: Okay. So the one-off factor is about JPY 5 billion. Is that the correct understanding? Limited only to the data center, yes, because there are other factors. So may I mention that? Keisuke Kusakabe: At this time, the overseas -- well, North America, we were able to receive a subsidy from the government. That was about JPY 3 billion. So that's about it for the large number factors. Chikai Tanaka: My second question, Japan domestic situation. Overall, I think it is steadily performing. However, for the public and social infrastructure, what is the background on the strength of new orders? And I think there is a reactionary decline this year. So when is that going to turn around is what I would like to confirm with you. Tadaoki Nishimura: This is Nishimura speaking. I'd like to answer your question. The reason why the new orders performance is strong, the digital agency is showing their policy, the facilities advancement to improve the convenience of the people and increase investment in this area. So CAGR, it's about 8% growth market is what we expect. That is the factor behind this. And the other point is that, what was the other question? Chikai Tanaka: The reactionary decline whether it's only this time only for the public and social infrastructure. There's quite a large-scale system development, and this continues for multiple years. So in several -- once in several years, there's such a timing that occurs. So whether it's just only this time? Tadaoki Nishimura: Well, such a timing arises every several years. That's all. So this decline, reactionary decline, it's not regular. It happens on an ad hoc basis. Chikai Tanaka: But what the impact of that for this fiscal year, is that going to continue on to next fiscal year is what I wanted to ask. Tadaoki Nishimura: From next fiscal year onwards, whether it is -- we will have a reactionary decline. Last year, we had a very high margin project. And due to that, this year, as a reaction to that, it's declining, but this is not going to carry over to next fiscal year. Chikai Tanaka: Lastly, the overseas business, the orders received environment overall, what is the trend? It seems that there's quite of a drop in North America. Is that just a difference depending on the quarter, but I wanted to confirm that situation. And recently, which is the hot topic, this is the disruption type of topic in the AI, especially in the overseas market, it is considered to be an issue. And because you have a quite a weight in the overseas business, so what is your take on this part is what I would like to confirm as the third point. Tadaoki Nishimura: Regarding the overseas new orders received, do you want to know by region? Chikai Tanaka: Yes, roughly speaking. Tadaoki Nishimura: North America, first of all, regarding this fiscal year, well, last fiscal year, we had a large-scale project. And even though such project existed, this third quarter, regardless of that, we were able to receive orders regarding quite a large-scale project as well. So the growth we use this dedicated team for growth projects, and they are going out there to receive the orders. Therefore, we are seeing that effect of that at an early stage. So North America, this quarter has turned around to an increase in revenue. And so those efforts, actually, were the factors for the turnaround for North America region. And Europe, depending on the specific region in Europe, it differs or the country differs. The U.K. we brought in a growth office that we've done in North America. And so U.K. and the new orders received, we're seeing a positive impact from this establishment of this office. Germany, in terms of orders received, there are areas that they're struggling still. Starting from last October, the top management has been replaced. And in Germany as well, they are utilizing the Indian resources, which is -- well, it's like a North American model that they have applied. So the multinational corporations in Germany, they are proactively conducting the activities towards those companies. This fiscal year, the orders have not been fixed yet. However, from this fourth quarter onwards, we can expect orders coming in or it is becoming firmer. So in that sense, moving forward, we will start to see improvements in the new orders received side. And EMEAL, so up to now, they were steadily performing. And so they are progressing as usual. And lastly, APAC, Australia is not doing well quite a bit. So regarding Australia, regarding the orders received side, we have not seen a turnaround in the actual terms. However, Australia as well, reinforcement of the sales force is what we are doing. By industry, we are thoroughly responding to this situation. So the outcome of these efforts for Australia, we are having expectations towards that and waiting for it. And India within the APAC region are quite steadily performing and the Indian economy itself within the APAC region, they have a high growth rate as well. Therefore, in India, we're able to acquire quite a level of orders. And the other remaining areas of APAC, the cloud and security, there are strong performing due to the high demand of tech areas. The advanced team of U.S. is taking the lead and the know-how is utilized in APAC. And we are seeing the positive factor. And so those are the positive materials for this area. Chikai Tanaka: So regarding AI disruption, what kind of perspective do you have? Sota Endo: So Nishimura would like to answer that question. Tadaoki Nishimura: Using AI and improving the efficiency, the cost reduction pressure probably is going to becoming stronger is the outlook we have. And globally, when conducting the BPO business, the improvement of efficiency in incorporated type of contract is starting to show up. So on the customer side, the AI efficiency improvement that they do internally, they're outsourcing it. That is the situation. So specifically speaking, by the rise of AI disruption, we have expectations for the new business being deployed. So that part, we are positively receiving this. The negative part is that looking at the other companies' financial results, with this rise, it's not that they are experiencing a decline in their revenue or sales. That is our understanding. That is all. Sota Endo: So next question, JPMorgan Securities, Henderson-san. Matthew Henderson: Henderson from JPMorgan. Thank You about the financial results, Q3 segment by segment. So there's a reactionary fall from last year in the public sector, but good impression on your business. Overseas profit margin may flip next year. You will continue your structural reform expenses, although lower than this year. So Q3, Y-o-Y profit margin, EBITDA margin may improve by 2 or 3 percentage points. It's improving by 2 to 3 percentage points. But in Q3, will you continue improving at that rate and next year and enter the 10 percentage territory? Are there any changes internally? Kazuhiko Nakayama: Nakayama speaking. Thank you for the question. First of all, for Q3, as Kusakabe-san said earlier, overseas, there were some one-off positive factors. But the underlying basis by region, we're seeing an improvement. So you are right. Now profit margin, will we have the same level of profit margin in Q4? Q4 volume is quite large, and there are some unique treatments we need in the end of the year. So our forecast is we don't know if the Q3 profit margin will remain unchanged in Q4. I cannot give you a clear-cut answer there. On Page 12, profit margin trend is shown. This line graph is shown. But because we're showing this, we want to work hard to give you some positive results and numbers, but that is our view on Q4. Matthew Henderson: My second question is on data center. There was a big order in Q3. And looking at the external environment, data center demand remains strong. Are there risks that you cannot execute your current orders like the utility or power shortage or construction capacity or the raw material cost increase? Any risks that may hinder the order execution? Or can we be optimistic? So according to what you hear from the on-site is that there are no risks really, no such risks. As I mentioned earlier, large hyperscalers deals account for more than 80% of the new orders, and these are made to order. We do after we receive orders and the term is 10 to 15 years, very long. And the customers have financial strengths. So there is small risk that this gets canceled or deviate due to customers' situation. Now the former NTT Communication, North America, Germany and India. So that was the start, purchasing those companies in the region. And initially, the operation was independent by region. But now we work with hyperscalers. So the raw material procurement and design are now unified and centralized globally. So raw material delivery is now optimized and try to exchange and interchange when necessary. So we don't have the risks that you just mentioned. We have high expectations in Q4 and next year. Sota Endo: [Operator Instructions] The next question will be the last one of Nomura Securities, Mr. Masuno. Daisaku Masuno: This is Masuno from Nomura. I have simply 3 questions. The first is on Page 13, the structural reform of the overseas business. From next fiscal year onwards, so if you have about 2 years, this JPY 151 million will disappear in 2 years, and the synergy is going to be JPY 30 billion. And in total, about JPY 50 billion is going to contribute to the profit. So if you have 1 or 2 years, there's about JPY 50 billion of contribution to the profit. Is that the correct understanding? Sota Endo: Nishimura would like to answer that question. Tadaoki Nishimura: First of all, regarding integration of the overseas businesses, we have been working on it up to now as well. As you can see here on the chart, the upgrade of the business processes and optimization of business operation and moving forward, we have the ERP integration. And from next fiscal year onwards, what is the budget for it? We're still considering it. And there's nothing that I can share with you that is clear. But to a certain extent, we will spend a certain extent of expense to business transformation by integration. And the synergy, was it non-synergy? The categorization of that because the integration is progressing, it's difficult to say that. But if you look at the Inc. overall growth, we will grow more than the expense that is required. Whether it's around JPY 50 billion at this point, I cannot give you a clear answer. Daisaku Masuno: And then my second question is regarding the sales of the data center. Truly, I think it is a way of actually selling a very crown jewel asset. So last -- end of the last fiscal year, the noncurrent asset, the others is JPY 2.2 trillion and the equity depreciation or amortization itself is JPY 1.2 trillion. So I think you should sell about JPY 50 billion and have the cash going to your company, and then you don't have to sell data centers. And that part to the holding company, sell the -- ask them to sell their treasury shares and create that cash. Kazuhiko Nakayama: This is Nakayama speaking. At the second quarter, I think Mr. Masuno, you did give us a similar comment. So we are taking note on that -- we have been taking note on that. So I do understand your opinion very well. Having said that, at the end, the EBITDA number, how much are we going to increase that? And how much investment are we going to make towards the data center? Well, the data center is quite a long period project or business. So there's an immediate profit. But how it's going to be 5 years from now, 10 years from now? When we think about that, how are we going to think about the balance with the cash side are the factors that we need to consider and make the final decision. I do understand your opinion very well. Daisaku Masuno: Lastly, AIVista. You're going to have your Top Gun team do this. But every day, there's a new announcement made from the U.S. So you can't spend that much of a long time. What I'd like to ask is that if you have about 12 months, will the first platform be completed? Is that the sense of speed that you are taking in? Because if you take too much time, what you created at the initial stage is going to become obsolete. So at what timing will the first phase of the first platform be completed? Tadaoki Nishimura: This is Nishimura speaking. Thank you very much for your question. You are correct. Because the changes occur so fast, and how we can come about with something quickly? Is that going to become the key? So next fiscal year, we would like to come out with a certain deliverable. And this company itself is not a large-scale company. It's about between 30 to 50 headcount size company. And there is sales specialists that are very well versed in the industry, exists in each country. So utilizing this talent, we would like to create a new business case. So by next fiscal year, we are working on so we can come out with a certain deliverables. So please look forward to that. Sota Endo: So we answered all the questions that were raised. So we would like to close NTT DATA's Q3 financial results briefing. Thank you very much for your attendance.
Operator: Ladies and gentlemen, welcome to the presentation of Vontobel's Full Year 2025 Results Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] and the conference is being recorded. [Operator Instructions] At this time, it is my pleasure to hand over to Christel Rendu de Lint. Please go ahead. Christel De Lint: Good morning, and a very warm welcome from Georg, Jan and myself. Thank you for joining us today. Georg and I look forward to sharing the progress we have made on our strategic priorities as well as the highlights of our financial results. Jan Marxfeld, our CFO at Interim, will then take you through the detailed numbers, after which we will open the line and take your questions. 2025 was a successful year for Vontobel. We achieved strong financial results and made decisive progress on our strategic priorities. We reached a net profit of CHF 280 million. We delivered significant growth while at the same time, absorbing lower interest rates and a much weaker U.S. dollar. Assets under management increased to CHF 241 billion, supported by strong inflows in private clients and strong inflows for institutional clients in four of our six investment boutiques, notably in fixed income. Our capital position remains very strong. We closed with a CET1 ratio of 19.7%, thanks to record capital generation and effective resource management. We will propose a continued attractive dividend of CHF 3 per share. We made decisive strategic progress. First, we integrated our quantitative investment boutique into the broader investments organization. The tighter integration will accelerate ID generation insights and innovation. We also divested customer funding, a digital lending platform. We want to concentrate on our growth areas. Second, we captured organic and inorganic growth. In private clients, we hired new relationship managers in key markets and will open an office in Los Angeles to see strong client demand. We welcome the new employees and clients from IHAG Private Bank. This integration was a resounding success. It was completed ahead of schedule on the budget and with very positive client feedback. Meanwhile, our institutional client teams operate sharper, faster and higher on the value chain. They achieved standout flows in several flagship funds, secured a number of prestigious mandates. Third, our CHF 100 million efficiency program is running ahead of plan. We have structurally improved our cost income ratio and redeployed resources to growth areas. The program will be completed by the end of 2026. Let me now briefly recap the environment in which we delivered these results. Global bonds and equities gained though volatility remained high. Bond yields drifted down as both the SMB and the Fed cut interest rates. The Swiss franc appreciated sharply, driven primarily by safe haven demand. This environment created dual financial headwind for us. The lower interest rates weighed on our net interest income and the much weaker U.S. dollar reduced our foreign currency income. Yet, these conditions clearly played into the strength of our credit light investment-led model. We helped our clients diversify and invest with confidence. The proof lies in our strong net inflows and continued high client engagements. Our unique integrated investment model underpins our success and remains the foundation for our future growth. We are an active investment firm serving two complementary client segments, private clients and institutional clients. These are mutually reinforcing in skills and business and complementary in the diversification benefits. Both segments grow and rely on the expertise of our single factory, investment solutions and our dedicated experts. Our strategy is clear. We are doubling down on this model to realize its full potential. This will drive long-term value for our clients, employees and shareholders. I am now turning to private clients which delivered another year of strong growth. Operating income grew by 5%, supported by continued client demand for structured investment solutions. While we saw a brief slowdown in April, activity bounced back and stayed above historical levels for the rest of the year. We attracted net new money of CHF 5.8 billion with continued strong growth in developed and Western markets. This ranks us in the top quartile amongst peers. We win clients with our investment expertise not through leverage. We stick to our defining and successful approach using our investment know-how to grow in Western and developed markets, thereby generating steady recurring revenues. We are committed to building on this track record of steady growth. We will recruit and develop top caliber relationship managers and are excited about opening our Los Angeles office later in H1. We will further invest in our market-leading platform for structured investment solutions, thereby, expanding its capabilities. Finally, we will complement our organic growth with highly selective acquisitions. We have successfully acquired integrated many banks and most recently, the client book of IHAG Private Bank. This strong track record positions us to pursue further opportunities in key markets such as Switzerland, Germany and Italy. And now over to Georg. Georg Franz Schubiger: Good morning, everybody and also from my side, a very warm welcome from Zurich. Last year, institutional clients net new money was minus CHF 1.6 billion. 3 years ago, outflows exceeded CHF 10 billion in 1 single year. So we made strong progress, but we are not yet where we want to be. Our ambition remains to grow institutional client flows by 4% to 6% through the cycle. In absolute terms, we want to generate annual net inflows of at least CHF 4 billion. First, I'll update you on where we stand in institutional clients. Then I will share the strategic actions that we are taking across our investments unit to drive our next cycle of growth. Over the past 18 months, institutional clients have executed the strategic measures we outlined at our Investors Day in 2024. These measures have sharpened and accelerated our distribution capabilities. We have introduced a new coverage model for integrated solutions. We replaced regionally different processes and systems with a fast and globally consistent client journey. We have reinforced our teams with senior hires in priority markets, particularly Asia. These changes are already yielding results. Our response times have improved, conversion rates have increased and our client relationships have deepened. The operational and financial results are clear. Several of our flagship funds have been exceptionally strong, have seen exceptionally strong inflows. This includes CHF 1.8 billion into credit opportunities and CHF 1.4 billion into emerging markets debt. We have won prestigious mandates. For example, one, is their CHF 600 million multi-asset mandate from the Auckland Future Fund Board. Vontobel emerged as the winner in a highly competitive selection process, including 21 participants. Our distribution strength is also evident when compared to peers. In 2025, Vontobel ranked in the top quartile for European institutional fund flows underlying our distribution effectiveness. These are tangible proof points that our strategy is working. Our disciplined execution is also driving tangible results across our investments unit, our factory that serves both private and institutional clients. After the so-called industry winter that started in 2022 for active and especially for emerging markets focused firms, the industry is now back in growth mode. And so is Vontobel 4 out of our 6 boutiques achieved strong investment performance, grew assets under management and attracted significant net inflows. These 4 boutiques delivered a combined net new money growth rate of 6.7% in 2025, well ahead of most active managers in our industry. By delivering strong performance and innovation across our boutiques, we attracted net inflows in every asset class. To accelerate the next phase of growth, we will continue to realign and expand our offering towards areas with attractive economics, strong anticipated client demand and demonstrated performance. First, we will launch new ancillary fixed income offerings that are already under development. This will build on the outstanding success of our flagship funds, including emerging markets that credit opportunities and strategic income. Second, we will expand our solutions offering. Third, we will scale our strong private clients and Swiss institutional clients multi-asset track record to a wider set of institutional clients. And fourth, we will raise the next fund in Ancala. For the remaining 2 boutiques, quantitative investment and quality growth, which have seen significant outflows, we have an equally clear strategy. This year, we completed a leadership transition at quality growth, ensuring continuity for a boutique founded in 1984. Quality growth continues to deliver stable double-digit returns, making it an attractive diversifier. The boutique has seen significant retail outflows. These were driven by the current focus on AI-driven mega cap stocks. Quality growth, however, continues to resonate with a set of institutional clients, they value the distinct and defensive style of quality growth. Style preference cycles can span years. Flows could therefore remain volatile. The boutique financials of quality growth are attractive. Our development resources will, however, be concentrated in fast-growing areas, mainly in fixed income solutions and private markets. Systematic investing has been challenged by stop and go macro conditions, and we no longer see pure systematic strategies as a growth area. Nevertheless, we will continue to serve existing clients and keep our capabilities in place. Going forward, we will focus our quantitative expertise on 2 priorities. Driving tailored solutions and supporting our fundamental investment teams. To make this shift, we are integrating the quantitative investment boutique into a central hub. This hub will eliminate overlaps and drive idea generation, insights and innovation across all our investment teams. We have already seen the benefits of this integrated approach. One example is this sustainable equity income plus. It blends our quantitative expertise and fundamental research to deliver outstanding results for our clients. This integration also positions us for the previously communicated insourcing of the Raiffeisen Futura funds in July 2027. Most of those assets are booked with this boutique today. This change will not impact any other areas of our long-standing and successful cooperation with Raiffeisen. And we continue to expect a minimal impact on the group profit. Now let's turn to our structured solutions business. It gives clients access to tailored investment solutions at scale. We combine customization, automation and scalability on a leading technology platform. Importantly, Structured Solutions has operated profitably in every single year for more than 20 years. That unbroken track record comes from our franchise being uniquely diversified. First, in terms of client types and channels, we work with external asset managers and banks, support our internal private clients and provide white label issuance services. We serve individual investors via exchange-traded products. Second, we maintain a balanced mix across 2 lines. Investment solutions and exchange solutions. Investment Solutions include yield-enhancing certificates and managed certificates. Exchange Solutions offer products such as warrants. This combination stabilizes overall revenues. Third, in terms of geography, We are the market leader in both businesses in Switzerland. We hold the second spot in Germany for leverage certificates. And we have profitable operations in select key European, Middle Eastern and Asian markets. We will continue investing in our leading technology to stay at the forefront of innovation for our clients. This will defend and expand our market share. And finally, we have substantially improved our efficiency over the past 3 years. Our cost/income ratio is structurally lower decreasing from 78.2% in 2023 to 72.9% in 2025. This underscores the progress of our efficiency program which is ahead of schedule with over 80% of the targeted savings already achieved. The efficiency gains have been driven by firm-wide initiatives including the consolidation of our IT infrastructure and applications, reductions in vendor spending and process automation. The program has allowed us to lower absolute costs while continuing to invest into our business and technology. We are currently implementing additional measures to build on this momentum. We remain fully committed to achieving the CHF 100 million in savings by the end of 2026 and embedding a lasting culture of cost discipline across the organization. Our objective remains clear. To deliver sustainable growth and create attractive returns for our shareholders through disciplined execution of our priorities. We are confident that Vontobel has the right strategy, the right business model and the right team to achieve our through-the-cycle targets. With this, let me hand over to Jan, our Interim CFO, to cover the financials. Jan Marxfeld: Thank you, Georg. Good morning, and a warm welcome. 2025 was a successful year for Vontobel. We delivered strong financial results. We generated a profit of CHF 280 million, up 5% year-on-year. Profit before tax increased to CHF 364 million. As Christel mentioned earlier, we managed to navigate dual headwinds, CHF 34 million from lower interest rates that compressed our net interest income and CHF 27 million from currency translations into our reporting currency, the Swiss franc. The Franc significantly strengthened against the U.S. dollar and almost all other currencies. This matters because 37% of our operating income is in Franc's compared to 78% of our costs. Currency swings, therefore, have an impact on our reported profitability. But I'm pleased to report that our underlying profit grew by CHF 74 million, more than overcompensating these headwinds. The efficiency program achieved CHF 41 million run rate savings, while business growth contributed another CHF 33 million. Our reported results include one-offs of CHF 19 million, slightly lower than 2024. These are what we call cost to achieve related to the efficiency program and the IHAG client book integration expenses. We expect a cost to achieve of around CHF 18 million in 2026 to complete the program. On the tax line, we realized a lower effective rate than in 2024 due to the regional mix of taxable profits and the fading of last year's one-off impacts. We are maintaining our effective tax rate guidance of 22% to 23%. We closed the year with assets under management of CHF 241 billion, up 5% year-on-year. This increase was driven by positive net inflows and market performance, again, partly offset by currency headwinds. Net new money rose to CHF 4.2 billion, up from CHF 2.6 billion last year. Private clients delivered CHF 5.8 billion of inflows which is 5.2% annualized growth. This is certainly in the upper half of our through-the-cycle target range. 4 out of our 6 investment boutiques attracted solid net inflows. But the net outflows from our quantitative investment and quality growth boutiques more than offset these. The stronger Swiss franc also reduced assets under management by CHF 10.1 billion. This reflects the fact that 3/4 of our asset base is foreign currency denominated. Performance and other effects added CHF 17.6 billion. These predominantly include market gains. Furthermore, we have effects from the integration of the IHAG client book, the divestment of cosmofunding and our decision to stop developing certain service offerings. These are connected to the strategy and the next steps for the quantitative investment boutique, which Georg explained earlier. Turning to operating income. It increased 1% to CHF 1.4 billion. Setting aside the FX headwinds mentioned earlier, on a constant FX basis, our operating income grew 3%. Net interest income declined 30%, mainly due to the SMB's successive rate cuts throughout 2024 and in early 2025. Net fee and commission income grew 2% preliminary, reflecting higher average assets under management. Trading and other income increased 6%, mainly due to the strong client demand for structured solutions throughout the second half of the year. By segment operating income in private clients yet again grew strongly by 5%. This as lower interest income was more than offset by positive effects of higher asset levels and high client activity. Within institutional clients, operating income fell 7%. This is because of slightly lower assets under management and the tail end of shift away from emerging market products. Turning to Slide 20 and the Private Clients margin. Our recurring margin remained stable at 40 basis points throughout the year. Growth in the ultra-high network segment has put some pressure on the recurring margin. That is because larger clients typically deliver a somewhat lower margin, but this has been offset by revenue management and the launch of our new modular product offering. We saw continued strong margins in structured solutions. The 2 basis point of net interest compression is a direct consequence of the lower market interest rates. The transactional margin reflects a normalization and activity levels. As a reminder, this item includes client transactional revenues not related to structured products. In institutional clients, the overall margin declined 3 basis points to 34 basis points. This is a direct result of the prior period shift away from emerging market funds and mandates. In the years 2022 and 2024, industry-wide demand for emerging market products weakened. This compressed overall margins as EM-related products typically come with a higher margin. But in 2025, the share of emerging market assets flattened out at around 10%, marking the end of this headwind. Our gross flows have now turned clearly margin accretive. This reversal is supported by our continued pricing discipline and more importantly, the success we are enjoying with our higher-margin fixed income solutions and emerging market debt offerings. Moving to costs. Our CHF 100 million efficiency program is running ahead of plan and is delivering tangible results. By the end of 2025, we have already realized CHF 84 million exit rate savings. So with 66% of this 3-year program done, we realized 84% of the savings on an exit rate basis. Now if you look carefully at this slide, you will see that despite of what I just said, the costs are flat year-on-year. It is our efficiency program that enabled us to do so even as we reinvested for growth and our cost base includes CHF 90 million of one-off costs to achieve and the IHAG client book integration costs. We will see further benefits next year. Because all the efficiency measures we identified throughout this year will be fully reflected in our P&L of 2026. Coming to the all-important cost/income ratio. Year-on-year, this improved further to 74.2%. Another consideration is the one-off effects. Adjusted for the cost to achieve of the efficiency program and the IHAG implementation, our cost/income ratio was even lower at 72.9% this year. In summary, this means we are well on track for our below 72% targets. Now to another core strength of Vontobel, our balance sheet. It is fully market-to-market, and we hold around CHF 25 billion of liquid assets which is more than 70% of our total balance sheet. Our Structural Solution business is subject to conservative and highly effective risk management. This has again been proven during the market turmoil surrounding the so-called liberation Day in April. Our lending book remains deliberately small and conservative. It comprises CHF 2.1 billion of Swiss mortgages and CHF 5.9 billion of Lombard loans backed by liquid collateral. We apply strict underwriting standards and a robust risk management, keeping credit losses minimal. Earlier in the year, we issued our first CHF 200 million senior unsecured bond, which was met with high investor demand. This further diversified our funding base and demonstrates our strong market access. Overall, our liquidity is strong with a liquidity coverage ratio of 150%. Since listing in 1986, we have reported a profit every single year. This unbroken record underscores the strength of our conservative risk culture and the prudence of our balance sheet management. Vontobel has a very strong capital position. Our CET1 ratio stands at 19.7%, up 3.6 percentage points from a year ago and up 1 percentage point from 2023. Since then, our capital-efficient business model has allowed us to first, fund 2 strategically important acquisitions. Second, support business growth; and third, absorb the Basel III Final regulation impacts all while funding an attractive dividend every year. This development reflects exceptionally high capital generation and disciplined management of our risk positions. For example, under Basel III Final operational risk-weighted assets are now largely based on past operational losses because our operational losses are minimal or corresponding RWAs are low. Additionally, the previously communicated optimization measures played a role. These are now largely complete. Our CET1 ratio comfortably exceeds both the 8% regulatory minimum and our 12% internal targets. This capital position gives us the flexibility to support further organic and inorganic growth while sustaining attractive returns for shareholders. One of the special things about Vontobel is that we take a long-term approach to shareholder value generation. And we are creating shareholder value this year, but also every year since 2014. Our return on equity reached 12.2%, constantly above our estimated cost of equity of around 9%. This year, our tangible book value per share rose by 15% to 33.86, our strongest annual increase in more than a decade. Including dividends, tangible equity per share has grown over 200% since 2014, underscoring the compounding power of our capital-efficient investment-led model. In recognition of this robust capital generation and healthy profitability, the Board will propose a continued attractive dividend of CHF 3 per share for 2025. This is equivalent to a payout ratio of 60%, in line with our target of more than 50%. To summarize, we achieved significantly higher net profit offsetting both lower interest rates and FX headwinds. Asset under management grew by 5%, and we recorded improved net inflows. We are making good progress narrowing the cost/income ratio down towards our 72% target. And our balance sheet and capital positions remain very strong. We ended with a CET1 ratio of just below 20%. Taken together, these results demonstrate the strength of our business model, especially in the prevailing macro environment and the strategic progress we are making. With that, I hand back to Georg. Georg Franz Schubiger: Thank you, Jan. 2025 was a successful year for Vontobel. We delivered strong financial results, enabling us to propose a continued attractive dividend of CHF 3 per share. We decisively advanced our strategic priorities. And we captured both organic and inorganic growth and our CHF 100 million efficiency program is ahead of plan. At Vontobel, we are determined to carry this execution momentum into 2026. Thank you for your attention. We are now happy to take your questions. Operator: [Operator Instructions] Our first question comes from Daniel Regli from ZKB. Daniel Regli: I have 4 questions, if I may. Ask all of them, please interrupt me if you want to limit the number of questions by analysts. The first question I have is on the margin and in institutional clients. And as you say, you have kind of flows have turned margin accretive by about 5 basis points difference inflows versus outflows. But can you give us kind of a rough impact of this kind of exit margin as of end of '25 versus the full year gross margin in institutional clients? Then the second question I have is regarding the net interest income in private clients H2 versus H1. And it seems like the net interest income shown in private clients is up in H2 compared to H1. However, the interest income on a group level was down H2 versus H1. So can you maybe explain to me when -- or what kind of interest income is allocated to the segment and what interest income remains in the corporate center. And then on the efficiency program, you said CHF 84 million was realized as an exit run rate. Can you give us a rough number what we already see in the cost line of CHF 25 million. And then the last question on the capital policy. Obviously, the capital looks very strong at 19.7%. So my question is a bit why didn't you choose a higher dividend? Or what do you plan to do with your capital, given the high capital ratio? Christel De Lint: Thank you very much, Daniel, for your 4 questions. I'll take the first one, and Jan will go through to the next 3 questions. So as we've shown, indeed, the growth flows have turned margin accretive. It's very hard to give you an exact numbers on the exit rate, but you can see the evolution from '24 H1 '25 and H2 '25. I would also points to the outflows coming at a lower margin. Now the end results in a given year very much depends on the outcome in the market as well. So what have we seen last year, in particular, is returning demand on emerging markets, we've seen strong inflows into credit opportunities. These are all nicely merged segments the way it's starting off, you can expect the same type of flows. But of course, it honestly really depends on the way that the year pans out. I think the key message is to see that where we're growing, where we are strong. And in particular, in the fixed income space, this is not a low-margin plain vanilla treasury type of fixed income. It's the high value-added type of fixed income. So that's important to remember. I think the other part that is important to remember is the flattening out on the EM assets. One aspect was the industry winter in a sense for EM demand. That was not under control, and that seems to be now behind us. And there was, of course, an element of under performance, in particular, for quality growth EM. And that effect is behind us because the assets have literally gone to 0. On the other side, EM was very strong for us in fixed income over the past few years until 2022 and has shown that it will again be strong in the sense that this is a top well in the upper half of the top quartile across horizon. So that's kind of the full picture on margins. And now over to Jan. Jan Marxfeld: Yes. So regarding your question of the allocation of the net interest income between PC and the Corporate Center. What I can tell you the way we do this, and we look at this is that we have an internal funding curve and PC they basically earn interest on the deposit side versus this funding cost. And they also an interest on the loan side compared to this funding curve. What remains in Corporate Center is basically a residual treasury income, which we don't allocate out. Regarding the CHF 84 million, exit rate reduction. I think you will capture this very correctly. So this is basically what we have identified over the program today. So in the years '24 and '25. And what is in our P&L is roughly 3/4 of this. This is basically the effects which materialized in 2024 and over 2025. And for the remaining, we obviously then we'll see this coming in, in 2026. Last question I think you had was on our capital and what we will do is this. So on the CET1 capital, 19.7%, at the moment, we feel that this is a very good spot to be in. And there are a couple of reasons for this. So one is definitely, we need capital to sustain our future growth. And this is organic and inorganic. So for example, the Ancala transaction in the mid- to long term, we will, as you know, acquire further shares or further part of Ancala. So that will certainly absorbed some of the CET1 capital. And lastly, there is upcoming regulation. This is on the background of the UBS, CS discussion, but might also have impact on smaller banks like us. And for this, we also would need capital if that materializes. The dividend, I think you also asked about the dividend. So the dividend it's obviously decided or proposed by the Board and decided by the AGM. It's important to remember that we have a through-the-cycle target of 50% payout ratio. We are there at 60%. So depending on growth and capital needs from the things we just explained, they will constantly evaluate this. . Daniel Regli: Follow-up on the first question on the IC. Can you maybe give me kind of the gross outflow number versus the gross inflow number. So I can kind of calculate the impact from the numbers you've given me? Christel De Lint: We'll take that offline with Peter afterwards, also in the interest of the other participants, if you don't mind. I think you already have the ballpark. But yes, yes, let's pick it up offline. Operator: The next question comes from [indiscernible] from Octavian. Unknown Analyst: I have actually 2 questions. Firstly, on the capital. So your 19.7 CET1 ratio. What I saw it was due to drop in the RWAs. You mentioned operational risk, but there was also a drop in credit risk RWA. So could you maybe give a bit more color on that and maybe more how it came to that precisely? And the second one, if you could elaborate on this CHF 1.1 billion of inflows to the Center of Excellence that you treat us institutional clients inflow so what kind of inflows are this exactly? Jan Marxfeld: All right. So on your last question, on CHF 1.1 billion from the Centers of Excellence. So this is something these are institutional clients or clients of institutional in nature, which have besides transaction banking needs, they have also investment advice needs and therefore, they are booked in the corporate center. But for the presentation here, we thought it was appropriate to show them by their origin or the client segment. And we also did this in the half year, by the way, consistently. On the capital question, the 19.7%. So I think on the credit risk, RWA can say too much here. It's in line with the measurement approach that we used the standard approach and depends a bit on the composition of our loan book. Lombard loans have carried very low credit risk RWAs, I think operational risk you saw and then on the market risk we had the measures which I explained before. Operator: Next question comes from Mate Nemes from UBS. Mate Nemes: I have 2 of them please. The first one would be going back to institutional clients. It's really good to see good performance and inflows into 4 of the 6 boutiques. Yet you are still seeing some outflows for equities or namely the quality of growth boutique. Could you offer any color on what is your expectations with regards to those flows? Could we see a stabilization already in the first half of '26? Or this is just entirely dependent on yield curves appetite for quality growth, and so on? That's the first question. The second question would be going back to the jump in the CET1 ratio. And appreciate the color on operational risk also over that some of that has to do with market risk and tail risk hedges. My question is, should we expect a somewhat more volatile market risk RWAs going forward? Or this is a single onetime jump and this is a baseline from which on you'll develop simply along the lines of normal business volumes. Christel De Lint: Thank you, Mate, for the question. To clarify, really, for all intents and purposes, quality growth is now a developed market boutique if you wish, the quality growth EM exposure is, as said, reduced literally to nothing. So that is not something that's featuring into any expectation or weighing into our results. Closing the topic of emerging markets. On the other side, it's very clear that appetite has returned from clients. As said, we saw the first green shoot on EM debt as we were standing here a year ago and that materialized the whole year. And we're also now seeing, I would say, green shoots and slightly more in EM equities. And there, our franchise in conviction equities mtx is benefiting. You've seen from the slide that one of the key prestigious mandate win from a U.S. Pension Fund was for this team in EM equities. So quality growth, the core franchises are U.S. equities and global equities. You're not, obviously, without knowing that the Magnificent 7, AI tech, et cetera, has had a predominant impact on market behavior and have therefore penalized any retail wholesale flows that was chasing performance. So it is dependent on client appetite and market because what we're seeing is the interest on the other side of institutional clients, those who really look to diversify to construct a book of business that is diversified across investment approaches, et cetera, they actually are seeing as we speak, if you want, because that is obviously a distinctive approach. Hard to forecast strong investment process, value profitable for us. So that's where we're standing right now as we look at it. But EM is not the factor for quality growth. In capital for -- Jan? Jan Marxfeld: So on the market risk RWAs and whether or not this is volatile. So I think probably it helps just to reflect 1 second on the structured solutions business itself. So this is margin-driven business, which is clearly depending on client activity, which again then is fueled by healthy volatility of the markets and sentiment around that. So it's deliberately not position taking. So therefore, I would expect the RWAs, they are being more or less flat. And we have done the optimizations. So certainly not going down from here. We have, obviously, a hedging arsenal already and a prudent risk management, which just was exemplified in the turmoil after the Liberation Day. So I would steer you towards a flattish -- somewhat flattish RWS there. Operator: [Operator Instructions] The next question comes from Nicholas Herman from Citi. Nicholas Herman: I've got a few, but I'll start with 3, and I might circle back if that's okay, later. Just can I just continue the line of questioning on institutional clients, please? Encouraging, but not a surprise to see, I guess, your EM assets stabilize given strong markets. I'm interested, could you just talk about the pipeline there? And more broadly, do you see this as being investors just addressing under allocations? Or -- and I guess even more broadly than that, do you see this as well as the start of a structural reverse of a shift away from global back towards local. I would love to hear your thoughts on what your clients are telling you. Sticking with IC, I was a little surprised to see equities AuM shrink by 10% half-on-half despite clearly very strong equity markets. Just why was that AuM build so weak in Q4? And could you please segregate that between investment performance and flows? And then finally, private client margins. How do you see the outlook for recurring margin? And I guess I ask that in the context that you mentioned some revenue management actions and the launch of a new modular product offering. Could you give some more details on these, please, and the impact on the benefit that those have driven to your P&L? Jan Marxfeld: Yes. Thank you for the questions. We had great difficulties to understand your first 2 questions. So maybe you can repeat them, but we got the third one. So I will respond to that. This was about the recurring PC margins and revenue management in case we understood that right? Yes, listen, there is always pressure on those margins, right? There's overcapacity in the industry. So we constantly need to ask ourselves and take action in terms to defend those margins. Secondly, with the strategy we announced a few years ago to do more in the ultra space that also has put certain pressure on the margin. So therefore, we mentioned last time that we have done 2 things. We have introduced a new modular product offering combined with rollout that was focusing on revenue management or pricing as you can also call it. And I think the combination of these things has been allowing us to keep the margins very stable at 40 basis points, while the overall industry is struggling. This is a very big focus point of ours because we -- as I said, we don't just need to compensate for a certain book transformation towards some of the larger clients and it's a little bit away from the small and very small clients. Secondly, we also need to compensate the general industry development. Now if I may ask you to repeat your question number 1 and 2. So we can... Nicholas Herman: Can you hear me okay? Christel De Lint: Yes. Nicholas Herman: So the first two questions that I had were on institutional clients. So the first part was on EM. And could you talk about the pipeline there in the context of very strong EM markets? And more broadly, is this investors just starting to kind of address some underweight allocations? And are they -- is it -- and do you see this as well as the beginning of a structural reverse of the shift away from local towards global, are we going back towards local away from global because that's been a long-term structural shift for a long time. And I would just love to think your clients are telling you there. And then the other part on IC was, I think equities AuM shrank by 10% in the half despite very -- clearly very strong equity markets. Could you please disaggregate the moving parts there between investment performance and markets and net new money, please? Christel De Lint: Sure. So on EM on the pipeline, it's very clear that the client engagement is strong on that. And so it's followed the packing order that we'd expect, right, in terms of moving up the risk ladder. So starting with EM debt and now moving into EM equities. So for us, we've seen the flows materialize tangibly in EM debt, and you've seen them on the presentation through the funds. We've seen the interest also starting to materialize, and you've seen that mandate for mtx, and we're seeing the interest. So I think it's a bit of both, to answer your question. They go together, right? So the valuations were extremely stretched if you look about 6 months ago. And going back to 2021, 2022, there was really a sense among the investors community that suddenly, EM, it started with China, but then EM was on investable. And that was kind of, I guess, always questionable, right, is 50% of the GDP of the world is investable -- uninvestable. So we're seeing both, it's just -- looking at the stretch valuation, looking at the underweight allocation and the discussions around diversification around the dollar also play a role. So it's -- that probably -- that part is bigger than it historically was. In terms of the equities, it's been -- indeed, there are moving parts. And there, Peter can walk you through what you've seen has worked very well for us is the Swiss equity part has grown through the sustainable equity income product. The other franchise have stabilized to slightly up. So that's impact for us. It's empty emerging market equities and quality growth is the part that has suffered in terms of outflows, as we've mentioned, the EM having come to an end, if you want now by the end of last year pretty much. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Christel Rendu De Lint for any closing remarks. Christel De Lint: Thank you all for joining us today and for your questions. We appreciate your continued interest in Vontobel. Should you have any additional questions, please do not hesitate to reach out to our Investor Relations team. We look forward to seeing you latest at our AGM in April. Until then, we wish you a successful day and a great finish to your week. Thank you very much. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Jan Marcel Matthieu Boone: Good morning, everyone. Welcome to the investor call. Following the announcement this morning of the 2025 annual results of Lotus Bakeries. I'm Jan Boone, and joining me today is our CFO, Mike Cuvelier; and we are both here in Lembeke. We will start with the presentation providing an overview of the performance and also the milestones of '25 and later on, deep dive into the financials. And of course, following the presentation, we are open for questions from your sides. And in total, we have foreseen 50 minutes for this call in total. First slide, I'm proud to report another year of strong and double-digit top line growth. The reported sales in '25 amounted to EUR 1.35 billion, and that represents an increase of 10%. This evolution is driven by continued strong volume growth in the second semester for both Lotus Biscoff and Lotus Natural Foods. At constant currencies, growth was even stronger, given the negative currency evolutions of the dollar and the pound in the second half of the year. Profitability improved further with underlying EBITDA on sales exceeding 20%, and this is an increase of 12% compared to the prior year. Also, the net profit increased and the net profit increased with 13%. The strong reduction of net financial debt led to a historic low multiple of 0.25x underlying EBITDA. Besides a strong operational cash flow delivery, we also realized a successful exit in FF2032 with the sale of our participation and The Good Crisp Company. A dividend of EUR 90 per share is proposed, and that's an increase of EUR 14 per share compared to the 76 of last year. And similar amount to prior year, we invested EUR 120 million in capital expenditures, and that's mainly in the plant in Thailand. The successful start-up of the first lines in Chonburi is for us, as a company, a huge milestone. And the operations teams deserve full credit for delivering this greenfield ahead of schedule and well in budgets. Last but not least, the partnerships with Mondelez advanced strongly and they contribute positively to the results. Lotus Bakeries is a growth company, and has been for the last 20 years, delivering a compounded annual growth rate of 11%. Looking at the pillars, the 3 strategic pillars. We see that Lotus Biscoff achieved a growth of 13% in '25. It reflects the discontinuation of Lotus Bakeries' own Biscoff ice-cream sales following the new license agreement with Froneri, EUR 11.6 million of second semester revenue was excluded from the reported top line sales. This primary volume growth of Lotus Biscoff demonstrates continued strong demand for Biscoff cookies and spreads. The Biscoff cookie once again ranks as the fastest grower in the global cookie brands ranking further reinforcing its position within the top 5. Lotus Natural Foods is the fastest-growing strategic pillar '25 with a growth of 17%. And after a strong performance in the first semester of '25, Lotus Natural Foods continued on the same positive path. TREK is the fastest-growing brand and BEAR is the biggest contributor to growth. [ After ] sales remained flat in the first half of '25, the Local Heroes delivered again growth in the latter half of the year. Annas pepparkakor even realized more than 10% growth and had its best holiday season ever in Sweden. The gingerbread sales in the Netherlands stabilized on a full year basis. Growth in Continental Europe of 9% is outstanding, certainly given the full allocation of the Local Heroes portfolio to this region. Belgium and the Netherlands are good examples of home countries that carry a broad assortment of the 3 strategic pillars and generates good growth in '25. The reported growth in the U.K. was 2%. Currency evolution of the pound has a negative impact on the reported sales in the second half of the year. The deep focus on the own Biscoff chocolate business and the exclusion of Biscoff ice-cream sales in the second half of the year further tempered the growth. On the contrary, the Natural Foods brands performed strong in the U.K. As an example, TREK was the fastest-growing brand in the bar category in the U.K. And in the U.S., Biscoff was the fastest-growing brand in both, the cookies and spreads category. Household penetration for the Biscoff cookie has steadily expanded in recent years, and now stands at 9%. Significant growth was also realized again in the U.S. with BEAR. Our largest consumer markets continued to increase in imports. You can see this in the overview here on this slide, an overview that shows the revenue distribution by country. The U.K. remains our largest market, closely followed by the U.S. Other major consumer markets, including many European markets, China and Canada, are also gaining share. Within the remaining 19%, several smaller but high potential markets are emerging. Let's now go into more details about Biscoff. Biscoff realizes a 10-year average growth of 15%. The most important growth engine of Lotus Bakeries in absolute value of the last decennial. We have reached with Biscoff again, a lot of milestones and we will go into more detail on some of those in the following slides. The launch of spreads was almost 20 years ago, namely in 2008. You can see the interesting evolution of our pack design over the years. In '23, the brand named Biscoff became prominent on the pack. And now we take the next step, and we will move from a generic shape jar to our own design. [Presentation] Jan Marcel Matthieu Boone: The new jar makes the perfect reference to our Biscoff cookie with the embossment linking into our iconic cookie. And you can see the new Biscoff spreads lined up next to other global spread brands. And now it's our goal to make this Biscoff jar also iconic. Here you can see that our Biscoff brand. Here, you can see our Biscoff brand identity over the years. In 2018, we created the red banner on the packaging design. And in '23, we placed Biscoff front and center on the packaging as part of a shift towards a unified global brand identity. And we are ready to take the final step. In '25, we introduced the Biscoff engraving on the cookies, replacing the long-standing Lotus engraving. This change completes more than a decade of brand evolution, and ensures us 1 consistent visual identity and tone of voice. The letter fonts on the cookie is aligned to our Biscoff logo connecting the Fs to ensure readability. The new engraving will be introduced across the entire range, including the original cookie and the sandwich cookie, as you can see here. Implementation began late '25 in the U.S. and India, followed by a global rollout in '26. And now an update on the partnerships. One of the highlights '25 is, for sure the launch of Biscoff cookie in India. Towards the end of '25 an unprecedented nationwide launch campaign was rollouts, rapidly building distribution in more than 300,000 stores in less than 4 weeks. Sales conferences were organized across 15 key cities to inform and energize among the sales teams across the country. This allowed us to reach 10,000 salespeople in all parts of the country. A wide range of impactful marketing initiatives was deployed across the country. The main focus was on the unique product taste. [Presentation] Jan Marcel Matthieu Boone: Painting the towns red with Biscoff billboards across top cities. Social and influencer buzz delivering more than 150 million views. Also a nationwide and broadly covered press conference was organized. And of course, impactful in-market activation in all channels, both modern trade and traditional trade. Traditional trades includes thousands of small shops, as you can see on the slides. At '25, we successfully launched Biscoff with Cadbury, Milka and Cote d'Or. And Mondelez is working on some more exciting innovations that will come soon on the markets. The Froneri led Biscoff ice cream launches will start in '26 this year, and the U.K. and later on in European countries. Following extensive work throughout '25 to define the new assortments and develop new product innovations. This slide shows the different concepts that have been developed. You can see the sticks, the pints and the new sandwich concepts. And the sandwich concept is ice cream in between 2 original Biscoff cookies. In recent years, Lotus Bakeries has invested in a new greenfield production facility in Chonburi in Thailand to support its growth ambitions in the Asia Pacific region. We have now 4 Biscoff plants, including India, on 3 continents. By the end of '25, the first cookies produced in Chonburi have been delivered to the customers. Plant is expected to be fully completed and operational by the end of the first semester in '26 at the latest, including capability of spread production and in-house bottling of spread jars. You can see here a drone picture of the current Chonburi plants. On the left of the current building, you can see that the plot of land still allows for significant future expansion. Mid '25, a new investment in spread production and bottling was also commissioned at the plant in Mebane U.S. Local sourcing and production of Biscoff spreads in the U.S. will reduce our ecological impact, lower import duties and accelerate our logistical flow. Our ambition with Natural Foods is clear. We want to become a global leader in better-for-you snacking segments. And in '25, we have made great steps again. Lotus Natural Foods was the fastest-growing pillar of the group with 17%. It is now a EUR 300 million business. And this is not a one-off because since we entered the better-for-use snacking segment in 2015. Our 10-year average growth has been that same 17%. With Natural Foods, we reached several milestones in '25, and we will go more into detail on some of those in the following slides. An important driver of growth in recent years for those Natural Foods is the successful development and introduction of new innovations. Other brand, BEAR brands, the fruit splits are a perfect example of an innovation that was introduced in recent years. The fruit splits are performing very strongly next to the original BEAR fruit rolls. In both key markets for BEAR, the U.K. and the U.S., the splits rotates in the top quartile, at most retailers. Seasonal activation strengthened brand's visibility and consumer engagements. Alongside BEAR's strong overall performance, the brand successfully launched nationwide Halloween Edition featuring a single wrapped strawberry fruit roll and themes cards with the BEAR mascots. Also under the TREK brands, we launched 1 of the most impactful innovation of recent years, the TREK Protein Flapjack with Biscoff. And this TREK Protein Flapjack with Biscoff is a vegan protein bar layered with smooth Biscoff spreads. This innovation created a strong halo effect. While consumers were introduced to the iconic Biscoff of taste while Biscoff brands encouraged trial and visibility for TREK, strengthening relevance and appeal for both brands. In '25 Lotus Bakeries entered into partnerships with RunThrough in the U.K. and with Golazo in Belgium, the Netherlands and France. We will be a key partner at running events reaching over 900,000 runners annually and offering a strong opportunity to further build the visibility and relevance for -- of TREK and Nakd brands. So this concludes my part of the presentation. And now I will hand over to Mike, who will present the financials. Mike Cuvelier: Thank you, Jan. On the financials. In '25, we delivered another strong set of annual results, powered by an in-sync flywheel of sales profitability, cash flow and continued reductions in net debt. You see that revenue is up by 10%. Underlying EBITDA is up by 12%. Free cash flow before expansion CapEx is up by 20%. All of which make it possible to invest EUR 240 million in the past 2 years and at the same time, reduce the net financial debt further to 0.25x underlying EBITDA. The strong performance of '25 is also reflected in a proposed increase of the dividend with EUR 14 per share. This slide shows the yearly volume growth in percentage on the left and in millions of euro over the past years on the right. The reported revenue growth of 10% in '25 is primarily driven by continued robust volume growth of 9.5% or more than EUR 115 million. This is the darker bar in the graph. Before exclusion of the Biscoff ice cream sales of the second semester, normalized volume growth is actually higher at 10.4% or close to EUR 130 million. This is the bar on the right of the graph. And you can see this volume in '25 was outstanding and comes on top of a record volume growth already realized in 2024 of 14% and EUR 150 million. Over the past 5 years, underlying EBITDA has grown faster than sales. And in 2025, underlying EBITDA reached again the 20% of sales level matching the profitability level we delivered also in 2021. Our partnerships with Mondelez further enhance the group's margin profile. Underlying EBIT and underlying EBITDA grew by more than 12%, as you can see, outperforming the top line growth of 10%. This demonstrates the solid underlying quality of earnings. Strong volume growth, combined with disciplined pricing and margin management, continue to support expansion of profitability and cash flow. Our Biscoff plants in Lembeke and Mebane, together with the Bar factory in Wolseley, operated at high occupancy levels throughout the year. And towards the end of 2025, our new plant in Thailand became operational. The annualized depreciation in '26 for Thailand is expected to add around 0.5% on sales. The volume growth and operating leverage is being reinvested in strengthening our commercial organizations, expanding marketing initiatives to build brand awareness and penetration and further increasing production capacity. The nonunderlying items of EUR 4.8 million relate mainly to the start-up cash costs for the plant in Thailand before production commercially goes live. The financial results of EUR 2.4 million consists of interest expenses, net of cash deposit income, bank charges and a negative exchange rate impact from the revaluation of balance sheet positions in foreign currencies. The tax expense amounts to almost EUR 53 million and remains as a percentage profit before tax in line with prior year at 23.5%. Underlying net result amounts to EUR 177 million or 13.1% on revenue. On this slide, you can see our investment program over the last 5 years. We invested more than EUR 500 million since 2021 in total CapEx and more than EUR 430 million in expansion CapEx alone. In 2025, we invested EUR 120 million similar to the 2024 number, and the majority of this budget goes to the plant in Thailand. Maintenance expense remains well under control and also remains below 1.5% of sales in 2025. The CapEx forecast for '26 and '27 combined stands at EUR 250 million, and is slightly above the EUR 240 million over the last 2 years, '24 and '25. Cash flow delivery was once again very strong in the second half of the year, with cash conversion before expansion CapEx well above 90%, we were able to absorb more than EUR 100 million of expansion CapEx and still reduce net financial debt further. Supporting drivers of cash conversion remain control on working capital and maintenance CapEx. Net financial debt is historically low at 0.25x underlying EBITDA. The sustained strong cash flow delivery over the recent years and the successful exits by FF2032 of the participation in The Good Crisp Company are the drivers in 2025. And I have to repeat myself, this balance sheet, again, is stronger than ever. Increased long-term investments, reaching the EUR 1 billion mark alongside increased equity. Net working capital remains stable and the reported net financial debt further reduces. On this slide, the reported net financial debt of EUR 89 million includes EUR 21 million of debt to be expressed by applying the IFRS 16 standard about leases. The evolution of underlying earnings per share shows a CAGR of 17.1% over the recent 5 years. and is actually outpacing the underlying EBITDA evolution we saw in 1 of the previous slides. And then to end the presentation with another highlight of 2025 Lotus Bakeries has reached the status of dividend aristocrat with 25 consecutive years of dividend growth and proposing a dividend this year of EUR 90 per share. This concludes the presentations. We will now open the call for questions. Mike Cuvelier: And we have the first question of Alexander Craeymeersch of Kepler Cheuvreux. Alexander Craeymeersch: Thank you. Yes. So the first question, I would ask 2 questions. And congratulations on the good set of results first. So the first question would be, you mentioned at the beginning of the year that you could have only a max volume growth of 10% over full year 2025 in Biscoff and you mentioned also that there was going to be a high base in H2. Of course, at the H1, you already mentioned that there was the new plant in Thailand opening but now we show in Biscoff 15% growth half-on-half. And if you compare that, because in the first half of the year, it was only 1% growth half-on-half. I was just wondering now can we also expect that 15% growth to also be present in H1 next year because, of course, there was little room for growth supposedly, but now apparently, that was well overshoot. So that was the first question. The question -- the second question I would have would be on Capex. I was just wondering why CapEx landed a bit on the lower end in H2? And how much capacity would be coming free in 2026? That would be my second question. Jan Marcel Matthieu Boone: Thank you, Alexander, for the questions and also for the congratulations, so thank you. Regarding your first question, indeed in '25, we gave some guidance in respect of capacity related to Biscoff and in '26, there is not. The demand will be leading and we had indeed a very good, very strong second semester and the 15% growth of Biscoff is a bit exaggerated. It's more like-for-like almost 13% in the second semester that we grew with Biscoff. But the demand will be leading in '26, we have been investing in increased capacity, mainly through our plant in Thailand, and that plant will be producing for Asia and Australia and New Zealand. So the capacity is there to grow, to grow Biscoff in '26. In relation to the CapEx number, we have shown an outlook for '26-'27. So about EUR 250 million will be reserved for increasing the capacity in our different factories. That includes our Biscoff factories but also our factory in South Africa for Natural Foods products. And sometimes the risk between H1 and H2, a difference in cash out, but we can be assured in H2. We did work quite hard to get the plants up and running in Thailand. We are extremely happy with how the team performed -- our operations team performed in Thailand. They -- we did not have any significant setbacks. And that's why we made a clear statement in our press release that at the latest by end of the first semester we will be up and running with all our lines. Mike Cuvelier: The next question, Kris Kippers, Degroof Petercam. Kris Kippers: So yes, indeed, also on my side, excellent second half, so congrats on that. My question is more on the comment made in the press release on the first page also on the profile the group. Looking forward and looking at your cost base, which remain indeed well under control in the second half, given the fact that you have some scale increase as a group, you have indeed Mondelez, which is helping. On the other hand, there is, of course, the effect of Thailand which might not be as profitable as the Belgium plant or even Mebane in the short term. But what seems to be a realistic margin assumption going forward because, indeed, it could be that 21% in a couple of years is feasible? Or would it imply again what you commented in the past that you aim for, let's say, more marketing effect in order to focus on the long-term growth, it will be helpful to give some insight on that because it does see indeed that your margin uptick in second half could be structural. That's my main question, actually. Jan Marcel Matthieu Boone: Thank you, Kris. Yes, indeed, we are happy that the EBITDA margin was higher than the 20%. So we are now at 20.2%. There are a couple of elements that affected that percentage. First of all, the ice cream business we took out in the nonunderlying line. So not only the top line, but the whole P&L of the ice cream business in the second half is not included in the underlying results. So as you know, our ice cream business was not the most profitable one. So that helps to increase that profitability percentage. Looking into the future, a couple of elements will play. First of all, we will have the Thailand plant as from the 1st of January, fully consolidated into the results, which also means full overheads will be in the costs. And so it's clear that a new factory being integrated in the profit and loss has its overhead costs. And once it's fully in the P&L and you add lines, it's more profitable. So if we add lines in Lembeke and the profitability level of these additional lines is higher than implementing and your P&L, a full plant. So that's the effect we will see in '26. And also depreciation will be a bit higher, about 0.5% impact on our depreciation. On the other hand, the Mondelez partnership will play positively on the EBITDA and percentages as well, India as the corporation on ice cream and chocolate will play positive side percentage wise. So to summarize it, we think for '26 the EBIT and EBITDA percentages will be more or less in line with what we have communicated today in relation to '25. Kris Kippers: Okay. Very clear. And then just one follow-up, coming back on the CapEx program, EUR 250 million, somewhat north of what we anticipated, I presume. To what extent is this ample? And what kind of capacity expansion would this provide you? Could you share more details on what it entails? Jan Marcel Matthieu Boone: I said it's linked to our Biscoff factories and also our factory in South Africa. We -- the calculation made is, of course, based on what we expect in relation to demand to coming years. We don't like to build empty factories. We're not going to invest already for 30%, 40% additional capacity. We'd like to be quite close to the market. And the factories, the 3 Biscoff factories specifically, they are close to -- is very close to the full capacity. '26 will give us room for growth. But we're not going to be overinvesting in capacity sort of EUR 250 million, and it will not give us 30% to 40% additional capacity. I don't know if that gives you an idea. Mike Cuvelier: Next question, Maxime Stranart from ING Bank. Maxime Stranart: Can you hear me? Jan Marcel Matthieu Boone: Yes. Maxime Stranart: Correct. So first of all, looking at organic growth coming back on that. If I may, excluding the impact, would imply the organic growth is above 14% in H2 with volume growth of almost 13%. If I look at the number you just communicated, I just want to crosscheck with you that's basically the correct assumption to take? And is it a level you see sustainable in H1 that would be the first question on my slide. And secondly, digging deeper into India. Could you elaborate a bit on what's your view on what the growth could be in '26. That would be all for me. Jan Marcel Matthieu Boone: Thank you, Maxime. Indeed, in the second half of the year, we increased like-for-like. And that means the FX like-for-like, also the ice cream was indeed 14% of organic growth, which is exceptional. We are delighted with the 14% and if you see it in the history of the last 5 to 10 years and 14% of organic growth for the group is exceptional. What do we expect H1 '26. We are confident to further grow. But as I said, 40% is exceptional. And we also have the headwinds of the foreign exchange effects based on the currencies of today, pound-wise, dollar-wise, we have already, and we have to start with minus 2.5%. Things can change in a good way or in an versus way. You never know, but we start with minus 2.5%. And -- but if we purely look at the like-for-like growth, 14% is extremely high. And that's why both Mike and I are sitting here with a big smile because of the fantastic results in the second half. And then in respect of India. And then I have to quote my CEO colleague of Mondelez. He said, "Okay, I want to have at least USD 100 million sales in 5 years in India." And for us, it's clearly strategically a very good partnership. We have been in India for 20 years, even more, and we could never realize a substantial sales we would never become a real brand in India. And I think through this partnership, we will be, if we see the resources that Mondelez have used now to launch the marketing efforts and especially also the way they operate. And the fast way they can get the Biscoff products in all these stores more than 300,000 stores that's really truly impressive. And I'm sure they will create a brand. They will create Biscoff as a brand also for the Indian population. And that's our ultimate goal. And I want to become a global brand and if you cannot become a brand in India, you cannot say generally, we are a global brand. So I'm happy that we can work together with Mondelez on realizing that. Mike Cuvelier: Next question is Guy Sips from KBC Securities. Guy Sips: I have 2 questions. First question is on the ramp-up and the packaging cost evolution. We see some ease in the raw mat. Can you give us some color if that could give some tailwinds from that side going forward? And the second is coming back on the CapEx, do you intend to allocate some additional CapEx to the healthy snacking activities. Jan Marcel Matthieu Boone: Thank you, Guy. In respect of packaging raw materials and other costs. What we do is, we have the whole budget around and also calculating the cost prices and the different cost elements of our products. That's an exercise we do very meticulously. And that gives us the ability to communicate also our prices to our customers before year-end. We also try to hedge as much as possible of these costs. So we have a cash flow predictability. For '26, price increases will be moderate. So if you look at the growth of next year and hopefully, the growth of next year, it will be based on volume. So it will be very -- price effects will be very limited. In respect of capital expenditures for healthy snacking. Indeed, BEAR is doing really well. So we're going to invest in our South African plant and also for Nakd that we also produce in the same plant, we will add capacity over there. So partly is allocated for the plant in Wolseley. Mike Cuvelier: Next question, Jeremy Kincaid from Van Lanschot Kempen. Jeremy Kincaid: One more for me on Capex, are you able to split out how much of the CapEx guidance will be to the Biscoff brand and to the Natural Foods brand? And then my second question is just on your balance sheet. Obviously, you called out it's very strong. Does that mean going forward, we could expect higher cash distributions to shareholders? Or do you have a target leverage ratio that you're working towards? And then just finally on The Good Chip Company or Crisp Company, are you able to disclose how much you sold that for? I'm sorry if you said that at the beginning of the call, I was having technical issues. Jan Marcel Matthieu Boone: Thank you, Jeremy. In respect of CapEx, the majority should be allocated to Biscoff and the exact number, we will not disclose, but it's the majority to Biscoff. And we do have a strong balance sheet. We have increased the dividend pay out slightly I think if you look at the underlying profit of last year and our payout ratio, which was a bit below 40% and now it's a bit above 40% because we have indeed a very strong balance sheet with low leveraging. So happy to be dividend aristocrats. So we're official aristocrats. That does not mean that we're going to stop working. So -- but the view on our dividend has not changed. I think the dividend payout, we have no plans to really dramatically change the payout ratio. And -- but the balance sheet enables us to invest in capacity. So we will invest EUR 0.5 billion in the next 2 years. And that will be -- and that helps if you have a strong balance sheet. We do look at M&A. We do look at external growth. But it's not something that we really need today. As you can see, our organic growth is very strong, as well for Natural Foods as for Biscoff. The organization is also built and organized to really focus on Biscoff, focused on Natural Foods and also the Local Heroes. So an external growth and acquisition could be interesting. And we have the balance sheet for it, but it really has to be a perfect match. And it's not something that we really need in the short term. We love the organic growth, it's the most profitable way to grow, and -- we don't -- we are not nervous by the fact that we have almost no debt anymore. And in respect of the funds, FF2032. What we've seen is that the most targets are in the U.S. we invest in scale-up companies, not in seed. We're not investing in not seed money, but more in scale-up companies. And we like companies that we think that in the mid long term, they can reach EUR 75 million to EUR 100 million. And we've seen also out of experience that most of these targets are in the U.S. And so we have our team now in San Francisco mostly looking at U.S. targets. And a The Good Crisp Company, a very nice company in the sense that they have a very good product. They did grow significantly the last years and PearlRock private company that acquired and we agreed not to disclose any detailed information. But we did create some surplus value for the funds. Mike Cuvelier: We have time for 1 more question -- a follow-up question from Maxime Stranart of ING. Maxime Stranart: [indiscernible] that you're still looking at a growth target and also [indiscernible] looking at M&A. So any element in the portfolio; that you would add any category you feel would be a great fit as a group into. Jan Marcel Matthieu Boone: I think I more or less understood your question because the line is not perfect. But I understood that your question is, do we want to invest in other categories. I think looking at M&A, preferably, it will be either in the healthy snack and natural foods fields, I think that's what we focus on in our search. On the other hand, also in traditional biscuits and bakery, could be interesting, certainly in respect of getting more scale in certain countries. Today, we're not eagerly seeking in other categories and the categories we are in today. Mike Cuvelier: Thank you, Maxime. Just 1 last question, Antoine Prevot from Bank of America. Antoine Prevot: Can you hear me? Mike Cuvelier: Yes, yes. Antoine Prevot: Perfect. Yes. 2 quick questions. So first 1 on the U.S. So 9% household penetration, see good development there. any bit of an update on what your target a bit there in the U.S. household penetration over the midterm? And just a very quick 1 on India in terms of like -- I mean, strong launch, as you said and pointed out. I mean in terms of spending on A&P and so on. I mean how is it split between you and Mondelez? Is it them taking care of everything? Or do you also need to contribute a bit? Jan Marcel Matthieu Boone: Thank you for your question. Indeed, the U.S. has been evolving very positively. We are now at 9% of household penetration and our distribution on store level is -- it's 80% more or less. So evolving really positively. What are our ambitions there. Of course, we would like to cross the bridge of the 10% household penetration in the short term in the U.S. Today, the U.S. consumers are not that positive. We have not seen that in our figures for '25. And hopefully, we will not see that in our figures in '26. Today, there are no indications that the sales would be less good. So we still have a positive vibe coming from the U.S. And it's -- it's 1 of our, maybe our most strategic markets for Biscoff. We have been investing quite a lot in the U.S. in relation to marketing above the line. Investments have been started in '24, evaluated positively, so we are extending it in '25 and also probably in '26. So we keep on spending, supporting our brands to marketing. I think another important aspect is we have our factory in the U.S. producing for the U.S. Now also we have added to the spread line. And the good news is that we had a vision to buy enough land in North Carolina on that side. So we can still extend capacity on the same site because it takes quite some time to create know-how and factory. And now in the U.S., quality of the cookies are very good and are fully on par with the Lembeke ones. So it's good that we can extend on the same spots in Maiden, North Carolina. So we are ready in the U.S. to grow. Fantastic year '25. In general, consumers are but more hesitant, but today, we don't see that in our figures. India, indeed, a great start. And our contribution is, of course, that we look at the quality of the cookie. We decide on the marketing program together, and we do have a contribution also in the marketing support and the majority of the investments are being done by Mondelez, but we also contribute a bit to the marketing efforts. And like I said, it looks very positive but we're only there for 2 months now. But the start has been very promising and very proud to see our products and so many stores to see the positive pipe in India. Mike Cuvelier: Okay. Thank you for your good questions, interesting questions. Jan Marcel Matthieu Boone: Yes. Also from my side, thank you. We will close the call here. But of course, if you have any follow-up questions, you know where to also find me or find us in the next few days and weeks. Thank you very much.
Sota Endo: We would now like to start the presentation of the third quarter -- FY 2025 third quarter financial results of NTT DATA. My name is Endo from the IR office. I will be serving as the moderator today. Regarding today's materials, please refer to the financial results briefing session materials posted on our company's IR website. I would like to introduce the attendees today. Nakayama, Representative Director and Senior Executive Vice President; Nishimura, Director and Senior Vice President, Head of Corporate Planning, General Headquarters; Kusakabe, Senior VP, Head of Finance Headquarters. Total of 3 will be attending. Sota Endo: Today, we will start from the Q&A session. Without further ado, we would like to take question. [Operator Instructions] First question, SMBC Nikko Securities, Kikuchi-san. Tatsuma Kikuchi: Kikuchi speaking. I have 2 questions. First is this fiscal year, in Q2, July, data center shifted to REIT, it was a bit off from the initial assumption, and so you revised. But since then, there has not been any revision. Are you trending as planned? In Q4, how much profit are you expecting and for the full year? Kazuhiko Nakayama: Thank you. I will go one by one. Nakayama speaking. Thank you very much for the question. So at this time, the performance forecast was revised. So about the gain on sale of data center was revised downward. Others are in line, no change from the initial forecast. Q3 financial results, if I could explain a little. In data center, the fee income was a bit large. There were some one-off positive factors. So including that, Q4 -- for other areas, it's not that we have much headroom, but especially on the overseas side, we had a stretched target year-on-year. So there is a downside risk. But we want to somehow achieve the target for this year. So that is the key focus. In Japan, in public sector, in Q3 and year-to-date, we are negative year-on-year. We are trying to come close to the target as possible. And in other financial and enterprise, we will try to cover the shortfall. I think this is a question by others, too. Second question, I asked this question to the holdings, too. Tatsuma Kikuchi: In the new year, I'm sure you will discuss further. But in Q4, you may not be planning a capital recycling, but other than REIT, you may have some capital recycling in Q4. So what is your forecast? If not, and even not in Q4, what is your thinking on REIT and non-REIT capital recycling in the next fiscal year? What is your policy? Capital recycling disposal. So gain on sales, so how much gain you can get and whether you will do it or not is also my question. Kazuhiko Nakayama: First, data center gain on sale, we have nothing planned for Q4. And next year, FY '26 data center gain on sale, we have nothing fixed yet. As we've mentioned from the past, FY '25 data center gain on sale was Singapore REIT IPO. So to form the REIT price, we had to have the liquidity. So we had quite a big sale for that. So the second and third offering are usually smaller than the IPO amount, a fraction of IPO amount in normal cases. When we launched this REIT, we considered the portion for IPO and for the follow-on, we've thought of the -- so the ones that are mature and can have certain level of yield, and we also think of the regional balance. Our plan for next year is not fixed. And we understood by doing this IPO in FY '25, depending on the market trend, we get impacted. So the initial plan, it may be good or bad to mention the amount that we plan upfront. But our general thinking is not do IPO and put an end to it. We want to do some more deals to realize the cash flow early on and prepare for the next investment. So if I mention the amount, the number will help the analysts, I know, but that's not the nature of what we're trying to do. So once we have a clearer number, we will share it with you. And one clarification. Next fiscal year, data center investment, I will ask you again 3 months from now, but JPY 300 billion or JPY 400 billion. And then you recycle and also finance debt. So asset and debt will increase more next year, so you cannot help but increase? Yes. Data center investment from FY '23 to '27, we say over JPY 1.5 trillion. So that's the general trend. And the data center demand, given the strong demand, we now do business with hyperscalers, but we get orders and try to address those orders. So data center sales and profit will become sizable in the medium term. Of course, the key is the balance with the leverage. But -- and cannot mention the numbers how much next year, but the general direction is no change from the past. So most likely, we will move forward like we've done in the past. Sota Endo: We'd like to take the next question from Goldman Sachs Securities, Mr. Tanaka. Chikai Tanaka: This is Tanaka from Goldman Sachs Securities. I wanted to ask the 3 questions, including confirmation of the numbers. The first is regarding the fee income of the data centers. The one-off factor, how much of a plus or negative impact did it have on the -- sorry, the first -- the third quarter on a quantitative manner? Can you quote on that on a quantitative manner? Keisuke Kusakabe: This is Kusakabe speaking. I would like to answer your question. The data centers, it's sold as an asset and from where it's into a joint venture. If it sells, we are going to receive the revenue. That's a one-off situation. But the third quarter is about JPY 5 billion. And I believe that in the first half, I believe, was about JPY 5 billion. So 9-month total is about JPY 10 billion. Chikai Tanaka: Okay. So the one-off factor is about JPY 5 billion. Is that the correct understanding? Limited only to the data center, yes, because there are other factors. So may I mention that? Keisuke Kusakabe: At this time, the overseas -- well, North America, we were able to receive a subsidy from the government. That was about JPY 3 billion. So that's about it for the large number factors. Chikai Tanaka: My second question, Japan domestic situation. Overall, I think it is steadily performing. However, for the public and social infrastructure, what is the background on the strength of new orders? And I think there is a reactionary decline this year. So when is that going to turn around is what I would like to confirm with you. Tadaoki Nishimura: This is Nishimura speaking. I'd like to answer your question. The reason why the new orders performance is strong, the digital agency is showing their policy, the facilities advancement to improve the convenience of the people and increase investment in this area. So CAGR, it's about 8% growth market is what we expect. That is the factor behind this. And the other point is that, what was the other question? Chikai Tanaka: The reactionary decline whether it's only this time only for the public and social infrastructure. There's quite a large-scale system development, and this continues for multiple years. So in several -- once in several years, there's such a timing that occurs. So whether it's just only this time? Tadaoki Nishimura: Well, such a timing arises every several years. That's all. So this decline, reactionary decline, it's not regular. It happens on an ad hoc basis. Chikai Tanaka: But what the impact of that for this fiscal year, is that going to continue on to next fiscal year is what I wanted to ask. Tadaoki Nishimura: From next fiscal year onwards, whether it is -- we will have a reactionary decline. Last year, we had a very high margin project. And due to that, this year, as a reaction to that, it's declining, but this is not going to carry over to next fiscal year. Chikai Tanaka: Lastly, the overseas business, the orders received environment overall, what is the trend? It seems that there's quite of a drop in North America. Is that just a difference depending on the quarter, but I wanted to confirm that situation. And recently, which is the hot topic, this is the disruption type of topic in the AI, especially in the overseas market, it is considered to be an issue. And because you have a quite a weight in the overseas business, so what is your take on this part is what I would like to confirm as the third point. Tadaoki Nishimura: Regarding the overseas new orders received, do you want to know by region? Chikai Tanaka: Yes, roughly speaking. Tadaoki Nishimura: North America, first of all, regarding this fiscal year, well, last fiscal year, we had a large-scale project. And even though such project existed, this third quarter, regardless of that, we were able to receive orders regarding quite a large-scale project as well. So the growth we use this dedicated team for growth projects, and they are going out there to receive the orders. Therefore, we are seeing that effect of that at an early stage. So North America, this quarter has turned around to an increase in revenue. And so those efforts, actually, were the factors for the turnaround for North America region. And Europe, depending on the specific region in Europe, it differs or the country differs. The U.K. we brought in a growth office that we've done in North America. And so U.K. and the new orders received, we're seeing a positive impact from this establishment of this office. Germany, in terms of orders received, there are areas that they're struggling still. Starting from last October, the top management has been replaced. And in Germany as well, they are utilizing the Indian resources, which is -- well, it's like a North American model that they have applied. So the multinational corporations in Germany, they are proactively conducting the activities towards those companies. This fiscal year, the orders have not been fixed yet. However, from this fourth quarter onwards, we can expect orders coming in or it is becoming firmer. So in that sense, moving forward, we will start to see improvements in the new orders received side. And EMEAL, so up to now, they were steadily performing. And so they are progressing as usual. And lastly, APAC, Australia is not doing well quite a bit. So regarding Australia, regarding the orders received side, we have not seen a turnaround in the actual terms. However, Australia as well, reinforcement of the sales force is what we are doing. By industry, we are thoroughly responding to this situation. So the outcome of these efforts for Australia, we are having expectations towards that and waiting for it. And India within the APAC region are quite steadily performing and the Indian economy itself within the APAC region, they have a high growth rate as well. Therefore, in India, we're able to acquire quite a level of orders. And the other remaining areas of APAC, the cloud and security, there are strong performing due to the high demand of tech areas. The advanced team of U.S. is taking the lead and the know-how is utilized in APAC. And we are seeing the positive factor. And so those are the positive materials for this area. Chikai Tanaka: So regarding AI disruption, what kind of perspective do you have? Sota Endo: So Nishimura would like to answer that question. Tadaoki Nishimura: Using AI and improving the efficiency, the cost reduction pressure probably is going to becoming stronger is the outlook we have. And globally, when conducting the BPO business, the improvement of efficiency in incorporated type of contract is starting to show up. So on the customer side, the AI efficiency improvement that they do internally, they're outsourcing it. That is the situation. So specifically speaking, by the rise of AI disruption, we have expectations for the new business being deployed. So that part, we are positively receiving this. The negative part is that looking at the other companies' financial results, with this rise, it's not that they are experiencing a decline in their revenue or sales. That is our understanding. That is all. Sota Endo: So next question, JPMorgan Securities, Henderson-san. Matthew Henderson: Henderson from JPMorgan. Thank You about the financial results, Q3 segment by segment. So there's a reactionary fall from last year in the public sector, but good impression on your business. Overseas profit margin may flip next year. You will continue your structural reform expenses, although lower than this year. So Q3, Y-o-Y profit margin, EBITDA margin may improve by 2 or 3 percentage points. It's improving by 2 to 3 percentage points. But in Q3, will you continue improving at that rate and next year and enter the 10 percentage territory? Are there any changes internally? Kazuhiko Nakayama: Nakayama speaking. Thank you for the question. First of all, for Q3, as Kusakabe-san said earlier, overseas, there were some one-off positive factors. But the underlying basis by region, we're seeing an improvement. So you are right. Now profit margin, will we have the same level of profit margin in Q4? Q4 volume is quite large, and there are some unique treatments we need in the end of the year. So our forecast is we don't know if the Q3 profit margin will remain unchanged in Q4. I cannot give you a clear-cut answer there. On Page 12, profit margin trend is shown. This line graph is shown. But because we're showing this, we want to work hard to give you some positive results and numbers, but that is our view on Q4. Matthew Henderson: My second question is on data center. There was a big order in Q3. And looking at the external environment, data center demand remains strong. Are there risks that you cannot execute your current orders like the utility or power shortage or construction capacity or the raw material cost increase? Any risks that may hinder the order execution? Or can we be optimistic? So according to what you hear from the on-site is that there are no risks really, no such risks. As I mentioned earlier, large hyperscalers deals account for more than 80% of the new orders, and these are made to order. We do after we receive orders and the term is 10 to 15 years, very long. And the customers have financial strengths. So there is small risk that this gets canceled or deviate due to customers' situation. Now the former NTT Communication, North America, Germany and India. So that was the start, purchasing those companies in the region. And initially, the operation was independent by region. But now we work with hyperscalers. So the raw material procurement and design are now unified and centralized globally. So raw material delivery is now optimized and try to exchange and interchange when necessary. So we don't have the risks that you just mentioned. We have high expectations in Q4 and next year. Sota Endo: [Operator Instructions] The next question will be the last one of Nomura Securities, Mr. Masuno. Daisaku Masuno: This is Masuno from Nomura. I have simply 3 questions. The first is on Page 13, the structural reform of the overseas business. From next fiscal year onwards, so if you have about 2 years, this JPY 151 million will disappear in 2 years, and the synergy is going to be JPY 30 billion. And in total, about JPY 50 billion is going to contribute to the profit. So if you have 1 or 2 years, there's about JPY 50 billion of contribution to the profit. Is that the correct understanding? Sota Endo: Nishimura would like to answer that question. Tadaoki Nishimura: First of all, regarding integration of the overseas businesses, we have been working on it up to now as well. As you can see here on the chart, the upgrade of the business processes and optimization of business operation and moving forward, we have the ERP integration. And from next fiscal year onwards, what is the budget for it? We're still considering it. And there's nothing that I can share with you that is clear. But to a certain extent, we will spend a certain extent of expense to business transformation by integration. And the synergy, was it non-synergy? The categorization of that because the integration is progressing, it's difficult to say that. But if you look at the Inc. overall growth, we will grow more than the expense that is required. Whether it's around JPY 50 billion at this point, I cannot give you a clear answer. Daisaku Masuno: And then my second question is regarding the sales of the data center. Truly, I think it is a way of actually selling a very crown jewel asset. So last -- end of the last fiscal year, the noncurrent asset, the others is JPY 2.2 trillion and the equity depreciation or amortization itself is JPY 1.2 trillion. So I think you should sell about JPY 50 billion and have the cash going to your company, and then you don't have to sell data centers. And that part to the holding company, sell the -- ask them to sell their treasury shares and create that cash. Kazuhiko Nakayama: This is Nakayama speaking. At the second quarter, I think Mr. Masuno, you did give us a similar comment. So we are taking note on that -- we have been taking note on that. So I do understand your opinion very well. Having said that, at the end, the EBITDA number, how much are we going to increase that? And how much investment are we going to make towards the data center? Well, the data center is quite a long period project or business. So there's an immediate profit. But how it's going to be 5 years from now, 10 years from now? When we think about that, how are we going to think about the balance with the cash side are the factors that we need to consider and make the final decision. I do understand your opinion very well. Daisaku Masuno: Lastly, AIVista. You're going to have your Top Gun team do this. But every day, there's a new announcement made from the U.S. So you can't spend that much of a long time. What I'd like to ask is that if you have about 12 months, will the first platform be completed? Is that the sense of speed that you are taking in? Because if you take too much time, what you created at the initial stage is going to become obsolete. So at what timing will the first phase of the first platform be completed? Tadaoki Nishimura: This is Nishimura speaking. Thank you very much for your question. You are correct. Because the changes occur so fast, and how we can come about with something quickly? Is that going to become the key? So next fiscal year, we would like to come out with a certain deliverable. And this company itself is not a large-scale company. It's about between 30 to 50 headcount size company. And there is sales specialists that are very well versed in the industry, exists in each country. So utilizing this talent, we would like to create a new business case. So by next fiscal year, we are working on so we can come out with a certain deliverables. So please look forward to that. Sota Endo: So we answered all the questions that were raised. So we would like to close NTT DATA's Q3 financial results briefing. Thank you very much for your attendance.
Operator: Welcome to the COPT Defense Properties Fourth Quarter and Full Year 2025 Results Conference Call. As a reminder, today's call is being recorded. At this time, I'd like to turn the call over to Venkat Kommineni, COPT Defense's Vice President, Investor Relations. Mr. Kommineni, please go ahead. Venkat Kommineni: Thank you, Jonathan. Good afternoon, and welcome to COPT Defense's conference call to discuss fourth quarter and full year results. With me today are Steve Budorick, President and CEO; Britt Snider, Executive Vice President and COO; and Anthony Mifsud, Executive Vice President and CFO. Reconciliations of GAAP and non-GAAP financial measures that management discusses are available on our website in the results press release and presentation and in our supplemental information package. As a reminder, forward-looking statements made during today's call are subject to risks and uncertainties, which are discussed in our SEC filings. Actual events and results could differ materially from these forward-looking statements, and the company does not undertake a duty to update them. Steve? Stephen E. Budorick: Good afternoon, and thank you for joining us. 2025 was another great year for the company as we outperformed on virtually all of our operating and financial metrics. FFO per share was $2.72, which is $0.06 above the midpoint of our initial guidance and represents an increase of 5.8% over 2024's results and marks our seventh consecutive year of FFO per share growth. Same-property cash NOI increased 4.1% year-over-year, driven by a 40 basis point increase in our average occupancy. We executed 557,000 square feet of vacancy leasing, which represented 47% of the space we had vacant at the beginning of the year. We also executed 477,000 square feet of investment leasing at a weighted average lease term of 13 years. We committed $278 million of capital to new investments which consisted of 5 projects in 4 different markets and these projects are 81% pre-leased. Importantly, 4 of 5 projects represent expansions with existing tenants. In late December, we committed roughly $155 million to 2 build-to-suit projects in our Fort Meade BW Corridor and San Antonio markets. First, we committed $66 million to a fully pre-leased development with ARLIS, which is the University of Maryland's Applied Research Laboratory for Intelligence and Security to expand their footprint in our park. This 110,000 square foot project will expand our Discovery District campus which currently totals 415,000 square feet and is 98.4% leased. This new ARLIS facility will serve as the Capital Quantum Benchmarking Hub to test and evaluate quantum computing prototypes for national security in a partnership between the State of Maryland and DARPA, the Defense Advanced Research Projects Agency. In 2024, the University of Maryland received a $500 million contract from the DoD to support ARLIS and their mission of addressing complex national security problems. Second, we committed $88 million to 132,000 square foot fully pre-leased development project in San Antonio with an existing Defense/IT tenant. Our team did a tremendous job of adding incremental density to our already fully leased high security 1.1 million square foot campus to create this additional development opportunity. In aggregate, our active developments, along with those projects placed in service or acquired in 2025 will generate an incremental $52 million of cash NOI on a stabilized annual basis, which will be realized as projects are completed and placed into service. The incremental NOI will phase in between 2026 and 2029, which will be the first full year benefiting from the total amount. $48 million of this is contractual and the balance is from leasing up the remaining availability at 8500 Advanced Gateway. Britt will discuss the very strong pipeline of activity we have for RG 8500. For 2026, we're establishing the midpoint of FFO per share guidance at $2.75, which implies $0.03 or 1.1% growth over 2025's outstanding results. Our guidance absorbs a $0.09 increase in financing costs. Excluding this impact, 2026 FFO per share would have totaled $2.84 and 4.4% year-over-year growth. Anthony will provide details on the specific assumptions included in our guidance but we're already off to a great start to the year with capital commitments and investment leasing. In January, we committed $146 million to yet another fully pre-leased development project at the National Business Park, once again with an existing Defense/IT tenant. This is another high security specialized facility that will total 236,000 square feet. An earlier this week, we executed a full building lease for NBP 400 with an existing tenant that is a top 10 U.S. defense contractor for 148,000 square feet and a lease term of nearly 11 years. Turning to the Defense budget. 3 days ago, President Trump signed the FY 2026 Defense Appropriations Act. This base budget is $841 billion, which is an $8 billion increase over the President's initial request. Adding the $113 billion in allocated DOD funding that was in the Big Beautiful Bill. This amounts to a Defense Budget of over $950 billion, which is the largest defense-based budget in our nation's history and is a 15% year-over-year increase. The President's fiscal year 2027 budget request is expected to be submitted in the coming weeks, but he publicly announced the need for a $1.5 trillion Defense Budget. Regardless of where the final number ends up, his comments send a strong policy signal of the President's commitment to increase investment in Defense, and we expect the overall size of the defense budget to continue to increase throughout the next 3 years. Importantly, the initial FY 2026 Defense Appropriations Act enjoyed very strong bipartisan support, recognizing the increasingly complex global threat environment. A recent editorial published in the Wall Street Journal was titled a serious Defense Budget at last, and it highlighted the new technologies that are proliferating in ways that threaten the U.S. homeland, which include hypersonic missiles, space and cyber weapons, drones and the weaponization of AI. The editorials conclusions are perfectly aligned with the administration's peace through strength philosophy and recognizes that investment in Defense is infinitely less costly than a war. Given this backdrop, we continue to expect that the priority missions our portfolio supports will be well funded in the near and medium term to safeguard national security. And these missions include intelligence, surveillance and reconnaissance, cybersecurity, missile defense, space activities, among others. Space is the newest war-fighting domain and achieving uncontested dominance in this theater is of paramount importance to the country's defense. In support of this objective, we expect the $175 billion multiyear Golden Dome initiative and the relocation of Space Command's headquarters to Huntsville to drive growth in demand from both government and contractors at the Redstone Gateway for the foreseeable future. Before I turn the call over to Britt, let me reflect on our performance over the past few years. In 2019, we entered our era of growth as we had largely completed our strategic reallocation plan and our FFO per share for that year was $2.03. 7 years later, the midpoint of our 2026 guidance is $2.75, a 35% increase and represents a compound annual growth rate of 4.4%. Between the initial midpoint of 2023 and 2026 guidance ranges, FFO per share is expected to grow at a compounded rate of 4.9%, which is over 20% higher than what we had projected back in 2022. And with that, I'll turn the call over to Britt for some details. Britt Snider: Thank you, Steve. We finished the quarter with strong occupancy at 94% in the total portfolio and 95.5% in the Defense/IT portfolio. Year-over-year, occupancy increased 40 basis points in the total portfolio and 10 basis points in the Defense/IT portfolio. Our buildings remain highly leased with our total portfolio at 95.3% and our Defense/IT portfolio at 96.5%. The lease percentage for the total portfolio increased 20 basis points from the end of last year, driven by our incredibly strong vacancy leasing performance. And I want to give special recognition to our entire team who contributed to these outstanding results in terms of both vacancy and investment leasing. In fact, we executed 557,000 square feet of vacancy leasing during the year, which exceeded our initial target by 40% or over 150,000 square feet. In our Defense/IT portfolio, we executed 424,000 square feet, which alone exceeded our 400,000 square foot initial goal for our entire portfolio. The vacancy leasing achieved represented 47% of our available inventory at the beginning of the year for the total portfolio and 58% within our Defense/IT portfolio. Half of this leasing was tied to either secure space, cyber activity or a combination of both. In our Defense/IT portfolio, over half of our vacancy leasing and 90% of our investment leasing was executed with existing tenants. We enjoyed broad-based leasing activity across our markets. And notably, we executed roughly 110,000 square feet in our Navy support market, which represented 73% of our available inventory in that group at the beginning of the year. Many of you have asked about this market over the past few quarters, and we delivered. The lease rate in this portfolio increased nearly 200 basis points over the year and the occupancy rate increased over 400 basis points. We also executed over 130,000 square feet in our other segment, which is the highest level in over a decade and represented 29% of our available inventory at the beginning of the year. This is important as this segment holds the largest amount of vacancy in the portfolio. Leasing achievement in the other segment included over 40,000 square feet at our property in Tysons Corner and nearly 90,000 square feet in Baltimore. Year-over-year, the leased rate in our other segment increased nearly 300 basis points and the occupancy rate increased nearly 400 basis points. For 2026, we have again set a vacancy leasing target of 400,000 square feet, which represents 1/3 of total available inventory at the beginning of the year. Our leasing activity ratio is 74%, which equates to 870,000 square feet of prospects on 1.2 million square feet of availability and 10% of this activity is in advanced negotiations. Turning to renewal leasing. We executed 2 million square feet for the year with tenant retention of 78% and cash rent spreads of 1.1%. In our Defense/IT portfolio, we executed 1.9 million square feet for the year with tenant retention of 79% and cash rent spreads up 2.7%. The government had an administrative delay in processing lease renewals that were expected in the fourth quarter, which included 700,000 square feet of secure full building leases in San Antonio. This delay negatively impacted our tenant retention and cash rent spreads relative to our guidance. And to quantify the impact of these delayed renewals, tenant retention would have been 84% or over 600 basis points higher and cash rent spreads on renewals would have been 2.4% or over 130 basis points higher. Our 2026 guidance assumes a midpoint for tenant retention of 80% and cash rent spreads up 2% at the midpoint. In 2026, we have 2.2 million square feet of government leases expiring, virtually all of which we expect to renew. Nearly 1 million square feet of this total is at our campus in San Antonio, which consists entirely of secure full building leases with the government that expire in the first quarter of 2026. This group of leases accounts for 1/3 of the expiring square feet in our Defense/IT portfolio this year and over 40% of the expiring annualized rental revenue. We expect 100% retention on this nearly 1 million square feet as lease economics have already been finalized. And again, we're just waiting for the government to finish processing the paperwork. We believe this process will be completed, and this batch of leases will be renewed in the first quarter. Turning to our large lease retention on Slide 20 of our flip book, we provide an update on leases in excess of 50,000 square feet that expire between mid-2024 and year-end 2026. Overall, we now expect tenant retention of over 95% on the entire 4 million square feet of these large lease renewals as we expect 100% retention on the remaining 12 leases totaling 1.9 million square feet, all of which are with the U.S. government and half of which are at our campus in San Antonio. Additionally, since we started providing this disclosure 3.5 years ago, we have renewed over 4 million square feet of large leases with a retention rate of over 97%. Moving on to development. We commenced 3 developments over the past few months, and our active development pipeline totals nearly $450 million of capital commitment. The active pipeline totals 880,000 square feet and is 86% pre-leased. 5 of our 6 development projects are 100% pre-leased now that we've executed the full building lease at NBP 400. The only development with space available is our 8500 Advanced Gateway project in Huntsville, which was just constructed as an inventory building in one of our highest occupied parks. We commenced construction on 8500 Advanced Gateway a year ago and the roughly 400,000 square feet of prospects on the remaining 125,000 square feet of availability speaks to the strength of tenant demand at Redstone Gateway. The project is currently 20% pre-leased as we signed a 32,000 square foot lease in the fourth quarter with a Defense/IT tenant whose technology is central to the Golden Dome initiative. We are in advanced negotiations on a 32,000 square foot lease with another defense contractor, which is also supporting Golden Dome and has been a tenant of ours for over 20 years. This lease will increase the pre-lease rate at 8500 Advanced Gateway to 40%. We are already progressing planning and design for our next inventory building at Redstone Gateway. And once 8500 Advanced Gateway approaches 60% pre-leased, we expect to commence the next inventory development. And finally, at 8100 Rideout Road in Huntsville, which is an inventory development we delivered last year, we are in advanced negotiations with one of our top Defense/IT tenants to expand into the remaining 27,000 square feet of availability. Once executed, the only space available in our 2.4 million square foot Redstone Gateway operating portfolio will be a single 10,000 square foot suite, and we are in advanced negotiations with a defense contractor on that space. Our development leasing pipeline, which we define as opportunities we consider 50% likely to win or better within 2 years or less, currently stands at nearly 1 million square feet. Recall, the pipeline stood at 1.3 million square feet at the end of last quarter. Since then, we achieved over 650,000 square feet of investment leasing, and we added another 300,000 square feet of high probability prospects. Beyond that, we are tracking an additional 1 million square feet of potential development opportunities. This activity should allow us to maintain a solid development pipeline in the near and medium term. And with that, I'll hand it over to Anthony. Anthony Mifsud: Thank you, Britt. We reported 2025 FFO per share of $2.72, which was $0.02 above the midpoint of our revised guidance and $0.06 above our initial guidance. The year benefited from earlier-than-expected leases commencements and success in flipping expected nonrenewals to renewals, lower-than-anticipated net operating expenses, including nonrecurring real estate tax refunds. The Stonegate acquisition in late October, additional interest and other income on investments and lower net interest expense from the timing of development funding, which was partially offset by higher interest expense from our October bond offering. During 2025, same-property cash NOI increased 4.1%, which was well above the midpoint of our original guidance of 2.75% and was driven by a 40 basis point increase in same-property average occupancy and operating expense savings, which also positively impacted FFO per share. Same-property occupancy ended the year at 94.2%, which is right in line with the midpoint of updated guidance and 20 basis points higher than initial guidance. The 10 basis point decline over the quarter was driven by a few previously discussed nonrenewals in the Fort Meade BW corridor, each of which were under 30,000 square feet. In October, we issued $400 million of 5-year unsecured notes at a yield to maturity of 4.6%. The bonds priced at a credit spread of 95 basis points and are currently trading at spreads that are tighter than our higher-rated office peers. The proceeds from the offering will be used to repay our $400 million 2.25% bond, which impacts 2026 FFO per share based on the higher interest rate between the new bond and the maturing bond. Our decision in September to prefund this bond maturity was driven by our conservative and risk-averse nature and the tight execution window that exists for any issuer early in the first quarter. Our decision not only eliminated any execution risk, but also removed any underlying treasury rate risk. The 5-year treasury at the time of our offering was 3.67%. And since our deal priced, the 5-year has traded at or above that rate in 90% of the trading days open for issuance. With respect to guidance, we expect another solid year of performance in 2026. We are establishing FFO per share at a range of $2.71 to $2.79, implying 1.1% growth at the midpoint. The $2.75 per share midpoint takes into account a $0.17 increase in NOI from rent increases and lease commencements in the operating portfolio, partially offset by nonrecurring real estate tax refunds, along with increases in NOI from developments and one acquisition placed into service during 2025 and 2026. This is partially offset by $0.09 from higher financing costs, $0.015 from the delivery of NBP 400 into the operational portfolio and $0.03 from the net effect of lower interest and other income on investments and higher G&A. Same-property cash NOI is projected to increase 2.5% at the midpoint. This guidance is impacted by the nonrecurring real estate tax benefits in 2025, which reduced the 2026 growth rate by 100 basis points. We expect same-property occupancy to end the year between 93.5% and 94.5% and be relatively flat throughout the year. Regarding uses of capital in 2026, we expect to spend $200 million to $250 million on active and future projects and to commit $225 million to $275 million of capital to new investments. We take a conservative approach to our AFFO payout ratio, which has averaged roughly 60% over the past 2 years and is forecasted to be under 65% in 2026. At this level, the portfolio continues to generate sufficient cash to fund the equity component of our anticipated investments on a leverage-neutral basis. Finally, I'd like to take a moment to discuss the impact of placing our development NBP 400 into service this year and our overall approach to capitalize costs as it relates to development. We will place NBP 400 into service on April 1, which marks 1 year from the completion of the core and shell of the building. At that point, as our long-standing policy compels us, we will stop capitalizing interest and operating costs associated with the project. This results in a $0.015 impact to 2026 FFO per share, which is absorbed in our guidance. Our policy is to capitalize interest and operating expenses, the largest component of which is real estate taxes associated with properties undergoing development or redevelopment. We continue to capitalize these costs until a property becomes operational, which we define as the earlier of 90% occupancy or 1 year from substantial completion of the core and shell. Historically, we capitalize only a small fraction of our overall interest expense with capitalized interest averaging roughly 5% of our gross interest over the past 3 years. And in 2026, we forecast we will capitalize less than 8% of our gross interest expense. While delivery of NBP 400 will temporarily reduce total portfolio occupancy by 60 basis points beginning in the second quarter and FFO per share in the second and third quarters, our guidance assumes the lease we just executed with a defense contractor will commence in the fourth quarter. We believe our policy regarding capitalized costs related to development and redevelopment projects is illustrative of our conservative approach to adhering to GAAP standards and avoids accumulating excess basis in our projects, which would deteriorate our expected yields. With that, I'll turn the call back to Steve. Stephen E. Budorick: Thanks. I'll close by summarizing our key accomplishments and messages. 2025 was a year of outstanding achievements, delivering strong performance across all segments of the portfolio and all departments of the business, resulting in FFO per share growth of 5.8% year-over-year and representing our third consecutive dividend increase, resulting in a 10.9% increase over the last 3 years. For 2026, we expect this will be our eighth consecutive year of FFO per share growth. We again set a target for vacancy leasing at 400,000 square feet, which is an aggressive goal given the limited amount of unleased space in our portfolio. We expect tenant retention will remain strong at 80%, and we expect to commit $250 million of capital to new investments, of which we've already committed $146 million. Our liquidity remains very strong, and we expect to continue self-funding the equity component of our capital investments. We now anticipate compound annual FFO per share growth of nearly 5% between 2023 and 2026, and we're already off to a great start. We expect to deliver another strong year of results. Before I wrap up, I want to make a comment about the passing of my good friend and former colleague, Roger Waesche. Sadly, Roger passed away suddenly on January 8. Much of the foundation that we have built on over the past decade is a result of the leadership and foresight of Roger Waesche. Roger worked for the company for over 3 decades, serving in a wide range of leadership roles, culminating with being the company's third Chief Executive Officer from 2011 and 2016. We have no need to idealize him beyond what he was because that was more than enough. A loving husband and father, a man of great faith and integrity, a fierce and loyal friend, a man of great intelligence and kindness and a colleague and leader who cared deeply for all those he encountered. Those of us who had the privilege to work with and alongside Roger are better off because of it. He is greatly missed. Operator, with that, please open up the call for questions. Operator: [Operator Instructions] Our first question comes from the line of Seth Bergey from Citi. Seth Bergey: I guess just starting off with the development pipeline. Are you starting to see opportunities from Golden Dome and the new kind of defense appropriations kind of trickle into that pipeline visibility? Or are projects kind of related to that still on the come? Stephen E. Budorick: I think the answer is both, Seth. Britt talked about the big backlog of prospects we have for RG 8500 in the 400,000 square foot range. Many, if not most, of those pertain to Golden Dome. And I believe they represent kind of initial footprints, early moves to get into the action. And I think subsequent down the road, you'll see larger requirements as awards are made and the contractors ramp up to perform the actual creation of the Golden Dome. Britt Snider: I'll just add a couple of things to that, too. I mean they're really trying to move that process forward from a contracting standpoint. And I mean, the Missile Defense Agency's Shield contract could afford DOD with quite a bit more flexibility to process orders more quickly. And then also, they're looking to fast track, especially some of the space-based interceptor contractors through OTAs or other transactional authority. So we actually -- we're seeing it not just through the tours, but also how they're setting up for these contracts to be awarded. So expect some velocity this year. Seth Bergey: Great. And then just a second one on kind of the leasing assumptions around tenant retention, 80% at the midpoint. I guess, kind for the 20% that would not be retained, given kind of the type of tenant that you have, where are those tenants going? Is there like a cited reason for move out? Or could that be conservative just kind of given where your retention has been in the past couple of years? Stephen E. Budorick: Well, when you look at our nonrenewals from year-to-year, it's typically smaller tenants that are vulnerable to a relocation because they need a little less space or a little more space. Probably 70% of nonrenewals are just getting smaller tenants into the rightsized space. Some of those are nondefense tenants. And often, it's our asset managers managing their inventory to accommodate the growth of larger defense tenants. So there's always a little friction in there. But I have to remind you, for a decade, we've delivered 80% retention. It's a pretty astounding number. Operator: And our next question comes from the line of Blaine Heck from Wells Fargo. Blaine Heck: Just following up on potential additional investments, specifically the roughly $100 million of additional investments earmarked for guidance in 2026. I guess what do you think the mix between acquisitions and developments will be in that total? And can you talk about the profile and yields that you're targeting on acquisitions? And outside the activity in Huntsville you described, are there any additional near-term development projects that you're eyeing at the moment? Stephen E. Budorick: Well, we talked about our development pipeline having roughly 1 million square feet. A big chunk of that are smaller contractors for 8,500, but there are some build-to-suit opportunities. Our yield targets haven't really changed for developments. We target 8.5% cash-on-cash yield at the commencement of the lease. Regarding acquisitions, when they occur, we consider them opportunistic. We don't have any built into our guidance, if you will. And typically, the yield on that acquisition has to exceed that, which we can do on our development opportunities for us to make the move. Blaine Heck: Got it. That's helpful color. And then just switching gears, you guys have been pretty steadfast in your messaging around not needing equity as a source of funds to support your investment initiatives. But given that the stock performance has been very strong thus far this year, I'm wondering whether you'd be more open to issuance at these levels. I guess, how equity would rank in your options for funding sources? And maybe alternatively, are there any assets that you would consider for dispositions if you were to add significant developments or acquisitions this year? Stephen E. Budorick: Well, many layers to that question. It's nice to be in a position where we could consider issuing equity, but it's kind of a last alternative. We have -- as we have made very clear, the ability to handle our expected development investments with the cash we generate internally. We actually have the ability to flex up in a given year or 2 with a modest increase in our debt ratio, which on a pre-lease basis will only be temporary. Regarding dispositions, there are a few assets that we've clearly indicated we'd like to sell. They're all in the other segment, not defense. Timing of those sales is not so much dependent on our development -- our pace of development opportunities, but more market conditions in the markets where they exist, where we can get an efficient sale and preserve shareholder value. Blaine Heck: So I guess just asked another way, I guess, you don't feel like your hesitation to issue equity has held you back at all from taking on more projects. Is that correct? Stephen E. Budorick: Not at all. Blaine Heck: Okay. Stephen E. Budorick: If God forbid, we get so much that we have to issue equity, well, that will be a happy day for our investors, and we'll let everyone know well in advance, but we don't expect that to happen. Operator: And our next question comes from the line of Anthony Paolone from JPMorgan. Anthony Paolone: So first one, just on the starts that you anticipate for 2026. It sounds like maybe the follow-up for 8,500 in Huntsville. And then are there any others in the plan? Stephen E. Budorick: Well, we have our eye on a few, but you know we're not going to tell you where they are at. We're working several other opportunities. And yes, you're right. We expect to start an inventory pretty quickly after 8,500 gets committed. Anthony Paolone: Okay. And so I guess if we're kind of looking out even beyond '26, like your investment spending has been pretty consistent the last couple of years in your guidance for '26. But if we look at like what's left to spend on the developments in place right now, it sounds like you'll still have a couple of hundred million to spend after 2026. And then if you start some things this year, that will kind of add to that. So I guess, should we expect development spending or investment spending to maybe ramp a bit in the next couple of years? Britt Snider: From a spending standpoint, yes, because if you look at the development chart in our supplement, you'll notice that the two buildings that we committed to, one in late December and one in early January have placed in service dates that are in 2027 and late 2028. So you're correct, the spending for the significant spending for those isn't going to occur in 2026, it will occur in '27 and 2028. So there will be incremental funding for the commitments that we've made this year as well as the commitments we expect to make in 2026 and beyond. Anthony Paolone: Okay. And then I guess my follow-up then on all of that because it seems like the business is going well. And a few years ago, you had laid out your 4% kind of earnings CAGR as an intermediate or maybe even longer-term growth rate. Do you think that still stands? Is there a chance that could bump a bit higher given all the conditions surrounding the business? Or maybe how to think about that? Stephen E. Budorick: Well, this year is a transition year because of the impact of the refinancing costs. I think later in the year, we'll probably try to give you a little more of a view of what our future looks like but we're very confident we're going to continue to produce solid growth as we have and that's my message. Operator: And our next question comes from the line of Manus Ebbecke from Evercore ISI. Manus Ebbecke: Out of demand that you're seeing in your markets, how much is driven by existing tenants versus new tenants? And have you witnessed any like meaningful uptake and in-migration from maybe like tech defense tenants into your markets from other regions in the U.S. Britt Snider: Yes, I would say it's about 50-50 existing and new biz. And then we are seeing some groups come in from other locations, including Colorado and California. So it's we're encouraged by seeing some influx from people into our markets that have not had footprints there previously. Manus Ebbecke: Got you. I appreciate the commentary about maybe getting another outlook later this year. So we're definitely looking forward to that one. But just maybe in your view, obviously, with now the demand picture looking really good and you're certainly like being able to capitalize on that, like how do you expect your like tenant mix maybe to change if we compare today's portfolio maybe to one potentially in like 5 years from now? Like where do you think like maybe the mix is shifting in your portfolio? Stephen E. Budorick: The mix of tenants, or are you talking about concentration? Manus Ebbecke: Specifically tenants, like government versus tech defense versus traditional contractors, like where do you think there's maybe outside growth? Who do you think is going to take bigger shares going forward? Stephen E. Budorick: Well, that's a hard one to answer. I think it will be roughly comparable to what it is, 2 parts defense contractor for every one part government, and we'll see that growth in a variety of markets. Operator: And our next question comes from the line of Rich Anderson from Cantor Fitzgerald. Richard Anderson: Yes. Rich Anderson here. I got caught off there. Steve, first, well said on Roger, one of the best that I can recall ever working with, soft spoken, unassuming, but probably a big part, as you mentioned, the architect of where you guys are today. So his legacy lives. Just now getting under the questions. In terms of Huntsville and kind of where it is in terms of the size of the portfolio, 2.5 million square feet or thereabouts, NBP is 4.3 million square feet and growing from there. When I think about all the forces at work moving to Huntsville, whether it's Missile Command, Space Command, Golden Dome, do you feel like you could get to a point where you just kind of run out of opportunity to meet some of these demand forces coming at the area? Or do you see opportunities to expand to be able to build more in the area? I'm curious what your sort of 5-year outlook is on Huntsville in terms of how big it can become within the portfolio. Stephen E. Budorick: Well, I can't wait to be on a call to tell you how we're going to manage that growth. And it's going to happen. It's just going to take a year or 2, Rich. But do recall, we're built to 2.4 million square feet right now. We've got a little bit under development. Our overall capacity on the land we control without structured parking is 5.5 million square feet. So we got 3 million square feet of development runway on the enhanced use land that we do currently control. We believe there is a significant opportunity at the point where we have consumed that development that we can continue to expand our enhanced use lease presence on the base because there's ample land available. The existence of our contractor and government campus is a well-appreciated catalyst to the missions on the base. And in essence, we work in partnership with the U.S. Army overall Commands to support their missions. So I don't think we're ever going to run out of runway there. There might be some processes we have to go through. But we've got a long runway in Huntsville. Richard Anderson: Okay. In terms of the organic growth of the company, you guys have been successful at improving upon whatever your guidance was to start the year. I think in the last 2 years, you've seen it steadily sort of improve from one quarter to the next. Maybe the calculus is a little bit different this year. I'm not sure. But would you say that you've left some opportunity on the table from a pure organic point of view? And what has to happen for same-store to sort of get a little boost up as the year progresses and maybe you've left some conservatism on the table as well? Stephen E. Budorick: Well, same-store is a battle of inches. It's square feet renewed weeks of earlier or later commencements, pennies of rents. It's hard to say we're leaving anything on the table. Last year, our team executed extraordinarily well at getting the best outcome of probably 150 different transactions. And meanwhile, our operating teams have to keep the expenses in line and contest taxes. It's a hand-to-hand combat in same-store growth. And I think we've put out a good solid forecast, and we'd like to beat it, but I don't think we've sugar coated it. Richard Anderson: Okay. Last for me, the $950 billion defense budget with the OBBB. I'm curious if you could sort of frame when that will start to matter from -- to the bottom line in terms of leasing and actual opportunities for the company? I mean it's great, obviously, as a setup for the long term. But is that like a 2- or 3-year type of process before you actually see it, make its way to your FFO line? Stephen E. Budorick: Yes. We've traditionally conveyed that from an appropriation, our demand impact is 12 and sometimes 18 months down the road. And particularly with some of the big funding things that are occurring right now because the funding is going to new programs. New programs have to be conceptualized, then put into contract competitions, defense contractors have to compete for the contract, get an award, survive a protest, finally get an adjudicated result and then they can lease space. So 12 to 18 months, it's really a very strong signal that our demand is going to remain very healthy, if not improve, over the next 2 years. Britt Snider: Rich, I would just add that there's a couple -- like if you look at what I was referring to earlier, Golden Dome and even Golden Fleet, which is less applicable to us. But those 2 initiatives, they're working on ways to fast track those dollars in the program. So Golden Dome for us is certainly has the potential to see benefit from that sooner than that. Richard Anderson: That was the genesis of my question, like it's somewhat political that all this is happening, although it is bipartisan, I get it in terms of the spending bills. But I just wondered if there was -- given the geopolitical climate of today, maybe you would see the benefits of this appropriations bill and so on sooner than 12 months, but I guess you're holding the line on that for now. Stephen E. Budorick: Well, I think what Britt conveyed is you're going to see a mix of both. But one thing that's crystal clear is this administration is very high sense of urgency. So it could be quicker than we have traditionally seen, but it's hard to tell you it will be. Operator: [Operator Instructions] Our next question comes from the line of Dylan Burzinski from Green Street. Dylan Burzinski: I know the Iowa data center development plans has sort of been pushed back a little bit, but just sort of wondering if there are any other sort of markets that you're looking to sort of go out and gobble up some land parcels for future development opportunities on the data center side? Stephen E. Budorick: Not currently. We're constantly evaluating opportunities, but there's nothing that we're seriously considering. Dylan Burzinski: And then I guess just one last one on sort of the office disposition plans. I think the theme that we've heard over the last several months is that debt capital markets are improving, bidding tents are getting more full. Just sort of curious on your thoughts on sort of bringing 2100 L to market because I know that's sort of largely stabilized now. Stephen E. Budorick: Well, the D.C. market has not yet indicated pricing for assets that excites us. And so I don't expect that to happen for 12 months, but we have that building extremely well positioned. It's a fantastic development with great tenants. And when we see capitalization rates approach the level that makes sense for our shareholders, we can move on it. Operator: Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Mr. Budorick for any further remarks. Stephen E. Budorick: Thank you all for joining our call today. We are in our offices, so please feel free to coordinate through Venkat if you'd like to talk to us further. Have a great day. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Ladies and gentlemen, welcome to the presentation of Vontobel's Full Year 2025 Results Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] and the conference is being recorded. [Operator Instructions] At this time, it is my pleasure to hand over to Christel Rendu de Lint. Please go ahead. Christel De Lint: Good morning, and a very warm welcome from Georg, Jan and myself. Thank you for joining us today. Georg and I look forward to sharing the progress we have made on our strategic priorities as well as the highlights of our financial results. Jan Marxfeld, our CFO at Interim, will then take you through the detailed numbers, after which we will open the line and take your questions. 2025 was a successful year for Vontobel. We achieved strong financial results and made decisive progress on our strategic priorities. We reached a net profit of CHF 280 million. We delivered significant growth while at the same time, absorbing lower interest rates and a much weaker U.S. dollar. Assets under management increased to CHF 241 billion, supported by strong inflows in private clients and strong inflows for institutional clients in four of our six investment boutiques, notably in fixed income. Our capital position remains very strong. We closed with a CET1 ratio of 19.7%, thanks to record capital generation and effective resource management. We will propose a continued attractive dividend of CHF 3 per share. We made decisive strategic progress. First, we integrated our quantitative investment boutique into the broader investments organization. The tighter integration will accelerate ID generation insights and innovation. We also divested customer funding, a digital lending platform. We want to concentrate on our growth areas. Second, we captured organic and inorganic growth. In private clients, we hired new relationship managers in key markets and will open an office in Los Angeles to see strong client demand. We welcome the new employees and clients from IHAG Private Bank. This integration was a resounding success. It was completed ahead of schedule on the budget and with very positive client feedback. Meanwhile, our institutional client teams operate sharper, faster and higher on the value chain. They achieved standout flows in several flagship funds, secured a number of prestigious mandates. Third, our CHF 100 million efficiency program is running ahead of plan. We have structurally improved our cost income ratio and redeployed resources to growth areas. The program will be completed by the end of 2026. Let me now briefly recap the environment in which we delivered these results. Global bonds and equities gained though volatility remained high. Bond yields drifted down as both the SMB and the Fed cut interest rates. The Swiss franc appreciated sharply, driven primarily by safe haven demand. This environment created dual financial headwind for us. The lower interest rates weighed on our net interest income and the much weaker U.S. dollar reduced our foreign currency income. Yet, these conditions clearly played into the strength of our credit light investment-led model. We helped our clients diversify and invest with confidence. The proof lies in our strong net inflows and continued high client engagements. Our unique integrated investment model underpins our success and remains the foundation for our future growth. We are an active investment firm serving two complementary client segments, private clients and institutional clients. These are mutually reinforcing in skills and business and complementary in the diversification benefits. Both segments grow and rely on the expertise of our single factory, investment solutions and our dedicated experts. Our strategy is clear. We are doubling down on this model to realize its full potential. This will drive long-term value for our clients, employees and shareholders. I am now turning to private clients which delivered another year of strong growth. Operating income grew by 5%, supported by continued client demand for structured investment solutions. While we saw a brief slowdown in April, activity bounced back and stayed above historical levels for the rest of the year. We attracted net new money of CHF 5.8 billion with continued strong growth in developed and Western markets. This ranks us in the top quartile amongst peers. We win clients with our investment expertise not through leverage. We stick to our defining and successful approach using our investment know-how to grow in Western and developed markets, thereby generating steady recurring revenues. We are committed to building on this track record of steady growth. We will recruit and develop top caliber relationship managers and are excited about opening our Los Angeles office later in H1. We will further invest in our market-leading platform for structured investment solutions, thereby, expanding its capabilities. Finally, we will complement our organic growth with highly selective acquisitions. We have successfully acquired integrated many banks and most recently, the client book of IHAG Private Bank. This strong track record positions us to pursue further opportunities in key markets such as Switzerland, Germany and Italy. And now over to Georg. Georg Franz Schubiger: Good morning, everybody and also from my side, a very warm welcome from Zurich. Last year, institutional clients net new money was minus CHF 1.6 billion. 3 years ago, outflows exceeded CHF 10 billion in 1 single year. So we made strong progress, but we are not yet where we want to be. Our ambition remains to grow institutional client flows by 4% to 6% through the cycle. In absolute terms, we want to generate annual net inflows of at least CHF 4 billion. First, I'll update you on where we stand in institutional clients. Then I will share the strategic actions that we are taking across our investments unit to drive our next cycle of growth. Over the past 18 months, institutional clients have executed the strategic measures we outlined at our Investors Day in 2024. These measures have sharpened and accelerated our distribution capabilities. We have introduced a new coverage model for integrated solutions. We replaced regionally different processes and systems with a fast and globally consistent client journey. We have reinforced our teams with senior hires in priority markets, particularly Asia. These changes are already yielding results. Our response times have improved, conversion rates have increased and our client relationships have deepened. The operational and financial results are clear. Several of our flagship funds have been exceptionally strong, have seen exceptionally strong inflows. This includes CHF 1.8 billion into credit opportunities and CHF 1.4 billion into emerging markets debt. We have won prestigious mandates. For example, one, is their CHF 600 million multi-asset mandate from the Auckland Future Fund Board. Vontobel emerged as the winner in a highly competitive selection process, including 21 participants. Our distribution strength is also evident when compared to peers. In 2025, Vontobel ranked in the top quartile for European institutional fund flows underlying our distribution effectiveness. These are tangible proof points that our strategy is working. Our disciplined execution is also driving tangible results across our investments unit, our factory that serves both private and institutional clients. After the so-called industry winter that started in 2022 for active and especially for emerging markets focused firms, the industry is now back in growth mode. And so is Vontobel 4 out of our 6 boutiques achieved strong investment performance, grew assets under management and attracted significant net inflows. These 4 boutiques delivered a combined net new money growth rate of 6.7% in 2025, well ahead of most active managers in our industry. By delivering strong performance and innovation across our boutiques, we attracted net inflows in every asset class. To accelerate the next phase of growth, we will continue to realign and expand our offering towards areas with attractive economics, strong anticipated client demand and demonstrated performance. First, we will launch new ancillary fixed income offerings that are already under development. This will build on the outstanding success of our flagship funds, including emerging markets that credit opportunities and strategic income. Second, we will expand our solutions offering. Third, we will scale our strong private clients and Swiss institutional clients multi-asset track record to a wider set of institutional clients. And fourth, we will raise the next fund in Ancala. For the remaining 2 boutiques, quantitative investment and quality growth, which have seen significant outflows, we have an equally clear strategy. This year, we completed a leadership transition at quality growth, ensuring continuity for a boutique founded in 1984. Quality growth continues to deliver stable double-digit returns, making it an attractive diversifier. The boutique has seen significant retail outflows. These were driven by the current focus on AI-driven mega cap stocks. Quality growth, however, continues to resonate with a set of institutional clients, they value the distinct and defensive style of quality growth. Style preference cycles can span years. Flows could therefore remain volatile. The boutique financials of quality growth are attractive. Our development resources will, however, be concentrated in fast-growing areas, mainly in fixed income solutions and private markets. Systematic investing has been challenged by stop and go macro conditions, and we no longer see pure systematic strategies as a growth area. Nevertheless, we will continue to serve existing clients and keep our capabilities in place. Going forward, we will focus our quantitative expertise on 2 priorities. Driving tailored solutions and supporting our fundamental investment teams. To make this shift, we are integrating the quantitative investment boutique into a central hub. This hub will eliminate overlaps and drive idea generation, insights and innovation across all our investment teams. We have already seen the benefits of this integrated approach. One example is this sustainable equity income plus. It blends our quantitative expertise and fundamental research to deliver outstanding results for our clients. This integration also positions us for the previously communicated insourcing of the Raiffeisen Futura funds in July 2027. Most of those assets are booked with this boutique today. This change will not impact any other areas of our long-standing and successful cooperation with Raiffeisen. And we continue to expect a minimal impact on the group profit. Now let's turn to our structured solutions business. It gives clients access to tailored investment solutions at scale. We combine customization, automation and scalability on a leading technology platform. Importantly, Structured Solutions has operated profitably in every single year for more than 20 years. That unbroken track record comes from our franchise being uniquely diversified. First, in terms of client types and channels, we work with external asset managers and banks, support our internal private clients and provide white label issuance services. We serve individual investors via exchange-traded products. Second, we maintain a balanced mix across 2 lines. Investment solutions and exchange solutions. Investment Solutions include yield-enhancing certificates and managed certificates. Exchange Solutions offer products such as warrants. This combination stabilizes overall revenues. Third, in terms of geography, We are the market leader in both businesses in Switzerland. We hold the second spot in Germany for leverage certificates. And we have profitable operations in select key European, Middle Eastern and Asian markets. We will continue investing in our leading technology to stay at the forefront of innovation for our clients. This will defend and expand our market share. And finally, we have substantially improved our efficiency over the past 3 years. Our cost/income ratio is structurally lower decreasing from 78.2% in 2023 to 72.9% in 2025. This underscores the progress of our efficiency program which is ahead of schedule with over 80% of the targeted savings already achieved. The efficiency gains have been driven by firm-wide initiatives including the consolidation of our IT infrastructure and applications, reductions in vendor spending and process automation. The program has allowed us to lower absolute costs while continuing to invest into our business and technology. We are currently implementing additional measures to build on this momentum. We remain fully committed to achieving the CHF 100 million in savings by the end of 2026 and embedding a lasting culture of cost discipline across the organization. Our objective remains clear. To deliver sustainable growth and create attractive returns for our shareholders through disciplined execution of our priorities. We are confident that Vontobel has the right strategy, the right business model and the right team to achieve our through-the-cycle targets. With this, let me hand over to Jan, our Interim CFO, to cover the financials. Jan Marxfeld: Thank you, Georg. Good morning, and a warm welcome. 2025 was a successful year for Vontobel. We delivered strong financial results. We generated a profit of CHF 280 million, up 5% year-on-year. Profit before tax increased to CHF 364 million. As Christel mentioned earlier, we managed to navigate dual headwinds, CHF 34 million from lower interest rates that compressed our net interest income and CHF 27 million from currency translations into our reporting currency, the Swiss franc. The Franc significantly strengthened against the U.S. dollar and almost all other currencies. This matters because 37% of our operating income is in Franc's compared to 78% of our costs. Currency swings, therefore, have an impact on our reported profitability. But I'm pleased to report that our underlying profit grew by CHF 74 million, more than overcompensating these headwinds. The efficiency program achieved CHF 41 million run rate savings, while business growth contributed another CHF 33 million. Our reported results include one-offs of CHF 19 million, slightly lower than 2024. These are what we call cost to achieve related to the efficiency program and the IHAG client book integration expenses. We expect a cost to achieve of around CHF 18 million in 2026 to complete the program. On the tax line, we realized a lower effective rate than in 2024 due to the regional mix of taxable profits and the fading of last year's one-off impacts. We are maintaining our effective tax rate guidance of 22% to 23%. We closed the year with assets under management of CHF 241 billion, up 5% year-on-year. This increase was driven by positive net inflows and market performance, again, partly offset by currency headwinds. Net new money rose to CHF 4.2 billion, up from CHF 2.6 billion last year. Private clients delivered CHF 5.8 billion of inflows which is 5.2% annualized growth. This is certainly in the upper half of our through-the-cycle target range. 4 out of our 6 investment boutiques attracted solid net inflows. But the net outflows from our quantitative investment and quality growth boutiques more than offset these. The stronger Swiss franc also reduced assets under management by CHF 10.1 billion. This reflects the fact that 3/4 of our asset base is foreign currency denominated. Performance and other effects added CHF 17.6 billion. These predominantly include market gains. Furthermore, we have effects from the integration of the IHAG client book, the divestment of cosmofunding and our decision to stop developing certain service offerings. These are connected to the strategy and the next steps for the quantitative investment boutique, which Georg explained earlier. Turning to operating income. It increased 1% to CHF 1.4 billion. Setting aside the FX headwinds mentioned earlier, on a constant FX basis, our operating income grew 3%. Net interest income declined 30%, mainly due to the SMB's successive rate cuts throughout 2024 and in early 2025. Net fee and commission income grew 2% preliminary, reflecting higher average assets under management. Trading and other income increased 6%, mainly due to the strong client demand for structured solutions throughout the second half of the year. By segment operating income in private clients yet again grew strongly by 5%. This as lower interest income was more than offset by positive effects of higher asset levels and high client activity. Within institutional clients, operating income fell 7%. This is because of slightly lower assets under management and the tail end of shift away from emerging market products. Turning to Slide 20 and the Private Clients margin. Our recurring margin remained stable at 40 basis points throughout the year. Growth in the ultra-high network segment has put some pressure on the recurring margin. That is because larger clients typically deliver a somewhat lower margin, but this has been offset by revenue management and the launch of our new modular product offering. We saw continued strong margins in structured solutions. The 2 basis point of net interest compression is a direct consequence of the lower market interest rates. The transactional margin reflects a normalization and activity levels. As a reminder, this item includes client transactional revenues not related to structured products. In institutional clients, the overall margin declined 3 basis points to 34 basis points. This is a direct result of the prior period shift away from emerging market funds and mandates. In the years 2022 and 2024, industry-wide demand for emerging market products weakened. This compressed overall margins as EM-related products typically come with a higher margin. But in 2025, the share of emerging market assets flattened out at around 10%, marking the end of this headwind. Our gross flows have now turned clearly margin accretive. This reversal is supported by our continued pricing discipline and more importantly, the success we are enjoying with our higher-margin fixed income solutions and emerging market debt offerings. Moving to costs. Our CHF 100 million efficiency program is running ahead of plan and is delivering tangible results. By the end of 2025, we have already realized CHF 84 million exit rate savings. So with 66% of this 3-year program done, we realized 84% of the savings on an exit rate basis. Now if you look carefully at this slide, you will see that despite of what I just said, the costs are flat year-on-year. It is our efficiency program that enabled us to do so even as we reinvested for growth and our cost base includes CHF 90 million of one-off costs to achieve and the IHAG client book integration costs. We will see further benefits next year. Because all the efficiency measures we identified throughout this year will be fully reflected in our P&L of 2026. Coming to the all-important cost/income ratio. Year-on-year, this improved further to 74.2%. Another consideration is the one-off effects. Adjusted for the cost to achieve of the efficiency program and the IHAG implementation, our cost/income ratio was even lower at 72.9% this year. In summary, this means we are well on track for our below 72% targets. Now to another core strength of Vontobel, our balance sheet. It is fully market-to-market, and we hold around CHF 25 billion of liquid assets which is more than 70% of our total balance sheet. Our Structural Solution business is subject to conservative and highly effective risk management. This has again been proven during the market turmoil surrounding the so-called liberation Day in April. Our lending book remains deliberately small and conservative. It comprises CHF 2.1 billion of Swiss mortgages and CHF 5.9 billion of Lombard loans backed by liquid collateral. We apply strict underwriting standards and a robust risk management, keeping credit losses minimal. Earlier in the year, we issued our first CHF 200 million senior unsecured bond, which was met with high investor demand. This further diversified our funding base and demonstrates our strong market access. Overall, our liquidity is strong with a liquidity coverage ratio of 150%. Since listing in 1986, we have reported a profit every single year. This unbroken record underscores the strength of our conservative risk culture and the prudence of our balance sheet management. Vontobel has a very strong capital position. Our CET1 ratio stands at 19.7%, up 3.6 percentage points from a year ago and up 1 percentage point from 2023. Since then, our capital-efficient business model has allowed us to first, fund 2 strategically important acquisitions. Second, support business growth; and third, absorb the Basel III Final regulation impacts all while funding an attractive dividend every year. This development reflects exceptionally high capital generation and disciplined management of our risk positions. For example, under Basel III Final operational risk-weighted assets are now largely based on past operational losses because our operational losses are minimal or corresponding RWAs are low. Additionally, the previously communicated optimization measures played a role. These are now largely complete. Our CET1 ratio comfortably exceeds both the 8% regulatory minimum and our 12% internal targets. This capital position gives us the flexibility to support further organic and inorganic growth while sustaining attractive returns for shareholders. One of the special things about Vontobel is that we take a long-term approach to shareholder value generation. And we are creating shareholder value this year, but also every year since 2014. Our return on equity reached 12.2%, constantly above our estimated cost of equity of around 9%. This year, our tangible book value per share rose by 15% to 33.86, our strongest annual increase in more than a decade. Including dividends, tangible equity per share has grown over 200% since 2014, underscoring the compounding power of our capital-efficient investment-led model. In recognition of this robust capital generation and healthy profitability, the Board will propose a continued attractive dividend of CHF 3 per share for 2025. This is equivalent to a payout ratio of 60%, in line with our target of more than 50%. To summarize, we achieved significantly higher net profit offsetting both lower interest rates and FX headwinds. Asset under management grew by 5%, and we recorded improved net inflows. We are making good progress narrowing the cost/income ratio down towards our 72% target. And our balance sheet and capital positions remain very strong. We ended with a CET1 ratio of just below 20%. Taken together, these results demonstrate the strength of our business model, especially in the prevailing macro environment and the strategic progress we are making. With that, I hand back to Georg. Georg Franz Schubiger: Thank you, Jan. 2025 was a successful year for Vontobel. We delivered strong financial results, enabling us to propose a continued attractive dividend of CHF 3 per share. We decisively advanced our strategic priorities. And we captured both organic and inorganic growth and our CHF 100 million efficiency program is ahead of plan. At Vontobel, we are determined to carry this execution momentum into 2026. Thank you for your attention. We are now happy to take your questions. Operator: [Operator Instructions] Our first question comes from Daniel Regli from ZKB. Daniel Regli: I have 4 questions, if I may. Ask all of them, please interrupt me if you want to limit the number of questions by analysts. The first question I have is on the margin and in institutional clients. And as you say, you have kind of flows have turned margin accretive by about 5 basis points difference inflows versus outflows. But can you give us kind of a rough impact of this kind of exit margin as of end of '25 versus the full year gross margin in institutional clients? Then the second question I have is regarding the net interest income in private clients H2 versus H1. And it seems like the net interest income shown in private clients is up in H2 compared to H1. However, the interest income on a group level was down H2 versus H1. So can you maybe explain to me when -- or what kind of interest income is allocated to the segment and what interest income remains in the corporate center. And then on the efficiency program, you said CHF 84 million was realized as an exit run rate. Can you give us a rough number what we already see in the cost line of CHF 25 million. And then the last question on the capital policy. Obviously, the capital looks very strong at 19.7%. So my question is a bit why didn't you choose a higher dividend? Or what do you plan to do with your capital, given the high capital ratio? Christel De Lint: Thank you very much, Daniel, for your 4 questions. I'll take the first one, and Jan will go through to the next 3 questions. So as we've shown, indeed, the growth flows have turned margin accretive. It's very hard to give you an exact numbers on the exit rate, but you can see the evolution from '24 H1 '25 and H2 '25. I would also points to the outflows coming at a lower margin. Now the end results in a given year very much depends on the outcome in the market as well. So what have we seen last year, in particular, is returning demand on emerging markets, we've seen strong inflows into credit opportunities. These are all nicely merged segments the way it's starting off, you can expect the same type of flows. But of course, it honestly really depends on the way that the year pans out. I think the key message is to see that where we're growing, where we are strong. And in particular, in the fixed income space, this is not a low-margin plain vanilla treasury type of fixed income. It's the high value-added type of fixed income. So that's important to remember. I think the other part that is important to remember is the flattening out on the EM assets. One aspect was the industry winter in a sense for EM demand. That was not under control, and that seems to be now behind us. And there was, of course, an element of under performance, in particular, for quality growth EM. And that effect is behind us because the assets have literally gone to 0. On the other side, EM was very strong for us in fixed income over the past few years until 2022 and has shown that it will again be strong in the sense that this is a top well in the upper half of the top quartile across horizon. So that's kind of the full picture on margins. And now over to Jan. Jan Marxfeld: Yes. So regarding your question of the allocation of the net interest income between PC and the Corporate Center. What I can tell you the way we do this, and we look at this is that we have an internal funding curve and PC they basically earn interest on the deposit side versus this funding cost. And they also an interest on the loan side compared to this funding curve. What remains in Corporate Center is basically a residual treasury income, which we don't allocate out. Regarding the CHF 84 million, exit rate reduction. I think you will capture this very correctly. So this is basically what we have identified over the program today. So in the years '24 and '25. And what is in our P&L is roughly 3/4 of this. This is basically the effects which materialized in 2024 and over 2025. And for the remaining, we obviously then we'll see this coming in, in 2026. Last question I think you had was on our capital and what we will do is this. So on the CET1 capital, 19.7%, at the moment, we feel that this is a very good spot to be in. And there are a couple of reasons for this. So one is definitely, we need capital to sustain our future growth. And this is organic and inorganic. So for example, the Ancala transaction in the mid- to long term, we will, as you know, acquire further shares or further part of Ancala. So that will certainly absorbed some of the CET1 capital. And lastly, there is upcoming regulation. This is on the background of the UBS, CS discussion, but might also have impact on smaller banks like us. And for this, we also would need capital if that materializes. The dividend, I think you also asked about the dividend. So the dividend it's obviously decided or proposed by the Board and decided by the AGM. It's important to remember that we have a through-the-cycle target of 50% payout ratio. We are there at 60%. So depending on growth and capital needs from the things we just explained, they will constantly evaluate this. . Daniel Regli: Follow-up on the first question on the IC. Can you maybe give me kind of the gross outflow number versus the gross inflow number. So I can kind of calculate the impact from the numbers you've given me? Christel De Lint: We'll take that offline with Peter afterwards, also in the interest of the other participants, if you don't mind. I think you already have the ballpark. But yes, yes, let's pick it up offline. Operator: The next question comes from [indiscernible] from Octavian. Unknown Analyst: I have actually 2 questions. Firstly, on the capital. So your 19.7 CET1 ratio. What I saw it was due to drop in the RWAs. You mentioned operational risk, but there was also a drop in credit risk RWA. So could you maybe give a bit more color on that and maybe more how it came to that precisely? And the second one, if you could elaborate on this CHF 1.1 billion of inflows to the Center of Excellence that you treat us institutional clients inflow so what kind of inflows are this exactly? Jan Marxfeld: All right. So on your last question, on CHF 1.1 billion from the Centers of Excellence. So this is something these are institutional clients or clients of institutional in nature, which have besides transaction banking needs, they have also investment advice needs and therefore, they are booked in the corporate center. But for the presentation here, we thought it was appropriate to show them by their origin or the client segment. And we also did this in the half year, by the way, consistently. On the capital question, the 19.7%. So I think on the credit risk, RWA can say too much here. It's in line with the measurement approach that we used the standard approach and depends a bit on the composition of our loan book. Lombard loans have carried very low credit risk RWAs, I think operational risk you saw and then on the market risk we had the measures which I explained before. Operator: Next question comes from Mate Nemes from UBS. Mate Nemes: I have 2 of them please. The first one would be going back to institutional clients. It's really good to see good performance and inflows into 4 of the 6 boutiques. Yet you are still seeing some outflows for equities or namely the quality of growth boutique. Could you offer any color on what is your expectations with regards to those flows? Could we see a stabilization already in the first half of '26? Or this is just entirely dependent on yield curves appetite for quality growth, and so on? That's the first question. The second question would be going back to the jump in the CET1 ratio. And appreciate the color on operational risk also over that some of that has to do with market risk and tail risk hedges. My question is, should we expect a somewhat more volatile market risk RWAs going forward? Or this is a single onetime jump and this is a baseline from which on you'll develop simply along the lines of normal business volumes. Christel De Lint: Thank you, Mate, for the question. To clarify, really, for all intents and purposes, quality growth is now a developed market boutique if you wish, the quality growth EM exposure is, as said, reduced literally to nothing. So that is not something that's featuring into any expectation or weighing into our results. Closing the topic of emerging markets. On the other side, it's very clear that appetite has returned from clients. As said, we saw the first green shoot on EM debt as we were standing here a year ago and that materialized the whole year. And we're also now seeing, I would say, green shoots and slightly more in EM equities. And there, our franchise in conviction equities mtx is benefiting. You've seen from the slide that one of the key prestigious mandate win from a U.S. Pension Fund was for this team in EM equities. So quality growth, the core franchises are U.S. equities and global equities. You're not, obviously, without knowing that the Magnificent 7, AI tech, et cetera, has had a predominant impact on market behavior and have therefore penalized any retail wholesale flows that was chasing performance. So it is dependent on client appetite and market because what we're seeing is the interest on the other side of institutional clients, those who really look to diversify to construct a book of business that is diversified across investment approaches, et cetera, they actually are seeing as we speak, if you want, because that is obviously a distinctive approach. Hard to forecast strong investment process, value profitable for us. So that's where we're standing right now as we look at it. But EM is not the factor for quality growth. In capital for -- Jan? Jan Marxfeld: So on the market risk RWAs and whether or not this is volatile. So I think probably it helps just to reflect 1 second on the structured solutions business itself. So this is margin-driven business, which is clearly depending on client activity, which again then is fueled by healthy volatility of the markets and sentiment around that. So it's deliberately not position taking. So therefore, I would expect the RWAs, they are being more or less flat. And we have done the optimizations. So certainly not going down from here. We have, obviously, a hedging arsenal already and a prudent risk management, which just was exemplified in the turmoil after the Liberation Day. So I would steer you towards a flattish -- somewhat flattish RWS there. Operator: [Operator Instructions] The next question comes from Nicholas Herman from Citi. Nicholas Herman: I've got a few, but I'll start with 3, and I might circle back if that's okay, later. Just can I just continue the line of questioning on institutional clients, please? Encouraging, but not a surprise to see, I guess, your EM assets stabilize given strong markets. I'm interested, could you just talk about the pipeline there? And more broadly, do you see this as being investors just addressing under allocations? Or -- and I guess even more broadly than that, do you see this as well as the start of a structural reverse of a shift away from global back towards local. I would love to hear your thoughts on what your clients are telling you. Sticking with IC, I was a little surprised to see equities AuM shrink by 10% half-on-half despite clearly very strong equity markets. Just why was that AuM build so weak in Q4? And could you please segregate that between investment performance and flows? And then finally, private client margins. How do you see the outlook for recurring margin? And I guess I ask that in the context that you mentioned some revenue management actions and the launch of a new modular product offering. Could you give some more details on these, please, and the impact on the benefit that those have driven to your P&L? Jan Marxfeld: Yes. Thank you for the questions. We had great difficulties to understand your first 2 questions. So maybe you can repeat them, but we got the third one. So I will respond to that. This was about the recurring PC margins and revenue management in case we understood that right? Yes, listen, there is always pressure on those margins, right? There's overcapacity in the industry. So we constantly need to ask ourselves and take action in terms to defend those margins. Secondly, with the strategy we announced a few years ago to do more in the ultra space that also has put certain pressure on the margin. So therefore, we mentioned last time that we have done 2 things. We have introduced a new modular product offering combined with rollout that was focusing on revenue management or pricing as you can also call it. And I think the combination of these things has been allowing us to keep the margins very stable at 40 basis points, while the overall industry is struggling. This is a very big focus point of ours because we -- as I said, we don't just need to compensate for a certain book transformation towards some of the larger clients and it's a little bit away from the small and very small clients. Secondly, we also need to compensate the general industry development. Now if I may ask you to repeat your question number 1 and 2. So we can... Nicholas Herman: Can you hear me okay? Christel De Lint: Yes. Nicholas Herman: So the first two questions that I had were on institutional clients. So the first part was on EM. And could you talk about the pipeline there in the context of very strong EM markets? And more broadly, is this investors just starting to kind of address some underweight allocations? And are they -- is it -- and do you see this as well as the beginning of a structural reverse of the shift away from local towards global, are we going back towards local away from global because that's been a long-term structural shift for a long time. And I would just love to think your clients are telling you there. And then the other part on IC was, I think equities AuM shrank by 10% in the half despite very -- clearly very strong equity markets. Could you please disaggregate the moving parts there between investment performance and markets and net new money, please? Christel De Lint: Sure. So on EM on the pipeline, it's very clear that the client engagement is strong on that. And so it's followed the packing order that we'd expect, right, in terms of moving up the risk ladder. So starting with EM debt and now moving into EM equities. So for us, we've seen the flows materialize tangibly in EM debt, and you've seen them on the presentation through the funds. We've seen the interest also starting to materialize, and you've seen that mandate for mtx, and we're seeing the interest. So I think it's a bit of both, to answer your question. They go together, right? So the valuations were extremely stretched if you look about 6 months ago. And going back to 2021, 2022, there was really a sense among the investors community that suddenly, EM, it started with China, but then EM was on investable. And that was kind of, I guess, always questionable, right, is 50% of the GDP of the world is investable -- uninvestable. So we're seeing both, it's just -- looking at the stretch valuation, looking at the underweight allocation and the discussions around diversification around the dollar also play a role. So it's -- that probably -- that part is bigger than it historically was. In terms of the equities, it's been -- indeed, there are moving parts. And there, Peter can walk you through what you've seen has worked very well for us is the Swiss equity part has grown through the sustainable equity income product. The other franchise have stabilized to slightly up. So that's impact for us. It's empty emerging market equities and quality growth is the part that has suffered in terms of outflows, as we've mentioned, the EM having come to an end, if you want now by the end of last year pretty much. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Christel Rendu De Lint for any closing remarks. Christel De Lint: Thank you all for joining us today and for your questions. We appreciate your continued interest in Vontobel. Should you have any additional questions, please do not hesitate to reach out to our Investor Relations team. We look forward to seeing you latest at our AGM in April. Until then, we wish you a successful day and a great finish to your week. Thank you very much. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Jan Marcel Matthieu Boone: Good morning, everyone. Welcome to the investor call. Following the announcement this morning of the 2025 annual results of Lotus Bakeries. I'm Jan Boone, and joining me today is our CFO, Mike Cuvelier; and we are both here in Lembeke. We will start with the presentation providing an overview of the performance and also the milestones of '25 and later on, deep dive into the financials. And of course, following the presentation, we are open for questions from your sides. And in total, we have foreseen 50 minutes for this call in total. First slide, I'm proud to report another year of strong and double-digit top line growth. The reported sales in '25 amounted to EUR 1.35 billion, and that represents an increase of 10%. This evolution is driven by continued strong volume growth in the second semester for both Lotus Biscoff and Lotus Natural Foods. At constant currencies, growth was even stronger, given the negative currency evolutions of the dollar and the pound in the second half of the year. Profitability improved further with underlying EBITDA on sales exceeding 20%, and this is an increase of 12% compared to the prior year. Also, the net profit increased and the net profit increased with 13%. The strong reduction of net financial debt led to a historic low multiple of 0.25x underlying EBITDA. Besides a strong operational cash flow delivery, we also realized a successful exit in FF2032 with the sale of our participation and The Good Crisp Company. A dividend of EUR 90 per share is proposed, and that's an increase of EUR 14 per share compared to the 76 of last year. And similar amount to prior year, we invested EUR 120 million in capital expenditures, and that's mainly in the plant in Thailand. The successful start-up of the first lines in Chonburi is for us, as a company, a huge milestone. And the operations teams deserve full credit for delivering this greenfield ahead of schedule and well in budgets. Last but not least, the partnerships with Mondelez advanced strongly and they contribute positively to the results. Lotus Bakeries is a growth company, and has been for the last 20 years, delivering a compounded annual growth rate of 11%. Looking at the pillars, the 3 strategic pillars. We see that Lotus Biscoff achieved a growth of 13% in '25. It reflects the discontinuation of Lotus Bakeries' own Biscoff ice-cream sales following the new license agreement with Froneri, EUR 11.6 million of second semester revenue was excluded from the reported top line sales. This primary volume growth of Lotus Biscoff demonstrates continued strong demand for Biscoff cookies and spreads. The Biscoff cookie once again ranks as the fastest grower in the global cookie brands ranking further reinforcing its position within the top 5. Lotus Natural Foods is the fastest-growing strategic pillar '25 with a growth of 17%. And after a strong performance in the first semester of '25, Lotus Natural Foods continued on the same positive path. TREK is the fastest-growing brand and BEAR is the biggest contributor to growth. [ After ] sales remained flat in the first half of '25, the Local Heroes delivered again growth in the latter half of the year. Annas pepparkakor even realized more than 10% growth and had its best holiday season ever in Sweden. The gingerbread sales in the Netherlands stabilized on a full year basis. Growth in Continental Europe of 9% is outstanding, certainly given the full allocation of the Local Heroes portfolio to this region. Belgium and the Netherlands are good examples of home countries that carry a broad assortment of the 3 strategic pillars and generates good growth in '25. The reported growth in the U.K. was 2%. Currency evolution of the pound has a negative impact on the reported sales in the second half of the year. The deep focus on the own Biscoff chocolate business and the exclusion of Biscoff ice-cream sales in the second half of the year further tempered the growth. On the contrary, the Natural Foods brands performed strong in the U.K. As an example, TREK was the fastest-growing brand in the bar category in the U.K. And in the U.S., Biscoff was the fastest-growing brand in both, the cookies and spreads category. Household penetration for the Biscoff cookie has steadily expanded in recent years, and now stands at 9%. Significant growth was also realized again in the U.S. with BEAR. Our largest consumer markets continued to increase in imports. You can see this in the overview here on this slide, an overview that shows the revenue distribution by country. The U.K. remains our largest market, closely followed by the U.S. Other major consumer markets, including many European markets, China and Canada, are also gaining share. Within the remaining 19%, several smaller but high potential markets are emerging. Let's now go into more details about Biscoff. Biscoff realizes a 10-year average growth of 15%. The most important growth engine of Lotus Bakeries in absolute value of the last decennial. We have reached with Biscoff again, a lot of milestones and we will go into more detail on some of those in the following slides. The launch of spreads was almost 20 years ago, namely in 2008. You can see the interesting evolution of our pack design over the years. In '23, the brand named Biscoff became prominent on the pack. And now we take the next step, and we will move from a generic shape jar to our own design. [Presentation] Jan Marcel Matthieu Boone: The new jar makes the perfect reference to our Biscoff cookie with the embossment linking into our iconic cookie. And you can see the new Biscoff spreads lined up next to other global spread brands. And now it's our goal to make this Biscoff jar also iconic. Here you can see that our Biscoff brand. Here, you can see our Biscoff brand identity over the years. In 2018, we created the red banner on the packaging design. And in '23, we placed Biscoff front and center on the packaging as part of a shift towards a unified global brand identity. And we are ready to take the final step. In '25, we introduced the Biscoff engraving on the cookies, replacing the long-standing Lotus engraving. This change completes more than a decade of brand evolution, and ensures us 1 consistent visual identity and tone of voice. The letter fonts on the cookie is aligned to our Biscoff logo connecting the Fs to ensure readability. The new engraving will be introduced across the entire range, including the original cookie and the sandwich cookie, as you can see here. Implementation began late '25 in the U.S. and India, followed by a global rollout in '26. And now an update on the partnerships. One of the highlights '25 is, for sure the launch of Biscoff cookie in India. Towards the end of '25 an unprecedented nationwide launch campaign was rollouts, rapidly building distribution in more than 300,000 stores in less than 4 weeks. Sales conferences were organized across 15 key cities to inform and energize among the sales teams across the country. This allowed us to reach 10,000 salespeople in all parts of the country. A wide range of impactful marketing initiatives was deployed across the country. The main focus was on the unique product taste. [Presentation] Jan Marcel Matthieu Boone: Painting the towns red with Biscoff billboards across top cities. Social and influencer buzz delivering more than 150 million views. Also a nationwide and broadly covered press conference was organized. And of course, impactful in-market activation in all channels, both modern trade and traditional trade. Traditional trades includes thousands of small shops, as you can see on the slides. At '25, we successfully launched Biscoff with Cadbury, Milka and Cote d'Or. And Mondelez is working on some more exciting innovations that will come soon on the markets. The Froneri led Biscoff ice cream launches will start in '26 this year, and the U.K. and later on in European countries. Following extensive work throughout '25 to define the new assortments and develop new product innovations. This slide shows the different concepts that have been developed. You can see the sticks, the pints and the new sandwich concepts. And the sandwich concept is ice cream in between 2 original Biscoff cookies. In recent years, Lotus Bakeries has invested in a new greenfield production facility in Chonburi in Thailand to support its growth ambitions in the Asia Pacific region. We have now 4 Biscoff plants, including India, on 3 continents. By the end of '25, the first cookies produced in Chonburi have been delivered to the customers. Plant is expected to be fully completed and operational by the end of the first semester in '26 at the latest, including capability of spread production and in-house bottling of spread jars. You can see here a drone picture of the current Chonburi plants. On the left of the current building, you can see that the plot of land still allows for significant future expansion. Mid '25, a new investment in spread production and bottling was also commissioned at the plant in Mebane U.S. Local sourcing and production of Biscoff spreads in the U.S. will reduce our ecological impact, lower import duties and accelerate our logistical flow. Our ambition with Natural Foods is clear. We want to become a global leader in better-for-you snacking segments. And in '25, we have made great steps again. Lotus Natural Foods was the fastest-growing pillar of the group with 17%. It is now a EUR 300 million business. And this is not a one-off because since we entered the better-for-use snacking segment in 2015. Our 10-year average growth has been that same 17%. With Natural Foods, we reached several milestones in '25, and we will go more into detail on some of those in the following slides. An important driver of growth in recent years for those Natural Foods is the successful development and introduction of new innovations. Other brand, BEAR brands, the fruit splits are a perfect example of an innovation that was introduced in recent years. The fruit splits are performing very strongly next to the original BEAR fruit rolls. In both key markets for BEAR, the U.K. and the U.S., the splits rotates in the top quartile, at most retailers. Seasonal activation strengthened brand's visibility and consumer engagements. Alongside BEAR's strong overall performance, the brand successfully launched nationwide Halloween Edition featuring a single wrapped strawberry fruit roll and themes cards with the BEAR mascots. Also under the TREK brands, we launched 1 of the most impactful innovation of recent years, the TREK Protein Flapjack with Biscoff. And this TREK Protein Flapjack with Biscoff is a vegan protein bar layered with smooth Biscoff spreads. This innovation created a strong halo effect. While consumers were introduced to the iconic Biscoff of taste while Biscoff brands encouraged trial and visibility for TREK, strengthening relevance and appeal for both brands. In '25 Lotus Bakeries entered into partnerships with RunThrough in the U.K. and with Golazo in Belgium, the Netherlands and France. We will be a key partner at running events reaching over 900,000 runners annually and offering a strong opportunity to further build the visibility and relevance for -- of TREK and Nakd brands. So this concludes my part of the presentation. And now I will hand over to Mike, who will present the financials. Mike Cuvelier: Thank you, Jan. On the financials. In '25, we delivered another strong set of annual results, powered by an in-sync flywheel of sales profitability, cash flow and continued reductions in net debt. You see that revenue is up by 10%. Underlying EBITDA is up by 12%. Free cash flow before expansion CapEx is up by 20%. All of which make it possible to invest EUR 240 million in the past 2 years and at the same time, reduce the net financial debt further to 0.25x underlying EBITDA. The strong performance of '25 is also reflected in a proposed increase of the dividend with EUR 14 per share. This slide shows the yearly volume growth in percentage on the left and in millions of euro over the past years on the right. The reported revenue growth of 10% in '25 is primarily driven by continued robust volume growth of 9.5% or more than EUR 115 million. This is the darker bar in the graph. Before exclusion of the Biscoff ice cream sales of the second semester, normalized volume growth is actually higher at 10.4% or close to EUR 130 million. This is the bar on the right of the graph. And you can see this volume in '25 was outstanding and comes on top of a record volume growth already realized in 2024 of 14% and EUR 150 million. Over the past 5 years, underlying EBITDA has grown faster than sales. And in 2025, underlying EBITDA reached again the 20% of sales level matching the profitability level we delivered also in 2021. Our partnerships with Mondelez further enhance the group's margin profile. Underlying EBIT and underlying EBITDA grew by more than 12%, as you can see, outperforming the top line growth of 10%. This demonstrates the solid underlying quality of earnings. Strong volume growth, combined with disciplined pricing and margin management, continue to support expansion of profitability and cash flow. Our Biscoff plants in Lembeke and Mebane, together with the Bar factory in Wolseley, operated at high occupancy levels throughout the year. And towards the end of 2025, our new plant in Thailand became operational. The annualized depreciation in '26 for Thailand is expected to add around 0.5% on sales. The volume growth and operating leverage is being reinvested in strengthening our commercial organizations, expanding marketing initiatives to build brand awareness and penetration and further increasing production capacity. The nonunderlying items of EUR 4.8 million relate mainly to the start-up cash costs for the plant in Thailand before production commercially goes live. The financial results of EUR 2.4 million consists of interest expenses, net of cash deposit income, bank charges and a negative exchange rate impact from the revaluation of balance sheet positions in foreign currencies. The tax expense amounts to almost EUR 53 million and remains as a percentage profit before tax in line with prior year at 23.5%. Underlying net result amounts to EUR 177 million or 13.1% on revenue. On this slide, you can see our investment program over the last 5 years. We invested more than EUR 500 million since 2021 in total CapEx and more than EUR 430 million in expansion CapEx alone. In 2025, we invested EUR 120 million similar to the 2024 number, and the majority of this budget goes to the plant in Thailand. Maintenance expense remains well under control and also remains below 1.5% of sales in 2025. The CapEx forecast for '26 and '27 combined stands at EUR 250 million, and is slightly above the EUR 240 million over the last 2 years, '24 and '25. Cash flow delivery was once again very strong in the second half of the year, with cash conversion before expansion CapEx well above 90%, we were able to absorb more than EUR 100 million of expansion CapEx and still reduce net financial debt further. Supporting drivers of cash conversion remain control on working capital and maintenance CapEx. Net financial debt is historically low at 0.25x underlying EBITDA. The sustained strong cash flow delivery over the recent years and the successful exits by FF2032 of the participation in The Good Crisp Company are the drivers in 2025. And I have to repeat myself, this balance sheet, again, is stronger than ever. Increased long-term investments, reaching the EUR 1 billion mark alongside increased equity. Net working capital remains stable and the reported net financial debt further reduces. On this slide, the reported net financial debt of EUR 89 million includes EUR 21 million of debt to be expressed by applying the IFRS 16 standard about leases. The evolution of underlying earnings per share shows a CAGR of 17.1% over the recent 5 years. and is actually outpacing the underlying EBITDA evolution we saw in 1 of the previous slides. And then to end the presentation with another highlight of 2025 Lotus Bakeries has reached the status of dividend aristocrat with 25 consecutive years of dividend growth and proposing a dividend this year of EUR 90 per share. This concludes the presentations. We will now open the call for questions. Mike Cuvelier: And we have the first question of Alexander Craeymeersch of Kepler Cheuvreux. Alexander Craeymeersch: Thank you. Yes. So the first question, I would ask 2 questions. And congratulations on the good set of results first. So the first question would be, you mentioned at the beginning of the year that you could have only a max volume growth of 10% over full year 2025 in Biscoff and you mentioned also that there was going to be a high base in H2. Of course, at the H1, you already mentioned that there was the new plant in Thailand opening but now we show in Biscoff 15% growth half-on-half. And if you compare that, because in the first half of the year, it was only 1% growth half-on-half. I was just wondering now can we also expect that 15% growth to also be present in H1 next year because, of course, there was little room for growth supposedly, but now apparently, that was well overshoot. So that was the first question. The question -- the second question I would have would be on Capex. I was just wondering why CapEx landed a bit on the lower end in H2? And how much capacity would be coming free in 2026? That would be my second question. Jan Marcel Matthieu Boone: Thank you, Alexander, for the questions and also for the congratulations, so thank you. Regarding your first question, indeed in '25, we gave some guidance in respect of capacity related to Biscoff and in '26, there is not. The demand will be leading and we had indeed a very good, very strong second semester and the 15% growth of Biscoff is a bit exaggerated. It's more like-for-like almost 13% in the second semester that we grew with Biscoff. But the demand will be leading in '26, we have been investing in increased capacity, mainly through our plant in Thailand, and that plant will be producing for Asia and Australia and New Zealand. So the capacity is there to grow, to grow Biscoff in '26. In relation to the CapEx number, we have shown an outlook for '26-'27. So about EUR 250 million will be reserved for increasing the capacity in our different factories. That includes our Biscoff factories but also our factory in South Africa for Natural Foods products. And sometimes the risk between H1 and H2, a difference in cash out, but we can be assured in H2. We did work quite hard to get the plants up and running in Thailand. We are extremely happy with how the team performed -- our operations team performed in Thailand. They -- we did not have any significant setbacks. And that's why we made a clear statement in our press release that at the latest by end of the first semester we will be up and running with all our lines. Mike Cuvelier: The next question, Kris Kippers, Degroof Petercam. Kris Kippers: So yes, indeed, also on my side, excellent second half, so congrats on that. My question is more on the comment made in the press release on the first page also on the profile the group. Looking forward and looking at your cost base, which remain indeed well under control in the second half, given the fact that you have some scale increase as a group, you have indeed Mondelez, which is helping. On the other hand, there is, of course, the effect of Thailand which might not be as profitable as the Belgium plant or even Mebane in the short term. But what seems to be a realistic margin assumption going forward because, indeed, it could be that 21% in a couple of years is feasible? Or would it imply again what you commented in the past that you aim for, let's say, more marketing effect in order to focus on the long-term growth, it will be helpful to give some insight on that because it does see indeed that your margin uptick in second half could be structural. That's my main question, actually. Jan Marcel Matthieu Boone: Thank you, Kris. Yes, indeed, we are happy that the EBITDA margin was higher than the 20%. So we are now at 20.2%. There are a couple of elements that affected that percentage. First of all, the ice cream business we took out in the nonunderlying line. So not only the top line, but the whole P&L of the ice cream business in the second half is not included in the underlying results. So as you know, our ice cream business was not the most profitable one. So that helps to increase that profitability percentage. Looking into the future, a couple of elements will play. First of all, we will have the Thailand plant as from the 1st of January, fully consolidated into the results, which also means full overheads will be in the costs. And so it's clear that a new factory being integrated in the profit and loss has its overhead costs. And once it's fully in the P&L and you add lines, it's more profitable. So if we add lines in Lembeke and the profitability level of these additional lines is higher than implementing and your P&L, a full plant. So that's the effect we will see in '26. And also depreciation will be a bit higher, about 0.5% impact on our depreciation. On the other hand, the Mondelez partnership will play positively on the EBITDA and percentages as well, India as the corporation on ice cream and chocolate will play positive side percentage wise. So to summarize it, we think for '26 the EBIT and EBITDA percentages will be more or less in line with what we have communicated today in relation to '25. Kris Kippers: Okay. Very clear. And then just one follow-up, coming back on the CapEx program, EUR 250 million, somewhat north of what we anticipated, I presume. To what extent is this ample? And what kind of capacity expansion would this provide you? Could you share more details on what it entails? Jan Marcel Matthieu Boone: I said it's linked to our Biscoff factories and also our factory in South Africa. We -- the calculation made is, of course, based on what we expect in relation to demand to coming years. We don't like to build empty factories. We're not going to invest already for 30%, 40% additional capacity. We'd like to be quite close to the market. And the factories, the 3 Biscoff factories specifically, they are close to -- is very close to the full capacity. '26 will give us room for growth. But we're not going to be overinvesting in capacity sort of EUR 250 million, and it will not give us 30% to 40% additional capacity. I don't know if that gives you an idea. Mike Cuvelier: Next question, Maxime Stranart from ING Bank. Maxime Stranart: Can you hear me? Jan Marcel Matthieu Boone: Yes. Maxime Stranart: Correct. So first of all, looking at organic growth coming back on that. If I may, excluding the impact, would imply the organic growth is above 14% in H2 with volume growth of almost 13%. If I look at the number you just communicated, I just want to crosscheck with you that's basically the correct assumption to take? And is it a level you see sustainable in H1 that would be the first question on my slide. And secondly, digging deeper into India. Could you elaborate a bit on what's your view on what the growth could be in '26. That would be all for me. Jan Marcel Matthieu Boone: Thank you, Maxime. Indeed, in the second half of the year, we increased like-for-like. And that means the FX like-for-like, also the ice cream was indeed 14% of organic growth, which is exceptional. We are delighted with the 14% and if you see it in the history of the last 5 to 10 years and 14% of organic growth for the group is exceptional. What do we expect H1 '26. We are confident to further grow. But as I said, 40% is exceptional. And we also have the headwinds of the foreign exchange effects based on the currencies of today, pound-wise, dollar-wise, we have already, and we have to start with minus 2.5%. Things can change in a good way or in an versus way. You never know, but we start with minus 2.5%. And -- but if we purely look at the like-for-like growth, 14% is extremely high. And that's why both Mike and I are sitting here with a big smile because of the fantastic results in the second half. And then in respect of India. And then I have to quote my CEO colleague of Mondelez. He said, "Okay, I want to have at least USD 100 million sales in 5 years in India." And for us, it's clearly strategically a very good partnership. We have been in India for 20 years, even more, and we could never realize a substantial sales we would never become a real brand in India. And I think through this partnership, we will be, if we see the resources that Mondelez have used now to launch the marketing efforts and especially also the way they operate. And the fast way they can get the Biscoff products in all these stores more than 300,000 stores that's really truly impressive. And I'm sure they will create a brand. They will create Biscoff as a brand also for the Indian population. And that's our ultimate goal. And I want to become a global brand and if you cannot become a brand in India, you cannot say generally, we are a global brand. So I'm happy that we can work together with Mondelez on realizing that. Mike Cuvelier: Next question is Guy Sips from KBC Securities. Guy Sips: I have 2 questions. First question is on the ramp-up and the packaging cost evolution. We see some ease in the raw mat. Can you give us some color if that could give some tailwinds from that side going forward? And the second is coming back on the CapEx, do you intend to allocate some additional CapEx to the healthy snacking activities. Jan Marcel Matthieu Boone: Thank you, Guy. In respect of packaging raw materials and other costs. What we do is, we have the whole budget around and also calculating the cost prices and the different cost elements of our products. That's an exercise we do very meticulously. And that gives us the ability to communicate also our prices to our customers before year-end. We also try to hedge as much as possible of these costs. So we have a cash flow predictability. For '26, price increases will be moderate. So if you look at the growth of next year and hopefully, the growth of next year, it will be based on volume. So it will be very -- price effects will be very limited. In respect of capital expenditures for healthy snacking. Indeed, BEAR is doing really well. So we're going to invest in our South African plant and also for Nakd that we also produce in the same plant, we will add capacity over there. So partly is allocated for the plant in Wolseley. Mike Cuvelier: Next question, Jeremy Kincaid from Van Lanschot Kempen. Jeremy Kincaid: One more for me on Capex, are you able to split out how much of the CapEx guidance will be to the Biscoff brand and to the Natural Foods brand? And then my second question is just on your balance sheet. Obviously, you called out it's very strong. Does that mean going forward, we could expect higher cash distributions to shareholders? Or do you have a target leverage ratio that you're working towards? And then just finally on The Good Chip Company or Crisp Company, are you able to disclose how much you sold that for? I'm sorry if you said that at the beginning of the call, I was having technical issues. Jan Marcel Matthieu Boone: Thank you, Jeremy. In respect of CapEx, the majority should be allocated to Biscoff and the exact number, we will not disclose, but it's the majority to Biscoff. And we do have a strong balance sheet. We have increased the dividend pay out slightly I think if you look at the underlying profit of last year and our payout ratio, which was a bit below 40% and now it's a bit above 40% because we have indeed a very strong balance sheet with low leveraging. So happy to be dividend aristocrats. So we're official aristocrats. That does not mean that we're going to stop working. So -- but the view on our dividend has not changed. I think the dividend payout, we have no plans to really dramatically change the payout ratio. And -- but the balance sheet enables us to invest in capacity. So we will invest EUR 0.5 billion in the next 2 years. And that will be -- and that helps if you have a strong balance sheet. We do look at M&A. We do look at external growth. But it's not something that we really need today. As you can see, our organic growth is very strong, as well for Natural Foods as for Biscoff. The organization is also built and organized to really focus on Biscoff, focused on Natural Foods and also the Local Heroes. So an external growth and acquisition could be interesting. And we have the balance sheet for it, but it really has to be a perfect match. And it's not something that we really need in the short term. We love the organic growth, it's the most profitable way to grow, and -- we don't -- we are not nervous by the fact that we have almost no debt anymore. And in respect of the funds, FF2032. What we've seen is that the most targets are in the U.S. we invest in scale-up companies, not in seed. We're not investing in not seed money, but more in scale-up companies. And we like companies that we think that in the mid long term, they can reach EUR 75 million to EUR 100 million. And we've seen also out of experience that most of these targets are in the U.S. And so we have our team now in San Francisco mostly looking at U.S. targets. And a The Good Crisp Company, a very nice company in the sense that they have a very good product. They did grow significantly the last years and PearlRock private company that acquired and we agreed not to disclose any detailed information. But we did create some surplus value for the funds. Mike Cuvelier: We have time for 1 more question -- a follow-up question from Maxime Stranart of ING. Maxime Stranart: [indiscernible] that you're still looking at a growth target and also [indiscernible] looking at M&A. So any element in the portfolio; that you would add any category you feel would be a great fit as a group into. Jan Marcel Matthieu Boone: I think I more or less understood your question because the line is not perfect. But I understood that your question is, do we want to invest in other categories. I think looking at M&A, preferably, it will be either in the healthy snack and natural foods fields, I think that's what we focus on in our search. On the other hand, also in traditional biscuits and bakery, could be interesting, certainly in respect of getting more scale in certain countries. Today, we're not eagerly seeking in other categories and the categories we are in today. Mike Cuvelier: Thank you, Maxime. Just 1 last question, Antoine Prevot from Bank of America. Antoine Prevot: Can you hear me? Mike Cuvelier: Yes, yes. Antoine Prevot: Perfect. Yes. 2 quick questions. So first 1 on the U.S. So 9% household penetration, see good development there. any bit of an update on what your target a bit there in the U.S. household penetration over the midterm? And just a very quick 1 on India in terms of like -- I mean, strong launch, as you said and pointed out. I mean in terms of spending on A&P and so on. I mean how is it split between you and Mondelez? Is it them taking care of everything? Or do you also need to contribute a bit? Jan Marcel Matthieu Boone: Thank you for your question. Indeed, the U.S. has been evolving very positively. We are now at 9% of household penetration and our distribution on store level is -- it's 80% more or less. So evolving really positively. What are our ambitions there. Of course, we would like to cross the bridge of the 10% household penetration in the short term in the U.S. Today, the U.S. consumers are not that positive. We have not seen that in our figures for '25. And hopefully, we will not see that in our figures in '26. Today, there are no indications that the sales would be less good. So we still have a positive vibe coming from the U.S. And it's -- it's 1 of our, maybe our most strategic markets for Biscoff. We have been investing quite a lot in the U.S. in relation to marketing above the line. Investments have been started in '24, evaluated positively, so we are extending it in '25 and also probably in '26. So we keep on spending, supporting our brands to marketing. I think another important aspect is we have our factory in the U.S. producing for the U.S. Now also we have added to the spread line. And the good news is that we had a vision to buy enough land in North Carolina on that side. So we can still extend capacity on the same site because it takes quite some time to create know-how and factory. And now in the U.S., quality of the cookies are very good and are fully on par with the Lembeke ones. So it's good that we can extend on the same spots in Maiden, North Carolina. So we are ready in the U.S. to grow. Fantastic year '25. In general, consumers are but more hesitant, but today, we don't see that in our figures. India, indeed, a great start. And our contribution is, of course, that we look at the quality of the cookie. We decide on the marketing program together, and we do have a contribution also in the marketing support and the majority of the investments are being done by Mondelez, but we also contribute a bit to the marketing efforts. And like I said, it looks very positive but we're only there for 2 months now. But the start has been very promising and very proud to see our products and so many stores to see the positive pipe in India. Mike Cuvelier: Okay. Thank you for your good questions, interesting questions. Jan Marcel Matthieu Boone: Yes. Also from my side, thank you. We will close the call here. But of course, if you have any follow-up questions, you know where to also find me or find us in the next few days and weeks. Thank you very much.
Jan Marcel Matthieu Boone: Good morning, everyone. Welcome to the investor call. Following the announcement this morning of the 2025 annual results of Lotus Bakeries. I'm Jan Boone, and joining me today is our CFO, Mike Cuvelier; and we are both here in Lembeke. We will start with the presentation providing an overview of the performance and also the milestones of '25 and later on, deep dive into the financials. And of course, following the presentation, we are open for questions from your sides. And in total, we have foreseen 50 minutes for this call in total. First slide, I'm proud to report another year of strong and double-digit top line growth. The reported sales in '25 amounted to EUR 1.35 billion, and that represents an increase of 10%. This evolution is driven by continued strong volume growth in the second semester for both Lotus Biscoff and Lotus Natural Foods. At constant currencies, growth was even stronger, given the negative currency evolutions of the dollar and the pound in the second half of the year. Profitability improved further with underlying EBITDA on sales exceeding 20%, and this is an increase of 12% compared to the prior year. Also, the net profit increased and the net profit increased with 13%. The strong reduction of net financial debt led to a historic low multiple of 0.25x underlying EBITDA. Besides a strong operational cash flow delivery, we also realized a successful exit in FF2032 with the sale of our participation and The Good Crisp Company. A dividend of EUR 90 per share is proposed, and that's an increase of EUR 14 per share compared to the 76 of last year. And similar amount to prior year, we invested EUR 120 million in capital expenditures, and that's mainly in the plant in Thailand. The successful start-up of the first lines in Chonburi is for us, as a company, a huge milestone. And the operations teams deserve full credit for delivering this greenfield ahead of schedule and well in budgets. Last but not least, the partnerships with Mondelez advanced strongly and they contribute positively to the results. Lotus Bakeries is a growth company, and has been for the last 20 years, delivering a compounded annual growth rate of 11%. Looking at the pillars, the 3 strategic pillars. We see that Lotus Biscoff achieved a growth of 13% in '25. It reflects the discontinuation of Lotus Bakeries' own Biscoff ice-cream sales following the new license agreement with Froneri, EUR 11.6 million of second semester revenue was excluded from the reported top line sales. This primary volume growth of Lotus Biscoff demonstrates continued strong demand for Biscoff cookies and spreads. The Biscoff cookie once again ranks as the fastest grower in the global cookie brands ranking further reinforcing its position within the top 5. Lotus Natural Foods is the fastest-growing strategic pillar '25 with a growth of 17%. And after a strong performance in the first semester of '25, Lotus Natural Foods continued on the same positive path. TREK is the fastest-growing brand and BEAR is the biggest contributor to growth. [ After ] sales remained flat in the first half of '25, the Local Heroes delivered again growth in the latter half of the year. Annas pepparkakor even realized more than 10% growth and had its best holiday season ever in Sweden. The gingerbread sales in the Netherlands stabilized on a full year basis. Growth in Continental Europe of 9% is outstanding, certainly given the full allocation of the Local Heroes portfolio to this region. Belgium and the Netherlands are good examples of home countries that carry a broad assortment of the 3 strategic pillars and generates good growth in '25. The reported growth in the U.K. was 2%. Currency evolution of the pound has a negative impact on the reported sales in the second half of the year. The deep focus on the own Biscoff chocolate business and the exclusion of Biscoff ice-cream sales in the second half of the year further tempered the growth. On the contrary, the Natural Foods brands performed strong in the U.K. As an example, TREK was the fastest-growing brand in the bar category in the U.K. And in the U.S., Biscoff was the fastest-growing brand in both, the cookies and spreads category. Household penetration for the Biscoff cookie has steadily expanded in recent years, and now stands at 9%. Significant growth was also realized again in the U.S. with BEAR. Our largest consumer markets continued to increase in imports. You can see this in the overview here on this slide, an overview that shows the revenue distribution by country. The U.K. remains our largest market, closely followed by the U.S. Other major consumer markets, including many European markets, China and Canada, are also gaining share. Within the remaining 19%, several smaller but high potential markets are emerging. Let's now go into more details about Biscoff. Biscoff realizes a 10-year average growth of 15%. The most important growth engine of Lotus Bakeries in absolute value of the last decennial. We have reached with Biscoff again, a lot of milestones and we will go into more detail on some of those in the following slides. The launch of spreads was almost 20 years ago, namely in 2008. You can see the interesting evolution of our pack design over the years. In '23, the brand named Biscoff became prominent on the pack. And now we take the next step, and we will move from a generic shape jar to our own design. [Presentation] Jan Marcel Matthieu Boone: The new jar makes the perfect reference to our Biscoff cookie with the embossment linking into our iconic cookie. And you can see the new Biscoff spreads lined up next to other global spread brands. And now it's our goal to make this Biscoff jar also iconic. Here you can see that our Biscoff brand. Here, you can see our Biscoff brand identity over the years. In 2018, we created the red banner on the packaging design. And in '23, we placed Biscoff front and center on the packaging as part of a shift towards a unified global brand identity. And we are ready to take the final step. In '25, we introduced the Biscoff engraving on the cookies, replacing the long-standing Lotus engraving. This change completes more than a decade of brand evolution, and ensures us 1 consistent visual identity and tone of voice. The letter fonts on the cookie is aligned to our Biscoff logo connecting the Fs to ensure readability. The new engraving will be introduced across the entire range, including the original cookie and the sandwich cookie, as you can see here. Implementation began late '25 in the U.S. and India, followed by a global rollout in '26. And now an update on the partnerships. One of the highlights '25 is, for sure the launch of Biscoff cookie in India. Towards the end of '25 an unprecedented nationwide launch campaign was rollouts, rapidly building distribution in more than 300,000 stores in less than 4 weeks. Sales conferences were organized across 15 key cities to inform and energize among the sales teams across the country. This allowed us to reach 10,000 salespeople in all parts of the country. A wide range of impactful marketing initiatives was deployed across the country. The main focus was on the unique product taste. [Presentation] Jan Marcel Matthieu Boone: Painting the towns red with Biscoff billboards across top cities. Social and influencer buzz delivering more than 150 million views. Also a nationwide and broadly covered press conference was organized. And of course, impactful in-market activation in all channels, both modern trade and traditional trade. Traditional trades includes thousands of small shops, as you can see on the slides. At '25, we successfully launched Biscoff with Cadbury, Milka and Cote d'Or. And Mondelez is working on some more exciting innovations that will come soon on the markets. The Froneri led Biscoff ice cream launches will start in '26 this year, and the U.K. and later on in European countries. Following extensive work throughout '25 to define the new assortments and develop new product innovations. This slide shows the different concepts that have been developed. You can see the sticks, the pints and the new sandwich concepts. And the sandwich concept is ice cream in between 2 original Biscoff cookies. In recent years, Lotus Bakeries has invested in a new greenfield production facility in Chonburi in Thailand to support its growth ambitions in the Asia Pacific region. We have now 4 Biscoff plants, including India, on 3 continents. By the end of '25, the first cookies produced in Chonburi have been delivered to the customers. Plant is expected to be fully completed and operational by the end of the first semester in '26 at the latest, including capability of spread production and in-house bottling of spread jars. You can see here a drone picture of the current Chonburi plants. On the left of the current building, you can see that the plot of land still allows for significant future expansion. Mid '25, a new investment in spread production and bottling was also commissioned at the plant in Mebane U.S. Local sourcing and production of Biscoff spreads in the U.S. will reduce our ecological impact, lower import duties and accelerate our logistical flow. Our ambition with Natural Foods is clear. We want to become a global leader in better-for-you snacking segments. And in '25, we have made great steps again. Lotus Natural Foods was the fastest-growing pillar of the group with 17%. It is now a EUR 300 million business. And this is not a one-off because since we entered the better-for-use snacking segment in 2015. Our 10-year average growth has been that same 17%. With Natural Foods, we reached several milestones in '25, and we will go more into detail on some of those in the following slides. An important driver of growth in recent years for those Natural Foods is the successful development and introduction of new innovations. Other brand, BEAR brands, the fruit splits are a perfect example of an innovation that was introduced in recent years. The fruit splits are performing very strongly next to the original BEAR fruit rolls. In both key markets for BEAR, the U.K. and the U.S., the splits rotates in the top quartile, at most retailers. Seasonal activation strengthened brand's visibility and consumer engagements. Alongside BEAR's strong overall performance, the brand successfully launched nationwide Halloween Edition featuring a single wrapped strawberry fruit roll and themes cards with the BEAR mascots. Also under the TREK brands, we launched 1 of the most impactful innovation of recent years, the TREK Protein Flapjack with Biscoff. And this TREK Protein Flapjack with Biscoff is a vegan protein bar layered with smooth Biscoff spreads. This innovation created a strong halo effect. While consumers were introduced to the iconic Biscoff of taste while Biscoff brands encouraged trial and visibility for TREK, strengthening relevance and appeal for both brands. In '25 Lotus Bakeries entered into partnerships with RunThrough in the U.K. and with Golazo in Belgium, the Netherlands and France. We will be a key partner at running events reaching over 900,000 runners annually and offering a strong opportunity to further build the visibility and relevance for -- of TREK and Nakd brands. So this concludes my part of the presentation. And now I will hand over to Mike, who will present the financials. Mike Cuvelier: Thank you, Jan. On the financials. In '25, we delivered another strong set of annual results, powered by an in-sync flywheel of sales profitability, cash flow and continued reductions in net debt. You see that revenue is up by 10%. Underlying EBITDA is up by 12%. Free cash flow before expansion CapEx is up by 20%. All of which make it possible to invest EUR 240 million in the past 2 years and at the same time, reduce the net financial debt further to 0.25x underlying EBITDA. The strong performance of '25 is also reflected in a proposed increase of the dividend with EUR 14 per share. This slide shows the yearly volume growth in percentage on the left and in millions of euro over the past years on the right. The reported revenue growth of 10% in '25 is primarily driven by continued robust volume growth of 9.5% or more than EUR 115 million. This is the darker bar in the graph. Before exclusion of the Biscoff ice cream sales of the second semester, normalized volume growth is actually higher at 10.4% or close to EUR 130 million. This is the bar on the right of the graph. And you can see this volume in '25 was outstanding and comes on top of a record volume growth already realized in 2024 of 14% and EUR 150 million. Over the past 5 years, underlying EBITDA has grown faster than sales. And in 2025, underlying EBITDA reached again the 20% of sales level matching the profitability level we delivered also in 2021. Our partnerships with Mondelez further enhance the group's margin profile. Underlying EBIT and underlying EBITDA grew by more than 12%, as you can see, outperforming the top line growth of 10%. This demonstrates the solid underlying quality of earnings. Strong volume growth, combined with disciplined pricing and margin management, continue to support expansion of profitability and cash flow. Our Biscoff plants in Lembeke and Mebane, together with the Bar factory in Wolseley, operated at high occupancy levels throughout the year. And towards the end of 2025, our new plant in Thailand became operational. The annualized depreciation in '26 for Thailand is expected to add around 0.5% on sales. The volume growth and operating leverage is being reinvested in strengthening our commercial organizations, expanding marketing initiatives to build brand awareness and penetration and further increasing production capacity. The nonunderlying items of EUR 4.8 million relate mainly to the start-up cash costs for the plant in Thailand before production commercially goes live. The financial results of EUR 2.4 million consists of interest expenses, net of cash deposit income, bank charges and a negative exchange rate impact from the revaluation of balance sheet positions in foreign currencies. The tax expense amounts to almost EUR 53 million and remains as a percentage profit before tax in line with prior year at 23.5%. Underlying net result amounts to EUR 177 million or 13.1% on revenue. On this slide, you can see our investment program over the last 5 years. We invested more than EUR 500 million since 2021 in total CapEx and more than EUR 430 million in expansion CapEx alone. In 2025, we invested EUR 120 million similar to the 2024 number, and the majority of this budget goes to the plant in Thailand. Maintenance expense remains well under control and also remains below 1.5% of sales in 2025. The CapEx forecast for '26 and '27 combined stands at EUR 250 million, and is slightly above the EUR 240 million over the last 2 years, '24 and '25. Cash flow delivery was once again very strong in the second half of the year, with cash conversion before expansion CapEx well above 90%, we were able to absorb more than EUR 100 million of expansion CapEx and still reduce net financial debt further. Supporting drivers of cash conversion remain control on working capital and maintenance CapEx. Net financial debt is historically low at 0.25x underlying EBITDA. The sustained strong cash flow delivery over the recent years and the successful exits by FF2032 of the participation in The Good Crisp Company are the drivers in 2025. And I have to repeat myself, this balance sheet, again, is stronger than ever. Increased long-term investments, reaching the EUR 1 billion mark alongside increased equity. Net working capital remains stable and the reported net financial debt further reduces. On this slide, the reported net financial debt of EUR 89 million includes EUR 21 million of debt to be expressed by applying the IFRS 16 standard about leases. The evolution of underlying earnings per share shows a CAGR of 17.1% over the recent 5 years. and is actually outpacing the underlying EBITDA evolution we saw in 1 of the previous slides. And then to end the presentation with another highlight of 2025 Lotus Bakeries has reached the status of dividend aristocrat with 25 consecutive years of dividend growth and proposing a dividend this year of EUR 90 per share. This concludes the presentations. We will now open the call for questions. Mike Cuvelier: And we have the first question of Alexander Craeymeersch of Kepler Cheuvreux. Alexander Craeymeersch: Thank you. Yes. So the first question, I would ask 2 questions. And congratulations on the good set of results first. So the first question would be, you mentioned at the beginning of the year that you could have only a max volume growth of 10% over full year 2025 in Biscoff and you mentioned also that there was going to be a high base in H2. Of course, at the H1, you already mentioned that there was the new plant in Thailand opening but now we show in Biscoff 15% growth half-on-half. And if you compare that, because in the first half of the year, it was only 1% growth half-on-half. I was just wondering now can we also expect that 15% growth to also be present in H1 next year because, of course, there was little room for growth supposedly, but now apparently, that was well overshoot. So that was the first question. The question -- the second question I would have would be on Capex. I was just wondering why CapEx landed a bit on the lower end in H2? And how much capacity would be coming free in 2026? That would be my second question. Jan Marcel Matthieu Boone: Thank you, Alexander, for the questions and also for the congratulations, so thank you. Regarding your first question, indeed in '25, we gave some guidance in respect of capacity related to Biscoff and in '26, there is not. The demand will be leading and we had indeed a very good, very strong second semester and the 15% growth of Biscoff is a bit exaggerated. It's more like-for-like almost 13% in the second semester that we grew with Biscoff. But the demand will be leading in '26, we have been investing in increased capacity, mainly through our plant in Thailand, and that plant will be producing for Asia and Australia and New Zealand. So the capacity is there to grow, to grow Biscoff in '26. In relation to the CapEx number, we have shown an outlook for '26-'27. So about EUR 250 million will be reserved for increasing the capacity in our different factories. That includes our Biscoff factories but also our factory in South Africa for Natural Foods products. And sometimes the risk between H1 and H2, a difference in cash out, but we can be assured in H2. We did work quite hard to get the plants up and running in Thailand. We are extremely happy with how the team performed -- our operations team performed in Thailand. They -- we did not have any significant setbacks. And that's why we made a clear statement in our press release that at the latest by end of the first semester we will be up and running with all our lines. Mike Cuvelier: The next question, Kris Kippers, Degroof Petercam. Kris Kippers: So yes, indeed, also on my side, excellent second half, so congrats on that. My question is more on the comment made in the press release on the first page also on the profile the group. Looking forward and looking at your cost base, which remain indeed well under control in the second half, given the fact that you have some scale increase as a group, you have indeed Mondelez, which is helping. On the other hand, there is, of course, the effect of Thailand which might not be as profitable as the Belgium plant or even Mebane in the short term. But what seems to be a realistic margin assumption going forward because, indeed, it could be that 21% in a couple of years is feasible? Or would it imply again what you commented in the past that you aim for, let's say, more marketing effect in order to focus on the long-term growth, it will be helpful to give some insight on that because it does see indeed that your margin uptick in second half could be structural. That's my main question, actually. Jan Marcel Matthieu Boone: Thank you, Kris. Yes, indeed, we are happy that the EBITDA margin was higher than the 20%. So we are now at 20.2%. There are a couple of elements that affected that percentage. First of all, the ice cream business we took out in the nonunderlying line. So not only the top line, but the whole P&L of the ice cream business in the second half is not included in the underlying results. So as you know, our ice cream business was not the most profitable one. So that helps to increase that profitability percentage. Looking into the future, a couple of elements will play. First of all, we will have the Thailand plant as from the 1st of January, fully consolidated into the results, which also means full overheads will be in the costs. And so it's clear that a new factory being integrated in the profit and loss has its overhead costs. And once it's fully in the P&L and you add lines, it's more profitable. So if we add lines in Lembeke and the profitability level of these additional lines is higher than implementing and your P&L, a full plant. So that's the effect we will see in '26. And also depreciation will be a bit higher, about 0.5% impact on our depreciation. On the other hand, the Mondelez partnership will play positively on the EBITDA and percentages as well, India as the corporation on ice cream and chocolate will play positive side percentage wise. So to summarize it, we think for '26 the EBIT and EBITDA percentages will be more or less in line with what we have communicated today in relation to '25. Kris Kippers: Okay. Very clear. And then just one follow-up, coming back on the CapEx program, EUR 250 million, somewhat north of what we anticipated, I presume. To what extent is this ample? And what kind of capacity expansion would this provide you? Could you share more details on what it entails? Jan Marcel Matthieu Boone: I said it's linked to our Biscoff factories and also our factory in South Africa. We -- the calculation made is, of course, based on what we expect in relation to demand to coming years. We don't like to build empty factories. We're not going to invest already for 30%, 40% additional capacity. We'd like to be quite close to the market. And the factories, the 3 Biscoff factories specifically, they are close to -- is very close to the full capacity. '26 will give us room for growth. But we're not going to be overinvesting in capacity sort of EUR 250 million, and it will not give us 30% to 40% additional capacity. I don't know if that gives you an idea. Mike Cuvelier: Next question, Maxime Stranart from ING Bank. Maxime Stranart: Can you hear me? Jan Marcel Matthieu Boone: Yes. Maxime Stranart: Correct. So first of all, looking at organic growth coming back on that. If I may, excluding the impact, would imply the organic growth is above 14% in H2 with volume growth of almost 13%. If I look at the number you just communicated, I just want to crosscheck with you that's basically the correct assumption to take? And is it a level you see sustainable in H1 that would be the first question on my slide. And secondly, digging deeper into India. Could you elaborate a bit on what's your view on what the growth could be in '26. That would be all for me. Jan Marcel Matthieu Boone: Thank you, Maxime. Indeed, in the second half of the year, we increased like-for-like. And that means the FX like-for-like, also the ice cream was indeed 14% of organic growth, which is exceptional. We are delighted with the 14% and if you see it in the history of the last 5 to 10 years and 14% of organic growth for the group is exceptional. What do we expect H1 '26. We are confident to further grow. But as I said, 40% is exceptional. And we also have the headwinds of the foreign exchange effects based on the currencies of today, pound-wise, dollar-wise, we have already, and we have to start with minus 2.5%. Things can change in a good way or in an versus way. You never know, but we start with minus 2.5%. And -- but if we purely look at the like-for-like growth, 14% is extremely high. And that's why both Mike and I are sitting here with a big smile because of the fantastic results in the second half. And then in respect of India. And then I have to quote my CEO colleague of Mondelez. He said, "Okay, I want to have at least USD 100 million sales in 5 years in India." And for us, it's clearly strategically a very good partnership. We have been in India for 20 years, even more, and we could never realize a substantial sales we would never become a real brand in India. And I think through this partnership, we will be, if we see the resources that Mondelez have used now to launch the marketing efforts and especially also the way they operate. And the fast way they can get the Biscoff products in all these stores more than 300,000 stores that's really truly impressive. And I'm sure they will create a brand. They will create Biscoff as a brand also for the Indian population. And that's our ultimate goal. And I want to become a global brand and if you cannot become a brand in India, you cannot say generally, we are a global brand. So I'm happy that we can work together with Mondelez on realizing that. Mike Cuvelier: Next question is Guy Sips from KBC Securities. Guy Sips: I have 2 questions. First question is on the ramp-up and the packaging cost evolution. We see some ease in the raw mat. Can you give us some color if that could give some tailwinds from that side going forward? And the second is coming back on the CapEx, do you intend to allocate some additional CapEx to the healthy snacking activities. Jan Marcel Matthieu Boone: Thank you, Guy. In respect of packaging raw materials and other costs. What we do is, we have the whole budget around and also calculating the cost prices and the different cost elements of our products. That's an exercise we do very meticulously. And that gives us the ability to communicate also our prices to our customers before year-end. We also try to hedge as much as possible of these costs. So we have a cash flow predictability. For '26, price increases will be moderate. So if you look at the growth of next year and hopefully, the growth of next year, it will be based on volume. So it will be very -- price effects will be very limited. In respect of capital expenditures for healthy snacking. Indeed, BEAR is doing really well. So we're going to invest in our South African plant and also for Nakd that we also produce in the same plant, we will add capacity over there. So partly is allocated for the plant in Wolseley. Mike Cuvelier: Next question, Jeremy Kincaid from Van Lanschot Kempen. Jeremy Kincaid: One more for me on Capex, are you able to split out how much of the CapEx guidance will be to the Biscoff brand and to the Natural Foods brand? And then my second question is just on your balance sheet. Obviously, you called out it's very strong. Does that mean going forward, we could expect higher cash distributions to shareholders? Or do you have a target leverage ratio that you're working towards? And then just finally on The Good Chip Company or Crisp Company, are you able to disclose how much you sold that for? I'm sorry if you said that at the beginning of the call, I was having technical issues. Jan Marcel Matthieu Boone: Thank you, Jeremy. In respect of CapEx, the majority should be allocated to Biscoff and the exact number, we will not disclose, but it's the majority to Biscoff. And we do have a strong balance sheet. We have increased the dividend pay out slightly I think if you look at the underlying profit of last year and our payout ratio, which was a bit below 40% and now it's a bit above 40% because we have indeed a very strong balance sheet with low leveraging. So happy to be dividend aristocrats. So we're official aristocrats. That does not mean that we're going to stop working. So -- but the view on our dividend has not changed. I think the dividend payout, we have no plans to really dramatically change the payout ratio. And -- but the balance sheet enables us to invest in capacity. So we will invest EUR 0.5 billion in the next 2 years. And that will be -- and that helps if you have a strong balance sheet. We do look at M&A. We do look at external growth. But it's not something that we really need today. As you can see, our organic growth is very strong, as well for Natural Foods as for Biscoff. The organization is also built and organized to really focus on Biscoff, focused on Natural Foods and also the Local Heroes. So an external growth and acquisition could be interesting. And we have the balance sheet for it, but it really has to be a perfect match. And it's not something that we really need in the short term. We love the organic growth, it's the most profitable way to grow, and -- we don't -- we are not nervous by the fact that we have almost no debt anymore. And in respect of the funds, FF2032. What we've seen is that the most targets are in the U.S. we invest in scale-up companies, not in seed. We're not investing in not seed money, but more in scale-up companies. And we like companies that we think that in the mid long term, they can reach EUR 75 million to EUR 100 million. And we've seen also out of experience that most of these targets are in the U.S. And so we have our team now in San Francisco mostly looking at U.S. targets. And a The Good Crisp Company, a very nice company in the sense that they have a very good product. They did grow significantly the last years and PearlRock private company that acquired and we agreed not to disclose any detailed information. But we did create some surplus value for the funds. Mike Cuvelier: We have time for 1 more question -- a follow-up question from Maxime Stranart of ING. Maxime Stranart: [indiscernible] that you're still looking at a growth target and also [indiscernible] looking at M&A. So any element in the portfolio; that you would add any category you feel would be a great fit as a group into. Jan Marcel Matthieu Boone: I think I more or less understood your question because the line is not perfect. But I understood that your question is, do we want to invest in other categories. I think looking at M&A, preferably, it will be either in the healthy snack and natural foods fields, I think that's what we focus on in our search. On the other hand, also in traditional biscuits and bakery, could be interesting, certainly in respect of getting more scale in certain countries. Today, we're not eagerly seeking in other categories and the categories we are in today. Mike Cuvelier: Thank you, Maxime. Just 1 last question, Antoine Prevot from Bank of America. Antoine Prevot: Can you hear me? Mike Cuvelier: Yes, yes. Antoine Prevot: Perfect. Yes. 2 quick questions. So first 1 on the U.S. So 9% household penetration, see good development there. any bit of an update on what your target a bit there in the U.S. household penetration over the midterm? And just a very quick 1 on India in terms of like -- I mean, strong launch, as you said and pointed out. I mean in terms of spending on A&P and so on. I mean how is it split between you and Mondelez? Is it them taking care of everything? Or do you also need to contribute a bit? Jan Marcel Matthieu Boone: Thank you for your question. Indeed, the U.S. has been evolving very positively. We are now at 9% of household penetration and our distribution on store level is -- it's 80% more or less. So evolving really positively. What are our ambitions there. Of course, we would like to cross the bridge of the 10% household penetration in the short term in the U.S. Today, the U.S. consumers are not that positive. We have not seen that in our figures for '25. And hopefully, we will not see that in our figures in '26. Today, there are no indications that the sales would be less good. So we still have a positive vibe coming from the U.S. And it's -- it's 1 of our, maybe our most strategic markets for Biscoff. We have been investing quite a lot in the U.S. in relation to marketing above the line. Investments have been started in '24, evaluated positively, so we are extending it in '25 and also probably in '26. So we keep on spending, supporting our brands to marketing. I think another important aspect is we have our factory in the U.S. producing for the U.S. Now also we have added to the spread line. And the good news is that we had a vision to buy enough land in North Carolina on that side. So we can still extend capacity on the same site because it takes quite some time to create know-how and factory. And now in the U.S., quality of the cookies are very good and are fully on par with the Lembeke ones. So it's good that we can extend on the same spots in Maiden, North Carolina. So we are ready in the U.S. to grow. Fantastic year '25. In general, consumers are but more hesitant, but today, we don't see that in our figures. India, indeed, a great start. And our contribution is, of course, that we look at the quality of the cookie. We decide on the marketing program together, and we do have a contribution also in the marketing support and the majority of the investments are being done by Mondelez, but we also contribute a bit to the marketing efforts. And like I said, it looks very positive but we're only there for 2 months now. But the start has been very promising and very proud to see our products and so many stores to see the positive pipe in India. Mike Cuvelier: Okay. Thank you for your good questions, interesting questions. Jan Marcel Matthieu Boone: Yes. Also from my side, thank you. We will close the call here. But of course, if you have any follow-up questions, you know where to also find me or find us in the next few days and weeks. Thank you very much.
Operator: Good afternoon, and welcome to Garanti BBVA's 2025 Financial Results and 2026 Operating Plan Guidance Webcast. Thank you for joining us today. Presenting on behalf of Garanti BBVA, we have our CEO, Mr. Mahmut Akten; our CFO, Mr. Atil Ozus; and our Head of Investor Relations, Ms. Ceyda Akinc?. [Operator Instructions] With that, I now would like to hand over to management for their presentation. Ceyda Akinc: Hello everyone, and thank you for joining us. We are excited to be with you on another earnings call. Before getting into our financial performance details, let's as usual, go over the broader macroeconomic environment. Turkish economy grew by 1% Q-on-Q in the third quarter and for the fourth quarter, we now cast a slightly positive quarterly growth. Therefore, parallel to our previous expectations, we maintain our GDP forecasts as 3.7% in '25 and 4% in '26, consistent with the still-resilient activity outlook. In terms of inflation and monetary policy, seasonally adjusted inflation improved into year-end, however, January CPI figure reinforces our view that the pace of monetary easing will become increasingly data-dependent and points to a slower pace of rate cuts compared to consensus. In this regard, we maintain our call of 25% inflation and 32% policy rate for 2026-year-end. In terms of current account deficit, it remains broadly manageable, although the trend has deteriorated, reflecting domestic demand dynamics and the gold channel. We expect the current account deficit to GDP to be around 1.5-2% range. The outlook remains sensitive to the Eurozone growth and Brent oil dynamics. In terms of budget deficit, we expect budget deficit to GDP to remain around 3.5%. led by tighter expenditures control and strong revenue generation. Now moving into our financials, I'll start with the headline figures. In '25 once again, we delivered a strong track record of achieving results in line with with our commitments. Our key P&L metrics came in fully consistent with our guidance, and cumulative net income reached TRY 111 billion, corresponding to 21% year-on-year growth and a 29% return on equity. In the fourth quarter, our bottom line was impacted by tax-regulation-related effects. Excluding this one-off impact, our ROE would have been around 30%, which was fully in line with our guidance. Despite operating with the lowest ratio, we continued to deliver an ROE above the sector average. As always, we maintained our focus on capital-generative growth, which is clearly reflected in our sector-leading CET1, Common Equity Tier 1 ratio. This earnings outperformance was once again driven by core banking revenues-and with that, let me move on to page 7. We have now delivered growth in core banking revenues for eight consecutive quarters. In the fourth quarter, core banking revenues grew by 11% Q-on-Q, driven mainly by higher net interest income, which was supported by a declining funding cost environment. Trading income declined Q-on-Q during the quarter, we repositioned our TL securities portfolio and we reduced our exposure to securities with relatively lower yields. Net fees also remained resilient, registered 5% quarterly growth with the increasing contribution from money transfer and lending-related fees. As a result, our core banking revenues reached TRY 300 billion, which suggests the highest level among peers. A big part of this success stems from our asset mix-now moving into Slide 8. Our asset growth continued to be fueled by higher-yielding customer driven sources namely loans. Performing loans share in assets further increased to 58% and lending growth was across the board. I will touch upon this on the next slide. In securities, I would like to highlight that we had a favorable securities mix with lower CPI and increase foreign currency share. During the year, we had strategic additions to foreign currency and TL fixed rate securities. Moving into Slide 9 our TL loan portfolio reached TRY 1.7 trillion, while we continued to maintain a well-balanced mix between consumer and business banking loans. In the fourth quarter, we sustained our quarterly growth pace of 10% in TL loans, bringing full-year growth to 45%, which is above our operating plan guidance. Throughout the year, we further strengthened our long-standing leadership in TL loans, with market share gains across all retail products and SME loans. As we grow, we remain highly disciplined and continue to keep a close focus on asset quality and with that, let's look at the evolution of our asset quality. In the third quarter, consumer and credit card related flow to Stage-2 restructured and SICR portfolio continued, yet the share of Stage-2 within gross loan remained flat at around 10%. Our Stage-2 coverage ratio declined due to improved repayment performance of some individual-assessed firms. While our stage-2 loans coverage is now 9%, if we look at the TL and foreign currency breakdown, our foreign currency Stage-2 loans coverage remains healthy at 16%. In terms of NPL movements, Now, let's walk through the evolution of our NPLs; our NPL ratio increased modestly to 3.1% in line with expectations, and we are witnessing the natural consequence of robust consumer and credit card growth that sector registered in the last couple years. Retail and credit card portfolio still accounted for 70% of net NPL flows. If we move on to the net cost of risk, on page 12. Net provisions increased in 4Q, reflecting the absence of the exceptional provision reversals recorded in previous quarters. On a cumulative basis, cost of risk closed the year better than the guidance with the impact of large-ticket provision reversals, which are not expected to repeat in this year, as I will explain in more detail on the guidance slide. Now moving to the other side of the balance sheet, how we are funding the balance sheet growth? Not only in assets but also in funding, we rely on customer-driven sources. Total customer deposits exceeded TRY 3 trillion and now make up 69% of total assets and remain TL heavy. This quarter, in TL deposits, we gained a notable market share and our TL deposit market share increased to 21% among private peers. On foreign currency side, deposits increased by 4%. Half of that growth was due to gold price increase related parity impact. The rest can be explained by the flow from maturing KKM deposits. Growing demand deposit base, which is one of the key pillar of our margin performance, continued to support deposit growth. Demand deposits currently make up 41% of total deposits. Our diversified and liquid funding mix is also backbone of our success. With two new transactions successfully completed in 2025, total volume of subordinated bond issuances over the past two years reached $2.45 billion, making us the bank with the largest subordinated bond issuance in the recent years. We achieved another major milestone by issuing Turkiye's first Biodiversity and Blue-Themed Bond. We also secured a syndicated loan from international markets with diversified maturities. This year, we introduced a 3-year tranche for the first time, and a 2-year tranche for the first time since 2017. Putting all of this together, our total external debt currently stands at $9.8 billion, of which $3.5 billion is short term. Against this, we maintain a comfortable and strong foreign-currency liquidity buffer of $7.1 billion. Our active funding management is also visible in net interest income, on page 15, in the fourth quarter, our net interest margin recovered by 60bps with the support of declining deposit costs. On an annual basis, net interest income including swap cost doubled which points to 1.2% annual margin expansion. Our net interest margin reached 5.4%, we continue to have by far the highest net interest margin and net interest income level among major peers and our aim is to preserve this leading position. If we look at the margin component, as shown on bottom-right side of the slide, TL core spread has started to recover as of 4Q, and we expect this recovery to continue throughout 2026. We utilized more swaps in 4Q due to its funding cost advantage relative to TL deposit costs. In terms of CPI linkers' income, CPI rate used in the valuation increased to 32.9%, based on actual inflation data. Therefore, on a quarterly basis, we had positive contribution from CPI linkers' income. However when looking at CPI interest, we should also take into account its funding cost and as of this quarter we have started to share with you the net contribution of CPI Linkers' to net interest margin. In the fourth quarter CPI Linkers' negative contribution is compared to 3Q due to increased income on an annual basis CPI increased net impact to margin was -0.4%. Let's move on the other P&L item fees. Our fee base remains robust, up 50% year-over-year. On an annual basis, payment systems fees were the main driver of the growth. In the fourth quarter, contribution from lending related fees and money transfer fees gained momentum. I would like to highlight that, we are number one in money transfer fees and in both life and non-life insurance fees. We increased our mutual fund market share by 1.3% to 11.6%, which also provided additional support to our fee base. Moving to our operating expenses, our OpExbase grew in line with our operating plan and was up by 67% in 2025. As we have been communicating, we have been investing in customer acquisition through salary promotions. And to enhance customer experience and increase customer penetration, we have been leveraging the power of artificial supports our revenue generation capability. As a result, significant portion of operating expense base is covered by fee income and we have the lowest cost/income ratio. As per our capital strength, In the fourth quarter, our solvency ratios improved with support from strong profitability and Tier-2 issuance we had in October. Our consolidated CET1 realized at 13.1%. Capital adequacy ratio reached 17.5% without BRSA forbearance. The foreign currency sensitivity on capital remains limited, 13bps negative for every 10% depreciation. With TRY 179 billion TL excess capital, we maintain a solid buffer to support our long-term growth strategy. With that, let me now summarize our performance before moving into operating plan. As I mentioned in '25, we sustained our unmatched leadership in earnings generation capability and once again demonstrated a strong track record of achieving results in line with our commitments. Net interest margin performance and cost growth were broadly in line with our operating plan, while fee growth clearly stood out, driven by strong momentum in payment systems and lending-related fees. In fact, in TL loans, our growth outpaced inflation, supported by consumer, credit cards, and SME loans. Net cost of risk performed well better than expectations, benefiting from provision reversals recorded during the year. Now, let me walk you through our operating plan guidance. I will begin with the macro assumptions on the left, as these form the foundation of our planning framework. Our baseline assumes a gradual easing cycle in the policy rate. The pace of monetary easing will become increasingly data-dependent and points to a slower pace of rate cuts in the second half of the year. Inflation will continue to decelerate, closing the year at around 25%. However, given the stickiness in services inflation, we believe CBRT will maintain a sufficiently tight stance, implying ex-post real policy rate of around 6-7 percentage points. Turning to balance sheet growth on the right-hand side, we expect TL loan growth to be in the range of 30-35% foreign currency loan growth at mid-single digit levels. Net cost of risk is expected to normalize, settling in the 2 to 2.5 percent range, reflecting the absence of large-ticket provision reversals and the natural impact of strong growth in consumer and credit cards. Regarding margins, we project net interest margin expansion of around 75 basis points, on top of its highest level. I would like to highlight that the extent of this improvement will largely depend on the pace of rate cuts and the evolution of macro-prudential measures. As I mentioned earlier, our assumption of 32% year-end policy rate represents the upper end of market expectations. We deliberately adopted a conservative approach during the budgeting process in order to prepare the balance sheet for funding costs remaining above the policy rate, particularly on the deposit side. On fees, we expect growth of 30-35%, as a result of strategic investments, we expect OpEx growth to exceed average inflation. And that said, on a bank-only basis, we expect approximately 80-85% of the OpEx base to be covered by fee income. Finally, bringing all these elements together, we are targeting mid-single digit positive real ROE. Since 2018, real ROE has remained negative; however, in '26, we expect this to turn positive, supported by declining policy rates. This concludes my presentation. Thank you for your listening. Now, we can take your questions. Operator: [Operator Instructions] Our first question comes from David Taranto, Bank of America. David Taranto: The first question is on costs. Your cost growth has been running above the sector for some time, yet your revenue margins have also been higher. So this hasn't weighed on your relative profitability. But for this year, guidance again suggests cost growth at the higher end of the sector. So could you elaborate on the key cost drivers for this year? Should we view this as front-loaded investment ahead of what will hopefully be a lower inflation environment? Or are these increases more structural? And looking ahead, should we expect Garanti's cost growth to move closer to or maybe potentially below the sector levels in the future years? The second question is on fees. Your fee growth guidance appears broadly in line with the volume growth expectations. Could you elaborate on your guidance here? I assume we'll see a meaningful deceleration in payment-related fees. And in which segments do you expect to see stronger growth this year? And is there a meaningful seasonality that we should be aware of in terms of fees? And the last question is on margins. Your year-end policy rate expectations of 32% seems slightly above the market review. How would your NIM expectations change if the policy rates were closer to 30% instead? And could you also share your expectations regarding the deposit rates under your base scenario? Do you assume deposit beta to improve at some point this year? Mahmut Akten: David, thank you for all the good questions. First of all, on the cost growth, as you noticed, yes, we have a higher than inflation cost growth for basically several reasons, but primarily one on non-HR, one on HR. In Turkey, for a while now, most banks and institutions makes 2 salary increases every year. And then therefore, second increase, which is July to December, is not fully reflected in the prior year. So when you make the increase in January, you also have further increase from the base. So there is a bit of higher than inflation increase in the cost base. But as inflation comes down, the impact of that increase in the second half of the year will be lower, as you can imagine. That's number one. But more important increase actually is related to non-HR. And within non-HR, we internally, we look at this differently, especially customer acquisition cost is a different animal. It's an investment for the future. And in Turkey, especially payroll or pension, we pay promotion as you are aware of, and that's every 3 years. So you get 3 years of inflation within those numbers as you replace 1/3 or slightly more than that of your acquisition cost suddenly with 3 years inflation. So those numbers are a bit investment for the future. We expect as we go forward as inflation comes down, and this will affect also this payroll acquisition cost as well that 3 years inflation will come down. The impact to the extent is reflected on cost-to-income ratio. But we expect that cost-to-income ratio slow down or reduce down to 40% going forward. That's our expectation. And we have been highly investing in the AI within the BBA framework, and we start to see impact in efficiency, as you will see in the coming year. That's number one. Number two, fee growth. Again, as you clearly and correctly point out, as interest rate and inflation comes down, some of the payment commissions will come down properly. But we are actually offsetting that with both loan commissions, a bit of regulation also positive effect on the FX loans. So that has happened last week. But more importantly, we have investment in especially insurance type of commission-generating products and wealth management. We are expecting that to be offsetting the decrease in payment commission. So we expect a similar pattern in terms of ratio going forward as well. That will be the positive side. And the third on deposit rates. Again, I think if you look at the third quarter and fourth quarter, even though the policy rate significantly reduced, we didn't -- we were not able to reflect all of it to the deposit cost up until very recently. That's part of it, a tight monetary policy and data-driven Central Bank policy, which came with certain regulatory measures on the banks and one of which that is very important and relevant was related to deposit rate. We had 4 weeks windows to have a certain Turkish lira total deposit ratio, and that has been recently extended to 8 weeks. That has been a big plus because every 4 weeks trying to hit the ratio, it creates this synthetic competition. And despite policy rate reduction, we are not able to reflect 100% of that reduction in deposit funding. But a few weeks ago, that time break has been extended from 4 weeks to 8 weeks. That has been clearly a positive news. And then also the -- we had some level of challenge with the gold prices, especially after, I think, starting October, right? As gold increases, the total Turkish lira deposit ratio came down. That also put certain pressure on deposit ratios or deposit rates. But we start to see with this 8 weeks interval and a bit of stability now this week on the gold prices, we see that more stability and better correction in the deposit ratios and deposit interest rate. It's getting very close to overnight repo rate, which is a good news for us. So we expect further improvement in deposit rates going forward in the next months. Operator: Our next question comes from Ashwath from Goldman Sachs. Ashwath PT: I have a few questions. The first one being on your NIM dynamics. You expect 75 basis points of expansion. Would you mind breaking that up between the impact from lower CPI and the impact on core spreads? And in relation to the topic on NIMs, when do you expect to see NIMs peak? Would that be in the second half of the year? My second question would be on the dollar exposures across your balance sheet. From what I can see, your loans are around 25% to 27% in terms of U.S. foreign currency exposure, your deposits a bit higher in terms of 37%. Would you mind also telling me how much of your equity is also held in dollars or in foreign currency terms? The third question I had was around the ROE. It's good that you're guiding for real ROEs to be in the mid-single digits. My question here would be more on your expectations on your long term. Where do you think this real ROE figure would settle in an environment where there's inflation settling below or at 20% or below. And in that scenario, where do you think currency's NIMs would be at and also its normalized level of ROE? Mahmut Akten: Okay. Let's try to answer all the questions. One of them was related to 75 bps improvement, if I took my notes right. We see a further improvement in loan-to-deposit margin, 150 bps actually, but reverse repo and swap is additional 0.7%. However, CPI income this year will be with the inflation coming down, minus 60 bps and the reserve remuneration will be another minus 70 bps as well. That's the reason we are conservatively forecasting 75 bps improvement. And regarding the improvement in NIM and spread, we expect towards the end of second quarter, we'll probably see the highest level this year as well as we start to see a slowdown in the policy rate reduction starting third quarter, and we'll see further emergence between the reduction in loans as well as spreads. There was a second question about equity. Can you? Ceyda Akinc: Yes, we will get back to you regarding the second question. Mahmut Akten: On the dollarization. Okay. And the third question was related to ROE, right? Atil, would you like to take that? Kemal Ozus: Yes. In terms of return on equity, our guidance for 2026 is a real return on equity improvement. Over the long term, when we assume that it was your question, normalized ROE over long term, when we assume that inflation will limit teens, like, I mean, 15% to 20% level. We expect a return on equity -- real return on equity above inflation around 8% to 10% could be our sustained long-term return on equity. Mahmut Akten: And I think there was a question also -- a follow-up question on the -- what's a stable NIM for long term. We expect that to be around 500 bps as well. We have been always relatively high. But conservatively, we think something around 500 bps will be a relatively good margin as we increase our customer base and loan book. Does that answer your question? Ashwath PT: But just wanted to clarify regarding the numbers in terms of expansions. You said 150 basis points in terms of core spreads, 60 negative from the CPI, 60 from the reserve requirements. What was the other 70 you mentioned? Ceyda Akinc: The rest was the -- between the repo and swap funding costs. So the other funding instruments. Mahmut Akten: That's also positive. Ceyda Akinc: Yes, because swap costs will also come down in line with the declining funding costs. So therefore, we are projecting to get a positive from swaps and repos. Mahmut Akten: And we are already seeing it actually in the swap markets... Operator: It seems like we don't have any more audio questions. So moving on to the written ones a bit. First of all, Valentina asks for some color on how loan and deposit spreads have been developing so far in first quarter and what we see as the main risk to our NIM guidance? Mahmut Akten: Valentina, we are seeing actually with this 4 weeks to 8 weeks conversion, we start to see a positive improvement in cost of deposits actually despite some volatility in the MTR market. So we might be even a bit conservative in first quarter, but we'll see an improvement to almost 50 bps in the first quarter, let alone. So it's a positive improvement, and we start to see it this week further. To be honest, there is a certain level of regulation that has been published last week related, for instance, growth in overdraft, which is highly profitable product as well as credit card. But not everything has been applied so far yet. This might be a bit more limitation on credit growth, especially on the most profitable one on the consumer side. And then there has been a bit of limitations on FX loans as well, further restriction given the higher inflation. As we point out all of this guidance, Ceyda, especially underlying is everything is data-driven a bit. That's the reason on our guidance, as usual, we are a bit conservative, at least whatever we say we want to deliver at minimum that level. But we see limited downside, but regulatory framework might be always a bit challenging. And then we forecasted even last year in our forecast, we have been a bit above the market in terms of our inflation expectation and policy rate expectation being year-end 25% and 32%. I think we have been the highest in terms of inflation and interest rate perspective. We are more emerging to those numbers. It sounds like based on the January and February data. At least for now, we don't see those are at risk because higher policy rate would definitely challenge us as well in terms of our expectation, but we are not at that point at the moment. Operator: Valentina's second question comes regarding insights on asset quality trends, particularly in the SME and corporate segments. Mahmut Akten: A perfect question. SME and? Operator: Corporate segment... Mahmut Akten: Now in reality, 60%, 70% of our NPL is related to consumer retail segment. There, we are -- we continue to see improvement. On consumer, we see substantial improvement versus a year ago, close to -- in terms of NPL roll rates, more than 40% improvement as well as we see further improvement in credit card, which is the highest NPL product normally. We also see an improvement of 20%, 25%. We see a good January start. And then when it comes to wholesale and SME, wholesale, we had an exceptional year last year. We had a lot of provision release because of the asset sales and collection efforts. This year, we have a bit of -- a bit more of those, but not at the same size. But regular NPL flow in January has been half of what we have seen in terms of NPL inflow of last year. On SME, SME, I think in one of these calls, we have discussed this in the past as well, has been only 13%, 14% of our NPL roles. It has been more like 16%, 17% lately. But when we look at the January as well, our NPL roll rate in SME has been 20% less than the last year. So there is an improvement. And then the recent development regarding to credit guaranteed fund support by the government will be helping on the SME segment specifically for those who are late in their payments will benefit from this credit guaranteed fund. So that will also further help our numbers. And in the third and fourth quarter numbers related to retail, I just want to underline that. Lately, we see a further regulation that helps us to extend the terms for the delayed consumer customers as well. In the third quarter, we restructured quite a bit of them. And then this reason our fourth quarter provision is higher than the third quarter because for those customers who were going to the NPL, we have deferred and restructured and some of them still went into the NPL. But lately, with the regulation last week and then similar to credit guaranteed fund in the retail side, -- the government also -- regulator also permitted us to restructure late credit and credit card and GPL loans for up to 48 months. So it's going to help further to reduce overall provision and NPL flow. And there might be, to an extent, a shift between first quarter and second quarter as well, but overall will help to relieve this. But overall asset quality is getting better, and we have regulator support and government support on both SME and retail customers. Operator: We have a couple of questions on the audio line. So our next question comes from David Taranto. David Taranto: Sorry I have one follow-up. Just wanted to confirm one technical point. Is your mid-single-digit positive real return on equity guidance based on your year-end CPI expectation of 25% or on your average CPI assumption, which I guess is a few percentage point higher. Mahmut Akten: Based on 25%... Operator: Our next audio question comes from Tomasz Noetzel. Can you hear us? Okay. I think he has some problem with the line. Tomasz Noetzel: Can you hear me now? Operator: Yes, we can hear you now. Tomasz Noetzel: Apologies for last time. I just have one clarification and follow-up questions that was asked before. Possibly, I may have missed that when you answered that. But what will be the potential NIM upside should interest rates go further down to, let's say, 28%, not 32% as you guided because that's some market expectation that rates could go down as slow in Turkey this year. How should we think about the NIM upside in that scenario? Thank you for confirming that... Mahmut Akten: Yes. Every 100 bps change in policy rate has -- for the full year, it affects the NIM by 15 bps. Operator: Our next audio question comes from Simon Nellis. Simon Nellis: I think I put these questions through the chat as well. But yes, my first one is on risk costs. So you're guiding for higher risk costs this year. Can you just run us through the key drivers of that? And where do you think risk cost normalizes kind of longer term? And my second question would just be on the effective tax rate. What should we pencil into our numbers this year and next year given the big jump in the fourth quarter and recent regulatory changes there? Mahmut Akten: Yes. Regarding first question, actually, we had a lot of one-off large ticket provision reversal this year. Excluding those, the bank only cost of risk could have been 2.4% this year. But we had all these one-off items that we successfully achieved this year for large ticket provision reversals, mostly related to sales and collection. And our consolidated figure was 2.1%. And regarding next year, we have different products with different rates, but we expect conservatively again between 2% to 2.5% cost of risk. Our credit card cost of risk has been historically as well around 4% for retail, 3% SME 2.5% and wholesale 0.5%. We don't expect that too much to change. But recent regulatory changes will provide further positive news for cost of risk. We have not incorporated those numbers yet. We are just starting on credit guaranteed funds potentially in 2 weeks or so on restructuring on retail, this extra relief on conditions will be starting next week. So there might be some positive news on that, which might get us to be closer to 2% rather than 2.5%. Our normalized cost of risk historically has been around 1.5% to 1.7%. But given the high interest rate environment, it's probably normal to be around 2%. That's our take. And there was a second question. Kemal Ozus: It was about the effective tax rate. Mahmut Akten: Yes. Kemal Ozus: It will be similar to 2025 because already there's a change in the tax law, and it has been reflected in the fourth quarter. So full year, you can consider is full year 2025 is reflecting the new normal, let me say. So you can use 2025 as a proxy for the next year as well. Mahmut Akten: Yes. And Simon, aside from this, I think when we show the numbers, there is always from one quarter to another, there is one-offs. So it's not very easy in banking to normalize all the numbers and make it an apple. But again, quarterly income, especially the fourth quarter doesn't reflect fully the improvement in NIM. One reason was tax rate that has been shown there are only 3 quarters of the tax around TRY 2 billion, but the full impact is TRY 2.7 billion if there wasn't any change in the tax regulation. So that will bring TRY 9 billion to TRY 9.7 billion actually, apple-to-apple, our profitability in the last quarter. And because of the restructuring in the third quarter, there has been a movement of NPL. We saved some of these customers, but the movement also understated the P&L on the fourth quarter and overstated the P&L in the third quarter because of the consumer credit and credit card provisioning. So quarter-by-quarter, if you correct those 2 items, our profitability last quarter would have been TRY 31.7 billion. And on top, we had certain security optimization, things like that. So actually, even though you don't see directly the improvement in NIM in those numbers, if you correct for one-offs, the trend has been positive, and we'll continue to see that in the coming quarters as well. From that perspective, we feel comfortable with the improvements. Simon Nellis: Okay. And -- just on the tax rate, if I calculate it right for the parent bank, you had an effective tax rate of around 22.5%, 23% for 2025. I mean that's still well below the statutory rate, right, which is 30%. Are you sure that effective tax rate will be around that level this year? Kemal Ozus: Yes, around 20%, 25%, you can use because although the tax rule change about the inflation accounting, but there's still some cause inflation accounting treatment of the revaluation of assets, which are bringing some deferred tax asset year-on-year. This is one reason why effective tax rate is below 30%. Mahmut Akten: And also because of subsidies, different tax rates and as well as subsidies income level is different. In some subsidiaries, we have lower tax rate and some subsidies, we have some tax cushion as well. So depending on the performance of all the subsidiaries and our consolidated figure will be still relatively good. Simon Nellis: And do you think that should be sustained further out? Or will the DTA effect fade and the tax rate go higher? Kemal Ozus: It could change depending on the revaluation rate or the inflation rate, let's say, which is interlinked. So when the inflation is lower in the coming years, let's say, mid-teen inflation or devaluation rate, we may see an uptick in the effective tax rate. Operator: Our next audio question comes from Mustafa Kemal Karakose. Mustafa Karakose: My first question is about loan pricing. What should we expect in terms of loan pricing for the next year? We have seen so much ups and downs in loan rates recently. And my second question about spread between policy rate and the deposit rate. How much -- how many spreads do you expect for the next year and beyond? And my third question is around about ROE guidance. Do you assume any mark-to-market gain in your ROE guidance? Because if there will be some mark-to-market gains, your equity base will be higher. Mahmut Akten: Thanks. First of all, loan pricing, as you point out, depending on the product, there has been some volatility on loan pricing. But overall, because of the positive side of the regulation in some sense, given the limits on loan growth, the expected decrease in loan pricing has not been realized, given that we don't have much room to grow in loan because of the caps. Depending on the product, as you said, there has been sometimes ups and downs that's related to 8 weeks window. Sometimes when we get close to the end of the 8 weeks, especially on very digital products, we might have sometimes need to change the pricing to be within the cap. But what is important is the trend in terms of trend the reduction or reduction in the loan prices is below our expectation, are not fully parallel with the policy rate reduction. So it's not a perfect 100% beta there. Regarding deposit pricing as well, because of, again, regulatory measures because of the Turkish lira ratio, typically, in the past, what we have seen, we are not seeing right now, which means normally our incremental deposit pricing is below the Central Bank policy rate around 50 to 100 bps below. And you see that right away in the 2 days after the Central Bank policy rate, we see a significant reduction. But given that there is ratios and there is a lot of dependency on the FX situation and interest, which has been recently realty has been around gold and silver, but regardless, because of those ratios, the incremental cost of deposit has been slightly higher than the policy rate nowadays 50 to 100 bps. So instead of actually 50 to 100 bps below the policy rate. So we are not seeing the similar reduction in deposit as well. But overall, despite all this, we are improving as we see on the fourth quarter, our margin regardless because of the duration differences. We have been always investing in the customer side on loans. As you see in this quarter as well, our security fixed book has not changed much. We actually had some optimization, which you don't see from the numbers to be more sustainable and more profitable security book, but we are still at 58% customer loan versus our peer group at 49%. So I believe this is going to be reflected relatively positively on our numbers going forward. But we see 50 bps to 100 bps above policy rate. This will diminish in the following weeks as well as volatility reduced in the market, given that we are switching from 4-week windows to right now 8 weeks, which is a big plus in terms of our major. And then there was the last question about return on equity guidance. Kemal Ozus: I can take that. I mean we did not incorporate a significant amount of mark-to-market gain in our ROE calculation. Our foreign currency -- our securities foreign currency TL, there's an increase in the foreign currency part toward 40%. And in TL, we have AFS book and the hold-to maturity book. So we don't have much exposure to interest rate changes in equity in total. So we did not incorporate a significant amount of mark-to-market. Mahmut Akten: We have significantly lower sensitivity to interest rates -- that has been our policy and strategy. Operator: Our next audio question comes from Ali Dhaloomal. Ali Dhaloomal: I had this question actually about the TL spread policy rate. My question is just actually about wholesale funding. I mean what should we expect from Garanti this year in terms of issuance? I mean, last year, you have been very active in the Tier 2 format. But also in terms of other instruments, I mean, are you looking to do more in the DPR format or others? That would be great to have some color. Mahmut Akten: Sure. Let me speak first and then Atil will add. On wholesale funding in the past as well, we have been opportunistic. We have relatively high liquidity always, but going to always grow -- further strengthen our capital as well. So we had, yes, Tier 2s. But at the time we did Tier 2s, there has been substantial spreads or cost between Tier 1 and Tier 2. Depending on the needs in the following months, we'll be, again, opportunistic on how we decide on funding, but we don't have a decision at the moment, but we see very much reduction in the overall spread between different instruments. But also from senior funding standpoint, we don't -- we are not in rush to do so. But DPR type of instruments or senior loans is always 2 depending on the cost, we might tap those markets as well. What do you think, Atil? Kemal Ozus: Yes. I mean, nothing to add. I mean, yes, DPR for many years, I mean, we were not in the market. I mean -- but with the new developments, DPR market could also increase. So we may be in the market depend on conditions and the pricing. Operator: Moving on with the written questions. The next question comes from, Valentina. She says, in first quarter, usually the banks take some one hit off it on capital due to operating risk adjustments. Can you share roughly what impact on capital we should expect? Mahmut Akten: 83 bps. Operator: Next written question comes from Orkun Godek. How do you evaluate the potential implications of the recent regulatory changes introduced over the weekend? In addition, there's an expectation for an easing of loan regulations in the final quarter of the year. What is your take on this view? Mahmut Akten: Yes. I think when do we see easing of the regulation, I don't really have an answer. Yes. I mean you would expect with the reduction in interest rates, there might be further reduction, but there are 2 main instruments on cooling down the economy. Number one, interest rates. And if you believe that interest rates are coming down, that will further strengthen growth and investment and loan book. So I'm not sure whether we will see a significant release on loan caps. However, having said that, as I said, it is not fully negative for us as one of the -- I mean, one of the largest bank in terms of balance sheet, given our customer base, we have a higher growth cap, and we are pretty much tapping that growth every quarter to meet our customer needs. And those caps also in parallel are requiring to interest rate or loan yields to settle at a higher rate, which also helps cooling down economy. So we'll see how it goes. Inflation is not an easy animal. So we'll see quarter-by-quarter, data by data. I would say that. And then that was the first part. The impact of regulation, the recent regulation, yes, there are several parts. One is significant growth in credit card limits and overdraft limits. Those have been 2 products used extensively. And there were other items, as we mentioned, one that was very helpful doing restructuring of the credit card blade loan book, which is significant. And then FX loan book growth has been reduced to 0.5%. Again, recently, we have seen on the FX loan book decreasing interest. So further limitation on the growth of FX will actually help in the NIM side, but it has a negative impact on the volume side. So it makes us more road focus in our customer day-to-day business. So I'm not concerned about that as well. On the credit card and overdraft, yes, I mean, Turkey is a consumption-driven market and credit card has been highly utilized versus the past 5 years, especially after COVID and after effective money being only TRY 200 and then rising of the e-commerce and online shopping, we have seen 40%, 45% credit card share in terms of day-to-day payment going up to almost 70%. I think still the tax -- still the regulation on credit card is being worked out. The details has not been fully published. Given that we have significant market share on credit card and overdraft, any optimization on limit or risk will adapt easily. Last year, we have captured a very high market share of the new credit card customers as well. Last year, our customer growth has been close to 3 million customers, and now we have more than 30 million customers who have account with us more than 50% of the total market. So I think any optimization that's guided by the regulator will apply it. And then we have -- we will have some effect, but will not be significant in my view. But we'll see how it turns out over the next few months. As you know, in the regulation itself, things are being worked out. What I mean is like, for instance, there has been regulation regarding the school payments, which is an important one ticket, large ticket item. There has been some exceptions on the overdraft. Potentially, there might be exceptions on credit card as well. That reason we'll see over the next few weeks and months how this play out. But as the largest player in the credit card market and overdraft, we believe that we can optimize and leverage our customer base and will not affect it negatively from this change as well. Operator: We have an audio question from Furkan Vefa Tirit. Furkan Tirit: Just to clarify, you said for every 100 basis points of rate cuts, 15 basis points of effect on ROE, right? Is that true? Mahmut Akten: On NIM, but full year -- so initially lower, yes. Operator: Moving on with the written questions. We have one from Bulent Sengonul. He asks, does your 75 bps margin expansion guidance include any easing in macro prudential measures? Mahmut Akten: No. Operator: Okay. Moving on to the next one from Bulent. Does your mid-cycle NIM and ROE targets assume that macro prudentials are fully normalized? Mahmut Akten: No, we don't expect macro prudential, which means around the ratios not fully normalized this year. So we still -- even in this environment, we expect to have a real ROE at the end of the year. So we are, again, I mean, I briefly said only no, but the prior question as well, we have been conservative in our approach. As I said, everything is data-driven. And so far, inflation and interest rate expectation of other banks has been wrong or it has been going up. So we have been conservative in our approach, and we expect no change on the regulation. Operator: We have an audio question from Tomasz Noetzel. Tomasz Noetzel: Yes. I can just ask for clarification on your fee guidance. Does this include any changes to regulation in terms of interchange fees or anything like this? Could you please clarify that as well? Mahmut Akten: Yes, we expect some changes and reduction interchange. But at the moment, the interchange is already set up a bit low. So we haven't seen a change recently, but it will, at some point, there's a breakeven policy rate. But we expect to compensate that with wealth management, insurance and other service and commissions. So we incorporate the reduction in payment. Normally, payment has not been that high as a percentage of total fee. We normally normalized rates around 55%. But nowadays REI is around 67%. So there will be a reduction to normalization, but the insurance and wealth management brokerage commissions and crypto type of commissions is increasing in our overall commissions. So that has been always within the plan, and that's the reason in our strategy, these type of commissions are important to offset the very strong payment commissions we have. I hope that answers. Operator: We have a written question from Cemal Demirtas. What's the sensitivity of your ROE assumption to 1 point lower or higher inflation? Mahmut Akten: We actually -- we have a perfect number of 1%, 15 bps. We didn't calculate, but back of the envelope, you would expect to around 0.5%, 0.6%. But Ceyda will get back to you on the exact number that Ceyda needs. These are the questions I need to answer. You need to calculate that as well. But definitely, that will be an improvement in ROE as well to get a better number. So I think we finish all the questions. There is one more. Okay. Let's go for it. Operator: It seems like we have one more question, a written one from Valentina. She asks a follow-up question on 83 bps negative impact. Do you think this can be easily offset? And expanding on this, why do you see your CET1 buffers throughout the year? Kemal Ozus: Yes. Of course, this 83 basis points is one-off impact since, I mean, in the new year, the operational risk is increased based on your prior year income calculation. With the current year profit, I think we will be compensating that. Of course, in the first quarter, there will be some reduction out of the dividend payment. And I think we will be compensating these... Mahmut Akten: There will be some baseline effect as well. Kemal Ozus: There could be baseline impact around 45 basis points in the second half, assuming that Basel IV will be enforced at that time. But with the internal revenue generation, we will be compensating those impacts. Mahmut Akten: Any further question? So I think we finished the questions. So it was really good list of questions. So thank you very much for everybody's participation. Really, we are pleased to conclude 2025 with very strong numbers. Again, reflecting our strategy, as I pointed out in the prior meetings as well. We are focused on customer-driven business. Our strategy is to expand our customer base and have sustainable profitability, not quarter-on-quarter, but on the long term. And so we continue to do some investment you see in the non-HR OpEx or trading, sometimes optimization, things like that. And -- but regardless, if you do one-off corrections, as I pointed out, our Q4 apple-to-apple is better than Q3. Q3 is better than Q2. So this continues like that. And then in the first month, January, we see also relatively good results for January above our budget, our internal targets. So we continue to make consistent progress. But our focus on digital transformation, AI transformation, efficiency, sustainability agenda, innovation continues to be our top of the agenda. And then going into new year, as you point out in your questions, our sensitivity of our security portfolio is relatively low. We are positioned ourselves in any situation. And then our focus is sustainable, delivering sustainable value for all of our stakeholders. So that's the strategy, hopefully, 3 months later, these days, we'll come together and we'll also show you even a better picture going forward. Again, thank you very much for everybody's participation and your patience late in the evening. So I hope to see you and to hear from you 3 months later in the next earnings presentation. Have a nice evening to all of you. Thank you.
Operator: Good afternoon, and welcome to Phillips Edison & Company's Fourth Quarter 2025 Earnings Call. Please note that this call is being recorded. I will now turn the call over to Kimberly Green, Head of Investor Relations. Kimberly, you may begin. Kimberly Green: Thank you. I'm joined today by our Chairman and CEO, Jeff Edison; President, Bob Myers; and CFO, John Caulfield. Following our prepared remarks, we will open the call to Q&A. After today's call, an archived version will be published on our Investor Relations website. As a reminder, today's discussion may contain forward-looking statements about the company's view of future business and financial performance, including forward earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties, as described in our SEC filings. And our discussion today will reference certain non-GAAP financial measures. Information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in our earnings press release and supplemental information packet, both of which have been posted on our website. Please note that we have also posted a presentation with additional information. Our caution on forward-looking statements also applies to these materials. Now I'd like to turn the call over to Jeff Edison. Jeff? Jeffrey Edison: Thank you, Kim, and thank you, everyone, for joining us today. We are pleased to report strong 2025 results which reflect NAREIT FFO per share growth of 7.2%, core FFO per share growth of 7% and same-center NOI growth of 3.8%. In addition, our strong 2026 guidance growth rates for NAREIT FFO and core FFO per share are in the mid-single digits. While the market may continue to be nervous about the health of the consumer and the impact of tariffs on retailers, our outlook remains unchanged. As it relates to PECO's neighbors and grocers, we continue to feel very good about our portfolio. We are seeing a resilient consumer, and our top grocers and necessity-based retailers continue to drive solid foot traffic to our centers. As it relates to the transactions market, it's no surprise that the strong fundamentals of grocery-anchored shopping centers continue to attract increased attention to the market. We remain confident in our ability to deliver on our gross acquisitions guidance of $400 million to $500 million in 2026 at PECO share. We acquired approximately $400 million in acquisitions at PECO share in 2025. We have demonstrated consistent success in finding core grocer-anchored opportunities, as well as undermanaged and underoccupied Everyday Retail centers. Additionally, we have the joint venture expertise and partnerships to continue to acquire across the investment spectrum of grocery-anchored retail. We continue to be disciplined buyers, investing in acquisitions above our cost of capital. We continue to target an unlevered IRR of 9% for our grocery-anchored acquisitions and above 10% for our Everyday Retail centers. In summary, we are pleased with our results for 2025 and our outlook for 2026. PECO's core business is our grocery-anchored shopping center business. We are the leader in owning rightsized neighboring shopping centers focused on necessity-based retail. Our Locally Smart operating platform is driving strong rent and NOI growth. We remain confident in our ability to execute our plans and deliver solid growth in 2026 and beyond. We believe the quality of our portfolio and the strength of our operating platform give PECO the best opportunity in our space to produce sector-leading FFO per share growth and AFFO growth. We believe an investment in PECO provides significant upside opportunity backed by high-quality cash flows, strong fundamentals and sustained long-term growth. With our shares trading at a discount to our long-term growth profile, we believe PECO represents an attractive opportunity to invest in a leading operator that can deliver mid- to high single-digit annual earnings growth. We will continue to drive more alpha with less beta. With that, I'll now turn it over to Bob. Bob? Robert Myers: Thank you, Jeff, and thank you for joining us, everyone. We continue to see high demand for necessity-based retail with no current signs of slowing. PECO's leasing team remains focused on capturing this demand, driving our in-line occupancy to tie for a record high while pushing very impressive comparable rent spreads. Retailers want to be located at our centers, where top grocers drive consistent and reoccurring foot traffic. PECO continues to deliver strong internal growth. Our leasing activity and occupancy remain at very high levels. The PECO team executed 1,026 leases totaling approximately 6 million square feet in 2025. We believe this activity represents a substantial increase in value at the property level. Portfolio occupancy remained high and ended the year at 97.3% leased. Anchor occupancy remained strong at 98.7%, and in-line leased occupancy ended the year at a record high 95.1%, a sequential increase of 30 basis points. Our portfolio retention rate remained high at 93% at year-end. High retention means less downtime and lower tenant improvement costs, which translates to better economics for PECO. We expect to see consistent retention in the future. PECO delivered comparable renewal rent spreads of 20% in the fourth quarter. Comparable new leasing rent spreads for the quarter remained strong at 34.3%. Our leasing spreads reflect a retail environment, which continues to be extremely positive. We are leveraging PECO's pricing power resulting from the demand of our high-quality portfolio, strong leasing spreads and embedded rent escalators. Leasing deals we executed during 2025, both new and renewal, achieved average annual in-line rent bumps of 2.7%. This is another important contributor to our long-term growth. As it relates to bad debt, we actively monitor the health of our neighbors. We expect bad debt in 2026 to be in line with 2025, which came in at approximately 78 basis points of revenue for the year. Given our current pipeline and visibility, along with strong retailer demand and the lack of new supply, we are comfortable with our guidance range for bad debt. We have a highly diversified neighbor mix with no meaningful rent concentration outside of our grocers. Turning to development and redevelopment. PECO has 20 projects under active construction. Our total investment in these projects is estimated to be approximately $70 million, with average estimated yields between 9% and 12%. 23 projects were stabilized in 2025. This represents over 400,000 square feet of space delivered to our neighbors and incremental NOI of approximately $6.8 million annually. We are focused on growing our pipeline of development and redevelopment projects. This activity remains an important driver of growth. In addition, the PECO team continues to find accretive acquisitions that add long-term value to our portfolio. Our year-to-date activity reflects $77 million, including 2 core grocery-anchored shopping centers. Currently in our pipeline, we have visibility into approximately $150 million in assets that we've been awarded or under contract that we expect to close either by the end of the first quarter or early in the second quarter. Given the strength of the market, the pipeline we are targeting and the team we have at PECO, we believe we can achieve our targets for gross acquisitions in 2026, our current pipeline reflects a combination of core, grocery-anchored neighborhood shopping centers, Everyday Retail centers and joint venture opportunities. I will now turn the call over to John. John? John Caulfield: Thank you, Bob, and good morning, and good afternoon, everyone. Our fourth quarter results demonstrate what we've built at PECO: A high-performing grocery-anchored and necessity-based portfolio that generates reliable, high-quality cash flows. The PECO team continues to operate from a position of strength and stability. Fourth quarter NAREIT FFO increased to $88.8 million or $0.64 per diluted share. Fourth quarter core FFO increased to $91.1 million or $0.66 per diluted share. Turning to our balance sheet. We have a strong liquidity position. Combined with our proven access to the equity and debt markets, we have the ability to execute our growth plans. As a reminder, PECO can acquire $300 million of acquisitions annually and remain within our target leverage range. As of December 31, 2025, we have approximately $925 million of liquidity to support our acquisition plans. Our net debt to trailing 12-month annualized adjusted EBITDA was 5.2x at year-end and was 5.1x on a last quarter annualized basis. As a reminder, our fixed rate debt target is approximately 90%, and we finished the year at 85%. We anticipate addressing our floating rate debt through financing activity in 2026, where we will look to access the debt market opportunistically. We believe fixed income investors appreciate the high-quality cash flows and stability of grocery-anchored, necessity-based retail, and we continue to believe we are an underrated credit relative to our higher rated shopping center peers. Moving on to guidance. We provided strong guidance for 2026 in December. Our outlook reflects continued solid earnings growth. Net income guidance for 2026 is in the range of $0.74 to $0.77 per share. Our same-center NOI growth for 2026 is projected to be in a range of 3% to 4%. Our guidance for NAREIT FFO per share for 2026 reflects a 5.5% increase over 2025 at the midpoint, and our guidance for core FFO per share for 2026 represents 5.4% year-over-year growth at the midpoint. Our guidance for 2026 does not assume any equity issuance. Our growth and investment plans are not dependent on access to the equity capital markets. The PECO team continues to have significant financial capacity to support our long-term growth plans. We have diverse sources of capital that we can use to grow and match fund our investment activity. These sources include additional debt issuance, dispositions, joint ventures and equity issuance when the markets are more favorable. We sold approximately $145 million of assets in 2025 at PECO share, and we plan to sell between $100 million and $200 million in 2026. Similar to our acquisitions, we evaluate our portfolio on an IRR basis and are reinvesting proceeds from these dispositions into assets with higher long-term IRRs. We are focused on maintaining our high-quality portfolio while improving PECO's long-term growth profile. This activity provides PECO the opportunity to realize the gains we've achieved while investing in future growth. We believe this approach helps drive solid NOI growth long term. In summary, PECO delivered outstanding results in 2025, and we are positioned very well to continue that growth for 2026. Looking beyond 2026, we continue to believe that PECO can consistently deliver 3% to 4% same-center NOI growth and achieve mid- to high single-digit core FFO per share growth on a long-term basis. We also believe that our long-term AFFO growth can be higher, as more of our leasing mix is weighted towards renewal activity. We believe our targets for core FFO per share and AFFO growth will allow PECO to outperform the growth of our shopping center peers on a long-term basis. With that, we will open the line for questions. Operator? Operator: [Operator Instructions] Our first question will come from the line of Andrew Reale with Bank of America. Andrew Reale: You're expecting to do even more volume externally this year. So as we think about this level of competition for high-quality grocery-anchored assets and how that's sort of intensified over the last year, could you speak to the diversity of opportunities within your pipeline and what looks most attractive to you externally right now? Jeffrey Edison: Sure. Thanks for the question, Andrew. So on the acquisition side, what we're seeing is, as you point out, there's more competition there. But we're also seeing a lot of product on the market. And we think that, that is probably going to balance itself out in a way that creates enough opportunities. And I think that's why we have a high level of confidence that we can reach our targets that we've laid out for the acquisition pace. Bob, any of your thoughts on that? Robert Myers: Yes, Jeff, I'll just add that as a comparison in 2025, we saw really over 200% of new potential opportunities. We underwrote about 50% more than the year previous and double the amount of deals we presented to investment committee. So that was in 2025 compared to '24. In '26, and I know it's early time in the year, but we've already seen about a 70% increase in the opportunities that we're looking at and about a 67% increase in the deals that we've underwritten and 10% what we presented to investment committee. You will continue to see us stay disciplined on our unlevered return targets of 9% and 10%. We're going to be very focused on continuing our core strategy of grocery-anchored shopping centers. We will complement it at a very small percentage with our everyday retail category. So both areas are going to be very active for us this year. We feel real good about our acquisitions that we completed year-to-date and our pipeline going forward. Andrew Reale: Okay. That's very helpful. And then just any update on the Ocala development parcel, especially as it relates to the timing of that project? And are there any other large-scale strategic land acquisitions currently in your pipeline? Jeffrey Edison: Bob, do you want to take that? Robert Myers: Yes. Another great question. We're excited about the Ocala market and the growth that we're seeing, given it's one of the nation's fastest-growing communities and areas, 10,000 new homes being built within a 5-mile radius. Again, we acquired the land for a grocer that we expect to spin off midyear. And then we'll be left with 7 outparcels that we're currently marketing for ground lease opportunities. So we're in a good spot. And I believe as of a couple of weeks ago, our -- we're looking at hitting targets of unlevered returns above a 9.5%, 10% on that project. So we feel real good about leaning into that market. Obviously, that's a reflection of our grocery relationships that we've established over 30 years. In terms of any new larger grocery scale development projects, we have a pipeline, and we're discussing that with our grocers. We have a couple of deals under contract that we're working on, but nothing real close that I would say would strike this year as a thought. Operator: Our next question is going to come from the line of Michael Griffin with Evercore. Michael Griffin: I was on mute, apologies. I wanted to start off and ask just about occupancy in the portfolio. Both leased and economic is pretty meaningfully above the peer set. I guess, number one, do you feel like we're reaching almost a terminal occupancy level, probably more so on the anchors than the in-line neighbors. But number two, just given where your occupancy is, do you think that gives you more leverage when it comes for these renewal negotiations, maybe being able to push more on rent escalators or with an anchor lease, potentially shortening options or building in some kind of internal growth into those? Jeffrey Edison: Yes. Before I turn it over to you, Grif, thanks for the question. Our belief is that the reason our occupancy is higher is because more retailers want to be in our grocery-anchored locations. And the necessity-based retailers see us as where they want to be, which is giving us a higher level of stabilized occupancy than anyone else in the space. And we think that will continue, and we believe that there is upside from where we are today. Obviously, not a ton on the anchor side as we are in the very high 90s on that. But we still think there's 1 or 2 points that we can get of additional growth in the in-line stores. So we're excited about that. We are -- we believe very strongly that the retailers are voting with their leases, and they're leasing a lot of our space. And that's why we are at the highest level of the -- of our peers. Bob, do you want to talk a little more about the tenant demand and what we're seeing there in the tenant side? Robert Myers: Yes. I'll continue to give a little bit more color in terms of occupancy. We're currently at 97.3%. And as I look at our anchor occupancy, we're at 98.7%. I do believe that there's anchor demand. We're seeing it with our spaces that are over 10,000 feet and the amount of leases that we have out for signature and letters of intent. I believe that we still have room to move that number to 99.1% to 99.3% this year. I would also tell you that our in-line leased occupancy is a record high 95.1%. I don't see it slowing down. And given the visibility I have in the pipeline, it's very active. There's no new supply, retailer demand and our necessity-based focus has been very positive. I would say that we believe that we have 100 to 150 basis points of continued in-line upside as well. Feel real good about that. In terms of leverage, that was a great question. 93% is our current retention of our occupancy. That's strong. And if you look at our fourth quarter numbers at 93%, we only spent $0.24 a foot in terms of TIs to renew that with over 20% renewal spreads with over a 3% CAGR. So we are driving the CAGR. We're getting exceptional first year increases. And the pipeline I have on that, I probably have 150 renewals out for Signature currently, and the numbers are even more accelerated than what I just shared with you. So again, I think we're in a very good spot given the retailer demand, our focus on having the #1, #2 grocer. We just don't see anything slowing down. The other thing that we're working on as part of the renewal process is renegotiating some of the non-monetary clauses you think about caps and restrictions and no build area. We do have the leverage to negotiate that to give us more flexibility in our pipeline and our existing portfolio to continue to create NOI growth. Michael Griffin: And then maybe just circling back on the everyday retail portion of the acquisition pipeline. It seems like in addition to the core grocery-anchored, you could get some real kind of kicker on earnings accretion and external growth through these properties. But I'm curious, maybe Jeff or Bob, if you could comment how you kind of weigh the potential differences in credit and sort of maybe some tenant health, not concerns, but just a different tenant makeup of these kind of unanchored strips that you might be targeting for everyday retail relative to your core grocery-anchored tenant base? Jeffrey Edison: It's a great question. I'll take a little bit, and then Bob, why don't you jump in, too. As we look at everyday retail, we see it as hopefully, over the next 3 years, we get that to be $1 billion of assets. So it's always going to be a piece of our company, not our main focus on the -- which is going to be on the grocery-anchored side. But there is a, we believe, a unique opportunity to take advantage of certain places where we can find properties that we can use the PECO machine that knows where every neighbor wants to be in that market, and we can bring them to locations that they can't -- when they can't get into one of our existing centers. And that's a very powerful tool that we think will be able to drive outsized results in that particular niche of the market. And we're excited about it. And we think it's going to create some great opportunities for us to get outsized growth where -- from what we're getting in our traditional grocery-anchored centers. Operator: Our next question is going to come from the line of Haendel St. Juste with Mizuho. Haendel St. Juste: First question on capital deployment. I appreciate your comments on the acquisition strategy. I guess I'm curious also on the other capital allocation alternatives that you're considering. So maybe some comments on how you're thinking about either ramping up redev, ground-up development and also potentially buying back the stock here, which looks like it's trading somewhere in the low to mid-6s on implied cap rate, which isn't that much different, a little higher than acquisition cap rates, but it's an immediate return. So just curious on how you're thinking about capital deployment beyond acquisitions. Jeffrey Edison: Great question, and one that we obviously think about a lot. And all of the pieces that you're talking about are part of our regular conversation on our allocation of capital. The ground-up development is a very strong part of where we think there is opportunity, small. It's not going to be a major piece. It's going to be -- we hope we can get it to the size that we're talking about with everyday retail. That -- because we think we can get outsized returns there. So that will continue to be a part of our property. We will put up, we think, $70 million of sort of redev and capital that we will put into the ground up this year. we kind of were in that $50 million to $70 million range, $70 million last year, $70 million this year, probably more like $50 million going forward, but we hope we can get that to $70 million. So we love that part of our business. Obviously, the allocation to the acquisition side between our traditional grocery-anchored stuff and our everyday retail, again, a piece where we think there's opportunity to -- if we can find it and get to the unlevered IRRs that we are targeting, we think there's opportunity to allocate capital there as well. And as we -- I think we've said a few times, we can purchase $300 million of property and do redev in $300 million property without going back to the market and keeping our leverage where it is today. So we have opportunities for that growth, and we want to continue to -- where we find the opportunity to be able to take advantage of that. So all those are part of it. We are always looking at share buyback since we started, we've looked at that. Right now, we're in sort of that tweener zone where it's really not a great time to be issuing equity. But also, it's not -- we don't -- we think we can get better returns for our investors with buying properties than we can and doing our readout than we can buying our stock back. So we're in that sort of between range. And that's why we've laid out the vision for this year that we have. and we're excited about it. I think we can do some really exciting things. The one piece that is in addition here is the dispositions. And the dispositions give us more opportunity to buy at a larger scale, and that is something that we'll be looking at this year as well. Haendel St. Juste: That's great color. I wanted to ask a question about Amazon. Some headlines out there that they're closing some stores, some Amazon Go Fresh locations. I guess I'm curious, one, if you have much, if any, exposure there and if that's impacting your conversations or impacting grocery demand for space? Jeffrey Edison: Yes. So Amazon Fresh is closing their stores. It's not a surprise to us that they are. They really have had a tough time with bricks-and-mortar retail, and they're trying to figure that out. I think that Whole Foods is their avenue, and you're hearing things about them expanding that banner. That's sort of the next step in their bricks-and-mortar campaign, which I think they're going to keep trying different things until they find something that works. And to date, they have not found anything that can work. They have made some announcements about more delivery on the grocery side, which we're watching pretty closely. And our feeling is that if you look at it today, over 80% of grocery delivery, just the delivery part of grocery is done from the store. And so how do you -- how do they make it work from -- when you don't have the store footprint that a Kroger has, that a Walmart has and the rest of the traditional grocers have. It's going to be tough. And so we'll continue to watch it. You never underestimate them. They're a great company. So we'll keep watching them and seeing what they do. To date, they've been underimpressive on the bricks-and-mortar side. Operator: Our next question is going to come from the line of Caitlin Burrows with Goldman Sachs. Caitlin Burrows: Maybe as a follow-up to some of the other questions, John, you talked about it a little bit, but how does cost of capital influence PECO's acquisition pace? Do you feel constrained at all? Would a higher share price make you interested in the higher acquisition target for the year? Jeffrey Edison: Great question, Caitlin. Thank you. The answer is yes, a higher stock price would encourage us to be more active on the acquisition side. We have the capital to -- and the ability to meet the targets that we've set for this year without issuing additional equity. So we're prepared for that. We also are going to be active on the disposition side so that we can use that additional capital to perhaps be able to grow even faster than what we have talked about in our guidance. So we think that if there are opportunities, we will find the capital to be able to do it. And hopefully, that's in a share price that is commensurate with where we think it should be. If not, we will -- we've got multiple other channels that we can use to get that growth. And there's a lot of interest from outside parties to JV with us and other things like that where we could add to the growth that we have projected now. Caitlin Burrows: Got it. Okay. And then maybe just on the bad debt side, it did pick up a little in 4Q. Can you discuss what led to that? How much visibility you had to it? And then to what extent your expectations for 2026 might have evolved since the business update in December? Or is it kind of all in line with the past couple of months' expectations? Jeffrey Edison: John, do you want to take that? John Caulfield: Sure. They always leave the fun ones for me. Thanks for the question, Caitlin. Look, ultimately, if you're comparing towards the fourth quarter of '24, I would say that was the lower run rate. Overall this year, our bad debt has really actually been pretty consistent. We finished this year around 78 basis points. And as we look forward, that is pretty consistent with where we believe it will be. So when we set the guidance in December, the information and the data points we have from January and February so far are very consistent with that. We're really encouraged by the continued leasing demand that we have and are encouraging our teams to find the best operators, the best merchandising mix for our properties that are going to allow us to drive rent and make our neighbors successful. So we don't see anything on the bad debt side that is concerning. The fourth quarter, it was a little elevated, but ultimately still very consistent with what we've seen this year and what we expect in '26. Operator: Our next question is going to come from the line of Omotayo Okusanya with Deutsche Bank. Omotayo Okusanya: John, this one's for you. You had made a comment earlier on about just your overall credit rating and kind of your in-house view that you probably should be at a higher kind of credit rating. Just curious, when you talk to the rating agencies at this point, what's kind of preventing that from happening? And then kind of if and when it does, how do you expect that to kind of impact your cost of debt? John Caulfield: Thanks for the question, Tayo, and thank you for the opportunity to use this as a platform. So we do believe we are an underrated credit when we compare our leverage level compared to our peers. We have the same leverage metrics or better in some cases than they do. The rating agencies at this point are more focused on scale. If you look to those that have achieved A ratings in our space, they are quite a bit larger than us. So as we look at it, we think our continued scale and acquisition activity are going to give us opportunities to increase our debt issuance in the unsecured bond market. It will hopefully give us opportunity to access the equity markets to increase our institutional holdings and our float. Ultimately, we think the [run] is usually, I have been told 25 basis points per credit notch. But I will say that the fixed income investors are definitely paying attention. And I do think they have compressed that range for us. So while I do believe there is benefit to a ratings increase, the fixed income investors do recognize the strength of our grocery-anchored portfolio, our performance, our track record. So ultimately, I think right now, if we issue 10-year debt, it'd probably be around 5.25% I think that, that could be better if we were in a higher rated position. It is a conversation that I continue to impress upon the rating agencies. At this point, I think it's going to be around scale. But we're going to continue to fight the fight. Omotayo Okusanya: Got you. That's helpful. Then if I may just follow-up still on the balance sheet. Again, your variable rate debt, the percent of the variable rate debt is a little higher than probably most of your peers. Just thinking -- how are you guys thinking about that in light of whatever [ facing have about ] where interest rates are going on a going-forward basis? The viewpoint of maybe putting swaps on some of that stuff to kind of reduce it, or how do you kind of think through that? John Caulfield: We finished the year at 85%. We have a long-term target of 90% fixed rate. We believe in this environment, the key piece that we watch is really our maturity calendar, and that's the piece that I'm focused on. So we have some maturities that are coming up in January of 2027 that we are going to work on this year. And when we access longer-dated capital, that will be fixed in that component and naturally move us in that way. We believe that the market currently is a position where there's questions around what will happen with short-term rates. But I do think that stability is there. And I think the curve being more positively sloped now there isn't a penalty per se for this. We are focused on making sure that it's available and opportunistic and not in a position where we must move, so our preferred method of this is the same way that we've done in the last few years, which is going to be continuing to acquire and match funding those acquisitions will -- as well as working on our refinancing activity is going to allow us to add duration and fixed rate coupons to our debt stack. Operator: Our next question is going to come from the line of Ronald Kamdem with Morgan Stanley. Unknown Analyst: This is [ Caroline ] on for Ron. You've mentioned being active on the disposition side. I was just wondering if you could share a little bit more about what you're seeing or anticipating? And overall, just a little more color on what you're seeing in terms of cap rates and unlevered IRRs for those dispositions? Jeffrey Edison: Sure. Caroline, thanks for the question. Bob, do you want to talk a little bit about the disposition side? Robert Myers: Yes. Great question. We ended up selling about $140 million worth in 2025. And that was something that we wanted to be more intentional about in terms of property recycling. And really, our core strategy on the disposition side is trading out assets that we've stabilized where we have unlevered return targets that might be, say, 7% and replacing it with our strategies and the opportunities we're seeing today with unlevered returns between 9% and 10%, 10.5%. In terms of expectations for 2026, we'll continue to do the same thing. We put a budget in place between $100 million and $150 million to execute the same strategy. Operator: Our next question is going to come from the line of Floris Van Dijkum with Ladenburg. Floris Gerbrand Van Dijkum: Going back to capital allocation. Maybe just -- if you can talk a little bit about why your everyday or unanchored strategy isn't bigger if you're getting higher IRRs? And -- is there not enough an opportunity set there? Or I would have thought it would be bigger actually. If you can maybe talk about that? And then also, on the dispositions, do you think of -- where do you think you can sell assets at? Is it a 5.5, sub-5 cap on some of your assets? Jeffrey Edison: Floris, thanks. The -- on the capital allocation side, with regard to everyday Retail, we've set targets of getting to $1 billion over the next 3 years. We hope we can do it quicker than that. And if the opportunities arise, we will do that. As you know, we're really disciplined about this business. We want to make sure that it is the kind of product where when we put the PECO machine to work on it, that we can get accelerated and outsized returns. That means we have to be disciplined. We won't -- we might not go as fast as if we were just buying straight triple-net deals that are more homogenous. But we think that's where the opportunity is in this space, and we think that we can find that product and -- and if we find more of that product, we'll buy more of that product. And that is -- that will be the -- the governor will be on whether we can find that level of opportunities. So that's our key sort of allocation question there. And in terms of dispositions, there are really 2 buckets, Floris, that we look at in -- when we're selling properties. One is projects where there is not a ton of upside where we have put the machine to work on it, we stabilize the product, and we think we can get good pricing on it that will price it in -- where the -- in our mind, the unlevered IRR would be in that 7%, 7.5% kind of range. That's a bucket that we did. And we sold a project in California last year at a 5.7%, 5.8% cap rate that fit into that bucket. The other bucket is just more of a derisking bucket where we see that we can get good pricing, but where we think that the IRR will still be in that 7% -- 6.5%, 7% range. But we -- but it's more because we think we can take some risk out of the portfolio and selling it. So those are the 2 buckets we tend to take to market more than what we actually anticipate executing on, because we want to make sure that we're getting the pricing and we have the variety of product that allows us to make sure that if we get the pricing, we sell it. If we don't get the price, then we don't sell it, because these are all solid assets that we will hold long term otherwise. But that is how we approach the disposition market. And then obviously, that ties into how it helps to manage the balance sheet as well. Does that answer your question, Floris? Floris Gerbrand Van Dijkum: It helps. Thanks, Jeff. No, again, the spread between the unanchored and the noncore sales is pretty wide. So... Jeffrey Edison: Yes. Floris Gerbrand Van Dijkum: My follow-up... Jeffrey Edison: We're excited about that, Floris. We think there is an opportunity there. And that is why we're in it. That's why we think we're getting paid to take what is -- I think the risk that people believe is there is a lot less than what we think. And that's why we're excited about it. Floris Gerbrand Van Dijkum: Maybe my follow-up -- I think I might have asked this on a previous call, but the -- your renewal spreads were really strong, but your option sort of impacts your overall -- your average spreads still including options were still 13-plus percent, so very solid. But what are you doing on the options in going forward leases? Because obviously, are you signing new leases with no options so that, again, some of that break on spread is removed going forward? Jeffrey Edison: Yes. The answer is yes. Bob, do you want to talk a little bit about sort of option strategy on the leasing side? Robert Myers: Yes. Floris, it's a great question. This is something that we're very focused on. Certainly, with 93% retention and the leverage we have on the renewal side, we're getting a lot of that in the negotiation with your 20% increases and 3.25% CAGRs as an example. On the new deal side, our new leasing spread was around 34%, and we're seeing CAGRs anywhere between 2% and 3% on new deals. So that's in terms of the existing portfolio. I think as part of our negotiation strategy on new deals, we simply say no. If a tenant wants to have an option, we always start with saying no. I know the options don't benefit the landlords. However, when you have a nice portfolio that has the integrity of a lot of national and regional tenants in it, they're investing a lot of capital alongside us in the space. So they do want some protection above and beyond either their 5- or 10-year primary terms. So it makes sense. On those, what we've really been pushing for -- and it's hard to get -- is 20% increases during each option period plus a 3% CAGR on top of that. I incentivized my leasing team to drive that behavior. We're moving in that direction. But it is a difficult one, but you're spot on in terms of continuing to figure out ways to have less options and higher CAGRs. Operator: Your next question comes from the line of Todd Thomas with KeyBanc Capital Markets. Todd Thomas: I wanted to ask a couple of questions around acquisitions and JV activity, in particular, where you've seen a measured pace of activity. Bob, you mentioned that you're seeing a pickup in offerings. And I guess, 2 questions here. Should we expect to see JV activity ramp up a little bit more meaningfully in 2026? And then second, Jeff, I think you commented that you're having discussions with some other potential sources of capital. Are there other potential JV partners that you are having discussions with for another vehicle, perhaps? Jeffrey Edison: So I'll answer the second one, and Bob, do you want to jump in on the JV activity for this year? Todd, we're always talking to potential JV partners who have specific needs that might fit into our overall necessity-based grocery-anchored shopping center focus. And that -- this is no different than that. And we will continue to have those conversations. And in the right case, that will be an opportunity like it was with the 2 JVs that we have. And when your stock is not trading where you want it to, the JV opportunity is one that you've got to keep looking at more closely. Bob, do you want to talk about activity this year a little bit? Robert Myers: Yes. We continue to see increased opportunity. We have a weekly meeting for Investment Committee with our partners. And we're typically presenting anywhere between 2 and 4 new sites weekly to the team. So I do think that we'll see more activity this year than we have in the past. I think we're going to see more product. And things are heading in the right direction behind the opportunity set, the pricing opportunities that we're seeing. I think we'll close out our 1 fund. We need 1 or 2 more deals that we currently have under contract. So that will close out one. And then our Cohen & Steers joint venture has not only been very successful early days, but is well equipped with capital to continue to take advantage of market opportunities which we're seeing. So I'm encouraged by the activity in the joint ventures. Todd Thomas: Okay. And then with regards to -- you continue to talk about sort of IRRs north of 9% for core acquisitions for grocery-anchored acquisitions. And then I think you said north of 10% for Everyday Retail. Can you just walk through sort of the basic framework and underwriting assumptions that you're looking at or targeting for those sort of IRR hurdles? Jeffrey Edison: Sure. Why don't -- Bob, do you want to walk through sort of just how we're -- the -- just so you -- Todd, I mean, the simple answer is that we do a very standard underwriting, and it's consistent across everything we look at. And it's something we've refined over 30 years that we've been in this business. And it's been very -- we've refined it to the point where we are very accurate in it. And if you -- we do once a year as we go back, we look at everything that we underwrote and we compare it to what we performed on. And we're -- we performed about 1% above where -- what our underwriting is across a portfolio over a decade. So it shows that we have the -- we believe we have the right system in place to actually get to what we're going to -- what we believe will happen in the portfolio, and it's proven itself out. Robert Myers: And Jeff, I will add, when you specifically look at our everyday retail, the 9 centers that we have, roughly $180 million, one upside opportunity that helps us get above the 10% unlevered return is the current occupancy and vacancy and mark-to-market opportunities. So we've done a very good job given the lack of new supply coming on the market and the leverage to be able to push rents. As an example, on that 9 property portfolio, we've generated over 45% new leasing spreads and over 27% renewal spreads with CAGRs -- and we're very focused on a solid strategy that's in our core markets where we can take our national accounts team, we can remerchandise. We're very focused on transitioning our merchandising focus towards necessity-based goods and services. You think about fast casual, health and beauty, medtail services. Those are the areas where we're seeing demand and we're seeing validity in our overall merchandising. Right now, you'll typically see in this strategy that we'll acquire between -- it's been between 6.7% and 7%. Maybe we'll go down to 6.5% if there's more vacancy for growth. But as Jeff pointed out, yes, in our underwriting, and we do not compress cap rates on the back end of this. So we are taking advantage of pure growth. These will have NOI CAGRs between 4.3% and 6%. We'll be able to move the occupancy, which even in the last year on the 9 properties, we've already moved occupancy from 91.6% to 94.7%, 310 basis points, and we're seeing unlevered returns increase above our underwriting, to Jeff's point, 100 basis points. We're above 11%. So that's the benefit of the strategy as we continue to use our operational expertise to remerchandise and create value long term. That's why we're also excited about over the next 3 or 4 years, growing this part of our business to $700 million to $1 billion over time, the Phillips Edison way. Todd Thomas: Okay. That's really helpful color. I appreciate that. One last one, John, a quick one on the guidance. It includes gross acquisitions. $400 million to $500 million, but it seems like there's this $100 million to $200 million of dispositions that's also contemplated for the year. Is that embedded in the range? Or is the disposition activity not currently factored into the guidance specifically? John Caulfield: It is in our guidance. The dispositions are considered in the guidance that we provided. Yes. Operator: Our next question is going to come from the line of Cooper Clark with Wells Fargo. Cooper Clark: Great. I guess, just to stay on the disposition pipeline, curious as you think about marketing deals today, what the depth of the bidder pools looks like and the buyer profiles you're seeing? Jeffrey Edison: Cooper, thanks for the question. The buyer profile is pretty dispersed. I mean, there's a breadth to it that is pretty solid. And certainly, more solid -- it was pretty solid last year. So it's very comparable to what we saw last year in terms of the level and the variety of buyers. We don't see that changing this year, and we certainly haven't seen it so far this year. Obviously, we're still finding enough product to meet our goals, but it's a more -- it's a broader market, and it's a broader level of interest. And each property has its own little character. And as -- and each character has its own set that different buyers, whether it's a family office or whether it's an institutional buyer looking at it, how are they going to evaluate and see value in it. And that's what we're -- that's what we do. And we find those specific opportunities where we can find that the right buyer for our product. Operator: Our next question is going to come from the line of Hong Zhang with JPMorgan. Hong Zhang: I guess my first question, you've talked in the past about the potential to proactively take back space in order to push rents higher in the long term. Where you sit today, do you see any opportunities this year that could potentially be a little bit of a headwind to occupancy, but ultimately push rents higher in the longer term? Jeffrey Edison: Bob, do you want to talk about that? Robert Myers: Yes. I appreciate the question. I don't believe we're going to see any headwinds in terms of occupancy. What I'm encouraged by, we will be very selective from a merchandising standpoint on recapturing spaces where either a neighbor doesn't choose to step up to the current market rent or we're not seeing the renewal increases or viability in the profitability of the neighbor. So that will be a case-by-case decision asset by asset. Given the 93% retention and what we saw in the fourth quarter as a trend, only spending $0.24 a foot, it's just a lot better economic decision than replacing a new neighbor and pushing the rents. The rents have to be extremely high on that first year renewal spread when you're investing somewhere, say, between $22 and $28 a foot in tenant improvement. So the good news is we'll continue to have flexibility to remerchandise the way we can be just given the lack of supply and the leverage we have in our existing portfolio. I don't see any signs of occupancy weakening. Again, it will just be case by case and market-to-market opportunities so we can maximize the value of the portfolio. Operator: Your next question is going to come from the line of Michael Goldsmith with UBS. Michael Goldsmith: Earlier, you talked about maybe having 100 basis points of upside for the shop occupancy. It seems like the demand is there. So what needs to change in order for you to realize that upside? Jeffrey Edison: Bob, do you want to talk about the upside? Robert Myers: Great question. So that is a topic that we continue to discuss on what we can do. One initiative that we put in place is getting ahead of the curve, whether we discuss supply chain or making improvements to the space where we can turn them faster. In every portfolio, you'll have some spaces that are located in unique spots or spaces that are tired. And I think that will be a new strategy as we see where our portfolio is today, not only identifying spaces where we should invest capital earlier. But the other thing that I've done with our leasing team is I put incentives in place on our top 100 vacant opportunities that generate the highest NOI for the center. And I'm compensating it like a bounty program if we can get those leased. One thing we've seen a lot of success at Phillips Edison is when you have incentive pay and commissions to drive a behavior, it works. That's part of the reason why you're seeing new leasing spreads, renewal spreads and the integrity of our portfolio. This is something I'm excited about. This is going to help move the needle another 100, 150 basis points with a targeted space leasing approach. Operator: Your next question is going to come from the line of Sidney Rome with Barclays. Unknown Analyst: With regards to the $400 million to $500 million acquisition guide alongside higher interest expense, I know you commented on $100 million to $150 million of disposition budget. But I was hoping you could help us bridge how much of the remaining funding comes from incremental debt versus free cash flow generation? Jeffrey Edison: [ Sidney ], thank you for the question. John, do you want to talk about the allocation there between the 2? John Caulfield: Thanks for the question. We generate over $100 million. Actually, this year, we think it will be closer to over $120 million of cash flow available to us after distributions. As we said earlier, about $70 million of that will likely go towards our development and redevelopment activity. And then you consider the proceeds from the disposition activity. So as we look to the debt market share, we will utilize incremental debt capital but also to refinance it. So the math there, I think I kind of pointed to the pieces that could do it. But ultimately, we would be looking at 1 to 2 bond offerings this year or other debt offerings that we would look at, depending upon pricing at the time. So we're going to, again, work too on those January maturities, but I would say we have over $900 million of liquidity available to us between our revolver. And at the end of the year, we had some dollars available in 1031 proceeds that have been invested in the acquisitions we've already closed. So we feel really good about the availability of debt capital in the markets across types in addition to the free cash flow generation that we have. Operator: Our next question is going to come from the line of Paulina Rojas with Green Street. Paulina Rojas Schmidt: Good afternoon. Can you please share some rough numerical guidelines on how CapEx has deferred between your Everyday Retail and typical grocery-anchored centers? Jeffrey Edison: Paulina, thank you for the question. I want to make sure I get it. You're saying what capital are we spending on the, our core grocery stuff versus capital on Everyday Retail. Is that -- and is that the comparison you're looking at? Paulina Rojas Schmidt: Yes, correct. Ideally, as a percent of NOI or something like that. Jeffrey Edison: John, do you want to walk through that? John Caulfield: Absolutely. As we look at it, we are targeting over 10% on levered IRRs. And to Bob's point earlier, actually, even 100 basis points or higher above that. For us at this point in the strategy, I would say that the capital as a percentage of NOI actually looks a lot like our grocery anchored centers because of the growth that we're generating. As we stabilize these assets, we do believe they will be very efficient from a CapEx perspective as you get to renewing neighbors and just pushing rents, that because of the character of how we are evaluating these everyday centers and opportunities to push rents that are in place, but more so change the merchandising mix, upgrade the merchandising rates. . We talk about it because we also have similarly that there's market data that suggests the capital for these centers should be more efficient. I think that is a data point to look at. I'm looking at it as an opportunity to get above a 10% unlevered when you include the impact of this capital. So when we look at the Everyday Retail in its current state, it actually looks a lot like the 12% to 13% of AFFO CapEx that we're spending at these centers generally because they're smaller, not as many opportunities to build out parcels given the footprint. But we think that it has the capability. But right now, we're focused on remerchandising, releasing, pushing rents, and that will ultimately get to that capital efficiency. Jeffrey Edison: Yes. And Paulina, we're programming that in our underwriting. So we oftentimes, when we're buying some of the Everyday Retail, we have significant capital that we're putting in upfront to redo the centers to bring in the merchandising that we want to have at that center. And then you get to what John is talking about, which is on a stabilized basis, we think it will be less of a cost. But if you truly want to turn around the capital we think is necessary. Operator: This concludes our question-and-answer session. I will now turn the conference back to Jeff Edison for some closing remarks. Jeff? Jeffrey Edison: Yes. Thank you, operator. In closing, I want to reiterate that PECO performed very well in 2025. Our grocery anchored, necessity-based portfolio provided both growth and stability. We're carrying that momentum into 2026. Our high-quality, reliable cash flows continue to grow as a result of our solid operational metrics and disciplined investment strategy. We remain confident in our ability to execute on our acquisition plans and are focused on generating attractive long-term IRRs. With our shares trading at a discount to our long-term growth profile, we believe PECO represents an attractive opportunity to invest in a leading operator that can deliver mid- to high single-digit annual earnings growth. We will continue to drive more alpha with less beta. In conclusion, I want to thank our PECO associates for their continued hard work, and I'd like to thank our shareholders and our neighbors for their continued support. With that, we'll end our conversation. And thank you, and have a great day, everyone. Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.
Marcelo de Noronha: [Interpreted] Good morning, everyone. I am Marcelo Noronha. I'm here live from Cidade de Deus, the headquarter of Bradesco for this earnings release presentation related to the fourth quarter of 2025. And why not saying of the full year of 2025 today is February 6 and my watch shows 10:31 a.m. I'll start with presentation saying that all of this material has been released last night after the market closing and I think you had access to it. And I start with our recurring net income, BRL 6.5 billion growing 20.6% year-on-year, and BRL 24.7 billion for the full year 26.1% growth and however, with an ROAE of 15.2% exceeding our cost of capital for the first time in this quarter. And that's why we say that we will continue to grow our ROAE for the coming quarters and years to come. Here, I have all of the operating highlights. I'm not going to go over each one of them because I will show -- I will certainly change a little bit today's presentation, and I would like to bring you some elements related to our transformation plan that in fact was published February 7, 2024, so less than 2 years ago, it will the 2 years as of tomorrow. So that's when we released the plan. And I would just like to remind you of what we did back then. So we started with a diagnosis at Banco Bradesco the Brazilian market, and also, we drew up a worldwide benchmark with all of the relevant aspects like technology. Out of the diagnosis, we drew up a plan knowing all of our strengths. The plan -- the bank has several strengths, and the organization as a whole for that matter. Back then, we said that we have 70 million clients. We also said that we were leaders in SMEs. SMEs understood as a segment defined by the Central Bank because every bank has its own format. These are companies that grows up to BRL 300 million a year. We also said that there was high penetration in the high income segment. And certainly, we have the largest insurance group in Latin America, in addition to having a stake in many other companies. And we also said that we will work on our strength to create a new position with the clear goal to increase competitiveness in the short and long run. But it's important to remember that we put a deadline of up to 5 years. It wouldn't happen overnight. And it hasn't even been 2 years. When we presented the plan, we came up with this [ mandala ] with all the main topics, the 10 main items that were carefully looked at with more than 200 new initiatives. I will go over some of them, I will not talk about all of them or all of that, otherwise, we will be here for 2 hours, and you will be really tired. But our IR team and the transformation office, everybody is available to give you further clarification, especially those that want to talk to investors, to discuss some particular area of this [ mandala ] -- and if you have additional questions, we are certainly at your disposal. So I'll briefly cover some of the most important highlights and then I'll go back to the core numbers, and we wrap up the presentation. So then after the presentation we have the Q&A. Well starting with digital retail. We haven't been bringing a lot of elements for you, but after this period at year-end, we came up with 19 million clients fully digital. They are fully assisted through the digital channel with our BIA GenAI with the level of resolution, which is very high. So BIA is retaining 90% of all calls that comes through digital retail, but it's also important to look at the engagement level. Our efficiency in this client life cycle that allow us to -- I mean, I'm not going to get into the details of every topic. But I would like to draw your attention to this item here down below. The direct cost to serve to all of these clients in the digital platform that was reduced by 40x. This is an important number. And what we envision for 2026 vis-a-vis our digital retail. First, we go from 19 million to approximately 40 million clients between account holders and non-account holders. And certainly our objective, not only for 2026, but going forward is to reduce the cost of -- cost to serve and to continue growing our customer base. The second topic is affluent clients, and we are talking about principal and prime segments. We promoted an upgrade to more than 3.1 million clients with a new value proposition. And at the same time, we introduced a new position in this segment of clients. Prime ended the year of 2.3 million clients. We trained 3,500 managers, we focus on that training. But notice the level of accuracy for BIA team. It's accuracy was 93% at BIA customers, and then i go to Principal. You may recall that we launched principal in November 2024, with 3 offices, one in Faria Lima, another one in Campinas and the other one in Leblon in Rio. And then we started the expansion process. In fact, I invited sell-side and buy-side clients to look at our management model rather than just the business model. So we are just going through this phase in other segments. So we launched a new segment in November of '24. By the end of last year, we had 62 offices and 36 municipalities approximately 320,000 clients in this segment with this current level of NPS, so a new value proposition. And this created this new differential. And what do we expect to see next year out of these 2 affluent segment. I mean, new upgrade with more than 1.5 million clients reaching 4,700,000 clients. And as for principle, we will open almost 50 additional offices in Sao Paulo, reaching 70 municipalities, and we will have almost 800,000 clients by the end of the year. But you might recall our target because it's not something that we change overnight because this is gradually build. So we will expand our share of wallet, and this is what you see down below when it comes to the affluent segment. And next comes SMEs. As I said at the beginning, we were market leaders. We had approximately 14.3% market share in SMEs of almost BRL 300 million a year. But notice what happen here. We've built a much more robust segment with a new digital model with a new value proposition. So mostly digital and remote service and also companies and business segment. This is a segment where we introduced 150 new branches during 2024, and we changed the segmentation of the business segment. The configuration of the management model for managers, we delivered a new Internet Banking an new app for companies and look at what happened to our NPS. These are numbers that were not disclosed before. We went from 56 to 74 points. So I'd like to say that nothing happens by divine order, it happens because we work hard in the backdrop and we execute based on the plan. But I will draw your attention to say that we have more than 5,000 managers in this segment. And we are present in 2,100 service points, and this adds value to clients. Regardless of having this level of evaluation in metrics with a robust capacity to serve clients because they can't do self-service and at the same time, have a very good experience. But we can still serve these clients in the physical channels. But I would like to draw your attention to something that I said at the beginning. We had 14.3% share. We are leaders in this market, but what happened up to September 2025. We gained market share. We reached 16.6% market share, and we continue on the right track in terms of this segment. Our purpose, not only for 2026, but for a more distant future is to increase our penetration in these segments. And we believe in this was stated in the diagnosis that in this segment of up to 300,000 a year of SMEs, it's a segment that tends to increase its share in the financial system in the next coming years up to BRL 300 million a year. And I mean, payments and cash. I'm not going to get into many details, but Bradesco Global Solutions with global cash, and obviously, our goal is to increase the share of wallet and customer centricity through time. I mean credit we introduced a credit view. Of course, I will talk about cause and effect, because as I said, things don't happen by divine chance. We introduced the credit BU at the beginning of our plan, and we thinned this business unit. We introduced a portfolio management area. They are working on different client segments. And they are also operating in the life portfolio, be it in Wholesale and Retail bank, Customer Finance, et cetera. So within this business unit, we also introduced a new pricing area to serve all segments and businesses, all the verticals I mentioned to you before, and all of them to generate more risk-adjusted return, and this is a very important part of our strategy. But when we put this together I told Andre that we wouldn't get any lack of resources. There will be enough resources. So to that end, we hired 250 professionals and we gave them full technology support to enhance the models for all customer segments, also to manage the portfolios. And looking at the time line of credits and loans that are not only decided on prediction models, but mostly decided by human judgment, and then support all of it, and the consequence is -- that this SME growth level is still the same that we have with payroll loans. And if we hadn't put this together in the way it is, certainly, we wouldn't be growing SMEs the way we've been growing today and the way we grew in 2025. And what do we expect in terms of our objectives. This unit together with the clients segment. We want more competitiveness in some lines and segments, but growth with quality and moreover, a very strict risk adjusted returns. We have also many other initiatives. Maybe there is one that will take longer to deliver. But our clear objective is not only to have back office and front office. But moreover, having an end-to-end experience that we really boost our productivity. I mean, model culture, in addition to the area led by Silvana, which is people -- they are contributing with up-skilling, re-skilling. And despite everything we are doing including new variable compensation KPIs, et cetera, we conducted a new survey new engagement survey, 84% engagement when compared to 74% postpaid in the survey of 2024. And that's why we are focused on keeping a very engaged team and fully committed to everything we want to do with the capacity to change as well and adjust. People are crucial, competent teams and teams that can certainly deliver and change as we go so that we can deliver more competitive goals in the short and long run. So organizational structure was the first thing I showed during the plan. So we reduced layers. We reduced the span of control -- I mean we increased the span of control. And -- we brought C-levels and Directors to different areas. I talked about the credit area more recently, but we also promoted inorganic growth. I'm not going to get into the details, but in the Insurance company as well with the hospitals. And what do we expect out of this organizational structure. To gain more efficiency and agility, when it comes to decision making. Technology. This is a chapter that I've been talking about all the time for investments in AI. For us our culture is AI first. AI first and AI is not just GenAI, but it's machine learning for our mathematical models, but also multi-agents who have been working with a number of initiatives on the slide, I spoke about BIA client with that level of retention using GenAI. But we have the BIA Core, BIA Tech and BIA Client so on and so forth. So what happened in these 2-year period. We gained productivity. We reduced lead time and the consequences was this that I mentioned before. With a base of 100 of delivery of apps for clients internally for review processes, and gaining productivity of a regulatory points we ended 2025 with 300. We grew our capacity by 3x over -- less than 2 years. That's when we started this whole move. We invested and we've invested in cybersecurity. We have -- we improved our second and third lines of defense for cyber, and we expect greater productivity gain. More and more intensive GenAI use, but more competitiveness, and innovation and time to market. And I'd like to mention some other things here because I'm going to get to the numbers in a minute and we'll speak about guidance eventually. But we invested last year, invested heavily in technology. Investment in technology grew in 2025 compared to 2024 by 22%. And if you look at our guidance, which I will refer to in a minute of those about 8% of growth approximately, about 3% or slightly over 3% come from the investments that we will continue to make. We will not give up on investing. I see technology is a big driver of our productivity and our ability to deliver a lot more to tech clients with hyper personalization, which we have been doing, and during the Q&A, we can speak more about that. Synergies and Innovations. We had a number of actions with Cielo. Tap-on-phone, D+0 receivables discount all invented in our corporate app. In Bradesco Financiamentos, we also gained investment with new hiring, not just efficiency in the unit cost, but commercial efficiency of Bradesco Financiamentos. And what are the next steps, we expect -- well, with the next step to increase our share of wallet, increase growth, productivity and innovation with different verticals that we have in our organization. And now speaking again about profitability to give you more numbers. I mentioned that before, and feel free because our team is ready to talk with you and explain this in much more detail. If we look at the net income. I always tell my team, this should be the last slide and not in the first because again, we speak here about the cost and effect and this is the effect. Effect of what? Effect of a plan that is been executed and that is showing how our capacity revealing and improving, the strengths that we talked about, but strengths that were driven by actions of the plan and we have a growing number. 8 quarters delivering always a little bit more and step by step, we don't change these strategic plan overnight. You correct of course. You correct the tactics, but there is a strategic continuity, with execution discipline. And this is -- it called also discipline, we are showing this with our the team in the transformation office. Moving to total revenues. We are growing in all revenues. NII, we see here, the growth in NII and fee and commission income. When we remove the Cielo tender offer, the growth is 5.5%. Insurance investment plans of 16.1%, another robust quarter and growth expectation. But why is all the revenue growing? Again comes into the effect. It's not by divining profit. It's by increased penetration, credit trading traction in NII, a reduction of liabilities cost better liability management and so on and so forth. With all the initiatives adopted. Looking at our loan portfolio almost BRL 1.1 billion in December 2025, and the previous quarter, we were at BRL 9.6 billion and now BRL 11 billion. The highlight goes to micro-small medium-sized companies growing 21.3%, and that's why we're gaining share. And by looking at all of the portfolios, we are growing in all of them. Again, why are we growing? We are growing because we have a client base. We've grown because we have high penetration in all client segments, and in the verticals that we work with, and so when this supported, because we have an engaged team. A team that was supported by client management systems, GenAI, a better offering for clients. In a nutshell, it is a set of measure that we improved over this period. And looking at the portfolio, and the loan quality indicators they are all flat over 90-day NPLs totally easy. Over 15 days, if we look on the slide, it's absolutely flat, we structured our portfolio with the BRL 10.5 billion in 2025. BRL 20.5 billion reduction of problematic assets. Look at our stages. Stage 3 dropping quarter-after-quarter. Stage 1 increasing quarter-after-quarter with the evolution of the secured portfolio. So we are totally at ease with our loan portfolio and with our ability to continue to originate even more and particularly with some levers. Net interest income 14.9% increased and the client NII up 17.4%. Again, this is we see 17.4% to growth, in here, this hits the bottom line, BRL 4.8 billion to BRL 10.3 billion, growing 22.6%. Cost of risk, absolutely under control and quite and market NII delivering our expectation -- expectation of our treasury. Fee and commission income grew at the proportion that I mentioned before, but please note I should highlight 3 card income 14.4% increase in high income 25%. Construction management. There is a lot of traction, growing 17.3%. When we look at loan operations, we have a lot of traction as well. Why is it not growing? Because part of it has been deferred because of the Resolution 4,966. But look at what happened with capital markets. 29.2% increase full year '25 compared to full year '24. This was not divine providence again, this is investment. We changed the structure with Bruno's team and the whole team, we created the agribusiness segment. We changed our investment banking structure to broaden Bradesco's team and capture a lot more in DCM, M&A and other line items such as project finance. The result is this level of growth. We have a DCM share, that we had in 2022. So we grew, we're doing well in the rankings, and we continue to grow. But there are 2 offenders here that do not help these levers, which are checking account and collection, which normally in this market pull the results down. But overall, we are delivering and we're delivering well. Operating expenses, 8.5% increase. I told you and I will repeat it. Investments in technology. We grew 22% of technology investments in 2025 compared to 2024. And we will continue to invest in technology. But if we break our expenses down into personnel and administrative, where we grew 5% in line with the average IPCA. POR is one of defect on expenses with our profit sharing patent, this would be 2.5%. We continue to reduce our footprint -- if we look at the complete period. 2,800 points, and if we exclude EloPar and Cielo as we have been doing in past quarters, growth of operating expenses would be 7.2%. But in the Q&A, if you want you can ask and we can debate administrative expenses, but overall growth was negative. We have personal expenses with this variable that I mentioned, the profit sharing program and investments in technology, in transformation. For example the whole implementation of the 59 Principal office almost 50 more will be added next year, so we continue to invest in reviewing our footprint and focusing on the necessary investments in each one of the departments to help us grow. Our Insurance growth, another strength of our organization. ROE 24.3%, but in the full [indiscernible] 22%, spoke about this already. We are growing in all lines with a lot of balance. Client base growing. I was checking this with Ivan earlier today. The result of insurance operations exceeding the guidance of 16.1% and growth in operating results, and not necessarily in financial results, with technical provisions of 446% (sic) [ BRL 446 billion ] growing more than 10% year-on-year. Moving to the end of my presentation. When we'll look at this capital discipline. We have year-on-year growth, if we look at December 2024 compared to December 2025 in Tier 1, 12.4% to 13.2% and the quarter there is a slight reduction of 20 basis points in common equity in Tier 1, but if we look at common equity we also posted growth year-on-year up 0.7 percentage points and this is something that I mentioned with all of you with the sell-side, with the buy-side. I spoke about this that we have this under control. And lastly on guidance. Well we delivered at the top of the guidance impacting all items in expanded loan portfolio we were growing 9.6% in September and we ended up with 11% good, because of our traction and the ability to execute. We start 2026 with even more traction. Insurance operations 16.1% beyond the guidance and we have the guidance for 2026 listed here. I am here and I'm ready to discuss this with you and now I will sit down with my colleagues Andre Carvalho IR Officer and Cassiano for us to start our Q&A. But I would end my speech saying that we have heard comments since last night, when we released the results, post the results, some positive comments regarding the 2025 numbers. I didn't hear anyone saying bad things, negative things, but the expectations were much higher for our 2026 guidance. Our share between December 31, 2024, and today is Feb, 6 had increased 106%. Appreciated a 106% -- so it is only natural, its part of the game of sell-side, buy-side to have price adjustments. Not 29%, it's 27.5%, of the middle of the guidance, it's up to you, but we will not loose sight of our horizon because the shares have to be adjusted by 5%, no problems. Can you imagine today with the level of conviction that we have, with the level of the delivery that we have, I am super confident in our organization. I'm happy. I had the meeting yesterday with our leadership team with the level of engagement we have in our company. So Andre over to you. Thank you very much for joining us in this call. Andre Carvalho: [Interpreted] Good morning, everyone. Thank you, Marcelo and Cassiano. I would like to let you know that Ivan Gontijo, CEO of our Insurance company is joining us remotely. To start the Q&A session, I would like to present 3 alternative for questions. [Operator Instructions] The first question comes from Pedro Leduc from Itau BBA. Pedro Leduc: [Interpreted] Good morning, everyone. Thank you for the presentation and congratulations on this wonderful year in your trajectory. My question is related to how you see the underlying business trends? So we could look at the NII guidance, less LLP. I mean I think you're going to grow low 2-digits, slightly above the portfolio. I just want to understand what's behind it when we think about NII in isolation or LLP, I think these 2 things have to talk to one another, but to understand what is part of it, so that I will have a good idea of your views about mix, spread, credit quality as you know, the year is just beginning. Marcelo de Noronha: [Interpreted] Okay. Pedro I will start, Cassiano will start as well. It's good to see you again, Pedro. Our NII remains focused on our standard. We changed our mix for 2025. Secured products remains our main lever. Obviously, the quality of our credit BU allows us to work in any credit line secured and unsecured we're very, very comfortable with the quality of our portfolio and the way we are operating it. The average rate should be maintained until the end of the year. And our LLP should grow in line with our operational. These are the main drivers of our NII, and we will maintain it with a very high degree of engagement. Cassiano Scarpelli: [Interpreted] Okay. I have a few things to add. It's important to say and highlight what you just said. Portfolio mix, spread level, always focusing on risk adjusted return. This is the goal, and I also talked about pricing. The pricing area comes to reinstate that point. I mean we have some very important levers that go through different segments like payroll loans in all of its lines I'm talking about public and INSS and private. We have approximately slightly above 14% market share. But I would like to remind you that we have the lowest market share on the private side. So we have a lot of opportunities, and we already saw this level of growth. And I would just like to add that we are I mean, we are placing our hiring offering. It's 24/7. And this is hyper customized with microseconds, that go and come and already respond, give us a response about the risk of the borrower, the company and pricing, which is adjusted to risk, it's risk-adjusted pricing. Therefore, I'm saying that we will grow in payroll loans. We see a lot of traction coming from the clients. INSS has its own challenges, market challenges. It's not all ours, but in previous quarters, year-over-year, we were growing 5%. And now in this past quarter, we grew 6.8%. But this is payroll loan, SME, we are still growing, and we will continue to grow in lines with secure lines backed by receivables, be it direct receivables or some lien, et cetera. So we will grow with auto for companies and individuals. We are very optimistic in terms of future growth with the credit quality that it's absolutely under control. I do not see any deviations. We are not concerned with that, because certainly, you know that we did our homework, when it comes to portfolio management and our modelings team. And then you also mentioned an important aspect. You talked about NII growing slightly above the portfolio. Well, this has to do with the mix. We are a wholesale bank, we can fluctuate as it happened this quarter on the positive side, but it could also fluctuate on the negative side because we do the turnover of the portfolio. Andre Carvalho: [Interpreted] And the next question is from Mario Pierry with Bank of America. Mario Pierry: [Interpreted] Congratulations on your results. We understand that a lot has been done in the first 2 years, but you still have a lot more to do going forward. But what you have already demonstrated is that you are on the right track. Right. I have 2 questions. You had an additional expense of BRL 700 million. You spent that to restructure and the structure that is suggested for 2026. And this is almost twice as much in terms of provisions you posted last year. So could you please highlight where these restructuring will focus more, whether it has to do with the number of branches? And we understand that we are getting a lot of questions from our clients. Your guidance says that you will grow expenses by 8% at the top you said it's 3% relates to investments and technology. This also means that the rest of the bank will grow or is growing 5%, in line with inflation. And just like you said, you already reduced -- 2,800 points in the past 2 years. So how come expenses are not growing below inflation? That's why the consensus, I was hoping for a number close to BRL 20 million rather than BRL 27.5 million. We thought that the bank's core expense should be growing below inflation? Marcelo de Noronha: [Interpreted] Well, thank you for your questions. If you look at our admin expenses, and if you look at some of the lines in our full publication, you will see, okay, third-party services, maintenance, conservation, lease, all of these lines were down and transportation, transportation of currency. So what are the detractors here? I'm just summarizing, there are some that are very positive. But technology, I mean, it grew 22%. And when we look at it, it will continue to grow. We will continue to invest, to increase our competitiveness. Second, I mean, profit sharing, we increased profit, and we paid out more. And the third detractor. I'm not going to refer to small lines. We had some changes on the advertising side. But we found 3 good opportunities at the end of the year, and we decided to invest like when we launched Principal. And that's when we did the coverage at the airports. It's out of what we expect us to do at that time. And thirdly, there are other expenses that also go through some lawsuits, we have a very good provision coverage. We've been working a lot based on this root causes. And when you work in that root cause, you do not expand the incoming, but that is coming down with time. So I believe that these lines will be below 27%, 28%. And this is what you look at when you look at expenses or other expenses in addition to expenses with technology. And talking about investments in restructuring, I would tell you that, first of all, we continue to review the footprint. We were doing less than -- less than what we would do in 2025. And so we will do more than what we did last year. But we will open, as I said before, about 50 offices earmarked for Principal. But we are also refurbishing some physical stores with private, meaning that we continue to invest in this transformation, making footprint adjustments also increasing our capacity to invest more and reduce cost to serve, in Retail and Digital. So our cost is 40x lower. Cassiano Scarpelli: [Interpreted] Well, thank you for your question. There is one more thing I would like to add in addition to the 3% you mentioned in terms of technology investment. 5% is only related to human resources. Well, that's important to remember, in addition to profit shares. You will see that our expenses are very much under control. There is one more thing because you said that was twice as what it was last year. If you look at 2024, it's very close to the number that we posted in 2024. Maybe the difference is about BRL 100 million. 40% higher on average or greater than average. There is another point related to efficiency. Our efficiency ratio was down by 2.2%, from 2.2% to 50%. So our ambition is to reach 40% by 2028, meaning that the trend is downwards in 2026, and this drop will be even more accentuated in '27 '28, when the top line grows a lots, it's just natural that some OpEx to see growth with OpEx. And our top line growth will be almost 10% in 2026. Also, as you increase transactional, certainly the variable cost I mean it's different even with scale. Andre Carvalho: Next question is from Gustavo Schroden with Citi. Gustavo Schroden: [Interpreted] Congratulations on resuming ROAE starting from 10% to 12% now over 15%. I would like to think a little about the investment cycle, more specifically and linking with operating efficiency and efficiency ratio. Marcelo you're very clearly showing, and I heard an interview you gave, when you said that you won't stop in investing, but the focus is to maintain competitiveness. And is that you're thinking about the future of the bank in a sustained fashion. So I'd like to understand, what part of the cycle would you say the bank is in? Particularly in terms of technology investments or investments in new product or segments? And should we start thinking -- should we start thinking about the benefits coming from operating leverage operating efficiency, and reducing efficiency ratio, thinking that in 2026 revenue should continue to support the step-by-step ROAE improvement, so that in '27, we'll start seeing the benefits of operating efficiencies? Marcelo de Noronha: [Interpreted] Gustavo, I would say that we are in the middle of the cycle. We are not at the end of the cycle. If you look at our plan, we spoke about stretching this until 2028. And along that period, some things are quick wins. You capture the benefits in the short term. Other things we invest in and you're going to reap the fruits later. We'll continue to invest in the whole renovation of the bank. Look at some U.S banks and Asian banks and what they have been seeing in September, I was in Asia I had an opportunity to talk with CEOs of other Asian organizations and to speak with peers of that region, and everyone is investing again in AI first, we see opportunities to improve efficiency and to gain competitiveness in our relationship with our clients. I will not stop investing. We want to improve our infrastructure, our architecture constantly in terms of technology. So efficiency doesn't come only because we're going to invest less -- and I'm going to give you my opinion. In the opinion of all world banks. I don't see anyone stopping investing in technology. Technology will require growing constant investing over time. That's my opinion. But we're going to gaining in other lines. For example, loss expense and areas, where we are going to have a reduction not only in 2026. So we have to have efficiency gains, and we will have these efficiency gains -- but this will be driven to the top line. Gustavo, you can ask me, if I don't deliver the top line, but I want to deliver the top line. Increased penetration continue to grow and delivering ROAEs even better than what we currently have. My colleague yesterday said an airplane will never fly backwards. We are not going to fly backwards. It was 15.2% in this quarter, and we expect it to increase, if we can deliver more and more, which was the case of the loan book in the past quarter, we will do it. Andre Carvalho: Next question from Daniel Vaz with Safra. Daniel Vaz: [Interpreted] Congratulations on the results and the delivery, since the beginning of the strategic plan. I think it's -- we can see how dedicated the management is in readapting the bank and improving the whole quality of the portfolio while still growing. My question is focused on Cielo. Cielo is a strategic asset of yours. You're talking about integrating Cielo, particularly in SMEs, integrating Cielo even more. It's already partially integrated. But in terms of TPV, Cielo had a big difference compared to the network. So perhaps we're thinking about those big accounts, not SMEs. This is an important difference in trajectory. So I'd like to hear from you what is the strategy for the large accounts? Perhaps there's a loss of profitability and you don't want to change that? And in SMEs, you advanced a lot also in terms of governmental programs, and that's an important liquidity for the system. But the Cielo part in terms of strategy, the strategy is not so clear to me in 2026, '27. I'd like to understand what is the integration stage we're at. Cassiano Scarpelli: [Interpreted] Well, thank you, Daniel, for the questions. #1, regarding Cielo. Cielo has also been undergoing a process of transformation, which is rather significant. Over there, we created separate teams for the 2 partners. Today, we have a connection at different sites with the Wholesale and the Corporate Retail segments. And we worked with them in a plan and so that we'll be a lot more connected in a verticalized way. Talking about cash and talking about affiliation, more than having a segregated company, where I would originate something and they would work with it. No, they have to improve logistics. They did. They had to deliver tap-on-phone. They did, deliver. They had to deliver a whole new pricing system for D-0, they did. They needed to deliver a connection to our app. We delivered it together. So all of that is done. But you're correct. I think that there were 2 or 3 cases, I don't remember, 2 or 3 of large accounts. And the similar team went to the limit and took it to the limit and decided to give up the TPV, which was important rather than losing profitability. So we see an ability to grow and grow a lot because we are very accelerated and tractioned in SMEs, and we reduced the attrition with our distribution channels. And this is an army of more than 5,000 managers in addition to all of the digital offering that we have. So we are going to move forward. You can rest be assured of that. But we are not going to throw away money with margins that are effectively very reduced. Regarding SMEs, our SMEs, we are growing not only in government clients, our expectation is to continue to grow. With a very similar number that we had in 2025. Indeed, we haven't got that final number, okay, Daniel, the final number regarding government or total government programs. But we have an estimate. And the estimate is that we had 26% or 25% to 26% market share. We were the bank that operated the most government clients last year. We have an initial estimate, our own estimate, not market estimate, but let's wait for official data, but that's kind of that level. We have good traction, but we can only do all that because of the kind of structuring we have in the SME segment and also because of our technology deliveries, our ability to hire through our digital channels, the whole modeling of the Credit BU portfolio management. So we are not granting credit just because we have a government guarantee. We have a lot of criteria, and it's always about RAR, risk-adjusted return. We have a program to price each one of these government programs. So, we have a lot of traction. We ended the year with high traction, and we believe that we will continue to deliver good results and Marcelo? Marcelo de Noronha: [Interpreted] This is one of the important pillars of technology this year. We created our app for business with a totally different technology embedded to it. And this is a very important reinforcement for this. Yes, we're migrating 500,000 clients to this new experience that Cassiano just mentioned. So that's another important information. We are increasing our competitiveness with Cielo being integrated. Andre Carvalho: Next question from Yuri Fernandes with JPMorgan. Yuri Fernandes: [Interpreted] I mean, your long-term view -- your long-term view, I mean, I know sometimes it's not easy to invest in the future, but you are delivering improvements gradually. So congratulations for it. I mean my question is about capital. I mean CET1 is very close to 11%. I think this quarter was 11.2%. But for 2026, there might be some challenges. There are some prudential adjustments going forward, 49.66% operating risk. So can you please elaborate a little bit about the capital outlook, whether CET1 should remain at 11%? Or maybe possibly it will be slightly lower and you would just gradually increase it. And in addition to that prudential adjustment, my other question has to do with your portfolio growth. I mean, you posted a very positive growth message. And like you said, the bank is well tractioned. But this 9.5% growth in the portfolio with retained profit, the retained profits in the middle of the guidance also might imply some capital consumption. So going back to my question, will it remain at 11% or it will go slightly above? So if you can tell me something else about CET1, I would appreciate it. Cassiano Scarpelli: [Interpreted] Thank you. You were constantly provoking us about this topic, and I really enjoy your provocation. So thank you again for joining us today. I would like Andre to start answering your question, and then I will follow through. Andre Carvalho: [Interpreted] Thank you, Yuri. In terms of CET1 of around 11%, that's what we expect to have throughout 2026. We are here talking about loan book growing at 9.5%, and we look at full CET1 of 9.2% in the first quarter, going up vis-a-vis what it was in 2025. So interest on equity that was BRL 14.5 billion last year, it will go up this year for above BRL 15 million. Our capital absorbs that portfolio growth increase in interest on equity. And here, we also have DTA, like you said. So CET1, it's around 11%. In the first quarter of the year, we know that we have the regulatory measures, operating risk, the Resolution 4,966 issue. So everything has been computed whenever when we mentioned CET of around 11% for this year. There might be some fluctuations, but it will be around the 11% number, but our baseline is 11%. But there might be some fluctuation for the reasons already explained by Andre, but it will be around 11%, and this is important. Cassiano Scarpelli: [Interpreted] Yuri, I would just -- I'm not going to repeat what they said because this is what we expect to see. But 2 years ago, we told you that we have a lot of discipline when it comes to capital. And every year, we review our DTA or tax credit horizon for 10 years, meaning that we are constantly monitoring that. And we also evaluate all of the opportunities as you put it yourself. Therefore, we are constantly looking at that. And back then, we said that we would have enough capital. But look at our allocation in our loan portfolios. Turnover of the wholesale bank therefore, everything we are doing is very well planned and coordinated. So I can even go further. I think we can surprise you more than anything else just in terms of our CET or common equity. And of course, net income will grow and our return as well. Obviously, [ 14.67 ] is a challenge more for some banks than others. But it is for the period of 10 years, but there is an intersection here, which is '26, '27 and '28 are the heaviest years. But after that, when the horizon may change. Therefore, we are very confident about everything we are doing and in terms of the capital that we are allocating. Well, thank you for your provocations. Andre Carvalho: Next question from [indiscernible] with Santander Bank. Unknown Analyst: [Interpreted] I would just like to revisit the payroll loan. I think you said something about it, but if you could elaborate a bit more about your appetite and expectations for payroll loans and more specifically private payroll loans? And I know that on the public side, you gained some important and relevant market share. Cassiano Scarpelli: [Interpreted] Well, we are very, very well positioned to grow. Gain market, of course, that depends on the competition, but I think we are well positioned to gain market share. Well, we gain market share on the public side, INSS that involves a lot of market discussions and things related to the management of INSS, when it comes to payroll loans. But we are also very well positioned with INSS. But on the private side, we tend to increase our share. And as I said, we deploy models that are highly competitive 24/7. We are growing. We've seen that in the past quarter of 2025, the last quarter of last year, and we will see the same things happening throughout the year. Therefore, I'm very optimistic in terms of everything that we are doing to grow and to gain share. Andre Carvalho: [Interpreted] Next question from Renato Meloni with Autonomous. Renato Meloni: [Interpreted] I'd like to second my colleagues and congratulate you on the deliveries, since the plan was announced. I think that the results show the whole work that was done. Over the year, you showed a lot of ROE expansion. But when we look at the guidance at the midrange, ROE similar to that of Q4. So I'd like to understand, do you expect 2026 as to be a year of accommodation of settling or the uncertainty regarding the elections made you be more conservative in the guidance? Now moving to 2027. If we have this scenario of accommodation, I think that in 2027, we bring ROEs to more reasonable levels. What would be the levers in revenue to increase profitability? Marcelo de Noronha: [Interpreted] Renato, thank you for the question. I'd say that I don't see a year of settling for us. I think it's part of our plan. Again, we will improve step by step because we'll continue to invest to increase competitiveness. I don't want to be repetitive, but this is our mantra. We focus on this all the time. Regarding the ROE, again, it's kind of an internal joke. Yesterday, we were laughing about this. An aircraft will not fly backwards. So there's no chance that we'll do less than 15%, 20%. Actually, Andre, you might witness and Cassiano as well, I said a year ago, I'm more optimistic. I'm more pointing to the upper range of the guidance than focusing on the lower band of the guidance. Of course, this year, I'm a little more optimistic. So what we actually saw, Renato, is that the market somehow started bringing the expectation of our net income to BRL 30 billion, BRL 31 billion. And the role of IR is to correct the course. You don't have a 30%, 40% leap year-on-year because we continue to invest in our transformation. Remember that. I see a higher and growing ROE. Indeed, you mentioned the macroeconomic aspect. It is true. We should have a little more volatility in the second half because of the elections that is only natural. But I am optimistic regarding what we are doing and our ability to compete in terms of the expectation of our economists we'll have the GDP growth and unemployment rate very balanced. So we have a lot of opportunity for growth. With the interest rate cuts, they happen a little faster. This will help some companies regarding their costs, if they are a little bit more leveraged. So of course, the macroeconomic environment does have an influence for all players in the market. But I see us with a lot of opportunities to grow the ROE. And if we can deliver superior absolute results, just like the loan book that grew 11% when in September, it was growing 9.6%, we will do it. We're not wasting time. We're not wasting space or losing space. And please remember what I explained here, Renato. We are well aligned, increasing penetration. I spoke about Principal segment, SMEs, Corporates doing well, the Insurance company. I mean, they are delivering a lot. And there are several verticals. Earlier today in the press conference, Ivan spoke about the continuity of growth in pension plans, active distribution there. So I see 2026 with optimism. I think that there is some a structural issue in Brazil. In terms of the fiscal aspect and the public debt. But if we're able to look at the public debt regardless of the presidential candidate, if we improve that for 2027, '28, we'll improve the market expectations. And he asked about the levers to increase profitability. Cassiano Scarpelli: [Interpreted] Renato, I can say that it's almost everything, credit. We're growing it with the right drivers. But we are not operating in the higher risk segments for credit card, mid-income and high income. In lower income, our risk appetite is lower. Credit is a big driver. Liability management, the liability management we've been doing and the growth that we've been posting and we've posted a lot of growth. Fee and commission income, the main levers and the detractor. So that's another line. The insurance group again. And in the other areas, payments, our consortium business at full speed, the ability for auto loans in our own channels and external channels and so on and so forth. So I see a lot of opportunity because our organization is diversified. We have different revenue sources at different moments. And this year, we will review the channels, and this will increase cross-selling a lot. We spoke about Bradesco Expresso, distributing a lot more consortium, operations, insurance, payroll deductible loans, but also Bradesco Financiamentos selling more insurance. So we have a number of opportunities for cross-selling. Our business app that we'll have Cielo will soon have insurance, dental insurance. So it's all part of operating leverage for us. Andre Carvalho: [Interpreted] Next question from Thiago Batista with UBS. Thiago Bovolenta Batista: [Interpreted] My question has to do with what you just mentioned, good performance of the insurance group. In recent years, the share of the insurance group was about 20%. It got to almost 50% in 2023, and it was dropping. But in recent quarters, it became relevant again. I think that in consolidated income, a much higher percentage came from the insurance group. This is due to an ROE of 18% post to that. But in the sister banks too a bit under pressure. So 2 topics, 1 is the relevance, when I think about the midterm in 5 years' time, how much of the results should come from the insurance group? And #2, is the power of the organization hurting the consumption of DTAs of the bank. In 2026, will DTAs start dropping or not? Cassiano Scarpelli: [Interpreted] Thank you, Thiago. Well, the insurance group is not getting in the way in terms of consumption of DTAs, and that is important to mention. What we have been saying in terms of DTAs is that this is a year when we will try to neutralize the nominal portion. We'll see a reduction of DTAs in 2027, '28. And this is part of our plan stretching until 2028, as Marcelo mentioned. And that is super important. And I think that we've had the best allocation possible in managing the cost of capital, and it has to do with the tax credit. What was the second part of the question? Well, a comment to make periodically, the insurance group also pays dividends to the controlling shareholder. So we declare it and repay it. So you see the insurance group is a strength to us and not the other way around. It is diversified. It is the biggest insurance group in Latin America. We have a huge traction in the bank's channels to distribute insurance, but we also have external distribution of insurance, reaching out to other clients, which were not necessarily reached out by our internal channels. But we don't hope that the insurance group will do less. We want them to do more. We have an expectation of growing even more. This is what we are seeing. The bank is investing a lot. We're investing in technology, 22% in 2025 over 2024. The bank is investing in technology. And sometimes, we capture the value considering BF consortium and so on and so forth. So what I see is, over time, we should have 2/3 from the bank, 1/3 from the Insurance group. But if this means that the Insurance group will grow a lot more and have a bigger share, I'm happy. I want to deliver more. And this is our expectation. We are very pleased with the results there and with the other related companies. So you'll see that we will be taking off in our ROE and absolute profit. Andre Carvalho: [Interpreted] Next question from Matheus Guimaraes with XP. Matheus Guimarães: [Interpreted] Congrats on the results. I would like to revisit the SME topic. I think Andre talked about market share, and that was a relevant information. And historically, this has been the bank's strength in SMEs. But we've seen some competitors, even new bank talking about SME. Of course, the concept of SME varies in terms of the size of the company. But what would we expect for 2026 in that portfolio? Because given that this is a very relevant portfolio for you in terms of growth and even in terms of growth going forward. Cassiano Scarpelli: [Interpreted] Matheus, thank you for your question. We are very pleased with our position. In reinstating our position, I must say that I've been working directly with Jose. Jose is the VP in charge of that area, but I've been working with all of my colleagues, [ Alexandre Pinheiro ], Mario [indiscernible] Marcelo, the entire corporate team or company team and also wholesale bank with Bruno, et cetera, and the middle market team. First of all, we always look at what places the Central Bank in terms of assets, companies up to BRL 300 million a year because this allow us to draw a comparison. Competition in this area is very fierce. We always knew that. But our distribution strength is very important. We delivered a lot in digital channels. We hire government progress through digital channels. The journey is very efficient. And we continue to invest. If there is a place to put money, it is precisely in SME, micro and small and midsized companies. The levers continue to be government lines, but also, we provide funding to company vehicles and other investments that have even sounder guarantees, prepayments to suppliers, all of that, it's part of our journey. But then when you look at the digital need with the new Internet app, I mean, a new app when we are migrating over 500,000 clients. The retention rate has been enormous and great growth opportunity and the commercial team in the back office is supported by GenAI and new tools. We just deployed Salesforce back in 2024 for the company segment. And now we are expanding that with the entire business segment and the previous platform we had so we can manage this whole set of things much better with more than 5,000 managers in 21 points of sales. I am very, very pleased with the results. So look at the level of market share we have and see all that we were able to deliver in terms of our loan portfolio. And that was not by chance, but rather because we implemented in new tools, new segmentation, new tools to our clients, new experiences and certainly with business unit models and products that are much more suitable. With SMEs, Matheus, not only we reduce the risk, but we increase penetration, and this is what we have to do. AI is here to help us. There are things that are a lot of -- involve a lot of machine learning and other things involve Gen AI. So there are things that we do to manage our portfolio, some predictive default models and engagement to grow, this means the client life cycle of a client totally connected to our analytics via CRM, which has also been revisited. Therefore, we are sticking to our position. I mean, going from 16.6% to 17% or 16.4% that's not what changes the game. We have to continue to grow and at the same time, reaching our fair share of everything that is important to us. And I'm very much aware of our potential and the growth that we can post for either corporate and individuals. Andre Carvalho: [Interpreted] Next question from Carlos Gomez-Lopez. Now I'll turn into English. Carlos Gomez-Lopez: Congratulations on your second year of -- under the new management. I had 2 very brief questions. The first one is about the absence of cockroaches, as you call them, bad corporate cases. We haven't had any this quarter? In your guidance for the next year, do you expect corporate defaults to stay where they are? Or do you incorporate some deterioration? And the second is, could you comment on what tax rate you expect for next year? Cassiano Scarpelli: Carlos, the answer is no for the first question. Andre Carvalho: [Interpreted] But Andre, you can just start answering on the tax rate, and then I can add if necessary. Cassiano Scarpelli: [Interpreted] Okay. The tax rate that we are working is between 16% and 21% and 18.5% or 19% to calculate fixed net income. And why is it that the tax rate was 20% in 2025, and it dropped a little bit. First of all, because we anticipate higher payment of interest on equity, like I said, BRL 14.5 billion in 2025. So I'm saying between BRL 15 billion and BRL 16 billion in 2026. Certainly, this is a number that certainly depends on interest on equity to be announced by the government. It's not a fixed number. This is just the best estimate, but we anticipate growth in IOE, so that we can take more advantage of the embedded benefit. And secondly, is what Marcelo said, part of our investments bring about competitive gains. And like consortium. We've been highlighting that almost every quarter, we could also talk about auto financing that had posted a good performance in the past 3 months. We have several examples, even with BBI. All of the companies are posting very strong performance, and this helps reduce the rate -- tax rate. That doesn't mean that this is operating weakness. But on the contrary, this is very well distributed. And this year, in particular, the tax rate will drop a bit. I mean, depending on the company, the rate is different. The insurance business has a lower tax rate. I think this is the answer. And we have no concerns when it comes to the wholesale bank. So thank you, Carlos. Andre Carvalho: Next question comes from Tito Labarta from Goldman Sachs. Daer Labarta: You may have just answered it, but just wanted to make sure, right, because on the -- if we do ROE on a pretax basis, it's actually been a little bit more stable throughout the year, right? And I think on the guidance, our tax rate will be a little bit lower. Just because of the tax benefits you have, I think as your profitability generation improves, I would expect that tax rate to go up. And I think you mentioned the insurance tax rate is a bit lower. But just to understand, in terms of the underlying sort of earnings potential of the business, do you think that keeps improving? Or do you think this tax rate sort of remains low because of the tax benefits that you do have? Just to kind of think about excluding the tax rate, the ROE of the business and how you see that continuing to evolve? Cassiano Scarpelli: [Interpreted] Tito. Regarding the operational results of the group, the operational results of the group before taxes grew 27% in 2025, very strong. Secondly, looking at 2026, the answer is no. Yes, we will post strong operational result growth. And it's not about a weaker operational and a lower tax rate. It is all well distributed with Insurance, very strong consortium, very strong Bradesco Financiamentos, very strong. It's a very big group with several companies. When we consolidate it all, we see a small reduction of the income tax rate. Let me stress this Tito. We spoke about this in the other question. The insurance group has a smaller tax rate. If you go to other affiliates as well, for example, in payments, it's the same thing. We consolidate it all. And sometimes in one channel, for example, the complete connection of Bradesco Financiamentos with this one single channel for checking account holders or non-checking account holders. So I have -- it's a different situation sometimes. It's not the case of the tax rate, but there are other companies that have different tax rates, which is the case of Cielo. You see there is a mix of tax rate. And you should not forget that sometimes in the end of a period, there are some fiscal aspects, a certain law here and there. For example, insurance group benefited from that in the past quarter. They benefited from one law that affected the tax rate. So this is kind of what explains it, nothing different, as Andre mentioned. Andre Carvalho: [Interpreted] Next question from Eduardo Nishio with Genial. Still no sound. Let's move on and the question comes from Andrew Geraghty from Morgan Stanley. Andrew Geraghty: Congratulations on the great results. I know you have discussed at some length credit growth and some expectations for payroll loans, secured loans. I was hoping you could maybe elaborate a bit more on each of the different segments and how they fit into the loan portfolio guidance of 8.5% to 10.5%, kind of where you're expecting better growth, maybe where you're expecting some weaker growth and where there could be some upside by segment, if possible? Cassiano Scarpelli: [Interpreted] Well, actually, as Marcelo mentioned, we start 2026 stronger than we started 2025. We had a positive surprise in credit in Q4 2025. So we start the year already with a lot of traction. So we see a continuity of that movement. So what do we see in terms of trends? Very strong SMEs followed by individuals and then wholesale, wholesale competing with the capital market funding. As Marcelo mentioned, sometimes very high tickets making a difference. In Q4, positive difference for us. That doesn't happen all the time. But I think that the expectation, the prospects for the segments would be this, SMEs, individuals, wholesale, we have traction across all fronts, and we are ready to capture all opportunities. Right, but Andrew, there are some different situations, when we speak about the affluent segment. In Principal, we have relationship products such as investments, the credit card with a value proposition that is unique for these clients, totally different experiences for these clients. The same goes for Prime, which is different than the relationship for INSS retirees. For that audience, we offer deductible loans. And when we get to Prime and Principal, mortgages. So we have these mixes of products that sustain in these segments. And this is just to mention a few major. And in terms of companies, legal entities, we have a huge mix of products growing in small and medium-sized enterprises in different lines, by the way, increasing our penetration there. And with the wholesale bank, we are recycling the portfolio, and what we call OBD book origination for distribution, which is the case when the capital market spread was very crushed, we can compromise risk-adjusted return. So we don't work looking at that. So it is better to distribute than effectively keeping it in our books. And we have a set of fees, which are also important for us, in different lines of business. And there's also cash management. It is a super important platform for small and medium-sized enterprises as well as for the wholesale, we have a new technology platform, which over the year will bring us important improvements. That is another key point to improve profitability. Andre Carvalho: [Interpreted] Let's see if Nishio is back. We still cannot hear you. Not yet. Maybe if you remove your headset, maybe it will be better. We cannot hear. We're receiving a question about mass income. Okay. Tell me a little bit about the mass income portfolio? Cassiano Scarpelli: [Interpreted] So if you need any more information, I can add. Okay. Mass income is probably one of the major transformations of our banking cycle, since the beginning of our track record, our history. I think we are bringing some good news. I think Marcelo mentioned it quite well. 90 million clients are already fully digital in the mass retail with a totally different value proposition. But again, it's much easier to operate, not only they use BIA GenAI, but there is a specialist that can help with a customized sale, which changes the paradigm of having an individual physically present in a branch. The second relevant aspect is the engagement, our capacity to serve that client with Gen AI tools and integration tools that are very important to boost sales. And I think this has been a major evolution. We anticipate BRL 45 million. So throughout the year, we will be fully digital. This will be our mass retail bank. This is a very important aspect. And today, February 6, we already have 25 million digital clients because every week, the numbers are growing with zero resistance, zero friction with clients. And this has been a very pleasing experience, very good experience. And behind all that, all of that is supported by a very good technological platform for individuals, and this will encompass all the individuals. And I think we've been telling you about that in the past quarters, and this will certainly grow or help us decrease cost to serve, which has been significantly reduced, and this has an important correlation to our footprint adjustment. Andre Carvalho: [Interpreted] Well, [ Nishio ], thank you very much for joining us. I know you had a that problem with the sound. But thank you. We are always available to talk to you and also to welcome you here at the bank. And the same thing goes for our IR team. I think Cassiano gave you a good backdrop. Well, you saw more than BRL 40 million at the end of '26, starting with BRL 19 million, but engagement is increasing and improving. And certainly, we are able to reduce direct cost to serve by 40 fold. We are very committed to what we are doing. And there are still people that look at the physical space in the physical world, and we are testing different models all the time with our Bradesco Expresso, so that we can address these topics. And this is a challenge. In fact, I said that I went to Asia last September. And I heard comments from some banks, they have the same challenges we have when it comes to footprint adjustments, cost to serve and consumer. Therefore, an issue, we are sticking to our plan, and we will bring this year, and in particular, in the second half, more information about this digital retail. And thank you. Thank you, Nishio. And with that, we conclude the Q&A session. Questions that couldn't be answered right now will be answered by our IR team. And before I turn the floor to Marcelo to his final comments, I must say that this presentation and the full material of this release is available in our IR website. Marcelo de Noronha: [Interpreted] Well, thank you, Andre. Thank you, Cassiano. -- and I extend this thanks to all of our team, who helped us in this video conference. And thank you, our audience, for your interest and for the time that you spent with us. Its what I said -- I mean, this is the summary of our transformation, 8 quarters in a row, delivering good numbers with the focus that I said, without losing sight of the plan that we set up for ourselves step by step, but delivering improved ROE and improved absolute net income with a very engaged team with clients and with the Bradesco team. So thank you once again. And our team is entirely available to give you more details, not only about this earnings presentation, but also about our transformation program. Thank you all very much, and thank you for joining us.
Gustavo Rodrigues: [Interpreted] Hello. Good morning, everyone. My name is Gustavo, and it is a pleasure to have you joining us for our fourth quarter 2025 earnings video conference. As always, Milton will walk you through our performance. And afterwards, we will have our traditional Q&A session in which analysts and investors will be able to interact directly with us. Before handing the floor over to Milton, I would like to share a few instructions to help you make the most of today's event. For those accessing the webcast through our website, there are 3 audio options available, the entire content in Portuguese, the entire content in English or the original audio. [Operator Instructions] Today's presentation is available for download on the hot side screen and as always, on our Investor Relations website. With that, I will now hand over to Milton, and we will reconvene later for the Q&A session. Milton, over to you. Milton Maluhy Filho: [Interpreted] Good morning. Welcome to another earnings release. Today, we will review the results for the fourth quarter of 2025. I will also discuss our outlook for the coming year and provide guidance for 2026. In addition, I will share an overview of our journey so far, highlighting our progress over recent years and the key achievements in 2025 to provide greater transparency into our agenda at the bank, though not exhaustively. Let me begin by revisiting our history, first, reinforcing the pillars that have guided us and proven essential to our management model. Client centricity remains our top priority and the central focus of the entire organization. Delivering on this commitment has required a comprehensive cultural and digital transformation within the bank over the past years. While this is an ongoing process, the advancements have been highly significant. Our risk management culture is a distinct competitive advantage. We maintain a long-term perspective and the ability to thoroughly assess all risks to which the conglomerate is exposed daily. Risk management is fully integrated across all business areas and is not solely the responsibility of the risk division, which is why I emphasize this pillar as a competitive differentiator. Capital allocation is another key area of focus in our management and daily decision-making models. as well as in our remuneration structures. We maintain strict capital allocation discipline, choosing the right place to allocate capital at the right price and with appropriate returns, always with a client-focused forward-looking perspective, which is fundamental. The modernization of our technology platform and data architecture has been a critical enabler of all our achievements. We have made years of substantial investment and transformational changes in our platforms including the modernization and simplification of our legacy systems, which notably are now scheduled for decommissioning. Therefore, we remain highly optimistic about the potential of this agenda, particularly with the ongoing review of our data architecture. We have developed a much more centralized architecture with a single source of information for the entire bank, democratized data across the organization and a cloud-based data mesh. This evolution has significantly enhanced our capacity to apply artificial intelligence to our business from launching new products and improving client interaction to process optimization and productivity gains. This transformation has been instrumental in achieving these improvements. And last but not least, let's touch on strategic cost management and efficiency. This is not about cost for cost's sake. Efficiency is a core guiding principle across the bank. We have been able to invest significantly in this transformation while delivering strong results and profitability with revenue growth outpacing cost increases over the years as reflected in our efficiency ratio. With all these investments made in technology, platforms and digitalization of the organization, we have entered a critical phase of scalability. Operational scale is now essential, especially for certain business lines, which I will detail shortly. How does this translate into results? Our loan portfolio grew by 40% during this period, a significant increase. During this process, we also carried out a relevant derisking of certain portfolios that did not deliver adequate returns according to our portfolio management framework. which is one of the core disciplines within our risk management culture and capital allocation pillar. This relevant derisking protected us from several million in potential losses and from a deterioration of key delinquency indicators. It also left our portfolio significantly stronger and better positioned with higher quality to support future growth. In terms of numbers, we saw a notable expansion in ROE, rising from 19.3% in 2021 to 23.4%, a substantial increase in the period. Our efficiency ratio improved from 44% to 38.8%, representing a significant reduction as well. During this period, we distributed BRL 105 billion in cash dividends, equating to a payout ratio of 57.9% in the period. In other words, we generated strong value creation and profitability, maintaining discipline in cost and efficiency management, which translated into significant returns for our shareholders. And how do we measure value creation within the bank? Here, we can see a 2021 snapshot. The bank delivered net income of BRL 26.9 billion, generating value based on our models and the cost of capital in line with market methodologies of BRL 9.3 billion. In 2025, we reached consolidated net income of BRL 46.8 billion with value creation of BRL 18.5 billion, twice the value created over the period and double what we delivered in 2021. This represents very strong growth with quality, sustainability and consistency and above all, with a high level of discipline and value creation. This slide contains a lot of information, but my goal is to provide an overview of our 2025 performance. I will now delve into a few highlights, starting with stakeholder satisfaction. The first metric reflects how we are evaluated by our employees across the bank. We achieved an eNPS of 83 points, very close to historical highs, which demonstrates the significant progress we have made internally in terms of workplace environment, culture, entrepreneurship and our ability to attract and retain talent, creating a truly productive environment. It is within this environment that we are naturally able to take care of our clients. In 2025, we achieved an all-time high consolidated NPS with record levels in the middle and high-income segments, 2 segments that are highly relevant to the bank and remain central to our strategy. For our investors, we did not present this information through valuation multiples, share price performance or stock evolution over the period. We always maintain a very long-term perspective. The bank's total shareholder return over the past 5 years has been outstanding, demonstrating our ability to deliver value and earn investor recognition. That said, we chose to highlight this performance through the Extel survey, where we were ranked as leaders across all categories for the second consecutive year. I am very pleased and would like to once again thank our investors for their trust and recognition. Our sense of responsibility and dedication only continues to grow. From a technology standpoint, we achieved a significant reduction in incidents as a result of our modernization agenda. Incidents were reduced by 99%, which is a very relevant achievement given the size and complexity of our architecture, our platforms and our operations across multiple businesses. One theme that I consider central to this modernization is speed. It is our ability to deliver value to our clients with much greater agility and responsiveness. As a result, our delivery speed increased by 2,600%, representing a truly transformational shift. When we analyze scalability, a topic we have discussed extensively, we achieved a 45% reduction in our unit transaction cost, demonstrating that we have indeed been able to carry out this transformation with high quality, depth and very consistent results. In retail banking, both individual and business, we delivered numerous initiatives throughout 2025, making it a highly significant year. I will highlight a few. First, we migrated 15 million clients to the Super App with a primary focus on client experience as evidenced by an NPS of 80 points. From now on, we will have a full banking relationship with these clients. In terms of speed, we increased our delivery pace by 4 to 5x, developing new products, addressing client pain points and achieving high adoption and activation rates. The transaction volumes on these new features are substantial, including Pix on WhatsApp powered by AI, Piggy bank, Cofrinhos, limit transfers and collateralized cards, among others, a robust suite of offerings for our clients. The modernization of our platform enabled us to participate quickly in the new private sector payroll loan program. If you look at the data from inception to now, we have regained leadership in this area. We had already led in the previous private sector payroll loan model and have now returned to leadership in production over this period. We maintained our leadership in portfolio size with significant growth, quality and a long-term perspective. We also saw a notable increase in digital adoption among our clients. Our investments in technology, cultural and digital transformation and best-in-class client service have naturally optimized our footprint. In insurance, a segment where we have long recognized the need to catch up, we ended 2025 with a 130% increase in recurring results, more than doubling our outcomes in the period. Encouragingly, we continue to see strong prospects ahead with insurance now an integral part of our value proposition for both individual and business clients. In the corporate segment, I would like to highlight the BRL 1 trillion in transaction volume reached in acquiring. As a result, we have secured market leadership in credit which we had already achieved, maintained leadership in acquiring with discipline, focus, new technologies and products and in payment and collection flow. This underscores the importance of our client-centric approach in corporate retail banking. We launched Itau Emps, a 100% AI-powered platform with tremendous future potential as part of our value delivery and business model for corporate and retail. In Wholesale Banking, I would also like to highlight a few lines. We are ranked first in fixed income issuance and distribution, a highly competitive market that many of our large and mid-sized clients have increasingly accessed over the past few years. We closed the year with 26% market share and BRL 124 billion in originated transactions. Continuing in wholesale, as discussed extensively at Ita� Day, we created the Infrastructure and Energy segment with specialized focus and structure given the robust investment pipeline. We achieved leadership in Eco Invest Brazil, a very important program and recorded the highest fundraising among banks, already enabling BRL 12 billion in investments. We had yet another year in which we took the lead at BNDES and in the rankings for foreign exchange, derivatives and supplier risk. Once again, we stood out in credit, in structuring transactions in capital markets and in supporting our clients' day-to-day needs. We also achieved leadership for the second consecutive year in something extremely important in research, the Institutional Investor or Extel Brazil for 2 years in a row and in Extel LATAM in which we were the winner for the first time. It's a great source of pride to see the work our teams have been doing, once again covering our publicly listed clients with deep discipline and thoroughness. Turning to Wealth Management Services, WMS, I'd like to highlight 2 areas. First, in the trillion world, we have reached BRL 4.1 trillion in assets under management and administration. This is the volume the bank currently has under management and administration. Regarding the open platform, a topic often discussed, the bank operates by offering clients a highly diversified range of products. We grew 15% in the fourth quarter, reaching BRL 422 billion, which shows that it's possible to grow with quality, with strong curation, with discipline, with security and naturally maintaining a robust system with a very client-centric approach. I believe the numbers speak for themselves. We also saw significant growth in revenue from our retail brokerage business, an area previously identified as a gap with a threefold increase over the period. Now I will address the fourth quarter results, covering profitability, loan portfolio, net interest margin with clients, commissions, fees and results from insurance and conclude with the efficiency ratio. For ease of visualization, let's zoom in on the results. We posted net income of BRL 12.3 billion, a robust result for the fourth quarter, representing growth of 3.7% over the previous quarter and 13.2% year-over-year, maintaining a very strong level of profitability. On a consolidated basis, ROE reached 24.4% and in Brazil, 26.0%. Adjusted for 11.5% capital, our current industry average and capital appetite as defined by the Board, consolidated profitability was 25.4% and in Brazil, 27.3%. This is perhaps the most comparable number for interpreting our performance in the Brazilian operation with growth and expansion across all dimensions. How did we build this? Our loan portfolio grew significantly with 6.3% compared to September 2025 and 6% compared to December 2024. I will talk about the year-end guidance shortly. We reached a loan portfolio of BRL 1,490.8 billion. Excluding the effects of foreign currency variation, quarterly growth would have been 4.5% and annual growth would have been 7.3%. This is because our portfolio is influenced both by the operations of our banking units outside Brazil, which affect balances through currency fluctuations and by portfolios originated in Brazil that also contain foreign currency components Net interest margin with clients also delivered very solid results with 1.5% growth over the previous quarter and 8.6% year-over-year, a strong performance for a bank of our size and profitability. For services and insurance, it was also an excellent quarter with 5.9% growth over the prior quarter and 9.1% year-over-year, totaling BRL 15.6 billion in high-quality solid results. We reached our best ever efficiency ratio levels at 38.9% on a consolidated basis and 36.9% in Brazil. We are seeing improvement across all dimensions with continuous progress in our efficiency ratio, which is also consistent with the initial slide I presented to you. Now focusing on the loan portfolio. There is a lot of information, so I will highlight what I consider most relevant. First, this is a seasonally strong quarter due to year-end purchases, which typically boost the card portfolio, up 8% this quarter. Importantly, and this also explains the margin on the next slide. The transactor portfolio typically tends to grow more this quarter due to a very simple reason, higher purchase volumes, whether paid in full or in installments, resulting in 4.3% growth. The finance portfolio grew 1.6% in the quarter. Both segments posted strong year-over-year growth. In payroll loans, the portfolio grew by 4%. The main highlight was private payroll loans with 27.5% growth in the quarter and 36% year-over-year. This growth has led to us achieving market leadership in private payroll loans in Brazil with high quality, profitability and a very well-executed model supported by an outstanding onboarding experience. The next highlight is mortgage lending, and we recognize the importance of this lever for long-term client relationships. We reached approximately BRL 142 billion in mortgage portfolio, the largest among private banks. We surpassed 50% market share in mortgage origination with over BRL 33 billion originated in 2025, continuing a strong growth trend. Origination grew 9% year-over-year, and the portfolio expanded 12.8% in the period. Moving to SMEs. We also saw strong growth this quarter. Breaking it down, middle market companies grew 12% and small companies grew 6.4%. Government facilities, which allow us to offer clients competitive rates and suitable terms grew 10%. Annual growth rates were also robust for both small companies and government facilities. Let me now move on to margins. As mentioned earlier, given the mix you've seen, we have a meaningful growth component coming from corporate lending. However, in retail, the mix is also an important driver of margins. There was significant growth in the transactor portfolio typical for this quarter as well as in mortgage and private payroll loans, which are secured products that, while very important for long-term profitability and portfolio quality, have only a minor impact on the annualized margin in the short term. In summary, we grew by BRL 13 billion in 2025 versus 2024. In the fourth quarter versus the third, the increase was BRL 500 million or 1.5%. The main driver was volume, supported by strong portfolio growth. The mix I just described has a slight negative impact on margins. Spreads and liabilities margins remained strong, particularly on the liability side. There were also smaller effects from calendar wholesale bank structured operations in Latin America. Overall, it was a solid growth quarter. Moving on to NIM. There was a slight decrease in the quarter from 9% to 8.9% and 6.2% to 6.1% risk adjusted. In Brazil, NIM declined from 9.8% to 9.7% and 6.7% to 6.6% risk adjusted. This is mainly explained by the mix between corporate and retail and within retail, the product mix with more significant growth in certain segments during the quarter. This is the breakdown view as we see it. And this is the annualized margin view I was just discussing with you fully within very appropriate levels. Now regarding NII with the market, I want to highlight that this decline was already anticipated. The guidance itself already implied a slightly lower market margin. We saw very strong performance in Brazil, but it's worth noting that prior quarters were also very strong. Still, performance remains solid. Latin America saw a slightly weaker result due to capital index hedge costs, consistent with what we observed in prior quarters. I believe our annual reporting is very clear. If you look at the difference in performance, it is not in the top line. Brazil performed slightly below 2024, while Latin America was somewhat better. However, in terms of composition, the margin was very similar. The main variance is the capital index hedge costs, which increased due to the interest rate differential in the hedge. The main takeaway is that we are very comfortable with our hedging strategy as it enables strong capital management with high predictability and consistent dividend payouts over time. This approach has reduced volatility in our capital ratio, and we review and discuss this policy every 6 months. Now let's move on to commissions, fees and results from insurance. I will emphasize what I consider most relevant. I talked earlier about payments and collections. We posted a 5% improvement in the quarter with a very strong transacted volume of BRL 301 billion, an impressive figure, reflecting growth of 16.8% in the quarter and 22.8% year-over-year. In Asset Management, we recorded 14.2% growth, making this a particularly strong quarter, also benefiting from performance fees. As previously mentioned, we reached BRL 4.1 trillion in assets under management and administration. I would like to highlight our record net inflows in 2025, totaling BRL 156 billion, an increase of 49%. Once again, this demonstrates our credibility, ability to deliver value, long-term vision and most importantly, the trust we build daily with our clients. In Advisory Services and Brokerage, we had a strong quarter with growth of 17.1%. We remain market share leaders and as previously mentioned, with BRL 124 billion in originated volume. Year-over-year, there was a decline as 2024 was a record year for advisory and brokerage results, especially in corporate debt. Nevertheless, we outperformed our initial expectations for market volumes this year. Insurance, pension plans and premium bonds results grew 1.9% in the quarter and 17% year-over-year. The most important message is that our earned premiums continue to grow 13% year-over-year. Recurring earnings rose by more than 20% this year, following several years of significant growth, resulting in a cumulative increase of 130% from 2021 to date. Now let's take a closer look at asset quality. Starting with short-term delinquencies. There are a few points to note. As anticipated in the previous quarter, we had a specific case within corporate, a well-known and widely reported case that had moved into short-term delinquency. Our expectation was that it would be removed from the balance sheet sold and restructured by year-end, which is exactly what happened. This explains the spike in September and the decline in December. Without this event, the indicator would have remained flat. When looking at total Brazil and Latin America, indicators remain well behaved. In Brazil, 2 effects are noteworthy. First, in individuals, where we reached the lowest delinquency rate in our history, demonstrating that our portfolio management over the years has yielded important results with portfolio growth, value creation and a highly sustainable portfolio. The corporate effect is also evident here. Short-term delinquency peaked at 1% in September and dropped to 0.03% in December as the specific corporate client I mentioned was removed from the balance sheet in the fourth quarter, reinforcing information previously shared. Regarding long-term delinquency, there are no major developments. The message is that delinquencies are very well controlled as well as in Latin America, resulting in solid outcomes. Across portfolios, individual delinquency stands at 3.6%, which is historically stable. For SMEs, there was a slight increase in line with what I had previously anticipated, particularly driven by the rollout of government-backed products with grace periods. We expect these delays to normalize over time as grace periods end. These are well-collateralized portfolios. So while delinquencies occur, they do not significantly impact losses or portfolio results. In terms of long-term delinquency for corporate, we make a caveat because we actually had a sale. Without considering this sale, it would have been an increase of 0.9 percentage points, which indicates a certain stability. It is worth noting that this is not an indicator we like to monitor, especially for large companies. Regarding Stage 2 and Stage 3 exposures, there are no major developments except for a decline in the Stage 3 portfolio, especially in corporates. This is exactly related to the exit of the specific corporate client I referred to earlier. Once the exposure is sold, it exits Stage 3, driving this effect. You can also observe a slight decline in coverage as this was a corporate client with a high level of provisions, consistent with its risk profile. This credit leaves the portfolio with a higher coverage level than the remaining balance, which explains the slight decline in coverage. I would say these are the only 2 highlights, and ultimately, they both refer to the same case. Turning now to credit costs. We have recorded BRL 9.4 billion in credit costs, representing 2.6% of the portfolio, an absolutely stable ratio if you look at the historical series. On a year-over-year basis, there was a nominal increase, which is expected given the significant portfolio growth during the period. This is why we always prefer to look at the credit cost to portfolio ratio, which is at a very healthy 2.6%. When looking at the restructured portfolio, the key highlight is that the specific case I mentioned earlier was classified as restructured, as you can see here. This nominal decline is primarily explained by that event, which is also why the percentage of the total portfolio has declined. This is the main takeaway for this section. Now turning to expenses. The first specific point is that while costs typically tend to be higher in this quarter, they remained very disciplined with just 0.5% growth in Brazil, which demonstrates the direction and trend. This will be evident in forward-looking guidance. For the year, expenses grew 7.6% in Brazil and 7.5% overall, which is perfectly in line with the midpoint of our guidance, demonstrating our discipline and predictability. Much of this year-over-year cost increase stems from our capacity to absorb relevant investments made as well as higher volumes combined with lower unit costs. However, this is an operation that is generating more business and higher volumes with our clients, which results in variable costs. Naturally, the bank's profitability also impacts costs due to compensation models. We always see an effect in this regard, which is healthy given the level of profitability and results the bank has been delivering. Now regarding the efficiency ratio, it is worthwhile to look back at the historical series starting from 2019, both consolidated and in Brazil. There has been a substantial reduction over the period, reaching 36.9% in Brazil, the lowest in the series. This demonstrates our commitment to client-centric care, strategic investments, results generation, increased productivity, organizational efficiency and a strong focus on operational scale. This remains a central topic for us. I would like to share some new information with you and as we classify it on a base 100, given the sensitivity of the data, we have broken down our business into different views. As I often state, Itau Unibanco is a diversified business portfolio. It is a very large wholesale bank and a very large retail bank. It is a major player in the region and the most international bank in Brazil. We have significant regional operations with 18% of our assets and 8% of our results coming from outside Brazil. This highlights the diversification of our portfolio, which is concentrated in investment-grade countries in South America. On this slide, we have outlined what we consider benchmark segments, whether in wholesale, retail or those areas where we believe we have already achieved a global standard of efficiency. Naturally, opportunities remain, and we are constantly monitoring them, especially in this new era of artificial intelligence and emerging technologies where there is always room to optimize further However, if you look at this 100 base chart from 2024 to the present, you will see the business and segments that have successfully maintained their efficiency ratios. For Latin America, the curve is heavily influenced by foreign exchange effects. So I will set this aside for a moment, although it naturally impacts the consolidated figures. On a consolidated basis, using a base 100 view, we can see our efficiency ratio moving from 100% to 98%. The key is that our most significant progress in efficiency is occurring within the scalable segments, specifically retail, both for individuals and SMEs, where technology, value proposition, scalability and productivity are fundamental. Long term, this is what will differentiate our ability to better serve our clients and expand to new client groups that given our current cost structure and efficiency ratio, we would otherwise have less capacity to absorb credit losses from. As you can see, I am already sharing an insight for 2026. We started from a base of 100 in 2024 and reached 94 in 2026. Our ambition is to continue improving this trend. Therefore, much of the investment and the transformation carried out in previous years is what allows us to accelerate scalability moving forward. It is a robust digital offering, a powerful platform and an optimization of the business and service models and a strong value proposition. We are very optimistic, not only with the evolution of these elements, but also with the prospects. Regarding capital, at the end of the day, all the results and discipline I've mentioned translate into strong capital performance. In the first block, we have the pro forma for December 2024, where we achieved a CET1 ratio of 12.3%. Net income generated 3.3% in the period. There was 0.8% capital consumption from risk-weighted assets. Regarding dividends and interest on equity, there was 2.5% capital consumption. We also had a positive 0.2% capital variance from new AT1 issuances, primarily in the domestic market. These factors led us to reach a CET1 ratio of 12.3% and AT1 of 1.5% as of December 2025. It is important to note that in the first quarter of 2026, we already have some regulatory events that are consuming part of this capital surplus. This was all factored into our planning when we decided to proceed with the early distribution of additional dividends, which we typically pay in March, but executed at the end of 2025. Regarding interest on own capital and dividends, we distributed BRL 9.7 billion in paid and provisioned IOC and BRL 24 billion in additional dividends and interest on own capital, resulting in a total payout of BRL 33.7 billion in 2025. Representing a payout ratio of 72%. This is a strong distribution, which is only possible due to high quality and robust capital generation. Our focus is to maximize the profitability of the business, but when we determine that there is excess capital beyond our expected opportunities for deployment and returns, our objective is to distribute it to shareholders. Now I will present the accountability regarding the guidance. I won't go into detail line by line, but visually, we came very close to the midpoint in almost all guidance lines throughout the year. The loan portfolio grew by 6%, while financial margin with clients increased by 12.1%. Our financial margin with the market reached BRL 3.3 billion. Credit cost was BRL 36.6 billion, and commissions and fees and results from insurance operations grew 6.3%. Noninterest expenses increased 7.5%, in line with our budget, and the effective tax rate was 29.7%. This demonstrates not only our predictability, but also our control over key levers. Looking ahead to 2026, and we will have more time to discuss this during our Q&A session, I would like to add a very important comment. As previously said, we expected to make some reclassifications across line items in our management reporting model as presented in the MD&A. We conducted a review to ensure that the way we disclose our results is an accurate reflection of how we manage the bank. As a result, there were some delayed adjustments that we wanted to implement, and we waited until the end to make those changes. There is no right or wrong here. This simply represents the most accurate depiction of what we do and how we manage the organization. You will see that at the end of the day, the bottom line remains unchanged with recurring managerial net income of BRL 46.8 billion in 2025. In other words, there are no changes to the total result. The variations are purely between line items. And of course, the Investor Relations team remains fully available to walk you through the details and provide further clarification. I will try to explain this in a simplified way. What we refer to here as the main reclassifications account for roughly 90% of the adjusted amounts. Let me give you a practical example. Historically, card network fees related to issuing and acquiring were split between noninterest expenses and a deduction from banking product revenues. We are now reclassifying all card-related expenses, both issuing and acquiring from noninterest expenses to commissions and fees. As a result, you can see a positive impact on expenses while this helps explain part of the negative effect observed on commissions and fees. That is one example. Another example is the discount of receivables financial margin. As we have mentioned in previous earnings calls, part of [ Rede's ] results was previously allocated in commissions and part in financial margin with clients. Within financial margin with clients, there were 2 components: discount of receivables financial margin and the cost of funding of automatic discount of receivables flex, both were previously classified under financial margin with clients. We are now reclassifying everything related to Rede to the commissions, fees and results from insurance line. This also helps explain part of what you are seeing here, namely an increased NII with clients as the flex cost of funding, which was previously recorded in that line is now reflected as a reduction within commissions, fees and results from insurance. A third example involves discounts on debts of up to 90 days overdue. These were previously recorded in NII with clients. We believe it is more appropriate to reclassify them into cost of credit as they are effectively credit discounts, and we explicitly disclose discounts granted within the cost of credit line. This helps explain part of the positive impact of BRL 2.8 billion in financial margin with clients, which is offset by a negative impact of BRL 1.5 billion in cost of credit. With this reclassification, total cost of credit would move from BRL 36.6 billion to BRL 38.1 billion. The key point is that going forward, we will refer exclusively to these reclassified results. Another adjustment relates to Avenue over which we now have control. Avenue is therefore, consolidated into our P&L lines as shown in this column. This has a positive impact on NII with clients, no impact on cost of credit and affects other P&L lines where it previously did not as Avenue was accounted for using the equity method through 2025 and will be fully consolidated from 2026 onward. The central message here is that our guidance looking forward already incorporates all these reclassifications, which we believe is the most appropriate way to present our numbers, our results and how we manage the bank. All future comparisons will be made against 2025 figures adjusted for these reclassifications. Turning to the macroeconomic scenario. This slide reflects the assumptions we've used. We recognize that the environment is highly dynamic, but these are the inputs applied in our projections and guidance analysis for 2026. We assume GDP growth of 1.9%, a year-end Selic rate of 12.75% with an expected rate cut starting in March, inflation measured by IPCA converging toward 4%, unemployment remaining low, but increasing slightly from 5.4% to 5.7% and the exchange rate moving from BRL 5.47 to BRL 5.50. Again, these are the assumptions underlying our planning and guidance for 2026. With that, I will conclude by walking you through the 2026 guidance. First, total credit portfolio growth is expected to range between 5.5% and 9.5%. We highlight that growth in Brazil is expected to be higher between 6.5% and 10.5% as Latin America weighs on consolidated growth. All other lines are presented on a consolidated basis. We expect net interest income with clients to grow between 5% and 9% and market NII between BRL 2.5 billion and BRL 5.5 billion. Cost of credit is expected to range between BRL 38.5 billion and BRL 43.5 billion. Commissions, fees and insurance are expected to grow between 5% and 9%. Regarding noninterest expenses, it is worth recalling that growth in the fourth quarter of 2025 was just 0.5% quarter-over-quarter. you can see that there is also a meaningful convergence in 2026 with expected growth between 1.5% and 5.5% with the midpoint below projected inflation, bearing in mind that banking inflation typically runs above IPCA. This clearly demonstrates our ability to capture the benefits of everything that has been implemented over the past few years. We expect the effective tax rate to range between 29.5% and 32.5%. This is our current view for 2026. Naturally, as the year progresses and more information becomes available, we will update and adjust if needed. But this reflects the best information available at this time. With that, I'll conclude. This was a slightly longer presentation than usual as we covered our historical journey, the full year performance, quarterly results and concluded with a clearer view of our 2026 guidance. For me, this closes a year of very solid high-quality results. Beyond the headline numbers, it is critical to look at the quality of the balance sheet. Across all lines, we have very adequate provisions, disciplined capital allocation, meaningful value creation over the period and ROE of 27.3% in Brazil. I believe this clearly reflects all the effort behind this journey, combined with an efficiency agenda that is advancing at a very strong pace. This is evident in everything I have just shared with you, including our guidance and also in the positive outlook we see looking ahead. Of course, this is a year where we expect some volatility. However, our risk management culture, a very healthy portfolio operating at historically low cost of credit levels and a highly provisioned balance sheet allow us to capture opportunities as they arise, whether to grow more aggressively or if needed, to manage the portfolio more defensively. In summary, I believe we delivered an outstanding year. Everyone here is very proud of the work accomplished yet fully aware of the challenges ahead. Past results do not guarantee future performance. Therefore, we remain humble, disciplined and focused, but above all, passionate and energetic about our work at the bank. That concludes my remarks. I will now join Gustavo in the studio for our traditional Q&A session. Once again, thank you not only for your time, but for the trust you have placed in the bank over the years, whether as clients, investors or employees. Thank you very much. Gustavo Rodrigues: [Interpreted] We're back to our studio with Milton and Gabriel for the Q&A. Now before we start, we would like to let you know that we are going to answer the questions in the language that they are asked. In English and Portuguese. [Operator Instructions] Let's go to the first question from Thiago Batista, UBS. Thiago Bovolenta Batista: [Interpreted] Congratulations on the result. Once again, a strong result that Ita� is delivering. I'm going to get 2 topics in one question. One is profitability of the bank and the other capital. A few years ago, we couldn't imagine that the ROI was 24%, 25%. Our doubt is, is this level recurrent? Can we imagine that this ROI is going to remain at this threshold all throughout the years and now the leverage of the bank? A few years ago, maybe 10%, the target was 13.5% Tier 1, which is not different from the 11.5%, 12% of core capital. But since then, we've seen a few issues. Overhead is over. You do the hedge of the capital abroad. So the capacity of capital is reduced. Can you keep this ROI of 24%, 25%? And can we imagine a reduction or an increase of leverage over time to keep this ROI at 24%, 25%? Milton Maluhy Filho: [Interpreted] Thiago, pleasure to see you once again. Thank you for the question. We are very happy with the deliverables and the optimistic with the future. Now about profitability. Maybe the best information, as you know, we don't give guidance of ROI in the long term. But the guidance of this year, we have profitability and thresholds very close to what we observed in '25. If you've seen the midpoint of the guidance, we should grow close to what was the growth of '25 against '24 and delivering a bottom line that is very solid with a profitability that is very strong. I don't foresee today any reason why we shouldn't have a vision of the ROI in this threshold that is implicit in the guidance. Of course, the year and the events are dynamic. For us, the most important thing is always the spread over the cost of capital. And we should get into a cycle of reduction of interest rates. Let's see how the premium of risk for the COE for Brazil is behaving all throughout the year. But as we have a reduction of interest rates all throughout time, the spread over is kept, not necessarily at the level of ROI, but we have a long ways ahead to see about the leverage of the bank. The point is interesting. You are right. The overhead brought some volatility to the capital index. But we still have some volatility in the portfolios with the foreign currency. That's how we implemented the policy of the hedge of the index that is working very well, and there is a cost of opportunity, of course. But also we have a predictability that is very important for the prospective management of the bank or for the distribution of dividends. What happens? When we define the appetite at 11.5%, it was 12% the appetite. We reduced it to 11.5%. That was approved by the Board. But we at the Board for the distribution of dividends, we work with a buffer of 50 basis points. That 0.5% is what gives us security, tranquility so we can grow with strength, seize the opportunities that appear. So we don't run the risk of invading the appetite and doing a contingency recomposition of the capital index and losing opportunities thereafter. So having a strong balance, well capitalized, we think it's a comparative advantage. And the scenarios change and can change quickly. We've seen that in the pandemic. So to have a solid capital base is important. Our biggest restriction now to do a review of leverage, we discussed with a lot of frequency are the rating agencies. What we do not want is to work with the more leverage and losing a rating, which is important. Even though today, we have capture -- foreign capture that is lower than the past, having an international rating that is relevant is what brings opportunities for the cost of capture so we can be very competitive. That's the restriction that is active. We're always debating this. Looking at the different scenarios of shocking the balance, and this is a year that can have more volatility due to the scenario of the elections. uncertainties that are up ahead. It shouldn't be this year that we're going to do this discussion of reviewing the leverage, but this is a theme that is present in our debates. We always have talks with the agencies to try and understand how can that impact our ratings. This is a constant theme in our agenda. I don't think that this debate will advance in 2026. But depending on the perspectives, we can eventually do a review of the level of leverage, certainly, this is a discussion that we're going to take to the Board at the opportune moment. Gustavo Rodrigues: [Interpreted] Now we'll give the floor to Bernardo Guttmann, XP. The floor is yours. Bernardo Guttmann: [Interpreted] Congratulations on the results. It's impressive, the level of profitability that the bank is delivering. ROI, 27% in Brazil. I'm going to explore those levers, levers in the future, trying to zoom on that level of efficiency. Looking at the guidance of expenses not correlated to interest rates. It seems that there are low expenses considering that 2026, there is negative items that are temporary with the adjustments in the infrastructure. So the correct reading is that '26 will capture a relevant change in the cost base, allowing the bank to get into '27 with a structure that is more clean, more efficient, creating, therefore, a driver for operational leverage up ahead, that's a question. Thank you. Milton Maluhy Filho: [Interpreted] Pleasure to see you again. Thank you for your initial words. The answer is yes and yes. Yes, we are capturing and gathering the fruits of our labor of the previous years, a lot of investment in technology, a lot of focus of increase in productivity, digitalization of the platforms of the bank. The experience of the clients, reviewing the business models, the model of service, a way of servicing the client in an ever more digital way. That slide that I just showed you separated what was the segments that were the reference in reference and those that we can scale. And that's where we get most of the efficiencies that we will capture over the next years. We finished with a projection of 94% at the end of '26. There is a certain assumption for the guidance for the year. But looking ahead, we are certain that this is a path. Efficiency all throughout the game, operational efficiency, but it's not brute force operational efficiency. An adjustment of infrastructure reduction without any strategy, no. It's a deep review of everything that we are investing all throughout the years. most important than that, all this reduction and adjustment running below the IPCA rate. It's banking inflation because there is an increase in payroll, real, there is other expenses is higher than the IPCA. But all that growth that you see projected 3.5% for the midpoint of the guidance for '26, there's also important volumes for investment. We are investing long term. We are still investing in our business. We are still investing in our platforms. Of course, prioritizing the most relevant. Looking at the long term, focusing in value creation. This capacity of generating top line, capacity of absorbing the investments, doing a deep transformation of the organization. And now a period of deliverables that is consistent allows us to open ourselves to more investments and expanding those investments. We did investments in several businesses, and we will continue with a long-term view without doing -- without selling out the future. We want to grow sustainably. We want to seek more productivity, more efficiency, more operational scalability. Gabriel is here. He is leading this front in the bank. This is not a front from the finance BU. He is the leader, but this is a multidisciplinary front. All businesses are involved. everyone with their own challenges, ones with the threshold that are more efficient than others, but I'm very optimistic that we got into a journey that is very deep of adjustments and scalability. Gustavo Rodrigues: [Interpreted] Our next question, Renato, Autonomous. Renato Meloni: [Interpreted] Congratulations on the results. I wanted to expand on the previous questions on the ROI. I think it's natural that now we get into a moment of reduction of capital -- cost of capital in Brazil, ROI drops. And as you said, the generation of value is important. So I wanted to understand more on the long term. What are the levers that you foresee for the expansion of this generation of value? Are we at a reasonable level? You've discussed the efficiency, but I remember a comment in the past that as you implement this efficiency, part of this is given to the clients. So maybe other ideas that can generate more value. And if you allow me, just a clarification of the guidance here that if we look at the growth of the financial margin and the growth of the portfolio, that implies into a reduction in the line. But I imagine that here, you also have the effect of the anticipation of the dividends. So if you can comment very quickly on the evolution of the line sensitivity to the interest rates and how that will go throughout the year. Milton Maluhy Filho: [Interpreted] Thank you, Renato. Great points. Thank you for being in our call. I think that the levers are throughout the business, they're spread out throughout. The capacity of growing the portfolio with quality, the management of this portfolio has been done for many years. The discipline of capital allocation. This is the name of the game. Growing, generating operations below the cost of capital will always be dilutive. We will destroy value in the long term. This is a discipline that generates profitability that is necessary through the cycle, always with this long-term view. All the part of the efficiency and cost is very important. But as you know, deep down is a binomial cost and expenses -- cost of revenue, sorry. So we've deepened the -- very consistently with our portfolios. We're doing the deep dive into being the main engager with the customers. This is the main threshold in our history. We are growing 2 digits in some portfolios. So there is a series of levers. Of course, cost is one, but always with this logic of efficiency, looking at our capacity of generating top line of growth and working with the cost of productivity. So we can have offerings that are more lean, more digital, better experiences for our clients. and simplifying the value proposition and simplifying the bank, of course, with all this transformation. A part of this technological modernization, we are talking about the decommissioning of legacy systems in a few years. This is going to be a big difference once we operate in a more variable cost basis in a more simplified internally way and speed of delivery in technology. I showed 2,000% of growth. Now today, we can develop a product and bringing a solution for the market 5x faster. So the capacity of throughput of delivering value changed with a very strong threshold. And we will continue to follow up on the opportunities, cost of equity every month, we're looking at the internal methodology, the market methodology, cost of capital, the buy side, sell side. And so we have our COPI meeting monthly. So we define what is the COPI of the bank, and this affects the capacity of pricing. And as you said, I don't believe in a static world that you do the world -- the work of efficiency reduces, but the revenue is always the same. In the end scale so you can generate more value, more portfolio and you can have the returns through the cross-sell and the reduction of the relationship. But a part of this efficiency has to go to the price. This is what's going to transform ourselves into a platform that is ever more competitive. We're very competitive from the cost of funding perspective, and we're going to be more competitive in the unit cost. Our unit cost has reduced 45% in this period, and we see space for reductions. Volumes grow, cost -- unit cost is dropping. This is the name of the game. Now on the margin, I wanted to do a reinforcement. Let me give you some numbers. If we consider the delta dividend that is paid, '25 against '24 and the anticipation that was done all throughout the next month in December of last year, this generates for ourselves about BRL 1.5 billion less margin through '26. So if the question is, well, Milton, I have the portfolio growing with the midpoint and 7.5% and the margin of clients is growing 7%. What is the reason of the margin growing a bit below? If we do this adjustment, the margin would be growing 8.1% in the year. So the margin comparable normalized which is what we are going to observe really throughout the year, but the comparable margin for understanding the dynamic of the generation of value of the bank is comparing 8.1% with the portfolio that is going to grow 7.5%. These are comparable basis. Certainly, this effect allows us to explain a potential adjustment. That is not so relevant, but we have adjustments in the NIN in the consolidated and also in the net cost of credit NIN. So this is important, and it's 110 basis points. When we look at the effect in the financial margin with the client in the year, which is not little, and it shows that the core, the organic growth is coming at an adequate rhythm with an adequate risk, adequate mix and generating value for the threshold for the shareholder. Gustavo Rodrigues: [Interpreted] Next question, Yuri Fernandes, JPMorgan. Yuri Fernandes: [Interpreted] Congratulations on your results. NPS quality of credit lines accelerating short-term deliverables that are good for the middle to long term. So I wanted to focus on the SME. The -- how are these deliverables in the small and medium-sized companies should change the profitability of the bank. When we look at the volume, I think it was a very strong quarter. Rede grow above 20%, which is 2x the industry. We also see the portfolio growing 9%. Looking at [ BACEN ], it's about 3%. So we have a share in the portfolio. Of course, it's not comparable. We don't have all the expanded portfolio, but we see that in payments and volume of credit, Itau didn't even start. It's being implemented. So it should bear fruit. The question is, given that the SMEs and investors, the previous ones, they had ROIs above 30%, 35%, very profitable segment. How does this impact -- going back to the question of my peers, how does it impact the ROE? We should have SME gaining more traction. We should see the ROE of retail growing more or maybe there is a -- no, no, maybe there is a question of price, competition because it seems that this could be a lever of profitability for you. Milton Maluhy Filho: [Interpreted] Thank you, Yuri. Great to see you. Thank you for your time, and thank you for the initial words. Now the SME segment for us, as we publish it, we have micro, small and medium. So we mix what we call the BU PJ, which is the companies and the middle market, which is managed by Itau BBA. It's a sum of both businesses that are here. When we add the business model and the profitability, then we break down the BU PJ within the retail and the middle market and the structure of the wholesale, but in the -- we block them together. We had an extraordinary result in the companies, whether if it's middle market or the retail companies, and these are very -- this is a work that has been done for many years, a reorganization review, deep one of the strategy. Moreover, the portfolio management. I think that we managed to seize the opportunities, and we knew how to grow with the clients always in the long-term view and more so the discipline of capital allocation. We see a market that is very erratic in the pricing in that segment. We always try to do an analysis of how much would have been our return if we had been operating in a few operations that are very relevant in some of these segments. And these are returns in operations with funding without funding below our cost of capital, considering our model, which is very efficient. So here is discipline, discipline of management of being the main one for the client, having that overview of flow, so that integration of Rede with the bank was fundamental. So we could, in fact, having an integrated vision of the flow. If we see the level of acquirers in the market, it's just a fraction of the flow of payments and receivables in the system as a whole. So the share of flow is more important than the market share of acquirers. And how do we deliver an integrated value proposition for the clients. Being the main one is the name of the game. So we've grown. We've grown with quality. Now we operate in a level of profitability that is very high in this segment. And what I want to say is that we have the expectation of incrementing the bottom line. And this is what we expect for '26 and not an expansion of profitability in the segment given the level of profitability that we already have today, which is above the threshold that you commented a little bit before. This is for the BU companies and also the middle market. We've done strategic reviews that are constant. We've done another one this year in the companies and the individuals. And we also have a solid plan and are very optimistic for the future for the delivery of value and execution of these plans. And this has a role that is ever more protagonist in the strategy of the BU companies. So we've tested the new technology very carefully learning with the clients, powered by AI, but the advances are incredible. The amount of products that we have in the platform, it's more a full bank focused on the needs of the companies, smaller ones, the digital needs, it doesn't -- it's no use taking all the products. You need to understand the pain of your client that you need to solve. And how do you interact in a more efficient way. So the platform has a more relevant role within the strategy so we can deliver better the base of clients that is within the bank that is -- well, and besides the clients that we've seized for the bank and in a more efficient way, in a more digital way with a better experience. So this is the path of the platform this is work and the platform has a relevant work in this sense. So I don't see an expansion in the return in the retail. I think that we've done a catch-up that is very important since the third quarter of 2022 that I told you. I was very uncomfortable with the level of profitability, and we've seen a cycle of expenses and PDD that is more strong. Looking up ahead, we've done an important catch-up of 10 percentage points in the profitability of the retail in a sustainable way. So there is no business performing well or a business performing below the cost of capital. All the businesses are creating value and operating above the cost of capital and with good perspectives looking ahead. It's a balance of the portfolio, therefore. I don't see necessarily an expansion of ROI because of this, but I see an increase that is consistent of the franchise of the results of these segments. Gustavo Rodrigues: We're going to switch to English as we have Tito Labarta from Goldman Sachs. Daer Labarta: Congratulations on the strong results, very consistent over the years. Milton, my question is on the competitive environment. I mean, if you look over the last 10 years, competitive environment has evolved quite a bit in Brazil, I think still evolving. We've seen a lot of your incumbent peers having to adapt their business models, a lot of fintechs that have become very strong today. And you've been able to adapt very well, right? I mean, just looking at your profitability, as you just said, right, every business is operating above the cost of capital. So in that context, so what worries you? Is it -- it could be from incumbent peers adapting a lot of them more coming after the high-income segments where you're very strong in. Is it the fintechs? Is there any segments that you sort of maybe worry about more than others? I mean you talked about you're already a leader in private payroll. It's a new segment. So what kind of worries you about this new competitive environment? And what are you maybe also most excited about? Where do you see the opportunities from here to continue to be able to deliver these results? And where could the risk be? Milton Maluhy Filho: Thank you, Tito. Good to see you. Thank you for your compliments. We are very proud, and thank you for coming to our call. I will tell you, first of all, that we have a huge enormous respect for all our competitors. But as you know, we are a huge portfolio of businesses. So we have in the wholesale many business where we compete with the incumbent banks, but also compete with the new I would say, competition. So depending on what segment you are looking at, the competition and change a lot. So our capability to understand client needs, to understand our competitors, to be humble, to look outside all the time and understand that we might have people doing better things that we are, and we can do better, and we have to leapfrog and go for it has been able to transform the organization in the past years. So I don't see in any segment today, any difficulty of competing even though we know the fierce competition is coming from all around the places. So again, huge respect. I think we have enormous competition in Brazil, good competition. Everybody is doing their homework, everybody trying to get -- to do better what they already do. And we have to do better and fast. So I think this is what we've been doing in the past years. So I see a few levers that take us to this place. First of all, human capital. We do believe that we have a very, very good people inside the organization, people that has passion for what they do. We have a very strong culture that put us in a competitive advantage in our view. We have this capability of capital allocation that is very, very important, this discipline of looking always for the long term, the capability of do investments all around. So as we're not looking for the next quarter, we are looking for the next 10 years. We do huge investments throughout all our businesses and all the modernization we've done in our platform, the data architecture, the way we approach clients today, all the AI power that we've been releasing in our businesses, not only internally, but also externally, has been putting us in a very, I would say, competitive spot. So this is how we look today. I think in the individuals, just to give you an example, we've gone through a huge strategy revision this year of 2025. We are in the execution mode. We did a relevant change in the structure in the retail operation as a whole. Also, the SMEs has been going through relevant change in looking forward. What brought us here not necessarily will take us for the next years. So it's this capability of looking ahead all the time and putting the bar very high to get to great achievement. So I think what takes my -- what worries me everything. So I am paranoid here with competition, with the macro, with the level of service we deliver to our clients. This is what drives us. And I think we have the capability. And again, human capital, good talent, great culture and great capability of execution, I think, are levers that can take us further. We have to keep an eye on the macro. Of course, due to the size of the bank, the macro makes price. Of course, we have to take a look at risk. And I think we have a very, very strong culture, risk culture. So everybody from first line to third line are 100% focused on managing risk. We have a unique, I would say, very great risk area with very good great and risk people helping all the businesses, looking productive and prospective and what are the levers, what are the risks and how we make decisions on a daily basis based on that. So I think this is a little bit of what we've been doing here, and this is where we have been putting all our effort in the organization. Gustavo Rodrigues: [Interpreted] Going back to Portuguese with Gustavo Schroden. The floor is yours. Gustavo Schroden: [Interpreted] Congratulations on the results, very solid, strong results. A follow-up on the question of Tito more specifically, I remember that 2 segments specifically are massified. And recently, INSS, which is social security in Brazil. And Milton commented that the cost of service that is lower would be ideal to be able to accept the level of delinquency that is higher in the massified and in the INSS social security compensating the lower interest rates after the changes in the cap. We see the efficiency level that is very low, 36% in Brazil. All the effort that the bank has done of adjustments in the infrastructure. So Milton, I wanted to be more specific in those 2 segments. How is the appetite? Is there appetite? Is there profitability? I wanted to hear from you specifically on those 2 segments. Milton Maluhy Filho: [Interpreted] Sure. First and foremost, we tend to simplify when we talk about the massified. And the name that I've used and it's in the presentation is segments that are more scalable of medium to high income where the operational scalability makes a difference. That is important. This is a focus, delivering a value proposition that is more competitive for our clients. With that, we can create a capacity to improve and advance in our efficiency levels. We work with a series of clients in all the segments, which is low or high income. And these are clients that are resilient through the cycle. So not necessarily is that the client has a lower income that they're not resilient. No. You just see the ones that are retired with the social security INSS, connecting with your question, it's a customer that has lower income, but it's very resilient on the long cycle. And this is for the entirety of the portfolio. So our capacity, true. Look at the data, look at the client, understanding their capacity, facing the obligations in the long cycle, it's regardless of the income sometimes. Inevitably, when you are more competitive from the efficiency level, your capacity of absorption of losses increases and the review of appetite is constant. So every time that we do an operation with the client, we look at the cost, whether it's marginal cost or absolute cost in the segment, the more efficient you are, the higher will be the capacity of absorption of losses. The more inefficient you are, the less space you have to absorb losses and generate a result and remunerate the capital that is allocated in that activity. So the direction that we've gone is operational scalability, maximum efficiency, digital, full so we can service those clients better. It's servicing better, the client better. And here, there is a theme of you having a full digital offer for the client, but you need to have a full bank to be able to service that client in the best way possible. And I think that we have today a portfolio that is incredible, the migration that we've done of the Ita�, 50 million clients. It's not that we took 50 million clients and we improved the experience of the app for the current clients. We migrated 50 million clients that didn't have any experience and not a relationship that was full bank by Ita�, and we migrated them to a new platform. And we improved a lot the platform of the clients that already used the Super App. So it's a best of both worlds. We improved a lot what we brought because we brought functionalities of the mono apps that were more advanced for the Super App. And we improved the experience of the existing clients, and we migrated 50 million clients. And these clients are distributed in several segments. We have clients that are migrated that are target clients of Personnalite, Uniclass, Ita� branches, and we've managed to convert them importantly, increasing engagement. And it's a full digital service. Remember that right when we published the results last year, we did a talk with investors. They ask me about Consignado CLT. Well, you have a branch structure going to be competitive well. We don't do subsidies or cross costs. If my channel of hiring is digital, my cost is digital. And I am as efficient as any player in the industry. So this is the way that we've grown in the payroll loan, Consignado and a cost of service that is very low. So it's 100% digital channel. So we don't do cross cost between segments and the entry path of the client. The INSS Social Security, 2 important issues. First, in this cycle, we had the highest volumes of hiring in the market. But the market decreased a lot, and it didn't decrease because of the cap. The main effect recently of the INSS has to do with the blocking of the benefits and all the work that the Ministry and the President of the INSS is doing because of the fraud, because of all the problems that they found, they created mechanisms so that the client reconfirms and will get the benefit once again. So that made the volume of payments of benefits decrease of the payroll loans as well. Given the volumes that were produced recently, we've released this volume of hiring much more focused in the internal channel. We've done an important exit in the external channel because the cap of interest rate makes price and the commissions for the corresponding banks doesn't make sense. So the return on those operations are below the cost of capital. So therefore, we privileged 75% of our subcontracting is done with the banking channels, which if it's digital or physical. So with 2 points, with the reduction of the interest rates that we should see up ahead, this will open for the space of new publics in the INSS, we can penetrate in pubs that were left outside, and it's a lot of money because of the cap that were left outside. And the second effect, which is the capacity of reconfirming the benefits and going back to a certain normality, this will make the volume of demand also increase. Gustavo Rodrigues: [Interpreted] Next question, Mario Pierry, Bank of America. Mario Pierry: [Interpreted] Congratulations on the result, not only on this quarter, but also throughout the next 5 years since you assumed the bank, took over the bank. So one of the big advantages of the bank is all that modernization that you've discussed of the platform, investments in technology. I think it's very interesting, your slide showing the cost of technology is growing 18% over the last 12 months. It represents 20% of your expenses. So how should we think, Milton, from now on? How much more investment is necessary? How do you think in investments in technology now and looking to the future, the percentage of revenue? And the investments that you need to do, they need to come for improving processes, more investments for improving the efficiency or also investments that help you growing. How do you see this mix of investments, the value? And a question that wasn't done in the call is if you can just do -- well, when you talk about the growth of the portfolio that you expect for the '26, if you can specify for us per segment, what you are expecting of growth? Milton Maluhy Filho: [Interpreted] Thank you, Mario. Always great to see you. Thank you for your initial words. We're very flattered with your words. Now let me tell you, the investment of the bank is something that we always discuss deeply to ensure, one, that we are investing in the right place with the adequate return. And three, also the capacity of absorption of the investments on the long term because if they're accretive and they generate value, they should be positive throughout the year and our capacity to project. So we always have our back testing, and we always look at the investments that were done in the previous cycles, and we see in the investment office investment. So we see the returns of premises are okay. We always check what changed, why the result is coming worse or better. We always look at the 2 sides of the same coin, and we always recalibrate in our sensitivity for the decision-making process. This is a central point. In technology, we continue to do investments in the same threshold. There isn't a reduction in investment in technology. On the contrary, it's a mechanical natural growth. We've done an adjustment today. A great deal of our cost is connected to our talents to our human capital. This has changed throughout the years. Today, the cost of headcount is higher than it was in the past. And if you look at our mix throughout the years, it changed a lot. A few years ago, we had 7% of our employees were in technology, now we have over 20% today. That shows how the mix is adjusting throughout the time, investing more in platform, more into communities, more in technology, more in the experience of the client and naturally, the mix is adjusting. So that's number one. Number two, and here, I have to focus on one point. The capacity of absorption of investment is important because of the discipline in activation. We are very careful when we activate an investment in the bank, which is an intangible that is amortized throughout time. So we are always careful with a funnel of activation, we would like to say that we will activate half of what I could at the limit activate through the accounting rules. And why that? Because we have the discipline of letting a lot pass through OpEx because we don't want to sell the future and sell out the future. And this is an account that once you hire, the math comes in the long term. And we only activate projects that have benefits effectively. If it's a regulatory change, operational risk or a change in the platform that doesn't bring clear benefits, we're not going to activate it because of the discipline of mismatching the benefits that, that platform of the investment is going to have with the results that we expect. So they walk in parallel. Secondly, the deadline of activation. We do not activate more than 5 years because we have difficulty in looking at the lifetime of a platform, a system longer than 5 years. Every time that you increase the activation deadline, you are hiring a problem for the future, knowing that the lifespan of the platform is less than 10 years. So you have a new cycle of reinvestment in the platform and didn't finish paying the investment of the previous platform. So you pile up. This is the higher cost that is given through time. So we really pay attention to that. And the investment is not just in technology. So we look at the investment in business expansion, the expansion of sales force expansion or creation of new business models or new products. So we are always at all times looking at that. And the rhythm of investment is always in the same threshold. We are looking at the investment in regards to the revenues to see what we are investing. We see how we can project that activation and amortization out throughout the years, how is that behaving with the company. So all of that management is done in an important way. Your second comment, and it all depends on the opportunities. It's very difficult to tell you now if we're going to invest more here or there, but I'm going to tell you that the investment in the maintenance of platform has been reduced and maintenance has been reduced because of the modernization that we've done in the platform. A great deal of the investments is to develop new products, new features for our clients because when you have a high volume of capacity of investment tax and then you use half for regulatory issues for maintenance of the platform, you end up having very little to invest in new businesses. So what we've done is improving the quality of the investment and increasing the investment for new businesses that will generate benefits in the long term that will improve the NPS and the relationships with our clients. So the mix is important. where we are investing. And about the portfolio, which is your question about the growth in 2026. I would like to say that this is very well distributed through the segments. The segment that we always are a bit uncertain is the big companies because it depends on the dynamics of the capital markets. So we need to see how the capital markets will evolve in 2026. There was an important volume in '25, BRL 700 million, but it's a platform that is important for us to deliver value for our clients given our participation in the market today. This is the cog in the wheel that is always in doubt because it might be more or less depending on the capital markets, how they will absorb the demands of the big companies. In the other portfolios, we've had a growth that is very consistent of SMEs. We've seen consistent growth in the middle market. We've seen consistent in the individuals, very well distributed in the business line. So I would like to say that there isn't a big concentration. All of them are growing in a very adequate rhythm for 2026, but always in that logic of target long term, portfolio vision, resilience and above all, the right price, generating value for the bank and the shareholders. Gustavo Rodrigues: Switching back to English as we have Jorge Kuri with us from Morgan Stanley. Jorge Kuri: Congrats on the great numbers, 27% return on equity, quite impressive. I wanted to ask about -- and just bear with me for a second because this may be a long question given they need to provide the backdrop. But I wanted to ask about your 2026 credit growth guidance, which is somewhat underwhelming. And I guess let me explain why. This time last year, when you provided the guidance for 2025, the macro backdrop was more challenging. You expected Selic rate to rise from 12.25% to 15.75%, which is obviously negative for credit demand and supply. Unemployment was expected to increase to 6%. I believe that was on your guidance. And nonetheless, you guided to credit growth of 4.5% to 8.5%, and you ultimately delivered right around the midpoint of that range. So fast forward to today and the macro outlook you're assuming for this year appears to be more constructive. You expect policy rates to fall from 15% to 12.7%, which should improve affordability and support credit demand. Unemployment is expected to remain below the level that you assumed last year. And the economy is still growing at a nice 2% clip. Despite this better macro backdrop, your credit growth guidance is only marginally higher than last year's guidance. You're at 5.5% to 9.5%, 1 percentage points higher than both the low and the high end of the range. Milton, you talked about significant improvements in how you run your consumer and SME platforms that were executed during 2025, which one would expect would allow you to grow faster, especially given that consumer and SME is a really big part of your loan book. Payroll loans, which is also a really important product, were notably bad in 2025, growing only 1% for all of the reasons you mentioned. Now with falling rates, this is a product that is highly sensitive to rates. You're now pushing aggressively on the seller debt. So it just feels that, that could be significantly higher. So Again, why the relatively conservative guidance? Is it competition intensifying? Is it making it harder for you to defend share? Are you losing share? Are you really cautious about the political cycle and you're going to be sort of a pause until October? What other things are being driving that? Any color would be really helpful. Milton Maluhy Filho: Thank you, Jorge. Good to see you. And I understand perfectly where you're coming from your question. So let me try to be clear to give you a better answer, not so long, but I will try to be very straight in my view. I think I hope you're right, and I hope we find our room an opportunity to have a better results and better growth in 2026. But when we do our planning, we have to look forward and see if -- what are the uncertainties. The macro area has this view, but we know this is an election year in Brazil. Election brings volatility. So when the macro tries to give us the figures, they understand that everything is the same. So you don't see there an input of volatility in that macro perspective. And this is what we will be facing in Brazil. So how will the investor react in the election process? What will be the economic plans of the candidates? What will happen with the indebtness of Brazil in the long term? What will happen with the FX if it brings more volatility. If the inflation goes up for any reason due to the FX and also due to the food price will the Central Bank be able to cut rates and to get you to 12.75% by the year-end. If we need to stay longer with rates, it's not what we believe what this will impact our portfolio for wholesale, what this will impact the portfolio for SMEs. How will the activity that we are seeing a downturn in activity, even though the GDP will grow 1.9% in our projection, how expansionist will be this GDP. What is the quality of this growth? Is this going to be more on the fiscal stimulus or will be more productivity? What are the level of investments that we are seeing in Brazil? I'm not saying about portfolio investment, infrastructure investment, long-term investments, many companies waiting to make decisions understanding what will happen in the election year. So I wouldn't say it's a defensive guidance, but it's a realistic guidance due to the level of uncertainty we see in 2026. I hope you are right. I hope everything goes smooth. But the good thing of that is our capability to react and to come back and say, look, we made a mistake or we have new information, and we believe we can do better, we will do it. If you look for last year guidance, which we had BRL 44.8 billion implied in our bottom line, if you could do that for the midpoint of all the metrics, we were able to deliver BRL 2 billion more throughout the year. And we changed the guidance in the coming quarters. We did that for financial margin with clients. We did that for financial margin with the market. We did that for the income tax. So we made the adjustments. So if there is an opportunity, don't be so focused on the guidance. We'll be able to come back and say we are doing better. So in the first quarter, we have the first quarter results and prospectively speaking, what we are seeing in Brazil. So our capability to react is very fast either way. And if things go south for any reason, we're going to react fast as well in a defensive mode. And I think our portfolio, we don't have any capital restriction. We don't have any liquidity restriction. We don't have any NPL restriction. We don't have any profitability restriction. So we're going to be agile. We're going to react if necessary. So look more in our capability to deliver in the long term and how we able -- how we've been able to react in cycles going in a different direction. So this is the most important thing, the capabilities that we have to react, the execution capabilities that we have inside the organization and the capability to look prospectively. Imagine if we decide to grow twice the portfolio as we are seeing today and if things go wrong and if the macro changes, if the election for some reason, the market doesn't react well and if the inflation goes up and they need to keep the rate at a higher level, the portfolio is there. So I cannot be providing a huge growth and then looking back and say, I think we should have done in a different path. So this is the discipline that we have, always looking for the long term. If there is an opportunity, if we can deliver more, we will do it. And don't forget that the rates, also the reduction of rates have impact in our balance sheet in one side, but have benefits in the other side. So you always make that point how sensitive we are for the CDI in Brazil, and we always come back and show a slide showing that we are less sensitive that market believes. I don't think you believe that anymore. You've been seeing us through the cycle, but we have hedges in our portfolio. And this is the way we're going to be facing 2026, realistic, kind of cautious looking ahead, what's going to come in terms of the election scenario. And if there is an opportunity to speed up, we're going to speed up. If there's an opportunity to deliver more, we will deliver more. Gustavo Rodrigues: [Interpreted] Going back to Portuguese. Marcelo Mizrahi with Bradesco. Marcelo Mizrahi: [Interpreted] Congratulations on the results. Excellent results. The guidance is very transparent. Now my question has to do wanted to understand with the scenario of uncertainty about the delinquency. So I wanted you to bring your vision on the delinquency of individuals and the companies, different dynamics, of course. As you said, capital markets have been -- has impacted the liquidity of the companies, and we have the programs of the government, how do you see the impact of the potential reduction of the programs in this year? And the bank has grown strongly recently in the SMEs. This is a point. And in the individuals, we also have the reform, the reduction of the tax, also the liquidity that the payroll has, brought to the -- that the bank has dropped the individuals, the payroll loan for individuals is strong. So I wanted to get a diagnostic on what do you think about the delinquency for '26. I understand that we can have different years between the first quarter, second quarter, but any sense that you can share with us will be very useful. Milton Maluhy Filho: [Interpreted] Marcelo, thank you for your initial words. About delinquency, I would like to say that we don't see any material changes in the indicators of delinquency for 2026. But the first quarter is more cyclically seasonally, there is an increase in delinquency because of all the commitments for the beginning of the year that ends up pulling up the delinquency at the beginning. That cycle, we do not expect a very relevant change from what we've observed in previous cycles. We have a month. We are practically in February already. So we see a behaved cycle. We see a few portfolios, specifically indicators of industry that we see the delays that are more pressured. And we see the delays that are more pressured, whether if it's in the individuals or the SMEs, the short delays or controls in all the portfolios, there is no deviation. What we have in the SMEs, and we've discussed that, is what I call the normalization of the effect of the governmental programs. So there is the period of payment now and that pressures the delays on the short term, but now the cost of credit as the portfolios are well insured and the cost of credit is well behaved. So I would say no concern with the scenario for '26. Evidently, the scenario is dynamic. If the interest rates, they don't do the adjustments that we expect the pressure on the companies and the individuals will be higher, so you can expect a higher delinquency we see a good quality for the generation of employment. There's a decrease of the employment. There's an increase of investment in labor-intensive sectors. So the liquidity that you commented on the assumption of the taxes, it brings more -- the inflation of services is very resilient because of this. The commitment of the compromise of income is very high even though the salaries are growing in Brazil, the compromise of salaries is a big issue and the delays that have been published in the market short term or there has been reasonable increases in several products and portfolio and our portfolios have performed differently from the data. So when you exclude our delinquency and all the products, we have a behavior that is very different. Now it's important to reinforce that a part of this increase in the long term has to do with the change in the 446 and a lot of institutions have increased the criteria for the write-offs, which pressures the delay because it takes longer to clean in the portfolio, but it alleviates the cost of credit in an important way. We decided in the bank to work with the best expectation for recovery, even though with the flexibility that the 496 gives to the bank to adjust the write-off for longer deadlines, we maintain the same deadline since the first day. So there isn't any change in any portfolio, any delays in the write-off because you have the number and then you are not doing the provision for expected loss. You start to do the provision for the incurred loss because you decrease the capacity of the model of anticipating the real capacity of reacquiring the credit. So the best proxy for this is to go back 3 quarters in the past and looking at the level of NPL creation that we have and comparing that with the write-offs that are here, and this is a direct correlation to one. When you look at the breakdown of correlation, 70% of what it was, 60% of what it was of the creation 3 quarters down the line, there is a change of policy of write-off and the increasing of the line, benefiting on the short term, but the math is there. It's higher. So these are controlled indicators, the portfolio of the companies, the provisioning is very adequate. We always look at the review name by name, but events happen, especially in big companies. Events that were captured by the model, sometimes in events that sometimes because of something that we don't control, frauds, for example, we've seen in the past. We always have to look at the attend with a lot of attention because the wholesale is less statistics and more event and we don't foresee anything. And if we see any case, we provision adequately and we have a balance with the level of provision that is very adequate. Looking at the strength of our provisions and the coverage of all the segments, it's something very important. Something important is that we're not going to stop doing the provision for delivering the result in a quarter. The provision is a decision is management of the portfolio of the balance, and we're always going to do the provision in the future. If the ROI drops, then we explain. But the provision is in front of the profitability always. So we're never going to leave the wholesale or retail sub provision to deliver a better result. Gustavo Rodrigues: We are switching back to English again, and we have Carlos Gomez-Lopez from HSBC with us. Good to see you, Carlos. Carlos Gomez-Lopez: Among the many good numbers you have sent to us. Perhaps one that impress me the most is the 50% market share in real estate financing among the private banks. Where do you see that market going? And why do you think you have such a presence there that the other banks are not replicating? And then the other question, you're a big consumer of software and IT services. We have seen a big reaction in the market to AIs going into this space and that has affected stocks. As a consumer of these services, have you seen a change in pricing when you're discussing with the providers in the last few months? Milton Maluhy Filho: Thank you, Carlos. Good to see you. Thank you for your compliments. First of all, on the real estate side, mortgage business, I would say we have the biggest saving account deposits in Brazil after Caixa Economica Federal. So, looking to the private sector, we have the biggest saving account figures will allow us to be more competitive on the mortgage side as well. So this is one. Second, everybody has put in the market 100% of our saving accounts with the obligation that we have to provide the 65% plus the demand deposits that we have to live in the Central Bank. And this year, there is this change. They are releasing 5% more of the demand deposits that we live in the Central Bank, which provide us more liquidity. I think our capability to serve our clients in a very competitive way due to this liquidity structure or funding structure that we have has been able to put us in a different spot in terms of providing credit. So if you took any company in Brazil, any bank and you compare the rate we offer to our clients, and if we have the same rate offering to a client, I can tell you that the level of return that we have is different from the market because we need less funding from the treasury than other competitors that have more portfolio that they have in terms of saving accounts. So that's structurally very relevant. Of course, the products that we have, the experience journey that we have with our clients is not only price oriented. I think we've been able to invest a lot in the real estate, the mortgage journey with our clients and also this long-term view, knowing that the real estate, the mortgage, it's a very important product when we look to stickiness. Looking to our clients in the long term. So I think this is the capabilities that we have, and we've been able to deploy relevant amount of mortgage in the market for that reason. We have the biggest portfolio as well, always taking Caixa Economica Federal on the side and Banco do Brasil, they don't have a saving account for mortgage. They do that for agriculture. So it's a different business. So I think this is, I would say, the main reason. Talking about our relationship with the tech providers, I think we're going to be seeing a lot of volatility in the market. Many people saying there is -- it's not a bubble. When you look to the technology itself, the capability of scaling that throughout the globe, a lot of investments going into that, and this has been very accretive for the GDP growth, especially in the U.S. But the question is, who will be the champions in the long term? Because as any other industry, you won't have many champions. You have a few, but everybody is doing massive investments. So the concern that the market has more on the equity side has to do, am I investing in the champion? Who will be here in 5 years more, who won't be here in 5 years more. And as the prices has gone up very, very strongly recently, we'll be seeing a lot of volatility in the industry. As a client, we've been able to do very good negotiations with all the providers. We have relationship with many of them before all this AI phenomenon that we are seeing. So that means that those providers, they look to us and try to do -- to be very competitive due to the level of scale that we have, the capabilities that we have to buy in relevant amount. But of course, if you go to the GPR and all the processors that we have to use, then we have to pay market price and it's expensive for everybody, not only for us. So what we try to do is to do big negotiations, long-term negotiations. This is the same for cloud. We have long-term contracts with our providers and more the contracts, good long-term relationship with them, trying to understand it out through the cycle, what needs we have, how should we measure and negotiate the contract in the long term. So we are not seeing a huge amount of increasing price. I think the prices has been, of course, due to the level of price that we see today, be competitive, and it's not putting us additional pressure in our costs. Gustavo Rodrigues: [Interpreted] Now the last question, Daniel Vaz, Safra. Daniel Vaz: [Interpreted] I just wanted to do a follow-up on the previous question. On the government lines, we've seen, it's very interesting, the delinquency and the increase in the delays. But it's very -- it's not clear in our perception if the FGI can support this production and rollout for 2026. So if you can comment, if you see that we need for the size of the production of the fund, would you need a recapitalization of the funds of the -- this year? And mine is about AI, and it's very clear the effect for the cost efficiency. But in business, there is a certain difficulty in making it tangible the potential of growth for the revenues. The bank has always done a lot of benchmarking globally. It's good. And I wanted to hear from you. Do you foresee a clear opportunity in businesses and the potential of revenues coming from Gen AI and all those technologies? Milton Maluhy Filho: [Interpreted] Thank you for taking part in our meeting. The FGI, if we look at the program as a whole, I think that there is a better allocation of the governmental programs with better results than ours. This is for the Pronampe lines for the FGI. The BNDES has an important role. It's the manager of the program. So the allocation of public money, the returns are really impressive because we can get to companies, smaller ones, companies that would have more difficulty in capturing resources under those conditions, especially in the deadlines that we can offer. So I'm enthusiast of the program because it's a great application of the public resources with great results. If we do a retrospect in the last years, the amount of credit that was released in the market, how many clients were benefited, how many people financed the increase in jobs and investments that were done, productivity, the program is a winner. What happened is at the end of '24, the last quarter of '24, we understood that the level of leverage of those sureties guarantees that were done in the FGI were low. So we could bring to the market additional resources, which were -- they call it pocket change, but we Itau took that proposition to BNDES. We had a conversation with them, and we had an opportunity of returning to the system an important level of resources without getting new resources in the FGI fund. And the BNDES did the analysis they agreed, and we could with that bringing -- we brought BRL 100 billion more for resources for the system. So in the last quarter of '24, if you see the production of the market, you will see that we applied an important volume of resources of FGI throughout '25, the market as a whole, also not all, but some banks applied some resources in the FGI. Now for '26, the budget is a certain maintenance of what was the organic of the last years, but without that change. change that return, which is BRL 100 billion. So the phenomenon, the sensation of having less resources because of that because the leverage that was done with the top-up generated additional resources. We've discussed with the Ministry and the government of economy to give visibility for the allocation of public resources. I don't think that we have a better program than this. There are discussions that are happening. I don't know if we are going to have an appetite for an additional, but I would like to say, maybe yes, maybe no. Pronampe, no, this is a more definitive organic program. So we're going to see a growth that is normal of Pronampe. And FTI will depend on this decision that the government has to take of resource allocation. And as you said, we would need an additional for the fund so we can produce a volume that is similar to what was produced over the last 15 months. So we are depending on this decision that is very important. Second point about AI. This is an agenda that is here to stay. We want to be on the vanguard of this movement. It's a great modernization and the review of data architecture, having done that has placed it in a differentiated threshold so we can advance in the new era. We believe that when we talk about AI without in the background, having all the knowledge that we have in several journeys, several products and several businesses, you cannot train your models beyond the commoditized models. It's a very junior experience from the standpoint of training. So our capacity of training and doing this at scale and getting great results, training our models with our way of doing things without the experience that we have embarked. So this organization of the database of the tokens in the big models, and we are using that in an architecture that is making the data democratic and enriching the basis makes us find incredible opportunities in all the dimensions of efficiency, modeling, experience, customer experience, process, internal processes and productivity. So we've seen advances that are relevant. And from the standpoint of the overview of the client, the APs platform that I just commented is powered by AI, 100%. So the benefit comes because I can engage clients with an efficiency level that is higher. So that will bring me opportunity to have more risk appetite because I can accept more losses. This is a value generation for the bank, and I can be more competitive due to the other offerings of the bank -- of the market. And that allows me to gain market -- gain efficiency and gain more clients. So this increases my principality with the client without needing to scale the sales force because the cost of service of these new B2C more specialist models, it stems from -- through people, through -- goes through a cost of service that you cannot offer for all clients. These models are very scalable. So I can service the client in an investment world in a very simple way, and I can increase the level of engagement with the bank, generating top line, reducing churn, improving the relationship with the client. on the long term. So we see the PIX through WhatsApp is transactional. A very efficient, cheap platform. This increases the principality of the client because the transaction with you and now they're using other products, other businesses and then you are the main bank. So every solution comes from a different angle, but we also believe in the capacity of generation of top line, not only in the generation of bottom line as you generate more. As you are more efficient to service your clients. Gustavo Rodrigues: [Interpreted] Thank you, Daniel. Thank you, Milton, and thank you, everyone, that took part of our conference call. We finish our Q&A session and our fourth quarter of '25. I will give the floor to Milton to close the session. Milton Maluhy Filho: Thank you, Gustavo. Thank you, Gabriel. Thank you, everyone. for being here for your questions. I finished the initial presentation of the slides talking about discipline, focus and humility. So I would like to always bring these issues. I think that there is an additional element, which is being serious. And we know the importance of building business models that are sustainable, and we can get the interest of the system and of the client in front of -- well, before the interest of the bank. Even though we see in the market a phenomenon that doesn't happen in that way. It's sometimes the interest of the company in front of the interest of the system. And we need to be leaders by example, therefore. We need to do the right thing, do the sustainable thing because there is no way -- no right way of doing the wrong thing. So this is what we believe. So there is no responsibility that is higher than of any institution of looking at their processes or their clients in the system and thinking about what are the impacts that we're going to generate. I think that this is the primary responsibility of any financial institution, and we cannot subcontract that. It's not default of the regulator. It's no one's fault. Our responsibility is that, and we have the capacity installed the technical teams that can understand and evaluate the data. And we don't need an auditor or a regulator to tell us if it's right or wrong. So, this is what we see. I am very excited. Even though this is a more challenging year because of the uncertainties and the election, I am very excited with the moment of the bank, and we close a cycle of deliverables that are robust with consistency and quality and the results. And looking to the future, I think that we have everything to deliver a solid year of quality. Of course, we have all the execution that is done throughout the year. But I am certain that if the conditions are there, we will deliver with a lot of quality and a lot of wisdom without selling out the future, but without anticipating the future as well. So this is the discipline of capital allocation and creation of value. that agenda of efficiency is very important. So we can go through another cycle, which are the next years that are up ahead. So I would like to thank you for your participation and your support, your trust that you deposit in the institution and tell you that everyone is here ready to work with a lot of focus, with a lot of strength and in a work environment that is incredible with the transformation that we've gone through the years that has produced incredible results, and we are very optimistic of what we can do for the future. Thank you very much, and we will see you shortly. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Unknown Executive: Let me start the explanation meeting. My name is Hiraoka from Public Relations Department of KDDI. I serve as MC. Today's meeting, as is disclosed on a timely basis to present preliminary results of the third quarter of the year ending in March 2026 of KDDI. Today's presentation is being distributed on YouTube and other media in addition to the on-site. And we have put up three related materials on the KDDI website. Please refer to the materials at hand. This is the message for the people in the outside audience. Today's attendees are as follows: Hiromichi Matsuda, President, Representative Director, CEO; Senior Managing Executive Officer, CFO, Executive Director, Corporate Sector, Nanae Saishoji; Managing Executive Officer, Director, CSO and CDO, Executive Director, Corporate Strategy Division, Tomohiko Katsuki; Executive Officer, Executive Director, Corporate Management Division, Corporate Sector, Kenji Aketa. These four are in attendance. President Matsuda, please. Hiromichi Matsuda: Thank you very much for gathering here today despite your busy schedules. First and foremost, we sincerely apologize for the significant inconvenience and concern caused to our customers, business partners, shareholders, investors and many other stakeholders, including our employees due to the suspected improper transactions at our subsidiary. We recognize this matter as a serious issue that could potentially undermine the trust in the entire KDDI Group. As the top management, I feel a profound sense of responsibility for the occurrence of this matter and for failing to prevent it. Today, I will carefully explain the details available at this time and sincerely answer your questions. Please be assured that this matter relates solely to transactions within the advertising agency business and has no impact whatsoever on the provision of communication services, including BIGLOBE. I will explain the purpose of today's preliminary results explanation. As the Special Investigation Committee's inquiry into inappropriate transactions is ongoing, the impact on our financial statements remains undetermined at this time. Therefore, we have decided to postpone the disclosure of our Q3 FY March '26 earnings release. Therefore, today's explanation is titled Q3 Preliminary Results Explanation. We will report on the facts currently recognized by the company, the outline of the financial impact and separate from this matter, the business progress for the third quarter and initiatives for future growth. Please note that the Q3 preliminary results, prior year results and financial impact figures related to this matter presented today are reference values based on facts currently recognized by the company. These figures may be subject to revision based on the findings of the Special Investigation Committee and the audit results of the accounting auditor. Final figures will be reported promptly upon completion of the investigation. At this time, we plan to receive and disclose the investigation report from the Special Investigation Committee by the end of March. Based on this assumption, we will plan to announce the Q3 results at the end of March, and we currently intend to proceed with FY March '26 financial results announcement without delay. I will now outline the key points of today's business performance briefing and preliminary results explanation. First, the inappropriate transactions that occurred at our subsidiary, then the growth of our core business foundations, including mobile in our key focus areas and the growth in the AI era. First, regarding the improper transactions that occurred at our subsidiary. This was disclosed on January 14. It has been discovered that improper transactions were allegedly conducted by employees of BIGLOBE, a consolidated subsidiary of the company and its subsidiary G-PLAN within their advertising agency business. Regarding the advertising agency business, the possibility that sales and other figures had been overstated came to light following delayed payments from certain agencies in December 2025. To clarify the facts and causes related to this matter, we determined it necessary to conduct a more specialized and objective investigation. Accordingly, we established a special investigation committee composed of external attorneys and certified public accountants on January 14. Next, an overview of the fictitious transactions we have identified. Both -- so this is the left side, which we have anticipated. Usually, from the advertiser, advertiser approaches us. Usually, there is a request to the advertising agency. And the web media becomes multiple. So there is another existence publishing agencies. This BIGLOBE and G-PLAN are in the upstream. Advertising agencies and publishing agencies, they are the intermediary. Around 2017, G-PLAN launched this business and BIGLOBE later entered to develop new ventures. You can see the flow here. Within this business, the money is also flowing -- subtracting the fees and the advertisement fee is paid. Within this business, we confirmed suspicions that subsidiary employees conducted fictitious transactions for advertising agency services despite the absence of actual advisers -- advertisers, resulting in the recording of fictitious sales revenue and other figures over multiple years. Now let me use the right side to explain. First of all, the discovery process. The transaction volume increased. So following an internal investigation, KDDI instructed BIGLOBE and G-PLAN to reduce orders to downstream agencies to strengthen management systems and manage business risks. This led to delayed payments from upstream agencies. Within the structure where downstream agencies deducted commissions from payments related to BIGLOBE and G-PLAN's transactions and returned them to upstream agencies, a reduction in payments from both companies decreased the funds flowing to upstream agencies. Therefore, upstream agency became unable to make payments to both companies. So this transaction volume snowballed and reaching hundreds of billions of yen per month in recent periods. Beyond the publishing agencies, there is #3 and #1, the upstream agencies. We understood that those #1 and #3 are identical. And through this fictitious transaction, BIGLOBE and G-PLAN, posting of revenue was excessive. And because it's fictitious transactions, the fee was flowing outside. And the impact is on next page. At the top, as of today, these are the impacts that we recognize. As I mentioned earlier, because of fictitious transactions, we need to cancel booked revenue, part of the booked revenue. And this is before FY '24 March, about JPY 96 billion and for FY '25 March, JPY 82 billion; and FY '26 March, JPY 68 billion, the total of JPY 246 billion. Below that, operating income, reversal of recorded income, about JPY 8 billion or JPY 17 billion and about JPY 25 billion. These profits are to be canceled. In addition, as I mentioned earlier, the commissions, which are outflow, and we have provisioning for that, JPY 5 billion, JPY 11 billion and JPY 17 billion. And as to JPY 33 billion approximate number, we are going to make efforts to recover this amount. In addition, including the prior years, there is a possibility of recognizing impairment losses. At the bottom, next steps. As I mentioned earlier, at the end of March or beyond, we are going to publicize the report of investigation as well as financial results without delay. In addition, in a parallel way, doing and strengthening the company group's governance and examining recurrence prevention measures will be taken. Now this is our commitment to future actions. First, we are fully committed to cooperating with the Special Investigation Committee, diligently uncovering the facts and thoroughly analyzing the causes. I myself will take the lead in actively addressing these issues to restore and strengthen the trust for our group. Our company opposed the KDDI philosophy, which embodies the shared values and code of conduct that every individual should uphold. We will create an environment where transparency and fairness underpin our work, ensuring that these principles are communicated throughout the entire group and practiced consistently. By doing so, we aim to foster a culture that enhances both human capabilities and ethical standards to meet expectation and to regain trust, of course, we will make efforts to do everything to avoid any reoccurrence of similar matters. At the same time, it is indispensable for us to continue to develop our business for sustainable business operation. So, from now on, I would like to communicate to you specifically what initiatives or measures we will take. Now this is as reference figures. I present consolidated results for the third quarter FY 2025. And we have revised both prior year and this year because of the impact coming from the matter. Please refer to the bottom column. And we have canceled the revenue and income associated with fictitious transactions. And on the right-hand side, we are showing the numbers as reference values after the provisioning of external outflow. So, in year-on-year comparison with the actual results, the cumulative results for the first three quarters are as follows: operating revenue plus 3.8%; operating income, plus 2% and the profit for the period, plus 5.3%, we are performing well. So that is the cumulative base consolidated results change factors. From the left-hand side, we have the Mobile personal services segment base, plus JPY 27.2 billion and the Finance Energy Lawson, plus JPY 18.2 billion; and DX business services segment, plus JPY 8.5 billion; Technological structure reform, plus JPY 12.9 billion and impact of prior year's promotional expenses, minus JPY 28.9 billion. And based on those numbers, the total of plus JPY 17.4 billion positive. And also the mobile-related revenue grew and it's expanded and the finance and the DX are is moving on smoothly. And this is the Q3 alone consolidated operating income and the factors for change. In addition to each business domain growth, negative impact from prior year's promotional expenses has also subsided. So we are seeing positive growth. And now I would like to explain about this year's topics. The mobile business is making steady progress in structural transformation. building a stable business foundation that will serve as a pillar for sustainable growth. Mobile revenues bottomed out in FY March '24 and growth accelerated on a nine-month cumulative basis in FY March '26 with an increase of JPY 29.9 billion year-on-year. Right side, we are shifting away from excessive promotional competition and focusing on LTV. Structural transformation is also progressing, and we are building a lean and mean operational base with ARPU growth driven by value creation and churn rate reduction through longer contract duration. These are the key points of structural transformation of the mobile business that we explained in our Q2 financial results. We are promoting initiatives to secure long-term contracts by creating value that motivates customers to sign up shown on the left. And refining au's communication quality and differentiated value services shown in the center. This shows creating value that motivates customers to sign up to maximize LTV. Left side, at UQ Mobile, we are focusing on promotions that suggest the optimal device to customers and device bundled contracts, which have higher ARPU and contracts retention rate are on the rise by 4 percentage points. Right side, we are also working to differentiate our plans and services and money activity plan to Ponta pass and Netflix are all performing well, which has increased ninefold. We are enhancing the value of the connected experience, which is the source of our competitiveness. We aim to expand the 5G SA area, which provides more stable communication with stand-alone 5G to over 90% population coverage by the end of the fiscal year, which will be one of the highest in the industry. Right side, au Starlink Direct was launched in April 2025 and has expanded to over 80 devices, 10 million units in less than a year with a number of connections reaching approximately 3.5 million. Recently, there was a report of a fall while ice climbing in Hokkaido and one of them used this service to send SOS, which led to a rescue. Last week, the coverage area doubled, now covering the Ogasawara Islands and all major ferry routes. And in March, the service will be available outside of Japan in the U.S. as well. This shows the result of ARPU growth driven by value creation, which is a factor towards leaner and meaner operation base. Our value creation efforts have been successful as shown on the left. And regarding brand migration, UQ mobile to au migrations finally surpassed au to UQ mobile migrations on a quarterly basis. These factors also contributed to the significant growth of mobile ARPU by JPY 190 year-on-year, as shown on the right. The second factor towards leaner and meaner operation base is churn rate reduction due to longer contract trend. Left side, au contract retention rate is improving as customers are finding the value they receive during sign-up attractive. These trends are accumulating and the momentum remains strong, as shown on the right. The smartphone churn rate in Q3 of FY March '26 fell by 0.01 percentage points year-on-year, showing steady improvement. We are making progress in addressing the financial business, which was identified as an issue in Q2 financial results. In Q3, credit card business mainly drove profit growth with operating income up by 30.5% year-on-year on a cumulative basis. As shown on the right, the bank's deposit procurement capability, which had been a challenge, has improved steadily and the personal deposit balance expanded by 1.3x year-on-year and number of gold credit card members also increased steadily by 24.5% year-on-year. Another challenge for us, namely the Business Services segment. Here, growth was seen in each business area. As shown on the left, the growth of the third quarter alone was plus 7.7%, showing a strong momentum. In particular, the BPO/SI-related services, which had been identified as an issue in the first half, turned around and increased profits in the third quarter. On the right-hand side, IoT drove growth, increasing about double digit year-on-year. And especially IoT, including the SORACOM, the connections exceeded 66 million. On the left-hand side, we have the Lawson and Ikeda City in Osaka, we are working on the development of the town where you can leave in a secured and safe manner. And on the right-hand side, we are using drone to instruct the disaster-related location and we have more 1,000 locations where we have the drone ports, and we'd like to construct very agile and safe system for the disaster. And now the management platform and how to strengthen it. In light of inappropriate transaction of our subsidiaries, we will be even more conscious of the importance of governance. And as you can see on the left-hand side, we have the KDDI philosophy, which emphasizes the human capabilities and the KDDI version of its job-based personnel system has created a mechanism to enhance expertise. And as shown here, with the shift to a new management structure, we will further strengthen our core competencies by combining these with our aspiration to be a company that inspires challenges. To take on challenges, we will introduce systems and programs that celebrate challenges and promote collaboration and advance human resource development in line with our business strategies for growth. Now I'd like to talk about our efforts towards growth in the AI era. As a social infrastructure provider, it is our responsibility to support Japan's digital society and contribute to strengthening industrial competitiveness with both our cultivated communications infrastructure and our new AI infrastructure. As AI becomes more widespread in a variety of settings, an AI infrastructure that can process data securely with low latency will be important. Left side, with an eye towards such era, we ensured sovereignty and began operations at the Osaka Sakai Data Center in January as a data hub for securely processing corporate data. We have achieved efficiency gains by utilizing the existing space. And following Sakai, we plan to launch the Miyazaki Network Center in February as a communication hub, leveraging the knowledge gained at Sakai to expand into an AI data center. So we will expand operations in the counter region and Kyushu and so on. and utilize our existing landing stations to connect AI data centers with our strong communications network, building an AI digital built, a nationwide low latency network and AI computational infrastructure. We will also utilize the landing stations and submarine cables across the country to enhance the value of the AI digital belt. And we are going to create a hub by connecting landing stations and submarine cables. KDDI possesses some of Japan's leading know-how and assets covering everything from submarine cable installation to maintenance with over 60 years of experience, 360-day availability and landing stations across the country. We also strengthened Universal Joint connection technology for optical submarine cables and possess world-class technological capabilities. By leveraging these assets, we will develop landing stations near AIDCs and expand accessibility by AI computation infrastructure to overseas locations, thereby capturing global demand. Today, at the Board of Directors meeting, we decided we resolved to launch a new AI integration business cooperation. The communication platform on top of that, we need this AI platform. We have lots of contacts with customers. So the AI is -- in order to deliver AI as part of the labor force, it is very important to have solid platform. And for that, we are going to utilize our expertise and technological prowess. And also, we will integrate consulting professionals from the headquarters. And based on that, we established KDDI iret. And going forward, we will also call upon more engineers from outside, targeting at about 3,000 personnel by fiscal year 2028. Next is today's summary. First of all, the Special Investigation Committee will continue its investigation into the inappropriate transactions while the company reviews and strengthen its group governance and examines recurrence prevention measures. As to the impact amount, it is expected to include the reversal of fictitious sales and profits as well as provisions for amounts that flowed outside the company. The company will make every effort to recover the externally flowed portion. As to the schedule, as I mentioned earlier, targeting at the end of March, Special Investigation Committee is going to issue report on the investigation. And based on the results of investigation, corrections to prior financial statements and FY '26 March Q3 results will be disclosed by end of March and FY '26 March full year results will be disclosed without a delay. In the third quarter, core businesses performed very steadily, especially mobile structural reforms progressed as planned and the business foundation, including focus areas, continued to grow solidly. AI social implementation initiatives, including the AI digital build and the AI development platform are making steady progress. Even with the impact coming from inappropriate transaction, our business is performing well. And also, there is no revision to the dividend forecast for fiscal year '26 March. Thank you very much. Unknown Executive: We will now move on to the Q&A session. [Operator Instructions]. We will take questions from front. Unknown Analyst: Koma is my name. So about this fictitious transactions, I do not have the full understanding. So let me ask you a question. So about the amount. So maximum amount is this amount that you have shown here? Hiromichi Matsuda: Thank you for the question. As of today, the amount that we have confirmed, the impact on revenue is this amount and the profit impact is minus JPY 50 billion. And there's a possibility of additional impairment, but the Special Investigation Committee and the audit firm will confirm and there may be a possibility of revision going forward. Unknown Analyst: And this external flow, JPY 33 billion, if you could explain the scheme once again. So, this external flow, so upstream advertising agency and the three subcontracted party, was this external outflow from to those parties? Or was there an investment by the employees? Hiromichi Matsuda: Yes, if you could turn to the scheme diagram. Basically, this was a fictitious transaction. The agencies received the commissions of the transaction. It subtracted the fee. So the amount is this external outflow recorded as fees? I see. So this is shown here. So, to five companies, the fee was provided in this fictitious transactions, the advertising fee that goes to the publishing agencies was also returned. G-PLAN and BIGLOBE commission was also external outflow within the group. G-PLAN and BIGLOBE fees that were deducted fees was posted, but that was fictitious. And so the sales and profit was reversed. So that's shown in orange on the upper half. Unknown Executive: Next questions? D3 on the internal side, please. Unknown Analyst: Kobayashi from Yomiuri newspaper. I want to clarify some facts. This [indiscernible] the booking, when did it start? And also, how many employees have been involved? I ask those questions. Hiromichi Matsuda: So multiple number of years, that's a recognition. As a result of internal investigation, G-PLAN, this business started in 2017 and BIGLOBE, they started this business from FY 2022. This time, there are some fictitious transactions and non-fictitious ones. But the amount shown in the materials, they are all based on it, all of them are fictitious transactions. And as to the number of employees involved, G-PLAN, two, I understand that the other two are involved from the G-PLAN. And these two are seconded to the big globe and these transactions were conducted by them. That's our current recognition. Unknown Analyst: So these two people, 2017 and onward, they booked inappropriately. And the total is JPY 246 billion. Am I right? Hiromichi Matsuda: From the very beginning, when the advertising business was started, it is included in that amount. But from when and from where the investigation committee is still investigating it. And those numbers are as far as we recognize. So the more precisely, the committee will receive the report. Unknown Analyst: Am I right to understand that the employees of the KDDI are not involved, right? Hiromichi Matsuda: As to this, the commercial flow, we have already confirmed that no employee from KDDI has been involved. Unknown Executive: [Operator Instructions] Fourth from the front to the exit, please. Unknown Analyst: Sankei Newspaper, [indiscernible] is my name. First question. So when it started, this overlaps with the previous question, but the business started in 2017. And since then, this has been conducted. So from before the business started, the scheme was anticipated and started the business on top of based on that? Or did the business start first and then this fictitious transaction started? What do you think? What does the investigation look like so far? Hiromichi Matsuda: According to our understanding, the amount started becoming big in recent years. And so we said we have to have a control -- tighter control internally. So until when the transaction was authentic and correct, this is still being investigated by the investigation committee. Unknown Analyst: One more question. With this scheme, #1 and #3 were the same entity. And these agencies had to be part of the collusion. So the recovery of JPY 33 billion, will you request for the damage compensation to the agencies? Or will they be sued for criminal lawsuit? Hiromichi Matsuda: Thank you for the question. First of all, we will wait for the result by the Special Investigation Committee. And according to that, we will take appropriate measures. Unknown Executive: Any other questions? Unknown Analyst: One please. [ Fujita ] from Asahi Newspaper. I would like to clarify some facts here. So this diagram of the fictitious transaction 1, 2, 3, the advertising agency, is this just a single agency or only #2 is a different agency. Multiple number of agencies are involved. #1 and #3 are the same. There's a note on the right-hand side. So that #1, #3 are the same entity. It's just one company, you mean. Hiromichi Matsuda: Yes, we have just confirmed one and others are yet to be investigated. G-PLAN 2017 and BIGLOBE from 2022, #1 and #3. So it's not about this #1 and #3, the same entity. The 2017, when we calculated the amount, we just assumed that from the very beginning, everything was fictitious. So, back then, this entity is the same entity. We are still investigating it. So going forward, there's a possibility that there is non-fictitious transactions might be detected. That's right. As to the amount to be canceled. So about those amounts, it's not that everything is based on fictitious transactions. Well, basically, when the amount started to bigger, we thought that they were because of fictitious transactions. But as you can see at the footnote, it is either on the total sales amount or the pure sales amount. So, recently, the profit the cancellation that is getting canceled more and the transaction itself is getting bigger. Unknown Executive: Next question, please. So A4 towards the MC. Unknown Analyst: [ Niki Subo ] is my name. In the last financial results briefing, there was challenges you mentioned, the deposit procurement capability. I have a question on that. And then about AI-related question. First, on the deposit procurement capability. You said you are enhancing the capability. Could you elaborate on that? Hiromichi Matsuda: Thank you for the question. So, Jibun Bank program, we are trying to enhance the benefit, but not only that, the channel, there are multiple channels. And so we're trying to appeal and working with securities brokerage partners, enhancing that to expand the deposit. And the other is plan benefit. So money activity too is launched. On the bank side, we are focusing on the plan. And so the individual personal deposit is increasing on that side. Unknown Analyst: Next, a new AI company. You're working on the implementation, you said, trying to establish the development infrastructure. In the financial industry, the AI is used more and more. So, in the financial industry, what kind of implementation are you working on or planning? Hiromichi Matsuda: Katsuki-san would like to respond. Tomohiko Katsuki: Thank you for the question. AI implementation. In various industries, there are common areas. First, contact center and the fraud detection, AI will start from those areas. In our financial group, we are studying, examining the possible implementation and working with other financial institutions to conduct the POC, proof-of-concept. Unknown Analyst: So, SoftBank has been on that, the contact center. So if you could say a little more about what you're trying to do in the new company, what is the significance of this new company? Hiromichi Matsuda: Well, this new company is not solely for financial industry. And as we announced the Sakai last time for pharmaceutical companies and others, data, internal data and know-how that Japanese companies have will be used, managed for AI analysis. So we are being approached by pharmaceutical and other industries. Katsuki-san just talked about the financial industry, but that is the initial step. The call center is the first step. So thank you. I hope you could understand. Unknown Executive: Next question, please. The D2, please. Unknown Analyst: [indiscernible] As to the inappropriate transaction, the two people from G-PLAN, and they was seconded to BIGLOBE from when?. And these two employees, are they managers or executives? Hiromichi Matsuda: Thank you for the questions. It's related to their privacy. So I would like to refrain from answering those questions, sorry. Unknown Executive: So, B3, please. Unknown Analyst: [indiscernible] About this matter of inappropriate transaction. These two people, they were seconded to BIGLOBE. That means that they had authorities to work both for G-PLAN and BIGLOBE. They were seconded from G-PLAN to BIGLOBE and the BIGLOBE launched this new business and these two were working on that new business. And during the secondment period, they will also be able to work for Jan as well? Hiromichi Matsuda: Yes, usually, yes. Unknown Analyst: As to KDDI, to reduce the downstream the ad publishing, the request to reduce it, when did it happen and why? Hiromichi Matsuda: It was the mid-December last year. Back then, in order to strengthen the control because the amounts were getting larger and also we need to identify the risks for business. So, as to these two companies, we issued such instruction to reduce the volume. That means back then, you knew that there had been some the fictitious transactions. The specific doubt, we reduced the orders and the other payment was delayed from upstream. When that happened, we thought that we had some doubt beginning -- well, beginning to have some doubt about those transactions. In October 2025, the auditing firm pointed out some potential the fictitious transactions. And this is the table of the research. So we involved the outside the auditor and the internal auditor together started some -- the investigation. But back then, they could not get any specific evidence. Unknown Executive: Thank you. Next question please. We'll move to the online for now. [Operator Instructions] Unknown Analyst: Thank you. So about the fictitious transactions, so the external outflow portion, this is #1 and #3 companies. It's the amount that is paid to #1 and #3. Is that what you mean by external outflow? Or were there a possibility of outflow to other parties as well other than #1 and #3? Hiromichi Matsuda: Thank you for the question. So you can see this on the screen. On the right side, it says external outflow. This is the gray area. So #1 and #2 -- well, #3 and #1 are the same. So #1 and #2 paid as fees of the transaction. But this transaction turned out to be fictitious. So this is the area that is outflowing -- outflow externally. Unknown Executive: Another question from online from [ Toizai ]. Unknown Analyst: Question about inappropriate transaction. At this moment, why did it happen? How are you looking at the reason? The investigation committee is yet to come up with the conclusion. But at this moment, what is your thought? Hiromichi Matsuda: Thank you for the question. As to the reason why, of course, we are doing investigation about it. And at the same time, the times, for example, are there any signs for such a matter to happen, we need to avoid reoccurrence of similar matters. So, in December -- I mean October 2025, there were some points made. But as to the documents, the billings and the receipts, which are the evidence of the transaction existed, and there were no problem about the impairment and outpayment, and we were told that there was no problem from the big as well. And in this advertising and the business, there are lots of people involved from downstream to upstream. And we didn't look into a very extreme of the floor. So I think that's part of the reasons this kind of matter happened, and that's some -- I think that we need to make improvements. Unknown Analyst: Another question. So there is a governance issue. You have many subsidiaries and your business is diversified. So a company, what kind of governance issues do you recognize? And what kind of actions you would like to take about them? Hiromichi Matsuda: Thank you for the question. We have been expanding our business, including outside directors. the corporate ethics that should be better actually that we received such point from the directors. And since last year, we have been working on that and still this kind of matter happened, and I feel very sorry about it. I think there are two things. We have KDDI philosophy to raise a spirit to improve our mindset. The KDDI and group companies together, we would like to make repeated efforts so that the philosophy will be well embedded in the organization. And also how to prevent such the matter, that process for that is yet to be established. We need to brush up our detection capability to see any signs. Unknown Executive: [Operator Instructions]. Line B4 towards the exit, please. Unknown Analyst: Yomiuri newspaper. [indiscernible] is my name. So my question is also on fictitious transactions. So in this scheme, #1 and #2 agencies. So it was elucidated because the payment was not done. Did you contact these companies? Is the business continuing? So that's my first question. And number two, in the scheme, how involved is this company in the fictitious transaction? In this business flow, were they used -- or did they collaborate? Did they contribute to the fictitious transaction? Hiromichi Matsuda: Thank you for the question. The transaction is, of course, stopped. It's suspended. With some agencies, there were collaborations, but we think -- but this accuracy is now being investigated by the Special Investigation Committee. So number two, so you think some of them were collaborating, but I don't know a big picture. The big picture is now being investigated by the Special Investigation Committee. Unknown Executive: Any other questions? B2, please. Unknown Analyst: I am from Nikkei Newspaper. As to detection process, JPY 250 billion, the fictitious transactions. Why was it possible? I wonder. What kind of supervision did you take in the past? Hiromichi Matsuda: You mean the supervision on the results? Unknown Analyst: Yes. Hiromichi Matsuda: The billing and other slips documents were there and G-PLAN and BIGLOBE based on those documents, they did issue results. Unknown Analyst: Understood. In this -- the commercial flow, so two companies, the parent and subsidiary were involved. Is there any particular reason for that? Hiromichi Matsuda: The BIGLOBE came into the picture not from the very beginning. So, compared to G-PLAN, because of the level of the trust and the credibility, the BIGLOBE has started its operation as a new business. Unknown Executive: Next question, please. B3, third row towards the exit, please. Unknown Analyst: Sankei newspaper, Fujia is my name. So my question is on fictitious transactions. So it's cumulative, but JPY 246 billion impact on sales. So this is quite large. Each individual transaction was large amount or just accumulated to be this big. So number of cases or the transaction volume value, I don't -- I know you cannot go into much detail, but just a rough image, if you could elaborate to -- for us to get a better image, please. Hiromichi Matsuda: Thank you. So as I mentioned earlier, recently, a few tens of billions of money had been circulated back. In the scheme based on the assumption that the amount goes up month after month. And so it gradually increased and amounted to a few tens of billions of yen. So including previous years, JPY 246 billion. So this is the size of the transaction. Unknown Analyst: How much per case? If you explain this may be too much detail, but the advertisement, how -- what's the size per case of transaction? Hiromichi Matsuda: So it's -- I understand that it was circulated back in its snowballs. I understand that, but still the amount is large though. You are right. Basically, there was the report, the -- so we validated the validity of the transaction. But this is the fee for the posting of the advertisement and paid to each advertisement agency. So it was not for each individual advertisement. Unknown Executive: Any other questions? Question from B1, please. Unknown Analyst: Two questions. Yesterday, NTT DOCOMO, Mr. Maeda, President said that there is a very intensified competition. But previously, the announcement of the results, you made a shift to the LTV from the excessive competition. As to new customers and the competition for new customers, are you slowing down your efforts? Are you slowing down your speed a little bit? Hiromichi Matsuda: As I mentioned in my presentation, the mobile revenue is increasing. And the promotional cost, I said the last time, the year-on-year basis, our promotional cost is flat. So it's not that we are using a lot more compared to the previous year. And the impact -- as to the impact, for example, the handset replacement program, there should be a good balance there. But in the third quarter, the [indiscernible] plan that is producing the good benefit for this year. Unknown Analyst: My second question, Rakuten Mobile exceeded 10 million contracts to the end of last year. And I think roaming I think there are some difficulties, but could you please talk about the direction and your thought on this area as well? Hiromichi Matsuda: I cannot talk about the other companies, but the competition and collaboration for roaming included, and we are also competing with them as well. So, in September this year, we are discussing with them for the roaming for September this year. The other day, the Rakuten was faced with some communication failures. And that pushed a lot of traffic toward us. The areas, in other words, are overlapping. And that should be sorted out. So -- and we are going to suspend the part of via the communication in the due course. Thank you. Unknown Executive: Line A row 1 towards the exit, please. Unknown Analyst: [indiscernible] is my name. I have a question on your business. On Page 17 of your presentation, you talked about the Netflix, the differentiated service subscriber is now 9x bigger. So the pricing plan, subscription, how much track record do you have as au? And regarding Netflix, LYP premium, [indiscernible] is now launching a new plan, so Netflix can be used. So what do you -- how do you see the impact there? Hiromichi Matsuda: Thank you. So the original -- it's not the original Netflix bundle, it's subscription. So 20% point back if you subscribe and maximum five months, you get free. So that's the campaign. au and UQ customers. And of course, there's the product appeal of Netflix that attracts these users, but we want this to be used. So, from March and April onward, we will continue. And as I showed, this will lead to the long-time usage. So this is a bit different. The users may be a bit different from our peers' program. Unknown Analyst: One more question is on your CapEx, your thinking on CapEx. Hiromichi Matsuda: In yesterday's NTT DOCOMO briefing, they said in their CapEx, they're increasing from last year and FY '26, they will build the base station quite aggressively. And by next year, they said they will catch up with the other competitors. So not all base stations will directly lead to the communication quality, but you will be caught up. Unknown Analyst: So based on that assumption, what is your thinking on your CapEx? Any changes there? Or will you just keep your CapEx plan unchanged? If you have any questions, please -- if you have any comments, please. Hiromichi Matsuda: So we think this area expansion is the source of competitiveness. So we will continue executing and continue being the winner by the outside rating evaluation companies. Regarding 5G, we did quite a big investment last year. And so it's well built, and it has peaked out. So instead, we are now moving -- focusing on AI infrastructure and thinking of keeping the capital expenditure flat. Unknown Executive: Any other questions? The person at C1, please. Unknown Analyst: [ Ishikawa ] freelance journalist. The net increase in smartphones compared to the DOCOMO compared to the last time, it seems that the number is rather low. Are you satisfied, Mr. President? Hiromichi Matsuda: Thank you. This is related to structural reform. There are pros and cons, we need to strike a good balance. The smartphone, the numbers, 33.3 million. That's the target toward the end of the year. And June and September, plus 30,000 plus 20,000 and this time, plus 70,000. And in the fourth quarter, we will see more growth. Rather than taking excessive increase, we would like to focus on the contribution to lifetime value. So those numbers alone are not the basis for us to increase the number. Yesterday, DOCOMO talked about the following thing, the performance aggravated because too much the competition for the handset. Unknown Analyst: As to the replacement, do you have a good control on the replacement program or the purchase support program and the [indiscernible] is also revisiting the issue. Are you changing any thoughts? Hiromichi Matsuda: As this slide shows, we think that we have a very well-balanced control. In the past, we struggled a little bit, and that is because why we are controlling it a better way. And of course, new functions and new handsets, we would like to deliver those new things to the customers and striking good balance. Unknown Analyst: When you say control, exactly what are you doing? Hiromichi Matsuda: From the customer's point of view, I want something new. And after 24 months, it gets more expensive. If that's the case, of course, the customer comes in to replace it with the new one. The first such -- we -- in the past, we did not understand what could happen correctly, but we made some adjustments. And based on the plan, we are building this the scheme of control. Unknown Executive: So, next question, please. Line B row 2 towards the exit, please. Unknown Analyst: [indiscernible] is my name. So I would like to go back to the fictitious transactions. Earlier, you talked about the two members from G-PLAN. So I have a question on those two members. So these two were originally in G-PLAN or -- so when this intermediary business was launched, they joined. So my first question is that. Hiromichi Matsuda: I am sorry. We have identified the two, but I'd like to refrain from mentioning that because it has to do with their privacy. So those two, from around 2017 until this was discovered, they were in this intermediary business throughout. We want to wait for the investigation result on that as well. Basically, as I said earlier, from 2017 onward, it's been recorded. So we are trying to understand how much of that was correct and how much is fictitious. So this needs to be elucidated through the investigation. Unknown Analyst: My last question is those two for the disciplinary action, are they G-PLAN staff? Or are they already fired? Are they former employees? Hiromichi Matsuda: We are still contacting them. So they are staff employee. Unknown Executive: Any other questions? Please raise your hand. A person at C3, please. Unknown Analyst: [indiscernible]. So number one, #3 or #2, the external flow to whom or to what kind of company like sector or business form size, is it possible to share some information? Hiromichi Matsuda: As to the other companies that the flow went to, the committee is investigating it, and I would like to refrain from talking about specific names. It is not -- but it is not large ad agencies. The anti-social organization or suspicious of the kind of status is involved. And that also is being investigated. At this moment, there's nothing we can talk about it. Unknown Executive: Next question, please. A1 towards emcee, please. Unknown Analyst: [ Nakamura ] is my name. I have a question on the fictitious transaction case. So the two that are suspected to be involved, what was the motive or reasons or trigger? Have they talked about that? Hiromichi Matsuda: We want to not impact the investigation of the Special Investigation Committee. So allow me to refrain from mentioning that today. Unknown Analyst: Yes. One more question is going forward, so in the -- where a large amount of money is involved, if there was a falsification of the document, that may be another crime. So have you submitted the damage to the police or have you taken actions? Hiromichi Matsuda: Yes, we are aware of that. We have not consulted with the police yet, but depending on the progress of the investigation, we will consider that and take appropriate actions. Unknown Executive: Any other questions? Next D1, please. Unknown Analyst: [indiscernible] As to money coming in, the advertisement and the fees move together. And recently, it's the level of dozens of billions per month, including fees. And the fees are the ones which are counted as revenue? Hiromichi Matsuda: So it's about the gross amount or net amount. So it looked like the revenue canceled decreased, but it is based on net basis. So as you said, it's correct that the fees are counted as revenue. I think there should be some fund, the initial fund for advertisement, right? The amount increased dramatically to a very big amount. BIGLOBE and G-PLAN, they had fund at hand. And also, we have group finance mechanism. For the whole group, we have surplus and KDDI kind of concentrated and at headquarters. And from the headquarters, we lend money to the other companies. So the group finance was executed for BIGLOBE. The telecommunication-related investment and last year, JPY 57.9 billion or so lending was extended to BIGLOBE last year -- last fiscal year in the group financing. And so group finance is -- might be used -- might have been used as part of this incoming money. Unknown Analyst: And as to these two employees involved, both of them were seconded BIGLOBE, but they are G-PLAN employees. And at this moment, you have not confirmed any other employees involved. Hiromichi Matsuda: Yes, your understanding is correct. At this moment, we have not confirmed any other employees involved. But that is also subject to the investigation by the committee. Unknown Executive: Next question, please. Line D towards the emcee, please. Unknown Analyst: [indiscernible] is my name. So fictitious transactions, #1 and #3. there's #2 in the middle. So number three, other -- unless the order goes to the #3, the money does not circulate. But was the scheme such that the money will always go from #2 to #3? Is there #1 company and #2? Usually, I think it's multiple. But in this fictitious scheme, was there one particular company that was in charge? Hiromichi Matsuda: From BIGLOBE and G-PLAN, the upstream companies contract and the contract with the publishing agency. There were two types of contracts. And I mentioned the business practice, commercial practice. And what's beyond this downstream publishing agency, we usually don't see that. We were not looking at what's beyond the publishing agency. Now the money stopped coming in from the top. And so we heard from the employees. And after we heard from the employees, we found out that it was subcontracted from #2 and 3 and #1 and #3 were identical. Unknown Executive: Any other questions? The person at B1, please. Unknown Analyst: [indiscernible] freelance channel. Starlink related question. This year, other carriers are going to start the satellite telecommunication service within this year. You had a lead time of about one year. What is the advantage? Do you think that there is an advantage for you? And how are you going to differentiate yourself this year? Are there any specific measures? Hiromichi Matsuda: There is something that you can look forward to. I would say, Starlink Direct or area, we would like to deliver it right away. And with that in our mind, we have been developing area and Starlink the direct as well. The sooner, the better for customers. As to the lead time advantage, without thinking about other companies, as a frontrunner, we would like to work on something new. not just at area, but Starlink Direct, we would like to make advancements with something new all the time. Unknown Executive: Line B4 towards the emcee, please. Unknown Analyst: [indiscernible] Sorry for asking you another question. Just one clarification. So fictitious transactions, the impact on your financial results. Earlier, you said from 2017, the business started and sales, you mentioned full amount. But as the investigation progresses, the fictitious portion and the actual transaction will be clearer. So this amount is the current estimated amount or this amount is subject to change as investigation progresses? Hiromichi Matsuda: For now, this is the maximum amount that we are expecting. But the fictitious transaction started increasing in recent years. So we think fictitious portion will account for a large portion. So now -- so this is the amount that will be reversed. Is this already fixed? Of course, it depends on the special investigation committee and the audit firm's audit. So this is subject to change. But we understand that this is the maximum amount. So we are showing you the approximate amount. Unknown Executive: Question from online. Unknown Analyst: [indiscernible] Jibun Bank and the deposit funding and the improvement and the impact of the money activity too. You talked about other reasons as well -- factors as well. What is the impact coming from the money activity? You talked about the reimbursement, if it is over 500,000 and so on. Any impact there you've seen? And also card business is also growing. Is also driven by the money activity or any other factors? Hiromichi Matsuda: Katsuki-san, anything? Tomohiko Katsuki: As to deposit funding, there are two factors, as I mentioned earlier, the bundled -- the deposit bundled plan, the money activity two and au Jibun Bank's own campaign during the bonus season, for example. such deposit collection campaign worked. And as you can see later, the operation data, you can look at Page 36 of operation data. Y-o-Y deposit increased significantly, especially retail deposit. As you can see -- so it's not really the growth coming from the money activity. We do not disclose it. Please bear with us. And the credit cards, especially for money activity too, the growth of gold card is paying off. As you can see on the screen, -- we are seeing good effect coming from that. are you okay with that? Unknown Executive: So another question from online. Unknown Analyst: Yes. I think this question has been raised a few times, and I'm sorry about the impact of the fictitious transactions. So, 2024 March, so JPY 96 billion before March '24. So G-PLAN started -- since they started the advertising business, this has been posted. So the fictitious transaction started from the start of the business. Is that how this was recorded? Or there was a starting line when this started. And you summarized the amount up to March '24. So what is the time line. Hiromichi Matsuda: Thank you very much for the question. As an internal investigation, we found out that before year ending March '24, each company -- so all transactions since they started the advertisement business has been summarized. So in case of G-PLAN from 2017 and BIGLOBE 2022, they started the advertisement agency business. So it's a summary of all the amounts. So it started from -- not from there onward, but from the very beginning, the fictitious transaction was likely to have happened from the beginning of the business. Well, the authentic correct transaction and fictitious transactions are now being separated, but now we're seeing an increase of the fictitious transaction portion. So -- we are looking at all the transactions with a view that there is a possibility of future transactions. Unknown Analyst: Understood. So including those cases that were correct in the past, you are checking all cases. You don't know when the starting line was, but you're including everything. Hiromichi Matsuda: Yes. Unknown Analyst: Including the ones that may be correct. So the maximum amount is a revenue of JPY 246 billion and JPY 33 billion, the external outflow, is this maximum or at least or this is the maximum amount. Hiromichi Matsuda: So this time, this is the external outflow. So we are provisioning this amount shown on the table. We think this is the maximum amount. Unknown Executive: One more question online. Horikoshi-san of Nikkei business. Unknown Analyst: Horikoshi speaking. Two questions. First, in appropriate transaction. So, within this, the scheme diagram, #2, it could be involved from the very beginning with #1 and #3 or it could be involved later. So in the supply chain as a whole, my question is why you did not detect such the transactions? Hiromichi Matsuda: I think it is because of failure of the control scheme. Unknown Analyst: So do you -- could you please share with your thought? Hiromichi Matsuda: So, the group governance, and it is related to the responsibility of supervision. So Monthly transaction itself has the vouchers and slips, accounting slips, which verify that the transactions occurred and they were continuing this business as normal transaction. And the BIGLOBE also gave us some information about the appropriateness of the transactions as well objective. But the objective evidence was not detected about the inappropriate transaction. So it took time for us to detect all that. So as I mentioned earlier, group finance is part of the picture. Ad network accounts for most of the amount. that is currently being investigated. So I do not make any comments on that. Atul Goyal: And second question is about the Miyazaki data center. Two years ago, you did some construction work. What is the size of the investment? And what is the size of data center? Hiromichi Matsuda: As you can see on the screen, AI digital belt concept or initiative, you have about -- there are about three big data centers. Unknown Analyst: Are you going to open three big data centers in Japan? Or what about Tohoku and Hokkaido area? Is there any possibility for you to go to those areas as well? Hiromichi Matsuda: Thank you. The belt diagram is showing that there is no coverage in the north. But actually, we are constructing the but in the north as well. Putting aside whether it's big size or not, what kind of AI data center should be there that is in our mind. The AI processing will be happening in the different locations. So it's not that everything will be concentrated on big data centers. So the connection like mesh and as a whole, the belt, which covers the whole -- the Japanese archipelago, that's what we are thinking about. Miyazaki, we have secured the adjacent land so that we can easily expand this location as well, watching closely the demand level, we are going to make next moves. In the next midterm strategic -- midterm strategy, we are going to give you more details. Thank you. Unknown Executive: So next question, please. D3 towards the exit, please. Unknown Analyst: Yashi is my name. Sorry to ask you. So JPY 33 billion external outflow is my question. In Q3 -- up to Q3, JPY 17 billion has been provisioned, if my understanding is correct. And maximum JPY 33 billion has flown outside. So in KDDI's P&L, how much will eventually be posted as loss? So that's my first question. Hiromichi Matsuda: Thank you for the question. So this year impact. We need to wait for the result by the Special Investigation Committee for the amount to be fixed. But for now, this amount that is shown vertically will be posted on our P&L. So JPY 33 billion, and there may be additional impairment. For this fiscal year, JPY 17 billion is provisioned. So reversal of profit is JPY 25 billion. And other than that, there is a possibility of impairment in addition. Unknown Analyst: So then JPY 33 billion can -- may not be your loss. So of the JPY 33 billion and JPY 17 billion, I'm not understanding the difference between the two. Are there prior year portion? So how can I sort this out? Hiromichi Matsuda: So this table is grouped into #3. First, March '26 is up to Q3, the provision up to Q3, this is JPY 17 billion and JPY 33 billion to the right is including the prior years, it's the total of prior years. So including that, it is JPY 33 billion. And this is assuming that we cannot recover the entire amount. So we will provision this for once for now. But if we can recover, of course, we're trying to recover. And if the amount can be recovered, the recovered portion will be added to the profit in the following years. Unknown Analyst: Then at this point, JPY 17 billion loss is provisioned or is assumed for this fiscal year. Hiromichi Matsuda: Yes, this is the expected loss. Unknown Analyst: One more question, please. So there are a few advertisement agencies. So those that were involved in the fictitious transactions, do you know how many advertising agencies were involved? Hiromichi Matsuda: We only know that multiple are involved, but we don't have the exact number or the names that is left in the hands of the Special Investigation Committee. Is it 2 or 3 or maybe 10 agencies? I'd like to refrain from mentioning that as well. Unknown Executive: Any other questions? Since there are not many questions left. The two people are raising their hands. So starting with A4, the person at A4, please? Unknown Analyst: Last week, DOCOMO using DOCOMO shop, they will give support for financial business. I think they already started it actually. What about your company, for example, the opening account for the Smart Securities or are you planning to use shops for providing similar support? Could you please talk about your thought? Hiromichi Matsuda: au Jibun Bank and we have been providing support using the au shops as the other agencies for the au Jibun Bank. In addition, we have credit card business as well. So I think your question is about the -- based on the securities and the salesperson qualification. For that online intermediary securities, SBI SECURITIES using the au Jibun Bank, that kind of alliance is our current focus. So when it comes to the securities sales rep, which requires special qualification and development of such personnel on real world, we are not thinking about it at this moment. I answered your question. Unknown Analyst: It's not only about securities account, for example, the various services of the au Jibun Bank or mortgage loans in those areas, what is your thought? And of course, always we are reviewing every potential possibility. There are various financial services and some new emerging financial services, especially au Financial Holdings, as to their operating areas, we would like to give serious thought. Have I answered your question? Unknown Executive: So the last question, C3 towards the entrance, please. Unknown Analyst: [indiscernible] again. So regarding the fictitious transaction, so the two employees were involved, you said. So if I could put this in perspective, the two are still seconded to below. They are -- yes, G-PLAN employees seconded to below. So seconded to below -- and there are multiple -- so they are belong to G-PLAN. So they're seconded to G-PLAN. But why despite the absence of the two, can this transaction continue? Hiromichi Matsuda: So they're not in G-PLAN, but why can they operate G-PLAN's transaction or can be involved in G-PLAN transaction? So they're dual headed. They're seconded, but there is a proportion between the second destination and the source company. So they are dual headed. Unknown Analyst: I see. So the two employees, so they were not checked. The transactions that the two were involved. Hiromichi Matsuda: So the transactions that only two of them were involved were fictitious. So this fictitious transactions, we have elucidated up to now this much fact is already clear. There are authentic or correct transactions as well. So we're trying to draw a line between the two. And for the ones that were involved in BIGLOBE and G-PLAN, they are fictitious transactions. That is our understanding. So we're trying to have the special investigation committee -- check the accuracy of that. #1 and #3 were identical companies. That's one company. So yes, one entity, we want to refrain from saying how many companies they were, but the hearing or the entry withdraw money and digital forensic is utilized and understood that 1 and 3 are the same. That's what we're saying today. Unknown Analyst: And last question. So in your investigation so far, have you heard any motives or reasons to this were pressured to have large sales? Or were they just trying to invest all the money or the special investigation committee is investing that it's their scope. Hiromichi Matsuda: So I want to refrain from saying anything here. But of course, BIGLOBE is a business operating company. So the development of the business plan and the target management is done. But from our company, we have a medium-term plan. We are in the final year of the medium-term plan. So communication and financial or DX and enterprise business, energy, these are our main businesses. So this advertisement agency business is not a driver for us to achieve the medium-term plan target. Now the amount that you found out this time in each year, BIGLOBE and G-PLAN, what is the proportion of this in BIGLOBE, G-PLAN's revenue? BIGLOBE and G-PLAN are consolidated. BIGLOBE revenue is around JPY 230 billion. And this is last fiscal year and of which this is JPY 82 billion. Unknown Executive: With that, we would like to conclude the Q&A session. Hiromichi Matsuda: Lastly, I'd like to say a few words. Again, we are very sorry for this matter. And of course, we are going to avoid reoccurrence and strengthen our governance. And at the same time, we are going to solidify our business platform to grow our business. And that is the path that we need to take to take our responsibility. And I will take the lead in making efforts, and we will continue to make advancements. Thank you for your continued support. Unknown Executive: We will conclude this meeting. Thank you very much for joining us today.
Shirish Jajodia: Hello, everyone, and good evening. I'm Shirish Jajodia, Corporate Treasurer and Head of Investor Relations at Strategy. I will be your moderator for Strategy's 2025 Fourth Quarter Earnings Webinar. We will start the call with a 60-minute presentation starting with Andrew Kang, followed by Phong Le and then Michael Saylor. This will be followed by a 30-minute interactive Q&A session with four Wall Street equity analysts and four Bitcoin analysts. Before we proceed, I will read the safe harbor statement. Some of the information we provide in this presentation regarding our future expectations, plans and prospects may constitute forward-looking statements. Actual results may differ materially from these forward-looking statements due to various important factors, including fluctuations in the price of Bitcoin. And the risk factors discussed in our current report on Form 8-K filed with the SEC on October 6, 2025, and under the caption Risk Factors in Strategy's quarterly report on Form 10-Q filed with the SEC on November 3, 2025. And the risks described in other filings that Strategy may make with the SEC from time to time. We assume no obligations to update these forward-looking statements, which speak only as of today. With that, I would like to turn the call over to Andrew Kang, the CFO of Strategy. Andrew Kang: Thank you, Shirish, and thank you, everyone, for joining our call today. I'll start by touching on a few of our highlights for Q4 as well as for the full year 2025. We closed the year with 713,502 Bitcoin on our balance sheet, which represented approximately 3.4% of all Bitcoin that will ever exist. This reflects continued discipline around Bitcoin accumulation through the fourth quarter and further reinforces our position as the largest corporate holder of Bitcoin in the world. Also during 2025, we successfully raised over $25 billion of total capital, funding growth across our treasury strategy and expanding our product ecosystem. We now have five listed preferred equity securities, which has broadened investor access across yield, duration and risk profiles. Our execution throughout the year puts us in a position to enter 2026 with a stronger balance sheet, more access to liquidity and upside when hopefully Bitcoin price rallies soon. Next slide. 2025 overall was a very important year with several strategic corporate events that I think strengthened our foundation as the world's leading Bitcoin treasury company. We adopted fair value accounting at the beginning of the year, which provided greater investor and market transparency of our Bitcoin holdings, which are now, as you know, marked to market each quarter. Second, Treasury and IRS guidance confirmed that unrealized Bitcoin gains would not be subject to additional corporate alternative minimum tax. We also received the first-ever credit rating for a Bitcoin treasury company, which marked an important step, I think, in institutional recognition and setting the foundation for future progress. And lastly, in Q4, we established a $2.25 billion cash reserve, which provides over 2.5 years of dividend coverage. This is an important enhancement to our overall risk management framework and supports our ability to meet our interest and dividend obligations through market cycles like the one we are seeing today. And lastly, MSCI confirmed that digital asset treasury companies will remain eligible for inclusion in its global market indices, which we believe was the appropriate outcome, and I'll touch a little bit more about that later on in my presentation. Next slide. Thank you. Turning to our Q4 financial results. We reported an operating loss of $17.4 billion and a net loss of $12.6 billion. These results were obviously driven by the quarter-end decline in Bitcoin's fair value under our mark-to-market accounting. Next slide. For the full year, we reported an operating loss of $5.4 billion and a net loss of $4.2 billion. We updated our target range for the full year 2025, precisely because our results are highly dependent on Bitcoin price and can move meaningfully based on market conditions. It's important to call out that our full year results were within our target guidance based on where Bitcoin price ended the year. And while accounting outcomes may fluctuate quarter-to-quarter, our long-term focus remains unchanged. We are committed to increasing Bitcoin per share and building durable shareholder value over the long term. Next slide. Turning to our Bitcoin KPI performance for the full year. At the start of the year, we established clear KPI targets tied to Bitcoin per share growth while recognizing a wide range of possible Bitcoin price outcomes. Under those conditions, we delivered a BTC yield of 22.8% for the year, beating the lower end of our target range, which was set at 22% to 26%. That translated into a total BTC Gain of 101,873 Bitcoin and a BTC dollar gain of $8.9 billion, also beating the lower end of our target range. I think the key takeaway is that even with significant volatility in Bitcoin price, our strategy remained disciplined, and we executed against our KPIs of increasing Bitcoin per share and compounding shareholder value for the long term. Next slide. Since adopting Bitcoin as our treasury asset in 2020, we've consistently added Bitcoin per share each year. 2025 was yet another strong year in this regard and building on the momentum of prior years and demonstrating our ability to add more Bitcoin per share in both good markets and in challenging ones as well. Our focus remains unchanged. As I mentioned before, our goal is to systematically increase Bitcoin per share over time regardless of near-term market cycles and continue to deliver durable BTC value for our long-term investors. Next slide. One more. Thank you. Now turning to the balance sheet. I'll start at the top here. Our digital assets increased from $23.9 billion at the end of 2024 to $58.9 billion at the end of 2025. This was due to a $17.9 billion increase in fair value at the beginning of the year balance as well as the fair value of the Bitcoin we added in 2025. As a result, we ended the year with also $2.3 billion in cash and cash equivalents of which, as I mentioned earlier, $2.25 billion of that represents our USD cash reserve. As of the end of 2025, we now carry also a $1.9 billion deferred tax liability, which just reflects the accounting difference between the market value and the cost basis of our Bitcoin. I'll remind everyone, this is a balance sheet item. It is not a cash tax obligation and it does change quarter-to-quarter with the price of Bitcoin. Moving on -- can you go back, please? In terms of long-term debt, we ended the year at $8.2 billion, which takes into account a new convertible bond as well as an equitization of a prior convert, which we executed both in early 2025. As we said before, we do not plan to issue any new convertible debt in the future, and we'll focus on assessing strategic liability management opportunities to the extent market conditions make sense. And over time, we intend to reduce our leverage to further enhance our credit profile. We also added $6.9 billion of preferred equity, diversifying our capital-raising channels. As a result, total equity, including both preferred and common, rose to $51.1 billion at the end of the year, up from $22.8 billion a year ago. We added $6.9 billion of preferreds through five distinct IPOs as well as subsequent ATM activity, and our common equity increased to $44.2 billion through our ATM. We deployed all of that capital in an accretive manner to acquire more Bitcoin. As I mentioned before, we delivered 22.8% BTC yield and we established the cash reserve. I'd say the year-over-year growth of our capital base strengthens our balance sheet and provides more -- a more durable base to continue raising capital efficiently and acquiring more Bitcoin over the long term. All right. Thanks, Shirish. Next slide. At the end of Q3 -- sorry, at the end of Q4 -- sorry, at the end of Q3, the market value of our Bitcoin position was approximately $73.2 billion, that was based on a Bitcoin price of about $114,000. During Q4, Bitcoin, as we all know, experienced a price decline, which drove the total unrealized fair value loss of $17.4 billion. Look, quarter-to-quarter moves like this can be sharp. It can also be unsettling, but it's important to emphasize that our strategy is built for the long term. It's built to withstand short-term price volatility, even short-term extreme conditions like we're seeing today. And importantly, even in a volatile environment, we continue to execute, we purchased an additional 32,470 Bitcoin in Q4 for approximately $3.1 billion. Next slide. For the full year 2025, the market value of our Bitcoin holdings increased by approximately $17 billion from $41.8 billion at the end of 2024 to $58.9 billion at the end of 2025. And during the year, we added approximately 225,000 Bitcoin. We also recognized an unrealized fair value loss of about $5.4 billion across the year, but we significantly expanded our Bitcoin position, right? We increased our total holdings from 447,000 to 672,500 Bitcoin for the year. Next slide. Our total interest and dividend obligations are now $888 million, which is made up of about $35 million in interest on our converts. That represents an average cost of about 42 basis points. It's also made up of $713 million in dividend obligations from our cumulative preferreds, an additional $140 million related to our noncumulative preferreds. You can see here at the bottom, our cash reserve of $2.25 billion, which was established in Q4, now provides over 2.5 years of interest and dividend coverage, and it's an important and direct benefit to our debt and credit investors. Next slide. And lastly, in October, MSCI opened a public comment period around the proposal that could have excluded companies whose digital asset holdings represented more than 50% of total assets. We felt it was important for us to be a voice on this matter, and we submitted formal written feedback to MSCI. We noted that this threshold would, in our opinion, be discriminatory towards digital assets. It's arbitrary. And in many ways, I think the proposal was unworkable, and that it rested on a mischaracterization of strategy. As a result, MSCI determined not to implement their initial proposal. And as a result, we have not been excluded from MSCI's indices. I'd note Strategy is an operating company. We have 30-plus years of history in software and tech. We have 1,500 employees. Last year, in 2025, we generated $477 million in annual revenue. And while our Bitcoin holdings has grown significantly from a balance sheet perspective, we are an operating company with a treasury balance sheet built upon a commodity. And lastly, look, on a final note, I just want to say thank you. We appreciate the strong support we received from both active and passive retail and institutional investors, regulators and policymakers all in support of our efforts on index inclusion. We thank you for that. I think there's still some more work to be done, and we look forward to working with the industry in the coming year on that as well. So with that, I will turn over to Phong, our CEO. Thank you. Phong Le: Thanks, Andrew. First, just want to acknowledge. I understand the market conditions for today's call is challenging. And the fact that we have thousands of people watching this, as a testament to your intellect, your curiosity and for many of you, your conviction. So thanks, everyone, for joining us today. I also want to share, look, some of you bought Bitcoin or MSTR in the last year. This is your first downturn. My advice is to hold on. Remember the fundamentals that cause you to buy Bitcoin. It's because Bitcoin is the digital transformation of capital or maybe it's because it's the hardest and most ethical form of money or because you believe in a non-sovereign censor-resistant store of value. None of these fundamentals have changed. They didn't change in the last year. They haven't changed in the last 18 years. For the MicroStrategy shareholders and the Strategy shareholders now, remember the fundamentals of why you bought into MSTR common, because we are levered and amplified Bitcoin, we're built to outperform Bitcoin over the long run. It could be because you see us as digital innovators. We invented the enterprise business intelligence software space in the 1990s, and we invented digital treasury companies in 2020. Or it's because you believe in the management team that's here today. None of that's changed in the last year. And for those of you who have been with us on this journey since 2020, you've seen other periods of Bitcoin and MSTR downturns, and you held on and you were rewarded for your conviction. So thank you. And perhaps I ask that you share your wisdom and your confidence with those who are newer to the community. X is a great place to do this, in person is a great place to do this, and a great opportunity to get together in person. Next slide, please. It is Bitcoin for Corporations. We will have our sixth annual Bitcoin for Corporations in Las Vegas in 3 weeks, February 23 through 26. I'd love to see you there. It's a great place to get together and learn about Bitcoin, Bitcoin treasury companies, digital credit, digital capital and digital money. It's also a great place to see our software business in action. And as Andrew mentioned, our software business constitutes 1,500 employees and over 3,000 customers, and they'll be there, showcasing the transformation of intelligence and the intersection of AI and BI. And I would like to note, we had a great year last year in our software business. We saw a big cloud transition as our revenue went from decline to increase of 3%, and our cloud revenue went up 65% year-over-year. So I invite you all to join us in Las Vegas, February 23 through 26. Next slide. Take a step back, this is our business. We have been buying and holding Bitcoin since the third quarter of 2020, every single quarter. We now have 713,502 Bitcoin with a total acquisition cost of $54 billion and a $76,000 average Bitcoin purchase price. Recognizing now that Bitcoin is below the average Bitcoin price, you might ask the question, what does that mean? it really doesn't mean anything, right? It doesn't mean that we have any issues servicing our debt or paying the dividends on our preferreds. We don't have any covenants or triggers that say when Bitcoin price goes below our average Bitcoin purchase price, that anything has to occur other than we continue with our strategy. Next slide. 2025, as Andrew mentioned, was a pretty big year for us in the capital markets. As you see here, in 2024, we raised $22.6 billion, and we actually outstripped that number in 2025. The big change last year was we moved from convertible debt, $6.2 billion in '24 and $2 billion in '25, to $7 billion of preferred. We invented digital credit, and we invented the preferred market, which now other Bitcoin treasury companies are moving into, issuing perpetual preferreds. We're pretty excited about this. You'll see here, we had five IPOs. The other thing I'll note here is that year-to-date 2026 in the face of a tougher Bitcoin market, we were able to, in 1 month, raise an additional $3.9 billion of capital. And for the most part, buy Bitcoin with that. Next slide. So what do those big numbers mean? How do you think about that? In 2024, we were the largest U.S. issuer of equity in the entire country. Last year, 2025, we were once again the largest issuer of equity. We were 8% of the entire equity capital markets, 6% to the common equity market and 33% of the preferred equity market. We are getting people to invest in our company through equity raises and preferred raises, and turn that into Bitcoin, Bitcoin per share and Bitcoin yield to our shareholders. And we're doing it with the intersection of traditional finance with some of the largest banking partners in the world. Morgan Stanley, Barclays, Moelis, TD, Benchmark, Clear Street have all been participants in these markets. And they give us distribution out to wealth management and to retail and to institutions. So we've been very successful in the last year with continuing our strategy. Next slide. You'll see here in addition to getting folks to participate in our equity raises in our equity capital markets. We continue to add more and more research analysts. Here you can see price targets, and you can see they all have buy ratings on Strategy. Next slide. So let me talk about digital credit and what are we doing in digital credit and why digital credit is important. Next slide. First, I mentioned 2025 marked the launch of digital credit, and we launched five different instruments. We started with Strike, which is convertible digital credit. And it was really a gateway from convertible debt, which we no longer are issuing, to a convertible preferred note. We then launched Strife, which was our most senior of our instruments, our first fixed perpetual digital credit instrument. And after that, we launched our most junior one, Stride. And as you can see, the size gets bigger and bigger with each one. And then we launched the most important, which was Stretch, which is $2.5 billion in our first digital credit instrument. And then in November, we went to the euro market and launched Stream, which is USD 717 million. And the importance of this is accessing a European market and those who want euro exposure. Our plan with Stream is to, over time, up-list it into a regulated retail accessible market, and we're excited to do that over the course of this year. Next slide. Here's the overview of digital credit. I think the most notable here is to look at, as an example, the liquidity that we're experiencing in Stretch, $118 million traded a day over the last 30 days. As a comparison, typical U.S.-based preferreds trade $1 million a day. So these are very liquid and very interesting instruments, the dividend at 11.25% and on a tax equivalent basis 18%. And you also see the volatility here at 7%. So it's an instrument where we've been able to start to target a very finite price close to $100 and drive that volatility down to 7%. Let's go to the next slide. So what is 2025, the third quarter and the rest of 2026 has been about? It's really been about seasoning our digital credit. And by seasoning, I mean, maturing in the market and making the instrument more creditworthy. So after we launched Stretch on July 25, there were a couple of actions we took that made the credit more creditworthy and a better investment. First, and Andrew mentioned it, the CAMT guidance was a big deal. This is a big change by Treasury and IRS, acknowledging the importance of the digital asset ecosystem and that there should be no unrealized capital gains, taxes on Bitcoin, period. The second thing is we got an S&P rating, a B- issuer credit rating, which is a starting point for us to be able to access different types of investors in the credit market. November 4, we got to what really was our target, was to get Stretch to trade at par, $100 for the first time. $100 is important because it decreases the volatility of the instrument. It shows that we're able to do something that no other preferred instrument has done in its past, which is to target a specific price, and it allows us to raise more via our ATM. And then we added our U.S. dollar reserve. At the same time, since we launched Stretch, we have added 105,732 Bitcoin to our balance sheet. That's about 16% more. These are all actions we took to make our digital credit stronger over time. Next slide. So what is Stretch, right? Why are we so enamored and excited about Stretch? Why did I say 2026 is the coming out party for Stretch. Stretch is one of the most attractive instruments and securities in the market today. It pays an 11% effective yield, 18% on a tax equivalent basis. We paid monthly dividends on time, on schedule. And we have said that we expect the return of capital treatment for the next 10 years. We'll run our business to be able to give everybody tax-deferred earnings for the next 10 years. We're targeting $100 price. The volatility is 7%, its actually decreased recently to 6%, and we have mechanisms above and below that price to keep the price stable. It's quite a bit of a feat of financial engineering. And it's extremely over-collateralized after you take out all instruments that are senior to Stretch, we still have 5.6x collateral over Stretch. And so it's an over-collateralized instrument. And then after that, we've added $2.25 billion of U.S. dollar reserves. So we have 2 to 3 years of dividend coverage. And I mentioned the liquidity of Stretch is trading extremely well. Its Nasdaq-listed and it has a 4-letter ticker, is easily accessible to folks. Its now accessible on Robinhood and Square Cash App and pretty much anywhere else that you can buy a security. Next slide. So let's talk about our balance sheet. I've seen a lot of questions. We get them from investors, we get them from shareholders, we get them from people on X. What's going on with Strategy's balance sheet? Are you worried that when Bitcoin price drops, that you are going to have issues with your convertible bonds? Are you going to have issues paying your dividends? Are you going to have to sell Bitcoin? The short answer is I'm not worried, we're not worried and no, we're not having issues. What's the reason? One, we have a BTC reserve at $60 billion. This was as of last Friday, now it's $45 billion. And our equity or enterprise value still trades above our Bitcoin reserve. Our convertible debt, that's the notes that come due or preferred equity doesn't come due, is at about 10% leverage. With the latest Bitcoin price as of today, we still have about 13% leverage. So the $8.2 billion that come due is 13% leverage. How do you think about 13% leverage? Those who do not spend a lot of time in the debt world, you might say, well, 13% sounds like a lot. Let me show you how we compare 13% to the S&P 500 universe. Next slide. First thing is when you take your leverage, you take out the cash that we have. So our net debt is $6 billion. As I mentioned, our net leverage is 10% and it's 13% with the most recent Bitcoin price. If you look on the bottom left-hand side, this is how we compare to the S&P 500 universe, right? We have 10%, currently 13%, leverage. If you're AAA-rated, right, investment-grade company, your bonds are trading as AAA rated, you have 23% leverage. If you're BBB rated, high yield, you have 32% leverage. We have half the leverage of an investment-grade company, 1/3 of the leverage of a high-yield company. How about looking at it by sector, Strategy at 13%, it looks like a tech company, which is low capital, low assets, high income, right? They're levered at about 15.7%. You compare us to asset heavy, high debt companies and industries, utilities or real estate, they're levered at 42% to 48%. We are not a highly-levered company. Next slide. What about our convertible debt, right? Not very highly levered, so that's good, but what happens when our convertible debt comes due over the next 5 or 6 years, are we worried that we're not going to be able to pay back our convertibles. No, not really. You'll see here the net debt of $6 billion compared to a Bitcoin reserve of $59 billion, now $45 billion. In the extreme downside, if we were to have a 90% decline in Bitcoin price, and the price was $8,000, right, which I still think is pretty hard to imagine, that is the point at which our Bitcoin reserve equals our net debt, and we will not be able to then pay off our convertibles using our Bitcoin reserve, and we either look at restructuring, issuing additional equity, issuing additional debt. And let me remind you, this is over the course of the next 5 years, right? So I'm not really worried at this point in time, even with Bitcoin drops that we're not going to be able to service our convertible debt. All that said, it's staggered over time. We have put dates between 2027 and 2032, and our plan is to equitize that over time. And if we're not able to equitize it, we'll find different ways to restructure the debt. Next slide. Of course, we have this Bitcoin reserve. And what does it really do for us? It creates long-term durability. That's why we've been building it up. That's why we've added about 16% over the last 9 months to our Bitcoin reserve. It gives us long-term durability to issue more credit ultimately. And as we issue more credit, the dividends will rise. Our dividends, as Andrew explained, $888 million, we have 67 years of dividend coverage with our Bitcoin reserve. If Bitcoin goes up 1.5% a year, that's our breakeven ARR, we could just sell the incremental Bitcoin that we get, not that that's what we'll do, to pay our dividends. So we don't need a large increase in Bitcoin price to be able to service our dividends, primarily through Stretch. Next slide. Our U.S. dollar reserve, which I'm very happy we put in place in Q4 and solidified in Q1, is $2.25 billion. That's 30 months of dividend coverage, 2.5 years of dividend coverage. So if we were not able to raise capital, which we've shown that we've been able to do through equity issuances, we could sit here and do nothing and pay off our dividends over the -- or satisfy our dividends over 30 months using this reserve. Next slide. And as I mentioned, since we took -- since we received a B- stable outlook credit rating from S&P, we've taken a lot of positive actions to improve this, right? Will the S&P increase it from B-? I think if they were to make an evaluation today, they likely would, but they usually make valuations every year or so. They don't want to move fast in terms of what the credit rating is. But we've added a U.S. dollar reserve, $2.25 billion. I'll remind you that the first $1.44 billion, we raised in 8 days. The second is we've been able to maintain a robust access to capital. We raised $9.5 billion in 3 months and 72,300 Bitcoin. So we've shown that we're highly liquid and able to access capital. And we paid dividends every single month, every single quarter since our credit rating. Next slide. So what are we going to do to make Stretch even better? In addition to improving the credit quality, we've been working with brokerages like Robinhood and Cash App to get Stretch and preferreds listed there. Robinhood, in fact, launched the first-ever preferreds on their platform because of the demand and the liquidity that they saw in Stretch. We've been working with wirehouses, wealth management and broker-dealers, RIAs to help explain Stretch. We've integrated Stretch now into crypto. So just like you saw MSTR turn into MSTY, MSPU et cetera, we're seeing Buck and other coins like Saturn, APYX, A-P-Y-X and TradFi platform starting to launch products on top of Stretch. And we expect, over time, Stretch will be tokenized. We'll integrate with ETFs also, right. We started, we've been involved in industry conference, leveraged finance conferences, teach-in sessions, and so we're telling everybody about Stretch. And we engaged in digital marketing, you might have seen ads on X or YouTube or Wall Street Journal. And of course, we have strategy.com Strategy app, interviews and podcasts. We want everyone to be aware of digital credit because we think it's an amazing product for an end investor, and we think it helps build the Strategy flywheel and the Bitcoin flywheel over time. Next slide. I do want to update a slight change to our Stretch guidance. In the past, we've said that we're going to base our actions on Stretch on a 5-day VWAP at the end of the month. What we found is that Stretch trades very interestingly around dates like our record day and our payment date. Our record date falls before the 5 days at the end of the month, and that's where we've seen people try to buy Stretch, so beginning before the record date. So we thought the better view of Stretch price is to look over the course of the entire month. So the VWAP range by which we'll look at the price of Stretch and make determinations on what to do with our rate will be based on the entire month. So as an example, for January, if we were to have made that change in January, it would have been January 1 through January 31. For February, it'll be February 1 through February 28. Next slide. So we talked about digital credit and the importance of digital credit is what it does for a digital equity. Digital credit amplifies our common equity. And I just looked at -- these numbers were as of last Friday. As of today, MSTR is up 48% since we started this strategy, Bitcoin is up 36% since we started this strategy, and we've outperformed the Mag 7, gold, S&P 500. We amplified Bitcoin, designed to outperform Bitcoin, and our belief is that Bitcoin will outperform every other asset class in the world over time. Next slide. How do we create amplified Bitcoin? How do we outperform Bitcoin? We produce Bitcoin per share. We increase Bitcoin per share, which is -- the change of Bitcoin per share is Bitcoin yield. And you look here over the course of the last 6 years, we've increased Bitcoin per share every single year. That's why we outperform Bitcoin. If you buy 1 Bitcoin at the beginning of the year, you'll have 1 Bitcoin at the end of the year. If you buy 1 share of Strategy at the beginning of the year, 2025, you would have had 23% more Bitcoin at the end of the year 2025. We increase Bitcoin per share, and we call that increased Bitcoin yield. Next slide. So how do we think about this over the course of the next 7 years? I showed you what we've done in the last 6 years. The way we're going to increase Bitcoin per share over the course of the next 6, 7 years is we are going to sell digital credit. And what does digital credit do? By selling digital credit, we generate amplification. By generating amplification, we increase Bitcoin per share. By increasing Bitcoin per share, MSTR common outperforms Bitcoin. It's a very simple formula. And what are the inputs? How much digital credit can we sell, which is how much Stretch can we sell? Here is an assumption that on a base of $60 billion at Bitcoin, if we can sell 10% of digital credit, which is $6 billion, this is what this might look like over time. And you say $6 billion, is that a lot? Or is that a little? Well, last year, we sold $7 billion of digital credit. And we raised over $25 billion in the equity capital markets. So we think this is a fairly conservative assumption, $6 billion. This assumes a 10% dividend rate, which is where we are right now, and that we're issuing equity to pay for the dividend on digital credit at 1.34x mNAV. And so I'll call this a low scenario. If we have this low scenario over the course of 7 years, we'll increase Bitcoin per share 1.4x. That's a 5% annual Bitcoin yield. Next slide. What if we can do a little bit better? What if we can assume 16% of digital credit sales, so not $6 billion, but $10 billion. What if the Fed lowers interest rates or we're able to lower interest rates on our digital credit down to 9%? And what if the view of this causes investors to believe we'll increase Bitcoin per share and our mNAV goes up and we have amplified Bitcoin and MSTR. And we're able to get to 1.75x mNAV. This scenario with the assumption of 30% Bitcoin ARR gets us to a 2x increase in Bitcoin per share over 7 years, which is a 10% annual BTC yield. Next slide. What does a more aggressive scenario look like? Maybe we can assume 20% digital credit sales, we were able to drive the dividend rate down to 8%, and our mNAV goes up to 2.25x, then we can increase Bitcoin per share 2.5x over 7 years and a 14% annual Bitcoin yield. That's another scenario. And I'll go to the final slide of my section. Ultimately, this is the strategy of the company. We're going to issue digital credit through Stretch. We're going to amplify the common equity because of it. It increases our Bitcoin per share, and we outperform Bitcoin. What are the levers that we can play with? How much digital credit can we sell? How attractive can we make Stretch? How well do we market it? How well do we distribute it? With higher demand, we can lower the cost of credit, and we'll increase the mNAV. That's the thesis for the company, and that's what we're excited to do and that's what we're going to focus on in 2026. So with that, I will pass it over to Michael. Michael Saylor: Thank you, Phong. I'm delighted to have you join us today. Why don't we go to the next slide? All of our strategy is based upon looking at the fundamentals and taking a 10-year view. And so when you consider the fundamentals of digital capital, you have to start with the most important regulator in the entire world. And that is the President of the United States. We have a Bitcoin President, and he's intent upon making America the Bitcoin superpower, the crypto capital of the world and the leader in digital assets. I don't think you can underestimate the importance of having support for the industry and digital capital at the very top of the political structure. Now equally important, if we look at the cabinet that's been put in place on the next slide, you see the entire government has now embraced Bitcoin. When I say embraced Bitcoin, what I mean is 18 months ago, there was one person in the government that had an awareness of it and was skeptical to neutral or grudgingly accepting of it. And everyone else in government was either negatively inclined or they were ignorant of it. And now there are 12 individuals I'd want to highlight here. J.D. Vance, the Vice President; Scott Bessent, the Treasury Secretary; Paul Atkins, the Head of the SEC; #4, Kevin Warsh, who is just -- who is the Fed Chair Nominee, who is -- who understands digital assets, understands the use case of Bitcoin. This is a tremendous move forward for us, a big fundamental shift that now you can look at the Head of the SEC, the Head of the Treasury and the Head of the Fed as all-appreciating the pivotal role of digital assets and the growth of the country. And the economy, and if you go to the second line, right, you see the Head of Intelligence, the Head of the Small Business Administration, the Head of Federal Housing, the Head of Health and Human Services. All Bitcoin believers. And then Michael Selig, the CFTC Chairman; David Sacks, who's doing a wonderful job; Howard Lutnick, Commerce Secretary and even Kash Patel. So if you consider that, we went from one neutral to a Bitcoin President and 12 positive, constructive. These are great fundamentals for us, and I don't think we can lose sight of this, because everything that follows in the marketplace is very much influenced by the political structure of the world. On the next slide. Capitol Hill has embraced Bitcoin. We've got bipartisan consensus that the United States should embrace digital assets, should embrace digital capital, should be a leader. That is not a debate. No one is saying that there's one party in favor of digital capital, another party against it. That's a big deal. So although the political process is complicated, the fact that we have moved from an asset which was a scary speculative thing and maybe a legitimate to a legitimate asset that most reasoned politicians and regulators and policymakers believe they need to move constructively forward with. Let's go to the next slide. Big banks are embracing Bitcoin. Roll the clock back 18 months, and this Harvey Ball diagram is pretty much blank, mostly blank. And so when you actually look at the top financial institutions and you ask the question, do they allow IBIT trading? Well, there's an avalanche of support there. That's flipped in 12 months. The second question is do they offer credit against IBIT? That's a big deal. 12 months ago, it was almost impossible to get a loan or a margin loan against IBIT. Now there are many banks coming in the space. Would they let you trade BTC? Now you have banks that are announcing support for that. You have banks announcing support to custody BTC and you have banks announcing intent to offer credit against BTC. Again, this is an extraordinary sea change. We cannot underestimate the value. I think that the fundamentals of the industry are driven by the banks creating credit. One bank can create as much credit as all the Bitcoin miners can create in Bitcoin in a year. So each bank that turns on Bitcoin-backed credit lines might be the equivalent of another halving for the network. Let's go to the next slide. TradFi and fintech have embraced Bitcoin. If you look at the number of accounts of BTC trading asset, there's a pretty clear bullish trend here both across crypto-native exchanges, fintechs and neobanks and the brokerages and banks in the wealth management channel. Those are large numbers. Fundamentally, we're going from an asset class that no one could buy if they wanted to, to an asset class where everyone is competing to facilitate access and exposure. The next slide. This is the ETF trend. ETFs are embracing Bitcoin. 125 ETFs -- or ETPs launched, 1.4 million Bitcoin held in them. A very consistent trend, up and to the right. Next. And this is the corporate trend. It was nothing in 2019. We were the first serious player. We were lonely for a bit and we went to 33, then we were 64 in 2024, and now we're 194. This is clearly explosive growth, and there's a signal here. Next. The public markets are embracing Bitcoin. Look at these IPOs that have taken place this year. Bullish, Circle, Gemini, BitGo, Kraken that's coming. And then Coinbase, Block and Robinhood have all been included in the S&P 500. So I see this as a very bullish indicator and a fundamental improvement in the structure of the industry. The concern du jour is quantum computers. And many people ask, do quantum computers represent a threat to Bitcoin? I would note the quantum computing concern and quantum FUD is just the latest in a long litany and a parade of horrible FUD that has been taken by since the beginning of Bitcoin. There was functionality FUD. Bitcoin is not functional enough, so it will fail, it needs smart contracts. And then people thought it was a ponzi. And then they thought it was too volatile. And then they thought , well, there is a bug in it and maybe it will be 51% attack. Maybe the Chinese control too much of it. And then there was -- the Chinese shut it down. It was the opposite of the China FUD. It was the China non-embrace. And then we had all manner of block size wars and bandwidths FUD and there was it uses electricity FUD and then there was a wealth concentration FUD and of course, then there was another crypto will be better. What I would say is whenever dealing with each of these concerns, we have to take them seriously. We have to consider them, but we have to remember two things. One, the two words on the back of the Hitchhiker's Guide to the Galaxy. Don't panic. Most important, two words, more important than everything and the encyclopedia or the Hitchhiker's Guide to the Galaxy. The second observation, the Hippocratic Oath, do no harm. And so whenever you're faced with a challenge in any system or any network, you have to make sure you don't panic, you're not railroaded into doing something foolish or destructive. And you also can't do something that causes harm. You don't want an iatrogenic intervention where the care is worse than the disease. So our position on quantum computing: one, we think it's probably 10 or more years away before there's a threat. That is the consensus. It's a promising technology, but it's still nascent. Many industries, including finance and defense are dependent upon traditional cryptography. They face the same risks. There's a significant global investment going into building quantum-resistant protocols not just in the Bitcoin community, across all communities. The Bitcoin community in specific is engaged on research and development in these efforts. There's good work that's taking place. If Bitcoin requires an upgrade, there will be global consensus. Right now, there isn't a global consensus that existing cryptographic libraries are at risk. And to stampede into a hypothetical fix before there is consensus would introduce new attack surfaces and new complexity and new failure modes that don't currently exist. It's very similar to over-vaccinating and it's like, well, there's a 0.001% chance that the kid might get a disease. So we're going to vaccinate them just in case, but of course, 3% of the people that get the vaccine have side effects, right? And so it's very important that we don't over-insure over-vaccinate, overtreat, over-worry. A famous President of the United States, he said, "if you see 10 problems driving down the road, 9 of them will probably drive themselves into a ditch before they get to you." So the one thing you can't do is you can't buy 100 expensive insurance policies that cost collectively 100% of all your operating income to insure against something which is 2% likely to happen. That's why you have to be very thoughtful about addressing these risks. And you have to address them at the right time, not too soon, not too late. But -- because too soon, you probably don't have the right technology and you're over-insuring. Too late, right, you accept the risk that you shouldn't. That's why consensus is very important. Bitcoin will be stronger if and when that quantum upgrade takes place, right? And so Bitcoin is upgradable, and Bitcoin can be upgraded to be stronger, and we, of course, are optimists. And we believe that the human race will accept challenges and will upgrade to meet those challenges and do it in a rational fashion. And Bitcoin has a history of meeting challenges in a rational fashion such that it is stronger, and you can see all those examples. Last, but probably most important on this slide, Strategy, we are going to initiate a Bitcoin security program that coordinates with the global cybersecurity community, the global crypto security community and the global Bitcoin security committee, in order to help and contribute to consensus and solutions to address the quantum computing threat as well as any other emerging security threats that evolve. We think it's reasonable and appropriate for us to do this, given our large responsibility as a Bitcoin holder but we want to do it in a very responsible fashion. And we want to make sure that we coordinate with the global cyber, crypto and Bitcoin security community because there are a lot of very, very brilliant minds here. There's a lot of good work being done. And it's likely that consensus will form and solutions will form at the right time in a responsible fashion. So that's our view on quantum. Next slide. Digital credit. Our company exists to -- we structure and we secure Bitcoin, right? We're a digital credit issuer. If you look at this chart, what you can see is that the native volatility or the natural volatility of Bitcoin is about 45%. For a 45%-vol asset to draw down 45% shouldn't shock anybody, right? I note the Bitcoin looks like it's drawn down about 45% since it's all-time high 4 months ago. So a 45% drawdown on a 45%-vol asset is probably to be expected, just like an 80% drawdown when it was an 80%-vol asset. On the other hand, what you can see pretty clearly is that Strategy has stripped that volatility off of BTC with Strike, which was 32%; Stride 27%; Strife 24%; and Stretch down to 7%. So we are stripping the volatility off of Bitcoin, and there is conservation of energy and conservation of volatility. And so the volatility that we stripped off of the credit instruments accrues to the common equity. And so that's why MSTR is 63% vol. But it's not really complicated piece of engineering. It is just -- it is very pure financial engineering. There's a group of people that want low-vol, principal-protected instruments that are credit instruments, and there are other people that want high vol, high performance. Next slide. Right, think of us as a digital credit vehicle. Our job -- we are thrusting forward. We are actually moving through space through issuing digital credit, right? It's -- digital credit is the product. Bitcoin is the backing collateral. The secret or the most important thing for us to do is to build the vehicle in the most robust, fault-tolerant way that we can, the most scalable way we can. You could think of it as a Bitcoin battery and then a U.S. dollar battery. And we have lots of options. We have options to run on the U.S. dollar reserve. We have the option to sell equity. We have the option to sell Bitcoin. We have the option to sell Bitcoin derivatives. And we keep our options open so that we can do the best thing for all of our stakeholders. Our common stock shareholders. We want to do the right thing for the MSTR common stock shareholders. We want to do the right thing for the credit holders of the digital credit instruments. And we want to do the right thing for the Bitcoin community. And we believe that if we're rational and thoughtful then we get a good outcome, which is BTC positive, MSTR positive, STRC positive. Next slide. Companies exist to convert capital into cash flows. In essence, you have capital investors and you have credit investors. The credit investor wants $10,000 a month forever. And the capital investor gets $1 million of real estate with no cash flows for the next 30 years. And maybe they'll get more than 10% a year. Maybe they'll get 20%, 30% a year performance. But it's pretty straightforward that the world's built on capital. The world runs on credit. BTC is digital capital. STRC is digital credit. We -- it takes an operating company to transform capital into credit. If we were a real estate development company, we could take $50 billion of capital, buy a bunch of land in New York City, build a bunch of buildings, market the buildings, rent the buildings and generate cash flows. That's a way to do this, but you take on all sorts of liability, all sorts of counterparty risk, operating risk, it takes a lot of time. You have property taxes, employment taxes, income taxes, usage taxes, et cetera. That's the 20th century way to actually create credit from capital. We've taken a much faster route, we would just take the money, buy Bitcoin and just issue the credit, and we skip all the intermediate steps. That makes us extremely technically efficient, it makes us extremely economically efficient, it makes us extremely tax efficient. Next slide. At the core, what are we doing, right? we're transforming that capital into credit. We're taking BTC and we're converting it into a currency, whether it's a U.S. dollar or a euro. We're stripping the risk by over-collateralizing it, right? If you have $5 of Bitcoin, right, and it falls by 80%, then you've got $1 of Bitcoin. But when you have $1 of STRC backed by $5 of Bitcoin and it falls by 80%, you still got $1 of STRC backed by $1 of Bitcoin. So we're stripping or reducing the risk by the BTC rating. And then we're also taking other actions to reduce risk, right? We're an operating company. We can raise capital. We can sell equity. We can refinance. We can strip risk by taking a 2-year obligation or a 10-year obligation and stretching it out to a 20-year obligation. So operating companies can do these things. We're also dampening the volatility. We damped the volatility by building the collateral, by building the U.S. dollar value, by adjusting the dividends, by adjusting the ATM programs, by adjusting our capital markets behavior. And we adjust these things minutely every minute, maybe even every second, right? We have programs to adjust all of our activity so as to damp volatility, and we're very engaged and we are very focused on it. Of course, and then we distill the yield from the capital asset in order to create a fixed income yield rate. And of course, we're compressing the duration. Instead of telling you to wait 10 years in order to get a 30% return, we're giving the 18-year-old cash flow this month and every month. So 10 years of duration is 120 months. We're converting 120 months into 1-month duration. And so when people say, what does the company do? The company transforms digital capital into digital credit. Are these things valuable? Of course, they're valuable. There's a $300 trillion market for credit. It's extraordinarily valuable. And the key is for us to create the best credit in the world. And to create the best credit you can using digital capital. Let's go to the next slide. How do we benchmark ourselves against the other credit alternatives? Well, the bank accounts might give you 40 basis points. The money markets are giving you 360 basis points taxable. Insurance companies don't pay tax and endowments don't pay tax, but actual real people, families do, private companies do, public companies pay tax, the world's full of people that have to pay tax. And so 360 basis points of money markets works out to -- might be only 180 basis points if you live in New York or California after tax. So clearly, what we have here is a yield-starved environment. The base rate and the risk-free rate is 360 basis points taxable, and that means that all the conventional credit instruments are pegged to that, like mortgage-backed securities, investment-grade bonds, junk bonds. They all trade at very small premiums or spreads over that risk-free rate. And STRC is paying 11.3% at par -- 11.25% at par. And so you can see here that it's 3x more on a pretax basis, but on a tax equivalent basis, it's like a bank account in Miami that pays you 18%. It would be much more. It would be like a bank account that pays you 22% or 23% in New York City or San Francisco. So we think we've been able to create a very compelling credit instrument versus other credit instruments. It's just 2 to 4x better. And let's go to the next slide. We don't just benchmark ourselves against other credit instruments. We also benchmark ourselves against all the other non-U.S. dollar currencies. And what you can see here is the U.S. dollar has got a 370 basis point risk-free rate, but the Korean won, the Canadian currency, the euro, Singapore dollars, Japanese yen, Swiss francs, they're much weaker. And so fundamentally, you can think of the Stretch rate as the risk-free rate in the Bitcoin ecosystem. It's like the Bitcoin rate, short end of the yield curve. So we are working to define the yield curve, like what -- if you're willing to accept no guarantee of yield and 10-year duration, then you get the Bitcoin rate, which is right now 35%, 40%. We expect that going to be 30% over time. But if you want to go to the short end of the yield curve to the 1 month and then 11.3%, right, is the rate. We think that this is -- creates just a very compelling opportunity. Clearly, we believe the killer app of digital capital is digital credit. And oftentimes people joke, it takes 100 hours to understand Bitcoin, maybe it takes 1,000 hours to become a Bitcoin maximalist. It only takes 10 seconds to understand Stretch. Stretch is 11.25% dividend yield paid monthly. That's it, right? It's a 10-second idea. Let's go to the next slide. Okay. Here's an actual 4-month snapshot. And this is an interesting comparison, Stretch versus Bitcoin. What's the difference between credit and capital? Well, in the last 4 months, Bitcoin has traded down 30% through the first of February, Stretch is up 1%. And so it doesn't take a rocket scientist to look at this chart. If you're a retiree, if you're a corporate treasurer, if you're a fixed income investor, if you're any kind of investor and you look at these two charts -- if your crypto curious or you think you might like Bitcoin, you look at this and you think, "well, I like it, I just can't stand the ball." And you could see why. Do you want 30% drawdown and no dividends? Or do you want a 1% price appreciation and 5.3% paid dividends with an ongoing 11.25% dividend rate. And with the company that's making a commitment to stabilize that price, to target $100 and do whatever it takes, including raise the dividend. So we believe that what we're doing is expanding the market. We're bringing new capital with new forms of investors into the digital asset space. And we're making -- we're creating sort of a gateway product or an on-ramp to digital assets and digital capital by way of STRC. And of course, we're still very early on. This is like the first 5 months of seasoning of STRC. We think that after 12 months, we'll have a better picture. And clearly, in some cases, with credit instruments, people have to see it for 2, 3, 4 years before they actually want to buy it. So we think that STRC is going to continue to season, continue to harden, continue to stabilize, continue to build AUM, build liquidity, and we will continue to make progress on volatility over the coming 2, 3, 4 years. So it's a very straightforward exercise on our part. This is the flagship product of the company, right? At this point, everything we're doing in the capital structure is to improve the liquidity, decrease the volatility, increase the AUM, increase the creditworthiness, decrease the risk and improve the standing of Stretch, right? And you can extrapolate what that might mean with everything else that we do going forward. Let's go to the next slide. There's a picture of that volatility, right? We started with a higher vol. We're working it down. We do things like create the USD reserve. We adjust the dividend rate. We do no harm. We don't sell it if it's not at our target. I mean, all of these things are active decisions every day, every minute of the day. Next. And we're pleased that we are building the AUM. It is scaling. And it's not going to be a straight line up and to the right. We're going to have good months. We're going to have great weeks. We're going to have bad weeks. We're going to have bad months. That's okay. We're in this for the long term. By the way, the long term means 4 years is the short number, 10 years is the target number, 7 years is the middle, right. So as Phong pointed out, we're looking out 7 years thinking, well, we can -- if we do what we're doing, we can double Bitcoin per share over 7 years, if we execute well. And then we're looking at this over that 7-year time frame and thinking about how we actually make this into a truly great -- the greatest credit instrument in the world. Next slide. Phong had alluded to the fact that it's much more liquid. I think Stretch traded something like nearly $300 million today, a huge number, right? And it's trading consistently above $100 million. That's unheard of. A lot of people list -- perhaps over the counter, they trade $100,000 a day. And then they -- publicly listed, they trade $1 million a day. So these things in the first 12 months are already off the charts by a factor of 100 more. And Phong noted, but we didn't dwell on it. We were 33% of the preferred stock issuance last year, right? We are transforming the preferred equity markets. We're digitally transforming them. We're -- just like we revolutionized and shook up the convertible bond market until we were the largest convertible bond issuer, we're now shaking up the preferred equity market and becoming the largest preferred equity issuer. And it's because we're putting an innovative asset together with an innovative security together with innovative business strategy and the way we manage our ATMs, the way we manage our company. Next. This is a chart we're very proud of. Even though Bitcoin has struggled, if you look at the Bitcoin price, we've been increasing the BTC rating of Stretch even as the Bitcoin price has been falling, right? So we're increasing the collateralization of this. We're decreasing the risk of this. And we're doing it through programmatic, thoughtful risk management on our balance sheet. Next slide. Bitcoin is a 43% ARR, 45% vol asset. Digital credit, Stretch is 11.25%, 7% vol. It might jump up to 10% vol sometimes. Maybe we get it down to 5% vol, 4% vol, 3% vol, 2% vol. I don't know where we'll get it, but it seems like it's going to be single digits. And then the third layer is digital money. Our view for that is less than 1% vol, 0 vol digital money. Can we actually create something that pays 6% to 8% that's got 0 vol. We can't do it ourselves. We won't do it, but we welcome partnerships with other companies. With ETFs, with TradFi projects, with banks, with crypto token projects. I mean a lot of other people can use Stretch and they can step it down. They can make it 80% Stretch, 20% cash. People are going to step Stretch down. They're going to lever it down. They're going to lever it up. They're going to mix it. They're going to manage -- they're going to actively put in management and volatility buffers and liquidity buffers, and put it in various regulatory containers. Next slide. Right, you can deliver digital money as coin, like a savings coin; you can deliver it as a fund, a private fund or a public fund, an ETF or you can deliver it as an account on a crypto exchange or a bank. We welcome all those partnerships. Our view with Stretch is, we're going to market it to the general public. We're going to market it to credit investors. We're going to market it to enterprises. We're going to market it to corporate treasurers and corporate CFOs, right? We're going to offer you 2 to 4x more than your existing treasury strategy. And we're going to also work these OEM relationships in order to build great partnerships so people can create insanely good digital money products based on our digital credit. Next slide. Quick review of illustrative models. We're looking out 7 years. And so one model is we target 5% BTC yield and we increase Bitcoin per share by 1.4x over the 7 years. The mid case is we target 10% BTC yield. Let's go to that slide. Yes, 10% BTC yield. In that case, we will double Bitcoin per share over 7 years. And the high end would be a higher yield and we -- 2.5x Bitcoin per share. What is our objective? Our objective is to double your Bitcoin per share, right, over 7 years, right? I mean, I would be disappointed if we don't double Bitcoin per share over a 7-year time frame. This chart actually shows how the amplification works in practice. By selling digital credit, we create an amplification. So if Bitcoin ARR was 10%, we could achieve a 12% to 19% ARR. If Bitcoin was a 30% ARR, we could achieve a 36% to 45% if we execute on our strategy. So clearly, the equity is for vol junkies and performance junkies, they want to outperform. This is how we believe you can best outperform Bitcoin in the most responsible fashion while doing the most good for the world. And for the other end of the spectrum, for the credit investors that can't stand the vol, they want principal protection and low vol and no currency risk and they want clear yield and they want tax-efficient treatment, well, then they have digital credit and Stretch specifically. Let's go to the next slide. So I would end with this thought, right? Bitcoin is digital capital. We believe in it. We will continue to advocate for it. And for the pure capital investor, you should buy it. Stretch is digital credit. If you don't know what you want, but you believe in digital assets and you believe in digital capital, you probably want Stretch. It's 11.25% dividend paid monthly, tax deferred. If you're a corporate treasurer, if you're a retiree, if you've got money that you need 3 months from now to pay your kid's tuition, but you want to invest it in more than 2% after tax, well, then Stretch is an option for you, right? So Stretch clearly is the flagship product. And if you believe in the future of digital credit and you want to invest in the company that is making it possible, and you would buy our equity. And if you do that, you should probably have a 7-year time horizon because we're long-term thinkers, we're not -- when -- every day is not going to be a great day, every week, every month. If our thesis is wrong for 100 years, the equity won't work, and we'll run out of money to pay the dividends at some point in 100 years. If our thesis doesn't work for 10 years straight, if that doesn't work, then the credit will get paid -- the dividends will get paid, the equity won't be a great investment for you. But if we actually execute and if over the next 7 to 10 years, things work out fine, the company is well managed, well collateralized and responsibly structured so that we can stand difficult months, difficult quarters, even difficult years or 2 or 3-year cycles at a time. We've done it before. And we're prepared to do it going forward. So with that, thank you. And I think I'll pass over the floor to open Q&A. Shirish Jajodia: Thank you, Michael. We are now going to proceed to the interactive live Q&A section of our webinar. I would like to welcome all our Q&A guests and invite them to come on video. We look forward to hearing your questions. [Operator Instructions] So for the first question, I would like to invite Lance Vitanza, our research analyst from TD. Lance Vitanza: My question is, since the beginning of the year, I can count 3 weeks over which your Bitcoin acquisitions have generated negative -- slightly negative, but negative Bitcoin yield. Now I'm all in favor of buying Bitcoin even when times are tough, but shouldn't the goal be to increase Bitcoin per share at all times rather than just increasing the total amount of Bitcoin that you own? And maybe if you could just talk about the strategy or the thinking that went into those 3 particular weeks and what that could mean going forward? Michael Saylor: Yes, we agree with you. We -- those -- we don't aim to reproduce those weeks. The times that we've actually done dilutive transactions on a Bitcoin per share basis were -- if you go back to the crypto winter when we had to recapitalize some toxic debt on our balance sheet, we took out debt either it was like asset-backed loans or senior debt that had EBITDA covenants that we felt were crippling the company's growth prospects. And so we didn't do it enthusiastically, but we did it because over the 10-year time frame, we knew we needed to remove those toxic elements to our balance sheet. If you look at these 3 weeks, when we took actions that were somewhat dilutive, they all were generally associated with building up the U.S. dollar reserve. And we did that in response to analysis and feedback from the market and some reflexive concerns that we wouldn't be able to pay the dividend if the equity capital markets closed us. So we wanted to get ahead of that and address the credit quality. So the reason we did it, the short answer is we do it to improve the creditworthiness of the company. And if we felt that there was a credit problem, we would do it. Right now, we feel that we've built the U.S. dollar reserve to the level where we don't have a credit problem. We're good for the next few years. We don't have any of those other forms of debt, the senior debt or the asset-backed lending. So the balance sheet is in much better shape today. Going forward, we wouldn't electively or programmatically issue equity to buy Bitcoin if it was going to decrease Bitcoin per share, right? We're -- we don't think that's a good idea. We would only take those actions when we feel like it's essential to defend the credit of the company because if people lose confidence in the credit, then that will ripple into losing confidence in the equity and then losing confidence in the business model in general. So it's a practical consideration. But I don't think we expect to see anything of that magnitude going forward because the first USD 2.25 billion of U.S. dollar reserve was a big move. Lance Vitanza: And just if I could just get a follow-up question regarding that $2.5 billion cash reserve, could you -- in theory, could you use that -- if you chose, could you use that to redeem the $1 billion of converts that are putable in September of '27? Michael Saylor: Yes, we could. We can use it for any corporate purpose. We can use it to pay dividends. We could use it to meet a credit obligation. We could use it to pay interest on a loan. We could use it for whatever. Shirish Jajodia: Great. Thank you. For the next question, I would like to invite Tom Lee from Fundstrat and Bitmine. Tom Lee: Really useful presentation. I took a ton of notes. But I wanted to ask you a 2-part question. I apologize, it's 2 parts. On Slide 53, you talked about quantum vulnerability of Bitcoin. And I apologize, and it's getting a little nerdy, but I know a lot of people have questions about quantum vulnerability because -- of course, Bitcoin could upgrade its network. But I know there's 3 types of wallets that remain quantum vulnerable. One is Satoshi because he used a paid to public key, a really old wallet. And then anyone who's sent Bitcoin reveals their public key. And then as you know, the taproot wallets actually are somewhat quantum vulnerable. So I think that's like 25% or 30% of all Bitcoin wallets out there. So the part one question is, you -- I know MicroStrategy is a security expert. You have so much experience in security. Could you give us some idea of how Bitcoin and the core developers might think about addressing the quantum vulnerable wallets. But the second part is, that's really a small part of the story because there's 4.4 million -- there's only 4.4 million wallets that have even $10,000 worth of Bitcoin, which means what -- whereas there's almost 1 billion accounts globally that have $10,000 of stocks, bonds or cash, meaning the world hasn't really adopted Bitcoin yet. And so as you think about the rest of this year, could you give us like what you think are some milestones or road maps that further drive Bitcoin adoption, which in turn help the price of Bitcoin. Michael Saylor: So with regard to the first, the quantum question, I don't think it's appropriate for us to advocate a particular solution or a particular approach nor a particular time frame. I think that our role is to support all of the various communities and facilitate the evolution of consensus about what should be done, how it should be done, when it should be done. And I think that if you accelerate those and pressurize those processes, you end up solving a bunch of problems that don't exist in a way that maybe are iatrogenic. So we don't have a particular set of policy points that we wish to advocate right now, nor do I think it's really responsible or appropriate for us to do that. I think that, that will be emergent exactly what should be done. By the way, it's not clear anything should be done ever. It's quite possible we'll actually pop out -- you remember, the world was going to end in climate change, death 26 years ago when 26 years went by and none of those things happened, we were going to -- Bitcoin was going to boil the ocean and use all the energy on earth as late as 2018, and that never happened. So it's possible that whatever happens in the quantum domain will actually improve the security of the Bitcoin network inadvertently before we have to even discuss a protocol change. So I don't think there's any particular policies to be advocating right now other than to support all the various communities and facilitate consensus at the right time to do the right things. The second topic is really what are the catalysts for Bitcoin price to improve. Look, I think the fundamental catalysts are regulatory support. We have a very -- we have the most constructive set of financial regulators in the history of the industry right now. The head of the Fed, the head of the Treasury, the head of the CFTC, the head of the SEC and the White House has a digital asset ZAR, right? Those 5 things are massive bold flags. They're all very positive. And generally, you would expect that something good will come probably out of the CFTC or the SEC as they are constructive about facilitating financial companies to innovate in the digital asset space, right? I would have been skeptical about that 2 years ago. But I think for you to be skeptical about their support for digital innovation today would be ignoring all the words from everybody in those positions. And I think that the second catalyst will be banking adoption. The formation of the banking credit networks as the large banks and as companies like Schwab, they start to allow you to trade Bitcoin, custody Bitcoin, borrow against Bitcoin. They're going to legitimize the asset, and they're going to decrease the volatility of the asset. They're going to improve the usefulness of the asset. You're aware of the announcement of the BlackRock, Bitcoin volatility Income Fund that came like about a week ago where they said they were going to sell volatility or generate income. And a lot of people that speculate that will decrease the volatility of Bitcoin and put a more stable floor into the asset. So I think the actions by big finance, the actions by the big banks and the actions by the financial regulators are the fundamentals. I mean those are the fundamental things. And if you were to light a candle and pray to the gods of the crypto sphere, you would say, I want prodigital assets regulators, I want prodigital assets banks, and I want prodigital assets, financial innovations like BlackRock is bringing to the market, like we're bringing to the market, right? Like STRC, fundamentally, the industry is going to move forward because of enlightened regulation, engaged, thoughtful banking and then innovative finance. And that's what we're doing, and that's what we see right now. Shirish Jajodia: For the next question, I would like to invite Pete Christiansen from Citi. Peter Christiansen: Michael, I want to talk about events of the last week. On Friday, the President presented his nominee for next Fed Chair, which exacerbated volatility across a number of asset classes, including Bitcoin. The good news is Kevin Warsh is on the tape noting that Bitcoin is the new gold. So that's good. But I guess my question is, how would strategy's capital allocation framework or possibly if it would change, if the next Fed share is perceived to be less independent, perhaps maybe more tolerant of fiscal dominance, that may raise Bitcoin prices short term. But longer term, it may introduce increased rate volatility, which may be a challenge on the funding side. I'm just curious if you have any perspectives on how that might change the capital allocation framework for strategy. Michael Saylor: We try to be very reactive to market signals. So for example, when our equity trades weak, we don't sell it. When our credit instruments are trading weak when the cost of credit is too high, we don't sell them. The most obvious is STRC, if it trades below 100, we don't sell it. So in periods where the marketplace loses confidence in our particular credit instruments, we simply wait. And in periods when the NAV of the equity explodes to 3 or 3.5, we might sell $1 billion a day, right? So when the capital markets are enthusiastic about either the equity or the credit, we react to them. And it's above our pay grade to set financial policy. It's even above our pay grade to interpret like the financial policy, like sometimes the macro economy has one set of numbers, and you would think that's good for Bitcoin, but it's bad for Bitcoin. Or another time, you would say, well, if they do this, that should be good for us and it's not good for us. And in other times, it's the opposite. I think the nice thing about our business is we have the option to do nothing. And we have a set of disciplined capital markets programs. They've moved from being discrete where it's like, well, we got to do a deal this quarter. What's the deal we're going to do in Q3? And we've moved from discrete 144A capital markets programs to continuous ATM type programs. And with the ATMs, if the market thinks that the cost of capital on an instrument like STRF should be 11%, well, we just don't want to sell it. We think it ought to go to 8%. So when the market takes STRF to $140 or whatever the price it is that we think is fair, then we will be open to issuing more. And when the market is bearish on those instruments, we don't. And the good thing about the business is if you think Bitcoin is going to grow pill in a number, 30% a year, then our option is just do nothing, and we're a company that's a $45 billion, $50 billion company growing 30% a year. So that's our default. Our default -- if you think Bitcoin is only going to grow 10% or 20% a year, our default is we just do nothing and we grow at the rate of Bitcoin, and we're okay with that. And then if we think that there's something very accretive, that's going to be good for the shareholders, then we will participate. And we can participate in size, $1 million a day, $100 million a day, $1 billion a day. And the truth is, Pete, sometimes we get up in the morning, and we basically set up our programs and we think, well, nothing is going to happen today and then 5 minutes before the market closes, a lot of stuff happens. Like it can literally change in 60 seconds. And again, that's beyond our control. We can't control how the markets will interpret all these things. What we can do is set up a rational set of credit structures so that we only issue credit when we think it's in the best interest of the company, and we only issue equity when it's in the best interest of the company. Shirish Jajodia: I would like to invite [ Lynn Alden ] from [ Lynn Alden Investment Strategy ]. Unknown Analyst: Given the popularity of STRC, my question is focused on that. The company established that USD reserve, which I think shored up the confidence of these products and make them more attractive. Right now, the USD reserve is on the website, 30 months of coverage compared to the dividends of the preferreds. The other preferreds are fixed dividends. STRC is a variable dividend, which introduces some degree of uncertainty around how many months of coverage there are for the total amount of dividends payable. Do you have any kind of views on what you think is an appropriate minimum reserve relative to months of dividend coverage? Or do you have a kind of a maximum that you'd be willing to pay on a dividend for STRC? And then a related question is, we are seeing some kind of early financial products that are out in the market that are looking to potentially leverage STRC given the goal of low volatility and high yield. Are you monitoring the space for leverage build on top of that as it could contribute to spikes of volatility should there be an issue in the market? And do you have any -- are you -- would you encourage that kind of thing? Or would you dissuade leverage from building on top of that increasingly kind of a popular product? Michael Saylor: I can start, [ Lynn ]. Thanks for the question. First, we said that we target 2 to 3 years of dividend coverage with the U.S. dollar reserve. So we wouldn't want it to go below 2 years. I think 3 years would be pretty high. And as far as whether we think there's a cap to the Stretch rate, we're pretty early on, and we're sort of trying to understand what happens every single month at the end of the month, and that's why we have our guidance that we have, right? Instead of $11.25, could we take it to 12 potentially? But it's going to be a function of how do we keep the price within a tight range right around that $100 and also a function of what happens to interest rates in general. But I don't think we have a cap right now. We're just going to have to see how this instrument plays out over time. So that's the answer on Stretch overall. And your second question, remind me? Unknown Analyst: The second question was around we're seeing kind of early products potentially looking to lever it up for other customers. Do you perceive issues in that? Are you monitoring it? Would you encourage or dissuade that type of activity? Michael Saylor: I think any time people create products on top of Stretch, right? There are some products that we've seen like buck that have been issued that are -- they're not levered products, but they're actually reducing the volatility down to about 0, and they're actually showing daily accruals as opposed to monthly accruals. So I think those are positive. I think the extent people are going to build levered products, one, we can't really -- we're not going to stop them. And I think leverage adds liquidity, adds a certain extent, interest in Stretch. And we'll see how it plays out over time. But I don't necessarily think that's a bad thing. Shirish Jajodia: Okay. So we can move on to the next question. For that, I would like to invite Mark Palmer from Benchmark. Mark Palmer: A couple of questions. First of all, we have seen over the last year, a tremendous number of new digital asset treasury companies formed. Many of them focused on accumulating Bitcoin, others on accumulating other crypto tokens. What is your take on how this industry is likely to evolve in terms of the number of players, whether there's going to be a shakeout, if there is a shakeout, will there be consolidation? And most importantly, what could this all mean for strategy as it unfolds? Are there opportunities for the company to take advantage of that dynamic? Michael Saylor: I think every business has to have an operating model that works, that adds value if it's going to grow and prosper. So one model is just to provide Bitcoin exposure if people in the country in question can't get it any other way. There are a lot of people in the U.K. that bought our stock for 4 years because they just couldn't buy Bitcoin any other way. So if there's a value proposition in Brazil or in France or wherever, then maybe just you can be a simple Bitcoin holder. I think another value proposition is issue digital credit, and you can see that Stryve and MetapPinet have both pursued digital credit. If you're good at it, by the way, you can do digital credit and not be good at it, right? If you take on debt, you can't pay back, right? And that doesn't help the company, that hurts the company. But if you're good at digital credit, that could be another case. 1/3 would be anything that uses capital, right? So if these companies -- if they want to generate Bitcoin yield, they're going to have to find some way to generate a benefit from the capital, right? You could underwrite insurance, you could support trading or derivatives trading by posting it as collateral. You can engage in derivatives trading, right? You could literally become a public company with a lot of capital that trades in a digital derivatives market, posting your Bitcoin as the collateral to take the trade and sell the volatility. It's a different business model. What do I think? I think there's thousands of companies that get launched. Many don't succeed. Some will fail. Some get launched doing one thing and then they evolve into something different. like look at our company, we evolved. In fact, you could argue that the most successful companies evolved through 2, 3, 4 stages in their life cycle. I mean, Apple didn't start out as a phone company for sure. And I think Elon maybe he ends up being a robot company and not a car company, right, at Tesla. So I think that the winners will evolve and they'll find a niche. And I think that the ones that don't evolve, if you're just a holding company holding Bitcoin, not doing anything with it, might you get bought up? Yes, you might get bought and would that be good for you? You're a lot better off if you have something people want to buy, for example, Sears had a future because they had a lot of real estate that somebody wanted to own. And if they didn't own the real estate, it would have been a much worse situation for them. So I think that you're going to see all sorts of examples. Now -- and presumably thousands and thousands of companies get launched and they all do different things, and we're very embryonic early on, like in the first year or 2 years. 50 years from now, right? I mean, the debate will be who's the best Bitcoin-backed insurance company, right? But 20, 30, 40 years from now, and that company doesn't even exist right now. But on the other hand, what about us? Are they opportunities for us? Well, they were an opportunity for Stryve. Stryve did the deal with similar and they closed it quickly, and they were able to build their capital base pretty rapidly. So that's -- we see examples of that. There probably will be some mergers and acquisitions of other companies in various spaces that they put together their various assets in a synergistic way. Our business is laser-like, monomiacally focused on one thing right now. we want to make Stretch, STRC, the premier credit instrument in the digital world, the best digital credit in the world and maybe the best credit in the world. If we can create a product that trades with less than 5 that pays you 10% dividend with a stable $100 value and we pay a rock dividend, the question is who would want that? It's like everybody would want that. I mean, why wouldn't you -- like what's the demand for that? It's infinite. Like -- so if Stretch works, it's the ideal product and the company that can create treasury credit based on digital capital has the ideal business model. And so we generally won't get distracted, right? The #1 risk for us is a dilutive distraction, right? Everything else on our capital structure that undermines the credit of Stretch is a question mark, right? So you have to be thinking about that. And then anything we might do that looks complicated or risky or different would -- anything that introduces a question in the mind of the Stretch investor, can we pay the dividend? That's going to be deemed negative. Anything that introduces a question in the equity investors' mind, can you outperform Bitcoin? So generally, generally, we're pretty skeptical on acquisitions because they take a long time and then you might acquire something that you didn't want that you have to divest and then everybody wants to talk about how and why and how long it takes. And so I don't think -- I wouldn't say it's not a good strategy for other companies and other investors. There are other companies and other investors for which it's a great opportunity for them, and they can make a lot of money and they will pursue it and God bless them. For us, we believe we've stumbled upon maybe the most promising product, STRC. After 20 capital markets transactions and all sorts of credit instruments, we think we found the best one for us and for the credit investor. And we've -- and we think we found a great business model, right, the treasury company. If you can generate return of capital dividends scalably and scale up the issuance of treasury credit, you've got maybe one of the most efficient business models in the world and one of the most compelling products in the world. So we don't want to do anything that would dilute that focus, undermine the credit of the balance sheet or distract the management team from what we see is a once-in-a-lifetime opportunity. Shirish Jajodia: For the next question, I would like to invite Larry Lepard from Equity Management Associates. Larry Lepard: Yes. Thanks for having me on, guys. First off, 2 great things in my view, came out of the call. One, the whole guidance on the STRC rate. I mean that's brilliant. I really love it, and it's going to help people like me who are buying STRC as kind of a solid retirement type of asset to understand where it's going. And I have a question related to that, but I'd like to put it to the end. The second thing that I thought was really important was the notion that we're going to upgrade -- we're going to upgrade and play a leadership role in the technical direction of Bitcoin. I think that's fabulous and a great way of addressing all the f around Quantum, which I think is probably scared off a few of the bigger institutions who are looking at it and kind of saying, hey, who controls this whole thing. Just back to first principles, I want to just kind of run through how I look at this and see if you, as a management team agree I'm a value investor. I look for asymmetry. And in my view, right now, MicroStrategy is the most asymmetric value investment in the world, and most people don't understand it. And it's kind of stunning to me. My partner, David Foley and I, we did a model. We've done several models, and we've looked at it and said, if Bitcoin stays at $50,000 for 4 or 5 years, you can't break this company. It's unbreakable. I mean the dilution -- we calculate the dilution would maybe be 15% or 20%. So the downside case here in our view is really covered as a result of the fact that the debt is unsecured and the interest rate on it is very, very low. Some of it's convertible, as we all know. And the preferred is really equity. So to me, you've got an unbelievable situation. I think a lot of people listening to this call are kind of wondering, "Hey, what's going on with the stock price, what's going on with Bitcoin." My view on that is just that what's going on with Bitcoin is liquidity is really tight. And this is what's going to drive a big print at sometime relatively soon. And it's also what's driving the stock market down, and Bitcoin has always been kind of a leading indicator of where -- how much liquidity is out there. And so things are tight right now, and you see it, gold is getting hit, silver is getting hit, all of a sudden money assets are getting hit. But we know that the basement trade is alive and well because gold and silver have just been on a tear. And this reminds me very much of 2020 when gold and silver led first and Bitcoin followed harder. Bitcoin went up 6x in October of 2020 after gold had gone up 45% when Pell pivoted and then COVID came along. So to me, what's going to happen here is this thing is going to be a 2-bagger, 5 bagger, 10 bagger and most people don't really understand it. And I think the reason that's the case is kind of said where he said, commodities are a very, very hard business to invest in because they have long cycles and the average investor who's being marked quarter-to-quarter, month-to-month, year-to-year can't show long time preference. He didn't use those words, but he was essentially saying the same thing, which is Seifadine's point. And if you have the long time preference, you realize this is a commodity that has a fixed supply, the asymmetry, it's just -- it's absolutely blowing my mind. So I just want to say congrats for all you're doing. And I think it's a no-brainer that this is going to be an outstanding upside investment. I do have one specific question related to the Stretch product, and that is this. You're going to adjust it, okay? So maybe you have to adjust it in a while to get more people to buy it, fine. At some point, this is going to be a fabulous product. Everybody is going to want it. And if you kind of set the price at $100, could it ever adjust down? I mean, I'm buying it and I'll probably gift it to my kids because the tax basis will be 0, and I'll never sell it. Would be -- could you think about setting a lower boundary on the yield? I mean, 11%, that's attractive, 9%, 8%, 7%, those are all attractive. If it got so attractive that the yield on it started to go down to 5, 4, 3, 2, 1, that would be -- I mean, if people looking at buying it, thinking long, long term might wonder, is there a boundary below which this thing can fall? And we'd be better, we'd be more comfortable buying it if we knew there was such a boundary on the yield. Michael Saylor: Go ahead, Phong. Phong Le: I can start, Larry, and we agree with all your points. I think there's a significant misunderstanding of the leverage on the balance sheet and how we're going to service our convertible debt over time and these ideas that if Bitcoin price goes below our cost basis, that becomes an issue. And as I stated, Bitcoin needs to go down to $8,000 a coin and sit there for 5 years up until 2032 before we really have a problem being able to satisfy the convertible note. So thank you for pointing that out. On the rate on Stretch, right, right now, technically, the bottom of the rate would be SOFR, but we think of the fact that we get capital from Stretch. We put it into Bitcoin and Bitcoin is going to go up on average 30% a year. So anything that we pay less than, call it, 20% is accretive to our shareholders. So I don't think it's something where you should sit there and think that we're going to drive it down to SOFR, right? If Stretch price goes to $100 and sits at $100, we might take it down a couple of percentage points. But I don't think -- and obviously, it depends on where SOFR goes, but I don't think it's something that someone should think we're going to pull the rug out from under folks and drive it down to 1. Larry Lepard: Yes. I think stating that publicly to people who are buying Stretch would be important just so people understand. And if you were to say something along the lines of we're not going to let it go below 7 or something because it's going to get to be really popular at some point in time. And those of us who are buying it are buying it with multi-decade time frames, right? Michael Saylor: Yes. Another point to make is we can't lower the rate more than 25 basis points a month. So we're always going to be very incremental. And we would only lower the rate when -- in such a way that we thought it would stay in that zone of 99 to 101. Like we want to keep it target at 100. So you might 5 years from now find out that the rational credit spreads that the market assigns us are 300 basis points instead of 600 and that people would like to buy this thing at 400 basis points over SOFR, maybe. But we would very gradually get there and we would still expect STRC to be trading around 100. And so we're not looking to do anything that is jarring to the price. We want the price to be stable. As a practical matter, the reason that we would lower the dividend rate would be we had such an avalanche of demand. We had too much demand and people want to buy infinite, and we don't want to sell infinite because we'll drive the BTC rating of STRC down. right? Like if hypothetically, someone said, I want to buy $100 billion of STRC tomorrow, you can see how we don't want to sell it, right? Because then that's reflective and that would undermine the credit quality and that would increase the volatility and that kind of works against everything. So luckily for us, and practically, that's not going to happen, right? Like they say it's good that we have time because otherwise, everything would take place at the same time, right, all at once, all at once. We don't want stuff to happen all at once. So it will happen progressively. We'll be very thoughtful about it. Our goal is always for it to be extremely compelling to attract capital. and at the point where we feel like we've got too much capital. It would be a circumstance, Larry, where there was massive success of STRC and Bitcoin was lagging and MSTR equity premium was lagging and it's that weird situation where it's hard for the company to increase its collateral base in order to back the credit. And then we would say we have too much demand for the credit, so we need to click it down. But if there's over demand for the credit, it would still be pegged at 100 when we -- and we take it down 25 basis points. And so we're going to responsibly manage this so as to minimize volatility, maximize stability, and in all likelihood, it's going to be excessively compelling in terms of dividend rate for quite a while because even though you believe in Bitcoin as collateral and I believe in Bitcoin as collateral, we've got a lot of work to do with credit rating agencies and the Basel rules and traditional finance establishment before they recognize it as being good collateral. And as long as they don't, then that means probably the spreads are going to stay pretty compelling. Shirish Jajodia: For the next question, can we have Andrew Harte from BTIG. Andrew Harte: So it'd be great to hear some examples of some of the doors that have been open since strategy got a credit rating. Back in the fall, I think it's opened -- potentially open doors to pension funds, insurance companies and other really large institutional investors. And Michael, before we got on this webcast, you said something like times today that we're seeing with Bitcoin is when people are looking for insight and leadership. So I guess who better to ask, right, what is your expectation for conversations with these new potential investors with these really large pools of capital? If you could also shed some light on how the conversations to date since you've gotten that credit rating have evolved. Phong Le: Sorry, go ahead, Andrew. Andrew Kang: I was going to start, and Phong, please jump in. Look, Andrew, thank you for the question. I think the process with the rating agencies was an excellent process I think we've noted that we've had a credit rating in the past. It was more based on the legacy business. This is the first time a Bitcoin treasury company with a framework specific to that was rated by a major credit agency. I think overall, the reaction has been what we had expected, right? Like there is now a public profile that investors can look to. It is opening up, I think, interest. I think it's still early though, right? I think a lot of us that have been in these types of markets know that the credit rating agencies take time to develop. I think we noted earlier in the presentation that we believe we've made strides since the launch of the -- relaunch of the rating that we'll continue to make progress I think there's more to do in that sense. And there -- it's sort of created a little bit of a floor, so to speak, because everything we do here will be incrementally increasing the capital base. It will increase our ability to strengthen our balance sheet. And so I think in the long run, it may be -- it may take longer than it would take a near-term action. But I think that there's possible upside. I think that will continue to drive more large institutional demand. And to answer your question, I think the reaction from the investor base has been net positive. And certainly, the cash reserve has added on to that as well. Phong Le: Mike, do you want to cover the second question around just general Bitcoin? Michael Saylor: Just restate the question again. Andrew Harte: I was wondering how the conversations you've had with these really large -- very large investors have come along. And then before we got on, you said times like this is when people are looking for insight and leadership. And so as you continue to have those conversations with people that are new to Bitcoin, what do you tell them in a day like today? Michael Saylor: I think we've got an unprecedented number of invitations to financial conferences and meetings with investors in general. And I think that the amount of interest in this topic explodes. And when the volatility explodes, the engagement explodes. What I would tell them is the same. We've kind of said for a while, Bitcoin's capital investment, your time horizon needs to be minimal 4 years. I would actually say, look at the moving -- the simple moving 200-week average, the 200-week simple moving average or the 4-year average, and I would invest like with a 4-year DCA dollar cost averaging type approach if you're going to invest in Bitcoin. And you really want to have the intent to hold the product -- hold the asset for a decade. And if you can't stomach -- if you can't wait a decade with no cash flow and if you can't stand the volatility, then I would say you ought to buy the credit. If you believe in digital assets or digital capital, you believe in Bitcoin, but you can't stand to wait for a decade and take the vol, you should buy the credit and just take the 11% tax deferred with much, much less volatility and with someone else stomaching, the pain for you. And so I think it's kind of simple, right? You either don't believe in Bitcoin at all and then you don't want the credit or the capital or you believe in Bitcoin as a maxi and you want the equity because you want 2x Bitcoin or you want Bitcoin as sovereign and censorship resistant long-term store value to give you great grandkids who may be living in a country you're going to live in right now and you want to self-custody, then you buy the Bitcoin. Or you just think all this stuff looks really good, but you need the money back in September. then you think about the credit, right? And specifically the treasury credit because the other credit instruments are too complicated. So I would say we're really, at this point, pitching the credit, treasury credit as the first step in a Bitcoin journey for a traditional or conventional investor who believes in digital assets. And we're pitching to a lot of people, like we're talking to a lot, right? So there's a lot of conversations. And if anything, right, the volatility right here is the kind of the reason why you might want to have a product like STRC. If you wonder what's the justification? Well, just look at the 2 charts next to each other and you figure out why you might want the credit instrument. Shirish Jajodia: Great. And for the last question here, I would like to invite Dan Hillery from Buck. Unknown Analyst: So my question is as follows: The de-equitization of the convertible notes has seemed to be a bit of a headwind for the cost of capital across all the preferred equities. And if MSCR continues to trade below the convertible note conversion price, how many months before the put date would you guys consider refinancing or retiring the converts at a discount in order to lower the cost of capital across all the digital credit instruments? Phong Le: Dan, we went through this in 2022 during Bitcoin winter and our converts were at some point in time trading at $35 each and... Unknown Analyst: You mean $0.35 or $0.40 on the dollar, $0.35 on the dollar. Phong Le: $0.35 on the dollar, and we had considered whether it made sense to call -- to buy some of those back, and it never really made a lot of sense, especially if you live in a world where you think Bitcoin price is going to go up. So the converts aren't really this big overhang for us. And as I mentioned, you need Bitcoin price to go down to $8,000 and sit there for 5, 6 years before it really becomes a problem. So it's not really something that we think about a lot of whether we're going to buy back any of the converts or if we're going to do something early with them right now. Michael Saylor: I would say a year before we have a put event or a year before we have a redemption event, we certainly look at it and we look at the statistical likelihood of anything. And then we evaluate whether or not it makes sense to refinance or hedge or mitigate anything. And if we were to do it, we would want to do it 6 months before the event took place. So -- but right now, we're still far out of that window, and it's not clear there's any event. The last time I looked at one of our puts. It was -- the one that was coming due earliest, the bond was already above par, and so there is no risk to it. So when we get to a -- certainly, when you're more than 1 year out, it's all hypothetical worrying about something that's unlikely to ever happen. When you get to 1 year out, you have to consider whether there's a risk. And then we're certainly not going to wait until 1 month before we deal with the risk. We wouldn't wait until the last few weeks or the last few months. We would probably do it with a few quarters buffer at the latest, which means we start thinking about a year before. Shirish Jajodia: Great. Thank you, everyone. This concludes the Q&A portion of the webinar. I would like to thank all the guests for the questions and all the attendees for tuning in live. We had over 3,000 people join us live on Zoom webinar, over 4,000 people on YouTube live stream and over 180,000 views on X live stream. So this should be one of the most viewed earnings call in our history. So I appreciate all your interest in curiosity, and thank you. I would like to now turn the call over to Phong for final closing remarks. Phong Le: Look, I want to echo everyone's thoughts. Thank you for the analysts for joining us. Thank you for everybody for dialing into the call and listening, and thanks for those who are joining us online. I invite you all to join us in Las Vegas, February 25 at Strategy World and Bitcoin Corporations. And if we don't see you there, we'll see you again in 3 months at our next earnings call. Thanks.
Kimberly Callahan: Good morning, and welcome to Camden Property Trust's Fourth Quarter 2025 Earnings Conference Call. I'm Kim Callahan, Senior Vice President of Investor Relations. Joining me today for our prepared remarks are Ric Campo, Camden's Chairman and Chief Executive Officer; Keith Oden, Executive Vice Chairman; and Alex Jessett, President and Chief Financial Officer. We also have Laurie Baker, Chief Operating Officer; and Stanley Jones, Senior Vice President of Real Estate Investments, available for the Q&A portion of our call. Today's event is being webcast through the Investors section of our website at camdenliving.com, and a replay will be available shortly after the call ends. And please note, this event is being recorded. Before we begin our prepared remarks, I would like to advise everyone that we will be making forward-looking statements based on our current expectations and beliefs. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from expectations. Further information about these risks can be found in our filings with the SEC, and we encourage you to review them. Any forward-looking statements made on today's call represent management's current opinions, and the company assumes no obligation to update or supplement these statements because of subsequent events. As a reminder, Camden's complete fourth quarter 2025 earnings release is available in the Investors section of our website at camdenliving.com, and it includes reconciliations to non-GAAP financial measures, which will be discussed on this call. We would like to respect everyone's time and complete our call within 1 hour. So please limit your initial question to one, and rejoin the queue if you have a follow-up question or additional items to discuss. If we are unable to speak with everyone in the queue today, we'd be happy to respond to additional questions by phone or e-mail after the call concludes. At this time, I'll turn the call over to Ric Campo. Richard Campo: Good morning. The theme for today's on-hold music, uncertainty, could not be more fitting for the state of the multifamily REIT sector. It's no exaggeration to say that the words uncertain or uncertainty have echoed through the conference call transcripts during 2025. And why wouldn't they? The operating environment last year was uncertain. Every sign suggests that the first half of 2026 will be marked by the same cautious tone as last year. The song that you've heard this morning reference uncertain times. However, the song verse that best captures the current uncertain vibe for us is from The Doors classic Roadhouse Blues. Well, I woke up this morning and I got myself a beer. The future is uncertain and the end is always near. The end of uncertainty that is, here's what we are certain about. We are certain that we finished 2025 strong, exceeding our original guidance for core FFO by $0.13 a share. We are certain that people need a great place to live, and we provide that. We are certain that new supply has peaked and is falling like a knife in our markets. We are certain that 2025 had one of the highest levels of apartment absorption in the last 20 years. We are certain that our Sunbelt markets will continue to grow faster than the rest of the country, prompting us to market our California properties for sale. The sale allows us to expand our Sunbelt footprint, simplify our operating platform and buy our shares at a significant discount to net asset value. We are certain that our residents are resilient and the financial prospects are strong with rent payments at only 19% of their income. We are certain that apartments are significantly more affordable than owning a home and will be for the foreseeable future. We are certain that new lease rates and net operating income will grow in the future. We are certain that Camden has one of the strongest balance sheets in REIT land. We are certain that we have one of the best teams in the business, providing living excellence to our residents. And finally, I'm certain that Keith Oden is up next. D. Keith Oden: Thanks, Ric. As we reported last night, Camden's same-property revenue growth for 2025 came in at 76 basis points, which represents a 1 basis point beat to the midpoint of our most recent guidance. And our operations teams are celebrating like they've just won the Super Bowl. In putting together our projections for 2026, we reviewed supply forecasts and job growth estimates from several third-party data providers, and we budgeted from the individual property level up, taking into account each community's historical performance, current submarket dynamics and other relevant factors. On the supply front, it is clear that deliveries in almost all of our markets peaked during 2024 and continued to decline in 2025, setting up 2026 and 2027 to be below average years for new supply. Completions as a percentage of inventory peaked at nearly 4% for our portfolio in 2024 and are expected to be less than 2% this year and closer to 1.5% in 2027. Regarding 2026 job growth, I'll echo Ric's comments that uncertainty is still a key theme in the markets this year, but we are certain also that whatever jobs are created this year will predominantly be in Camden Sunbelt markets, which continue to attract corporate relocations and growth as a result of their affordable business-friendly environments. In 2026, we expect operating conditions will improve over the course of the year with modest acceleration in the second half of 2026. The midpoint of our 2026 same-property revenue guidance range is 75 basis points, basically the same that we achieved last year, with half of our markets falling between 1% and 2% revenue growth and most others flat to up 1%. The two outliers with slight revenue declines will likely be Austin due to continued supply pressure and Denver due to recent regulatory changes affecting income from utility rebilling. As many of you know, we have a tradition of assigning letter grades to forecast conditions in our markets at the beginning of each year and providing outlooks of improving, stable or moderating for their expected performance during 2026. We currently grade our overall portfolio as a B with a stable but improving outlook. Our first three markets are rated either A- or B+ and should achieve revenue growth in the 1% to 2% range this year. Washington, D.C. Metro ranks as an A- with a moderating outlook. Despite all of the conversations around D.C., DOGE and politics last year, D.C. Metro clearly outperformed our expectations with 3.5% revenue growth in 2025 and heads into 2026 well positioned with 96% occupancy. Houston is next with a B+ rating and a stable outlook, the same grade as last year. Supply has been quite limited in Houston for the past couple of years, allowing it to place # 4 for revenue growth in 2025, and we expect Houston to exceed our average portfolio growth again in 2026. Our Southern California markets earn a B+ grade with a moderating outlook for 2026. Like D.C. Metro, Southern California outperformed our original expectations, posting mid-3% revenue growth in 2025, in large part due to declining levels of bad debt. Supply has not really been an issue in most of our California markets, but we do expect less of a tailwind from reducing bad debt as we move through 2026. Denver was our #3 revenue growth market in 2025 and receives a grade of B+ with a moderating outlook. Market conditions in Denver are fairly stable, though slightly more challenging in a few of its urban submarkets. But as I mentioned earlier, revenue growth is expected to decline year-over-year due to lower levels of utility rebilling and other income anticipated in 2026. Our next four markets earned a B letter grade with improving outlooks. Nashville, Atlanta, Dallas and Southeast Florida are all expected to improve over the course of 2026 as existing supply is absorbed. We have begun to see the proverbial green shoots in some of these markets and have budgeted between 1% and 2% revenue growth for each market this year. Orlando, Raleigh and Charlotte received B ratings this year with stable outlooks and budgeted revenue growth of 0% to 1% compared to relatively flat growth last year. Demand has been solid in all of these markets, but it will take a few more quarters to see any meaningful improvements given the higher-than-average supply delivered, particularly in the two North Carolina markets. We grade Tampa B with a moderating outlook and Phoenix of B- with a stable outlook and expect relatively flat revenue growth in both markets this year. Tampa benefited from above-average occupancy in 2024 and much of 2025, but has since returned to more normalized levels around 95%, tending to slow the revenue growth there. Phoenix still faces elevated levels of supply, mainly on the Western side. So we expect pricing power to be limited for most of 2026. And finally, Austin earns a C+ this year with an improving outlook after being stuck for a C- for the past 2 years. New supply is finally slowing and there is light on the horizon. But given the overwhelming amount of new apartment homes delivered in 2024 and 2025, it will take a little while longer for market-wide occupancy to improve and concessions to burn off. Stay tuned as we're fully expecting Austin to receive a B or better in 2027. And now a few details of our -- on our fourth quarter '25 operating results. Rental rates for the fourth quarter had new leases down 5.3% and renewals up 2.8% for a blended rate of negative 1.6%, which is fairly in line with what we saw in the fourth quarter of '24 and what we expect for the -- expected for the fourth quarter of '25. Renewal offers for first quarter expirations were sent out with an average increase of 3% to 3.5%. And as expected, move-outs to purchase homes remain extremely low at 9.6% for the fourth quarter and 9.8% for the full year of 2025. I'll now turn the call over to Alex Jessett, Camden's President and Chief Financial Officer. Alexander Jessett: Thanks, Keith, and good morning. I'll begin today with an update on our recent real estate and financial activities, then move on to our fourth quarter results and our guidance for 2026. During the fourth quarter, we disposed of three communities located in Houston and Phoenix for a total of $201 million, acquired one community in Orlando for $85 million and stabilized Camden Long Meadow Farms, one of our two build-to-rent communities located in suburban Houston. Our transaction activity for full year 2025 included the sale of seven older, higher CapEx communities with an average age of 22 years for $375 million and the acquisition of 4 newer assets with an average age of 5 years for $423 million. We recently began marketing for sale our 11 California operating communities. Obviously, the market will dictate final pricing, but preliminary indications of value and market chatter range from $1.5 billion to $2 billion. We are assuming this transaction closes midyear. Additionally, we are assuming that approximately 60% of the sales proceeds will be reinvested through 1031 exchanges into our existing high-demand, high-growth Sunbelt markets. And the remainder of the proceeds, modeled at $650 million will be used for share repurchases. We have already completed nearly $400 million of the $650 million of share repurchases associated with the planned asset sales, and we expect to complete the remaining buybacks in early 2026. In anticipation of this additional buyback activity, our Board recently approved a new $600 million share repurchase authorization. The just over $1 billion of 2026 acquisitions from the California sales proceeds are projected to occur during the summer months. Based upon this timing of asset sales, asset purchases and share repurchases, we are assuming no accretion or dilution in 2026 from this strategic transaction. Variability in transaction timing is considered in our core FFO guidance ranges. Turning to financial results. Last night, we reported core funds from operations for the fourth quarter of $193.1 million or $1.73 per share, $0.03 ahead of the midpoint of our prior quarterly guidance, driven entirely by higher fee and asset management income from our third-party construction business as we favorably closed out several jobs, which came in well under budget. Property revenues, expenses and NOI were exactly in line with expectations. Turning to guidance. You can refer to Page 24 of our fourth quarter supplemental package for details on the key assumptions driving our 2026 financial outlook. We expect our 2026 core FFO per share to be in the range of $6.60 to $6.90 with a midpoint of $6.75, representing a $0.13 per share decrease from our 2025 results. This decrease is anticipated to result primarily from an approximate $0.04 per share decrease in fee and asset management income as the outperformance we experienced in this category, particularly in the fourth quarter of 2025, is not anticipated in 2026, an approximate $0.045 per share or 3% increase in general overhead and other corporate expenses and an approximate $0.045 per share decrease in same-store net operating income. The growth in operating income from our development, non-same-store and retail communities is entirely offset by the impact of our disposition of older, higher FFO yielding communities in 2025. At the midpoint, we are expecting same-store net operating income of negative 50 basis points with revenue growth of 75 basis points, in line with 2025 and expense growth of 3% versus 1.7% in 2025. Each 1% increase in same-store NOI is approximately $0.09 per share in core FFO. Our same-store guidance includes California for the full year, and California is accretive to our numbers by approximately 25 basis points on revenue and 40 basis points on NOI. The midpoint of our 2026 same-store revenue growth of 75 basis points assumes 55 basis points of growth attributed to rental income and 20 basis points of growth from other income. We expect market rent growth of approximately 2% for our portfolio over the course of the year, with most of that growth occurring in the second half of the year, recognizing a portion of this rental rate growth with our slightly negative earn-in, flat occupancy and a slight improvement in bad debt results in expected growth of approximately 55 basis points for rental income. Other income which is primarily comprised of utility rebilling and fee income represents 10% of our total property revenues and is expected to grow around 2% in 2026. Adding approximately 20 basis points to same-store revenue growth. Page 24 of our supplemental package also details other guidance assumptions, including the plan for up to $335 million in development starts at the end of the year and approximately $200 million of total 2026 development spend. Noncore FFO adjustments for the year are anticipated to be approximately $0.14 per share and are primarily legal expenses and expense transaction pursuit costs. We expect core FFO per share for the first quarter of 2026 to be within the range of $1.64 to $1.68. The midpoint of $1.66 represents a $0.10 per share decrease from the fourth quarter of 2025, which is primarily the result of an approximate $0.05 per share sequential decline in same-store NOI driven by an increase in sequential same-store expenses resulting from the timing of quarterly tax refunds, the reset of our annual property tax accrual on January 1 of each year, and other expense increases, primarily attributable to typical seasonal trends, including the timing of on-site salary increases. An approximate $0.04 per share decrease in fee and asset management income from the large outperformance we recorded in the fourth quarter, an approximate $0.04 per share increase in interest expense from higher debt balances resulting in part from our actual anticipated share repurchases and an approximate $0.02 per share decrease in non-same-store NOI due to our late 2025 and anticipated first quarter 2026 disposition activity. This $0.15 per share cumulative decrease in quarterly sequential core FFO is partially offset by an approximate $0.05 per share increase in core FFO related to our share repurchase activity. And finally, we plan on launching a new $400 million to $500 million bond transaction later this quarter. At this time, we will open the call up to questions. Operator: [Operator Instructions] Our first question comes from Eric Wolfe with Citi. Nicholas Joseph: It's Nick Joseph here with Eric. Just on the Southern California portfolio sale. Can you talk about why now is the right time to do that, just given obviously the considerations of California right now? I think over the past few years, you've thought about kind of that portfolio exposure relative to the rest. And so essentially why now? Richard Campo: I would say why now is because we think there's going to be a pivot point in the Sunbelt growth story, we want to be in front of that rather than behind that. That's number one. So we think Sunbelt is going to grow. And when it turns, it's going to turn, it's going to turn pretty strong and pretty hard, I believe. So that's number one. Number two is if you look at the transaction volume across America, the coasts have been the most vibrant transaction environment. When you think about -- if you're a developer, you want to -- you need to sell your development deal you did, you'd rather not sell it in Austin today, but in fact, California has had a really decent revenue growth. So you don't have to -- buyers are not having to kind of pick the point when they think the market is going to turn and go up. It continues to be a pretty vibrant market. So those are the two main reasons. And I guess the last would be when we think about the ability to execute the transaction in a very buoyant buyer market. We also look at the opportunity to redeploy the capital not only in the Sunbelt, but also to buy the shares. And so when we can sell the California portfolio at a cap rate that's substantially less than our implied cap rate in our -- that's implied in our stock. That's what kind of drove the decision of those three things. Nicholas Joseph: And then you're marketing that portfolio, but how are you thinking about either splitting up into smaller portfolios or individual assets? Or is the goal really to sell it all at once? Richard Campo: Well, the good news is that there's lots of buyers and there are lots of different permutations of the portfolio and how it can be either done in a portfolio deal or individually. And what we're going to do is maximize the purchase price, whether it's individually or separate or combinations of thereof. Operator: And the next question comes from Jamie Feldman with Wells Fargo. James Feldman: Great. Thank you. I guess just going back to some of your guidance and the thoughts on the pickup in the second half. Can you just walk us through your thoughts on new and renewal rents and blends as you go throughout the year? And are there any markets that are more or less concerning as you think about hitting your numbers? Unknown Executive: Yes, absolutely. So what we're expecting in the first quarter is slight improvements versus the fourth quarter of '25 in both in terms of new leases and renewals, which obviously will translate to slight improvement on a blended rates for the first quarter of '26. As we go through the second quarter and beyond, we're going to have a lot more visibility because we'll start to get into our peak leasing season. And at that point in time, we'll give you some more color on exactly what we assume for new lease renewals and blends for the rest of the year. But I will tell you, obviously, included in our numbers is an improvement and is an improvement at the back half of the year, which is what I said in the prepared remarks. When I look at individual markets, as Keith walked through when he gave his letter grades, certainly we've got quite a few markets that are improving. And really, we don't have any markets that are declining. So based upon that, there's nothing that really sort of jumps out to us as a big concern. We're absolutely seeing green shoots in some of our markets that have been a little more challenged throughout last year and the year prior. So we feel like we're in good shape. But obviously, we need to get into the peak leasing season and see how the rest of this year unfolds. Operator: And the next question comes from Yana Galan with Bank of America. Jana Galan: A question on the guidance, and thank you for covering some of this in your prepared remarks, but can you clarify how to think about the timing of the 1031 exchange acquisitions? And I think some of the miss relative to the Street, maybe that you're net seller this year, but it does also sound like some of the share buyback activity is front-end loaded. So if you could kind of help me kind of walk through that. Unknown Executive: Yes, absolutely. So for the full year, when we look at California, and when I say California, I'm picking up the California sale, the redeployment of about $1.1 billion of capital into the Sunbelt, the redeployment of about $650 million of capital into share repurchases. When we look at all of that combined, effectively, we're saying it has no net impact whatsoever to 2026 guidance. When you think about timing, the anticipation is, is that California closes midyear, the anticipation also is, is that the $1.1 billion of redeployment happens in the summer months, so call that midyear as well. So there may be some slight little delays where we may sell before we buy. But we're trying to get as efficient as we possibly can on that entire process. And then when you look at share repurchases. At our stock price today, we think we're a screaming buy. And so we're certainly going to be doing the share prices earlier as soon as we can get them done. So that's how it lays out for the full year. As it comes to differential between our numbers and the Street, I really don't think a part of it is California because as I said, it's just -- it's a net neutral. Operator: The next question comes from Steve Sakwa with Evercore ISI. Steve Sakwa: You guys are obviously penciling in some development starts this year. Could you maybe just talk about your expectations for stabilized returns. What are you seeing on costs? And how are you underwriting rents today in those development projects? Unknown Executive: Yes, with the cost. Go ahead Alex. Alexander Jessett: Yes. So on a cost basis, here's the good news, is costs are coming down. We're seeing anywhere between 5% to 8% reduction in costs. But clearly, developments are still hard to pencil. And if you can -- you look at our activity in '25 and it was more muted and you look at the guidance that we have for '26, and we're saying that any starts are going to be in the latter half of the year. We do have a couple of land sites that we own, and we have a couple of other land sites that we control that we clearly could close on and could start this year. But developments continue to be a challenge. When we look at rental rates, obviously, the way we sort of think about things is we try not to look at trended too much. We try to look at what everything looks like on an untrended basis, and we're seeing really sort of in line with, call it, 5%, 5.5% on an untrended basis, which can get you up to sort of a 6% on a trended basis. Operator: And the next question comes from Alexander Goldfarb with Piper Sandler. Alexander Goldfarb: Can we just get a bit more color on the $14 million of legal expenses. And I know that you guys switched to core from a NAREIT, but still across the industry, these legal expenses, settlement political advocacy, whatever, in aggregate, is all becoming more a regular part of the business. So if you could just talk; one on the $14 million and two, how you guys are thinking about legal, political advocacy and stuff on a go-forward basis? Alexander Jessett: Yes. So I'll hit the first part. So the first part is, is that $14 million is the combined number of noncore adjustments, which includes legal and costs associated with development and acquisition activity, et cetera. But legal costs, I mean, it's well known, the legal battles that we're in the middle of and legal cost is becoming a significant number. And the good news is that it will go away at some point, right? This is some very specific actions that you guys know about. Those things will resolve itself, and we'll return to a more normal cadence when it comes to that category. In terms of how we're thinking about activation, Ric? Richard Campo: Sure. So when you think about the -- let me just talk about the political action issues, and this is a pretty simple math. So in the last 5 years, our political action activity was primarily dominated in California, 92% of our spend on political efficacy was in California. And so once we close that portfolio, the political efficacy in the Sunbelt is pretty much 0. . Operator: The next question comes from Michael Goldsmith with UBS. Ami Probandt: This is Ami on with Michael. What gives you confidence that you can redeploy the capital received from the asset sales within the 1031 window given some of the increased competition that we've been seeing and pretty low cap rates across the Sunbelt. And then if you can't redeploy it, what's the potential impact to earnings? Is there a tax implication here that you would have to pay? Thanks. Alexander Jessett: Yes. So we just came back from NMHC. And I will tell you, we talked to quite a few sellers that absolutely have portfolios, have individual assets, et cetera, that they would love for us to buy. Camden is a fantastic buyer, and sellers recognize that, because we don't have financing contingencies, because they know we're real, because we have been doing this for 33 years. So we are the type of buyer that sellers want. So I don't think we're going to have an issue of redeploying this capital and not to mention that we've got one of the best acquisition teams in the business spread across the country, tasked with doing this on a full-time basis. So I'm not very concerned about that. But I will tell you that if you look at the way we're doing our math is that we are -- there are tax consequences. And if we cannot redeploy this capital, then we would likely have to do some type of a special dividend. Operator: The next question comes from Austin Wurschmidt with KeyBanc Capital Markets. Austin Wurschmidt: Just going back to the acquisition opportunities. Just wondering the types of deals that you're looking at? Are these development deals that are in lease-up, are they mostly stabilized transactions? And then could you just also talk about some of the specific markets you're evaluating and whether there's any new markets included in that? Stanley Jones: This is Stanley. So on the acquisition front, we are evaluating -- we're already evaluating a number of opportunities across all of our markets, and those are stabilized opportunities, both on and off market. So look, we're going to continue to leverage all of our relationships to find opportunities to redeploy the proceeds from the California sales. So, like Alex said, our investment team is up to the task. We did $423 million in acquisitions in 2025, and we certainly could have upsized that if we had wanted to. So we're very sanguine about the opportunity in front of us and are already making some headway with that. Unknown Executive: And at this point, we're not anticipating any new markets. Operator: And the next question comes from Haendel St. Juste with Mizuho. Haendel St. Juste: Another one on the SoCal portfolio trade. I guess, a bit of a 2-parter. First, it looks like those assets are still in the same-store pool, and that taking them out would be about a 15 basis point drag to annualized same-store revenue forecast. So first of all, is that fair? And then secondly, if you're able to actually achieve closer to the upper end of the range that you outlined, closer to the $2 billion. I'm curious how you think about the incremental capital deployment of that if they would also be earmarked for acquisitions or any tax limitations there? Unknown Executive: Yes. So as I mentioned in the prepared remarks, the impact of California coming out of same store will be about 25 basis points on revenue. So that's how you need to think about it. Unknown Executive: And I think on the issue of if we -- if the portfolio sells for $2 billion, which we would really enjoy, we would increase the 1031 exchange pie and then probably increase the buyback. . Operator: And the next question comes from Brad Heffern with RBC. Brad Heffern: Yes, [ everybody ], demand question. There've obviously been a lot of issues with the job market for college graduates. I'm wondering if you've seen a noticeable impact on your business from that. And is that something that's a potential upside lever if that proves to be just a 2025 phenomenon? Richard Campo: The job prospects for college graduates has been -- in 2025 was kind of the worst in a decade. And if you look at the unemployment rate, for people in their -- in 18 to 24, it's at 10% right now. The other part of the equation, too, is if you look at those same -- that same cohort living at home. It's back to pre-COVID levels, meaning like in 2019 -- we're back to 2019 levels, and it was down big time over the last couple of years. So on the one hand, it is definitely a tough market for those folks coming out of school, which could be a tailwind if in fact, you have some sort of reasonable job growth in the second half of the year. And there's a fair number of folks that are pretty constructive about better job growth in '26 versus '25. When you think about the tailwinds of the Big Beautiful Bill, the tax refunds people are going to get as a result of that and kind of the wind down of tariffs and some of those other things that have been a drag on the uncertainty aspect of the economy in 2025. Because I think what happened then is right after Liberation Day, companies like us and many, many others just didn't know how to react, right? What's going to happen? And how is it going to be? And so you had this sort of hiring freeze that happened. And the question will be whether that freeze [indiscernible] in 2026 when you have a pretty stimulative construct with the economy. So I think it remains to be seen. I look at it as a potential tailwind when those -- when that demand is released because most of those people want to be on their own and run an apartment from Camden. Operator: And the next question comes from John Kim with BMO Capital Markets. John Kim: Alex, you gave the impact on same-store revenue from California in '26. I'm wondering if you could provide that same figure for '25, just to get an apples-to-apples where same-store revenue is going for your remaining portfolio? And then going forward, how do you think that impacts same-store expenses? Just to get in California really helps mitigate property taxes? What's the going-forward impact on same-store expense growth? Alexander Jessett: Yes. So if you look at 2025, the impact on revenue would have been the same 25 basis points. So it's consistent in '25 as it is in '26. If you look at expenses for 2026, it doesn't really have any impact whatsoever to our expense numbers. On a go-forward basis, you are right that Prop 13 does limit taxes, which is helpful to -- which is helpful to the growth rate in California. That being said, one of the things that we've absolutely experienced in our other markets when it comes to property taxes as they go up, but they also come down. If you look at our 2025 results, our property tax total growth was 0. And so California was up, but most of our other markets were, in fact, down. So I don't really think it's going to have that much of an impact on expenses on a go-forward basis. Richard Campo: Let me add to that. That if you take the sort of portfolio cost, and I mentioned our political advocacy group expenses in California, if you take the last 5 years -- or 6 years, say, and these costs, by the way, are not in same-store numbers. So they wouldn't be in your same-store occupancy numbers. But if you average the cost over that period of time, it's 80 basis points off of your net operating income. So said another way, if California is growing at a 4% NOI and the rest of our portfolio is growing at a 4% NOI and we said we have to subtract that 80 basis points off of California, because that's included in our corporate G&A. California really delivered a 3.2% NOI opposed to our -- compared to our rest of our country that didn't have those same kind of operating costs embedded in our G&A. So we were -- we actually -- when you look at the overall Sunbelt portfolio outperformed California by 80 basis points because of that excess cost. But it's not embedded in the NOI growth. Operator: And the next question comes from Rich Hightower with Barclays. Richard Hightower: I think since Keith brought up 2027 as it relates to Austin specifically in the prepared comments. I'm going to assume '27 is in play for this call. So maybe as we think about a lot of your core markets going forward, just give us a sense of kind of what that deepness of the recovery curve, that exit velocity, whichever metaphor you want to use, where do the market stack up in your current forecasting as we think about the end of '26 and then into 27? D. Keith Oden: So now we have to say we're not going to give the guidance for 2027, but we will talk about it, Rich. So our guidance... Richard Hightower: It's a rank order, right? D. Keith Oden: Yes, exactly. So one of the things that's kind of interesting about where we are, and it gives us some additional degree of optimism about what the Sunbelt markets may look like, not only in 20 -- at the end of '26, but into '27 and beyond is the fact that if you look at Camden's rents for properties in our portfolio that have been built in the last 5 years. We are -- as we sit here today, we are back to the rent levels that we were achieving at the end of 2021. So we are about to start year 5 of basically no rental growth. And this is unprecedented. I mean in our 35 years of doing this -- almost 40 years of doing this, we have never had a 3-year period where rents were flat to down. And not even in the GFC, not even in COVID. So we are already 4 years in. We're beginning 2026, and you see our guidance for 2026. If all this works out the way we expect it to, we will be 4.5 years down wind of basically 0 rental growth. And that's just not sustainable long term. And we've seen it coming out of the GFC, coming out of COVID. When you get a turn and a pivot that Ric was talking bout, it's not -- it doesn't go from 1% to 2.5%, because it's -- if you think about our average renter over that same period of time, our average renters wages, their actual household income has gone up an average of 4% a year over that 5-year period. So the income is up 20%. Their rent is basically flat. We've got -- so our residents are incredibly financially healthy. And when it turns, it usually turns pretty hard. So it's hard to -- it's always hard to pick that point, but it just feels like we are way, way down the trail of flat rent growth and do for something different. Richard Campo: The only thing I would add to that is that when you think about markets, we talk -- Keith gave Austin a C plus, right? And the issue there is you've got really good drop growth, but you just had a whole lot of supply. They added more than 15% of the supply in 3 years. And so Austin and Nashville are probably the ones that are a little slower to come out of the system. But all the rest of the markets are pretty much positioned for when that supply gets taken up over the next 12 months that they're going to be -- you're going to have a situation where simple supply and demand economics work. Which means that we'll have more demand and supply and rental go up. The other thing to think about is -- is that if you think about the way concessions work, right? So when people are leasing up, they get a month free, they get 2 months free if it's really tough, maximum is 3 months free, but I don't think there's not very many places where it's 3 months free. And so what developers do then or operators is once they get to the point where they don't need to give that month, they stop giving the month or the 2, right? And so what happens then -- and that's -- if you stop giving a month, that's an 8.3% increase immediately in the rent roll by eliminating one month. So that's where -- that's the Keith's point that it doesn't just all of a sudden, you go from flat to 1%, 2% growth. When you stop the concessions, it's immediately if it's a one month free, it's immediately an 8.3% increase in the rent roll on the next lease. So -- and then it just takes time to roll the leases over and get that revenue growth. So -- and that's going to happen. It's because of simple supply and demand. And if you think about -- when rents went up big time in 2021 and '22, it was a function of not enough supply and huge demand, and you had increases that were unprecedented. If you go to [ St. Pete ] for example, we had a 50% increase in rents in a 3-month period there. And the reason was we were at 98% occupied. We had a tiny number of units that were available and the market price just skyrocketed as a result of that. And that's simple supply and demand economics. And I think we have the recency effect that's going on in the market today, meaning that three years of flat rent growth, it's probably going to be another 5 years or 6 years of flat rent growth. And that just doesn't happen long term. The market will work and supply and demand economics will move in our favor over the next few years. Operator: And the next question comes from Rich Anderson with Cantor Fitzgerald. Richard Anderson: And just file this one away for 2027 on hold music Austin Powers theme song, just throwing it out there. So my question is on new lease rate growth. Alex, you mentioned you'll give an update as you get closer to the spring leasing season. But what I see from fourth quarter '24, it was negative 4.7%, fourth quarter '25 is negative 5.3%. I get it. It takes some time for these things to happen even though that was post-peak deliveries as you described it, Keith. So I'm wondering if you were to -- I think it's an important metric to get that above the kind of the 0% threshold eventually for multifamily to work again, particularly in the Sunbelt. Do you think how probable possible or maybe even unlikely is it to see new lease rate growth this year somehow get above that 0% threshold. I know you perhaps want to be careful about setting expectations at this point, but probable, possible, unlikely, what do you think? Unknown Executive: Yes. So clearly, that inflection point is very important. You're exactly right. And my belief is, is that as soon as we all hit that inflection point, I think a whole lot of generalists that have been out of our stocks are going to come flooding into our stocks, and we're all going to see massive pops. So it's just a matter of when, definitely not if, because it will occur. I think it's probable. I think it's probable that it could happen this year. Now obviously, we're going to continue to update you guys as we get each quarter's worth of activities as we see what's happening on site. But I certainly think it's probable. Operator: And the next question comes from John Pawlowski with Green Street. John Pawlowski: Forgive me if I missed, I joined the call late, but I wanted to talk a little bit about the change in the Denver regulation around utility rebilling and reimbursements and then any other income. So maybe if you could talk about for a minute, the specific legislation. And is there any other concerning draft legislation in other states or markets you're in that might drive downward pressure on your ancillary income, just given how proactive you've been over the years and with bundling services and there's a lot of -- there's a lot of non-rental income for each unit. So I'm concerned about longer-term risk to your other income streams. Unknown Executive: Yes. So we didn't talk about it in the prepared remarks, but what you're referring to is House Bill 25-1090 and yes, this is a new legislation that was put in place in Colorado effective January 1 of this year, which no longer enables us to bill for common area utilities. It is a significant item for us. The total value of this is about $1.8 million. If you extrapolate that out, that's close to 19 basis points of same-store NOI. So it certainly is an issue. It's something that we're having to account for. And obviously, we certainly do make sure that we monitor regulations that are out there. The good news is, is that most of our markets, the reason why they grow so fast is because they're pro business pro growth and obviously, putting the legislation like that in place is not pro business or pro growth. So not really worried about it in other places, but we're certainly paying attention to Denver. I don't know, Laurie, do you have anything to add? Laurie Baker: I mean I would just add, you asked about some of the specifics of Colorado. And I mean the key impacts are no hidden rental fees. So it's full transparency. We're seeing this across the country. We're all kind of mobilizing as an industry to ensure that there is transparency and that our residents know exactly what they're paying for. But in this particular Bill, the landlords have to show the tenants the full cost of renting before they sign anything, and that includes this common area maintenance and giving some estimates of what their utilities would be. And so that's some of the impact here trying to average out what you assume each renter's utilities bills will be. So that's the impact we're seeing. There are some things you are not allowed to charge back to our residents. So sub-metering is important. Because of this restriction, we have submeter all of our properties. And we did it fast and furious at the end of the year to make sure that we were able to capture as much of the information we needed. But it did eliminate any unclear utility pass-through charges and just really requires more disclosures. And so that's [indiscernible] the impact overall. And as Alex said, I don't think we're expecting in any of our other markets something similar to this, but we are closely monitoring that within Camden as well as at the industry level. And I play a big role with the National Multi-Housing Council and this is something we're paying attention to across the country. Operator: And the next question comes from Alex Kim with Zelman & Associates. Alex Kim: Do you talk about if you're seeing any difference in performance or rent growth between your urban and suburban assets and kind of your expectations through the balance of the year as well? Unknown Executive: Yes, absolutely. So it's interesting our urban assets are absolutely doing better and really starting to gap out just a little bit in terms of what we saw in the fourth quarter '25 revenue. And my gut is -- and the way we've modeled it is that's probably going to continue as we go throughout 2026. This is a sort of a turnaround from what we saw, obviously, for about 3 or 4 years. So today, what we're seeing is Class A urban is doing a lot better. But of course, it's and they got impacted worse at that point in time. So they had a little bit of gas in the tank to get back to where they were and go from there. Operator: The next question comes from Julien Blouin with Goldman Sachs. Julien Blouin: I think you mentioned you're expecting market rent growth of around 2% in markets this year. I think on the third quarter call, that was in the sort of 3% to 3.5% range, maybe 2 quarters ago, I think third parties were maybe talking more over 4%. I guess what has changed the most in that outlook to sort of drive that revision downwards? And then as we think about that 2% expectation for this year, what does that assume in terms of job growth? And sort of how do you think of maybe sort of the down case scenarios to that? Unknown Executive: Yes. So if you think about the way Ric started this call as he talked about uncertainty. And this is clearly a time of uncertainty and what all the economists and obviously, what we're doing is we're talking about what economists are telling us, what the economists we're looking at in mid-2025 is they were looking at the simple math that supply is falling off the cliff. And everybody recognizes that the last time you got to the level of the supply that we're expecting, everybody had some really, really large outsized growth. It's just a matter of when does that actually happen? And how quickly is all of the excess supply being absorbed. And so obviously, it's taken a little bit longer to absorb some of that excess supply. I think we've hit on some of the reasons earlier in the call, if you look at the hiring of May grads, that was obviously very weak. There's -- obviously, the job growth hasn't been as great as everybody had expected. And I think that's been putting some pressure on it. But back to one of my earlier comments, it's not a matter of if, it's a matter of when, it's absolutely going to occur that we're going to see this momentum come back to us, but it's just pushed back a little bit. D. Keith Oden: Yes. And just specifically on the employment growth outlook, 2025 Wheaton originally had job growth across Camden's markets closer to 350,000. That -- this is -- everybody knows that got revised dramatically down. I think he ended up the year at 170. His forecast for 2026 is 257,000 jobs across Camden's markets. So part of the head fake for forecasters and everybody that looks at this data was that 1 million jobs sort of evaporated that were reported as created in 2025 that as it turns out after all the revisions, it was not anything close to that. So some of it was probably just in the data set, people like that look at this and use the BLS statistics or we're using numbers that got revised away. So hopefully, we're on track with better data for 2026. And 257,000 jobs across Camden's platform would be a really good year for us, particularly in light of what Alex described as we got -- we're about to keep getting close to the end of this outsized development pipeline that we've had to work our way through for the last 3 years. Operator: And the next question comes from Alexander Goldfarb with Piper Sandler. Alexander Goldfarb: Just want to go back to the comments on lack of rent growth. Certainly, in the past number of years, everything else has gone up, Uber rides, groceries, everyone has streaming services, et cetera. So Ric, do you think the traditional sort of 20% rent to income still holds? Or do you think because of inflationary pressure on people's lives, plus all their other activities and subscriptions that maybe that number is no longer 20%, maybe it's something lower than that? Richard Campo: No, I don't think so. I think that, that number is still a really good number. At 20, people are very -- it's a very affordable thing. If you look at the real job growth or real wage growth over the last 3.5 years, 4 years, it's 4% to 5%. And that's real. That's after inflation, right? So the thing that's interesting when you think about -- when I think about our customers, we spend a lot of time getting -- trying to get inside their financial heads and also and what their preferences are for apartments and things like that. And you look at the -- like the forward consumer confidence numbers and stuff like that. And affordability is like the big question today. But when you look at our demographic, average income of $121,000 for our resident base. Their earnings are going up 4% to 5% on a real basis for the last 3 to 5 years. Then you go, well, what's really happening to them? Why are they unhappy? Why are they -- why is the consumer confidence at low levels. Part of it is just the psychology that you have high inflation and price everything kind of went up. And then I think the bigger psychological issue, and this gets to the overall housing market, which includes single-family for sale market. And the inflation numbers really haven't caught the -- haven't -- didn't include this kind of concept on housing. So COVID with low interest rates, and increased demand drove housing prices up dramatically. Interest rates doubled on the 30-year mortgage. So the attainability of a single-family home today is so expensive relative to what it was pre-COVID. But that's hanging on the -- I think, on the consumer's mind a lot. And so even though their financial picture is pretty good they still feel really bad about the economy and about because of this single-family house price issue and just the narrative that's going on. Because if you think about other big-ticket items like the price of gasoline. And I filled up my suburban the other day, and it was $2.17 a gallon. So even though you have food prices that are continuing to be elevated and some other costs that went up because of inflation. Gas prices are down, rents are flat. So I think it's a psychological issue that we have with American consumers today that isn't as real from a pure dollars and cents perspective, from an apartment perspective, it's more of an overarching issue. And unfortunately, that overarching issue makes people think everything is more expensive, even though their finances are pretty good. Operator: And the next question comes from Mason Guell with Baird. Mason P. Guell: Looks like your revenue enhancing and repositioning CapEx guide is down from last year. Can you talk about why this has guided lower and what initiatives you are working on in this category? Unknown Executive: Yes. So on the reposition side, it is down slightly, but you have to keep in mind, we're now -- this is something that we do every year. And we are reaching the point in time where we've done probably 70% to 80% of our portfolio, and there's a little less opportunities to be there this year. But I will tell you, I still believe this is one of our absolute best uses of capital, absolutely plan to continue to do it. And I will tell you that I have no doubt that our repositioning team is listening to this call, and they're probably very excited that somebody else is noticing all their good work that they're doing. So yes, we will continue to do this. It's a good use of capital for us. Operator: And the final question comes from John Pawlowski with Green Street. John Pawlowski: I want to go back to the development economics question. So the four properties that you have in the pipeline today on current market rents, could you give me an estimate on like where these would be yielding today? Or is it in that low -- that 5% to 5.5% range? Alex, you quoted on the shadow development pipeline. I'm just wondering how these four assets are kind of trending given the malaise in market rent growth in the last few years. Alexander Jessett: Yes. If you look at our development pipeline that we've actually put out there, it's two deals, which is Baker in Denver and Gulch in Nashville. And then what I told you is that we've got a couple of other sites that we control and those sites that we control that we could close on this year. And in fact, start this year, when I look at those sites, those returns are a little bit better. Those returns are penciling on those couple of sites to sort of call it the mid-5 on an untrended basis. Baker and Gulch are more challenging. This is why if you look at our math, originally, we had them as 2025 starts. And now I've got them as potentially late 2026 starts. So the math is -- I think everybody pretty well aware of what's going on in Denver, at least downtown Denver. It's a tough place to develop today. I do think the economics are going to get better, but we're certainly waiting to see if those economics get better before we get started. We talked about buyouts. Buyouts are absolutely coming down 5% to 8%, but maybe they'll come down a little bit more, which makes that economics better. And then I would say the same thing about our deal in downtown Nashville. Nashville is a fantastic market, but everybody knows that downtown Nashville is very oversupplied. And so we're waiting to see a little bit more clarity. And when we see some more clarity in that market and we can take a look at the economics and make sure it makes sense to start. But if we can't do it in a way that's accretive to our shareholders, we're not going to. But right now, we're patient, and we're going to find the right time to start, which is penciled to be towards the end of this year. Operator: This concludes our question and answer session. I would like to turn the conference back over to Ric Campo for any closing remarks. Richard Campo: Thank you. We appreciate you being on the call today, and we'll see you soon -- or talk to you soon, I'm sure. Operator: Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, everyone, and thank you for participating in Magnolia Oil & Gas Corporation's Fourth Quarter 2025 Earnings Conference Call. My name is Chloe and I will be your moderator for today's call. [Operator Instructions] Our call is being recorded. I will now turn the call over to Magnolia's management for their prepared remarks, which will be followed by a brief question-and-answer session. Tom Fitter: Thank you, Chloe, and good morning, everyone. Welcome to Magnolia Oil & Gas' Fourth Quarter Earnings Conference Call. Participating on the call today are Chris Stavros, Magnolia's Chairman, President and Chief Executive Officer; and Brian Corales, Senior Vice President and Chief Financial Officer. As a reminder, today's conference call contains certain projections and other forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements. Additional information on risk factors that could cause results to differ is available in the company's annual report on Form 10-K filed with the SEC. A full safe harbor can be found on Slide 2 of the conference call slide presentation with the supplemental data on our website. You can download Magnolia's fourth quarter 2025 earnings press release as well as the conference call slides from the Investors section of the company's website at www.magnoliaoilgas.com. I will now turn the call over to Mr. Chris Stavros. Christopher Stavros: Thank you, Tom, and good morning, everyone. We appreciate you joining us today for a discussion of our fourth quarter and full year 2025 financial and operating results. I plan to briefly speak to last year's results, which closed out another year of strong, consistent performance and execution showing the beneficial characteristics and merits of our differentiated business model and during a year of elevated product price volatility. Our model has allowed us to deliver strong free cash flow and cash returns to our shareholders resulting from superior asset performance and our continued focus on capital discipline, cost containment and visible efficiency improvements. I'll conclude by providing an outlook of Magnolia's 2026 capital and operating plan which is expected to deliver moderate growth with a similar level of capital spending that provides us with further opportunities to capture low-cost resource across our acreage position. Brian will then review our financial results in greater detail and provide some additional guidance before we take your questions. Beginning on Slide 3 of our quarterly investor presentation and looking at the highlights, Magnolia delivered another solid quarter and year of performance marked by steady execution of our capital-efficient business model and our high-quality assets. I'm particularly proud of our ongoing dedication and focus shown by both our operating teams in the field and our Houston staff. Their continued hard work and diligence is a significant factor behind Magnolia's success. Our business performed exceptionally well throughout the year, driven by stronger-than-expected well results, improved efficiencies, lower unit costs and our committed -- commitment to capital discipline, as I mentioned. For the full year 2025, total company production grew by 11% to approximately 100,000 barrels of oil equivalent per day with oil production growing by 4% and averaging nearly 40,000 barrels per day. Operationally, we continue to make strides in reducing our field level cash operating expenses, which declined by 7% to $5.12 per BOE during 2025. The better-than-expected well productivity we experienced during the first half of last year not only provided us with higher production growth in 2025, but also allowed us to save capital by deferring some well completions into this year. Our teams were also able to drive a more efficient drilling and completions program last year in Giddings with our average drilled feet per day increasing by 8% and with completed feet per day improving by 6%. Turning specifically to the fourth quarter, we achieved a new company record for our production, averaging nearly 104,000 barrels of oil equivalent per day and 40,700 barrels of oil per day. These both marked a sequential increase of 3% and reflected the continued strong performance from our wells. Financially, the quarter and year were equally strong and aligned with our goal of generating consistent and sustainable free cash flow through disciplined capital allocation. Our fourth quarter adjusted net income was approximately $71 million or $0.38 per diluted share with adjusted EBITDAX coming in at $216 million. Our drilling and completion capital for the period was roughly $117 million, representing 54% of our adjusted EBITDAX. Pretax operating margins averaged 33% for the year despite a more than 15% annual decline in our oil price realizations. Our low reinvestment rate enabled us to generate free cash flow of more than $425 million for the full year. We stood by our commitment to return a significant portion of that free cash flow to our shareholders, distributing approximately 75% through a combination of our base dividend and share repurchases. In total, we repurchased approximately 8.9 million shares throughout the course of 2025, reducing our diluted share count by roughly 4.5%. This not only accretes value on a per share basis, but also reinforces our business model that leads to a serial compounding of value. Our balance sheet ended the year in a position of strength, allowing us to navigate product price uncertainty and provides us with ample liquidity and a cash balance giving us flexibility to selectively pursue opportunistic bolt-on additions to our portfolio. As shown on Slide 4, our strategy is designed to produce steady mid-single-digit total production growth, high pretax margins and reliable free cash flow while maintaining a low reinvestment rate and a strong balance sheet. The strength of this model and the strategy is clear when looking at Magnolia's longer-term performance across these key financial metrics. Looking at Slide 5. Magnolia has maintained one of the lowest capital reinvestment rates among the U.S. oil and gas producers over the past 5 years, while delivering one of the highest rates of production growth per share. As shown on Slide 6, Magnolia continues to achieve strong pretax operating margins, driven primarily by our low-cost, high-quality asset base, which is also in close proximity to large consuming markets on the U.S. Gulf Coast. Slide 7 highlights the continued strength of our balance sheet, which remains best-in-class in the industry. Maintaining low leverage is a critical part of our strategy as it reduces financial risk while preserving substantial flexibility and strategic optionality. While many oil and gas operators often excel in 1 or 2 of these areas, we believe that our combination of our low capital reinvestment rate, above-average per share growth, high operating margins and minimal debt is unique, especially for a small to midsized operator. This powerful recipe allows us to generate high corporate returns, maximize our free cash flow generation and sustain our strong and consistent capital return program for shareholders. Slide 8 illustrates our corporate level returns showing 2025 as another strong year with return on capital employed ROCE of 18% and well above our cost of capital despite year-over-year lower oil prices. Over the last 5 years, Magnolia has generated an average ROCE of 34% and more than 3x our weighted average cost of capital. These exceptional returns stem from our prudent capital allocation, consistent low debt levels, ongoing share repurchase program and perhaps most importantly, our low-cost, high-quality assets. Case in point, Magnolia added approximately 50 million BOE of proved developed reserves during the year. When accounting for all expenditures to add these reserves, this resulted in organic proved developed finding and development costs or F&D of $9.25 per BOE. During the 3-year period from 2023 to 2025, Magnolia's organic proved developed F&D cost averaged $9.85 per BOE. This demonstrates our high quality and low cost of supply asset base. Looking ahead into 2026, we're committed to the principles that have guided us from the start and have proven to be successful thus far. We plan to remain fiscally prudent and disciplined with our capital spending expected to be approximately flat year-over-year while delivering total production growth of approximately 5%. As I've often said, Magnolia's primary goals and objectives are to be the most prudent and efficient to be the most efficient of our -- and our best-in-class oil and gas assets to generate the highest return on those assets, while spending the least amount of capital on drilling and completing wells no matter what the product price. Last year was another example of our successful delivery on these goals. We achieved double-digit production growth with less capital than originally planned, repurchased more than 4% of our outstanding shares recently announced a 10% increase in our dividend, our fifth consecutive annual increase and completed approximately $67 million of bolt-on acquisitions, furthering our resource opportunity set. To summarize, Magnolia is well positioned and consistently guided by the principles of our business model. Our high-quality assets and strategy of continued capital spending discipline, proactive cost management and pursuit of further operational efficiencies should serve us well during periods of product price volatility. Our consistent policy of low leverage and the lack of commodity hedges is central to our strategy, providing us with downside protection while also allowing for upside to product prices and the ability to generate value through commodity cycles. I'll now turn the call over to Brian for a review of our financials and provide some additional guidance. Brian Corales: Thanks, Chris, and good morning, everyone. I will review some items from our fourth quarter and full year results and refer to the presentation slides found on our website. I'll also provide some additional guidance for the quarter -- for the first quarter of 2026 and the remainder of the year before turning it over for questions. Magnolia ended 2025 with a strong performance across our operations. Starting on Slide 10. During the fourth quarter, we generated total adjusted net income of $71 million or $0.38 per diluted share. Our adjusted EBITDAX for the quarter was $216 million with total capital associated with drilling completions and associated facilities of $117 million, representing 54% of our adjusted EBITDAX. For the full year, adjusted EBITDAX was $906 million with D&C capital representing 51% of EBITDAX. Fourth quarter production volumes grew 11% year-over-year to 103,800 barrels of oil equivalent per day. For the full year, production volumes grew 11% to 99,800 barrels of oil equivalent per day with oil growth of 4%. During the year, we repurchased a total of 8.9 million shares and our diluted share count fell by 4% year-over-year. Looking at the quarterly cash flow waterfall chart on Slide 11. We started the year with $260 million of cash. Cash flow from operations before changes in working capital was $906 million with working capital changes and other small items impacting cash by $41 million. Throughout the year, we added $67 million of bolt-on acquisitions. We paid dividends of $117 million and allocated $205 million towards share repurchases. We incurred $469 million on drilling completions and associated facilities and leasehold and ended the year with $267 million of cash. Looking at Slide 12. This chart illustrates the progress in reducing our total outstanding shares since we began our repurchase program in the second half of 2019. Since that time, we have repurchased 81.8 million shares leading to a change in weighted average diluted shares outstanding of approximately 27% net of issuances. Magnolia's weighted average diluted share count declined by more than 2 million shares sequentially, averaging 188 million shares during the fourth quarter. As Chris discussed, the Board recently approved a 10 million share increase to our share repurchase authorization leaving 12.9 million shares remaining under our current repurchase authorization, which are specifically directed towards repurchasing Class A shares in the open market. Turning to Slide 13. Our dividend has grown substantially over the past few years, including a 10% increase we recently announced to $0.165 per share on a quarterly basis. Our next quarterly dividend is payable on March 2 and provides an annualized dividend payout rate of $0.66 per share. Our plan for annualized dividend growth is an important part of Magnolia's investment proposition and supported by our overall strategy of achieving moderate annual production growth, reducing our outstanding shares and increasing the dividend payout capacity of the company. Magnolia continues to have a very strong balance sheet, and we ended the quarter with $267 million of cash. Our $400 million of senior note does not mature until 2032. Including our fourth quarter ending cash balance of $267 million and our undrawn $450 million revolving credit facility, our total liquidity is approximately $717 million. Our condensed balance sheet as of December 31 is shown on Slide 14. Turning to Slide 15 and looking at our per unit cash costs and operating income margins. Total revenue per BOE declined 13% quarter-over-quarter due to the decline in oil prices. Our total adjusted cash operating costs, including G&A, were $10.64 per BOE in the fourth quarter of 2025. Our operating income margin for the fourth quarter was $9.85 per BOE or 30% of our total revenue. The decrease in our quarter-over-quarter pretax operating margin was entirely driven by the decrease in commodity prices and were further benefited from lower DD&A expense. On Slide 16, Magnolia continues to have a very successful organic drilling program. The total proved developed reserves at year-end 2025 were 167 million barrels of oil equivalent. Excluding acquisitions and price-related revisions, the company added 50 million barrels of oil equivalent of proved developed reserves during the year. Total drilling and completions capital was $461 million in 2025, resulting in organic proved developed F&D cost of $9.25 per BOE and reflective of our current drilling program. The 3-year average organic proved developed F&D cost was $9.85 per BOE. Turning to guidance. We expect our 2026 drilling completions and facility capital to be in the range of $440 million to $480 million, which includes an estimate of nonoperated capital that is similar to that of 2025. At the midpoint, this is similar to prior year's capital cost despite planning more wells in 2026. We expect first quarter D&C capital expenditures to be approximately $125 million and anticipate this to be the highest quarterly rate of spending for the year. Total production for the first quarter is estimated to be approximately 102,000 barrels of oil equivalent per day, which includes approximately 1,500 barrels of oil equivalent per day of winter weather impacts experienced in January. Total full year 2026 production growth is expected to be approximately 5%. Oil price differentials are anticipated to be approximately $3 per barrel discount to Magellan East Houston and Magnolia remains completely unhedged for all of its oil and natural gas production. The fully diluted share count for the first quarter of 2026 is expected to be approximately 187 million shares, which is 4% lower than first quarter 2025 levels. We expect our effective tax rate to be approximately 21%, with all of this being deferred. We are now ready to take your questions. Operator: [Operator Instructions] The first question comes from Neal Dingmann with William Blair. Neal Dingmann: Nice to see another strong quarter, Chris and team. Chris, my first question is to jump right to the Giddings play. Specifically, looking at our well data, it suggests that a number of your recent wells not only continue to outperform the type curves, but they certainly appear to be some of the best drilled to date. I'm just wondering, with that said, has there been notable operational changes? Is it more because you're in pure development for a lot of that now? What do you attribute most of this continued upside to? Christopher Stavros: Neal, thanks for the question and also for pointing it out, we did notice it as well. They're producing -- the wells are very strong. They're producing a lot of everything. And I'm not sure exactly which specific wells that you're referring to, but many of them have performed very well. I can't point to anything specific or very different in terms of the completion design if that's a little bit of what you're asking. I think what you're seeing is simply the outcome of drilling into some very good rock. And I think when we take a lot of and make a lot of effort in terms of locating the wells and placing the wells. I think there's a better than decent chance that you'll see more of this. So I -- there's nothing specific that I can say that we've changed we've just gotten better at it with time. Neal Dingmann: No, that's obvious to see. And then second question, moving over to M&A. Simply, could you discuss -- I know you look at sort of all of the above, I think, as any -- or steward would. But what we've noticed out there, I mean we've seen record prices paid for Delaware. We've seen big prices paid for PDP heavy things. I guess, sort of twofold here, what are you looking sort of at all the above? And when it comes to the Giddings around your area in particular, are we seeing prices increase there like we've seen in a lot of these other areas? Christopher Stavros: Yes. Brian put some numbers around the bolt-on transactions, acquisitions, some of the ground game that has led to some of the bolt-ons that we've done over the last couple of years. And what I'd say is that it's not predictable. But we've done a good job, I think, with that ground game in Giddings, western Eagle Ford, Karnes area, I really do expect it to continue. Like I said, it's just tough to predict in terms of the timing. The competition, I would tell you it has risen over the last year, the larger the opportunity or maybe deal size or item that you might be looking for the tougher it is and maybe the more expensive it is. But we've done a good job of better understanding the things that we're looking for in terms of the subsurface and in and around where we currently operate. I'm not and never really have been a big proponent of very large PDP-heavy deals as you're more likely to pay full value for these or even higher. I think part of that is within your question in terms of what you might be seeing in the Permian and the Delaware. I really much prefer to focus on opportunities where we have more undeveloped upside but you're generally right, the prices for acreage has climbed. I mean, we're not out there looking to build a data center anytime soon. In terms of what you're seeing for what's happening in real estate or land prices. But for all I know, we could be competing with those -- with some of those who are looking to build a data center. I just don't know but it's certainly reflected in some of the elevated levels of pricing. Operator: The next question comes from Phillip Jungwirth with BMO. Phillip Jungwirth: You called out the faster cycle times last year in the release. I was also hoping you could talk to well cost reductions and how those might have contributed to the better capital efficiency and lower F&D. And any expectations here as we go into 2026 or what you're seeing on the service cost front? Christopher Stavros: Yes, sure. We had been -- if I go back a year plus, we were looking at a standard cost of -- or the cost of the standard Giddings well as sort of maybe $1,100 a foot. And it was trending through that period up to now, maybe down towards $1,000 a foot. So I think that's sort of what we're looking at right now for a standard Giddings well, which is between 8,000 to 8,500 feet. So something between that probably gives you a reasonable estimate and maybe closer to $1,000 a foot, if that helps you. On the service cost, things are flat to slightly down into this year, but we'll see where this goes as far as commodity prices. We have regular conversations with our service partners, and we want to keep them working because they've been good partners. Most recently, this has been a tough way to make a living. I think the OFS market continue to experience some pricing pressure going through this year. And certainly, if prices for oil are $60 or below. We've locked in some of our service costs with our key providers through most of the first half of this year, and we'll be going back probably later in the spring to start looking at negotiating for things in the back half of the year and sort of close it out. But I feel as if we're in a good position and we're not looking to take advantage, but it's like I said, it's tough. And I get it but we're also in the business to make a margin as well. So things are favorable for us, less favorable for the OFS guys. Phillip Jungwirth: Right. Makes sense. And then we've seen really strong equity performance year-to-date for the sector and Magnolia. I mean, helped by geopolitical risk. So how tactical do you plan to be on the buyback? Do you view this as more programmatic as far as deploying it or maintaining dry powder to take advantage of any pull back given that we're likely to continue to see volatility? Christopher Stavros: Yes. The programmatic portion of it is the sort of 1% that we're minimally committed to as far as the way I think about it, I mean and there's -- it really does have teeth as it starts to chew into the shares outstanding and works with that sort of serial compounding that I mentioned, some of the tactical portion of it is what you saw probably for us in the fourth quarter where we underperformed, whether that was mean reversion or whatever, nothing really changed in the business, but we have the opportunity to sort of -- since we don't provide broker discretion, we sort of run it ourselves. We have the opportunity to sort of lean in or not. As things move along on the stock, it's going to be volatile. And if we see pockets of disconnect or I can't necessarily determine why that's occurring, we can lean in or not. And so should that occur again, we will. Operator: The next question comes from Peyton Dorne with UBS. Peyton Dorne: Understanding the weather impacts for the first quarter I wonder if you could just touch on your expectations for the shape of the 2026 production outlook. Is it fair to think that beyond the step back here in 1Q that we should kind of see maybe a steady growth rate through the year? Or is there any other factors that we should keep in mind kind of as we go through 2026? Christopher Stavros: Yes, more or less. I mean, you can do the arithmetic. I mean, I think we've provided you with enough information where with the winter storm impact in the quarter and sort of adding it back, what it might have looked like perhaps without the occurrence of the event. So '26 is off to a good start, and I sort of see things gradually progressing through the year, but it's a little bit heavier capital outlay in the first half of the year, certainly the first quarter. So typically, that's sort of the way the curve works for us just in terms of timing of the spend, 4Q, 1Q is a little heavier, and then it sort of tapers off in the mid part of the year. And then again, rises on the capital as we ended out or finish out the full year. But the goal would be to spend as least as possible and generate better results on growth if we can. And I'm optimistic around the outcome of the wells. But generally, I think you'll see a gradual steady progress through the year on the volumes. Operator: The next question comes from Tim Rezvan with KeyBanc Capital Markets. Timothy Rezvan: I wanted to ask about the development approach for the year. You talked about 75% of activity on multi-well pads and Giddings almost identically to your comments a year ago. Can you sort of refresh our memories on sort of leading edge, the pad template. I know there's unique pads for different regions. But are you still sort of in that 3- to 4-well package size? Why not kind of push out laterals more to 10,000 feet or above? Just trying to kind of understand what development looks like as we think about incremental efficiency opportunities? Christopher Stavros: Yes. The 3 to 4 per pad is about -- is still about right. There's no real change there. We do have some 5-well pads. We do have some 2-well pads. But generally, I would tell you, it's probably around 3 to 4 on average. And the lateral lengths will vary. I mean we'll drill, if possible. I mean, we're not trying to drill shorter laterals. We'll drill longer laterals if and when we can. And that's part of the assist that we get with a little bit of the ground game, if we can acquire some adjacent or open acreage that could assist or help us out in that way. There's opportunities to do that. We drilled wells that are 12,000, 13,000 feet. And if we can do it, we will. But on average, it's sort of 8 to 8.5. That's sort of the typical program. that I would expect to see this year not very different. Timothy Rezvan: Okay. That's helpful context. And if I could just circle back to the M&A question. You talked about some more competition on the larger side. I know there's at least 2 large packages right now in the market from public, not really in your Giddings backyard. But do you still feel the better opportunities on those sort of smaller side? Would there be interested in doing something big, potentially on that transformative side if the pricing was correct in your favor? Brian Corales: Yes. These are what I alluded to or mentioned before, probably -- not probably, they are more on the PDP heavy side, have been well developed, has sort of been through the machination of time and heavily drilled up. So you really -- you don't want to buy somebody else's decline curve. You never want to get involved with that if you can avoid it. So I'm looking for things that have untested upside or just upside undrilled acreage. And those are tougher things to be had. I'm just not looking to -- you're going to pay full value or better on this PDP heavy stuff. And so I think generally, that's what those larger things would look like. We probably also like to lean a little bit more on the liquids side on the oil side, if we can do it or find it. So I'm not averse to gas necessarily, but if we can -- if there's going to be some production that comes along with it, I'd probably prefer to have a little bit more on the oil side. The other thing, too, large deals come with obviously greater risk. And so you just want to be sure that you can manage this and if you have a good understanding of it. So whatever we're going to do or whatever going to look like, has to sort of start off with the understanding that we have a good firm view of what we're getting ourselves into subsurface-wise and whether or not we can continue to manage it going forward. So there's a lot of -- looking at old things that are being hived off by publics. It's interesting, but you just got to make sure you understand it well, and it's actually contributing to the business in a positive way fits into our model and can be accretive to the equity. Timothy Rezvan: Okay. I appreciate the responses. And if I could just sneak a quick one in. Oil SKUs has been about 39% in the back half of 2025. As we look forward, should we still expect that 39% to 40% range to hold? Christopher Stavros: Yes. The percentage is a tough one, not tough from -- in terms of what it's going to be. It's just -- I'd rather speak in terms of absolute oil, and absolute oil I expect to grow 2% to 3% this year, and it will be a mix of Giddings and the Karnes area asset, so I'm confident around that. And if we can do a little bit better, we'll see. But the percentage considering the proportion of the program in Giddings, where you -- getting on average is running very much mid-30s, 35%, 36% thereabouts. And we're, call it, like you said, 40%, 39%, 40%. It's going to be in that range. And if you were able to add an asset or a little activity that could make you a little bit oilier, we'll just sort of see. But I'm very confident that on the low end, you're not going to sort of be 20% or something odd, you're going to be in that mid-30s or 40-ish or maybe even a touch better depending on things that are available to drill and that we fit into the program. Operator: The next question comes from Leo P. Mariani with ROTH. Leo Mariani: Just obviously, strong well performance in Q4, which you guys spoke of. Trying to get a sense of whether or not that's been primarily driven by the 240,000 acre development area? Or are you seeing some contributions from some other areas? You did reference some new development areas in your release. So I was just trying to get a sense of those new areas are on top of the 240,000 acres or kind of included in the 240? Christopher Stavros: I would tell you it's included in the 240 but that's not to say that we're not looking elsewhere and have plans to go outside the 240,000 with additional appraisal this year, which we will. So I'm looking forward to that. I'm looking forward to what the results may bring, and it's been very useful helpful to us up to now, and I expect it to be additive in terms of our resource going forward. So I'm optimistic around that. But to your question around where did it come from, it's sort of historical and it's really within the 240,000. Leo Mariani: Okay. I appreciate that color. And then obviously, LOE was once again pretty strong this quarter in terms of being a low number. Just wanted to get a sense of kind of what's really been driving that? You guys have done a really good job at getting costs down. And I think from your prepared comments, I think you're still continuing to work on that. So how should we expect that to trend as we roll through '26 here? Christopher Stavros: So good question. The first quarter, obviously, we had the weather events with the freeze and there's just some extra things that need to be done to sort of compensate for that in terms of repairs and maintenance. I'm not going to dwell on it. It's not a huge deal, but you'll see a little bit of that, I believe, in the first quarter on LOE. And LOE seasonally is generally higher in the first quarter for field bonus payments, we have to pay our guys and hopefully, we pay them well. So there's some of that. So that's just seasonality. I will tell you, though, that they have done a very good job, an impressive job, frankly, in terms of bringing down costs in the field. I think we have additional things. They have some things up their sleeve that will work out in a positive way over time. And I'm confident that sort of the numbers that we're seeing in terms of continuing to trend down, I feel pretty good about it. So I think there's some additional room for improvement with some things we're working on. Operator: The next question comes from Noah Hungness with Bank of America. Noah Hungness: You guys gave a decently wide range for your '26 capital guide. Could you maybe put some color around what would push you either to the upper or lower end of that range? Brian Corales: There's not much that I can come up with that would push us to the upper -- in the current environment. So I'm confident that you're sort of in the middle part of that range or lower. We're not looking to do more and frankly, should we do better in terms of the well performance has occurred last year. We could find ourselves in a similar position where you just put off some of the spending or defer some completions or whatever, just because the performance is better. So if we can spend lower, less and have more free cash flow, that would be terrific. That is really the objective. So I'm simply giving a range really because just some of the product price volatility and uncertainty, should prices move higher and directionally higher and we see some reflation or pickup in service costs that could lead to it. But right where we are now, that's not something I'm anticipating. Noah Hungness: That's really helpful. And for my second question is just on first quarter GP&T. During the winter freeze, we also saw really strong gas prices. Is that higher gas pricing going to potentially translate into higher GP&T for the quarter? Brian Corales: Maybe slightly. We expect GP&T to be relatively similar from what we've seen over the past couple of quarters. So I don't expect too much volatility there. Could it be slightly higher? Yes, but we're not talking quarters and it could be a couple of pennies or nickels. Operator: The next question comes from Carlos Escalante with Wolfe. Carlos Andres E. Escalante: I would like to pivot real quick to your D&C cost savings year-on-year. I learned yesterday from your own Tom Fitter that you've been running the same Patterson rig since Magnolia's inception, and I thought that's just the epitome of your industrial approach. So I wonder if you can, in a very succinct manner unpack how much of the D&C cost gains year-on-year have been on as a consequence of that industrial approach to the business versus any kind of service deflation? And perhaps with your additional commentary on how much more you can squeeze via that continued repetition on the drilling side specifically? Christopher Stavros: Well, it's a very good point in observation. I mean it's running these rigs, not just one, but both consistently over a multiyear period has led to a wonderful understanding of the field, the drilling challenges and capabilities that the assets bring to us. And so not just the rig, but the crews that we have and equipment really does provide us with that further understanding and capability and consistency that I think drive some of the efficiencies that we've been seeing. So if you want to call that the industrial approach, that's fine. But it does translate into benefits with time. The crews, the people, the equipment, all of it, we like what we have. We're always looking to continue to utilize those things. But at the same time, be competitive and look elsewhere, but there's advantages to having that consistency for sure. Carlos Andres E. Escalante: That's very helpful. And as my second question and building on Noah's question. On capital, so if we exclude the 6 deferred sales that you had from '25 and then you include back the downtime from the production storm. In my mind, it stands the reason that your development capital, your maintenance capital is substantially down. I wonder if you can put maybe perhaps a number on where you see that, where you can hold your production flat? And I think that I'll add that as a backdrop, the industry hasn't been paid to grow for the past few years. So a lot of interesting things going on in the Permian Basin and the South in general with growing dynamics. So we could be trending the tide here. So wondering how you see that and if you can provide again that number on your maintenance capital as it stands today? Christopher Stavros: No. The capital is an interesting observation or point, setting aside the winter event. We're going to complete -- drill and complete a few more wells this year that is sort of embedded within the growth expectations that we have and some of that is largely fits into the program because of some of the efficiencies that we've generated over the years. But in terms of maintenance, probably -- I'm not sure -- we haven't tested it yet. So it's always hard to exactly come up with a very, very narrow range. But I would tell you, $400 million-ish feels about right, maybe a little less. Brian Corales: Carlos, maybe I'll just add, too. If you go look back in time, the last 5 years, we've spent about the same amount of money every year. Our production is up roughly 50%. We're drilling more wells each year generally, and that's driven by efficiencies. There's other things that can contribute to the decrease in total capital costs. But when you look at it as a whole, since the last 5 years has been relatively stable in terms of how much we spend on an absolute basis. And we're doing that with more production and more wells. Christopher Stavros: And factoring in the first part of your question around the industrial capabilities of the equipment and the drilling rig, I mean, all of that sort of comes together to allow that flatness, if you will, in terms of what you've seen or consistency on the capital over the last 5 years that Brian mentioned. Operator: The next question comes from Phillips Johnston with Capital One Securities. Phillips Johnston: Just a few housekeeping questions on the modeling front. I know your average working interest on some of your acreage in Giddings has moved up with some of the recent bolt-ons. So what should we assume for your average working interest for this year's drilling program in both Giddings and Karnes? And just in terms of cycle times company-wide, are we still kind of running somewhere around 28 gross wells per rig -- per year per rig line? Brian Corales: I'll start with the second, '28. I mean that may be slightly aggressive, but it's not far off depending on where we are and exactly what we drill. And in terms of working interest in Giddings, I believe we've been able to move that up from the, call it, mid, maybe slightly higher 70% range. And I would assume something in the low 80s today. Phillips Johnston: Okay. Perfect. And you guys noted some deferred well completions from '25 into '26. I think the number was around 6. So just to clarify, would you expect your tail count this year to be about 6 wells higher than the number of wells that you drill? Or should we think about the company just operating with a higher working inventory of DUCs? Christopher Stavros: No, I wouldn't necessarily -- I mean, we don't purposefully look to add DUCs necessarily. But I think you're in the range, plus or minus ballpark of the half dozen that we sort of had coming in from last year. Operator: The next question comes from Charles Meade with Johnson Rice. Charles Meade: Chris, I want to go back to the acquisition market. And I know you spoke a lot about this earlier in the Q&A, but I want to try to put the pieces together and see if I understand your thinking. When I think about the traditional oily parts of the Eagle Ford, that's going to all be PDP-heavy or almost anything would be PDP heavy. And then you think about something that has more undeveloped, which I think you said that's more interesting to you, those are mostly going to be down dip in gassier. And so am I -- and I think you said you weren't interested in gas. And so if I'm putting those pieces together, right, does that mean that you're not likely to be a really charge hard at those traditional Eagle Ford packages? Christopher Stavros: I wouldn't disagree with what you said as far as they're tough to find, but they're out there. So you just have to be -- remember, we're small. And so little things here and there can make a difference. And you just have to make the effort and poke around and we know a lot of folks. And so there are opportunities out there. You just have to set to try. The PDP heavy Eagle Ford and things like that, that you're referring to up dip, I'm not -- I'm less interested in those. It's difficult, it tends to be more scattered. There's less obvious synergies that are available because it's just sort of county to county, it's not homogenous. It's very different scattered like I said. So it's tougher to make it work as a public company. If you're private, you could do some of these things get away with it. It's not a big deal. But as a public company in terms of the way we think about things, it's a tougher way to make a living. Charles Meade: And then on -- I wonder if you could just give us a refresh on I think that there's a lot of bearishness in the ore market, but we recently saw $65. And so when you guys look at internal scenarios where you run $70 or $75 oil rig, what is the -- where does the extra cash go in your -- in the scenarios that you run? Brian Corales: On your oil comment, you're right. I mean the sentiment as we sort of got out of '25 was extremely negative. And maybe some of that is still lingering in there in terms of just available supply in the market is certainly ample oil. Personally, I've been more constructive. I think I've said this many times in investor meetings that we've had. Been more constructive on oil as you go into 2026, and then you have all these sort of geopolitical whack-a-mole events that sort of tend to pop up, and you don't know what's lurking around the corner. So those have sort of underpinned and helped, I guess, on oil just to remind everybody that 2/3 to 3/4 of the world's oil supplies and some pretty nasty places. And so it's -- that's not going to end anytime soon. The other thing, you've got other dynamics too. Global demand is pretty healthy. You've got sort of the economy that's pretty good. I'm sorry, but what your question is getting at, what exactly? Charles Meade: When you guys run scenarios at $70 or $75, where does the extra cash go? I mean does it go to more is the first thing, another dividend bump? Or is the first thing that ramp up share repurchases? Or is -- and part of that could even be, when does another rig come into the picture? Christopher Stavros: Another rig doesn't come into the picture. That's not the plan. So again, I say this again and again and maybe people don't believe me, but I mean the plan is to spend as little as we can or be the most efficient with the money in terms of drilling the fewest wells to continue to take advantage of the productivity gains that we see in the field and have some moderate growth. We're not chasing growth for growth's sake. So in a better-than-expected commodity product price scenario, we just sort of sit there, take the winnings. It's the advantage of having an unhedged outcome, if you will, structure and so we don't have any real financial risk in terms of the leverage. So we capture all the upside to commodity prices that will ultimately feed back to the shareholder and the way shape or form of like you said, and we could toggle this, whether it's dividends, share repurchase and/or just being opportunistic around redeploying some of the excess cash towards opportunistic acquisitions. So that's pretty much where the extra money would go. Operator: The next question comes from Tim Moore with Clear Street. Timothy Michael Moore: And great execution and reliable capital allocation. And I'd just like Chris comments that another rig cost won't creep into the picture. But Chris, I just wanted to follow up on just another Giddings thread. How much more confident are you in future outcomes of new wells there, bringing more net acreage into the portfolio with some higher predictability than you were maybe 18 months ago? If you kind of could add any color on your look back of EUR predrill and post-drill results for new wells in Giddings. I mean they came out a couple of percent better. Or just any thoughts on that would be helpful. Christopher Stavros: I'm very confident because of the ongoing appraisal and even where you say maybe adding to that a touch of sprinkle of exploration, if you will, in and around some of our areas. So whether it's that or some of previous bolt-ons or things that we may be working on, there is a very good chance in there will be more opportunity set to work on that will deliver the types of results that we've been accustomed to seeing. So I'm very confident around that. Timothy Michael Moore: Great. And my only other question is mean without adding another rig, like you mentioned you own, how quickly can you really lean in and slightly ramp up drilling for a few extra wells in Giddings, if later this year, oil price is somewhere around 70%, I mean, I know you were able to quickly delay, I don't know, 6 completions last year. Could you flex that much on new wells? Or do you need a lot more lead time? Christopher Stavros: I mean, we could, but we won't. It's not -- it's just generally not the direction we would take it. Like I said, we set our plan at something that is -- we view as practical and prudent in terms of what we envision with the product price scenario that is conservative. And we'd like to grow within that outcome and the moderate growth that we talked about is what the assets are capable of delivering. We're not stretching for more than that. If the outcome turns out to be better than expected, that's great, but we won't chase more growth or necessarily just respond to the product price in that way. We'll just take the money and view it as winnings and we'll deploy it to -- or we'll provide it back to the shareholder and some fashion either share repurchases, most likely. Operator: The next question comes from Zach Parham with JPMorgan. Zachary Parham: Just one question for me. And you commented on this a little bit, but you have delivered some pretty significant gains in productivity this year that's allowed you to grow production more than originally planned at lower CapEx. Do you think that higher level of productivity is sustainable going forward? And maybe comment on how much of that productivity uplift is factored into your 2026 guidance. Christopher Stavros: There's -- we pretty much take a backward look on this and look at our drilling plan. The drilling plan, I would tell you and the anticipated outcome is not very different in terms of the sets of wells that we're expecting planning to drill as far as what this year's program. So there's a reasonable chance that things could turn out better than what we're predicting. Certainly, it turned out that way last year. But you can't -- there's no guarantee I mean so -- but there is a reasonable chance that some of that will occur in certain areas. So it's a balanced program. It's designed to sort of deliver moderate expectations for volume growth and factoring in some sorts of levels of risk. But I think as I look at the risk this year, frankly, it doesn't even feel as great as it was last year and last year turned out okay. So I think the outcome will be pretty good. Operator: The next question comes from Paul Diamond with Citi. Paul Diamond: Just a quick one for me. Just talked a bit about the improvement in drilling feet per day, completion feet per day and kind of just general overall cycle improvement. I guess just trying to understand, as we look forward, how much is up in that bone is there? Take the recent trend is indicative of what we should expect over the next 12 to 18 months or say it the thought there? Christopher Stavros: Yes. I can't speak to precise estimates or a factor of improvement that's coming in the next 12 to 18 months? Is it likely to improve? Yes. gradually, yes. And some of that is some of the -- what I mentioned in an earlier response, just the consistency and understanding of not just where we're drilling, how we're completing and the experience of not just the equipment but the personnel that are driving the effort. So as you understand more, you unlock more efficiencies with time, so I do expect that to gradually improve. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good evening, everyone. Welcome to TSKB's 2025 Year-end Financial Results and 2026 Expectations Webcast. Our presentation will start soon and will be followed by a Q&A session. Today's presenters will be Ms. Meral Murathan, Executive Vice President and Sustainability Leader, responsible for Financial Institutions and Investor Relations, Development Finance Institutions, Treasury, Climate Change, Sustainability Management and Treasury and Capital Market Operations; Mr. Can Ulku, Head of Financial Institutions and Investor Relations. Meral, madam, the floor is yours. Meral Murathan: Thank you, Jos, and good evening, dear participants. Welcome. Thank you for joining our financial results webcast by the end of 2025. On this call, we are also going to disclose our 2026 expectations and guidance by the end of our presentation. The first slide, where this demonstrates our year-end performance versus our guidance figures, we are glad to see that our realizations are well aligned with our projections. We did actually commit to our growth strategy and development mission throughout the year. On the top of $1.5 billion of loan disbursements during the first 9 months of last year, we disbursed nearly an extra $500 million of cash loans to Turkish economy during the last quarter. As a result, we closed the year with 11.2% of FX-adjusted loan growth as we guided. Our core net interest margin expanded during the year, whereas the security side had a constant contribution throughout the year, driven by our strategic asset management and our relatively resilient loan spreads, which stayed solid against even the market competition, we delivered 5.6% of net interest margin, which actually over beat our guidance figure. To remind, fees and commissions are generated from mainly 3 business lines of the bank, and we could name these like corporate finance, advisory and noncash loan operations. On advisory and noncash loan operations front, we have successfully realized our targets. In terms of corporate finance activities, last year was a bit muted as communicated with yourselves during previous webcasts. As a result, we ended up 17% below the 2024 year-end net fee income, which will actually translate into a low base for this year, where we project more favorable backdrop for capital markets. Our 29.3% cumulative ROE continued to be an example of the highest ROEs in the industry, as you will recognize. And 2025's strong earnings performance was mainly driven by consistently solid NII generation, strong collections both in the Stage 2 and Stage 3 and also participation income contribution. And on top of that, pre-provisions gradually being released amounting to TRY 950 million throughout the year. Still, we would like to note that we have TRY 1.1 billion free provisions in place to support our revenues throughout this year. Had we released the rest, the subject figure during last year in 2025, our ROE would have been at around 32%. On the efficiency side, OpEx growth was in line with the sector and above the average CPI as guided. To remind, main driver of OpEx is human resources expenses. Consequently, our cost-to-income ratio was flat on a quarterly basis, standing at 17.1%, which is still the lowest in the industry. Superior solvency ratios, which are well above the market was driven by our consistent and robust profitability. We are gladly closing the year with 20.3% capital adequacy ratio and 19.2% Tier 1 ratio, excluding the BRSA's temporary measures, while also achieving a more than 11% of FX adjusted loan growth in addition to more than 20% of Turkish lira depreciation. Our asset quality front, we booked a large ticket NPL, which was transferred to Stage 2 during the previous quarters. As a result, the NPL ratio rose to 2.4%, which is particularly in line with our guidance level. In addition, the problematic loans representing Stage 2 and 3 in the total loan book stood at around -- at actually 9.6%. Given this inflow, the cumulative net cost of risk, excluding the currency impact was read at 55 basis points by the year-end, again, aligned with the expected figure. To note, we do not foresee this shift to turn into a trend market position. Next slide shall deep dive into the last quarter's developments. Our new cash loan disbursements supporting Turkish economy reached almost $2 billion, given the accelerated FX loan growth during last quarter, bringing our FX-adjusted loan growth to 11.2%, as mentioned. And the main finance areas with the sustainable development focus were renewable energy projects, energy storage investments, renewable energy resource area projects, capacity investments in manufacturing sectors, along with the restructuring of the earthquake affected regions and inclusiveness focused projects. With the climate finance funding agreement signed under Ministry of Treasury and Finance Guarantee with KfW amounting to EUR 250 million. And the partial credit guarantee facility guaranteed by IBRD with the counter guarantee of the Ministry of Treasury and Finance secured through certain FIs in the amount of EUR 300 million. The total DFI funding represented to be $1.1 billion, which has been a record year. And when we include this syndication facility, Eurobond issuances, both in benchmark size and certain private placements, total funding reached to a level of $1.8 billion. Our distinguished profitability where NIM stood at 5.6% and ROE at 29.3% continued to decouple from the sector. Given our long-term nondeposit funding base, lease sensitivity to Turkish lira interest rates as well as strategically positioned investments in securities portfolio and also loans via our asset and liability management, our profitability figures continues to stay resilient enough. As we have just noted, we have been gradually reversing our free provisions with 4.5%. Still, we have one of the highest coverage ratios at an additional TRY 1 billion pre-provision stock in Turkish lira terms of core stock as a buffer and a contributor to our profitability going forward this year. Being committed to expand fees and commissions to income to support banking revenues, we have successfully closed 165 advisory projects in diverse sectors and have performed well on noncash loan business as well. And last but not the least, our comfortable solvency buffers enable us to stick to our growth strategy and meet our targets. Capital adequacy ratios supporting our internal capital -- supported by our internal capital generation capacity shall continue to stay well above the regulatory and sector levels going forward. This slide depicts quarterly and yearly earnings performance year-on-year and quarter-on-quarter earnings performance and the superiority in return on equity of the bank. Thanks to our business model focusing on investment loans, TSKB's profitability decoupled positively from the sector for the last 3 consecutive years, which translated into above market levels of ROEs. Posting TRY 2.1 billion of quarterly income, TSKB reached a cumulative year-end figure of TRY 11.4 billion with 12% year-on-year pickup in 2025. Quarterly net income dropped by 25% versus the previous quarter, given the high provision cost incurred as explained. Having said that, please note that we have not been affected by the tax adjustments as a sector due to our banking model. To remind, approximately TRY 1 billion of free provisions were reversed during the year with TRY 200 million extra resolved during the last quarter. The remaining free provision stock amounting to TRY 1.1 billion is going to support our revenues within this year, we do plan gradually reversing them with a cautiously optimistic approach. With the sustained earnings quality, the bank delivered a cumulative ROE of 29.3%, which was going up to 32% when the remaining provisions were totally released. The performance has been in alignment with our guidance levels. On this page, I would like to go into more detail about the P&L items and explain the main developments of the last quarter, particularly. Bank's NII, including the swap cost, continued to expand marking a surge of 22% year-on-year and 7% quarter-on-quarter. Behind the strong top line generation, loan spread was solid during the year, and we have started to reap the benefits of our leverage security investments in a timely and front-loaded manner. To note, our swap book expanded by 50% quarter-on-quarter as we allocated some excess liquidity opportunistically. However, our total swap cost stayed almost unchanged compared to the previous quarter. Moreover, TRY 844 million of CPI linker income was booked during the last quarter, surpassing in total TRY 3 billion, again, on a cumulative basis. The adjustment from 30.8% of our previous assumption to realized figure of 32.9% added an approximately TRY 200 million extra interest income. Trading line showed a surge of 74% year-on-year and 365% quarter-on-quarter basis. Substantially increased valuation gains from our private equity funds, including Turkey Green Fund, also contributed this performance. To remind, we have invested into one important project during last year in TGF, and we continue investing further, which will expand its contribution to our revenues going forward. On the fees front, the cumulative year-end performance was below our projections due to the market conditions, which has been communicated as such so far. Over this low base, our aim is to generate a substantial growth during this year with the increasing activity in the capital markets on which we will touch upon on the guidance page going forward. Other income includes TRY 200 million of pre-provision reversal where the cumulative amount reached almost TRY 1 billion on the top of strong collection performance within this year. As a result of resilient top line in tandem with the contribution of provision reversals and strong collections, banking income picked up by 37% compared to the previous year, whereas the quarterly figure was up by 23% on a quarter-on-quarter basis. Cumulative OpEx were up by 53% year-on-year, where the quarterly figure was also up by 20% compared to the last year -- the previous quarter, sorry. Quarter relief was mainly driven by HR side, human resources side in addition to expenses related with the 75th year anniversary of our bank. The trend is fully aligned with our projections and in line with the banking industry. It is certainly going to be gradually normalized by time with the improvements in the inflation front. Net banking income continues to expand by 34% year-on-year. To note, it is also up by 23% on a quarterly basis. Due to the last quarter's loaded provision costs, the cumulative and quarterly provisions are up by 400% levels. As a result, the total coverage surged from 3.6% to 4.5% quarter-on-quarterly change. Our income from participations continued to contribute to the bottom line with nearly 8% yearly and 20% quarterly increase. Unlike commercial banks, we do not have any promotional expenses or fixed assets and used to have a consistently stable effective tax rate. Therefore, we haven't seen any negative impact from the withdrawal of the regulation regarding the inflation adjustment. Consequently, the bank posted a net income of TRY 2.1 billion during last quarter, which is cumulatively up by 12% on a year-on-year basis. On this slide, we will touch upon our well diversified and long-term funding structure in a bit more detail. As discussed, loan agreements with the DFIs remain to be the main source of the bank's funding pool and continues to dominate our liability base. 2025 has been a record year for TSKB in terms of FX funding activities. We signed 6 new loan agreements throughout the year through the contributions of MDBs from various and different regions. In addition to the loan agreements signed in the first 9 months of the year, we've been marking the very first collaboration between TSKB and OPEC. And also the rest of the DFI agreements were to be during the first 9 months like OPEC funds, AIB, Development Bank and EBRD. In December, we have signed a new loan agreement in the amount of EUR 250 million with KfW as discussed, which support the climate finance team investments and also strengthen the economic cooperation between Turkey and Germany. This year also marked another first for us. We secured an RBR partial credit guarantee loan with the inclusion of financial institutions totaling to EUR 300 million. It's been a very debut transaction for us given the structure type. And as a kind reminder, we have implemented an assessment tool, actually created an assessment tool and implemented this for being the first of its kind. And the tool not only identifies and measures climate-related risks, but also provides a tailor-made recommendations and suggests actionable steps to our clients. So this will basically enable firms to make informed investment decisions that foster a sustainable and climate resilient transformation. Please also note that the 100% of the DFI funding obtained during the year has been under not guarantee, Ministry of Treasury and Finance Guarantee. On top of the DFI agreements, as discussed, TSKB was quite active in Eurobonds and private placement markets and syndicated loans and bilateral loans too. Thus, total funding from DFIs and FIs reached to $1.8 billion in a record size, which enhanced, of course, our liquidity buffers even further. To note, we have also currently by the end of the year, $982 million worth of nondrawn DFI funding, which are all guaranteed with the teams basically indicating the contribution to climate and environment and inclusiveness. Our strong liquidity position is very well reflected also by the FX LCR ratio, which is around 58% as of the year-end. This strong capacity shall certainly support our growth targets for the future. And going forward, we will be very proactive in new team development as discussed within the scope of climate mitigation adaptation, new incentive mechanisms and by the Ministry of Industry and Technology and also job creation, while also scaling our multilateral and bilateral FI funding activities. This slide is talking on the bank's healthy growing asset composition. Total assets as of the fourth quarter have reached TRY 326.7 billion with an increase of 7% compared to the third quarter and nearly 41% on a yearly basis. In line with our business model, assets mainly consist of loans with a share of 72%, followed by a strategically managed securities portfolio with a share of actual limited share of 16%. Consistent with our growth targets for 2025, total loans have expanded to nearly TRY 236 billion, reflecting an FX adjusted growth rate of 11.2%. With this realization, the 3-year average growth rate of the bank has been nearly at around 10%. The currency breakdown of our loan portfolio is, as you know, primarily in FX terms, accounting for 94% with Turkish lira loans comprising just 6% of the total loan portfolio. In terms of currency composition of the loans, the preference changed in favor of euro-denominated loans during the year. As a result, the share of euro loans reached 52.9% from nearly 42% compared to the previous year. We could say that these are well adjusted and secured on the funding base as well in terms of the currency breakdown, currency denomination breakdown. When we look at the types of loans in our portfolio as a development bank, investment loans corresponded to the largest portion, representing 81% of the total book. As such, we would like to kindly remind that the bank's loan growth targets were not adversely affected by the FX loan cap and some other relevant temporary regulations to this end. Our target is to continue our focus on sustainable development investments and expand our loan book by another low-teen figures going forward, which we will be explaining on the guidance page. And we do not foresee any change in the balance sheet composition either in terms of loans and securities and subsidiaries. We will continue with the details of our loan book on this slide. In the final quarter of the year, we continue to maintain our strategic focus and our development-oriented lending activities to support the economy. During the last quarter, cash loan allocation surpassed $1.9 billion, fulfilling our $200 billion -- sorry, $2 billion of year-end target, which corresponds to low teens FX adjusted loan growth for the year, meeting the year-end guidance. Within the total disbursements made last year, energy generation projects had the largest share by nearly 20%. In the outstanding loan portfolio, electricity generation loans contribute to the largest share with nearly 30%, of which 94% is allocated to renewable projects. To note teams such as inclusive reconstruction of the earthquake affected region, hybrid renewables and distributed solar power plants are tracked under their respective sectors such as metals and machinery, chemistry, plastics as such. And in both outstanding loan portfolio and disbursement graphs, as you could see on the slide. Again, in line with our long-term targets, SDG-linked loans continue to account over 90% of the total loan portfolio with the teams in the new loan disbursements standing up such as renewable projects, including storage investments, transformation, green transformation investments, circular economy projects. We are also enabling technologies efficiency -- energy efficiency projects and capacity increasing investments in manufacturing industry have been also important. Regarding project finance loans, renewable energy resource areas and certain infrastructure projects were also with us. Throughout the year, we monitored our net zero PET and performance temperature scores very closely. In that sense, last year has been a year of first. In the first quarter, we extended our first transition loan to a cement company. In the second quarter, our first project finance deal in agriculture benefiting from geothermal energy was also dispersed to enhance access to sustainable and safe food systems while also promoting women's empowerment. During the third quarter, consistent with our important role in financing Turkiye's renewable capacity, we signed 2 major renewable energy loan agreements as well as energy resource area project amounting with project amounting with a blue chip company actually. And in the fourth quarter, we financed the capacity enhancement investment of one of the largest renewable projects in Turkey. Going forward, TSKB will continue to support Turkey's sustainable development with investment focus on required areas as transition and mitigation, valuable job creation, inclusiveness and climate adaptation as well as the contribution to the earthquake affected areas. This slide shall focus on the bank's asset quality. With 9.6%, our bank's total problematic loans ratio continues to remain below 10%, which is the lowest in the sector. Despite the 2 files were transferred to Stage 3 during the last quarter of the year, NPL ratio still remained below the year-end guidance of 2.5%. Additionally, one single file was transferred to Stage 2 during third quarter. We always find it beneficial to highlight that the number of Stage 2 and Stage 3 loans are all -- are very low actually and will continue to be low in TSKB's portfolio. And all of them are already in operation, and these are also belonging to well-known groups or companies. We would like to also note about our collection ratio. Our collection ratio has been hovering around 90%. In addition, 100% of our Stage 2 loans and 33% of our NPLs are restructured. Thanks to our qualified human capital, we have the capacity to monitor these loans very closely and to conduct periodic and ad hoc analysis. And the provisions were increased in each loan group in the last quarter of the year. There have been also a considerable lift in the Stage 3 provisioning further to a single large filing as mentioned. Moreover, with the additional increases in Stage 1 and 2 coverages, the total coverage ratio of the loan portfolio went up to 4.5% from the last figure of 3.6%. This is still well above among the peers in line with the bank's prudent approach. In the fourth quarter, we reversed TRY 200 million free provisions following our reversals in the first and the third quarters. This all adds up to a total reversal of TRY 950 million in the last year. Bank's total free provision stock to remind, is at TRY 1.1 billion by the year-end. Consequently, the bank's currency adjusted net cost of risk was recorded at 55 basis points. For this year, for 2026, we would like to underline that we are not exposed to any trend in the base case scenario. We expect to maintain our NPL ratio and net cost of risk levels as reflected within this year, but we will explain it on the last slide. On this page, you can see our security portfolio in a bit detail. In the last quarter of the year, the share of securities book has slightly decreased to 16% of the total assets, while the composition of the portfolio has changed in favor of Turkish lira and fixed assets compared to the previous year. Share of Turkish securities in total portfolio remains to be above 50%, while the size of the total securities portfolio surpassing TRY 52.5 billion. As a result of our strategic management, we have been gradually decreasing the share of CPI linkers and investing in high yield fixed income notes as well as floating rate notes with higher spreads. October and October inflation was realized at 32.9%, which was a bit slightly above our assumption of 30.8%. As such, we booked TRY 844 million CPI linker income, and this was actually up by 32% quarter-on-quarter and making the whole year total amount reading at TRY 3 billion. To note, our October and October 2026 CPI assumption is 24.1%. In this year, we will continue to closely monitor the markets and continue to strategically manage the securities book to support our income base. Next slide focuses on our successful and structurally sustainable NIM performance throughout the year. We generated strong and resilient net interest income throughout 2025, thanks to our robust loan spread and front-loaded strategic asset management despite the increased market competition. The net interest income, excluding CPI and swap costs amounted to nearly TRY 4.5 billion during the last quarter, which corresponds to a cumulative increase of 35% year-on-year and 10% quarter-on-quarter. CPI linker income for the whole year, as mentioned, reaching to TRY 3.1 billion showing a year-on-year drop of 40%, driven by the disinflationary backdrop. This has been well justified by shifting the securities portfolio from CPI linkers to Turkish lira reference notes and floating rate notes. Swap utilization also picked up in the last quarter opportunistically and total swap costs have been almost flat still during the year and year-on-year basis. As a result, our strategic balance sheet as a result of our strategic balance sheet management, bank's annualized NIM realized at 5.6%, well above our year-end guidance of 5%. The slight quarter-on-quarter decrease reflects a lower CPI impact of 0.9%, while core NIM was sustained at 4.7%. We expect FX-adjusted loan growth to continue in this year, and this shall further contribute to NII within the year 2. And we could see some tightening in the loan spreads and the effect of the CPI linkers could come, but we will explore on this on the last slide. Slide, which you see on the screen, focuses on the bank's solvency metrics, which are beyond sector average, reflecting comfortable buffers against partly market volatilities and potential regulatory changes. In line with the year-end guidance, the bank remained on track to achieve its growth targets for the year, maintaining a clear focus on capital efficiency, delivering risk-adjusted returns and upholding a strong balance sheet. Our capital adequacy ratio moderated by 150 basis points compared to the previous year, mainly reflecting loan growth and higher risk-weighted assets, while the credit risk increased in line with growth and net profit remains resilient and still remaining above the sector average. In the last quarter of the year, without the temporary measures, bank's Tier 1 and capital adequacy ratios stood at 19.2% and 12.3%, respectively, well above the sector and regulatory requirements. Entering this year, the bank maintains a solvency buffer while contributing to the growth scenario and standing out favorably still against the peers. Strong capital adequacy continues to underpin again, our long-term growth strategy while resilient asset quality, above sector loan coverage and sustainable earnings generation further reinforces our sustainable solvency profile. As a reminder, the bank holds EUR 1.1 billion in free provisions. When adjusted for this amount, both Tier 1 and total CAR will increase by an additional 40 basis points. Last but not the least, we would like to conclude our presentations 2025 part with some highlights on sustainable banking. By the end of the year, SDG-linked loan disbursements have exited $7 billion and with a 2030 target of out of $10 billion. And meanwhile, our climate and environment focused SDG loan disbursements have reached to $1.7 billion, positioning us well to achieve our $4 billion target by 2030. During last year, we continued to prioritize both environmental and social development, operationalizing 2 focus areas, as discussed, adaptation finance and huge employment. And for each team, we develop internal toolkits to analyze our clients and clients' portfolio and increase our technical capacity and knowledge base as well. Since 2013, our bank has consistently reported to CDP, carbon disclosure projects, and reflecting a long-standing commitment to climate action and transparency. This sustained approach actually has resulted in our inclusion in the global A list for climate change and water security, while 2025 also marks our second reporting year for the forest team. In parallel, our sustainability performance continues to be recognized globally and along with external benchmarks. Our bank ranks at 39th overall the Corporate Knights Global 100 Index and List and is positioned first among 4 international banks while being the only Turkish FI represented on the list. Looking ahead, we remain committed to supporting Turkey's sustainable development by delivering innovative financial solutions and advisory services and while also advancing green and social investments and transformation. On the last slide, you can see our guidance figures and key differentiating areas that will continue to stand out relative to sector in 2026. Having achieved more than 11% real loan growth in the previous 3 consecutive years, the bank is committed with its sustainable development focused growth strategy. Our aim is to continue low teens real growth rate in 2026, too. The main focus areas will be as discussed, climate fund finance, such as circular economy adaptation transition and so on as well as renewable energy, including hybrid and consumer investment, storage systems, advanced enabling technology projects, efficiency, energy efficiency infrastructure and inclusiveness. With our earlier communications, we have pointed to a normalization in our profitability in accordance with the improving macroeconomic indicators. As very well known by the analysts and investors community, ourselves, TSKB is able to generate an average ROE above its cost of equity in the long run due to its distinctive business model. Our long-term funding base dominated by DFI sources also enables us to generate robust net interest margins. And in 2026, we expect our NIM to be normalized to 4.5% levels. The estimated contraction will also be driven by declining years of CPI linkers, which is not a unique case for our bank. To remind, we have been mitigating this situation, opportunistically shifting our strategy of the bank investing in Turkish lira on fixed bond securities. 2026 outlook is foreseen more favorable compared to the previous year in terms of capital market transaction, given 2025 low base for corporate finance fees and we basically estimate realizing at least 50% of yearly growth in this front. We believe this is achievable for net total fees and commissions income going forward. On a network basis, we will also continue to fill our targets in advisory and noncash business lines, too. Our distinguished and efficient business model enables us to deliver ROEs in the good level of ROEs in the sector. As such, we are expecting 2026 ROE to be around 25% levels. The operating expenses of the bank is mainly driven by human resources costs. To note, we expect actually our yearly growth to come down gradually with the improving backdrop in a couple of years. So our 2026 guidance will probably exceed the average inflation. Despite considerable loan growth guidance in alignment with our strong internal capital generation, both CAR and Tier 1 ratio are at record levels of the last decade. While expanding our loans, we will maintain our sustainable profitability and continue to generate solid internal capital. And as such, our estimated targets of CAR is around 19% and 14% Tier 1 ratio and -- sorry, our estimated target for CAR is around 19% and for Tier 1 ratio, it's going to be 18%, still above the sector levels. On the asset quality front, we do not foresee a deterioration as discussed in the risk profile or based on any specific sector. As 2026 guidance, we maintain our 2.5% NPL ratio and further to this 50 basis points of net cost of risk target. Operator: This ends our presentation. We will now start our Q&A. [Operator Instructions] We have 2 questions from Sadrettin Bagci and [indiscernible], which are similarly the same question basically. Do your 2026 ROI guidance include any free provision reversals? Yes. We will gradually keep the free provision reversals in 2026. Therefore, yes, our guidance includes these reversals. [Operator Instructions] Meral Murathan: So Sadrettin actually has question, meaning a very brief macro framework. Actually, we have not touched upon that but no problem. We could elaborate on this one. Actually, we could say that the general growth still continues to be under some limits, but still for this year, we estimate a 4% of GDP growth. Still we anticipate a growth, meaning in comparison to 3.3% of last year, 2025. And how we are going to operate in the inflation figure, we estimate that 24% will be the year-end. But on an average terms, we anticipate 27%. And also, we do continue the CBRE, as you mentioned, the rate cuts. The year-end figure is estimated to be under 30%, but currently, we anticipated around 27%. And we still continue -- we still expect the continuation of the real appreciation of Turkish lira and also in terms of the general macro levels, in terms of the current account deficit over GDP, we do not anticipate any substantial changes given where we've landed. And also this well with the noninterest income, public stock, noninterest over GDP. And also, we do not anticipate big changes in relation to the budget deficit or budget balance, let's say, compared to the last year's figures. So overall, we do not expect substantial shifts from the policy implementation, actually no shifts from the policy implementation. And in terms of the base case scenario, we do not actually price in certain elections, et cetera. [indiscernible] has a question. I do read it. Can you give more details about the funds you invested, revaluation gains are being recorded in trading gains? What are the areas of investments regarding these funds? And how is the revaluation dynamics working out? Actually, what we are talking about is mainly the Turkey Green Funds investments. And these investments -- investment actually was executed last year for a fishery. And we've been seeing -- as you know, the fund is in dollars and FX denomination basically. And this FX denomination creates also FX valuations on the revaluation front. And also, of course, the market valuation of the investment itself happens to be the case. So overall, in accounting terms, for some portion, it's been meant to be in the trading gains. If you have further questions, we could give details around this, if you could reach us. And we have another question by Sadrettin Bagci. Any restrictions for a fixed loan growth rate on your side due to recent amendments? Actually, TSKB is immune to these changes, not that we are excluded, but through the certain vehicles like we have been -- we are investing in investment loans, the green transformation. We have incentive mechanism implementations through the public and also the DFI funds that are secured under motor guarantee, we are immune to these changes. So as observed last year has been another growth year with us. And for this year, it's the base case. And last but not least, we have another question by [indiscernible]. Is there any restriction in terms of your funding agreement not to place any loans in defense sector? I could not see the defense sector in your loan mix. Actually, this is not within our mission and vision. So we are basically operating in, as you know, sustainable development focus. It's not a priority agenda with us. Operator: No other questions. Dear speakers, back to you for the conclusion. This concludes today's webcast. Thank you for your participation, and we wish you all a nice evening.