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Jukka Miettinen: Good afternoon, everybody. Welcome to discuss Neste's Q4 results that were published this morning. My name is Jukka Miettinen. I'm VP for Investor Relations at Neste. Here with me, we have our President and CEO, Heikki Malinen; and our CFO, Eeva Sipila. We are referring to the presentation that was launched today on our website early this morning. In the presentation, we will go through the key highlights, for example, our Q4 financial performance and the status of our key focus areas, including the performance improvement program and the progress towards our financial targets. We will be also discussing the key regulatory developments, key opportunities and uncertainties in the market as well as the outlook. We will have time for discussions with all of you. And please pay attention to the disclaimer as we will be making forward-looking statements in this call. With these remarks, I would like to hand over to our President and CEO, Heikki Malinen. Heikki, please. Heikki Malinen: Thank you, Jukka. Good morning, good afternoon to everybody. Welcome also to this call on my behalf. Really looking forward to discussing with you about 2025 results, the last quarter and also how this year will work. Okay. So let's start with a couple of slides here. First, I want to show you -- I want to start with discussing the key figures. But before I do that, let me just make a few comments to provide you with a bigger picture on how I see the situation at Neste after having been in charge of the company now for a bit over 1.25 year. I think overall, if we look at 2025, we had a good year. We have been able to achieve a financial turnaround compared to where we were just a few years ago. I'm very pleased about the fact that in 2025, all of our businesses performed better. Each of them had their own successes. I want to highlight in the area of RP, specifically that we were able to increase our volumes from 3.7 million to 4.1 million tons of sales. In OP, I'm specifically pleased by the operational performance of the Porvoo refinery. If you look at the utilization of the OP business, which is mainly Porvoo, we achieved 90% at the -- in the fourth quarter, which actually is one of the best years we've had operationally in Porvoo's history. And we were luckily, of course, then able to capture the cracks -- spike in cracks in the fourth quarter. Marketing and sales, we rarely talk about that, but still, they were able to improve their results by 10%, and they actually launched some very exciting new retail concepts here in the Finnish market, which have been received very well by retail and business consumers. We also met our financial targets for 2025. I was especially pleased that the performance improvement program, that Eeva will go through in more detail, performed really well. In fact, it performed better than I expected. I've done a number of these during my career, and I was really positively surprised how well the Neste team delivered on multiple areas very systematically, quickly and very efficiently. So a big hats off to the Neste team for what they did. On the regulatory front, the year was filled with all kinds of rumors and expectations. But in the end, I think the tailwinds are supporting Neste, both in Europe, gradually in the United States as well with the RVO. And then we're starting to see initial green sprouts, so to speak, when it comes to SAF in Asia. And last but not least, I think overall, where we are today, we have a good foundation then to perform better in 2026. But then looking at Neste in a bit more detail, I always start with safety. This is the #1 subject here in the company. Every meeting starts with safety. On the left-hand side, you can see our total recordable injury frequency rate. This really is people safety calculated on a per 1 million tons -- we were -- 1 million hours worked. We were able to reduce it a bit. We have a long way to go here. I think we have all the means and tools and skills to bring this down. We just need more systematic and discipline. But I'm not happy with the number. We can do much better. On the right-hand side, we see process safety, which in the past has been pretty tough for Neste in some areas. But overall, if you look at last year, we made good progress. We are not yet at first quartile, we need to go lower, but still, I'm very pleased with how the year ended. 0.9 is a big improvement from the past. And one piece of information, which is not shown in the slide, but which I want to mention specifically is that in the Rotterdam capacity growth project, our expansion, we actually have had a very good safety year as well, good progress. And considering how large and undertaking Rotterdam is, and we have thousands of people on the site, so far, we've done well. Of course, the work continues. Then a few numbers from last year 2025. Our comparable EBITDA was EUR 1.683 billion, over EUR 400 million improvement vis-a-vis the previous year. I was very pleased with that. On the other hand, you can see the term. The sales margins on renewable products, $411 per ton. We were impacted by the term deals from the fourth quarter of 2024. They did impact that number in the second half. And in the final quarter, we saw prices rise, but we did have that overhang as we often do when we term a part of the business annually. And then on the right-hand side, maybe I want to highlight the SAF volume. We doubled it to 867,000 tons, pretty much, I would say, at a level which is sort of reasonable given the amount of volume being sold overall. As we know, the renewable -- let's say, the SAF mandates have not risen as rapidly as we had hoped, but still over 800,000 delivered to our customers. Then on the fourth quarter, our -- shown on the bottom left-hand side, our EBITDA for the fourth quarter was EUR 601 million. We had a very strong finish to the year on multiple fronts. As I said, all of our businesses performed better than the year before. And so of course, we're very pleased with that. Free cash flow in the last quarter was exceptionally strong, EUR 809 million. Eeva will talk about the balance sheet further. I think overall, I can say as far as the balance sheet is concerned that, that 40% leverage that we set at the beginning of the year as an absolute cap, well, I think looking at the number, we can say that we're clearly now in much better shape than we were in the past. Maybe [indiscernible] we're in clear waters, but clearly, the direction of travel is very positive. So good on that front. The work continues, of course, into this year. We have a number of major things we are working on. The performance improvement program, as discussed already, and Eeva will go through in more detail, delivered EUR 376 million. So we actually achieved, on a run rate basis, more than what we had set out as a target for the 2-year program. So we've really done extremely well. What I want to do here is now that we will report to you -- we're actually going to continue this program for another year, for '26, and then we will, in '27, move more into continuous-improvement type of a mode. We are not setting new public targets for this year, but we will continue reporting to you on a quarterly basis how the work continues. What I can say is that after having observed the work for 1 year, I see there's still good potential to raise that number even more. So you will then get reports on a quarterly basis, and we'll then see where we end up after 2026, what the total final tally is. Rotterdam is a big undertaking. I go there almost every 6 weeks. During my last visit, I was impressed by the good work people are doing there. It's very, very busy, very intense, a lot of people there. They're making good progress. But as I said, 2027 is then the big year for the startup. And then finally, operationally, we continue to work to increase our own production to make more advancements there and also to be commercially successful. And then, of course, gradually get ready for the Rotterdam launch in '27. So those are some topics on the agenda of the company. We will be happy to discuss these with you in a moment when we get to the Q&A. Now let me hand it over to Eeva to talk about the financials. Thank you. Eeva Sipila: Good afternoon on my behalf as well. And I'll start with the renewables market. This slide shows the reference margin development of renewable diesel. And as you can clearly see, the fourth quarter was better than the previous quarters of '25. We have a bit of a sliding down effect during the quarter and then a small sort of jump at the year-end, quite typical in a way that some late buying tightening the market, which again then typically also in early January of this year has then eased back. So in this sort of a supportive market environment, our EBITDA on a comparable basis reached EUR 601 million. In Renewable Products, we had a maintenance-heavy quarter, but higher sales volumes and margins offset the higher net production costs. In Oil Products, solid utilization, and the November spike in gas oil market prices supported profitability. And finally, Marketing & Services, we saw a nice sales volume increase in Finland and Estonia. Looking at the sort of full year 2025. So we reached almost EUR 1.7 billion in comparable EBITDA and really thanks to higher sales volume and lower costs, as you see on the right-hand side graph. Like Heikki already mentioned, all the business areas improved from the previous year, and we're very pleased with that. The performance improvement program, indeed, 1 year ahead of schedule, so exceeding EUR 350 million by the end of '25 instead of the original target, which was only end of this current year. Very pleased with that. Of the EUR 376 million, that is the run rate in the P&L of 2025, there is EUR 172 million that have come through. And this is just purely from the fact that, obviously, the run rate is ahead as the program started after a few months into the year and then getting sort of all activities ramped up and before there is that annual effect, it takes -- comes then with -- over the coming quarters. Like Heikki said, very pleased with the amount of activities and kind of actions and the overall engagement of the Neste team in improving our competitiveness. So we're absolutely pushing forward. 75% of what we've achieved so far has come really from cost reduction and the big elements being general procurement and logistics, and then 25% coming from margin and volume optimization. Then a bit more detail into the quarterly performance by segment. So starting with Renewable Products. So indeed, despite significant maintenance activities in the quarter, the sales volume reached 1.1 million tons and our commercial team did -- worked very hard to -- for this. The comparable EBITDA came pretty close to the third quarter level, which was always going to be a tough target since that was one of more sort of solid operations. But as you can well see, so sales volumes, margins supporting, and then really the maintenance cost visible in fixed costs dragging the result down. But sort of -- no sort of surprises there per se. Moving to Oil Products. High utilization, we are very proud of this. And especially now in Q4, this was really worth a lot of money for us because the market prices in diesel cracks really went up to almost $30 a barrel. And of course, there being agile and really on top of the market and being able to leverage that opportunity was very, very important in reaching the EUR 321 million for the quarter. And indeed, our refining margin of over $20 is something we're very pleased and did require, as I said, quite a spike in the market price, but good -- really good work from the team here. And with all the volatility that we can expect to continue in the global oil markets, I think this agility continues to be something that we're focusing a lot on in our performance management. Marketing & Services also did well, EUR 28 million. Unit margins were seasonally weaker. And then the fixed costs were also higher. We have a bit more higher investments ongoing in IT and then also the new retail Huili concept here in the Finnish retail market. But good work on the sales volumes from the team and then supporting the result on to the other direction. Moving then to cash flow, and this certainly increased markedly. Obviously, improved results helped but also a lot of good work on the net working capital side. EUR 809 million was the cash flow for the quarter, and this then resulted in a full year cash flow before financing activities of EUR 759 million. And this really despite cash out investments being EUR 260 million in the quarter, so a bit higher than the previous 2 quarters, the Rotterdam expansion and then the additional maintenance work behind that, a slightly higher figure. And as we've said earlier, the Rotterdam investment will keep our investment level high also in '26. And then we have the Porvoo refinery turnaround coming up every 2.5 years, and this is now the time it comes. And so that, of course, adds to the CapEx, but we are guiding on cash out investments to be between EUR 1 billion and EUR 1.2 billion. So very -- I would say, very well in line with what we said a year back. And still on the net working capital, so maybe a few words. So on the inventory side, you'll remember, we were very clear that fourth quarter will be one of reduced inventories as we really push out the pre-maintenance buildup that we had to do in Q3, which hurt cash flow at that time, succeeded in that. But in addition, we had a lot of focus on AP and also AR. And I think, again, the sort of team did very well on that, and we're certainly very, very pleased with the outcome. And this then leads to us being well on track with our financial targets. So as Heikki already mentioned, leverage is clearly now below the 40%, and the other financial target on the performance improvement also being accomplished. Now work continues on both of these areas, and we have a lot of things we can and need to do still at Neste to improve, but successful delivery in any case for '25. And with that, handing back to you, Heikki. Jukka Miettinen: Thank you, Eeva. So let's then talk a bit about regulatory matters. On this list, there's a lot of text here. Sorry for that. We wanted to give you a full compendium of all the things we see happening on the regulatory front, both in North America, Europe and Asia for the different products. I think just the fact that the list is quite long and much longer than we had earlier sends a message that now things are happening here again. What's particularly interesting on the right-hand side is how much activity we see across all of Asia. Yes, there are small numbers, there are small mandates, 1%, 2%. In some countries, they're more on SAF for international flights, not for domestic flights. But still, Singapore has taken the lead with Japan, and now other countries are following. In Europe, of course, for us, the big thing is the implementation of the Renewable Energy Directive III and specifically what that does to Germany. Since we last have spoken -- or since we last spoke, the process has continued in Germany. Now they are in parliamentary review in the Bundestag, and we hope in the coming months then to get a final resolution. But so far, so good. Direction of travel is positive. And as we estimate by the end of the decade, the volume of renewable diesel should go from 5 million to over 10 million-plus tons in Europe. And of course, for us, at Neste, where we can produce both SAF and RD in our refinery. So this is really good news. And then in Europe, of course, the mandates will rise in 2030. We are going to continue discussion with the European Union to make sure that, that really then materializes. So overall, very good. And in the U.S., we're waiting for more news on the RVO renewable volume obligation decision, which was part of the big beautiful bill. And also there, we should hopefully get some more news towards the end of the first quarter. Focus areas for this year. I already talked about these a little bit. But if I just sort of summarize, still what's on my and my team's agenda, so really continuing with the performance improvement program. There's a lot of activity. I've been positively surprised how much team Neste actually is able to do on this front. Maximization of our asset utilization. Here, I would say that we have our work -- we still have work to do, I need to put more efforts into predictive maintenance, make sure that we really prepare for our turnarounds really well. We get maintenance done on time and on budget. And this year, in particular, we have the big TA coming in Porvoo in the fourth quarter or towards the fourth quarter. It's a very big undertaking, but we are monitoring that carefully. So far, what I've seen, I feel good about the preparatory work. And we also do external benchmarking to see how well we're getting ready. So -- and that benchmarking data also indicates that the team has done good work, and we're -- we will be prepared then for the turnaround. And then Rotterdam already, we discussed. It is moving according to plan at the moment. Market opportunities overall. Our world in renewables is -- can be a bit volatile from time to time. As said already, a lot of positive things happening now on the regulatory front. Let's see how those get implemented, but still the tailwind is clearly more positive. The big unknown for us is Chinese SAF volumes, how much will come into Europe. We know there's volume coming. I need to wait and see for the customs data to get a better view on that. We continue to work on SAF, antidumping duties to make sure we have a level playing field on SAF. And then on uncertainties, maybe I want to highlight the feedstock prices. Of course, in our business, feedstocks account for a very large share of the variable costs. So depending on how they progress for animal fats and UCO and then for the Annex IX feedstocks will be critical to then determining the final margin of our products because we have -- we can hedge these costs to some degree, but not fully. And then I think on geopolitics and trade, otherwise, I don't see anything particularly new happening on that front that would impact Neste at the moment. So that pretty much is that story. Then in terms of dividend. Our Board recommends to the Annual General Meeting that the dividend would be kept at the same level as last year. So that is EUR 0.20 overall. And then finally, the outlook for this fiscal year. So renewable product sales volumes in 2026 are expected to be approximately at the same level as in 2025. Oil Products' sales volumes in 2026 are expected to be lower than 2025 due to the planned maintenance turnaround at the Porvoo refinery. So those are our key messages at this stage, and I think we will hand it over to the operator, right, and take your questions. So thank you very much. Operator: [Operator Instructions] The next question comes from Alejandro Vigil from Santander. Alejandro Vigil: The first one is about the outlook for '26. Of course, you are talking about this guidance of volumes flat year-on-year. And I'm wondering something is going on in terms of utilization rates or why you see this flattish performance year-on-year? That's the first question. And the second is regarding profitability. We have seen in the last couple of quarters, EBITDA in the Renewable Products division of about EUR 250 million, EUR 270 million per quarter. This is a good indication of the current status of the market in terms of margins for Neste in this division? Heikki Malinen: So if I take the outlook and if you talk about the profitability. So well, I would say that at the moment, with respect to our refinery, so we are running fairly close to the capacity we have at the moment that we can get out. We are constantly optimizing and trying to squeeze out more. But in our situation, any debottlenecking that we can do to get more out will have to happen during the turnarounds. And the next opportunity for debottlenecking will be end of this year, early 2027, when we have the next turnarounds in Rotterdam and Singapore. So you cannot do debottlenecking until you have done a certain amount of engineering and you've ordered different types of equipment and pipes, et cetera. So there's always delays to how quickly you can do the turnarounds and debottlenecking. So that will be a story more towards the end of this year, early next year. And then Rotterdam, of course, will then be the big volume increase, and that will come in 2027. So that is the situation. And as I said, we are trying to squeeze out safely and reliably as much as possible, but we have to overcome those debottlenecking challenges first. Eeva Sipila: And Alejandro, on your profitability development question. There, so obviously, sales market prices are important. We've had tailwind that we see continuing. At the same time, if you look at feedstock prices '25 versus '24, they were higher. So it's -- we need to continue to work really on finding the right feedstock and really utilizing the whole global network that we have to maximize the margins. But importantly, then obviously, is the performance improvement program. A lot of the actions are RP focused. And we -- as mentioned, we have more in the pipeline just from a sort of timing perspective, but still working on new actions. So we're certainly very focused on improving the profitability at RP. I think we've -- this is not a level where we're yet satisfied in any way. Operator: The next question comes from Paul Redman from BNP Paribas. Paul Redman: Yes, 2, please. The first one is just back to sales volumes. Could you just be clear? You used to provide a breakout of weeks by refinery of how much turnaround activity will go on in the year. Could you just go through each refinery, just highlighting how many weeks' turnaround you're expecting in 2026? Or as you just mentioned, Rotterdam or Singapore possibly in 2027? And then secondly, I have a question about -- it's a bit longer term. So when we look beyond 2026, you previously guided to a material reduction in CapEx post 2026 as the Rotterdam facility comes online. If margins continue to be strong, the balance sheet will degear. How do you think about financial priorities post 2026? Heikki Malinen: Okay. So I will give -- I will start and let Eeva continue. So in terms of this fiscal year, so we have these catalyst changes pretty much every year. And I cannot really give you an exact week number here yet for the turnaround in Rotterdam or in Singapore because they will also include debottlenecking work. So it isn't just the pure catalyst change, but there will be others. But the Rotterdam TA will be at the end of -- sometime in the fourth quarter. And then Singapore will start Line 2. Now that's the first TA on Line 2 in Singapore, that will be starting probably -- as it was this time, mid-December-ish, somewhere there, and it will flow then into the first quarter. But the exact date still will depend a bit also on the holiday season in Singapore with Chinese New Year, et cetera. So -- but anyway, roughly there. So Singapore more into the '27-ish, and that will also include then debottlenecking work, which has to be done. Now then to your question about beyond '26 and CapEx and how we're thinking about that, so maybe Eeva? Eeva Sipila: Yes, financial priorities post '26, Paul, I think it was. So no news here really. Deleveraging is the one word I would say that, obviously, whilst we now had good cash flow and we've clearly turned the corner in leverage, the amount of gross debt remains high and this year being still a sort of CapEx-intensive year, is not going to sort of fundamentally change that. So then as we go into '27, '28, that's really sort of the main focus. And of course, in order then that to build ourselves a stronger balance sheet then that we have more optionality a few years after that. Operator: The next question comes from Henri Patricot from UBS. Henri Patricot: I have 2 questions, please. The first one is just another follow-up on the volumes for this year because, Heikki, you mentioned that you're running fairly close to capacity at the moment, but your utilization rate last year was 73%, and Neste used to run much closer to full capacity. Are you saying that we should assume that full utilization would be close to this sort of level because of the frequency of the catalyst changes? Or is there some upside to that utilization rate over the next couple of years? And then secondly, on the sales structure for 2026. Can you give us an update on the term contracts for this year? Where did you end up in terms of the split between term sales versus spot? And any comment you can make on how this term premium looks in '26 versus '25? Heikki Malinen: Yes. Thank you. Thank you very much for those questions. Yes, the utilization level, I would like to see that also higher. So -- but that will require some more work in the refineries. There's also a bit of how much do we swing between RD and SAF. So last year, we made over 870,000 ton-ish of SAF. So how much we are swinging back and forth between that also impact the utilization. It isn't just a -- although we're happy about the flexibility, getting -- putting the SAF lines on also impacts a bit the utilization. So the more we can run with 1 grade, RD in particular, that helps that. So -- but we are going to try to improve that further and then do some more debottlenecking. Then in terms of the term contracts, I said in the last call, I said that we would take our time and not rush. Well, in the end, then we did ultimately then go and term about 60%, roughly, about the same level as the year before. So about that. Anything you want to add, Eeva? Eeva Sipila: Well, maybe just to mention, Henri, on the premium, so significantly higher than a year back. Obviously, the market situation was healthy. And thanks to that, that actually was behind our decision to term that much. I mean, originally, we -- I think we discussed also with you that we'd aim a bit higher. But when the market was as good as it was, we felt it was the best decision for shareholder value. Operator: The next question comes from Adnan Dhanani from RBC. Adnan Dhanani: Two for me, please. Just the first one on your CapEx. You were able to lower your guidance a couple of times last year and still end up spending less than the final guidance at the end of the year. Just can we get some color on the moving parts there? Is that just a phasing thing? And if so, could that mean that this year's spend could be towards the higher end of the range you provided? And then secondly, on your performance improvement program, obviously, very solid results so far. You've noted that the work continues in 2026. Are you able to provide any color on how much further upside there could be beyond the EUR 376 million that's already been achieved? Heikki Malinen: Yes. Thank you. Maybe I'll take the second one first, and then Eeva can take a crack on the first one. On the performance improvement program, the -- we had the 4 modules which were -- there's the efficient organization, which has been done. There were items on procurements or sourcing. A lot of work has happened. Some of it will flow also into this year. There's the commercial piece. There's -- we've had -- we've optimized our logistics and terminal networks. We've closed some terminals, which had very low utilization. So that -- a bunch of that work has been done. On the refinery side, there, we do see a lot of further opportunity. That module has been slower to progress because the changes we need to make to these lines, some of them may need some money or they just need some design work, and it just takes more time to do these adjustments, let's say, safely, plus it's just simply more complex work. So we will continue focusing especially on the refinery side in '26. We are not going to set -- give you any guidance or estimate on the upside. As I said, I only can state that I'm really pleased with what we've accomplished this year. We're going to continue focusing particularly on the upside on refineries, and we will then report on a quarterly basis and try to provide you as much color as we can. That is the current way we're going to move forward. And then in terms of the CapEx, so anything you would like to say regarding... Eeva Sipila: Yes. Certainly, I think it's not a sort of untypical phenomena that you have a bit of slipping. I wouldn't say that it was more than a few tens of millions. So indeed, we were expecting that, that slipped. Now the estimate is based on what we kind of have currently. And yes, then obviously, we've given a range just because there are some uncertainties. And I'm comfortable with the range, but indeed, I think it's a typical phenomenon, sometimes really difficult to estimate exactly right then on how the sort of payments then go out, but not a big thing for last year. Operator: The next question comes from Artem Beletski from SEB. Artem Beletski: So I have 2 to be asked. So the first one is relating to renewables volume outlook for this year and basically split between RD and SAF. Is it fair to assume that there will be growth in RD, and maybe SAF volumes coming down, just looking at the market fundamentals currently and the SAF market being pressured by import volumes coming from China? And then the second question is relating to Q4 fixed cost. What it comes to renewables? So there has been quite significant increase sequentially, I think, more than EUR 30 million. How big portion of it was related to this maintenance activity happening in the quarter? And maybe you can provide some guidelines for this year as well? Heikki Malinen: Thank you, Artem. So I'll take a crack at the first one, and then Eeva can talk about the fixed costs. So yes, last year, we sold -- it was 3.5 -- hold on -- 870,000 on the SAF, if I remember correctly, and then the rest was RD. I think I said on the call last time that if the SAF market doesn't develop well, then we have always the option to sell RD, and that is what we will do. So we are constantly optimizing and depending on the -- what really makes sense financially for our shareholders, we will run the refineries according to that. So it is possible that this year, we'll have a bit less SAF. But let's see, it's early. We're just in January, and let's see how the markets -- what happens with the imports, we really don't know yet very well. We don't have any data yet really for '26. And then based on that, we'll have to make the choice. But we will go with what really maximizes the value for the company. Eeva Sipila: And then on the fixed cost item, so indeed, the growth in fixed cost was really all around maintenance. And looking into '26, so we'll have a similar phenomena that obviously, we have some of the performance improvement savings coming through in the fixed cost, and that's supportive. But then at the same time, we will be increasing somewhat the money spent on maintenance for the obvious reason that we do want to sort of max out on the utilization and reach a better utilization, as Heikki already mentioned. So that will probably mean that in a way, net-net, there's not much improvement in fixed cost per se to be expected. But of course, we're very focused on all elements on the margin, then to sort of improve profitability, nevertheless. Fixed cost, relatively speaking, is not the main item. Operator: The next question comes from Henry Tarr from Berenberg. Henry Tarr: The first one is just on premiums and margins. So I think you talked about higher premiums into the term contracts. Obviously, there are lots of push and pull factors, et cetera, driving margins in the renewables business. But as we stand here today, then looking into 2026, does it make sense as a starting point to think about the sort of second half levels from last year being a good base as we think about modeling renewable products? I think that's my first question. Eeva Sipila: Well, I think that if you use the second half as a reference, it wasn't that maybe impressive in the beginning [ on ]. So I would say that we are aiming to sort of -- aiming upwards on that. But like you rightly say, so obviously, the premium we fixed is dependent also how -- what happens on the feedstock side and how we're able to optimize. But I think it's fair to say that our ambition is higher and hence, the higher term rate. Heikki Malinen: I think the feedstock pricing is, of course, really critical here for the final margins. Henry Tarr: Yes. And that's probably my second question then, which is, what are the key sort of drivers and risks that you see for this year on feedstock? Heikki Malinen: We try to buy from all jurisdictions. Globally, we're continuing to expand our reach, both for animal fat for UCO. And what's been really interesting, of course, now with the new RED III requirements is these Annex IX feedstocks. I think we're well positioned -- actually pretty well positioned on these Annex IX feedstocks, which I think is -- could become an asset here as we go forward, but let's see. And then in terms of UCO, what I think is playing here a lot into the equation is how much will Chinese demand be, hard to predict and then also what happens with the RIN, the RIN 50% in North America. So I think those are the 2 maybe triggers which could then impact both UCO and animal fat prices. And then, of course, how much supply of animal fat is available, particularly out of Australia. So I think those are the sort of dimensions or things which are moving the market. But as I said, I think overall, we're probably -- we're the largest buyer of these feedstocks globally, and we have a good sourcing organization. I think we're very well on the pulse of the market, and we have multiple sources to buy from. If one area looks more expensive, we then always have the opportunity to look for other sources. I think that is an advantage. Feedstocks are really critical in this industry. Operator: Next question comes from Nash Cui from Barclays. Naisheng Cui: Two questions, please. The first one is a follow-up on term sales. I just want to clarify on the ability to lock the margin. From your previous answers, am I right to understand that you can lock the sales price, but not the fixed stock price, so we can still see a bit of volatility on the margin? Then my second question is on one of your peers' comments, your other European energy peer CEO mentioned some bearish comment on SAF mandate. I wonder what's your view on that? Heikki Malinen: Well, do you want to comment on the hedging? Eeva Sipila: Yes, sure. So indeed, I think, Nash, the challenge on the feedstock side is that not all of those products can really be hedged. They are not open transparent market. So more on the -- where you can hedge is then on the sort of soya, palm side, and that means that there's certain limitations when we sort of term a sale. But of course, we sort of -- they do, over time, usually sort of have a correlation and then we sort of try to optimize based on the sort of experience we've built on how to do so. But indeed, there is a certain open position and hence, our cautiousness on the commenting on the final sales margin. Heikki Malinen: Regarding your question about the SAF mandate. So I said before that at least based on the conversations I've had and we've had with the European Union, they are pretty committed to implementing the SAF mandates for 2030. I mean between now and 2030, nothing specifically will happen. There will be a review probably somewhere between now and 2030 about these mandates. I know the airlines are, of course, pushing back and trying to move the 6% into the longer-term future. But as I said, our indication is that the mandates are going to grow and [ 6 ] is the number that's been -- which has been decided. I'm very pleased with what we're seeing in Asia. Gradually starting to see mandates coming there as well. I think that's a very positive sign. If Asia now starts to move forward, why would Europe then suddenly move backward, especially when Europe has been the one really pushing for SAF to start off with. So if we hear something different, we will report to you, but I'm not aware of anything that would derail the 2030 program, at least not at the moment. Operator: The next question comes from Alice Winograd from Morgan Stanley. Alice Bergier Winograd: Just one for me, please. So you said about 60% of sales were termed. Can you give maybe a breakdown between Europe and the U.S. within the term sales? Because the EU margins have been extremely high for the better part of the second half, I think, upwards of $900 per ton. So if there's any indication that a lot of these term sales are in Europe as opposed to the U.S., this has some read across to margins, right? So I appreciate any color you can give. Heikki Malinen: Alice, thank you for your question. Unfortunately, we only provide information on the aggregated number of terms across the region. So we do not break that out by markets in more specific detail. So sorry about that. But thanks for your question. Operator: The next question comes from IIris Theman from DNB Carnegie. Iiris Theman: I have 2 questions, please. So the first one is related to renewable diesel prices, which have come slightly down from Q4 over the past 2 to 3 weeks. So what has been driving prices lower? And do you see any drivers that could affect prices for the remainder of Q1. Yes, so this is my first question. And the second question is related to your utilization rates in RP. So I think previously, you highlighted the 80% utilization rate as a good proxy for this year in RP, while now it seems to be 75% or something like that. So is there anything that has changed since the Q3 presentation when you highlighted this 80% proxy? Did you, for example, have a longer maintenance in Rotterdam or Singapore that basically has impacted your volumes this year? Heikki Malinen: So thank you, IIris, for your questions. On the RD prices, on the last few weeks -- I cannot report anything in particular. I think partially it can be also a bit sentiment driven, how these mandates are coming into play. But I think overall, I cannot report anything specific about that. I think what is good is that the level is, of course, much higher for us compared to where we were last year. I think we've now gotten to a more, let's say, healthy level. And I think for Neste, that is what's really critical here. On the utilization level, as I said earlier, we feel that we have more work to do in terms of these refineries. At the moment, we are running at a level which is fairly close to -- well, let's say, that is the performance of the day, if I would say, so forth. Part of our PIP program, our performance improvement program, specifically focuses on getting more improvements out of the refineries. And therefore, we want to also get that number up. But that is the health of the refinery at the moment. Regarding the turnarounds that you referred to, Singapore, I think, is very close to starting, if not starting, and both turnarounds have been done. We don't comment specifically on the individual turnarounds per se, but both of them have been now been completed. Operator: The next question comes from Christopher Kuplent from BofA. Christopher Kuplent: I'm afraid I'm going to keep asking about turnarounds. I'm going to focus on Porvoo and the Oil Products division. As far as I can recall, this used to be a 4-year cadence for major turnarounds. I think the last one we had was in Q2 of 2024. And maybe it's my recollection that's off, but I thought it was -- next going to be in 2027, which was already, to me, earlier than the usual 4-year cadence. And you're now, as far as I can tell, telling us that, that 2027 may actually happen in 2026. So I wonder, not whether you can give us the exact week when it's happening, but I wonder what your thinking is behind reducing the cadence and what can explain the more regular turnarounds and shutdowns? And lastly, again, this is not about a turnaround, but about Rotterdam and the ramp-up that we're looking forward to for 2027. Can you give us an insight into how fast you think that ramp-up can happen once you've gone through the latest rounds of debottlenecking by the end of this year and you then bring the new units online? Is this a 3-month process, a 24-month process, 12 months? What's a reasonable expectation for the speed of that ramp-up, please? Heikki Malinen: Thank you very much. I think the first question is easier for me to answer. It's a good question. The reason why we have gone to a more frequent turnaround is very straightforward. Here in Finland in the Nordic markets, what we have concluded is that the 4-year cycle is just simply too big a turnaround to pull off safely and reliably. We have -- there are certain sort of limitations on how much workers and contractors we can actually physically get into this fairly small market. And therefore, we've concluded that breaking it into more smaller parts simply makes the turnaround more manageable. This is purely driven by efficiency and safety and productivity rather than anything particularly different. So it will be a bit smaller scope, but then more frequency. So then -- yes, so the 2.5-year cycle is what is the way that our engineers have concluded is the safest and most efficient way to do it. Obviously, I cannot tell you the exact day when we're starting. We will report back to you on that later. But we are spending a lot of time really to do our utmost to get this turnaround to be good. The previous turnaround we had actually was quite successful. If you look at the performance at Porvoo, I think part of the explanation why we've done so well is that in terms of utilization is that the previous turnaround was done really well. So taking learnings from the previous one into the '26 program, hopefully will then yield good results. Regarding Rotterdam ramp-up, unfortunately, here, I cannot give you any information yet. We're so in the midst of building the refinery. You know we are 1 year late from the initial schedule that was published, I think, in summer of 2022, if I remember. And so there's still a fair amount of work to do. I think probably -- well, let's see when we are closer to startup and when we are in that phase, we will then start telling you more about the ramp-up curve. But at the moment, unfortunately, I cannot -- I don't have any meaningful information to share with you. So sorry about that. Operator: The next question comes from Yulia Bocharnikova from Goldman Sachs. Yulia Bocharnikova: I have 2, please. First on SAF. So given we see currently SAF trading at discount to RD, is it correct to assume that 100% of SAF should be sold on term contracts? And if you could give any clarification if there is any premium of SAF to RD in terms of prices in term contracts? And the second one on hedging. So you mentioned there is still palm oil or soybean hedging. Is my understanding correct that if we further see lower diesel prices and higher palm oil prices, that would result in a positive hedging impact in Q1 '26? Heikki Malinen: So let me address the first one and then on hedging, Eeva. So indeed, you are right that -- the SAF is trading unfortunately, at a discount to RD. I mean, SAF should be trading at a premium because it's -- obviously, it's a more advanced product and more higher value-added product, but that's how the market is today. I can't comment on the particular prices or how we do the terms. The only thing which I would just say is, what I said earlier is that when we look at the SAF business for us, we pretty much optimize it based on what creates more value for us. And depending on the commercial returns, we will then adjust our lines accordingly. That's really all I want to say about the SAF commercial aspects. Hedging then, please. Eeva Sipila: Yes. I would say, Yulia, that higher diesel is better both in RP and OP kind of irrespective of hedging. Now obviously, that can sort of have some impact. But -- so I would -- in that sense, their conclusion maybe is a bit sort of too focused on the palm oil side. So the diesel component is important in both businesses. And of course, what we've seen so far in the quarter is a healthy level of diesel prices even if we're not sort of where we were in that sort of November spike. Operator: The next question comes from Matti Kaurola from OP Corporate Bank. Matti Kaurola: 2 questions. First, regarding your production flexibility. So could you open up your kind of flexibility to produce more SAF in case the market is recovering. So how easy the switches do? Are we speaking about like S&OP horizon, like 1 quarter or something like that? And then the second one is regarding trade policy. So could you help me to understand why the ADDs to our Chinese SAF is pending because it's -- I mean, the case pretty much the same, then with RD aside where we already have those ADDs in place. Heikki Malinen: Thank you, Matti. I'm sorry, at least I had some difficulty in hearing the... Eeva Sipila: Yes. The first question for Matti was around how easy it is to switch between RD... Heikki Malinen: Yes. That's what I got. What about the second question? Eeva Sipila: And the second was on trade policy that's why -- I believe, Matti, you asked that why don't -- why are we yet to see any ADDs on SAF, that the case would be similar to RD and when we only have RD. Matti Kaurola: Exactly, exactly. The production is happening in the same facility. Heikki Malinen: Right. Okay. So very good. So on production flexibility, so it is -- the advantage of our production system is that we can fairly quickly move back and forth in the lines. It is something in our system. I mean, these lines do have that flexibility. But of course, we only do it if we think it is financially viable. The switch is -- we're not talking of very long lead times to go from one product to another. So I don't know if I have much else to say there. Anything you want to add on the flexibility? Eeva Sipila: No, no. Heikki Malinen: And then on the trade policy, yes, we are actively working with the European Union on this. But European Union takes its -- they have their own procedures. They have their own methods and approaches on how they review these things. They have to do a lot of data collection. And sometimes it just takes time to get the data for them to do the actual calculations on potential injury. So we don't have a deep insight into how the processes work inside the union, but we are hopeful that in 2026, we actually could see some progress. So we will report back to you at the moment we know that the European Union is moving forward. I really hope they will make a decision this year. I really hope so. Operator: The next question comes from Alastair Syme from Citi. There are no more questions at this time. So I hand the conference back to the speakers. Heikki Malinen: Okay. Well, thank you for your questions. Thanks for taking the time to discuss with us about 2025 and 2026 outlook. I want to really summarize our presentation with 4 main points. Looking at last year, I'm very happy with how we were able to deliver the financial turnaround compared to 2024. As you've heard, really phenomenally good success on the improvement program, really very happy with exceeding the targets. And I believe there's more to come, and we will report to you on a quarterly basis. Regulatory development looks to be favorable. And as referring to Matti's question about SAF, antidumping duties, hopefully, we can report something on that as well in '26. And really, I believe we have a good foundation. There is still opportunity to improve the company, and we are working towards getting full asset utilization in place in 2026 and then '27, Rotterdam 2 is coming. So with those messages, both from Eeva, me and Jukka, I wish you all a very good day and look forward to seeing you then after Q1. Take care.
Operator: Welcome to CellaVision Q4 Report 2025. [Operator Instructions] Now I will hand the conference over to CEO, Simon Ostergaard. Please go ahead. Simon Østergaard: Thank you very much, and thank you very much out there for dialing in for CellaVision's quarterly report Q4 2025, which obviously also includes the consolidated results from the entire 2025. A lot of good things have happened. And first of all, I want to formally welcome our newly appointed CFO, Monica Jonsson, who is with me today to participate and, of course, explain our business. Monica has been with us since autumn, and she was formally appointed CFO with CellaVision on December 12. So that was the first good news. Hopping into the quarter in brief, the Q4 in brief, we have entitled our quarterly report as a solid quarter driven by strong performance in Americas. So it's particularly in Americas. However, we also see a pretty strong performance in EMEA, while the quarter has been somewhat soft in APAC, and we will unfold that throughout the -- today's call. We landed the quarter with net sales that increased by 5.6% to a revenue stream of SEK 197 million, which translates into an organic growth of 12.2% given our headwind on the FX of minus 6.6%. So double-digit growth throughout this quarter. This translates into an EBITDA contribution of SEK 65 million, equivalent to 33 percentage points. In terms of the business, we will go into the business and explain both our P&L, our regional split, give some highlights there and of course, also cut it across the different product families. But I also want to give a little bit of insight as to our progress on our strategic direction. We accomplished a key milestone by getting CE Mark for our new applications for bone marrow aspirates. So this is a Class C product that is now registered according to the EU IVDR, which allows us to start launching the product this year or pretty much in the quarter we're in. We can talk more about this a little bit later. We have also -- as we've noticed in our latest report, we've also been working on a significant software upgrade for our hematology instruments. This has been successfully validated at a customer site. So this really allows to upgrade our fleet with a modern and user-friendly interface, some new features, including also higher speed on the new DI-90 -- DI-60s that comes up. Furthermore, I also want to emphasize that the -- since we are coming to the year-end, the Board of Directors proposes to increase our dividend from SEK 2.5 per share last year to SEK 2.75 per share. So this is what will be proposed at the Annual General Meeting taking place on the 28th of April. If we zoom in on the financial development for Q4, I've mentioned our revenue. And then if we hop in -- so on the left-hand side, we have the quarter we are reporting today, the comparable quarter, and then we've consolidated the entire full year report with a compare from 2024 to the very right-hand side. For the quarter, our gross margin was 67%. So a little bit lower than normal, a little bit hit by software, especially from APAC, but also FX also takes us down a little bit here. Operating expenses landed at 39%. And EBITDA, I've talked about the SEK 65 million that is 33%, which is above our target of 30%. And then we -- on the R&D side, which is really very strategic for us, we've increased our R&D spends over the -- within this strategic period. So we're at 19% and up against the compare, it drops from 22%. So it's actually SEK 37 million in total R&D spend. But maybe I can ask you, Monica, to comment on our capitalization and also -- maybe also our principles for capitalization that might be appropriate. Monica Jonsson: Sure. So during the quarter, we capitalized SEK 15 million in R&D costs. And as you can see then that we capitalized more or less half of the R&D spend. And what is not capitalized is mainly related to projects that are in an early stage and also product care. And you will see during 2026 that we will start capitalizing some of the projects that are maturing and also start depreciating some projects that we are launching products such as bone marrow. Simon Østergaard: Excellent. So the -- so on the cash flow side, operating cash flow of SEK 51 million, so slightly increased with SEK 5 million versus our comparable quarter and a total cash flow of SEK 30 million. So going from the operating to the total, the majority of that is really the cash that we invest and capitalize in R&D. That's what sits there. We have low -- very low financing activities. So we have hardly any debt, and we end the year with a balance sheet that contains a cash position of SEK 180 million -- SEK 188 million, sorry. All right. Yes. So I could say that here, we are also showing the full year results. So we landed the plane or the year of SEK 759 million, which is an organic growth of 9% over the year and a gross margin of 68%. And that provides a total cash flow of SEK 40 million. So obviously, we've paid out dividends, and we have also capitalized a considerable amount of R&D cost of SEK 67 million throughout the year. So that is the main components that brings us to this total cash flow of SEK 40 million. Right, let's move on. Let's try and look at the regional performance across the 3 regions, Americas, so North and South EMEA, including the Middle East and APAC. So our performance was very strong in America, in fact, all-time high with SEK 90 million. That is an organic growth of [ 50% ] throughout the quarter, also 50%, but then the headwind of currency effects. So organic, 58%. Very strong momentum in Americas, especially in the U.S., which you may also -- by Sysmex in their last couple of reports, Sysmex being our main strategic partner. So that is kind of the business that is elevated as [Technical Difficulty] our joint momentum. It is fair to say that it's extremely high, and that is also due to the presidential election in [ Q4 this year ]. I think that's a fair comment to provide the full picture. For EMEA, we had -- there, we also saw an increase in both in small and large systems. And we obviously also had a contribution from reagents, but they actually impacted negative this quarter. There is -- that is a euro business. So we are primarily [ impacted by ] currency. And then there's a little bit of phasing on there. But I can talk more to reagent in a second. On APAC, we landed sort of in -- we -- typically in APAC, we have high fluctuations depending on whether we ship to APAC, in particular, China or not. And here, we landed in a pretty reasonable quarter, SEK 28 million. However, it does represent an organic decline or growth of minus 40%. And that is also due to a strong comparable quarter. You may recall that we had a, let's call it, a one-off tender delivery for New South Wales in Q4 last year, which is why we organically declined so much because it's a reasonable quarter where we've seen deliverables going both to China and to Southeast Asia, a little bit spread. So -- and then we continue to see growth of the -- our expansion into APAC throughout this -- a lot of countries, of course, smaller volumes, but we are building our position with the RAL stains across APAC. And if I cut the same numbers per product family, instruments, reagents, software and others. Here, you do see that our total instrument revenue was SEK 126 million, and we talked about the U.S. and the other elements. But it gives us a growth of 8%. For reagents, we actually were flat or minus 2% on the total business -- on the total business for the quarter, which translates into 6% growth on the year. So organically, around 9%. EMEA decreased slightly. And as I said, that is primarily currency. I would say though that we -- our hematology, which is the growing portfolio we have, what we -- what does not relate to the hematology labs and then the hematology reagents. Hematology reagents, which is the bulk of the business, like 2/3 of the business, it grows 10% for the majority of it, which is for Europe. And in APAC, where we've started to expand with our hematology reagents. There, we also had solid growth, but though smaller numbers. But we grew on the quarter from SEK 1.4 million to SEK 2 million with -- up against the comparable. And that pretty much more than doubled our revenue in APAC on the year. For software and others, we had declining growth for -- I should say software and others. It contains both spare parts, of course, software and also consumables such as oil, but it also entails the currency effect, which impacted our numbers considerable from a comparable position here. Specifically on the software, we were low in the compare and there was a major contribution from APAC due to the large tender we provided last year, where we also -- that also entailed a considerable amount of software. So this is also why we see the decline. Key takeaways, as we say, the fourth quarter is driven by strong performance in Americas. We said we landed our year with 9% organic growth. And in fact, if I really look at where we work and how we work with our strategic partner organizations, our core strategy, it works. We are growing double-digit with these -- both partner organizations across the world. However, we have some product -- some product lines like non-hematology other products that has taken our organic growth a little bit down. But our direction is paying off. And that also -- that is also consistent with -- that also applies to our Power of Focus strategy that we communicated in 2022. Here, we invested a very ambitious investment program in R&D and innovation. And one of the levers was a new lever of entering what we call the specialty analysis arena. So more applications to assist the hematology labs out there to diagnose blood-based disorders. The first product is out. That is the product for bone marrow, as I initially said. So we do believe that now we can start building the market for assisting the lymphomas and leukemias out there in the hematology lab and adjacent labs where they utilize this hematology solution or this bone marrow solution. So we are starting to launch. First, campaign-wise, there will be training of our partner organizations. There will be building of a funnel, and then there will be evaluations of -- and really for the health care professional to see how it assists their workflows. And then we do expect that we -- in the, let's say, the second half of the year, we will start seeing revenues from this product from Europe. And then we are, of course, also on that note, aiming for getting into the U.S., but more about that later. As mentioned also when we teed up the call, we have a major milestone in launching the software upgrade that delivers this faster and smarter workflow and cutting-edge user experience for the hematology labs. And actually for the new DI-60 systems, that is integrated with the hematology line of Sysmex. It offers an improved integration, but it also entails an improved throughput. So the number of blood samples that can be deployed will increase on the new DI-60s. So we believe we are well positioned to continue our journey in assisting the mid- and high-volume labs. So very important key takeaway is repeating back to our Power of Focus, where we in early 2020 -- or in spring 2022, we acquired the exclusive rights to -- IP rights to a patent portfolio that was invented by Caltech. And we have deployed and further developed our technology in our hands. And as you can see in the way we communicate, we're extremely confident that this will really support our next-generation hematology analyzers that are part of this major investment program that CellaVision has gone through and is going through. And furthermore, we are also very clear on our ambitions to expand and deploy our capabilities for adjacent areas. And here, we are also confident to say that we truly believe that the way we go about pursuing our vision of really pushing the evolution of microscopy, we have a disruptive microscopy solution in our hands. And we believe that, that is something we will continue to invest in, and we will also pursue future partnerships that can help us commercialize these technologies in the future. So with that, taken together, the -- I do believe we ended 2025 on a pretty strong note with 9% organic growth given everything that have happened. And I'm actually very proud of the team given the fact that we've done this with our existing portfolio, and we are seeing now that our innovation program pays off, and we are starting to start launching all these new opportunities, which we are very confident will be a profound platform for future growth. With that, we will close this session and enter the Q&A. Operator: [Operator Instructions] The next question comes from Ulrik Trattner from DNB Carnegie. Ulrik Trattner: A few questions on my end. First of all, and I apologize, I struggle a little bit with the sound, maybe it was just me. So it might be things that you already addressed. But if I can start off with the DC-1 and the DC-1 momentum, particularly in the U.S. And you sound like current trading and what you did see throughout Q4 was really improving. Is that something -- what do you derive that from? Are you seeing that there is sort of increased capacity from the labs to expand and invest versus last year or the reasoning behind the current sort of situation and demand flow? Simon Østergaard: No, fair. And thanks for your question, Ulrik. I think we see a momentum also given the softness we experienced a year ago, then gradually over the last half of 2025. We've seen positive momentum communicated externally by Sysmex and what -- how the market is operating on the large lab segment. And we've seen that translate into that also entails our solution, our integrated solution. And at the same time, we have seen the interest, let's say, come back on the DC-1. And I think what is happening, and this is also something we are really starting to position the targeted opportunities for the integrated health networks in the U.S. So there, having the labs that can digitalize the satellite labs, that is the value proposition. So there's one story around the workflow for the individual labs. But then what we are really seeing resonates in the U.S., because they are digitalized to a relatively high degree, that is attaching these IHNs or the integrated health networks to distant satellite hospitals. And this is where we believe there is a market that is, I shouldn't say untouched because we have certainly placed DC-1s, but the opportunities is much larger than what we have placed so far. Ulrik Trattner: That's great. And for the last few years, we have seen this prolonged order to installation trend. Has there been any shifts sort of in that being shortened here? Or is it still the same situation? Simon Østergaard: No, I think typically, from orders are placed, let's say, in the U.S., it is our belief and understanding that, that is pretty much a phase of 2 to 6 months. Then we have been in a situation where it probably was longer. And now it seems like we're somewhat back to that kind of up to half a year. And that's because hospital places the order with Sysmex, and then there is an installation project starting up. So that means that everyone, IT, et cetera, has to come together and then all the equipment, the cell counter, including CellaVision's cell morphology analyzer needs to be in place. So this is why from the orders of Sysmex to that, that is about this -- up to half a year. And then it varies. We saw the tender we talked about in Australia that took 5 years. So it does vary. There are deviations to this rule of thumb. Ulrik Trattner: And this -- you touched upon this now with sort of the software, I noted as sort of software and others in your report, had a bit of weakness here in Q4 affecting the product mix. And as you alluded to the sort of larger tender in Australia, and now you're rolling out an updated version. What to expect from that segment? I guess you would assume some big price increases for software heading into '26 versus '25. Simon Østergaard: Actually, that's not how we position this. We position this solution as part of the -- both the new DI-60s. So we want to be competitive and protect the installed base, also the replacement market. So this is not an upgrade where we charge. It's part of the DI-60 system. But what it does, it also allows the health network. So if you take a given hospital with the satellite hospitals, et cetera, they -- if they upgrade to this software version called 7.2, then all their entire fleet, including the old instruments, will all of a sudden be utilizing a new user interface with the improvements that we are launching in the software. So this is a way to really provide additional customer experience prior to our next generation coming out. So we have sort of considered that's a better proposition as opposed to starting a price, we would rather increase right prices when we come out with new hardware. Ulrik Trattner: Okay. So that would entail that there is no price increase of the DI-60 either. It's just... Simon Østergaard: No, there will be price increases on the instruments, but we will not sort of take the route of just charging for software. We believe we have a better -- we will capture the growth from the instrument placement instead. Ulrik Trattner: And then just an accounting question here and just to double check if my sort of maths about sort of aligned with yours. Because capitalized R&D historically has had an effect on the gross margin side. So I'm -- and now when you're rolling out the bone marrow application, I'm approximately at a 1 percentage point headwind on the gross margin on the back of starting to depreciate that. Does that sound fair? Monica Jonsson: Yes, that sounds reasonable. Ulrik Trattner: Great. Short answer, I like it. And then last question on my end before going back into the queue. If you can provide some more granularity on the rollout of the bone marrow application and the methanol-free reagents throughout sort of '26? And going to the bone marrow, is there -- I know that you say that you will do a launch here in Q1, but is there any conferences here in the near term where you're going to do more of a broad-based launch as well as how does the training of Sysmex personnel going? Simon Østergaard: Great question. Yes. So for the bone marrow, you're absolutely right. We'll start sort of the SoMe campaign in this quarter in March. We will -- we are in the process of training the Sysmex reps. And once that is done, then we will, of course, start to position our solutions in the -- in Europe across the different countries. There will be demos in the different individual labs, and then it's commercially available. With regards to conferences, we'll do the big launch at the ISLH later in May. That's in May. So that's the big conference where we sort of give the splash. And then we will also be present at [ ACP ] later in the year. But ISLH is the biggest launch sort of event. Coming back to the quarter here in Q4, I just want to express my appreciation also for our partner organization who has been with us on site here with Sysmex, where we have presented the bone marrows and then we actually obtained the bone marrow CE Mark before Christmas as opposed to Q1 as we had pointed. But that is kudos to the team for actually driving this to be in our hands a little bit earlier, but also to Sysmex who are really welcoming this significant product. On the methanol-free, I can also --you -- right, you also asked about methanol-free, right? Ulrik Trattner: Yes. Simon Østergaard: Yes. The story around the methanol-free stain is that -- so we've been selling our -- our reagent revenue is primarily the classic stains. And now we have this methanol-free stain. We've had it for years, in fact. But now there is an opportunity for the methanol-free to be running on the SP-50, so the smearing and staining device of Sysmex. And that has opened up for the opportunity to globalize [ methanol-free ]. So this is -- this will be available. It is available in Europe. But this is also the opportunity to enter the U.S. where we have hardly been selling any reagents. So this is obviously the plan. We are currently in the U.S. We are current, let's say, tweaking the protocol, so the actual stain resembles what is preferred in the American market, right, right, Giemsa stains. So it's still methanol-free, but there is a little bit of trick going on there, and then we plan to launch it this year. So this is the plan together with Sysmex. That is the game plan for to get into Americas or the U.S. Operator: The next question comes from Ludvig Lundgren from Nordea. Ludvig Lundgren: Yes. So I have a few, and I'll take them one by one. So starting off on order intake, I believe you said you have a very strong order intake in Americas from the networks. So I just wonder if it's possible to, in some way, quantify the book-to-bill here in the quarter and whether the strong order intake, is it fair to expect this to translate to strong instrument placements also in H1 '26? Simon Østergaard: Yes. So in general, there is a momentum in the Americas and especially in the U.S. So it's early days, and we don't typically disclose our order book for the current quarter. Having said that, I see no reason why the momentum for Americas should vanish. So I think we're in a reasonable solid situation there from what we hear from the market situation. Ludvig Lundgren: Okay. Great. And then I had a question on gross margins as well, a bit of a follow-up. So softer here in the quarter. And I just wonder like if it's possible to quantify how much of this relates to FX and how much of this relates to the softer software sales and the weaker product mix from that, like in rough terms would be great. Monica Jonsson: Yes. Comparing to last year, it's a lot of FX and somewhat product mix. Exact relation here, I will not disclose, but a little more FX than product mix. Ludvig Lundgren: Okay. Great. And then a final one from my side on gross R&D. You talked a bit about it here, but I just wonder like it was down to SEK 37 million, down 9% year-over-year, I believe. Like why was it down this quarter? And like how should we think about this R&D -- gross R&D level looking into '26? Is SEK 37 million a reasonable level to extrapolate? Monica Jonsson: Yes. Actually, we see some decline in R&D spending in Q3 and Q4 versus last year's Q4, Q1 and Q2, and that is mainly due to the phase of one of our biggest projects where we had a lot of buying of consumables during Q4, Q1 and Q2. And then due to the phase of the project, we do not have that in Q3 and Q4. And then also, we have released some consultants that worked on the software upgrade project after the Q2. But what we see going forward, we will see continued high R&D costs actually in 2026. We have many interesting projects that we are working on. So I would expect more in line with Q1, Q2, Q3 levels also during 2026. So Q4 is not significant what you will expect for the next year -- for this year. So more in line with the quarters. Ludvig Lundgren: Understood. Yes. And just a follow-up on that, like what is a fair capitalization rate to expect on these projects then in '26? Monica Jonsson: Yes, more or less at the same level. We'll see. Ludvig Lundgren: Higher or lower. Yes. Okay. Simon Østergaard: Probably the same level. The projects that Monica elaborated, some of them will be early stage, which means that we don't capitalize. And then some of them will actually make it throughout our development model, and they will cross the line and start being capitalized. So there's a little bit of balance. Monica Jonsson: And then we have a few that were capitalized up until Q4 that are now depreciating. So that is then evening out. Simon Østergaard: Yes. Operator: The next question comes from Simon Larsson from Danske Bank. Simon Larsson: Yes. I think most of the questions have been asked and answered already. But maybe just to clarify, did you say that we should expect, Simon, some contribution from the bone marrow application in EU here during the fiscal year in H2? Was that correct? Simon Østergaard: Yes. It's -- so we're building up the funnel, but we do expect that -- so the question is how long time does it take for the labs to evaluate it before they place the order and we ship to Sysmex. However, we are positive that we should start selling and see invoices, so to speak, in the second half and in particular, in Q4. That's our ambition, definitely. Simon Larsson: Yes. Yes. I think also this was touched upon before, but on the methanol-free [ reagents ], obviously now available in EU with Sysmex. Is this more also a second half thing? Or could we see something here already in first half? Simon Østergaard: Yes. I think for EU, I think the methanol-free stain represents a growth opportunity in general because it's a better value proposition. However, given the market share we have on the route and there is markets where we have a very low market share where there's plenty to do and there's markets where we have very high market share. But we will cannibalize a little bit in Europe. So that's my point that we may transfer certain classic stain customers to methanol-free in Europe. In the U.S., we expect that we will gain share as we start pushing this because there, we have 0 market share. We own the market together with Sysmex, but reagent-wise, this is when we start with the methanol-free. So there, we will gradually gain customers as they convert their engines and the line is down, then we expect to place methanol-free stains gradually. That contribution for 2026 is probably somewhat limited because it's also depending on the launch and then there is a phase where the customer would like to try it out. So therefore, we would be a little bit conservative on estimates for contribution from methanol-free in the U.S. I hope that explains the situation, Simon. Simon Larsson: Yes, yes, definitely. And could you remind us roughly the difference in price between the methanol-free stain and the legacy stains from RAL, just in the case of cannibalization, I mean, what's like the net effect can be? Simon Østergaard: No, I'm not going to go to the pricing piece also for competitive reasons. But there will be a little bit of a lift. But I would say -- remember, this is -- the hematology reagents are a little bit commoditized. It's high volume, but it's not sophisticated chemistry. So we will raise the price, but it's -- you cannot go for extra sort of top margins in this market. Simon Larsson: No, no, that's understood. My final question relates to the FPM technology. You sound quite upbeat in the CEO letter, I think, around it and the prospects. So I was just a bit curious to learn about sort of what a potential partner could look like? Do you expect that to happen within the hematology market where you are present already today with your current existing partners? Or could this also be a new partner in an adjacent area? Just high level, if you could say anything about that. Simon Østergaard: No, I think, yes, high level, I'd say definitely the position we have where we lead the hematology space, we are very confident, and I'm glad that I transmit the positive and confident attitude because that's what we have. So we are very -- we are now at a stage where we are confident to protect and grow our business in the hematology arena. The adjacent areas, this is where we've also, throughout 2025, matured the technology to a level, so that we've talked about cytology, we've talked about pathology. We're confident that we can actually build instruments for those segments. But there are other adjacent areas in the clinical space and in the research space, where we believe that the FPM technology, given the image quality, given also the speed, but the depth of focus. And there are a number of features where we believe we can disrupt those segments. Those will be players in the microbiology arena, in the hematology/cytology -- sorry, in the pathology/cytology arena and in the life science space. So now we're in a situation where we can engage more, let's say, fundamental and more substantially with partners because they can see what we can, and it's not just IP rights that we have acquired. So that's why we are pushing our communication a little bit further because we are confident that we sit on a disruptive microscopy solution here. And of course, we are looking forward to disclose partners or improvements as we go along. So yes, so that's, of course, our goal. Operator: The next question comes from Christian Lee from Pareto Securities. Christian Lee: Yes. I have one follow-up regarding the order intake. You mentioned that you reached record levels in the quarter from larger integrated networks in the U.S. Did you deliver most of it in Q4? Simon Østergaard: Yes. Yes, that may be worthwhile sort of communicating that the order intake, it is also shipped. And then we believe we still have momentum for Americas. So yes. What you see is what is shipped, that's what we booked for Q4. So that is correct. Christian Lee: All right. But do you see any risk of inventory buildup impacting Q1 in the U.S.? Simon Østergaard: In the U.S., I'd say roughly speaking, maybe a little bit for smaller instruments, but not necessarily for the larger instruments. Christian Lee: All right. And could you please give us some comment on the outlook in the other regions regarding the instruments? Simon Østergaard: Yes. I mean, I think that's along the lines of what we've said with the momentum we've seen in the different regions. So we believe that translates into orders. Now the business is fluctuating a little bit. And for Americas, we have relatively good visibility. It's a little bit harder for us for Europe because it's a consolidation of orders that comes from multiple countries via [ separating ] via the supply chain of Sysmex and then it comes to us. So there, we actually have less visibility. What we hear is that there is -- this is what we communicate and we have seen it over the last couple of years that there's a fundamental interest and -- for our solutions. And we see no reason why that shouldn't stop. And then, of course, we may have some fluctuations per quarter. But fundamentally, we believe we're in a pretty good situation also now that we are launching new software, et cetera. That makes us believe in the future. APAC, I would say we think we have good opportunities, incremental business in Australia and New Zealand. There could be some opportunities also in Japan. And then as you know, we are now manufacturing our integrated system in China. So that allows us to participate in domestic tenders where you have to be a domestic player and our products is registered in China as a -- being a Chinese -- coming from a Chinese legal entity. So over time, we still believe in China. However, we also know that this is where our competitive -- our competitor is strong. So we're up against that in China. But it's a huge market. So we believe that there's certainly a position for Sysmex elevation out there. Operator: The next question comes from Ludvig Lundgren from Nordea. Ludvig Lundgren: Yes. Just another follow-up on the reagent side. So that was a bit weaker in Q4 when comparing to Q3, but Q3 was, of course, very strong. So I just wonder like is an average of this a fair assumption going ahead? Or like what would you say is the run rate of reagents currently? Simon Østergaard: No, I agree. I think Q4 was a little bit weak, both on the hematology side, even it was 10% organically, but we were flat, if not negative on the non-hematology proportion. So we had a big tender where we expected -- we've been working on that throughout the year, where we didn't ship products. So we were a little bit negative on that. So I think Q4 stands out as somewhat of a soft quarter on the reagents, and we expect it to bounce back and especially with the growth coming from the hematology where -- which represent approximately 2/3 of our reagent business. Ludvig Lundgren: Okay. Great. And a follow-up to that, like what is a fair growth rate that you would expect for the hematology business? Like can this grow double digits looking into... Simon Østergaard: Yes. I'd say historically, we've been landing at probably lower double-digit for the hematology. And I see no reason why we should -- it's a considerable business. So it takes more to change the growth, so to speak. However, with the gradual increase, we've seen the 80% growth we have on the hematology side in APAC. However, it's a small contribution, obviously. Total revenue out there this year was SEK 9 million. But still, it's growing. And then as we start over the next coming years to get into the U.S., I think that's where we can probably even more ambitious of getting higher growth rates for the company in the revenue bucket because this is really incremental growth that comes in, while we still believe that we have opportunities to grow double-digit in Europe, where we have a profound footprint. It's really a big thing for us that we can finally enter the U.S. given the fact that our -- the Sysmex smearing device can now host the methanol-free stain. So it is exciting for the coming years to start and build that market. Ludvig Lundgren: And would you expect some incremental sales in the U.S. already in '26 from this? Simon Østergaard: Yes, I would expect it, but I don't want to overdo it. I would say that I'm much more -- if I can see traction from the ones starting to use methanol-free, that would be our -- really our goal, but it will translate into some revenue, but it's at the end of the year, I would expect. So that would put us in a situation where it's confirmed in the market, and that gives us a good platform to -- for growth contribution in '27. I think that's the way to look at it. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Simon Østergaard: Yes. Thank you very much. And again, thank you, everybody, who called in and not the least to the good questions that gave us a meaningful report out here today for 2025. I want to sort of finish up the call by saying that I think what we have demonstrated throughout the previous year, both on commercial arena, but also on our investments and the organization's ability to translate the investments into to meet very, very crucial strategic milestones. That means we are set up to continue our position of leading digital cell morphology into the future. So thanks to our team for the relentless effort that you all do. But also thanks to our strategic partner organizations spanning from Japan and all across all regions around the world. I think that is key. And then finally, I also want to send my sincere thanks to our entire group of hematology professionals who are actually using our solutions on a daily basis. And amongst that segment, a special thanks to the ones who are providing us with feedback to our development programs and/or who has participated in our clinical validations, which has been a considerable part of the investments. But again, the good example is the bone marrow CE Mark that we, of course, want to leverage for a global product. So I really -- a big thanks to our employees, our partners and our professionals that we work with as customers. So with that, thanks for dialing in, and we are looking forward to actually be back with the interim report on the 24th of April. And then we have our Annual General Meeting for the April 28. So thank you very much.
Operator: Welcome to the Geospace Technologies First Quarter 2026 Earnings Conference Call. Hosting the call today from Geospace is Mr. Rich Kelley, President and Chief Executive Officer. He is joined by Mr. Robert Curda, the company's Chief Financial Officer. Today's call is being recorded and will be available on the Geospace Technologies Investor Relations website following the call. [Operator Instructions] It is now my pleasure to turn the floor over to Rich Kelley. Sir, you may begin. Richard Kelley: Thank you, Katie. Good morning, and welcome to Geospace Technologies conference call for the first quarter of fiscal year 2026. I am Rich Kelley, the company's Chief Executive Officer and President. I am joined by Robert Curda, the company's Chief Financial Officer. In our prepared remarks, I will provide an overview of the first quarter, and Robert will then follow up with more in-depth commentary on our financial performance as well as an overview of our financials. I will then give some final comments before opening the line for questions. Today's commentary on markets, revenue, planned operations and capital expenditures may be considered forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on what we know now, but actual outcomes are affected by uncertainties beyond our control or prediction. Both known and unknown risks can lead to results that differ from what is said or implied today. Some of these risks and uncertainties are discussed in our SEC Form 10-K and 10-Q filings. For convenience, we will link a recording of this call on the Investor Relations page of our geospace.com website, which I invite everyone to browse through and learn more about Geospace, our subsidiaries and our products. Note that today's recorded information is time-sensitive and may not be accurate at the time one listens to the replay. Yesterday, after the market closed, we released our financial results for the period ended December 31, our first quarter of fiscal year 2026. For the 3 months ended December 31, we reported revenue of $25.6 million with a net loss of $9.8 million. This past year was not without its challenges, many of which are reflected in our first quarter performance. We continue to operate in an environment shaped by economic uncertainty. Inflation drove up material costs faster than we could adjust pricing, tariffs impacted margins and supply chain challenges forced us to carry higher inventory costs. With that said, we remain committed to what we can control: serving our customers; running the business efficiently; and making smart long-term decisions that benefit our clients, our shareholders and our employees. Overall, I am encouraged by how our organization performed in this difficult operating environment. We continue to invest wisely in our future, advance our strategic initiatives and leverage innovative technology to further diversify our business. These efforts position us well to drive sustainable growth and long-term value for our shareholders. The Smart Water segment continues to operate in a stable yet increasingly demanding environment. As is typical of the first quarter, revenue was reduced due to seasonal deployment schedules and the timing of municipal government budget cycles. However, long-term demand for water infrastructure, treatment and management services remains strong, driven by population growth, urbanization, aging infrastructure and heightened regulatory and environmental standards. We are expanding the geographic reach of our sales and marketing operations where these pressure points are most acute, where demand criteria exists and our technology offers significant added value. At the same time, the industry faces challenges, including rising operating costs, climate-related variability, evolving compliance requirements and the need for sustained capital investment. These dynamics reinforce the importance of prudent planning, operational discipline and long-term asset stewardship. The environment surrounding our Energy Solutions segment is defined by uncertainty and change. The global energy demand remains resilient, reflecting the essential role that oil and natural gas play in supporting economic activity, industrial production and energy security. We were encouraged by the award of the large Permanent Reservoir Monitoring contract in fiscal year 2025, which reinforces the strength of our capabilities and marketing position. In addition, our Pioneer land node solution continues to drive interest in the market. We have completed several sales and anticipate additional sales later this year. At the same time, the sector faces ongoing volatility driven by geopolitical events, inflationary pressures, regulatory developments and evolving expectations from investors and policymakers. While commodity prices have fluctuated over the past year, these movements reinforce the importance of maintaining a disciplined approach rather than reacting to short-term market signals. The long-term fundamentals of our industry remain intact, but success requires caution, adaptability and operational excellence. Our Intelligent Industrial segment continues to generate steady predictable revenue from our industrial sensors, imaging products and contract manufacturing solutions. As previously announced, we strengthened our security portfolio with the acquisition of GeoVox Security, the exclusive licensee of a human heartbeat detection algorithm developed by Oak Ridge National Labs. Since the acquisition, customer interest and engagement has exceeded Geovox's historical levels, driven largely by the reduced product form factor and the introduction of a monthly subscription model, which simplifies procurement by enabling purchase orders under operating budgets rather than capital expenditures. Combined with the consistent revenue from our long-established industrial product lines, this recurring revenue model positions the Intelligent Industrial segment for growth in 2026 and beyond. Over the past year, we prioritized safe and reliable operations across our company. We manage costs carefully, maintain capital discipline and continue to strengthen our strategic position. Our investment decisions were guided by conservative assumptions and rigorous return criteria, ensuring that capital was deployed where it could generate durable value. Looking ahead, we expect continued uncertainty in global markets. While challenges remain, we believe the company is well positioned due to the quality of our portfolio, the experience and professionalism of our workforce, and our conservative financial framework. We will continue to evaluate opportunities carefully, avoid speculative investments and remain guided by returns, risk management and long-term shareholder value. I will now turn the call over to Robert to provide more detail of our financial performance. Robert Curda: Thanks, Rich. Before I begin, I'd like to remind everyone that we will not provide any specific revenue or earnings guidance during our call this morning. In yesterday's press release for our first quarter ended December 31, 2025, we reported revenue of $25.6 million compared to last year's revenue of $37.2 million. Net loss for the quarter was $9.8 million or $0.76 per diluted share compared to the first quarter of last year's net income of $8.4 million or $0.65 per diluted share. First quarter revenue from the company's Smart Water segment totaled $5.8 million for the 3 months ended December 31, 2025. This compares to $7.3 million in revenue for the same period a year ago, a decrease of 21%. The decrease in revenue is due to lower demand for the company's Hydroconn cable and connector products. The Energy Solutions segment revenue totaled $14.6 million for the 3 months ended December 31, 2025. This compares to $24.3 million in revenue for the same period a year ago, a decrease of 40%. Revenue for the 3 months ended December 31, 2025, included $10.6 million of Pioneer and related equipment for an order to Dawson Geophysical announced in August of 2025. However, in comparison, revenue for the first quarter of the prior year included a $17 million OBX marine wireless product sale. Additionally, the reduction in revenue for the first quarter of fiscal year 2026 was due to lower utilization of the OBX rental fleet. Revenue for the company's Intelligent Industrial segment totaled $5.1 million for the 3-month period ended December 31, 2025. This is compared with $5.6 million for the same year ago period, a decrease of 8%. The decrease in revenue for the 3 months ended December 31, 2025, was primarily due to lower demand for industrial sensor products. This decrease was partially offset by an increase in demand for our contract manufacturing services. As of December 31, 2025, the company had $10 million in cash and cash equivalents. Additionally, the company's working capital was $52.2 million, which includes $25.4 million of trade accounts and financing receivables as of December 31. The company continues to own unencumbered property and real estate in both domestic and international locations. In fiscal year 2026, management anticipates a capital expenditure budget of $5 million and does not anticipate additions to the rental fleet given current market conditions. This concludes my discussion, and I'll turn the call back to Rich. Richard Kelley: Thank you, Robert. This concludes our prepared commentary, and I will now turn the call back to the moderator for any questions from our listeners. Operator: [Operator Instructions] Our first question will come from [ Martin Lorentzon ], private investor. Unknown Attendee: Can you talk about the strategic importance of the heartbeat installed base? Specifically, when should we expect a meaningful portion of those contracts to come up for renewal? And if that installed base were fully subscription-based today, which I realize it's not, but just hypothetically posing, what would be the implied annual recurring revenue for us? Richard Kelley: Thanks for the question, Martin. So I'll break it into two pieces. The first one is that we have reached out to the historical installed base. The prior system was designed to last for many, many years. However, that equipment is aging out. And there is obviously interest in replacing their legacy equipment with the new subscription model. However, that base is pretty diverse and it's international in nature. We've not really run the numbers if we did 100% replacement, knowing that really wasn't possible. So I don't have a good answer for you. But that clearly would be -- there's several hundred installed bases, so you can sort of imply what that might be. That's a good question. Operator: [Operator Instructions] Our next question will come from Bill Dezellem with Tieton Capital. William Dezellem: I have a group of questions. First of all, on the government's -- the U.S. government's website, there is a reference to Homeland Security doing an RFP for persistent surveillance detection system for 15 miles. Did you all bid on that? Richard Kelley: Bill, thanks for the question. So even though that's out there, if you also look, they actually did a direct award. We followed up with that. And this administration in order to expedite contracts has taken the mindset to do direct awards where applicable. And so in the areas of interest, they did direct awards. We were not direct awarded in relation to that. So there is no expectation of a further RFP. William Dezellem: Okay. And then shifting to Petrobras and that contract win. Would you discuss the time line for the deployment of that and how you anticipate revenues will be reflected over time? Richard Kelley: Do you want to speak to the revenue recognition? Robert Curda: The revenue recognition will be an overtime model, which will be very similar in nature to percentage completion. So as we accumulate cost against what our total anticipated cost, we'll recognize revenue proportionately. Richard Kelley: And we anticipate recognizing revenue for the first time in Q3. Robert Curda: Yes, beginning in Q3. Richard Kelley: And that project is slated to -- as you remember, Bill, in prior discussions, the goods contract, which is our portion of that, is expected to be completed in Q1 of 2027. So we'll have revenue recognition through that. And then on the actual installation, that's the consortium that we're partnered with in Brazil, and there'll be a small other portion of revenue recognition later in 2027. William Dezellem: And so as we shift into Q3, what is your anticipated revenue level that you would experience in that quarter and then in Q4? Richard Kelley: We're not really speaking in actuals at this time, Bill. But if you can imagine, I mean, the portion of the contract, if you divided it over the next 3 quarters, roughly, it will be slightly lower in the first quarter as we build up production capacity, full capacity in Q4 going into Q1 and then downgrading at the end of Q1. So you can think about the revenue curve being kind of a curve versus a fixed number. William Dezellem: Got it. And literally, you do think it will be over 3 quarters that this will be recognized? Richard Kelley: The expectation is that we ship this equipment out in Q1. So yes, I mean, the goods portion should be completed in Q1, possibly depending on the customer's final schedule in Q2 of 2027. Robert Curda: We'll continue to recognize revenue on the services contract as services are performed... Richard Kelley: Afterwards. Robert Curda: Afterwards, yes. William Dezellem: And Robert, roughly how large will that be? Richard Kelley: The total value of the contract, which we've announced in the past is in the $90-ish million range. Robert Curda: With the vast majority... Richard Kelley: We've never announced what the difference is between the goods and the services, Bill. Robert Curda: The services is a much more insignificant portion in comparison to the goods. William Dezellem: Okay. That is helpful. And then let's shift, if we could, to GeoVox. Would you provide a detailed update on the deployments that you have experienced to date and on the pipeline of the -- on essentially the pipeline? Richard Kelley: So we've just started shipping the units this quarter. So we'll have revenue recognition in this quarter, which we'll announce at the next call, the next release. We anticipate a couple of hundred units in this year and then that building over the subsequent periods. There is a tremendous amount of interest, both domestically and internationally in that. William Dezellem: And so if you think about the pipeline, what's the magnitude or what's the size of it? You mentioned you have a couple of hundred units that will be deployed, it sounds like, starting next quarter? Richard Kelley: The first deliveries are this quarter, ramping up into next quarter. As far as the pipe, I mean, we anticipate -- we've talked about this in the past. I mean, the overall market size is in the thousands, it's not tens of thousands. And so we anticipate over the next couple of years, reaching a saturable -- close to saturable level. William Dezellem: And is the market continuing to be prisons and jails, essentially incarceration facilities? Richard Kelley: Short term, yes. And then, of course, border crossings, and then we are trying to expand into secured sites like nuclear power facilities, power transfer stations where you want to protect the egress and ingress on the site. Robert Curda: Yes, that's really the new market we'll be moving towards as we develop that product line. William Dezellem: And relative to the border, where does the Border Patrol's interest lie in this product? And how large could that be? Richard Kelley: They're definitely interested in the technology. I mean they utilize a couple of different technologies today. They're obviously looking at ways to make it more efficient and effective. As we've said in the past, the number of trucks that are checked coming across the border are in the single percentiles. They would obviously like to increase that. And they do like the efficiency as far as the timeliness of the system. There are 300-ish border crossing points in the U.S. alone. So if you talk about multiple units on each site to build -- check multiple trucks, it could be 1,000-plus units for CBP. William Dezellem: That's helpful. And then two additional questions. You did increase the contingent consideration on one business here this quarter by, I think, $196,000. Which business was that? Robert Curda: It's related to Heartbeat Detector. William Dezellem: Okay. And then lastly, what's the prospects for the rental fleet seeing activity levels pick up a little more on the deployment front? Richard Kelley: So overall, the ocean bottom node business as of last year, expected this year is still to be flattish. We have seen a number of requests for quotations going into the summer season, but none of those are developed into orders yet. So the volume has increased as far as requesting information, but we've not seen any actual impact on orders yet. Operator: [Operator Instructions] We do have a follow-up from Martin Lorentzon. Unknown Attendee: Just on PRM, could you disclose the number of parties you have ongoing discussions with, excluding Petrobras? Richard Kelley: No, due to confidentiality, we're not able to discuss which parties. There's a couple of other companies we're talking to, but we're not allowed to disclose those discussions at this time. Unknown Attendee: And just a number of those? Is it one additional party? Or is it two or three, without going into... Robert Curda: It's multiple. Richard Kelley: I would say it's multiple, Martin. Operator: At this time, this concludes our question-and-answer session. I'd now like to turn the meeting back over to management for any final or closing remarks. Richard Kelley: Thank you, Katie, and thanks to all of you who joined our call today. We look forward to speaking with you again on our conference call for the second quarter of fiscal year 2026. Thank you, and have a good day. Operator: Thank you. That brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Murphy USA Fourth Quarter 2025 Earnings Q&A Call. [Operator Instructions] I would now like to turn the call over to Christian Pikul. Please go ahead. Christian Pikul: Thanks, Carly. Good morning, everybody. Thanks for participating in our first Q&A only session covering fourth quarter and full year 2025 results, I would remind everybody to refer to the forward-looking statements commentary we included in our prepared remarks yesterday, which I hope you all took the opportunity to listen to or read. With me this morning are Mindy West, President and Chief Executive Officer; Donnie Smith, Chief Accounting Officer and Interim Chief Financial Officer; and Ash Aulds, Director of Investor Relations and FP&A. [Operator Instructions] Carly, you can go ahead and open us up for questions. Operator: [Operator Instructions] Your first question comes from Bobby Griffin with Raymond James. Robert Griffin: Yes. I like the new format getting that out there after the press release. I guess my first question is more on the competitive comments that you put in the prepared remarks. Just curious if you can kind of conceptualize where the competitive kind of pressure is versus 6, 8 months ago? Is it getting worse or getting better? And then, I guess, more importantly, after you see that initial competitive response of new entrants how long does it take the store that's impacted to kind of come back to what you'd say are company-wide trends or company-wide averages. Mindy West: Right. That's a great question, Bobby. Our same-store gallons in particular, are impacted by those factors of competitive intrusion. And really the pressures vary market by market. So for instance, in 2025, some of our stores had average per store month volumes that were actually higher. We saw that in 9 states that we operate in. Margins were higher in 10 states. . But those markets are in different stages of competitive intrusion and pricing behaviors. When we look at Texas, has both higher margins, higher volumes. Colorado and Florida, though had lower volumes and lower margins but those states over time are going to look more like Texas as they mature and stabilize and those new competitor entrants their share and then ultimately raise prices because they have to make a return on their sites, too. So our new stores also take share from others and they're outperforming the network. But same-store remains under pressure. So we have to invest an extra penny or so in order to maintain volumes. So typically, when a new entrant enters the market, they do exactly what we do. They price very low at the outset while they try to gain their share from the other competitors that are already entrenched in the market and that could take 3 months. It could take 6 months. It could take a year. And then it depends on how many stores that particular market entrant wants to build and that -- and what density do they want to build in that market as to how long it's going to last. But ultimately, everything goes back to normal and margins rise and we are able to increase our margins as well. So in a way, we actually like competition because while it creates a disruption when it's happening, as that market matures and stabilizes and the winners have acquired their share of customers, then the higher margins ultimately follow. And we're disciplined where we build and continuously upgrade. So we're going to be there for the long term and we're going to be a winner also. Robert Griffin: Okay. That's helpful. And I guess, secondly for me, and I'll turn it back over. The comment there about the step-up or the acceleration in the maintenance capital spending, I found interesting. And more so and just like the fact about it limiting disruption, is there any -- can you put any more details around how big of a drag those, call it, disruptions have been? Or is more this step-up just kind of getting ahead of what could have been a drag. And just kind of trying to see if we've been -- there's been an EBITDA impact that actually will start to go away after you do this maintenance capital step up. Mindy West: Sure. What I would say is it's more of the latter. It's more of a getting ahead of things before it happens. We have been entirely within a break fix mode for our history. That means that maintenance comes in lumps, but it's difficult to predict. And as our market -- as our fleet ages, we found the need to go ahead and proactively invest in equipment that is end of life or near end of life because that does 2 things. It results in maintenance expense that we can predict. It also enhances uptime with that equipment, so enhances the customer experience and therefore, their loyalty to us. So the kinds of things that we're talking about doing is a step-up in proactively replacing some dispensers HVAC units, space, things like that, which are going to cost us a little bit in capital from the beginning. But we'll improve it in uptime and store performance over time. And we think the projected savings from just doing that is roughly $6 million to $8 million, somewhere in that range of maintenance cost -- maintenance expense that we would avoid by doing that. And then, of course, the impact on our customer goes even beyond that by being able to serve them in a more consistent fashion. Operator: Your next question comes from Bonnie Herzog with Goldman Sachs. Bonnie Herzog: I actually had a question on your long-term guidance, I guess, through '28 and I guess I'm just thinking about it, this for modeling purpose guidance this year of $1 billion, it does imply stronger EBITDA growth in, I guess, '27 and '28 to ultimately reach that long-term guidance of EBITDA target of the $1.2 billion. So I was just hoping maybe you could talk about the drivers of maybe faster expected growth in the out years? And where you see maybe the most upside or maybe most downside. Just trying to think through the potential for you to kind of meet that long-term EBITDA guidance? Mindy West: Great question, Bonnie. And what you're seeing in our EBITDA guidance is really a function of several factors for 2026 so the guidance is capturing the timing and scale impacts of our new store program. So as we get to a level where we can sustain 50-plus NTIs a year and those classes mature, then that EBITDA contribution becomes more visible because we would expect that 50 stores can contribute $35 million to $40 million of EBITDA once they complete their 3-year ramp. However, for this year, when an entire class of 50 from last year opens at once, it does create a temporary drag that outweighs the strong 2- and 3-year contributions that we are getting from our earlier smaller classes. So it isn't that the stores aren't performing, it's about scaling up our program to deliver the 50-plus stores going forward. So that's one of the factors is us just being able to build 50-plus stores a year and then ramping as expected. The other factor is in a more normalized, more volatile fuel environment, our EBITDA growth will become even more sustainable. Because, as you know and we've talked about at length, the current fuel environment does impact our same-store performance that the new stores right now are not able to offset this early into their ramp, and that's going to be a headwind this year. Now when you look at the path to the $1.2 billion, it really depends on 3 levers only 2 of which we can control. We talked about one, the normalized fuel environment. That's one unfortunately, we cannot control sustaining the 50-plus NTIs annually, we can, and we are in a great position to do that and accelerate our growth there, also executing on our initiatives. So making our business better is also a material driver of that future growth. So when the environment changes, I think investors are going to be very surprised about the earnings power of this business. But if I was going to handicap how can we achieve $1.2 billion. What am I, what are the pluses and minuses I believe in the pipeline that we have, I believe, it's a quality pipeline that will deliver the $35 million to $40 million at ramp and a 50-plus store ramp per year. I believe in our ability to achieve our initiatives. But again, the $1.2 million does depend on a little bit more volatility and I think as we saw in the fourth quarter, when we can just get brief spurts of that, our business is functioning well and we are attributing the value to the company that we would expect in periods like that. But we do need a little more help from the macro environment in order to get to the $1.2 billion. Bonnie Herzog: Yes. That's super helpful. And honestly, it makes a lot of sense. And yes, volatility is your friend as you kind of suggest. And maybe a quick follow-up then on that because also just in the context of that, the fuel margin, I know, again, it's for modeling purposes, but it did suggest a 30.5% CPG. And so if I'm right, I think that's maybe 4 years of flat to down fuel margins. So just trying to think through that for how you're kind of thinking about fuel margins. And again, and then also just the breakeven costs? Like how have they been trending recently? Mindy West: So for fuel margins, our outlook for the year really reflects what we believe is the highest probability and most likely environment. So it's -- we think it's going to still be characterized by relatively low volatility as we go through the year. We think we're going to see relatively stable and still low fuel prices, which impacts our business model because it makes our customers on margin a bit less price sensitive. So we believe it is a base case similar to last year. And of course, we're comping several years ago when we experienced the other extreme of things, which we benefited from tremendously where we saw really high volatility, higher prices, which made our offer even more compelling so we are going to focus on the things we can control and improve our business and the earnings power, including levers that in the future could be more fuel immune. But for right now, for the fuel margin, we think that $0.30-ish all in is right where we need to be. And it's still reflective of that structural component because to be able to earn margins at this level despite the fact that we're putting a $0.01 or $0.02 on the Street. And despite the fact that we have low volatility is really speaking to that structural element that, that is still there and supporting the stock, the margin. So when you talk about the breakeven, what I can say is the cost to serve is really not going down and that breakeven component is still alive and well and playing out industry-wide. So the fact that margins were flat this prior year given the low volatility and really nothing that was there to macroly support margins being that high shows you that those marginal retailers are still requiring those higher margins to break even, much less continue to invest in their business, which they're not able to do, and we are able to do that. Operator: Your next question comes from Irene Nattel with RBC Capital Markets. Irene Nattel: Before I get to my question, I just wanted to clarify something you just said, Mindy, which is, you're still planning on putting $0.01 to $0.02 a gallon on the Street this year and that -- and even with that, you're still looking at sort of 1% to 3% same-store volume pressure. Is that correct? Mindy West: We still think that we will continue to see volume pressure in this lower price environment, and we will still need to protect our position, especially against competitive entrants in certain markets by putting some sense on the Street in order to do that and maintain our competitive position. So yes. Irene Nattel: And then just moving on to the back hard. Can you talk about how you see the nicotine environment unfolding this year? We had some bright spots last year. How do you think it plays out that in 2026 and moving ahead? Mindy West: I think that we are still the ideal retailer for manufacturers as they help our customers progress down the risk spectrum from cigarettes to other products. We will continue to be very promotion-driven throughout the year. And I think that we have delivered strongly on promotions. I think you saw that earlier in the year when we have a promotion, our sales force can get behind that and really sell it. We are having our national leadership conference over these several weeks. I just got home from St. Louis, where we toured the Midwest. We had all our store managers from the Midwest in one location a couple of weeks ago, we were in Houston for the Southwest. And I can tell you, all of those store managers are so excited and they are very promotion-driven. They are very contest-driven. And I think that, that culture really underpins our ability to be the most effective use of our manufacturers promotional dollars and meanwhile, we still continue to take share in cigarettes and we will continue to do that. But the other categories, the other nicotine categories are growing strongly, and we don't expect that to slow down any. Now we do realize that we're going to be comping a very special one-off promotions. So we are not anticipating in our guidance being able to duplicate that but we have put in our numbers accelerated promotional funding from what we had last year. Operator: Your next question is from Ed Kelly with Wells Fargo. Edward Kelly: Good morning I wanted to ask you about per store expense growth. You had a very strong year in '25 below the initial guidance that you had mentioned. The '26 outlook assumes that you'll still be running below that 5% level that I think at one point, you maybe thought was more normal in terms of run rate. I'm just hoping that you could talk about the drivers of that for '26 and then just taking a step back, what's the right -- the correct run rate over time for per store expense growth over the next few years? Mindy West: Great questions. Let me take that. And you're right. We have -- the team has done a great job of managing their expenses, so hats off to them delivering OpEx at only up 3.3% last year. It was really good. And obviously, our guidance is still forecasting that we're going to be below that 5% number. I'll talk about some of the drivers this year that we expect to maintain going into this year. We've done a lot of work with our store excellence campaign and our self-maintenance in particular, and just changing -- being able to change our card reader batteries, ourselves versus calling in a technician allowed us to save almost $2 million on maintenance expense last year. Our team has also done a great job of cutting overhead almost in half and that's attributed to our store managers just doing a great job with staffing and with scheduling and motivating their teams and running their stores more efficiently and then done a great job on loss prevention as well. We've moved some of the higher shrink items closer to the register. We also really dialed in on our cash loss and our merchandise inventory management. That alone allowed us to cut shrink by over $4 million, and that's inclusive of price increases, growth. We were still managed to save over $4 million. So we expect the impacts of those things to continue and even amplify. And then things like I talked about with proactively going ahead and replacing some of our equipment those will earn some savings in our maintenance line over time. And then I think your last question was, what should you expect going forward? I would expect something around 4% going forward. And bear in mind, we are building a lot of new-to-industry stores. Those stores are bigger than some of our existing networks. So those are going to come with higher costs from the -- and especially in the beginning as we are going to make sure that those stores are fully staffed to make a really good first impression to our customer. And then, of course, the fuel on the merch will ramp over time. So a lot of the driver of our OpEx is actually the new-to-industry growth building the bigger stores. But we are going to hold the line on making sure that we are operating as efficiently as possible. Operator: Your next question comes from Jacob Aiken-Phillips with Melius Research. Jacob Aiken-Phillips: I just wanted to double quick on the larger format stores and some of the cost pressures. I think last year, there was a dynamic where a lot of stores opened towards the end of the year, beginning of the year. And the winter storm in February like exacerbated some of those cost pressures. We had this January storm and I guess, February is still pending. But how should we think about like the 1Q dynamics there? And then the evolution of that or cadence throughout the year? Mindy West: What I would tell you is we will experience some higher maintenance costs from this first quarter winter storms, but we also got -- we're the beneficiary of some higher margins to heading into those storms. So we think that on balance, all that is going to offset and was fully baked into kind of the $1 billion-ish that we already talked about. So you are correct that when we build a bunch of stores, these larger stores, all at one time, those come with full OpEx really from day 1, while our fuel takes a bit of time to ramp and merchandise takes a full 3 years to ramp. And then, of course, the fuel does ramp faster, but we are also probably aggressively in order to take that share as well. So that definitely has an impact on our overall OpEx. And I would say that half of it or so is it just attributable to those larger stores. Jacob Aiken-Phillips: Got it. And then just on the small tuck-in acquisitions like you just did 4 and then could potentially do some this year. It's a newer dynamic. And I'm just curious what exactly do you look for? And I know it's early, but like what do you envision like economic improvement of the stores when like you get the Murphy's merchandising into the stores? Mindy West: We really like that Colorado acquisition in particular because we got to pick and choose which ones we wanted versus taking a whole portfolio where you get the good and the bad and you just have to make the best of the bad. In this case, we got the kind of cherrypick. And it was a market in which, one, we wanted to add density. This was a very quick and easy way to do it. It was also an economic way to do it. And we were able to get those stores open in what, 30 days or so, less than 30 days, we were able to put our signage up get our assortment, how we wanted to get those stores back open. So we were able to hopefully retain most of the customer base that was already going there and then leverage our Murphy Drive Rewards loyalty app and our density of stores in that market to drive more traffic into that store. So we like it from the standpoint we got to cherry pick it. It was a market in which we wanted to add density. It also allowed us to do that very quickly without having to go through -- we like organic growth, but it takes a long time to go through that, let's pick the site, let's permit the site, let's construct the store, let's get all our opening permits. That just takes a long time. So having the ability to bolster that with some of these maybe smaller onesie twosie [ fivesie ] type acquisitions. We are certainly in the market looking at some of those right now. Jacob Aiken-Phillips: Thanks, Mindy. Congrats on the new role. Mindy West: Thank you very much. Operator: Your next question comes from Pooran Sharma with Stephens Inc. Pooran Sharma: Just wanted to maybe start off with understanding the contribution from the NTIs in year 3. I think you mentioned $35 million to $40 million in yesterday's prepared comments and today as well. And I think you mentioned in the prepared comments, you maybe expected? Was it 2 years worth of these 50 class builds contributing $35 million to $40 million. So higher level, should we be thinking that you're going to get about $70 million to $80 million in contribution dollars from these stores and then that would rise to around $100 million to $120 million by 2028 or just wanted to get the right way to frame up that contribution? Mindy West: It's more of a stair step. And greater, we're always going to be -- for the foreseeable future, we're going to be building a new class of 50, which are going to be a drag on that as they didn't incur full cost, but have to go to ramp. So what we said was we expect each new build cost of 50 stores to generate between $35 million and $40 million of EBITDA at maturity after their 3-year ramp. So as we enter 2027, we will have the 32 new stores from our 2024 bill class, the 51 stores from our 2025 bill class and the 45 to 55 from this year, helping to grow EBITDA in 2027. So cumulatively, this will begin to move the needle even if the fuel environment does not normalize and we expect and continue to potentially increase our ability to add more than 50 stores in the network as we look even beyond 2027. So that's why we say looking back, 2026 will be viewed as an inflection point in our ability to deliver sustained EBITDA. But the $120 million is a bit extreme because you're going to still have that 50 new stores coming on, which in that first year, especially or a decrement to EBITDA. Pooran Sharma: And I wanted to maybe understand kind of the higher-than-expected PS&W and RINs contribution for the quarter. I wanted to understand more specifically what the dynamics at play were during 4Q? And as we look and think about PS&W margins in 1Q I know you're expecting $0.05 for the year. But just with the run-up in RIN prices, should we expect PS&W margins to stay a little bit above that $0.02 to $0.025 per gallon range you'd previously mentioned? Mindy West: Sure. When you compare the fourth quarter versus prior year on PS&W, this years were really supported by stronger arbitrage, stronger line space values. But less than prior year because we did have some downward movements in the price. So that's what's explaining that, but just there was a little more volatility in the fourth quarter than in the third quarter, for example. And so you saw the benefit of that in the PS&W line. As we look forward into the first quarter, obviously, these winter storms are having an impact on the network. It's also having an impact on price. Too early to say where we're going to end up on PS&W for the quarter at this point because the swings can be pretty dramatic. But safe to say for the full year, we think that we're still going to be within that band unless we can see some more prolonged volatility sustain itself but that's where we would expect PS&W to land for the full year, too early to say really for the first quarter. And then with regard to the RINs, as we always say, the price of the RIN is baked into the price of the gas we pay. So while there may be some temporary dislocations if RINs run up very quickly or run down very quickly, over the sweep of time, it all balances out. Operator: Your next question comes from Corey Tarlowe with Jefferies. Corey Tarlowe: Can you talk a little bit about what happened on the tobacco side from a margin perspective in the quarter? And then also maybe what to expect ahead there? Mindy West: Sure. And that's a great question. What you were seeing there, something we talked about frequently last year. So for the fourth quarter, it's really the timing of promotional dollars impacting that cigarette category, in particular, and the volumes. So importantly, though, although volumes were down, we did grow share of market in the cigarette category for both the 4-week and 13-week periods ending January 4. So our volumes did remain strong compared to the market. But keep in mind, these categories are highly promotional, so you won't necessarily ever see straight-line growth even on a year-to-year basis. But as we've demonstrated over longer periods of time, we do have -- we have significantly grown those contribution dollars in the overall nicotine category and we are definitely seeing strength in pouches and other products. And I will tell you, too, the business has already normalized in January, and we expect to continue to show consistent margin performance when viewed over time, but it can be lumpy quarter-to-quarter. Corey Tarlowe: Okay. Great. And then I have 2 quick follow-ups. I know we're lapping severe weather from last year. Can you provide any context around the storm impacts this year? And then also any impacts from changes in SNAP as well? Mindy West: Well, I would just reiterate what we said for January, it's shaping up to be a good month. We are lapping winter storms from last year, but we're not finished with the winter storms from this year because now we have one impact in the Carolinas and other parts of our network. So while we were pleased with January's results, that was one of the reasons, quite frankly, that we were not willing to increase the EBITDA guidance materially because we don't know what's going to happen for the rest of the year, and we know that we're going to have some impacts on the back end of these winter storms as well. So turning to SNAP though that is a great question. And we do have some exposure there, but it is relatively small. It's actually less than 2% of our sales but we did have those SNAP changes take effect January 1 in 5 of the states in which we operate, as you I'm sure know, they primarily affect candy, packed bev and specifically energy drinks. I'll share with you some data points, but I want to caveat these are very preliminary, but our early read suggest kind of a modest headwind in candy and energy drinks. We're going to continue to monitor the data, obviously, as the space is in, and we do expect some impact in the very discretionary categories, which is included in our guidance, by the way, we put in our guidance a headwind and I think it's roughly less than $5 million overall for SNAP. Our top EBT item, you might not guess it. It's actually Red Bull. So while some customers may pull back, we believe that most are going to continue to buy those products even if they are not eligible for the SNAP benefit. So there is some category noise there, but the overall impact to the business is modest. As I said, it's $5 million or less. Operator: Your final question comes from Brad Thomas with KeyBanc Capital Markets. Bradley Thomas: Mindy, I'll just add my congratulations as well on your first call as CEO. And I know that last quarter, the main message was around much of the leadership transition, keeping the core strategies of Murphy in place. But just wondering if I could ask directly, if there are specific areas that you think the priorities will change a little bit now that you've taken over? Mindy West: That is a great question. Thank you, actually for asking that. What I said in those certain terms, some things are going to stay the same. Our everyday low price strategy, our continuous improvement mindset capital allocation will remain unchanged. So when I think about it, it's really more of our culture that is evolving. So we're pushing for things like quicker collaboration, more nimble decision-making reorganized the company to create more clear roles in accountability. We've already made some leadership changes to help us work better together, remove some inefficient reporting structures and increase accountability. I can tell you people are excited because their work and ideas can have more impact and then that excitement ends up being infectious. And we have an incredibly strong platform to improve this business and are 100% dedicated to growing shareholder value. So our 5 strategic pillars in which we have grown the company since spin, are still intact. It's really just a culture shift, which I think is necessary to make sure that we are agile and adaptable and really unafraid to challenge ourselves and stretch further and try new things. So you may see us be and I hope you will see us be a bit more innovative going forward than we are in the past. And as we have these macro conditions pressuring our stores, we have accelerated competition. I think that's a smart thing to do. We need to be able to fight back in our business model, reducing our reliance on fuel and tobacco where we can, but still preserving the strength in both of those. We need to figure out how to attract and retain new customers, how to grow trips and spend and how to make our store's teams life easier and our stores more productive. And then what are those niches of opportunities of value that we can exploit. So we're going to be looking to innovation to support our core business and also drive for more business. And we're really already looking at it around 3 main pillars, which are our portfolio, our customer and advanced technology, and we're going to attack all of those types of opportunities and absolutely believe that we have untapped potential in this business to improve, not just our existing stores and serving our existing customers, but the ability to stretch for more with different stores and different customers. So I'm excited about the future. I know the team is too and stay tuned to see what we will deliver on this topic. Bradley Thomas: If I could squeeze in one last follow-up just on the QuickChek brand. I don't think I heard any commentary about how it performed in the quarter. Could you just address that? I mean, how you're thinking about its impact on EBITDA in 2026? Mindy West: Yes. Great question. It is continuing to exhibit stronger sales. Margins continued to be pressured. Traffic continues to be pressured. What we're doing really there is really simple. We are refocusing on the fundamentals of the business. We are focusing on the core, which are mainly coffee, breakfast and sandwich as our traffic drivers. We are simplifying the menu, rationalizing the assortment based on performance, not legacy, not what we've always done. So we're choosing where we win and really not trying to be everything for everybody. We're also focused on improving margin. We need to balance the innovation with cost and margin control because while growth is important, we have to earn money. I can't take growth to the bank. We have to take margin to the bank. So being disciplined around that. And then building a better operating model that simplifies operation, reduces complexity, enhances that customer experience because we're -- our speed to service is better. So overall, it took really just a recognition that execution and ability to scale are as important as idea generation because ideas which can't be implemented well or executed consistently are actually a bad idea. So I would add to that we have new leadership at QuickChec in that new structure and that will help speed up execution and also, I think, spark some innovation. So I really like where the team is headed and I believe they're focused on the right thing. So really appreciate you asking about that part of our business. Operator: There are no further questions at this time. I'll turn the call back over to Murphy's Presenter Panel for any closing remarks. Mindy West: Thank you for your time and participation on the call. All great questions. As we look to upcoming calls, I want you to know that we are committed to strengthening our core business while pursuing incremental sources of value that endure across the fuel cycle. And we are building from a very solid foundation, and I have solid conviction in this leadership team's capacity to unlock Murphy USA's next level of potential. So thank you again and I look forward to the next quarter's call. Operator: This concludes today's call. Thank you for participating. You may now disconnect.
Linda Hakkila: Hello all, and welcome to follow Konecranes' Q4 2025 Results Webcast. My name is Linda Hakkila, I'm the VP, Investor Relations here at Konecranes. And with me today, as our main speakers, we have our CEO, Marko Tulokas; and our CFO, Teo Ottola. Before we proceed, I would like to remind you about the disclaimer as we might be making forward-looking statements. As per usual, we will first start with presentations, both from our CEO and CFO. And after that, we will start the Q&A session. We are happy to answer your questions through the conference call lines. But now without any further comments, I would like to hand over to our CEO. Marko Tulokas: Thank you, Linda, and good afternoon from cold, but very sunny Helsinki. I'd like to start with some general statements. It was a really very strong year for Konecranes, and I'm very, very proud of our team and very proud to be part of the Konecranes team, particularly in a year like 2025. Konecranes has a very sound business model. We've been executing our strategy. And that, of course, in this sort of environment has really improved -- shown that an improved resilience in our results. There was a very uncertain environment last year. We focused on executing our strategy and focused on the most important things. The year started on uncertain terms, but we acted fast and early, whether it's on pricing, focus on execution or tight cost control. Towards the second half of the year, the market environment stabilized and particularly in the delivery side, it was visible, and that helped us to finish the year strong. And now when we look at towards 2026, we have a good order book in place, the structure is solid and our strategy for 2026 has a very good road map in place. So I'm really confident for year 2026. So now let's look at how the year turned out and then also how the quarter 4 look like. Throughout the year, the demand environment stayed positive overall. There was a lot of positive development in many customer segments and Konecranes' broad presence in different customer sectors and geographies, of course, helped us in this sort of volatile environment. Our orders were very strong, particularly in Port Solutions and Industrial Equipment. So we grew almost 12% in 2025 in comparable terms compared to 2024. The demand on industrial service instead was quite a tough demand environment. But even in this environment, we were able to strengthen our agreement base. We took very good care of our pricing and also made sure that we adjusted our cost base to the prevailing conditions. We also took care of our margins and our cost structure, good execution in our project business, and we continue to roll out our products according to our strategy. And that, of course, meant that we were able to complete the year with almost 1 percentage point improvement in the comparable EBITA at 14%, record high level. Moving on to quarter 4. And in quarter 4, our orders were also very good. So we continue very solid order intake and also sales. But it's also noteworthy that both decreased against a very strong comparison quarter of -- quarter 4 of 2024. So orders were down 4% and net sales roughly flat in comparable terms. Quarter 4 in 2024 had a very strong order intake in Port Solutions, but also in Industrial Equipment, where both actually had the second highest quarter of all time in Konecranes. And that makes quarter 4 of '25 also very satisfactory for us. Our order book continued to strengthen, and it was 3 percentage points higher or 7 percentage points in comparable terms. Our profitability improved and increased to 14.1%. It was really very good project execution in Industrial Service, Industrial Equipment and in Port Solutions, Port Solutions with very good margins, but with slightly lower volume. And we kept our cost control intact and had a bit of pricing and tariff tailwind, but less than we had in quarter 3. And of course, the order book improved, and that means a solid start for 2026. Now if you look at the market environment in general, how is the best way to describe it? Maybe one way to say that the market and the customers have maybe used -- got used a little bit to the uncertainty. So there is a cautious positive development in the capacity utilization rates as it is visible in this Industrial Service and Equipment slide, which shows the capacity utilization rates in the 3 main market areas. And our own funnels and our customer demand, how we see it. European sales funnels are good on solid level. There are some signs of improvement. But of course, customers continue to be rather cautious around this type of volatile environment. In the United States, the previously very strong industrial equipment funnel has somewhat flattened down. But on the other hand, on the service side, we see some signs of improvement. So customers are starting to do the service that they may have put on hold temporarily during the kind of tariff-related uncertainty. It's, of course, too early to say how this actually pans out during this year, but we are optimistic in general about the market environment or continue to be so. And in Asia Pacific, the market continues and the funnel continue to be on a stable level, but the tough competition continues, particularly from the Chinese competition. And then if we take a look at the Port Solutions segment, here, the container throughput index, as we have discussed before, is, of course, the main indicator, and that continued to be on a very good level overall. Maybe there is some flattening in the growth rate, but it's still very positive. Our funnels continue to be good. There are big and small cases in the funnel. And of course, it's good to remember here that besides the obvious container throughput traffic indicator, there is the long-term prevailing trends in port solutions that are, of course, driving investments. So that comes from the automation trend, the prevailing consolidation trend in that industry, change in the traffic routes driven by the repatriation and changing manufacturing locations. So of course, we continue here to have a kind of positive general view on the market as we have had also last year. So reiterating again a bit more about the quarter 4 development against the strong comparison period and how the past 2 years have gone, as you see here, of course, the order intake in quarter 4 was slightly down from previous year quarter 4. But last year, the order intake was actually very good and better than previous year in the first 3 quarters. There was a decrease in quarter 4 in all business areas, some increase in Europe and some decrease in Americas and APAC. And actually, the same profile is true for the sales side of things. Next is time to look at the order book situation, and we have had a solid above 1 book-to-bill ratio throughout last year, and we've been strengthening our order book throughout the whole last year since quarter 4 of 2024. So we have a particularly strong order book situation in Port Solutions. It is positive in Industrial Equipment with also a positive mix, but it's also a bit down in Industrial Service. Now here, you see the profitability development over the last 2 years and again, comparing the quarters to each other. This is really a very strong progress and very strong execution to our strategy. There is increase in Industrial Service and Industrial Equipment in quarter 4, some decrease in Port Solutions. And like I stated earlier, that's mainly driven by the volume. So Port Solutions continued to have good margins and good execution. And they also had a very good quarter 4 last year. Some less tariff tailwind, but still some visible in quarter 4, really good cost management and slightly weaker mix in Port Solutions, but we are very happy with this 14.1% outcome to quarter 4 last year. And that, of course, really helped us to reach this almost a percentage point year-on-year full year improvement on profitability. Now then it's time to take a look at the -- how we track in our profit improvement progress or process. This is actually the third consecutive year in all 3 business areas where we consistently improve our profitability. All 3 business areas are well within their defined profitability -- midterm profitability ranges. And we've done this under rather challenging demand environment. But at the same time, of course, it is true to say that we have not really had a challenging downturn in terms of volumes. So as you will see here, there has been pressure on the volumes, and we've shown continuous good profitability improvement. And of course, with additional volumes, then this is -- we are confident that this continues to be a good story. And now I would like to hand over to Teo, and then I'll come back in after a few slides to talk about the demand outlook and a couple of other things. Teo Ottola: Thank you, Marko. And let's take a look at some of the business area numbers in more detail. But before going there, as usually, so let's take a brief look at the comparable EBITA bridge between Q4 '24 and Q4 '25. So we had close to 1 percentage point improvement in the EBITA margin in a year-on-year comparison, and this translates into roughly EUR 5 million improvement in EBITA in euros. And let's unpack this now next a little bit. So pricing impact year-on-year was roughly 3% -- and then when we combine with that information, the fact that the sales decline -- there was a sales decline in comparable currencies. So we are actually taking a look at the underlying volume decline of some 4% or so, which obviously is not good from the profit and profitability point of view. However, net of inflation pricing, mix and then particularly good execution, so project execution, for instance, then we're all working in a positive manner. And as a result of that, the net of those -- all of those impacts is positive by EUR 13 million, as we can see as a combination of volume, pricing, mix and variable cost on the slide. And then fixed costs continued to be very well under control. So only EUR 2 million increase in fixed costs in a year-on-year comparison, whereas then the translation impact as a result of the FX differences was a clearly negative number, minus EUR 7 million. And as a result of all of these then combined, so we end up with the improvement of roughly EUR 5 million in a year-on-year comparison. Then moving on to the business areas, starting with Industrial Service. So we had order intake of EUR 380 million. So this is actually a decline in reported currencies, but an improvement of more than 2% in comparable currencies. So like already mentioned in connection to the bridge, so actually, the FX differences continue to play a big role now in the fourth quarter as well. Taking a look at the different parts of the businesses. So Field Service declined in the order intake in a year-on-year comparison, whereas Parts business cut up. And then when we take a look at the regions, so EMEA did well. So there was an increase, whereas then Asia Pacific and Americas both saw a decline in the order intake. Agreement base actually grew by 4.4%, like Marko already also mentioned. Order book decline of 7%. That's a big number. But in reality, that is almost all, let's say, everything actually is in relation to the currency changes. Net sales, 3.5% higher year-on-year in comparable currencies. The story is very similar to what it is in the order intake. So Parts did better than the Field Service and of the regions, EMEA did better than Asia Pacific and Americas. Comparable EBITA margin, 21.9% on a very good level, 1.3 percentage point improvement year-on-year. The improvement did not obviously come from the volume as the net sales increase is roughly in line with the pricing change. It actually more came from pricing, from good execution as well as then efficient cost management in general. Then moving on to the Industrial Equipment. So there, we have an order intake increase in comparable currencies of roughly 1%. However, when we take a look at the external orders, so this is down slightly by almost 1 percentage point against fairly tough comparables, fourth quarter of '24 was very good from the Industrial Equipment order intake point of view. Of the business units, we had growth in components in a year-on-year comparison. We had a decline in process cranes and standard cranes as well, a slight decline. One could maybe also say that this was flattish in a year-on-year comparison. And of the regions, again, EMEA did fairly well, so increase there, whereas then we had a decline or decrease in the Americas and APAC. In a sequential comparison and taking a look at the business units, so components orders actually rose also in a quarterly comparison, so the component orders in the fourth quarter were very good. We had a decline in port cranes as also in a year-on-year comparison and then standard cranes were fairly flat in a sequential comparison, similar to what it was in a year-on-year comparison as well. Here, our order book rose by 2% and of course, with comparable currencies, even more. Net sales up 3% roughly, taking a look at the total volume or then the external volumes, both roughly 3% up. The sales mix was such that it was a little bit more favorable from the margin point of view now in the fourth quarter of '25 than a year ago. And then when taking a look at the comparable EBITA margin, 11.7%, excellent improvement of more than 2 percentage points in a year-on-year comparison. Again, good execution, pricing and of course, also the already mentioned mix supported the profitability in the fourth quarter. And then Port Solutions order intake, EUR 406 million. This is a decline of roughly 11% in a year-on-year comparison, of course, against very tough comparables. So also here, the fourth quarter of '24 was very good from the order intake point of view. When we take a look at different businesses within Port Solutions, so Lift Trucks actually had good activity as well as RTGs, Port Service, quite flattish in a year-on-year comparison. And then when taking a look at sequentially, particularly the business units that are more short cyclical like Lift Trucks and Port Service. So Lift Trucks had an increase also in a sequential comparison, so Q4 was higher than Q3, and Port Service was relatively on the same level in fourth quarter as in third quarter. So flat exactly like in a year-on-year comparison as well. Net sales declined by as much as 7% in a year-on-year comparison. This was, of course, as a result of the order book timing and as such, as expected already earlier. Order book, however, is clearly higher than what it was a year ago, thanks to good order intake that has been there basically throughout the whole of '25. Comparable EBITA margin, 9.2%. So this is a decline of 0.5 percentage point. So this primarily obviously comes from the lower volume. So sales was lower than a year ago. Mix did not help here. So in ports, it was rather negative than positive in a year-on-year comparison, but this was partly offset by very good execution and project execution in the fourth quarter within the Ports business. Then a couple of comments on the balance sheet side. Let's start with the net working capital. As usual, net working capital has continued to be on a very low level. So there is no meaningful change from the third quarter. Obviously, the structure is a little bit different. Inventories have turned into accounts receivable, but otherwise, very much on the same level. The improvement in comparison to a situation a year ago comes from accounts receivable as well as advanced payments. And then on the right-hand side, we can see the free cash flow, which continues to be on a very good level, record levels actually also for '25 and the cash conversion continues to be clearly above 100%. Then consequently, of course, as a result of the cash flow, our balance sheet from the net debt point of view looks very strong or actually, we have net cash in the amount of more than EUR 160 million at the end of the year. And then finally, from the balance sheet point of view, so the return on capital employed on comparable terms, 22.1% at the end of '25. And then I will invite Marko back to talk about the outlook for '26. Marko Tulokas: Thank you very much, Teo. There is the outlook for '26. But before that, some other additional things, of course, our solid progress, very nice development, strong cash flow and balance sheet has 2 outcomes. Our Board of Directors is proposing to the AGM a share split with 1:3 ratio. That is, of course, due to the high price and to enhance the liquidity of the shares. And we also have the Board proposing to the AGM that we increase our dividend from the previous year EUR 1.65 level to EUR 2.25 per share for [ 2025 ], which is very much in line with our stable to increasing dividend policy. And now to the demand outlook. Although there is a volatility, of course, in the marketplace, we expect several sectors to keep the demand up. And in the industrial customer segment, we expect the demand environment to remain on a healthy level. And for the port customers, the container throughput continues to be on a high level as we saw before. And there is, of course, these long-term prospects in that business in general, the long-term drivers and then is, of course, supporting a strong container handling demand in the future. So the outlook continues to be good. But at the same time, of course, it is good to keep in mind that this uncertainty related to geopolitical decisions, the trade politicians and the tensions, they do remain high. And of course, they may have positive and negative impact to our demand picture that may also come quite quickly. But generally speaking, we have a positive outlook on the margin. And then finally, let's look at our financial guidance. So we have a starting order book that is better as already was elaborated also by Teo and myself earlier. The demand outlook is stable. So we are confident that realistic picture on the demand environment, and we are conscious about the market uncertainty also. So we expect our net sales to remain approximately on the same level or to increase in 2026 compared to 2025. And as you saw, our margins have been developing very well in '25. And we expect these margins to remain approximately on the same level also in 2026 compared to 2025. And with that, I thank you all very much, and we can move to the questions and answers. Thank you. Linda Hakkila: Thank you, Marko and Teo, for the presentation. And now we will start the Q&A session. Operator, we are ready to take questions. Operator: [Operator Instructions] The next question comes from Daniela Costa from Goldman Sachs. Daniela Costa: I have 3 questions, if possible. First, I wanted to ask you to -- if you could give some color on how you see the mix in Port Solutions going forward. I know you mentioned here it was slightly disadvantageous. I don't know if it's just one-off this quarter or given the nature of equipment, maybe more larger equipment, is that something that will continue? And then I'll ask my other questions right after. Teo Ottola: The ports mix going to next year, of course, it is approximately flat, the mixed or neutral, the impact as I see. And I guess that is also your conclusion also. Marko Tulokas: That is actually my conclusion also. And I think that what you are referring to with the larger equipment. So of course, we have been talking about that, that potential mix might be weaker going forward in case the product -- let's say, the demand moves more towards the, let's say, heavier equipment. However, that has not happened to the extent that we would be expecting a deterioration in the mix for this year. Daniela Costa: Got it. And then I guess we have seen in some regions quite a steep move on things like steel prices. Can you talk us through a little bit how we should think about that given the lag between orders and sales, the pricing that you're putting out at the moment? Do you expect that to be a headwind in the shorter term or not really you can pass it all to? Teo Ottola: So your question was particularly about steel prices, right? Daniela Costa: Yes. Teo Ottola: So the steel prices throughout 2025, they have been approximately flat, and there's actually a slight positive or from our point of view, positive. So in that way that there is actually a somewhat lower quarter 1 steel price rates than there was in quarter 4 of 2025. The outlook is -- or the forecast is that there would be a minor increase in steel prices in 2026. But of course, only time will show that how will that materialize. Our approach has been and it continues to be so, as still is for many of our products, a reasonably significant cost component that we will pass on the steel cost in our prices, and that's how all our pricing systems and our configurators have been built. Finally, there is some regulatory developments in the market and the CBAM is one of them that, of course, eventually the CBAM regulation, although it is no direct impact to our products and so forth, that may drive steel costs up in the longer term, but that's not in the immediate visibility at the moment. Daniela Costa: Got it. And then a final one, just in terms of like you have obviously very strong free cash flow. It looks like a decent size comes from the payables within working capital. Can you talk a little bit about sort of exactly what that is? And how should we think about payables going forward? Teo Ottola: I'm not quite sure that what your question was. I mean, are you talking about capital allocation of our balance sheet in general? Daniela Costa: Free cash flow. Teo Ottola: Yes, of course, I mean if you're referring to the dividend policy only or to the question of other means of distributing the cash. Daniela Costa: No. I'm just actually asking about free cash flow. Within your cash flow statement, there is a big positive of payables in the working capital. Yes. Teo Ottola: Maybe commenting on net working capital as a whole. So now at the end of '25, we are on a very beneficial level. And we are clearly, let's say, we are several percentage points better than our, let's say, midterm target is, which is that we should be below 10% of rolling 12-month sales in net working capital. Now we are clearly below that. So the situation is very beneficial from the net working capital point of view. And if the question is that, is that something exceptional? Or will it stay here or will it even improve? So one could maybe say so that this is, let's say, maybe in the midterm perspective, this is on the better side of the average. So maybe the overall in a way, level on a long-term basis could be even a little bit higher for net working capital. But definitely so that we aim to be below the 10% threshold of the rolling 12-month sales. And then, of course, we will need to allow volatility in both directions as we are now seeing a very good situation. So it may be that in some quarters, we are seeing a little bit worse situation. So the payables, accruals and advanced payments, all of the combination of all of that is very important, but I would still stress the importance of the advanced payments. So this is a lot of customer project timing related, how the net working capital develops from one quarter to another one. Operator: The next question comes from Antti Kansanen from SEB. Antti Kansanen: It's Antti from SEB. A few questions from me as well. I'll start with the guidance of flat to growing sales and especially on the Port Solutions side, how much of the backlog that you currently have do you expect to convert to revenues during '26? Or if you don't want to give the number, how does that compare to situation a year ago? Teo Ottola: We maybe not give the direct number for the first question, but if we take a look at the overall order book, now that we have at the end of '25 for '26 and compare that to how much order book we had 1 year ago for '25. So the difference is now more than EUR 100 million. Marko Tulokas: For all [ 3PAs ]. Teo Ottola: For all 3PAs. And then, of course, it is fair to say that the ports business is a clear majority of that, particularly now that the FX differences are impacting so much to the order book of the service business. So that basically it is the same number or maybe even slightly more for ports than what it is on the group level. But this is, of course, with reported currencies. So if you take a look at comparable currencies, Marko showed both numbers. So then, of course, that number is higher. So it's about twice as high, not for ports, but for the group. Antti Kansanen: Yes, sure. And I was also thinking on the guidance, if we talk about, let's say, on the lower end of it that your sales will be on the same level as in '25. Would that imply actually that volumes would be down, I don't know, clearly. But anyways, one would assume that there, you talked about the net price impact on Q4, one would assume that the positive pricing continues through '26. So how should we think about that volume pricing trend in the backlog? Marko Tulokas: Of course, like we were saying earlier, the starting point is positive with a stronger order book. And of course, we have a stable funnel that we look with positive mind. So there is all the reason to be positive about the demand environment and the volumes also. But at the same time, there are some question marks. Teo mentioned one of them is, of course, is the currency rate. And of course, then the other one is related, of course, to the general development of the market environment overall. But what we are trying to say with our guidance that, of course, we have a good starting point for the year, and we look at the volume development positively. But being appropriately, let's say, cautious about it also in this environment. Teo Ottola: But logically, of course, you are right. So I mean, if the sales were flat in a year-on-year comparison and the order book for this year is EUR 100 million more than what it was for last year, so of course, then it would mean that the in and out volume would be lower, which could be, let's say, depending on various things. But of course, now we need to remember that what we are saying regarding the overall market outlook is that the sales funnels in the various businesses. So they continue to be good. I don't know. They continue to be stable and on a good level. Antti Kansanen: Yes, that's clear. Then the second question was on profitability. And maybe a reminder on the tariff-related pricing tailwinds that were kind of notable on previous quarter and still there on Q4. How should we think about kind of impacts of those going forward, maybe fading away? Any guidance on that? Marko Tulokas: Well, they repeated also in quarter 4 after being visible in quarter 3 and quarter 2, but not to the same extent. So as we have also said before, the expectation is that they will go away or deteriorate over time. And of course, it actually continued throughout the whole year, and there was a positive sign to us. We expect that you will not see the similar kind of positive tailwind going forward. But also it should not have a significant negative impact to the margins either. Antti Kansanen: Okay. That makes sense. And then the last question, and I guess, Marko, you almost started to answer on the capital allocation side. And I mean, obviously, there's a clear increase on the ordinary dividend. But I mean, balance sheet is getting stronger and stronger and capital allocation has been a bit of a discussion point. So any updates on further distribution, buybacks, anything like that? Marko Tulokas: Yes, I was so eager to start answering that question already. So I was preempting that. But no, I mean, of course, that our approach has not changed there. Of course, we have several potential means for the use of that cash, and we are working on all of them. And one of the obvious one is the potential acquisitions. And as we've said before, that has been a big part of Konecranes' history, and it continues to be so in our future also the inorganic part of the growth. And so we have a funnel of different size of opportunities that we are actively exploring. And it's more a timing question that when we can realize those. And for that, for sure, we want to have maneuvering room and the increase in the dividend that was announced today, of course, that is, in our view, no way jeopardizing those -- that maneuvering room that we have going forward, given the available cash and then, of course, our ability to leverage the company. Would you like to add something to that? Teo Ottola: No. Operator: The next question comes from Mikael Doepel from Nordea. Mikael Doepel: So a couple of them. I'll take them one by one. So if we can start to talk a bit about the net of inflation pricing. I think you mentioned it was positive still in Q4 of last year. How do you think about 2026? I mean if we put tariffs aside, how do you think about pricing net of inflation? Marko Tulokas: Maybe since you are going through the bridge, you may want to continue on this also. Teo Ottola: Yes. The basic commentary here is the same as it has been. So we believe that we will be able to push cost inflation into the customer prices. And then, of course, the tariffs may change, the currency rates may change. But if we take a look at the overall underlying inflation, so the idea is that we will be pushing that into the customer prices. And in the past years, we have been able to do that in some cases, maybe a little bit even more than the cost inflation. So we believe that we can balance the situation from that point of view, but maybe it is not a good idea to expect a continuous net of inflation price benefit in '26 or further. Mikael Doepel: No, that makes sense. And talking about costs and just a follow-up, do you have any meaningful cost efficiency measures ongoing now that could support margins into this year? Anything tangible you could mention on that side? Marko Tulokas: Maybe 2 things I will mention. First of all, the topic that we have discussed also in the past is the ongoing industrial equipment cost efficiency program that we earlier announced that will continue until end of 2025. And on that note, we can say that we are still continuing that and we expect that to continue to bring us some benefits also -- additional benefits also during this year. The second topic is -- or the second answer to that is that when it comes to adjusting our cost structure to the prevailing market conditions, that is what we did early last year also that in all accounts, whether it's the SG&A or cost that we have on the group level or, for example, in service, the costs that are directly related to customer projects. And that is business as usual for us and that we've done in 2025, and we continue to do the same in '26 if the market environment and demand so requires. But beyond those 2 things, we don't have anything specific to discuss about right now. Mikael Doepel: Okay. That's clear. And just finally, I think you mentioned in your opening remarks, you talked about the industrial service business and saying it was a bit of a tough environment within that business. Can you talk a bit about what you see there specifically happening across the regions, across the customer segments and how you expect 2026 to develop? Marko Tulokas: When we look at Industrial Service in general, if I start from just the market activity and how it looks, one thing that we've discussed earlier and we also can measure is how our remote connections also with what we call the TRUCONNECT product, how much activity the customer is having with our cranes business and then, of course, means that how much manufacturing or production activity there is and those productivity rates are down last year, the whole year, and they also ended with a negative sign that somewhere 6% to 7% compared to the previous year in terms of the general use of the cranes. That's a fairly good proxy or explanation also to how much -- how the productivity and service develops for those particular customers, and that has a correlation to how our service business is actually developing. So that tells more that there is in this sort of environment where the customers have uncertainty of which direction the world is going that they have the tendency to hold back on not urgent or not critical measures. They want to do the things that have to be done to make sure that the equipment is productive and safe. That was a phenomenon last year and had certain impact to the service business. But it is obvious that you cannot do that for a very long time. So those equipment has to be taken care of. So that is something that usually returns. The other positive aspect is that we kept on increasing our -- or improving our agreement base, which is essentially the growth engine for service and very important, so that grew more than 4%, 4.5% last year. And that is what we consider and I consider very important as a service core. And then finally, I would say to that, and sorry for the long answer, easy to get excited on the topic. On service side, there is a lot of positive demand drivers like there is in the ports demand side in the long term. And whether it is the demographic trend of having less people doing this sort of thing or the automation trend that's also prevailing in some of the segments there, the outsourcing that similarly to ports actually is prevalent in many of the industrial segments and many others that also in the long term are drivers for demand in Industrial Service as well as in the efficiency drivers too. Teo Ottola: If I may add to a little bit additional color on... Marko Tulokas: I thought I answered the whole thing already because... Teo Ottola: That was very good, but I would maybe add one more thing. And I think when we have previously been saying that actually the differences between regions tend to be bigger than between customer segments in our demand. So now it may be that there start to be relatively big differences in demand pictures between different customer segments. And there are maybe a couple of indications of that one. And one of them is that the thing that we have been discussing also earlier that, for example, in North America or in the U.S., there has been a little bit slowness on the service and equipment business on the other hand, has been maybe even surprisingly strong, so which would, in a way, maybe indicate that some of the segments are doing well and they are buying equipment and some others have maybe a little bit more issues with the utilization and they are maybe saving on nonessential service. And also then this fact that our service spare parts are doing better than the Field Service may be an indication of the same thing. I mean, of course, the tariff thing, et cetera, can impact the spare part pricing and inflate that a little bit, but that doesn't explain the whole thing. So these kind of changes may be there happening a little bit because of defense and because of power and those kind of specifically, let's say, buoyant segments currently. Operator: [Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Linda Hakkila: Thank you, everyone, for following our webcast event today, and thank you for asking such a great questions. [Technical Difficulty]
Operator: Good morning, and thank you for standing by. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. It is now my pleasure to turn the call over to Whit Kincaid. Whit Kincaid: Good morning, everyone. Thank you for joining us for Mueller Water Products First Quarter conference call. Yesterday afternoon, we issued our press release reporting results of operations for the quarter ended December 31, 2025. A copy of the press release is available on our website, muellerwaterproducts.com. I have joined this morning by Martie Zakas, our Chief Executive Officer; Paul McAndrew, our President and Chief Operating Officer; and Melissa Rasmussen, our Chief Financial Officer. Following our prepared remarks, we will address questions related to the information covered on the call. As a reminder, please keep to one question and a follow-up and then return to the queue. This morning's call is being recorded and webcast live on the Internet. We have also posted slides on our website to accompany today's discussion. They also address forward-looking statements and our non-GAAP disclosure requirements. At this time, please refer to Slide 2. This slide identifies non-GAAP financial measures referenced in our press release, on our slides and on this call. It discloses the reasons why we believe these measures provide useful information to investors. Reconciliations between non-GAAP and GAAP financial measures are included in the supplemental information within our press release and on our website. Slide 3 addresses forward-looking statements made on this call. This slide includes cautionary information identifying important factors that could cause actual results to differ materially from those included in forward-looking statements. Please review Slides 2 and 3 in their entirety. During this call, all references to a specific year or quarter, unless specified otherwise, refer to our fiscal year, which ends the 30th of September. A replay of this morning's call will be available for 30 days at 1-800-814-6745. The archived webcast and corresponding slides will be available for at least 90 days on the Investor Relations section of our website. I'll now turn the call over to Martie. Marietta Zakas: Thanks, Whit. Good morning, everyone. Thank you for joining our First Quarter Earnings Call. As a reminder, this is my last week as Mueller's CEO. After my opening remarks, I will hand the call over to Paul to provide an overview of our performance followed by Melissa, who will go over our first quarter financial results and discuss our increased guidance for 2026. It has been the highlight of my career to lead this talented team, an extraordinary company with its rich legacy and iconic brands. The sense of fulfillment I feel in what the entire Mueller team has accomplished together is beyond words. It's thanks to their hard work and unwavering dedication that we have become the successful company we are today. Mueller plays a critical and essential role as a leader in water infrastructure products and solutions every day. I have great confidence that Paul, the leadership team and all our talented employees will build on our positive momentum. I believe our performance this quarter and over the last few years is just the beginning. I look forward to seeing Paul and the entire Mueller team write the next chapter in Mueller's winning legacy. I'll now turn it over to Paul. Paul McAndrew: Thanks, Martie. Good morning, everyone. Before reviewing our performance, I want to start by recognizing Martie and thank her for her incredible leadership. With nearly 2 decades of dedicated service, she has shaped Mueller into the company we are today. I am grateful that she will continue to guide us as a senior adviser through the end of the year. Since joining Mueller more than 3 years ago, I have witnessed firsthand the passion, expertise and commitment of our team members. I believe we are in the early stages of our transformation. We have improved operational execution, strengthened relationships with our stakeholders and delivered outstanding results, all while navigating a challenging external environment. I am pleased with the great start to our fiscal year. We delivered net sales growth of 4.6% in the quarter, supported by resilient end markets and our focus on delivering outstanding customer service. Our operations and supply chain teams executed well as manufacturing efficiencies more than offset the impact from higher tariffs and inflationary pressures, driving year-over-year gross margin expansion. This includes the expected benefits from efficiencies associated with the transition to our new brass foundry. These improvements led to first quarter records for net sales, gross margin, adjusted EBITDA and adjusted EBITDA margin. During the quarter, we generated $44 million of free cash flow and continued our balanced approach to cash allocation. We invested approximately $17 million in capital expenditures and returned approximately $16 million to shareholders through our quarterly dividend payment and share repurchases. We are raising our fiscal 2026 guidance, reflecting our strong first quarter results and current views for the rest of the year. Our end market expectations are consistent with our prior guidance. We anticipate that healthy municipal repair and replacement activity and strong growth in project-related work using specialty valves will more than offset slower new residential construction activity. Our operations and supply chain teams continue to work with suppliers to manage the ongoing tariffs and inflationary pressures, mainly related to brass. With this in mind, we recently announced price actions across most product lines. We are on track to deliver another year of gross and adjusted EBITDA margin expansion, supported by our operational and commercial initiatives. Overall, I am excited about our team's strong performance this quarter. We expect that our ongoing investments in our commercial and operational capabilities, together with strategic capital expenditures will enable us to increase capacity, achieve sustained margin expansion and deliver long-term value creation. I am grateful for our dedicated employees who serve our stakeholders with relentless drive and passion. With that, I'll turn it over to Melissa, who will take us through the financials. Melissa Rasmussen: Thanks, Paul, and good morning, everyone. We are pleased to report a great start to the year with consolidated net sales increasing 4.6% to $318.2 million, surpassing last year's strong first quarter performance. This growth was driven primarily by higher pricing across most product lines, partially offset by slightly lower volumes. Gross profit for the quarter increased 16.3% to $119.8 million and gross margin expanded 380 basis points to 37.6%. The improvement in gross profit was primarily driven by higher pricing and manufacturing efficiencies as well as inventory and other asset write-downs at WFS in the prior year period that did not recur. Manufacturing efficiencies largely resulted from the expected benefits associated with the closure of our legacy brass foundry last year. These benefits were partially offset by higher tariffs and ongoing inflationary pressures. Total SG&A expenses for the quarter of $59.8 million increased $5.9 million compared with the prior year, reflecting higher personnel costs, inflationary pressures and unfavorable foreign currency impacts. Operating income increased 19.6% in the quarter to $56.7 million compared with the prior year. Operating income included $3.3 million of strategic reorganization and other charges, which have been excluded from adjusted results along with the inventory and other asset write-downs at WFS. Turning now to our consolidated non-GAAP results for the quarter. Adjusted operating income increased 14.5% in the first quarter to $60 million driven by higher pricing and continued manufacturing efficiencies, partially offset by increased tariffs, inflationary pressures and higher SG&A expenses. Adjusted operating margin expanded 170 basis points year-over-year to 18.9%. Adjusted EBITDA reached a first quarter record of $72.1 million an increase of 13.5% compared to the prior year quarter. Adjusted EBITDA margin expanded 180 basis points year-over-year to 22.7% marking a new first quarter record. Over the last 12 months, adjusted EBITDA was $335 million or 23.2% of net sales, a 90 basis point improvement compared with the prior 12-month period. Net interest expense of $1 million declined $0.6 million, reflecting higher interest income. Adjusted net income per diluted share increased by 16% year-over-year to $0.29, setting another first quarter record. Moving on to quarterly segment performance, starting with WFS. Net sales decreased 0.9% to $173 million, primarily reflecting lower volumes of service brass products, which were partially offset by higher pricing across most product lines and increased volumes of specialty valves. Adjusted operating income increased 28% to $49.4 million. The increase reflects benefits from manufacturing efficiencies and higher pricing, which more than offset increased tariffs, inflationary pressures, lower volumes and higher SG&A expenses. Adjusted EBITDA grew 26.4% to $56.5 million and adjusted EBITDA margin expanded 710 basis points to 32.7% compared with 25.6% in the prior year period. WFS set a new record for quarterly adjusted EBITDA margin. I'll now move to quarterly results for WMS. Net sales increased 12% to $145.2 million, driven by higher pricing across most product lines and strong volume growth of hydrants. The benefits were partially offset by lower volumes for natural gas distribution and repair products. Adjusted operating income decreased 11.2% to $24.5 million. The decline reflects increased tariffs, manufacturing inefficiencies, higher SG&A expenses, inflationary pressures and unfavorable foreign currency. These headwinds more than offset the benefits from higher pricing and hydrant volume growth. Adjusted EBITDA in the quarter decreased 9.5% to $29.5 million and adjusted EBITDA margin contracted 480 basis points to 20.3%. Moving on to cash flow. Net cash provided by operating activities for the 3-month period was $61.2 million, an increase of $7.1 million compared with the prior year. The improvement was primarily driven by higher net income and noncash adjustments, partially offset by changes in working capital and other assets and liabilities. Capital expenditures through the first 3 months of the year increased to $17.2 million compared with $11.9 million in the prior year, reflecting continued investments in our iron foundries. Free cash flow for the period increased $1.8 million to $44 million and was 96% of adjusted net income, in line with our expectations. We ended the quarter with $452 million of total debt and $460 million of cash and cash equivalents. Our balance sheet remains strong and flexible with no debt maturities until June 2029 and $450 million of senior notes at a 4% fixed interest rate. We had no borrowings under our ABL and ended the quarter with $623 million of total liquidity, including $164 million of availability under the ABL. As a result, we continue to maintain ample liquidity, capacity and financial flexibility to support our strategic priorities, including pursuing acquisitions. I will now review our updated outlook for fiscal 2026. We are raising our full year guidance for consolidated net sales by $20 million at the midpoint of the range. Our net sales growth is now expected to be between 2.8% and 4.2% year-over-year, reflecting our strong first quarter performance and our current expectations for end market demand orders and price realization, which includes expected benefits from our recently announced price actions across most product lines. We are also increasing our annual adjusted EBITDA guidance by $10 million at the midpoint to a new range of $355 million and $360 million. At the midpoint, our updated guidance range represents an adjusted EBITDA margin of more than 24%, an improvement of more than 100 basis points year-over-year. We are maintaining our expectations for total SG&A expenses. We continue to expect our second half adjusted EBITDA margin to be higher than the first half of the year largely driven by seasonality of net sales. Additionally, we expect the benefits from our recently announced price actions will start to phase in the coming months, benefiting gross margins in the second half of the year. We are reaffirming our expectations for capital expenditures to be between $60 million and $65 million and continue to expect free cash flow to exceed 85% of adjusted net income for the year. With that, I'll turn it back to Paul for closing comments. Paul McAndrew: Thanks, Melissa. I want to provide a few closing comments before opening it up for Q&A. We are excited about our start to the year as we continue to execute well despite the challenging external environment. We are pleased to be raising our annual guidance at this point in the year. We are benefiting from our strategic capital investments and improving commercial and operational execution. We are confident that we can build on our momentum to accelerate net sales growth and expand our margins further. I want to thank all our employees worldwide for the extraordinary commitment and passion and supporting our customers and communities. They are the reason for our success and why Mueller has been a trusted partner for over a century. That concludes our comments. Operator, please open the line up for questions. Operator: [Operator Instructions] Brian Lee with Goldman Sachs. Tyler Bisset: This is Tyler Bisset on for Brian. So you guys took revenue guidance up for the year, reflecting the 1Q results and price increases so far. So can you quantify how much you guys have raised prices so far this year and how that compares to prior years? Should we think about this revised guidance is almost entirely due to the higher prices? Or are you seeing improved demand across any key areas of your business? Paul McAndrew: So as we said in our prior guidance, it didn't include our annual price increase, which we recently announced, which we will see the main benefit in Q3 -- our fiscal Q3. Prior guidance included the prior year price increase, plus the tariff price increase that we put in effect, which really took effect in Q4 of the prior fiscal year. So in your question, yes, the majority of the increased growth in our guidance is predominantly price related. Tyler Bisset: All right. And then I guess just like in relation to that, on Water Flow, you guys saw a nice pickup in margins, and you called out manufacturing efficiencies and favorable pricing. So can you break down the impact from those 2 items and how you expect margins to trend for the balance of the year? Melissa Rasmussen: Sure. With Water Flow, I want to remind you that we had mentioned last year that we would expect to see a benefit as we close the legacy brass foundry. We saw a benefit in the second half of last year, and we expect to see a benefit from that in the first half of this year. So we benefited from the closure of the iron foundry in first quarter. And that was the largest impact. And like I said, you'll see that again through second quarter. With the -- we did have -- sorry, we had some impact related to tariffs and we'll continue to expect to see that as well. The tariffs will start to lap in the second half of the year as they started to really impact us as a whole in third quarter of last year. Operator: Our next caller is Deane Dray with RBC Capital Markets. Deane Dray: Can I start with, once again, congratulating, Martie. I wish you all the best, and truly, you're leaving the company in really good hands. It isn't often that you see smooth leadership transitions. It's nice when it happens. And I just wanted to call that out and again, wish you all the best. Marietta Zakas: Great. Well, look, thank you, Deane. And I think just echoing what you said, I think everything was structured to ensure that it was a very smooth CEO transition, and I think things are going very, very well and look forward to Paul and the leadership team taking this company forward. Deane Dray: Terrific. And then just for Melissa, can you size for us the inflation pressures? And just to clarify, you said that the price increases should more than offset those pressures as they stand today? Melissa Rasmussen: Yes. As the price increases, we do expect to be price positive -- price/cost positive for the full year. For inflation, we typically see a low single-digit range of inflation. However, since the tariffs went into effect last year, that's more than doubled. In our guidance, we have incorporated an approximately 3% impact from the tariffs as we netted out the efficiencies that we expected to gain from that. So a 3% impact is what we're seeing related to the tariffs. Deane Dray: Great. And then just the second question, has there been any update on your assumptions regarding residential lot development, just kind of activity there? What's the expectation? Paul McAndrew: Deane, there's been no change in our assumption. We still anticipate that high single-digit range of slowdown in residential construction we track external reports. We look at the public homebuilders and they kind of all aligned in what we are guiding to there on the decline in housing starts. But I think if you think about positive though, given the low inventory on homes, the population demographics, we could see land and housing activity increase, particularly if rates lower, and we are ready to support that activity. Operator: [Operator Instructions] Our next caller is Bryan Blair with Oppenheimer. Bryan Blair: And I'll echo Deane's sentiments. Congrats, Martie, you're definitely leaving Mueller in a very solid place. Marietta Zakas: Very good. Thanks, Bryan. Bryan Blair: I have a couple of higher-level questions. Paul, you had mentioned that Mueller's transformation remains kind of early innings, early stages. Maybe offer a little more color on that. What are the next steps in the team's journey? And what does that mean for through-the-cycle growth prospects, margin entitlement, any of those kind of key metrics? Paul McAndrew: Bryan, we've really improved our commercial and operational investments over the last few years and bringing a lot more discipline to the organization, which you can kind of see how we've been achieving our results and our margin expansion. I think looking forward, the capital expenditures that we got laid out in our iron foundries for domestic capability is going to drive further capacity and further efficiencies for further margin expansion. And then just continuing that strategy of how we interact with our customers, either through digitally or in terms of our training programs, our whole commercial team segued with the operational investments. And we are well positioned with our specialty valve portfolio to capture the project work that's related to that product line. So overall, continue our commercial operational initiatives and drive capacity and margin expansion with our capital investments. Bryan Blair: Okay. Understood. That all makes sense. And how about capital deployment? I think it's fair to say that your team is in a better position, has the rights to deploy capital more so than any time in Mueller's history. Balance sheet is in great shape, generating pretty solid cash flow. So it would be great to hear the funnel development, thoughts on actionability, the kinds of assets of greatest interest, if and when they're available. Paul McAndrew: Yes. Great point, Bryan. We are in a much more better position now our improved momentum on execution, acquisitions are more of a priority for us. We continue to evaluate the funnel, evaluating opportunities with a strong focus on drinking water and wastewater and infrastructure exposure where we can drive synergies with our operations and our commercial teams, it is a priority of ours. Melissa Rasmussen: And Bryan, I'll add on related to the capital as far as our capital expenditures. We had expressed that we will begin spending 4% to 5% of net sales in the next couple of years. And Paul's earlier point, that is related to our iron foundries and investing in domestic capabilities and to drive efficiencies and increase capacity across the board. Bryan Blair: Understood. I was more focused on inorganic or M&A deployment with the follow-up question, but I completely understand that the higher return is on the organic side, and you have that path forward. Thanks again. Operator: And the last question comes from Joseph Giordano with TD Cowen. Michael Anastasiou: This is Michael on for Joe. So just wondering, can you just run through your exposures? Maybe help us get a better understanding of the repair and replace contribution in the quarter, new builds, gas and tech such as meters and leak detection, understanding that for the quarter would be helpful. And then as we look towards the remainder of the year, maybe just help us contextualize those assumptions and guidance. Melissa Rasmussen: Sure. The quarter, we had a strong quarter, grew by 4.6%, and that was related to higher pricing across most of our product lines and slightly lower volumes. We did see volume growth in specialty and hydrants and that more than offset -- was offset by a decrease in service brass and natural gas and repair. We continue to expect to see resilient end markets. Paul had mentioned earlier that we will continue to expect to see a decrease in the residential outlook, but strong performance in the residential or the municipal market. And then how it flows to guidance we can -- as far as the overall guidance report, we expect that we'll see growth on a consolidated basis for each subsequent quarter for the year. We do expect that, that will be driven by slightly positive volumes at the midpoint and price realization in the low to mid-single digits. We'll see normalized seasonality and that, again, will be healthy municipal and strong growth in specialty valves, offset slightly by the residential impact. Michael Anastasiou: Great. And any way you could just drill down a little bit more deeply on like the growth rates for those particular markets assumed in the guide? I know you mentioned kind of from a high-level qualitative perspective, but just trying to help us understand how we can kind of underwrite into the end of the year. Melissa Rasmussen: Yes. For the markets, we do expect to see a high single-digit decrease in the residential construction market, and that is going to be offset by the municipal repair and replacement growth that's going to be in the low to mid-single-digit range and the project-related work with our specialty valves, which we expect to see in the mid- to high single-digit range. Operator: And at this time, we are showing no further questions. I will turn the call back over to you for closing comments. Paul McAndrew: Thank you, operator. And thanks to everyone who joined us on our call today. We are very pleased with how we started this year with a record first quarter results while facing a challenging external environment, including the expected impact from higher tariffs. Our increased annual guidance reflects the confidence we have in our commercial and operational capabilities as well as the resilience of our end markets. We're excited to be in a position to expand sales, our margins for a third consecutive year, especially given the external environment. We believe we're in the early stages of our transformation. I want to once again thank our dedicated team members who have been and always will be the driving force behind our success. Thank you all, and we look forward to speaking with you again on our second quarter results when they're announced in early May. And with that, operator, please conclude the call. Operator: Thank you. This concludes today's conference. You may disconnect at this time, and have a great rest of your day.
Rune Sandager: Hello, everyone, and welcome to GN's conference call in relation to our annual report announced this morning. Participating in today's call is Group CEO, Peter Karlstromer; Group CFO, Soren Jelert; and myself, Rune Sandager, Head of Investor Relations. The presentation is expected to last about 25 minutes, after which we'll turn to the Q&A session. The presentation is already uploaded on gn.com. And with that, I'm happy to hand over to Peter for some opening remarks. Peter Karlstromer: Thank you, Rune, and thank you all for joining us today. '25 were a year where we continue to execute on our strategic and operational agenda in a difficult market environment influenced by uncertain trade and macroeconomic weakness. In Hearing, we continue to deliver very strong performance, and we are now at record high market shares driven by ReSound Vivia that was launched in the beginning of the year. Our premium products sell very well, and our margin is under control in spite of an adverse country and business growth mix in '25. Our product and software platforms are in strong shape, and we plan to launch further innovation in '26 that will support our growth. In Enterprise, the U.S. and APAC market continued to grow modestly throughout the year, while the European market still experiences some weakness. We are pleased with our own execution in this environment and well prepared to benefit from a continued gradual strengthening of the market. In '25, we successfully accelerated several supply chain and pricing initiatives to manage the uncertain trade environment. We have managed this well and have mitigated most of this change. We have a strong pipeline of products in video and headsets that we will launch in '26, the most important one for our financial results is the Evolve3 headset platform, which we announced a few weeks ago and will start to ship later in this quarter. Additional launches under this new platform will follow later in the year. In gaming, we continue to gain market shares in a challenging gaming equipment market. While gaming also faced some of the same margin headwinds as enterprise, we have executed sustainable margin initiatives and operational resilience initiatives supporting our long-term margin aspirations for the division. In addition, we have also launched exciting products in gaming, including our new gaming headset, the Nova Elite, which is very much a premium offering. Also here, our product pipeline is strong, and we look forward to exciting launches in '26. The markets that our 3 divisions operate in have been challenged in '25. While we aspire to deliver stronger absolute numbers in the year, we feel very good about our relative performance across our divisions and focus on the things that are within our own control. We have taken several supply chain and operational improvement initiatives that we will benefit from in the years to come. In addition, our product pipeline across our 3 divisions is stronger than it's been for a very long time. We remain firm in our belief that our markets remain attractive and look forward to further developing our business in '26 and the years to come. With this introduction, I'm happy to hand it to Soren for further details on our performance in the group. Soren Jelert: Thank you, Peter, and thank you all for joining us today. Essentially, as Peter mentioned, we are satisfied with what we achieved during '25 under these challenging circumstances. The group delivered a negative 1% organic growth for the year, supported by a 5% organic growth from our Hearing divisions, a negative 6% organic growth from our Enterprise division, and a negative 2% organic growth from our Gaming division. Our profitability, we are pleased with where we landed for the year with an EBITA margin of 11.4% as this essentially demonstrates strong mitigation of what is within our own control. We have successfully increased prices and kept a strong focus on costs while harvesting group-wide benefits from the scale of GN. The profitability also positively influenced the free cash flow generation where we ended the year with DKK 1.1 billion in free cash flow. Moving to the financial details on Slide 6. Starting with the results of the fourth quarter of '25, the group delivered organic revenue growth of a negative 2%, reflecting solid execution across our divisions in some difficult market conditions. The EBITA margin ended at 13.4%, reflecting a group-wide cost focus offset by an extraordinary R&D write-down due to the new partnership with Huddly in our video collaboration business. Lastly, the group generated free cash flow, excluding M&A of DKK 744 million, reflecting the strong profitability and positive development from our working capital. For the full year, the group landed at an organic revenue growth of negative 1%, in line with our financial guidance. The group delivered an EBITA margin of 11.4%, which reflects prudent cost management while strengthening business fundamentals and preparing for future growth. The free cash flow, excluding M&A generated for the year was DKK 1.1 billion, driven by solid earnings and positive impact from working capital. In 2025, we have decreased our net interest-bearing debt by more than DKK 800 million, which also allow us to refinance our main loan facilities during the year with attractive terms. In summary, at a group level, we delivered solid profitability and good cash generation while continuing to improve the balance sheet. We also accelerated our efforts to ensure a flexible and diversified operational setup while making important progress on our product road maps, paving the way for growth opportunities in '26 and beyond. And with those group highlights, I'm happy to hand you over to Peter for some additional color on the 3 divisions. Peter Karlstromer: Thank you, Soren. Let me start with our Hearing division. In Q4, we finished the year well with 7% organic revenue growth, reflecting a market that continued to grow slightly below its normal trends. Divisional profit margin for the quarter was 35.2%, reflecting a focused cost control. When looking back at '25 as a whole, we can conclude that Hearing grew faster than the market and continue to gain market share. The full year organic growth was 5% in the market growing slightly slower than normal. The gross margin ended at 61.1%, which was below 24% due to an adverse development in the country and business mix as well as the divestment of Dansk HoreCenter. Divisional profit margin ended at 33.6% due to prudent management on sales and distribution costs, offset by the gross margin development and ongoing investments to support the strong momentum of our ReSound Vivia platform. The divisional profit margin was slightly below 24%, which is explained by margin underperformance in the difficult and unusual Q1 that we and the market experienced. In the last 3 quarters of '25, we delivered a slightly better divisional profit margin compared to the same period in '24. We are confident in the underlying margin structure and plan for margin improvement in '26 and beyond. Let's move to the next slide for some highlights on the performance on Enterprise. The Enterprise division ended the year with a fourth quarter organic growth of negative 3%. This includes a larger FalCom order that continued its good progress. Our Enterprise business grew in North America and APAC, while the weakness in EMEA continued. Sell-out in the quarter was a few percentage points stronger than the sell-in, reflecting some channel inventory reductions in EMEA. Channel inventories were stable in North America and APAC. The divisional profit ended at 33.3% for the quarter, reflecting positive contribution from price increases and cost control and offset by direct tariff costs. For the year of '25, Enterprise managed to maintain its market-leading position in a challenged European market while executing positive sell-out growth in North America and APAC, resulting in organic revenue growth of negative 6%. As part of these numbers, it's worth highlighting that our sell-out growth numbers were around 3% better than this. So global channel inventories have decreased compared to last year. The gross margin increased 0.3 percentage points compared to '24 in spite of the extra tariff cost. We are pleased about how we mitigated uncertain trade environment through accelerated diversification of our supply chain and targeted price increases. The development in divisional profit margin reflects focused cost control, negative operating leverage and costs related to the upcoming launch of the Evolve3 platform. Moving to the next slide and Gaming. In our Gaming division, we delivered organic revenue growth of negative 12% in the fourth quarter, reflecting a difficult gaming equipment market influenced by low consumer sentiment as well as a very demanding comparison base as we delivered 16% organic growth in the same quarter '24. In the quarter, we demonstrated good cost control, delivering a divisional profit margin of 16.4% despite the direct tariff cost. For the year, we have increased our market share in a difficult market, resulting in organic revenue growth of negative 2%. We increased the gross margin for the division due to strong pricing discipline and benefits from the supply chain integration with Enterprise, partly offset by direct tariff cost. The divisional profit margin for the year reflects investments in product launches and extra costs related to managing the difficult trade environment. Let me move to the next item on the agenda, where we'll provide some more flavor on the divisional growth ambitions for '26 and beyond. Starting with Hearing. In '25 the market grew slightly less than normal. We still very much believe in the underlying growth drivers of the market with increased adoption and a growing elderly middle class around the world. This will continue to support healthy market growth over time. We are pleased that we have managed to outgrow these attractive markets for the last years, driven by strong commercial execution and product innovation. With the help of our latest platform, ReSound Vivia, we have further strengthened our position and our momentum remains strong around the world. As announced earlier this week, we will now also expand the Savi portfolio, which will support growth, especially in countries and channels looking for more affordable product solution. On top of these exciting portfolio additions, we have even more innovative product launches planned for the second half of '26. Altogether, this gives us high confidence that we can continue to grow above the market and strengthen our competitive position in the coming years and further. Let's turn to the development of the Enterprise business. I think it's worthwhile taking a step back and looking on our headset business has been shaped over the last decade. We have been one of the frontrunners establishing the market and driving the professional headset penetration. And the enabler for this has been technology shifts, where we have been successful in developing products that caters for customers' needs over time. Back in 2014, we launched our award-winning Evolve portfolio that supported the rapid adoption of different UC platforms driven by large technology infrastructure companies. What was unique and industry-leading at that time was the easy integration of our headset portfolio in the different user platforms, where we also launched ANC and a strong microphone pickup. The result was clear, professional headset quickly became popular and a standard for the knowledge workers wanting a high-quality experience. Moving into 2020 and the hybrid work age, as we would call it, this was accelerated by COVID-19. This period in time required new technology for headset performance and integration. In early 2020, we launched the Evolve2 portfolio that significantly increased headset performance across multiple dimensions. As a result, global headset penetration increased further to around 20% where it is today. And now with a fast-developing AI solution, we're entering what we believe is the next era. We call this the modern work shift. And with the increased adoption of AI solution, we believe that the next headset penetration will be driven by new technology demands. For it to succeed, you need to have a headset that fits the evolving trends of tomorrow. Let me give you a few examples. Ninety-nine percent of knowledge workers acknowledge that poor sound is impacting online meetings. Seventy-eight percent of knowledge workers from multiple locations, which means that the design of headsets is important and that headset needs to handle ever-changing noise situation in different environments. Currently, we're also seeing a return to office trend among many companies as well as a trend that the majority of new offices being built are having more open landscapes and less square meter per worker. This means that all of us need great solutions for working in these open spaces that are comfortable and where we can have online meetings where all background noise is filtering out. And that would help you to come across very clearly even in these challenging environments. AI workflows will also be a driving force. Voice is 3x faster than typing, making AI voice interaction much more efficient than if we type. Simply, we will likely speak more to our computers and devices and type less. This puts new requirements on the headsets in terms of how they can handle this with great accuracy. It would also like to increase the sound level in open spaces further and further increasing the need for great headsets that can handle that. Lastly, cybersecurity is important today and will likely increase even more into the future and grow in importance while an enterprise-grade framework for security is becoming an essential to be in this market. We have talked to numerous customers, partners, and analysts over the years to form a strong view on what's needed. And we believe that we have announced the -- what we have announced last week is really the headset that can take us into the new modern work area. Our latest enterprise-grade headset launch, the Evolve3 is designed to take the user experience to a new level while playing up against future technology trends. And it's not just another hardware update that is slightly better all around. The Evolve3 is also based to close to 10 years of research and development in its underlying technology. First and foremost, the AI-driven deep learning technology had been trained on more than 60 million real-world synthesis, taking microphone technology to a completely new level with outstanding ability to separate speech from noise, and this is quite impressive considering that it's also been possible even without the traditional boom arm. These headsets captures 99% of words accurately in an open office environment, making it built for voice-led AI and screen productivity in any environment. In addition, it is the first of its kind to feature adaptive noise cancellation while we're on a call and it comes with improved connectivity and a significant step-up in battery life with the possibility of a full day use from only 10 minutes of charging. In addition to impressive technical development, Evolve3 is also designed to be compelling. It is released in black and warm gray with a modern design. It's also designed for comfort. It is light and comfortable to wear all day. From March, the Evolve3 will be globally available in our high-end form factors, the 85, which has an over-the-ear fit and is designed for immersed focus and the 75, which has an over-the-ear fit if you prefer a lighter wear and greater environmental awareness. We call this the best headset for modern work and it's really built to match the pace and flexibility of what we all require. So let me move to the next page. As the working habits change, we need technology that adapts well. Whether you are in an airport, working at home, in the office or somewhere else, Evolve3 is a perfect companion. Even in very noisy environments, voice clarity is state-of-the-art due to our DNN-based voice processing, taking the benefits from the wider GN Group. As an example, you can literally stand in the room with loud music playing in the background and a person that you're speaking to will only be able to hear you and what you are saying and not the music at all. The same applies when you're taking a call outside a windy day, in a noisy coffee shop, or basically anywhere in any situation you can imagine. It's only you that is being heard. And perhaps most important, the strong sound process to make the headset the perfect companion for working also in the normal open landscape where you likely will be shielded from the noise around you. And when you make a call, you need to be heard without any background noise and the shatter to enter your meeting. The sound performance is so strong that you do not even need to mute when you're not talking any longer. The participants in the meeting will essentially only hear your voice and nothing more. We cannot be more excited about this launch and have more confidence in that this is really taking the headset to the next level and help us with the growth for the Enterprise division in '26 and beyond. It is developed to be the next penetration wave, while it also will assist the ongoing replacement of existing legacy products. And stay tuned because more will also come. We will, as normal, launch across mid and entry-level price points later and a more affordable price point will come over time in the next 15 months. Let's move to the next slide, where we'll also talk more about our aspirations for the gaming business. SteelSeries have been on a journey with increasing market shares for quite some time now. Since 2019, we have increased our market shares significantly in our core categories of headset and keyboards due to our best-in-class innovation. In [ mikes ], we have been defending our position during the last 5 years. This will be one of the focus areas for the coming periods as we obviously want to improve our position in this market as well. The core gaming equipment market remains structurally attractive, supported by continued growth in the number of gamers, time spent on gaming, and a growing appetite for premium features. These dynamics underpin a healthy long-term growth profile for the market, even though the near-term environment is held back by a muted consumer sentiment, in particular in the U.S. Against that backdrop, SteelSeries continues to win, and we expect our current momentum to continue in '26 and beyond, and we continue to deliver new product innovation in the market that will support this growth. SteelSeries is not just another gaming equipment option. In SteelSeries, we continue to challenge status quo and expand our categories into new and better options. For '26 and beyond, we expect to harvest broad-based market share gains by strong brand momentum and significant launches across categories and into new form factors on top of the growing core portfolio. While it is, of course, important that Gaming returns to deliver strong growth, the division has also been a journey to increase margins to becoming part of GN. We have come a long way by fully integrating Gaming into the same systems and product flows as Enterprise business and there are even more margin benefits to come over time by fully utilizing the GN at scale. In addition, we will continue our strong pricing discipline to mitigate impact from direct tariff cost and other unforeseen future external headwinds that could be a threat to our margins. Moving to next slide. Let me go through the assumptions for '26. In '26, we are planning for growth across our 3 divisions. We are convinced about our strong product portfolio that will help us to further gain market share in a flat to slightly growing markets. For the hearing aid market, we expect the market growth for '26 to be at the low end of the structural value growth of 3% to 5% due to the current low level of consumer sentiment around the world. In this market, we assume that we can continue to gain market share driven by our current momentum and further product innovation. And this is why assuming an organic revenue growth for the years between 3% and 7%. For the Enterprise market, we believe that the growth patterns that we have observed outside EMEA in '25 will continue. We also believe in some level of stabilization of the macroeconomic environment in the EMEA region to materialize during the year. All in all, we believe the global enterprise market will likely grow between flat and 2% in '26. In this market, we assume we can gain market shares driven by the launch of our Evolve3 headset platform and a gradual strengthening of our video portfolio. As a result, we're assuming an organic revenue growth for Enterprise between 0% and 6%. For Gaming, we expect the market growth for '26 to be modest, influenced by the current low consumer sentiment in the near term. In this market, we're assuming continued market share gains, driven by current momentum and the strong product innovation. And we believe that for Gaming, we can grow between 7% and 13% in the year. And with that, I'm happy to hand it back to Soren to speak more about our guidance for '26. Soren Jelert: Thank you, Peter. All in all, when we apply these divisional assumptions, it leads to our guidance for the group where we guide for an organic revenue growth of 3% to 7%, driven by continued strong execution and market share gains across our 3 divisions, as mentioned by Peter. Moreover, we are guiding for a reported EBITA margin of between 11.5% to 13.5%, driven by continued cost focus and operational leverage, offset by some short-term headwinds. All in all, the financial guidance supports our ambition to grow in a sustainable and profitable way that eventually will lead to realization of our long-term targets. On the next slide, I'll provide you with some more details on the elements that drives our '26 EBITA margin guidance. First and foremost, we are pleased with our ability to mitigate the impact on tariff in '25 by effective price increases and a successful acceleration of our diversification of our supply chain. Specifically, in '26, we will experience a margin tailwind from the temporary cost taken in '25 to relocate our production lines. That tailwind is then more or less offset by the full year effect of tariffs as these were only really impacting our COGS from the third quarter of '25. Then we will have a net negative effect from a step-up in absolute amortizations following the product finalizations of a number of projects, including the recent Evolve3 portfolio. This is, by definition, a noncash effect, but is following our accounting principles. Taking these factors into account, we do believe that we can drive a very healthy underlying growth in '26, which will materialize across gross margins and operating leverage. Depending on the growth development in the year, we will be able to expand our underlying EBITA margin by 1 to 3 percentage points. This once again underpins our strong group-wide margin platform potential. We remain firm on our long-term structural margin target of 16% to 17%. With the underlying margin target we are guiding for this year, we are convinced that we can continue to drive yearly margin expansions beyond '26 as a result of healthy top line growth and prudent OpEx management. On top of this, we will naturally look for gross margin opportunities as well. So to conclude, following a difficult '25 due to a wide range of external headwinds, we are excited about the prospects of the coming year. With growth coming back to our 3 divisions, we will be able to deliver a strong profitable growth while continuing our focus on strong cash flow generation and thereby continuing deleveraging. And with that, happy to hand you back to Rune. Rune Sandager: Thank you, Peter and Soren, for the updates. This was the end of the presentation. I will hand you over to the operator for the Q&A. Please limit your questions to 2 at a time, please. Operator: [Operator instructions] The first question comes from the line of Andjela Bozinovic with BNP. Andjela Bozinovic: Maybe one on Enterprise and one on Hearing. So on Enterprise, having in mind the Q4 performance, can you give us more details on underlying assumptions supporting the guidance and phasing of the growth throughout 2026? And just more broadly, what is your take on the expected decline in the PC volumes following the memory price hikes? How do you see this affecting IT budgets and the end markets in particular? And on Hearing, can you maybe discuss the moving parts going into 2026 and the phasing of growth? And any indication of what is baked in your guidance in terms of market share gains, competitor launches and market growth assumptions for both at the top end and bottom end? Peter Karlstromer: Great questions and quite a lot of unpack there. Let me start with Enterprise. We recognize that '25 was, of course, not the year where we delivered the growth, which we aspired for. But with that, there were still some positive things happening in the year. We saw the U.S. market and the APAC market actually growing throughout the whole year. So the difficulties were in EMEA, and we did see some underlying improvements throughout the year. Q4 ended a bit weaker than what we anticipated. Still, if we look back over the years, it has improved. And then, of course, also with our launches here, I talked a lot in the opening about Evolve3. We also have video products, which we are launching this year. We do believe that will support and growth also on top of the market improvement. In terms of the sequencing, I think it's fair to expect that it will be a gradual return to growth. So we will build up the growth over the year. So in some ways, the second half will be stronger than the first half. We also expect more product launches throughout the years and the launches we have made now, while the products, I think, are truly fantastic, it is a premium product that's still a smaller part of the total Enterprise volume. So all in all, I think we will build up the growth in Enterprise throughout the year. Then you asked about the relationship to PC shipments. I think we need to admit that we have seen a correlation before over time. We saw a little bit less of that last year, and it's probably also linked to quite an accelerated forced upgrades of a lot of PCs. So with a significant amount of budget for many companies spent on this. So it's probably crowded out spending in other categories. So while perhaps PCs decline a bit, we do not necessarily see this as something negative for us. And so we believe in the underlying growth here and the gradual improvement of our market. Then if I move to Hearing, I think it's fair to say that there is, of course, a lot of many moving pieces when we're building up our growth aspiration here for the year. I mean as we talked to, we believe that the market underlyingly is growing slightly below its normal trends. And we're talking about the lower end of the 3% to 5% value growth, which we consider to be normal. And you asked about what we have factored in. We have tried to factor in everything that we know, of course. We do assume some competitive launches. We do assume, of course, some larger customers making different type of decisions with opening up for more entrants. So we have tried to factor in everything we can. But we're, of course, also factoring in our own new innovation and our own launches. And we are entering the year with a good momentum. We had a 7% growth in Q4. We're entering with that momentum into this year and feel good about the momentum of Vivia. And with more innovation throughout the year, we think we can support a healthy growth over the year. So in Hearing, in terms of sequencing, I think you should probably expect a fairly even momentum throughout the year. Every quarter, we see a good opportunity to grow in essentially. Operator: Next question comes from the line of Martin Brenoe with Nordea. Martin Brenoe: I have a quite long question here. So I think I'll just limit myself to this one question, and then I'll jump back in the queue. In your Q3 report, you wrote that GN has minority investments in noncore assets that may contain significant value and could be divested. I've done some channel checks, which are indicating that NationsBenefits is a $1 billion valuation company, which is looking for external funding here in 2026. And this should translate into a potential divestment opportunities with potentially billions in DKK, based on my analysis at least. I know it's a bit out of your hands, whether this happens or not. But could you maybe just confirm whether you expect a funding round in 2026 and whether you expect to monetize that opportunity when it arises. And then just as part of that, I guess it would also explain why you're not having a cash flow guidance for this year, which indicating that you are a bit more comfortable with your leverage ratio. And if possible, I know I'm asking for a lot here, but could you maybe just provide some details on what you think such an opportunity would affect your deleveraging path from here and how you -- if you monetize it? Otherwise, potentially just give some basic information about the revenue and the growth of these minority investments? Peter Karlstromer: So Martin, thanks a lot, and thanks for laying this out and your work around this. We started to talk about Nations because we realized it started to build up to a valuable asset that we wanted to be very open about. And -- but we've also been clear on that there are some unknowns also for us. This is a company that is privately held. It is, of course, we have an ownership share of about 19%. We have a founder in that, that's been there since the beginning and another large investor also. So we're one of the larger investors. I think we are very happy, of course, with the underlying performance of the company. We do not want to comment on the details here since it's not a public company. I think that all of you can approach Nations for request directly from them. But I can just confirm that our view is that the underlying performance of Nations is strong and is strengthening over time, and it's been a very successful business buildup. So that's probably all we can say. And then in terms of how we think about our ownership, this is not strategic to us in terms of that is interlinked a lot with our existing business. At the beginning, Nations were very hearing aid focused, but they've grown to be much more than that today. And as such, there is not a very strong link to our existing business. So at the right point in time to the right valuation, we would be open to consider if we're the right owner. But it's not anything we are unilaterally seeking. We probably will do that in great harmony with other key owners and the founder, which we respect a lot. And we will update you over time as opportunities will present themselves. There is nothing very imminent around this, but could very well be over time. I hand it back to Soren for more commenting on the cash flow guidance and how to think about it. Soren Jelert: Yes. I think in many ways, you're absolutely correct that we do not guide for cash flow this year. And just to echo what Peter said, in the event something would happen, it would be M&A. And as such, we would always guide excluding M&A. So in that sense alone, it is not interlinked. But that's fundamentally not why we are not guiding for free cash flow this year. It's more the fact that we now, the last 3 years have generated more than plus DKK 1 billion in free cash flow. We have demonstrated that when we have the margins that we've had that we can generate the cash flow. In addition to that, we have also now made a new loan agreement that in many ways, is also a testimony to that our endeavor to go towards 2.0 leverage by '28 is definitely on the right track. And it was our opinion that where we need to focus now is to generate growth and the earnings. And when we do that, it will yield cash flow. And rest assured, we'll stay focused on getting to the deleveraging of 2.0 as fast as we can. Operator: Next question comes from the line of Hassan Al-Wakeel with Barclays. Hassan Al-Wakeel: Firstly, can you talk us through the drivers of hearing aid market outperformance and any regional performance that you can highlight? Your market outlook is for another softer year in 2026. It'd be great if you can walk us through how you see Europe within this and whether you're seeing any signs of improvement? And then secondly, on margins, given this should be a strong year of launches across your businesses. Can you talk us through some of the building blocks for expansion in the margin over the course of 2026? And I appreciate this is a wide range for the year, but the gap to the midterm ambition remains pretty large. So any updated thoughts on the bridge to 2028 would be very helpful? Peter Karlstromer: And let me start in the order you're asking this essentially. So if you take Hearing, if we look on '25, as you have heard us talk about before, in the first 3 quarters, this was very much Europe and international markets providing the growth for our business. We have been doing very well there. I think what's positive is that in Q4, we saw a bit of a stronger performance and growth contribution also from the U.S. side of our business. And if we look into the next year, I would say market-wise, we do expect the U.S. to be a little bit stronger than it was in '25. As we remember, Q1, in particular, was a very difficult quarter in the U.S. But generally, still the global market outlook, as we're saying, we do believe it's adding up to slightly below the structural growth of the market. That's our planning assumptions. Then in terms of our own plan for how to outgrow that market, I would say it's broad-based. We like to see outperformance versus the market growth in each of the region and also very focused to drive success in each of the channel types, everything from larger key accounts to more smaller independents. So this has been the approach we have taken in the last few years. It's very important for us to have that kind of balanced exposure and balanced ambition for our growth across. And the same is how we think about '26. And then you asked about Europe specifically. I think it's clear that Europe has been, I think, lately a little bit better. I would say that the markets where we have been doing very well has been, in particular, in Germany, that has been a growth driver for us, and we continue to have a very good momentum there. I think it's probably what I would highlight. But generally, I mean, the European markets for us has provided quite healthy support for our growth. I think it's also fair to say that in some European markets, we have a bit of a lower market share, also presenting an opportunity for us to catch up a little bit to what we think are natural market shares for us. Soren Jelert: And then when it comes to the margins, I think a couple of questions here, one linked to this year's margin. And for us, I think it's important to also recognize that we all the time have said that Gaming is an area where we will, through the good synergies with Enterprise, improve, amongst others, our gross margin. And as such, we also do believe that the group as a whole will be able to improve its gross margin in '26. Then in addition to that, actually, we also do see an opportunity on leverage of the OpEx base essentially. But to your point, we have factored in that we are launching. And then bear also in mind that within Hearing, we did launch Vivia in '25. So those costs were actually sitting in '25 as well. So in many ways, we are at a level of the cost base, which we believe is adequate to actually support the growth that we are striving for within the 3 divisions. Then when you look at the long-term margin aspiration of 16% to 17%, I think fundamentally, it's also important the decomposition we did of the aspirations for '26, where we have some cost items, amortizations as one, we do believe when you come out to the outer years we will be able to leverage the top line growth and as such be able to generate these margin increments as you see. So fundamentally, the underlying performance of our business should be able to get us to the 16% to 17%, which we believe is right for GN as a group. Operator: Next question comes from the line of Carsten Lonborg Madsen, Danske Bank. Carsten Madsen: Yes, a quick follow-up on Nations and the value here. Could maybe -- I know you cannot really talk about the value of it, but what will happen tax-wise if you realize a gain on this? Should we extract some tax from that, at least then we know that? And then I have a question on Huddly. You talked a lot about Huddly and you also mentioned video as a growth driver for you in 2026, something we have on the outside been waiting for a very long time. How meaningful is this collaboration? And do you expect -- and have you factored in sort of the meaningful growth of the video segment into your Enterprise outlook for this year. That's it? Peter Karlstromer: Let me start with the video and then hand it back to Soren for Nations and tax. I think that the Huddly partnership is meaningful in the way that it's addressing a gap which we've been having for a while, which is to work with companies in large video rooms. And Huddly is a company -- it's a smaller company, but with great technology for how you can add cameras into video rooms. So we essentially have integrated this into our existing video platforms together with their R&D. So it helps us a lot to now be able to address the full needs of companies, and it's been very well received when we're talking to customers and have presented this. We are launching this now in Barcelona this week at the big conference here, ISC. And we also have own other video launches, some which we have made and some that's coming. I think it's meaningful for the video business, what we're launching. It should definitely support the growth of the video business. If you look on the total growth support for both Enterprise and for the group, we need to remember that video is still a relatively small part in absolute numbers, so to say. But it certainly are important steps to see some acceleration of growth on the video side. But if you look into the growth ambition of our -- of Enterprise of 0% to 6%, we are counting on some contribution from video, but the majority will come from the core of the business, which still is headset. Soren Jelert: And then, Carsten, when it comes to your further deep dive on Nations question, I mean, I'll refer back to the question or the answer that Peter gave before. And as such, neither are we speculating in a potential tax implication of this and as such, are planning on group level still with around this 22% as we have also reported out on this year. Carsten Madsen: I was more thinking about whether we should -- when we calculate the value, whether we should just assume that the value is the value or whether we should subtract 20% tax? Soren Jelert: Again, I wouldn't speculate in the value is the value. I mean, honestly, we do not have a comment on the value as such and when it will materialize on Nations. So that's the way we look at it. Operator: Next question comes from the line of Veronika Dubajova with Citi. Veronika Dubajova: I will keep it on to 2, please. One, I just was hoping you could quantify the contribution from FalCom to the fourth quarter revenues and then what your expectations are for 2026 and whether those have changed in any way? And kind of maybe just gate some sort of risks to the upside and the downside around that just so that we can think about that since it was a driver. And then I apologize, but I have to go back to sort of the expectations around the Enterprise business growth. I guess there is a lot of concern and uncertainty in the sort of broader IT spending market. I guess it'd be helpful to understand the conversations that you're having with your distributors with some of the larger customers. What are you picking up in terms of corporate willingness to spend, especially as they face a lot of other competing priorities for investments, whether that's PC units or it's things like AI. I'd be kind of good to understand what you're hearing there. Just to give us a bit more confidence in your kind of -- what seems to be a very clear message that Enterprise should grow this year after many years of decline. Peter Karlstromer: Starting with FalCom, as you remember, we had a very good quarter in Q2 where we talked about more than DKK 100 million of business. In Q4, we had a similar quarter. So also a very good quarter. And we did preannounce that already earlier in the year because we had more or less agreements for that order in a firm way already then. But it was delivered and revenue in Q4. So if you look on the year in total, we made a bit more than DKK 200 million on FalCom for the full year of '25. And if we look into '26 that at the minimum, we see that we should be able to do the same level of revenue, but our base case scenario is probably to grow that a bit further. So I would say it could have some small growth contribution to the overall group growth. But I think we also need to remember FalCom still is relatively small in absolute terms. So it's not a real needle mover. But we continue to see a very positive development of FalCom, and we are pleased about that and very focused on continuing to growing it, of course. And then if I move to Enterprise, I appreciate a lot your questions around this and also how to think about this? I do think that we can approach this both top down, what we hear from leading analysts in terms of IT budgets and how much they spend on software versus hardware and so on. And if you do that, I think you're coming to a conclusion that IT hardware is probably modestly growing in most of the forecast, but relatively low growth numbers. And then if we observe it more from our own trends and the markets where we operate, which is predominantly headsets and video, as I talked about before, the market has been growing in the U.S. and APAC, which is great to see actually a stability of that growth. It's been going on every quarter for more than a year. And then EMEA has been the traveling area for us and the whole industry. And it's still not in growth in EMEA. So I would say that, that's perhaps a major uncertainty here and what the market growth will end up with. But our best assumption, if we take the growing North America and APAC and an improving Europe is market growth then for around 0% to 2%. And that is also consistent with what we are picking up with our largest distributors and resellers and when we speak to large customers and I mean trying to both plan our own business, but also talk about how they see and observe the future. So that's a market. And then we are guiding slightly above that because we feel very good about the products we are launching. I hope you all have a chance to test them at some point in time soon because we really think that this is not just like another product, so to say, another headset, but it really is taking the performance to next levels. And the initial reception has been very positive. It will take some time to build up the volume on this new line of products in Evolve3. We will see some limited contribution already in Q1, but more throughout the year essentially. So that's the combined thinking in resulting into the guidance of 0% to 6% growth for Enterprise. Veronika Dubajova: Got it. And can I just maybe ask a very quick kind of financial modeling question. Would you expect Enterprise to grow already in the first quarter? And I guess maybe, I don't know, Soren, if you want to comment on the phasing of growth for you specifically given some of the destocking dynamics you saw in the fourth quarter? Soren Jelert: No, we don't know and we're not guiding per quarter per se, but we do believe you will see gradual strengthening of it. And at this point in time we have some level of negative growth momentum, and we need to turn that into a flat to growing momentum. If that is happening in Q1 specifically or a little bit later in the year, we are not really guiding [indiscernible] it will be gradual. I do think though, and I could have talked about that also in the overall dynamics, it's worthwhile to highlight that we did see some channel destocking for the full year of '25. So that affected our growth in Enterprise with a few percentage points. And what we have assumed for next year are fairly stable channel inventories, and that is also what is a little bit helping to create the range of the guidance, what is happening to the channel inventories. Operator: Next question comes from the line of Jack Reynolds-Clark, RBC Capital Markets. Jack Reynolds-Clark: I had a couple also on Enterprise, please, and then across the U.S. and Europe. So within the U.S., can you kind of quantify the positive growth coming out of the quarter? And has that sell-out growth translated into a recovery in sell-in so far in Q1? And how much -- and if not, kind of how much destocking is there left in the U.S.? Then within Europe, again, in Enterprise, you mentioned some sell-out growth recovering there. Could you point to which markets are seeing sell-out growth and kind of quantify that recovery? And again, are you seeing any kind of translation into sell-in growth recovery and/or kind of how much destocking or how much inventory are your distributors holding there? Peter Karlstromer: So on the U.S. market, in the quarter, we did see sell-out growth, and we also had the sell-in growth, and they were actually fairly aligned those 2 numbers. So the channel inventories in the quarter in the U.S. were stable. We saw some more significant channel reductions in the beginning of the year '25 in the U.S. But towards the end of the year, they have actually stabilized. So the delta of sell-out and sell-in in the last quarter were predominantly in EMEA, and there, we saw it with several percentage point differences. And then to the markets have been going best. I mean, the last few quarters, a highlight of EMEA has been Germany, which is very encouraging for us because it is the largest market in EMEA. It is also a market where we have a very strong position. So that market has been both in sell-out and sell-in growth in the last few periods. U.K. has also improved a lot lately. And then I would say the Nordics and a few others of the more Central European countries have been -- I mean, also improving. And then we've been having a bit of a further challenges in Southern Europe. But I think that overall, if you look in EMEA, it is ending stronger than it started '25, so to say, and that's why we're talking about some level of improvement in trends. But the channel destocking have impacted also the numbers in EMEA. Operator: Next question comes from the line of Martin Parkhoi with SEB. Martin Parkhoi: First, a question again to Soren on the margin. I'm still a little bit curious to understand the bridge towards '28, in the short-term, which is '26, you have a range of 2 percentage points on the margin. And you believe 3 years later, you have a better transparency, only have 1% range in your margins? So how can that be? How can you -- if you land in the low end like 11.5%, how can you reach up in the 16%? What tools do we have to make such cost control? Then second question on the hearing aid market. We saw your gross margin going down this year, as you also rightfully say that you use some channel and country mix. And how should we see that mix in '26? Also if we get a soft hearing aid market, slightly soft hearing market again in '26 as we saw in '25, then there's a tendency to manufacturers starting to compete a little bit more on prices to reach their budget. So what kind of pricing environment have you baked in and margin have you baked in on hearing? Soren Jelert: Soren speaking, and that's on the longer-term aspiration. I think it's the way we have also decomposed the '26 guidance. We are of the opinion that in the event that we come in lower, it will, in our minds, also be a question of timing as we will strive for the growth as the key vehicle for us to get to the long-term 16% to 17%. Fundamentally, some of the investments we are taking in 2026 in, for instance, operations will yield gross margin improvements when we come out in the outer years closer to the '28. So in reality, we believe we will be able to catch up in the event that we land in the lower end. And we believe that if it's timing, it will definitely be possible. So we are investing in an underlying improvement structure that will yield results towards the '28 target. Peter Karlstromer: Martin, for more the hearing aid margins in '26, as we commented and you also highlighted in '25, the gross margins reduced due to the growth mix essentially we had in areas where we have low gross margins, channel types and geographies basically. As we're looking into the '26, we do expect a little bit of reversion of that into the more higher margin areas growing more normally and as such, supporting the gross margins. What I'd also like to highlight here and had that in the opening readout the divisional margins because they were actually -- if we look on -- after the difficult Q1, which was challenging in many ways, we were actually stable vis-a-vis the year before. And the explanation of that is that some channels where we have low gross margins also have a very, what should we say, compelling cost to serve. And as such, you might get a lower gross margin, but you still can protect a very good divisional margins. And we remain very focused on both type of margins. They're helping us to manage the business in a good way. But the planning assumption is some type of improvement on the gross margins for the year. Operator: Next question comes from the line of Richard Felton with Goldman Sachs. Richard Felton: Two, please. The first one is on Gaming. I'd like to understand the confidence in the 2026 guide. I suppose that that business was down slightly in 2025, momentum sort of decelerated into the end of the year. So just trying to understand sort of the gap from 2025 to the 7% to 13% guide for '26 between how much of that is the market getting better? How much is market share gains and product launches? That's the first one, please. And then the second one, thanks very much for sharing the detail on the Evolve3 launch. My question is, how impactful the launch has been historically on the Enterprise business? I know for hearing aids you get quite excited about new platform launches. But thinking about the business model and the type of customer base in Enterprise, how important is that launch cycle to drive growth? Peter Karlstromer: If we take the Gaming first, I think it's a combination of an improving market and then market share gains. If we look on the '25, the market was, I mean, relatively weak, around the world and in particular in the U.S. and Europe, where we have the majority of our business. So we do expect a bit of a stronger market environment. And then also have several great launches in the pipeline for the year across key core categories where we have meaningful business. Then I appreciate also when you're looking at, we all get a bit scared, of course, about Q4, which looks like a loss of momentum. I think it's important to bear in mind the outstandingly strong quarter Q4 the year before. So the comp was also part of seeing that decline in growth. So if you look more on sequential growth, quarter-on-quarter growth, it looks a little bit less daunting, so to say, to go from where we ended the year to growing into '26. So it is what we believe in as the base assumptions. And then the Evolve3 launch for Enterprise, we think it's a very meaningful launch and that this really will support our business. And given that we are the market leader in headsets also, hopefully, it can help the whole market to grow. So maybe get a double help here in some way. We have had this headset in early trial programs with both channels and lead customers for a while, and the feedback is overwhelmingly very positive. At the same time, we need to recognize it several years since we launched a line like this. So it's hard for us to analytically come back and say exactly what it would mean. But definitely, we are of the firm belief it will be a strong contributor to finding our way back in growth for Enterprise essentially. Operator: Next question comes from the line of Niels Granholm-Leth with DNB Carnegie. Niels Granholm-Leth: You are calling out a headwind in your margin for this year because of less positive effect from R&D capitalization. I mean, the effect for '25 was actually a little bit more than 2 percentage points. So would you expect to neutralize the effect completely this year? Or is it just going to be a less positive effect in '26? So that's my first question. And then getting back to the phasing in the Enterprise division. So how should we think about the growth trend throughout the year? I mean, are you continuing to expect kind of flattish to negative growth in quarter 1 to improve in the second half? How should we think about that? Peter Karlstromer: The way we have planned it out and can see it, of course, operating in the asset bases we have under R&D, we believe that the headwind or the less headwind is -- of the headwind in this case is to the tune of 1%. So it's not a full erosion of the 2% that you rightfully quote, but think of it at least as 1%. That's for the planning purposes. Soren Jelert: And then when it comes to Enterprise facing, I think the best way to do it is to expect a gradual buildup of the growth. So second half stronger than the first half. And I think it's both about generally getting the growth momentum going and also linked to the Evolve3 launch. We will see some impact in Q1, but we will see more impact of the Evolve3 launch later in the year. We will also launch more headsets later in the year, also further contributing to that growth. Then, of course, if we look on the Enterprise overall number, I think it's helpful, of course, to keeping a track on the large 2 FalCom orders in the comparison base from last year. And if we look on FalCom for '26, I said we aspire to have at least the same level of revenue, but also FalCom will likely be bigger in the second half than in the first half for '26. So that's probably as much as we can help you here, but do expect a gradual buildup of the growth momentum. I think that's the conclusion here. Niels Granholm-Leth: But shouldn't we expect any channel filling from the Evolve3 launch already here in quarter 1. Soren Jelert: Some level, definitely. But again, as I said, the Evolve3 85 and 75, these are the premium products, which is meaningful, but a smaller part of the total Enterprise sales. The mid-tier is where we have most of our Evolve3 sales and these type of products will launch at a later point in time. So that's what I meant with the sell-in will contribute in Q1 to some extent, but I think you will have even stronger Evolve3 contributions later in the year. Operator: Next question comes from the line of Julien Ouaddour with Bank of America. Julien Ouaddour: And sorry, guys, I come last, it won't be too different from my peers. I want to focus on the Enterprise guide again. I just think you need to give us a little bit more confidence for that. Just if I summarize, you're talking about gradual market improvement, 1Q and likely to grow back-end loaded year for Enterprise and Gaming. I think 4Q was softer than expected and not yet significant improvement in EMEA with declining PC shipments for next year. That's basically what I take from the call. I'm just wondering why putting such guide with ambitious market and share gain expectations instead of trying maybe to rebate expectations for beat and raise if the market recovers and the share gains materialize later. So that's just a question about just your thoughts behind how the guide was set and the visibility you -- I mean, you have today given, let's say, it was a little bit challenged to call the market in recent years? That's the first question. The second one, so switching to Hearing, you're the largest OTC player out there probably. Could you maybe address on what you're seeing on this channel in the U.S. and globally? And I'm asking the question because we're seeing some slowdown in the hearing aids market. AI seems to have unlocked possibility for smaller OTC players to get out with pretty good products from a performance standpoint. So my question is just, do you see some traction from small competitors? And could it be one of the reasons the U.S. market was soft for prescription hearing aids recently? Peter Karlstromer: Now back to Enterprise, and I run the risk of repeating some of the things I said before, but we have really tried to take all facts into accounts. I mean, both what we are picking up top down from all the sources we have available to us and then discussions with partners, distributors, and customers. And finally, what we observe ourselves in the underlying momentum of the business. And as I highlighted before, we do see the U.S. and APAC market in growth. It's been a lot about EMEA. And I mean, what we do believe and have into the guidance is some gradual improvement in EMEA. It doesn't say that the market will enter a high growth. We are saying a global growth of flat to 0%. It can even cater for some level of decline in EMEA for the year for the flat scenario there. And then we very much believe in the launches we are doing across the portfolio. And we do believe that the guidance we are giving with the midpoint as the most likely is our best effort here to give a meaningful guidance. We could, of course, have given an even broader range, but we do think the best way we can help you and the market is to guide like this in what we believe will be the most likely outcome. Then if I move to the OTC side. We -- I can speak about our own business first. I mean we have shared with you that we saw a little bit of a disappointing growth momentum in the first 3 quarters of '25. We actually had a fairly good quarter in Q4, so reentered double-digit growth in our Jabra Enhance our OTC offering. But I think I will say that still, if we look on the whole for both the market and our business, I think we've seen actually relatively similar dynamics to what we've seen in the overall hearing aid market. In the beginning of the year, and particularly in Q1, also the OTC business was really negatively impacted then the Q2 and Q3, I mean, our business, but I would also believe that's true for the overall business didn't really perform in the normal ways. And now we're seeing a little bit of stronger momentum in OTC. But to be fair, we actually see that in the U.S. business overall for ourselves. I personally do not believe it is, what should we say, cannibalizing significantly the traditional market. I think it continues to be a complement. It's interesting for us when we analyze our customer data. And so we do see that the customers buying from OTC are a bit different from the traditional hearing aids. In particular, it seems to be people that are younger. On average, it's about 10-year younger profile. And so there probably are some differences in the user base also. I appreciate there might be some limited overlap, but this is our best read on the market. So we don't think it will be the key explanation of the performance of the traditional hearing aid market, so to say. Julien Ouaddour: Perfect. I mean if I may just squeeze a very last one. Do you have any view on the Section 232, maybe any potential impact like on the protocol for the hearing aids? I mean, could it change your -- the original tariff for '26? Peter Karlstromer: No, we don't have any privileged insights in this. We're, of course, observing this also. So I have no further insights or comments. Operator: Next question comes from the line of Martinien Rula with Jefferies. Martinien Rula: I think you can hear me okay. Most of my questions have already been addressed. So I'll probably keep it to 2 quick ones and just to be as well conscious of time. So the first one is on your formerly called Lively business, which, if I remember correctly, was supposed to be breakeven by late '25, early '26. Could you elaborate a bit on how much of a drag it was for 2025? And if you have considered any potential scenarios for divestment or something like that into 2026 and beyond for this business? And the second question would be on the Gaming. I appreciate that you've been gaining consistently some share in the headset and keyboard categories. But I was a bit surprised to see that your share in the mike category, sorry, have remained stable. As such, I would appreciate if you could remind us of the revenue contribution of each of these categories and elaborate on why you haven't been able to grow your share in mike. Peter Karlstromer: Now, starting on the Lively business, which is what we call Jabra Enhance today. And as I mentioned, this year, we have not been able to have the same growth profile as in the previous years. The positive, I mean, fact is that Q4, we are back to the double digit growth, which we like to see. But given that the slow growth profile this year, our breakeven has been a bit delayed. We talked about that it will happen late '25, early '26. I will say with the growth momentum we have now, it's probably a bit later in '26 or early '27. But what is positive is that, I mean, the P&L works, so to say. I mean it will help the breakeven with the growth of volume. So we've been very focused on getting the business back to growth, and it's encouraging to see that now in Q4. Then on the Gaming side, I mean, you're absolutely correct. I mean the key category for us in Gaming are headsets. And here, we're really the leader for premium headsets in Gaming. And we are also large in headsets overall. So that is the largest category for Gaming. And then keyboards has been another category where we've really been building up a good business over time and very meaningful. You highlight mike as an area where there should be a growth opportunity, and I would say I agree with that. I don't want to forgo future launches, but it was a while ago since we launched new products into the mikes area. So I think you should expect us to have something going there that can help us to capture that opportunity essentially. I very much agree with your observation that that is a growth opportunity for us. Operator: This concludes our question-and-answer session. I would now like to turn the conference back over to the management for closing comments. Rune Sandager: Thank you very much, operator, and thanks, everybody, on the call.
Operator: Good day, and thank you for standing by. Welcome to the Q4 2025 Black Hills Corporation Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Sal Diaz, Director of Investor Relations. Salvador Diaz: Thank you, operator. Good morning, and welcome to Black Hills Corporation's Fourth Quarter and Full Year 2025 Earnings Conference Call. You can find our earnings release and materials for our call this morning on our website at blackhillscorp.com. Leading our earnings call are Linn Evans, President and Chief Executive Officer; Kimberly Nooney, Senior Vice President and Chief Financial Officer; and Marne Jones, Senior Vice President and Chief Utility Officer. During our earnings discussion today, comments we make may contain forward-looking statements as defined by the Securities and Exchange Commission, and there are a number of uncertainties inherent in such comments. Although we believe that our expectations are based on reasonable assumptions, actual results may differ materially. We direct you to our earnings release, Slide 2 of the investor presentation on our website and our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission for a list of some of the factors that could cause future results to differ materially from our expectations. With that, I will now turn the call over to Linn Evans. Linn? Linden Evans: Thank you, Sal. Good morning, and thank you all for joining us today. I'll begin my comments on Slide 3 with a summary of our achievements in 2025 and our strategic outlook, including an update on our merger with NorthWestern Energy. Kimberly will provide our financial update, and Marne will discuss our operational performance and progress on a few key initiatives. I'll start with a sincere thank you to our Black Hills team. I'm incredibly proud of our team's accomplishments in 2025. We achieved the key commitments we made at the beginning of the year, setting the stage for ongoing success. We once again fulfilled our financial commitments, achieving the midpoint of our earnings guidance and long-term growth target. We successfully executed our financing strategy, maintaining our solid investment-grade credit ratings. We achieved strong earnings through the consistent execution of our long-term strategy, which drove new base rates, rider recovery and enabled customer growth. Notably, we witnessed growing demand from our large load customers such as data centers and solid economic development in our service territories. We also increased our dividend for the 55th consecutive year in 2025 and recently extended that industry-leading track record to 56 years. Our team made strong regulatory progress, completing 3 rate reviews and advancing several strategic project approvals. We also advanced our plans to serve data center demand, tripling our data center pipeline during the year to more than 3 gigawatts. In just 3 years, our team successfully designed, permitted, constructed and energized our 260-mile Ready Wyoming transmission project, delivering the project on schedule. This transformative project is a great example of our commitment to innovative and customer-centric investments. By strategically interconnecting our electric systems in South Dakota and Wyoming, we're providing value that will reliably and affordably serve our customers for generations to come. We're also constructing our Lange II 99-megawatt generation project in Rapid City. This project will replace aging resources with cutting-edge generation technology, enhancing our ability to provide resilient and reliable service to our customers and communities. Our legacy of excellent operational performance is fundamental to everything we do. We consistently achieved better-than-industry average safety performance, top quartile reliability and a positive customer experience. To ensure the safety of our customers and our communities, we established an emergency public safety power shutoff program. This program serves as an additional tool in our toolbox to help mitigate the risk of wildfires. In addition to our success as a stand-alone business, we announced a strategic merger with NorthWestern Energy in August. Slide 4 outlines our unwavering commitment to these critical areas in 2026 as we advance our customer-centric strategy and capitalize on emerging opportunities. We remain steadfast in our dedication to consistency building upon last year's achievements as we embrace the exciting prospects ahead. We're already diligently working towards fulfilling our financial commitments, including achieving earnings growth in the upper half of our long-term growth target, as reflected in our 2026 earnings guidance, which anticipates 6% year-over-year growth. We anticipate delivering exceptional results for our stakeholders through executing on our customer-focused capital plan, continuing our regulatory progress through multiple rate reviews, meeting the growing demand of our customers and maintaining our positive momentum through our upside data center pipeline and completing our merger with NorthWestern Energy. Slide 5 outlines our data center pipeline of more than 3 gigawatts. Our pipeline includes only high-quality data center companies under nondisclosure agreements, which we are actively negotiating to serve. Meta is ramping up its new data center, and Microsoft demand continues to grow. Their combined load represents approximately 600 megawatts to be served by 2030 under our minimal capital investment model. Viewed through a financial lens beginning in 2028, we expect this data center demand to contribute more than 10% of our growing consolidated EPS. We're also making progress in negotiations with our other high-quality partners to potentially serve the remainder of our data center pipeline. To fulfill the scale of demand, we rely upon a combination of energy resources that include the procurement of market energy, contracted generation and investments we would make in generation and transmission. Each of these energy resources has its own distinct risks and considerations which will individually contribute to earnings uniquely based upon negotiated contracts with each customer. Our unique tariff offers flexibility in how we serve data centers, provide speed to market and is positively impacting affordability for our Wyoming customer base. Marne will provide more detail in her business update. Slide 6 outlines our $4.7 billion capital plan. We invest in our natural gas and electric customers' core needs for safety, reliability and growth. As I outlined earlier with our data center pipeline, our current capital plan includes only minimal investments to support 600 megawatts of data center demand, which we expect to serve through market energy procurement and contracted generation. We are developing opportunities for investment that aren't currently in our plan. As I said before, this would include generation and transmission bills as a part of a mix of resources to serve additional data center demand. Moving to Slide 7 and 8 for an update on our merger with NorthWestern Energy. We are very committed to the merger because combining these two companies makes great sense for our stakeholders. The merger will create a stronger, more competitive utility company, providing long-term value for stakeholders created through increased scale and improved customer diversity with our existing 8-state footprint, an improved financial profile with a larger balance sheet that expands opportunities for strategic investments. Offering employees greater opportunities for growth, creating improved deployed attraction and retention. And through the industrial logic of efficiencies associated with procurement and adopting best practices as a couple of examples. Importantly, the merger will enhance our capabilities and capacity to grow especially as compared to our stand-alone business. In short, we are committed to this strategic merger, one we have pursued for more than 2 decades. Today, more than ever, the combination of these two companies will enable us to unlock additional value creation opportunities for our customers and our shareholders, which excites us. To date, we have submitted all joint applications to our regulators in Montana, Nebraska and South Dakota, requesting their approval of our merger, and we're involved in the discovery phase in each state. We also filed our Form S-4 with the SEC last week, with special shareholder meetings scheduled for early April and intend to secure all necessary approvals to finalize the merger within the second half of this year. With that, I'll turn the call over to Kimberly for our financial update. Kimberly? Kimberly Nooney: Thank you, Linn, and good morning, everyone. Our team did an exceptional job of delivering on our strategy and financial commitments for 2025. Together, we are pleased to deliver another year that advanced our track record as a trusted energy partner by achieving the midpoint of our earnings guidance and maintaining our strong investment-grade credit rating while efficiently funding our $900 million capital investment plan during the year. And as Linn mentioned, regarding the merger with NorthWestern Energy, we are working towards a stronger future, including a larger balance sheet that will support our ability to execute with confidence on the needs of our customers with a stable financial foundation. On Slide 10, we provide a bridge comparing results for 2025 to the prior year. We delivered GAAP EPS of $3.98, which included $0.12 of merger-related transaction costs. Adjusting for these costs, we reported $4.10 of adjusted EPS for 2025, an increase of 5% compared to $3.91 per share in 2024. We successfully executed our regulatory strategy, delivering $0.95 per share of new rates and rider recovery margin, along with ongoing customer growth, which more than offset higher operating, financing and depreciation expenses. Weather was favorable by $0.09 compared to a very mild 2024. However, when compared to normal, weather represented an $0.11 headwind we overcame in 2025. O&M was higher by $0.36 per share, which included $0.12 of merger-related transaction costs. Excluding merger costs, our O&M expenses increased $0.24 per share year-over-year, primarily driven by $0.13 of higher employee and outside service expense, $0.08 per share of higher insurance costs and $0.05 of unplanned generation outages. Financing costs increased $0.33 per share which included $0.25 of higher interest expense, $0.19 of share dilution and a benefit of $0.12 per share from AFUDC, driven by large construction projects. We also incurred higher depreciation of $0.15 per share, reflecting new assets placed in service. Further details on year-over-year changes can be found in our earnings release and our 10-K to be filed with the SEC on February 11. Slide 11 presents our solid financial position through the lens of credit quality, capital structure and liquidity. We continue to maintain a healthy balance sheet by delivering credit metrics within our targets of 55% net debt to total capitalization and 14% to 15% FFO to debt, which is 100 basis points above our downgrade threshold of 13%. We issued a total of $220 million of equity in 2025. Given stronger forecasted cash flows from our successful execution of strategic capital investments, regulatory plans and increasing data center load growth, we expect a significantly lower equity need of $50 million to $70 million for 2026. In early October, we completed our planned debt offering, issuing $450 million of 4.55% notes, a portion of which was used to pay off our $300 million 3.95% notes on their January 2026 maturity date. Our next maturity is in January of 2027 for $400 million of 3.15% notes. We maintained strong liquidity with more than $700 million of availability under our revolving credit facility at year-end. Looking forward, our financial outlook is listed on Slide 12. For 2026, we initiated adjusted earnings guidance in the range of $4.25 to $4.45 per share, which represented 6% growth at the midpoint over 2025. Our capital plan, solid financial position and organic customer growth drives strong confidence in our ability to deliver in the upper half of our current 4% to 6% plan while maintaining 2023 as our base year. Our confidence is driven by ongoing customer growth within our jurisdictions, increasing data center demand and new rates and rider recovery on strategic investments like Ready Wyoming and Lange II that will provide long-term benefits to customers. We continue to actively pursue additional data center pipeline demand that would be additive to our 5-year plan and contribute upside to earnings over time through a combination of market energy purchases, contracted generation and utility-owned capital investments in generation and transmission. Slide 13 illustrates our success in delivering on our earnings guidance. In early 2023, we set our 4% to 6% growth target with the objective of holding ourselves accountable to consistently delivering on our financial commitments. With consistency in mind, we maintained our long-term EPS growth target, including our 2023 base year while communicating greater clarity and confidence in the upper half of the range. Slide 14 illustrates our industry-leading dividend track record. In January, we increased our dividend, extending our track record of increases to 56 consecutive years in 2026. We continue to target a 55% to 65% payout ratio. A dependable and increasing dividend is an important component of our strategy to deliver long-term value for our shareholders. I will now turn the call over to Marne for a business update. Marne Jones: Thank you, Kimberly, and good morning, everyone. As Linn and Kim already outlined, we had a remarkable year, providing safe and reliable service to our customers. Operational performance was excellent, as we continue to deliver top quartile reliability and invest in a resilient and reliable energy future, advancing electric transmission and generation projects as well as safety and integrity focused projects for our gas utilities. We advanced regulatory and growth initiatives and continued to work to address wildfire risk. I'm pleased to report on our success this year, which did not come without hard work and dedication. An example of the resilience of our team and system was response to an extreme wind event in December. With winds reaching 100 miles per hour in Rapid City, South Dakota, our teams and mutual aid partners work throughout our communities to restore power safely and as efficiently as possible, replacing damaged poles and lines. Thank you to our dedicated team members and the response from our community and our restoration efforts. I'll start on Slide 16 with our 2025 accomplishments. In December, we completed construction of our 260-mile Ready Wyoming transmission project that energized the final segments on schedule. This is a milestone in our history, and I couldn't be more proud of our team and partners as this project is transformational to our ability to serve customers reliably and cost effectively. It reduces our reliance on third-party transmission, enhances resiliency and increases access to market energy. Our interconnected transmission network will support long-term price stability for our customers and enable continued growth across our service territory. And as a reminder, the bulk of this investment is being recovered through our Wyoming transmission rider. Moving to Slide 17. In 2025, we broke ground on our Lange II project, a 99-megawatt utility-owned natural gas-fired generation resource located in Rapid City, South Dakota. This new resource will replace aging generation facilities with modern Wartsila engines and address updated reserve margin requirements. Major components are already procured in on-site, including 6 reciprocating internal combustion engines, and we are on pace for the facility to be in service in Q4 of 2026. We plan to recover this investment through the South Dakota generation rider. Our Colorado Clean Energy Plan is listed on Slide 18. We obtained approval for our plan in 2024 and works towards finalizing our project contracts during 2025. In November, we received approval of our 50-megawatt utility-owned battery storage project to be placed in service in 2027, which is already included in our capital plan. We are negotiating the 200-megawatt solar PPA and expect to sign an agreement during the first quarter. Slide 19 summarizes our regulatory progress. Over decades of strategic acquisition and investment, we have grown our scale and the diversity of our large electric and gas systems, growing long-term value for the benefit of our customers and stakeholders. From a regulatory perspective, we manage this valuable diversity by executing 3 to 4 rate reviews annually as normal course of business. 2025 was another productive year as we completed 3 rate reviews representing over $52 million in new annual revenue. Within those rate reviews, we also received approval for deferred accounting insurance trackers in Kansas and Nebraska and a new weather normalization pilot program in Nebraska, both mechanisms helped to reduce volatility in future earnings. In December, we also filed a new rate review for Arkansas Gas, seeking recovery of $147 million of new investments since our last rate review in 2023. We are requesting $29.4 million in new annual revenue at a return on equity of 10.5% at approximately 50-50 capital structure, with new rates anticipated in the second half of this year. We are also planning to file an abbreviated rate review in Kansas during the first quarter, as outlined in our last rate review, and is expected to recover capital invested through 2025 at the previously agreed-upon weighted average cost of capital. Looking ahead, we are preparing for a rate review in South Dakota within the next few weeks after holding base rates unchanged for more than a decade. The request will recover our customer-focused investments and increased cost to serve customers since our last rate review in 2014. Given we have operations in both South Dakota and Wyoming for this utility, we will have separate filings in each state. Additionally, we recently received approval for a new tariff for interruptible large load service in South Dakota to serve blockchain growth opportunities. And lastly, in Wyoming, wildfire liability legislation was signed into law in early 2025. In accordance with this legislation, we filed our wildfire mitigation plan in November for commission approval anticipated in March. As a result, we expect to obtain significant liability protections as we remain in compliance with our approved plan. We are also supporting similar legislation introduced in South Dakota. Slide 20 provides an update on our progress towards serving more than 3 gigawatts of data center demand. We have successfully served growing demand for Microsoft hyperscale data centers for more than a decade through market energy procurement with benefits to other customers in the region. We are also serving Meta's new AI data center under construction in Cheyenne, which we expect to transition from construction power to permanent service this quarter. We have built into our plan and expect to serve 600 megawatts of demand from existing data center customers by 2030. Based on current market conditions, demand of approximately 600 megawatts will require investment in generation and transmission infrastructure. Given large load requests, should we reach that level sooner than expected, the need for generation and transmission could be accelerated. In addition to our 5-year plan, our pipeline offers compelling and significant upside. We are making progress negotiating with high-quality customers around a mix of resources to serve this demand under our flexible Wyoming tariffs. Serving the scale of this demand will require a mix of energy resources, including energy procurement, subject to market availability, contracted generation through PPAs, including third-party and customer co-located generation and utility-owned generation and transmission investments. We have an opportunity to earn on total customer demand from each project. However, each customer's need is unique, requiring varying resources to meet their needs, which will impact margins in different ways as we negotiate within the framework of our LPCS tariffs. Where we have investment opportunities, we expect risk-adjusted utility-like returns. And where investment outlays are not necessary, the pricing is negotiated by project and is reflective of speed to market value, operational and financial risks and is intentionally designed to incentivize the utility as a replacement for traditional utility investment. As we work to contract the new load, we are prudently analyzing and negotiating the potential mix of resources to achieve a mutually beneficial long-term solution that protects customers, communities and shareholders. Specific to the Crusoe and Tallgrass project, we are working through several agreements that would ultimately support 1.8 gigawatts of demand. As examples of our incremental progress, we recently filed the CPCN with the Wyoming Public Service Commission in support of a substation for this project and are engaging with all partners involved in solutioning for the mix of resources to serve this demand, including fuel cells. As you can imagine, a project of this magnitude is complex and has many components involving multiple parties. As such, the project contracts must be thoughtfully structured and negotiated to manage operational and financial risk. Keeping with our normal practice, additional details will be provided upon signing of binding service agreements. With that, I will now turn the call back to Linn. Linden Evans: Thank you, Marne. I'm excited about all that we've accomplished as a Black Hills team over the past year with a long list of other wins beyond what we had time to mention today. As you've heard, we continue to consistently achieve our financial commitments and make excellent progress on our regulatory plan, our growth initiatives and our strategic goals. We're already off and running with a consistent focus in 2026 with customer-centric innovation as we pursue our mission of improving life with energy and how we do business and be the energy partner of choice. As we look forward, Black Hills offers a compelling long-term value proposition when considering our customer-focused growth, competitive yield and significant upside opportunities above and beyond our 5-year plan. Additionally, our planned merger with NorthWestern Energy will provide us with the advantages of increased scale and new opportunities as a larger and premier regional electric and natural gas utility company. Thank you for your interest and your trust in the Black Hills team as we partner to grow long-term value for our customers and stakeholders. This concludes our prepared remarks, and we're happy to take your questions. Operator: [Operator Instructions] Our first question comes from Chris Ellinghaus with Siebert Williams Shank. Christopher Ellinghaus: Linn, vis-a-vis the 3 gigawatt pipeline. Can you give us any sense of what proportion that might fall within your 5-year window? Or how much of it is beyond the 5-year plan? Can you give us any color on timings or even geography? Linden Evans: Chris, thank you for the question. I appreciate that. Yes, I'm happy to provide some color as best I can here. We have two existing customers in Microsoft and Meta, they continue to be in our pipeline. We indicated in our opening comments that we would be 600 megawatts by 2030. That's our estimate based upon forecasts and conversations, things of that nature. And then beyond that, we do have the 3 gigawatt plus. And I would say the best way to describe that is, the ones that we are negotiating with the most aggressively might be the right phrase or the most right now -- want to take service in that 2027 time frame. And then realize when they start to take service, it will ramp up. It won't be all at once as they construct, as they expand their data centers, et cetera. So hopefully, that gives you some idea about how we think about it, Chris. Christopher Ellinghaus: Okay. That helps. So obviously, you have a much better sense of what's likely and what the time frames are. And the equipment queue is tight. Can you file CPCNs in advance of having exact specificity of what resources you might need to sort of get that ball rolling and maybe get some greater security for yourself in terms of trying to get in equipment queues and whatnot? Marne Jones: Chris, this is Marne. So I can talk to you a little bit about the CPCN process. So typically, you want to have as many of the facts present as possible when you look at CPCN. As we are working through this, as you mentioned, the equipment queue is tight, we are in those queues. We are starting to get some of those specific details about CPCN. But really, it's also important to recognize to how we'll recover on those -- any of those CPCNs and so all of this really ties together. We're still navigating. This is new territory. Obviously, CPCNs aren't new to us, but new territory as we're working on that speed to market, that we'll be working through how do we bring those CPCNs as quickly as we can. Linden Evans: Just emphasizing what Marne said, we're in the queue. And as importantly, our customers are also in equipment queues, so that's been helpful to us. Christopher Ellinghaus: Okay. That helps. And as far as the NorthWestern merger goes, you've made filings, but have you had any significant interface with the Montana Commission to sort of gauge what their attitude is at this point? Linden Evans: I'd say the best way to describe that, Chris, is we are in discovery stage right now. So we have to be very careful of [indiscernible] things of that nature, but we are in the discovery phase. We're getting the kind of questions that we would fully anticipate and that's going. I'd say just kind of almost according to plan, if you will, certainly according to our expectations about questions that would be asked information that they need to make a good decision. Christopher Ellinghaus: Okay. Maybe one last question about data centers since that's a topic -- Can you give us any sense of the scale or numbers of data centers in your pipeline? Or is there a bunch of -- I guess this is objective of what's large to you. But is there a bunch of large ones? Are there -- are they sort of moderate scale? Can you give us any sense of how many candidates there are in the queue? Marne Jones: Chris, as Linn mentioned upfront, we do have our two customers today, Microsoft and Meta, both are looking for potential opportunities to expand. We've talked a bit about Tallgrass, Crusoe. I would say, in general, that's a big chunk of what we consider as our pipeline. Obviously, there's some others out there, too, but that's the big chunk of it. Linden Evans: And then I would add one of the advantages of Wyoming and Cheyenne in particular, where we're seeing a lot of these data centers, bloom and blossom, is the fact that land is relatively available, and it's relatively inexpensive. So from our perspective, quite a bit of land is being acquired for these. So I think they're going to be large hyperscale data centers for the most part. Operator: Our next question comes from Andrew Weisel with Scotiabank. Andrew Weisel: Unsurprisingly, a couple more questions about the Crusoe-Tallgrass project. First, based on the regulatory filings, and Marne, you alluded to some of this in your comments, but you're proposing to build some transmission infrastructure, including this Robinson substation and some transmission lines to connect it to your grid. And you're proposing a pretty unique setup where the customer would pay for construction to help alleviate risk and cost to the Cheyenne Light customers. I think that's a great setup. My question is, given this interconnection, do you see -- do these assets essentially ensure that the entire data center project will be "grid connected?" And therefore, would all related spending qualify for the LPCS tariff, is that your expectation? Basically, I just want to understand how this would be applied. You talked about certain fees being negotiated. How should we think about what's objective versus subjective maybe? Marne Jones: Yes. Andrew, coming through, I want to make sure I got your question here, so I'll give it a shot. From a microgrid management fee perspective, we really apply that to peak demand. So -- as I think all of us had mentioned, there's 3 different types of resources we can use to serve that type of load and each type of resource that we use comes with a different type of a microgrid management fee or a typical utility or risk-adjusted return, that's really that the fees that are charged based on their peak demand. Linden Evans: And Andrew, I believe -- Andrew, sorry to interrupt you, but I think further to that is these networks to date as we -- everything is being negotiated. Not everything is cemented, obviously or we'd be making other kinds of announcements. But much of this -- these megawatts, this energy, yes, it's tied to our system, if you will, to date. Andrew Weisel: Okay. That's helpful. I guess maybe if I could get a little more specific on the generation side. You haven't talked about generation needs as so far, it's not your project and you haven't announced contracts, of course. But Tallgrass has publicly talked about investing $7 billion of energy infrastructure in your service territory. You alluded to fuel cells. And of course, a big utility had an SEC document about $3 billion of fuel cells in Cheyenne. Some investors are confused about whether these would qualify for utility fees and the LPCS tariff. So I guess maybe could you just elaborate? Is there anything about fuel cells or anything else? How should we think about all those billions of dollars and whether or not that would apply to your fee structure? Marne Jones: Yes, Andrew, so as I mentioned, the resource mix is still being evaluated and how ultimately we would serve that load. As I noted, and you're very familiar with, as we use market that's more reliant on -- in lieu of building when we're looking at contracted or co-located generation that comes with a different type of pricing. And certainly, if there's opportunity to build, we would look at that through the lens of risk-adjusted utility return very similar to what we do today from a regulated rate base perspective. So all of that goes into play in the pricing, that pricing has been what is basically applied to the peak demand. Andrew Weisel: Okay. Okay. And I guess, going back to the T&D side or transmission side, really, are there other assets that you're looking to fast track to accommodate this or other big data center customers? Should we expect more filings like that Robinson substation filing? Marne Jones: As we've talked in the past, that 500 and 600 -- 500 to 600 megawatts, we believe, is going to require some additional investment beyond that time frame. So whether it's this project, other projects, we certainly see there's opportunities for additional investment beyond our current plan based on this pipeline. Andrew Weisel: Okay. Great. Maybe one last one and answer as best you can, I guess. You obviously still have not yet signed an energy service agreement with the hyperscaler for the Crusoe project. Will be as patient as we can. My question is they're looking to move pretty quickly and the timing of your CPCN filing calls for in-service, I believe, by March of next year, which is very fast. By when would you need to sign and announce something to keep everything on track? Is there some kind of time frame we should be watching for on the calendar? Marne Jones: We do know -- I mean there's intention from the customer, I think, to begin taking service in Q1 of 2027. So obviously, we are working in alignment with them as well as all the parties. We want to meet both of our goals. Operator: [Operator Instructions] Our next question comes from Ross Fowler with Bank of America. Ross Fowler: Hopefully not beating a dead horse here, but I just wanted to go back to kind of what we factually know at this point and kind of walk through some numbers and make sure my understanding is correct. So we have 600 megawatts currently in the plan. And we know that, that is 200 megawatts from Microsoft. Is the other 400 megawatts of that, the meta site or is there something else in that gap? Linden Evans: Ross, I think I'll step back and correct you on that. We have not disclosed nor has Microsoft disclosed the number of megawatts that they take from us. But we can see on a combined basis for both Microsoft and Meta, we anticipate it'll be 600 megawatts by 2030. Hopefully, that's helpful. Ross Fowler: Okay. That is helpful. And then we know that Meta's data center is in Wyoming County. And so we know some piece of the 600 is in Wyoming County. And there's about 1,150 megawatts of generation in the interconnection queue filings in Wyoming County. So the rest of that beyond whatever I estimate Meta might be of the 600, where is that coming from? Is that the Tallgrass site? Is that some other side? Is that -- I'm just trying to scale things based on what we know from public filings? Marne Jones: So yes, Ross, we've shared, I guess, kind of what we can share. We are still under negotiations. We're still determining resource mix. As with any queue, you're going to have a lot of parties in queues. And so these are things that we'll continue to work through as we firm up our mixes. Linden Evans: And Ross, I might add to that. I'd ask you to remember that both Meta and Microsoft are taking market energy. And therefore, the megawatts of interconnection don't always connect if you will, or add up. Ross Fowler: Okay. All right. So it's not additive because they're taking market, [indiscernible] And then the 4% to 6% EPS CAGR, right, through '28, that is inside or I should say, the 4% to 6% EPS CAGR includes that 10% EPS contribution. It's not on top of the 4% to 6%, right? It's within the 4% to 6%. Marne Jones: You're correct. Operator: I would now like to turn the call back over to Linn Evans for any closing remarks. Linden Evans: Well, thank you very much for your questions. Thank you very much for your interest in Black Hills Energy and Black Hills Corporation. I want to once again say thank you to our team for a fantastic 2025 and thank you for leaning into 2026, and we appreciate all of you attending today and have Black Hills Energy Safe day. Thank you. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Linda Hakkila: Hello all, and welcome to follow Konecranes' Q4 2025 Results Webcast. My name is Linda Hakkila, I'm the VP, Investor Relations here at Konecranes. And with me today, as our main speakers, we have our CEO, Marko Tulokas; and our CFO, Teo Ottola. Before we proceed, I would like to remind you about the disclaimer as we might be making forward-looking statements. As per usual, we will first start with presentations, both from our CEO and CFO. And after that, we will start the Q&A session. We are happy to answer your questions through the conference call lines. But now without any further comments, I would like to hand over to our CEO. Marko Tulokas: Thank you, Linda, and good afternoon from cold, but very sunny Helsinki. I'd like to start with some general statements. It was a really very strong year for Konecranes, and I'm very, very proud of our team and very proud to be part of the Konecranes team, particularly in a year like 2025. Konecranes has a very sound business model. We've been executing our strategy. And that, of course, in this sort of environment has really improved -- shown that an improved resilience in our results. There was a very uncertain environment last year. We focused on executing our strategy and focused on the most important things. The year started on uncertain terms, but we acted fast and early, whether it's on pricing, focus on execution or tight cost control. Towards the second half of the year, the market environment stabilized and particularly in the delivery side, it was visible, and that helped us to finish the year strong. And now when we look at towards 2026, we have a good order book in place, the structure is solid and our strategy for 2026 has a very good road map in place. So I'm really confident for year 2026. So now let's look at how the year turned out and then also how the quarter 4 look like. Throughout the year, the demand environment stayed positive overall. There was a lot of positive development in many customer segments and Konecranes' broad presence in different customer sectors and geographies, of course, helped us in this sort of volatile environment. Our orders were very strong, particularly in Port Solutions and Industrial Equipment. So we grew almost 12% in 2025 in comparable terms compared to 2024. The demand on industrial service instead was quite a tough demand environment. But even in this environment, we were able to strengthen our agreement base. We took very good care of our pricing and also made sure that we adjusted our cost base to the prevailing conditions. We also took care of our margins and our cost structure, good execution in our project business, and we continue to roll out our products according to our strategy. And that, of course, meant that we were able to complete the year with almost 1 percentage point improvement in the comparable EBITA at 14%, record high level. Moving on to quarter 4. And in quarter 4, our orders were also very good. So we continue very solid order intake and also sales. But it's also noteworthy that both decreased against a very strong comparison quarter of -- quarter 4 of 2024. So orders were down 4% and net sales roughly flat in comparable terms. Quarter 4 in 2024 had a very strong order intake in Port Solutions, but also in Industrial Equipment, where both actually had the second highest quarter of all time in Konecranes. And that makes quarter 4 of '25 also very satisfactory for us. Our order book continued to strengthen, and it was 3 percentage points higher or 7 percentage points in comparable terms. Our profitability improved and increased to 14.1%. It was really very good project execution in Industrial Service, Industrial Equipment and in Port Solutions, Port Solutions with very good margins, but with slightly lower volume. And we kept our cost control intact and had a bit of pricing and tariff tailwind, but less than we had in quarter 3. And of course, the order book improved, and that means a solid start for 2026. Now if you look at the market environment in general, how is the best way to describe it? Maybe one way to say that the market and the customers have maybe used -- got used a little bit to the uncertainty. So there is a cautious positive development in the capacity utilization rates as it is visible in this Industrial Service and Equipment slide, which shows the capacity utilization rates in the 3 main market areas. And our own funnels and our customer demand, how we see it. European sales funnels are good on solid level. There are some signs of improvement. But of course, customers continue to be rather cautious around this type of volatile environment. In the United States, the previously very strong industrial equipment funnel has somewhat flattened down. But on the other hand, on the service side, we see some signs of improvement. So customers are starting to do the service that they may have put on hold temporarily during the kind of tariff-related uncertainty. It's, of course, too early to say how this actually pans out during this year, but we are optimistic in general about the market environment or continue to be so. And in Asia Pacific, the market continues and the funnel continue to be on a stable level, but the tough competition continues, particularly from the Chinese competition. And then if we take a look at the Port Solutions segment, here, the container throughput index, as we have discussed before, is, of course, the main indicator, and that continued to be on a very good level overall. Maybe there is some flattening in the growth rate, but it's still very positive. Our funnels continue to be good. There are big and small cases in the funnel. And of course, it's good to remember here that besides the obvious container throughput traffic indicator, there is the long-term prevailing trends in port solutions that are, of course, driving investments. So that comes from the automation trend, the prevailing consolidation trend in that industry, change in the traffic routes driven by the repatriation and changing manufacturing locations. So of course, we continue here to have a kind of positive general view on the market as we have had also last year. So reiterating again a bit more about the quarter 4 development against the strong comparison period and how the past 2 years have gone, as you see here, of course, the order intake in quarter 4 was slightly down from previous year quarter 4. But last year, the order intake was actually very good and better than previous year in the first 3 quarters. There was a decrease in quarter 4 in all business areas, some increase in Europe and some decrease in Americas and APAC. And actually, the same profile is true for the sales side of things. Next is time to look at the order book situation, and we have had a solid above 1 book-to-bill ratio throughout last year, and we've been strengthening our order book throughout the whole last year since quarter 4 of 2024. So we have a particularly strong order book situation in Port Solutions. It is positive in Industrial Equipment with also a positive mix, but it's also a bit down in Industrial Service. Now here, you see the profitability development over the last 2 years and again, comparing the quarters to each other. This is really a very strong progress and very strong execution to our strategy. There is increase in Industrial Service and Industrial Equipment in quarter 4, some decrease in Port Solutions. And like I stated earlier, that's mainly driven by the volume. So Port Solutions continued to have good margins and good execution. And they also had a very good quarter 4 last year. Some less tariff tailwind, but still some visible in quarter 4, really good cost management and slightly weaker mix in Port Solutions, but we are very happy with this 14.1% outcome to quarter 4 last year. And that, of course, really helped us to reach this almost a percentage point year-on-year full year improvement on profitability. Now then it's time to take a look at the -- how we track in our profit improvement progress or process. This is actually the third consecutive year in all 3 business areas where we consistently improve our profitability. All 3 business areas are well within their defined profitability -- midterm profitability ranges. And we've done this under rather challenging demand environment. But at the same time, of course, it is true to say that we have not really had a challenging downturn in terms of volumes. So as you will see here, there has been pressure on the volumes, and we've shown continuous good profitability improvement. And of course, with additional volumes, then this is -- we are confident that this continues to be a good story. And now I would like to hand over to Teo, and then I'll come back in after a few slides to talk about the demand outlook and a couple of other things. Teo Ottola: Thank you, Marko. And let's take a look at some of the business area numbers in more detail. But before going there, as usually, so let's take a brief look at the comparable EBITA bridge between Q4 '24 and Q4 '25. So we had close to 1 percentage point improvement in the EBITA margin in a year-on-year comparison, and this translates into roughly EUR 5 million improvement in EBITA in euros. And let's unpack this now next a little bit. So pricing impact year-on-year was roughly 3% -- and then when we combine with that information, the fact that the sales decline -- there was a sales decline in comparable currencies. So we are actually taking a look at the underlying volume decline of some 4% or so, which obviously is not good from the profit and profitability point of view. However, net of inflation pricing, mix and then particularly good execution, so project execution, for instance, then we're all working in a positive manner. And as a result of that, the net of those -- all of those impacts is positive by EUR 13 million, as we can see as a combination of volume, pricing, mix and variable cost on the slide. And then fixed costs continued to be very well under control. So only EUR 2 million increase in fixed costs in a year-on-year comparison, whereas then the translation impact as a result of the FX differences was a clearly negative number, minus EUR 7 million. And as a result of all of these then combined, so we end up with the improvement of roughly EUR 5 million in a year-on-year comparison. Then moving on to the business areas, starting with Industrial Service. So we had order intake of EUR 380 million. So this is actually a decline in reported currencies, but an improvement of more than 2% in comparable currencies. So like already mentioned in connection to the bridge, so actually, the FX differences continue to play a big role now in the fourth quarter as well. Taking a look at the different parts of the businesses. So Field Service declined in the order intake in a year-on-year comparison, whereas Parts business cut up. And then when we take a look at the regions, so EMEA did well. So there was an increase, whereas then Asia Pacific and Americas both saw a decline in the order intake. Agreement base actually grew by 4.4%, like Marko already also mentioned. Order book decline of 7%. That's a big number. But in reality, that is almost all, let's say, everything actually is in relation to the currency changes. Net sales, 3.5% higher year-on-year in comparable currencies. The story is very similar to what it is in the order intake. So Parts did better than the Field Service and of the regions, EMEA did better than Asia Pacific and Americas. Comparable EBITA margin, 21.9% on a very good level, 1.3 percentage point improvement year-on-year. The improvement did not obviously come from the volume as the net sales increase is roughly in line with the pricing change. It actually more came from pricing, from good execution as well as then efficient cost management in general. Then moving on to the Industrial Equipment. So there, we have an order intake increase in comparable currencies of roughly 1%. However, when we take a look at the external orders, so this is down slightly by almost 1 percentage point against fairly tough comparables, fourth quarter of '24 was very good from the Industrial Equipment order intake point of view. Of the business units, we had growth in components in a year-on-year comparison. We had a decline in process cranes and standard cranes as well, a slight decline. One could maybe also say that this was flattish in a year-on-year comparison. And of the regions, again, EMEA did fairly well, so increase there, whereas then we had a decline or decrease in the Americas and APAC. In a sequential comparison and taking a look at the business units, so components orders actually rose also in a quarterly comparison, so the component orders in the fourth quarter were very good. We had a decline in port cranes as also in a year-on-year comparison and then standard cranes were fairly flat in a sequential comparison, similar to what it was in a year-on-year comparison as well. Here, our order book rose by 2% and of course, with comparable currencies, even more. Net sales up 3% roughly, taking a look at the total volume or then the external volumes, both roughly 3% up. The sales mix was such that it was a little bit more favorable from the margin point of view now in the fourth quarter of '25 than a year ago. And then when taking a look at the comparable EBITA margin, 11.7%, excellent improvement of more than 2 percentage points in a year-on-year comparison. Again, good execution, pricing and of course, also the already mentioned mix supported the profitability in the fourth quarter. And then Port Solutions order intake, EUR 406 million. This is a decline of roughly 11% in a year-on-year comparison, of course, against very tough comparables. So also here, the fourth quarter of '24 was very good from the order intake point of view. When we take a look at different businesses within Port Solutions, so Lift Trucks actually had good activity as well as RTGs, Port Service, quite flattish in a year-on-year comparison. And then when taking a look at sequentially, particularly the business units that are more short cyclical like Lift Trucks and Port Service. So Lift Trucks had an increase also in a sequential comparison, so Q4 was higher than Q3, and Port Service was relatively on the same level in fourth quarter as in third quarter. So flat exactly like in a year-on-year comparison as well. Net sales declined by as much as 7% in a year-on-year comparison. This was, of course, as a result of the order book timing and as such, as expected already earlier. Order book, however, is clearly higher than what it was a year ago, thanks to good order intake that has been there basically throughout the whole of '25. Comparable EBITA margin, 9.2%. So this is a decline of 0.5 percentage point. So this primarily obviously comes from the lower volume. So sales was lower than a year ago. Mix did not help here. So in ports, it was rather negative than positive in a year-on-year comparison, but this was partly offset by very good execution and project execution in the fourth quarter within the Ports business. Then a couple of comments on the balance sheet side. Let's start with the net working capital. As usual, net working capital has continued to be on a very low level. So there is no meaningful change from the third quarter. Obviously, the structure is a little bit different. Inventories have turned into accounts receivable, but otherwise, very much on the same level. The improvement in comparison to a situation a year ago comes from accounts receivable as well as advanced payments. And then on the right-hand side, we can see the free cash flow, which continues to be on a very good level, record levels actually also for '25 and the cash conversion continues to be clearly above 100%. Then consequently, of course, as a result of the cash flow, our balance sheet from the net debt point of view looks very strong or actually, we have net cash in the amount of more than EUR 160 million at the end of the year. And then finally, from the balance sheet point of view, so the return on capital employed on comparable terms, 22.1% at the end of '25. And then I will invite Marko back to talk about the outlook for '26. Marko Tulokas: Thank you very much, Teo. There is the outlook for '26. But before that, some other additional things, of course, our solid progress, very nice development, strong cash flow and balance sheet has 2 outcomes. Our Board of Directors is proposing to the AGM a share split with 1:3 ratio. That is, of course, due to the high price and to enhance the liquidity of the shares. And we also have the Board proposing to the AGM that we increase our dividend from the previous year EUR 1.65 level to EUR 2.25 per share for [ 2025 ], which is very much in line with our stable to increasing dividend policy. And now to the demand outlook. Although there is a volatility, of course, in the marketplace, we expect several sectors to keep the demand up. And in the industrial customer segment, we expect the demand environment to remain on a healthy level. And for the port customers, the container throughput continues to be on a high level as we saw before. And there is, of course, these long-term prospects in that business in general, the long-term drivers and then is, of course, supporting a strong container handling demand in the future. So the outlook continues to be good. But at the same time, of course, it is good to keep in mind that this uncertainty related to geopolitical decisions, the trade politicians and the tensions, they do remain high. And of course, they may have positive and negative impact to our demand picture that may also come quite quickly. But generally speaking, we have a positive outlook on the margin. And then finally, let's look at our financial guidance. So we have a starting order book that is better as already was elaborated also by Teo and myself earlier. The demand outlook is stable. So we are confident that realistic picture on the demand environment, and we are conscious about the market uncertainty also. So we expect our net sales to remain approximately on the same level or to increase in 2026 compared to 2025. And as you saw, our margins have been developing very well in '25. And we expect these margins to remain approximately on the same level also in 2026 compared to 2025. And with that, I thank you all very much, and we can move to the questions and answers. Thank you. Linda Hakkila: Thank you, Marko and Teo, for the presentation. And now we will start the Q&A session. Operator, we are ready to take questions. Operator: [Operator Instructions] The next question comes from Daniela Costa from Goldman Sachs. Daniela Costa: I have 3 questions, if possible. First, I wanted to ask you to -- if you could give some color on how you see the mix in Port Solutions going forward. I know you mentioned here it was slightly disadvantageous. I don't know if it's just one-off this quarter or given the nature of equipment, maybe more larger equipment, is that something that will continue? And then I'll ask my other questions right after. Teo Ottola: The ports mix going to next year, of course, it is approximately flat, the mixed or neutral, the impact as I see. And I guess that is also your conclusion also. Marko Tulokas: That is actually my conclusion also. And I think that what you are referring to with the larger equipment. So of course, we have been talking about that, that potential mix might be weaker going forward in case the product -- let's say, the demand moves more towards the, let's say, heavier equipment. However, that has not happened to the extent that we would be expecting a deterioration in the mix for this year. Daniela Costa: Got it. And then I guess we have seen in some regions quite a steep move on things like steel prices. Can you talk us through a little bit how we should think about that given the lag between orders and sales, the pricing that you're putting out at the moment? Do you expect that to be a headwind in the shorter term or not really you can pass it all to? Teo Ottola: So your question was particularly about steel prices, right? Daniela Costa: Yes. Teo Ottola: So the steel prices throughout 2025, they have been approximately flat, and there's actually a slight positive or from our point of view, positive. So in that way that there is actually a somewhat lower quarter 1 steel price rates than there was in quarter 4 of 2025. The outlook is -- or the forecast is that there would be a minor increase in steel prices in 2026. But of course, only time will show that how will that materialize. Our approach has been and it continues to be so, as still is for many of our products, a reasonably significant cost component that we will pass on the steel cost in our prices, and that's how all our pricing systems and our configurators have been built. Finally, there is some regulatory developments in the market and the CBAM is one of them that, of course, eventually the CBAM regulation, although it is no direct impact to our products and so forth, that may drive steel costs up in the longer term, but that's not in the immediate visibility at the moment. Daniela Costa: Got it. And then a final one, just in terms of like you have obviously very strong free cash flow. It looks like a decent size comes from the payables within working capital. Can you talk a little bit about sort of exactly what that is? And how should we think about payables going forward? Teo Ottola: I'm not quite sure that what your question was. I mean, are you talking about capital allocation of our balance sheet in general? Daniela Costa: Free cash flow. Teo Ottola: Yes, of course, I mean if you're referring to the dividend policy only or to the question of other means of distributing the cash. Daniela Costa: No. I'm just actually asking about free cash flow. Within your cash flow statement, there is a big positive of payables in the working capital. Yes. Teo Ottola: Maybe commenting on net working capital as a whole. So now at the end of '25, we are on a very beneficial level. And we are clearly, let's say, we are several percentage points better than our, let's say, midterm target is, which is that we should be below 10% of rolling 12-month sales in net working capital. Now we are clearly below that. So the situation is very beneficial from the net working capital point of view. And if the question is that, is that something exceptional? Or will it stay here or will it even improve? So one could maybe say so that this is, let's say, maybe in the midterm perspective, this is on the better side of the average. So maybe the overall in a way, level on a long-term basis could be even a little bit higher for net working capital. But definitely so that we aim to be below the 10% threshold of the rolling 12-month sales. And then, of course, we will need to allow volatility in both directions as we are now seeing a very good situation. So it may be that in some quarters, we are seeing a little bit worse situation. So the payables, accruals and advanced payments, all of the combination of all of that is very important, but I would still stress the importance of the advanced payments. So this is a lot of customer project timing related, how the net working capital develops from one quarter to another one. Operator: The next question comes from Antti Kansanen from SEB. Antti Kansanen: It's Antti from SEB. A few questions from me as well. I'll start with the guidance of flat to growing sales and especially on the Port Solutions side, how much of the backlog that you currently have do you expect to convert to revenues during '26? Or if you don't want to give the number, how does that compare to situation a year ago? Teo Ottola: We maybe not give the direct number for the first question, but if we take a look at the overall order book, now that we have at the end of '25 for '26 and compare that to how much order book we had 1 year ago for '25. So the difference is now more than EUR 100 million. Marko Tulokas: For all [ 3PAs ]. Teo Ottola: For all 3PAs. And then, of course, it is fair to say that the ports business is a clear majority of that, particularly now that the FX differences are impacting so much to the order book of the service business. So that basically it is the same number or maybe even slightly more for ports than what it is on the group level. But this is, of course, with reported currencies. So if you take a look at comparable currencies, Marko showed both numbers. So then, of course, that number is higher. So it's about twice as high, not for ports, but for the group. Antti Kansanen: Yes, sure. And I was also thinking on the guidance, if we talk about, let's say, on the lower end of it that your sales will be on the same level as in '25. Would that imply actually that volumes would be down, I don't know, clearly. But anyways, one would assume that there, you talked about the net price impact on Q4, one would assume that the positive pricing continues through '26. So how should we think about that volume pricing trend in the backlog? Marko Tulokas: Of course, like we were saying earlier, the starting point is positive with a stronger order book. And of course, we have a stable funnel that we look with positive mind. So there is all the reason to be positive about the demand environment and the volumes also. But at the same time, there are some question marks. Teo mentioned one of them is, of course, is the currency rate. And of course, then the other one is related, of course, to the general development of the market environment overall. But what we are trying to say with our guidance that, of course, we have a good starting point for the year, and we look at the volume development positively. But being appropriately, let's say, cautious about it also in this environment. Teo Ottola: But logically, of course, you are right. So I mean, if the sales were flat in a year-on-year comparison and the order book for this year is EUR 100 million more than what it was for last year, so of course, then it would mean that the in and out volume would be lower, which could be, let's say, depending on various things. But of course, now we need to remember that what we are saying regarding the overall market outlook is that the sales funnels in the various businesses. So they continue to be good. I don't know. They continue to be stable and on a good level. Antti Kansanen: Yes, that's clear. Then the second question was on profitability. And maybe a reminder on the tariff-related pricing tailwinds that were kind of notable on previous quarter and still there on Q4. How should we think about kind of impacts of those going forward, maybe fading away? Any guidance on that? Marko Tulokas: Well, they repeated also in quarter 4 after being visible in quarter 3 and quarter 2, but not to the same extent. So as we have also said before, the expectation is that they will go away or deteriorate over time. And of course, it actually continued throughout the whole year, and there was a positive sign to us. We expect that you will not see the similar kind of positive tailwind going forward. But also it should not have a significant negative impact to the margins either. Antti Kansanen: Okay. That makes sense. And then the last question, and I guess, Marko, you almost started to answer on the capital allocation side. And I mean, obviously, there's a clear increase on the ordinary dividend. But I mean, balance sheet is getting stronger and stronger and capital allocation has been a bit of a discussion point. So any updates on further distribution, buybacks, anything like that? Marko Tulokas: Yes, I was so eager to start answering that question already. So I was preempting that. But no, I mean, of course, that our approach has not changed there. Of course, we have several potential means for the use of that cash, and we are working on all of them. And one of the obvious one is the potential acquisitions. And as we've said before, that has been a big part of Konecranes' history, and it continues to be so in our future also the inorganic part of the growth. And so we have a funnel of different size of opportunities that we are actively exploring. And it's more a timing question that when we can realize those. And for that, for sure, we want to have maneuvering room and the increase in the dividend that was announced today, of course, that is, in our view, no way jeopardizing those -- that maneuvering room that we have going forward, given the available cash and then, of course, our ability to leverage the company. Would you like to add something to that? Teo Ottola: No. Operator: The next question comes from Mikael Doepel from Nordea. Mikael Doepel: So a couple of them. I'll take them one by one. So if we can start to talk a bit about the net of inflation pricing. I think you mentioned it was positive still in Q4 of last year. How do you think about 2026? I mean if we put tariffs aside, how do you think about pricing net of inflation? Marko Tulokas: Maybe since you are going through the bridge, you may want to continue on this also. Teo Ottola: Yes. The basic commentary here is the same as it has been. So we believe that we will be able to push cost inflation into the customer prices. And then, of course, the tariffs may change, the currency rates may change. But if we take a look at the overall underlying inflation, so the idea is that we will be pushing that into the customer prices. And in the past years, we have been able to do that in some cases, maybe a little bit even more than the cost inflation. So we believe that we can balance the situation from that point of view, but maybe it is not a good idea to expect a continuous net of inflation price benefit in '26 or further. Mikael Doepel: No, that makes sense. And talking about costs and just a follow-up, do you have any meaningful cost efficiency measures ongoing now that could support margins into this year? Anything tangible you could mention on that side? Marko Tulokas: Maybe 2 things I will mention. First of all, the topic that we have discussed also in the past is the ongoing industrial equipment cost efficiency program that we earlier announced that will continue until end of 2025. And on that note, we can say that we are still continuing that and we expect that to continue to bring us some benefits also -- additional benefits also during this year. The second topic is -- or the second answer to that is that when it comes to adjusting our cost structure to the prevailing market conditions, that is what we did early last year also that in all accounts, whether it's the SG&A or cost that we have on the group level or, for example, in service, the costs that are directly related to customer projects. And that is business as usual for us and that we've done in 2025, and we continue to do the same in '26 if the market environment and demand so requires. But beyond those 2 things, we don't have anything specific to discuss about right now. Mikael Doepel: Okay. That's clear. And just finally, I think you mentioned in your opening remarks, you talked about the industrial service business and saying it was a bit of a tough environment within that business. Can you talk a bit about what you see there specifically happening across the regions, across the customer segments and how you expect 2026 to develop? Marko Tulokas: When we look at Industrial Service in general, if I start from just the market activity and how it looks, one thing that we've discussed earlier and we also can measure is how our remote connections also with what we call the TRUCONNECT product, how much activity the customer is having with our cranes business and then, of course, means that how much manufacturing or production activity there is and those productivity rates are down last year, the whole year, and they also ended with a negative sign that somewhere 6% to 7% compared to the previous year in terms of the general use of the cranes. That's a fairly good proxy or explanation also to how much -- how the productivity and service develops for those particular customers, and that has a correlation to how our service business is actually developing. So that tells more that there is in this sort of environment where the customers have uncertainty of which direction the world is going that they have the tendency to hold back on not urgent or not critical measures. They want to do the things that have to be done to make sure that the equipment is productive and safe. That was a phenomenon last year and had certain impact to the service business. But it is obvious that you cannot do that for a very long time. So those equipment has to be taken care of. So that is something that usually returns. The other positive aspect is that we kept on increasing our -- or improving our agreement base, which is essentially the growth engine for service and very important, so that grew more than 4%, 4.5% last year. And that is what we consider and I consider very important as a service core. And then finally, I would say to that, and sorry for the long answer, easy to get excited on the topic. On service side, there is a lot of positive demand drivers like there is in the ports demand side in the long term. And whether it is the demographic trend of having less people doing this sort of thing or the automation trend that's also prevailing in some of the segments there, the outsourcing that similarly to ports actually is prevalent in many of the industrial segments and many others that also in the long term are drivers for demand in Industrial Service as well as in the efficiency drivers too. Teo Ottola: If I may add to a little bit additional color on... Marko Tulokas: I thought I answered the whole thing already because... Teo Ottola: That was very good, but I would maybe add one more thing. And I think when we have previously been saying that actually the differences between regions tend to be bigger than between customer segments in our demand. So now it may be that there start to be relatively big differences in demand pictures between different customer segments. And there are maybe a couple of indications of that one. And one of them is that the thing that we have been discussing also earlier that, for example, in North America or in the U.S., there has been a little bit slowness on the service and equipment business on the other hand, has been maybe even surprisingly strong, so which would, in a way, maybe indicate that some of the segments are doing well and they are buying equipment and some others have maybe a little bit more issues with the utilization and they are maybe saving on nonessential service. And also then this fact that our service spare parts are doing better than the Field Service may be an indication of the same thing. I mean, of course, the tariff thing, et cetera, can impact the spare part pricing and inflate that a little bit, but that doesn't explain the whole thing. So these kind of changes may be there happening a little bit because of defense and because of power and those kind of specifically, let's say, buoyant segments currently. Operator: [Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Linda Hakkila: Thank you, everyone, for following our webcast event today, and thank you for asking such a great questions. [Technical Difficulty]
Operator: Good day, and welcome to the Star Group Fiscal 2026 First Quarter Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Chris Witty, Investor Relations Adviser. Please go ahead. Chris Witty: Thank you, and good morning. With me on the call today are Jeff Woosnam, President and Chief Executive Officer; and Rich Ambury, Chief Financial Officer. I would now like to provide a brief safe harbor statement. This conference call may include forward-looking statements that represent the company's expectations and beliefs concerning future events that involve risks and uncertainties and may cause the company's actual performance to be materially different from the performance indicated or implied by such statements. All statements other than statements of historical facts included in this conference call are forward-looking statements. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the company's expectations are disclosed in this conference call, the company's annual report on Form 10-K for the fiscal year ended September 30, 2025, and the company's other filings with the SEC. All subsequent written and oral forward-looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements. Unless otherwise required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this conference call. I'd now like to turn the call over to Jeff Woosnam. Jeff? Jeffrey Woosnam: Thanks, Chris, and good morning, everyone. Thank you for joining us to discuss our first quarter results. Fiscal 2026 has started off very well as our performance benefited from recent acquisitions, physical supply and per gallon margin management, the continued focus on service and installation profitability and last but not least, temperatures that were almost 19% colder than last year and 6% colder than normal. The confluences of these factors, even given the operational challenges associated with persistent cold temperatures resulted in an increase of adjusted EBITDA of $16.5 million or 32% year-over-year, net of a $5 million charge to our weather hedge program. At the same time, net customer attrition was modest during the period. Improvement efficiency and operational execution have been specific areas of focus for us, so it's quite rewarding to see our work have a meaningful impact on bottom line results. The cold weather has continued thus far into the second quarter and, in fact, January finished 2% colder than last year and 9% colder than normal. I'm very proud of the way our employees have responded to the added demand and the challenges of making deliveries in snow and ice conditions. They've worked tirelessly at times through difficult conditions to provide our customers with the level of service and responsiveness they have come to expect. While we did not close on any acquisitions in the first quarter, we did complete one purchase of a small heating oil business just a few days ago. It's not at all unusual to experience a slight lull in prospect activity, during a busy heating season, but we still have several opportunities under various stages of review. And I anticipate that we will see new ones presented as we get closer to spring. Although it's too early to say how fiscal 2026 will play out, we remain vigilant in providing excellent customer service, keeping costs down and growing our service and installation profitability. I believe we are well prepared to address whatever challenges or opportunities might present themselves over the remainder of the heating season. With that, I'll turn the call over to Rich to provide additional comments on the quarter's financial results. Rich? Richard Ambury: Thanks, Jeff, and good morning, everyone. For the quarter, our home heating oil and propane volume rose by 11.5 million gallons or 14% to approximately 94 million gallons as the additional volume provided from acquisitions and colder temperatures was reduced by net customer attrition and other factors. Temperatures in our geographic areas of operations for the 3 months ending December 31, 2025, were 19% colder than the 3 months ending December 31, 2024, and 6% colder than normal. Our product gross profit increased by $29 million or 19% to approximately 179 million gallons due to an increase in home heating oil and propane volumes sold and higher per gallon margins. We realized a combined gross profit from service and installations of $5.6 million for the 3 months ending December 31, 2025, compared to gross profit of $6.9 million for the 3 months ending December 31, 2024. While installation gross profit increased by $1.4 million, the service gross profit loss did increase by $2.7 million due to the high demand for service relating to the 19% colder temperatures and the additional costs attributable to an increase in our propane tank sets. Delivery, branch and G&A expenses rose by $11 million in the first quarter of fiscal 2026 versus the prior year period. The company's weather hedge contracts accounted for $5 million of the increase as temperatures experienced from November through December of 2025 were colder than the contract strike price. In addition, delivery expenses rose by $3.8 million or 13%, largely due to the 14% increase in home heating oil and propane volumes sold. The remaining operating costs increased by just $2.2 million or approximately 2%. During the first quarter of fiscal 2026, we recorded a $5 million noncash charge related to the change in the fair value of our derivative instruments. By comparison, in the first quarter of fiscal 2025, we recorded a $5 million credit. Net income increased by $3 million in the quarter to $36 million as an increase in adjusted EBITDA of $16.5 million was reduced by the unfavorable noncash change in the fair value of derivative instruments, as I just mentioned, was $10 million year-over-year. In addition, net income was also negatively impacted by higher depreciation and amortization expenses and net interest expense due solely to our higher acquisition program and that totaled $1.7 million in aggregate, along with higher income tax expense of $1.3 million. Adjusted EBITDA increased by $16.5 million to $68 million, primarily due to a $16.8 million increase in adjusted EBITDA in the base business and a $4.8 million increase in adjusted EBITDA from recent acquisitions which was partially offset by the $5 million increase in expense relating to the company's weather hedge contracts. And with that, I'll turn the call back over to Jeff. Jeffrey Woosnam: Thanks, Rich. At this time, we're pleased to address any questions you may have. Operator, please open the phone lines for questions. Operator: [Operator Instructions] The first question comes from Tim Mullen with Laurelton Management. Timothy Mullen: Just wondering if you had any commentary given we're now a month in -- a little over a month into the second quarter for the fiscal year, given obviously this cold weather has persisted in terms of how it's going operationally or any other kind of general commentary you can provide? Jeffrey Woosnam: Sure, Tim. Yes. I mean, obviously, January was colder than normal. February is starting off that way, and we've got a pretty strong forecast in front of us. And we've been dealing with some storms. So conditions have definitely been a challenge for us. But frankly, this is what we're built for as a full-service provider, and this is what we plan for. So I'm just always amazed at how our employees really just step up and get a lot of satisfaction out of taking care of our customers. So I feel very good about our current position right now, given some very difficult conditions. Timothy Mullen: Congrats on a good quarter. Operator: [Operator Instructions] At this point, there are nobody in the queue. So I'll turn it back to Jeff Woosnam for any closing remarks. Please go ahead. Jeffrey Woosnam: Well, thank you for taking the time to join us today and your ongoing interest in Star Group. We look forward to sharing our 2026 fiscal second quarter results in May. Thanks, everybody. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the February 5th, Rogers Sugar Inc. First Quarter 2026 Results Conference Call. [Operator Instructions] Before we begin, please be reminded that today's call may include forward-looking statements regarding our future operations and expectations. Such statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today. Please also note that we may refer to some non-IFRS measures in our call. Please refer to the forward-looking disclaimers and non-IFRS measures definitions included in our public filings with the Securities Commission for more information on these items. A replay of this call will be available later today. The replay numbers and passcodes have been provided in our press release, and an archived recording of this call will also be available on our website. I'll now turn the call over to Mike Walton, President and CEO of Rogers Sugar. Michael Walton: Thank you, operator, and good morning, everyone. Thank you all for joining us today to discuss our results for the first quarter of 2026. I'll begin by summarizing our results for the quarter with updates from both our Sugar and Maple segments. I'll also touch on the environment and how we are navigating market developments and positioning Rogers Sugar for the months ahead, including an update on Our LEAP Project. After my remarks, J.S., our Chief Financial Officer, will provide a deeper dive into our financial performance for the first quarter. I will then come back to discuss our outlook for the remainder of 2026. We will conclude with a summary and then open the line for questions from the analysts. As usual, we have an investor presentation accompanying this call. This presentation is available on the Investors section of our website for those who want to follow along. Our results in the first quarter underscore the power of disciplined execution and a clear strategic vision. Despite the evolving market dynamics around trade policy and tariffs, we delivered strong earnings, advanced our LEAP project and continue to strengthen the foundation of our business. This performance reflects on our focus on operational agility, cost management and above all, an unwavering commitment to serving our customers. At the same time, we remain mindful that the external environment is far from settled. Ongoing shifts in global trade policy and the upcoming CUSMA negotiation continue to introduce uncertainty for the Canadian economy, which ultimately could impact our industry and our markets. While we are confident in our ability to adapt and respond as we have done for close to 140 years, we know that vigilance and flexibility will be essential in the months ahead. With the momentum we have built in recent years and the dedication of our Sugar and Maple teams, I am confident that Rogers Sugar is positioned to meet the challenges ahead and continue to lead in both of our business segments. Now looking at the results of our first quarter, we are proud to report consolidated adjusted EBITDA of $47 million, reflecting an 18% increase year-over-year. Adjusted net earnings reached $25 million, up by 27% from last year. We generated $89 (sic) [ $89.3 million ] in free cash flow in the trailing 12 months, an increase of about 4% from last year. Our internal cash generation supports ongoing investment in our business and consistent returns to shareholders. Although these strong first quarter results were somewhat boosted by some favorable nonrecurring and timing items in comparison to last year, they do show the stability and resilience of our business operating model. They demonstrate the effects of our strategic focus over the last several years on delivering consistent profitable results. I am pleased with the performance from both of our business segments, which support the strong position of financial health we enjoy today. We have the people, the know-how and the resources we need to meet various challenges while moving forward with the delivery of our LEAP project. Turning to Slide 5. Throughout the first quarter, we saw a solid performance in both our Sugar and Maple segments. Demand in our core markets remained steady with our teams adapting quickly to shifting customer needs and identifying new opportunities for growth. Global food inflation and consumer health focus continue to influence purchasing patterns affecting global sugar demand. As a result, food and beverage producers in certain segments have adjusted their buying patterns in response to consumer behavior. Although we haven't seen a material direct impact on such changes in the Canadian market thus far, we view these changes as part of the normal cycle with overall domestic demand for sugar remaining stable over time. We are staying agile and focused, working closely with customers to support their evolving needs. Years of experience have taught us that disciplined execution, delivering quality products and strong customer service help us navigate any environment. Our Maple segment continued to build momentum. The incremental sales volume is a good reflection of the recent increase in global demand for maple syrup and maple-related products. Our gross margin percentage has improved from the slight dip seen in the second half of 2025. The quality and availability of the previous crop, coupled with our active syrup procurement activities supported our ability to deliver reliable results. Looking ahead, we will keep working with producers to ensure steady supply as demand is expected to continue to grow. In summary, we are beginning 2026 with a strong foundation, a clear effective strategy and confidence in our ability to create value even as market conditions continue to shift. This quarter's results show the result of our Rogers refined model. Through ongoing improvement, focused investment and disciplined cost control, we keep our operations resilient and ready for change, including challenges from global trade shifts. Rogers Refined is reflected in our team's commitment and agility. Their dedication to our shared mission enables us to meet uncertainty head on and act on new opportunities as they arise. Now let me update you on our LEAP expansion project in Eastern Canada. This quarter, we continued to progress on the construction activities related to the LEAP project, which is embedded in our strategy to support long-term growth and enhance our supply capabilities in Central Canada. The construction site in Montreal remains active with significant progress on facility upgrades, electrical connections and the integration of new refining technology. Our teams and contractors are working closely to keep the project aligned with our revised schedule. We are seeing tangible results as key infrastructure elements take shape while we are planning the commissioning process with suppliers and business partners. We continue to target a start-up date in the first half of 2027. This schedule reflects our focus on careful execution, taking into account current market conditions and our commitment to maintaining the highest standards of product quality. In addition, we are carrying out the LEAP project with an unwavering commitment to safety. Protecting our people remains our top priority, and we are dedicated to upholding rigorous standards and best practices throughout the organization. Coordinating a major capital project alongside a plant operating at capacity is complex, but our experience and planning are enabling us to advance construction without disrupting our essential core business. Our estimate of the cost to complete LEAP is unchanged, and we are confident that this expansion will boost our ability to serve customers more efficiently throughout Central Canada. By increasing our Eastern refining capacity, we can respond faster to demand shifts, reduce transportation requirements and strengthen our overall supply chain. Now I'll turn the call over to J.S. for a financial review. Jean-Sebastien Couillard: Well, thank you, Mike, and good morning, everyone. I will begin my financial remarks on Slide 10 with a high-level review of consolidated results before we get into the details of the 2 segments. Adjusted net earnings per share in the first quarter amounted to $0.19 compared to $0.15 in the first quarter last year. The increase was due to a favorable variance of over $7 million in adjusted EBITDA. This increase of 18% came mainly from the Sugar segment, where our business benefited from some timing and nonrecurring items while relying on strong sales margin. Free cash flow for the trailing 12 months totaled $89 million (sic) [ $89.3 million ] consistent with the same period last year. Overall, though, if we exclude timing differences in the payment of tax installments, free cash flow improved by over $11 million. The improvement was the result of stronger operating performance and tight control over working capital. This strong financial performance was delivered in a quarter when revenues declined year-over-year. Revenues for the quarter were just short of $300 million, down from $331 million in the same period last year. The reduction was largely due to a lower average Raw #11 sugar price and lower sales volume in the Sugar segment, partially offset by favorable sales volumes in the Maple segment. Although important in the overall performance of both of our business segments, revenues and associated sales volume are not the primary drivers of our strategy. Our focus remains on delivering what matters most, consistent profitability as measured by adjusted EBITDA and robust free cash flow. Now let's take a moment to review the individual business segments, starting with our Sugar segment, which drives about 85% of our profitability. Sales volume was 175,000 metric tonnes during the quarter, a reduction of about 21,000 tonnes from the same quarter last year with a significant portion of the reduction attributable to lower export volumes. The decrease in export sales is mainly related to the current market dynamics, which do not favor the sales of refined sugar of Brazilian origin in the U.S. Although we are disappointed with the volume reduction, we want to point out that this sales category usually has a lower contributed margin. We also experienced a reduction in industrial sales with a nonrecurring production issue at one of our key customers. This is the same issue that impacted the last few weeks of the fourth quarter of 2025 and has since been resolved. Overall, revenues in our Sugar segment declined by about 15% in the quarter to $226 million, reflecting the decline in volumes that we have just discussed and a drop in the price for Raw #11 sugar. That being said, our refining margin continued to be healthy and mitigated the decrease. Despite these headwinds, we were able to report improved profitability in the quarter. Adjusted gross margin per ton rose to $304, an increase of $79 from the same period of last year. A significant portion of the increase was attributable to favorable timing variances and nonrecurring items related to procurement activities, raw sugar freight and major maintenance programs. The positive adjusted gross margin was also supported by a higher sales margin associated with our disciplined pricing strategy. Adjusted EBITDA for the Sugar segment reached $41 million, an increase of $7 million over last year. This performance underscores our focus on protecting margin and managing through volatile market cycles. Distribution costs increased slightly, reflecting an unexpected adjustment we made through our supply chain to meet the needs of our customers. Administration expenses were also slightly higher, mainly reflecting market-based increases in compensation and employee benefit. Overall, the Sugar segment delivered strong results in the first quarter, setting up the foundation for the remainder of 2026. The Maple segment also delivered strong financial results in the first quarter, reflecting strong execution and healthy market demand. Revenues increased by 8% to $72 million, driven by higher sales volume as we continue to expand and take advantage of the growing global demand for this beloved sweetener. Interest in maple syrup remains robust, supported by positive customer trends and effective supply management. Adjusted EBITDA for Maple was $5.8 million, a slight improvement over the same period of last year as we maintain our overall profitability through disciplined operations. Sales volumes were 8% higher in the first quarter, supported by incremental demand from some of our established customers. Adjusted gross margin percentage at 10.6% was consistent with our recovery expectation and reflected the impact of consistent product mix sold during the period. If you recall, margin dipped below 10% in the second half of 2025 as we faced challenges related to mix of products. Over the last few months, we have strengthened our sourcing strategy and are expecting a more stable adjusted gross margin percentage for our Maple segment going forward. Looking ahead, we remain focused on supporting our producers' partners and maintaining reliable access to supply as global demand for maple syrup continues to grow. Our strong and stable performance in Maple reinforces the value of our diversified platform and positions us well to meet growing demand in this segment. From a capital allocation standpoint, we remain disciplined. We invested in our future by allocating $25 million to capital expenditures with the bulk of that spend supporting the ongoing progress of our LEAP project. This investment reflects our joint commitment to growth and operational excellence. We continue to support the LEAP project with a diversified funding approach. Our financing plan for the project supports the expected cost, which continues to range between $280 million and $300 million. In January, we further enhanced our financial flexibility with a successful issue of our Ninth series convertible debentures. Following the issuance of the Eighth series last year, this issue completes the refinancing of the Sixth and Seventh Series, which matured in 2024 and 2025. This move anchors our liquidity position and ensures we have the resources to continue to fund our strategic priorities. Our balance sheet remains strong, supported by ample available credit and a robust free cash flow profile. We maintain our quarterly dividend, reflecting our ongoing commitment to consistent shareholder returns. This approach positions us well to execute on our growth strategy while delivering value to our investors. With that, I will turn the call back over to Mike to provide a summary and outlook for 2026. Michael Walton: Thank you, J.S. Now looking at the remainder of the year. As 2026 progresses, we recognize that the business environment is still complex and dynamic. Within that context, I am confident in our ability to adapt, thanks to our vigilant approach and decades of experience in managing shifting market trends. Our teams are ready to respond quickly as circumstances evolve. Central to our success is a disciplined go-to-market approach. We are selective in how we allocate resources and pursue opportunities. Our main objective continues to be developing and nurturing long-term partnerships that deliver sustainable profitability. Our commercial team remains focused on meeting customer demand and understanding our target markets, ensuring every decision supports our long-term strategy. While tariffs and trade developments have had minimal direct impact so far, we are fully prepared to adjust course as conditions indicate. We will move forward by fostering strong customer partnerships, being rigorous about cost control and investing strategically to safeguard our resilience and our competitiveness. The progress we have made over the last several years has led to meaningful gains in profitability and execution. Our goal for 2026 is to continue along the same path and deliver consistent solid performance. Beginning with the Sugar segment, our current forecast for sales volume for the year is around 750,000 metric tons. This forecast is at the lower end of the range we provided at the end of the fourth quarter and represents a reduction of approximately 4% compared to 2025. The reduction in volume is mainly impacting lower-margin export sales as the current trade conditions for Brazilian origin refined sugar are not favorable. We expect demand from our domestic customers to be stable, and we continue to prioritize domestic sales while being alert to export opportunities as market evolves. Our beet harvest at Taber was completed in November, and we are now in the late stages of processing the beets with expected completion by the end of this month. We anticipate the 2025 crop to deliver approximately 100,000 metric tons of beet sugar, consistent with our earlier expectation. Across all our facilities, production and maintenance costs will edge slightly higher this year, driven by market-based cost increases, annual wage increases from employees. We are committed to managing our costs responsibly to maintain our production assets and ensure reliable operations. Distribution costs are expected to increase slightly as we continue to transfer sugar between refineries to meet customer demand, pending the completion of our LEAP project. Administration and selling expenses are expected to increase slightly in 2026 compared to 2025, reflecting general market increases and incremental costs associated with the planned review of the Canadian International Trade Tribunal scheduled for the second half of 2026. Interest costs will be somewhat higher as we access the funding we have put in place to complete our LEAP project. For Maple, we anticipate another strong year in 2026, continuing the steady growth over the past few years. We expect sales volumes to reach 56 million pounds, an increase of 5% from last year, driven by ongoing strength in global demand. Thanks to a favorable maple crop in 2025, we have been able to meet the expected demand for maple products through most of 2026. We expect to meet any excess volume requirements with [ syrup ] from the 2026 crop. Both segments reflect our best view of current market trends, but we recognize market dynamics can change rapidly, and we're ready to adjust as needed. On the CapEx front, we plan to allocate approximately $27 million across our core businesses this year, excluding LEAP-related spending. LEAP will continue to be our major initiative for 2026 as we press forward with construction and installation of new refining and logistics capacity. Balancing this project with day-to-day operations is challenging but essential to ensure uninterrupted service to our customers. In summary, we started 2026 on a strong note, continuing to build on our momentum in profitable and sustainable growth. Over the past 4 years, we have transformed Rogers Sugar, and our recent results reflect the impact of that evolution. Our focus remains unchanged, maintaining strong partnerships with our customers, prioritizing safety and continuous improvement, managing cash carefully and driving progress on the LEAP project to support our market. These efforts are anchored by our strong balance sheet and financial discipline, which give us the resilience and flexibility to meet the market demands and create long-term value for our shareholders. In closing, I want to recognize our teams at every site for their dedication and commitment to excellence. Your focus on customer service and workplace safety is vital to our continued success. I also extend my thanks to our customers and business partners for their trust and support as we move forward together. I'll now ask the operator to open the line for questions from the analysts. Operator: [Operator Instructions] Your first question comes from Michael Van Aelst with TD Securities. Michael Van Aelst: I want to start on the sugar side on the volumes. So the customer that had their own issues, did any of that flow into Q2? And is the lost volume something that you expect to be recaptured or are those lost sales by the customers, so you won't be able to recapture that? Michael Walton: Yes, Michael, the -- so first part answer to your question is, no, the problem didn't go into Q2. It lagged into Q1 only. And they are back in production now and resolve their issues. And as far as making up the volume, these kinds of plants are running at capacity. So not likely, although who knows, they could pick up something from one of their other sites that we would be able to supply in new supply and new demand. But we expect it to pick those volumes up across other pieces in the market. Market gives you lots of opportunities and puts and takes through the year, as you know, and that's why we're still staying in our range of the $750. Michael Van Aelst: Okay. And then you talked about improved average pricing. How much of that was just from mix like exports falling versus price increases that actually helped the margin? Jean-Sebastien Couillard: Mike, it's Jess here. It's a combination of both. I think the reduction in export had some impact on it, but we also have seen some continued strong pricing in the market. And so probably half and half. Michael Van Aelst: Okay. Okay. And then so if I look at the gross margin differences because there's some pretty severe nonrecurring items this quarter. So the timing of the production and recovery costs, is that -- was that just pushed into Q2, and so we should just reverse that in Q2? Jean-Sebastien Couillard: Yes. So a portion of the timing is going to be in Q2. For example, the shutdown, which is our annual shutdown happened in the first week of Q2 instead of the last week of Q1. And so that will be move into the next quarter. And so the rest of those nonrecurring, obviously, that's not going to change. Michael Van Aelst: Okay. So yes, exactly. So the $8 million should come in Q2? Jean-Sebastien Couillard: No, not all of it. So a portion of it, I would say half of it will come into Q2. The $8 million is made of nonrecurring and timing. So I'd say 50% of it is nonrecurring. The rest is onetime. Michael Van Aelst: Okay. All right. And then the supply chain issues on the sugar distribution side, was that tied to this customer? Or is there some -- was there something different? Jean-Sebastien Couillard: No, it was something different. So we had some issues, and we had customers that had to go pick up at a different location. And obviously, when this happened, we are compensating customers for. Michael Van Aelst: So can you explain what those issues were and how they were resolved? Jean-Sebastien Couillard: Yes. We had some technical issue with some of our railcars. And so what we would end up happening is we had customers supposed to pick up in Toronto that came in pick up in Montreal. That has been resolved. We fixed those railcars. Operator: Your next question comes from John Zamparo with Scotiabank. John Zamparo: I wanted to ask about the volume guide on the sugar side, the reduction to the lower end of the previous guide. Is that primarily from the decline you saw in Q1, whether that's export specific or related to that one customer you referenced? Or is there something related to Qs [ two through four ] that's influencing that guide change? Michael Walton: A bit of both, John. The export business, as we've reported in the past on a direct sugar basis is less than 10% of our total volume. And so anything that we were producing at that time that was a Brazilian origin didn't cross into the U.S. because of the new tariff. So some of it -- most of it was in the first quarter and our customer event was in the first quarter. And in Q2, there'll be less impact based on those export contracts because we've already repositioned them. John Zamparo: Okay. Understood. And export challenges aside, you said you now expect domestic sales growth to be stable against the prior guide of growing modestly. So again, is that related purely to Q1? Or is there anything incremental to that? Michael Walton: No, it's just a stable outlook long term for the rest of the year. It's consistent with what we're seeing globally across all markets, whether it be in Europe, Brazil, United States or Mexico. It's -- we've seen the cycle, the commodity cycle in sugar and it's just slightly lower coming in the forward months. John Zamparo: Okay. And there was a comment about lower confectionery demand in Q1 due to timing. Can you add some more color there? Michael Walton: Yes. We had -- we saw all of us for the last 18 months or maybe 24 months, the spike in cocoa prices globally and the impact of that inflation in unit costs in those products. And so we saw pricing -- a lag in the pricing coming through to retailers. And so that started showing up late in '25 and into Q1, and it started to reduce sales input at the retail side for those products. John Zamparo: Right. Okay. Understood. And then last one, and I'll get back in the queue afterwards. The $4.5 million in nonrecurring gains, J.S, you referenced penalties received in pricing adjustments. Can you elaborate on that? Jean-Sebastien Couillard: Yes. So we got some -- last year, we had some contamination, for example, on some of the vessels, it's been necessarily something that happened to different sugar refiners and sugar coming from Brazil. So we got compensated for that. So this thing happened in '25, obviously, increased somehow our production costs, and we got compensated in the first quarter. So that's part of the onetime. And on the freight, it's market pricing adjustment for freight. John Zamparo: Okay. So just to clarify, there was $8 million from the last question, $8 million in total cost, half of that was onetime, half of that was timing and then the $4.5 million, that's the gains, that's purely onetime. I got that right? Jean-Sebastien Couillard: Yes, that's good, that's a fair comment. Operator: Your next question comes from Stephen MacLeod with BMO Capital Markets. Stephen MacLeod: I just wanted to circle around. I was going to ask about nonrecurring, it sounds like we've already figured that out. Just with respect to like putting the kind of the moving parts together around the timing and gross margin per metric tonne potentially shifting into fiscal Q2. Would you still expect kind of on a full year basis, sort of a stable adjusted gross margin per metric tonne outlook? Jean-Sebastien Couillard: The short answer is yes. I think we are -- we've seen some slight improvement in adjusted gross margin and a lot of it is related to the mix of the products that we're going to sell. So if you're removing some of the export sales that are usually carrying lower margin, and the rest, you will -- your per metric tonne should increase. So last year, we did $224. Obviously, the $304 is a bit of an outlier in the first quarter. So -- but we're still -- overall, we're expecting to do better than last year on an adjusted gross margin per metric tonne basis, and that's mainly because of the mix of what we're going to sell. Stephen MacLeod: Right. Okay. Okay. And then just turning to the Maple segment. Would you also expect kind of that margin to be sort of stable year-over-year? Are you still kind of expecting margins to be in that kind of 8% range on adjusted EBITDA? Jean-Sebastien Couillard: Well. Yes, on adjusted EBITDA, yes, sorry. So our adjusted gross margin is at just about 10% right now. So between 10% and 11% is usually our target. And usually, it translates to around an 8% EBITDA margin. That's our forecast for the rest of the year. Stephen MacLeod: Okay. That's great. And then maybe just finally, just ahead of the CUSMA negotiations. I guess, is there a way to get a sense of sort of how you're feeling about those negotiations heading into the process? Just wondering if you can get any color there. Michael Walton: Yes. Sure, Stephen. It's a murky piece of ground for everybody in North America, I think, these days. As we've said all along, we've been around for 140 years, and we've seen these kinds of trade disputes come and go. Fact of the matter is the U.S. market is a deficit market on sugar production. It has to import sugar or sugar-containing products. And the manufactured goods that we're talking about are very complex production lines and production systems, and it would take a long time to make any meaningful shifts to move plants out of Canada as an example, as some people fear. We don't see any meaningful change there. And we're optimistic that seeing the impacts of these kinds of moves -- immediate impact on inflation and consumers and especially in U.S. or Canadian markets, that probably would temper any massive disruption. But that's an opinion of one. We'll see how it goes. We'll remain focused on it. We'll remain in the background advocating for what's right for the long term for our industry and hope that calmer has prevailed in the end. Operator: [Operator Instructions] Your next question comes from Nathan Po with National Bank. Nathan Po: Congrats on the quarter. So on the LEAP project, it's mentioned in the presentation that start-up is going to be in line with expected demand growth. Should we be inferring that there is other customer capacity aiming to be ramped up around that time as well or new customer wins are over the horizon? Or is that just a general comment? Michael Walton: Well, it's a bit of both. We've seen pretty steady growth in the refined sugar and SCP production in Canada over several years. And so that was the impetus for doing LEAP to begin with. And we expect to see that growth as return once we come out of the higher inflation cocoa market, which we've already seen happen and cocoa prices are down substantially. So we expect that growth to continue. And as you know, there's been many public announcements, several of them in Ontario-based area of new manufacturing capacity coming into Canada from foreign jurisdictions, and those plants have yet to start construction. So we're pretty optimistic based on what we know and what we've heard our major customers are doing on the long term and sugar containing product manufacturing in Canada. Nathan Po: All right. That's great color. And regarding the volumes and the onetime adjustments heading into Q2. How does this affect your working capital seasonality in 2026? Jean-Sebastien Couillard: We're not expecting any major impact on our working capital. So our -- if you look at some of the big impact on our working capital is always a level of inventory that we're carrying, especially on the raw sugar side. And we have adjusted our -- we've adjusted the delivery of our vessels to mirror the volume of sugar that we're expecting to sell. Operator: Your next question comes from Frederic Tremblay with [ Desjardins ]. Frederic Tremblay: Just maybe one clarification on the sugar volume outlook. That outlook implies a 4% year-over-year annual decline. Q1 was down 11%. I'm just -- maybe it would be helpful to get a bit of color on sort of the pace of improvement on year-over-year trends there and maybe the key drivers of that. I know, Mike, you mentioned those export volumes being repositioned maybe starting in Q2. So if you could just maybe provide a bit more color to help us understand how that's going to evolve over the year to get to that full year guidance that you've provided? Michael Walton: Yes, Fred, there's a lot of moving pieces, as you can imagine. If we all just look back, it's only been 370 days, I think, since we entered this new world of trade chaos. And we've navigated amazing through this with constant pivots and adjusting to what our plans are. We put a plan together now to finish the balance of the year that delivers this range that we've put together on the volume. Some of that includes the swapping of some cargoes so that we'll swap out a Brazilian origin for a non-Brazilian origin so that allows us to continue to produce some products and deliver our contracted volumes. So as I said, there's many things going on as we've proved over the last 4 years, this is a group that knows how to pivot and maximize the opportunities and take advantage where we can. Operator: Your next question comes from Michael Van Aelst with TD Securities. Michael Van Aelst: So just circling back on Sugar. So you talked about lower volumes for the year and slightly higher gross margins, but then also some inflationary pressures in distribution and min. So do you -- I think last quarter, you said you expected sugar EBITDA to be roughly stable this year. Is that something you still expect? Jean-Sebastien Couillard: I think we might slightly be better than what we did last year, and that's because some of the onetime that we received in the first quarter will actually stick. So if you look at the results of the first quarter, yes, there are timing issues, but there's also some nonrecurring impacts that are going to stick on our results for the year. So I think we should expect a slight improvement based on the Q1. I think for the remainder of the year, I think it would be aligned to what we were initially expecting. Michael Van Aelst: Okay. And then on the maple side, you touched on -- you commented that you've changed your maple sourcing, and that's going to help stabilize gross margins. Can you explain what you did and so -- and how that's going to keep your margins a little more stable going forward? Michael Walton: Yes. So Michael, we haven't changed our sourcing. We've doubled down on our activity and making sure we hold syrup. Like many of our competitors, we bought inventory that was available through the PPAQ reserve. And so we hold that to ensure we cover our sales. And we're in the season now where we're all meeting with producers and we're making sure that the producers know that we're a well-capitalized company, and we're available to take the syrup as the crop comes off. And so just continuing like we do on every other sector of our business, building relationships with growers, whether they beet or cane growers in Brazil and Central America. So -- we're just applying our good disciplined approach to long-term business partnerships and making sure that people know who we are. Operator: [Operator Instructions] Your next question comes from John Zamparo with Scotiabank. John Zamparo: Mike, I think in your prepared remarks, you referenced that you're seeking out new opportunities for growth. And I wonder if you can unpack that a bit. I presume you're always trying to do that, but I wonder if there was anything that led you to make that comment in this quarter. Michael Walton: Yes, sure. We -- it seems to be what everybody is talking about in Canada these days, John. And so -- but we've been doing it. The Maple business is distributed in over 50 countries. So this is not new for us. We've been in the Maple business over 7 years, and we're looking at those strong relationships and partnerships we've developed in those other countries and seeing where we can leverage it against other things. As a great example, we just had our commercial team and some others in Dubai on a trade mission and attending the Dubai Food Conference. So we're not going to sit on our laurels and wait for markets to come and correct themselves on our doorstep. We're going to theirs like we always have and we'll continue to do. John Zamparo: Okay. I appreciate that example. And I wanted to ask about pricing. You said that was contributing to some top line growth in the quarter. I wonder what level of resistance or how you'd characterize the resistance you're seeing to inflation, even if it's driven by commodities, there's a good amount of pushback from consumers. There's a good amount of talk in the media about this. I wonder how those conversations go on passing through commodity-driven pricing. Michael Walton: Yes. We're very fortunate in one major respect is that commodity # 11s are down to 4-year lows. And because, as I said earlier in the call, we've got a slowdown globally on demand and a strengthening production side. So we're going to see lower commodity levels going forward, which really helps negate the food inflation that has anything to do with sugar. And we've seen cocoa prices come down dramatically in the last 6 months and more recently in the last 2 or 3 months, more correction. So on the food inflation items that impact specifically sugar-containing products and the high sugar content goods like we like to be in, we're seeing things improving rapidly on the cost side. John Zamparo: Okay. And then last one on the major maintenance that fell into FQ2, 2 parts to this. Is that the typical amount? Is it annually about $8 million? And does that change once LEAP is completed? Do you still incur that level of maintenance expense? Or does that decline once LEAP is done? Jean-Sebastien Couillard: Yes, John, this is J.S here. So $8 million is not all related to maintenance. So there's a portion of it, I'd say, probably 50% is related to that. And our maintenance program is spent throughout the year. What we didn't spend in the first quarter was what we have -- we have one major shutdown every year, and that didn't get spent and a portion of that amount didn't get spent in the first quarter, and it got spent early in the second quarter. So we're not seeing Obviously, when need comes along, you will continue to have the same type of maintenance program on the current facility. And obviously, we'll have incremental maintenance because the new assets will have to be maintained. And so we will see some incremental maintenance that should be commensurate with the amount of volume that we are going to -- that we're going to push through the system. Operator: There are no further questions at this time. I will now turn the call over to Mike Walton for closing remarks. Michael Walton: Well, thank you all for joining us today, and thank you for your continued interest in Rogers Sugar. Of course, Rogers Sugar is the only 100% Canadian owned and operated sweetener company in Canada, and we look forward to seeing you in Q2. Have a good day. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Good day, and welcome to the AMSC Third Quarter Fiscal 2025 Financial Results Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Nicol Golez, Director of Communications. Please go ahead. Nicol Golez: Thank you, Bailey. Good morning, everyone, and welcome to American Superconductor Corporation's Third Quarter of Fiscal Year 2025 Conference Call. I am Nicol Golez, AMSC's Director of Communications. Joining me today are Daniel McGahn, Chairman, President and Chief Executive Officer; and John Kosiba, Senior Vice President, Chief Financial Officer and Treasurer. Yesterday, after market closed, American Superconductor issued its earnings release for the third quarter of fiscal year 2025. A copy of this release is available on the Investors page of the company's website at www.amsc.com. Remarks that management may make during today's call about American Superconductor's future expectations, including expectations regarding the company's financial results, plans, and prospects constitute forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including those set forth in the Risk Factors section of American Superconductor's annual report on Form 10-K for the year ended March 31, 2025, which the company filed with the Securities and Exchange Commission on May 21, 2025, and the company's other reports filed with the SEC, all of which are available on our website. The company disclaims any obligation to update these forward-looking statements. On today's call, management will refer to non-GAAP net income or non-GAAP financial measures. Tables of reconciliation of GAAP to adjusted financial measures can be found in the company's earnings release. With that, I will now turn the call over to Chairman, President and Chief Executive Officer, Daniel McGahn. Daniel? Daniel McGahn: Thanks, Nicol, and good morning, everyone. I will begin today by providing an update and sharing a few remarks on our business. John Kosiba will then provide a detailed review of our financial results for the third fiscal quarter, which ended December 31, 2025, and we'll provide guidance for the fourth fiscal quarter, which will end March 31, 2026. Following our comments, we'll open up the line to questions from our analysts. We are excited to share a quarter of outstanding financial results. Total revenue for the third quarter of fiscal year 2025 exceeded our guidance range and came in at over $74 million. Revenue grew over 20% versus the year ago period, driven by organic growth as well as a few weeks of contributions from the acquisition of Comtrafo, which we closed on December 5, 2025. The business outperformed this quarter. We delivered our sixth consecutive quarter of profitability and our 10th consecutive quarter of non-GAAP profitability. Strong market demand drove bookings, resulting in a robust 12-month backlog of over $250 million. Gross margins again topped 30% and we closed the quarter with a strong balance sheet of over $145 million in cash after acquiring Comtrafo. Total revenue for the past 9 months is nearly total revenue for the entire previous fiscal year. This means that most of what we do in the fourth quarter will contribute to year-over-year growth. Our grid revenue accounted for 85% of AMSC's total revenue and grew over 20% versus the year ago period. Nearly 15% of the revenue came from our Wind business, which grew by 25% versus the year ago period. During our third quarter, we generated revenue across a diverse set of sectors. Traditional energy accounted for nearly 1/3 of shipments. Renewables represented about 1/4. Military and utility markets each contributed over 15% and materials, including semiconductors, made up more than 10% of revenue. Additionally, we delivered into a data center project this quarter. We've talked about this for the past couple of quarters. We believe this delivery marks an important milestone for additional potential opportunities in this market. We said we were going to deliver on a data center order, and we did. But please remember, these projects make up about 5% of total revenue. Our revenue mix is well diversified, and we expect our recent acquisition to strengthen our reach to utilities while expanding our overall end market exposure. This quarter, we did record a significant tax benefit due in large part to our recent history of sustained profitability and our forecasted future earnings outlook. This is an important moment in the history of our company's financial progress, and John will get into more details later in the call. Now I'll turn the call over to John Kosiba to review our financial results for the third quarter of fiscal year 2025 and provide guidance for the fourth quarter of fiscal year 2025, which will end March 31, 2026. John? John Kosiba: Thanks, Daniel, and good morning, everyone. AMSC generated revenues of $74.5 million for the third quarter of fiscal 2025 compared to $61.4 million in the year ago quarter. Our Grid business unit accounted for 85% of total revenues, while our Wind business unit accounted for 15%. Grid business unit revenues of $63.2 million, increased by 21% in the third quarter versus the year ago quarter. The increase in revenue was primarily driven by organic growth within our new energy product lines as well as the addition of Comtrafo revenues, which totaled $4.6 million in the quarter. Please note that Comtrafo revenue and associated financial activity in the quarter was for a partial period from the date we closed on December 5, 2025, through the end of the quarter. There were approximately 19 days of Comtrafo financial activity included in our Q3 results. Our Wind business unit revenues of $11.3 million increased by 25% over the same time period. The increase in revenue was primarily driven by additional shipments of electrical control systems. Looking at the P&L in more detail, gross margin for the third quarter of fiscal 2025 was 31% compared to 27% in the year ago quarter. This marks the third sequential quarter with gross margins exceeding 30%. Included in cost of goods sold in the third quarter of fiscal 2025 is approximately $400,000 in noncash adjustments related to the purchase and accounting for the acquisition of Comtrafo. The year-over-year increase in gross margin was primarily driven by higher revenues, a favorable product mix, both within our Grid and Wind business units. Moving on to operating expenses. R&D and SG&A expenses for the third quarter of fiscal 2025 were $19 million compared to $14.6 million in the year ago quarter. The year-over-year increase includes the acquired operating expenses of our recent acquisition of Comtrafo. Additionally, there was approximately $1.2 million of acquisition-related expenses to complete the Comtrafo acquisition. Approximately 20% of R&D and SG&A expenses in the third quarter of fiscal 2025 were noncash compared to 19% in the year ago quarter. Our net income for the third quarter of fiscal 2025 was $117.8 million or $2.68 per share. Our non-GAAP net income for the third quarter of fiscal 2025 was $123.5 million or $2.81 per share. Included in our third quarter net income and non-GAAP net income was a tax benefit of $113.1 million due to the release of a valuation allowance on deferred tax assets. Excluding this tax benefit, net income in the third quarter of fiscal 2025 was $4.7 million or $0.11 per share. This compares to net income of $2.5 million or $0.07 per share in the year ago quarter. Excluding the tax benefit, non-GAAP net income was $10.5 million or $0.24 per share. This compares to a non-GAAP net income of $6 million or $0.16 per share in the year ago quarter. Please see our press release issued last night for a reconciliation of GAAP to non-GAAP results. We ended the third quarter of fiscal 2025 with $147.1 million in cash, cash equivalents and restricted cash, which compares with $218.8 million on September 30, 2025. Included in the quarter was the acquisition of Comtrafo, which included cash consideration of $88.3 million. We generated $3.2 million of operating cash flow in the third quarter of fiscal 2025. Our CapEx for the quarter was $900,000. I would like to note, it would not be unusual for CapEx to exceed $1 million a quarter, and at times, it may even exceed a couple of million dollars in a quarter as we scale up production, particularly within our power transformer lines, which are seeing high levels of demand. Now turning to our financial guidance for the fourth quarter of fiscal 2025. We expect that our revenues will exceed $80 million. Our net income is expected to exceed $3 million or $0.07 per share, and our non-GAAP net income is expected to exceed $8 million or $0.17 per share. With that, I'll turn the call back over to Daniel. Daniel McGahn: Thanks, John. We're very pleased with this quarter's result and super excited about the rest of the fiscal year. We believe going forward, the company has the capability to deliver consistent profit. We achieved 2 quarters of what I consider record-breaking revenue levels, one of over $72 million, that was our first quarter earlier this year and now over $74 million in the quarter that just ended. And we're guiding to another possible quarter that could become another record-breaking quarter for our fourth quarter. As we approach the final quarter of fiscal year 2025, total revenue for the past 3 quarters reached an impressive $212 million. With 3 quarters completed, our revenue nearly matches our total revenue for the entire prior fiscal year. The business has demonstrated growth, both organically as well as through our recent acquisition. Let's discuss some additional benefits that we expect of the acquisition when combined. The team has done an excellent job of integrating and making the last several acquisitions work and work together. The acquisition of Comtrafo strengthens our utility position and positions us to capture opportunities in Brazil and the broader Latin American markets. Comtrafo brings 30 years of operating history, a manufacturing presence in Brazil and deep relationships with utility customers across one of the world's fastest-growing electricity markets. Comtrafo expands our transformer offering to include distribution and large power transformers up to 250 MVA. With their strong local demand driven by government-led grid investment, we can now serve critical transmission and grid expansion needs that we could not previously address. In closing, this was an exceptional quarter for our company. The results reflect the strength of our core business and the discipline of our operations. We delivered strong financial results and remain focused on execution. The business grew organically and the addition of Comtrafo opens new possibilities. Overall, we are truly excited about this business. We are developing business opportunities in new areas with utilities for data centers and for pipelines for traditional energy. We are very well positioned as a company that has diversified and has been growing. I am personally very excited about the future of the company. We believe we are in a tremendous position to take advantage of our end markets. We are prepared to capitalize on the growing demand for energy and the need for a stable grid to support it. We have delivered another outstanding quarter, and we can see the fundamentals of our business are well grounded. This is an exciting and positive moment for us here at AMSC. Our future-facing technologies help harmonize the world's desire for decarbonization and clean energy with the need for more reliable, effective and efficient power delivery. We're now focused not only on the American market, but on the entire Americas. I look forward to reporting back to you at the completion of our fourth fiscal quarter and fiscal year-end. Bailey, we'll now take questions from our analysts. Operator: [Operator Instructions]. Our first question comes from Justin Clare with ROTH Capital Partners. Justin Clare: So I wanted to start out just on the data center opportunity. So you mentioned that you have delivered a solution to a data center project here. And so just wondering if you could speak to the scope of the engagement, which products were involved? And then just within your portfolio, which solutions do you see as kind of the strongest fit for the data center application at this point in time? And then I guess just lastly, is the opportunity largely at the utility substation that you see at this point? Or is this inside the data center facility? Daniel McGahn: Yes. Let me talk a little bit about what we're doing. So it represented about 5% of revenue in the quarter, so on the 74%, 75% that we did. So a significant project. It's something that we were telegraphing that we thought would happen. And really, the only reason we're talking about it is because I get asked the question wherever I go about data centers and what are you going to do. What we're finding is as these data centers get bigger, particularly when there are areas where they have a weaker grid, what we can do is modulate the instantaneous change in voltage. And we do that through a very contact footprint. So the more that they're loading equipment in for managing thermal load, HVAC, the more that they have higher computing power and they're worried about very small disruptions similar to what we do in a semiconductor fab, the more we think we fit. And we think that the footprint may be a unique competitive advantage that makes it easy for either the utility or the data center construction project to buy the equipment from us. So in this case, this is really our first win in the construction of a data center. Alongside this in this current quarter, we also helped a utility that has a lot of data centers and has some challenges coming from them. So I think the answer to part of your question, Justin, is yes to both. I think that there are opportunities for us going forward. in data center construction projects, but also to help support challenges with the utility. That's no different than what we've seen in semiconductor. It's no different than what we see in mining. The market and the investment drives the need. And then the question is, where does the solution physically fit? Where does it fit within the grid? Is it on the pad that sits as part of the data center? Or is it somewhere in the grid that's supporting that effort. So it's really no different application than what we do for semi, what we've done for a lot of other industrials. What we're finding is that there are changes in induction at the site that we can modulate what we think in a very unique way. It's one data point, however, right? So it's hard for us to say this is the white paper and here's how we're going to analyze the return on investment for the customers. Those are all things that we're going to figure out. But what we found is there are a number of data center operators and a number of data center builders that have approached us looking for exactly the type of solution that we uniquely offer. So I'm very opportunistic that -- and optimistic that this could become a part of the business. But again, we like diversity in what we do. Did I get to all the different pieces, Justin, if I didn't, I apologize and you can ask it again. Justin Clare: Yes. No, I think you got to everything there. So yes, I definitely appreciate that explanation. And I guess just thinking through it a little bit, just how significant do you think the growth opportunity might be here? And I'm just wondering, has your solution been installed and is now operating effectively with this project? Or is that coming in the next few months? Just wondering if this kind of proves out that your solution is effective and then others can see the effectiveness and this could potentially lead to upside in your orders here. Daniel McGahn: Yes. I think the hardest part for people that follow us is to realize so much of what we do is industrial construction. So there's a pacing that things go through a year to be able to build. So I'm pleased to announce we got the order. I'm pleased to announce that we delivered on the order, but that's as far as we can take it. We're not at the point where it's going to operate and we'll get all the learning out of it. That's all going to come. It's a customer that knows us well, that we know well, and we'll try to use that as best as we can to try to market having a bonafide solution in the wild that works. But again, simplistically, this is no different than what we do in all the other markets. I think that there's an interesting need. I think the form factor and the speed that we can go to market really becomes a critical advantage here. If I speak more broadly, we have a huge pipeline of larger orders. I keep talking about order expansion and -- we used to talk about cross-selling. Now we just talk about selling. We have hundreds of millions of dollars of opportunity across all the different areas that we have tailwinds. We have probably in a dozen or 2 projects that are very large, we have several hundred million of potential business, not just for data centers, but for mines, for semiconductor, for traditional energy that the business is really working. The business is expanding because we're relied on to deliver more content into larger projects. That's what we've been talking about for the past few years. That trend seems positioned to continue to grow. And data centers will be a part of it. I hope to not have to talk about it every conference call because it's a piece of the business, and it's something that people get excited about. But we're not a data center stock, and we're not we shouldn't be thinking of ourselves as a play just in one area. This is really a diversified company that's focused on the problem with energy, which is the grid designed today to be able to meet those needs and those demands that many uses and many sources of generation require to have a very effective and reliable and resilient grid. Operator: Our next question comes from Eric Stine with Craig-Hallum. Eric Stine: Maybe we could just talk about traditional energy. I believe that was 1/3 of the quarter. And obviously, that's been a pretty increased focus here over the last year plus. I mean as we think about that, can you just talk to us about kind of where you're selling, where you play in there? I mean, should we view that as cyclical that it's more -- that swings in oil prices have an impact? Or is it insulated because it's more tied to traditional infrastructure? That would be helpful for me to clarify my thinking. Daniel McGahn: Yes. I think it's more insulated in that it's persistent demand. In general, I think what's changed in the American economy is that traditional energy is no longer considered something that people don't want to invest in. But creating cleaner energy in a traditional way is something we can help powering pipelines that move natural gas and things are an area that we fit in and as well as kind of general oil processing, being able to take from extraction [ of extra ] sources and move them downstream, midstream and end stream, the types of processes that move and refine that create other byproducts, all are becoming more and more energy dependent. So you need energy to be able to move and process the traditional energy sources. And that's really where we come in. So we see it as a long-term kind of persistent trend for us. The climate is really more apropo there. We think there's a fit definitely in North America. We think there's a potential in Latin America as well as we look at not necessarily quarters and years. The other part I'll say, Eric, realize and take everything I say with a little bit of a grain of salt. Our lead times are 9, 12 months for many products, right? So anything that we're going to do today that we think is exciting is really going to affect the financials a year plus out. Eric Stine: Okay. Yes. No, that's very helpful. That makes sense. Maybe just as you think about growth in the business, now you're guiding to $80 million plus, a new level on a quarterly perspective. I know capacity is less of an issue than I think in the past, you've talked about labor. I mean any updates you can share there? It clearly is an area which maybe is a bit of a push point, but just that would be great, an update. Daniel McGahn: Yes. I think the team has done very well at hiring. I feel like all the factories are being utilized very well. We have a lot of demand. We have a lot of bigger demand. So we feel really good. I think the new wrinkle in our portfolio is Brazil and the very strong demand there and the need potentially for some more expansion. And John kind of almost directly said that given the CapEx guidance that we believe the business is positioned to ramp, and we may have to expand capability, particularly in Brazil to be able to go meet all of that demand 2, 3, 4, 5 years out. So there's a longer-term plan that we want to be able to implement. We're at a point where the business really is driving us. We have a multiple set of very strong tailwinds that are pushing us, and we just need to be able to react to the market. If we do a good job for our existing customers, they're going to come back again and again as they have, and they come back with harder and bigger problems for us to solve. Eric Stine: Got it. And maybe last one for me. I know -- well, data center, just -- I mean, is that something as we think about that similar to semiconductor where potentially if it's a large data center operator or EPC that you potentially are spec-ed in? Or do you view it as it's a little more lumpy and then it would be kind of not one-off projects, but it would be more based on different projects moving forward rather than a few key partners. Daniel McGahn: Yes. I don't think I have clear visibility on that. Our EPC customers tend to try to design us in and we see a print that has our rectangle on it, and that's what we try to do. Obviously, doing one of these, we're not at that level yet. Do I think this has the potential for that? Yes. If this market grows faster than other markets, we'll have to invest in them to make sure that they grow to be able to maintain the diversity. part of the portfolio. That's tremendously valuable. It's a stabilizing effect on the business and allows us to grow on multiple fronts in parallel. Operator: Our next question comes from Tim Moore with Clear Street. Timothy Michael Moore: Congratulations on your revenue growth and operating leverage. That was very nice to see. My first question for you is about the potential to cross-sell and bundle to customers. You've done that extremely well on oil and gas to target upstream, midstream and downstream power systems. Maybe curious if you can shed some light on maybe what end markets make the most sense to cross-sell near term besides oil and gas? Is there potential in mining or chemicals or just your overall thoughts on end markets to really get that through. Daniel McGahn: Yes, it's pretty much everything, Tim. The way the business is now aligned is we no longer cross-sell, we just sell. So we have combined solutions that come from the family of acquisitions that we have that we're now presenting in some cases, they're $10 million projects. In some cases, they're $25 million projects, where we're presenting a combined offering to be able to manage voltage, to be able to transform voltage, to be able to modulate AC/DC power flows and to be able to do all of those features and functions for customers. So we no longer have to sell them as separate. We do because many of our customers think of them that way. But as for the larger projects, I'll say, more established customers, they like where we've headed with what we've added. And it's for mining, it's for traditional energy, it's for semiconductor. To some extent, it's even for renewable projects as we see them. Wherever we can, we want to be valuable to our customer. And if we can keep demonstrating that value, both from what the product does and what our engineers can help solve or derisk for the end customer, that's where we win, and that's why we win. Timothy Michael Moore: That's terrific color. Switching gears to my second question. I mean, you're clearly busy integrating Comtrafo in Brazil. And I know some comments were made on CapEx there, and they've got a great factory that you can expand. The organic growth is awesome there and the backlog is quite big. So can you maybe just give us a little bit more color on the near-term plan on increasing output there? And then just on the topic of acquisitions, how comfortable do you need to be with integration there, maybe how many quarters in until you maybe consider doing your next acquisition given you're sitting on a lot of cash right now? Daniel McGahn: Yes, it's hard, Tim, at this point to speculate. We're 19 days in plus the days we have in January. So it's early days for us. It will take us some time to be able to digest and leverage. We have a huge opportunity just in Brazil alone that we want to go after with everything that the company has to offer there. So I think we'll take our time and we'll be as we have been with each of them. We want them to run as they've run because we like the culture. We like the financials. That's true of all the acquisitions we've done. And then over time, how do we do more together? And that becomes the question that helps affect things 2, 3 years out from now. So I don't anticipate we're going to turn around and do another acquisition right away. But we do have a lot of inbound. We do have a list. We are working -- it's becoming -- the business is evolving to we have an operation business and then an opportunistic part led by John here to say, okay, what can we add to the portfolio and how do we do that? We're also looking, and you can hear it in my tone at combining product to basically come up with whole new sets of opportunities for us. And that's taken some R&D investment to be able to do all those things. So the company is evolving and maturing in all the right ways. Timothy Michael Moore: That's great color, and comforting that you won't rush into the next acquisition, until you're ready for them. Operator: Our next question comes from Colin Rusch with Oppenheimer. Colin Rusch: I have a few. I would love to just get a quick read on working capital and how that transitions over time. Obviously, with the acquisition, you've got a substantial amount of inventory and some receivables that grew in the quarter. Would love to understand kind of how that trends over the next few quarters. John Kosiba: Yes. Good question, Colin. We have had -- I don't want to call it a drain on working capital, but we have invested into the growth of the company over the last couple of quarters. To the extent we continue that growth and if we can maintain elevated levels of growth, then we'll continue to invest in working capital. If growth tapers to, call it, single-digit growth, then we would see working capital probably turn favorable. So it's difficult to tell depending on our growth strategy, but I can -- if working capital is an investment, I can assure you it's to support growth. Colin Rusch: Okay. And then we haven't talked about some of the military opportunities. Certainly, there's an awful lot of activity in Washington right now around enhanced military capabilities. Can you just talk a little bit outside of the ships, you talked about ports and infrastructure being a meaningful growth opportunity. In your sales pipeline, what are you seeing these days? And how do you see that starting to flow through into the P&L over the next couple of years? Daniel McGahn: Yes. I think just topically for the quarter, Colin, we had a good percentage in military more than 15%. I think typically, it's closer to 10% quarter-to-quarter, and that was because we're doing a bunch of things at once within the quarter, which is good. And that helps strengthen quarters. I think longer term, we're kind of front and center in some of the critical problems that have and ports have and those opportunities are going to be persistent kind of long term. But I'd say there's nothing I'll say specifically that's going to change the trajectory of that business in the next 2 to 4 quarters. Colin Rusch: Awesome. And then just a final one on the R&D road map. As your customer intimacy has improved, you're getting a look at what the real needs are for a bunch of these applications in a different way. And obviously, you guys have capabilities around customization for different applications. But I would love to understand how you're thinking about the cadence of evolving the product suite and just the leverage that you have out of the existing designs to meet all of the opportunities that you're seeing with your customers these days? Daniel McGahn: Yes. I'll take by example. So we're working towards a project for a very large mine, and there's opportunities at the site, but there's also opportunities with the utility that the grid is going to need to be improved. So I think our capability has matured now to the point where we really understand the problems that capital investment will cause in capacity from an electricity standpoint. So we try to just start with that as the premise and then work backwards and say, okay, what are going to be all the electrical challenges that this CapEx investment for this end customer is going to create, not just locally, but more broadly in the utility. So being able to combine our capabilities into products that are more proprietary, more defensible, more valuable to customers, that's where we're trying to push things as much as we can. Operator: This concludes our question-and-answer session. I'd like to turn the conference back over to Daniel McGahn for closing remarks. Daniel McGahn: Thanks, [ Bailey]. As we look forward to the future, it's clear that the opportunities ahead are vast. We stand ready to capitalize on the rising demand for energy and the critical need for a dependable grid to support it. We reached another recent record quarter with revenue levels of over $70 million, and we guided for our next quarter to potentially exceed $80 million. The business has already demonstrated a strong year through the first 9 months into the fiscal year. We see more traditional energy and utility projects, including those driven by data center demand on the horizon. In the longer term, we have a very strong pipeline of materials and semiconductor projects as well. I look forward to talking to you again when we report our full year results. Thank you, everybody, for your support and attention, and have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Kimball Electronics Second Quarter Fiscal 2026 Earnings Conference Call. My name is Alicia, and I'll be your facilitator for today's call. [Operator Instructions]. Today's call, February 5, 2026, is being recorded. A replay of the call will be available on the Investor Relations page of the Kimball Electronics website. At this time, I'd like to turn the call over to Andy Regrut. Vice President, Investor Relations, Strategic Development and Treasurer. Mr. Regrut, you may begin. Andrew Regrut: Thank you, and good morning, everyone. Welcome to our second quarter conference call. With me here today is Ric Phillips, our Chief Executive Officer; and Jana Croom, Chief Financial Officer. We issued a press release yesterday afternoon with our results for the second quarter of fiscal 2026 ended December 31, 2025. To accompany today's call presentation has been posted to the Investor Relations page on our company website. Before we get started, I'd like to remind you that we will be making forward-looking statements that involve risks and uncertainties and are subject to our safe harbor provisions as stated in our press release and SEC filings. And that actual results can differ materially from the forward-looking statements. Our commentary today will be focused on adjusted non-GAAP results. Reconciliations of GAAP to non-GAAP amounts are available in our press release. This morning, Ric will start the call with a few opening comments. Jana will review the financial results for the quarter and guidance for fiscal 2026 and Ric will complete our prepared remarks before taking your questions. I will now turn the call over to Ric. Richard Phillips: Thank you, Andy, and good morning, everyone. I'm pleased with the results for the second quarter and our updated guidance for fiscal 2026. Sales in Q2 were in line with expectations, highlighted by another quarter of strong double-digit year-over-year growth in the Medical vertical. Margins improved compared to the same period last year and cash from operations was positive for the eighth consecutive quarter. Our focus as a Medical CMO continues to gain momentum as we leverage our unique capabilities in the industry. We expect top line growth in Medical to outpace our other two verticals as we balance our portfolio across the markets we serve. Our recent announcement to rebrand as Kimball Solutions and the grand opening of the new medical manufacturing facility in Indianapolis reflects this strategy and our expanded offering of capabilities and services. Turning to the second quarter. Net sales for the company were $341 million, a 5% decline compared to Q2 last year. From an end market perspective, the strong results in Medical were offset by declines in North American automotive and industrial and continued softness in China. Starting with Medical. Sales in the second quarter were $96 million, up 15% compared to the same period last year and 28% of total company sales. This represents our fourth consecutive quarter of year-over-year revenue growth in this vertical. Approximately half of our medical business is in North America, the other half is roughly split between Asia and Europe. The increase in Q2 was driven by growth in Poland and Thailand. North America was flattish in the quarter. We continue to view the Medical vertical as a compelling opportunity to diversify our top line and leverage our core strengths as a trusted partner in a complex and highly regulated industry. Megatrends such as an aging population, increasing access and affordability to health care, and smaller medical devices requiring higher levels of precision and accuracy are expected to fuel future growth. Our strategy is to align with new and existing blue-chip customers in need of manufacturing capacity for products with long life cycles and high degrees of visibility. A great example of this strategy coming to life is our new facility in Indianapolis. Tomorrow, we will be celebrating the grand opening with a ribbon-cutting ceremony and plant tour showcasing our state-of-the-art facility that adds capacity to our U.S. footprint for manufacturing medical products, single-use surgical instruments and drug delivery devices such as auto-injectors. Indy, however, is not the only example. Thailand, Poland, Mexico and Jasper also serves the medical market with HLAs and finished medical products. To complement our organic growth, we're actively pursuing our discipline in acquisitions that could bring new customers, increase exposure to faster-growing end markets, expand our geographic reach and add manufacturing capabilities, including opportunities for vertical integration. Together, these strategies strengthen our global platform and position the company for a sustainable return to profitable growth. Next is Automotive, with sales of $162 million, down 13% compared to the second quarter of last year and 48% of the total company. The decline in Q2 was driven by lower sales in North America. The result of the electronic braking program transferred out of Reynosa in mid fiscal '25 and recent pressure in the U.S. related to tariffs. The combined impact represented the majority of the decrease in the quarter, although Automotive sales were also down in China. This was partially offset by strong growth in both Poland and Romania with programs in steering and braking, respectively. Our company has supported the automotive market since the mid-80s and has become a very good business for us, generating strong cash flow when production volumes are at or above planned levels. Electronic steering and braking applications continue to be our sweet spot with advances such as steer by wire and brake by wire, or electronic mechanical braking, increasing the electronic content on vehicles. We are also seeing early stages of growth from the full assembly of an EPP or Electronic Power Pack, a steering system HLA that integrates the motor and the ECU. In addition, OEMs are starting to design-in a second steering system in vehicles, this one in the rear of certain higher-end cars and trucks. Finally, sales in Industrial totaled $83 million, a 5% decrease compared to Q2 last year and 24% of total company sales. Our Industrial business is heavily concentrated in North America, where the majority of the decline occurred with lower demand for HVAC systems. This was partially offset by higher sales in Europe, a result of a rebound of the smart meter business for us in that region. I'll now turn the call over to Jana for more detail on Q2 and our updated outlook with raised guidance for fiscal 2026. Jana? Jana Croom: Thank you, and good morning, everyone. As Ric highlighted, net sales in the second quarter were $341.3 million, a 5% decrease year-over-year. Foreign exchange had a 2% favorable impact on consolidated sales in the quarter. On a sequential basis, sales were down just over 6% compared to Q1, with the decline primarily occurring in the Industrial vertical market driven by reduced sales in the North American climate control submarket. The gross margin rate in the second quarter was 8.2%, a 160 basis point improvement compared to 6.6% in the same period of fiscal 2025, with the increase resulting from favorable mix, the closure of our Tampa facility, favorable FX rates and our global restructuring efforts. Adjusted selling and administrative expenses in the second quarter were $12.6 million, a $2.5 million increase year-over-year. When measured as a percentage of sales, the rate was 3.7% this year compared to 2.9% last year. As we previously indicated, expense will be higher in FY '26 as we make strategic investments in business transformation, IT solutions and business development for the future. Adjusted operating income in Q2 was $15.3 million or 4.5% of net sales, which compares to last year's adjusted results of $13.3 million or 3.7% of net sales. Our improved guidance for adjusted income reflects the impact of higher sales as well as the S&A investments I just spoke about and the grand opening of our new CMO facility in Indianapolis, where we will incur higher depreciation and other expenses related to the plant opening. We have worked hard to balance the needs of the business against the backdrop of declining sales. We will continue our restructuring efforts in FY '26 and beyond as we align our cost structure to end market demand. Other income and expense was expense of $3.8 million compared to $4.8 million of expense last year. Once again this quarter, interest expense drove the decrease, down 50% year-over-year. The effective tax rate in Q2 was 47.9% compared to 1.2% last year with a higher rate driven by the impact of a provision to tax return adjustment and the valuation allowance adjustment associated with the expected sale of the Tampa facility. For the full year of fiscal '26, we continue to expect an effective tax rate in the high 20s to low 30s. Adjusted net income in the first quarter was $6.9 million or $0.28 per diluted share compared to last year's adjusted results of $7.4 million or $0.29 per diluted share. Turning now to the balance sheet. Cash and cash equivalents at December 31, 2025, were $77.9 million. Cash generated by operating activities in the quarter was $6.9 million, our eighth consecutive quarter of positive cash flow. Cash conversion days were 91 days, an 8-day increase compared to last quarter, but a 16-day improvement compared to Q2 of fiscal '25. We are continuing to focus on improving cash conversion days by actively managing the components and are pleased by our progress thus far. Inventory ended the quarter at $281.7 million, marginally higher than Q1, but down $24.5 million or 8% from a year ago. Capital expenditures in Q2 were $18.2 million, with much of the spend once again this quarter on leasehold improvements in the new facility in Indianapolis. Borrowings at December 31, 2025, were $154 million, up $16 million from the first quarter, but down $51 million or roughly 25% from a year ago. Short-term liquidity available represented as cash and cash equivalents plus the unused portion of our credit facilities totaled $363 million at the end of the second quarter. We invested $4.3 million in Q2 to repurchase 149,000 shares. Since October 2015, under our Board authorized share repurchase program, a total of $109.5 million has been returned to our shareowners by purchasing 6.8 million shares of common stock. We have $10.5 million remaining on the repurchase program. As Ric mentioned, we are raising our guidance for fiscal '26 with net sales expected to be in the range of $1.4 billion to $1.46 billion, which compares to our previous guidance of $1.35 billion to $1.45 billion. The improvement is driven by strength in the Medical vertical as well as the ramp of Automotive programs at both European facilities. Adjusted operating income now estimated to be 4.2% to 4.5% of net sales versus our prior estimate of 4.0% to 4.25% with the improvement driven by higher sales balanced against investments in our Indianapolis CMO facility, business development needs and business transformation and IT solutions to further innovations and enhance our capabilities. The guidance for capital expenditures did not change with a range of $50 million to $60 million for the fiscal year. I'll now turn the call back over to Ric. Richard Phillips: Thanks, Jana. Before we open the lines for questions, I'd like to share a few thoughts in closing. As Jana detailed, we are pleased to raise the outlook for the fiscal year, driven by strength in the Medical vertical. We continue to monitor the outlook for FY '27, particularly in the North America automotive and industrial verticals as the consumer continues to respond to tariff impacts, changes in U.S. tax subsidies and economic concerns. We'll provide more color on our outlook as the year progresses. 2026 is a year of milestones for our company, with our facility in Romania celebrating 10 years of operations; China, 20 years; and it's the 65th anniversary for the enterprise. As we previously announced, we are celebrating this anniversary and embracing our future with a new company name, Kimball Solutions. This rebrand is a strategic move that reflects our evolution beyond traditional electronics manufacturing services with an expanded portfolio of capabilities that includes design and engineering support, supply chain management, precision plastics for medical applications and high-level and final product assemblies for the verticals we serve. It also embodies our customer-centric approach to long-lasting partnerships, providing end-to-end solutions from design and prototyping to new product introduction, to manufacturing and aftermarket support. The rebrand will occur in a phased rollout at locations across the global footprint beginning in July of 2026 and will be completed when the company officially changes its name a year later, pending shareowners' approval. This change, along with the recent investments in Indianapolis, demonstrates our commitment to innovation and the vision to deliver comprehensive solutions worldwide. While the name of the company is changing, our core values of integrity, quality and continuous improvement remain steadfast. These steps are a celebration of our heritage and a move toward the future, building tomorrow together. I've never been more excited about the company, and thank you for your support. Operator, we would now like to open the lines for questions. Operator: [Operator Instructions] Our first question comes from the line of Mike Crawford with B. Riley Securities. Michael Crawford: Jana, starting with Automotive, and I believe it's primarily Nexteer driving your steer-by-wire growth. Is that -- they remain your largest customer. It was a 19% customer in the September quarter. What percent was Nexteer in December? Jana Croom: 20%. Michael Crawford: 20%? Jana Croom: Yes. Michael Crawford: And then are your other customers also expanding that? Or is it more braking that's driving some of the recovery there? Jana Croom: So we are seeing steering and braking with our largest automotive customers now being Nexteer, ZF and] HL Mondo ]. So it's not exclusive to Nexteer, but obviously, globally, Nexteer is our largest customer. Michael Crawford: Okay. Yes. Well, it's great to see that flattening out. And then on the growth side, can you remind us what the capacity is and ramp expectations are for this new facility in Indianapolis? Jana Croom: Yes. So the new facility in Indianapolis is 300,000 square feet under roof. And so considerably larger than our current footprint. We're not yet -- it depends on the makeup of the volume of work we got to be able to tell you exactly what that's going to equate to in terms of revenue dollars, but significant opportunity for growth there. And we needed to demonstrate that for the types of business that we are quoting for that facility. Michael Crawford: And then I mean, I think Philips remains your largest Medical customer to date, but I imagine much of the work that you're doing in Indianapolis would be with some of your emerging growing Medical customers? Or do I have that wrong? Jana Croom: No, you have that correct. And as an example, if you look at the growth in Q2 and the year-to-date growth, it was split fairly evenly amongst North America, Europe and Asia and fairly evenly in the subverticals within Medical, meaning it was not driven by respiratory care. And so Medical for Kimball is growing. And you're right, that CMO space would likely not have Philips content just because that's not the makeup of the business that we perform for them. It would be new customers and expanded opportunities there. Michael Crawford: Okay. And just a final question. Would -- is it more plastic injection molding? Or what are some of the value-added CMO applications that drive your fastest-growing parts of the business? Richard Phillips: Yes, Mike, it's Ric. Great question. Yes. So we expect that facility. And again, as Jana said, we'll be working with customers. We're excited about our funnel and some of the discussions that we're having. But we could imagine, think of single-use surgical instruments, drug delivery devices such as an auto-injector. Certainly, as you said, plastic injection molding, we expect to be very significant, and we'll have significant capacity there. So all of those are expected to be housed at least partially in that CMO facility in Indy. Operator: Our next question comes from the line of Derek Soderberg with Cantor Fitzgerald. Derek Soderberg: So I wanted to start with automotive. So a little bit of softness in China and North America. Just given that you guys won't be comping against quarters in the past with the braking program in North America. Just going forward, how should we think about sort of growth in the Automotive piece for Q3 and Q4, sort of flattish declines year-on-year, sort of down single-digit percentages. What's sort of the right way to think about Automotive for the rest of the year? Jana Croom: Yes. So great question. We will finally anniversary the end of the EV100 program in Q3. And so what we would expect is Q3 Automotive to be flat to potentially up just a little bit because we finally work that through the system. And we've got the 2 new programs in Europe and Europe has been rebounding nicely for us. And so in terms of Automotive and the sluggishness, the worst of it is past us in Q1 and Q2. Derek Soderberg: Got it. That's helpful. And then, Ric, just if you could comment on some of the win rates you're seeing across the business. Any sort of change in the size of the wins? What sort of gets you excited for what you're seeing in the portfolio as we sort of kind of look forward here? Richard Phillips: Yes. We're really excited, Derek, looking forward and appreciate the question. We're seeing pretty consistent win rates. I mean, not that it's not very competitive out there. And there are certainly situations where we have -- program bidding situations where we decide we're not willing to accept a level of margin that's not for us. So it's certainly -- I wouldn't characterize it as anything but very competitive. However, we feel the strengths that we have in those long-term customer relationships, our capabilities, our flexibility and quality and operations record, all of those things that we've talked about in the past continue to serve us very well. In terms of programs going forward, particularly in Medical, but also in Industrial, there's maybe a couple of things that are worth to note. One is that we've always been open to and seeking what we call lift and shift opportunities. So where we're working with a customer who's currently doing their own manufacturing and has a desire to exit that for whatever reason to focus on R&D or marketing or sales or whatever is appropriate for them and have us take that over in our existing facility network. So we're seeing that activity in terms of those conversations increase, and those tend to be large programs because this would be an example of a customer potentially shutting down an entire plant and moving that all into our footprint. So those are larger to the extent that we close those, and we're excited about those discussions. And then the CMO discussions that we're having also, those programs tend to be significantly larger than our typical average medical program just because of the nature of that business, the growth in that business and the scope and scale of what those customers are doing. But great question. Operator: Our next question comes from the line of Anja Soderstrom with Sidoti. [Operator Instructions] Anja Soderstrom: So I'm just curious, first, with this new facility that you're opening, as you ramp up, how should we think about that having an impact on the margin? Richard Phillips: We certainly think over time that the CMO space has an opportunity for margins accretive to what you've seen from us historically. That's going to depend program by program and customer by customer and again, all competitive situations. But we think that, that space and our capabilities lends itself for that to be accretive in the long term. Jana Croom: But Anja, I will tell you, in the near term, it's going to drag, right, because we have all the depreciation expense, all the additional expense associated with the opening of that facility. We're currently running both facilities, right, because we've got to move everything over and then we'll have to close the facility. So for the next 6 to 9 months or 2 to 3 quarters, it's going to be a drag. And the reason that I want to point that out is the operating income margin that we produced in Q2, considering the fact that we had $16 million less sales and the impact of the grand opening of the Indy facility and other investments that we made, I think, is a testament to our commitment as a leadership team to deliver value to the organization and to our shareholders. It was a lot of work and while we feel very confident in the strategy for the future, we're working hard to offset that drag in other areas of the business. Anja Soderstrom: Okay. And then how do you see the cash cycle days play out in the coming quarters? It was quite elevated for the quarter. Jana Croom: Yes. So for the last 2 years, we've really been after cash conversion, cash cycling. We've got a pretty aggressive PDSOH goal. We saw it tick up from 85 days to 90 days, primarily driven by North America and the impact of autos and industrial. We saw inventory tick up a little bit. That remains a key focus of the organization. We worked really, really hard to get working capital solid and inventory reductions and corresponding impact in debt on the balance sheet. You can expect that to continue to be a laser focus of us as a leadership team. So said more plainly, I would expect Q3 to come back down from where it was in Q2. I would like to -- and I know no one asked, but I think it would just be helpful to give a little bit more color specifically on the remainder of the year. So if you take the midpoint of our revenue guide at $1,430 million and you strip out the full year or what we've done so far at $707 million, that leaves you with $723 million roughly to go. What that would insinuate is that Q3 and Q4 are going to be roughly in line with Q1 in terms of revenue growth. And we already talked about autos and the fact that we've anniversaried EV100. From a Medical perspective, I would like to remind everyone that we had the consigned inventory sale in Q3 of FY '25 of $24 million. So when we report Q3, we're going to give you the results. We will tell you what growth was in Medical, including the inventory sales and excluding the inventory sales. So we won't make you do that math, but I just wanted to remind everybody of that. And then it's Industrial, North America, and that's where our focus is going to continue to be in terms of seeing how that's going to shake out. So just as everybody is fine-tuning their models, some additional color, I thought might be helpful for you. Operator: Our next question comes from the line of Max Michaelis with Lake Street Capital Markets. Maxwell Michaelis: Thanks for the color on the model, too. So if we look at Automotive, I was just hoping if you could provide some more color on maybe the opportunity with the EPP, the Electronic Power Pack program, and then kind of some of the opportunities around the OEMs with the second steering design. I mean, can these become similar in size to the old braking program that ended up going away? Or kind of just help me out with where the potential is with these 2 programs? Jana Croom: So we were really excited about the EPP program because it's our first higher-level assembly in Automotive where you're combining the motor and the printed circuit board assembly, and so that's really exciting. In terms of size of the program, the EPP is not as big as the braking program was. It's probably about 2/3 of that size. But from a future strategic focus in Automotive, it's really excited. The other thing that I'll say is as you think about the continuum of opportunity in Automotive, particularly as it relates to ADAS, right? So you've got steering programs now, you've got braking programs now, steer-by-wire, brake-by-wire, that's all really excited. But you also have ADAS where it's, "Hey, there's going to be a central brain functioning in the car that's going to be controlling all of the electronics in there," and that's something that Kimball is also interested in pursuing in the future. We would expect as EPP becomes more common in vehicles, as second steering column becomes more common in vehicles and ADAS, those are strategic areas that we would want to participate in, right? So I remember when autonomous driving lane departure features were only available in very, very high-end cars. Now they're everywhere, right? You're -- a Nissan-centric has got it. So everybody everywhere is offering that feature, and it's exciting in terms of the strategic opportunities for Automotive. Maxwell Michaelis: Awesome. Next one, if we look at the Medical space, you talked about inorganic opportunities last quarter, I don't think you have in the prepared remarks in this call. But we look at some of the things you guys provide with the auto-injectors, sleep therapy, drug delivery. I mean when you're looking at acquisitions, I mean, what are some of the other spaces or let's call them sub verticals that you guys are looking at where you're seeing some great opportunities? Andrew Regrut: Max, it's Andy. We have done a fairly deep dive on end market exposures. And in vitro diagnostics is really interesting to us. Cardiology is really interesting to us. So we would certainly consider opportunities or adjacencies to expand into those areas, especially if it provided a chance to either expand our relationship with an existing customer or add a new customer and the same for manufacturing capabilities. Operator: There are no further questions at this time. A replay of this call will be available beginning later today and will remain available through February 19, 2026. To access the replay, please dial (877) 660-6853 and enter the access ID 13757544. And with that, this concludes today's conference call. Thank you, everyone, for your participation. You may now disconnect.
Operator: Welcome to the Pandox Q4 presentation for 2025. [Operator Instructions]. Now, I will hand the conference over to the Head of IR and Communication, Anders Berg. Please go ahead. Anders Berg: Thank you very much, and good morning, everyone, and welcome to this presentation of Pandox Year-end Report 2025. I'm here together with Liia Nou, our CEO, and Anneli Lindblom, our CFO. And today, we also have the pleasure of having both Aoife Roche, Vice President at STR, and Rasmus Kjellman, CEO at Benchmarking Alliance, with us, and they will provide a hotel market update on Europe and Nordics, respectively. As you know, STR Benchmarking Alliance is both a leading independent research firm, totally dedicated to the hotel market, and the views they express are completely separate from Pandox, and we offer this presentation only as a service to Pandox stakeholders. Please note that Aoife and Rasmus' presentations will be held after we have completed our formal earnings presentation, including the Q&A. We start with Liia and Analyst business update and financial highlights for the quarter and the year, which in every sense was a very eventful one. And then we end up with a Q&A session. So yes, with that, Liia, please go ahead. Liia Nou: Thank you, Anders, and good morning, and welcome, everyone. I agree that this report summarizes a very busy fourth quarter and also a full year 2025. Starting with our existing portfolio, I am glad to report solid like-for-like growth in both business segments in the fourth quarter. This is explained by broad-based improvements in the hotel market, driven by active business demand, an overall solid event calendar, and active leisure travel. Together with profitable contributions from completed acquisitions in the business segment leases and improved profitability in own operations, this resulted in a tangible increase in group earnings. In the Leases business segment, demand improved markedly; however, still with variations between markets. The Nordics developed the best, with good rent growth in Sweden, Norway, and Denmark, while Finland was stable. Growth in Germany was also markedly stronger than earlier in the year, while growth in the U.K. was slightly positive. Like-for-like revenues increased by 5% in own operations in the fourth quarter, which, together with a positive business mix and good conversion, resulted in a like-for-like increase of 16% in net operating income. To be fair, part of this uplift is explained by one-time costs in the corresponding quarter last year. For the group, total revenues increased by 9% and net operating income increased by 22% in the quarter. Dalata is included in the numbers from the 7th of November. And from the fourth quarter, we report the acquisition as fully completed, including the expected divestment of the hotel operations to Scandic, which is expected to be closed or be done in the second half of 2026. In the quarter, we recorded rent of NOK 146 million and net operating income of NOK 138 million, i.e., for the 54 days we had Dalata. In the quarter, we also recorded transaction costs of NOK 241 million and preparatory financial costs of NOK 22 million. Adjusted for these one-time costs, cash earnings amounted to SEK 666 million in the fourth quarter. This corresponds to an increase of 23% year-on-year. We also report an acquisition result from the Dalata transaction amounting to approximately NOK 1.6 billion. This includes the estimated remaining transaction cost of NOK 340 million, which is expected to be done in 2026, and adding deferred tax of approximately NOK 1.8 billion, this contributes to an increase in the EPRA NAV of NOK 17.70 per share for a total of NOK 3.4 billion. In the fourth quarter, we also started the work to separate the properties from the hotel operations, which is expected to be finalized in the second half of 2026. Financially, our key ratios now largely reflect all aspects of the transaction. Loan-to-value, excluding debt of some SEK 504 million related to the expected sale of the hotel operating platform to Scandic and including Andlspars AB's minority holding in Bidco, was 52.7% compared to 50.2% at the end of the third quarter. On this page, we summarize some basic facts on Pandox. We are active in Europe, the world's largest hotel and tourism market, with strong structural growth drivers. We only invest in hotel properties and create value through active and engaged ownership. We have long-term revenue-based leases with a WAULT of 13.6 years and good guaranteed minimum rent levels with skilled operators. Please note that the reported WAULT is excluding the expected new revenue-based lease in Scandic for the Dalata portfolio and will thus increase. Our property portfolio has an average valuation yield of 6.37% and a strong yield spread of close to 250 basis points. We systematically invest in climate change projects in our portfolio with good returns based on our science-based targets and validated targets. We have strong cash flow and a balanced financial position, which enables us to drive continuous profitable growth through acquisitions of new properties and investments in our existing portfolio over time. We have a strong and well-diversified hotel property portfolio now consisting of 193 hotel properties with approximately 43,000 rooms in 11 countries and 90 cities, and with a property market value of approximately NOK 92 billion and a blended average yield of 6.37%. Please note that the yield increase compared with the third quarter is all explained by the Dalata properties going into our portfolio at a higher average yield. We are divided into 2 mutually supportive and reinforcing business segments: leases and owned operations. Leases where we own and lease out our hotel properties stand for 84% of the property market value. In our own operations, we transform and run hotels in properties we own. Own operations make up for 16% of our property market value. Our focus is upper mid-market hotels with mostly domestic demand, which is still the backbone of the hotel market, regardless of which phase the hotel market cycle is in. We also have one of the strongest networks of brands and partners in the hotel property industry, and this ensures efficient operations and revenue management, which maximizes cash flow and property values, and a continuous flow of business opportunities. Also, a relatively large part of the investment in leases is shared with the tenant, which lowers our risk. Later in this presentation, I will share some data on what the portfolio will look like after the acquisition of Dalata. Here, we have a breakdown of the performance for a selection of countries, regions, and cities versus 2024. We show the average daily rate on the vertical axis and occupancy on the horizontal axis. In the boxes, we indicate how much higher or lower RevPAR is compared with the corresponding period in 2024. In 2025, RevPAR growth was mixed across our markets. Occupancy was stable or growing in most markets, while the average price was more varied. In terms of RevPAR, the greatest relative improvements during the year took place in the Nordic markets, with Norway as a leader, Denmark performing consistently well, and Sweden ending the year on a positive note. Oslo and Copenhagen were strong city markets throughout the year. Many markets ended the year strongly, with Germany and especially Frankfurt and Hanover as good examples. Aoife Roche from STR and Rasmus Selman from Benchmark Alliance will talk more about this and the underlying trends in the hotel market later in this call. At every point in time, we have our projects rolling, big and small. The projects vary from high-yielding investments like adding more rooms in an existing hotel, converting non-yielding spaces into guest rooms, for instance, cabin rooms, or adding more beds to existing rooms, to more bread-and-butter investments like product uplifts and rooms/bathroom renovations. In the leases business segment, we share the investment with our tenants, and both parties enjoy the upside potential and share the risk. In our own operations business segment, we take the whole investment in our own books, but also have more control and can enjoy the full cash flow. And on this slide, you can see some examples of our bigger ongoing projects. Every year, we invest approximately SEK 1 billion into our existing portfolio. Now that the acquisition of Dalata completed, this figure is growing a bit, mainly during the next 2 years, due to especially 2 large projects from the Dalata portfolio. One conversion from an office into a hotel in City Center Edinburgh and one large extension of 115 rooms in Clayton Cardifflaine in Dublin. Both are exciting, high-yielding investments that we expect to be finalized in 2026 and 2027. Here, we have a selection of some of the upgraded products that we've done during 2025. Many of these are already giving impact in '25, but more so for the full year of '26. Add to that, our pipeline of approved investments for ongoing and future projects of around SEK 2.6 billion, out of which SEK 1.6 billion, as I said, is expected to be completed during 2026. So a good pipeline of both upgrades of products, as well as expected to add more than 550 new rooms during 2026 and 2027. Here, we have summarized key financial effects from the Dalata transaction. And yes, it is a nightmare slide, but still useful to explain the complexity of this transaction. This acquisition was closed on 7th November 2025, and we report the transaction as fully completed, including the expected divestment to Scandic. I will not go through all these lines, but except for Q4 2025 are in short. 31 plus 1 investment properties with some SEK 16.9 billion were added. The properties were externally appraised in the fourth quarter, with rent and NOI of SEK 146 million and NOK 138 million, respectively, or 54 days in business area leases. The transaction cost of NOK 241 million was expensed, prepared to financial cost of SEK 22 million, i.e., for the period before the 7th of November, and an acquisition result of SEK 1.6 billion, which includes SEK 340 million in expected sale cost for the expected sale of the hotel operating platform to Scandic. This means in principle that we do not expect any additional transaction costs on top of what has already been recorded unless we identify new areas of consideration. The deferred tax liability of NOK 1.8 billion arises from temporary differences between fair value and taxable value for investment properties. Loan-to-value, we exclude the debt of approximately NOK 500 million for the expected sale of our hotel operating platform to Scandic and include Andaz SPAR AB's minority holding in Bidco. We are currently working full speed with the separation of properties and hotel operations, which we expect to be completed in the second half of 2026. As we have said previously, there are several ways to think about this transaction from a value perspective. The main value driver is, of course, that we add 31 plus 1 investment properties of high quality in high RevPAR markets with solid profitability and cash flow generation capacity, together with a strong operating partner. We also unlock value from acquiring Dalata at an attractive price and, in turn, an implied value of the properties, which is lower than they are worth according to Pandox's business model. Our tentative estimate of this value uplift, or expressed slightly different embedded value, was some NOK 3 billion, or actually NOK 3.4 billion, as the increase in EPRA NAV of NOK 17.7 per share. Accounting-wise, this is expressed as an acquisition result of approximately SEK 1.6 billion, which together with a deferred tax of SEK 1.8 billion amount to this EPRA NAV uplift. And please note again, this also includes the estimated remaining transaction cost of some SEK 340 million. Here, we have mapped out the 31 investment properties from Dalata that we already added to the leases in the fourth quarter, and apologies in advance if some of the cities have been marked out wrongly. 21 of the properties are located in Ireland and 10 in the U.K. Dublin and London are the biggest markets with 11 and 5 hotel properties, respectively. All hotels are well-established with leading commercial positions in the markets. This is what our portfolio in the U.K. and Ireland looks like, including Dalata. In total, we now have 63 hotels, of which 12 are in Dublin and 11 are in London. In the number of rooms in our total portfolio, the U.K. now accounts for 20% and Ireland 12%. We thus increase our exposure to Ireland, in particular, but also to the U.K. market. In terms of destinations, our exposure will increase towards international destinations and decrease towards regional destinations relatively speaking. Here, we have mapped our now 12 properties in Dublin with a total of some 3,200 rooms, including some prime assets like our 608 rooms Clayton 57 rooms Clayton Hotel Leopardstown, 334 rooms Clayton Hotel Ballsbridge and not the least, 304 rooms Clayton Hotel Cardi Lane, where we also have an extension project for 115 new rooms expected to be completed in the end of 2027. Here on this page, we have 3 out of 5 new London hotels, 227-room Clayton Hotel Chiswick, the 212-room Clayton Hotel City of London, and the 191-room Malon Hotel Finsbury Park. On this page, the remaining 2 properties added the Maldron Hotel Shortage and Clayton Hotel London Wall. In total, we now have 11 properties in London for a total of some 2,400 rooms. Here, we have a quick summary of the main changes in the portfolio measured in number of rooms, primarily in relative terms. Our international exposure increases as a consequence of more rooms in international cities, notably Dublin, London, and Edinburgh. The share of revenue leases with minimum guaranteed rent also increases, which adds to the earnings quality of our portfolio. And with that, I hand over to Anneli Lindblom, our CFO. Anneli Lindblom: Thank you, Liia. Good morning. In the fourth quarter, revenue and group net operating income increased by 9% and 22%, respectively, driven by the acquisition and overall strong like-for-like growth. Like-for-like, leases reported growth of 5% in both revenue and net operating income, while own operation reported revenue and net operating income growth of 5% and 24%, respectively. Adjusted for nonrecurring items of NOK 263 million, where NOK 241 million is transaction costs and NOK 22 million is financial costs related to the acquisition of Dalata. Adjusted for those, cash earnings and profit before changes in value increased by 23% and 35%, respectively. When it comes to currency, please note that to reduce the currency exposure in foreign investments, our aim is to finance the investment in local currency. Equity is normally not hedged, as Pandox's strategy is to have a long investment perspective. Currency exposure is largely in the form of currency translation effects. In the fourth quarter, currency had a negative impact on both earnings and property values. And as you know, we have the main part of our hotel properties outside Sweden and denominated in foreign currencies, and now even a larger part due to the acquisition of Dalata. On this slide, we show the change in the main valuation parameters for the total property portfolio year-to-date. And please remember that investment properties are recognized at fair value. According to IFRS, unrealized changes in value for operating properties are only reported for information purpose, but it is included in the EPRA NRV. For the year, the total unrealized changes in value were a positive NOK 117 million, driven by lower yields. As I said earlier, changes in currency had a negative impact on the balance sheet items for the period, with decline in property value of minus NOK 4.6 billion in the period. As you know, on the 7th of November, we closed the acquisition of Dalata Hotel Group with a purchase value corresponding to NOK 15 billion, on which some NOK 16.9 billion in property value is added here. End of period, the average valuation yield for investment properties increased by 19 basis points to 6.2%, reflecting the higher yields on the Dalata portfolio. For operating properties, it increased by 1 basis point to 6.85%. So the blended yield for the group increased 13 basis points to 6.37%. So here, we have the average yield, the average interest on debt, and EPRA NAV per share quarterly, and the yield spread is intact, and in the period, growth in EPRA NAV was a positive 7.7%, measured on an annual basis and adjusted for paid dividends. Our LTV at the end of the quarter amounted to 52.7%, and the debt related to the expected divestment of Dalata's wholesale operation to Scandic is included, and that item is reported as a liability held for sale. The minority interest in Andazspar's ownership in our bidding company is included, however. As you can see, we are still well within the range. The ICR on a rolling 12-month basis was 2.6x. Adjusted for the preparatory financial cost of SEK 57 million, the ICR was 2.7x. Cash and credit facilities amounted to SEK 1.7 billion. Including credit approval of new financing of NOK 1.5 billion in the first quarter of 2026, the liquidity reserve amounted to NOK 3.2 billion. And on top of that, we still have unencumbered assets with a value of some NOK 900 million as an untapped reserve. So during the quarter, the constructive trend in our financing market continued. In the fourth quarter, we took up new and refinanced existing loans of NOK 13.8 billion, which makes it close to NOK 21 billion for the full year. Looking ahead, we have NOK 5.8 billion of debt maturing within 1 year. And our bank relations are strong and expanding across our markets. We have ongoing and positive discussions on future financing and refinancing. And there is really a strong appetite among not only the Nordic banks to finance our hotels. So we have a wider group of banks that are very interested. At the moment, 51% of the net debt is hedged. This is the lowest level since the end of 2022. And with that, I hand over back to Liia. Liia Nou: Thank you, Anneli. We have said it before, the hotel market remains resilient, supported by strong underlying structural growth drivers. We expect that gradually strengthening macroeconomic data should support the hotel market as well, and hotel demand to increase in 2026, driven by multiple segments. The supply outlook is more benign, which should support ADR, but the mix depends on the market. In Q1, which is the smallest quarter, we expect a normal seasonal pattern. Finess on the books looks promising for Q1 compared with the same quarter last year. But please remember, the first quarter is small and always difficult to draw any major conclusions from when it comes to full-year performance. We currently have a relatively strong appreciation of the Swedish krona, which has a negative translation effect on earnings and asset values, as Anneli described. Finally, we expect the properties from Dalata to contribute substantially to both NOI and cash earnings. And now we move over to Q&A. Operator, we are now ready for questions. Operator: [Operator Instructions] The next question comes from Artem Prokopets from UBS. Artem Prokopets: So first question for me. I will ask them individually, if it's okay. So, the first one, following the Dalata acquisition, when do you expect to be in a position to pursue additional large-scale acquisitions? And specifically, given that the PPHE is now in a formal sales process as part of its strategic review, is this an opportunity you would evaluate? Or is PPHE outside of your current acquisition focus? Liia Nou: Well, overall, of course, having done and in the process of finalizing our biggest ever transaction, we, of course, have a lot of focus on this. But you can still see from our strong financials that we still have some gunpowder to also pursue some investments, as well as we're also always looking at some divestments. I won't specifically comment on individual transactions, but you can expect us to put some effort and some strength into completing the ongoing acquisitions, and we are also on the hand for continued new ones, whether they are single assets, smaller portfolios, or even a bigger chunk. Artem Prokopets: Second question, how do you assess the impact of rising U.K. business rates on Pandox's own operations segment, and particularly with regard to net operating margin? Liia Nou: Yes. I mean, as you know, it affects our own operations, and this is a smaller part of our exposure in the U.K. The expected effect, which is, of course, in our numbers for next year in our budget, is around GBP 1 million for our own properties in the U.K., which are affected. And we have also taken, of course, some impact on that when it comes to the valuations. So a minor effect, but it's mostly affecting, to some extent, the City of London hotels. Artem Prokopets: And given these changes in U.K. business rates, do you expect this to affect the lease agreements you are negotiating with Scandic for the U.K. hotels, which are due to begin in the second half of the year? And specifically, does the fact that Scandic's U.K. position has worsened since the time of the Dalata acquisition, does it change how you would price these leases? Liia Nou: Not at all. The agreements and the framework are already in place. So that was all already agreed and put in place when we bid for this deal back in the summer of 2025. So that will not change. Artem Prokopets: And could you please provide an update on Revo Hospitality, specifically whether you have any new tenants in mind for those assets? Liia Nou: Well, of course, this is a process, as you know, where the former HR Group and Riga have put themselves in self-administration. It's a process that is in the hands of the external. I should not say that we have foreseen this, but of course, this has been on our radar for some time. And we are constantly sort of in both dialogue and also guarding our interests. We do think we have good possibilities to either rent it out, continue if HR continues their operations to some part, or whether we will find new operators with a large network, or, as we have our own operations, this is something we can sort out in the shorter term, take it on our own. So as we said in the press release, which we sent out, it affects 4% of the rooms in our portfolio. So it's smaller, but we are confident that there will be, if any, a very small financial impact, if any. Artem Prokopets: And maybe last question for me. Could you, if possible, provide a numerical outlook for RevPAR growth in 2026? And given Pandox's focus on the upper mid-scale segment, do you think the company is well-positioned this year? Liia Nou: I think we are very well positioned because, as I said, we have a broad portfolio of 193 hotels in 11 markets. So it's right. All in all, of course, after this pandemic, we are now at levels that are more single-digit. Europe grew by 5% in the fourth quarter, 3% overall. But we are positive, especially Nordic, it looks strong. We are looking at Germany, which has also come out strong with the new trade fair activities ongoing. There is some new supply coming in some markets, which will momentarily put some, I shouldn't say make, the RevPAR growth more stable. But all in all, I would say around anything between 2% to 4% overall on our portfolio. Operator: The next question comes from Andres Toome from Green Street. Andres Toome: I had just a couple of questions. Firstly, maybe just hitting on how you are thinking about your financial leverage after this transaction? And how do you see a path to a lower LTV? And maybe you could also speak to some of the disposals you might have in the pipeline already. And I noticed there's a bigger portfolio on the market in the Nordics, and if there's any progress on that? Liia Nou: Thank you. Yes. As you know, our policy range for LTV is between 45% and 60%. So we are typically, as a Nordic company, quite satisfied with the content, but fine with an LTV, which is close to 50% or slightly south. Being at 52%, which is actually what we did expect, and which is an area where we are quite confident. And also, as you've seen with our strong financial position, of close after we secure some further financing of close to 3.2 billion in liquidity reserve, then this makes us confident that this is a level that we can pursue. Of course, with our very strong cash earnings, automatically, our LTV will decrease. But also, we have also given out that we will pay out a dividend in the second quarter. So all in all, being in these areas, we are confident. There is no plan of reducing the LTV, even though we are always looking to rotate some assets. We are open to selling some assets if we just find a good price, but also, of course, acquire new value-creating properties. And when it comes to the ongoing process, I can't comment on it specifically, but it's a normal part of our business model. Andres Toome: And then my second question was just around your foreign currency exposure. And obviously, this year, it's been a year where there's a lot of FX headwind converting back to your home currency. So I was just wondering, how are you thinking about your hedging strategy going forward? And are you planning to make any changes on that front, maybe to mitigate some of that exposure, as you seem to be also expanding more and more internationally? Liia Nou: Well, it's as Anneli Lindblom mentioned earlier, it's a pure translation effect. We have all our properties financed in local currency. So yes, the translation effect of both earnings results and the value is, of course, when you report it, but it's a pure reporting effect. So we don't intend to make any changes, but our hedging policy is to finance the properties in local currency, continuing. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Anders Berg: Okay. With that, we move into the market presentations, and we will start with Aoife Roche from STR. Please go ahead. Aoife Roche: Good morning. So firstly, although a lot of variations at a market and market class level have been discussed already, they persist. Hotel performance has overcome many, many setbacks through 2025. The economic and geopolitical climate did little to support a positive consumer sentiment, and there was a high level of uncertainty for the consumer and for businesses, which created an environment of indecision. Despite that, Europe ended the year on a positive note with growth in 2024. And I will explore this now in some detail through this presentation on covering the how and the why behind this varied performance. So first up, a global perspective. During a turbulent year, it could be easy to lose sight that demand for hotel rooms is actually higher than it ever has been, up 8% on 2019. And the world population has doubled over the last 50 years. Tourism arrivals have increased sevenfold. The majority of growth in demand was in the Asia Pacific region, the Middle East, and Africa in 2025, as you can see on this slide. For the GCC countries, in particular, which have grown by 34% in terms of demand, this is really reflective of an open economy and is working hard to build market share in this industry. The U.S., however, contends with a deficit in tourism relative to 2019. There were 5.7 million less international travelers arriving in the country, whilst there were 9.7 million more Americans heading abroad, which, of course, we can see in our European numbers in 2025. We are seeing declines in the U.S., Mexico, and the Caribbean. Whilst at the top of the table here, we can see Africa is leading on growth in demand year-on-year. And much of this is down to the Red Sea resorts, which have grown by 11%, selling an average of 10,000 more nights a year than last year. From a European perspective, Germany, Spain and Europe on the whole is pushing ahead of the global average of 1.1% growth year-on-year. So good news and positive results for Europe so far. Now demand growth is slowing, albeit from record levels, there is a favorable component for the occupancy equation, and that is that global supply growth is slowing or has slowed over the last 24 months. We are all well aware of the challenges of financing new projects in recent years and an increasing focus has been on conversion, which has helped shape a more favorable level of supply growth. So the combination of growing yet muted demand and a relatively slow pace of new openings has allowed occupancy to grow. We highlighted the challenges in the U.S. and of course, China, where the 3 largest markets, Shanghai, Beijing and Guangdong have all seen declines in occupancy even with limited supply growth, and this has weighed on the national occupancy declining by 3% year-on-year. Whilst in the Middle East, Dubai and Abu Dhabi have an occupancy growth of 3% to 4%, and that is really driving that Middle Eastern growth, while Saudi growing by 2% in occupancy despite the elevated demand growth, they have had to contend with a substantial supply growth. So Europe is sitting here in the middle with a 1% growth in occupancy versus last year. Change now to average daily rate, the global picture is far more varied. Again, China and the U.S. have little or no growth. ADR in the U.S. has grown slower than inflation for 21 out of 24 months. And Europe also has seen limited growth, 2% up on last year. And if we ignore Africa and South America, where there are double-digit growth and much of that linked to inflation, so that is somewhat skewed. We can look to the Middle East and Asia, excluding China, of course, that are leading the way. Abu Dhabi, in particular, with stellar growth of 20% Dubai up 9%. Whilst in Southeast Asia, there's notable performance growth in Thailand and in Vietnam. So let's dive into Europe a little bit more. So even in a year facing tough event comparisons, missing the Olympics, the Euros and of course, Taylor Swift, Europe was able to deliver growth. Unsurprisingly, the summer faced very tough comparisons, primarily on the rate side. Germany, France, and the host cities for the IRA tour faced sizable comparisons. However, as you can see to the right of this chart, strong growth in the fourth quarter helped round out a solid year. Strong growth in occupancy in December also permitted a good end to the year, and that was due to an increase in Inverted Comma's week of business travel in the month of December. So overall, Europe is up 2.1% in RevPAR terms, and that is aided by ADR growth, up 1.2% for the full year 2025. Now we monitor 550-plus submarkets in Europe, and they did appear to be a slight risk in performance and certainly year-on-year performance in the first half. And it followed a similar pattern or trend to 2008, but a very strong summer and even a very strong start to the fourth quarter averted any concern that we had. Occupancy growth has been limited across the continent in 2025, as I highlighted earlier, and nations with the highest occupancies, like U.K. and Ireland, with 78% occupancy actualized, and Spain, with 75% occupancy actualized, have witnessed very limited growth year-on-year. But it is important to remember that these countries, in particular, U.K., had recovered far earlier than any other countries across Europe. So there is less opportunity to grow occupancy. However, we have seen good growth in countries in the Nordics and Central and Eastern Europe, much higher growth than the rest of Europe. Here, the data demonstrates country-level performance, proving that demand is attractive to those countries where there is more availability, potentially more affordability. But definitely, this is much of this is linked to a gap in the full hotel recovery. Supply also has a role to play here in occupancy performance. We have seen limited supply growth across the continent, and that really has enabled continued occupancy growth, even if that is quite limited. Turning to ADR. If we frame our narrative around North versus South and even urban versus resort, we acknowledge that there is a perennial appeal for the South, Spain, Portugal, and Italy highlighted here. We can really better understand the growth that we have seen in the South if we continue to use that narrative. Unsurprisingly, Germany and France have a hangover from an excellent summer in 2025. Additionally, if we look at the South and resort destinations, not only did they lead in 2025 on year-on-year growth, as we saw on the last slide, but they have also achieved the highest rates in Europe. Greece and Italy stand out here, some countries achieving up to EUR 300 in actualized ADR, whilst the Northern nations situated more to the right are on the lower end of the spectrum. So at a market level, performance variations do persist, and this is no different for Pandox market performance. There is a theme of Nordic growth, with the exception of Helsinki,, and here, Rasmus will speak more on that. Germany has shown some positive occupancy change year-on-year, yet this is not always followed by ADR growth, for example, Berlin and Dusseldorf. The U.K. in contrast does have many markets declining in occupancy. These are markets that have new supply, perhaps non-repeat events, and these show up in those quadrants. Yet a stronger half has helped compensate with ADR. So I'm going to spend a few moments on the U.K. and Ireland specifically. So in the previous slide, we acknowledged the quantity of submarkets that are declining in occupancy in the U.K., which resulted in a high number of submarkets not being in a position to deliver a positive RevPAR growth. The first half of 2025 mirrored 2008, much like the rest of Europe. Uncertainty postponed decisions and ultimately drove many markets to a negative growth. The second half, however, there was far less caution, and there was a peak in September of 73% of all submarkets showing positive RevPAR growth, and this dropped off as usual to a more 56% in December. Now we can clearly see this in monthly performance also. ADR has steered the ship through the second half of the year, which has enabled for the U.K. an overall growth in RevPAR of 1% for full year 2025. As we can see here, much of the growth comes through the luxury segment, with economy continuing to experience negative growth year-on-year with those middle classes, upscale, and upper mid-scale performing positively year-on-year. Like many markets across the U.K., negative growth occurred in the first half of 2025 in London. Much of this was occupancy driven in the regions, whilst ADR driven for London. London experienced this a little bit differently. ADR declined in the first half, pointing to consumer caution, perhaps a reduced short and long-haul inbound traveler and a direct impact from non-repeat summer events. Pricing power is a real problem in the U.K., and it was unavailable to 5 out of the 6 classes that we monitor. Overall, London's ADR declined by 0.4% and RevPAR was down 0.2%. So here is an outlook of the supply chain, which really sets the tone for how we expect occupancy to look going forward in 2026. And you can see there are some key markets here that have a very high double-digit growth in supply or active pipeline, I should say, expected to deliver in 2026 and 2027, which, of course, will impact our forecast. Now, most markets expect to see new supply. And here is a summary of market level forecast for 2026. We do expect pricing power to return in 2026. And for the most part, with the balance between supply and demand dynamics, with the exception, of course, of a few markets, namely Dublin and Belfast, here showing some negativity. Occupancy does have room to grow, affording the sector some confidence to drive rate. Moving to Dublin, looking very different from London or even the U.K. regions. The Dublin market managed a 3.7% RevPAR growth in 2025. 8 out of 12 months showed positive RevPAR growth, and there was a very strong last quarter. Dublin showed again, particularly in the last quarter, with well-attended events offsetting any new supply that came into that market. At a class level, performance looks very, very different in Dublin compared to the previous slides for the U.K. and Europe. A wider pool of economy hotel rooms has emerged in Dublin, available to the more cost-conscious traveler, and it has done very well in this segment, something that has been very much missing in this market prior to 2021, I would say. So let's look ahead. The forecast for the aggregate of European cities is muted. 2025 closed with a meager growth of 1.2% in RevPAR terms for Europe. 2026 is forecasted to grow by 0.4%, which is quite concerning when you stack this against inflation. In 2026, however, we do expect to see more markets with a positive RevPAR performance than we saw in 2025. And much of that, as you can see from the blue, is still rate-driven. Say some markets that will have to absorb some new supply in 2026, which will affect their chances of coming back into positive territory, perhaps. Munich and Cologne, for example, still have a lot of event offset challenges. And Amsterdam is a case on its own as it embarks on a year of added ADR pressure with the new VAT policy in play from this month. 2026 looks set to grow supply in line with previous year trends, with a particular focus on the luxury segment. As a percentage of existing rooms, Georgia, Ireland, and Poland will see the greatest percentage increase in rooms delivered in 2026. Consumer confidence is expected to strengthen for Europe, likely more so in the second half of the year; however, with interest rates falling, inflation slowing, and a high ratio of savings available to households, there is an expectation that consumption will persist. There is some concern around affordability for lower earners, particularly in the U.K., with the recent budget. However, it appears that higher earners will continue to consume, which, of course, is great news for the hospitality industry. From a source market perspective, there is a question mark around the U.S. traveler with the exchange rate. Will the exchange rate deter business, or will the U.S. traveler want to travel internationally as they have done in 2025? Many markets, and in particular, the high-end hotels and resorts, are dependent on this business to drive ADR. Now the U.S. traveler chooses differently in 2025 and probably will do so in 2026, and this had a great impact on the U.K. performance, where we saw a softening of demand coming from the U.S. to the U.K. when compared to the average in Europe. So there is a lot to consider when looking at the outlook. But overall, STR expects Europe to perform very well, particularly in the second half of the year. The global economy suggests a strengthening of consumer confidence. The desire to spend on experiences abates any concern about whether they are geopolitical or economic. Many thanks. And I'm going to hand this back over to Rasmus. Rasmus Kjellman: Thank you very much. I'm Rasmus. Let me get my slide here. I'm Rasmus Kjellman. I'm the CEO of Benchmarking Alliance. And for the coming 10 to 15 minutes, I will guide you through the Nordic hotel market. We are the largest supplier of benchmarking in hotel market data in the Nordics, and we strive to have the best possible coverage in the markets we work in, and we are based here in Stockholm. So, diving into the data, looking into the Nordics, these are the country-wide averages in the Nordics and the Baltics, and we see a positive trend continued through 2025. Generally, we see an increase in RevPAR in all countries. Blue boxes show the total 2025 RevPAR development compared to last year, and orange boxes show the previous quarter, the third quarter, and the RevPAR development up until the Q3. So the difference is an indication of how the year ended. In Finland, the increase is a bit slower, with a lot of new supply in some of the markets, as well as a slower recovery from the Asian markets, and the proximity to Russia is holding back the recovery. And in the Baltics, we are continuing to recover, especially since the Basketball European Championship in Riga had a clear impact. And after years of lost Russian demand and other negative effects from the war in Ukraine, travelers are finding their way back to the Baltics and to Riga in particular. Diving into the capitals. Oslo had the Nor-Shipping Large Maritime Industry Conference, the Ed Sheeran concert, and generally a very good summer, as well as several smaller congresses and other events driving demand. In Copenhagen, we had the Endo-ERN, the Wind Conference, the Copenhagen Rock Festival, and Robbie Williams all at the same weekend, which brought prices up to new record levels in ADR. Stockholm had difficulties replacing the extreme demand in 2024, generated by Taylor Swift, Spring, and the ECO Congress. In Helsinki, May and June were good Congress Mass and the Helsinki Metal Music Festival in August, possibly affecting. And Westervik is bouncing back again after long periods of volcanic eruptions last year. Interesting to see that the general Icelandic market is increasing more than Westervik, as Countryside hotels suffered more than Westervik hotels earlier. So if you go to a bit more of the details, the sold room increased basically demand and sold rooms increased basically everywhere. There are only smaller changes in the available room. The largest increase we see in Stockholm is our largest decrease in Riga, where a couple of hotels in the budget segment were closed during the year. In Stockholm, the increase is from Villa Foresta and VillaDaga now in full year capacity, as well as Scandi Sadakayjen and Scandicokunlman also in full year capacity. BW also opened 2 new properties in Stockholm, 90 rooms in the market, and Reykjavik did not manage to fill the small capacity increase. In Oslo, the Savoy closed and is undergoing total renovation by new owners, and the Hotel and Frogner Grunlukka is closed. This means occupancy increased in all markets, except Reykjavik. Riga, 1 hotel closed and renovation of rooms in Radisson and in RevPAR battle, Riga is the clear leader; however, pretty much poised down to one event, as I mentioned. And in the Nordics, both Oslo and Copenhagen show remarkable increases. If we also look at ancillary revenue, we see that we have an increased total revenue per available room in Stockholm and in Copenhagen, whereas in Oslo, Helsinki , and Westervik, it has decreased, holding back the RevPAR development. And it's interesting to look at the total revenue as well as other revenue in the hotels, such as food, beverages, meetings, events, and departments that don't necessarily follow the room development in the same way. Driving down and diving down into the Scandinavian capitals by segment. If we look into the Stockholm segments, we see new supply in the luxury segment holding back the occupancy levels, while rates continue to increase. Mid-scale segment supply is due to the capacity reopened after renovations and rebranding. And even though demand is there, the lack of events and concerts this year can also be seen in the loss of average rates in all segments, except in luxury. Moving to Oslo. Oslo shows a very steady and positive trend in all segments. The mid-scale and budget hotels previously mentioned can be seen in the loss of supply. Moving to Copenhagen. The Copenhagen luxury segment is starting to slow down in demand, but rates are still increasing. It is interesting to see that the demand is slowing down. And the upgoing trend can be seen in all segments, while it's only upscale and mid-scale hotels that can enjoy higher demand as well. Looking into the Helsinki market. Westfalenhalle, Foresta, and Hotel Collection are adding more supply to the luxury segments. However, this capacity has been utilized well, maybe at the cost of slightly lower rates; otherwise, mostly smaller changes in the Helsinki lower segments. If we look at the weekday, weekend patterns comparing the Nordic capitals, we can see that there is an even spread in Copenhagen and Oslo, and the pattern is somewhat different in Stockholm. So if we look into more details into the Stockholm market and the distribution between the days of the week, we can see that shoulder days, Monday and Thursday is holding back the development through the weekdays, Tuesday and Wednesday are still increasing. However, the demand is stronger on weekends. If we look into the details in the Swedish market, we cover around 36 markets, including all regional cities within Sweden. And in this graph, each bubble represents the market, and the size of the bubble represents the RevPAR. We have ADR on the left and occupancy on the lower axis. So we can see Westervik in the top right corner here. But if we look at the major changes over the last year, the majority of the Swedish regional market increased in RevPAR. But the highlights are maybe that the Swedish defense is investing a lot right now, and partly because of the new membership in NATO, and this has a positive effect in India. In Uppsala, we had the Swedish live music conference in January, having a positive effect. And [ Helestio ] is suffering very badly from the effect of the Northvolt bankruptcy. In the same way, look into the Norwegian market, we have Trons as a very strong market, with the highest RevPAR. They have the Nord Turisme and the Midnight Sun, while Oslo is the highest occupancy. In the same way, looking to the changes through the different markets, Trondheim was very strong last year, especially since they had the Ski World Championship in the end of February and beginning of March. Oslo, as I mentioned earlier, had a new shipping, a generally good summer with a Chan concert. Kristiansand had a very strong summer with an increase in the month of July only with 25%. Pori, a bit weaker, but the year before in 2024, they were the culture of capital and have a bit of trouble in replacing that. In the same way, looking to the Danish market, Copenhagen is not surprisingly the largest market. And looking to the changes, Vee had a large amount of out order rooms last year that are back on sale. And generally, there is a strong development within all of the Danish markets. Driving and diving into Finland. Rovaniemi, the outstanding strong market within Finland, the Arctic tourism, the Santa Clause bringing people from all over the world to Rovaniemi. There are increased direct flights to Rovaniemi, driving a very strong market. Helsinki is far behind from Rovaniemi, but of course, a much larger market. Otherwise, most of the Finnish markets range on an ADR of EUR 100 to EUR 110 and an occupancy between 55% to 70% and looking at the pattern of change through last year, Rovaniemi, together with the largest cities, Helsinki, Sponge are the ones increasing. Pori was affected by a slower corporate demand as well as Vantaa. Vantaa is the Helsinki Airport area, and they have a lot of new supply in the market. So if we then look into the pattern of future bookings, starting with Stockholm and there is a general increase of future bookings with 10.2%. Looking ahead, we see that we, in the coming year, have the EHA 2026 Hematology Congress in June. We have the Bad Bunny concert in Strawberry Arena in July, and we also have the weekend concert in Strawberry Arena in Stockholm driving demand. Looking at the Oslo market, not as strong as the development in Stockholm. Last year, there was the Nord Shipping and the what Congress. They are not really replaced yet. There was also the adherent concert, and this has an impact on the comparison to the coming year. Looking into Copenhagen, we see a very stable increase in the books for the remainder of the year. There is 3 days of the design festival in June, driving demand, but otherwise, a very stable increase in the Copenhagen market. And at last, looking at the future bookings for Helsinki, the start of the year looks positive in Helsinki. However, the Congress in July 2025 has no particular replacement yet, but in general, a positive development. With that, I thank you. And if you have any questions, reach out to the Pandox team or to me, and I'll be happy to help. And with that, I leave it back to the Pandox team. Liia Nou: Thank you, Aoife and Rasmus, for your excellent hotel market updates. And thank you all for participating in this call. We really appreciate your time and interest in Pandox. And our interim report for January to March 2026 will be published on the 29th of April. We also want to mention that on the 5th of May, later this year, we will host a Capital Market Day in London. If you can't join in person, the day will also be possible to follow via webcast. Then we wish you a nice winter and spring, and don't forget to stay at our hotels when you're on the road. Goodbye.
Rune Sandager: Hello, everyone, and welcome to GN's conference call in relation to our annual report announced this morning. Participating in today's call is Group CEO, Peter Karlstromer; Group CFO, Soren Jelert; and myself, Rune Sandager, Head of Investor Relations. The presentation is expected to last about 25 minutes, after which we'll turn to the Q&A session. The presentation is already uploaded on gn.com. And with that, I'm happy to hand over to Peter for some opening remarks. Peter Karlstromer: Thank you, Rune, and thank you all for joining us today. '25 were a year where we continue to execute on our strategic and operational agenda in a difficult market environment influenced by uncertain trade and macroeconomic weakness. In Hearing, we continue to deliver very strong performance, and we are now at record high market shares driven by ReSound Vivia that was launched in the beginning of the year. Our premium products sell very well, and our margin is under control in spite of an adverse country and business growth mix in '25. Our product and software platforms are in strong shape, and we plan to launch further innovation in '26 that will support our growth. In Enterprise, the U.S. and APAC market continued to grow modestly throughout the year, while the European market still experiences some weakness. We are pleased with our own execution in this environment and well prepared to benefit from a continued gradual strengthening of the market. In '25, we successfully accelerated several supply chain and pricing initiatives to manage the uncertain trade environment. We have managed this well and have mitigated most of this change. We have a strong pipeline of products in video and headsets that we will launch in '26, the most important one for our financial results is the Evolve3 headset platform, which we announced a few weeks ago and will start to ship later in this quarter. Additional launches under this new platform will follow later in the year. In gaming, we continue to gain market shares in a challenging gaming equipment market. While gaming also faced some of the same margin headwinds as enterprise, we have executed sustainable margin initiatives and operational resilience initiatives supporting our long-term margin aspirations for the division. In addition, we have also launched exciting products in gaming, including our new gaming headset, the Nova Elite, which is very much a premium offering. Also here, our product pipeline is strong, and we look forward to exciting launches in '26. The markets that our 3 divisions operate in have been challenged in '25. While we aspire to deliver stronger absolute numbers in the year, we feel very good about our relative performance across our divisions and focus on the things that are within our own control. We have taken several supply chain and operational improvement initiatives that we will benefit from in the years to come. In addition, our product pipeline across our 3 divisions is stronger than it's been for a very long time. We remain firm in our belief that our markets remain attractive and look forward to further developing our business in '26 and the years to come. With this introduction, I'm happy to hand it to Soren for further details on our performance in the group. Soren Jelert: Thank you, Peter, and thank you all for joining us today. Essentially, as Peter mentioned, we are satisfied with what we achieved during '25 under these challenging circumstances. The group delivered a negative 1% organic growth for the year, supported by a 5% organic growth from our Hearing divisions, a negative 6% organic growth from our Enterprise division, and a negative 2% organic growth from our Gaming division. Our profitability, we are pleased with where we landed for the year with an EBITA margin of 11.4% as this essentially demonstrates strong mitigation of what is within our own control. We have successfully increased prices and kept a strong focus on costs while harvesting group-wide benefits from the scale of GN. The profitability also positively influenced the free cash flow generation where we ended the year with DKK 1.1 billion in free cash flow. Moving to the financial details on Slide 6. Starting with the results of the fourth quarter of '25, the group delivered organic revenue growth of a negative 2%, reflecting solid execution across our divisions in some difficult market conditions. The EBITA margin ended at 13.4%, reflecting a group-wide cost focus offset by an extraordinary R&D write-down due to the new partnership with Huddly in our video collaboration business. Lastly, the group generated free cash flow, excluding M&A of DKK 744 million, reflecting the strong profitability and positive development from our working capital. For the full year, the group landed at an organic revenue growth of negative 1%, in line with our financial guidance. The group delivered an EBITA margin of 11.4%, which reflects prudent cost management while strengthening business fundamentals and preparing for future growth. The free cash flow, excluding M&A generated for the year was DKK 1.1 billion, driven by solid earnings and positive impact from working capital. In 2025, we have decreased our net interest-bearing debt by more than DKK 800 million, which also allow us to refinance our main loan facilities during the year with attractive terms. In summary, at a group level, we delivered solid profitability and good cash generation while continuing to improve the balance sheet. We also accelerated our efforts to ensure a flexible and diversified operational setup while making important progress on our product road maps, paving the way for growth opportunities in '26 and beyond. And with those group highlights, I'm happy to hand you over to Peter for some additional color on the 3 divisions. Peter Karlstromer: Thank you, Soren. Let me start with our Hearing division. In Q4, we finished the year well with 7% organic revenue growth, reflecting a market that continued to grow slightly below its normal trends. Divisional profit margin for the quarter was 35.2%, reflecting a focused cost control. When looking back at '25 as a whole, we can conclude that Hearing grew faster than the market and continue to gain market share. The full year organic growth was 5% in the market growing slightly slower than normal. The gross margin ended at 61.1%, which was below 24% due to an adverse development in the country and business mix as well as the divestment of Dansk HoreCenter. Divisional profit margin ended at 33.6% due to prudent management on sales and distribution costs, offset by the gross margin development and ongoing investments to support the strong momentum of our ReSound Vivia platform. The divisional profit margin was slightly below 24%, which is explained by margin underperformance in the difficult and unusual Q1 that we and the market experienced. In the last 3 quarters of '25, we delivered a slightly better divisional profit margin compared to the same period in '24. We are confident in the underlying margin structure and plan for margin improvement in '26 and beyond. Let's move to the next slide for some highlights on the performance on Enterprise. The Enterprise division ended the year with a fourth quarter organic growth of negative 3%. This includes a larger FalCom order that continued its good progress. Our Enterprise business grew in North America and APAC, while the weakness in EMEA continued. Sell-out in the quarter was a few percentage points stronger than the sell-in, reflecting some channel inventory reductions in EMEA. Channel inventories were stable in North America and APAC. The divisional profit ended at 33.3% for the quarter, reflecting positive contribution from price increases and cost control and offset by direct tariff costs. For the year of '25, Enterprise managed to maintain its market-leading position in a challenged European market while executing positive sell-out growth in North America and APAC, resulting in organic revenue growth of negative 6%. As part of these numbers, it's worth highlighting that our sell-out growth numbers were around 3% better than this. So global channel inventories have decreased compared to last year. The gross margin increased 0.3 percentage points compared to '24 in spite of the extra tariff cost. We are pleased about how we mitigated uncertain trade environment through accelerated diversification of our supply chain and targeted price increases. The development in divisional profit margin reflects focused cost control, negative operating leverage and costs related to the upcoming launch of the Evolve3 platform. Moving to the next slide and Gaming. In our Gaming division, we delivered organic revenue growth of negative 12% in the fourth quarter, reflecting a difficult gaming equipment market influenced by low consumer sentiment as well as a very demanding comparison base as we delivered 16% organic growth in the same quarter '24. In the quarter, we demonstrated good cost control, delivering a divisional profit margin of 16.4% despite the direct tariff cost. For the year, we have increased our market share in a difficult market, resulting in organic revenue growth of negative 2%. We increased the gross margin for the division due to strong pricing discipline and benefits from the supply chain integration with Enterprise, partly offset by direct tariff cost. The divisional profit margin for the year reflects investments in product launches and extra costs related to managing the difficult trade environment. Let me move to the next item on the agenda, where we'll provide some more flavor on the divisional growth ambitions for '26 and beyond. Starting with Hearing. In '25 the market grew slightly less than normal. We still very much believe in the underlying growth drivers of the market with increased adoption and a growing elderly middle class around the world. This will continue to support healthy market growth over time. We are pleased that we have managed to outgrow these attractive markets for the last years, driven by strong commercial execution and product innovation. With the help of our latest platform, ReSound Vivia, we have further strengthened our position and our momentum remains strong around the world. As announced earlier this week, we will now also expand the Savi portfolio, which will support growth, especially in countries and channels looking for more affordable product solution. On top of these exciting portfolio additions, we have even more innovative product launches planned for the second half of '26. Altogether, this gives us high confidence that we can continue to grow above the market and strengthen our competitive position in the coming years and further. Let's turn to the development of the Enterprise business. I think it's worthwhile taking a step back and looking on our headset business has been shaped over the last decade. We have been one of the frontrunners establishing the market and driving the professional headset penetration. And the enabler for this has been technology shifts, where we have been successful in developing products that caters for customers' needs over time. Back in 2014, we launched our award-winning Evolve portfolio that supported the rapid adoption of different UC platforms driven by large technology infrastructure companies. What was unique and industry-leading at that time was the easy integration of our headset portfolio in the different user platforms, where we also launched ANC and a strong microphone pickup. The result was clear, professional headset quickly became popular and a standard for the knowledge workers wanting a high-quality experience. Moving into 2020 and the hybrid work age, as we would call it, this was accelerated by COVID-19. This period in time required new technology for headset performance and integration. In early 2020, we launched the Evolve2 portfolio that significantly increased headset performance across multiple dimensions. As a result, global headset penetration increased further to around 20% where it is today. And now with a fast-developing AI solution, we're entering what we believe is the next era. We call this the modern work shift. And with the increased adoption of AI solution, we believe that the next headset penetration will be driven by new technology demands. For it to succeed, you need to have a headset that fits the evolving trends of tomorrow. Let me give you a few examples. Ninety-nine percent of knowledge workers acknowledge that poor sound is impacting online meetings. Seventy-eight percent of knowledge workers from multiple locations, which means that the design of headsets is important and that headset needs to handle ever-changing noise situation in different environments. Currently, we're also seeing a return to office trend among many companies as well as a trend that the majority of new offices being built are having more open landscapes and less square meter per worker. This means that all of us need great solutions for working in these open spaces that are comfortable and where we can have online meetings where all background noise is filtering out. And that would help you to come across very clearly even in these challenging environments. AI workflows will also be a driving force. Voice is 3x faster than typing, making AI voice interaction much more efficient than if we type. Simply, we will likely speak more to our computers and devices and type less. This puts new requirements on the headsets in terms of how they can handle this with great accuracy. It would also like to increase the sound level in open spaces further and further increasing the need for great headsets that can handle that. Lastly, cybersecurity is important today and will likely increase even more into the future and grow in importance while an enterprise-grade framework for security is becoming an essential to be in this market. We have talked to numerous customers, partners, and analysts over the years to form a strong view on what's needed. And we believe that we have announced the -- what we have announced last week is really the headset that can take us into the new modern work area. Our latest enterprise-grade headset launch, the Evolve3 is designed to take the user experience to a new level while playing up against future technology trends. And it's not just another hardware update that is slightly better all around. The Evolve3 is also based to close to 10 years of research and development in its underlying technology. First and foremost, the AI-driven deep learning technology had been trained on more than 60 million real-world synthesis, taking microphone technology to a completely new level with outstanding ability to separate speech from noise, and this is quite impressive considering that it's also been possible even without the traditional boom arm. These headsets captures 99% of words accurately in an open office environment, making it built for voice-led AI and screen productivity in any environment. In addition, it is the first of its kind to feature adaptive noise cancellation while we're on a call and it comes with improved connectivity and a significant step-up in battery life with the possibility of a full day use from only 10 minutes of charging. In addition to impressive technical development, Evolve3 is also designed to be compelling. It is released in black and warm gray with a modern design. It's also designed for comfort. It is light and comfortable to wear all day. From March, the Evolve3 will be globally available in our high-end form factors, the 85, which has an over-the-ear fit and is designed for immersed focus and the 75, which has an over-the-ear fit if you prefer a lighter wear and greater environmental awareness. We call this the best headset for modern work and it's really built to match the pace and flexibility of what we all require. So let me move to the next page. As the working habits change, we need technology that adapts well. Whether you are in an airport, working at home, in the office or somewhere else, Evolve3 is a perfect companion. Even in very noisy environments, voice clarity is state-of-the-art due to our DNN-based voice processing, taking the benefits from the wider GN Group. As an example, you can literally stand in the room with loud music playing in the background and a person that you're speaking to will only be able to hear you and what you are saying and not the music at all. The same applies when you're taking a call outside a windy day, in a noisy coffee shop, or basically anywhere in any situation you can imagine. It's only you that is being heard. And perhaps most important, the strong sound process to make the headset the perfect companion for working also in the normal open landscape where you likely will be shielded from the noise around you. And when you make a call, you need to be heard without any background noise and the shatter to enter your meeting. The sound performance is so strong that you do not even need to mute when you're not talking any longer. The participants in the meeting will essentially only hear your voice and nothing more. We cannot be more excited about this launch and have more confidence in that this is really taking the headset to the next level and help us with the growth for the Enterprise division in '26 and beyond. It is developed to be the next penetration wave, while it also will assist the ongoing replacement of existing legacy products. And stay tuned because more will also come. We will, as normal, launch across mid and entry-level price points later and a more affordable price point will come over time in the next 15 months. Let's move to the next slide, where we'll also talk more about our aspirations for the gaming business. SteelSeries have been on a journey with increasing market shares for quite some time now. Since 2019, we have increased our market shares significantly in our core categories of headset and keyboards due to our best-in-class innovation. In [ mikes ], we have been defending our position during the last 5 years. This will be one of the focus areas for the coming periods as we obviously want to improve our position in this market as well. The core gaming equipment market remains structurally attractive, supported by continued growth in the number of gamers, time spent on gaming, and a growing appetite for premium features. These dynamics underpin a healthy long-term growth profile for the market, even though the near-term environment is held back by a muted consumer sentiment, in particular in the U.S. Against that backdrop, SteelSeries continues to win, and we expect our current momentum to continue in '26 and beyond, and we continue to deliver new product innovation in the market that will support this growth. SteelSeries is not just another gaming equipment option. In SteelSeries, we continue to challenge status quo and expand our categories into new and better options. For '26 and beyond, we expect to harvest broad-based market share gains by strong brand momentum and significant launches across categories and into new form factors on top of the growing core portfolio. While it is, of course, important that Gaming returns to deliver strong growth, the division has also been a journey to increase margins to becoming part of GN. We have come a long way by fully integrating Gaming into the same systems and product flows as Enterprise business and there are even more margin benefits to come over time by fully utilizing the GN at scale. In addition, we will continue our strong pricing discipline to mitigate impact from direct tariff cost and other unforeseen future external headwinds that could be a threat to our margins. Moving to next slide. Let me go through the assumptions for '26. In '26, we are planning for growth across our 3 divisions. We are convinced about our strong product portfolio that will help us to further gain market share in a flat to slightly growing markets. For the hearing aid market, we expect the market growth for '26 to be at the low end of the structural value growth of 3% to 5% due to the current low level of consumer sentiment around the world. In this market, we assume that we can continue to gain market share driven by our current momentum and further product innovation. And this is why assuming an organic revenue growth for the years between 3% and 7%. For the Enterprise market, we believe that the growth patterns that we have observed outside EMEA in '25 will continue. We also believe in some level of stabilization of the macroeconomic environment in the EMEA region to materialize during the year. All in all, we believe the global enterprise market will likely grow between flat and 2% in '26. In this market, we assume we can gain market shares driven by the launch of our Evolve3 headset platform and a gradual strengthening of our video portfolio. As a result, we're assuming an organic revenue growth for Enterprise between 0% and 6%. For Gaming, we expect the market growth for '26 to be modest, influenced by the current low consumer sentiment in the near term. In this market, we're assuming continued market share gains, driven by current momentum and the strong product innovation. And we believe that for Gaming, we can grow between 7% and 13% in the year. And with that, I'm happy to hand it back to Soren to speak more about our guidance for '26. Soren Jelert: Thank you, Peter. All in all, when we apply these divisional assumptions, it leads to our guidance for the group where we guide for an organic revenue growth of 3% to 7%, driven by continued strong execution and market share gains across our 3 divisions, as mentioned by Peter. Moreover, we are guiding for a reported EBITA margin of between 11.5% to 13.5%, driven by continued cost focus and operational leverage, offset by some short-term headwinds. All in all, the financial guidance supports our ambition to grow in a sustainable and profitable way that eventually will lead to realization of our long-term targets. On the next slide, I'll provide you with some more details on the elements that drives our '26 EBITA margin guidance. First and foremost, we are pleased with our ability to mitigate the impact on tariff in '25 by effective price increases and a successful acceleration of our diversification of our supply chain. Specifically, in '26, we will experience a margin tailwind from the temporary cost taken in '25 to relocate our production lines. That tailwind is then more or less offset by the full year effect of tariffs as these were only really impacting our COGS from the third quarter of '25. Then we will have a net negative effect from a step-up in absolute amortizations following the product finalizations of a number of projects, including the recent Evolve3 portfolio. This is, by definition, a noncash effect, but is following our accounting principles. Taking these factors into account, we do believe that we can drive a very healthy underlying growth in '26, which will materialize across gross margins and operating leverage. Depending on the growth development in the year, we will be able to expand our underlying EBITA margin by 1 to 3 percentage points. This once again underpins our strong group-wide margin platform potential. We remain firm on our long-term structural margin target of 16% to 17%. With the underlying margin target we are guiding for this year, we are convinced that we can continue to drive yearly margin expansions beyond '26 as a result of healthy top line growth and prudent OpEx management. On top of this, we will naturally look for gross margin opportunities as well. So to conclude, following a difficult '25 due to a wide range of external headwinds, we are excited about the prospects of the coming year. With growth coming back to our 3 divisions, we will be able to deliver a strong profitable growth while continuing our focus on strong cash flow generation and thereby continuing deleveraging. And with that, happy to hand you back to Rune. Rune Sandager: Thank you, Peter and Soren, for the updates. This was the end of the presentation. I will hand you over to the operator for the Q&A. Please limit your questions to 2 at a time, please. Operator: [Operator instructions] The first question comes from the line of Andjela Bozinovic with BNP. Andjela Bozinovic: Maybe one on Enterprise and one on Hearing. So on Enterprise, having in mind the Q4 performance, can you give us more details on underlying assumptions supporting the guidance and phasing of the growth throughout 2026? And just more broadly, what is your take on the expected decline in the PC volumes following the memory price hikes? How do you see this affecting IT budgets and the end markets in particular? And on Hearing, can you maybe discuss the moving parts going into 2026 and the phasing of growth? And any indication of what is baked in your guidance in terms of market share gains, competitor launches and market growth assumptions for both at the top end and bottom end? Peter Karlstromer: Great questions and quite a lot of unpack there. Let me start with Enterprise. We recognize that '25 was, of course, not the year where we delivered the growth, which we aspired for. But with that, there were still some positive things happening in the year. We saw the U.S. market and the APAC market actually growing throughout the whole year. So the difficulties were in EMEA, and we did see some underlying improvements throughout the year. Q4 ended a bit weaker than what we anticipated. Still, if we look back over the years, it has improved. And then, of course, also with our launches here, I talked a lot in the opening about Evolve3. We also have video products, which we are launching this year. We do believe that will support and growth also on top of the market improvement. In terms of the sequencing, I think it's fair to expect that it will be a gradual return to growth. So we will build up the growth over the year. So in some ways, the second half will be stronger than the first half. We also expect more product launches throughout the years and the launches we have made now, while the products, I think, are truly fantastic, it is a premium product that's still a smaller part of the total Enterprise volume. So all in all, I think we will build up the growth in Enterprise throughout the year. Then you asked about the relationship to PC shipments. I think we need to admit that we have seen a correlation before over time. We saw a little bit less of that last year, and it's probably also linked to quite an accelerated forced upgrades of a lot of PCs. So with a significant amount of budget for many companies spent on this. So it's probably crowded out spending in other categories. So while perhaps PCs decline a bit, we do not necessarily see this as something negative for us. And so we believe in the underlying growth here and the gradual improvement of our market. Then if I move to Hearing, I think it's fair to say that there is, of course, a lot of many moving pieces when we're building up our growth aspiration here for the year. I mean as we talked to, we believe that the market underlyingly is growing slightly below its normal trends. And we're talking about the lower end of the 3% to 5% value growth, which we consider to be normal. And you asked about what we have factored in. We have tried to factor in everything that we know, of course. We do assume some competitive launches. We do assume, of course, some larger customers making different type of decisions with opening up for more entrants. So we have tried to factor in everything we can. But we're, of course, also factoring in our own new innovation and our own launches. And we are entering the year with a good momentum. We had a 7% growth in Q4. We're entering with that momentum into this year and feel good about the momentum of Vivia. And with more innovation throughout the year, we think we can support a healthy growth over the year. So in Hearing, in terms of sequencing, I think you should probably expect a fairly even momentum throughout the year. Every quarter, we see a good opportunity to grow in essentially. Operator: Next question comes from the line of Martin Brenoe with Nordea. Martin Brenoe: I have a quite long question here. So I think I'll just limit myself to this one question, and then I'll jump back in the queue. In your Q3 report, you wrote that GN has minority investments in noncore assets that may contain significant value and could be divested. I've done some channel checks, which are indicating that NationsBenefits is a $1 billion valuation company, which is looking for external funding here in 2026. And this should translate into a potential divestment opportunities with potentially billions in DKK, based on my analysis at least. I know it's a bit out of your hands, whether this happens or not. But could you maybe just confirm whether you expect a funding round in 2026 and whether you expect to monetize that opportunity when it arises. And then just as part of that, I guess it would also explain why you're not having a cash flow guidance for this year, which indicating that you are a bit more comfortable with your leverage ratio. And if possible, I know I'm asking for a lot here, but could you maybe just provide some details on what you think such an opportunity would affect your deleveraging path from here and how you -- if you monetize it? Otherwise, potentially just give some basic information about the revenue and the growth of these minority investments? Peter Karlstromer: So Martin, thanks a lot, and thanks for laying this out and your work around this. We started to talk about Nations because we realized it started to build up to a valuable asset that we wanted to be very open about. And -- but we've also been clear on that there are some unknowns also for us. This is a company that is privately held. It is, of course, we have an ownership share of about 19%. We have a founder in that, that's been there since the beginning and another large investor also. So we're one of the larger investors. I think we are very happy, of course, with the underlying performance of the company. We do not want to comment on the details here since it's not a public company. I think that all of you can approach Nations for request directly from them. But I can just confirm that our view is that the underlying performance of Nations is strong and is strengthening over time, and it's been a very successful business buildup. So that's probably all we can say. And then in terms of how we think about our ownership, this is not strategic to us in terms of that is interlinked a lot with our existing business. At the beginning, Nations were very hearing aid focused, but they've grown to be much more than that today. And as such, there is not a very strong link to our existing business. So at the right point in time to the right valuation, we would be open to consider if we're the right owner. But it's not anything we are unilaterally seeking. We probably will do that in great harmony with other key owners and the founder, which we respect a lot. And we will update you over time as opportunities will present themselves. There is nothing very imminent around this, but could very well be over time. I hand it back to Soren for more commenting on the cash flow guidance and how to think about it. Soren Jelert: Yes. I think in many ways, you're absolutely correct that we do not guide for cash flow this year. And just to echo what Peter said, in the event something would happen, it would be M&A. And as such, we would always guide excluding M&A. So in that sense alone, it is not interlinked. But that's fundamentally not why we are not guiding for free cash flow this year. It's more the fact that we now, the last 3 years have generated more than plus DKK 1 billion in free cash flow. We have demonstrated that when we have the margins that we've had that we can generate the cash flow. In addition to that, we have also now made a new loan agreement that in many ways, is also a testimony to that our endeavor to go towards 2.0 leverage by '28 is definitely on the right track. And it was our opinion that where we need to focus now is to generate growth and the earnings. And when we do that, it will yield cash flow. And rest assured, we'll stay focused on getting to the deleveraging of 2.0 as fast as we can. Operator: Next question comes from the line of Hassan Al-Wakeel with Barclays. Hassan Al-Wakeel: Firstly, can you talk us through the drivers of hearing aid market outperformance and any regional performance that you can highlight? Your market outlook is for another softer year in 2026. It'd be great if you can walk us through how you see Europe within this and whether you're seeing any signs of improvement? And then secondly, on margins, given this should be a strong year of launches across your businesses. Can you talk us through some of the building blocks for expansion in the margin over the course of 2026? And I appreciate this is a wide range for the year, but the gap to the midterm ambition remains pretty large. So any updated thoughts on the bridge to 2028 would be very helpful? Peter Karlstromer: And let me start in the order you're asking this essentially. So if you take Hearing, if we look on '25, as you have heard us talk about before, in the first 3 quarters, this was very much Europe and international markets providing the growth for our business. We have been doing very well there. I think what's positive is that in Q4, we saw a bit of a stronger performance and growth contribution also from the U.S. side of our business. And if we look into the next year, I would say market-wise, we do expect the U.S. to be a little bit stronger than it was in '25. As we remember, Q1, in particular, was a very difficult quarter in the U.S. But generally, still the global market outlook, as we're saying, we do believe it's adding up to slightly below the structural growth of the market. That's our planning assumptions. Then in terms of our own plan for how to outgrow that market, I would say it's broad-based. We like to see outperformance versus the market growth in each of the region and also very focused to drive success in each of the channel types, everything from larger key accounts to more smaller independents. So this has been the approach we have taken in the last few years. It's very important for us to have that kind of balanced exposure and balanced ambition for our growth across. And the same is how we think about '26. And then you asked about Europe specifically. I think it's clear that Europe has been, I think, lately a little bit better. I would say that the markets where we have been doing very well has been, in particular, in Germany, that has been a growth driver for us, and we continue to have a very good momentum there. I think it's probably what I would highlight. But generally, I mean, the European markets for us has provided quite healthy support for our growth. I think it's also fair to say that in some European markets, we have a bit of a lower market share, also presenting an opportunity for us to catch up a little bit to what we think are natural market shares for us. Soren Jelert: And then when it comes to the margins, I think a couple of questions here, one linked to this year's margin. And for us, I think it's important to also recognize that we all the time have said that Gaming is an area where we will, through the good synergies with Enterprise, improve, amongst others, our gross margin. And as such, we also do believe that the group as a whole will be able to improve its gross margin in '26. Then in addition to that, actually, we also do see an opportunity on leverage of the OpEx base essentially. But to your point, we have factored in that we are launching. And then bear also in mind that within Hearing, we did launch Vivia in '25. So those costs were actually sitting in '25 as well. So in many ways, we are at a level of the cost base, which we believe is adequate to actually support the growth that we are striving for within the 3 divisions. Then when you look at the long-term margin aspiration of 16% to 17%, I think fundamentally, it's also important the decomposition we did of the aspirations for '26, where we have some cost items, amortizations as one, we do believe when you come out to the outer years we will be able to leverage the top line growth and as such be able to generate these margin increments as you see. So fundamentally, the underlying performance of our business should be able to get us to the 16% to 17%, which we believe is right for GN as a group. Operator: Next question comes from the line of Carsten Lonborg Madsen, Danske Bank. Carsten Madsen: Yes, a quick follow-up on Nations and the value here. Could maybe -- I know you cannot really talk about the value of it, but what will happen tax-wise if you realize a gain on this? Should we extract some tax from that, at least then we know that? And then I have a question on Huddly. You talked a lot about Huddly and you also mentioned video as a growth driver for you in 2026, something we have on the outside been waiting for a very long time. How meaningful is this collaboration? And do you expect -- and have you factored in sort of the meaningful growth of the video segment into your Enterprise outlook for this year. That's it? Peter Karlstromer: Let me start with the video and then hand it back to Soren for Nations and tax. I think that the Huddly partnership is meaningful in the way that it's addressing a gap which we've been having for a while, which is to work with companies in large video rooms. And Huddly is a company -- it's a smaller company, but with great technology for how you can add cameras into video rooms. So we essentially have integrated this into our existing video platforms together with their R&D. So it helps us a lot to now be able to address the full needs of companies, and it's been very well received when we're talking to customers and have presented this. We are launching this now in Barcelona this week at the big conference here, ISC. And we also have own other video launches, some which we have made and some that's coming. I think it's meaningful for the video business, what we're launching. It should definitely support the growth of the video business. If you look on the total growth support for both Enterprise and for the group, we need to remember that video is still a relatively small part in absolute numbers, so to say. But it certainly are important steps to see some acceleration of growth on the video side. But if you look into the growth ambition of our -- of Enterprise of 0% to 6%, we are counting on some contribution from video, but the majority will come from the core of the business, which still is headset. Soren Jelert: And then, Carsten, when it comes to your further deep dive on Nations question, I mean, I'll refer back to the question or the answer that Peter gave before. And as such, neither are we speculating in a potential tax implication of this and as such, are planning on group level still with around this 22% as we have also reported out on this year. Carsten Madsen: I was more thinking about whether we should -- when we calculate the value, whether we should just assume that the value is the value or whether we should subtract 20% tax? Soren Jelert: Again, I wouldn't speculate in the value is the value. I mean, honestly, we do not have a comment on the value as such and when it will materialize on Nations. So that's the way we look at it. Operator: Next question comes from the line of Veronika Dubajova with Citi. Veronika Dubajova: I will keep it on to 2, please. One, I just was hoping you could quantify the contribution from FalCom to the fourth quarter revenues and then what your expectations are for 2026 and whether those have changed in any way? And kind of maybe just gate some sort of risks to the upside and the downside around that just so that we can think about that since it was a driver. And then I apologize, but I have to go back to sort of the expectations around the Enterprise business growth. I guess there is a lot of concern and uncertainty in the sort of broader IT spending market. I guess it'd be helpful to understand the conversations that you're having with your distributors with some of the larger customers. What are you picking up in terms of corporate willingness to spend, especially as they face a lot of other competing priorities for investments, whether that's PC units or it's things like AI. I'd be kind of good to understand what you're hearing there. Just to give us a bit more confidence in your kind of -- what seems to be a very clear message that Enterprise should grow this year after many years of decline. Peter Karlstromer: Starting with FalCom, as you remember, we had a very good quarter in Q2 where we talked about more than DKK 100 million of business. In Q4, we had a similar quarter. So also a very good quarter. And we did preannounce that already earlier in the year because we had more or less agreements for that order in a firm way already then. But it was delivered and revenue in Q4. So if you look on the year in total, we made a bit more than DKK 200 million on FalCom for the full year of '25. And if we look into '26 that at the minimum, we see that we should be able to do the same level of revenue, but our base case scenario is probably to grow that a bit further. So I would say it could have some small growth contribution to the overall group growth. But I think we also need to remember FalCom still is relatively small in absolute terms. So it's not a real needle mover. But we continue to see a very positive development of FalCom, and we are pleased about that and very focused on continuing to growing it, of course. And then if I move to Enterprise, I appreciate a lot your questions around this and also how to think about this? I do think that we can approach this both top down, what we hear from leading analysts in terms of IT budgets and how much they spend on software versus hardware and so on. And if you do that, I think you're coming to a conclusion that IT hardware is probably modestly growing in most of the forecast, but relatively low growth numbers. And then if we observe it more from our own trends and the markets where we operate, which is predominantly headsets and video, as I talked about before, the market has been growing in the U.S. and APAC, which is great to see actually a stability of that growth. It's been going on every quarter for more than a year. And then EMEA has been the traveling area for us and the whole industry. And it's still not in growth in EMEA. So I would say that, that's perhaps a major uncertainty here and what the market growth will end up with. But our best assumption, if we take the growing North America and APAC and an improving Europe is market growth then for around 0% to 2%. And that is also consistent with what we are picking up with our largest distributors and resellers and when we speak to large customers and I mean trying to both plan our own business, but also talk about how they see and observe the future. So that's a market. And then we are guiding slightly above that because we feel very good about the products we are launching. I hope you all have a chance to test them at some point in time soon because we really think that this is not just like another product, so to say, another headset, but it really is taking the performance to next levels. And the initial reception has been very positive. It will take some time to build up the volume on this new line of products in Evolve3. We will see some limited contribution already in Q1, but more throughout the year essentially. So that's the combined thinking in resulting into the guidance of 0% to 6% growth for Enterprise. Veronika Dubajova: Got it. And can I just maybe ask a very quick kind of financial modeling question. Would you expect Enterprise to grow already in the first quarter? And I guess maybe, I don't know, Soren, if you want to comment on the phasing of growth for you specifically given some of the destocking dynamics you saw in the fourth quarter? Soren Jelert: No, we don't know and we're not guiding per quarter per se, but we do believe you will see gradual strengthening of it. And at this point in time we have some level of negative growth momentum, and we need to turn that into a flat to growing momentum. If that is happening in Q1 specifically or a little bit later in the year, we are not really guiding [indiscernible] it will be gradual. I do think though, and I could have talked about that also in the overall dynamics, it's worthwhile to highlight that we did see some channel destocking for the full year of '25. So that affected our growth in Enterprise with a few percentage points. And what we have assumed for next year are fairly stable channel inventories, and that is also what is a little bit helping to create the range of the guidance, what is happening to the channel inventories. Operator: Next question comes from the line of Jack Reynolds-Clark, RBC Capital Markets. Jack Reynolds-Clark: I had a couple also on Enterprise, please, and then across the U.S. and Europe. So within the U.S., can you kind of quantify the positive growth coming out of the quarter? And has that sell-out growth translated into a recovery in sell-in so far in Q1? And how much -- and if not, kind of how much destocking is there left in the U.S.? Then within Europe, again, in Enterprise, you mentioned some sell-out growth recovering there. Could you point to which markets are seeing sell-out growth and kind of quantify that recovery? And again, are you seeing any kind of translation into sell-in growth recovery and/or kind of how much destocking or how much inventory are your distributors holding there? Peter Karlstromer: So on the U.S. market, in the quarter, we did see sell-out growth, and we also had the sell-in growth, and they were actually fairly aligned those 2 numbers. So the channel inventories in the quarter in the U.S. were stable. We saw some more significant channel reductions in the beginning of the year '25 in the U.S. But towards the end of the year, they have actually stabilized. So the delta of sell-out and sell-in in the last quarter were predominantly in EMEA, and there, we saw it with several percentage point differences. And then to the markets have been going best. I mean, the last few quarters, a highlight of EMEA has been Germany, which is very encouraging for us because it is the largest market in EMEA. It is also a market where we have a very strong position. So that market has been both in sell-out and sell-in growth in the last few periods. U.K. has also improved a lot lately. And then I would say the Nordics and a few others of the more Central European countries have been -- I mean, also improving. And then we've been having a bit of a further challenges in Southern Europe. But I think that overall, if you look in EMEA, it is ending stronger than it started '25, so to say, and that's why we're talking about some level of improvement in trends. But the channel destocking have impacted also the numbers in EMEA. Operator: Next question comes from the line of Martin Parkhoi with SEB. Martin Parkhoi: First, a question again to Soren on the margin. I'm still a little bit curious to understand the bridge towards '28, in the short-term, which is '26, you have a range of 2 percentage points on the margin. And you believe 3 years later, you have a better transparency, only have 1% range in your margins? So how can that be? How can you -- if you land in the low end like 11.5%, how can you reach up in the 16%? What tools do we have to make such cost control? Then second question on the hearing aid market. We saw your gross margin going down this year, as you also rightfully say that you use some channel and country mix. And how should we see that mix in '26? Also if we get a soft hearing aid market, slightly soft hearing market again in '26 as we saw in '25, then there's a tendency to manufacturers starting to compete a little bit more on prices to reach their budget. So what kind of pricing environment have you baked in and margin have you baked in on hearing? Soren Jelert: Soren speaking, and that's on the longer-term aspiration. I think it's the way we have also decomposed the '26 guidance. We are of the opinion that in the event that we come in lower, it will, in our minds, also be a question of timing as we will strive for the growth as the key vehicle for us to get to the long-term 16% to 17%. Fundamentally, some of the investments we are taking in 2026 in, for instance, operations will yield gross margin improvements when we come out in the outer years closer to the '28. So in reality, we believe we will be able to catch up in the event that we land in the lower end. And we believe that if it's timing, it will definitely be possible. So we are investing in an underlying improvement structure that will yield results towards the '28 target. Peter Karlstromer: Martin, for more the hearing aid margins in '26, as we commented and you also highlighted in '25, the gross margins reduced due to the growth mix essentially we had in areas where we have low gross margins, channel types and geographies basically. As we're looking into the '26, we do expect a little bit of reversion of that into the more higher margin areas growing more normally and as such, supporting the gross margins. What I'd also like to highlight here and had that in the opening readout the divisional margins because they were actually -- if we look on -- after the difficult Q1, which was challenging in many ways, we were actually stable vis-a-vis the year before. And the explanation of that is that some channels where we have low gross margins also have a very, what should we say, compelling cost to serve. And as such, you might get a lower gross margin, but you still can protect a very good divisional margins. And we remain very focused on both type of margins. They're helping us to manage the business in a good way. But the planning assumption is some type of improvement on the gross margins for the year. Operator: Next question comes from the line of Richard Felton with Goldman Sachs. Richard Felton: Two, please. The first one is on Gaming. I'd like to understand the confidence in the 2026 guide. I suppose that that business was down slightly in 2025, momentum sort of decelerated into the end of the year. So just trying to understand sort of the gap from 2025 to the 7% to 13% guide for '26 between how much of that is the market getting better? How much is market share gains and product launches? That's the first one, please. And then the second one, thanks very much for sharing the detail on the Evolve3 launch. My question is, how impactful the launch has been historically on the Enterprise business? I know for hearing aids you get quite excited about new platform launches. But thinking about the business model and the type of customer base in Enterprise, how important is that launch cycle to drive growth? Peter Karlstromer: If we take the Gaming first, I think it's a combination of an improving market and then market share gains. If we look on the '25, the market was, I mean, relatively weak, around the world and in particular in the U.S. and Europe, where we have the majority of our business. So we do expect a bit of a stronger market environment. And then also have several great launches in the pipeline for the year across key core categories where we have meaningful business. Then I appreciate also when you're looking at, we all get a bit scared, of course, about Q4, which looks like a loss of momentum. I think it's important to bear in mind the outstandingly strong quarter Q4 the year before. So the comp was also part of seeing that decline in growth. So if you look more on sequential growth, quarter-on-quarter growth, it looks a little bit less daunting, so to say, to go from where we ended the year to growing into '26. So it is what we believe in as the base assumptions. And then the Evolve3 launch for Enterprise, we think it's a very meaningful launch and that this really will support our business. And given that we are the market leader in headsets also, hopefully, it can help the whole market to grow. So maybe get a double help here in some way. We have had this headset in early trial programs with both channels and lead customers for a while, and the feedback is overwhelmingly very positive. At the same time, we need to recognize it several years since we launched a line like this. So it's hard for us to analytically come back and say exactly what it would mean. But definitely, we are of the firm belief it will be a strong contributor to finding our way back in growth for Enterprise essentially. Operator: Next question comes from the line of Niels Granholm-Leth with DNB Carnegie. Niels Granholm-Leth: You are calling out a headwind in your margin for this year because of less positive effect from R&D capitalization. I mean, the effect for '25 was actually a little bit more than 2 percentage points. So would you expect to neutralize the effect completely this year? Or is it just going to be a less positive effect in '26? So that's my first question. And then getting back to the phasing in the Enterprise division. So how should we think about the growth trend throughout the year? I mean, are you continuing to expect kind of flattish to negative growth in quarter 1 to improve in the second half? How should we think about that? Peter Karlstromer: The way we have planned it out and can see it, of course, operating in the asset bases we have under R&D, we believe that the headwind or the less headwind is -- of the headwind in this case is to the tune of 1%. So it's not a full erosion of the 2% that you rightfully quote, but think of it at least as 1%. That's for the planning purposes. Soren Jelert: And then when it comes to Enterprise facing, I think the best way to do it is to expect a gradual buildup of the growth. So second half stronger than the first half. And I think it's both about generally getting the growth momentum going and also linked to the Evolve3 launch. We will see some impact in Q1, but we will see more impact of the Evolve3 launch later in the year. We will also launch more headsets later in the year, also further contributing to that growth. Then, of course, if we look on the Enterprise overall number, I think it's helpful, of course, to keeping a track on the large 2 FalCom orders in the comparison base from last year. And if we look on FalCom for '26, I said we aspire to have at least the same level of revenue, but also FalCom will likely be bigger in the second half than in the first half for '26. So that's probably as much as we can help you here, but do expect a gradual buildup of the growth momentum. I think that's the conclusion here. Niels Granholm-Leth: But shouldn't we expect any channel filling from the Evolve3 launch already here in quarter 1. Soren Jelert: Some level, definitely. But again, as I said, the Evolve3 85 and 75, these are the premium products, which is meaningful, but a smaller part of the total Enterprise sales. The mid-tier is where we have most of our Evolve3 sales and these type of products will launch at a later point in time. So that's what I meant with the sell-in will contribute in Q1 to some extent, but I think you will have even stronger Evolve3 contributions later in the year. Operator: Next question comes from the line of Julien Ouaddour with Bank of America. Julien Ouaddour: And sorry, guys, I come last, it won't be too different from my peers. I want to focus on the Enterprise guide again. I just think you need to give us a little bit more confidence for that. Just if I summarize, you're talking about gradual market improvement, 1Q and likely to grow back-end loaded year for Enterprise and Gaming. I think 4Q was softer than expected and not yet significant improvement in EMEA with declining PC shipments for next year. That's basically what I take from the call. I'm just wondering why putting such guide with ambitious market and share gain expectations instead of trying maybe to rebate expectations for beat and raise if the market recovers and the share gains materialize later. So that's just a question about just your thoughts behind how the guide was set and the visibility you -- I mean, you have today given, let's say, it was a little bit challenged to call the market in recent years? That's the first question. The second one, so switching to Hearing, you're the largest OTC player out there probably. Could you maybe address on what you're seeing on this channel in the U.S. and globally? And I'm asking the question because we're seeing some slowdown in the hearing aids market. AI seems to have unlocked possibility for smaller OTC players to get out with pretty good products from a performance standpoint. So my question is just, do you see some traction from small competitors? And could it be one of the reasons the U.S. market was soft for prescription hearing aids recently? Peter Karlstromer: Now back to Enterprise, and I run the risk of repeating some of the things I said before, but we have really tried to take all facts into accounts. I mean, both what we are picking up top down from all the sources we have available to us and then discussions with partners, distributors, and customers. And finally, what we observe ourselves in the underlying momentum of the business. And as I highlighted before, we do see the U.S. and APAC market in growth. It's been a lot about EMEA. And I mean, what we do believe and have into the guidance is some gradual improvement in EMEA. It doesn't say that the market will enter a high growth. We are saying a global growth of flat to 0%. It can even cater for some level of decline in EMEA for the year for the flat scenario there. And then we very much believe in the launches we are doing across the portfolio. And we do believe that the guidance we are giving with the midpoint as the most likely is our best effort here to give a meaningful guidance. We could, of course, have given an even broader range, but we do think the best way we can help you and the market is to guide like this in what we believe will be the most likely outcome. Then if I move to the OTC side. We -- I can speak about our own business first. I mean we have shared with you that we saw a little bit of a disappointing growth momentum in the first 3 quarters of '25. We actually had a fairly good quarter in Q4, so reentered double-digit growth in our Jabra Enhance our OTC offering. But I think I will say that still, if we look on the whole for both the market and our business, I think we've seen actually relatively similar dynamics to what we've seen in the overall hearing aid market. In the beginning of the year, and particularly in Q1, also the OTC business was really negatively impacted then the Q2 and Q3, I mean, our business, but I would also believe that's true for the overall business didn't really perform in the normal ways. And now we're seeing a little bit of stronger momentum in OTC. But to be fair, we actually see that in the U.S. business overall for ourselves. I personally do not believe it is, what should we say, cannibalizing significantly the traditional market. I think it continues to be a complement. It's interesting for us when we analyze our customer data. And so we do see that the customers buying from OTC are a bit different from the traditional hearing aids. In particular, it seems to be people that are younger. On average, it's about 10-year younger profile. And so there probably are some differences in the user base also. I appreciate there might be some limited overlap, but this is our best read on the market. So we don't think it will be the key explanation of the performance of the traditional hearing aid market, so to say. Julien Ouaddour: Perfect. I mean if I may just squeeze a very last one. Do you have any view on the Section 232, maybe any potential impact like on the protocol for the hearing aids? I mean, could it change your -- the original tariff for '26? Peter Karlstromer: No, we don't have any privileged insights in this. We're, of course, observing this also. So I have no further insights or comments. Operator: Next question comes from the line of Martinien Rula with Jefferies. Martinien Rula: I think you can hear me okay. Most of my questions have already been addressed. So I'll probably keep it to 2 quick ones and just to be as well conscious of time. So the first one is on your formerly called Lively business, which, if I remember correctly, was supposed to be breakeven by late '25, early '26. Could you elaborate a bit on how much of a drag it was for 2025? And if you have considered any potential scenarios for divestment or something like that into 2026 and beyond for this business? And the second question would be on the Gaming. I appreciate that you've been gaining consistently some share in the headset and keyboard categories. But I was a bit surprised to see that your share in the mike category, sorry, have remained stable. As such, I would appreciate if you could remind us of the revenue contribution of each of these categories and elaborate on why you haven't been able to grow your share in mike. Peter Karlstromer: Now, starting on the Lively business, which is what we call Jabra Enhance today. And as I mentioned, this year, we have not been able to have the same growth profile as in the previous years. The positive, I mean, fact is that Q4, we are back to the double digit growth, which we like to see. But given that the slow growth profile this year, our breakeven has been a bit delayed. We talked about that it will happen late '25, early '26. I will say with the growth momentum we have now, it's probably a bit later in '26 or early '27. But what is positive is that, I mean, the P&L works, so to say. I mean it will help the breakeven with the growth of volume. So we've been very focused on getting the business back to growth, and it's encouraging to see that now in Q4. Then on the Gaming side, I mean, you're absolutely correct. I mean the key category for us in Gaming are headsets. And here, we're really the leader for premium headsets in Gaming. And we are also large in headsets overall. So that is the largest category for Gaming. And then keyboards has been another category where we've really been building up a good business over time and very meaningful. You highlight mike as an area where there should be a growth opportunity, and I would say I agree with that. I don't want to forgo future launches, but it was a while ago since we launched new products into the mikes area. So I think you should expect us to have something going there that can help us to capture that opportunity essentially. I very much agree with your observation that that is a growth opportunity for us. Operator: This concludes our question-and-answer session. I would now like to turn the conference back over to the management for closing comments. Rune Sandager: Thank you very much, operator, and thanks, everybody, on the call.
Operator: Good morning, everyone, and welcome to the Aflac Incorporated Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded. I would now like to turn the floor over to David Young, Vice President of Capital Markets. Please go ahead. David Young: Good morning, and welcome. Thank you for joining us for Aflac Incorporated's Fourth Quarter 2025 Earnings Call. This morning, Dan Amos, Chairman, CEO of Aflac Incorporated; will provide an overview of our results and operations in Japan and the United States. Then Max Broden, Senior Executive Vice President and CFO of Aflac Incorporated; will provide more detail on our financial results for the quarter, current capital and liquidity. These topics are also addressed in the materials we posted with our earnings release, financial supplement and quarterly CFO update on our investors.aflac.com. For Q&A today, we are joined by Virgil Miller, President of Aflac Incorporated and Aflac U.S.; Charles Lake, Chairman and Representative Director, President of Aflac International; Masatoshi Koide, President and Representative Director, Aflac Life Insurance Japan; and Brad Dyslin, Global Chief Investment Officer, President of Aflac Global Investments. Before we begin, some statements in this teleconference are forward-looking within the meaning of federal securities laws. Although we believe these statements are reasonable, we can give no assurance that they will prove to be accurate because they are prospective in nature. Actual results could differ materially from those we discuss today. We encourage you to look at our annual report on Form 10-K for some of the various risk factors that could materially impact our results. As I mentioned earlier, the earnings release with reconciliations of certain non-U.S. GAAP measures and related earnings materials are available on investors.aflac.com. I'll now hand the call over to Dan. Dan? Daniel Amos: Thank you, David, and good morning, everyone. We're glad you joined us. Aflac Incorporated reported fourth quarter net earnings per diluted share of $2.64 and adjusted earnings per diluted share of $1.57. For the year, Aflac Incorporated reported net earnings per diluted share of $6.82 and adjusted earnings per diluted share of $7.49. Max will expand upon these strong results for the quarter in a moment. But before he does, I'd like to comment on our operations. Beginning with Japan, I am very pleased with Aflac Japan sales increase of 15.7% for the fourth quarter and 16% for 2025. These strong sales results were driven largely by the remarkable 35.6% sales increase, mainly due to Miraito, our latest cancer insurance product launched in March. While still early, we are also excited about the positive reception our newest medical product, Anshin Palette has received since its late December introduction. As part of our ongoing strategy, we also continue to emphasize and promote the importance of third sector protection to new and younger customers with our innovative first sector product, Tsumitasu, which was repriced in September. While premium persistency reflected lapses tied to the launch of Miraito, it still remains strong at 93.1% for the year. Our success with so many policyholders who realize the value of Aflac's products and keep them is a testament to Aflac's reputation, our strategy and our customers' recognition of the value of our products. By maintaining this level of persistency while adding new premium through sales, we look to offset the impact of reinsurance and policies reaching paid-up status in the future. Maintaining strong persistency continues to be vital to the future of Aflac Japan. For the year, we also saw an increase in sales through each distribution channel. Being where the customer wants to buy insurance has always been an important competitive strength of our growth strategy in Japan. Our broadened networks of distribution channels, including agencies, alliance partners and banks are dedicated to continually optimizing opportunities to help provide financial protection to Japanese consumers. We will continue to work hard to support each channel as we evolve to meet customers' changing needs. Overall, I believe we have put in place the right people and the strategy to meet our customers' financial protection needs through their different stages of life. Turning to Aflac U.S. We generated nearly $1.6 billion in new sales in 2025, over 1/3 of which came from the fourth quarter. More importantly, we maintained strong premium persistency of 79.2% and increased net earned premiums by 2.9% for 2025. We continue to focus on driving our profitable growth by exercising a strong underwriting discipline and maintaining strong premium persistency. We believe this will continue to drive net earned premium growth. At the same time, Aflac U.S. has continued its prudent approach to expense management and maintaining a strong pretax margin as Max will expand upon shortly. In both Japan and the United States, consumers continue to face financial hardships due to increasing out-of-pocket medical expenses. That is exactly where we come in as partners to be there when our policyholders need us most. As the pioneer of cancer insurance and the leader in the industry, our management teams, employees and sales networks approach every day as a chance to help our policyholders fill the gap during challenging times, providing not just financial protection, but also compassion and care. At the same time, we generate strong capital and cash flows on an ongoing basis while maintaining our commitment to prudent liquidity and capital management. We continue to be pleased with our investments, producing solid net investment income. As an insurance company, our primary responsibility is to fulfill the promises we make to our policyholders while being responsive to the needs of our shareholders. Our financial strength is the foundation that backs up our promise to our policyholders balanced with the financial flexibility and tactical capital deployment. I am very pleased with the company's financial strength, which supports our capital deployment, including the Board's decision to increase the first quarter of 2026 dividend by 5.2%. In 2025, Aflac Incorporated deployed a record $3.5 billion to repurchase 33 million shares of our stock and paid dividends of $1.2 billion. We treasure our 43 consecutive years of dividend increases and remain committed to extending this record. Combining share repurchase and dividends, we delivered nearly $4.8 billion back to the shareholders in 2025. In doing so, we have maintained our position among companies with the highest return on capital and the lowest cost of capital in the industry. 2025 also marked 3 significant milestones for Aflac, the 70th year since the company's founding, the 30th anniversary of what is now Aflac Cancer and Blood Disorder Center of Children's Healthcare of Atlanta and the 25th anniversary of the Aflac Duck. Each of these noteworthy milestones demonstrates the staying power of the financial protection Aflac's products help provide and the privilege of helping enrich the lives of millions of people. In today's complex health care environment, our relevant products, financial strength, powerful brand and broad distribution network uniquely positions Aflac as the ideal partner for consumers as they navigate the financial strain from out-of-pocket medical costs. The enduring foundational strengths of our business and our capacity for continued growth in Japan and the U.S., 2 of the largest life insurance markets in the world, support our leading position and build on our momentum. I will now turn the program over to Max to cover more details of the financial results. Max? Max Broden: Thank you, Dan. For the fourth quarter of 2025, adjusted earnings per diluted share increased 0.6% year-over-year to $1.57, excluding effect of foreign currency in the quarter. In this quarter, remeasurement gains on reserves totaled $36 million, reducing benefits. Variable investment income ran $12 million below our long-term return expectations. Adjusted book value per share, excluding foreign currency remeasurement, increased 0.5%. The adjusted ROE was 11.7% and 14.5%, excluding foreign currency remeasurement, a solid spread to our cost of capital. Overall, we view these results in the quarter as solid. Starting with our Japan segment. Net earned premiums in yen terms for the quarter declined 1.9%. Aflac Japan's underlying earned premiums, which excludes the impact of deferred profit liability, paid-up policies and reinsurance declined 1.2%. We believe this metric provides a clearer insight into long-term premium trends. Japan's total benefit ratio came in at 65% for the quarter, down 150 basis points year-over-year. We estimate the impact from reserve remeasurement gains to be approximately 110 basis points favorable to the benefit ratio in Q4 2025. Long-term experience trends as they relate to treatments of cancer and hospitalization continue to be in place. Leading to continued favorable underwriting experience. Persistency remained solid year-over-year and in line with our expectations at 93.1%. With refreshed product introductions, we generally see an uptick in lapse and reissue activity, causing reported lapsation to increase. We did experience this uptick with our recently launched cancer insurance product, but overall lapses remain within our expectations. Lapses on our first sector savings block remained low and in line with previous periods despite the increase in yen interest rates. Our expense ratio in Japan was 22% for the quarter, up 120 basis points year-over-year, driven primarily by sales promotion expenses associated with higher sales. For the quarter, adjusted net investment income in yen terms was down 3.9%, primarily driven by lower floating rate income on our U.S. dollar book and lower variable investment income, partially offset by higher U.S. dollar fixed income due to higher volume. The pretax margin for Japan in the quarter was 31.3%, down 30 basis points year-over-year, a very good result. Now turning to U.S. results. Net earned premiums were up 4%, while premium persistency declined slightly by 10 basis points year-over-year. It remains strong at 79.2%. Our total benefit ratio came in at 48.6%, 230 basis points higher than Q4 2024 driven by prior year endorsements and higher claims activity on our individual voluntary block as well as a higher benefit ratio on group life and disability. We estimate that reserve remeasurement gains impacted the benefit ratio by approximately 140 basis points in the quarter. Our expense ratio in the U.S. was 40.4%, up 10 basis points year-over-year, primarily driven by timing of spend from previous quarters. Our growth initiatives, group life and disability, network dental and vision and direct-to-consumer increased the expense ratio by 60 basis points in the quarter. This is in line with our expectations as these businesses continue to scale. Adjusted net investment income in the U.S. was down 2.8% for the quarter, primarily driven by a reduction in floating rate assets and corresponding rates. Profitability in the U.S. segment was solid with a pretax margin of 17.4%, a 230 basis point decrease compared with a stronger quarter a year ago. In Corporate and Other, we recorded pretax adjusted loss of $31 million in the quarter. Total premiums decreased on closed blocks of business. Adjusted net investment income was $1 million higher than last year due to a combination of lower volume of tax credit investments and higher asset balances. Our tax credit investments impacted the net investment income line for U.S. GAAP purposes negatively by $43 million in the quarter with an associated credit to the tax line. The total fourth quarter earnings benefit from tax credit investments was $13 million. Adjusted earnings declined due to lower revenues and higher adjusted expenses, driven primarily by higher costs pertaining to business operations and higher interest expense, partially offset by lower net benefits and claims. We continue to be pleased with the performance of our investment portfolio. During the quarter, we did not record any charge-offs for the commercial real estate portfolio. Additionally, we did not foreclose on any properties in the period. On our portfolio of first lien senior secured middle market loans, we recorded charge-offs of $22 million in the quarter. For U.S. statutory, we recorded a $3 million valuation allowance on mortgage loans as an unrealized loss during the quarter. On a Japan FSA basis, there were net realized gains of JPY 380 million for securities impairments in Q4. and we booked a valuation allowance of JPY 87 million related to transitional real estate loans. This is well within our expectations and has a limited impact on regulatory earnings and capital. In the third quarter of 2025, we enhanced our liquidity and capital flexibility by $2 billion with the creation of 2 off-balance sheet precapitalized trusts that issued securities commonly referred to as PCAPs. With increased off-balance sheet capital resources and improved liquidity flexibility, we have lowered our minimum liquidity balance at the holding company by $750 million to $1 billion. This means that Aflac Inc. unencumbered liquidity stood at $4.1 billion, which was $3.1 billion above our minimum balance at the end of the quarter. The full PCAP facility remains undrawn. Our adjusted leverage was 21.4% for the quarter, which is within our target range of 20% to 25%. As we hold approximately 63% of our debt in yen, this leverage ratio is impacted by moves in the yen-dollar exchange rate. This is intentional and part of our enterprise hedging program, protecting the economic value of Aflac Japan in U.S. dollar terms. Our capital position remains strong. We ended the quarter with an SMR above 970% and an estimated regulatory ESR with the undertaking specific parameter or USP, of 253%. We estimate that the USP benefits the regulatory ESR by 18 points. We estimate our combined RBC to be 575%. These are strong capital ratios, which we actively monitor, stress and manage to withstand market volatility and credit cycles as well as external shocks. We last updated our ESR sensitivities at our financial analysts briefing in December 2024. Since then, we have seen significant movements in both the dollar yen and yen interest rates. So we wanted to provide an updated estimate before the ESR comes into effect on March 31. We have deliberately improved our ALM during this time, which has led to reduced exposure to interest rate risk. We generally have lowered our sensitivities to market risk factors. We have also refreshed the sensitivity analysis related to our combined RBC ratio in the U.S. I will characterize these refreshed estimates also as being in line with what we shared at FAB in December 2024. Given the strength of our capital and liquidity, we repurchased $800 million of our own stock and paid dividends of $303 million in Q4, offering good relative IRR on these capital deployments. We will continue to be flexible and tactical in the way we manage the balance sheet and deploy capital in order to drive strong risk-adjusted ROE with a meaningful spread to our cost of capital. Before concluding, I would like to address our 2026 outlook. At our 2024 financial analyst briefing, I provided ranges for net earned premiums, benefits and expense ratios and pretax profit margin for each segment for 2025 through 2027. These ranges remain substantially intact for 2026, but with a couple of exceptions. For Aflac Japan, we expect underlying earned premiums to decline 1% to 2% in 2026. And we also expect the expense ratio to be in the 20% to 23% range. However, we expect the benefit ratio in Japan to be in the 60% to 63% range and the pretax profit margin to be in the 33% to 36% range. In the U.S., we continue to expect net earned premium growth to be in the lower end of the 3% to 6% range. We also expect the benefit ratio for 2026 to be in the 48% to 52% range and the expense ratio to be in the 36% to 39% range as we continue to scale new business lines. At the same time, we expect pretax profit margin for 2026 to be in the range of 17% to 20%. Thank you. I will now turn the call back over to David for Q&A. David Young: Thank you, Max. [Operator Instructions] We'll now take the first question. Operator: [Operator Instructions] Our first question today comes from Wes Carmichael from Wells Fargo. Wesley Carmichael: I had a question on the Japan business. And Max, I think you touched on this a little bit in your prepared remarks. But in particular, in the savings products ways for sector, we've seen super long yields in Japan rise pretty considerably. And I think more broadly, there's some concern that we could see additional, I guess, surrenders with interest-sensitive products. So curious if you expect higher levels of surrender going forward. I know that was pretty stable recently. Max Broden: Thank you, Wes, for the question. Yes, obviously, we've seen quite significant moves up, especially at the long end of the yen yield curve lately. And if everybody is 100% efficient in their behavior, you would expect both demand and potentially lapsation of in-force policies to increase somewhat. We have not experienced that yet, but obviously, it's something that we closely monitor and prepare the company for. Wesley Carmichael: Got it. And my follow-up is just on capital. It seems like you've got a lot of flexibility in terms of regulatory solvency in Japan and the U.S., but also at the parent too, and you continue to be pretty tactical with the buyback. But curious if once ESR is printed in 2026, is there any change to the thinking around M&A or capital deployment, just given the capital flexibility you have? And maybe what could be incremental for you? Max Broden: From a capital standpoint, we've been traveling with significant capital for quite some time. And we continue to both enhance and increase the flexibility of both the sources and how we can use that as well. When it comes to M&A, that's predominantly an operational and strategic question and that secondarily is a financial question. So the way we evaluate M&A, it really goes through those lenses and it needs to tick all those boxes. But the fact of the matter is, do we have capital available if we wanted to do something? That is absolutely true. But I would also acknowledge that we are operating in a relatively narrow niche, both in the United States and in Japan and to sort of find operational and strategic targets within those niches is relatively difficult to find. So we continue to obviously evaluate things. But for the time being, we're very happy with the businesses that we have. Operator: Our next question comes from John Barnidge from Piper Sandler. John Barnidge: My question is around Japan. Can you maybe talk about the lower benefit ratio embedded in the guidance? I think it's based on Japan new business versus the in-force block. I know there's been some repricing and new products being introduced. But how enduring does that benefit seem to be? Max Broden: Thank you, John. So there's a couple of factors that is pushing our benefit ratio down on a GAAP basis in 2026. The first one, I will put in a more permanent category, and that is as we updated our actuarial assumptions in the third quarter of 2025, we lowered the net premium ratio by about 130 basis points. That is for the full in-force block, and that was obviously a one-timer in the third quarter, but it also feeds through into the future net premium ratio as well. So that is directly impacting the benefit ratio for future periods by 130 basis points lower, all things being equal. The other impact is with new product introductions that we've seen on our cancer product and as we now introduce our medical product, we've seen an elevation of lapse and reissue activity when those product introductions take place. When you have lapse and reissue increase, the old policies that lapses, we will then release the reserves associated with those policies and it runs through our GAAP financials, lowering the benefit ratio. And generally speaking, we have lower reserves on our older policies than the new policies that we are reissuing. So that also has an impact for us. The last piece is if you go back and analyze our full in-force, we did sell quite a lot of life insurance savings policies in the years 2010 through 2016, and this is the old waste product. That waste product runs through our GAAP financials with a very high benefit ratio. On an economic basis, it carries a significantly lower benefit ratio. But on a GAAP basis, it's very high. That block obviously is in runoff. And as that block shrinks, then obviously, the mix impact is such that our total benefit ratio is then lower. So I will characterize those 3 factors as the main factors for the lower benefit ratio expected in 2026. John Barnidge: Thanks, Max. And my related follow-up, sticking with Japan on distribution, it looks like Tsumitasu got repriced and Anshin Palette got introduced. Can you talk about what you see as the total addressable market for these new products? And then within the context of Miraito and ability, do you need to reprice that? Koichiro Yoshizumi: [Foreign Language] [Interpreted] This is Yoshizumi speaking from Marketing and Sales division of Aflac Japan. As you mentioned, we went through a rate revision last September. And since then, sales are growing steadily. And the purpose of launching Tsumitasu is to respond to the citizens' needs of asset formation as the government is also promoting people to shift from saving to investment. So we -- our purpose was to encourage those young and middle-aged generation to promote such activities. So our market audience will be those -- the individual customers who seek for yen-denominated level payment products. But in fact, actually, Tsumitasu is also gaining popularity from middle age to older generation. This is a result from gaining attention and popularity from affluent customers who prefer to pay with that or discounted advanced premium option. One of Tsumitasu strength is the fact that we can change the premium rate in a timely manner with agility. So going forward, whenever we see a necessity given the interest rate market situation, when time comes, we will increase or decrease our premium rate as necessary. Daniel Amos: This is Dan. Let me just make a couple of comments about sales to have a more concise way of you looking at it. Miraito, our newest cancer policy did terrific better than we even thought. And we feel like it was a product that was wanted and needed by the consumers, and that's what's driving it. Saying that, we had enormous sales in 2025, and we would expect sales to be more level where I think you'll see an increase in sales will be at the medical product and also the potential is for Tsumitasu depending on what interest rates do, but that has the potential. But overall, cumulatively, we expect a good year in Aflac Japan in regard to sales and the job they're doing. And I want to personally thank all of them on the other end from Japan for the job that they did in 2025 in setting an enormous record for us to work forward again in 2026. Operator: Our next question comes from Joel Hurwitz from Dowling & Partners. Joel Hurwitz: I wanted to touch on U.S. sales. So the overall growth tracked pretty in line with what you guys saw in the first 3 quarters of the year, but it looks like the supplemental health growth was better while disability sales were down. Virgil, can you just talk about what you saw in terms of sales in the quarters? And I guess, any color on how the group life and disability and dental sales were versus expectations? Virgil Miller: Yes. Thank you, Joel. Yes, let me just give an overview of sort of the performance throughout, and I'll give you a little bit more detail of some of the numbers behind the scenes. Again, overall for the year, we did $1.6 billion overall. So I'm pleased with that sales number, how we came out. And when you asked about the buy-to-bill specifically, they made up 20% of that overall number. So what am I calling the buy-to-bill? Just a reminder, the life absence and disability. And overall, for the year, that line of business was up 11.3%. Network dental and vision, but just the dental product itself for network was up 48.8% for the year. And then our direct-to-consumer platform, we refer to as consumer markets was up 10.5%. So that's where I get the combined 20% of total of the $1.6 billion. So overall, I am very pleased with how those businesses performed. And a lot of that sales in that life and disability was sales of our life product, to your point. But again, definitely overall good performance. The other thing I would say to you is when you look at the year, it was pretty much consistent. We ended up overall 3.1%, but we did have good earned premium growth of 4% during the quarter, right at 2.9% to 3% for the year. Persistency remained strong, 79.2%. So when I look at the overall, I look at a good solid balanced performance for the year for us. Joel Hurwitz: Okay. Great. And then, Max, just a quick one on ESR. In your prepared remarks, you had said that the uplift from the USP was 18 points. I think the last time you disclosed it a couple of quarters ago, it was 30 points. Can you just take us through the drivers of the decline in that? Max Broden: The main driver of that decline is related to the level of yen interest rates. So as yen interest rates go higher, the impact from the USP tends to -- will decline a little bit. Operator: Our next question comes from Jack Matten from BMO. Francis Matten: I just have one follow-up on the Japan benefit ratio. Any way for us to think about the kind of the statutory or economic margin change that you're seeing? I know there's different dynamics between how the ways product accounting works and there's the net premium ratio change is also a big driver of the GAAP update. But just wondering, putting it all together, are you still seeing a better trend on a statutory margin basis? Max Broden: Yes. So the main difference between the FSA benefit ratio and the U.S. GAAP benefit ratio, it relates to the net premium ratio. So what I referenced there was that the net premium ratio on a U.S. GAAP basis will lower our benefit ratio by roughly 130 basis points in 2026 relative to the first 3 quarters of 2025. That impact will not occur on an FSA earnings basis, but the other drivers will. So think about it this way that essentially, when you look at the decline in the benefit ratio in 2026 over 2025, about 1/3 of that is driven by the lower net premium ratio. The other 2/3 will occur both on a U.S. GAAP basis and on an FSA earnings basis. Francis Matten: That's helpful. And then just a follow-up on the -- on your Bermuda entity. I mean any change to your kind of outlook on how you expect to use that entity over time? I know you've kind of talked in the past about reinsuring up to 10% of your in-force in Japan. Is that limit something you're still evaluating? Or could it be revised higher over time? Max Broden: Yes. So to date, we've ceded roughly 6% of our Aflac Japan balance sheet to Bermuda. We have a midterm target to get to 10%. We do not think of that as an absolute limit. I think over time, we will risk assess that number and evaluate if there's a higher internal limit that would make sense for us. The bottom line is that we see significant capacity for continuing ceding business between our subsidiary in Japan and our reinsurance affiliate in Bermuda. Operator: Our next question comes from Suneet Kamath from Jefferies. Suneet Kamath: That was helpful color on the Japan benefit ratio, Max. I appreciate that. I was wondering if you could maybe do the same for the U.S. benefit ratio because the guide is 48% to 52%, I believe. And it looks like you've been traveling kind of more in the mid-40% range. So I don't know if you're assuming some reversion to the mean or something, but just some color on that would be helpful. Max Broden: So there's a couple of factors going on impacting the benefit ratio in the U.S. And some of them are for specific lines of business and some of it is driven by mix of business as well. So we have, as outlined in the script, we have actively increased the benefit ratios on a number of products, utilizing endorsements, also increasing benefits. This applies specifically to our cancer product in the U.S. on an individual basis. It also applies to our accident policy. These products were running very low during the pandemic due to low claims utilization, and we have actively gone in and increased those future benefit ratios associated with those products. So that in itself will continue to push our benefit ratio slightly higher. At the same time, when you look at the total benefit ratio, there's a mix impact as well. Virgil just outlined that the sales of group life and disability and dental and vision specifically are increasing quite significantly for us. These businesses are gradually becoming an increased proportion of our total in-force, and they carry a higher benefit ratio than our core voluntary benefits products. So what that means is that over time, that mix impact will move our benefit ratio slightly higher as well. And you see some of that happening in 2026. Suneet Kamath: Okay. Got it. And then I guess maybe for Virgil or Dan, we're hearing a lot more about this sort of K-shaped economy and sort of given your target market, just wondering what sort of impacts do you expect in terms of both consumer behavior, but also in terms of agent recruiting potential? Virgil Miller: Yes. This is Virgil. Let me start and let me work backwards, Dan, what you just said about the agent recruiting. So first, I would say we were up for the year with our career recruiting. To your point on the environment, we certainly monitor inflationary rates. We monitor unemployment rates. We look at any material impact. Of course, we look at anything related to interest rates, U.S. dollar rates. But I can't tell you right now that had any material impact on us this year. What we did was we put a deliberate focus on our career channel. We are dedicated and still believe in the agency force that we have out there. We increased it this year in new recruits. We were able to have a higher conversion rate than we normally have. So 16% of those converted into sellers as we go through that process. And then the last thing I'd say is that we increased the productivity. So I totally agree with you that there's volatility in the market if you look at through these lands, but they had no material impact on us. The other thing I would point out too, though, is that we're also looking at things that we can do to make sure that consumers get access to our products. You see us continue to be dedicated to making sure we have a strong brand out in the market. We know that there were some changes this year, about 22 million Americans were affected by ACA. We still sell our products though alongside major medical. We do not want to see people go uninsured, but you need to carry a major medical plan alongside our supplemental health. And we did see an increase though in activity coming from that group going through our direct-to-consumer channel. So we want to make sure that we offer our products however people need to get access to them, and we did have a 10.5% increase in that channel itself. So overall, I would tell you, no material impact. We are certainly making sure that our distribution is still networked through our agency force. We remain dedicated to it with recruitment and conversion. We have strong relationships with our broker channel. Again, we continue to see increase in broker sales and group sales year-over-year over year. So Dan, any further comment? Daniel Amos: No, I think we're expecting 2026 to be a good year for us, and we're looking forward to it. Operator: Our next question comes from Tom Gallagher from Evercore ISI. Thomas Gallagher: First question is back to Virgil on the U.S. I heard Max's comment that you've had significant increases in group sales. Can you talk about what kind of levels we're talking about here for group versus non-group sales? Yes, I'm just curious because I'm wondering if there's like explosive growth in group, what's happening to your voluntary benefits because the total sales number is still pretty low. Virgil Miller: Yes. Thank you for that question. Yes. So let me start with the voluntary benefits. Our core traditional products -- and remember, we are carrying probably one of the -- not probably, we're carrying a large block that other competitors just don't have, which is a great thing for Aflac. That block is certainly produced for Aflac many, many years. It delivers high profitability ranges. We are still committed to that, mainly driven through our agency force. I want to make sure I state that and we stand committed. We are continuing to enhance our products there with revising our accident and our cancer products in that space. But what you're seeing though overall is that our traditional business has been flat to negative for the past few years, including last year. So when you have that anchor of a core business, you don't see the tremendous explosive growth that you are seeing -- that we are seeing though on the group side. So if you look at isolated just our group policies and products themselves that we file as group, benefits, the overall growth would have been 14%. We would have been much higher than the industry or any competition. And going underneath that, I'll be more specific as I get shared some of the numbers. The network dental product is filed as a group benefit. It was up 48.8%. Our life absence disability, if you were to combine that block of business was up 11.3%. And then the original traditional group benefits we bought -- you remember, we purchased Continental American. It's now our Aflac Group chassis, more core VB was up 11.7%. So again, solid growth in the group space, driven by brokers. Our broker relationships are very strong. And as you can see, I'm very, very pleased with those numbers. The focus continues to be 2 things for us. A, we're going to unify those channels though. One of the things that we can do a better job of and we're focused on 2026 is making sure through that group lens that we give one unified experience. So we're investing in a unified experience through platform and technology and also how we go to market. And that is one of the things we will continue to work on and deliver. But then the second thing, we're making some additional investment though in the traditional business. We're going to continue to enhance our products. We're going to continue to recruit. We're also enhancing the technology. We've improved our enrollment platform that we just released in the first quarter of this year, and we're expecting that to be a benefit in that particular channel. Daniel Amos: This is Dan. I want to make one other comment, and that is, as we reflect back over the COVID period, and you look at our distribution channel, it wasn't the product that changed things. It was the number of producers out in the field force selling for us. They were pulled away to a degree because it was total commissions and they were shut down and replacing those people has taken some time, but we are having success with that, and we've been working on the quality of the producers, and they've been producing at a faster pace than our old new producers. And so that's to give you some context on why that old channel has slowed down. So it's part of recruiting, recruiting, recruiting. Thomas Gallagher: Okay. My follow-up is on Japan. I guess listening, Dan, to you describe the sales outlook in Japan for '26, it sounds pretty good, which follows a very good '25. Curious why that's not translating to better earned premium growth. We're still in that negative 1% to 2% range on a core basis. Are we more likely to see an inflection in 2027? Max Broden: So Tom, it's -- we're somewhat the victim of very strong persistency. So if you think about Japan, it's a very, very, very large in-force block and the new sales that we're adding each year is relatively small relative to the total in-force block because of the high persistency that we have. So it takes quite some time for increased sales to sort of get to that level where you're really adding growth to the overall in-force block. COVID had a couple of years where our sales dropped quite significantly and the delta between sales and lapses was significant. And we are closing in on that gap now. And once that turns positive, it is eventually when we are going to have net earned premium growth in Japan. So we see that within a reasonable future. But even going into 2026, we still expect that lapses will be greater than total sales. Operator: Our next question comes from Alex Scott from Barclays. Taylor Scott: I just had a follow-up on the Japan premium growth. I know you guided to sort of the underlying growth, but could you talk about any of the more, I guess, non-underlying or noncore parts of it, just so we are making sure we understand how the guidance kind of looks with the actual premiums that will come in? Because I know there's some paid-up policies and maybe reinsurance impact. I just want to make sure I have that clear. Max Broden: So in the guidance that we give on negative 1% to negative 2% on that metric, just to go back to the fourth quarter, we were at the lower end of that or the better end of it at negative 1.2%. So what we adjust for is the deferred profit liability impacts, any paid-up impacts and then also any reinsurance. So if we execute any reinsurance throughout the year, that is not contemplated in that guidance. So for example, if we were to decide to move any significant block of business sitting from Aflac Japan to Aflac Bermuda, then obviously, the net earned premiums is expected to be impacted in Aflac Japan. That being said, those earned premiums would show up in the Bermuda's legal entity instead and show up in the Corporate and Other segment. So it's just premiums out of one pocket into the other, so to speak. So it wouldn't impact the total premiums for the total enterprise. But the 3 components that really differs between the net earned premiums that was negative 1.9% in the fourth quarter and the underlying 1.2 -- the vast majority of that is paid-up status and then a little component of that is the deferred profit liability. There was very little impact from reinsurance in the fourth quarter. Taylor Scott: So is it fair to take that delta between what we saw in 4Q on underlying versus actual and assuming no more reinsurance, that's a fair way to think about the difference that we potentially see in '26. Is that right? Max Broden: That is a -- I would expect that impact to be slightly smaller and the reason for that is that we have a declining balance of paid-up impact coming through. Taylor Scott: Got it. Okay. That's all helpful. And then as a follow-up, I wanted to ask about technology. And obviously, we're getting a lot of questions from clients on artificial intelligence and how it affects different areas of our market. So I'd be interested in your take on what you see. Obviously, there's opportunities, there's also risks of disintermediation here or there. And then maybe separately, if you could just talk about any kind of exposure that you're focused on in the investment portfolio like software and so forth. Unknown Executive: Why don't I start with the last part there, Alex. Obviously, the software is getting a lot of attention now with all that's going on in the AI world. In our credit portfolio, we have about 1.5% of total exposure to software-related companies. About half of that is in our middle market loan portfolio, where you'll recall this is a very well-diversified portfolio, all first lien senior secured positions, very small average sizes of about $15 million. And then the other half is in our investment grade -- is investment-grade exposure and carries an A- rating. So there's a lot to like about these software companies from a credit standpoint. We're well aware of the threat from AI, and we're watching it very closely. But right now, we feel very comfortable with our overall exposure to software. Virgil Miller: And this is Virgil. Let me give it to you from an operational standpoint, what we're doing within our businesses. So I spent a lot of time last year in Japan. First, I want to commend our Aflac Japan team. We are making investments in exploring how we can leverage AI in a variety of different ways there. working very strongly with the FSA. And I would say to you that we're focused a lot on the enrollment process of how we distribute our products. We're also looking at it by way of what AI could do by way of product innovation and some of the learnings that we've learned through our Japan counterparts, we're leveraging here also in the U.S. For the U.S., what we focused on is, first, looking throughout our company and how AI can assist in making people better at what we do. What we're saying is that technology, we're not looking to replace the people. It's a high-touch business when it comes to delivering on that promise and paying claims. We want to make sure that AI is assisting us with that. So what we've done is where we can automate some of the more routine processes within the claims area, a larger percentage of our claims, especially in our traditional business, more than 60% is automated using a lot of the machine learning techniques. We apply AI to actually give the claims adjudicator advice on what to look to it for, but we do not deny or have any claim fully adjudicated by automation without a final person making that decision. We're also looking at, though, how we can help with our enrollment process here in the U.S. So when I mentioned that we're rolling out some enhanced automation in our enrollment that's going to make our agents more efficient as they meet with consumers face-to-face, a lot of how we prepared that technology was done through AI in the background of how we were able to get it to market so fast, normal -- much faster than our normal process before. So I will conclude just by saying we are certainly looking at how we can leverage AI going forward. It is a part of our DNA. But right now, it's more in an assist role as far as how we're leveraging it as part of our rollout. Operator: And with that, ladies and gentlemen, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to David Young for any closing remarks. David Young: Thank you, Jamie, and thank you all for joining us today. I hope you'll mark your calendars also for December 3 to join us for our financial analyst briefing, and we'll be sending out more information in that -- in regard to that closer to that date. In the interim, if you have any questions, please reach out to Investor Relations. We'll get back to you or try and help and respond to your question as soon as we can. Thank you all for joining. Have a good day. Operator: And with that, ladies and gentlemen, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Ladies and gentlemen, thank you for standing by, and I'd like to welcome you to Banco Santander-Chile's Fourth Quarter 2025 Earnings Conference Call on the 5th of February 2026. [Operator Instructions] So with this, I would now like to pass the line to Patricia Perez, the Chief Financial Officer. Please go ahead. Patricia Pallacan: Good morning, everyone, and welcome to Banco Santander-Chile's Fourth Quarter 2025 Results Webcast and Conference Call. This is Patricia Perez, CFO, and I'm joined today by Cristian Vicuna, Head of Strategy and Investor Relations; Lorena Palomeque, our Economist. Thank you all for joining us today as we review our performance and results for the fourth quarter. Lorena will begin with an overview of the economic environment followed by Cristian, who will walk you through our strategic priorities and fourth quarter results. We will then conclude with a Q&A session. Lorena Palomeque: Thank you. Throughout 2025, Chile's macroeconomic environment continued to improve gradually after several years of significant adjustments, inflation maintaining a clear downward trend and continued converging towards targets, which allows monetary policy to move away from a clearly restrictive stance. As a result, financial conditions became progressively more supportive, helping to stabilize economic activity. Here on Slide 4, we can see the regulatory and policy environment. A key development in 2025 was the implementation of the mortgage subsidy law, aimed to lowering effective borrowing costs and supporting the recovery of housing demand. This measure is particularly relevant in a context where affordability constraints and higher interest rates have significantly affected mortgage origination in previous years. While the impact is gradual, it represents an important step towards reactivating a strategic sector for the economy. In parallel, there were important advances in the regulatory modernization agenda. Progress on the fintech and open finance law established the foundations for greater asset portability, a stronger competition among financial institutions and increased innovation in digital financial services. Over time, this framework should enhance efficiency, improve customer outcomes and support the development of new financial solutions while maintaining appropriate risk management standards. In addition, initiatives such as the sectoral permits law are designed to simplify and eliminate redundant regulatory approvals. By reducing administrative complexity and execution risk, these measures aim to lower barriers to investments and accelerate project development. Together with a continued focus on fiscal adjustment and spending efficiency, they contribute to a more predictable and sustainable policy framework. The new administration will assume office in March 2026 with an agenda that includes 3 economic policy initiatives that may provide additional stimulus to economic activity in the period ahead. Based on public communications, we expect an emphasis on large-scale investment projects alongside efforts to simplify permitting process and technical requirements in order to reactivate key sectors of the economy. These measures could have positive spillovers for construction activity, household supply and private investment more broadly. Another potential initiative is a reduction in the corporate tax rate. Currently, Chile's corporate tax rate stand at 27% and President-elect, Kast has indicated an initial target of reducing it to 23%. This would help improve competitiveness and attract domestic and foreign investment. Any such changes would likely be phased in over several years to mitigate fiscal impact. In parallel, the administration has highlighted the importance of improving spending efficiency and strengthening fiscal sustainability through enhanced budget allocation and expenditure review processes. It is important to note that the implementation of these initiatives will depend on congressional approval. While the new administration is close to achieving a majority, legislative dynamics will play a key role in shaping the scope, timing and final design of any policy changes. As we can see on Slide 5, one of the most encouraging developments in recent months has been the improvement in confidence. Business confidence followed a steady upward trend and moved gradually into optimistic territory at the beginning of 2026, also differences across sectors persist. Commerce confidence is now firmly in positive territory, while construction, one of the sectors most negatively affected since the onset of the pandemic, has shown a significant improvement in recent months. This matters because confidence is a key leading indicator for investment and credit demand. What we are observing is an economy that is gradually shifting from a defensive stance towards a more constructive mindset, in which companies begin to reactivate investment decisions and households may start to incorporate this improved environment in their financial planning. On Slide 6, we can see how the economy has been performing and what we expect for the coming years. Chile remained on a growth trajectory despite a challenging external environment and a still fragile labor market. The economy is estimated to have expanded by 2.3% in 2025, driven by a recovery in domestic demand. In particular, economic activity benefited from a strong increase in investment driven by the execution of larger-scale investment projects in the mining and energy sectors. In contrast, residential construction remains under pressure, meanwhile private consumption recovered gradually over the year. Regarding inflation, after the application associated with the adjustment of electricity tariffs at the beginning of the year, the consumer price index followed a downward trajectory, closing the year at 3.5%. With inflation expectations well [ anchored ] in the medium term and a limited outlook, the Central Bank continued its normalization process, lowered the monetary policy rate to 4.5% in December 2025 and gradually approaching its neutral level. The labor market gained some traction over the course of the year. Also vulnerabilities remain. During the first half of the year, job creation was limited, but this shifted in the second half when employment began to increase. As a result, the unemployment rate closed the year at 8%, averaging 8.5% over the year, the same level as in 2024. For the next year, we expect labor market conditions to improve gradually as activity recovers. Looking ahead to 2026, inflation is expected to remain marginally below the 3% target, while an additional cut to the monetary policy rate is anticipated in the first half of the year, taking it to an estimated neutral level of 4.25%. Economic activity is projected to expand between 2.1% and 2.4%, broadly in line with trend growth before picking up in 2027. So even as global risk remains elevated amid geopolitical tensions and increasing economic fragmentation, the local outlook appears more constructive. At the domestic level, expectation of a more market credit policy environment, combined with regulatory simplification and a stronger focus on competitiveness and investment should translate into an improvement in business client. This environment is supportive of a gradually recovery in credit demand as confidence improves and financial conditions ease. Importantly, this recovery is likely to be more balanced and sustainable than in previous cycles, supported by stronger macro fundamentals and a more resilient financial system. I will now hand over to Cristian for the rest of the presentation. Cristian Vicuna: Thank you, Lorena. On Slide 7, we outlined our strategy to create value for all our stakeholders entered in our vision of being a digital bank with Work Cafe. Our focus remains on attracting and activating new clients, understanding their needs and deepening engagement. We continue to target more than 5 million clients by 2026 while steadily increasing our active customers. At the same time, we're building a global platform that leverages artificial intelligence and process automation to scale efficiently. This supports lower cost per active client and reinforces operational excellence. Our goal is to sustain an efficiency ratio in the mid-30s or better, reflecting a disciplined and digital operating model. We are also broadening our transactional and noncredit fee-generating services. This supports double-digit fee growth and best-in-class recurrence, defined as fee income over structural operating expenses. As our client base grows, activity levels continue to increase, particularly in payments. Our digital ecosystem encourages frequent and seamless interactions, strengthening engagement and loyalty. This growth is supported by strong CET1 levels, ensuring that expansion remains sound, responsible and aligned with regulatory expectations. Together, this strategy position us to deliver attractive value creation with ROEs above 20% and a dividend payout ratio of between 60% to 70%. On Slide 8, we can already see how our strategy over the last few years has succeeded in changing our income mix and creating a more efficient and profitable bank. Our key measure of value creation has been the strong growth in ROE, which has increased by more than 6 percentage points, more than double the improvement seen in the industry while maintaining solid capital ratios throughout the implementation of Basel III. This has been supported by a 4 percentage point improvement in efficiency compared to 1 percentage point for the industry, reflecting disciplined cost control and the successful execution of our digital transformation. At the same time, fee income has increased from 15% to 21% participation of our total revenues, driven by client growth and the expansion of noncredit services, including digital accounts, cards, asset management, brokerage and acquiring. Industry revenue composition has remained broadly unchanged. This shift has driven our recurrence ratio to the best-in-class levels now above 63%, well ahead of peers. We're very proud of the success of our study had so far. As you will see later on, we are enthusiastic about the evolution of our results in the coming year. Now in Slide 10, we will take a closer look at the results this year. As of December, the bank generated net income of CLP 1,053 billion, up 23% year-on-year. This resulted in a return on average equity of 23.5% and an efficiency ratio of 36%. Growth was supported by a 9% increase in fee income and an 8% rise in financial transactions. Mutual funds grew 7% and the recurrence ratio reached 63.7% year-to-date. Net interest income, including the adjusted income increased 11% year-on-year, while NIMs remained stable at 4%. Our capital CET1 ratio stands at 11%, and we are provisioning a 60% dividend payout to be paid in April next year. We also began 2026 with a successful $500 million 5-year 144A issuance at a rate of 4.55%. During the year, we received several important recognitions, Euromoney, Latin Finance and The Banker named us the Best Bank in Chile, while Global Finance recognized us as Best Bank for SMEs. We also strengthened our sustainability profile with our MSCI ESG rating improving from A to AA and our sustainability score improving to 15.4 levels. On Slide 11, we show the evolution of the quarterly ROE. We have consistently maintained ROEs above 21% even in quarters with lower inflation. In the most recent quarters, new variation was 0.61% and ROE reached 21.9%. On a yearly basis, net interest income increased 10.9%, driven by a lower cost of funding, which improved by approximately 100 basis points year-on-year. As a result, year-to-date NIM reached 4%. Slide 12 highlights the continued expansion of our client base and its impact on fee generation. We now serve close to 4.6 million clients with 58% active and approximately 2.3 million digital clients accessing our platform monthly. Current accounts increased 9% year-on-year, supporting 5% growth in active clients and 7% growth in total clients. This translated into a 15% increase in credit card transactions and a 7% increase in mutual fund volumes. Client satisfaction remains high across our products. We also continue to expand our corporate footprint, increasing business current accounts by 19% over the last 12 months, driven by simple business account and integrated payment solutions through Getnet. As shown on the right-hand table, higher client activity translated into 8.5% year-on-year growth in fees and financial transaction income with cards, Getnet, account fees and mutual funds showing strong momentum. On Slide 13, the income growth and disciplined cost control supported strong operating metrics. The efficiency ratio reached 36%, the best in the Chilean banking industry in 2025, while the recurrence ratio reached 63.7%, meaning more than 60% of our expenses are covered by fee generation. Operating expenses increased temporarily in early 2025 due to cloud migration costs. For the full year, operating expenses grew just 1.6%. In the quarter, total core expenses declined 1%, driven by lower administrative costs, reduced data processing expenses and the appreciation of the Chilean peso. Overall, we continue to deliver best-in-class efficiency and recurrence. At the same time, we are evolving our branch network towards the Work Cafe format, improving efficiency and customer experience supported by continued enhancements to our digital platforms. On Slide 14, we show an overview of our cost of risk and asset quality. As in prior quarters, cost of credit remains above the historical average. The bank has been actively managing different parts of the portfolio, increasing loan duration that is reflected in increasing the impaired loan ratio, while our nonperforming loans with 90 days over or more has stabilized. On Slide 15, we can see that the CET1 ratio reached 11% in December, far above our minimum requirement of 9.08% for December 2025 and demonstrating about 50 basis points of capital creation since December 2024. This was driven by our income generation in '25 and considers a 60% dividend provision of our 2025 profit and a 2% increase in risk-weighted assets. Our capital ratios are now fully loaded with complete implementation of capital deductions in the Basel III Chilean framework. In January of 2026, the regulator published the current Pillar 2 charges for the Chilean banks, where we were assigned a Pillar 2 charge of 13 basis points. This is a reduction from the original 25 basis points that were assigned last year, demonstrating our solid management. Of the 13 basis points of Pillar 2 charges, about 8% must be met with core equity Tier 1 capital. So on Slide 17, we show our guidance for 2026. For this year, we're expecting a GDP growth of a low 2%, as Lorena already mentioned, with a UF variation just below the 2.9% and an average monetary policy rate of around 4.3%. We anticipate a more favorable business environment this year, supporting mid-single-digit loan growth with a stronger rebound in the second half of the year. Despite the slightly lower inflation, loan growth and slightly lower rates will help to sustain our NIMs on 4% levels, while our fees and financial transactions should grow mid- to high single digits. This does not include any impact for a further interchange fee reduction, which is yet to be defined by the interchange fee commission. Our efficiencies should remain around the mid-30s, while our cost of credit should continue to improve gradually to reach around 1.3% for the full year. Based on these assumptions, our expectation for 2026 are for an ROE within the range of 22% to 24%, highlighting the strong profitability of Santander Chile. With this, I finish the presentation, and we can start the Q&A session. Operator: [Operator Instructions] Our first question is from Ernesto Gabilondo from Bank of America. Ernesto María Gabilondo Márquez: My first question will be on the economic and political outlook. So we have been hearing that there could be the possibility to reduce the statutory tax rate and also to reduce the credit cap limit. So any color on what you are hearing also will be very helpful. And then my second question is on your loan growth expectations. You were guiding between mid-single digit around that. Just wondered if you can break down in terms of how much we expect for each segment, also very useful. And for my last question is in the sale of Getnet. I don't know if you can provide more details on the implications behind that. I don't know if you obtain an amount of cash from this transaction. So any more details will be helpful. Cristian Vicuna: Thank you, Ernesto, for the questions. So I'll pass the word first to Lorena for the economic political outlook. And then Patricia will comment on asset expansion. I'll get the last question from Getnet. Lorena Palomeque: Yes. For the political and economic outlook, it's important to say that we correct growth projections for 2026 and '27 mainly due to -- for one side, improvement of copper prices process and better performance of trading process and of course, the dynamic of internal demand. But in the political side, we expect that the new government will have a transition period and the tax reduction could take some time. So we expect the effect more in the 2027 and in the second half of this year than in the short term. Cristian Vicuna: Right. Regarding the credit card limit discussion, we believe that, that's going to take longer to get discussed in Congress. So we don't expect anything going on in 2026 regarding that change. It will be welcome news for the industry and for the bancarization of the Chilean economy in general terms, but I believe it's going to take a while for that to get discussed. Patricia Pallacan: Ernesto, regarding the loan growth for this year, as Cristian mentioned, our guidance for this year is to be around mid-single digits, both for the industry and our bank. Assumptions behind this guidance are consistent with a macro that improves gradually within the year. First of all, on the consumer side, we are seeing steady growth in auto lending. The weaker demand still for installment loans that we are expecting to improve during the year. Regarding commercial portfolio, we already have seen a reactivation in investment in mining and better investment cycle together with recent improvements in confidence, as Lorena showed us. However, this has not yet translated into stronger growth. But during the year, this should boost commercial lending, especially in large companies and other parts of the economy as well and also help to drive higher consumer lending. And finally, regarding mortgages, we have also seen gradual improvement in the demand during the year, in line with better conditions in the Construction segment, also the mortgage subsidy launched in May last year. And going forward, we are expecting better trends, especially in the affluent segment. All in all, we think we are well positioned in terms of liquidity and capital as well to support a higher growth scenario. And in addition, we also think we benefit from the scale and synergy generated by being part of Santander Group, leveraging shared platforms and international market expertise from the global and local teams as well. Cristian Vicuna: Thanks. And regarding the Getnet question, so we had a shareholders meeting last week that considered an offer from Getnet Payments to acquire the minority stake of Getnet Chile in order to formalize a strategic partnership. The main goal is to strengthen the Getnet Chile position in a payments market that we believe is increasingly competitive, both technologically and requiring global integration. Bringing in a large international player will allow us to access those capabilities such as continuous innovation, scale, globally proven functions and the international network that opens new business opportunity for our acquiring operation. It's very relevant that we are keeping control and the majority of the Board, ensuring business continuity, indebtedness, strategic continuity while managing the business. And at the same time, we are adding a partner that accelerates growth and strengthen the efficiency and leadership for the next stage that we're seeing on the market. So we think this is a decision to strengthen Getnet's future and create value that will benefit all shareholders. Regarding the Construction, included an initial payment of CLP 68 billion and a service agreement under which Banco Santander provides infrastructure, staff equipment and data processing to sell Getnet solutions. And Santander will receive -- Santander Chile will receive the equivalent of 10% of the net operating revenues for the next year with an automatic extension of that contract for additional 3 years. So all in all, we assess about 65% to 70% of the total net income of Getnet will go straight to Banco Santander Chile. So the impact in terms of P&L is negligible. And well, we had the meeting last week. So the transaction was approved with -- the quorum was very close to 95% of total shares, and it was approved by close to 87% of the participant. Out of those, 29% were minority shareholders and the majority of the minority shareholders voted in favor of the transaction. Change in regulation requires that all shareholders must vote on the shareholders' meeting to achieve the quorum required by the law. So that's why the group also was forced to vote, but we had a very strong support from the minority base of shareholders. So that's pretty much regarding Getnet. Operator: Our next question is from Lindsey Shema from Goldman Sachs. Lindsey Marie Shema: Cristian and Lorena, just first, your 2026 guidance implies a slight improvement in cost of risk. Just want to hear where you see that coming from and your projections for asset quality throughout the year? And then my second question is just we saw expenses falling year-over-year in this fourth quarter. And you mentioned some efficiency improvements you've been doing that can lower your efficiency ratio long term. So just wanted to get some more color on improvements you've been making there and how you see expense growth progressing going forward? Cristian Vicuna: Thank you, Lindsey, for your questions. Regarding risk, well, 2025 was on the neighborhood of the 1.4% cost of risk for this operation, and we are expecting that to improve to levels of 1.3% area. We did a relevant job in terms of improving NPLs in the commercial portfolio last year. And apart from the agro sector, we don't expect many, many new pieces of information from that part of the portfolio. So all in all, we are seeing a more sustainable and controlled cost of risk looking forward. In terms of -- we saw a slight pickup, as I already mentioned, in December figures due more to seasonality and the start of the summer holidays that put some pressure on the collection teams by contactability, but nothing that we are seeing a very concerning. And at the same time, the mortgage portfolio, which has been increasing in [indiscernible] is not going to pass through as cost of risk, and we expect this to start improving this year gradually. It's going to take a while because the judicial process of collections is taking longer. But all in all, we don't expect this to pass through to cost of risk. So that's why we are more comfortable guiding a slight improvement this year. And to your question on expenses, the way to look at this is that we aim to control the growth in our expense base by trying to deliver inflation expansion or inflation plus 1%. That's what we're seeing in the long term as an internal target. We are addressing this through a strong transformation in our technological platforms, improving efficiency, getting rid of routinary tasks that can be avoided and implementing new solutions and new technologies, and we are delivering some initial things on artificial intelligence that are probably going to allow us to sustain on these trends. We are not expecting very relevant changes in the network size of us. So just slight modifications, maybe opening 1 or 2 new formats with Work Cafe and renovating some part of the legacy branch that we still have some 90 branches over there. But to your point regarding the improvement in the final part of the year, well, there was a relevant peso appreciation. And about 25% of our administrative expenses are linked to euro and U.S. dollar currencies. So that's also explaining a little, but it's also part of the whole story of how we are trying to achieve the best levels of efficiency in the industry. So thank you. Operator: Our next question is from Yuri Fernandes from JPMorgan. Yuri Fernandes: A quick one, just on the guidance, just checking if the guidance includes the reduction on Getnet stake. I know it's small, but if you can remind us what is the relevance for ROE and especially for the non-NII guidance this year, I guess you grew your fees closer to high single. I think the guidance shows a little bit of a slowdown, but not sure if this is Getnet or maybe [ mutual ] funds that were also very strong, maybe being a little bit more normalized. So just trying to understand if the guidance reflects Getnet. I understand you still need to deconsolidate. So maybe you still consolidate 10% of Getnet for a few more quarters, but just trying to get some color on this. And on your presentation -- go ahead, and I can ask another one later. Cristian Vicuna: Okay. So well, regarding your questions, and thank you for that. In terms of the fee figures, you're not going to see any changes. Well, you're going to see an increase in the final part of the P&L in the minority stake in the net income assigned to minority shareholders, right? So that's where you're going to see an increase in that line that will be an effect that it's less than 1% of the total P&L of the company through the sale of this subsidiary. So it's nothing that's going to be seen as material in terms of ROE. Well, consistently, this should be on the neighborhood of 20 bps of ROE. So we are not changing guidance for this matter. It's included in the 22% to 24% range. So do you have another question, Yuri? Yuri Fernandes: Yes. No, no, that's clear. So basically, it's -- and sorry for that, it should be a minority interest, the delta here. I have just another follow-up on the SME business. On Slide 13, Cristian, you showed the EPS of SMEs and you point to 37. And you are the first here, probably you are the best one. But 37% looks a little bit low for NPS. So just checking if the number is correct and if this is the real number, if you're happy with this number or if you are working to improve, that would be... Cristian Vicuna: No, in general terms, SME NPS in the local industry, it's slower, slower and it's in the area of the 33% to 37% range for most of our peers. We track this with the same methodology consistently along the years. So nothing has changed on that side. We are trying to get to levels closer to 50%, but the reality of the industry here in Chile is that, all in all, NPSs in the SME area are to be lower. Yuri Fernandes: Okay. And my final one here, just a broad one regarding the parent company and Santander Chile. Do you see any other business area where there could be synergies and optionalities similar to Getnet? Just trying to understand if we could see further partnerships like on investment bank. We already have, I guess, insurance, right, and asset management. But just trying to understand if there are other areas that could be synergies with the parent. Cristian Vicuna: So all in all, as a group and their operations in Chile, I think pretty much most of the pieces are in place. So you mentioned Santander Asset Management. We already have and we acquired from a previous partner a couple of years ago. And actually, we control, too, the Santander Consumer Finance operation. That's another subsidiary of the bank. We, of course, lever the partnership with the Santander Group through all the alliances that we can show as a very, very effective and with great results in terms of the amount of new brands that we cover through the auto lender. So that's a good example of one area where we are tapping into the group resources. And the other part is a direct acquisition that the Santander Group did in Chile and that was announced in January where the group purchased an annuities company from principal. This is subject to regulatory approvals, and we expect those to -- that operation to be fulfilled by mid this year, so very close to third quarter. And well, there are some natural components between annuities companies in the Chilean market and banks as we banks tend to originate longer. We have a very good capability of originate longer assets, but it's getting more expensive for us to store them. And those assets are quite interesting for companies like the one that was recently announced to be acquired. So I think that's pretty much the state of the art. We don't expect many moving parts going forward and the group needs to integrate this new acquired operation into the area of control. So that's what I... Yuri Fernandes: No, no, that's clear. On annuities, can the local banks on annuity companies in Chile or you can't... Cristian Vicuna: No, no. Capital from banks have not been completely isolated from annuities companies. So we have to remain -- we have to control those business completely separate, and that's why it was the Santander Group that purchased that company. Operator: Our next question is from Neha Agarwala from HSBC. Neha Agarwala: We are hearing about some discussions around removing interest rate caps for consumer lending. And given that you've been historically very strong in the mass market segment, how do you weigh that opportunity? And also if you have any clarity as per that discussions? And how could that impact Santander Chile? I'll ask my next question later. Cristian Vicuna: Thank you for the question. Interest rate caps have relevant limits on the ability in Chilean banks to charge interest rates to customers. So credit cards are capped at 40%, and the typical auto lender will be lending on the area of 20% to 22% and so on. So it's a sign on different sorts of products, sizes of the credit and durations. There is an early discussion regarding whether the system needs amendments on the definition of interest rate caps. But it's too early to say when this discussion is going to go from the government to the economic commissions in Congress to be discussed. So we don't expect pretty much this thing getting approved this year. We think it's too early to tell. We need first for the Kast administration to take office. And then they will announce what the schedule is going to be like and what their priorities are going to be. We believe that it will be or it would be good news in terms of general bancarization access, especially for the part of the mass market. But we don't expect news to come on that front too soon. Neha Agarwala: Perfect. Very clear. And regarding your loan growth expectation, we are expecting the Kast administration to take office. And after that, maybe we could see a pickup in investments in general, which could improve the sentiment and the loan growth. Is that scenario already incorporated into your guidance? Or could that pose a little bit of upside risk, mostly in the second half? Cristian Vicuna: So pretty much what we're seeing is a low 2% year, so something 2.3% in that area. So 1x that plus inflation places you on the low 5% area. We're expecting something between 5% and 6% for the year. Remember that Kast administration will take office in March 11. So we don't expect structural changes to be made at least until the second quarter, maybe more skewed to the final part of the year. So the pickup that we are expecting in terms of growth for the economy in general are more skewed to the final part of 2026 and into 2027. Neha Agarwala: And you account for that in your forecast, right? Cristian Vicuna: Yes. Yes. That's what we are considering in the forecast. Operator: [Operator Instructions]Our next question is from Ewald Stark from BICE. Ewald Stark Bittencourt: I have 2 questions. The first one is if you can provide any details regarding your expectations for risk-weighted assets density for the year-end? And the second is regarding sensitivity to inflation. It seems like sensitivity to inflation has decreased based on monthly financial results. Those are my 2 questions. Well, what do you expect going forward regarding net income from indexation units relative to inflation? Patricia Pallacan: Okay. Thanks, Ewald, for your question. Regarding the risk-weighted assets for this year and the density with a mid-single-digit growth in loans during this year, we are expecting consistent with that scenario, a growth in risk-weighted assets around 2% for this year. That will keep the density within this level, assuming that the proportion of the growth is what we already mentioned in our loan growth projections, right? So that is our base scenario for RWAs. Regarding inflation for this year, we are considering an average exposure to inflation of around CLP 8.5 billion, which means around 15 basis points of sensitivity to every 100 basis point inflation, right? So it is true that by the end of the year, last year, we reduced our exposure given the low CPI rate that we have. The average for this year will be around CLP 8.5 billion in our base scenario. Cristian Vicuna: Could you clarify what you mean by the net income from indexation? Ewald Stark Bittencourt: Well, if you decompose net interest margin -- well, the NII, the NII is composed of 2 main elements, interest and the component of inflation, yes. Cristian Vicuna: Yes. So regarding the readjustment part of the NII that you're mentioning, as Patricia already mentioned, we are carrying about a 15 basis point sensitivity per 100 percentage -- 100 basis points of inflation movement, right? So that's pretty much in the area of the CLP 8 billion along inflation. So pretax, it will mean about $80 million per 100 basis points of inflation. Ewald Stark Bittencourt: Perfect. And let me check if I got this right. So you expect risk-weighted assets density to mildly decrease throughout the year because they are going to increase by 2%, while assets will be growing by close to 5%, given your expectations for loan growth? Patricia Pallacan: Yes, right. If we assume that -- if we assume that our density maintained during the year, an increase of 5% in loan portfolio will imply around 2.5% of risk-weighted assets growth during the year. Operator: We have a follow-up from Yuri from JPMorgan. Yuri Fernandes: Just going back to the Getnet, a curiosity I have here regarding the appraisal report, and I know it's not the company, right? But some of the appraisals, they had a little bit -- in our view, a little bit conservative revenue CAGRs ahead, right? I guess revenue for Getnet should be growing 5% until 2035, like net income decreasing minus 15% CAGR until 2035. Just to understand like is this the view of the company? Like should we -- when we see your fee guidance and this thinking about the total for Getnet, should we assume like even more competitive environment, changing industry, this is the reality, like should Getnet grow revenues at 5% going forward? Cristian Vicuna: So well, you mentioned -- well, that's for the long run, in terms of whatever was in the different documents displayed some stronger still growth in the first 2 years. But actually, to your point, we believe that the industry is facing relevant transformations, right? So on the one side, some very -- some recent news have talked about how Transbank now can renegotiate all the fees structure that were locked in by some court rulings. So that will create a relevant pickup in terms of competition from the largest player in the industry. At the same time, we've seen some M&A happening of Itau and the initiation of the acquiring operation of Banco de Chile. And as such -- and we also saw the Chilean Central Bank authorizing the chamber of payments that will provide functionality for instant payments in a similar way to PI for the start-up environment. And all of this is on the umbrella of upcoming changes in the regulation that are already approved such as the open finance law. So we are seeing a super intensive change in the way the industry is configurated. We are seeing a relevant increase in competition. And as such, we expect that the economic drivers that were part of the success of the growth of Getnet for the last 4 years are changing as we speak in terms of -- now we'll be competing with more and more relevant competitors and not only an incumbent that had the hands locked by some court rulings. This is why we believe that it was the right time to incorporate the strategic partnership with PagoNxt to support the efficiency and the growth prospects of Getnet through the capability to enter into some cross-border transactions that we can get through this partnership. So that's pretty much the main key beliefs that are behind the transactions. And that we have been seeing materializing in the last 2 to 3 months. Thank you, Yuri. Yuri Fernandes: No, no, that's a good answer, Cristian. So basically, maybe the near term is still doing fine, but competition is building up. So who knows what's going to happen, but it's likely that maybe we're going to see a more challenging environment for Getnet. I guess that's the summary, right? Cristian Vicuna: Yes. Yes. That's it. Operator: It looks like we have no further questions. I will now hand it back to the Santander Chile for the closing remarks. Patricia Pallacan: Thank you all very much for taking the time to participate in today's call. We look forward to speaking with you again soon. Operator: We'll now be closing all the lines. Thank you, and have a nice day. Lorena Palomeque: Thank you. Cristian Vicuna: Thank you.
Operator: Good morning, and welcome to the Markel Group Fourth Quarter and Year-End 2025 Conference Call. [Operator Instructions] During the call today, we may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. They are based on current assumptions and opinions concerning a variety of known and unknown risks. Actual results may differ materially from those contained in are suggested by such forward-looking statements. Additional information about factors that could cause actual results to differ materially from those projected in the forward-looking statements is included in the press release from our 2025 results as well as our most recent annual report on Form 10-K and quarterly report on Form 10-Q, including under the captions Safe Harbor and Cautionary Statement and Risk Factors. We may also discuss certain non-GAAP financial measures during the call today. You may find the most directly comparable GAAP measures and reconciliation to GAAP for these measures in the press release for our 2025 results, the press release for our 2025 results as well as our Form 10-K and Form 10-Q can be found on our website at www.mklgroup.com in the Investor Relations section. Please note, this event is being recorded. I would now like to turn the conference over to Tom Gayner, Chief Executive Officer. Please go ahead. Thomas Gayner: Thank you, Rebecca, and good morning, and welcome. Thank you for joining this call on today's call. I'm delighted to be here with my colleagues, Brian Costanzo, our CFO; Simon Wilson, CFO of Markel Insurance as well as Mike Heaton, our COO, who will be available for the Q&A session. At Markel Group, our purpose is to be a long-term home for exceptional leaders and businesses, and to relentlessly compound your capital at attractive rates of return over decades, all while staying true to our culture as we describe it in the Markel style. 2025 was a year that reinforced the power of that model. Every reportable segment made a positive contribution, and the company advanced both quantitatively and qualitatively. Let me begin with Markel Insurance, where we took a series of decisive long-term actions this year. These were not easy, but they were necessary. And I want to thank the entire team for a year marked by tough decisions and genuine progress. In 2025, we exited underperforming businesses, most notably reinsurance, made key leadership changes, including appointing Simon Wilson as the new CEO of Markel Insurance, and we made structural improvements to simplify the business and reinforce accountability. The full impact of these changes will play out over years as is the case with all long-term compounding. Last quarter, I described the results as a green shoot. This quarter, all adjusted to the plural. We are now seeing green shoots. In the fourth quarter, Markel Insurance generated a 92.9% combined ratio and contributed $399 million of adjusted operating income. For the full year, the segment delivered $1.4 billion in adjusted operating income, up from $1.2 billion in the prior year. And 2025 marked the 21st consecutive year of favorable reserve development, a testament to our conservative posture and financial integrity. Within Markel Insurance, the headline is simple. We're doing more of what works and less of what doesn't with a focus on simplification, better execution and improved returns on equity. As Simon will discuss later, we believe the foundation is now set, but it's early days. Importantly, Markel Insurance is only one part of a broader, more diverse ecosystem of high-quality cash flows, which are central to the Markel Group story. Our Financial, Industrial and Consumer and Other segments also delivered positive results in 2025, each benefiting from the autonomy and accountability we give leaders to make the best long-term decisions for their businesses. The Financial segment, which includes State National and Nephila had a tremendous year, generating $327 million in adjusted operating income, up 25% from 2024. The Industrial segment earned $343 million, slightly below last year's level. This was a strong result given the softening in certain end markets, and it reflects the skills of the amazing leaders of those businesses and the room and space we give them to serve their customers with a long-term mindset. Consumer and Other delivered $175 million of adjusted operating income, up from $145 million last year with our acquisition of EPI driving most of the increase. Our public equity portfolio returned 10.5%, generating $156 million in dividend income and ending the year with a market value of $13 billion with an unrealized gain of $8.9 billion. These equity holdings, diversified, high quality and held with a long-term mindset remain an important driver of compounding. All of our streams of adjusted operating income convert well into cash, producing durable, resilient and diverse inflows that give us the flexibility to allocate capital to its highest and best use wherever that may be across the group. To that end, cash flow from our operations grew to $2.8 billion in 2025, and we put that cash to work with discipline. To give you a sense of that, we deployed some of that cash to $1.4 billion in fixed maturity net purchases, $207 million in new property and equipment. We bought $143 million of net public equity securities and invested $170 million in bolt-on acquisitions and increases in our ownership stakes in our existing majority-owned businesses. We also redeemed $600 million in preferred shares and repurchased $430 million of our own common shares, all while weighing every dollar invested against its next best alternative. Even with all that investment and return of cash to shareholders, our cash balance increased by $411 million, and we paid down a little bit of our long-term debt. That combination, high-quality cash inflows with a 360-degree set of opportunities to deploy it continues to fuel what we often describe as a perpetual motion machine of shareholder value creation. In any given year, results can and will be volatile. But over 5-year periods and beyond, the trend has been up and to the right. That's the power of long-term compounding. It is a joy to serve you alongside such a great team. We are energized for the year to come, and we thank you for your ongoing engagement and support. With that, I'll turn it over to Brian. Brian Costanzo: Thank you, Tom. Good morning, everyone. As a reminder, last quarter, we released significant enhancements to our financial disclosures, along with the reporting changes guide available on our IR site. We made these changes to help investors better understand the company and its performance. To review the major changes we made were changing the presentation of investment gains and losses to be included outside of revenues, establishing new reportable segments of Markel Insurance, Industrial, Financial, and Consumer and Other, while collapsing our former investment segment results into these new segments and reporting of new metrics, including adjusted operating income for all segments that excludes investment gains and amortization expense and segment level KPIs such as organic growth and return on equity for insurance. With that, let's cover the results for the period, starting with our consolidated results. Markel Group's consolidated operating revenues, which exclude net investment gains, were up 8% for the quarter and 5% for the year. Operating income for the quarter was $795 million, up from $595 million in the comparable period last year and $3.2 billion for the year versus $3.7 billion in 2024. As a reminder, operating income includes net investment gains, which can be volatile from period to period. Net investment gains were $212 million in the quarter compared with $117 million in the fourth quarter last year and $1.1 billion for the year versus $1.8 billion in 2024. Adjusted operating income, which excludes net investment gains and amortization expense, totaled $626 million for the quarter, up 19% versus the same period last year. Adjusted operating income was $2.3 billion in 2025 compared to $2.1 billion in 2024 or up 10%. The increase in adjusted operating income was primarily driven by improvements in our insurance business and strong performance within our Financial segment. Operating cash flow was $2.8 billion in 2025 versus $2.6 billion in 2024 and comprehensive income to shareholders totaled $606 million in the quarter and $2.6 billion for the year. Turning now to our operating segments, starting with Markel Insurance. The return on equity for Markel Insurance for 2025 was 14% and the trailing 5-year period return on equity was 13%. We view the 5-year average return on equity as our primary KPI within insurance, measuring our commitment to generating consistent profitability within both our underwriting and investment operations and remaining efficient with our use of capital. Markel Insurance underwriting gross written premiums increased 3% for the quarter and 4% for the full year, driven by personal lines in the U.S. and growth across several product classes in our International division. At a divisional level within Markel Insurance, within our International division, gross written premium grew by 14% for the year with the division growing in every market. Our International division continued its recent track record of fantastic results, posting an 83% combined ratio for the year. Programs and Solutions gross written premium grew by 8% for the year, driven by our personal lines and delegated programs units. For our Wholesale and Specialty division, gross written premium declined 4% for the year. Excluding the impact from exiting our U.S. risk managed professional liability book earlier this year, premium growth was flat across the division. In Global Reinsurance, which we exited in 2025, gross written premium declined 10% for the year. Overall, underwriting gross written premium volume, excluding the impact of exiting our Global Reinsurance and U.S. risk managed professional lines grew by 7% for the year. One additional note on premium volume relative to our 2026 reporting. Our underwriting premium volume next year will be impacted by 2 significant items. First, the exit of our $1 billion gross written premium Global Reinsurance business; and second, the transition effective January 1, 2026, of our partnership with Hagerty to a pure fronting model. Hagerty premium will be included in our results going forward as fronted gross written premium versus underwriting gross written premium. This change was a natural next step in our long-term evolution of our partnership with Hagerty, continuing to retain greater amounts of underwriting risk. In 2025, Markel only retained 20% of the Hagerty gross written premium volume, so the impact on our net earned premium volume will be significantly less. Together, these 2 changes will decrease underwriting gross written premiums for 2026 by approximately $2 billion, but we expect these changes over the long term to benefit our combined ratio, adjusted operating income and return on equity. Turning back to insurance profitability. Adjusted operating income for Markel Insurance was $399 million for the quarter, up 31% from last year. The combined ratio for the quarter was 92.9% compared to 95.9% in the same quarter last year. This 3-point improvement was driven by lower losses from our CPI product and within our U.S. casualty lines, partially offset by higher attritional losses in our U.S. personal umbrella product and large losses incurred in the fourth quarter within our U.S. surety line. Our surety portfolio has been highly profitable for us since our acquisition of SureTec in 2017. For the year, Markel Insurance finished with $1.4 billion in adjusted operating income and a combined ratio of 94.6%, a 1 point improvement from last year. We had 6 points of favorable prior year loss development for both the quarter and year-to-date periods, and our balance sheet position for reserves remains strong. Turning next to our investment portfolio. Our net investment income was $258 million in the quarter and $970 million for the year, up 6% for the quarter and 5% year-to-date due to higher interest rates and increased holdings in fixed income securities. Our fixed income portfolio yield was 3.6% for the fourth quarter. We reinvested new money into securities at an average yield of 4% in the quarter versus 3.1% on average across our net maturities. Within our public equity portfolio, during 2025, we made $143 million of net purchases of securities. Our public equity portfolio returned 10.5% for the year, bringing the value of our public equity portfolio at the end of the year to $13 billion with a total unrealized gain of $8.9 billion. Over the trailing 5-year period, the equity portfolio's annual return was 12% compared with 15% for the S&P 500. Our net equity purchases declined year-over-year, reflecting rising and less attractive valuations and better opportunities elsewhere for incremental investments. Moving to our Industrial segment. Revenues were $1 billion for the quarter and $3.9 billion for the full year, up 4% for both the quarter and for the year. Organic revenue growth was 2% for the year. Revenue growth for the year was impacted by our acquisition of Valor and organic growth was driven by our equipment leasing business and our businesses that serve commercial and residential construction markets, partially offset by lower revenues in our transportation products businesses. Adjusted operating income was $80 million for the quarter, down 26% from $108 million in the same period last year. Adjusted operating income was $343 million for the year or down 6% versus 2024. The decline in adjusted operating income was driven by lower revenues in our transportation products businesses and tightening margins due to higher materials and labor costs within our other products businesses. For our Consumer and Other segment, revenues were $274 million in the quarter and $1.4 billion for the full year or up 4% for both the quarter and year-to-date periods. Organic revenue growth was 1% for the year. Adjusted operating income was $23 million in the quarter, up 35% versus $17 million in the same quarter 1 year ago. Adjusted operating income was $175 million for 2025 or up 20% versus 2024, driven primarily by our acquisition of EPI and higher sales volume of ornamental plants. Next, within our Financial segment, revenues were $224 million or up 41% for the quarter versus the same period 1 year ago and $737 million for 2025, up 24% versus 2024. Organic revenue growth was 17% for the year. The increase in revenues for the year was due primarily to increased performance fees and a higher management fee rate within ILS, along with higher premium volumes within our program services product. Year-to-date revenues were impacted by a $41 million gain on the sale of our remaining minority interest in Velocity earlier this year. The increases in revenue drove adjusted operating income up 58% to $107 million for the quarter versus the comparable period 1 year ago and up 25% for 2025 to $327 million. The year-to-date adjusted operating income change was also impacted by $58 million of favorable loss development related to Markel CATCo recognized in 2024. Finally, regarding capital allocation. For the year, we repurchased shares totaling $430 million, reducing our share count to 12.6 million shares from 12.8 million shares at the end of last year. We also redeemed our $600 million preferred stock issue earlier this year, making total capital returned to shareholders over $1 billion. With that, I will pass it over to Simon to discuss Markel Insurance. Simon Wilson: Thank you, Brian, and good morning, everyone. I'm pleased to be with you and share some further insight on the progress at Markel Insurance. First off, some numbers. The quarter produced a combined ratio of 92.9%, 3 percentage points better than the same quarter in 2024. The prior year reserve release of 6 points in the quarter was broad-based and reflective of the stable position of our reserves. We achieved 3% growth in GWP and 7% growth in net earned premium despite our withdrawal from the Global Reinsurance business. Improving underwriting results were an important factor in achieving a 14% return on equity for Markel Insurance in 2025. Our underwriting and reorganization actions over recent years are beginning to pay dividends. We are now far better able to focus on the key areas where we have a right to win. The combined ratio of our 3 ongoing business divisions for Q4 2025, which excludes the impact from Global Reinsurance and CPI was 91%. This figure would have been even stronger, but was impacted by heavier-than-expected losses in a large personal umbrella program and our surety business, where we were hit by 3 discrete losses in the period. Every decision that we made during 2025 was designed to simplify our business and create clarity around P&L ownership. Ultimately, these decisions will drive more consistency and better execution around the key financial metrics of combined ratio and return on equity over the long term. The 2026 business planning process completed in the quarter was a key test of a new structure and gives me confidence that the overall organization will benefit from the changes we made in 2025. Five key indicators that underpin this confidence are: number one, a revamped portfolio mix with a refreshed focus on bottom line results and a wide range of profitable growth opportunities; number two, ambitious and measured investment plans for our high-performing businesses with clear growth opportunities such as environmental, energy, healthcare, financial institutions, personal lines and workers' comp in the U.S. and our key regional businesses in the London market, European Union, Asia Pacific, Canada and the U.K.; number three, P&L owners are challenging expenses harder than I've seen in a long time. It's been interesting to watch the way behavior changes when costs are clearly attributable to a business unit. I fully expect and encourage this behavior to continue. The planned doubling of investment of our technology stack this year versus last is the fourth area. These decisions are now driven by the business rather than the corporate center. For example, we have a complete system overhaul in the high-performing personal lines business, the continued transformation of our data and core operating systems across the International division and a commitment to increasing decision-making speed and response times in our core U.S. wholesale and specialty division. AI will be a central component of all these investments. We are fully aware that speed is a critical success factor in our business, and we are focused on improving it. And finally, number five, a renewed sense of ownership across our leadership group. A founder's mentality is returning to the fray. Our business model is designed to be driven by many, not few. We have set clear expectations for every area of our business for 2026. Our job is now to execute. Further, the overall improvement in operations is built upon the continued strength of our balance sheet. The overall reserve release for 2025 was 6 points or $484 million. We're able to make these releases while increasing our margin of safety and overall strength of the balance sheet. We have a continued commitment to setting reserves that are more likely redundant than deficient. A strong margin of safety will be important in the coming years. There is no doubt that market conditions in many areas of the specialty insurance industry have softened. Profitability has been high. Competition has increased and prices are under pressure in several key lines of business. However, competition drives progress and our customers and brokers continue to value clear appetite, market-leading expertise, high-quality service and speed of decision-making. Our job is to continue building a business that meets these needs, all while staying true to the Markel style. Businesses and teams that focus on their customers remain well organized and have a strong sense of purpose for those best positioned to succeed in any market conditions. As the comedian Billy Connolly once quipped, there is no such thing as bad weather, only the wrong clothes. I'm pleased with our new wardrobe and look forward to sharing the results with you on the 2026 catwalk. With that, I pass it back to Tom. Thomas Gayner: Thank you, Simon. Rebecca, we'd love to open the floor for questions. Thank you. Operator: [Operator Instructions] The first question comes from Andrew Kligerman with TD Cowen. Andrew Kligerman: I'd like to start off in the property casualty segment. I think back in early January when you hosted an investor meeting, Simon, you touched on wanting to kind of level out at a 93% combined ratio. And I guess the fortunate part is that you're more focused on casualty. So I want to get a sense, do you feel like the way pricing is in casualty, coupled with some intense loss cost trends, can you -- and you did come in at 92.9%, so right on the number in the quarter. Do you feel like you can sustain the trends, the 93%? And then underlying that, looking at Program and Solutions, you came in at 101.9%. I'd like to know what drove that and what you might do to kind of get that lower? And then on the flip side, International was fabulous at 80.5%, and I'm wondering what's driving such a terrific combined ratio and whether trends are going to push that up, long question. Simon Wilson: Well, that's pretty much everything there. Andrew Kligerman: Yes, [indiscernible] question, sorry. Simon Wilson: No, that's fine. And thank you for the interest in those numbers as well. I have said -- and we said for a long time now that to hit our return on equity kind of like aspirations, a low 90s combined ratio is important to us. So that's absolutely my ambition and the focus of our organization to get down to that kind of a number consistently. That's the plan. Part of your question is saying, look, you guys pretty casualty-centric organization. How do you get to a 93% with that backdrop? I'd probably challenge that actually. I don't think we are that heavily casualty oriented. We've got a very diverse book of specialty products. Yes, we've got U.S. casualty, but our London market business, for example, lots of marine, energy, a lot of professional lines all around the world. So I don't know the exact percentages of our casualty -- the casualty contribution to our book, but it will be less than 50% for sure. And so again, very well balanced across the portfolio. Therefore, I think it's the power of that diversification and us kicking the tires in lots of these specialty business areas that gives us the confidence that we can get towards achieving that ambitious combined ratio target over time. So if you're asking me, do I think we can approach those targets? Well, everything that we're doing and putting in place is designed to achieve those, but we'll see how that pans out. But the diversification of the portfolio and those different drivers, a couple of those that you just called out that will end up with the result overall. So I'm focused on it, I feel good about it at the moment. Specifically on Programs and Solutions, you raised that in the quarter, it took a pop. And I did mention in my comments, and I think Brian did in his, there were 2 factors that influence that. And a quarter is a pretty short period of time. So you get the occasional blip. The 2 areas were in our -- what we call our programs business, that's delegated underwriting, where we do a personal umbrella account. And we saw the claims trends beginning to spike in that area. And what we tend to do at Markel and certainly my philosophy is to get ahead of those loss trends and put our reserves up early. So the combined ratio and the loss ratio within that for the personal umbrella program is really driven by us putting up a big solid reserve against that program so that we've got the money in the bank effectively to pay the claims that may or may not come through, but that's our best guess at the moment and very much focused on that redundant rather than deficient position on our balance sheet. So that's the first area in Programs and Solutions that created that result that came overall. The second area was actually in our surety business, which I'll be honest, I think we were a little bit surprised, not least because the surety business has been an absolute mainstay of profitability for a decade now since we bought a company called SureTec back in the mid-2000 teens. This -- often in business like the ones that we do, we get the occasional large loss, and in surety, we actually suffered 3 large losses in the quarter, and we've obviously reserved and paid claims against those. That happens. I will take the trade on surety every day of the week, though. We were -- we had 3 large losses this year, but it's on the back of 10 years of very significant profitability. And as we look forward into 2026, having reviewed that entire book of business, we feel really good about that, the standard result that comes out of that business, absolutely meeting our combined ratio and return on equity targets. So I would consider, and I genuinely think that the Programs and Solutions business suffer from 2 very specific areas. The rest of that area, personal lines business, our Bermuda business and our workers' comp business all performed really well. So on average, I think they did really nicely. International, I do have fairly good insight into that. They've been producing extremely good results for a number of years now. And what happened there was in the late of probably 2017, '18, we took a big hard look at the portfolio and took out areas of business which we didn't think we were going to be profitable over the long term, areas where we didn't feel we had the right to win. So when we cut back and -- this is 5, 6 years ago, those areas, we then started to grow in areas where we did have the right to win and our regional businesses as well. So what we're seeing now is the result of decisions that were made 5 and 6 years ago and then investment on that new business model over quite a long period of time. So key growth areas last year were in Asia Pacific, which was up over 30%, our European Union business, which is up 20%; London market business, which is up 13%. They are all areas that we've been strategically investing in for a long period of time. And the result is one of quite good market conditions over the past few years, but absolute focused investment in areas where we think we can win. And that's what we're trying to do in all the other areas of the business now that we've got this really focused business model across the whole of Markel Insurance. So I can't say that we're going to achieve low 80s combined across the whole thing for the next decade. That's not what I'm going to say here, but we'll take the International results now. And I think what we've seen there and the techniques that were driven to achieve those results is exactly what we're deploying across the rest of the business. And that's what gives me confidence in the thing as a whole. And I look forward genuinely to what we can do in 2026. Thomas Gayner: If I may, Andrew, just to finish up, to translate Simon's English accent to the American idiom, we will do the best we can, and that's not so bad. Andrew Kligerman: No, it's not. super helpful response. Maybe shifting over to Industrial and Consumer. And by the way, thank you for the new reporting structure. It's very helpful. The Industrial organic revenue was up 2.5%. I think you just mentioned equipment leasing was good, and it was offset by transportation. Wondering if you could share a little color on how that's likely to trend going forward. And then in the Consumer, you had organic growth of about 1%. I think you mentioned ornamental plants was a positive. But how do you think that's going to trend going forward as well? Thomas Gayner: Yes, Andrew, it's Tom. We are delighted with the collection of businesses that we own. We've got first-class people running them. They're producing good returns on capital. We run those with a focus on good returns on capital over long periods of time. Each and any one of those businesses in any quarter has volatility and normal cyclicality and seasonality. So frankly, the answer to your question is we don't think about it that much. As long as those businesses are being well run and doing what they should do, well, then the outside forces are what they are. But when we totted up the numbers of them for a long period of time. As you can more clearly see in the way we're presenting the financial disclosures and data these days, we are happy. We were happy 6 months ago. We're happy right now. We would anticipate continuing to be happy with the way those businesses are performing. Operator: [Operator Instructions] Your next question comes from the line of Andrew Andersen with Jefferies. Andrew Andersen: Maybe just on the Insurance segment. How are you kind of viewing the insurance pricing environment into '26? Are you still seeing rate increases in certain areas? And maybe how does that differ between U.S. Wholesale and the International segment? Simon Wilson: Thanks, Andrew. Thanks for the question. In -- there's a general trend, I think I mentioned that sort of -- so there's a number of lines that you are seeing softening rating conditions at the moment. In particular, I would say U.S. property would be top of the list on that. We've seen very significant profitability definitely in our book, but that's across the industry. And with that profitability often in the insurance market cycle, you see heavy competition. So we are seeing very significant competition in that U.S. property market. And it depends what the account is, but you're looking at probably at least 10% reductions in many of that -- in that property book and probably up nearer towards 20%, I think, in general terms. And we've seen that reported by several other players as well. It is a bit more nuanced than that. It's not just to say like every property risk is down double-digit percentages. What we're really seeing in property is the structured and layered risks that come in. There's a change in the structure that's going about. So the primary layer is actually writing larger lines with sort of the initial insurer and some of the -- the layers on top of that, the excess layers are being challenged either by being removed completely or you're seeing an awful lot of competition going around them. So if you're playing in the second or third excess layer, you're probably seeing more intense price reductions there than maybe you are on the primary side. So property is generally soft, but you're also seeing that nuance a bit where depending on where you play in the program. A lot of people though in property are talking maybe not just about rate reductions, but rate adequacy. And I think that's really important because there were a lot of sharp rises in the property market when we saw catastrophes kind of 3 and 4 years ago, impacting the cat market and then the non-cat market in property as well. So I think the general sentiment in the industry is that prices are just about remaining adequate at the moment, but you really have to be thoughtful about what your risk appetite is and where your sort of your walkaway price might be. So we're keeping a close eye on that area. Conversely, the casualty market continues to get rate increases, specifically in auto risks, habitational risks, construction risk. We're seeing that significant rate increases ongoing. And that's important because the claims trends that we're seeing in those areas continue to be fairly strong as well. So the skill in casualty is not just writing everything just because rates are going up, but really being thoughtful about the areas of the casualty market in which we're going to play because the litigation environment in the United States is all very significant as well. Moving to International briefly. I would suggest that there is softness there. So as a wholesale market in London, you see quite a lot of business that going to London becoming sort of structured and certain brokers are bringing that in and looking for price reductions when they go into London. So certainly, in marine lines, energy lines, property areas, we're seeing that price competition in London as well. I think the professional lines area actually has begun to stabilize after a couple of years of softening. I think that's stabilizing. And again, being really focused on rate adequacy in that area is what we're focused on. And sticking to the bits of the professional lines where we really think we add value to the broker and to the ultimate customer and where we've got expertise, that serves us well, and that's one of the reasons why our combined ratios have been so good in London is because we've chosen our risk pretty well. Outside of London, in our regional offices, and this is a really important point for people to note, we tend to focus on the small end of the risk market. And the very small end of the risk market, and this is maybe $2,000, $3,000 policies quite often, certainly in the European Union, the U.K. regions and some of our Asia book. In that area, the price competition is less aggressive. So yes, you might see a bit of softening, but it's very much single digit in there. And often, we're charging minimum premium. So the rate adequacy can be really positive in that area. So less affected outside of our London lines than in London just because the intensity of competition for that small risk segment is just lower. It's harder to get at, and it's stickier. So our strategy within International is to grow our non-London portion relative to London so that we've got more of this kind of smaller, stickier business, which is less exposed to intense price competition going forward. And I think that balance will help us with that overall diversified portfolio over time. So it's a mixed bag in terms of what's happening in the rating environment. And to very quickly summarize, property is competitive. Casualty actually, we're seeing firming and hardening, but it's not an easy market to underwrite your way through. London is competitive. Non-London International actually is stacking up, continues to stack up pretty well. So hopefully, that gives you a bit of a flavor for what's going on in our world. It's an interesting time, and I like our odds with the underwriters that we've got on the ground to navigate it. Andrew Andersen: Very comprehensive. And maybe we could just kind of shift to AI and the expense ratio. What kind of -- where is it being deployed within insurance? Maybe what are some returns or examples you've seen so far, and some focus areas into '26 and '27 for deployment? Thomas Gayner: I'll ask Brian to take the first stab at that and... Brian Costanzo: Sure. Yes. I mean, I think with the new model that we have and the operating model and the org structure, I mean, now it's really in the hands of the individual business leaders. We're trying to put tools in their toolbox, make them aware of what's out there. We've had some really nice wins in lines where you have large documents and need to digest big amounts of data. So think of things like transaction liability, financial institutions where you can get data rooms filled with all kinds of things that humans have to pour through, the AI can synthesize that down very quickly, pull together the data and allow you to lower the investment of the human side, and that allows you to look at accounts that from a size and premium standpoint, you wouldn't have been able to access just because of the human element and the expense ratio of going after those. Now you've broadened what you can go after from an appetite standpoint. So that's certainly one example. I think the other place we've seen a lot of AI use is in data ingestion. So when we have delegated underwriting arrangements, when we have [ border ] business coming in, when we need to get data into our systems and use that to make decisions using the AI to transport, bring it in, and that avoids a lot of the human element of what I call data wrangling and data compiling that's expensive, it's non-value add. It shifts those resources now to where the data is there, you can now spend the time doing the analysis, finding the trends, finding where you win and enhancing the book overall. Simon Wilson: And I'll just add to Brian, and you picked up some really important spots. I will say this, I am -- Andrew, I'm utterly obsessed with operations. I'm sort of -- I'm pretty geeky around this stuff. I'll admit that much. And efficient and high-quality operations that lead to speed of response are absolutely at the center of my mind now. I'm really excited about where we are on this AI position, right? We have some really exciting projects ongoing at the moment. Brian alluded to a couple of them there. But what 2025 did to clear the organizational structure so we can really focus on specific areas of the business, allows us to deploy AI in a much, much more effective way than a simple broad brush effect that we did previously. So I don't think we -- we're doing some really exciting things. I think will begin to impact our productivity and efficiency at the moment. But I'm going to start turning the handle on AI and just operations in particular, during this quarter and next to get our focus in and around that. And I think that will begin to have a much more material impact as we go through the next sort of 6 to 12 months. So we've made a nice start, but the strategic level of what we need to do here is just beginning. Brian Costanzo: And maybe I'll add, [ Markel ] will talk more generally on expense ratio. If you look at the portfolio, the areas in which we're growing and have been very profitable in some of the segments in International, our European business, our Asian business in the U.S., our personal lines business, those are all great businesses, low combined ratios. They have higher expense ratios to operate. They have opted inverted expense ratio loss ratio profile to other areas of the business. Areas where we've been very challenged, our Global Reinsurance business, our risk managed professional liability product that we've exited, those are some of the lowest expense ratio businesses that we had in our portfolio. So we are ultra-focused on combined ratio, return on equity. We certainly want to take advantage of efficiencies, AI or whatever they might be from an operations standpoint. But number one is that combined ratio focus that we have. Operator: Your next question comes from the line of Mark Hughes with Truist. Mark Hughes: In the Financial segment, earnings very strong this quarter. You talked about better fees, I think assets under management. How much of that was product of just the light cat season this year? And how much of that should we think ought to carry forward into 2026? Thomas Gayner: Yes, I'll start, and I'll turn it to Brian. Yes, clearly, the light cat environment helps. Brian Costanzo: Yes. I mean -- so what I'll say is the like cat environment at Nephila, they did earn some performance fees in the fourth quarter based on that. But kind of -- we've talked about this before. Those kind of all matriculate in the fourth quarter. So you wait the full year, you see how the ultimate kind of cat season plays out. And then in the fourth quarter, those crystallize. And with a very low cat season, we saw the benefit coming from that. The other thing going on there is the State National business has just been on a consistent track record year-over-year growth, growth in the premium base, growth in the fee income that they're generating. That's high-margin business when it comes in. So a lot of that growth drops right to the bottom line. Mark Hughes: On State National, have you seen any push in your book for more risk retention on your part? Or -- yes, I'll leave it at that. Thomas Gayner: Yes, it's Tom again. Yes, that's a feature of the market. State National has been a leader, they do well and leaders attract competition. Mark Hughes: Very good. And then Tom, the AI trade, when you allude to your equity portfolio, a lot of discussion of software companies or tech companies that may be at risk from AI and obviously, opportunity, but then it's quite a volatile area. So how are you looking at that from your equity portfolio standpoint? Thomas Gayner: Well, I appreciate the question. One of my great friends and mentors and teachers and long-time Markel shareholder who passed recently, a guy named Chhadrow down in Texas, and I learned so much from him over the years. And one of the things he used to say was that in the investment business at any given point in time, you look either smarter or dummer than you really are. And 2025 was a year, I would say we looked dummer and we probably really are. If you look at our long-term record, very proud of it, very pleased with the discipline and the way we do things. But clearly, the AI headlines that you read had a lot to do with investment returns and probably a bit less with what happened at Markel. As we turn the quarter into 2026, the swirl that's out there, let's hold our fire and see how that works out. But clearly, the disciplines and the tools and the principles we've used to manage and select equity investments over the years on any given day will look better or worse than they truly are and I stand by what we do. Mark Hughes: Very good. And if I could squeeze in one more on the personal umbrella. You put up strong reserves. What underwriting actions have you taken? Price increases, stricter terms and conditions, just curious. Simon Wilson: Yes, good question. So we've done 2 major things I would suggest just for this call. The first is to increase rate quite significantly. Now it's an admitted product, so you have to do that state by state, you have to apply for it. So I think we're up to, I mean, a dozen states now that have signed off on that. So we have a material increase in the pricing that we're able to charge in those states now. But we've also taken another key underwriting action, which is to stop underwriting people's second homes in Florida. That was a cause of a lot of these losses. And increase the attachment point from -- it used to be $250,000 where we attached in these states where we've been able to get the rate increase, we've also increased the attachment point to $0.5 million. And we think that will take away a significant chunk of the losses that we've been being hit with mainly from auto losses actually in those various states. So we've acted decisively, quickly, and we are keeping a very, very close eye on how those claims trends go from here on in. But we do have -- we put the reserve up this quarter to give ourselves breathing space and cushion to watch that play out. And ultimately, if these underwriting actions don't work, then we'll have to think about maybe withdrawing from that particular area of business. We're not there yet, but we'll see. But a very, very big focus in the last couple of months from Alex Martin, Jeff Lamb and their teams. Operator: This concludes our question-and-answer session. I would like to turn the call back over to Tom Gayner for any closing remarks. Thomas Gayner: Thank you very much for joining us. We appreciate your support and your interest, and we're delighted to be able to report the results of the rational focus and the rational actions that we are indeed committed to and starting to see the green shoots from those activities. We look forward to connecting back with you next quarter. Be well. Operator: The conference call has now concluded. Thank you all for attending today's presentation. You may now disconnect.
Operator: Welcome to the Pandox Q4 presentation for 2025. [Operator Instructions]. Now, I will hand the conference over to the Head of IR and Communication, Anders Berg. Please go ahead. Anders Berg: Thank you very much, and good morning, everyone, and welcome to this presentation of Pandox Year-end Report 2025. I'm here together with Liia Nou, our CEO, and Anneli Lindblom, our CFO. And today, we also have the pleasure of having both Aoife Roche, Vice President at STR, and Rasmus Kjellman, CEO at Benchmarking Alliance, with us, and they will provide a hotel market update on Europe and Nordics, respectively. As you know, STR Benchmarking Alliance is both a leading independent research firm, totally dedicated to the hotel market, and the views they express are completely separate from Pandox, and we offer this presentation only as a service to Pandox stakeholders. Please note that Aoife and Rasmus' presentations will be held after we have completed our formal earnings presentation, including the Q&A. We start with Liia and Analyst business update and financial highlights for the quarter and the year, which in every sense was a very eventful one. And then we end up with a Q&A session. So yes, with that, Liia, please go ahead. Liia Nou: Thank you, Anders, and good morning, and welcome, everyone. I agree that this report summarizes a very busy fourth quarter and also a full year 2025. Starting with our existing portfolio, I am glad to report solid like-for-like growth in both business segments in the fourth quarter. This is explained by broad-based improvements in the hotel market, driven by active business demand, an overall solid event calendar, and active leisure travel. Together with profitable contributions from completed acquisitions in the business segment leases and improved profitability in own operations, this resulted in a tangible increase in group earnings. In the Leases business segment, demand improved markedly; however, still with variations between markets. The Nordics developed the best, with good rent growth in Sweden, Norway, and Denmark, while Finland was stable. Growth in Germany was also markedly stronger than earlier in the year, while growth in the U.K. was slightly positive. Like-for-like revenues increased by 5% in own operations in the fourth quarter, which, together with a positive business mix and good conversion, resulted in a like-for-like increase of 16% in net operating income. To be fair, part of this uplift is explained by one-time costs in the corresponding quarter last year. For the group, total revenues increased by 9% and net operating income increased by 22% in the quarter. Dalata is included in the numbers from the 7th of November. And from the fourth quarter, we report the acquisition as fully completed, including the expected divestment of the hotel operations to Scandic, which is expected to be closed or be done in the second half of 2026. In the quarter, we recorded rent of NOK 146 million and net operating income of NOK 138 million, i.e., for the 54 days we had Dalata. In the quarter, we also recorded transaction costs of NOK 241 million and preparatory financial costs of NOK 22 million. Adjusted for these one-time costs, cash earnings amounted to SEK 666 million in the fourth quarter. This corresponds to an increase of 23% year-on-year. We also report an acquisition result from the Dalata transaction amounting to approximately NOK 1.6 billion. This includes the estimated remaining transaction cost of NOK 340 million, which is expected to be done in 2026, and adding deferred tax of approximately NOK 1.8 billion, this contributes to an increase in the EPRA NAV of NOK 17.70 per share for a total of NOK 3.4 billion. In the fourth quarter, we also started the work to separate the properties from the hotel operations, which is expected to be finalized in the second half of 2026. Financially, our key ratios now largely reflect all aspects of the transaction. Loan-to-value, excluding debt of some SEK 504 million related to the expected sale of the hotel operating platform to Scandic and including Andlspars AB's minority holding in Bidco, was 52.7% compared to 50.2% at the end of the third quarter. On this page, we summarize some basic facts on Pandox. We are active in Europe, the world's largest hotel and tourism market, with strong structural growth drivers. We only invest in hotel properties and create value through active and engaged ownership. We have long-term revenue-based leases with a WAULT of 13.6 years and good guaranteed minimum rent levels with skilled operators. Please note that the reported WAULT is excluding the expected new revenue-based lease in Scandic for the Dalata portfolio and will thus increase. Our property portfolio has an average valuation yield of 6.37% and a strong yield spread of close to 250 basis points. We systematically invest in climate change projects in our portfolio with good returns based on our science-based targets and validated targets. We have strong cash flow and a balanced financial position, which enables us to drive continuous profitable growth through acquisitions of new properties and investments in our existing portfolio over time. We have a strong and well-diversified hotel property portfolio now consisting of 193 hotel properties with approximately 43,000 rooms in 11 countries and 90 cities, and with a property market value of approximately NOK 92 billion and a blended average yield of 6.37%. Please note that the yield increase compared with the third quarter is all explained by the Dalata properties going into our portfolio at a higher average yield. We are divided into 2 mutually supportive and reinforcing business segments: leases and owned operations. Leases where we own and lease out our hotel properties stand for 84% of the property market value. In our own operations, we transform and run hotels in properties we own. Own operations make up for 16% of our property market value. Our focus is upper mid-market hotels with mostly domestic demand, which is still the backbone of the hotel market, regardless of which phase the hotel market cycle is in. We also have one of the strongest networks of brands and partners in the hotel property industry, and this ensures efficient operations and revenue management, which maximizes cash flow and property values, and a continuous flow of business opportunities. Also, a relatively large part of the investment in leases is shared with the tenant, which lowers our risk. Later in this presentation, I will share some data on what the portfolio will look like after the acquisition of Dalata. Here, we have a breakdown of the performance for a selection of countries, regions, and cities versus 2024. We show the average daily rate on the vertical axis and occupancy on the horizontal axis. In the boxes, we indicate how much higher or lower RevPAR is compared with the corresponding period in 2024. In 2025, RevPAR growth was mixed across our markets. Occupancy was stable or growing in most markets, while the average price was more varied. In terms of RevPAR, the greatest relative improvements during the year took place in the Nordic markets, with Norway as a leader, Denmark performing consistently well, and Sweden ending the year on a positive note. Oslo and Copenhagen were strong city markets throughout the year. Many markets ended the year strongly, with Germany and especially Frankfurt and Hanover as good examples. Aoife Roche from STR and Rasmus Selman from Benchmark Alliance will talk more about this and the underlying trends in the hotel market later in this call. At every point in time, we have our projects rolling, big and small. The projects vary from high-yielding investments like adding more rooms in an existing hotel, converting non-yielding spaces into guest rooms, for instance, cabin rooms, or adding more beds to existing rooms, to more bread-and-butter investments like product uplifts and rooms/bathroom renovations. In the leases business segment, we share the investment with our tenants, and both parties enjoy the upside potential and share the risk. In our own operations business segment, we take the whole investment in our own books, but also have more control and can enjoy the full cash flow. And on this slide, you can see some examples of our bigger ongoing projects. Every year, we invest approximately SEK 1 billion into our existing portfolio. Now that the acquisition of Dalata completed, this figure is growing a bit, mainly during the next 2 years, due to especially 2 large projects from the Dalata portfolio. One conversion from an office into a hotel in City Center Edinburgh and one large extension of 115 rooms in Clayton Cardifflaine in Dublin. Both are exciting, high-yielding investments that we expect to be finalized in 2026 and 2027. Here, we have a selection of some of the upgraded products that we've done during 2025. Many of these are already giving impact in '25, but more so for the full year of '26. Add to that, our pipeline of approved investments for ongoing and future projects of around SEK 2.6 billion, out of which SEK 1.6 billion, as I said, is expected to be completed during 2026. So a good pipeline of both upgrades of products, as well as expected to add more than 550 new rooms during 2026 and 2027. Here, we have summarized key financial effects from the Dalata transaction. And yes, it is a nightmare slide, but still useful to explain the complexity of this transaction. This acquisition was closed on 7th November 2025, and we report the transaction as fully completed, including the expected divestment to Scandic. I will not go through all these lines, but except for Q4 2025 are in short. 31 plus 1 investment properties with some SEK 16.9 billion were added. The properties were externally appraised in the fourth quarter, with rent and NOI of SEK 146 million and NOK 138 million, respectively, or 54 days in business area leases. The transaction cost of NOK 241 million was expensed, prepared to financial cost of SEK 22 million, i.e., for the period before the 7th of November, and an acquisition result of SEK 1.6 billion, which includes SEK 340 million in expected sale cost for the expected sale of the hotel operating platform to Scandic. This means in principle that we do not expect any additional transaction costs on top of what has already been recorded unless we identify new areas of consideration. The deferred tax liability of NOK 1.8 billion arises from temporary differences between fair value and taxable value for investment properties. Loan-to-value, we exclude the debt of approximately NOK 500 million for the expected sale of our hotel operating platform to Scandic and include Andaz SPAR AB's minority holding in Bidco. We are currently working full speed with the separation of properties and hotel operations, which we expect to be completed in the second half of 2026. As we have said previously, there are several ways to think about this transaction from a value perspective. The main value driver is, of course, that we add 31 plus 1 investment properties of high quality in high RevPAR markets with solid profitability and cash flow generation capacity, together with a strong operating partner. We also unlock value from acquiring Dalata at an attractive price and, in turn, an implied value of the properties, which is lower than they are worth according to Pandox's business model. Our tentative estimate of this value uplift, or expressed slightly different embedded value, was some NOK 3 billion, or actually NOK 3.4 billion, as the increase in EPRA NAV of NOK 17.7 per share. Accounting-wise, this is expressed as an acquisition result of approximately SEK 1.6 billion, which together with a deferred tax of SEK 1.8 billion amount to this EPRA NAV uplift. And please note again, this also includes the estimated remaining transaction cost of some SEK 340 million. Here, we have mapped out the 31 investment properties from Dalata that we already added to the leases in the fourth quarter, and apologies in advance if some of the cities have been marked out wrongly. 21 of the properties are located in Ireland and 10 in the U.K. Dublin and London are the biggest markets with 11 and 5 hotel properties, respectively. All hotels are well-established with leading commercial positions in the markets. This is what our portfolio in the U.K. and Ireland looks like, including Dalata. In total, we now have 63 hotels, of which 12 are in Dublin and 11 are in London. In the number of rooms in our total portfolio, the U.K. now accounts for 20% and Ireland 12%. We thus increase our exposure to Ireland, in particular, but also to the U.K. market. In terms of destinations, our exposure will increase towards international destinations and decrease towards regional destinations relatively speaking. Here, we have mapped our now 12 properties in Dublin with a total of some 3,200 rooms, including some prime assets like our 608 rooms Clayton 57 rooms Clayton Hotel Leopardstown, 334 rooms Clayton Hotel Ballsbridge and not the least, 304 rooms Clayton Hotel Cardi Lane, where we also have an extension project for 115 new rooms expected to be completed in the end of 2027. Here on this page, we have 3 out of 5 new London hotels, 227-room Clayton Hotel Chiswick, the 212-room Clayton Hotel City of London, and the 191-room Malon Hotel Finsbury Park. On this page, the remaining 2 properties added the Maldron Hotel Shortage and Clayton Hotel London Wall. In total, we now have 11 properties in London for a total of some 2,400 rooms. Here, we have a quick summary of the main changes in the portfolio measured in number of rooms, primarily in relative terms. Our international exposure increases as a consequence of more rooms in international cities, notably Dublin, London, and Edinburgh. The share of revenue leases with minimum guaranteed rent also increases, which adds to the earnings quality of our portfolio. And with that, I hand over to Anneli Lindblom, our CFO. Anneli Lindblom: Thank you, Liia. Good morning. In the fourth quarter, revenue and group net operating income increased by 9% and 22%, respectively, driven by the acquisition and overall strong like-for-like growth. Like-for-like, leases reported growth of 5% in both revenue and net operating income, while own operation reported revenue and net operating income growth of 5% and 24%, respectively. Adjusted for nonrecurring items of NOK 263 million, where NOK 241 million is transaction costs and NOK 22 million is financial costs related to the acquisition of Dalata. Adjusted for those, cash earnings and profit before changes in value increased by 23% and 35%, respectively. When it comes to currency, please note that to reduce the currency exposure in foreign investments, our aim is to finance the investment in local currency. Equity is normally not hedged, as Pandox's strategy is to have a long investment perspective. Currency exposure is largely in the form of currency translation effects. In the fourth quarter, currency had a negative impact on both earnings and property values. And as you know, we have the main part of our hotel properties outside Sweden and denominated in foreign currencies, and now even a larger part due to the acquisition of Dalata. On this slide, we show the change in the main valuation parameters for the total property portfolio year-to-date. And please remember that investment properties are recognized at fair value. According to IFRS, unrealized changes in value for operating properties are only reported for information purpose, but it is included in the EPRA NRV. For the year, the total unrealized changes in value were a positive NOK 117 million, driven by lower yields. As I said earlier, changes in currency had a negative impact on the balance sheet items for the period, with decline in property value of minus NOK 4.6 billion in the period. As you know, on the 7th of November, we closed the acquisition of Dalata Hotel Group with a purchase value corresponding to NOK 15 billion, on which some NOK 16.9 billion in property value is added here. End of period, the average valuation yield for investment properties increased by 19 basis points to 6.2%, reflecting the higher yields on the Dalata portfolio. For operating properties, it increased by 1 basis point to 6.85%. So the blended yield for the group increased 13 basis points to 6.37%. So here, we have the average yield, the average interest on debt, and EPRA NAV per share quarterly, and the yield spread is intact, and in the period, growth in EPRA NAV was a positive 7.7%, measured on an annual basis and adjusted for paid dividends. Our LTV at the end of the quarter amounted to 52.7%, and the debt related to the expected divestment of Dalata's wholesale operation to Scandic is included, and that item is reported as a liability held for sale. The minority interest in Andazspar's ownership in our bidding company is included, however. As you can see, we are still well within the range. The ICR on a rolling 12-month basis was 2.6x. Adjusted for the preparatory financial cost of SEK 57 million, the ICR was 2.7x. Cash and credit facilities amounted to SEK 1.7 billion. Including credit approval of new financing of NOK 1.5 billion in the first quarter of 2026, the liquidity reserve amounted to NOK 3.2 billion. And on top of that, we still have unencumbered assets with a value of some NOK 900 million as an untapped reserve. So during the quarter, the constructive trend in our financing market continued. In the fourth quarter, we took up new and refinanced existing loans of NOK 13.8 billion, which makes it close to NOK 21 billion for the full year. Looking ahead, we have NOK 5.8 billion of debt maturing within 1 year. And our bank relations are strong and expanding across our markets. We have ongoing and positive discussions on future financing and refinancing. And there is really a strong appetite among not only the Nordic banks to finance our hotels. So we have a wider group of banks that are very interested. At the moment, 51% of the net debt is hedged. This is the lowest level since the end of 2022. And with that, I hand over back to Liia. Liia Nou: Thank you, Anneli. We have said it before, the hotel market remains resilient, supported by strong underlying structural growth drivers. We expect that gradually strengthening macroeconomic data should support the hotel market as well, and hotel demand to increase in 2026, driven by multiple segments. The supply outlook is more benign, which should support ADR, but the mix depends on the market. In Q1, which is the smallest quarter, we expect a normal seasonal pattern. Finess on the books looks promising for Q1 compared with the same quarter last year. But please remember, the first quarter is small and always difficult to draw any major conclusions from when it comes to full-year performance. We currently have a relatively strong appreciation of the Swedish krona, which has a negative translation effect on earnings and asset values, as Anneli described. Finally, we expect the properties from Dalata to contribute substantially to both NOI and cash earnings. And now we move over to Q&A. Operator, we are now ready for questions. Operator: [Operator Instructions] The next question comes from Artem Prokopets from UBS. Artem Prokopets: So first question for me. I will ask them individually, if it's okay. So, the first one, following the Dalata acquisition, when do you expect to be in a position to pursue additional large-scale acquisitions? And specifically, given that the PPHE is now in a formal sales process as part of its strategic review, is this an opportunity you would evaluate? Or is PPHE outside of your current acquisition focus? Liia Nou: Well, overall, of course, having done and in the process of finalizing our biggest ever transaction, we, of course, have a lot of focus on this. But you can still see from our strong financials that we still have some gunpowder to also pursue some investments, as well as we're also always looking at some divestments. I won't specifically comment on individual transactions, but you can expect us to put some effort and some strength into completing the ongoing acquisitions, and we are also on the hand for continued new ones, whether they are single assets, smaller portfolios, or even a bigger chunk. Artem Prokopets: Second question, how do you assess the impact of rising U.K. business rates on Pandox's own operations segment, and particularly with regard to net operating margin? Liia Nou: Yes. I mean, as you know, it affects our own operations, and this is a smaller part of our exposure in the U.K. The expected effect, which is, of course, in our numbers for next year in our budget, is around GBP 1 million for our own properties in the U.K., which are affected. And we have also taken, of course, some impact on that when it comes to the valuations. So a minor effect, but it's mostly affecting, to some extent, the City of London hotels. Artem Prokopets: And given these changes in U.K. business rates, do you expect this to affect the lease agreements you are negotiating with Scandic for the U.K. hotels, which are due to begin in the second half of the year? And specifically, does the fact that Scandic's U.K. position has worsened since the time of the Dalata acquisition, does it change how you would price these leases? Liia Nou: Not at all. The agreements and the framework are already in place. So that was all already agreed and put in place when we bid for this deal back in the summer of 2025. So that will not change. Artem Prokopets: And could you please provide an update on Revo Hospitality, specifically whether you have any new tenants in mind for those assets? Liia Nou: Well, of course, this is a process, as you know, where the former HR Group and Riga have put themselves in self-administration. It's a process that is in the hands of the external. I should not say that we have foreseen this, but of course, this has been on our radar for some time. And we are constantly sort of in both dialogue and also guarding our interests. We do think we have good possibilities to either rent it out, continue if HR continues their operations to some part, or whether we will find new operators with a large network, or, as we have our own operations, this is something we can sort out in the shorter term, take it on our own. So as we said in the press release, which we sent out, it affects 4% of the rooms in our portfolio. So it's smaller, but we are confident that there will be, if any, a very small financial impact, if any. Artem Prokopets: And maybe last question for me. Could you, if possible, provide a numerical outlook for RevPAR growth in 2026? And given Pandox's focus on the upper mid-scale segment, do you think the company is well-positioned this year? Liia Nou: I think we are very well positioned because, as I said, we have a broad portfolio of 193 hotels in 11 markets. So it's right. All in all, of course, after this pandemic, we are now at levels that are more single-digit. Europe grew by 5% in the fourth quarter, 3% overall. But we are positive, especially Nordic, it looks strong. We are looking at Germany, which has also come out strong with the new trade fair activities ongoing. There is some new supply coming in some markets, which will momentarily put some, I shouldn't say make, the RevPAR growth more stable. But all in all, I would say around anything between 2% to 4% overall on our portfolio. Operator: The next question comes from Andres Toome from Green Street. Andres Toome: I had just a couple of questions. Firstly, maybe just hitting on how you are thinking about your financial leverage after this transaction? And how do you see a path to a lower LTV? And maybe you could also speak to some of the disposals you might have in the pipeline already. And I noticed there's a bigger portfolio on the market in the Nordics, and if there's any progress on that? Liia Nou: Thank you. Yes. As you know, our policy range for LTV is between 45% and 60%. So we are typically, as a Nordic company, quite satisfied with the content, but fine with an LTV, which is close to 50% or slightly south. Being at 52%, which is actually what we did expect, and which is an area where we are quite confident. And also, as you've seen with our strong financial position, of close after we secure some further financing of close to 3.2 billion in liquidity reserve, then this makes us confident that this is a level that we can pursue. Of course, with our very strong cash earnings, automatically, our LTV will decrease. But also, we have also given out that we will pay out a dividend in the second quarter. So all in all, being in these areas, we are confident. There is no plan of reducing the LTV, even though we are always looking to rotate some assets. We are open to selling some assets if we just find a good price, but also, of course, acquire new value-creating properties. And when it comes to the ongoing process, I can't comment on it specifically, but it's a normal part of our business model. Andres Toome: And then my second question was just around your foreign currency exposure. And obviously, this year, it's been a year where there's a lot of FX headwind converting back to your home currency. So I was just wondering, how are you thinking about your hedging strategy going forward? And are you planning to make any changes on that front, maybe to mitigate some of that exposure, as you seem to be also expanding more and more internationally? Liia Nou: Well, it's as Anneli Lindblom mentioned earlier, it's a pure translation effect. We have all our properties financed in local currency. So yes, the translation effect of both earnings results and the value is, of course, when you report it, but it's a pure reporting effect. So we don't intend to make any changes, but our hedging policy is to finance the properties in local currency, continuing. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Anders Berg: Okay. With that, we move into the market presentations, and we will start with Aoife Roche from STR. Please go ahead. Aoife Roche: Good morning. So firstly, although a lot of variations at a market and market class level have been discussed already, they persist. Hotel performance has overcome many, many setbacks through 2025. The economic and geopolitical climate did little to support a positive consumer sentiment, and there was a high level of uncertainty for the consumer and for businesses, which created an environment of indecision. Despite that, Europe ended the year on a positive note with growth in 2024. And I will explore this now in some detail through this presentation on covering the how and the why behind this varied performance. So first up, a global perspective. During a turbulent year, it could be easy to lose sight that demand for hotel rooms is actually higher than it ever has been, up 8% on 2019. And the world population has doubled over the last 50 years. Tourism arrivals have increased sevenfold. The majority of growth in demand was in the Asia Pacific region, the Middle East, and Africa in 2025, as you can see on this slide. For the GCC countries, in particular, which have grown by 34% in terms of demand, this is really reflective of an open economy and is working hard to build market share in this industry. The U.S., however, contends with a deficit in tourism relative to 2019. There were 5.7 million less international travelers arriving in the country, whilst there were 9.7 million more Americans heading abroad, which, of course, we can see in our European numbers in 2025. We are seeing declines in the U.S., Mexico, and the Caribbean. Whilst at the top of the table here, we can see Africa is leading on growth in demand year-on-year. And much of this is down to the Red Sea resorts, which have grown by 11%, selling an average of 10,000 more nights a year than last year. From a European perspective, Germany, Spain and Europe on the whole is pushing ahead of the global average of 1.1% growth year-on-year. So good news and positive results for Europe so far. Now demand growth is slowing, albeit from record levels, there is a favorable component for the occupancy equation, and that is that global supply growth is slowing or has slowed over the last 24 months. We are all well aware of the challenges of financing new projects in recent years and an increasing focus has been on conversion, which has helped shape a more favorable level of supply growth. So the combination of growing yet muted demand and a relatively slow pace of new openings has allowed occupancy to grow. We highlighted the challenges in the U.S. and of course, China, where the 3 largest markets, Shanghai, Beijing and Guangdong have all seen declines in occupancy even with limited supply growth, and this has weighed on the national occupancy declining by 3% year-on-year. Whilst in the Middle East, Dubai and Abu Dhabi have an occupancy growth of 3% to 4%, and that is really driving that Middle Eastern growth, while Saudi growing by 2% in occupancy despite the elevated demand growth, they have had to contend with a substantial supply growth. So Europe is sitting here in the middle with a 1% growth in occupancy versus last year. Change now to average daily rate, the global picture is far more varied. Again, China and the U.S. have little or no growth. ADR in the U.S. has grown slower than inflation for 21 out of 24 months. And Europe also has seen limited growth, 2% up on last year. And if we ignore Africa and South America, where there are double-digit growth and much of that linked to inflation, so that is somewhat skewed. We can look to the Middle East and Asia, excluding China, of course, that are leading the way. Abu Dhabi, in particular, with stellar growth of 20% Dubai up 9%. Whilst in Southeast Asia, there's notable performance growth in Thailand and in Vietnam. So let's dive into Europe a little bit more. So even in a year facing tough event comparisons, missing the Olympics, the Euros and of course, Taylor Swift, Europe was able to deliver growth. Unsurprisingly, the summer faced very tough comparisons, primarily on the rate side. Germany, France, and the host cities for the IRA tour faced sizable comparisons. However, as you can see to the right of this chart, strong growth in the fourth quarter helped round out a solid year. Strong growth in occupancy in December also permitted a good end to the year, and that was due to an increase in Inverted Comma's week of business travel in the month of December. So overall, Europe is up 2.1% in RevPAR terms, and that is aided by ADR growth, up 1.2% for the full year 2025. Now we monitor 550-plus submarkets in Europe, and they did appear to be a slight risk in performance and certainly year-on-year performance in the first half. And it followed a similar pattern or trend to 2008, but a very strong summer and even a very strong start to the fourth quarter averted any concern that we had. Occupancy growth has been limited across the continent in 2025, as I highlighted earlier, and nations with the highest occupancies, like U.K. and Ireland, with 78% occupancy actualized, and Spain, with 75% occupancy actualized, have witnessed very limited growth year-on-year. But it is important to remember that these countries, in particular, U.K., had recovered far earlier than any other countries across Europe. So there is less opportunity to grow occupancy. However, we have seen good growth in countries in the Nordics and Central and Eastern Europe, much higher growth than the rest of Europe. Here, the data demonstrates country-level performance, proving that demand is attractive to those countries where there is more availability, potentially more affordability. But definitely, this is much of this is linked to a gap in the full hotel recovery. Supply also has a role to play here in occupancy performance. We have seen limited supply growth across the continent, and that really has enabled continued occupancy growth, even if that is quite limited. Turning to ADR. If we frame our narrative around North versus South and even urban versus resort, we acknowledge that there is a perennial appeal for the South, Spain, Portugal, and Italy highlighted here. We can really better understand the growth that we have seen in the South if we continue to use that narrative. Unsurprisingly, Germany and France have a hangover from an excellent summer in 2025. Additionally, if we look at the South and resort destinations, not only did they lead in 2025 on year-on-year growth, as we saw on the last slide, but they have also achieved the highest rates in Europe. Greece and Italy stand out here, some countries achieving up to EUR 300 in actualized ADR, whilst the Northern nations situated more to the right are on the lower end of the spectrum. So at a market level, performance variations do persist, and this is no different for Pandox market performance. There is a theme of Nordic growth, with the exception of Helsinki,, and here, Rasmus will speak more on that. Germany has shown some positive occupancy change year-on-year, yet this is not always followed by ADR growth, for example, Berlin and Dusseldorf. The U.K. in contrast does have many markets declining in occupancy. These are markets that have new supply, perhaps non-repeat events, and these show up in those quadrants. Yet a stronger half has helped compensate with ADR. So I'm going to spend a few moments on the U.K. and Ireland specifically. So in the previous slide, we acknowledged the quantity of submarkets that are declining in occupancy in the U.K., which resulted in a high number of submarkets not being in a position to deliver a positive RevPAR growth. The first half of 2025 mirrored 2008, much like the rest of Europe. Uncertainty postponed decisions and ultimately drove many markets to a negative growth. The second half, however, there was far less caution, and there was a peak in September of 73% of all submarkets showing positive RevPAR growth, and this dropped off as usual to a more 56% in December. Now we can clearly see this in monthly performance also. ADR has steered the ship through the second half of the year, which has enabled for the U.K. an overall growth in RevPAR of 1% for full year 2025. As we can see here, much of the growth comes through the luxury segment, with economy continuing to experience negative growth year-on-year with those middle classes, upscale, and upper mid-scale performing positively year-on-year. Like many markets across the U.K., negative growth occurred in the first half of 2025 in London. Much of this was occupancy driven in the regions, whilst ADR driven for London. London experienced this a little bit differently. ADR declined in the first half, pointing to consumer caution, perhaps a reduced short and long-haul inbound traveler and a direct impact from non-repeat summer events. Pricing power is a real problem in the U.K., and it was unavailable to 5 out of the 6 classes that we monitor. Overall, London's ADR declined by 0.4% and RevPAR was down 0.2%. So here is an outlook of the supply chain, which really sets the tone for how we expect occupancy to look going forward in 2026. And you can see there are some key markets here that have a very high double-digit growth in supply or active pipeline, I should say, expected to deliver in 2026 and 2027, which, of course, will impact our forecast. Now, most markets expect to see new supply. And here is a summary of market level forecast for 2026. We do expect pricing power to return in 2026. And for the most part, with the balance between supply and demand dynamics, with the exception, of course, of a few markets, namely Dublin and Belfast, here showing some negativity. Occupancy does have room to grow, affording the sector some confidence to drive rate. Moving to Dublin, looking very different from London or even the U.K. regions. The Dublin market managed a 3.7% RevPAR growth in 2025. 8 out of 12 months showed positive RevPAR growth, and there was a very strong last quarter. Dublin showed again, particularly in the last quarter, with well-attended events offsetting any new supply that came into that market. At a class level, performance looks very, very different in Dublin compared to the previous slides for the U.K. and Europe. A wider pool of economy hotel rooms has emerged in Dublin, available to the more cost-conscious traveler, and it has done very well in this segment, something that has been very much missing in this market prior to 2021, I would say. So let's look ahead. The forecast for the aggregate of European cities is muted. 2025 closed with a meager growth of 1.2% in RevPAR terms for Europe. 2026 is forecasted to grow by 0.4%, which is quite concerning when you stack this against inflation. In 2026, however, we do expect to see more markets with a positive RevPAR performance than we saw in 2025. And much of that, as you can see from the blue, is still rate-driven. Say some markets that will have to absorb some new supply in 2026, which will affect their chances of coming back into positive territory, perhaps. Munich and Cologne, for example, still have a lot of event offset challenges. And Amsterdam is a case on its own as it embarks on a year of added ADR pressure with the new VAT policy in play from this month. 2026 looks set to grow supply in line with previous year trends, with a particular focus on the luxury segment. As a percentage of existing rooms, Georgia, Ireland, and Poland will see the greatest percentage increase in rooms delivered in 2026. Consumer confidence is expected to strengthen for Europe, likely more so in the second half of the year; however, with interest rates falling, inflation slowing, and a high ratio of savings available to households, there is an expectation that consumption will persist. There is some concern around affordability for lower earners, particularly in the U.K., with the recent budget. However, it appears that higher earners will continue to consume, which, of course, is great news for the hospitality industry. From a source market perspective, there is a question mark around the U.S. traveler with the exchange rate. Will the exchange rate deter business, or will the U.S. traveler want to travel internationally as they have done in 2025? Many markets, and in particular, the high-end hotels and resorts, are dependent on this business to drive ADR. Now the U.S. traveler chooses differently in 2025 and probably will do so in 2026, and this had a great impact on the U.K. performance, where we saw a softening of demand coming from the U.S. to the U.K. when compared to the average in Europe. So there is a lot to consider when looking at the outlook. But overall, STR expects Europe to perform very well, particularly in the second half of the year. The global economy suggests a strengthening of consumer confidence. The desire to spend on experiences abates any concern about whether they are geopolitical or economic. Many thanks. And I'm going to hand this back over to Rasmus. Rasmus Kjellman: Thank you very much. I'm Rasmus. Let me get my slide here. I'm Rasmus Kjellman. I'm the CEO of Benchmarking Alliance. And for the coming 10 to 15 minutes, I will guide you through the Nordic hotel market. We are the largest supplier of benchmarking in hotel market data in the Nordics, and we strive to have the best possible coverage in the markets we work in, and we are based here in Stockholm. So, diving into the data, looking into the Nordics, these are the country-wide averages in the Nordics and the Baltics, and we see a positive trend continued through 2025. Generally, we see an increase in RevPAR in all countries. Blue boxes show the total 2025 RevPAR development compared to last year, and orange boxes show the previous quarter, the third quarter, and the RevPAR development up until the Q3. So the difference is an indication of how the year ended. In Finland, the increase is a bit slower, with a lot of new supply in some of the markets, as well as a slower recovery from the Asian markets, and the proximity to Russia is holding back the recovery. And in the Baltics, we are continuing to recover, especially since the Basketball European Championship in Riga had a clear impact. And after years of lost Russian demand and other negative effects from the war in Ukraine, travelers are finding their way back to the Baltics and to Riga in particular. Diving into the capitals. Oslo had the Nor-Shipping Large Maritime Industry Conference, the Ed Sheeran concert, and generally a very good summer, as well as several smaller congresses and other events driving demand. In Copenhagen, we had the Endo-ERN, the Wind Conference, the Copenhagen Rock Festival, and Robbie Williams all at the same weekend, which brought prices up to new record levels in ADR. Stockholm had difficulties replacing the extreme demand in 2024, generated by Taylor Swift, Spring, and the ECO Congress. In Helsinki, May and June were good Congress Mass and the Helsinki Metal Music Festival in August, possibly affecting. And Westervik is bouncing back again after long periods of volcanic eruptions last year. Interesting to see that the general Icelandic market is increasing more than Westervik, as Countryside hotels suffered more than Westervik hotels earlier. So if you go to a bit more of the details, the sold room increased basically demand and sold rooms increased basically everywhere. There are only smaller changes in the available room. The largest increase we see in Stockholm is our largest decrease in Riga, where a couple of hotels in the budget segment were closed during the year. In Stockholm, the increase is from Villa Foresta and VillaDaga now in full year capacity, as well as Scandi Sadakayjen and Scandicokunlman also in full year capacity. BW also opened 2 new properties in Stockholm, 90 rooms in the market, and Reykjavik did not manage to fill the small capacity increase. In Oslo, the Savoy closed and is undergoing total renovation by new owners, and the Hotel and Frogner Grunlukka is closed. This means occupancy increased in all markets, except Reykjavik. Riga, 1 hotel closed and renovation of rooms in Radisson and in RevPAR battle, Riga is the clear leader; however, pretty much poised down to one event, as I mentioned. And in the Nordics, both Oslo and Copenhagen show remarkable increases. If we also look at ancillary revenue, we see that we have an increased total revenue per available room in Stockholm and in Copenhagen, whereas in Oslo, Helsinki , and Westervik, it has decreased, holding back the RevPAR development. And it's interesting to look at the total revenue as well as other revenue in the hotels, such as food, beverages, meetings, events, and departments that don't necessarily follow the room development in the same way. Driving down and diving down into the Scandinavian capitals by segment. If we look into the Stockholm segments, we see new supply in the luxury segment holding back the occupancy levels, while rates continue to increase. Mid-scale segment supply is due to the capacity reopened after renovations and rebranding. And even though demand is there, the lack of events and concerts this year can also be seen in the loss of average rates in all segments, except in luxury. Moving to Oslo. Oslo shows a very steady and positive trend in all segments. The mid-scale and budget hotels previously mentioned can be seen in the loss of supply. Moving to Copenhagen. The Copenhagen luxury segment is starting to slow down in demand, but rates are still increasing. It is interesting to see that the demand is slowing down. And the upgoing trend can be seen in all segments, while it's only upscale and mid-scale hotels that can enjoy higher demand as well. Looking into the Helsinki market. Westfalenhalle, Foresta, and Hotel Collection are adding more supply to the luxury segments. However, this capacity has been utilized well, maybe at the cost of slightly lower rates; otherwise, mostly smaller changes in the Helsinki lower segments. If we look at the weekday, weekend patterns comparing the Nordic capitals, we can see that there is an even spread in Copenhagen and Oslo, and the pattern is somewhat different in Stockholm. So if we look into more details into the Stockholm market and the distribution between the days of the week, we can see that shoulder days, Monday and Thursday is holding back the development through the weekdays, Tuesday and Wednesday are still increasing. However, the demand is stronger on weekends. If we look into the details in the Swedish market, we cover around 36 markets, including all regional cities within Sweden. And in this graph, each bubble represents the market, and the size of the bubble represents the RevPAR. We have ADR on the left and occupancy on the lower axis. So we can see Westervik in the top right corner here. But if we look at the major changes over the last year, the majority of the Swedish regional market increased in RevPAR. But the highlights are maybe that the Swedish defense is investing a lot right now, and partly because of the new membership in NATO, and this has a positive effect in India. In Uppsala, we had the Swedish live music conference in January, having a positive effect. And [ Helestio ] is suffering very badly from the effect of the Northvolt bankruptcy. In the same way, look into the Norwegian market, we have Trons as a very strong market, with the highest RevPAR. They have the Nord Turisme and the Midnight Sun, while Oslo is the highest occupancy. In the same way, looking to the changes through the different markets, Trondheim was very strong last year, especially since they had the Ski World Championship in the end of February and beginning of March. Oslo, as I mentioned earlier, had a new shipping, a generally good summer with a Chan concert. Kristiansand had a very strong summer with an increase in the month of July only with 25%. Pori, a bit weaker, but the year before in 2024, they were the culture of capital and have a bit of trouble in replacing that. In the same way, looking to the Danish market, Copenhagen is not surprisingly the largest market. And looking to the changes, Vee had a large amount of out order rooms last year that are back on sale. And generally, there is a strong development within all of the Danish markets. Driving and diving into Finland. Rovaniemi, the outstanding strong market within Finland, the Arctic tourism, the Santa Clause bringing people from all over the world to Rovaniemi. There are increased direct flights to Rovaniemi, driving a very strong market. Helsinki is far behind from Rovaniemi, but of course, a much larger market. Otherwise, most of the Finnish markets range on an ADR of EUR 100 to EUR 110 and an occupancy between 55% to 70% and looking at the pattern of change through last year, Rovaniemi, together with the largest cities, Helsinki, Sponge are the ones increasing. Pori was affected by a slower corporate demand as well as Vantaa. Vantaa is the Helsinki Airport area, and they have a lot of new supply in the market. So if we then look into the pattern of future bookings, starting with Stockholm and there is a general increase of future bookings with 10.2%. Looking ahead, we see that we, in the coming year, have the EHA 2026 Hematology Congress in June. We have the Bad Bunny concert in Strawberry Arena in July, and we also have the weekend concert in Strawberry Arena in Stockholm driving demand. Looking at the Oslo market, not as strong as the development in Stockholm. Last year, there was the Nord Shipping and the what Congress. They are not really replaced yet. There was also the adherent concert, and this has an impact on the comparison to the coming year. Looking into Copenhagen, we see a very stable increase in the books for the remainder of the year. There is 3 days of the design festival in June, driving demand, but otherwise, a very stable increase in the Copenhagen market. And at last, looking at the future bookings for Helsinki, the start of the year looks positive in Helsinki. However, the Congress in July 2025 has no particular replacement yet, but in general, a positive development. With that, I thank you. And if you have any questions, reach out to the Pandox team or to me, and I'll be happy to help. And with that, I leave it back to the Pandox team. Liia Nou: Thank you, Aoife and Rasmus, for your excellent hotel market updates. And thank you all for participating in this call. We really appreciate your time and interest in Pandox. And our interim report for January to March 2026 will be published on the 29th of April. We also want to mention that on the 5th of May, later this year, we will host a Capital Market Day in London. If you can't join in person, the day will also be possible to follow via webcast. Then we wish you a nice winter and spring, and don't forget to stay at our hotels when you're on the road. Goodbye.
Operator: Good morning, and welcome to the Everest Group Limited Fourth Quarter of 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Matthew Rohrmann, Senior Vice President, Head of Investor Relations. Please go ahead. Matthew Rohrmann: Thanks, Drew. Good morning, everyone, and welcome to the Everest Group Limited Fourth Quarter of 2025 Earnings Conference Call. The Everest executives leading today's call are Jim Williamson, President and CEO; and Mark Kociancic, Executive Vice President and CFO. We're also joined by other members of the Everest management team. Before we begin, I'll preface the comments by noting that on today's call, we will include forward-looking statements. Actual results may differ materially, and we undertake no obligation to publicly update forward-looking statements. Management comments regarding estimates, projections and future results are subject to the risks, uncertainties and assumptions as noted in Everest's SEC filings. Management may also refer to certain non-GAAP financial measures. Available explanations and reconciliations to GAAP can be found in the earnings release, investor presentation and financial supplement on our website. With that, I'll turn the call over to Jim. James Williamson: Thanks, Matt, and good morning, everyone. Before getting into the quarter, let me provide a brief summary of the strategic steps we took in 2025. During the course of the year, we simplified the company, reduced reserve risk, reshaped the portfolio and strengthened the balance sheet. Despite reserving actions and costs associated with implementing our $1.2 billion adverse development cover and the divestiture of our commercial retail business, we generated an operating ROE of 12.4% and a TSR of 13.1%. We also made significant strides in strengthening the management team with several new world-class executives joining us in critical roles. Today, Everest is better positioned to drive improved performance and consistent returns. We have more work to do, and the entire Everest team is focused squarely on the rigorous execution of our business plan to ensure we achieve our financial and strategic objectives. Turning to the quarter. Gross written premiums were $4.3 billion, down year-over-year, driven primarily by the sale of the commercial retail business and deliberate underwriting actions in both businesses, particularly in U.S. casualty lines. Net investment income was $562 million, up meaningfully from prior year, driven by growth in the fixed income portfolio and strong performance from limited partnerships. Investment income continues to be a durable contributor to earnings. The combined ratio for the quarter was 98.4%, including $216 million of catastrophe losses and $122 million of ADC premium. Excluding those impacts, the attritional combined ratio was 89.9%, reflecting the underlying strength of the book and our focus on margin development. Now for our segment results. Our fourth quarter reporting is consistent with prior quarters with operating results presented for reinsurance and insurance. Mark will provide details regarding future segmentation. The reinsurance business performed well in the quarter with strong underwriting discipline applied consistently across geographies and lines. The division generated $255 million of underwriting income in the quarter. Our ongoing portfolio discipline in reinsurance is the driver of our strong underlying performance. For example, since we began deliberately resizing our casualty portfolio in January of 2024, we have come off over $1.2 billion in premium. This same discipline carried into the January 1 reinsurance renewals. As expected, market conditions softened across many lines in the Jan 1 renewals with property cat rates down an average of 10% globally while remaining above our required technical price. As has been the case in past renewals, our preferred market position allowed us to shape our signings to maximize expected profitability. We bound over $6.3 billion of premium at Jan 1, down just under 1% over expiring. Terms and conditions and attachment points largely held, which is a sign of underlying market discipline. Total property limit deployed decreased for the first time since 2022 with a modest 2% reduction. Capacity deployment was selective. We retained over 95% of our in-force premium with our top-tier accounts while deliberately reducing exposure to less profitable deals. We continue to see attractive opportunities in Asia, including in our new India branch as well as in targeted specialty lines. The global development of data centers, supporting energy capacity and other infrastructure investments has helped propel and diversify the development of our specialty book, which is now approximately $2 billion in premium with an attritional loss ratio in the mid-80s. Our Mt. Logan third-party capital business is also performing well with over $2.5 billion of AUM as of January 1. We have an excellent pipeline of investor interest in Mt. Logan across multiple lines of business, and I would expect Logan to assume a more prominent role in our capital mix over time. Overall, the Everest Reinsurance team once again did an excellent job navigating a more challenging market. Moving to insurance. As I discussed during our Q3 earnings call, we completed our one renewal casualty remediation in North America as planned and are seeing indications those efforts are improving book performance. In addition, in October, we sold the renewal rights to our European, U.S. and Asian commercial retail insurance businesses to AIG for a total consideration of $426 million, including the transition services agreement. Since then, we have been working closely with AIG to transition that portfolio. Pricing in the insurance book remained strong in Q4. North American casualty pricing continues to exceed average loss trend with GL, auto and umbrella excess increasing, in some cases, as much as 20%. This was somewhat offset by declining rates in property, which were down 11%, but remain above required technical price. While the retail divestiture will create modest short-term pressure on our group expense ratio, we expect it to subside in coming quarters back to levels where we've historically operated. I think it's worth spending a moment to outline the scope and strategy of our global Wholesale and Specialty platform. This business competes in attractive markets where the capabilities needed for success closely align with our reinsurance treaty business. Both businesses require expertise-driven underwriting discipline, limited but strong distribution relationships, dynamic capital management and strong supporting claims and technology capabilities. This focus will allow us to further sharpen our execution and efficiency to benefit our clients and shareholders. At year-end 2025, gross written premium for our go-forward Global Wholesale and Specialty business was $3.6 billion, including $1.2 billion in facultative, which we have reported in this and prior years as part of our reinsurance business. Also included in this business is Syndicate 2786 in our London market business, Evolution, our U.S. E&S platform, U.S. programs and a range of specialty underwriting units in areas like marine, aviation, political risk, surety and Accident and Health. These businesses are relatively mature with established underwriting franchises and proven risk selection. The platform is positioned to generate reasonable underwriting profits even as we select more prudent loss picks going forward. We expect additional mix improvement to increase underwriting profitability over the course of 2026. Since announcing our retail divestiture in October, we've quickly assembled the go-forward management team of Global Wholesale Specialty, now led by segment CEO, Jason Keen. Jason has deep experience running profitable specialty insurance businesses around the world, and he's already positioning Global Wholesale and Specialty for improved performance. We expect this business to become a more significant share of Everest's earnings mix over time. Finally, a word on reserves and capital management. As Mark will share in more detail in a moment, we've completed all our reserve studies for the year. In reinsurance, we believe the overall division position is robust, driven by short tail and specialty lines. In insurance, we believe prudent loss picks in the most recent accident years, coupled with our previous actions and the cover provided by our ADC, dramatically improved and stabilized our overall position despite the ongoing challenges posed by the abuse of the U.S. legal system. And I'll end with capital management. To speak plainly, Everest stock price does not reflect the value of our firm, either in terms of current book value or the strong potential earnings of the company going forward. As long as that's the case, we will prioritize share repurchases as a use of excess capital. In Q4, we repurchased $400 million of shares and a further $100 million in January of 2026. And with that, I'll turn the call over to Mark. Mark Kociancic: Thank you, Jim, and good morning, everyone. As Jim mentioned, 2025 was a transformational year at Everest. We took significant steps to improve the return profile of our business and strengthen our balance sheet, while at the same time, returning capital to shareholders. Everest delivered a solid fourth quarter, generating $549 million of net operating income, an operating return on equity of 14.2% and an annualized total shareholder return of 13.1%. Our results this quarter reflect the strength of the contributions from both underwriting and our investment portfolio. There are several onetime moving parts that include the premium cost associated with the adverse development cover, the sale of the renewal rights to our commercial retail insurance business and the preliminary onetime charge associated with the exit of that business. And I'll discuss each of these items in detail in a few minutes. Starting with group results. Everest reported fourth quarter gross written premiums of $4.3 billion, representing an 8.6% decrease in constant dollars, while excluding reinstatement premiums from the prior year quarter. This was largely driven by targeted reductions in U.S. casualty lines as well as the impact of our announced exit of the commercial retail insurance business. The combined ratio was 98.4% for the quarter, and this includes approximately $122 million or 3.2 points on the group combined ratio from premium consideration Everest paid for the second layer of the adverse development cover we announced in the quarter. The premium consideration was split between $105 million in the Insurance segment underwriting results with the remaining $17 million in the other segment and is recorded in the prior year loss expense line of the financials. Catastrophe losses contributed 5.6 points to the group combined ratio, largely driven by Hurricane Melissa and other midsized events globally. The group attritional loss ratio improved 3.7 points to 60.2% in the quarter, largely driven by improved loss experience while we continue our prudent approach to setting initial loss picks in U.S. casualty lines. The attritional combined ratio improved 1.7 points to 89.9% when excluding the impact of $68 million in profit commissions related to prior year loss reserve releases in mortgage lines from fourth quarter 2024. The commission ratio improved to 22.4% in the quarter, while the underwriting-related expense ratio increased 1 point to 7.2%, and the increase was primarily driven by lower casualty net earned premium growth and several onetime costs in our insurance business, which I'll speak to shortly. In the other income line, we recognized a net benefit of $127.3 million associated with the sale of the commercial retail insurance renewal rights to AIG in the quarter. And this consists of $289 million of revenues and fees, offset by charges of $162 million. As I previously noted, we expect there will be approximately $150 million of restructuring charges throughout 2026 associated with our exit from the commercial retail insurance business. And this includes approximately $80 million of real estate-related costs that we expect to incur in the fourth quarter of 2026, which we'll look to mitigate where possible. These costs will be reflected in our other income and expense line within operating income and will not impact the combined ratio. In our Other segment, we expect approximately a $10 million monthly net expense benefit from AIG in each of the first 9 months of the year. Net earned premium associated with the commercial retail insurance business will continue to earn through the other segment before diminishing to a small amount around year-end. Given these dynamics, the combined ratio will likely fluctuate during the year as earned premium rolls off and general expenses diminish throughout the year. We expect the other segment to run at a combined ratio above 110% in 2026, driven primarily by higher expenses as we transition the commercial retail insurance book to AIG. Moving to reinsurance. Gross written premiums decreased 3.6% in constant dollars versus the prior year quarter when adjusting for reinstatement premiums during the quarter, and we grew 10.1% in property cat XOL when excluding reinstatement premiums and continued to expand in Global Specialty lines while remaining disciplined in casualty lines. The combined ratio increased 80 basis points from the prior year to 91.2%. The attritional combined ratio increased 90 basis points to 84.6% when excluding the impact of $68 million in profit commissions associated with favorable mortgage reserve development from the prior year fourth quarter. And moving to Insurance. Gross premiums written decreased 20.1% in constant dollars to $1.1 billion. Growth in Accident & Health and other specialty was more than offset by the lower retention and new business in our commercial retail business as a result of the announced renewal rights transaction in October. The underwriting-related expense ratio was 21.5%, with the increase driven by reduced casualty earned premium growth as well as onetime restructuring impacts that contributed 1.2 points to the increase relating primarily to accelerated IT project depreciation. The commission ratio increased 1.5 points to 14.1%, with the increase largely driven by mix. The attritional loss ratio improved to 68.6% this quarter, while at the same time, we remain disciplined in our approach to setting and sustaining prudent loss picks in our U.S. casualty lines portfolio, given the elevated risk environment due to social inflation. There were several large energy losses in the market that impacted our wholesale business in Q4, leading to an elevated insurance attritional loss ratio. In addition to the premium consideration for the second layer of the adverse development cover, this led to an elevated combined ratio in our go-forward global Wholesale and Specialty Insurance business in the quarter. Now moving to our other segment with the announcement of the renewal rights transaction of our commercial retail insurance business, we will report 3 segments beginning in 2026. Our treaty reinsurance business, our global Wholesale and Specialty Insurance business, which includes facultative business and our other segment, which will encompass the exited commercial retail business. We expect to disseminate the historical resegmentation following the filing of the 2025 Form 10-K. Now moving to reserves. All material reserve studies were completed during the third quarter, and our fourth quarter reserve roll forwards and review process yielded immaterial net movements for the 3 segments. Overall, we continue to see evidence of improved underwriting results in our insurance U.S. liability lines from the remediation process. We continue to maintain elevated loss picks in 2026 for U.S. liability lines as we did in 2025, given the uncertainty of the environment. Rate remains in excess of loss trend for U.S. casualty lines, and we expect that U.S. casualty lines will continue to represent a smaller portion of our reinsurance and insurance premium writings in 2026 year-over-year. Moving on to investments. Net investment income increased to $562 million for the quarter, and this was driven by higher assets under management and strong alternative asset returns, which generated $125 million of net investment income in the quarter versus $41 million in the prior year quarter. Overall, our book yield remained flat at 4.5%, and our current new money yield is approximately 4.7%. We continue to have a short asset duration of approximately 3.4 years and the fixed income portfolio benefits from an average credit rating of AA-. For the fourth quarter of 2025, our operating income tax rate was 19.7%, which was above our working assumption of 17% to 18% for the year due to higher income associated with the proceeds from the renewal rights transaction, and the full year operating effective tax rate was 16.3%. Operating cash flow for the quarter of negative $398 million decreased from $780 million in the prior year fourth quarter, primarily driven by the consideration paid for the adverse development cover in the quarter. Shareholders' equity ended the quarter at $15.5 billion. Book value per share ended the quarter at $379.83, an improvement of 20.1% from year-end 2024 when adjusted for dividends of $8 per share year-to-date. In the fourth quarter, we repurchased 1.2 million shares, amounting to approximately $400 million at an average share price of $320.59 per share. For the full year, we repurchased 2.4 million shares, amounting to approximately $800 million at an average share price of $333 per share. Looking ahead to 2026, we repurchased an additional $100 million of common shares this past January, and we continue to view share repurchases very attractively and plan to continue share buybacks in Q1 and in 2026 as a whole, given the return profile of our businesses and the expected capital release from the renewal rights transaction that will be unlocked over time. As mentioned on the third quarter call, we consider $200 million as a quarterly floor for common share repurchases and expect to have a willingness to exceed this amount, conditions permitting, as you saw in the fourth quarter. And with that, I'll turn the call back over to Matt. Matthew Rohrmann: Thanks, Mark. Drew, we're now ready to open the line for questions [Operator Instructions]. Operator: [Operator Instructions] The first question comes from Gregory Peters with Raymond James. Charles Peters: So I want to focus on the expense ratio. And I know you called out that it's going to be higher as you work through some of the restructuring initiatives. in '26. But what's the final destination if you look forward for the global Wholesale and Specialty business when we think about the expense ratio? And there's the 2 pieces, right, the commission and then the other underwriting expense. Just wondering what that kind of looks like going forward. Mark Kociancic: Greg, it's Mark here. So let me unpack this a bit for you. I think for the -- let me just speak to the group first. A bit elevated as a result of moving parts we have here with the retail insurance transaction. So 6% to 7% is what we expect for the year. I think ultimately, that has to be on the lower end of 6% as we enter into 2027. With respect to Global Wholesale and Specialty, we'll get into that more when we have the resegmentation in the -- probably in March or late February when we release the resegmentation statements to the market via 8-K. I do think the expense ratio for GW&S will be significantly lower than the current insurance segment, and that's still going to be lower end of double digits. You're probably going to be in the 12%, 13% type percent to start. And I believe that, that will improve over time as we benefit from scaling the businesses and becoming a bit more efficient. So I would expect that to move during 2026 and then settle into 2027 into a more mature level. Charles Peters: Perfect. And then just stepping back, a lot of breathless rhetoric in the marketplace about price action in reinsurance. And it feels like when we go into the June renewal season that there could be further pressure on reinsurance pricing. So if you could just provide us some perspective on how you think that might change the portfolio. And I noticed in your comments, Jim, you said it's still -- you're still getting rate adequacy where you choose to participate. And I'm just wondering if you anticipate changing your approach in different layers as the market continues to evolve. James Williamson: Yes. Thanks for the question. I mean I think, first of all, as a general expectation, given what we saw at Jan 1 from a supply-demand perspective, I would sort of expect the rest of this year to be similar to the 1/1 renewal with rates on property cat down in that, whatever, 10% to 15% range that various folks are reporting. I think that's a reasonable expectation. Florida will be an interesting dynamic. I mean there is a clear dependence on reinsurance capacity to serve that market, which I think will help buoy the demand side of the equation. At the same time, it's pretty clear to us now in our data, and I think we've been quite conservative about this, that the reforms in Florida are working, and we're seeing it clearly playing out in our data, and I think others will be as well. So I'm not going to give you a point estimate on how those 2 factors intersect other than to say I think there could be some reasons to suspect it may be down a little bit more than what we saw at 1/1. And then in terms of the return estimates of the business, it's above where we sort of require the return on capital for property cat to be to continue to write the business at scale. We feel good about that. We haven't really changed our layer approach much. I think if you dissect our PMLs, you might see a little bit of upward movement in the lower return periods. That's really an inflationary factor more than us trading down in the stack. We like our positioning. We tend to play what I'd sort of call in the middle of most U&L programs. We usually avoid the really remote tail positions because we don't feel like we get paid enough. And then further down, you get too close to loss. So I think we're in a good spot. I don't really suspect we'll change it much as we go forward. Operator: Next question comes from Alex Scott with Barclays. Taylor Scott: Could you comment a bit just about rate adequacy and how it compares to 2022, I think, is an interesting conversation. When you consider those expectations for rate through the rest of the year, where does that kind of shake you out relative to '22? Do you still find the market attractive to grow? How should we think about how you'll shift your market share in property cat in particular, as this unfolds? James Williamson: Yes. Good question, Alex. Look, I would say that from a rate adequacy perspective, return on capital, we -- I like property cat better today than I would have in 2022. And certainly, you saw us cutting back in '22 pretty meaningfully, which I think was the right move, particularly in light of the cat losses that occurred toward the end of that year. And then in addition to rate, what's also really critical to keep in mind is structurally how programs are crafted today is much more advantageous, I think, to the reinsurance market relative to program structures like aggregates, the lowdown covers are gone. We're not participating in those. So feeling much better about returns given where we sit right now. In terms of market share view, I think you've hopefully heard me say repeatedly, that's just not something we think a whole lot about. We look to place ourselves on the right programs, the right clients, shift the book as the economics shift. But if I were to step back from all that, I would sort of assume, and I think you heard my comments in the prepared remarks about what we did at Jan 1, we did take a little bit of capacity off the table. I wouldn't necessarily be surprised if that's a theme for 2026. And if others are willing to write more at lower prices, then our -- I guess, our absolute market share would decline slightly. But it's really on the margins and the profit-generating capacity of the book we're writing now, I think, is very favorable. Taylor Scott: Got it. And then next on capital deployment. You obviously have ramped up the buybacks. Could you talk about your capital position currently, how you're thinking about it? And just as you're potentially pulling a little bit of capacity off the table, what will that mean for how you approach buybacks in '26? Mark Kociancic: Capital position is very strong right now. So you've got several impacts to your point. So first of all is we want to keep, obviously, the A+ financial strength rating of the company, execute the strategic plan. I suspect this will be a lower growth type year versus previous years in the marketplace. So there will be less pressure to support significant growth. And given the profitability expectations, ROE, I expect to generate significant levels of net income this year. So these are all positives for creating even more excess capital. Combine that with what I would consider to be expected capital releases in the back half of the year as a result of the renewal rights transaction. I think that adds even more excess capital for repatriation purposes. And then you can get into where are we? We're trading at a discount to book. So it's very attractive no matter what to do the buybacks. And you saw us step on the gas in Q4. We'll continue that Q1. And for the rest of '26, we continue to see that as very attractive and probably the best use of excess capital in 2026. Operator: The next question comes from Meyer Shields with KBW. Meyer Shields: I want to follow up on the capital question. Basically, hoping you can describe your openness to additional retroactive reinsurance transactions for the future other segment and maybe a sense as to how much capital is currently supporting reserves that will be in that segment once you've resegmented everything? James Williamson: Sure, Meyer. Thanks for the question. I would think about it this way. The ADC, obviously, that we executed in 2025 was about creating certainty around reserves. And I think that's something that I put in the done column. So not really looking at additional ADCs for that purpose. But at the same time, I think particularly given the growth of the other segment with the runoff of the retail business, I think there could be interesting opportunities for us to leverage transactions as a way of managing and freeing up capital. The reserve balance in the other segment is going to grow meaningfully, obviously, with the resegmentation. And so we have now a dedicated CEO of our runoff business, and I know that he's actively looking at ways to optimize the capital stack of that unit. And so I wouldn't be surprised if we find creative ways to further optimize the way we're using our capital to support that runoff. Mark Kociancic: Just to add to the capital question on reserves, Meyer. So I think we've got or will have approximately $1 billion supporting the bulk of those reserves. And I would expect it to start to diminish most likely in H2 as the renewal rights transaction matures and we start to run off the earned premium that you'll see in the other segment in Q1 and Q2, it will start to approach a much smaller number, plus the paydowns on the reserves will start to release that capital. So I think we'll get meaningful portions of that in the back half of the year, first part of next year. And then there's a good chunk of those reserves that are longer tail in nature. So that $1 billion or thereabouts will take some time to fully run off several years given the nature of casualty, but there should be a nice slug from essentially July 1 this year into next year that frees up. Meyer Shields: Okay. That's very helpful. Second question, I'm just unclear. In the slide deck where you talked about the ambitions for the Global Specialty and Wholesale -- or Global Wholesale and Specialty unit, it talks about a high 90s attritional combined ratio going to mid-90s. Is the mid-90s an attritional number or an all-in number? James Williamson: Yes, that would be -- I mean, I would think about it as that business sort of stabilizes in 2026 as being sort of an all-in view. Now it's not a heavy cat business. So the gap between attritional and total combined ratio is certainly nowhere near what you would expect out of our reinsurance business. But I would think about that as an all-in number. Mark Kociancic: And part of that shift, Meyer, is mix of business composition in GWS. You will see more short-tail emphasis in the premium composition in 2026 versus some of the historical results. And I think when we get to the resegmentation discussions next month, we'll put more color into this when we discuss it. Operator: The next question comes from Josh Shanker with Bank of America. Joshua Shanker: I want to follow up a little on Alex's question. January 1 renewals is really a discussion for the next conference call, but we can see a little bit with PMLs, you gave us your January 1 PML disclosure, and they are down as a percentage of equity as capital is up, which means that you're taking less risk. Can you opine a little bit on how we might think about property premium underwritings in 1Q versus 1Q '25? If your exposure is down, maybe premium is down a good bit as well? James Williamson: Yes, sure, Josh. I mean I think I wouldn't be surprised if you start to see the growth that we've had over the last couple of years in total property premium begin to subside. Now you got to keep in mind, our Q1 print is going to include a lot of recognition of premium that was written in 2025, and we had a lot of growth in the middle of the year in particular. So I'm not going to give you a point expectation around up, down or sideways around that. What I would say is in terms of total risk, I think we're getting paid really well. Program structures are good. Rate levels remain above adequacy. We're taking some chips off the table really around the margins as we evaluate programs to ensure they're all hitting our hurdle rates. And I expect that to continue during the course of 2026. Joshua Shanker: And shifting gears to the insurance section segment. If we think 3 years into the future, how big of an insurance underwriter is Everest? And is that a business where Everest can consistently be profitable at a smaller size? James Williamson: Yes. I think, Josh, I think if this industry has learned one lesson, not just in our own experience, but many, many others, is setting growth objectives, long-term growth objectives, size is not the way to measure these businesses. Bottom line profit is the way to measure these businesses. And my expectations for that business in '26 and in every year going forward is that it makes underwriting profits and strong returns on capital. Now that said, we are a relatively modest sized player in a very large pool. And I think we have a great management team. We've got great products. We're well represented among our distribution partners. I think the divestiture of retail further strengthens us with many of our distribution partners. And so there's going to be a lot of opportunity, and we'll certainly take advantage of it. But I'll reiterate, just so we're all crystal clear, that will be viewed through the lens of how do we drive underwriting income growth, not how do we create a bigger top line. I do think we could be quite relevant. But again, always harkening back to that bottom line result is the measure that matters. Joshua Shanker: In a few core lines or will you have an expansive appetite? James Williamson: Well, I think -- I mean, I think we have a reasonably broad appetite. We have a lot of capability. As I described, we've got our London market business, our U.S. E&S business, highly specialized underwriting units in a variety of segments. So I think we're broad that way. But if you look underneath the covers, in each of the areas we're choosing to underwrite, we have a lot of depth and capability. So I would characterize it as across the entire business, lots of variety, but in our individual underwrites, it's quite [indiscernible] and deep. And we would rather write more risks in areas we really understand and try to find ways to write new different risks. And some of the examples I cited earlier, for example, take our U.S. E&S business. We have a really nice expertise in construction and engineering. And that's an area where we're leaning in. We're taking advantage of all of the development you're seeing around data centers, energy, infrastructure. And so I'd rather go deeper on that and get really honed as opposed to find new greenfields to conquer. Operator: The next question comes from Michael Zaremski with BMO. Michael Zaremski: I guess my first question just around the catastrophes. Just thinking very high level, if this year was somewhat of a below average cat year, maybe disagree with that, at about $800 or so million of cats, and we'll see how that develops. Would a normal year be kind of like double that level? Or just trying to get a sense, I think the cat level was a little bit higher than expected in 4Q. So I just want to understand, given all the mix positioning, if we should kind of be toggling up the absolute cats by a very material amount for just kind of normal '26 or '27. James Williamson: Yes, Mike, I think using the word normal with respect to cats is always a challenge. I think if you look at the total loss content in the industry, and there's a variety of estimates out there, 2025 was sort of what I would call an expected. It's the new normal year. You had -- and I've seen a variety of estimates, but a lot of them coalesce around $110 billion, $120 billion, $130 billion of industry loss. I call that a pretty hefty cat loss year, and I think that's pretty normal these days. So I think our cat performance kind of made sense given that backdrop. And I don't really think of Q4 as elevated for us. I think if you look globally, I think a lot of times, we over-index the United States, and we didn't have a landfalling hurricane in the U.S. in the fourth quarter. But there were a lot of things going on around the world. We're a lead cat underwriter in Latin America and the Caribbean region. We had a cat 5 hurricane roll through the Caribbean. We had major storms and hail in Australia, flooding in Southeast Asia. So a lot of things happened in the fourth quarter. When I look at our market share relative to those events and the profitability of the underlying books that we're taking those risks, I feel really good about all that. So I wouldn't expect any sort of dramatic change in our approach to the cat load as we go forward other than to say the one thing to always keep in mind is as we've divested retail insurance, there's earned premium associated with that, that goes away. So you get a little bit of a movement in the denominator. But I think the numerator is relatively consistent year-over-year. Michael Zaremski: Okay. That's great color. Maybe just switching gears to capital management. I think you guys have been clear that at this valuation level, buybacks will continue to be the main source of capital contribution for shareholders. But I guess given the top line is shrinking, unless we're doing the math wrong, it appears -- including with the money you're going to get from AIG and et cetera, it appears that you guys can do billions more buyback than the consensus is estimating at least starting in the back half of the year. So maybe more of a comment, but -- than a question, but maybe it would help if you eventually decided to kind of maybe give us a little bit more guidance specifically on buybacks as the year progresses to the extent valuation remains lower, hopefully doesn't. Mark Kociancic: Yes. I think, look, there are several points that you made that I think are very good fundamentals for increasing buybacks. I certainly don't think a normal payout ratio of the 40% to 50% range is applicable for 2026 environment. I think that you're going to see something more elevated, particularly with the discounted share price and the general lack of intensity coming from the growth in the business. So for me, those are great backdrops to promote even more buyback. And we'll communicate more when we have more. There's still significant risk out there. You've got the wind season. You've got -- obviously, you've got standard risks like reserves, regulatory, potential opportunities, growth, et cetera. But I think the fundamental baseline is that, yes, there will be elevated capital management with all of the fundamentals we see right now, and we'll just take it one quarter at a time and try to increase the level of value that we're providing to shareholders as we buy back. Operator: The next question comes from Brian Meredith with UBS. Brian Meredith: Jim, I'm just curious, we're seeing a lot of M&A happening right now in the P&C industry, and it's pretty typical for this part of the cycle. Is that something that you're thinking about to maybe bolster your global -- or your specialty businesses, parts you can add on? And clearly, you've got the excess capital to do it right now. James Williamson: Sure, Brian. Thanks for the question. Look, I think the first thing you have to keep in mind is where we left the last question, which is right now, we have a very compelling return on capital available to us with de minimis risk, which is repurchasing our own shares. And so anything we would do on an inorganic basis would have to compete with that value proposition, and that's a pretty high bar. That said, if the right thing became available and it made sense and it really advanced our strategic goals, it's certainly an option. We certainly have the firepower to do it. And we have a team now that has expertise from prior companies executing a variety of M&A transactions and doing it well and most importantly, understands how to do integration. But if you were to see us do something, I think I could safely characterize whatever it might be is small. It would have to be on our existing strategy path. We're not going to go off and do something that's in new markets, and it would be relatively low risk, and it would have to add some capabilities, some distribution, a platform that would be too difficult to build on our own. So it's a very, very high bar. Brian Meredith: Great. That's helpful. And then I guess second question, just back on the reinsurance business. Thinking about 2026 here and kind of what's going on with property cat. Property pro rata, what's kind of the appetite there? Do you think that maybe expands a little bit here as a percentage of the overall mix, just particularly given Florida and some of the attractive homeowners returns you're seeing there now? James Williamson: Yes. We've had a really great run in property pro rata. Our team has done an outstanding job of selecting the right clients. Those programs, I think, are very well structured in terms of event limits that help to really minimize the amount of property cat exposure you need to take relative to available profit. So that's all working toward the good. I think -- the thing we keep an eye on, obviously, is underlying rates in the property insurance market are starting to come down. And so you'll see us be very thoughtful. I think that's playing through in our numbers now. We were down very, very slightly year-over-year in property pro rata. So we like the portfolio. If additional opportunities present themselves, we could certainly lean into them. I'd say right now that we do have a little bit of bias to commercial and a little bit of bias to E&S. So I wouldn't necessarily expect a huge expansion into homeowners, and we'll see how the year plays out. Operator: The next question comes from Elyse Greenspan with Wells Fargo. Elyse Greenspan: My first question, I wanted to spend more time on some of the color you provided around January 1. So you said that price was -- in property cat, sorry, price was down 10%. But your book, I believe, you said was down 1%. Can you just comment, I guess, what enabled you, I guess, to show a good differential versus the market? And then where did you see those better opportunities to drive that to put your book only down 1%? Was that in the U.S., Europe? Just trying to get some additional context there. James Williamson: Sure. Elyse, let me just make sure I clarify the numbers that we're using. So the minus 10% is that was our book, our rate change. So we were down 10 points of rate, 1 point of premium. So if you look at our total GWP -- and by the way, that's not just property cat, that's for all lines of business, including pro rata, specialty, which we saw some great opportunities, casualty, et cetera. The total book premium, book premium was down 1%. And then we slightly reduced our total deployed property cat capacity in response to the 10% decrease. Now I think based on what I'm hearing from certainly some of the broker indices, maybe some of our esteemed competitors who have reported, I still think our 10% is a good number. I think we outmaneuvered, frankly, the market to sort of control it. I think a lot of people are more in the low teens. And I think that's a testament to our market position. I think if we look at where property cat pricing is right now, there's a lot of attractive opportunity around the world. Clearly, I think the U.S., particularly Southeast U.S. is the best priced peak zone, but there's good business to be had around the world, and we were active pursuing those opportunities globally. So there was really no one region where we said, okay, we want to double down here because of where it's priced relative to others. It's a pretty broad-based opportunity. Elyse Greenspan: And my second one, I guess, I just want to, I guess, cross reference some of the data points you guys gave on the new insurance segment and just make sure the -- I guess, the right sound bite is out there. Because I think in the prepared remarks, you guys had mentioned that it's $2 billion in premium, the specialty book with an attritional loss ratio in the mid-80s. And then I think the slides mentioned an attritional combined ratio in the mid-90s. I would think the expense ratio differential would be greater than 10% -- so I'm just trying to tie those points and maybe that specialty attritional was not a loss, but a combined ratio. If you could just help me there. James Williamson: Sure. Sure, Elyse. Yes. So the $2 billion -- when I was talking about specialty, the $2 billion specialty book, that's our reinsurance specialty book. And that's an attritional combined in the mid-80s. It's been an excellent business for us. We've grown that meaningfully. That's different than our Global Wholesale and Specialty business, our insurance business going forward, which is -- if you look at where it would have landed in 2025, it's $3.6 billion in premium, $1.2 billion facultative -- of that is facultative. And we would expect that for a whole year basis of 2026 to sort of fall in that mid-90s range and an all-in basis. So hopefully, that squares the circle for you in terms of the numbers. Operator: The next question comes from David Motemaden with Evercore ISI. David Motemaden: I had a question just on the OpEx expense ratio, the 6% to 7% mark that you had called out that you expect for the year. And I guess it's going to work down to 6%, I think you said by the end of the year. I was hoping you could just size for us the stranded overhead associated with the renewal rights deal. And I know you guys have a restructuring program out there, too. But just so we can sort of think about the dollar amount of stranded overhead associated with that deal and then just sort of track that throughout the course of the year as you guys whittle that down? Mark Kociancic: David, I think -- so a few points I want to put on the table here. I think we're going to be on the elevated side of 6% to 7% at the beginning of the year. I think it will trend downwards towards the lower end of 6%. I don't think it will be 6.0%, for example. Clearly, there's got to be a transition of the renewal rights to AIG throughout 2026, and we're planning for that. We'll obviously have commensurate corporate expenses with the remaining business. And the costs associated with the exited retail insurance business will eventually diminish significantly throughout the year as the business is transitioned over to AIG. So that type of expense load last year would have been in the low $400 million range. So I would expect that to diminish significantly throughout the year as we transition on a quarterly basis to AIG. What are we going to be left with by the end of the year? I would estimate we would be somewhere closer to the $50 million type range, maybe a bit above. But the real issue is we're going to have an other segment or a legacy type segment for a significant period of time. There will be an associated run rate general expense with that, which will become clearer towards the back half of the year. And the expense reduction for the retail insurance unit, I think, is also subject to making sure, first of all, that we fulfill our obligations on the renewal rights transfer and that we properly treat the employees, et cetera, that are exiting the company over time. So a lot of moving parts here, but we have a clear set of objectives that we're trying to achieve in 2026. David Motemaden: Great. I appreciate that detail. And maybe just one other one. So it sounded like there were immaterial net movements on the reserve side. I see the $2 million favorable in reinsurance, so I wanted to focus there. Anything -- any other changes around the casualty reinsurance reserves in the fourth quarter that you guys want to call out from like a gross basis that maybe were offset by releases elsewhere? Mark Kociancic: No, nothing material. The bulk of the work was done in Q3. We feel -- I think Jim alluded to this in his prepared remarks, very good about the reinsurance reserves in terms of embedded margin that we see, particularly in shorter tail lines. So we believe we have still a very meaningful amount and an increased amount year-over-year. Feel good about casualty. So yes, we're adequate right now. Operator: The next question comes from Ryan Tunis with Cantor. Ryan Tunis: Just one for me. Just on capital management, listening to your remarks, it does sound like you think that there might be some excess and that could potentially be deployable at some point in time. But should we be thinking about any drawdown of that excess as more of a '27, '28 event? Or could that potentially be something that we do later on in '26? Mark Kociancic: I think later in '26 is certainly on the table. We have to see how the claims pay out, for example, making sure that the renewal rights are transferred the way we believe they will be in 2026 and then making sure that capital is fungible for buyback, all solvable problems. And obviously, whatever events that may impact us during the year can be handled within our existing capital stack. But you saw what we did in the fourth quarter. I think we were quite committed to buybacks given the fundamentals. From my standpoint, I see a strong commitment to buybacks. As Jim alluded to, it's a very attractive return profile for the company. You'll see us emphasize that Q1 and for the remainder of the year. And as soon as we can -- we feel better about unlocking some of those expected benefits on the transaction, for example, that will be a natural place to look. We'll go right after the buyback. Operator: The next question comes from Tracy Benguigui with Wolfe Research. Tracy Benguigui: I have a follow-up on the lower PMLs to equity at 1/1. Was that just a consequence of deliberately reducing the exposure to less profitable deals that you mentioned? Or are you looking to improve capital efficiency like lowering your PML to equity targets? James Williamson: Sure, Tracy. Happy to unpack that for you. I mean the first thing to keep in mind, and this is critical, we have plenty of capital to fuel whatever cat underwriting we'd like to do. It's really a function of the market opportunities we're seeing. And so you -- and certainly mentioned this regarding the January 1 renewal, we did start to take some chips off the table, while the overall available return in property cat remains comfortably above sort of our target. Individual deals, given the rate decreases, sometimes don't meet our standards, and that's why we're cutting back a bit there. The other thing that's happening under the covers is, as I mentioned in my prepared remarks, we've also had some really nice fundraising in Mt. Logan. So there's a little bit of a hedging component to it as well, where we're ceding a little bit more premium and hence, PML to third-party investors, which we find attractive, and it certainly helps to boost our returns. And I think as a rough estimate for what's going to happen over the next year, I think those themes will continue to play out on both sides. Tracy Benguigui: Okay. Great. You also, I think, made a comment that social inflation drove several large energy losses in your wholesale business that led to elevated insurance attritional loss ratio in the quarter. Was that more episodic? Or do you see these pressures persisting over having a longer-lasting impact on your attritional loss ratios? I'm just trying to square some of your earlier comments about insurance casualty pricing ahead of loss trend. James Williamson: Yes. So the -- I want to separate -- there are really 2 separate items. Social inflation is a persistent reality in the U.S. casualty market across both divisions. It's something we've spent a lot of time assessing, understanding we underwrite against that reality, which is why we've reduced our casualty book in both divisions. That's separate from Mark's comment regarding energy losses in the fourth quarter, which were not casualty losses. Those are just -- we just happen to have as will happen in our industry, we just had a little spike of multiple unrelated, mostly refining losses where you had large explosions at refineries. Thankfully, that seems to be one area of our business that doesn't have social inflation in it. So 2 unrelated factors that happened to be mentioned in the same part of the script. Operator: This concludes the question-and-answer session and the Everest Group Limited Fourth Quarter of 2025 Earnings Conference Call. Thank you for attending today's presentation. You may now disconnect.